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
[ ] Confidential, for Use of the Commission Only (as permitted by rule 14a-
6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S240.14a-11(c) or S240.14a-12
UTAH MEDICAL PRODUCTS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filling Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2), or
Item 22(a)(2) of Schedule 14A.
[ ] 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 (Set forth the amount on which the
filing fee is calculated and state how it was determined).
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] 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>
March 23, 1999
Dear UM Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders of
Utah Medical Products, Inc. (UM). The meeting will be held promptly at 12:00
noon (local time) on Friday, May 14, 1999 at the corporate offices of UM, 7043
South 300 West, Midvale, Utah USA. Please use the North Entrance.
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. Proof of ownership can be a copy of the enclosed proxy
card. You may wish to refer to page two of this Proxy Statement for information
about voting your proxy, including voting at the Annual Meeting.
At the Annual Meeting, UM shareholders will elect two directors and consider
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.
If you would like to receive UM's press releases and other financial information
such as SEC Forms 10-K and 10-Q, you can choose from several methods of
obtaining the information: To be added to the Company mailing list, call (801-
569-4200), write or e-mail ([email protected]) your mailing address to Paul
Richins. To get news releases by facsimile, call 800-758-5804, access number
891175 and follow the instructions. To use the Internet, you can view and print
the information directly from UM's website: HTTP://WWW.UTAHMED.COM.
Thank you for your ownership in UM!
Sincerely,
/s/ Kevin L. Cornwell
Kevin L. Cornwell
Chairman & 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 14, 1999
TO THE SHAREHOLDERS OF UTAH MEDICAL PRODUCTS, INC.
The Annual Meeting of Shareholders (the "Annual Meeting") of Utah Medical
Products, Inc. (the "Company" or "UM "), will be held at the corporate offices
of the Company, 7043 South 300 West, Midvale, Utah, on May 14, 1999, at 12:00
noon, local time, for the following purposes:
(1) To elect two directors to serve for terms expiring at the 2002 Annual
Meeting and until successors are elected and qualified; and
(2) To transact such other business as may properly come before the Annual
Meeting.
UM's Board of Directors recommends a vote "FOR" each of the nominated
directors, whose backgrounds are described in the accompanying Proxy Statement,
and for the other proposal.
ONLY SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON MARCH 12, 1999
(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, 1999.
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: March 23, 1999
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" or "UM") in connection with the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the corporate offices of the
Company, 7043 South 300 West, Midvale, Utah, on May 14, 1999, 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 G.
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 7,840,336 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 12, 1999 (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 7,840,336 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 86,777 shares, or
approximately 1.11% of the issued and outstanding stock, have indicated their
intent to vote in favor of all proposals.
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 G. Hoyer for
election as directors, each for a three year term expiring at the 2002 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 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 G. Hoyer .
The other members of the Board of Directors were either elected at the Company's
1997 and 1998 meetings for terms of three years, or were appointed to fill a
vacancy in the Board, and therefore are not standing for election at the 1999
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 Business Experience During
First Past Five Years
Name Age Elected and Other Information
- ---------------- --- ------- ---------------------------------------------
Kevin L. Cornwell 52 1993 Chairman since 1996. 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 UM since December 1992;
Secretary since 1993. Has served in various
senior operating management positions in
several technology-based companies over a 25
year time span, including as a director on
seven other company boards.
Stephen W. Bennett 66 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.
Ernst G. Hoyer 61 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 29 year time span.
Barbara A. Payne 52 1997 Received B.A. degree in psychology from
Stanford University, M.A. degree from Cornell
University, and M.A. and Ph.D. degrees in
sociology from Stanford University. Served
over eighteen years as corporate research
scientist for a Fortune 50 firm, environmental
scientist for a national laboratory, and as a
consultant.
Paul O. Richins 38 1998 Received B.S. degree in finance from Weber
State University , and MBA degree from
Pepperdine University. Treasurer and Assistant
Secretary of UM since 1994. Joined UM in 1990.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN PERSONS
The following table furnishes information concerning the ownership of the
Company's Common Stock as of March 12, 1999, by the directors, the nominees for
director, the executive officer 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 as of
December 31, 1998.
Number of
Nature of Shares
Name Ownership Owned Percent
---- --------- ---------- --------
PRINCIPAL SHAREHOLDER
- ---------------------
FMR Corp. Direct 838,000 10.69%
82 Devonshire Street
Boston, Massachusetts 02109
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------
Kevin L. Cornwell(1)(3)(4) Direct 68,000 0.87%
Options 320,000 3.92%
-------
Total 388,000 4.75%
Ernst G. Hoyer(1)(2)(3)(4)(5) Direct 10,000 0.13%
Options 7,500 0.10%
-------
Total 17,500 0.22%
Paul O. Richins(4) Direct 4,977 0.06%
Options 18,063 0.23%
-------
Total 23,040 0.29%
Stephen W. Direct 2,500
Bennett(1)(2)(3)(4)(5) Options 25,000 0.03%
------
Total 27,500 0.35%
Barbara A. Payne(2)(3)(4)(5) Direct 1,300 0.02%
Options 1,250 0.02%
------
Total 2,550 0.03%
ALL OFFICERS AND DIRECTORS Direct 86,777 1.11%
AS A GROUP (8 PERSONS) Options 383,563 4.66%
Total -------
470,340 5.72%
(1) Executive Committee member.
(2) Audit Committee member.
(3) Nominating Committee member.
(4) Compliance Committee member.
(5) Compensation and Option Committee member.
In the previous table, shares owned directly by directors and executive officers
are owned beneficially and of record, and such record shareholder has sole
voting, investment, and dispositive power. Calculations of percentage of shares
outstanding assumes the exercise of options to which the percentage relates.
Percentages calculated for totals assume the exercise of options comprising such
totals.
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 1998 and one meeting to date in 1999.
All of the directors attended all meetings during their respective incumbencies.
The Company has Executive, Audit, Compliance, Nominating, and Compensation
and Option Committees. The current members of the Company's committees are
identified in the preceding table.
The Executive Committee held two formal meetings during 1998 and one formal
meeting to date in 1999. In addition, the Committee met informally about once
per month. At each of its formal meetings, the Committee passed resolutions on
behalf of the board of directors.
The Audit Committee met once during 1998 and once to date in 1999 to review
the results of the 1997 and 1998 audits by UM's independent auditor, Tanner +
Co., respectively. 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 met in conjunction with each board meeting during
1998. In each meeting, after receiving the Company's routine compliance
reports, the Board reviewed compliance by UM 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 during 1998. 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 her/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 three outside directors
as indicated in the table above, consulted by telephone and met once formally
near the beginning of 1999 to review management performance, 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 informal independent
analysis of the CEO compensation in selected medical device companies, which
culminated in recommendations at the January 1999 Board Meeting.
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. No other
executive officers received salary and bonus for services which exceeded
$100,000 for the fiscal year ended December 31, 1998.
[CAPTION]
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term Compensation
-----------------------
Annual Compensation Awards Payouts
----------------------- ------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Annual Restricted Underlying All Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Year Salary Bonus sation Award(s) SARs Payouts sation
Position Dec. 31 ($) ($) ($)(1) ($) (#)(2) ($) ($)
------- ------- ------ -------- ------ -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kevin L. 1998 $195,000 $120,240 $1,000 -- 85,000 -- --
Cornwell 1997 185,000 75,000 1,000 -- 65,000 -- --
Chairman & 1996 180,000 125,280 900 -- 180,000 -- --
Chief Executive
Officer
</TABLE>
(1) Amounts are Company payments for 401(k) matching contributions.
(2) Amount for 1996 is twice the number of option shares outstanding due to
the replacement of the February 1996 option award of 90,000 to Mr. Cornwell
which was canceled in September 1996 in exchange for options to purchase
the same number of shares at a lower exercise price and a longer vesting
schedule.
The following table sets forth information respecting all individual grants
of options made during the last completed fiscal year to any executive named in
the Summary Compensation Table.
[CAPTION]
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
Potential
Realized Value at
Assumed Annual
Rates of Stock
Price
Appreciation for
Option Term(2)
Individual Grants -----------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Number of Options/SARs
Securities Granted to Exercise
Underlying Employees or Base
Options/SARs During Fiscal Price Expiration
Name Granted(#) Year(1) ($/share) Date 5%($) 10%($)
--------- ------------ ------------ -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Kevin L.
Cornwell 85,000(3) 36.6% $7.25 Jan 2008 $387,600 $982,100
</TABLE>
(1) The Company awarded new options to employees representing 232,500 shares in
1998. Percentage shown is based on this total. As of March 1999, 205,200
shares of the 1998 awards remain outstanding.
(2) Value was calculated based on grant date market price ($7.25 per share)
assuming the indicated appreciation rates compounded annually.
(3) 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.
The following table sets forth information respecting the exercise of options
during the last completed fiscal year by each executive named in the Summary
Compensation Table above and the December 31, 1998 fiscal year end values of
unexercised options, based on the closing price ($6.5625) of the Company's
Common Stock on the New York Stock Exchange on December 31, 1998.
[CAPTION]
<TABLE>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c)
Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares
Name Acquired on Value Exercisable/ Exercisable/
Exercise (#) Realized ($) Unexercisable Unexercisable
--------- ----------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
Kevin L.
Cornwell 0 0 286,563/163,437 $0/$0
</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 long term 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 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.
(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. UM 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. UM has a Management Bonus Plan for sales, research and
development, and management employees, which is generated out of an annual
pretax profit sharing pool, calculated after the year-ending independent
financial audit has been completed. 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 Plan. For example, if
the Company achieves 20% growth in pretax earnings, the sales, research and
development, and management bonus pool will accrue 6% of pretax earnings, which
will be paid under recommendation of the Compensation and Option Committee and
approved by the Board.
UM's management personnel, beginning with the first level of supervision and
professional management, and including certain non-management specialists and
technical people, together with all direct sales representatives, are eligible
as participants in the Management Bonus Plan. In 1998, eighty participants
were included in the Plan. The Management Bonus Plan also funded extraordinary
performance bonuses paid to three employees during the year who were non-
participants in the Plan, attendance bonuses paid to over one hundred non-exempt
personnel and the annual holiday gift to employees.
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. The awards are funded from the accrued Plan
described above, and therefore do not impact the Company's financial
performance. Senior management is not eligible for these awards.
For 1998, executive management listed in the table on page 6 received a total
bonus of $120,240, which was equal to about 38% of aggregate base income and
about 30% of the pool accrued per the formula above. Actual individual bonuses
result from the Compensation and Option Committee's assessment and the Board's
approval of each senior executive's achievement of specific objectives and value
of both short term and long term contribution to the Company's overall
performance.
(3) Employee Stock Options. The Board of Directors believes that its awards
of stock options have successfully focused the Company's key management
personnel on building profitability and shareholder value. When taken together
with the share repurchase program, the net result of the option program over the
last five years has been awarding option shares to key employees at a higher
price, and in smaller amounts, than shares actually repurchased in the open
market during the same time period. The Board of Directors considers this
policy highly contributory to growth in future shareholder value. The number of
options granted in 1998 reflects the judgment of the Board of the number of
options sufficient to constitute a material, recognizable benefit to recipients.
No explicit formula criteria were utilized, other than minimizing dilution to
shareholder interests.
The Board of Directors ordinarily awards employee options each year at its
regularly scheduled board meeting following the audited close of the prior
year's financial performance. During 1998, the Board of Directors approved
grants to 100 employees of options to purchase a total of 232,500 shares at an
average price of $7.24 per share. Included in this number are options on 85,000
shares granted to executive management listed on page 6. In August, 1998 the
Board approved a grant of 5,000 shares to a consultant, at a price of $6.75 per
share, which subsequently has been canceled.
Of the 232,500 options granted to employees in 1998, options representing
27,300 shares have been canceled after termination of services. Employee options
vest over a four year period, with a ten year exercise period. Consultant
options vest over six months to four years, and have an exercise period of from
one to ten years, depending on length of service to UM. Management expects to
recommend additional options 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.
In January 1999, the Board of Directors authorized options to purchase a total
of 240,000 shares at a price of $6.50 per share. Included in this number are
options on 90,000 shares granted to executive management listed on page 6.
(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 1998 at a cost of about $63,000. Of this total
amount, executive management received $1,000. For 1999, the Board of Directors
has approved a matching formula of 40% of employee contributions, up to certain
individual limits, 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 similarly sized companies. A portion of the monthly premium
cost is generally paid by plan participants. Prior to 1998, all employees,
including executive officers and senior managers, paid premiums on the same
basis. Beginning in 1998, employees being paid wages at a rate of $9.50 or less
per hour were provided a 25% discount to the standard premium rates paid by
other employees.
Executive Officer Compensation
Utilizing the compensation objectives and vehicles outlined previously, the
Compensation and Option Committee comprised of all three outside directors
established base compensation for the CEO by reference to informal surveys of
similar companies, adjusted as the Committee deemed appropriate for variations
in industry type, geographic location, size, and profitability. Base salary was
fixed at a level 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. The
annual bonus 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.
The annual bonus for the CEO was awarded on the same basis as all employees
included in the Management Bonus Plan. At the beginning of the year, Plan
participants were awarded participation units in the bonus plan, proportional to
base salary and responsibility, based on the Committee's determination of the
relative contribution expected from each person toward attaining Company goals.
Each individual's 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, reacting to competitive challenges,
developing business initiatives to further support critical mass in a
consolidating marketplace, 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 amount of bonus paid to the CEO was based on the Committee's evaluation
of his success in meeting the respective shorter term performance objectives,
supplemented by the Committee's evaluation of his performance and contribution
in meeting the Company's longer term financial and non-financial objectives. In
1998, revenue and profit growth objectives set in the operating plan at the
beginning of the year were partially met. However, the acquisition of the Gesco
neonatal product line during the year was a significant accomplishment handled
directly by the CEO, without the need for investment banking resources which
would likely have resulted in fees in excess of the bonus paid to Mr. Cornwell
for 1998. In addition, the Committee believes that non-financial performance
objectives were met or exceeded. In particular, the U.S. direct sales force
required to implement UM's solutions selling approach was significantly
developed. Further, the CEO was credited by the Committee with protecting UM
shareholder interests in leading important litigation activities. 1998 stock
options were awarded the CEO incorporating the criteria utilized for
establishing cash bonuses as discussed above, supplemented by the Committee's
evaluation of the suitability of long-term option awards as an effective
incentive.
Upon application of the above criteria by the Compensation and Option
Committee and upon its recommendation in early 1999, the Board of Directors
awarded the CEO a bonus for 1998 of $120,240 under the Management Bonus Plan.
In addition, the Board set the CEO's 1999 base salary at $200,850.
The Committee intends that stock options serve as a significant component of
the CEO'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 (eps) starting in 1994, or on such other terms as the Board
of Directors may specify. In the first three years of the plan, actual
compounded primary eps growth averaged about 16% per year, but then declined 45%
in 1997. In 1998, eps grew 15%. In early 1999, upon the recommendation of the
Compensation Committee, the Board awarded Mr. Cornwell stock options to purchase
an additional 90,000 shares with an exercise price of $6.50 per share, vesting
over four years.
The foregoing report has been furnished by: Stephen W. Bennett
Ernst G. Hoyer
Barbara A. Payne
COMPENSATION AND OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Option Committee are Stephen W. Bennett,
Ernst G. Hoyer, and Barbara A. Payne. 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 UM.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
The Company is required to pay Mr. Cornwell additional compensation equal to
his last three year's salary and bonus 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, under the
agreement 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. Further, in the event of a change in control, the Company will pay Mr.
Cornwell incentive compensation equal to about 1% of the excess value per share
paid by an acquiring company that exceeds $14.00 per share.
The Company is required to pay all other optionees under employee and
outside director's 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.
The Company presently has no other employment agreements in the U.S. In
Ireland, the Company is subject to providing certain advance notice to its
employees in the event of termination. Under the terms of employment grants
awarded as incentives by the Industrial Development Agency (Ireland), the
Company would be obligated to repay grants during a five year period if
employment declined from levels at which grants were claimed by UM.
OUTSIDE DIRECTORS' COMPENSATION
Outside (non-employed) directors currently receive annual cash compensation
of $12,000 each ($15,000 for executive committee members) plus reimbursement of
expenses in attending meetings. In addition, pursuant to the 1993 Directors'
Stock Option Plan approved by shareholders at the 1994 annual meeting, UM
awarded 1998 options to each of three outside directors to purchase 10,000
shares at an exercise price of $7.1875 per share.
Pursuant to the FASB's recent proposed interpretation of APB Opinion No. 25,
on January 29, 1999 the Board of Directors awarded additional options to outside
directors in the aggregate amount of 45,000 shares at an exercise price of $6.50
per share. The 1999 outside director options will fully vest on August 30,
1999, which, under the current FASB interpretation, avoids the requirement for
UM to accrue option value charges against future reported earnings.
The board notes that the purpose of the Directors' Stock Option Plan, as
ratified and approved by the shareholders at an annual meeting, is to aid the
Company in retaining outside directors without interlocking interests, and to
provide directors with an incentive to use their best efforts to promote the
success of UM's business consistent with all shareholders' interests.
In seven years under the outside directors' option plan including 1999,
outside directors have been awarded options for 265,000 shares, of which 109,000
have been canceled without exercise. Outside director options which have not
been canceled or exercised represent about 11% of total Company options awarded
and uncanceled since 1993. The Company is required to pay optionees under the
outside directors' option plan, the appreciation of stock value for issued
options above the option exercise price in the event of a change of control of
the Company.
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, 1993 for the Company's Common Stock and the two
indicated indices. The Company's common stock traded on NASDAQ until December
26, 1996 when it began trading on the New York Stock Exchange.
Performance Graph appears here. Detailed below are the plot points:
<TABLE>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Utah Medical
Products 100.0 107.9 251.6 169.8 86.5 83.3
Nasdaq Stock Market
(US & Foreign) 100.0 97.0 136.2 166.8 203.7 282.0
Nasdaq Stocks (SIC
3800-3899 US
Companies) 100.0 107.7 158.6 165.1 187.8 191.9
</TABLE>
Cumulative shareholder return data respecting the Nasdaq Stock Market (U.S. and
Foreign) is included as the comparable broad market index and Nasdaq Stocks
Standard Industrial Classification Codes 3800 through 3899 (US Companies) is
included in UM's peer group because such Nasdaq groups include companies of
comparable market capitalization even though UM's common stock has been traded
on the NYSE since December 26, 1996.
UM provides cumulative shareholder return data based on the broadly based
Nasdaq SIC peer group involving a large number of diverse firms, even though UM
selects from this broadly based Nasdaq SIC group a number of similarly sized
companies engaged in the same or similar businesses in considering executive
compensation.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors retained Tanner + Co. as the Company's auditor and
independent certified public accountants for the years ended December 31, 1997
and December 31, 1998, and Deloitte & Touche LLP, in the preceding years. 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. The selection of the independent auditors for 1999 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. There are no
disagreements on accounting policies or practices between the Company and its
current or prior auditors.
It is anticipated that representatives of Tanner + Co. 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 2000. Shareholders may present
proposals for inclusion in the Proxy Statement to be mailed in connection with
the 2000 Annual Meeting of Shareholders of the Company, provided such proposals
are received by the Company no later than December 2, 1999, 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
Chairman and CEO
Salt Lake City, Utah
March 23, 1999
<PAGE>
PROXY
ANNUAL MEETING OF THE SHAREHOLDERS OF (THIS PROXY IS SOLICITED ON
UTAH MEDICAL PRODUCTS, INC. BEHALF OF THE BOARD OF DIRECTORS)
The undersigned hereby appoints Kevin L. Cornwell and Paul O. Richins
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 ("Annual Meeting")
to be held at the corporate offices of the Company, 7043 South 300 West,
Midvale, Utah, on May 14, 1999, at 12:00 noon, local time, and any postponement
or adjournment(s) thereof, such proxies being directed to vote as specified
below. IF NO INSTRUCTIONS ARE SPECIFIED, SUCH PROXY 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 boxes marked "WITHHOLD AUTHORITY" or
"AGAINST" below.
1. To elect Stephen W. Bennett, M.D., Dr.P.H., and Ernst G. Hoyer as
directors of the Company to serve a three-year term and until their
successors are elected and qualified:
Ernst G. Hoyer: FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY [ ]
Stephen W. Bennett: FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY [ ]
3. 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 IN THE SPACE PROVIDED THE NAME OF THE
BROKERAGE HOUSE AND THE NUMBER OF SHARES HELD.
Dated: Number 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
