utahmedicaldef14a031708.htm
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
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Definitive
Proxy Statement
|
o
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Definitive
Additional Materials
|
o
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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)
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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)
|
Proposed
maximum aggregate value of
transaction:
|
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,
2008
Dear UTMD
Shareholder:
You are
cordially invited to attend the 2008 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 9, 2008, 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 two
directors 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!
Sincerely,
/s/
Kevin L. Cornwell
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 9, 2008
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 9, 2008, at 12:00 noon, local time, for the following
purposes:
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(1)
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To
elect two directors to serve for terms expiring at the 2011 Annual Meeting
and until successors are 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 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 7, 2008 (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, 2008.
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
Dated:
March 17, 2008
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 DIRECTORS
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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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2007
Summary Compensation Table
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5
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2007
Grants of Equity Incentive Plan-Based Awards
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5
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2007
Grants of Non-Equity Incentive Plan-Based Awards
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6
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Outstanding
Equity Awards at 2007 Fiscal Year End
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7
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2007
Option Exercises and Stock Vested
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7
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2007
Pension Benefits
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7
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2007
Nonqualified Deferred Compensation
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7
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2007
Director Compensation
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7
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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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12
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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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14
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Report
of the Compensation and Option Committee
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15
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Report
of the Audit Committee
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15
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STOCK
PERFORMANCE CHART
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16
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INDEPENDENT
PUBLIC ACCOUNTANTS
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17
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SHAREHOLDER
PROPOSALS
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18
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MISCELLANEOUS
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18
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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 9, 2008, 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 Ernst G. Hoyer and James H. Beeson, M.D., Ph.D. as
directors; 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 3,885,000 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 7, 2008 (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 3,885,000 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 390,154 shares, or approximately 10%, 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
Mr. Ernst G. Hoyer and Dr. James H. Beeson for election as directors, each for a
three-year term expiring at the 2011 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’ nominees for
election as directors of the Company at the Annual Meeting are Ernst G. Hoyer
and James H. Beeson. Other members of the Board of Directors were
elected at the Company’s 2006 and 2007 meetings for terms of three years, and
therefore, are not standing for election at the Annual Meeting. The
terms of Mr. Cornwell and Mr. Richins expire at the 2009 Annual Meeting, and the
term of Dr. Payne expires at the 2010 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 directors
standing for reelection to the Board.
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Year
First
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Business
Experience during Past Five Years
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Name
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Age
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Elected
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and Other
Information
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Kevin
L. Cornwell
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61
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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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70
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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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61
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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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Year
First
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Business
Experience during Past Five Years
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Name
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Age
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Elected
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and Other Information
|
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James
H. Beeson
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66
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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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47
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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.
[remainder
of page intentionally left blank]
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN PERSONS
The following table furnishes
information concerning the ownership of the Company’s Common Stock as of March
7, 2008, 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, 2007.
Name
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Nature
of
Ownership
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Number
of Shares Owned
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Percent
|
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Principal
Shareholders
|
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FMR
Corp
|
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Direct
|
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473,310 |
|
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12.2% |
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82
Devonshire Street
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Boston,
Massachusetts 02109
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Ashford
Capital Management, Inc.
|
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Direct
|
|
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361,622 |
|
|
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9.3% |
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1
Walkers Mill Road
|
|
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Wilmington,
Delaware 19807
|
|
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Bares
Capital Management, Inc.
|
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Direct
|
|
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259,507 |
|
|
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6.7% |
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221
West 6th Street, Suite 1225
|
|
|
|
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Austin,
Texas 78701
|
|
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Directors
and Executive Officers
|
|
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Kevin
L. Cornwell (1)
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Direct
|
|
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289,241 |
|
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7.4% |
|
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Options
|
|
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50,000 |
|
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1.3% |
|
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Total
|
|
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339,241 |
|
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8.6% |
|
|
|
|
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|
|
|
|
|
|
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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% |
|
|
|
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Options
|
|
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10,000 |
|
|
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0.3% |
|
|
|
|
|
|
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63,844 |
|
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1.6% |
|
|
|
|
|
|
|
|
|
|
|
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Paul
O. Richins
|
|
|
|
|
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27,231 |
|
|
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0.7% |
|
|
|
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Options
|
|
|
|
113 |
|
|
|
0.0% |
|
|
|
|
|
|
|
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27,344 |
|
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0.7% |
|
|
|
|
|
|
|
|
|
|
|
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Barbara
A. Payne(2)(3)(4)
|
|
|
|
|
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19,838 |
|
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0.5% |
|
|
|
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Options
|
|
|
|
10,000 |
|
|
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0.3% |
|
|
|
|
|
|
|
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29,838 |
|
|
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0.8% |
|
|
|
|
|
|
|
|
|
|
|
|
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James
H. Beeson(2)(3)(4)
|
|
|
|
|
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0 |
|
|
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0.0% |
|
|
|
|
Options
|
|
|
|
2,500 |
|
|
|
0.1% |
|
|
|
|
|
|
|
|
2,500 |
|
|
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0.1% |
|
|
|
|
|
|
|
|
|
|
|
|
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|
All
executive officers and
|
|
|
|
|
|
|
390,154 |
|
|
|
10.0% |
|
directors
as a group (5 persons)
|
|
|
Options
|
|
|
|
72,613 |
|
|
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1.8% |
|
|
|
|
|
|
|
|
462,767 |
|
|
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11.7% |
|
__________________________
(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 two fiscal years, compensation received by the Company’s Chief Executive
Officer and Principal Financial Officer. There are no other named
executive officers.
2007
Summary Compensation Table
|
|
|
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Salary
|
|
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Bonus
|
|
|
Option
Awards
|
|
|
Non-equity
Incentive Plan Compensation
|
|
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All
Other Compensation
|
|
|
Total
|
|
Name
and Principal Position
|
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Kevin
L. Cornwell
|
|
|
2007
|
|
|
256,100 |
|
|
-- |
|
|
-- |
|
|
247,000 |
|
|
5,850 |
|
|
508,950 |
|
Chairman
& CEO
|
|
|
2006
|
|
|
256,100 |
|
|
-- |
|
|
-- |
|
|
261,250 |
|
|
5,730 |
|
|
523,080 |
|
Paul
O. Richins
|
|
|
2007
|
|
|
94,435 |
|
|
-- |
|
|
-- |
|
|
15,007 |
|
|
3,097 |
|
|
112,539 |
|
VP
& Principal Financial Officer
|
|
|
2006
|
|
|
90,280 |
|
|
-- |
|
|
-- |
|
|
15,873 |
|
|
2,960 |
|
|
109,113 |
|
Narrative disclosure to the Summary
Compensation Table:
|
1.
|
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 2008, each named executive officer will
be eligible to receive payment of eligible medical expenses under the
employee Health Plan, up to $5,520 in 401(k) matching contributions, up to
$500 in matching pet health cost reimbursements, and up to $450 in
matching Section 125 matching
contributions.
|
|
2.
|
Medical,
dental and vision expenses paid in 2007 under the Company’s Health Plan,
which are generally available to all employees, are not included in the
above table.
|
|
3.
|
Non-equity
Incentive Plan Compensation amounts, as described in more detail on the
next page under 4., were paid in late January or early February of the
following calendar year, representing Management Bonuses earned during the
fiscal year reported.
|
2007
Grants of Equity Incentive Plan-Based Awards
No stock option awards were made in
2007 to any of the named executive officers listed in the Summary Compensation
Table, or are currently planned for 2008. The Company has no other
equity incentive plans.
2007
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 2007 grants under the MB Plan to the named
executive officers were recommended by the Compensation and Audit Committee in
early 2008, 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
2008.
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 2007 was
the same as for 2006. Mr. Cornwell’s base salary for 2008 will
also remain the same. The annual MB paid to Mr. Cornwell for
2007, which represented 49% of his total compensation, is tied closely to
the Company’s success. In 2007, UTMD’s sales, operating income,
and earnings per share decreased 0.9%, 0.7% and 1.9%,
respectively. Mr. Cornwell’s MB for 2007 decreased 5.5%, and
his total compensation decreased 2.7% compared to 2006. Mr.
Cornwell’s MB for 2007 was the same as for 2005. Sales,
operating income and earnings per share (EPS) in 2007 were each higher
than in 2005 by 2.9%, 16.4% and 10.1% respectively. The 2007
decrease in the CEO’s bonus and total compensation was greater than the
rate of decrease of UTMD’s sales and income, and substantially lower than
the salary and bonus increase guidelines established by the Compensation
Committee for all UTMD employees, in part because the Committee has also
taken into consideration the fact that Mr. Cornwell benefits from his
ownership of UTMD stock.
|
|
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 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 2008 was $95,200 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 13% of his total
compensation in 2007, decreased 5.5%, consistent with the decrease
targeted by the Compensation Committee for all participants in the MB
Plan 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 performance in 2007.
|
|
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
$29.72/ share closing price on December 31, 2007 and actual salary plus
bonuses for the three years of 2005-2007, the additional compensation
would be $1,710,300.
|
|
In
the event of a change in control, the Company will also pay Mr. Cornwell
incentive compensation under the agreement equal to about 1.8% of the
excess value per share paid by an acquiring company that exceeds $14.00
per share. For example, at the $29.72 per share closing price
at the end of 2007, the amount of incentive compensation in the event of
an acquisition of UTMD would be $1,179,000. 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, 2007, excluding those held by the CEO, is 162,200 at an
average exercise price of $20.50/ share. Of those option
shares, 33,075 are at exercise prices above $29.72, the year-end 2007
closing price. At the $29.72 per share closing price, the
amount of change of control pay due all optionees excluding the CEO would
be $1,532,900.
|
Outstanding
Equity Awards at 2007 Fiscal Year End
|
|
Option
Awards
|
|
|
Number
of Securities Underlying Unexercised Options
|
|
Number
of Securities Underlying Unexercised Options
|
|
Option
Exercise
|
|
Option
|
|
|
(#) |
|
(#) |
|
Price
|
|
Expiration
|
Named
Executive Officer
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
Kevin
L. Cornwell
|
|
50,000 |
|
-- |
|
25.59 |
|
1/29/2014
|
Paul
O. Richins
|
|
-- |
|
125 |
|
18.00 |
|
10/4/2014
|
|
|
-- |
|
150 |
|
21.68
|
|
5/13/2015
|
The
Company has no outstanding Stock Awards. |
2007
Option Exercises and Stock Vested
|
|
Option
Awards |
|
Named
Executive Officer
|
|
Number
of Shares Acquired on Exercise
(#)
|
|
Value
Realized on Exercise
($)
|
|
Kevin
L. Cornwell
|
|
--
|
|
--
|
|
Paul
O. Richins
|
|
17,625
|
|
405,970
|
|
The
Company has made no Stock Awards.
|
2007
Pension Benefits
The
Company does not provide a defined benefit pension plan to any employee.
2007
Nonqualified Deferred Compensation
The
Company does not provide nonqualified deferred compensation to any
employee.
2007
Director Compensation
|
|
Fees
Earned or Paid in Cash
|
|
Stock
Awards
|
|
Option
Awards
|
|
All
Other Compensation
|
|
Total
|
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
James
Beeson
|
|
18,375
|
|
--
|
|
55,078
|
|
412
|
|
73,865 |
|
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.
Beeson was paid $18,375 base director’s fee for ten and one-half month’s
service. Dr. Beeson joined the Board in February,
2007. Option Award compensation represents the full grant date
fair value (as estimated under SFAS 123R) of the 10,000 share option
granted to Dr. Beeson at $31.33 per share. The option vests
over a four-year period. All Other Compensation for Dr. Beeson
is reimbursements for a fax machine and associated out-of-pocket
communication costs.
|
|
3.
|
Dr.
Payne was paid the $21,000 base annual director’s
fee.
|
|
4.
|
For
2008, the base annual director’s fee will remain
$21,000.
|
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 2004-2007, except
for the 10,000 share award to Dr. Beeson for joining the board in
2007.
At December 31, 2007, 20,000
unexercised outside director options were outstanding with an exercise price of
$24.02, and 10,000 with a $31.33 exercise price. 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 $29.72 per
share closing price at the end of 2007, the amount of change in control pay due
outside directors would be $114,000.
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
|
|
|
|
212,000 |
|
|
|
|
$ |
21.70 |
|
|
|
|
|
525,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
|
- |
|
|
|
|
(Not
applicable)
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
212,000 |
|
|
|
|
$ |
21.70 |
|
|
|
|
|
525,000 |
|
|
(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:
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Option
shares available for award per shareholder approved option plans
(beginning of year)
|
|
|
358,700 |
|
|
|
441,909 |
|
|
|
537,203 |
|
Option
shares allocated by the Board of Directors
|
|
|
40,000 |
|
|
|
30,000 |
|
|
|
40,000 |
|
Total
option shares awarded
|
|
|
27,900 |
|
|
|
14,600 |
|
|
|
23,600 |
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Total
unexercised awarded option shares (end of year)
|
|
|
548,621 |
|
|
|
227,944 |
|
|
|
212,245 |
|
Weighted-average
unexercised option exercise price
|
|
$ |
13.89 |
|
|
$ |
19.40 |
|
|
$ |
21.70 |
|
Closing
market price of UTMD stock per share (end of year)
|
|
$ |
31.95 |
|
|
$ |
32.98 |
|
|
$ |
29.72 |
|
(A)
Dilution from options (shares)
|
|
|
230,207 |
|
|
|
99,441 |
|
|
|
61,916 |
|
(B)
Weighted average shares outstanding
|
|
|
3,961,813 |
|
|
|
3,943,437 |
|
|
|
3,926,591 |
|
Total
diluted shares outstanding (A+B), used for EPS calculation
|
|
|
4,192,020 |
|
|
|
4,042,878 |
|
|
|
3,988,507 |
|
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, 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-one 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 the
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, and, except for the CEO, has added an
additional bonus inflating factor ranging from 7-11%. The pool
accrual formula remains the same for 2008.
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 2007, 83
employees were included in the distribution of the $510,900 annual MB Plan
payout. The MB Plan also funded $35,300 in extraordinary bonuses paid
contemporaneously to employees during the year, $13,400 in non-exempt employee
attendance bonuses, and $6,300 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 2007 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 7, 2008, options representing 75,000 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
2007, option awards were granted to 33 employees and one director to purchase a
total of 23,600 shares at an exercise price of $31.33 per share, none of which
were awarded to named executive officers. Of the 13,600 options
granted to employees in 2007, options representing 2,600 shares have been
canceled after termination of services. All 10,000 shares granted to
Dr. Beeson remain outstanding. Employee and director 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 2008, the Board of Directors
authorized awards of up to 20,000 option shares during 2008, and 12,500 of those
shares have already been granted to 20 employees at an exercise price of $29.41
per share, none of which were awarded to named executive officers or
directors.
(4) Retirement
Plans. The Company has sponsored a 401(k) retirement plan for
U.S. employees since 1985, and a contributory retirement plan for Irish
employees since 1998. The Compensation and Option Committee believes
that a continuance of the retirement plans 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 2007 and paid administrative expenses at a total cost
of about $119,000. For 2008, the Board of Directors has approved
continuing the retirement plan matching formulas on the same basis as in
2007.
(5) Group Benefit
Plans. The Company provides group health, dental, and life
insurance benefit plans for its employees. For U.S. employees, the
medical plan is 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 U.S. 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. In Ireland, employees are
provided medical and life coverages consistent with benefits provided to
employees of similar companies.
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 2007, UTMD generally did not meet its financial
objectives. Based on the Company’s overall performance, annual
bonuses were 5.5% lower than the previous year for unchanged management
responsibility and contribution.
The Committee intends that stock
options serve as a significant component of executive officers’ 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 through 2007.
Compensation
and Option Committee Interlocks and Insider Participation
The members of the Compensation and
Option Committee are Ernst G. Hoyer, Barbara A. Payne and Dr. James H.
Beeson. Dr. Beeson joined the committee 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 2007, and one meeting to date in 2008. 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 about two
informal meetings per month during 2007, and to date in 2008. In
2007, the Committee did not take any formal actions of behalf of the Board of
Directors.
The Audit Committee formally met four
times during 2007 and once to date in 2008 to review the quarterly financial
reports, and periodic independent reviews and audits by Jones Simkins, P.C.,
UTMD’s independent auditor. 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 2007 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;
|
|
·
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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;
|
|
·
|
existing
commitments to other businesses;
|
|
·
|
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 2007 and 2008 to review
management performance relative to objectives for the prior years, 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 2008 Board of Directors
meeting.
In each 2007 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, as needed.
The
policy of the Company is that each member of the Board of Directors is
encouraged, but not required, to attend the Annual Meeting. All five
directors attended the 2007 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. Beeson joined the Audit Committee 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 2007 and once to date in 2008 to review the quarterly financial
reports and 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, 2007, for filing with the
Securities and Exchange Commission.
Submitted
by the Audit Committee:
|
Ernst
G. Hoyer
|
|
Barbara
A. Payne
|
|
James
H. Beeson
|
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,
2002, 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.
|
|
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Dec-02
|
|
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Dec-03
|
|
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Dec-04
|
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|
Dec-05
|
|
|
Dec-06
|
|
|
Dec-07
|
|
Utah
Medical Products, Inc.
|
|
|
100.0 |
|
|
136.9 |
|
|
120.0 |
|
|
172.9 |
|
|
182.4 |
|
|
170.0 |
|
Nasdaq
Stock Market (US & Foreign)
|
|
|
100.0 |
|
|
150.8 |
|
|
164.1 |
|
|
167.9 |
|
|
185.2 |
|
|
204.7 |
|
Nasdaq
Stocks (SIC 3840-3849) Medical Devices, Instruments and
Supplies
|
|
|
100.0 |
|
|
147.9 |
|
|
173.3 |
|
|
190.3 |
|
|
200.6 |
|
|
255.0 |
|
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, 2006 and 2007. 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
2008 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 2007 and 2006, UTMD paid Jones
Simkins $91,434 and $79,181, 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 2007 or 2006.
Tax
Fees
During
2007 and 2006, UTMD paid Jones Simkins, P.C. $29,350 and $40,871, respectively,
for tax filing, preparation, and tax advisory services.
All
Other Fees
UTMD paid no other fees to Jones
Simkins, P.C. in either 2007 or 2006.
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.
No proposals have been submitted by
shareholders of the Company for consideration at the 2008 Annual
Meeting. It is anticipated that the next Annual Meeting of
Shareholders will be held during May 2009. 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 2009 Annual Meeting of Shareholders of the
Company, provided such
proposals are received by the Company no later than December 2, 2008, and are
otherwise in compliance with applicable laws and regulations and the governing
provisions of the Articles of Incorporation and Bylaws of the
Company.
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, 2008
|
Chairman
and CEO
|
PROXY
Annual
Meeting of the Shareholders of
Utah
Medical Products, Inc.
|
(This
Proxy is Solicited on Behalf
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 9, 2008, 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 two directors of the Company to serve three year term and until
their successors are elected and qualified;
|
|
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|
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Ernst
G. Hoyer:
|
FOR
G |
WITHHOLD
G |
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James
H. Beeson:
|
FOR
G |
WITHHOLD
G |
|
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(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) _____________________
|
|
|
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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