Utah Medical Products, Inc. Schedule 14A - Proxy Statement 2007
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
o
|
Preliminary
Proxy Statement
|
o
|
Confidential,
for Use of the Commission Only (as permitted by rule
14a-6(e)(2))
|
x |
Definitive
Proxy Statement
|
o
|
Definitive
Additional Materials
|
o
|
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):
o
|
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:
|
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2)
|
Aggregate
number of securities to which transaction
applies:
|
|
3)
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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)
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Proposed
maximum aggregate value of
transaction:
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o
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Fee
paid previously with preliminary
materials.
|
o
|
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.
|
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule, or Registration Statement
No.:
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March
17,
2007
Dear
UTMD
Shareholder:
You
are
cordially invited to attend the 2007 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 11, 2007, 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 guests of the Company.
Proof of ownership can be a copy of the enclosed proxy card. You may wish to
refer to page one of this Proxy Statement for information about voting your
proxy, including voting at the Annual Meeting.
At
the
Annual Meeting, we seek the approval of UTMD shareholders in electing one
director and considering 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, you may revoke the proxy
and vote in person.
You
have
several options for obtaining UTMD’s public announcements and other disclosures
including financial information, such as SEC Forms 10-K and 10-Q. You can be
added to the Company mail or fax lists by contacting Paul Richins with your
mailing address or fax number, by sending an instruction letter to the corporate
address, by calling (801-569-4200) with instructions, or by e-mailing your
contact information to [email protected].
As an
alternative, you can view and print Company financial and other information
directly from UTMD’s website;
http://www.utahmed.com.
Thank
you
for your ownership in UTMD!
/s/
Kevin L.
Cornwell
Sincerely
Kevin
L.
Cornwell
Chairman
& CEO
UTAH
MEDICAL PRODUCTS, INC.
7043
South 300 West
Midvale,
Utah 84047
(801)
566-1200
____________________
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD MAY 11, 2007
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 11, 2007, at 12:00 noon,
local time, for the following purposes:
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(1)
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To
elect one director to serve for a term expiring at the 2010 Annual
Meeting
and until a successor is elected and qualified;
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(2)
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To
transact such other business as may properly come before the Annual
Meeting.
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UTMD’s
Board of Directors recommends a vote “FOR” the nominated director, whose
background is described in the accompanying Proxy Statement, and for the other
proposal.
Only
shareholders of record at the close of business on March 9, 2007 (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 3, 2007.
THE
ATTENDANCE AT AND/OR VOTE OF EACH SHAREHOLDER AT THE ANNUAL MEETING IS
IMPORTANT, AND EACH SHAREHOLDER IS ENCOURAGED TO ATTEND.
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BY
ORDER OF THE BOARD OF DIRECTORS
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/s/
Kevin L.
Cornwell
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Kevin
L. Cornwell, Secretary
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Salt
Lake City, Utah
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Dated:
March 17, 2007
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PLEASE
PROMPTLY FILL IN, SIGN, DATE AND RETURN THE ENCLOSED PROXY, WHETHER OR NOT
YOU
EXPECT TO ATTEND THE ANNUAL MEETING.
If
your shares are held in the name of a third party brokerage firm, nominee,
or
other institution, only that third party can vote your shares. In that case,
please promptly contact
the third party responsible for your account and give
instructions
how your shares should be voted.
TABLE
OF CONTENTS
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PAGE
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PROXY
STATEMENT
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1
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PROPOSAL
NO. 1. ELECTION OF DIRECTOR
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2
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SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN PERSONS
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4
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EXECUTIVE
OFFICER COMPENSATION
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5
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2006
Summary Compensation Table
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5
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2006
Grants of Equity Incentive Plan-Based Awards
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5
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2006
Grants of Non-Equity Incentive Plan-Based Awards
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6
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Outstanding
Equity Awards at 2006 Fiscal Year End
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7
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2006
Option Exercises and Stock Vested
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7
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2006
Pension Benefits
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7
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2006
Nonqualified Deferred Compensation
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7
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2006
Director Compensation
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8
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DISCLOSURE
RESPECTING THE COMPANY’S EQUITY COMPENSATION PLANS
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8
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COMPENSATION
DISCUSSION AND ANALYSIS
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9
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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13
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BOARD
OF DIRECTORS AND BOARD COMMITTEE REPORTS
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13
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Stockholder
Communications with Directors
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15
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Report
of the Compensation and Option Committee
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16
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Report
of the Audit Committee
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16
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STOCK
PERFORMANCE CHART
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17
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INDEPENDENT
PUBLIC ACCOUNTANTS
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18
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SHAREHOLDER
PROPOSALS
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19
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MISCELLANEOUS
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19
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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 11, 2007, 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 timely returned without specific instructions, it will be voted
at
the Annual Meeting:
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(1)
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FOR
the election of Barbara A. Payne as a director;
and
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(2)
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IN
accordance with the best judgment of the persons acting under the
proxies
on other matters presented for a
vote.
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The
Board of Directors has approved the foregoing proposals and recommends that
the
shareholders vote in favor of 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. 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 3,945,696 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 9, 2007 (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 3,945,696 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. Directors are elected by a plurality of the votes cast.
Abstentions and broker non-votes are not counted for purposes of determining
whether a matter has been approved or a director has been elected.
Executive
officers and directors holding an aggregate of 391,934 shares, or approximately
9.9%, of the issued and outstanding stock have indicated their intent to vote
in
favor of all proposals.
PROPOSAL NO. 1. ELECTION OF DIRECTOR
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 Barbara A. Payne for election as a director for a three-year
term
expiring at the 2010 Annual Meeting.
It
is
intended that votes will be cast, pursuant to authority granted by the enclosed
proxy, for the election of the nominee named above as director of the Company,
except as otherwise specified in the proxy. In the event a nominee shall be
unable to serve, votes will be cast, pursuant to authority granted by the
enclosed proxy, for such other person 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 nominee 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’ nominee for election as a director of the Company at the Annual
Meeting is Barbara A. Payne. Other members of the Board of Directors were
elected at the Company’s 2005 and 2006 meetings for terms of three years, or
were appointed to fill a vacancy for the unexpired term of a director, and
therefore, are not standing for election at the Annual Meeting. The terms of
Mr.
Hoyer and Dr. Beeson expire at the 2008 Annual Meeting. The terms of Mr.
Cornwell and Mr. Richins expire at the 2009 Annual Meeting. The Board of
Directors has determined that Dr. Payne, Mr. Hoyer and Dr. Beeson are
independent directors within the meaning of NASD Rule 4200(a)(15). Background
information appears below with respect to the incumbent directors whose terms
have not expired, as well as the director standing for reelection to the Board.
Name
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Age
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Year
First
Elected
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Business
Experience during Past Five Years
and
Other Information
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Kevin
L. Cornwell
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60
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1993
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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 30-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 Management Science
from the Stanford Graduate School of Engineering, and M.B.A. degree
specializing in Finance and Operations Management from the Stanford
Graduate School of Business.
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Ernst
G. Hoyer
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69
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1996
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Retired.
Served fifteen years as 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 M.B.A. degree from the University of
Santa
Clara.
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Barbara
A. Payne
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60
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1997
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Retired.
Served over eighteen years as corporate research scientist for a
Fortune
50 firm, and 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.
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Name
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Age
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Business
Experience during Past Five Years
and
Other Information
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James
H. Beeson
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65
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2007
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Professor
and Chairman of The University of Oklahoma College of Medicine, Tulsa,
Department of Obstetrics and Gynecology. Received B.S. degree in
Chemistry
from Indiana University in 1962, Ph.D. degree in Organic Chemistry
from
M.I.T. in 1966, MBA from Michigan State University in 1970, and M.D.
from
the University of Chicago Pritzker School of Medicine in 1976. Served
four
year residency in Ob/Gyn at Chicago Lying-In Hospital, and has actively
practiced Obstetrics and Gynecology for over 30 years. Currently
licensed
to practice medicine in the states of Utah and Oklahoma. Has published
numerous articles and other technical papers.
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Paul
O. Richins
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46
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1998
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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 M.B.A. degree from Pepperdine University.
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Code
of Ethics
The
Company has adopted a Code of Conduct that applies to all of its employees,
including its named executive officers, principal financial officer, and board
of directors. The Code of Ethics is available on the Company’s website,
www.utahmed.com.
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN PERSONS
The
following table furnishes information concerning the ownership of the Company’s
Common Stock as of March 9, 2007, by the directors, the nominees for director,
the executive officers named in the compensation tables on page 5, all directors
and executive 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, 2006.
Name
|
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Nature
of
Ownership
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Number
of Shares Owned
|
|
Percent
|
|
Principal
Shareholders
|
|
|
|
|
|
|
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FMR
Corp
|
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Direct
|
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510,380
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13.0%
|
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82
Devonshire Street
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|
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|
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Boston,
Massachusetts 02109
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|
|
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|
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Ashford
Capital Management, Inc.
|
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Direct
|
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405,000
|
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10.3%
|
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1
Walkers Mill Road
|
|
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Wilmington,
Delaware 19807
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Directors
and Executive Officers
|
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|
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|
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|
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|
|
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Kevin
L. Cornwell (1)
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Direct
|
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289,241
|
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7.3%
|
|
|
|
Options
|
|
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50,000
|
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1.3%
|
|
|
|
Total
|
|
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339,241
|
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8.5%
|
|
|
|
|
|
|
|
|
|
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|
Ernst
G. Hoyer (1)(2)(3)(4)
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Direct
|
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53,844
|
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1.4%
|
|
|
|
Options
|
|
|
10,000
|
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0.3%
|
|
|
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Total
|
|
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63,844
|
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1.6%
|
|
|
|
|
|
|
|
|
|
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|
Paul
O. Richins
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Direct
|
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29,011
|
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0.7%
|
|
|
|
Options
|
|
|
456
|
|
0.0%
|
|
|
|
Total
|
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29,467
|
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0.7%
|
|
|
|
|
|
|
|
|
|
|
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|
Barbara
A. Payne(2)(3)4)
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Direct
|
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19,838
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0.5%
|
|
|
|
Options
|
|
|
10,000
|
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0.3%
|
|
|
|
Total
|
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|
29,838
|
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0.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
James
H. Beeson(2)(3)4)
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Direct
|
|
|
0
|
|
0.0%
|
|
|
|
Options
|
|
|
0
|
|
0.0%
|
|
|
|
Total
|
|
|
0
|
|
0.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
All
executive officers and
|
|
Direct
|
|
|
391,934
|
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9.9%
|
|
directors
as a group (5 persons)
|
|
Options
|
|
|
70,456
|
|
1.8%
|
|
|
|
Total
|
|
|
462,390
|
|
11.5%
|
|
_________________________
(1)
Executive Committee member.
(2)
Audit
Committee member.
(3)
Nominating Committee member.
(4)
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.
Section
16(a) Beneficial Ownership Reporting 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.
EXECUTIVE
OFFICER COMPENSATION
The
following table sets forth, for the last fiscal year, compensation received
by
the Company’s Chief Executive Officer and Principal Financial Officer. There are
no other named executive officers.
2006
Summary Compensation Table
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Option
Awards
($)
|
|
Non-equity
Incentive
Plan Compensation
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
Kevin
L. Cornwell
|
|
2006
|
|
256,100
|
|
--
|
|
--
|
|
261,250
|
|
5,730
|
|
523,080
|
Chairman
& CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
O. Richins
|
|
2006
|
|
90,280
|
|
--
|
|
--
|
|
15,873
|
|
2,960
|
|
109,113
|
VP
& Principal Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greg
A. LeClaire
|
|
2006
|
|
32,230
|
|
--
|
|
--
|
|
--
|
|
1,380
|
|
33,610
|
Former
VP & CFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Narrative
disclosure to the Summary Compensation Table:
|
1. |
Mr.
LeClaire terminated employment in April 2006.
|
|
2. |
Amounts
included in All Other Compensation represent the aggregate total
of
Company 401(k) matching contributions, Company Section 125 matching
contributions, and reimbursements under UTMD’s pet insurance plan to each
named executive officer, all of which are benefits generally available
to
all employees. During 2007, each named executive officer will be
eligible
to receive payment of eligible medical expenses under the employee
Health
Plan, up to $5,400 in 401(k) matching contributions, up to $500 in
matching pet health cost reimbursements, and up to $450 in matching
Section 125 matching contributions.
|
|
3. |
Medical,
dental and vision expenses paid in 2006 under the Company’s Health Plan,
which are generally available to all employees, are not included
in the
above table.
|
2006
Grants of Equity Incentive Plan-Based Awards
No
stock
option awards were made in 2006 to any of the named executive officers listed
in
the Summary Compensation Table, or are currently planned for 2007. The Company
has no other equity incentive plans.
2006
Grants of Non-Equity Incentive Plan-Based Awards
Named
Executive Officers participated in the Profit-Sharing Sales & Management
Bonus Plan (MB Plan), generally available to all exempt, as well as key
nonexempt, employees. The structure of the performance-based MB Plan is
described in the following Compensation
Discussion and Analysis. The
2006
grants under the MB Plan to the named executive officers were recommended by
the
Compensation and Audit Committee in early 2007, after the independent audit
of
financial results had been concluded. The grants were subsequently approved
by
the board of directors. The structure of the MB Plan remains the same for 2007.
Additional
narrative disclosure to the Summary Compensation Table:
|
4. |
The
Compensation Committee establishes the criteria, and directs the
implementation, of all compensation program elements for the CEO.
The
CEO’s base salary is set at the beginning of each year by the board of
directors after review of the recommendation of the Compensation
Committee. Mr. Cornwell’s base salary for 2006 was set the same as for
2005. Mr. Cornwell’s base salary for 2007 will also remain the same. The
annual MB paid to Mr. Cornwell for 2006, which represented 50% of
his
total compensation, is tied closely to the Company’s success. In 2006,
UTMD’s operating income, income before income taxes and earnings per share
increased 17.3%, 21.6% and 12.2%, respectively. These amounts all
exceeded
UTMD’s operating plan. Mr. Cornwell’s MB increased 5.8%, and his total
compensation increased 2.8%. The increase in the CEO’s base salary and
bonus was substantially more modest than the rate of increase of
UTMD’s
income, and substantially lower than the salary and bonus increase
guidelines established by the Compensation Committee for all UTMD
employees, in part because the Compensation Committee has also taken
into
consideration the fact that Mr. Cornwell benefits from his ownership
of
UTMD stock, approximately two-thirds of which was accumulated through
the
exercise of earlier option awards.
|
|
5. |
For
all other employees, in collaboration with the other executive officer(s),
the CEO develops compensation policies, plans and programs that are
intended to meet the objectives of the Company’s overall compensation
program. The Compensation and Option Committee annually formally
reviews
and approves the elements of the compensation program recommended
by the
CEO. In addition, the committee periodically reviews any proposed
changes
within a calendar year. The compensation of employees other than
the CEO,
including other named executive officer(s), is administered by the
CEO
under the review and ratification of the Compensation Committee comprised
of all the independent directors.
|
Mr.
Richins’ base salary at the beginning of 2007 was $92,400 which is subject to
review and adjustment during the year on the same basis as the Company’s
performance review criteria for its exempt employees. Mr. Richins’ MB, which was
about 15% of his total compensation in 2006, increased 10.1%, which was
consistent with the increase targeted by the Compensation Committee for all
participants in the MB Plan (excluding the CEO), based solely on Company
performance. Other (non-executive) employees’ MBs were adjusted up or down from
that guideline to reflect individual performance and individual contribution
to
UTMD’s success in exceeding the operating plan during 2006.
|
6. |
Employment
Agreements, Termination of Employment, and Change in
Control.
|
Except
for Mr. Cornwell, the Company has no employment agreements in the United States.
In Ireland, UTMD is subject to providing certain advance notice to its employees
in the event of termination.
In
May
1998, the Company entered into an agreement with the CEO to provide a long
term
incentive to increase shareholder value. 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 years’ salary and bonuses, and the appreciation of stock value for
awarded options above the option exercise price. Presently, Mr. Cornwell holds
50,000 option shares at an exercise price of $25.59/ share. Based on the $32.98/
share closing price on December 31, 2006 and actual salary plus bonuses for
the
three years of 2004-2006, the additional compensation would be $2,148,500.
In
the
event of a change in control, the Company will also pay Mr. Cornwell incentive
compensation under the agreement equal to about 1% of the excess value per
share
paid by an acquiring company that exceeds $14.00 per share. For example, at
the
$32.98 per share closing price at the end of 2006, the amount of incentive
compensation in the event of an acquisition of UTMD would be $1,423,500. At
the
time of the execution of the agreement, the value per UTMD share was
approximately $7.75.
The
CEO
is the only employee with a formal termination benefit agreement, which was
last
modified in 1998. The board of directors does not anticipate the need for any
other agreements for the indefinite future. In the absence of any practical
requirement, UTMD has no general policies regarding termination benefits.
The
Company is also 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 number of options outstanding as of December 31, 2006, excluding
those held by the CEO, is 177,900 at an average exercise price of $17.66/ share.
At the $32.98 per share closing price at the end of 2006, the amount of change
of control pay due all optionees excluding the CEO would be
$2,726,100.
Outstanding
Equity Awards at 2006 Fiscal Year End
|
|
Option
Awards
|
Named
Executive Officer
|
|
Number
of Securities
Underlying
Unexercised
Options
(#)
|
|
Number
of Securities
Underlying
Unexercised
Options
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
Kevin
L. Cornwell
|
|
50,000
|
|
--
|
|
25.59
|
|
1/29/2014
|
Paul
O. Richins
|
|
6,000
|
|
--
|
|
7.25
|
|
1/30/2008
|
|
|
5,000
|
|
--
|
|
6.75
|
|
1/28/2010
|
|
|
2,000
|
|
--
|
|
9.125
|
|
2/2/2011
|
|
|
1,000
|
|
--
|
|
15.01
|
|
3/1/2012
|
|
|
938
|
|
62
|
|
17.71
|
|
1/31/2013
|
|
|
2,000
|
|
--
|
|
25.59
|
|
1/29/2014
|
|
|
250
|
|
250
|
|
18.00
|
|
10/4/2014
|
|
|
150
|
|
250
|
|
21.68
|
|
5/13/2015
|
The
Company has no outstanding Stock
Awards.
|
2006
Option Exercises and Stock Vested
|
|
Option
Awards
|
Named
Executive Officer
|
|
Number
of Shares
Acquired
on Exercise
(#)
|
|
Value
Realized
on
Exercise
($)
|
Kevin
L. Cornwell
|
|
198,277
|
|
4,687,205
|
Paul
O. Richins
|
|
4,000
|
|
97,400
|
Greg
A. LeClaire
|
|
13,313
|
|
212,269
|
The
Company has made no Stock Awards.
|
|
|
|
|
2006
Pension Benefits
The
Company does not provide a defined benefit pension plan to any
employee.
2006
Nonqualified Deferred Compensation
The
Company does not provide nonqualified deferred compensation to any
employee.
2006
Director Compensation
Name
|
|
Fees
Earned or
Paid
in Cash
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
Stephen
Bennett
|
|
12,500
|
|
--
|
|
--
|
|
--
|
|
12,500
|
Ernst
Hoyer
|
|
27,000
|
|
--
|
|
--
|
|
--
|
|
27,000
|
Barbara
Payne
|
|
21,000
|
|
--
|
|
--
|
|
--
|
|
21,000
|
Narrative
disclosure to the Director Compensation Table:
|
1. |
Mr.
Hoyer was paid $4,000 as a member of the executive committee, $2,000
as
chairman of the audit committee and the $21,000 base annual director’s
fee.
|
|
2. |
Dr.
Bennett was paid $2,000 as a member of the executive committee, in
addition to $10,500 base director’s fee, for six months’ service. Dr.
Bennett resigned from the Board in July,
2006.
|
|
3. |
Dr.
Payne was paid the $21,000 base annual director’s
fee.
|
|
4. |
For
2007, the base annual director’s fee has been increased to
$22,000.
|
In
1994,
shareholders approved the 1993 Directors’ Stock Option Plan under which up to
80,000 shares per year could be granted to outside directors over a ten-year
term. The 1993 Plan expired in September 2003. Of the aggregate 800,000 option
share limit, 186,000 shares were granted. Prior to expiration on September
8,
2003, the Board of Directors awarded options to outside directors in the
aggregate amount of 30,000 shares at an exercise price of $24.02 per share.
The
Board of Directors did not approve an award of outside director options in
the
three preceding years 2000-2002, or in the ensuing years of 2004-2006.
At
December 31, 2006, 20,000 unexercised outside director options were outstanding
with an exercise price of $24.02. 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. At the $32.98 per share closing price at the end of 2006, the
amount of change in control pay due outside directors would be
$179,200.
DISCLOSURE RESPECTING THE COMPANY’S EQUITY COMPENSATION
PLANS
The
following table summarizes, as of the end of the most recent fiscal year,
compensation plans, including individual compensation arrangements, under which
equity securities of the Company are authorized for issuance, aggregated for
all
compensation plans previously approved by shareholders and for all plans not
previously approved by shareholders:
Plan
Category
|
|
Number
of Securities To Be Issued upon Exercise of Outstanding Options,
Warrants
and Rights
(a)
|
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and
Rights
(b)
|
|
Number
of Securities Remaining Available for Future Issuance under Equity
Compensation Plans (excluding securities reflected in column
(a))
(c)
(1)
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved
by security holders
|
|
|
228,000
|
|
$
|
19.40
|
|
|
439,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved
by security holders
|
|
|
-
|
|
(Not
applicable)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
228,000
|
|
$
|
19.40
|
|
|
439,000
|
|
(1)
Up to
an additional 100,000 shares will be added to the available shares on the first
day of each calendar year through 2013.
Additional
disclosure regarding dilution from equity awards:
In
2003,
shareholders approved the incentive stock option plan for employees and
directors summarized in the table above. The
Company currently has no other equity award programs. The dilutive impact to
shareholders of stock option awards is provided in the tables below:
|
|
2004
|
|
2005
|
|
2006
|
|
Option
shares available for award per shareholder approved option plans
(beginning of year)
|
|
|
1,676,360
|
|
|
358,700
|
|
|
441,909
|
|
Option
shares allocated by the Board of Directors
|
|
|
170,000
|
|
|
40,000
|
|
|
30,000
|
|
Total
option shares awarded
|
|
|
164,100
|
|
|
27,900
|
|
|
14,600
|
|
|
|
2004
|
|
2005
|
|
2006
|
|
Total
unexercised awarded option shares (end of year)
|
|
|
755,526
|
|
|
548,621
|
|
|
227,944
|
|
Weighted-average
unexercised option exercise price
|
|
$
|
13.24
|
|
$
|
13.89
|
|
$
|
19.40
|
|
Closing
market price of UTMD stock per share (end of year)
|
|
$
|
22.47
|
|
$
|
31.95
|
|
$
|
32.98
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
Dilution from options (shares)
|
|
|
276,063
|
|
|
230,207
|
|
|
99,441
|
|
(B)
Weighted average shares outstanding
|
|
|
4,399,015
|
|
|
3,961,813
|
|
|
3,943,437
|
|
Total
diluted shares outstanding (A+B), used for EPS calculation
|
|
|
4,675,078
|
|
|
4,192,020
|
|
|
4,042,878
|
|
COMPENSATION
DISCUSSION AND ANALYSIS
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, earnings per share (EPS) growth and return on
shareholders’ equity (ROE) 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 long term key financial
performance objectives are a 20% annually compounded rate of increase in EPS
and
an average ROE greater than 25%. The Company has cumulatively achieved these
financial objectives over the twenty years since 1986, its first year of
profitability since becoming a publicly-traded company.
At
the
beginning of each year, the board of directors approves an operating plan which
sets the standards for the Company’s financial and nonfinancial performance. The
performance each year may vary according to general economic conditions,
competitive environment, life cycle of products, new product development and
other factors. The Compensation Committee then approves compensation criteria
set in relation to the Company’s annual operating plan which includes numerous
income statement, balance sheet and cash flow measures, in addition to
nonfinancial objectives established for each employee participating in the
annual MB program.
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 time off).
(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.
UTMD
sets base salaries by reviewing the aggregate of base salary and annual bonus
for competitive positions in the market. The CEO’s base salary is set at the
beginning of each calendar year by the Board of Directors. For executive
officers and 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’s
Profit-Sharing Sales & Management Bonus (MB) Plan, which funds annual
management bonuses, along with other contemporaneous incentives during the
year,
is generated out of a pretax/prebonus profit-sharing pool accrued throughout
year, and finalized, where the annual bonus portion is concerned, after the
year-end independent financial audit has been completed. Prior to 2006, the
Board of Directors had approved an accrual guideline of 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
achieved 20% growth in pretax/prebonus accrual earnings, the MB Plan would
accrue 6% of pretax, prebonus earnings during the year into a “pool.” The pool
would then be distributed after the completed independent audit under
recommendation of the Compensation and Option Committee and approved by the
Board. Beginning in 2006, although the mechanism for the MB Plan remains
unchanged, in order to compensate for the decrease in the number of option
shares granted key employees (as the result of the requirement to expense the
estimated “value” of options), the Board of Directors increased the base percent
of the annual Management Bonus accrual formula from 4% to 5% of pretax/prebonus
profits. The pool accrual formula remains the same for 2007.
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 MB 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. As part of the planning process,
each
eligible employee develops a set of measurable and dated objectives for the
ensuing year. Achieving the Company’s plan sets an expected value per bonus
unit. After the end of the year, each individual participant’s contribution to
the Company’s performance is assessed in order to determine the allocation of
units for individual contributions, with the accomplishment of the beginning
of
year objectives as a key component. In 2006, 90 employees were included in
the
distribution of the $549,700 annual MB Plan payout. The MB Plan also funded
$23,500 in extraordinary bonuses paid contemporaneously to employees during
the
year, $14,700 in non-exempt employee attendance bonuses, and $8,200 in holiday
gifts 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
at any time during the year. These contemporaneous payments are made as
frequently as possible to recognize excellent accomplishments when they occur.
The awards are funded from the accrued MB plan described above, and therefore
do
not otherwise impact the Company’s financial performance. Senior management is
not eligible for these awards.
(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. The Board of Directors considers this
policy highly contributory to growth in future shareholder value. The number
of
options awarded in 2006 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 and the impact on earnings per share for option expense.
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 substantially smaller amounts, than shares
actually repurchased in the open market during the same time period.
In
1994,
shareholders approved the 1994 Employee Stock Option Plan under which up to
two
million shares could be granted to employees within a ten-year term. The 1994
Plan expired on January 29, 2004, with about 1.2 million of the two million
authorized option shares expiring because they were not granted. During the
same
ten year period, UTMD repurchased about 7.3 million of its shares in the open
market. At the 2003 Annual Meeting, shareholders approved the 2003 Employees’
and Directors’ Incentive Plan, under which up to 1.2 million shares may be
granted over the ten-year life of the plan. As of March 9, 2007, options
representing 50,400 shares are outstanding under the 2003 Plan.
After
the
conclusion of the annual independent audit and public announcement of financial
results, the Board of Directors allocates an annual amount of shares for
employee options each year at its regularly scheduled Board meeting following
the audited close of the prior year’s financial performance. Option shares may
be awarded on this same date at the closing price on the date of the meeting.
Some number of allocated shares are usually reserved for awards later in the
year to employees, including new or key employees with increased
responsibilities. The Compensation Committee approves all awards, and the
closing price on the date of the approval is the exercise price of the option
shares. According to policy, awards are not made in advance of material news
events, or when material non-public information is known.
During
2006, option awards were granted to 44 employees to purchase a total of 14,600
shares at an exercise price of $29.86 per share, none of which were awarded
to
named executive officers. Of the 14,600 options granted to employees in 2006,
options representing 1,600 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 ownership of the Company with those who help create its success is
the
best way to assure growth in shareholder value. In January 2007, the Board
of
Directors authorized 2007 awards of up to 30,000 option shares during 2007.
(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 2006 and
paid administrative expenses at a total cost of about $91,000. For 2007, the
Board of Directors has approved continuing the matching formula of 40% of
employee contributions, up to certain 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. Between 1998 and 2002,
employees being paid wages at a rate of $9.50 or less per hour were provided
a
25% discount to the standard premium rates. In 2003, employees with a base
annual salary over $45,000 began paying 10-20% more than the standard premium
rates, and employees being paid at a rate of $10.50 or less per hour were
provided a 25% discount to standard premiums paid by other
employees.
Structure
for Executive Officer Compensation
Utilizing
the compensation objectives and vehicles outlined previously, the Compensation
and Option Committee, comprised of all three outside directors, establishes
base
salary for the CEO. All other employees’ salaries are set by the CEO, and
reviewed by the Committee for consistency with the Company’s compensation
objectives. The Committee used surveys of similar companies selected from among
the companies with which UTMD’s stock is compared in the Stock Performance
Chart, based on variations in industry type, geographic location, size, and
profitability as the Committee deemed appropriate. 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 bonuses for the named executive officers are awarded using the same
basis
as all employees included in the annual profit-sharing MB Plan. The goals for
executive officers include financial and non-financial goals. Financial goals
include 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 include continuing the development of a talented and
motivated team of employees, conceiving and implementing programs to maintain
competitive advantages and to achieve consistent earnings per share 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, protecting intellectual
property, maintaining compliance with regulatory requirements, achieving a
high
regard for the integrity of the Company and its management, and minimizing
issues that represent significant business risk factors. In 2006, UTMD met
all
of its financial and most non-financial objectives. Based on the Company’s
overall performance, annual bonuses were 10% higher than the previous year
for
the same level of management responsibility and contribution.
The
Committee intends that stock options serve as a significant component of the
executive officer total compensation in order to retain critical efforts on
behalf of the Company and to focus efforts on enhancing shareholder value.
The
Committee believes that past option awards have successfully provided this
incentive. An option for 50,000 shares was awarded the CEO in January 2004,
at
an exercise price of $25.59 per share. No CEO options had been awarded from
1999
through 2003, and none were awarded in 2005 or 2006.
Compensation
and Option Committee Interlocks and Insider Participation
The
members of the Compensation and Option Committee remain Ernst G. Hoyer and
Barbara A. Payne who were on the committee for the full year 2006. Dr. Stephen
Bennett served until his resignation in July 2006. Dr. James Beeson was added
as
a replacement for Dr. Bennett in February 2007. No member of the committee
is a
present or former officer of the Company or any subsidiary. There are no other
interlocks. No member of the Committee, his or her family, or his or her
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.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
None.
BOARD
OF DIRECTORS AND OTHER BOARD COMMITTEE REPORTS
Director
Independence
UTMD’s
Board of Directors has determined that a majority of its directors are
independent, as that term is defined in NASD Rule 4200(a)(15), which satisfies
the independence requirement of NASD Rule 4350(c). The Board of Directors was
not aware of any transactions, relationships or arrangements to be considered
in
determining that Dr. Payne, Mr. Hoyer and Dr. Beeson were independent under
the
NASD Rules.
Board
Committees and Meetings
The
board
of directors held four formal meetings during 2006, and one meeting to date
in
2007. All of the directors attended all meetings during their respective
incumbencies.
The
Company has Executive, Audit, Nominating, and Compensation and Option
Committees. The current members of the Company’s committees are identified in
the table on page 4. The written charters of each of these committees are
available for review at www.utahmed.com.
The
Executive Committee held two formal meetings during 2006, and one meeting to
date in 2007. In addition, the Committee met informally about twice per month.
At its formal meetings, the Committee took actions which were later ratified
by
the full Board of Directors.
The
Audit
Committee formally met four times during 2006 and once to date in 2007 to review
the results of the periodic independent reviews and audits by Jones Simkins,
P.C., UTMD’s independent auditor. In addition, the Audit Committee met
informally about once per quarter. The Audit Committee selects the Company’s
independent accountants, approves the scope of audit and related fees, and
reviews financial reports, audit results, internal accounting procedures,
internal controls and other programs to comply with applicable requirements
relating to financial accountability.
The
Nominating Committee met informally during 2006 at board of director meetings.
The Nominating Committee, which is comprised of the independent members of
the
Board of Directors, takes the lead in nominating new directors. The Nominating
Committee will consider nominees recommended by shareholders. In accordance
with
the Company’s Bylaws, shareholders’ 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 40 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).
When
considering candidates for directors, the Nominating Committee takes into
account a number of factors, including the following:
|
·
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judgment,
skill, integrity and reputation;
|
|
·
|
whether
the candidate has relevant business experience;
|
|
·
|
whether
the candidate has achieved a high level of professional accomplishment;
|
|
·
|
independence
from management under both Nasdaq and Securities and Exchange Commission
definitions;
|
|
·
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existing
commitments to other businesses;
|
|
·
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potential
conflicts of interest with other pursuits;
|
|
·
|
corporate
governance background and experience;
|
|
·
|
financial
and accounting background that would permit the candidate to serve
effectively on the Audit Committee;
|
|
·
|
age,
gender, and ethnic background; and
|
|
·
|
size,
composition, and experience of the existing Board of Directors.
|
The
committee will also consider candidates for directors suggested by stockholders
using the same considerations. Stockholders wishing to suggest a candidate
for
director should write to Nominating Committee, Utah Medical Products, Inc.,
7043
South 300 West, Midvale, UT 84047 and include:
|
·
|
a
statement that the writer is a stockholder and is proposing a candidate
for consideration by the committee;
|
|
·
|
the
name of and contact information for the
candidate;
|
|
· |
a
statement that the candidate is willing to be considered and would
serve
as a director if elected;
|
|
·
|
a
statement of the candidate’s business and educational experience
preferably in the form of a resume or curriculum vitae;
|
|
·
|
information
regarding each of the factors identified above, other than facts
regarding
the existing Board of Directors, that would enable the committee
to
evaluate the candidate;
|
|
·
|
a
statement detailing any relationship between the candidate and any
customer, supplier, or competitor of the Company;
|
|
·
|
detailed
information about any relationship or understanding between the
stockholder and the proposed candidate;
and
|
|
·
|
confirmation
of the candidate’s willingness to sign the Company’s code of ethics and
other restrictive covenants, and abide by all applicable laws and
regulations.
|
Before
nominating a sitting director for reelection at an annual meeting, the committee
will consider:
|
·
|
the
director’s performance on the Board of Directors and attendance at Board
of Directors’ meetings; and
|
|
·
|
whether
the director’s reelection would be consistent with the Company’s
governance guidelines and ability to meet all applicable corporate
governance requirements.
|
When
seeking candidates for director, the committee may solicit suggestions from
incumbent directors, management or others. After conducting an initial
evaluation of the candidates, the committee will interview that candidate if
it
believes the candidate might be suitable for a position on the Board of
Directors. The committee may also ask the candidate to meet with management.
If
the committee believes the candidate would be a valuable addition to the Board
of Directors, it will recommend to the full Board of Directors that candidate’s
nomination.
The
Compensation and Option Committee, comprised of all incumbent outside directors
as indicated in the table on page 4, consulted by telephone and met once
formally in early 2006 and 2007 to review management performance relative to
objectives for the prior year, recommend compensation and develop compensation
strategies and alternatives throughout the Company, including those discussed
in
the Compensation Discussion and Analysis section of this Proxy Statement. The
deliberations culminated in recommendations ratified at the January 2007 Board
of Directors meeting.
In
each
2006 board 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
policy of the Company is that each member of the Board of Directors is
encouraged, but not required, to attend the Annual Meeting. Four of five
directors attended the 2006 Annual Meeting.
Stockholder
Communications with Directors
UTMD
stockholders who wish to communicate with the Board, any of its committees,
or
with any individual director may write to the Company at 7043 South 300 West,
Midvale, UT 84047. Such letter should indicate that it is from a UTMD
stockholder. Depending upon the subject matter, management will:
|
·
|
forward
the communication to the director, directors, or committee to whom
it is
addressed;
|
|
·
|
attempt
to handle the inquiry directly if it is a request for information
about
UTMD or other matter appropriately dealt with by management;
or
|
|
·
|
not
forward the communication if it is primarily commercial in nature,
or if
it relates to an improper or irrelevant topic.
|
At
each
Board of Directors’ meeting, a member of management will present a summary of
communications received since the last meeting that were not forwarded to the
directors and make those communications available to the directors on
request.
Report
of the Compensation and Option Committee
The
Compensation Committee has reviewed and discussed the CD&A with UTMD
management. Based on that review, the Committee recommended to the Board of
Directors that the CD&A be included in the Company’s annual report on Form
10-K and this Proxy Statement.
Submitted
by the Compensation and Option Committee:
|
Ernst
G. Hoyer
|
|
Barbara
A. Payne
|
|
James
H. Beeson
|
Report
of the Audit Committee
The
Audit
Committee of the Board of Directors is composed of all outside directors, all
of
whom are independent as defined in Nasdaq Stock Market Rule 4200(a)(15) and
under Rule 10A-3(b)(1) adopted pursuant to the Securities Exchange Act of 1934.
The members of the Audit Committee are James H. Beeson, Ernst G. Hoyer and
Barbara A. Payne. Dr. Stephen W. Bennett served as a member of the Audit
Committee until July 2006. Dr. Beeson was elected to replace Dr. Bennett in
February 2007. In July 2003, the Board of Directors adopted an updated Audit
Committee charter, which is attached as an appendix to this Proxy Statement.
Ernst G. Hoyer is the Board of Directors’ designated Audit Committee Financial
Expert consistent with The Sarbanes-Oxley Act of 2002.
The
Audit
Committee oversees the financial reporting and internal controls processes
for
UTMD on behalf of the Board of Directors. In fulfilling its oversight
responsibilities, the Audit Committee reviewed the quarterly and annual
financial statements included in the Annual Report to Shareholders and reports
filed with the Securities and Exchange Commission.
The
Audit
Committee formally met four times during 2006 and once to date in 2007 to review
the results of the reviews and audits by Jones Simkins, P.C., UTMD’s independent
auditor. The Committee also met informally from time to time during the year.
In
accordance with Statement on Auditing Standards No. 61, discussions were held
with management and the independent auditors regarding the acceptability and
the
quality of the accounting principles used in the reports. These discussions
included the clarity of the disclosures made therein, the underlying estimates
and assumptions used in the financial reporting, and the reasonableness of
the
significant judgments and management decisions made in developing the financial
statements. In addition, the Audit Committee has discussed with the independent
auditors their independence from the Company and its management, including
the
matters in the written disclosures required by Independence Standards Board
Standard No. 1 and The Sarbanes-Oxley Act of 2002.
The
Audit
Committee has also met with Company management and its independent auditors
and
discussed issues related to the overall scope and objectives of the audits
conducted, the internal controls used by the Company, the openness and honesty
of management, auditor verification of information provided by management,
quality control procedures used by auditors in performing the independent audit,
and any possible conflicts of interest. The Committee elicited recommendations
for improving UTMD’s internal control procedures. The independent auditors
completed a formal review of the scope and effectiveness of the Company’s
internal control procedures, and made a few minor recommendations.
Pursuant
to the reviews and discussions described above, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included
in
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2006, for filing with the Securities and Exchange Commission.
Submitted
by the Audit Committee:
|
Ernst
G. Hoyer
|
|
Barbara
A. Payne
|
|
James
H. Beeson
|
STOCK
PERFORMANCE CHART
The
following chart compares what an investor’s five-year cumulative total return
(assuming reinvestment of dividends) would have been assuming initial $100
investments on December 31, 2001, for the Company’s Common Stock and the two
indicated indices. The Company’s Common Stock trades on the Nasdaq Global
Market.
Cumulative
shareholder return data respecting the Nasdaq Stock Market (U.S. and Foreign)
are included as the comparable broad market index. The peer group index is
all
Nasdaq Stocks with Standard Industrial Classification (SIC) codes 3840-3849,
all
of which are in the medical device industry. UTMD’s primary SIC code is
3841.
|
|
Dec-01
|
|
Dec-02
|
|
Dec-03
|
|
Dec-04
|
|
Dec-05
|
|
Dec-06
|
|
Utah
Medical Products, Inc.
|
|
|
100.0
|
|
|
140.3
|
|
|
192.1
|
|
|
168.4
|
|
|
242.7
|
|
|
256.0
|
|
Nasdaq
Stock Market (US & Foreign)
|
|
|
100.0
|
|
|
68.8
|
|
|
103.8
|
|
|
112.9
|
|
|
115.5
|
|
|
127.4
|
|
Nasdaq
Stocks (SIC 3840-3849) Medical Devices, Instruments and
Supplies
|
|
|
100.0
|
|
|
80.9
|
|
|
119.7
|
|
|
140.2
|
|
|
153.9
|
|
|
162.3
|
|
INDEPENDENT PUBLIC ACCOUNTANTS
The
Board
of Directors retained Jones Simkins, P.C. as the Company’s auditor and
independent certified public accountants for the two years ended December 31,
2005 and 2006. 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
2007 will be made by the Company’s Audit Committee of the Board of Directors, at
such time as they may deem it appropriate.
Representatives
of Jones Simkins, P.C. will be present at the Annual Meeting and have the
opportunity to make a statement, if they desire to do so, and to be available
to
respond to shareholder questions.
Audit
Fees
During
2006 and 2005, UTMD paid Jones Simkins $79,181 and $71,467, respectively for
professional services rendered for the audit of its annual financial statements,
reviews of the financials included in UTMD’s quarterly reports on Form 10-Q and
related regulatory reviews, S-8 review, and audit of its internal controls
in
accordance with the Sarbanes Oxley Act of 2002.
Audit-Related
Fees
UTMD
did
not pay Jones Simkins, P.C. any audit-related fees during 2006 or
2005.
Tax
Fees
During
2006 and 2005, UTMD paid Jones Simkins, P.C. $40,871 and $35,383, respectively,
for tax filing, preparation, and tax advisory services.
All
Other Fees
UTMD
paid
no other fees to Jones Simkins, P.C. in either 2006 or 2005.
Audit
Committee Policy and Approval
The
engagements of UTMD’s auditors to perform all of the above-described services
were made by the Audit Committee. The policy of the Audit Committee is to
require that all services performed by the independent auditor be pre-approved
by the Audit Committee before services are performed.
Auditor
Independence
The
Audit
Committee has considered whether the provision of the services rendered for
nonaudit matters is compatible with maintaining Jones Simkins’ independence, and
concluded that its independence was not impaired by performing such work for
the
Company.
SHAREHOLDER
PROPOSALS
No
proposals have been submitted by shareholders of the Company for consideration
at the 2007 Annual Meeting. It is anticipated that the next Annual Meeting
of
Shareholders will be held during May 2008. In accordance with SEC Rule 14a-8
and
the advance notice requirements of Section 2.15 of UTMD’s Bylaws, shareholders
may present proposals for inclusion in the Proxy Statement to be mailed in
connection with the 2008 Annual Meeting of Shareholders of the Company,
provided
such
proposals are received by the Company no later than December 2, 2007, 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 that
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. Whether
or not you sign a proxy, we encourage you to attend 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
17, 2007
|
Chairman
and CEO
|
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 11, 2007, 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@
or
AAGAINST,"
below.
|
(1) |
To
elect one director of the Company to serve a three year term and
until her
successor is elected and qualified;
|
Barbara
A. Payne:
|
FOR
G
|
WITHHOLD G
|
|
(2) |
To
transact such other business as may properly come before the Annual
Meeting.
|
FOR
G
|
AGAINST
G
|
ABSTAIN
G
|
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
ACT PROMPTLY
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