NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 21, 1997
Merit Medical Systems, Inc.
(Graphic Omitted) MERIT MEDICAL
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 21, 1997 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 six directors of the Company, to serve for terms of one, two or
three years or until their respective successors have been duly elected and
qualified;
(2) To consider and vote upon an amendment to the Company's Articles of
Incorporation to classify the board of directors into three classes and to
provide for staggered terms.
(3) To consider and vote upon an amendment to the Articles of Incorporation to
increase the number of shares which the Company is authorized to issue from ten
million to 25 million shares, 20 million of which shall be common stock and five
million of which shall be preferred stock.
(4) 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, 1997; and
(5) 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 16,
1997 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
KENT W. STANGER
April 21, 1997 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.
<PAGE>
MERIT MEDICAL SYSTEMS, INC.
1600 Merit Parkway, South Jordan, Utah 84095
PROXY STATEMENT
Annual Meeting of Shareholders
May 21, 1997
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 21, 1997 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 21, 1997.
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 therefor,
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 16,
1997 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 7,239,681 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 six
director nominees for their respective terms; FOR approval of proposed
amendments to the Company's Articles of Incorporation; FOR the ratification of
the appointment of Deloitte & Touche to be the Company's independent auditor for
the fiscal year ending December 31, 1997; 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 six nominees receiving the highest number of
votes will be elected.
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<PAGE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, subject to shareholder approval of the proposed
Amendment to the Articles of Incorporation to classify directors and provide for
staggered terms, six directors of the Company are to be elected to serve for
terms of one, two or three years or until their successors shall be duly elected
and qualified. If the proposed Amendment is not approved each director will be
elected to serve until the next annual meeting of shareholders 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 six nominees receiving the
highest number of votes at the Annual Meeting will be elected.
Directors and Nominees for Election as Directors
Certain information with respect to each director is set forth below.
Each of the Company's current directors has been nominated for reelection.
Fred P. Lampropoulos, 47, 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 is nominated to serve a three-year term.
Kent W. Stanger, 42, 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 is nominated to serve a three-year term.
Rex C. Bean, 66, 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 two-year
term.
Richard W. Edelman, 56, has been a director of the Company since 1988.
Since 1996 he has been Managing Director of Rodman & Renshaw, Inc., a stock
brokerage firm. From 1987 to 1996 he was employed by Southwest Securities, Inc.,
a regional stock brokerage firm located in Dallas, Texas, 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 two-year
term.
James J. Ellis, 63, 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. Mr. Ellis is nominated to
serve a one-year term.
Michael E. Stillabower, M.D., 53, has been a director of the Company
since March 1996. Dr. Stillabower has been a physician in private practice in
Wilmington, Delaware since 1980. Since 1988, he has also been Chief, Cardiology,
Medical Center of Delaware, where he has 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 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 one-year term.
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 Audit Committee met once during the 1996 fiscal year. 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.
The Executive Compensation Committee met five times during the 1996
fiscal 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, including the Company's Incentive Plan.
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<PAGE>
During the fiscal year ended December 31, 1996, there were 13 meetings
held by the Board of Directors of the Company. 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) Benifical 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 a director's fee
of $1,000 per meeting attended in person and $250 for telephonic Board meetings.
All directors are also 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, certain information is
furnished with respect to the following executive officers of the Company.
B. Leigh Weintraub, 47, has been Chief of Operations since February
1997 and was appointed Vice President of Operations in April 1995. She was Vice
President or Director 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, 42, 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.
Gilles J. DeVos, 51, has been Vice President of International Sales and
Marketing since February 1996. He was General Manager of Merit Medical France
from October 1994 to January 1996. From 1993 until joining the Company, Mr.
DeVos was Sales And Marketing Director Southern Europe for Scimed. From 1989 to
1993 he was General Manager for ACS France. Mr. DeVos has 25 years of
management, marketing and sales experience in the cardiology markets of Europe,
Africa and the Middle-East.
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<PAGE>
Compensation of Executive Officers#
The compensation of Fred P. Lampropoulos, the Company's Chief Executive
Officer, and the four other most highly paid executive officers during the
fiscal year ended December 31, 1996 is shown on the following pages in three
tables and discussed in a report from the Compensation Committee of the Board of
Directors.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Fiscal Options All Other
Name and Position Year Salary Bonus SARs (#)
Compensation(1)
<S> <C> <C> <C> <C> <C>
Fred P. Lampropoulos 1996 $ 245,000 $ 8,071 42,500 $ 4,367
Chairman of the Board and 1995 230,000 20,000 5,000 -0-
Chief Executive Officer 1994 173,693 -0- 5,000 2,184
Brian L. Ferrand 1996 174,038 37,880 15,000 4,340
Vice President of Sales 1995 149,039 49,650 10,000 121
1994 150,327 19,750 -0- 2,133
Gilles DeVos 1996 194,740 -0- 25,000 21,865(2)
Vice President of International 1995 123,796 -0- -0- 13,363(2)
Sales and Marketing 1994 -0- -0- -0- -0-
Kent W. Stanger 1996 162,500 4,615 22,500 3,472
Chief Financial Officer, 1995 150,000 1,000 10,000 199
Secretary, Treasurer
and Director 1994 130,769 2,000 5,000 1,928
B. Leigh Weintraub 1996 142,254 13,016 25,000 3,063
Vice President of Operations 1995 125,971 6,968 -0- -0-
1994 105,416 2,500 -0- 115
</TABLE>
(1) Amounts shown reflect contributions made by the Company for the benefit of
the named executive officers under the Company's 401(k) Profit Sharing Plan.
(2) Amounts shown reflect contributions made by the Company for the benefit of
Mr. DeVos in the French National Pension Plan.
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<PAGE>
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, 1996. As of December 31, 1996, the Company had not granted any
stock appreciation rights.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
Percent of of Stock Price
Total Options Appreciation for
Granted to Option Term
Options Employees in Exercise Expiration
Name Granted Fiscal Year Price Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Fred P. Lampropoulos 35,000 10.3% $ 7.13 1/9/2001 $ 68,898 $ 152,246
7,500(1) 2.2% 10.62 5/30/2001 22,016 48,650
Kent W. Stanger 15,000 4.4% 7.13 1/9/2001 29,528 65,248
7,500(1) 2.2% 10.62 5/30/2001 22,016 48,650
Brian L. Ferrand 15,000 4.4% 7.13 1/9/2001 29,528 65,248
Leigh Weintraub 25,000 7.4% 7.50 11/8/2001 51,803 114,471
Gilles DeVos 25,000 7.4% 7.25 3/25/2001 50,076 110,655
</TABLE>
(1) Reflects stock options granted under the formula plan provisions of the
Incentive Plan.
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, 1996 upon the exercise of
stock options, the value realized upon such exercise, the number of unexercised
stock options held on December 31, 1996, and the aggregate value of such options
held by the five individuals named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In the Money Options
Number of Shares Value December 31, 1996 at December 31, 1996(1)
Acquired Realized on
Name on Exercise Exercise Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Fred P. Lampropoulos -0- -0- 51,000 44,000 $ 123,500 $ 77,125
Kent W. Stanger -0- -0- 47,500 25,000 91,625 42,750
Brian L. Ferrand -0- -0- 30,000 20,000 63,625# 29,500
B. Leigh Weintraub -0- -0- 15,000 35,000 52,500 60,000
Gilles DeVos -0- -0- 5,000 20,000 6,250 25,000
</TABLE>
(1) Reflects the difference between the exercise price of the Options
granted and the value ofthe Common Stock on December 31, 1996. The closing sale
price of the Common Stock on December 31, 1996, as reported by NASDAQ, was
$8.50 per share.
Certain Relationships and Related Transactions
Since the beginning of the 1996 fiscal year, the Company has made
advances to Fred P. Lampropoulos, the Chairman of the Board, President and Chief
Executive Officer. The highest aggregate amount of such advances outstanding
during the period, and the amount outstanding at the end of the 1996 fiscal
year, was $113,957. The advances are repayable to the Company on demand,
together with interest at the prime rate plus 2%, per annum.
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<PAGE>
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 and the Performance Graph set
forth on page 7 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, including the Incentive Plan.
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 discretionary bonus compensation element.
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 towards achieving specific objectives are also important factors in
setting compensation for Mr. Lampropoulos. Specific objectives in fiscal 1996
focused on international product distribution and strategic alliances with key
industry partners. The Company's efforts to reduce costs and increase the
efficiency of its operations and Mr. Lampropoulos' performance in achieving
those objectives are also considered. In July 1996 Mr.
Lampropoulos' base salary was set at $250,000.
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.
Equity-Based Compensation. The Incentive Plan is 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 Incentive Plan. 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 1996 fiscal year discretionary option grants were made to the chief
executive officer and the other named executive officers as set forth in the
option table above. In addition, Mr. Lampropoulos and Mr. Stanger, as directors
of the Company, were each granted options to purchase 7,500 shares of Common
Stock pursuant to the nondiscretionary formula plan provisions of the Incentive
Plan.
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 who have completed one year of service, and in the Company's
Employee Stock Purchase Plan. 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
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<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of April 7, 1997 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 executive officer
named in the Summary Compensation Table 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 7,239,681
shares outstanding.
Beneficial Ownership
Number of Percentage
Shares of Class
Fred P. Lampropoulos(1)(2) 613,118 9.0%
The Vertical Group, L.P.(3) 497,600 6.9
Kent W. Stanger(1)(2) 300,200 4.1
Rex C. Bean(2) 276,942 3.8
Richard W. Edelman(2) 48,501 *
James J. Ellis(2) 30,900 *
Michael E. Stillabower M.D.(2) 15,500 *
B. Leigh Weintraub(1)(2) 15,394 *
Brian L. Ferrand(1)(2) 12,853 *
Gilles J. DeVos(2) 5,000 *
All officers and directors as a group (9 persons) 1,318,408 17.9%
* 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, 9,036 shares; Kent W. Stanger, 7,168 shares; Brian L.
Ferrand, 7,153 shares; B. Leigh Weintraub, 349 shares; and all officers and
directors as a group, 23,706 shares.
(2) The computations above include the following share amounts which are, or
will become prior to the date of the Annual Meeting, available pursuant to
options and warrants to purchase shares of Common Stock, none of which have been
exercised: Fred P. Lampropoulos, 34,000 shares; Kent W. Stanger, 22,500 shares;
Rex C. Bean, 17,500 shares; Richard W. Edelman, 17,500 shares; James J. Ellis,
7,500 shares; Michael E. Stillabower M.D., 7,500 shares; Brian L. Ferrand, 5,000
shares; B. Leigh Weintraub, 15,000 shares; Gilles J. DeVos, 5,000 shares; and
all officers and directors as a group, 131,500 shares.
(3) Based on a Schedule 13D dated February 7, 1997.
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<PAGE>
Merit Medical Systems, Inc.
Comparison of Five Year-Cumulative Total Returns
Performance Graph
Prepared by the Center for Research in Security Prices
Produced on 02/21/97 including data to 12/31/96
(GRAPH OMITTED)
(LEGEND OMITTED)
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<PAGE>
PROPOSAL NO. 2 AMENDMENT TO ARTICLES OF INCORPORATION
TO CLASSIFY THE BOARD OF DIRECTORS AND PROVIDE FOR STAGGERED TERMS
Introduction
Section 16-10a-806 of the Utah Revised Business Corporation Act
("URBCA") provides that a corporation may classify its directors and elect
directors for staggered terms by dividing the total number of directors into two
or three classes, with each group containing one half or one third of the total
number of directors, as near as possible. In the absence of such authorization,
directors are elected annually to serve until the next annual meeting. The
proposed amendment to the Articles of Incorporation would divide the directors
of the Company into three classes, with the terms of directors in the first
class expiring at the first annual shareholders meeting after their election,
the terms of directors in the second class expiring at the second annual
shareholders meeting after their election and the terms of directors in the
third class expiring at the third annual shareholders meeting after their
election. Upon the expiration of the initial terms, one third of the directors
would be elected annually for a term of three years.
Classification of directors may significantly extend the time required
to effect a change in control of the Board of Directors and may render more
difficult or discourage hostile takeover bids for the Company. In the absence of
staggered terms, a change in control of the Board of Directors could be made by
shareholders holding a plurality of the votes cast at a single annual meeting of
shareholders. Under the proposed amendment, a majority of the shareholders
voting at two separate annual meetings of shareholders would be required to
effect a change in control of the Board of Directors, because only a minority of
the directors (approximately one third) will be elected at each annual meeting
of the shareholders under the proposed amendment. The classification of
directors is intended to encourage persons seeking to acquire control of the
Company to negotiate at arms' length with the Board of Directors and to allow
the Board of Directors sufficient time to evaluate any proposal and to study
alternative proposals.
Because of the additional time required to effect a change in control
of the Board of Directors, the classification of directors will tend to
perpetuate the existing composition of the Board of Directors and of present
management. In addition, the increase in the amount of time required for a
takeover bidder to obtain control of the Company without the cooperation of the
Board of Directors could tend to discourage or make more difficult certain
mergers, tender offers, proxy contests or assumption of control by a holder of a
larger block of securities including, perhaps, some transactions that
shareholders may feel would be in their best interests. Staggered terms could
make a third party tender offer at a premium or short term fluctuations in the
market price of the Company's Common Stock due to open market purchases less
likely. The classification of the Board of Directors also makes it more
difficult for the shareholders to change the composition of the Board of
Directors even if the shareholders believe that such a change would be
desirable.
The Board of Directors has no knowledge of any present effort to gain
control of the Company either through acquisition of stock or by means of a
proxy contest. Moreover, there has been no stated concern in the past or at the
present time with management continuity or stability. The Board of Directors
believes that it is prudent and in the interest of shareholders generally to
encourage prospective acquirors to negotiate with the Board of Directors which
the Board if Directors believes will result from the adoption of the proposed
amendment. The Board believes this advantage outweighs any disadvantage relating
to discouraging potential acquirors from making an effort to obtain control of
the Company.
Proposed Amendment
The Board of Directors has unanimously approved an amendment to the
Company's Articles of Incorporation to provide for the classification of
directors into three groups to serve for staggered terms of three years. In
addition, the amendment provides that vacancies on the Board shall be filled by
majority vote of the remaining directors, that directors may be removed "for
cause" only upon a majority vote of outstanding capital stock and "without
cause" only upon the affirmative vote of not less than two-thirds of the
outstanding capital stock entitled to vote thereon. Of the nominees for
director, Messrs. Ellis and Stillabower would be elected for an initial term of
one year, Messrs. Bean and Edelman would be elected for an initial term of two
years and Messrs. Lampropoulos and Stanger would be elected for an initial term
of three years. Thereafter, at each annual election of directors, the class of
directors, whose term expire, representing approximately one-third of the Board,
would be elected to serve for a term of three years.
The proposal would amend Article VI of the Articles of Incorporation as
set forth on Appendix A. If approved, the amendment would become effective upon
the shareholders' approval of the amendment and filing with the Utah Department
of Commerce, Division of Corporations and Commercial Code, which would occur
promptly after the Annual Meeting. The nominees for director at the Annual
Meeting will be elected to the staggered terms set forth above. If the amendment
is not approved, each will serve until the next annual meeting or until their
successors are elected and qualified.
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<PAGE>
Certain Interests of Directors
The Board of Directors recognizes that adoption of the proposed
amendment may benefit individual directors of the Company and their successors,
but believes that the current classification of directors is appropriate to
maintain continuity and stability in the composition of the Board of Directors
and to encourage persons seeking to acquire control of the Company to negotiate
with the Board of Directors and to allow the Board of Directors sufficient time
to evaluate any proposal and to study alternative proposals. The amendment will
be approved by the shareholders if the number of votes cast approving the
amendment exceeds the number of votes cast opposing such amendment.
The Board of Directors recommends that shareholders vote FOR the
proposed amendment to the Articles of Incorporation.
PROPOSAL NO. 3 AMENDMENT TO THE
COMPANY'S ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF CAPITAL STOCK
Proposed Amendment
The Board of Directors has adopted a resolution setting forth a
proposed amendment to Article VI of the Company's Articles of Incorporation that
will effect an increase in the total number of shares of capital stock which the
Company is authorized to issue from 10,000,000 to 25,000,000, of which
20,000,000 shares shall be designated as Common Stock, no par value, and
5,000,000 shares shall be designated as Preferred Stock, no par value. The
proposed amendment is attached hereto as Appendix "B."
Reasons for the Proposed Amendment
The Board of Directors has determined that the proposed amendment is in
the best interests of the Company and its shareholders and recommends that
shareholders adopt the proposed amendment to the Company's Articles of
Incorporation for the reasons described below.
The Company currently has 10,000,000 shares of Common Stock authorized
under its Articles of Incorporation. As of April 7, 1997, there were 7,239,681
shares of Common Stock outstanding and 2,208,461 shares reserved for issuance
upon exercise of outstanding option and warrants and for employee stock plans.
As a result, the Company does not have sufficient shares of Common Stock
available for public or private sale as a means of funding future growth or
operating capital requirements. Shares of Common Stock may also be needed in
connection with any future acquisitions and for issuance upon exercise of
options granted under the Company's stock plans, including the Long Term
Incentive Plan, Section 401(k) Employee Benefit Plan and Section 423 Employee
Stock Purchase Plan.
Common Stock
The increase in the number of authorized shares of Common Stock will
not otherwise affect the rights and preferences of holders of Common Stock. Each
outstanding share of Common Stock is entitled to participate equally in
dividends as and when declared by the Board of Directors and is entitled to
participate equally in any distribution of net assets made to the shareholders
upon liquidation of the Company. There are no redemption, sinking fund,
conversion or preemptive rights with respect to the shares of Common Stock. All
shares of Common Stock have equal rights and preferences. The holders of Common
Stock are entitled to one vote for each share held of record on all matters
voted upon by shareholders and may not accumulate votes for the election of
directors.
Preferred Stock
If the amendment is approved, the Company will be authorized to issue
up to 5,000,000 shares of Preferred Stock from time to time in one or more
series without shareholder approval. The Board of Directors believes that
availability of Preferred Stock adds flexibility to the Company's capital
structure and may be useful in structuring future financings or in connection
with implementation of takeover defenses. The Board of Directors would be
authorized, without any further action by the shareholders of the Company, to
determine the designation, powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
on any series of Preferred Stock and the number of shares constituting any such
series. Holders of Preferred Stock, if issued, will be entitled to such voting
rights are the Board of Directors, in its sole discretion, shall determine.
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Thus, the Board of Directors, without shareholders approval, could authorize the
issuance of Preferred Stock with rights which could adversely affect the rights
of the holders of Common Stock. Any future issuance of Preferred Stock may have
the effect of delaying or preventing a change in control of the Company without
further action by the shareholders and may adversely affect the voting and other
rights of the holders of Common Stock. The ability of the Board of Directors to
authorize the issuance of Preferred Stock may have an anti-takeover effect and
may discourage takeover attempts not first approved by the Board of Directors
(including a takeover which certain shareholders may deem to be in their best
interests). To the extent takeover attempts are discouraged, fluctuations in the
market price of the Company's Common Stock which may result from actual or
rumored takeover attempts, may be inhibited.
Interests of Certain Persons in the Proposed Amendment
In the event the proposed amendment is adopted by the shareholders, the
number of shares of Common Stock currently available for issuance under Company
stock plans will be increased. Directors are currently eligible to receive
annual grants of stock options under the Long Term Incentive Plan and officers
are eligible to receive discretionary grants of stock options under the Long
Term Incentive Plan. Certain executive officers are also eligible to participate
in the Company's Employee Stock Purchase Plan and in the Section 401(k) Employee
Benefit Plan. Adoption of the amendment may also have the anti-takeover effects
described above and tend to perpetuate the exiting Board of Directors and
present management. The Board of Directors recognizes that approval of the
proposed amendment to the Articles of Incorporation may indirectly benefit
individual officers and directors of the Company and their successors, but
believes that approval of the amendment is in the best interests of the Company
for the reasons set forth above. In considering the recommendation of the Board
of Directors, shareholders should be aware that current members of the Board of
Directors own, in the aggregate, approximately 17.5% of the shares of Common
Stock outstanding as of April 16, 1997. See "Principal Holders of Voting
Securities."
The Board of Directors believes that the Amendment of the Articles of
Incorporation is in the best interests of the Company and its shareholders, and
therefore, unanimously recommends that shareholders vote FOR the proposal to
approve the Amendment.
PROPOSAL NO. 4 -- 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, 1997, 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.
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 1998 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 30, 1997.
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 1996 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.
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APPENDIX A
ARTICLE VI
DIRECTORS
The Board of Directors shall consist of such number of members, which
number shall not be less than three and not more than nine as may be determined
and established from time to time by the Board of Directors and shall be divided
into three classes, as nearly equal in size as possible. No increase in the
maximum number of members shall be made except upon the affirmative vote of not
less than two-thirds of the outstanding capital stock of the corporation
entitled to vote thereon. The initial terms of directors first elected or
reelected by the shareholders after the adoption of this amendment and revision
of the Articles of Incorporation shall be for the following terms of office:
Class A Directors - One Year
Class B Directors - Two Years
Class C Directors - Three Years
Upon the expiration of the initial term specified for each class of
directors, their successors shall be elected for three-year terms or until such
time as their successors shall be elected qualified, with one class of directors
to be elected each year.
Vacancies on the Board of Directors, whether the result of removal
(with or without cause), death, resignation or otherwise, shall be filled by
majority vote of the remaining members of the Board of Directors, regardless of
whether such remaining members constitute a quorum.
The corporation shall nominate persons to serve as members of the Board
of Directors upon the expiration of the term of each class of directors, which
nominations shall be submitted to the shareholders at the annual meeting of
shareholders for approval. Any nominations for election to the Board of
Directors shall be received, with respect to any annual meeting of shareholders,
not later than the date specified by the Board of Directors for submission of
such nominations. Failure to submit timely nominations shall prevent
consideration of the nomination at such annual shareholders' meetings.
Directors of the corporation may be removed "for cause" only upon the
affirmative vote of the holders of a majority of the outstanding capital stock
entitled to vote thereon. A director may be removed for cause only after a
finding that (i) the director engaged in fraudulent or dishonest conduct or
gross abuse of authority or discretion, with respect to the corporation and (ii)
removal is in the best interests of the corporation. Directors of the
corporation may be removed for any reason other than cause only upon the
affirmative vote of the holders of not less than two-thirds of the outstanding
capital stock of the corporation entitled to vote thereon.
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APPENDIX B
ARTICLE IV
AUTHORIZED SHARES
The total number of shares of capital stock which the corporation shall
have authority to issue is 25 million (25,000, 000) of which five million
(5,000,000) shall be shares of preferred stock, no par value (hereinafter called
"Preferred Stock") and 20 million (20,000,000) shall be shares of common stock,
no par value (hereinafter called "Common Stock").
The designation, powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of each class of stock, and the express grant of authority
to the board of directors to amend these Articles of Incorporation to fix the
designation, powers, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, of each
share of Preferred Stock which are not fixed by these Articles of Incorporation,
are as follows:
A. Preferred Stock
1. Number; Series. The Preferred Stock may be issued in one or more
series, from time to time, with each such series to have such designation,
powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, as shall be
stated and expressed in an amendment to these Articles of Incorporation
providing for the issue of such series. The Board of Directors of the
corporation is hereby expressly vested with authority to amend the Article of
Incorporation, without shareholder action or approval, to: (a) create one or
more series of Preferred Stock, fix the number of shares of each such series
(within the total number of authorized shares of Preferred Stock available for
designation as a part of such series), and designate and determine, in whole or
part, the preferences, limitations, and relative rights of each series of
Preferred Stock; (b) alter or revoke the preferences, limitations and relative
rights granted to or imposed upon any wholly unissued series of Preferred Stock;
or (c) increase or decrease the number of shares constituting any series of
Preferred Stock (the number of shares of which was originally fixed by the Board
of Directors) either before or after the issuance of shares of the series,
provided that the number may not be decreased below the number of shares of such
series then outstanding, or increased above the total number of authorized
shares of the Preferred Stock available for designation as a part of such
series. Without limiting the foregoing, the authority of the board of directors
with respect to each such series shall include, but not be limited to, the
determination or fixing of the following:
(i) The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the board of
directors in creating such series) be increased or decreased (but not below the
number of shares then outstanding) from time to time by like action of the board
of directors;
(ii) The dividend rate of such series, the conditions and times upon
which such dividends shall be payable, the relation which such dividends shall
bear to the dividends payable on any other class or classes of stock or series
thereof, or on the other series of the same class, and whether dividends shall
be cumulative or noncumulative;
(iii) The conditions upon which the shares of such series shall be
subject to redemption by the corporation and the times, prices and other terms
and provisions upon which the shares of the series may be redeemed;
(iv) Whether or not the shares of the series shall be subject to the
operation of retirement or sinking fund provisions to be applied to the purchase
or redemption of such shares and, if such retirement or sinking fund be
established, the annual amount thereof and the terms and provisions relative to
the operation thereof;
(v) Whether or not the shares of the series shall be convertible into
or exchangeable for shares of any other class or classes, with or without par
value, or of any other series of the same class and, if provision is made for
conversion or exchange, the times, prices, rates, adjustments, and other terms
and conditions of such conversion or exchange;
(vi) Whether or not the shares of the series shall have voting rights,
in addition to the voting rights provided by law, and, if so, subject to the
limitations hereinafter set forth, the terms of such voting rights;
(vii) The rights of the shares of the series in the event of voluntary
or involuntary liquidation, dissolution, or upon distribution of assets of the
corporation;
(viii) Any other powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of the shares of such series, as the board of directors
may deem advisable.
2. Dividends. The holders of the shares of Preferred Stock of each
series shall be entitled to receive, when and as declared by the board of
directors, out of the funds legally available for the payment of dividends,
dividends at the rate fixed by the board of directors for such series for the
current period and, if cumulative, for all prior periods for which such
dividends are cumulative.
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Whenever, at any time, dividends on the then outstanding Preferred
Stock as may be required with respect to any series outstanding shall have been
paid or declared and set apart for payment on the then outstanding Preferred
Stock, and after complying with respect to any retirement or sinking fund or
funds for all applicable series of Preferred Stock, the board of directors may,
subject to the provisions of the resolution or resolutions creating the series
of Preferred Stock, declare and pay dividends on the Common Stock as provided in
paragraph B.1. of this Article IV, and the holders of shares of Preferred Stock
shall not be entitled to share therein, except as otherwise provided in the
amendment creating any series.
3. Liquidation; Dissolution. The holders of the Preferred Stock of each
series shall be entitled upon liquidation or dissolution of the corporation to
such preferences as are provided in the amendment creating such series of
Preferred Stock, and no more, before any distribution of the assets of the
corporation shall be made to the holders of shares of the Common Stock. Whenever
the holders of shares of the Preferred Stock shall have been paid the full
amounts to which they shall be entitled, the holders of shares of the Common
Stock shall be entitled to share in all assets of the corporation remaining as
provided in paragraph B.2. of this Article IV. If, upon such liquidation,
dissolution or winding up, the assets of the corporation distributable as
aforesaid among the holders of Preferred Stock of all series shall be
insufficient to permit full payment to them of said preferential amounts, then
such assets shall be distributed ratably among such holders in proportion to the
respective total amounts which they shall be entitled to receive as provided in
this paragraph 3.
4. Voting. Except as otherwise provided by an amendment to the
Articles of Incorporation creating any series of Preferred Stock or by the
general corporation law of Utah, the Common Stock issued and outstanding shall
have and possess the exclusive power to vote for the election of directors and
for all other purposes as provided in paragraph B.3. of this Article IV.
5. Preemptive Rights. Except as may be provided in the amendment
adopted by the board of directors providing for the issue of any series of
Preferred Stock, no holder of shares of the Preferred Stock of the corporation
shall, as such holder, be entitled as of right to subscribe for, purchase or
receive any part of any new or additional issue of stock of any class, whether
now or hereafter authorized, or of bonds, debentures or other securities
convertible into or exchangeable for stock, but all such additional shares of
stock of any class, or bonds, debentures or other securities convertible into or
exchangeable for stock, may be issued and disposed of by the board of directors
on such terms and for such consideration, so far as may be permitted by law, and
to such persons, as the board of directors in its absolute discretion may deem
advisable.
B. Common Stock
1. Dividends. Subject to the rights of the holders of Preferred Stock,
and subject to any other provisions of the Articles of Incorporation, holders of
Common Stock shall be entitled to receive such dividends and other distributions
in cash, stock or property of the corporation as may be declared thereon by the
board of directors from time to time out of assets or funds of the corporation
legally available therefor.
2. Liquidation; Dissolution. In the event of any liquidation,
dissolution or winding up of the affairs of the corporation, whether voluntary
or involuntary, after payment or provision for payment of the debts and other
liabilities of the corporation and after payment or provision for payment to the
holders of each series of Preferred Stock of all amounts required in accordance
with paragraph A.3. of this Article IV, the remaining assets and funds of the
corporation shall be divided among and paid to the holders of Common Stock.
3. Voting.
(a) At every meeting of the shareholders every holder of Common Stock
shall be entitled to one vote in person or by proxy for each share of such Stock
standing in his name on the stock transfer records of the corporation.
(b) No shareholder shall have the right to cumulate votes in the
election of directors.
4. Preemptive Rights. No holder of shares of Common Stock of the
corporation shall, as such holder, be entitled as of right to subscribe for,
purchase or receive any part of any new or additional issue of stock of any
class, whether now or hereafter authorized, or of bonds, debentures or other
securities convertible into or exchangeable for stock, but all such additional
shares of stock of any class, or bonds, debentures or other securities
convertible into or exchangeable for stock, may be issued and disposed of by the
board of directors on such terms and for such consideration, so far as may be
permitted by law, and to such persons, as the board of directors in its absolute
discretion may deem advisable.
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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 22, 1996 at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at the offices of the
Company, on May 30, 1996, 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 DIRECTORS, each to serve until the next Annual Meeting of
Shareholders of the Company 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.)
Fred P. Lampropoulos (3-year term) Kent W. Stanger (3-year term)
Richard W. Edelman (2-year term) Rex C. Bean (2-year term)
James J. Ellis (1-year term) Michael E. Stillabower M.D. (1-year term)
2. PROPOSAL TO AMEND the Company's Articles of Incorporation to classify
the Directors and provide for staggered terms.
|_| FOR |_| AGAINST |_| ABSTAIN
3. PROPOSAL TO AMEND the Company's Articles of Incorporation to increase
the number of shares which the Company is authorized to issue to 25 million of
which 20 million shall be common stock and 5 million shall be preferred stock.
|_| FOR |_| AGAINST |_| ABSTAIN
4. PROPOSAL TO RATIFY the appointment of Deloitte & Touche as the
independent auditor of the Company.
|_| FOR |_| AGAINST |_| ABSTAIN
5. 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 ALL OF THE DIRECTOR NOMINEES NAMED ABOVE
FOR THE TERMS SET OPPOSITE THEIR NAMES, FOR THE PROPOSALS TO AMEND THE COMPANY'S
ARTICLES OF INCORPORATION 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: _________________________, 1997
---------------------------------------
Signature
---------------------------------------
Signature if held jointly
(Please sign above exactly 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.)
