NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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May 23, 2002
MERIT MEDICAL SYSTEMS, INC.
[MERIT LOGO]
You are cordially invited to attend the Annual Meeting of Shareholders
of Merit Medical Systems, Inc. (the "Company"), which will be held on Thursday,
May 23, 2002, 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 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, 2002, and
(3) 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,
2002, 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,
/s/KENT W. STANGER, C.P.A.
--------------------------
KENT W. STANGER
April 24, 2002 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.
1
MERIT MEDICAL SYSTEMS, INC.
1600 West Merit Parkway
South Jordan, Utah 84095
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PROXY STATEMENT
---------------------------------
Annual Meeting of Shareholders
May 23,
2002
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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 Thursday, May 23, 2002, at 3:00 p.m., at the Company's corporate
offices 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, 2002.
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,
2002, 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 13,523,977 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 ratification of the
appointment of Deloitte & Touche to be the Company's independent auditor for the
fiscal year ending December 31, 2002; 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.
2
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.
Nominees for Election as Directors
Certain information with respect to each Director nominee is set forth
below.
Rex C. Bean, 71, 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 is nominated to serve a three-year
term.
Richard W. Edelman, 61, 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. Mr. Edelman also serves as a director for Vertical
Health Solutions, Inc., in Florida. From 1998 to 2000, he was a senior vice
president of 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 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, 52, 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. 47, 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 is a certified public
accountant. Mr. Stanger's term as a director expires in 2003.
James J. Ellis, 68, 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' term as a director
expires in 2004.
3
Michael E. Stillabower, M.D., 58, has been a director of the Company
since March 1996. Dr. Stillabower has been a physician in private practice in
Wilmington, Delaware, since 1980. He is president of Cardiology consultants,
P.A. in Wilmington. In 1999, Dr. Stillabower was appointed Director,
Cardiovascular Research, Christiana Hospital. 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's term as a director expires in 2004.
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 three times during the 2001
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.
The Audit Committee met once during the 2001 year to review the audited
financials of the Company for the year ended December 31, 2000.
During the fiscal year ended December 31, 2001, there were 14 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 properly filed.
Director Compensation
Directors who are not employees of the Company receive an annual
retainer of $7,500 and a director's fee of $1,200 per meeting attended in person
and $250 for telephonic Board meetings. 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 previously 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, 52, was appointed Chief Operating Officer in
February 1997, from her previous position as vice president of operations were
she served since 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.
4
Brian L. Ferrand, 47, 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 four most highly compensated executive officers
who were paid at least $100,000 (the "Named Executive Officers") during the
fiscal year ended December 31, 2001, 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
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Long Term
Compensation
- ----------------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards
- ----------------------------------------------------------------------------------------------------------------------------
Fiscal Options/ All Other
Name and Position Year Salary Bonus SARs (#) Compensation
- ----------------------------------------------------------------------------------------------------------------------------
Fred P. Lampropoulos 2001 $305,000 $180,000 128,125 (3)(4) 33,021 (1)(2)
Chairman of the Board, 2000 305,000 25,450 74,219 (3) 22,843 (1)(2)
Chief Executive Officer and President 1999 305,000 25,685 42,969 (3) 23,437 (1)
- ----------------------------------------------------------------------------------------------------------------------------
Brian L. Ferrand 2001 250,000 100,000 42,188 (3)(4) 13,584 (1)(2)
Vice President of Sales 2000 200,000 40,377 23,438 (3) 15,522 (1)(2)
1999 200,000 50,000 15,625 (3) 6,606 (1)(2)
- ----------------------------------------------------------------------------------------------------------------------------
Kent W. Stanger, C.P.A. 2001 200,000 61,500 71,875 (3)(4) 4,047 (2)
Chief Financial Officer, 2000 200,000 10,000 42,969 (3) 12,361 (1)(2)
Secretary, Treasurer and Director 1999 185,577 0 41,016 (3) 13,317 (1)(2)
- ----------------------------------------------------------------------------------------------------------------------------
B. Leigh Weintraub 2001 200,000 51,500 56,250 (3)(4) 3,955 (2)
Chief Operating Officer 2000 200,000 18,667 31,250 (3) 2,700 (2)
1999 185,577 500 29,297 (3) 5,149 (1)(2)
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(1) Includes accured 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) All option amounts adjusted to reflect two 5-for-4 stock splits
effective August 28, 2001 and April 12, 2002.
(4) 2001 options include the grant for 2002 granted on December 8, 2001.
5
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, 2001.
As of December 31, 2001, the Company had not granted any stock appreciation
rights. The exercise price of all options granted during the year ended December
31, 2001 was not less than the market price of the Company's common stock as of
the date of grant.
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Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
Option Term
----------------------------
Percent of
Total Options
Name Options Granted to Exercise
Granted Employees in Price Expiration
(1) Fiscal Year (1) Date
5% 10%
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Fred P. Lampropoulos . . . . . . . 62,500(2) 4.1% 3.68 02/12/11 $144,646 366,561
15,625 1.1% 5.06 05/23/11 49,683 125,906
50,000(2) 3.6% 13.53 12/08/11 425,384 1,078,007
Brian L. Ferrand . . . . . . . . . 23,438(2) 1.7% 3.68 02/12/11 54,242 137,460
18,750(2) 1.3% 13.53 12/08/11 159,519 404,253
404,253
Kent W. Stanger, C.P.A. . . . . . 31,250(2) 2.2% 3.68 02/12/11 72,323 183,280
15,625 1.1% 5.06 05/23/11 49,683 125,906
25,000(2 1.8% 13.53 12/08/11 212,692 539,004
B. Leigh Weintraub . . . . . . . 31,250(2) 2.2% 3.68 02/12/11 72,323 183,280
25,000(2) 1.8% 13.53 12/08/11 212,692 539,004
(1) All option grants and exercise prices adjusted to reflect two 5-for-4
stock splits effective August 28, 2001 and April 12, 2002.
(2) Requires a five-year vesting period, with 20% vesting each anniversary
of the date grant.
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Aggregated 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, 2001, upon the exercise of
stock options, the value realized upon such exercise, the number of unexercised
stock options held on December 31, 2001, and the aggregate value of such options
held by the Named Executive Officers:
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Number of Unexercised Value of Unexercised
Options at In"the"Money Options
December 31, 2001 (1) at December 31, 2001 (2)
Number of
Shares
Acquired Value
on Realized on
Name Exercise Exercise
(1)
Exercisable Unexercisable Exercisable Unexercisable
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Fred P. Lampropoulos....... 136,719 $1,025,175 225,781 218,750 $2,559,413 $1,929,100
Brian L. Ferrand . . . . . 79,687 442,982 12,500 51,563 130,300 396,150
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Kent W. Stanger, C.P.A..... 11,719 82,695 109,375 73,830 1,227,384 581,005
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B. Leigh Weintraub......... 83,438 501,971 7,970 73,830 96,150 581,005
6
(1) All options amounts and prices adjusted to reflect two 5-for-4 stock
splits effective August 28, 2001 and April 12, 2002.
(2) Reflects the difference between the exercise price of the Options
granted and the value of the Common Stock on December 31, 2001. The
closing sale price of the Common Stock on December 31, 2001 as reported
by NASDAQ was $14.94 per share.
Certain Relationships and Related Transactions
During 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 evidenced the loan and a related pledge
agreement that provided 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. In July of
2000, the first installment was paid by the surrender of shares of the Company's
stock, owned by Mr. Lampropoulos. In August 2001, Mr. Lampropoulos paid the
entire balance by surrender of shares of the Company's stock. For purposes of
crediting Mr. Lampropoulos' note the shares surrendered were valued at the
closing price of the Company's common stock as of the date of surrender, as
reported by NASDAQ.
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 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.
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.
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, or the Securities Exchange
Act of 1934, 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 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.
7
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 the 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.
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 bonus
compensation element.
The salary for Fred P. Lampropoulos, 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. Under the direction of the Chief Executive Officer, the
Company achieved or exceeded the highest level in each of the following eight
categories (total revenues, new product revenues, gross margin, net income,
inventory reduction, inventory turns, sales per employee and stock price
compared to Russell 2000 Stock Index) for the 2001 year; thereby Mr.
Lampropoulos qualified for the maximum bonus of $180,000. For 2002 Mr.
Lampropoulos will be entitled to receive base incentive compensation of
$150,000. Such incentive compensation will be 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 2002 fiscal year is $180,000 provided that Mr.
Lampropoulos achieves 120% or better of all goal targets for each of the eight
categories.
Equity-Based Compensation. The Company has adopted various
stock-based compensation plans that are designed to promote and advance the
interest of the Company and its shareholders by strengthening the mutuality of
interests between the executive officers of the Company and the Company's
shareholders. 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 2001 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.
8
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 2001 year, to review the annual
financial statements of the Company for the year ended December 31, 2001, 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 10-Q 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.
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 in the United States of America 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 2001 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 Committee), as amended.
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 below under the
captions Proposal No. 2 Ratification of Selection of Auditor, "Financial
Information Systems Design and Implementation Fees" and "All Other Fees" is
compatible with maintaining 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,
2001, filed with the Securities and Exchange Commission.
AUDIT COMMITTEE
Rex Bean, Chairman
James J. Ellis
Richard W. Edelman
9
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of April 19, 2002, 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 13,523,977 shares outstanding.
Beneficial Ownership
- ----------------------------------------------------------------------------------------------------------------------
Number of Percentage
Shares Of Class
- ----------------------------------------------------------------------------------------------------------------------
Principal Shareholders
Fred P. Lampropoulos (1)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 989,410 7.2
Merit Medical Systems, Inc., 1600 West Merit Parkway, South Jordan, Utah
Navellier & Associates, Inc.(3) . . . . . . . . . . . . . . . . . . . . . . . . . . 904,253 7.0
One East Liberty, Third Floor, Reno, Nevada
Officers and Directors
Fred P. Lampropoulos . . . . . . . . . . . . . . . . (see above). . . . .
Kent W. Stanger C.P.A(1)(2)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 541,996 4.0
Rex C. Bean (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414,786 3.1
James J. Ellis(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,063 *
Michael E. Stillabower M.D. (2). . . . . . . . . . . . . . . . . . . . . . . . . . . 51,563 *
Richard W. Edelman(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,438 *
B. Leigh Weintraud(1)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,008 *
Brian L. Ferrand(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,250 *
All officers and directors as a group (8 persons) 2,130,514 15.1%
- ----------------------
* Represents holdings of less than 1%
(1) 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, 29,618; shares; Kent W. Stanger, 25,602
shares; B. Leigh Weintraub, 3,555 shares; Brian L. Ferrand, 4,313 shares;
and all officers and directors as a group, 63,088 shares.
10
(2) 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, 300,782 shares; Kent W. Stanger, 121,485
shares; Rex C. Bean, 50,782 shares; James J. Ellis 37,500 shares; Michael
E. Stillabower M.D, 39,063 shares; Richard W. Edelman, 23,438 shares; B.
Leigh Weintraub, 12,580 shares; Brian L. Ferrand, 10,937 shares; and all
officers and directors as a group, 596,567 shares.
(3) Based on a Schedule 13F dated December 31, 2001.
(4) 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, 2,906 shares.
11
Comparison of Five-Year Cumulative Total Returns
Performance Report for
Merit Medical Systems, Inc.
Prepared by the Center for Research in Security Prices
Produced on 04/04/2002 including data to 12/31/2001
Company Index: CUSIP Ticker Class Sic Exchange
58988910 MMSI 3840 NASDAQ
Fiscal Year-end is 12/31/2001
Market Index: Nasdaq Stock Market (US Companies)
Peer Index: NASDAQ Stocks (SIC 3840-3849 US Companies)
Surgical, Medical, and Dental Instruments and Supplies
Date Company Index Market Index Peer Index
12/31/1996 100.000 100.000 100.000
01/31/1997 117.647 107.092 103.285
02/28/1997 104.412 101.169 101.987
03/31/1997 92.647 94.573 93.018
04/30/1997 91.176 97.519 90.469
05/30/1997 86.765 108.560 100.014
06/30/1997 77.941 111.901 101.343
07/31/1997 83.824 123.689 108.263
08/29/1997 78.676 123.502 108.588
09/30/1997 83.824 130.814 119.678
10/31/1997 85.294 124.005 117.108
11/28/1997 76.471 124.661 114.748
12/31/1997 73.529 122.482 113.672
01/30/1998 66.912 126.367 116.068
02/27/1998 76.471 138.236 123.659
03/31/1998 73.529 143.347 124.691
04/30/1998 96.324 145.770 124.786
05/29/1998 88.235 137.677 118.439
06/30/1998 104.412 147.299 117.846
07/31/1998 94.118 145.575 114.614
08/31/1998 75.735 116.711 93.071
09/30/1998 70.588 132.904 103.988
10/30/1998 63.235 138.744 103.700
11/30/1998 63.971 152.846 117.998
12/31/1998 77.941 172.704 126.425
01/29/1999 69.118 197.770 132.714
02/26/1999 64.706 180.059 123.116
03/31/1999 67.647 193.681 133.707
Copyright 2002
12
Comparison of Five-Year Cumulative Total Returns
Performance Report for
Merit Medical Systems, Inc.
Prepared by the Center for Research in Security Prices
Produced on 04/04/2002 including data to 12/31/2001
Date Company Index Market Index Peer Index
04/30/1999 60.294 199.921 144.953
05/28/1999 67.647 194.381 145.171
06/30/1999 58.640 211.820 157.814
07/30/1999 61.765 208.002 162.801
08/31/1999 76.471 216.796 158.494
09/30/1999 71.324 217.093 149.282
10/29/1999 73.529 234.494 140.818
11/30/1999 76.471 263.020 152.565
12/31/1999 85.294 320.874 152.092
01/31/2000 86.765 309.026 153.605
02/29/2000 94.118 367.819 177.153
03/31/2000 116.176 360.229 176.707
04/28/2000 55.882 302.987 161.667
05/31/2000 57.353 266.437 162.863
06/30/2000 76.471 313.223 177.838
07/31/2000 68.382 296.246 177.870
08/31/2000 68.382 331.264 200.447
09/29/2000 74.265 288.227 201.190
10/31/2000 73.897 264.558 185.497
11/30/2000 68.382 203.826 159.711
12/29/2000 66.176 193.001 158.235
01/31/2001 69.853 216.413 153.138
02/28/2001 66.176 167.548 146.703
03/30/2001 72.794 144.070 133.809
04/30/2001 82.353 165.563 147.931
05/31/2001 91.176 165.365 160.672
06/29/2001 105.882 169.804 170.784
07/31/2001 148.235 159.001 169.574
08/31/2001 232.059 141.677 161.221
09/28/2001 279.412 117.806 150.939
10/31/2001 224.853 132.918 158.310
11/30/2001 215.735 151.838 159.948
12/31/2001 274.706 153.146 172.726
The index level for all series was set to 100.0 on 12/31/1996
Copyright 2002
13
PROPOSAL NO. 2 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, 2002, 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, 2001, and for the
review of the financial statements included in the Company's Quarterly Reports
on Form 10-Q for that fiscal year were approximately $108,000.
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, 2001.
All Other Fees
The aggregate fees billed by Deloitte for all other non-audit services, for the
fiscal services year ended December 31, 2001, were approximately $90,000.
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 2003 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, 2002.
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 2001 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.
14
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, 2002, at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the offices of the Company on
May 23, 2002, 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.)
REX C. BEAN RICHARD W. EDELMAN
2. To consider and vote upon a proposal to ratify the appointment of Deloitte &
Touche as the independent auditor of the Company.[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Shareholders at 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 THE NOMINEES FOR DIRECTORS SET FORTH ABOVE, FOR THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE AS THE INDEPENDENT AUDITOR
OF THE COMPANY AND AT THE DESCRETION OF THE PROXIES ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE SHAREHOLDERS AT THE ANNUAL MEETING.
Please complete, sign and date this proxy where indicated and return it
promptly in the accompanying prepaid envelope.
DATED: 2002
----------------- --------------------------------------------
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.)
15