10-K

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, 2002

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: 443-259-7800

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 September 27, 2002, 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 $152.6 million.

There were 4,543,976 shares of Registrant’s common stock outstanding as of September 27, 2002.

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, 2002 are incorporated by reference into Part III of this Form 10-K.

Page 1 of 59

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TABLE OF CONTENTS

TABLE OF CONTENTS

PART I
ITEM 1. BUSINESS
	GENERAL
PRODUCTS AND SERVICES
		Specialty Pharmaceuticals
		Cardiopulmonary Systems
	COMPETITION
	BACKLOG
	PATENTS, TRADEMARKS, AND LICENSES
	PRODUCT LIABILITY INSURANCE
	SOURCES AND AVAILABILITY OF RAW MATERIALS
	GOVERNMENT REGULATION
	EMPLOYEES
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES OF THE REGISTRANT
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
ITEM 8. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
ITEMS 10 through 13.
PART IV
ITEM 14. CONTROLS AND PROCEDURES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS FORM 8-K
SIGNATURES
CEO Certification
CFO Certification
EXHIBIT INDEX
Exhibit 10.15
Exhibit 10.22
Exhibit 23.1
Exhibit 24
Exhibit 99.1
Exhibit 99.2
Exhibit 99.3

		Page
	PART I
Item 1.	BUSINESS
	General		5
	Products and Services		6
	Specialty Pharmaceuticals		6
	Cardiopulmonary Systems		10
	Competition		12
	Backlog		12
	Patents, Trademarks, and Licenses		12
	Product Liability Insurance		13
	Sources and Availability of Raw Materials		13
	Government Regulation		13
	Employees		15
Item 2.	PROPERTIES		15
Item 3.	LEGAL PROCEEDINGS		15
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF
	SECURITY HOLDERS		16
	EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT
	EMPLOYEES OF THE REGISTRANT
	(Unnumbered Item)		16
	PART II
Item 5.	MARKET FOR THE REGISTRANT'S COMMON STOCK
	AND RELATED STOCKHOLDER MATTERS		18
Item 6.	SELECTED FINANCIAL DATA		19
Item 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF
	FINANCIAL CONDITION AND RESULTS OF OPERATIONS		20

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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		51
	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, 2002, 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.	CONTROLS AND PROCEDURES	51
Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND
	REPORTS ON FORM 8-K	51
Signatures		54
CEO Certification		55
CFO Certification		56
Exhibit Index		57

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FORWARD LOOKING STATEMENTS

This report contains and other written and oral statements made by the Company may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to financial performance and other financial and business matters. Forward-looking statements are typically identified by future or conditional verbs or similar expressions regarding events that have yet to occur. These forward-looking statements are based on the Company’s current expectations and are subject to numerous assumptions, risks and uncertainties. The following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: political, economic and competitive conditions; capital availability or costs; fluctuations in demand for the Company’s products; government procurement timing and policies; technological challenges associated with the development and manufacture of the Company’s products; commercial acceptance of the Company’s products; delays, costs and uncertainties associated with clinical testing and government approvals required to market new drugs and medical devices; availability and quality of raw materials; success and timing of efficiency, cost reduction and quality enhancement programs; regulatory and contract compliance; relationships with significant customers; adequacy of product liability insurance; ability to obtain, timing and success of marketing representatives, strategic alliances and medical reference centers; adequacy of intellectual property protection; and the inability to realize cost savings or revenue enhancements, implement integration plans and other consequences associated with mergers, acquisitions, restructurings, and divestitures. Meridian assumes no duty to update forward-looking statements.

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PART I

ITEM 1. BUSINESS

GENERAL

Meridian Medical Technologies, Inc. (referred to in this report as the “Company”, “MMT” or “Meridian”) is a medical technology company operating in two segments: Specialty Pharmaceuticals and Cardiopulmonary Systems.

Specialty Pharmaceuticals – Previously known as Pharmaceutical Systems, the Specialty Pharmaceuticals segment consists of the Commercial and Government businesses, both of which utilize the Company’s auto-injector technology. The principal source of Commercial revenue currently is the EpiPen® family of auto-injectors, which are prescribed for moderate to severe allergic reactions and other causes of anaphylaxis. The Company plans to expand its commercial business through internally developed auto-injector based products and external acquisition of complementary products. Government revenues are principally generated from auto-injector products and services marketed to the U.S. Department of Defense (“DoD”), foreign allies and federal, state, and local first responders, such as police, fire and ambulance personnel. Marketing efforts from this unit focus on maintaining the Industrial Base Maintenance Contract with the U.S. Department of Defense, supplying the U.S. DoD with required products, as well as expanding Homeland Security and international market applications.

Cardiopulmonary Systems — The Cardiopulmonary Systems segment utilizes the Company’s electrocardiology and telemedicine technologies. Telemedicine sales currently are the principal source of revenue. In March 2002, the Company received clearance from the FDA to market its new PRIME ECG® product in the United States. This approval is the culmination of years of development and investment in this product, which the Company feels could generate significant revenues and profits over time, as it targets a significant worldwide market. The Company’s goal is to establish PRIME ECG® as the standard of care in the diagnosis, treatment and monitoring of heart disease. The Company introduced PRIME ECG® in certain countries outside the United States in 2000, having received the CE mark approval in Europe.

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PRODUCTS AND SERVICES

Revenues from MMT’s two segments and gross profit for the five years ended July 31, 2002 are as follows (in thousands):

			Year Ended July 31,
			2002			2001			2000			1999			1998
Specialty Pharmaceuticals
	Commercial		$	40,656		$	33,839		$	27,036		$	14,405		$	22,414
	Government			37,201			21,425			26,070			24,485			21,165
				77,857			55,264			53,106			38,890			43,579
Cardiopulmonary Systems				4,550			2,826			1,501			1,840			1,089
		Total Revenues		82,407			58,090			54,607			40,730			44,668
		Gross Profit		39,055			24,305			22,016			12,710			17,577
		Gross Profit %		47.4	%		41.8	%		40.3	%		31.2	%		39.4	%

Specialty Pharmaceuticals

The Company 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 family of spring-loaded, needle based auto-injectors. These auto-injectors are a convenient, disposable, one-time use drug delivery system 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 management of pain, diazepam for the treatment of seizures, and antidotes for the treatment of nerve agent exposure. The auto-injector offers a common delivery system platform that can be used for both commercial and government new product needs. It is anticipated that the Company’s initial new product range will be based on its auto-injector delivery systems but over time will expand to include other drug delivery product technologies. MMT also supplies pharmaceutical research and development and FDA current Good Manufacturing Practice (cGMP)-approved sterile product manufacturing to pharmaceutical and biotechnology companies.

Commercial

MMT currently manufactures the EpiPen and other commercial auto-injectors, provides contract research and development, and performs pharmaceutical manufacturing for some of the leading pharmaceutical and biotechnology companies.

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a.     EpiPen

The EpiPen auto-injector currently accounts for a majority of the Company’s commercial sales. The EpiPen is prescribed to patients at risk of anaphylaxis resulting from severe allergic reactions to insect stings or bites, foods, drugs and other allergens, as well as idiopathic or exercise induced anaphylaxis. It is generally estimated that as many as 40.9 million people in the U.S. are at risk of developing moderate to severe anaphylaxis due to allergic reactions to insect stings and various foods. EpiPen is available in two dosage strengths, and permits 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, particularly those associated with food. The Company owns the New Drug Application (“NDA”) for EpiPen and markets the product through a supply agreement with Dey L.P. (“Dey”), an associate of Merck KgaA, Darmstadt, Germany. The supply agreement has a ten-year term, expiring December 31, 2010. Within the agreement, the Company grants to Dey the exclusive right and license to market, distribute, and sell the EpiPen worldwide. Currently, approximately 23% of the unit sales are ultimately for international sales.

b.     Contract Research and Development

The Company provides research and development services on a contract basis to a number of different pharmaceutical and biotechnology companies. Development programs include feasibility and stability studies as well as the manufacturing of clinical trial materials in the Company’s pilot plant in St. Louis. If feasibility and stability studies are successful and all regulatory approvals are received, the Company anticipates contracts in future years to manufacture these products. Revenue from customer-funded research and development activities was $3.4 million, $3.1 million and $1.5 million during fiscal years 2002, 2001 and 2000, respectively.

c.     Contract Manufacturing

The Company has sterile parenteral pharmaceutical manufacturing and packaging capabilities for a broad range of sterile injectable dosage forms which includes vials, dental cartridges, pre-filled syringes, and auto-injectors. Further, the Specialty Pharmaceutical business provides fully validated formulation and aseptic filling services and regulatory and clinical trial assistance for pharmaceutical and biotechnology companies not currently possessing such capabilities or requiring outside support. The Company intends to expand this portion of its business going forward.

d.     New Product Initiative

The Company will continue to explore additional pharmaceutical products as it expands its commercial business within Specialty Pharmaceuticals. The Company’s initial focus will be on products that require emergency administration and where the patient or caregiver will benefit by administration with an auto-injector. Initially focused on central nervous system (CNS) drugs, the Company intends to build the required sales and marketing infrastructure to support the initial product launch of an auto-injector product. The Company’s first new product, DiaJect™, is scheduled to be introduced to the market in the second half of fiscal 2003, subject to receipt of FDA approval. This product is targeted for the treatment of status epilepticus and severe recurrent convulsive seizures associated with epilepsy outside of a hospital setting and utilizes the Company’s auto-injector technology. Meridian has also initiated the development of an auto-injector based migraine therapy utilizing dihydroergotomine. The Company intends to pursue follow-on products utilizing its auto-injector technology, as well as through externally acquired products and technology.

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Government

The Government Systems business unit supplies auto-injector-based antidotes and emergency medicine products to military and civilian organizations worldwide, with revenues from the United States and over 20 allied countries over the last four years. MMT’s major Government Systems customer continues to be the DoD. Through a combination of the Industrial Base Maintenance Contract (described below) and new product development contracts, MMT expects to maintain a strong and stable business relationship with the DoD.

MMT plans to capitalize on the auto-injector delivery systems developed for government applications by expanding Government Systems revenue and providing new drug delivery technology for application in its commercial business unit. The Company continues to advance its multichambered auto-injector (Antidote Treatment Nerve Agent Auto-injector, or “ATNAA”), which provides a two-chamber technology for the enhanced absorption of two incompatible drug compounds from the same injection site. The multichambered technology was developed for the DoD, and the DoD retains ownership of the NDA, which has received FDA approval. The Company retains the right to produce and market the product, and maintains ownership of all intellectual property.

MMT currently produces the following products for the U.S.: the AtroPen, containing atropine and the ComboPen, containing pralidoxime, both used as nerve agent antidotes; an auto-injector containing morphine for pain management; and a ComboPen containing diazepam for seizure management. These auto-injectors are intended for use primarily by military personnel but are also now available for use by first responders as a part of Homeland Security programs.

a.     U.S. Department of Defense

The Company has been the supplier of auto-injectors to the DoD for many years. 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 any 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 between the Company and the DoD since 1992 (the “IBMC”). This contract is part of a program by the DoD to ensure adequate supplies of critical items in the event of armed conflict.

This innovative contract 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 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. MMT recently concluded negotiations with the DoD for its fourth IBMC beginning September 15, 2002 (the period from the end of the previous contract, July 31, 2002 and the renewal date, September 15, 2002 was covered by an extension of the previous contract). This contract includes DoD renewal options for two additional years through July 31, 2005. Revenues under this contract have ranged from $15 to $22 million over each of the last three years.

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b.     International

The Company will continue its strategy of seeking 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. International government sales for fiscal 2002, 2001 and 2000 were $6.9 million, $5.0 million, and $7.8 million, respectively.

The product range for the international community includes the same type of auto-injectors as used by the U.S. community; however, it also includes a number of variations to address the formulation specific requests of client countries.

c.     Homeland Security

The Company provides its nerve agent antidote auto-injector products to a growing number of non-military U.S. government agencies and state and local governments for preparedness against possible chemical agent terrorist attacks, particularly for populations in high risk areas. Since the terrorist attacks of September 11, 2001, a national and a comparable state and local homeland security strategy has begun to emerge. This strategy, in part, is focused on training and equipping emergency teams as initial, on-site responders and targets the most populous metropolitan areas as well as local communities. Homeland Security sales for fiscal 2002, 2001, and 2000 were $7.8 million, $639,000, and $341,000, respectively.

d.     Research and Development

The Company has signed a development contract with a major European country to develop a two-chambered auto-injector incorporating its antidote formulations. The second phase of this program was negotiated and is currently underway. This phase is a full scale development effort that, if successful, could lead to product registration in Europe as early as FY2004. This product registration would allow the Company to sell this product to major NATO countries. The Company expects to submit the registration application to European regulatory authorities in late fiscal 2003.

With the renewed interest by a number of NATO countries in the nerve agent antidote HI-6, Meridian’s technology group has begun work to develop a specialized auto-injector that could be used to administer this antidote. HI-6 has only a short shelf-life when in solution which necessitates an auto-injector that contains individual chambers separating the drug and the diluent. Prior efforts by others have resulted in auto-injectors that are cumbersome, difficult to manufacture, and expensive. Meridian has developed an injector that meets the expected performance requirements, is less bulky and easier to use. The Company recently announced an agreement with the Canadian Department of Defence to design, develop and manufacture the wet/dry auto-injector for administering HI-6.

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Cardiopulmonary Systems

The Company’s Cardiopulmonary Systems unit is focused on the development and sale of non-invasive cardiopulmonary diagnostic products. In addition to a line of telemedicine products, the Company received clearance from the FDA during 2002 to market its new PRIME ECG® product in the United States. This approval is the culmination of years of development and investment in this product, which the Company feels could generate significant revenues and profits over time, as it targets a significant worldwide market. The Company’s goal is to establish PRIME ECG® as the standard of care in the diagnosis, treatment and monitoring of heart disease. The Company introduced PRIME ECG® in certain countries outside the United States in 2000, having received the CE mark approval in Europe.

a.     PRIME ECG® 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.

The PRIME ECG® system consists of a patented 80-lead disposable electrode vest, 80-channel recording module, computer assisted analysis software and a full color multi-dimensional graphic display. The system initially has been introduced for the early detection of acute myocardial infarction (“AMI”) or heart attack. Multi-center clinical tests conducted in the U.S. and Europe concluded that the PRIME ECG® system can allow earlier and more accurate diagnosis of AMI for significantly more patients than the standard 12-lead ECG. Further, the Company believes that the PRIME ECG® system displays results in a manner that can allow the clinician to identify the nature of the infarct, which can be utilized in determining the most effective course of treatment.

Without early and accurate diagnosis of AMI, potentially life-saving treatment of AMI victims may be delayed. 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 believes 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.

The Company expects the PRIME ECG® system will be used initially by the emergency room physician who needs faster and more accurate diagnosis for more than 20 million chest pain patients worldwide each year. The Company is pursuing additional indications where this technology may enhance detection and/or treatment of heart conditions known to affect the electrophysiology of the heart. Potential applications include the ability to detect changes in reperfusion of the coronary arteries as evidenced by the imaging of the effects of myocardial ischemia. This may prevent potentially life threatening and costly emergencies. The Company is unaware of a non-invasive alternative means to detect this condition. Other potential applications including arrhythmia management are being investigated. The Company estimates that the market size for these potential additional uses of PRIME ECG® is substantial.

The use of the PRIME ECG® system requires purchase of a disposable electrode array or vest. This patented device is expected to provide a recurring source of revenue to the Company, which anticipates that it will be the sole manufacturer. The Company projects that the disposable electrode vest design can be modified to meet a range of applications, allowing lower cost and greater convenience in potential future applications.

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The PRIME ECG® system received the CE Mark from European authorities during fiscal 2000, and was awarded a Millennium Product Award for innovation and creativity in the U.K. from the Design Council of Britain. To date, the Company has signed representation agreements with companies to market PRIME ECG® in Korea, Italy, Denmark, Spain and Australia. Initial shipment of the product was made in fiscal 2000 and continues to date. The multi-center clinical study was completed in fiscal 2001, and an application was submitted to the Food and Drug Administration for clearance to market PRIME ECG® in the United States on July 31, 2001. The Company received FDA clearance in March 2002. To date, sales of the PRIME ECG® system have not been significant, as the product is still in the initial marketing stages.

The Company is marketing PRIME ECG® in the U.S. directly through a focused sales force. The Company intends to expand coverage in Europe and Pan-Pacific regions by adding distributors. Additionally, to favorably impact adoption of PRIME ECG®, the Company is seeking to establish reference centers at prestigious medical universities. The medical institutions would train residents, and visiting doctors who are planning to purchase PRIME ECG® in their hospitals.

b.     Telemedicine Products

The Company is a leader in the development of devices that measure and transmit diagnostic information by telephone. This product suite allows 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-12/12 CardioBeeper® electronic heart monitor transmits a standard 12-lead electrocardiogram (“ECG”) by telephone. The CardioPocket™ provides unprecedented convenience by incorporating a miniaturized single-lead version into a wallet. The CardioPocket was awarded a Millennium Product Award for innovation and creativity in the U.K. from the Design Council of Britain, and has already been purchased by over 50,000 users since its introduction in 1999. In 2001, the Company completed development of, and placed in its product line, a new blood pressure device and Tele-Pulse Oximeter, which measures oxygen in the blood.

The telemedicine product line is sold by Shahal Medical Services, Ltd. (“SHL”), which has exclusive worldwide marketing rights. SHL, based in Israel, is a home healthcare monitoring company serving more than 60,000 subscribers. In 2001, SHL entered into a joint venture with Philips Medical Systems to market cardiology telemedicine products and services in targeted markets in Europe. Additionally, in 2002, SHL acquired Raytel Medical Corporation, a U.S. provider of remote cardiac monitoring and testing. SHL has advised Meridian that SHL plans to use this acquisition as an entry into the U.S. market. Meridian expects that if successful, this acquisition could result in increased demand for its telemedicine products.

c.     Research & Development

The Company invested $975,000 in Cardiopulmonary Systems research & development in fiscal 2002. The majority of this expenditure was dedicated to the improvement of the PRIME ECG® system, as well as the funding of certain university research projects selected for their potential to lead to new and improved applications.

The Company intends to continue to invest in the further development of PRIME ECG® in 2003. These development investments include algorithm enhancement to further improve heart attack detection, software development to provide new applications such as reperfusion, hardware development to reduce costs, and graphics enhancements to further improve ease of interpretation, in addition to increased sales and marketing expenditures.

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COMPETITION

In the commercial auto-injector market, the Company competes directly with companies that manufacture drug injection devices, whether such devices are automatic like the Company’s products or non-automatic, variable dose pen-like injection devices, reloadable injection devices and disposable needle-free injection systems. The Company is the leading manufacturer of automatic injectors in the world. The Company expects competition to intensify.

Meridian is the sole supplier of auto-injectors to the U.S. Government for military use. The Company has limited competition in 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 number 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. The PRIME ECG® product competes 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

As of July 31, 2002, the backlog of orders was approximately $29.4 million, of which $10.4 million related to production and delivery of commercial products and services, and $19.0 million related to military products and the IBMC contract. This compares with commercial product sales backlog of $7.3 million and a military backlog of $11.0 million, for a total of $18.3 million at July 31, 2001.

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, consultants, and other parties. Patents covering important features of the Company’s current principal auto-injector products have expired. This lack of patent protection could permit others to design products that may have an adverse effect on the Company’s revenues and results of operations. MMT is currently developing new generation auto-injector products 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 ATNAA. The ATNAA patents provide protection for various components of the device through 2010. Applications have also been submitted for the Company’s wet/dry auto-injector. In addition, the Company holds several patents and licenses on the PRIME ECG™ electrocardiac mapping system, including the patent on the PRIME ECG® disposable electrode vest. 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 17 years.

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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.

Certain copyrights, trademarks and trade names referred to in this report are the property of their respective owners.

PRODUCT LIABILITY INSURANCE

The Company maintains product liability coverage for its products in an aggregate amount of $30 million. 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 pending or potential product liability claims.

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 formulations are unique and require highly specialized synthesis facilities, consequently, limited amounts of these ingredients are available from time to time. Auto-injector components also require specialized tooling and by commercial manufacturing standards are considered low volume production. Cardiopulmonary product component availability is subject to worldwide demand within the electronics industry. Component requirements frequently compete with high volume, high demand vendor manufacturing time. The Company monitors these situations carefully and seeks to provide a continued supply of both raw materials and components. The Company procures inventory principally when supported by customer purchase orders.

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, vials, pre-filled syringes and cardiopulmonary products, the Company’s products are subject to regulation by the FDA under the Federal Food, Drug and Cosmetic Act (the “Act”). All of the Company’s auto-injectors are “new drugs” and may be marketed only with the FDA’s approval of an NDA or a supplement to an existing NDA. The Company currently holds approved NDAs or licenses to 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.

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The Company’s prefilled syringe systems are typically 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.

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 and Belfast facilities have undergone multiple routine inspections by the United States and various foreign countries.

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 financial 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.

Certain states have instituted needle protection standards. Presently, to the best of the Company’s knowledge, the Company’s products are not covered by these standards. The applicability of these needle protection standards in the future could require the Company to change its product design and production methods.

The Company also is subject to regulation by other federal and state agencies under various statues, regulations and ordinances, including export control laws, environmental laws, occupational health and safety laws, labor laws and laws regulating the manufacture and sale of narcotics.

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.

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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.

EMPLOYEES

As of August 31, 2002, the Company employed a total of 452 employees: 351 employees work at the Company’s plant and warehouse facilities in St. Louis, Missouri; 58 employees work at the facility in Belfast, Northern Ireland, and 43 employees work at the Company’s corporate headquarters in Columbia, Maryland (see “Properties”). Effective March 1, 2002, the Company entered into a three-year agreement with the Teamsters Local Union No. 688 (“Teamsters”). Since 1979, Teamsters have been the exclusive agent for all production and maintenance employees of the Company at its St. Louis facility. Approximately 224 employees are covered by this collective bargaining agreement.

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 2004. The corporate headquarters facility houses the corporate administration, human resources, finance, commercial business development, government programs, and the product design and development functions of Meridian.

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.

The Company has a 28,000 square foot facility in Belfast, Northern Ireland which is designed to develop and produce innovative technology products for its Cardiopulmonary Systems Group, including the PRIME ECG® system, and supply auto-injectors for the Government Systems Group for sale to international markets. The Company is leasing the 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 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 has sub-leased the facility to a third party through 2003.

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.

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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 2002 to a vote of security holders, through the solicitation of proxies or otherwise.

EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES OF THE REGISTRANT

The following table lists, as of September 27, 2002, the names and ages of all executive officers and other significant employees of the Company, and their positions and offices held with the Company:

Name	Age		Present Positions with the Company
James H. Miller*		64	Chairman, President and Chief Executive Officer
Carl J. Rebert*		51	President, Cardiopulmonary Systems
Gerald L. Wannarka*		63	Senior Vice President and Chief Technology Officer
Robert J. Kilgore*		52	Senior Vice President and General Manager, Specialty Pharmaceuticals
Dennis P. O’Brien*		44	Vice President of Finance and Chief Financial Officer
Peter A. Garbis*		61	Vice President, Organization Development
Jamil F. LaHam		54	Vice President, Cardiopulmonary Systems
J. Donald Ferry, Jr.		48	General Manager, Manufacturing, St. Louis Operations
Thomas Handel		37	Vice President, Sales

*     Executive Officer

Mr. Miller joined the Company as President in June 1989, was elected Chief Executive Officer in June 1990 and was elected Chairman of the Board in April 1996. 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.

Mr. Rebert joined Meridian in May 2002 as President, Cardiopulmonary Systems, with responsibility for Meridian’s cardiopulmonary business, including the PRIME ECG system and telemedicine products. Prior to joining Meridian, he was president and CEO of Vesta Medical, Inc., a medical device company. He also held senior management positions at Circon Corporation and American Hospital Supply. Mr. Rebert has more than twenty years of experience in the medical device and hospital products industries.

Dr. Wannarka joined Meridian in December 1997 as Vice President, Technology and Government Systems and was promoted to Senior Vice President in September 1998. He then was promoted to Chief Technology Officer in May 2001. 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, Specialty Pharmaceuticals, 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.

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Mr. Kilgore joined Meridian in April 2000 as Senior Vice President, General Manager Specialty Pharmaceuticals. From January 1997 to March 2000, Mr. Kilgore was Director of Marketing and Business Development for Becton Dickinson Pharmaceutical Systems. There he was also responsible for worldwide licensing activities including sales and marketing activities associated with Becton Dickinson Advanced Injection Systems, which focused on new delivery technology for the delivery of parenteral pharmaceuticals. Prior to his position at Becton Dickinson, Mr. Kilgore was Director of Business Development at Reed & Carnrick Pharmaceuticals where he negotiated several major strategic alliances with multi-national pharmaceutical companies and has held marketing management positions with Schering Plough and Winthrop Pharmaceuticals.

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. from 1996 to February 1999. 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. Prior to joining Meridian, Mr. Garbis was Director of Human Resources at Lamb Associates, a high-tech engineering consulting firm, from 1993 to 1996. Prior to this, he was Director of Human Resources at Solarex Corp., a division of Amoco, from 1981 to 1993. Other experience in the field of human resources and organizational management has been with such major companies as Lockheed Martin, ITT Telecommunications, and Nuclear-Chicago, a division of G.D. Searle.

Mr. LaHam joined Meridian in June 1997 as Director of Sales for the Cardiopulmonary Systems group. He was appointed to the position of General Manager in November 1997, and Vice President in May 2002. He has had extensive U.S. and international experience in marketing and sales with such companies as Nicolet Instruments, BOC Healthcare, and Johnson & Johnson. Prior to joining Meridian, Mr. LaHam was General Manager of US Operations for a start-up group within Pfizer.

Mr. Ferry joined Meridian in May 1994 as Senior Manager, Sterile Product Manufacturing and was promoted to Director in 1996, and Executive Director Manufacturing in April 1997. He became General Manager, St. Louis Operations in March 1998. Mr. Ferry has fifteen years experience in the parenteral drug delivery industry with Taylor Pharmacal Co. in various operations positions. Prior to joining Meridian, he had senior management responsibilities in operations at Pharmacia/Adria-SP, Inc.

Mr. Handel was previously employed with Meridian from 1991 to 1998 holding the following positions: Manager, Quality Compliance, Senior Manager, Sterile Production, Senior Manager, Technical Marketing, and Executive Director, Business Development. Mr. Handel was with Akorn, Inc. from 1998 to 2001 before rejoining Meridian in May, 2001 as Vice President, Sales. He has extensive experience in numerous aspects of the parenteral pharmaceutical industry, as well as a blend of business, technical and managerial skills. His technical and managerial background encompasses a variety of fields such as chemistry, microbiology, physical quality control, auditing, aseptic manufacturing, project management and business development.

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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, 2002, as reported on the NASDAQ National Market System.

	2002					2001
Quarter		High		Low		High		Low
First		$	25.25	$	10.95	$	19.313	$	10.250
Second			28.50		16.62		14.125		9.500
Third			42.95		19.60		13.375		8.875
Fourth			41.25		31.20		16.000		11.500

The Board of Directors has not declared any dividends on the Company’s common stock since its organization. As of September 1, 2002, there were approximately 1,200 holders of the Company’s common stock known to the Company.

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ITEM 6. SELECTED FINANCIAL DATA

Meridian Medical Technologies, Inc.

		Fiscal Year Ended July 31
(in thousands, except per share data)		2002			2001			2000			1999			1998
Operations:
Net sales		$	82,407		$	58,090		$	54,607		$	40,730		$	44,668
Gross profit			39,055			24,305			22,016			12,710			17,577
Operating income			19,241			8,782			7,349			1,287			3,067
Other expense, net			(1,167	)		(2,821	)		(3,536	)		(3,027	)		(2,629	)
Income (loss) before income tax and extraordinary loss			18,074			5,961			3,813			(1,740	)		438
Provision for income taxes			8,139			3,099			1,514			—			343
Income (loss) before extraordinary loss			9,935			2,862			2,299			(1,740	)		95
Extraordinary loss on debt refinancing			(645	)		—			—			—			(494	)
Net income (loss)		$	9,290		$	2,862		$	2,299		$	(1,740	)	$	(399	)
Earnings per common share:
Income before extraordinary loss		$	2.45		$	.93		$	.77		$	(.58	)	$	.03
Extraordinary loss			.16			—			—			—			(.17	)
Net income per common share		$	2.29		$	.93		$	.77		$	(.58	)	$	(.14	)
Earnings per common share assuming dilution:
Income before extraordinary loss		$	2.15		$	.81		$	.70		$	(.58	)	$	.03
Extraordinary loss			.14			—			—			—			(.15	)
Net income per common share assuming dilution		$	2.01		$	.81		$	.70		$	(.58	)	$	(.12	)
Weighted average shares:
	Basic		4,056			3,064			2,996			2,993			2,971
	Diluted		4,627			3,549			3,276			2,993			3,328
EBITDA (1)		$	22,642		$	12,602		$	10,913		$	5,103		$	6,861
EBITDA margin			27.5	%		21.7	%		20.0	%		12.5	%		15.4	%
Financial Position:
Current assets		$	35,051		$	18,613		$	18,809		$	20,233		$	18,296
Working capital			21,848			11,699			7,586			4,373			6,046
Fixed assets, net			16,624			16,464			15,795			15,826			16,389
Total assets			59,479			43,498			44,685			47,751			46,847
Long-term debt			—			15,813			16,823			17,639			18,850
Shareholders’ equity			44,057			17,746			14,091			11,738			13,338

(1)  EBITDA represents operating income plus other income and depreciation and amortization. EBITDA is not a measure of performance or financial condition under generally accepted accounting principles, but is presented to provide additional information related to operating results. EBITDA should not be considered in isolation or as a substitute for other measures of financial performance or liquidity under generally accepted accounting principles. While EBITDA is frequently used as a measure of operations and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Revenues and operating income by segment for the years ended July 31 are as follows:

		2002			2001			2000
Revenues:
	Specialty pharmaceuticals	$	77,857		$	55,264		$	53,106
	Cardiopulmonary systems		4,550			2,826			1,501
Total revenues		$	82,407		$	58,090		$	54,607
Operating income (loss):
	Specialty pharmaceuticals	$	23,611		$	11,652		$	10,064
	Cardiopulmonary systems		(4,370	)		(2,870	)		(2,715	)
Total operating income		$	19,241		$	8,782		$	7,349
Operating income (loss) %:
	Specialty pharmaceuticals		30.3	%		21.1	%		19.0	%
	Cardiopulmonary systems		(96.0	%)		(101.6	%)		(180.9	%)
Total operating income %			23.3	%		15.1	%		13.5	%

2002 compared with 2001

MMT’s net income after taxes for the year ended July 31, 2002 was $9.3 million, or $2.01 per diluted share, on revenues of $82.4 million compared to an adjusted fiscal 2001 net income of $4.0 million, or $1.13 per diluted share, on revenues of $58.1 million, reflecting a 132.4% increase in net income and a 41.9% increase in revenues. Excluding the extraordinary loss as a result of the early extinguishment of debt, net income for the year ended July 31, 2002 was $9.9 million, or $2.15 per diluted share. For comparative purposes, last year’s reported net income was adjusted to reflect the pro forma impact of SFAS No. 142, “Goodwill and Other Intangible Assets,” which the Company adopted effective August 1, 2001. This allowed the Company to stop amortizing its excess of cost over net assets acquired. The adoption of this standard in the first quarter of fiscal 2002 had the impact of reducing annual amortization expense by approximately $1.1 million (or approximately $0.32 per diluted share). See Note 1 of the Notes to Consolidated Financial Statements for additional information on the adoption of SFAS No. 142.

Gross margins increased to 47.4% in 2002 compared to 41.8% in 2001, due to higher volumes, a more favorable product mix, and the Company’s focus on manufacturing efficiencies. Operating expenses increased by 27.6% from 2001 to 2002, but improved as a percentage of net sales. Operating income and EBITDA were $19.2 and $22.6 million, respectively, in 2002, up from $8.8 and $12.6 million in 2001 due to significant volume increases and improved overall operational efficiency.

Within Specialty Pharmaceuticals, Commercial sales were $40.7 million in 2002, 20.1% higher than 2001 resulting primarily from increased demand for the EpiPen product line. Government sales were $37.2 million, 73.6% higher than 2001 as sales to the DoD, foreign governments, and for Homeland Security increased significantly. Cardiopulmonary Systems sales were $4.6 million in 2002, 61.0% higher than 2001 reflecting higher telemedicine sales.

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Operating costs were $19.8 million in 2002, an increase of $4.3 million from 2001. The Company made significant investments in the PRIME ECG® marketing infrastructure by expanding management and creating a direct U.S. sales force. The Company also continued to pursue opportunities relating to expanding its commercial product line within specialty pharmaceuticals. The Company expensed $4.3 million, $2.8 million and $2.9 million on research and development activities in fiscal 2002, 2001, and 2000, respectively, excluding costs associated with customer-funded projects. The Company expects research and development expenditures in fiscal 2003 to be higher than the fiscal 2002 level, as efforts in this area continue to accelerate.

Non-operating expenses in 2002 were $1.2 million, 58.6% lower than in 2001. The lower level in 2002 is a result of decreased interest expense, which was realized through an early extinguishment of $17.8 million of debt during the quarter ended January 31, 2002. The income tax provision was $8.1 million in 2002, reflecting a 45.0% effective rate, and $3.1 million in 2001, reflecting a 52.0% effective rate. The tax provision was adversely impacted by foreign subsidiary losses for which no tax benefits are recorded and, in 2001, non-deductible goodwill amortization. The impact of the foreign loss increases the effective tax rate for fiscal 2002 from 40% to 45.0%. The decrease in the effective rate from the prior year reflects the higher ratio of domestic income to foreign losses for the year, and the impact of no longer recording non-deductible goodwill amortization.

Line of Business Discussion

The Specialty Pharmaceuticals segment consists of Commercial Systems and Government Systems. Commercial Systems operations include sales of Meridian’s highly recognized EpiPen product, used in the emergency treatment of allergic reactions to insect stings or bites, foods, drugs and other allergens, as well as idiopathic or exercise induced anaphylaxis.

Within the Specialty Pharmaceuticals segment, Commercial Systems sales were $40.7 million in 2002, 20.1% higher than in 2001 due to increased revenue from the EpiPen product, and increased R&D services. The level of demand of EpiPen has surpassed any previous period, and is expected to continue growing.

Contract Research and Development revenue was $3.4 million in fiscal 2002, 9.9% higher than fiscal 2001. This business unit is expected to generate revenues in fiscal 2003 comparable to 2002.

The Company is moving forward on its new product initiative to market branded specialty pharmaceuticals. Current new therapies awaiting regulatory approval, under development or in negotiations include anti-seizure drugs and other central nervous system (“CNS”) agents frequently prescribed by neurologists. The Company anticipates future revenue growth from these products and plans to coordinate the sales, marketing and distribution of future products, rather than entering into marketing and distribution arrangements with third parties.

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Within Government Systems, the Company has a long-standing relationship with the DoD, and also markets its products to foreign governments and state and local governments for Homeland Security. Government Systems revenues increased 73.6% in 2002 compared to the prior year, to $37.2 million. Military revenues (DoD and foreign government) were $29.4 million for the year ended July 31, 2002, an increase of 41.2% from the prior year. DoD revenues were 42.0% higher than the prior year, reflecting DoD demands related to heightened military readiness, while foreign government revenues increased 38.9% for the year due to the timing of procurements by foreign military customers. Homeland Security sales were $7.8 million for the year ended July 31, 2002 versus $639,000 for the prior year. This dramatic increase reflects shipments of nerve agent antidotes and other military auto-injector products to state and local first responders under the Metropolitan Medical Response System (“MMRS”), and to other non-military agencies, such as the Department of Health and Human Services (“HHS”), as an initial response to the terrorist attacks of September 11, 2001, and current heightened levels of readiness.

The Company maintains a core business relationship with the DoD through its IBMC, which was successfully renegotiated in 2002. 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 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. The IBMC contributed 60.3% of the total Government Systems revenue in fiscal 2002, and is expected to generate at least $17 million in revenues in fiscal 2003. For purposes of complying with terms of a contract, the Company discloses that for the year ended July 31, 2002, sales of diazepam auto-injectors to customers other than the DoD totaled 96,815 units.

Cardiopulmonary Systems revenues were $4.6 million for the year ended July 31, 2002 compared to $2.8 million for the prior year, primarily due to stronger telemedicine sales. MMT’s distributor of telemedicine products, SHL, is party to a joint venture with Philips Medical Systems to market cardiology telemedicine products and services in targeted markets in Europe. The increased telemedicine revenues include orders placed as a result of this continued market expansion. Additionally, in 2002, SHL acquired Raytel Medical Corporation a U.S. provider of remote cardiac monitoring and testing. SHL has advised Meridian that SHL plans to use this acquisition as an entry into the U.S. market.

In March 2002, the Company obtained approval from the FDA to market its PRIME ECG® product in the U.S. The Company then prepared for the U.S. launch of PRIME ECG® by investing in a sales and marketing infrastructure to support the product. The Company plans to maintain on-going marketing efforts to support sales, education and promotional activities. A strategy has also been formulated for product cost-justification and reimbursement. Additionally, the Company announced the hiring of Mr. Carl J. Rebert as President, Cardiopulmonary Systems in May 2002. Mr. Rebert will have overall responsibility for the segment.

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2001 compared with 2000

MMT’s net income after taxes for the year ended July 31, 2001 was $2,862,000, or $0.81 per share, on revenues of $58.1 million compared to fiscal 2000 net income of $2,299,000, or $0.70 per share, on revenues of $54.6 million, reflecting a 6.4% increase in revenues. Gross margins increased to 41.8% in 2001 compared to 40.3% in 2000, due to higher volumes, a more favorable product mix, and the Company’s focus on manufacturing efficiencies. Operating expenses increased by 5.8% from 2000 to 2001, but improved as a percentage of net sales. Operating income and EBITDA were $8.8 and $12.6 million, respectively, in 2001, up from $7.3 and $10.9 million in 2000 due to improved overall operational efficiency.

Within Specialty Pharmaceuticals, Commercial sales were $33.8 million in 2001, 25.2% higher than 2000 resulting primarily from an increased demand for the EpiPen and the introduction of the EpiPen 2-Pak™. Government sales were $21.4 million, 17.8% lower than 2000 as sales to foreign governments decreased due to the timing of orders. Cardiopulmonary Systems sales were $2.8 million in 2001, 88.3% higher than 2000 reflecting higher telemedicine sales.

Operating costs were $15.5 million in 2001, an increase of $856,000 from 2000. In addition to expanding investment in the PRIME ECG® marketing infrastructure, the Company incurred expenses related to its initial efforts in developing a specialty pharmaceutical business unit. The Company expensed $2.8 million and $2.9 million on research and development activities in fiscal 2001 and 2000, respectively, excluding costs associated with customer-funded projects.

Non-operating expenses in 2001 were $2.8 million, 20% lower than in 2000. The lower level in 2001 is a result of decreased interest expense, which was realized through a combination of lower debt balances and lower interest rates. During the year, bank debt was reduced by $2.7 million, while the Company held $2.2 million of cash at July 31, 2001. The income tax provision was $3.1 million in 2001, reflecting a 52% effective rate, and $1.5 million in 2000, reflecting a 40% effective rate. The 2000 tax provision benefited from utilization of operating loss carryforwards for which valuation allowances were previously provided. Also, the foreign losses for which the Company takes no consolidated tax benefit were higher in 2001 as compared to 2000. The impact of the foreign loss increased the effective tax rate for fiscal 2001 from 39% to 52%.

Line of Business Discussion

Within the Specialty Pharmaceuticals segment, Commercial Systems sales were $33.8 million in 2001, 25% higher than in 2000 due to increased revenue from the EpiPen product, and increased R&D services. In March 2001, the Company launched the EpiPen 2-Pak, a new product packaging, where two EpiPen units and one EpiPen trainer are sold in one package. The initial sales of the 2-Pak were primarily to stock the product with retailers. EpiPen 2-Pak sales accounted for approximately 14% of the total $29.9 million of EpiPen revenues for the year. Contract Research and Development revenue was $3.1 million in fiscal 2001, 106.7% higher than fiscal 2000.

Government Systems revenues fell 17.8% in 2001 compared to the prior year, to $21.4 million. The decrease reflected the cyclical nature of procurements, which are tied to the needs of U.S. and allied military customers. The IBMC with the DoD contributed 73.7% of the total Government Systems revenue in fiscal 2001. For purposes of complying with terms of a contract, the Company discloses that for the year ended July 31, 2001, sales of diazepam auto-injectors to customers other than the U.S. DoD totaled 64,635 units.

The Company maintains a Homeland Security business unit within Government Systems. Revenues within the Homeland Security unit were $639,000 in 2001, 87% higher than the previous year.

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Cardiopulmonary Systems product revenues in 2001 were $2.8 million, an increase from 2000 revenues of $1.5 million. The increase was due to increased telemedicine orders to support SHL and its newly announced joint venture with Philips Medical.

Liquidity and Capital Resources

Total cash at July 31, 2002 was $13.0 million, an increase of $10.8 million from July 31, 2001. The Company generated $17.0 million in cash from operations for the current year attributable mostly to net income, non-cash depreciation and amortization, and higher accounts payable and other liabilities, offset by higher inventories. Investing activities in fiscal 2002 used $2.8 million of cash for capital additions, offset by the release of restricted cash. Financing activities used $3.4 million. During the year ended July 31, 2002, the Company issued 727,000 shares of common stock generating gross proceeds to the Company of $10.4 million through a private placement transaction. The Company also issued 618,818 shares of common stock through the exercise of options and warrants, generating gross proceeds of $4.6 million. The proceeds from the issuance of these shares along with cash provided by operations were used to repay in full all of the Company’s debt facilities, which included a $2.75 million term loan from ING, and a $15 million subordinated note from Nomura Holdings. The Company presently has no outstanding debt, and has obtained a $20 million senior revolving credit loan and acquisition line from Fleet National Bank.

Working capital at July 31, 2002 was $21.8 million, up from $11.7 million at July 31, 2001. The increase was primarily attributable to higher cash ($10.8 million), higher inventory ($5.3 million), and the elimination of long-term debt (the current portion of which was $1.3 million at July 31, 2001), offset by higher accounts payable and other accrued liabilities ($7.6 million). At July 31, 2002, accounts receivable were $7.1 million, representing 38 days-sales-outstanding, and inventories were $12.1 million representing a turn-over rate of 4.6 times per year.

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Critical Accounting Policies

Revenue Recognition:

The majority of the Company’s revenues involve sales of medical products to commercial, military, and governmental customers. Revenues are recognized as products are shipped and title has transferred to the customer. In addition, we earn substantial revenues from the IBMC with the DoD. The IBMC calls for production of auto-injectors, the retention by the Company of key personnel and facilities to assure expertise for manufacturing 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. Revenues from this contract are recognized ratably over the contract term, with the exception of revenue from product sales which are recorded upon acceptance by the customer, and revenue from the component prestocking program which are recognized as the raw materials have been accepted by the customer and title has passed to the customer.

Inventory Valuation Allowance:

In determining the allowance for inventory obsolescence and usability, the Company assesses the inventory on-hand on a part-by-part basis and makes a judgment regarding the part’s potential future utilization. Allowances are recorded as deemed appropriate based on the part’s likelihood of use.

Long-Term Asset Impairment:

In determining whether an impairment has occurred, the Company reviews its long-lived assets, including property, plant and equipment and intangible assets, for indicators such as the nature of the asset, historical or future profitability measurements, the future economic benefit of the assets, as well as other external market conditions that may be present. If impairment indicators are present or other factors exist that indicate that the asset may not be recoverable, the Company determines whether an impairment has occurred through the use of an undiscounted cash flow analysis. If undiscounted cash flows are not sufficient to recover the asset carrying amount, a loss is recognized for the difference between the carrying amount and the estimated fair value of the asset. Fair value is estimated using discounted cash flow analysis.

The Company has capitalized software costs related to the development of PRIME ECG. The Company evaluates capitalized software costs for recoverability against anticipated future revenues, and writes down or writes off a portion of the capitalized costs if recoverability is in question.

The Company has excess of cost over net assets acquired (goodwill) related to each of its two reporting units, Specialty Pharmaceuticals and Cardiopulmonary Systems. As required by SFAS No. 142, the Company will test the value of its goodwill annually by determining whether the fair value of each reporting unit exceeds the carrying amount of its net assets, including goodwill. Any impairment that results from applying the methodology required by SFAS No. 142 will be recorded as a charge against operations.

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Recent Accounting Standards

In October 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS No. 144). SFAS No. 144 replaces SFAS No. 121, and the accounting and reporting provisions of APB Opinion No. 30, “Reporting Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” SFAS No. 144 requires that long lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. The Company will adopt the provisions of SFAS No. 144 effective August 1, 2002. The adoption of SFAS No. 144 is not expected to have a material impact on the Company’s consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145 “Recission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections” (SFAS No. 145) which, in most circumstances, will require gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS No. 4. The Company will adopt the new standard effective August 1, 2002, and anticipates that, upon reissuance of the 2002 financial statements covering the period in which the debt extinguishment occurred, the extraordinary loss will be reclassified to other expense, thereby reducing income before income taxes.

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.

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, 2002, 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 net income of approximately $164,000 for the year ended July 31, 2002. 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.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

					July 31,
Assets					2002			2001
Current assets:
	Cash and cash equivalents				$	13,005		$	2,167
	Restricted cash					—			291
	Receivables, less allowances of $169 and $68, respectively					7,067			6,834
	Inventories					12,082			6,787
	Deferred income taxes					2,143			1,829
	Other current assets					754			705
				Total current assets		35,051			18,613
	Property, plant and equipment					29,228			26,091
				Less – Accumulated depreciation		12,604			9,627
				Net property, plant and equipment		16,624			16,464
	Deferred financing fees					420			490
	Capitalized software costs					1,016			1,331
	Excess of cost over net assets acquired, net					5,266			5,266
	Other intangible assets, net					1,102			1,334
				Total assets	$	59,479		$	43,498
			Liabilities and Shareholders’ Equity
Current liabilities:
		Accounts payable and other accrued liabilities			$	13,007		$	5,518
		Note payable to bank				—			71
		Customer deposits				196			75
		Current portion of long-term debt				—			1,250
				Total current liabilities		13,203			6,914
		Long-term debt — notes payable, net of discount				—			15,813
		Deferred income taxes				1,274			1,775
		Other non-current liabilities				945			1,250
		Commitments and contingencies (Note 9)				—			—
				Total liabilities		15,422			25,752
Shareholders’ equity:
		Common stock (voting and non-voting)-
				Par value $.10 per share; 18,000,000 shares authorized; 4,543,976 and 3,197,088 shares issued		454			320
		Additional capital				49,615			33,156
		Accumulated other comprehensive income (loss) –cumulative translation adjustment				201			(227	)
		Accumulated deficit				(6,000	)		(15,290	)
		Treasury stock, 30,176 shares at cost				(213	)		(213	)
				Total shareholders’ equity		44,057			17,746
		Total liabilities and shareholders’ equity			$	59,479		$	43,498

The accompanying notes are an integral part of these consolidated financial statements.

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MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

		Year Ended July 31,
		2002		2001		2000
Net sales		$	82,407	$	58,090	$	54,607
Cost of sales (exclusive of depreciation shown separately below)			43,352		33,785		32,591
Gross profit			39,055		24,305		22,016
Selling, general, and administrative expenses			12,375		9,184		8,174
Research and development expenses			4,261		2,751		2,853
Depreciation and amortization			3,178		3,588		3,640
			19,814		15,523		14,667
Operating income			19,241		8,782		7,349
Other expense:
	Interest expense		1,054		2,735		3,301
	Other expense		113		86		235
			1,167		2,821		3,536
Income before income taxes and extraordinary loss			18,074		5,961		3,813
Provision for income taxes			8,139		3,099		1,514
Income before extraordinary loss			9,935		2,862		2,299
Extraordinary loss on debt extinguishment (net of an income tax benefit of $413)			645		—		—
Net income		$	9,290	$	2,862	$	2,299
Earnings per common share:
Income before extraordinary loss		$	2.45	$	.93	$	.77
Extraordinary loss			.16		—		—
Net income per common share		$	2.29	$	.93	$	.77
Earnings per common share assuming dilution:
Income before extraordinary loss		$	2.15	$	.81	$	.70
Extraordinary loss			.14		—		—
Net income per common share assuming dilution		$	2.01	$	.81	$	.70
Weighted average shares:
Basic			4,056		3,064		2,996
Diluted			4,627		3,549		3,276

The accompanying notes are an integral part of these consolidated financial statements.

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MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

					Year Ended July 31,
					2002			2001			2000
OPERATING ACTIVITIES:
	Net income				$	9,290		$	2,862		$	2,299
	Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation and amortization			3,178			3,588			3,640
			Amortization of unearned stock compensation			—			35			35
			Amortization of capitalized software costs			336			317			159
			Amortization of notes payable discount and deferred financing fees			229			371			369
			Tax benefit related to exercise of non-qualified stock options			1,615			—			—
			Extraordinary loss			1,058			—			—
			Deferred income taxes			(815	)		118			—
	Changes in assets and liabilities
				Receivables		(233	)		395			2,328
				Inventories		(5,295	)		1,457			(1,172	)
				Other current assets		(49	)		513			99
				Accounts payable and other accrued liabilities		7,610			(2,613	)		958
	Other					113			(43	)		(184	)
Net cash provided by operating activities						17,037			7,000			8,531
INVESTING ACTIVITIES
		Purchase of fixed assets				(3,137	)		(2,525	)		(1,747	)
		Change in restricted cash				291			(6	)		(7	)
		Capitalized software costs				—			(219	)		—
Net cash used for investing activities						(2,846	)		(2,750	)		(1,754	)
FINANCING ACTIVITIES
		Net payment of line of credit				(71	)		(1,672	)		(5,574	)
		Payment on long-term debt				(17,750	)		(1,026	)		(1,440	)
		Payment of financing fees				(510	)		—			(70	)
		Proceeds from issuance of common stock				14,978			536			159
Net cash used for financing activities						(3,353	)		(2,162	)		(6,925	)
Net increase (decrease) in cash						10,838			2,088			(148	)
Cash and cash equivalents at beginning of period						2,167			79			227
Cash and cash equivalents at end of period					$	13,005		$	2,167		$	79

The accompanying notes are an integral part of these consolidated financial statements.

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MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)

													Cumulative						Unearned
			Common		Additional		Accumulated			Translation			Treasury			Stock Option			Shareholders'
			Stock		Capital		Deficit			Adjustment			Stock			Compensation			Equity
Balance at July 31, 1999			$	299	$	32,187	$	(20,451	)	$	(14	)	$	(213	)	$	(70	)	$	11,738
	Issuance of common stock from the exercise of stock options and warrants			1		158		—			—			—			—			159
	Amortization of stock option compensation			—		—		—			—			—			35			35
	Foreign currency translation			—		—		—			(140	)		—			—			(140	)
	Net income			—		—		2,299			—			—			—			2,299
		Total comprehensive income																		2,159
Balance at July 31, 2000				300		32,345		(18,152	)		(154	)		(213	)		(35	)		14,091
	Issuance of common stock from the exercise of stock options and warrants			20		516		—			—			—			—			536
	Tax benefit from exercise of stock options and warrants			—		295		—			—			—			—			295
	Amortization of stock option compensation			—		—		—			—			—			35			35
	Foreign currency translation			—		—		—			(73	)		—			—			(73	)
	Net income			—		—		2,862			—			—			—			2,862
		Total comprehensive income																		2,789
Balance at July 31, 2001				320		33,156		(15,290	)		(227	)		(213	)		—			17,746
	Issuance of common stock from the exercise of stock options and warrants			61		4,426		—			—			—			—			4,487
	Issuance of common stock from private placement transaction			73		10,418		—			—			—			—			10,491
	Tax benefit from exercise of stock options and warrants			—		1,615		—			—			—			—			1,615
	Foreign currency translation			—		—		—			428			—			—			428
	Net income			—		—		9,290			—			—			—			9,290
		Total comprehensive income																		9,718
Balance at July 31, 2002			$	454	$	49,615	$	(6,000	)	$	201		$	(213	)	$	—		$	44,057

The accompanying notes are an integral part of these consolidated financial statements.

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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 diagnostic and monitoring products, and other innovative health care devices. The Company also supplies customized drug delivery system design, pharmaceutical research and development and FDA cGMP-approved sterile product manufacturing to pharmaceutical and biotechnology companies. The Company operates in two reporting segments: Specialty Pharmaceuticals and Cardiopulmonary Systems. Specialty Pharmaceuticals consists of Commercial and Government Systems business, both of which utilize the Company’s auto-injector technology. The Cardiopulmonary Systems segment utilizes the Company’s electrocardiology and telemedicine technologies.

Principles of Consolidation

All intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents and Restricted Cash

The Company considers all investments with a maturity of three months or less on their acquisition date to be cash equivalents. Restricted cash consisted of cash pledged as collateral on a previously outstanding letter of credit supporting the working capital line of credit at the Company’s Belfast subsidiary.

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 31.5 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.

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Intangible Assets

Intangible assets consist of the following (in thousands):

	July 31,
	2002			2001
Patents and licenses		2,453			2,451
Other		820			794
		3,273			3,245
Less: accumulated amortization		(2,171	)		(1,911	)
	$	1,102		$	1,334

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. Other intangible assets are amortized over 10 years.

Accounting Standards Recently Adopted

Effective August 1, 2001, the Company early adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Intangible Assets” (SFAS No. 142) which resulted in discontinuing the amortization of goodwill (excess of cost over net assets). Under the Statement, goodwill is carried at its book value as of the date of adoption and any future impairment of goodwill will be recognized as an operating expense in the period of impairment. However, under the terms of the Statement, identifiable intangibles with identifiable lives will continue to be amortized. Amortization expense for the year ended July 31, 2002 was $260,000, which represented the amortization relating to the identified intangible assets still required to be amortized under SFAS No. 142. For each of the next five years, intangible amortization expense relating to these identified intangibles is expected to remain at this level.

The Company has two reporting units, Specialty Pharmaceuticals and Cardiopulmonary Systems. As of July 31, 2002, the Specialty Pharmaceuticals unit has $4.7 million of net goodwill, while the Cardiopulmonary unit has $541,000 of net goodwill. There were no changes in the goodwill balance during the year. The Company completed its transitional impairment test of its goodwill balance as of the beginning of fiscal 2002. The results of the impairment test indicated that there was no impairment. The Company is required to test the value of its goodwill at least annually.

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As required by SFAS No. 142, the results for periods prior to adoption have not been restated. A reconciliation of previously reported net income and earnings per share to the amounts adjusted for the exclusion of goodwill amortization net of the related income tax effect follows (in thousands, except per share data):

			Year Ended
			July 31,
			2002		2001		2000
Reported income before extraordinary loss			$	9,935	$	2,862	$	2,299
Add back goodwill amortization, net of tax				—		1,136		1,136
		Adjusted income before extraordinary loss	$	9,935	$	3,998	$	3,435
Reported net income			$	9,290	$	2,862	$	2,299
Add back goodwill amortization, net of tax				—		1,136		1,136
		Adjusted net income	$	9,290	$	3,998	$	3,435
Basic earnings per share before extraordinary loss:
	As reported net income per share before extraordinary loss		$	2.45	$	0.93	$	0.77
	Goodwill amortization, net of tax			—		0.37		0.38
		Adjusted basic earnings per share before extraordinary loss	$	2.45	$	1.30	$	1.15
Basic earnings per share:
	As reported net income per share		$	2.29	$	0.93	$	0.77
	Goodwill amortization, net of tax			—		0.37		0.38
		Adjusted basic earnings per share	$	2.29	$	1.30	$	1.15
Earnings per share before extraordinary loss assuming dilution:
	As reported net income per share before extraordinary loss assuming dilution		$	2.15	$	0.81	$	0.70
	Goodwill amortization, net of tax			—		0.32		0.35
		Adjusted diluted earnings per share before extraordinary loss	$	2.15	$	1.13	$	1.05
Earnings per share assuming dilution:
	As reported net income per share assuming dilution		$	2.01	$	0.81	$	0.70
	Goodwill amortization, net of tax			—		0.32		0.35
		Adjusted diluted earnings per share	$	2.01	$	1.13	$	1.05

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Accounting Standards Not Yet Adopted

In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS No. 144). SFAS No. 144 replaces SFAS No. 121, and the accounting and reporting provisions of APB Opinion No. 30, “Reporting Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” SFAS No. 144 requires that long lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. The Company will adopt the provisions of SFAS No. 144 effective August 1, 2002. The adoption of SFAS No. 144 is not expected to have a material impact on the Company’s consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145 “Recission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections” (SFAS No. 145) which, in most circumstances, will require gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS No. 4. The Company will adopt the new standard effective August 1, 2002, and anticipates that, upon reissuance of the 2002 financial statements covering the period in which the debt extinguishment occurred, the extraordinary loss will be reclassified to other expense, thereby reducing income before income taxes.

Impairment of Long-lived Assets

The Company reviews its long-lived assets to determine whether an event or change in circumstances indicates that the carrying amount of the asset may not be recoverable. For long-lived assets to be held and used, the Company bases its evaluation on such impairment indicators as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, the Company determines whether an impairment has occurred through the use of an undiscounted cash flows analysis of assets at the lowest level for which identifiable cash flows exist. If impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the estimated value of the asset. The fair value of the asset is measured using discounted cash flow analysis or other valuation techniques. No impairment expense was recognized for the years ended July 31, 2002, 2001 or 2000.

35

Revenue Recognition

Sales of medical products are recorded when shipments are made to customers. Shipping terms are FOB shipping point. Revenues from the DoD industrial base maintenance contract are recorded ratably throughout the contract term, with the exception of revenue from product sales, which are recorded upon acceptance by the customer, and revenue from the component prestocking program. Under the component prestocking program, the customer purchases raw material inventory from the Company. Upon receipt and inspection of raw materials from suppliers, title passes to the customer, at which point the Company invoices the customer and records revenue. 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. The aggregate exchange gain (loss) included in determining net income was $97,000, $40,000, and $40,000 for the years ended July 31, 2002, 2001, and 2000, respectively.

Research and Development

Research and development expenses are charged to operations in the period incurred. Customer funded R&D projects generated $3.4 million, $3.1 million, and $1.5 million of revenues for the years ended July 31, 2002, 2001, and 2000, respectively. Costs associated with these projects are reported as costs of goods sold in the same period that revenue is recognized, and were $721,000, $821,000, and $390,000 for the years ended July 31, 2002, 2001, and 2000, respectively.

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. A valuation allowance reduces deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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, 2002 and 2001. Management believed the principal balance of its long-term debt as of July 31, 2001, which was $687,000 higher than the carrying value at July 31, 2001, was a better estimate of the fair value of that liability. The debt was carried net of unamortized discount.

36

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 Per Common Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands):

			Year Ended July 31,
			2002		2001		2000
		Numerator:
Net income			$	9,290	$	2,862	$	2,299
		Denominator:
Denominator for basic earnings per share – weighted average shares outstanding				4,056		3,064		2,996
Dilutive effect of stock options and warrants				571		485		280
	Denominator for diluted earnings per share			4,627		3,549		3,276

Reclassification

Certain reclassifications have been made to prior year financial statements in order to conform with the current year presentation.

2.     Inventories

Inventories as of July 31, 2002 and 2001 consist of the following (in thousands):

	2002			2001
Components and subassemblies	$	7,248		$	4,750
Work in process		4,803			2,378
Finished goods		1,099			497
		13,150			7,625
Less: inventory valuation allowance		(1,068	)		(838	)
	$	12,082		$	6,787

37

3.     Fixed Assets

Fixed assets as of July 31, 2002 and 2001 consist of the following (in thousands):

	2002			2001
Furniture and equipment	$	19,964		$	18,613
Leasehold improvements		5,987			5,378
Construction in progress		3,277			2,100
		29,228			26,091
Less: accumulated depreciation		(12,604	)		(9,627	)
	$	16,624		$	16,464

Depreciation expense was $2.9 million, $2.2 million, and $2.2 million for the years ended July 31, 2002, 2001 and 2000, respectively.

4.     Capitalized software costs

During fiscal 2001, the Company capitalized $219,000 of software development costs related to software enhancements to the PRIME ECG™ Electrocardiac Mapping System. The Company had also capitalized $1,588,000 of similar costs during fiscal 1999 and prior. The Company accounts for these development costs in accordance with SFAS 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed.” The Company began amortizing the costs that were capitalized in fiscal 1999 and prior during the third quarter of fiscal 2000, the time the product was available for general release to customers. Amortization of costs capitalized during fiscal 2001 began on March 1, 2002, the date when the product enhancements were available for general release. The capitalized costs are amortized on a product by product basis based on the greater of the ratio of current sales to estimated total sales or a straight–line basis over the remaining estimated economic life of the product, not exceeding five years. During the years ended July 31, 2002, 2001, and 2000, the Company recognized $336,000, $317,000, and $159,000 of amortization expense, respectively, which is included in cost of sales. Total accumulated amortization was $815,000 and $477,000 as of July 31, 2002 and 2001, respectively. The Company periodically evaluates the capitalized software costs for recoverability against anticipated future revenues, and writes down or writes off a portion of the capitalized costs if recoverability is in question.

5.     Debt

During the quarter ended January 31, 2002, the Company repaid in full its $2.75 million senior term loan with International Nederlanden (U.S.) Capital Corporation (“ING”) and its $15 million senior subordinated note with Nomura Holding America, Inc. (“Nomura”), primarily using proceeds from stock issuances and cash generated from operations. The Company also cancelled its $6.5 million revolving line of credit with ING and its GBP 145,000 line of credit for the Northern Ireland operations, which enabled the Company to release previously restricted cash. The Company recorded an extraordinary loss on debt extinguishment of $645,000, net of $413,000 of related tax benefit. This loss consisted of unamortized debt discount and unamortized deferred financing fees relating to the ING and Nomura credit facilities. The unamortized discount was $687,000 as of July 31, 2001 and $599,000 as of the date the debt was extinguished.

The Company has no outstanding debt at July 31, 2002.

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Senior Revolving Credit Loan and Acquisition Line

On January 31, 2002, the Company obtained a $20 million senior revolving credit loan and acquisition line from Fleet National Bank (“Fleet”). The Fleet line expires on November 30, 2004. The Company deferred $510,000 of financing fees relating to the new credit facility, which will be amortized over the life of the loan. The interest rate applicable to the senior revolving credit loan and acquisition line is equal to prime and/or LIBOR plus a margin based on the ratio of funded debt to EBITDA, which can range from minus 50 to plus 200 basis points. The Company pays a commitment fee for the unused portion of the credit facility equal to .25% per annum. The Company has made no borrowings to date under this new credit facility.

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. This note was repaid in full on January 31, 2002. The Company issued a warrant to Nomura to purchase 204,770 shares of the Company’s common stock in conjunction with entering into the agreement. $930,000 of the proceeds was allocated to the value of the warrant; accordingly, the note was carried net of the related unamortized discount. Prior to the extinguishment of the note in January 2002, the Company was amortizing the discount over the term of the debt. This resulted in charges against operations of $51,600 in fiscal 2002 prior to the repayment, and $132,800 in fiscal 2000 and 1999. Nomura exercised its warrant on November 26, 2001, using the cashless exercise option. The Company issued 157,999 shares of common stock to Nomura as a result of this exercise, generating no proceeds.

Lines of Credit

The Company had an agreement with ING for an $6.5 million line of credit and a $5 million long-term loan. The term loan was repaid in full on December 14, 2001, and the line of credit was cancelled.

The ING line of credit accrued interest at either the greater of the prime rate plus 1.25% (8.00% at July 31, 2001) or the federal funds rate plus 1.75%; or the eurodollar loan rate plus 3.25%. The ING line was secured by certain accounts receivable and inventory. The outstanding borrowing on the Company’s ING line of credit was $0 at July 31, 2001. The Company paid a commitment fee to ING of .5% on the average unused portion of the line of credit.

An additional line of credit existed for the Company’s operation in Northern Ireland. The line of credit, which was cancelled during the quarter ended January 31, 2002, was for GBP 145,000 and was secured by an irrevocable standby Letter of Credit. The line of credit matured annually each December and bore interest on outstanding borrowings at the bank’s published rate of 7.25% at July 31, 2001. The outstanding borrowing on this line of credit was $71,000 at July 31, 2001.

Long-Term Debt (ING)

The term loan with ING accrued interest at either the Eurodollar loan rate plus 3.5% or the greater of the prime rate plus 1.5% (8.25% at July 31, 2001) or the federal funds rate plus 2.00%. The outstanding balance was $2,750,000 at July 31, 2001.

Warrants were issued to ING in the financing described above. The Company allocated a portion 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 was 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. Prior to the extinguishment of the note in

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January 2002, the Company was amortizing the remaining discount over the term of the debt. This resulted in charges against operations of $36,000 in fiscal 2002 prior to the repayment, and $108,000 in fiscal 2001 and 2000. ING has exercised the warrants described above with the exception of a warrant covering 90,912 shares of common stock which remains outstanding.

Interest paid for the years ended July 31, 2002, 2001 and 2000 was $1.0 million, $2.4 million and $3.0 million, respectively.

6.     Shareholders’ Equity

Issuance of Common Stock

During the year ended July 31, 2002, the Company issued 727,000 shares of common stock generating proceeds to the Company of $10.5 million through a private placement transaction. The Company also issued 618,818 shares of common stock through the exercise of options and warrants, generating proceeds of $4.5 million.

Employee Stock Purchase Plan

The Company offers a stock purchase plan to all full-time employees whereby the employee can elect to have money withheld from their pay checks, and twice a year, use that money to purchase Company common stock at a discounted price.

Stock Options

The Company has adopted three Stock Option Plans (“the Plans”) which reserve 500,000 shares of common stock for granting of options through 2001, 500,000 shares of common stock for granting of awards through 2007, and 500,000 shares of common stock for granting of awards through 2010. While two of the Plans provide for issuance of non-qualified stock options, incentive stock options, stock appreciation rights, incentive shares and restricted stock, the Plan expiring in 2010 provides only for the issuance of non-qualified stock options, incentive stock options and restricted stock. The Company also has assumed stock options granted by predecessor companies.

Options granted to employees, officers and directors pursuant to 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, 2002, 2001 and 2000 was equivalent to or greater than the market value of the Company’s stock on the date of grant. The Company recognized $35,000 of expense in each of fiscal 2001 and 2000 as a result of options issued in prior years with exercise prices less than fair market value at the date of grant.

Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” 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 2002, 2001 and 2000: risk-free

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interest rate of 4.0%, 5.0%, and 5.0%, respectively; no dividends; a volatility factor of the expected market price of the Company’s common stock of .68, .55, and .55, respectively; and a weighted-average expected life of the options of approximately seven years. The weighted average fair value of options granted during 2002, 2001 and 2000 was $16.10, $7.77, and $4.36, respectively.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

For the purpose of pro forma disclosures, the estimated fair value of the stock options is amortized to expense over the options’ vesting periods. The Company’s pro forma net income and net income per share calculated using the provisions of FAS 123 were as follows (in thousands, except per share data):

		Year Ended July 31,
		2002			2001			2000
Net income		$	9,290		$	2,862		$	2,299
Pro forma FAS 123 expense			(1,008	)		(589	)		(394	)
Pro forma net income		$	8,282		$	2,273		$	1,905
Weighted average shares outstanding			4,056			3,064			2,996
	Pro forma net income per share	$	2.04		$	0.74		$	0.64

The following table summarizes stock option activity and stock options exercisable for the years ended July 31, 2002, 2001 and 2000.

					Weighted Average					Weighted Average					Weighted Average
		2002			Exercise price		2001			Exercise price		2000			Exercise price
Number of shares
	Options outstanding at beginning of year		1,141,948		$	7.52		1,009,834		$	6.54		795,435		$	6.81
	Granted during the year		292,500			23.72		184,000			13.46		281,326			6.20
	Exercised during the year		(183,365	)		8.81		(25,913	)		7.08		(7,032	)		9.13
	Expired or terminated		(3,086	)		17.78		(25,973	)		12.00		(59,895	)		8.02
	Options outstanding at end of year		1,247,997		$	11.10		1,141,948		$	7.52		1,009,834		$	6.54
	Options exercisable at end of year		666,941		$	6.25		646,502		$	6.20		519,334		$	6.18

The price range of options outstanding is as follows:

	2002		2001		2000
Less than $1.00		148,512		148,512		148,512
$1.00 to $5.00		51,450		66,950		66,950
$5.01 to $9.00		470,160		574,736		586,059
$9.01 to $13.00		162,300		172,050		143,613
$13.01 to $20.00		174,700		179,700		64,700
$20.01 and above		240,875		—		—
		1,247,997		1,141,948		1,009,834

The average contractual life of the Company’s options is approximately 6-10 years.

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Common Stock Warrants

Outstanding warrants to acquire the Company’s common stock as of July 31, 2002 and 2001 are as follows:

	2002		2001
Exercise price:
$1.00 -$10.99		—		204,770
@$11.00		90,912		377,417
@$18.60		36,350		—
		127,262		582,187

All warrants to purchase shares of common stock outstanding at July 31, 2002 expire during calendar year 2006.

7.     Income Taxes

The provision for federal, state, and foreign income taxes on income before extraordinary loss consists of the following (in thousands):

		Year Ended July 31,
		2002			2001			2000
Current:
	Federal	$	7,226		$	2,686		$	2,357
	State		1,568			651			447
	Foreign		—			6			185
NOL utilization			(371	)		(362	)		(1,475	)
			8,423			2,981			1,514
Deferred:
	Federal and state		(284	)		118			—
		$	8,139		$	3,099		$	1,514

The following is a reconciliation of the provision for income taxes to the provision calculated at the statutory rate (in thousands):

	Year Ended July 31,
	2002		2001			2000
Provision for income taxes at federal statutory rate	$	6,325	$	2,027		$	1,296
State taxes, net of federal income tax benefit		993		496			261
Non-deductible costs		16		440			483
Changes in valuation allowance		493		76			(920	)
Foreign taxes		82		82			321
Other		230		(22	)		73
	$	8,139	$	3,099		$	1,514

The Company paid income taxes of $4,864,600, $3,791,200, and $126,400 for the years ended July 31, 2002, 2001, and 2000, respectively.

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The Company provides deferred income taxes for temporary differences between the book basis of assets and liabilities for financial reporting purposes and the basis of assets and liabilities for tax return purposes. Deferred tax assets and liabilities were as follows at July 31, 2002 and 2001 (in thousands):

	July 31,
	2002			2001
Foreign net operating loss carryforwards	$	2,561		$	2,068
Valuation allowance		(2,561	)		(2,068	)
U.S. net operating loss and tax credits carryforward		484			425
Inventory valuation		367			326
Uniform inventory capitalization		648			280
Postretirement benefits		362			325
Incentive accrual		406			247
Vacation expense		248			153
Other		204			73
Deferred tax asset	$	2,719		$	1,829
Depreciation	$	(1,749	)	$	(1,667	)
Patent costs		(101	)		(108	)
Deferred tax liability	$	(1,850	)	$	(1,775	)

At July 31, 2002, the Company has net operating losses (NOLs) available for future use to offset U.S. income of approximately $1.2 million. These NOLs begin to expire in 2005. At July 31, 2002, the Company’s foreign subsidiaries have NOLs to offset their future income of approximately $8.5 million, which have no expiration date.

Realization of net deferred tax assets at the balance sheet date is dependent upon future earnings. Based on historical net operating losses and uncertain future earnings, a valuation allowance to offset net deferred tax assets related to all foreign NOL’s has been recorded at July 31, 2002.

For financial statement reporting purposes, income before income taxes and extraordinary loss includes the following components:

	Year Ended July 31,
	2002			2001			2000
U.S	$	19,717		$	8,003		$	5,321
Foreign		(1,643	)		(2,042	)		(1,508	)
	$	18,074		$	5,961		$	3,813

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8.     Employee Retirement Plans

Pension and Savings Plans

The Company maintains a profit sharing thrift plan covering all full-time employees in the United States. 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 profit sharing contributions in fiscal 2002, 2001, or 2000. As part of this profit sharing thrift plan, eligible employees may elect to make contributions on a pre-tax basis 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 $227,900, $207,700, and $156,700 in fiscal years 2002, 2001, and 2000, respectively.

The Company also made payments to a multi-employer 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 $187,700, $150,100, and $125,600 in fiscal years 2002, 2001, and 2000, respectively.

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. 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):

	2002			2001
Benefit obligation at the beginning of the year	$	857		$	710
Service cost		49			23
Interest cost		82			57
Actuarial loss/(gain)		303			127
Benefits paid		(99	)		(60	)
Benefit obligation at the end of the year		1,192			857
Unrecognized prior service cost		(6	)		(15	)
Unrecognized net gain		215			527
Unrecognized transition obligation		(493	)		(538	)
Accrued benefit costs	$	908		$	831

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The Company recognized net periodic postretirement expense of $175,300, $108,000, and $98,100 for the years ended July 31, 2002, 2001 and 2000, respectively, as follows (in thousands):

	2002			2001			2000
Service cost-benefits attributed to service during periods	$	49		$	23		$	20
Interest cost on accumulated postretirement benefit obligation		82			57			54
Amortization of prior service		9			9			9
Amortization of net gain		(10	)		(26	)		(30	)
Amortization of transition obligation		45			45			45
Net periodic postretirement benefit cost	$	175		$	108		$	98

For measurement purposes, an 8.0% annual rate of increase in cost of health care was assumed for fiscal 2002; the rate was assumed to decrease gradually to 5% by 2007 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, 2002 by $207,000 and the aggregate of the service and interest cost component of net periodic postretirement benefit cost by $28,500 for the year ended July 31, 2002. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.25% and 7.25% for 2002 and 2001, respectively.

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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 Kent, England, a facility in Belfast, Northern Ireland, and administrative offices in Columbia, Maryland and St. Louis, Missouri.

Future minimum rentals as of July 31, 2002 under noncancellable leases are as follows (in thousands):

Year Ending July 31,	Operating Leases		Sublease Revenue
2003	$	1,103	$	29
2004		1,102		2
2005		806		—
2006		542		—
2007		497		—
Thereafter		2,368		—
	$	6,418	$	31

The Company incurred net rental expense of $1,513,000, $1,401,000, and $1,282,500 in fiscal 2002, 2001 and 2000, respectively. Included within net rental expense is sublease rental income of $207,000, $386,700, and $350,400 in fiscal 2002, 2001, and 2000, respectively.

Sale/Leaseback of Former 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 approximately $168,900 in 2002 (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 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.

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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. This agreement renews for three-year periods unless timely notice of non-renewal is given. 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. 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 all of the above agreements include continued life, 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. The maximum contingent liability under these agreements at July 31, 2002 is $2,178,700.

Purchases with Extended Payment Terms

In October 2000, the Company purchased inventory, equipment, and a patent with extended payment terms. Pursuant to the terms of the purchase agreement, payments are made semi-annually through May 2003 in amounts ranging from $100,000 to $200,000. Aggregate payments to be made under this agreement total $800,000. The Company has recorded the inventory, equipment, and patent acquired, as well as, the related liability at net present value assuming an incremental borrowing rate of 9.0%.

10.     Segment Information

The Company operates in two industry segments: Specialty Pharmaceuticals, previously known as Pharmaceutical Systems, and Cardiopulmonary Systems. 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 Cardiopulmonary Systems business unit operates in Northern Ireland with most of its revenue generated overseas. Revenues, operating income, and long-lived asset additions by segment for the years ended July 31, 2002, 2001 and 2000 and total assets at July 31, 2002, 2001 and 2000 are as follows:

		2002			2001			2000
Revenues:
	Specialty Pharmaceuticals	$	77,857		$	55,264		$	53,106
	Cardiopulmonary Systems		4,550			2,826			1,501
Total revenues			82,407			58,090			54,607
Operating income (loss):
	Specialty Pharmaceuticals	$	23,611		$	11,652		$	10,064
	Cardiopulmonary Systems		(4,370	)		(2,870	)		(2,715	)
Total operating income			19,241			8,782			7,349
Long-lived asset additions
	Specialty Pharmaceuticals	$	3,199		$	2,797		$	1,747
	Cardiopulmonary Systems		448			287			—
Total long-lived asset additions			3,647			3,084			1,747
Total assets
	Specialty Pharmaceuticals	$	52,675		$	38,767		$	40,018
	Cardiopulmonary Systems		6,804			4,731			4,667
Total assets			59,479			43,498			44,685

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11.     Significant Customers & Foreign Operations

Financial information relating to major customers and export sales follows (in thousands):

		For the year ended July 31,
		2002		2001		2000
Sales to major U.S. customers:
	U.S. Department of Defense	$	22,400	$	15,793	$	17,904
	Dey L.P.		36,702		29,861		23,918
	Other		11,801		4,617		3,459
Total			70,903		50,271		45,281
Export sales:
	Contract sales to the Governments of foreign countries		6,954		4,993		7,825
	Other		4,550		2,826		1,501
Total export sales			11,504		7,819		9,326
Total net sales		$	82,407	$	58,090	$	54,607

The Company extends credit to domestic customers and generally requires a letter of credit for export sales.

At July 31, 2002 and 2001, the Company had 50% and 67%, respectively, of its accounts receivable from two customers, Dey and the U.S. government. An affiliate of Dey, EM Industries, Inc., is a shareholder of the Company.

The Company operates subsidiaries in the U.K which represent 6.7% and 5.1% of the Company’s sales for the years ended July 31, 2002 and 2001, respectively, and 11.8% and 9.9% of the Company’s total assets at July 31, 2002 and 2001, respectively. Long-lived assets located in the U.K. were 7.4% and 7.8% of the Company’s total long-lived assets at July 31, 2002 and 2001, respectively.

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12.     Quarterly Operating Results (unaudited)

                    (in thousands, except per share data)

	Quarter Ended
Fiscal Year 2002	Oct. 31, 2001			Jan. 31, 2002			Apr. 30, 2002			Jul. 31, 2002
Net sales	$	14,777		$	24,958		$	22,270		$	20,402
Cost of sales		8,081			12,279			12,118			10,874
Gross profit		6,696			12,679			10,152			9,528
Operating expenses		3,984			5,007			5,420			5,403
Operating income		2,712			7,672			4,732			4,125
Other expense, net		(677	)		(391	)		(59	)		(40	)
Income before income taxes and extraordinary loss		2,035			7,281			4,673			4,085
Provision for income taxes		877			3,329			1,996			1,937
Extraordinary loss, net of income taxes		—			645			—			—
Net income	$	1,158		$	3,307		$	2,677		$	2,148
Earnings per common share:
Income before extraordinary loss	$	0.36		$	0.97		$	0.60		$	0.47
Extraordinary loss		—			0.16			—			—
Net income per common share	$	0.36		$	0.81		$	0.60		$	0.47
Earnings per common share assuming dilution:
Income before extraordinary loss	$	0.32		$	0.86		$	0.53		$	0.42
Extraordinary loss		—			0.14			—			—
Net income per common share assuming dilution	$	0.32		$	0.72		$	0.53		$	0.42

Fiscal Year 2001	Oct. 31, 2000			Jan. 31, 2001			Apr. 30, 2001			Jul. 31, 2001
Net sales	$	12,986		$	14,021		$	14,774		$	16,309
Cost of sales		7,848			8,084			8,649			9,204
Gross profit		5,138			5,937			6,125			7,105
Operating expenses		3,621			4,197			4,003			3,702
Operating income		1,517			1,740			2,122			3,403
Other expense, net		(702	)		(755	)		(652	)		(712	)
Income before income taxes		815			985			1,470			2,691
Provision for income taxes		390			500			706			1,503
Net income	$	425		$	485		$	764		$	1,188
Net income per common share	$	0.14		$	0.16		$	0.25		$	0.38
Net income per common share assuming dilution	$	0.12		$	0.14		$	0.22		$	0.33

During the quarter ended January 31, 2002, the Company repaid in full its $2.75 million senior term loan with ING and its $15 million senior subordinated note with Nomura, primarily using proceeds from stock issuances and cash generated from operations. The Company also cancelled its $6.5 million revolving line of credit with ING and its GBP 145,000 line of credit for the Northern Ireland operations, which enabled the Company to release previously restricted cash. The Company recorded an extraordinary loss

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on debt extinguishment of $645,000, net of $413,000 of related tax benefit. This loss consisted of unamortized debt discount and unamortized deferred financing fees relating to the ING and Nomura credit facilities.

On January 31, 2002, the Company obtained a $20 million senior revolving credit loan and acquisition line from Fleet. The Fleet line expires on November 30, 2004. The Company deferred $465,000 of financing fees relating to the new credit facility, which will be amortized over the life of the loan. The Company has no outstanding debt at July 31, 2002.

Effective August 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Intangible Assets” which resulted in the discontinuance of amortization of goodwill. Under this statement, goodwill will be carried at its book value as of August 1, 2001 and any future impairment of goodwill will be recognized as an operating expense in the period of impairment. Therefore no amount for goodwill amortization is included in any of the four quarters in fiscal 2002. As required by SFAS No. 142, the results for periods prior to adoption have not been restated. Goodwill amortization of $284,000 is included in operating expenses in each of the four quarters ended in fiscal 2001.

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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, 2002 and 2001 and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended July 31, 2002. Our audits also included the financial statement schedule listed in the Index at Item 15. 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 auditing standards generally accepted in the United States. 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, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended July 31, 2002, in conformity with accounting principles generally accepted in the United States. 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.

As discussed in Note 1 to the consolidated financial statements, in fiscal 2002 the Company changed its method of accounting for goodwill and intangible assets.

/s/ Ernst & Young LLP

McLean, VA
September 16, 2002

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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, 2002, 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. CONTROLS AND PROCEDURES

(a)	Evaluation of Disclosure Controls and Procedures: Not applicable.
(b)	Changes in Internal Controls: To the knowledge of the Registrant, there have not been any significant changes in the Registrant’s internal controls or in other factors that could significantly affect these controls subsequent to their evaluation in connection with the preparation of this report, including any corrective actions with regard to significant deficiencies and material weaknesses.
(c)	Asset-Backed Issuers: Not applicable.

ITEM 15. 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, 2002 and 2001.
	Consolidated Statements of Operations for the years ended July 31, 2002, 2001, and 2000.
	Consolidated Statements of Shareholders’ Equity for the years ended July 31, 2002, 2001, and 2000.
	Consolidated Statements of Cash Flows for the years ended July 31, 2002, 2001, and 2000.
	Notes to Consolidated Financial Statements.
	Report of Independent Auditors.

52

	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.
	All other schedules are omitted because they are immaterial, not applicable or the required information is shown in the consolidated financial statements or the notes thereto.

3.	The exhibits listed on the Exhibit Index on pages 56-60 of this Form 10-K are filed herewith or are incorporated herein by reference.
(b)	Reports on Form 8-K:

                         No reports on Form 8-K were filed during the quarter ended July 31, 2002.

53

SCHEDULE II

MERIDIAN MEDICAL TECHNOLOGIES, INC.
VALUATION AND QUALIFYING ACCOUNTS

				Additions		Additions
		Balance at		Charged to		Charged to
		Beginning of		other		Costs and		Write-off		Balance at
		Period		Accounts		Expenses		Deductions		End of Period
For the year ended July 31, 2002
	Allowance for doubtful accounts	$	67,900	$	—	$	104,100	$	3,000	$	169,000
	Inventory valuation allowance	$	837,700	$	—	$	1,624,400	$	1,394,500	$	1,067,600
	Restructuring reserves	$	20,500	$	—	$	—	$	20,500	$	—
For the year ended July 31, 2001
	Allowance for doubtful accounts	$	523,700	$	—	$	134,400	$	590,200	$	67,900
	Inventory valuation allowance	$	745,500	$	—	$	1,285,900	$	1,193,700	$	837,700
	Restructuring reserves	$	78,700	$	—	$	—	$	58,200	$	20,500
For the year ended July 31, 2000
	Allowance for doubtful accounts	$	466,500	$	—	$	57,200	$	—	$	523,700
	Inventory valuation allowance	$	438,000	$	—	$	1,145,300	$	837,800	$	745,500
	Restructuring reserves	$	134,300	$	—	$	—	$	55,600	$	78,700

54

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MERIDIAN MEDICAL TECHNOLOGIES, INC.
(Registrant)

By /S/JAMES H. MILLER
James H. Miller
Chairman of the Board
President & CEO

Dated: October 3, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

/S/ JAMES H. MILLER         James H. Miller	Chairman, President and Chief Executive Officer (Principal Executive Officer)	October 3, 2002
/S/ DENNIS P. O’BRIEN         Dennis P. O’Brien	Vice President of Finance and Chief Financial Officer (Principle Financial and Accounting Officer)	October 3, 2002
*         Thomas L. Anderson	Director	October 3, 2002
*         Bruce M. Dresner	Director	October 3, 2002
*         Robert G. Foster	Director	October 3, 2002
*         David L. Lougee	Director	October 3, 2002
* By: /S/ JAMES H. MILLER             James H. Miller             Attorney-in-fact		October 3, 2002

55

CEO Certification

I, James H. Miller, Chairman, President and Chief Executive Officer of Meridian Medical Technologies, Inc., certify that:

1.	I have reviewed this annual report on Form 10-K of Meridian Medical Technologies, Inc. for the fiscal year ended July 31, 2002;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

October 3, 2002

/S/ JAMES H. MILLER

James H. Miller
Chairman, President and
Chief Executive Officer
Meridian Medical Technologies, Inc.

56

CFO Certification

I, Dennis P. O’Brien, Vice President of Finance and Chief Financial Officer of Meridian Medical Technologies, Inc., certify that:

1.	I have reviewed this annual report on Form 10-K of Meridian Medical Technologies, Inc. for the fiscal year ended July 31, 2002;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

October 3, 2002

/S/ DENNIS P. O’BRIEN

Dennis P. O’Brien
Vice President of Finance and
Chief Financial Officer
Meridian Medical Technologies, Inc.

57

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
3.1	The Company’s Bylaws (as amended). Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended July 31, 1997 (File No. 0-5958).
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 Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended July 31, 1997 (File No. 0-5958).
4.1	Form of Securities Purchase Agreement, dated as of November 30, 2001, by and among Meridian Medical Technologies, Inc. and the purchasers in the Company’s December 5, 2001 private placement. Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K dated December 13, 2001 (File No. 0-5958).
4.2	Warrant issued by the Company to Fahnestock & Co. Inc. in connection with the Company’s December 5, 2001 private placement, dated as of December 5, 2001. Incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K dated December 13, 2001 (File No. 0-5958).
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).
10.2	Lease Agreement dated August 26, 1991 between Pru Beta 2 and the Company. Incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the year ended July 31, 1991 (File No. 0-5958).
10.3	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).
10.4	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).
10.5	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 (File No. 0-5958).
10.6	Agreement by and between Survival Technology, Inc. and EM Industries, Inc., dated as of October 21, 1996. Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 31, 1999 (File No. 0-5958).

58

10.7	Supply Agreement dated as of January 1, 2001 between Meridian Medical Technologies, Inc. and Dey, L.P. Incorporated by reference to Exhibit 10.41 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2001 (File No. 0-5958). (Portions of this Exhibit have been omitted pursuant to a Confidential Treatment Request, which the Company has filed separately with the Securities and Exchange Commission.)
10.8	Warrant Purchase Agreement, dated as of April 15, 1996, between Brunswick and Internationale Nederlanden (U.S.) Capital Corporation. Incorporated by reference to Exhibit 2 to the Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996 (File No. 5-35771).
10.9	First Amendment to Warrant Purchase Agreement, dated as of October 25, 1996, between Brunswick and Internationale Nederlanden (U.S.) Capital Corporation. Incorporated by reference to Exhibit 5 to the Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996 (File No. 5-35771).
10.10	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 to Exhibit 7 to the Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996 (File No. 5-35771).
10.11	Warrant Certificate for 90,912 Warrants of Meridian Medical Technologies, Inc. — Certificate No. 1. Incorporated by reference to Exhibit 10 to the Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996 (File No. 5-35771).
10.12	Form of Registration Rights Agreement with former Brunswick stockholders. Incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 31, 1996. (File No. 0-5958).
10.13	Registration Rights Agreement, dated as of April 15, 1996, between Brunswick and Internationale Nederlanden (U.S.) Capital Corporation. Incorporated by reference to Exhibit 3 to the Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996 (File No. 5-35771).
10.14	Loan and Security Agreement between the Company and Fleet National Bank dated January 30, 2002. Incorporated by reference to Exhibit 10.37 to the Company’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2002 (File No. 0-5958).
10.15	Contract SP0200-02D-0006 dated September 15, 2002 between the U.S. Government (Defense Personnel Support Center) and the Company. Filed herewith.
10.16	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.*
10.17	Meridian Medical Technologies, Inc. 1997 Long-Term Incentive Plan. Incorporated by reference to Exhibit 4 to Registration Statement No. 333-32498 on Form S-8.*
10.18	Meridian Medical Technologies, Inc. 2000 Stock Incentive Plan. Incorporated by reference to Exhibit 4 to Registration Statement No. 333-54780 on Form S-8.*

59

10.19	Form of Change of Control Agreement between the Company and Dr. Gerald L. Wannarka, Mr. Peter A Garbis, Mr. Dennis P. O’Brien, and Mr. Robert J. Kilgore dated October 9, 2001. Incorporated by reference to Exhibit 10.36 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2001 (File No. 0-5958).*
10.20	Change of Control Agreement between the Company and Mr. Carl J. Rebert dated May 6, 2002. Incorporated by reference to Exhibit 10.39 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2002 (File No. 0-5958).*
10.21	Independent Consultant Agreement between the Company and Thomas L. Anderson dated December 6, 2001. Incorporated by reference to Exhibit 10.38 to the Company’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2002 (File No. 0-5958).*
10.22	Employment agreement with James H. Miller, dated December 6, 2001. 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	Power of Attorney of the Company’s Directors. Filed herewith.
99.1	CEO Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.
99.2	CFO Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.
99.3	Factors affecting the Company’s business and prospects. Filed herewith.

*  Management contract, compensatory plan or arrangement. EX-10.15 3 w64342exv10w15.htm EXHIBIT 10.15

EXHIBIT 10.15

AWARD/CONTRACT	1.	This contract is rated order under DPAS (15 CFR 350)	Rating DO C9	Page of Pages      1     |     59
2. Contract (Pros. last.) No.	3.	Effective Date	4. Requisition/Purchase Request/Project No.
SP0200-02D-0006		13 SEP 2002	DD# 01010

5. Issued by	Code  |	SP0200	6. Administered by (if other than Item 5)	Code   S2101A
DEFENSE SUPPLY CENTER PHILADELPHIA ATTN: DSCP-MGAA (BLDG #6) 700 ROBBINS AVENUE PHILADELPHIA, PA 19111-5092 ATTN: A. PODLAS (DSCP-MGAA-PGC) 215-737-5768			DCMC BALTIMORE 217 EAST REDWOOD STREET SUITE 1800 BALTIMORE, MD 21202-5299
7. Name and Address of Contractor (No.,Street,city,county,state,zipcode)			8. Delivery
	MERIDIAN MEDICAL TECHNOLOGIES, INC. 10240 OLD COLUMBIA ROAD COLUMBIA, MD 21046 ATTN: MS. CRISTINA D’ERASMO		x   FOB ORIGIN 9. DISCOUNT FOR PROMPT PAYMENT .5% 10 DAYS 10. SUBMIT INVOICES (4 copies unless otherwise specified herein) ADDRESS SHOWN IN:	o OTHER (See below) ITEM
CODE 54452		FACILITY CODE
11. SHIP TO/MARK FOR		Code  |	12. PAYMENT WILL BE MADE BY	Code   HQ0338
SEE INDIVIDUAL DELIVERY ORDERS			DFAS-COLUMBUS CENTER DFAS-CO/SOUTH ENTITLEMENT OPERATIONS P.O. BOX 182264 COLUMBUS, OH       43218-2264
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION:			14. ACCOUNTING AND APPROPRIATION DATA
x 10USC2304(c)	( 3 )	o 41USC253(c) (      )	MG97X4930  5CMO 01 25.0 S33150 (CLINs 0001, 0002 & 0006) MG97X4930  5CMO 01 26.0 S33150 (CLINs 0004 and 0005)

15.A. ITEM No.	15B. SUPPLIES/SERVICES	15C. QUANTITY	15D. UNIT	15E. UNIT PRICE       15F. AMOUNT
	SEE ATTACHED PAGES
			15G. TOTAL AMOUNT OF CONTRACT   $
16. TABLE OF CONTENTS

(X)	SEC.	DESCRIPTION	PAGE(S)	(X)	SEC.	DESCRIPTION	PAGE(S)
PART 1 - THE SCHEDULE				PART II - CONTRACT CLAUSES
	A	SOLICITATION/CONTRACT FORM			I	CONTRACT CLAUSES
	B	SUPPLIES OR SERVICES AND PRICES/COST		PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.
	C	DESCRIPTION/SPECS./WORK STATEMENT			J	LIST OF ATTACHMENTS
	D	PACKAGING AND MARKING		PART IV - REPRESENTATIONS AND INSTRUCTIONS.
	E	INSPECTION AND ACCEPTANCE			K	REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS OF OFFERORS
	F	DELIVERIES OR PERFORMANCE
	G	CONTRACT ADMINISTRATION DATA			L	INSTRS., CONDS., AND NOTICES TO OFFERORS
	H	SPECIAL CONTRACT REQUIREMENTS			M	EVALUATION FACTORS FOR AWARD
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE

17. o 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. x AWARD (Contractor is not required to sign this document). Your offer on Solicitation Number SP0200-01R-1005 (see page 25), 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 consummates 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
JAMES H. MILLER  - CHAIRMAN, PRESIDENT & CEO	ANNA PODLAS

19B. NAME OF CONTRACTOR	19C. DATE SIGNED 9/13/02	20B. UNITED STATES OF AMERICA	19C. DATE SIGNED 9/13/02
BY   /s/ JAMES H. MILLER		BY   /s/ ANNA PODLAS
(Signature of person authorized 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)

CONTRACT:            SP0200-02D-0006

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 [now known as Deployable Force Package
(DFP)]

     To provide on-site support for the storage, assembly, and shipment of Deployable Force Packages in accordance with statement of work.

0004      BASE MAINTENANCE/MATERIAL

     To provide completely assembled Mark I Kits, Atropine, Pralidoxime, Diazepam, Morphine, and ATNAA (when fielded by Army) 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      PROGRAM MANAGEMENT UNDER READINESS ENHANCEMENT PROGRAM (REP)

     To maintain a contract with a personnel company to ensure a trained personnel pool is available to staff a 2nd and 3rd shift in accordance with statement of work.

2

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

					SCHEDULE
ITEM NO.	SUPPLIES				QTY		U/I	U/P		TOTAL
0001	BASE MAINTENANCE/SERVICE
0001AA	BASE YEAR*					1	LT	$	8,409,568.13	$	8,409,568.13
0001AB	OPTION YEAR ONE**					1	LT	$	10,060,341	$	10,060,341
0001AC	OPTION YEAR TWO***					1	LT	$	10,507,790	$	10,507,790
0002	LOGISTICS MAINTENANCE
0002AA	BASE YEAR*					1	LT	$	1,231,121.50	$	1,231,121.50
0002AB	BASE YEAR ONE**					1	LT	$	1,526,755	$	1,526,755
0002AC	BASE YEAR TWO***					1	LT	$	1,653,352	$	1,653,352
0003	DIVISION-READY BRIGADE SET PROGRAM (Now known as Deployable Force Package)
0003AA	BASE YEAR*					1	LT	$	0	$	0
0003AB	OPTION YEAR ONE**					1	LT	$	0	$	0
0003AC	OPTION YEAR TWO***					1	LT	$	0	$	0
0004	BASE MAINTENANCE/MATERIAL							ANNUAL ESTIMATE
0004AA	BASE YEAR
MARK I		(6505-01-174-9919	)			380,350	EA	$	9.19	$	3,495,416.50
		24,500		thru		122,500		$	9.74
		122,501		thru		367,500		$	9.41
		367,501		thru		637,000		$	9.19
		637,001		thru		882,000		$	9.15
		882,001		thru		1,300,000		$	9.12
ATROPINE		(6505-00-926-9083	)			414,440	EA	$	2.99	$	1,239,175.60
		40,529		thru		121,587		$	3.15
		121,588		thru		364,761		$	3.07
		364,762		thru		648,464		$	2.99
		648,465		thru		891,638		$	2.99
		891,639		thru		1,300,000		$	2.99
PRALIDOXIME		(6505-01-125-3248	)			150,120	EA	$	5.84	$	876,700.80
		25,829		thru		116,230		$	6.16
		116,231		thru		361,606		$	5.84
		361,607		thru		645,725		$	5.72
		645,726		thru		891,100		$	5.68
		891,101		thru		1,300,000		$	5.65

*Base Year is 10.5 months (Sep 15, 2002 to Jul 31, 2003)

3

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

**Option Year One is 12 months (Aug 1, 2003 to Jul 31, 2004)
***Option Year Two is 12 months (Aug 1, 2004 to Jul 31, 2005)

4

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

					SCHEDULE
ITEM NO.	SUPPLIES				QTY		U/I	U/P		TOTAL
DIAZEPAM		(6505-01-274-0951	)			482,050	EA	$	5.10	$	2,458,455.00
		25,869		thru		116,410		$	5.48
		116,411		thru		362,166		$	5.28
		362,167		thru		633,790		$	5.10
		633,791		thru		879,546		$	5.07
		879,547		thru		1,300,000		$	5.05
MORPHINE		(6505-01-302-5530	)			145,290	EA	$	3.23	$	469,286.70
		40,094		thru		120,282		$	3.34
		120,283		thru		360,846		$	3.23
		360,847		thru		641,504		$	3.15
		641,505		thru		882,068		$	3.14
		882,069		thru		1,300,000		$	3.14
ATNAA		(6505-01-362-7427	)			447,400	EA	$	6.00	$	2,684,400
		25,000		thru		362,500		$	7.13	(See Note on Page 7)
		362,501		thru		625,000		$	6.00
		625,001		thru		875,000		$	5.80
		875,001		thru		1,300,000		$	5.73
0004AB	OPTION YEAR ONE
MARK I		(6505-01-174-9919	)			380,350	EA	$	9.51	$	3,617,128.50
		24,500		thru		122,500		$	10.08
		122,501		thru		367,500		$	9.74
		367,501		thru		637,000		$	9.51
		637,001		thru		882,000		$	9.47
		882,001		thru		1,300,000		$	9.44
ATROPINE		(6505-00-926-9083	)			414,440	EA	$	3.09	$	1,280,619.60
		40,529		thru		121,587		$	3.26
		121,588		thru		364,761		$	3.18
		364,762		thru		648,464		$	3.09
		648,465		thru		891,638		$	3.09
		891,639		thru		1,300,000		$	3.09

5

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

					SCHEDULE
ITEM NO.	SUPPLIES				QTY		U/I	U/P		TOTAL
PRALIDOXIME		(6505-01-125-3248	)			150,120	EA	$	6.04	$	906,724.80
		25,829		thru		116,230		$	6.37
		116,231		thru		361,606		$	6.04
		361,607		thru		645,725		$	5.92
		645,726		thru		891,100		$	5.88
		891,101		thru		1,300,000		$	5.85
DIAZEPAM		(6505-01-274-0951	)			482,050	EA	$	5.28	$	2,545,224.00
		25,869		thru		116,410		$	5.67
		116,411		thru		362,166		$	5.47
		362,167		thru		633,790		$	5.28
		633,791		thru		879,546		$	5.25
		879,547		thru		1,300,000		$	5.22
MORPHINE		(6505-01-302-5530	)			145,290	EA	$	3.34	$	485,268.60
		40,094		thru		120,282		$	3.46
		120,283		thru		360,846		$	3.34
		360,847		thru		641,504		$	3.26
		641,505		thru		882,068		$	3.26
		882,069		thru		1,300,000		$	3.25
ATNAA		(6505-01-362-7427	)			447,400	EA	$	6.21	$	2,778,354
		25,000		thru		362,500		$	7.38	(See Note on Page 7)
		362,501		thru		625,000		$	6.21
		625,001		thru		875,000		$	6.00
		875,001		thru		1,300,000		$	5.93
0004AC	OPTION YEAR TWO
MARK I		(6505-01-174-9919	)			380,350	EA	$	9.84	$	3,742,644.00
		24,500		thru		122,500		$	10.44
		122,501		thru		367,500		$	10.08
		367,501		thru		637,000		$	9.84
		637,001		thru		882,000		$	9.81
		882,001		thru		1,300,000		$	9.77

6

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

					SCHEDULE
ITEM NO.	SUPPLIES				QTY		U/I	U/P		TOTAL
ATROPINE		(6505-00-926-9083	)			414,440	EA	$	3.20	$	1,326,208.00
		40,529		thru		121,587		$	3.38
		121,588		thru		364,761		$	3.29
		364,762		thru		648,464		$	3.20
		648,465		thru		891,638		$	3.20
		891,639		thru		1,300,000		$	3.20
PRALIDOXIME		(6505-01-125-3248	)			150,120	EA	$	6.26	$	939,751.20
		25,829		thru		116,230		$	6.59
		116,231		thru		361,606		$	6.26
		361,607		thru		645,725		$	6.12
		645,726		thru		891,100		$	6.09
		891,101		thru		1,300,000		$	6.05
DIAZEPAM		(6505-01-274-0951	)			482,050	EA	$	5.46	$	2,631,993.00
		25,869		thru		116,410		$	5.87
		116,411		thru		362,166		$	5.66
		362,167		thru		633,790		$	5.46
		633,791		thru		879,546		$	5.43
		879,547		thru		1,300,000		$	5.40
MORPHINE		(6505-01-302-5530	)			145,290	EA	$	3.46	$	502,703.40
		40,094		thru		120,282		$	3.58
		120,283		thru		360,846		$	3.46
		360,847		thru		641,504		$	3.37
		641,505		thru		882,068		$	3.37
		882,069		thru		1,300,000		$	3.37
ATNAA		(6505-01-362-7427	)			447,400	EA	$	6.43	$	2,876,782
		25,000		thru		362,500		$	7.64	(See Note on Page 7)
		362,501		thru		625,000		$	6.43
		625,001		thru		875,000		$	6.21
		875,001		thru		1,300,000		$	6.14

Pricing under CLIN 0004 is 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 ATNAA and/or Pralidoxime and/or Diazepam Injectors.

7

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

Note: Price for ATNAA autoinjector under CLIN 0004, for Base Year and Option Year One and Two (tier 25,000 to 362,500 only), represents a not-to-exceed ceiling price. This tier price will be evaluated in mid November 2002 and will be downwardly adjusted by deducting any direct material reduction only, if applicable.

8

CONTRACT:            SP0200-02D-0006

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 I Injectors or 1.2 million injectors Atropine and/or Morphine Injectors and 1.2 million ATNAA and/or Pralidoxime and/or Diazepam Injectors), the Government is entitled to purchase up to an additional 1,000,000 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:

0004AD             BASE YEAR

ITEM NO.	SUPPLIES				QTY		U/I	U/P		TOTAL
MARK I		(6505-01-174-9919	)
		24,500		thru		122,500		$	12.89
		122,501		thru		367,500		$	12.45
		367,501		thru		637,000		$	12.15
		637,001		thru		882,000		$	12.11
		882,001		thru		1,300,000		$	12.06
ATROPINE		(6505-00-926-9083	)
		40,529		thru		121,587		$	4.23
		121,588		thru		364,761		$	4.12
		364,762		thru		648,464		$	4.01
		648,465		thru		891,638		$	4.01
		891,639		thru		1,300,000		$	4.00
PRALIDOXIME		(6505-01-125-3248	)
		25,829		thru		116,230		$	8.32
		116,231		thru		361,606		$	7.89
		361,607		thru		645,725		$	7.72
		645,726		thru		891,100		$	7.68
		891,101		thru		1,300,000		$	7.63
DIAZEPAM		(6505-01-274-0951	)
		25,869		thru		116,410		$	7.61
		116,411		thru		362,166		$	7.34
		362,167		thru		633,790		$	7.09
		633,791		thru		879,546		$	7.05

9

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

879,547 thru 1,300,000 $ 7.01

0004AD             BASE YEAR (continued)

ITEM NO.	SUPPLIES				QTY		U/I			U/P	TOTAL
MORPHINE		(6505-01-302-5530	)
		40,094		thru		120,282		$	4.65
		120,283		thru		360,846		$	4.50
		360,847		thru		641,504		$	4.38
		641,505		thru		882,068		$	4.38
		882,069		thru		1,300,000		$	4.38
ATNAA		(6505-01-362-7427	)
		25,000		thru		362,500		$	8.96
		362,501		thru		625,000		$	7.91
		625,001		thru		875,000		$	7.70
		875,001		thru		1,300,000		$	7.63
0004AE	OPTION YEAR ONE
MARK I		(6505-01-174-9919	)
		24,500		thru		122,500		$	13.35
		122,501		thru		367,500		$	12.90
		367,501		thru		637,000		$	12.59
		637,001		thru		882,000		$	12.54
		882,001		thru		1,300,000		$	12.50
ATROPINE		(6505-00-926-9083	)
		40,529		thru		121,587		$	4.38
		121,588		thru		364,761		$	4.27
		364,762		thru		648,464		$	4.15
		648,465		thru		891,638		$	4.15
		891,639		thru		1,300,000		$	4.15
PRALIDOXIME		(6505-01-125-3248	)
		25,829		thru		116,230		$	8.62
		116,231		thru		361,606		$	8.18
		361,607		thru		645,725		$	8.01
		645,726		thru		891,100		$	7.96

10

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

891,101 thru 1,300,000 $ 7.92

ITEM NO.	SUPPLIES				QTY		U/I	U/P		TOTAL
DIAZEPAM		(6505-01-274-0951	)
		25,869		thru		116,410		$	7.89
		116,411		thru		362,166		$	7.61
		362,167		thru		633,790		$	7.35
		633,791		thru		879,546		$	7.31
		879,547		thru		1,300,000		$	7.27
MORPHINE		(6505-01-302-5530	)
		40,094		thru		120,282		$	4.82
		120,283		thru		360,846		$	4.66
		360,847		thru		641,504		$	4.54
		641,505		thru		882,068		$	4.54
		882,069		thru		1,300,000		$	4.54
ATNAA		(6505-01-362-7427	)
		25,000		thru		362,500		$	9.28
		362,501		thru		625,000		$	8.20
		625,001		thru		875,000		$	7.98
		875,001		thru		1,300,000		$	7.91
0004AF	OPTION YEAR TWO
MARK I		(6505-01-174-9919	)
		24,500		thru		122,500		$	13.84
		122,501		thru		367,500		$	13.37
		367,501		thru		637,000		$	13.05
		637,001		thru		882,000		$	13.00
		882,001		thru		1,300,000		$	12.95
ATROPINE		(6505-00-926-9083	)
		40,529		thru		121,587		$	4.54
		121,588		thru		364,761		$	4.43
		364,762		thru		648,464		$	4.31
		648,465		thru		891,638		$	4.31

11

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

891,639 thru 1,300,000 $ 4.31

ITEM NO.	SUPPLIES				QTY		U/I	U/P		TOTAL
PRALIDOXIME		(6505-01-125-3248	)
		25,829		thru		116,230		$	8.93
		116,231		thru		361,606		$	8.47
		361,607		thru		645,725		$	8.29
		645,726		thru		891,100		$	8.24
		891,101		thru		1,300,000		$	8.20
DIAZEPAM		(6505-01-274-0951	)
		25,869		thru		116,410		$	8.18
		116,411		thru		362,166		$	7.89
		362,167		thru		633,790		$	7.62
		633,791		thru		879,546		$	7.58
		879,547		thru		1,300,000		$	7.54
MORPHINE		(6505-01-302-5530	)
		40,094		thru		120,282		$	5.00
		120,283		thru		360,846		$	4.84
		360,847		thru		641,504		$	4.71
		641,505		thru		882,068		$	4.71
		882,069		thru		1,300,000		$	4.71
ATNAA		(6505-01-362-7427	)
		25,000		thru		362,500		$	9.62
		362,501		thru		625,000		$	8.50
		625,001		thru		875,000		$	8.27
		875,001		thru		1,300,000		$	8.20

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 1,000,000 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.

12

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

13

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

SCHEDULE

PRESTOCK COMPONENT PRICING (Schedule B)

ITEM NO.		SUPPLIES				QTY		U/I	U/P		TOTAL
0004AG	BASE YEAR
	MARK I			(6505-01-174-9919)				EA
		24,500	thru				122,500		$	7.25
		122,501	thru				367,500		$	6.98
		367,501	thru				637,00		$	6.80
		637,001	thru				882,000		$	6.77
		882,001	thru				1,200,000		$	6.74
	ATROPINE				(6505-00-926-9083)			EA
		40,529	thru				121,587		$	2.33
		121,588	thru				364,761		$	2.26
		364,762	thru				648,464		$	2.20
		648,465	thru				891,638		$	2.19
		891,639	thru				1,200,000		$	2.19
	PRALIDOXIME				(6505-01-125-3248)			EA
		25,829	thru				116,230		$	4.62
		116,231	thru				361,606		$	4.36
		361,607	thru				645,725		$	4.26
		645,726	thru				891,100		$	4.23
		891,101	thru				1,200,000		$	4.20
	DIAZEPAM				(6505-01-274-0951)			EA
		25,869	thru				116,410		$	3.98
		116,411	thru				362,166		$	3.83
		362,167	thru				633,790		$	3.68
		633,791	thru				879,546		$	3.66
		879,547	thru				1,200,000		$	3.64
	MORPHINE				(6505-01-302-5530)			EA
		40,094	thru				120,282		$	2.48
		120,283	thru				360,846		$	2.39
		360,847	thru				641,504		$	2.32
		641,505	thru				882,068		$	2.32
		882,069	thru				1,200,000		$	2.32

14

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

SCHEDULE

PRESTOCK COMPONENT PRICING (Schedule B)

ITEM NO.			SUPPLIES			QTY		U/I		U/P		TOTAL
	ATNAA				(6505-01-362-7427)				EA
			25,000	thru			125,000			$	4.50
			125,001	thru			362,500			$	3.87
			362,501	thru			625,000			$	3.84
			625,001	thru			875,000			$	3.71
			875,001	thru			1,200,000			$	3.67
0004AH		OPTION YEAR ONE
	MARK I				(6505-01-174-9919)				EA
			24,500	thru			122,500			$	7.50
			122,501	thru			367,500			$	7.23
			367,501	thru			637,00			$	7.04
			637,001	thru			882,000			$	7.00
			882,001	thru			1,200,000			$	6.98
	ATROPINE				(6505-00-926-9083)				EA
			40,529	thru			121,587			$	2.41
			121,588	thru			364,761			$	2.34
			364,762	thru			648,464			$	2.27
			648,465	thru			891,638			$	2.27
			891,639	thru			1,200,000			$	2.27
	PRALIDOXIME				(6505-01-125-3248)				EA
			25,829	thru			116,230			$	4.78
			116,231	thru			361,606			$	4.51
			361,607	thru			645,725			$	4.41
			645,726	thru			891,100			$	4.38
			891,101	thru			1,200,000			$	4.35
	DIAZEPAM				(6505-01-274-0951)				EA
			25,869	thru			116,410			$	4.12
			116,411	thru			362,166			$	3.96
			362,167	thru			633,790			$	3.81
			633,791	thru			879,546			$	3.79

15

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

879,547 thru 1,200,000 $ 3.76

16

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

SCHEDULE

PRESTOCK COMPONENT PRICING (Schedule B)

ITEM NO.		SUPPLIES			QTY		U/I		U/P		TOTAL
	MORPHINE			(6505-01-302-5530)				EA
		40,094	thru			120,282			$	2.57
		120,283	thru			360,846			$	2.47
		360,847	thru			641,504			$	2.40
		641,505	thru			882,068			$	2.40
		882,069	thru			1,200,000			$	2.40
	ATNAA			(6505-01-362-7427)				EA
		25,000	thru			125,000			$	4.66
		125,001	thru			362,500			$	4.01
		362,501	thru			625,000			$	3.97
		625,001	thru			875,000			$	3.84
		875,001	thru			1,200,000			$	3.79
0004AJ	OPTION YEAR TWO
	MARK I			(6505-01-174-9919)				EA
		24,500	thru			122,500			$	7.77
		122,501	thru			367,500			$	7.48
		367,501	thru			637,00			$	7.28
		637,001	thru			882,000			$	7.25
		882,001	thru			1,200,000			$	7.22
	ATROPINE			(6505-00-926-9083)				EA
		40,529	thru			121,587			$	2.50
		121,588	thru			364,761			$	2.43
		364,762	thru			648,464			$	2.35
		648,465	thru			891,638			$	2.35
		891,639	thru			1,200,000			$	2.35
	PRALIDOXIME			(6505-01-125-3248)				EA
		25,829	thru			116,230			$	4.95
		116,231	thru			361,606			$	4.67
		361,607	thru			645,725			$	4.56
		645,726	thru			891,100			$	4.53

17

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

891,101 thru 1,200,000 $ 4.50

SCHEDULE

PRESTOCK COMPONENT PRICING (Schedule B)

ITEM NO.		SUPPLIES		QTY		U/I	U/P		TOTAL
	DIAZEPAM		(6505-01-274-0951)			EA
		25,869	thru		116,410		$	4.26
		116,411	thru		362,166		$	4.10
		362,167	thru		633,790		$	3.94
		633,791	thru		879,546		$	3.92
		879,547	thru		1,200,000		$	3.90
	MORPHINE		(6505-01-302-5530)			EA
		40,094	thru		120,282		$	2.66
		120,283	thru		360,846		$	2.56
		360,847	thru		641,504		$	2.49
		641,505	thru		882,068		$	2.49
		882,069	thru		1,200,000		$	2.49
	ATNAA		(6505-01-362-7427)			EA
		25,000	thru		125,000		$	4.82
		125,001	thru		362,500		$	4.15
		362,501	thru		625,000		$	4.11
		625,001	thru		875,000		$	3.97
		875,001	thru		1,200,000		$	3.93

18

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

SCHEDULE

ITEM NO.	SUPPLIES			QTY		U/I	U/P		TOTAL
0005	MOBILIZATION SURGE OPTION*
0005AA	BASE YEAR (UP TO 1,500,000 individual injectors---Mark I counts as 2)
MARK I		(6505-01-174-9919	)		614,799	EA	$	13.38
ATROPINE		(6505-00-926-9083	)		57,072	EA	$	4.36
DIAZEPAM		(6505-01-274-0951	)		181,842	EA	$	7.82
MORPHINE		(6505-01-302-5530	)		31,488	EA	$	4.75
ATNAA		(6505-01-362-7427	)		614,799	EA	$	9.31
Total					1,500,000
0005AB	BASE YEAR (1,500,001 TO 3,811,000 individual injectors---Mark I counts as 2)
MARK I		(6505-01-174-9919	)		1,562,000	EA	$	12.69
ATROPINE		(6505-00-926-9083	)		145,000	EA	$	4.34
DIAZEPAM		(6505-01-274-0951	)		462,000	EA	$	7.58
MORPHINE		(6505-01-302-5530	)		80,000	EA	$	4.75
ATNAA		(6505-01-362-7427	)		1,562,000	EA	$	8.21
Total					3,811,000
0005AC	BASE YEAR (3,811,001 AND UP individual injectors---Mark I counts as 2)
MARK I		(6505-01-174-9919	)			EA	$	12.61
ATROPINE		(6505-00-926-9083	)			EA	$	4.24
DIAZEPAM		(6505-01-274-0951	)			EA	$	7.36
MORPHINE		(6505-01-302-5530	)			EA	$	4.75
ATNAA		(6505-01-362-7427	)			EA	$	7.92

19

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

*Minimum quantity to exercise surge will be 500,000 Mark I (or 1,000,000 individual injectors)

SCHEDULE

ITEM NO.	SUPPLIES			QTY		U/I	U/P		TOTAL
0005AD	OPTION YEAR ONE (UP TO 1,500,000 individual injectors-Mark I counts as 2)
MARK I		(6505-01-174-9919	)		614,799	EA	$	13.87
ATROPINE		(6505-00-926-9083	)		57,072	EA	$	4.52
DIAZEPAM		(6505-01-274-0951	)		181,842	EA	$	8.11
MORPHINE		(6505-01-302-5530	)		31,488	EA	$	4.92
ATNAA		(6505-01-362-7427	)		614,799	EA	$	9.65
Total					1,500,000
0005AE	OPTION YEAR ONE (1,500,001 TO 3,811,000 individual injectors---Mark I counts as 2)
MARK I		(6505-01-174-9919	)		1,562,000	EA	$	13.15
ATROPINE		(6505-00-926-9083	)		145,000	EA	$	4.50
DIAZEPAM		(6505-01-274-0951	)		462,000	EA	$	7.86
MORPHINE		(6505-01-302-5530	)		80,000	EA	$	4.92
ATNAA		(6505-01-362-7427	)		1,562,000	EA	$	8.51
Total					3,811,000
0005AF	OPTION YEAR ONE (3,811,001 AND UP individual injectors---Mark I counts as 2)
MARK I		(6505-01-174-9919	)			EA	$	13.07
ATROPINE		(6505-00-926-9083	)			EA	$	4.39
DIAZEPAM		(6505-01-274-0951	)			EA	$	7.63
MORPHINE		(6505-01-302-5530	)			EA	$	4.92
ATNAA		(6505-01-362-7427	)			EA	$	8.21

20

CONTRACT:            SP0200-02D-0006

CONTRACTOR:      MERIDIAN MEDICAL TECHNOLOGIES INC.

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

SCHEDULE
ITEM NO.	SUPPLIES	QTY	U/I	U/P	TOTAL
0005AG	OPTION YEAR TWO (UP TO 1,500,000 individual injectors—Mark I counts as 2)
MARK I	(6505-01-174-9919)	614,799	EA	$14.37
ATROPINE	(6505-00-926-9083)	57,072	EA	$4.68
DIAZEPAM	(6505-01-274-0951)	181,842	EA	$8.40
MORPHINE	(6505-01-302-5530)	31,488	EA	$5.10
ATNAA	(6505-01-362-7427)	614,799	EA	$10.00
Total		1,500,000
0005AH	OPTION YEAR TWO (1,500,001 TO 3,811,000 individual injectors—Mark I counts as 2)
MARK I	(6505-01-174-9919)	1,562,000	EA	$13.63
ATROPINE	(6505-00-926-9083)	145,000	EA	$4.66
DIAZEPAM	(6505-01-274-0951)	462,000	EA	$8.15
MORPHINE	(6505-01-302-5530)	80,000	EA	$5.10
ATNAA	(6505-01-362-7427)	1,562,000	EA	$8.82
Total		3,811,000
0005AJ	OPTION YEAR TWO (3,811,001 AND UP individual injectors—Mark I counts as 2)
MARK I	(6505-01-174-9919)		EA	$13.54
ATROPINE	(6505-00-926-9083)		EA	$4.55
DIAZEPAM	(6505-01-274-0951)		EA	$7.91
MORPHINE	(6505-01-302-5530)		EA	$5.10

22

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

ATNAA (6505-01-362-7427) EA $8.51

23

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

SCHEDULE
ITEM NO.	SUPPLIES	QTY	U/I	U/P	TOTAL
0006	PROGRAM MANAGEMENT UNDER READINESS ENHANCEMENT PROGRAM (REP)
0006AA	BASE YEAR (10.5 Months)	1	LT	$75,719.84	$75,719.84
0006AB	Adm of Classification Test	1	LT	$2,158,24	$2,158,24
0006AC	Adm of Eye Test	1	LT	$647.92	$647.92
0006AD	Adm of Record Check	1	LT	$863.52	$863.52
0006AE	Adm of Initial Drug Test	1	LT	$2,391.76	$2,391.76
0006AF	Adm of Random Drug Test	1	LT	$525.00	$525.00
0006AG	Program Fee	1	LT	$5,860.40	$5,860.40
0006AH	Retaining Bonus	1	LT	$5,278.00	$5,278.00
0006AJ	Pool Training	1	LT	$57,995.00	$57,995.00
	Total				$75,719.84
0006BA	OPT YR ONE (12 Months)	1	LT	$90,201.40	$90,201.40
0006BB	Adm of Classification Test	1	LT	$2,592.00	$2,592.00
0006BC	Adm of Eye Test	1	LT	$784.00	$784.00
0006BD	Adm of Record Check	1	LT	$1,027.20	$1,027.20
0006BE	Adm of Initial Drug Test	1	LT	$2,870.40	$2,870.40
0006BF	Adm of Random Drug Test	1	LT	$627.00	$627.00
0006BG	Program Fee	1	LT	$6,988.80	$6,988.80

24

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

SCHEDULE
ITEM NO.	SUPPLIES	QTY		U/I	U/P		TOTAL
0006BH	Retaining Bonus		1	LT	$	6,032.00	$	6,032.00
0006BJ	Pool Training		1	LT	$	69,280.00	$	69,280.00
	Total						$	90,201.40
0006CA	OPT YR TWO (12 Months)		1	LT	$	93,321.40	$	93,321.40
0006CB	Adm of Classification Test		1	LT	$	2,592.00	$	2,592.00
0006CC	Adm of Eye Test		1	LT	$	784.00	$	784.00
0006CD	Adm of Record Check		1	LT	$	1,027.20	$	1,027.20
0006CE	Adm of Initial Drug Test		1	LT	$	2,870.40	$	2,870.40
0006CF	Adm of Random Drug Test		1	LT	$	627.00	$	627.00
0006CG	Program Fee		1	LT	$	6,988.80	$	6,988.80
0006CH	Retaining Bonus		1	LT	$	6,032.00	$	6,032.00
0006CJ	Pool Training		1	LT	$	72,400.00	$	72,400.00
	Total						$	93,321.40

25

CONTRACT:	SP0200-02D-0006
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:	Organichem, Rensselaer, NY
Diazepam:	Fabbrica Italiana Sintetici, SPA, Milan, Italy
Morphine:	Mallinckrodt Chemical, Inc., St. Louis, MO

Payment Address:

          Meridian Medical Technologies, Inc.
          P.O. Box 34466
          Newark, New Jersey 07189-4466

Guaranteed Minimum:

Delivery Order SP0200-02D-0006-8001 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: $224,469) will be issued during the base year.

Annual Maximum Order Quantities under line item 0004:

2,400,000 equivalent injectors (1.2 M Mark I Injectors or 1.2 M Atropine and/or Morphine Injectors and 1.2 M ATNAA and/or Pralidoxime and/or Diazepam Injectors). Quantities up to 2,400,000 will be priced under Line 0004AA (AB and AC for option year one and two, respectively). An additional quantity of

26

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

1,000,000 injectors will be priced at the unit prices stated in the contract schedule (referenced under quantities above 2.4 M).

Delivery:

For items with available pre-stocked components: For items without available pre-stocked components:       45 days after award of delivery order (assumes MMT does not have any DSCP orders in-house).   135 days after award of delivery order.

Minimum monthly deliveries during peacetime:

100,000 Mark I Injectors    or    100,000 ComboPens (ATNAA, Pralidoxime, Diazepam) and 175,000 AtroPens (Atropine, Morphine)

     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.

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 Lines 0004AD to 0004AF). This material shall be stored and rotated by the contractor to fill given delivery orders. No additional costs for storage (unless the Government owned quantities as stated on page 29 are exceeded by 10%) 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/DFP (Deployable Force Package—these were formerly known as DRB (Division Ready Brigade)) Program Statement of Work.

                       2) Material purchased under line item 0004 specifically for the Army’s DFP Program to be stored at MMT in accordance with line item 0003 and Logistics Maintenance/DFP Program Statement of Work.

                       3) Material purchased under line item 0004 specifically to support the Army’s Unit Deployment Package (UDP) Medical Potency and Dated (P&D) material Program to be stored at MMT in accordance with Logistics Maintenance/DFP Program Statement of Work.

27

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

                       4) Components purchased under line item 0004 identified as pre-stocking components.

                       5) Equipment and components purchased under the Readiness Enhancement Program (REP).

Effective Date of Award:

Effective date of Base Year shall be from 15 Sep 2002 through 31 Jul 2003, 10.5 Months. (Note: The period 8/1/2002 to 9/14/02 was an extension to the prior contract SP0200-99D-0007.)
Option Years One and Two will each be 12 months. Effective dates are 8/1/2003 to 7/31/2004, and 8/1/2004 to 7/31/2005, respectively.

The payment schedule for Line Items 0001 and 0002 (Base Year):

Line 0001
21 payments of:	$400,455.63
Line 0002
21 payments of:	$58,624.83

Invoices for payment of Lines 0001 and 0002 shall be submitted on the 15 and 30 of each month commencing Sep 30, 2002 and ending July 31, 2003.

The payment schedule for Line Items 0001 and 0002 (Option Year One):

Line 0001
24 payments of:	$419,180.88
Line 0002
24 payments of:	$63,614.79

Invoices for payment of Lines 0001 and 0002 shall be submitted on the 15 and 30 of each month commencing Aug 15, 2003 and ending July 31, 2004.

The payment schedule for Line Items 0001 and 0002 (Option Year Two):

Line 0001
24 payments of:	$437,824.58
Line 0002
24 payments of:	$68,889.67

Invoices for payment of Lines 0001 and 0002 shall be submitted on the 15 and 30 of each month commencing Aug 15, 2004 and ending July 31, 2005.

28

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

The payment schedule for Line Item 0006 (Base Year):

Line 0006
First quarter:            $10,817.12 (1.5 months only)
Invoice to be submitted end of quarter (10/31/02)
Second quarter:            $21,634.24 (three months)
Invoice to be submitted end of quarter (1/31/03
Third quarter:            $21,634.24 (three months)
Invoice to be submitted end of quarter (4/30/03)
Fourth quarter:            $21,634.24 (three months)
Invoice to be submitted end of quarter (7/31/03)

The payment schedule for Line Item 0006 (Option Year One):

Line 0006
First quarter:            $22,550.35 (three months)
Invoice to be submitted end of quarter (10/31/03)
Second quarter:            $22,550.35 (three months)
Invoice to be submitted end of quarter (1/31/04
Third quarter:            $22,550.35 (three months)
Invoice to be submitted end of quarter (4/30/04)
Fourth quarter:            $22,550.35 (three months)
Invoice to be submitted end of quarter (7/31/04)

The payment schedule for Line Item 0006 (Option Year Two):

Line 0006
First quarter:            $23,330.35 (three months)
Invoice to be submitted end of quarter (10/31/04)
Second quarter:            $23,330.35 (three months)
Invoice to be submitted end of quarter (1/31/05
Third quarter:            $23,330.35 (three months)
Invoice to be submitted end of quarter (4/30/05)
Fourth quarter:            $23,330.35 (three months)
Invoice to be submitted end of quarter (7/31/05)

Invoices for Line Item 0004 will be submitted after issuance of each Delivery Order. The same shall apply for Line Items 0005, if exercised.

29

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

Continuation from Block 18 Page 1:

Amendments 0001 through 0002

Contractor Correspondence dated:

31 Oct, 2001	Initial Offer
26 Nov 2001	Fax (completion of clause fill-ins)
22 March 2002	Revised Offer
1 August 2002	MMT letter in response to DSCP letter dated 29 July 2002
15 August 2002	MMT letter in response to DSCP e-mail dated 8 August 2002
15 August 2002	MMT e-mail (completion of clause fill-ins)
20 August 2002	MMT e-mail (MMT’s response to DSCP’s Proposed Prices
21 August 2002	MMT e-mail (Corrected Exhibit C)
21 August 2002	MMT e-mail (FCCM Summary)
21 August 2002	MMT e-mail (CLIN 0006 breakdown)
21 August 2002	MMT e-mail (Corrected CLIN 0005 Option II)

30

CONTRACT:	SP0200-02D-0006
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,

31

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

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.

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.

32

CONTRACT:	SP0200-02D-0006
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.

Clauses

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:

52.232-13	Notice of Progress Payments (Apr 1984)
252.232-7004	DOD Progress Payment Rates (Oct 2001) DFARS
The following clause is also included by reference:
52.233-1	Disputes (July 2001) ALTERNATE 1 (Dec 1991)

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.

33

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

As of 8/27/02 DSCP has in storage at MMT (as Government Owned Property), individual components to assemble the following quantities of autoinjectors:

	Atropine		Pralidoxime		Diazepam		Morphine
Quantity	1,517,683 Ea		1,517,683 Ea		490,160 Ea		694,812 Ea
Value (dollars paid when placed into	$	2,727,009	$	5,017,630	$	1,529,299	$	1,207,842
storage)

The Atropine and Pralidoxime components may be used to assemble a total of 1,517,683 individual Atropine autoinjectors and 1,517,683 individual Pralidoxime autoinjectors or 1,517,683 Mark I Kits (each kit contains an individual Atropine and Pralidoxime autoinjector).

The ATNAA (Antidote Treatment Nerve Agent Autoinjector), currently in the R&D stage, is expected to receive FDA approval in Sep 2002. The ATNAA will replace the Mark I Kit as the next generation autoinjector. In order to facilitate the transition to the ATNAA, the Government shall, from time to time, direct MMT to draw down and replace Government owned Mark I kit components with ATNAA components.

When Mark I components are drawn down and replaced with ATNAA components, as directed by the Contracting Officer, the Mark I components will be replaced in accordance with the following formula.

        Schedule A (pages 31-33) lists NAA component material prices (without Material Overhead and Profit)

        Schedule B (pages 12-15) lists NAA (including ATNAA) component prices (inclusive of Material Overhead and Profit)

Number of Mark Is to be purchase as specified by the Contracting Officer: The number of Mark Is to be purchased will be multiplied by the Mark I material component price listed in schedule A. This dollar total will then be divided by the ATNAA component price listed in schedule B, which will the be the number of ATNAA components received.

The Contracting Officer may also direct MMT to draw down and exchange other NAA components under the same formula. The Government and MMT, with mutual agreement reached at the time the request is made, may agree to exchange components under the same exchange formula at prices set in schedule A and B. The components exchanged to MMT would become MMT’s property.

34

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

Purchase of ATNAA components (without any draw down of Mark I components) shall be priced as stated in Schedule B found on pages 12-15.

The Government also retains its right to use Government-owned components for expedited delivery as cited in the contract. When so directed, MMT shall use the Government-owned components to complete the order, and replace the components with an equal number of same components, (That is, replace Mark I components with Mark I components; or ATNAA components with ATNAA components). This shall be effected at no cost to the Government.

35

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

Schedule A

PRESTOCK EXCHANGE PRICING
DRAWDOWN MATERIAL PRICING				Schedule A
BASE YEAR
						Price/Order
PRODUCT	FROM QTY			TO QTY		Quantity
Mark 1		(6505-01-174-9919	)
RD		24,500			122,500	$	5.03
		122,501			367,500	$	4.84
		367,501			637,000	$	4.71
		637,001			882,000	$	4.69
		882,001			1,200,000	$	4.67
Atropine		(6505-00-926-9083	)
S4		40,529			121,587	$	1.64
		121,588			364,761	$	1.59
		364,762			648,464	$	1.54
		648,465			891,638	$	1.54
		891,639			1,200,000	$	1.54
Pralidoxime		(6505-01-125-3248	)
T5		25,829			116,231	$	3.19
		116,232			361,606	$	3.01
		361,607			645,725	$	2.94
		645,726			891,101	$	2.92
		891,102			1,200,000	$	2.91
Diazepam		(6505-01-274-0951	)
D1		25,869			116,411	$	2.83
		116,412			362,166	$	2.72
		362,167			633,791	$	2.61
		633,792			879,546	$	2.60
		879,547			1,200,000	$	2.58
Morphine		(6505-01-302-5530	)
N3		40,094			120,282	$	1.72
		120,283			380,846	$	1.65
		360,847			641,504	$	1.61
		641,505			882,068	$	1.61
		882,069			1,200,000	$	1.61

36

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

Schedule A (Continued)

OPTION YEAR ONE
					Price/Order
PRODUCT	FROM QTY		TO QTY		Quantity
Mark 1	(6505-01-174-9919	)
RD	24,500		122,500	$	5.20
	122,501		367,500	$	5.01
	367,501		637,000	$	4.87
	637,001		882,000	$	4.85
	882,001		1,200,000	$	4.83
Atropine	(6505-00-926-9083	)
S4	40,529		121,587	$	1.69
	121,588		364,761	$	1.65
	364,762		648,464	$	1.60
	648,465		891,638	$	1.59
	891,639		1,200,000	$	1.59
Pralidoxime	(6505-01-125-3248	)
T5	25,829		116,231	$	3.31
	116,232		361,606	$	3.12
	361,607		645,725	$	3.05
	645,726		891,101	$	3.03
	891,102		1,200,000	$	3.01
Diazepam	(6505-01-274-0951	)
Dl	25,869		116,411	$	2.92
	116,412		362,166	$	2.81
	362,167		633,791	$	2.70
	633,792		879,546	$	2.69
	879,547		1,200,000	$	2.67
Morphine	(6505-01-302-5530	)
N3	40,094		120,282	$	1.78
	120,283		360,846	$	1.71
	360,847		641,504	$	1.66
	641,505		882,068	$	1.66
	882,069		1,200,000	$	1.66

37

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

Schedule A (Continued)

OPTION YEAR TWO
PRODUCT	FROM QTY			TO QTY		Price/Order
						Quantity
Mark 1		(6505-01-174-9919	)
RD		24,500			122,500	$	5.38
		122,501			367,500	$	5.18
		367,501			637,000	$	5.04
		637,001			882,000	$	5.02
		882,001			1,200,000	$	5.00
Atropine		(6505-00-926-9083	)
S4		40,529			121,587	$	1.75
		121,588			364,761	$	1.70
		364,762			648,464	$	1.65
		648,465			891,638	$	1.65
		891,639			1,200,000	$	1.65
Pralidoxime		(6505-01-125-3248	)
T5		25,829			116,231	$	3.42
		116,232			361,606	$	3.23
		361,607			645,725	$	3.15
		645,726			891,101	$	3.13
		891,102			1,200,000	$	3.11
Diazepam		(6505-01-274-0951	)
Dl		25,869			116,411	$	3.03
		116,412			362,166	$	2.91
		362,167			633,791	$	2.80
		633,792			879,546	$	2.78
		879,547			1,200,000	$	2.77
Morphine		(6505-01-302-5530	)
N3		40,094			120,282	$	1.84
		120,283			360,846	$	1.77
		360,847			641,504	$	1.72
		641,505			882,068	$	1.72
		882,069			1,200,000	$	1.72

38

CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC.

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CONTRACT:	SP0200-02D-0006
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
NSN:	6505-01-362-7427	ATNAA (Antidote Treatment Nerve Agent Autoinjector)

                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.

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CONTRACT:	SP0200-02D-0006
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.

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CONTRACT:	SP0200-02D-0006
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
NSN:	6505-01-362-7427	ATNAA (Antidote Treatment Nerve Agent Autoinjector)

               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.

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CONTRACT:	SP0200-02D-0006
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.

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

     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.

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.

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 1 of 16

1. Background

The Army has established several programs to centrally manage Medical Nuclear Biological Chemical Defense Materiel (MNBCDM). MNBCDM covered by this Statement of Work (SOW) are listed in paragraph 2B. These items shall be stored in a state of readiness in support of Deployable Force Package (DFP), formerly known as Division Ready Brigade (DRB) sets, and Unit Deployment Package (UDP) Medical Potency and Dated (P&D) materiel programs. The U.S. Army Medical Materiel Agency (USAMMA) has been designated as the Army Program Manager for these programs.

2. Description of Work Required

The Contractor shall be required to manufacture new autoinjectors and store/maintain autoinjectors (both new and extended materiel) and component parts (includes labels and packaging for Army SLEP material, boxes for Army UDP, and DSCP pre-stock components). The storage requirement encompasses receipt processing, storage (i.e. vault, refrigeration, and controlled room temperature), record-keeping, Care of Supplies in Storage (COSIS). Re-labeling/over-labeling, assembling and packing will be performed upon receipt of a Delivery Order based on a funded Army requisition passed through the Defense Supply Center Philadelphia (DSCP). These costs will be as listed on page 55. These represent ceiling costs until they are audited by DCAA. Material shall be shipped as stated in this SOW.

     A.     The Army intends to store:

           (1) A maximum of three (3) DFPs of new materiel (not extended expiration-dated materiel). Each DFP consists of 15,000 Antidote Kit Nerve Agent (Mark I Kits), 5,000 Diazepam Injectors (CANA) and 1,000 packages of Pyridostgmine Bromide Tablets (PBT).

           (2) One (1) DFP of extended expiration dated materiel that has been re-labeled (CANA and Pralidoxime Chloride/2-PAM) and over-labeled (Atropine).

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 2 of 16

           (3) MNBCDM to support the UDP Medical P&D Program. The items under this program are the Atropine Autoinjectors, CANA, Morphine Sulfate Injectors, and Pralidoxime Chloride Injectors (2-Pam). UDP materiel, i.e., CANA, Atropine and 2-PAM, having an expiration date, will be re-labeled/over-labeled as the expiration date is extended. Current Morphine Sulfate assets have a date of manufacture and will require the “RX Only” statement applied to each unit of issue (EA) in the event release is required to meet emergency or contingency situations. New Morphine Sulfate assets will have a date of manufacture and/or date of expiration and the Rx Only statement on the label. When the date of manufacture requirement is replaced with the date of expiration per FDA Regulatory Affairs, the injector shall be over-labeled when the expiration date is extended.

           (4) MNBCDM in the Shelf Life Extension Program (SLEP). This materiel will only be re-labeled/over-labeled when notified by the Army Program Manager, Materiel Management Division (MCMR-MMS-M) and upon receipt of a Delivery Order based on funded Army requisitions passed through the Defense Supply Center Philadelphia (DSCP). USAMMA’s Technical Operations Division (MCMR-MMO-T) will provide the lot numbers and other pertinent data to accomplish the re-labeling/over-labeling.

           (5) MMT will store 1.5 million pouches and clips for future assembly of Army owned Mark I Kits.

     B.     The following NSNs apply to the MNBCDM covered by this SOW:

           (1) Mark I Kits or NAAK, NSN 6505-01-174-9919 (consists of one Atropine and one 2-Pam Injector)

           (2) CANA, NSN 6505-01-274-0951

           (3) PBT or NAPP, NSN 6505-01-178-7903 (consisting of 210 tablets per package).

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

           (4) Atropine Autoinjector, NSN 6505-00-926-9083

           (5) 2-Pam, NSN 6505-01-125-3248

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 3 of 16

           (6) Morphine Sulfate Injector, 10 Mg per 0.7 mL, NSN 6505-01-302-5530

           (7) Antidote Treatment Nerve Agent Autoinjector (ATNAA), NSN 6505-01-362-7427 (will replace Mark I Kits)

3. Manufacturing

     A.     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 materiel will be issued under Line Item 0004). Materiel required to fill DFP Program funded requisitions may be retained at the Contractor’s facility or shipped to a DLA depot or a location within the Continental United States (CONUS) as specified in the order. Prior to shipping DFP materiel, the Army Program Manager, must be notified of the estimated shipping date and estimated arrival date at the destination. The Army Program Manager will coordinate with the receiving unit(s), advising them of the anticipated shipment(s). The Army Program Manager will then advise the Contractor when shipment(s) can proceed. Copies of the DD Form 250, or applicable shipping document, must be sent to USAMMA, ATTN: MCMR-MMS-M when the shipment has been processed. Materiel manufactured for the UDP Medical P&D Program will remain at the Contractor’s facility unless/until movement is requested.

     B.     A maximum of three (3) different lot numbers can be provided for each 15,000 Mark I Kits and two (2) different lot numbers for each 5,000 CANA in each DFP. Ideally only one (1) lot number would be shipped for each item of DFP materiel. 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. The Army Program Manager must approve any deviation from this requirement for minimum lots in writing.

     C.     Work must be consistent with current good manufacturing practices (CGMP) and government regulations.

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 4 of 16

4. Storage of Army Owned MNBCDM

     A.     Receipt Processing

                 (1)      Annually, the Contractor will accept the MNBCDM quantities below, in addition to the MNBCDM currently maintained at the Contractor’s facility. One-fourth of the yearly amount stated would be the average amount expected in quarterly shipments.

                 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 or ATNAA, NSN 6505-01-362-7427.

                 b.      200,000 CANA, NSN 6505-01-274-0951. (The maximum Contractor secure storage limitation is approximately 883,200 ea, less ten percent (88,320 ea) for partial cartons). Note: If commercial carriers are utilized for shipment of overseas returns, proper DEA import/export documentation is required.

                 c.      40,000 packages of PBT, NSN 6505-01-178-7903. (The maximum Contractor refrigerated storage limitation is approximately 109,560 packages.)

                 d.      200,000 Morphine, NSN 6505-01-302-5530. (The maximum Contractor secure storage limitation is approximately 200,000 ea). Note: Upon notification by USAMMA, MCMR-MMO-T of intended return of Morphine, MMT will prepare DEA 222 and 223 forms and provide them to USAMMA, MCMR-MMO-T prior to scheduling the shipment of the activity returns. If commercial carriers are utilized for shipment of overseas returns, proper DEA Import/Export documentation is required.

(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-T, will provide thirty (30) calendar days advance notification to the Contractor of expected

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

shipments of materiel and when known, will provide notice of changes prior to shipment. USAMMA, MCMR-MMO-T will provide notification of the expected shipments using Excel spreadsheet reflecting the Activity, Lot Number, Nomenclature, NSN, Document Number, and Expected Receipt Quantity. The Contractor will inventory all incoming shipments within thirty (30) workdays of receipt.

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 5 of 16

All requests for an extension of the inventory period will be approved by USAMMA, MCMR-MMO-T.

                 (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 packages of PBT during a quarterly shipment, USAMMA, MCMR-MMO-T may substitute 10,000 CANA, Mark I Kits, Atropine, ATNAA, or 2-Pam injectors as long as it is within the parameters stated in Paragraph 4.A.(1).

                 (4)      USAMMA, MCMR-MMO-T shall request that all turn-in activities not send loose and mixed materiel to the Contractor. In the event the Contractor receives shipments of loose materiel, the shipment will not be processed. The loose shipment shall be segregated and USAMMA, MCMR-MMO-T shall be notified. USAMMA, MCMR-MMO-T will determine the disposition and provide appropriate guidance for shipments of loose materiel.

                 (5)      The Contractor will forward USAMMA, MCMR-MMS-M, copies of any DD Forms 1348-1 or other shipping documents received with shipments upon completion of the receipt inventory.

     B.      Storage

                 (1)      Mark I Kits, ATNAA, Atropine and 2-Pam requires room temperature storage with approximately 59-86 degrees Fahrenheit or 15-30 degrees Celsius. These items must not be allowed to freeze.

                 a.      The Contractor shall disassemble Mark I Kits received in to separate components, unless otherwise directed by USAMMA, MCMR-MMS-M or USAMMA, MCMR-MMO-T.

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

                 b.      MMT will maintain a 1.5 million inventory level using both recovered clips and new clips.

                 (2)      CANA should be maintained between 59-86 degrees Fahrenheit or 15-30 degrees Celsius and requires safekeeping in a cage or vault due to its Note Q rating.

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 6 of 16

                 (3)      Morphine should be maintained between 59-86 degrees Fahrenheit or 15-30 degrees Celsius and requires safekeeping in a safe or vault which meets DEA Class II storage requirements due to its Note Q rating.

                 (4)      PBT requires refrigeration between 35-46 degrees Fahrenheit or 2-8 degrees Celsius and cannot be outside of refrigerated conditions for more than a cumulative period of six months. The Contractor shall ensure this item is continuously stored in refrigeration except when USAMMA directs packaging and shipment of PBT. The Contractor shall not be held accountable for the storage conditions of the materiel prior to receipt.

                 (5)      All MNBCDM will be segregated by, NSN, lot number, quantity of each lot and the turn-in activity. A temporary pallet location will be assigned to facilitate verification of the inventory by USAMMA, MCMR-MMO-T. Lot integrity shall be maintained at all times. Upon arrival, the Contractor shall provide the USAMMA, MCMR-MMO-T Representative an inventory report of all stored Army materiel. The data elements for this report are provided in Paragraph 4.C.(4) below. At a minimum, USAMMA, MCMR-MMO-T will verify inventory on a quarterly basis.

                 (6)      Each category of materiel should be stored and recorded separately (i.e. the extended DFP, SLEP materiel, UDP and DFP).

                 (7)      The Contractor shall notify USAMMA, MCMR-MMS-M to obtain disposition instructions when they have accumulated ten (10) or more Tri-wall containers from various turn-in activities.

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

                 (8)      The Contractor shall notify MCMR-MMO-T, within one (1) workday, when any situation arises wherein the above storage requirements cannot be maintained.

     C.      Record Keeping

                 (1)      After ninety (90) calendar days of contract award or implementation of an option to the contract, the quantity of Army/Office of The Surgeon General (OTSG) MNBCDM reflected in USAMMA’s records (MNBCDM database) must match the quantity of MNBCDM physically on hand (in inventory) at the Contractor’s site.

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 7 of 16

                 (2)      The Contractor shall maintain a database of all stored Army owned materiel. Accurate data from receipt processing, FDA test results, shipments and disposal actions will be maintained. The database will reflect the NSN, nomenclature, manufacturer, quantity, lot number, turn-in activity, extended expiration date, original expiration date, an indicator if materiel has been re-labeled or over-labeled, ship date, receipt date, and document number. A monthly and quarterly extract is required from this database.

                 a.      On a monthly basis, (first workday of the month), the Contractor shall provide the NSN, nomenclature, project code, lot number and an indicator if materiel has been re-labeled or over-labeled, original expiration date, extended expiration date, manufacturer and quantity to USAMMA, MCRM-MMI-M via electronic mail. USAMMA will review/verify the data and notify the Contractor of any discrepancies in the data.

                 b.      On a quarterly basis (the first workday of January, April, July, and October), an extract will be provided via electronic mail to USAMMA, MCMR-MMS-M and USAMMA, MCMR-MMO-T. This extract contains two (2) parts. The first is the NSN Summary that provides the NSN, nomenclature, and total quantity on-hand by project/category. The second part is the Lot Number Summary, which reflect the project code, NSN, lot number and indicator if material has been re-labeled or over-labeled, original expiration date, nomenclature, extended expiration date, manufacturer and quantity. USAMMA will review/verify the data and notify the contractor of any discrepancies in the data.

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

                 (3)      USAMMA, MCMR-MMO-T 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. The contractor will utilize this data to update their database.

                 (4)      The Contractor must provide USAMMA, MCMR-MMO-T and MCMR-MMS-M an Excel spreadsheet document reflecting the assets received for each quarterly shipment. The document shall contain the shipping activity, document number, NSN, lot number, expected quantity, quantity received, acceptable units, expiration date, and location. Within fifteen (15) workdays after completion of the quarterly inspection and inventory, the Contractor shall post the results of the

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 8 of 16

inspection/inventory to their resident system and provide a copy via electronic mail to USAMMA, MCMR-MMO-T and MCMR-MMS-M. USAMMA, MCMR-MMO-T and MCMR-MMS-M will validate the data, resolve discrepancies and provide notification of acceptance or required changes to the Contractor via electronic mail within fifteen (15) workdays of receipt from the Contractor. Necessary changes will be made to the Contractor’s database within fifteen (15) workdays of notification from USAMMA, MCMR-MMO-T.

     D.      Destructions

                 (1)      USAMMA, MCMR-MMO-T will provide document number, lot numbers and quantity of materiel to be sent for destruction. Materiel requiring destruction will be processed and made ready for shipping to destruction within ninety (90) calendar days upon receipt of notification. USAMMA, MCMR-MMO-T will provide DEA 222 and 223 forms to MMT for destruction of Schedule II Morphine. The Contractor shall provide USAMMA, MCMR-MMO-T, the weights and dimensions of the materiel to be shipped for destruction so that transportation may be arranged.

                 (2)      USAMMA, MCMR-MMO-T shall direct shipments within thirty (30) calendar days of verification by the contractor that the materiel has been staged and quantities and lot numbers verified.

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

                 a.      USAMMA will be fully responsible for all costs associated with the destruction of Army owned MNBCDM assets, including expired SLEP prestock component inventories. However, should the Contractor desire to reclaim one or more components of a stand-alone injector which exceeds the Army’s stockage requirement, the Contractor shall be responsible for the disposal costs. MMT shall provide USAMMA, MCMR-MMO-T with documentation indicating active ingredients were destroyed in accordance with (IAW) local, state, and federal regulations. Should the Contractor desire to reclaim the pouches and clips after the Army’s stockage requirement has been met, the Contractor may do so at no expense to the government.

                 b.      USAMMA, MCMR-MMO-T will be responsible for arranging funding and coordinating the shipments of Army owned assets for destruction and for obtaining a Certificate of Destruction. Upon destruction of the materiel, USAMMA, MCMR-MMO-T

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 9 of 16

is responsible for providing the Contractor with a copy of the Certificate of Destruction for Controlled Substances.

     E.     Government Visits

                 The Contractor agrees to allow the USAMMA Contracting Officer Technical Representatives (COTR) from MCMR-MMS-M and/or MCMR-MMO-T to inspect, inventory, and audit all Government owned property at any time (at least quarterly) throughout the period of the contract. These audits will be directed by the Contracting Officer, but may be requested by the COTR. If during such audits, the on-hand quantity is less than indicated in the MNBCDM database maintained by USAMMA, USAMMA shall select one of two replacement alternatives as outlined below. The Army Program Manager retains the right to choose the replacement alternative based upon the needs of the Government at the time.

                 a.      The Contractor replaces in kind all shortages within twenty (20) weeks from the date of notification.

                 b.      The Contractor shall pay the Government in full for any shortages within twenty (20) calendar days from the date of notification.

     F.      Re-labeling/Over-labeling

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

                 (1)      Re-labeling involves removal of the existing product label and applying a new product label with updated label information. Over-labeling involves applying a new product label over the existing product label.

                 (2)      The MNBCDM for the UDP Medical P&D Program will require re-labeling/over-labeling with the latest extended expiration date within thirty (30) workdays from date of USAMMA, MCMR-MMO-T notification via .a Delivery Order based on a funded Army requisition passed through DSCP.

                 (3)      The DFP of extended and SLEP materiel will be re-labeled/over-labeled on an “as required” basis when directed by USAMMA, MCMR-MMS-M. USAMMA, MCMR-MMS-M will provide sixty (60) calendar days advance notice via a Delivery Order based on a funded Army requisition passed through DSCP to re-label/over-label extended DFP and/or SLEP materiel. USAMMA, MCMR-MMO-T will provide the Contractor the lot number(s), quantity, and extended expiration date for

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 10 of 16

each NSN requiring re-labeling/over-labeling at the time of order placement. The Contractor shall re-label/over-label 160,000 auto-injectors, e.g., 100,000 AtroPens and 60,000 2-PAM or 50,000 Mark I Kits and 60,000 Diazepam, in the initial 60 calendar day period and 100,000 units per month thereafter, until the requirement is met.

                 (4)      The Contractor shall at no time combine separate lots to make larger lots, when re-labeling/over-labeling, due to the potential recall requirements.

                 (5)      The re-label/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. Additionally, the Contractor is required to apply the “RX Only” statement, as required by Federal Law, to all products re-labeled/over-labeled with a new expiration date. Upon completion of any MNBCDM re-labeling/over-labeling, the Contractor shall immediately notify USAMMA, MCMR-MMO-T and USAMMA, MCMR-MMS-M, via electronic mail, with the actual number of assets of extended/issuable (quantity), NSN, manufacturer, lot number, and new expiration date. (Losses in the re-labeling/over-labeling process shall not exceed two percent of the total product requiring labeling.

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CONTRACT:	SP0200-02D-0006
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                 (6)      MMT shall re-label/over-label lot numbers in the order/configuration specified by USAMMA MCMR-MMO-T. Lot numbers provided by USAMMA MCMR-MMO-T will enable MMT to over-label/re-label lots which are 5,000+ units first, followed by lots in descending quantity lot sizes.

                 (7)      Only lot sizes of 1,000 (+) units will be considered candidates for re-labeling/over-labeling.

                 (8)      The Contractor will only re-label/over-label MNBCDM, which the Contractor has manufactured.

                 (9)      The exterior box bar code requirements are waived for extended materiel in the UDP, DFP and SLEP programs.

                 (10)      PBT is excluded from the re-labeling/over-labeling requirement.

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 11 of 16

                 (11)      Auto-injectors may be over-labeled or re-labeled one (1) time only, over a period not to exceed (5) years from original expiration date. Over-labeling shall apply to Atropine and Morphine (if Morphine has expiration date). Re-labeling shall apply to Diazepam and Pralidoxime.

     G.      Assembly/Packing/Shipping

                 (1)      In the event of contingency operations, DFP and UDP Medical P&D MNBCDM shall be palletized, shipped and received at locations within seventy-two (72) hours after the Contractor receives notification. (This seventy-two (72) hour limitation includes weekend hours.) USAMMA, MCMR-MMS-M or MCMR-MMS-P, will provide the quantity, type, ship to destination, and other applicable details. Transportation funding for the DFP shipment will be provided by USAMMA, MCMR-MMS-M or USAMMA, MCMR-MMO-TF. The DSCP will provide transportation funding for the UDP Medical P&D materiel. MNBCDM shall be shipped via Defense Contract Management (DCM) carrier and packaged per the contract specified Medical Procurement Item Description (MPID) or specification for each product.

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CONTRACT:	SP0200-02D-0006
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                 (2)      The Contractor shall ensure that only those lots and quantities to be shipped as directed by the Army Program Manager are packed and prepared for shipment. The Contractor shall maintain lot integrity at all times. Under no circumstances will different lots of loose MNBCDM be placed in containers and shipped.

                 (3)      In non-contingency situations, the Contractor shall pack and ship MNBCDM (DFP and UDP Medical P&D materiel) within ten (10) calendar days after receipt of the directive from USAMMA, MCMR-MMS-M or MCMR-MMS-P.

                 (4)      All shipments of MNBCDM shall be made using a Government Bill of Lading (GBL) or method specified by USAMMA, MCMR-MMS-M or MCMR-MMS-P and shall conform to applicable Defense Transportation System (DTS) and commercial carrier rules and regulations. Materiel shall be packaged IAW commercial practices, and intermediate package(s) and shipping container(s)

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 12 of 16

shall be marked IAW MIL-STD-129 or Medical Marking STD No. 1. Contractor shall be a Procedure A Contractor. The contractor shall coordinate and make arrangements with commercial firms specializing in overnight or rapid delivery, as well as the DTS, for the timely shipment of MNBCDM within CONUS.

                 (5)      Shipment of materiel to the FDA for shelf life testing will be processed for shipment within ten (10) workdays from receipt of DEA forms. DEA 222 and 223 forms must be provided to MMT from the FDA facility for the shipment of Morphine samples.

                 (6)      The MNBCDM SLEP materiel that requires re-labeling/over-labeling before shipment will be packaged using SLEP pre-stock components.

                 (7)      The Contractor shall annotate on the pallet markings and shipping documents, when PBT are removed from the refrigerator for shipping. The exception to this requirement is when PBT is removed from refrigeration for destruction.

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CONTRACT:	SP0200-02D-0006
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     H.      Testing

                 USAMMA, MCMR-MMS-M or MCMR-MMS-P, will test the Contractor’s ability to provide MNBCDM to specific locations within the seventy-two (72) hours timeframe. Such tests could range from a simple paper exercise to the packing and shipping MNBCDM to specified locations anywhere in the world. The Army Program Manager intends to test the Contractor twice yearly.

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 13 of 16

TIME TABLE SUMMARY

Shipments

     1.      During contingency situations, DFP and UDP MNBCDM must be palletized, shipped, and received at specified locations within seventy-two (72) hours after notification from the Army Program Manager.

     2.      The Contractor has up to ten (10) calendar days after notification to package and ship DFP and UDP MNBCDM in non-contingency situations.

Destruction

     1.      The Contractor has ninety (90) calendar days from USAMMA, MCMR-MMO-T notification to complete staging for destruction.

     2.      Upon notification that materiel is ready for destruction, USAMMA, MCMR-MMO-T has thirty (30) calendar days to provide shipping instructions or notification to the Contractor that shipment cannot occur due to unavoidable circumstances.

FDA Samples

     The Contractor has ten (10) workdays after notification or receipt of DEA forms to ship samples.

Re-labeling/Over-Labeling

     1.      The Contractor has thirty (30) workdays after receipt of a Delivery Order based on a funded Army requisition passed through the Defense Supply Center Philadelphia (DSCP)to re-label/over-label UDP materiel.

     2.      Excluding PBT, the Contractor has sixty (60) calendar days after receipt of a Delivery Order based on a funded Army requisition passed through DSCP to re-

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CONTRACT:	SP0200-02D-0006
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label/over-label 160,000 DFP or SLEP assets and provide 100,000 each month thereafter until the requirement is completed.

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 14 of 16

Record Keeping

     1.      The Contractor has ninety (90) calendar days after award of contract or implementation of an option to ensure the quantity of Army/OTSG MNBCDM reflected in USAMMA records matches the on-hand balances stored in the Contractor’s facility.

     2.      Monthly Database Extract – First workday of the month, FTP database extract to USAMMA, MCMR-MMI-M.

     3.      Quarterly Database Extract – First workday of January, April, July, and October, annually, forwarded database extract to USAMMA, MCMR-MMS-M and USAMMA, MCMR-MMO-T via electronic mail.

     4.      The Contractor has fifteen (15) workdays after completion of the quarterly inspection/inventory to input inventory data into the MNBCDM database (Contractor facility) and provide USAMMA, MCMR-MMO-T a copy via electronic mail.

SLEP Receipts

     1.      USAMMA, MCMR-MMO-T will provide thirty (30) calendar days advance notification to the Contractor of expected shipments.

     2.      The Contractor shall complete processing of SLEP receipts within thirty (30) workdays from date of last receipt and notify USAMMA, MCMR-MMO-T.

Acronyms/Office Symbols

2-Pam	Pralidoxime Chloride Injection
ATNAA	Antidote Treatment Nerve Agent Auto-injector
CANA	Diazepam
CGMP	Current Good Manufacturing Practices

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

COSIS	Care of Supplies in Storage
COTR	Contracting Officer Technical Representative
DCM	Defense Contract Management
DD Form	Department of Defense Form

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 15 of 16

DLA	Defense Logistics Agency
DFP	Deployable Force Package
DSCP	Defense Supply Center Philadelphia
DTS	Defense Transportation System
FDA	Food and Drug Administration
FTP	File Transfer Protocol
GBL	Government Bill of Lading
IAW	In Accordance With
IBMC	Industrial Base Maintenance Contract
JMAR	Joint Medical Asset Repository
Mark I Kits	Antidote Kit Nerve Agent
MCMR-MMI-M	Joint Medical Asset Repository Project Office (Leslie Eyler, leslie.eyler@det.amedd.army.mil)
MCMR-MMO-T	USAMMA’s Operations and Support Directorate COTR: Ms. Teresa Bess (teresa.bess@det.amedd.army.mil, General Supply Specialist)
MCMR-MMO-TF	USAMMA’s Distribution Operations Center Operations & Support Directorate
MCMR-MMS-M	Office within USAMMA’s Strategic Capabilities & Materiel Directorate for Materiel Management, COTR: Ms. Tammy Dundus, Army Program Manager (tammy.dundus@det.amedd.army.mil)
MCMR-MMS-P	Office within USAMMA’s Strategic Capabilities & Materiel Directorate for UDP Management
MNBCDM	Medical Nuclear Biological Chemical Defense Materiel
MPID	Medical Procurement Item Description
NAAK	Antidote Kit Nerve Agent
NAPP	Pyridostigmine Bromide Tablets
Note Q	An item which is a drug or other substance determined by the Administrator, Drug Enforcement Administration, to be designated Schedule Symbol II, III, IV, or V, and defined in the

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

	Controlled Substances Act, effective 1 May 1971, and other items requiring security storage.
NSN	National Stock Number
OTSG	Office of The Surgeon General
Over-Label	Applying a new product label over the existing product label

STATEMENT OF WORK

LOGISTICS MAINTENANCE AND DFP PROGRAM
(LINE ITEMS 0002 AND 0003)
Page 16 of 16

P&D Materiel	Potency and Dated Materiel (Medical)
PBT	Pyridostigmine Bromide Tablets
Re-Label	Removal of the existing product label and applying a new product label with updated label information
SLEP	Shelf Life Extension Program
Turn-In Activities	Army activities authorized to receive MNBCDM from maneuver units for shipping to the Contractor (MMT)
UDP	Unit Deployment Package
USAMMA	U.S. Army Medical Materiel Agency ATTN:
	1423 Sultan Drive, Suite 100 Fort Detrick, MD 21702-5001
DEA 222 Form	Schedule I and II Controlled Substances Order Form
DEA 223 Form	DEA Facility License

DATABASE LOT INDICATORS

HT	High temperature – material stored above temperature storage requirements in the field.
RT	Refrigerated temperature – material not provided refrigerated storage in the field.
XL	Extra Label – unit has already been over-labeled 2 or more times.
RL	Re-Labeled – Unit has been relabeled 1 time with new expiration dating. (Applies to 2-PAM and CANA units.)
OL	Over-Labeled – Unit has been over-labeled 1 time with new expiration dating. (Applies to Atropine and Morphine)

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16a of 16

Solicitation SPO200-01R-1005												SCHEDULE C
FY03	Base Yr.			MARK-I		PRALIDOXIME		ATROPINE		DIAZEPAM		MORPHINE
Batch size				24,650		24,650		40,500		24,650		40,500
Direct Labor				$	1.118713	$	0.451888	$	0.373837	$	0.479407	$	0.373837
Plant O/H		26.30	%	$	0.294222	$	0.118847	$	0.098319	$	0.126084	$	0.098319
Sub Total				$	1.412935	$	0.570735	$	0.472156	$	0.605491	$	0.472156
Corp O/H		15.79	%	$	0.223102	$	0.090119	$	0.074553	$	0.095607	$	0.074553
Profit		14.00	%	$	0.229045	$	0.092519	$	0.076539	$	0.098154	$	0.076539
Unit Price				$	1.87	$	0.75	$	0.62	$	0.80	$	0.62

FY04	Option I			MARK-I		PRALIDOXIME		ATROPINE		DIAZEPAM		MORPHINE
Batch size				24,650		24,650		40,500		24,650		40,500
Direct Labor				$	1.198899	$	0.483471	$	0.400053	$	0.513336	$	0.400053
Plant O/H		26.30	%	$	0.315310	$	0.127153	$	0.105214	$	0.135007	$	0.105214
Sub Total				$	1.514209	$	0.610624	$	0.505267	$	0.648343	$	0.505267
Corp O/H		15.79	%	$	0.239094	$	0.096418	$	0.079782	$	0.102373	$	0.079782
Profit		14.00	%	$	0.245462	$	0.098986	$	0.081907	$	0.105100	$	0.081907
Unit Price				$	2.00	$	0.81	$	0.67	$	0.86	$	0.67

FY05	Option II			MARK-I		PRALIDOXIME		ATROPINE		DIAZEPAM		MORPHINE
Batch size				24,650		24,650		40,500		24,650		40,500
Direct Labor				$	1.279184	$	0.515544	$	0.426526	$	0.547457	$	0.426526
Plant O/H		26.30	%	$	0.336425	$	0.135588	$	0.112176	$	0.143981	$	0.112176
Sub Total				$	1.615609	$	0.651132	$	0.538702	$	0.691438	$	0.538702
Corp O/H		15.79	%	$	0.255105	$	0.102814	$	0.085061	$	0.109178	$	0.085061

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

Profit	14.00	%	$	0.261900	$	0.105552	$	0.087327	$	0.112086	$	0.087327
Unit Price			$	2.13	$	0.86	$	0.71	$	0.91	$	0.71

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CONTRACT:	SP0200-02D-0006
CONTRACTOR:	MERIDIAN MEDICAL TECHNOLOGIES INC

STATEMENT OF WORK

Program Management Under Readiness Enhancement Program
(Line Item 0006)
Page 1 of 4

I      BACKGROUND

A.     The Nerve Agent Antidote Autoinjectors (NAAA) Readiness Enhancement Program (REP) initiative provides for pre-positioned components of long lead-time items, production equipment, and a trained pool of personnel to staff the 2nd and 3rd shifts. The NAAA REP initiative will increase production capacity at Meridian Medical Technologies (MMT) by 66% during the critical first 120 days of a Two-Major-Theater-War (2MTW).

B.     In order to maintain a trained pool of personnel to staff the additional two shifts, MMT shall enter into a business arrangement with an employment agency to ensure that a trained workforce is available upon notice to staff the 2nd and 3rd shifts.

II      DESCRIPTION OF WORK REQUIRED

A.     MMT shall establish a program that will ensure that a sufficient number of qualified and properly trained temporary employees are available to staff the second and third production shifts for the production of NAAAs. MMT will secure a business arrangement with a subcontractor, Southside Temporaries (ST), to set up and maintain a contingency worker pool of 25 Assemblers for MMT. The number of assemblers is based on MMT being able to meet the 2MTW scenario by taking the following actions:

a) Assembling, re-labeling, and shipping inventories currently under Shelf Life Extension Program (SLEP)

b) Assembling, re-labeling, and shipping inventories currently being stored at MMT in the form of pre-stock components

c) Utilizing ALL of MMT’s St. Louis staff in production of US DoD injectors in order to satisfy the 2MTW. This would include personnel not currently dedicated to DoD production under the IBMC.

The additional 25 assemblers will provide flexibility in operations to allow for the best utilization of MMT staff employees in other areas of autoinjector production. Initially these assemblers will concentrate on converting SLEP inventory for quick shipments to DoD and as those stocks are exhausted, they will be integrated into the production of new injectors. Three-shift production shall ensure that production capacity is adequate to meet the requirements of a 2MTW.

If requirements for the 2MTW are adjusted, the number of additional assemblers may be adjusted. The assignments for these additional employees will expire once MMT has satisfied the autoinjector requirements for the 2MTW.

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CONTRACT:	SP0200-02D-0006
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STATEMENT OF WORK

Program Management Under Readiness Enhancement Program
(Line Item 0006)
Page 2 of 4

B.     This program is currently in place under SP0200-99D0007. MMT will advise the Contracting Officer of any changes to, or cancellation of, that agreement occurring prior to the expiration of contract SP0200-99-D-0007 and the award of the next IBMC. The contract/agreement with the personnel company shall identify the number of employees under the program, a description of the work the temporary employees are expected to perform under a contingency and the qualifications the temporary employees must meet to be in enrolled and retained in the program.

C.     MMT shall continue submitting a written report to the Contracting Officer on the last day of each quarter documenting the following:

           a) Summary of past quarter’s efforts and results achieved

           b) Outstanding problems, new problems, and prior issues resolved

           c) Summary of costs incurred and amounts to be invoiced for payment

The report shall be submitted in hard copy. Contracting Officer approval of the progress report submitted shall be deemed as acceptance by the Government of the service provided. The Contracting Officer shall complete the review of the progress report within one week after submittal.

D.     MMT shall submit a DD250 as the invoice for the services provided to the Contracting Officer on the last day of each quarter. The Government shall pay in accordance with FAR clause 52.232-25, Prompt Payment, based on the actual costs incurred, but not exceeding the ceiling prices contained in the Cost and Fee Schedule.

III      BASIC REQUIREMENTS FOR CONTINGENCY WORKERS

A.     The provider of the contingency workers (ST) will use the same criteria it uses to provide non-contingency workers to MMT.

B.     The basic requirements for contingency workers are as follows:

1. Pool members must pass an MMT Assembler Classification Test administered by ST prior to being selected as a contingency worker. The Assembler Classification Test is a validated test based on the work the individuals will be performing (reading comprehension and basic math skills).

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CONTRACT:	SP0200-02D-0006
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STATEMENT OF WORK

Program Management Under Readiness Enhancement Program
(Line Item 0006)
Page 3 of 4

2. Pool members will be required to pass an eye test administered by ST trained personnel before job offer and annually thereafter. Pool members will be tested using the Titmus II Vision Tester. Pool members are required to achieve a score of 9 or above for near vision, (14”) with both eyes. This is equivalent to a Snellen fraction of 14/16 or a Jaeger between J-1 and J-2.

3. ST will conduct a police reference check on pool members from the City and County. Pool members will be required to have a positive police reference check. A positive police reference check is required before the individual is assigned as a contingency worker. ST will also conduct a police reference check when a contingency worker wants to come back after a break (if they miss a quarterly training cycle) in their pool rotation.

4. Pool member will be required to pass a drug test. The individual will be referred to the South Point Hospital (St. Louis) who will administer an industry standard drug test in a controlled environment. An acceptable test result is required before the individual is assigned as a contingency worker. Contingency workers wanting to come back after a break (if they miss a quarterly training cycle) in their rotation will also be administered and required to pass the drug test.

5. When DSCP notifies MMT to activate the pool, MMT will telephonically notify ST. ST, within 3 weeks, must secure the 25 qualified individuals to undergo the one-week training phase (the training will consist of hands-on final assembly, labeling, package labeling and packing). For purposes of training the full complement of 25 individuals have to be trained. At the conclusion of the one-week training cycle the individuals are released back to ST who will keep them active and have them ready for their next training cycle in 3 months.

6. At a Department of Defense declared emergency, DSCP will notify MMT who will in turn notify ST. ST will then have 48 hours to have the trained pool members report to the MMT facility ready to work, unless the pool members are already on site as part of their one week, every quarter, training cycle.

7. Pool members will be trained/retrained for one week every quarter. The training cycle lasts 5 working days. No training will be scheduled during a week having a Holiday. MMT will follow a training plan, which addresses final assembly, labeling, package labeling and packing. Production Supervisors (qualified on Good

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CONTRACT:	SP0200-02D-0006
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Manufacturing Practices (GMP) and local procedures) will conduct hands on training on company premises in actual production environments.

STATEMENT OF WORK

Program Management Under Readiness Enhancement Program
(Line Item 0006)
Page 4 of 4

C.     ST will do the following to maintain the pool of contingency workers:

1. Ensure that each pool member is tested once for drug use prior to starting in the contingency program. The drug test will be in accordance with Industry Standards at a local hospital. Thereafter, pool members will be randomly tested on a quarterly basis based on the date this program is activated or when a contingency worker wants to come back after a break (if they miss a quarterly training cycle) in their pool rotation.

2. ST will communicate with all pool members, no less often than once every 15-calendar days, to verify the pool members’ availability to work. All pool members will be required to report in person at least once every 30-calendar days. Should a pool member not be reached by telephone or fail to appear in person, ST will report the incident to MMT along with a recommendation to retain or release the employee from the program. MMT will in turn report the incident and the outcome in their quarterly progress report to the Government. ST shall document all contacts with pool members.

3. ST will assist pool members in finding alternate temporary work. MMT will have priority over any other employers, as it relates to pool members, should a contingency happen.

4. MMT has the discretion of changing the training dates, however, pool members will be given approximately 30 days notice of any change in dates.

5. ST will send MMT all employment documentation, certification and test results BEFORE a person is put in the pool and starts their training. ST shall make the documentation available to MMT upon MMT’s written request within five working days of the request. MMT will provide this documentation to the Government either in quarterly progress reports or at the specific written request of the contracting officer.

6. MMT will report additional/new training actions necessary and/or corrective action taken, as a result of the Pool falling to 13 persons or less, in the quarterly report to the Government.

7. ST will pay a retaining bonus of $100 to each pool member at the completion of each retraining session based on fulfillment of requirements and attendance, as required. MMT will be billed for this payment.

67 EX-10.22 4 w64342exv10w22.htm EXHIBIT 10.22

EXHIBIT 10.22

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT, dated as of December 6, 2001, is made by and between JAMES H. MILLER (the “Executive”) and MERIDIAN MEDICAL TECHNOLOGIES, INC. (the “Company”), a Delaware corporation.

RECITALS

     WHEREAS, the Executive and the Company have previously entered into an employment agreement, dated November 20, 1996 (the “Former Agreement”); and

     WHEREAS, the Board of Directors of the Company (“Board of Directors”) has determined that it is in the best interest of the Company’s shareholders that appropriate steps should be taken to reinforce and encourage the continued dedication of the Executive to the Executive’s assigned duties; and

     WHEREAS, in order to induce the Executive to remain in the employ of the Company and to induce the Executive to give the Executive’s continued attention and dedication to the Executive’s assigned duties, the Company desires to enter into, and the Executive wishes to accept, this Employment Agreement in substitution for the Former Agreement;

     NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Company and the Executive do hereby agree as follows:

ARTICLE 1.
DEFINITIONS

     Whenever the following terms are used below in this Employment Agreement, they shall have the meaning specified below, and no other, unless the context clearly indicates to the contrary. The masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates.

1.1	Annual Bonus. “Annual Bonus” shall mean the greater of (a) the annual bonus paid or payable by the Company to the Executive for the fiscal year immediately preceding the Date of Termination and (b) the average of the annual bonuses paid or payable to the Executive for the three (3) fiscal years immediately preceding the fiscal year in which the Date of Termination falls.
1.2	Board of Directors. “Board of Directors” shall have the meaning provided in the second recital of this Agreement.

1.3	Cause. “Cause” shall mean termination of employment with the Company because of (i) the Executive’s failure or refusal to substantially perform the 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 (iii) any willful act or omission by the Executive which is injurious in any material respect to the financial condition or business reputation of the Company. For purposes of this Section 1.3, 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.
1.4	Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.
1.5	Company. “Company” shall mean Meridian Medical Technologies, Inc., a Delaware corporation, its subsidiaries and affiliates, and any successor to its business, whether direct or indirect, by purchase or securities, merger, consolidation, purchase of all or substantially all of the Company’s assets or otherwise.
1.6	Date of Termination. “Date of Termination” shall mean (i) in the case of the Executive’s termination of employment by the Company for Disability, thirty days after Notice of Termination is given, provided that the Executive shall not have returned to the performance of the Executive’s assigned duties on a full-time basis during such thirty day period; (ii) in the case of termination of the Executive’s employment by the Company for Cause, the date of actual termination; or (iii) in the case of termination of the Executive’s employment by the Executive for Good Reason or termination for any other reason, the date specified in the Notice of Termination, which date shall not be less than thirty days after the date such Notice of Termination is given.
1.7	Disability. “Disability” shall mean a disability that results in the Executive’s entitlement, for the duration of his disability, to payments under the Company’s long-term disability plan or policy in effect immediately before the Executive’s termination of employment hereunder.
1.8	Executive. “Executive” shall have the meaning provided in the first paragraph of this Agreement.
1.9	Good Reason. “Good Reason” shall mean the occurrence of any of the following events without the Executive’s express written consent:

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(a)	the assignment to the Executive of duties inconsistent with the position and status of the Chairman of the Board, President and Chief Executive Officer of the Company, or a substantial alteration in the nature, status or prestige of the Executive’s responsibilities as Chairman of the Board, President and Chief Executive Officer of the Company from those in effect at the date hereof, excluding for these purposes 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;
(b)	a reduction by the Company in the Executive’s pay grade or base salary as in effect at the date hereof or as the same may be increased from time to time during the term of this Agreement or the Company’s failure to increase (within 12 months of the Executive’s last increase in base salary) the Executive’s base salary in an amount which at least equals, on a percentage basis, the average percentage increase in base salary for the Company’s executive officers (within the meaning of Rule 3b-7, promulgated under the Securities Exchange Act of 1934, as amended) in the preceding 12 months;
(c)	an involuntary relocation of the Executive from the location contemplated in Article 3 hereof or the breach by the Company of any other provision of this Agreement (other than an immaterial breach that is promptly corrected after notice by the Executive to the Company); or
(d)	any purported termination of the employment of the Executive by the Company which is not effected according to the requirements of a Notice of Termination as defined in Section 1.10 hereof.

1.10

Notice of Termination. “Notice of Termination” shall mean a notice, in writing, to the Executive from the Company or to the Company from the Executive, which indicates the specific termination provision enumerated in this Agreement relied upon, and which sets forth in reasonable detail the facts and circumstances alleged to provide a basis for termination of the Executive’s employment by the Company or by the Executive. Such notice must be communicated to the Executive in accordance with Section 7.3 hereof.

1.11

Tax Counsel. “Tax Counsel” shall mean legal counsel, selected by Ernst & Young LLP (or an independent certified public accounting firm that is duly selected by the Board of Directors), and acceptable to the Executive and the Company, for the purpose of rendering legal advice and services on tax issues arising under this Agreement.

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ARTICLE 2.
TERM

     This Agreement shall be effective commencing on the date hereof and shall continue in effect through the third anniversary of the date hereof; provided, however, that commencing on the first anniversary of the date hereof and on each annual anniversary of the date hereof thereafter, the term of this Agreement shall automatically be extended for one additional year unless no later than 90 days before such anniversary, the Company shall have given the Executive notice that it does not desire to extend the term of this Agreement. Notice by the Company pursuant to this Article 2 that it does not wish to extend the term of this Agreement shall not constitute a Notice of Termination and shall not constitute Good Reason for the Executive to terminate his employment with the Company.

ARTICLE 3.
EMPLOYMENT

     The Company agrees to employ the Executive and the Executive agrees to continue to serve the Company on the terms and conditions set forth herein. Except as may otherwise be agreed upon between the Company and the Executive, the Executive shall serve the Company as President and Chief Executive Officer of the Company. At all times, the Executive shall report directly to the Board of Directors of the Company. The Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company, except for reasonable time spent for service on the boards of directors of other corporations, vacations and civic and charitable activities, and shall continue to represent the Company within its industry. The Executive shall, except as the Executive may otherwise agree, perform his principal activities at the executive offices of the Company located in the Baltimore-Washington corridor subject to required travel on the Company’s business.

ARTICLE 4.
BENEFITS AND COMPENSATION

4.1	Base Salary. During the term of his employment hereunder, the Company shall pay to the Executive, in approximately equal installments not less often than twice per month, a base salary of not less than $420,000 per year, as the same may from time to time be increased.
4.2	Eligibility for Bonuses. Each year during the term of the Executive’s employment hereunder, the Executive shall be eligible to receive an annual bonus, the amount and payment of which shall be determined by the Board of Directors in its reasonable discretion.
4.3	Benefit Plans and Arrangements. The Executive shall be entitled to participate in the Company’s employee benefit plans and arrangements in effect during the term of his employment hereunder: provided that the benefits and rights provided to the Executive under such plans and

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	arrangements shall be not less favorable than the benefits and rights provided to the Executive under the Company’s plans and arrangements applicable to the Executive as of the date hereof.
4.4	Perquisites. During the term of his employment hereunder, the Executive shall be entitled to receive fringe benefits ordinarily and customarily provided by the Company. The fringe benefits to which the Executive is entitled under this Section 4.4 shall not be less favorable than those to which the Executive is entitled as of the date hereof.
4.5	Expenses. The Company shall promptly reimburse the Executive for all reasonable travel and other business-related expenses related to the Company’s business actually paid or incurred by him in the performance of his services under this Agreement.

ARTICLE 5.
TERMINATION

5.1	Death. The Executive’s employment hereunder shall terminate upon his death.
5.2	Disability. During any period within the term of this Agreement that the Executive is or becomes incapacitated due to physical or mental illness, the Executive shall continue to receive the Executive’s full base compensation and other benefits at the rate then in effect until the Executive’s employment is terminated. After termination for Disability, benefits accruing to the Executive shall be determined in accordance with the Company’s disability policy as then in effect.
5.3	Cause. The Company may terminate the Executive’s employment hereunder for Cause. In the event that the Executive’s employment with the Company is terminated for Cause, the Executive shall receive the Executive’s full base compensation as earned through the Date of Termination at the rate in effect at the time Notice of Termination is given. Following payment of said amount and without impairing the Executive’s rights under benefit plans and arrangements and the Company’s policies and procedures, the Company shall have no further obligations to the Executive under this Agreement.
5.4	Termination for Reason other than Death, Disability or Cause. In the event that the employment of the Executive shall be terminated during the term of this Agreement (i) by the Company for any reason other than for Cause or Disability or (ii) by the Executive for Good Reason, then:

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(a) unless the Executive shall elect instead to receive the benefits available under the Company’s severance policy, the Executive shall be entitled to receive from the Company:

(i)	the Executive’s full base compensation as earned through the Date of Termination at the rate in effect at the time Notice of Termination is given;
(ii)	any bonus to which the Executive has become entitled but which has not yet been paid to the Executive;
(iii)	for a 36-month period after such termination, life, disability, accident and health insurance coverage (under the Company’s plans and policies) that are substantially the same as that which the Executive received immediately prior to the Notice of Termination, provided that if any such benefits enumerated above cannot be provided to the Executive or his dependents, beneficiaries or estate under any of the Company’s plans, the Company shall cause the Executive to receive such benefits under alternative plans or arrangements that provide such coverage on substantially the same terms and at a cost to the Executive that is not greater than that incurred by the Executive (determined on an after-tax basis) immediately prior to the Notice of Termination;
(iv)	a lump sum cash payment equal to the product of (A) three (3), and (B) the Executive’s combined base compensation for the twelve-month period immediately preceding the Notice of Termination;
(v)	a lump sum cash payment equal to the Executive’s Annual Bonus; and
(vi)	a lump sum cash payment equal to the product of (A) the Executive’s Annual Bonus and (B) a fraction, the numerator of which is the number of days in the then-current fiscal year through the Date of Termination and the denominator of which is 365;

(b)	all options to purchase securities of the Company then held by the Executive shall be immediately exercisable, without regard to whether such options are exercisable at such time pursuant to the terms of the documents under which such options were granted; and
(c)	any securities of the Company then held by the Executive that are subject to any restriction on transfer, other than restrictions

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imposed only by federal or state securities laws, shall lapse and be of no further force and effect with the result that the Executive shall be permitted to sell, transfer or otherwise dispose of such securities without regard to any such restrictions.

5.5 Tax Gross-Up of Benefit Payments.

(a)

In the event that (i) the Executive becomes entitled to any benefits or payments in connection with a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company (within the meaning of Section 280G of the Code and the regulations promulgated thereunder) or the termination of the Executive’s employment, whether pursuant to the terms of this Agreement or otherwise (collectively, the “Total Benefits”), and (ii) any of the Total Benefits will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), the Company shall pay to the Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive from the Gross-Up Payment, after deduction of any federal, state and local income taxes, Excise Tax, and FICA and Medicare withholding taxes upon the Gross-Up Payment, shall be equal to the Excise Tax on the Total Benefits. For purposes of determining the amount of such Excise Tax, the amount of the Total Benefits that shall be treated as subject to the Excise Tax shall be equal to (i) the Total Benefits, minus (ii) the amount of such Total Benefits that, in the opinion of Tax Counsel, are not excess parachute payments (within the meaning of Section 280G(b)(1) of the Code).

(b)

For purposes of this Section 5.5, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Excise Tax is (or would be) payable and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s residence on the Date of Termination, net of the reduction in federal income taxes which could be obtained from deduction of such state and local taxes (calculated by assuming that any reduction under Section 68 of the Code in the amount of itemized deductions allowable to the Executive applies first to reduce the amount of such state and local income taxes that would otherwise be deductible by the Executive). Except as otherwise provided herein, all determinations required to be made under this Section 5.5 shall be made by Tax Counsel, which determinations shall be conclusive and binding on the Executive and the Company absent manifest error.

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(c) In the event that the Excise Tax on the Total Benefits is subsequently determined to be less than the amount taken into account hereunder at the time of termination of the Executive’s employment, the Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax, federal, state and local income taxes and FICA and Medicare withholding taxes imposed on the Gross-Up Payment being repaid by the Executive to the extent that such repayment results in a reduction in any such taxes and/or a federal, state or local income tax deduction) plus interest (at the rate applicable under Section 1274 of the Code) on the amount of such repayment for the period that the portion of the Gross-Up Payment being repaid was held by the Executive. In the event that the Excise Tax on the Total Benefits is determined to exceed the amount taken into account hereunder at the time of the termination of the Executive’s employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment (which shall be calculated by Tax Counsel in the same manner and using the same assumptions as set forth in Sections 5.5(a) and 5.5(b) hereof) to the Executive in respect of such excess (plus any interest, penalties or additions payable by the Executive with respect to such excess to the Internal Revenue Service or any other federal, state, local or foreign taxing authority) at the time that the amount of such excess is finally determined.

5.6

Legal Fees and Expenses. Provided that the Executive is the prevailing party, the Company shall pay to the Executive all reasonable legal fees and expenses incurred by the Executive as a result of a dispute regarding the application of any provision of this Agreement, including all such fees and expenses, if any, incurred (a) in seeking to obtain or enforce any right or benefit provided by the Agreement or (b) in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any of the Total Benefits. Such payments shall be made within five (5) business days after delivery of the Executive’s respective written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require.

5.7

No Mitigation. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Agreement be reduced or offset by any compensation earned by the Executive as a result of employment by another employer or by

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retirement benefits after the Date of Termination or otherwise. Benefits payable pursuant to Section 5.4(a)(iii) of this Agreement shall cease to the extent that the Executive is entitled to receive such benefits pursuant to the benefit plans of another employer of the Executive.
 

ARTICLE 6.
NON-COMPETITION; NON-DISCLOSURE

6.1

The Executive agrees that, while he is employed by the Company and for the one (1) year period thereafter, he will not directly or indirectly engage or participate in, as an owner, partner, shareholder, officer, employee, director, agent or consultant, any business that directly or indirectly competes with the Company or any of its subsidiaries or affiliates, and, further, that he will not make any investments in any business that competes with the Company. The Executive further agrees that he will not at any time, except in the performance of his duties for the Company, directly or indirectly disclose any trade secret or confidential information that he learns by reason of his association with the Company. The Executive acknowledges that all business records, papers, documents and other matters created, collected or made by him in the performance of his service for the Company shall remain the exclusive property of the Company. The agreements and acknowledgements in this paragraph are in addition to those contained in the Employment Agreement incorporated by reference in Section 6.2.

6.2

The Executive ratifies and confirms the terms and obligations of the Employment Agreement executed between the Company and the Executive on July 13, 1989, containing a covenant not to compete and provisions on nondisclosure of information, new inventions, delivery of documents, and remedies. That Employment Agreement, and any successor agreement to that Agreement, is hereby incorporated by reference into this Agreement.

ARTICLE 7.
MISCELLANEOUS

7.1 Successors; Binding Agreement. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The failure of the Company to obtain such assumption agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive had terminated the Executive’s employment for
 

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	Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.
7.2	Successors and Assigns. This Agreement shall inure to the benefit of, and be enforceable by, the personal heirs, distributed, devisees and legatees of the Executive.
7.3	Notice. Any notice and all communications by either party to the other provided for in this Agreement shall be in writing and shall be deemed to have been received when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, or deposited with a recognized national overnight delivery service. If addressed to the Executive, the notice shall be delivered or mailed to the Executive at the address reflected in the personnel records of the Company, or if addressed to the Company, the notice shall be delivered or mailed to the attention of the Board of Directors with a copy to the Secretary of the Company, to the Company’s principal executive offices, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
7.4	No Waiver. No provision of this Agreement may be modified, waived or discharged unless in writing and signed by the Executive and such officer of the Company as may be specifically designated or authorized by the Board of Directors or by a Committee of the Board of Directors. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
7.5	Entire Agreement. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. This Agreement constitutes the entire agreement of the parties, recites the sole considerations for the promises exchanged and supersedes any prior agreements between the Executive and the Company with respect to the subject matter hereof, including without limitation the Former Agreement but excluding the Employment Agreement incorporated by reference in Section 6.2 hereof.
7.6	Controlling Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware relating to contracts to be performed entirely therein. All amounts payable to the Executive pursuant to this Agreement shall be paid

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	subject to such reporting and withholding requirements, if any, as may be imposed by applicable law and applicable Company policy.
7.7	Invalid Provision. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
7.8	Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts together shall constitute but one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.

MERIDIAN MEDICAL TECHNOLOGIES, INC.,
a Delaware corporation

By: /s/ David L. Lougee
Chairman, Compensation and
Stock Option Plan Committee

JAMES H. MILLER

/s/ James H. Miller

-11- EX-23.1 5 w64342exv23w1.htm EXHIBIT 23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements (Form S-3 No. 333-18279 and No. 333-75398; Form S-8 Nos. 333-54782, 333-54780, 333-32498, 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 September 16, 2002, 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, 2002.

/s/ Ernst & Young LLP

McLean, VA
September 27, 2002

EX-24 6 w64342exv24.htm EXHIBIT 24

Exhibit 24

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, 2002 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 James H. Miller	September 26, 2002
/s/ Thomas L. Anderson Thomas L. Anderson	September 26, 2002
/s/ Bruce M. Dresner Bruce M. Dresner	September 26, 2002
/s/ Robert G. Foster Robert G. Foster	September 26, 2002
/s/ David L. Lougee David L. Lougee	September 26, 2002

EX-99.1 7 w64342exv99w1.htm EXHIBIT 99.1

EXHIBIT 99.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of Meridian Medical Technologies, Inc. (the “Company”) on Form 10-K as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James H. Miller, as Chairman of the Board, President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

     (1)  The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the dates and periods covered by the Report.

     This certificate is being made for the exclusive purpose of compliance by the Chairman of the Board, President, and Chief Executive Officer of the Company with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be disclosed, distributed or used by any person or for any reason other than as specifically required by law.

October 3, 2002 /s/ James H. Miller
James H. Miller
Chairman of the Board, President
  and Chief Executive Officer

EX-99.2 8 w64342exv99w2.htm EXHIBIT 99.2

EXHIBIT 99.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of Meridian Medical Technologies, Inc. (the “Company”) on Form 10-K as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dennis P. O’Brien, as Vice President, Finance and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

     (1)  The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the dates and periods covered by the Report.

     This certificate is being made for the exclusive purpose of compliance by the Vice President, Finance and Chief Financial Officer of the Company with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be disclosed, distributed or used by any person or for any reason other than as specifically required by law.

October 3, 2002 /s/ Dennis P. O’Brien
Dennis P. O’Brien
Vice President, Finance
  and Chief Financial Officer

EX-99.3 9 w64342exv99w3.htm EXHIBIT 99.3

EXHIBIT 99.3

FACTORS AFFECTING THE COMPANY’S BUSINESS AND PROSPECTS

a.  Risks Related to the Company’s Specialty Pharmaceuticals Business

The Company depends on its auto-injector products for substantially all of its revenues.

     Substantially all of the Company’s revenues are derived from the manufacture and sale of a family of spring-loaded, needle based auto-injectors. Sales of the EpiPen auto-injector and sales of auto-injector-based antidotes to the DoD accounted for 78.6% of the Company’s total revenues during fiscal 2001 and 71.7% of total revenues during fiscal 2002. Future results of operations depend to a substantial degree upon the continued demand for these products. If sales of such products decrease, the Company’s business will be materially adversely affected and its revenues and results of operations will decline.

The Company depends exclusively on its relationship with Dey to distribute the EpiPen auto-injector.

     The Company markets EpiPen through a supply agreement with Dey that expires on December 31, 2010. Under the terms of the agreement with Dey, the Company grants Dey the exclusive right and license to market, distribute and sell EpiPen worldwide. The Company’s future results of operations depend to a substantial degree on Dey’s continued marketing of EpiPen. Although demand for EpiPen continues to be strong due to increased awareness of the health risks associated with allergic reaction, the Company expects competition to intensify. The supply agreement with Dey stipulates minimum purchase requirements that are less than Dey’s purchases in recent years. A failure by Dey to market and distribute EpiPen successfully would have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company depends on its relationship with the U.S. Department of Defense with respect to auto-injector sales to the U.S. government.

     The Company’s major customer with respect to auto-injector sales to the U.S. government is the DoD, and the Company anticipates that it will continue to depend on sales to the DoD for a significant percentage of its revenues from sales to government entities. The Company’s nerve agent antidote auto-injectors have been the subject of an IBMC between the Company and the DoD since 1992. Many Government contracts contain a base period of one or more years, as well as option periods covering more than half of a contract’s potential duration. Government agencies generally have the right not to exercise these option periods, and the decision not to exercise the option periods under the IBMC could adversely affect the profitability of the contract.

The Company’s relationship with the U.S. Department of Defense and other governmental entities is subject to risks associated with government business.

     All U.S. government contracts provide that they may be terminated for the convenience of the government as well as for default. The unexpected termination of one or more significant contracts could result in significant revenue shortfalls. The natural expiration of especially large contracts, such as the IBMC, can also present management challenges. If revenue shortfalls occur and are not offset by corresponding reductions in expenses, the Company’s business could be adversely affected. The Company cannot be certain if, when or to what extent a customer might terminate any or all of its contracts with the Company.

The Company’s supply contracts with the DoD are subject to post-award audit and potential price redetermination. These audits may include a review of a contractor’s performance on its contract, its pricing practices, its cost structure and its compliance with applicable laws, regulations and standards. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while costs

2

already reimbursed must be refunded. Therefore, a post-award audit or price redetermination could result in an adjustment to Company revenues. From time to time, the DoD makes claims for pricing adjustments with respect to completed contracts. At present, no claims are pending. If a government audit uncovers improper or illegal activities, a contractor may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeitures of profits, suspension of payments, fines and suspension or disqualification from doing business with the Government.

     Other risks involved in government sales include the unpredictability in funding for various government programs and the risks associated with changes in procurement policies and priorities. Reductions in defense budgets may result in reductions in the Company’s revenues. Furthermore, the Company provides its nerve agent antidote auto-injector to federal and state agencies and local communities for homeland defense against chemical agent terrorist attacks. Changes in governmental and agency procurement policies and priorities may also result in a reduction in government funding for programs involving the Company’s auto-injectors. A significant loss in government funding would have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company’s expansion of its commercial business into specialty pharmaceutical products may not yield products or technology that can be commercialized. Furthermore, the Company expects to incur significant expenses in developing a sales and marketing infrastructure to support products or technology that can be commercialized.

     The Company is planning the expansion of its Specialty Pharmaceuticals business through a specialty pharmaceutical initiative. It is anticipated that the Company’s initial new product range will be based on its auto-injector delivery systems, but it is anticipated that over time the specialty pharmaceuticals group may include other drug delivery product technologies. The Company may not be able to identify, develop or obtain products compatible with its auto-injector delivery systems. Furthermore, the Company may be not be successful in identifying or acquiring external products and technology compatible with its goals for the specialty pharmaceutical initiative. Even if new products are developed or acquired, such products must be approved by the appropriate regulatory authorities before such products may be manufactured and marketed. Finally, the Company intends to build a sales and marketing infrastructure to support the launch of products developed under its specialty pharmaceutical initiative. However, the Company has limited sales and marketing experience and expects to incur significant expenses in developing a sales force. The Company’s limited sales and marketing experience may restrict its success in commercializing new specialty pharmaceutical products, and the failure to commercialize such products may have a material adverse impact on the Company.

The Company must subject certain Specialty Pharmaceuticals products to clinical trials, the results of which are uncertain.

     The Company is exploring the use of its auto-injector technology with products that require emergency administration and where a patient or caregiver would benefit by administration of a drug with an auto-injector. Before obtaining regulatory approvals for the commercial sale of certain of these products, the Company must sponsor clinical studies to establish the safety and efficacy of the proposed product for use in the administration of each specific drug. The Company cannot guarantee that such clinical trials will demonstrate sufficient safety and efficacy to obtain the required regulatory approvals or will result in marketable products. Any clinical studies or trials which fail to demonstrate the safety and efficacy of the Company’s products could have a material adverse effect on the Company’s business, financial condition and results of operations.

b.  Risks Related to the Company’s Cardiopulmonary Systems Business

The Company’s PRIME ECG® is a new product, and the Company cannot be certain that it will gain market acceptance.

3

     The Company has completed the development phase of its PRIME ECG® electrocardiac mapping system, introduced it in certain countries outside the United States, and received FDA clearance to market the product in the U.S. Market acceptance of PRIME ECG® will depend on the Company’s ability to demonstrate the diagnostic advantages and cost-effectiveness of this technology and upon the ability of the Company to obtain third-party reimbursement for users of PRIME ECG®. The failure of PRIME ECG® to achieve broad market acceptance, the failure of the market for PRIME ECG® to grow or grow at the rate the Company anticipates, or a decline in the price of PRIME ECG® could have a material adverse effect on the Company.

     The Company has begun to market PRIME ECG® in the U.S. directly through a dedicated sales force and also plans to supplement its European distributor base with the addition of direct representation in major markets. The success of the PRIME ECG® product depends on the Company’s ability to market and sell the product. The Company can give no assurance that it will be able to successfully commercialize or achieve market acceptance of PRIME ECG® or that its competitors will not develop competing technologies that are superior to PRIME ECG®.

The Company has limited sales and marketing experience and expects to incur significant expenses in developing a sales force for the marketing of PRIME ECG®. The Company’s limited sales and marketing experience may restrict its success in commercializing PRIME ECG®.

     The Company has limited sales and marketing experience, and has only recently begun building a sales and marketing force. The Company cannot guarantee that its sales and marketing force will be able to effectively demonstrate the advantages of PRIME ECG® over competing products and other traditional solutions. Furthermore, the Company expects that it will be necessary to expand its current sales force. The highly technical nature of PRIME ECG® limits the pool of qualified sales personnel and competition for these persons is intense.

     There can be no assurance that the Company will be successful in marketing and selling PRIME ECG®. The Company’s inability to achieve any of these objectives could have a material adverse effect on the Company’s business, financial condition and results of operations.

The failure to obtain or maintain adequate levels of third-party reimbursement may restrict the Company’s success in commercializing PRIME ECG®.

     Reimbursement for the use of PRIME ECG® would require third-party reimbursement for the recording module, analysis software and graphic display as well as the disposable electrode vest. There is no reimbursement currently available for the use of PRIME ECG® instead of currently available diagnostic methods. The Company’s ability to commercialize PRIME ECG® successfully will depend, in large part, on the extent to which appropriate reimbursement levels for the cost of using PRIME ECG® are obtained from government authorities, private health insurers and other organizations, such as health maintenance organizations.

     The amount of reimbursement that will be available for clinical use of PRIME ECG® in the U.S. is uncertain and may vary. In the U.S., the cost of medical care is funded, in substantial part, by government insurance programs such as Medicare and Medicaid, and private and corporate health insurance plans. Third-party payors may deny reimbursement if they determine that a prescribed device is not used in accordance with cost-effective treatment methods as determined by the payor, or is experimental, unnecessary or inappropriate.

     The Company does not know whether reimbursement in the U.S. or foreign countries for PRIME ECG® will be provided or that reimbursement amounts will not reduce the demand for, or the price of, PRIME ECG®. The unavailability of third-party reimbursement for PRIME ECG® could have a material adverse effect on the Company.

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The Company depends exclusively on its relationship with Shahal Medical Services, Ltd. to distribute its telemedicine product line.

     The Company sells its telemedicine product line through SHL, which has exclusive worldwide marketing rights with respect to the telemedicine product line. SHL has no minimum purchase requirements under its contract with the Company. SHL has entered into a joint venture with Philips Medical Systems to market cardiac telemedicine products and services in targeted markets in Europe. The Company’s future revenues and results of operations with respect to its telemedicine product line depend exclusively upon SHL’s continued marketing and distribution of the Company’s telemedicine products. Any failure by SHL to market and distribute the product line successfully would have an adverse impact on the Company.

c.  Risks Related to all Segments of the Company’s Business

The Company relies upon its manufacturing facilities for the production of its products, and manufacturing problems or delays could severely affect the Company’s business.

     The Company’s primary pharmaceutical operations and manufacturing facilities are located in St. Louis, Missouri. These facilities are used primarily for formulation, suitability testing, aseptic filling, assembly and final packaging of the Company’s auto-injectors, vials and pre-filled syringes. The Company also has a facility in Belfast, Northern Ireland that is designed to develop and produce products for its Cardiopulmonary Systems group and also supplies auto-injectors for sale in international markets. Each facility contains highly specialized equipment and utilizes complicated manufacturing processes developed over a number of years that would be difficult and time consuming to duplicate.

     The Company’s ability to manufacture its products would be disrupted wholly or in part by technical problems, labor relations problems, natural disasters, fire, sabotage or business accidents among other factors. The Company’s ability to manufacture its products would also be disrupted by shortages in the necessary raw materials, components and supplies essential to the manufacture of its products. Several of the ingredients used in antidote formulations are unique and require highly specialized synthesis facilities. As a result, limited amounts of these ingredients are available from time to time. Auto-injector components also require specialized tooling and are considered low volume production. Any prolonged disruption in the operations of either manufacturing facility would seriously harm the Company’s ability to satisfy customer orders for its products. If the Company is unable deliver its products in a timely manner or in sufficient quantities, its revenues will suffer and its reputation may be harmed.

If the Company fails to meet strict regulatory requirements, such failure could harm the Company’s business.

     The business of the Company is highly regulated by governmental entities, including the FDA and corresponding agencies of states and foreign countries. Governmental approval is required of all auto-injectors, syringe systems and cardiopulmonary systems products and the manufacture and marketing of such products prior to their commercial use. The Company currently holds approval for each of its existing auto-injector products, but the use of the Company’s existing auto-injectors to administer another drug or the introduction of new auto-injector products generally would require new FDA approvals. If such products do not receive the required regulatory approvals or if such approvals are delayed, the Company’s business would be materially adversely affected. There can be no assurance that the requisite regulatory approvals will be obtained without lengthy delays, if at all. The regulatory process is time consuming and requires substantial funds.

     If the Company fails to comply with applicable FDA requirements, the FDA or the courts may impose sanctions. These sanctions may include civil penalties, criminal prosecution of the Company or its officers and employees, injunctions, product seizure or detention, product recalls, and total or partial

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suspension of production. The FDA may withdraw approved applications or refuse to approve pending new drug applications, premarket approval applications or supplements to approved applications.

     The Company’s facilities and manufacturing techniques generally must conform to standards that are established by government agencies, including those of foreign governments, as well as the FDA. These regulatory agencies may conduct periodic inspections of Company facilities and monitor the Company’s compliance with applicable regulatory standards. If a regulatory agency finds that the Company fails to comply with the appropriate regulatory standards, it may impose fines on the Company or if such a regulatory agency determines the non-compliance is severe, it may close the Company’s facilities. Any adverse action by an applicable regulatory agency would have a negative impact on the Company’s operations.

     Foreign regulatory approval of the Company’s products must also be obtained prior to marketing its products internationally. Foreign approval procedures vary from country to country. The time required for approval may delay or prevent marketing in certain countries. In certain instances, the Company or its collaborative partners may seek approval to market and sell certain products outside of the United States before submitting an application for United States approval to the FDA. The clinical testing requirements and the time required to obtain foreign regulatory approvals may differ from that required for FDA approval. Although there is now a centralized European Union (“EU”) approval mechanism in place, each EU country may nonetheless impose its own procedures and requirements. Many of these procedures and requirements are time-consuming and expensive. Some EU countries require price approval as part of the regulatory process. These constraints can cause substantial delays in obtaining required approval from both the FDA and foreign regulatory authorities after the relevant applications are filed, and approval in any single country may not meaningfully indicate that another country will approve the product.

If the Company delivers products that fail to meet regulatory requirements, its credibility may be harmed, market acceptance of its products may decrease and the Company may be exposed to liability in excess of its product liability insurance coverage.

     The manufacturing of medical devices and drug delivery devices, such as the Company’s cardiopulmonary systems products and auto-injector products, involve an inherent risk of product liability claims. In addition, the Company’s product development and production are extremely complex and could expose its products to defects. Any such defects could harm the Company’s credibility and decrease market acceptance of its products. On May 8, 1998, the Company announced a voluntary Class I recall of certain EpiPen and EpiPen Jr. auto-injectors, with the direct cost of the recall totaling $3.2 million. The Company’s ability to satisfy other costs associated with the recall with free auto-injectors further depressed margins and profitability with respect to such products.

     Potential product liability claims may exceed the amount of the Company’s insurance coverage or may be excluded from coverage under the terms of the policy. In the event the Company is held liable for a claim for which it is not indemnified, or for damages exceeding the limits of its insurance coverage, such a claim could materially damage the Company’s business and financial condition.

The rights the Company relies upon to protect the intellectual property underlying its products may not be adequate, which could enable third parties to use the Company’s technology and would reduce its ability to compete in the market.

     The Company’s success will depend in part on its ability to obtain and maintain commercially valuable patent claims and to protect its intellectual property. The Company’s patent position involves complex legal and factual questions. Patents covering important features of the Company’s current principal auto-injector products have expired. This lack of patent protection could enable other companies to compete more effectively with the Company which may have an adverse effect on the Company’s revenues and results of operations. The degree of future protection for the Company’s proprietary rights is uncertain.

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     The risks and uncertainties that the Company faces with respect to its patents and other proprietary rights include the following:

• the pending patent applications the Company has filed or to which the Company has exclusive rights may not result in issued patents or may take longer than expected to result in issued patents;

• the claims of any patents which are issued may not provide meaningful protection;

• the Company may not be able to develop additional proprietary technologies that are patentable;

• the patents licensed or issued to the Company may not provide a competitive advantage;

• other companies may challenge patents licensed or issued to the Company;

• patents issued to other companies may harm the Company’s ability to do business; and

• other companies may design around technologies the Company has licensed or developed.

     In addition to patents, the Company relies on a number of trade secrets, nondisclosure agreements and other contractual provisions and technical measures to protect its intellectual property rights. Nevertheless, these measures may not be adequate to safeguard the technology underlying the Company’s products. If they do not protect the Company’s rights, third parties could use Company technology, and the Company’s ability to compete in the market would be reduced. In addition, employees, consultants and others who participate in the development of Company products may breach their agreements with the Company regarding its intellectual property, and the Company may not have adequate remedies for the breach.

     The Company also may not be able to effectively protect its intellectual property rights in some foreign countries. For a variety of reasons, the Company may decide not to file for patent, copyright or trademark protection or prosecute potential infringements of its patents. The Company also realizes that its trade secrets may become known through other means not currently foreseen by the Company. Despite its efforts to protect its intellectual property, competitors of the Company may independently develop similar or alternative technologies or products that are equal or superior to the Company’s technology and products without infringing on any of its intellectual property rights.

Claims by other companies that the Company’s products infringe on their proprietary rights could adversely affect the Company’s ability to sell its products and increase costs. Similarly, the Company may need to protect or enforce its own patents and other intellectual property rights, which would be expensive and, if the Company loses, could cause the Company to lose some of its intellectual property rights.

     None of the Company’s products are currently the subject of litigation that it is infringing on the intellectual property rights of others. The Company expects that its products and products in its industry may be increasingly subject to third-party infringement claims as the number of competitors grows and the functionality of products and technology in different industry segments overlaps. Furthermore, the Company’s ability to develop its technologies and make commercial sales of products using its technologies also depends on not infringing others’ patents. Third parties may currently have, or may eventually be issued, patents on which the Company’s products or technology may infringe. Any of these third parties might make a claim of infringement against the Company.

     In order to protect or enforce its own patent rights, the Company may initiate patent litigation against third parties, such as infringement suits or interference proceedings. Litigation would put the Company’s patents at risk of being invalidated or interpreted narrowly and our patent applications at risk

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of not issuing. The Company cannot assure you that it will prevail in any of these suits or that the damages or other remedies awarded, if any, will be commercially valuable.

     Lawsuits could be expensive, take significant time and divert management’s attention from other business concerns. During the course of litigation, there may be public announcements of the results of hearings, motions and other interim proceedings or developments in the litigation. If securities analysts or investors perceive any of these results to be negative, the Company’s stock price could decline.

     In addition, litigation in which the Company is accused of infringement may have an impact on prospective customers, cause product shipment delays, and require the Company to develop non-infringing technology or enter into royalty or license agreements, which may not be available on acceptable terms, or at all. If a successful claim of infringement were made against the Company and it could not develop non-infringing technology or license the infringed or similar technology on a timely and cost-effective basis, the Company’s business could be significantly harmed and it could be exposed to legal actions by its customers.

d.  Risks Related to the Company’s Financial Condition

Various factors, including seasonality and domestic and international events, may cause the Company’s operating results to fluctuate.

     Factors relating to the Company’s business make its future operating results uncertain and may cause them to fluctuate from period to period. With respect to EpiPen, some of the demand for the product is seasonal as a result of its use in the emergency treatment of allergic reactions to insect stings or bites. With respect to auto-injector products sold to government entities, demand for the product is affected by the cyclical nature of procurements as well as response to domestic and international events. While the Company has received orders in response to the September 11, 2001 terrorist attacks and the threat of chemical attacks, it cannot predict whether an increased level of sales will persist in subsequent periods. Additional factors that may cause the Company’s operating results to fluctuate include: (i) the timing of new product announcements and introductions by the Company and its competitors; (ii) market acceptance of new or enhanced versions of its products; (iii) changes in manufacturing costs or other expenses; (iv) competitive pricing pressures; (v) the gain or loss of significant distribution outlets or customers; (vi) the availability and extent of reimbursement for its products; (vii) increased research and development expenses; or (viii) general economic conditions.

The Company’s financial condition or results of operations may be adversely affected by domestic and international business risks.

     The Company’s operations are vulnerable to damage or interruption from computer viruses, human error, natural disasters, telecommunications failures, intentional acts of vandalism, acts of war, and similar events. While the Company has established a disaster recovery plan, its back-up operations and its business interruption insurance may not be adequate to compensate it for losses that occur. A significant business interruption would result in losses or damages incurred by the Company and would harm its business.

     A number of the Company’s employees, including sales, support and research and development personnel, are located outside of the United States. Conducting business outside of the United States is subject to numerous risks, including:

• decreased liquidity resulting from longer accounts receivable collection cycles typical of foreign countries;

• decreased revenues on foreign sales resulting from possible foreign currency exchange and conversion issues;

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• lower productivity resulting from difficulties managing sales, support and research and development operations across many countries;

• lost revenues resulting from difficulties associated with enforcing agreements and collecting receivables through foreign legal systems;

• lost revenues resulting from the imposition by foreign governments of trade protection measures; and

• higher cost of sales resulting from import or export licensing requirements.

Intense competition could reduce the Company’s market share or limit its ability to increase market share, which could impair the sales of its products and harm its financial performance.

     The medical device and pharmaceutical industries are rapidly evolving and developments are expected to continue at a rapid pace. Competition in these industries is intense and expected to increase as new products and technologies become available and new competitors enter the market. The Company’s competitors in the United States and abroad are numerous and include, among others, larger pharmaceutical, medical device and other medical products companies. The Company’s future success depends upon its maintaining a competitive position in the development of products and technologies in its areas of focus. Competitors may be more successful in: (i) developing technologies and products that are more effective than the Company’s products or that render its technologies or products obsolete or noncompetitive; (ii) obtaining patent protection or other intellectual property rights that would prevent the Company from developing its potential products; or (iii) obtaining regulatory approval for the commercialization of their products more rapidly or effectively than the Company is in doing so. Also, many of the Company’s existing or potential competitors have or may have substantially greater research and development capabilities, clinical, manufacturing, regulatory and marketing experience and financial and managerial resources.

If the Company chooses to acquire new and complementary businesses, products or technologies instead of developing them itself, the Company may be unable to complete these acquisitions or to successfully integrate an acquired business or technology in a cost-effective and non-disruptive manner.

     The Company’s success depends on its ability to enhance and broaden its product offerings in response to changing technologies, customer demands and competitive pressures. Accordingly, from time to time the Company has acquired complementary businesses, products, or technologies instead of developing them itself and may choose to do so in the future. The Company does not know if it will be able to complete any acquisitions, or whether it will be able to successfully integrate any acquired businesses, operate them profitably or retain their key employees. Integrating any business, product or technology the Company acquires could be expensive and time consuming, disrupt its ongoing business and distract Company management. In addition, in order to finance any acquisitions, the Company might need to raise additional funds through public or private equity or debt financings. In that event, the Company could be forced to obtain financing on less than favorable terms and, in the case of equity financing, that may result in dilution to its shareholders. If the Company is unable to integrate any acquired entities, products or technologies effectively, its business will suffer. In addition, under certain circumstances, amortization of assets or charges resulting from the costs of acquisitions could harm the Company’s business and operating results.

The Company’s share price may be volatile due to operating results, as well as factors beyond the Company’s control.

     The Company’s share price may be volatile due to operating results, as well as factors beyond the Company’s control. In addition, it is possible that in some future periods the results of operations will be below the expectations of the public market and the estimates of securities analysts. In any such event, the market price of the Company’s Common Stock could be materially and adversely affected.

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Furthermore, the stock market may experience significant price and volume fluctuations, which may affect the market price of the Common Stock for reasons unrelated to the Company’s operating performance. The market price of the Company’s Common Stock, which has ranged from $10.95 per share to $42.95 per share during the last twelve months, may be highly volatile and may be affected by factors such as: (i) the Company’s quarterly operating results; (ii) changes in financial estimates of Company revenues and operating results or buy/sell recommendations by securities analysts; (iii) the timing of announcements by the Company or its competitors of significant products, contracts or acquisitions or publicity regarding actual or potential results or performance thereof; (iv) changes in general conditions in the economy, the financial markets, or the health care industry; (v) government regulation in the health care industry; (vi) changes in other areas such as tax laws; (vii) sales of substantial amounts of common stock or the perception that such sales could occur; (viii) political events; or (ix) other developments affecting the Company or its competitors.

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