NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 24, 2000
MERIT MEDICAL SYSTEMS, INC.
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 24, 2000 at 3:00 p.m., at the Company's corporate office 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 amend the Merit Medical
Systems, Inc. 1996 Employee Stock Purchase Plan, (the "Employee Plan") to (a)
increase the number of shares of Merit Medical Systems, Inc. Common Stock (the
"Common Stock") subject to the Employee Plan from 250,000 shares to 500,000
shares; (b) to extend the termination date of the Employee Plan from June 30
,2001 until June 30, 2006; and (c) require Employee Plan participants to hold
shares of Common Stock purchased under the Employee Plan for a minimum of 90
days prior to resale or transfer.
(3) To consider and vote upon a proposal to ratify the appointment of
Deloitte & Touche as independent auditor of the Company for the fiscal year
ending December 31, 2000; and
(4) To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 19,
2000 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
------------------
KENT W. STANGER
April 27, 2000 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 West Merit Parkway, South Jordan, Utah 84095
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PROXY STATEMENT
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Annual Meeting of Shareholders
May 24, 2000
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 24, 2000 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 26, 2000.
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 19, 2000 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 7,747,561 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 approval of the proposal
to amend the Merit Medical Systems, Inc 1996 Employee Stock Purchase Plan (the
"Employee Plan"); FOR the ratification of the appointment of Deloitte & Touche
to be the Company's independent auditor for the fiscal year ending December 31,
2000; and in the discretion of the proxy holder as to any other matters which
may properly come before the Annual Meeting. A shareholder who has executed and
returned a proxy may revoke it at any time prior to its exercise at the Annual
Meeting by executing and returning a proxy bearing a later date, by filing with
the Secretary of the Company, at the address set forth above, a written notice
of revocation bearing a later date than the proxy being revoked, or by voting
the Common Stock covered thereby in person at the Annual Meeting.
Vote Required
A majority of the issued and outstanding shares of Common Stock entitled to
vote, represented in person or by proxy, is required for a quorum at the Annual
Meeting. Abstentions and broker non votes will be counted as "represented" for
the purpose of determining the presence or absence of a quorum. Under Utah law,
once a quorum is established, shareholder approval with respect to a particular
proposal is generally obtained when the votes cast in favor of a proposal exceed
the votes cast against the proposal. Accordingly, abstentions and broker non
votes will not generally have the effect of being considered as votes cast
against any matter considered at the Annual Meeting. In the election of
directors, the two nominees receiving the highest number of votes will be
elected.
PROPOSAL NO. 1 ELECTION OF DIRECTORS
At the Annual Meeting, two directors of the Company are to be elected to
serve for a term of three years or until their successors shall be duly elected
and qualified. Each of the nominees for director, identified below, is currently
a director of the Company. If any of the nominees should be unavailable to
serve, which is not now anticipated, the proxies solicited hereby will be voted
for such other persons as shall be designated by the present Board of Directors.
The two nominees receiving the highest number of votes at the Annual Meeting
will be elected.
-1-
<PAGE>
Nominees for Election as Directors
Certain information with respect to each director nominee is set forth
below.
Fred P. Lampropoulos, 50, 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, 45, 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.
Directors Whose Terms of Office Continue
Rex Bean, 69, has been a director of the Company since 1988. Mr. Bean
retired from the U.S. Air Force in 1987 and is principally engaged in the
management of private investments. Mr. Bean's term as a director expires in
2002.
Richard W. Edelman, 59, has been a director of the Company since 1988. He
is 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's term as a director expires in 2002.
James J. Ellis, 66, 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
2001.
Michael E. Stillabower, M.D., 56, has been a Director of the Company since
March 1996. Dr. Stillabower has been a physician in private practice in
Wilmington, Delaware since 1980. In 1999, he was appointed Director,
Cardiovascular Research, Christiana Care Health Systems. From 1988 to 1999, he
was chief of cardiology at the Medical Center of Delaware, where he 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's term as a Director expires in 2001.
<PAGE>
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 1999 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 three times during the 1999 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 Long Term Incentive Plan (the "Incentive
Plan") and the Employee Plan.
During the fiscal year ended December 31, 1999 there were 9 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) 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 $5,000 and a director's fee of $1,000 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 elsewhere in this Proxy Statement, certain information is furnished
with respect to the following executive officers of the Company:
B. Leigh Weintraub, 50, was appointed Chief Operating Officer in February
1997 and was appointed Vice President of Operations in April 1995. She was
Director or Vice President of Regulatory Affairs and Quality Assurance of the
Company from August 1993 to 1995. From 1992 to August 1993, she was Director of
Regulatory Affairs and Clinical Programs for Endomedix, a medical device company
based in Irvine, California. From 1988 to 1992, Ms. Weintraub was employed by
Baxter Healthcare Corporation as Manager of Quality Strategies and Quality
Engineering and as Project Engineer, Quality Engineering. Ms. Weintraub
completed an executive MBA program at Pepperdine University in April 1993.
Brian L. Ferrand, 45, 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.
<PAGE>
Compensation of Executive Officers
The compensation of Fred P. Lampropoulos, the Company's Chief Executive
Officer, and the Company's other executive officers (the "Named Executive
Officers") during the fiscal year ended December 31, 1999 is shown on the
following pages in three tables and discussed in a report from the Executive
Compensation Committee of the Board of Directors.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
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Annual Compensation Awards
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Fiscal Options All Other
Name and Position~~~ Year--- Salary-- Bonus SARs (#) Compensation
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fred P. Lampropoulos 1999 $ 305,000 $ 685 27,500(1) $ 23,437(2)
Chairman of the Board, 1998 262,985 200 107,500(1) 20,433(2)
Chief Executive Officer and President 1997 250,000 9,615 107,500(1) 4,385(3)
Brian L. Ferrand 1999 200,000 50,000 10,000 6,606(2)(3)
Vice President of Sales 1998 207,692 30,000 0 7,692(2)
1997 198,904 10,846 40,000 4,319(3)
Kent W. Stanger 1999 185,577 0 26,250(1) 13,317(2)(3)
Chief Financial Officer, 1998 181,731 0 7,500(1) 3,365(2)
Secretary, Treasurer and Director 1997 175,000 673 10,000(1) 4,139(3)
B. Leigh Weintraub 1999 185,577 500 18,750 5,149(2)(3)
Vice President of Operations 1998 181,058 13,968 0 0
1997 182,411 16,525 10,000 4,358(3)
</TABLE>
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(1) Includes stock options granted under the formula plan provisions of the
Incentive Plan (7,500 shares/year).
(2) Accrued Vacation paid with cash in lieu of benefit.
(3) 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.
<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, 1999. As
of December 31, 1999 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 Granted Fiscal Year Price Date 5% 10%
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fred P. Lampropoulos 20,000 4.8% $5.75 03/31/2004 $ 31,772 $ 70,209
7,500(1) 1.8% 5.875 05/26/2004 12,174 26,901
Brian L. Ferrand 10,000 2.4% 5.75 03/31/2004 15,886 35,104
Kent W Stanger 10,000 2.4% 5.75 03/31/2004 15,886 13,104
7,500(1) 1.8% 5.875 05/26/2004 12,174 26,901
8,750 2.1% 6.562 10/23/2004 15,863 35,054
B. Leigh Weintrauab 10,000 2.4% 5.75 03/31/2004 15,886 35,104
8,750 2.1% 6.562 10/23/2004 15,863 35,054
</TABLE>
- -------------------------------
(1) Reflects stock options granted under the formula plan provisions of the
Incentive Plan (7,500 shares/year).
<PAGE>
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
The following table sets forth the number of shares of Common Stock
acquired during the fiscal year ended December 31, 1999 upon the exercise of
stock options, the value realized upon such exercise, the number of unexercised
stock options held on December 31, 1999 and the aggregate value of such options
held by the Named Executive Officers:
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In-the-Money Options
Number of Shares Value December 31, 1999 at December 31, 1999(1)
Acquired Realized on ---------------------------- ----------------------------
Name on Exercise Exercise Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fred P. Lampropoulos 5,000 $ 4,375 126,000 164,000 $ 47,313 $ 134,875
Brian L. Ferrand 0 0 44,000 31,000 13,250 21,750
Kent W. Stanger 5,000 5,375 57,000 30,500 28,688 27,020
B. Leigh Weintraub 0 0 21,000 31,750 8,750 26,645
</TABLE>
- ---------------------------
(1) Reflects the difference between the exercise price of the Options granted
and the value of the Common Stock on December 31, 1999. The closing sale
price of the Common Stock on December 31, 1999 as reported by NASDAQ was
$7.25 per share.
Certain Relationships and Related Transactions
During fiscal 1998 the Company loaned to Fred P. Lampropoulos, Chairman of
the Board, President, and Chief Executive Officer, for personal reasons, the sum
of $225,000 payable in five annual installments with interest at the Company's
blended borrowing rate. The note evidencing the loan and a related pledge
agreement provide for collateral in the form of 62,950 shares of Common Stock.
In 1999, the Executive Compensation Committee of Merit Medical extended the term
of the Promissory Note for a period of one year. The first installment will be
due June 1, 2000.
Change of Control Employment Agreements
In March 1998, the Board of Directors of the Company approved Change of
Control Employment Agreements (the "Employment Agreements") for each of the
Named Executive Officers. These Employment Agreements provide certain benefits
in the event of a change of control of the Company, as well as payments and
benefits in the event of termination of employment under certain circumstances.
The Employment Agreements provide for the continued employment of the Named
Executive Officers for two years following a change of control (three years in
the case of Mr. Lampropoulos) (the "Employment Period") in essentially the
position held prior to the change of control and at an annual base salary and
average annual bonus which is based on the salary paid during the last fiscal
year and the average of the bonuses paid during the three fiscal years prior to
the change of control. In addition, during the Employment Period, the Named
Executive Officers are entitled to participate in all retirement plans, benefit
plans and other employee benefits in effect prior to the change of control or,
if more favorable, in those benefit programs provided to employees after the
change of control.
Upon termination of employment 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.
<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 and the Employee 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.
Effective March 19, 2000, the Named Executive Officers took a voluntary
reduction in pay as part of a Company-wide, cost-reduction program to improve
the Company's future profitability. The salary for Fred P. Lampropoulos was
reduced by $30,500, or 10 percent; the quarterly bonus for Brian L. Ferrand
declined by $10,000, or 16 percent of his total compensation; the salary for
Kent W. Stanger was reduced by $25,000, or 13 percent; and B. Leigh Weintraub's
salary was reduced by $25,000, or 13 percent.
The salary for Fred P. Lampropoulos, the President and Chief Executive
Officer, is based generally upon comparisons with levels of compensation paid to
chief executive officers of other comparably sized medical device manufacturers.
The overall performance of the Company and the Company's progress toward
achieving specific objectives are also important factors in setting compensation
for Mr. Lampropoulos. Specific objectives in fiscal 1999 focused on new
strategic market expansion and related product development. The Company's
efforts to reduce costs and increase the efficiency of its operations and Mr.
Lampropoulos' performance in achieving those objectives were also considered. On
March 19, 2000, Mr. Lampropoulos' base salary was set at $274,500.
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.
<PAGE>
Equity Based Compensation. The Employee Plan and the Incentive Plan are
designed to promote and advance the interests of the Company and its
shareholders by strengthening the mutuality of interests between the executive
officers of the Company and the Company's shareholders. The Company has limited
the payment of executive incentive compensation in the form of annual cash
bonuses, preferring to make stock based grants under the Company's Long-Term
Incentive Stock Option Plan (the "Predecessor 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 1999 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. 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
Predecessor 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. 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
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of April 19, 2000, with
respect to the beneficial ownership of shares of the Common Stock by each person
known by the Company to be the beneficial owner of more than 5% of the Common
Stock, by each director, by each director nominee, by each Named Executive
Officer and by all directors and officers as a group. Unless otherwise noted,
each person named has sole voting and investment power with respect to the
shares indicated. Percentages are based on 7,747,561 shares outstanding.
<TABLE>
<CAPTION>
Beneficial Ownership
- ------------------------------------------------------------------------------------------------
Number of Percentage
Shares of Class
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
The Vertical Group, L.P.(1) 1,123,400 14.5%
Fred P. Lampropoulos(2)(3) 705,898 8.9
Kent W. Stanger(2)(3) 338,596 4.3
Rex C. Bean(3) 296,556 3.8
Richard W. Edelman(3) 66,537 *
Brian L. Ferrand(2)(3) 63,017 *
James J. Ellis(3) 53,400 *
Michael E. Stillabower M.D.(3) 38,000 *
B. Leigh Weintraub(2)(3) 31,114 *
All officers and directors as a group (8 persons)(2)(3) 1,593,118 19.5%
</TABLE>
- ----------------------
* Represents holdings of less than 1%
(1) Based on a Schedule 13D dated April 14, 2000.
(2) The computations above include the following share amounts which are held
in the Company's 401(k) Profit Sharing Plan on behalf of participants
thereunder: Fred P. Lampropoulos, 14,551 shares; Brian L. Ferrand, 12,317
shares; Kent W. Stanger, 12,130 shares; B. Leigh Weintraub, 1,472 shares;
and all officers and directors as a group, 40,470 shares.
(3) The computations above include the following share amounts which are
subject to options exercisable within 60 days, none of which have been
exercised: Fred P. Lampropoulos, 171,000 shares; Kent W. Stanger, 58,750
shares; Rex C. Bean, 35,000 shares; Richard W. Edelman, 35,000 shares;
Brian L. Ferrand, 50,000 shares; James J. Ellis 30,000 shares; Michael E.
Stillabower M.D., 30,000 shares; B. Leigh Weintraub, 27,750 shares; and all
officers and directors as a group, 437,500 shares.
<PAGE>
Merit Medical Systems, Inc.
Comparison of Five Year-Cumulative Total Returns
Performance Graph [Graph Ommitted]
The above-referenced graph illustrates the five-year cumulative performance of
(1) MMSI Common Stock versus (2) Nasdaq U.S. companies and (3) Nasdaq stocks
with SIC codes 3840-3849 U.S. Companies, surgical, medical, and dental
instruments and supplies (Sector). The index hypothesizes the cumulative value
(cost basis plus return on investment) as of 12/31/99 of $100 invested on
12/31/94 as follows: (1) MMSI Common stock, $165.70; (2) Nasdaq, $545.70; and
(3) Sector, $219.20.
Prepared by the Center for Research in Security Prices
Produced on 03/14/00 including data to 12/31/99
<PAGE>
PROPOSAL NO. 2
TO AMEND THE MERIT MEDICAL SYSTEMS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
General
On April 15, 1996, the Board of Directors adopted the Employee Plan. The
first offering under the Employee Plan commenced on July 1, 1996. On April 15,
2000, the Board of Directors adopted an amendment of the Employee Plan, subject
to approval of the Company's shareholders at the Annual Meeting, to a) increase
the number of shares of Common Stock subject to the Employee Plan from 250,000
shares to 500,000 shares; b) extend the termination date of the Employee Plan
from June 30, 2001 to June 30, 2006; and c) require participants to hold shares
of Common Stock purchased under the Employee Plan for a minimum of 90 days prior
to resale or transfer. The following description of the Employee Plan does not
purport to be complete and is qualified in its entirety by reference to the full
text thereof.
Description of the Employee Plan
Purpose. The purpose of the Employee Plan is to provide a method whereby
employees of the Company and certain of its subsidiaries will have an
opportunity to acquire a proprietary interest in the Company through the
purchase of shares of Common Stock. The Board of Directors believes that the
Employee Plan is important because it provides incentives to present and future
employees of the Company by allowing them to share in the growth of the Company.
The Employee Plan is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
Administration. The Employee Plan is administered by a committee (the
"Committee") of the Board of Directors consisting of no fewer than two members
of the Board of Directors. Each member of the Committee must qualify as a
"disinterested person" with respect to the Employee Plan as defined in Rule
16b-3 promulgated pursuant to the Exchange Act. The Committee is presently
composed of the Executive Compensation Committee of the Board of Directors. The
Committee has the authority to interpret and construe all provisions of the
Employee Plan and to make all decisions and determinations relating to the
operation of the Employee Plan.
Duration. The Employee Plan became effective upon its adoption by the Board
of Directors and will remain in effect until June 30, 2006 unless terminated
earlier or amended by the Board of Directors (including the extension of the
termination date contemplated by the proposed amendment, which is subject to
shareholder approval). No termination of the Employee Plan may adversely affect
the rights of any employee with respect to outstanding options under the
Employee Plan without the consent of the employee.
Shares Currently Subject to Employee Plan. The maximum number of shares of
Common Stock which may currently be issued under the Employee Plan is 250,000
shares. As of April 19, 2000, the Company had issued 190,508 shares of Common
Stock under the Employee Plan. In the event the outstanding shares of Common
Stock are increased, decreased, changed into, or exchanged for a different
number or kind of shares or securities of the Company through reorganization,
merger, recapitalization, reclassification, stock split, reverse stock split or
similar transaction, the maximum number of shares available for issuance under
the Employee Plan shall be proportionately adjusted.
Eligibility. Participation in the Employee Plan is limited to employees of
the Company and its subsidiaries who have completed ninety (90) days of
employment with the Company. Employees who own five percent (5%) or more of the
voting stock of the Company, however, may not participate in the Employee Plan.
Approximately 1,200 employees are eligible to participate in the Employee Plan.
Offerings Under the Employee Plan. The Employee Plan provides for a series
of annual offerings commencing on July 1st of each calendar year during the term
of the Employee Plan. At the election of the Committee, each annual offering may
be divided into four quarterly offerings or two six-month offerings.
<PAGE>
An eligible employee may elect to participate in an offering under the
Employee Plan by authorizing the Company to make deductions from his or her pay
on each payday during the time the employee is a participant in an offering at
any rate between 2% and 15% of his or her base salary. On the commencement date
of an offering, the Company will grant to each employee who elects to
participate in an offering under the Employee Plan an option to purchase a
maximum number of shares. The maximum number of shares for a quarterly offering
period shall be equal to $6,250 divided by the fair market value of the Common
Stock on the date of grant. The maximum number of shares will be proportionately
increased for six-month and annual offerings. No employee will be granted an
option which permits him or her to purchase in excess of $25,000 of Common Stock
per calendar year.
Options will be deemed to have been exercised automatically on the offering
termination date for the purchase of the number of full shares of Common Stock
which the accumulated payroll deductions in his or her account will purchase,
but not in excess of the maximum number of shares for which an option has been
granted to an employee.
Exercise Price of Options. The price per share to be paid by participants
under the Employee Plan shall be the lesser of (a) 85% of the fair market value
of the Common Stock on the applicable offering commencement date or (b) 85% of
the fair market value of the Common Stock on the applicable offering termination
date. The fair market value of the Common Stock shall be the closing sale price
of the Common Stock on the NASDAQ Stock Market (National Market System) on the
applicable date or the nearest prior trading day, if such date is not a trading
day. The exercise price shall be payable only through payroll deductions from an
employee's compensation, except in limited circumstances involving a leave of
absence.
Termination of Employment. Upon the termination of a participant's
employment for any reason during an offering, including retirement (but
excluding death while in the employ of the Company), the payroll deductions
credited to the participant's account shall be returned to the participant and
shall not be used to purchase shares of Common Stock under the Employee Plan. In
the event the participant's employment is terminated as result of his or her
death, his or her designated beneficiary shall have the right to elect to (a)
withdraw all payroll deductions credited to the participant's account under the
Employee Plan, or (b) exercise the participant's option on the offering
termination date for the purchase of the number of full shares which the
participant's accumulated payroll deductions will purchase at the applicable
exercise price.
Amendment and Termination. The Board of Directors may amend, suspend or
terminate the Employee Plan or any portion thereof at any time; provided,
however, that (a) no amendment may be made without shareholder approval to the
extent such amendment would cause the Employee Plan to fail to meet the
requirements of Section 423 of the Code, and (b) to the extent required by Rule
16b-3 and the SEC's interpretations and releases under Rule 16b-3, no amendment
may be made without shareholder approval that would (i) materially increase the
number of shares that may be issued under the Employee Plan, (ii) materially
modify the requirements as to eligibility for participation in the Employee
Plan, or (iii) materially increase the benefits accruing to participants under
the Employee Plan.
General Provisions. No participant or his legal representatives, legatees
or distributees will be deemed to be the holder of any shares of Common Stock
subject to an offering until the option has been exercised and the purchase
price for the shares has been paid. No payroll deductions credited to a
participant's stock purchase account nor any rights with regard to the exercise
of rights to receive shares of Common Stock under the Employee Plan may be
assigned, transferred, pledged or otherwise disposed of in any way by a
participant other than by will or the laws of descent and distribution. Options
under the Employee Plan will be exercisable during a participant's lifetime only
by him, his guardian or legal representative.
<PAGE>
Certain Federal Income Tax Consequences
The following tax discussion is a brief summary of federal income tax law
applicable to the Employee Plan. The discussion is intended solely for general
information and omits certain information which does not apply generally to all
participants in the Employee Plan.
Grant of Options. In the opinion of the Company, the Employee Plan
qualifies as an "employee stock purchase plan" within the meaning of Section 423
of the Code. As such, a recipient of options under the Employee Plan incurs no
income tax liability, and the Company obtains no deduction, from the grant of
the options. The payroll deductions, however, are made on an after-tax basis.
Participants will not be entitled to deduct or exclude from income or social
security taxes any part of the payroll deductions.
Exercise of Options. An employee will not be subject to federal income tax
upon the exercise of an option granted under the Employee Plan, nor will the
Company be entitled to a tax deduction by reason of such exercise, provided that
the holder is still employed by the Company (or terminated employment no longer
than three months before the exercise date). The employee will have a cost basis
in the shares of Common Stock acquired upon such exercise equal to the option
exercise price.
Disposition of Shares Acquired Under Employee Plan. In order to defer
taxation on the difference between the fair market value and exercise price of
shares acquired upon exercise of an option, the employee must hold the shares
during a holding period which runs through the later of one year after the
option exercise date or two years after the date the option was granted. The
only exceptions are for dispositions of shares upon death, as part of a tax-free
exchange of shares in a corporate reorganization, into joint tenancy with right
of survivorship with one other person, or the mere pledge or hypothecation of
shares.
If an employee disposes of stock acquired under the Employee Plan before
expiration of the holding period in a manner not described above, such as by
gift or ordinary sale of such shares, the employee must recognize as ordinary
compensation income in the year of disposition the difference between the
exercise price and the stock's fair market value as of the date of exercise.
This amount must be recognized as income even if it exceeds the fair market
value of the shares as of the date of disposition or the amount of the sales
proceeds received. The Company will be entitled to a corresponding compensation
expense deduction.
Disposition of shares after expiration of the required holding period will
result in the recognition of gain or loss in the amount of the difference
between the amount realized on the sale of the shares and the exercise price for
such shares. Any loss on such a sale will be a long-term capital loss. Any gain
on such a sale will be taxed as ordinary income up to the amount of the
difference between exercise price and the stock's fair market value as of the
date of exercise with any additional gain taxed as a long-term capital gain.
Value of Benefits
The Company is unable to determine the amount of benefits that may be
received by participants under the Employee Plan as participation is
discretionary with each employee.
<PAGE>
Proposed Amendment
On April 15, 2000, the Board of Directors adopted an amendment to the
Employee Plan for the purposes of (a) increasing the number of shares of Common
Stock subject to the Employee Plan from 250,000 shares to 500,000 shares; (b)
extending the termination date of the Employee Plan from June 30, 2001 to June
30, 2006; and (c) requiring participants to hold shares of Common Stock
purchased under the Employee Plan for a minimum of 90 days prior to resale or
transfer. The proposal of the Board of Directors to amend the Employee Plan is
based upon a determination by the Board of Directors that the Employee Plan
provides a meaningful opportunity for employees of the Company and certain of
its subsidiaries to acquire a proprietary interest in the Company through the
purchase of shares of Common Stock. The Board of Directors believes the proposed
amendment is beneficial to the Company and its shareholders because it will
extend the opportunity for present and future employees of the Company to
participate in the Company's growth. Following a review of the operation of the
Employee Plan, the Board of Directors is recommending that shareholders of the
Company vote FOR approval of the proposed amendment.
Approval of the proposed amendment of the Employee Plan requires the
affirmative vote of the holders of the majority of the issued and outstanding
shares of Common Stock represented and voted at the Annual Meeting. Approval of
the proposed amendment will not result directly in the grant of awards or
options under the Employee Plan to the executive officers, directors or
employees of the Company. Approval will, however, increase the number of shares
subject to the Employee Plan which may be sold to employees of the Company,
including those executive officers and directors who are eligible to participate
in the Employee Plan. If the proposed amendment is not approved by the
shareholders of the Company at the Annual Meeting, the Employee Plan will
continue in effect as previously adopted by the shareholders of the Company.
Certain Interests of Directors
In considering the recommendation of the Board of Directors with respect to
the proposed to amend the Employee Plan, shareholders should be aware that the
members of the Board of Directors have certain interests which may present them
with conflicts of interest in connection with such proposal. As discussed above,
all employees, including directors who are employees of the Company, are
generally eligible to purchase Common Stock under the Employee Plan. The Board
of Directors recognizes that the operation of the Employee Plan may benefit
certain directors of the Company and their successors, but believes that
approval of the proposed Employee Plan will advance the interests of the Company
and its shareholders by encouraging employees of the Company to make significant
contributions to the long term success of the Company.
The Board of Directors believes the amendment of Employee Plan is in the
best interests of the Company, and therefore, unanimously recommends that the
shareholders vote FOR approval of the proposal to amend the Employee Plan. In
considering the foregoing recommendation of the Board of Directors, shareholders
should be aware that the current members of the Board of Directors own, in the
aggregate, approximately 20 percent of the shares of Common Stock outstanding as
of April 19, 2000. See "Principal Holders of Voting Securities."
<PAGE>
PROPOSAL NO. 3 RATIFICATION OF SELECTION OF AUDITOR
The Audit Committee has recommended, and the Board of Directors has
selected, the firm of Deloitte & Touche, independent certified public
accountants, to audit the financial statements of the Company for the fiscal
year ending December 31, 2000 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 2001 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, 2000.
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 1999 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.
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 19, 2000 at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the offices of the Company, on
May 24, 2000, 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.
o FOR all nominees listed below (except as marked to the contrary).
o 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 KENT W. STANGER
2. To consider and vote upon a proposal to amend the Merit Medical Systems,
Inc. 1996 Employee Stock Purchase Plan.
o FOR o AGAINST o ABSTAIN
3. To consider and vote upon a proposal to ratify the appointment of
Deloitte & Touche as the independent auditor of the Company.
o FOR o AGAINST o ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF TWO DIRECTORS, FOR THE APPROVAL OF THE EMPLOYEE
PLAN AND FOR THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE AS THE
INDEPENDENT AUDITOR OF THE COMPANY.
Please complete, sign and date this proxy where indicated and return it
promptly in the accompanying prepaid envelope.
Date: , 2000 -------------------------------------
------- 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.)
