UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

[x]

Definitive Proxy Statement

[ ]

Definitive Additional Materials

[ ]

Soliciting Material under §240.14a-12

Merit Medical Systems, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[x]

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

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(2)

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(3)

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Title fee paid:

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

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2021 NOTICE OF

Annual Meeting and

Proxy Statement

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Fred P. Lampropoulos

Chair of the Board of Directors, President, and

Chief Executive Officer

April 30, 2021

Dear Shareholders:

It is my pleasure to invite you to participate in the 2021 Annual Meeting of Shareholders (including any adjournment of the meeting, the Annual Meeting) of Merit Medical Systems, Inc. (Merit or the Company), which will be held on Thursday, June 17, 2021, at 2:00 p.m. (Mountain Time). In light of the continuing public health impact of the coronavirus COVID-19 pandemic, and in order to help protect the health and well-being of our shareholders and employees, the Annual Meeting will be held virtually, via live webcast, at www.virtualshareholdermeeting.com/MMSI2021. Shareholders will be able to attend the Annual Meeting, and submit questions and vote their shares during the Annual Meeting, from any location that has internet connectivity. There will be no physical in-person meeting; however, we hope you will join with us virtually. For further information about how to attend the Annual Meeting via live webcast, and how to submit questions and vote your shares during the live webcast, please refer to the accompanying Proxy Statement or the Notice Regarding the Availability of Proxy Materials which was mailed to you (the Notice).

2020 represented a year of challenges, opportunities and accomplishments for our company.  Along with the rest of the world, we faced a global pandemic of catastrophic scope.  We focused our efforts on the health and safety of our employees and the continued operation of our business, then found opportunities to continue the development of our business, consistent with our core values.  We developed and have begun implementation of our Foundations for Growth program, which sets a clear course of operating and financial objectives which we believe will carry us forward to new heights.  We believe our operating and financial results for 2020 were impressive on their own merits, and particularly remarkable given the challenges we faced.  We look forward to the opportunity to discuss these achievements with you at the Annual Meeting.

We hope you will participate in the Annual Meeting. The Company is providing access to the proxy materials for the Annual Meeting via the internet. Accordingly, you can access the proxy materials and vote prior to the Annual Meeting by visiting www.proxyvote.com. Instructions for accessing the proxy materials and voting are described below and in the Notice. Please review the proxy materials prior to voting. Your vote is important to all of us at Merit. I look forward to your virtual attendance at the Annual Meeting.

Sincerely,

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GUIDE TO PROXY STATEMENT

2

Notice of 2021 Annual Meeting of Shareholders

Purpose of these materials:

On behalf of our Board of Directors, we are making these materials available to you in connection with our solicitation of proxies for our Annual Meeting.  You are receiving this communication because you hold shares of Merit’s stock.

What we need from you:

Please read these materials and submit your vote and proxy by telephone, Internet or, if you received your materials by mail, by completing and returning your proxy card or voting instructions.  We ask that you vote in advance via one of the above means as soon as practicable.

More information:

The Notice, this Proxy Statement and the accompanying form of proxy are first being mailed or made available to our shareholders on or about May 3, 2021.

This Proxy Statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (Annual Report on Form 10-K) are available online at: www.proxyvote.com. You may also request a paper copy of the Annual Report on Form 10-K, including the related financial statements and schedules, free of charge, by writing to our Corporate Secretary (Brian G. Lloyd) at the address below:

Merit Medical SYSTEMS, INC.

Attn: Corporate Secretary

1600 West Merit Parkway

South Jordan, UT 84095

3

Proxy Summary

7

Corporate Governance and Related Matters

7

Proposal 1 – Election of Directors

11

Directors Whose Terms of Office Continue

17

Our Board of Directors

33

Director Compensation

35

Related Person Matters

37

Equity Compensation Plans

37

Proposal 2 – Approve amendment to increase the number of shares authorized under the 2018 Long-Term Incentive Plan

44

Proposal 3 – Approve amendment to increase the number of shares authorized under the 1996 Employee Stock Purchase Plan

49

Executive Compensation and Related Matters

49

Executive Summary

56

Compensation Discussion and Analysis

72

Proposal 4 Advisory Vote on Executive Compensation

73

Executive Compensation Tables

73

Summary Compensation Table

75

Grants of Plan-Based Awards

76

Outstanding Equity Awards at Year End

77

Option Exercises and Stock Awards Vested

77

Non-Qualified Deferred Compensation

78

Potential Payments Upon Termination or Change in Control

84

CEO Pay Ratio

85

Audit Matters

85

Audit Committee Report

86

Proposal 5 Ratification of Appointment of Independent Registered Public Accounting Firm

87

Stock Ownership and Trading

87

Principal Holders of Voting Securities

89

Other Proxy Information

89

Information About the Annual Meeting and Voting

94

Other Matters

94

Shareholder Proposals for Annual Meeting 2022

95

Non-GAAP Financial Measures


NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS

When

How to Vote

June 17, 2021

2:00 P.M. (Mountain Time)

Even if you attend the Annual Meeting, you can vote in advance using a method below. Phone and Internet voting will close at 11:59 P.M. Eastern Time on June 16, 2021 but voting by Internet will open again during the meeting (see below). Voting instructions for shares held in the Company’s 401(k) Profit Sharing Plan must be received by 11:59 P.M. Eastern Time on June 14, 2021 and such shares may not be voted during the meeting. Holders in “street name” must instruct their broker or nominee.  

Where

To participate in the Annual Meeting, go to: www.virtualshareholdermeeting.com/MMSI2021, enter the 16-digit control number found on your proxy card or Notice, and follow the instructions on the website.

Due to the ongoing public health impact of the COVID-19 pandemic, the Annual Meeting will be held in virtual format only. 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, employees and members of management. Only shareholders of record as of the close of business on April 20, 2021 (the Record Date) will be able to participate in and vote at the Annual Meeting.

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By Phone

call

1-800-690-6903

(U.S. and Canada)

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by Mail

(cast your ballot, sign proxy card and post)

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By Internet

Before the meeting go to:

www.proxyvote.com

During the meeting go to: www.virtualshareholdermeeting.com/MMSI2021.

Items of Business

Proposals

Board’s Recommendation

Vote Required / Broker Discretionary Voting Allowed?

More Information

1

Elect four directors, each to serve until 2024

FOR each nominee

Majority* / No

Page 7

2

Approve amendment to increase the number of shares authorized under the 2018 Long-Term Incentive Plan

FOR

Majority* / No

Page 37

3

Approve amendment to increase the number of shares authorized under the 1996 Employee Stock Purchase Plan

FOR

Majority */ No

Page 44

4

Non-binding, advisory vote to approve named executive officer compensation (“Say on Pay”)

FOR

Majority / No

Page 72

5

Ratify appointment of independent registered public accounting firm (Deloitte & Touche)

FOR

Majority* / Yes

Page 86

* Votes cast in favor of the proposal must exceed the votes cast against the proposal. Majority vote required for each director nominee.

We will also conduct such other business as may properly come before the Annual Meeting.

Your Vote is Important to Our Future

We strongly encourage you to read the Proxy Statement and then promptly vote your shares as instructed herein. See “Other Proxy Information” beginning on page 89 for additional information.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 17, 2021

The Company’s Notice, Proxy Statement and Annual Report on Form 10-K are available at: www.proxyvote.com.

By Order of the Board of Directors,

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Brian G. Lloyd

Chief Legal Officer and Corporate Secretary

April 30, 2021

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PROXY STATEMENT SUMMARY

PROXY STATEMENT SUMMARY

This Proxy Statement is provided in connection with the solicitation of proxies by the Board of Directors of Merit Medical Systems, Inc. (Board or Board of Directors) for the Annual Meeting of Shareholders to be held on June 17, 2021, at 2:00 p.m. Mountain Time (Annual Meeting or 2021 Annual Meeting). In this Proxy Statement, we may refer to Merit Medical Systems, Inc. as the Company, Merit, we, us, or our.

The following summary highlights information contained elsewhere in this Proxy Statement. Before Voting, please review the entire Proxy Statement and the Company’s Annual Report on Form 10-K.

PROPOSAL 1: Election of Four Nominees for Director (See page 7)

Board Recommendation

Vote FOR each nominee

Governance Highlights

The Board believes good governance is integral to achieving long-term value and is committed to governance policies and practices that benefit the Company and our shareholders. This belief is manifest in:

Increased director diversity and the number of independent directors on the Board
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 an executive compensation program, including long-term performance stock units and cash bonuses, to increase the alignment of executive compensation with the Company’s achievement of Board-approved performance measures
Extended share ownership requirements for directors to include our Chief Executive Officer
Strong lead independent director
Majority voting for all directors
Annual Board and committee evaluation process
Director retirement policy
Regular executive sessions of independent directors
Robust code of ethics
No shareholder rights plan (“poison pill”) or dual capitalization structure
Annual “say-on-pay” advisory votes

You are asked to vote on the election of four nominees to serve on the Board until 2024.

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PROXY STATEMENT SUMMARY

The following table provides summary information about each director nominee (first four), as well as each director whose term of office will continue after the 2021 Annual Meeting.

Director

Term

Board Committees

Name, Primary Occupation

Age

Since

Expires

Independent

A

C

F

ESG

O

Fred P. Lampropoulos

Chair, President & CEO of Merit

71

1987

(1)

No

A. Scott Anderson

President & CEO of Zions Bank

74

2011

(1)

Yes

Lynne N. ward

Former Executive Director of my529 (formerly Utah Educational Savings Plan)

62

2019

(1)

Yes

STEPHEN C. EVANS

Founder, Chairman & CEO of Flag Bridge Global Solutions, LLC; Rear Admiral (Ret.) and Former Special Advisor to the Commander, U.S. Navy

57

N/A

(1)

Yes

(2)

(2)

(2)

(2)

(2)

Jill D. Anderson

Co-founder of Cianna Medical; Served as Vice President, Oncology Services, for Lehigh Valley Hospital

61

2019

2022

No

THOMAS J. GUNDERSON

Retired Medtech Analyst at Piper Jaffray

70

2017

2022

Yes

F. Ann Millner, Ed.D.

Regents Professor of Health Administrative Services at Weber State Univ.

69

2015

2022

Yes

Lonny J. Carpenter

Former Group President, Stryker Corporation

59

2020

2023

Yes

David K. Floyd

Former Group President, Stryker Corporation

60

2020

2023

Yes

James T. Hogan

Former President, Latin America, of Medtronic Inc.

64

2020

2023

Yes

●: Committee Chair

A: Audit Committee

F: Finance Committee

O: Operating Committee

●: Committee Member

C: Compensation and Talent Development Committee

ESG: Environmental, Social and Governance Committee

(1) If elected at the Annual Meeting, Mr. Lampropoulos, Mr. Anderson, Ms. Ward and Mr. Evans would serve terms expiring in 2024.
(2) If Mr. Evans is elected at the Annual Meeting, the Board will determine his committee assignments.

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PROXY STATEMENT SUMMARY

Selected 2020 Highlights

 Achieved revenues of approximately $964 million
Achieved record cash flows from operating activities of approximately $165 million
Implemented Company-wide initiatives through our Foundations for Growth program to reduce operating expenses and increase profitability
Prioritized reduction of environmental footprint by continuing to implement programs to reduce waste, conserve resources and improve the areas where we do business
Cumulative total return on our common stock, no par value (Common Stock) from December 31, 2015 to December 31, 2020 of approximately 199% (1)
(1)
Reflects five-year cumulative total return of our Common Stock, as reported on the Nasdaq Global Select Market System (Nasdaq) for the period from December 31, 2015 to December 31, 2020. Past results are not necessarily an indicator of future results.

Access and Review

For more complete information about our 2020 operations and financial performance, see our Annual Report on Form 10-K.

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PROXY STATEMENT SUMMARY

PROPOSAL 2: Approval of Amendment to the 2018 Long-Term Incentive Plan to Increase the Number of Shares Authorized for Issuance Thereunder by 3,000,000 Shares (See page 37)

Board Recommendation

Vote FOR this proposal

PROPOSAL 3: Approval of Amendment to the 1996 Employee Stock Purchase Plan to Increase the Number of Shares Authorized for Issuance Thereunder by 100,000 Shares (See page 44)

Board Recommendation

Vote FOR this proposal

PROPOSAL 4: Advisory Vote on Executive Compensation (Say-On-Pay) (See page 72)

Board Recommendation

Vote FOR this proposal

Consistent with our strong interest in shareholder engagement and our pay-for-performance approach, the Compensation and Talent Development Committee of our Board (Compensation Committee) has continued to refine our executive compensation program to encourage alignment between the interests of our executives and shareholders. Shareholders have shown strong support for our executive compensation program, with 95% of shareholders represented at our 2020 annual meeting voting in favor of it.

At our 2018 annual meeting of shareholders, our shareholders approved the adoption of the Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan (2018 Incentive Plan), which provides for the issuance of up to 3,100,000 shares of our Common Stock (6,100,000 shares if Proposal 3 is approved) pursuant to the terms and conditions of the plan. During 2018, our Board amended the 2018 Incentive Plan to establish minimum vesting periods of not less than one year for awards granted under the plan.

During 2020, the Compensation Committee implemented a program of awarding performance-based restricted stock units under the provisions of the 2018 Incentive Plan, which ties a significant portion of executive equity compensation to the achievement of operating cash flow metrics, adjusted for the performance of our stock relative to the Russell 2000 market index.

We ask that our shareholders approve, on an advisory basis, the compensation of our Named Executive Officers (NEOs). For additional information regarding our executive compensation practices, see “Compensation Discussion and Analysis” in this Proxy Statement.

PROPOSAL 5: Ratify Appointment of Independent Registered Public Accounting Firm (See page 86)

Board Recommendation

Vote FOR ratification

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CORPORATE GOVERNANCE AND RELATED MATTERS

CORPORATE GOVERNANCE

AND RELATED MATTERS

Governance Highlights

The Board believes good governance is integral to achieving long-term value and is committed to governance policies and practices that benefit the Company and our shareholders. This belief is manifest in:

Increased director diversity and number of independent directors on the Board
Enhanced oversight of sustainable business practices
Implementation of an executive compensation program, including long-term performance stock units and cash bonuses, designed to align executive compensation with Company performance
Extended share ownership requirements for directors to include our Chief Executive Officer
Restrictions on short-term trading, short sales, option trading and hedging transactions by our officers, directors and other designated employees.
Strong and active lead independent director
Majority voting for all directors
Annual Board and committee evaluation processes
Director retirement policy
Regular executive sessions of independent directors
Robust code of ethics
No shareholder rights plan (“poison pill”) or dual class capitalization structure
Annual “say-on-pay” advisory votes

Proposal No. 1: Election of Directors

Board Recommendation

The Board unanimously recommends a vote FOR each of the four director nominees listed below

At the Annual Meeting, four directors will be elected to serve until our 2024 Annual Meeting of Shareholders and until their successors are duly elected and qualified. If any of the below nominees become unavailable to serve, proxies solicited by this Proxy Statement will be voted for other persons designated by the Board in their stead.

Classification of Board of Directors

Our Amended and Restated Articles of Incorporation (Articles of Incorporation) provide for a classified, or “staggered,” board of directors. Our Board is divided into three classes, with directors in each class serving a three-year term. Approximately one-third of our directors’ terms expire at each annual meeting of shareholders. Based upon the existing classification of the Board, the terms of Fred P. Lampropoulos, A. Scott Anderson and Lynne N. Ward are scheduled to expire in connection with our Annual Meeting.

Size of the Board of Directors

The Board currently consists of nine directors. Our Third Amended and Restated Bylaws (Bylaws) permit the Board to set the number of directors to a number not less than three and not more than eleven.  In April 2021, the Board increased the size of the Board to ten directors, conditioned upon the election of Rear Admiral (Ret.) Stephen C. Evans to the Board at the Annual Meeting.

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CORPORATE GOVERNANCE AND RELATED MATTERS

Nominees for Election as Directors

Our Board and its Environmental, Social and Governance Committee (ESG Committee) believes that each of the following nominees possesses the experience and qualifications that directors of the Company should possess, as described in detail below, and that the experience and qualifications of each nominee complement the experience and qualifications of the other directors of the Company.

The experience and qualifications of each nominee, including information regarding the specific experience, qualifications, attributes and skills that led the Board and the ESG Committee to conclude that he or she should be nominated to serve as a director of the Company, in light of our business and structure, are set forth below:

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FRED P. Lampropoulos

Chair, President,

Chief Executive Officer

Age: 71

Director Since: July 1987

Committees: Operating

Other Public Boards: None

Term Expires: 2021

Career Highlights

Chair of the Board, Chief Executive Officer (CEO) and President of the Company since its formation in 1987
Chair of the Board and President of Utah Medical Products, Inc. (medical device manufacturer), 1983 to 1987
Filed more than 300 domestic and international patents and applications on medical devices
Serves on multiple community and advisory boards
Recipient of numerous community and industry awards, including the 2019 Salt Lake Chamber of Commerce “Giant in our City” and 2003 and 2018 Utah Governor’s Medal for Science and Technology

Qualifications of Particular Relevance to Merit

The Board believes the Company benefits immensely from Mr. Lampropoulos’ experience as founder, President and CEO. He plays an essential role in communicating the expectations, advice, concerns and encouragement of the Board to our employees. Mr. Lampropoulos has a deep knowledge and understanding of the Company, as well as the industry and markets in which our products compete. Mr. Lampropoulos also performs an essential function as the Chair of the Board, providing decisive leadership and direction to the activities and deliberations of the Board. The Board also believes Mr. Lampropoulos’ leadership, drive and determination are significant factors in our growth and development and continue to be tremendous assets to the Company and its shareholders.

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CORPORATE GOVERNANCE AND RELATED MATTERS

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A. Scott Anderson

Lead Independent Director

Age: 74

Director Since: November 2011

Committees: Compensation (Chair); ESG

Other Public Boards: None

Education: B.A. (philosophy, economics), Columbia University;

M.S. (economics, international studies), Johns Hopkins University

Term Expires: 2021

Career Highlights

President and CEO of Zions First National Bank (145-year old commercial bank based in the Intermountain West U.S.), 1990 to present
Vice-Chairman, American Bankers Association, 2019 to present
Member of Board of Trustees of Intermountain Healthcare (integrated healthcare system in Utah and Idaho), 2005 to present (Chair, 2012 to 2018)
Director of the Federal Reserve Bank of San Francisco (Salt Lake City Branch), 2003 to 2008

Qualifications of Particular Relevance to Merit

Mr. Anderson contributes to the Board’s deliberations more than 40 years of experience in the banking and financial services industries. The Board believes Mr. Anderson provides insight regarding national and international financial and credit markets, as well as lending practices, which are valuable as we continue to implement our growth strategy. Mr. Anderson also contributes extensive business and corporate governance experience to the strategic planning and operational discussions of the Board. Mr. Anderson’s business and corporate governance experience have been instrumental in the deliberations of the Compensation Committee, which he chairs, the refinement of our executive compensation practices and the enhancement of our human resource and talent development efforts. The Board also recognizes the valuable service Mr. Anderson provides to the Company through his service as Lead Independent Director.

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CORPORATE GOVERNANCE AND RELATED MATTERS

A PERSON SMILING FOR THE CAMERA  DESCRIPTION AUTOMATICALLY GENERATED WITH LOW CONFIDENCE

LYNNE N. WARD

Independent Director

Age: 62

Director Since: August 2019

Committees: Audit (Chair); Finance (Chair); ESG

Other Public Boards: None

Education: B.S. University of Utah (Accounting); Certified Public Accountant

Term Expires: 2021

Career Highlights

Executive Director, my529 (formerly known as the Utah Educational Savings Plan), offering municipal fund securities, 2004 to 2019. Underlying investments were with Vanguard, Dimensional, PIMCO, Sallie Mae Bank and U.S. Bank.
Member of the University of Utah’s Investment Advisory Committee, 2018 to present
Member of the Board of Directors of the Blue Healthcare Bank, 2007 to 2009
Member of the Board of Directors of Stampin’ Up!, 2010 to 2016
Director, National Association of Corporate Directors (Utah Chapter), 2017 to present
Walker Institute at Weber State University board of directors, 2012 to present
Senior leader and advisor to Utah governors Olene S. Walker and Michael O. Leavitt
Senior leader for Utah state government’s central accounting office and Utah State Auditor’s Office

Qualifications of Particular Relevance to Merit

Ms. Ward demonstrated her diverse skills by creating and leading my529’s rapid growth of $950 million to $14 billion assets under management. The Board believes her high standards, strategic foresight and business development fueled the growth. Her cost management, and investment and marketing innovations of a highly regulated product led to year-over-year Gold ratings from Morningstar. The Board believes Ms. Ward has strong career experiences, including financial oversight capabilities and leadership of a rapidly growing organization. The Board believes her contributions will strengthen the Company’s strategic direction while encouraging operational excellence. The Board also recognizes the valuable perspective and significant service Ms. Ward provides to the Company as Chair of the Audit Committee.

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CORPORATE GOVERNANCE AND RELATED MATTERS

PICTURE OF STEPHEN EVANS  DESCRIPTION AUTOMATICALLY GENERATED WITH LOW CONFIDENCE

REAR ADMIRAL (RET.) STEPHEN C. EVANS

Independent Director

Age: 57

New Nominee: No prior service with the Company.

Other Public Boards: Alarm.com Holdings, Inc.

Education: M.A., U.S. Naval War College (National Security Affairs; B.A., The Citadel

Career Highlights

Served in the United States Navy, most recently as Special Advisor to the Commander, Naval Operations, before retiring in 2020. During more than 20 years of service in the United States Navy, Admiral Evans held a variety of leadership positions, including Senior Advisor, Deputy U.S. Military, NATO Military Committee; Commander, George H. W. Bush Carrier Strike Group; and Commander, Naval Service Training Command.
Served on diplomatic missions in over 64 countries, delivering results in international diplomacy and military relations to establish enduring, productive global partnerships.
Commanded U.S. naval forces in six operational theaters.
Served in a senior strategic advisory role to the 75th Secretary of the Navy.
Represented the U.S. in deliberations and actions of NATO, providing counsel to Heads of State in Europe and around the world.

Qualifications of Particular Relevance to Merit

Admiral Evans possesses extensive experience in handling complex, international relationships. His prior leadership experiences, particularly within the last two decades, involved extensive cybersecurity oversight, and he has broad experience in anticipating and identifying cyber risks and digital vulnerabilities. Admiral Evans’ cybersecurity experience is of particular importance to the Company as we seek to secure our information technology and build secure and effective information systems and to assess and mitigate potential cybersecurity risk. Admiral Evans has extensive insight on geo-political matters, and the Board believes that together with his experience in handling global partnerships, he can be a valuable leader within the Company as it seeks to expand its operations and sales efforts across the globe.

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CORPORATE GOVERNANCE AND RELATED MATTERS

Directors Whose Terms of Office Continue

In its regular discussions regarding Board composition, our ESG Committee works with the Board to determine the appropriate mix of professional experience, areas of expertise, educational background and other qualifications that are particularly desirable for our directors to possess in light of our current and future business strategies.

The Board believes that its current members have the right combination of experience and qualifications to continue to lead the Company to success. Information regarding the specific experience, qualifications, attributes and skills that led the Board and the ESG Committee to conclude that each continuing director should serve on the Board are set forth below:

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JILL D. ANDERSON

Director

Age: 61

Director Since: January 2019

Committees: Finance

Other Public Boards: None

Education: B.A. (finance), Temple University; M.B.A., Temple University

Term Expires: 2022

Career Highlights

Non-Executive Director of OncoRes Medical Ltd. Pty (a privately-owned company engaged in developing intraoperative imaging technology to provide surgeons with real-time assessment of tissue microstructure), 2019 to present
Fellow, National Association Corporate Directors
President, Chief Executive Officer and Director of Cianna Medical, Inc. (Cianna Medical) from January 2008 until the Company’s acquisition of Cianna Medical in November 2018
President of BioLucent, Inc. from May 2001 to September 2007
Previously served on the Board of Directors for Mammoplan LLC, and Solis Women’s Health

Qualifications of Particular Relevance to Merit

Ms. Anderson is a healthcare executive with more than 20 years of experience leading the innovation, development and commercialization of medical devices. The Board believes she brings innovative thinking and creative problem solving to addressing complex business problems in the search for growth opportunities. Ms. Anderson is skilled in building executive-level teams, commercializing breakthrough technologies, strategic planning, market strategy, company and product branding, marketing and communications. Her entrepreneurial nature and commitment to patient care have contributed to the development and successful exit of two venture-backed medical device companies and the organization and operation of several for-profit and not-for-profit comprehensive cancer centers.

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CORPORATE GOVERNANCE AND RELATED MATTERS

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Thomas J.
Gunderson

Independent Director

Age: 70

Director Since: May 2017

Committees: Finance (Chair); Audit

Other Public Boards: TransMedics Group, Inc.

Education: B.A. (biology focus), Carleton College; M.S. (cell biology), University of Minnesota; M.B.A., University of St. Thomas

Term Expires: 2022

Career Highlights

Member of the Board of Directors of TransMedics Group, Inc., a medical technology company focused on developing organ transplant therapy for end-stage organ failure patients, 2019 to present
Member of the Board of Directors of the Minneapolis Heart Institute Foundation, 2011 to present (Chair from 2015 to 2020)
Executive in Residence at the University of Minnesota’s Medical Industry Leadership Institute, 2016 to present
Member of American Heart Association Science and Technology Accelerator Committee, 2015 to 2017
Managing Director and senior research analyst at Piper Jaffray (focus on medical technology companies), 1992 to 2016
Project Director at American Medical Systems (private medical device company acquired by Pfizer in 1983), 1979 to 1992
Recognized by several industry publications, including the Wall Street Journal, Institutional Investor, First Call, Thomson Reuters, and Medical Device and Diagnostic Industry (e.g., in 1996 and 2000, he was named an All-Star Analyst for medical stocks by the Wall Street Journal and in 2014, Thomson-Reuters named him “Top Stock Picker” in the medical technology sector)

Qualifications of Particular Relevance to Merit

Mr. Gunderson provides the Board with more than 25 years of substantive experience in the medical device industry, with a seasoned perspective on the challenges, trends and opportunities of publicly-traded medical device manufacturers, as well as a keen understanding of the Company’s competitive position within its industry. Mr. Gunderson also contributes a strong background in financial and economic analysis and valuable insights regarding business development and acquisition opportunities. Mr. Gunderson’s financial background and industry experience have been beneficial in his service as the Chair of the Finance Committee of the Board (Finance Committee).

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CORPORATE GOVERNANCE AND RELATED MATTERS

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F. Ann Millner, Ed.D.

Independent Director

Age: 69

Director Since: July 2015

Committees: ESG (Chair), Audit, Compensation

Other Public Boards: None

Education: B.S. (education), University of Tennessee; M.S. (allied health education and management), Southwest Texas State University; Ed.D (education administration), Brigham Young University; Completed medical technology program, Vanderbilt University

Term Expires: 2022

Career Highlights

Regents Professor and Professor of Health Administrative Services at Weber State University, 2013 to present
Member of the Utah State Senate (member of multiple committees and subcommittees), 2015 to present
Member of Utah Governor's Task Force on Educational Excellence, 2015 to present
Member of Board of Trustees of Intermountain Healthcare (integrated healthcare system in Utah and Idaho), 2005 to present (serving as Vice Chair, 2017 to present)
President of Weber State University, 2002 to 2012 (first female president of a Utah state university)
Vice President of University Relations at Weber State University, 1993 to 2002
Associate Dean of Continuing Education and Assistant Vice President of Community Partnerships at Weber State University, 1985 to 1993

Qualifications of Particular Relevance to Merit

The Board believes Dr. Millner's qualifications to serve as a director of the Company include her executive leadership skills and her experience in the areas of organizational administration, operations and financial management, and business strategy. Those skills and experience have been particularly valuable to the Company in the course of Dr. Millner’s service as the Chair of our ESG Committee. During her service as the Chair of our ESG Committee, Dr. Millner has played a significant role in the development of our corporate governance practices and engagement with our shareholders.

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GRAPHIC

Lonny j. carpenter

Independent Director

Age: 59

Director Since: June 2020

Committees: Operating (Chair), Compensation, Finance

Other Public Boards: Novanta Inc.

Education: B.S., United States Military Academy at West Point

Term Expires: 2023

Career Highlights

Member of the Board of Directors (Lead Independent Director) of Novanta Inc., a manufacturer of precision photonic and motion control components and subsystems, 2018 to present
Member of the Board of Directors of Orchid Orthopedics Solutions (a privately-owned orthopedic medical device outsourcing company), 2019 to present
Member of the Board of Directors of The Boler Company, (a privately-owned auto part manufacturing company), 2019 to present
Group President, Global Quality and Business Operations of Stryker Corporation (Stryker), 2016 to 2019
Group President, Global Quality and Operations of Stryker, 2011 to 2016
President, Instruments and Medical Division of Stryker, 2006 to 2008
Captain in the U.S. Army and helicopter pilot having served in leadership roles for the 101st Airborne Division

Qualifications of Particular Relevance to Merit

The Board believes Mr. Carpenter’s broad business background and experience in setting enterprise-wide direction, experience in quality, manufacturing, procurement and logistics strategies from his tenure at Stryker provide the Board with practical, real-world knowledge and guidance and have strengthened the Company’s efficiency and cost-reduction initiatives. Mr. Carpenter’s business background and experience have been particularly beneficial to the Company in the course of his leadership of the Board’s Operating Committee (Operating Committee) and the development of our Foundations for Growth program.

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GRAPHIC

David K. FLOYD

Independent Director

Age: 60

Director Since: June 2020

Committees: Audit, ESG, Operating

Other Public Boards: None

Education: B.S., Grace College

Term Expires: 2023

Career Highlights

Chairman and Interim CEO, Corin Group LTD, a privately-held medical device manufacturer, July 2020 to present
Member of the Board of Directors of Health Outcomes Performance Company (a privately-owned company focused on transforming the patient care experience and improving the practice of medicine), April 2020 to present
Advisor to Bain & Company (a private global management consulting services firm), 2019 to present.
Group President of Stryker, 2012 to 2019
U.S. President and Worldwide President of Johnson & Johnson’s DePuy Orthopaedics, 2007 to 2011

Qualifications of Particular Relevance to Merit

Mr. Floyd possesses more than 30 years of experience as a leader in the life sciences industry, including serving as president and CEO within several leading medical technology organizations. Additionally, the Board believes Mr. Floyd’s nearly 20 years of general management experience provides the Board with expertise on a broad range of matters, including mergers and acquisitions, global business and operations and product commercialization. The Board believes Mr. Floyd’s industry and management experience have been particularly beneficial through his service on the Operating Committee and his guidance in the Company’s development of its Foundations for Growth program.

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GRAPHIC

James T. Hogan

Independent Director

Age: 64

Director Since: June 2020

Committees: Compensation, Operating

Other Public Boards: Prolung, Inc.

Education: B.A., University of Minnesota; MBA, University of Minnesota

Term Expires: 2023

Career Highlights

Member of the Board of Directors of Prolung, Inc., a medical technology company specializing in predictive analytics technology, 2019 to present
Member of the Board of Directors of Xenocor, Inc. (a privately-owned medical device company), 2019 to present
President of Latin America at Medtronic Inc., now Medtronic plc, 2007 to 2016
Director of Gastroenterology and Urology Division for Western Europe at Medtronic Inc., 2005 to 2007
Director of Sales and Marketing for Europe, the Middle East and Africa at Pfizer Inc.’s American Medical Systems Division, 1991 to 1993

Qualifications of Particular Relevance to Merit

The Board believes Mr. Hogan’s extensive experience in sales, marketing and medical support activities in a large medical device company, combined with his international experience, having lived and worked in England, Switzerland, France, Israel and Holland provide significant benefits to the Company. Additionally, the Board believes Mr. Hogan’s background in medical device start-ups, having started three medical device companies in the cardiology, urology and vascular fields, all of which were purchased by larger medical device companies, provides the Board with knowledge and experience with branding, innovating and dealing with ongoing challenges facing the medical device industry. Mr. Hogan has also provided valuable insight and guidance to the Board through his service on the Operating Committee and his oversight of the development and implementation of the Foundations for Growth program.

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Our Board of Directors

Our business affairs are managed subject to the oversight of the Board, which represents and is accountable to the shareholders of the Company. The Board advises and oversees management, which is responsible for the day-to-day operations of the Company. The primary mission of the Board is to represent and protect the interests of our shareholders. As a result, the basic responsibility of our directors is to act in good faith and with due care so as to exercise their business judgment on an informed basis in what they reasonably and honestly believe to be in the best interests of the Company and its shareholders. The Board reviews and assesses our strategic, competitive and financial performance.

Board Structure

Chair of the Board

The Chair of the Board provides leadership to the Board and works with it to define its structure, agenda and activities in order to fulfill its responsibilities. The Chair works with senior management to help ensure that matters for which management is responsible are appropriately reported to the Board.

Fred P. Lampropoulos currently serves as the Chair of the Board, CEO and President of the Company. The Board and ESG Committee believe that the traditional practice of combining the roles of chair of the board and chief executive officer currently provides the preferred form of leadership for the Company. Given Mr. Lampropoulos’ vast experience since founding the Company in 1987, his role as an inventor and his involvement in filing of more than 300 patents and pending applications, the respect which he has earned from our employees, business partners and shareholders, and his proven leadership skills, the Board believes Mr. Lampropoulos’ continued service in both capacities serves the best interests of our shareholders. Further, the Board believes Mr. Lampropoulos’ fulfillment of both responsibilities encourages accountability and effective decision-making and provides strong leadership for employees and other stakeholders.

Independent Directors

Under our Corporate Governance Guidelines (Governance Guidelines), a majority of our directors should be independent directors who meet the director independence guidelines set forth in the Nasdaq Marketplace Rules, on which shares of the Common Stock are currently quoted. Among other things, each independent director should be free of significant business connections with competitors, suppliers, or customers of the Company.

In 2020, the ESG Committee undertook its annual review of director and nominee independence and recommended that the Board determine that Mr. Anderson, Mr. Carpenter, Mr. Floyd, Mr. Gunderson, Mr. Hogan, Dr. Millner and Ms. Ward each be designated as an independent director. Mr. Lampropoulos is not considered independent because of his employment as President and CEO of the Company. Ms. Anderson may not be considered to be independent because of her service as the CEO and an employee and director of Cianna Medical, which we acquired in November 2018.  

Based upon the information provided by Admiral Evans, the ESG Committee and the Board believe that Admiral Evans meets the director independence guidelines set forth in the Nasdaq Marketplace Rules.  

Lead Independent Director

Since June 2020, A. Scott Anderson has served as the Lead Independent Director. The position of Lead Independent Director comes with clearly delineated and comprehensive duties, as set out in our Governance Guidelines.

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These duties include:

Board Meetings and Executive Sessions

Authority to call meetings of the independent directors
Presides at all meetings of the Board at which the Chair is not present, including executive sessions of the independent directors

Communicating with Management

Serves as principal liaison between the Chair/CEO and the independent directors

Agendas

Approves meeting agendas for the Board and information sent to the Board by the Chair/CEO, including supporting materials

Meeting Schedules

Approves meeting schedules for the Board to assure that there is sufficient time for discussion of all agenda items

Communicating with Shareholders

Ensures availability for consultation and direct communication with major shareholders of the Company upon reasonable request

Our independent directors regularly meet in executive session without the CEO/Chair present, generally at least once each quarter.

During these sessions, independent directors discuss topics such as executive (including the CEO) succession planning, corporate governance, business strategy and Board responsibilities.

Composition and Selection of Board Members

The ESG Committee is responsible for reviewing annually with the Board the desired skills and characteristics of directors, as well as the composition of the Board as a whole. Directors should be individuals who have succeeded in their particular field and who demonstrate integrity, reliability, knowledge of corporate affairs, and an ability to work well together. Directors should have:

demonstrated management ability at senior levels in successful organizations;
current or recent employment in positions of significant responsibility and decision-making;
expertise in the medical device industry, medical profession or related areas of training; or
current and prior experience related to anticipated Board and committee responsibilities in other areas of importance to the Company.

The ESG Committee reviews the skills and characteristics required of directors in the context of the current composition of the Board. There is currently no set of specific minimum qualifications that must be met by a nominee recommended by the ESG Committee, as different factors may assume greater or lesser significance at particular times and the needs of the Board may vary in light of its composition and the ESG Committee’s perceptions about future issues and needs. Additionally, in considering the composition of the Board and identifying nominees, the ESG Committee does not have a formal policy regarding the consideration of gender, race, sexual preference, religion and other traits typically associated with the term “diversity.”

However, the ESG Committee considers it important that the Board be composed of directors with a broad range of experience, areas of expertise and skills and considers several factors, including a candidate’s:

age;
skills;

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integrity and moral responsibility;
policy-making experience;
ability to work constructively with our management and other directors;
diversity;
capacity to evaluate strategy and reach sound conclusions;
availability of time to devote to the Board; and
awareness of relevant social, political, and economic trends affecting the Company.

The ESG Committee uses a variety of methods for identifying and evaluating director nominees. The ESG Committee assesses the appropriate size of the Board, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the ESG Committee considers various potential candidates for director. Candidates may come to the attention of the ESG Committee through various means, including recommendations from current directors, shareholders or other individuals. To date, the ESG Committee has not engaged a professional search firm to assist in identifying candidates for service on the Board.

The table below summarizes some of the relevant experience, qualifications and demographic information of our directors and nominees identified by the ESG Committee. The biographies above describe each director’s or nominee’s background in more detail.

A. Scott Anderson

Jill D. Anderson

Lonny J. Carpenter

Stephen C. Evans

David K. Floyd

Thomas J. Gunderson

James T. Hogan

Fred P. Lampropoulos

F. Ann Millner, ED.D.

Lynne N. Ward

Experience

CEO or board leadership – complex organizational performance and oversight

Medical device industry – marketing, sales, operations, distribution, R&D

Manufacturing – regulated industry experience

International business

Management or corporate board service

Skills and Expertise

Strategy and strategic planning

Sales and marketing

Corporate financial literacy

Accounting and audit

Capital markets and financing transactions

Technology, IT systems and cybersecurity

Mergers and acquisitions

Talent management

Corporate environmental, social and governance

Investor and stakeholder relations

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Demographic Information

Board Tenure

10

2

1

N/A

1

4

1

34

6

2

Age

74

61

59

57

60

70

64

71

69

62

Gender:

Female

Male

Ethnicity:

African American/Black

Asian, Hawaiian or Pacific Islander

Caucasian/White

Shareholder Recommendations

The ESG Committee considers properly submitted director-nominee recommendations from shareholders prior to the issuance of the proxy statement for the next annual meeting of shareholders. Materials provided by a shareholder in connection with such a recommendation are forwarded to the ESG Committee. In evaluating those recommendations, the ESG Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria described above.

Any shareholder wishing to recommend a candidate for consideration by the ESG Committee should submit a recommendation in writing indicating the candidate’s qualifications and other relevant biographical information and provide confirmation of the candidate’s consent to serve as a director.

Interested shareholders should send recommendations to:

Merit Medical Systems, Inc.

Attn: Brian G. Lloyd, Corporate Secretary

1600 West Merit Parkway

South Jordan, Utah 84095

Board and Committee Meetings and Responsibilities

In 2020, the Board met 27 times. Directors are expected to attend regular Board meetings, Board committee meetings and annual shareholder meetings. The independent directors met in executive session five times during 2020.

All directors attended at least 75% of the total number of meetings of the Board and of any committee on which he or she served.

As further described below, the Board has a standing Audit Committee, Compensation Committee, ESG Committee, Finance Committee and Operating Committee. The Company believes each of the directors serving on the Audit, Compensation, and ESG Committees is an “independent director” for purposes of the Nasdaq Marketplace Rules and that each of the directors serving on the Compensation Committee is a “non-employee director” for purposes of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (Exchange Act).

Audit Committee

The Audit Committee meets to review and discuss our accounting practices and procedures and quarterly and annual financial statements with our management and independent public accountants. The Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of our accounting, auditing and reporting practices.

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The Audit Committee’s primary duties include:

reviewing the scope and adequacy of internal accounting and financial controls;
reviewing the independence of our independent registered public accounting firm;
approving the scope and results of the audit activities of our independent accountants;
approving fees of, and non-audit related services by, our independent accountants;
reviewing our compliance and enterprise risk management programs, including our information technology and cybersecurity risk management program;
reviewing the objectivity and effectiveness of our internal audit function;
reviewing our financial reporting activities and the accounting standards and principles followed; and
reviewing and approving related person transactions.

Audit Committee Members

Lynne N. Ward (Chair)
David K. Floyd
Thomas J. Gunderson
F. Ann Millner, Ed. D.

Financial Experts on Audit Committee

The Board has determined that Ms. Ward and Mr. Gunderson are audit committee financial experts, as defined in Item 407(d) of Regulation S-K under the Exchange Act.

The Audit Committee met 13 times during 2020.

Compensation and Talent Development Committee

The Compensation Committee is responsible for overseeing, reviewing and approving executive compensation and benefit programs of the Company, as well as the Company’s talent development activities. Additional information regarding the functions, procedures and authority of the Compensation Committee is provided in the Compensation Discussion and Analysis beginning on page 56 below. The Compensation Committee Report appears on page 71 below.

The Compensation Committee met six times during 2020, although members of the Compensation Committee also met informally and discussed compensation issues at other times throughout the year.

Compensation Committee Members

A. Scott Anderson (Chair)
Lonny J. Carpenter
James T. Hogan
F. Ann Millner, Ed. D.

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Environmental, Social and Governance Committee

The ESG Committee is responsible for oversight of the Company’s environmental and social business practices, the Company’s corporate governance practices, including the practices set forth in our Governance Guidelines and the Company’s director nomination process and procedures, and matters impacting the Company’s image and reputation and its standing as a responsible corporate citizen. As discussed earlier, the ESG Committee selects, evaluates and recommends to the full Board qualified candidates for election to the Board. The ESG Committee also provides oversight of our sustainable business practices.

ESG Committee Members

F. Ann Millner, Ed.D. (Chair)
A. Scott Anderson
David K. Floyd
Lynne N. Ward

The ESG Committee met five times during 2020.

Finance Committee

The Finance Committee assists the Board with oversight of the Company’s financial management, including oversight of the Company’s financing and capital structure objectives and plans; and the following:

the Company’s merger and acquisition strategy;
the Company’s investment programs and practices, including international cash management
the Company’s strategic planning and activities; and
the Company’s tax strategy and structure.

Finance Committee Members

Thomas J. Gunderson (Chair)
Jill D. Anderson
Lonny J. Carpenter
Lynne N. Ward

The Finance Committee met 11 times during 2020.

Operating Committee

In 2020, the Board formed an Operating Committee pursuant to an agreement entered into with Starboard Value L.P. (Starboard). The Operating Committee’s primary purpose is to work with the Company’s management to establish operating targets for the business (subject to approval of the Board). Management reports to the Operating Committee on its progress to achieve the operating targets approved by the Board. The Operating Committee also played a significant role in the development of our Foundations for Growth program and continues to provide oversight of that program.

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Operating Committee Members

Lonny J. Carpenter (Chair)
David K. Floyd
James T. Hogan
Fred P. Lampropoulos

The Operating Committee met nine times during 2020.

Risk Management

The Board is involved in assessing and managing risks that could affect the Company. One of the roles of the Board is to periodically assess the processes used by management with respect to risk assessment and risk management, including identification by management of the principal risks of our business, and the implementation by management of appropriate systems to deal with such risks. The Board fulfills these responsibilities either directly, through delegation to committees of the Board, or, as appropriate, through delegation to individual directors.

When the Board determines to delegate any risk management oversight responsibilities, typically such delegation is made to the applicable standing committee(s) of the Board. The Audit Committee is generally responsible for oversight of risks such as those relating to the quality and integrity of our financial reports, the independence and qualifications of our independent registered public accounting firm, our compliance with disclosure and financial reporting requirements and overall enterprise risk management, including evaluation and oversight of cybersecurity risk management. At least annually, the Board and/or the Audit Committee is briefed by the Company’s Chief Technology Officer and other members of the Company’s management on information technology and cybersecurity risks and the Company’s efforts to mitigate those risks. The ESG Committee is generally responsible for oversight of risks addressed through the identification and recommendation of individuals qualified to become directors of the Company, director and management succession planning and development and implementation of corporate governance principles. The Compensation Committee is generally responsible for oversight of risks such as those relating to executive employment policies, our compensation and benefits systems, including our executive compensation program, and human capital development. These committees exercise their oversight responsibilities through reports from and meetings with officers of the Company responsible for each of these risk areas, including our Chief Financial Officer, Chief Legal Officer, Chief Compliance Officer, Chief Technology Officer, Chief Information Officer and Director of Internal Audit. In such meetings, committee members discuss and analyze such risks, and, when necessary, consult with outside advisors.

Director Orientation and Continuing Education

New directors participate in an orientation program developed and overseen by our ESG Committee, which is conducted prior to or shortly after the director’s election or appointment. This orientation program includes presentations by other directors and members of the Company’s senior management with respect to finance, operations, governance, legal and compliance matters, regulatory issues, cybersecurity, industry developments and strategic planning. During 2020, our ESG Committee led an enhancement of our director orientation program, including scheduled orientation sessions with members of the Company’s senior management and delivery of detailed orientation materials. In addition to the initial onboarding process, members of the Company’s senior management regularly provide ongoing orientation and training sessions at Board meetings, including presentations regarding business strategy, legal and regulatory compliance, information technology and cybersecurity, business development and governance. The information technology and cybersecurity training provided to the Board is an extension of the Company’s cybersecurity awareness program provided by the Company’s information technology department to Company employees worldwide. The Company’s cybersecurity awareness program includes regular training courses which are available throughout the Company and periodic updates targeted to individual departments, sites or regions as appropriate. The Company also encourages directors to obtain third-party continuing

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education on topics of relevance to the Company and its operations and provides to directors reimbursement of up to $5,000 of annual educational expenses.

Shareholder Engagement

We regularly communicate with many of our largest shareholders regarding our operations and financial results. During the years leading up to 2020, we expanded our shareholder communication efforts in an attempt to develop a better understanding of the corporate governance and executive compensation perspectives and practices which are important to our shareholders. Our shareholder engagement efforts are directed by Ann Millner, Ed.D., Chair of our ESG Committee, and A. Scott Anderson, our Lead Independent Director, and are supported by members of our executive management and investor relations teams.

As a consequence of the COVID-19 pandemic, the scope of engagement between our directors and shareholders was reduced significantly during 2020. We maintained contact with several of our large shareholders during the year; however, most of the input we received with respect to the interests of our shareholders was provided by external advisors and focused on the development of corporate governance and executive compensation practices which are generally deemed favorable by sophisticated shareholders and their advisors. After considering that input, our Board and its ESG and Compensation Committees took a number of actions which we believe have strengthened our corporate governance and executive compensation practices. Those actions include:

Increased the number of independent directors;
Took steps to increase director diversity;
Continued to encourage and provide oversight of expanded sustainable business practices; and
Implemented long-term equity performance-based restricted stock program designed to align executive compensation with Company performance.

Our Board is committed to implementing governance, executive compensation and sustainability practices which will contribute to the long-term success of the Company. To fulfill that commitment, our Board, primarily through its ESG and Compensation Committees, will continue to seek opportunities to consult with major shareholders in appropriate situations. We anticipate Dr. Millner and Mr. Anderson will continue to lead those efforts, with the support of members of our executive management and investor relations teams.

Shareholder Communication with the Board of Directors

The Board will receive communications from Company shareholders. All communications, except those related to shareholder proposals that are discussed below under the heading “Shareholder Proposals for Annual Meeting 2022,” must be sent to our Corporate Secretary (Brian G. Lloyd) at our principal executive offices at 1600 West Merit Parkway, South Jordan, UT 84095. Communications submitted to the Board (other than communications received through our whistleblower hotline, which are reviewed and addressed by the Audit Committee) are generally reported to our directors at the next regular meeting of the Board.

All directors of the Company are strongly encouraged to attend our Annual Meeting. All nine directors, then serving on the Board or nominated to the Board, were present through video conference at our 2020 annual meeting of shareholders.

Governance Guidelines and Code of Ethics

Corporate Governance Guidelines

Our Governance Guidelines set forth the responsibilities of our directors.

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The Governance Guidelines include guidelines that, among other things, contemplate that directors will maintain minimum stock ownership with a value of at least three times the annual retainer received. The Governance Guidelines also require the CEO to maintain minimum stock ownership with a value of at least five times his or her annual base salary. Directors have three years from appointment to the Board to comply with the minimum stock ownership requirement. The ESG Committee provides oversight of the stock ownership guidelines and may allow waivers with respect to the stock ownership guidelines for directors and the CEO on a case-by-case basis. All current directors and nominees are within their respective three-year transition periods except our CEO, A. Scott Anderson, Thomas J. Gunderson and F. Ann Millner. Our CEO, Mr. Anderson and Dr. Millner are presently in compliance with the minimum stock ownership guidelines. After conducting its review of the stock ownership guidelines, the ESG Committee temporarily waived compliance with the minimum stock ownership guidelines for Mr. Gunderson. The ESG Committee determined that a waiver was appropriate for Mr. Gunderson due to his relatively short tenure as a director and that, upon further vesting of stock options and RSUs that he already holds and which are anticipated to vest during the current year, Mr. Gunderson’s stock ownership would exceed the minimum stock ownership guidelines.

Governance Materials

The following materials relating to corporate governance are available via our website at: www.merit.com/investors/corporate-governance-leadership/

Code of Business Conduct and Ethics

Code of Ethics for CEO and Senior Financial Officers

Corporate Governance Guidelines

Compensation Committee Charter

Audit Committee Charter

ESG Committee Charter

Operating Committee Charter

Finance Committee Charter

Code of Business Conduct and Ethics

Our Code of Business Conduct and Ethics (Code of Conduct) applies to our directors and employees, including our NEOs, and is supplemented by additional provisions applicable to our CEO and senior financial and accounting officers. All Merit directors, officers and employees are required to act ethically at all times and in accordance with the principles and policies set forth in the Code of Conduct.

Among other principles and policies, the Code of Conduct finds a conflict of interest exists when a person’s private interest interferes with the interests of the Company. The Code of Conduct recognizes that a conflict of interest occurs when the Company enters into a transaction in which an employee, officer, or director, or someone related to or affiliated with an employee, officer, or director, has a significant personal interest. The Code of Conduct also recognizes that a conflict of interest arises when an employee, officer or director of the Company receives an improper benefit as a result of the person’s position with the Company and prohibits any form of loan or credit to directors or officers of the Company or their family members.

The Code of Conduct obligates employees, officers and directors to promptly disclose conflicts of interest to a supervisor, management, or the Board. Any director who has a conflicting interest in a potential conflicting interest transaction may not participate in the review of that transaction by the Board. Any waiver of the Code of Conduct may be made only by the Board and is required to be promptly disclosed as required by law or the regulations of any exchange on which our securities are traded, including Nasdaq.

Whistleblower Hotline

As contemplated by the Code of Conduct, we maintain a whistleblower hotline that enables our employees, vendors, customers, and shareholders, as well as other interested parties, to submit confidential and anonymous reports of suspected or actual violations of the Code of Conduct or other issues of concern to those parties.

The Audit Committee regularly reviews all complaints we receive through the whistleblower hotline.

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Our whistleblower hotline may be accessed:

by telephone at (877) 874-8416

online at www.merit.alertline.com

Trading Restrictions

Our directors and executive officers are subject to our Corporate Policy on Insider Trading, which is designed to facilitate compliance with insider trading laws and governs transactions in our Common Stock and related derivative securities. Any director, officer or employee in possession of material, nonpublic information, or who may be deemed to possess such information by reason of his or her positions, may not (i) trade in the Company’s securities; (ii) share the information with others (“tipping”), or (iii) permit a member of his or her immediate family to trade in the Company’s securities. Our policy designates certain regular periods, from 15 days prior to the end of a calendar quarter to two full business days after the release of financial results, in which trading is prohibited for individuals in information-sensitive positions, including directors and executive officers. Our policy also prohibits executive officers and directors (i) trading in Merit stock on a short-term basis (minimum six-month holding period); (ii) engaging in short sales of Merit stock; (iii) buying or selling put options or call options or other derivative instruments associated with Merit stock; or (iv) entering into hedging transactions associated with Merit stock.

Additional periods of trading restriction may be imposed as determined by our CEO or the Insider Trading Compliance Officers (currently our Chief Legal Officer and our Chief Financial Officer) in light of material pending developments. Further, during permitted windows, individuals in information-sensitive positions are required to seek pre-clearance for trades from an Insider Trading Compliance Officer, who assesses whether there are any important pending developments, including cybersecurity matters, which need to be made public before the individual may participate in the market.

Director Retirement Policy

In October 2017, we amended our Governance Guidelines to require that, upon reaching 75 years of age, each director of the Company must submit to the Board a letter of resignation to be effective at the next annual meeting of shareholders. The Board will generally accept such resignations unless the ESG Committee or the Board determines to extend the director’s service through the expiration of his or her then-current term or nominate the director for another term.

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Sustainability

Because we understand and recognize our responsibility to the communities where we operate, we strive to be a good corporate citizen. We work hard to conduct our business in a sustainable and transparent manner, recognizing the importance of this to our customers and supply chain partners who are striving to achieve their own corporate responsibility goals and objectives. We are dedicated to reducing our footprint on the environment. As shown below, we continually evaluate our performance on preventing pollution, reducing waste, and promoting the sustainable use of natural resources. From considering new green building technologies at the beginning of all construction projects, to re-evaluating the way we package and ship our products, to our employee pollinator garden that provides farm-to-table nutrition for our employees at our headquarters in Utah, the Company is dedicated to applying our culture of innovation to lessen our impact on the world around us. By partnering with our internal and external stakeholders, we continually seek to better understand the areas where we can make the most significant impact. As a leader in the medical device industry, we are committed to establishing responsible and sustainable business practices for our future and our communities. The following discussion demonstrates the ways we are working to better track and measure progress in material areas where we believe we can achieve sustainable improvement within our business.

Greenhouse Gas (GHG) Emissions

During 2020, we began tracking our global scope 1 and 2 greenhouse gas emissions utilizing the location-based method. This added layer of tracking has provided us greater transparency to our total global environmental impact, and we are committed to reducing that footprint as we move into a more sustainable future. We have also begun tracking selected Scope 3 emissions from travel and major logistics providers. We measure these emissions by carbon dioxide equivalent (CO2e).

2,837 metric tons CO2e Scope 1 Emissions

These emissions include stationary combustion from Company-managed and Company-operated facilities over 10,000 square feet, as well as facility vehicle usage.

17,480 metric tons CO2e Scope 2 Emissions

These emissions include purchased non-renewable energy at our global operation sites over 10,000 square feet.

10,447 metric tons CO2e Scope 3 Emissions

These emissions include travel and third-party logistics. During 2020, travel decreased by approximately 90%, due primarily to the COVID-19 pandemic, which had a significant effect on reducing our scope 3 emissions during the year as compared to 2019.

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GRAPHIC

Total Scope 1, 2 and 3 emissions during 2020 were approximately 30,764 metric tons of CO2e. Total GHG emissions indexed to revenue was approximately .032 metric tons of CO2e/$K Revenue.

Water

We have identified water as one of our key environmental risks and opportunities. Water is a global concern; we seek to address goals and initiatives at the site level by understanding local/regional water basin activity and stress. We continuously work to understand the impact of water use at each of our operating facilities and to enact programs to improve water efficiency.  

215,300 m3 water used

During 2020, our total global water usage at sites greater than 10,000 square feet was approximately 215.3K cubic meters. Our 2020 water intensity was .223, indexed to revenue (M3/$1K Revenue).

Water issues vary significantly by operating location. In 2020, we utilized the Water Risk Tool provided in collaboration between the World Wide Fund for Nature (WWF) and KFW DEG to understand basin water risk at our five largest manufacturing facilities located in South Jordan, Utah, Tijuana, Mexico, Galway, Ireland, Pearland, Texas, and Richmond, Virginia. The methodology disclosure for the Water Risk Filter tool notes: “the logic that underpins the water risk assessment is to evaluate average, recent water risk conditions, as well as some level of future risk.”

Site

Country

River Basin

Water Depletion*

Baseline Water Stress*

Available Water Remaining*

Drought Frequency Probability*

Tijuana

Mexico

Tijuana

4

5

4

4

Salt Lake City

USA

Great Salt Lake

3

2

5

4

Pearland

USA

Texas

3

3

2

3

Richmond

USA

James

1

3

2

2

Galway

Ireland

Republic of Ireland

1

1

2

1

*Assessed risk from 1 (very limited risk) to 5 (very high risk)

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2030 Operational Sustainability Goals

We have utilized this improved information to set operational environmental sustainability goals centered on combating climate change and reducing our usage of water resources. Utilizing 2020 as a baseline year, we commit that by 2030:

50% of our total energy usage will come from renewable sources
Our energy intensity will decrease by 10% or more, indexed to revenue
Our GHG emissions will decrease by 15% or more, indexed to revenue
Our water intensity will decrease by 10% or more, indexed to revenue

See our Statement on Climate Change to learn more about our position and objectives related to climate change, available at www.merit.com/about/corporate-sustainability/.

2020 Sustainability Highlights

15,000 Metric Tons recycled

During 2020 our global facilities recycled more than 15,000 metric tons of waste produced by our operations. We recognize additional opportunities to expand our recycling efforts and strive to increase recycling each year, as well as finding ways to reduce total waste.

2.8 million sheets of paper

Our internally designed eWORQ program is transitioning our operating lines from paper and plastic sleeves to electronic work orders. After it is fully implemented, at all our manufacturing sites, we estimate an annual savings of 2.8 million sheets of paper and 20,000 plastic sleeves.

3,000 pounds of fresh produce

During 2020, we distributed more than 3,000 pounds of fresh produce to our employees through our U-Pick program at our South Jordan facility, a program that encourages our employees to visit our Company-sponsored garden for fresh air and sunshine during their workday to pick fresh produce and participate in garden cultivation activities. Employees also participate in the garden by signing up for garden boxes to grow fresh produce for themselves and family members throughout the growing season, with the help and expertise of our knowledgeable garden staff. Each year, we donate high-quality produce to low-income senior citizen centers, and we donate lower quality produce to farm animals at a nonprofit charter school, in order to reduce waste. Green waste removed from our garden at the end of the growing season is donated to a local landfill to make compost for the next growing season.

7.5+ metric ton reduction in employee transportation related CO2e emissions

At our South Jordan and Galway facilities, we promote the usage of electric vehicles by providing employees with on-site, electric vehicle-charging stations. These stations have resulted in the prevention of over 7.5 metric tons of GHG emissions. That is the equivalent of planting 400 trees and letting them grow for ten years. Our Tijuana facility implemented a mass transportation initiative, in an effort to conserve emissions and encourage employee safety. We operate 13 fuel-efficient buses to transport approximately

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900 employees to and from the facility each workday. These buses provide safe, efficient, and comfortable transportation for our employees in Tijuana.

7.3 metric tons of CO2e diverted to natural gas systems

Our "Scrape Your Plate" program at our corporate headquarters in South Jordan, Utah has resulted in several tons of food waste diverted from the local landfill to an anaerobic digestion plant. By diverting this waste, we have helped to reduce methane gas emissions that contribute to the degradation of air quality in our high-elevation mountain valley. Our food waste is processed, resulting in a natural source of methane gas that is pumped back into the natural gas system and used to heat homes and businesses. Since the launch of the program in 2019, our employees have diverted approximately 7.3 metric tons of CO2 emissions. That’s the equivalent of preventing the CO2 emission from burning 7,796 pounds of coal.

Our corporate sustainability strategy focuses on adding business value by assessing the risks and opportunities of our environmental, social, and governance aspects. We achieve this through our Enterprise Opportunity Management (EOM) program, engaging with stakeholders, and considering the areas where we can have the greatest impact.

Oversight for Sustainability

Our corporate sustainability strategy and goals are overseen by the ESG Committee, executive management, and our Corporate Sustainability Council, comprised of executives and subject-matter experts from across the organization. The council meets at least quarterly and leads our efforts to integrate corporate sustainability throughout the organization and ensure accountability.

ESG Committee

Chairman & Chief Executive Officer

Executive Sponsor: Chief Operating Officer

Chair: Vice President (VP), Environmental, Social & Governance

Corporate Sustainability Council Members

Chief Compliance Officer

Chief Human Resource Officer

Chief Wellness Officer

Director, Enterprise Risk Management

EVP - European Operations

EVP, Global Research & Development

Chief Strategy & Innovation Officer

VP, Global Supply Chain

VP, Operations - SLC

VP, Operations - Texas

Director of Operations - Mexico

Director, Global Real Estate & Facilities

Sustainability Working Groups - As Assigned

2020 Sustainability Report

Our 2020 Sustainability Report included the following priorities related to our Sustainability Initiatives. For more information, visit www.merit.com/about/corporate-sustainability/.  

Health & Safety

The health and safety of our employees is our top priority. We promote a culture where the health and safety of our environment, employees, contractors, suppliers, partners, and customers are of utmost importance. We believe that everyone across the organization is accountable and responsible for environmental health and safety, and we train and ask every employee to actively champion the behaviors and attitudes necessary to prevent work-related injuries, illnesses, property damage, and adverse impacts to the environment. In this way, employee health and safety is an integral part of our culture and a driver for sustainable growth.

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Compliance & Ethics

We are committed to a strong culture of compliance and ethics. We recognize that corruption and unethical conduct of any kind undermines our integrity and reputation and are contrary to our values and long-term success. We demonstrate this advocacy by maintaining ethical and responsible policies and practices and embedding these throughout all levels of the organization. We hold ourselves accountable to high standards of honesty, fairness, and integrity.

Environmental Sustainability

As a leading global manufacturer of medical devices, we believe we have a significant role to play in contributing to a sustainable future. Our core beliefs and our goal to be the most customer-focused company in healthcare is at the heart of everything we do. We strive to provide superior safe and effective products in a sustainable manner, providing for the health of our customers and our communities. We understand that good environmental practices are beneficial to our business and to our stakeholders, both now and in the future.

Diversity & Inclusion

We understand that a diverse workforce brings valuable global benefits to the entire organization. Advantages include greater innovation, learning, growth, and productivity. We continue to work towards the goal of maintaining a diverse and inclusive global culture that reflects the diversity of the customers we serve and fosters an environment where all employees feel welcome, respected, and valued. With this goal in mind, in late 2020 the Company hired its first Chief Human Resources Officer who, in part, has been charged with working with our leadership team to strengthen and enhance our diversity and inclusion efforts company wide. We are committed to providing equal opportunity in all aspects of employment. In the U.S., we are an equal opportunity/affirmative action employer committed to making employment decisions without regard to race, religion, ethnicity or national origin, gender, sexual orientation, gender identity or expression, age, disability, protected veteran status or any other characteristics protected by law. As a result, over 50% of our U.S. population identifies with diverse minority backgrounds, and our global workforce is comprised of approximately 55% female team members. While we are proud of the progress we have made to improve diversity within the Company, we recognize there is still room for improvement, and management has dedicated significant time and resources to continue to advance our initiatives in this area.

Philanthropy

From the inception of our company, we set out to improve lives around the globe. More than 30 years later, this mission still drives us forward in business and social impact. Through financial contributions, employee time and dedication, and collaboration with global and local non-profit organizations, our worldwide facilities foster stronger communities and create positive change in the areas we serve.

Quality Assurance

We are committed to delivering excellence across all aspects of our business. This includes the quality of our products, the attitude of our employees who interact with our customers, our turnaround time on shipping and deliveries, and the additional value we can bring to the healthcare system with clinician training programs.

We have long recognized the importance of operating both a sustainable and profitable enterprise for the long term. We believe our operations should not compromise the environment or the economic prospects of future generations, and, under the direction of the ESG Committee, we have focused increasing attention on sustainability and reducing our global environmental footprint in our operations through reducing waste, combating climate change and reducing, reusing and recycling materials.

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Whether it is manufacturing processes, shipping, or the day-to-day activities at the office, our employees at all levels are engaged and passionate about developing innovative solutions to produce the highest quality medical products while reducing our global environmental footprint. We are committed to continued reduction in the environmental impact of our business, even as our operations continue to grow. To learn more about our sustainability efforts, please review the information on our website at www.merit.com/about/corporate-sustainability/.  

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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. The following table shows the annual retainer amounts payable by the Company to non-employee directors.

Schedule of Director Retainers (1)

Lead Independent Director (2)

$110,000

Other Directors (2)

$80,000

Audit Chair

$10,000

Compensation Chair

$7,500

Governance Chair

$7,500

Finance Chair

$7,500

Operating Chair

$7,500

(1) Beginning in 2020, director retainers were paid in quarterly payments, with 50% of the amounts stated in the table paid in 2021.
(2) During 2020, the Company implemented temporary graded salary reductions for our employees. In support of these reductions, the Board voted to reduce the amount of the director retainers for each non-employee director by 20% from the amounts indicated in the preceding table for the third quarter of 2020.

Cash Compensation Paid to Directors

During the year ended December 31, 2020, all non-employee directors of the Company (except A. Scott Anderson) received quarterly retainer payments totaling $36,000 in aggregate. Mr. Anderson, as lead independent director, received quarterly retainer payments totaling $49,500 in aggregate. The retainer amounts paid to the non-employee directors during 2020 reflect a 20% reduction in the retainer payment amounts for the third quarter of 2020, which was implemented by the Board in support of the salary reductions undertaken by the Company for many of its employees in response to the COVID-19 pandemic. Additionally, each of the committee chairs was paid one-half of his or her chair-specific retainer(s) (as set forth in the foregoing table) during the year December 31, 2020.  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 Awards

Directors are eligible to participate in our equity incentive programs. Each non-employee director who served during the year ended December 31, 2020 received 4,188 restricted stock units under the 2018 Incentive Plan, which vest on June 22, 2021, one year from the grant date. In prior years, directors were granted options to purchase shares of Common Stock, which vested in equal annual increments over a period of three years (for options granted in 2019) or five years (for options granted prior to 2019).

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The following table shows compensation for each of our non-employee directors in 2020:

Non-Employee Director Summary Compensation

Name (1)

 

Fees Earned or Paid in Cash 

($)

Stock Awards ($) (2)

Non-Equity Incentive Plan Compensation 

($)

All Other Compensation ($)

Total Compensation ($)

A. Scott Anderson

53,250

180,000

 

233,250

Jill D. Anderson (3)

36,000

180,000

__

216,000

Lonny J. Carpenter

39,750

180,000

 

219,750

David K. Floyd

 

36,000

 

180,000

 

 

 

216,000

Thomas J. Gunderson

 

39,750

180,000

 

 

219,750

James T. Hogan

 

36,000

180,000

 

 

 

216,000

F. Ann Millner, Ed.D.

 

39,750

180,000

 

 

219,750

Lynne N. Ward

 

41,000

180,000

 

 

221,000

(1) Fred P. Lampropoulos served as a director of the Company during 2020 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’ 2020 compensation can be found under “Executive Compensation” below.
(2) The amounts shown for stock awards reflect the aggregate grant date fair value of restricted stock units granted to the non-employee directors in 2020. 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 Annual Report on Form 10-K. As of December 31, 2020, all current non-employee directors held 4,188 restricted stock units. As of December 31, 2020, non-employee directors held outstanding options for the following number of shares: Mr. Anderson, 106,250; Ms. Anderson, 30,976; Mr. Gunderson, 71,250; Dr. Millner, 80,496; and Ms. Ward, 22,300.
(3) We made a contingent purchase price payment of approximately $800,000 to Ms. Anderson under the terms of our merger agreement with Cianna Medical during the year ended December 31, 2020. The terms of the acquisition, including contingent consideration payments, were determined prior to the appointment of Ms. Anderson as a director of the Company. As a former shareholder of Cianna Medical, Ms. Anderson may be eligible for additional payments for the achievement of sales milestones specified in our merger agreement with Cianna Medical. This payment has been excluded from the Non-Employee Director Summary Compensation table, as it is settlement of a contingent liability recorded as part of the purchase consideration for Cianna Medical in 2018 and is not compensation for services provided during the year ended December 31, 2020.

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 (SEC) (including under Item 404 of Regulation S-K under the Securities Act of 1933), other than:

grants of stock options made by the Board or any committee thereof or pursuant to an automatic grant plan; and
payment of compensation authorized by the Board or any committee thereof.

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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:

Justin J. Lampropoulos, President of Merit EMEA, a division of the Company, is the son of Fred P. Lampropoulos, Chair of the Board, CEO and President of the Company. In 2020 we provided to Mr. Justin J. Lampropoulos total cash and equity compensation of $1,747,275. Refer to the Summary Compensation Table for additional information regarding his compensation.
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 2020 we provided to Mr. Wright total cash and equity compensation of $1,685,310.
Charles Wright, former 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 2020 we provided to Mr. Wright total compensation of $287,116.
Anne-Marie Wright, former 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 2020 we provided to Ms. Wright total compensation of $370,014.
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 2020 we provided to Mr. Wright total compensation of $230,537.

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EQUITY COMPENSATION PLANS

EQUITY COMPENSATION PLANS

Securities Authorized for Issuance Under Equity Compensation Plans

The following table contains information regarding our equity compensation plans as of December 31, 2020 (in thousands, except weighted-average price):

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)

Weighted-average exercise price of outstanding options, warrants and rights (b)

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)

Equity compensation plans approved by security holders

4,103 (1)(2)

35.98 (3)

1,337 (4)

(1) Consists of 2,375,752 shares of Common Stock subject to options granted under the Merit Medical Systems, Inc. 2006 Long-Term Incentive Plan, 1,566,203 shares of Common Stock subject to options granted under the 2018 Long-Term Incentive Plan, 127,060 shares of Common Stock subject to performance stock units granted under the 2018 Incentive Plan, and 33,504 shares of Common Stock subject to restricted stock units under the 2018 Incentive Plan.
(2) Performance stock units are included in column (a) based on actual FCF and rTSR multipliers for unvested awards with completed performance periods and based on the maximum potential payout for awards with incomplete performance periods.
(3) The weighted-average exercise price included in the table excludes the performance stock units and restricted stock units included in column (a), as the underlying shares are issued and distributed to the recipient upon vesting and do not have an exercise price.
(4) Consists of 40,073 shares available to be issued under the 1996 Merit Medical Systems, Inc. Employee Stock Purchase Plan and 1,297,062 shares available to be issued under the 2018 Incentive Plan.

Proposal No. 2– Approval of an Amendment to the 2018 Long-Term Incentive Plan to Increase the Number of Shares of Common Stock Authorized for Issuance Thereunder by 3,000,000 Shares

Board Recommendation

The Board unanimously recommends a vote FOR this proposal

Upon the recommendation of our Compensation Committee, our Board has unanimously approved, and unanimously recommends that the shareholders approve, the Second Amendment to the 2018 Incentive Plan, attached hereto as Appendix A (Incentive Plan Amendment). If approved by the shareholders at the Annual Meeting, the number of shares authorized for issuance under the 2018 Incentive Plan will increase by 3,000,000 shares from 3,100,000 shares to 6,100,000 shares of our Common Stock.

The Board recommends that shareholders approve the Incentive Plan Amendment because it will allow the Company to better (a) align employee and shareholder interests, and (b) recruit and retain talented employees and senior management.

The 2018 Incentive Plan was originally approved by our shareholders in 2018, and this is the first time we have requested approval to increase the shares authorized under the 2018 Incentive Plan. As of April 20, 2021, the 2018 Incentive Plan had 1,057,172 shares of Common Stock available for grant, and if the

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Incentive Plan Amendment is approved, a total of 4,057,172 shares of Common Stock will be available for grant.

Significant Historical Award Information

The following table provides information regarding the grant of equity awards under the 2018 Incentive Plan over the past three fiscal years:

Key Equity Metric

2020

2019

2018

Percentage of equity awards granted to NEOs (1)

53.0%

22.4%

23.6%

Equity burn rate (2)

0.9%

2.2%

1.3%

Dilution (3)

9.7%

10.9%

11.7%

Overhang (4)

7.4%

7.8%

6.4%

Potential shares issuable from options and awards granted

489,508

1,244,403

692,002

Shares issued under stock option exercises

441,707

287,426

690,176

(1) Percentage of equity awards granted to individuals who were named executive officers in the relevant year is calculated by dividing the number of shares that were issuable pursuant to equity awards that were granted to NEOs during the year by the number of shares issuable pursuant to all equity awards granted during the year.
(2) Equity burn rate is calculated by dividing the number of shares issuable pursuant to equity awards granted during the year by the weighted average number of shares outstanding during the year, as disclosed in our Annual Report on Form 10-K.
(3) Dilution is calculated by dividing the sum of (x) the number of shares issuable pursuant to equity awards outstanding at the end of the fiscal year and (y) the number of shares available under the 2018 Incentive Plan for future grants by the number of shares outstanding at the end of the year. If the shares from the Incentive Plan Amendment are included in the number of shares issuable pursuant to equity awards outstanding at the end of the fiscal year, this dilution metric would be approximately 15.1% in 2020.
(4) Overhang is calculated by dividing the number of shares issuable pursuant to equity awards outstanding at the end of the year by the number of shares outstanding at the end of the year.

2018 Incentive Plan Summary

The following is a brief description of the principal features of the 2018 Incentive Plan. This summary is qualified in its entirety by reference to the full text of the 2018 Incentive Plan, which is included as an exhibit to our Annual Report on Form 10-K, and the full text of the Incentive Plan Amendment attached hereto as Appendix A.

 

Purpose

The purpose of the 2018 Incentive Plan is to assist the Company and its subsidiaries in attracting and retaining qualified individuals to serve as directors and employees of, and consultants and advisors to, the Company and our subsidiaries. The Board believes that the awards granted under the 2018 Incentive Plan align incentives of such individuals and help us achieve our long-term objectives, which in turn inure to the benefit of all our shareholders.

 

Eligibility

Directors, employees, consultants and advisors of the Company and our subsidiaries are eligible to receive awards under the 2018 Incentive Plan to the extent designated by the Compensation Committee or its delegate. The Compensation Committee has not yet determined who will receive future awards under the 2018 Incentive Plan, but future grants consistent with the Company’s historical equity-based compensation practices are likely.

 

Administration

The 2018 Incentive Plan is administered by the Compensation Committee. The Compensation Committee has the authority to interpret and construe the provisions of the 2018 Incentive Plan and to make all

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decisions and determinations relating to the operation of the 2018 Incentive Plan, including the authority and discretion to:

 

select the individuals to receive stock option grants or other awards;
determine the time or times when stock option grants or other awards will be granted and will vest; and
establish the terms and conditions upon which awards may be exercised.

 

Subject to certain limitations, the Compensation Committee may delegate to the CEO authority to make stock option grants to employees other than executive officers and directors.

 

Duration

The 2018 Incentive Plan became effective on May 24, 2018 and shall continue until May 23, 2028 unless sooner terminated by the Board of Directors.

 

Shares Subject to Plan

A maximum of 3,100,000 shares of Common Stock are currently authorized for issuance under the 2018 Incentive Plan (including issuance pursuant to incentive stock options). As of the Record Date, 1,057,172 shares were available for issuance under the 2018 Incentive Plan. If the Incentive Plan Amendment is approved, a maximum of 6,100,000 shares of Common Stock will be authorized for issuance and 4,057,172 shares will be available for issuance under the 2018 Incentive Plan.

 

Any shares subject to options or stock appreciation rights are counted against the shares available for issuance under the 2018 Incentive Plan (Share Reserve) as one share for every share subject thereto. Any shares subject to awards other than options or stock appreciation rights, e.g., restricted stock units and performance share units, are counted against the Share Reserve as two and one-half shares for every one share subject thereto. If an award under the 2018 Incentive Plan is forfeited or expires, the subject shares are again available for grant under the 2018 Incentive Plan (such forfeited or expired shares, Recycled Shares). To the extent that a share that was subject to an award that counted as one share against the 2018 Incentive Plan Share Reserve becomes a Recycled Share, the Share Reserve would be credited with (increased by) one share. To the extent that a share that was subject to an award that counted as two and one-half shares against the 2018 Incentive Plan Share Reserve becomes a Recycled Share, the Share Reserve is credited with two and one-half shares. The following types of shares of Common Stock are not eligible to be granted again under the 2018 Incentive Plan:

 

shares tendered by the participant, or withheld by the Company, to satisfy the purchase price of an option or any tax withholding obligation;
shares which we repurchase with option proceeds; or
shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right on exercise thereof.

 

In the event the outstanding shares of Common Stock are increased, decreased, changed into, or exchanged for a different number or kind of shares or securities through reorganization, merger, recapitalization, reclassification, stock split, reverse stock split or similar transaction (Recapitalization), the Share Reserve under the 2018 Incentive Plan will be proportionately adjusted.

We intend to register the new shares reserved for issuance under the 2018 Incentive Plan on a Registration Statement on Form S-8 under the Securities Act of 1933, as amended, as soon as practicable after receiving stockholder approval.

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Types of Awards under the 2018 Incentive Plan

The 2018 Incentive Plan provides for the following types of awards (Awards): (a)stock options; (b) stock appreciation rights; (c) restricted stock; (d) restricted stock units, including performance stock units; and (e) other share-based awards. Awards under the 2018 Incentive Plan may be granted as “performance awards” subject to conditions on exercise, vesting or payment that are tied to satisfaction of pre-determined financial or other performance goals designated by the Compensation Committee and set forth the applicable award agreements.   Except in the case of certain Changes in Control, as described below, all awards under the 2018 Incentive Plan will have a minimum vesting requirement of at least one year of continuous service from the date of grant.

Stock Options

The Compensation Committee may from time to time award options to any 2018 Incentive Plan participant subject to the limitations described above. Stock options give the holder the right to purchase shares of our Common Stock within a specified time at a specified exercise price. Two types of stock options may be granted under the 2018 Incentive Plan, namely: (a) incentive stock options (ISOs), which are subject to special tax treatment as described below and which are limited to employees of the Company and our subsidiaries; and (b) non-statutory options (NSOs), which are available to all directors, employees, consultants and advisors of the Company and our subsidiaries. The exercise price of an option cannot be less than the fair market value of a share of Common Stock at the time of grant. A participant may pay the applicable Option exercise price in cash, certified check or by wire transfer, or if permitted under the applicable award agreement or by the Compensation Committee by tendering previously acquired shares, by withholding of shares or through a cashless broker-assisted exercise program.   The expiration dates of options cannot be more than seven years after the date of the original grant. Other than appropriate adjustments as described above to reflect a Recapitalization, the Compensation Committee may not without the approval of our shareholders: (i) lower the option exercise price of an option after it is granted; (ii) cancel an option when the option exercise exceeds the fair market value of the underlying shares in exchange for another Award; or (iii) take any other action with respect to an option that may be treated as a repricing under the rules and regulations of NASDAQ.

Stock Appreciation Rights

The Compensation Committee may grant stock appreciation rights under the 2018 Incentive Plan to eligible participants. A stock appreciation right entitles the holder upon exercise to receive an amount in cash, shares of Common Stock, other property, or a combination thereof (as determined by the Compensation Committee), computed by reference to appreciation in the value of the Common Stock over its stated base value per share, which cannot be less than the fair market value of a share of Common Stock at the time of grant. The expiration dates of stock appreciation rights cannot be more than seven years after the date of the original grant.

Restricted Stock

The Compensation Committee may grant restricted shares of Common Stock under the 2018 Incentive Plan to such eligible participants, in such amounts, and subject to such terms and conditions (including the attainment of performance criteria) as the Compensation Committee determines in its discretion. Awards of restricted shares of the Common Stock may be made in exchange for services or other lawful consideration. Generally, awards of restricted shares of Common Stock are subject to the requirement that the shares be forfeited to the Company unless specified conditions are met. Subject to these restrictions, conditions and forfeiture provisions, any recipient of an award of restricted stock will have all the rights of a shareholder of the Company, including the right to vote the shares upon grant subject to these restrictions, conditions and forfeiture provisions.

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Restricted Stock Units

The Compensation Committee may grant restricted stock units under the 2018 Incentive Plan having a value equal to a designated number of shares of Common Stock to such eligible participants, in such amounts, and subject to such terms and conditions (including the attainment of performance criteria) as the Compensation Committee determines in its discretion. If the requirements specified by the Compensation Committee are met, the grantee of such units will receive shares of Common Stock, cash, other property, or any combination thereof, equal to the fair market value of the designated number of shares of Common Stock. Restricted Stock Units may be granted in a manner under which the applicable payout (in shares, cash or a combination thereof) and vesting is linked to and contingent upon the attainment of designated performance measures, such as performance-based stock units (PSUs).

Other Share-Based Awards

The Compensation Committee may also make other awards measured by the value of or payable in the form of shares under the 2018 Incentive Plan subject to the satisfaction of specified performance or other criteria. Other share-based awards may be paid in shares of Common Stock, cash, other property, or any combination thereof.

Accelerated Exercisability and Vesting on a Change in Control

Under the 2018 Incentive Plan, all then outstanding awards will automatically become fully exercisable, vested and earned upon a Change in Control. Additionally, upon a Change in Control, the Company may elect to cancel all or any portion of then outstanding awards under the 2018 Incentive Plan in exchange for a payment equal to the fair market value of the cancelled awards. For this purpose, a Change in Control means: (a) certain changes in the majority of the Board within a 12-month period; (b) the acquisition by any person of 30% or more of the voting securities of the Company; (c) consummation of a merger or reorganization of the Company in which neither the Company nor another entity controlled by our shareholders is the surviving entity; (d) a sale or other disposition of all or substantially all of our assets to another entity that is not controlled by our shareholders; or (e) shareholder approval of a liquidation of the Company.

Recoupment/Clawback

The Company is entitled to recoup compensation of whatever kind paid under the 2018 Incentive Plan by the Company at any time to the extent required by applicable securities or other law or as provided in any recoupment policy adopted by the Company.

Provisions for Foreign Participants  

The Compensation Committee may modify awards granted to participants who are foreign nationals or employed outside the United States or establish, amend or rescind rules, sub-plans or procedures under the 2018 Incentive Plan to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefits or other matters.

General Provisions

Unless authorized by the Compensation Committee in the agreement evidencing an award granted under the 2018 Incentive Plan, awards may not be transferred other than by will or the laws of descent and distribution, and may be exercised during the participant’s lifetime only by the participant or the participant’s guardian or legal representative. The Board may, from time to time, alter, amend, suspend or terminate the 2018 Incentive Plan. Unless sooner terminated by the Board of Directors, the 2018 Incentive Plan will automatically terminate on May 23, 2028. No grants may be made under the plan following the date of termination, although grants made prior to that date may remain outstanding following the termination of the 2018 Incentive Plan until their scheduled expiration date.

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Certain Federal Income Tax Consequences

The following is a brief summary of certain U.S. federal income tax consequences relating to awards under the 2018 Incentive Plan. This summary is made as of the date of this Proxy Statement, is not (and is not intended to be) complete, and does not describe state, local, foreign, or other tax consequences. The tax information summarized is not tax advice. The U.S. federal tax laws may change and the federal, state and local tax consequences for any participant will depend upon his or her individual circumstances. Tax consequences for any particular individual may be different. We advise participants to consult with a tax advisor regarding the tax implications of their awards under the 2018 Incentive Plan.

Tax Consequences to the Company

To the extent that a participant recognizes ordinary income in the circumstances described below, the Company or the subsidiary for which the participant performs services will be entitled to a corresponding deduction for income tax purposes, but only if, among other things, the expense: (a) meets the test of reasonableness; (b) is an ordinary and necessary business expense; (c) is not an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986 (as amended, the Code); and (d) is not disallowed by the $1 million limitation on executive compensation under Section 162(m) of the Code.

Tax Consequences to Participants

The U.S. federal income tax consequences to participants receiving various types of awards under the 2018 Incentive Plan are summarized below.

Nonqualified Stock Options (NSOs). In general, for recipients of NSOs: (a) no income will be recognized by the participant at the time an NSO is granted; (b) at the time of exercise of an NSO, ordinary income will be recognized by the participant in an amount equal to the difference between the option exercise price paid for the shares of Common Stock and the fair market value of the shares, if unrestricted, on the date of exercise; and (c) at the time of sale of shares of Common Stock acquired pursuant to the exercise of an NSO, appreciation (or depreciation) in value of the shares after the date of exercise will be treated as either short-term or long-term capital gain (or loss) depending on how long the shares have been held. For post-exercise appreciation in share value to qualify for long-term capital gain treatment, the shares must be held for more than one year from their date of issuance.

Incentive Stock Options (ISOs). No income will be recognized by a participant upon the grant to them of an ISO. In general, no income will be recognized by the participant upon the exercise of an ISO for regular income tax purposes. However, the difference between the option price paid and the fair market value of the shares at exercise may constitute a preference item triggering alternative minimum tax on the participant. If shares of Common Stock are issued to a participant pursuant to the exercise of an ISO, and if no disqualifying disposition of such shares is made by such option holder within two years after the date of the grant or within one year after the transfer of such shares to the option holder, then upon later sale of such shares, any amount realized in excess of the option price will be taxed to the participant as long-term capital gain and any loss sustained will be a long-term capital loss. If shares of Common Stock acquired upon the timely exercise of an ISO are disposed of prior to the expiration of either holding period described above, the participant generally will recognize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at the time of exercise (or, if less, the amount realized on the disposition of such shares if a sale or exchange) over the option exercise price paid for such shares. Any further gain (or loss) realized by the participant generally will be taxed as short-term or long-term capital gain (or loss) depending on the holding period.

Stock Appreciation Rights. No income will be recognized by a participant in connection with the grant of a stock appreciation right. When the appreciation right is exercised, the participant normally will be required to include as taxable ordinary income in the year of exercise an amount equal to the amount of cash

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received and the fair market value of any unrestricted shares of Common Stock or other property received on the exercise.

Restricted Stock. The recipient of restricted shares of Common Stock generally will not be subject to tax until the shares are no longer subject to forfeiture or restrictions on transfer for purposes of Section 83 of the Code (Restrictions). At such time, the participant will be subject to tax at ordinary income rates on the then fair market value of the restricted shares (reduced by any amount paid by the participant for such restricted shares). However, a participant who makes an election under Section 83(b) of the Code within 30 days of the date of transfer of the shares will have taxable ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such shares (determined without regard to the Restrictions) over the purchase price, if any, of such restricted shares. Any appreciation (or depreciation) after the date the value of the restricted shares initially becomes taxable to the participant which the participant later realizes upon a subsequent disposition of such shares will be treated as long-term or short-term capital gain (or loss) depending upon how long the shares have been held. If a Code Section 83(b) election has not been made, any dividends received with respect to shares of restricted stock that are subject to the restrictions generally will be treated as deferred compensation that is taxable as ordinary income to the participant.

Restricted Stock Units (including PSUs). Generally, no income will be recognized by a participant upon the award of restricted stock units, including PSUs. The recipient of a restricted stock unit award generally will be subject to tax at ordinary income rates on any cash received and the fair market value of any unrestricted shares of Common Stock or other property on the date that such amounts are transferred to the participant under the award (reduced by any amount paid, if any, by the participant for such restricted stock units).

Other Share-Based Awards. No income generally will be recognized by a participant upon the grant of other Share-Based Awards until such awards become vested and payable. Upon payment in respect of other Share-Based Awards, the recipient generally will be required to include as taxable ordinary income in the year of receipt an amount equal to the amount of cash received and the fair market value of any non-restricted shares of Common Stock or other property received.

Value of Benefits

We are unable to determine the amount of benefits that may be received by participants under the 2018 Incentive Plan if the Incentive Plan Amendment is approved (or if it is not approved) as grants of awards under the 2018 Incentive Plan are discretionary with the Compensation Committee.

Certain Interests of Directors

In considering the rec