Director Compensation
We use a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve as directors. In setting director compensation, the Board considers the significant amount of time that directors expend in fulfilling their duties to the Company as well as the skill level required by the Company of its directors.
|
Schedule of Director Retainers
|
Lead Independent Director
|
$
110,000
|
Other Directors
|
$
80,000
|
Audit Chair
|
$
10,000
|
Compensation Chair
|
$
7,500
|
Governance Chair
|
$
7,500
|
Finance Chair
|
$
7,500
|
|
Cash Compensation Paid to Directors
For the year ended December 31, 2019, all non-employee directors of the Company (except Nolan E. Karras and Lynne N. Ward) received an annual cash retainer of $80,000. Mr. Karras, as lead independent director, received an annual cash retainer of $110,000. Jill Anderson also received a pro-rated amount of $33,333 for service rendered from her appointment on January 1, 2019 to the date of the 2019 annual meeting of shareholders. In January 2020, Ms. Ward was paid $62,027, which represented a pro-rated portion of her retainer from the date of her appointment as a director of the Company on August 19, 2019 through the date of the Annual Meeting. Committee chair-specific retainers are set forth in the foregoing table. Directors are also reimbursed for (a) out-of-pocket travel and related expenses incurred in attending Board and committee meetings and other Company events, and (b) up to $5,000 for annual educational expenses.
Stock Option Awards
Directors are eligible to participate in our equity incentive programs. Each non-employee director who served during the year ended December 31, 2019 (except for Lynne N. Ward) received an option under the 2018 Incentive Plan to purchase up to 21,250 shares of Common Stock at an exercise price of $52.17 per share, which is not less than the per share market closing price on the date of the grant. Subsequent to her appointment as a director in August 2019, Ms. Ward received an option under the 2018 Incentive Plan to purchase up to 22,300 shares of Common Stock at an exercise price of $34.46 per share, the per share market closing price on the date of the grant. Subsequent to her appointment as a director in January 2019, Jill D. Anderson also received an option to purchase 9,726 shares of Common Stock under the 2018 Incentive Plan (which represented a pro-rated amount for her service from the date of her appointment as a director in January 2019 to the date of the 2019 annual meeting of the Company’s shareholders) at an exercise price of $51.31 per share, the per share market closing price on the date of the grant. Options granted to directors of the Company during 2019 vest over three years in three equal annual increments of one-third of the shares subject to the option per year.
The following table shows amounts paid to each of our non-employee directors in 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Employee Director Summary Compensation
|
Name (1)
|
|
Fees Earned or Paid in Cash ($)
|
|
Options Awards ($) (2)
|
|
Non-Equity Incentive Plan Compensation ($)
|
|
All Other Compensation ($)
|
|
Total Compensation ($)
|
A. Scott Anderson
|
|
87,500
|
|
|
242,400
|
|
|
—
|
|
|
—
|
|
|
329,900
|
|
Jill D. Anderson (3)
|
|
113,333
|
|
|
356,498
|
|
|
—
|
|
|
__
|
|
|
469,831
|
|
Thomas J. Gunderson
|
|
87,500
|
|
|
242,400
|
|
|
—
|
|
|
—
|
|
|
329,900
|
|
Nolan E. Karras
|
|
120,000
|
|
|
242,400
|
|
|
—
|
|
|
—
|
|
|
362,400
|
|
David M. Liu, M.D.(4)
|
|
80,000
|
|
|
242,400
|
|
|
—
|
|
|
—
|
|
|
322,400
|
|
Franklin J. Miller, M.D.
|
|
80,000
|
|
|
242,400
|
|
|
—
|
|
|
—
|
|
|
322,400
|
|
F. Ann Millner, Ed.D.
|
|
87,500
|
|
|
242,400
|
|
|
—
|
|
|
—
|
|
|
329,900
|
|
Kent W. Stanger
|
|
80,000
|
|
|
242,400
|
|
|
—
|
|
|
—
|
|
|
322,400
|
|
Lynne N. Ward (5)
|
|
—
|
|
|
187,153
|
|
|
—
|
|
|
—
|
|
|
187,153
|
|
|
(1)
|
|
Fred P. Lampropoulos served as a director of the Company during 2019 but is not identified in the foregoing director summary compensation table because of his dual status as an NEO and director. Information regarding Mr. Lampropoulos’ 2019 compensation can be found under “Executive Compensation” below.
|
|
(2)
|
|
The amounts shown for the option awards reflect the aggregate grant date fair value of all equity awards granted to the non-employee directors in 2019. We calculated these amounts in accordance with financial statement reporting rules, using the same assumptions we used for financial statement reporting purposes pursuant to our long-term incentive plans. Assumptions used in the calculation of these amounts are included in footnotes to our 2019 audited financial statements. As of December 31, 2019, each non-employee director held outstanding options for the following number of shares: Mr. Anderson, 125,250; Ms. Anderson, 30,976; Mr. Gunderson, 71,250; Mr. Karras, 154,250; Dr. Liu, 69,250; Dr. Miller, 166,250; Dr. Millner, 80,496; Mr. Stanger, 107,625; and Ms. Ward, 22,300.
|
|
(3)
|
|
Ms. Anderson was appointed to serve as a director of the Company on January 1, 2019. The amount shown under “Fees Earned or Paid in Cash ($)” includes $80,000 for her 2019 annual retainer, plus $33,333 for her pro-rated retainer earned for service rendered from her appointment date to the date of the 2019 annual meeting.
|
|
(4)
|
|
Prior to his appointment as a director of the Company, Dr. Liu entered into a technology license agreement with the Company, pursuant to which the Company acquired a license to use certain technology created by Dr. Liu and one of his colleagues. The Company did not pay to Dr. Liu any amounts under the license agreement during 2019; however, it is possible that the Company may pay to Dr. Liu future payments, in the form of consulting fees, royalties and lump-sum milestone payments. The terms of the license agreement with Dr. Liu were negotiated in an arms-length transaction.
|
|
(5)
|
|
Ms. Ward was appointed as a director of the Company on August 19, 2019. She was not paid a cash retainer during the year ended December 31, 2019. In January 2020, she was paid $62,027, which represented a pro-rated portion of her retainer from the date of her appointment in August 2019 through the date of the Annual Meeting.
|
Related Person Matters
Policies and Procedures Regarding Transactions with Related Persons
Our Code of Conduct requires that every employee avoid situations where loyalties may be divided between our interests and the employee’s own interests. Employees and directors must avoid conflicts of interest that interfere with the performance of their duties or are not in our best interests.
Pursuant to its written charter, the Audit Committee reviews and approves all “related party transactions” (as such term is used by ASC Topic 850 Related Party Disclosures) involving executive officers and directors, or as otherwise may be required to be disclosed in our financial statements or periodic filings with
the Securities and Exchange Commission (the Commission) (including under Item 404 of Regulation S-K under the Securities Act of 1933), other than:
|
(a)
|
|
grants of stock options made by the Board or any committee thereof or pursuant to an automatic grant plan; and
|
|
(b)
|
|
payment of compensation authorized by the Board or any committee thereof.
|
A “Related Person Transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which the Company (including any of its subsidiaries) was, is or will be a participant and, as relates to directors or shareholders who have an ownership interest in the Company of more than 5%, the amount involved exceeds $120,000, and in which any Related Person (defined below) had, has or will have a direct or indirect material interest.
A “Related Person” includes officers, directors, nominees, five percent beneficial owners and their respective immediate family members (which in turn includes person’s spouse, parents, siblings, children, in-laws, step relatives, and any other person sharing the household (other than a tenant or household employee)).
Related Person Transactions include transactions between the Company and its executive officers and directors. We have adopted written policies and procedures regarding the identification of Related Persons and Related Person Transactions and the approval process for such transactions. The Audit Committee considers each Related Person Transaction in light of the specific facts and circumstances presented, including but not limited to the risks, costs and benefits to the Company and the availability from other sources of comparable services or products.
Certain Related Person Transactions
The Board, acting through the Audit Committee, believes that the following Related Party Transactions are reasonable and fair to the Company:
|
·
|
|
Joseph C. Wright, President of Merit International, a division of the Company, is the brother-in-law of Fred P. Lampropoulos, Chair of the Board, CEO and President of the Company. In 2019 we provided to Mr. Wright total cash and equity compensation of $1,465,758.
|
|
·
|
|
Justin J. Lampropoulos, Executive Vice President of Sales, Marketing & Strategy of the Company, is the son of Fred P. Lampropoulos, Chair of the Board, CEO and President of the Company. In 2019 we provided to Mr. Justin J. Lampropoulos total cash and equity compensation of $1,211,599.
|
|
·
|
|
Charles Wright, Director of Business Development of the Company, is the brother-in-law of Fred P. Lampropoulos, Chair of the Board, CEO and President of the Company. In 2019 we provided to Mr. Wright total cash and equity compensation of $513,081.
|
|
·
|
|
Anne-Marie Wright, Vice President of Corporate Communications of the Company, is the wife of Fred P. Lampropoulos, Chair of the Board, CEO and President of the Company. In 2019 we provided to Ms. Wright total cash and equity compensation of $392,117.
|
|
·
|
|
Frank Wright, OEM Business Development Manager of the Company, is the brother-in-law of Fred P. Lampropoulos, Chair of the Board, CEO and President of the Company. In 2019 we paid to Mr. Wright total compensation of $260,878.
|
EXECUTIVE COMPENSATION
AND RELATED MATTERS
Executive summary
During 2019, we continued to execute our global growth plan, spurred by strategic acquisitions as well as internal product development. Among other significant accomplishments, we completed the integration of the soft tissue biopsy and pleural and peritoneal drainage product lines we acquired from Becton, Dickinson and Company, and rolled out sales and marketing programs to capitalize on the Cianna Medical, Vascular Insights LLC and Brightwater Medical Inc. acquisitions we completed in late 2018 and 2019. Those acquisitions, together with continued growth in sales of our legacy products and the introduction of new products commercialized through our continued research and development efforts, contributed to our achievement of record revenues in 2019. Unfortunately, we also experienced challenges associated with our acquisition integration and the adjustment of our sales force and associated marketing efforts, which resulted in a shortfall against our goals for the year. Consistent with the principles upon which our executive compensation program is based, the failure to achieve targeted levels of performance resulted in negative adjustments to the compensation amounts paid to our executive officers during the year, particularly in the decision of our Compensation Committee to pay no bonuses to our CEO and other NEOs, other than amounts tied directly to achievement of sales targets. The factors our Compensation Committee considered in reaching compensation decisions for our NEOs are outlined below.
Key financial results for the last five fiscal years are highlighted below:
|
(1)
|
|
Non-GAAP net income, non-GAAP gross margin and non-GAAP earnings per share are non-GAAP financial measures. A reconciliation of non-GAAP financial measures used in this Proxy Statement to their most directly comparable GAAP financial measures is included under the heading “Non-GAAP Financial Measures” below.
|
The results of our operating and financial performance over the past five years are illustrated in the tables above. Although our historic results are not a guarantee of future performance, we believe Merit is well positioned for sustainable growth in profitability going forward.
Our operating and financial results were a significant factor in the deliberations of our Compensation Committee when evaluating the amount and form of compensation paid to our CEO and other NEOs. Our Compensation Committee believes there are multiple factors that have contributed to our financial and
operating performance, however, two of the key factors have been our outstanding employees and the leadership provided by our CEO and other executive officers. Accordingly, the Compensation Committee seeks to implement and advance an executive compensation program that recognizes Company performance and individual contribution, while encouraging long-term motivation and retention. The Compensation Committee believes our executive compensation program has been instrumental in helping the Company sustain its strong financial performance over many years.
Under the oversight of the Compensation Committee, our compensation philosophy is to offer compensation programs to the NEOs that align the interests of management and shareholders for the purpose of maximizing shareholder value, while considering the interests of other significant stakeholders such as employees, customers, business partners and the communities in which we operate.
Among other objectives, those programs are designed to:
|
·
|
|
focus executives on achieving or exceeding measurable performance targets;
|
|
·
|
|
influence executives to lead our employees in the implementation of cost-saving plans;
|
|
·
|
|
continue our entrepreneurial spirit;
|
|
·
|
|
attract and retain highly-qualified and motivated executives; and
|
|
·
|
|
promote a highly ethical environment and maintain health and safety standards.
|
Our executive compensation programs specific to the NEOs are overseen by the Compensation Committee. In pursuit of our compensation philosophy and objectives, the Compensation Committee believes that the compensation packages provided to the NEOs should generally include both cash and equity-based compensation, historically in the form of stock options. Base pay and benefits are set at levels considered necessary to attract and retain qualified and effective executives. Variable incentive pay is used to align the compensation of the NEOs with our short-term business and performance objectives, such as income and overall financial performance. Equity awards have historically been used to retain key employees and to motivate executives to create long-term shareholder value. During the 2019 fiscal year, the Compensation Committee determined to add awards of performance-based restricted stock units to our long-term equity incentive program effective in 2020. The performance-based restricted stock units are designed to increase the alignment of NEO compensation with the Company’s achievement of Board-approved performance measures.
|
Selected 2019 Highlights
|
Developed a program to award long-term performance stock units beginning in 2020 to increase the alignment of executive compensation with the Company’s achievement of Board-approved performance measures
Prioritized reduction of environmental footprint by continuing to implement new programs to reduce waste, conserve resources, and improve the areas where we do business
Implemented Company-wide operating efficiency initiatives designed to reduce operating expenses and increase profitability
Based on Company failure to achieve stated performance targets, no 2019 bonuses were paid to NEOs, other than amounts tied directly to achievement of sales targets.
Cumulative total return on our Common Stock from December 31, 2014 to December 31, 2019 of approximately 80% (1)
(1) Reflects five-year cumulative total return of our Common Stock, as reported by Nasdaq for the period from December 31, 2014 to December 31, 2019. Past results are not necessarily an indicator of future results.
|
Executive Officers
In addition to Fred Lampropoulos (whose biography is included above under “Directors Whose Terms of Office Continue”), we have included the following information related to our executive officers:
|
|
|
|
raul parra
Chief Financial Officer and Treasurer
Age: 42
|
Current Position Since: July 2018
Education: B.S. (business administration with accounting emphasis), Sonoma State; Certified Public Accountant (CPA)
|
Highlights
Previous positions at Merit include Interim CFO, Vice President of Accounting, Corporate Controller and Director of Financial Reporting
Before joining Merit, held various audit positions at Deloitte & Touche, LLP
|
|
|
|
|
Ronald A. Frost
Chief Operating Officer
Age: 58
|
Current Position Since: January 2014
Education: Manufacturing Engineering Technology, AAS, Machine Tooling, Weber State University
|
Highlights
More than 27 years of service to Merit and its shareholders
Previous positions at Merit include Vice President (Materials and Operations), Quality Engineer, Manufacturing Engineer, Custom Kits Manager, Customer Service Manager, Production Planning and Warehouse Manager, General Manager of our Richmond, Virginia operations, and Vice President (Technology Transfer), 1991 to 2014
|
|
|
|
Joseph C. Wright
President,
International Division
Age: 50
|
Current Position Since: July 2015
Education: B.A., (political science), Columbia University; M.B.A., (finance) Columbia University; Speaks Japanese
Mr. Wright is the brother-in-law of Fred P. Lampropoulos, Merit’s Chair of the Board, President and CEO
|
Highlights
Previous positions at Merit include (a) President, Technology Group – overseeing Merit OEM, Merit Sensor Systems, Inc. and Merit’s coating division, (b) Vice President of Marketing, and (c) Vice President, International – responsible for sales in Canada, Asia Pacific, and Latin America, 2005 to 2015
Manages businesses in all global markets outside the U.S., Europe, Middle East and Africa
Before joining Merit, held sales, marketing and business development positions with several companies, including Motorola and Micron
|
|
|
|
Brian G. Lloyd
Chief Legal Officer,
Corporate Secretary
Age: 59
|
Current Position Since: April 2016
Education: B.S. (finance), Brigham Young University; J.D., Columbia Law School
|
Highlights
Practiced as an attorney, specializing in corporate governance, securities regulation and mergers & acquisitions, with the law firm of Parr Brown Gee & Loveless in Salt Lake City, Utah for more than 20 years
Also practiced law in those areas of specialization as a partner with the law firm of Stoel Rives, LLP for four years
|
|
|
|
Justin j. lampropoulos
Executive Vice President, Sales, Marketing and Strategy
Age: 37
|
Current Position Since: May 2015
Education: Completed postgraduate studies at Oxford University's Saïd Business School in Oxford, England in strategic management and is an alumnus of Harvard Business School.
Mr. Justin J. Lampropoulos is the son of Fred P. Lampropoulos, Merit’s Chair of the Board, President and CEO
|
Highlights
From 2010 to 2015 led Merit’s Europe, Middle East and Africa business unit from Maastricht, the Netherlands
Began his career in the medical device technology field in 2004
Compensation Discussion and
Analysis
This Compensation Discussion and Analysis is designed to explain our philosophy and objectives underlying our executive compensation policies, the processes we follow in setting executive compensation, and the components of executive compensation that we utilize in compensating our NEOs, who are listed below.
|
|
|
The Summary Compensation Table and other compensation tables under “Executive Compensation Tables” below should be read in conjunction with this section.
|
|
|
Fred P. Lampropoulos
|
Chair, CEO and President
|
Raul Parra
|
Chief Financial Officer and Treasurer
|
Ronald A. Frost
|
Chief Operating Officer
|
Joseph C. Wright
|
President, International
|
Justin J. Lampropoulos
|
Executive Vice President, Sales, Marketing and Strategy
|
Process for Establishing Executive Compensation
Procedure
The Compensation Committee has oversight responsibility for establishing compensation practices for our CEO and the other NEOs. The Compensation Committee also reviews all compensation decisions for employees of the Company who are related to our CEO.
Performance reviews of the CEO are conducted by the Compensation Committee based on our performance during a given year, compared with our performance objectives, as well as other factors intended to maximize short-term and long-term shareholder value.
Performance reviews of the other NEOs are based on the CEO’s evaluation of individual officer and Company performance for that year, with the objective of maximizing shareholder value. With respect to the compensation levels for the other NEOs, the Compensation Committee considers input and recommendations from the CEO. The CEO makes recommendations concerning salary adjustments, cash bonus programs and equity awards for the other NEOs, and the Compensation Committee considers those recommendations in determining the compensation of the other NEOs.
Role of Consultants
The Compensation Committee engaged Pearl Meyer & Partners (Pearl Meyer), an independent compensation consulting firm, to review our executive officer and director compensation practices and advise the Compensation Committee with respect to those compensation practices, including salary, bonus, benefits and equity awards for our executive officers and retainers, meeting fees and equity awards for our directors. The Compensation Committee has generally evaluated and considered Pearl Meyer’s reports and recommendations.
In conducting its review of our executive compensation practices for 2019, the Compensation Committee consulted with Pearl Meyer regarding the Company’s executive composition practices for 2019, the implementation of our Executive Bonus Plan discussed on page 46 and the issuance of performance-based restricted stock units (PSUs) designed to increase the alignment of executive compensation with the Company’s achievement of Board-approved performance measures, as discussed on page 48. During 2019, the Compensation Committee reviewed industry and peer compensation data for medical device companies included in published surveys issued by Radford, Aon Hewitt’s medical device consulting group (Radford). During 2019, we participated in the Radford Global Technology Survey (Radford Survey), which includes more than 100 medical device companies with headquarters located in the United States. The Radford Survey – which we believe is generally considered a standard source of information for executive compensation – provides valuable information regarding industry and peer executive compensation practices. Our management uses the Radford Survey to determine the reasonableness of compensation for various levels of employees, including executive officers.
The Compensation Committee also directed management to perform an internal review of Company executive compensation practices, as well as the executive compensation practices of other U.S. publicly-traded companies in the medical device industry.
Neither the consultation with Pearl Meyer, the Radford Survey nor our internal review yielded any significant concerns at the Compensation Committee level regarding our executive compensation practices.
Evaluation
In evaluating compensation of the NEOs for the year ended December 31, 2019, the Compensation Committee considered, among other factors, our performance and relative shareholder return in 2019, as compared to our performance targets for 2019, and other factors considered relevant by the Compensation Committee.
Notwithstanding the Compensation Committee’s use of the information supplied by Pearl Meyer, and information obtained from the Radford Survey and our management’s review of executive compensation practices, the decisions of the Compensation Committee with regard to the NEOs for 2019 were based principally on objective and subjective evaluations of the individual NEOs.
Other Considerations
The Compensation Committee also relied on its experience and judgment in making executive compensation decisions after reviewing our performance on a quarterly and annual basis, and evaluating each NEO’s individual performance and responsibilities with the Company, as well as current compensation arrangements. The compensation program for the NEOs and the Compensation Committee assessment process have been designed to be flexible in an effort to respond to the evolving business environment and individual circumstances relative to Company and individual performance, shareholder value, as well as internal equity for compensation levels among our executives.
Our executive compensation program is divided into the following two general categories: fixed pay and variable pay.
Fixed pay consists of base salary and is intended to provide each NEO with a level of assured cash compensation appropriate for his or her position within the Company. Variable pay includes annual cash bonus awards and equity-based awards in the form of stock options, each as explained in more detail below. Additionally, beginning in 2020, variable pay includes PSUs.
The Compensation Committee believes that a portion of total compensation of the NEOs should be both at-risk and tied to the Company’s performance goals.
Generally, at the beginning of each year, the CEO identifies performance goals which are intended to align the efforts of our executive officers, including the NEOs, with our achievement of our strategic business plan to maximize shareholder value. The CEO then reviews those performance goals with the Compensation Committee. Those goals then become targets for the variable annual performance bonus component of our executive compensation program. Because the performance goals are generally established at the beginning of each year and market conditions fluctuate throughout the year, the performance goals may not correspond to subsequent annual earnings estimates released by the Company.
Compensation Committee Consideration of Shareholder Advisory Votes
At our annual meeting of shareholders held on May 23, 2019, we submitted the compensation of our executive officers to our shareholders in a non-binding vote. Our executive compensation program received the support of holders of approximately 94% of the shares represented at the meeting.
At our annual meeting of shareholders held on May 24, 2017, our shareholders voted on an advisory basis with respect to the frequency of future advisory votes on executive compensation. Holders of approximately 77% of the shares represented at that meeting expressed their preference for an annual advisory vote. Accordingly, we intend to hold an annual advisory vote on executive compensation until the next “say-on-frequency” vote at our annual meeting of shareholders in 2023.
The Compensation Committee will continue to review future shareholder voting results and determine whether changes should be made to our executive compensation program based on such voting results.
Pay Mix
The allocation between cash and non-cash NEO compensation is influenced by the practices of subjective and objective analysis conducted by the Compensation Committee and is intended to reflect the Compensation Committee’s determination of the appropriate compensation mix among base pay, annual cash incentives and long-term equity incentives for each NEO. Actual cash and equity-based incentive awards are determined based on the performance of the Company and/or the individual NEO, depending on the position of the NEO, the type of award and our performance, compared to established goals.
For 2019, the elements of the compensation mix for the NEOs included:
|
·
|
|
base salary (designed to attract and retain executives over time);
|
|
·
|
|
annual performance bonus (designed to focus on business objectives established by the Compensation Committee for a particular year);
|
|
·
|
|
long-term equity-based incentive compensation in the form of stock option awards (designed to further align NEO pay with performance);
|
|
·
|
|
broad-based employee retirement, welfare and fringe benefits programs, and other personal benefits; and
|
|
·
|
|
executive deferred compensation.
|
|
|
Among the factors the Compensation Committee considered when establishing the amounts of fixed and variable compensation paid to our NEOs for 2019 were:
|
Fred P. Lampropoulos
|
leadership and direction of our Company and employees in a challenging business environment;
our 2019 operating and financial performance;
development and oversight of operating efficiency initiatives designed to reduce operating expenses and increase profitability;
operational management, product development (including inventions and patent prosecution), international expansion, subsidiary development, risk management, and manufacturing capacity planning;
strategic business development, and management development and oversight; and
shareholder relations.
|
Raul Parra
|
responsibility for the financial and accounting affairs of an increasingly large and complex organization;
implementation of operating efficiency initiatives designed to reduce operating expenses and increase profitability;
oversight of our cash flow and budgeting practices; and
accounting for, and financing of, acquired enterprises and products.
|
Ronald A. Frost
|
conducting our worldwide operations within the budget established by the Board;
integration of the operations of acquired enterprises, particularly the operations acquired from Becton, Dickinson and Company;
implementation and oversight of our efforts to reduce our environmental footprint and promote sustainability; and
implementation of operating efficiency initiatives designed to reduce operating expenses and increase profitability.
|
Joseph C. Wright
|
management of our international division, including oversight of our international growth and sales;
identifying potential new markets for expansion and growth and development of our international sales strategy; and
budget management.
|
Justin J. Lampropoulos
|
management of our sales and marketing activities throughout the United States, Europe, the Middle East and Africa;
development and coordination of new product launches, market research, and analysis;
implementation of sales strategies and performance goals; and
budget management.
|
Fixed Compensation
Base Salary
The Compensation Committee does not use a specific formula for evaluating individual performance of the NEOs. The performance of the NEOs other than the CEO is assessed by the Compensation Committee taking into account the CEO's input regarding each NEO’s contributions to our performance for the applicable year. The CEO’s performance is assessed by the Compensation Committee in formal and informal meetings with the CEO, as well as executive sessions conducted by the Compensation Committee.
The criteria used in setting the base salary for each NEO, including the CEO, vary depending on the NEO’s function, but generally include the Compensation Committee’s assessment of the NEO’s:
|
·
|
|
advancement of our interests with shareholders and customers and in other strategic business relationships;
|
|
·
|
|
achievement of our financial results, position and experience (in an effort to avoid gender or age discrimination);
|
|
·
|
|
leadership inside and outside the Company;
|
|
·
|
|
contribution to specific Company initiatives, such as expense reduction efforts, product quality and development and environmental and social objectives; and
|
|
·
|
|
advancement in skills and responsibility.
|
Given the subjective nature of the criteria identified above, the Compensation Committee has not attempted to develop numeric measurements in determining base salaries for the NEOs. Instead, the Compensation Committee establishes base salaries at levels commensurate with the Compensation Committee’s evaluation of each NEO’s contribution to our business success. The Compensation Committee has also consulted with Pearl Meyer to assess the levels of base salary and other compensation paid to the CEO and other NEOs, relative to the Company’s peers. In particular, the Compensation Committee has set the base salary and incentive cash bonus of the CEO at levels which are higher than the aggregate amount of base salary and incentive bonus paid to the principal executive officers of a number of our peers. Because the CEO is a founder of the Company and currently owns a substantial number of shares of Common Stock, the Compensation Committee believes his personal interests are closely aligned with the interests of our stakeholders and that the payment of cash compensation in amounts approved by the Compensation Committee is effective in further aligning his interests with the interests of our stakeholders.
Based on its evaluation, the Compensation Committee approved the following NEO base salaries for the year ended December 31, 2019, which are also reflected in the Summary Compensation Table under “Executive Compensation Tables” below.
|
|
|
Named Executive Officer
|
|
Base Salary (1)
|
Fred P. Lampropoulos
|
$
|
1,804,136
|
Raul Parra
|
$
|
580,769
|
Ronald A. Frost
|
$
|
598,077
|
Joseph C. Wright
|
$
|
550,000
|
Justin J. Lampropoulos
|
$
|
596,154
|
|
|
|
|
(1)
|
|
The base salary amounts shown above reflect amounts paid to the NEOs during 2019 as reported in the Summary Compensation Table shown on page 54. The annual base salary amounts for fiscal year 2020 as approved by the Compensation Committee are: Mr. F. Lampropoulos, $1,750,000; Mr. Parra $600,000; Mr. Frost, $600,000, Mr. Wright, $550,000, and Mr. J. Lampropoulos $600,000.
|
In April 2020, after giving consideration to the significant impact of the COVID-19 pandemic on the Company’s personnel, operations and financial results and uncertainly regarding the scope and duration of that impact, the Company implemented a temporary salary reduction for executive management and certain other salaried personnel. The amount of the reduction for each affected employee was based upon the base salary of that employee. As a consequence of those salary reductions, the base salary for each of the NEOs was temporarily reduced by 20% from the amounts indicated in footnote 1 of the preceding table.
Variable Compensation
In general, our variable compensation programs are designed to align the interests of our executive officers, including the NEOs, with our operating and financial results.
Annual Performance Cash Bonuses
Our general practice is to provide our NEOs with the opportunity to earn annual performance bonus compensation under a program that recognizes attainment of key objectives. The key objectives that underlie our annual incentive compensation programs are established annually by the Compensation Committee based upon recommendations made by the CEO, and may vary between years and between NEOs, but generally include objectives that reward attainment of targeted levels of sales, earnings and gross margins.
In setting the performance bonus amounts that an NEO is eligible to earn for achieving specified objectives, the Compensation Committee and the CEO consider bonus and total cash compensation levels for each NEO. Although bonus opportunities for achieving objectives are generally established for each NEO based on job scope and contribution, the Compensation Committee retains discretion to positively or negatively adjust performance bonus amounts based on factors that are not included in the pre-determined objectives. NEOs also have the opportunity to earn additional discretionary bonuses for extraordinary performance, as determined by the Compensation Committee.
The decision as to whether to provide an annual performance bonus program to any NEO for any year, the type and funding of any program offered, and the objectives that underlie any program, are subject to the discretion of the Compensation Committee, taking into account the recommendation of the CEO and industry-specific conditions existing during the applicable year. The Compensation Committee may also exercise positive or negative discretion based on its assessment of the individual NEO’s contribution and accountability for the objectives that are the subject of the bonus recommendations from the CEO and any other factors the Compensation Committee considers relevant.
For 2019 (and after considering the CEO’s recommendations), the Compensation Committee established incentive cash performance bonus objectives for Fred Lampropoulos and Joseph Wright, but did not establish specific incentive cash performance bonus objectives for the other NEOs. The incentive cash performance bonus objectives for Mr. Lampropoulos were based on sales, gross margins (calculated on a non-GAAP basis), and earnings per share (calculated on a non-GAAP basis). The incentive cash performance bonus objectives for Mr. Wright were based on sales of the Company’s products in all global markets other than the United States, Europe, the Middle East, and Africa.
The specific 2019 performance bonus objectives established by the Compensation Committee for Mr. Fred Lampropoulos, together with the level of our actual 2019 performance in those categories, were as follows.
|
|
|
|
|
|
Performance Bonus Objectives
|
|
2019 Goals
|
|
2019 Results
|
|
|
|
|
|
|
|
Sales
|
|
$1,011 – 1,030M
|
|
$994.9M
|
|
Gross Margin (Non-GAAP) (1)
|
|
50.6 – 51.3%
|
|
48.6%
|
|
Earnings Per Share (Non-GAAP) (2)
|
|
$1.97 - $2.08
|
|
$
1.46
|
|
|
|
|
(1)
|
|
Non-GAAP Gross Margin is calculated by adjusting GAAP gross profit by amounts recorded for amortization of intangible assets and inventory mark-up related to acquisitions. See “Non-GAAP Financial Measures” presented on page 74 of this Proxy Statement for additional information.
|
|
(2)
|
|
Non-GAAP Earnings Per Share is calculated as GAAP net income excluding intangible amortization expense, acquisition related costs, intangible and other asset impairment charges, contingent consideration expense (benefits), certain legal expenses, and severance costs. All excluded items are tax affected and total Non-GAAP net income is divided by the weighted average diluted shares outstanding. See “Non-GAAP Financial Measures” presented on page 74 of this Proxy Statement for additional information.
|
The specific 2019 performance bonus objectives for Mr. Fred Lampropoulos in the categories outlined above align with the guidance we issued publicly on February 26, 2019, but were not adjusted downward to reflect the updated guidance we issued publicly on July 25, 2019 and October 30, 2019.
The Compensation Committee’s evaluation of the performance bonus objectives and results shown above indicated that we did not reach performance levels that met or exceeded any of the three objectives established by the Compensation Committee. Accordingly, the Compensation Committee determined that no incentive cash performance bonus should be paid to Mr. Fred Lampropoulos with respect to the 2019 fiscal year. Although the Compensation Committee did not establish specific 2019 incentive cash performance bonus objectives for Messrs. Parra, Frost and Justin J. Lampropoulos, the Compensation Committee determined that no discretionary incentive cash performance bonuses should be paid to such officers in 2019 due to the Company’s failure to meet the performance goals listed above (See Discretionary Bonuses).
With respect to Mr. Wright, the Compensation Committee approved incentive cash performance bonus objectives based on the following sales targets for our international operations for which Mr. Wright has supervisory responsibility.
|
|
|
2019 Goal
|
|
2019 Results
|
$216.4 million
|
|
$227.0 million
|
Based on the Company’s achievement of the incentive cash performance bonus objectives approved by the Compensation Committee, the Compensation Committee approved the payment to Mr. Wright of an incentive cash performance bonus in the amount of $300,000, as reflected in the Summary Compensation Table set forth on page 54.
Executive Bonus Plan
After reviewing our executive incentive compensation practices, and based upon the preferences communicated by the institutional shareholder community, in 2019 our Board adopted the Merit Medical Systems, Inc. Executive Bonus Plan (the Executive Bonus Plan). The purposes of the Executive Bonus Plan are to motivate and reward the Company’s executive employees by making a portion of their annual cash compensation dependent on the achievement of certain pre-determined corporate performance goals, to align the interests of those executives with those of the Company, and to attract and retain superior executive employees by providing a competitive bonus program that rewards outstanding performance. The Executive Bonus Plan is administered by the Compensation Committee and became effective for the year ending December 31, 2019 and thereafter. During each year of the operation of the Executive Bonus Plan, the Compensation Committee will establish a target bonus amount and performance criteria and goals for each participating executive officer. At the conclusion of such year, the Compensation Committee will determine the bonus amount payable to each participating executive officer and the Company will pay to the executive officer the determined bonus amount not later than the 15th day of the third month following the conclusion of the applicable year. In determining the amount of each award to be paid, the Compensation Committee may reduce, eliminate or increase (but not above 110% of the applicable award amount otherwise payable) the amount of an Award if, in its discretion, such reduction, elimination or increase is appropriate. The amounts payable to executive officers participating in the Executive Bonus Plan will be determined and allocated based on the performance criteria established for the applicable year, and the Company’s performance relative to those criteria. For 2019, the performance criteria were based upon the Company’s net sales, non-GAAP net income and non-GAAP gross margin. For 2019, the Compensation Committee established a target award amount for Mr. Fred Lampropoulos of $1,000,000; however, because the Company did not achieve the performance criteria established pursuant to the Executive Bonus Plan, Mr. Fred Lampropoulos did not receive any payment under the plan. Although all NEOs are eligible to participate in the Executive Bonus Plan, for 2019 the Compensation Committee did not establish target award amounts under the plan of any NEOs other than Mr. Fred Lampropoulos.
For 2020, the Compensation Committee has established target award amounts for each of the executive officers of the Company, including Mr. Fred Lampropoulos and the other NEOs other than Mr. Wright. The Compensation Committee has also established the corporate performance goals (revenues, non-GAAP gross margin and non-GAAP earnings per share) upon which payments (if any) under the Executive Bonus Plan will be determined. The Compensation Committee does not anticipate that Mr. Wright will participate in the Executive Bonus Plan during 2020 because his incentive compensation goal for the year has already been established based on the Company’s sale targets for the international operations for which Mr. Wright has supervisory responsibility.
Return of Incentive Compensation (“Clawback Policy”)
The Executive Bonus Plan provides to our Board the authority to obtain reimbursement from any participant in the plan if the Board determines that: (a) a significant restatement of the Company’s financial results for any of the three prior fiscal years is required; and (b) the participant’s award amount would have been lower had the financial results been properly calculated. Such reimbursement shall consist of any portion of any award previously paid to such participant that is greater than the award that would have been paid if calculated based upon the restated financial results. The action permitted to be taken by the Board under the Executive Bonus Plan is in addition to, and not in lieu of, any and all other rights of the Board and/or the Company under applicable law or any other claw-back or similar policy of the Company. The PSU agreements which are part of the long-term equity incentive program which our Compensation Committee implemented in 2020 also include a “clawback” feature which permits our Compensation Committee to recover payments from award recipients if (i) the payment was predicated upon achieving financial results that were subsequently the subject of a restatement of the Company’s financial statements filed with the Commission; (ii) the Compensation Committee determines that the recipient engaged in intentional misconduct, gross negligence or fraudulent or illegal conduct that caused or substantially caused the need for the restatement; and (iii) a lower amount would have been paid to the recipient based upon the restated financial results.
Discretionary Bonuses
In addition to the cash bonus opportunities under the performance bonus program described above, the Compensation Committee (with the input of the CEO) may choose to reward extraordinary performance and achievements by awarding discretionary bonuses to the NEOs and other executives from time to time that are not part of the annual incentive plan or any other plan. Based upon the Compensation Committee’s review of the performance bonus objectives discussed above, the Compensation Committee determined that no discretionary bonuses should be paid to any NEOs in 2019. There is no standing expectation that all (or any) NEOs will receive discretionary performance bonuses in any particular year, and the criteria for such bonuses are not established in advance.
Long-Term Incentive Compensation
Historically, long-term equity awards, in the form of stock options, have been granted at the Compensation Committee’s discretion to the NEOs annually in an effort to provide long-term performance-based compensation, to encourage the NEOs to continue their engagement with the Company throughout the vesting periods, and to align management and shareholder interests. Beginning with our 2019 fiscal year, long-term equity awards were and will continue to be made under the 2018 Incentive Plan. Although we have traditionally made long-term equity incentive awards to our NEOs solely in the form of stock options, during 2019, the Compensation Committee developed a program, which was implemented in 2020, to grant to the Company’s executive officers long-term equity awards in the form of stock options and performance-based restricted stock units or PSUs, with the objective of more closely aligning management and shareholder interests. For 2020, the Compensation Committee reduced the number of stock options awarded to each NEO to approximately 40% of the total target long-term incentive compensation amount for that NEO, with the remaining portion of the NEO’s long-term incentive compensation amount awarded in the form of PSUs.
In making awards under our 2018 Incentive Plan, the Compensation Committee considers grant size, the appropriate combination of equity-based awards, the impact of the grant on our financial performance (as determined in accordance with the requirements of the Financial Accounting Standards Board ASC Topic 718 (ASC Topic 718)), and the corresponding compensation value used by the Company in determining the amount of the awards (which may vary from the ASC Topic 718 expense).
Generally, the amount of long-term equity awards granted to the NEOs has been based upon the Compensation Committee’s assessment of each NEO’s expected future contributions to the Company and other factors. The amount or existence of those awards may also be influenced by external factors such as general economic or industry-specific conditions. We generally grant long-term equity awards at the regularly-scheduled Compensation Committee meeting held in February or May of each year but may vary the date of grant from year to year.
Stock Options
During 2019, the Compensation Committee granted stock option awards to NEOs under the 2018 Incentive Plan in the following amounts:
|
|
Named Executive Officer
|
Number of Options Granted
|
Fred P. Lampropoulos
|
159,151
|
Raul Parra
|
30,000
|
Ronald A. Frost
|
30,000
|
Joseph C. Wright
|
30,000
|
Justin J. Lampropoulos
|
30,000
|
Performance Stock Units
During 2019, in consultation with Pearl Meyer, the Compensation Committee developed a program, which was implemented 2020, to grant to the Company’s executive officers equity awards under our 2018 Incentive Plan consisting in part of PSUs, with the objective of more closely aligning management and shareholder interests. Subject to the terms and conditions of PSU award agreements executed with the Company’s executive officers, each executive officer is entitled to receive a payment in shares of Common Stock based upon the target number of shares determined by the Compensation Committee and the Company’s performance during the applicable performance period with respect to the achievement of free cash flow (FCF) targets as defined in the agreements and the Company’s relative total shareholder return (rTSR) compared to the Russell 2000 index (Performance Goals). The actual number of shares to be issued to each executive officer will be determined by the Compensation Committee by multiplying the total target number of shares for that employee by the applicable FCF and rTSR multipliers, based on the Company’s performance during the applicable performance period. The Compensation Committee has the sole authority and discretion to determine the achievement level with respect to the number of shares earned at the end of each performance period. PSUs may also include a feature providing for the payment of a long-term cash award based on the degree of attainment of the same designated Performance Goals that apply to the earning and issuance of shares of Common Stock under the PSUs. The Compensation Committee consulted with Pearl Meyer in reaching its determination of the number of shares subject to the PSU awards granted to each of the NEOs in 2020.
Broad-Based Benefits Programs
We offer multiple broad-based benefits programs to our employees, including our NEOs. Those programs include benefits such as health, dental, vision, disability and life insurance, health savings accounts, health care reimbursement accounts, employee stock purchase plan, paid vacation time and discretionary Company contributions to a 401(k) profit sharing plan.
Benefits are provided to our NEOs in accordance with practices the Compensation Committee believes are consistent with industry standards. The Compensation Committee believes such benefits are a necessary element of compensation in attracting and retaining employees. In addition, the NEOs receive limited perquisites in an attempt to achieve a competitive pay package, as further detailed in the Summary Compensation Table.
Deferred Compensation Plan
We provide a non-qualified deferred compensation plan for the benefit of certain of our highly-compensated executives, including the NEOs. Under the non-qualified deferred compensation plan, eligible participants may elect in advance of each calendar year to defer up to 100% of their cash salary and bonus compensation earned with respect to such year. Amounts deferred are credited to an unfunded liability account maintained by the Company on behalf of the applicable participant, which account is deemed invested in and earns a rate of return based upon certain notational and self-directed investment options offered under the plan. In our discretion, we may elect to credit each eligible participant’s account under the deferred compensation plan with an employer matching contribution but, to date, we have never elected to do so. Participant account balances under the deferred compensation plan are fully-vested and will be paid by the Company to each participant upon retirement or separation from employment, or on other specified dates, in a lump sum or in installments according to a schedule elected in advance by the participant.
The Company and its subsidiaries do not maintain any other executive pension or retirement plans for the NEOs.
Employment Agreements
The Compensation Committee has determined that executive employment agreements are necessary to provide competitive compensation arrangements to our NEOs, particularly because such agreements are common in our industry. Moreover, the Compensation Committee believes that the change in control provisions within the executive employment agreements help to retain the NEOs by reducing personal uncertainty and anxiety that may arise from the possibility of a future business combination.
We have entered into employment agreements (collectively, the Employment Agreements) with each of the NEOs. The annual base salaries paid under the Employment Agreements for 2019 were:
|
|
|
Named Executive Officer
|
|
Base Salary (1)
|
Fred P. Lampropoulos
|
$
|
1,804,136
|
Raul Parra
|
$
|
580,769
|
Ronald A. Frost
|
$
|
598,077
|
Joseph C. Wright
|
$
|
550,000
|
Justin J. Lampropoulos
|
$
|
596,154
|
|
(1)
|
|
The base salary amounts shown above reflect amounts paid to the NEOs during 2019 as reported in the Summary Compensation Table shown on page 54. The annual base salary amounts for fiscal year 2020 as approved by the Compensation Committee are: Mr. F. Lampropoulos, $1,750,000; Mr. Parra $600,000; Mr. Frost, $600,000, Mr. Wright, $550,000, and Mr. J. Lampropoulos $600,000.
|
The amount of the base salary payable to each NEO may be subject to change based on review by the Compensation Committee on an annual basis. Although the employment status of each of the NEOs is “at will,” the Employment Agreements provide for mandatory severance payments to each NEO in the event the NEO’s employment terminates for certain reasons in connection with a “Change in Control” (as defined below). Those severance arrangements are discussed in greater detail below under the heading “Executive Compensation Tables—Potential Payments upon Termination or Change in Control.”
In addition to the annual base salary described above, the Employment Agreements also allow the NEOs to receive an annual cash bonus payment in an amount to be determined in the sole discretion of the Board (which has delegated that authority to the Compensation Committee). Notably, in fiscal years ending after a Change in Control, the annual bonus must be at least equal to an NEO’s average annual cash bonus for the last three full fiscal years ending prior to the Change in Control.
The NEOs (and to the extent applicable, their spouses and eligible dependents) are eligible to participate in all incentive, savings and retirement, health insurance, term life insurance, long-term disability insurance, deferred compensation, employee stock purchase and other employee benefit plans, policies or arrangements we maintain for our employees generally and, at the discretion of the Compensation Committee, in the 2018 Incentive Plan and other benefit plans maintained by the Company for our executives.
The terms of the Employment Agreements reflect in part the concern of the Compensation Committee that a future threatened or actual change in control, such as through an acquisition or merger, could cause disruption and harm to the Company in the event of the resulting loss of any of its key executives. The change in control provisions in the Employment Agreements are intended to provide a measure of incentive and security to our key executives until the resolution of any such threatened or actual change in control.
However, the Compensation Committee believes that such agreements should not include provisions that would obligate a potential acquirer of the Company to make large payouts to the NEOs simply because a change in control has occurred. Because of this concern, the occurrence of a change in control event alone will not trigger any payment obligations to the NEOs under their respective Employment Agreements. Additional change in control payment obligations under the Employment Agreements only arise in the event the NEO’s employment is terminated “without Cause” in connection with the change in control or the NEO
resigns “for Good Reason” (with each capitalized term in this sentence defined in the Employment Agreements and described under the heading “Potential Payments Upon Termination or Change in Control—Employment Agreements” below) in connection with a change in control. Thus, the Compensation Committee regards the employment agreements as “double trigger” change in control agreements.
Tax Deductibility and Executive Compensation
Section 162(m) (Section 162(m)) of the Internal Revenue Code of 1986, as amended (the Code) imposes a $1.0 million annual limit on the amount that a public company may deduct for compensation paid to a company’s chief executive officer, chief financial officer, or any of the company’s three other most highly compensated executive officers for a tax year. For tax years beginning before 2018, the limit did not apply to compensation that met the requirements of Section 162(m) for “qualified performance-based” compensation (i.e., compensation paid only if the executive meets pre-established, objective goals based upon performance criteria approved by our shareholders). Qualified performance-based awards, such as stock options, issued prior to 2018 remain under certain conditions exempt from Section 162(m) even if exercised after 2017.
The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) and attempts, to the extent practical, to implement compensation policies and practices that maximize the potential income tax deductions available to the Company.
In certain situations, the Compensation Committee may approve compensation that will exceed the deduction limitations of Section 162(m) in order to ensure competitive levels of total compensation for its executive officers. In such situations, the portion of the compensation payable to the executive officer that exceeds the $1.0 million limit will not be deductible for tax purposes. Although deductibility of executive compensation for tax purposes is generally preferred, tax deductibility is not the primary objective of our executive compensation programs. The Company and the Compensation Committee believe that meeting the compensation objectives described above is more important than the benefit of being able to deduct the compensation for tax purposes.
All compensation paid to the NEOs, other than Mr. Fred Lampropoulos, during 2019 was intended to be deductible under Section 162(m). Although Mr. Fred Lampropoulos’ compensation for 2019 exceeded the deduction limits of Section 162(m), the Compensation Committee approved that compensation amount in order to provide Mr. Fred Lampropoulos with a compensation package that the Compensation Committee considers competitive and in the best interests of the Company and its shareholders.
Additionally, under Sections 280G and 4999 of the Code, our NEOs and other Company executives may be subject to additional taxes if they receive payments or benefits in connection with a change of control of the Company that exceed certain prescribed limits (so-called Excess Parachute Payments), and the Company or its successor may not deduct such Excess Parachute Payments. The Company is not obligated to provide any NEO or other executive with a “gross-up” or other reimbursement payment for any tax liability that the executive might owe as a result of the application of Sections 280G or 4999 of the Code. Certain potential future payments described in the table captioned “Termination Without Cause or For Good Reason in Connection with a Change in Control” on page 61 may, however, constitute Excess Parachute Payments that the Company or its successor could not fully deduct.
Compensation Policies and Practices Relating to Risk Management
The Compensation Committee has reviewed our company-wide compensation program, which applies to all of our full-time employees, including the NEOs. The Compensation Committee has also reviewed our executive compensation practices with Pearl Meyer. Based on the Compensation Committee’s review of the various elements of our executive compensation practices and policies, the Compensation Committee believes our compensation policies and practices are designed to create appropriate and meaningful incentives for our employees without encouraging excessive or inappropriate risk taking.
After undertaking this review, the Compensation Committee came to the following conclusions:
|
·
|
|
Our compensation policies and practices are designed to include a significant level of long-term compensation, which discourages short-term risk taking;
|
|
·
|
|
The base salaries we provide to our employees are generally consistent with salaries paid for comparable positions in our industry, and provide our employees with steady income while reducing the incentive for employees to take risks in pursuit of short-term benefits;
|
|
·
|
|
Our incentive compensation is capped for some NEOs at levels established by the Compensation Committee, which it believes reduces the incentive for excessive risk-taking;
|
|
·
|
|
We have established and adopted codes of ethics and business conduct, which are designed to reinforce the balanced compensation objectives established by the Compensation Committee; and
|
|
·
|
|
We have adopted equity ownership guidelines for our executive officers, which the Compensation Committee believes discourages excessive risk-taking.
|
Based on the review outlined above, the Compensation Committee has further concluded that the risks arising from our compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company.
Compensation Committee Report
The Compensation Committee establishes and oversees the design and function of our executive compensation programs.
The members of the Compensation Committee have reviewed and discussed the foregoing Compensation Discussion and Analysis with the management of the Company and recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
|
Compensation Committee:
A. Scott Anderson (Chair)
Franklin J. Miller, M.D.
F. Ann Millner. Ed. D.
|
Proposal No. 2– Advisory Vote on Executive Compensation
|
Board Recommendation
|
The Board unanimously recommends a vote FOR this proposal
|
Section 14A of the Exchange Act (Section 14A), which was enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, requires that we provide shareholders with the opportunity to vote on an advisory (non-binding) resolution to approve the compensation of the NEOs disclosed in this Proxy Statement (colloquially referred to as a “Say-on-Pay” proposal).
Accordingly, the following resolution will be submitted to our shareholders for approval at the Annual Meeting:
proxy statement for the 2019 Annual Meeting of Shareholders, pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosures.”
|
“RESOLVED, that the Company’s shareholders APPROVE, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s proxy statement for the 2020 Annual Meeting of Shareholders, pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosures.”
|
As described above under the heading “Compensation Discussion and Analysis,” the Board believes our compensation of the NEOs achieves the primary goals of:
|
·
|
|
focusing our executives on achieving or exceeding measurable performance targets;
|
|
·
|
|
encouraging continuation of our entrepreneurial spirit;
|
|
·
|
|
attracting and retaining highly-qualified and motivated executives;
|
|
·
|
|
promoting our guiding principles for adherence to a high ethical environment, as well as health and safety standards; and
|
|
·
|
|
aligning management compensation with shareholder value.
|
The Board encourages shareholders to review in detail the Compensation Discussion and Analysis beginning on page 39 of this Proxy Statement and the executive compensation tables beginning on page 54 of this Proxy Statement. In light of the information set forth in such sections, the Board believes the compensation of the NEOs for the fiscal year ended December 31, 2019 was fair and reasonable and that our compensation programs and practices are in the best interests of the Company and our shareholders.
The advisory vote on this Say-on-Pay resolution is not intended to address any specific element of compensation; rather, the vote relates to all aspects of the compensation of the NEOs, as described in this Proxy Statement. While this vote is only advisory in nature, which means that the vote is not binding on the Company, the Board or the Compensation Committee (which is composed solely of independent directors), value the opinion of our shareholders and will consider the outcome of the vote when addressing future compensation arrangements.
In the 2017 annual meeting of shareholders, held on May 24, 2017, our shareholders recommended that they be given an opportunity to vote on a Say-on-Pay resolution every year at our annual meeting of shareholders. Consequently, we intend to hold an annual advisory vote on executive compensation until the next “say-on-frequency” vote at our annual meeting of shareholders in 2023 (as required by Section 14A).
Approval of the resolution above (on a non-binding, advisory basis) requires that the number of votes cast at the Annual Meeting, in person or by proxy, in favor of the resolution exceeds the number of votes cast in opposition to the resolution.
EXECUTIVE COMPENSATION
TABLES
Summary Compensation Table
The following Summary Compensation Table summarizes the total compensation earned by each of the NEOs for the years indicated.
|
|
Salary
|
Bonus
|
Stock Awards
|
Non-Equity Incentive Plan Compensation
|
All Other Compensation
|
|
Total
|
Name and Position
|
Year
|
($)
|
($) (1)
|
($) (2)
|
($) (3)
|
($)
|
|
($)
|
Fred P. Lampropoulos
|
2019
|
1,804,136
|
—
|
3,008,622
|
—
|
236,528
|
(4)(5)
|
5,049,286
|
Chair of the Board, CEO and President
|
2018
|
1,700,000
|
—
|
587,861
|
1,300,000
|
92,719
|
(4)(5)
|
3,680,580
|
2017
|
1,412,308
|
400,000
|
1,838,700
|
600,000
|
59,787
|
(4)(5)
|
4,310,795
|
|
|
|
|
|
|
|
|
Raul Parra
|
2019
|
580,769
|
—
|
567,126
|
—
|
20,873
|
(4)(5)
|
1,168,768
|
Chief Financial Officer and Treasurer (6)
|
2018
|
319,231
|
275,000
|
154,692
|
—
|
51,987
|
(4)(5)
|
800,910
|
|
|
|
|
|
|
|
|
Ronald A. Frost
|
2019
|
598,077
|
—
|
567,126
|
—
|
65,515
|
(4)(5)
|
1,230,718
|
Chief Operating Officer
|
2018
|
532,692
|
150,000
|
618,768
|
—
|
65,499
|
(4)(5)
|
1,366,959
|
2017
|
400,000
|
200,000
|
459,675
|
—
|
23,145
|
(4)(5)
|
1,082,820
|
|
|
|
|
|
|
|
|
Joseph C. Wright
|
2019
|
550,000
|
—
|
567,126
|
300,000
|
48,632
|
(4)(5)
|
1,465,758
|
President, Merit
International
|
2018
|
536,538
|
—
|
386,730
|
300,000
|
25,298
|
(4)(5)
|
1,248,566
|
2017
|
473,078
|
—
|
229,838
|
225,000
|
15,551
|
(4)(5)
|
943,467
|
|
|
|
|
|
|
|
|
Justin J. Lampropoulos
|
2019
|
596,154
|
—
|
567,126
|
—
|
48,319
|
(4)(5)
|
1,211,599
|
Executive Vice President, Sales, Marketing and Strategy
|
2018
|
500,000
|
50,000
|
309,384
|
—
|
45,267
|
(4)(5)
|
904,651
|
2017
|
500,000
|
50,000
|
229,838
|
—
|
5,963
|
(5)
|
785,801
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Bonus amounts represent discretionary bonuses not based solely upon pre-determined performance criteria.
|
|
(2)
|
|
Stock Awards reflect the aggregate grant date fair value of the awards granted to the NEOs in the year shown under our 2006 Incentive Plan or our 2018 Incentive Plan, as applicable, computed in accordance with FASB ASC Topic 718. Such amounts have been calculated in accordance with current financial statement reporting guidance, using the same assumptions the Company has used for financial statement reporting purposes with respect to our long-term incentive plans. Assumptions used in the calculation of these amounts for 2019, 2018, and 2017 are included in footnotes to our audited consolidated financial statements for the years ended December 31, 2019, 2018, and 2017 (which are included in our Annual Reports on Form 10-K filed with the Commission on March 2, 2020, March 1, 2019, and March 1, 2018, respectively).
|
|
(3)
|
|
Incentive bonuses under our performance-based annual bonus plan based on pre-established performance criteria appear in the Non-Equity Incentive Plan Compensation column. The Compensation Committee’s evaluation of our achievement of the performance bonus goals for Mr. Wright in 2019 indicated that we achieved the goal established for international operations for which Mr. Wright has supervisory responsibility. Based upon the Company’s achievement of this goal established by the Compensation Committee, the Compensation Committee determined to award to Mr. Wright the full amount of the targeted annual cash bonus established for him. No other NEOs earned bonuses of any kind with respect to 2019.
|
|
(4)
|
|
Amounts include vacation benefits paid to the NEOs in cash in lieu of vacation benefits, as follows:
|
|
·
|
|
for the year ended December 31, 2019: $228,128 for Mr. F. Lampropoulos; $15,865 for Mr. Parra; $57,115 for Mr. Frost; $40,232 for Mr. Wright; and $40,012 for Mr. J. Lampropoulos.
|
|
·
|
|
for the year ended December 31, 2018: $84,469 for Mr. F. Lampropoulos; $43,737 for Mr. Parra; $57,249 for Mr. Frost; $17,048 for Mr. Wright; and $37,536 for Mr. J. Lampropoulos.
|
|
·
|
|
for the year ended December 31, 2017: $53,824 for Mr. F. Lampropoulos; $17,183 for Mr. Frost; and $9,588 for Mr. Wright.
|
|
(5)
|
|
Amounts shown also include matching contributions made by the Company for the benefit of the NEOs to the Company’s 401(k) Plan in the following amounts:
|
|
·
|
|
for the year ended December 31, 2019: Mr. F. Lampropoulos, $8,400; Mr. Parra, $5,008; Mr. Frost, $8,400; Mr. Wright, $8,400; and Mr. J. Lampropoulos, $8,307.
|
|
·
|
|
for the year ended December 31, 2018: Mr. F. Lampropoulos, $8,250; Mr. Parra, $8,250; Mr. Frost, $8,250; Mr. Wright, $8,250; and Mr. J. Lampropoulos, $7,731.
|
|
·
|
|
for the year ended December 31, 2017: Mr. F. Lampropoulos, $5,963; Mr. Frost, $5,963; Mr. Wright, $5,963; and Mr. J. Lampropoulos, $5,963.
|
|
(6)
|
|
Mr. Parra became an executive officer of the Company on May 29, 2018. The foregoing table presents compensation received for the years in which an NEO acted in an executive officer capacity.
|
Grants of Plan-Based Awards
The following table sets forth information concerning plan-based awards to the NEOs during the year ended December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Grant Date
|
|
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards ($) (1)
|
|
All other Option Awards: Number of Securities Underlying Options Granted (#) (2)
|
|
Exercise Price of Option Awards ($/sh) (3)
|
|
Grant Date Fair Value of Option Awards ($)
|
Threshold ($)
|
Target ($)
|
Maximum ($)
|
|
Fred P. Lampropoulos
|
|
N/A
|
|
—
|
$1,000,000
|
—
|
|
—
|
|
—
|
|
—
|
|
3/1/2019
|
|
—
|
—
|
—
|
|
159,151
|
|
$
55.73
|
|
$
|
3,008,622
|
|
Raul Parra
|
|
N/A
|
|
—
|
—
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/1/2019
|
|
—
|
—
|
—
|
|
30,000
|
|
$
55.73
|
|
$
|
567,126
|
|
Ronald A. Frost
|
|
N/A
|
|
—
|
—
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/1/2019
|
|
—
|
—
|
—
|
|
30,000
|
|
$
55.73
|
|
$
|
567,126
|
|
Joseph C. Wright
|
|
N/A
|
|
$180,000
|
$300,000
|
$300,000
|
|
—
|
|
—
|
|
|
|
—
|
|
|
3/1/2019
|
|
—
|
—
|
—
|
|
30,000
|
|
$
55.73
|
|
$
|
567,126
|
|
Justin J. Lampropoulos
|
|
N/A
|
|
—
|
—
|
—
|
|
—
|
|
—
|
|
—
|
|
|
3/1/2019
|
|
—
|
—
|
—
|
|
30,000
|
|
$
55.73
|
|
$
|
567,126
|
|
|
(1)
|
|
Listed amounts reflect threshold, target, and maximum incentive performance bonuses for 2019. For the year ended December 31, 2019, Mr. Fred Lampropoulos did not receive any incentive performance bonus. For the year ended December 31, 2019, Mr. Wright received the full targeted level of his incentive performance bonus, as discussed above and as shown in the “Non-Equity Incentive Plan Compensation" column in the Summary Compensation Table above. Mr. Wright’s annual incentive performance bonus is paid in quarterly increments of up to $75,000 based upon the Company’s achievement of sales targets for our international operations for which Mr. Wright has supervisory responsibility. If the Company achieves less than 80% of those sales targets on an annual basis, no bonus is payable to Mr. Wright.
|
|
(2)
|
|
Stock options vest at the rate of 20.0% per year over five years on the first through the fifth anniversaries of the date of the grant.
|
|
(3)
|
|
The exercise price per share for each stock option is the market closing price on the date of the grant.
|
Outstanding Equity Awards at Year End
The following table provides information on the holdings of stock options and other stock awards by the NEOs as of December 31, 2019.
Named Executive Officer (1)
|
Grant Date
|
Number of Securities
Underlying Unexercised
Options Exercisable
|
Number of Securities
Underlying Unexercised
Options Unexercisable (1)
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
Fred P. Lampropoulos
|
10/4/2014
|
50,000
|
—
|
12.06
|
10/4/2021
|
|
2/13/2015
|
40,000
|
10,000
|
17.27
|
2/13/2022
|
|
1/28/2016
|
30,000
|
20,000
|
16.05
|
1/28/2023
|
|
4/14/2017
|
80,000
|
120,000
|
28.20
|
4/14/2024
|
|
3/2/2018
|
7,600
|
30,402
|
44.80
|
3/2/2025
|
|
3/1/2019
|
—
|
159,151
|
55.73
|
3/1/2026
|
Raul Parra
|
10/4/2014
|
1,000
|
—
|
12.06
|
10/4/2021
|
|
2/13/2015
|
—
|
1,000
|
17.27
|
2/13/2022
|
|
1/28/2016
|
—
|
2,000
|
16.05
|
1/28/2023
|
|
4/14/2017
|
—
|
6,000
|
28.20
|
4/14/2024
|
|
3/2/2018
|
—
|
8,000
|
44.80
|
3/2/2025
|
|
3/1/2019
|
—
|
30,000
|
55.73
|
3/1/2026
|
Ronald A. Frost
|
10/4/2014
|
25,000
|
—
|
12.06
|
10/4/2021
|
|
2/13/2015
|
16,000
|
4,000
|
17.27
|
2/13/2022
|
|
1/28/2016
|
12,000
|
8,000
|
16.05
|
1/28/2023
|
|
4/14/2017
|
20,000
|
30,000
|
28.20
|
4/14/2024
|
|
3/2/2018
|
8,000
|
32,000
|
44.80
|
3/2/2025
|
|
3/1/2019
|
—
|
30,000
|
55.73
|
3/1/2026
|
Joseph C. Wright
|
7/31/2013
|
10,000
|
—
|
13.14
|
7/31/2020
|
|
10/4/2014
|
25,000
|
—
|
12.06
|
10/4/2021
|
|
2/13/2015
|
8,000
|
2,000
|
17.27
|
2/13/2022
|
|
1/28/2016
|
12,000
|
8,000
|
16.05
|
1/28/2023
|
|
4/14/2017
|
10,000
|
15,000
|
28.20
|
4/14/2024
|
|
3/2/2018
|
5,000
|
20,000
|
44.80
|
3/2/2025
|
|
3/1/2019
|
—
|
30,000
|
55.73
|
3/1/2026
|
Justin J. Lampropoulos
|
10/4/2014
|
5,000
|
—
|
12.06
|
10/4/2021
|
|
2/13/2015
|
16,000
|
4,000
|
17.27
|
2/13/2022
|
|
1/28/2016
|
12,000
|
8,000
|
16.05
|
1/28/2023
|
|
4/14/2017
|
10,000
|
15,000
|
28.20
|
4/14/2024
|
|
3/2/2018
|
4,000
|
16,000
|
44.80
|
3/2/2025
|
|
3/1/2019
|
—
|
30,000
|
55.73
|
3/1/2026
|
|
(1)
|
|
Each unvested stock option award vests 20% each year for five years commencing one year from the grant date. No stock-based awards, other than stock options, were granted to the NEOs in 2017, 2018 or 2019.
|
Option Exercises and Stock Awards Vested
The following table provides information regarding stock options exercised by the NEOs during the year ended December 31, 2019.
|
|
Number of Shares
Acquired on Exercise
|
|
Value Realized
on Exercise $ (1)
|
Name Granted
|
|
|
Fred P. Lampropoulos
|
|
—
|
|
—
|
Raul Parra
|
|
7,000
|
|
223,851
|
Ronald A. Frost
|
|
—
|
|
—
|
Joseph C. Wright
|
|
—
|
|
—
|
Justin J. Lampropoulos
|
|
8,000
|
|
381,806
|
|
(1)
|
|
The reported value for this column is determined by multiplying the number of shares acquired upon the exercise of the applicable option by the difference between the market price of our Common Stock on the date of exercise and the exercise price of the stock option. The value is stated before payment of applicable taxes.
|
Non-Qualified Deferred Compensation
Pursuant to the Merit Medical Systems, Inc. Deferred Compensation Plan (the Deferred Compensation Plan), NEOs may elect prior to the beginning of each calendar year to defer the receipt of base salary and bonuses earned for the ensuing calendar year. Amounts deferred are credited to an unfunded liability account maintained by the Company on behalf of the applicable NEO, which account is deemed invested in and earns a rate of return based upon certain notational, self-directed investment options offered under the Deferred Compensation Plan. The NEOs’ accounts under the Deferred Compensation Plan may also be credited with a discretionary employer matching contribution, although no such discretionary contribution was made for 2019 or at any other time since the Deferred Compensation Plan’s inception. Participant account balances under the Deferred Compensation Plan are fully-vested and will be paid by the Company to each NEO upon retirement or separation from employment, or on other specified dates, in a lump sum form or in installments according to a schedule elected in advance by the participant. The following table sets forth certain information regarding the account balances and amounts with respect to the NEOs who participated in the Deferred Compensation Plan during 2019.
|
|
Executive Contributions in Last Fiscal Year
($) (1)
|
|
Registrant Contributions in Last Fiscal Year
($)
|
|
Aggregate Earnings in Last Fiscal Year
($)
|
|
Aggregate Withdrawals / Distributions
($)
|
|
Aggregate Balance at Last Fiscal Years End
($)
|
Named Executive Officer
|
|
|
|
|
|
Ronald A. Frost
|
|
—
|
|
|
—
|
|
|
98,974
|
|
|
—
|
|
|
543,799
|
|
Joseph C. Wright
|
|
127,500
|
|
|
—
|
|
|
417,716
|
|
|
—
|
|
|
1,895,071
|
|
|
(1)
|
|
These amounts are also reflected in the Summary Compensation Table for the year ended December 31, 2019 as “Salary.”
|
The table below shows the funds available for notational investment under the Deferred Compensation Plan and their annual rate of return for the calendar year ended December 31, 2019. These notational investments were generally the same as the mutual fund investment options offered in 2019 under our 401(k) Plan:
|
|
|
Name of Fund
|
Rate of Return
|
Vanguard VIF Equity Index
|
31.30
|
%
|
T. Rowe Price Mid Cap Growth II
|
30.98
|
%
|
Vanguard VIF Total Stock Market Index Inv
|
30.75
|
%
|
MFS VIT III Mid Cap Value Svc
|
30.71
|
%
|
T. Rowe Price Blue Chip Growth
|
29.89
|
%
|
Vanguard VIF REIT Index
|
28.81
|
%
|
Vanguard VIF Small Company Growth Inv
|
28.05
|
%
|
T. Rowe Price Equity Income II
|
26.04
|
%
|
MFS VIT II International Value Svc
|
25.65
|
%
|
Model Portfolio - Global Growth
|
24.46
|
%
|
American Funds IS International 2
|
22.88
|
%
|
DFA VA US Targeted Value
|
22.56
|
%
|
Nationwide VIT International Index II
|
21.42
|
%
|
Model Portfolio - Balanced Growth
|
21.31
|
%
|
Model Portfolio - Balanced Moderate
|
18.45
|
%
|
Lazard Retirement Emerging Markets Svc
|
18.14
|
%
|
Model Portfolio - Balanced Conservative
|
15.53
|
%
|
Model Portfolio - Income with Growth
|
13.34
|
%
|
Van Eck VIP Global Hard Assets Initial
|
11.87
|
%
|
PIMCO VIT Real Return Admin
|
8.44
|
%
|
PIMCO VIT Total Return Admin
|
8.36
|
%
|
Nationwide VIT Money Market V
|
1.83
|
%
|
Potential Payments Upon
Termination or Change in Control
Employment Agreements
In 2016, the Company entered into an Employment Agreement with each of Messrs. Fred P. Lampropoulos, Frost, Wright and Justin J. Lampropoulos. These Employment Agreements were amended in 2017. In 2018, the Company entered into an Employment Agreement with Mr. Parra. The Employment Agreements (as amended) are described further in the “Compensation Discussion and Analysis” discussion above.
The Employment Agreements provide payments and benefits in the event of termination of employment under certain circumstances, including in connection with a change in control as follows:
Termination Other Than in Connection with a Change in Control.
If an Executive’s employment with the Company is terminated for any reason, voluntarily or involuntarily, with or without “Cause” (as defined below), other than “in Connection with a Change in Control” (as defined below), we are obligated to pay the Executive a lump sum cash payment equal to his or her accrued and unpaid base salary and any accrued vacation pay earned but not yet paid through the date of termination, plus a lump sum cash payment equal to the Executive’s accrued annual bonus earned for our last fiscal year ending immediately prior to the Executive’s date of termination, to the extent not already paid (the sum of such payments hereinafter referred to as the Accrued Obligations). Any additional severance benefit is solely at the discretion of the Company. A termination is deemed to be “in Connection with a Change in
Control” if it occurs on or within two years after the date of a Change in Control or, in the case of involuntary termination without Cause, within six months prior to a Change in Control and in anticipation of the Change in Control.
A “Change in Control” means:
|
·
|
|
the acquisition in one or more integrated transactions by any individual, entity or group of beneficial ownership of more than 30% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors;
|
|
·
|
|
certain changes in a majority of the Board; and
|
|
·
|
|
consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of our assets.
|
in each case, subject to certain exceptions set forth in the Employment Agreements.
Termination for Good Reason or Without Cause in Connection with a Change in Control
If an NEO’s employment with the Company is terminated by the NEO for “Good Reason” (as defined below) in Connection with a Change in Control or by the Company without Cause in Connection with a Change in Control, the Company is obligated to:
|
(a)
|
|
pay to the NEO any Accrued Obligations to the extent not already paid;
|
|
(b)
|
|
pay to the NEO a cash severance benefit equal to two times (three times solely in the case of the CEO) the sum of (i) the NEO’s annual base salary then in effect, and (ii) the NEO’s average annual bonus for the last three full fiscal years ending prior to the Change in Control;
|
|
(c)
|
|
continue to provide group health benefits to the NEO and/or NEO’s eligible spouse and dependent children for two years (three years solely in the case of the CEO) after the date of the NEO’s termination;
|
|
(d)
|
|
provide the NEO with certain outplacement services at our expense; and
|
|
(e)
|
|
pay or provide to the NEO certain other accrued benefits to the extent not already paid or provided.
|
For purposes of the Employment Agreements, Cause means:
|
·
|
|
the willful and continued failure of an NEO to perform his or her duties after a written demand for substantial performance specifically identifying the deficiencies in the Executive’s performance has been delivered to the NEO by the Board or, in the case of all NEOs other than the CEO, by the CEO;
|
|
·
|
|
the willful engaging by an NEO in illegal conduct, intentional misconduct or gross negligence which materially and demonstrably injures the Company; or
|
|
·
|
|
violation of written Company policies prohibiting workplace discrimination, sexual harassment, and alcohol or substance abuse.
|
For purposes of the Employment Agreements, Good Reason means:
|
·
|
|
our assignment to the NEO, upon or within two years after a Change in Control, of any duties inconsistent with or that diminishes the NEO’s duties, authority or responsibilities under the terms of the NEO’s Employment Agreement;
|
|
·
|
|
our failure to comply with certain compensation provisions in the Employment Agreements;
|
|
·
|
|
requiring the NEO to relocate to another office or location upon or within two years of a Change in Control; or
|
|
·
|
|
our failure to require any successor entity to comply with the terms of a respective Employment Agreement.
|
Termination for Cause or Without Good Reason Following a Change in Control
If the Company terminates an NEO’s employment for Cause on or after the date of a Change in Control, the Company must pay to the NEO his or her annual base salary and accrued vacation and must continue to pay and/or provide certain other welfare benefits to the extent not already provided and/or unpaid. If an NEO voluntarily terminates his or her employment without Good Reason upon or following a Change in Control, the Company is obligated to pay the NEO for Accrued Obligations and to provide certain other accrued benefits to the extent not already paid and/or provided.
Termination upon Death or Disability
Upon an NEO’s death or disability other than in Connection with a Change in Control, the Company is obligated to pay the NEO (or the NEO’s estate) an amount equal to Accrued Obligations plus any additional discretionary severance benefits approved by the Compensation Committee. If an NEO’s employment is terminated after the date of a Change in Control by reason of the NEO’s death, the Company must also continue to provide certain welfare benefits to the NEOs family for a stated period. If an NEO’s employment is terminated after the date of a Change in Control by reason of the NEO’s disability, the Company must also continue to provide certain welfare benefits.
Accelerated Stock Option Vesting Upon a Change in Control
Under our 2006 Incentive Plan, as well as our 2018 Incentive Plan, all otherwise unvested stock options held by NEOs become fully vested upon a “change in control” as defined below, without regard to whether the NEO terminates employment.
Our 2018 Incentive Plan defines a “Change in Control” as:
|
|
|
certain changes in the majority of the Board within a 24-month period;
|
|
|
|
the acquisition by any person of 30% or more of the Common Stock or other voting securities;
|
|
|
|
consummation of a merger or reorganization of the Company that requires the approval of our shareholders, unless more than 30% of the total voting power of the surviving corporation or its parent is represented by securities held by the company’s shareholders prior to the transaction, no person (other than an employee benefit plan sponsored or maintained by the surviving corporation or its parent) owns more than 30% of the securities eligible to elect directors of the surviving corporation or its parent, and at least a majority of the directors of the parent corporation or the surviving corporation were directors of the Company for a period of 12 months preceding such transaction;
|
|
|
|
shareholder approval of a liquidation or dissolution of the Company; or
|
|
|
|
a sale or other disposition of all or substantially all of our assets to another entity that is not controlled by our shareholders.
|
Amounts Payable upon a Change in Control without Termination of Employment
The following table shows for each NEO the intrinsic value of his or her otherwise unvested stock options on December 31, 2019 that would have vested had a “Change in Control” within the meaning of the Employment Agreements occurred on that date, calculated by multiplying the number of underlying shares by the closing price of Common Stock on the last trading day of 2019 and by then subtracting the applicable option exercise price:
|
|
Named Executive Officer
|
Intrinsic Value of Stock Options ($)
|
Fred P. Lampropoulos
|
805,300
|
Raul Parra
|
62,410
|
Ronald A. Frost
|
267,760
|
Joseph C. Wright
|
194,560
|
Justin J. Lampropoulos
|
222,460
|
The Employment Agreements do not provide for any additional payments to the NEOs merely upon a Change in Control (i.e., absent a termination of employment of the NEOs).
Amounts Payable upon Termination of Employment
Termination without Cause or For Good Reason in Connection with a Change in Control.
The following table shows the amounts that would be payable to each NEO if the Company had undergone a Change in Control within the meaning of the Employment Agreements and the NEO’s employment with the Company terminated voluntarily for Good Reason or involuntarily without Cause, in each case, on December 31, 2019.
Amounts shown in the table do not reflect any accrued vacation and distributions from our 401(k) Plan that are payable to all salaried employees upon termination of employment:
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
Salary and Bonus Continuation
|
Stock Option Vesting Acceleration
|
Health Plan Coverage Continuation
|
Deferred Compensation Plan
|
Total
|
|
($)
|
($) (1)
|
($) (2)
|
($) (3)
|
($)
|
Fred P. Lampropoulos
|
7,550,000
|
|
805,300
|
|
45,338
|
|
—
|
|
|
8,400,638
|
Raul Parra
|
1,404,731
|
|
62,410
|
|
30,408
|
|
—
|
|
|
1,497,549
|
Ronald A. Frost
|
1,433,333
|
|
267,760
|
|
29,150
|
|
543,799
|
|
|
2,274,042
|
Joseph C. Wright
|
1,583,333
|
|
194,560
|
|
29,150
|
|
1,895,071
|
|
|
3,702,114
|
Justin J. Lampropoulos
|
1,266,667
|
|
222,460
|
|
29,150
|
|
—
|
|
|
1,518,277
|
|
(1)
|
|
Stock Option Vesting Acceleration represents the intrinsic value of the otherwise unvested stock options held by NEOs on December 31, 2019 calculated by multiplying the number of shares underlying such options by the closing price of Company shares on December 31, 2019 ($31.22 per share), and by then subtracting the applicable exercise price.
|
|
(2)
|
|
Health Plan Coverage Continuation amounts represent the estimated future cost of providing continuing Company-paid coverage under the Company’s group health, disability and life insurance plans for the applicable severance period. The estimated amounts are based upon December 31, 2019 actual premium rates, plus a 10% assumed rate of annual premium cost increases.
|
|
(3)
|
|
Deferred Compensation Plan amounts represent the account balance in each NEO’s Deferred Compensation Plan account as of December 31, 2019.
|
Involuntary Termination without Cause or Termination For Good Reason (Other Than in Connection with a Change in Control).
The following table shows the amounts that would be payable to each NEO if the NEO’s employment had terminated voluntarily for good reason or involuntarily without Cause, other than in connection with a Change in Control, on December 31, 2019 and we had exercised our discretion to pay severance equal to one year’s salary and the annual bonus earned in 2019.
The following amounts are in addition to accrued vacation and distributions from our 401(k) Plan that are payable to all salaried employees upon termination of employment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Discretionary Severance
($) (1)
|
Health Plan Coverage Continuation
($)
|
Deferred Compensation Plan
($) (2)
|
Total
($)
|
Fred P. Lampropoulos
|
|
1,750,000
|
|
—
|
—
|
|
1,750,000
|
|
Raul Parra
|
|
600,000
|
|
—
|
—
|
|
600,000
|
|
Ronald A. Frost
|
|
600,000
|
|
—
|
543,799
|
|
1,143,799
|
|
Joseph C. Wright
|
|
850,000
|
|
—
|
1,895,071
|
|
2,745,071
|
|
Justin J. Lampropoulos
|
|
600,000
|
|
—
|
—
|
|
600,000
|
|
|
(1)
|
|
Assumes the Company exercised its discretion to pay severance equal to one year’s salary and the 2019 earned bonus.
|
|
(2)
|
|
Deferred Compensation Plan amounts represent the account balance in the NEO’s Deferred Compensation Plan account as of December 31, 2019.
|
Termination on Account of Death, Disability, Involuntary Termination for Cause or Voluntary Resignation without Good Reason.
If, on December 31, 2019, an NEO had died, his or her employment had been terminated on account of disability, his or her employment had been terminated for Cause, or he or she had voluntarily resigned without Good Reason, whether or not in connection with a Change in Control, he or she would have been entitled to receive only:
|
(a)
|
|
his accrued salary and bonus earned through December 31, 2019;
|
|
(b)
|
|
accrued but unpaid vacation pay through December 31, 2019;
|
|
(c)
|
|
distribution of his vested account balance from our 401(k) Plan;
|
|
(d)
|
|
the payment of insured benefits, if applicable, under our broad-based long-term disability insurance or group term life insurance plans; and
|
|
(e)
|
|
distribution of his Deferred Compensation Plan account balance.
|
CEO Pay Ratio
The following pay ratio and supporting information compares (x) the annual total compensation for the year ended December 31, 2019 of our median employee identified as of December 31, 2019 by taking into account all of our employees other than our CEO, (including full-time and part-time employees and employees on leave) and annualizing permanent employees (full-time and part-time) that did not work a full year, (excluding employees on leave under the Family and Medical Leave Act of 1993, employees called for active military duty, and employees who took an unpaid leave of absence during the period for another reason) (the Median Employee) against (y) the annual total compensation of our CEO (as reported in our Summary Compensation Table), as required by Section 953(b) of the Dodd-Frank Act.
As illustrated in the table below, our 2019 CEO pay ratio was 146.7 to 1.
|
|
|
Compensation ($)
|
Fred P. Lampropoulos (1)
|
5,049,286
|
Median Employee (2)
|
34,418
|
|
(1)
|
|
Amount represents taxable compensation paid to Mr. Lampropoulos during 2019, plus the fair value of equity awards granted to Mr. Lampropoulos during 2019. For additional information, see our Summary Compensation Table beginning on page 54.
|
|
(2)
|
|
Amount represents taxable compensation paid, plus the fair value of equity awards granted (if applicable), to the Median Employee during 2019.
|
In calculating our 2019 CEO pay ratio, we calculated the annual total compensation (annual taxable compensation, plus the fair value of equity awards granted) for all employees of the Company (other than the CEO) for the year ended December 31, 2019. We believe that annual total compensation is a consistently applied compensation measure and appropriate for determining the median-paid employee. We used actual annual total compensation (converted, where applicable, to U.S. dollars based on an average annual exchange rate for the year ended December 31, 2019), and did not make any assumptions or adjustments to the amounts determined.
Audit Matters
Audit Committee Report
The Audit Committee provides oversight of our accounting and financial reporting processes, systems of internal accounting and financial controls and the audits of our financial statements. The Audit Committee reviewed with our independent registered public accounting firm and management the financial information included in our audited financial statements. All members of the Audit Committee are “independent,” as defined in the Nasdaq Marketplace Rules.
Management is responsible for our internal controls and financial reporting process. Our independent registered public accounting firm is responsible for performing an audit of our financial statements in accordance with generally accepted auditing standards in the United States of America and for expressing an opinion on those financial statements based on its audit. The Audit Committee reviews these processes on behalf of the Board. The Audit Committee has reviewed and discussed with our management and our independent registered public accounting firm the audited financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019, as amended by our Amendment No. 1 to Annual Report on Form 10-K/A. The Audit Committee has also reviewed and discussed management’s assessment of the effectiveness of our internal control over financial reporting, and the opinion of our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.
The Audit Committee also has discussed with our independent registered public accounting firm the matters required to be discussed by the Statement on Auditing Standards No. 61 (Communication with Audit Committee), as amended.
The Audit Committee has received the written disclosures and the letter from our independent registered public accounting firm required by the Statement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board, and has discussed with the independent registered public accounting firm its independence. The Audit Committee has also considered whether the provision of the non-audit services described herein under the caption “Proposal No. 3 - Ratification of Appointment of Independent Registered Public Accounting Firm” is compatible with maintaining the independence of the independent registered public accounting firm.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2019, as amended by Amendment No. 1 to Annual Report on Form 10-K/A, as filed with the SEC.
|
Audit Committee
Nolan E. Karras (Chair)
A. Scott Anderson
Thomas J. Gunderson
Lynne N. Ward
|
Appointment of Independent Registered Public Accounting Firm
|
|
|
Proposal No. 3– Ratification of Appointment of Independent Registered Public Accounting Firm
|
Board Recommendation
|
The Board unanimously recommends a vote FOR this proposal.
|
Subject to shareholder ratification, the Audit Committee has recommended, and the Board has appointed, the firm of Deloitte & Touche LLP, (Deloitte) independent registered public accountants, to audit the financial statements of the Company for the year ending December 31, 2020. Deloitte has acted as the independent public accounting firm for the Company since 1988.
The Board anticipates that representatives of Deloitte will be participating in the Annual Meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions.
Fees Paid to Our Independent Certified Public Accounting Firm
The following table presents aggregate fees for audits of our consolidated financial statements and fees billed for other services rendered by Deloitte for the years ended December 31, 2019 and 2018.
|
|
|
|
2019 ($)
|
2018 ($)
|
Audit Fees (1)
|
1,384,763
|
1,270,445
|
Audit-Related Fees (2)
|
30,864
|
138,331
|
Tax Fees (3)
|
476,450
|
463,274
|
All Other Fees (4)
|
121,670
|
252,591
|
Total
|
2,013,747
|
2,124,641
|
|
(1)
|
|
Audit Fees: The aggregate fees billed by Deloitte, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, the “Deloitte Firms”) for professional services rendered for the audits and reviews of our financial statements filed with the Commission on Forms 10-K, 10-Q, 8-K and S-3. Audit fees for 2019 and 2018 also include fees for the audit of management’s assessment of the effectiveness of internal control over financial reporting and the audit of the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002.
|
|
(2)
|
|
Audit-Related Fees: The aggregate fees billed by the Deloitte Firms for all audit-related services, including an audit of our employee benefit plan (in both years) and service related to our public offering of Common Stock (in 2018).
|
|
(3)
|
|
Tax Fees: The aggregate fees billed by the Deloitte Firms for tax compliance, tax advice and tax planning.
|
|
(4)
|
|
All Other Fees: The aggregate fees billed by the Deloitte Firms related to due diligence services rendered during 2019 and 2018, respectively.
|
Pre-Approval Policies and Procedures
The Audit Committee ensures that the Company engages its independent registered public accounting firm to provide only audit and non-audit services that are compatible with maintaining the independence of its public accountants. The Audit Committee approves or pre-approves all services provided by our public accountants. Permitted services include audit and audit-related services, tax and other non-audit related services. Certain services are identified as restricted. Restricted services are those services that may not be provided by our external public accountants, whether identified in statute or determined in our opinion to be incompatible with the role of an independent auditor. All fees identified in the preceding table were approved by the Audit Committee. During 2019, the Audit Committee reviewed all non-audit services provided by our independent registered public accounting firm and concluded that the provision of such non-audit services was compatible with maintaining the independence of the external public accountants.
Stock Ownership and Trading
Principal Holders of Voting Securities
The following table sets forth information as of April 30, 2020, with respect to the beneficial ownership of shares of 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 NEO and by all directors and executive officers as a group.
For each individual and group included in the table below, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the 55,350,751 shares of Common Stock outstanding as of April 30, 2020, plus the number of shares of Common Stock that such person or group had the right to acquire on or within 60 days after April 30, 2020.
Unless otherwise noted, each person named has sole voting and investment power with respect to the shares indicated.
|
|
|
Principal Shareholders
|
Number
of Shares
|
Percentage of Outstanding Common Stock
|
Blackrock, Inc. (1)
|
8,254,514
|
14.9%
|
The Vanguard Group, Inc. (1)
|
5,760,308
|
10.4%
|
ArrowMark Colorado Holdings, LLC (1)
|
4,921,872
|
8.9%
|
Starboard Value LP (1)
|
4,841,860
|
8.7%
|
Nuance Investments, LLC (1)
|
4,232,030
|
7.6%
|
|
|
|
Officers, Directors and Nominees
|
|
|
Fred P. Lampropoulos (2) (3)
|
1,271,766
|
2.3%
|
Kent W. Stanger (2) (3)
|
549,974
|
1.0%
|
Franklin J. Miller, M.D. (3)
|
136,983
|
*
|
Ronald A. Frost (2) (3)
|
134,311
|
*
|
Nolan E. Karras (3)
|
118,583
|
*
|
Joseph C. Wright (3)
|
92,000
|
*
|
A. Scott Anderson (3)
|
80,845
|
*
|
Justin J. Lampropoulos (3)
|
70,000
|
*
|
F. Ann Millner, Ed.D. (3)
|
43,313
|
*
|
Thomas J. Gunderson (3)
|
32,083
|
*
|
David M. Liu, M.D. (3)
|
30,883
|
*
|
Jill Anderson (3)
|
16,725
|
*
|
Raul Parra (2)(3)
|
15,920
|
*
|
David K. Floyd
|
425
|
*
|
Lonny J. Carpenter
|
370
|
*
|
Lynne N. Ward
|
-
|
*
|
James T. Hogan
|
-
|
*
|
Total Officers, Directors and Nominees (18 people)
|
2,660,295
|
4.7%
|
* Represents a holding of less than 1.0%
|
(1)
|
|
Based upon the most recent Schedules 13F available on the SEC’s website as of May 18, 2020, with holdings reported as of March 31, 2020. Number of shares listed represents aggregate number of shares of Common Stock beneficially owned by each reporting person as indicated in the applicable Schedule 13F report.
|
|
(2)
|
|
The computations above include the following share amounts that are held in our 401(k) Plan on behalf of participants as of April 30, 2020:
|
|
·
|
|
Mr. F. Lampropoulos, 95,461 shares
|
|
·
|
|
Mr. Stanger, 42,278 shares
|
|
·
|
|
Mr. Frost, 16,311 shares
|
|
·
|
|
Mr. Parra, 2,920 shares
|
|
·
|
|
All executive officers and directors as a group, 156,970 shares
|
|
(3)
|
|
The computations above include the following share amounts that are subject to options exercisable within 60 days after April 30, 2020, none of which had been exercised as of such date:
|
|
|
● Mr. F. Lampropoulos, 207,030 shares
|
● Mr. J. Lampropoulos, 70,000 shares
|
● Mr. Stanger, 61,583 shares
|
● Dr. Millner, 32,083 shares
|
● Dr. Miller, 102,083 shares
|
● Mr. Gunderson, 32,083 shares
|
● Mr. Frost, 113,000 shares
|
● Dr. Liu, 30,883 shares
|
● Mr. Karras, 102,083 shares
|
● Mr. Parra, 13,000 shares
|
● Mr. Wright, 82,000 shares
|
● Ms. Anderson, 10,325 shares
|
● Mr. Anderson, 62,083 shares
|
● All executive officers and directors as a group, 984,236 shares
|
|
Other Proxy Information
Information about the Annual Meeting and Voting
On behalf of the Company, the Board is soliciting your proxy to vote at our Annual Meeting (or at any adjournment of the meeting). This Proxy Statement includes information you need to know to vote at the Annual Meeting.
Date, Time and Place of the Annual Meeting
Date:June 22, 2020
Time:2:00 p.m. (Mountain Time) We encourage you to access the Annual Meeting prior to the start time and allow plenty of time to log into the Annual Meeting.
Place:Online at www.virtualshareholdermeeting.com/MMSI2020
The Annual Meeting platform is fully supported across browsers and devices running the most updated versions of the applicable software and plugins. Participants should ensure that they have a strong internet connection wherever they intend to participate in the Annual Meeting.
This Proxy Statement, the Notice of 2020 Annual Meeting of Shareholders and the accompanying form of proxy are first being mailed or made available to our shareholders on or about May 27, 2020.
We 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 materials, as well as the expense of making this Proxy Statement and accompanying materials available on the Internet (although shareholders must bear any costs associated with their Internet access). In addition to the solicitation of proxies by use of the mail and the Internet, our directors, officers, and employees, without receiving additional compensation, may solicit proxies personally or by telephone, electronic mail 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 those persons, and we will reimburse those brokerage firms, custodians, nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them in connection therewith.
The Board has fixed the close of business on April 30, 2020 as the Record Date for determination of shareholders entitled to receive notice of and to vote at the Annual Meeting. As of the Record Date, there were issued and outstanding 55,350,751 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.
Method for Electronic Viewing and Printing of the Proxy Materials
The Record Date is April 30, 2020. Shareholders of record on the Record Date will be entitled to notice and to vote, in person or by proxy, at the Annual Meeting and any adjournments or postponements thereof.
All shareholders may access our proxy materials on the website (www.proxyvote.com) or may request to receive a printed set of our proxy materials. This Proxy Statement contains information regarding the proposals to be considered at the Annual Meeting, and shareholders are encouraged to read it in its entirety.
Proxies
Shares of Common Stock that are entitled to be voted at the Annual Meeting and are represented by properly executed proxies will be voted in accordance with the instructions on those proxies.
If no instructions are indicated, shares on a properly executed proxy will be voted:
|
·
|
|
FOR the election of each of the three director nominees identified in this Proxy Statement;
|
|
·
|
|
FOR the non-binding resolution to approve the compensation of our named executive officers;
|
|
·
|
|
FOR the ratification of the appointment of Deloitte to serve as our independent registered public accounting firm for the year ending December 31, 2020.
|
In respect of any other matters that may properly come before the Annual Meeting, shares represented by properly executed proxies may be voted at the discretion of the proxy holder. The Board is not currently aware of any other matters to be presented at the Annual Meeting.
Revocation of Proxies
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 mail, by voting via the Internet, by filing with Brian G. Lloyd, our Corporate Secretary, 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. In order to revoke a proxy executed with respect to shares held in street name, the shareholder must contact the appropriate broker or nominee.
Broker Non-Votes
Shares of Common Stock that are held in “street name,” which means shares of Common Stock held of record by a trustee or in an account at a brokerage firm, bank, dealer, or other similar organization (collectively, brokerage firms), may be voted, even if the beneficial holder does not provide the brokerage firm with voting instructions. Brokerage firms have the authority under applicable securities rules to cast votes on certain “routine” matters, even if they do not receive instructions from their customers. However, the ratification of our independent registered accounting firm is considered the only routine matter for which brokerage firms may vote un-instructed shares. The election of directors and the advisory vote to approve named executive officer compensation are not considered routine matters under current securities rules. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.”
As all of the proposals described in this Proxy Statement, other than the proposal to ratify our independent registered accounting firm, are considered to be non-routine matters, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.
Vote Required
A majority of the issued and outstanding shares of Common Stock entitled to vote, properly 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 the Utah Revised Business Corporation Act, once a quorum is established, shareholder approval with respect to a particular proposal is generally obtained when the votes cast in favor of the proposal exceed the votes cast against the proposal.
Holders of shares of Common Stock are entitled to one vote at the Annual Meeting for each share of Common Stock held of record on the Record Date. The vote required for each of the proposals described in this Proxy Statement is as follows:
Proposal 1: In the election of directors, shareholders will not be allowed to cumulate their votes. Each director-nominee who receives a majority of the votes cast with respect to his or her election will be elected as a director of the Company.
Proposal 2: The advisory vote on executive compensation is non-binding. Nevertheless, we will record the number of votes cast in favor of and against the proposal and will report the voting results.
Proposal 3: The proposal to ratify the appointment of Deloitte to serve as our independent registered public accounting firm for the year ending December 31, 2020 requires that the votes cast in favor of the proposal must exceed the votes cast against the proposal.
Abstentions and broker non-votes will not affect the outcome of any proposals to be considered at the Annual Meeting; however, because the third proposal is considered a routine matter, brokerage firms may vote un-instructed shares for or against the proposal.
|
No Dissenters’ Rights of Appraisal
There are no rights of appraisal or similar dissenters’ rights with respect to any matter to be acted upon pursuant to this Proxy Statement.
|
Attending the Annual Meeting
The Annual Meeting will be online and a completely virtual meeting of shareholders due to the ongoing public health impact of the coronavirus (COVID-19) pandemic. This decision was made in light of the protocols that federal, state, and local governments have imposed and taking into account the health and safety of our shareholders, directors, members of management and employees. Conducting a virtual meeting will also allow shareholders whose travel may be restricted due to COVID-19 to participate in the meeting.
To participate in the Annual Meeting, visit www.virtualshareholdermeeting.com/MMSI2020 and enter the 16-digit control number included on your proxy card or on the voting instructions that accompanied your proxy materials. If you do not have your 16-digit control number, you will be able to access and listen to the Annual Meeting but you will not be able to vote your shares or submit questions during the Annual Meeting. If you wish to submit a question before the meeting, you may log into www.proxyvote.com and enter your 16-digit control number. Once past the login screen, click on “Question for Management,” type in your question, and click “Submit.” Alternatively, if you want to submit your question during the meeting, log into the virtual meeting platform at www.virtualshareholdermeeting.com/MMSI2020, type your question into the “Ask a Question” field, and click “Submit.”
Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints. Questions regarding personal matters, including those related to employment or product or service issues, are not pertinent to meeting matters and therefore will not be answered.
You may begin to log into the Annual Meeting platform beginning at 1:45 p.m. MDT on June 22, 2020. The Annual Meeting will begin promptly at 2:00 p.m. MDT on June 22, 2020. A list of registered shareholders of record entitled to vote shall be open to any shareholder for any purpose relevant to the Annual Meeting for ten days before the Annual Meeting, during normal business hours, at the Office of the Corporate Secretary. A list of registered shareholders as of the close of business on the Record Date will also be available for examination by the shareholders throughout the meeting at www.virtualshareholdermeeting.com/MMSI2020.
The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong Wi-Fi connection wherever they intend to participate in the meeting. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior to the start of the meeting.
If you encounter any difficulties accessing the Annual Meeting during the check-in or meeting time, please call the technical support number that will be posted on the Annual Meeting login page. Technical support will be available starting at 1:45 p.m. MDT on June 22, 2020 and through the conclusion of the meeting.
Proxy Solicitation on Behalf of the Board
The Board is soliciting proxies to provide an opportunity for all shareholders to vote, whether or not the shareholders are able to participate in the Annual Meeting or any adjournment or postponement thereof. Directors, officers and employees of the Company may solicit proxies on behalf of the Board in person, by mail, by telephone or by electronic communication. The proxy representatives of the Board will not be specially compensated for their services in this regard. In addition, the Company has retained Innisfree M&A Incorporated to assist in soliciting proxies for the Annual Meeting for a fee not to exceed $25,000. The cost of soliciting proxies will be borne by the Company.
Methods of Voting
The method of voting by proxy differs for shares of Common Stock registered directly in a shareholder’s name, considered the shareholder of record, and shares held in “street name,” which means shares held of record by a trustee or in an account at a brokerage firm, bank, dealer, or other similar organization.
Holders of Record
If the shareholder holds shares as a record holder, the shareholder may vote the shares by proxy on www.proxyvote.com, by means of the telephone (at 1-800-690-6903), by mail (by requesting a printed copy of this Proxy Statement and then voting by mail), or by participating in the Annual Meeting and voting over the Internet. Each method is discussed further below:
|
·
|
|
Voting by Mail. If a shareholder chooses to vote by mail, simply mark the proxy card mailed or transmitted to the shareholder (the Proxy) and complete, sign, date and mail it in the postage-paid envelope provided. The Proxy must be completed, signed and dated by the shareholder or the shareholder’s authorized representative.
|
|
·
|
|
Voting by Telephone. Shareholders of record can vote by phone by following the instructions on the Proxy or by calling toll-free at 1-800-690-6903. Voice prompts will instruct shareholders to vote their shares and confirm that their vote has been properly recorded.
|
|
·
|
|
Voting over the Internet. Shareholders of record can vote on the Internet by accessing the Internet at www.proxyvote.com. As with telephone voting, shareholders can confirm that their votes have been properly recorded. We provide Internet proxy voting to allow shareholders to vote their shares online, with procedures designed to ensure the authenticity and correctness of proxy vote instructions.
|
However, please be aware that shareholders must bear any costs associated with their Internet access, such as usage charges from Internet access providers and telephone companies.
|
|
·
|
|
Voting in Person. The Annual Meeting will be held entirely online, so there will be no way to vote in person at the meeting. Registered shareholders may vote over the Internet during the Annual Meeting.
|
If a shareholder votes his, her or its Proxy by telephone, the Internet or by returning the Proxy to us before the Annual Meeting, the individuals designated in the Proxy will vote as the Proxy directs. If a shareholder votes by telephone or over the Internet, the shareholder does not need to return the Proxy.
Telephone and Internet voting facilities for shareholders will be available 24 hours a day, and will close at 11:59 P.M. ET on June 21, 2020 for shares held directly and by 11:59 P.M. ET on June 18, 2020 for shares held in a Company plan.
Holders in “Street Name”
If a shareholder holds shares in “street name,” the shareholder should have received a voting instruction form from the broker, bank or other nominee holding the shares. The shareholder should follow the instructions in the voting instruction form in order to instruct your broker, bank or other nominee on how to vote your shares. The availability of telephone and Internet voting will depend on the voting process of the broker, bank or nominee.
A large number of banks and brokerage firms are participating in the Broadridge Investor Communications Solutions, Inc. (Broadridge) online program. This program provides eligible shareholders the opportunity to vote via the internet or by telephone. If a shareholder’s bank or brokerage firm is participating in Broadridge’s program, the voting form will provide instructions.
If a shareholder holds shares in “street name” and the shareholder wishes to vote at the Annual Meeting, the shareholder will need the 16-digit control number included on her, his or its proxy card or voting instruction form (if the shareholder received a printed copy of the proxy materials) or included in the email to the shareholder, if she, he or it received the proxy materials by email in order to be able to vote her, his or its shares at the Annual Meeting.
Employee Savings Plan Shares
Participants in the Company’s employee savings plans will receive a voting instruction form. Your executed form will provide voting instructions to the respective plan trustee. If no instructions are provided, the plan trustees and/or administrators for the relevant employee savings plan will vote the shares according to the provisions of the relevant employee savings plan. To allow sufficient time for voting, your voting instructions must be received by the Company by 11:59 P.M. Eastern Time on June 18, 2020. You may not vote your shares held in an employee savings plan virtually at the Annual Meeting.
Additional Information and Additional Copies of Proxy Materials
We will provide without charge to any person from whom a proxy is solicited by the Board, upon the written request of that person, a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, including the financial statements and schedules thereto (as well as exhibits thereto, if specifically requested), as amended by our Amendment No. 1 to Annual Report on Form 10-K/A.
We will generally deliver one copy of this Proxy Statement to each address where multiple record holders of our Common Stock reside, unless we have received instructions to the contrary (i.e., “householding”). Upon written or oral request, we will promptly deliver another copy of this Proxy Statement and the Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as amended by our Amendment No. 1 to Annual Report on Form 10-K/A, to any holder of our Common Stock living at a shared address where we have delivered only one copy. Shareholders who receive multiple copies of this Proxy Statement at their address and would like to request householding of their communications should contact their broker.
Requests for additional information or additional Proxy Statements should be directed to:
|
Merit Medical Systems, Inc.
Attn: Brian G. Lloyd, Corporate Secretary
1600 West Merit Parkway
South Jordan, Utah 84095
|
Other Matters
As of the date of this Proxy Statement, the Board knows of no matters to be presented for action at the Annual Meeting other than those matters described in the preceding pages. If, however, any further business should properly come before the Annual Meeting, the persons named as proxies in the accompanying form will vote on that business in accordance with their best judgment.
Shareholder Proposals for Annual Meeting 2021
If any shareholder intends to present a proposal to be considered for inclusion in our proxy materials in connection with our 2021 annual meeting of shareholders, the proposal must be in proper form (per Commission Regulation 14A, Rule 14a-8 - Shareholder Proposals) and received by our Corporate Secretary no later than January 28, 2021. Nominations of persons for election as directors must be made consistent with the provisions of our Third Amended and Restated Bylaws, including the requirement that the shareholder provide timely notice of the nomination in proper written form to our Corporate Secretary.
In accordance with the procedures set forth in our Third Amended and Restated Bylaws, shareholders who wish to submit a proposal for consideration at our 2021 annual meeting of shareholders, including a nomination for director, but who do not wish to submit a proposal for inclusion in our proxy statement, must deliver notice of the proposal to our Corporate Secretary at our principal executive offices no earlier than January 24, 2021 and no later than February 23, 2021. Such proposals must contain all information required by our Third Amended and Restated Bylaws. If the month and day of the next annual meeting is advanced or delayed by more than 30 calendar days from the month and day of the annual meeting to which this Proxy Statement relates, we will inform our shareholders of the change in a timely manner, as well as any change in the date by which proposals of shareholders must be received.
Non-GAAP Financial Measures
Although our financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and the majority of the financial measures described in this Proxy Statement are calculated in accordance with GAAP, the Board and Compensation Committee use certain non-GAAP financial measures referenced in this Proxy Statement in order to assess year-over-year performance. We believe that such non-GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of our ongoing operations and can be useful for period-over-period comparisons of such operations. Non-GAAP financial measures referenced in this Proxy Statement include:
|
·
|
|
non-GAAP net income; and
|
|
·
|
|
non-GAAP earnings per share
|
non-gaap financial measures
Non-GAAP Gross Margin: Non-GAAP gross margin is calculated by reducing GAAP cost of sales by amounts recorded for amortization of intangible assets, inventory mark-up related to acquisitions and severance.
Non-GAAP Net Income: Non-GAAP net income is calculated by adjusting GAAP net income for certain items which are deemed by Merit’s management to be outside of core operations and vary in amount and frequency among periods, such as expenses related to new acquisitions, non-cash expenses related to amortization or write-off of previously acquired tangible and intangible assets, severance expenses, expenses resulting from non-ordinary course litigation, governmental proceedings or changes in tax regulations, and debt issuance costs, as well as other items set forth in the tables below.
Non-GAAP Earnings Per Share: Non-GAAP earnings per share is defined as non-GAAP net income divided by the diluted shares outstanding for the corresponding period.
|
Our management team uses these and other non-GAAP financial measures to evaluate our profitability and efficiency, to compare operating results to prior periods, to evaluate changes in the operating results of our operating segments, and to measure and allocate financial resources internally. Our Board and Compensation Committee may also use these non-GAAP financial measures to assess the performance of certain of our NEOs. Neither our management nor our Board or Compensation Committee consider any such non-GAAP measures in isolation or as an alternative to such measures determined in accordance with GAAP.
You should consider non-GAAP measures used in this Proxy Statement in addition to, not as a substitute for, financial reporting measures prepared in accordance with GAAP. These non-GAAP financial measures generally exclude some, but not all, items that may affect our financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which items are excluded. We believe it is useful to exclude such items in the calculation of non-GAAP net income, non-GAAP earnings per share and non-GAAP gross margin (in each case, as further illustrated in the reconciliation tables below) because such amounts in any specific period may not directly correlate to the underlying performance of our business operations and can vary significantly between periods as a result of factors such as new acquisitions, non-cash expenses related to amortization of previously acquired tangible and intangible assets, unusual compensation expenses or expenses resulting from litigation,
governmental proceedings or changes in tax regulations. We may incur similar types of expenses in the future, and the non-GAAP information included in this Proxy Statement should not be viewed as a statement or indication that these types of expenses will not recur. Additionally, the non-GAAP financial measures used in this Proxy Statement may not be comparable with similarly titled measures of other companies. We urge readers to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business or results of operations.
Tables reconciling our 2019, 2018, 2017, 2016, and 2015 non-GAAP gross margin, non-GAAP net income and non-GAAP earnings per share to equivalent GAAP measures are included below:
Reconciliation of GAAP Net Income and earnings per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
Pre-Tax
|
Tax Impact (a)
|
After-Tax
|
Per Share Impact
|
GAAP net income
|
$
|
2,193
|
|
$
|
3,258
|
|
|
$
|
5,451
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles
|
|
49,707
|
|
|
(12,730)
|
|
|
|
36,977
|
|
|
0.66
|
Inventory mark-up related to acquisitions
|
|
1,122
|
|
|
(289)
|
|
|
|
833
|
|
|
0.01
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
4,963
|
|
|
(1,281)
|
|
|
|
3,682
|
|
|
0.06
|
Acquisition-related (b)
|
|
3,497
|
|
|
(743)
|
|
|
|
2,754
|
|
|
0.05
|
Medical Device Regulation expenses (c)
|
|
562
|
|
|
(98)
|
|
|
|
464
|
|
|
0.01
|
Fair value adjustment to contingent consideration (d)
|
|
(232)
|
|
|
(47)
|
|
|
|
(279)
|
|
|
0.00
|
Acquired in-process research and development
|
|
525
|
|
|
(135)
|
|
|
|
390
|
|
|
0.01
|
Impairment and other charges (e)
|
|
24,587
|
|
|
(6,329)
|
|
|
|
18,258
|
|
|
0.32
|
Amortization of intangibles
|
|
10,964
|
|
|
(2,884)
|
|
|
|
8,080
|
|
|
0.14
|
Special legal expense (f)
|
|
6,508
|
|
|
(1,675)
|
|
|
|
4,833
|
|
|
0.09
|
Other (Income) Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of long-term debt issuance costs
|
|
821
|
|
|
(211)
|
|
|
|
610
|
|
|
0.01
|
Tax expense related to restructuring (g)
|
|
—
|
|
|
93
|
|
|
|
93
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
|
$
|
105,217
|
|
$
|
(23,071)
|
|
|
$
|
82,146
|
|
$
|
1.46
|
|
|
|
|
|
Diluted shares
|
|
|
|
56,235
|
Reconciliation of GAAP Net Income and earnings per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
|
Pre-Tax
|
Tax Impact (a)
|
After-Tax
|
Per Share Impact
|
GAAP net income
|
$
|
49,519
|
|
$
|
(7,502)
|
|
|
$
|
42,017
|
|
$
|
0.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles
|
|
31,795
|
|
|
(8,123)
|
|
|
|
23,672
|
|
|
0.43
|
Inventory mark-up related to acquisitions
|
|
5,233
|
|
|
(1,347)
|
|
|
|
3,886
|
|
|
0.07
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
920
|
|
|
(205)
|
|
|
|
715
|
|
|
0.01
|
Acquisition-related (b)
|
|
7,584
|
|
|
(1,679)
|
|
|
|
5,905
|
|
|
0.11
|
Fair value adjustment to contingent consideration (d)
|
|
(698)
|
|
|
(21)
|
|
|
|
(719)
|
|
|
(0.01)
|
Acquired in-process research and development
|
|
644
|
|
|
(166)
|
|
|
|
478
|
|
|
0.01
|
Impairment and other charges (e)
|
|
813
|
|
|
(209)
|
|
|
|
604
|
|
|
0.01
|
Amortization of intangibles
|
|
9,438
|
|
|
(2,503)
|
|
|
|
6,935
|
|
|
0.12
|
Special legal expense (f)
|
|
5,645
|
|
|
(1,453)
|
|
|
|
4,192
|
|
|
0.08
|
Other (Income) Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of long-term debt issuance costs
|
|
804
|
|
|
(207)
|
|
|
|
597
|
|
|
0.01
|
Tax expense related to tax reform (h)
|
|
—
|
|
|
3,005
|
|
|
|
3,005
|
|
|
0.06
|
|
|
|
|
|
Non-GAAP net income
|
$
|
111,697
|
|
$
|
(20,410)
|
|
|
$
|
91,287
|
|
$
|
1.69
|
|
|
|
|
|
Diluted shares
|
|
|
|
53,931
|
Reconciliation of GAAP Net Income and earnings per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
Pre-Tax
|
Tax Impact (a)
|
After-Tax
|
Per Share Impact
|
GAAP net income
|
$
|
35,881
|
|
$
|
(8,358)
|
|
|
$
|
27,523
|
|
$
|
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles
|
|
20,705
|
|
|
(7,550)
|
|
|
|
13,155
|
|
|
0.26
|
Inventory mark-up related to acquisitions
|
|
3,400
|
|
|
(1,253)
|
|
|
|
2,147
|
|
|
0.04
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
2,185
|
|
|
(847)
|
|
|
|
1,338
|
|
|
0.03
|
Acquisition-related (b)
|
|
6,648
|
|
|
(2,048)
|
|
|
|
4,600
|
|
|
0.09
|
Fair value adjustment to contingent consideration (d)
|
|
(298)
|
|
|
116
|
|
|
|
(182)
|
|
|
(0.00)
|
Acquired in-process research and development
|
|
12,136
|
|
|
(97)
|
|
|
|
12,039
|
|
|
0.24
|
Impairment and other charges (e)
|
|
988
|
|
|
(70)
|
|
|
|
918
|
|
|
0.02
|
Amortization of intangibles
|
|
6,111
|
|
|
(2,324)
|
|
|
|
3,787
|
|
|
0.07
|
Special legal expense (f)
|
|
12,616
|
|
|
(4,908)
|
|
|
|
7,708
|
|
|
0.15
|
Other (Income) Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on bargain purchase (i)
|
|
(11,039)
|
|
|
—
|
|
|
|
(11,039)
|
|
|
(0.22)
|
Amortization of long-term debt issuance costs
|
|
685
|
|
|
(267)
|
|
|
|
418
|
|
|
0.01
|
Tax expense related to tax reform (h)
|
|
—
|
|
|
1,855
|
|
|
|
1,855
|
|
|
0.04
|
|
|
|
|
|
Non-GAAP net income
|
$
|
90,018
|
|
$
|
(25,751)
|
|
|
$
|
64,267
|
|
$
|
1.28
|
|
|
|
|
|
Diluted shares
|
|
|
|
50,101
|
Reconciliation of GAAP Net Income and earnings per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
Pre-Tax
|
Tax Impact (a)
|
After-Tax
|
Per Share Impact
|
GAAP net income
|
$
|
25,386
|
|
$
|
(5,265)
|
|
|
$
|
20,121
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles
|
|
15,122
|
|
|
(5,592)
|
|
|
|
9,530
|
|
|
0.21
|
Inventory mark-up related to acquisitions
|
|
2,990
|
|
|
(1,163)
|
|
|
|
1,827
|
|
|
0.04
|
Severance
|
|
56
|
|
|
(22)
|
|
|
|
34
|
|
|
0.00
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
10,271
|
|
|
(3,878)
|
|
|
|
6,393
|
|
|
0.14
|
Acquisition-related (b)
|
|
4,503
|
|
|
(1,448)
|
|
|
|
3,055
|
|
|
0.07
|
Fair value adjustment to contingent consideration (d)
|
|
61
|
|
|
(24)
|
|
|
|
37
|
|
|
0.00
|
Acquired in-process research and development
|
|
461
|
|
|
(179)
|
|
|
|
282
|
|
|
0.01
|
Impairment and other charges (e)
|
|
100
|
|
|
(38)
|
|
|
|
62
|
|
|
0.00
|
Amortization of intangibles
|
|
4,167
|
|
|
(1,595)
|
|
|
|
2,572
|
|
|
0.06
|
Special legal expense (f)
|
|
1,016
|
|
|
(395)
|
|
|
|
621
|
|
|
0.01
|
Other (Income) Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of long-term debt issuance costs
|
|
952
|
|
|
(370)
|
|
|
|
582
|
|
|
0.01
|
|
|
|
|
|
Non-GAAP net income
|
$
|
65,085
|
|
$
|
(19,969)
|
|
|
$
|
45,116
|
|
$
|
1.01
|
|
|
|
|
|
Diluted shares
|
|
|
|
44,862
|
Reconciliation of GAAP Net Income and earnings per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
Pre-Tax
|
Tax Impact (a)
|
After-Tax
|
Per Share Impact
|
GAAP net income
|
$
|
31,200
|
|
$
|
(7,398)
|
|
|
$
|
23,802
|
|
$
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles
|
|
11,255
|
|
|
(3,779)
|
|
|
|
7,476
|
|
|
0.17
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
2,934
|
|
|
(1,141)
|
|
|
|
1,793
|
|
|
0.04
|
Acquisition-related (b)
|
|
2,305
|
|
|
(897)
|
|
|
|
1,408
|
|
|
0.03
|
Fair value adjustment to contingent consideration (d)
|
|
80
|
|
|
(31)
|
|
|
|
49
|
|
|
0.00
|
Acquired in-process research and development
|
|
1,000
|
|
|
(389)
|
|
|
|
611
|
|
|
0.01
|
Impairment and other charges (e)
|
|
141
|
|
|
(55)
|
|
|
|
86
|
|
|
0.00
|
Amortization of intangibles
|
|
3,563
|
|
|
(1,359)
|
|
|
|
2,204
|
|
|
0.05
|
Termination fee (j)
|
|
800
|
|
|
(311)
|
|
|
|
489
|
|
|
0.01
|
Other (Income) Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of long-term debt issuance costs
|
|
987
|
|
|
(384)
|
|
|
|
603
|
|
|
0.01
|
|
|
|
|
|
Non-GAAP net income
|
$
|
54,265
|
|
$
|
(15,744)
|
|
|
$
|
38,521
|
|
$
|
0.87
|
|
|
|
|
|
Diluted shares
|
|
|
|
44,511
|
|
a.
|
|
Reflects the tax effect associated with pre-tax income and the tax effect of non-GAAP adjustments based on statutory tax rates within the applicable markets with adjustments.
|
|
b.
|
|
Represents transaction and certain direct integration costs, including travel, related to acquisitions.
|
|
c.
|
|
Represents incremental expenses incurred to comply with the Medical Device Regulation (MDR) in Europe.
|
|
d.
|
|
Represents changes in the fair value of contingent consideration liabilities and contingent receivables associated with prior acquisitions.
|
|
e.
|
|
Represents impairment charges related to abandoned patents, other long-term assets, certain acquired intangible assets, and in 2019 the option to purchase NinePoint Medical, Inc. (“NinePoint”) and the outstanding loan balance to NinePoint.
|
|
f.
|
|
Represents costs incurred in responding to an inquiry from the U.S. Department of Justice.
|
|
g.
|
|
Represents net tax expense related to non-recurring tax withholdings in connection with restructuring of certain international subsidiaries.
|
|
h.
|
|
Represents net tax impact related to the enactment of the Tax Cuts and Jobs Act.
|
|
i.
|
|
Represents the gain on bargain purchase realized from the acquisition of the critical care division of Argon Medical Devices, Inc.
|
|
j.
|
|
Represents costs associated with the termination of our agreement with a third-party contract manufacturer in Tijuana, Mexico
|
Reconciliation of Reported Gross Margin (GAAP)
to Non-GAAP Gross Margin (Non-GAAP)
(Unaudited, as a percentage of reported revenue)
|
|
|
|
|
|
|
Year Ended
|
|
December 31,
|
|
2019
|
2018
|
2017
|
2016
|
2015
|
Reported Gross Margin
|
43.5%
|
44.7%
|
44.8%
|
43.9%
|
43.5%
|
|
|
|
|
|
|
Add back impact of:
|
|
|
|
|
|
Amortization of intangibles
|
5.0%
|
3.6%
|
2.8%
|
2.5%
|
2.1%
|
Inventory mark-up related to acquisitions
|
0.1%
|
0.6%
|
0.5%
|
0.5%
|
—
|
Severance
|
—
|
—
|
—
|
0.0%
|
—
|
Non-GAAP Gross Margin
|
48.6%
|
48.9%
|
48.1%
|
46.9%
|
45.6%
|
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of
information. Vote by 11:59 P.M. ET on 06/21/2020 for shares held directly and by 11:59
P.M. ET on 06/18/2020 for shares held in a Plan. Have your proxy card in hand
when you access the web site and follow the instructions to obtain your records and to
create an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET
on 06/21/2020 for shares held directly and by 11:59 P.M. ET on 06/18/2020 for shares
held in a Plan. Have your proxy card in hand when you call and then follow the
instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have
provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood,
NY 11717.
|
|
|
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
☒
|
KEEP THIS PORTION FOR YOUR RECORDS
|
|
|
DETACH AND RETURN THIS PORTION ONLY
|
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
The Board of Directors recommends you vote FOR the following:
|
For All
|
Withhold All
|
For All Except
|
To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
|
|
|
☐
|
☐
|
☐
|
|
|
|
|
|
|
|
1.
|
Election of Directors
|
|
|
|
|
|
|
|
|
|
|
01) Lonny J. Carpenter 02) David K. Floyd 03) James T. Hogan
|
|
|
|
The Board of Directors recommends you vote FOR proposals 2 and 3.
|
2.
|
Proposal to approve, on an advisory basis, the compensation of the Company's named executive officers.
|
For Against Abstain
☐☐☐
|
|
|
|
3.
|
Ratification of the appointment of Deloitte & Touche LLP to serve as the independent registered public accounting firm of the Company for the year ending December 31, 2020.
|
☐☐☐
|
|
|
|
|
|
|
NOTE: To transact such other business as may properly come before the meeting or any postponement or adjournment of the meeting.
|
|
|
|
|
Please sign exactly as your name(s) appear(s) hereon. When signing as
attorney, executor, administrator, or other fiduciary, please give full
title as such. Joint owners should each sign personally. All holders must
sign. If a corporation or partnership, please sign in full corporate or
partnership name by authorized officer.
|
|
|
|
|
|
|
|
|
|
Signature [PLEASE SIGN WITHIN BOX]
|
Date
|
|
Signature (Joint Owners)
|
Date
|
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report is/are available at www.proxyvote.com.
MERIT MEDICAL SYSTEMS, INC.
Annual Meeting of Shareholders
June 22, 2020, 2:00 PM (Mountain Time)
This proxy is solicited by the Board of Directors
The undersigned hereby appoints Fred P. Lampropoulos, Brian G. Lloyd and Raul Parra and each of them, as proxies, with full power of substitution, and hereby authorizes each of 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 30, 2020 at the Annual Meeting of Shareholders (the “Annual Meeting”) to be held virtually via live webcast at www.virtualshareholdermeeting.com/MMSI2020, on Monday, June 22, 2020, at 2:00 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 and Proxy Statement, receipt of which is hereby acknowledged.
This proxy card, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. The undersigned shareholder may revoke this proxy card at any time before it is voted at the Annual Meeting by executing and returning a proxy card bearing a later date by mail, by voting via the Internet, 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 card being revoked, or by voting the Common Stock covered thereby in person at the Annual Meeting.
If no instructions are indicated in this proxy card for the applicable proposal, the shares of the undersigned will be voted: FOR the election of each of the three director nominees identified in the accompanying Notice of 2020 Annual Meeting of Shareholders and Proxy Statement; FOR the non-binding resolution to approve the compensation of the Company’s named executive officers; FOR the ratification of the appointment of Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2020; and in the discretion of the proxies upon such other matters as may properly come before the Annual Meeting.
Continued and to be signed on reverse side.
Merit Medical Systems (NASDAQ:MMSI)
Historical Stock Chart
From Aug 2024 to Sep 2024
Merit Medical Systems (NASDAQ:MMSI)
Historical Stock Chart
From Sep 2023 to Sep 2024