NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 23, 2001
Merit Medical Systems, Inc.
[Graphic Omitted]
You are cordially invited to attend the Annual Meeting of Shareholders of Merit
Medical Systems, Inc. (the "Company"), which will be held on Wednesday, May 23,
2001, at 3:00 p.m., at the Company's corporate offices at 1600 West Merit
Parkway, South Jordan, Utah (the "Annual Meeting"), for the following purposes:
(1) To elect two directors of the Company, each to serve for a term of three
years or until their respective successors have been duly elected and
qualified;
(2) To approve the adoption of the Merit Services Non-Qualified Employee Stock
Purchase Plan;
(3) To consider and vote upon a proposal to ratify the appointment of Deloitte
& Touche as independent auditor of the Company for the fiscal year ending
December 31, 2001; and
(4) To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 18, 2001, as the
record date for the determination of shareholders entitled to receive notice of
and to vote at the Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors,
By: /s/ KENT W. STANGER, C.P.A.
-------------------------------
KENT W. STANGER, C.P.A.
April 25, 2001 Chief Financial Officer,
Secretary and Treasurer
IMPORTANT
Whether or not you expect to attend the Annual Meeting in person, to assure that
your shares will be represented, please complete, date, sign and return the
enclosed proxy without delay in the enclosed envelope, which requires no
additional postage if mailed in the United States. Your proxy will not be used
if you are present at the Annual Meeting and desire to vote your shares
personally.
This Page Intentionally Left Blank
MERIT MEDICAL SYSTEMS, INC.
1600 West Merit Parkway, South Jordan, Utah 84095
PROXY STATEMENT
Annual Meeting of Shareholders
May 23, 2001
SOLICITATION OF PROXIES#
This Proxy Statement is being furnished to the shareholders of Merit Medical
Systems, Inc., a Utah corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company of proxies from holders of
outstanding shares of the Company's Common Stock, no par value (the "Common
Stock"), for use at the Annual Meeting of Shareholders of the Company to be held
on Wednesday, May 23, 2001, at 3:00 p.m., at the Company's headquarters located
at 1600 West Merit Parkway, South Jordan, Utah, and at any adjournment or
postponement thereof (the "Annual Meeting"). This Proxy Statement, the Notice of
Annual Meeting of Shareholders and the accompanying form of proxy are first
being mailed to shareholders of the Company on or about April 25, 2001.
The Company will bear all costs and expenses relating to the solicitation of
proxies, including the costs of preparing, printing and mailing to shareholders
this Proxy Statement and accompanying material. In addition to the solicitation
of proxies by use of the mails, the directors, officers and employees of the
Company, without receiving additional compensation therefore, may solicit
proxies personally or by telephone or facsimile. Arrangements will be made with
brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of the shares of
Common Stock held by such persons, and the Company will reimburse such brokerage
firms, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in connection therewith.
VOTING
The Board of Directors has fixed the close of business on April 18, 2001, as the
Record Date for determination of shareholders entitled to receive notice of and
to vote at the Annual Meeting (the "Record Date"). As of the Record Date, there
were issued and outstanding 7,852,025 shares of Common Stock. The holders of
record of the shares of Common Stock on the Record Date entitled to be voted at
the Annual Meeting are entitled to cast one vote per share on each matter
submitted to a vote at the Annual Meeting.
Proxies
Shares of the Common Stock which are entitled to be voted at the Annual Meeting
and which are represented by properly executed proxies will be voted in
accordance with the instructions indicated on such proxies. If no instructions
are indicated, such shares will be voted FOR the election of each of the two
director nominees for their respective terms; FOR the adoption of the Merit
Services Non-Qualified Employee Stock Purchase Plan; FOR the ratification of the
appointment of Deloitte & Touche to be the Company's independent auditor for the
fiscal year ending December 31, 2001; and in the discretion of the proxy holder
as to any other matters which may properly come before the Annual Meeting. A
shareholder who has executed and returned a proxy may revoke it at any time
prior to its exercise at the Annual Meeting by executing and returning a proxy
bearing a later date, by filing with the Secretary of the Company, at the
address set forth above, a written notice of revocation bearing a later date
than the proxy being revoked, or by voting the Common Stock covered thereby in
person at the Annual Meeting.
Vote Required
A majority of the issued and outstanding shares of Common Stock entitled to
vote, represented in person or by proxy, is required for a quorum at the Annual
Meeting. Abstentions and broker non-votes will be counted as "represented" for
the purpose of determining the presence or absence of a quorum. Under Utah law,
once a quorum is established, shareholder approval with respect to a particular
proposal is generally obtained when the votes cast in favor of a proposal exceed
the votes cast against the proposal. Accordingly, abstentions and broker
non-votes will not generally have the effect of being considered as votes cast
against any matter considered at the Annual Meeting. In the election of
directors, the two nominees receiving the highest number of votes will be
elected.
PROPOSAL NO. 1 ELECTION OF DIRECTORS
At the Annual Meeting, two Directors of the Company are to be elected to serve
for a term of three years or until their successors shall be duly elected and
qualified. Each of the nominees for Director, identified below, is currently a
Director of the Company. If any of the nominees should be unavailable to serve,
which is not now anticipated, the proxies solicited hereby will be voted for
such other persons as shall be designated by the present Board of Directors. The
two nominees receiving the highest number of votes at the Annual Meeting will be
elected.
1
Nominees for Election as Directors
Certain information with respect to each Director Nominee is set forth below.
James J. Ellis, 67, has been a Director of the Company since November
1995. He has been Managing Partner of Ellis/Rosier Financial Services since
1992. Mr. Ellis served as General Manager of MONY Financial Services, Dallas,
Texas from 1979 until his retirement in 1992. He also serves as a director of
Jack Henry & Associates, a publicly traded company engaged in the sales and
service of software for the banking industry. Mr. Ellis is nominated to serve a
three-year term.
Michael E. Stillabower, M.D., 57, has been a Director of the Company
since March 1996. Dr. Stillabower has been a physician in private practice in
Wilmington, Delaware since 1980. In 1999, Dr. Stillabower was appointed
Director, Cardiovascular Research, Christiana Care Health Systems. From 1988 to
1999, he was chief of cardiology at the Medical Center of Delaware, where he had
held a number of appointments including Director, Coronary Care Unit, from 1984
to 1988. In May 1995, he was appointed Clinical Associate Professor of Medicine,
Jefferson Medical College in Philadelphia, Pennsylvania, where he obtained his
M.D. degree in 1976. He is an Elected Fellow of the American College of
Cardiology and a member of other professional associations and is actively
engaged in cardiology research, instruction and publication of related papers
and abstracts. Dr. Stillabower is nominated to serve a three-year term..
The Board of Directors recommends that shareholders vote FOR each of the
foregoing nominees.
Directors Whose Terms of Office Continue
Fred P. Lampropoulos, 51, has been Chairman of the Board, President and
Chief Executive Officer of the Company since its formation in July 1987. From
1983 to June 1987, Mr. Lampropoulos was chairman of the board and president of
Utah Medical Products, Inc. ("Utah Medical"), a medical device company. Mr.
Lampropoulos' term as a director expires in 2003.
Kent W. Stanger, C.P.A., 46, has been Chief Financial Officer,
Secretary, Treasurer and a Director of the Company since 1987. Prior to joining
the Company, Mr. Stanger was the controller for Utah Medical from 1985 to August
1987. Prior to 1985, he was the corporate controller for Laser Corporation,
American Laser and Modulaire Industries, Inc. Mr. Stanger's term as a director
expires in 2003.
Rex C. Bean, 70, has been a Director of the Company since 1988. Mr.
Bean retired from the U.S. Air Force in 1987 and is principally engaged in the
management of private investments. Mr. Bean's term as a director expires in
2002.
Richard W. Edelman, 60, has been a Director of the Company since 1988.
He is the Managing Director and Dallas Branch Manager of Sanders, Morris,
Harris, a stock brokerage firm. From 2000 to 1998 he was senior vice president
at Southwest Securities, Inc., a stock brokerage firm located in Dallas, Texas.
From 1996 to 1998 he was managing director of Rodman & Renshaw, Inc., a stock
brokerage firm. From 1987 to 1996 he was employed by Southwest Securities, Inc.,
as senior vice president. Prior to joining Southwest Securities, Inc., in 1987,
Mr. Edelman was a securities analyst and vice president for Schneider, Bernet
and Hickman, a Dallas, Texas securities firm. Mr. Edelman obtained an MBA degree
from Columbia University, New York City, in 1966. Mr. Edelman's term as a
director expires in 2002.
Committees, Meetings and Reports
The Board of Directors has a standing Audit Committee and an Executive
Compensation Committee. The members of the Audit Committee are Rex C. Bean
(Chairman), James J. Ellis and Richard W. Edelman. The members of the Executive
Compensation Committee are James J. Ellis (Chairman), Rex C. Bean and Richard W.
Edelman. The Company has no nominating committee.
The Executive Compensation Committee met two times during the 2000
year. The Executive Compensation Committee has oversight responsibility for all
executive compensation and benefit programs of the Company. The Executive
Compensation Committee reviews and approves all executive compensation and
benefit plans.
During the fiscal year ended December 31, 2000 there were 8 meetings
held by the Board of Directors. No Director attended fewer than 75 percent of
the total number of meetings of the Board and of any committee on which he
served.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors to file
with the Securities and Exchange Commission (the "Commission") initial reports
of ownership and reports of changes in ownership of Common Stock and other
securities which are derivative of the Common Stock. Executive officers and
directors are required by Commission regulations to furnish the Company with
copies of all Section 16(a) reports they file. Based solely upon a review of the
copies of such forms furnished to the Company and written representations from
the Company's executive officers and directors, the Company believes that all
Section 16(a) reports required to be filed by the Company's officers and
directors were filed in a timely fashion.
2
Director Compensation
Directors who are not employees of the Company receive an annual retainer of
$5,000 and a director's fee of $1,000 per meeting attended in person and $250
for telephonic Board meetings. All directors also have received stock options on
an annual basis priced at the fair market value of the Company's stock on the
date of grant. All directors also are reimbursed by the Company for their
out-of-pocket travel and related expenses incurred in attending all Board and
committee meetings.
EXECUTIVE OFFICERS
In addition to Messrs. Lampropoulos and Stanger, whose biographies are
included elsewhere in this Proxy Statement as directors of the Company, certain
information is furnished with respect to the following executive officers of the
Company:
B. Leigh Weintraub, 51, was appointed chief operating officer in
February 1997 and was appointed vice president of operations in April 1995. She
was director and vice president of regulatory affairs and quality assurance of
the Company from August 1993 to 1995. From 1992 to August 1993, she was director
of regulatory affairs and clinical programs for Endomedix, a medical device
company based in Irvine, California. From 1988 to 1992, Ms. Weintraub was
employed by Baxter Healthcare Corporation as manager of quality strategies and
quality engineering and as project engineer, quality engineering. Ms. Weintraub
completed an executive MBA program at Pepperdine University in April 1993.
Brian L. Ferrand, 46, has been vice president of sales of the Company
since June 1993. He was director of sales of the Company from May 1992 to May
1993 and was national sales manager of the Company from December 1991 to April
1992. From 1987 to December 1991, Mr. Ferrand was employed by Medical Marketing
Associates and held positions as medical products sales representative, sales
manager, and vice president of marketing and sales.
Compensation of Executive Officers
The compensation of Fred P. Lampropoulos, the Company's Chief Executive
Officer, and the Company's other three most highly compensated executive
officers who were paid at least $100,000 (the "Named Executive Officers") during
the fiscal year ended December 31, 2000 is shown on the following pages in three
tables and discussed in a report from the Executive Compensation Committee of
the Board of Directors.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
- ----------------------------------------------------------------------------------------------------------
Annual Compensation Awards
Fiscal Options All Other
Name and Position Year Salary Bonus SARs (#) Compensation
Fred P. Lampropoulos 2000 $ 305,000 $ 25,450 47,500 22,843(1)(2)
Chairman of the Board, 1999 305,000 685 27,500 23,437(1)
Chief Executive Officer and President 1998 262,985 200 107,500 20,433(2)
Brian L. Ferrand 2000 200,000 30,377 15,000 15,522(1)(2)
Vice President of Sales 1999 200,000 50,000 10,000 6,606(1)(2)
1998 207,692 30,000 0 7,692(1)
Kent W. Stanger, C.P.A. 2000 $ 200,000 $ 10,000 27,500 12,361(1)(2)
Chief Financial Officer, 1999 185,577 0 26,250 13,317(1)(2)
Secretary, Treasurer and Director 1998 181,731 0 7,500 3,365(1)
B. Leigh Weintraub 2000 $ 200,000 $ 18,667 20,000 2,700(2)
Chief Operating Officer 1999 185,577 500 18,750 5,149(1)(2)
1998 181,058 13,968 0 0
- ----------------------------------------------------------------------------------------------------------
(1) Includes accrued vacation paid with cash in lieu of benefit.
(2) Amounts shown reflect contributions made by the Company for the benefit of
the Named Executive Officers under the formula plan provision of the
Company's 401(k) Profit Sharing Plan.
3
Option Grants in Last Fiscal Year
The following table sets forth individual grants of stock options made
to the Named Executive Officers during the fiscal year ended December 31, 2000.
As of December 31, 2000 the Company had not granted any stock appreciation
rights:
- ------------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value
Total Options at Assumed Annual Rates
Percent of of Stock Price
Granted to Appreciation for
Options Employees in Exercise Expiration Option Term
Name Granted Fiscal Year Price Date 5% 10%
Fred P. Lampropoulos . . . . . . . 47,500 10.4% 4.50 05/24/2005 $59,856 130,497
Brian L. Ferrand . . . . . . . . . . 15,000 3.3% 4.50 05/24/2005 18,649 41,209
Kent W. Stanger, C.P.A. . . . . . . 27,500 6.0% 4.50 05/24/2005 34,190 75,551
B. Leigh Weintraub . . . . . . . . . 20,000 4.4% 4.50 05/24/2005 24,865 54,946
- ------------------------------------------------------------------------------------------------------------------------------
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
The following table sets forth the number of shares of Common Stock
acquired during the fiscal year ended December 31, 2000 upon the exercise of
stock options, the value realized upon such exercise, the number of unexercised
stock options held on December 31, 2000 and the aggregate value of such options
held by the Named Executive Officers:
- -------------------------------------------------------------------------------------------------------------------------
Number of Unexercised Value of Unexercised
Number of Shares Value Options at In-the-Money Options
Acquired Realized on December 31, 2000 at December 31, 2000(1)
Name on Exercise Exercise Exercisable Unexercisable Exercisable Unexercisable
Fred P. Lampropoulos 0 $ 0 180,500 152,000 $ 8,438 $ 45,000
Brian L. Ferrand 0 0 0 49,000 31,000 0 16,985
Kent W. Stanger, C.P.A. 5,000 10,000 64,250 37,000 8,438 22,500
B. Leigh Weintraub 9,000 13,152 27,750 42,000 0 22,500
- -------------------------------------------------------------------------------------------------------------------------
(1) Reflects the difference between the exercise price of the Options granted
and the value of the Common Stock on December 31, 2000. The closing sale price
of the Common Stock on December 29, 2000 as reported by NASDAQ was $5.625 per
share.
Certain Relationships and Related Transactions
During fiscal 1998, the Company loaned to Fred P. Lampropoulos,
Chairman of the Board, President, and Chief Executive Officer, for personal
reasons, the sum of $225,000 payable in five annual installments with interest
at the Company's blended borrowing rate. The note evidencing the loan and a
related pledge agreement provide for collateral in the form of 62,950 shares of
Common Stock. In 1999, the Executive Compensation Committee of Merit Medical
extended the due date of the principal payments for a period of one year. The
first installment was paid by the surrender of shares of the Company's stock
owned by Mr. Lampropoulos in 2000.
Change of Control Employment Agreements
In March 1998, the Board of Directors of the Company approved Change of
Control Employment Agreements (the "Employment Agreements") for each of the
Named Executive Officers. These Employment Agreements provide certain benefits
in the event of a change of control of the Company, as well as payments and
benefits in the event of termination of employment under certain circumstances.
The Employment Agreements provide for the continued employment of the
Named Executive Officers for two years following a change of control (three
years in the case of Mr. Lampropoulos) (the "Employment Period") in essentially
the position held prior to the change of control and at an annual base salary
and average annual bonus which is based on the salary paid during the last
fiscal year and the average of the bonuses paid during the three fiscal years
prior to the change of control. In addition, during the Employment Period, the
Named Executive Officers are entitled to participate in all retirement plans,
benefit plans and other employee benefits in effect prior to the change of
control or, if more favorable, in those benefit programs provided to employees
after the change of control.
4
Upon termination of employment by the Company following a change of
control, other than for death, disability or cause, or if the Named Executive
Officer terminates employment for good reason, the Named Executive Officer is
entitled to receive the sum of (i) his or her base salary and bonus through the
date of termination (ii) any accrued or deferred compensation or benefits, (iii)
an amount equal to the Named Executive Officer's annual base salary and average
annual bonus multiplied by the number of whole or fractional years remaining in
the Employment Period, and (iv) continued coverage during the remainder of the
Employment Period under the Company's benefit plans, programs, practices or
policies. The Employment Agreements provide that the Named Executive Officers
may voluntarily terminate employment during a 30-day window period following the
first 12 months of the Employment Period and that such a termination will be
deemed for good reason. If termination of the Employment of a Named Executive
Officer occurs which is not related to a change of control and is for other than
death, disability or cause, the Named Executive Officer is entitled to receive
the sum of (i) and (ii) above, plus a sum equal to his or her annual base
compensation and average bonus (based on the base salary paid during the last
fiscal year and bonuses paid during the last three fiscal years).
If termination of employment of a Named Executive Officer occurs by
reason of death or disability, he or she shall be entitled to payment of base
salary and bonus through the date of termination, any deferred or accrued
benefits, and such other death or disability benefits equal to the most
favorable benefits provided by the Company to other employees and their
families. If the Named Executive Officer is terminated for cause during the
Employment Period, the Company shall be obligated to pay to the Named Executive
Officer his or her annual base salary through the date of termination, the
amount of any compensation previously deferred, and any other benefits due
through the date of termination, in each case to the extent not previously paid.
The Company established a non-qualified deferred compensation plan in
2000 that permits highly compensated management employees of the company,
including Named Executive Officers, to defer a portion of their compensation.
The plan was adopted to permit eligible employees to elect to defer compensation
through payroll deductions and to provide participants with a vehicle to
supplement their retirement savings in excess of the amounts that they can
contribute under the Company's 401(k) plan. The Company, in its sole discretion,
may make matching contributions to the deferred compensation plan, although it
has not elected to do so to date. Any deferrals, plus discretionary Company
matching amounts, will be adjusted to reflect the rate of return on one or more
designated investment models selected by each participant. The amount attributed
to the participant will be paid by the Company upon the earlier of the
distribution date designated by the participant or the occurrence of other
events specified in the plan.
The plan permits participants to select an investment model based on a
hypothetical investment in the same investment options available to participants
of the Company's 401(k) plan, including Common Stock of the Company. The Company
is not required to invest the deferred funds in the investment model chosen by
the participant, but will agree to pay a rate of return equal to the amount that
would have been earned if such an investment had been made.
The Company will pay a participant's account on voluntary or
involuntary termination of employment; the date that a participant reaches a
certain age chosen by the participant; in certain cases of financial hardship;
or the company's approval of the participant's request for an early payment of
the amount in the participant's account as of the close of the calendar year
immediately preceding the year in which the request is received. In the case of
an early payment, 10% of the distribution is forfeited back to the Company. If
the participant competes with the Company after termination of employment, the
participant forfeits all discretionary contributions made by the Company and
deemed investment returns attributable to Company contributions.
Two of the Named Executive Officers, Kent W. Stanger and B. Leigh
Weintraub, have participated in the plan during 2000, deferring $10,000 and
$8,000 in compensation, respectively.
Report of the Executive Compensation Committee
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Exchange Act, that incorporates by reference, in whole or in part, subsequent
filings including, without limitation, this Proxy Statement, the following
Report of the Executive Compensation Committee, the report of the Audit
Committee and the Performance Graph set forth on page 8 hereof shall not be
deemed to be incorporated by reference into any such filings.
General. The Company's executive compensation program is administered
by the Executive Compensation Committee, which is responsible for establishing
the policies and amounts of compensation for the Company's executive officers.
The Executive Compensation Committee, composed of three independent directors,
has oversight responsibility for executive compensation and executive benefit
programs of the Company.
Executive Compensation Principles. The Company's executive compensation
program is designed to align executive compensation with the values, objectives
and performance of the Company. The executive compensation program is designed
to achieve the following objectives:
o Attract and retain highly qualified individuals who are capable of
making significant contributions to the long-term success of the
Company.
o Reward executive officers for long-term strategic management and the
enhancement of shareholder value.
o Promote a performance-oriented environment that encourages Company and
individual achievement.
Executive Compensation Program. The Company's executive compensation
program consists of both cash and equity-based compensation. The components of
the Company's executive compensation program and the policies which govern their
implementation are outlined briefly below.
5
Cash Compensation. The Company's cash compensation policy is designed
to provide competitive levels of compensation to attract and retain qualified
individuals and to reward individual initiative and achievement. The Company's
existing executive compensation program is a base compensation plan with a
discretionary bonus compensation element.
Effective March 20, 2000, the Named Executive Officers took a voluntary
reduction in pay as part of a Company-wide, cost-reduction program to improve
the Company's future profitability. The salary for Fred P. Lampropoulos was
reduced by $30,500, or 10 percent; the quarterly bonus for Brian L. Ferrand
declined by $10,000, or 4 percent of his total compensation; the salary for Kent
W. Stanger was reduced by $25,000, or 13 percent; and B. Leigh Weintraub's
salary was reduced by $25,000, or 13 percent. Subsequently on July 24, 2000, all
of the above named officers' salaries were restored to their previous levels.
The salary for Fred P. Lampropoulos, the President and Chief Executive
Officer, is based generally upon comparisons with levels of compensation paid to
chief executive officers of other comparably sized medical device manufacturers.
The overall performance of the Company and the Company's progress toward
achieving specific objectives are also important factors in setting compensation
for Mr. Lampropoulos.
Cash compensation for executive officers other than the Chief Executive
Officer is based generally upon comparisons with comparably sized medical device
manufacturers and is targeted at the mid-range of the salary levels of those
manufacturers. Compensation of executive officers is based, in part, upon their
respective responsibilities as compared to similar positions in comparable
companies. The Executive Compensation Committee also considers individual merit
and the Company's performance. It is the practice of the Committee to solicit
and review recommendations of the Chief Executive Officer when determining
salary levels for executive officers other than the Chief Executive Officer.
On February 10, 2001, the Compensation Committee created a new
incentive bonus program. Based on performance of the chief executive officer,
Mr. Lampropoulos will be entitled to receive base incentive compensation of
$150,000 for the Company's fiscal year 2001. Such incentive compensation will be
paid based upon the Company achieving each of eight goals. The Company will pay
Mr. Lampropoulos a percentage of the $150,000 base incentive compensation for
each goal achieved. If 100% of the goal is not achieved, no portion of the base
compensation will be paid for that category. The total cap on incentive
compensation which Mr. Lampropoulos will be eligible to receive for the 2001
fiscal year is $180,000 if Mr. Lampropoulos achieves 120% or better of all goal
targets for each of the eight goal categories.
Equity-Based Compensation. The Company has adopted various stock-based
compensation plans that are designed to promote and advance the interests of the
Company and its shareholders by strengthening the mutuality of interests between
the executive officers of the Company and the Company's shareholders. The
Company has limited the payment of executive incentive compensation in the form
of annual cash bonuses, preferring to make stock-based grants under the
Company's compensation plans. Since executive incentive compensation is based on
shares of Common Stock, the value of those awards to executive officers
increases as the value of the Common Stock increases. During the 2000 fiscal
year, discretionary option grants were made to the Chief Executive Officer,
Chief Financial Officer, the Chief Operating Officer and the Vice President of
Sales.
Benefits. The Company's policy is to provide an attractive benefit
package to all employees. Executive officers of the Company are generally
eligible to participate, on the terms and conditions applicable to all eligible
employees of the Company, in the Merit Medical Systems 401(k) Profit Sharing
Plan, a contributory savings and profit sharing plan for all Company employees
over the age of 21. Certain executive officers may elect to defer certain awards
or compensation under the Company's employee benefit plans.
EXECUTIVE COMPENSATION COMMITTEE
James J. Ellis, Chairman
Richard W. Edelman
Rex C. Bean
Report of the Audit Committee
The Audit Committee met once during the 2000 year, and all members
attended. Additionally, Rex Bean, as chairman, met with the Company's
independent auditors and management to review the financial information included
in each 10Q report of the Company prior to filing. The functions of the Audit
Committee are: (i) to review and approve the selection of, and all services
performed by, the Company's independent auditor; (ii) to review the Company's
internal controls; and (iii) to review, act and report to the Board of Directors
with respect to the scope of audit procedures, accounting practices and internal
accounting and financial controls of the Company. All members of the Audit
Committee are independent as defined in Rule 4200(a)(14) of the National
Association of Securities Dealers listing standards. The Audit Committee charter
is included with this proxy statement as Appendix A.
Management is responsible for Merit's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an audit of Merit's financial statements in accordance with the
generally accepted auditing standards and for expressing an opinion on those
financial statements based on their audit. The audit committee reviews these
processes on behalf of the Board of Directors. In this context, the committee
has reviewed and discussed the audited financial statements contained in the
2000 Annual Report on Form 10-K with Merit's management and its independent
auditors.
The committee also has discussed with the independent auditors the
matters required to be discussed by the Statement on Auditing Standards No. 61
(Communication with Audit Committees), as amended.
6
The committee has received the written disclosures and the letter from
the independent auditors required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), as amended and has discussed
with the independent auditors their independence. The committee has also
considered whether the provision of the services described above under the
captions "Financial Information Systems Design and Implementation Fees" and "All
Other Fees" is compatible with the maintaining of the independence of the
independent auditors.
Based on the review and discussions referred to above, the committee
recommended to the board of directors that the audited financial statements be
included in Merit's Annual Report on Form 10-K for the year ended December 31,
2000 filed with the Securities and Exchange Commission.
AUDIT COMMITTEE
Rex C. Bean, Chairman
James J. Ellis
Richard W. Edelman
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of April 18, 2001 with
respect to the beneficial ownership of shares of the Common Stock by each person
known by the Company to be the beneficial owner of more than 5% of the Common
Stock, by each director, by each director nominee, by each Named Executive
Officer and by all directors and officers as a group. Unless otherwise noted,
each person named has sole voting and investment power with respect to the
shares indicated. Percentages are based on 7,852,025 shares outstanding.
Beneficial Ownership
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Percentage
Shares of Class
Principal Sharesholders
Vertical Group, L.P.(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,073,400 13.7%
25 DeForest Avenue, Summit, New Jersey
Fred P. Lampropoulos(2)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . 727,248 9.3
Merit Medical Systems, Inc., 1600 West Merit Parkway, South Jordan, Utah
Benson Associates, LLC (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . 518,300 6.6
11 Southwest Fifth Avenue, Suite 2130, Portland, Oregon
Officers and Directors
Fred P. Lampropoulos(2)(3). . . . . . . . . . . . . (see above). . . . . . . . .
Kent W. Stanger C.P.A.(2)(3)(5). . . . . . . . . . . . . . . . . . . . . . . . . 351,275 4.4
Rex C. Bean(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278,556 3.5
Richard W. Edelman(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,037 0
James J. Ellis(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,900 0
B. Leigh Weintraub(2)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,449 0
Brian L. Ferrand(2)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,000 0
Michael E. Stillabower M.D.(3). . . . . . . . . . . . . . . . . . . . . . . . . 45,500 0
All officers and directors as a group (8 persons) 1,642,965 19.6
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o Represents holdings of less than 1%
(1) Based on a Form 4 dated April 12, 2000.
(2) The computations above include the following share amounts which are held
in the Company's 401(k) Profit Sharing Plan on behalf of participants
thereunder: Fred P. Lampropoulos, 16,547 shares; Kent W. Stanger, 14,699
shares; B. Leigh Weintraub, 1,851 shares; Brian L. Ferrand, 2,300 shares;
and all officers and directors as a group, 35,397 shares.
(3) The computations above include the following share amounts which are
subject to options exercisable within 60 days, none of which have been
exercised: Fred P. Lampropoulos, 225,500 shares; Kent W. Stanger, 71,000
shares; Rex C. Bean, 37,500 shares; Richard W. Edelman, 37,500 shares;
James J. Ellis 37,500 shares; B. Leigh Weintraub, 54,500 shares; Brian L.
Ferrand, 49,000 shares; Michael E. Stillabower M.D., 37,500 shares; and all
officers and directors as a group, 550,000 shares.
(4) Based on a Schedule 13F dated December 31, 2000.
(5) The computations above include the following share amounts which are held
in the Company's Highly Compensated Deferred Compensation Plan on behalf of
participants thereunder: Kent W. Stanger, 1,860 shares.
7
Merit Medical Systems, Inc.
Comparison of Five Year-Cumulative Total Returns
Performance Graph
Prepared by the Center For Research in security Prices
Produced on 4/06/01 including data to 12/29/00
[Graphic Omitted]
8
PROPOSAL NO. 2 - TO ADOPT THE MERIT SERVICES
NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
General
On February 10, 2001, the Board of Directors adopted the Merit Services
Non-Qualified Employee Stock Purchase Plan (the "Stock Purchase Plan"). The
Company previously adopted and currently maintains a qualified stock purchase
plan for the benefit of its employees. The Stock Purchase Plan, which does not
qualify for advantageous tax treatment for federal income tax purposes, was
adopted for those employees who are ineligible to participate in the qualified
plan. This includes employees of Merit Services, Inc. a subsidiary of the
Company, and certain highly compensated employees of the Company. The following
description of the Stock Purchase Plan does not purport to be complete and is
qualified in its entirety be reference to the full text thereof.
Description of the Stock Purchase Plan
Purpose. The purpose of the Stock Purchase Plan is to provide a method
whereby employees of the Company and certain of its subsidiaries who are
ineligible to participate in the Company's qualified stock purchase plan will
have an opportunity to acquire a proprietary interest in the Company through the
purchase of shares of Common Stock. The Board of Directors believes that the
Stock Purchase Plan is important because it provides incentives to present and
future employees of the Company by allowing them to share in the growth of the
Company. The Stock Purchase Plan does not qualify for beneficial tax treatment
as an "employee stock purchase plan" under Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code").
Administration. The Stock Purchase Plan is administered by a committee
(the "Committee") of the Board of Directors consisting of no fewer than three
members of the Board of Directors. The Committee is presently composed of the
Executive Compensation Committee of the Board of Directors. The Committee has
the authority to interpret and construe all provisions of the Stock Purchase
Plan and to make all decisions and determinations relating to the operation of
the Stock Purchase Plan.
Duration. The Stock Purchase Plan became effective upon its adoption by
the Board of Directors and will remain in effect until June 30, 2006, unless
terminated earlier or amended by the Board of Directors. No termination of the
Stock Purchase Plan may adversely affect the rights of any employee with respect
to outstanding options under the Stock Purchase Plan without the consent of the
employee.
Shares Currently Subject to the Stock Purchase Plan. The maximum number
of shares of Common Stock which may currently be issued under the Stock Purchase
Plan is 70,000 shares, which are allocated from the Employee Stock Purchase
Plan, as amended on May 24, 2000. The Company has not issued any shares of
Common Stock under the Stock Purchase Plan. In the event the outstanding shares
of Common Stock are increased, decreased, changed into, or exchanged for a
different number or kind of shares or securities of the Company through
reorganization, merger, recapitalization, reclassification, stock split, reverse
stock split, or similar transaction, the maximum number of shares available for
issuance under the Stock Purchase Plan and the number of shares subject to
options held by participants shall be proportionately adjusted.
Eligibility. Participation in the Stock Purchase Plan is limited to
employees of Merit Services, Inc, and officers of the Company who are not
eligible to participate in the Company's qualified stock purchase plan and who
became employees prior to the commencement of the current offering period.
Approximately 85 employees are eligible to participate in the Stock Purchase
Plan.
Offerings Under the Stock Purchase Plan. The Stock Purchase Plan
provides for a series of quarterly offerings commencing on the first business
day of April, July, October, and January of each calendar year during the term
of the Stock Purchase Plan. An eligible employee may elect to participate in an
offering under the Stock Purchase Plan by authorizing the Company to make
deductions from his or her pay on each payday during the time the employee is a
participant in an offering at a fixed dollar amount or a percentage of the
employee's pay, so long as such deduction is not less than 1% or more than 15%
of his or her base salary. On the commencement date of an offering, the Company
will grant to each employee who elects to participate in an offering under the
Stock Purchase Plan an option to purchase that number of shares equal to the
amount deducted from the participant's account divided by 85% of the fair market
value of the Common Stock as determined in accordance with the Stock Purchase
Plan. Notwithstanding the foregoing, no employee will be granted an option which
permits him or her to purchase in excess of $25,000 of Common Stock per calendar
year. In addition, employees who have received a hardship distribution from the
Company's 401(k) plan may not make payroll deduction contributions during the 12
months following the hardship distribution.
Options will be deemed to have been exercised automatically on the
offering termination date for the purchase of the number of full shares of
Common Stock which the accumulated payroll deductions in his or her account will
purchase, but not in excess of the maximum number of shares the employee can
purchase during any calendar year.
Exercise Price of Options. The price per share to be paid by
participants under the Stock Purchase Plan shall be the lesser of (a) 85% of the
fair market value of the Common Stock on the applicable offering commencement
date or (b) 85% of the far market value of the Common Stock on the applicable
offering termination date. The fair market value of the Common Stock shall be
the closing sale price of the Common Stock on the Nasdaq Stock Market (National
Market System) on the applicable date or the nearest prior trading day, if such
date is not a trading day. The exercise price shall be payable only through
payroll deductions from an employee's compensation, except in limited
circumstances involving a leave of absence.
9
Termination of Employment. Participation in the Stock Purchase Plan
does not affect the Company's right to terminate any employee. Upon the
termination of a participant's employment for any reason during an offering,
including retirement (but excluding death while in the employ of the Company),
the payroll deductions credited to the participant's account shall be returned
to the participant and shall not be used to purchase shares of Common Stock
under the Stock Purchase Plan. In the event the participants employment is
terminated as a result of his or her death, his or her designated beneficiary
shall have the right to elect to (a) withdraw all payroll deductions credited to
the participant's account under the Stock Purchase Plan, or (b) exercise the
participant's option on the offering termination date for the purchase of the
number of full shares which the participant's accumulated payroll deductions
will purchase at the applicable exercise price.
Amendment and Termination. The Board of Directors may amend, suspend,
or terminate the Stock Purchase Plan or any portion thereof at any time,
provided that such amendment or termination will not adversely affect options
then outstanding under the plan.
Restriction on Disposition of Shares. Participants may not sell or
otherwise transfer the shares of Common Stock acquired under the Stock Purchase
Plan for a period of ninety (90) days subsequent to the acquisition.
General Provisions. A participant may withdraw from the Stock Purchase
Plan at any time. No participant or his legal representatives, legatees, or
distributees will be deemed to be the holder of any shares of Common Stock
subject to an offering until the option has been exercised and the purchase
price for the shares has been paid. No payroll deductions credited to a
participant's stock purchase account nor any rights with regard to the exercise
of rights to receive shares of Common Stock under the Stock Purchase Plan may be
assigned, transferred, pledged, or otherwise disposed of in any way by a
participant other than by will or the laws of descent and distribution. Options
under the Stock Purchase Plan will be exercisable during a participant's
lifetime only by him, his guardian, or legal representative.
Certain Federal Income Tax Consequences
The following tax discussion is a brief summary of federal income tax
law applicable to the Stock Purchase Plan. The discussion is intended solely for
general information and omits certain information which does not apply generally
to all participants in the Stock Purchase Plan.
The Stock Purchase Plan does not qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Code. As such, a recipient of
options under the Stock Purchase Plan is not entitled to any tax benefit from
participating in the plan. Participants will not be entitled to deduct or
exclude from income or social security taxes any part of the payroll deductions.
On exercise of an option granted under the Stock Purchase Plan the participant
will be deemed to have received income equal to the difference between the price
per share paid by the participant to acquire the stock and the fair market value
of the stock on the date of exercise. The Company will be entitled to a tax
deduction equal to the amount of income recognized by the participant. The
employee will have a cost basis in the shares of Common Stock acquired upon such
exercise equal to the option exercise price plus the income recognized on
exercise.
Value of Benefits
The Company is unable to determine the amount of benefits that may be
received by participants under the Stock Purchase Plan as participation is
discretionary with each employee.
Interests of Certain Directors
In considering the recommendation of the Board of Directors with
respect to the proposal to adopt the Stock Purchase Plan, shareholders should be
aware that certain members of the Board of Directors may have a conflict of
interest in connection with such proposal. As discussed above, officers,
including directors who are officers of the Company, who are not eligible to
purchase Common Stock under the Company's qualified stock purchase plan may
participate in the Stock Purchase Plan. The Board of Directors recognizes that
the operation of the Stock Purchase Plan may benefit certain officers who are
also directors of the Company, but believes that approval of the proposed Stock
Purchase Plan will advance the interests of the Company and its shareholders by
encouraging employees of the Company to make significant contributions to the
long-term success of the Company.
The Board of Directors believes that adoption of the Stock Purchase
Plan is in the best interests of the Company, and therefore, unanimously
recommends that the shareholders vote FOR approval of the proposal to adopt the
Stock Purchase Plan.
10
PROPOSAL NO. 3 - RATIFICATION OF SELECTION OF AUDITOR
The Audit Committee has recommended, and the Board of Directors has
selected, the firm of Deloitte & Touche, independent certified public
accountants, to audit the financial statements of the Company for the fiscal
year ending December 31, 2001 subject to ratification by the shareholders.
Deloitte & Touche has acted as independent auditor for the Company since 1987.
The Board of Directors anticipates that one or more representatives of Deloitte
& Touche will be present at the Annual Meeting and will have an opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions.
The Board of Directors recommends that shareholders vote FOR
ratification of the appointment of Deloitte & Touche as the Company's
independent auditor.
Audit Fees
The aggregate fees billed by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates (collectively,
"Deloitte") for professional services rendered for the audit of the Company's
annual financial statements for the year ended December 31, 2000 and for the
review of the financial statements included in the Company's Quarterly Reports
on From 10-Q for that fiscal year were approximately $89,000.
Financial Information Systems Design and Implementation Fees
There were no services provided by Deloitte for professional services
rendered for information technology services relating to financial information
systems design and implementation for the fiscal year ended December 31, 2000.
All Other Fees
The aggregate fees billed by Deloitte for all other non-audit services,
for the fiscal services year ended December 31, 2000 were $227,000.
The audit committee has considered whether the provision of non-audit
services is compatible with maintaining the principal accountant's independence
and has concluded that it is.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of
no other matters to be presented for action at the Annual Meeting. If, however,
any further business should properly come before the Annual Meeting, the persons
named as proxies in the accompanying form will vote on such business in
accordance with their best judgment.
PROPOSALS OF SHAREHOLDERS
Proposals which shareholders intend to present at the Annual Meeting of
Shareholders to be held in calendar year 2002 must be received by Kent W.
Stanger, Chief Financial Officer, Secretary and Treasurer of the Company, at the
Company's executive offices (1600 West Merit Parkway, South Jordan, Utah 84095)
no later than December 31, 2001.
ADDITIONAL INFORMATION
The Company will provide without charge to any person from whom a proxy
is solicited by the Board of Directors, upon the written request of such person,
a copy of the Company's 2000 Annual Report on Form 10-K, including the financial
statements and schedules thereto (as well as exhibits thereto, if specifically
requested), required to be filed with the Securities and Exchange Commission.
Written requests for such information should be directed to Kent W. Stanger,
Chief Financial Officer, Secretary and Treasurer of the Company, at the address
indicated above.
11
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF
Merit Medical Systems, Inc.
Adopted by the Board of Directors
PURPOSE AND OBJECTIVES:
The Audit Committee is a committee of the Board of Directors which will make
such examinations as are necessary to monitor the corporate financial reporting
and the internal and external audits of Merit Medical Systems, Inc. and its
subsidiaries (the Company"), and to provide to the Board of Directors the
results of its recommendations, to outline to the Board improvements made, or to
be made, in internal accounting controls, and to make the Board aware of
significant financial matters that require Board attention.
The objectives of the Audit Committee are as follows:
o to provide communication between directors and external and internal
auditors; and
o to review the external and internal auditors' independence.
In addition, the Audit Committee will undertake those specific duties
and responsibilities listed below and such other duties as the Board of
Directors from time to time prescribe.
CONSTITUTION:
Each domestic company listed on NASDAQ must have an audit committee
comprised solely of directors independent of management and free from any
relationship that would interfere with the exercise of independent judgement as
a committee member.
The Audit Committee of the Company shall be comprised such number of
members of the Company as is determined from time to time by the Board of
Directors, but in no event shall be comprised of less than three (3) members. A
quorum of the Audit Committee shall be a majority of the members of the Audit
Committee.
The members of the Audit Committee shall choose a Chairman.
The Audit Committee shall meet as frequently as circumstances require.
The Audit Committee will meet with the Chief Executive Officer and the Chief
Financial Officer of the Company as circumstances require to review the
financial affairs of the Company. The Audit Committee will meet with the
independent auditors of the Company, at such times as it deems appropriate, to
review the independent auditor's examination and management report.
RESPONSIBILITIES:
In meeting their responsibilities, the Audit Committee should address
each of the following matters:
External Auditors
1. Recommend to the Board of Directors the external auditors to be
nominated, approve their compensation as negotiated by management,
and review and approve their discharge.
2. Consider and review the independence of the external auditor.
3. Consider the external auditors' audit scope and plan.
4. Consider with management and the external auditors the rationale
for employing audit firms other than the principal external
auditors on financial accounting and reporting issues.
5. Review with the external auditors the coordination of audit effort
to assure the effective use of audit resources.
6. Review with the external auditors any impact on the financial
statements of any new or proposed changes in accounting principles
or regulatory requirements.
12
7. Consider and review with the external auditors:
(a) he adequacy of the Company's internal controls including
computerized information system controls and security.
(b) Any related significant findings and recommendations of the
external auditors together with management's responses
thereto.
8. Meet with the external auditors in executive session to discuss
any matters that the committee members or the external auditors
believe should be discussed privately with the Audit Committee.
Financial Reporting
1. Review with management and the external auditors at the completion
of the annual examination:
(a) The Company's annual financial statements and related
footnotes.
(b) The external auditors' audit of the financial statements and
their report thereon.
(c) Any significant changes required in executing the external
auditor's audit plan.
(d) Any serious difficulties or disputes with management
encountered during the course of the audit.
(e) Other matters related to the conduct of the audit which are
to be communicated to the committee under generally accepted
auditing standards.
(f) Nature of management advisory services (including fees)
provided by the independent public accountant during the year
under audit.
2. Review with management and the external auditors any public
interim financial reporting.
3. Review filings with SEC or other regulatory bodies which contain
the Company's financial statements.
General Responsibilities
1. Review and make recommendations to the Board regarding approval of
any conflicts of interest between management and the Company.
2. Meet with management in executive session to discuss any matters
that the committee members or management believes should be
discussed privately with the Audit Committee.
3. Report committee actions to the board of directors with such
recommendations as the committee may deem appropriate.
4. The Audit Committee shall have the power to conduct or authorize
investigations into any matter within the Audit Committee's scope
of responsibilities. The Audit Committee shall be empowered to
retain independent counsel, accountants, or others to assist it in
the conduct of any investigation.
5. The Audit Committee will perform such other functions as assigned
by law, the Company's charter or bylaws, or the Board of
Directors.
In addition to the above responsibilities, the Audit Committee will
undertake such other duties as the Board of Directors delegates, and will
report, at least annually, to the Board regarding the Committee's examinations
and recommendations.
13
Proxy
Merit Medical Systems, Inc.
1600 West Merit Parkway
South Jordan, Utah 84095
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Fred P. Lampropoulos and Kent W.
Stanger, and each of them, as proxies, with full power of substitution, and
hereby authorizes them to represent and vote, as designated below, all shares of
the Common Stock of Merit Medical Systems, Inc., a Utah corporation (the
"Company"), held of record by the undersigned on April 18, 2001 at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at the offices of the
Company on May 23, 2001 at 3:00 P.M. local time, or at any adjournment or
postponement thereof, upon the matters set forth below, all in accordance with
and as more fully described in the accompanying Notice of Annual Meeting of
Shareholders and Proxy Statement, receipt of which is hereby acknowledged.
1. Election of two directors, each to serve for a term of three years or
until their respective successors shall have been duly elected and
qualified.
[ ] FOR all nominees listed below (except as marked to the contrary).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in the list
below.)
JAMES J. ELLIS MICHAEL E. STILLABOWER, M.D.
2. To approve the adoption of Merit Services Non-Qualified Employee Stock
Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To consider and vote upon a proposal to ratify the appointment of
Deloitte & Touche as the independent auditor of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF TWO DIRECTORS, FOR THE APPROVAL OF THE
MERIT SERVICES NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN AND FOR THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE AS THE INDEPENDENT AUDITOR
OF THE COMPANY.
Please complete, sign and date this proxy where indicated and return it
promptly in the accompanying prepaid envelope.
Date: _________________________, 2001 _____________________________________
Signature
_____________________________________
Signature (If held jointly)
(Please sign above as the shares are issued. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.)
14
