-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MMcKgpOFSGrLrVo0x3jG/K2Hw9YLSaIVgnxFYutxXMYffzPO8UoCpI/OnOZnJJH8 jTBs6vfw5FwEtiktC1egrw== 0001024739-99-000636.txt : 19991102 0001024739-99-000636.hdr.sgml : 19991102 ACCESSION NUMBER: 0001024739-99-000636 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19991101 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERIDIAN MEDICAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000095676 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 520898764 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-05958 FILM NUMBER: 99737991 BUSINESS ADDRESS: STREET 1: 10240 OLD COLUMBIA RD STREET 2: STE 100 CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 4103096830 MAIL ADDRESS: STREET 1: 10240 OLD COLUMBIA ROAD CITY: COLUMBIA STATE: DE ZIP: 21046- FORMER COMPANY: FORMER CONFORMED NAME: SURVIVAL TECHNOLOGY INC DATE OF NAME CHANGE: 19920703 10-K 1 FORM 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, 1999 ------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ___________. Commission File Number 0-5958 ------ MERIDIAN MEDICAL TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware 52-0898764 - --------------------------------- --------------------------------- (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 10240 Old Columbia Road, Columbia, Maryland 21046 - ------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 410-309-6830 ------------ Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.10 par value Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K any amendment to this Form 10-K. [X] As of October 27, 1999, the aggregate market value of voting stock held by non-affiliates of the Registrant, based on the average of the high and low sales prices of such stock reported by the National Association of Securities Dealers, Inc. on such date, was approximately $14.2 million. There were 2,994,930 shares of Registrant's common stock outstanding as of September 30, 1999 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Meridian Medical Technologies, Inc. definitive Proxy Statement for the Annual Meeting of Shareholders for the fiscal year ended July 31, 1999 are incorporated by reference into Part III of this Form 10-K. ================================================================================ Page 1 of 57 2 TABLE OF CONTENTS Page ---- PART I Item 1. BUSINESS General 4 Products and Services 5 Injectable Drug Delivery System 5 Government Systems 7 Cardiopulmonary Systems 9 Sources and Availability of Raw Materials 10 Competition 11 Backlog and Renegotiation 11 Research and Development 12 Patents, Trademarks, and Licenses 12 Product Liability Insurance 13 Cost Reduction Program 13 Government Regulation 13 Employees 14 Item 2. PROPERTIES 15 Item 3. LEGAL PROCEEDINGS 15 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16 EXECUTIVE OFFICERS OF THE REGISTRANT (Unnumbered Item) 16 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS 17 Item 6. SELECTED FINANCIAL DATA 18 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19 3 TABLE OF CONTENTS Page ---- Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 26 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 27 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 47 PART III Items 10. Through 13. (Incorporated by reference from the definitive Proxy Statement for the Annual Meeting of Shareholders for the fiscal year ended July 31, 1999, which will be filed with the Securities and Exchange Commission not later than 120 days after the end of that fiscal year) PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K 47 Signatures 53 Exhibit Index 54 FORWARD LOOKING STATEMENTS Certain statements in this Annual Report on Form 10-K are forward-looking and are identified by the use of forward-looking words or phrases such as "will be positioned", "expects", is or are "expected", "anticipates", and "anticipated". These forward-looking statements are based on the Company's current expectations. Because forward-looking statements involve risks and uncertainties, the Company's actual results could differ materially. In addition to the factors discussed under "Business--Competition", "Business--Product Liability Insurance" and "Business--Government Regulation", among the factors that could cause results to differ materially from current expectations are: (i) the general economic and competitive conditions in markets and countries where the Company and its subsidiaries offer products and services; (ii) changes in capital availability or costs; (iii) fluctuations in demand for certain of the Company's products, including changes in government procurement policy; (iv) technological challenges associated with the development and manufacture of current and anticipated products; (v) commercial acceptance of auto-injectors and competitive pressure from traditional and new drug delivery methods; (vi) delays, costs and uncertainties associated with government approvals required to market new drugs and medical devices; (vii) availability of raw materials in adequate quantities at reasonable prices and sufficient quality; (viii) costs of the Company's EpiPen voluntary recall and/or EpiEZPen voluntary product exchange associated with differences from management's estimate of the number of returned units, total costs or adverse impact on future sales; (ix) success and timing of cost reduction programs; (x) adequacy of product liability insurance; (xi) factors related to PRIME ECG including successful product completion, degree of market acceptance and ability to obtain strategic alliances; (xii) expiration of patents and the ability of competitors to design around the Company's patent protection; and (xiii) factors relating to Year 2000 issues. 4 PART I ------ ITEM 1. BUSINESS GENERAL ------- Meridian Medical Technologies, Inc. (hereinafter referred to as the "Company" or "MMT" or "Meridian") was formed in November 1996 through the merger (the "Merger") of Survival Technology, Inc. ("STI") and Brunswick Biomedical Corporation ("Brunswick"). At the time of the Merger, Brunswick held approximately 61% of STI's outstanding common stock, which Brunswick purchased from the estate of STI's late founder on April 15, 1996. As a result, STI had been treated for financial accounting purposes as a consolidated, majority-owned subsidiary of Brunswick from that date. Upon completion of the Merger, STI was the surviving corporation as a legal matter but the Merger was recorded as a purchase of STI by Brunswick for financial accounting purposes. The Merger brought together two companies with a long-standing historical relationship that had complimentary business synergies and marketing strategies. Both companies were focused on the rapidly growing home healthcare and emergency healthcare markets. STI was a publicly traded company that primarily sold auto-injectors to commercial and military markets. Brunswick was primarily a privately held research and development company with core technologies focused on enhancing the diagnosis of cardiac ischemia and arrhythmias, and was engaged principally in the development of the PRIME ECG(TM) electrocardiac mapping system. MMT, through STI, pioneered the development of auto-injectors for the self-administration of injectable drugs. An auto-injector is a prefilled, pen-like device that allows a patient to automatically inject a precise drug dosage quickly, safely, and reliably. Meridian manufactures a spring-loaded, needle applied auto-injector and has North American marketing rights to a needleless auto-injector device using compressed gas. These auto-injectors are a convenient, disposable, one-time use device designed to improve the medical and economic value of many drug therapies. The product is well-suited for the administration of certain drugs and is currently marketed with epinephrine for the treatment of allergic reactions, lidocaine for the treatment of cardiac arrhythmias, morphine for the treatment of pain, and antidotes and diazepam for the treatment of chemical exposures in battlefield conditions. MMT also supplies customized drug delivery system design, pharmaceutical research and development and FDA current Good Manufacturing Practice (cGMP)-approved sterile product manufacturing to pharmaceutical and biotechnology companies. The Company has three primary areas of business: Injectable Drug Delivery Systems, Government Systems and Cardiopulmonary Systems. The Injectable Drug Delivery and Government businesses both utilize the Company's auto-injector technology, while the Cardiopulmonary business utilizes the Company's electrocardiology and telemedicine technologies. The Company expects, over the coming years, to realize significant revenue growth from new commercial applications of its auto-injector products. Additionally, revenue growth is anticipated from alliances that introduce new products for auto-injectors and other drug delivery devices. Current new therapies under development or in negotiations for delivery in auto-injectors include migraine, growth hormone and seizure. Management believes that the PRIME ECG(TM) electrocardiac mapping system has the potential to become the standard ECG system of the future and to generate significant revenues and profits for the Company. Meridian also anticipates a continued increase in revenue from its telemedicine products. Government auto-injector revenues are also expected to increase through international market expansion, new product development and expanding civil defense applications for the Company's products. 5 PRODUCTS AND SERVICES --------------------- Revenues from MMT's three areas of business and gross profit for the years ended July 31, 1999, 1998 and 1997 are as follows (in thousands): Year Ended July 31, 1999 1998 1997 ---- ---- ---- Injectable Drug Delivery Systems $14,405 $22,414 $20,079 Cardiopulmonary Systems 1,840 1,089 2,761 Government Systems 24,485 21,165 17,825 ------- ------- ------- Total Revenues 40,730 44,668 40,665 Gross Profit 12,710 17,577 15,044 Gross Profit % 31.2% 39.4% 37.0% Injectable Drug Delivery Systems revenues in fiscal 1999 above were adversely impacted by the 1998 EpiPen recall. See Item 7 - Management's Discussion and Analysis for further discussion. Injectable Drug Delivery Systems - -------------------------------- MMT currently markets the EpiPen family of products, Lidopen, and contract filling products. Additional technologies under development for commercial application include the TruJect and Weston "needleless" auto-injector. Regulatory approvals have been received and are pending for a line of vial filled generic injectable drugs to be sold through an alliance with Mylan Laboratories. a. Existing Products - --------------------- Currently, the substantial majority of the Company's commercial (i.e., non-government) sales come from its EpiPen(R) epinephrine auto-injectors, which are prescribed to patients at risk of anaphylaxis resulting from severe allergic reactions to bee stings, insect bites, foods and exercise-induced anaphylaxis. These auto-injectors, which are available in two dosage sizes, permit the immediate self-injection of epinephrine, the drug of choice for emergency treatment of such conditions. The EpiPen was the Company's first major commercial auto-injector, and demand for the EpiPen continues to be strong due to increased awareness of the health risks associated with allergic reactions. The Company markets the EpiPen through Dey L.P., a subsidiary of E. Merck based in Germany. Dey Laboratories has a marketing agreement with ALK, Inc., a Danish company, for international markets in 13 foreign countries, and with Allerex in Canada. The Company also produces the LidoPen(R) auto-injector, which utilizes the same delivery system as the EpiPen(R), except that it is prefilled with lidocaine hydrochloride for self-injection by persons experiencing a serious cardiac event. The LidoPen(R) is sold primarily in connection with the sale of the CardioBeeper(R) ECG product family sold by the Cardiopulmonary Systems business. 6 On May 8, 1998, the Company announced a voluntary Class I recall of 47 lots of its EpiPen and EpiPen Jr. auto-injectors (approximately 1,000,000 units) because some may not provide effective doses of medication. During fiscal 1998, the Company recorded provisions for recall costs totaling $2.7 million. Included in this cost is the direct cost of the actual returned products as well as cash costs incurred by the distributor. The Company supplied free units of product to satisfy the reimbursement for cash costs at regular sales price, while the provision provides for the Company's expense at its direct cost of the product. This reimbursement of cash costs with free product reduced normal sales revenue and gross margins in fiscal 1999 and 1998. Management recorded an additional provision of $454,000 in the fourth quarter of fiscal 1999 for what it believes to be the final costs of the recall. b. Developmental Products - -------------------------- Meridian continues to explore new products to further capitalize on its auto-injector technologies. The Company's TRUJECT(TM) is an innovative and low cost single use disposable auto-injector utilizing a technology platform that could replace existing auto-injector applications. TRUJECT(TM) incorporates the latest safety features plus a needle cover, which prevents contamination and shields the needle from view during self-injection. TRUJECT(TM) utilizes dental cartridge technology, which is the container of choice for many commercial drug delivery systems due to its low cost and ease of manufacturing. Due to these factors, the Company believes that the new TRUJECT(TM) technology coupled with the Company's drug development and manufacturing capabilities have the potential to fuel significant growth in its Injectable Drug Delivery business in future years. In March 1998, the Company announced an agreement with U.K.- based Weston Medical Ltd., to acquire North American rights to co-market and manufacture Weston's pre-filled, disposable needle free injector Intraject(R). Intraject is about half the size of a fountain pen. Due to its low cost and ease of use, this patented technology offers a strategic opportunity for Meridian and positions this technology to potentially displace a significant portion of the pre-filled conventional needle syringe market. Meridian and Weston began co-marketing activities in March 1998. Currently, no contracts have been signed by the Company for either TRUJECT(TM) or IntraJect. Commercialization of either technology is dependent upon the successful formulation of the drug product and further development of the auto-injector. c. Generic Products - -------------------- In 1997, the Company formed a long term strategic alliance with Mylan Laboratories ("Mylan") under which Meridian will license, develop and manufacture a line of generic injectable drugs to be marketed by Mylan. In fiscal 1999, the FDA granted clearance for two generic drugs and initial sales were recognized in the fourth quarter of fiscal 1999. Regulatory clearance of a third generic injectable drug is expected in fiscal 2000. 7 d. Pharmaceutical Manufacturing and Packaging - ---------------------------------------------- The Injectable Drug Delivery business also has complete sterile parenteral pharmaceutical manufacturing and packaging services for a broad range of sterile injectable dosage forms which includes vials, dental cartridges, pre-filled ready-to-use syringes, and a line of autoinjectors. Further, the Injectable Drug Delivery business provides fully validated formulation and aseptic filling services and regulatory and clinical trial assistance for those pharmaceutical and biotechnology companies not currently possessing such capabilities. The Company also supplies customized drug delivery system design, cGMP-approved sterile product manufacturing and pharmaceutical research and development to a number of different companies. Development programs include feasibility and stability studies as well as the manufacturing of clinical trial materials in the Company's pilot plant. If feasibility and stability studies are successful and all regulatory approvals are received, the Company anticipates licensing fees and contracts in the coming years to manufacture these products in vials, prefilled syringes and proprietary auto-injector systems. Revenue from customer-funded research and development activities was $1.3, $1.3 and $1.2 million during fiscal years 1999, 1998 and 1997, respectively. The Company expects fiscal 2000 revenue from funded R&D activities and licensing fees to continue. Government Systems - ------------------ The Government Systems business unit supplies auto-injectors for both military and civil defense applications. Currently fielded products include: the AtroPen, containing atropine, and the ComboPen, containing pralidoxime chloride, both used as nerve agent antidotes, a morphine auto-injector for pain management, and a diazapam auto-injector for seizure management. These auto-injectors are intended for use by military personnel and first responders under attack conditions, for the self-administration of nerve agent antidotes against the effects of chemical warfare agents. a. U.S. Department of Defense - ------------------------------ U.S. Department of Defense (DoD) procurements of auto-injectors are restricted to qualified producers and the FDA must approve all products. The Company is currently the only FDA-approved and the only qualified producer for all DoD military auto-injectors. The Company's auto-injectors are classified as critical "war stopper" items by the DoD and have been the subject of an Industrial Base Maintenance Contract ("IBMC") between the Company and the DoD since 1992. This contract is part of a program by the DoD to ensure adequate supplies of critical items in the event of war. The Company has been the supplier of auto-injectors to the DoD since 1970. During fiscal 1999, MMT concluded negotiations with the DoD for its third IBMC beginning August 1, 1999. This contract includes renewal options for two additional years through July 31, 2002. This innovative contract, initially awarded in 1992, calls for production of auto-injectors filled with nerve agent antidotes, the retention by the Company of key personnel and facilities to assure expertise for manufacturing auto-injectors containing nerve agent antidotes, the storage of serviceable material from expired auto-injectors, the management of the U.S. Army's Shelf Life Extension Program, and the pre-stocking of critical components to enhance readiness and mobilization capability. A surge capability provision allows for the coverage of defense mobilization requirements in the event of rapid military deployment. Revenues under this contract have ranged from $13 to $21 million over each of the last three years and are expected to exceed $15 million per year for the new contract period. 8 The Government Systems business unit plans to build upon its strong relationship with the DoD and remain the source of first choice for military auto-injector products. To that end, the Company continues to maintain leadership by introducing new products into this market. New products include the Multi-chambered Auto-injector ("MA") delivery system specifically developed for the U.S. Army. This system will allow military personnel to use a single auto-injector to sequentially administer the required antidotes, quickly and effectively, under battlefield conditions. The MA is expected to be available in December 2000. Other recent developments include the anticonvulsant Diazepam auto-injector manufactured by MMT in 1997 and the pain management Morphine auto-injector introduced in 1998. b. International - ----------------- The Company will continue its strategy to expand its international military sales into new markets worldwide as a principal supplier of critical life saving antidotes for chemical warfare defense. The foreign government customer base includes many allied countries in Europe, the Middle East and the Far East. Sales for fiscal 1999 were $2.5 million. During fiscal 1999, the Company was granted a Product License - Marketing Authorization by the German Federal Institute for Medicinal Drugs and Medicinal Products for its atropine-filled auto-injectors ("AtroPen"). This approval also allows MMT to expand the marketing of the AtroPen under the European Mutual Recognition Procedures to supply allied armed forces throughout Europe. c. Civil Defense - Domestic Preparedness - ---------------------------------------- The Company's life-saving medical technology can be used in a variety of emergency situations before trained medical professionals can intervene. Because of this advantage, the demand for nerve agent antidote auto-injectors has recently expanded to include growing numbers of state agencies and local communities, for civil defense purposes in response to potential terrorist attacks and as protection for populations in high risk areas, in conjunction with DE-MIL programs (disarming and destroying chemical weapon stockpiles). The Government Systems business unit now encompasses not only the sales and marketing activities for the military markets but also the marketing activities geared toward city and state Emergency First Responders. This is essentially an untapped market with a significant growth potential. Sales were $1.3 and $0.5 million for fiscal years 1999 and 1998, respectively. d. Development - -------------- Under a program in conjunction with the DoD, the Company completed the development of its next generation of auto-injectors for the U.S. Army - Ft. Detrick, and recently delivered a complete NDA [505(b)(2)] for Government sponsored submission to the FDA. This new automatic injection system is a single unit, multi-chambered auto-injector referred to as the "MA". This new delivery system houses two drugs separately in a single injector, atropine and pralidoxime chloride, delivering the two nerve agent antidotes in succession through a single needle. Feasibility studies are underway to evaluate the use of other antidote formulations in the MA configuration. Funding to support this development work is in negotiation with several European countries. The Company is continuing to explore the feasibility of a delivery system capable of storing compounds in dry and liquid form in separate chambers and capable of automatically, upon activation, mixing them into solution prior to self-injection by trained personnel. 9 Cardiopulmonary Systems - ----------------------- The Cardiopulmonary Systems business develops, manufactures, and sells medical systems and disposable products that are used for diagnosis and management of heart attack and other cardiac conditions. The Company recently completed development of the PRIME ECG(TM) electrocardiac mapping system, which provides a more complete non-invasive analysis of the electrophysiology of the heart than is possible with conventional 12-lead ECG technology. This more comprehensive view of the electrical activity of the heart offers the clinician the opportunity to more quickly and accurately detect heart attack through an easy to interpret graphic display that depicts both size and location of the affected area. Early research indicates this more comprehensive view of the electrical activity of the heart can be applied to a broad range of applications where the smaller 12-lead sample is inadequate for diagnosis and management. The PRIME ECG system received the CE Mark from European authorities during fiscal 1999 and the company is actively recruiting specialty distributors in selected markets. Initial system orders are expected in the third quarter of fiscal 2000. In the United States, a large clinical study designed to demonstrate superior performance compared to the 12-lead ECG, will be initiated in the second quarter of fiscal 2000. A 510(k) filing with the FDA is anticipated during calendar 2000. Subject to prior receipt of FDA approval, the Company will introduce the PRIME ECG system in this country. The Company also participates in the telemedicine market, providing a range of easy to use devices that record and transmit various diagnostic information from the home to a monitoring center or physician's office. These products are sold through a large telemedicine service provider based in Israel. The Company anticipates moderate growth in this area through the introduction of several new monitoring products and by expansion to other countries including the United States. a. PRIME ECG(TM) Electrocardiac Mapping System. - The PRIME ECG system is a unique electrocardiac mapping system developed in collaboration with university and medical school researchers. This system offers the potential to significantly improve the diagnosis and treatment of heart disease, which affects over 13 million people in the U.S. alone, including 1.5 million heart attacks each year. The PRIME ECG system consists of a patented 80-lead disposable electrode vest, 80-channel recording module, computer assisted analysis and a full color graphic display. The system will initially be introduced for the early detection of acute myocardial infarction ("AMI") or heart attack. Clinical tests at the University of Ulster in Belfast conclude that the PRIME ECG system allows earlier and more accurate diagnosis of AMI for significantly more patients than the standard 12-lead ECG. Further, the PRIME ECG system displays results in a manner that allows the clinician to identify the nature of the infarct, which can be invaluable in determining the most effective course of treatment. Without early and accurate diagnosis of AMI, potentially life-saving treatment is delayed for AMI victims. For non-AMI chest pain patients, unnecessary tests and hospital admissions to rule-out AMI are estimated to cost health care systems and individuals billions of dollars each year. The Company anticipates that the clinical and economic benefits of this new system can create the opportunity for the Cardiopulmonary Systems business to become a prominent participant in the electrocardiography market in future years. 10 The Company expects the PRIME ECG(TM) system will be used initially by the emergency room physician who needs faster and more accurate diagnosis for more than 15 million chest pain patients each year. The Company is pursuing additional applications in areas where a more complete knowledge of the electrical condition of the heart would enhance detection and/or treatment of related conditions. Based on early research, this might include, but is not limited to confirmation of reperfusion following thrombolysis, identification of accessory pathways found in atrial arrhythmia and vulnerability to sudden cardiac death. The use of the PRIME ECG system requires purchase of a disposable electrode array or vest. This patented, simple to use device is expected to provide a recurring source of revenue to the Company, which anticipates that it will be the sole manufacturer. The Company anticipates that the disposable electrode vest design can be modified to meet a range of applications, allowing lower cost and even greater convenience if this technology is adapted to even routine ECG applications. b. Telemedicine Products - The Company is a leader in the development of devices that measure and transmit diagnostic information by telephone. These products allow a patient's condition to be monitored while at home, which can reduce expensive office visits, allow for earlier diagnosis and minimize emergency room and hospital admissions. Meridian's CB-12L CardioBeeper(R) electronic heart monitor transmits a standard 12-lead electrocardiogram ("ECG") by telephone. A new heart monitor, the CardioPocket(TM) was introduced in 1999, providing unprecedented convenience by incorporating a miniaturized single-lead version into a wallet. The CardioPocket was awarded a Millenium Product Award for innovation and creativity in the U.K. from the Design Council of Britain, and has already been purchased by more than 15,000 users. The CardioBeeper(R) product line is sold by Shahal Medical Services, Ltd. ("Shahal"), which has exclusive international marketing rights. Shahal, based in Israel, is a home healthcare monitoring company serving more than 60,000 subscribers. Last year, Shahal formed SHL International for the purpose of accelerating its program to expand its business to other countries with a focus in Europe and the United States. In addition, several new product development programs have been initiated which are intended to result in new opportunities for growth in this business area over the next several years. SOURCES AND AVAILABILITY OF RAW MATERIALS ----------------------------------------- The Company purchases, in the ordinary course of business, necessary raw materials, components and supplies essential to the Company's operations from numerous suppliers in the U.S. and overseas. Several of the ingredients used in the antidote regimens are unique and require specialized synthesis facilities, consequently, limited amounts of these ingredients are available from time to time. The Company monitors this situation carefully to ensure a continued supply of these ingredients. The Company procures inventory principally when supported by customer purchase orders. 11 COMPETITION ----------- In the commercial auto-injector market, the Company competes directly with companies that manufacture drug injection devices, whether such devices are automatic like the Company's products or non-automatic, variable dose pen-like injection devices, reloadable injection devices and disposable needle-free injection systems. The Company is the leading manufacturer of automatic injectors in the world. The Company expects competition to intensify in the coming years. Meridian is the sole supplier of auto-injectors to the U.S. Government for military use, and effective August 1, 1999, has renewed its three-year base maintenance contract (an initial base year and two option years) with the U.S. Department of Defense. The Company competes with a small number of companies selling to foreign military markets. The Company's pharmaceutical manufacturing and packaging services operate in an intensely competitive field that is presently dominated by larger pharmaceutical companies. There are numerous other disposable, prefilled syringe systems presently available which can be less expensive than those offered by the Company. A small group of independent companies and a few pharmaceutical companies offer contract syringe filling services similar to those that the Company offers. The Cardiopulmonary business operates in a highly competitive sector of the healthcare industry. Meridian's telemedicine products compete against the products of numerous other companies and joint ventures. The PRIME ECG(TM) product will compete with existing diagnostic equipment and testing procedures such as blood markers for detection of AMI, and potentially with products and technologies currently under development that may be brought to market, such as enhanced 12-lead ECG algorithms, invasive cardiac mapping and improved cardiac stress testing. BACKLOG AND RENEGOTIATION ------------------------- As of July 31, 1999, the backlog of orders was approximately $19.7 million, of which $6.2 million related to production and delivery of commercial products and services, and $13.5 million related to military products and the IBMC contract. This favorably compares with commercial product sales backlog of $8.2 million, some of which were for recall returns, and a military backlog of $9.6 million, for a total of $17.8 million at July 31, 1998. The Company's supply contracts with the DoD are subject to post-award audit and potential price redetermination. From time to time, the DoD makes claims for pricing adjustments with respect to completed contracts. At present, no claims are pending. All U.S. Government contracts provide that they may be terminated for the convenience of the Government as well as for default. Upon termination for convenience of cost reimbursement type contracts, the Company would be entitled to reimbursement of allowable costs plus a portion of the fixed or target fee related to work accomplished. Upon termination for convenience of fixed-price contracts, the Company normally would be entitled to receive the contract price for items which have been delivered under the contract, as well as reimbursement for allowable costs for undelivered items, plus an allowance for profit thereon or adjustment for loss if completion of performance would have resulted in a loss. The Company anticipates no such contract terminations. 12 RESEARCH AND DEVELOPMENT ------------------------ The Company expensed $1.2 million, $1.3 million and $2.8 million on research and development activities in fiscal 1999, 1998, and 1997, respectively. The Company expects research and development expenditures in fiscal 2000 to be higher than the fiscal 1999 level. MMT is in the final development phase of the MA, a multi-chambered auto-injector for intramuscular use to contain pharmacalogical or chemically incompatible medications in respective chambers, dispensing them sequentially through a single needle. Production of this auto-injector is scheduled to begin in the second quarter of fiscal 2001. MMT also has Truject, a single-chambered auto-injector for subcutaneous injection which utilizes a very thin (27 gauge) needle, under development for potential new applications. This new auto-injector is designed for use in emergency situations and for any episodic treatment where a subcutaneous injection is the preferred drug delivery route. Such applications may include migraine, seizures and pain management. These new auto-injectors will be subject to regulations prior to the product reaching the marketplace. See "Government Regulation" below. In addition, MMT expects to develop and introduce additional applications for its Electrocardiac Mapping System and Telemedicine Products with the key focus being on the PRIME ECG(TM). PATENTS, TRADEMARKS, AND LICENSES --------------------------------- The Company considers its proprietary technology to be important in the development, marketing and manufacture of its products and seeks to protect its technology through a combination of patents and confidentiality agreements with its employees and others. Patents covering important features of the Company's current principal auto-injector products have expired. This loss of patent protection could have an adverse effect on the Company's revenues and results of operations. MMT is currently developing a new generation of auto-injector products (see "Research and Development") for which a number of patents have been granted to the Company. Over the last few years, the Company was granted U.S. patent protection for several of its new auto-injector drug delivery systems, designed for fast and reliable patient self-administration of the expanding range of new pharmaceutical and biotechnology products that require injection. Some of these patents cover the multi-chambered auto-injector (MA) expected to be launched in the first half of fiscal 2001. The MA patents cover various components running through 2010. In addition, the Company holds several patents and licenses on the PRIME ECG(TM) electrocardiac mapping system, including the patent on the PRIME ECG algorythm. Most of the other patents are licensed from the Northern Ireland Bioengineering Center at the University of Ulster in Northern Ireland for a minimum remaining term of 18 years. The Company intends to file for additional protection for its new auto-injector and cardiopulmonary products currently under development. The new auto-injector products are expected to replace or supplement the Company's existing line of auto-injectors over time. 13 PRODUCT LIABILITY INSURANCE --------------------------- The Company maintains product liability coverage for its products aggregating $35 million. The Company will continue to maintain liability insurance as it relates to divested operations to cover potential claims incurred but not reported prior to their disposition. Although the Company's management is of the opinion that, with respect to amounts, types and risks insured, the insurance coverage is adequate for the business conducted by the Company, there can be no assurance that such insurance will provide sufficient coverage against any or all potential product liability claims. COST REDUCTION PROGRAM ---------------------- The Company's cost reduction program is on-going, with additional initiatives which were implemented in fiscal 1999 and 1998, and more expected in the future. The Company seeks to incorporate both enhanced features and lower manufacturing costs in its next generation products. The Company expects to achieve significant future cost savings from the consolidation of facilities in St. Louis. Currently the St. Louis manufacturing operations utilize a total of eight buildings, a reduction of one from 1998. The Company intends to continue to consolidate these operations into fewer buildings which should result in enhanced product flow, increased product yield and reduced inventory and overhead costs. GOVERNMENT REGULATION --------------------- The business of the Company is highly regulated by governmental entities, including the FDA and corresponding agencies of states and foreign countries. The summary below does not purport to be complete and is qualified in its entirety by reference to the complete text of the statutes and regulations cited herein. As a manufacturer of auto-injectors, cardiopulmonary products, vials and pre-filled syringes, the Company's products are subject to regulation by the FDA under the Federal Food, Drug and Cosmetic Act ("Act"). All of the Company's auto-injectors are "new drugs" and may be marketed only with the FDA's approval of a New Drug Application "NDA" or a supplement to an existing NDA. The Company currently holds approved NDAs for each of its existing auto-injector products. The use of the Company's existing auto-injectors to administer another FDA approved drug generally would require the filing of a NDA, supplement to an existing NDA or an Abbreviated New Drug Application ("ANDA"). In addition, the introduction of the Company's new generation auto-injectors will require FDA approvals based on data demonstrating the safety, effectiveness, and/or bioequivalence of the drug delivered by these auto-injectors. There is no assurance that the NDAs will be processed in a timely manner or that FDA ultimately will approve such NDAs. The Company's prefilled syringe systems are also regulated as drugs; however, the requisite FDA approval is held by the supplier of the drug that the Company fills into the syringe. To the extent the Company's auto-injector and syringe systems are expected to be used to administer new drugs under development, FDA approval to market such drugs first must be received by the pharmaceutical manufacturer. Obtaining the requisite FDA approval is a time consuming and costly process through which the manufacturer must demonstrate the safety and effectiveness of a new drug product. Once acquired, this approval is specific to company and manufacturing sites. The Company's Cardiopulmonary Systems Products must have FDA Registration for U.S. sales and CE Marking for European sales. 14 In connection with its manufacturing operations, the Company must comply with cGMP regulations, and its manufacturing facilities are subject to periodic inspections. The Company's St Louis facility has undergone multiple routine, satisfactory inspections of both the facilities as well as individual drug products manufactured there in 1999 and 1998. Suppliers of bulk drugs for filling into the Company's drug delivery systems, as well as subcontractors that manufacture components for the Company's medical devices, also are subject to FDA regulation and inspection. The Company has only limited control over these other companies' compliance with FDA regulations. Failure of these companies to comply with FDA requirements could adversely affect the Company's ability to procure component parts, market finished products and may cause the Company's products made with non-compliant components to be adulterated or misbranded in violation of the Act, subjecting the products to a variety of FDA administrative and judicial actions. The FDA is empowered with broad enforcement powers. The FDA may initiate proceedings to withdraw its approval for marketing of the Company's product should it find that the drugs are not manufactured in compliance with cGMP regulations, that they are no longer proven to be safe and effective or that they are not truthfully labeled. Noncompliance with cGMP regulations also can justify nonpayment of an existing government procurement contract and, until the deficiencies are corrected to FDA's satisfaction, can result in a nonsuitability determination, precluding the award of future procurement contracts. For any of the Company's auto-injectors and syringe systems, noncompliance with FDA regulations could result in civil seizure of the drugs, an injunction against the continued distribution of the drugs or criminal sanctions against the Company. The Company's medical devices also are subject to seizure by the FDA through administrative or judicial proceedings. In addition, the FDA may impose civil money penalties for most violations of law and may order that defective devices be recalled, repaired or replaced or that purchasers be refunded the cost of the device. The Company also is subject to regulation by other federal and state agencies under various statues, regulations and ordinances, including environmental laws, occupational health and safety laws, labor laws and laws regulating the manufacture and sale of narcotics. EMPLOYEES --------- As of September 30, 1999, the Company employed a total of 275 employees: 219 employees work at the Company's plant and warehouse facilities in St. Louis, Missouri; 30 employees work at the new facility in Belfast, Northern Ireland, and 26 employees work at the Company's corporate headquarters in Columbia, Maryland (see "Properties"). Effective March 1, 1999, the Company successfully renegotiated and entered into a three-year agreement with the Teamsters Local Union No. 688 ("Teamsters") which is affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America. Teamsters are the exclusive agent for all production and maintenance employees of the Company at its St. Louis facility. Approximately 122 employees are covered by this collective bargaining agreement. 15 ITEM 2. PROPERTIES The Company's corporate headquarters are located in an 11,000 square foot facility in Columbia, Maryland. The facility is leased through 2002. The corporate headquarters facility houses the corporate administration, human resources, finance, commercial business development, government programs, regulatory affairs and the product design and development functions. Meridian had entered into a ten-year lease expiring in 2002 on a 17,000 square foot facility in Rockville, Maryland, which previously served as the Company's headquarters. The Rockville, Maryland facility has been sub-leased to a third party through 2002. The Company's primary R&D and pharmaceutical operations are located in St. Louis, Missouri. These facilities are used primarily for formulation, stability testing, aseptic filling, assembly and final packaging of the Company's auto-injectors, vials and pre-filled syringes. The St. Louis manufacturing facilities consist of eight separate buildings occupying over 100,000 square feet. See Cost Reduction Program above. In fiscal 1999, the Company opened a new facility in Belfast, Northern Ireland, and consolidated the operations previously performed at the Antrim, N. Ireland and Rochester, Kent England facilities. The new, 28,000 square foot facility is designed to develop and produce innovative technology products for its Cardiopulmonary Systems Group, including the PRIME ECG(TM) system, and supply auto-injectors for the Government Systems Group for sale to international markets. The Company is leasing the new facility under a lease expiring in 2014. The Company has a 4,200 square foot facility in Rochester, Kent in the United Kingdom previously used for aseptic assembly and packaging of auto-injector product under contracts with foreign countries. This facility was also used as a sales and marketing office to promote the Company's commercial and military products in Europe and the Middle East. The facility is leased pursuant to a lease that expires in 2010, and the Company is currently pursuing sub-lease tenants. The operations of the Rochester facility were consolidated with the Antrim, N. Ireland facility into the new Belfast facility in fiscal 1999. ITEM 3. LEGAL PROCEEDINGS Lawsuits and claims are filed from time to time against the Company and its subsidiaries in the ordinary course of business. Management of the Company, after reviewing developments to date with legal counsel, is of the opinion that the outcome of such matters will not have a material adverse effect on the Company's consolidated financial position or results of operations. 16 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted by the Company during the fourth quarter of fiscal 1999 to a vote of security holders, through the solicitation of proxies or otherwise. EXECUTIVE OFFICERS OF THE REGISTRANT The following table lists, as of September 30, 1999, the names and ages of all executive officers of the Company, and their positions and offices held with the Company
Name Age Present Positions with the Company - ---- --- ---------------------------------- James H. Miller 61 Chairman, President and Chief Executive Officer Gerald L. Wannarka 60 Senior Vice President, Technology and Government Systems Dennis P. O'Brien 41 Vice President, Finance and Chief Financial Officer Peter A. Garbis 58 Vice President, Organization Development
Mr. Miller joined the Company as President of STI in June 1989, was elected Chief Executive Officer in June 1990 and was elected Chairman of the Board in April 1996. In November 1993, Mr. Miller assumed the additional post of chairman and chief executive officer of Brunswick Biomedical Corporation while continuing his position with STI. Prior to joining the Company, Mr. Miller served as Executive Vice President of Beecham Laboratories from February 1987 to May 1989, responsible for the Pharmaceutical and Animal Health Divisions. Prior to joining Beecham, Mr. Miller spent ten years with Frank J. Corbet Inc. (Healthcare Advertising Agency) as Executive Vice President and fourteen years in marketing management with Abbott Laboratories. Dr. Wannarka joined Meridian in December 1997 as Vice President, Technology and Government Systems and was promoted to Senior Vice President in September 1998. Dr. Wannarka is a former US Army Medical Service Corps Officer retiring in 1992 at the rank of Colonel. While on active duty, Dr. Wannarka had responsibilities in research, research management and FDA regulatory affairs, and served in positions of gradually increasing responsibility such as: Project Manager, Pharmaceutical Systems, Deputy Director, USA Medical Research Institute of Chemical Defense, and Director, Clinical Investigation Program, US Army Health Services Command. Since retiring from the military, he has held positions as Vice President, Research and Development, for DPT Laboratories and Coloplast Corporation. He has conducted research with therapeutics for high-hazard virus infections, medical chemical defense, topical therapeutics and drug delivery to include auto-injectors, transdermal, inhalation, sustained release oral and parenteral systems. Mr. O'Brien joined Meridian in March 1999 as Vice President, Finance and Chief Financial Officer. Prior to joining Meridian, he was Vice President of Finance and Chief Financial Officer of Ogden Environmental & Energy Services Co., Inc. Previous positions held by Mr. O'Brien include Vice President of Finance/Chief Financial Officer positions of After Six, Ltd. and Tate Global Corporation from 1990 through 1996. Prior to joining Tate, Mr. O'Brien was with Flow Laboratories, Inc., a biomedical products supply company, and KPMG Peat Marwick. Mr. O'Brien is a Certified Public Accountant and a Certified Management Accountant. Mr. Garbis joined Meridian in May 1996 as Executive Director, Organization Development and was promoted to Vice President in April 1998. Mr. Garbis' prior experience in the field of human resources and organizational management has been with such major companies as Solorex Corp., a Division of Amoco/Enron, Lockheed Martin, ITT Telecommunications, and Nuclear-Chicago, a Division of G.D. Searle. 17 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded on the over-the-counter market and is quoted in the NASDAQ National Market System under the symbol MTEC. The following table shows the high and low sales price of the Company's common stock for each fiscal quarter during the two year period ended July 31, 1999, as reported on the NASDAQ National Market System. 1999 1998 ---- ---- Quarter High Low High Low ---- --- ---- --- First $ 11.625 $ 6.500 $ 9.750 $ 6.125 Second 8.000 4.625 12.000 6.875 Third 7.000 4.000 14.625 11.125 Fourth 7.125 5.000 14.750 9.500 The Board of Directors has not declared any dividends on the Company's common stock since its organization. As of October 29, 1999, the number of shareholders of record was approximately 400. 18 ITEM 6. SELECTED FINANCIAL DATA
Year End Year End Year End Month End Year End Year End July 31, July 31, July 31, July 31, June 30, June 30, (in thousands, except per share data) 1999 1998 1997 1996 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------------- Operations: Net sales $ 40,730 $ 44,668 $ 40,665 $ 4,511 $ 10,375 $ 2,903 Gross profit 12,710 17,577 15,044 1,901 3,420 1,205 Operating income (loss) 1,287 3,067 (1,699) 908 (6,212) (1,582) Other expense, net (3,027) (2,629) (2,395) (140) (539) (18) Income (loss) before income tax, minority interest, and extraordinary loss (1,740) 438 (4,094) 768 (6,751) (1,600) Provision for income tax - 343 45 440 27 - Minority interest in consolidated subsidiary - - 266 327 17 - Income (loss) before extraordinary loss (1,740) 95 (4,405) 1 (6,795) (1,600) Extraordinary loss on debt refinancing - (494) - - - - ------------------------------------------------------------------------------------- Net income (loss) $ (1,740) $ (399) $ (4,405) $ 1 $ (6,795) $ (2,903) Basic income(loss) per share $ (0.58) $ (0.13) $ (2.16) $ 0.02 $ (99.32) $ (23.39) Diluted income(loss) per share $ (0.58) $ (0.12) $ (2.16) $ 0.02 $ (99.32) $ (23.39) Weighted average shares: Basic 2,993 2,971 2,040 68 68 68 Diluted 2,993 3,328 2,040 68 68 68 Financial Position: Current assets $ 20,233 $ 18,296 $ 16,031 $ 16,557 $ 16,352 $ 981 Working capital 4,373 6,046 844 4,230 4,145 (681) Fixed assets, net 15,826 16,389 15,778 14,984 14,990 200 Total assets 47,751 46,847 44,082 41,568 41,694 3,188 Long-term debt 17,639 18,850 13,921 16,385 16,056 55 Shareholders' equity 11,738 13,338 12,293 3,844 4,387 1,472
Through April 15, 1996, only Brunswick's revenues and other financial data are included in the amounts reflected in the table above. STI revenues and other financial data are included from April 15, 1996, the date when Brunswick acquired a majority interest in STI. 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction - ------------ MMT is a medical device and drug delivery system company focusing on Early Intervention Healthcare and Emergency Medical Technologies. The Company has three areas of business. The Injectable Drug Delivery Systems business focuses on injectable drug delivery devices with an emphasis on commercial auto-injectors. This business also supplies customized drug delivery system design, pharmaceutical research and development, and sterile product manufacturing to pharmaceutical and biotechnology companies. The Cardiopulmonary Systems business focuses on non-invasive cardiac diagnostics and telemedicine. The Cardiopulmonary Systems business is beginning the European distribution phase for the PRIME ECG system, an 80-lead cardiac mapping system designed for rapid and improved diagnostic accuracy of cardiac ischemia. Multiple distributors in major western European markets are being targeted and, subject to the completion of negotiations and execution of distribution agreements, will become distributors of the system over the coming months. A U.S. based FDA clinical study of the PRIME ECG system will begin in November 1999. Meridian intends to complete the U.S. clinical study by the fourth quarter of fiscal 2000. Subject to a successful completion of the clinical, a 510(k) application will be made to the FDA for approval to market the product in the U.S. The Company, through Shahal, is also planning a US expansion of its telemedicine business. The Government Systems business focuses on the world-wide market for auto-injectors used for self-administration of nerve agent antidotes, morphine and diazepam, and markets to the U.S. and allied governments, as well as local governments for civil defense applications. Results of Operations - --------------------- 1999 compared with 1998 - ----------------------- MMT's net loss after taxes for the year ended July 31, 1999 was $1,740,000 ($0.58 per share) on revenues of $40.7 million compared to a fiscal 1998 net loss of $399,000 ($0.13 per share) on revenues of $44.7 million. Included in the net loss for 1999 was a fourth quarter charge of $454,000 for the EpiPen recall, and included in the net loss for 1998 were charges of $2.7 million for the EpiPen recall and $494,000 for the extraordinary loss on debt extinguishment. Gross margins decreased to 31% in 1999 compared to 39% in 1998. This decrease reflects the impact of supplying free units of EpiPen as a result of the 1998 EpiPen recall. Operating expenses decreased by 6.8% from 1998 to 1999, excluding the recall charges from 1999 and 1998. This reduction reflects planned cost reductions in selling, general and administrative expenses. Operating income and EBITDA were $1.3 and $5.1 million, respectively, in 1999, down from $3.1 and $6.9 million in 1998 due to the gross margin decline associated with the recall. 20 The Company has estimated results excluding the impact of the 1998 EpiPen recall and the 1997 EpiEZPen voluntary exchange program for the years ended July 31, 1999 and 1998 as follows:
(In thousands) Impact of the 1998 EpiPen recall and the 1997 EpiEZPen voluntary Reported results exchange program Estimated results ---------------- ---------------- ----------------- The year ended July 31, 1999 Net sales $ 40,730 $ 3,187 $ 43,917 Operating income 1,287 2,842 4,129 (Loss) income before income taxes $ (1,740) $ 2,842 $ 1,102 ========== =========== ========== The year ended July 31, 1998 Net sales $ 44,668 1,294 $ 45,962 Operating income 3,067 3,713 6,780 Income before income taxes and extraordinary loss $ 438 $ 3,713 $ 4,151 ========== =========== ==========
The table above removes the estimated impact of the 1998 EpiPen recall and the 1997 EpiEZPen voluntary exchange program from actual reported results. The impact includes lost sales and gross margins due to free units supplied to reimburse for cash costs, as well as the actual expense provided. The above analysis does not quantify the impact that the free units supplied for replacement purposes had on sales and gross margins. Drug Delivery business sales were $14.4 million in 1999, 36% lower than 1998 resulting from free units of EpiPen supplied to satisfy replacement units and cash costs relating to the EpiPen recall. Government business sales were $24.5 million, 16% higher than 1998 as sales to the U.S. Department of Defense (DoD) and civilian defense customers continued to grow. Cardiopulmonary sales were $1.8 million in 1999, 69% higher than 1998 reflecting increased telemedicine sales, primarily the CardioBeeper product. Gross margins were 31% of sales in 1999 compared to 39% in 1998. The decreased gross margins from 1998 to 1999 resulted primarily from recall obligations. The Company shipped 771,000 free EpiPens in fiscal 1999, both for actual units returned and to reimburse the distributor for cash costs. While the direct cost of these free units was fully reserved in 1998, the lost revenue from those units caused the gross margin to decline. The Company has provided $454,000 in the fourth quarter of fiscal 1999 for what it believes to be the final costs of the recall. Management expects EpiPen sales for fiscal 2000 to exceed pre-recall levels. Operating costs were $11.4 million in 1999, a decrease of $3.1 million from 1998. Most of the decreased cost was from reserve provisions for the EpiPen recall totaling $2.7 million which was expensed in 1998. Additionally, administrative costs were lower by 10% due to cost reduction programs initiated by the Company. Nonoperating expenses in 1999 were $3.0 million, 15% higher than in 1998. The higher costs in 1999 result from increased interest cost on debt. Interest cost includes a full year of the Senior Subordinated Debt compared to only 3 months in 1998, following the April 30, 1998 refinancing. Additionally, borrowings on the Revolving Line of Credit were higher in 1999 due to working capital requirements relating to production for recall obligations. The Company generated other income items amounting to $340,000 in 1999 and $256,000 in 1998, mostly from grant income in 1999 and sales of nonstrategic technology in 1998. The income tax provision was $0 in 1999 and $26,000 in 1998 for Alternative Minimum Tax. The Company continues to have significant operating loss carryforwards as explained in Note 7 to the financial statements. 21 Line of Business Discussion Drug Delivery sales were $14.4 million in 1999, 36% lower than in 1998 due to free units of EpiPen supplied to satisfy obligations from the May 8, 1998 product recall. The Company produced and shipped in excess of 1.6 million EpiPens in fiscal 1999, 771,000 of which were for recall obligations and were non-revenue generating. Of the 771,000 units, a portion were to replace actual units returned, and the remainder were to reimburse for cash costs incurred by the distributor. The reserve provisions exclude any impact from lower sales revenue and resulting lower margins because the Company is reimbursing recall costs with free EpiPen units instead of cash reimbursement. It is estimated that the delivery of EpiPen units to reimburse recall cash costs depressed 1999 revenues by $3.2 million. R&D services and contract filling both had an increase in revenues from 1998 to 1999, including the initial shipment to Mylan Laboratories of Acyclovir, contributing toward this business unit's results. Government revenues increased by 16% in 1999 over the prior year to $24.5 million. The increase resulted from higher sales to the DoD under the IBMC contract, as well as sales to local municipalities for civil defense - domestic preparedness applications. Sales to foreign governments were 58% higher in 1999 than 1998 reflecting a favorable timing of orders and an expanding international market for the Company's products. In 1999, the Company successfully renegotiated its industrial base maintenance contract with the DoD. The contract calls for the retention by the Company of key personnel and facilities to assure expertise for manufacturing auto-injectors containing nerve agent antidotes, the storage of serviceable material from expired auto-injectors, the management of the U.S. Army's Shelf Life Extension Program, the pre-stocking of critical components to enhance readiness and mobilization capability, and new product orders. This contract is expected to generate at least $15 million in revenues in fiscal 2000. Cardiopulmonary product revenues in 1999 were $1.8 million, an increase from 1998 sales of $1.1 million. The increase was due to higher telemedicine sales, specifically the CardioBeeper and CardioPocket products. Significant activities in the Cardiopulmonary business is focused on moving the PRIME ECG system from the development phase towards market introduction. Sensitivity and specificity results continue to improve and are currently above expectations. A CE Mark was received in 1999, approving the product for sale in Europe, and a distribution network in western Europe is presently being developed. US clinical trials will begin in November 1999 and, subject to the successful completion, FDA approval is expected in late fiscal 2000. The Company capitalized $1,043,000 in 1999 for software development costs relating to PRIME. The Company opened a plant in 1999 in Belfast, Northern Ireland to support the production of the PRIME ECG system, among other uses. The new 28,000 square foot facility is expected to provide the production capacity necessary for the product launch. Fourth Quarter 1999 compared with Fourth Quarter 1998 - ----------------------------------------------------- The Company's net income was $99,000 on revenues of $10.4 million during the quarter ended July 31, 1999, compared to a net loss of ($441,000) on revenues of $9.9 million during the same period in fiscal 1998. Gross margin was 42.6% for the fourth quarter, compared to 40.5% for the same quarter last year. This represents an improvement from the prior quarters of fiscal 1999, and reflects the declining impact of the recall. 22 1998 compared with 1997 - ----------------------- 1998 financial results improved over 1997 as the net loss after taxes for the year ended July 31, 1998 was $399,000 ($0.13 per share), compared with a $4,405,000 net loss ($2.16 per share) in 1997. Sales increased 10% to $44.7 million in 1998 from $40.7 million in fiscal 1997. Operating income was $3.1 million compared to $2.2 million in 1997, excluding merger costs. Gross margins increased to 39% in 1998 compared to 37% in 1997. The increased gross margins from 1997 to 1998 resulted primarily from higher sales volume, including record sales of EpiPen brand products, product mix, as well as cost reductions and fixed cost controls initiated after the Merger. Operating expenses were higher in 1998 primarily because of the charges for the EpiPen recall amounting to $2.7 million. EBITDA was $6.9 million in 1998, $1.3 million higher than the 1997 EBITDA, excluding merger costs. Drug Delivery business sales were $22.4 million in 1998, 12% higher than 1997 resulting from record EpiPen brand sales. STI Government business sales were $21.2 million, 19% higher than 1997 as sales to the US Department of Defense (DoD) continued to grow. Cardiopulmonary sales were $1.1 million in 1998, down from $2.8 million in 1997 reflecting slower sales of the CardioBeeper and the disposition of a non-strategic business in late 1997. Operating costs were $14.5 million in 1998, an increase of $1.7 million over 1997, excluding merger costs. Most of the increased cost was from reserve provisions for the EpiPen recall totaling $2.7 million. Additionally, administrative costs were higher due to increased marketing and investor relations activities, but were partially offset by lower research and development costs and the 1997 product exchange expense. The combination of increasing revenues, lower costs of sales and higher operating costs resulted in operating income growing to $3.1 million in 1998 from $2.2 million in 1997, excluding merger costs. Nonoperating expenses in 1998 were $2.6 million, $234,000 higher than 1997. The higher costs in 1998 result from increased interest cost on debt. Interest cost includes amortization of warrants issued to finance the debt relating to the Merger amounting to $295,000 in 1998 and $458,900 in 1997. Additionally, the Company recorded an interest charge amounting to $166,000 in its fourth quarter to reflect the revaluation of warrants issued to Nomura during the 1998 refinancing of the Company's debt. The Company generated other income items amounting to $256,000 in 1998 and $172,000 in 1997 mostly from sales of nonstrategic technology in 1998 and the assets of a nonstrategic business in 1997. The income tax provision was $26,000 in 1998 for Alternative Minimum Tax compared to tax provisions of $45,400 in 1997. The Company continues to have significant operating loss carryforwards as explained in Note 7 to the financial statements. Extraordinary Loss The Company refinanced its term debt on April 30, 1998 and took a $494,000 after-tax charge to write-off unamortized debt discount associated with warrants issued in conjunction with the original debt. 23 Liquidity and Capital Resources The Company used $125,000 of cash from operations in 1999. Cash flow approximated break-even despite the net loss for the year primarily because of non-cash expenses for depreciation and amortization, which were partially offset by an increase in year-end accounts receivable, which were higher due to strong July 1999 sales. Investing activities used $2.5 million of cash in fiscal 1999 for capital additions and software development costs. Financing activities generated $2.6 million primarily resulting from net borrowings on the Company's line of credit. The Company increased its asset based working capital credit line with ING CAPITAL to a maximum of $8.5 million from $6.5 million in fiscal 1999. The amount outstanding under this working capital line at July 31, 1999 was $7.2 million. (See Note 5 to the consolidated financial statements for discussion about the Company's debt). The Company obtained waivers of financial covenants from its lenders for the fourth quarter fiscal 1999. The Company also obtained amendments to the loan agreements from its lenders to reset the financial covenants for fiscal 2000 to levels consistent with the Company's operating plan. Working capital at July 31, 1999 was $4.4 million, down from $6.0 million at July 31, 1998. The decrease is primarily attributable to the loss for the year and higher current maturities on long-term debt. At July 31, 1999, accounts receivable were $9.6 million, representing 74 days-sales-outstanding, and inventories were $6.9 million reflecting a turn-over rate of 4.1 times per year. Borrowings under the working capital line were $7.2 million leaving $1.3 million available credit at July 31, 1999. The Company is exploring financing options to provide additional sources of capital and/or potentially refinancing all or a portion of its existing long-term debt. Inflation - --------- In the view of management, the low levels of inflation in recent years and changing prices have had no significant effect on the Company's financial condition and results of operations. Generally, the Company is able to mitigate the effects of inflation on operating costs and expenses through price increases and productivity gains. 24 Year 2000 - --------- The Company's Program - The Company has undertaken a program to address the Year 2000 issue ("Y2K") with respect to the following: (i) the Company's information technology and operating systems (including its billing, accounting and financial reporting systems); (ii) the Company's non-information technology systems (such as buildings, plant, equipment and other infrastructure systems that may contain embedded micro-controller technology); (iii) certain systems of the Company's major suppliers and material service providers (insofar as such systems relate to the Company's business activities with such parties); and (iv) the Company's major distributors (insofar as the Year 2000 issue relates to the ability of such distributors to distribute the Company's products). As described below, the Company's Year 2000 program involves (i) an assessment of the Year 2000 problems that may affect the Company, (ii) the development of remedies to address the problems discovered in the assessment phase, (iii) the testing of such remedies and (iv) the preparation of contingency plans to deal with worst case scenarios. Assessment Phase - As part of the assessment phase of its program, the Company has attempted to identify substantially all of the major components of the systems described above. In order to determine the extent to which such systems are vulnerable to the Year 2000 issue, a Y2K three tier matrix was applied to MMT systems. Tier-one systems are mission critical and tier-two systems are critical business operations. Mission-critical (Tier 1) can be defined as extended downtime (1+ hr.) for 30 or more employees. Downtime for 5-30 employees lasting from 2 to 24 hours is categorized as critical (Tier 2). The last tier, three, is for productivity systems that are important to the ongoing improvement of the business; MMT however, could operate without these systems for a period of time (days). Remediation and Testing Phase - Based upon the results of its assessment efforts, the Company has undertaken remediation and testing activities which are intended to address potential Year 2000 problems in computer software used by the Company in its information technology and non-information technology systems in an attempt to demonstrate that this software will be made substantially Year 2000 compliant on a timely basis. In this phase, the Company first evaluated a program application and, if a potential Year 2000 problem was identified, it took steps to remediate the problem and individually test the application to confirm that the remediating changes were effective and did not adversely affect the functionality of that application. 25 It was determined that all MMT systems had a completed plan and are Y2K compliant, as of the date of this filing, with the exception of minor remediation efforts that will be completed during November 1999. The following summarizes the efforts being made: a. MMT will not risk the possibility of downtime based on vendor assurances of Y2K compliant systems in Tier 1 and 2 systems. Y2K has been completed for all Tier 1 systems. One Tier 2 item is in its final phase of remediation that will be completed during November 1999. b. MMT is a medium-sized company with packaged software purchased from reliable vendors. Y2K compliant programs are supplied by the vendor. c. MMT has no Tier 1 or 2 systems which are proprietary or custom designed that need to be fixed internally. All new systems have passed an internal Y2K validation for Tier 1, 2 and 3. d. All Tier 1 and 2 systems are supported by vendor contracts or through excellent relationships with MMT. All contracts for Tier 1 and 2 systems are through the year 2000. e. Vendors supplying components or PLCs have submitted documentation to MMT concerning their Y2K compliance. f. Programmable Logic Controllers (PLC), Lab and testing equipment used with machinery that produces MMT product could malfunction and stop production. All PLCs, Lab and testing equipment is Y2K compliant or in the final phase of remediation that will be completed during November 1999. g. Low risk Tier 3 systems have been addressed. Y2K compliance will be completed for Tier 3 during November 1999. With the above items completed by November 1999, MMT will still be dependent on some suppliers, such as utility and telecommunication companies. To address this risk, MMT's current forecast and orders have been adjusted with our customers' input. MMT believes that all customer orders will be unaffected during the transition to the Year 2000. Contingency Plans - The Company developed a contingency plan to handle its most likely worst case Year 2000 non-compliant scenarios. The sales forecast was then adjusted to reflect these scenarios. Costs Related to the Year 2000 Issue - To date, the Company's costs, which have been expensed as incurred, have amounted to $148,000. Additional costs to be incurred in the future are not expected to exceed $30,000. The costs and timetable in which the Company completes the Year 2000 readiness activities are based on management's best estimates, which are derived using numerous assumptions of future events including the continued availability of certain resources, third-party readiness plans and other factors. The Company can make no guarantee that these estimates will be achieved, and actual results could differ from such plans. Risks Related to the Year 2000 Issue - Although the Company's Year 2000 efforts are intended to minimize the adverse effects of the Year 2000 issue on the Company's business and operations, the actual effects of the issue and the success or failure of the Company's efforts described above cannot be known until the year 2000 occurs. Failure by the Company and its major suppliers, other material service providers and major distributors to address adequately their respective Year 2000 issues in a timely manner (insofar as such issues relate to the Company's business) could have a material adverse effect on the Company's business, results of operations and financial condition. 26 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's earnings are affected by fluctuations in the value of the U.S. dollar, as compared to foreign currencies, as a result of transactions in foreign markets. At July 31, 1999, the result of a uniform 10% strengthening in the value of the dollar relative to the currencies in which the Company's transactions are denominated would have resulted in an increase in operating income of approximately $89,000 for the year ended July 31, 1999. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, which are a changed dollar value of the resulting sales, changes in exchange rates also affect the volume of sales or the foreign currency sales price as competitors' services become more or less attractive. The Company's sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices. While the Company is exposed to changes in interest rates as a result of its outstanding debt, the Company does not currently utilize any derivative financial instruments related to its interest rate exposure. Total short-term and long-term debt outstanding at July 31, 1999 was $26.4 million, consisting of $12.2 million in variable rate borrowing and $14.2 million in fixed rate borrowing. At this level of variable rate borrowing, a hypothetical 10% increase in interest rates would have decreased pre-tax earnings by approximately $113,700 for the year ended July 31, 1999. At July 31, 1999, the fair value of the Company's fixed rate debt outstanding was estimated at $15.0 million. A hypothetical 10% change in interest rates would not result in a material change in the fair value of the Company's fixed rate debt. 27 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA MERIDIAN MEDICAL TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
July 31, Assets 1999 1998 ------ -------- -------- Current assets: Cash and cash equivalents $ 227 $ 284 Restricted cash 278 271 Receivables, less allowances of $467 and $325, respectively 9,557 6,787 Inventories 6,889 8,612 Deferred income taxes 1,965 1,661 Prepaid income taxes 546 - Other current assets 771 681 -------- -------- Total current assets 20,233 18,296 -------- -------- Property, plant and equipment 21,407 19,914 Less - Accumulated depreciation 5,581 3,525 -------- -------- Net property, plant and equipment 15,826 16,389 -------- -------- Deferred financing fees 749 836 Capitalized software costs 1,588 545 Excess of cost over net assets acquired, net 7,403 8,325 Other intangible assets, net 1,952 2,456 -------- -------- Total assets $ 47,751 $ 46,847 ======== ======== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable and other accrued liabilities $ 7,080 $ 7,255 Note payable to bank 7,317 3,988 Customer deposits 54 221 Current portion of long-term debt 1,409 786 -------- -------- Total current liabilities 15,860 12,250 -------- -------- Long-term debt - notes payable, net of discount 17,582 18,453 Long-term debt - other 57 397 Deferred income taxes 1,793 1,769 Other non-current liabilities 721 640 -------- -------- Total liabilities 36,013 33,509 -------- -------- Shareholders' equity: Common stock (voting and non-voting)- Par value $.10 per share; 18,000,000 shares authorized; 2,994,930 and 2,990,930 shares issued 299 299 and outstanding Additional capital 32,187 32,083 Cumulative translation adjustment (14) (15) Accumulated deficit (20,451) (18,711) Unearned stock option compensation (70) (105) Treasury stock, at cost (213) (213) -------- -------- Total shareholders' equity 11,738 13,338 -------- -------- Total liabilities and shareholders' equity $ 47,751 $ 46,847 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 28 MERIDIAN MEDICAL TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
Year Ended July 31, 1999 1998 1997 ---- ---- ---- Net sales $ 40,730 $ 44,668 $ 40,665 Cost of sales 28,020 27,091 25,621 -------- -------- -------- Gross profit 12,710 17,577 15,044 Selling, general, and administrative expenses 6,245 6,928 5,331 Research and development expenses 1,248 1,300 2,783 Depreciation and amortization 3,476 3,538 3,142 Write-off in-process R&D - - 2,702 Write-off merger transaction costs - - 1,246 Product exchange/recall expense 454 2,744 1,539 -------- -------- -------- 11,423 14,510 16,743 -------- -------- -------- Operating income (loss) 1,287 3,067 (1,699) Other (expense) income: Interest expense (3,367) (2,885) (2,567) Other income 340 256 172 -------- -------- -------- (3,027) (2,629) (2,395) -------- -------- -------- (Loss) income before income taxes, minority interest and extraordinary loss (1,740) 438 (4,094) Provision for income taxes - 343 45 Minority interest in income of consolidated subsidiary - - 266 -------- -------- -------- (Loss) income before extraordinary loss (1,740) 95 (4,405) Extraordinary loss on debt extinguishment (net of an income tax benefit of $317) - (494) - -------- -------- -------- Net loss $ (1,740) $ (399) $ (4,405) ======== ======== ======== Earnings per common share: (Loss) income before extraordinary item $ (0.58) $ 0.03 $ (2.16) Extraordinary loss - (0.16) - -------- -------- -------- Net loss per common share $ (0.58) $ (0.13) $ (2.16) ======== ======== ======== Earnings per common share assuming dilution: (Loss) income before extraordinary item $ (0.58) $ 0.03 $ (2.16) Extraordinary loss - (0.15) - -------- -------- -------- Net loss per common share assuming dilution $ (0.58) $ (0.12) $ (2.16) ======== ======== ======== Weighted average shares: Basic 2,993 2,971 2,040 Diluted 2,993 3,328 2,040
The accompanying notes are an integral part of these consolidated financial statements. 29 MERIDIAN MEDICAL TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Year Ended July 31, 1999 1998 1997 ---- ---- ---- OPERATING ACTIVITIES: Net loss $ (1,740) $ (399) $ (4,405) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 3,476 3,538 3,142 Amortization of unearned stock compensation 35 35 36 Amortization of notes payable discount 246 876 459 Non-cash charge to modify warrant terms 75 166 - Loss on fixed asset disposal - - 346 Deferred income taxes (280) 28 (305) Write off of in-process R&D - - 2,702 Write off of patents and other intangibles - - 340 Minority interest - - 266 Extraordinary loss on debt extinguishment - 811 - Changes in assets and liabilities Receivables (2,912) 720 (68) Inventories 1,723 (2,565) (716) Other current assets (636) (150) 203 Accounts payable and other accrued liabilities (261) (1,299) 795 Other 149 (101) 774 -------- -------- -------- Net cash provided by (used for) operating (125) 1,660 3,569 activities INVESTING ACTIVITIES Purchase of fixed assets (1,493) (2,668) (3,287) (Increase) decrease in restricted cash (7) (7) 697 Capitalized software costs (1,043) (545) - Sale of short-term investments - - 258 Other - - (56) -------- -------- -------- Net cash used for investing activities (2,543) (3,220) (2,388) FINANCING ACTIVITIES Net (payment) proceeds from line of credit 3,329 (125) 40 Payment on long-term debt (717) (12,447) (1,726) Proceeds on long-term debt - 14,070 - Proceeds from issuance of warrants - 930 - Payment of financing fees (30) (868) - Proceeds from issuance of common stock 29 261 - -------- -------- -------- Net cash provided by (used for) financing activities 2,611 1,821 (1,686) -------- -------- -------- Net increase (decrease) in cash (57) 261 (505) Cash at beginning of period 284 23 528 -------- -------- -------- Cash at end of period $ 227 $ 284 $ 23 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 30 MERIDIAN MEDICAL TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands)
Convertible Redeemable Preferred Stock Common Stock Series A-F Treasury Stock Unearned ------------- ------------- -------------- Stock Number Number Accumu- Cumulative Number Option Share- of Par of Par Additional lated Translation of Compen- holders' Shares Value Shares Value Capital Deficit Adjustment Shares Cost sation Equity ---------------------------------------------------------------------------------------------------- Balance at July 31, 1996 747 $ 8 68 $ 1 $17,939 $(13,907) $ (9) 2 $ (12) $(176) $ 3,844 Merger with STI (747) (8) 2,844 291 12,794 - - - - - 13,077 Exchange of treasury stock - - - - - - - - (201) - (201) for assets Foreign currency - - - - - - (58) - - - (58) translation Amortization of stock option compensation - - - - - - - - - 36 36 Net loss - - - - - (4,405) - - - - (4,405) ---------------------------------------------------------------------------------------------------- Balance at July 31, 1997 - - 2,912 292 30,733 (18,312) (67) 2 (213) (140) 12,293 Warrants issued with notes - - - - 930 - - - - - 930 payable Modification of warrant - - - - 166 - - - - - 166 terms Issuance of common stock from the exercise of stock options and - - 79 7 254 - - - - - 261 warrants Foreign currency - - - - - - 52 - - - 52 translation Amortization of stock option compensation - - - - - - - - - 35 35 Net loss - - - - (399) - - - - (399) ---------------------------------------------------------------------------------------------------- Balance at July 31, 1998 - - 2,991 299 32,083 (18,711) (15) 2 (213) (105) 13,338 Issuance of common stock from the exercise of stock options and - - 4 - 29 - - - - - 29 warrants Modification of warrant - - - - 75 - - - - - 75 terms Foreign currency - - - - - - 1 - - - 1 translation Amortization of stock option compensation - - - - - - - - - 35 35 Net loss - - - - - (1,740) - - - - (1,740) ---------------------------------------------------------------------------------------------------- Balance at July 31, 1999 - $ - 2,995 $299 $32,187 $(20,451) $ (14) 2 $(213) $ (70) $11,738 ====================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 31 ITEM 8. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Meridian Medical Technologies, Inc. 1. Business and Summary of Significant Accounting Policies Meridian Medical Technologies, Inc. ("Company") is a technology-based health care company that designs, develops and produces a broad range of automatic injectors, prefilled syringes, cardiopulmonary products, and other innovative health care devices, with a major focus on safe and convenient participation by the patient in injection therapy and cardiac monitoring. The Company also supplies customized drug delivery system design, pharmaceutical research and development and FDA current Good Manufacturing Practice (cGMP)-approved sterile product manufacturing to pharmaceutical and biotechnology companies. On November 20, 1996, Brunswick Biomedical Corporation ("Brunswick") was merged into Survival Technology, Inc. ("STI") to form the Company. At the time of the merger, Brunswick held approximately 61% of STI's outstanding common stock, which it had purchased from the estate of STI's late founder on April 15, 1996. Although STI was the surviving corporation of the merger as a legal matter, the merger was treated as a purchase of STI by Brunswick for financial accounting purposes. As a result, Brunswick's historical financial statements became the Company's financial statements, STI's assets and liabilities have been revalued to their respective fair values and the Company's historical financial statements reflect the combined operations of STI and Brunswick after April 15, 1996 (subject to minority interests). The minority interests were eliminated upon completion of the merger on November 20, 1996. Principles of Consolidation All intercompany balances and transactions have been eliminated in consolidation. Inventories Inventories relating to commercial and military products are stated at the lower of cost (first-in, first-out) or market. Fixed Assets Fixed assets are stated at cost. The Company computes depreciation and amortization under straight-line and accelerated methods using the following estimated useful lives: Furniture and equipment 2 to 15 years Capital leases and leasehold improvements 4 to 20 years The Company uses either the units of production method or the straight-line method over a 10-year life (whichever period is shorter) to depreciate production molds and tooling over their estimated production life cycle. 32 Intangible Assets Intangible assets consist of the following (in thousands): July 31, 1999 1998 ---- ---- Excess of cost over net assets acquired $ 10,351 $ 10,351 Patents and licenses 2,418 2,418 Other 1,805 1,805 -------- -------- 14,574 14,574 Less: accumulated amortization (5,219) (3,793) -------- -------- $ 9,355 $ 10,781 ======== ======== Excess of cost over net assets acquired and other intangible assets are amortized over 10 years. Legal costs incurred in connection with patent applications and costs of acquiring patents and licenses are capitalized and amortized on a straight-line basis over the shorter of the patent life (not to exceed seventeen years) or the period of expected benefit. Revenue Recognition Sales of medical products are recorded when shipments are made to customers. Revenues from the U.S. Department of Defense ("DoD") industrial base maintenance contract are recorded ratably throughout the contract term with the exception of revenue from the component prestocking program that is recorded upon component receipt in MMT's warehouse and product sales which are recorded upon acceptance by the customer. Revenues from license fees are recorded when the fees are due and non-refundable. Revenues from research and development arrangements are recognized in the period related work has been substantially completed. Foreign Currency Assets and liabilities of foreign operations are translated at the exchange rate in effect at the balance sheet date. Revenue and expense accounts are translated using a weighted average of exchange rates in effect during the year. Cumulative translation adjustments are shown in the accompanying consolidated balance sheets as a separate component of shareholders' equity. Research and Development Research and development expenses are charged to operations in the period incurred. Relating to the merger transaction, the allocation of excess purchase price to in-process research and development represents the independent assessment of the fair value of a number of research and development projects whose technological feasibility had not yet been established. These research and development projects had no alternative future use and, therefore, were charged to expense as of the date of consummation of the merger. Income Taxes The Company accounts for income taxes using the asset and liability method that requires the recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences between carrying amounts and the tax basis of assets and liabilities. 33 Value of Financial Instruments Other than described below, the Company considers the recorded value of its financial assets and liabilities, which consist primarily of cash, accounts receivable, accounts payable and other accrued liabilities to approximate the fair value of the respective assets and liabilities at July 31, 1999 and 1998. Management believes the principal balance of its long-term debt, which is $1.2 million and $1.3 million higher than the carrying value at July 31, 1999 and 1998, respectively, is a better estimate of the fair value of that liability. The debt is carried net of unamortized discount. Use of Estimates and Assumptions The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and assumptions. Net Income (Loss) Per Common Share The following table sets forth the computation of basic and diluted earnings per share (in thousands): Year Ended July 31, 1999 1998 1997 ---- ---- ---- Numerator: Income (loss) before extraordinary loss $(1,740) $ 95 $(4,405) Extraordinary loss on debt extinguishment (net of an income tax benefit of $317) - (494) - ------- ------- ------- Net loss $(1,740) $ (399) $(4,405) ======= ======= ======= Denominator: Denominator for basic earnings per share - weighted average shares outstanding 2,993 2,971 2,040 Stock options and warrants - 357 - ------- ------- ------- Denominator for diluted earnings per share 2,993 3,328 2,040 ======= ======= ======= Comprehensive Income (Loss) A reconciliation of net loss to comprehensive income (loss) is as follows: Year Ended July 31, 1999 1998 1997 ---- ---- ---- Net loss $(1,740) $ (399) $(4,405) Foreign exchange translation adjustment 1 52 (58) ------- ------- ------- Comprehensive income (loss) $(1,739) $ (347) $(4,463) ======= ======= ======= Reclassification Certain reclassifications have been made to prior year financial statements in order to conform with the current year presentation. 34 2. Inventories Inventories as of July 31, 1999 and 1998 consist of the following (in thousands): 1999 1998 ---- ---- Components and subassemblies $ 3,667 $ 6,616 Work in process 3,325 2,262 Finished goods 335 193 ------- ------- 7,327 9,071 Less: inventory valuation allowance (438) (459) ------- ------- $ 6,889 $ 8,612 ======= ======= 3. Fixed Assets Fixed assets as of July 31, 1999 and 1998 consist of the following (in thousands): 1999 1998 ---- ---- Furniture and equipment $ 14,889 $ 13,346 Leasehold improvements 4,862 4,004 Construction in progress 1,656 2,564 -------- -------- 21,407 19,914 Less: accumulated depreciation (5,581) (3,525) -------- -------- $ 15,826 $ 16,389 ======== ======== The Company capitalized interest costs of $51,000 and $173,000 on internally constructed fixed assets in the years ended July 31, 1999 and 1998, respectively. Depreciation expense was $2.1, $2.2 and $1.9 million for the years ended July 31, 1999, 1998 and 1997, respectively. 4. Capitalized software costs During fiscal 1999 and 1998, the Company capitalized $1,043,000 and $545,000, respectively, of software development costs related to a product under development, the PRIME ECG(TM) Electrocardiac Mapping System. No further costs are expected to be capitalized on this project. The Company will begin amortizing capitalized costs on a per unit sales basis in fiscal 2000. 35 5. Debt Senior Subordinated Notes In April 1998, the Company entered into a note agreement with Nomura Holding America, Inc. for $15 million of senior subordinated notes, at a 12% fixed rate of interest, due April 2005. The Company issued a warrant to Nomura to purchase 204,770 shares of the Company's common stock in conjunction with the transaction. $930,000 of the proceeds was allocated to the value of the warrant; accordingly, the note is carried net of the related unamortized discount. The Company is amortizing the discount over the term of the debt. This resulted in a charge against operations of $132,800 and $33,000 in fiscal 1999 and 1998, respectively. Subsequent to the refinancing transaction, the Company modified the terms of the warrant issued to Nomura, lowering the per share exercise price from $11.988 to $6.25. The Company recorded additional interest expense of $75,000 and $166,000 in fiscal 1999 and 1998, respectively, relating to the modification of terms. Proceeds from the transaction were used for the following (in thousands): Paydown of ING term note (see below) $ 3,500 Payoff of Sarnoff note (see below) 6,004 Payoff of EM Industries subordinated loan 1,277 Paydown of ING Line of Credit 3,351 Financing fees (deferred) 868 ------- $15,000 ======= An extraordinary loss of $494,000 (net of a $317,000 income tax benefit) was recorded on the transaction relating to the portion of the unamortized discount on the ING term note which was paid down. The Company is required to maintain certain financial covenants and is restricted from paying cash dividends. The Company has obtained a waiver of covenants for the fourth quarter of fiscal 1999, and has amended the credit agreement to reset financial covenants going forward. Lines of Credit The Company has an agreement with International Nederlanden (U.S.) Capital Corporation ("ING") for an $8.5 million line of credit and a $5 million long-term loan. The ING line of credit accrues interest at either the greater of the prime rate plus 1.25% (9.25% at July 31, 1999) or the federal funds rate plus 1.75%; or the eurodollar loan rate plus 3.25%. The ING line is secured by certain accounts receivable and inventory. The outstanding borrowings on the Company's lines of credit were $7.2 million and $4.0 million at July 31, 1999 and 1998, respectively. The Company pays a commitment fee to ING of .0025% per month on the average unused portion of the line of credit. The interest rate on outstanding borrowings was 9.25% at July 31, 1999 and 9.75% at July 31, 1998. An additional line of credit exists for the Company's operation in N. Ireland. The line of credit is for (pound)145,000 and is secured by an irrevocable standby Letter of Credit. The line of credit matures annually each December and bears interest on outstanding borrowings at the bank's published rate of approximately 7.00% at July 31, 1999. 36 Long -Term Debt (ING) The term loan with ING accrues interest at either the Eurodollar loan rate plus 3.5%; or the greater of the prime rate plus 1.5% (9.5% at July 31, 1999) or the federal funds rate plus 2.00%. At July 31, 1997, the principal repayment terms called for quarterly principal payments of $250,000 beginning in June 1997 increasing to $500,000 in December 1997 and maturing on October 31, 2001. The Company made the first three principal payments ($1,250,000) prior to the Nomura refinancing transaction, at which time the terms were amended. The new terms call for quarterly principal payments of $250,000 beginning in June 1999 increasing to $500,000 in June 2002 and maturing on March 31, 2003. As noted above, a portion of the proceeds of the Nomura note were used to pay down this term debt in April 1998. The outstanding balance was $4,750,000 and $5,000,000 at July 31, 1999 and 1998, respectively. Warrants were issued to ING in the financing described above. The Company allocated $2,072,900 of the note proceeds to the warrants based on the relative fair value of the warrants and the note at the agreement date. Accordingly, the note is carried at a discount from its maturity value. $811,000 of the remaining unamortized discount ($494,000 after the tax benefit of $317,000) was written off as an extraordinary loss on extinguishment of debt in April 1998. The Company is amortizing the discount over the term of the debt. This resulted in a charge against operations of $108,000 and $181,000 in fiscal 1999 and 1998, respectively. The Company is required to maintain certain financial covenants and is restricted from paying cash dividends. The Company has obtained a waiver of covenants for the fourth quarter of fiscal 1999, and has amended the credit agreement to reset financial covenants going forward. Other Long-Term Debt In May 1995, the Company entered into a loan agreement with the CIT Group/Equipment Financing, Inc. ("CIT") to assist in financing the Company's capital investment programs. This arrangement consists of a series of loans for the acquisition of production molds, high-speed component preparation and filling equipment and facility renovations. Loan principal outstanding was $294,000 and $731,000 as of July 31, 1999 and 1998, respectively. The interest rate in both years was approximately 8.8%. Repayment of each loan is due in sixty (60) equal monthly installments. The agreement with CIT is collateralized by the asset financed with the loan. In January 1996, the Company received a non-interest bearing loan in the amount of $375,000 from Dey Laboratories (Dey), STI's exclusive distributor for the EpiPen(R). The proceeds from this loan assisted the Company in purchasing high-speed filling and automated packaging equipment. Repayment of this loan commenced during the first quarter of fiscal 1997 with an agreed upon credit per unit of product shipments to Dey. The balance at July 31, 1999 and 1998 was $172,000 and $201,900, respectively. Maturities of all long term-debt are as follows (in thousands): 2000 $ 1,409 2001 1,057 2002 1,250 2003 1,500 2004 - Thereafter 15,000 -------- Subtotal 20,216 Discounts on term loans (1,168) -------- Total debt per balance sheet $ 19,048 ======== Interest paid for the years ended July 31, 1999, 1998 and 1997 was $2,882,000, $2,314,000 and $2,466,700, respectively. 37 6. Shareholders' Equity Stock Options In November 1993, Brunswick adopted the 1993 Stock Option Plan ("the 1993 Plan"). As of June 30, 1996, 124,720 Brunswick options were outstanding. At the merger date, the Company assumed Brunswick's obligations with respect to such options, and all Brunswick options were converted to stock options of the Company at a rate of 2.1 to 1 resulting in 258,100 options. Pursuant to the merger, the Company assumed STI's 293,800 outstanding options to purchase the Company's common stock. The Company has adopted two Stock Option Plans ("the Plans") which reserve 500,000 shares for granting of options through 2001 and 500,000 shares, subject to shareholder approval, for granting of options through 2007. The Plans provide for issuance of non-qualified stock options, incentive stock options, stock appreciation rights, incentive shares and restricted stock. Options granted to employees, officers and directors pursuant the Company's stock option plans generally have been exercisable in varying amounts in cumulative annual installments up to ten years from the date of grant. The exercise price on all options granted during years ended July 31, 1999 and 1998 was equivalent to the market value of the Company's stock on the date of grant. The Company recognized $35,000 of expense in each of fiscal 1999 and 1998 as a result of options issued in prior years with exercise prices less than fair market value at the date of grant. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," which recommends a fair value based methodology of accounting for all stock option plans. Under SFAS No. 123, companies may account for stock options under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations and provide pro forma disclosure of net income, as if the fair value based method of accounting defined in SFAS No. 123 had been applied. The Company has elected to follow APB 25 and related Interpretations in accounting for its employee stock options and provide pro forma fair value disclosure under SFAS 123. For SFAS 123, the fair value of options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1999, 1998 and 1997. Risk-free interest rate of 6.5%, 4.2% and 6.5%, respectively; no dividends; a volatility factor of the expected market price of the Company's common stock of .49, .53 and .53, respectively, and a weighted-average expected life of the options of approximately 4-10 years. The weighted average fair value of options granted during 1999, 1998 and 1997 was $4.89, $3.93 and $5.85, respectively. Options assumed in the merger have been included in the fair value estimates assuming the original grant date and adjusted exercise price. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. 38 For the purpose of pro forma disclosures, the estimated fair value of the stock options is amortized to expense over the options' vesting periods. The Company's pro forma net loss and net loss per share calculated using the provisions of FAS 123 were as follows (in thousands except per share data): Year Ended July 31, 1999 1998 1997 ---- ---- ---- Net income (loss) $(1,740) $ (399) $(4,405) Pro forma FAS 123 expense (284) (155) (153) ------- ------- ------- Pro forma net income (loss) $(2,024) $ (554) $(4,558) ======= ======= ======= Weighted average shares outstanding 2,993 2,971 2,040 Pro forma net (loss) per share $ (0.68) $ (0.19) $ (2.23) The following table summarizes stock option activity for the years ended July 31, 1999, 1998 and 1997. Amounts presented reflect the combined option plans of Brunswick and STI with the adjustments as necessary to reflect the exchange ratio in connection with the November 1996 merger of Brunswick and STI. Year Ended July 31, 1999 1998 1997 ---- ---- ---- Number of shares Options outstanding at beginning of year 645,100 553,300 551,900 Granted during the year 203,685 163,200 57,600 Exercised during the year (4,067) (40,200) (8,800) Expired or terminated (49,283) (31,200) (47,400) -------- -------- -------- Options outstanding at end of year 795,435 645,100 553,300 ======== ======== ======== The price range of options outstanding are as follows: 1999 1998 1997 ---- ---- ---- Less than $1.00 148,512 148,512 148,512 $1.00 to $5.00 56,950 61,950 111,000 $5.00 to $9.00 353,960 196,075 120,475 $9.00 + 236,013 238,563 173,313 ------- ------- ------- 795,435 645,100 553,300 ======= ======= ======= Options exercisable at July 31, 1999, 1998 and 1997 were 473,800, 383,200 and 380,200, respectively. The average contractual life of the Company's options is approximately 6-10 years. The weighted average exercise price of the options granted in fiscal 1999 and 1998 was $7.07 and $8.62. Common Stock Warrants Outstanding warrants to acquire the Company's common stock as of July 31, 1999 and 1998 are as follows: 1999 1998 ---- ---- Exercise price: Less than $1.00 83,579 83,579 $1.00 - $10.99 397,302 397,302 @$11.00 513,271 513,271 ------- ------- 994,152 994,152 ======= ======= 789,382 of the warrants expire during 2001, and 204,770 expire in 2005. 39 7. Income Taxes The provision for federal and state income taxes exclusive of taxes related to the extraordinary loss consist of the following (in thousands): Year Ended July 31, 1999 1998 1997 ---- ---- ---- Current: Federal $(230) $ 554 $ 482 State (50) 122 71 Other - - 22 NOL utilization - (358) (225) ----- ----- ----- (280) 318 350 Deferred: Federal and state 280 25 (294) Other - - (11) ----- ----- ----- 280 25 (305) ----- ----- ----- $ - $ 343 $ 45 ===== ===== ===== The following is a reconciliation of the provision for income taxes from continuing operations to the provision calculated at the statutory rate (in thousands): Year Ended July 31, 1999 1998 1997 ---- ---- ---- Provision for income taxes at federal statutory rate $ (592) $ 149 $(1,498) State taxes, net of federal income tax benefit (122) 20 (265) Write off non-deductible in process R&D - - 1,025 Non deductible merger costs - - 474 Non-deductible amortization costs 474 512 346 Changes in valuation allowance 172 (358) - Other 68 20 (37) ------- ------- ------- $ - $ 343 $ 45 ======= ======= ======= The Company paid income taxes of $761,700, $508,000, and $551,900 for the years ended July 31, 1999, 1998, and 1997, respectively. 40 The Company provides deferred income taxes for temporary differences between the book basis of assets and liabilities for financial purposes and the basis of assets and liabilities for tax return purposes. Deferred tax assets and liabilities were as follows at July 31, 1999 and 1998 (in thousands): July 31, 1999 1998 ---- ---- Net operating loss and tax credits carryforward $ 2,391 $ 1,939 Inventory valuation 113 95 Uniform inventory capitalization 530 427 Postretirement benefits 281 264 Vacation expense 136 83 Restructuring charge 51 47 Product exchange reserve 139 566 Other 233 179 Valuation allowance (1,909) (1,939) ------- ------- Deferred tax asset $ 1,965 $ 1,661 ======= ======= Depreciation $(1,666) $(1,594) Patent costs (127) (137) Other - (38) ------- ------- Deferred tax liability $(1,793) $(1,769) ======= ======= At July 31, 1999, the Company has net operating losses (NOLs) available for future use of approximately $5.8 million. These NOLs begin to expire in 2005. 8. Employee Retirement Plans Pension and Savings Plans The Company maintains a profit sharing thrift plan covering all full-time employees. Annual contributions under the plan may be made up to 6.6% of the base annual salary of all plan participants not covered by a collective bargaining agreement. Plan benefit allocations are based on the participants' annual compensation. The Company made no contributions in fiscal 1999, 1998, or 1997. As part of this profit sharing thrift plan, eligible employees may elect to contribute up to 12% of their base salary to the plan. The Company matches a portion of the contributions by employees not covered by a collective bargaining agreement. The Company match amounted to $153,600, $151,300, and $152,000 in fiscal years 1999, 1998, and 1997, respectively. The Company also made payments to a pension plan for its full-time employees in St. Louis, Missouri covered by a collective bargaining agreement. Contributions to this plan resulted in expense of $103,400, $101,700, and $92,000 in fiscal years 1999, 1998, and 1997, respectively. 41 Other Postretirement Benefits The Company sponsors a postretirement benefit plan (the "Plan") to provide certain medical and life insurance benefits to retirees, their spouses and dependents. Employees who terminated from active service after March 1992 and are at least 60 years of age, but no more than age 65, with 20 years service, are eligible for medical coverage. Employees who reached age 50 prior to April 1, 1992, who retire after March 31, 1992 before reaching age 65 and who have at least 2 years service are eligible for medical coverage. Employees who terminated from active service prior to April 1, 1992 and were at least 55 years of age, but no more than age 65, with 10 years service, are eligible for medical and life insurance coverage. The Plan is contributory for medical benefits based on the retiree's years of service and is noncontributory for life insurance benefits. The Company funds its obligations under the Plan as incurred. The following table sets forth the Plan's funded status (in thousands): 1999 1998 ---- ---- Benefit obligation at the beginning of the year $ 945 $ 828 Service cost 34 29 Interest cost 71 67 Actuarial (gain)/loss (13) 61 Benefits paid (46) (40) ----- ----- Benefit obligation at the end of the year 991 945 Unrecognized prior service cost (33) (42) Unrecognized net gain 391 446 Unrecognized transition obligation (628) (673) ----- ----- Accrued benefit costs $ 721 $ 676 ===== ===== The Company recognized net periodic postretirement expense of $111,000, $91,000 and $153,000 for the years ended July 31, 1999, 1998 and 1997, respectively, as follows (in thousands): 1999 1998 1997 ---- ---- ---- Service cost-benefits attributed to service during periods $ 34 $ 29 $ 48 Interest cost on accumulated postretirement benefit obligation 71 67 112 Amortization of prior service 9 9 9 Amortization of net gain (48) (59) (61) Amortization of transition obligation 45 45 45 ----- ----- ----- Net periodic postretirement benefit cost $ 111 $ 91 $ 153 ===== ===== ===== For measurement purposes, an 8.5% annual rate of increase in cost of health care was assumed for fiscal 1999; the rate was assumed to decrease gradually to 5% by 2005 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. To illustrate, increasing assumed health care cost by 1% in each year would increase the accumulated postretirement benefit obligation as of July 31, 1999 by $204,000 and the aggregate of the service and interest cost component of net periodic postretirement benefit cost by $30,000 for the year ended July 31, 1999. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.5% for 1999 and 1998. 42 9. Commitments and Contingencies Leases The Company has various commitments under operating leases through 2014 relating to computer hardware and software, its pharmaceutical manufacturing facility and warehouses in St. Louis, Missouri, its facility in the United Kingdom, a new facility in Belfast, Northern Ireland, and administrative offices in Columbia, Maryland and St. Louis, Missouri. Future minimum rentals as of July 31, 1999 under noncancellable leases are as follows (in thousands): Operating Sublease Year Ending July 31, Leases Revenue -------------------- ------ ------- 2000 $1,443 $ 330 2001 1,298 330 2002 913 165 2003 574 - 2004 574 - Thereafter 3,933 - ------ ------ $8,735 $ 825 ====== ====== The Company incurred net rental expense of $1,066,200, $986,200 and $825,400 in 1999, 1998 and 1997, respectively. Sales/Leaseback of Corporate Headquarters Building In connection with the December 1988 sale of the Company's former headquarters building in Bethesda, Maryland, the Company's obligations under the Leasehold Deed of Trust ("Ground Lease") were assigned to and assumed by the purchaser of the building. The Company remains contingently liable under the Ground Lease. The annual commitment under the Ground Lease aggregated $154,000 in 1999 (adjusted for increases in the Consumer Price Index) and extends until the year 2042. Litigation Lawsuits and claims are filed from time to time against the Company and its subsidiaries in the ordinary course of business. Management of the Company, after reviewing developments to date with legal counsel, is of the opinion that the outcome of such matters will not have a material adverse effect on the Company's consolidated financial position or results of operations. Government Contract Revenue The Company's supply contracts with the Department of Defense ("DoD") are subject to post-award audit and potential price redetermination. In the opinion of management, adjustments, if any, on completed contracts would not have a material adverse effect on the Company's consolidated financial position or results of operations. Employee Contracts The Company has an agreement with a key employee which provides for certain benefits should the employee be terminated within the term of the agreement for other than specified reasons. The Company also has agreements with certain key employees which provide for certain benefits should the employees be terminated within a two year period subsequent to a change of control (as defined by the agreements) for other than specified reasons. Benefits to be provided under these agreements include continued life, 43 disability, accident and health insurance coverage for a period of two years and a severance payment up to 100-200% of the employee's annual base compensation. Additionally, all stock options held by the employee become immediately exercisable and any restrictions on transfer of the Company's stock held by the employee shall lapse. These arrangements renew for three-year periods unless timely notice of non-renewal is given. The maximum contingent liability under these agreements at July 31, 1999 aggregates $1,380,000. 10. Industry Segment Information The Company operates in two industry segments: injection therapy and cardiac monitoring. Both segments include the design, development, manufacture and sale of medical products and related services, with a major focus on safe and convenient participation by the patient. The cardiac monitoring business unit operates in N. Ireland with most of its revenue generated overseas. At this time, the cardiac monitoring segment does not qualify for separate segment reporting due to immateriality. 11. Significant Customers & Foreign Operations Financial information relating to major customers and export sales follows (in thousands): 1999 1998 1997 ---- ---- ---- Sales to major U.S. customers: U.S. Department of Defense $20,698 $16,939 $13,116 Dey L.P. 11,449 20,734 15,028 Other 4,270 1,730 5,051 ------- ------- ------- Total 36,417 39,403 33,195 Export sales: Contract sales to the Governments of foreign countries 2,474 1,565 4,709 Other 1,839 3,700 2,761 ------- ------- ------- Total export sales 4,313 5,265 7,470 ------- ------- ------- Total net sales $40,730 $44,668 $40,665 ======= ======= ======= The Company extends credit to domestic customers and generally requires a letter of credit for export sales. At July 31, 1999 and 1998, the Company had 56% and 78%, respectively, of its accounts receivable from two customers, Dey and the U.S. government. Dey's parent is a shareholder of the Company. The Company operates subsidiaries in the U.K which represent 8.5% and 8.1% of the Company's sales and total assets, respectively. 44 12. Product Exchange/Recall On May 8, 1998, the Company announced a voluntary Class I recall of 47 lots of its EpiPen and EpiPen Jr. auto-injectors (approximately 1,000,000 units) because some may not provide effective doses of medication. The original estimated cost of the recall was $2.2 million and was included in third quarter 1998 results. During the fourth quarter, management revised the estimate and increased the provision by $0.5 million, bringing the total expense for fiscal 1998 to $2.7 million. Included in this cost is the direct cost of the actual returned products as well as cash costs incurred by the distributor which are paid for by shipment of additional product units. The provision provides for the Company's expense at its cost. Management has performed an analysis of potential costs of the recall and made their best estimate regarding these costs. Actual costs could differ materially from management's estimates. The Company has provided $454,000 in the fourth quarter of fiscal 1999 for what its believes to be the final costs of the recall. The Company had $3.2 million and $1.3 million of EpiPen shipments during fiscal 1999 and 1998, respectively, to satisfy cash costs incurred by the distributor for the 1998 EpiPen recall and the 1997 EpiEZPen voluntary exchange program. On October 8, 1997, the Company announced a product exchange program for all of its EpiEZPen(R) product sold since March 1996 (approximately 500,000 units). This exchange program was initiated after a minimal amount of units (less than .001 percent) were returned for premature activation in the package. The estimated cost of the exchange program was $1.5 million and was included in fiscal 1997 results of operations. Actual costs through July 31, 1999 have not differed materially from management's estimates. 45 13. Quarterly Operating Results (unaudited)
(in thousands, except per share data) Quarter Ended ---------------------------------------------------------------------- Fiscal Year 1999 Oct. 31, 1998 Jan. 31, 1999 Apr. 30, 1999 Jul. 31, 1999 - ---------------- ------------- ------------- ------------- ------------- Net sales $ 10,850 $ 9,824 $ 9,620 $ 10,436 Cost of sales 6,673 7,422 7,937 5,988 -------- -------- -------- -------- Gross profit 4,177 2,402 1,683 4,448 Operating expenses 2,980 2,816 2,309 3,318 -------- -------- -------- -------- Operating income (loss) 1,197 (414) (626) 1,130 Other expense, net (838) (453) (705) (1,031) -------- -------- -------- -------- Income (loss) before income tax 359 (867) (1,331) 99 Provision for income tax 93 (93) - - -------- -------- -------- -------- Net income (loss) $ 266 $ (774) $ (1,331) $ 99 ======== ======== ======== ======== Net income (loss) per share $ 0.08 $ (0.26) $ (0.44) $ 0.03 ======== ======== ======== ======== Fiscal Year 1998 Oct. 31, 1997 Jan. 31, 1998 Apr. 30, 1998 Jul. 31, 1998 - ---------------- ------------- ------------- ------------- ------------- Net sales $ 10,643 $ 10,723 $ 13,430 $ 9,872 Cost of sales 6,508 6,388 8,324 5,871 -------- -------- -------- -------- Gross profit 4,135 4,335 5,106 4,001 Operating expenses 2,629 2,852 5,340 3,689 -------- -------- -------- -------- Operating income (loss) 1,506 1,483 (234) 312 Other expense, net (705) (490) (707) (727) -------- -------- -------- -------- Income (loss) before income tax and extraordinary item 801 993 (941) (415) Provision for income tax 186 354 (223) 26 Extraordinary loss, net of income taxes (494) -------- -------- -------- Net income (loss) $ 615 $ 639 $ (1,212) $ (441) ======== ======== ======== ======== Net income (loss) per share $ 0.20 $ 0.20 $ (0.41) $ (0.15) ======== ======== ======== ========
During the quarters ended April 30, 1998, July 31, 1998 and July 31, 1999, the Company recorded charges of $2.2 million, $500,000 and $454,000, respectively, for the estimated cost of a recall of the Company's EpiPen product. Gross Margins for the quarters ended January 31, 1999 and April 30, 1999 were both negatively impacted by the shipment of free units to satisfy recall obligations. In addition, the gross margin for the quarter ended January 31, 1999 was affected by product mix, and that of the quarter ended April 30, 1999 was affected by a planned upgrade and renovation of the Company's clean room manufacturing facility, which caused a temporary closure of the plant. 46 REPORT OF INDEPENDENT AUDITORS - ------------------------------ Board of Directors and Shareholders Meridian Medical Technologies, Inc. We have audited the accompanying consolidated balance sheets of Meridian Medical Technologies, Inc. and subsidiaries as of July 31, 1999 and 1998 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended July 31, 1999. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Meridian Medical Technologies, Inc. and subsidiaries at July 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended July 31, 1999, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP Washington, DC October 22, 1999 47 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III -------- ITEMS 10. through 13. Information required by Part III (Items 10 through 13) of this form 10-K is incorporated by reference to the Company's definitive Proxy Statement for the Annual Meeting of Shareholders for the fiscal year ended July 31, 1999, which will be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year to which this report relates. PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS FORM 8-K (a) The following documents are included under Item 8 in this report: 1. Financial Statements: Consolidated Balance Sheets at July 31, 1999 and 1998 Consolidated Statements of Operations for the years ended July 31, 1999, 1998, and 1997. Consolidated Statements of Shareholders' Equity for the years ended July 31, 1999, 1998, and 1997. Consolidated Statements of Cash Flows for the years ended July 31, 1999, 1998, and 1997. Notes to Consolidated Financial Statements Report of Independent Auditors The above-listed financial statements are included in Item 8 to this Form 10-K. 2. Financial Statement Schedule: The following financial statement schedule immediately precedes the signatures to this report: Schedule II - Valuation and Qualifying Accounts Allother schedules are omitted because they are immaterial, not applicable or the required information is shown in the consolidated financial statements or the notes thereto. 48 3. Exhibits: Exhibit No. Description of Exhibit - ----------- ---------------------- (3.1) The Company's Bylaws (As Amended). Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended July 31, 1997. (3.2) First Amended and Restated Certificate of Incorporation and certification of the amendment of first amended and restated Certificate of Incorporation. Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended July 31, 1997. (4.1) Form of warrant to be issued by the Registrant to former holders of Brunswick preferred stock. Incorporated by reference herein from Exhibit 4.1 to Form 8-K filed by the Registrant dated December 5, 1996. (4.2) Forms of warrants assumed and to be issued by the Registrant in connection with the merger with Brunswick. Incorporated by reference herein from Exhibit 4.1 to Form 8-K filed by the Registrant dated December 5, 1996. (4.3) Form of warrant issued to the Estate of Stanley J. Sarnoff, assumed by the Registrant. Incorporated by reference herein from Exhibit 4b to Schedule 13D filed by Brunswick dated April 15, 1996. (10.1) Indenture of Lease, dated January 1, 1982, between Survival Technology, Inc. and Abraham M. Morrison, Incorporated by reference to Exhibit (10.1) to the Company's Annual Report on Form 10-K for the year ended July 31, 1988 (File No. 0-5958). (10.5) Survival Technology, Inc. 1986 Stock Option Plan (As Amended). Incorporated by reference to Exhibit (4.2) to Registration Statement No. 33-46981 on Form S-8.* (10.7) Agreement dated as of January 1, 1987 between Center Laboratories, a division of EM Industries, Inc. and the Company. Incorporated by reference to Exhibit (10.11) to the Company's Annual Report on Form 10-K for the year ended July 31, 1988 (File No. 0-5958). (10.7.1) Letter Agreement dated as of January 31, 1990 between Center Laboratories, a division of EM Industries, Inc. and the Company. Incorporated by reference to Exhibit (10.10.1) to the Company's Annual Report on Form 10-K for the year ended July 31, 1990. (10.8) Agreement dated June 23, 1981 between Survival Technology, Inc, and American Home Products Corporation. Incorporated by reference to Exhibit (10.12) to the Company's Annual Report on Form 10-K for the year ended July 31, 1988 (File No. 0-5958). (10.8.1) License Agreement dated April 20, 1982 between Survival Technology, Inc. and American Home Products Corporation. Incorporated by reference to Exhibit (10.12.1) to the Company's Annual Report on Form 10-K for the year ended July 31, 1988 (File No. 0-5958). (10.10) Development, Manufacturing and Supply Agreement between Mylan Laboratories, Inc. and Survival Technology, Inc. dated August 31, 1993. Incorporated by reference to Exhibit (10.11) to the Company's Annual Report on Form 10-K for the year ended July 31, 1993 (File No. 0-5958). 49 (10.10.1) Development, Manufacturing and Supply Amendment Agreement dated July 28, 1994 between Mylan Laboratories, Inc. and Survival Technology, Inc. Incorporated by reference to Exhibit (10.12.1) to the Company's Annual Report on Form 10-K for the year ended July 31, 1994. (10.11) Lease Agreement dated August 26, 1991 between Pru Beta 2 and the Company. Incorporated by reference to Exhibit (10.12) the Company's Annual Report on Form 10-K for the year ended July 31, 1991 (File No. 0-5958). (10.13) Commitment letter dated May 4, 1995 between the CIT Group/Equipment, Financing Inc., and the Company. Incorporated by reference to Exhibit (10.15) to the Company's Annual Report on Form 10-K for the year ended July 31, 1995 (File No. 0-5958). (10.15) Credit Agreement, dated as of April 15, 1996, among Brunswick, as the Borrower, Various Lenders and Internationale Nederlanden (U.S.) Capital Corporation as the Agent for the Lenders (incorporated by reference herein Exhibit 1 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.16) Warrant Purchase Agreement, dated as of April 15, 1996, between Brunswick and Internationale Nederlanden (U.S.) Capital Corporation (incorporated by reference herein from Exhibit 2 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996) (10.17) Registration Rights Agreement, dated as of April 15, 1996, between Brunswick and Internationale Nederlanden (U.S.) Capital Corporation (incorporation by reference herein from Exhibit 3 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.18) First Amendment to Credit Agreement, dated as October 25, 1996, between Brunswick and Internationale Nederlanden (U.S.) Capital Corporation (incorporation by reference herein from Exhibit 4 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.18.1) Second Amendment to Credit Agreement, date September 2, 1997 between Meridian Medical Technologies, Inc. and Internationale Nederlanden (U.S.) Capital Corporation. Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended July 31, 1997 (File No. 0-5958). (10.19) First Amendment to warrant Purchase Agreement, dated as of October 25, 1996, between Brunswick and Internationale Nederlanden (U.S.) Capital Corporation (incorporated by reference herein from Exhibit 5 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.20) Assumption Agreement to the Credit Agreement, dated as of November 20, 1996, between Meridian Medical Technologies, Inc. and Internationale Nederlanden (U.S.) Capital Corporation (incorporated by reference herein from Exhibit 6 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.21) Assumption Agreement to the Warrant Purchase Agreement, dated as of November 20, 1996, between Meridian Medical Technologies, Inc. and Internationale Nederlanden (U.S.) Capital Corporation (incorporated by reference herein from Exhibit 7 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). 50 (10.22) $10,000,000 Term Note of Meridian Medical Technologies, Inc. dated November 20, 1996 (incorporated by reference herein from Exhibit 9 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.23) $15,000,000 Revolving Note of Meridian Medical Technologies, Inc. dated November 20, 1996 (incorporated by reference herein from Exhibit 10 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.24) Warrant Certificate for 90,912 Warrants of Meridian Medical Technologies, Inc. Certificate No. 1 (incorporated by reference herein from Exhibit 10 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.25) Warrant Certificate for 83,579 Warrants of Meridian Medical Technologies, Inc. - Certificate No. 1 (incorporated by reference herein from Exhibit 11 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.26) Employment agreement with James H. Miller, dated November 20, 1996. Incorporated by reference to the Company's Form 10K for the year ended July 31, 1996 (File No. 0-5958). * (10.27) Form of Registration Rights Agreement with former Brunswick stockholders (Incorporated by reference to the Company's Form 10K for the year ended July 31, 1996. (File No. 0-5958). (10.28) Note and Warrant Purchase Agreement dated as of April 30, 1998. Incorporated by reference to the Company's Form 10-Q for the quarter ended April 30, 1998. (10.29) Registration Rights Agreement dated as of April 30, 1998. Incorporated by reference to the Company's Form 10-Q for the quarter ended April 30, 1998. (10.30) Warrant Agreement dated as of April 30, 1998. Incorporated by reference to the Company's Form 10-Q for the quarter ended April 30, 1998. (10.31) First Amendment to the Note and Warrant Purchase Agreement dated October 15, 1998. Incorporated by reference to the Company's Form 10-K for the year ended July 31, 1998. (10.32) Fifth Amendment to the Credit Agreement dated October 15, 1998. Incorporated by reference to the Company's Form 10-K for the year ended July 31, 1998. (10.33) Contract SP0200-99-D-0007 dated July 30, 1990 between the U.S. Government (Defense Personnel Support Center) and the Company. Filed herewith. (10.34) Form of Change of Control Agreement between the Company and Dr. Gerald L. Wannarka and Mr. Peter A. Garbis dated October 26, 1998, and between the Company and Mr. Dennis P. O'Brien dated March 8, 1999. Filed herewith. * (10.35) Sixth Amendment to the Credit Agreement dated November 6, 1998 between the Company and and Internationale Nederlanden (U.S.) Capital Corporation. Filed herewith. 51 (10.36) Waiver and Amendment Agreement dated June 14, 1999 between the Company and Nomura Holding America Inc. Filed herewith. (22) A list of the Company's subsidiaries is not provided because they, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of the end of the year covered by this report. (23.1) Consent of Independent Auditors. Filed herewith. (24.0) Power of Attorney of the Company's Directors. Filed herewith. (27.0) Financial Data Schedule dated July 31, 1999. Filed herewith. *Management contract, compensatory plan or arrangement. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended July 31, 1999. 52 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, 1999 Allowance for doubtful accounts $324,800 $ - $141,700 $ - $466,500 Inventory reserves $458,900 $ - $ 45,800 $ 66,700 $438,000 Restructuring reserves $121,800 $ - $ 80,000 $ 67,500 $134,300 ======== =========== ======== ======== ======== For the year ended July 31, 1998 Allowance for doubtful accounts $247,800 $ - $ 76,980 $ - $324,800 Inventory reserves $546,300 $ - $ 92,600 $180,000 $458,900 Restructuring reserves $123,800 $ - $ - $ 2,000 $121,800 ======== =========== ======== ======== ======== For the year ended July 31, 1997 Allowance for doubtful accounts $ 45,000 $ - $292,000 $ 89,200 $247,800 Inventory reserves $293,500 $ - $695,200 $442,400 $546,300 Restructuring reserves $640,400 $ - $ 64,300 $580,900 $123,800 ======== =========== ======== ======== ========
53 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MERIDIAN MEDICAL TECHNOLOGIES, INC. - ----------------------------------- (Registrant) By /S/JAMES H. MILLER ------------------ James H. Miller Chairman of the Board President & CEO Dated: October 29, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: /S/ JAMES H. MILLER Chairman of the Board October 29, 1999 - ----------------------------- President and Director James H. Miller (Principal Executive Officer) /S/ DENNIS P. O'BRIEN Vice President of Finance October 29, 1999 - ----------------------------- (Principal Financial and Dennis P. O'Brien Accounting Officer) * Director October 29, 1999 - ----------------------------- Bruce M. Dresner * Director October 29, 1999 - ----------------------------- Robert G. Foster * Director October 29, 1999 - ----------------------------- David L. Lougee * Director October 29, 1999 - ----------------------------- E. Andrews Grinstead, III * - By: /S/ JAMES H. MILLER October 29, 1999 - ----------------------------- James H. Miller Attorney-in-fact
54 EXHIBIT INDEX ------------- Exhibit No. Description of Exhibit - ----------- ---------------------- (3.1) The Company's Bylaws (As Amended). Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended July 31, 1997. (3.2) First Amended and Restated Certificate of Incorporation and certification of the amendment of first amended and restated Certificate of Incorporation. Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended July 31, 1997. (4.1) Form of warrant to be issued by the Registrant to former holders of Brunswick preferred stock. Incorporated by reference herein from Exhibit 4.1 to Form 8-K filed by the Registrant dated December 5, 1996. (4.2) Forms of warrants assumed and to be issued by the Registrant in connection with the merger with Brunswick. Incorporated by reference herein from Exhibit 4.1 to Form 8-K filed by the Registrant dated December 5, 1996. (4.3) Form of warrant issued to the Estate of Stanley J. Sarnoff, assumed by the Registrant. Incorporated by reference herein from Exhibit 4b to Schedule 13D filed by Brunswick dated April 15, 1996. (10.1) Indenture of Lease, dated January 1, 1982, between Survival Technology, Inc. and Abraham M. Morrison, Incorporated by reference to Exhibit (10.1) to the Company's Annual Report on Form 10-K for the year ended July 31, 1988 (File No. 0-5958). (10.5) Survival Technology, Inc. 1986 Stock Option Plan (As Amended). Incorporated by reference to Exhibit (4.2) to Registration Statement No. 33-46981 on Form S-8.* (10.7) Agreement dated as of January 1, 1987 between Center Laboratories, a division of EM Industries, Inc. and the Company. Incorporated by reference to Exhibit (10.11) to the Company's Annual Report on Form 10-K for the year ended July 31, 1988 (File No. 0-5958). (10.7.1) Letter Agreement dated as of January 31, 1990 between Center Laboratories, a division of EM Industries, Inc. and the Company. Incorporated by reference to Exhibit (10.10.1) to the Company's Annual Report on Form 10-K for the year ended July 31, 1990. (10.8) Agreement dated June 23, 1981 between Survival Technology, Inc, and American Home Products Corporation. Incorporated by reference to Exhibit (10.12) to the Company's Annual Report on Form 10-K for the year ended July 31, 1988 (File No. 0-5958). (10.8.1) License Agreement dated April 20, 1982 between Survival Technology, Inc. and American Home Products Corporation. Incorporated by reference to Exhibit (10.12.1) to the Company's Annual Report on Form 10-K for the year ended July 31, 1988 (File No. 0-5958). (10.10) Development, Manufacturing and Supply Agreement between Mylan Laboratories, Inc. and Survival Technology, Inc. dated August 31, 1993. Incorporated by reference to Exhibit (10.11) to the Company's Annual Report on Form 10-K for the year ended July 31, 1993 (File No. 0-5958). 55 (10.10.1) Development, Manufacturing and Supply Amendment Agreement dated July 28, 1994 between Mylan Laboratories, Inc. and Survival Technology, Inc. Incorporated by reference to Exhibit (10.12.1) to the Company's Annual Report on Form 10-K for the year ended July 31, 1994. (10.11) Lease Agreement dated August 26, 1991 between Pru Beta 2 and the Company. Incorporated by reference to Exhibit (10.12) the Company's Annual Report on Form 10-K for the year ended July 31, 1991 (File No. 0-5958). (10.13) Commitment letter dated May 4, 1995 between the CIT Group/Equipment, Financing Inc., and the Company. Incorporated by reference to Exhibit (10.15) to the Company's Annual Report on Form 10-K for the year ended July 31, 1995 (File No. 0-5958). (10.15) Credit Agreement, dated as of April 15, 1996, among Brunswick, as the Borrower, Various Lenders and Internationale Nederlanden (U.S.) Capital Corporation as the Agent for the Lenders (incorporated by reference herein Exhibit 1 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.16) Warrant Purchase Agreement, dated as of April 15, 1996, between Brunswick and Internationale Nederlanden (U.S.) Capital Corporation (incorporated by reference herein from Exhibit 2 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996) (10.17) Registration Rights Agreement, dated as of April 15, 1996, between Brunswick and Internationale Nederlanden (U.S.) Capital Corporation (incorporation by reference herein from Exhibit 3 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.18) First Amendment to Credit Agreement, dated as October 25, 1996, between Brunswick and Internationale Nederlanden (U.S.) Capital Corporation (incorporation by reference herein from Exhibit 4 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.18.1) Second Amendment to Credit Agreement, date September 2, 1997 between Meridian Medical Technologies, Inc. and Internationale Nederlanden (U.S.) Capital Corporation. Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended July 31, 1997 (File No. 0-5958). (10.19) First Amendment to warrant Purchase Agreement, dated as of October 25, 1996, between Brunswick and Internationale Nederlanden (U.S.) Capital Corporation (incorporated by reference herein from Exhibit 5 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.20) Assumption Agreement to the Credit Agreement, dated as of November 20, 1996, between Meridian Medical Technologies, Inc. and Internationale Nederlanden (U.S.) Capital Corporation (incorporated by reference herein from Exhibit 6 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). 56 (10.21) Assumption Agreement to the Warrant Purchase Agreement, dated as of November 20, 1996, between Meridian Medical Technologies, Inc. and Internationale Nederlanden (U.S.) Capital Corporation (incorporated by reference herein from Exhibit 7 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.22) $10,000,000 Term Note of Meridian Medical Technologies, Inc. dated November 20, 1996 (incorporated by reference herein from Exhibit 9 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.23) $15,000,000 Revolving Note of Meridian Medical Technologies, Inc. dated November 20, 1996 (incorporated by reference herein from Exhibit 10 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.24) Warrant Certificate for 90,912 Warrants of Meridian Medical Technologies, Inc. Certificate No. 1 (incorporated by reference herein from Exhibit 10 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.25) Warrant Certificate for 83,579 Warrants of Meridian Medical Technologies, Inc. - Certificate No. 1 (incorporated by reference herein from Exhibit 11 to Schedule 13D filed by ING (U.S.) Investment Corporation dated December 2, 1996). (10.26) Employment agreement with James H. Miller, dated November 20, 1996. Incorporated by reference to the Company's Form 10K for the year ended July 31, 1996 (File No. 0-5958). * (10.27) Form of Registration Rights Agreement with former Brunswick stockholders (Incorporated by reference to the Company's Form 10K for the year ended July 31, 1996. (File No. 0-5958). (10.29) Note and Warrant Purchase Agreement dated as of April 30, 1998. Incorporated by reference to the Company's Form 10-Q for the quarter ended April 30, 1998. (10.29) Registration Rights Agreement dated as of April 30, 1998. Incorporated by reference to the Company's Form 10-Q for the quarter ended April 30, 1998. (10.30) Warrant Agreement dated as of April 30, 1998. Incorporated by reference to the Company's Form 10-Q for the quarter ended April 30, 1998. (10.31) First Amendment to the Note and Warrant Purchase Agreement dated October 15, 1998. Incorporated by reference to the Company's Form 10-K for the year ended July 31, 1998. (10.32) Fifth Amendment to the Credit Agreement dated October 15, 1998. Incorporated by reference to the Company's Form 10-K for the year ended July 31, 1998. (10.33) Contract SP0200-99-D-0007 dated July 30, 1990 between the U.S. Government (Defense Personnel Support Center) and the Company. Filed herewith. (10.34) Form of Change of Control Agreement between the Company and Dr. Gerald L. Wannarka and Mr. Peter A. Garbis dated October 26, 1998, and between the Company and Mr. Dennis P. O'Brien dated March 8, 1999. Filed herewith. * 57 (10.35) Sixth Amendment to the Credit Agreement dated November 6, 1998 between the Company and Internationale Nederlanden (U.S.) Capital Corporation. Filed herewith. (10.36) Waiver and Amendment Agreement dated June 14, 1999 between the Company and Nomura Holding America Inc. Filed herewith. (22) A list of the Company's subsidiaries is not provided because they, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of the end of the year covered by this report. (23.1) Consent of Independent Auditors. Filed herewith. (24.0) Power of Attorney of the Company's Directors. Filed herewith. (27.0) Financial Data Schedule dated July 31, 1999. Filed herewith. *Management contract, compensatory plan or arrangement. EX-10.33 2 DEPARTMENT OF DEFENSE CONTRACT Exhibit 10.33 - -------------------------------------------------------------------------------- AWARD/CONTRACT 1. This contract is rated order Rating Page of Pages under DPAS (15 CFR 350) DO C9 1 of 34 - -------------------------------------------------------------------------------- 2. Contract No. 3. Effective Date 4. Requisition/Purchase Request/ Project No. SP0200-99D-0007 7-30-99 DD#80004______________________ 5. Issued by Code SP0200 6. Administered by (if other than Item 5) Code S2101A DEFENSE SUPPLY CENTER PHILADELPHIA DCMC BALTIMORE ATTN: DSCP-MGAA (BLDG #6) 217 EAST REDWOOD STREET 700 ROBBINS AVENUE SUITE 1800 PHILA., PA 19111-5092 BALTIMORE, MD 21202-5299 ATTN: A. PODLAS (DSCP-MGAA-PGC) 215-737-5768 ------------------------------------ 7. Name and Address if Contractor 8. Delivery (No.,Street,city,county,state,zipcode) MERIDIAN MEDICAL TECHNOLOGIES, INC. 10240 OLD COLUMBIA ROAD / / FOB ORIGIN / / OTHER COLUMBIA, MD 21046 ------------------------------------ ATTN: MS. CRISTINA D'ERASMO 9. Discount for Prompt Payment - -------------------------------------------- .5% 10 DAYS CODE 54452 FACILITY CODE ------------------------------------ 10. SUBMIT INVOICES ITEM 11. SHIP TO/MARK FOR CODE _______________ (4 copies unless otherwise ADDRESS SHOWN IN: ------------------------------------ CODE HQ0338 ------------------------------------ 12. PAYMENT WILL BE MADE BY DFAS-COLUMBUS CENTER DFAS-CO/SOUTH ENTITLEMENT OPERATIONS P.O. BOX 182264 SEE INDIVIDUAL DELIVERY ORDER COLUMBUS, OH 43218-2264 - -------------------------------------------------------------------------------- 13. AUTHORITY FOR USING OTHER THAN FULL 14. ACCOUNTING AND APPROPRIATION AND OPEN COMPETITION: DATA / / 10USC2304(C) ( 3 ) / / 41USC253(C)( ) MG97X4930 5CMO 01 26.0 S33150 - -------------------------------------------------------------------------------- 15.A. 15B. 15C. 15D. 15E. 15F. ITEM No. SUPPLIES/SERVICES QUANTITY UNIT UNIT PRICE AMOUNT SEE ATTACHED PAGES - -------------------------------------------------------------------------------- 15G. TOTAL AMOUNT OF CONTRACT $ - -------------------------------------------------------------------------------- 16. TABLE OF CONTENTS - -------------------------------------------------------------------------------- (X) SEC DESCRIPTION PAGE(S) - -------------------------------------------------------------------------------- PART I - THE SCHEDULE - -------------------------------------------------------------------------------- A SOLICIATION/CONTRACT FORM - -------------------------------------------------------------------------------- X B SUPPLIES OR SERVICES AND PRICES/COST - -------------------------------------------------------------------------------- X C DESCRIPTION/SPECS/WORK STATEMENT - -------------------------------------------------------------------------------- D PACKAGING AND MARKING - -------------------------------------------------------------------------------- E INSPECTION AND ACCEPTANCE - -------------------------------------------------------------------------------- F DELIVERIES OR PERFORMANCE - -------------------------------------------------------------------------------- G CONTRACT ADMINISTRATION DATA - -------------------------------------------------------------------------------- H SPECIAL CONTRACT REQUIREMENTS - -------------------------------------------------------------------------------- PART II - CONTRACT CLAUSES - -------------------------------------------------------------------------------- X I CONTRACT CLAUSES - -------------------------------------------------------------------------------- PART III - LIST OF DOC. EXHIBITS & OTHER ATTACH. - -------------------------------------------------------------------------------- J LIST OF ATTACHMENTS - -------------------------------------------------------------------------------- PART IV - REPRESENTATIONS AND INSTRUCTIONS - -------------------------------------------------------------------------------- K REPRESENTATION,CERTIFICATION AND OTHER STATEMENTS OF OFFERORS - -------------------------------------------------------------------------------- L INSTRS.,CONDS., & NOTICES TO OFFERORS - -------------------------------------------------------------------------------- M EVALUATION FACTORS FOR AWARD - -------------------------------------------------------------------------------- CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE - -------------------------------------------------------------------------------- 17. / / CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is required to sign this document and return _______copies to issuing office.) Contractor agrees to furnish and deliver all items or perform all the services set forth or otherwise identified above and on any continuation sheets for the consideration stated herein. The rights and obligations of the parties to this contract shall be subject to and governed by the following documents (a) this award/contract,(b) the solicitation, if any, and (C) such provisions, representations, certifications, and specifications, as are attached or incorporated by reference herein. (Attachments are listed herein.) 18. / / AWARD (Contractor is not required to sign this document) Your offer on Soliciation Number SP0200-98R-1002 (see page 13), including the additions or changes made by you which additions or changes are set forth in full above, is hereby accepted as to the items listed above and on any continuation sheets. This award consummate the contract which consists of the following documents: (a) the Government's solicitation and your offer, and (b) this award/contract. No further contractual document is necessary. - -------------------------------------------------------------------------------- 19A. NAME AND TITLE OF SIGNER (Type or print) 20A. NAME OF CONTRACTING OFFICER DENNIS P. O'BRIEN - VP-FINANCE/CFO ANNA PODLAS - -------------------------------------------------------------------------------- 19B. NAME OF CONTRACTOR 19C. DATED SIGNED - -------------------------------------------------------------------------------- 20B. UNITED STATES OF AMERICA 20C. DATED SIGNED - -------------------------------------------------------------------------------- BY BY ----------------------------------- --------------------------------- (Signature of person auth. to sign) (Signature of Contracting Officer - -------------------------------------------------------------------------------- nsn 7540-01-152-8069 26-107 STANDARD FORM 28 (REV.4-85) (EG)/ PRESCRIBED BY GSA PREVIOUS EDITION UNUSABLE PERFORM (DLA) FAR (48 CFR) 43.214 (a) - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 2 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- SECTION B --------- 0001 BASE MAINTENANCE/SERVICE To provide labor, services and incremental production as directed by the Government in accordance with statement of work. 0002 LOGISTICS MAINTENANCE To provide segregation of goods, disassembly into components, shelf life extension program, and storage in accordance with statement of work. 0003 DIVISION-READY BRIGADE SET PROGRAM To provide on-site support for the storage, assembly, and shipment of Division-Ready Brigade Sets in accordance with statement of work. 0004 BASE MAINTENANCE/MATERIAL To provide completely assembled Mark I Kits, Atropine, Pralidoxime, Diazepam, and Morphine Auto Injectors using refurbished and/or new components in accordance with statement of work. 0005 MOBILIZATION SURGE OPTION To provide material in the event of a mobilization surge contingency or other Government need. The contractor will ship to those locations identified by the Contracting Officer up the maximum quantities indicated. 0006 VENDOR VALIDATION Validation testing and direct plant support costs for new Pralidoxime supplier. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 3 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- SCHEDULE
ITEM NO. SUPPLIES QTY U/I U/P TOTAL - -------- -------- --- --- --- ----- 0001 BASE MAINTENANCE/SERVICE 0001AA BASE YEAR 1 LT $7,657,018 $7,657,018 0001AB OPTION YEAR ONE 1 LT $8,005,263 $8,005,263 0001AC OPTION YEAR TWO 1 LT $8,309,044 $8,309,044 0002 LOGISTICS MAINTENANCE 0002AA BASE YEAR 1 LT $2,052,506 $2,052,506 0002AB BASE YEAR ONE 1 LT $2,128,455 $2,128,455 0002AC BASE YEAR TWO 1 LT $2,206,383 $2,206,383 0003 DIVISION-READY BRIGADE SET PROGRAM 0003AA BASE YEAR 1 LT $0 $0 0003AB OPTION YEAR ONE 1 LT $0 $0 0003AC OPTION YEAR TWO 1 LT $0 $0 0004 BASE MAINTENANCE/MATERIAL ANNUAL ESTIMATE --------------- 0004AA BASE YEAR --------- MARK I (6505-01-174-9919) 462,000 EA $8.44 $3,899,280 1 thru 499,999 $8.44 500,000 thru 749,999 $8.05 750,000 thru 999,999 $7.84 1,000,000 thru 1,200,000* $7.72 ATROPINE (6505-00-926-9083) 400,000 EA $2.69 $1,076,000 1 thru 499,999 $2.69 500,000 thru 749,999 $2.60 750,000 thru 999,999 $2.52 1,000,000 thru 1,200,000* $2.49 PRALIDOXIME (6505-01-125-3248) 250,000 EA $5.39 $1,347,500 1 thru 499,999 $5.39 500,000 thru 749,999 $5.09 750,000 thru 999,999 $4.96 1,000,000 thru 1,200,000* $4.88 DIAZEPAM (6505-01-274-0951) 400,000 EA $4.71 $1,884,000 1 thru 499,999 $4.71 500,000 thru 749,999 $4.43 750,000 thru 999,999 $4.30 1,000,000 thru 1,200,000* $4.21
- -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 4 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- SCHEDULE
ITEM NO. SUPPLIES QTY U/I U/P TOTAL - -------- -------- --- --- --- ----- MORPHINE (6505-01-302-5530) 300,000 EA $2.94 $882,000 1 thru 499,999 $2.94 500,000 thru 749,999 $2.84 750,000 thru 999,999 $2.76 1,000,000 thru 1,200,000* $2.72 0004AB OPTION YEAR ONE --------------- MARK I (6505-01-174-9919) 462,000 EA $8.71 $4,024,020 1 thru 499,999 $8.71 500,000 thru 749,999 $8.30 750,000 thru 999,999 $8.09 1,000,000 thru 1,200,000* $7.97 ATROPINE (6505-00-926-9083) 400,000 EA $2.78 $1,112,000 1 thru 499,999 $2.78 500,000 thru 749,999 $2.69 750,000 thru 999,999 $2.61 1,000,000 thru 1,200,000* $2.57 PRALIDOXIME (6505-01-125-3248) 250,000 EA $5.55 $1,387,500 1 thru 499,999 $5.55 500,000 thru 749,999 $5.24 750,000 thru 999,999 $5.11 1,000,000 thru 1,200,000* $5.03 DIAZEPAM (6505-01-274-0951) 400,000 EA $4.87 $1,948,000 1 thru 499,999 $4.87 500,000 thru 749,999 $4.58 750,000 thru 999,999 $4.45 1,000,000 thru 1,200,000* $4.36 MORPHINE (6505-01-302-5530) 300,000 EA $3.04 $912,000 1 thru 499,999 $3.04 500,000 thru 749,999 $2.93 750,000 thru 999,999 $2.85 1,000,000 thru 1,200,000* $2.81
- -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 5 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- SCHEDULE
ITEM NO. SUPPLIES QTY U/I U/P TOTAL - -------- -------- --- --- --- ----- 0004AC OPTION YEAR TWO --------------- MARK I (6505-01-174-9919) 462,000 EA $8.98 $4,148,760 1 thru 499,999 $8.98 500,000 thru 749,999 $8.56 750,000 thru 999,999 $8.35 1,000,000 thru 1,200,000* $8.22 ATROPINE (6505-00-926-9083) 400,000 EA $2.88 $1,152,000 1 thru 499,999 $2.88 500,000 thru 749,999 $2.78 750,000 thru 999,999 $2.70 1,000,000 thru 1,200,000* $2.66 PRALIDOXIME (6505-01-125-3248) 250,000 EA $5.71 $1,427,500 1 thru 499,999 $5.71 500,000 thru 749,999 $5.39 750,000 thru 999,999 $5.26 1,000,000 thru 1,200,000* $5.17 DIAZEPAM (6505-01-274-0951) 400,000 EA $5.05 $2,020,000 1 thru 499,999 $5.05 500,000 thru 749,999 $4.74 750,000 thru 999,999 $4.60 1,000,000 thru 1,200,000* $4.51 MORPHINE (6505-01-302-5530) 300,000 EA $3.15 $945,000 1 thru 499,999 $3.15 500,000 thru 749,999 $3.04 750,000 thru 999,999 $2.95 1,000,000 thru 1,200,000* $2.91
*Pricing limited to quantities, excluding Pre-stock units, of 1.2 million each of Mark I Injectors or 1.2 million injectors Atropine and/or Morphine Injectors and 1.2 million Pralidoxime and/or Diazepam Injectors. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 6 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- SCHEDULE ADDITIONAL AVAILABLE QUANTITIES UNDER LINE ITEM 0004 During any contract year, if the Government has reached the 2.4 million unit autoinjector limit under item 0004 (1.2 million each of Mark 1 injectors or 1.2 million Atropine and/or Morphine injectors and 1.2 million Pralidoxime and/or Diazepam injectors), the Government is entitled to purchase up to an additional 499,999 units during that year, without exercising Line Item 0005, Mobilization Surge Option. The pricing is as follows, for these non mobilization surge quantities exceeding the 2.4 million annual threshold: Base Period Option Year One Option Year Two ----------- ----------- ------------------- MARK 1 $10.85 $11.13 $11.47 ATROPINE $3.51 $3.61 $3.73 PRALIDOXIME $6.88 $7.04 $7.25 DIAZEPAM $6.38 $6.55 $6.76 MORPHINE $3.85 $3.96 $4.08 These extra quantities above the 2.4 million will be delivered 150 days after date of delivery order, but Contractor will not be required to deliver these additional quantities during the months of June, July, and August. If delivery of the 499,999 falls after the end of the contract year in which the delivery order was issued, the price will not be increased to the next years pricing, nor will the quantities be subtracted from the next years 2.4 million available quantity. This in no way limits the Government's rights to purchase quantities against Line Item 0004, or to exercise Line Item 0005, or any other rights under this contract - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 7 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- SCHEDULE PRESTOCK COMPONENT PRICING
ITEM NO. SUPPLIES QTY U/I U/P TOTAL - -------- -------- --- --- --- ----- 0004AD BASE YEAR --------- MARK I (6505-01-174-9919) 1 thru 499,999 EA $6.44 500,000 thru 749,999 EA $6.17 750,000 thru 999,999 EA $6.00 1,000,000 thru 1,200,000 EA $5.91 ATROPINE (6505-00-926-9083) 1 thru 499,999 EA $2.01 500,000 thru 749,999 EA $1.95 750,000 thru 999,999 EA $1.89 1,000,000 thru 1,200,000 EA $1.86 PRALIDOXIME (6505-01-125-3248) 1 thru 499,999 EA $4.13 500,000 thru 749,999 EA $3.92 750,000 thru 999,999 EA $3.82 1,000,000 thru 1,200,000 EA $3.76 DIAZEPAM (6505-01-274-0951) 1 thru 499,999 EA $3.53 500,000 thru 749,999 EA $3.33 750,000 thru 999,999 EA $3.22 1,000,000 thru 1,200,000 EA $3.16 MORPHINE (6505-01-302-5530) 1 thru 499,999 EA $2.18 500,000 thru 749,999 EA $2.11 750,000 thru 999,999 EA $2.05 1,000,000 thru 1,200,000 EA $2.02
- -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 8 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- SCHEDULE PRESTOCK COMPONENT PRICING
ITEM NO. SUPPLIES QTY U/I U/P TOTAL - -------- -------- --- --- --- ----- 0004AE OPTION YEAR ONE --------------- MARK I (6505-01-174-9919) 1 thru 499,999 EA $6.64 500,000 thru 749,999 EA $6.36 750,000 thru 999,999 EA $6.19 1,000,000 thru 1,200,000 EA $6.09 ATROPINE (6505-00-926-9083) 1 thru 499,999 EA $2.08 500,000 thru 749,999 EA $2.02 750,000 thru 999,999 EA $1.96 1,000,000 thru 1,200,000 EA $1.93 PRALIDOXIME (6505-01-125-3248) 1 thru 499,999 EA $4.25 500,000 thru 749,999 EA $4.03 750,000 thru 999,999 EA $3.93 1,000,000 thru 1,200,000 EA $3.86 DIAZEPAM (6505-01-274-0951) 1 thru 499,999 EA $3.65 500,000 thru 749,999 EA $3.45 750,000 thru 999,999 EA $3.34 1,000,000 thru 1,200,000 EA $3.27 MORPHINE (6505-01-302-5530) 1 thru 499,999 EA $2.26 500,000 thru 749,999 EA $2.19 750,000 thru 999,999 EA $2.12 1,000,000 thru 1,200,000 EA $2.09
- -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 9 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- SCHEDULE PRESTOCK COMPONENT PRICING
ITEM NO. SUPPLIES QTY U/I U/P TOTAL - -------- -------- --- --- --- ----- 0004AF OPTION YEAR TWO --------------- MARK I (6505-01-174-9919) 1 thru 499,999 EA $6.85 500,000 thru 749,999 EA $6.56 750,000 thru 999,999 EA $6.39 1,000,000 thru 1,200,000 EA $6.28 ATROPINE (6505-00-926-9083) 1 thru 499,999 EA $2.16 500,000 thru 749,999 EA $2.09 750,000 thru 999,999 EA $2.03 1,000,000 thru 1,200,000 EA $2.00 PRALIDOXIME (6505-01-125-3248) 1 thru 499,999 EA $4.38 500,000 thru 749,999 EA $4.15 750,000 thru 999,999 EA $4.05 1,000,000 thru 1,200,000 EA $3.98 DIAZEPAM (6505-01-274-0951) 1 thru 499,999 EA $3.78 500,000 thru 749,999 EA $3.57 750,000 thru 999,999 EA $3.45 1,000,000 thru 1,200,000 EA $3.38 MORPHINE (6505-01-302-5530) 1 thru 499,999 EA $2.34 500,000 thru 749,999 EA $2.26 750,000 thru 999,999 EA $2.19 1,000,000 thru 1,200,000 EA $2.16
- -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 10 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- SCHEDULE
ITEM NO. SUPPLIES QTY U/I U/P TOTAL - -------- -------- --- --- --- ----- 0005 MOBILIZATION SURGE OPTION 0005AA BASE YEAR (FULL QTY) MARK I (6505-01-174-9919) 2,244,762 EA $11.59 $26,016,792 ATROPINE (6505-00-926-9083) 1,079,426 EA $3.74 $4,037,053 PRALIDOXIME (6505-01-125-3248) 583,507 EA $7.51 $4,382,138 DIAZEPAM (6505-01-274-0951) 689,788 EA $7.05 $4,863,005 MORPHINE (6505-01-302-5530) 1,517,225 EA $4.23 $6,417,862 0005AB OPTION YEAR ONE (FULL QTY) MARK I (6505-01-174-9919) 2,244,762 EA $11.88 $26,667,773 ATROPINE (6505-00-926-9083) 1,079,426 EA $3.87 $4,177,379 PRALIDOXIME (6505-01-125-3248) 583,507 EA $7.68 $4,481,334 DIAZEPAM (6505-01-274-0951) 689,788 EA $7.27 $5,014,759 MORPHINE (6505-01-302-5530) 1,517,225 EA $4.37 $6,630,273 0005AC OPTION YEAR TWO (FULL QTY) MARK I (6505-01-174-9919) 2,244,762 EA $12.28 $27,565,677 ATROPINE (6505-00-926-9083) 1,079,426 EA $4.00 $4,317,704 PRALIDOXIME (6505-01-125-3248) 583,507 EA $7.94 $4,633,046 DIAZEPAM (6505-01-274-0951) 689,788 EA $7.52 $5,187,206 MORPHINE (6505-01-302-5530) 1,517,225 EA $4.52 $6,857,857 0005AA BASE YEAR TIER PRICING VOLUMES (UP TO 3,000,000 UNITS) MARK I (6505-01-174-9919) 1,101,326 EA $11.79 $12,984,634 ATROPINE (6505-00-926-9083) 529,589 EA $3.81 $2,017,734 PRALIDOXIME (6505-01-125-3248) 286,280 EA $7.64 $2,187,179 DIAZEPAM (6505-01-274-0951) 338,424 EA $7.17 $2,426,500 MORPHINE (6505-01-302-5530) 744,381 EA $4.31 $3,208,282 0005AB OPTION YEAR ONE TIER PRICING VOLUMES (UP TO 3,000,000 UNITS) MARK I (6505-01-174-9919) 1,101,326 EA $12.04 $13,259,965 ATROPINE (6505-00-926-9083) 529,589 EA $3.93 $2,081,285 PRALIDOXIME (6505-01-125-3248) 286,280 EA $7.81 $2,235,847 DIAZEPAM (6505-01-274-0951) 338,424 EA $7.40 $2,504,338 MORPHINE (6505-01-302-5530) 744,381 EA $4.45 $3,312,495
- -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 11 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- SCHEDULE
ITEM NO. SUPPLIES QTY U/I U/P TOTAL - -------- -------- --- --- --- ----- 0005AC OPTION YEAR TWO TIER PRICING VOLUMES (UP TO 3,000,000 UNITS) MARK I (6505-01-174-9919) 1,101,326 EA $12.50 $13,766,575 ATROPINE (6505-00-926-9083) 529,589 EA $4.07 $2,155,427 PRALIDOXIME (6505-01-125-3248) 286,280 EA $8.07 $2,310,280 DIAZEPAM (6505-01-274-0951) 338,424 EA $7.65 $2,588,944 MORPHINE (6505-01-302-5530) 744,381 EA $4.60 $3,424,153 0005AA BASE YEAR TIER PRICING VOLUMES (3,000,001 TO 6,114,708) MARK I (6505-01-174-9919) 2,244,762 EA $11.39 $25,567,839 ATROPINE (6505-00-926-9083) 1,079,426 EA $7.26 $7,836,633 PRALIDOXIME (6505-01-125-3248) 583,507 EA $3.60 $2,100,625 DIAZEPAM (6505-01-274-0951) 689,788 EA $6.80 $4,690,558 MORPHINE (6505-01-302-5530) 1,517,225 EA $4.11 $6,235,795 0005AB OPTION YEAR ONE TIER PRICING VOLUMES (3,000,001 TO 6,114,708) MARK I (6505-01-174-9919) 2,244,762 EA $11.69 $26,241,268 ATROPINE (6505-00-926-9083) 1,079,426 EA $3.80 $4,101,819 PRALIDOXIME (6505-01-125-3248) 583,507 EA $7.55 $4,405,478 DIAZEPAM (6505-01-274-0951) 689,788 EA $7.15 $4,931,984 MORPHINE (6505-01-302-5530) 1,517,225 EA $4.30 $6,524,068 0005AC OPTION YEAR TWO TIER PRICING VOLUMES (3,000,001 TO 6,114,708) MARK I (6505-01-174-9919) 2,244,762 EA $12.08 $27,116,725 ATROPINE (6505-00-926-9083) 1,079,426 EA $3.93 $4,242,144 PRALIDOXIME (6505-01-125-3248) 583,507 EA $7.80 $4,551,355 DIAZEPAM (6505-01-274-0951) 689,788 EA $7.39 $5,097,533 MORPHINE (6505-01-302-5530) 1,517,225 EA $4.44 $6,736,479 0006 NEW VENDOR VALIDATION 0006AA 1 LT $270,528 270,528
- -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 12 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- Variation in Quantity: Plus or Minus 2% Inspection and Acceptance: Origin FOB: Origin Manufacturing and Packaging/Packing Location: Meridian Medical Technologies, Inc. 2555 Hermelin Dr. St. Louis, MO 63144 Source of Raw Materials: Atropine: Boeringer-Ingelheim, Germany Pralidoxime: Nycomed Amersham, Rensselear, NY Diazepam: SST Corp., Clifton, NJ Morphine: Mallincroft, St. Louis, MO Payment Address: Meridian Medical Technologies, Inc. 10240 Old Columbia Road Columbia, MD 21046 Guaranteed Minimum: Delivery Order SP0200-99D-0007-8001 covering the base year annual services under lines 0001, 0002, and 0006 of the contract will be issued as a separate document concurrently with the issuance of this basic contract. The guaranteed minimum for line 0004 (2% of the estimated dollar value of line 0004: $181,776) will be issued during the base year. Annual Maximum Order Quantities under line item 0004: 2,899,999 equivalent injectors. Quantities up to 2,400,000 will be priced under Line 0004AA (AB and AC for option year one and two, respectively). The additional 499,999 will be priced at the unit prices stated in the contract schedule.
Delivery: For items with available pre-stocked components: 30 days after award of delivery order. For items without available pre-stocked components: 135 days after award of delivery order.
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. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 13 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- Pre-Stocking of Component Parts: The Government may purchase component parts for each injector throughout the life of this contract as excess War Stopper funds become available. This material shall be purchased against line item 0004 (at the stated prices shown for Pre-stock). This material shall be stored and rotated by the contractor to fill given delivery orders. No additional costs for storage and rotation shall apply. Government Furnished Material: The following will be considered Government Furnished Material under this contract: 1) Expired or extended material shipped to MMT for shelf life extension in accordance with line item 0002 and Logistics Maintenance/DRB Program Statement of Work. 2) Material purchased under line item 0004 specifically for the Army's DRB Program to be stored at MMT in accordance with line item 0003 and Logistics Maintenance/DRB Program Statement of Work. 3) Material purchased under line item 0004 specifically to support the Army's Unit Deployment Package (UDP) Potency and Dated (P&D) Program to be stored at MMT in accordance with Logistics Maintenance/DRB Program Statement of Work. 4) Components purchased under line item 0004 identified as pre-stocking components. Effective Date of Award: Effective date of Base Year shall be from 1 Aug 1999 through 31 Jul 2000. The payment schedule will be as follows for Line Items 0001 and 0002: Value per Month: $809,127.00 24 Payments of: $404,563.50 Invoices for payment of Lines 0001 and 0002 shall be submitted on the 15 and 30 of each month commencing Aug 15, 1999 and ending July 31, 2000. Line 0006 may be invoiced upon award of this delivery order. Invoices for Line Item 0004 will be submitted after issuance of each Delivery Order. The same shall apply for Line Items 0005, if exercised. Continuation from Block 18 Page 1: Amendments 0001 through 0004 Contractor Correspondence dated: 29 Jun 1998 Initial offer 15 Jan 1999 Second offer 16 Jul 1999 Revised offer (faxed 7/19/99) 39 Pages 23 Jul 1999 Revised offer (faxed 7/26/99) 33 Pages 29 Jul 1999 Revised offer (faxed 7/29/99) 18 Pages 30 Jul 1999 Correction to Line 0001 (Option 1 and 2) - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 14 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- Mobilization Surge Cost Reconciliation Procedure A full cost accounting and reconciliation against billings is required upon completion of a declared Mobilization Surge (MS). The procedure is as follows: 1. Declaration and Termination: a. Mobilization Surge (MS) will be officially declared via a Delivery Order from DSCP requesting products under CLIN 0005 for immediate delivery under Mobilization Surge provisions. MMT will immediately become obligated to terminate in a reasonable fashion production for non-DoD customers and proceed as rapidly as possible to devote all production resources to manufacture and deliver the requested MS products. CLIN 0001 payments shall continue IAW the original contract payment schedule after MS has been declared. If the MS continues after eight (8) CLIN 0001 biweekly payments have been made, CLIN 0001 payments shall then be suspended for the duration of the MS. CLIN 0001 payments shall resume IAW the original contract payment schedule upon the termination of the MS. b. Termination of Mobilization Surge requires written confirmation from DSCP. Termination notification is expected to be noted on the last MS Delivery Order. However, DSCP may terminate MS by separate written notification to the Contractor. Since MMT will likely be in a full production, 3 shift operation, notification of Mobilization Surge termination will be received prior to completion and delivery of the last quantities requested on a Mobilization Surge Delivery Order. This prompt notification will allow for orderly phase down and return to commercial production. If CLIN 0001 payments were suspended in accordance with paragraph 1.a. immediately above, CLIN 0001 payments shall resume IAW the original contract payment schedule upon the termination of the MS. NOTE: Failure to provide timely MS termination notice may result in additional charges billable to DoD for idle time and idle facilities. 2. Accounting for Mobilization Surge (MS): a. To determine the full cost of Mobilization Surge, costs incurred for MS from the initial MS Delivery Order through the later of delivery of the final MS Delivery Order or notice of the termination of MS, shall be treated as a single "job-order" under a job-order costing system. The "job-order" will accumulate the full MS cost for all MS production made during the surge; i.e., the full accounting during MS adjusted for any non-MS production. Cost to complete production lots in progress at the time Mobilization Surge is started will be deducted from the total costs during MS. Likewise, cost continuations beyond termination of MS which are the result of MS will be charged to the MS. b. Cost will be accumulated and summarized in a format consistent with the CLIN 0005 cost proposal. Product cost will include manufacturing variances against standards. Variances attributable to non-DoD production will be excluded from the MS costing. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 15 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- 3. Reconciliation of cost against billings and settlement of charges: a. MS total costs will consist of the full costs incurred, (and accounted for in accordance with Section 2.a. above), for MS from implementation to the later of delivery of the final MS Delivery Order or notice of the termination of MS, plus any costs incurred (idle time and idle facilities) due to failure of timely termination of MS. b. Progress payments for Direct Materials will be liquidated against invoiced product. c. Amounts due will result when total actual incurred costs, including costs incurred (idle time and idle facilities) from untimely MS termination, exceed the total payments. The Government's maximum liability for Mobilization Surge may not exceed the combined value of product ordered during the MS at the CLIN 0005 prices and the total amount available under CLIN 0001 Base Maintenance for the entire duration of the MS. A refund will result if total payments exceed actual costs incurred. Refund will be limited to CLIN 0001 payments less any costs (idle time and idle facilities) of untimely termination. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 16 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- ADJUSTMENT OF COST OF PRALIDOXIME CHLORIDE IN MARK I KITS AND PRALIDOXIME (a) This clause applies only to the CLIN 0004 (both up to and beyond 2.4 million equivalent Autoinjectors), CLIN 0005, and Prestock contract prices for Mark I Kits and Pralidoxime (a/k/a Combopen or 2-Pam) for each contract year as listed in Section B, Schedule of Supplies and Services. These unit prices may be adjusted upward or downward as appropriate. (b) The contract award prices for these items were based on the most current, accurate and complete information available at the time of award. These contract award prices are firm-fixed priced for the Base Year and Option Years One and Two except for the costs outlined in paragraph (c) below. (c) At the time of contract award, the Direct Material cost of Pralidoxime Chloride in Mark I Kits and Pralidoxime anticipated in the performance of this contract could not be established with any reasonable certainty due to ongoing negotiations between Meridian Medical Technologies, Inc. (MMT) and their new Pralidoxime Chloride supplier, Nycomed Amersham Imaging Americas (Nycomed). It is hereby agreed that the Direct Material cost of Pralidoxime Chloride per Mark I Kit and per Pralidoxime shall be subject to one adjustment under this clause. It is further agreed that the adjustment will be limited to the change in the Direct Material cost of Pralidoxime Chloride per Mark I Kit and per Pralidoxime with no adjustment for Material Handling, Variable Overhead, Plant Overhead, Corporate Overhead/General and Administrative (G & A), and Profit. The contract award prices for these items were based on the most recent written quote provided to the Government by MMT, i.e., Nycomed's quote of April 6, 1998 of $516.56 per kilogram of Pralidoxime Chloride. The Direct Material cost of Pralidoxime Chloride at each quantity/price tier in the negotiated contract prices for Mark I Kits and Pralidoxime was determined by entering that quote on a per gram basis into the negotiated Component Quotations furnished by MMT in support of Component Cost and Detail Schedules H and J. The calculation and the value of the Direct Material cost of Pralidoxime Chloride at each quantity/price tier for Mark I Kits and Pralidoxime for each contract year currently included in the contract prices are shown on the attached schedules entitled "Effect of Pralidoxime Chloride Costs" and "Material Cost". - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 17 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- (d) When MMT and their supplier reach an agreement on the price(s) for Pralidoxime Chloride, MMT shall furnish a copy of said agreement to the Contracting Officer. To determine the adjusted Direct Material cost of Pralidoxime Chloride at each quantity/price tier for Mark I Kits and Pralidoxime for each contract year, the newly negotiated price for Pralidoxime Chloride applicable to each contract year shall be entered on a per gram basis into the schedule entitled "Effect of Pralidoxime Chloride Costs." For each quantity/price tier for Mark I Kits and Pralidoxime for each contract year, the increase or decrease (carried or rounded to five decimal places) in Direct Material cost of Pralidoxime Chloride from that included in the contract prices (as shown on the attached schedule entitled "Material Cost") will be calculated. That increase or decrease will then be added to or subtracted from (as appropriate) the contract award total unit price (carried or rounded to five decimal places) for each quantity/price tier for Mark I Kits and Pralidoxime for each contract year. The resulting unit prices will then be rounded to the nearest cent to establish the adjusted contract unit prices (e) Once the adjusted contract prices are determined, the Contracting Officer shall issue a modification adjusting the unit prices for all three contract years for Mark I Kits and Pralidoxime for CLIN 0004 (both up to and beyond 2.4 million equivalent Autoinjectors), CLIN 0005, and Prestock. The modification shall include the adjusted unit prices and all calculations used to determine the adjusted unit prices. All delivery orders issued on or after the date of this adjustment modification shall be priced at the adjusted contract unit prices. Payment on this contract shall be at the contract award prices pending issuance of the adjustment modification. The modification establishing the adjusted contract unit prices or a subsequent modification shall (as appropriate) increase or reduce payment under this contract for all delivery orders of Mark I Kits and Pralidoxime issued prior to the effective date of the adjustment modification. Price adjustment will not apply to any quantities under this contract that have already been shipped. End of clause - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 18 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- Combopen ----------------------------------------------------------- 1 thru 500,000 750,000 1,000,000 over Quantity 499,999 749,999 999,999 1,200,000 1,200,000 ----------------------------------------------------------- Base Year Costs - --------------- Other Material 2.48052 2.34552 2.28053 2.23845 2.23845 Pral. Chlor Cost 0.48011 0.46534 0.45795 0.45426 0.45426 ------- ------- ------- ------- ------- Total DM 2.96063 2.81086 2.73848 2.69271 2.69271 ======= ======= ======= ======= ======= Option 1 Costs - -------------- Other Material 2.56734 2.42761 2.36035 2.31679 2.31679 Pral. Chlor Cost 0.48011 0.46534 0.45795 0.45426 0.45426 ------- ------- ------- ------- ------- Total DM 3.04745 2.89295 2.81830 2.77105 2.77105 ======= ======= ======= ======= ======= Option 2 Costs - -------------- Other Material 2.65720 2.51258 2.44296 2.39788 2.39788 Pral. Chlor Cost 0.48011 0.46534 0.45795 0.45426 0.45426 ------- ------- ------- ------- ------- Total DM 3.13731 2.97792 2.90091 2.85214 2.85214 ======= ======= ======= ======= ======= - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 19 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- Mark I ----------------------------------------------------------- 1 thru 500,000 750,000 1,000,000 Over Quantity 499,999 749,999 999,999 1,200,000 1,200,000 ----------------------------------------------------------- Base Year Costs - --------------- Other Material 4.13684 3.95693 3.84692 3.78005 3.78005 Pral. Chlor Cost 0.48011 0.46534 0.45795 0.45426 0.45426 ------- ------- ------- ------- ------- Total DM 4.61695 4.42227 4.30487 4.23431 4.23431 ======= ======= ======= ======= ======= Option 1 Costs - -------------- Other Material 4.28163 4.09542 3.98156 3.91235 3.91235 Pral. Chlor Cost 0.48011 0.46534 0.45795 0.45426 0.45426 ------- ------- ------- ------- ------- Total DM 4.76174 4.56076 4.43951 4.36661 4.36661 ======= ======= ======= ======= ======= Option 2 Costs - -------------- Other Material 4.43149 4.23876 4.12092 4.04928 4.04928 Pral. Chlor Cost 0.48011 0.46534 0.45795 0.45426 0.45426 ------- ------- ------- ------- ------- Total DM 4.91160 4.70410 4.57887 4.50354 4.50354 ======= ======= ======= ======= ======= - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 19 A of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - --------------------------------------------------------------------------------
1 to 500000 to 750000 to 1000000 to OVER 499999 units 749999 units 999999 units 1200000 units 1200000 units ------------ ------------ ------------ ------------- ------------- Pral. Chlor Requirements 278,832 450,421 664,907 879,394 1,055,273 Pral. Chlor Unit Price [0.51656] 0.51656 0.51656 0.51656 0.51656 ---------- ---------- ---------- ------------ ------------ Total Pral Chlor per Production Batch 144,033.46 232,669.47 343,464.36 454,259.76 545,111.82 Divided by number of units produced 300,000.00 500,000.00 750,000.00 1,000,000.00 1,200,000.00 ---------- ---------- ---------- ------------ ------------ Pral. Chlor price per product unit 0.48011 0.46534 0.45795 0.45426 0.45426 ========== ========== ========== ============ ============
- -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 20 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- PROGRESS PAYMENTS If Mobilization Surge is officially declared via a Delivery Order from DSCP for products under CLIN 0005 for immediate delivery pursuant to the Mobilization Surge provisions of this contract, Progress Payments are authorized for only Direct Material costs incurred in the performance of the Mobilization Surge, by Meridian Medical Technology, and supported by vendor invoices. Progress Payments will cease upon written notification to Meridian Medical Technology that the Mobilization Surge is ended. The following additional clauses are hereby incorporated by reference and apply only to Direct Material costs incurred for CLIN 0005 end items ordered pursuant to the Mobilization Surge provisions of this contract: 52.232-16 Progress Payments (Jul 1991) ALTERNATE 1 (Aug 1987) 252.232-7004 DOD Progress Payment Rates (Feb 1996) DFARS The following clauses are also included by reference: 52.233-1 Disputes (Oct 1995) ALTERNATE 1 (Dec 1991) 52.215-17 Waiver of Facilities Capital Cost of Money (Oct 1997) Funds from this contract pay the salary expenses of most of Meridian's NAA labor force and a significant portion of NAA plant overhead. Therefore, for the duration of this contract and unless otherwise authorized in writing by the DSCP Contracting Officer, the contractor shall not accept orders for autoinjectors for the US military unless those orders are placed by DSCP under this contract. If contractor has any non-DoD federal agency sales for the items covered under this contract, then the price charged to that agency (s) shall not be less than two (2) times the price established in Line Item 0004. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 21 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- Base Maintenance (Line Item 0001) Page 1 of 5 I. This is a supply/service contract to provide labor and services as necessary and directed by the Government and in accordance with the enclosed Statement of Work and the DoD Industrial Preparedness Program Production Planning Schedule. II. The Contractor agrees from the effective date of contract to perform the following: a. Maintain existing facilities and equipment and technical expertise in a state of readiness for immediate production start up to achieve the Government's current mobilization requirements, as set forth in the Contractor's Industrial Preparedness Planning Agreement (DD Form 1519) for the following products: NSN: 6505-01-174-9919 Antidote Kit, Nerve Agent, Mark I NSN: 6505-01-125-3248 Pralidoxime Chloride Injection, Automatic, 300 mg per ml, 2 ml NSN: 6505-00-926-9083 Atropine Injection, Automatic, 2 mg NSN: 6505-01-274-0951 Diazepam Automatic Injector, USP, 10 mg NSN: 6505-01-302-5530 Morphine Sulfate Injector, 10 Mg per 0.7 Ml b. Maintain in readiness the following tasks, functions and activities to produce the above cited products: 1) An aseptic sterile production facility in accordance with the Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder including FDA's current good manufacturing practices. 2) A cleaning and preparation of piece parts function required for assembly as relates to aseptic sterilization production. 3) A product formulation department consistent with the products processing requirements and to exercise the formulation process for the Atropine, Pralidoxime, Diazepam, and Morphine Injection solutions on a periodic basis that validates the capability to produce the products in compliance with all regulatory, technical and quality assurance specifications; the current technical packages for the above cited products, as of the effective date of this contract, are incorporated into the solicitation. 4) A clean room and product filling operation. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 22 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- Base Maintenance (Line Item 0001) Page 2 of 5 5) An inspection, assembly, labeling and packaging capability to effectively meet the Government's mobilization requirements. 6) A warehouse facility to insure adequate control and accountability of new supplies and materials during the receipt, storage and issue phases and of components and fully assembled injectors being stored/rotated for the Government. 7) A quality assurance and FDA regulatory compliance function to insure compliance with all quality and performance requirements of the applicable specifications and the Government's "shelf life enhancement" program for all products. 8) A cost accounting system in accordance with generally accepted accounting principles that will be acceptable to the Government to insure trackability of contractor costs. 9) A qualified management team, supervisory staff and administrative personnel to insure effective and efficient operation of the Contractor's facilities. 10) An acceptable training program to insure that qualified skill levels are retained in order to meet the Government's mobilization requirements. 11) Sub-contractor business relationships to insure that the necessary sub-contractor's production capability, capacity, technical expertise and management commitment will meet the Contractor's Industrial Preparedness Planning Agreement provisions. c. Dedicate those best efforts to maintain a qualified sub-contractor component base for the manufacture of components and sub-components needed to produce the end items. d. In the event that prime contractor-owned component molds, tooling and assembly molds, pre-positioned at various subcontractor plants, require replacement, the Contractor will replace or issue a contract to replace these items at no additional cost to the Government. Furthermore, the Contractor agrees that in the event of a third party or other said agreements, the Contractor, or the liable third party, agrees to replace, repair, or refurbish all Contractor owned molds, tooling and assembly molds prepositioned at various sub-contractor's plants at no additional cost to the Government. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 23 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- Base Maintenance (Line Item 0001) Page 3 of 5 e. In the course of performing said labor and services in accordance with Statement of Work, the Contractor will produce an end item product listed as line item 0004 of the schedule to the services performed. The Government recognizes these incidental products to be, but not limited to, the following: NSN: 6505-01-174-9919 Antidote Kit, Nerve Agent, Mark I NSN: 6505-01-125-3248 Pralidoxime Chloride Injection, Automatic, 300 mg per ml, 2 ml NSN: 6505-00-926-9083 Atropine Injection, Automatic, 2 mg NSN: 6505-01-274-0951 Diazepam Automatic Injector, USP, 10 mg NSN: 6505-01-302-5530 Morphine Sulfate Injector, 10 Mg per 0.7 Ml f. The Contractor agrees to advise the Government through the Contracting Officer of changes which may or will adversely impact production capability to meet the production rate and schedule requirements of the current mobilization planning agreement. The Contractor shall advise the Contracting Officer of changes required to the agreement and/or proposals which may favorably impact the Government and/or the contractor from achieving mobilization production delivery requirements. g. The Contractor also agrees to enter into future yearly Industrial Preparedness Agreements with the Government covering the above cited products for the duration of this contract. III. Required standards of workmanship: a. Unless otherwise specifically provided in this contract, the quality of all services rendered hereunder shall conform to the highest standards in the relevant profession, trade or field of endeavor. All services shall be rendered or supervised directly by individuals fully qualified in the relevant profession, trade or field, and holding any licenses required by law. b. The Defense Supply Center Philadelphia (DSCP) reserves the option to conduct in-process reviews (IPRs) at the Contractor's facility. These must be scheduled by DSCP personnel at least seven (7) days in advance of the IPR. Requests for IPRs by any other personnel will be referred to DSCP. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 24 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- Base Maintenance (Line Item 0001) Page 4 of 5 Packaging and Marking --------------------- 1. Marking of Reports All reports shall prominently show on the cover of the report: a. Name and business address of the contractor. b. Contract number. 2. Preparation for Delivery (Incidental Product - End Item) Preparation for delivery shall be in accordance with Section 5 of the end item specification, the latest edition at time of manufacture, required by Section C of the contract. Inspection and Acceptance ------------------------- 1. Inspection of Services Definition "Services", as used in this clause, includes services performed, workmanship, and material furnished or used in performing services. 2. Inspection and Acceptance a. Inspection and acceptance of services to be furnished hereunder shall be made, upon completion of the services, by DCMC Saint Louis. Inspection and acceptance of material shall be made by FDA Kansas City. b. The Contractor shall provide and maintain an inspection system acceptable to the Government covering services under this contract in accordance with all Federal Food Drug and Cosmetic Act and regulations. Complete records of all inspection work performed by the Contractor shall be maintained and made available to the Government during contract performance and for as long afterwards as the contract requires. c. The Government has the right to inspect and test all services called for by the contract, to the extent practicable at all places and times during the term of the contract. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 25 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- Base Maintenance (Line Item 0001) Page 5 of 5 The Government shall perform inspections and tests in a manner that will not unduly delay the work. d. If any of the services performed do not conform with contract requirements, the Government may require the Contractor to perform the services again in conformity with the contract requirements, for no additional fee. When the defects in services cannot be corrected by re-performance, the Government may (1) require the Contractor to take necessary action to ensure that future performance conforms to contract requirements, and (2) reduce any fee payable under the contract to reflect the reduced value of the services performed. e. If the Contractor fails to promptly perform the services again or take the necessary actions to ensure future performance in conformity with the contract requirements, the Government may (1) by contract or otherwise, perform the services and reduce any fee payable by an amount that is equitable under the circumstances or, (2) terminate the contract for default. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 26 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003) Page 1 of 9 1. Background The Army has established several programs to centrally manage Medical Chemical Defense Materiel (MCDM). USAMMA has been designated as the Program Manager for these programs. 2. Description of Work Required Manufacturing of new MCDM and the storage of materiel (both new and extended materiel). The storage requirement encompasses receipt processing, storage (i.e. vault, refrigeration, controlled room temp), record keeping, Care of Supplies in Storage (COSIS), remarking, assembly, packing, and shipment. A. The Army intends to store: (1) A maximum of 3 DRBs of new materiel (not extended materiel). Each DRB consists of 15,000 Mark I Kits, 5,000 CANA and 1,000 packages of PBT. (2) 1 DRB of extended materiel that has been remarked. (3) MCDM to support the Unit Deployment Package (UDP) Potency and Dated (P&D) Program. The items under this program are the Atropine, Diazepam, and Pralidoxime Auto-injectors. This material will be remarked as it is extended. (4) MCDM in the Shelf Life Extension Program (SLEP). This materiel will only be remarked as required. B. The following NSNs apply to the MCDM covered by this SOW: (1) Antidote Kit Nerve Agent, (Mark I Kits, NAAK) NSN 6505-01-174-9919 (consists of one Atropine and one Pralidoxime Chloride Injector) (2) Diazepam Injector (CANA) NSN 6505-01-274-0951 (3) Pyridostigmine Bromide Tablets (PBT or NAPP) NSN 6505-01-178-7903 (consisting of 210 tablets per Package) - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 27 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003) Page 2 of 9 (4) Atropine Autoinjector NSN 6505-00-926-9083 (5) Pralidoxime Chloride Injection (2-Pam) NSN 6505-01-125-3248 (6) Morphine Sulfate Injector, 10 Mg per 0.7 Ml NSN 6505-01-302-5530 3. Manufacturing Based on receipt of funded Army requisitions passed through the Defense Supply Center Philadelphia (DSCP), the contractor shall produce the required materiel (Delivery Orders for this material will be issued under Line Item 0004). Material required to fill regular requisitions shall be shipped to a DLA depot specified in the order. Materiel manufactured for the UDP P&D Program will remain at the contractor's facility. DRB materiel will either be shipped to the activity, DLA depot or retained at the contractor's facility as part of the three DRBs of new materiel. A maximum of three different lot numbers can be provided for each 15,000 Mark I Kits and two different lot numbers can be provided for each 5,000 CANA (1 DRB's worth). Ideally only one lot number would be shipped for each DRB. If the contractor must produce additional lots of Mark I Kits and CANA to satisfy this requirement, the Government has no responsibility or liability to procure these additional quantities. Any deviation from this requirement for minimum lots must be approved in writing by USAMMA, MCMR-MMS-M. Work must be consistent with good business practices and government regulations. After 90 days of contract award, or implementation of an option to the contract, the quantity of Army/OTSG MCMD reflected in USAMMA's accountable records (as reflected in the MCDM database) must match the quantity of MCDM physically on hand (in inventory) at the contractor's site. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 28 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003) Page 3 of 9 4. Storage of Army Owned MCDM A. Receipt Processing (1) In addition to the MCDM currently on-hand at the contractor's facility, the contractor will accept annually the below quantities. Quarterly shipments will be on average 1/4 of the yearly amount stated. (a) 600,000 Mark I Kits (NSN 6505-01-174-9919) and/or stand alone autoinjectors of Atropine and 2-Pam (NSNs 6505-00-926-9083 and 6505-01-125-3248). (b) 200,000 CANA (NSN 6505-01-274-0951). However, due to limited secure storage the maximum number of CANA that can be stored is approximately 576,000 EA. (c) 40,000 Packages of PBT (NSN 6505-01-178-7903). However, due to limited refrigerated storage the maximum number of PBT that can be stored is approximately 109,560 Packages. (2) Materiel will be shipped to the contractor in quarterly shipments to be placed in the Industrial Base Maintenance Contract (IBMC) for the life of the contract. USAMMA, MCMR-MMO, will provide 30 days advance notification to the contractor of expected shipments of materiel. Contractor has 30 working days to inventory incoming shipments. Contractor will request extension from USAMMA (MCMR-MMO) if additional time is required. (3) If necessary, substitution may be made for the shipment and quantity of one item for another item. For example, in lieu of shipping 10,000 of PBT during a quarterly shipment, the Army can substitute 10,000 CANA, Mark Is, Atropine or 2-Pam. (4) Army will request that activities not send loose materiel mixed together to the contractor. In the event the contractor receives loose shipments, the contractor will place the materiel on a shelf, and notify USAMMA, MCMR-MMO. During the quarterly site visit, USAMMA, MCMR-MMO, will provide appropriate guidance for the loose materiel. (5) Contractor will forward USAMMA, MCMR-MMO, copies of any DD Forms 1348-1 received with shipments. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 29 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003) Page 4 of 9 B. Storage (1) Mark I Kits, Atropine and 2-Pam requires room temperature storage with approximately 59-86 degrees Fahrenheit or 15-30 degrees Celsius and should not be allowed to freeze. Mark I Kits received (above the requirements for the 3 new and 1 extended DRB) will be broken down by separate components. Usable pouches and clips will be stored in case the Mark I Kits would need to be assembled from extended materiel to support a contingency. Quantity of pouches and clips should not exceed the number of individual extended Atropine/2-PAM on hand. (2) CANA requires special storage due to its note Q rating (safekeeping in a safe or vault) and temperature control of 59-86 degrees Fahrenheit or 15-30 degrees Celsius. (3) PBT requires refrigeration between 35-46 degrees Fahrenheit or 2-8 degrees Celsius. Moreover, PBT cannot be outside of refrigerated conditions for more than a cumulative period of six months. Therefore, the contractor shall assure this item is continuously stored in refrigeration except when USAMMA directs the assembly/shipment of materiel. Note: The contractor will not be responsible for the referenced cumulative period, since the material has been in the possession of others prior to arriving at the contractor's location. (4) All MCMD will be segregated by lot number and activity until inventory is verified by MCMR-MMO. Lots will be stored in a manner that will ensure materiel from one lot can not be confused with any other lot in the container. Lot integrity will be maintained at all times following MCMR-MMO inspection. (5) The new DRB materiel will be kept separate from the extended DRB materiel, other material being stored at the contractor's location and the UDP P&D materiel. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 30 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003) Page 5 of 9 (6) Contractor has elected not to store the DRB material in the TRI-Walls. TRI-Walls currently on hand shall be shipped to: SR USAMMA Bldg 348 103 Guidance Road Goose Creek, SC 29445-5000 DODAAC: W90KEW C. Record Keeping Accurate data from receipt processing will be loaded into the contractor's ACCESS/EXCEL database within 15 days after completion of the inspection and inventory. (1) Contractor will maintain a database of all Army owned materiel stored. The database will reflect the NSN, nomenclature, manufacturer, quantity, lot number, activity who shipped the materiel, expiration date, an indicator if materiel has been extended, ship date, and receipt date. (2) Contractor shall provide a copy of the ACCESS/EXCEL database on a quarterly basis to USAMMA (both MCMR-MMO and MCMR-MMS-M) via electronic mail using existing software. Updates should be provided after the data has been modified based on the quarterly shipments. (3) USAMMA will provide the contractor copies of the FDA reports for materiel in the SLEP. Codes on the report will indicate if the materiel has been extended or failed testing. (4) USAMMA will furnish the contractor a copy of the EXCEL database on a quarterly basis. (5) USAMMA will provide lot numbers and quantity of materiel to be sent for destruction. Product will be scheduled and shipped for destruction within 90 days after materiel failed FDA testing. If only a small quantity has failed (i.e., less than 1,000 units total), this materiel may be held and accumulated until an economical quantity is available for destruction. Shipment should occur within 30 days of verification by the contractor that the materiel has been staged and quantities and lot numbers verified. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 31 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003) Page 6 of 9 (a) USAMMA will be fully responsible for all costs associated with the destruction of Army owned MCDM. Unless, the contractor reclaims the components of an injector (with the exception of the Mark I pouches and clips), the contractor shall be responsible for the disposal of the remaining components and active ingredient. Contractor will provide USAMMA, MCMR-MMO documentation citing that the active ingredient was destroyed IAW the local, state and federal regulations. (b) USAMMA, MCMR-MMO will be responsible for funding and coordinating the shipments for destruction and for obtaining a Certificate of Destruction. MCMR-MMO will provide the contractor with a copy of the Certificate of Destruction for Controlled Substances upon destruction of these items. D. Government Visits The contractor shall agree to allow USAMMA's Strategic Capabilities and Materiel Directorate (MCMR-MMS-M) and/or the Operations and Support (MCMR-MMO) COTRs to inspect, inventory, and audit all Government owned property at any time (at least quarterly) throughout the period of the contract. These inspections will be directed by the Contracting Officer, but may be requested by the COTR. If during such inspection (audit) the on-hand quantity is less than indicated in the MCDM database, USAMMA will select one of two replacement alternatives: (a) The contractor replaces in kind all shortages within 20 weeks. (b) The contractor reimburses the Government in full within 20 days. USAMMA retains the right to choose the replacement alternative based upon the needs of the Government at the time. E. Over-label (1) The DRB of extended materiel shall be remarked with the latest expiration date, i.e. month/year as instructed by the COTR. Lot numbers within the DRB will be limited to a maximum of 3 for the Mark I Kits and 2 for the CANA. Ideally, only one lot number will be allocated for the extended DRB. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 32 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003) Page 7 of 9 (2) The MCDM for the UDP P&D program will require over-labeling with the latest expiration date, i.e. month/year. (3) Other MCDM will be over-labeled on an as required basis. 30 days advance notice will be provided. (4) Due to the potential recall requirements, when over-labeling, the contractor will at no time combine separate lots to make larger lots. (5) The over-label will always contain the original NSN, Manufacturer, and lot number. The only change to the over-label will be the new expiration date. Whenever any MCDM is over-labeled, USAMMA will be immediately notified with the actual number of assets of extended/issuable material. This shall take into account the units which are held for QC, not to exceed 5 per lot, and the numbers of units lost as rejects. (6) Only lot sizes of 1,000 (+) units will be considered candidates for over-labeling. Contractor will first over-label lots which are 5,000 (+) units. Once lot sizes of 5,000 (+) have been over-labeled, contractor will over-label smaller lots. (7) Contractor will only over-label MCDM which contractor has manufactured. F. Assembly/Packing/Shipping (1) The DRB and UDP P&D MCDM will need to be assembled, packed and received at a consolidation point within 72 hours after notification during an contingency situation. This includes weekends. USAMMA (either MCMR-MMO or MCMR-MMS-M) will provide the quantity, type, ship to destination, and other applicable details. Transportation funding for the DRB shipment would be provided by USAMMA, MCMR-MMS-M. Transportation funding for the UDP P&D materiel will be provided by DSCP. Packing, packaging, and storage will be to a degree of protection that precludes loss, damage, or destruction to containers and contents under normal transportation. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 33 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003) Page 8 of 9 (2) Assembly steps will ensure that only those lots and quantities required are packed and prepared for shipment. Lot integrity will be maintained at all times. Under no circumstances will MCDM materiel from different lot be placed loosely in containers and shipped. If more than one lot is placed in a container, lots will be packaged so as to ensure materiel from one lot could not be confused with any other lot in the container. (3) Assembly/packing and shipment of MCDM (including UDP P&D material) in support of non-emergency situations will be accomplished within 10 calendar days after receipt of request. (4) Shipment will occur by Government Bill of Lading (GBL) and will conform to applicable Defense Transportation System (DTS) and commercial carrier rules and regulations. Materiel shall be packaged in accordance with (IAW) commercial practices, and intermediate package(s) and shipping container(s) shall be marked IAW MIL-STD-129. Contractor shall be a Procedure A Contractor. (5) The contractor shall coordinate and make arrangements with commercial firms specializing in overnight or rapid delivery, as well as the Defense Transportation System (DTS), for the timely shipment of DRB and MCDM within the United States. (6) Shipment of materiel to the FDA for shelf life testing will be processed for shipment within 10 days from receipt of request from USAMMA, MCMR-MMO. (7) The MCDM that requires over-labeling before shipment will be processed and shipped within 60 days after receipt of request. G. Testing USAMMA, MCMR-MMS-M, will test the contractor's ability to provide MCDM to a designated consolidation point within 72 hours. Such tests could range from simply a paper exercise to the packing and shipment of actual MCMD to selected locations anywhere in the world. USAMMA plans to perform these drills twice a year. Further, at the direction of USAMMA, MCMR-MMS-M, DTS will also be used to ship MCDM. - -------------------------------------------------------------------------------- CONTINUATION SHEET: SP0200-99D-0007 Page 34 of 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTOR: MERIDIAN MEDICAL TECHNOLOGIES INC. - -------------------------------------------------------------------------------- STATEMENT OF WORK ----------------- LOGISTICS MAINTENANCE AND DRB PROGRAM (LINE ITEMS 0002 AND 0003) Page 9 of 9 H. Contractor's Documentation Requirements. Within 30 days of execution of the agreement to which this Statement of Work is applicable, the Program Manager for these programs as defined in section 1 of this Statement of Work, must provide to Contractor coordination documentation reflecting FDA's approval process for the Shelf-Life Extension Program, to include, but not limited to, o a Memorandum of Understanding or any other formal agreement among the parties o product testing procedures and guidelines Contractor will be provided with copies of any updates or changes to the referenced documentation. USAMMA shall continue to provide copies of the documentation received from FDA regarding extended product as stated in paragraph 4.C.(3) of this Statement of Work. EX-10.34 3 CHANGE OF CONTROL AGREEMENT Exhibit 10.34 CHANGE OF CONTROL AGREEMENT --------------------------- AGREEMENT made as of this _____th day of October, 1998, between Meridian Medical Technologies, Inc., a Delaware corporation (hereinafter "Company"), and _______________(hereinafter "Executive"). WHEREAS, the Company wishes to assure the continued availability of the Executive's services and to create an environment which will promote the Executive's giving impartial and objective advice in circumstances resulting from the possibility of a Change of Control (as herein defined) of the Company; and WHEREAS, the Company and the Executive wish to provide the Executive with financial protection in the event significant changes in the Executive's employment status occur following a Change of Control of the Company. NOW, THEREFORE, the Company and the Executive, in consideration of the terms and conditions set forth herein and other valuable consideration, receipt and sufficiency of which are hereby acknowledged, mutually covenant and agree as follows: 1. Term. ---- The term of this Agreement shall commence on the date hereof and terminate on October 1, 2001 unless the Executive's employment with the Company or a subsidiary is sooner terminated prior to a Change of Control in which case it will terminate upon the termination of the Executive's employment (the "Term"), provided, however, if a Change of Control occurs prior to October 1, 2001, then this Agreement will terminate on the second anniversary of the Change of Control. 2. Payments Upon Change of Control and Termination Event. ----------------------------------------------------- The Company shall make payments to the Executive as provided for in paragraph 4 hereof upon the occurrence of both a Change of Control of the Company and a Termination Event, as such terms are defined in paragraph 3. 3. Definitions. ----------- (a) "Base Salary" shall mean an amount equal to the Executive's highest annual base salary after the date hereof and preceding a Termination Event. (b) "Cause" means (i) the Executive's failure or refusal to perform satisfactorily any duties reasonably required of the Executive by the Company (other than by reason of disability), after reasonable demand for substantial performance is delivered by the Company specifically identifying the manner in which the Company believes the Executive has not performed his duties; (ii) the commission by the Executive of a felony or the perpetration by the Executive of a dishonest act against or breach of fiduciary duty toward the Company or any of its customers, employees, or vendors; or (iii) any willful act or omission by the Executive which is injurious in any material respect to the financial condition or business reputation of the Company. For purposes of this definition, no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his act or omission was in the best interests of the Company. (c) A "Change of Control" shall be deemed to have occurred if any of the following have occurred prior to the expiration of the Term: (i) any person or group of persons (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended ("1934 Act")) together with its affiliates, excluding employee benefit plans of the Company, is or becomes, directly or indirectly, the "beneficial owner" (as defined in Rule 13d-3 promulgated under the 1934 Act) of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (ii) as a result of a proxy contest, individuals who prior to the conclusion thereof constituted the Board of Directors of the Company (the "Board") (including for this purpose any new director whose election or nomination for election by the Company's shareholders in connection with such proxy contest was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were directors prior to such proxy contest) cease to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); (iii) during any period of twenty-four consecutive months, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); (iv) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation or entity regardless of which entity is the survivor, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to continuing to represent (either by remaining outstanding or being converted into voting securities of the surviving entity) at least 60% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (v) the stockholders of the Company approve a plan of complete liquidation or winding-up of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or (vi) any other event which the Board of Directors determines should constitute a Change of Control. -2- (d) A "Termination Event" shall be deemed to have occurred if, within the twenty-four (24) month period following a Change of Control, (1) the Executive's employment with Company is terminated by the Company without Cause, other than by reason of death, disability or retirement; or (2) the Executive voluntarily terminates his employment with the Company within 30 days after the occurrence of any of the following events: (i) the assignment to the Executive of any duties inconsistent in any material respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities immediately prior to the Change of Control, or any other action by the Company which results in a diminution in any material respect in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof, as the same may be increased from time to time; (iii) the Company's requiring the Executive to be based at any office or location that is more than fifty (50) miles from the Executive's office or location immediately prior to the Change of Control; (iv) the failure by the Company (i) to continue in effect any bonus, stock option, or other cash or equity-based incentive plan in which the Executive participates immediately prior to a Change in Control that is material to the Executive's total compensation, unless an arrangement not materially less favorable to the Executive (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or (ii) to continue the Executive's participation in such plan (or in such substitute or alternative plan) on a basis at least as favorable, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as existed immediately prior to the Change of Control; or (v) the failure by the Company to continue to provide the Executive with benefits that in the aggregate are not materially less favorable to the Executive than those received by the Executive under the Company's pension (including, but not limited to, tax-qualified plans), life insurance, health, accident, disability or other welfare plans in which the Executive was participating, at costs not materially greater than to those paid by the Executive, immediately prior to the Change of Control. -3- 1. Cash Payments. ------------- In the event of a Termination Event, the Company agrees to continue to pay to the Executive, the Executive's Base Salary for a period of twelve (12) months. 2. Death of Executive. ------------------ If the Executive dies before receiving all payments payable to him under paragraph 4 of this Agreement, the Company shall continue to make payments pursuant to paragraph 4 hereof to the Executive's spouse, or if the Executive leaves no spouse, to the estate of the Executive. 3. Health and Life Insurance Benefits. ---------------------------------- The Company agrees to maintain, for a period of twelve (12) months following the date of the occurrence of a Termination Event, the Executive's eligibility for and participation in any health and life insurance plans ("Insurance Benefits"), in which the Executive was eligible to participate prior to the Termination Event and upon the same basis and cost as prior to the Termination Event, provided however, that if, for any reason, the Company is unable to continue the Executive's participation in any such plan, the Company shall cause the Executive to be eligible to participate in a substantially equivalent arrangement upon substantially the same basis and cost as prior to the Termination Event. Notwithstanding any other provision of this Agreement to the contrary, if in connection with the termination of the Executive's employment for any reason the Company is obligated by law or by contract (including any employment or severance agreement other than this Agreement) or by Company plan or policy to provide the Executive with life or health insurance after the Executive's termination (or a cash payment in lieu thereof), then any Insurance Benefits hereunder shall be reduced by the amount of any payments and similar benefits described above, as applicable. 4. No Duty to Seek Other Employment. -------------------------------- Amounts payable to the Executive under this Agreement shall not be reduced by the amount of any compensation received by the Executive from any other employer or source, and the Executive shall not be under any obligation to seek other employment or gainful pursuit as a result of this Agreement. 5. Reduction of Payments. --------------------- Notwithstanding any other provision of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change of Control or the termination of the Executive's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement (all such payments and benefits, including the payments and benefits provided for hereunder, being hereinafter called "Total Payments") would not be deductible (in whole or part), by the Company, an affiliate or other person or entity making such payment or providing such benefit as a result of section 280G of the Internal Revenue Code of 1986, as amended, -4- then, to the extent necessary to make such portion of the Total Payments deductible, (A) the cash payments provided for by paragraph 4 hereof shall first be reduced (if necessary, to zero), and (B) the benefits provided for by paragraph 7 hereof shall next be reduced. For purposes of this limitation, no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived by written notice to the Company prior to the date of payment shall be taken into account. All determinations required to be made under the provisions of this paragraph 8 hereof shall be made by tax counsel selected by the Company's independent auditors and reasonably acceptable to the Executive. 6. Payment of Compensation to Termination Date. ------------------------------------------- In addition to any other payments payable to the Executive hereunder, the Company shall pay the Executive full compensation and all other amounts and benefits to which the Executive is entitled through the termination of his employment. 7. No Right to Continued Employment. -------------------------------- This Agreement shall not confer upon the Executive any right with respect to continuance of employment by the Company or any subsidiary, nor shall it interfere in any way with the right of his employer to terminate his employment at any time. No payments hereunder shall be required except upon the occurrence of both a Change of Control of the Company and a Termination Event. Thus, except as specifically provided herein, no payments hereunder shall be made on account of termination of the Executive's employment (i) upon the Executive's death, disability or retirement, (ii) by the Company with or without cause or (iii) upon the Executive's voluntary termination. 8. Waiver of Breach. ---------------- Waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed as a waiver by such party of any subsequent breach hereof. 9. Invalidity. ---------- The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision, which shall remain in full force and effect. 10. Entire Agreement; Written Modification; Termination. --------------------------------------------------- This Agreement contains the entire agreement between the parties concerning the matters covered hereby. No modification, amendment or waiver of any provision hereof shall be effective unless in writing specifically referring hereto and signed by the party against whom such provision as modified or amended or such waiver is sought to be enforced. This Agreement shall terminate as of the time the Company makes the final payment which it may be obligated to pay hereunder or provide the final benefit which it -5- may be obligated to provide hereunder. This Agreement supersedes and replaces any earlier agreement on the subject matter hereof. 11. Counterparts. ------------ This Agreement may be made and executed in counterparts, each of which may be considered an original for all purposes. 12. Governing Law. -------------- This Agreement is governed by and is to be construed and enforced in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, the undersigned parties have executed or caused to be executed this Agreement as of the day and year first above written. MERIDIAN MEDICAL TECHNOLOGIES, INC. By: ------------------------------------ "EXECUTIVE" ------------------------------------ -6- EX-10.35 4 SIXTH AMENDMENT TO CREDIT AGREEMENT Exhibit 10.35 SIXTH AMENDMENT TO CREDIT AGREEMENT ----------------------------------- THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of November 6, 1998, among, MERIDIAN MEDICAL TECHNOLOGIES, INC. (as successor by merger to Brunswick Biomedical Corporation) a Delaware corporation (the "Borrower"), and ING (U.S.) CAPITAL CORPORATION, a Delaware corporation ("ING"), constituting, the sole Lender under the Credit Agreement referenced below (together with its successors and assigns, the "Lenders"), and ING in its capacity as Agent for the Lenders. WITNESSETH: ----------- RECITALS: A. The Borrower, the Lenders and the Agent have entered into a certain Credit Agreement, dated as of April 15, 1996 (as amended prior to the date hereof, the "Credit Agreement"); capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Credit Agreement. B. The Borrower has requested an amendment to the Credit Agreement to increase the Revolving Credit Commitment from $6,500,000 to $8,500,000 and to reflect a change in the financial covenants, and the Lenders have agreed to so amend the Credit Agreement on the terms and conditions set forth herein. NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Amendment to Section 1.1. Section 1.1 of the Credit Agreement is hereby amended by replacing the definition of "Revolving Loan Commitment Amount" in its entirety with the following: "Revolving, Loan Commitment Amount" means (i) for the period commencing November 6,1998 and ending, October 31, 1999, $8,500,000, and (ii) for the period commencing November 1, 1999 and ending on the Revolving Loan Commitment Termination Date, $6,500,000. SECTION 2. Amendment to Section 1.1. Section 1.1I of the Credit Agreement is hereby amended by replacing the definition of "Eligible Inventory" in its entirety with the following: "Eligible Inventory" means the lower of cost or market value of the Inventory of the Borrower and its Subsidiaries, provided that no Inventory shall be deemed eligible if: (a) any warranty or representation contained in this Agreement or any of the other Loan Documents applicable either to Inventory in general or to any specific Inventory has been breached in any material respect with respect to such Inventory; (b) it is neither (i) located at one of the places of business of the Borrower or its Subsidiary listed in the Perfection Certificate delivered to the Agent on November 20, 1996 by the Borrower in connection with the Security Agreement or in a jurisdiction where, if such location is in the United States, all necessary UCC filings have been made to perfect the security interest of the Agent under the Security Agreement in such Inventory and, if located in the United Kingdom or the Republic of Ireland, all actions and filings shall have been taken or made such that the Agent and the Lenders shall have a perfected, first-priority security interest (or the equivalent thereof) in such Inventory under the laws of such jurisdiction, nor (ii) located at such other place of business which is reported to the Agent pursuant to Section 4(a) of the Security Agreement, which the Agent agrees in writing is an acceptable location for Eligible Inventory and which is located in a jurisdiction where, if such location is in the United States, all necessary UCC filings have been made to perfect the security interest of the Agent under the Security Agreement in such Inventory and, if located in the United Kingdom or the Republic of Ireland, all actions and filings shall have been taken or made such that the Agent and the Lenders shall have a perfected, first-priority security interest (or the equivalent thereof) in such Inventory under the laws of such jurisdiction, nor (iii) in transit from one place of business to another; (c) with respect to Inventory located in a public warehouse or at a leased location, the Agent has not received a bailee letter or landlord's lien waiver, in form and substance reasonably satisfactory to the Agent; (d) it is located at any outside processing location; -2- (e) [intentionally omitted]; (f) it consists of returned goods; (g) it is under consignment to or from any Person; (h) it is not of good and merchantable quality, free from defects which would materially and adversely affect the market value thereof; (i) it does not meet in all material respects all standards in all material respects imposed by any governmental authority, or any agency, department or division thereof, having regulatory authority over such Inventory; (j) it is obsolete or is otherwise currently not usable or saleable in the ordinary course of business of the Borrower and its Subsidiaries; or (k) it consists of Inventory located outside of the United States, the United Kingdom or the Republic of Ireland. SECTION 3. Amendment to Section 6.2.5. Section 6.2.5 of the Credit Agreement is hereby amended by replacing said Section in its entirety with the following: SECTION 6.2.5 Capital Expenditures. The Borrower will not, and will not permit any Subsidiary to, make or commit to make any Consolidated Capital Expenditures, except the Borrower and its Subsidiaries may make Consolidated Capital Expenditures during any fiscal year provided (x) no Default or Event of Default has occurred and is continuing, and (y) the aggregate amount of Consolidated Capital Expenditures made during such fiscal year (including the amount of Capital Lease Liabilities incurred during such Fiscal Year that in accordance to GAAP is attributable to principal) does not exceed the amount set forth below opposite such fiscal year; -3- Fiscal Year Amount ----------- ------ 1998 $3,800,000 1999 $3,000,000 2000 $5,000,000 2001 $5,000,000 2002 $5,000,000 2003 $5,000,000 provided further, however, that expenditures from insurance proceeds received upon the occurrence of a Loss which are made to replace or repair damaged or destroyed assets will not be included in the foregoing calculation. SECTION 4. Continuing Effectiveness of Credit Agreement. The Credit Agreement and each of the other Loan Documents shall remain in full force and effect in accordance with their respective terms, except as expressly amended or modified by this Amendment. SECTION 5. Cost and Expenses. The Borrower agrees to pay all out-of-pocket expenses of the Agent for the negotiation, preparation, execution and delivery of this Amendment (including fees and expenses of counsel to the Agent). SECTION 6. Effectiveness. This Amendment shall become effective upon the prior or concurrent receipt by the Agent of each of the following: (a) a copy of this Amendment, duly executed by each of the Borrower, the Agent and the Lenders; (b) an original Revolving Note, dated as of the date of this Amendment, in the principal amount of $8,500,000 (the "New Revolving Note"), issued as a substitution for the existing Revolving Note in the principal amount of $6,500,000 (the "Old Revolving Note"). Upon receipt of the New Revolving Note, Lender agrees to promptly return the Old Revolving Note to the Borrower for cancellation; (c) a certificate, dated as of the date of this Amendment, of the Secretary of the Borrower as of such date as to: (i) resolutions of its Board of Directors, then in full force and effect authorizing the execution, delivery and performance of this Amendment and the other documents -4- referenced in Section 6 of this Amendment and the related transactions contemplated hereby and thereby, and (ii) the incumbency and signatures of those of its officers authorized to act with respect to such documents, upon which certificate each Lender may conclusively rely until it shall have received further certificates of the Secretary of the Borrower canceling or amending such prior certificate; (iii) absence of changes to the Organic Documents of the Borrower since April 30, 1998; (d) a so-called "good standing" certificate with respect to the Borrower as of a recent date from the appropriate Governmental Authority of the State of its incorporation; (e) evidence of qualification of the Borrower as of a recent date to do business in each other jurisdiction in which the failure to so qualify could result in a Material Adverse Change; (f) an opinion letter, dated as of the date of this Amendment, addressed to the Agent and all Lenders, from counsel to the Borrower and its Subsidiaries in form and substance reasonably satisfactory to the Agent covering such matters as the Agent may reasonably request regarding this Amendment and the transactions contemplated hereby; (g) such other documents (certified if requested) as the Agent or the Required Lenders may reasonably request with respect to this Amendment and the other documents referenced in Section 6 of this Amendment, the transactions contemplated hereby or thereby, or any Organic Document, Contractual Obligation or Regulatory Approval; and (h) payment of the amount of all costs and expenses which have been invoiced and are payable on or prior to the date of this Amendment pursuant to Section 9.3 of the Credit Agreement. -5- SECTION 7. Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provision hereof. SECTION 8. Counterparts. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Amendment shall become effective when counterparts hereof executed on behalf of the Borrower and each Lender (or notice thereof satisfactory to the Agent) shall have been received by the Agent and notice thereof shall have been given by the Agent to the Borrower and each Lender. SECTION 9. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. SECTION 10. Successors and Assigns. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that the Borrower may not assign or transfer its rights or obligations hereunder or under the Credit Agreement except in accordance with the terms of the Credit Agreement. -6- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written. MERIDIAN MEDICAL TECHNOLOGIES, INC. By: ------------------------------- James H. Miller President [CORPORATE SEAL] ING (U.S.) CAPITAL CORPORATION, in its capacity as Agent and Lender By: ------------------------------- Michael Garvin Vice President [SIGNATURE PAGE TO SIXTH AMENDMENT] EX-10.36 5 WAIVER AND AMENDMENT AGREEMENT Exhibit 10.36 WAIVER AND AMENDMENT AGREEMENT This WAIVER AND AMENDMENT AGREEMENT is made and entered into as of June 14, 1999, by and between MERIDIAN MEDICAL TECHNOLOGIES, INC., a Delaware corporation (the "Company") and NOMURA HOLDING AMERICA INC., a Delaware corporation (together with its successors, assigns and transferees, the "Purchaser"). RECITALS -------- WHEREAS, the Company and the Purchaser have entered into that certain Note and Warrant Purchase Agreement dated as of April 30, 1998, as amended by the Waiver and Amendment dated as of October 15, 1998 (as amended, the "Purchase Agreement"); capitalized terms used herein but not defined herein shall have the meanings assigned thereto in the Purchase Agreement; WHEREAS, the Company and the Purchaser have agreed to further amend the Purchase Agreement on the terms and conditions set forth herein; NOW, THEREFORE, the Company and the Purchaser agree as follows: SECTION 1. Waiver. On the Amendment Effective Date (as defined below), the Purchaser shall be deemed to have waived, as of April 30, 1999, any violation of the Company's Financial Covenants set forth in Section 10.16 of the Purchase Agreement. Nothing herein shall be deemed to waive any violation of such covenants that arose or came into existence after the Amendment Effective Date. SECTION 2. Amendment of Warrants. The Company and the Purchaser hereby agree to amend the Warrants so that the exercise price thereof shall be the lesser of (i) $6.25 per share and (ii) the lowest five consecutive trading day average of the Company's common share price (based on last sales prices) during the six month period commencing on the date hereof (subject to adjustment as provided therein). Such amendment may take the form of a replacement warrant certificate (the "Replacement Warrant"). The Purchaser shall deliver the current warrant certificate to the Company for cancellation. SECTION 3. Covenant and Representations. (a) The Company hereby covenants that it shall use its reasonable efforts to obtain a commitment, no later than August 31, 1999, to refinance the Notes or to have a third party purchase the Notes. The Purchaser hereby agrees to cooperate in the Company's efforts to obtain such commitment. (b) The Company hereby represents and warrants to the Purchaser that (i) this Waiver and Amendment Agreement and the Replacement Warrant have been duly authorized by all necessary corporate action, (ii) this Waiver and Amendment Agreement has been, and the Replacement Warrant will be, duly executed and delivered by the Company and (iii) this Waiver and Amendment Agreement is, and the Replacement Warrant when issued, executed and delivered as contemplated herein will be, the legal, valid and binding obligations of the Company, in each case enforceable against the Company in accordance with their respective terms, except, in each of the foregoing cases, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other laws relative to or affecting the enforcement of creditors' rights generally in effect from time to time and by general principles of equity. (c) The Company hereby represents and warrants to the Purchaser that, other than the occurrence which is being waived under Section 1 above, as of the date hereof no Default or Event of Default has occurred and is continuing. SECTION 4. Continuing Effectiveness of Purchase Agreement. Except as expressly provided herein, no other provision of the Purchase Agreement is amended hereby. The Purchase Agreement, as amended hereby, is and shall continue in full force and effect in accordance with the provisions thereof, and this Waiver and Amendment Agreement shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Purchaser under the Purchase Agreement. This Waiver and Amendment Agreement shall be effective only in the specific instances and for the purpose for which it is given and shall be limited precisely as written and shall not constitute a waiver of any other provision of the Purchase Agreement or a waiver of the Purchase Agreement for any other purpose or for any other period. SECTION 5. Cost and Expenses. The Company agrees to pay all out-of-pocket expenses of the Purchaser for the negotiation, preparation, execution and delivery of this Waiver and Amendment Agreement (including fees and expenses of Stroock & Stroock & Lavan LLP, counsel to the Purchaser). SECTION 6. Effectiveness. This Waiver and Amendment Agreement shall become effective on the date (the "Amendment Effective Date") when each of the following conditions have been satisfied: (a) a copy of this Waiver and Amendment Agreement shall have been duly executed by each of the Company and the Purchaser and delivered to the Purchaser; and (b) delivery to the Purchaser of the Replacement Warrant, duly executed by the Company, against delivery of the current warrant certificate. SECTION 7. Headings. The various headings of this Waiver and Amendment Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Waiver and Amendment Agreement or any provision hereof. SECTION 8. Counterparts. This Waiver and Amendment Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall together constitute one and the same instrument. SECTION 9. References. From and after the Amendment Effective Date, the term "this Agreement" and the expressions "hereunder and "herein", and words of similar import when used in or with respect to the Purchase Agreement shall mean the Purchase Agreement as amended by this Waiver and Amendment Agreement. SECTION 10. Governing Law. THIS WAIVER AND AMENDMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Company and the Purchaser have caused this Waiver and Amendment Agreement to be executed by their duly authorized officers as of the date first written above. MERIDIAN MEDICAL TECHNOLOGIES, INC. By: \S\ James H. Miller ------------------------------------------ Its: President and Chief Executive Officer NOMURA HOLDING AMERICA, INC. By: \S\ Salvatore Gentile ------------------------------------------ Its: Attorney-in-fact EX-23.1 6 CONSENT OF INDEPENDENT AUDITORS MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-K JULY 31, 1999 Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-3 No. 333-18279; Form S-8 Nos. 33-46981, 33-34045, 33-26681 and 2-80908) and in the related prospectuses of Meridian Medical Technologies, Inc. or its predecessor, Survival Technology, Inc. of our report dated October 22, 1999, with respect to the consolidated financial statements and schedule of Meridian Medical Technologies, Inc. included in this Annual Report (Form 10-K) for the year ended July 31, 1999. /s/ Ernst & Young LLP Washington DC October 22, 1999 EX-24.0 7 POWER OF ATTORNEY Exhibit 24.0 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned directors (each, a "Signatory") of Meridian Medical Technologies, Inc., a corporation organized under the laws of the state of Delaware (the "Company"), hereby constitutes and appoints James H. Miller, Dennis O'Brien and Michael McGuire (each, an "Agent", and collectively, "Agents") or any of them, his true and lawful attorney-in-fact and agent for and in his name, place and stead, in any and all capacities, to sign the Company's Annual Report on Form 10-K for the year ended July 31, 1999 and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission. Each Signatory further grants to the Agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary, in the judgment of such Agent, to be done in connection with any such signing and filing, as full to all intents and purposes as he might or could do in person, and hereby ratifies and confirms all that said Agents, or any of them, may lawfully do or cause to be done by virtue hereof. This Power of Attorney may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which constitute but one and the same instrument. Signature Date \S\ James H. Miller ____________________________ September 28, 1999 James H. Miller \S\ Bruce M. Dresner ____________________________ September 28, 1999 Bruce M. Dresner \S\ Robert G. Foster ____________________________ September 28, 1999 Robert G. Foster \S\ E. Andrews Grinstead, III ____________________________ September 28, 1999 E. Andrews Grinstead, III \S\ David L. Lougee ____________________________ September 28, 1999 David L. Lougee EX-27 8 FDS -- FINANCIAL DATA SCHEDULE
5 0000095676 Meridian Medical Technologies, Inc. 1,000 US Dollars 12-MOS JUL-31-1999 AUG-1-1998 JUL-31-1999 1.000 505 0 10,024 (467) 6,889 20,233 21,407 (5,581) 47,751 15,860 17,582 0 0 299 11,439 47,751 40,730 40,730 (28,020) (28,020) (11,423) 0 (3,367) (1,740) 0 (1,740) 0 0 0 (1,740) (0.58) (0.58)
-----END PRIVACY-ENHANCED MESSAGE-----