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. XX)
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[ ] | Preliminary Proxy Statement | |
[ ] | 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 | |
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Merit Medical Systems, | ||
(Name of Registrant as Specified In Its Charter) | ||
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) | ||
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Payment of Filing Fee (Check the appropriate box): | ||
[x] | No fee required. | |
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[ ] | Fee paid previously with preliminary materials | |
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[ ] | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules | |
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TO OUR SHAREHOLDERS:
April It is my pleasure to invite you to participate in the
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 in the Proxy Statement 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. FRED P. LAMPROPOULOS | ||
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1 | | 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. We ask that you vote in advance 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 April This Proxy Statement and the Company’s Annual Report on Form 10-K for the year ended December 31, You may also request a paper copy of the Annual Report, including the related financial statements and schedules, free of charge, by writing to the Corporate Secretary at the address below (principal executive offices of the company): Merit Medical Systems, Inc. Attn: Corporate Secretary | |||||
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NOTICE OF 20222024 ANNUAL MEETING OF SHAREHOLDERS
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Date and Time | Access | Record Date | |
May 2:00 p.m. Mountain | Webcast www.virtualshareholdermeeting.com | March Only shareholders of record on the Record Date may vote | |
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Items of Business
Proposals | Board’s | More | |
1 | Elect | FOR | Page 5 |
2 | Non-binding, advisory vote to approve named executive officer compensation (“Say on Pay”) | FOR | Page 57 |
3 | Approve amendment to increase the number of shares authorized for issuance under the Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan | FOR | Page 74 |
4 | Ratify appointment of Deloitte & Touche LLP as our independent registered public accounting firm | FOR | Page |
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.
Shareholders can vote via the Internet, by telephone or by mail. Specific instructions on how to vote are included in the Notice of Internet Availability of Proxy Materials that we will mail to our shareholders on or about April 7, 2022.5, 2024. Shareholders will also be able to vote electronically during the webcast of the 2024 Annual Meeting.
Phone and Internet voting will close at 11:59 p.m. EDT on May 18, 2022,14, 2024, but voting by Internet will open again during the meeting. Voting instructions for shares held in the Company’s 401(k) Profit Sharing Plan must be received by 11:59 p.m. EDT on May 16, 202210, 2024 and such shares may not be voted during the meeting. Holders in “street name” must instruct their broker or nominee.
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| By Order of the Board of Directors, |
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| Brian G. Lloyd |
By Order of the Board of Directors,
Brian G. LloydChief Legal Officer and Corporate SecretaryApril 7, 2022
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 19, 202215, 2024
The Company’s Notice, Proxy Statement and Annual Report are available at: www.proxyvote.com.
www.merit.com | 1
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 2022 Annual Meeting of Shareholders to be held on May 19, 2022,15, 2024, at 2:00 p.m. Mountain Time (Annual Meeting or 20222024 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 Annual Report.
Voting Roadmap Even if you attend the Annual Meeting, you can vote in advance using a method below. | |||||||
Before the meeting go to: During the meeting go to: | Call 1-800-690-6903 | (cast your ballot, | |||||
Phone and Internet voting will close at 11:59 P.M. Eastern Time on May | |||||||
PROPOSAL 1: Election of | |||||||
The Board of Directors recommends that you vote FOR each director nominee. These individuals bring a range of relevant experiences and | The Board recommends a | ||||||
PROPOSAL 2: Advisory Vote on Executive Compensation (Say-On-Pay) (See page 57) | |||||||
The Board of Directors recommends that you vote FOR this “Say-on-Pay” advisory proposal because our compensation program attracts top talent commensurate with our peers and reinforces our “Pay for Performance” philosophy. | The Board recommends a | ||||||
PROPOSAL 3: Approve an Amendment to Increase the Number of Shares Authorized Under the Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan (See page 74) | |||||||
The Board of Directors recommends that you vote FOR approval of the Third Amendment to the Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan, which would increase the number of shares of Common Stock of the Company (the Common Stock) authorized for issuance under the Plan by 3,000,000 shares. The Board of Directors believes that in order to successfully attract and retain highly talented individuals, and to better align the interests of those individuals and the Company, we must continue to offer a competitive equity incentive program. The proposed increase in authorized shares under the Plan would allow Merit to continue its granting practices to key employees. | The Board recommends a | ||||||
PROPOSAL 4: Ratify Appointment of Independent Registered Public Accounting Firm (See page | |||||||
We have selected Deloitte & Touche LLP (Deloitte) to serve as our independent registered public accounting firm for the year ending December 31, | The Board recommends a | ||||||
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2 | Understand. Innovate. Deliver.TM
PROXY STATEMENT SUMMARY
A Snapshot of Our Board of Directors
The following table provides summary information about each director nominee (first four)three), as well as each director whose term of office will continue after the Annual Meeting.
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| | Director | Term | | Board Committees | | Director | Term | | Board Committees | ||||||||
Name, Primary Occupation | Age | Since | Expires | Independent | A | C | F | ESG | O | Age | Since | Expires | Independent | A | C | F | G | O |
F. Ann Millner, Ed.D. Regents Professor of Health Administrative Services at Weber State Univ. | 70 | 2015 | (1) | Yes | | ● | | □ | | |||||||||
Fred P. Lampropoulos Chair, President & CEO of Merit | 74 | 1987 | 2024(1) | No | | | | | ● | |||||||||
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 | 59 | 2021 | 2024(1) | Yes | ● | ● | | | | |||||||||
SILVIA M. PEREZ President and General Manager, Commercial Branding and Transportation, 3M Company | 57 | - | (1) | Yes | (2) | (2) | (2) | (2) | (2) | |||||||||
THOMAS J. GUNDERSON Retired Medtech Analyst at Piper Jaffray | 71 | 2017 | (1) | Yes | ● | | □ | | | 73 | 2017 | 2025 | Yes | ● | | □ | | |
Laura S. Kaiser President & CEO of SSM Health | 61 | - | (1) | Yes | (2) | (2) | (2) | (2) | (2) | 63 | 2022 | 2025 | Yes | | | | ● | ● |
Michael R. McDonnell Executive Vice President & CFO of Biogen, Inc. | 58 | - | (1) | Yes | (2) | (2) | (2) | (2) | (2) | |||||||||
Fred P. Lampropoulos Chair, President & CEO of Merit | 72 | 1987 | 2024 | No | | | | | ● | |||||||||
A. Scott Anderson President & CEO of Zions Bank | 75 | 2011 | 2024 | Yes | | □ | | ● | | |||||||||
Michael R. McDonnell Chief Financial Officer of Biogen, Inc. | 60 | 2022 | 2025 | Yes | ● | | ● | | | |||||||||
F. ANN MILLNER, ED.D. Regents Professor of Health Administrative Services at Weber State Univ. | 72 | 2015 | 2025 | Yes | | ● | | □ | | |||||||||
LONNY J. CARPENTER Former Group President, Stryker Corporation | 62 | 2020 | 2026 | Yes | | ● | ● | | □ | |||||||||
DAVID K. FLOYD Former Group President, Stryker Corporation | 63 | 2020 | 2026 | Yes | | | | ● | ● | |||||||||
Lynne N. ward Former Executive Director of my529 (formerly Utah Educational Savings Plan) | 63 | 2019 | 2024 | Yes | □ | | ● | ● | | 65 | 2019 | 2026 | 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 | 2021 | 2024 | Yes | ● | ● | | | | |||||||||
Lonny J. Carpenter Former Group President, Stryker Corporation | 60 | 2020 | 2023 | Yes | | ● | ● | | □ | |||||||||
David K. Floyd Former Group President, Stryker Corporation | 61 | 2020 | 2023 | Yes | | | | ● | ● | |||||||||
James T. Hogan Former President, Latin America, of Medtronic Inc. | 65 | 2020 | 2023 | Yes | ● | ● | | | ● |
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□: Committee Chair | A: Audit Committee | F: Finance Committee | O: Operating Committee |
●: Committee Member | C: Compensation and Talent Development Committee |
Sustainability Committee |
(1) | If elected at the Annual Meeting, |
(2) | If Ms. |
www.merit.com | 3
PROXY STATEMENT SUMMARY
Selected 20212023 Highlights
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Revenue | | | Operating Cash Flow | | | 5-Year TSR (1) |
$ | | | $ | | |
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(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, |
Environment | | | Foundations for Growth |
Prioritized reduction of environmental footprint by continuing to implement programs to reduce waste, conserve resources and improve the areas where we do business | | |
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Compensation Highlights
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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 |
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The Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan, as amended (2018 Incentive Plan), provides for the issuance of up to 6,100,000 shares of our Common Stock. Awards granted under the 2018 Incentive Plan generally have minimum vesting periods of not less than one year.
During 2020, we began 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. These performance-based restricted stock units generally have a three-year performance period.
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. We also ask that our shareholders approve an amendment to increase the number of shares authorized for issuance under the 2018 Incentive Plan. For additional information about this amendment, see “Proposal 3: Approval of an Amendment to the Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan to Increase the Number of Shares of Common Stock Authorized for Issuance Thereunder by 3,000,000 Shares.”
4 | Understand. Innovate. Deliver.TM
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: | |
| | ● ● ● Enhanced Board oversight of cybersecurity risk management and sustainable business practices ● Highly independent Board – Nine of our ten Directors are independent ● Under the direction of the Board’s Governance and Sustainability Committee (Governance Committee) continued Board refreshment practices - Six new directors or nominees since 2019, increasing gender and racial diversity - Added critical medical industry, cybersecurity and financial expertise | ● Developed and is providing oversight of a multifaceted succession plan in preparation for the anticipated transition in CEO responsibilities ● Strong and active lead independent director ● Majority voting for all directors ● ● Completed the third phase of a three-year evaluation cycle focused on assessing and enhancing the effectiveness of the Board and ● ● Regular executive sessions of independent directors ● Annual independent director evaluation of CEO ● Comprehensive code of ethics and corporate governance guidelines ● Robust ● No shareholder rights plan (“poison pill”) or dual class capitalization structure ● Annual “say-on-pay” advisory votes |
The Board of Directors recommends that you vote FOR | The Board recommends a |
At the Annual Meeting, four directorsshareholders will be electedasked to consider the nominations of three directors to serve until our 20252027 Annual Meeting of Shareholders and until their successors are duly elected and qualified. If any of the below nominees becomebecomes unavailable to serve, proxies solicited by this Proxy Statement will be voted for other persons designated by the Board in their stead.
www.merit.com | 5
CORPORATE GOVERNANCE AND RELATED MATTERS
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. ApproximatelyOur Third Amended and Restated Bylaws (Bylaws) provide that the number of directors serving in each class shall be as nearly equal in size as possible. Accordingly, 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 F. Ann Millner, Ed.D., Thomas J. GundersonFred P. Lampropoulos, Stephen C. Evans and Jill D.A. Scott Anderson are scheduled to expire in connection with our Annual Meeting. Ms.Because Mr. Anderson washas reached the age at which our Corporate Governance Guidelines (Governance Guidelines) require him to submit his resignation from the Board, the Board did not nominatednominate him for re-election as a director. Accordingly, Mr. Anderson’s service as a director will conclude at the Annual Meeting. The Board has nominated Fred P. Lampropoulos, Stephen C. Evans and Silvia M. Perez for election at the Annual Meeting to serve new three-year terms.
Size of the Board of Directors
The Board currently consists of ten 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 anticipation of2023, the Annual Meeting, the Environmental, Social and Governance Committee of the Board (ESG Committee) recommended, and the Board unanimously adopted a resolution increasingsetting the number of directors serving onat ten, which is the Board to eleven.current number of directors.
www.merit.com 6 | 5 Understand. Innovate. Deliver.TM
CORPORATE GOVERNANCE AND RELATED MATTERS
Nominees for Election as Directors
Our Board and the ESGits Governance Committee believe that each of the following nominees possessespossess 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.
directors. The experience and qualifications of each nominee, including information regarding the specific experience qualifications, attributes and skillsqualifications that led the Board and the ESG Committee to conclude that she or he should be nominated to serve as a director of the Company, in light of our business and structure, are set forth below:
73 July 1987 Operating None 2024 | : 76 November 2011 Compensation (Chair), ESG None B.A. (philosophy, economics), Columbia University; 2024 | |||
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FRED P. LAMPROPOULOS Chair, President, Chief Executive Officer Age: 74 Director Since: July 1987 Committees: Operating Other Public Boards: None Term Expires: 2024 | REAR ADMIRAL (RET.) STEPHEN C. EVANS Independent Director Age: 59 Director Since:June 2021 Committees: Audit, Compensation Other Public Boards: Alarm.com Holdings, Inc. Education: M.A., U.S. Naval War College (National Security Affairs), B.A., The Citadel Term Expires: 2024 | |||
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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. | | 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 provide valuable counsel to the Company as it seeks to expand its operations and sales efforts across the globe. | ||
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www.merit.com | 7
CORPORATE GOVERNANCE AND RELATED MATTERS
: 57 None Pharmaceutical Chemist ], University of the Republic (Uruguay); Industrial Pharmacist, Federal University of Parana (Brazil) New Nominee |
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Career Highlights ● President and ● ● ● ● Qualifications of Particular Relevance to Merit Ms. |
8 | Understand. Innovate. Deliver.TM
CORPORATE GOVERNANCE AND RELATED MATTERS
Directors Whose Terms of Office Continue
In its regular discussions regarding Board composition, our Governance 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 Governance Committee to conclude that each continuing director should serve on the Board are set forth below:
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LONNY J. CARPENTER Independent Director Age: 62 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: 2026 |
| | DAVID K. FLOYD Independent Director Age: 63 Director Since: June 2020 Committees: Governance and Sustainability, Operating Other Public Boards: None Education: B.S., Grace College Term Expires: 2026 | |
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Career Highlights ● ● ● ● ● Group President, Global Quality and Operations of Stryker, 2011 to 2016 ● President, Instruments and Medical Division of Stryker, 2006 to 2008 ● Qualifications of Particular Relevance to Merit
| | Career Highlights ● Board Chair, Corin Group LTD, a privately-held global orthopedic enabling technology company, 2020 to present ● Board member and ● Senior Advisor, Permira, a leading global private equity investment firm ● Group President, Orthopaedics, 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 35 years of experience as a leader in the life sciences industry, including serving as president and CEO within several leading medical technology companies. Additionally, the Board believes Mr. Floyd’s nearly 20 years of general management experience provide the Board with expertise on a broad range of matters, including mergers and acquisitions, strategic planning, global business and operations, corporate governance and product commercialization. The Board |
6 www.merit.com | Understand. Innovate. Deliver.TM 9
CORPORATE GOVERNANCE AND RELATED MATTERS
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| THOMAS J. GUNDERSON Independent Director Age: 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: | LAURA S. KAISER Independent Director Age: 63 Director Since: May 2022 Committees: Governance and Sustainability, Operating Other Public Boards: None Education: B.S. (health sciences management), University of Missouri; M.B.A., Saint Louis University; Masters of Health Administration, Saint Louis University Term Expires: 2025 | |||||
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| 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 ● ● 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). |
www.merit.com | 7
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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Career Highlights ● ● ● ● ● ● Named one of the Qualifications of Particular Relevance to Merit Ms. Kaiser is a seasoned executive with more than 35 years of experience in the healthcare industry. The Board believes | ||||
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10 | Understand. Innovate. Deliver.TM
CORPORATE GOVERNANCE AND RELATED MATTERS
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MICHAEL R. MCDONNELL Independent Director Age: 60 Director Since: May 2022 Committees: Audit, Finance Other Public Boards: None Education: B.S. (accounting), Georgetown University Term Expires: 2025 | F. ANN MILLNER, Ed.D. Lead Independent Director Age: 72 Director Since: July 2015 Committees: Governance and Sustainability (Chair), 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: 2025 | |||
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Career Highlights ● ● ● Executive Vice President and Chief Financial Officer of Intelsat, a global provider of satellite services, 2008-2015 ● Chief Operating Officer (2006-2008) and Chief Financial Officer (2004-2008) of MCG Capital Corporation, a publicly-held commercial finance company, 2004 to 2008 ● Chief Financial Officer of EchoStar Communications Corporation (dba Dish Network), a satellite television provider, 2000 to 2004 ● Partner of PricewaterhouseCoopers, LLP, 1996 to 2000, other positions, PricewaterhouseCoopers, LLP, 1986-1996 ● Director of Catalyst Health Solutions, Inc., a publicly held pharmacy benefits management company, 2005 to 2012 ● Certified public accountant Qualifications of Particular Relevance to Merit Mr. McDonnell is a financial executive with more than 35 years of experience providing financial and accounting advice and oversight to life science and technology companies. The Board believes Mr. McDonnell’s depth of understanding of financial management, accounting principles and practices, capital markets and financing transactions strengthen the Board’s oversight of the | | 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 ● ● Vice President of University Relations at Weber State University, 1993 to ● 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
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8 www.merit.com | Understand. Innovate. Deliver.TM 11
CORPORATE GOVERNANCE AND RELATED MATTERS
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LYNNE N. WARD Independent Director Age: Director Since: August 2019 Committees: Audit (Chair), Finance; Other Public Boards: None Education: B.S. University of Utah (Accounting) Term Expires: | |
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Career Highlights ● Executive Director of 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 of the 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 ● Certified public accountant 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 | |
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Director Whose Term of Office Does Not Continue
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Director Whose Term of Office Does Not Continue
Ms. Anderson was not nominated for re-election as a director, and her term of service will expire upon the election her successor at the Annual Meeting.
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Service to Merit
Because Mr. Anderson has reached the age at which our Governance Guidelines require him to submit his resignation from the Board, the Board did not nominate him for re-election as a director. Accordingly, Mr. Anderson’s service as a director will conclude at the Annual Meeting. | | | | ||
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CORPORATE GOVERNANCE AND RELATED MATTERS
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 ESGGovernance 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. Among other things, each independent director should be free of significant business connections with competitors, suppliers, or customers of the Company.
In 2021,2023, the ESGGovernance Committee undertook its annual review of director and nominee independence and recommended that the Board determine that Mr. Anderson, Mr. Carpenter, Admiral Evans, Mr. Floyd, Mr. Gunderson, Ms. Kaiser, Mr. Hogan,McDonnell, Dr. Millner, and Ms. Ward and Admiral Evans each be designated as an independent director. If elected to the Board, we believe that Ms. Perez will also 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 Ms. Kaiser and Mr. McDonnell, the ESG Committee and the Board believe that Ms. Kaiser and Mr. McDonnell meet the director independence guidelines set forth in the Nasdaq Marketplace Rules.
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Lead Independent Director
Since July 2021, F. AnnDr. Millner 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. These duties include:
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| 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 |
| Agendas | ● |
| Meeting Schedules | ● Approves meeting schedules for the Board and its committees to |
| 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, 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 ESGGovernance 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 |
● | current and prior experience related to anticipated Board and committee responsibilities in other areas of importance to the Company. |
The ESGGovernance 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 ESGGovernance 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 ESGGovernance Committee’s perceptions about future issues and needs. Additionally, in considering the composition of the Board and identifying nominees, the ESGGovernance 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.”
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However, the ESGGovernance 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:
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CORPORATE GOVERNANCE AND RELATED MATTERS
● | age; |
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● | policy-making experience; |
● | ability to work constructively with our management and other directors; |
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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 ESGGovernance Committee uses a variety of methods for identifying and evaluating director nominees. The ESGGovernance 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 ESGGovernance Committee considers various potential candidates for director. Candidates may come to the attention of the ESGGovernance Committee through various means, including recommendations from current directors, third-party searchadvisory firms, shareholders or other individuals. In 2021, the ESG Committee engaged a third-party search firm to identify director candidates based on criteria provided by the ESG Committee. The third-party search firm provided a list of candidates that met the desired criteria, and the ESG Committee, as well as other directors, selected and interviewed a number of candidates. From this process, the ESG Committee recommended the nomination of Mr. McDonnell for consideration by the entire Board. The Board meet with Mr. McDonnell and reviewed additional information gathered from external parties, following which the Board accepted the recommendation of the ESG Committee and nominated Mr. McDonnell for election at the Annual Meeting. Contemporaneously with its consideration of the nomination of Mr. McDonnell, the ESG Committee identified and interviewed a number of other director candidates for nomination, without engaging a third-party to identify those candidates. From that process, the ESG Committee recommended the nomination of Ms. Kaiser for consideration by the entire Board. The Board met with Ms. Kaiser and reviewed additional information gathered from third parties, following which the Board accepted the recommendation of the ESG Committee and nominated Ms. Kaiser for election at the Annual Meeting.
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Experience and Skills
The table below summarizes some of the relevant experience, qualifications and demographic information of oureach existing director and nominee identified by the Governance Committee. Although the Board believes each director and nominee provides the Company with extensive experience and skills which complement the experience and skills of other directors and nominees identified byand are of great benefit to the ESG Committee.Company and its shareholders, the following table identifies the core competencies of each director and nominee. The biographies above describe each director’s or nominee’s background in more detail.
Experience and Skills Matrix
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| A. Scott | Lonny J. Carpenter | Stephen C. Evans | David K. Floyd | Thomas J. Gunderson | James T. Hogan | Laura S. Kaiser | Fred P. Lampropoulos | Michael R. McDonnell | F. Ann | Lynne N. Ward |
Board Tenure | 11 | 2 | 1 | 2 | 5 | 2 | - | 35 | - | 7 | 3 |
Age | 75 | 60 | 57 | 61 | 71 | 65 | 61 | 72 | 58 | 70 | 63 |
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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| A. Scott | Lonny J. | Stephen C. | David K. | Thomas J. | Laura S. | Fred P. | Michael R. | F. Ann | Lynne N. | Silvia M. |
Board Tenure | 13 | 4 | 3 | 4 | 7 | 2 | 37 | 2 | 9 | 5 | Nominee |
Age | 77 | 62 | 59 | 63 | 73 | 63 | 74 | 60 | 72 | 65 | 57 |
Leadership experience | ● | ● | ● | ● | | ● | ● | ● | ● | ● | |
Financial transactions | ● | ● | | ● | ● | | | | |||
Financial management | ● | | ● | ● | ● | ● | ● | ||||
Global strategic planning | ● | ● | | ● | | ● | |||||
Medical device industry knowledge | ● | | ● | ● | | ● | | | | ● | |
R&D innovation | | | | | ● | | | ||||
Marketing & sales | | | | ● | | | | | | ● | |
Operations | ● | | | ● | | | ● | ||||
Governance & regulatory | | ● | | | | | | | ● | | |
Investor & stakeholder relations | | | | | ● | | ● | ● | | | |
Digital, data & analytics | | | ● | | | | | | | ● | |
IT systems & cybersecurity | | | ● | | | | | | | ● | |
Talent management & compensation | ● | | ● | ● | |
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CORPORATE GOVERNANCE AND RELATED MATTERS
Board Diversity
The Company is committed to diversity and inclusion, and believes it is important that the Board is composed of individuals representing the diversity of our communities. The ESGGovernance Committee seeks director nominees with a broad diversity of experience, professions, skills and backgrounds.
The table below reports self-identified gender and demographic statistics for the Board, as constituted prior to the Annual Meeting, and prior to (i) the prospective election of Ms. Kaiser and Mr. McDonnell, and (ii) the prospective departure of Ms. Anderson, in the format required by the Nasdaq Marketplace Rules.
Board Diversity Matrix
(as of April 7, 2022)2, 2024)
Board Size | Board Size | Board Size | ||||||
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Total Number of Directors | 10 | 10 | ||||||
Female | Male | Non-Binary | Did Not Disclose Gender | Female | Male | Non-Binary | Did Not Disclose Gender | |
Part I: Gender Identity | Part I: Gender Identity | Part I: Gender Identity | ||||||
Directors | 3 | 6 | - | 1 | 3 | 7 | - | - |
Part II: Demographic Background | Part II: Demographic Background | Part II: Demographic Background | ||||||
African American/Black | - | 1 | - | - | - | 1 | - | - |
Alaskan Native or Native American | - | - | - | - | - | - | - | - |
Asian | 1 | - | - | - | 1 | - | - | - |
Hispanic or Latinx | - | - | - | - | - | - | - | - |
Native Hawaiian or Pacific Islander | - | - | - | - | - | - | - | - |
White | 2 | 5 | - | - | 2 | 6 | - | - |
Two or More Races or Ethnicities | - | - | - | - | - | - | - | - |
LGBTQ+ | - | - | ||||||
Did not Disclose Demographic Background | 2 |
Shareholder Recommendations The Any shareholder wishing to recommend a candidate for consideration by the | | | We want to hear from you | |
Interested shareholders should send recommendations to: Merit Medical Systems, Inc. Attn: Brian G. Lloyd, 1600 West Merit Parkway South Jordan, Utah 84095 |
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Board and Committee Meetings and Responsibilities
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In As further described below, the Board has a standing Audit Committee, Compensation Committee, | | | ≥75% 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. |
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Audit Committee | ||
Members | Primary Responsibilities | # of
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Lynne N. Ward (Chair) Stephen C. Evans Thomas J. Gunderson
The Board has determined that Ms. Ward and | 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. 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; ● in coordination with the Operating Committee, reviewing our risk management program with respect to financial and accounting practices, information technology and cybersecurity; ● 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 |
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Compensation and Talent Development Committee | ||
Members | Primary Responsibilities | # of
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A. Scott Lonny J. Carpenter Stephen C. Evans
F. Ann Millner, Ed. D. | 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 and executive succession planning activities. Additional information regarding the functions, procedures and authority of the Compensation Committee is provided in the Compensation Discussion and Analysis beginning on page |
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Thomas J. Gunderson (Chair)
Lonny J. Carpenter Michael R. McDonnell Lynne N. Ward | 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 ● the Company’s strategic planning and activities; and ● the Company’s tax strategy and structure. |
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Members | Primary Responsibilities | # of |
F. Ann Millner, Ed.D. (Chair) A. Scott Anderson* David K. Floyd Laura S. Kaiser Lynne N. Ward | The Governance Committee is responsible for oversight of (1) the Company’s corporate governance practices, including the practices set forth in our Governance Guidelines and the Company’s director nomination process and procedures, (ii) the Company’s practices with respect to environmental sustainability and (iii) matters impacting the Company’s image and reputation and its standing as a responsible corporate citizen. As discussed earlier, the Governance Committee selects, evaluates and recommends to the full Board qualified candidates for election to the Board. The Governance Committee also provides oversight of our sustainable business practices. | 8 |
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Operating Committee | ||
Members | Primary Responsibilities | # of
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Lonny J. Carpenter (Chair)
David K. Floyd
Fred P. Lampropoulos | 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 played a significant role in the development and oversight of our Foundations for Growth program, |
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* Mr. Anderson’s membership on these committees will end when his current term as director expires at the Annual Meeting.
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Board Evaluation
In 2022, the Governance Committee engaged an experienced independent advisor to develop and conduct a comprehensive Board evaluation process to assess the effectiveness of our Board, committees and members. The evaluation process aims to identify strengths and development opportunities with respect to our Board and its committees in the areas of Board oversight and duties, Board functioning and meetings and Board composition and culture. The evaluation conducted in the first phase of the process was led by the Governance Committee and facilitated by the independent advisor to preserve the integrity of the process and anonymity of the feedback of the Company’s directors and senior executive officers who participated in the process. The evaluation facilitator met individually with each director and some of the Company’s senior executive officers to obtain and compile responses to the evaluation, which included feedback from directors on other directors, for review by the Governance Committee and the Board. The Governance Committee reviewed the first-phase evaluation results with the evaluation process facilitator and coordinated an opportunity for the facilitator to present the general conclusions developed in the course of the evaluation to the Board. The Board reviewed and discussed the conclusions presented by the facilitator and reviewed potential actions to be taken as a result of the evaluation. Subsequent to the completion of the evaluation, the Board has used the evaluation results to inform Board and committee composition and refreshment, including expansion and refinement of the attributes and experience criteria for Board membership and to address the evolving needs of the Company. In the second phase of the evaluation process, the Governance Committee and the Board, in coordination with an external independent advisor, conducted a detailed review of the action items identified during the evaluation conducted in the first phase and a full-day Board effectiveness session facilitated by an independent external advisor in May 2023. In preparation for the session, the independent advisor conducted interviews with each of the directors, focused on Board effectiveness and executive succession planning. During the session, the advisor reviewed the interview findings, noting strengths and opportunities for further development, the directors (as an entire group and in sessions of the independent directors) discussed in detail the feedback provided by the advisor and the directors developed an action plan to address the objectives identified during the session, both with respect to the duties and responsibilities of the Board in general, as well as in preparation for the anticipated CEO succession transition. At the end of 2023, the Governance Committee completed the third phase of the evaluation process by conducting a confidential internal assessment facilitated by the Company’s Corporate Secretary. Each director responded to a series of questions addressing the director’s assessment of the effectiveness of our Board, committees and members. The assessment questions were developed with the assistance of the independent advisor who conducted the evaluation in the first phase of the evaluation process and were designed to evaluate the actions taken by the Board, committees and members during the three-phase process. The Governance Committee reviewed the responses to the internal assessment and the Chair of the Governance Committee summarized the responses in a meeting of the Board. The Board and Governance Committee intend to use the assessment results in their continued efforts to identify opportunities for enhanced Board and committee effectiveness.
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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.
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CORPORATE GOVERNANCE AND RELATED MATTERS
The Board has delegated risk management oversight responsibilities to the Operating Committee. However, oversight of particular risks has been further delegated to the applicable standing committee(s) of the Board. The Audit Committee is generally responsible for oversight of risks 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 TechnologyInformation 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 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. The ESGGovernance Committee is generally responsible for oversight of risks associated with the Company’s sustainability efforts, director and management succession and development and implementation of corporate governance principles, as well as 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.Company. The Finance Committee is generally responsible for oversight of risks relating to mergers and acquisitions, as well as capital raising activities and transactions. 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 Operating Officer, Chief Legal Officer, Chief ComplianceCommercial Officer, Chief Technologyof Accounting, Chief Compliance Officer, Chief Information Officer, and Director of Internal Audit.Audit, Director of Enterprise Risk Management and Vice President, Environmental, Social and Governance. 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 ESGGovernance 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
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and strategic planning. In recent years, our ESGGovernance Committee has 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 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 2021,2020, 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 arehave historically been directed by F. Ann Millner, Ed.D., our Lead Independent Director and Chair of our ESGGovernance Committee, and A. Scott Anderson, Chair of our Compensation Committee and former Lead Independent Director, and are supported by members of our executive management and investor relations teams.team.
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As a consequence of the ongoing COVID-19 pandemic, the scope of engagement between our directors and shareholders was reduced significantly during 2020, 2021 and 2021.2022. We maintained contact with several of our large shareholders during 2021;2023, primarily through financial conferences and investor presentations; 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, during 2023 our Board and its ESGGovernance and Compensation Committees took a number of actions which we believe have strengthened our corporate governance and executive compensation practices. Those actions include:
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Identified experience and skills which would enhance the Board’s ability to fulfill its duties and responsibilities and |
● | Reviewed and amended the Governance Guidelines to strengthen our corporate governance practices, including enhancing the emphasis on director education, increasing the responsibilities of the Lead Independent Director, establishing a requirement that not less than 60% of the members of the Board shall be independent directors, requiring the independent directors to review the Company’s Corporate Policy on Insider Trading (Insider Trading Policy) and provide oversight of a written report provided by the Company’s Chief Legal Officer to the Board, adopting a policy regarding rotation of the Audit Committee Chair, implementing additional practices with respect to the Company’s ethics hotline and providing for regular reporting of the Company’s Chief Legal Officer and Chief Compliance Officer to the Board; |
● | Continued to encourage and provide oversight of expanded sustainable business practices; |
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● | Enhanced oversight of the Company’s enterprise risk management practices, under the direction of the Operating |
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 ESGGovernance and Compensation Committees, will continue to seek opportunities to consult with major shareholders in appropriate situations. WeDue to the expiration of Mr. Anderson’s term of service as a director, we anticipate Dr. Millner and Mr. Andersonother Board committee chairs will continue to lead those efforts, with the support of members of our executive management and investor relations teams.
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CORPORATE GOVERNANCE AND RELATED MATTERS
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 2023,2025,” 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 whistleblowerethics 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 tenTen of the eleven directors, then serving on the Board or nominated to the Board, were present in person or through video conference at our 20212023 annual meeting of shareholders.
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Governance Guidelines and Code of Ethics
Corporate Governance Guidelines
Our Governance Guidelines set forth the responsibilities of our directors.
The Governance Guidelines include guidelines that, among other things, contemplate that directors will maintain minimum stock ownership with a value of at least five 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 five years from appointment to the Board to comply with the minimum stock ownership requirement. The ESGGovernance 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. AllBased on its review of the stock ownership of the directors and CEO, the Governance Committee determined that all current directors and nomineesthe CEO are within their respective five-year transition periods except our CEO, A. Scott Anderson and F. Ann Millner. Our CEO, Mr. Anderson and Dr. Millner are presently in compliance with the minimum stock ownership guidelines.guidelines set forth in the Governance Guidelines or are within their five-year transition periods.
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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 | ● |
●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 MeritCompany 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
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improper benefit as a result of the person’s position with the Company. Our Governance Guidelines prohibit the Company and prohibits any form of loanfrom making or creditarranging personal loans to directors or executive officers of the Company or their family members.Company.
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.
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Merit Ethics Hotline
As contemplated by the Code of Conduct, we maintain The Audit Committee regularly reviews all complaints we receive through the | | |
Hotline | |
Our ● by telephone at ● online at |
Trading Restrictions
Our directors and executive officers are subject to our Corporate Policy on Insider Trading Policy, 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 from (i)(a) trading in MeritCompany stock on a short-term basis (minimum six-month holding period); (ii)(b) engaging in short sales of MeritCompany stock; (iii)(c) buying or selling put options or call options or other derivative instruments associated with MeritCompany stock; or (iv)(d) entering into hedging transactions associated with Merit stock. After reviewing the provisions of the policy which prohibit our directors and executive officers from maintaining margin accounts collateralized by shares of our Common Stock, the Board granted to our CEO a limited waiver of the application of the policy in order to provide him with a two-year period to close out a margin account he had established prior to the adoption of the policy.
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.
During 2023, our independent directors, with the assistance of our Chief Legal Officer, completed a comprehensive review of our Insider Trading Policy, following which our Chief Legal Officer provided to the Board a written report setting forth findings of the review. Based upon that review, as well as the SEC’s amendment of rules governing stock trading programs for corporate insiders, known as Rule 10b5-1 plans, the Governance Committee recommended and the Board approved amendments to the Insider Trading Policy to address the recommendations of the independent directors as well as the requirements of the new SEC rules. Those amendments included imposing restrictions on gifts or donations of Common Stock made while the donor is in possession of material non-public information, extending the duration of “blackout periods” under the Insider Trading Policy until disclosure of the Company’s periodic financial information has been disclosed in a quarterly or annual report filed with the SEC, enhancing the procedures for adoption of Rule 10b5-1 plans by Company insiders and development of Rule 10b5-1 plan guidelines.
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 ESGGovernance 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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CORPORATE GOVERNANCE AND RELATED MATTERS
In accordance with the provisions of the Governance Guidelines, upon reaching the age of 75 years, A. Scott Anderson tendered to the Board his letter of resignation. Our environment, social,Governance Committee and governance (ESG) priorities are more critical than everthe Board considered Mr. Anderson’s resignation and his contributions to the Company. Following such consideration, the Governance Committee recommended that the Board decline to accept Mr. Anderson’s resignation and, acting on that recommendation, the Board declined to accept his resignation. The Board determined that, despite being beyond the retirement age set forth in our Governance Guidelines, Mr. Anderson continued to provide significant contributions to our successBoard and the Company, and his unique perspective and extensive skills and experience continued to make him a valuable asset to the Board and the Company. Mr. Anderson’s term as a director will expire at Meritthe Annual Meeting and to our relationship with the world. AsBoard did not nominate him for re-election as a global company, we understand thatdirector. Accordingly, Mr. Anderson’s service as a director will conclude at the long-term healthAnnual Meeting.
Sustainability
Under the oversight of our employees, customers,Board of Directors and communities will benefit frommanagement team, we continue to make sustainability a key focus of our business. We have a cross-functional Corporate Sustainability Council that promotes achievement of long-term Environment, Social and Governance (ESG) goals across our enterprise. These efforts have included proactive actions to help create a healthier and more sustainable and equitable world. Merit’s sustainability strategy focuses on adding business value by assessing theaddress both risks and opportunities related to our sustainability program, as we strive for continued growth and profitability.
Most of our ESG aspects, as well as addressingproducts are disposable medical devices and are generally discarded after a single use due primarily to the risks of exposing patients to bloodborne pathogens capable of transmitting disease or other potentially infectious materials. Additionally, repeated sterilization to address such risks is not possible because it may adversely affect the quality of the materials used in many of our products and result in the failure of our products to function properly if used in multiple medical procedures. Consequently, many of our used products will likely end up in a medical waste disposal facility at the end of their usefulness. We continually look for opportunities to deliver sustainable, long-term growth of our business. Our sustainability practices are an integral component of our business strategy.
We have identified our sustainability opportunities and have developed areas of focus where we believe we can haveare positioned to make a positive impact. These include programs designed to reduce waste, improve efficiencies, reduce greenhouse gas emissions, and protect the greatest impact. We pursue that strategy throughenvironment.
Sustainability Governance Structure
Our formal sustainability governance structure is depicted below, and its elements guide the implementation of our Enterprise Risk/Opportunity Management Program, engaging with stakeholders,sustainability program. The Governance Committee oversees our sustainability program, including regular reviews of our stated targets and seeking to identify the areas where we can make the greatest difference. Our sustainability objectives focus on seven key value pillars: compliance and ethics, diversity, equity and inclusion, employee health and safety, environmental sustainability, quality assurance, and philanthropy.
The following discussion summarizes our efforts to implement that strategy in 2021.
Energy & Greenhouse Gas (GHG) Emissions
Energy is a significant manufacturing input and cost within our global operations, so energy efficiency and conservation are important objectives within our business. Using energy effectively conserves resources, advances environmental performance, reduces the burning of fossil fuels, and improves air quality.
In comparison to our 2020 baseline year, we achieved a reduction in energy intensity and GHG emissions (scope 1 and 2). Our energy intensity decreased by 9% and our GHG emissions intensity decreased by 24% in 2021, as compared to 2020. The principal factors that contributed to those results were our movement to more green energy, increased energy efficiency within our operating units, increased revenues, and incremental improvement in location-based emissions factors. We measure GHG emissions by carbon dioxide equivalent (CO2e) and energy intensity by units of joules consumed to dollars of revenue earned.
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3,415 | | | 14,785 | | | 0.1902 |
Metric tons CO2e These emissions include stationary combustion from Company-managed and Company-operated facilities over 10,000 square feet, as well as facility vehicle usage. | | | metric tons CO2e These emissions include purchased non-renewable energy at our global operation sites over 10,000 square feet. | | | Energy Intensity Energy includes purchased electricity and fuels consumed by Merit-managed and operated sites greater than 10,000 ft2. |
commitments.
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Governing Body: | Board of Directors | Corporate Sustainability Council | Enterprise Opportunity Management | Sustainability Management |
Lead by: | Chair and Chair of Governance Committee | Chair, President and CEO | Director, Enterprise Risk Management | Vice President, ESG |
Organization Participants: | Directors, facilitated by the Governance Committee | Chief Operating Officer Chief Financial Officer Senior Vice Presidents of business functions Vice Presidents of business segments | Vice Presidents of business segments | Directors and Senior Managers responsible for functions related to specific sustainability management and goals |
Functions & Oversight: | Monitors the Company’s adherence to corporate governance policies, including the Governance Guidelines, oversight of the Company’s practices with respect to environmental sustainability, oversight of matters impacting the Company’s image and reputation and its standing as a responsible corporate citizen and other responsibilities required by applicable laws and regulations. | Oversees the sustainability program and enables business segment and functions to pursue and implement opportunities and practices that support the sustainability policy | Oversees enterprise risk management and opportunities to inform executive leadership and the Board of Directors on risk management efforts and provides a forum to review and guide enterprise sustainability initiatives and provide input on sustainability program execution. | Reviews progress to targets and opportunities for program enhancement and shares internal and external insights and best practices. |
Sustainability Reporting
Merit has been recognized for our sustainability efforts. We publish annual sustainability reporting which is prepared with Global Reporting Initiative and Sustainability Accounting Standards Board disclosure indexes. We also maintain a dedicated sustainability website at www.merit.com that serves as an online repository for our historical sustainability-related disclosures and accompanying policies. In our upcoming 2023 Sustainability Report scheduled to be released in May 2024, we intend to include disclosures consistent with the framework of the Task Force on Climate-Related Financial Disclosures that will add valuable insights for investors on how Merit is incorporating climate-related risks and opportunities into our business strategy.
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CORPORATE GOVERNANCE AND RELATED MATTERS
Climate and Environmental Stewardship
Total Scope 1Climate risks and 2 emissions during 2021 was approximately 18,200 metric tonsopportunities impact our long-term resiliency as a global medical device leader. We recognize that companies have a role in meeting the challenge of CO2e. Total GHG emissions intensity was approximately 0.0169 metric tons of CO2e/$K Revenue. Our total global energy usage was approximately 204,404,000 megajoules of which 41,454,760 (20%) came from renewable sources (wind, solar, and/or hydroelectric).
Water
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mitigating and adapting to climate change risks. We |
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Water issues vary significantly by operating location. In 2021, we utilized the Water Risk Filter provided in collaboration between the World Wildlife Fund for Nature (WWF) and KFW DEG to understand basin water risk at our operating locations. We have identified three Merit manufacturing locations (Tijuana, Mexico, South Jordan, Utah, and Pearland, Texas) as water-stressed sites. The methodology disclosureaddress climate risks while leveraging opportunities to foster a strong business model for the Water Risk Filter notes: “the logic that underpins the water risk assessment isfuture. In 2024, Merit has engaged consultants to evaluate average, recent water risk conditions,run scenario analysis to further refine our strategy and disclosures as well as some level of future risk” (waterriskfilter.org).
The following table summarizes Merit operating sites located in identified water stressed regions:
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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 |
* Assessed risk from 1 (very limited risk) to 5 (very high risk)
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CORPORATE GOVERNANCE AND RELATED MATTERS
we move forward with our 2030 Operational Sustainability Goals
We have set operational environmental sustainability goals centered on combating climate change and reducing our usage of water resources. Using 2020 as a baseline year, we commit to achieve the following goals by 2030:
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The table below captures our progress toward these goals during 2021. We adjust our baseline for changes in our portfolio, assessment methods, and boundary definitions to facilitate consistent measurement of our progress. Due to the improvement in our first year’s results from our baseline year (2020), we intend to continue to evaluate these targets for increased performance year over year.management plan.
Operational Sustainability Target Performance
(Intensity measured on a per $ of revenue basis, compared to 2020)
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2021 Sustainability Highlights
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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 company. The council meets at least quarterly and leads our efforts to integrate corporate sustainability throughout the company and encourage accountability. The council consists of the following members:
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20212023 Sustainability Report
Our Sustainability Report for 2021 (to be released in April 2022) willWe intend to provide furtheradditional details about our sustainability initiatives and efforts in 2021.2023 in our 2023 Sustainability Report, which is scheduled to be released in May 2024. To learn more about our sustainability efforts, and to view Sustainability Reports for prior years, please review the information on our website at 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 are an integral part of our culture and a driver for sustainable growth. Our 2021 total recordable injury rate (TRIR) was 0.8, a decrease from our 2020 TRIR of 1.1. We made a goal in 2020 to achieve ISO certification of our Occupational Health and Safety Management System at all eight of our largest manufacturing sites by the end of 2022. As of this report, we have achievedMerit holds ISO 45001 certifications for our occupational health and safety management systems at six of the eight sites. These include Singapore; South Jordan, Utah; Tijuana, Mexico; Galway, Ireland; Pearland, Texas;our facilities located in Salt Lake City, Utah and Richmond, Virginia.Virginia in the United States, Galway, Ireland, Tijuana, Mexico, Paris, France, and Venlo and Maastricht, The Netherlands.
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 areis contrary to our values and long-term success. We demonstrate this advocacy by maintaining ethical and responsible policies and practices and embeddingmonitoring and enforcing these policies throughout all levels of the organization. We hold ourselves accountable to high standards of honesty, fairness, and integrity. MeritCompany compliance and anti-corruption policies are designed to ensure interactions with healthcare professionals and healthcare organizations will benefit patients and enhance the practice of medicine. Every Merit employee is responsible for adhering to these policies as well as complying with all applicable laws and regulations, e.g., the U.S. Anti- Kickback Statute, the False Claims Act, the Foreign Corrupt Practices Act (FCPA)(FCPA), export and import regulations, advertising and promotion laws, and applicable Sunshine/Transparency Laws.
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. In 2019, we made a goal to achieve ISO 14001 certification of our Environmental Management System at all eight of our largest manufacturing sites by the end of 2021. We are proud to report that we achieved our goal. We now hold ISO 14001 certification for our environmental management systems at our manufacturing sites located in South Jordan, Utah;Salt Lake City, Utah and Richmond, Virginia in the United States, Galway, Ireland;Ireland, Tijuana, Mexico; Singapore, Pearland, Texas; Richmond, Virginia;Mexico, Paris, France;France and Venlo, The Netherlands and at our EMEA distribution center located in Maastricht, The Netherlands.
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Diversity & Inclusion
WeAs a global company, we understand that having a diverse workforce brings valuable global benefitsadds value to the entire organization. Advantages includeAmong the many advantages are greater innovation, learning, growth, and productivity. We are committed to recruiting and retaining diverse team members at all levels of the organization who can share their varied perspectives on the most complex challenges facing us as we work toward a more equitable world. Today, 30%Thirty percent of our directors are women, and 40% of our directors meet the Nasdaq standard for diversity. Additionally, more than 34%37% of our management teamemployees are women. Our global workforce comprises 56%55% female team members, and 51%57% of our team members in the United States come from diverse minority backgrounds. While we are proud of our progress, we recognize there is still room for improvement and are working on initiatives in this area.
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CORPORATE GOVERNANCE AND RELATED MATTERS
In 2021, we launched our North America Women’s Leadership Initiative (WLI)(WLI) with tremendous success. We have also launched similar organizations in Asia and Europe. The WLI is an affinity group led by women that is open to all MeritCompany employees. The group employs a comprehensive program to cultivate employee engagement and retention by holding meaningful events that facilitate both personal and professional development.
Enterprise Opportunity Management
With risk comes opportunity, and with opportunity comes risk. As we navigate our business through a myriad of risks, we strive to focus on and embraces opportunities to improve. We recognize that risks and opportunities are present in all business activities and that the effective management of risk while proactively seeking opportunity is crucial to maximizing organizational value. Our Enterprise Opportunity Management (EOM) program is designed to actively engage executive leadership, with Board oversight, in monitoring and managing critical risks and opportunities associated with our business and the environment in which we operate. We also look to the future to prepare for emerging risks and opportunities that are on the horizon. As Merit’s Enterprise Risk Management program, EOM is aligned with the COSO Enterprise Risk Management and ISO 31000:2018 frameworks.
Our EOM program has supported Merit’s sustainability objectives by facilitating analysis and discussion in many areas related to ESG, such as responsible sourcing, salient environmental impacts, transitional risks, diversity and inclusion, numerous business continuity-related matters, and compliance with various laws and regulations. During 2023, we conducted scenario analyses to assess both our potential impact on the environment as well as potential climate change impacts on our operations. We considered the potential impact of a 1.5°- 3°C of warming at eight of our manufacturing facilities worldwide. Through these EOM activities, we identified and have been driving to implement opportunities for improvement that will enable us to not only prepare but to thrive as a sustainable and responsible organization.
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. During 2023, we partnered, through donations, with important organizations such as The American Heart Association, Ask Childhood Cancer Foundation, Mothers Against Prescription Drug Abuse, Primary Children’s Medical Center, The Huntsman Cancer Foundation, Utah Special Olympics, Utah Clean Air, Women’s Leadership Institute, and Women in Innovation through the Society for Cardiovascular Angiography and Interventions. We also partnered with organizations that facilitate the delivery of healthcare to underserved regions of the globe. In 2023, Merit donated products to medical missions in Haiti, Honduras, Brazil, Belize, Nigeria, and Tanzania.
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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, our turnaround time on shipping and deliveries, and the additional value we can bring to the healthcare system with clinician training programs. Patient care is central to our mission. Providing high-quality, innovative products that are safe and effective is our primary goal. Merit’sThe Company’s Quality Policy is supported by a quality management system, (QMS), which is designed to deliver innovative quality products and services throughout all stages of a product’s lifecycle, including design, manufacturing, pre- and post-clinical trials, customer evaluations, and post-market surveillance. During 2021, we participated in 36 regulatory audits, 15 customer audits, and 127 internal audits. We had zero class 1 recalls and achieved a 5% reduction in our reportable rate (per 1M units sold) compared to our 2020 rate.
Continued Dedication
We have long recognizedrecognize 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 ESGGovernance Committee and corporate leadership, 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.
Whether it is manufacturing processes, shipping, or the day-to-day activities at the office,our offices, our employees at all levels are engaged and passionate aboutin developing innovative solutions to produce the highesthigh 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.
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Schedule of Director Retainers | 2020(1) | 2021(2) |
Lead Independent Director | $110,000 | $116,000 |
Other Directors | $80,000 | $86,000 |
Audit Chair | $10,000 | $20,000 |
Compensation Chair | $7,500 | $15,000 |
Governance Chair | $7,500 | $15,000 |
Finance Chair | $7,500 | $15,000 |
Operating Chair | $7,500 | $15,000 |
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Director Retainers | | | |
Lead Independent Director | | $ | 116,000 |
Other Directors | | $ | 86,000 |
Audit Chair | | $ | 20,000 |
Compensation Chair | | $ | 15,000 |
Governance Chair | | $ | 15,000 |
Finance Chair | | $ | 15,000 |
Operating Chair | | $ | 15,000 |
Cash Compensation Paid to Directors
During the year ended December 31, 2021,2023, all non-employee directors of the Company (except A. Scott Anderson, F. Ann Millner, Ed.D and Stephen C. Evans)James T. Hogan, a former director) received quarterly retainer payments totaling $83,000$86,000 in aggregate. Mr. Anderson and Ms.James T. Hogan, received a pro-rated retainer amount of $43,000 for services rendered through the end of his term as a director on May 18, 2023. Dr. Millner, who each served as lead independent director for a portion ofLead Independent Director throughout the year, each received quarterly retainer payments totaling $98,000$116,000 in aggregate. Mr. Evans, who joined the board in June 2021, received quarterly retainer payments totaling $43,000 in aggregate. 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 ended December 31, 2021.2023. 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.
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Stock Awards
Directors are eligible to participate in our equity incentive programs. EachFor the year ended December 31, 2023, the amount of the annual equity compensation award for non-employee directors was set at $190,000. Accordingly, each non-employee director who served during the year ended December 31, 20212023 received 2,9142,262 restricted stock units under the 2018 Incentive Plan, which vest on June 17, 2022,May 18, 2024, one year fromafter the grant date. We first began granting restricted stock units to directors during the year ended December 31, 2020. 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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Table Effective as of Contentsthe Annual Meeting, the Board increased the amount of the annual equity compensation award for non-employee directors to $200,000.
CORPORATE GOVERNANCE AND RELATED MATTERS
The following table shows compensation for each of our non-employee directors in 2021:2023:
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Name (1) |
| Fees Earned | Stock | Non-Equity Incentive | All Other | Total |
| Fees Earned | Stock | Stock | Non-Equity Incentive | All Other | Total | |||||||||||||||||||||||||||||||||||||
A. Scott Anderson | | 109,250 | | 179,998 | | — | | — - | 289,248 | | 101,000 | | 189,985 | | — | | — | 290,985 | ||||||||||||||||||||||||||||||||
Jill D. Anderson (3) | | 83,000 | | 179,998 | | — | | — - | | 262,998 | ||||||||||||||||||||||||||||||||||||||||
Lonny J. Carpenter | | 94,250 | 179,998 | | — | — - | | 274,248 | | 101,000 | 189,985 | | — | — | | 290,985 | ||||||||||||||||||||||||||||||||||
Stephen C. Evans | | 43,000 | | 179,998 | | — | | — - | | 222,998 | | 86,000 | | 189,985 | | — | | — | | 275,985 | ||||||||||||||||||||||||||||||
David K. Floyd |
| 83,000 | 179,998 | — | — - | 262,998 |
| 86,000 | 189,985 | — | — | 275,985 | ||||||||||||||||||||||||||||||||||||||
Thomas J. Gunderson |
| 94,250 | | 179,998 | | — - | — - | 274,248 |
| 101,000 | | 189,985 | | — | — | 290,985 | ||||||||||||||||||||||||||||||||||
James T. Hogan |
| 83,000 | | 179,998 | — | — - | 262,998 | |||||||||||||||||||||||||||||||||||||||||||
James T. Hogan(3) |
| 43,000 | | — | — | — | 43,000 | |||||||||||||||||||||||||||||||||||||||||||
Laura S. Kaiser |
| 86,000 | | 189,985 | | — | | — | | 275,985 | ||||||||||||||||||||||||||||||||||||||||
Michael R. McDonnell | | 86,000 | | 189,985 | | — | | — | | 275,985 | ||||||||||||||||||||||||||||||||||||||||
F. Ann Millner, Ed.D. |
| 109,250 | | 179,998 | | — - | — - | 289,248 |
| 131,000 | | 189,985 | | — | — | 320,985 | ||||||||||||||||||||||||||||||||||
Lynne N. Ward |
| 100,500 | | 179,998 | | — - | — - | 280,498 |
| 106,000 | | 189,985 | | — | — | 295,985 |
(1) | Fred P. Lampropoulos served as a director of the Company during |
(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 |
(3) |
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.
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CORPORATE GOVERNANCE AND RELATED MATTERS
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)1933, as amended (Securities Act), 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 Personincludes 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
Joseph C. Wright, Chief Commercial Officer of the Company, is the brother-in-law of Fred P. Lampropoulos, Chair of the Board, CEO and President of the Company. In 2023, we provided to Mr. Wright total cash and equity compensation of $2,814,511. Refer to the Summary Compensation Table on Page 58 for additional information regarding his compensation.
The Board, acting through the Audit Committee, believes that the following Related Party Transactions arePerson Transaction between the Company and Mr. Wright is reasonable and fair to the Company:
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EXECUTIVE COMPENSATION AND RELATED MATTERS
EXECUTIVE COMPENSATION AND RELATED MATTERS
During the years ended December 31, 2021 and 2020, the global COVID-19 pandemic impacted our business in various ways. In 2021,2023, we observed a generally improving operating environment, as compared to the years during the Covid-19 pandemic, with fewer restrictions on elective and deferrable procedures leading toprocedures. Consequently, we achieved record sales of $1.075$1.257 billion, an increase of 11.5% from 2020, and 8.0% higher than 2019up $106.4 million or 9.2%, compared to 2022 sales of $994.9. Throughout the year we experienced notable variations$1.151 billion. Our 2023 revenue results were driven primarily by stronger-than-anticipated demand for our products in the paceU.S. and more favorable than anticipated international sales trends, particularly in the EMEA and “Rest of recovery across regionsWorld” regions.
In 2023, we completed the third and final year of the world influenced by the incidence and timing of COVID-19 infections and the associated governmental and patient responses.
We continue to focus our efforts to expand our presence in foreign markets, particularly Europe, Middle East and Africa (EMEA), China, Southeast Asia, Japan, Australia and Brazil, with the objective of capitalizing on additional market opportunities. In 2021, international sales were $465.9 million, or 43.3% of our net sales, up 12.6% from international sales of $413.8 million in 2020.
On November 10, 2020, we introduced our “FoundationsFoundations for Growth”Growth Program, a corporate transformation initiative with multi-year financial targets for growth and improved profitability delivering or exceeding each of the financial targets we outlined for the three-year period. On February 28, 2024, we introduced the “Continued Growth Initiatives” Program, which established new multi-year financial targets for the three-year period ending December 31, 2023. As part2026.
In February 2023, we received FDA “Breakthrough Device Designation” for the SCOUT® MD™ Surgical Guidance System. The SCOUT MD expanded our portfolio of this initiative,oncology products for breast and other soft tissue cancers. The SCOUT MD is the latest step in our ongoing commitment and leadership in advancing oncology care.
In June 2023, we continuecompleted the acquisition of a portfolio of dialysis catheter products and the BioSentry® Biopsy Tract Sealant System from AngioDynamics, Inc. (“AngioDynamics”) and acquisition of the Surfacer® Inside-Out® Access Catheter System from Bluegrass Vascular Technologies, Inc. (“Bluegrass”). These acquisitions strengthened our positions in the dialysis and biopsy markets and expanded the foundation of our growing specialty dialysis device offering, which includes the WRAPSODY™ Cell-Impermeable Endoprosthesis and the HeRO® Graft.
On December 8, 2023, we closed an offering of $747.5 million aggregate principal amount of 3.00% Convertible Senior Notes due 2029 (the “Notes”). We intend to reviewuse the needproceeds from the Notes offering for general corporate purposes, which may include repayment or reduction of existing debt, sales and marketing activities, medical affairs and educational efforts, research and development, clinical studies, working capital, capital expenditures and investments in and acquisitions of other companies, products or technologies in the future.
During 2023, we also completed projects that resulted in the newest additions to consolidate facilities, strategically reduce operating expensesour product lineup: BIG60 Alpha™ Inflation Device, Radial Length Merit Maestro® Microcatheters, Prelude Roadster® Guide Sheath Line Extensions, and incentivizethe Micro ACE™ Advanced Micro-Access System, a novel addition to our sales force to focus on products that will improve our financial performance. We have launched multiple initiatives to drive value creation for Merit, including SKU optimization, network consolidation, compensation and benefit programs, product line transfers and manufacturing initiatives. In the area of SKU rationalization, we have identified more than 2,000 products with revenues or gross margins which are below our targets, and in nearly all cases have moved customers to alternative products.
Micro-Access lineup.
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Key financial results for the last five fiscal years are highlighted below:
(1) | Non-GAAP net income, non-GAAP gross margin and non-GAAP earnings per share are non-GAAP financial measures. A reconciliation of non-GAAP financial measures used in this Proxy Statement to their most directly comparable GAAP financial measures is included under the heading “Non-GAAP Financial Measures” below. |
The results of our operating and financial performance over the past five years are illustrated in the tables above. Although our historic results are not a guarantee of future performance, we believe Merit is well positionedour performance during that five-year period positions us for sustainable growth in profitability going forward.
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Our operating and financial results were a significant factor in the deliberations of our Compensation Committee when evaluating the amount and form of compensation paid to our CEO and other NEOs. Our Compensation Committee believes there are multiple factors that have contributed to our financial and operating performance, particularly during the challenges of the past several years; however, two of the key factors have been our outstanding employees and the leadership provided by our CEO
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EXECUTIVE COMPENSATION AND RELATED MATTERS
and other executive officers. Accordingly, the Compensation Committee seeks to implement and advance an executive compensation program that recognizes Company performance and individual contribution, while encouraging long-term motivation and retention. The Compensation Committee believes our executive compensation program has been instrumental in helping the Company sustain its strong financial performance over many years.
Compensation Philosophy | | The primary objectives of our compensation programs are: | |
Under the oversight of the Compensation Committee, our compensation philosophy is to offer compensation programs to the NEOs that align the interests of management and shareholders for the purpose of maximizing shareholder value, while considering the interests of other significant stakeholders such as employees, patients, customers, business partners and the communities in which we operate. | | 1 | focus executives on achieving or exceeding measurable performance targets; |
| | | |
| 2 | influence executives to lead our employees in the implementation of cost-saving plans; | |
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| 3 | continue our entrepreneurial spirit; | |
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| 4 | attract and retain highly-qualified and motivated executives; and | |
| | | |
| 5 | promote a highly ethical environment and maintain health and safety standards. |
Our executive compensation programs specific to the NEOs are overseen by the Compensation Committee. In pursuit of our compensation philosophy and objectives, the Compensation Committee believes that the compensation packages provided to the NEOs should generally include both cash and equity-based compensation. Base pay and benefits are set at levels considered necessary to attract and retain qualified and effective executives. Variable incentive pay is used to align the compensation of the NEOs with our short-term business and performance objectives, such as income and overall financial performance. Equity awards are intended to motivate executives to create long-term shareholder value. Historically,Prior to 2019, equity awards to the NEOs consisted solely of stock options, but during 2019, the Compensation Committee determined to add awards of performance-based restricted stock units (PSUs) to our long-term equity incentive program and to base our short-term executive bonus program on the achievement of predetermined performance targets, with both adjustments effective in 2020. The PSUs and executive bonus targets are designed to increase the alignment of NEO compensation with the Company’s achievement of Board-approved performance measures and relative shareholder return. During 2021, the Compensation Committee, working with the Operating Committee, also provided oversight of the development and implementation of a globalCompany-wide compensation and bonus plan for all Company employeesprogram as part of our Foundations for Growth initiative.Program. Subsequent to the conclusion of each of the years of the Foundations for Growth Program, we distributed to Company employees payments pursuant to the compensation and bonus program.
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EXECUTIVE COMPENSATION AND RELATED MATTERS
| | ● ● ● ● | ● ● ● ● ● ● ● | |
Selected | ||||
| | ● Achieved - record revenues in excess of $1.25 billion, representing nearly 10% year-over-year constant currency revenue growth; - non-GAAP operating margin year-over-year improvement of 120 basis points; and - strong free cash flow generation of more ● Completed the third and final year of the Foundations for Growth program, in which we achieved or exceeded the goals relating to revenue growth, operating margin expansion and free cash flow generation. In particular, under the direction of our CEO and other NEOs, during the three-year period we achieved: - compound annual revenue growth of nine percent, exceeding our Foundations for Growth target; - operating margin improvement of 440 basis points; and - cumulative free cash flow during the three-year period of approximately $300 million ● Issued $747.5 million aggregate principal amount of 3.00% Convertible Senior Notes due 2029 ● ● ● Completed projects that resulted in the newest additions to our product lineup: BIG60 Alpha™ Inflation Device, Radial Length Merit Maestro® Microcatheters, Prelude Roadster® Guide Sheath Line Extensions, and the Micro ACE™ Advanced Micro-Access System, a novel addition to our micro-access lineup | ● Based upon the Company’s achievement of the Foundations for Growth performance measures, we distributed to Company employees payments under our Company-wide compensation and bonus program designed to increase the alignment of employee compensation with the Company’s achievement of those measures. In March 2024 we distributed to Company employees additional bonus payments based upon the Company’s successful completion of those performance measures for the third year of the Foundations for Growth | ● ● Received FDA Breakthrough Device Designation for the SCOUT® MDTM Surgical Guidance System ● Continued initiatives to move toward higher-margin therapeutic products ● Completed enrollment in the WAVE pivotal study to support the projected launch of the Wrapsody Cell-Impermeable Endoprosthesis in the United States of America ● Completed preparations for first enrollment in the MOTION Trial, designed to expand indications for our Embosphere® Microspheres ● Continued company-wide efforts to (i) improve employee training, health and safety and (ii) reduce our environmental footprint by |
(1) | Reflects five-year cumulative total return of our Common Stock, as reported by Nasdaq for the period from December 31, |
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Executive Officers
In addition to Fred P. Lampropoulos (whose biography is included above under “Directors Whose Terms of Office Continue”“Nominees for Election as Directors”), we have included the following information related to our other executive officers:
RAUL PARRA | Chief Financial Officer and Treasurer | |
Age: Current Position Since: July 2018 Highlights: ● Previous positions at Merit include, Vice President of Accounting, Corporate Controller and Director of Financial Reporting ● Before joining Merit, held various audit and managerial positions at Deloitte & Touche, LLP ● Director and Audit Committee chair, American Express National Bank, 2022 to present | ||
Education: |
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| Chief Commercial Officer | |
Age: 54 Current Position Since: October 2022 Highlights: ● Oversees commercial activities in all global markets ● Previous positions at Merit include (a) President, International Division, (b) President, Technology Group – overseeing Merit OEM, Merit Sensor Systems, Inc. and Merit’s coating division, (c) Vice President of Marketing, and (d) Vice President, International – responsible for sales in Canada, Asia Pacific, and Latin America, 2005 to 2015 ● Before joining Merit, held sales, marketing and business development positions with several companies, including Motorola and Micron ● Mr. Wright is the brother-in-law of Fred P. Lampropoulos, Merit’s Chair of the Board, President and CEO | ||
Education: |
NEIL W. PETERSON | Chief Operating Officer | |
Age: Current Position Since: Highlights: ● More than 28 years of service to Merit and its shareholders ● Previous positions at Merit include Vice President | ||
Education: |
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BRIAN G. LLOYD | Chief Legal Officer, Corporate Secretary | |
Age: Current Position Since: April 2016 Highlights: ● Practiced as an attorney, specializing in corporate governance, securities regulation and mergers & acquisitions, with the law firm of Parr Brown Gee & Loveless, PC in Salt Lake City, Utah for more than 20 years ● Also practiced law in those areas of specialization as a partner with the law firm of Stoel Rives, LLP for four years | ||
Education: |
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MICHEL J. VOIGT | Chief Human Resources Officer | |
Age: Current Position Since: December 2020 Highlights: ● Former Chief Human Resources Officer of Mavenir Systems, Inc. from 2017-2020 ● Over 20 years of experience in human resources management in various positions at Galderma/Nestle Skin Health, Lexicon Pharmaceuticals Incorporated, and Verizon | ||
Education: |
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EXECUTIVE COMPENSATION AND RELATED MATTERS
Compensation Discussion and Analysis
This Compensation Discussion and Analysis is designed to explain our philosophy and objectives underlying our executive compensation policies, the processes we follow in setting executive compensation, and the components of executive compensation that we utilize in compensating our NEOs, who are listed below.
|
The Summary Compensation Table and other compensation tables under “Executive Compensation Tables” below should be read in conjunction with this section. |
| | |
Named Executive Officer | Position | |
Fred P. Lampropoulos | Chair, CEO and President | |
Raul Parra | Chief Financial Officer and Treasurer | |
| Chief Commercial Officer | |
Neil W. Peterson | Chief Operating Officer | |
Brian G. Lloyd | Chief Legal Officer and Corporate Secretary | |
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Process for Establishing Executive Compensation
Procedure
The Compensation Committee has oversight responsibility for establishing compensation practices for our CEO and the other NEOs. The Compensation Committee also reviews all compensation decisions for employees of the Company who are related to our CEO.
Performance reviews of the CEO are conducted by the Compensation Committee based on our performance during a given year, compared with our performance objectives, as well as other factors intended to maximize short-term and long-term shareholder value.
Performance reviews of the other NEOs are based on the CEO’s evaluation of individual officer and Company performance for that year, with the objective of maximizing shareholder value. With respect to the compensation levels for the other NEOs, the Compensation Committee considers input and recommendations from the CEO. The CEO makes recommendations concerning salary adjustments, short-term incentive bonus programs and long-term equity awards for the other NEOs, and the Compensation Committee considers those recommendations in determining the compensation of the other NEOs.
Role of Consultants
Since 2019, the Compensation Committee has engaged Pearl Meyer & Partners, LLC (Pearl Meyer), an independent compensation consulting firm, to review our executive officer and director compensation practices and advise the Compensation Committee with respect to those compensation practices, including salary, bonus, benefits and equity awards for our executive officers and retainers, meeting fees and equity awards for our directors. Representatives of Pearl Meyer meet regularly with the Compensation Committee and the Compensation Committee has generally evaluated and considered Pearl Meyer’s reports and recommendations.
During 2019 and 2020, the Compensation Committee consulted with Pearl Meyer to revise and update the Company’s executive compensation programs. The Compensation Committee engaged Pearl Meyer to help revise the Company’s executive composition practices to establish a long-term equity incentive program that was not based primarilysolely on the award of time-vesting stock options, but was based upon the achievement of pre-determined performance measures, utilizing a combination of stock options, PSUs and annual performance-based cash bonuses. Through this collaboration, the Compensation Committee adopted an executive compensation program which became effective
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during 2020 and continued through 2021. This2023. For 2023, this executive compensation program iswas comprised of an equity feature that aimsaimed for an equity compensation mix of 60% PSUs and 40% stock options (vesting on a ratable basis over four years of service) and performance-based cash bonuses determined as a percentage of each executive officer’s base salary. This executive compensation program is designed to increase the alignment of executive compensation with the Company’s achievement of Board-approved performance measures, as discussed below.
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External Pay Comparisons
In its oversight of the compensation practices for our CEO and the other NEOs, the Compensation Committee reviews industry and peer compensation data for medical device companies to confirm that executive compensation is within an appropriate competitive range. The Compensation Committee considers external pay comparison data as a market check on its compensation decisions, but not for specific benchmarking. With input from Pearl Meyer, the Compensation Committee identified a peer group to guide its compensation decisions for 20212023 executive compensation that consisted of the following companies:
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Company | Revenue(1) (dollars in millions) | Market Capitalization at December 4, 2020 (dollars in millions) | | Revenue(1) | | Market Capitalization | ||||
ABIOMED, Inc. | $ | 803 | $ | 12,318 | ||||||
AngioDynamics, Inc. | | 268 | | 580 | ||||||
Cantel Medical Corp.(2) | | 1,056 | | 2,669 | ||||||
CONMED Corporation | | 874 | | 2,925 | | | 1,139 | | | 3,440 |
Globus Medical, Inc. | | | 1,097 | | | 5,736 | ||||
ICU Medical, Inc. | | 1,266 | | 4,146 | | | 2,294 | | | 3,396 |
Inari Medical, Inc. | | | 439 | | | 3,919 | ||||
Insulet Corporation | | 868 | | 17,067 | | | 1,465 | | | 15,296 |
Integer Holdings Corporation | | 1,130 | | 2,584 | | | 1,494 | | | 2,978 |
Integra LifeSciences Holdings Corporation | | 1,378 | | 4,752 | | | 1,545 | | | 3,544 |
LivaNova Plc | | 952 | | 2,684 | | | 1,085 | | | 2,979 |
Masimo Corporation | | 1,096 | | 14,603 | | | 2,187 | | | 5,852 |
Natus Medical Incorporated | | 428 | | 704 | ||||||
Nevro Corp | | | 419 | | | 709 | ||||
NuVasive, Inc. | | 1,069 | | 2,490 | | | 1,226 | | | 2,086 |
Penumbra, Inc. | | 539 | | 7,621 | | | 938 | | | 9,998 |
Quidel Corporation | | 1,005 | | 8,143 | ||||||
QuidelOrtho Corporation | | | 3,162 | | | 4,989 | ||||
Shockwave Medical, Inc. | | | 617 | | | 8,256 | ||||
Teleflex Incorporated | | 2,507 | | 18,020 | | | 2,899 | | | 10,543 |
West Pharmaceutical Services, Inc. | | 2,037 | | 20,075 | ||||||
| | | | | | | | | | |
Median | $ | 978 | $ | 4,449 | | $ | 1,226 | | $ | 3,919 |
Merit Medical Systems, Inc. | $ | 964 | $ | 3,228 | | $ | 1,198 | | $ | 3,942 |
(1) | Revenue is for the trailing twelve months as of the most recently disclosed quarter as of |
(2) | Acquired by |
The companies selected
In 2023, Pearl Meyer performed an assessment of the Company’s then-existing executive compensation peer group and provided to the Compensation Committee recommendations for inclusion inadjustment of the Company’s executive compensation peer group were selected by the Compensation Committee following consultation with Pearl Meyer based on revenue, market capitalization,
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EXECUTIVE COMPENSATION AND RELATED MATTERS
market peer indices and Pearl Meyer’s assessment of the strength of comparability, as well as overall business characteristics, including product offerings and end markets. The Compensation Committee reviewed Pearl Meyer’s recommendations and considered the application of the foregoing factors to the Company’s executive compensation practices. Following that review and based upon the recommendations of Pearl Meyer, the Compensation Committee approved the Company’s 2023 executive compensation peer group as shown above, which reflects the following modifications from the Company’s 2022 peer group: (i) Abiomed, Inc., AngioDynamics, Inc., Cantel Medical Corp., Natus Medical
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Incorporated and West Pharmaceutical Services, Inc. were removed from the 2023 peer group; and (ii) Nevro Corp. and Shockwave Medical, Inc. were added to the 2023 peer group.
Neither the consultations with Pearl Meyer nor ourthe Compensation Committee’s internal review yielded any significant concerns at the Compensation Committee level regarding our executive compensation practices.
Evaluation
In evaluating compensation of the NEOs for the year ended December 31, 2021,2023, the Compensation Committee considered, among other factors, our performance and relative shareholder return in 20202021, 2022 and 2021,2023, as compared to our performance targets for 20202021, 2022 and 2021,2023, prior analysis and reports from Pearl Meyer (which contained comparisons of our compensation and financial results with respect to the peer group), and other factors considered relevant by the Compensation Committee.
Other Considerations
The Compensation Committee also relied on its experience and judgment in making executive compensation decisions after reviewing our performance on a quarterly and annual basis, and evaluating each NEO’s individual performance and responsibilities with the Company, as well as current compensation arrangements. The compensation program for the NEOs and the Compensation Committee assessment process have been designed to be flexible in an effort to respond to the evolving business environment and individual circumstances relative to Company and individual performance, shareholder value, as well as internal equity for compensation levels among our executives.
Our executive compensation program is divided into the following two general categories: fixed pay and variable pay.
Fixed pay consists of base salary and is intended to provide each NEO with a level of assured cash compensation appropriate for his or her position within the Company. Variable pay includes annual cash bonus awards and equity-based awards in the form of PSUs and stock options, each as explained in more detail below.
The Compensation Committee believes that a significant portion of total compensation of the NEOs should be both at-risk and tied to the Company’s achievement of predetermined performance goals. The Compensation Committee’s development and implementation of the Company’s revised executive compensation program during 20202021, 2022 and 20212023 reflects its efforts to shift an increased portion of the total compensation payable to the Company’s NEOs away from fixed, time-vesting compensation to at-risk, performance-based compensation.
Pursuant to our revised executive compensation program, at the beginning of each year, the CEO and other members of the Company’s executive management team identify performance goals which are intended to align the efforts of our executive officers, including the NEOs, with our achievement of our strategic business plan to maximize shareholder value. The CEO then reviews those performance goals with the Compensation Committee. Those goals then become targets for the PSUs and annual performance-based cash bonus component of our executive compensation program. Because the performance goals are generally established at the beginning of each year and market conditions fluctuate throughout the year, the performance goals may not correspond to subsequent annual earnings estimates released by the Company.
Compensation Committee Consideration of Shareholder Advisory Votes
At our annual meeting of shareholders held on June 17, 2021,May 18, 2023, we submitted the compensation of our executive officers to our shareholders in a non-binding vote. Our executive compensation program received the support of holders of approximately 98%96% of the shares represented at the meeting.meeting, excluding broker non-votes.
AtAlso, at our May 18, 2023 annual meeting of shareholders, held on May 24, 2017, our shareholders voted on an advisory basis with respect to the frequency of future advisory votes on executive compensation. Holders of approximately 77%96% of the shares represented at that meeting, excluding broker non-votes, expressed their preference for an annual advisory vote. Accordingly, we intend to conduct annual advisory votes on executive compensation. The advisory vote on
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to hold an annual advisory vote on executive compensation untilis the next “say-on-frequency” votesubject of Proposal 2 to be considered by the Company’s shareholders at our annual meeting of shareholders in 2023.the Annual Meeting.
The Compensation Committee will continue to review future shareholder voting results and determine whether changes should be made to our executive compensation program based on such voting results.
Pay Mix
The allocation between cash and non-cash NEO compensation is influenced by the practices of subjective and objective analysis conducted by the Compensation Committee and is intended to reflect the Compensation Committee’s determination of the appropriate compensation mix among base pay, annual cash incentives and long-term equity incentives for each NEO. Actual cash and equity-based incentive awards are determined based on the performance of the Company and/or the individual NEO, depending on the position of the NEO, the type of award and our performance, compared to established goals. The Compensation Committee also compares the compensation mix relative to our executive compensation peer group. No specific benchmark with respect to the peer group is targeted, but the Compensation Committee may be influenced by the peer group data to adjust our executive compensation mix if it significantly deviates from the median of the peer group.
For 2021,2023, the elements of the compensation mix for the NEOs included:
● | base salary (designed to attract and retain executives over time); |
● | annual performance-based cash bonus (designed to focus on business objectives established by the Compensation Committee for a particular year); |
● | long-term equity-based incentive compensation in the form of stock options, PSUs and, in the case of our CEO, long-term cash-based incentive compensation (designed to align NEO pay with long-term performance); |
● | broad-based employee retirement, welfare and fringe benefits programs, and other personal benefits; and |
● | executive deferred compensation. |
Executive Pay Mix Summary
20212023 Target Compensation
The following charts show the targeted mix of compensation for our named executive officers in 2021:2023:
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CEO |
| AVERAGE OTHER NEOs | |
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20212023 Compensation
The following charts show the mix of compensation actually paid to our named executive officers for 2021, as detailed in the summary compensation table below:
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The Compensation Committee considered the following factors, among others, when establishing the amounts of fixed and variable compensation paid to our NEOs for 2021:2023:
Fred P. Lampropoulos |
● ● oversight of operating efficiency initiatives, including our Foundations for Growth ● completion of the offering of $747.5 million aggregate principal amount of 3.00% Convertible Senior Notes due 2029; ● acquisitions of a dialysis catheter portfolio and the BioSentry Biopsy Tract Sealant System from AngioDynamics and the Surfacer Inside-Out Access Catheter System from Bluegrass; ● operational management, product development, international expansion, subsidiary development, risk management, and manufacturing capacity planning; ● strategic business development, and management development and oversight; and ● shareholder and financial community relations. |
Raul Parra |
● achievement of the financial and operating performance targets established pursuant to the Foundations for Growth Program for the three-year period ended December 31, 2023; ● completion of the offering of $747.5 million aggregate principal amount of 3.00% Convertible Senior Notes due 2029; ● responsibility for the financial and accounting affairs of an increasingly large and complex global organization; ● oversight of our cash flow, including a substantial increase in the amount of our free cash flow, and budgeting ● shareholder and financial community relations. |
Joseph C. Wright |
● achievement of the financial and operating performance targets established pursuant to the Foundations for Growth Program for the three-year period ended December 31, 2023; ● leadership and development of our commercial organization and activities in all regions of the world during 2023; ● implementation of sales strategies and performance goals for our worldwide commercial organization; and ● budget management for our global commercial operations. |
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|
● ● responsibility for the conduct of our worldwide operations within the budget established by the Board; ● implementation of operating efficiency initiatives designed to reduce operating expenses and increase ● integration of the operations associated with the dialysis catheter portfolio and the BioSentry Biopsy Tract Sealant System acquired from AngioDynamics and the Surfacer Inside-Out Access Catheter System acquired from Bluegrass; and ● oversight of our efforts to reduce our environmental footprint and promote sustainability. |
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 (Exchange Act) requires directors, certain officers, and greater than ten percent holders of our common stock to file reports indicating their holdings of, and transactions in, our equity securities. Based on thea review of these reports and written representations from our directors and the applicable officers, we believe that in 20212023 all required reports except one, were timely filed with the SEC. An inadvertently late Form 4SEC, except that Ms. Kaiser had one report relating to a single transaction which was due on May 22, 2023, however due to a delay in receiving the necessary filing code the report was filed on behalf of A. Scott Anderson, one of our directors, that related to the exercise of stock optionsday late on May 17, 2021.23, 2023.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table contains information regarding our equity compensation plans as of December 31, 20212023 (in thousands, except weighted-average price):
Plan Category | Number of securities to | Weighted-average | Number of securities |
Equity compensation plans approved by security holders |
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(1) | Consists of |
(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 |
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OTHER PROXY INFORMATION
OTHER PROXY INFORMATIOINFORMATION
Information about the Annual Meeting and Voting
On behalf of the Company, the Board is soliciting your proxy to vote at our Annual Meeting (or at any adjournment of the meeting). This Proxy Statement includes information you need to know to vote at the Annual Meeting.
Date, Time and Place of the Annual Meeting
Date:May 19, 202215, 2024
Time:2:00 p.m. (Mountain Time) We encourage you to access the Annual Meeting prior to the start time and allow plenty of time to log into the Annual Meeting.
Place:Online at www.virtualshareholdermeeting.com/MMSI2022MMSI2024
The Annual Meeting platform is fully supported across browsers and devices running the most updated versions of the applicable software and plugins. Participants should ensure that they have a strong Internet connection wherever they intend to participate in the Annual Meeting.
This Proxy Statement, the Notice of the 20222024 Annual Meeting of Shareholders and the accompanying form of proxy are first being mailed or made available to our shareholders on or about April 7, 2022.5, 2024.
We will bear all costs and expenses relating to the solicitation of proxies, including the costs of preparing, printing and mailing to shareholders this Proxy Statement and accompanying materials, as well as the expense of making this Proxy Statement and accompanying materials available on the Internet (although shareholders must bear any costs associated with their Internet access). In addition to the solicitation of proxies by use of the mail and the Internet, our directors, officers, and employees, without receiving additional compensation, may solicit proxies personally or by telephone, electronic mail or facsimile. Arrangements will be made with brokerage firms and other custodians, nominees and fiduciaries for the forwarding of solicitation materials to the beneficial owners of the shares of Common Stock held by those persons, and we will reimburse those brokerage firms, custodians, nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them in connection therewith.
The Board has fixed the close of business on March 22, 202218, 2024 as the Record Date for determination of shareholders entitled to receive notice of and to vote at the Annual Meeting. As of the Record Date, there were issued and outstanding 56,634,69158,064,556 shares of Common Stock. The holders of record of the shares of Common Stock on the Record Date entitled to be voted at the Annual Meeting are entitled to cast one vote per share on each matter submitted to a vote at the Annual Meeting.
Method for Electronic Viewing and Printing of the Proxy Materials
The Record Date is March 22, 2022.18, 2024. Shareholders of record on the Record Date will be entitled to notice and to vote, in person or by proxy, at the Annual Meeting and any adjournments or postponements thereof.
SEC rules allow companies to furnish their proxy materials over the Internet. As a result, the Company is mailing to most of its shareholders a Notice of Internet Availability of Proxy Materials (the Notice) instead of a paper copy of this Proxy Statement and our Annual Report. The Notice contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how to request a paper copy of our proxy materials, including this Proxy Statement, the Annual Report and a form of proxy card or voting instruction card. All shareholders who do not receive a Notice will receive a paper copy of the proxy materials by mail. We believe this process will allow us to provide shareholders with the information they need in a more efficient manner, while reducing the environmental impact and lowering the costs of printing and distributing these proxy materials.
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OTHER PROXY INFORMATION
All shareholders may choose to access our proxy materials on the website (www.proxyvote.com) or may request to receive a printed set of our proxy materials. This Proxy Statement contains information regarding the proposals to be considered at the Annual Meeting, and shareholders are encouraged to read it in its entirety.
Proxies
Shares of Common Stock that are entitled to be voted at the Annual Meeting and are represented by properly executed proxies will be voted in accordance with the instructions on those proxies.
If no instructions are indicated, shares on a properly executed proxy will be voted:
● | FORthe election of each of the |
● | FOR the non-binding resolution to approve the compensation of our NEOs; |
● | FOR the approval of an amendment to increase the number of shares authorized under the 2018 Incentive Plan; and |
● | FOR the ratification of the appointment of Deloitte to serve as our independent registered public accounting firm for the year ending December 31, |
In respect of any other matters that may properly come before the Annual Meeting, shares represented by properly executed proxies may be voted at the discretion of the proxy holder. The Board is not currently aware of any other matters to be presented at the Annual Meeting.
Revocation of Proxies
A shareholder who has executed and returned a proxy may revoke it at any time prior to its exercise at the Annual Meeting by executing and returning a proxy bearing a later date by mail, by voting via the Internet, by filing with Brian G. Lloyd, our Corporate Secretary, at the address set forth above, a written notice of revocation bearing a later date than the proxy being revoked (in each case, the same must be delivered in advance of the Annual Meeting), or by voting the Common Stock covered thereby in person at the Annual Meeting. In order to revoke a proxy executed with respect to shares held in street name, the shareholder must contact the appropriate broker or nominee.
Broker Non-Votes
Shares of Common Stock that are held in “street name,” which means shares of Common Stock held of record by a trustee or in an account at a brokerage firm, bank, dealer, or other similar organization (collectively, brokerage firms), may be voted, even if the beneficial holder does not provide the brokerage firm with voting instructions. Brokerage firms have the authority under applicable securities rules to cast votes on certain “routine” matters, even if they do not receive instructions from their customers. However, the ratification of our independent registered accounting firm is considered the only routine matter for which brokerage firms may vote un-instructed shares. The election of directors, and the advisory vote to approve named executive officer compensation, and the approval of the amendment to increase the number of shares authorized under the 2018 Incentive Plan, are not considered routine matters under current securities rules. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.”
As all of the proposals described in this Proxy Statement, other than the proposal to ratify our independent registered accounting firm, are considered to be non-routine matters, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.
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Vote Required
A majority of the issued and outstanding shares of Common Stock entitled to vote, properly represented in person or by proxy, is required for a quorum at the Annual Meeting. Abstentions and broker non-votes will be counted as “represented” for the purpose of determining the presence or absence of a quorum. Under the Utah Revised Business Corporation Act, once a quorum is established, shareholder approval with respect to a particular proposal is generally obtained when the votes cast in favor of the proposal exceed the votes cast against the proposal.
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OTHER PROXY INFORMATION
Holders of shares of Common Stock are entitled to one vote at the Annual Meeting for each share of Common Stock held of record on the Record Date. The vote required for each of the proposals described in this Proxy Statement is as follows:
Proposal 1: In the election of directors, shareholders will not be allowed to cumulate their votes. Each director-nominee who receives a majority of the votes cast with respect to his or her election will be elected as a director of the Company.
Proposal 2: The advisory vote on executive compensation is non-binding. Nevertheless, we will record the number of votes cast in favor of and against the proposal and will report the voting results.
Proposal 3: The proposal to approve an amendment to increase the number of shares authorized under the 2018 Incentive Plan requires that the votes cast in favor of the proposal must exceed the votes cast against the proposal.
Proposal 4: The proposal to ratify the appointment of Deloitte to serve as our independent registered public accounting firm for the year ending December 31, 20222024 requires that the votes cast in favor of the proposal must exceed the votes cast against the proposal.
Abstentions and broker non-votes will not affect the outcome of any proposals to be considered at the Annual Meeting; however, because the fifthfourth proposal is considered a routine matter, brokerage firms may vote un-instructed shares for or against the proposal.
|
No Dissenters’ Rights of Appraisal There are no rights of appraisal or similar dissenters’ rights with respect to any matter to be acted upon pursuant to this Proxy Statement. |
Attending the Annual Meeting
The Annual Meeting will be online and a completely virtual meeting of shareholders. This format is more cost-efficient and makes the meeting accessible to more of our shareholders.
To participate in the Annual Meeting, visit www.virtualshareholdermeeting.com/MMSI2022MMSI2024 and enter the 16-digit control number included on your Notice, on your proxy card, or on the voting instructions that accompanied your proxy materials. If you do not have your 16-digit control number, you will be able to access and listen to the Annual Meeting but you will not be able to vote your shares or submit questions during the Annual Meeting. If you wish to submit a question before the meeting, you may log into www.proxyvote.com and enter your 16-digit control number. Once past the login screen, click on “Question for Management,” type in your question, and click “Submit.” Alternatively, if you want to submit your question during the meeting, log into the virtual meeting platform at www.virtualshareholdermeeting.com/MMSI2022MMSI2024, type your question into the “Ask a Question” field, and click “Submit.”
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OTHER PROXY INFORMATION
Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints. Questions regarding personal matters, including those related to employment or product or service issues, are not pertinent to meeting matters and therefore will not be answered.
You may begin to log into the Annual Meeting platform beginning at 1:45 p.m. MDT on May 19, 2022.15, 2024. The Annual Meeting will begin promptly at 2:00 p.m. MDT on May 19, 2022.15, 2024. A list of registered shareholders of record entitled to vote shall be open to any shareholder for any purpose relevant to the Annual Meeting for ten days before the Annual Meeting, during normal business hours, at the Office of the Corporate Secretary. A list of registered shareholders as of the close of business on the Record Date will also be available for examination by the shareholders throughout the meeting at www.virtualshareholdermeeting.com/MMSI2022MMSI2024.
The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong Wi-Fi connection wherever they intend to participate in
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OTHER PROXY INFORMATION
the meeting. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior to the start of the meeting.
If you encounter any difficulties accessing the Annual Meeting during the check-in or meeting time, please call the technical support number that will be posted on the Annual Meeting login page. Technical support will be available starting at 1:45 p.m. MDT on May 19, 202215, 2024 and through the conclusion of the meeting.
Proxy Solicitation on Behalf of the Board
The Board is soliciting proxies to provide an opportunity for all shareholders to vote, whether or not the shareholders are able to participate in the Annual Meeting or any adjournment or postponement thereof. Directors, officers and employees of the Company may solicit proxies on behalf of the Board in person, by mail, by telephone or by electronic communication. The proxy representatives of the Board will not be specially compensated for their services in this regard.
Methods of Voting
The method of voting by proxy differs for shares of Common Stock registered directly in a shareholder’s name, considered the shareholder of record, and shares held in “street name,” which means shares held of record by a trustee or in an account at a brokerage firm, bank, dealer, or other similar organization.
Holders of Record
If the shareholder holds shares as a record holder, the shareholder may vote the shares by proxy on www.proxyvote.com, by means of the telephone (at 1-800-690-6903), by mail (by requesting a printed copy of this Proxy Statement and then voting by mail), or by participating in the Annual Meeting and voting over the Internet. Each method is discussed further below:
● | Voting by Mail. If a shareholder chooses to vote by mail, simply mark the proxy card mailed or transmitted to the shareholder (the Proxy) and complete, sign, date and mail it in the postage-paid envelope provided. The Proxy must be completed, signed and dated by the shareholder or the shareholder’s authorized representative. |
● | Voting by Telephone. Shareholders of record can vote by phone by following the instructions on the Proxy or by calling toll-free at 1-800-690-6903. Voice prompts will instruct shareholders to vote their shares and confirm that their vote has been properly recorded. |
● | Voting over the Internet. Shareholders of record can vote on the Internet by accessing the Internet at www.proxyvote.com. As with telephone voting, shareholders can confirm that their votes have been properly recorded. We provide Internet proxy voting to allow shareholders to vote their shares online, with procedures designed to ensure the authenticity and correctness of proxy vote instructions. However, please be aware that |
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shareholders must bear any costs associated with their Internet access, such as usage charges from Internet access providers and telephone companies. |
● | Voting in Person. The Annual Meeting will be held entirely online, so there will be no way to vote in person at the meeting. Registered shareholders may vote over the Internet during the Annual Meeting. |
If a shareholder votes his, her or its Proxy by telephone, the Internet or by returning the Proxy to us before the Annual Meeting, the individuals designated in the Proxy will vote as the Proxy directs. If a shareholder votes by telephone or over the Internet, the shareholder does not need to return the Proxy.
Telephone and Internet voting facilities for shareholders will be available 24 hours a day and will close at 11:59 P.M. ET on May 18, 202214, 2024 for shares held directly and by 11:59 P.M. ET on May 16, 202210, 2024 for shares held in the Company’s 401(k) Profit Sharing Plan.
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OTHER PROXY INFORMATION
Holders in “Street Name”
If a shareholder holds shares in “street name,” the shareholder should have received a voting instruction form from the broker, bank or other nominee holding the shares. The shareholder should follow the instructions in the voting instruction form in order to instruct your broker, bank or other nominee on how to vote your shares. The availability of telephone and Internet voting will depend on the voting process of the broker, bank or nominee.
A large number of banks and brokerage firms are participating in the Broadridge Investor Communications Solutions, Inc. (Broadridge) online program. This program provides eligible shareholders the opportunity to vote via the Internet or by telephone. If a shareholder’s bank or brokerage firm is participating in Broadridge’s program, the voting form will provide instructions.
If a shareholder holds shares in “street name” and the shareholder wishes to vote at the Annual Meeting, the shareholder will need the 16-digit control number included on her, his or its proxy card or voting instruction form (if the shareholder received a printed copy of the proxy materials) or included in the email to the shareholder, if she, he or it received the proxy materials by email in order to be able to vote her, his or its shares at the Annual Meeting.
Shareholders receiving multiple Notices, or whose shares are registered in more than one name or are registered in different accounts, should follow the voting instructions on each Notice to ensure that all of their shares are voted.
Employee 401(k) Profit Sharing Plan Shares
Employees participating and owning shares in the Company’s 401(k) Profit Sharing Plan will receive a voting instruction form. Your executed form will provide voting instructions to the plan trustee. If no instructions are provided, the plan trustee will vote the shares assigned to your plan account in the same proportion as to which it has received instructions from other plan participants. To allow sufficient time for voting, your voting instructions must be received by the trustee by 11:59 P.M. Eastern Time on May 16, 2022.10, 2024. You may not vote your shares held in the Company’s 401(k) Profit Sharing Plan virtually at the Annual Meeting.
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OTHER PROXY INFORMATION
Additional Information and Additional Copies of Proxy Materials
We will provide without charge to any person from whom a proxy is solicited by the Board, upon the written request of that person, a copy of our Annual Report, including the financial statements and schedules thereto (as well as exhibits thereto, if specifically requested).
We will generally deliver one copy of this Proxy Statement, or Notice, as applicable, to each address where multiple record holders of our Common Stock reside, unless we have received instructions to the contrary (i.e., “householding”). Upon written or oral request, we will promptly deliver another copy of this Proxy Statement and the Annual Report, or Notice, as applicable, to any holder of our Common Stock living at a shared address where we have delivered only one copy. Shareholders who receive multiple copies of this Proxy Statement or the Notice at their address and would like to request householding of their communications should contact their broker.
Requests for copies of our Annual Report, additional information or additional Proxy Statements should be directed to:
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Merit Medical Systems, Inc. Attn: Brian G. Lloyd, Corporate Secretary 1600 West Merit Parkway South Jordan, Utah 84095 |
Other Matters
As of the date of this Proxy Statement, the Board knows of no matters to be presented for action at the Annual Meeting other than those matters described in the preceding pages. If, however, any further business should properly come before the Annual Meeting, the persons named as proxies in the accompanying form will vote on that business in accordance with their best judgment.
Shareholder Proposals for Annual Meeting 20232025
If any shareholder intends to present a proposal to be considered for inclusion in our proxy materials in connection with our 20232025 annual meeting of shareholders, the proposal must be in proper form (per SEC Regulation 14A, Rule 14a-8 - Shareholder Proposals) and received by our Corporate Secretary no later than December 8, 2022.7, 2024. Nominations of persons for election as directors must be made consistent with the provisions of our Bylaws, including the requirement that the shareholder provide timely notice of the nomination in proper written form to our Corporate Secretary.
In accordance with the procedures set forth in our Bylaws, shareholders who wish to submit a proposal for consideration at our 20232025 annual meeting of shareholders, including a nomination for director, but who do not wish to submit a proposal for inclusion in our proxy statement, must deliver notice of the proposal to our Corporate Secretary at our principal executive offices no earlier than December 20, 202217, 2024 and no later than January 19, 2023.16, 2025. Such proposals must contain all information required by our Bylaws. If the month and day of the next annual meeting is advanced or delayed by more than 30 calendar days from the month and day of the annual meeting to which this Proxy Statement relates, we will inform our shareholders of the change in a timely manner, as well as any change in the date by which proposals of shareholders must be received.
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Non-GAAP Financial Measures
Although our financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) and the majority of the financial measures described in this Proxy Statement are calculated in accordance with GAAP, the Board and its committees use certain non-GAAP financial measures referenced in this Proxy Statement in order to assess year-over-year performance. We believe that such non-GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of our ongoing operations and can be useful for period-over-period comparisons of such operations. Non-GAAP financial measures referenced in this Proxy Statement include:
● | non-GAAP gross margin; |
● | non-GAAP |
● | non-GAAP net income; and |
● | non-GAAP earnings per share |
non-gaap financial measures Non-GAAP Gross Margin: Non-GAAP gross margin is calculated by reducing GAAP cost of sales by amounts recorded for amortization of intangible assets, Non-GAAP Non-GAAP Net Income: Non-GAAP net income is calculated by adjusting GAAP net income for the items set forth in the definition of non-GAAP operating income above, as well as for expenses related to debt issuance costs, Non-GAAP Earnings Per Share: Non-GAAP earnings per share is defined as non-GAAP net income divided by the diluted shares outstanding for the corresponding period. Non-GAAP Free Cash Flow: Non-GAAP free cash flow is defined as GAAP operating cash flow less GAAP capital expenditures for property and equipment. Non-GAAP Free Cash Flow - adjusted: Non-GAAP free cash flow - adjusted is defined as Non-GAAP free cash flow adjusted for the cash effect of any non-GAAP adjustments to the Company’s financial statements. |
Our management team uses these and other non-GAAP financial measures to evaluate our profitability and efficiency, to compare operating results to prior periods, to evaluate changes in the operating results of our operating segments, and to measure and allocate financial resources internally. Our Board and Compensation Committee may also use these non-GAAP financial measures to assess the performance of certain of our NEOs.
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OTHER PROXY INFORMATION
Neither our management nor our Board or Compensation Committee consider any such non-GAAP measures in isolation or as an alternative to such measures determined in accordance with GAAP.
You should consider non-GAAP measures used in this Proxy Statement in addition to, not as a substitute for, financial reporting measures prepared in accordance with GAAP. These non-GAAP financial measures generally exclude some, but not all, items that may affect our financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which items are excluded. We believe it is useful to exclude such items in the calculation of non-GAAP gross margin, non-GAAP operating income and margin, non-GAAP net income, and non-GAAP earnings per share and non-GAAP gross margin (in each case, as further illustrated in the reconciliation tables below) because such amounts in any specific period may not directly correlate to the underlying performance of our business operations and can vary significantly between periods as a result of factors such as such new acquisitions, non-cash expenses related to amortization or write-off of previously acquired tangible and intangible assets, certain severance expenses, performance-based stock compensation expenses, corporate transformation expenses, expenses resulting from non-ordinary course litigation or administrative proceedings and resulting settlements, government proceedings or
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changes in tax or industry regulations, debt issuance costs, and gains or losses on disposal of certain assets. We may incur similar types of expenses in the future, and the non-GAAP information included in this Proxy Statement should not be viewed as a statement or indication that these types of expenses will not recur. Additionally, the non-GAAP financial measures used in this Proxy Statement may not be comparable with similarly titled measures of other companies. We urge readers to review the reconciliations of our non-GAAP financial measures to the comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business or results of operations.
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Tables reconciling our 2023, 2022, 2021, 2020 2019, 2018 and 20172019 non-GAAP gross margin, non-GAAP operating income and margin, non-GAAP net income and non-GAAP earnings per share to equivalent GAAP measures are included below:
Reconciliation of GAAP Net (LOSS)INCOME and (Loss)EARINGS per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
| | | | | | | | | | | | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 | Year Ended December 31, 2023 | ||||||||||||||||||||||
| Pre-Tax | Tax Impact | After-Tax | Per Share | Pre-Tax | Tax Impact | After-Tax | Per Share | ||||||||||||||||
GAAP net income | $ | 53,917 | | $ | (5,463) | | | $ | 48,454 | | $ | 0.84 | $ | 112,089 | | $ | (17,678) | |
| $ | 94,411 | | $ | 1.62 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-GAAP adjustments: | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of Sales | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles | | 42,453 | | | (10,543) | | | | 31,910 | | | 0.56 | | 47,795 | | | (11,492) | | | | 36,303 | | | 0.62 |
Inventory write-off (1) | | 1,620 | | | (202) | | | | 1,418 | | | 0.02 | ||||||||||||
Corporate restructuring (1) | | 448 | | | (108) | | | | 340 | | | 0.01 | ||||||||||||
Inventory mark-up related to acquisitions | | 2,069 | | | (497) | | | | 1,572 | | | 0.03 | ||||||||||||
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Contingent consideration benefit | | 3,161 | | | 52 | | | | 3,213 | | | 0.06 | ||||||||||||
Contingent consideration expense | | 1,704 | | | (47) | | | | 1,657 | | | 0.03 | ||||||||||||
Impairment charges | | 4,283 | | | (481) | | | | 3,802 | | | 0.07 | | 270 | | | — | | | | 270 | | | 0.00 |
Amortization of intangibles | | 7,183 | | | (1,798) | | | | 5,385 | | | 0.09 | | 8,293 | | | (1,998) | | | | 6,295 | | | 0.11 |
Performance-based share-based compensation (2) | | 5,035 | | | (604) | | | | 4,431 | | | 0.08 | | 8,526 | | | (1,121) | | | | 7,405 | | | 0.13 |
Corporate transformation and restructuring (3) | | 18,649 | | | (4,620) | | | | 14,029 | | | 0.24 | | 19,365 | | | (4,646) | | | | 14,719 | | | 0.25 |
Acquisition-related | | 8,473 | | | (2,100) | | | | 6,373 | | | 0.11 | | 5,286 | | | (1,269) | | | | 4,017 | | | 0.07 |
Medical Device Regulation expenses (4) | | 4,036 | | | (1,001) | | | | 3,035 | | | 0.05 | | 11,822 | | | (2,838) | | | | 8,984 | | | 0.15 |
Other (5) | | 16,652 | | | (2,977) | | | | 13,675 | | | 0.24 | | (1,268) | | | 304 | | | | (964) | | | (0.02) |
Other (Income) Expense | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of long-term debt issuance costs | | 604 | | | (150) | | | | 454 | | | 0.01 | | 1,639 | | | (393) | | | | 1,246 | | | 0.02 |
Gain on disposal of business unit | | (431) | | | — | | | | (431) | | | (0.01) | ||||||||||||
| | | | | | | | | ||||||||||||||||
Non-GAAP net income | $ | 166,066 | | $ | (29,887) | | | $ | 136,179 | | $ | 2.37 | $ | 217,607 | | $ | (41,783) | | | $ | 175,824 | | $ | 3.01 |
| | | | | | | | | ||||||||||||||||
Diluted shares | | | | 57,359 | | | | 58,356 |
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Reconciliation of GAAP Net (LOSS)income and (Loss)EARNINGS per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
| | | | | | | | | | | | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 | Year Ended December 31, 2022 | ||||||||||||||||||||||
| Pre-Tax | Tax Impact | After-Tax | Per Share | Pre-Tax | Tax Impact | After-Tax | Per Share | ||||||||||||||||
GAAP net income | $ | (13,231) | | $ | 3,388 | | | $ | (9,843) | | $ | (0.18) | $ | 82,629 |
| $ | (8,113) |
| | $ | 74,516 |
| $ | 1.29 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-GAAP adjustments: | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of Sales | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles | | 50,696 | | | (13,065) | | | | 37,631 | | | 0.67 | | 42,154 | | | (10,335) | | | | 31,819 | | | 0.55 |
Inventory write-off (1) | | 1,752 | | | (465) | | | | 1,287 | | | 0.02 | ||||||||||||
Inventory mark-up related to acquisitions | | 191 | | | (49) | | | | 142 | | | 0.00 | ||||||||||||
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Contingent consideration benefit | | (7,960) | | | 466 | | | | (7,494) | | | (0.13) | ||||||||||||
Contingent consideration expense | | 4,611 | | | 14 | | | | 4,625 | | | 0.08 | ||||||||||||
Impairment charges | | 36,504 | | | (7,115) | | | | 29,389 | | | 0.52 | | 2,219 | | | (318) | | | | 1,901 | | | 0.03 |
Amortization of intangibles | | 7,943 | | | (2,141) | | | | 5,802 | | | 0.10 | | 6,300 | | | (1,558) | | | | 4,742 | | | 0.08 |
Performance-based share-based compensation (2) | | 3,735 | | | (475) | | | | 3,260 | | | 0.06 | | 5,506 | | | (546) | | | | 4,960 | | | 0.09 |
Corporate transformation and restructuring (3) | | 14,175 | | | (3,700) | | | | 10,475 | | | 0.19 | | 23,757 | | | (5,516) | | | | 18,241 | | | 0.32 |
Acquisition-related | | 1,229 | | | (317) | | | | 912 | | | 0.02 | | 2,114 | | | (517) | | | | 1,597 | | | 0.03 |
Medical Device Regulation expenses (4) | | 1,379 | | | (359) | | | | 1,020 | | | 0.02 | | 12,933 | | | (3,166) | | | | 9,767 | | | 0.17 |
Other (5) | | 24,438 | | | (3,815) | | | | 20,623 | | | 0.37 | | 7,966 | | | (1,893) | | | | 6,073 | | | 0.11 |
Other (Income) Expense | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of long-term debt issuance costs | | 604 | | | (155) | | | | 449 | | | 0.01 | | 604 | | | (148) | | | | 456 | | | 0.01 |
Gain on disposal of business unit | | (517) | | | 133 | | | | (384) | | | (0.01) | ||||||||||||
Loss on disposal of business unit | | 1,407 | | | (29) | | | | 1,378 | | | 0.02 | ||||||||||||
Tax expense related to restructuring (6) | - | | (4,324) | (4,324) | (0.07) | |||||||||||||||||||
| | | | | | | | | ||||||||||||||||
Non-GAAP net income | $ | 120,938 | | $ | (27,669) | | | $ | 93,269 | | $ | 1.65 | $ | 192,200 | | $ | (36,449) | | | $ | 155,751 | | $ | 2.70 |
| | | | | | | | | ||||||||||||||||
Diluted shares | | | | 56,374 | | | | 57,671 |
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Reconciliation of GAAP Net Incomeincome and earningsEARNINGS per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
| | | | | | | | | | | | |||||||||||||
| | | | | | | | | | | | | ||||||||||||
| Year Ended December 31, 2019 | Year Ended December 31, 2021 | ||||||||||||||||||||||
| Pre-Tax | Tax Impact | After-Tax | Per Share | Pre-Tax | Tax Impact | After-Tax | Per Share | ||||||||||||||||
GAAP net income | $ | 2,193 | | $ | 3,258 | | $ | 5,451 | | $ | 0.10 | $ | 53,917 | | $ | (5,463) | | | $ | 48,454 | | $ | 0.84 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-GAAP adjustments: | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of Sales | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles | | 49,707 | | | (12,730) | | | | 36,977 | | | 0.66 | | 42,453 | | | (10,543) | | | | 31,910 | | | 0.56 |
Inventory mark-up related to acquisitions | | 1,122 | | | (289) | | | | 833 | | | 0.01 | ||||||||||||
Inventory write-off (1) | | 1,620 | | | (202) | | | | 1,418 | | | 0.02 | ||||||||||||
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Contingent consideration benefit | | (232) | | | (47) | | | | (279) | | | (0.00) | ||||||||||||
Contingent consideration expense | | 3,161 | | | 52 | | | | 3,213 | | | 0.06 | ||||||||||||
Impairment charges | | 23,750 | | | (6,113) | | | | 17,637 | | | 0.31 | | 4,283 | | | (481) | | | | 3,802 | | | 0.07 |
Amortization of intangibles | | 10,964 | | | (2,884) | | | | 8,080 | | | 0.14 | | 7,183 | | | (1,798) | | | | 5,385 | | | 0.09 |
Corporate restructuring (6) | | 5,551 | | | (1,433) | | | | 4,118 | | | 0.07 | ||||||||||||
Performance-based share-based compensation (2) | | 5,035 | | | (604) | | | | 4,431 | | | 0.08 | ||||||||||||
Corporate transformation and restructuring (3) | | 18,649 | | | (4,620) | | | | 14,029 | | | 0.24 | ||||||||||||
Acquisition-related | | 3,497 | | | (743) | | | | 2,754 | | | 0.05 | | 8,473 | | | (2,100) | | | | 6,373 | | | 0.11 |
Medical Device Regulation expenses (4) | | 562 | | | (98) | | | | 464 | | | 0.01 | | 4,036 | | | (1,001) | | | | 3,035 | | | 0.05 |
Other (5) | | 7,282 | | | (1,874) | | | | 5,408 | | | 0.10 | | 16,652 | | | (2,977) | | | | 13,675 | | | 0.24 |
Other (Income) Expense | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of long-term debt issuance costs | | 821 | | | (211) | | | | 610 | | | 0.01 | | 604 | | | (150) | | | | 454 | | | 0.01 |
Tax expense related to restructuring (7) | | — | | | 93 | | | | 93 | | | 0.00 | ||||||||||||
| | | | | | | | | | | | | ||||||||||||
Non-GAAP net income | $ | 105,217 | | $ | (23,071) | | $ | 82,146 | | $ | 1.46 | $ | 166,066 | | $ | (29,887) | | | $ | 136,179 | | $ | 2.37 | |
| | | | | | | | | ||||||||||||||||
Diluted shares | | | | 56,235 | | | | 57,359 |
82 94 | Understand. Innovate. Deliver.TM
OTHER PROXY INFORMATION
Reconciliation of GAAP Net (LOSS) and (LOSS) per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
| | | | | | | | | | | | |
| Year Ended December 31, 2020 | |||||||||||
| Pre-Tax | Tax Impact | After-Tax | Per Share | ||||||||
GAAP net loss | $ | (13,231) | | $ | 3,388 | | | $ | (9,843) | | $ | (0.18) |
| | | | | | | | | | | | |
Non-GAAP adjustments: | | | | | | | | | | | | |
Cost of Sales | | | | | | | | | | | | |
Amortization of intangibles | | 50,696 | | | (13,065) | | | | 37,631 | | | 0.67 |
Inventory write-off (1) | | 1,752 | | | (465) | | | | 1,287 | | | 0.02 |
Inventory mark-up related to acquisitions | | 191 | | | (49) | | | | 142 | | | 0.00 |
Operating expenses | | | | | | | | | | | | |
Contingent consideration benefit | | (7,960) | | | 466 | | | | (7,494) | | | (0.13) |
Impairment charges | | 36,504 | | | (7,115) | | | | 29,389 | | | 0.52 |
Amortization of intangibles | | 7,943 | | | (2,141) | | | | 5,802 | | | 0.10 |
Performance-based share-based compensation (2) | | 3,735 | | | (475) | | | | 3,260 | | | 0.06 |
Corporate transformation and restructuring (3) | | 14,175 | | | (3,700) | | | | 10,475 | | | 0.19 |
Acquisition-related | | 1,229 | | | (317) | | | | 912 | | | 0.02 |
Medical Device Regulation expenses (4) | | 1,379 | | | (359) | | | | 1,020 | | | 0.02 |
Other (5) | | 24,438 | | | (3,815) | | | | 20,623 | | | 0.37 |
Other (Income) Expense | | | | | | | | | | | | |
Amortization of long-term debt issuance costs | | 604 | | | (155) | | | | 449 | | | 0.01 |
Gain on disposal of business unit | | (517) | | | 133 | | | | (384) | | | (0.01) |
| | | | | ||||||||
Non-GAAP net income | $ | 120,938 | | $ | (27,669) | | | $ | 93,269 | | $ | 1.65 |
| | | | | ||||||||
Diluted shares | | | | 56,374 |
www.merit.com | 95
OTHER PROXY INFORMATION
Reconciliation of GAAP Net Income and earnings per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 | Year Ended December 31, 2019 | ||||||||||||||||||||||
| Pre-Tax | Tax Impact | After-Tax | Per Share | Pre-Tax | Tax Impact | After-Tax | Per Share | ||||||||||||||||
GAAP net income | $ | 49,519 | | $ | (7,502) | | | $ | 42,017 | | $ | 0.78 | $ | 2,193 | | $ | 3,258 | | $ | 5,451 | | $ | 0.10 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-GAAP adjustments: | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of Sales | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles | | 31,795 | | | (8,123) | | | | 23,672 | | | 0.43 | | 49,707 | | | (12,730) | | | | 36,977 | | | 0.66 |
Inventory mark-up related to acquisitions | | 5,233 | | | (1,347) | | | | 3,886 | | | 0.07 | | 1,122 | | | (289) | | | | 833 | | | 0.01 |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Contingent consideration benefit | | (698) | | | (21) | | | | (719) | | | (0.01) | | (232) | | | (47) | | | | (279) | | | (0.00) |
Impairment charges | | 657 | | | (169) | | | | 488 | | | 0.01 | | 23,750 | | | (6,113) | | | | 17,637 | | | 0.31 |
Amortization of intangibles | | 9,438 | | | (2,503) | | | | 6,935 | | | 0.12 | | 10,964 | | | (2,884) | | | | 8,080 | | | 0.14 |
Corporate restructuring (6) | | 920 | | | (205) | | | | 715 | | | 0.01 | ||||||||||||
Corporate transformation and restructuring (3) | | 5,551 | | | (1,433) | | | | 4,118 | | | 0.07 | ||||||||||||
Acquisition-related | | 7,584 | | | (1,679) | | | | 5,905 | | | 0.11 | | 3,497 | | | (743) | | | | 2,754 | | | 0.05 |
Medical Device Regulation expenses (4) | | 562 | | | (98) | | | | 464 | | | 0.01 | ||||||||||||
Other (5) | | 6,445 | | | (1,659) | | | | 4,786 | | | 0.09 | | 7,282 | | | (1,874) | | | | 5,408 | | | 0.10 |
Other (Income) Expense | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of long-term debt issuance costs | | 804 | | | (207) | | | | 597 | | | 0.01 | | 821 | | | (211) | | | | 610 | | | 0.01 |
Tax expense related to tax reform (8) | | — | | | 3,005 | | | | 3,005 | | | 0.06 | ||||||||||||
Tax expense related to restructuring (6) | | — | | | 93 | | | | 93 | | | 0.00 | ||||||||||||
| | | | | | | | | | | | | ||||||||||||
Non-GAAP net income | $ | 111,697 | | $ | (20,410) | | | $ | 91,287 | | $ | 1.69 | $ | 105,217 | | $ | (23,071) | | $ | 82,146 | | $ | 1.46 | |
| | | | | | | | | ||||||||||||||||
Diluted shares | | | | 53,931 | | | | 56,235 |
www.merit.com 96 | 83 Understand. Innovate. Deliver.TM
OTHER PROXY INFORMATION
Reconciliation of Reported GAAP Net Income and earnings per shareOPERATING INCOME (Loss)
to Non-GAAP Net Income and earnings per shareOPERATING INCOME
(Unaudited, in thousands exceptthousands)
| | | | | | | | | | | | | | | | ||||||
| | Year Ended December 31, | |||||||||||||||||||
| | 2023 | | | | 2022 | | | | 2021 | | | 2020 | | 2019 | ||||||
Net Sales as Reported | $ | 1,257,366 | | | $ | 1,150,981 | | | $ | 1,074,751 | | $ | 963,875 | $ | 994,852 | ||||||
| | | | | | | | | | | | | | | | ||||||
GAAP Operating income (loss) | | 123,944 | | | | 87,563 | | | | 60,916 | | | (1,562) | | 15,434 | ||||||
Cost of Sales | | | | | | | | | | | |||||||||||
Amortization of intangibles | | 47,795 | | | | 42,154 | | | | 42,453 | | | 50,696 | | 49,707 | ||||||
Corporate restructuring and inventory write-off (1) | | 448 | | | | — | | | | 1,620 | | | 1,752 | | — | ||||||
Inventory mark-up related to acquisitions | | 2,069 | | | | — | | | | — | | | 191 | | 1,122 | ||||||
Operating Expenses | | | | | | | | | | | | | | | | ||||||
Contingent consideration expense (benefit) | | 1,704 | | | | 4,611 | | | | 3,161 | | | (7,960) | | (232) | ||||||
Impairment charges | | 270 | | | | 2,219 | | | | 4,283 | | | 36,504 | | 23,750 | ||||||
Amortization of intangibles | | 8,293 | | | | 6,300 | | | | 7,183 | | | 7,943 | | 10,964 | ||||||
Performance-based share-based compensation (2) | | 8,526 | | | | 5,506 | | | | 5,035 | | | 3,735 | | — | ||||||
Corporate transformation and restructuring (3) | | 19,365 | | | | 23,757 | | | | 18,649 | | | 14,175 | | 5,551 | ||||||
Acquisition-related | | 5,286 | | | | 2,114 | | | | 8,473 | | | 1,229 | | 3,497 | ||||||
Medical Device Regulation expenses (4) | | 11,822 | | | | 12,933 | | | | 4,036 | | | 1,379 | | 562 | ||||||
Other (5) | | (1,268) | | | | 7,966 | | | | 16,652 | | | 24,438 | | 7,282 | ||||||
| | | | | | | | | | | | | | | | ||||||
Non-GAAP Operating Income | $ | 228,254 | | | $ | 195,123 | | | $ | 172,461 | | $ | 132,520 | $ | 117,637 | ||||||
| | | | | | | | | | | | | | | | ||||||
Non-GAAP Operating Margin | | 18.2% | | | | 17.0% | | | | 16.0% | | | 13.7% | | 11.8% |
Note: Certain per share amounts)impacts may not sum to totals due to rounding.
| | | | | | | | | | | | |
| Year Ended December 31, 2017 | |||||||||||
| Pre-Tax | Tax Impact | After-Tax | Per Share | ||||||||
GAAP net income | $ | 35,881 | | $ | (8,358) | | | $ | 27,523 | | $ | 0.55 |
| | | | | | | | | | | | |
Non-GAAP adjustments: | | | | | | | | | | | | |
Cost of Sales | | | | | | | | | | | | |
Amortization of intangibles | | 20,705 | | | (7,550) | | | | 13,155 | | | 0.26 |
Inventory mark-up related to acquisitions | | 3,400 | | | (1,253) | | | | 2,147 | | | 0.04 |
Operating expenses | | | | | | | | | | | | |
Contingent consideration benefit | | (298) | | | 116 | | | | (182) | | | (0.00) |
Impairment charges | | 809 | | | — | | | | 809 | | | 0.02 |
Amortization of intangibles | | 6,111 | | | (2,324) | | | | 3,787 | | | 0.07 |
Corporate restructuring (6) | | 2,185 | | | (847) | | | | 1,338 | | | 0.03 |
Acquisition-related | | 6,648 | | | (2,048) | | | | 4,600 | | | 0.09 |
Other (5) | | 24,931 | | | (5,075) | | | | 19,856 | | | 0.40 |
Other (Income) Expense | | | | | | | | | | | | |
Gain on bargain purchase (9) | | (11,039) | | | — | | | | (11,039) | | | (0.22) |
Amortization of long-term debt issuance costs | | 685 | | | (267) | | | | 418 | | | 0.01 |
Tax expense related to tax reform (8) | | — | | | 1,855 | | | | 1,855 | | | 0.04 |
| | | | | ||||||||
Non-GAAP net income | $ | 90,018 | | $ | (25,751) | | | $ | 64,267 | | $ | 1.28 |
| | | | | ||||||||
Diluted shares | | | | 50,101 |
(1) | Represents corporate restructuring charges reflected within costs of sales including the write-off of inventory related to the divestiture or exit of certain businesses or product lines. |
(2) | Represents performance-based share-based compensation expense, including stock-settled and cash-settled awards. |
(3) | Includes severance related to corporate initiatives, write-offs and valuation adjustments of other long-term assets associated with restructuring activities, expenses related to the Foundations for Growth Program, and other transformation costs. |
(4) | Represents incremental expenses incurred to comply with the E.U. Medical Device Regulation |
(5) | Represents expense from acquired in-process research and development, charges related to abandoned patents, costs incurred in responding to an inquiry from the U.S. Department of Justice (DOJ), costs to comply with Merit’s corporate integrity agreement with the DOJ, insurance reimbursement of approximately $(3.0) million for costs incurred in responding to an inquiry by the DOJ in 2023, legal costs associated with a shareholder derivative proceeding in 2022, accrued class action litigation settlement costs of $10 million in 2021, net of expected insurance proceeds, accrued contract termination costs of approximately $6 million in 2021 to renegotiate certain terms of an acquisition agreement, |
(6) |
Represents net tax expense related to non-recurring tax withholdings in connection with restructuring of certain international subsidiaries. |
84 www.merit.com | Understand. Innovate. Deliver.TM 97
OTHER PROXY INFORMATION
Reconciliation of Reported Gross Margin (GAAP)
to Non-GAAP Gross Margin (Non-GAAP)
(Unaudited, as a percentage of reported revenue)
| | | | | | | ||||
| Year Ended | Year Ended | ||||||||
| December 31, | December 31, | ||||||||
| 2021 | 2020 | 2019 | 2018 | 2017 | 2023 | 2022 | 2021 | 2020 | 2019 |
Reported Gross Margin | 45.2% | 41.6% | 43.5% | 44.7% | 44.8% | 46.4% | 45.1% | 45.2% | 41.6% | 43.5% |
| | | | | | | ||||
Add back impact of: | | | | | | | ||||
Amortization of intangibles | 4.0% | 5.3% | 5.0% | 3.6% | 2.8% | 3.8% | 3.7% | 4.0% | 5.3% | 5.0% |
Inventory write-off (1) | 0.2% | 0.2% | — | — | ||||||
Corporate restructuring and inventory write-off (1) | 0.0% | — | 0.2% | — | ||||||
Inventory mark-up related to acquisitions | — | 0.0% | 0.1% | 0.6% | 0.5% | 0.2% | — | 0.0% | 0.1% | |
Non-GAAP Gross Margin | 49.3% | 47.1% | 48.6% | 48.9% | 48.1% | 50.4% | 48.8% | 49.3% | 47.1% | 48.6% |
Note: Certain percentages may not sum to totals due to rounding
(1) | Represents corporate restructuring charges reflected within costs of sales including the write-off of inventory related to the divestiture or exit of certain businesses or product lines. |
Reconciliation of OPERATING CASH FLOW
to Non-GAAP FREE CASH FLOW
TO ADJUSTED NON-GAAP FREE CASH FLOW
(Unaudited, in thousands)
| | | | | | | | | | | | | | | | ||||
| | Year Ended December 31, | |||||||||||||||||
| | 2023 |
|
| | 2022 |
|
| | 2021 | | | 2020 | | 2019(4) | ||||
Operating cash flow | $ | 145,151 | | | $ | 114,291 | | | $ | 147,231 | | $ | 165,270 | $ | 77,813 | ||||
| | | | | | | | | | | |||||||||
Less: | | | | | | | | | | | | | | | | ||||
Capital expenditures | | 34,290 | | | | 45,029 | | | | 27,939 | | | 45,988 | | 78,173 | ||||
| | | | | | | | | | | | | | | | ||||
Non-GAAP Free Cash Flow | $ | 110,861 | | | $ | 69,262 | | | $ | 119,292 | | $ | 119,282 | $ | (360) | ||||
| | | | | | | | | | | | | | | | ||||
Add back impact of: | | | | | | | | | | | | | | | | ||||
Corporate transformation(1) | | 14,834 | | | | 16,923 | | | | 18,855 | | | 8,551 | | | ||||
Medical Device Regulation expenses(2) | | 11,822 | | | | 12,933 | | | | 4,036 | | | 1,379 | | | ||||
Acquisition-related | | 5,286 | | | | 2,114 | | | | 8,473 | | | 1,229 | | | ||||
Other (3) | | (2,877) | | | | 10,357 | | | | 6,416 | | | 24,334 | | | ||||
Contingent acquisition payments in Operating CF | | 12,762 | | | | 1,780 | | | | — | | | — | | | ||||
| | | | | | | | | | | | | | | | ||||
Non-GAAP Free Cash Flow – Adjusted | $ | 152,688 | | | $ | 113,369 | | | $ | 157,072 | | $ | 154,775 | | | ||||
| | | | | | | | | | | | | | | |
(1) | Includes severance related to corporate initiatives and expenses related to the Foundations for Growth Program. |
(2) | Represents incremental expenses incurred to comply with the E.U. Medical Device Regulation (“MDR”). |
(3) | Represents expense from acquired in-process research and development, insurance reimbursement of approximately $(3.0) million for costs incurred in responding to an inquiry by the DOJ in 2023, class action litigation settlement costs of $10 million in 2022, contract termination costs of approximately $6 million in 2021 to renegotiate certain terms of an acquisition agreement, $18.7 million of settlement costs in 2020 to fully resolve an investigation conducted by the DOJ, and activist shareholder settlement fees in 2020. |
(4) | Adjusted Non-GAAP Free Cash Flow was a metric used by the Company starting in 2020. |
www.merit.com 98 | 85 Understand. Innovate. Deliver.TM
OTHER PROXY INFORMATION
APPENDIX A
COMPANIES INCLUDED IN
NASDAQ Stocks
SIC 3840-3849 US COMPANIES SURGICAL, MEDICAL and DENTAL INSTRUMENTS AND SUPPLIES
MODD | Modular Medical, Inc. | ATRC | AtriCure, Inc. | |
MOTS | Motus GI Holdings, Inc. | AVGR | Avinger, Inc. | |
MOVE | Movano Inc. | AXNX | Axonics, Inc. | |
CLPT | ClearPoint Neuro, Inc. | BSGM | BioSig Technologies, Inc. | |
TLSI | TriSalus Life Sciences, Inc. | CERS | Cerus Corporation | |
NAOV | NanoVibronix, Inc. | BLFS | BioLife Solutions, Inc. | |
NARI | Inari Medical, Inc. | CODX | Co-Diagnostics, Inc. | |
NDRA | ENDRA Life Sciences Inc. | MBOT | Microbot Medical Inc. | |
NEPH | Nephros, Inc. | CTSO | Cytosorbents Corporation | |
NMRD | Nemaura Medical Inc. | CUTR | Cutera, Inc. | |
NMTC | NeuroOne Medical Technologies Corporation | LIVN | LivaNova PLC | |
NPCE | NeuroPace, Inc. | PSTV | Plus Therapeutics, Inc. | |
NTRB | Nutriband Inc. | DCTH | Delcath Systems, Inc. | |
NURO | NeuroMetrix, Inc. | STRR | Star Equity Holdings, Inc. | |
NVAC | NorthView Acquisition Corporation | DXCM | DexCom, Inc. | |
NVCR | NovoCure Limited | DXR | Daxor Corporation | |
NVIV | InVivo Therapeutics | DYNT | Dynatronics Corporation | |
NXGL | NEXGEL, Inc. | ECOR | electroCore, Inc. | |
NXL | Nexalin Technology, Inc. | OSUR | OraSure Technologies, Inc. | |
LGMK | LogicMark, Inc. | ESTA | Establishment Labs Holdings Inc. | |
RSLS | ReShape Lifesciences Inc. | VANI | Vivani Medical, Inc. | |
OFIX | Orthofix Medical Inc. | FONR | FONAR Corporation | |
OM | Outset Medical, Inc. | INO | Inovio Pharmaceuticals, Inc. | |
OTEC | OceanTech Acquisitions I Corp. | NVNO | enVVeno Medical Corporation | |
PAVM | PAVmed Inc. | HOLX | Hologic, Inc. | |
PDEX | Pro-Dex, Inc. | ICAD | iCAD, Inc. | |
PLSE | Pulse Biosciences, Inc. | HSDT | Helius Medical Technologies, Inc. | |
POCI | Precision Optics Corporation, Inc. | IART | Integra LifeSciences Holdings Corporation | |
PODD | Insulet Corporation | ICUI | ICU Medical, Inc. | |
PRCT | PROCEPT BioRobotics Corporation | GCTK | GlucoTrack, Inc. | |
PXDT | Pixie Dust Technologies, Inc. | INGN | Inogen, Inc. | |
MDAI | Spectral AI, Inc. | IRIX | IRIDEX Corporation | |
SGHT | Sight Sciences, Inc. | IRMD | IRADIMED CORPORATION | |
SIBN | SI-BONE, Inc. | IRTC | iRhythm Technologies, Inc. | |
SIEN | Sientra, Inc. | ISRG | Intuitive Surgical, Inc. | |
SILK | Silk Road Medical, Inc | INVO | INVO Bioscience, Inc. | |
POAI | Predictive Oncology Inc. | KIDS | OrthoPediatrics Corp. | |
SMLR | Semler Scientific, Inc. | LAKE | Lakeland Industries, Inc. | |
SRDX | Surmodics, Inc. | AXGN | AxoGen, Inc. | |
SRTS | Sensus Healthcare, Inc. | LMAT | LeMaitre Vascular, Inc. | |
NUWE | Nuwellis, Inc. | BIOL | BIOLASE, Inc. | |
STIM | Neuronetics, Inc. | MASI | Masimo Corporation | |
STSS | Sharps Technology, Inc. | MDXG | MiMedx Group, Inc. | |
SWAV | Shockwave Medical, Inc. | SSKN | STRATA Skin Sciences, Inc. | |
TCMD | Tactile Systems Technology, Inc. | AFIB | Acutus Medical, Inc. | |
TELA | TELA Bio, Inc. | CTCX | Carmell Corporation | |
PETV | PetVivo Holdings, Inc. | ALTU | Altitude Acquisition Corp. | |
TIVC | Tivic Health Systems, Inc. | COCH | Envoy Medical, Inc. | |
TMCI | Treace Medical Concepts, Inc. | IONM | Assure Holdings Corp. | |
TMDX | TransMedics Group, Inc. | ATAK | Aurora Technology Acquisition Corp * | |
TNDM | Tandem Diabetes Care, Inc. | BBLG | Bone Biologics Corporation | |
TNON | Tenon Medical, Inc. | BEAT | HeartBeam, Inc. |
OTHER PROXY INFORMATION
TTOO | T2 Biosystems, Inc. | BJDX | Bluejay Diagnostics, Inc. | |
UFPT | UFP Technologies, Inc. | BVS | Bioventus Inc. | |
UTMD | Utah Medical Products, Inc. | CVRX | CVRx, Inc. | |
UTRS | Minerva Surgical, Inc. | AKLI | Akili, Inc. | |
SKIN | The Beauty Health Company | EAR | Eargo, Inc. | |
VVOS | Vivos Therapeutics, Inc. | EMBC | Embecta Corp. | |
SMTI | Sanara MedTech Inc. | FEMY | Femasys Inc. | |
XRAY | DENTSPLY SIRONA Inc. | INBS | Intelligent Bio Solutions Inc. | |
ZIMV | ZimVie Inc. | GEHC | GE HealthCare Technologies Inc. | |
ZYXI | Zynex, Inc. | HYPR | Hyperfine, Inc. | |
KRMD | KORU Medical Systems, Inc. | OBIO | Orchestra BioMed Holdings, Inc. | |
AEMD | Aethlon Medical, Inc. | HSCS | Heart Test Laboratories, Inc. | |
ALGN | Align Technology, Inc. | ICU | SeaStar Medical Holding Corporation | |
SINT | Sintx Technologies, Inc. | LNSR | LENSAR, Inc. | |
APYX | Apyx Medical Corporation | LUCD | Lucid Diagnostics Inc. | |
ANGO | AngioDynamics, Inc. | LUNG | Pulmonx Corporation | |
ANIK | Anika Therapeutics, Inc. | LYRA | Lyra Therapeutics, Inc. | |
ARAY | Accuray Incorporated | MBTC | Nocturne Acquisition Corporation | |
ATEC | Alphatec Holdings, Inc. | SEPA | SEP Acquisition Corp. | |
ATRI | Atrion Corporation | MGRM | Monogram Orthopaedics, Inc. | |
* acquired by DIH Technology Ltd. On February 7 2024 |
OTHER PROXY INFORMATION
APPENDIX B
THIRD AMENDMENT TO THE
MERIT MEDICAL SYSTEMS, INC.
2018 LONG-TERM INCENTIVE PLAN
THIS THIRD AMENDMENT TO THE MERIT MEDICAL SYSTEMS, INC. 2018 LONG-TERM INCENTIVE PLAN (this "Amendment") is made and adopted effective February 17, 2024 by Merit Medical Systems, Inc. (the “Company”), contingent upon approval of this Amendment by the shareholders of the Company not later than June 30, 2024.
WHEREAS, the Company maintains the Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan, as amended (the "Plan"), for the benefit of its employees and the employees of its participating subsidiaries;
WHEREAS, it is necessary and desirable to amend the Plan to increase the number of shares of Company common stock (“Shares”) authorized for grant under the Plan from 6,100,000 Shares to 9,100,000 Shares; and
WHEREAS, the Company, acting through its Board of Directors (the "Board"), has reserved the right to amend the Plan at any time and from time to time, subject to shareholder approval in the case of certain material modifications;
NOW, THEREFORE, contingent upon approval of this Amendment by the shareholders of the Company not later than June 30, 2024, the Plan is amended as follows effective February 17, 2024:
1. | Section 3.1(a) of the Plan is amended and restated in its entirety to read as follows: |
"(a)Subject to adjustment as provided in Section 12.2, a total of 9,100,000 Shares shall be authorized for grant under the Plan. Any Shares that are subject to Awards of Options or Stock Appreciation Rights shall be counted against this limit as one (1) Share for every one (1) Share granted. Any Shares that are subject to Awards other than Options or Stock Appreciation Rights shall be counted against this limit as two and one-half (2½) Shares for every one (1) Share granted.”
2. | The third sentence of Section 5.7 of the Plan, relating to the maximum number of Shares with respect to which incentive stock options may be granted under the Plan, is amended to read as follows: |
“Solely for the purposes of determining whether Shares are available for the grant of Incentive Stock Options under the Plan, the maximum aggregate number of Shares with respect to which Incentive Stock Options may be issued under the Plan shall be 9,100,000 Shares, subject to adjustment under Section 12.2.”
3. | Notwithstanding the foregoing, if the shareholders of the Company fail to approve this Amendment by June 30, 2024, this Amendment shall be null and void. Except as provided above, the terms of the Plan are hereby ratified and confirmed in all respects. |
OTHER PROXY INFORMATION
VOTE BY INTERNET
Before The Meeting – Go to www.proxyvote.com
Use the Internet to transmit your voting instructions
and for electronic delivery of information. Vote by 11:59 P.M. Eastern Time
on May 18, 202214, 2024 for shares held directly and by 11:59 P.M. Eastern Time
on May 16, 202210, 2024 for shares held in
the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan.
Have your proxy card in hand when you access the web site
and follow the instructions to obtain your records
and to create an electronic voting instruction form.
During The Meeting – Go to www.virtualshareholdermeeting.com/MMSI2022MMSI2024
You may attend the meeting via the Internet and vote during the meeting.
Have the information that is printed in the box marked by the arrow available
and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions.
Vote by 11:59 P.M. Eastern Time on May 18, 202214, 2024 for shares held directly
and by 11:59 P.M. Eastern Time on May 16, 202210, 2024 for shares held
in the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan.
Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have
provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood,
NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ⌧ | KEEP THIS PORTION FOR YOUR RECORDS |
| | DETACH AND RETURN THIS PORTION ONLY |
86 | Understand. Innovate. Deliver.TM
OTHER PROXY INFORMATION
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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MERIT MEDICAL SYSTEMS, INC. The Board of Directors recommends you vote | ||||||||
1. | The election of Nominees: For Against Abstain | |||||||
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The Board of Directors recommends you vote For Against Abstain | ||||||||
2. | Approval of a non-binding, advisory resolution approving the compensation of the Company's named executive officers as described in the Merit Medical Systems, Inc. Proxy Statement. | [ ] [ ] [ ] | ||||||
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3. | Approval of an amendment to increase the number of shares authorized for issuance under the Merit Medical Systems, Inc. 2018 Long-Term Incentive Plan by 3,000,000 shares. | [ ] [ ] [ ] | ||||||
| | | | | For Against Abstain | |||
4. | Ratification of the Audit Committee’s appointment of Deloitte & Touche LLP to serve as the independent registered public accounting firm of the Company for the year ending December 31, | [ ] [ ] [ ] | ||||||
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NOTE: In their discretion, proxies are authorized to vote upon such other business as may properly come before the meeting or any postponement or adjournment of the meeting. | |
Please sign exactly as your name(s) appear(s) hereon. When signing as
attorney, executor, administrator, or other fiduciary, please give full
title as such. Joint owners should each sign personally. All holders must
sign. If a corporation or partnership, please sign in full corporate or
partnership name by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX] | Date | | Signature (Joint Owners) | Date |
www.merit.com | 87
OTHER PROXY INFORMATION
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
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MERIT MEDICAL SYSTEMS, INC.
Annual Meeting of Shareholders
May 19, 2022,15, 2024, 2:00 PM (Mountain Time)
This proxy is solicited by the Board of Directors
The undersigned hereby appoints Fred P. Lampropoulos, Brian G. Lloyd and Raul Parra and each of them, as proxies, with full power of substitution, and hereby authorizes each of them to represent and vote, as designated below, all shares of the common stock of Merit Medical Systems, Inc., a Utah corporation (the “Company”), held of record by the undersigned on March 22, 202218, 2024 at the Annual Meeting of Shareholders (the “Annual Meeting”) to be held virtually via live webcast at www.virtualshareholdermeeting.com/MMSI2022,MMSI2024, on Thursday, May 19, 2022,15, 2024, at 2:00 p.m., Mountain Time, or at any adjournment or postponement thereof, upon the matters set forth below, all in accordance with and as more fully described in the accompanying Notice of Annual Meeting and Proxy Statement, receipt of which is hereby acknowledged.
This proxy also provides voting instructions to the Trustee of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan and directs such Trustee to vote at the Annual Meeting all of the shares of the Company's Common Stock which are allocated to the undersigned's employee plan account in the manner directed on the reverse side of this card. If no direction is given or if direction is received after May 16, 2022,10, 2024, the Trustee will vote the shares in the same proportion as to which it has received instructions from other plan participants.
This proxy card, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations (FOR Proposals 1, through 3)2, 3 and 4) and in the discretion of the proxies, or Trustee of the Merit Medical Systems, Inc. 401(k) Profit Sharing Plan, as applicable, upon such other matters as may properly come before the Annual Meeting. The undersigned shareholder may revoke this proxy card at any time before it is voted at the Annual Meeting by executing and returning a proxy card bearing a later date by mail, by voting via the Internet, by filing with the Secretary of the Company, at the Company’s address set forth above,in the Notice of Annual Meeting and Proxy Statement, a written notice of revocation bearing a later date than the proxy card being revoked, or by voting the Common Stock covered thereby in person at the Annual Meeting.
(Continued and to be marked, dated and signed on reverse side)
88 | Understand. Innovate. Deliver.TM