MERIDIAN BIOSCIENCE INC (Form: 10-K, Received: 12/22/2003 10:35:24)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2003.


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File No. 0-14902

MERIDIAN BIOSCIENCE, INC.


Incorporated under	3471 River Hills Drive	IRS Employer ID
the Laws of Ohio	Cincinnati, Ohio 45244	No. 31-0888197
	Phone: (513) 271-3700

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, No 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, and (2) has been subject to such filing requirements for the past 90 days.


YES		NO

x		o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S–K (Section 229.405 of this Chapter) 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 or any amendment to this Form 10–K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).


YES		NO

x		o

The aggregate market value of Common Stock held by non-affiliates as of March 31, 2003 was $79,598,050 based on a closing sale price of $7.85 per share on March 31, 2003. As of December 8, 2003, 14,826,046 shares of no par value Common Stock were issued and outstanding.

Documents Incorporated by Reference

Portions of the Registrant’s Annual Report to Shareholders for the fiscal year ended September 30, 2003 furnished to the Commission pursuant to Rule 14a-3(b) as specified and portions of the Registrant’s Proxy Statement filed with the Commission for its 2004 Annual Meeting are incorporated by reference in Parts II and III as specified.

TABLE OF CONTENTS


PART I.
	ITEM 1. BUSINESS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II.
	ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MAT
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM 9A. CONTROLS AND PROCEDURES
PART III
	ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
SIGNATURES
EX-10.10
EX-10.27
EX-10.28
EX-10.29
Exhibit 13
EX-14
EX-21
EX-23
EX-31.1
EX-31.2
EX-32

MERIDIAN BIOSCIENCE, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K


		Page
Part I
Item 1	Business	2
Item 2	Properties	12
Item 3	Legal Proceedings	12
Item 4	Submission of Matters to a Vote of Security Holders	13
Part II
Item 5	Market for Registrant’s Common Equity and Related Stockholder Matters	13
Item 6	Selected Financial Data	14
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	30
Item 8	Financial Statements and Supplementary Data	31
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	56
Item 9A	Controls and Procedures	56
Part III
Item 10	Directors and Executive Officers of the Registrant	57
Item 11	Executive Compensation	57
Item 12	Security Ownership of Certain Beneficial Owners and Management	57
Item 13	Certain Relationships and Related Transactions	57
Item 14	Principal Accountant Fees and Services	57
Item 15	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	58

FORWARD LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward looking statements accompanied by meaningful cautionary statements. Except for historical information, this report contains forward-looking statements which may be identified by words such as “estimates”, “anticipates”, “projects”, “plans”, “expects”, “intends”, “believes”, “should” and similar expressions or the negative versions thereof and which also may be identified by their context. Such statements are based upon current expectations of the Company and speak only as of the date made. The Company assumes no obligation to publicly update any forward looking statements. These statements are subject to various risks, uncertainties and other factors that could cause actual results to differ, including, without limitation, the following: Meridian’s continued growth depends, in part, on its ability to introduce into the marketplace enhancements of existing products or new products that incorporate technological advances, meet customer requirements and respond to products developed by Meridian’s competition. While Meridian has introduced a number of internally-developed products, there can be no assurance that it will be successful in the future in introducing such products on a timely basis. Ongoing consolidations of reference laboratories and formation of multi-hospital alliances may cause adverse changes to pricing and distribution. Costs and difficulties in complying with laws and regulations administered by the United States Food and Drug Administration can result in unanticipated expenses and delays and interruptions to the sale of new and existing products. Changes in the relative strength or weakness of the U.S. dollar can change expected results. One of Meridian’s main growth strategies is the acquisition of companies and product lines. There can be no assurance that additional acquisitions will be consummated or that, if consummated, will be successful and the acquired businesses successfully integrated into Meridian’s operations.

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PART I.

ITEM 1.

BUSINESS

Overview

Meridian is a fully-integrated life science company whose principal businesses are (i) the development, manufacture, sale and distribution of diagnostic test kits, primarily for certain respiratory, gastrointestinal, viral and parasitic infectious diseases, (ii) the manufacture and distribution of bulk antigens and reagents used by researchers and other diagnostic manufacturers and (iii) the contract manufacture of proteins and other biologicals for use by biopharmaceutical and biotechnology companies engaged in research for new drugs and vaccines. By exploiting revenue opportunities across research, clinical diagnostics and therapeutic areas for key biologicals, Meridian can maximize revenues, efficiently invest in research and development and increase profitability of manufacturing operations.

Operating Segments

As a result of changes that occurred in February 2003 in the organization and management of Meridian’s businesses, effective with the quarter beginning January 1, 2003, Meridian changed its reportable operating segments to US Diagnostics (formerly referred to as Meridian Bioscience, Inc. or MBI), European Diagnostics (formerly referred to as Meridian Bioscience Europe or MBE) and Life Science. While the scientific foundation of these three segments is essentially the same, the market dynamics, competitive trends, regulatory requirements and sales and marketing approach vary substantially. The US Diagnostics operating segment consists of research and development and manufacturing operations in Cincinnati, Ohio, and the sale and distribution of diagnostic test kits in the US and countries outside of Europe, Africa and the Middle East. The European Diagnostics operating segment consists of the sale and distribution of diagnostic test kits in Europe, Africa and the Middle East. The Life Science operating segment consists of research and development and manufacturing operations in Memphis, Tennessee and Saco, Maine, and the sale and distribution of bulk antigens, antibodies and bioresearch reagents domestically and abroad. Manufacturing operations for the Life Science operating segment include a protein production laboratory for the contract manufacture of proteins and other biologicals used by biopharmaceutical and biotechnology companies in research for new drugs and vaccines. Financial information for Meridian’s operating segments is included in Note 10 to the consolidated financial statements contained herein.

Meridian’s primary source of revenues continues to be its core diagnostic products. Meridian’s diagnostic products provide accuracy, simplicity and speed, and enable early diagnosis and treatment of common, acute medical conditions, and provide for better patient outcomes at reduced costs. Meridian targets diagnostics for disease states that (i) are acute conditions where rapid diagnosis impacts patient outcomes, (ii) have favorable

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demographic and disease profiles, (iii) are underserved by current diagnostic products and (iv) have difficult sample handling requirements. This approach has allowed Meridian to establish significant market share in its target disease states.

Meridian expects that its Life Science operating segment will serve as a key platform for sourcing biologicals and technologies, by acquisition or license, for development of new products for all of Meridian’s operating segments. One of Meridian’s specific strategies in this area is to target biologicals that have commercial product applications across multiple markets, such as human diagnostics, veterinary diagnostics and therapeutics. This strategy is expected to leverage research and development resources as products can be developed with all three markets in mind, rather than on a market-by-market basis.

Meridian’s website is www.meridianbioscience.com. Meridian makes available its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments thereto, free of charge, as soon as reasonably practicable after such material has been electronically filed with the Securities and Exchange Commission.

US Diagnostics Operating Segment

Overview

The US Diagnostics operating segment’s business focuses on the development, manufacture, sale and distribution of diagnostic test kits, primarily for certain respiratory, gastrointestinal, viral and parasitic infectious diseases. In addition to diagnostic test kits, products also include transport media that store and preserve specimen samples from patient collection to laboratory testing. Third-party sales for this operating segment were $39,906,000, $34,171,000 and $32,557,000 for fiscal 2003, 2002 and 2001, respectively. As of September 30, 2003, the US Diagnostics operating segment had 240 employees.

Meridian’s diagnostic test kits utilize immunodiagnostic technologies, which test samples of blood, urine, stool and other body fluids or tissue for the presence of antigens and antibodies of specific infectious diseases. Specific immunodiagnostic technologies used in Meridian’s diagnostic test kits include enzyme immunoassay, immunofluorescence, particle agglutination/aggregation, immunodiffusion, complement fixation and chemical stains. The enzyme immunoassay technology is used in multiple test formats; the Premier™ products for large volume users and the ImmunoCard® products for single test, low volume users.

Meridian’s diagnostic products are used principally in the detection of respiratory diseases, such as pneumonia, valley fever, flu and RSV; gastrointestinal diseases, such as stomach ulcers (H. pylori), antibiotic associated diarrhea (C. difficile) and pediatric diarrhea (Rotavirus and Adenovirus); viral diseases, such as mononucleosis, Herpes Simplex, chicken pox and shingles (Varicella-Zoster) and Cytomegolovirus (organ transplant infections);

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and parasitic diseases, such as Giardiasis, Cryptosporidiosis and Lyme. The primary markets and customers for these products are reference laboratories, hospitals and physicians’ offices.

Market Trends

The global market for infectious disease tests continues to expand as new disease states are identified, new therapies become available and worldwide standards of living and access to health care improve. More importantly, within this market there is a continuing shift from conventional testing, which requires highly trained personnel and lengthy turnaround times for test results, to more technologically advanced testing which can be performed by less highly trained personnel and completed in minutes or hours. These technological advances permit accurate testing to occur outside the traditional hospital or laboratory.

The increasing pressures to contain total health care costs have accelerated the increased use of diagnostic testing and the market shift to alternate sites. With rapid and accurate diagnoses of infectious diseases, physicians can pinpoint appropriate therapies quickly, leading to faster recovery, shorter hospital stays and less treatment expense. In addition, these pressures have led to a major consolidation among reference laboratories and the formation of multi-hospital alliances that have reduced the number of institutional customers for diagnostic products and resulted in changes in buying practices. Specifically, multi-year exclusive or primary source marketing or distribution contracts with institutional customers have become more common, replacing less formal distribution arrangements of shorter duration and involving lower product volumes.

Sales and Marketing

The US Diagnostics operating segment’s sales and distribution network consists of a direct sales force in the US and independent distributors in the US and abroad. The direct sales force consists of three regional sales managers, one corporate health systems manager, 21 technical sales representatives and two inside sales representatives. Meridian utilizes two primary independent distributors in the US, who accounted for 39% of the US Diagnostics operating segment’s third-party sales in fiscal 2003. Meridian participates in the selling effort for key customers where these independent distributors are utilized. Therefore, Meridian believes that the loss of either of these independent distributors would not have a material adverse effect on it.

Consolidation of the US healthcare industry is expected to continue and potentially affect Meridian’s customers. Industry consolidation puts pressure on pricing and aggregates buying power. In response, in the last four years, Meridian has entered into, extended or renewed several exclusive multiple-year contracts with consolidated healthcare providers and supply agreements with major reference laboratories.

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Products and Markets

Meridian has expertise in the development and manufacture of products based on multiple core diagnostic technologies, each of which enables the visualization and identification of antigen/antibody reactions for specific pathogens. As a result, Meridian is able to develop and manufacture diagnostic tests in a variety of formats that satisfy customer needs and preferences, whether in a hospital, commercial or reference laboratory or alternate site location. Meridian’s product offering consists of over 200 medical diagnostic products. Meridian’s products generally range in list price from $1 per test to $33 per test.

Meridian’s product technologies include enzyme immunoassay, immunofluorescence, particle agglutination/aggregation, immunodiffusion, complement fixation and chemical stains.

Enzyme Immunoassay (EIA) – Products incorporating the EIA technology achieve extremely high levels of accuracy in detecting disease-related antigens or antibodies through the use of special color-based enzyme-substrate reactions. Meridian utilizes this technology in its multiple test format, the Premier™ product for large volume users, and in its single test formats, the Immuno Card®, Immuno Card STAT!® and Monolert® products, for lower volume users.

Immunofluorescence – When the microscopic visualization of an antigen/antibody reaction is necessary or desired, immunofluorescence technology is frequently utilized. Fluorescing immunochemicals, in the presence of the target antigen or antibody, can be viewed via a fluorescent microscope. Meridian utilizes this technology in its Merifluor® products.

Particle Agglutination/Aggregation – This technology utilizes microparticles (e.g., latex, red blood cells) coated with specific antigens or antibodies that form visible aggregates in the presence of a specimen containing the complementary antigen or antibody. This technology is rapid and economical and is used in Meridian’s Meritec™, MeriStar® and MonoSpot® products.

Other Technologies – Meridian utilizes other technologies that include immunodiffusion, complement fixation and chemical stains. Meridian also manufactures and markets specimen collection, transportation, preservation and concentration products, such as Para-Pak®, Macro-CON® and Spin-CON.

Research and Development

The US Diagnostics operating segment’s research and development organization consists of 13 research scientists with expertise in biochemistry, immunology, mycology, bacteriology, virology and parasitology. Research and development expenses for the US Diagnostics operating segment for fiscal 2003, 2002 and 2001 were $2,527,000, $1,730,000 and $2,147,000, respectively. This research and development organization focuses

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its activities on new applications for Meridian’s existing technologies, improvements to existing products and development of new technologies. Research and development efforts may occur in-house or with collaborative partners. Meridian believes that internally developed products are a key source for sustaining revenue growth. Meridian’s internally developed products include Premier™ Platinum HpSA and Premier™ Toxins A & B, which accounted for 25% of the US Diagnostics operating segment’s third-party sales during fiscal 2003.

Manufacturing

Meridian’s immunodiagnostic products require the production of highly specific and sensitive antigens and antibodies. Meridian produces substantially all of its own requirements including monoclonal antibodies and polyclonal antibodies, plus a variety of fungal, bacterial and viral antigens. Meridian believes it has sufficient manufacturing capacity for anticipated growth.

Intellectual Property, Patents and Licenses

Meridian owns or licenses US and foreign patents for approximately 25 products manufactured by the US Diagnostics operating segment, including Premier™ Platinum HpSA. In the absence of patent protection, Meridian may be vulnerable to competitors who successfully replicate Meridian’s production and manufacturing technologies and processes. Meridian’s employees are required to execute confidentiality and non-disclosure agreements designed to protect Meridian’s proprietary products. Meridian believes that its products and technologies do not infringe the proprietary rights of any third parties.

Government Regulation

Meridian’s diagnostic products are regulated by the Food & Drug Administration as “devices” pursuant to the Federal Food, Drug and Cosmetic Act (FDCA). Under the FDCA, medical devices are classified into one of three classes (i.e., Class I, II or III). Class I and II devices are not expressly approved by the FDA, but, instead, are “cleared” for marketing. Class III devices generally must receive “pre-market approval” from the FDA as to safety and effectiveness.

A 510(k) clearance will be granted if the submitted data establishes that the proposed device is “substantially equivalent” to an existing Class I or Class II medical device or to a Class III medical device for which the FDA has not required pre-market approval. The 510(k) clearance process for “substantially equivalent” devices allows product sales to be made after the filing of an application and upon acknowledgment by the FDA, typically within 90 to 120 days after submission. If the FDA requests additional information, the product cannot be sold in the US until the application has been supplemented and upon acknowledgment by the FDA within 90 to 120 days of the supplemental application. In practice, the FDA has been granting clearance in about 90 days following submission of the supplemental information. If there are no existing FDA-approved products or

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processes comparable to a diagnostic product or process, approval by the FDA involves the more lengthy pre-market approval procedures.

Each of the diagnostic products currently marketed by Meridian in the United States has been cleared by the FDA pursuant to the 510(k) clearance process or is exempt from such requirements. Meridian believes that most, but not all, products under development will be classified as Class I or II medical devices and, in the case of Class II devices, will be eligible for 510(k) clearance.

Sales of Meridian’s diagnostic products in foreign countries are subject to foreign government regulation, the requirements of which vary substantially from country to country. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA approval and the requirements may differ.

European Diagnostics Operating Segment

The European Diagnostics operating segment’s business focuses on the sale and distribution of diagnostic test kits, those manufactured by the US Diagnostics operating segment and others manufactured by third-party vendors. Approximately 65% of third-party sales for fiscal 2003 were products manufactured by the US Diagnostics operating segment. Third-party sales for this operating segment were $13,756,000, $11,920,000 and $12,421,000 for fiscal 2003, 2002 and 2001, respectively. As of September 30, 2003, the European Diagnostics operating segment had 38 employees, including 13 employees in the direct sales force. The European Diagnostics operating segment’s sales and distribution network consists of direct sales forces in Belgium, France, Holland and Italy, and independent distributors in other European countries, Africa and the Middle East. The European Diagnostics operating segment maintains distribution centers in Nivelle, Belgium and Milan, Italy. The primary markets and customers for this operating segment are hospitals and reference laboratories. Sales to customers in Italy are mainly to hospitals and laboratories that are funded by the Italian government.

During the last three years, competitive factors and government reimbursement policies have slowed growth in European markets. In response to these market conditions, Meridian restructured its European distribution operations in fiscal 2001 and 2000 by moving the export business from Germany to Belgium, and moving the German in-country business to an independent distributor. This restructuring has improved overall operating results for the European Diagnostics operating segment by lowering its cost structure. Based on operating results for fiscal 2003 and expectations for fiscal 2004, Meridian believes that sales levels in local currency have stabilized, and in fact, believes that market conditions have begun to improve and will yield modest growth.

The European Diagnostics operating segment’s functional currency is the Euro. The translation of Euros into US dollars is subject to exchange rate risk.

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Life Science Operating Segment

Overview

The Life Science operating segment’s business currently focuses on the development, manufacture, sale and distribution of bulk antigens and reagents used by researchers and other diagnostic companies, as well as the contract manufacturing of proteins and other biologicals used by biopharmaceutical and biotechnology companies engaged in research for new drugs and vaccines. Third-party sales for this operating segment were $12,202,000, $13,013,000 and $11,549,000 for fiscal 2003, 2002 and 2001, respectively. The Life Science operating segment consists of Meridian’s Viral Antigens and BIODESIGN subsidiaries. As of September 30, 2003, the Life Science operating segment had 78 employees.

Revenue sources for the Life Science operating segment currently come from the manufacture, sale and distribution of bulk antigens and reagents used by researchers and other diagnostic companies. During fiscal 2003, 28% of third-party sales were to one customer, a substantial portion of which is under exclusive supply agreements that expire in fiscal 2007. Meridian has a long-standing relationship with this customer, and although there can be no assurances, Meridian intends to renew these supply agreements in the normal course of business.

This customer is currently experiencing delays in taking delivery of certain bulk antigen from Meridian. These delays are not related to the quality of Meridian’s product. As a result of these delays, the Life Science operating segment may generate an operating loss for the first quarter of fiscal 2004 that would be recouped during the second quarter, upon commencement of shipments to this customer. Although, there can be no assurances that shipments will commence during the second quarter. This matter is not expected to have a material adverse effect on Meridian’s consolidated results of operations for the fiscal year ended September 30, 2004.

Growth Strategies

Growth strategies for the Life Science operating segment include (i) developing new product applications from existing technologies and (ii) acquisition or licensing of biologicals and technologies for development of new products.

Contract manufacturing of proteins and other biologicals for biopharmaceutical and biotechnology companies engaged in research for new drugs and vaccines is an example of a significant new product application built from Meridian’s existing expertise in manufacturing bulk antigens and reagents using cell culture techniques. This business will focus on contract manufacturing of materials that will be used in Phase I and II clinical trials. During March 2003, Meridian opened its protein production laboratory for commercial business. During the first quarter of fiscal 2004, Meridian began work in manufacturing a recombinant protein that will be used by the

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National Institutes of Health in the development of a vaccine for parvovirus. This contract is expected to be completed in the fourth quarter of fiscal 2004. The proteins that will be produced are intended to be used as “injectibles”. As such, they will be produced under cGMP Regulations for Biologics and Human Drugs under the auspices of the FDA. Approval and licensing, following clinical trials, of these products will be the responsibility of the applicant, who owns the right to each protein. Meridian may or may not be the applicant depending on specific circumstances with particular customers.

The protein production laboratory will provide a new class of customers, and in some cases, have longer production cycles than historical bulk manufacturing of antigens and reagents. Longer production cycles can affect timing of revenue recognition, as revenue is recognized either upon shipment of product or final lot acceptance depending on contract terms.

Markets

The Life Science operating segment has targeted three primary market segments for its products and services: bulk biomedical reagents, drug and vaccine discovery, and drug and vaccine development. The customer base for bulk biomedical reagents is large and fragmented, and includes other diagnostic manufacturers as well as researchers in academia and the pharmaceutical and biotechnology industries. The market segments for drug and vaccine discovery and development are intended to be served via contract manufacturing in the protein production laboratory discussed above.

Sales and Marketing

The Life Science operating segment applies sales and marketing efforts in two different manners that are designed to complement one another. An internal sales and marketing staff, as well as a website, have been built to market bulk biomedical reagents directly to a large and fragmented customer base. The website provides detailed technical information and capability to submit purchase orders. For major bulk biomedical reagent customers, scientific resources have been dedicated to establish sole-source supply arrangements. Similarly for the protein production laboratory, scientific resources are dedicated to each potential customer.

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Research and Development

The Life Science operating segment’s research and development organization consists of 5 research scientists. Research and development expenses for the Life Science operating segment for fiscal 2003, 2002 and 2001 were $1,348,000, $1,158,000 and $1,216,000, respectively. This research and development organization focuses its activities on the protein production laboratory, developing new biomedical reagents, and working with the US Diagnostics operating segment in the development of products that have commercial application across multiple markets, such as human diagnostics, veterinary diagnostics and therapeutics.

Manufacturing and Government Regulation

The proteins that will be produced in VAI’s cGMP protein production laboratory are intended to be used as “injectibles”. As such they will be produced under cGMP Regulations for Biologics and Human Drugs under the auspices of the FDA. Approval and licensing, following clinical trials, of these products will be the responsibility of the applicant, who owns the rights to each protein. VAI may or may not be the applicant depending on specific circumstances with particular customers.

Competition

Diagnostics

The market for diagnostic tests is a multi-billion dollar international industry, which is highly competitive. Many of Meridian’s competitors are larger with greater financial, research, manufacturing and marketing resources. Important competitive factors of Meridian’s products include product quality, price, ease of use, customer service, and reputation. In a broader sense, industry competition is based upon scientific and technological capability, proprietary know-how, access to adequate capital, the ability to develop and market products and processes, the ability to attract and retain qualified personnel and the availability of patent protection. To the extent that Meridian’s product lines do not reflect technological advances, Meridian’s ability to compete in those product lines could be adversely affected.

Companies competing in the diagnostic test industry generally focus on a limited number of tests or limited segments of the market. As a result, the diagnostic test industry is highly fragmented and segmented. Hundreds of companies in the United States alone supply immunodiagnostic tests. These companies range from multi-national health care companies, for which immunodiagnostics is one line of business, to small start-up companies. Of central importance in the industry are mid-sized medical diagnostic specialty companies, like Meridian, that offer multiple, broad product lines and have the ability to deliver new, high value products quickly to the marketplace. Among the companies with which Meridian competes in the marketing of one or

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more of its products are Abbott Laboratories Inc., Becton, Dickinson and Company, Diagnostic Products Corporation, Quidel Corporation and Inverness Medical.

Life Science

The market for bulk biomedical reagents is highly competitive. Important competitive factors include product quality, price, customer service and reputation. Where sole-source supply arrangements do not exist, Meridian faces competitors, many of which have greater financial, research and development, sales and marketing, and manufacturing resources. From time to time, customers may choose to manufacture their biomedical reagents in-house rather than purchase from outside vendors such as Meridian.

The market for contract manufacturing in a validated cGMP facility such as the protein production laboratory is also competitive. Important competitive factors include reputation, customer service and price. Although the product application for this facility was built from Meridian’s existing expertise in manufacturing bulk antigens and reagents using cell culture techniques, Meridian faces competitors with greater experience in contract manufacturing in a cGMP environment.

Acquisitions

Acquisitions have played an important role in the historical growth of Meridian’s businesses. Meridian’s acquisition objectives are to, among other things, (i) enhance product offerings, (ii) improve product distribution capabilities, (iii) provide access to new markets, and/or (iv) provide access to key biologicals that lead to new products. Recent examples of this include the acquisition of Gull Laboratories in fiscal 1999 and Viral Antigens in fiscal 2000. The Gull acquisition enhanced product offerings, expanded sales and distribution capabilities in Europe and provided the initial access into the Life Science market for Meridian (through the BIODESIGN subsidiary). The Viral Antigens acquisition, coupled with the opening of the protein production laboratory, solidified Meridian’s entry into the Life Science market. Although Meridian cannot provide any assurance that it will consummate any acquisitions in the future, Meridian expects that acquisitions will continue to serve as a source of new revenues and growth in the future.

International Markets

International markets are an important source of revenue for Meridian’s operating segments. For all operating segments combined, international sales were $23,220,000 or 35% of total sales, $17,993,000 or 30% of total sales and $18,123,000 or 32% of total sales in fiscal 2003, 2002 and 2001, respectively. Domestic exports for the US Diagnostics and Life Science operating segments were $9,464,000, $6,073,000 and $5,702,000 in fiscal 2003, 2002 and 2001, respectively. Meridian expects to continue to look to international markets as a source of new revenues and growth in the future.

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Environmental

Meridian is a conditionally exempt small quantity generator of hazardous waste and has a US EPA identification number. All hazardous material is manifested and disposed of properly. Meridian is in compliance with applicable portions of the federal and state hazardous waste regulations and has never been a party to any environmental proceeding.

ITEM 2.

PROPERTIES

Meridian’s corporate offices, manufacturing facility and research and development facility are located in three buildings totaling approximately 94,000 square feet on 6.2 acres of land in a suburb of Cincinnati. These properties are owned by Meridian. Meridian has approximately 51,000 square feet of manufacturing space and 9,000 square feet of warehouse space in the Cincinnati facility.

Meridian rents approximately 6,000 square feet of space in Nivelle, Belgium for sales, warehousing and distribution. The lease expires in 2009. Meridian also rents office space in France and the Netherlands for small sales offices.

The distribution center in Italy conducts its operations in a two-story building in the Milan, Italy area consisting of approximately 18,000 square feet. This facility is owned by Meridian Bioscience Europe s.r.l.

BIODESIGN rents a 10,000 square foot facility that houses administration, distribution and manufacturing facilities in Saco, Maine under a lease that expires in 2006.

Viral Antigens’ executive offices and manufacturing facility are located in Memphis, Tennessee. This facility, which is owned by Viral Antigens, is comprised of two buildings totaling approximately 34,000 square feet, including approximately 27,000 square feet of manufacturing space.

ITEM 3.

LEGAL PROCEEDINGS

During fiscal 2003, Meridian reached a settlement with a former employee regarding his breach of an employment agreement, misappropriation of company trade secrets and related legal proceedings. This settlement provided that Meridian receive proceeds from the disposition of certain personal assets of the former employee. The amount of such proceeds was $216,000. Legal proceedings for these matters have been on-going since June 2000. Legal fees related to these matters amounted to $60,000, $150,000, $440,000 and

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$450,000 in fiscal 2003, 2002, 2001 and 2000, respectively. During fiscal 2003, Meridian received insurance reimbursement in the amount of $187,000 for a portion of these legal fees.

Meridian is a party to other litigation that it believes is in the normal course of business. The ultimate resolution of these matters is not expected to have a material adverse effect on Meridian’s financial position, results of operations or cash flows.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2003.

PART II.

ITEM 5.

MARKET FOR REGISTRANT’S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS

“Common Stock Information” on the inside back cover of the Annual Report to Shareholders for 2003 and “Quarterly Financial Data” in Note 12 to the Consolidated Financial Statements are incorporated herein by reference. There are no external restrictions on cash dividend payments.

In November 2002, Meridian’s Board of Directors adopted a new cash dividend policy whereby the indicated annual dividend rate will be set between 75% and 85% of each fiscal years’ expected net earnings. The declaration and amount of dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings, cash flow requirements and future business developments and opportunities, including acquisitions.

Meridian paid dividends of $0.26 per share, $0.28 per share, and $0.34 per share in fiscal 2001, fiscal 2002, and fiscal 2003, respectively.

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Equity Compensation Plan Information as of September 30, 2003 was as follows:

(c)

Number of securities

remaining available

(a)

for future issuance

Number of securities

(b)

under Equity

to be issued upon

Weighted average

Compensation Plans

exercise of

exercise price of

(excluding securities

Plan Category

outstanding options (2)

reflection in column (a)).

Equity compensation plans approved by security holders ⁽¹⁾

1,186,545

7.13

150,495

Equity compensation plans not approved by security holders

30,000

7.95

—

Total

1,216,545

7.13

150,495


(1)	1986 Stock Option Plan	(2	)	No warrants or rights are authorized
	1990 Director’s Stock Option Plan			for issuance.
	1994 Director’s Stock Option Plan
	1996 Stock Option Plan, as amended in 2001
	1999 Director’s Stock Option Plan

ITEM 6.

SELECTED FINANCIAL DATA

Incorporated by reference from inside front cover of the Annual Report to Shareholders for 2003.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Refer to “Forward Looking Statements” following the Index in front of this Form 10-K.

Future Trends:

Life Science

During fiscal 2003, Meridian opened its protein production laboratory for business, creating the opportunity to serve as an “enabler” in the development of new drugs and vaccines. This protein production laboratory is an extension of Meridian’s existing antigen manufacturing technologies and capabilities. It will create a new class of customers, pharmaceutical companies, as well as the opportunity to leverage sales and marketing resources. Sales and marketing resources at Meridian’s Viral Antigens and BIODESIGN subsidiaries are being aligned to

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focus on common customers and complimentary products. As part of our overall Life Science strategy, Meridian also expects to develop or license unique biological tools and technology.

European Diagnostics

Meridian’s European Diagnostics operating segment experienced sales growth in FY 2003 of 15%, following two successive years of sales declines of 4% in fiscal 2002 and 13% in fiscal 2001. Although currency translation accounts for most of the fiscal 2003 increase, sales in local currency, the Euro, increased 1% during fiscal 2003, compared to fiscal 2002. During the last three years, competitive factors and government reimbursement policies slowed growth in European markets and sales in fiscal 2001 and fiscal 2002 were also negatively affected by currency translation. In response to these market conditions, Meridian restructured its European distribution operations in fiscal 2001 and 2000 by moving the export business from Germany to Belgium, and moving the German in-country business to an independent distributor (this latter move also affected sales because Meridian no longer sells to end-user customers on a direct basis in Germany). This restructuring has improved overall operating results for the European Diagnostics operating segment by lowering its cost structure. Based on operating results for fiscal 2003 and expectations for fiscal 2004, Meridian believes that sales levels in local currency have stabilized, and in fact, believes that market conditions have begun to improve and will yield modest growth.

US Diagnostics

Research and Development

Meridian believes that internally-developed products will continue to be a critical source of sales and sales growth. Research and development efforts are expected to focus on the development of new products and product improvements where Meridian has a dominant market position, or its intellectual property is protected by patents or licenses.

Meridian expects its the Life Science operating segment will serve as a key platform for sourcing biologicals and technologies, by acquisition or license, for development of new products for all of Meridian’s operating segments. One of Meridian’s specific strategies in this area is to target biologicals that have commercial product applications across multiple markets, such as human diagnostics, veterinary diagnostics and therapeutics. This

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strategy is expected to leverage research and development resources as products can be developed with all three markets in mind, rather than on a market-by-market basis.

Operating Segments:

As a result of changes that occurred in February 2003 in the organization and management of Meridian’s businesses, effective with the quarter beginning January 1, 2003 (Meridian’s second quarter), Meridian changed its reportable operating segments to US Diagnostics (formerly referred to as Meridian Bioscience, Inc. or MBI), European Diagnostics (formerly referred to as Meridian Bioscience Europe or MBE) and Life Science. The US Diagnostics operating segment consists of manufacturing operations in Cincinnati, Ohio, and the sale and distribution of diagnostic test kits in the US and countries outside of Europe, Africa and the Middle East. The European Diagnostics operating segment consists of the sale and distribution of diagnostic test kits in Europe, Africa and the Middle East. The Life Science operating segment consists of manufacturing operations in Memphis, Tennessee and Saco, Maine, and the sale and distribution of bulk antigens, antibodies and bioresearch reagents domestically and abroad. The Life Science operating segment consists of the Viral Antigens and BIODESIGN subsidiaries (formerly part of the Meridian Bioscience, Inc. operating segment), including the protein production laboratory.

Results of Operations:

Overview

Fourth quarter

Net earnings for the fourth quarter of fiscal 2003 were $1,849,000, or $0.12 per diluted share. Net earnings for the fourth quarter of fiscal 2002 were $863,000, or $0.06 per diluted share, including an after-tax charge of $751,000, or $0.05 per diluted share, for costs related to the abandoned Biotrin acquisition. Net sales for the fourth quarter of fiscal 2003 were $17,155,000, an increase of $1,596,000 or 10% compared to the fourth quarter of fiscal 2002.

In May 2002, Meridian executed a letter of intent to acquire all of the outstanding capital stock of Biotrin Holdings plc, headquartered in Dublin, Ireland. In November 2002, Meridian terminated negotiations and ceased further discussions regarding its interest in acquiring Biotrin. Costs of $751,000, after-tax, were for professional fees for attorneys and financial and tax advisors.

Fiscal Year

Net earnings for fiscal 2003 were $7,018,000, or $0.47 per diluted share. Net earnings for fiscal 2002 were

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$5,031,000, or $0.34 per diluted share, including the after-tax charge of $0.05 per share for the abandoned Biotrin acquisition. Results of operations for fiscal 2003 compared to fiscal 2002 are discussed below.

Fiscal Year Ended September 30, 2003 Compared to Fiscal Year Ended September 30, 2002

Net sales

Overall, net sales increased $6,760,000, or 11%, to $65,864,000 for fiscal 2003 compared to fiscal 2002. Net sales for the US Diagnostics operating segment increased $5,735,000, or 17%, for the European Diagnostics operating segment increased $1,836,000, or 15%, and for the Life Science operating segment decreased $811,000, or 6%.

For the US Diagnostics operating segment, the sales increase was primarily related to volume growth in new and existing products. For new products, Meridian began distributing new diagnostic tests for the detection of Flu and RSV during the first quarter of fiscal 2003. These new products contributed sales of approximately $1.9 million and are a result of Meridian’s recent distribution agreement with Binax, Inc. Other new products included Immunocard STAT! HpSA, a rapid test for the detection of H. pylori . This product was introduced into non-US markets in late fiscal 2002. Non-US markets for fiscal 2003 contributed a full year of sales of approximately $256,000. Meridian expects to introduce this product into the US market beginning in fiscal 2004, upon clearance from the FDA. For existing products, volume growth was strong in C. difficile diagnostic products, led by Meridian’s internally developed Premier™ Toxins A&B, as well as tests to detect Cryptosporidium, Giardia, Rotavirus, Mycoplasma, H. pylori and E. coli . A substantial portion of growth in Mycoplasma and H. pylori products occurred in export markets, including Japan. Certain of the sales of Mycoplasma product into Japan related to the SARS outbreak. This product was used to exclude the diagnosis of certain respiratory ailments having similar symptoms, such as Mycoplasma, during the diagnosis of patients potentially infected with SARS. Meridian also began selling Premier™ Platinum HpSA into Japan during the fourth quarter of fiscal 2003, upon the Japanese government establishing the amount of insurance reimbursement.

For the European Diagnostics operating segment, the sales increase includes currency translation gains in the amount of approximately $1.7 million. Sales in local currency, the Euro, increased 1%.

For the Life Science operating segment, the decrease in sales for fiscal 2003 was primarily due to orders for make-to-order bulk antigen products with one customer. This customer provided sales of approximately $3.4 million, $5.2 million and $4.0 million in fiscal 2003, 2002 and 2001, respectively. For such products, bulk quantities are manufactured pursuant to customer purchase orders. Sales are recorded upon shipment. This customer is currently experiencing delays in taking delivery of certain bulk antigen from Meridian. These delays are not related to the quality of Meridian’s product. As a result of these delays, the Life Science operating

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segment may generate an operating loss for the first quarter of fiscal 2004 that would be recouped during the second quarter, upon commencement of shipments to this customer. Although, there can be no assurances that shipments will commence during the second quarter. This matter is not expected to have a material adverse effect on Meridian’s consolidated results of operations for the fiscal year ended September 30, 2004. Revenue for the protein production laboratory is recognized either upon shipment of product or final lot acceptance depending on contract terms. No revenues for the protein production laboratory have been recognized to date.

For all operating segments combined, international sales were $23,220,000, or 35% of total sales, for fiscal 2003, compared to $17,993,000, or 30% of total sales, in fiscal 2002. Combined domestic exports for the US Diagnostics and Life Science operating segments were $9,464,000 for fiscal 2003, compared to $6,073,000 in fiscal 2002. The remaining international sales were generated by the European Diagnostics operating segment.

Gross Profit

Gross profit increased $3,690,000 or 11%, to $38,288,000 for fiscal 2003 compared to fiscal 2002. Gross profit margins were 58% for fiscal 2003 compared to 59% for fiscal 2002.

Meridian’s overall operations consist of the sale of diagnostic test kits for various disease states and in alternative test formats, as well as bioresearch reagents, bulk antigens and proficiency tests. Product sales mix shifts, in the normal course of business, can cause the consolidated gross profit margin to fluctuate by several points.

Operating Expenses

Operating expenses increased $895,000, to $25,499,000, for fiscal 2003 compared to fiscal 2002. Operating expenses for fiscal 2002 included $1,211,000 related to the abandoned acquisition of Biotrin Holdings. The overall increase in operating expenses for fiscal 2003 is discussed below.

Research and development expenses increased $987,000, or 34%, to $3,875,000 for fiscal 2003 compared to fiscal 2002, and as a percentage of sales, increased from 5% in fiscal 2002, to 6% in fiscal 2003. Of this increase, $797,000 related to the US Diagnostics operating segment and $190,000 related to the Life Science operating segment. The increase for the US Diagnostics operating segment is primarily attributable to additional product development staff and material costs for new product development activities. The increase for the Life Science operating segment is primarily attributable to activities at the protein production laboratory prior to opening in March 2003.

Selling and marketing expenses increased $871,000, or 9%, to $10,601,000 for fiscal 2003 compared to fiscal 2002, and as a percentage of sales, was 16% for fiscal 2003 and fiscal 2002. Of this increase, $727,000 related

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to the US Diagnostics operating segment and $163,000 related to the European Diagnostics operating segment. The increase for the US Diagnostics operating segment is primarily attributable to spending on strategic sales initiatives, including preparation and training of field sales personnel, costs related to the new Binax products, such as samples and brochures, and sales person incentive compensation. The increase for the European Diagnostics operating segment is, in part, due to currency.

General and administrative expenses increased $248,000, or 2%, to $11,023,000 for fiscal 2003 compared to fiscal 2002, and as a percentage of sales, decreased from 18% in fiscal 2002, to 17% in fiscal 2003. General and administrative expenses for the US Diagnostics operating segment increased $706,000 and for the European Diagnostics operating segment decreased $511,000. General and administrative expenses for the US Diagnostics operating segment included the favorable effects of insurance reimbursements for legal fees related to trade secrets litigation in the amount of $127,000, net of $60,000 of legal fees, an adjustment to reduce the reserve for bad debts in the amount of $104,000 based on better than anticipated write-off history, and a sales and use tax refund in the amount of $150,000. The overall increase in general and administrative expenses for the US Diagnostics operating segment, after consideration of the above credits, is primarily attributable to employee incentive compensation, normal salary and wage increases and support costs for growth in the business. General and administrative expenses for the European Diagnostics operating segment included a favorable adjustment in the amount of $150,000 related to a contract amendment that reduced certain minimum purchase commitments to align with current market expectations, and an adjustment in the amount of $122,000 to reduce the reserve for bad debts based on better than anticipated write-off history in Italy.

Operating Income

Operating income increased $2,795,000, or 28%, to $12,789,000 in fiscal 2003, as a result of the factors discussed above.

Other Income and Expense

Interest expense declined $256,000 or 13%, to $1,718,000 for fiscal 2003 compared to fiscal 2002. This decrease is attributable to the favorable effects of a lower interest rate environment and lower overall debt levels outstanding.

Other income and expense, net for fiscal 2003 includes a gain on the sale of certain distributor relationships for the European Diagnostics operating segment in the amount of $226,000. These distributor relationships related to blood-grouping products that no longer fit into Meridian’s long-range product plans. Other income and expense, net for fiscal 2003 also includes $216,000 of income received, related to the settlement of litigation with a former employee involving his breach of an employment agreement and misappropriation of company trade secrets. Other income and expense, net for fiscal 2002 included a net gain of $254,000 related to the sale of shares of common stock received in the demutualization of two insurance companies during the first quarter.

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Income Taxes

The effective rate for income taxes was 39% for both fiscal 2003 and fiscal 2002.

Fiscal Year Ended September 30, 2002 Compared to Fiscal Year Ended September 30, 2001

Net Sales

Overall, net sales increased $2,577,000, or 5%, to $59,104,000 for fiscal 2002 compared to fiscal 2001. Net sales for the US Diagnostics operating segment increased $1,614,000, or 5%, for the European Diagnostics operating segment decreased $501,000, or 4%, and for the Life Science operating segment increased $1,464,000, or 13%.

For the US Diagnostics operating segment, the negative effects of discontinuing the manufacturing and distribution of approximately 30 products in the second quarter of fiscal 2001 was more than offset by strong volume growth in C. difficile and H. pylori diagnostic products. Meridian’s Premier™ Toxins A&B and Premier™ Platinum HpSA led the volume growth for these two disease states. Both of these products were developed by Meridian and launched in 1999 and 1998, respectively.

For the European Diagnostics operating segment, the decline in sales during fiscal 2002 is net of currency translation gains of $371,000. It reflects volume declines attributable to continued deterioration in market conditions in Germany, as well as price erosion and volume declines related to competition for certain products in Italy and other European markets. In addition, upon changeover to an independent distributor in Germany in the second quarter of fiscal 2001, the new distributor placed stocking orders that did not repeat in fiscal 2002.

For the Life Science operating segment, volume growth was particularly strong for Rubella make-to-order bulk antigen products.

For all operating segments combined, international sales were $17,993,000, or 30% of total sales, for fiscal 2002, compared to $18,123,000, or 32% of total sales, in fiscal 2001. Combined domestic exports for the US Diagnostics and Life Science operating segments were $6,073,000 for fiscal 2002, compared to $5,702,000 in fiscal 2001. The remaining international sales were generated by the European Diagnostics operating segment.

Gross Profit

Gross profit increased $7,892,000 or 30%, to $34,598,000 for fiscal 2002 compared to fiscal 2001. Gross profit margins increased from 47% for fiscal 2001, to 59% for fiscal 2002. Gross profit for fiscal 2001 included the negative effects of an inventory impairment charge in the amount of $4,000,000 related to FDA matters, as well as certain inefficiencies related to products manufactured in Cincinnati, because during the second quarter of

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fiscal 2001, resources were concentrated on execution of the plan submitted to the FDA (see FDA discussion contained herein).

Operating Expenses

Operating expenses declined $14,609,000, to $24,604,000 for fiscal 2002 compared to fiscal 2001. Operating expenses for fiscal 2002 included $1,211,000 related to the abandoned acquisition of Biotrin Holdings. Operating expenses for fiscal 2001 included costs of $11,074,000, $1,510,000, and $800,000 related to FDA matters, European restructuring and acquired in-process research and development, respectively. This decline is primarily attributable to closure of the German distribution operation during the first quarter of fiscal 2001, general cost-cutting measures implemented across all Meridian business units, tightly controlled spending and the offsetting effects of lower legal costs related to trade secrets litigation and increased reserves for distributor rebates.

Research and development expenses declined $475,000 or 14%, to $2,888,000 for fiscal 2002 compared to fiscal 2001, and as a percentage of sales, declined from 6% for fiscal 2001 to 5% for fiscal 2002. Of this decrease, $417,000 related to the US Diagnostics operating segment and $58,000 related to the Life Science operating segment. The decline for the US Diagnostics operating segment is primarily attributable to lower outside contract research and clinical trial costs based on timing of projects, as well as the favorable effects of spending controls.

Selling and marketing expenses declined $1,241,000 or 11%, to $9,730,000 for fiscal 2002 compared to fiscal 2001, and as a percentage of sales, declined from 19% for fiscal 2001 to 16% for fiscal 2002. Of this decline, $688,000 related to the US Diagnostics operating segment, $524,000 related to the European Diagnostics operating segment and $29,000 related to the Life Science operating segment. The decline for the US Diagnostics operating segment is primarily attributable to spending controls and cost-cutting measures. Spending controls and cost-cutting measures were in the areas of advertising, promotional materials, travel and conventions. In addition, freight costs to ship product to customers from the Cincinnati manufacturing facility have been reduced as a result of better management of this element of operations. The decline for the European Diagnostics operating segment is primarily attributable to the closure of the German distribution operation during the first quarter of fiscal 2001.

General and administrative expenses declined $720,000 or 6%, to $10,775,000 for fiscal 2002 compared to fiscal 2001, and as a percentage of sales, declined from 20% for fiscal 2001 to 18% for fiscal 2002. Of this decline, $665,000 related to the US Diagnostics operating segment and $140,000 related to the European Diagnostics

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operating segment. The Life Science operating segment increased $85,000. The decline for the US Diagnostics operating segment is primarily attributable to no longer amortizing goodwill due to the adoption of SFAS No. 142 and lower legal costs related to trade secrets litigation. These decreases were somewhat offset by increased reserves for distributor rebates. The decline for the European Diagnostics operating segment is primarily attributable to the closure of the German distribution operation during the first quarter of fiscal 2001.

Operating Income

Operating income increased $22,501,000 from a loss of $12,507,000 in fiscal 2001, to income of $9,994,000 in fiscal 2002 as a result of the factors discussed above.

Other Income and Expense

Interest expense declined $572,000 or 22%, to $1,974,000 for fiscal 2002 compared to fiscal 2001. This decrease is attributable to the favorable effects of a lower interest rate environment and lower overall debt levels outstanding.

Other income and expense, net for fiscal 2002 included a net gain of $254,000 related to the sale of shares of common stock received in the demutualization of two insurance companies during the first quarter. Other income and expense, net for fiscal 2002 and 2001 included net currency losses of $14,000 and $39,000, respectively, related to transactions that are denominated in foreign currencies. The decrease in currency losses is attributable to the level of Euro/US dollar exchange rates during each period as well as strategies that were implemented in the latter part of fiscal 2001 to reduce currency exposure on these types of transactions.

Income Taxes

The effective rate for income taxes is a provision of 39% for fiscal 2002, compared to a credit of 31% for fiscal 2001. The effective rate for fiscal 2002 includes the favorable effects of reversing valuation allowance provisions in Belgium that were established prior to the restructuring of European operations, as net operating loss carryforwards in this jurisdiction are being utilized, and certain favorable book-to-tax return adjustments related to non-US sales activities. The effective rate for fiscal 2001 includes the unfavorable effects of the goodwill portion of the impairment charges related to FDA matters, a substantial portion of the European restructuring charge and the acquired in-process research and development charge, which could not be utilized for tax purposes.

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Liquidity and Capital Resources:

Comparative Cash Flow Analysis

Meridian’s operating cash flow and financing requirements are determined by analyses of operating and capital spending budgets and consideration of acquisition plans. Meridian has historically maintained line of credit availability to respond to acquisition opportunities quickly.

Net cash provided by operating activities increased $938,000 or 8%, to $12,353,000 in fiscal 2003 compared to fiscal 2002. This increase is primarily attributable to earning levels and changes in deferred taxes, and also reflects higher investments in receivables and inventories.

Net cash used for investing activities was $3,252,000 for fiscal 2003, compared to $4,201,000 for fiscal 2002, and primarily related to capital expenditures and Viral Antigens earnout payments during both periods. The higher level of capital expenditures during fiscal 2002 reflects the construction of Viral Antigens’ protein production laboratory. Net cash used in investing activities for fiscal 2002 also included proceeds of $254,000 related to the sale of common stock received in the demutualization of two insurance companies during the first quarter.

Net cash used for financing activities was $9,827,000 for fiscal 2003, compared to $8,999,000 for fiscal 2002. Repayments of debt obligations, including the revolving credit facility, were $5,275,000 in fiscal 2003 and $5,115,000 in fiscal 2002, reflecting Meridian’s intended efforts to pay down debt. Activity on the revolving credit facility during fiscal 2002 includes approximately $1,000,000 related to repayment of the mortgage loan for the Viral Antigens facilities that matured in January 2002.

Net cash flows from operating activities are anticipated to fund working capital requirements, debt service and dividends during fiscal 2004.

Capital Resources

The following table presents Meridian’s payments due on financing obligations as of September 30, 2003 (amounts in thousands):


	2004		2005		2006		Total

Bank term debt	$	797	$	797	$	640	$	2,234
Other debt obligations		82		68		—		150
Subordinated debentures		—		—		20,000		20,000

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Meridian has a $25,000,000 credit facility with a commercial bank that includes $5,000,000 of term debt and capital lease capacity and a $20,000,000 line of credit that expires in September 2004. As of November 30, 2003, there were no borrowings outstanding on the line of credit portion of this facility, and the availability was $20,000,000.

During November 2003, Meridian commenced an offer to exchange $16,000,000 of its 7% convertible subordinated debentures for an equal principal amount of new convertible subordinated debentures that mature September 1, 2013 and bear interest at 5%. The exchange offer expires December 30, 2003. The new debentures will be convertible into Meridian’s common stock at a price of $14.50 per share. Subsequent to a successful exchange of $16,000,000 of its convertible subordinated debentures, Meridian expects to redeem the remaining $4,000,000 at par through the revolving credit facility. These measures are expected to reduce annual interest expense by approximately $500,000. Upon completion of the exchange offer and redemptions, the remaining carrying value of unamortized debt issuance costs related to the 7% convertible subordinated debentures, $382,000 at September 30, 2003, will be charged to expense.

All of the bank term debt is denominated in the Euro currency and bears interest at a variable rate tied to Euro LIBOR. A one-percentage point increase in the Euro LIBOR rate would increase fiscal 2004 interest expense by approximately $20,000 for this debt. This debt serves as a natural currency hedge against certain Euro denominated intercompany receivables.

The Viral Antigens acquisition, completed in fiscal 2000, provides for additional purchase consideration up to a maximum remaining amount of $5,475,000, contingent upon Viral Antigens’ future earnings through September 30, 2006. Earnout consideration is payable each year, following the period earned. Earnout payments, if any, may require financing under the line of credit or other bank credit facility. Earnout consideration in the amount of $463,000 related to fiscal 2003 is due to be paid in the second quarter of fiscal 2004 and will be financed on Meridian’s line of credit.

Meridian’s capital expenditures are estimated to be $2,500,000 for fiscal 2004, and may be funded with operating cash flows or availability under the $25,000,000 credit facility discussed above. Capital expenditures relate to manufacturing and other equipment of a normal and recurring nature.

Commitments and Off-balance Sheet Arrangements:

Operating Leases

Meridian and its subsidiaries are lessees of (i) office and warehouse buildings in Maine, Belgium, France and Holland; (ii) automobiles for use by the direct sales forces in the US and Europe; and (iii) certain office equipment such as facsimile machines and copier machines across all business units, under operating lease

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agreements that expire at various dates. Meridian believes that commitments under these operating lease agreements are not material to its liquidity or capital resources.

Royalties

Meridian has entered into various license agreements that require payment of royalties based on a specified percentage of sales of related products (1% to 8%). Meridian expects that payments under these agreements will amount to as much as $600,000 in fiscal 2004. These royalty payments primarily relate to the US Diagnostics operating segment.

For one of these license agreements, Meridian is engaged in a dispute with the licensor regarding the payment of royalties. The licensor has claimed additional royalties due from Meridian in the amount of approximately $700,000. Meridian believes that it has satisfactorily complied with all provisions of this license agreement, and therefore, disputes this claim. In addition, Meridian believes that it has valid claims against the licensor under this agreement. This matter is not expected to have a material effect on results of operations or financial condition.

Unconditional Purchase Commitments

Meridian has entered into agreements to distribute diagnostic test kits that are manufactured by other diagnostic manufacturing companies. One of these agreements requires Meridian to purchase minimum quantities of diagnostic kits during 12-month measurement periods. Aggregate minimum purchase commitments under this agreement amount to approximately $125,000 for fiscal 2004.

For this agreement, Meridian did not meet the minimum purchase provisions contained therein for fiscal 2002 due to the actual size of the market for this specific product being smaller than anticipated prior to execution of the agreement. Meridian and the other party to this agreement have subsequently adjusted the minimum purchase provisions to align with current market expectations. The amendment to this agreement did not result in any further financial obligation for Meridian.

Contract Research and Development

During fiscal 2000, Meridian executed a Research and Development Agreement and an Exclusive Supply Agreement with OraSure Technologies, Inc. to commercialize the Up Link technology. These agreements, assuming certain milestones were met, would require Meridian to make future payments to OraSure to fund research and development activities for specific diagnostic products and to obtain an exclusive license to market and sell such products on a global basis. These agreements were terminated in November 2003. Costs to terminate these agreements were not material.

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Forward Contracts

Meridian uses forward contracts from time to time to address foreign currency risk related to certain transactions denominated in the Euro currency. These contracts are used to fix the exchange rate in converting Euros to US dollars. As of September 30, 2003, Meridian was a party to one such forward contract with a notional amount of 300,000 Euro and a maturity date of December 2003.

Market Risk Exposure:

Meridian has market risk exposure related to interest rate sensitive debt and foreign currency transactions.

Meridian has debt obligations in the aggregate amount of $22,847,000 outstanding at September 30, 2003, of which $2,697,000 bears interest at variable rates. Information concerning the maturities of interest rate sensitive debt is included in the discussion of Capital Resources above. To date, Meridian has not employed a hedging strategy with respect to interest rate risk.

Meridian is exposed to foreign currency risk related to its European distribution operations, including foreign currency denominated intercompany receivables, as well as Euro denominated term debt. The Euro denominated term debt serves as a natural hedge against a portion of the Euro denominated intercompany receivables.

FDA Matters:

During January 2001, the FDA completed an inspection of Meridian’s compliance with the Quality Systems Regulations that govern the manufacturing of in vitro diagnostics. In response to this inspection, in January 2001, Meridian submitted a comprehensive plan to the FDA outlining specific steps it committed to undertake to improve its quality systems. In June 2001, Meridian received a Warning Letter from the FDA which summarized and reiterated certain of the observations made by the FDA during their inspection completed in January 2001.

In August 2002, the FDA completed an on-site follow-up inspection to its January 2001 inspection. The FDA issued several observations, primarily aimed at fine-tuning established quality control systems and procedures. Meridian submitted written corrective action plans to address these refinements and continues its periodic communications with the FDA on the progress of its comprehensive plan submitted to the FDA in January 2001.

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completed in November 2001. The second audit was completed in May 2003. The reports from these audits substantiated Meridian’s continued progress in addressing issues raised in the prior FDA and independent audits. Meridian responded to the latest observations and recommendations with corrective actions designed to further improve its established quality control systems and procedures.

At present, it is uncertain whether Meridian’s actions will be sufficient so that no further remedial action or enforcement action by the FDA will occur.

Critical Accounting Policies:

The consolidated financial statements included in this Annual Report on Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States. Such accounting principles require management to make judgments about estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Management believes that the following accounting policies are critical to understanding the accompanying consolidated financial statements because the application of such polices requires the use of significant estimates and assumptions and the carrying values of related assets and liabilities are material.

Revenue Recognition

Meridian’s revenues are derived primarily from product sales. Revenue is recognized when product is shipped and title has passed to the buyer. Revenue for the US Diagnostics operating segment is reduced at the date of sale for estimated rebates and cash discounts that will be claimed by customers. Rebate agreements are in place with certain independent national distributors and are designed to reimburse such distributors for their cost in handling Meridian’s products. Management estimates reserves for rebate agreements and cash discounts based on historical statistics, current trends and other factors. Changes to these reserves are recorded in the period that they become known. Revenue for the Life Science operating segment’s protein production laboratory is recognized either upon shipment of product or final lot acceptance depending on contract terms.

During fiscal 2002, Meridian adopted EITF No. 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including the Reseller of a Vendor’s Products) . EITF No. 01-9 affected the manner in which Meridian estimates reserves for distributor rebate agreements. Rebate agreements are in place with certain

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independent national distributors and are designed to reimburse such distributors for their cost in handling Meridian’s products. Reserves for rebate agreements include components for reported but unpaid rebates to date and rebates not yet reported. Meridian’s reserves for rebate agreements were increased by approximately $350,000 upon adoption of EITF No. 01-9.

Inventories

Meridian’s inventories are carried at the lower of cost or market. Cost is determined on a first-in, first-out basis, except for inventories in the Viral Antigens business for which cost is determined on a last-in, first-out basis. Meridian establishes reserves against cost for excess and obsolete materials, finished goods whose shelf life may expire before sale to customers, and other identified exposures. Management estimates reserves based on assumptions about future demand and market conditions. If actual market conditions are less favorable than such estimates, additional inventory writedowns would be required and this would negatively affect gross profit margin and overall results of operations. Changes to inventory reserves are recorded in the period that they become known.

For the Viral Antigens purchase business combination, Meridian elected to use last-in, first-out accounting for inventories for financial reporting purposes. Under last-in, first-out accounting, the stepped-up inventory value will be charged to earnings in periods in which inventory quantities decline below those on hand at the acquisition date. To date, inventory quantities have remained above levels on hand at the acquisition date.

Intangible Assets

Meridian’s intangible assets include identifiable intangibles and goodwill. Identifiable intangibles include customer lists, supply agreements, manufacturing technologies, patents, licenses, trade names and non-compete agreements. All of Meridian’s identifiable intangibles have finite lives.

During the first quarter of fiscal 2002, Meridian adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets . SFAS No. 142 provides that goodwill and intangible assets with indefinite lives are no longer amortized over their useful lives, but rather, are now subject to an annual impairment review (or more frequently if impairment indicators arise) by applying a fair-value based test. There have been no impairments from the analyses required by SFAS No. 142.

Identifiable intangibles with finite lives are subject to impairment testing as prescribed by SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets . Pursuant to the provisions of SFAS No. 144, identifiable intangibles with finite lives are reviewed for impairment when events or circumstances indicate that such assets may not be recoverable at their current carrying value. Whether an event or circumstance triggers an impairment is determined by comparing an estimate of the asset’s undiscounted future cash flows to its carrying

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value. If impairment has occurred, it is measured by a fair-value based test. Meridian adopted SFAS No. 144 effective October 1, 2002. There were no impairments from adoption.

Meridian’s ability to recover its intangible assets, both identifiable intangibles and goodwill, is dependent upon the future cash flows of the related acquired businesses and assets. The application of SFAS Nos. 142 and 144 requires management to make judgments and assumptions regarding future cash flows, including sales levels, gross profit margins, operating expense levels, working capital levels and capital expenditures. With respect to identifiable intangibles, management also makes judgments and assumptions regarding useful lives.

Management considers the following factors in evaluating events and circumstances for possible impairment: (i) significant under-performance relative to historical or projected operating results, (ii) negative industry trends, (iii) sales levels of specific groups of products (related to specific identifiable intangibles), (iv) changes in overall business strategies and (v) other factors.

If actual cash flows are less favorable than projections, this could trigger impairment of intangible assets. If impairment were to occur, this would negatively affect overall results of operations.

Income Taxes

Pursuant to SFAS No. 109, Accounting for Income Taxes , Meridian’s provision for income taxes includes federal, foreign, state and local income taxes currently payable and those deferred because of temporary differences between income for financial reporting and income for tax purposes.

Meridian’s deferred tax assets include net operating loss carryforwards in foreign jurisdictions. The realization of tax benefits related to net operating loss carryforwards is dependent upon the generation of future taxable income in the applicable jurisdictions. Management assesses the level of deferred tax asset valuation allowance by taking into consideration historical and future projected operating results, future reversals of taxable temporary differences, as well as tax planning strategies. The amount of net deferred tax asset considered realizable could be reduced in future years if estimates of future taxable income during the carryforward period are reduced.

Undistributed earnings in Meridian’s foreign subsidiaries are considered by management to be permanently re-invested in such subsidiaries. Consequently, US deferred tax liabilities on such earnings have not been recorded. Management believes that such US taxes would be largely offset by foreign tax credits for taxes paid in applicable foreign jurisdictions.

-29-

New Accounting Pronouncements:

During December 2002, the Financial Accounting Standards Board issued Statement No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, an Amendment of FASB Statement No. 123 . Statement No. 148 provides alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based compensation. Meridian accounts for its stock-based compensation plans under Accounting Principles Board Opinion No. 25, in which compensation expense is determined based on intrinsic value. Meridian continually evaluates its accounting policies, including those governing stock-based compensation, and at this time believes it is appropriate to continue accounting for employee stock-based compensation under APB No. 25, consistent with historical practice.

During November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Direct Guarantees of Indebtedness of Others . Interpretation No. 45 clarifies the requirements of FASB Statement No. 5 relating to a guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. Meridian’s adoption of Interpretation No. 45 has had no impact on results of operations or financial condition.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Market Risk Exposure under Item 7 above.

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ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


Index to Consolidated Financial Statements
Reports of Independent Auditors			32
Consolidated Statements of Operations for the years ended September 30, 2003, 2002 and 2001			34
Consolidated Statements of Cash Flows for the years ended September 30, 2003, 2002 and 2001			35
Consolidated Balance Sheets as of September 30, 2003 and 2002			36
Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2003, 2002 and 2001			38
Notes to Consolidated Financial Statements			39
Schedule No. II – Valuation and Qualifying Accounts for the years ended September 30, 2003, 2002 and 2001			63

All other supplemental schedules are omitted due to the absence of conditions under which they are required or because the information is shown in the Consolidated Financial Statements or Notes thereto.

-31-

Report of Independent Auditors

To the Board of Directors and Shareholders of Meridian Bioscience, Inc.:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Meridian Bioscience, Inc. and its subsidiaries at September 30, 2003 and September 30, 2002, and the results of their operations and their cash flows for each of the two years in the period ended September 30, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statements schedule are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The financial statements, prior to the revisions discussed in Notes 2 and 10, and financial statement schedule of the Company as of September 30, 2001 and for the year then ended were audited by independent accountants who have ceased operations. Those independent accountants expressed an unqualified opinion on those financial statements and financial statement schedule in their report dated November 9, 2001.

As discussed in Note 2, on October 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

As discussed above, the financial statements of the Company for the year ended September 30, 2001, prior to the revisions described in Notes 2 and 10, were audited by other independent accountants who have ceased operations. As described in Notes 2 and 10, these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which was adopted by the Company as of October 1, 2002 and to give effect to a change in reportable segments in 2003. We audited the transitional disclosures in Note 2 and the reclassifications described in Note 10. In our opinion, the transitional disclosures for 2001 in Note 2 are appropriate and the reclassifications described in Note 10 for 2002 and 2001 are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2001 financial statements of the Company other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 financial statements taken as a whole.

/s/ PricewaterhouseCoopers LLP
November 14, 2003

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THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP (ANDERSEN). THIS REPORT HAS NOT BEEN REISSUED BY ANDERSEN AND ANDERSEN DID NOT CONSENT TO THE INCORPORATION BY REFERENCE OF THIS REPORT INTO ANY OF THE COMPANY’S REGISTRATION STATEMENTS.

AS DISCUSSED IN NOTE 2, THE COMPANY HAS REVISED ITS FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2001 TO INCLUDE THE TRANSITIONAL DISCLOSURES REQUIRED BY STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 142, GOODWILL AND INTANGIBLE ASSETS. THE ANDERSEN REPORT DOES NOT EXTEND TO THESE CHANGES. THE REVISIONS TO THE 2001 FINANCIAL STATEMENTS RELATED TO THESE TRANSITIONAL DISCLOSURES WERE REPORTED ON BY PRICEWATERHOUSECOOPERS LLP, AS STATED IN THEIR REPORT APPEARING HEREIN.

ADDITIONALLY, AS DISCUSSED IN NOTE 10, THE COMPANY HAS REVISED ITS 2001 FINANCIAL STATEMENTS TO GIVE EFFECT TO A CHANGE IN REPORTABLE SEGMENTS. THE ANDERSEN REPORT DOES NOT EXTEND TO THESE CHANGES TO THE 2001 FINANCIAL STATEMENTS. THE REVISIONS TO THE 2001 FINANCIAL STATEMENTS RELATED TO THE CHANGE IN REPORTABLE SEGMENTS WERE REPORTED ON BY PRICEWATERHOUSECOOPERS LLP, AS STATED IN THEIR REPORT APPEARING HEREIN.

Report of Independent Public Accountants

To Meridian Bioscience, Inc.:

We have audited the accompanying consolidated balance sheets of MERIDIAN BIOSCIENCE, INC. and subsidiaries as of September 30, 2001 and 2000, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended September 30, 2001. These financial statements and the schedule referred to below are the responsibility of Meridian’s management. Our responsibility is to express an opinion on the financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Meridian Bioscience, Inc. and subsidiaries as of September 30, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2001, in conformity with accounting principles generally accepted in the United States.

Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index of the financial statements is presented for the purposes of complying with the Securities and Exchange Commission’s rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Cincinnati, Ohio,
November 9, 2001

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CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Meridian Bioscience, Inc. and Subsidiaries


For the Year Ended September 30,			2003			2002			2001

Net Sales			$	65,864		$	59,104		$	56,527
Cost of Sales
	Sale of product			27,576			24,506			25,821
	Inventory impairment			—			—			4,000

		Total cost of sales		27,576			24,506			29,821

Gross Profit				38,288			34,598			26,706

Operating Expenses:
	Research and development			3,875			2,888			3,363
	Selling and marketing			10,601			9,730			10,971
	General and administrative			11,023			10,775			11,495
	Costs of abandoned acquisition			—			1,211			—
	Costs and asset impairment charges related to FDA matters			—			—			11,074
	European restructuring costs			—			—			1,510
	Acquired in-process research and development			—			—			800

		Total operating expenses		25,499			24,604			39,213

Operating Income (Loss)				12,789			9,994			(12,507	)
Other Income (Expense):
	Interest income			42			38			166
	Interest expense			(1,718	)		(1,974	)		(2,546	)
	Other, net			478			185			(19	)

		Total other income (expense)		(1,198	)		(1,751	)		(2,399	)

Earnings (Loss) Before Income Taxes				11,591			8,243			(14,906	)
Income Tax Provision (Benefit)				4,573			3,212			(4,631	)

Net Earnings (Loss)			$	7,018		$	5,031		$	(10,275	)

Earnings Per Share Data:
	Basic earnings (loss) per common share		$	0.48		$	0.34		$	(0.70	)
	Diluted earnings (loss) per common share		$	0.47		$	0.34		$	(0.70	)
	Common shares used for basic earnings (loss) per common share			14,664			14,621			14,589
	Dilutive stock options			286			139			—

	Common shares used for diluted earnings (loss) per common share			14,950			14,760			14,589

Dividends declared per common share			$	0.34		$	0.28		$	0.26
Anti-dilutive Securities:
	Common stock options			250			737			1,088
	Convertible debentures			1,243			1,243			1,243

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)

Meridian Bioscience, Inc. and Subsidiaries


For the Year Ended September 30,					2003			2002			2001

Cash Flows From Operating Activities
		Net earnings (loss)			$	7,018		$	5,031		$	(10,275	)
		Non-cash items
			Acquired in-process research and development			—			—			800
			Depreciation of property, plant and equipment			2,390			2,312			2,261
			Amortization of intangible assets			1,390			1,407			2,485
			Asset impairment charges related to FDA matters			—			—			12,752
			European restructuring			—			—			396
			Deferred income taxes			1,044			200			(4,394	)
			Stock compensation expense			14			48			15
			Gain on sale of stock received in demutualization			—			(254	)		—
			Loss on disposition of fixed assets			26			—			—
		Change in current assets				(3,945	)		(123	)		4,604
		Change in current liabilities				3,571			2,446			(1,302	)
	Other, net					845			348			1,360

				Net cash provided by operating activities		12,353			11,415			8,702

Cash Flows From Investing Activities
		Viral Antigens earnout payments				(1,407	)		(905	)		—
		Acquisitions of property, plant and equipment				(1,812	)		(3,550	)		(1,923	)
		Proceeds from sales of investments				—			254			9
		Other intangibles				(33	)		—			—

				Net cash used in investing activities		(3,252	)		(4,201	)		(1,914	)

Cash Flows From Financing Activities
		Net activity on revolving credit facility				(2,482	)		(2,940	)		(345	)
		Proceeds from debt obligations				—			—			4,058
		Repayment of debt obligations				(2,792	)		(2,175	)		(7,016	)
		Dividends paid				(4,989	)		(4,022	)		(3,722	)
		Acquisitions of treasury stock				—			—			(32	)
		Proceeds from exercises of stock options				478			138			11
		Cost of shelf registration statement				(42	)		—			—

				Net cash used in financing activities		(9,827	)		(8,999	)		(7,046	)

Effect of Exchange Rate Changes on Cash						349			172			111
Net Decrease in Cash						(377	)		(1,613	)		(147	)
Cash at Beginning of Period						3,060			4,673			4,820

Cash at End of Period					$	2,683		$	3,060		$	4,673

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

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CONSOLIDATED BALANCE SHEETS (dollars in thousands)

Meridian Bioscience, Inc. and Subsidiaries


As of September 30,			2003		2002

Assets
*Current Assets:*
	Cash (includes $600 that is restricted)		$	2,683	$	3,060
	Accounts receivable, less allowances of $471 in 2003 and $987 in 2002			14,894		12,616
	Inventories			14,066		12,735
	Prepaid expenses and other current assets			1,302		966
	Deferred income taxes			216		998

		Total current assets		33,161		30,375

*Property, Plant and Equipment, at Cost:*
	Land			688		666
	Buildings and improvements			15,183		13,986
	Machinery, equipment and furniture			18,035		15,317
	Construction in progress			838		2,780

	Subtotal			34,744		32,749
	Less-accumulated depreciation and amortization			17,194		14,744

		Net property, plant and equipment		17,550		18,005

*Other Assets:*
	Deferred debenture offering costs, net			382		517
	Goodwill			4,991		4,542
	Other intangible assets, net			10,207		11,415
	Other assets			129		241

		Total other assets		15,709		16,715

		Total assets	$	66,420	$	65,095

The accompanying notes are an integral part of these consolidated balance sheets.

-36-

CONSOLIDATED BALANCE SHEETS (dollars in thousands)

Meridian Bioscience, Inc. and Subsidiaries


As of September 30,			2003			2002

Liabilities and Shareholders’ Equity
*Current Liabilities:*
	Current portion of long-term debt and capital lease obligations		$	879		$	943
	Borrowings under revolving credit facility			463			2,945
	Accounts payable			2,271			1,914
	Accrued payroll costs			4,534			2,428
	Purchase business combination liability			463			1,407
	Abandoned acquisition costs			—			980
	Other accrued expenses			3,001			2,817
	Income taxes payable			3,719			1,815

		Total current liabilities		15,330			15,249

*Long-term Obligations:*
	Bank debt and capital lease obligations			1,505			3,626
	Convertible subordinated debentures			20,000			20,000
*Deferred Income Taxes*				2,101			1,839
*Commitments and Contingencies*
*Shareholders’ Equity:*
	Preferred stock, no par value, 1,000,000 shares authorized, none issued			—			—
	Common stock, no par value, 50,000,000 shares authorized, 14,728,590 and 14,633,215 shares issued and outstanding			2,535			2,535
	Treasury stock, 8,300 shares			(32	)		(32	)
	Additional paid-in capital			21,641			21,191
	Retained earnings			3,930			1,901
	Accumulated other comprehensive loss			(590	)		(1,214	)

		Total shareholders’ equity		27,484			24,381

		Total liabilities and shareholders’ equity	$	66,420		$	65,095

The accompanying notes are an integral part of these consolidated balance sheets.

-37-

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollars and shares in thousands except per share data)

Meridian Bioscience, Inc. and Subsidiaries


																			Accumulated
			Common		Shares								Additional						Other						Total
			Shares		Held in			Common		Treasury			Paid-in			Retained			Comprehensive			Comprehensive			Shareholders’
			Issued		Treasury			Stock		Stock			Capital			Earnings			Income (Loss)			Income (Loss)			Equity

Balance at September 30, 2000				14,587		—			2,530		—			20,941			14,889			(1,749	)					36,611
Cash dividends paid - $0.26 per share				—		—			—		—			—			(3,722	)		—						(3,722	)
Exercise of stock options				12		—			5		—			6			—			—						11
Stock compensation expense				—		—			—		—			15			—			—						15
Purchase of treasury stock				—		(8	)		—		(32	)		—			—			—						(32	)
Comprehensive loss:
	Net loss			—		—			—		—			—			(10,275	)		—		$	(10,275	)		(10,275	)
	Foreign currency translation adjustment			—		—			—		—			—			—			336			336			336

		Comprehensive loss																				$	(9,939	)

Balance at September 30, 2001				14,599		(8	)		2,535		(32	)		20,962			892			(1,413	)					22,944
Cash dividends paid - $0.275 per share				—		—			—		—			—			(4,022	)		—						(4,022	)
Exercise of stock options				34		—			—		—			138			—			—						138
Stock compensation expense				—		—			—		—			91			—			—						91
Comprehensive income:
	Net earnings			—		—			—		—			—			5,031			—		$	5,031			5,031
	Foreign currency translation adjustment			—		—			—		—			—			—			199			199			199

		Comprehensive income																				$	5,230

Balance at September 30, 2002				14,633		(8	)		2,535		(32	)		21,191			1,901			(1,214	)					24,381
Cash dividends paid - $0.34 per share				—		—			—		—			—			(4,989	)		—						(4,989	)
Exercise of stock options				94		—			—		—			478			—			—						478
Stock compensation expense				2		—			—		—			14			—			—						14
Cost of shelf registration statement				—		—			—		—			(42	)		—			—						(42	)
Comprehensive income:
	Net earnings			—		—			—		—			—			7,018			—		$	7,018			7,018
	Foreign currency translation adjustment			—		—			—		—			—			—			624			624			624

		Comprehensive income																				$	7,642

Balance at September 30, 2003				14,729		(8	)	$	2,535	$	(32	)	$	21,641		$	3,930		$	(590	)				$	27,484

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Meridian Bioscience, Inc. and Subsidiaries

(1) Corporate Name Change

On January 23, 2001, Meridian’s shareholders approved a change in the corporate name to Meridian Bioscience, Inc. Also during January 2001, Meridian changed its Nasdaq symbol from KITS to VIVO. These changes were implemented to more accurately reflect Meridian’s expansion of its capabilities in bioscience, research reagent development and other services that will enable drug discovery and realization of new pharmaceuticals, vaccines and diagnostics.

(2) Summary of Significant Accounting Policies

(a) Nature of Business – Meridian is a fully-integrated life science company whose principal businesses are (i) the development, manufacture and distribution of diagnostic test kits primarily for certain respiratory, gastrointestinal, viral and parasitic infectious diseases, (ii) the manufacture and distribution of bulk antigens and reagents used by researchers and other diagnostic manufacturers and (iii) the contract manufacture of proteins and other biologicals for use by biopharmaceutical and biotechnology companies engaged in research for new drugs and vaccines.

(b) Principles of Consolidation - The consolidated financial statements include the accounts of Meridian Bioscience, Inc. and its subsidiaries (collectively, “Meridian” or the “Company”). All significant intercompany accounts and transactions have been eliminated.

(c) Use of Estimates - 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, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are discussed in Notes 2(e), 2(g), 2(h), 2(k) and 8.

(d) Foreign Currency Translation Adjustments - Assets and liabilities of foreign operations are translated using year-end exchange rates with gains or losses resulting from translation included in a separate component of accumulated other comprehensive income (loss). Revenues and expenses are translated using exchange rates prevailing during the year. Meridian also recognizes foreign currency transaction gains and losses on certain assets and liabilities that are denominated in the Euro currency. These gains and losses are included in other income and expense in the accompanying consolidated statements of operations.

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(e) Inventories - Inventories are stated at the lower of cost or market. Cost is determined on a first-in, first-out basis (FIFO), except for $4,779,000 of inventory for which cost is determined on a last-in, first-out basis (LIFO). The FIFO cost of this inventory was $3,667,000 at September 30, 2003.

Meridian establishes reserves against cost for excess and obsolete materials, finished goods whose shelf life may expire before sale to customers, and other identified exposures. Management estimates reserves based on assumptions about future demand and market conditions. If actual market conditions are less favorable than such estimates, additional inventory writedowns would be required and this would negatively affect gross profit margin and overall results of operations. Changes to inventory reserves are recorded in the period that they become known.

For the Viral Antigens purchase business combination, Meridian elected to use LIFO accounting for inventories for financial reporting purposes. Under LIFO accounting, the stepped-up inventory value will be charged to earnings in periods in which inventory quantities decline below those on hand at the acquisition date. To date, inventory quantities have remained above levels on hand at the acquisition date.

(f) Property, Plant and Equipment - Property, plant and equipment are stated at cost. Upon retirement or other disposition of property, plant and equipment, the cost and related accumulated depreciation and amortization are removed from the accounts and the resulting gain or loss is reflected in earnings. Maintenance and repairs are expensed as incurred. Depreciation and amortization are computed on the straight-line method in amounts sufficient to write-off the cost over the estimated useful lives as follows:

Buildings and improvements - 5 to 33 years

Machinery, equipment and furniture - 3 to 10 years

(g) Intangible Assets and Adoption of SFAS Nos. 142 and 144: - Effective October 1, 2001, Meridian adopted SFAS No. 142, Goodwill and other Intangible Assets . SFAS No. 142 addresses accounting and reporting for acquired goodwill and other intangible assets. SFAS No. 142 provides that goodwill and other intangible assets with indefinite lives are no longer subject to amortization over their useful lives, but rather, are now subject to an annual impairment review (or more frequently if impairment indicators arise) by applying a fair-value based test. Meridian has no intangible assets with indefinite lives other than goodwill. There have been no impairments from the analyses prepared pursuant to SFAS No. 142. Pursuant to the provisions of SFAS No. 142, an intangible asset representing a workforce acquired in a past acquisition was reclassified to goodwill at September 30, 2002. The net book value of the acquired workforce at the time of transfer was $73,000, including deferred income taxes of $45,000. During fiscal 2003, the change in goodwill was an increase of $449,000. This change consisted of an increase related to the VAI earnout obligation for fiscal 2003 in the amount of $463,000, offset by a decrease of $14,000 that was included in the net gain received for the sale of blood-grouping products. During fiscal 2002, the change in goodwill was an increase of $1,586,000. This change related to the VAI earnout obligation and the transfer of the acquired workforce

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described above. The following table reconciles reported net earnings (loss) to amounts adjusted to add back goodwill and workforce amortization (in thousands, except per share amounts).


Year Ended September 30,		2003		2002		2001

Reported net earnings (loss)		$	7,018	$	5,031	$	(10,275	)
Add back: Goodwill amortization after-tax			—		—		152
	Workforce amortization after-tax		—		—		41

Adjusted net earnings (loss)		$	7,018	$	5,031	$	(10,082	)

Reported basic earnings (loss) per share		$	0.48	$	0.34	$	(0.70	)
Goodwill and workforce amortization after-tax			—		—		0.01

Adjusted basic earnings (loss) per share		$	0.48	$	0.34	$	(0.69	)

Reported diluted earnings (loss) per share		$	.047	$	0.34	$	(0.70	)
Goodwill and workforce amortization after-tax			—		—		0.01

Adjusted diluted earnings (loss) per share		$	.047	$	0.34	$	(0.69	)

A summary of Meridian’s acquired intangible assets subject to amortization, as of September 30, 2003 and 2002 is as follows (in thousands).

2003

2002

Gross

2003

Gross

2002

Carrying

Accumulated

Carrying

Accumulated

As of September 30,

Value

Amortization

Value

Amortization

Covenants not to compete

800

773

800

694

Core products

3,199

1,287

3,199

1,097

Manufacturing technologies

5,747

2,668

5,747

2,327

Trademarks, licenses and patents

1,820

1,146

1,787

1,007

Customer lists and supply agreements

7,367

2,852

7,367

2,360

18,933

8,726

18,900

7,485

The actual aggregate amortization expense for these intangible assets for fiscal 2003, fiscal 2002 and fiscal 2001 was $1,241,000, $1,272,000 and $2,350,000, respectively. The estimated aggregate amortization expense for these intangible assets for each of the five succeeding fiscal years is as follows: fiscal 2004 - $1,176,000, fiscal 2005 - $1,090,000, fiscal 2006 - $1,086,000, fiscal 2007- $1,086,000 and fiscal 2008 - $1,063,000.

Effective October 1, 2002, Meridian adopted SFAS No. 144, Accounting for Impairment or Disposal of Long-lived Assets . SFAS No. 144 establishes a single model for accounting for impairment or disposal of long-lived assets, including the disposal of a segment of a business. Long-lived assets, excluding goodwill and identifiable intangibles with indefinite lives, are reviewed for impairment when events or circumstances

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indicate that such assets may not be recoverable at their carrying value. Whether an event or circumstance triggers an impairment is determined by comparing an estimate of the assets’ future cash flows to its carrying value. If an impairment has occurred it is measured by a fair-value based test. SFAS No. 144 requires that assets to be disposed of by sale are reported at the lower of carrying value or fair value, less costs to sell. There was no impact on results of operations or financial condition from the adoption of SFAS No. 144.

Meridian’s ability to recover its intangible assets, both identifiable intangibles and goodwill, is dependent upon the future cash flows of the related acquired businesses and assets. The application of SFAS Nos. 142 and 144 requires management to make judgments and assumptions regarding future cash flows, including sales levels, gross profit margins, operating expense levels, working capital levels and capital expenditures. With respect to identifiable intangibles, management also makes judgments and assumptions regarding useful lives.

Management considers the following factors in evaluating events and circumstances for possible impairment: (i) significant under-performance relative to historical or projected operating results, (ii) negative industry trends, (iii) sales levels of specific groups of products (related to specific identifiable intangibles), (iv) changes in overall business strategies and (v) other factors.

If actual cash flows are less favorable than projections, this could trigger impairment of intangible assets and other long-lived assets. If impairment were to occur, this would negatively affect overall results of operations.

(h) Revenue Recognition - Revenue is recognized from sales when product is shipped and title has passed to the buyer. Revenue for the US Diagnostics operating segment is reduced at the date of sale for estimated rebates and cash discounts that will be claimed by customers. Management estimates reserves for rebate agreements and cash discounts based on historical statistics, current trends and other factors. Changes to the reserves are recorded in the period that they become known. Revenue for the Life Science operating segment’s protein production laboratory is recognized either upon shipment of product or final lot acceptance depending on contract terms.

During fiscal 2002, Meridian adopted EITF No. 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including the Reseller of a Vendor’s Products) . EITF No. 01-9 affected the manner in which Meridian estimates reserves for distributor rebate agreements. Rebate agreements are in place with certain independent national distributors and are designed to reimburse such distributors for their cost in handling Meridian’s products. Reserves for rebate agreements include components for reported but unpaid rebates to date and rebates not yet reported. Meridian’s reserves for rebate agreements were increased by approximately $350,000 upon adoption of EITF No. 01-9.

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(i) Research and Development Costs - Internal research and development costs are charged to earnings as incurred. Third-party research and development costs are expensed when the contracted work has been performed and certain milestone results have been achieved.

(j) Advertising - Advertising costs are charged to earnings as incurred. Expenditures for advertising in fiscal 2003, 2002 and 2001 were approximately $222,000, $238,000, and $193,000 respectively.

(k) Income Taxes – The provision for income taxes includes federal, foreign, state and local income taxes currently payable and those deferred because of temporary differences between income for financial reporting and income for tax purposes.

(l) Forward Contracts – Meridian uses forward contracts from time to time to address foreign currency risk related to certain transactions denominated in the Euro currency. These contracts are used to fix the exchange rate in converting Euros to US dollars. Gains and losses on such contracts are recorded in other income and expense in the accompanying consolidated statements of operations. As of September 30, 2003, Meridian had one such contract outstanding with a notional amount of 300,000 Euros and a maturity of December 2003.

(m) Supplemental Cash flow Information – Supplemental cash flow information is as follows for fiscal 2003, 2002 and 2001 (amounts in thousands):


Year Ended September 30,		2003		2002		2001

Cash paid (received) for -
	Income taxes	$	1,558	$	242	$	(4,242	)
	Interest		1,729		2,113		2,447
Non-cash items -
	Capital lease financing		—		—		214
	Viral Antigens earnout obligation		463		1,407		800

(n) New Accounting Pronouncements – During December 2002, the Financial Accounting Standards Board issued Statement No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, an Amendment of FASB Statement No. 123 . Statement No. 148 provides alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based compensation. Meridian accounts for its stock-based compensation plans under Accounting Principles Board Opinion No. 25, in which compensation expense is determined based on intrinsic value. Meridian continually evaluates its accounting policies, including those governing stock-based compensation, and at this time believes it is appropriate to continue accounting for employee stock-based compensation under APB No. 25, consistent with historical practice.

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No compensation cost, to date, has been recognized for options granted to employees. Had compensation cost for these plans been determined using the fair-value method, Meridian’s net income and earnings per share would have been reduced to the following pro forma amounts (amounts in thousands, except per share data):


		2003			2002			2001

Net income (loss) as reported		$	7,018		$	5,031		$	(10,275	)
Stock-based compensation included in net income as reported, after tax			9			30			9
Pro forma fair value of stock options, after tax			(597	)		(451	)		(613	)

Pro forma net income (loss)		$	6,430		$	4,610		$	(10,879	)

Basic EPS as reported		$	0.48		$	0.34		$	(0.70	)
Stock-based compensation included in net income as reported, after tax			—			—			—
Pro forma fair value of stock options, after tax			(0.04	)		(0.02	)		(0.05	)

	Pro forma basic EPS	$	0.44		$	0.32		$	(0.75	)

	Diluted EPS as reported	$	0.47		$	0.34		$	(0.70	)
Stock-based compensation included in net income as reported, after tax			—			—			—
	Pro forma fair value of stock options, after tax		(0.04	)		(0.03	)		(0.05	)

	Pro forma diluted EPS	$	0.43		$	0.31		$	(0.75	)

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:


Year Ended September 30,	2003			2002			2001

Risk-free interest rates		2.9%-3.8	%		4.0%-5.3	%		4.4%-6.0	%
Dividend yield		3.6%-6.3	%		4.1%-6.0	%		3.0%-10.4	%
Life of option	8.5 yrs.			8 yrs.			8 yrs.
Share price volatility		56%-57	%		56%-57	%		46%-57	%

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(3) FDA Matters

In accordance with the FDA’s directive in the Warning Letter, Meridian is required to undergo three annual independent audits to evaluate Meridian’s progress implementing its comprehensive plan. The first audit was completed in November 2001. The second audit was completed in May 2003. The reports from these audits substantiated Meridian’s continued progress in addressing issues raised in the prior FDA and independent audits. Meridian responded to the latest observations and recommendations with corrective actions designed to further improve its established quality control systems and procedures.

At present, it is uncertain whether Meridian’s actions will be sufficient so that no further remedial action or enforcement action by the FDA will occur.

During fiscal 2001, Meridian incurred costs and asset impairment charges in the amount of $15,074,000 related to implementation of its comprehensive plan submitted to the FDA and the discontinuance of manufacturing and distributing approximately 30 products. Of this amount, $2,322,000 related to implementation costs of the comprehensive plan, primarily consulting fees. The remaining $12,752,000 related to asset impairment charges and product recall costs. Impaired assets included inventory ($4,000,000) and certain intangibles ($7,569,000). Impaired intangible assets included manufacturing technologies, core products, customer lists and goodwill related to the discontinued products. Impairment amounts were measured by comparing discounted future cash flow projections to the net book value of the assets. These impairment charges related to the US Diagnostics operating segment.

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(4) European Restructuring

During the fourth quarter of fiscal 2000, a plan was implemented to restructure European distribution operations and improve operating results. Effective October 1, 2000, the European export business was transferred from Germany to Belgium. During the second quarter of fiscal 2001, Meridian completed the transfer of the German in-country business to an independent distributor. Total costs for the European restructuring plan were $2,310,000, including $800,000 recognized in the fourth quarter of fiscal 2000. Restructuring costs included severance, future lease costs and asset writedowns for accounts receivable, fixed assets and certain intangible assets. The reserve for restructuring costs at September 30, 2003 was $103,000 and related to remaining severance obligations not yet paid and professional fees. During fiscal 2003, provisions to the reserve were $98,000 and payments against the reserve were $94,000, both relating primarily to severance obligations and professional fees. The restructuring plan is complete and Meridian does not expect to incur additional restructuring costs.

(5) Inventories

Inventories are comprised of the following (amounts in thousands):


As of September 30,	2003		2002

Raw materials	$	3,896	$	3,578
Work-in-process		5,329		4,745
Finished goods		4,841		4,412

	$	14,066	$	12,735

(6) Bank Credit Arrangements

Meridian has a $25,000,000 credit facility with a commercial bank. This facility includes $5,000,000 of term debt and capital lease capacity and a $20,000,000 revolving line of credit which bears interest at a LIBOR based rate, and expires in September 2004. This line of credit is collateralized by Meridian’s business assets except for those of the Viral Antigens subsidiary and non-domestic subsidiaries. Borrowings of $463,000 and $2,945,000 were outstanding on this line of credit at September 30, 2003 and 2002, respectively, at weighted average interest rates of 2.4% and 3.1%, respectively. Available borrowings under this line of credit were $19,537,000 at September 30, 2003. In connection with this bank credit arrangement, Meridian is required to comply with financial covenants that limit the amount of debt obligations, require a minimum amount of tangible net worth, and require a minimum amount of fixed charge coverage. Meridian is in compliance with all covenants. Meridian is also required to maintain a cash compensating balance with the bank in the amount of $600,000 pursuant to this bank credit arrangement.

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(7) Long-Term Obligations

(a) Long-term debt obligations are comprised of the following (amounts in thousands):


As of September 30,	2003			2002

Convertible subordinated debentures, unsecured, 7% interest payable semi-annually on March 1 and September 1, principal due September 1, 2006	$	20,000		$	20,000
Bank term loan, denominated in Euro, interest based on Euro LIBOR (2.92 % at September 30, 2003), quarterly payments of $118,791, matures in June 2006		1,306			1,508
Bank term loan, denominated in Euro, interest based on Euro LIBOR (2.89% at September 30, 2003), quarterly payments of $80,381, matures in June 2006		928			2,381
Bank loan, interest at US LIBOR (3.82 % at September 30, 2002), repaid in fiscal 2003		—			62
Other debt obligations		150			618

		22,384			24,569
Less current portion		(879	)		(943	)

	$	21,505		$	23,626

Maturities of long-term debt and capital lease obligations for fiscal 2004, fiscal 2005 and fiscal 2006 are $879,000, $865,000 and $20,640,000, respectively.

Meridian’s debentures are convertible into common stock at $16.09 per share. These debentures were issued at par and do not have a discount feature. Meridian believes that the carrying value of these debentures approximates fair value. The accompanying consolidated balance sheet includes offering costs which have been deferred and are being amortized over the life of the debentures. The net amount of such costs was $382,000 and $517,000 at September 30, 2003 and 2002 (net of accumulated amortization of $947,000 and $812,000, respectively).

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(8) Income Taxes

(a) Earnings before income taxes, and the related provision for income taxes for the years ended September 30, 2003, 2002 and 2001 were as follows (in thousands):


Year Ended September 30,			2003			2002			2001

Earnings (loss) before income taxes -
Domestic			$	9,055		$	6,979			(15,206	)
Foreign				2,536			1,264			300

	Total		$	11,591		$	8,243		$	(14,906	)

Provision (credit) for income taxes -
Federal –
	Current provision		$	1,319		$	—		$	—
	Temporary differences
		Fixed asset basis differences and depreciation		(107	)		(108	)		39
		Intangible asset basis differences and amortization		(119	)		(213	)		(2,890	)
		Currently non-deductible expenses and reserves		136			(149	)		203
		Currency translation		17			(31	)		178
		Abandoned acquisition costs		412			(412	)		—
		Net operating loss carryforwards		1,368			3,248			(1,853	)
		Other, net		(97	)		(75	)		(17	)

	Subtotal			2,929			2,260			(4,340	)
State and local				581			438			(731	)
Foreign				1,063			514			440

Total			$	4,573		$	3,212		$	(4,631	)

(b) The following is a reconciliation between the statutory US income tax rate and the effective rate derived by dividing the provision for income taxes by earnings before income taxes (dollars in thousands):


Year Ended September 30,		2003					2002					2001

Computed income taxes at statutory rate		$	3,941		34.0	%	$	2,802		34.0	%	$	(5,068	)	(34.0	%)
Increase (decrease) in taxes resulting from -
	Goodwill amortization and impairment		—		—			—		—			414		2.8
	Acquired in-process research and development		—		—			—		—			275		1.8
	State and local income taxes		385		3.3			295		3.6			(472	)	(3.2	)
	Subpart F income taxes		384		3.3			228		2.8			—		—
	Foreign taxes		197		1.7			168		2.0			73		0.5
	Extra territorial income exclusion		(197	)	(1.7	)		(170	)	(2.1	)		(85	)	(0.6	)
	Valuation allowance		(25	)	(0.2	)		(52	)	(0.6	)		588		4.0
	Other, net		(112	)	(0.9	)		(59	)	(0.7	)		(356	)	(2.4	)

		$	4,573		39.5		$	3,212		39.0		$	(4,631	)	(31.1	)

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As of September 30,			2003			2002

Deferred tax assets -
	Valuation reserves and non-deductible expenses		$	568		$	967
	Net operating loss carryforwards – foreign			2,245			2,151
	Abandoned acquisition costs			—			459
	Foreign tax credits			193			173
	Fixed asset basis differences and depreciation			16			(125	)
	Other			10			—

		Subtotal		3,032			3,625
	Less valuation allowance			2,160			1,706

	Deferred tax assets			872			1,919

Deferred tax liabilities -
	Intangible asset basis differences and amortization			(2,068	)		(2,201	)
	Inventory basis differences			(309	)		(338	)
	Other			(380	)		(221	)

	Deferred tax liabilities			(2,757	)		(2,760	)

Net deferred tax liability			$	(1,885	)	$	(841	)

For income tax purposes, Meridian has tax benefits related to operating loss carryforwards in Belgium and France. The operating loss carryforward in Belgium has no expiration. The operating loss carryforward in France expires between 2004 and 2008. Meridian has recorded deferred tax assets for these carryforwards, inclusive of valuation allowances in the amount of $85,000 at September 30, 2003. Valuation allowances for pre-acquisition net operating loss carryforwards amount to $1,027,000, while valuation allowances for post-acquisition net operating loss carryforwards are $1,133,000. If tax benefits are recognized in future years for pre-acquisition operating losses, such benefits will be allocated to reduce goodwill and acquired intangible assets. The valuation allowance recorded against deferred tax assets at September 30, 2002 was $1,706,000, and related solely to operating loss carryforwards in foreign jurisdictions.

The realization of deferred tax assets in foreign jurisdictions is dependent upon the generation of future taxable income in certain European countries. Management has considered the levels of currently anticipated pre-tax income in foreign jurisdictions in assessing the required level of the deferred tax asset valuation allowance. Taking into consideration historical and current operating results, and other factors, management believes that it is more likely than not that the net deferred tax asset for foreign jurisdictions, after consideration of the valuation allowance which has been established, will be realized. The amount of the net deferred tax asset considered

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realizable in foreign jurisdictions, however, could be reduced in future years if estimates of future taxable income during the carryforward period are reduced.

Undistributed earnings re-invested indefinitely in the Italian operation were approximately $6,765,000 at September 30, 2003. US deferred tax liabilities of approximately $2,571,000 on such earnings have not been recorded. Management believes that such US taxes would be largely offset by foreign tax credits for taxes paid in applicable foreign jurisdictions.

(9) Employee Benefits

(a) Savings and Investment Plan - Meridian has a profit sharing and retirement savings plan covering substantially all full-time employees. Profit sharing contributions to the plan, which are discretionary, are determined by the Board of Directors. The plan permits participants to contribute to the plan through salary reduction. Under terms of the plan, Meridian will match up to 3% of an employee’s contributions. Discretionary and matching contributions by Meridian to the plan amounted to approximately $728,000, $665,000, and $265,000, during fiscal 2003, 2002 and 2001, respectively.

(b) Stock-Based Compensation Plans – Meridian has two active stock based compensation plans, the 1996 Stock Option Plan Amended and Restated effective January 23, 2001 (“The 1996 Plan”), the 1999 Directors’ Stock Option Plan (“The 1999 Plan”), and an Employee Stock Purchase Plan (“The ESP Plan”) which became effective October 1, 1997.

Meridian may grant options for up to 1,200,000 shares under the 1996 Plan and 50,000 shares under the 1999 Plan. Meridian has granted 1,198,467 options under the 1996 Plan and 35,755 shares under the 1999 plan through September 30, 2003. Options may be granted at exercise prices varying from 95% to 110% of the market value of the underlying common stock on the date of grant and have maximum terms up to ten years. Vesting schedules are established at the time of grant and may be set based on future service periods, achievement of performance targets or a combination thereof. All options contain provisions restricting their transferability and limiting their exercise in the event of termination of employment or the disability or death of the optionee. Meridian has granted options for 1,020,414 shares under similar plans that have expired.

Effective October 1, 1997, Meridian may sell shares of stock to its full-time and part-time employees under the ESP Plan up to the number of shares equivalent to a 1% to 15% payroll deduction from an employee’s base salary plus an additional 5% dollar match of this deduction by Meridian.

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A summary of the status of Meridian’s stock option plans at September 30, 2003, 2002 and 2001 and changes during the years then ended is presented in the tables and narrative below:


Year Ended September 30,	2003					2002					2001

				Wtd					Wtd					Wtd
				Avg Ex					Avg Ex					Avg Ex
	Shares			Price		Shares			Price		Shares			Price

Outstanding beginning of period		1,251,974		$	7.00		1,062,828		$	7.38		837,394		$	8.06
Grants		164,668			6.71		244,868			4.84		295,218			5.42
Exercises		(93,324	)		5.12		(35,649	)		4.25		(10,881	)		1.45
Expirations and forfeitures		(106,773	)		6.07		(20,073	)		5.52		(58,903	)		7.83

Outstanding end of period		1,216,545		$	7.13		1,251,974		$	7.00		1,062,828		$	7.38

Exercisable end of period		685,192		$	8.25		709,566		$	8.13		609,033		$	8.08

Weighted average fair value of grants				$	2.60				$	1.67				$	2.14

The range of exercise prices, the weighted average exercise price and the weighted average remaining contractual life is summarized below for options which are outstanding and those that are exercisable at September 30, 2003.


	Options Outstanding						Options Exercisable

			Wtd Avg
	Options		Remaining		Wtd Avg		Options		Wtd Avg
Range of Exercise Prices	Outstanding		Life (Yrs.)		Ex Price		Outstanding		Ex Price

$1.00 - $5.00		271,192		7.8	$	4.17		30,492	$	3.04
$5.01 - $10.00		757,877		5.9		6.94		474,024		7.05
$10.01 - $16.00		187,476		4.2		12.19		180,676		12.27

		1,216,545		6.1	$	7.13		685,192	$	8.25

Subsequent to year-end 107,000 stock options were granted which would have had no significant impact on the diluted EPS, if granted prior to year-end.

(10) Major Customers and Segment Data

Meridian was formed in 1976 and functions as a fully integrated research, development, manufacturing, marketing and sales organization with primary emphasis in the field of life science. Meridian’s principal businesses are (i) the development, manufacture and distribution of diagnostic test kits primarily for certain respiratory, gastrointestinal, viral and parasitic infectious diseases, (ii) the manufacture and distribution of bulk

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antigens and reagents used by researchers and other diagnostic manufacturers and (iii) the contract manufacture of proteins and other biologicals for use by biopharmaceutical and biotechnology companies engaged in research for new drugs and vaccines.

As a result of changes that occurred in February 2003 in the organization and management of Meridian’s businesses, effective with the quarter beginning January 1, 2003, Meridian changed its reportable operating segments to US Diagnostics (formerly referred to as Meridian Bioscience, Inc. or MBI), European Diagnostics (formerly referred to as Meridian Bioscience Europe or MBE) and Life Science. The US Diagnostics operating segment consists of manufacturing operations in Cincinnati, Ohio, and the sale and distribution of diagnostic test kits in the US and countries outside of Europe, Africa and the Middle East. The European Diagnostics operating segment consists of the sale and distribution of diagnostic test kits in Europe, Africa and the Middle East. The Life Science operating segment consists of manufacturing operations in Memphis, Tennessee and Saco, Maine, and the sale and distribution of bulk antigens, antibodies and bioresearch reagents domestically and abroad. The Life Science operating segment consists of the Viral Antigens and BIODESIGN subsidiaries (formerly part of the Meridian Bioscience, Inc. operating segment), including the protein production laboratory.

Sales to individual customers constituting 10% or more of net consolidated sales were as follows (dollars in thousands):


Year Ended September 30,	2003				2002				2001

Customer A	$	9,089	(14	%)	$	8,479	(14	%)	$	7,990	(14	%)
Customer B		6,408	(10	%)		6,526	(11	%)	$	5,124	(9	%)

Combined export sales for the US Diagnostics and Life Science operating segments were $9,464,000, $6,073,000 and $5,702,000 in fiscal years 2003, 2002 and 2001, respectively. Two products accounted for 20% of total sales in fiscal 2003. Accounts receivable, which are largely dependent upon funds from the Italian government, represent approximately 34% of the accounts receivable balance at September 30, 2003.

Significant country information for the European Diagnostics operating segment is as follows (in thousands). Sales are attributed to the geographic area based on the location from which the product is shipped to the customer.


Year Ended September 30,		2003		2002		2001

Italy -
	Sales	$	5,354	$	4,694	$	4,864
	Identifiable assets		6,124		5,978		6,498
Belgium -
	Sales	$	8,402	$	7,226	$	7,557
	Identifiable assets		4,158		4,034		5,150

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As required by Financial Accounting Standards Board Statement No. 131, Disclosures About Segments of an Enterprise and Related Information, prior year operating information in the following table has been reclassified to conform with the change in operating segments described above. Segment information for the years ended September 30, 2003, 2002, and 2001 is as follows (in thousands):


		US			European			Life
		Diagnostics			Diagnostics			Science		Elim (1)			Total

Fiscal Year 2003 -
Net sales –
	Third-party	$	39,906		$	13,756		$	12,202	$	—		$	65,864
	Inter-segment		5,155			79			939		(6,173	)		—
Operating income			8,375			2,717			1,676		21			12,789
Depreciation and amortization			2,820			150			810		—			3,780
Capital expenditures			1,324			55			433		—			1,812
Total assets			63,941			10,489			22,232		(30,242	)		66,420

Fiscal Year 2002 -
Net sales –
	Third-party	$	34,171		$	11,920		$	13,013	$	—		$	59,104
	Inter-segment		4,992			—			735		(5,727	)		—
Operating income			5,514			1,565			2,896		19			9,994
Depreciation and amortization			2,827			171			721		—			3,719
Capital expenditures			1,080			46			2,424		—			3,550
Total assets			63,708			10,229			21,293		(30,135	)		65,095

Fiscal Year 2001 -
Net sales -
	Third-party	$	32,557		$	12,421		$	11,549	$	—		$	56,527
	Inter-segment		5,380			—			689		(6,069	)		—
Operating income (loss)			(13,444	)		(725	)		1,880		(218	)		(12,507	)
Depreciation and amortization			3,939			153			654		—			4,746
Capital expenditures			1,073			136			714		—			1,923
Total assets			66,611			11,239			17,447		(29,315	)		65,982

(1) Eliminations consist of intersegment transactions.

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Year Ended September 30,	2003			2002			2001

Segment operating income (loss)	$	12,789		$	9,994		$	(12,507	)
Interest income		42			38			166
Interest expense		(1,718	)		(1,974	)		(2,546	)
Other, net		478			185			(19	)

Consolidated earnings (loss) before income taxes	$	11,591		$	8,243		$	(14,906	)

The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 2. Transactions between geographic segments are accounted for at established intercompany prices for internal and management purposes with all intercompany amounts eliminated in consolidation. Total assets for the US Diagnostics and Life Science operating segments include goodwill and other intangible assets of $9,526,000 and $5,672,000, respectively at September 30, 2003, $10,555,000 and $5,402,000, respectively at September 30, 2002, and $11,645,000 and $4,117,000, respectively at September 30, 2001.

(11) Commitments and Contingencies

(a) Royalty Commitments - Meridian has entered into various license agreements that require payment of royalties based on a specified percentage of the sales of licensed products (1% to 8%). These royalty expenses are recognized on an as-earned basis and recorded in the year earned as a component of cost of sales. Annual royalty expenses associated with these agreements were approximately $766,000 $860,000, and, $699,000, respectively, for the years ended September 30, 2003, 2002 and 2001.

For one of these license agreements, Meridian is engaged in a dispute with the licensor regarding the payment of royalties. The licensor has claimed additional royalties due from Meridian in the amount of approximately $700,000. Meridian believes that it has satisfactorily complied with all provisions of this license agreement, and therefore, disputes this claim. In addition, Meridian believes that it has valid claims against the licensor under this agreement. This matter is not expected to have a material effect on results of operations or financial condition.

(b) Litigation – During fiscal 2003, Meridian reached a settlement with a former employee regarding his breach of an employment agreement, misappropriation of company trade secrets and related legal proceedings. This settlement provided that Meridian receive proceeds from the disposition of certain personal assets of the former employee. The amount of such proceeds was $216,000, and is included in other income in the accompanying consolidated statement of operations for fiscal 2003. Legal proceedings for these matters

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have been on-going since June 2000. Legal fees related to these matters amounted to $60,000, $150,000, $440,000 and $450,000 in fiscal 2003, 2002, 2001 and 2000, respectively. During fiscal 2003, Meridian received insurance reimbursement in the amount of $187,000 for a portion of these legal fees. This insurance reimbursement is recorded in general and administrative expenses in the accompanying consolidated statement of operations for fiscal 2003.

Meridian is a party to other litigation that it believes is in the normal course of business. The ultimate resolution of these matters is not expected to have a material adverse effect on Meridian’s financial position, results of operations or cash flows.

(c) Viral Antigens Earnout

The purchase agreement for the Viral Antigens purchase business combination provides for additional consideration, up to a maximum remaining amount of $5,475,000, contingent upon Viral Antigens’ future earnings through September 30, 2006. Earnout consideration is payable each year following the period earned. During fiscal 2003, 2002 and 2001, additional consideration of $463,000, $1,407,000 and $905,000, respectively, was earned pursuant to this provision. Such amounts are included in goodwill in the accompanying consolidated balance sheets. Future earnout consideration, if any, will be allocated to goodwill, and will be recorded in the period in which it is earned and becomes payable.

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(12) Quarterly Financial Data (Unaudited)

Amounts are in thousands except per share data. The sum of the earnings per common share and cash dividends per share may not equal the corresponding annual amounts due to interim quarter rounding.

For the Quarter Ended in Fiscal 2003

December 31

March 31

June 30

September 30

Net sales

16,103

16,913

15,693

17,155

Gross profit

9,162

10,061

9,130

9,935

Net earnings

1,424

1,923

1,822

1,849

Basic earnings per common share

0.10

0.13

0.12

0.13

Diluted earnings per common share

0.10

0.13

0.12

Cash dividends per common share

0.07

0.09


For the Quarter Ended in Fiscal 2002	December 31		March 31		June 30		September 30

Net sales	$	13,555	$	15,092	$	14,898	$	15,559
Gross profit		8,011		8,659		8,572		9,356
Net earnings		1,187		1,425		1,556		863
Basic earnings per common share		0.08		0.10		0.11		0.06
Diluted earnings per common share		0.08		0.10		0.11		0.06
Cash dividends per common share		0.07		0.07		0.07		0.07

Net earnings for the fourth quarter of fiscal 2002 include a charge of $751,000, or $0.05 per diluted share, for costs of the abandoned Biotrin acquisition.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no disagreements on accounting and financial disclosure in the past fiscal year. The information required by Item 9 of Part II is incorporated by reference into the Registrant’s Proxy Statement for its 2004 Annual Shareholders Meeting to be filed with the Commission pursuant to Regulation 14A.

ITEM 9A.

CONTROLS AND PROCEDURES

As of September 30, 2003, an evaluation was completed under the supervision and with the participation of Meridian’s management, including Meridian’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Meridian’s disclosure controls and procedures pursuant to Rule 13a-15(b) and 15(d)-15(b) promulgated under the Securities Exchange Act of 1934, as amended. Based on that

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evaluation, Meridian’s management, including the CEO and CFO, concluded that Meridian’s disclosure controls and procedures were effective as of September 30, 2003. There have been no changes in Meridian’s internal controls over financial reporting identified in connection with the evaluation of internal controls that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to affect, Meridian’s internal controls over financial reporting, or in other factors that could significantly affect internal controls subsequent to September 30, 2003.

PART III

The information required by Items 10., 11., 12., and 13., of Part III are incorporated by reference from the Registrant’s Proxy Statement for its 2004 Annual Shareholders’ Meeting to be filed with the Commission pursuant to Regulation 14A. The equity compensation plan chart required by Regulation S-K Item 201(d) appears in and is hereby incorporated by reference from Item 5 of this Form 10-K. Because Meridian’s fiscal year ended prior to December 15, 2003, no disclosure is being provided with respect to Item 14.

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ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) (1) and (2) FINANCIAL STATEMENTS AND SCHEDULES.

All financial statements and schedules required to be filed by Item 8 of this Form and included in this report have been listed previously under Item 8. No additional financial statements or schedules are being filed since the requirements of paragraph (d) under Item 15 are not applicable to Meridian.

(a) (3) EXHIBITS.


Exhibit Number		Description of Exhibit	Filing Status

	3.1	Articles of Incorporation, including amendments not related to Company name change	A

	3.2	Code of Regulations	B

	4.1	Indenture between Meridian and Star Bank, National Association, as Trustee, relating to Meridian’s 7% Convertible Subordinated Debentures due 2006	C

	4.2	Indenture between Meridian and LaSalle Bank National Association, as Trustee, relating to Meridian’s 5% Convertible Subordinated Debentures due 2013	D

	10.3	License Agreement dated October 6, 1983 with Marion Laboratories, Inc.	B

	10.5	Sublicense Agreement dated June 17, 1993 among Johnson & Johnson, the Scripps Research Institute and Meridian Concerning certain Patent Rights	E

	10.6	Assignment dated June 17, 1993 from Ortho Diagnostic Systems Inc. to Meridian concerning certain Patent Rights	E

	10.7	Agreement dated January 24, 1994 between Meridian Diagnostics, Inc. and Immulok, Inc.	F

	10.8	Asset Purchase Agreement dated June 24, 1996 between Cambridge Biotech Corporation and Meridian Diagnostics, Inc.	G

	10.9	Merger Agreement among Gull Laboratories, Inc., Meridian Diagnostics, Inc. Fresenius AG and Meridian Acquisition Co. dated as of September 15, 1998	H

	10.10*	Savings and Investment Plan Prototype Adoption Agreement	Filed herewith

	10.12*	1986 Stock Option Plan	I

	10.14*	1994 Directors’ Stock Option Plan	J

	10.15*	1996 Stock Option Plan	K

	10.16*	Salary Continuation Agreement for John A. Kraeutler	L

	10.17	First Amendment to Merger Agreement Among Gull Laboratories, Inc., Meridian Diagnostics, Inc. Fresenius AG and Meridian Acquisition Co.	M

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Exhibit Number		Description of Exhibit	Filing Status

	10.18*	1999 Directors’ Stock Option Plan	N

	10.20	Dividend Reinvestment Plan	P

	10.21	Merger Agreement dated September 13, 2000 among Meridian and the Shareholders of Viral Antigens, Inc.	O

	10.22	Loan and Security Agreement among Meridian, certain of its subsidiaries and Fifth Third Bank Dated as of September 20, 2001	R

	10.23*	Employment Agreement Dated February 15, 2001 between Meridian and John A. Kraeutler, including the Addendum to Employment Agreement dated April 24, 2001 between Meridian and John A. Kraeutler	R

	10.24*	Sample Option Agreement Dated October 1, 2001	R

	10.25*	Sample Option Agreement Dated October 1, 2001	R

	10.26*	1996 Stock Option Plan as Amended and Restated Effective January 23, 2001	Q

	10.27	Sample Option Agreement Dated November 19, 2002	Filed herewith

	10.28	Agreement Concerning Disability and Death dated September 10, 2003, between Meridian and William J. Motto	Filed herewith

	10.29	Professional Services Agreement dated October 1, 2002 between Meridian and Antonio Interno	Filed herewith

	13	2003 Annual Report to Shareholders	(1)

	14	Code of Ethics	Filed herewith

	21	Subsidiaries of the Registrant	Filed herewith

	23	Consent of Independent Accountants	Filed herewith

	31.1	Certification of Principal Executive Officer required by Rule 13a-14(a)	Filed herewith

	31.2	Certification of Principal Financial Officer required by Rule 13a-14(a)	Filed herewith

	32	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer	Filed herewith

(1) Only portions of the 2003 Annual Report to Shareholders specifically are incorporated by reference in this Form 10-K as filed herewith. A supplemental paper copy of the 2003 Annual Report to Shareholders has been provided to the Securities and Exchange Commission for informational purposes only.

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*Management Compensatory Contracts

Incorporated by reference to:

A. Registration Statement No. 333-02613 on Form S-3 filed with the Securities and Exchange Commission on April 18, 1996.

B. Registration Statement No. 33-6052 filed under the Securities Act of 1933.

C. Registration Statement No. 333-11077 on Form S-3 filed with the Securities and Exchange Commission on August 29, 1996.

D. Meridian’s Schedule T-O filed with the Securities and Exchange Commission on October 24, 2003.

E. Meridian’s Form 8-K filed with the Securities and Exchange Commission on June 17, 1993.

F. Meridian’s Forms 8-K filed with the Securities and Exchange Commission on February 8, 1994 and April 6, 1994.

G. Meridian’s Form 8-K filed with the Securities and Exchange Commission on July 2, 1996.

H. Meridian’s Form 8-K filed with the Securities and Exchange Commission on September 17, 1998.

I. Registration Statement No. 33-89214 on Form S-8 filed with the Securities and Exchange Commission on April 5, 1995.

J. Registration Statement No. 33-78868 on Form S-8 filed with the Securities and Exchange Commission on May 12, 1994.

K. Meridian’s Annual Report on Form 10-K for the Fiscal Year Ended September 30, 1996.

L. Meridian’s Annual Report on Form 10-K for the Fiscal Year Ended September 30, 1995.

M. Company’s Report on Form 8-K filed with the Securities and Exchange Commission filed on November 13, 1998.

N. Meridian’s Proxy Statement filed with the Securities and Exchange Commission on December 21, 1998.

O. Meridian’s Current Report on Form 8-K dated September 29, 2000.

P. Meridian’s Annual Report on Form 10-K for the Fiscal Year Ended September 30, 1999.

Q. Registration Statement No. 333-75312 on Form S-8 filed with the Securities and Exchange Commission on December 17, 2001

R. Meridian’s Annual Report on Form 10-K for the Fiscal Year Ended September 30, 2001.

(b) REPORTS ON FORM 8-K.

Report on Form 8-K dated September 25, 2003, Item 5, reports change in operating segments

• Annual Report on Form 10-K for the year ended September 30, 2002, Part II, Item 8, Financial Statements and Supplementary Data

• Quarterly Report on Form 10-Q for the quarter ended December 31, 2002, Part I, Item 1, Financial Statements

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SIGNATURES

Pursuant to the requirements of Section 13 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 BIOSCIENCE, INC.

	By:	/s/ William J. Motto

Date: December 22, 2003		William J. Motto
		Chairman of the Board
		and Chief Executive Officer

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


Signature	Capacity	Date

/s/ William J. Motto William J. Motto	Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)	December 22, 2003

/s/ John A. Kraeutler John A. Kraeutler	President and Chief Operating Officer, Director	December 22, 2003

/s/ Melissa Lueke Melissa Lueke	Vice President and Chief Financial Officer	December 22, 2003

/s/ James A. Buzard James A. Buzard	Director	December 22, 2003

/s/ Gary P. Kreider Gary P. Kreider	Director	December 22, 2003

/s/ David C. Phillips David C. Phillips	Director	December 22, 2003

/s/ Robert J. Ready Robert J. Ready	Director	December 22, 2003

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SCHEDULE II

Meridian Bioscience, Inc.
and Subsidiaries

Valuation and Qualifying Accounts
(Amounts in Thousands)
Years Ended September 30, 2003, 2002 and 2001


			Charged
	Balance at		to Costs			Charged							Balance
	Beginning		and			to Other							at End of
Description	of Period		Expenses			Accounts		Deductions			Other ^(a)		Period

Year Ended September 30, 2003:
Allowance for doubtful accounts	$	987	$	(268	)	$	—	$	(360	)	$	112	$	471
Inventory realizability reserves		730		289			—		(439	)		5		585
European restructuring reserves		83		98			—		(94	)		16		103
Year Ended September 30, 2002:
Allowance for doubtful accounts	$	889	$	94		$	—	$	(46	)	$	50	$	987
Inventory realizability reserves		774		1,399			—		(1,443	)		—		730
European restructuring reserves		119		78			—		(119	)		5		83
Year Ended September 30, 2001:
Allowance for doubtful accounts	$	438	$	528		$	—	$	(109	)	$	32	$	889
Inventory realizability reserves		685		4,486			—		(4,498	)		101		774
European restructuring reserves		800		1,321			—		(2,002	)		—		119

(a) Balances reflect the effects of currency translation (fiscal years 2001-2003) and acquired valuation accounts related to the Viral Antigens acquisition (fiscal year 2001).

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EXHIBIT 10.10

KEATING, MUETHING & KLEKAMP, P.L.L.
PROTOTYPE PROFIT SHARING PLAN #001
ADOPTION AGREEMENT
(NON-STANDARDIZED)

MERIDIAN BIOSCIENCE, INC.
SAVINGS AND INVESTMENT PLAN

The Plan and Trust consist of:

- This Adoption Agreement

- The Keating, Muething & Klekamp, P.L.L. Basic Prototype Plan Document

- The Keating, Muething & Klekamp, P.L.L. Prototype Trust Agreement

IRS Opinion Letter Serial Number: K373773a

INSTRUCTIONS AND PROTOTYPE INFORMATION

1. INSTRUCTIONS. For each item in this Adoption Agreement:

(a) if there are boxes, then, except as otherwise noted, check one box; and

(b) fill in any blank lines (other than blanks applicable to unchecked boxes).

FAILURE TO PROPERLY FILL OUT THIS ADOPTION AGREEMENT
MAY RESULT IN DISQUALIFICATION OF THE PLAN.

2. NEED TO APPLY TO THE IRS. An adopting Employer should apply to the appropriate Key District Office of the Internal Revenue Service for a determination that the Plan is qualified under section 401 of the Internal Revenue Code.

                              EMPLOYER INFORMATION

EMPLOYER:         MERIDIAN BIOSCIENCE, INC.

ADDRESS:          3471 River Hills Drive
                  Cincinnati, Ohio 45244

TELEPHONE NO.:             (513) 271-3700

EMPLOYER IDENTIFICATION NUMBER: 31-0888197

EMPLOYER'S FISCAL YEAR END: 09/30

NATURE OF EMPLOYER:

 X       Corporation other than S Corporation      S Corporation

         Sole Proprietor                           Partnership

         Limited Liability Company

Nature of Business (if not incorporated):      _____________

         Tax-exempt Organization                   Governmental

Other ______________________________________________________

The following additional Employers related to the above Employer also adopt the Plan (use additional pages, if necessary):

BIODESIGN International Incorporated Meridian Bioscience Corporation Viral Antigens, Inc.

(A related Employer may adopt the Plan later than the "Effective Date" (below)
by attaching a separate page to this Adoption Agreement reflecting its adoption of the Plan and the effective date of its adoption.)

BASIC PLAN INFORMATION

1. PLAN STATUS AND EFFECTIVE DATE. This Plan:

is a new Plan with an "Effective Date" of ________________; or

X is a complete amendment and restatement of an existing Plan. (If selected, complete each of the following.)

- The "Effective Date" of the amendment and restatement is January 1, 2002.

- The original effective date for the Plan was October 1, 1983.

2. PLAN NUMBER. The Plan number (three digits) of the Plan is 001.

3. PLAN YEAR. The "Plan Year" is the 12-consecutive month period beginning on January 1 and on each anniversary thereof.

4. LIMITATION YEAR. The "Limitation Year" is the 12-consecutive month period beginning on January 1 and on each anniversary thereof.

5. PLAN ADMINISTRATOR. The Administrator is:

X the Employer; or

- The Administrator's telephone number is:
(513) 271-3700.

6. TRUSTEE(S):

Riggs Bank N.A.

808 17th Street N.W.
Washington, DC 20006

7. NORMAL RETIREMENT AGE. Normal Retirement Age is:

X Age 65;

Age ___ (not to exceed 65); or

the later of age ___ (not to exceed 65) or the ___th anniversary (not to exceed 5) of the time the Participant commenced participation in the Plan.

8. MAINTENANCE OF ACCOUNTS. The Trustee shall have the ministerial function of maintaining Participants' Accounts in accordance with information, interpretations, and directions from the Administrator.

X Yes

TYPE OF PLAN AND AUTHORIZED CONTRIBUTIONS

9. TYPE OF PLAN:

PROFIT SHARING ONLY. This Plan permits discretionary (profit sharing) contributions but has no Section 401(k) feature (skip Items 14-30); or

401(K) ONLY (WITH OR WITHOUT MATCH). This Plan has a
Section 401(k) feature but does not provide for discretionary (profit sharing) contributions (except for any required minimum top-heavy contributions) (skip Items 31- 35); or

X PROFIT SHARING AND 401(K). This Plan permits discretionary (profit sharing) contributions and also has a Section 401(k) feature.

10. VOLUNTARY (AFTER-TAX) PARTICIPANT CONTRIBUTIONS. Voluntary (after-tax) Participant contributions are:

X not permitted; or

permitted on a nondeductible basis only. (Not permitted if Safe Harbor 401(k) Plan election in Item 14(b) is in effect.) (If elected, complete Items 22 and 23.)

11. ROLLOVER CONTRIBUTIONS:

X BY PARTICIPANTS AND ELIGIBLE EMPLOYEES. The Plan shall accept rollover contributions from Participants (and Eligible Employees prior to becoming Participants); or

BY PARTICIPANTS ONLY. The Plan shall accept rollover contributions from Participants (but not from Eligible Employees prior to becoming Participants); or

NOT PERMITTED. The Plan shall not accept rollover contributions from Participants or Eligible Employees.

ELIGIBILITY

12. ELIGIBLE EMPLOYEE. "Eligible Employee" means:

any person who is an Employee of the Employer;

X any person who is an Employee of the Employer except for a temporary employee who is not expected to work at least 1,000 hours in a year; or

any person who is an Employee of the Employer fitting the following description ___________________________ __________________________; or

any employee of the Employer, any employee of any other employer required to be aggregated under section 414(b), (c), (m) or (o) of the Code, or any individual deemed under section 414(n) of the Code to be an employee of the Employer or any such employer. (All aggregated Employers should adopt this Plan by executing the Adoption Agreement.)

Note: Unless specified in the second or third option above, in no event shall Employees in the following categories be considered Eligible Employees:
Employees subject to a collective bargaining agreement not providing for their coverage by this Plan; leased employees; and nonresident aliens with no US source income. (See Section 1.18 of the Plan.) Any election to exclude Employees under the second or third option may not be based on the hours worked by an Employee.

13. ENTRY DATE AND AGE AND SERVICE REQUIREMENTS. The Plan either has one or multiple sets of Entry Date and age and service requirements as elected below. (Select one and complete.)

The Plan has one set of Entry Date and age and service requirements (applicable to all types of contributions permitted under the Plan) which are as follows:

(a) ENTRY DATE. "Entry Date" means the Effective Date if the Plan is a new plan and also means each of the following occurring on or after the Effective Date:

each _____ (either the first day or last day of the Plan Year) and (the date six months after the other Entry Date); or

the date on which the Employee satisfies the eligibility age and service requirements; or

the first day of each month; or the first day of each Plan Year quarter.

(b) AGE AND SERVICE REQUIREMENTS. The eligibility age and service requirements for this type of contribution are (complete all blanks; specify "0" if there is no requirement):

(1) for a person who is an Eligible Employee on the Effective Date:

(A) attainment of age and

(B) completion of Years of Service;

(2) for a person who is not an Eligible Employee on the

Effective Date:

(A) attainment of age________ and

(B) completion of ________ Years of
Service.

X The Plan has more than one set of Entry Date and age and service requirements as follows:

PARTICIPANT CONTRIBUTIONS.

N/A. Neither of these types of contributions
are permitted under the Plan; or

X To the extent Section 401(k) elective deferrals or voluntary (after-tax) contributions are permitted under the Plan, the Entry Date and age and service requirements as follows:

(a) ENTRY DATE. "Entry Date" for these types of contributions means the Effective Date if the Plan is a new plan and also means each of the following occurring on or after the Effective Date:

each _____ (either the first day or last day of the Plan Year) and ______ (the date six months after the other Entry Date); or

X the date on which the Employee satisfies the eligibility age and service requirements; or

the first day of each month; or

the first day of each Plan Year quarter.

(b) AGE AND SERVICE REQUIREMENTS. The eligibility age and service requirements are (complete all blanks; specify "0" if there is no requirement):

(1) for a person who is an Eligible Employee on the Effective Date:

(A) attainment of age 0 and

(B) completion of 0 Years of Service;

(2) for a person who is not an Eligible Employee on the Effective Date:

(A) attainment of age 0 and

(B) completion of 0 Years of Service.

NOTE: These eligibility criteria also apply to qualified nonelective contributions (QNECs) and qualified matching contributions if permitted under the Plan; as well as the 401(k) Safe Harbor, if elected.

MATCHING CONTRIBUTIONS SUBJECT TO ACP.

N/A. This type of contribution is not
permitted; or

X The Entry Date and age and service requirements for Employer matching contributions to be taken into account in determining the Actual Contribution Percentage are as follows:

(a) ENTRY DATE. "Entry Date" for these types of contributions means the Effective Date if the Plan is a new plan and also means each of the following occurring on or after the Effective Date:

each _____ (either the first day or last day of the Plan Year) and ______ (the date six months after the other Entry Date); or

the date on which the Employee satisfies the eligibility age and service requirements; or

the first day of each month; or

X the first day of each Plan Year quarter.

(b) AGE AND SERVICE REQUIREMENTS. The eligibility age and service requirements for this type of contribution are (complete all blanks; specify "0" if there is no requirement):

(1) for a person who is an Eligible Employee on the Effective Date:

(A) attainment of age 0 and

(B) completion of 1 Years of Service;

(2) for a person who is not an Eligible Employee on the Effective Date:

(A) attainment of age 0 and

(B) completion of 1 Years of Service.

PROFIT SHARING (DISCRETIONARY) EMPLOYER CONTRIBUTIONS.

N/A. This type of contribution is not
permitted; or

X The Entry Date and age and service requirements for profit sharing (discretionary) contributions are as follows:

(a) ENTRY DATE. "Entry Date" for this type of contribution means the Effective Date if the Plan is a new plan and also means each of the following occurring on or after the Effective Date:

each _____ (either the first day or last day of the Plan Year) and ______ (the date six months after the other Entry Date); or

the date on which the Employee satisfies the eligible age and service requirements; or

the first day of each month; or

X the first day of each Plan Year quarter.

(b) AGE AND SERVICE REQUIREMENTS. The eligibility age and service

requirements for this type of contribution are (complete all blanks; specify "0" if there is no requirement):

(1) for a person who is an Eligible Employee on the Effective Date:

(A) attainment of age 0 and

(B) completion of 1 Years of Service;

(2) for a person who is not an Eligible Employee on the Effective Date:

(A) attainment of age 0 and

(B) completion of 1 Years of Service.

(Note: The age requirement cannot be greater than 21. The service requirement cannot exceed 1 year, except that up to 2 years may be required if the Plan provides for full vesting after not more than 2 Years of Service and a Section 401(k) feature is not adopted. If a fractional Year of Service is specified, an Employee will not be required to complete any specified number of Hours of Service to receive credit for such fractional year.)

SECTION 401(k) FEATURE

(THE FOLLOWING ITEMS 14 THROUGH 30 SHOULD BE COMPLETED ONLY IF A
SECTION 401(k) FEATURE IS PART OF THE PLAN PURSUANT TO ITEM 9; BUT COMPLETE ITEMS 22 AND 23 IF THE PLAN ALLOWS VOLUNTARY (AFTER-TAX) PARTICIPANT CONTRIBUTIONS. OTHERWISE, SKIP TO ITEM 31.)

14. SECTION 401(k) FEATURE. In addition to Section 401(k) elective deferrals by Participants, the Plan shall allow the Employer to make other type(s) of contributions in accordance with the following:

(a) X REGULAR (NON-SAFE HARBOR) SECTION 401(k) FEATURE. The Plan does not follow the 401(k) Safe Harbor provisions of Section 3.10 of the Plan and allows the Employer to make the following type(s) of contributions in connection with the Section 401(k) feature:

X QNECs. This Plan permits the Employer to make qualified nonelective contributions (which are fully vested and subject to the 401(k) distribution limitations) to be taken into account in determining the Actual Deferral Percentage.

X QUALIFIED MATCHING CONTRIBUTIONS SUBJECT TO ADP. This Plan permits the Employer to make qualified matching contributions (which are fully vested and subject to the 401(k) distribution limitations) to be taken into account in determining the Actual Deferral Percentage.

X MATCHING CONTRIBUTIONS SUBJECT TO

                          ACP. This Plan permits the Employer
                          to make matching contributions to
                          the Employer Matching Accounts
                          (which are subject to the vesting
                          schedule selected in Item 49) to be
                          taken into account in determining
                          the Actual Contribution Percentage.

(b)               SAFE HARBOR 401(k) PLAN. The Plan shall
                  follow the 401(k) Safe Harbor provisions of
                  Section 3.10 of the Plan. (If elected,
                  complete Items 15 and 16 and then skip to
                  Items 27-30.)

SECTION 401(k) FEATURE

ELECTIVE DEFERRALS

15. LIMITATIONS ON ELECTIVE DEFERRALS. (Any limitations selected are in addition to the Section 402(g) limits and other limits under the Basic Plan Document.)

(a) PLAN YEAR LIMITATIONS. (Select only one and complete as necessary.)

A Participant's elective deferrals for a Plan Year may not exceed the lesser of ___% of his Compensation for the Plan Year or $______; or

No Plan Year limitations other than those otherwise imposed under the Plan; or

X The Administrator may set a maximum and/or minimum limit (which may change from time to time) to be applied uniformly to the Participants on the percentage or dollar amount of a Participant's Compensation that may be reduced for any Plan Year under a salary reduction election hereunder.

(b) PAY PERIOD LIMITATIONS. (Select only one and complete as necessary.)

A Participant's salary reductions for a pay period or with respect to a bonus or other special payment may not exceed the lesser of ___% of his Compensation otherwise payable for such pay period or as a bonus or special payment or $______; or

No pay period limitations other than those otherwise imposed under the Plan or the law; or

X The Administrator may set a maximum and/or minimum limit (which may change from time to time) to be applied uniformly to the Participants on the percentage or dollar amount of a Participant's Compensation that may be reduced under a salary reduction agreement hereunder for any pay period or for a bonus or special payment.

NOTE: Any limit imposed may not prevent a Participant from receiving the maximum match.

16. ELECTION, CHANGE AND TERMINATION OF SALARY DEFERRALS.

(a) ELECTIONS. A Participant may enter (or re-enter following a termination under (d) below) into a salary reduction agreement by providing the prescribed election form to the Employer on or before one of the following applicable dates and the election shall become effective as soon after the applicable date coinciding with or first following the Employer's receipt of the Participant's election form as is administratively feasible: (Select only one of the following and complete as necessary.)

X Each of the following dates: (Fill in one or more dates during a year.) any date within the first 30 days after hire, otherwise the first day of each calendar quarter; or

Any time; or

Such dates (at least one each calendar year) as may be prescribed by the Administrator from time to time.

(b) CHANGES. A Participant may change a salary reduction agreement by providing the prescribed election form to the Administrator on or before one of the following applicable dates and the change shall become effective as soon after the applicable date coinciding with or first following the Administrator's receipt of the Participant's election form as is administratively feasible: (Select only one of the following and complete as necessary.)

X Each of the following dates: (Fill in one or more dates during a year.) January 1; April 1; July 1; October 1; or

Any time; or

Such dates (at least one each calendar year) as may be prescribed by the Administrator from time to time.

(c) LIMIT ON NUMBER OF CHANGES. A Participant may make changes to his salary reduction agreement no more frequently than: (Select only one of the following and complete as necessary.)

__ times per Plan Year (Fill in number (at least one).); or

X The Administrator may prescribe limits from time to time on the number of changes that can be made per Plan Year, provided that at least one change shall be permitted each Plan Year.

(d) TERMINATIONS. A Participant may terminate a salary reduction agreement by providing the prescribed election form to the Administrator at any time and the termination shall become effective as soon after the Administrator's receipt of the Participant's election form as is administratively feasible.

(e) SPECIAL BONUS ELECTIONS. The Administrator may allow Participants to enter special salary reduction agreements effective only with respect to the next bonus or other special payment due and payable after the Administrator's receipt of the election form.

Yes ("Yes" may not be elected if bonuses are excluded from the definition of Compensation under Item 39 of the Adoption Agreement.)

X No

Pre-existing salary reduction elections under (a) and (b) above shall not be affected by a special election hereunder and a special election hereunder shall be disregarded for purposes of (c), (d) and (e) above.

SECTION 401(k) FEATURE

QNECS

(THE FOLLOWING ITEMS 17 AND 18 SHOULD BE COMPLETED ONLY IF THE BOX IN
ITEM 14(a) ENTITLED "QNECS" IS SELECTED. DO NOT COMPLETE ITEMS 17 AND 18 IF THE SAFE HARBOR PLAN ELECTION IN ITEM 14(b) IS SELECTED.)

17. QNEC ALLOCATION METHOD AND AMOUNT. The Employer shall be authorized to make annual qualified nonelective contributions to the Plan to the Nonelective Contribution Accounts for allocation as follows: (Select (a) and/or (b) and complete. An Employer may elect to make contributions under one or both QNEC allocation methods.)

(a)      X        proportionate to the Compensation for the
         Plan Year of all Participants eligible under Item 18
         below and in the following amount: (Select one and
         complete.)

                          ___% of the Compensation of all
                          Participants who are entitled under
                          Item 18 below to receive an
                          allocation for the Plan Year; or

                  X       such other amount (if any) as may be
                          properly determined by the Employer
                          for such Plan Year.

(b)               X an equal flat dollar amount for each
                  Participant eligible under Item 18 below in
                  the following amount: (Select one and
                  complete.)

                          $______ for each Participant who is
                          entitled under Item 18 below to
                          receive an allocation for the Plan
                          Year; or

                  X       such other flat dollar amount (if
                          any) as may be properly determined
                          by the Employer for such Plan Year.

18. PARTICIPANTS ENTITLED TO RECEIVE A QNEC.

(a) "HIGHLY COMPENSATED" STATUS. (Select only one.)

Only Participants who are Non-highly Compensated Employees eligible under (b) or
(c) below shall be entitled to share in the Employer contribution under Item 17 to the Nonelective Contribution Accounts for a Plan Year; or All Participants who are eligible under (b) or (c) below shall be entitled to share in the Employer contribution under Item 17 to the Nonelective Contribution Accounts for a Plan Year; or

X On a year to year basis, the Administrator shall determine whether all Participants eligible under (b) or (c) below or only those Participants who are Non-highly Compensated Employees eligible under (b) or
(c) below shall be entitled to share in the Employer contribution under Item 17 to the Nonelective Contribution Accounts for the Plan Year.

(b) EMPLOYMENT STATUS. A Participant eligible under (a) above shall be entitled to share in the Employer contribution under Item 17 to the Nonelective Contribution Accounts for a Plan Year if: (Select only one.)

X he is an Eligible Employee at any time during the Plan Year;

he is an Eligible Employee on the last day of the Plan Year;

he receives credit for at least 500 Hours of Service during the Plan Year or he is an Eligible Employee on the last day of the Plan Year;

he receives credit for at least 1,000 Hours of Service during the Plan Year, regardless of whether he is an Eligible Employee on the last day of the Plan Year; or

he receives credit for at least 1,000 Hours of Service during the Plan Year and he is an Eligible Employee on the last day of the Plan Year.

(c) CERTAIN FORMER EMPLOYEES. In addition, a Participant eligible under (a) above who has Compensation for a Plan Year shall be entitled to share in such Employer contribution for such Plan Year if he is on an approved leave of absence at the end of such Plan Year or if his employment by the Employer terminates during such Plan Year on account of death, Disability, retirement at or after Normal Retirement Age, or (if provided for in Item 47) early retirement.

X Yes

SECTION 401(k) FEATURE

QUALIFIED MATCHING CONTRIBUTIONS SUBJECT TO ADP

(THE FOLLOWING ITEMS 19 THROUGH 21 SHOULD BE COMPLETED ONLY IF THE BOX IN ITEM 14(a) ENTITLED "QUALIFIED MATCHING CONTRIBUTIONS SUBJECT TO ADP" IS SELECTED. DO NOT COMPLETE ITEMS 19 THROUGH 21 IF THE SAFE HARBOR PLAN ELECTION IN ITEM 14(b) IS SELECTED.)

19. QUALIFIED MATCHING CONTRIBUTIONS ALLOCATION METHOD AND AMOUNT. The Employer shall be authorized to make matching contributions to the Nonelective Contribution Accounts of those Participants who both make elective deferrals hereunder for the Plan Year and who are entitled under Item 20 below to receive this type of matching contribution for the year for allocation as follows: (Select any that apply and complete. An Employer may elect to make more than one type of matching contribution by selecting more than one of the following options.)

(a)      X        As a percentage of Participants' Section
                  401(k) elective deferrals;

(b)               Proportionate to the Compensation for the
         Plan Year of all Participants who are entitled to
         this type of matching contribution for the Plan Year,
         in the following amount: (Select one and complete.)

                          ___% of the Compensation of all
                          Participants who are entitled to
                          receive this type of matching
                          contribution for the Plan Year; or

                          such other amount (if any) as may be
                          properly determined by the Employer
                          for such Plan Year;

(c)               An equal flat dollar amount for each
         Participant who is entitled to this type of matching
         contribution for the Plan Year in the following
         amount: (Select one and complete.)

                          $______ for each Participant who is
                          entitled to receive this type of
                          matching contribution for the Plan
                          Year; or

                          such other flat dollar amount (if
                          any) as may be properly determined
                          by the Employer for such Plan Year.

20. PARTICIPANTS ENTITLED TO RECEIVE A QUALIFIED MATCHING CONTRIBUTION.

(a) "HIGHLY COMPENSATED" STATUS. (Select only one.)

Only Participants who are Non-highly Compensated Employees eligible under (b) or
(c) below (and who make elective deferrals hereunder for the Plan Year) shall be entitled to receive the qualified matching contribution under Item 19 to the Nonelective Contribution Accounts for a Plan Year; or

X All Participants who are eligible under (b) or (c) below (and who make elective deferrals hereunder for the Plan Year) shall be entitled to receive the qualified matching contribution under Item 19 to the Nonelective Contribution Accounts for a Plan Year; or

for the Plan Year) shall be entitled to receive the qualified matching contribution under Item 19 to the Nonelective Contribution Accounts for the Plan Year.

(b) EMPLOYMENT STATUS. A Participant eligible under (a) above shall be entitled to receive a qualified matching contribution under Item 19 to the Nonelective Contribution Account for a Plan Year if:

(Select only one.)

X he is an Eligible Employee at any time during the Plan Year;

he is an Eligible Employee on the last day of the Plan Year;

he receives credit for at least 500 Hours of Service during the Plan Year or he is an Eligible Employee on the last day of the Plan Year;

he receives credit for at least 1,000 Hours of Service during the Plan Year, regardless of whether he is an Eligible Employee on the last day of the Plan Year; or

he receives credit for at least 1,000 Hours of Service during the Plan Year and he is an Eligible Employee on the last day of the Plan Year.

(c) CERTAIN FORMER EMPLOYEES. In addition, a Participant eligible under (a) above shall be entitled to receive such a qualified matching contribution for such Plan Year if he is on an approved leave of absence at the end of such Plan Year or if his employment by the Employer terminates during such Plan Year on account of death, Disability, retirement at or after Normal Retirement Age, or (if provided for in Item 47) early retirement.

X Yes

21. MATCHES AS A PERCENTAGE OF ELECTIVE DEFERRALS. (Complete this Item only if box (a) under Item 19 is selected.)

(a) AMOUNT. Subject to (b) and (c) below, the Employer's annual qualified matching contribution (if any) to the Plan to the Nonelective Contribution Account of each Participant entitled to receive this type of matching contribution for the Plan Year shall be an amount equal to: (Select only one and complete as necessary.)

___% of the Participant's elective deferrals hereunder for the Plan Year not in excess of % of the Participant's Compensation for the Plan Year; or

___% of the portion of the Participant's elective deferrals hereunder for the Plan Year not in excess of ___% of the Participant's Compensation for the Plan Year plus ___% of the portion of the Participant's elective deferrals hereunder for the Plan Year in excess of that amount but not in excess of ___% of the Participant's Compensation for the Plan Year; or

X such other percentage of such portion of the Participant's elective deferrals hereunder for the Plan Year as may be properly determined by the Administrator for such Plan Year and applied uniformly with respect to those Participants entitled to receive this

type of matching contribution hereunder.

(b) PAY PERIOD LIMITATIONS. The same percentage-of-Compensation limitations specified under (a) above also shall be applied on a pay period basis (and with respect to bonuses or other special payments) such that the Employer's qualified matching contributions shall be with respect to only such percentage of Compensation otherwise payable for a pay period (or as a bonus or other special payment).

Yes

X No

(c) BONUSES SUBJECT TO MATCH. Elective deferrals with respect to bonuses or other special payments shall be matched to the same extent and subject to the same limitations as any other part of a Participant's Compensation.

X Yes -- elective deferrals with respect to bonuses and special payments shall be matched

No -- elective deferrals with respect to bonuses and special payments shall not be matched

SECTION 401(k) FEATURE

ADP/ACP TESTING METHODS

(THE FOLLOWING ITEMS 22 AND 23 SHOULD BE COMPLETED ONLY IF ITEM 14(a)
(NON-SAFE HARBOR 401(k) PLAN) IS SELECTED OR THE PLAN ALLOWS VOLUNTARY
(AFTER-TAX) PARTICIPANT CONTRIBUTIONS IN ITEM 10.)

22. ADP/ACP TESTING METHOD.

(a) Testing Method. The ADP and/or ACP testing shall be applied using: (Select only one.)

PRIOR YEAR TESTING METHOD (referred to in Sections 3.1(e)(1) and 3.2(b)(1)).

New Feature Election. (If Prior Year Testing Method is selected, the Plan is not a successor plan and if the Section 401(k) feature (or either the Employer matching contribution feature or voluntary (after-tax) Participant contribution feature) was first made a part of the Plan on or after the "Effective Date" in Item 1, then select one of the following:)

For the first Plan Year in which a section 401(k) feature (or either the Employer matching contribution feature or voluntary (after-tax) Participant contribution feature) is part of the Plan, the Actual Deferral Percentage (or Actual Contribution Percentage, as the case may be) for Non-highly Compensated Employees to be taken into account shall be:

deemed to be 3 percent, or

the Actual Deferral Percentage (or Actual Contribution Percentage, as the case may be) for such first Plan Year for Participants who are Non-highly Compensated Employees eligible to make Section 401(k) contributions (or voluntary after-tax Participant contributions) for such Plan Year.

X CURRENT YEAR TESTING METHOD (referred to in Sections 3.1(e)(2) and 3.2(b)(2)).

NOTE: A Plan may change from the Current Year Testing Method to the Prior Year Testing Method only if (1) the Plan has been using the Current Year Testing method for the preceding 5 Plan Years, or, if lesser, the number of Plan Years the Plan has been in existence; or (2) the Plan otherwise meets one of the conditions specified in Notice 98-1 (or superseding guidance) for changing from the Current Year Testing method.

(b) METHODS USED FOR PRE-EFFECTIVE DATE PLAN YEARS. (Complete this Item only if the Plan was not previously amended for GUST and the choices in Item 22(a) would have been relevant and available in a Plan Year prior to the Effective Date.) (Select only one.)

The testing method selected in Item 22(a) was used for all relevant Plan Years prior to the Effective Date.

X The Plan used the methods for ADP and/or ACP testing in relevant Plan Years before the Effective Date as described in an attachment. (If selected, describe the testing in an attachment.)

23. OTHER TESTING METHODOLOGIES. (Select any of the following as are applicable; otherwise do not select.) (See Section 1.26(c) of the Plan.)

TOP-PAID GROUP ELECTION. In determining who is a Highly Compensated Employee, the Employer makes a top-paid group election. The effect of this election is that an Employee (who is not a Five-Percent Owner at any time during the determination year or the look-back year) with Section 415 Compensation in excess of $80,000 (as adjusted) for the look-back year is a Highly Compensated Employee only if the Employee was in the top-paid group for the look-back year.

CALENDAR YEAR ELECTION. In determining who is a Highly Compensated Employee (other than as a Five-Percent Owner), the Employer makes a calendar year data election. The effect of this election is that the look-back year is the calendar year beginning with or within the look-back year.

X NOT APPLICABLE. Neither of these elections applies.

SECTION 401(k) FEATURE

MATCHING CONTRIBUTIONS SUBJECT TO ACP

(THE FOLLOWING ITEMS 24 THROUGH 26 SHOULD BE COMPLETED ONLY IF THE BOX IN ITEM 14(a) ENTITLED "MATCHING CONTRIBUTIONS SUBJECT TO ACP" IS SELECTED. DO NOT COMPLETE ITEMS 24 THROUGH 26 IF THE SAFE HARBOR PLAN ELECTION IN ITEM 14(b) IS SELECTED.)

24. EMPLOYER MATCHING CONTRIBUTIONS TO EMPLOYER MATCHING ACCOUNTS. The Employer shall be authorized to make matching contributions to the Employer Matching Accounts of those Participants who both make elective deferrals hereunder for the Plan Year and who are entitled under Item 25 below to receive this type of matching contribution for the year for allocation as follows: (Select any that apply and complete. An Employer may elect to make more than one type of matching contribution by selecting more than one of the following options.)

(a)      X        As a percentage of Participants' Section
         401(k) elective deferrals (complete Items 25 and 26);

(b)               Proportionate to the Compensation for the
         Plan Year of all Participants who are entitled to
         this type of matching contribution for the Plan Year,
         in the following amount: (Select one and complete.)

                          ____________% of the Compensation of
                          all Participants who are entitled to
                          receive this type of matching
                          contribution for the Plan Year; or

                          such other amount (if any) as may be
                          properly determined by the Employer
                          for such Plan Year;

(c)               An equal flat dollar amount for each
         Participant who is entitled to this type of matching
         contribution for the Plan Year in the following
         amount: (Select one and complete.)

                          $____ for each Participant who is
                          entitled to receive this type of
                          matching contribution for the Plan
                          Year; or

                          such other flat dollar amount (if
                          any) as may be properly determined
                          by the Employer for such Plan Year.

25. PARTICIPANTS ENTITLED TO RECEIVE EMPLOYER MATCHING CONTRIBUTION TO EMPLOYER MATCHING ACCOUNTS.

(a) "HIGHLY COMPENSATED" STATUS. (Select only one.)

Only Participants who are Non-highly Compensated Employees eligible under (b) or
(c) below (and who make elective deferrals hereunder for the Plan Year) shall be entitled to receive the matching contribution under Item 24 to the Employer Matching Accounts for a Plan Year; or

X All Participants who are eligible under (b) or (c) below (and who make elective deferrals hereunder for the Plan Year) shall be entitled to receive the matching contribution under Item 24 to the

Employer Matching Accounts for a Plan Year; or

On a year to year basis, the Administrator shall determine whether all Participants eligible under (b) or (c) below or only those Participants who are Non-highly Compensated Employees eligible under (b) or
(c) below (and who make elective deferrals hereunder for the Plan Year) shall be entitled to receive the matching contribution under Item 24 to the Employer Matching Accounts for the Plan Year.

(b) EMPLOYMENT STATUS. A Participant who has met the eligibility criteria in Item 13 applicable to this type of contribution and who is eligible under (a) above shall be entitled to receive a matching contribution under Item 24 to the Employer Matching Account for a Plan Year if: (Select only one.)

X he is an Eligible Employee at any time during the Plan Year;

he is an Eligible Employee on the last day of the Plan Year;

he receives credit for at least 500 Hours of Service during the Plan Year or he is an Eligible Employee on the last day of the Plan Year;

he receives credit for at least 1,000 Hours of Service during the Plan Year, regardless of whether he is an Eligible Employee on the last day of the Plan Year; or

he receives credit for at least 1,000 Hours of Service during the Plan Year and he is an Eligible Employee on the last day of the Plan Year.

(c) CERTAIN FORMER EMPLOYEES. In addition, a Participant who has met the eligibility criteria in Item 13 applicable to this type of contribution and who is eligible under (a) above shall be entitled to receive such a matching contribution for such Plan Year if he is on an approved leave of absence at the end of such Plan Year or if his employment by the Employer terminates during such Plan Year on account of death, Disability, retirement at or after Normal Retirement Age, or (if provided for in Item 47) early retirement.

X Yes

26. MATCHES AS A PERCENTAGE OF ELECTIVE DEFERRALS. (Complete this Item only if box (a) under Item 24 is selected.)

(a) AMOUNT. Subject to (b) and (c) below, the Employer's annual matching contribution (if any) to the Plan to the Employer Matching Account of each Participant entitled to receive this type of matching contribution for the Plan Year shall be an amount equal to: (Select only one and complete as necessary.)

___% of the Participant's elective deferrals hereunder for the Plan Year not in excess of ___% of the Participant's Compensation for the Plan Year; or

Year in excess of that amount but not in excess of ___% of the Participant's Compensation for the Plan Year; or

(b) PAY PERIOD LIMITATIONS. The same percentage-of-Compensation limitations specified under (a) above also shall be applied on a pay period basis (and with respect to bonuses or other special payments) such that the Employer's matching contributions shall be with respect to only such percentage of Compensation otherwise payable for a pay period (or as a bonus or other special payment).

X Yes

X Yes -- elective deferrals with respect to bonuses and special payments shall be matched

No -- elective deferrals with respect to bonuses and special payments shall not be matched

SECTION 401(k) FEATURE

SAFE HARBOR 401(k) PLAN

(THE FOLLOWING ITEMS 27 THROUGH 30 SHOULD BE COMPLETED ONLY IF THE SAFE
HARBOR 401(k) PLAN SELECTION IN ITEM 14(b) IS SELECTED.)

27. EMPLOYER CONTRIBUTIONS.. The Employer shall satisfy the safe harbor contribution requirement by making the following type of contributions: (Select one of the following:)

Safe Harbor Matching Contribution (complete Items 28 and 30); or

Safe Harbor Nonelective Contribution (complete Items 29 and 30).

28. SAFE HARBOR MATCHING CONTRIBUTIONS.. (Complete only if the first box in Item 27 is selected.)

(a) AMOUNT. The Employer's matching contributions to the Nonelective Contribution Accounts of those Participants who make elective deferrals for the Plan Year and who are entitled under Item 30 below to receive this type of contribution shall be an amount equal to: (Select one and complete as necessary.)

BASIC MATCH ONLY. The Employer's matching contributions to the Nonelective Contribution Accounts of those Participants who make elective deferrals for the Plan Year and who are entitled under Item 30 below to receive this type of contribution shall be 100% of the Participant's elective deferrals hereunder up to 3% of the Participant's Compensation, plus 50% of the Participant's elective deferrals up to the next 2% of Compensation.

ENHANCED MATCH. The Employer's matching contributions shall be ___________% of the Participant's elective deferrals hereunder up to ___________% (not less than 3% or more than 6%) of the Participant's Compensation plus ___________% (not more than the first percentage) of the Participant's elective deferrals in excess of that amount but not in excess of ___________% (not more than 6%) of the participant's Compensation.

NOTE: The Enhanced Match option must entitle a Participant to at least as great a match at any level of elective deferrals as he would have under the Basic Match option.

(b) APPLICATION OF LIMITATIONS. The percentage-of-Compensation limitations specified under (a) above shall be applied (select one):

on a pay period basis;

on a monthly basis;

on a quarterly basis; or

on an annual (Plan Year) basis.

29. SAFE HARBOR NONELECTIVE CONTRIBUTION.. (Complete only if the second box in Item 27 is selected.) The Employer shall make contributions equal to at least ________% (at least 3%) of Compensation for each Participant who is eligible under Item 30 below to receive this type of contribution.

30. PARTICIPANTS ENTITLED TO SAFE HARBOR CONTRIBUTIONS.. A Participant shall be entitled to an Employer safe harbor matching contribution or nonelective contribution if (select only one):

he is an Eligible Employee at any time during the Plan Year; or

he is a Nonhighly Compensated Employee who is an Eligible Employee at any time during the Plan Year.

DISCRETIONARY (PROFIT SHARING) CONTRIBUTIONS

(THE FOLLOWING ITEMS 31 THROUGH 35 SHOULD BE COMPLETED ONLY IF A DISCRETIONARY (PROFIT SHARING) CONTRIBUTION FEATURE IS PART OF THE PLAN PURSUANT TO ITEM 9.)

31. DISCRETIONARY CONTRIBUTIONS ALLOCATION METHOD AND AMOUNT. The Employer shall be authorized to make discretionary (profit sharing) contributions to the Plan for allocation to the Employer Contribution Accounts as follows: (Select (a), (b) and/or (c) and complete. An Employer may elect to make contributions under one or more allocation methods.)

(a)      X        proportionate to Compensation method
         :(Complete Item 34 to specify the amount of the
         contribution; and below to select whether such
         allocations are to be on an integrated or
         non-integrated basis)

                  ALLOCATION OF EMPLOYER CONTRIBUTIONS. This
                  type of Employer contribution shall be
                  allocated, for each participant eligible
                  under Items 32 and 33 below, on:

                  X        a non-integrated basis (see Section
                           3.3(a)(2) of the Plan), or

                           an integrated basis (see Section
                           3.3(a)(3) of the Plan) (complete
                           Item 35).

(b)               an equal flat dollar amount for each
         Participant eligible under Items 32 and 33 below in
         the following amount: (Select one and complete.)

                          $______ for each Participant who is
                          entitled under Items 32 and 33 below
                          to receive an allocation for the
                          Plan Year; or

                          such other flat dollar amount (if
                          any) as may be properly determined
                          by the Employer for such Plan Year.

(c)               $______ for each Hour of Service credited
         for a Participant eligible under Items 32 and 33
         below for the Plan Year.

32. PARTICIPANTS ENTITLED TO RECEIVE AN ALLOCATION OF EMPLOYER CONTRIBUTION (PART 1). A Participant who has met the eligibility criteria in Item 13 applicable to this type of contribution shall be entitled to share in the Employer contribution to the Employer Contribution Accounts for a Plan Year if: (Select only one.)

he is an Eligible Employee at any time during the Plan Year;
he is an Eligible Employee on the last day of the Plan Year;

he receives credit for at least 500 Hours of Service during the Plan Year or he is an Eligible Employee on the last day of the Plan Year;

he receives credit for at least 1,000 Hours of Service during the Plan Year, regardless of whether he is an Eligible Employee on the last day of the Plan Year; or

X he receives credit for at least 1,000 Hours of Service during the Plan Year and he is an Eligible Employee on the last day of the Plan Year.

33. PARTICIPANTS ENTITLED TO RECEIVE AN ALLOCATION OF EMPLOYER CONTRIBUTION (PART

2). In addition, a Participant who has met the eligibility criteria in Item 13 applicable to this type of contribution and who has Compensation for a Plan Year shall be entitled to share in the Employer contribution for such Plan Year if he is on an approved leave of absence at the end of such Plan Year or if his employment by the Employer terminates during such Plan Year on account of death, Disability, retirement at or after Normal Retirement Age, or (if provided for in Item 47 of this Adoption Agreement) early retirement.

X Yes

34. DETERMINATION. The Employer's annual discretionary (profit sharing) contribution (if any) to the Plan for a Plan Year for allocation to the Employer Contribution Accounts shall be an amount equal to:

___% of the Compensation of all Participants who are entitled to receive an allocation for such Plan Year;

___% of the Employer's current Profits for such Plan Year;

___% of the Employer's current Profits in excess of $______ for such Plan Year; or

X such other amount as may be properly determined by the Employer for such Plan Year.

35. INTEGRATED ALLOCATION FORMULA. (Complete only if integrated basis is selected in 31(a) above.)

(a) INTEGRATION FORMULA. Employer contributions under Item 31(a) of the Adoption Agreement (and any forfeitures allocated with this type of contribution) shall be allocated, as follows, among the Employer Contribution Accounts of those Participants entitled to receive such an allocation: (Select only one.)

MAXIMUM DISPARITY METHOD. First, such
contribution (and forfeitures) shall be
allocated in the same ratio that the sum of
such Participants' Compensation plus Excess
Compensation for the Plan Year bears to the
sum of all such Participants' Compensation
plus Excess Compensation, but the amount so
allocated, expressed as a percentage, shall
not exceed the Maximum Disparity Rate.
Second, the balance, if any, of such
contribution (and forfeitures) shall be
allocated in proportion to such
Participants' Compensation for the Plan
Year.

FOUR-TIER METHOD. First, such contribution
(and forfeitures) shall be allocated in
proportion to the Participants' Compensation
for such Plan Year, but not in excess of 3
percent of each Participant's Compensation.
Second, any remaining contribution (and
forfeitures) shall be allocated in
proportion to the Participants' Excess
Compensation for the Plan Year but not in
excess of 3 percent of each Participant's
Excess Compensation. Third, any remaining
contribution (and forfeitures) shall be
allocated in the same ratio that the sum of
such Participants' Compensation plus Excess
Compensation for the Plan Year bears to the
sum of all such Participants' Compensation
plus Excess Compensation, but the amount so
allocated, expressed as a percentage, shall
not exceed the Maximum Disparity Rate less
three percentage points. Fourth, any
remaining contribution (and forfeitures)
shall be allocated in proportion to the
Participants' Compensation for the

Plan Year.

(b) TAXABLE WAGE BASE. For purposes of allocating on an integrated basis, "Taxable Wage Base" means:

the contribution and benefit base under section 230 of the Social Security Act, as of the first day of the particular Plan Year; or

$___________ (not to exceed the contribution and benefit base under section 230 of the Social Security Act, as of the first day of the Plan Year in which the Effective Date falls); or

___________% (not to exceed 100%) of the contribution and benefit base under section 230 of the Social Security Act, as of the first day of the particular Plan Year.

If a Plan Year consists of less than 12 months, then the Taxable Wage Base for such Plan Year shall be multiplied by the fraction the numerator of which is the number of months in the short Plan Year and the denominator of which is 12.

COMPENSATION TAKEN INTO ACCOUNT UNDER THE PLAN

36. BASE DEFINITION.

INSTRUCTIONS: Complete Column A for the definition of "Compensation" generally applicable under the Plan, including for the allocation of contributions. Complete Column B for the definition of "Section 415 Compensation" (Section 4.1(k) of the Plan) applicable in determining the section 415 limitations.

FOR SELF-EMPLOYED INDIVIDUALS (INCLUDING PARTNERS IN A PARTNERSHIP),
SEE SECTION 1.12(e) OF THE PLAN.

                                                              B
                                            A           "SECTION 415
                                     "COMPENSATION"     COMPENSATION"
                                     --------------     -------------
      IRS SAFE HARBORS

- W-2, Total Compensation Box

- Earnings subject to Federal
Income Tax Withholding                      X

- General Section 415 definition                             X

OTHER CHOICE

- FICA definition                                           N/A

37. EXCLUSION OF ELECTIVE DEFERRALS. The Compensation definition (but not the Section 415 Compensation definition) shall exclude any amount contributed pursuant to a salary reduction agreement and which are not includible in the Employee's gross income by reason of Sections 401(k), 402(e)(3), 125 or 132(f)(4) and similar Compensation reduction elections (Section 1.11(d) of Plan). (This exclusion is not available for the definition of Section 415 Compensation.)

Yes - these amounts are excluded.

X No - these amounts are included.

38. PARTIAL YEAR OF PARTICIPATION. Compensation for any part of a Plan Year during which an Employee is not a Participant or has not met the eligibility criteria for a particular type of Employer contribution (or forfeiture allocation): (Select one.)

shall be taken into account in the allocation of Employer contributions (and forfeitures) under the Plan; or

X shall not be taken into account in the allocation of Employer contributions (and forfeitures) under the Plan.

39. EXCLUSIONS. Compensation shall exclude the following (check any that apply):

FOR INTEGRATED ALLOCATIONS (SEE ITEM 35), ONE OF THE FOLLOWING
TWO ALTERNATIVES MUST BE SELECTED

No exclusions

X Safe-harbor exclusion of allowances, reimbursements and fringe benefits

(Section 1.11(c) of Plan)

ANY OF THE FOLLOWING EXCLUSIONS REQUIRE 414(s) TESTING

Bonuses Overtime

Commissions Other (specify)

40. CASH BASIS. Compensation should be taken into account in the Plan Year in which it is actually paid.

41. EFFECTIVE DATE. If the selections in Item 36 change the Plan's base definition of Compensation or Section 415 Compensation, or if the selections in Items 37-40 otherwise change the Plan's provisions as of a date other than the Effective Date, fill in the effective date of the change, identify the change and specify or attach the provisions in effect prior to the change: n/a

SERVICE TAKEN INTO ACCOUNT UNDER THE PLAN

42. METHOD OF DETERMINATION. For eligibility and vesting purposes, service shall be determined on the basis of:

the elapsed time method (skip to Item 46 unless a minimum Hours of Service requirement for sharing in certain contributions is elected in Item 18, 20, 24, 31 or 32), or

X the hour-counting method.

43. DETERMINATION OF HOURS OF SERVICE. An Employee's Hours of Service shall be determined on the basis of:

X the actual hours for which he is paid or entitled to payment, determined from records of hours worked and hours for which payment is made or due;

10 Hours of Service for each day for which he would be required to be credited with at least one Hour of Service;

45 Hours of Service for each week for which he would be required to be credited with at least one Hour of Service;

95 Hours of Service for each semi-monthly payroll period for which he would be required to be credited with at least one Hour of Service;

190 Hours of Service for each month for which he would be required to be credited with at least one Hour of Service.

44. SERVICE COMPUTATION PERIOD (ELIGIBILITY). "Service Computation Period" means, for eligibility purposes: (Complete only if the hour-counting method is elected in Item 42.)

the 12 consecutive month period beginning on an Employee's Employment Commencement Date or on an anniversary thereof; or

X the 12 consecutive month period beginning on an Employee's Employment Commencement Date and, thereafter in all cases, each Plan Year, beginning with the Plan Year containing the first anniversary of such Employment Commencement Date. An Employee who is credited with 1,000 Hours of Service in both the initial eligibility computation period and the first Plan Year which commences prior to the first anniversary of the Employee's Employment Commencement Date will be credited with two Years of Service for purposes of eligibility to participate.

45. SERVICE COMPUTATION PERIOD (VESTING). "Service Computation Period" means, for purposes of determining Years of Service and One-Year Breaks for vesting purposes: (Complete only if the hour-counting method is elected in Item 42.)

X the Plan Year, or

the 12 consecutive month period beginning on an Employee's Employment Commencement Date or on an anniversary thereof.

46. PREDECESSOR AND OTHER EMPLOYERS. For purposes of the Plan, service for the Employer shall be deemed to include service (including service as a self-employed individual) for the following organization(s):

None

X prior employers acquired by Meridian including Gull Laboratories, Biodesign, Viral Antigens and such other entities that may be specified by Meridian from time to time.

47. EARLY RETIREMENT. May Participants retire early with full vesting and immediate entitlement to benefits?

X Yes, upon attainment of age 50 and completion of at least 15 Years of Service for vesting purposes.

48. DISABILITY. Disability means with respect to a Participant:

that he is unable to engage in any substantial, gainful activity by reason of any medically-determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration;

(1) that he is unable to engage in any substantial, gainful activity by reason of any medically-determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than 12 months, and (2) that the Social Security Administration has determined that he is entitled to a Social Security disability benefit;

an injury or disease which was not intentionally self-inflicted and which the Administrator has determined, on the basis of such evidence as it determines to be satisfactory, permanently prevents such Participant from performing his regular duties with the Employer;

that the Administrator has determined, on the basis of such evidence as it determines to be satisfactory, that such Participant is unable to engage in each and every occupation or employment for remuneration or profit (except for the purpose of his rehabilitation not incompatible with his Disability), for which he is reasonably qualified by education, training and work experience, because of a physical or mental condition or impairment, which the Administrator determines will be permanent and continuous during the remainder of such Participant's lifetime, and which (1) was not intentionally self-inflicted, and
(2) was not incurred while or as a result of engaging in any unlawful activity, and (3) was not incurred as a result of chronic or excessive use of intoxicants, drugs or narcotics, and (4) was not incurred as a result of military service for which such Participant received a military pension; or

X other: a Participant who is established by a licensed physician selected by the Plan Administrator to (a) have suffered a disability which is expected to result in the Participant's death or last for not less than 12 months; and (b) not be able to perform his or her job or any job for which he or she is reasonably suited as a result of his or her education, training and experience. The determination by the Plan Administrator with respect to whether a Participant is totally and permanently disabled shall be made in a nondiscriminatory manner.

VESTING IN EMPLOYER CONTRIBUTIONS

49. VESTING SCHEDULE. The vesting schedule applicable, under
Section 6.1(d)(3)(A) of the Plan, to a Participant's Employer Contribution Account, shall be as follows: (Do not complete unless the Plan authorizes Employer contributions subject to a vesting schedule.)

NONFORFEITABLE PERCENTAGE

                  Option      Option     Option     Option      Option
                     1           2          3          4           5

                     X
   Years
    of                                   (2 year    (5 year
  Service        (2 to 6)    (3 to 7)     cliff)     cliff)     (other)
  -------
less than 1          0           0           0           0        ___
     1               0           0           0           0        ___
     2              20           0         100           0        ___
     3              40          20                       0        ___
     4              60          40                       0        ___
     5              80          60                     100        ___
     6             100          80                                ___
     7                         100                                ___

NOTE: (1) Vesting must be at least as rapid as Option 3 if more than 1 Year of Service is required for eligibility.

(2) Any vesting schedule elected under Option 5 must be at least as rapid, at every point, as Option 2, Option 4, or (if more than 1 Year of Service is required for eligibility) Option 3.

50. SERVICE DISREGARDED IN DETERMINATION OF NONFORFEITABLE PERCENTAGE. In addition to service disregarded in determining Years of Service under Section 1.58 of the Plan, the following service shall be disregarded in determining an Employee's service for vesting purposes (check any boxes that apply):

Years of Service (if the hour-counting method applies) or Service (if the elapsed time method applies) before age 18 (age 22 for a Participant who does not have at least 1 Hour of Service on or after the REA Effective Date).

Years of Service (if the hour-counting method applies) or Service (if the elapsed time method applies) during any period for which the Employer did not maintain the Plan or a predecessor plan, as defined in the applicable regulations of the Secretary of the Treasury.

51. FORFEITURE PROVISIONS.

(a) FORFEITURE UPON CASH-OUT. Upon the distribution to a terminated Participant, his forfeitable interest in his Account shall be forfeited in accordance with
Section 6.1(d)(6) of the Plan (select only one):

X immediately;

upon the incurrence of a One-Year Break; or

not applicable -- forfeiture delayed until the incurrence of a Break in Service (as defined in Section 1.09 of the Plan).

(b) APPLICATION OF FORFEITURES.

(1) Forfeitures occurring during a Plan Year shall be applied (select only one):

X to the reduction of the amount the Employer would otherwise contribute to the Plan; or

in addition to the amount the Employer would otherwise contribute to the Plan.

(2) Forfeitures occurring during the Plan Year shall be applied as specified in (1) to the following type(s) of Employer contributions (select only a type of contribution that is available under the Plan):

X Profit Sharing Contributions (under
Section 3.3 of the Plan)

X Matching Contributions Subject to ACP (under Section 3.2 of the Plan)

X QNECs (under Section 3.1 of the Plan)

Qualified Matching Contributions Subject to ADP (under Section 3.1 of the Plan)

Safe Harbor Contributions to Safe Harbor 401(k) Plan (only if Safe Harbor 401(k) Plan election of Item 14(b) is elected)

INVESTMENT OF PLAN ASSETS AND PLAN LOANS

52. PARTICIPANT INVESTMENT ELECTIONS.

(a) AVAILABILITY OF INVESTMENT ELECTIONS. Each Participant shall elect the manner in which his entire Account (or such subaccounts selected in (b) below) and any contributions and forfeitures allocated thereto are to be invested:

X Yes (If Yes, complete (b) and (c).)

No (Skip to Item 54.)

(b) SUBACCOUNTS SUBJECT TO PARTICIPANT INVESTMENT DISCRETION.

X Investment elections apply to entire Account, or

Investment elections apply only to the following subaccount(s): (Select all that apply.)

Section 401(k) Account (including the Nonelective Contribution Account) (applicable only if a
Section 401(k) feature is part of the Plan)

Nondeductible Voluntary Contribution Account (and Deductible Voluntary Contribution Account)

Rollover Account

Employer Contribution Account
(excluding the Employer Matching
Account unless selected below)

Employer Matching Account

(c) EXTENT OF PARTICIPANT INVESTMENT DISCRETION. In determining how his Account (or selected subaccounts) shall be invested, each Participant may:

(Select only one.)

X choose from among such investment funds as the Administrator directs the Trustee to make available; or

select any legally permissible investments which the Trustee agrees to hold for his Account (including such investment funds as the Administrator directs the Trustee to make available).

Pending execution of investment directions, the Trustee shall be authorized to hold balances in short- term, liquid deposit accounts or other investments.

53. QUALIFYING EMPLOYER SECURITIES. Subject to the other provisions of the Plan and Trust Agreement, Plan Assets may be invested in qualifying employer securities (as defined in ERISA section 407):

Yes

X No (Skip to Item 54.)

(a) DISTRIBUTION AND WITHDRAWAL OF QUALIFYING EMPLOYER
SECURITIES. (Select one.)

To the extent a Participant's Account is invested in qualifying employer securities, a Participant may elect to take a distribution or withdrawal to which he is otherwise entitled under the Plan in qualifying employer securities.

A Participant may not take a distribution or withdrawal in qualifying employer securities.

(b) VOTING OF QUALIFYING EMPLOYER SECURITIES. To the extent a Participant's Account is invested in qualifying employer securities, the following shall have the right to exercise any voting rights with respect to such securities:

(Select one.)

The Participant (or in the event of his
death, his Beneficiary); or

The Employer (if more than one Employer has
adopted the Plan, the first Employer named
in this Adoption Agreement); or

The Plan Administrator; or

An investment manager appointed under the
terms of the Trust Agreement; or

The Trustee; or

Other: _____________________________________

54. VALUATION METHOD. (Select only one.)

DAILY VALUATION METHOD FOR ENTIRE ACCOUNT. For Plan accounting purposes, Plan Assets shall be allocable separately to each Participant's Account and the value of a Participant's Account at any particular time shall be equal to the value of the Plan Assets so allocated to his Account at that time; or

X BALANCE FORWARD VALUATION METHOD FOR ENTIRE ACCOUNT. For Plan accounting purposes, Plan Assets shall be valued as of each Accounting Date and the value of each Participant's Account shall be adjusted only as of each Accounting Date; or

DAILY VALUATION METHOD FOR CERTAIN SUBACCOUNTS. For Plan accounting purposes, the daily valuation method shall apply to the Plan Assets attributable to the following subaccounts (and the balance forward valuation method shall apply to the other subaccounts). (Select all to which daily valuation will apply.)

Section 401(k) Account (including the Nonelective Contribution Account) (applicable only if a Section 401(k) feature is part of the Plan)

Nondeductible Voluntary Contribution Account (and Deductible Voluntary Contribution Account)

Rollover Account

Employer Contribution Account (excluding the
Employer Matching

Account unless selected below)

Employer Matching Account

55. LOANS. Are Participant loans permitted?

X Yes (Complete (a) through (f) below.)

No (Skip to Item 56.)

(a) LOANS ONLY TO EMPLOYEES. A loan is available to a Participant only while an Employee and loans shall be due and payable in full upon a Participant's termination of employment.

X Yes

(b) PAYROLL WITHHOLDING REQUIRED. Loans shall be repaid only by payroll withholding properly authorized by the Participant; provided that the Administrator may allow prepayment through other means; and if the available amount of payroll withholding is insufficient to meet the payments, the Administrator may authorize other means.

X Yes

X $1,000

Other $________ (fill-in but not to exceed $1,000)

N/A - No loan minimum

(d) SECURITY. The following types of collateral may secure a Participant loan: (Select only one.)

X 50% of the Participant's accrued nonforfeitable benefit under the Plan (excluding any Deductible Voluntary Contribution Account)

50% of the Participant's accrued nonforfeitable benefit under the Plan (excluding any Deductible Voluntary Contribution Account) and the following:

(e) NUMBER OF LOANS. A Participant may have no more than the following number of loans outstanding at any given time:

X other 3 (fill in)

N/A - no maximum number of loans

(f) OTHER SPECIFIC LOAN PROVISIONS. In addition to the provisions governing loans in Section 5.5 of the Plan and above, the following provisions apply to Plan loans (attach additional pages, if necessary):

(1) limitations (if any) in addition to limits in Section 5.5 and above on the types and amounts of loans offered:

(2) procedure for determining reasonable rate of interest: The rate a bank or other professional lender would charge for making a loan in a similar circumstance.

WITHDRAWALS AND DISTRIBUTIONS

IN-SERVICE WITHDRAWALS BY PLAN PARTICIPANTS

56. WITHDRAWALS FROM SECTION 401(k) ACCOUNT. (Complete only if a
Section 401(k) feature is part of the Plan pursuant to Item 9.)

(a) HARDSHIP. Subject to the limits of Section 7.2 of the Plan, withdrawals from a Participant's Section 401(k) Account by an Eligible Employee shall be permitted in the event of hardship.

X Yes

(b) AGE 59-1/2. Withdrawals from a Participant's Section
401(k) Account by an Eligible Employee shall be permitted after his attainment of age 59-1/2.

X Yes

57. WITHDRAWALS ON OR AFTER ATTAINMENT OF AGE 59-1/2.

(a) WITHDRAWAL RIGHT. Withdrawals from a Participant's Account (from such subaccounts as he may elect), to the extent vested and nonforfeitable, by an Eligible Employee prior to termination of employment shall be permitted after his attainment of the age specified in (b) below.

X Yes (If Yes, complete (b) and (c) below.)

No (Skip to Item 58.)

(b) AGE REQUIREMENT.

X 59-1/2

______ (Must be older than age 59-1/2.)

58. REQUIRED BEGINNING DATE (AGE 70-1/2) PAYMENTS. The Required Beginning Date for the payment of a Participant's distributions under the Plan (as referred to in Section 7.6(d) of the Plan) is (select (a) or (b)):

(a)               CONTINUATION OF PRIOR LAW. The April 1 of
         the calendar year following the calendar year in
         which the Participant attains age 70-1/2.

(b)      X        NEW LAW. For Participants other than
         Five-Percent Owners, the April 1 of the calendar year
         following the later of the calendar year in which the
         Participant attains age 70-1/2 or the calendar year
         in which the Participant retires. For a Five-Percent
         Owner, the April 1 of the calendar year following the
         calendar year in which the Participant attains age
         70-1/2. (If (b) is selected, complete the following:)

                  (i)     PRE-EFFECTIVE DATE ATTAINMENT OF AGE
                          70-1/2. For calendar years prior to
                          the Effective Date, the Plan
                          permitted Participants (other than
                          Five-Percent Owners) who attained
                          age 70-1/2 to elect to apply these
                          new law Required Beginning Date
                          provisions and defer their

                                                            38

                          distributions:

                                   Yes-For Participants who
                                   attained age 70-1/2 in the
                                   following years (1996 or
                                   later):

                                   ___________________________

X No

(ii) PRE-EFFECTIVE DATE CESSATION OF DISTRIBUTIONS. Participants other than Five-Percent Owners who had commenced receiving distributions prior to 1997 as required under prior law were permitted to elect to stop receiving such distributions until the new Required Beginning Date.

Yes - The election was first provided in __________________________.

The Administrator shall
follow Internal Revenue
Service guidance regarding
the re-commencement of
benefit payments. There is
either (select one)

A new annuity
starting date upon
recommencement, or

No new annuity
starting date upon
recommencement.

X No.

(iii) OPTIONAL IN-SERVICE COMMENCEMENT AT AGE 70-1/2. Although distributions are not required, a Participant may elect to commence distribution prior to termination of employment on or after April 1 of the calendar year following his attainment of 70-1/2.

N/A - Item 57 already allows withdrawals by an Eligible Employee who attains age 70-1/2.

X Yes.

No - (if No, select one of the following):

Participants who attained age 70-1/2 in or after calendar year ________ may not elect to commence distribution while remaining an Employee (the year inserted above must comply with applicable Treasury Regulations and must be a year subsequent to 1998 and subsequent to the year in which the amendment is adopted).

New Plan or Plan never has allowed in-service distributions upon attainment of age 70-1/2.

59. OTHER WITHDRAWAL RIGHTS. Are any additional withdrawal rights available under the Plan?

Yes (Describe the applicable withdrawal rights in detail in an attachment.)

X No

Note: The above withdrawal rights (and those listed on any attachment) are considered protected optional forms of benefit which cannot be changed with respect to benefits already accrued by a participant.

WITHDRAWALS AND DISTRIBUTIONS

EVENTS OF DISTRIBUTION AND TIME OF PAYMENT

60. TIME OF PAYMENT. Subject to Sections 7.6 and 7.7 and Article 10 of the Plan, distribution to a Participant whose benefit has become distributable shall commence in accordance with the following: (Check (a) or (b) and the applicable box(es) under the Item selected.)

(a)      X        SIMPLIFIED OPTION. Upon the Participant's
         termination of employment, as soon as
         administratively feasible (check the box that
         applies):

                  X       after the Participant elects
                          commencement of his benefit; or

                          after the first Accounting Date
                          coincident with or next following
                          the Participant's election to
                          commence benefits.

(b)               DETAILED OPTION.

         (1)      NORMAL RETIREMENT. Upon a Participant's
                  termination of employment on or after
                  attaining Normal Retirement Age, as soon as
                  administratively feasible (check the box
                  that applies):

                          after such termination of
                          employment;

                          after the first Accounting Date
                          coincident with or next following
                          such termination of employment;

                          after the Participant elects
                          commencement of his benefit; or

                          after the first Accounting Date
                          coincident with or next following
                          the Participant's election to
                          commence benefits.

         (2)      EARLY RETIREMENT. (Complete only if the
                  early retirement provision in Item 60(b)(5)
                  is elected.) Upon a Participant's
                  termination of employment on or after
                  satisfying the criteria in Item 60(b)(5) for
                  early retirement but before attaining Normal
                  Retirement Age (Item 7), as soon as
                  administratively feasible (check the box
                  that applies):

                          after the Participant elects
                          commencement of his benefit;

                          after the first Accounting Date
                          coincident with or next following
                          the Participant's election to
                          commence benefits; or
                          other (specify time or times)

                          ____________________________________
                          ____________________________________
                          ____________________________________

         (3)      DISABILITY RETIREMENT. Upon a Participant's
                  termination of employment, prior to Normal
                  Retirement Age (Item 7) and prior to
                  satisfying the criteria for early retirement
                  (if the Plan has an early retirement
                  provision), on account of the incurrence of
                  a Disability, as soon as administratively
                  feasible (check the box that applies):

                          after the Participant elects
                          commencement of his benefit;

                                                            41

                          after the first Accounting Date
                          coincident with or next following
                          the Participant's election to
                          commence benefits; or

                          other (specify time or times)

                          ____________________________________
                          ____________________________________
                          ____________________________________

         (4)      OTHER TERMINATION. Upon a Participant's
                  termination of employment prior to Normal
                  Retirement Age (Item 7), prior to satisfying
                  the criteria for early retirement (if the
                  Plan has an early retirement provision) and
                  prior to incurring a Disability, as soon as
                  administratively feasible (check the box
                  that applies):

                          after the Participant elects
                          commencement of his benefit;

                          after the first Accounting Date
                          coincident with or next following
                          the Participant's election to
                          commence benefits;

                          after the first Accounting Date
                          coincident with or next following
                          the Participant's termination of
                          employment, if elected by the
                          Participant, but if not elected,
                          after the first Accounting Date
                          coincident with or next following
                          the Participant's attainment of
                          Normal Retirement Age (Item 7); or

                          other (specify time or times):

                          ____________________________________
                          ____________________________________
                          ____________________________________

         (5)      OTHER. Are any additional commencement dates
                  available under the Plan?

                          Yes      (Describe the applicable
                                   forms in detail in an
                                   attachment.)

                          No

Note: The above commencement dates (and those listed on any attachment) are considered protected optional forms of benefit which cannot be changed with respect to benefits already accrued by a participant.

WITHDRAWALS AND DISTRIBUTIONS

FORM OF PAYMENT

61. FORMS OF BENEFIT PAYMENT. The following alternative forms of distribution and withdrawal are available under the Plan (check any boxes that apply):

X a single sum,

X periodic installment payments, not less frequently than annually, with any installments remaining unpaid at the Participant's death to be paid to his Beneficiary,

in the case of a Participant who has attained age 70-1/2 and who is required to commence benefit payments under Section 7.6(d) while employed by the Employer, periodic installment payments sufficient in amount and frequency to satisfy the minimum distribution requirements of Section 8.5, with a lump sum distribution of his remaining Account balance upon termination of employment,

a single life annuity,

a Qualified Joint and Survivor Annuity,

a joint and survivor annuity for the Participant and his Surviving Spouse under which the survivor annuity is more than one-half of, but not greater than, the annuity payable during the joint lives of the Participant and such spouse,

X the additional forms of benefit specified in the applicable attachment. (Describe the additional forms in detail in an attachment.)

(NOTE: For a plan which is a transferee of a plan required to have annuities, the Qualified Joint and Survivor Annuity and the single life annuity will automatically be available. Refer to Section 8.2 of the Plan.)

NOTE: The above alternative forms of benefit (and those listed on any attachment) are considered protected forms of benefit which can be changed with respect to benefits already accrued by a Participant only as permitted by Treasury Regulations.

62. CASH OR IN-KIND PAYMENTS. If a Participant's benefit is payable other than in an annuity form and other than in qualifying employer securities, the Participant's distribution or withdrawal shall be paid:

X in cash, or

in cash, or at the election of the Participant, in kind subject to the following limitations (describe in-kind withdrawal or distribution rights):

NOTE: An in-kind withdrawal or distribution option is considered a protected form of benefit that can be changed with respect to benefits already accrued by a Participant only as permitted by Treasury Regulations.

WITHDRAWALS AND DISTRIBUTIONS

CASH-OUT

63. $5000 CASH-OUT. Notwithstanding the benefit commencement dates otherwise adopted in Item 60 and the alternative forms of benefit otherwise adopted in Item 61, any amount payable to a Participant or any Preretirement Survivor Annuity payable to a Surviving Spouse shall be paid in a cash lump sum if such payment is made before payment otherwise begins and if, in the case of an amount payable to a Participant, the value (determined as of the date of distribution) of his nonforfeitable benefit does not exceed $5,000 or, in the case of a Preretirement Survivor Annuity, the value (determined as of the date of distribution) of such annuity does not exceed $5,000, and such lump sum shall be paid as soon as administratively feasible (whether or not the Participant or his spouse has consented to the distribution) (check the applicable box):

X after the Participant's termination of employment (death, in the case of the Preretirement Survivor Annuity);

after the first Accounting Date following the Participant's termination of employment (death, in the case of the Preretirement Survivor Annuity); or

Not Applicable -- This provision shall not be a part of the Plan.

This provision, if adopted, shall be applied by treating any Deductible Voluntary Contribution Account separately from other portions of the Participant's benefit.

TOP-HEAVY RULES AND SECTION 415 LIMITATIONS

64. TOP-HEAVY TESTING. For purposes of the provisions of the Plan applicable if the Plan is a Top-Heavy Plan:

the Plan shall be deemed always to be a Top-Heavy Plan; or

X the Plan shall be tested each year to determine whether it is a Top-Heavy Plan.

65. TOP-HEAVY MINIMUMS. If a Participant is covered under any other plan or plans of the Employer, then:

X Section 3.4 of the Plan shall apply as if such Participant were not so covered; or

Section 3.4 shall be modified by the attached provisions, in order to prevent duplication.

66. DEFINED BENEFIT ACTUARIAL ASSUMPTIONS. (Complete only if second option under Item 64 is selected and if there is one or more defined benefit plans in the Permissive Aggregation Group or the Required Aggregation Group.) The interest and mortality rates, for purposes of establishing Present Value to compute the Top-Heavy Ratio, with respect to any defined benefit plans in the Permissive Aggregation Group or the Required Aggregation Group shall be:

Interest Rate:            ______%
Mortality Table:          ______________________________
                          ______________________________

67. TOP-HEAVY VESTING. For any Plan Year in which the Plan is a Top-Heavy Plan, the vesting schedule, applicable under Section 6.1(d)(3)(A) of the Plan, to a Participant's Employer Contribution Account, shall be as follows: (Skip this Item if the general vesting schedule elected in Item 49 is at least as fast as Option 1 or 3 in Item 49.)

100% vesting after ___ (not to exceed 3) Years of Service.

___% (not less than 20) vesting after 2 Years of Service, ___% (not less than 40) vesting after 3 Years of Service, ___% (not less than 60) vesting after 4 Years of Service, ___% (not less than 80) vesting after 5 Years of Service, 100% vesting after 6 Years of Service.

If the vesting schedule under the Plan shifts in or out of the above schedule for any Plan Year because of the Plan's top-heavy status, such shift is an amendment to the vesting schedule and the election in Section 12.3(c) of the Plan applies.

LIMITATIONS ON ANNUAL ADDITIONS. If the Employer maintains or ever maintained another qualified plan in which any Participant in this Plan is (or was) a participant, or could possibly become a participant, the following two items must be completed. They must also be completed if the Employer maintains a welfare benefit fund, as defined in section 419(e) of the Code, or an individual medical benefit account, as defined in section 415(l)(2) of the Code, under which amounts are treated as Annual Additions with respect to any Participant in the Plan.

68. If a Participant is covered under another qualified defined contribution plan maintained by the Employer, other than a Master or Prototype Plan:

X the provisions of Section 4.3 of the Plan will apply as if the other plan were a Master or Prototype Plan; or

the attached provisions will apply. (Provide the method under which the plans will limit total Annual Additions to the Maximum Permissible Amount and will properly reduce any excess amounts, in a manner that precludes employer discretion.)

69. If any Participant is, or has ever been, a participant in a qualified defined benefit plan maintained by the Employer (as defined in Section 4.1 of the Plan), then the attached provisions shall apply to Limitation Years beginning before January 1, 2000. (Attach provisions which will satisfy the 1.0 limitation of section 415(e) of the Code for Limitation Years beginning before January 1, 2000. Such provisions must preclude employer discretion.)

MISCELLANEOUS

SPONSORING ORGANIZATION. The sponsor of this prototype is: Keating, Muething & Klekamp, P.L.L., 1400 Provident Tower, One East Fourth Street, Cincinnati, Ohio 45202; (513) 579-6400.

FURTHER DEVELOPMENTS. If Keating, Muething & Klekamp, P.L.L. amends the Plan or discontinues or abandons sponsorship of the prototype documents, the Employer will be notified.

ADOPTION OF PLAN. This Adoption Agreement may be used only in conjunction with the Keating, Muething & Klekamp, P.L.L. Basic Prototype Plan Document. By this Agreement between the Employer and the Trustee(s), the Employer hereby adopts the Keating, Muething & Klekamp, P.L.L. Basic Prototype Plan Document, as supplemented by this Adoption Agreement, and the Keating, Muething & Klekamp, P.L.L. Prototype Trust Agreement, as said Plan Document, Adoption Agreement, and Trust Agreement are now in effect or may be hereafter amended, for the purpose of establishing or amending a profit-sharing plan and hereby accepts all the terms and conditions thereof. Pursuant to section 401(a)(27) of the Code, this Plan is designated a profit-sharing plan.

RELIANCE. This prototype plan has been approved as to form by the Internal Revenue Service, in Opinion Letter Serial Number K373773a. The adopting employer may rely on an opinion letter issued by the Internal Revenue Service as evidence that the plan is qualified under section 401 of the Internal Revenue Code only to the extent provided in Announcement 2001-77, 2001-30 I.R.B.

The employer may not rely on the opinion letter in certain other circumstances or with respect to certain qualification requirements, which are specified in the opinion letter issued with respect to the plan and in Announcement 2001-77.

In order to have reliance in such circumstances or with respect to such qualification requirements, application for a determination letter must be made to Employee Plans Determinations of the Internal Revenue Service.

LISTING FOR IRS: By executing this Adoption Agreement, the Employer authorizes Keating, Muething & Klekamp, P.L.L. to include the Employer's name, address and taxpayer identification number on a list it is required to provide to the Internal Revenue Service annually.

The Employer will notify the Trustee in writing of any changes in this information.

Signed on the following date: ________________________________.

EMPLOYER

MERIDIAN BIOSCIENCE, INC.