As filed with the Securities and Exchange Commission
on March 10, 1998.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
February 25, 1998
(Date of Report)
BALLARD MEDICAL PRODUCTS
(Exact name of registrant
as specified in its charter)
1-12318
(Commission file number)
UTAH
(State or other jurisdiction of incorporation
or organization)
87-0340144
(I.R.S. Employer Identification No.)
12050 Lone Peak Parkway, Draper, Utah 84020
(Address and Zip Code
of principal executive offices)
(801) 572-6800
(Registrant's telephone number,
including area code)
ITEM 2. ACQUISITION OF ASSETS
Effective February 25, 1998, Ballard Medical Products
("BMP") entered into an Agreement Concerning the Exchange of
Common Stock of Ballard Medical Products for all Outstanding
Common Stock of Tri-Med Specialties, Inc. (the "Exchange
Agreement"), pursuant to which BMP has acquired all of the
outstanding capital shares (i.e., 10,000 shares Class A
Common Stock) of Tri-Med Specialties, Inc. ("Tri-Med"), in
exchange for 1,067,733 shares of BMP common shares (the
"Ballard Shares"). Thus, immediately following the
acquisition, Tri-Med became a wholly owned subsidiary of
BMP.
Tri-Med, a Kansas corporation, is a manufacturer of
Helicobacter Pylori diagnostic products. Found in more than
60% of Americans aged 60 and over, H. pylori has been linked
to peptic ulcer disease and may also be a causative factor
in stomach cancer. The international market for this test
is even greater, especially in third world countries where
the incidence of H. pylori is significant.
The principal products of Tri-Med are: (1) CLOtest, a
rapid urease test for the detection of H. pylori, that can
be used in conjunction with BMP s Thermal Option biopsy
forceps, and (2) PYtest, a breath test for the detection of
H. pylori. CLOtest has become the gold standard for the
detection of H. pylori by a biopsy. The PYtest is a
noninvasive Carbon 14 urea breath test, released by Tri-Med
in May, 1997.
Both the CLOtest and the PYtest products are inventions
of Barry J. Marshall, M.D., who was featured on a segment of
ABC s 20/20," and who received the coveted 1995 Lasker
award for medical research. Dr. Marshall first established
(in the 1980s) a causal link between the H. pylori bacterium
and peptic ulcer disease. Both the CLOtest and PYtest
products are covered by patents held by Dr. Marshall and
licensed to Tri-Med.
BMP feels this is a very exciting acquisition, which
opens a whole new frontier of opportunity within the call
pattern of its Interventional Division sales force, and
gives BMP a greater opportunity to impact international
markets.
This transaction is being accounted for as a pooling of
interests transaction. In addition, the parties intend that
the transaction qualify as a tax-free reorganization under
Section 368(a)(1)(B) of the Internal Revenue Code (1986, as
amended).
The Exchange Agreement called for the issuance of
approximately $26 million in Ballard Shares, valued based
upon the average closing price of BMP's stock for the fifty
trading days preceding the closing date. 53,386
(representing 5%) of the Ballard Shares were issued in
escrow in a certificate to Zions First National Bank (Salt
Lake City, Utah), as escrow agent. The escrow will likely
continue only until audited financial statements are issued
for the combined companies (approximately December, 1998).
The escrow secures representations and warranties made in
the Exchange Agreement by the shareholders of Tri-Med.
Certain statements herein could be characterized as
forward-looking statements and are subject to risks and
uncertainties that could cause actual results to differ
materially from those projected. Such forward-looking
statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not required under applicable tests of
significance.
(b) Not required under applicable tests of
significance.
(c) Exhibits
Exhibit
Number Description Location
99.1 Agreement Concerning the p. 4
Exchange of Common Stock of
Ballard Medical Products
for all Outstanding Common
Stock of Tri-Med
Specialties, Inc.
99.2 Escrow Agreement Related to p. 42
Shares of Ballard Medical
Products
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
BALLARD MEDICAL PRODUCTS
Dated: March 6, 1998 By: Dale H. Ballard, President
AGREEMENT
CONCERNING THE EXCHANGE OF COMMON STOCK
OF BALLARD MEDICAL PRODUCTS
FOR ALL OUTSTANDING COMMON STOCK OF
TRI-MED SPECIALTIES, INC.
Effective February 25, 1998
TABLE OF CONTENTS
ARTICLE I. DEFINED TERMS . . . . . . . . . . . . . . . . 1
ARTICLE II. EXCHANGE OF SECURITIES . . . . . . . . . . 3
2.1 Issuance of Shares . . . . . . . . . . . . . . 3
2.2 Pooling of Interest . . . . . . . . . . . . . 3
2.3 Escrow . . . . . . . . . . . . . . . . . . . . 3
2.4 Company Share Ownership . . . . . . . . . . . 3
2.5 Termination of Shareholder Agreement . . . . . 3
2.6 Tax-Free Reorganization . . . . . . . . . . . 4
ARTICLE III. CLOSING . . . . . . . . . . . . . . . . . 4
3.1 Date and Place . . . . . . . . . . . . . . . . 4
3.2 Deliveries by Sellers . . . . . . . . . . . . 4
3.3 Deliveries by Ballard . . . . . . . . . . . . 6
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLERS . 6
4.1 Organization . . . . . . . . . . . . . . . . . 6
4.2 Subsidiaries . . . . . . . . . . . . . . . . . 6
4.3 Ownership of Shares . . . . . . . . . . . . . 7
4.4 Authority . . . . . . . . . . . . . . . . . . 7
4.5 Capitalization . . . . . . . . . . . . . . . . 8
4.6 Financial Statements . . . . . . . . . . . . . 8
4.7 Absence of Certain Liabilities . . . . . . . . 9
4.8 Certain Asset Listings and Descriptions . . . 10
4.9 Absence of Certain Changes or Events . . . . . 10
4.10 Title to Assets and Properties; Condition . . 12
4.11 Accounts Receivables . . . . . . . . . . . . . 13
4.12 License, Patents, Trademark, Etc. . . . . . . . 13
4.13 No Conflict of Interest . . . . . . . . . . . 15
4.14 Human Resources . . . . . . . . . . . . . . . 16
4.15 Employee Benefit Plans . . . . . . . . . . . . 16
4.16 Tax Matters . . . . . . . . . . . . . . . . . 17
4.17 Legal Proceedings . . . . . . . . . . . . . . 18
4.18 Contracts, Agreements, Etc. . . . . . . . . . 18
4.19 Compliance with Laws, Etc. . . . . . . . . . . 19
4.20 Insurance . . . . . . . . . . . . . . . . . . 19
4.21 Fees or Commissions . . . . . . . . . . . . . 20
4.22 Illegal Payments . . . . . . . . . . . . . . . 20
4.23 Powers of Attorney . . . . . . . . . . . . . . 20
4.24 Bank Accounts . . . . . . . . . . . . . . . . 20
4.25 Environmental Compliance . . . . . . . . . . . 20
4.26 Marketing and Sales . . . . . . . . . . . . . 20
4.27 Disclosure . . . . . . . . . . . . . . . . . . 21
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BALLARD . . 21
5.1 Organization . . . . . . . . . . . . . . . . . 21
5.2 Authority . . . . . . . . . . . . . . . . . . 21
5.3 Reporting Company . . . . . . . . . . . . . . 22
5.4 Fees or Commissions . . . . . . . . . . . . . 22
5.5 Disclosure . . . . . . . . . . . . . . . . . . 22
ARTICLE VI. COVENANTS . . . . . . . . . . . . . . . . . 22
6.1 Tax Returns for 1997 and Short-Year 1998 . . . 22
6.2 Publicity . . . . . . . . . . . . . . . . . . 22
6.3 Release of Company . . . . . . . . . . . . . . 22
6.4 Covenant Not to Compete . . . . . . . . . . . 23
6.5 Transfer Restrictions . . . . . . . . . . . . 23
6.6 Post-Closing Assistance/Transition . . . . . . 23
6.7 Section 338 Election . . . . . . . . . . . . . 23
6.8 Indemnity . . . . . . . . . . . . . . . . . . 24
6.9 Receivables . . . . . . . . . . . . . . . . . 24
ARTICLE VII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES 24
7.1 Nature and Survival of Representations . . . . 24
7.2 No Merger . . . . . . . . . . . . . . . . . . 24
ARTICLE VIII. BALLARD SHARES . . . . . . . . . . . . . 24
8.1 Subscription Provisions . . . . . . . . . . . 24
ARTICLE IX. REGISTRATION OF BALLARD SHARES . . . . . . 26
9.1 Registration . . . . . . . . . . . . . . . . . 26
9.2 Revised Prospectuses . . . . . . . . . . . . . 27
9.3 Allocation of Expenses . . . . . . . . . . . . 27
ARTICLE X. BREACH BY SELLERS . . . . . . . . . . . . . 27
10.1 Escrow . . . . . . . . . . . . . . . . . . . . 27
10.2 Remedy . . . . . . . . . . . . . . . . . . . . 27
10.3 Limitations . . . . . . . . . . . . . . . . . 28
10.4 Liability . . . . . . . . . . . . . . . . . . 29
ARTICLE XI. MISCELLANEOUS . . . . . . . . . . . . . . . 29
11.1 Amendment or Supplement . . . . . . . . . . . 29
11.2 Expenses . . . . . . . . . . . . . . . . . . . 29
11.3 Entire Agreement . . . . . . . . . . . . . . . 29
11.4 Assignment . . . . . . . . . . . . . . . . . . 29
11.5 Notices . . . . . . . . . . . . . . . . . . . 29
11.6 Captions . . . . . . . . . . . . . . . . . . . 30
11.7 Counterparts/Facsimile Signatures . . . . . . 30
11.8 Governing Law . . . . . . . . . . . . . . . . 30
List of Schedules
Schedule 1. Schedule of Sellers' Interests
Schedule 2. Disclosure Schedule
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is made
effective the day of February, 1998, by and among
BALLARD MEDICAL PRODUCTS, a Utah corporation ("Ballard");
TRI-MED SPECIALTIES, INC., a Kansas corporation (the
"Company"); C. PHILLIP PATTISON ("Pattison"); KEVIN R. DYE
("Dye"); BARRY J. MARSHALL ("Marshall"); and WILLIAM A. FRY
("Fry"). (Pattison, Dye, Marshall, and Fry are referred to
herein individually as "Seller" and collectively as
"Sellers".)
WITNESSETH:
WHEREAS, Sellers own all of the issued and outstanding
shares of capital stock of the Company; and
WHEREAS, the parties desire to effect an exchange of
all of the issued and outstanding shares of the Company for
common stock of Ballard.
NOW, THEREFORE, in consideration of the mutual
promises, covenants and representations contained herein,
the parties hereto agree as follows:
ARTICLE I.
DEFINED TERMS
For all purposes of this Agreement, the following terms
shall have the meanings indicated:
1.1 "Affiliate" of a party shall mean any entity or
person which controls, is controlled by, or is under common
control with such party. "Control" shall mean direct or
indirect ownership of more than 50% of all issued voting
stock of the subject entity, or the power in fact to control
the management decisions of such entity.
1.2 "Ballard" shall mean Ballard Medical Products, a
Utah corporation.
1.3 "Ballard Common Stock" shall mean fully paid,
nonassessable Ballard common shares, par value $.10 per
share.
1.4 "Ballard Shares" shall mean the shares of Ballard
Common Stock to be issued at Closing to or for the benefit
of Sellers in exchange for the Company Shares.
1.5 "Closing" shall mean the consummation of the
exchange transaction contemplated by this Agreement. The
parties intend that the Closing occur contemporaneously with
their execution and delivery of this Agreement.
1.6 "Closing Date" shall mean the date of the Closing,
i.e., the effective date of this Agreement, or such other
time or date as shall be mutually agreed to in writing by
the parties.
1.7 "Company" shall mean Tri-Med Specialties, Inc., a
Kansas corporation.
1.8 "Company Shares" shall mean all of the issued and
outstanding shares of the Company, i.e., 10,000 shares of
Class A Voting Common Stock.
1.9 "Determined Market Value" shall mean the average
closing price for the Ballard Common Stock for the fifty
consecutive trading days ending on and including the day
preceding a given date, as quoted in the NYSE Net or the
Wall Street Journal.
1.10 "Disclosure Schedule" shall mean the Disclosure
Schedule (attached hereto as Schedule 2 and incorporated
herein by reference) which identifies specific sections to
which each such disclosure relates.
1.11 "Escrow" shall mean the escrow created by the
Escrow Agreement referenced in Section 2.3. "Escrow Agent"
shall mean Zion's First National Bank.
1.12 "IRC" shall mean the Internal Revenue Code of
1986, as amended.
1.13 "IRS" shall mean the Internal Revenue Service.
1.14 "NYSE" shall mean the New York Stock Exchange.
1.15 "SEC" shall mean the U.S. Securities and Exchange
Commission.
1.16 "Sellers" shall mean Pattison, Dye, Marshall, and
Fry.
1.17 "Tax" shall mean any federal, state, local,
foreign or other tax (whether income, sales, use, franchise,
excise, real or personal property or other kind of tax),
assessment, levy, impost, withholding or other governmental
charge and shall include all interest and penalties thereon.
1.18 "Third Party" shall mean any person, company,
partnership, corporation, or other entity or group that is
not a party to this Agreement (i.e., other than the Company,
other than any Seller, and other than Ballard and its
Affiliates).
1.19 "Trust" shall mean the CLOtest Trust, a revocable
trust formed by Marshall with Medquest Pty Ltd., a duly
incorporated company of care of Rod Blechynden, 1st Floor,
107 Cambridge Street, Leederville in the state of Western
Australia, as Trustee.
ARTICLE II.
EXCHANGE OF SECURITIES
2.1 Issuance of Shares.
(a) Subject to all the terms and conditions of
this Agreement, Ballard agrees to issue a number of shares
of Ballard Common Stock, having an aggregate Determined
Market Value as of the Closing Date of U.S. $26,000,000
minus the sum of all severance pay and bonuses paid or
payable by the Company as a result of the business
combination transaction herein and minus Sellers' attorneys
fees and costs (the "Ballard Shares"), in exchange for all
of the Company Shares. Sellers agree to sell, transfer, and
exchange the Company Shares for the Ballard Shares. The
Ballard Shares are being exchanged for the Company Shares at
Closing as provided herein.
(b) $104,000 of the consideration described in
paragraph (a) above (i.e., the Ballard Shares) being paid by
Ballard shall be deemed to constitute consideration for
Sellers' noncompete covenants in Section 6.4 below. The
balance shall be deemed to constitute the exchange price for
the Company Shares.
2.2 Pooling of Interests. The parties acknowledge and
agree that Ballard intends to treat this exchange, for
purposes of financial statement reporting and generally
accepted accounting principles, as a pooling of interests
transaction. Accordingly, Sellers and the Company covenant
and agree not to take any action subsequent to the date
hereof, which would, in the opinion of Ballard's independent
CPAs, invalidate or eliminate Ballard's right to treat this
transaction as a pooling. Sellers represent and warrant
that: (a) neither the Company nor Sellers have, within two
(2) years prior to the Closing Date, changed in any way the
equity interests of the Company's voting common stock; and
(b) the Company has never redeemed or purchased any of its
voting common stock.
2.3 Escrow. Sellers agree that five percent (5%) of
the Ballard Shares to be issued pursuant to the exchange
herein shall be held by the Escrow Agent in escrow pursuant
to the provisions of an Escrow Agreement in form and
substancesatisfactory tothe parties (the"Escrow Agreement").
2.4 Company Share Ownership. Sellers' respective
ownership of the Company Shares, and the respective number
of Ballard Shares which they are receiving at Closing, are
set forth in Schedule 1 attached to and made a part of this
Agreement by reference.
2.5 Termination of Shareholder Agreement. Sellers and
the Company hereby terminate that certain Amended Stock
Transfer Restriction and Option Agreement (the "Shareholder
Agreement") entered into by the parties effective January 2,
1990. Neither the Company nor any of Sellers shall have any
further rights or obligations under the Shareholder
Agreement upon consummation of the Closing hereunder.
Sellers waive any and all rights they otherwise would have
under the Shareholder Agreement regarding the Company
Shares.
2.6 Tax-Free Reorganization. The parties intend to
adopt this Agreement as a tax-free reorganization under IRC
Sec. 368(a)(1)(B). Sellers have sought and received separate
advice from counsel regarding the tax consequences of the
transactions contemplated hereunder and have not relied upon
any representation from Ballard regarding such tax
consequences.
ARTICLE III.
CLOSING
3.1 Date and Place. The Closing shall take place on
the Closing Date at Kansas City, Missouri.
3.2 Deliveries by Sellers. At the Closing, Sellers
are delivering to Ballard:
(a) Certificates representing the Company Shares,
duly endorsed in blank and accompanied by irrevocable stock
powers in form and substance satisfactory to the parties
(the "Stock Power(s)"), and any documents which are
necessary for the transfer to Ballard of good and marketable
title to the Company Shares, with any requisite transfer tax
or stamps attached or provided for;
(b) A copy of the Articles of Incorporation of
the Company, with all amendments thereto, and a certificate
of good standing from the State of Kansas, each of which
shall be certified as of a date within a reasonable time
prior to the Closing Date by the appropriate authority in
Kansas;
(c) A copy of the Bylaws of the Company, as
amended through the Closing Date, certified by the President
of the Company;
(d) All original books and records of the
Company, including without limitation NDAs, 510(k)s,
correspondence with regulatory agencies regarding NDAs and
510(k)s, GMP documents, SOPs, policy manual, complaint
files, FDA, NRC, and other regulatory files, tax returns,
stock transfer records, canceled stock certificates,
unissued stock certificate forms, minutes, resolutions,
financial records, and all written instructions from the
Company to applicable legal counsel to deliver upon request
to Ballard patent files and records;
(e) All consents and approvals of governmental
agencies, if any, and Third Parties to the transactions
contemplated by this Agreement;
(f) The written resignations of all directors and
officers of the Company;
(g) A unanimous resolution of the Board of
Directors of the Company, and, if applicable, the
shareholders of the Company approving the transfer of the
Company Shares to Ballard pursuant to this Agreement, in
each case certified to be in full force and effect on the
Closing Date by the Secretary of the Company;
(h) The Escrow Agreement, executed by each of
Sellers;
(i) An opinion of counsel for Sellers, in form
and substance satisfactory to Ballard;
(j) A Consulting Agreement, in form and substance
satisfactory to the parties, executed by each of Dye, Fry
and Marshall;
(k) An Acknowledgement of Determined Market
Value, in form and substance satisfactory to the parties and
signed by the parties, setting forth the calculation of
Determined Market Value;
(l) Signature cards and other necessary documents
transferring signature power for all Company bank accounts
to Ballard designees;
(m) Notices, in form and substance satisfactory
to the parties, signed by (as requested by Ballard),
advising suppliers, distributors, independent
representatives, and customers of the Company of this
transaction;
(n) All Company credit cards;
(o) Marshall is executing and delivering a patent
license agreement, in form and substance satisfactory to
Ballard and Marshall, related to U.S. Patent No. 4,830,010;
(p) Employment Agreements with Susie Hoffman,
Matthew Combs, Aruni H.W. Mendis, and Norman J. Bazzo; and
(q) An instrument, in form and substance
satisfactory to Ballard and the Trust, executed by the Trust
which:
(i) Amends that certain Lease with the
Company dated October 7, 1997 (the "Osborne Park Lease") to
provide for a term acceptable to Ballard and the Trust;
(ii) Acknowledges that the Company is
not in default under the Osborne Park Lease; and
(iii) Consents and agrees to the
representation made in Section 4.12(d) below.
3.3 Deliveries by Ballard. At the Closing, Ballard is
making the following deliveries:
(a) Ballard will deliver to Escrow Agent the
Escrow Agreement, executed by Ballard, together with
properly issued certificates representing five percent (5%)
of the Ballard Shares (to be held in escrow pursuant to the
terms and conditions of the Escrow Agreement);
(b) Ballard will deliver to Sellers properly
issued certificates representing the balance of the Ballard
Shares, as shown in Schedule 1;
(c) Ballard will deliver an opinion of counsel
for Ballard, in form and substance satisfactory to Sellers;
(d) Ballard will cause the Company to execute and
deliver to each of Dye, Fry, and Marshall his Consulting
Agreement;
(e) Ballard will execute and deliver the
Acknowledgement of Determined Market Value; and
(f) Ballard will pay in full the balance owed on
the Company's bank loan at Mercantile Bank of Kansas City.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS
As a material inducement to Ballard's willingness to
enter into and perform this Agreement, Sellers represent
and warrant to Ballard and the Company as set forth below.
For all purposes of this Article IV, any reference to the
"knowledge of the Company" shall mean the actual knowledge
of Pattison or Dye.
4.1 Organization. The Company is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Kansas; it has all requisite power and
authority to own, lease and operate its properties and to
carry on its business as it is now being conducted, and the
Company is duly licensed, authorized and qualified to do
business in the places where such business is now conducted;
and is duly qualified, licensed, and in good standing as a
foreign corporation authorized to do business in the states
listed in the Disclosure Schedule.
4.2 Subsidiaries. The Company has no subsidiaries,
nor has it ever had a subsidiary. The Company is autonomous
and has not ever been the subsidiary or division of another
corporation. The Company has no interest, direct or
indirect, and has no commitment to purchase any interest,
direct or indirect, in any other corporation or in any
partnership, joint venture or other business enterprise or
entity other than as set forth on the Disclosure Schedule.
The business carried on by the Company has not been
conducted through any other direct or indirect subsidiary or
affiliate of any Seller. No part of the Company's shares
has ever been owned by any other corporation.
4.3 Ownership of Shares.
(a) Sellers are the record and beneficial owners
of the outstanding Company Shares set forth opposite their
respective names in Schedule 1 and have good and marketable
title to their respective Company Shares, and at Closing the
Company Shares will be free and clear of all claims, liens,
charges, encumbrances, security interests and restrictions
of any kind whatsoever, and Sellers' delivery of the Company
Shares to Ballard at the Closing will convey to Ballard good
and marketable title to Sellers' Company Shares, free and
clear of all claims, liens, charges, encumbrances, security
interests and restrictions of any kind whatsoever.
(b) Except as set forth in the Disclosure
Schedule, there are no subscriptions, options, warrants,
calls, rights, contracts, agreements, commitments,
understandings, restrictions or arrangements to which the
Company or any Seller is a party relating to the issuance,
sale, purchase or transfer of any shares of the capital
stock or other securities of the Company, including any
rights of conversion or exchange under any outstanding
securities or other agreements or instruments.
(c) Except as set forth in the Disclosure
Schedule, there are no voting trusts, and there are no other
agreements or understandings to which the Company or another
Seller is a party with respect to the capital stock of the
Company.
4.4 Authority.
(a) Each Seller has full power and authority to
enter into this Agreement, is of sound mind and mentally
competent and is of the legal age of majority. This
Agreement has been duly executed and delivered by each
Seller.
(b) No corporate proceedings on the part of the
Company are necessary to authorize this Agreement or the
consummation of the transactions contemplated hereby.
(c) This Agreement is a valid and binding
obligation of each Seller enforceable in accordance with its
terms, except as it may be affected by bankruptcy,
insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally or by
equitable principles.
(d) Except as disclosed in the Disclosure
Schedule, to the knowledge of the Company neither the
execution and delivery of this Agreement nor the consum-
mation of the transactions contemplated hereby will (i)
violate, or conflict with, or require any consent under, or
result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by,
or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties of the
Company or any Seller, under any of the terms, conditions or
provisions of the Articles of Incorporation or Bylaws of the
Company or of any note, bond, mortgage, indenture, deed of
trust, license, agreement or other instrument or obligation
to which the Company or any Seller is a party, or by which
the Company or any Seller or any of their respective
properties may be bound or affected, or (ii) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any Seller or any of their
respective properties.
(e) Except as disclosed in the Disclosure
Schedule, to the knowledge of the Company no consent or
approval by, notice to or registration with any governmental
or administrative authority or board or Third Party is
required on the part of the Company or any Seller in
connection with the execution and delivery by any Sellers of
this Agreement or the performance by any Sellers of any of
the transactions contemplated hereby.
4.5 Capitalization.
(a) The authorized capital stock of the Company
consists solely of 50,000 common shares, $1.00 per share par
value, 25,000 of which are Class A Voting Common Stock and
25,000 of which are Class B Non-Voting Common Stock. Only
10,000 Class A Voting shares (i.e., the Company Shares) are
issued and outstanding. No shares are held in the treasury.
All of the Company Shares have been duly authorized, validly
issued and are fully paid, nonassessable and free of
preemptive rights. The issuance and sale of all of the
Company Shares by the Company have been in full compliance
with all applicable federal and state securities laws.
(b) Except as disclosed in the Disclosure
Schedule, the Company does not have any obligation
(contingent or other) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest
therein or to pay any dividend or make any other
distribution in respect thereof.
4.6 Financial Statements.
(a) Sellers have previously delivered to Ballard
the following financial statements of the Company prepared
by Timothy L. Sernett, CPA:
December 31, 1997 Income Statement
December 31, 1997 Balance Sheet
December 31, 1996 Income Statement
December 31, 1996 Balance Sheet
(All of the financial statements referred to above in
this Section are hereinafter collectively referred to as the
"Company Financial Statements" and copies thereof are
attached to the Disclosure Schedule.)
(b) Except as set forth in the Disclosure
Schedule or in the Compilation Report from the Company's
independent CPA attached to the Company Financial
Statements, the Company Financial Statements and have been
prepared from and are substantially in conformity with the
books and records of the Company throughout the periods
indicated and present fairly the financial condition and
results of operations, and cash flows (as applicable) of the
Company as of the dates and for the periods indicated, in
each case prepared under the accrual method of accounting.
(c) Income statements included in the Company
Financial Statements do not contain any items of income not
earned in the ordinary course of business except as
expressly specified therein.
4.7 Absence of Certain Liabilities.
(a) Except as set forth in the Disclosure
Schedule or included in the Company Financial Statements, as
of December 31, 1997, the Company did not have any
liabilities or obligations of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether due
or to become due), in excess of $20,000 in any single
instance and $50,000 in the aggregate (including without
limitation any tax liabilities or deferred tax liabilities,
or any other debts, liabilities, or obligations relating to
or arising out of any act, omission, transaction,
circumstance, sale of goods or services, state of facts, or
other condition which occurred on or before the Balance
Sheet date, whether or not then known, due, or payable),
which were not accurately and fully reflected or reserved
against in the December 31, 1997 Balance Sheet.
(b) Except as set forth in the Disclosure
Schedule or included in the Company Financial Statements, as
of December 31, 1996, the Company did not have any
liabilities or obligations of any nature (whether absolute,
accrued, contingent or otherwise and whether due or to
become due), in excess of $20,000 in any single instance and
$50,000 in the aggregate (including without limitation any
tax liabilities or deferred tax liabilities, or any other
debts, liabilities, or obligations relating to or arising
out of any act, omission, transaction, circumstance, sale of
goods or services, state of facts, or other condition which
occurred on or before the Balance Sheet date, whether or not
then known, due, or payable), which were not accurately and
fully reflected or reserved against in the December 31, 1996
Balance Sheet.
(c) Except as set forth in the Disclosure
Schedule, none of the Company's employees is now, or will by
the passage of time become, entitled to receive any vacation
time, vacation pay, or severance pay attributable to
services rendered prior to the Balance Sheet date referred
to in subparagraph (a) above except as disclosed on the face
of said Balance Sheet.
(d) All of the Company's liabilities and
obligations of any nature whatsoever (whether absolute,
accrued, contingent, or otherwise and whether due or to
become due) as of the effective date hereof are itemized in
the Disclosure Schedule, including the name, telephone
number, and address of the creditor, the nature of the
obligation, and the balance owed.
4.8 Certain Asset Listings and Descriptions. The
Disclosure Schedule contains an accurate and complete list
and description of all property in which the Company has a
leasehold interest and which is used by the Company in
connection with the operation of its business, together with
a description of each lease, sublease, license, or any other
instrument under which the Company claims or holds such
leasehold or other interest or right to the use thereof or
pursuant to which the Company has assigned, sublet or
granted any rights therein, identifying the parties thereto,
the rental or other payment terms, expiration date and
cancellation and renewal terms thereof.
4.9 Absence of Certain Changes or Events. Except as
set forth on the Disclosure Schedule, since December 31,
1997, the Company has conducted its business only in the
ordinary course, and there has not been:
(a) any change in the condition (financial or
otherwise), properties, business or operations of the
Company, or any event or circumstance, which is, or with
reasonable certainty may be, singly or in the aggregate,
materially adverse to the condition (financial or
otherwise), properties, business or operations of the
Company;
(b) any loss (whether by damage or destruction,
in the nature of a casualty loss or otherwise, and not
covered by insurance), affecting any tangible property or
asset or any intangible assets of the Company;
(c) any entering into or amendment of any
collective bargaining or other labor agreement, or any
actual or, to the best knowledge of Sellers, any threatened
strike or other labor trouble or dispute which materially
affects or might materially affect the condition (financial
or otherwise), properties, business, operations or prospects
of the Company; nor has there been, to the best knowledge of
Sellers, any labor union organizing activity.
(d) any loss or, to the best knowledge of
Sellers, any threatened loss of any permit, license,
qualification, special charter or certificate of authority
held or enjoyed or formerly held or enjoyed by the Company
which loss has had or upon occurrence would have an adverse
effect on the condition (financial or otherwise),
properties, business, operations or prospects of the
Company;
(e) any statute, regulation, order, ordinance or
other law, of which Sellers are aware, the adoption or
rescission of which adversely affects, singly or in the
aggregate, the condition (financial or otherwise),
properties, business, operations or prospects of the
Company;
(f) any indebtedness, liability or obligation
(whether absolute, accrued, contingent or otherwise)
incurred by the Company or any transaction entered into by
the Company other than in the ordinary course of business
and consistent with past practice, or any guarantee by the
Company of any indebtedness, liability or obligation of any
other person;
(g) any declaration, setting aside or payment of
any dividend or other distribution in respect of any of the
capital stock or other securities of the Company;
(h) any issuance, sale, combination or
reclassification of any capital stock or other securities of
the Company;
(i) any issuance or grant of any option, warrant
or other right in respect of any capital stock or other
securities of the Company;
(j) any direct or indirect redemption, purchase
or other acquisition of any capital stock or other
securities of the Company;
(k) any material obligation, liability, lien or
encumbrance paid, discharged or satisfied by or on behalf of
the Company other than current liabilities reflected on the
December 31, 1997 Balance Sheet and current liabilities
incurred since December 31, 1997 in the ordinary course of
business and consistent with past practices;
(l) any mortgage, lien, pledge, charge or
encumbrance affecting the properties of the Company (except
liens for current property taxes not yet due and payable)
created, suffered or assumed by or on behalf of the Company;
(m) any sale, transfer or other disposition of
any material tangible asset of the Company or any
cancellation or compromise of any debt to or claim of the
Company, except in the ordinary course of business and
consistent with past practice, nor has there been any
disposition of any of the Company's intangible or
intellectual properties, assets or rights, nor has there
been any waiver or cancellation of any right of substantial
value;
(n) any salary or wage increase made or committed
to be made with respect to any officer, director, employee
or agent of the Company or any bonus, incentive or deferred
compensation, profit sharing, retirement, pension, group
insurance, death benefit or other fringe benefit plan, trust
agreement or arrangement or any employment or consulting
agreement granted, entered into, amended or altered;
(o) any termination (whether by discharge,
retirement or otherwise) of any officer, director, employee
or agent of the Company or any notice to so terminate given
to or received by any of the foregoing;
(p) any loan made or increased by the Company,
including any loan to any officer, director, employee or
agent of the Company or to any member of any of their
families;
(q) any capital expenditure, addition or
improvement made or committed to be made by or on behalf of
the Company;
(r) any material failure on the part of the
Company to operate in the ordinary course so as to preserve
its business organization intact, to retain the services of
its employees and to preserve its goodwill and relationships
with customers, suppliers, creditors and others having
business relationships with it;
(s) any write-off as uncollectible of any notes
or accounts receivable, or any portions thereof;
(t) any material failure to maintain the
financial books and records of the Company in the usual,
regular and ordinary manner and in accordance with good
business practice or any change in any accounting principle
or practice of the Company;
(u) any notice received by the Company of
termination of any contract, lease, or other agreement;
(v) any change by the Company in its banking or
safe deposit arrangements;
(w) any institution, settlement, or agreement to
settle, any litigation, action, or proceeding before any
court or governmental body relating to the Company or its
property;
(x) any failure to replenish the Company's
inventories and supplies in a normal and customary manner
consistent with its prior practice and prudent business
practices; nor has there been any purchase commitment in
excess of the normal, ordinary, and usual requirements of
the Company's business; nor has there been any change in the
Company's selling, pricing, advertising, or personnel
practices inconsistent with prior practice and prudent
business practices;
(y) any agreement or commitment by the Company to
do any of the foregoing items set forth in paragraphs 4.9
(c), (f), (g), (h), (i), (j), (k), (l), (m), (n), (p), (q),
(s), (v), (w), or (x).
4.10 Title to Assets and Properties; Condition.
(a) Except as set forth on the Disclosure
Schedule, the Company owns or leases all of its assets and
properties, which are presently being used in or are
reasonably necessary to carry on its businesses and
operations as presently conducted, and such assets,
properties and agreements are all of the assets, properties
and agreements which are used in or are reasonably necessary
to carry on its businesses and operations as presently
conducted. Except as disclosed on the Disclosure Schedule,
all assets and properties leased or owned are located in one
or the other of the Company's three offices as disclosed in
Section 4.8(a) of the Disclosure Schedule.
(b) All leases are listed and described in the
Disclosure Schedule. Except as set forth in the Disclosure
Schedule, each lease or agreement under which the Company is
a lessee of any property, real or personal, owned by a Third
Party is a valid and continuing agreement without any
default of the Company thereunder or, to the best knowledge
of Sellers, of the other party thereto, and this Agreement
and the consummation of the transactions contemplated hereby
will not cause any default under any such lease or
agreement.
(c) The Company owns good, marketable title to
all property and assets (except leased assets) free and
clear of all mortgages, liens, pledges, charges, claims,
security interests, encumbrances or restrictions of any kind
whatsoever (whether accrued, absolute, contingent, or
otherwise), except liens for current property taxes not yet
due and payable.
(d) The Company has not received any notice of
violation of any regulation, ordinance, law, order or other
requirement relating to the property, real or personal, or
business of the Company. Sellers are unaware of any changes
in any such regulation, ordinance, law, order or other
requirement affecting any such property or any condemnation
proceeding, pending or threatened, which might prohibit the
Company from continuing its present use of such property or
from using such property for the purpose for which it was
acquired, or which might curtail or interfere with the
present or proposed use of such property.
(e) Except as set forth in the Disclosure
Schedule, the furniture, fixtures, leasehold improvements,
equipment and other personal property of the Company are in
good operating condition and repair and, to the best
knowledge of Sellers, are capable of doing the work for
which they were designed or purchased.
(f) Except as otherwise disclosed in the
Disclosure Schedule, the fixed assets and equipment of the
Company are sufficient to enable the Company to manufacture
the products presently manufactured by the Company, and no
other items of machinery or equipment are needed in order to
enable the Company to so manufacture said products.
4.11 Accounts Receivable. All receivables of the
Company (including accounts receivable, loans receivable,
and advances) have arisen from and represent arms-length,
bona fide transactions made in the ordinary course of
business. The receivables of the Company are good and
collectible to the extent of ninety percent (90%) of the
amount thereof, except as set forth on the Disclosure
Schedule. All receivables as of the date hereof are listed
and described in the Disclosure Schedule. Ballard will use
reasonable efforts to collect the receivables.
4.12 Licenses, Patents, Trademark, Etc.
(a) The Disclosure Schedule contains a list and
complete description of all permits, franchises, approvals,
authorizations, consents, licenses, identification numbers,
accreditations and registrations ("Licenses"), if any,
issued or granted to, or held by the Company or any
affiliate of the Company, and indicating the person or
entity to which any such License was issued. All such
Licenses are valid and in full force and effect, no
proceedings or actions with respect to the suspension,
cancellation or any other aspect of any of them is pending
or, to the best knowledge of Sellers, threatened, and no
basis exists therefor and the transactions contemplated
hereby will not affect such Licenses.
(b) The Disclosure Schedule also (i) contains a
list and brief description of all domestic and foreign
patents, patent and know-how licenses, trade names,
trademark and service mark registrations, common law
trademarks, copyright registrations, copyrights, and
applications for any of the foregoing ("Intellectual
Properties"), owned or used in the conduct of the business
of the Company, and (ii) specifies the jurisdiction in or by
which such Intellectual Properties have been registered,
filed or issued. All such Intellectual Properties are valid
and enforceable. U.S. Patent No. 4,748,113 (licensed by the
Company) is valid and enforceable. U.S. Patent No.
4,830,010 (licensed by the Company) is valid and
enforceable.
(c) The Company has all Licenses and owns, or
possesses adequate rights to use, all Intellectual
Properties and all inventions, technology, processes,
products, designs, computer programs, know-how, trade
secrets and formulae necessary to conduct its business as
now conducted and there are no actual or, to the best
knowledge of Sellers, threatened claims, assertions or
litigation (nor to the best knowledge of Sellers is there
any basis therefor) relating to the Company's ability to use
the foregoing as now used. The Company is not infringing
upon or otherwise violating the rights of any Third Party
with respect to any of the Company's products. Neither the
Company nor Sellers have received any claim or notice
alleging any such infringement or violation. No proceedings
have been instituted against the Company, nor, to the best
knowledge of Sellers, are any proceedings threatened
alleging any such infringement or violation. Sellers do not
know of any basis for any such proceeding or claim. There
is no infringement, judgment or other adverse judgment or
order against the Company with respect to any of the
foregoing.
(d) The following statements are true and correct
in relation to the Company's CLOtest product, and Marshall
and the other Sellers will be estopped from taking a
contrary position at any time in the future:
(i) On February 7, 1986, Marshall
entered into a Deed of license (the "CLOtest License") with
Delta West Limited, of Cunning Vale, Western Australia
("Delta West"), pursuant to which Marshall granted to Delta
West a license to make use and sell the "Product" (as
defined therein) throughout the world.
(ii) By an agreement made February 14,
1986, Marshall transferred and assigned his rights to
receive royalties payable pursuant to the CLOtest License to
the Trust.
(iii) By a Deed of Assignment made in
1991 among Marshall, Delta West, and Sunfirst Pty Ltd.,
Western Australia ("Sunfirst"), Delta West assigned all of
its right, title, and interest in the CLOtest License to
Sunfirst.
(iv) At some point in time, Sunfirst
changed its name to "Delta West Pty Ltd."
(v) By a Deed of Assignment and
Acknowledgement dated July 10, 1997 among Marshall, Delta
West, and the Company, Delta West assigned all of its right,
title, and interest under the CLOtest License to the
Company, and the Company is now the sole and exclusive
licensee, standing in the shoes of and succeeding to all of
the rights, title, interests, and ownership of Delta West
and Sunfirst under the CLOtest License.
(vi) The CLOtest License is in full
force and effect, and neither the Company nor its
predecessors in interest under the
CLOtest License are in default thereunder in any way. The
transactions contemplated by this Agreement will not trigger
any breach or default under the CLOtest License.
(vii) The "Patents", as defined in the
CLOtest License, now include also U.S. Patent No. 4,748,113,
issued May 31, 1988 (Compositions and Methods for the
Diagnosis of Gastrointestinal Disorders Involving Urease).
(viii) Freemantle Hospital has no right or
interest whatsoever in any of the "Patents," as defined in
the CLOtest License.
(ix) Procter & Gamble Company ("P&G") no
longer has any rights or interest in the "Patents" (as
defined in the CLOtest License). P&G never exercised the
option described in Section 3.2 of that certain June, 1985
Option/License Agreement between Marshall and P&G (the "P&G
Agreement"). To the Company's knowledge, except for U.S.
Patent Nos. 5,601,848 and 5,256,684, P&G never filed a
patent application with respect to either the "Therapeutic
Technology" or the "Diagnostic Technology", as defined in
the P&G Agreement. The license described in Section 3.1 of
the P&G Agreement has expired. To the Company's knowledge,
P&G never granted any sublicenses under Section 3.7 of the
P&G Agreement. All rights and interests under the P&G
Agreement have fully expired, except a possible continuing
non-exclusive license to practice for non-commercial
purposes.
(e) Neither the Company nor Sellers have received
any claim or are aware of any potential claims that any
employee affiliated with the Company has, in respect of his
or her activities to date, violated any of the terms or
conditions of an employment contract with any Third Party,
or disclosed or utilized any trade secrets or proprietary
information or documentation of any Third Party, or
interfered in the employment relationship between any Third
Party and any of its employees. To the knowledge of
Sellers, none of the Company's employees have been hired
from a direct competitor of the Company.
4.13 No Conflict of Interest. Except as disclosed in
the Disclosure Agreement, no present (or, to the best
knowledge of Sellers, former) officer or director, and no
shareholder, subsidiary, affiliate or related entity
thereof, has or claims to have (a) any interest in the
property, real or personal, tangible or intangible,
including without limitation, Intellectual Properties,
Licenses, inventions, technology, processes, designs,
computer programs, knowhow and formulae used in or
pertaining to the business of the Company, or (b) any
contract, commitment, arrangement or understanding regarding
any of the foregoing. No present officer or director of the
Company, and no shareholder, subsidiary, affiliate or
related entity thereof, has any ownership or stock interest
in any other enterprise, firm, corporation, trust or any
other entity which is engaged in any line or lines of
business which are the same as, or similar to, or
competitive with, the line or lines of business of the
Company. For purposes of this representation, ownership of
not more than five percent of the voting stock of any
publicly held corporation whose stock is listed on any
recognized securities exchange or traded over the counter
shall be disregarded.
4.14 Human Resources.
(a) The Disclosure Schedule contains a list of
(i) all written employment agreements, commission plans,
bonus plans and all material unwritten employment agreements
with any employee or agent of the Company, and the total
compensation (separately stating salary and bonus or other
compensation) payable to each of them, including the fringe
benefits (other than those made available to employees
generally) provided to each of them, (ii) all officers and
directors of the Company and the total compensation
(separately stating salary and bonus) paid to each of them
in 1997 and payable to each of them in 1998, including the
fringe benefits (other than those made available to
employees generally) provided to each of them, (iii) a list
of each present and former employee of the Company paid in
excess of $30,000 during the year ended December 31, 1997;
and any employee of the Company paid in excess of $30,000
on an annualized basis after December 31, 1997, and the job
description or title and the total compensation of each such
employee, and (iv) all employee handbooks, brochures or
booklets setting forth the employment policies or practices
of the Company.
(b) The Company is not in default with respect to
its payment or benefit obligations to its employees.
(c) There are no employment or other compensation
agreements with any director, officer or employee of the
Company that entitles any of them to terminate his or her
relationship with the Company upon the acquisition by any
person of control of the Company.
(d) A listing of departments of the Company,
including employee job classifications, numbers of employees
and compensation ranges is referenced in the Disclosure
Schedule.
(e) The Company has no contract or collective
bargaining agreement with any union. The Company is not
aware of any movement by Company employees to join any
union.
(f) There is no employee of the Company who
cannot be dismissed upon receiving reasonable notice of
termination.
(g) The Company has withheld from payments to
employees all Taxes and other deductions required to be
withheld under federal, state, and local law, and has timely
paid and remitted such amounts (together with required
employer contributions in respect thereof) to the
appropriate authorities.
4.15 Employee Benefit Plans.
(a) For purposes of this Section 4.15, the term
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the terms "employee welfare benefit
plan" and "employee pension benefit plan" have the meanings
set forth in ERISA Section 3(1) and 3(2), respectively.
(b) With respect to each employee welfare benefit
plan and employee pension benefit plan which is maintained
by the Company or in which at least one employee of the
Company: (i) each such plan is listed on the Disclosure
Schedule, along with a description of the assets of such
plan; (ii) a true and correct copy of each such plan, and
any trust, investment manager contract or insurance policy
used in conjunction with such plan or to provide benefits
thereunder, and summary plan description is attached to the
Disclosure Agreement; (iii) neither the Company nor any
representative or agent of the Company has misrepresented
any provision of any such plan to its employees or to any
other persons; (iv) each such plan is and has at all times
been maintained and operated in material compliance with the
requirements of applicable laws and regulations, including
but not limited to the requirements relating to reporting,
disclosure and fiduciary duties; and (v) no litigation or
asserted claims exist against the Company with respect to
any such plan or any fiduciaries of any such plan (excluding
only claims for plan benefits made in the normal course and
operation of such plan), and the Company does not have any
knowledge of or reason to believe that any such litigation
or claims are probable of assertion in the future.
(c) No employee of the Company participates in,
and the Company does not participate in or contribute to, a
multiemployer plan (as defined in Section 3(37) of ERISA").
The Company has never maintained or participated in any
employee pension benefit plan which is or was subject to
Title IV of ERISA.
(d) The Company is not a member of a controlled
group of corporations (as defined in Section 414(b) of the
IRC) or under common control (as defined in Section 414(c)
of the IRC) with any other trade or business (whether or not
incorporated).
4.16 Tax Matters.
(a) The Company has timely filed all Tax returns,
reports and forms concerning Taxes that are required to be
filed by the Company. The Company has made timely payment
of all Taxes as due per said returns when due and payable,
including all interest, penalties, deficiencies and
assessments, if any, heretofore levied or assessed against
it, and where payment is not required to be made before the
Closing Date, the Company has, except as set forth in the
Disclosure Schedule, set up an adequate reserve or accrual
for the payment of all Taxes required to be paid in respect
of all periods on or prior to the Closing Date. There are
no agreements for extension of the time of assessment or
payment of any Taxes of the Company. No waiver of any
statute of limitations has been executed by or on behalf of
the Company.
(b) Except as set forth in the Disclosure
Schedule, there are no examinations by the IRS ("IRS") of or
relating to the Company presently in process, or, to
Sellers' best knowledge, threatened against the Company.
Neither the IRS nor any other taxing authority is now
asserting or, to the best knowledge of Sellers, threatening
to assert, any deficiency or assessment for additional
Taxes, including any interest, penalties or fines, against
the Company. Sellers retain liability for any and all
additional Taxes (including interest, fines, and penalties)
which may result from an adjustment to income tax returns of
the Company for any period prior to Closing.
(c) Except as set forth in the Disclosure
Schedule, state, local and foreign income tax returns of the
Company have never been audited by the appropriate Tax
authorities for the jurisdictions indicated on the
Disclosure Schedule.
(d) Since December 31, 1997, the Company has not
incurred any liability for Taxes other than in the ordinary
course of business and the Company has not incurred any
liability for Taxes which, in the aggregate, would result in
a material decrease in the net worth of the Company.
(e) There has not been any consent or election
made under Section 341(f) of the IRC by or on behalf of the
Company.
(f) The Company is, and has been since its
formation, a corporation qualified for treatment under, and
in full compliance with the requirements of, Subchapter S of
the IRC.
4.17 Legal Proceedings. Except as set forth on the
Disclosure Schedule, there is no action, dispute, claim
(including any counterclaim or cross claim), litigation,
arbitration, grievance, investigation, hearing or other
proceeding, at law or in equity, pending or to the best of
Sellers' knowledge threatened, against or affecting the
Company or its businesses, properties or personnel or the
transactions contemplated by this Agreement and Sellers do
not know or have reasonable grounds to know of the basis for
any such action. The Company is not subject to or in
default under any judicial, governmental or administrative
judgment, decree, order, writ or injunction.
4.18 Contracts, Agreements, Etc.
(a) Except as set forth and briefly described in
the Disclosure Schedule, the Company is not a party to, or
bound by, any material contract, agreement, understanding,
commitment or engagement (written or oral). Except for
purchase and sales orders entered into in the ordinary
course of business, the Disclosure Schedule lists and
describes any and all contracts, agreements, commitments and
engagements material to the Company (the "Contracts"),
including without limitation all (i) supply and service
contracts to which the Company is a party as vendor or
vendee, (ii) contracts for the purchase or lease of capital
equipment, (iii) consulting contracts and agreements, (iv)
union contracts, (v) employee health and welfare, pension,
bonus, life, hospitalization or other insurance, medical,
deferred or incentive compensation, profit sharing, loan and
other employee benefit plans or arrangements, (vi) contracts
or agreements regarding credit or borrowed money, (vii)
guaranties, (viii) letters of credit, (ix) surety and
indemnification agreements, (x) confidentiality agreements,
(xi) covenants not to compete, (xii) leases of real
property, as lessor or lessee, (xiii) leases of personal
property, as lessor or lessee, (xiv) all contracts and
agreements regarding Licenses and Intellectual Properties,
(xv) all agreements or commitments regarding debts and
equity securities of the Company and any interest therein,
(xvi) all contracts and agreements regarding the
distribution or payment of profits or dividends, (xvii) all
contracts and agreements regarding the allocation or sharing
of Taxes or otherwise with respect to Taxes, (xviii) all
agreements regarding financial, management or advisory
services to be rendered by or for the Company, (xix) all
contracts regarding product distribution, (xx) all contracts
and agreements involving more than $10,000, and (xxi) any
contract or agreement not entered into in the ordinary
course of business.
(b) All such Contracts are valid and binding and
in full force and effect as of the date hereof, and no
breach or default (or event or condition, which after notice
or lapse of time, or both would constitute a breach or
default) by the Company or, to the best of Sellers'
knowledge, any other party thereto exists with respect
thereto, and this Agreement and the transactions
contemplated hereby will not cause any breach or default
thereof.
(c) The March 29, 1994 Agreement between the
Company and G.I. Medical Technologies, Inc. has been
terminated (by mutual agreement) in its entirety. The
Company has no remaining obligations or liabilities to G.I.
Medical under said contract nor under any other contract.
(d) The Proposal/letter agreement dated November
6, 1991 between the Company and Ram Murty has been
terminated (by mutual agreement) in its entirety. The
Company has no remaining obligations or liabilities
whatsoever to Mr. Murty.
(e) The Supply Agreement, dated effective July 2,
1997, between Delta West Pty. Limited and the Company, has
been fully performed by the Company and is now expired. The
Company has no remaining obligations or liabilities to Delta
West under said Supply Agreement.
(f) The Company has no existing contracts with
the University of Virginia (the "University") or the Rectors
and Visitors of the University. Prior Research Funding
Agreements with the University have all expired. The
University owns no right, title, or interest whatsoever in
any of the Assets, products, or product lines of the
Company.
4.19 Compliance with Laws, Etc. Except as disclosed in
the Disclosure Schedule, to the knowledge of Sellers, the
Company is not in violation of and is not under
investigation with respect to, and the Company has not been
charged with or given any notice of any violation of, any
applicable law, statute, order, rule, regulation, policy,
guideline or judgment of any federal, state, local or
foreign court or governmental or administrative body or
agency relating to the Company, its business, operations,
agreements or policies, or its manufacturing, possession,
shipping, and mailing of radioactive materials.
4.20 Insurance. The Disclosure Schedule sets forth a
correct and complete list and brief description (including
policy number, nature of coverage, limits, deductibles,
premiums, carriers and effective and termination dates) of
all policies of insurance in effect with respect to the
Company. The Disclosure Schedule also sets forth a list of
all claims for any insured loss in excess of $5,000 per
occurrence during the three-year period prior to the Closing
Date relating to the Company, including but not limited to
workers' compensation, automobile and general and product
liability claims. All such policies are in full force and
effect. The Company has not been denied any insurance or
indemnity bond and no insurance carrier has cancelled or
reduced any insurance coverage of the Company. The Company
has not received any notice from any insurer or agent of any
intent to cancel or reduce any insurance coverage or that
any substantial improvement or other expenditure with
respect to any insured property is necessary in order to
continue such insurance.
4.21 Fees or Commissions. The Company, (including its
officers, directors and employees), has not employed any
broker, agent or finder or incurred any liability for any
brokerage fees, agent's commissions or finder's fees or
other similar obligations in connection with the
transactions contemplated hereby.
4.22 Illegal Payments. Neither the Company nor, to the
best knowledge of Sellers, any officer, director, employee
or agent of the Company, or any other person or entity on
behalf of the Company, has made or authorized any payment of
funds of, or relating to, the Company which is prohibited by
law, and no funds of the Company have been set aside to be
used for any payment prohibited by law.
4.23 Powers of Attorney. Except as set forth on the
Disclosure Schedule, neither the Company nor Sellers have
granted any powers of attorney to any entity or person.
4.24 Bank Accounts. A correct and complete list of all
bank accounts, the balances thereof as of the Closing Date,
the persons authorized to access such accounts and to incur
indebtedness on behalf of the Company and a correct and
complete list of all safe deposit boxes of the Company is
set forth on the Disclosure Schedule.
4.25 Environmental Compliance. The Company is in
compliance with all federal, state and local laws and
regulations regarding the storage or release of toxic,
radioactive, or hazardous materials or other pollutants or
contaminants (together "Hazardous Substances") into the
atmosphere or the generation, storage or treatment of
Hazardous Substances, and there are no Hazardous Substances
in the buildings or soil on, or in the ground water under,
any properties which are owned or leased by the Company
which could result in an obligation of the Company to remedy
the condition. There is no other liability of the Company
under any federal, state or local law or regulation relating
to the environment.
4.26 Marketing and Sales.
(a) A complete and accurate list of the customers
of the Company for the calendar year 1997 is included in the
Disclosure Schedule.
(b) The Disclosure Schedule lists (names,
addresses, and telephone numbers) all of the distributors
(U.S. and foreign) and independent representatives for the
Company's products.
4.27 Disclosure. No representation or warranty made by
Sellers in this Agreement and neither the Disclosure
Schedule nor any schedule, exhibit or certificate furnished
or to be furnished by Sellers pursuant hereto and no other
document furnished to Ballard by Sellers as listed in the
Disclosure Schedule contains or will contain any untrue
statement of a material fact or omits or will omit any
material fact necessary in order to make the statements
contained therein not misleading.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BALLARD
As a material inducement to Sellers' willingness to
enter into and perform this Agreement, Ballard represents
and warrants to Sellers as follows:
5.1 Organization. Ballard is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Utah, with all requisite power and
authority to own, lease and operate its properties and to
carry on its business as it is now being conducted and is
duly licensed, authorized and qualified to do business and
in good standing in Utah.
5.2 Authority. The execution, delivery and
performance of this Agreement have been duly authorized by
the Board of Directors of Ballard. No other corporate
proceedings on the part of Ballard are necessary to
authorize this Agreement or the consummation of the
transactions contemplated hereby. This Agreement is a valid
and binding obligation of Ballard enforceable in accordance
with its terms, except as may be affected by bankruptcy,
insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally or by
equitable principles. Neither the execution and delivery of
this Agreement nor the consummation of the transactions
contemplated hereby will (a) violate, or conflict with, or
require any consent under, or result in a breach of any
provisions of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or
accelerate the performance required by, or result in the
creation of any lien, security interest, charge or
encumbrance upon any of the properties of Ballard, under any
of the terms, conditions or provisions of the Articles of
Incorporation or Bylaws of Ballard or of any note, bond,
mortgage, indenture, deed of trust, license, agreement or
other instrument or obligation to which Ballard is a party,
or by which Ballard or any of its properties may be bound or
affected, or (b) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Ballard or
any of its properties. No consent or approval by, notice to
or registration with any governmental or administrative
authority is required on the part of Ballard in connection
with the execution and delivery by Ballard of this Agreement
or the performance by Ballard of any of the transactions
contemplated hereby.
5.3 Reporting Company. Ballard is a reporting
company, whose common stock is properly listed on the NYSE.
5.4 Fees or Commissions. Ballard (including its
officers, directors and employees) has not employed any
broker, agent or finder or incurred any liability for any
brokerage fees, agent's commissions or finder's fee or
similar obligation in connection with the transactions
contemplated hereby.
5.5 Disclosure. No representation or warranty made by
Ballard in this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit
any material fact necessary in order to make the statements
contained therein not misleading.
ARTICLE VI.
COVENANTS
6.1 Tax Returns for 1997 and Short-Year 1998. Any
income tax returns (U.S., state, and city) required to be
filed by the Company for 1997 and the short and final
taxable year ending on the Closing Date shall be prepared
and filed by Sellers at Sellers' expense, and Sellers hereby
agree that any and all such returns will be filed at the
appropriate times. Before filing such returns, Sellers will
permit Ballard's tax accountant to review the same and make
suggestions with respect to them.
6.2 Publicity. Before Closing, no public announcement
of this Agreement or the transactions contemplated hereby
will be made without the prior consent of all parties hereto
as to both timing and content, except that Ballard without
the parties' consents may make such announcements and
disclosures as it believes is advisable pursuant to
securities and other laws.
6.3 Release of Company.
(a) Each Seller:
(i) Acknowledges and agrees that any
and all loans, fees, royalties, and other sums accrued prior
to the effective date hereof and owed to him by the Company,
and its respective officers, directors, shareholders,
agents, and employees (the "Tri-Med Parties") have been paid
in full; and
(ii) Forever releases Ballard and the
Tri-Med Parties and each of them from any liability, claim,
and loss whatsoever arising from any facts or events which
occurred prior to or contemporaneously with the date hereof
or arising from the transactions contemplated in this
Agreement (except liability arising from a material breach
of this Agreement by Ballard).
(b) Dye hereby acknowledges and agrees that his
royalty agreement with the Company is cancelled in its
entirety as of the Closing Date, and no further royalties
are or will be owed to him by any of the Tri-Med Parties.
6.4 Covenant Not to Compete.
(a) Provided the Closing occurs hereunder, for
the period ending on the third anniversary of the Closing
Date or for whatever time within that period is found by a
court of competent jurisdiction to be reasonably necessary
for the protection of Ballard, none of Sellers nor any of
their affiliates will directly or indirectly, own, manage,
operate, join, control, consult in or participate in the
ownership, management, operation or control of or become an
employee of: any business which manufactures, produces,
sells or distributes products which compete (directly or
indirectly) with products now manufactured, assembled,
produced, sold, or distributed by the Company; provided,
however, that nothing contained herein shall prohibit any
Seller from owning less than 5% of any class of securities
listed on a national securities exchange or traded publicly
in the over-the-counter market.
This restriction will apply throughout the continental
United States and in all foreign countries or whatever
geographical scope within that area described above found by
a court of competent jurisdiction to be reasonably necessary
for the protection of Ballard or any of its assignees.
(b) Sellers hereby agree (i) that the
restrictions set forth in the paragraph immediately above
are founded on valuable consideration and are reasonable in
duration and geographic extent in view of the circumstances
in which this Agreement is executed and are necessary to
protect the legitimate interests of Ballard, and (ii) that
the remedy at law for any breach of the foregoing covenant
will be inadequate and that Ballard will be entitled to
injunctive relief in the event of any such breach. Nothing
herein stated shall be construed as prohibiting Ballard from
pursuing any other remedies available to it for any such
breach or threatened breach or for any other breach of this
Agreement.
6.5 Transfer Restrictions. Each of Sellers covenants
and agrees that he will not sell, transfer, or otherwise
dispose of his Ballard Shares received under this Agreement
until financial results covering at least 30 days of
combined operations (after the Closing Date) of Ballard and
the Company have been published. Ballard estimates that
this publication will occur in its Form 10-Q to be filed on
or about May 15, 1998.
6.6 Post-Closing Assistance/Transition. Subsequent to
the Closing, Sellers will provide assistance to Ballard and
the Company, to train Ballard personnel in the business and
operations of the Company and to effect a smooth transition
of the business from the control of Sellers to the control
of Ballard.
6.7 Section 338 Election. Ballard reserves the right
to make an election under Section 338 of the Internal
Revenue Code with respect to the Company.
6.8 Indemnity. If any of the items disclosed in
Section 4.17 of the Disclosure Schedule results in a claim,
action, or lawsuit being commenced against the Company,
Sellers will indemnify and defend the Company and Ballard in
accordance with the provisions of Section 10.2 herein.
6.9 Receivables. After a particular Receivable is
more than 90 days old, Sellers will have the option of
demanding an assignment of that Receivable (a "Request") so
that Sellers may attempt themselves to collect the
Receivable. Such Request must include: (a) If the Escrow
is still in place, Sellers' written authorization to Escrow
Agent to disburse to Ballard from the Escrow a number of
Ballard Shares having a Determined Market Value as of the
date of such authorization equal to the balance of said
Receivable; or (b) If the Escrow is no longer in place,
payment by Sellers to Ballard of the balance of said
Receivable. After a particular Receivable is more than 150
days old, Sellers will pay the balance of said Receivable
upon written demand therefor from Ballard, and upon such
payment Ballard will assign said Receivable to Sellers. The
foregoing provision is subject to the provisions of Article
X below and the 90% provision of Section 4.11 above.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
7.1 Nature and Survival of Representations. All
representations and warranties of Sellers or Ballard made in
this Agreement (including the Disclosure Schedule) shall
survive the Closing Date and any investigation at any time
made by or on behalf of any party hereto for a period of
three (3) years following the Closing Date.
7.2 No Merger. The covenants, terms and provisions of
this Agreement shall survive the Closing and shall not be
merged into the Closing documents.
ARTICLE VIII
BALLARD SHARES
8.1 Subscription Provisions. Each Seller hereby
subscribes to purchase of the number of Ballard Shares set
forth adjacent to his name in Schedule 1 hereto, according
to the purchase and exchange terms set forth herein. Each
Seller acknowledges and understands that the Ballard Shares
are to be issued and sold at Closing without registration
under the Securities Act of 1933, as amended (the
"Securities Act") or under any state securities laws, in
reliance upon exemptions available for nonpublic offerings,
and in certain of the states in reliance upon an exemption
available for the issuance of stock listed on the NYSE.
Each Seller acknowledges and understands that the
availability of exemption(s) from registration under the
Securities Act and under certain state securities laws,
depends in part upon the accuracy of certain representations
which such Seller makes, as follows:
(a) Sellers are all residents and domiciliaries,
not temporary or transient residents, of the respective
states and countries indicated in Schedule 1;
(b) Sellers are acquiring the Ballard Shares for
investment and not with a view to the public resale or
distribution thereof, absent a registration of the Ballard
Shares by Ballard, as provided herein;
(c) Sellers acknowledge that the certificates
evidencing the Ballard Shares, and any and all replacements
thereof, shall, pending registration of the Ballard Shares
by Ballard, bear and be subject to legends in substantially
the following form affecting the transferability of the
Ballard Shares and that Ballard will place appropriate stop
transfer orders with its transfer agent and registrar:
"The shares of common stock evidenced by this
certificate have not been registered under the
Securities Act of 1933, as amended, nor have they
been registered with any state securities
commission. They have been issued in reliance
upon an exemption from the requirements for such
registration for non-public offerings.
Accordingly, the sale, transfer, pledge,
hypothecation or other disposition of the shares
evidenced hereby or any portion thereof or
interest therein may not be accomplished in the
absence of an effective registration statement
under that act, or an opinion of counsel
satisfactory in form and substance to the Company
to the effect that such a registration is not
required."
(d) Sellers understand and agree that if any
Seller desires to make any transfer of the Ballard Shares or
any portion thereof or interest therein, and Ballard is in a
position to impede such transfer through prior stop orders
placed with its transfer agent or otherwise, Ballard will
remove such impediments placed by it only when:
(i) The Seller desiring to sell has
furnished Ballard with a satisfactory opinion of its counsel
to the effect that the proposed transfer does not require
registration or qualification pursuant to the Securities
Act, or applicable state law, by reason of an exemption
provided thereunder and a representation and agreement of
the proposed transferee in form and substance satisfactory
to Ballard, and Ballard shall have advised Seller that such
opinion, representation and agreement are satisfactory to
Ballard and Ballard's counsel; or
(ii) Such Seller has furnished Ballard a
satisfactory opinion of counsel to the effect that the
proposed transfer complies with the provisions of Rule 144
and Ballard shall have advised Seller that such counsel and
such opinion are satisfactory to Ballard and Ballard's
counsel; or
(iii) A registration statement covering
the proposed transfer has been filed with the SEC and has
been declared effective.
(e) Each Seller covenants and agrees that he will
not attempt to dispose of the Ballard Shares or any portion
thereof or interest therein, unless and until Ballard has
determined to its satisfaction that the proposed disposition
does not violate the registration or qualification
requirements of the Securities Act or applicable state law;
(f) Each Seller has not relied on any
representations other than those set forth in this
Agreement; and
(g) Each Seller understands and acknowledges that
whether or not the disposition of his shares in the Company
hereunder will constitute a tax-free reorganization or tax-
deferred transaction will depend, in part, upon how long
Sellers retain their Ballard Shares received hereunder.
Ballard makes no representation or warranty whatsoever as to
the tax treatment of the transactions herein.
ARTICLE IX
REGISTRATION OF BALLARD SHARES
9.1 Registration. Ballard shall use its best efforts
to effect registration under the Securities Act of 1933, as
amended (the "Securities Act"), of the Ballard Shares, in a
reasonable and timely manner. In connection therewith,
Ballard shall:
(a) File with the SEC within six months after the
effective date hereof a registration statement (the
"Registration Statement") with respect to the Ballard Shares
and use its best efforts to cause that Registration
Statement to become and remain effective. Ballard presently
intends to effect registration by means of a Form S-3
Registration Statement, to be filed in behalf of Sellers.
(b) Thereafter, timely prepare and file with the
SEC any amendments and supplements to the Registration
Statement and the prospectus included in the Registration
Statement as may be necessary to keep the Registration
Statement effective for a period until at least December 31,
1999;
(c) Notify (in writing, if so requested) Sellers
(i) when the Registration Statement, the prospectus or any
prospectus supplement of post-effective amendment has been
filed, and with respect to the Registration Statement or any
post-effective amendment, when the same has become
effective, (ii) of any material comments by the SEC with
respect thereto or any request by the Commission for
amendments or supplements to the Registration Statement or
the prospectus or for additional information, (iii) of the
issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, or (iv) of
the receipt by Ballard of any notification with respect to
the suspension of the qualification of the Ballard Shares
for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
(d) Make best efforts to obtain the withdrawal of
any order suspending the effectiveness of a Registration
Statement hereunder or any post-effective amendment thereto
at the earliest practicable date.
(e) Furnish to each Seller such reasonable
numbers of copies of the prospectus, in conformity with the
requirements of the Securities Act, and such other documents
as Sellers may reasonably request in order to facilitate the
public sale or other disposition of the Ballard Shares owned
by Sellers; and furnish to each Seller, if any, such number
of copies of the Registration Statement, each amendment and
supplement thereto (in each case including all exhibits
thereto), the prospectus included in the Registration
Statement (including each preliminary prospectus and any
summary prospectus), in conformity with the requirements of
the Securities Act, and such other documents as such Seller
may reasonably request in order to facilitate the disposi-
tion of the Ballard Shares.
(f) Use its best efforts to register or qualify
the Ballard Shares covered by the Registration Statement
under an exemption under the securities or "Blue Sky" laws
of the states of Virginia and Kansas.
9.2 Revised Prospectuses. If Ballard has delivered
preliminary or final prospectuses to Sellers and after
having done so the prospectus is amended to comply with the
requirements of the Securities Act, Ballard shall promptly
notify Sellers and, if requested by Ballard, Sellers shall
immediately cease making offers of Ballard Shares and return
all prospectuses to Ballard. Ballard shall promptly provide
Sellers with revised prospectuses and, following receipt of
the revised prospectuses, Sellers shall be free to resume
making offers of the Ballard Shares.
9.3 Allocation of Expenses. Ballard will pay all
expenses of registration of the Ballard Shares under this
Agreement.
ARTICLE X
BREACH BY SELLERS
10.1 Escrow. Subject to the provisions of Section 10.3
and 10.4 below the Escrow Agreement is being entered into
between the parties and said escrow is being formed for the
purpose of securing Sellers' joint and several liability for
any breach of representations, warranties, and covenants
made by Sellers under this Agreement.
10.2 Remedy.
(a) In the event of a breach by one or more
Sellers of any covenant, warranty, or representation made
herein, the amount of which claim (or the aggregate amount
of which claim when added to previous claims), if damages
are asserted, exceeds the threshold amount set forth in
Section 10.3(c) below, Ballard shall give Sellers a written
notice of default or breach, whereupon Sellers shall have a
period of thirty (30) days to cure said default or breach,
or, if the breach is of such a nature that it cannot
reasonably be cured within said 30-day period, then Sellers
shall have a reasonable, extended period of time in which to
cure such default or breach so long as Sellers are
diligently proceeding with such cure. If Sellers fail to
cure said default or breach within said thirty (30)-day or,
if applicable, the extended period, Ballard must
nevertheless first exhaust its rights under the Escrow
Agreement before making any demand on Sellers for
reimbursement of the loss or damage alleged to have been
suffered as a result of such breach.
(b) Notwithstanding the foregoing, in the event
that such claimed breach or default is the result of a claim
or action being asserted against Ballard by a Third Party,
Ballard shall notify Sellers with reasonable promptness
after such claim or action arises and is known to Ballard,
and shall give Sellers a reasonable opportunity: (i) to
conduct any proceedings or negotiations in connection
therewith and necessary or appropriate to defend Ballard;
(ii) to take all other required steps or proceedings to
settle or defend any such claim or action; and (iii) to
employ counsel to contest any such claim or action in the
name of Ballard or otherwise. The reasonable expenses of
all proceedings, contests or lawsuits with respect to such
claims or actions shall be borne by Sellers. If Sellers
desire to assume the defense of any such claim or action,
they shall give written notice to Ballard within ten (10)
business days after notice from Ballard of such claim or
action and Sellers shall thereafter assume the defense of
any such claim or action through counsel reasonably
satisfactory to Ballard; provided that Ballard may
participate in such defense at its own expense and shall, in
any event, have the right to control the defense of the
claim or action. In addition, Ballard and the Company will
cooperate with Sellers by making the records and personnel
of the Company available to Sellers, at the Company's
expense, as may be reasonably necessary in connection with
the defense of any such claim or action.
(c) If Sellers shall not assume the defense of,
or if after so assuming they shall fail to diligently
defend, any such claim or action, Ballard may defend against
any such claim or action in such manner as it may deem
appropriate and Ballard may settle such claim or action on
such terms as it may deem appropriate, and Sellers shall
promptly reimburse Ballard for the amount of all reasonable
expenses, legal and otherwise, incurred by Ballard in
connection with the defense against and settlement of such
claim or action. If no settlement of such claim or action
is made, Sellers shall satisfy any judgment rendered with
respect to such claim or in such action, before Ballard is
required to do so, and shall pay all reasonable expenses,
legal or otherwise, incurred by Ballard in defense against
such claim or litigation.
10.3 Limitations. Notwithstanding any other provision
herein to the contrary:
(a) Any legal action to be brought by either
party hereto (Ballard or Sellers) founded upon an alleged
breach of any representation, warranty, or covenant herein
must be commenced within three (3) years from the date
hereof, notwithstanding any statutory limitations period to
the contrary.
(b) The aggregate liability of Sellers to Ballard
and Ballard to Sellers hereunder for losses or damages shall
not exceed the lesser of (i) $26,000,000; or (ii) an amount
equal to the product of the number of Ballard Shares issued
under Section 2.1(a) above multiplied by the closing price
of Ballard Common Stock (as reported in the Wall Street
Journal) as of the date Ballard gave its most recent notice
of default under Section 10.2 above; or
(c) No party shall be entitled to seek
reimbursement for losses or damages from the other party
unless, until and to the extent that the aggregate amount of
such losses and damages (including attorneys fees and costs)
exceeds $50,000.
(d) Any liability by any Seller to Ballard
hereunder may be paid and satisfied, at the option of the
applicable Seller, in whole or in part, in Ballard Shares to
be returned to Ballard valued using Determined Market Value
(as of the date said Ballard Shares are delivered).
10.4 Liability. To the extent of the Ballard Shares
being held in Escrow while they are still in Escrow,
Sellers' liability for losses and damages under Section 10.2
shall be joint and several. To the extent of such losses
and damages in excess of the Ballard Shares in Escrow,
Sellers' liability shall be several.
ARTICLE XI
MISCELLANEOUS
11.1 Amendment or Supplement. This Agreement may be
amended or supplemented at any time by mutual agreement of
Ballard and Sellers. Any amendment or supplement must be in
writing.
11.2 Expenses. Ballard shall bear and pay all costs
and expenses incurred by it and the Company shall bear and
pay all costs and expenses incurred by it and by Sellers
prior to the Closing Date in connection with the trans-
actions contemplated in this Agreement, including fees and
expenses of its and their own brokers, financial
consultants, accountants and counsel.
11.3 Entire Agreement. This Agreement (including all
exhibits hereto and together with all instruments being
delivered at Closing) contains the entire agreement among
the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral, other
than documents referred to herein. The terms and conditions
of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective
successors. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than
the parties hereto and their respective successors, any
rights, remedies, obligations or liabilities.
11.4 Assignment. None of the parties hereto may
assign any of its rights or obligations under this Agreement
to any other person, except that Ballard can assign all its
rights and obligations hereunder to any of its subsidiaries
without any other party's consent, but such assignment by
Ballard will not relieve it of its obligations for the
ultimate performance thereof.
11.5 Notices. All notices and other communications
which are required or permitted hereunder shall be in
writing and sufficient if delivered personally or sent by
overnight express courier or by registered or certified
mail, postage prepaid, addressed as follows:
If to the Company Ballard Medical Products
or Ballard: 12050 Lone Peak Parkway
Draper, UT 84020
Attention: Paul W. Hess,
General Counsel
If to Sellers: C. Phillip Pattison
470 Navajo West
Lake Quivira, KS 66106
Kevin R. Dye
8135 Vista Forest Drive
Roanoke, VA 24018
Barry J. Marshall
40 Beatrice Road
Dalkeith 6009, Western Australia
William A. Fry
26700 West 73rd Street
Shawnee, KS 66227
11.6 Captions. The captions contained in this
Agreement are for reference purposes only and are not part
of this Agreement.
11.7 Counterparts/Facsimile Signatures. This
Agreement may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall
constitute but one agreement. Facsimile signatures shall
constitute original signatures.
11.8 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Utah applicable to agreements made and entirely to be
performed within such jurisdiction except to the extent
federal law may be applicable. Any action under this
Agreement or the Escrow Agreement delivered in connection
with this Agreement may be filed and maintained only as
follows:
(a) If filed by any Seller, only in state or
federal courts located within Salt Lake County, State of
Utah, and all parties hereby submit to the jurisdiction of
such courts; or
(b) If filed by Ballard or the Company, only in
state or federal courts located within Johnson County, State
of Kansas, and all parties hereby submit themselves to the
jurisdiction of such courts.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
BALLARD MEDICAL PRODUCTS
Date: 2/25/98 By: Harold R. ("Butch") Wolcott
Title: Executive Vice President
TRI-MED SPECIALTIES, INC.
Date: 2/25/98 By: C. Phillip Pattison
Title: Vice President
SELLERS:
Date: 2/25/98 C. Phillip Pattison
Date: 2/25/98 Kevin R. Dye
Date: 2/25/98 Barry J. Marshall
Date: 2/25/98 William A. Fry
SCHEDULE 1
(Attached to and forming part of the Exchange Agreement)
Schedule of Sellers' Interests
Number of Ballard Shares
Number
Name and Address of to
of Seller Company Escrow to
Shares % Agent Sellers Total
C. Phillip 3,000 30 16,015 304,304 30%
Pattison
470 Navajo West
Lake Quivira, KS
66106
Kevin R. Dye 3,000 30 16,015 304,304 30%
8135 Vista
Forest Drive
Roanoke, VA
24018
Barry J. 1,000 10 5,341 101,435 10%
Marshall
40 Beatrice Road
Dalkeith 6009
Western
Australia
William A. Fry 3,000 30 16,015 304,304 30%
26700 West 73rd
Street
Shawnee, KS
66227
Total 10,000 100 53,386 1,014,347 100%
[Schedule 2. Disclosure Schedule is omitted in this filing.]
ESCROW AGREEMENT
RELATED TO SHARES OF BALLARD MEDICAL PRODUCTS
THIS ESCROW AGREEMENT is entered into in triplicate
effective the 25th day of February, 1998, by and among
BALLARD MEDICAL PRODUCTS, a Utah corporation ("Ballard");
ZIONS FIRST NATIONAL BANK ("Escrow Agent"); KEVIN R. DYE
("Dye"), C. PHILLIP PATTISON ("Pattison"); BARRY J. MARSHALL
("Marshall"); and WILLIAM A. FRY ("Fry"). (Dye, Pattison,
Marshall and Fry are referred to herein individually as
"Seller" and collectively as "Sellers").
WITNESSETH:
WHEREAS, simultaneously with the execution hereof,
Ballard and Sellers have entered into an Agreement
Concerning the Exchange of Common Stock of Ballard Medical
Products for All Outstanding Stock of Tri-Med Specialties,
Inc. (the "Exchange Agreement"), pursuant to which Ballard
has acquired from Sellers all of the outstanding stock of
Tri-Med Specialties, Inc., a Kansas corporation (the
"Company"), in exchange for 1,067,733 shares of the common
stock, par value $.10 per share, of Ballard (the "Ballard
Shares");
WHEREAS, in the Exchange Agreement, Sellers have made
numerous representations, warranties, and covenants to
Ballard, and the Exchange Agreement provides that certain of
the Ballard Shares are to be held in escrow; and
WHEREAS, the parties hereto desire to transfer and
assign to Escrow Agent 53,386 shares of the Ballard Shares
(the "Escrowed Shares"), to be held and disposed of by
Escrow Agent according to the terms and conditions provided
herein.
NOW, THEREFORE, in consideration of the mutual
covenants, conditions and agreements contained herein, the
parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement,
the terms set forth below shall have the meanings indicated:
(a) "Ballard" shall mean Ballard Medical
Products, a Utah corporation.
(b) "Ballard Common Stock" shall mean fully paid,
nonassessable Ballard common shares, par value $.10 per
share.
(c) "Ballard Shares" shall mean the shares of
Ballard Common Stock being issued to or for the benefit of
Sellers pursuant to the Exchange Agreement.
(d) "Claim" shall mean a written claim of loss or
damages to Ballard or the Company, alleged to arise from a
breach of warranty, representation, or covenant by Sellers
under the Exchange Agreement, and with respect to which
Ballard has given Sellers a notice of breach or default
followed by the requisite 30-day or longer period in which
Sellers failed to cure said default or breach, as provided
in Section 10.2(a) of the Exchange Agreement.
(e) "Claim Notice" shall mean a written notice of
a Claim given by Ballard to Escrow Agent, with a copy
thereof to Sellers.
(f) "Company" shall mean Tri-Med Specialties,
Inc, a Kansas corporation.
(g) "Determined Market Value" shall mean the
average of the closing prices for the Ballard Common Stock
(as reported in the NYSE Net or the Wall Street Journal) for
the fifty consecutive trading days ending on and including
the day preceding a given date. Whenever Determined Market
Value is to be calculated hereunder, Ballard will provide a
draft of the calculation to Escrow Agent for Escrow Agent's
review and confirmation.
(h) "Escrow Agent" shall mean Zions First
National Bank.
(i) "Escrowed Shares" shall mean those of the
Ballard Shares being transferred hereunder to Escrow Agent,
to be held and disposed of by Escrow Agent according to the
terms and conditions provided herein.
(j) "Final Determination" shall mean: (i) a
final order of a court not subject to further right of
appeal, disposing of a Claim and authorizing the
distribution of the Escrowed Shares in some manner; or (ii)
a settlement agreement signed by all of Sellers and Ballard
by which the applicable Claim is withdrawn, superseded, or
otherwise resolved by the parties.
(k) "Sellers" shall mean Kevin R. Dye, C. Phillip
Pattison, Barry J. Marshall, and William A. Fry who are all
of the shareholders of the Company.
(l) "Termination Date" shall mean the first to
occur of the following: (a) the date of issuance of the
first audited financial statements for Ballard and the
Company following the date of this Escrow Agreement; or (b)
that date which is one (1) year following the date of this
Escrow Agreement.
(m) "Unresolved Claim" shall mean a Claim for
which a Claim Notice has been given to Escrow Agent but with
respect to which there has been no Final Determination.
2. Escrowed Shares.
(a) Upon execution of the Exchange Agreement and
this Agreement by all of the parties thereto and hereto,
Ballard shall properly issue and deliver to Escrow Agent the
Escrowed Shares, in one certificate, receipt of which is
hereby acknowledged by Escrow Agent. The certificate bears
the following restrictive legend:
"The shares of common stock evidenced by this
certificate have not been registered under
the Securities Act of 1933, as amended, nor
have they been registered with any state
securities commission. They have been issued
in reliance upon an exemption from the
requirements for such registration for non-
public offerings. Accordingly, the sale,
transfer, pledge, hypothecation or other
disposition of the shares evidenced hereby or
any portion thereof or interest therein may
not be accomplished in the absence of an
effective registration statement under that
act, or an opinion of counsel satisfactory in
form and substance to the Company to the
effect that such a registration is not
required."
Notwithstanding the foregoing, the parties all
acknowledge and agree that any transfer of the Escrowed
Shares under the provisions of this Agreement shall not
require an opinion of counsel or the filing of a
registration statement.
(b) Beneficial ownership and voting rights in the
Escrowed Shares, during the time that the Escrowed Shares
are held hereunder by Escrow Agent, are allocated among
Sellers in proportion to their relative interests set forth
in Exhibit A, attached to and made a part of this Agreement
by reference.
3. Disposition of Escrowed Shares.
(a) At any time prior to the Termination Date,
Ballard may give notice of a Claim to Escrow Agent (the
"Claim Notice"), with a copy thereof to Sellers. The Claim
Notice shall set forth:
(i) the dollar amount of the Claim;
(ii) a description of the alleged breach of
covenant, warranty, or representation under the Exchange
Agreement; and
(iii) a statement to the effect that Ballard
properly gave the written notice of default, followed by the
requisite 30-day or longer period in which Sellers failed to
cure said default or breach, as provided in Section 10.2(a)
of the Exchange Agreement.
(b) If Escrow Agent receives, within sixty (60)
days following the date the Claim Notice is given under
paragraph (a) above, a copy of a complaint and summons which
have been filed in a federal or state court located in Salt
Lake County, Utah, together with proof that said summons and
complaint have been served on Ballard, which complaint seeks
judicial determination of the Claim filed with Escrow Agent
by Ballard, then Escrow Agent shall not issue or deliver to
Ballard any Escrowed Shares on account of the Claim, until a
Final Determination occurs with respect to the Claim.
When a Final Determination occurs, if the Final
Determination provides that a sum is owed to Ballard on
account of the Claim, Escrow Agent shall, upon receipt of a
copy of the Final Determination (certified by Ballard or any
one or more of Sellers to be a true and complete copy of the
original, or certified by the clerk of the applicable court)
and without further notice or consent being required,
immediately distribute and transfer to Ballard a number of
the Escrowed Shares in Determined Market Value (as of the
date of Escrow Agent's receipt of said certified copy of the
Final Determination) equal to the total dollar amount of
said sum owed.
If the Final Determination provides that no sum is owed
to Ballard on account of the Claim, no Escrowed Shares shall
be distributed to Ballard with respect to the Claim. For
this purpose, Escrow Agent may rely upon a copy of the Final
Determination as certified by Ballard or any one or more of
Sellers to be a true and complete copy of the original, or
certified by the clerk of the applicable court.
(c) If Escrow Agent does not receive, within the
60-day period following the date the Claim Notice is given,
a copy of a complaint and summons and proof of service
strictly as provided in paragraph (b) above, Escrow Agent
will promptly, without any further notice or consent being
required, disburse and transfer to Ballard a number of the
Escrowed Shares in Determined Market Value as of the date of
distribution equal to the dollar amount of the Claim as set
forth in the Claim Notice.
(d) At the Termination Date, Escrow Agent shall
retain in escrow a sufficient number of the Escrowed Shares
in Determined Market Value as of the Termination Date equal
to one and one-quarter times the total dollar amount of all
Unresolved Claims. The remaining Escrowed Shares will,
without further notice or consent being required, be
promptly disbursed, transferred, and delivered in the
respective names of Sellers, in the proportions indicated in
Exhibit A.
(e) Ballard shall deliver to Escrow Agent a copy
of the first audited financial statements for the Company
issued following the date of this Escrow Agreement, as soon
as they are issued.
4. Cancellation of Shares. Sellers consent to the
cancellation by Ballard on its records and on the records of
the Division of Corporations of the State of Utah of any and
all Escrowed Shares transferred and delivered hereunder to
Ballard.
5. Certificate. All certificates to be issued to
Sellers hereunder shall bear the same restrictive legend set
forth in Section 2 above, until the Escrowed Shares have
been registered with the Securities and Exchange Commission.
Escrow Agent shall cooperate with Ballard and Sellers in
effecting the registration of the Escrowed Shares held by
Escrow Agent, pursuant to Article IX of the Exchange
Agreement.
6. Fees and Expenses.
(a) The basic fees of Escrow Agent (items 1 and 2
in Exhibit B, attached to and made a part of this Agreement
by reference) and related out-of-pocket expenses of Escrow
Agent, together with any cost or expense of Escrow Agent
relating to the registration of the Escrowed Shares with the
Securities and Exchange Commission and under state blue sky
laws, shall be paid by Ballard. Fees for unusual or
extraordinary services and related out-of-pocket expenses of
Escrow Agent shall be paid one-half by Sellers and one-half
by Ballard, except that Sellers and Ballard shall have joint
and several liability to Escrow Agent for such unusual or
extraordinary charges.
(b) Additional compensation shall be paid to
Escrow Agent for any additional or extraordinary service it
may be requested to render hereunder; and Escrow Agent shall
be reimbursed for any out-of-pocket expenses (including,
without limitation, fees of counsel) reasonably incurred in
connection with such additional or extraordinary services.
(c) Escrow Agent shall have a first lien on the
Escrowed Shares held by it hereunder for its compensation
hereunder and for any expenses or counsel fees owed to
Escrow Agent hereunder.
7. Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder
shall be deemed to have been duly given if in writing and
delivered personally, mailed, first class, postage prepaid,
registered or certified mail, or delivered to a reputable
overnight courier, charges prepaid, as follows:
If to Ballard: Ballard Medical Products
12050 Lone Peak Parkway
Draper, Utah 84020
Attention: Paul W. Hess,
General Counsel
If to Escrow Agent: Zions First National Bank, N.A.
P.O. Box 30880
Salt Lake City, Utah 84130
Attention: Marc R. Edminster
If to Sellers: Kevin R. Dye
8135 Vista Forest Drive
Roanoke, VA 24018
C. Phillip Pattison
470 Navajo West
Lake Quivira, KS 66106
Barry J. Marshall
40 Beatrice Road
Dalkeith 6009, Western Australia
William A. Fry
26700 West 73rd Street
Shawnee, KS 66227
Any party may change the address to which such
communications are to be directed to it by giving written
notice to the other parties in the manner provided in this
Section.
8. Modification. No change or modification of this
Agreement, nor of any right, title, interest, or liability
hereunder, shall be binding on Escrow Agent, without Escrow
Agent's written consent.
9. Disagreement. In the event of any disagreement
between Ballard and Sellers resulting in adverse claims and
demands being made, Escrow Agent shall be entitled at its
option to refuse to comply with any such claim or demand so
long as such disagreement shall continue, and Escrow Agent
shall not be or become liable to Ballard or Sellers for its
reasonable failure or refusal to comply with such
conflicting or adverse demands; and Escrow Agent shall be
entitled to continue so to refrain and refuse so to act
until:
(a) The rights of the adverse claimants shall
have been finally adjudicated in a court assuming
jurisdiction of the parties and the Escrowed Shares involved
herein or affected hereby; or
(b) All differences shall have been adjusted by
agreement, and Escrow Agent shall have been notified thereof
in a writing signed by both Ballard and Sellers.
Escrow Agent may confer with legal counsel in the event
of any dispute or question as to its duties hereunder and
shall not be held to any liability for acting in accordance
with advice so received.
10. Escrow Agent Liability. Ballard and Sellers
further agree that:
(a) Escrow Agent acts hereunder as a depository
only and is not responsible or liable in any manner whatever
for any act to be performed hereunder on the part of either
Ballard or Sellers, or for any failure to perform by either,
or for the sufficiency, correctness, genuineness or validity
of any instrument deposited with Escrow Agent hereunder, or
with respect to the form of execution of the same, or the
identity, authority or rights of any person executing or
depositing the same;
(b) Except as herein otherwise expressly
provided, Escrow Agent shall be under no obligation
whatsoever to give any notice concerning any payment or any
default hereunder, or any other notice;
(c) Escrow Agent shall not be liable for acting
upon any notice (including a Claim Notice), certification,
request, waiver, consent, receipt or other paper or document
believed by Escrow Agent to be genuine and signed by the
proper party or parties;
(d) Escrow Agent is hereby expressly authorized
to comply with and obey any and all orders, judgments and
decrees of any court, made, filed, entered or issued, with
proper jurisdiction; and in case Escrow Agent shall obey or
comply with any such order, judgment, or decree, Escrow
Agent shall not be liable to any of the parties hereto, or
to anyone else or otherwise by reason of any such
compliance, notwithstanding the fact that any such order,
judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.
(e) Escrow Agent shall not be liable, except for
the negligence or willful misconduct of its agents or
employees, and except with respect to claims based upon such
negligence or willful misconduct that are successfully
asserted against Escrow Agent, the other parties hereto
shall jointly and severally indemnify and hold harmless
Escrow Agent from and against any and all losses,
liabilities, claims, actions, damages, and expenses,
including reasonable attorneys' fees, arising out of and in
connection with this Escrow Agreement.
11. Voting Rights. For so long as any of the Escrowed
Shares are being held by Escrow Agent pursuant to the terms
of this Agreement, Sellers shall have the right to vote the
Escrowed Shares in proportion to their relative beneficial
ownership of the Escrowed Shares, as set forth in Exhibit A.
Voting shall be by omnibus proxies executed and delivered by
Sellers to Escrow Agent who shall then vote as the record
holder of the Escrowed Shares in behalf of Sellers.
12. Dividend Rights. Any cash dividends paid to
Escrow Agent during the term of this Agreement with respect
to the Escrowed Shares will be promptly disbursed to Sellers
in proportion to their beneficial ownership of the Escrowed
Shares, as shown in Exhibit A. Any shares received by
Escrow Agent as a result of a stock dividend or stock split
up shall be added to and become part of the Escrowed Shares.
13. Miscellaneous.
(a) Titles and Captions. All section titles or
captions to this Agreement are for convenience only and
shall not be deemed part of this Agreement and in no way
define, limit, augment, extend or describe the scope,
content or intent of any part of this Agreement.
(b) Litigation Expenses. If any action, suit or
proceeding is brought by a party with respect to a matter or
matters governed by this Agreement, all costs and expenses
of the prevailing party incident to such proceeding,
including reasonable attorney's fees, shall be paid by the
nonprevailing party.
(c) Authorization. Each individual
executing this Agreement does thereby represent and warrant
to each other person so signing that he or she has been duly
authorized to execute and deliver this Agreement in the
capacity and for the entity set forth where he or she
signs.
(d) Governing Law/Forum Selection This Agreement
shall be governed by and construed in accordance with the
laws of the State of Utah applicable to agreements made and
to be performed entirely within such jurisdiction except to
the extent federal law may be applicable. Any action under
this Agreement may be filed and maintained only as follows:
(i) If filed by any Seller, only in state or
federal courts located within Salt Lake County, State of
Utah, and all parties hereby submit to the jurisdiction of
such courts; or
(ii) If filed by Ballard or the Company, only
in state or federal courts located within Johnson County,
State of Kansas, and all parties submit themselves to the
jurisdiction of such courts.
IN WITNESS WHEREOF, the parties have executed this
Agreement effective as of the date first shown above.
BALLARD MEDICAL PRODUCTS
Date: 2/25/98 By: Harold R. ("Butch") Wolcott
Title: Executive Vice President
ZIONS FIRST NATIONAL BANK
Date: 3/4/98 By: Marc R. Edminster
Title: Second Vice President
and Trust Officer
SELLERS:
Date: 2/25/98 Kevin R. Dye
Date: 2/25/98 C. Phillip Pattison
Date: 2/25/98 Barry J. Marshall
Date: 2/25/98 William A. Fry
Exhibit A
Attached to and forming part of Escrow Agreement
Schedule of Sellers
(1) (2) (3)
Escrowed Shares Percentage of
Being Delivered Total Escrowed
Name and Address Herewith Shares
Kevin R. Dye 16,015 30%
8135 Vista Forest Drive
Roanoke, VA 24018
C. Phillip Pattison 16,015 30%
470 Navajo West
Lake Quivira, KS 66106
Barry J. Marshall 5,341 10%
40 Beatrice Road
Dalkeith 6009,
Western Australia
William A. Fry 16,015 30%
26700 West 73rd Street
Shawnee, KS 66227
TOTAL 53,386 100%
Exhibit B
Attached to and forming part of Escrow Agreement
Escrow Agent Fees
1. Initial Charge: $500
2. Annual Account Administration Charge one year: $1,000,
to be prorated (over 12 months) for the actual
period of time the escrow hereunder is in
existence, with a minimum $500 fee.
3. Extraordinary Charges:
(a) Billable at $75.00 per officer hour
for services substantially expanding
the duties or responsibilities of
the Escrow Agent and not generally
associated (in the experience of
this Bank as Escrow Agent, either as
to type, or frequency, or both) with
the routine administration of
similar Escrow Agreements; or
(b) Services rendered in connection with
a direction by a party entitled to
make such direction.
4. Out-of-Pocket Charges: (will be billed as
they occur)
(a) Publication costs;
(b) Postage;
(c) Counsel fees;
(d) Printing and reproduction of
documents, notices and other
instruments;
(e) Airfreight; telecopy;
(f) Such other out-of-pocket expenses as
may reasonably be incurred.
