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 24, 2000
Dear UTMD Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of Shareholders of
Utah Medical Products, Inc. (UTMD). The meeting will be held promptly at 12:00
noon (local time) on Friday, May 12, 2000 at the corporate offices of UTMD, 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, UTMD 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 UTMD'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 UTMD's website; HTTP://WWW.UTAHMED.COM.
Thank you for your ownership in UTMD!
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 12, 2000
TO THE SHAREHOLDERS OF UTAH MEDICAL PRODUCTS, INC.
The Annual Meeting of Shareholders (the "Annual Meeting") of UTAH MEDICAL
PRODUCTS, INC. (the "Company" or "UTMD"), will be held at the corporate offices
of the Company, 7043 South 300 West, Midvale, Utah, on May 12, 2000, at 12:00
noon, local time, for the following purposes:
(1) To elect two directors to serve for terms expiring at the 2003 Annual
Meeting and until successors are elected and qualified; and
(2) To transact such other business as may properly come before the Annual
Meeting.
UTMD'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 10, 2000
(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 7, 2000.
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 24, 2000
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 "UTMD") 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 12, 2000, 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 Kevin L. Cornwell and Paul O. Richins 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 6,442,011 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 10, 2000 (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 6,442,011 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 113,377 shares, or
approximately 1.76% 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 Kevin L. Cornwell and Paul O. Richins for election as
directors, each for a three year term expiring at the 2003 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. 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 2000 Annual Meeting are Kevin L. Cornwell and Paul O. Richins. The other
members of the Board of Directors were elected at the Company's 1998 and 1999
meetings for terms of three years, and therefore are not standing for election
at the 2000 Annual Meeting. Dr. Payne's term expires at the 2001 Annual
Meeting, and the terms of Dr. Bennett and Mr. Hoyer expire at the 2002 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.
<TABLE>
<CAPTION>
Year
First Business Experience During
Name Age Elected Past Five Years and Other Information
- ----------------- ---- ------- ------------------------------------------------------------
<S> <C> <C> <C>
Kevin L. Cornwell 53 1993 Chairman of UTMD since 1996. President and CEO since
December 1992; Secretary since 1993. Has served in various senior
operating management positions in several technology-based
companies over a 26 year time span, including as a director on seven
other company boards. 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.
Stephen W. Bennett 67 1994 Retired. Served five years as fund manager, director and senior
analyst for healthcare investments for an institutional investment
firm. 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.
Ernst G. Hoyer 62 1996 General Manager of Petersen Precision Engineering Company,
Redwood City, CA. Previously served in engineering and general
management positions for four technology-based companies over a
30 year time span. Received B.S. degree in process engineering from
the University of California, Berkeley and MBA degree from the
University of Santa Clara.
Barbara A. Payne 53 1997 Consultant. Served over eighteen years as corporate research
scientist for a Fortune 50 firm, environmental scientist for a national
laboratory. 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.
Paul O. Richins 39 1998 Chief Administrative Officer of UTMD since 1997. Treasurer and
Assistant Secretary since 1994. Joined UTMD in 1990. Received
B.S. degree in finance from Weber State University , and MBA
degree from Pepperdine University.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN PERSONS
The following table furnishes information concerning the ownership of the
Company's Common Stock as of March 10, 2000, 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, 1999.
<TABLE>
<CAPTION>
Nature of Number of
Name Ownership Shares Owned Percent
- --------------------------------- ---------- ------------- --------
<S> <C> <C> <C>
PRINCIPAL SHAREHOLDER
FMR Corp. Direct 758,800 11.78%
82 Devonshire Street
Boston, Massachusetts 02109
DIRECTORS AND EXECUTIVE OFFICERS
Kevin L. Cornwell(1)(3)(4) Direct 80,000 1.24%
Options 402,500 5.88%
-------
Total 482,500 7.05%
Ernst G. Hoyer(1)(2)(3)(4)(5) Direct 20,000 0.31%
Options 35,000 0.54%
----------
Total 55,000 0.85%
Stephen W. Bennett(1)(2)(3)(4)(5) Direct 5,500 0.09%
Options 45,000 0.69%
---------
Total 50,500 0.78%
Paul O. Richins(4) Direct 4,977 0.08%
Options 24,188 0.37%
--------
Total 29,165 0.45%
Barbara A. Payne(2)(3)(4)(5) Direct 2,900 0.05%
Options 20,000 0.31%
---------
Total 22,900 0.35%
ALL OFFICERS AND DIRECTORS Direct 113,377 1.76%
AS A GROUP (8 PERSONS) Options 539,613 7.73%
-------
Total 652,990 9.35%
<FN>
(1) Executive Committee member.
(2) Audit Committee member.
(3) Nominating Committee member.
(4) Compliance Committee member.
(5) Compensation and Option Committee member.
</TABLE>
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.
<PAGE>
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 four meetings during 1999 and one meeting to date in
2000. 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 1999 and one formal
meeting to date in 2000. 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 1999 and once to date in 2000 to review
the results of the 1998 and 1999 audits by UTMD's independent auditor, Tanner +
Co. 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
1999. In each meeting, after receiving the Company's routine compliance
reports, the Board reviewed compliance by UTMD 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 1999. 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 three outside directors
as indicated in the table above, consulted by telephone and met once formally
near the beginning of 2000 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 independent analysis of
the CEO compensation in the medical device industry, which culminated in
recommendations at the January 2000 Board Meeting.
<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. No other
executive officers received salary and bonus for services which exceeded
$100,000 for the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------------------ ---------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Annual Restricted Underlying All Other
Year Comp- Stock Options/ LTIP Compen-
Name and Principal Ended Salary Bonus ensation Award(s) SARs Payouts sation
Position Dec. 31 ($) ($) ($) (1) ($) (#) ($) ($)
- ------------------- ------- ------- ------- -------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kevin L. Cornwell 1999 200,850 166,500 4,000 -- 90,000 -- --
Chairman & Chief 1998 195,000 120,240 1,000 -- 85,000 -- --
Executive Officer 1997 185,000 75,000 1,000 -- 65,000 -- --
<FN>
(1) Amounts are Company payments for 401(k) matching contributions.
</TABLE>
The following table sets forth information respecting all individual
grants of options made during the last completed fiscal year to any
executive named in the Summary Compensation Table.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realized Value
at Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term (2)
- --------------------------------------------------------------------------------------- ---------------------
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees During Base Price Expiration
Name Granted(#)(3) Fiscal Year(1) ($/share) Date 5%($) 10%($)
- ------------------ ------------- --------------- ---------- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Kevin L. Cornwell 90,000 40.5% $ 6.50 Jan 2009 $367,900 $932,300
<FN>
(1) The Company awarded new options to employees representing 222,000 shares in 1999. Percentage shown is
based on this total. As of March 2000, 186,500 shares of the 1999 awards remain outstanding.
(2) Value was calculated based on grant date market price ($6.50 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.
</TABLE>
<PAGE>
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 ($6.75) of the
Company's Common Stock on the New York Stock Exchange on December 31, 1999.
<TABLE>
<CAPTION>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Kevin L. Cornwell 0 0 365,000 / 175,000 $0 / $22,500
</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.
<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. UTMD 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. UTMD has sales, research and development, and management
-------
bonuses, which are generated out of an annual pretax profit sharing pool, the
Management Bonus Plan, which is 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.
UTMD'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 1999, seventy-nine
participants were included in the Plan. The Management Bonus Plan also funded
extraordinary performance bonuses paid to thirty-two 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 1999, executive management listed in the table on page 6 received a
total bonus of $166,500, which was equal to about 83% of aggregate base income
and about 35% of the pool accrued per the formula above. The actual bonus
resulted from the Compensation and Option Committee's assessment and the Board's
approval of 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 Compensation and Option Committee
------------------------
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 1999 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 1999, the Board of Directors approved
grants to 96 employees of options to purchase a total of 222,000 shares at an
average price of $6.58 per share. Included in this number are options on 90,000
shares granted to executive management listed on page 6.
<PAGE>
Of the 222,000 options granted to employees in 1999, options representing
35,500 shares have been canceled after termination of services. Employee options
vest over a four year period, with a ten year exercise period. 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 2000, the Board of Directors authorized options
to purchase a total of 120,000 shares at a price of $6.50 per share. No options
were 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 1999 at a cost about $87,000. Of this total amount,
executive management received $4,000. For 2000, the Board of Directors has
approved continuing the 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 similar 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 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, operating margin, after-tax profits, 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 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
1999, financial objectives set in the operating plan at the beginning of the
year were met or exceeded. In particular, a 25% increase in operating profits
and 29% increase in earnings per share were considered extraordinary performance
by the Committee. In addition, the Committee believes that non-financial
performance objectives were met. For example, the U.S. direct sales force
required to implement UTMD's solutions selling approach was further developed.
Further, the CEO was credited by the Committee with protecting UTMD shareholder
interests in leading important litigation activities. 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
1999 of $166,500 under the Management Bonus Plan. In addition, the Board set
the CEO's 2000 base salary at $208,884.
<PAGE>
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
early 1999, upon the recommendation of the Compensation Committee, the Board
awarded Mr. Cornwell stock options to purchase 90,000 shares with an exercise
price of $6.50 per share, vesting over four years. No CEO options have been
awarded in 2000.
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 UTMD.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
The Company is required to pay Mr. Cornwell additional compensation 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. Under the agreement, the additional compensation that the Company is
required to pay Mr. Cornwell is equal to his last three year's income inclusive
of salary and bonus, and the appreciation of stock value for awarded options
above the option exercise price. In the event of a change in control, the
Company will also 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 awarded
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 declines from levels at which grants were claimed by UTMD.
OUTSIDE DIRECTORS' COMPENSATION
Outside (non-employed) directors currently receive annual cash compensation
of $14,000 each ($17,000 for executive committee members) plus reimbursement of
expenses in attending meetings.
On January 29, 1999 the Board of Directors awarded 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 vested on August 30, 1999. No
outside director options have been awarded in 2000. 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 UTMD's business consistent with all
shareholders' interests.
In eight years under the outside directors' option plan including 2000,
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.
<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, 1994 for the Company's Common Stock and the two
indicated indices. The Company's common stock traded on NASDAQ from December
1983 until December 26, 1996, when it began trading on the New York Stock
Exchange. On March 8, 2000 the Company's stock began trading once again on the
NASDAQ Stock Market.
Performance Graph appears here. Detailed below are the plot points:
<TABLE>
<CAPTION>
12/94 12/95 12/96 12/97 12/98 12/99
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Utah Medical Products 100.0 233.1 157.4 80.1 77.2 79.4
Nasdaq Stock Market (US & Foreign) 100.0 140.4 171.8 209.8 290.1 534.7
Nasdaq Stocks (SIC 3800-3899 US Companies) 100.0 147.2 153.3 174.3 177.0 292.7
</TABLE>
Cumulative shareholder return data respecting the Nasdaq Stock Market (U.S.
and Foreign) is included as the comparable broad market index. Even though
UTMD's common stock traded on the NYSE for the reporting period, Nasdaq Stocks
Standard Industrial Classification Codes 3800 through 3899 for U.S. Companies is
included in UTMD's peer group because such groups include companies of
comparable market capitalization and UTMD is now trading on the Nasdaq.
<PAGE>
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,
1998 and 1999. 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 2000 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
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 2001. Shareholders may present
proposals for inclusion in the Proxy Statement to be mailed in connection with
the 2001 Annual Meeting of Shareholders of the Company, provided such proposals
are received by the Company no later than December 8, 2000, 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
March 24, 2000 Chairman and CEO
<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 corporate offices of the
Company, 7043 South 300 West, Midvale, Utah, on May 12, 2000, 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
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 Kevin L. Cornwell and Paul O. Richins as directors of the
Company to serve three year terms and until their successors are elected
and qualified;
KEVIN L. CORNWELL: FOR [ ] WITHHOLD AUTHORITY [ ]
PAUL O. RICHINS: 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
