As filed with the Securities and Exchange Commission on
March 5, 1997.
Registration No.:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933
BALLARD MEDICAL PRODUCTS
(Exact name of registrant as specified in its charter)
UTAH
(State of Incorporation)
87-0340144
(IRS Employer Identification Number)
12050 LONE PEAK PARKWAY
DRAPER, UTAH 84020
(Address of principal executive offices)
1996 INCENTIVE STOCK OPTION PLAN
(Full title of the Plan)
Adopted July 1, 1996
DALE H. BALLARD, President and Chief Executive Officer
BALLARD MEDICAL PRODUCTS
12050 Lone Peak Parkway
Draper, Utah 84020
(801) 572-6800
(Name, address and telephone number of agent for services)
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date
of the Registration Statement
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Maximum Maximum
Securities Amount to Offering Aggregate Amount of
to be be Price Per Offering Registration
Registered Registered Share (1) Price (1) Fee
Common
Stock, $0.10
par value 700,000 $19.69 $13,783,000 $4,177
In addition, pursuant to Rule 416(c) under the
Securities Act of 1933, this registration statement also
covers an indeterminate amount of interests to be offered or
sold pursuant to the employee benefit plan described herein.
(1) Estimated (pursuant to Rule 457(c) and (h)) solely for
the purpose of calculating the registration fee based
upon the average of the high and low prices of the
registrant's Common Stock quoted by the New York Stock
Exchange on March 3, 1997.
(2) The registration fee is calculated as follows:
$13,783,000 x 1/33 x .01 = $4,177
Total number of pages: 39
Index to Exhibits appears on page: 24
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are incorporated by reference
into this Registration Statement:
(a) The Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1996, filed December 6,
1996;
(b) The Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1996, filed February 14,
1997; and
(c) The Description of Common Stock contained in
the Company's Registration of Securities on the Form 8-A
(page 2) pursuant to Section 12(b) of the Securities
Exchange Act of 1934, filed with the Commission on September
3, 1993.
In addition, all documents filed subsequent to the date
hereof by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934, prior to
the filing of a post-effective amendment which indicates
that all securities offered have been sold or which
deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference in this Registration
Statement and to be part hereof from the date of filing such
documents.
In addition, the following financial statements are
filed herewith:
1. Independent Auditor's Report dated November 8,
1996 (February 18, 1997 as to Note 11);
2. Consolidated Balance Sheets as of September 20,
1996 and 1995;
3. Consolidated Statements of Operations for the
Years Ended September 30, 1996, 1995 and 1994;
4. Consolidated Statements of Stockholders' Equity
for the Years Ended September 30, 1996, 1995, and
1994;
5. Consolidated Statement of Cash Flows for the Years
Ended September 30, 1996, 1995, and 1994; and
6. Notes to Consolidated Financial Statements.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Ballard
Medical Products:
We have audited the accompanying consolidated balance
sheets of Ballard Medical Products and subsidiaries as of
September 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended
September 30, 1996. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial
position of Ballard Medical Products and subsidiaries as of
September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years
in the period ended September 30, 1996 in conformity with
generally accepted accounting principles.
As discussed in Notes 1 and 2 to the consolidated
financial statements, effective October 1, 1994 the Company
changed its method of accounting for investment securities
to conform with Statement of Financial Accounting Standards
No. 115. As discussed in Notes 1 and 4 to the consolidated
financial statements, the Company changed its method of
accounting for income taxes, effective October 1, 1993, to
conform with Statement of Financial Accounting Standards No.
109.
Deloitte & Touche LLP
Salt Lake City, Utah
November 8, 1996
(February 18, 1997 as to Note 11)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $14,164,103 $27,555,330
Investments (Notes 1 and 2) 26,662,598 18,357,304
Accounts receivable - trade
(less allowance for doubtful
accounts: 1996 - $182,000,
1995 - $125,000; and allowance
for sales returns: 1996 -
$805,000, 1995 - $500,000) 19,944,055 13,773,277
Royalties receivable 1,351,885 447,282
Other receivables 636,291 1,223,871
Inventories (Note 1):
Raw materials 7,171,048 3,825,405
Work-in-process 3,913,804 2,291,374
Finished goods 2,760,008 5,245,852
Deferred income taxes (Notes 1 and 4) 1,057,303 593,313
Income tax refund receivable
(Notes 1 and 4) 3,274,000 2,103,570
Prepaid expenses 169,431 232,315
Total current assets 81,104,526 75,648,893
PROPERTY AND EQUIPMENT
(Notes 1 and 6):
Land 3,944,701 1,849,511
Buildings 20,131,728 11,886,512
Molds 3,608,228 2,539,615
Machinery and equipment 9,192,269 8,306,448
Vehicles 1,039,175 535,547
Furniture and fixtures 2,081,200 1,436,563
Leasehold improvements 302,394 258,488
Construction in process 3,053,296 1,234,998
Total 43,352,991 28,047,682
Less accumulated depreciation (8,058,401) (6,035,636)
Property and equipment - net 35,294,590 22,012,046
INTANGIBLE ASSETS:
Cost in excess of purchase price
(less accumulated amortization:
1996 - $3,212,520; 1995 -
$2,161,887) (Notes 1 and 8) 15,644,651 11,655,058
Patents and other intangibles
(less accumulated amortization:
1996 - $711,431; 1995 -
$495,889) 5,012,157 3,452,543
Total intangible assets 20,656,808 15,107,601
OTHER ASSETS (Note 8) 5,409,164 934,007
TOTAL $142,465,088 $113,702,547
</TABLE>
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $2,273,674 $1,152,790
Accrued liabilities:
Employee compensation 1,985,135 2,314,504
Royalties 326,492 344,712
Other 845,183 465,926
Total current liabilities 5,430,484 4,277,932
DEFERRED INCOME TAXES (Notes 1 and 4) 1,110,764 223,757
Total liabilities 6,541,248 4,501,689
COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 6 and 8)
STOCKHOLDERS' EQUITY (Notes 1, 5, and
8): Common stock - $.10 par value;
75,000,000 shares authorized;
issued and outstanding:
1996 - 27,702,323 shares,
1995 - 26,800,014 shares 2,770,232 2,680,002
Additional paid-in capital 38,935,892 29,209,774
Unrealized losses on investments
(Notes 1 and 2) (156,564) (142,728)
Retained earnings 94,374,280 77,453,810
Total stockholders' equity 135,923,840 109,200,858
TOTAL $142,465,088 $113,702,547
</TABLE>
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1995 1994
(Notes 1 (Notes 1
1996 and 8) and 8)
<S> <C> <C> <C>
NET SALES
(Notes 1, 8, and 9) $103,525,263 $84,152,967 $67,051,628
COST OF PRODUCTS SOLD 35,734,178 28,070,350 22,193,542
GROSS MARGIN 67,791,085 56,082,617 44,858,086
OPERATING EXPENSES:
Selling, general and
administrative 28,286,793 24,429,181 21,696,098
Research and development 2,903,805 2,177,117 1,638,475
Royalties (Note 6) 1,539,200 1,385,841 1,404,681
Total operating
expenses 32,729,798 27,992,139 24,739,254
OPERATING INCOME 35,061,287 28,090,478 20,118,832
OTHER INCOME:
Interest income 1,917,925 1,923,257 772,645
Royalty income 2,400,000 2,147,620 2,204,347
Other 990,948 30,160 541,840
Total other income 5,308,873 4,101,037 3,518,832
INCOME BEFORE
INCOME TAX EXPENSE 40,370,160 32,191,515 23,637,664
INCOME TAX EXPENSE
(Notes 1 and 4) 14,767,121 11,248,899 8,446,698
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 25,603,039 20,942,616 15,190,966
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE (Notes 1
and 4) 1,403,232
NET INCOME (Note 8) $25,603,039 $20,942,616 $16,594,198
INCOME PER SHARE BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE (Note 1):
Common and common
equivalent share $0.895 $0.752 $0.555
Common share assuming
full dilution $0.884 $0.739 $0.553
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE PER SHARE
(Note 1):
Common and common
equivalent share None None $0.051
Common share assuming
full dilution None None $0.051
NET INCOME PER SHARE
(Note 1):
Common and common
equivalent share $0.895 $0.752 $0.606
Common share assuming
full dilution $0.884 $0.739 $0.604
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING
(Note 1):
Common and common
equivalent share 28,614,136 27,844,111 27,371,540
Common share assuming
full dilution 28,968,855 28,339,946 27,462,702
</TABLE>
See notes to consolidated financial statements.
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
Unrealized
Additional Losses on
Common Paid-in Invest- Retained
Shares Amount Capital ments Earnings
<S> <C> <C> <C> <C> <C>
BALANCE
OCTOBER
1, 1993
(as pre-
viously
reported) 26,114,250 $2,611,425 $24,983,195 $44,871,841
Pooling
of
interest
combina-
tion
(Notes 1
and 8) 238,727 23,873 (3,873) 324,647
BALANCE
OCTOBER
1, 1993
(as
restated) 26,352,977 2,635,298 24,979,322 45,196,488
Net
income 16,594,198
Cash
divi-
dends
paid (1,590,083)
Common
stock
issued
from
exercise
of stock
options
(Note 5) 361,612 36,161 1,511,520
Acqui-
sition
and
retire-
ment of
treasury
stock
(Note 5) (20,000) (2,000) (241,081)
Tax
benefit
attri-
butable
to appre-
ciation
in value
of stock
issued in
conjunc-
tion with
the exer-
cise and
disquali-
fying
dispo-
sitions
of incen-
tive
stock
options 1,796,546
BALANCE
SEPTEM-
BER 30,
1994 26,694,589 2,669,459 28,287,388 59,959,522
Net
income 20,942,616
Cash
divi
dends
paid (1,983,343)
Common
stock
issued
from
exer-
cise
of stock
options
(Note 5) 205,425 20,543 432,869
Acqui-
sition
and
retire-
ment
of
trea-
sury
stock
(Note 5) (100,000) (10,000) (1,464,985)
Tax
benefit
attri-
butable
to appre-
ciation
in value
of stock
issued in
conjunc-
tion with
the exer-
cise and
dis-
quali-
fying
dispo-
sitions
of incen-
tive
stock
options 489,517
Unre-
alized
losses on
invest-
ments
(Notes 1
and 2) $(142,728)
BALANCE
SEPTEM-
BER 30,
1995 26,800,014 2,680,002 29,209,774 (142,728) 77,453,810
Net
income 25,603,039
Cash
divi-
dends
paid (2,556,148)
Common
stock
issued
from
exer-
cise
of stock
options
(Note 5) 1,252,309 125,230 9,689,509
Acqui-
sition
and
retire-
ment of
trea-
sury
stock
(Note 5) (350,000) (35,000) (6,126,421)
Tax
benefit
attri-
butable
to appre-
ciation
in value
of
stock
issued
in con-
junc-
tion
with the
exercise
and
dis-
qual-
ifying
dispo-
sitions
of incen-
tive
stock
options 36,609
Unre-
alized
losses
on
invest-
ments
(Notes 1
and 2) (13,836)
BALANCE
SEPTEM-
BER 30,
1996 27,702,323 $2,770,232 $38,935,892 $(156,564) $94,374,280
</TABLE>
See notes to consolidated financial statements.
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net income $25,603,039 $20,942,616 $16,594,198
Adjustments to
reconcile net
income to net
cash provided by
operating
activities:
Depreciation and
amortization 3,932,373 3,116,862 2,477,007
(Gain) loss on
disposal of
property (446,320) 7,044 110,479
Tax benefit from
disqualifying
dispositions of
incentive stock
options 36,609 489,517 1,796,546
Provision for
losses on
accounts
receivable -
trade and sales
returns 355,000 225,000 200,000
Cumulative effect
of change in
accounting
principle (Note (1,403,232)
1)
Deferred income
taxes 442,122 373,655 828,489
Changes in
operating assets
and liabilities-
net of effects
from purchase of
subsidiaries in
1996 and 1995:
Accounts
receivable -
trade (6,150,608) (29,707) 2,686,146
Royalties and
other receivables (167,553) 52,484 (757,909)
Inventories (1,323,492) (1,398,153) (2,051,813)
Income tax refund
receivable (1,170,430) 897,815 929,232
Prepaid expenses 105,898 (196,526) (430,813)
Accounts payable 807,483 156,861 (1,525,061)
Accrued
liabilities 19,180 1,126,009 (3,707,205)
Total
adjustments (3,559,738) 4,820,861 (848,134)
Net cash
provided by
operating
activities 22,043,301 25,763,477 15,746,064
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Capital
expenditures for
property and
equipment (15,292,194) (2,769,625) (6,366,900)
Proceeds from
sales of property
and equipment 564,418 45,250 5,899
Purchases of
investments (30,569,641) (38,534,828) (29,744,216)
Investment in
and advances to
affiliates
(Note 8) (4,462,625) (800,000)
Proceeds from
maturities of
investments 22,231,406 36,288,627 20,485,633
Purchases of
intangible assets (2,854,344) (1,330,188) (245,801)
Purchases of
other assets (12,532) (109,579)
Payments for
purchase of
subsidiaries,
net of cash
acquired (5,618,432) (3,283,650) (500,000)
Net cash used
in investing
activities (36,013,944) (10,493,993) (16,365,385)
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Cash dividends
paid (2,556,148) (1,983,343) (1,590,083)
Proceeds from
issuance of
common stock and
exercise of
options 9,814,739 453,412 1,547,681
Purchase of
treasury stock (6,161,421) (1,474,985) (243,081)
Repayment of
long-term debt
assumed in
acquisitions (517,754) (18,446) (50,308)
Net cash
provided by
(used in)
financing
activities 579,416 (3,023,362) (335,791)
NET INCREASE
(DECREASE) IN
CASH AND CASH
EQUIVALENTS (13,391,227) 12,246,122 (955,112)
CASH AND CASH
EQUIVALENTS,
BEGINNING OF YEAR 27,555,330 15,309,208 16,264,320
CASH AND CASH
EQUIVALENTS, END
OF YEAR $14,164,103 $27,555,330 $15,309,208
SUPPLEMENTAL
DISCLOSURE OF
CASH FLOW
INFORMATION -
Cash paid during
the year for
income taxes $15,458,820 $9,487,912 $7,571,800
</TABLE>
See notes to consolidated financial statements.
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
On September 27, 1996, the Company entered into a
business combination with Plastic Engineered Products
Corporation in exchange for 238,727 shares of the Company's
common stock. This transaction has been accounted for by
the Company as a "pooling" and as such, the Company's
accompanying consolidated financial statements as of
September 30, 1996 and 1995 and for the three years in the
period ended September 30, 1996 have been restated as if
this transaction had occurred on October 1, 1993. In
addition, during the year ended September 30, 1996, the
Company entered into three acquisition transactions
accounted for as purchases as follows (see Note 8):
* On April 19, 1996, the Company acquired substantially
all of the assets of Endovations, Inc, for
approximately $1,220,000 cash. In conjunction with
this purchase, the Company recorded goodwill of
approximately $400,000 and the fair market value of
assets acquired approximately $820,000.
* On July 19, 1996, the Company purchased all of the
outstanding capital stock of Mist Assist, Inc. for
approximately $673,600 cash. In conjunction with the
acquisition, liabilities were assumed as follows:
Fair value of assets acquired
(including goodwill of $680,000) $800,000
Cash paid 673,600
Liabilities assumed $126,400
* On August 28, 1996, the Company purchased all of the
outstanding capital stock of Preferred Medical Products
for approximately $3,600,000 cash (see Note 8). In
conjunction with the acquisition, liabilities were
assumed as follows:
Fair value of assets acquired
(including goodwill of $2,900,000) $4,320,970
Cash paid 3,604,440
Liabilities assumed $716,530
On May 2, 1995, the Company acquired substantially all
of the net assets of Cox Medical Enterprises, Inc. for
approximately $3,313,000 cash (see Note 8). In conjunction
with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired
(including goodwill) $4,000,000
Cash paid 3,313,310
Liabilities assumed $686,690
During the years ended September 30, 1996 and 1995, the
Company in conjunction with its adoption of Financial
Accounting Standards No. 115 (see Note 1), wrote down its
short-term investments in total by $32,941 and $219,582,
respectively. The effect of this adjustment in 1996 and
1995 was a decrease in stockholders' equity in the amount of
$13,836 and $142,728 and an increase in current deferred
income taxes in the amount of $19,105 and $76,854 for the
years ended September 30, 1996 and 1995, respectively.
See notes to consolidated financial statements.
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Ballard Medical Products (Ballard) and
its subsidiaries develop, manufacture, and market
specialized medical products.
BASIS OF PRESENTATION - The consolidated financial
statements include the accounts of Ballard and its wholly-
owned subsidiaries, Medical Innovations Corporation (MIC),
Ballard Real Estate Holdings (BREH), Ballard International,
Inc. (BI), Plastic Engineered Products Company (PEPCO),
Ballard Medical Products (Canada) Inc. dba Preferred Medical
Products (PMP), and Mist Assist, Inc. (MAI) (see Note 8)
(collectively, the "Company"). All significant intercompany
accounts and transactions have been eliminated in
consolidation.
During the year ended September 30, 1996, the Company
entered into a business combination with PEPCO, in exchange
for 238,727 shares of the Company's common stock. This
transaction has been accounted for by the Company as a
"pooling", and as such, the Company's accompanying
consolidated financial statements as of September 30, 1996
and 1995 and for the three years in the period ended
September 30, 1996 have been restated as if this transaction
had occurred on October 1, 1993 (see Note 8).
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS -
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
INVESTMENTS - Investments consist of tax free municipal
bonds. Investments are recorded at fair market value (see
Note 2). Effective October 1, 1994, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities." SFAS No. 115 requires the classification of
investment securities as either held-to-maturity securities,
trading securities, or available-for-sale securities. Upon
adoption of SFAS 115, the Company reclassified all of its
investments as available-for-sale. The adoption of SFAS 115
had no material effect on the consolidated financial
statements.
INVENTORIES - Inventories are stated at the lower of
cost (on a first-in, first-out basis) or market.
PROPERTY AND EQUIPMENT - Property and equipment are
stated at cost. Depreciation is computed on the straight-
line method over the estimated useful lives as follows:
Buildings 30 to 40 years
Molds 5 years
Machinery and equipment 5 to 10 years
Vehicles 3 to 5 years
Furniture and fixtures 3 to 5 years
Leasehold improvements 3 to 5 years
INTANGIBLE ASSETS - Intangible assets include goodwill,
patent rights, and license costs which are stated at cost
and are being amortized using the straight-line method over
their estimated lives, which range from four to seventeen years.
REVENUE RECOGNITION - Revenues are recognized when the
related product is shipped. The Company records an
allowance for estimated sales returns.
INCOME TAXES - Effective October 1, 1993, the Company
adopted the provisions of Statement of Financial Accounting
Standards No. 109 (the Statement), "Accounting for Income
Taxes." The Statement requires an asset and liability
approach for financial accounting and reporting for income
taxes. The cumulative effect in 1994 of the change in
accounting principle of $1,403,232 is reflected in the 1994
consolidated statement of operations. The adoption of the
Statement had no effect on the pre-tax income from
continuing operations.
INCOME PER SHARE - Income per share is computed on the
basis of the weighted average number of shares outstanding
plus the common stock equivalents which would arise from the
exercise of stock options.
Such income per share amounts are adjusted to give
retroactive effect for all periods presented for the
acquisition by the Company of PEPCO in 1996 (see Note 8).
STATEMENTS OF CASH FLOWS - For purposes of the
consolidated statements of cash flows, the Company considers
cash and interest bearing securities with original
maturities of less than three months to be cash equivalents.
OTHER - Certain reclassifications have been made to the
prior year financial statements to conform to
classifications adopted in the current year.
2. INVESTMENTS
Investments at September 30, 1996 and 1995 consist of
municipal bonds.
The amortized cost and fair value of investments at
September 30, 1996 and 1995, classified as available-for-
sale, is as follows:
1996 1995
Amortized cost $26,915,121 $18,576,886
Gross unrealized
gains None None
Gross unrealized
losses (252,523) (219,582)
Fair value $26,662,598 $18,357,304
As of September 30, 1996 and 1995, all municipal bonds
had a contractual maturity of one year or less. During the
year ended September 30, 1996 and 1995, there were no gross
realized gains or gross realized losses from sales of
investments classified as available-for-sale.
3. LINE OF CREDIT
At September 30, 1996, the Company had an unused,
unsecured line of credit with a bank totaling $5,000,000
which expires February 15, 1997. The line, if drawn upon,
bears interest at the bank's base rate (8.25% at September
30, 1996). No compensating cash balances are required. As
of September 30, 1996 and during the year then ended, there
were no borrowings under the line of credit.
4. INCOME TAXES
The Company has recorded current deferred tax assets
and net long-term deferred tax liabilities at September 30,
1996 and 1995 as follows:
1996 1995
Current Long-Term Current Long-Term
Deferred income
tax assets $1,057,303 $(1,210,326) $593,313 $452,323
Deferred income
tax liabilities 99,562 (676,080)
Net $1,057,303 $(1,110,764) $593,313 $(223,757)
Net deferred income tax assets and liabilities at
September 30, 1996 and 1995 consisted of the following
temporary differences and carryforward items:
<TABLE>
<CAPTION>
1996 1995
Current Long-Term Current Long-Term
<S> <C> <C> <C> <C>
Deferred income tax
assets:
Allowance for
uncollectible
accounts receivable $69,121 $47,513
Allowance for
sales returns and
allowances 305,729 190,050
Allowance for
obsolete inventory 185,277 49,585
Accrued expenses 168,549 214,506
Unrealized losses on
investments 95,959 76,854
Net operating loss
carryforwards of
acquired subsidiaries 121,442 $99,562 14,805 $341,097
Research and
development credits 111,226 111,226
1,057,303 99,562 593,313 452,323
Deferred income tax
liabilities -
differences between
tax basis and
financial reporting
basis of property
and equipment (1,210,326) (676,080)
Total $1,057,303 $(1,110,764) $593,313 $(223,757)
</TABLE>
The components of income tax expense for the years
ended September 30, 1996, 1995, and 1994 are summarized as
follows:
1996 1995 1994
Current:
Federal $12,421,679 $9,425,942 $6,685,047
State 1,903,320 1,449,302 933,162
14,324,999 10,875,244 7,618,209
Deferred:
Federal 402,473 323,859 727,007
State 39,649 49,796 101,482
442,122 373,655 828,489
Total $14,767,121 $11,248,899 $8,446,698
Income tax expense differed from amounts computed by
applying the statutory Federal tax rate to pretax income as
follows:
1996 1995 1994
Computed
Federal income
tax expense at
statutory rate $14,129,556 $11,082,432 $8,128,345
State income
tax expense,
net of federal
benefit 1,317,054 990,493 661,806
Environmental
tax 16,614 30,000 25,000
Tax exempt
income (553,876) (624,750) (210,000)
Foreign sales
corporation (236,250) (121,756) (126,000)
Amortization
of goodwill 335,763 316,969 278,773
Other (241,740) (424,489) (311,226)
Total $14,767,121 $11,248,899 $8,446,698
As a result of the Company's acquisitions (see Note 8),
the Company has net operating loss carryforwards for Federal
income tax purposes of approximately $578,000, which can
only be used to offset future taxable income of acquired
subsidiaries. The utilization of the tax loss carryforwards
is subject to certain limitations and the carryforwards
expire through the year 2007.
5. COMMON STOCK AND STOCK OPTIONS
During the years ended September 30, 1996, 1995, and
1994, the Company repurchased 350,000, 100,000, and 20,000
shares of its outstanding common stock for $6,161,421,
$1,474,985, and $243,081, respectively. In accordance with
Utah State law, this treasury stock was accounted for as
retired common stock.
The Company has adopted several incentive stock option
plans for key employees and reserved shares of common stock
totaling approximately 2,926,400 and 3,483,000 at September
30, 1996 and 1995, respectively, for issuance under the
plans. Options are granted at a price not less than the
fair market value on the date of grant, become exercisable
between one to two years following the date of grant, and
expire in ten years.
Changes in stock options are as follows for the years
ended September 30:
Price Range
1996 Shares Per Share
Granted 516,900 $15.25-$17.25
Expired 78,200 $8.63-$17.25
Exercised 1,252,309 $1.46-$11.63
Outstanding at
September 30 2,517,553 $1.46-$16.75
Exercisable 1,799,351 $1.46-$16.75
1995
Granted 740,000 $9.38 - $14.25
Expired 101,666 $8.63 - $13.50
Exercised 205,425 $1.46 - $11.00
Outstanding at
September 30 3,331,162 $1.46 - $14.25
Exercisable 2,410,490 $1.46 - $14.25
1994
Granted 3,747,340 $8.63 - $16.50
Expired 2,582,256 $11.00 - $19.79
Exercised 361,612 $.67 - $11.00
Outstanding at
September 30 2,898,253 $1.46 - $13.50
Exercisable 766,486 $1.46 - $13.50
6. COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases office and production facilities and
office equipment under long-term operating lease agreements.
Rent expense on the above operating leases was approximately
$671,010, $456,990, and $316,469 for the years ended
September 30, 1996, 1995, and 1994, respectively. The
following represents the Company's future commitments under
such leases:
1997 $495,798
1998 335,406
1999 95,480
2000 85,200
2001 86,560
Thereafter 499,140
Total $1,597,584
The Company has agreements with the inventors of
certain of its products which provide for the payment of
royalties ranging from 2% to 6.5% of defined net sales or a
fixed rate per unit sold of the related products.
The Company is involved in certain litigation matters
in the normal course of business which, in the opinion of
management, will not result in any material adverse effects
on the Company (see Note 11).
In October, 1995 the Company began construction of an
additional manufacturing facility in Pocatello, Idaho. The
first phase of construction was completed during fiscal year
1996 at a total cost of approximately $7,200,000. The
second phase of construction began in August, 1996 with an
anticipated cost of construction of $5,200,000.
Construction of the second phase is anticipated to be
completed in May, 1997.
7. PROFIT SHARING PLAN
The Company sponsors an Employee Retirement and Savings
Plan (the Plan) under Section 401(k) of the Internal Revenue
Code. The Plan is designed to allow participating employees
to accumulate savings for retirement or other purposes.
Under the Plan, all employees, who have completed at least
one year of service and have reached age 21, are eligible to
participate. The Plan allows employees to make
contributions to the plan from salary reductions each year,
up to a maximum of 15% of a participant's annual
compensation. Under the Plan, the Company matches up to 4%
of a participant's contribution. The Company may, if it
desires, make additional contributions to the 401(k) Plan on
behalf of its employees. For the years ended September 30,
1996, 1995, and 1994, the Company expensed approximately
$621,000, $545,000, and $372,000, respectively, as matching
contributions to the Plan. 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. Employees are allowed to direct the investment of
their Plan contributions within a group of designated
investment funds.
8. BUSINESS COMBINATIONS
On September 27, 1996, the Company issued 238,727
shares of its common stock in exchange for all of the
outstanding common stock of PEPCO, a medical research and
manufacturing company incorporated in 1987 and headquartered
in Canal Fulton, Ohio. The assets and liabilities of PEPCO
at the date of combination were approximately $684,000 and
$88,000 respectively. The combination was accounted for as
a pooling of interests. The accompanying consolidated
financial statements have been prepared as if Ballard and
PEPCO had been combined for all periods presented. There
were no intercompany transactions between Ballard and PEPCO
prior to the date of merger. Net sales, net income, and net
income per share amounts of the previously separate
companies for the years ended September 30, 1995 and 1994 as
previously reported and combined are as follows:
The Company
as Previously
1995 Reported PEPCO As Restated
Net sales $81,762,142 $2,390,825 $84,152,967
Net income 20,415,191 527,425 20,942,616
Net income
per share 0.73 0.09 0.739
1994
Net sales $65,062,801 $1,988,827 $67,051,628
Net income 16,180,377 413,821 16,594,198
Net income
per share 0.59 0.014 0.604
On April 19, 1996, the Company acquired substantially
all of the assets of Endovations, Inc. ("Endovations") for
approximately $1,220,000 in cash. The acquisition has been
accounted for using the purchase method of accounting; as
such, Endovations' results of operations have been included
in the accompanying consolidated financial statements from
the date of acquisition. In conjunction with this
acquisition, the Company recorded goodwill of approximately
$400,000, which is being amortized on a straight-line basis
over 10 years.
Effective July 19, 1996, the Company acquired all of
the issued and outstanding common stock of MAI for
approximately $673,600 in cash and the assumption of
liabilities totally approximately $126,400. The acquisition
has been accounted for using the purchase method of
accounting; as such, results of operations have been
included in the accompanying consolidated financial
statements from the date of acquisition. In conjunction
with the acquisition, the Company recorded goodwill of
approximately $680,000, which is being amortized on a
straight-line basis over 15 years.
On August 28, 1996, the Company acquired all of the
issued and outstanding common stock of PMP for cash
approximately $3,600,000. The acquisition has been
accounted for using the purchase method of accounting; as
such, results of operations have been included in the
accompanying consolidated financial statements from the date
of acquisition. In conjunction with the acquisition, the
Company recorded goodwill of approximately $2,900,000 which
is being amortized on a straight-line basis over 15 years.
The pro forma results of operations of the Company for
the years ended September 30, 1996 and 1995 (assuming the
acquisitions of Endovations, MAI and PMP had occurred as of
October 1, 1994) are as follows:
1996 1995
Net sales $107,510,270 $87,881,669
Net income $26,400,040 $21,842,691
Net income per share $0.911 $0.771
On May 2, 1995, the Company acquired substantially all
of the assets of Cox for a purchase price of $4,000,000
consisting of $3,313,310 in cash and the assumption of
liabilities in the amount of $686,690. Cox is a
manufacturer of disposable endoscopic devices. The
acquisition has been accounted for using the purchase method
of accounting; as such, Cox's results of operations have
been included in the accompanying consolidated financial
statements from the date of acquisition. The cost of this
acquisition exceeded the estimated fair value of the
acquired net assets by $423,000 which is being amortized
over 10 years.
On November 14, 1995, the Company acquired 200,000
shares of the preferred stock of Neuro Navigational
Corporation (Neuro) representing a 19.5% equity interest in
Neuro for $2,000,000. As of September 30, 1995, the Company
had made interest-bearing advances to Neuro in the amount of
$800,000. These advances are included in the accompanying
consolidated balance sheet as of September 30, 1995 and were
subsequently credited towards the $2,000,000 purchase price
on November 14, 1996.
During the year ended September 30, 1996, the Company
made advances to Neuro in the form of promissory notes
totaling $2,492,110. Interest accrues on the unpaid
principal balance at a rate of 10% per annum. The entire
unpaid principal balance and accrued, but unpaid, interest
are due on January 19, 1997. In addition, on November 14,
1995, the Company paid Neuro $500,000 for an option to
purchase all of the assets of Neuro during the first 12
months of the option period for $9,500,000. If the option
is exercised during the remainder of the option term, the
purchase price will be equal to two times the net sales of
Neuro for the 12 months immediately preceding the exercise
of the option. In either event, the $500,000 option price
will be credited towards the purchase price. The option
term expires two years following the closing date of the
preferred stock purchase by the Company. The $2,000,000
purchase price of the preferred stock, the advances in the
amount of $2,492,110 and the $500,000 paid for the option
are included in the caption "Other Assets" in the
accompanying consolidated balance sheet as of September 30,
1996.
9. SALES
During the years ended September 30, 1996, 1995, and
1994, the Company had foreign export sales of approximately
$7,900,000, $6,200,000, and $4,700,000, respectively.
10. EFFECT OF RECENTLY ISSUED FINANCIAL ACCOUNTING
STANDARDS
In October, 1995, the Financial Accounting Standards
Board issued SFAS No. 123. "Accounting for Stock-Based
Compensation." SFAS No. 123 defines a fair value based
method of accounting for an employee stock option. Fair
value of the stock option is determined considering factors
such as the exercise price, the expected life of the option,
the current price of the underlying stock and its
volatility, expected dividends on the stock, and the risk-
free interest rate for the expected term of the option.
Under the fair value based method, compensation cost is
measured at the grant date based on the fair value of the
award and is recognized over the service period. A company
may elect to adopt SFAS No. 123 or elect to continue
accounting for its stock option or similar equity awards
using the intrinsic method, where compensation cost is
measured at the date of grant based on the excess of the
market value of the underlying stock over the exercise
price. If a company elects not to adopt SFAS No. 123, then
it must provide pro forma disclosure of net income and
earnings per share, as if the fair value based method had
been applied.
SFAS No. 123 is effective for transactions entered into
for fiscal years that begin after December 15, 1995. Pro
forma disclosures for entities that elect to continue to
measure compensation cost under the old method must include
the effects of all awards granted in fiscal years that begin
after December 15, 1995. It is currently anticipated that
the Company will continue to account for stock-based
compensation plans under the intrinsic method and therefore,
SFAS No. 123 will have no effect on the Company's
consolidated financial statements.
In March 1995, the FASB issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". This statement
addresses the accounting for the impairment of long-lived
assets, such as premises, furniture and equipment, certain
identifiable intangibles and goodwill related to those
assets. Long-lived assets and certain identifiable
intangibles are to be reviewed for impairment whenever
events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An
impairment loss is recognized when the sum of the future
cash flows (undiscounted and without interest charges
expected from the use of the asset and its eventual
disposition) is less than the carrying amount of the asset.
The statement also requires that long-lived assets and
identifiable intangibles, except for assets of a
discontinued operation held for disposal, be accounted for
at the lower of cost or fair value less cost to sell. SFAS
No. 121 is effective for fiscal years beginning after
December 15, 1995. The impact of SFAS No. 121 on the
Company is not expected to be material in relation to the
consolidated financial statements.
11. SUBSEQUENT EVENTS
On December 10, 1996, the Company entered into a stock
purchase transaction for approximately 90.1% of the
outstanding capital stock of Cardiotronics Systems, Inc.
("Cardiotronics") at a total purchase price of $11,392,916.
On December 30, 1996, the remaining 9.9% of the outstanding
capital stock of Cardiotronics was effectively acquired at a
cost of $1,236,488.
The acquisition has been accounted for using the
purchase method of accounting. The purchase price in this
acquisition exceeded the fair valued cost of the acquired
net assets by approximately $18,478,000, which will be
amortized over 15 years at goodwill.
R2, a wholly-owned subsidiary of Cardiotronics, is a
co-defendant in an ongoing product liability case.
Plaintiff in this case alleges, among other things, that
defibrillation pads manufactured by R2 were defective and
seeks damages of $20 million. The Company believes that it
has valid defenses; however, in view of the inherent
uncertainties surrounding the litigation, no assurance can
be given that R2 will prevail in this case. The Company is
unable to assess the likelihood of an adverse outcome or
estimate the amount of range, if any, of any possible loss.
An adverse judgment could have a material adverse effect on
the financial condition of the Company.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The general effect of the Utah statute under which any
director or officer of the Company is insured or indemnified
in any manner against liability which he or she may incur in
his or her capacity as an officer or director of the
Company, set forth in Section 16-10a-901 through 909, Utah
Code Annotated (1992, as amended), which provides generally
as follows:
The Company may indemnify any officer or director
against liability incurred in any threatened, pending, or
completed action, suit or proceeding (whether civil,
criminal, administrative or investigative, and whether
formal or informal), if: (a) his or her conduct was in good
faith; and (b) he or she reasonably believed that his or her
conduct was in, or not opposed to, the corporation's best
interest; and (c) in the case of any criminal proceeding, he
or she had no reasonable cause to believe his or her conduct
was unlawful. The determination as to whether in a specific
case indemnification of a director or officer is permissible
(i.e., whether the director or officer has met the above
applicable standard of conduct), is generally to be made by
the Board of Directors by a majority vote. The Company may
not indemnify a director or officer: (1) in connection with
a proceeding by or in the right of the Company in which the
director or officer was adjudged liable to the Company; or
(2) in connection with any other proceeding charging that
the director or officer derived an improper personal
benefit, whether or not involving action in his or her
official capacity, in which proceeding he or she was
adjudged liable on the basis that he or she derived an
improper personal benefit. Indemnification permitted in
connection with a proceeding by or in the right of the
Company is limited to reasonable expenses incurred in
connection with the proceeding.
The Company is required to indemnify a director or
officer who is successful, on the merits or otherwise, in
the defense of any proceeding, or in the defense of any
claim, issue or matter in the proceeding, to which he or she
was a party because he or she is or was a director of the
Company, against reasonable expenses incurred in connection
with the proceeding or claim with respect to which he or she
has been successful. The Company may purchase and maintain
liability insurance on behalf of directors, officers,
employees, fiduciaries, and agents of the Company, whether
or not the Company would have power to indemnify them
against liability.
The general effect of the Bylaws of the Company under
which any director or officer of the Company is insured or
indemnified in any manner against liability which he or she
may incur in his or her capacity as a director or officer is
set forth in Article VIII of the Company's Bylaws, which
contains provisions almost identical to the provisions of
Utah Code Annotated, Section 16-10a-901 et seq., summarized
above. In addition, in November, 1993, the Board of
Directors authorized and directed the Company to enter into
(and the Company has executed) an Indemnification Agreement
with each director and executive officer of the Company, by
which the Company is contractually obligated to indemnify
directors and officers in accordance with the standards,
terms, and conditions of Article VIII of the Company's
Bylaws.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
Exhibit
Number Description of Exhibits
4.1 Restated Certificate of Incorporation, dated
September 18, 1987.
4.2 Articles of Amendment, dated July 10, 1991.
4.3 Articles of Amendment, dated September 21,
1993.
4.4 Amended and Restated Bylaws of Ballard
Medical Products, dated October 12, 1992.
4.5 1996 Incentive Stock Option Plan.
4.6 Example of Incentive Stock Option Agreement
used under the 1996 Incentive Stock Option
Plan.
5 Opinion of counsel as to legality of
securities being registered.
15 Not applicable.
23.1 Consent of Independent Auditors.
23.2 Consent of Counsel (contained in
Exhibit 5)
24 Power of Attorney (contained on signature
page).
27 Not applicable.
ITEM 9. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
(1) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(2) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statements; and
(3) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(b) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification of liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant, Ballard Medical Products, a
corporation organized and existing under the laws of the
State of Utah, certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on
Form S-8 and has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, in Salt Lake City, State of Utah, on this 5th
day of March, 1997.
BALLARD MEDICAL PRODUCTS
By: Dale H. Ballard, President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person
whose signature appears below constitutes and appoints Dale
H. Ballard, his attorney-in-fact, with the power of
substitution, for him in any and all capacities, to sign any
amendments to this Registration Statement on Form S-8, and
to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the
following persons in the capacities indicated and on the
dates indicated.
March 5, 1997 Dale H. Ballard
President, Chief Executive Officer
and Chairman of the Board
March 5, 1997 Kenneth R. Sorenson,
Treasurer and Chief Financial
Officer
March 5, 1997 E. Martin Chamberlain,
Director and Secretary
March 5, 1997 Dale H. Ballard, Jr.
Director
March 5, 1997 Paul W. Hess
Director
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE NO.
4.1 Restated Certificate of Incorporated by
Incorporation, dated reference from July
September 18, 1987 10, 1991 Form S-8
Registration
Statement, Exhibit
4.1 Registration No.
33-41720
4.2 Articles of Amendment, Incorporated by
to Articles of Incorporation reference from
dated July 10, 1991 Exhibit 4.2 to the
Registration
Statement on
Form S-3, filed
November 13, 1991,
Registration No. 33-
43910
4.3 Articles of Amendment, Incorporated by
to Articles of Incorporation reference from
Dated September 21, 1993 Exhibit 4.3 to the
Registration
Statement on
Form S-8, filed
December 20, 1993
Registration No. 33-
73194
4.4 Amended and Restated Bylaws Incorporated by
of Ballard Medical Products, reference from
dated October 12, 1992 Exhibit 3.3 to
Form 10-K filed
December 24, 1992
4.5 1996 Incentive Stock Option
Plan p. 25
4.6 Example of Incentive Stock
Option Agreement used under
the 1996 Incentive Stock
Option Plan p. 31
5 Opinion of counsel as to
legality of securities being
registered p. 38
23.1 Consent of Independent
Auditors p. 39
23.2 Consent of Counsel Contained in
Exhibit 5
24 Power of Attorney Contained on
signature page
EXHIBIT 4.5
BALLARD MEDICAL PRODUCTS
1996 INCENTIVE STOCK OPTION PLAN
Adopted effective July 1, 1996
1. GRANT OF OPTIONS. The two stock Option
Committees, appointed by the Board of Directors of BALLARD
MEDICAL PRODUCTS (the "Company"), a corporation organized
under the laws of the State of Utah, with its principal
place of business located at 12050 Lone Peak Parkway,
Draper, Utah 84020, are hereby authorized to issue stock
options from time to time on the Company's behalf to any one
or more persons who, at the date of such grant, are
employees of the Company or a subsidiary of the Company and
meet the requirements contained in the remaining portions of
this 1996 Incentive Stock Option Plan (the "Plan"). Stock
Option Committee A ("Committee A") is authorized to grant
options 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. Any option to be
granted pursuant to this Plan must be granted within ten
(10) years from the date hereof.
2. AMOUNT OF STOCK AVAILABLE TO THIS PLAN. The
aggregate amount of stock which may be purchased pursuant to
options granted under this Plan shall be 700,000 shares of
the Company's Common Stock (the "Stock"), said number to be
automatically increased or decreased, as the case may be, by
any increase or decrease in the number of shares of Stock
outstanding because of any:
(a) change in par value;
(b) split up, or reverse split;
(c) reclassification, or
(d) distribution of a dividend payable in stock.
3. ELIGIBLE EMPLOYEES. This Plan is available, at
the discretion of the Stock Option Committees, to all
employees of the Company and all employees of the Company's
subsidiaries.
4. PARTICIPATION. Subject to the express provisions
of the Plan, the Stock Option Committees shall:
(a) select from employees the individuals to whom
options shall be granted;
(b) determine the number of shares to be subject
to each option granted; and
(c) grant such options to such individuals.
5. PARTICIPATION BY DIRECTORS AND OFFICERS. With
respect to any and all options granted under the Plan to
employees who are either officers or Directors of the
Company, the decisions as to the selection of the officer or
Director to whom stock options may be granted and the number
or maximum number of shares which may be covered by stock
options granted to any such officer or Director shall be
made only by Committee B. All the members of which
Committee B shall be "disinterested persons" within the
meaning of Reg. 240.16b-3(c)(2)(i), promulgated under the
Securities Exchange Act of 1934.
6. NONTRANSFERABILITY. All options granted under
this Plan shall be nontransferable by the optionee, other
than by will or the laws of descent and distribution upon
death, and shall be exercisable during the optionee's
lifetime only by the optionee or by the optionee's guardian
or legal representative.
7. CONTINUED EMPLOYMENT REQUIREMENT. Any option
granted pursuant to this Plan may contain such provisions
established by the applicable Stock Option Committee as the
Committee deems appropriate and desirable regarding the
manner of exercise of such option, subject to the other
provisions of this Plan. No option granted under this Plan
may be exercised in whole or in part unless the optionee
continues to be an employee of the Company or a subsidiary
for a period of at least one (1) year following the date
such option is granted. In his discretion, the President of
the Company may extend this one-year continued employment
period up to three years. However, the occurrence of either
of the following events will cause all of an optionee's
options to become immediately and fully exercisable,
notwithstanding the above requirement:
(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 paragraph, the following
definitions apply:
(c) "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 and regulations promulgated
thereunder), 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 and regulations promulgated
thereunder) 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 paragraph. Also for
purposes of this paragraph, 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 paragraph,
provided such determination is reasonable and made in
accordance with applicable law.
(d) "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 Company Act.
A person who is an Acquiring Person as of:
(xii) the time any definitive agreement
relating to a Business Combination is entered into;
(xiii) the record date for the determination of
stockholders entitled to notice of and to vote on a Business
Combination; or
(xiv) immediately prior to the consummation of
a Business Combination,
shall be an Acquiring Person for purposes of this
definition.
(e) "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.
(f) "Exchange Act" shall mean the Securities
Exchange Act of 1934.
(g) "Substantial Part" shall mean an amount of
assets having an aggregate fair market value of at least
$500,000.
(h) "Voting Stock" shall mean Common Stock and
all other securities of the Company entitled to vote
generally for the election of directors.
8. OTHER RESTRICTIONS.
(a) In no event will any option granted to a
person be, by its terms, exercisable after the expiration of
ten (10) years from the date such option is granted, and any
option granted pursuant to this Plan and not exercised
within said ten (10)-year period shall be void; provided,
however, that such period shall be only five (5) years,
instead of ten (10), for an optionee who, immediately before
the grant of the option, owns more than ten percent (10%) of
the voting power of all classes of the Company's Stock.
(b) No option granted under this Plan or any
part hereof may be exercised more than three (3) months
after the optionee ceases to be an employee of the Company.
However, if the optionee ceases employment with the Company
or subsidiary because of permanent and total disability,
then an option granted under this Plan may be exercised
within one (1) year of such cessation of employment so long
as the optionee has been an employee of the Company or
subsidiary for at least the period specified in the Stock
Option Agreement entered into by the Company and said
optionee. For purposes of this Plan, the term "permanent
and total disability" shall mean that the optionee 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 twelve months.
(c) No option or installment thereof shall be
exercisable except in respect of whole shares, and
fractional share interests shall be disregarded. No fewer
than one hundred (100) shares may be purchased at one time
unless the number purchased is the total number which may be
purchased at said time under the option.
9. PURCHASE PRICE. For any option granted hereunder,
the purchase price for a share of Stock shall be determined
by the applicable Stock Option Committee but shall not be
less than (but may be greater than) the fair market value of
the Stock on the date such option is granted. The fair
market value of such Stock shall be determined in accordance
with any reasonable valuation method, including the
valuation methods described in Treasury Regulations.
However, in the case of any person then owning more than ten
percent (10%) of the voting power of all classes of the
Company's capital stock, options will be granted at a
purchase price of not less than one hundred ten percent
(110%) of the fair market value of the Stock on the date
such option is granted. In either case, the applicable
Stock Option Committee will use good faith to determine the
fair market value of the Stock.
For so long as the Company's Stock is traded on the New
York Stock Exchange, the fair market value shall mean the
reported closing price on the last trading day preceding the
grant of the option. If the Company's Stock is traded in
the over-the-counter market, the fair market value shall
mean the reported closing price on the last trading day
preceding the grant of the option.
10. PAYMENT OF PURCHASE PRICE WITH COMPANY STOCK. The
optionee may, if the optionee chooses, pay the purchase
price to exercise an option granted under this Plan with
other shares of the Company's stock which the optionee owns.
In such cases, credit will be given the optionee for the
fair market value of such outstanding shares used in
payment, as of the date of payment, less any applicable
brokerage fees. The Company's Board of Directors will use
good faith to determine the fair market value of the stocks
thus used in payment as of the date of such payment.
11. RECLASSIFICATION, CONSOLIDATION, OR MERGER.
(a) If options issued under this Plan are
outstanding when the total number of issued shares of the
Stock is increased or decreased by any:
(i) change in par value;
(ii) split up, or reverse split;
(iii) reclassification; or
(iv) distribution of a dividend payable in
stock;
then the number of shares subject to such options and the
option price per share shall be proportionately adjusted.
(b) If the Company is reorganized, consolidated,
or merged with another corporation (regardless of which
entity will be the surviving corporation), the optionees of
any options then outstanding pursuant to this Plan shall be
entitled to receive options covering shares of the surviving
corporation:
(i) in substantially the same proportion;
(ii) at a substantially equivalent option
price; and
(iii) subject to the same conditions as their
prior, outstanding options granted under
this Plan.
12. AMENDMENTS TO THIS PLAN. The Board of Directors
is hereby authorized to amend this Plan as necessary to
comply with state and federal laws or as the Board deems to
be necessary or appropriate for the benefit of the Company,
its subsidiaries, or their employees.
13. DATE OF GRANT OF OPTIONS. The date of grant of an
option shall be the day of the grant of the option by the
applicable Stock Option Committee; provided, however, that
if the appropriate resolution of the Stock Option Committee
indicates that an option is to be granted as of and on some
future date, then the date of grant shall be such future
date. The applicable Stock Option Committee may also select
a past effective date for option grants, so long as the
Committee action is within a reasonable period of time
following the effective date of the grant.
14. STOCK OWNERSHIP. No optionee shall be entitled to
the privileges of Stock ownership as to any shares of Stock
not actually issued and delivered to such optionee in
certificate form.
15. STOCKHOLDER APPROVAL; EFFECTIVE DATE. This Plan
is subject to approval by the Shareholders of the Company
and will not remain in force unless approved by the
Shareholders within twelve (12) months after the date the
Plan is adopted.
16. STOCK RESERVE. The Company will, at all times
during the term of this Plan, reserve and keep available
such number of authorized but unissued shares of its Stock
and/or Treasury Stock as will be sufficient to satisfy the
requirements of this Plan. The Company will pay all fees
and expenses incurred by the Company in connection with the
exercise of options granted under this Plan. If any option
shall expire for any reason without having been exercised in
full, the unpurchased shares subject thereto shall again be
available for purposes of the Plan.
17. INTERPRETATION OF PLAN. Options granted pursuant
to the Plan are intended to be "Incentive Stock Options"
within the meaning of Section 422 of the Internal Revenue
Code (the "Code"), and the Plan shall be construed to
implement that intent. If all or any part of an option
shall not be deemed an "Incentive Stock Option" within the
meaning of Section 422 of the Code, said option shall
nevertheless be valid and carried into effect.
It is also intended that the Plan and its provisions
satisfy the conditions and requirements of Reg. 240.16b-3
promulgated by the Securities and Exchange Commission under
Section 16(b) of the Securities Exchange Act of 1934, both
before and after May 1, 1991 (the effective date of Release
No. 34-28869).
18. OTHER TERMS. Any option granted under this Plan
may contain such other and additional terms as are deemed
necessary or desirable by the applicable Stock Option
Committee, or the President of the Company, so long as such
terms do not materially differ from the terms of this Plan.
CERTIFICATE OF SECRETARY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby certify that he is the
Secretary of BALLARD MEDICAL PRODUCTS, a Utah corporation;
that the above and foregoing 1996 Incentive Stock Option
Plan was duly and regularly adopted as such by the Board of
Directors of the Company by unanimous Consent Resolution
dated effective August 12, 1996; that said Plan, as adopted
by the Board, was duly approved by a majority of
Shareholders of the Company at the Annual Meeting of
Shareholders held January 27, 1997; and that the above 1996
Incentive Stock Option Plan is now in full force and effect.
Dated this 5th day of March, 1997.
E. Martin Chamberlain,
Secretary
(Corporate Seal)
EXHIBIT 4.6
THIS OPTION AND THE SHARES UNDERLYING THIS OPTION HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993 (ACT), AND
ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE
144 PROMULGATED UNDER THE ACT. THIS OPTION IS
NONTRANSFERABLE AND THE SHARES UNDERLYING THIS OPTION MAY
NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE ACT, THE AVAILABILITY OF WHICH MUST BE ESTABLISHED TO
THE SATISFACTION OF THE COMPANY.
NOTHING CONTAINED IN THIS AGREEMENT IS INTENDED TO ALTER THE
AT-WILL EMPLOYMENT RELATIONSHIP BETWEEN OPTIONEE AND THE
COMPANY. EITHER PARTY MAY TERMINATE THE EMPLOYMENT
RELATIONSHIP AT ANY TIME, FOR ANY REASON, OR FOR NO REASON
AT ALL.
OPTIONEE SHOULD CONSULT HIS OR HER OWN TAX ADVISOR FOR A
DETERMINATION OF THE PROPER TAX TREATMENT OF THIS OPTION
UNDER FEDERAL AND STATE INCOME TAX LAWS.
BALLARD MEDICAL PRODUCTS
INCENTIVE STOCK OPTION AGREEMENT
(under 1996, 1995, 1994, 1993, 1992, and 1991
Incentive Stock Option Plans)
THIS AGREEMENT (the "Agreement") is made effective ----
-------------, by and between BALLARD MEDICAL PRODUCTS, a
corporation organized under the laws of the State of Utah
(the "Company"), and -----------------------------------, an
employee of the Company ("Optionee").
WHEREAS, Optionee is an employee of the Company, and
the Company desires to grant Optionee an option to purchase
shares of the Company's common stock (the "Stock"), in
accordance with one or more of six incentive stock option
plans of the Company;
NOW, THEREFORE, in consideration of the mutual
covenants and promises hereafter set forth, it is agreed by
and between the parties as follows:
1. GRANT OF OPTION.
(a) The Company hereby grants to Optionee the
right and option (the "Option") to purchase upon and subject
to the terms and conditions of the Applicable Plan or Plans
(as defined below), all or part of the following shares of
Stock at a purchase price of $----------- per share (the
"Option Price"), in the manner and subject to the terms and
conditions set forth herein:
Continued
Employment
Required (following
Option to Applicable Plan the effective date
Purchase of this
Agreement) for
-- shares under 1995 Plan 1 year
-- shares under 19-- Plan -- years
-- shares under 19-- Plan -- years
(b) The effective date of this grant by the
applicable Stock Option Committee of the Board of Directors
is the same as the effective date of this Agreement first
shown above.
(c) For all purposes of this Agreement, the term
"Applicable Plan" shall mean the incentive stock option plan
or plans under which Optionee is being granted an option to
purchase Stock, as identified in paragraph (a) above.
(d) The Option Price is not less than one hundred
percent (100%) of the fair market value of such stock as of
the effective date of action of the Stock Option Committee
granting this Option.
2. CONTINUED EMPLOYMENT REQUIREMENT. This Option may
be exercised, in whole or in part, at any time only after
Optionee has served as an employee of the Company following
the effective date of this Agreement for at least the period
shown in paragraph 1(a) above. However, the occurrence of
either of the following events will cause the Option to
become immediately and fully exercisable, notwithstanding
the above requirement:
(a) The death of Optionee; or
(b) The occurrence of a Business Combination (as
defined below) which is not approved by a two-thirds vote of
the Continuing Directors (as defined below).
For purposes of this Section, the following definitions
apply:
(c) "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 rules and regulations promulgated
thereunder), 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 rules and regulations promulgated
thereunder) 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 paragraph. Also for
purposes of this paragraph, 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 paragraph,
provided such determination is reasonable and made in
accordance with applicable law.
(d) "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:
(xii) the time any definitive agreement
relating to a Business Combination is entered into;
(xiii) the record date for the determination of
stockholders entitled to notice of and to vote on a Business
Combination; or
(xiv) immediately prior to the consummation of
a Business Combination,
shall be an Acquiring Person for purposes of this
definition.
(e) "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.
(f) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(g) "Substantial Part" shall mean an amount of
assets having an aggregate fair market value of at least
$500,000.
(h) "Voting Stock" shall mean Common Stock and
all other securities of the Company entitled to vote
generally for the election of directors.
3. TERMINATION OF OPTION. Notwithstanding contrary
provisions of this Agreement, the Option and any part
thereof, to the extent not theretofore exercised, will
terminate upon the first to occur of the following dates:
(a) The expiration of three (3) months after the
date on which Optionee's employment by the Company is
terminated (except if such termination is by reason of
permanent and total disability);
(b) The expiration of twelve (12) months after
the date on which Optionee's employment by the Company is
terminated, if such termination is by reason of Optionee's
permanent and total disability; or
(c) The expiration of seven (7) years from the
date hereof.
For purposes of this Agreement, the term "permanent and
total disability" shall mean that Optionee 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 twelve months. Optionee acknowledges and agrees that
the Company will have no obligation to give Optionee any
notice or reminder of the expiration of any of the periods
described in the foregoing subparagraphs or similar periods
described in any previous Incentive Stock Option Agreements
executed by the Company and Optionee.
4. METHOD OF EXERCISE.
(a) This Option will be exercised by written
notice ("Notice") by Optionee sent to the Company's
Secretary (original Notice or via facsimile) at the
Company's principal place of business stating the number of
shares with respect to which this Option is being exercised.
Such Notice must be accompanied by:
(i) Cash or a check in payment of the Option
Price for the number of shares specified; or
(ii) If Optionee desires to use Company Stock
owned by Optionee as payment of all or part of the Option
Price, Stock certificates (duly endorsed for transfer)
representing said shares of Stock to be used as payment (the
"Exchange Shares"); or
(iii) Cash (or a check) and Exchange Shares;
or
(iv) In the event of a "cashless", broker-
assisted Option exercise, a copy of a letter (executed by
Optionee) to Optionee's broker instructing the broker to
deliver the exercise price to the Company.
For all purposes of this Agreement and the calculation
of applicable federal taxes, the date the Company Secretary
receives the Notice and the applicable required items set
forth in subparagraphs (i) through (iv) above shall be
deemed to be and treated by the parties (and is referred to
herein) as the "Exercise Date".
NOTWITHSTANDING the foregoing:
(v) Any attempted "cashless", broker-
assisted Option exercised by Optionee will be void and of no
effect unless the broker who so assists in such Option
exercise is on a list of "Approved Option Exercise Brokers"
to be maintained by the Company Secretary; and
(vi) If Optionee makes a "cashless", broker-
assisted Option exercise, then the Company must receive
payment in full of the Option Price in cash and/or
transferred funds no later than the earlier of fifteen (15)
business days following the Exercise Date or the first to
occur of the possible termination dates under Section 3
above. To the extent of shares with respect to which such
funds are not so received before said deadline the attempted
Option exercise will be void and of no effect hereunder.
(b) Upon Optionee's strict compliance with the
provisions hereof, including without limitation the
Company's receipt of cash or transferred funds and/or
sufficient Exchange Shares as payment in full of the Option
Price, then the Company will notify its transfer agent to
make immediate delivery of the shares of Stock covered by
such Option exercise. However, if any law or regulation
requires the Company to take any action with respect to the
shares specified in such Notice before the issuance thereof,
the delivery date of such shares may be extended for the
period necessary to take such action.
(c) If Exchange Shares are used as payment of all
or part of the Option Price, the Company will in good faith
determine the fair market value of the Exchange Shares used
as payment as of the date the Notice is received by the
Company's Secretary. Only whole Exchange Shares will be
used as any part of payment of the Option Price for purposes
of this Section. The Company will cancel the Stock
certificates of such Exchange Shares submitted and reissue
balance certificates for any remaining shares not needed to
complete the purchase.
(d) In any exercise of any part of this Option,
unless Optionee directs otherwise in Optionee's Notice to
the Company, the Option Price of any shares purchased will
be paid in the following order:
(i) First, from cash or other funds
transferred from Optionee to the Company; and
(ii) Second, from the Exchange Shares, the
certificate(s) for which shares are submitted along with the
Notice.
5. MINIMUM SHARES PURCHASED.
(a) No fewer than one hundred (100) shares may be
purchased at one time unless the number purchased is the
total number which may be purchased at said time under the
Option.
(b) No option or installment thereof shall be
exercisable except in respect of whole shares, and
fractional share interests shall be disregarded.
6. RECLASSIFICATION. If this Option is outstanding
when the total number of issued shares of the Stock is
increased or decreased by any:
(a) change in par value;
(b) split up, or reverse split;
(c) reclassification; or
(d) distribution of a dividend payable in stock;
then the number of shares subject to this Option and the
Option Price per share shall be proportionately adjusted.
7. RIGHTS PRIOR TO EXERCISE OF OPTION. This Option
is non-transferable by Optionee, other than by will or the
laws of descent and distribution in the event of Optionee's
death. During Optionee's lifetime, this Option is
exercisable only by Optionee or Optionee's guardian or legal
representative. Optionee has no rights as a shareholder
with respect to the Option shares until payment of the
Option Price and delivery to Optionee of such shares as
herein provided.
8. RESTRICTION ON DISPOSITION OF STOCK. All shares
acquired by Optionee pursuant to this Agreement are subject
to any restrictions on sale, encumbrance, or other
disposition now or hereafter contained in the Company's
Bylaws or Articles of Incorporation.
9. INCOME TAXES.
(a) Optionee has the sole responsibility to pay
federal and state income taxes with respect to his or her
exercise of the Option and sale of the Stock received by
such exercise. Optionee understands and acknowledges that
if Optionee disposes of the shares of Stock acquired by
Optionee pursuant to this Agreement within two (2) years
from the date of this Option or within one (1) year after
the transfer of such shares to Optionee, then this Option
may not qualify as an Incentive Stock Option and all of the
income realized by Optionee may constitute ordinary income.
(Such a disqualifying sale is referred to herein as a
"Disqualifying Disposition".) Upon such a Disqualifying
Disposition, Optionee agrees to promptly notify the Company
in writing of the number of shares sold, the selling price
per share, and the date of the sale.
(b) Optionee also understands and acknowledges
that his or her exercise of this Option may generate federal
alternative minimum taxable income and a resulting federal
tax owed thereon.
(c) If the Option is not qualified, at the time
it becomes exercisable hereunder for the first time, as an
Incentive Stock Option because of the application of
Internal Revenue Code Section 422(d), then for purposes of
calculating Optionee's taxable income as of the Exercise
Date, the fair market value of the Stock will be based upon
the closing price of Ballard's Stock on the Exercise Date,
as published by the New York Stock Exchange or the Wall
Street Journal.
10. BINDING EFFECT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective heirs, executors, administrators, successors and
assigns.
11. STOCK RESERVE.
(a) The Company shall, at all times during the
term of this Agreement, reserve and keep available
sufficient Stock to satisfy the requirements of this
Agreement.
(b) The Company will pay all fees and expenses
necessarily incurred by the Company in connection with the
exercise of the Option.
(c) Notwithstanding paragraph (b) above, Optionee
will pay all brokerage fees incurred by Optionee in the use
of any of the Exchange Shares as payment for the exercise of
this Option.
12. RESERVATION OF RIGHT TO TERMINATE EMPLOYMENT.
NOTHING CONTAINED IN THIS AGREEMENT RESTRICTS THE RIGHT OF
THE COMPANY TO TERMINATE THE EMPLOYMENT OF OPTIONEE AT ANY
TIME WITH OR WITHOUT CAUSE, OR TO REDUCE OPTIONEE'S
COMPENSATION AT ANY TIME. The parties acknowledge and agree
that a termination of Optionee's employment by the Company
without cause will not be deemed in any way to constitute a
violation of any duty of good faith and fair dealing owed by
the Company to Optionee.
13. PARTIES BOUND BY PLAN. Each determination,
interpretation, or other action taken by the Board of
Directors or the applicable Stock Option Committee pursuant
to the provisions of the Plan is final, binding, and
conclusive for all purposes of the Company and Optionee and
their respective successors in interest.
14. CONDITIONAL EXERCISE. If at any time the Board of
Directors of the Company determines that listing, additional
registration, or qualification of the shares of Stock upon
any securities exchange, or under any state or federal law
is necessary or desirable, this Option may not be exercised
unless and until such listing, registration, or
qualification of the shares has been effected upon
conditions acceptable to the Board of Directors of the
Company.
15. INTERPRETATION OF PLAN. Options granted pursuant
to the Plan are intended to be "Incentive Stock Options"
within the meaning of Section 422 of the Internal Revenue
Code (the "Code"), and the Applicable Plan and this
Agreement shall be construed to implement that interest. If
all or any part of this Option shall not be deemed an
"Incentive Stock Option" within the meaning of Section 422
of the Code, the Option shall nevertheless be valid and
carried into effect.
16. GOVERNING LAW. This Agreement shall be construed
in accordance with and governed by the laws of the State of
Utah.
17. PLACE OF SUIT. Any action at law, suit in equity
or judicial proceeding for the enforcement of this contract
or any provision thereof shall be instituted only in state
or federal courts located in Salt Lake County, Utah.
Optionee hereby submits himself or herself to the
jurisdiction of such courts located in Salt Lake County.
18. SEVERABILITY. If and to the extent that any court
of competent jurisdiction holds any provision or any part
thereof of this Agreement to be invalid or unenforceable,
such holding shall in no way affect the validity of the
remainder of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day and year first above
written.
BALLARD MEDICAL PRODUCTS
By: Dale H. Ballard, President
Optionee:
(Print name and address)
EXHIBIT 5
M E M O R A N D U M
To: Board of Directors
From: Paul W. Hess, General Counsel
Date: March 5, 1997
Re: Registration Statement on Form S-8
I have examined the Registration Statement on Form S-8 to be
filed by Ballard Medical Products (the "Company") with the
Securities and Exchange Commission on or about March 5, 1997 (the
"Registration Statement"), in connection with the registration
under the Securities Act of 1933, as amended, of 700,000 shares
of the Company's common stock, $.10 par value (the "Shares"),
issuable upon exercise of options granted or to be granted under
the 1995 Stock Option Plan (the "Plan"), including all exhibits
to the Registration Statement.
It is my opinion that, upon completion of the proceedings
being taken or contemplated by the Company to be taken prior to
the issuance and sale of the Shares pursuant to the Plan, and
upon completion of the filings and proceedings required in order
to permit such transactions to be carried out in accordance with
the Securities Laws of the various states where required, the
Shares, when issued and sold in the manner referred to in the
Plan and the Registration Statement, will be legally and validly
issued, fully paid and nonassessable. This opinion is being
rendered pursuant to Regulation Section 229.601(b)(5).
I consent to the use of this opinion as an exhibit to the
Registration Statement, and further consent to the use of my name
wherever appearing in the Registration Statement and any
amendments thereto.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in this Registration Statement
of Ballard Medical Products on Form S-8 of our reports dated
February 8, 1996 (February 18, 1997 as to Note 11), appearing in
and incorporated by reference in the Annual Report on Form 10-K
of Ballard Medical Products for the year ended September 30,
1996.
Deloitte & Touche LLP
Salt Lake City, Utah
March 3, 1997
