SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
X Filed by the Registrant
__ Filed by a Party other than the Registrant
Check the appropriate box:
__ Preliminary Proxy Statement
X Definitive Proxy Statement
__ Definitive Additional Materials
__ Soliciting Material Pursuant to Section 240.14a-11(c) or
240.14a-12
BALLARD MEDICAL PRODUCTS
(Name of Registrant as Specified in Its Charter)
PAUL W. HESS
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
X $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
__ $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
__ Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which
transaction applies:
2) Aggregate number of securities to which
transaction applies:
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11: 1
4) Proposed maximum aggregate value of transaction:
1 Set forth the amount on which the filing fee is calculated and
state how it was determined.
__ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form of Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed: <PAGE>
BALLARD MEDICAL PRODUCTS
12050 Lone Peak Parkway
Draper, Utah 84020
_____________________________
PROXY STATEMENT
_____________________________
ANNUAL MEETING OF SHAREHOLDERS
To Be Held January 23, 1995
INTRODUCTION
This Proxy Statement is furnished to the shareholders with
the Notice of Annual Meeting of Shareholders of Ballard Medical
Products, a Utah corporation (the "Company"), in connection with
the solicitation of proxies by the Company. The proxies
solicited hereby are to be voted at the Annual Meeting of
Shareholders of the Company to be held at the Company's executive
offices, 12050 Lone Peak Parkway, Draper, Utah 84020, on Monday,
January 23, 1995, at 11:00 a.m. Mountain Standard Time, and at
any and all adjournments thereof. Stockholders of record at the
close of business on November 23, 1994 (the "Record Date") are
entitled to notice of and to vote at the meeting.
A form of proxy is enclosed for your use. The shares
represented by each properly executed, unrevoked proxy will be
voted as directed by the shareholder. The proxy will be voted
"for" each proposal on which no direction is made. This proxy
solicitation is being made by the Board of Directors of the
Company.
SOLICITATION AND REVOCATION OF PROXIES
It is contemplated that the solicitation of proxies will be
made exclusively by mail. Should it, however, appear desirable
in order to ensure adequate representation of shares at the
meeting, officers and employees of the Company may, for no
additional compensation, communicate with shareholders, banks,
brokerage houses and others by telephone, telegraph, or in person
to request that proxies be furnished. This Proxy Statement and
the accompanying form of proxy are being first mailed or
delivered to shareholders on or about December 9, 1994. All
expenses incurred in connection with this solicitation will be
borne by the Company. In following up on the original
solicitation of proxies by mail, the Company may make
arrangements with brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy material to the
beneficial owners of the shares and will reimburse them for their
reasonable expenses in so doing. The Company has no present
plans to hire special employees or paid solicitors to assist in
obtaining proxies, but reserves the right to do so if it should
appear that a quorum otherwise might not be obtained.
Any proxy given may be revoked at any time prior to the
exercise thereof. To accomplish this, written notice of
revocation must be received by the Secretary of the Company no
later than 10:00 a.m. MST on the date of the Annual Meeting, at
the Company's executive offices, 12050 Lone Peak Parkway, Draper,
Utah 84020. Such written notice may take the record form of a
later-dated proxy or some other written signed instrument. In
addition, any shareholder present at the meeting who has given a
proxy may withdraw it and vote his or her shares in person.
OUTSTANDING STOCK AND VOTING RIGHTS
Only holders of record of the Company's Common Stock at the
close of business on the Record Date are entitled to notice of
and to vote at the Annual Meeting. As of the Record Date, the
Company had issued and outstanding 26,477,745 shares of Common
Stock, $.10 par value. Each share of Common Stock is entitled to
one vote on every matter submitted at the meeting. There is no
cumulative voting. The presence at the meeting, in person or by
proxy, of a majority of the shares entitled to vote shall
constitute a quorum for the transaction of business. The vote
required for the election of Directors and approval of the other
proposals is set forth in the discussion of each item to be voted
upon.
All properly executed and returned proxies, as well as
shares represented in person at the meeting, will be counted to
determine if a quorum is present, whether or not the proxies
indicate abstentions or consist of broker non-votes (defined
below). Abstentions (but not broker non-votes) will also be
counted in the denominator to determine whether a matter has been
approved. Thus, abstentions (but not broker non-votes) will have
the same effect as a vote "against" the matter. A "broker non-
vote" refers to shares of Common Stock represented at the meeting
in person or by proxy by a broker or nominee where such broker or
nominee (1) has not received voting instructions on a particular
matter from the beneficial owners or persons entitled to vote and
(2) the broker or nominee does not have discretionary voting
power on such matter.
PRINCIPAL STOCKHOLDERS
So far as is known to management, as of the Record Date, the
following persons owned beneficially more than 5% of the
outstanding shares of the Company's Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENTAGE OF OUTSTANDING
BENEFICIAL OWNER OWNERSHIP COMMON STOCK (1)
<S> <C> <C>
Dale H. Ballard
12050 Lone Peak Parkway (2) 2,014,160 7.39%
Draper, Utah 84020
State Farm Mutual
Automobile (3) 1,852,502 6.80%
Insurance Company
One State Farm Plaza
Bloomington, Illinois
61710
</TABLE>
(1) All percentages are calculated on the basis of outstanding
shares of common stock, plus shares (in the denominator)
which could be acquired within sixty days of the Record Date
by the exercise of outstanding stock options.
(2) These shares are owned as follows:
Dale H. Ballard Family Living Trust 1,336,538 shares
Alice B. Ballard Family Living Trust 628,978
Pamela A. Ballard 1992 Trust 48,284
Indirect ownership through 360
Ballard Family Properties, Ltd.
Total 2,014,160 shares
(3) The shares held by State Farm are owned as follows:
State Farm Balanced Fund 427,751
State Farm Growth Fund, Inc. 820,000
State Farm Incentive and 604,751
Thrift Balanced Account
Total 1,852,502
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the Record Date, the
number of shares of Common Stock of the Company beneficially
owned by each of the Company's directors and executive officers,
and by all of the Company's directors and executive officers as a
group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP PERCENTAGE OF
BENEFICIAL OWNER, (SHARES)(4) OUTSTANDING
POSITION WITH COMPANY COMMON STOCK
(1)
<S> <C> <C>
Dale H. Ballard, President, CEO and
Chairman of the Board (2) 2,014,160 7.39%
John I. Bloomberg, Director Direct 58,767 (3)
J. Dallas VanWagoner, Director Direct 2,700 (3)
Robert V. Petersen, Director Direct 676 (3)
E. Martin Chamberlain, Director, Vice 0 0
President of Regulatory Affairs,
and Secretary
Dale H. Ballard, Jr., Director Direct 107,638 (3)
Indirect 34,076
Total 141,714
Paul W. Hess, Director, General Counsel Indirect 1,466 (3)
Harold R. ("Butch") Wolcott, Executive Direct 1,100 (3)
Vice President and General Manager
Bradford D. Bell, Vice President of Direct 2,666 (3)
Sales and Marketing
Kenneth R. Sorenson, Treasurer Direct 9,769 (3)
Options 36,000
Total 45,769
All directors and executive officers as Direct 1,519,854
a group (10 persons) Indirect 713,164
Options 36,000
Total 2,269,018 8.33%
</TABLE>
(1) All percentages are calculated on the basis of outstanding
shares of common stock, plus shares which could be acquired,
within 60 days of the Record Date, by the exercise of
outstanding stock options.
(2) SEE note (2) in the previous table, "Principal
Stockholders."
(3) Percentage of shares owned does not exceed 1%.
(4) This includes shares of common stock which would be
acquired, by the exercise of incentive stock options granted
to officers as employees, exercisable within 60 days of the
Record Date.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The full Board of Directors functions as the Company's
Compensation Committee. The Board has no separate Compensation
Committee. The following Board members are also employees and
executive officers of the Company:
Dale H. Ballard, Chairman of the Board, CEO, President
E. Martin Chamberlain, Vice President of Regulatory Affairs,
Secretary
Paul W. Hess, General Counsel
Dale H. Ballard, Jr., also a Board member, is the son of
Dale H. Ballard. During the last completed fiscal year, any
deliberations in Board meetings regarding executive officer
compensation were participated in by all members of the Board.
STOCK OPTION COMMITTEE
The Company's incentive stock option plans (the "Plans") are
administered by two stock option committees. Stock Option
Committee A ("Committee A") is authorized to grant options only
to employees who are not also officers or directors of the
Company. Stock Option Committee B ("Committee B") is authorized
to grant options only to employees who are also officers or
directors of the Company.
Each Committee must be comprised of two persons, both of
whom must be members of the Board of Directors. However, members
of Committee B must be "disinterested persons", within the
meaning of Rule 16b-3(c)(2)(i) promulgated by the Securities and
Exchange Commission. A "disinterested person" is a director who
is not, during the one year prior to service as an administrator
of the applicable plan, or during such service, granted or
awarded options pursuant to the applicable plan or any other
incentive stock option plan of the Company.
Committee A is currently comprised of Dale H. Ballard (the
President of the Company) and E. Martin Chamberlain (the Vice
President and Secretary of the Company). Committee B is
currently comprised of Dale H. Ballard and J. Dallas VanWagoner,
M.D., both of whom are "disinterested persons". Dr. VanWagoner
is not an employee or officer of the Company.
NO EMPLOYMENT CONTRACTS
The Company has no written employment contract with any
executive officer. Like all but a very few of the employees, the
executive officers are "at-will employees", meaning either the
employee or the Company can terminate the employment relationship
at any time for any reason or for no reason.
COMPENSATION POLICIES
The Board of Directors establishes and periodically reviews
the compensation of the Chief Executive Officer. Compensation of
other executive officers has been left to the judgment and
discretion of Dale H. Ballard, Chief Executive Officer. The
Board has left such other compensation to the discretion of the
CEO because the compensation levels of all such executive
officers have historically been reasonable in the judgment of the
Board of Directors, and because the Company has been successful
under Mr. Ballard's leadership and under this compensation
system.
There is no specific relationship of corporate performance
to executive compensation. No formula or specific evaluation
procedure is followed. Rather, the compensation policy is
subjective and informal. However, compensation for executives is
based generally on the principles that compensation must be (1)
competitive with other quality companies in order to help
motivate and retain the talent needed to grow Ballard Medical
Products' business; and (2) provide a strong incentive for key
personnel and sales representatives to achieve the Company's
goals.
The Company has a history of relying upon incentive stock
options as an important element of each executive's compensation
package. SEE ALSO "Report by Stock Option Committee B on
Repricing of Options." This program has generally enabled the
Company to keep salaries and bonuses at relatively modest levels.
The Company's successful sales and profit record suggests, we
believe, that these principles which form the basis for our
compensation program have delivered the desired results.
ELEMENTS OF EXECUTIVE COMPENSATION
It has been the Company's policy for many years that the
executive compensation program consist of base salary, bonuses,
and stock options. In addition, the Company has provided
automobiles toits executiveofficersand certainother keyemployees.
The Company's salary levels are determined by comparisons
with companies of similar size and complexity in the health care
industry. Salary increases are determined in view of the
financial performance of the Company, the individual performance
of the executive, and any increased responsibilities assumed by
the executive. Bonuses are determined by the Chief Executive
Officer at the end of each fiscal year, based upon these same
factors. Bonuses are completely discretionary and are not based
upon any formula.
All employee stock options are granted pursuant to one of
the Company's incentive stock option plans. The Company makes
stock option grants periodically at no less than 100% of the
market price on the effective date of the grant. All of the
current incentive stock option plans of the Company are
summarized below: SEE "Summary of Stock Option Plans."
In addition to the above compensation, executive officers,
along with all employees of the Company, are eligible to
participate in the Company's 401(k) retirement plan. This plan
is available to all employees after they have been employed by
the Company for at least one year following certain specified
plan entry dates. The plan allows employees to make
contributions to the plan from salary reductions each year, up to
an annual limit which is generally 15% of a participant's annual
compensation. Under the 401(k) plan, the Company matches a
participant's contribution up to 4% of his or her salary.
Employees are always fully vested in their own contributions and
become fully vested in any contributions made by the Company
after six years of service.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation of Dale H. Ballard, Chairman of the Board
and Chief Executive Officer, consists of a base salary, typically
an annual bonus, 401(k) plan contributions, and the use of a
vehicle. At no time in the Company's history has Mr. Ballard
received incentive stock options under any incentive stock option
plan.
There is no specific relationship between the Company's
performance and Mr. Ballard's compensation. Again, only a
subjective, informal policy is followed. The Board of Directors
periodically reviews Mr. Ballard's base salary and bonus and
revises his compensation based on the Board's evaluation of his
performance toward the achievement of the Company's financial,
strategic and other goals, his length of service as Chief
Executive Officer, and competitive Chief Executive Officer pay
information. Mr. Ballard has historically determined his own
bonus. The Company has enjoyed an overall strong performance,
and Mr. Ballard has been the Company's able Chief Executive
Officer from the Company's formation.
The Board feels that Mr. Ballard has been under compensated
over the years in view of his excellent performance as Chief
Executive Officer.
SECTION 162(m) POLICY.
Under Section 162(m) of the Internal Revenue Code, effective
January 1, 1994, no income tax deduction is allowed to a publicly
held corporation for remuneration paid to certain executive
officers (including the CEO) to the extent that the amount of
such remuneration with respect to any given employee/executive
officer for the taxable year exceeds $1,000,000. The Board's
current policy is that the Company will not pay remuneration to
any one employee during a given tax year which would not be
deductible to the Company because of the Section 162(m) limits.
BOARD OF DIRECTORS
Dale H. Ballard, Chairman
John I. Bloomberg
J. Dallas VanWagoner
Robert V. Petersen
E. Martin Chamberlain
Dale H. Ballard, Jr.
Paul W. Hess
EXECUTIVE COMPENSATION
DIRECTORS
During the fiscal year ended September 30, 1994, each of the
seven members of the Board of Directors received $500 in cash
compensation for his services as a director. There is no
standard agreement pursuant to which the directors are
compensated for their services.
EXECUTIVE OFFICERS
The following table sets forth the compensation paid or
awarded by the Company to the Company's Chief Executive Officer
and all of the Company's other executive officers who are
considered "highly compensated" under regulations promulgated by
the Securities and Exchange Commission, for each of the fiscal
years ended September 30, 1994, 1993, and 1992:
SUMMARY COMPENSATION TABLES
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
OTHER ANNUAL
NAME AND FISCAL YEAR SALARY COMPENSATION
PRINCIPAL POSITION ENDED 9/30 ($) BONUS ($) ($)
<S> <C> <C> <C> <C>
Dale H. Ballard, 1994 200,500 0 (3)
CEO 1993 183,333 60,000 (3)
1992 152,706 60,000 (3)
Harold R. "Butch" 1994 95,000 10,000 (3)
Wolcott, Executive Vice 1993 74,538 0 (3)
President (1) 1992 N/A N/A N/A
Paul W. Hess 1994 130,500 0 (3)
General Counsel (2) 1993 N/A N/A N/A
1992 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
(4)
FISCAL SECURITIES
YEAR UNDERLYING ALL OTHER
NAME AND ENDED OPTIONS COMPENSATION
PRINCIPAL POSITION 9/30 GRANTED (#) ($)(7)
<S> <C> <C> <C>
Dale H. Ballard, CEO 1994 (5) N/A 0
1993 (5) N/A 0
1992 (5) N/A 2,689
Harold R. ("Butch") 1994 29,000 0
Wolcott, Executive Vice 1993 (6) 26,667 0
President (1) 1992 N/A N/A
Paul W. Hess 1994 18,000 0
General Counsel (2) 1993 N/A N/A
1992 N/A N/A
</TABLE>
(1) Mr. Wolcott did not work for the Company in fiscal year
1992.
(2) Mr. Hess joined the Company in August, 1993. He first
became an officer in October, 1993.
(3) The personal benefits and perquisites received by the named
executives were less than the reporting thresholds
established by the Securities and Exchange Commission (the
lesser of $50,000 or 10% of the individual's cash
compensation).
(4) The Company does not have benefit plans involving Restricted
Stock Awards, Stock Appreciation Rights (SARs), or Long-Term
Incentive Plans (LTIPs)
(5) No options have ever been granted to Mr. Ballard under any
of the Company's Incentive Stock Option Plans.
(6) Adjusted to reflect a stock split which occurred after the
date of grant.
(7) These figures represent the Company's contributions to its
401(k) retirement plan for the benefit of the named
executives. All of the named executives who received a
Company contribution in the years shown are 100% vested in
their respective plan account balances.
OPTION GRANTS IN FISCAL YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
APPRECIATION FOR OPTION TERM (2)
INDIVIDUAL GRANTS (1)
Number of
Securities
Underlying
Options Granted
(#) and % of
Total Options
Granted to
Employees in Exercise Option
Fiscal Year Price ($/SH) Expiration
Name Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C>
Dale H. Ballard N/A N/A N/A N/A N/A
Harold R. 8,000 8.625 7/31/2001 28,040 65,480
("Butch") Wolcott 8,000 8.625 8/1/2001 28,040 65,480
13,000 10.00 9/12/2001 52,910 123,370
Total 29,000 Total 108,990 Total 254,330
2.4%
Paul W. Hess 8,000 8.625 7/31/2001 28,040 65,480
5,000 8.625 8/1/2001 17,558 40,925
5,000 10.00 9/12/2001 20,350 47,450
Total 18,000 Total 65,948 Total 153,855
1.5%
</TABLE>
(1) The above table lists only new options granted during the
1994 fiscal year. In addition to new grants, the Company's
employees (including its executive officers) also received
options to replace canceled options, as described in the
"Report by Stock Option Committee B on Repricing of Options"
included below.
(2) We recommend caution in interpreting the financial
significance of these "potential realized value" figures.
They are calculated by multiplying the number of options
granted by the difference between a future hypothetical
stock price and the option exercise price and are shown
pursuant to rules of the Securities and Exchange Commission.
They assume the value of Company stock appreciates 5% to 10%
each year, respectively, compounded annually, for seven
years (the life of each option). They are not intended to
forecast possible future appreciation, if any, of such stock
price or to establish a present value of options. Also, if
appreciation does occur at the 5% or 10% per year rate, the
amounts shown would not be realized by the recipients until
the year 2001. Depending on inflation rates, these amounts
may be worth significantly less in 2001, in real terms, than
their value today. The Company has not used an alternative
formula for valuation since the Company is not aware of any
formula which will determine with reasonable accuracy a
present value of options based on future unknown or volatile
factors. The realized values shown are before the payment
of federal or state income taxes.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED SEPTEMBER 30,
1994
<TABLE>
<CAPTION>
Number of Value of
Shares Securities Unexercised
Acquired Underlying In-the-Money
on Value Unexercised Options at
Name Exercise Received Options at Year Year End ($)
(#)(1) ($) End (#) (2)
Exer- Unexer- Exer- Unexer
cis- cisable cis- -cis-
able able able
<S> <C> <C> <C> <C> <C> <C>
Dale H. Ballard N/A N/A N/A N/A N/A N/A
Harold R.
("Butch") Wolcott 0 N/A 0 55,667 0 79,542
Paul W. Hess 0 N/A 0 48,000 0 77,125
</TABLE>
(1) The optionee may satisfy the exercise price by submitting
already owned shares and/or cash. Income tax withholdings
may be satisfied by electing to have the Company withhold
shares otherwise issuable under the option with a fair
market value equal to such obligations.
(2) The fair market value of the Company's common stock on
September 30, 1994 ($10.375 per share) minus the exercise
price.
REPORT BY STOCK OPTION COMMITTEE B
ON REPRICING OF OPTIONS
During fiscal year 1994, the Company's two Stock Option
Committees voted to cancel and replace many outstanding options
held by employees (including executive officers), so as to give
our employees the benefit of a lower exercise price (because of
the lower fair market value of the Company's stock). Stock
Option Committee B ("Committee B") has responsibility for the
granting of options to employees who are also executive officers.
Under all of the Company's Incentive Stock Option Plans (the
"Plans"), the option exercise price for options granted
(including replacement options) is the current market price of
the Company's Common Stock as of the date of the option grant.
Because the Company's stock value has dropped in comparison to
levels enjoyed in past years, many options held by employees
(including executive officers) simply had no value. The
compensation philosophy of the Board of Directors, Committee B,
and particularly Dale H. Ballard, has for many years been to
include stock options as an important component of compensation
for salaried employees. Thus, both Stock Option Committees felt
it was important this past year to reduce the exercise prices on
outstanding options so as to put the "incentive" back into our
compensation scheme. Set forth below is a summary of repricing
actions by Committee B during fiscal year 1994 for certain
Company executive officers. No option repricing occurred prior
to fiscal year 1994.
HAROLD R. ("BUTCH") WOLCOTT. Effective October 29, 1993,
Mr. Wolcott was granted options to acquire 4,000 shares.
Effective December 23, 1993, Committee B canceled the 10/29/93
grant for 4,000 shares and a February 18, 1993 grant for 26,667
shares (taking into account the February 1993 stock split) and
granted to Mr. Wolcott a replacement option for 34,667 shares,
i.e., 30,667 replacement options plus 4,000 new options. On
August 1, 1994, Committee B canceled all 34,667 options and
replaced them with options for 34,667 shares at a lower exercise
price of $8.625 per share.
PAUL W. HESS. Effective December 23, 1993, Mr. Hess was
granted an option for 38,000 shares, 30,000 of which were given
to replace an 8/18/93 grant and 8,000 of which were new. On
August 1, 1994, Committee B replaced all 38,000 options, at the
$8.625 per share exercise price.
STOCK OPTION COMMITTEE B
Dale H. Ballard
J. Dallas VanWagoner
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE EXERCISE ORIGINAL OPTION
UNDERLYING OF STOCK AT PRICE AT NEW TERM REMAINING
NAME AND OPTIONS TIME OF TIME OF EXERCISE AT DATE OF
PRINCIPAL REPRICED REPRICING ($) REPRICING PRICE ($) REPRICING
POSITION DATE (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Dale H. Ballard,
CEO N/A N/A N/A N/A N/A N/A
Harold R. 12/23/93 26,667 11.75 13.68 11.75 74 months
("Butch") Wolcott, 12/23/93 4,000 11.75 16.50 11.75 82 months
Executive Vice 8/1/94 34,667 8.63 11.75 8.63 77 months
President
Paul W. Hess, 12/23/93 30,000 11.75 14.13 11.75 80 months
General Counsel 8/1/94 38,000 8.63 11.75 8.63 77 months
</TABLE>
STOCK PERFORMANCE GRAPH
The following graph shows the yearly percentage change in
cumulative total shareholder return on the Company's Common Stock
during the preceding five fiscal years ended September 30, 1994,
compared with the Standard & Poor's 500 Stock Index and the
published Standard & Poor's Medical Products and Supplies
industry index. The comparison assumes $100 were invested on
September 30, 1989 in the Company's Common Stock, and in each of
the foregoing indices the comparison assumes reinvestment of
dividends.
WRITTEN DESCRIPTION OF THE STOCK PERFORMANCE GRAPH
FOR EDGAR FILING.
The graph line of each of these three securities is
described below:
BALLARD MEDICAL PRODUCTS. The graph shows that $100
invested in Ballard Medical Products Common Stock on September
30, 1989 would be worth the following values on the respective
dates shown:
September 30, 1990 $142
September 30, 1991 394
September 30, 1992 532
September 30, 1993 421
September 30, 1994 259
S&P 500. The graph shows that $100 invested in the S&P 500
Index on September 30, 1989 would be worth the following values
on the respective dates shown:
September 30, 1990 $ 91
September 30, 1991 119
September 30, 1992 132
September 30, 1993 149
September 30, 1994 155
S&P MEDICAL PRODUCTS AND SUPPLIES. The graph shows that
$100 invested in the S&P Medical Products and Supplies Index
would be worth the following values on the respective dates
shown:
September 30, 1990 $107
September 30, 1991 168
September 30, 1992 164
September 30, 1993 124
September 30, 1994 159
SUMMARY OF STOCK OPTION PLANS
GENERAL
The Company has adopted eight open incentive stock option
plans, identified in the table below:
NAME OF PLAN MONTH OF APPROVAL OF PLAN
BY SHAREHOLDERS
1984 Plan January, 1985
1987 Plan January, 1988
1988 Plan January, 1989
1990 Plan January, 1990
1991 Plan January, 1992
1992 Plan January, 1993
1993 Plan January, 1994
1994 Plan Not yet approved
(All of the above-named incentive stock option plans are
sometimes referred to herein collectively as the "Plans".)
The purpose of each of the Plans is to attract and retain
qualified personnel for positions of responsibility in the
Company by providing additional compensation incentives, thereby
promoting the success of the Company. Options granted under each
of the Plans are intended to qualify as incentive stock options
under Section 422 of the Internal Revenue Code (the "Code").
ADMINISTRATION
All of the Plans are administered by two Stock Option
Committees, by delegation of authority from the Board of
Directors. Committee A is authorized to grant options only to
employees who are not also officers or directors of the Company.
Committee B is authorized to grant options only to employees who
are also officers or directors of the Company.
Each Committee must be comprised of two persons, both of
whom must be members of the Board of Directors. However, members
of Committee B must be "disinterested persons", within the
meaning of Rule 16b-3(c)(2)(i) promulgated by the Securities and
Exchange Commission. A "disinterested person" is a director who
is not, during the one year prior to service as an administrator
of the applicable plan, or during such service, granted or
awarded options pursuant to the applicable plan or any other
incentive stock option plan of the Company.
Committee A is currently comprised of Dale H. Ballard (the
President of the Company) and E. Martin Chamberlain (the Vice
President and Secretary of the Company). Committee B is
currently comprised of Dale H. Ballard and Dr. J. Dallas
VanWagoner, both of whom are "disinterested persons".
The interpretation and construction of any provision of the
Plans is within the sole discretion of the applicable Committee
or the Board of Directors, whose determination is final and
conclusive. Members of each Committee are elected by a majority
vote of the Board, including the votes of the directors thus
elected to serve on the Committee. Committee members hold office
until the next regular meeting of the Board and until their
successors are elected and qualified. Committee members may be
removed at any time by a majority vote of the Board, including
the vote of the director whose removal as a Committee member is
sought.
ELIGIBILITY
Each of the Plans provides that options may be granted to
all employees of the Company and all employees of the Company's
subsidiaries. Under all of the Plans except the 1991 Plan, the
1992 Plan, the 1993 Plan, and the 1994 Plan, no further options
are available. Under the Plans, the applicable Committee selects
the optionees and determines the number of shares to be subject
to each option. None of the Plans provide for a maximum or
minimum number of shares which may be granted under option to any
one employee.
TERMS OF OPTIONS
Each option granted under the Plans may extend for a period of up
to ten (10) years from the date the option is granted, must be
evidenced by a stock option agreement between the Company and the
employee to whom such option is granted, and is subject to the
following additional terms and conditions:
(a) CONTINUED EMPLOYMENT. An option granted may not
be exercised, in whole or in part, unless the optionee continues
to serve as an employee of the Company for at least one full year
after the date the option is granted. The 1991, 1992, 1993, and
1994 Plans provide that the President of the Company, in his
discretion, may extend this continued employment period from one
year to up to three years. The intervening death of the optionee
before the end of such year of employment removes any continued
employment condition. In addition, the Board of Directors is
proposing an amendment to the Plans which would remove the
continued employment condition upon the occurrence of a Business
Combination. SEE "PROPOSAL NO. 3: PROPOSAL TO AMEND ALL
INCENTIVE STOCK OPTION PLANS TO PROVIDE FOR IMMEDIATE VESTING
(I.E., EXERCISABILITY) UPON OCCURRENCE OF BUSINESS COMBINATION."
(b) EXERCISE OF THE OPTION. Under all of the Plans,
payment for shares issued upon exercise of an option may consist
of cash or the exchange of other shares of the Company's stock
which have been held for more than one year by the optionee.
Under the 1984 Plan, no option granted prior to January 1, 1987
may be exercised while there is outstanding any previously
granted incentive stock option.
(c) OPTION PRICE. The option exercise price of
options granted under the Plans is the fair market value of the
Company's Common Stock on the date of grant. However, in the
case of options granted to an optionee who owns more than 10% of
the voting power or value of all classes of stock of the Company,
the exercise price must not be less than 110% of the fair market
value on the date of grant. For so long as the Company's stock
is included in the New York Stock Exchange, the Board of
Directors or Stock Option Committee will use the reported closing
price on the last trading day preceding the grant of the option,
as the fair market value for purposes of setting option prices.
(d) TERMINATION OF EMPLOYMENT. Each of the Plans
provides that if the optionee's employment by the Company is
terminated for any reason (other than permanent disability) the
option shall thereupon expire and any and all right to purchase
shares pursuant thereto shall terminate three months after the
optionee's employment terminates. If an optionee becomes
permanently disabled, the option may be exercised at any time
within one year after termination of employment by reason of
disability, so long as the optionee has been an employee of the
Company for at least the period specified (one year minimum) in
the stock option agreement entered into by the Company and the
optionee.
(e) TRANSFER OF OPTIONS. Options granted under any of
the Plans are not transferable by an optionee other than by will
or the laws of descent and distribution and are exercisable,
during the optionee's lifetime, only by the optionee.
(f) TERMINATION OF OPTIONS. No option is exercisable
by any person after ten (10) years from the date the option was
granted (five (5) years if the optionee owns more than 10% of the
voting power or value of all classes of stock of the Company).
The President of the Company has discretion to shorten this
period in stock option agreements entered into by the Company
with employees.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split, is made in
the Company's capitalization, which results in an exchange of
Common Stock for a greater or fewer number of shares, appropriate
adjustment is to be made under each of the Plans in the option
price and in the number of shares subject to the option. In the
event of a stock dividend, each optionee is entitled to receive,
upon exercise of the option, the equivalent of any stock dividend
which the optionee would have received had the optionee been the
holder of record of the shares purchased upon such exercise.
OPTION SUMMARIES
The following tables set forth certain information related
to the Plans and options granted thereunder, as of September 30,
1994:
SUMMARY OF INCENTIVE STOCK OPTIONS OUTSTANDING
AS OF SEPTEMBER 30, 1994 (1)
<TABLE>
<CAPTION>
TOTAL SHARES SHARES STILL
RESERVED OPTIONS OPTIONS AVAILABLE FOR
PLAN UNDER PLAN GRANTED OUTSTANDING GRANT
<S> <C> <C> <C> <C>
1984 Plan 900,004 900,004 5,998 0
1987 Plan 750,112 750,112 146,477 0
1988 Plan 750,018 750,018 188,655 0
</TABLE>
<TABLE>
<CAPTION>
TOTAL SHARES SHARES STILL
RESERVED OPTIONS OPTIONS AVAILABLE FOR
PLAN UNDER PLAN GRANTED OUTSTANDING GRANT
<S> <C> <C> <C> <C>
1990 Plan 1,125,021 1,125,021 604,258 0
1991 Plan 750,000 738,334 626,134 11,666
1992 Plan 200,000 199,333 199,333 667
1993 Plan 600,000 592,000 592,000 8,000
1994 Plan 600,000 536,426 536,426 63,574
TOTALS 5,675,155 5,591,248 2,899,281 83,907
</TABLE>
(1) All figures have been adjusted to reflect stock splits which
have occurred since the adoption of the 1984 Plan to the
present.
MEETINGS AND COMMITTEES OF THE BOARD
BOARD OF DIRECTORS
The Board of Directors met January 24, 1994, at the regular
meeting of the Board of Directors, immediately following the
January 24, 1994 Annual Meeting of Shareholders, with all members
of the Board of Directors in attendance. All other Board of
Directors action taken during the 1994 fiscal year was conducted
by thirteen unanimous directors consent resolutions, approved and
executed by all of the directors.
STOCK OPTION COMMITTEE A
The Company has a standing Stock Option Committee A whose
function is to administer and grant options to employees other
than officers and directors under all of the Company's incentive
stock option plans. The Committee is comprised of two members of
the Board, currently Dale H. Ballard and E. Martin Chamberlain.
Three meetings were held by Committee A during the 1994 fiscal
year (with both members present). The remaining actions of
Committee A were effected in fifteen Committee A consent
resolutions, approved and executed by both members of the
Committee.
STOCK OPTION COMMITTEE B
The Company has a standing Stock Option Committee B whose
function is to administer and grant options to employees who are
also officers and directors under all of the Company's incentive
stock option plans. Committee B is comprised of two members of
the Board, currently Dale H. Ballard and J. Dallas VanWagoner.
All Committee B action taken during the 1994 fiscal year was
conducted in five Committee B consent resolutions, approved and
executed by both members of the Committee.
AUDIT COMMITTEE
The Company has a standing Audit Committee whose functions
are: (a) to conduct reviews of potential conflict-of-interest
situations as requested by the President; (b) to select the
Company's auditors; and (c) to review the Company's annual report
and other reports prepared for the Company by the Company's
auditors. The Audit Committee is comprised of two members of the
Board, currently John I. Bloomberg and Robert V. Petersen. One
meeting (attended by both members) was held by the Audit
Committee during the 1994 fiscal year.
The Company has no standing compensation or nominating
committees of the Board of Directors.
PROXY CARD PROPOSALS
PROPOSAL NO. 1: ELECTION OF DIRECTORS
GENERAL
Directors are elected at each Annual Meeting of the
Shareholders and hold office until the next Annual Meeting and
until their successors are elected and qualified. Currently,
there are seven directors.
NOMINEES FOR ELECTION
The names of the nominees for election to the Board of
Directors, with respect to whom proxies are solicited hereby, and
each of their business backgrounds for at least the last five
years are set forth below:
<TABLE>
<CAPTION>
NAME, AGE AND DIRECTOR
POSITION WITH THE COMPANY SINCE PRINCIPAL OCCUPATION
<S> <C> <C>
Dale H. Ballard (71) 1978 President, Chief Executive
President and Chairman of Officer, and Chairman of the
the Board Board (1)
</TABLE>
<TABLE>
<CAPTION>
NAME, AGE AND DIRECTOR
POSITION WITH THE COMPANY SINCE PRINCIPAL OCCUPATION
<S> <C> <C>
John I. Bloomberg (59) 1981 Managing General Partner,
Director private investment
companies (2)
J. Dallas VanWagoner (57) 1984 Practicing Physician, Clinical
Director Instructor with the University
of Utah School of Medicine (3)
Robert V. Petersen (68) 1986 Professor Emeritus of
Director Pharmaceutics, University of
Utah (4)
E. Martin Chamberlain (54) 1988 Vice President of Regulatory Affairs
Director, Vice President of and Director of Quality Assurance
Regulatory Affairs, and (5)
Secretary
Dale H. Ballard, Jr. (47) 1993 President of Stratco, a
Director financial planning and
investment firm (6)
Paul W. Hess (40) 1994 General Counsel (7)
Director, General Counsel
</TABLE>
(1) Mr. Ballard has served as President, Chief Executive
Officer, and Chairman of the Board of Directors since the
formation of the Company in 1978. Mr. Ballard holds a Bachelor
of Science Degree in Pharmacy from the University of Utah.
(2) From July, 1981 to the present, Mr. Bloomberg has been
a General Partner of J.I.B. Associates, Bricoleur Partners,
Olympic Growth Fund, and Utah Capital Corp., private investment
companies. From 1963 to 1981, Mr. Bloomberg's positions
included Senior Drug Analyst at Kidder Peabody (1963-1965),
Associate Director of Research at CBWL-Hayden Stone, now a part
of Shearson/Lehman (1965-1972), Director of Research and Senior
Vice President at Ladenberg, Thalmann & Co. (1972-1976), Security
Analyst at Alex Brown and Sons (1976-1979), and a Limited Partner
and Vice President of Bear Stearns & Co. (1979-1981). Mr.
Bloomberg graduated from Amherst College with a BA in Chemistry
and received an MBA in Business Administration from Harvard
Business School in 1962. Mr. Bloomberg is also on the board of
directors of Jabra Corporation of La Jolla, California, a
nonreporting company, and he is on the Board of Directors of the
John Moran Eye Center, University of Utah.
(3) Dr. VanWagoner received his B.S.E.E. degree from the
University of Utah in 1961, and M.S.E.E. in 1964. He graduated
from St. Louis University School of Medicine in 1970. He is a
board certified obstetrician and gynecologist and a member of the
American College of Obstetrics and Gynecology. In addition to
his private practice, Dr. VanWagoner is a clinical instructor
with the University of Utah School of Medicine. Over the past
twelve years, Dr. VanWagoner has assisted companies in the health
care industry with numerous research projects.
(4) Dr. Petersen received a B.S. (Honors) in Pharmacy from
the University of Utah in 1950, and a Ph.D. in Pharmaceutical
Chemistry, with minors in Organic Chemistry and Pharmacology,
from the University of Minnesota in 1955. Dr. Petersen has held
various academic positions with the University of Utah since 1957
and has been a Professor of Pharmacy since 1967. He was Chairman
of the Department of Applied Pharmaceutical Sciences from 1965 to
1978 and Chairman of the Department of Pharmaceutics from 1978 to
1982. He retired from the University of Utah July 1, 1992, and
now serves as a professor emeritus of pharmaceutics. Dr.
Petersen has acted as a consultant to various companies,
including Albion Laboratories (1964-1982), Deseret Pharmaceutical
Company, Inc. (1970-1989), Sorenco, Inc. (1978-present), Kolmar
Laboratories (1983-1987), Sorenson Development (1983-1989, and
1993 - present), Pacific Chemicals of Seoul, Korea (1989-91), and
Ciba-Geigy Corporation (1989-91). He served as a member of the
board of directors of the American Foundation for Pharmaceutical
Education from 1973 to 1975, since 1980 has served as a member of
the board of directors for the Drug Standards Division of the
United States Pharmacopeia - National Formulary, and in 1990 was
appointed to the board of directors of the U.S.P. Committee of
Revisions. Dr. Petersen is past president of the American
Association of Colleges of Pharmacy and from 1972 to 1987 was the
University of Utah College of Pharmacy's liaison to the board of
trustees of the Utah Pharmaceutical Association.
(5) Dr. Chamberlain joined the Company in August, 1982, as
a project manager. He received his Bachelor of Science Degree in
Molecular and Genetic Biology in 1967, his Master of Arts Degree
in Biological Science with a minor in Chemistry in 1969, and his
Doctorate in Biology with Biochemistry as an allied field in
1973. Between 1974 and 1981, he held a faculty appointment with
the University of Utah School of Medicine, working with the
Departments of Biology and the School of Medicine's Department of
Obstetrics and Gynecology, involved in biological and medical
research. In 1982 and 1983, he served as a member of the
Corporate Executive Committee and as a director for Bio-Ten
Energy Corporation, a reporting company. Dr. Chamberlain became
Vice President in October, 1993 in addition to his appointment as
Secretary of the Company in 1983. In July, 1994 he became Vice
President of Regulatory Affairs. He has also served as Director
of Quality Assurance for the Company since 1986.
(6) Dale H. Ballard, Jr. is the son of Dale H. Ballard,
the Company's Chief Executive Officer. Dale Ballard, Jr.
graduated from Brigham Young University in 1970, with a Bachelor
of Science Degree in Business Management, with minors in
Accounting and Economics. From 1972 until April, 1992, he owned
and operated Ballard Construction Company, a closely-held
corporation engaged principally in the business of road and
asphalt construction. From approximately 1977 to April, 1992,
Mr. Ballard also operated a property management business called
Empire Properties. Empire Properties was a wholly-owned
subsidiary of Ballard Construction Company. In April, 1992, Mr.
Ballard sold his construction and landscaping businesses.
Subsequently he formed a new financial planning and investment
company called Stratco.
(7) Paul W. Hess joined the Company as in-house counsel in
August, 1993. He had served as outside general corporate counsel
for the Company, through his former law firm Strong & Hanni,
since approximately 1985. In October, 1993, Mr. Hess was elected
and appointed by the Board of Directors as General Counsel. Mr.
Hess worked as an attorney for Strong & Hanni from 1981 until
1993. He received his Bachelor of Science Degree in Accounting
from Brigham Young University in 1978 and his Juris Doctorate
Degree from the University of Utah College of Law in 1981. Mr.
Hess is also a Certified Public Accountant.
Should any of the nominees become unable or unwilling to
accept nomination or election, the persons named as Proxies in
the enclosed form of proxy will exercise their voting power in
favor of such person or persons as the Board may recommend. All
of the nominees have consented to being named in this Proxy
Statement and to serve if elected.
APPROVAL
If you return a proxy, but give no direction on this
Proposal No. 1, your proxy will be voted "for" all seven nominees
named above. The election of each director requires the
affirmative vote of a majority of the shares represented at the
Annual Meeting in person or by proxy.
PROPOSAL NO. 2: PROPOSAL TO APPROVE THE 1994 INCENTIVE STOCK
OPTION PLAN.
GENERAL
On or about August 1, 1994, by unanimous consent
resolution, the Board of Directors of the Company adopted the
1994 Incentive Stock Option Plan (the "1994 Plan"), reserving
600,000 shares of Common Stock for issuance to employees. At the
closing price on the Record Date of the Company's stock, said
600,000 shares would have a value of $5,925,000.
The purpose of the 1994 Plan is to attract and retain the
best available personnel for positions of responsibility in the
Company by providing additional compensation incentives, thereby
promoting the success of the Company. The 1994 Plan reserves the
same number of shares for issuance as were reserved in the 1993
Plan approved by the shareholders in January, 1994. Management
feels that it is very important, for the Company's continuing
growth and success, that options continue to be a significant
portion of salaried employee compensation.
The Company is seeking shareholder approval of the 1994
Plan, not because shareholder approval is required under state or
federal law, but in order to qualify options granted under the
1994 Plan as incentive stock options under Section 422 of the
Internal Revenue Code (the "Code"), and in order to qualify
transactions under the Plan as exempt transactions under Section
16(b) of the Securities Exchange Act of 1934 (the "Exchange
Act"), pursuant to Rule 16b-3 promulgated by the Securities and
Exchange Commission. As of September 30, 1994, 536,426 options
had been granted under the 1994 Plan.
ADMINISTRATION
The 1994 Plan is administered by two Stock Option
Committees, by delegation of authority from the Board of
Directors of the Company. Committee A is authorized to grant
options only to employees who are not also officers or directors
of the Company. Committee B is authorized to grant options only
to employees who are also officers or directors of the Company.
Committee A is currently comprised of Dale H. Ballard (the
President of the Company) and E. Martin Chamberlain (the Vice
President and Secretary of the Company). Committee B is
currently comprised of Dale H. Ballard and Dr. J. Dallas
VanWagoner. All members of the Stock Option Committees sit on
the Company's Board of Directors.
All members of Committee B are "disinterested persons",
within the meaning of Rule 16b-3(c)(2)(i). A "disinterested
person" is a director who is not, during the one year prior to
service as an administrator of the Plan, or during such service,
granted or awarded options pursuant to the Plan or any other
incentive stock option plan of the Company.
The interpretation and construction of any provision of the
Plan are within the sole discretion of the applicable Committee
or the Board of Directors, whose determinations are final and
conclusive. Members of each Committee are elected by a majority
vote of the Board, including the votes of the directors thus
elected to serve on the Committee. Committee members hold office
until the next regular meeting of the Board and until their
successors are elected and qualified. Committee members may be
removed at any time by a majority vote of the Board, including
the vote of the director whose removal as a Committee member is
sought.
ELIGIBILITY
The 1994 Plan provides that options may be granted to any
employees (including officers, whether or not they are directors)
of the Company and any of its subsidiaries. As of September 30,
1994, the Company and its subsidiaries had 616 employees.
Directors who are not employees are not eligible to participate
in the 1994 Plan, but Directors who are also employees may
participate in the 1994 Plan. Committee A selects the optionees
and determines the number of shares to be subject to each option,
except in the case of officers and directors in which case
Committee B makes such selections and decisions. The 1994 Plan
does not provide for a maximum or minimum number of shares which
may be granted under option to any one employee.
The number of options to be granted to officers as opposed
to employees is not yet determinable. However, the Stock Option
Committees do not intend to grant any options to Dale H. Ballard,
CEO. It is not possible to determine the benefits that would
have been received by executive officers in the last completed
fiscal year had the 1994 Plan been in effect, because the
granting of options is discretionary.
TERMS OF OPTIONS
Each option granted under the 1994 Plan may extend for a
period of up to ten years (or only five years for an optionee who
immediately before the grant of the option, owns more than 10% of
the Company's stock) from the date the option is granted, must be
evidenced by a stock option agreement between the Company and the
employee to whom such option is granted, and is subject to the
following additional terms and conditions:
(a) CONTINUED EMPLOYMENT. An option granted may not be
exercised, in whole or in part, unless the optionee continues to
serve as an employee of the Company for at least one full year
after the date the option is granted. The President of the
Company, in his discretion, may extend these continued employment
conditions from one year to up to three years. The intervening
death of the optionee before the end of such year of employment
removes this continued employment condition. In addition, the
Board of Directors is proposing an amendment to all of the Plans
including the 1994 Plan which would remove the continued
employment condition upon the occurrence of a Business
Combination. SEE "PROPOSAL NO. 3: PROPOSAL TO AMEND ALL
INCENTIVE STOCK OPTION PLANS TO PROVIDE FOR IMMEDIATE VESTING
(I.E., EXERCISABILITY) UPON OCCURRENCE OF BUSINESS COMBINATION."
(b) EXERCISE OF THE OPTION. Payment for shares issued
upon exercise of an option may consist of cash or the exchange of
other shares of the Company's stock owned by the optionee. The
option price of options granted under the 1994 Plan is the fair
market value of the Company's Common Stock on the date of grant
as determined by the applicable Committee. However, in the case
of options granted to an optionee who owns more than 10% of the
stock of the Company, the exercise price must not be less than
110% of the fair market value on the date of grant. For so long
as the Company's stock is listed on the New York Stock Exchange,
the Committee will use the reported closing price for the stock
on the last trading day preceding the grant of the option as the
fair market value, for purposes of establishing option prices.
(c) TERMINATION OF EMPLOYMENT. The 1994 Plan provides
that if the optionee's employment by the Company is terminated
for any reason, other than disability, the option shall thereupon
expire and any and all right to purchase shares pursuant thereto
shall terminate three months after the optionee's employment
terminates. If an optionee becomes permanently disabled, the
option may be exercised at any time within twelve (12) months
after termination of employment by reason of disability, so long
as the optionee has been an employee of the Company for at least
the period specified (one year minimum) in the stock option
agreement entered into by the Company and the optionee.
(d) TRANSFER OF OPTIONS. Options granted under the 1994
Plan are not transferable by an optionee other than by will or
the laws of descent and distribution and are exercisable, during
the optionee's lifetime, only by the optionee or by the
optionee's guardian or legal representative.
(e) TERMINATION OF OPTIONS. No option is exercisable by
any person after ten (10) years from the date the option was
granted, or five (5) years if the optionee owns more than 10% of
the voting power or value of the stock of the Company. The
President of the Company has discretion to shorten this period in
stock option agreements entered into by the Company with
employees.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split, is made in
the Company's capitalization which results in an exchange of
Common Stock for a greater or fewer number of shares, appropriate
adjustments are to be made in the option price and in the number
of shares subject to the option. In the event of a stock
dividend, each optionee is entitled to receive, upon exercise of
the option, the equivalent of any stock dividend which the
optionee would have received had the optionee been the holder of
record of the shares purchased upon such exercise. Appropriate
adjustments are also to be made to the number of shares subject
to the Plan and the number and option price of shares subject to
outstanding options in the event the Company effects a
reorganization, merger, or recapitalization.
AMENDMENT AND TERMINATION
The Board of Directors may amend the 1994 Plan at any time
or from time to time, as necessary to comply with state and
federal laws or for the good of the Company or the employees
affected by the 1994 Plan.
FEDERAL INCOME TAX CONSEQUENCES
Options granted pursuant to the 1994 Plan are intended to
qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code (the "Code"). If an option granted under
the 1992 Plan is treated as an incentive stock option, the
optionee recognizes no taxable income upon the granting of the
option, nor does the Company get an income tax deduction. Also,
the optionee recognizes no taxable income upon exercise of the
incentive stock option. However, the excess of the fair market
value of shares purchased pursuant to the exercise of an
incentive stock option over the exercise price is an item of tax
preference for purposes of computing the alternative minimum tax.
Subsequently, when such shares are sold, in determining the
amount of gain or loss to be recognized for purposes of computing
alternative minimum taxable income, the basis of such shares is
increased by the amount of such excess which constituted an item
of tax preference.
Upon the sale of the shares (assuming that the sale occurs
no sooner than two years after grant of the option and one year
after receipt of the shares by the optionee) any gain will
qualify as a long-term capital gain. If these holding periods
are not satisfied, the option will not qualify as an incentive
stock option, and the optionee will recognize ordinary income at
the time of disposition of the shares, equal to the difference
between the basis and the lower of the fair market value of the
stock at the date of the option exercise or the selling price of
the stock, and the Company will get a corresponding income tax
deduction.
To the extent that the aggregate fair market value of stock
with respect to which incentive stock options are exercisable for
the first time by any optionee during any calendar year (under
all of the Company's incentive stock option plans) exceeds
$100,000, such options are treated as options which are not
qualified as incentive stock options.
SECTION 16(b) EXEMPTION
Section 16(b) of the Exchange Act states that any profit
realized by insiders from the purchase and sale (or sale and
purchase) of any registered equity security (other than an
exempted security or exempted transaction) of an issuer within a
six-month period is subject to disgorgement, i.e., the profiting
insider can be required to disgorge or pay his or her profit to
the issuer. A transaction by an officer or director pursuant to
an employee benefit plan is exempt from this "short-swing profit"
liability if the plan and the transaction meet the conditions of
Rule 16b-3. One of the conditions of Rule 16b-3 is that the plan
be approved by the issuer's shareholders. The Company desires to
qualify the 1994 Plan (as all other Plans have been qualified)
under Rule 16b-3.
APPROVAL
Shareholder approval of the 1994 Plan requires the
affirmative vote of a majority of the shares represented in
person or by proxy at the Annual Meeting. If the shareholders do
not approve the 1994 Plan, the 1994 Plan and options granted
thereunder will be void. If you return a proxy but give no
direction on Proposal No. 2, your proxy will be voted "for" this
Proposal.
PROPOSAL NO. 3: PROPOSAL TO AMEND ALL INCENTIVE STOCK OPTION
PLANS, TO PROVIDE FOR IMMEDIATE VESTING
(I.E., EXERCISABILITY) UPON OCCURRENCE OF
BUSINESS COMBINATION
GENERAL
On or about October 15, 1994 the Board of Directors of the
Company unanimously approved the amendment of all of the
Company's Incentive Stock Option Plans (the "Plans") to provide
for the immediate vesting (i.e., exercisability) of options upon
the occurrence of a Business Combination (as hereinafter defined)
unless the Business Combination is approved by a two-thirds vote
of the Continuing Directors (as hereinafter defined). The
purposes of this provision are two-fold: (1) to protect the
employees/optionees from a Business Combination (such as a
hostile takeover attempt) which is not approved by a two-thirds
vote of the Continuing Directors; and (2) to enhance management's
bargaining power should an unfriendly takeover of the Company be
attempted by a third-party bidder.
While we have no knowledge of any accumulation of stock or
other circumstances leading to an effort to acquire Ballard
Medical Products, we believe that the Company may be an
attractive takeover candidate in view of its current stock price
for a number of reasons, including without limitation the
following:
(a) The Company has a substantial amount of cash and
liquid investments ($31,440,000 as of September 30, 1994),
increasing annually from its earnings;
(b) The Company has no long-term debt; and
(c) The Company has excellent, high margin products.
In the event of a possible takeover or tender offer by a
third party, the Company wants to encourage bidders to negotiate
with the Board of Directors, which knows the Company's products
and capabilities and understands its long-term potential value.
If a bidder elects not to negotiate with the Board of Directors
or wants to proceed with a hostile takeover, notwithstanding the
conclusions of the Board that the terms are not fair to the
shareholders, the Board believes that it is important that the
Company protect the holders of incentive stock options.
CURRENT PROVISIONS
The current Plans are not uniform in their treatment of
outstanding options upon the occurrence of a Business
Combination.
1984, 1987, 1988, AND 1990 PLANS. These Plans currently
provide that if the Company is reorganized, consolidated, or
merged with another corporation and the Company will be the
surviving corporation, the optionees are entitled to receive
replacement options in the newly merged, reorganized, or
consolidated corporation in the same proportion, at an equivalent
price, and subject to the same terms and conditions as the prior,
outstanding options. If the Company will not be the surviving
corporation, then the Board of Directors is required to give the
optionees written notice of the reorganization, merger, or
consolidation, whereupon the optionees must exercise their
options which are otherwise exercisable within ten days following
delivery of said written notice (i.e., there is no accelerated
right with respect to unexercisable options). All unexercised
options are canceled, after the expiration of the ten days.
1991, 1992, 1993, AND 1994 PLANS. These Plans currently
provide that if the Company is reorganized, consolidated, or
merged with another corporation, the optionees are entitled to
receive replacement options in the surviving corporation
(regardless of which entity survives) in substantially the same
proportion, at a substantially equivalent option price, and
subject to the same conditions as their prior, outstanding
options.
PROPOSED AMENDMENT
The Board of Directors has proposed to replace the above-
described provisions. Each of the Company's Plans contains a
provision requiring that an optionee continue to serve as an
employee of the Company for a period of one to three years (as
determined by the President) following the date of the stock
option agreement memorializing the option grant. Each Plan
further provides that the intervening death of the optionee
before the end of the one to three year employment period removes
this continued employment condition.
The Board of Directors' proposal is to amend each of the
Company's Plans to provide that the one to three year continued
employment period is also to be removed upon the occurrence of a
Business Combination, unless the Business Combination is approved
by a two-thirds vote of the Continuing Directors. Thus the
occurrence of either of the following events will cause all of an
optionee's options to become immediately and fully exercisable:
(a) The death of the optionee; or
(b) The occurrence of a Business Combination which is not
approved by a two-thirds vote of the Continuing Directors.
For purposes of this proposed amendment, the following
definitions apply:
(1) "Acquiring Person" shall mean any individual,
corporation (other than this corporation or any of its
subsidiaries), partnership, other person or entity which,
together with its affiliates and associates (as defined in the
Exchange Act or the Rules thereunder, as amended), and together
with any other individual, corporation (other than the Company or
any of its subsidiaries), partnership, person or entity with
which it or they have any agreement, arrangement, or
understanding with respect to acquiring, holding, voting, or
disposing of the Company's stock, beneficially owns (within the
meaning of the Exchange Act or the Rules) in the aggregate 10% or
more of the outstanding Voting Stock of the Company. "Acquiring
Person" shall also include any assignee of, or person or entity
which has succeeded to any shares of the Company's stock which
were at any time prior to the date of assignment or succession
beneficially owned by, a 10% Voting Stock owner, or an affiliate
or associate of a 10% Voting Stock owner, if such assignment or
succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the
meaning of the Securities Act of 1933, as amended. A person or
entity, its affiliates and associates, assignees and successors,
and all such other persons or entities with whom they have any
such agreement, arrangement, or understanding shall be deemed a
single Acquiring Person for purposes of this Article. Also for
purposes of this Article, the Continuing Directors shall by
majority vote have the power to determine, on the basis of
information known to the Board, if and when there is an Acquiring
Person. Any such determination shall be conclusive and binding
for all purposes of this Article, provided such determination is
reasonable and made in accordance with applicable law.
(2) "Business Combination" shall mean:
(i) any merger, consolidation, or share exchange
of the Company or a subsidiary of the Company with or into an
Acquiring Person;
(ii) any purchase for cash and/or securities by an
Acquiring Person of 20% or more of the Company's outstanding
shares of Voting Stock (including the purchase(s) which cause(s)
the purchaser to become an Acquiring Person hereunder);
(iii) any sale, lease, exchange, transfer or other
disposition (including without limitation, a mortgage or other
security device) in a single transaction or related series of
transactions, of all or any Substantial Part (as hereinafter
defined) of the assets either of the Company (including without
limitation, any voting securities of a subsidiary) or of a
subsidiary of the Company to or with an Acquiring Person;
(iv) any merger or consolidation of an Acquiring
Person with or into the Company or a subsidiary of the Company;
(v) any sale, lease, exchange, transfer or other
disposition (including without limitation, a mortgage or other
security device) in a single transaction or related series of
transactions, of all or any Substantial Part of the assets of an
Acquiring Person to the Company or a subsidiary of the Company;
(vi) the issuance or transfer of any securities of
the Company or a subsidiary of the Company to an Acquiring
Person;
(vii) the adoption of any plan or proposal for the
liquidation or dissolution of the Company proposed, directly or
indirectly, by or on behalf of, or pursuant to any agreement,
arrangement or understanding (whether or not in writing) with an
Acquiring Person;
(viii) any merger or consolidation of the Company
with a subsidiary of the Company proposed by or on behalf of an
Acquiring Person;
(ix) any reclassification of securities (including
without limitation, any stock split, stock dividend, or other
distribution of stock in respect of stock, or any reverse stock
split), or recapitalization of the Company or any merger or
consolidation of the Company with any subsidiary of the Company,
or any other transaction (whether or not with or into, or
otherwise involving the Acquiring Person), proposed by, on behalf
of, or pursuant to any agreement, arrangement or understanding
(whether or not in writing) with the Acquiring Person or any
affiliate or associate of the Acquiring Person which has the
effect, directly or indirectly, of increasing the proportionate
share of the outstanding shares of stock of the Company or any
subsidiary of the Company which is directly or indirectly owned
by the Acquiring Person, except as a result of immaterial
fractional share adjustments;
(x) any agreement, contract, or other arrangement
providing for any of the transactions described in this
definition of Business Combination; and
(xi) any other transaction with an Acquiring
Person which requires the approval of the Company's stockholders
under the Utah Revised Business Corporation Act.
A person who is an Acquiring Person as of:
(i) the time any definitive agreement relating to
a Business Combination is entered into;
(ii) the record date for the determination of
stockholders entitled to notice of and to vote on a Business
Combination; or
(iii) immediately prior to the consummation of a
Business Combination,
shall be an Acquiring Person for purposes of this definition.
(3) "Continuing Director" shall mean any director of the
Company who was a director prior to the time the Acquiring Person
became such, and any other director whose election or appointment
as a director was recommended or approved by a majority vote of
the Continuing Directors. A majority or two-thirds vote of the
Continuing Directors shall mean, respectively, a vote of the
majority of the Continuing Directors, a vote of or two-thirds of
the Continuing Directors, then in office, provided that at least
two Continuing Directors are then in office and participate in
such vote.
(4) "Exchange Act" shall mean the Securities Exchange Act
of 1934.
(5) "Substantial Part" shall mean an amount of assets
having an aggregate fair market value of at least $500,000.
(6) "Voting Stock" shall mean Common Stock and all other
securities of the Company entitled to vote generally for the
election of directors.
This proposed amendment to the Plans has also necessitated
certain technical and conforming amendments to be made to various
provisions of the Plans. Such conforming amendments include, for
example, the deletion of existing, inconsistent provisions
(summarized above) dealing with mergers and business
combinations, and the insertion of the foregoing proposed
amendment into specific plan paragraphs of the various Plans.
Shareholder approval of the amendment proposed herein shall be
deemed to include approval also for such technical and conforming
amendments.
APPROVAL
Shareholder approval of this proposed amendment to the Plans
requires the affirmative vote of a majority of the shares
represented in person or by proxy at the Annual Meeting. If the
shareholders do not approve this amendment, the amendment adopted
by the Board of Directors will be void. If you return a proxy
but give no direction on Proposal No. 3, your proxy will be voted
"for" this Proposal.
PROPOSAL NO. 4: PROPOSAL TO APPROVE DELOITTE & TOUCHE LLP AS
THE INDEPENDENT AUDITORS OF THE COMPANY
The Board of Directors of the Company, through its standing
Audit Committee, has selected Deloitte & Touche LLP as the
independent auditors of the Company for the fiscal year ending
September 30, 1995. The firm (and its predecessor) has served
the Company as auditors for the fiscal years ended September 30,
1982 through 1994. Shareholder approval of this selection
requires the affirmative vote of a majority of the shares
represented in person or by proxy at the Annual Meeting. If you
return a proxy but give no direction on Proposal No. 4, your
proxy will be voted "for" this Proposal.
Representatives of Deloitte & Touche LLP are expected to
attend the Annual Meeting of Shareholders and will be available
to respond to appropriate questions and will be afforded the
opportunity to make a statement if they desire to do so.
OTHER MATTERS
The Board of Directors knows of no matters to come before
the shareholders' meeting other than as specified herein. If
other business should, however, properly come before such
meeting, the persons voting the proxies will vote them in
accordance with their best judgment.
PROPOSALS FROM SHAREHOLDERS
Shareholder proposals submitted for consideration at the
Company's 1996 Annual Meeting of Shareholders must be received by
the Company not later than August 17, 1995, in order to be
included in the proxy materials for the 1996 Annual Meeting.
<PAGE>
ALL SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, AND RETURN
PROMPTLY THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By the Order of the Board of Directors
E. Martin Chamberlain
Secretary
Telephone No. (801) 572-6800
Telefax No. (801) 572-6869
Draper, Utah
December 9, 1994
<PAGE>
APPENDIX
OMITTED MATERIAL
The required Stock Performance Graph has been omitted in the
EDGAR filing of this Proxy Statement and has been replaced with a
written description on page 16.
<PAGE>
BALLARD MEDICAL PRODUCTS
12050 Lone Peak Parkway
Draper, Utah 84020
Telephone No. (801) 572-6800
Telefax No. (801) 572-6869
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 23, 1995
To the Shareholders of Ballard Medical Products:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of Ballard Medical Products will be held at the
Company's executive offices, 12050 Lone Peak Parkway, Draper,
Utah 84020, on Monday, January 23, 1995, at 11:00 a.m. Mountain
Standard Time, for the following purposes, all of which are more
fully set forth in the accompanying Proxy Statement:
1. To elect seven (7) Directors of the Company to serve
until the next Annual Meeting of Shareholders and until
their successors have been duly elected and qualified.
2. To approve the 1994 Incentive Stock Option Plan.
3. To amend all of the Company's Incentive Stock Option
Plans, to provide for immediate vesting (i.e.,
exercisability) of options upon the occurrence of a
Business Combination.
4. To approve Deloitte & Touche LLP as the independent
auditors of the Company.
5. To transact such other business as may properly come
before the Company or any adjournment thereof.
Said meeting may be adjourned from time to time without
notice other than an announcement at said meeting or at any
adjournment thereof, and any and all business for which said
meeting is hereby noticed may be transacted by any such
adjournment.
Shareholders of record at the close of business November 23,
1994 are entitled to notice of and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
E. Martin Chamberlain
Secretary
Draper, Utah
December 9, 1994
IMPORTANT
You can help avoid the necessity and expense of sending follow-up
letters to ensure a quorum by promptly returning the enclosed
Proxy. Please complete, sign and return your Proxy in the
envelope provided. Such action will not prevent you from voting
in person at the meeting.
<PAGE>
PROXY
BALLARD MEDICAL PRODUCTS
12050 Lone Peak Parkway
Draper, Utah 84020
Telephone (801) 572-6800
Telefax (801) 572-6869
ANNUAL MEETING OF SHAREHOLDERS
January 23, 1995
This Proxy is solicited on behalf of the Board of Directors.
The undersigned, revoking any proxy heretofore given, hereby
appoints Dale H. Ballard and E. Martin Chamberlain, and each of
them, acting alone or together, Proxies, each with power to
appoint his substitute, and hereby authorizes them to represent
and to vote, as designated below, for the undersigned, all the
shares of common stock of BALLARD MEDICAL PRODUCTS held of record
by the undersigned on November 23, 1994, at the Company's Annual
Meeting of Stockholders to be held on January 23, 1995, at 11:00
a.m., Mountain Standard Time, and at all adjournments thereof.
In their discretion, the Proxies are further authorized to vote
upon such other business as may properly come before the Annual
Meeting, and matters incident to the conduct of the meeting.
PLEASE MARK BOXES [ ] OR [X] IN BLUE OR BLACK INK.
1. ELECTION OF DIRECTORS: [ ] FOR all nominees listed below.
(except as marked to the
contrary below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees
listed below
NOMINEES: Dale H. Ballard, John I. Bloomberg,
J. Dallas Van Wagoner, Robert V. Petersen,
E. Martin Chamberlain, Dale H. Ballard, Jr.,
and Paul W. Hess
INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name
on the space provided:
___________________________________________________________
2. PROPOSAL TO APPROVE 1994 INCENTIVE STOCK OPTION PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
3. PROPOSAL TO AMEND ALL INCENTIVE STOCK OPTION PLANS, TO
PROVIDE FOR IMMEDIATE VESTING (I.E., EXERCISABILITY) OF
OPTIONS UPON OCCURRENCE OF BUSINESS COMBINATION:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO APPROVE DELOITTE & TOUCHE LLP AS THE INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S).
THE PROXY WILL BE VOTED "FOR" EACH PROPOSAL FOR WHICH NO
DIRECTION IS MADE.
Please sign exactly as name appears to the left. When
shares are held by joint tenants, both should sign. When signing
as attorney, executor, personal representative, administrator,
trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Please complete, sign and mail this proxy promptly in the
enclosed addressed envelope which requires no postage if mailed
in the United States.
Date ____________________________________
Signature________________________________
_________________________________________
Signature if held jointly)