SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
------
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
UTAH MEDICAL PRODUCTS, INC.
-------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
UTAH MEDICAL PRODUCTS, INC.
-------------------------------------------------------
(Name of Person(s) Filling Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ x ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
4) Proposed maximum aggregate value of transaction:
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
April 1, 1996
Dear UTMD Shareholder:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders of
Utah Medical Products, Inc. The meeting will be held at 12:00 noon (local time)
on Friday, May 17, 1996 at the Little America Hotel, 500 South Main Street, Salt
Lake City, Utah. A sandwich buffet will be served at 11:30 A.M.
Please note that attendance at the Annual Meeting will be limited to
shareholders as of the record date (or their authorized representatives) and to
guests of the Company. If your shares are registered in your name and you plan
to attend the Annual Meeting, please bring the enclosed proxy card with you to
the meeting. If your shares are held by a broker, bank or other nominee and you
plan to attend the meeting, please contact the person responsible for your
account regarding your intention to attend the meeting so they will know how you
intend your shares to be voted at that time. Shareholders will be admitted to
the Annual Meeting upon proper verification of stock ownership.
At the Annual Meeting, our shareholders will elect two directors and consider
any other business. If you think you will be unable to attend the meeting,
please complete your proxy and return it as soon as possible. If you decide
later to attend the meeting in person you may revoke the proxy.
Recently, UTMD announced an abrupt change in its relationship with Baxter. I
have enclosed a copy of the press release. The public announcement resulted in
a drop in UTMD's stock price which was not justified, in my opinion. Although
there may be a substantial negative impact on 1996 revenues as a result of the
change, the profit impact will be modest. With UTMD's new products, management
continues to be excited about prospects for continued growth in earnings per
share, which should translate directly into higher stock prices. The Company
has taken this opportunity to repurchase shares on the open market, and the
Board of Directors recently approved an additional $2 million for continued
share repurchase.
Thank you for your ownership in UTMD!
Sincerely,
/s/ Kevin L. Cornwell
Kevin L. Cornwell
President and CEO
<PAGE>
UTAH MEDICAL PRODUCTS, INC.
7043 SOUTH 300 WEST
MIDVALE, UTAH 84047
(801) 566-1200
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 1996
TO THE SHAREHOLDERS OF UTAH MEDICAL PRODUCTS, INC.
The Annual Meeting of Shareholders (the "Annual Meeting") of Utah Medical
Products, Inc. (the "Company"), will be held at the Little America Hotel, 500
South Main Street, Salt Lake City, Utah , on May 17, 1996, at 12:00 noon, local
time, for the following purposes:
(1) To elect two directors to serve for terms expiring at the 1999 Annual
Meeting and until successors are elected and qualified; and
(2) To transact such other business as may properly come before the Annual
Meeting.
Your Board of Directors recommends a vote "FOR" each of the nominated
directors, whose backgrounds are described in more detail in the accompanying
Proxy Statement.
ONLY SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON MARCH 15, 1996
(THE "RECORD DATE"), ARE ENTITLED TO NOTICE OF AND TO VOTE AT THE ANNUAL
MEETING.
This Proxy Statement and form of proxy are being first furnished to
shareholders of the Company on approximately April 1, 1996.
THE ATTENDANCE AT AND/OR VOTE OF EACH SHAREHOLDER AT THE ANNUAL MEETING IS
IMPORTANT, AND EACH SHAREHOLDER IS ENCOURAGED TO ATTEND.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Kevin L. Cornwell
Kevin L. Cornwell, Secretary
Salt Lake City, Utah
Dated: April 1, 1996
PLEASE FILL IN, SIGN, DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY, WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING.
IF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, NOMINEE, OR OTHER
INSTITUTION, ONLY IT CAN VOTE YOUR SHARES. PLEASE CONTACT PROMPTLY THE PERSON
RESPONSIBLE FOR YOUR ACCOUNT AND GIVE INSTRUCTIONS FOR YOUR SHARES TO BE VOTED.
-----------------
<PAGE>
UTAH MEDICAL PRODUCTS, INC.
PROXY STATEMENT
This Proxy Statement is furnished to shareholders of Utah Medical Products,
Inc. (the "Company") in connection with the Annual Meeting of Shareholders (the
"Annual Meeting") to be held at the Little America Hotel, 500 South Main Street,
Salt Lake City, Utah, on May 17, 1996, at 12:00 noon, local time, and any
postponement or adjournment(s) thereof. The enclosed proxy, when properly
executed and returned in a timely manner, will be voted at the Annual Meeting in
accordance with the directions set forth thereon. If the enclosed proxy is
signed and returned timely without specific instructions, it will be voted at
the Annual Meeting:
(1) FOR the election of Stephen W. Bennett, M.D., Dr.P.H., and Ernst Hoyer
as directors; and
(2) IN accordance with the best judgment of the persons acting under the
proxies on other matters presented for a vote.
THE BOARD OF DIRECTORS HAS APPROVED THE FOREGOING PROPOSALS AND RECOMMENDS
THAT THE SHAREHOLDERS VOTE FOR EACH OF THE PROPOSALS. PROXIES SOLICITED BY THE
COMPANY WILL BE VOTED FOR EACH OF THE PROPOSALS UNLESS A VOTE AGAINST, OR AN
ABSTENTION FROM ONE OR MORE OF THE PROPOSALS IS SPECIFICALLY INDICATED ON THE
PROXY.
A PROXY FOR THE ANNUAL MEETING IS ENCLOSED. IT IS IMPORTANT THAT EACH
SHAREHOLDER COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY,
WHETHER OR NOT SHE(HE) PLANS TO ATTEND THE ANNUAL MEETING. ANY SHAREHOLDER WHO
EXECUTES AND DELIVERS A PROXY HAS THE RIGHT TO REVOKE IT AT ANY TIME PRIOR TO
ITS EXERCISE BY PROVIDING THE SECRETARY OF THE COMPANY WITH AN INSTRUMENT
REVOKING THE PROXY OR BY PROVIDING THE SECRETARY OF THE COMPANY WITH A DULY
EXECUTED PROXY BEARING A LATER DATE. IN ADDITION, A SHAREHOLDER MAY REVOKE
HER(HIS) PROXY BY ATTENDING THE ANNUAL MEETING AND ELECTING TO VOTE IN PERSON.
PROXIES ARE BEING SOLICITED BY THE COMPANY, AND ALL COSTS AND EXPENSES
INCURRED IN CONNECTION WITH THE SOLICITATION WILL BE PAID BY THE COMPANY.
PROXIES ARE BEING SOLICITED BY MAIL, BUT, IN CERTAIN CIRCUMSTANCES, OFFICERS AND
DIRECTORS OF THE COMPANY MAY MAKE FURTHER SOLICITATION IN PERSON, BY TELEPHONE,
FACSIMILE TRANSMISSION, TELEGRAPH, OR OVERNIGHT COURIER.
Only holders of the 9,727,341 shares of common stock, par value $0.01 per
share, of the Company (the "Common Stock") issued and outstanding as of the
close of business on March 15, 1996 (the "Record Date"), will be entitled to
vote at the Annual Meeting. Each share of Common Stock is entitled to one vote.
Holders of at least a majority of the 9,727,341 shares of Common Stock
outstanding on the Record Date must be represented at the Annual Meeting to
constitute a quorum for conducting business.
All properly executed and returned proxies as well as shares represented in
person at the meeting will be counted for purposes of determining if a quorum is
present, whether or not the proxies are instructed to abstain from voting or
consist of broker non-votes. Under the Utah Revised Business Corporation Act,
matters, other than the election of directors and certain specified
extraordinary matters, are approved if the number of votes cast FOR exceed the
number of votes cast AGAINST, and abstentions and broker non-votes are not
counted for purposes of determining whether a matter has been approved.
Directors are elected by a plurality of the votes cast; abstentions and broker
non-votes are not counted.
Officers and directors holding an aggregate of 101,408 shares, or
approximately 1.04% of the issued and outstanding stock, have indicated their
intent to vote in favor of all proposals.
<PAGE>
PROPOSAL NO. 1. ELECTION OF DIRECTORS
GENERAL
The Company's articles of incorporation provide that the Board of Directors
is divided into three classes as nearly equal in size as possible, with the term
of each director being three years and until such director's successor is
elected and qualified. One class of the Board of Directors shall be elected
each year at the annual meeting of the shareholders of the Company. The Board
of Directors has nominated Dr. Stephen W. Bennett and Mr. Ernst Hoyer for
election as directors, each for a three year term expiring at the 1999 Annual
Meeting.
It is intended that votes will be cast, pursuant to authority granted by the
enclosed proxy, for the election of the nominees named above as directors of the
Company, except as otherwise specified in the proxy. In the event the nominees
shall be unable to serve, votes will be cast, pursuant to authority granted by
the enclosed proxy, for such other person(s) as may be designated by the Board
of Directors. Biographical information follows for the persons nominated. The
officers of the Company are elected at the annual meeting of the Board of
Directors to serve at the pleasure of the Board of Directors. The information
concerning the nominees and other directors and their security holdings has been
furnished by them to the Company. (See "PRINCIPAL SHAREHOLDERS" below.)
DIRECTORS AND NOMINEES
The Board of Directors' nominees for election as directors of the Company at
the Annual Meeting are Stephen W. Bennett, M.D., Dr.P.H. and Ernst Hoyer. The
other members of the Board of Directors were elected at the Company's 1994 and
1995 meetings for terms of three years, and therefore are not standing for
election at the 1996 Annual Meeting. Background information appears below with
respect to the incumbent directors whose terms have not expired, as well as the
two directors standing for election to the board.
Year
First Business Experience During Past
Name Age Elected Five Years and Other Information
- ---- --- ------- --------------------------------
Perry L. Lane 78 1985 Chairman since February 1994. Served as VP
and Director of Marketing, Executive VP and
Director of Sorenson Research Company, Salt
Lake City, UT., for more than 13 years. Has
served as a director on seven other company
boards.
Kevin L. Cornwell 49 1993 Received B.S. degree in chemical engineering
from Stanford University, M.S. degree in
engineering-economic systems from Stanford
Graduate School of Engineering, and MBA
degree specializing in finance from Stanford
Graduate School of Business. President and
CEO of UTMD since December 1992; Secretary
since 1993. Has served in various senior
operating management positions in several
technology-based companies over a 22 year
time span, including as a director on seven
other company boards.
Stephen W. Bennett 63 1994 Received B.A. degree in biology from Stanford
University, M.D. degree from Stanford School
of Medicine, M.P.H. and T.M. degree and
Dr.P.H. degree from Tulane School of
Medicine. Served five years as fund manager,
director and senior analyst for health care
investments for an institutional investment
firm.
Lori A. Sessions 36 1994 Received B.S. degree in accounting and MBA
degree from the University of Utah. Utah CPA
since 1985. UTMD Controller since 1993.
Previously served for 5 years in various
accounting and financial analysis positions
for Bourns Sensors/Controls, Inc., Ogden, UT.
Ernst Hoyer 58 1996 Received B.S. degree in process engineering
from the University of California, Berkeley
and MBA degree from the University of Santa
Clara. Previously served in engineering and
general management positions for four
technology-based companies over a 27 year
time span.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN PERSONS
The following table furnishes information concerning the ownership of the
Company's Common Stock as of March 15, 1996, by the directors, the nominees for
director, the executive officers named in the compensation tables on page 6, all
directors and officers as a group, and those known by the Company to own
beneficially, more than 5% of the Company's outstanding Common Stock.
Nature of Number of Percent
Name Ownership Shares Owned(1) (2)
- --------------------------------- -------------- --------------- ---------
PRINCIPAL SHAREHOLDERS
FMR Corp. Direct 1,275,500 13.11%
82 Devonshire Street
Boston, Massachusetts 02109
DIRECTORS AND EXECUTIVE OFFICERS
Perry L. Lane(3)(4)(5)(6) Direct 24,000 0.25%
Options 11,250 0.12%
------
Total 35,250 0.36%
Kevin L. Cornwell(4)(5) Direct 32,600 0.34%
Options 104,375 1.06%
-------
Total 136,975 1.39%
Stephen W. Bennett(3)(4)5)(6) Direct 1,500 0.02%
Options 2,500 0.03%
-----
Total 4,000 0.04%
Lori A. Sessions(4)(5) Direct 4,000 0.04%
Options 5,313 0.05%
-----
Total 9,313 0.10%
Ernst Hoyer(3)(4)(5) Direct 1,000 0.01%
David D. Chase(3)(4)(5) Direct 4,000 0.04%
Options 32,500 0.33%
------
Total 36,500 0.37%
Ernest D. Hammond Direct 29,568 0.30%
Options 7,500 0.08%
-----
Total 37,068 0.38%
R. Gail Billings Direct 578 0.01%
Options 30,470 0.31%
------
Total 31,048 0.32%
ALL EXECUTIVE OFFICERS AND Direct 101,408 1.04%
DIRECTORS AS A GROUP (9 PERSONS Options 198,846 2.00%
-------
Total 300,254 3.02%
(1) Shares owned directly are owned beneficially and of record, and such record
shareholder has sole voting, investment, and dispositive power.
(2) Calculations of percentage of shares outstanding assumes the exercise of
options, to which the percentage relates. Percents calculated for totals assume
the exercise of options comprising such totals.
(3) Audit Committee member.
(4) Nominating Committee member.
(5) Compliance Committee member.
(6) Compensation and Option Committee member.
<PAGE>
DIRECTOR NOT STANDING FOR REELECTION
David D. Chase has been an outside director of the Company since 1991. Mr.
Chase will serve out his present term as a director until the May 17, 1996
Shareholders' Meeting and not stand for reelection.
COMPLIANCE WITH EXCHANGE ACT REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of equity securities of the Company. Officers, directors,
and greater than 10% shareholders are required to furnish the Company with
copies of all section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, all section 16(a) requirements applicable to
persons who were officers, directors and greater than 10% shareholders during
the preceding fiscal year were complied with.
BOARD AND COMMITTEE MEETINGS
The directors held five meetings during 1995 and two meetings to date in
1996. All of the directors attended all meetings, except Mr. Chase for the last
meeting in March 1996.
The Company has Audit, Compliance, Nominating, and Compensation and Option
Committees. The current members of the Company's committees are identified in
the preceding table.
The Audit Committee met once during 1995 and once to date in 1996 to review
the results of the annual audits by Deloitte & Touche. The Audit Committee
approves management's recommendation of independent accountants, approves the
scope of audit and related fees, and reviews financial reports, audit results,
internal accounting procedures, and programs to comply with applicable
requirements relating to financial accountability.
The Compliance Committee did not meet separately from the Board of Directors
during 1995. In each board meeting, after receiving the Company's routine
compliance reports, the Board reviewed compliance by the Company and its
personnel, including executive officers and directors, with applicable
regulatory requirements as well as the Company's own compliance policy, and
compared its established policies and procedures for compliance with current
applicable laws and regulations, under the guidance of Corporate Counsel.
The Nominating Committee met informally periodically during 1995. The
Nominating Committee takes the lead in nominating new directors. The Nominating
Committee will consider nominees recommended by shareholders. In accordance
with the Company's bylaws, shareholder's nominations for election as directors
must be submitted in writing to the Company at its principal offices not less
than 30 days prior to the Annual Meeting at which the election is to be held (or
if less than 60 days' notice of the date of the Annual Meeting is given or made
to shareholders, not later than the tenth day following the date on which the
notice of the Annual Meeting was mailed). The notice to the Company from a
shareholder who intends to nominate a person at the Annual Meeting for election
as a director must contain certain information about the shareholder and the
person(s) nominated by him, including, among other things, the name and address
of the shareholder, a representation that the shareholder is entitled to vote at
the Annual Meeting and intends to appear in person or by proxy at the Annual
Meeting, a description of all arrangements or understandings between the
shareholder and each nominee, such other information as would be required to be
included in a proxy statement soliciting proxies for the election of the
proposed nominee, and the consent of each nominee to serve as a director if so
elected.
The Compensation and Option Committee, comprised of the outside directors,
consulted by telephone periodically throughout 1995 to review performance of
senior management, recommend compensation, and develop compensation strategies
and alternatives throughout the Company, including those discussed in the
committee's report contained in this Proxy Statement. The deliberations
included an independent analysis of the CEO's compensation during the fourth
quarter, which culminated in recommendations at the January 1996 Board Meeting.
<PAGE>
<PAGE>
EXECUTIVE OFFICER COMPENSATION
The following table sets forth, for each of the last three fiscal years, cash
compensation received by the Company's Chief Executive Officer during 1995 and
any remaining executive officers whose salary and bonus for all services in all
capacities exceeded $100,000 for the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payout
s
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securiti
Annual Restrict es All Other
Year Comp- ed Stock Underlyi LTIP Compen-
Name and Principal Ended Salary Bonus ensa- Award(s) ng Payout sation
Position Dec. 31 ($) ($) tion ($) Options/ s ($) ($)
($)(1) SARs
(#)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kevin L. Cornwell 1995 $170,000 $120,000 $900 -- 40,000 -- --
President & 1994 $157,500 $ 70,000 $900 -- 95,000 -- --
Chief Exec 1993 $150,000 $ 48,750 -- -- 75,000 -- $13,899
Officer, and (2)
Director
Ernest D. Hammond 1995 $ 82,659 $ 40,040 $900 -- 10,000 -- --
Vice-President, 1994 $ 76,250 $ 26,250 $900 -- 10,000 -- --
Sales and 1993 $ 75,000 $ 6,900 $823 -- -- -- --
Marketing
R. Gail Billings 1995 $ 83,640 $ 26,400 $900 -- 10,000 -- --
Vice-President, 1994 $ 82,000 $ 17,500 $900 -- 25,000 -- --
Research & 1993 $ 78,000 $ 18,200 $810 -- 22,500 -- --
Development
</TABLE>
(1) Amounts are Company payments for 401(k) matching contributions.
(2) During 1993 the Company reimbursed such amount for moving expenses incurred
by Mr. Cornwell in relocating his residence to Utah.
The following table sets forth information respecting all individual grants
of options and stock appreciation rights ("SARs") made during the last completed
fiscal year to any of the executives named in the summary compensation table.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realized
Value at Assumed
Annual Rates of
Individual Grants Stock Appreciation
for
Option Term(2)
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SA
Underlying Rs Granted Exercise
Options/SARs to or Base Expiration
Name Granted(#) Employees Price Date 5%($) 10%($)
During ($/share)
Fiscal
Year(1)
<S> <C> <C> <C> <C> <C> <C>
Kevin L. Cornwell 40,000(3)(4) 23.4% $9.50 Jan. 2005 $239,000 $605,600
Ernest D. Hammond 10,000(3)(4) 5.8% $9.50 Jan. 2005 $59,700 $151,400
R. Gail Billings 10,000(3)(4) 5.8% $9.50 Jan. 2005 $59,700 $151,400
</TABLE>
(1) The Company granted new options representing 171,000 shares to employees
during 1995. The percentages are based on this total.
(2) Value was calculated assuming indicated appreciation rate compounded
annually.
(3) The options became 25% vested on 1/1/96; will thereafter vest at the rate
of 6.25% per calendar quarter.
(4) All optionees may use Company shares owned for a period of at least six
months to pay for the exercise of options. The Company may accept shares
to cover withholding or other employee taxes. In the event of a change in
control, the Company is required to pay the optionee a cash amount equal to
the excess of the market price over the exercise price of all options
granted, whether or not vested.
<PAGE>
The following table sets forth information respecting the exercise of
options and SARs during the last completed fiscal year by each executive named
in The Summary Compensation Table above and the December 31, 1995, fiscal year
end values of unexercised options and SARs, based on the average high and low
price of the Company's common stock on December 29, 1995 on the NASDAQ National
Market System of $20.13
<TABLE>
<CAPTION>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of
Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options/SARs at FY
Options/SARs at End ($)
FY End (#)
Exercisable/
Shares Acquired Value Realized Exercisable/ Unexercisable
Name on Exercise (#) ($) Unexercisable
<S> <C> <C> <C> <C>
Kevin L. Cornwell -- -- 83,751/126,249 $962,696/$1,445,855
Ernest D. Hammond 77,708 $674,453 4,375/15,625 $56,350/$178,750
R. Gail Billings 578 $4,287 25,144/32,356 $283,367/$371,437
</TABLE>
REPORT OF THE COMPENSATION AND OPTION COMMITTEE
General
Under the supervision of the Compensation and Option Committee, the Company
has developed and implemented compensation policies, plans, and programs that
seek to enhance the long-term profitability and growth of the Company, and thus
shareholder value, by aligning closely the financial interests of the Company's
senior managers and other key employees with those of its shareholders. The
Compensation and Option Committee of the Board of Directors is responsible for
evaluating and recommending specific executive compensation for formal board
approval on an annual basis.
The Company applies a consistent philosophy to compensation for all
employees, including senior management. The philosophy is based on the premise
that the achievements of the Company result from the coordinated efforts of all
individual employees working toward common objectives. The Company strives to
achieve those objectives through teamwork that is focused on meeting the needs
and expectations of customers and shareholders.
There are seven basic objectives for the Company's compensation program:
(1)Pay for Performance. The basic philosophy is that rewards are provided
for the value of individual contribution and performance to the Company.
Rewards are both recurring (e.g., base salary) and non-recurring (e.g.,
bonuses), and both financial and non-financial (e.g., recognition and non-
financial awards).
(2)Provide for Fairness and Consistency in the Administration of Pay.
Compensation is based on the value of the job, what each individual brings to
the job, and how well each individual performs on the job, consistently applied
across all functions of the Company.
(3)Pay Competitively. The Company believes it needs to attract and retain
the best people in the industry in order to continue to achieve one of the best
performance records in the industry. In doing so, the Company needs to be
perceived as rewarding well, where competitive compensation includes the total
package of base pay, bonuses, awards, and other benefits.
(4)Conduct an Effective Performance Review Process. The Company believes it
needs to encourage individual employee growth and candidly review each
individual's performance in a timely way. This feedback process is bilateral,
providing management with an evaluation of the Company through the eyes of its
employees.
(5)Effectively Plan and Administer the Compensation Program. Expenditures
for employee compensation must be managed to what the Company can afford and in
a way that meets management goals for overall performance and return on
shareholder equity.
<PAGE>
(6)Communicate Effectively. The Company believes that an effective
communication process must be employed to assure that its employees understand
how compensation objectives are being administered and met.
(7)Meet All Legal Requirements. The compensation program must conform to all
state and federal employment laws and guidelines.
The Company uses essentially five vehicles in its compensation program.
(1)Salary. The Company sets base salaries by reviewing the aggregate of base
salary and annual bonus for competitive positions in the market. Executive base
salaries are set at the beginning of each calendar year by the board of
directors. For senior management, base salaries are fixed at levels somewhat
below the competitive amounts paid to senior management with comparable
qualifications, experience, and responsibilities at other similarly sized
companies engaged in the same or similar businesses. Then, annual bonuses and
longer term incentive compensation are more highly leveraged and tied closely to
the Company's success in achieving significant financial and non-financial
goals.
(2)Bonuses. The Company has sales, research and development, and management
bonuses, which are generated out of an annual pretax profit sharing pool
calculated after the year-ending independent financial audit has been completed.
The sales, research and development, and management bonus is offered to
Company management personnel to the first level of professional management,
certain specialists and technical people, and all direct sales representatives.
The annual plan includes senior management as part of the group of about 70 of
the Company's 380 current employees. Senior management bonuses might range
between 20% and 100% of an individual's regular base pay, depending on actual
performance relative to targeted objectives. The Board of Directors has
approved 4% of pretax, prebonus earnings, plus 10% of pretax, prebonus earnings
improvements over the prior year's results as an allocation for the pool. For
example, if the Company achieves 20%-25% growth in pretax earnings, the sales,
research and development, and management bonus pool will accrue 6%-6.5% of
pretax earnings, which will be paid under recommendation of the Compensation and
Option Committee.
The Company makes occasional cash awards, in amounts determined on an
individual basis, to employees who make extraordinary contributions to the
performance of the Company within a given period. These payments are made as
frequently and contemporaneously as possible to recognize excellent
accomplishments when they occur. In 1995, 32 such awards were made. The awards
are funded from the accrued management bonus pool described above, and therefore
do not impact the Company's financial performance. Senior management is not
eligible for these awards.
In 1995, the annual sales, research and development, and management bonus was
paid to 68 salaried employees based on specific individual management
objectives. The senior management employees received a total bonus of $186,440,
which was equal to about 56% of their aggregate base salaries and about 25% of
the pool accrued per the formula above. Actual individual bonuses resulted from
the Compensation and Option Committee's assessment of each executive's
achievement of specific objectives and value of contribution to the Company's
overall performance.
(3)Employee Stock Options. The Compensation and Option Committee believes
that its past grants of stock options have successfully focused the Company's
key management personnel on building profitability and shareholder value. The
number of options granted was consistent with the Company's overall goal
discussed above of increasing key employees' financial stake in the Company and
reflects the judgment of the Committee that the total number of options at each
grant date was sufficient to constitute a material, recognizable benefit to the
recipients while minimizing dilution to existing shareholders; no objective
criteria were utilized.
In 1995, the Board of Directors approved grants to 80 employees of options to
purchase a total of 171,000 shares. Subsequently, grants representing 23,500
shares of this total were canceled upon the resignation of certain employees.
Included in the 1995 grants were shares of 60,000 granted to senior management.
All new options vest over a four year period, with a ten year exercise period.
Management expects to recommend similar quantities of options to be awarded on
an annual basis to the Company's key employees based on its belief that sharing
the wealth of the Company with those who help create it is the best way to
assure growth in shareholder value.
<PAGE>
(4) 401(k) Retirement Plan. The Compensation and Option Committee believes
that a continuance of the Company plan instituted in 1985 is consistent with
ensuring a stable employment base by helping to provide Company employees with a
vehicle to build long-term financial security. The Company matched a portion of
employee contributions in 1995 by an amount equal to $57,200. Of this total
amount, senior management received about $2,700. The Board of Directors has
approved a matching formula of 30%, up to certain individual limits including a
fixed individual maximum of $900 per year, for employees who meet eligibility
requirements.
(5)Group Benefit Plan. The Company provides a group health, dental, and life
insurance plan for its employees consistent with self-funded group plans offered
by other companies its size. A portion of the monthly premium cost is generally
paid by plan participants. All employees, including executive officers and
senior managers, pay premiums on the same basis.
CEO and other Executive Officer Compensation
Utilizing the compensation objectives and vehicles outlined above, the
Committee established base compensation for executive officers, including the
CEO, by reference to surveys of similar companies as discussed above, adjusted
as the Committee deemed appropriate for variations in industry type, geographic
location, size, and profitability. Base salaries were fixed at levels somewhat
below the competitive amounts paid to executive officers with comparable
qualifications, experience, and responsibilities at other similarly sized
companies engaged in the same or similar businesses. Then, annual bonuses and
long term incentive compensation in the form of stock options were more highly
leveraged and tied closely to the Company's success in achieving significant
financial and non-financial goals.
Bonuses for executive officers were awarded on the same basis as all
employees included in the sales, research, development, and management bonus
plan. At the beginning of the year, the CEO and other executive officers were
awarded participation units in the bonus plan, proportional to base salary,
based on the Committee's determination of the relative contribution expected
from each person toward attaining Company goals. Each executive's individual
performance objectives, derived as the applicable contribution needed from that
executive to achieve the Company's overall business plan for the year, were
reviewed by the Committee. These goals included financial (weighted most
heavily) and non-financial goals. Financial goals included net sales, gross
profit margin, after-tax profits, and return on equity, and particularly in the
case of the CEO, growth in earnings per share. Non-financial goals included
continuing the development of a talented and motivated team of employees,
conceiving and implementing programs to maintain competitive advantages and to
achieve consistent growth, promoting the Company's participation in socially
responsible programs, maintaining compliance with regulatory requirements,
achieving a high regard of shareholders and the broad business community in the
integrity of the Company and its management, and minimizing factors that
represent significant business risks.
The amounts of bonuses to the CEO and other executive officers were based on
the Committee's evaluation of each executive's success in meeting the respective
performance objectives, supplemented by the Committee's subjective evaluation of
each executive's performance and contribution in meeting the Company's non-
financial objectives. In 1995, management met or exceeded financial objectives
set in the operating plan at the beginning of the year. In addition, the
Committee believes that each of the non-financial goals of the executive
officers was met or exceeded. Further, the CEO also was credited by the
Committee with elevating the level of professional management of the Company,
building a cohesive management team, and identifying new strategies for long-
term growth in profitability and shareholder value.
Stock options were awarded to the CEO and other executive officers generally
on the criteria utilized for establishing cash bonuses as discussed above,
supplemented by the Committee's subjective evaluation of the suitability of
long-term options grants as an effective incentive to each individual executive.
Upon application of the above criteria by the Compensation and Option
Committee and upon its recommendation in early 1996, the Board of Directors
awarded Mr. Cornwell a 1995 bonus of $120,000 under the Management Bonus Plan.
In addition, the Board set Mr. Cornwell's 1996 base salary at $180,000.
The Committee intends that stock options serve as a significant component of
Mr. Cornwell's total compensation package in order to retain his efforts on
behalf of the Company and to focus his efforts on enhancing shareholder value.
In that regard, shareholders in 1994 approved a Performance Option Plan under
which Mr. Cornwell could be granted options to purchase up to 400,000 shares of
common stock, contingent upon the Company achieving compounded 25% per annum
growth in earnings-per-share starting in 1994 or on such other terms as the
<PAGE>
Board of Directors may specify. In the first two years of the plan, actual
compounded primary earnings-per-share growth averaged about 18%. In addition to
achieving approximately 72% of the annual earnings-per-share target growth rate,
the Committee noted that at the date the Performance Option Plan was adopted the
price of the Company's stock was $7.25, as compared to $19.8125 as of December
31, 1995, an increase in the market capitalization value of the Company of
approximately $125 million. Therefore, in early 1996, upon the recommendation
of the Compensation Committee, the Board awarded Mr. Cornwell stock options to
purchase 90,000 shares with an average exercise price of $19.667 per share,
vesting over four years.
Since employment, Mr. Cornwell has been awarded options for a total of
300,000 shares at an average exercise price of $11.963. In April 1994, the
Company repurchased 300,000 shares from the former CEO at $7.875 per share.
Therefore, as compared to the holdings of the former CEO, Mr. Cornwell's options
to date have been non-dilutive to shareholders and upon exercise contribute
additional shareholder value of $1.2 million.
The foregoing report has been furnished by: Perry L. Lane
Stephen W. Bennett
COMPENSATION AND OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation and Option Committee are Perry L.
Lane, Ernst Hoyer, and Stephen W. Bennett. No member of such committee is a
present or former officer of the Company or any subsidiary. There are no other
interlocks. No member of such Committee, his family, or his affiliate was a
party to any material transactions with the Company or any subsidiary since the
beginning of the last completed fiscal year. No executive officer of the
Company serves as an executive officer, director, or member of a compensation
committee of any other entity, an executive officer or director of which is a
member of the Compensation and Option Committee of the Company.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
On December 31, 1992, the Company entered into an employment agreement with
Kevin L. Cornwell, President and Chief Executive Officer that expired on
December 31, 1993, except for the provision under which the Company is required
to pay Mr. Cornwell a one-time payment of one year's base salary in the event
his employment is terminated as a result of a change in control, at the election
of the Company, or by the mutual agreement of Mr. Cornwell and the Company. In
addition, the Company is required to pay Mr. Cornwell appreciation of stock
value for issued options above the option exercise price, in the event of a
change in control of the Company or if terminated at the election of the
Company. The Company has a performance option plan under which Mr. Cornwell
could earn options to purchase up to an additional aggregate of 200,000 shares
at a future market price if the Company attains 25% compounded per annum growth
in earnings per share, or on such other terms as the board of directors may
determine.
The Company presently has no other employment agreements. The Company is
required to pay Ernest D. Hammond and R. Gail Billings, as well as any other
optionees under employee option plans, the appreciation of stock value for
issued options above the option exercise price in the event of a change of
control of the Company.
DIRECTOR'S COMPENSATION
Outside (non-employed) directors receive annual cash compensation of $10,000
each ($12,000 in the case of the Chairman), plus reimbursement of expenses in
attending meetings. In addition, the Company, pursuant to the 1993 Directors'
Stock Option Plan approved by shareholders at the 1994 annual meeting, may award
to each director options to purchase 10,000 shares (15,000 shares in the case of
the Chairman) at an exercise price equivalent to the closing bid price ten
trading days after the public release of the Company's annual financial results.
Pursuant to the (outside) directors' option plan, the Company granted options
for 35,000 shares at prices of $10.625 per share during 1995. On March 30,
1996, outside directors were granted an additional 45,000 shares awarded at an
exercise price of $20.50. In four years under the plan including 1996, outside
directors have been awarded options on 160,000 shares, of which 50,000 either
have or will be canceled upon the resignations of certain directors. All of the
options vest over a four year period from grant date. Excluding CEO options
awarded to date to Mr. Cornwell which are offset by repurchases from the former
CEO, outside director options which have not been canceled represent about 20%
of total Company options awarded and uncancelled since 1993.
<PAGE>
STOCK PERFORMANCE CHART
The following chart compares what an investor's five year cumulative total
return (assuming re-investment of dividends) would have been assuming initial
$100 investments on December 31, 1990 for the Company's Common Stock and the two
indicated indexes.
[GRAPHICAL INFORMATION OMITTED]
Performance Graph appears here. Detailed below are the plot points:
12/31/90 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95
-------- -------- -------- -------- -------- --------
Utah Medical Products 100.0 208.7 158.7 103.4 111.6 260.1
Nasdaq Stock Market
(US & Foreign) 100.0 159.6 185.2 214.4 207.4 288.5
Nasdaq Stocks
(SIC 3800-3899) 100.0 188.5 161.8 136.8 147.5 216.9
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors is considering all of the options available for the
selection of the Company's independent certified public accountants for the year
ending December 31, 1996, particularly in view of the Company's new overseas
operations, and has made no determination whether to reappoint Deloitte & Touche
LLP, the Company's auditors for the last preceding three fiscal years, or to
appoint a new auditor. The selection of the auditors will be made by the
Company's Board of Directors, with the advice of the Audit Committee, at such
time as they may deem it appropriate. The selection of the Company's auditors
for the current fiscal year is not being submitted to the shareholders for their
consideration in the absence of a requirement to do so. There are no
disagreements on accounting policies or practices between the Company and its
current auditors.
It is anticipated that representatives of Deloitte & Touche LLP will be
present at the Annual Meeting and will be provided the opportunity to make a
statement, if they desire to do so, and to be available to respond to
appropriate questions.
SHAREHOLDER PROPOSALS
No proposals have been submitted by shareholders of the Company for
consideration at the Annual Meeting. It is anticipated that the next Annual
Meeting of Shareholders will be held during May 1997. Shareholders may present
proposals for inclusion in the Proxy Statement to be mailed in connection with
the 1997 Annual Meeting of Shareholders of the Company, provided such proposals
are received by the Company no later than December 5, 1996, and are otherwise in
compliance with applicable laws and regulations and the governing provisions of
the articles of incorporation and bylaws of the Company.
MISCELLANEOUS
OTHER BUSINESS
Management does not know of any business other than that referred to in the
Notice which may be considered at the Annual Meeting. If any other matters
should properly come before the Annual Meeting, it is the intention of the
persons named in the accompanying form of proxy to vote the proxies held by them
in accordance with their best judgment.
In order to assure the presence of the necessary quorum and to vote on the
matters to come before the Annual Meeting, please indicate your choices on the
enclosed proxy and date, sign, and return it promptly in the envelope provided.
The signing of a proxy by no means prevents your attending the meeting.
By Order of the Board of Directors,
UTAH MEDICAL PRODUCTS, INC.
/s/ Kevin L. Cornwell
Salt Lake City, Utah Kevin L. Cornwell, President and CEO,
April 1, 1996 and Director
<PAGE>
PROXY
ANNUAL MEETING OF THE SHAREHOLDERS OF (THIS PROXY IS SOLICITED ON BEHALF
UTAH MEDICAL PRODUCTS, INC. OF THE BOARD OF DIRECTORS)
The undersigned hereby appoint Kevin L. Cornwell and Paul O. Richins, and
each of them, proxies, with full power of substitution, to vote the shares of
common stock of Utah Medical Products, Inc. (the "Company") which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Company (the "Annual Meeting") to be held at the Little America Hotel, 500 South
Main Street, Salt Lake City, Utah , on May 17, 1996, at 12:00 noon, local time,
and any postponment or adjournment(s) thereof, such proxies being directed to
vote as specified below. IF NO INSTRUCTIONS ARE SPECIFIED, SUCH PROXIES WILL BE
VOTED "FOR" EACH PROPOSAL.
To vote in accordance with the Board of Directors' recommendations, sign
below; the "FOR" boxes may, but need not be, checked. To vote against any of
the recommendations, check the appropriate box(es) marked "WITHHOLD AUTHORITY"
or "AGAINST," below.
(1) To elect Stephen W. Bennett, M.D., Dr.P.H., and Ernst Hoyer as
directors of the Company to serve three year terms and until each's
respective successor is elected and qualified;
STEPHEN W. BENNETT: FOR [ ] WITHHOLD AUTHORITY [ ]
ERNST HOYER: FOR [ ] WITHHOLD AUTHORITY [ ]
(2) To transact such other business as may properly come before the Annual
Meeting.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS IN THE RECORDS OF THE COMPANY. WHEN
SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. IF YOUR SHARES ARE HELD AT
A BROKERAGE HOUSE, PLEASE INDICATE THE NAME OF THE BROKERAGE HOUSE AND THE
NUMBER OF SHARES HELD.
Dated No. of Shares
------------------------- ------------------------------
Signature Signature (if held jointly)
--------------------- ----------------
Print Name Print Name
-------------------- ---------------------------------
PLEASE MARK, SIGN, DATE, AND RETURN PROXY IN THE BUSINESS REPLY ENVELOPE
PROVIDED. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
UTAH MEDICAL PRODUCTS, INC.
7043 SOUTH 300 WEST
MIDVALE, UTAH 84047
