Selected 2022 Highlights
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Revenue | | | Operating Cash Flow | | | 5-Year TSR (1) |
$1.151 billion | | | $114 million | | | 63% |
| (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, 2017 to December 31, 2022. Past results are not necessarily an indicator of future results. |
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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 | | | Continued and expanded Company-wide initiatives through our Foundations for Growth program to reduce operating expenses and increase profitability |
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 95% of shareholders represented at our 2022 annual meeting voting in favor of it. | | 
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| | We pay for performance |
| 69% 69% of CEO’s Target Compensation package is performance-based | |
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| | other named executive officers’ target compensation package is performance-based |
MERIT MEDICAL SYSTEMS, INC.
1600 West Merit Parkway
South Jordan, Utah 84095
___________________________
PROXY STATEMENT
___________________________
Annual Meeting of Shareholders
May 26, 2016
___________________________
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the shareholders of
The Merit Medical Systems, Inc., a Utah corporation (the “Company” 2018 Long-Term Incentive Plan, as amended (2018 Incentive Plan), in connection withprovides for the solicitation byissuance of up to 6,100,000 shares of our Common Stock. Awards granted under the Board2018 Incentive Plan generally have minimum vesting periods of Directorsnot less than one year.
During 2020, we began a program of awarding performance-based restricted stock units under the provisions of the Company (the “Board”)2018 Incentive Plan, which ties a significant portion of proxies from holders of outstanding shares of the Company’s common stock, no par value (the “Common Stock”), for use at the Annual Meeting of Shareholders of the Company to be held on Thursday, May 26, 2016, at 3:00 p.m., at the Company’s corporate offices at 1600 West Merit Parkway, South Jordan, Utah 84095 and at any adjournment or postponement thereof (the “Annual Meeting”). This Proxy Statement, the Notice of Annual Meeting of Shareholders and the accompanying form of proxy are first being mailed or made available to shareholders of the Company on or about April 11, 2016.
The Company will bear all costs and expenses relatingexecutive equity compensation to the
solicitationachievement of
proxies, includingoperating cash flow metrics, adjusted for the
costsperformance 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. In additionour stock relative to the
solicitationRussell 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 proxies by use of the mailour Named Executive Officers (NEOs). For additional information regarding our executive compensation practices, see “Compensation Discussion and the Internet, the directors, officers and employees of the Company, 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 the Company will reimburse those brokerage firms, custodians, nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them in connection therewith.
VOTING
The Board has fixed the close of business on March 28, 2016 as the record date for determination of shareholders entitled to receive notice of and to vote at the Annual Meeting (the “Record Date”). As of the Record Date, there were issued and outstanding 44,285,041 shares of Common Stock. The holders of record of the shares of Common Stock on the Record Date entitled to be voted at the Annual Meeting are entitled to cast one vote per share on each matter submitted to a vote at the Annual Meeting.
Proxies
Shares of 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, those shares will be voted FOR the election of each of the three director nominees identifiedAnalysis” in this Proxy
Statement; FOR the non-binding resolution to approve the compensationStatement.
4 | Understand. Innovate. Deliver.TM
ContentsCORPORATE GOVERNANCE AND RELATED MATTERS
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 the Secretary of the Company, at the address set forth above, a written notice of revocation bearing a later date than the proxy being revoked, or by voting the Common Stock covered thereby in person at the Annual Meeting. In order to revoke a proxy executed with respect to shares held in street name, the shareholder must contact the appropriate broker or nominee.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: |
| | ● Added incremental financial, accounting and industry experience and skills to the Board ● Increased the number of independent directors on the Board ● Enhanced oversight of sustainable business practices ● Continued and refined an executive compensation program, including long-term performance stock units and cash bonuses, designed to align executive compensation with Company performance ● Increased focus on oversight of enterprise risk management, led by the Operating Committee of the Board (Operating Committee) | ● Strong and active lead independent director ● Majority voting for all directors ● With the assistance of an independent external advisor, the Board conducted a comprehensive evaluation to assess the effectiveness of the Board and its committees and members ● Regular executive sessions of independent directors ● No shareholder rights plan (“poison pill”) or dual class capitalization structure ● Annual “say-on-pay” advisory 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. The ratification of the Company’s independent registered accounting firm is considered a routine matter for which brokerage firms may vote un-instructed shares. The election of directors and the advisory vote to approve named executive officer compensation are not considered routine matters under current securities rules. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.” It should be noted that securities rules previously considered the election of directors to be a “routine” matter for which brokerage firms could vote in the election of directors if the record holder had not received instructions on how to vote from the beneficial owner. Accordingly, given this change, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.
Vote Required
A majority of the issued and outstanding shares of Common Stock entitled to vote, properly represented in person or by proxy, is required for a quorum at the Annual Meeting. Abstentions and broker non-votes, which are indications by a broker that it does not have discretionary authority to vote on a particular matter, will be counted as “represented” for the purpose of determining the presence or absence of a quorum. Under the Utah Revised Business Corporation Act, once a quorum is established, shareholder approval with respect to a particular proposal is generally obtained when the votes cast in favor of the proposal exceed the votes cast against the proposal.
Holders of shares of Common Stock are entitled to one vote at the Annual Meeting for each share of Common Stock held of record on the Record Date. In the election of directors, shareholders will not be allowed to cumulate their votes. The three director-nominees who receive a majority of the votes cast with respect to his or her election will be elected as directors of the Company. The advisory vote on executive compensation is non-binding; however, the Company will record the number of votes cast in favor of and against the proposal and will report the voting results at the Annual Meeting. The proposal to ratify the appointment of Deloitte to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2016 requires that the votes cast in favor of the applicable proposal must exceed the votes cast against the proposal. Accordingly, abstentions and broker non-votes will not affect the outcome of the election of directors, the advisory vote with respect to executive compensation, or the proposal to ratify the appointment of the Company’s independent registered public accounting firm.
Any other matter presented for approval by the shareholders at the Annual Meeting will generally be approved if the number of votes cast in favor of a matter exceeds the number of votes cast in opposition. With respect to any such matter, abstentions and broker non-votes are not likely to affect the outcome of a vote on such matter.
PROPOSAL 1: Election of Three Nominees for Director |
The Board of Directors recommends that you vote FOR all three director nominees. These individuals bring a range of relevant experiences and overall diversity of perspectives that is essential to good governance and leadership of our company. | The Board recommends a
Vote FOR all nominees | 
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PROPOSAL NO. 1 — ELECTION OF DIRECTORS
At the Annual Meeting, shareholders will be asked to consider the nominations of three directors of the Company are to be elected to serve until the annual meetingour 2026 Annual Meeting of the Company’s shareholders in 2019Shareholders and until their successors are duly elected and qualified. If any of the below nominees becomes unavailable to serve, which is not now anticipated, the proxies solicited by this Proxy Statement will be voted for other persons as may be designated by the Board. The three director -nominees who receive a majority of the votes cast with respect to his or her election at the Annual Meeting will be elected as directors of the Company.
Board in their stead.Classification of Board of Directors
The Company’sOur Amended and Restated Articles of Incorporation as amended,(Articles of Incorporation) provide for the classificationa classified, or “staggered,” board of thedirectors. Our Board also known as a “staggered board.” The directors of the Company areis divided into three classes, with the directors in each class serving a three-year term. The classes are staggered, withOur Third Amended and Restated Bylaws (Bylaws) provide that the termsnumber of directors serving in each class shall be as nearly equal in size as possible. Accordingly, approximately one-third of the directors, as near as possible, expiringour directors’ terms expire at each annual shareholders meeting.meeting of shareholders. Based upon the existing classification of the Board, the terms of Richard W. Edelman, Michael E. Stillabower, M.D.Lonny J. Carpenter, James T. Hogan and F. Ann Millner, Ed.DDavid K. Floyd are scheduled to expire in connection with our Annual Meeting. Mr. Hogan will leave the Board as his term expires with our Annual Meeting. The Board has nominated Lonny J. Carpenter and David K. Floyd for election at the Annual Meeting to serve new three-year terms. Because Mr. Hogan’s departure would cause an imbalance between the number of directors in each class, the Board has also nominated Lynne N. Ward for election at the Annual Meeting to serve a new three-year term to more evenly balance the number of directors serving in each class. If Ms. Ward is elected at the Annual Meeting, there will be three or four directors in each class. If Ms. Ward is not elected to serve a new term at the Annual Meeting, she will continue her current term (ending in 2024) and there may be two, three or four directors serving in each class.
Size of the Board of Directors
The Board currently consists of eleven directors. Our Bylaws permit the Board to set the number of directors to a number not less than three and not more than eleven. In anticipation of the Annual Meeting and the expiration of Mr. Hogan’s term of service as a director, the Environmental, Social and Governance Committee of the Board (ESG Committee) recommended, and the Board unanimously adopted, a resolution decreasing the number of directors serving on the Board to ten following the Annual Meeting.
Nominees for Election as Directors
TheOur Board and its Nominating and Corporate Governancethe ESG Committee (the “Nominating Committee”) believe that each of the following nominees possesses the experience and qualifications that directors of the Company should possess, as described in detail below, and that the experience and qualifications of each nominee complimentscomplement the experience and qualifications of the other nominees. directors of the Company.
The experience and qualifications of each nominee, including information regarding the specific experience, qualifications, attributes and skills that led the Board and the NominatingESG Committee to conclude that heshe or shehe should be nominated to serve as a director of the Company, at the present time, in light of the Company’sour business and structure, are set forth below:
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LONNY J. CARPENTER Independent Director Age: 61 Director Since: June 2020 Committees: Operating (Chair), Compensation, Finance Other Public Boards: Novanta Inc. Education: B.S., United States Military Academy at West Point Term Expires: 2023 | 
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| DAVID K. FLOYD Independent Director Age: 62 Director Since: June 2020 Committees: ESG, Operating Other Public Boards: None Education: B.S., Grace College Term Expires: 2023 | 
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Career Highlights ● Member of the Board of Directors (Lead Independent Director) of Novanta Inc., a manufacturer of precision photonic and motion control components and subsystems, 2018 to present ● Member of the Board of Directors of Orchid Orthopedics Solutions (a privately-owned orthopedic medical device outsourcing company), 2019 to present ● Member of the Board of Directors of The Boler Company, (a privately-owned auto part manufacturing company), 2019 to present ● Group President, Global Quality and Business Operations of Stryker Corporation (Stryker), 2016 to 2019 ● Group President, Global Quality and Operations of Stryker, 2011 to 2016 ● President, Instruments and Medical Division of Stryker, 2006 to 2008 ● Captain in the U.S. Army and helicopter pilot having served in leadership roles for the 101st Airborne Division Qualifications of Particular Relevance to Merit The Board believes Mr. Carpenter’s broad business background and experience in setting enterprise-wide direction, experience in quality, manufacturing, procurement and logistics strategies from his tenure at Stryker provide the Board with practical, real-world knowledge and guidance and have strengthened the Company’s efficiency and cost-reduction initiatives. Mr. Carpenter’s business background and experience have been particularly beneficial to the Company in the course of his leadership of the Operating Committee and the development of our Foundations for Growth program. | | Career Highlights ● Chair, Corin Group LTD, a privately-held global technology orthopaedic company, 2020 to present ● Member of the Board of Directors of Health Outcomes Performance Company (a privately-owned company focused on transforming the patient care experience and improving the practice of medicine), 2020 to present ● Advisor to Bain & Company (a private global management consulting services firm), 2019 to present ● 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 provides the Board with expertise on a broad range of matters, including mergers and acquisitions, global business and operations, corporate governance and product commercialization. The Board believes Mr. Floyd’s industry and management experience have been particularly beneficial through his service on the Operating Committee and his guidance in the Company’s development of its Foundations for Growth program. |
6 | Understand. Innovate. Deliver.TM
Richard W. Edelman, 75, has been a director
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LYNNE N. WARD Independent Director Age: 64 Director Since: August 2019 Committees: Audit (Chair), Finance; ESG Other Public Boards: None Education: B.S. University of Utah (Accounting) Term Expires: 2024 | 
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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 that growth. Her cost management, and investment and marketing innovations of a highly regulated product led to year-over-year Gold ratings from Morningstar. The Board believes Ms. Ward has strong career experience, including financial oversight capabilities and leadership of a rapidly growing organization. The Board believes her contributions strengthen the Company’s strategic direction while encouraging operational excellence. The Board also recognizes the valuable perspective and significant service Ms. Ward provides to the Company as Chair of the Audit Committee. Ms. Ward’s current term of service as a director does not expire until 2024. However, considering the expiration of Mr. Hogan’s term of service at the Annual Meeting, the Board has nominated Ms. Ward for election to a new three-year term to more evenly balance the number of directors in each class of the Board. If Ms. Ward is elected to serve a new term at the Annual Meeting, she will begin a new three-year term expiring in 2026. If Ms. Ward is not elected to serve a new term at the Annual Meeting, she will continue to serve her current term ending in 2024. | | |
Table of the Board since 2014. Mr. Edelman has been principally engaged in the management of private investments since February 2013. From April 2011 through February 2013, Mr. Edelman was engaged as an independent representative of SWS Financial Services, Inc., a registered investment advisor and registered broker-dealer. From 2000 through April of 2011, Mr. Edelman was a Managing Director and Senior Vice President of SMH Capital Inc., an investment banking firm (“SMH”). From 2000 to 2006, he was the Managing Director and Manager of SMH's Dallas branch. From 1998 to 2000, he was a Senior Vice President and Branch Manager of Southwest Securities, Inc., a stock brokerage firm headquartered in Dallas, Texas. From 1996 to 1998, he was a Vice President of Rodman & Renshaw, Inc., a stock brokerage firm. From 1987 to 1996, he was employed by Southwest Securities, Inc. as a Senior Vice President and securities analyst. Prior to joining Southwest Securities, Inc., Mr. Edelman was a securities analyst and Vice President for Schneider, Bernet and Hickman, a Dallas, Texas securities firm. Mr. Edelman obtained a master’s degree in business administration from Columbia University in 1966. Mr. Edelman serves as a director, in part, because of the depth of his financial training, experience and his analytical acumen. Mr. Edelman possesses a keen ability to review and understand financial information, both with respect to the Company and with respect to potential business partners and acquisition candidates. His financial training and experience have been extremely valuable to the Board in his service on the Audit Committee and his qualification as an audit committee financial expert. As the Lead Independent Director, Mr. Edelman has demonstrated his ability to ask difficult questions and encourage the Company's implementation of strong financial practices.Contents
CORPORATE GOVERNANCE AND RELATED MATTERS
Michael E. Stillabower, M.D., 72, has been a director of the Company since 1996. Dr. Stillabower has been a physician in private practice in Wilmington, Delaware since 1980. In 1999, Dr. Stillabower was appointed Director, Cardiovascular Clinical Trials, of Christiana Care Health Systems. From 1988 to 1999, he was Chief of Cardiology at the Medical Center of Delaware, where he had held a number of appointments including Director, Coronary Care Unit, from 1984 to 1988. In May 1995 he was appointed Clinical Associate Professor of Medicine, Jefferson Medical College in Philadelphia, Pennsylvania, where he obtained his M.D. degree in 1976. He is an elected Fellow of the American College of Cardiology and a member of other professional associations and is actively engaged in cardiology research, instruction and publication of related papers and abstracts. Dr. Stillabower's service reflects the Board’s recognition of his expertise in the medical profession, his valuable role in developing and evaluating existing and proposed Company products and his understanding of the medical community and the markets for the Company's products. Dr. Stillabower contributes more than 30 years of specialized training and experience in cardiology and related fields to the Board, and has actively participated in the development and commercialization of many of the Company's products. He has used the Company's products in cardiac procedures, and provides valuable insights from a practitioner's viewpoint. Dr. Stillabower is an independent director.
F. Ann Millner, Ed.D., 64, has been a director of the Company since July 2015. Since 2013 Dr. Millner has served as Regents Professor in Health Administrative Services at Weber State University. Dr. Millner also serves as a member of the Utah State Senate, where she chairs the Senate Education Committee and serves on the Economic Development and Workforce Services,
Higher Education Appropriations and Business, Economic Development and Labor Committees. Dr. Millner serves on the Utah Governor's Task Force on Educational Excellence and the Utah Lieutenant Governor's Commission on Service and Volunteerism. Dr. Millner serves on the board of trustees and executive committee of Intermountain Health Care. From 2002 to 2012, Dr. Millner served as the President of Weber State University and was the first woman president of a state university in Utah's history. From 1993 to 2002, Dr. Millner served as the Vice President of University Relations at Weber State University. From 1985 to 1993, Dr. Millner served as an Associate Dean of Continuing Education and the Assistant Vice President of Community Partnerships at Weber State University. Dr. Millner received a doctorate degree in education administration from Brigham Young University and a master's degree in allied health education and management from Southwest Texas State University. Additionally, she completed a post-baccalaureate program in medical technology at Vanderbilt University and received a bachelor's degree in education from the University of Tennessee. The Board believes Dr. Millner's qualifications to serve as a director of the Company include her executive leadership skills and her experience in the areas of operations and financial management, and business strategy. Dr. Millner serves on the Board's Nominating and Corporate Governance Committee.
The Board recommends that shareholders vote FOR each of the foregoing nominees to serve as a director of the Company.
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 of each continuing director ofto continue to lead the Company including informationto success. Information regarding the specific experience, qualifications, attributes and skills that led the Board and its Nominating and Corporate Governancethe ESG Committee to conclude that he or sheeach continuing director should serve as a director ofon the Company at the present time, in light of the Company’s business and structure,Board are set forth below:
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FRED P. LAMPROPOULOS Chair, President, Chief Executive Officer Age: 73 Director Since: July 1987 Committees: Operating Other Public Boards: None Term Expires: 2024 | 
| | A. SCOTT ANDERSON Independent Director Age: 76 Director Since:November 2011 Committees: Compensation (Chair), ESG Other Public Boards: None Education: B.A. (philosophy, economics), Columbia University; M.S. (economics, international studies), Johns Hopkins University Term Expires: 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 ● President and CEO of Zions First National Bank (145-year old commercial bank based in the Intermountain West U.S.), 1990 to present ● Chair Emeritus of the American Bankers Association, 2022 to present (Chair, 2021-2022) ● Member of Board of Trustees of Intermountain Healthcare (integrated multi-state healthcare system), 2005 to present (Chair, 2012 to 2018) ● Director of the Federal Reserve Bank of San Francisco (Salt Lake City Branch), 2003 to 2008 Qualifications of Particular Relevance to Merit Mr. Anderson contributes to the Board’s deliberations more than 40 years of experience in the banking and financial services industries. The Board believes Mr. Anderson provides insight regarding national and international financial and credit markets, as well as lending practices, which are valuable as we continue to implement our growth strategy. Mr. Anderson also contributes extensive business and corporate governance experience to the strategic planning and operational discussions of the Board. Mr. Anderson’s business and corporate governance experience have been instrumental in the deliberations of the Compensation Committee, which he chairs, the refinement of our executive compensation practices and the enhancement of our human resource and talent development efforts. |
8 | Understand. Innovate. Deliver.TM
Kent W. Stanger, 61,
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LYNNE N. WARD Independent Director Age: 64 Director Since: August 2019 Committees: Audit (Chair), Finance; ESG Other Public Boards: None Education: B.S. University of Utah (Accounting) Term Expires: 2024 |
| | REAR ADMIRAL (RET.) STEPHEN C. EVANS Independent Director Age: 58 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 ● 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 that growth. Her cost management, and investment and marketing innovations of a highly regulated product led to year-over-year Gold ratings from Morningstar. The Board believes Ms. Ward has strong career experience, including financial oversight capabilities and leadership of a rapidly growing organization. The Board believes her contributions strengthen the Company’s strategic direction while encouraging operational excellence. The Board also recognizes the valuable perspective and significant service Ms. Ward provides to the Company as Chair of the Audit Committee. Ms. Ward’s current term of service as a director does not expire until 2024. However, considering the expiration of Mr. Hogan’s term of service at the Annual Meeting, the Board has nominated Ms. Ward for election to a new three-year term to more evenly balance the number of directors in each class of the Board. If Ms. Ward is elected to serve a new term at the Annual Meeting, she will begin a new three-year term expiring in 2026. If Ms. Ward is not elected to serve a new term at the Annual Meeting, she will continue to serve her current term ending in 2024. | | 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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LAURA S. KAISER Independent Director Age: 62 Director Since: May 2022 Committees: ESG, 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 | 
| | MICHAEL R. MCDONNELL Independent Director Age: 59 Director Since: May 2022 Committees: Audit, Finance Other Public Boards: None Education: B.S. (accounting), Georgetown University Term Expires: 2025 | 
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Career Highlights ● President and Chief Executive Officer of SSM Health, an integrated multi-state health system with more than 40,000 employees and 23 hospitals, 2017 to present ● Chairperson of Catholic Health Association of the United States, representing more than 600 hospitals and 1,600 long-term care and other health facilities in all 50 states, 2018 to present ● Director and Vice Chair, Enterprise Strategy Committee for Joint Commission Resources, an international accrediting and consulting organization, 2021 to present ● Served on the Board of Directors for Nuance Communications, a multinational computer technology company acquired by Microsoft Corp., 2017-2022 ● Previously served as the Chief Operating Officer of Intermountain Healthcare, an integrated multi-state health system with 24 hospitals ● Named one of the “100 Most Influential People in Healthcare” by Modern Healthcare for the past five years 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 her senior leadership experience in healthcare and her consistent delivery of operational results, strategic expertise, market growth and innovative partnerships with organizations such as Stanford University, United Health Group/Optum and Costco, enable her to provide valuable industry and organizational perspective to the Board and the Company’s management team. The Board also believes Ms. Kaiser’s deep industry experience allows her to provide insight regarding merger and acquisition opportunities and transactions, regulatory initiatives and compliance, and governmental policies. | | Career Highlights ● Chief Financial Officer of Biogen Inc, a multinational Nasdaq-listed company engaged in discovering, developing, and delivering therapies for people living with serious and complex diseases, 2020 to present ● Executive Vice President and Chief Financial Officer of IQVIA Holdings Inc., a global provider of advanced analytics, technology solutions and contract research services to the life sciences industry, 2015 to 2020 ● 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 Company’s finance and accounting policies, procedures and practices. The Board also believes Mr. McDonnell’s industry experience enables him to contribute to the Board’s evaluation and oversight of merger and acquisition and capital funding transactions, as well as the Company’s investor relations and shareholder outreach efforts. |
10 | Understand. Innovate. Deliver.TM
| | | | |
F. ANN MILLNER, Ed.D. Lead Independent Director Age: 71 Director Since: July 2015 Committees: ESG (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 | 
| | THOMAS J. GUNDERSON Independent Director Age: 72 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: 2025 | 
|
| | | | |
Career Highlights ● Regents Professor and Professor of Health Administrative Services at Weber State University, 2013 to present ● Member of the Utah State Senate (member of multiple committees and subcommittees), 2015 to present ● Member of Utah Governor's Task Force on Educational Excellence, 2015 to present ● Member of Board of Trustees of Intermountain Healthcare (integrated multi-state health system), 2005 to present (serving as Vice Chair, 2017 to present) ● President of Weber State University, 2002 to 2012 (first female president of a Utah state university) ● Vice President of University Relations at Weber State University, 1993 to 2002 ● Associate Dean of Continuing Education and Assistant Vice President of Community Partnerships at Weber State University, 1985 to 1993 Qualifications of Particular Relevance to Merit The Board believes Dr. Millner's qualifications to serve as a director of the Company include her executive leadership skills and her experience in the areas of organizational administration, operations and financial management, and business strategy. Those skills and experience have been particularly valuable to the Company in the course of Dr. Millner’s service as Lead Independent Director and Chair of our ESG Committee. During her service, Dr. Millner has played a significant role in the development of our corporate governance practices and engagement with our shareholders. | | 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 ● Immediate Past Chair, of the Board of Directors of the Minneapolis Heart Institute Foundation, (Director from 2011 to present; Chair from 2015 to 2020) ● Executive in Residence at the University of Minnesota’s Medical Industry Leadership Institute, 2016 to present ● Member of American Heart Association Science and Technology Accelerator Committee, 2015 to 2017 ● Managing Director and senior research analyst at Piper Jaffray (focus on medical technology companies), 1992 to 2016 ● Project Director at American Medical Systems (private medical device company acquired by Pfizer in 1983), 1979 to 1992 ● Recognized by several industry publications, including the Wall Street Journal, Institutional Investor, First Call, Thomson Reuters, and Medical Device and Diagnostic Industry (e.g., in 1996 and 2000, he was named an All-Star Analyst for medical stocks by the Wall Street Journal and in 2014, Thomson-Reuters named him “Top Stock Picker” in the medical technology sector) Qualifications of Particular Relevance to Merit Mr. Gunderson provides the Board with more than 25 years of substantive experience in the medical device industry, with a seasoned perspective on the challenges, trends and opportunities of publicly-traded medical device manufacturers, as well as a keen understanding of the Company’s competitive position within its industry. Mr. Gunderson also contributes a strong background in financial and economic analysis and valuable insights regarding business development and acquisition opportunities. Mr. Gunderson’s financial background and industry experience have been beneficial in his service as the Chair of the Finance Committee of the Board (Finance Committee). |
Director Whose Term of Office Does Not Continue
| | | | |
JAMES T. HOGAN Independent Director Age: 66 Director Since: June 2020 Committees: Audit, Compensation, Operating Other Public Boards: Prolung, Inc. Education: B.A., University of Minnesota; MBA, University of Minnesota Term Expires: 2023 | 
| | | |
| | | | |
Career Highlights ● Member of the Board of Directors of Prolung, Inc., a medical technology company specializing in predictive analytics technology, 2019 to present ● Member of the Board of Directors of Xenocor, Inc. (a privately-owned medical device company), 2019 to present ● President, of Latin America at Medtronic Inc., now Medtronic plc, 2007 to 2016 ● Director of Gastroenterology and Urology Division for Western Europe at Medtronic Inc., 2005 to 2007 ● Director of Sales and Marketing for Europe, the Middle East and Africa at Pfizer Inc.’s American Medical Systems Division, 1991 to 1993 Service to Merit The Board believes Mr. Hogan’s extensive experience in sales, marketing and medical support activities in a large medical device company, combined with his international experience, having lived and worked in England, Switzerland, France, Israel and Holland, have provided significant benefits to the Company. Additionally, the Board believes Mr. Hogan’s background in medical device start-ups, having started three medical device companies in the cardiology, urology and vascular fields, all of which were purchased by larger medical device companies, has provided the Board with knowledge and experience with branding, innovating and dealing with ongoing challenges facing the medical device industry. Mr. Hogan has also provided valuable insight and guidance to the Board through his service on the Operating Committee and his contributions to the oversight of the development and implementation of the Foundations for Growth program. Mr. Hogan’s term as a director will expire at the Annual Meeting and the Board did not nominate him for re-election as a director. Accordingly, Mr. Hogan’s service as a director will expire at the Annual Meeting. | | | |
12 | Understand. Innovate. Deliver.TM
Our Board of Directors
Our business affairs are managed subject to the oversight of the Board, which represents and is currently engaged in real estate development and private investment management. From 1987 until November 2016, Mr. Stanger served asaccountable to the Chief Financial Officer, Secretary and Treasurershareholders of the Company. Mr. Stanger has served as directorThe Board advises and oversees management, which is responsible for the day-to-day operations of the Company since 1987. Prior to joining the Company, Mr. Stanger was the controller for Utah Medical Products, Inc., a medical device manufacturer, from 1985 to August 1987. Prior to 1985, he was the corporate controller for Laser Corporation, American Laser and Modulaire Industries, Inc., and was a practicing certified public accountant from 1979 through 1982 with Hansen, Barnett and Maxwell, a Utah accounting firm. Mr. Stanger received a bachelor’s degree in accounting from Weber State University in 1978. Mr. Stanger serves as a member of the board of directors and executive committee of the Utah Taxpayers Association. Mr. Stanger was a founder of the Company and, through more than 25 years of service as the principal financial manager of the Company, developed a broad understanding of the Company’s business and operations, as well as the industry and markets in which the Company competes.Company. The Board values Mr. Stanger’s accounting and financial management skills, and benefits greatly from his extensive knowledge of the Company’s history, achievements and strategic objectives. Mr. Stanger’s term as a director expires in 2017.
Nolan E. Karras, 71, has been a director of the Company since November 2011. Mr. Karras has been engaged as the Chairman and Chief Executive Officer of The Karras Company, Inc., an investment advisory firm, since 1997 and is a certified public accountant. In 2015, Mr. Karras was appointed the Chairman of the Utah Governor's Education Excellence Commission. In 2013, Mr. Karras was appointed a memberprimary mission of the Board is to represent and protect the interests of Trustees of Weber State University where he serves asour shareholders. As a result, the chair of the Audit Committee. From 2009 to 2014, Mr. Karras served as a member of the Community Board of Directors of the University of Utah Hospitals and Clinics where he served as the Chairman of the Finance Committee. Mr. Karras also serves as a member of the board of directors of Western Hay Company, Inc., an agricultural products company located in Ogden, Utah, where he also served as chief executive officer from 1995 to 2012. Mr. Karras previously served from 1996 to 2009 on the board of directors of Beneficial Life Insurance Company, a privately-held life insurance company headquartered in Salt Lake City, Utah, where he was chair of the finance committee and a member of the executive committee. In 2013, Mr. Karras completed a 12-year term as a member of the Utah State Board of Regents, where he served as board chairman from 2002 to 2006. Mr. Karras previously served as a director and member of the audit and compensation committees of the boards of directors of PacifiCorp, a public utility operating in the northwestern United States, and Scottish Power, a multinational energy company. Mr. Karras has held several positions in public service, including service in the Utah House of Representatives for ten years where he served as Speaker of the House and House Majority Leader. Mr. Karras received a bachelor’s degree from Weber State University and a master’s degree in business administration from the University of Utah. Mr. Karras’ experience and skills qualify him to work constructively with the Company’s management and directors, especially in connection with the Company’s pursuit of growth and expansion opportunities. The Board believes Mr. Karras’ financial acumen and experience in corporate governance are valuable to its deliberations and strategic planning and in his service as Chairman of the Audit Committee. Mr. Karras also has a keen awareness of the social, political and economic environment in which the Company operates. Mr. Karras is an independent director. Mr. Karras’ term as a director expires in 2017.
Fred P. Lampropoulos, 66, has been Chairman of the Board, Chief Executive Officer and President of the Company since its formation in July 1987. From 1983 to June 1987, Mr. Lampropoulos was Chairman of the Board and President of Utah
Medical Products, Inc., a medical device manufacturer. He holds more than 100 patents on diagnostic and therapeutic devices. He serves on several community and advisory boards and has been the recipient of numerous awards, including the 2003 Utah Governor’s Medal for Science and Technology. The Board believes the Company benefits immensely from Mr. Lampropoulos’ experience as founder, Chief Executive Officer and President of the Company. He plays a critical role in communicating the expectations, advice, concerns and encouragement of the Board to the Company’s employees. Mr. Lampropoulos has a deep knowledge and understanding of the Company, as well as the industry and markets in which the Company’s products compete. Mr. Lampropoulos also performs a critical function as the Chairman 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 the Company’s growth and development, and continue to be tremendous assets to the Company and its shareholders. Mr. Lampropoulos’ term as a director expires in 2018.
Franklin J. Miller, M.D., 75, has been a director of the Company since 2005, and served as a consultant to the Company, assisting in product testing and development, from 1997 through March 2005. Dr. Miller retired as a Professor of Radiology and Surgery from the University of Utah, Department of Radiology, in 2005, where he was the Director of Interventional Radiology from 1976 through 2001. In January 2002, Dr. Miller was appointed as Clinical Professor of Radiology at the University of California, San Diego, where he began the Hereditary Hemorrhagic Telangiectasia Clinic, one of only eight such clinics in the United States. He retired from the University of California in 2011. He was designated Emeritus Professor of the University of Utah in 2010. Dr. Miller has served on advisory boards to several medical device companies and has been on the editorial and review boards for numerous medical journals. He is a graduate of Temple University Medical School, and served his resident and fellowship physician training at Johns Hopkins Hospital. Dr. Miller contributes a valuable set of skills, training and experience to the Board’s deliberations. During his service as a director, Dr. Miller has provided critical advice regarding the Company’s product development strategy, and plays a significant role in the Company’s evaluation of acquisition and other growth opportunities. Based, in part, on his extensive medical training and his experience with various medical devices, Dr. Miller provides the Board valuable insight regarding the needs and preferences of the medical professionals who use and purchase the Company’s products. Dr. Miller is an independent director. His term as a director expires in 2018.
A. Scott Anderson, 69, has been a director of the Company since November 2011. Mr. Anderson is the President and Chief Executive Officer of Zions First National Bank, a commercial bank located in the intermountain United States. Mr. Anderson also serves on the Board of Directors of Intermountain Healthcare, an integrated healthcare system located in Utah and Idaho. From 2003 to 2008, Mr. Anderson served as a Director of the Federal Reserve Bank of San Francisco (Salt Lake City Branch). He received a bachelor’s degree in philosophy and economics from Columbia University and a master’s degree in economics and international studies from Johns Hopkins University. Mr. Anderson contributes to the Board’s deliberations more than 40 years of experience in the banking and financial services industries, and serves as the president of one of the largest financial institutions in the intermountain United States. The Board believes Mr. Anderson provides tremendous insight regarding national and international financial and credit markets, as well as lending practices, which are extremely valuable as the Company continues to implement its growth strategy. Mr. Anderson also contributes extensive business and corporate governance experience to the strategic planning and operational discussions of the Board. Mr. Anderson is an independent director. His term as a director expires in 2018.
CORPORATE GOVERNANCE
Corporate Governance Guidelines
The Board adopted Corporate Governance Guidelines (the "Governance Guidelines") on February 12, 2015. The Governance Guidelines can be accessed at the Company’s website, www.merit.com. The Governance Guidelines set forth the responsibilities of the Company's directors. The basic responsibility of the Company’sour 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 business affairs of the Company are managed subject to the oversight of the Board, which represents and is accountable to the shareholders of the Company. The Board reviews and assesses the Company'sour strategic, competitive and financial performance.Board Structure
Chair of the Board
The ChairmanChair 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 ChairmanChair works with senior management to help ensure that matters for which management is responsible are appropriately reported to the Board. The Lead Independent Director serves as liaison between the Chairman and the independent directors.
Committees of the Board
The Board has standing Audit, Compensation, and Nominating and Corporate Governance Committees. The Company believes each of the directors serving on the Audit, Compensation, and Nominating and Corporate Governance Committees is an
independent director for purposes of the Marketplace Rules of The Nasdaq Global Select Market, on which the Common Stock is currently quoted, and that each of the directors serving on the Compensation Committee is an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and a “non-employee director” for purposes of Rule 16b.3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). During the year ended December 31, 2015, the Board held 14 meetings. No director attended fewer than 75% of the total number of meetings of the Board and of any committee on which he or she served.
Audit Committee. The Audit Committee meets to review and discuss the Company’s accounting practices and procedures and quarterly and annual financial statements with the Company’s management and independent public accountants. The Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the Company’s accounting, auditing and reporting practices. The Audit Committee’s primary duties include reviewing the scope and adequacy of the Company’s internal accounting and financial controls; reviewing the independence of the Company’s independent registered public accounting firm; approving the scope and results of the audit activities of the Company’s independent registered public accounting firm; approving the fees of the Company’s independent registered public accounting firm; approving any non-audit related services rendered by the Company’s independent registered public accounting firm; reviewing the Company’s compliance and enterprise risk management programs; reviewing the objectivity and effectiveness of the Company’s internal audit function; reviewing and monitoring calls received through the Company’s whistleblower hotline and reviewing the Company’s financial reporting activities and the accounting standards and principles followed. DeloitteFred P. Lampropoulos currently serves as the Company’s independent registered public accounting firm.
The current membersChair of the
Audit Committee are Nolan E. Karras (Chairman), Richard W. EdelmanBoard, CEO and
Franklin J. Miller, each of whom is an “independent director” for purposesPresident of the
Marketplace Rules of The Nasdaq Global Select Market.Company. The Board
and ESG Committee believe that the traditional practice of combining the roles of chair of the board and chief executive officer currently provides the preferred form of leadership for the Company. Given Mr. Lampropoulos’ vast experience since founding the Company in 1987, his role as an inventor and his involvement in filing of more than 300 patents and pending applications, the respect which he has
determinedearned 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 2022, the ESG Committee undertook its annual review of director and nominee independence and recommended that the Board determine that Mr. EdelmanAnderson, Mr. Carpenter, Admiral Evans, Mr. Floyd, Mr. Gunderson, Mr. Hogan, Ms. Kaiser, Mr. McDonnell, Dr. Millner, and Ms. Ward each be designated as an independent director. Mr. Karras are audit committee financial experts,Lampropoulos is not considered independent because of his employment as definedPresident and CEO of the Company.
Lead Independent Director
Since July 2021, Dr. 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 Item 407(d)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 Chair and the independent directors |
| Agendas | ● Contributes to the development of and approves meeting agendas for the Board and information sent to the Board by the Chair, including supporting materials |
| Meeting Schedules | ● Approves meeting schedules for the Board and its committees to facilitate sufficient time for discussion of all agenda items |
| Communicating with Shareholders | ● Ensures availability for consultation and direct communication with major shareholders of the Company upon reasonable request |
Our independent directors regularly meet in executive session without the 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 Regulation SK under the Exchange Act. Board Members
The Board has adopted a written charter for the Audit Committee, a copy of which is available on the Company’s Internet website, www.merit.com. The Audit Committee met six times during 2015.
Compensation Committee. The CompensationESG Committee is responsible for overseeing, reviewing annually with the Board the desired skills and approving executive compensation and benefit programscharacteristics of directors, as well as the composition of the Company. The current members of the Compensation Committee are A. Scott Anderson (Chairman), Franklin J. Miller M.D. and Michael E. Stillabower M.D.
The Board has adopted a written Compensation Committee Charter, a copy of which is available on the Company’s Internet website, www.merit.com. Additional information regarding the functions, procedures and authority of the Compensation Committee is provided in the Compensation Discussion and Analysis beginning on page 10 below. The Compensation Committee Report appears on page 17 below. The Compensation Committee met twice during 2015; however, the members of the Compensation Committee met informally and discussed compensation issues affecting the Company at other times throughout the year as well.
Nominating Committee. The Nominating and Corporate Governance Committee (the “Nominating Committee”) is responsible for nomination of the Company’s directors and oversight of the Company’s corporate governance activities. The Nominating Committee selects, evaluates and recommends to the full Board qualified candidates for election to the Board. The members of the Nominating Committee are Michael E. Stillabower, M.D. (Chairman), A. Scott Anderson and F. Ann Millner, Ed.D. The Nominating Committee met once during 2015. The Board has adopted a written charter for the Nominating Committee, a copy of which is available on the Company’s Internet website, www.merit.com.
Nomination Process
The policy of the Nominating Committee is to consider properly-submitted shareholder recommendations for candidates to serve as directors of the Company. In evaluating those recommendations, the Nominating Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria described below. Any shareholder wishing to recommend a candidate for consideration by the Nominating Committee should submit a recommendation in writing indicating the candidate’s qualifications and other relevant biographical information and provide confirmation of the candidate’s consent to serve as a
director. This informationwhole. Directors should be
addressedindividuals who have succeeded in their particular field and who demonstrate integrity, reliability, knowledge of corporate affairs, and an ability to
Brian G. Lloyd, Chief Legal Officer and Corporate Secretary of the Company, at 1600 West Merit Parkway, South Jordan, Utah 84095.work well together. Directors should have:| ● | demonstrated management ability at senior levels in successful organizations; |
| ● | current or recent employment in positions of significant responsibility and decision-making; |
| ● | expertise in the medical device industry, medical profession or related areas of training; or |
| ● | current and prior experience related to anticipated Board and committee responsibilities in other areas of importance to the Company. |
The NominatingESG 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 NominatingESG 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 NominatingESG Committee’s perceptions about future issues and needs. AmongAdditionally, in considering the factorscomposition of the NominatingBoard and identifying nominees, the ESG Committee does not have a formal policy regarding the consideration of gender, race, sexual preference, religion and other traits typically considers are a candidate’s independence, skills, integrity, diversity, policy-making
experience, ability to work constructivelyassociated with the
Company’s managementterm “diversity.”However, the ESG Committee considers it important that the Board be composed of directors with a broad range of experience, areas of expertise and directors, capacity to evaluate strategyskills and reach sound conclusions, availabilityconsiders several factors, including a candidate’s:
14 | Understand. Innovate. Deliver.TM
| ● | integrity and moral responsibility; |
| ● | policy-making experience; |
| ● | ability to work constructively with our management and other directors; |
| ● | 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 NominatingESG Committee utilizesuses a variety of methods for identifying and evaluating director nominees. The NominatingESG 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 NominatingESG Committee considers various potential candidates for director. Candidates may come to the attention of the NominatingESG Committee through various means, including recommendations from current directors, third-party search firms, shareholders or other individuals. Candidates are evaluated
Experience and Skills
The table below summarizes some of the relevant experience, qualifications and demographic information of each continuing director and nominee identified by the Nominating Committee,ESG Committee. The biographies above describe each director’s or nominee’s background in more detail.
Experience and may be considered at any point during the year. All director-nominee recommendations which are properly submittedSkills Matrix
| | | | | | | | | | |
|---|
| A. Scott
Anderson | Lonny J. Carpenter | Stephen C. Evans | David K. Floyd | Thomas J. Gunderson | Laura S.
Kaiser | Fred P. Lampropoulos | Michael R. McDonnell | F. Ann
Millner, ED.D. | Lynne N. Ward |
|---|
Board Tenure | 12 | 3 | 2 | 3 | 6 | 1 | 36 | 1 | 8 | 4 |
Age | 76 | 61 | 58 | 62 | 72 | 62 | 73 | 59 | 71 | 64 |
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 | | | | | ● | | ● | ● | | |
16 | Understand. Innovate. Deliver.TM
Board Diversity
The Company is committed to the Nominating Committee are considered by the Nominating Committee prior to the issuance of the proxy statement for the next annual meeting of shareholders. Any materials provided to the Company by a shareholder in connection with the recommendation of a director candidate are forwarded to the Nominating Committee, which considers the recommended candidate in light of the director qualifications discussed above. To date, the Nominating Committee has not engaged a professional search firm to assist in identifying candidates for service on the Board.
Board Diversity
In identifying nominees, the Nominating Committee does not have a formal policy regarding the consideration of gender, race, sexual preference, religiondiversity and other traits typically associated with the term “diversity.” As described in “Nomination Process” above, however, the Nominating Committee considersinclusion, and believes it is important that the Board beis composed of directorsindividuals representing the diversity of our communities. The ESG Committee seeks director nominees with a diverse rangebroad diversity of experience, areas of expertiseprofessions, skills and skills.
Board Leadership Structurebackgrounds.The table below reports self-identified gender and Role in Risk Oversight
Mr. Fred P. Lampropoulos currently serves as the Chairman ofdemographic statistics for the Board,
and Chief Executive Officeras constituted prior to the Annual Meeting, in the format required by the Nasdaq Marketplace Rules.Board Diversity Matrix
(as of the Company. April 4, 2023)
| | | | |
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Board Size |
|---|
Total Number of Directors | 11 |
|---|
| Female | Male | Non-Binary | Did Not Disclose Gender |
|---|
Part I: Gender Identity |
Directors | 3 | 8 | - | - |
Part II: Demographic Background |
African American/Black | - | 1 | - | - |
Alaskan Native or Native American | - | - | - | - |
Asian | 1 | - | - | - |
Hispanic or Latinx | - | - | - | - |
Native Hawaiian or Pacific Islander | - | - | - | - |
White | 2 | 6 | - | - |
Two or More Races or Ethnicities | - | - | - | - |
LGBTQ+ | - |
Did not Disclose Demographic Background | 1 |
Shareholder Recommendations The ESG Committee considers properly submitted director-nominee recommendations from shareholders prior to the issuance of the proxy statement for the next annual meeting of shareholders. Materials provided by a shareholder in connection with such a recommendation are forwarded to the ESG Committee. In evaluating those recommendations, the ESG Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria described above. Any shareholder wishing to recommend a candidate for consideration by the ESG Committee should submit a recommendation in writing indicating the candidate’s qualifications and other relevant biographical information and provide confirmation of the candidate’s consent to serve as a director. | | | 
| We want to hear from you |
| | | Interested shareholders should send recommendations to: Merit Medical Systems, Inc. Attn: Brian G. Lloyd,
Corporate Secretary 1600 West Merit Parkway South Jordan, Utah 84095 |
Board and Committee Meetings and Responsibilities
| | | |
In 2022, the Board met 12 times. Directors are expected to attend regular Board meetings, Board committee meetings and annual shareholder meetings. The independent directors met in executive session six times during 2022. As further described below, the Board has a standing Audit Committee, Compensation Committee, ESG Committee, Finance Committee and Operating Committee. The Company believes each of the directors serving on the Audit, Compensation, and ESG Committees is an “independent director” for purposes of the Nasdaq Marketplace Rules and that each of the directors serving on the Compensation Committee is a “non-employee director” for purposes of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (Exchange Act). | | | ≥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
Meetings in 2022 |
Lynne N. Ward (Chair) Stephen C. Evans Thomas J. Gunderson James T. Hogan* Michael R. McDonnell The Board has determined that Ms. Ward and Messrs. Gunderson and McDonnell are audit committee financial experts, as defined in Item 407(d) of Regulation S-K under the Exchange Act. | 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 related person transactions. | 10 |
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| | |
Compensation and Talent Development Committee |
Members | Primary Responsibilities | # of
Meetings in 2022 |
A. Scott Anderson (Chair) Lonny J. Carpenter Stephen C. Evans James T. Hogan* 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 activities. Additional information regarding the functions, procedures and authority of the Compensation Committee is provided in the Compensation Discussion and Analysis beginning on page 40 below. The Compensation Committee Report appears on page 57 below. | 6 |
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| | |
| | |
Environmental, Social and Governance Committee |
Members | Primary Responsibilities | # of
Meetings in 2022 |
F. Ann Millner, Ed.D. (Chair) A. Scott Anderson David K. Floyd Laura S. Kaiser Lynne N. Ward | The ESG Committee is responsible for oversight of the Company’s environmental and social business practices, the Company’s corporate governance practices, including the practices set forth in our Governance Guidelines and the Company’s director nomination process and procedures, and matters impacting the Company’s image and reputation and its standing as a responsible corporate citizen. As discussed earlier, the ESG Committee selects, evaluates and recommends to the full Board qualified candidates for election to the Board. The ESG Committee also provides oversight of our sustainable business practices. | 6 |
| | |
| | |
Finance Committee |
Members | Primary Responsibilities | # of
Meetings in 2022 |
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 management ● the Company’s strategic planning and activities; and ● the Company’s tax strategy and structure. | 7 |
| | |
| | |
Operating Committee |
Members | Primary Responsibilities | # of
Meetings in 2022 |
Lonny J. Carpenter (Chair) David K. Floyd James T. Hogan* Laura S. Kaiser 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 of our Foundations for Growth program and continues to provide oversight of that program.The Operating Committee also provides oversight of our enterprise risk management program and coordinates oversight of particular risk areas with the standing committees to whom those areas of risk are delegated. | 10 |
* Mr. Hogan’s membership on these committees will end when his current term as director expires at the Nominating Committee believe that the traditional practiceAnnual Meeting.
Board believes the best interests of the Company’s shareholders are met by Mr. Lampropoulos’ continued service in both capacities. The Board believes Mr. Lampropoulos’ fulfillment of both responsibilities encourages clear accountability and effective decision-making, and provides strong leadership for the Company’s employees and other stakeholders.Evaluation
|
In 2022, the ESG Committee engaged an experienced independent advisor to conduct a comprehensive Board evaluation to assess the effectiveness of our Board, committees and members. The process was led by the ESG 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 process 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 ESG Committee and the Board. The ESG Committee reviewed the 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. The Board intends to use 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. The evaluation aims to (1) identify opportunities where our Board and its committees can improve their performance and effectiveness, (2) assess any need to evolve the composition and expertise of our Board and (3) assure that our Board and its committees are operating in accordance with our Governance Guidelines and committee charters. |
Given the outstanding experience and qualifications the Company’s independent directors contribute to the deliberations and activities of the Board, the Company has implemented a number of practices designed to encourage effective corporate governance. These practices include:
the requirement that at least a majority of the Company’s directors meet the standards of independence applicable to the Company;
the selection of a Lead Independent Director, who is empowered to schedule and conduct meetings of the independent directors, communicate with the Chairman of the Board, disseminate information to the Board and raise issues with management on behalf of the independent directors when appropriate;
regular executive sessions of the Board and its committees, which are typically held in conjunction with each regularly scheduled Board and committee meeting and include individual sessions with representatives of the Company’s independent registered public accounting firm, internal auditors and legal counsel;
implementation of shareholder voting procedures requiring a majority of the Company's directors to elect directors of the Company.
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 utilizedused by management with respect to risk assessment and risk management, including identification by management of the principal risks of the Company’sour business, and the implementation by management of appropriate systems to deal with such risks. The Board fulfills these responsibilities either directly, through delegation to committees of the Board, or, as appropriate, through delegation to individual directors.
When theThe Board determines to delegate anyhas delegated risk management oversight responsibilities typically such delegation is madeto 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 such as
those relating to the quality and integrity of
the Company’sour financial reports, the independence and qualifications of
the Company’sour independent registered public accounting firm,
the Company’sour compliance with disclosure and financial reporting requirements and overall enterprise risk
management, including evaluation and oversight of cybersecurity risk management.
At least annually, the Board and/or the Audit Committee is briefed by the Company’s Chief Technology Officer and other members of the Company’s management on information technology and cybersecurity risks and the Company’s efforts to mitigate those risks. The
NominatingCompensation 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 ESG Committee is generally responsible for oversight of risks addressed through the identification and recommendation of individuals qualified to become directors of the Company, director and management succession planning and development and implementation of corporate governance principles. The
CompensationFinance Committee is generally responsible for oversight of risks
such as those relating to
executive employment policiesmergers and
the Company’s compensationacquisitions, as well as capital raising activities and
benefits systems.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
the Company’sour Chief Financial Officer, Chief Operating Officer, Chief Legal Officer, Chief
Commercial Officer, Chief of Accounting, Chief Compliance Officer,
Chief Technology Officer, Director of Internal Audit, Director of Enterprise Risk Management and
Internal Auditor.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 ESG Committee, which is conducted prior to or shortly after the director’s election or appointment. This orientation program includes
20 | Understand. Innovate. Deliver.TM
Executive Sessions
presentations by other directors and members of the Company’s senior management with respect to finance, operations, governance, legal and compliance matters, regulatory issues, cybersecurity, industry developments and strategic planning. In recent years, our ESG 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 independentcybersecurity 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 meetto 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 2020, we expanded our shareholder communication efforts in an attempt to develop a better understanding of the corporate governance and executive session regularly,compensation perspectives and practices which are important to our shareholders. Our shareholder engagement efforts are directed by Ann Millner, Ed.D., our Lead Independent Director and Chair of our ESG 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.
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 2022. We maintained contact with several of our large shareholders during 2022, 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 quarterly. deemed favorable by sophisticated shareholders and their advisors. After considering that input, during 2022 our Board and its ESG and Compensation Committees took a number of actions which we believe have strengthened our corporate governance and executive compensation practices. Those actions include:
| ● | Increased the number of independent directors; |
| ● | Identified experience and skills which would enhance the Board’s ability to fulfill its duties and responsibilities and nominated two new directors whom the Board believes will contribute that experience and those skills; |
| ● | Continued to encourage and provide oversight of expanded sustainable business practices; |
| ● | Continued and refined the Company’s long-term equity performance-based restricted stock program designed to increase the alignment of our executive compensation with Company performance; and |
| ● | Enhanced oversight of the Company’s enterprise risk management practices, under the direction of the Operating Committee. |
Our Board is committed to implementing governance, executive compensation and sustainability practices which will contribute to the long-term success of the Company. To fulfill that commitment, our Board, primarily through its ESG and Compensation Committees, will continue to seek opportunities to consult with major shareholders in appropriate situations. We anticipate Dr. Millner and Mr. Anderson will continue to lead those efforts, with the support of members of our executive management and investor relations teams.
Shareholder Communication with the Board of Directors
The independentBoard 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 2024,” must be sent to our Corporate Secretary (Brian G. Lloyd) at our principal executive offices at 1600 West Merit Parkway, South Jordan, UT 84095. Communications submitted to the Board (other than communications received through our whistleblower hotline, which are reviewed and addressed by the Audit Committee) are generally reported to our directors at the next regular meeting of the Board.
All directors of the Company are strongly encouraged to attend our Annual Meeting. Ten of the eleven directors, then serving on the Board or nominated to the Board, were present in person or through video conference at our 2022 annual meeting of shareholders.
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 selected Mr. Edelmanfive years from appointment to serve as the Lead Independent Director who presides at all executive sessions.
Board to comply with the minimum stock ownership requirement. The ESG Committee provides oversight of the stock ownership guidelines and may allow waivers with respect to the stock ownership guidelines for directors and the CEO on a case-by-case basis. All current directors and nominees are within their respective five-year transition periods except our CEO, A. Scott Anderson, Thomas J. Gunderson and F. Ann Millner. Our CEO, Messrs. Anderson and Gunderson and Dr. Millner are presently in compliance with the minimum stock ownership guidelines. | |
Governance Materials The following materials relating to corporate governance are available via our website at: www.merit.com/investors/corporate-governance-leadership/ |
●Code of Business Conduct and Ethics | ●Code of Ethics for CEO and Senior Financial Officers |
●Corporate Governance Guidelines | ●Compensation Committee Charter |
●Audit Committee Charter | ●ESG Committee Charter |
●Operating Committee Charter | ●Finance Committee Charter |
Code of Business Conduct and Ethics
The Company has adopted aOur Code of Business Conduct and Ethics (the “Code(Code of Conduct”Conduct), which is applicable applies to the Company’sour directors and employees, including the Company's principal executive officer, principal financial officer and principal accounting officer,our NEOs, and is supplemented by additional provisions applicable to the Company’s Chief Executive Officerour CEO and the Company’s senior financial and accounting officers. The Code of Conduct is posted on the Company’s Internet website,
www.merit.com. All Company directors, officers and employees of the Company are required to act ethically at all times and in accordance with the principles and policies set forth in the Code of Conduct.22 | Understand. Innovate. Deliver.TM
Among other principles and policies, the Code of Conduct sets forth the Company’s position thatfinds a conflict of interest exists when a person’s private interest interferes in any way with the interests of the Company. The Code of Conduct recognizes that a conflict of interest occurs when the Company enters into a transaction in which an employee, officer, or director, or someone related to or affiliated with an employee, officer, or director, has a significant personal interest. The Code of Conduct also recognizes that a conflict of interest arises when an employee, officer or director of the Company receives an improper benefit as a result of the person’s position with the Company. 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 directorsdirector who havehas 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 the Company’sour securities are traded, including the Nasdaq Global Select Market.
Nasdaq.Ethics Hotline
Whistleblower Hotline
As contemplated by the Code of Conduct, we maintain an ethics hotline that enables our employees, vendors, customers, and shareholders, as well as other interested parties, to submit confidential and anonymous reports of suspected or actual violations of the Code of Conduct or other issues of concern to those parties. The Audit Committee regularly reviews all complaints we receive through the ethics hotline. | | | 
| Ethics Hotline |
| | | Our ethics hotline may be accessed: ● by telephone at (877) 874-8416 ● online at www.merit.alertline.com |
Trading Restrictions
Our directors and executive officers are subject to our Corporate Policy on Insider Trading, which is designed to facilitate compliance with insider trading laws and governs transactions in our Common Stock and related derivative securities. Any director, officer or employee in possession of Conduct, the Company has established a whistleblower hotline that enables Company employees, vendors, customers, and shareholders, as well as other interested parties, to submit confidential and anonymous reports of suspectedmaterial, nonpublic information, or actual violations of the Code of Conduct. The Company’s whistleblower hotlinewho may be accesseddeemed to possess such information by telephone at (877) 874-8416reason of his or online at merit.alertline.com. The Audit Committee regularly reviews all complaints received byher positions, may not (i) trade in the Company through its whistleblower hotline.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a)Company’s securities; (ii) share the information with others (“tipping”), or (iii) permit a member of
the Exchange Act requireshis 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) trading in Company stock on a short-term basis (minimum six-month holding period); (ii) engaging in short sales of Company stock; (iii) buying or selling put options or call options or other derivative instruments associated with Company stock; or (iv) 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
fileour CEO a limited waiver of the application of the policy in order to provide him with time 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.
Director Retirement Policy
In October 2017, we amended our Governance Guidelines to require that, upon reaching 75 years of age, each director of the Company must submit to the Board a letter of resignation to be effective at the next annual meeting of shareholders. The Board will generally accept such resignations unless the ESG Committee or the Board determines to extend the director’s service through the expiration of his or her then-current term or nominate the director for another term.
In accordance with the Securitiesprovisions of the Governance Guidelines, upon reaching the age of 75 years, A. Scott Anderson tendered to the Board his letter of resignation. Our ESG Committee and Exchange Commission (the “Commission”the Board considered Mr. Anderson’s resignation and his contributions to the Company. Following such consideration, the ESG 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 continues to provide significant contributions to our Board and the Company, and his unique perspective and extensive skills and experience continue to make him a valuable asset to the Board and the Company. Mr. Anderson’s current term as a director is scheduled to expire in 2024.
Sustainability
Under the oversight of our Board of Directors and management team, we continue to make sustainability a key focus of our business. We have a cross-functional Corporate Sustainability Council that is driving long-term Environment, Social and Governance (ESG) initial reportsgoals across our enterprise. These efforts have included proactive actions to address both risks and opportunities related to our sustainability program, as we strive for continued growth and profitability.
Most of ownershipour products are disposable medical devices and reportsare 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 are positioned to make a positive impact. These include programs designed to reduce waste, improve efficiencies, reduce greenhouse gas emissions, and protect the environment.
The following discussion summarizes our efforts to put our sustainability values into action during 2022.
24 | Understand. Innovate. Deliver.TM
Energy & Greenhouse Gas (GHG) Emissions
Energy is a significant manufacturing input and cost within our global operations. We strive to use energy efficiently and have worked to certify our largest manufacturing facilities to ISO 50001 for energy management systems. Currently 5 of our 6 largest sites hold ISO 50001 certifications, including three sites which were newly certified in 2022. We believe that, as we mature within this ISO system, we will have a positive impact on our energy efficiency. We measure energy by units of joules consumed and measure GHG emissions by carbon dioxide equivalent (CO2e) emitted. We measure intensity as units consumed/emitted per dollar of revenue earned.
In comparison to our 2020 baseline year, we experienced an 12% increase in our total energy intensity during 2022. Despite increases in energy intensity, we achieved a 35% decrease in GHG emissions (Scope 1 and 2) intensity due to our increased usage of renewable/clean energy over the past year. In 2022 26% of Merit’s total energy usage came from renewable/clean sources, compared to 5% of total energy coming from renewable/clean sources in our 2020 baseline year. During 2022 our total energy usage was 270,273 Gigajoules (GJ), compared to 201,513 GJ in our baseline year 2020. Our 2022 energy intensity was 0.2348 Gigajoules per thousand dollars of revenue earned (GJ/$KRev), compared to 0.2091 GJ/$KRev in 2020. Our 2022 Scope 1 GHG emissions were 3,069 metric tons (MT) of CO2e, compared to 2020 scope 1 emissions of 2,837 MT CO2e. Scope 2 emissions during 2022 were 13,524 MT, compared to 17,480 MT in our baseline year of 2020. Total GHG emissions intensity in 2022 was 0.0144 MT/$KRev of CO2e, compared to 0.0222 MT of CO2e/$KRev in 2020.
| | | | | | |
3,069 | | | 13,524 | | | 270,273 |
MT CO2e
Scope 1 Emissions These emissions include stationary combustion from Merit-managed and operated facilities over 10,000 square feet, as well as facility vehicle usage. | | | MT CO2e
Scope 2 Emissions These emissions include purchased non-renewable energy at our global operation sites over 10,000 square feet. | | | GJ Energy
Consumed Energy consumed includes purchased electricity and fuels consumed by Merit-managed and operated sites greater than 10,000 square feet. |
| | | | | | |
0.2348 | | | 0.0144 | | | 26% |
GJ/$KRev
Energy Intensity We used 0.2348 GJ of energy for every thousand dollars of revenue earned in 2022. | | | MT CO2e
GHG Emissions Intensity We emitted 0.0144 metric tons of carbon dioxide equivalent units for every thousand dollars of revenue earned in 2022. | | | Energy from Renewable/Clean Sources We sourced 26% of our total energy consumed from renewable/clean sources in 2022. |
Water
| | | |
We have identified water as one of our key environmental risks and opportunities. Water usage is a global concern; we seek to address goals and initiatives at the site level by understanding local/regional water basin activity and stress. We strive to understand the impact of water use at each of our operating facilities and to enact programs to improve water efficiency. In general, the water used at Merit sites is withdrawn from surface water, for example lakes and rivers. | | | 242,274 |
| | | M3 Water Used During 2022, our total global water usage at sites greater than 10,000 square feet was approximately 242.3K cubic meters. Our 2022 water intensity was 0.2105, indexed to revenue (M3/$1K Revenue). This is a 13% reduction from our baseline water intensity in 2020 of 0.2426 |
Water issues vary significantly by operating location. In 2022, 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 Company manufacturing locations (Tijuana, Mexico, South Jordan, Utah, and Pearland, Texas) as water-stressed sites. The methodology disclosure for the Water Risk Filter notes: “the logic that underpins the water risk assessment is to evaluate average, recent water risk conditions, as well as some level of future risk” (waterriskfilter.org).
The following table summarizes Merit operating sites located in identified water stressed regions:
| | | | | | |
| | | | | | |
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)
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 have committed to achieve the following goals by 2030:
| | ● of our total energy usage will come from renewable sources ● 10% or more, indexed to revenue ● 15% or more, indexed to revenue www.merit.com/about/corporate-sustainability/. |
| 2030 Operational Sustainability Goals | Utilizing 2020 as a baseline year, we have committed that by 2030: ● 50% of our total energy usage will come from renewable sources ● Our energy intensity will decrease by 10% or more, indexed to revenue ● Our water intensity will decrease by 10% or more, indexed to revenue ● Our GHG emissions will decrease by 15% or more, indexed to revenue See our Statement on Climate Change to learn more about our position and objectives related to climate change, available at www.merit.com/about/corporate-sustainability/. |
The table below captures our progress toward these goals during 2022. We adjust our baseline for changes in ownershipour 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 improved performance year over year.
Operational Sustainability Target Performance
(Intensity measured on a per $ of revenue basis, compared to 2020)
| | |
Operational Sustainability Target Performance | 2030 Target | 2022 Result |
Percentage Energy from Renewable Sources | 50% | 21% Increase |
Energy Intensity | 10% Reduction | 12% Increase |
GHG Emissions (Scope 1 and 2) | 15% Reduction | 35% Reduction |
Water Intensity | 10% Reduction | 13% Reduction |
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2022 Sustainability Highlights
| | |
| 3.3M+
kg recycled | During 2022 our global facilities recycled more than 3.3M kgs of waste produced by our operations. We recognize additional opportunities to expand our recycling efforts and strive to increase recycling each year, as well as finding ways to reduce total waste. |
| Million+
sheets of paper & thousands of plastic sleeves | Our internally designed eWORQ program is transitioning our operating lines from paper and plastic sleeves to electronic work orders. After it is fully implemented, at all our manufacturing sites, we estimate annual savings of millions of sheets of paper and thousands of plastic sleeves. Currently, we are at 34% implementation. |
| 5,000
pounds of fresh produce | During 2022, we served over 500 pounds of fresh produce from our gardens in Merit cafeterias and we distributed more than 3,200 pounds of fresh produce to our employees through our U-Pick program at our South Jordan facility, a program that encourages our employees to visit our Company-sponsored garden for fresh air and sunshine during their workday to pick fresh produce and participate in garden cultivation activities. Employees also participate in the garden by signing up for garden boxes to grow fresh produce for themselves and family members throughout the growing season, with the help and expertise of our knowledgeable garden staff. Each year, we donate high-quality produce to low-income senior citizen centers, and we donate lower quality produce to farm animals at a nonprofit charter school, to reduce waste. In total, our 2022 growing season produced approximately 5,000 pounds of fresh produce. Green waste removed from our garden at the end of the growing season is donated to a local landfill to make compost for the next growing season. |
| 100+
metric tons reduction in employee transportation related CO2e emissions | At our South Jordan and Galway facilities, we promote the usage of electric vehicles by providing employees with on-site, electric vehicle-charging stations. At our Tijuana facility, we operate our employee transportation program to reduce emissions and encourage employee safety. During 2022 we contracted 21 fuel-efficient buses to transport over 1,600 employees to and from the facility each workday. These buses provide safe, efficient, and comfortable transportation for our employees in Tijuana. In all, our employee transportation programs at these three locations have resulted in a reduction of over 100 metric tons of CO2e. That is the equivalent of planting 3,800 trees and letting them grow for ten years. |
| 170+
metric tons of food waste recycled globally | Our food waste recycling programs at our large facilities in Salt Lake City, Tijuana and Mexico help to divert organic waste from local landfills. In Salt Lake City, our food waste is taken to an anaerobic digestion plant where it is turned into methane gas that is piped back into the natural gas system to heat businesses and homes. Solid food waste taken from our facilities is turned back into compost to grow more food, contributing to a circular economy for food production. |
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 Common Stockfollowing members:
| | | |
Neil W. Peterson Chief Operating Officer and Sustainability Council Executive Sponsor |
Alisha Jerauld Sustainability Council Chair and Vice President, Environment, Social & Governance | JoAnne Alkire Executive Vice President, Global Marketing & Strategy | Jennifer Allan Director, Enterprise Risk Management | Ricardo Alvarez Managing Director, Operation Merit Medical Tijuana |
Mark Butler Executive Vice President, Merit Medical EMEA | Sarah Comstock Vice President, Global Communications | Clay Creamer Executive Vice President, Manufacturing Finance & Strategy | George Frioux Vice President, Global Real Estate & Facilities |
Jim Mottola Executive Vice President, Global Research & Development | Nicole Priest, M.D. Chief Wellness Officer | Mike Voigt Chief Human Resources Officer | Jason Reber Vice President, Operations |
2022 Sustainability Report
Through our 2022 Sustainability Report (scheduled to be released in May 2023) we intend to provide further details about our sustainability initiatives and efforts in 2022. 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 2022 total recordable injury rate (TRIR) was 0.7, a 36% decrease from our 2020 TRIR of 1.1. We set a goal in 2020 to achieve ISO certification of our Occupational Health and Safety Management System at all our largest manufacturing sites by the end of 2022. We are pleased to report we have reached this goal. We hold ISO 45001 certifications at our large facilities located in Salt Lake City, Galway, Tijuana, Paris, Venlo, and Richmond.
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Compliance & Ethics
We are committed to a strong culture of compliance and ethics. We recognize that corruption and unethical conduct of any kind undermines our integrity and reputation and is contrary to our values and long-term success. We demonstrate this advocacy by maintaining ethical and responsible policies and practices and monitoring and enforcing these policies throughout all levels of the organization. We hold ourselves accountable to high standards of honesty, fairness, and integrity. Company 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 laws and regulations, e.g., the U.S. Anti- Kickback Statute, the False Claims Act, the Foreign Corrupt Practices Act (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 our largest manufacturing sites. We are proud to report that we achieved our goal. We now hold ISO 14001 certification at sites located in Salt Lake City, Galway, Tijuana, Paris, Venlo and Richmond.
Diversity & Inclusion
As a global company, we understand that having a diverse workforce adds value to the entire organization. Among 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, more than 25% of our directors are women, and more than 35% of our directors meet the Nasdaq standard for diversity. Additionally, more than 34% of our management employees are women. Our global workforce comprises 56% female team members, and 51% of our team members 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.
In 2021, we launched our North America Women’s Leadership Initiative (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 Company 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 for a positive focus that embraces opportunity. We recognize that risks and opportunities are present in all business activities and that the effective management of risk while proactively seeking opportunity is a crucial element in maximizing organizational value. Our Enterprise Opportunity Management (EOM) program is designed to actively engage executive leadership, with Board oversight, in monitoring and managing critical corporate risks and opportunities that are in 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, diversity and inclusion, numerous business continuity-related matters, and compliance with various laws and regulations. During 2022 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. The goal of these EOM activities is to identify opportunities 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. We have partnered with other organizations that facilitate the delivery of healthcare to underserved regions of the globe. In 2022, Merit donated products to medical missions in Haiti, Honduras, Kenya, Nicaragua, and Tanzania.
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. The 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 2022, we participated in 38 regulatory audits, 43 customer audits, and 125 internal audits and had zero class 1 recalls.
Continued Dedication
We recognize the importance of operating both a sustainable and profitable enterprise for the long term. We believe our operations should not compromise the environment or the economic prospects of future generations, and, under the direction of the ESG Committee, we have focused increasing attention on sustainability and reducing our global environmental footprint in our operations through reducing waste, combating climate change, and reducing, reusing, and recycling materials.
Whether it is manufacturing processes, shipping, or the day-to-day activities at our offices, our employees at all levels are engaged in developing innovative solutions to produce high 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.
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
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directors. The following table shows the annual retainer amounts payable by the Company to non-employee directors.
| |
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, 2022, all non-employee directors of the Company (except F. Ann Millner, Laura S. Kaiser and Michael R. McDonnell) received quarterly retainer payments totaling $86,000 in aggregate. Ms. Millner, who served as Lead Independent Director throughout the year, received quarterly retainer payments totaling $116,000 in the aggregate. Ms. Kaiser and Mr. McDonnell each received a pro-rated retainer amount of $52,923 for services rendered commencing on their appointment to the Board on May 19,2022. Additionally, each of the committee chairs was paid his or her chair-specific retainer(s) (as set forth in the foregoing table) during the year ended December 31, 2022. Directors are also reimbursed for (a) out-of-pocket travel and related expenses incurred in attending Board and committee meetings and other securities thatCompany events, and (b) up to $5,000 for annual educational expenses.
Stock Awards
Directors are derivativeeligible to participate in our equity incentive programs. For the year ended December 31, 2022, the amount of the Common Stock. Executive officers andannual equity compensation award for non-employee directors are required by Commission regulations to furnishwas set at $180,000. Accordingly, each non-employee director who served during the Company with copies of all Section 16(a) reports they file. Based solely upon a review ofyear ended December 31, 2022 received 3,050 restricted stock units under the copies of those forms and written representations2018 Incentive Plan, which vest on May 24, 2023, one year from the Company’s executive officers and directors, the Company believes that all Section 16(a) reports requiredgrant date. We first began granting restricted stock units to be filed by the Company’s officers and directors during the year ended December 31, 20152020. In prior years, directors were filed timely.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). Effective January 1, 2023, the Board increased the amount of the annual equity compensation award for non-employee directors to $190,000.
Shareholder Communication
The following table shows compensation for each of our non-employee directors in 2022:
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Name (1) | | Fees Earned
or Paid in
Cash
($) | | Stock
Awards
($) (2) | | Non-Equity Incentive
Plan Compensation
($) | | All Other
Compensation
($) | | Total
Compensation
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| (1) | Fred P. Lampropoulos served as a director of the Company during 2022 but is not identified in the foregoing director summary compensation table because of his dual status as an NEO and director. Information regarding Mr. Lampropoulos’ 2022 compensation can be found under “Executive Compensation” below. |
| (2) | The amounts shown for stock awards reflect the aggregate grant date fair value of restricted stock units granted to the non-employee directors in 2022. We calculated these amounts in accordance with financial statement reporting rules, using the same assumptions we used for financial statement reporting purposes pursuant to our long-term incentive plans. Assumptions used in the calculation of these amounts are included in footnotes to our Annual Report. As of December 31, 2022, all current non-employee directors held 3,050 restricted stock units. As of December 31, 2022, non-employee directors held outstanding options for the following number of shares: Mr. Anderson, 61,250; Mr. Gunderson, 71,250; Dr. Millner, 66,250; and Ms. Ward, 7,433. |
| (3) | Ms. Anderson served as a director of the Company from January 2019 through May 2022. During the years ended December 31, 2022, 2020 and 2019, we made contingent payments of approximately $1.6 million, $800,000 and $1.0 million, respectively, to Ms. Anderson, in her capacity as a former shareholder of Cianna Medical, Inc. (Cianna Medical) which we acquired in 2018. We made no such payments in 2021. The terms of the Cianna Medical acquisition, including contingent consideration payments, were determined prior to the appointment of Ms. Anderson as a director of the Company. As a former shareholder of Cianna Medical, Ms. Anderson may be eligible for additional payments for the achievement of sales milestones specified in our merger agreement with Cianna Medical. These payments have been excluded from the Non-Employee Director Summary Compensation table in each respective year, as they represent settlement of a contingent liability recorded as part of the purchase consideration for Cianna Medical in 2018 and were not compensation for services provided. |
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 Boardperformance of Directorstheir duties or are not in our best interests.
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The Board will receive communications from Company shareholders. All communications, except those relatedPursuant to shareholder proposals that are discussed below under the heading “Proposals of Shareholders,” must be sent to the Company's Corporate Secretary at the Company’s executive offices at 1600 West Merit Parkway, South Jordan, Utah 84095. Communications submitted to the Board (other than communications received through the Company’s whistleblower hotline, which are reviewed and addressed byits written charter, the Audit Committee) are reportedCommittee 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 other directors of the Company at the next regular meeting of the Board. All directors of the Company are strongly encouraged to attend the Company’s annual meetings of shareholders. All of the Company’s directors were present at the 2015 Annual Meeting of the Company’s Shareholders.
Compensation Committee InterlocksSecurities and Insider Participation
As of December 31, 2015, the members of the Compensation Committee were A. Scott Anderson (Chairman), Franklin J. Miller, and Michael E. Stillabower. Nomember of the Compensation Committee is currently, or has formerly been, an officer or employee of the Company or any of its subsidiaries. The Company had no relationship during 2015 requiring disclosureExchange Commission (SEC) (including under Item 404 of Regulation S-K with respectunder the Securities Act of 1933), other than:| ● | grants of stock options made by the Board or any committee thereof or pursuant to an automatic grant plan; and |
| ● | payment of compensation authorized by the Board or any committee thereof. |
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 the personsits subsidiaries) was, is or will be a participant and, as relates to directors or shareholders who served on the Compensation Committee during 2015.
EXECUTIVE OFFICERS
In addition to Mr. Lampropoulos whose biography is included previouslyhave an ownership interest in
this Proxy Statement as a director of the Company
certain information is furnished with respect toof more than 5%, the
following executiveamount 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, ofdirectors, 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 Company:
Bernard J. Birkett, 47, has served as the Chief Financial Officer and Treasurer of the Company since November 4, 2015. Mr. Birkett joined the Company in 1997 and previously served as the Company’s Controller responsible for Europe, the Middle East and Africa from 2000 until 2010 and as the Company’s Vice President of International Finance since 2010. Mr. Birkett served as Executive Vice President Finance of the Company from January 2015 until November 2015 pursuant to an expatriate assignment arrangementhousehold (other than a tenant or household employee)).Related Person Transactions include transactions between the Company and Merit Medical Ireland, Ltd. (“Merit Ireland”) (Mr. Birkett’s direct employerits executive officers and a wholly-owned subsidiarydirectors. 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 Company) under which Mr. Birkett would livespecific facts and circumstances presented, including but not limited to the risks, costs and benefits to the Company and the availability from other sources of comparable services or products.
Certain Related Person Transactions
The Board, acting through the Audit Committee, believes that the following Related Party Transactions are reasonable and fair to the Company:
| ● | Joseph C. Wright, Chief Commercial Officer, is the brother-in-law of Fred P. Lampropoulos, Chair of the Board, CEO and President of the Company. In 2022 we provided to Mr. Wright total cash and equity compensation of $1,858,936. Refer to the Summary Compensation Table for additional information regarding his compensation. |
| ● | Frank Wright, formerly the OEM Business Development Manager of the Company, is the brother-in-law of Fred P. Lampropoulos, Chair of the Board, CEO and President of the Company. In 2022 we provided to Mr. Wright total compensation of $145,697. |
EXECUTIVE COMPENSATION AND RELATED MATTERS
Executive Summary
During the years ended December 31, 2021 and 2020, the global COVID-19 pandemic impacted our business in significant ways. In 2022, we observed a generally improving operating environment with fewer restrictions on elective and deferrable procedures leading to record sales of $1.151 billion, an increase of $76.2 million or 7.1%, compared to 2021 sales of $1.075 billion. Our 2022 revenue results were driven primarily by stronger-than-anticipated demand for our products in the United States but remain employed byU.S. and more favorable than anticipated international sales trends.
During 2022 we received “Breakthrough Device Designation” for our Embosphere® Microspheres for use in genicular artery embolization for symptomatic knee osteoarthritis. We also received FDA clearance for our SCOUT® Bx™ delivery system, the first wire-free breast localization solution that can be deployed at the time of stereotactic or MRI-guided biopsy, representing a notable addition to the Merit Ireland. Mr. Birkett isOncology portfolio.
We also launched eight new products during 2022 including the basixALPHA™ inflation device, PreludeSYNC EZ™ radial compression device, TEMNO Elite™ soft tissue biopsy system, Prelude Roadster™ guide sheath, SafeGuard Focus Cool™ compression device, SCOUT Mini Reflector, ReSolve® thoracostomy tray and the commercial release of the smallest and shortest configuration in the Elation® pulmonary balloon dilator portfolio.
In November 2020, we introduced a certified accountant with a business degree from the National University of Ireland Galway and a master’s degree in banking and finance from the University College Dublin’s Michael Smurfit Graduate Business School. He has also completed a program in strategic leadership at Stanford’s Graduate School of Business.
Joseph C. Wright, 46, has servedcorporate transformation initiative known as the President“Foundations for Growth” Program, with multi-year financial targets for growth and improved profitability for the three-year period ending December 31, 2023. As part of this initiative, we continue to review the Company’s International Division since July, 19, 2015. Mr. Wright joinedneed to consolidate facilities, strategically reduce operating expenses and incentivize our sales force to focus on products that will improve our financial performance. Our dedication to the CompanyFoundations for Growth Program has helped offset inflationary cost pressures we experienced in 2005 as Vice President, International, responsiblecertain raw materials, shipping and freight expenses.
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Key financial results for sales in Canada, Asia Pacific,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 Latin America. In 2006 Mr. Wright took onfinancial performance over the additional responsibility as the Company’s Vice President of Marketing and was promoted to President, Merit Technology Group, overseeing Merit OEM, Merit Sensor Systems, Inc., and the Company's coating division in 2007. Mr. Wright manages Merit’s businesses in all global markets outside the U.S., Europe, Middle East and Africa. Mr. Wright oversaw the creation of Merit's operations in China and Hong Kong. Previously, Mr. Wright held sales, marketing and business development positions with several companies, including Motorola and Micron. Mr. Wright speaks Japanese and received a bachelor's degree and master’s degree in business administration from Columbia University. Mr. Wright is the brother-in-law of Mr. Fred P. Lampropoulos, the Chairman of the Board, Chief Executive Officer and President of the Company.
Justin J. Lampropoulos, 33, has served as the Company’s Executive Vice President of Global Sales, Marketing & Strategy since May 22, 2015. He began his career in medical device technology as a member of the Company’s sales organization in 2004. Most recently, he spentpast five years from 2010 until 2015 leadingare illustrated in the Company’s Europe, Middle East,tables above. Although our historic results are not a guarantee of future performance, we believe our performance during that five-year period positions us for sustainable growth in profitability going forward.
Our operating and Africa (EMEA) business unit from Maastricht, The Netherlands before returning tofinancial results were a significant factor in the Company’s headquarters to leaddeliberations of our Compensation Committee when evaluating the Company’s commercial organization in addition to global marketingamount and strategy. Mr. Lampropoulos completed postgraduate studies at Oxford University’s Saïd Business School in Oxford, England in strategic management and is an alumnus of Harvard Business School. Mr. Lampropoulos is the son of Mr. Fred P. Lampropoulos, the Chairman of the Board, Chief Executive Officer and President of the Company.
Ronald A. Frost, 54, joined the Company in 1991 and has served as the Company’s Chief Operating Officer since January 1, 2014. Prior to his appointment as Chief Operating Officer, Mr. Frost served as the Company’s Vice President of Materials and Operations from December 2007 until December 31, 2013. He also worked for the Company in other positions, including as a Quality Engineer, a Manufacturing Engineer, Custom Kits Manager, Customer Service Manager, Production Planning and Warehouse Manager, General Manager of the Company’s Richmond, Virginia operations and Vice President of Technology Transfer. Mr. Frost earned an associate degree in applied science from Weber State University in 1991.
Brian G. Lloyd, 55, was appointed as the Chief Legal Officer and Corporate Secretary of the Company in April 2016. Prior to joining the Company, Mr. Lloyd practiced as an attorney, specializing in corporate governance, securities regulation and mergers and acquisitions, with the law firm of Parr Brown Gee & Loveless in Salt Lake City, Utah for more than 20 years.
He also practiced law in those areas of specialization as a partner with the law firm of Stoel Rives, LLP for four years. Mr. Lloyd received a juris doctorate degree from Columbia Law School and a bachelor’s degree in finance from Brigham Young University.
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis is designed to explain the Company’s philosophy and objectives underlying its compensation policies, the processes the Company follows in setting compensation, and the componentsform of compensation that the Company utilizes in compensating its named executive officers (“NEOs”) listed in the Summary Compensation Table located on page 18 of this Proxy Statement. The Summary Compensation Table, as well aspaid to our CEO and other compensation tables beginning on page 18, should be read in conjunction with this discussion.
Executive Summary
The Company has delivered year-over-year revenue growth and maintained profitability since 1990. TheNEOs. Our Compensation Committee believes there are multiple factors that have contributed to the Company’s strong record ofour financial and operating performance, butparticularly during the challenges of the past several years; however, two of the key factors have been the Company’sour outstanding employees and the leadership provided by the Company’sour CEO and other executive officers. Accordingly, the Compensation Committee seeks to implement and advance an executive compensation program that recognizes Company performance and individual contribution, while encouraging long-term motivation and retention. The Compensation Committee believes the Company’sour executive compensation program has been instrumental in helping the Company sustain its strong financial performance over many years.
Under the oversight of the Compensation Committee, the Company’s 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. Among other objectives, those programs are designed to:
Focus executives on achieving or exceeding measurable performance targets;
Influence executives to lead Company employees in the implementation of cost saving plans;
Encourage continuation of the Company’s entrepreneurial spirit;
Attract and retain highly-qualified and motivated executives; and
Promote the Company’s guiding principles for adherence to a high ethical environment, as well as health and safety standards.
The Company’sCompensation 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; |
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| | 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 |
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| | 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 the Company’sour 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, generally in the form of stock options.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 the Company’sour short-term business and performance objectives, such as income and overall financial performance. Equity awards have historically been used to retain key employees andare intended to motivate executives to create long-term shareholder value. Historically, equity awards 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 Company-wide compensation and bonus program as part of our Foundations for Growth Program. During 2022, we distributed to Company employees the first payment pursuant to that program.
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| | | |
| Selected 2022 Highlights |
| | ● Achieved record revenues in excess of $1.15 billion ● Exceeded many of the Company-wide performance measures established pursuant to our Foundations for Growth initiative, designed to maintain growth, improve our operating margins and build a foundation for long-term profitability ● Distributed to Company employees the first payment under our Company-wide compensation and bonus program designed to increase the alignment of employee compensation with the Company’s achievement of the Foundations for Growth performance measures ● Continued efforts to reduce our environmental footprint by continuing to implement new programs to reduce waste, conserve resources, and improve the areas where we do business | ● Launched eight new products during 2022 including the basixALPHA™ inflation device, PreludeSYNC EZ™ radial compression device, TEMNO Elite™ soft tissue biopsy system, Prelude Roadster™ guide sheath, SafeGuard Focus Cool™ compression device, SCOUT Mini Reflector, ReSolve® thoracostomy tray and the commercial release of the smallest and shortest configuration in the Elation® pulmonary balloon dilator portfolio ● Continued to address challenges attributable to the global COVID-19 pandemic by focusing on employee health and safety and maintaining operations, which ultimately resulted in positive operating and financial results ● Cumulative total return on our Common Stock from December 31, 2017 to December 31, 2022 of approximately 63% (1) |
| (1) | Reflects five-year cumulative total return of our Common Stock, as reported by Nasdaq for the period from December 31, 2017 to December 31, 2022. Past results are not necessarily an indicator of future results. |
Executive Officers
In addition to Fred P. Lampropoulos (whose biography is included above under “Directors Whose Terms of Office Continue”), we have included the following information related to our other executive officers:
| RAUL PARRA | Chief Financial Officer and Treasurer |
| Age: 45 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 member, American Express National Bank, 2022 to present |
Education:
B.S. (business administration with accounting emphasis), Sonoma State; Certified Public Accountant (Inactive) | |
| NEIL W. PETERSON | Chief Operating Officer |
| Age: 57 Current Position Since: April 2022 Highlights: ● More than 28 years of service to Merit and its shareholders ● Previous positions at Merit include Vice President Operations |
Education:
B.S. (electronic engineering), Weber State University | |
| JOSEPH C. WRIGHT | Chief Commercial Officer |
| Age: 53 Current Position Since: October 2022 Highlights: ● 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 ● Manages businesses in all global markets outside the U.S. and EMEA ● 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:
B.A., (political science), Columbia University; M.B.A., (finance) Columbia University; Speaks Japanese | |
| BRIAN G. LLOYD | Chief Legal Officer, Corporate Secretary |
| Age: 62 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:
B.S. (finance), Brigham Young University; J.D., Columbia Law School | |
38 | Understand. Innovate. Deliver.TM
| MICHEL J. VOIGT | Chief Human Resources Officer |
| Age: 50 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:
B.S. (business administration and management), Oklahoma State University | |
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. |
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| Chief Financial Officer and Treasurer |
| Chief Operating Officer (from April 2022 to present) |
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| Chief Legal Officer and Corporate Secretary |
| Former Chief Operating Officer |
Process for Establishing Executive Compensation
Procedure
. The Compensation Committee has oversight responsibility for establishing the Company’s compensation practices for the Chief Executive Officer of the Company (the “CEO”)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 the Company’sour performance during a given year, compared with the Company’sour 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, cashshort-term incentive bonus programs and award amountslong-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
. During the year ended December 31, 2015,Since 2019, the Compensation Committee has engaged Pearl Meyer & Partners, (“LLC (Pearl Meyer”Meyer), an independent compensation consulting firm, to review the Company’sour executive officer and director
compensation
practices. Pearl Meyer advisedpractices and advise the Compensation Committee with respect to
the Company’s executive officer and directorthose compensation practices, including salary, bonus, benefits and equity awards for
the Company’sour executive officers and retainers, meeting fees and equity awards for
the Company’s directors, based on practicesour directors. Representatives of
peer group companies. ThePearl Meyer meet regularly with the Compensation Committee
and the Compensation Committee has generally evaluated
and considered Pearl Meyer’s reports and
as they considered appropriaterecommendations.During 2019 and 2020, the Compensation Committee consulted with Pearl Meyer to achieverevise and update the best interests of the Company and its shareholders, implemented some of Pearl Meyer’s recommendations.Company’s executive compensation programs. The Compensation Committee intendsengaged Pearl Meyer to further evaluatehelp revise the Company’s executive composition practices to establish a long-term equity incentive program that was not based solely 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 considerannual performance-based cash bonuses. Through this collaboration, the Compensation Committee adopted an executive compensation program which became effective during 2020 and continued through 2022. This executive compensation program is comprised of an equity feature that aims 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 2022 executive compensation that consisted of the following companies:
| | |
Company | Revenue(1)
(dollars in millions) | Market Capitalization
at September 15, 2021
(dollars in millions) |
ABIOMED, Inc.(2) | $ | 935 | $ | 16,118 |
AngioDynamics, Inc. | | 291 | | 1,045 |
Cantel Medical Corp.(3) | | - | | - |
CONMED Corporation | | 979 | | 3,742 |
ICU Medical, Inc. | | 1,279 | | 5,173 |
Insulet Corporation | | 996 | | 20,073 |
Integer Holdings Corporation | | 1,107 | | 3,071 |
Integra LifeSciences Holdings Corporation | | 1,509 | | 5,859 |
LivaNova Plc | | 1,022 | | 4,521 |
Masimo Corporation | | 1,177 | | 15,016 |
Natus Medical Incorporated(4) | | 452 | | 850 |
NuVasive, Inc.(5) | | 1,153 | | 3,052 |
Penumbra, Inc. | | 671 | | 10,567 |
Quidel Corporation | | 1,837 | | 6,125 |
Teleflex Incorporated | | 2,687 | | 18,190 |
West Pharmaceutical Services, Inc. | | 2,523 | | 33,475 |
| | | | |
Median | $ | 1,107 | $ | 5,859 |
Merit Medical Systems, Inc. | $ | 1,031 | $ | 4,073 |
| (1) | Revenue is for the trailing twelve months as of the most recently disclosed quarter as of September 15, 2021, generally June 2021. |
| (2) | Acquired by Johnson & Johnson in 2022 |
| (3) | Acquired by STERIS plc in June 2021. Revenues and market capitalization not available for the periods indicated. |
| (4) | Acquired by ARCHIMED in 2022. |
| (5) | Added to the peer group for 2021. |
The companies selected for inclusion in the Company’s executive compensation peer group were selected by the Compensation Committee following consultation with Pearl Meyer based on revenue, market capitalization, market peer indices and Pearl Meyer’s recommendations contained inassessment of the strength of comparability, as well as overall business characteristics, including product offerings and end markets.
Neither the consultations with Pearl Meyer reports.nor our internal review yielded any significant concerns at the Compensation Committee level regarding our executive compensation practices.
Evaluation.
In evaluatingcompensation of the NEOs for the year ended December 31, 2015,2022, the Compensation Committee considered, among other factors, the Company’sour performance and relative shareholder return for the year ended December 31, 2015,in 2021 and 2022, as compared to the Company’sour performance targets for 2021 and 2022, prior analysis and reports from Pearl Meyer (which contained comparisons of our compensation and financial results with respect to the year ended December 31, 2015,peer group), and other factors considered relevant by the Compensation Committee. Notwithstanding the Compensation Committee’s use of the information supplied by Pearl Meyer, the decisions of the Compensation Committee with regard to the NEOs for 2015 were based principally on objective and subjective evaluations of the individual NEOs.
Other Considerations
. The Compensation Committee also relied on its experience and judgment in making executive compensation decisions after reviewing theour performance of the Company on a quarterly and annual basis, and evaluating the NEOs’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 the Company’sour executives.
The Company’sOur executive compensation program is divided into the following two general categories;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 equityequity-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 toof the NEOs should be both at-risk and tied to the Company’s achievement of itspredetermined performance goals.
Generally, The Compensation Committee’s development and implementation of the Company’s revised executive compensation program during 2021 and 2022 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 identifiesand other members of the Company’s executive management team identify performance goals which are intended to align the efforts of the Company’s executives,our executive officers, including the NEOs, with the Company’sour achievement of itsour 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 variablePSUs and annual performanceperformance-based cash bonus component of the Company’sour executive compensation program. Because the performance goals are generally
established at the beginning of each year and market conditions fluctuate throughout the year, the performance goals may not correspond to subsequent annual earnings estimates released by the Company.Compensation Committee Consideration of Shareholder Advisory Votes
At our annual meeting of shareholders held on May 19, 2022, 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 95.7% of the shares represented at the meeting.
At our annual meeting of shareholders held on May 24, 2017, our shareholders voted on an advisory basis with respect to the frequency of future advisory votes on executive compensation. Holders of approximately 77% of the shares represented at that meeting expressed their preference for an annual advisory vote. Accordingly, we have conducted annual advisory votes on executive compensation since that meeting. The frequency of future advisory votes on executive compensation is the subject of Proposal 3 to be considered by the Company’s shareholders at 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.
42 | Understand. Innovate. Deliver.TM
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.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 the Company’sour performance, compared to established goals. The Compensation Committee also compares the compensation mix relative to our 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 the year ended December 31, 2015,2022, 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. |
•Base salary, which is designed to attract and retain executives over time;
•Annual performance bonusExecutive Pay Mix Summary
2022 Target Compensation
The following charts show the targeted mix of compensation which is designed to focus on business objectives established by
thefor our named executive officers in 2022: | | |
CEO | | AVERAGE OTHER NEOs |
| | 
|
2022 Compensation
The Compensation Committee considered the following factors, among others, when establishing the amounts of fixed and variable compensation paid to our NEOs for a particular year;2022:
|
Fred P. Lampropoulos |
● leadership and direction of our Company and employees during an unprecedented time of uncertainty and economic instability as a result of the COVID-19 pandemic and resulting industry dynamics and business constraints; |
•Long-term equity-based incentive compensation in the form
● achievement of our 2022 financial performance, targets and partial achievement of the 2022 operating targets set for our executive officers in accordance with our Foundations for Growth Program; ● oversight of operating efficiency initiatives, including our Foundations for Growth initiatives, designed to reduce operating expenses and increase profitability; ● 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 |
● responsibility for the financial and accounting affairs of an increasingly large and complex global organization; ● achievement of our 2022 financial performance targets and partial achievement of the 2022 operating targets set for our executive officers in accordance with our Foundations for Growth Program; ● implementation of operating efficiency initiatives, including our Foundations for Growth initiatives, designed to reduce operating expenses and increase profitability; and ● oversight of our cash flow, including a substantial increase in the amount of our free cash flow, and budgeting practices. |
Neil W. Peterson |
● assumption of responsibility for the conduct of our worldwide operations within the budget established by the Board; ● leadership and achievement of critical operational aspects of our Foundations for Growth Program; ● oversight of our efforts to reduce our environmental footprint and promote sustainability; and ● implementation of operating efficiency initiatives designed to reduce operating expenses and increase profitability, consistent with our Foundations for Growth Program. |
Joseph C. Wright |
● management of our international sales and marketing activities throughout 2022, with added responsibility for oversight of the Company’s U.S. commercial activities upon his appointment as Chief Commercial Officer in November 2022; ● achievement of our 2022 financial performance targets and partial achievement of the 2022 operating targets set for our executive officers in accordance with our Foundations for Growth Program; ● implementation of sales strategies and performance goals; and |
|
Brian G. Lloyd |
● oversight of our legal department, with responsibility for supporting our worldwide operations; |
•Broad-based employee retirement, welfare and fringe benefits programs, and other personal benefits; and44 | Understand. Innovate. Deliver.TM
•Executive deferred compensation and, for those NEOs who are eligible, post-retirement medical benefits.● corporate counsel and support of the Board in fulfilling its corporate governance obligations; ● achievement of our 2022 financial performance targets and partial achievement of the 2022 operating targets set for our executive officers in accordance with our Foundations for Growth Program; and ● oversight and coordination of significant litigation and other disputes, as well as acquisition and financing transactions. |
Fixed Compensation
The Compensation Committee does not use a specific formula for evaluating individual performance of the NEOs. The performance of the NEOs other than the CEO is assessed by the Compensation Committee taking into account the CEO'sCEO’s input regarding each NEO’s contributions to the Company’sour performance for the applicable year. The CEO’s performance is assessed by the Compensation Committee infollowing formal and informal meetings with the CEO, as well as executive sessions conductedand find determinations are made by the Compensation Committee. The criteria used in setting the base salary for each NEO, including the CEO, vary depending on the NEO’s function, but generally include the Compensation Committee’s assessment of the NEO’s:
•Advancement of the Company’s interests with shareholders and customers and in other strategic business
relationships;
•Achieving the Company’s financial results;
•Leadership inside and outside the Company;
•Contribution to the Company’s product quality and development; and
•Advancement in skills and responsibility.
| ● | advancement of our interests with shareholders and customers and in other strategic business relationships; |
| ● | achievement of our financial results, position and experience (in an effort to avoid gender or age discrimination); |
| ● | leadership inside and outside the Company; |
| ● | contribution to specific Company initiatives, such as our Foundations for Growth initiatives, expense reduction efforts, product quality and development and environmental and social objectives; and |
| ● | advancement in skills and responsibility. |
Given the subjective nature of the criteria identified above, the Compensation Committee has not attempted to develop numeric measurements in determining base salaries for the NEOs. Instead, the Compensation Committee establishes base salaries at levels commensurate with the Compensation Committee’s evaluation of each NEO’s contribution to our business success. The Compensation Committee has also consulted with Pearl Meyer to assess the levels of base salary and other compensation paid to the CEO and other NEOs, relative to the Company’s business success. Among the factorspeers. In particular, the Compensation Committee considered when establishinghas set the base salary and incentive cash bonus of the CEO at levels which are higher than the aggregate amount of base salary and incentive bonus paid to the principal executive officers of a number of our peers. Because the CEO is a founder of the Company and owns a substantial number of shares of Common Stock, the Compensation Committee believes his personal interests are more aligned with the interests of our shareholders than our other NEOs. Therefore, the Compensation Committee believes that adjusting his compensation mix to include a greater proportion of cash payments, rather than issuing additional equity awards, serves to increase the alignment of our CEO’s interests with the interests of our shareholders.
Effective November 1, 2021, upon the recommendation of the CEO, the Compensation Committee increased the annual base salary payable to Joseph C. Wright to $700,000, on an interim basis, due to the temporary expansion of his responsibilities for oversight of the Company’s international operations, including the Company’s operations in Europe, Middle East and Africa, pending the Company’s engagement of a new Chief Commercial Officer. Effective November 1, 2022, the increase in Mr. Wright’s salary was affirmed upon his appointment as Chief Commercial Officer.
On April 19, 2022, Ronald A. Frost resigned from his position as Chief Operating Officer of the Company and Neil W. Peterson was appointed to serve as the Company’s Chief Operating Officer. During the period from April 19, 2022 through August 26, 2022, Mr. Frost continued to be employed by the Company in a non-executive capacity and provided services to facilitate a smooth transition in responsibilities. Base salary information for Mr. Frost set forth in the table below and the Summary Compensation Table reflect amounts paid to Mr. Frost through the date of his separation.
Based on its evaluation, the Compensation Committee approved the following NEO base salaries for the year ended December 31, 2015 were: (a) for Mr. Fred Lampropoulos, the Company’s 2015 financial performance, cost savings, shareholder relations, strategic business development, acquisition transactions and integration, product development, inventions and patent prosecution, international expansion, financing transactions, subsidiary development, risk management, manufacturing capacity planning and strategy, and shareholder value; (b) for Mr. Stanger, the Company’s 2015 financial results, increased responsibility for the financial affairs of a larger and more complex organization, shareholder relations, oversight of the Company’s cash flow and budgeting practices and structuring, accounting for and financing acquisitions; (c) for Mr. Birkett, the Company’s 2015 financial results, increased responsibility for the financial affairs of a larger and more complex organization, shareholder relations, oversight of the Company’s cash flow and budgeting practices and structuring, accounting for and financing acquisitions; (d) for Mr. Wright, responsibility for management of the Company’s international division, oversight of the Company’s international growth and sales, identifying potential markets for expansion and growth, research and analysis, development of the Company’s international sales strategy, and budget management (e) for Mr. Justin Lampropoulos, management of the Company's marketing department, development and coordination of new product launches, market research and analysis, implementation of sales strategies and performance goals, and budget management; (f) for Mr. Stephens, management of an expanded sales force in the United States, implementation of sales strategies, managing the Company’s marketing department, product launches, market research and analysis, and responsibility for encouraging Company growth; (g) for Ms. Perry, oversight of the worldwide legal obligations, including strategic relations, corporate governance, risk assessment, commercial and acquisition transactions, litigation, intellectual property, subsidiary development, regulatory and compliance, securities and employment matters; and (h) for Mr. Frost, conducting the Company’s worldwide operations within the budget established by the Board, contributing to the integration of operations acquired by the Company and efforts to achieve cost savings in the Company’s operations.
Based on the Compensation Committee’s evaluation, the Compensation Committee approved the NEO base salaries for the year ended December 31, 20152022, which are
also reflected in the Summary Compensation Table
set forthunder “Executive Compensation Tables” below. | | | |
Named Executive Officer | | Base Salary (1) | |
Fred P. Lampropoulos | $ | 1,800,000 | |
Raul Parra | $ | 600,000 | |
Neil W. Peterson | $ | 600,000 | |
Joseph C. Wright | $ | 700,000 | |
Brian G. Lloyd | $ | 600,000 | |
Ronald A. Frost | $ | 403,846 | (2) |
| (1) | The base salary amounts shown above reflect amounts paid to the NEOs during 2022 as reported in the Summary Compensation Table shown on page 59. The annual base salary amounts for fiscal year 2023 as approved by the Compensation Committee and the Board are: Mr. Lampropoulos, $1,890,000; Mr. Parra $630,000; Mr. Peterson, $630,000; Mr. Wright $700,000; and Mr. Lloyd $630,000. |
| (2) | Base salary amount shown for Mr. Frost reflects amounts paid to Mr. Frost for periods prior to his separation from the Company effective August 26, 2022. |
Long-Term Incentive Compensation
Historically, long-term equity awards, in the form of stock options, have been granted at the discretion of the Board and Compensation Committee to the NEOs annually in an effort to provide long-term performance-based compensation, to encourage the NEOs to continue their engagement with the Company throughout the vesting periods, and to align management and shareholder interests. Beginning with our 2019 fiscal year, long-term equity awards were made under the 2018 Incentive Plan, and the Compensation Committee anticipates such awards will continue to be made under the 2018 Incentive Plan. Although we have traditionally made long-term equity incentive awards to our NEOs solely in the form of stock options, during 2019, the Compensation Committee developed a program, which was implemented in 2020 and continued through 2022, to grant to the Company’s executive officers long-term equity awards in the form of stock options and PSUs, with the objective of more closely aligning management and shareholder interests. For 2022, the Board and Compensation Committee awarded stock options to each NEO at a level of approximately 40% of the total target long-term incentive compensation amount for each NEO, with the remaining portion (approximately 60%) of the NEO’s long-term incentive compensation amount awarded in the form of PSUs.
In making awards under our 2018 Incentive Plan, the Board and Compensation Committee consider grant size, the appropriate combination of equity-based awards, the impact of the grant on page 18.our financial performance (as determined in accordance with the requirements of the Financial Accounting Standards Board ASC Topic 718 (ASC Topic 718)), and the corresponding compensation value used by the Company in determining the amount of the awards (which may vary from the ASC Topic 718 expense).
Generally, the amount of long-term equity awards granted to the NEOs has been based upon the Compensation Committee’s assessment of each NEO’s expected future contributions to the Company and other factors. The amount or existence of those awards may also be influenced by external factors such as general economic or industry-specific conditions. The Compensation Committee reviewedgenerally grants long-term equity awards at its regularly-scheduled meeting held in February or May of each year but may vary the date of grant from year to year.
46 | Understand. Innovate. Deliver.TM
Performance Stock Units (PSUs)
During 2019, the Compensation Committee, in consultation with Pearl Meyer, developed a program to grant to the Company’s executive officers equity awards under our 2018 Incentive Plan consisting in part of PSUs, with the objective of more closely aligning management and shareholder interests. Subject to the terms and conditions of PSU award agreements executed with the Company’s executive officers, each executive officer is entitled to receive a payment in shares of Common Stock based upon the target number of shares, as determined by the Compensation Committee and set forth in the executive’s PSU award agreement (Target PSU Shares), and the Company’s performance during the applicable performance period with respect to the achievement of (a) free cash flow (FCF) targets (Free Cash Flow is calculated as GAAP operating cash flow less GAAP capital expenditures, adjusted for the cash effect of any non-GAAP adjustments to the Company’s financial statements, as further defined in the PSU award agreements) and (b) targeted levels of the Company’s relative total shareholder return (rTSR) compared to the Russell 2000 index as further defined in the PSU award agreements (collectively, the Performance Goals).
To reward NEOs for long-term performance, the program developed by the Compensation Committee aims to only grant PSUs with a three-year performance period. However, during the first two years of this new program (2020 and 2021), PSUs with one- and two-year performance periods were granted to help transition into this long-term approach of having PSUs with only a three-year performance period. Commencing in 2022, PSUs awarded to the NEOs have had three-year performance periods.
The actual number of shares of Common Stock to be issued to each executive officer under their PSUs will be determined at the end of each applicable performance period by the Compensation Committee by multiplying (i) the Target PSU Shares for that performance period by (ii) the applicable FCF and rTSR multipliers, based on the Company’s performance during the applicable performance period. The Compensation Committee has the sole authority and discretion to determine the achievement level with respect to the number of shares of Common Stock earned at the end of each performance period. The Compensation Committee consulted with Pearl Meyer in determining the target long-term incentive compensation levels for the NEOs, from which the Compensation Committee established the target number of shares of Common Stock subject to the PSU awards granted to each of the NEOs in 2022.
During 2022, the NEOs were granted PSUs with the following Target PSU Shares:
| |
Named Executive Officer | Target PSU Shares
Three-Year
Performance Period
(2022-2024) | Total Grant Date Fair Value of
Target PSU Shares ($) |
Fred P. Lampropoulos | 12,302 | 917,852 |
Raul Parra | 8,304 | 619,561 |
Neil W. Peterson | 4,613 | 318,112 |
Joseph C. Wright | 4,613 | 344,176 |
Brian G. Lloyd | 4,613 | 344,176 |
Ronald A. Frost (1) | 4,613 | 344,176 |
| (1) | Mr. Frost’s employment with the Company terminated on August 26, 2022, at which time all PSU awards granted to him during 2022 were forfeited. |
The actual shares of Common Stock to be issued upon settlement of the PSUs depend on the Company’s level of performance during the applicable performance period. If the Company’s performance during a performance period does not meet or exceed the applicable FCF Metric Threshold, no shares of Common Stock will be issued or paid out with respect to the PSUs for such performance period. The actual number of shares of Common Stock issued upon settlement of the PSUs will be determined by multiplying the total Target PSU Shares by the applicable FCF Multiplier (determined on an interpolated linear basis if between the threshold and target or between the target and maximum) and the applicable rTSR Multiplier from the tables below:
FCF Metrics and Multiplier
| | |
FCF Metric Level | FCF Metric Amount | FCF Multiplier |
Maximum | 120% of Target | 200% |
Target | 100% of Target | 100% |
Threshold | 80% of Target | 50% |
rTSR Metric and Multiplier
| |
rTSR Metric Level | rTSR Multiplier |
1st (Top) Quartile | 125% |
2nd Quartile | 100% |
3rd Quartile | 100% |
4th (Bottom) Quartile | 75% |
Because our CEO is a substantial shareholder of the Company and, by virtue of his ownership of Common Stock, his financial interests are closely aligned with the NEOs, which included the criteria described above, and established the following annual base salary amounts for the NEOs for the year ended December 31, 2015: Fred P. Lampropoulos, $1,210,000; Kent W. Stanger, $405,000; Bernard J. Birkett, $500,000 (commencing upon his appointment as Chief Financial Officerinterests of theother Company in November 2015); Justin J. Lampropoulos, $500,000; Joseph C. Wright, $450,000; and Ronald Frost, $400,000. At the time of their termination, the annual base salaries of Martin Stephens and Rashelle Perry were each $400,000.
Broad-Based Benefits Programs
The Company offers multiple broad-based benefits programs to its employees, including the NEOs. Those programs include benefits such as health, dental, vision, disability and life insurance, health savings accounts, health care reimbursement accounts, employee stock purchase plan, paid vacation time and discretionary Company contributions to a 401(k) profit sharing plan. Benefits are provided to the Company’s executives in accordance with practicesshareholders, the Compensation Committee
believesdetermined to provide in his PSU award agreements that approximately 55% of the targeted award amount, if any, earned by him at the end of the applicable performance periods would be paid in cash in lieu of the issuance of a portion of the shares of Common Stock that otherwise would have been awarded under his PSU award agreements. Accordingly, the PSUs awarded to our CEO also include a feature providing for the payment of a long-term cash award based on the degree of attainment of the same designated Performance Goals that apply to the award and issuance of shares of Common Stock under the PSUs (each a PSU Cash Incentive). The actual amount of a PSU Cash Incentive to be paid is determined by multiplying the Target Cash Incentive provided in the PSU award agreement (Target Cash Incentive) by the same FCF Multiplier and rTSR Multiplier that are
consistentused to determine the number of shares of Common Stock issued under the PSUs (from the tables above). The Target Cash Incentive included in the CEO’s PSU award is as follows:
|
Target Cash Incentive
Three-Year
Performance Period
(2022-2024) |
$1,000,000 |
If the Company’s performance during a performance period does not meet or exceed the FCF Metric Threshold, no PSU Cash Incentive will be paid with industry standards. respect to the CEO’s PSUs for such performance period.
To be eligible to receive any shares of Common Stock or, if applicable, payment of a PSU Cash Incentive under the PSUs, the executive in question must remain employed by the Company until the second day of the calendar year following the end of the applicable performance period (Vesting Date). However, a pro rata portion may be paid after the end of the applicable performance period if, before the Vesting Date and at least one year after the PSU grant date, the executive (i) ceases employment on account of his or her death or disability (as defined in the PSU award agreements), (ii) is involuntarily terminated from employment without Cause (as defined in the award agreements), or (iii) resigns from employment for Good Reason (as defined in the PSU award agreements).
If the Company experiences a Change in Control (as defined in the award agreements), the NEOs shall receive the total Target PSU Shares (and the CEO shall also receive the Target Cash Incentive) within thirty (30) days of such Change in Control regardless of the level of interim performance attained with respect to the applicable Performance Goals.
48 | Understand. Innovate. Deliver.TM
2022 PSU Award Determinations
The Compensation Committee believes such benefits are a necessary element of compensation
in attracting and retaining employees. In addition, the NEOs receive limited perquisites in an attempt to achieve a competitive pay package as detailed inBoard determined that the Summary Compensation Table.
Deferred Compensation Plan
The Company provides a non-qualified deferred compensation planmaximum level for the
benefit of certain of its highly-compensated management employees, including the NEOs. Under the non-qualified deferred compensation plan, eligible executives may elect in advance of each calendar year to defer up to 100% of their cash salary and bonus compensation earnedFCF Metric had been met with respect to
such year. Amounts deferred are creditedthe Three-Year Performance Period for the PSUs granted in 2020 and the Two-Year Performance Period for the PSUs granted in 2021, as summarized below:FCF Metric Level | 2020 PSU grants -
FCF goals | Actual Non-GAAP FCF
Achieved | FCF Multiplier |
Maximum | $175,200,000 | $389,000,000 | 200% |
Target | $146,000,000 | | |
Threshold | $116,800,000 | | |
| | | |
FCF Metric Level | 2021 PSU grants -
FCF goals | Actual Non-GAAP FCF
Achieved | FCF Multiplier |
Maximum | $228,000,000 | $270,000,000 | 200% |
Target | $190,000,000 | | |
Threshold | $152,000,000 | | |
The Compensation Committee and the Board further determined that the top quartile of the rTSR Metric had been met with respect to an unfunded liability account maintained bythe Three-Year Performance Period for the PSUs granted in 2020 and the middle quartile of the rTSR Metric had been met with respect to the Two-Year Performance Period for the PSUs granted in 2021. Accordingly, the following shares were issued to the NEOs in 2023 under the PSU agreements having two and three-year performance periods as follows with respect to the 2020 and 2021 fiscal years:
| | | | | | |
Named Executive Officer | Year
Granted | Target PSU
Shares | FCF
Metric % | rTSR
Metric % | Total
Payout % | Number of
Shares Issued |
Fred P. Lampropoulos | 2020 2021 | 7,071 4,741 | 200% 200% | 125% 100% | 250% 200% | 17,677 9,482 |
Raul Parra | 2020 2021 | 2,651 1,778 | 200% 200% | 125% 100% | 250% 200% | 6,627 3,556 |
Neil W. Peterson(1) | 2020 2021 | - - | - - | - - | - - | - - |
Joseph C. Wright | 2020 2021 | 2,651 1,778 | 200% 200% | 125% 100% | 250% 200% | 6,627 3,556 |
Brian G. Lloyd | 2020 2021 | 2,651 1,778 | 200% 200% | 125% 100% | 250% 200% | 6,627 3,556 |
| (1) | Mr. Peterson was not awarded PSUs prior to his appointment as Chief Operating Officer in April 2022. |
The Board determined that the maximum level for the FCF Metric had been met with respect to the Target Cash Incentive for the Three-Year Performance Period for the PSUs granted in 2020 and the Two-Year Performance Period for the PSUs granted in 2021. They further determined that, with respect to the Target Cash Incentive, the top quartile of the rTSR Metric had been met with respect to the Three-Year Performance Period for the PSUs granted to Mr. Lampropoulos in 2020 and the middle quartile of the rTSR Metric had been met with respect to the Two-Year Performance Period for the PSUs granted to Mr. Lampropoulos in 2021. Accordingly, the Company paid a PSU Cash Incentive of $1,500,001 to Mr. Lampropoulos in 2022 as follows:
| | | | | |
Named Executive Officer | Year Granted | Target Cash
Incentive | FCF Metric % | rTSR Metric% | PSU Cash
Incentive |
Fred P. Lampropoulos | 2020 2021 | $333,334 $333,333 | 200% 200% | 125% 100% | $833,335 $666,666 |
Stock Options
During 2022, the Compensation Committee granted non-statutory stock option awards to NEOs under the 2018 Incentive Plan in the following amounts:
| | |
Named Executive Officer | Number of Options
Granted (#) | Grant Date Fair Value ($) |
Fred P. Lampropoulos | 48,566 | 1,199,993 |
Raul Parra | 14,570 | 360,003 |
Neil W. Peterson | - | - |
Joseph C. Wright | 8,094 | 199,991 |
Brian G. Lloyd | 8,094 | 199,991 |
Ronald A. Frost (1) | 8,094 | 199,991 |
| (1) | Mr. Frost’s employment with the Company terminated on August 26, 2022, at which time all stock options granted to him during 2022 were forfeited. |
The stock options were awarded at an exercise price of $65.03 per share of Common Stock, the per share market closing price of a share of Common Stock on behalfthe date of grant. The 2022 stock option grants vest and become exercisable over a four-year period on each of the applicable NEO, which account is deemed invested in and earns a rate of return based upon certain notational and self-directed investment options offered under the plan. In its discretion, the Company may elect to credit each eligible participant’s account under the deferred compensation plan with an employer matching contribution; however, the Company has never made such a matching contribution. Participant account balances under the deferred compensation plan are fully-vested and will be paid by the Company to each participant upon retirement or separation from employment, or on other specified dates, in a lump sum or in installments according to a schedule elected in advance by the participant.
The Company and its subsidiaries do not maintain any other executive pension or retirement plans for the NEOs.
Variable Compensation
In general, the Company’s variable compensation programs are designed to align the interestsfirst through fourth anniversaries of the Company’s executive officers, including the NEOs, with the Company’s operating and financial results.
date of grant.Annual Performance Cash Bonuses
It is the Company’s and Executive Bonus PlanOur general practice is to provide our NEOs with the opportunity to earn annual performance bonus compensation under a program that recognizes attainment of key Company objectives. The key objectives that underlie the Company’sour annual incentive compensation programs are established annually by the Compensation Committee based upon recommendations made by the CEO, and may vary between years and between NEOs, but generally include objectives that reward attainment of targeted levels of sales, earnings and gross marginsmargins.
After reviewing our executive incentive compensation practices, and cost savings. based upon the preferences communicated by the institutional shareholder community, in 2019 our Board adopted the Merit Medical Systems, Inc. Executive Bonus Plan (Executive Bonus Plan). The purposes of the Executive Bonus Plan are to motivate and reward our executive employees by making a portion of their annual cash compensation dependent on the achievement of certain pre-determined corporate performance goals, to align the interests of those executives with those of our shareholders, and to attract and retain superior executive employees by providing a competitive bonus program that rewards outstanding performance. The Executive Bonus Plan is administered by the Compensation Committee. Each year, the Compensation Committee establishes a target bonus amount (based on a certain percentage of base salary) and performance criteria and goals for each participating executive officer. At the conclusion of such year, the Compensation Committee will determine the bonus amount payable to each participating executive officer and we will pay to the executive officer the determined bonus amount not later than the 15th day of the third month following the conclusion of the applicable year. In determining the amount of each award to be paid, the Compensation Committee may reduce, eliminate or increase the amount of an Award if, in its discretion, such reduction, elimination or increase is appropriate. The amounts payable to executive officers participating in the Executive Bonus Plan will be determined and allocated based on the performance criteria established for the applicable year, and our performance relative to those criteria.
In setting the performance bonus amounts that an NEO is eligible to earn for achieving specified objectives, the Compensation Committee and the CEO consider bonus and total cash compensation levels for each NEO. BonusAlthough bonus opportunities for achieving objectives are generally established for each NEO based on job scope and contribution; however,contribution, the Compensation Committee retains the discretion to positively or negatively adjust performance bonus amounts based on factors that are not included in the pre-determined Company objectives. ExecutivesNEOs also have the opportunity to earn additional discretionary bonuses for extraordinary performance, as determined by the Compensation Committee.
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The decision as to whether to provide an annual performance bonus program to any NEO for any year, the type and funding of any program offered, and the objectives that underlie any program, are subject to the discretion of the Compensation Committee, based ontaking into account the recommendation of the CEO and industry-specific conditions existing during the applicable year. The Compensation Committee may also exercise positive or negative discretion based on its assessment of the individual NEO’s contribution and accountability for the objectives that are the subject of the bonus recommendations from the CEO and any other factors the Compensation Committee considers relevant.
For 2015,2022, the Compensation Committee, after considering the CEO’s recommendations, set Company performance criteria and bonus amounts for the NEOs. The Compensation Committee established incentive cash performance bonus objectives for the NEOs. The incentive cash performance bonus objectives for the NEOs other than Messrs. Wright, Justin Lampropoulos and Stephens, in the following categories:were based on sales, gross marginsoperating margin (calculated on a GAAP and non-GAAP basis), operating profit (calculated on a GAAP and non-GAAP basis) and earnings per share (calculated on a GAAPnon-GAAP basis) and non-GAAP basis). With respectachievement of the following two equally-weighted operational targets linked to Mr. Wright,our Foundations for Growth program:
| ● | realization of $3.0 million in reduced manufacturing expenses; and |
| ● | generation of $6.0 million in product pricing growth. |
For 2022, the Compensation Committee approvedestablished the performance range for the Executive Bonus Plan to provide for incentive cash performance payments based on the following levels of attainment of each of the individual bonus objectives:
| ● | less than 92.5% attainment = no payout |
| ● | 92.5% attainment = 50% payout |
| ● | 100% attainment = 100% payout |
| ● | 110% attainment = 125% payout |
| ● | 120% attainment = 150% payout (cap) |
The specific 2022 performance bonus objectives based on revenue targets for the Company’s international operations for which Mr. Wright has supervisory responsibility. With respect to Mr. Justin Lampropoulos, the Compensation Committee approved performance bonus objectives based on the Company’s financial performance and sales and marketing targets, including controllable cost objectives, established for the divisions over which Mr. Lampropoulos has supervisory responsibility. With respect to Mr. Stephens, the Compensation Committee approved performance bonus objectives based on sales and marketing targets for the divisions over which Mr. Stephens had supervisory responsibility prior to the termination of his employment. The Compensation Committee believes that the 2015 annual cash bonus objectives provided meaningful motivation to the NEOs and were instrumental in influencing Company performance during 2015.
The specific 2015 goals established by the Compensation Committee for the NEOs (other than Messrs. Wright and Stephens) in the performance bonus categories, together with the level of the Company’sour actual 20152022 performance in those categories, are set forth in the following table
were as follows. | | | | | | | | | |
Performance Bonus Objectives | | 2022 Goals | | 2022 Results | | Target
Weight | | Attainment | |
Sales | | $1,140M | | $1,151M | | 35% | | 35.84% | |
Operating Margin (Non-GAAP) (1) | | 17.25% | | 16.5% | (2) | 30% | | 21.85% | |
Earnings Per Share (Non-GAAP) (3) | | $2.56 | | $2.70 | | 20% | | 22.73% | |
FFG Manufacturing Footprint | | $3M | | Fully Missed | | 7.5% | | 0.00% | |
FFG Pricing Growth | | $6M | | Exceeded | | 7.5% | | 11.25% | (4) |
| | | | | | | | | |
| | | | Total Attainment | 91.67% | |
| (1) | Non-GAAP operating income is calculated by adjusting GAAP operating income for certain items which are deemed by Merit’s management to be outside of core operations and vary in amount and frequency among periods, such as expenses related to acquisitions or other extraordinary transactions, 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, governmental proceedings, and changes in governmental or industry regulations, as well as other items. Non-GAAP operating margin is calculated by dividing non-GAAP operating income by reported net sales. See “Non-GAAP Financial Measures” presented on page 82 of this Proxy Statement for additional information. |
|
| (2) | | | | | |
Performance Category | | 2015 Goals | | 2015 Results | |
| | | | | |
Sales | | $535 - 545 million | | $542.1 million | |
Gross Margins GAAP | | 44.5 - 45.5% | | 43.5% | |
Gross Margins Non-GAAP | | 46.5 - 47.5% | | 45.6% | |
Operating Profit GAAP | | 8.2 - 9.2% | | 6.9% | |
Operating Profit Non-GAAP | | 10.9 - 11.9% | | 11.0% | |
GAAP Earnings Per Share | | $0.63 - $0.67 | | $0.53 | |
Non-GAAP Earnings Per Share(1)
| | $0.85 - $0.89 | | $0.87 | For purposes of determining amounts payable to the NEOs pursuant to the Executive Bonus Plan for 2022, the Compensation Committee exercised negative discretion to set the calculation of operating margin performance at a level equal to the calculation of operating margin performance for purposes of the Company’s Global Bonus Plan for non-executive employees. |
_________________________
| |
(1)(3) | Non-GAAP Earnings Per Share equalsis calculated as GAAP net income excluding intangible amortization expense, acquisitionitems set forth in the definition of non-GAAP operating income above, as well as for expenses related to debt issuance costs, intangible asset impairment charges, contingent consideration benefits,gains or losses on disposal of certain assets, changes in tax regulations, and severance costs.other items. All excluded items are tax affected and total Non-GAAP net income is divided by the weighted average diluted shares outstanding. See “Non-GAAP Financial Measures” presented on page 82 of this Proxy Statement for additional information. |
| (4) | Payout factor capped at 150%. |
Based on the attainment level calculated above and the target bonus amounts set by the Compensation Committee, each NEO received performance-based bonus payments under the Executive Bonus Plan as follows:
| | | | | | | | | |
Named Executive Officer | | 2022
Base Salary | | Performance
Bonus Target | | Attainment | | Performance
Bonus Payment (1) |
Fred P. Lampropoulos | $ | 1,800,000 | | 60% | | 91.67% | | $ | 990,036 |
Raul Parra (2) | | 600,000 | | 50% | | 91.67% | | $ | 275,010 |
Neil W. Peterson | | 600,000 | | 40% | | 91.67% | | $ | 220,008 |
Joseph C. Wright (3) | | 700,000 | | 40% | | 91.67% | | $ | 201,674 |
Brian G. Lloyd | | 600,000 | | 40% | | 91.67% | | $ | 220,008 |
| (1) | These amounts are shown in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table below. |
| (2) | For the year ended December 31, 2022, the Compensation Committee increased the performance bonus target for Mr. Parra, reflecting his anticipated contributions to the achievement of the performance bonus objectives under the Executive Bonus Plan and his role in accomplishing the Company’s Foundations for Growth initiatives. |
| (3) | In connection with Mr. Wright’s appointment as interim Chief Commercial Officer in November 2021, his 2022 base salary was temporarily increased to $700,000; however, his 2022 bonus payment was based on his prior base salary of $550,000. Upon Mr. Wright’s appointment as Chief Commercial Officer in November 2022, his base salary of $700,000 was affirmed. Future payments to Mr. Wright under the Executive Bonus Plan will be based on the affirmed base salary. |
Return of Incentive Compensation (“Clawback Policy”)
The Compensation Committee’s evaluationExecutive Bonus Plan provides to our Board the authority to obtain reimbursement from any participant in the plan if the Board determines that: (a) a significant restatement of the Company’s performancefinancial results for any of the three prior fiscal years is required; and (b) the participant’s award amount would have been lower had the financial results been properly calculated. Such reimbursement shall consist of any portion of any award previously paid to such participant that is greater than the award that would have been paid if calculated based upon the restated financial results. The action permitted to be taken by the Board under the Executive Bonus Plan is in addition to, and not in lieu of, any and all other rights of the performance bonus categories summarized above indicated thatBoard and/or the Company achievedunder applicable law or any other clawback or similar policy of the objectives set for sales, non-GAAP operating profit, and non-GAAP earnings per share. Accordingly,Company. The PSU agreements which are part of the long-term equity incentive program under the 2018 Incentive Plan which our Compensation Committee implemented in 2020 also include a “clawback” feature which permits our Compensation Committee to recover payments from award recipients if (i) the payment was predicated upon achieving financial results that were subsequently the subject of a restatement of the Company’s financial statements filed with the SEC; (ii) the Compensation Committee awardeddetermines that the recipient engaged in intentional misconduct, gross negligence or fraudulent or illegal conduct that caused or substantially caused the need for the restatement; and (iii) a lower amount would have been paid to the NEOs (other than Messrs. Wright, Justin Lampropoulos and Stephens) performance-based bonuses equal to 60%recipient based upon the restated financial results.
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In addition to the cash bonus opportunities under the performance bonus programExecutive Bonus Plan described above, the Compensation Committee with(with the input of the CEOCEO) may choose to reward extraordinary performance and achievements by awarding discretionary bonuses to the NEOs and other executives from time to time that are not part of the annual incentive plan or any other plan. With respectThe Compensation Committee did not determine to pay any discretionary bonuses to the NEOs no such discretionary bonuses awarded based on exceptional performance rather than pre-determined performance criteria were earned for 2015, except that the Compensation Committee awarded to Mr. Birkett a discretionary bonus in the amount of $32,000 for the fiscal year ended December 31, 2015, in recognition of his outstanding effort in managing the transition of the Company’s financial management and accounting functions, and the Compensation Committee awarded to Mr. Stephens and Ms. Perry discretionary bonuses prior to the termination of their employment with the Company. The discretionary bonuses paid to Messrs. Birkett and Stephens and Ms. Perry are reported under the heading “Bonus” in column (d) of the Summary Compensation Table that appears on page 18 below.2022. There is no standing expectation that all (or any) NEOs will receive discretionary performance bonuses in any particular year, and the criteria for such bonuses are not established in advance.
Long-Term Incentive Compensation
Historically, long-term equity awards,Broad-Based Benefits Programs
We offer multiple broad-based benefits programs to our employees, including our NEOs. Those programs include benefits such as health, dental, vision, disability and life insurance, health savings accounts, health care reimbursement accounts, employee stock purchase plan, paid vacation time and discretionary Company contributions to a 401(k) profit sharing plan.
Benefits are provided to our NEOs in the form of stock options, have been granted at the Compensation Committee’s discretion to the NEOs annually in an effort to provide long-term performance-based compensation, to encourage the NEOs to continue their engagementaccordance with the Company throughout the vesting periods, and to align management and shareholder interests. In making awards under the Merit Medical Systems, Inc. 2006 Long-Term Incentive Plan (the "2006 Incentive Plan")practices the Compensation Committee considers grant size,believes are consistent with industry standards. The Compensation Committee believes such benefits are a necessary element of compensation in attracting and retaining employees. In addition, the appropriate combinationNEOs receive limited perquisites in an attempt to achieve a competitive pay package, as further detailed in the Summary Compensation Table.
Deferred Compensation Plan
We provide a non-qualified deferred compensation plan for the benefit of equity-based awards,certain of our highly-compensated executives, including the impactNEOs. Under the non-qualified deferred compensation plan, eligible participants may elect in advance of the grant on the Company’s financial performance, as determined in accordanceeach calendar year to defer up to 100% of their cash salary and bonus compensation earned with the requirements of the Financial Accounting Standards Board ASC Topic 718 (“ASC Topic 718”), and the corresponding compensation value usedrespect to such year. Amounts deferred are credited to an unfunded liability account maintained by the Company in determining the amounton behalf of the awards (which may vary from the ASC Topic 718 expense). Generally, the amountapplicable participant, which account is deemed invested in and earns a rate of long-term equity awards granted to the NEOs has beenreturn based upon certain notational and self-directed investment options offered under the Compensation Committee’s assessment ofplan. In our discretion, we may elect to credit each NEO’s expected future contributionseligible participant’s account under the deferred compensation plan with an employer matching contribution but, to date, we have never elected to do so. Participant account balances under the deferred compensation plan are fully-vested and will be paid by the Company andto each participant upon retirement or separation from employment, or on other factors. The amountspecified dates, in a lump sum or existence of those awards may also be influencedin installments according to a schedule elected in advance by external factors such as general economic or industry-specific conditions. the participant.
The Company generally grants long-term equity awards atand its subsidiaries do not maintain any other executive pension or retirement plans for the regularly-scheduled Compensation Committee meeting held in May or December of each year, but may vary the date of grant from year to year. During 2015, the Compensation Committee granted stock option awards to NEOs under the 2006 Incentive Plan in the following amounts: (a) Mr. Fred Lampropoulos, options to acquire 50,000 shares of Common Stock; (b) Mr. Stanger, options to
acquire 21,800 shares of Common Stock; (c) Mr. Birkett, options to acquire 25,000 shares of Common Stock; (d) Mr. Wright, options to acquire 10,000 shares of Common Stock; (e) Mr. Justin Lampropoulos, options to acquire 20,000 shares of Common Stock; (f) Mr. Frost, options to acquire 20,000 shares of Common Stock; (g) Mr. Stephens, options to acquire 10,000 shares of Common Stock; and (h) Ms. Perry, options to acquire 20,000 shares of Common Stock. Due to the termination of employment of Mr. Stephens and Ms. Perry during the year ended December 31, 2015, the options granted to them during 2015 expired as they were unvested upon the applicable employment termination dates. On January 4, 2016, Mr. Stanger's employment with the Company was terminated, and as such, the options granted to him during 2015 expired as well.
Other
NEOs.Employment Agreements
The Compensation Committee has determined that executive employment agreements are a necessary component of the Company’s compensation package in order to provide competitive compensation arrangements to our NEOs, particularly because such agreements are common in the Company’sour industry. Moreover, the Compensation Committee believes that the change in control provisions within the executive employment agreements helpshelp to retain the NEOs by reducing the personal uncertainty and anxiety that arisesmay arise from the possibility of a future business combination.
The Company has
We have entered into amended and restated employment agreements (collectively, the “Employment Agreements”Employment Agreements) with each of the NEOs. The annual base salaries payablepaid under the Employment Agreements as adjusted for 2015, were $1,210,000 for Mr. Fred P. Lampropoulos; $405,000 for Mr. Stanger; 275,000 EUR for Mr. Birkett (Mr. Birkett’s base salary was adjusted to $500,000 in November 2015 upon his appointment as the Chief Financial Officer of the Company); $450,000 for Mr. Wright; $500,000 for Mr. Justin J. Lampropoulos; $400,000 for Mr. Frost; $400,000 for Mr. Stephens (before the termination of his employment in 2015); and $400,000 for Ms. Perry (before the termination of her employment in 2015). 2022 were:
| | |
Named Executive Officer | Base Salary(1) |
Fred P. Lampropoulos | $ | 1,800,000 |
Raul Parra | $ | 600,000 |
Neil W. Peterson | $ | 526,308 |
Joseph C. Wright | $ | 700,000 |
Brian G. Lloyd | $ | 600,000 |
Ronald A. Frost | $ | 403,846(2) |
| (1) | The base salary amounts shown above reflect amounts paid to the NEOs during 2022 as reported in the Summary Compensation Table shown on page 59. The annual base salary amounts for fiscal year 2023 as approved by the Compensation Committee are: Mr. Lampropoulos, $1,890,000; Mr. Parra $630,000; Mr. Peterson, $630,000; Mr. Wright, $700,000; and Mr. Lloyd, $630,000. |
| (2) | The base salary amount shown for Mr. Frost reflects amounts paid to Mr. Frost for periods prior to his separation from the Company in August 2022. |
The amount of the base salary payable to each NEO may be subject to change based on review by the Compensation Committee on an annual basis. TheAlthough the employment status of each of the NEOs pursuant to the Employment Agreements is “at will”: however,will,” the Employment Agreements provide for mandatory severance payments to each NEO in the event the NEO’s employment with the Company terminates for certain reasons in connection with a “Change in Control.”Control” (as defined below). Those severance arrangements are discussed in greater detail below under the heading “Executive Compensation Tables and Discussion - Tables—Potential Payments upon Termination or Change in Control.”
In addition to the annual base salary described above, the Employment Agreements also provide forallow the NEOs to receive an annual cash bonus payment in an amount to be determined in the sole discretion of the Board (which has delegated that authority to the Compensation Committee); provided, however, that for. Notably, in fiscal years ending after a Change in Control, the annual bonus must be at least equal to an NEO’s average annual cash bonus for the last three full fiscal years ending prior to the Change in Control.
The NEOs (and to the extent applicable, their spouses and eligible dependents) are eligible to participate in all incentive, savings and retirement, medical insurance, prescription insurance, dental insurance, visionhealth insurance, term life insurance, long-term disability insurance, deferred compensation, plan, and employee stock purchase plan and other employee benefit plans, policies or arrangements maintained by the Companywe maintain for itsour employees generally and, at the discretion of the Compensation Committee, in incentive stock optionthe 2018 Incentive Plan and other benefit plans maintained by the Company for Companyour executives.
The terms of the Employment Agreements reflect in part the concern of the Compensation Committee that anya future threatened or actual change in control, of the Company, such as through an acquisition or merger, could cause disruption and harm to the Company in the event of the resulting loss of any of its key executives. The change in control provisions in the Employment Agreements are intended to provide a measure of incentive and security to the Company’sour key executives until the resolution of any such threatened or actual change in control. The
However, the Compensation Committee believes that such agreements should not include provisions that would obligate a potential acquirer of the Company to make large payouts to the NEOs simply because a change in control has occurred. Because of this concern, the occurrence of a change in control event alone will not trigger any payment obligations to the NEOs under their respective Employment Agreements.
Additional change in control payment obligations under the Employment Agreements only arise in the event the NEO’s employment is terminated without “Cause”“without Cause” in connection with the change in control or the NEO resigns “for Good Reason” (as(with each capitalized term in this sentence defined in the Employment Agreements)Agreements and described under the heading “Potential Payments Upon Termination or Change in Control—Employment Agreements” below) in connection with a change in control. Thus, the Compensation Committee regards the employment agreements as “double trigger” change in control agreements.54 | Understand. Innovate. Deliver.TM
Tax Deductibility and Executive Compensation
Section 162(m) (Section 162(m)) of the Code (“Section 162(m)”) imposes a $1.0 million annual limit on the amount that a public company may deduct for compensation paid to thecertain of a company’s officers including its chief executive officer, during a tax yearchief financial officer, or to any of the company’s three other most highly compensated executive officers who are still employed at the end of thefor a tax year. TheFor tax years beginning before 2018, the limit doesdid not apply to
compensation that meetsmet the requirements of Section 162(m) for “qualified performance-based” compensation (i.e., compensation paid only if the executive meets pre-established, objective goals based upon performance criteria approved by the Company’sour shareholders).
Qualified performance-based awards, such as stock options, issued prior to 2018 remain under certain conditions exempt from Section 162(m) even if exercised after 2017. Because of limited guidance regarding this transition rule, we cannot provide any assurance that it will apply to stock options issued prior to 2018 and exercised after 2017.The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) and, attempts, to the extent practical, attempts to implement compensation policies and practices that maximize the potential income tax deductions available to the Company by qualifying such policies and practices as performance-based compensation exempt from the deduction limits of Section 162(m). Company.
In certain situations, the Compensation Committee may approve compensation that will not meetexceed the requirementsdeduction limitations of Section 162(m) in order to ensure competitive levels of total compensation for its executive officers. In such situations, the portion of the compensation payable to the executive officer that exceeds the $1.0 million limit will not be deductible for tax purposes. Although deductibility of executive compensation for tax purposes is generally preferred, tax deductibility is not the soleprimary objective of the Company’sour executive compensation programs. It is the view of theThe Company and the Compensation Committee believe that meeting the compensation objectives described above is more important than the benefit of being able to deduct the compensation for tax purposes.
All compensation paid to the NEOs, other than Mr. Lampropoulos, during fiscal year 20152022 was intended to be deductible under Section 162(m). Although Mr. Lampropoulos’ compensation arrangement for 20152022 exceeded the deduction limits of Section 162(m); however,, the Compensation Committee approved that compensation amount in order to provide to Mr. Lampropoulos with a compensation package that the Compensation Committee considers competitive and in the best interests of the Company and its shareholders. Portions
Additionally, under Sections 280G and 4999 of the amounts paidCode, our NEOs and other Company executives may be subject to Mr. Stephensadditional taxes if they receive payments or benefits in connection with a change of control of the Company that exceed certain prescribed limits (so-called Excess Parachute Payments), and Ms. Perry also exceeded the deduction limitsCompany or its successor may not deduct such Excess Parachute Payments. The Company is not obligated to provide any NEO or other executive with a “gross-up” or other reimbursement payment for any tax liability that the executive might owe as a result of Section 162(m);the application of Sections 280G or 4999 of the Code. Certain potential future payments described in the table captioned “Termination Without Cause or For Good Reason in Connection with a Change in Control” on page 67 may, however, constitute Excess Parachute Payments that the Compensation Committee approved the payment of those amounts because they resulted, in substantial part, from the payment of separation payments to Mr. Stephens and Ms. Perry associated with the termination of their employment with the Company.
Company or its successor could not fully deduct.Compensation Policies and Practices Relating to Risk Management
The Compensation Committee has reviewed the Company’sour company-wide compensation program, in total, which applies to all of the Company’sour full-time employees, including the NEOs. The Compensation Committee has also reviewed our executive compensation practices with Pearl Meyer. Based on the Compensation Committee’s review of the various elements of the Company’sour executive compensation practices and policies, the Compensation Committee believes the Company’sour compensation policies and practices are designed to create appropriate and meaningful incentives for the Company’sour employees without encouraging excessive or inappropriate risk taking. Among other factors,
After undertaking this review, the Compensation Committee consideredcame to the following information:conclusions:
| ● | our compensation policies and practices are designed to include a significant level of long-term compensation, which discourages short-term risk taking; |
The Company’s compensation policies and practices are designed to include a significant level
| ● | the base salaries we provide to our executive employees are generally consistent with salaries paid for comparable positions in our industry, and provide our employees with steady income while reducing the incentive for employees to take risks in pursuit of short-term benefits; |
| ● | our incentive compensation for our NEOs is capped at levels established by the Compensation Committee, which it believes reduces the incentive for excessive risk-taking; |
| ● | we use different performance metrics in our Executive Bonus Plan and for our PSUs, providing balance and mitigating against taking undue risk to meet a single goal; |
| ● | Executive Bonus Plan payments and PSU awards are subject to clawback in the event of a material restatement of our financial results and in certain other cases; |
| ● | our stock-based long-term incentives either vest or are earned over a multi-year period, providing upside potential while at the same time requiring our NEOs to bear the economic risk of the award over the vesting period; |
| ● | we have established and adopted codes of ethics and business conduct, which are designed to reinforce the balanced compensation objectives established by the Compensation Committee; |
| ● | we have adopted equity ownership guidelines for our CEO, which the Compensation Committee believes discourages excessive risk-taking; and |
| ● | our CEO owns a significant number of shares of Common Stock, which serve to align his interests with the interests of the Company’s shareholders and discourages excessive risk-taking. |
The base salaries the Company provides to its employees are generally consistent with salaries paid for comparable positions in the Company’s industry, and provide the Company’s employees with steady income while reducing the incentive for employees to take risks in pursuit of short-term benefits.
The Company’s incentive compensation is capped for some NEOs at levels established by the Compensation Committee, which the Compensation Committee believes reduces the incentive for excessive risk-taking.
The Company has established and adopted codes of ethics and business conduct, which are designed to reinforce the balanced compensation objectives established by the Compensation Committee.
The Company has adopted equity ownership guidelines for its executive officers, which the Compensation Committee believes discourages excessive risk-taking.
Based on the review outlined above, the CompanyCompensation Committee has further concluded that the risks arising from itsour compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company.
Compensation Committee Consideration of Shareholder Advisory Votes
At the Company’s annual meeting of shareholders held on May 21, 2015, the Company submitted the compensation of its executive officers to the Company’s shareholders in a non-binding vote. The Company’s executive compensation program received the support of the holders of more than 90% of the shares represented at the meeting. The Compensation Committee considered the results of the 2015 vote and views the outcome as evidence of strong shareholder support of the Company’s executive compensation decisions and policies. The Compensation Committee will continue to review future shareholder voting results, including the voting results with respect to “Proposal 2 - Advisory Vote on Executive Compensation” described in this Proxy
Statement, and determine whether to make any changes to the Company’s executive compensation program in light of such voting results.
COMPENSATION COMMITTEE REPORT
ReportThe Compensation Committee establishes and oversees the design and function of the Company’sour executive compensation programs.
The undersigned members of the Compensation Committee have reviewed and discussed the foregoing Compensation Discussion and Analysis with the management of the Company and recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement for the 2016 Annual Meeting.
Statement. |
| |
| COMPENSATION COMMITTEE |
| |
| Compensation Committee: A. Scott Anderson Chairman(Chair) F. Ann Millner. Ed. D. Lonny J. Carpenter Stephen C. Evans James T. Hogan |
56 | Understand. Innovate. Deliver.TM
PROPOSAL 2: Advisory Vote on Executive Compensation | The Board unanimously recommends a vote FOR this proposal |
|
Section 14A of the Exchange Act (Section 14A), which was enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, requires that we provide shareholders with the opportunity to vote on an advisory (non-binding) resolution to approve the compensation of the NEOs disclosed in this Proxy Statement (colloquially referred to as a “Say-on-Pay” proposal).
Accordingly, the following resolution will be submitted to our shareholders for approval at the Annual Meeting:
|
| Franklin J. Miller, M.D. |
| Michael E. Stillabower, M.D.“RESOLVED, that the Company’s shareholders APPROVE, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s proxy statement for the 2023 Annual Meeting of Shareholders, pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosures.” |
As described above under the heading “Compensation Discussion and Analysis,” the Board believes our compensation of the NEOs achieves the primary goals of:
| ● | focusing our executives on achieving or exceeding measurable performance targets; |
| ● | encouraging continuation of our entrepreneurial spirit; |
| ● | attracting and retaining highly-qualified and motivated executives; |
| ● | promoting our guiding principles for adherence to a high ethical environment, as well as health and safety standards; and |
| ● | aligning management compensation with shareholder value. |
The Board encourages shareholders to review in detail the Compensation Discussion and Analysis beginning on page 40 of this Proxy Statement and the executive compensation tables beginning on page 59 of this Proxy Statement. In light of the information set forth in such sections, the Board believes the compensation of the NEOs for the fiscal year ended December 31, 2022 was fair and reasonable and that our compensation programs and practices are in the best interests of the Company and our shareholders.
The advisory vote on this Say-on-Pay resolution is not intended to address any specific element of compensation; rather, the vote relates to all aspects of the compensation of the NEOs, as described in this Proxy Statement. While this vote is only advisory in nature, which means that the vote is not binding on the Company, the Board or the Compensation Committee (which is composed solely of independent directors), the Board and Compensation Committee value the opinion of our shareholders and will consider the outcome of the vote when addressing future executive compensation arrangements.
At our annual meeting of shareholders held on May 24, 2017, our shareholders voted on an advisory basis with respect to the frequency of future advisory votes on executive compensation. Holders of approximately 77% of the shares represented at that meeting expressed their preference for an annual advisory vote. Accordingly, we have conducted annual advisory votes on executive compensation since that meeting. The frequency of future advisory votes on executive compensation is the subject of Proposal 3 to be considered by the Company’s shareholders at the Annual Meeting.
Approval of the resolution above (on a non-binding, advisory basis) requires that the number of votes cast at the Annual Meeting, in person or by proxy, in favor of the resolution exceeds the number of votes cast in opposition to the resolution.
EXECUTIVE COMPENSATION TABLES AND DISCUSSION
Summary Compensation Table for 2015
The following Summary Compensation Table summarizes the total compensation earned by each of the NEOs for the years indicated
.
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| | | | | | | | | | | | | | | | | | | | |
(a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) |
| | | | | Salary | | Bonus | | Stock Awards | | Non-Equity Incentive Plan Compensation | | All Other Compensation | | Total |
| Name and Position | | Year | | ($) | | ($) (1) | | ($) (2) | | ($) (1) | | ($) | | ($) |
| Fred P. Lampropoulos | | 2015 | | 1,206,924 |
| | — |
| | 286,720 |
| | 449,999 |
| | 8,825 |
| (4)(5) | 1,952,468 |
|
| Chairman of the Board, | | 2014 | | 1,108,654 |
| | — |
| | 199,535 |
| | — |
| | 114,081 |
| (3)(4) | 1,422,270 |
|
| Chief Executive Officer | | 2013 | | 887,692 |
| | — |
| | — |
| | — |
| | 35,094 |
| (3)(4) | 922,786 |
|
| and President | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Kent W. Stanger | | 2015 | | 405,000 |
| | — |
| | 125,010 |
| | — |
| | 5,963 |
| (4) | 535,973 |
|
| Chief Financial Officer, | | 2014 | | 403,654 |
| | — |
| | 39,907 |
| | 50,000 |
| | 5,850 |
| (4) | 499,411 |
|
| Secretary, Treasurer | | 2013 | | 355,000 |
| | 25,000 |
| | — |
| | — |
| | 4,426 |
| (4)(5) | 384,426 |
|
| and Director | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Bernard J. Birkett | | 2015 | | 296,211 |
| | 32,000 |
| | 143,360 |
| | 48,000 |
| | 132,915 |
| (8) | 652,486 |
|
| Chief Financial Officer | | | | | | | | | | | | | (6) | |
| | | | | | | | | | | | | | | |
| Joseph C. Wright | | 2015 | | 466,289 |
| | — |
| | 57,344 |
| | 187,217 |
| | 7,477 |
| (4)(5) | 718,327 |
|
| President, Merit | | | | | | | | | | | | | (6) | |
| International | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Justin J. Lampropoulos | | 2015 | | 456,009 |
| | — |
| | 114,688 |
| | 60,000 |
| | 42,366 |
| (3)(4) | 673,063 |
|
| Executive Vice President | | | | | | | | | | | | | (6) | |
| Sales, Marketing | | | | | | | | | | | | | | |
| and Strategy | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Ronald A. Frost | | 2015 | | 384,615 |
| | — |
| | 114,688 |
| | 48,000 |
| | 7,355 |
| (4)(5) | 554,658 |
|
| Chief Operating Officer | | 2014 | | 317,500 |
| | — |
| | 99,768 |
| | 60,000 |
| | 5,850 |
| (4) | 483,118 |
|
| | | | | | | | | | | | | | (6) | |
| | | | | | | | | | | | | | | |
| Martin R. Stephens | | 2015 | | 126,154 |
| | 12,500 |
| | 57,344 |
| | — |
| | 651,396 |
| (3)(4)(5)(7) | 847,394 |
|
| Executive Vice President | | 2014 | | 400,000 |
| | — |
| | 39,907 |
| | 240,000 |
| | 25,818 |
| (3)(4)(5) | 705,725 |
|
| of Sales (former) | | 2013 | | 400,000 |
| | 65,000 |
| | — |
| | 200,000 |
| | 17,498 |
| (3)(4)(5) | 682,498 |
|
| | | | | | | | | | | | | | | |
| Rashelle Perry | | 2015 | | 384,616 |
| | 2,000 |
| | 114,688 |
| | — |
| | 790,977 |
| (3)(4)(7) | 1,292,281 |
|
| Chief Legal Officer | | 2014 | | 398,654 |
| | 2,000 |
| | 99,768 |
| | 60,000 |
| | 5,850 |
| (4) | 566,272 |
|
| (former) | | 2013 | | 350,000 |
| | 55,000 |
| | 37,898 |
| | — |
| | 2,753 |
| (4) | 445,651 |
|
| | | | | | | | | | | | | | | |
| | Salary | Bonus | Stock
Awards | Option
Awards | Non-Equity
Incentive Plan
Compensation | All Other
Compensation | Total |
Name and Position | Year | ($) | ($)(1) | ($)(2)(3)(4) | ($)(4)(5) | ($)(6) | ($)(7)(8)(9) | ($)(3) |
Fred P. Lampropoulos | 2022 | 1,800,000 | — | 4,130,104 | 1,199,993 | 990,036 | 8,700 | 8,128,833 |
Chair of the Board, CEO and President | 2021 | 1,800,000 | 458,501 | 2,946,700 | 1,200,059 | 1,131,840 | — | 7,537,100 |
| 2020 | 1,736,538 | — | 3,778,119 | 1,198,851 | 990,000 | — | 7,703,508 |
| | | | | | | | |
Raul Parra | 2022 | 600,000 | — | 1,239,123 | 360,003 | 275,010 | 53,339 | 2,527,475 |
Chief Financial Officer and Treasurer | 2021 | 600,000 | 101,889 | 491,090 | 200,020 | 251,520 | 57,980 | 1,702,499 |
| 2020 | 586,154 | — | 693,623 | 199,804 | 210,000 | 66,735 | 1,756,316 |
| | | | | | | | |
Neil W. Peterson | 2022 | 526,308 | — | 636,225 | — | 220,008 | 50,309 | 1,432,850 |
Chief Operating Officer (10) | 2021 | — | — | — | — | — | — | — |
| 2020 | — | — | — | — | — | — | — |
| | | | | | | | |
Joseph C. Wright | 2022 | 700,000 | — | 688,352 | 199,991 | 201,674 | 68,920 | 1,858,937 |
Chief Commercial Officer | 2021 | 573,077 | 93,398 | 491,090 | 200,020 | 230,560 | 51,704 | 1,639,849 |
| 2020 | 537,307 | — | 693,623 | 199,804 | 211,501 | 43,075 | 1,685,310 |
| | | | | | | | |
Brian G. Lloyd | 2022 | 600,000 | — | 688,352 | 199,991 | 220,008 | 28,653 | 1,737,004 |
Chief Legal Officer, Corporate Secretary | 2021 | 600,000 | 101,889 | 491,090 | 200,020 | 251,520 | 11,885 | 1,656,404 |
| 2020 | 586,154 | — | 693,623 | 199,804 | 210,000 | — | 1,689,581 |
| | | | | | | | |
Ronald A. Frost | 2022 | 403,846 | — | 688,352 | 199,991 | — | 1,607,252 | 2,899,441 |
Former Chief Operating Officer (10) | 2021 | 600,000 | 101,889 | 491,090 | 200,020 | 251,520 | 69,230 | 1,713,749 |
| 2020 | 586,154 | — | 693,623 | 199,804 | 210,000 | 69,231 | 1,758,812 |
| | | | | | | | |
| |
| (1) | Bonus amounts in column (d) represent discretionary bonuses not based solely upon pre-determined performance criteria. |
| (2) | Stock Awards include the aggregate grant date fair value of PSUs granted to the NEOs in the year shown under our 2018 Incentive bonuses underPlan computed in accordance with ASC Topic 718, including the Company’s performance-based annual bonus planportion of Mr. Lampropoulos’ PSU payable in cash (i.e., his PSU Cash Incentive). Such amounts have been calculated in accordance with current financial statement reporting guidance, using the same assumptions the Company used on the grant date for financial statement reporting purposes with respect to our long-term incentive plans, which may not be indicative of the realized value of the awards when they vest. The grant-date fair value of PSUs granted to Mr. Lampropoulos in 2022 includes $1,835,704 of shares and $2,294,400 of potential PSU Cash Incentive, in 2021 includes $1,309,633 of shares and $1,637,067 of potential PSU Cash Incentive, and in 2020 includes $1,849,806 of shares and $1,928,313 of potential PSU Cash Incentive. See footnote 1 to the Grants of Plan-Based Awards table for additional details. The table below shows the Free Cash Flow multiplier that was |
58 | Understand. Innovate. Deliver.TM
| assessed as probable as of each grant date and the grant date fair value of stock awards based on pre-established performance criteria appear in column (f) under the heading “Non-Equity Incentive Plan Compensation.”maximum potential attainment. |
Description | 2022 | 2021 | 2020 |
Probable Grant-Date Free Cash Flow Multiplier | 200% | 150% | 200% |
Maximum Grant-date fair value of shares-Mr. F. Lampropoulous | $1,835,704 | $1,746,178 | $1,849,806 |
Maximum Grant-date fair value of PSU cash incentive -Mr. F. Lampropoulous | $2,294,400 | $2,182,755 | $1,928,313 |
Maximum Grant-date fair value of shares-Parra | $1,239,123 | $654,786 | $693,623 |
Maximum Grant-date fair value of shares-Messrs. Lloyd, Wright and Frost Maximum Grant-date fair value of shares-Peterson | $688,352 $636,225 | $654,786 - | $693,623 - |
| (3) | On June 22, 2020, we amended the one-year performance period PSU award agreements granted in 2020 for all NEOs to reduce the maximum FCF Multiplier and the FCF Metric amount. There was no incremental fair value recorded in accordance with ASC Topic 718 in connection with this modification, as this amendment reduced the grant date fair value of equity classified awards by $307,137 for Mr. Lampropoulos, and by $115,176 for Messrs. Parra, Wright, Lloyd and Frost. Because ASC Topic 718 does not permit a reduction in compensation cost below the value established at the grant date for equity classified awards, pursuant to the rules of the SEC, this column reports the grant date fair value of the original PSUs and does not reflect the reduction in grant date fair value of the PSUs resulting from the amendments. These amendments also reduced the fair value of the PSU Cash Incentive to Mr. Lampropoulos under his PSU by $383,894, which is reflected in the table above, as ASC Topic 718 does permit a reduction in compensation cost below the grant date fair value for liability classified awards.PSUs granted in 2020 with two and three-year performance periods were not amended. |
(2)(4) | TheAssumptions used in the calculation of these amounts for 2022, 2021, and 2020 are included in column (e)footnotes to our audited consolidated financial statements for the years ended December 31, 2022, 2021, and 2020 (which are included in our Annual Reports on Form 10-K filed with the SEC on February 24, 2023, March 1, 2022 and March 1, 2021, respectively). |
| (5) | Option awards reflect the aggregate grant date fair value of the awardsoptions granted to the NEOs in the year shown under our 2018 Incentive Plan, computed in accordance with FASB ASC Topic 718. Such amounts have been calculated in accordance with current financial statement reporting guidance, using the same assumptions the Company has used for financial statement reporting purposes with respect to our long-term incentive plans. |
statement reporting purposes with respect to the Company’s long-term incentive plans. Assumptions used in the calculation of these amounts for 2015, 2014, and 2013 are included in footnotes to the Company’s audited consolidated financial statements for the years ended December 31, 2015, 2014, and 2013 which consolidated financial statements are included in the Company’s Annual Reports on Form 10-K filed with the Securities and Exchange Commission on February 29, 2016, March 5, 2015, and March 12, 2014, respectively. Due to the termination of employment of Mr. Stephens and Ms. Perry during the year ended December 31, 2015, the options granted to them during 2015 expired as they were unvested upon the applicable employment termination dates. On January 4, 2016, Mr. Stanger's employment with the Company was terminated and, as such, the options granted to him during 2015 expired as well.
| (6) | Annual Incentive bonuses under our Executive Bonus Plan based on pre-established performance criteria appear in the Non-Equity Incentive Plan Compensation column. Based upon the Company’s achievement of goals established by the Compensation Committee, the Compensation Committee determined to award and pay the annual cash bonus at 91.67%, 104.8% and 100% of the target payment amount for each of the NEOs for 2022, 2021 and 2020, respectively. Payment was made in 2023, 2022, and 2021 respectively. |
(3)(7) | Amounts include vacation benefits paid to the NEOs in cash in lieu of vacation benefits: (i) benefits, as follows: |
| ● | for the year ended December 31, 2015, in the amounts of $10,8172022: $44,639 for Mr. Justin Lampropoulos, $18,333Parra; $41,609 for Mr. Stephens,Peterson; $60,220 for Mr. Wright; $20,781 for Mr. Lloyd; and $185,014$173,552 for Ms. Perry; (ii) Mr. Frost. |
| ● | for the year ended December 31, 2014, in the amounts of $108,2312021: $57,980 for Mr. Fred Lampropoulos and $15,385Parra; $51,554 for Mr. StephensWright; $11,885 for Mr. Lloyd; and (iii) $69,230 for Mr. Frost. |
| ● | for the year ended December 31, 2013, in the amounts of $29,3562020: $66,735 for Mr. Fred Lampropoulos and $15,385Parra; $43,075 for Mr. Stephens. Also,Wright; and $69,231 for the year ended December 31, 2015, Mr. Justin Lampropoulos received $25,586 in sales commissions.Frost. |
| (8) | |
(4) | Amounts shown also include matching contributions made by the Company for the benefit of the NEOs to the Company’s 401(k) Plan in the following amounts: (i) |
| ● | for the year ended December 31, 2015:2022: $8,700 for each of Messrs. Lampropoulos, Parra, Wright, Peterson, and Frost, and $7,872 for Mr. Fred Lampropoulos, $5,963 ; Mr. Stanger, $5,963; Mr. Wright, $5,963; Mr. Justin Lampropoulos, $5,963; Mr. Frost, $5,963; Mr. Stephens, $5,963; and Ms. Perry, $5,963; (ii) Lloyd. |
| ● | for the year ended December 31, 2014:2021: $150 for Mr. Fred Lampropoulos, $5,850; Mr. Stanger, $5,850; Mr. Stephens, $5,850; Ms. Perry, $5,850; and Mr. Frost, $5,850; and (iii) for the year ended December 31, 2013: Mr. Fred Lampropoulos, $5,738; Mr. Stanger, $3,031; Mr. Stephens, $1,456; Ms. Perry, $2,753.Wright. |
| (9) | |
(5) | Amounts shown also reflect the incremental travel expenses incurred byinclude a severance payment made to Mr. Frost in 2022 for $1,425,000. |
| (10) | Mr. Peterson became an executive officer of the Company for spouses of the following NEOs who attended the Company’s off-site President’s Award recognition event: (i) for the year ended December 31, 2015, Mr. Fred Lampropoulos in the amount of $2,862; Mr. Wright, $1,514;on April 19, 2022. Mr. Frost $1,392; and Mr. Stephens, $2,100; (ii) for the year ended December 31, 2014, Mr. Stephens in the amountresigned his position as an executive officer effective as of $4,583; and (iii) for the year ended December 31, 2013, Mr. Stanger in the amount of $1,395 and Mr. Stephens in the amount of $657. |
| |
(6) | Mr. Frost became an NEO on January 1, 2014. Mr. Justin Lampropoulos became an NEO on May 22, 2015. Mr. Wright became an NEO on May 22, 2015. Mr. Birkett became an NEO on November 4, 2015.April 19, 2022. The foregoing table only presents compensation received for periodsthe years in which an NEO acted in thatan executive officer capacity. As such, there is no compensation disclosure provided for Mr. Frost for the year ended December 31, 2013, or for Mr. Justin Lampropoulos, Mr. Wright, or Mr. Birkett for the years ended December 31, 2014 and 2013. |
| |
(7) | Mr. Stephens was terminated as an employee on April 14, 2015. Ms. Perry was terminated as an employee on December 1, 2015. The foregoing table sets forth the amount of compensation each NEO received during 2015 for the portion of the year he or she was employed in his or her capacities as an NEO. Mr. Stephens received $625,000 in discretionary severance payments during 2015 in accordance with his separation agreement. Ms. Perry received $600,000 in discretionary severance payments in accordance with her separation agreement. The severance amounts have been included in the column (g). |
| |
(8) | Pursuant to Mr. Birkett's employment agreement, the Company paid the following expenses in connection with Mr. Birkett's relocation from Ireland to the United States: $12,596 for an automobile allowance, $32,085 in educational expenses, $38,700 for a housing allowance, and $28,703 for relocation and travel expenses. A portion of the amounts reflected in this table for Mr. Birkett was calculated using amounts paid to him in Euros, then converted using the average EUR/USD published foreign exchange rates. |
Grants of Plan-Based Awards for 2015
The following table sets forth information concerning non-equity based grantsplan-based awards to the NEOs during the year ended December 31, 2015.
|
| | | | | | | | | | | | | | | | | |
| Name Granted | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($) (1) | | All other Option Awards: Number of Securities Underlying Options Granted (#) (2) | | Exercise Price of Option Awards ($/sh) (3) | | Grant Date Fair Value of Options Awards ($) |
| | | | | | | | | | | |
| Fred P. Lampropoulos | | N/A | | $ | 625,000 |
| | | | | | |
| | | 2/13/2015 | | | | 50,000 |
| | $ | 17.27 |
| | $ | 286,720 |
|
| Kent W. Stanger | | N/A | | $ | — |
| | | | | | |
| | | 2/13/2015 | | | | 21,800 |
| | $ | 17.27 |
| | $ | 125,010 |
|
| Bernard J. Birkett | | N/A | | $ | 114,393 |
| | | | | | |
| | | 2/13/2015 | | | | 25,000 |
| | $ | 17.27 |
| | $ | 143,360 |
|
| Joseph C. Wright | | N/A | | $ | 200,000 |
| | | | | | |
| | | 2/13/2015 | | | | 10,000 |
| | $ | 17.27 |
| | $ | 57,344 |
|
| Justin J. Lampropoulos | | N/A | | $ | 100,000 |
| | | | | | |
| | | 2/13/2015 | | | | 20,000 |
| | $ | 17.27 |
| | $ | 114,688 |
|
| Ronald A. Frost | | N/A | | $ | 80,000 |
| | | | | | |
| | | 2/13/2015 | | | | 20,000 |
| | $ | 17.27 |
| | $ | 114,688 |
|
| Martin R. Stephens | | N/A | | $ | — |
| | | | | | |
| | | 2/13/2015 | | | | 10,000 |
| | $ | 17.27 |
| | $ | 57,344 |
|
| Rashelle Perry | | N/A | | $ | — |
| | | | | | |
| | | 2/13/2015 | | | | 20,000 |
| | $ | 17.27 |
| | $ | 114,688 |
|
Named Executive Officer | | Grant Date | | Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards ($) | | Estimated Possible Payouts Under
Equity Incentive Plan Awards (#) (3) | | All other
Option Awards:
Number of
Securities
Underlying
Options
Granted (#) (4) | | Exercise
Price of
Option
Awards
($/sh) (5) | | Grant Date
Fair Value of
Stock and
Option
Awards
($) (4)(6) |
| | | | Threshold | Target | Maximum | | Threshold | Target | Maximum | | | | | | |
Fred P. Lampropoulos | | 2/28/2022 (1) | | 375,000 | 1,000,000 | 2,500,000 | | 4,613 | 12,302 | 30,755 | | — | | — | | 4,130,104 |
| | N/A (2) | | 540,000 | 1,080,000 | 1,620,000 | | — | — | — | | — | | — | | — |
| | 2/28/2022 | | — | — | — | | — | — | — | | 48,566 | | 65.03 | | 1,199,993 |
Raul Parra | | 2/28/2022 | | — | — | — | | 3,114 | 8,304 | 20,760 | | — | | — | | 1,239,123 |
| | N/A (2) | | 150,000 | 300,000 | 450,000 | | — | — | — | | — | | — | | — |
| | 2/28/2022 | | — | — | — | | — | — | — | | 14,570 | | 65.03 | | 360,003 |
Neil W. Peterson | | 5/19/2022 | | — | — | — | | 1,730 | 4,613 | 11,533 | | — | | — | | 636,225 |
| | N/A (2) | | 120,000 | 240,000 | 360,000 | | — | — | — | | — | | — | | — |
| | N/A | | — | — | — | | — | — | — | | — | | — | | — |
Joseph C. Wright | | 2/28/2022 | | — | — | — | | 1,730 | 4,613 | 11,533 | | — | | — | | 688,352 |
| | N/A (2) | | 110,000 | 220,000 | 330,000 | | — | — | — | | — | | — | | — |
| | 2/28/2022 | | — | — | — | | — | — | — | | 8,094 | | 65.03 | | 199,991 |
Brian G. Lloyd | | 2/28/2022 | | — | — | — | | 1,730 | 4,613 | 11,533 | | — | | — | | 688,352 |
| | N/A (2) | | 120,000 | 240,000 | 360,000 | | — | — | — | | — | | — | | — |
| | 2/28/2022 | | — | — | — | | — | — | — | | 8,094 | | 65.03 | | 199,991 |
Ronald A. Frost (7) | | 2/28/2022 | | — | — | — | | 1,730 | 4,613 | 11,533 | | — | | — | | 688,352 |
| | N/A (2) | | 120,000 | 240,000 | 360,000 | | — | — | — | | — | | — | | — |
| | 2/28/2022 | | — | — | — | | — | — | — | | 8,094 | | 65.03 | | 199,991 |
| |
| (1) | The PSU agreements with Mr. Lampropoulos include Target PSU Shares and a Target Cash Incentive. Both the Target PSU Shares and Target Cash Incentive are considered part of an equity incentive plan and are accounted for under ASC Topic 718 because they are based, at least in part, on the price of our shares of Common Stock. However, because there is not a stated number of shares underlying the PSU Cash Incentive, the threshold, target, and maximum payments of the PSU Cash Incentive under Mr. Lampropoulos PSUs have been included in this table under the non-equity incentive plan awards column. These amounts are based upon achievement of the performance measures with respect to the PSU awards granted in 2022. The threshold amount assumes threshold FCF performance and application of the 4th (bottom) quartile rTSR multiplier, and the maximum amount assumes maximum FCF performance and application of the 1st (top) quartile rTSR multiplier. See the section “Performance Stock Units (PSUs)” on page 48 for additional details regarding the PSUs, and footnote 2 to the Summary Compensation Table. |
| (2) | Listed amounts reflect target and maximumthreshold incentive performance bonuses for 2015. No separate threshold bonus targets were set for2022 under our Executive Bonus Plan. Target amounts also reflect the maximum possible payout. For the year ended December 31, 2015. Performance-based bonuses earned for 2015 are listed2022, each of Messrs. Lampropoulos, Parra, Wright, Lloyd and Peterson received 91.67% of the targeted level of their incentive annual performance bonus, as discussed above and as shown in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table set forthTable. |
| (3) | Listed amounts reflect threshold, target, and maximum number of shares the named executive officer is eligible to receive based upon achievement of the performance measures with respect to performance stock units granted in 2022. See the section “Performance Stock Units (PSUs)” on page 18 above. Mr. Fred Lampropoulos earned a performance-based bonus48 for additional details regarding the PSUs. The threshold amount assumes threshold FCF performance and application of $449,999 for 2015; Mr. Birkett earned a performance-based bonusthe 4th (bottom) quartile rTSR multiplier, and the maximum amount assumes maximum FCF performance and application of $48,000 for 2015; Mr. Wright earned a performance-based bonus of $187,217 for 2015; Mr. Justin Lampropoulos earned a performance-based bonus of $60,000 for 2015; and Mr. Frost earned $48,000 for 2015. During 2015, the employment of Mr. Stephens and Ms. Perry was terminated. On January 4, 2016, the employment of Mr. Stanger was terminated. As such, those officers were not paid performance bonuses for the year ended December 31, 2015.1st (top) quartile rTSR multiplier. |
| (4) | |
(2) | Stock Optionsoptions are NSOs and vest at the rate of 20%25% per year over fivefour years on the first through the fifthfourth anniversaries of the date of the grant. Due to the termination of employment of Mr. Stephens and Ms. Perry during the year ended December 31, 2015, the options granted to them during 2015 expired as they were unvested upon the applicable employment termination dates. On January 4, 2016, Mr. Stanger's employment was terminated, and as such, the options granted to him during 2015, which were all unvested, expired. |
| (5) | |
(3) | The exercise price per share underfor each stock option is the market closing price on the date of the grant. |
2060 | Understand. Innovate. Deliver.TM
| (6) | The grant-date fair value of PSUs granted to Mr. Lampropoulos includes $1,835,704 of shares and $2,294,400 potential PSU Cash Incentive. See footnote 1 for additional details regarding the PSU cash incentive. |
| (7) | Mr. Frost’s employment with the Company terminated on August 26, 2022, at which time all PSU awards and options granted to him during 2022 were forfeited. |
Outstanding Equity Awards at Year-End 2015
Year EndThe following table provides information on the holdings of stock options and other stock awards by the NEOs as of December 31,
2015. |
| | | | | | | | | | | | |
| | | | | Number of Securities | | Number of Securities | | Option | | Option |
| | | Grant | | Underlying Unexercised | | Underlying Unexercised | | Exercise | | Expiration |
| Name | | Date | | Options Exercisable | | Options Unexercisable (1) | | Price ($) | | Date |
| Fred P. Lampropoulos | | 9/26/2009 | | 25,000 |
| | — |
| | 13.82 | | 9/26/2016 |
| | | 8/11/2011 | | 96,000 |
| | 24,000 |
| | 13.75 | | 8/11/2018 |
| | | 10/4/2014 | | 10,000 |
| | 40,000 |
| | 12.06 | | 10/4/2021 |
| | | 2/13/2015 | | — |
| | 50,000 |
| | 17.27 | | 2/13/2022 |
| Kent W. Stanger | | 9/26/2009 | | 25,000 |
| | — |
| | 13.82 | | 9/26/2016 |
| | | 8/11/2011 | | 64,000 |
| | 16,000 |
| | 13.75 | | 8/11/2018 |
| | | 10/4/2014 | | 2,000 |
| | 8,000 |
| | 12.06 | | 10/4/2021 |
| | | 2/13/2015 | | — |
| | 21,800 |
| | 17.27 | | 2/13/2022 |
| Bernard J. Birkett | | 8/11/2011 | | 8,000 |
| | 2,000 |
| | 13.75 | | 8/11/2018 |
| | | 10/4/2014 | | 2,000 |
| | 8,000 |
| | 12.06 | | 10/4/2021 |
| | | 2/13/2015 | | — |
| | 25,000 |
| | 17.27 | | 2/13/2022 |
| Joseph C. Wright | | 8/11/2011 | | 16,000 |
| | 4,000 |
| | 13.75 | | 8/11/2018 |
| | | 7/31/2013 | | 4,000 |
| | 6,000 |
| | 13.14 | | 7/31/2020 |
| | | 10/4/2014 | | 5,000 |
| | 20,000 |
| | 12.06 | | 10/4/2021 |
| | | 2/13/2015 | | — |
| | 10,000 |
| | 17.27 | | 2/13/2022 |
| Justin J. Lampropoulos | | 8/11/2011 | | 7,000 |
| | 7,000 |
| | 13.75 | | 9/26/2016 |
| | | 7/31/2013 | | 2,000 |
| | 6,000 |
| | 13.14 | | 8/11/2018 |
| | | 10/4/2014 | | 5,000 |
| | 20,000 |
| | 12.06 | | 10/4/2021 |
| | | 2/13/2015 | | — |
| | 20,000 |
| | 17.27 | | 2/13/2022 |
| Ronald A. Frost | | 8/11/2011 | | 12,000 |
| | 3,000 |
| | 13.75 | | 8/11/2018 |
| | | 7/31/2013 | | 4,000 |
| | 6,000 |
| | 13.14 | | 7/31/2020 |
| | | 10/4/2014 | | 5,000 |
| | 20,000 |
| | 12.06 | | 10/4/2021 |
| | | 2/13/2015 | | — |
| | 20,000 |
| | 17.27 | | 2/13/2022 |
| Martin R. Stephens | | 8/11/2011 | | 12,000 |
| | — |
| | 13.75 | | 8/11/2018 |
| Rashelle Perry | | 8/11/2011 | | 32,000 |
| | — |
| | 13.75 | | 8/11/2018 |
| | | 7/31/2013 | | 4,000 |
| | — |
| | 13.14 | | 7/31/2020 |
| | | 10/4/2014 | | 5,000 |
| | — |
| | 12.06 | | 10/4/2021 |
| | Option Awards | | Stock Awards |
| | Number of
Securities Underlying
Unexercised Options
Exercisable | Number of
Securities Underlying
Unexercised Options
Unexercisable (1) | | | | Number of
Shares or Units
of Stock that
Have Not
Vested (2)(3) | Market Value of
Shares or Units
of Stock that
Have Not
Vested (2)(3) | Equity
Incentive Plan Awards: Number of Unearned Shares,
Units or Other
Rights That Have
Not Vested (#) (4) | Equity
Incentive Plan Awards: Market
Value of Unearned Shares,
Units or Other
Rights That Have
Not Vested ($) (4) |
Fred P. Lampropoulos | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| 2/26/2020 | 50,168 | 50,166 | 37.71 | 2/26/2027 | | 17,677 | 2,081,720 | — | — |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| 3/19/2021 | 2,421 | 7,260 | 56.25 | 3/19/2028 | | 3,556 | 251,125 | 7,110 | 502,108 |
| 2/28/2022 | — | 8,094 | 65.03 | 2/28/2029 | | — | — | 9,226 | 651,540 |
| | | | | | | | | | |
| |
| (1) | Each unvestedUnvested stock option award vestsawards granted in 2022, 2021 and 2020 vest 25% each year for four years commencing one year from the grant date. All other outstanding stock option awards held by NEOs vest 20% each year for five years commencing one year from the grant date. |
| (2) | The market value of unvested PSUs is calculated based on a market price of $70.62 per share, which was the closing price of our Common Stock on December 31, 2022, as reported by Nasdaq. |
| (3) | Amounts in this column represent PSUs with completed performance periods as of December 31, 2022, and for Mr. Lampropoulos include the cash incentive of $833,335 for 2020 awards and $666,666 for 2021 awards. These PSUs and the underlying shares and cash incentive vested and were issued or paid, as applicable, on February 28, 2023. |
| (4) | Amounts in this column represent unvested PSUs granted with incomplete performance periods as of December 31, 2022. The figures shown assume that maximum performance is achieved with respect to PSUs issued with ongoing performance periods extending beyond 2022 (including the maximum cash incentives of $1,333,334 and $2,000,000 for awards with ongoing performance periods granted to for Mr. Lampropoulos in 2021 and 2022 respectively) without application of the rTSR multiplier. The assumption of maximum performance is based on prior year performance. If maximum performance is achieved (including the maximum rTSR multiplier) the number and market value of shares and the cash incentive to be issued or paid, as applicable, following vesting of these PSUs would be as follows for 2021: Mr. Lampropoulos: 23,703 Shares ($1,673,871) and $1,666,668 of PSU Cash Incentive (total of $3,340,538), Messrs. Parra, Wright and Lloyd: 8,888 shares ($627,635) and for 2022: Mr. Lampropoulos: 30,755 Shares ($2,171,918) and $2,500,000 of PSU Cash Incentive (total of $4,671,918), Mr. Parra: 20,760 Shares ($1,466,071), Messrs. Wright, Lloyd and Peterson: 11,533 shares ($814,425). |
Option Exercises and Stock Awards Vested in 2015
The following table provides information regarding stock options exercised by each of the NEOs and restricted stock awards (PSUs) that vested during the year ended December 31,
2015.
|
| | | | | | |
| | | Number of Shares | | Value Realized |
| Name Granted | | Acquired on Exercise | | on Exercise $ (1) |
| Fred P. Lampropoulos | | 231,250 |
| | 2,051,438 |
|
| Kent W. Stanger | | 87,500 |
| | 788,625 |
|
| Bernard J. Birkett | | 8,125 |
| | 69,119 |
|
| Joseph C. Wright | | 9,000 |
| | 73,280 |
|
| Justin J. Lampropoulos | | 12,000 |
| | 67,501 |
|
| Ronald A. Frost | | 11,250 |
| | 89,663 |
|
| Martin R. Stephens | | — |
| | — |
|
| Rashelle Perry | | 37,500 |
| | 310,099 |
|
| | | | | |
| Option Awards | | Stock Awards |
Named Executive Officer | Number of
Shares Acquired on
Exercise | Value Realized on Exercise ($) (1) | | Number of
Shares Acquired on
Vesting | Value Realized on Exercise ($) (1) |
Fred P. Lampropoulos | 50,000 | 2,305,500 | | 17,680 | 1,149,730 |
Raul Parra | 2,000 | 69,080 | | 6,630 | 431,149 |
Neil W. Peterson | 4,000 | 168,182 | | — | — |
Joseph C. Wright | 20,000 | 1,025,750 | | 6,630 | 431,149 |
Brian G. Lloyd | 30,000 | 1,014,741 | | 6,630 | 431,149 |
Ronald A. Frost | 130,783 | 4,527,276 | | 6,630 | 431,149 |
| |
| (1) | The reported value for this column is determined by multiplying the number of shares acquired upon the exercise of the applicable option shares by the difference between the market price of theour Common Stock on the date of exercise and the exercise price of the stock option. The value is stated before payment of applicable taxes. |
Non-Qualified Deferred Compensation for
2015
Pursuant to the Merit Medical Systems, Inc. Deferred Compensation Plan (the “Deferred(Deferred Compensation Plan”Plan), NEOs may elect prior to the beginning of each calendar year to defer the receipt of base salary and bonuses earned for the ensuing calendar year. Amounts deferred are credited to an unfunded liability account maintained by the Company on behalf of the applicable NEO, which account is deemed invested in and earns a rate of return based upon certain notational, self-directed investment options offered under the Deferred Compensation Plan. The NEO’sNEOs’ accounts under the Deferred Compensation Plan may also be credited with a discretionary employer matching contribution, although no such discretionary contribution was made for 20152022 or at any other time since the Deferred Compensation Plan’s inception. Participant account balances under the Deferred Compensation Plan are fully-vested and will be paid by the Company to each NEO upon retirement or separation from employment, or on other specified dates, in a lump sum form or in installments according to a schedule elected in advance by the participant.
The following table sets forth certain information regarding the account balancesbalance and amounts credited underwith respect to the NEOs who participated in the Deferred Compensation Plan in 2015 with respect to the NEOs.
62 | Understand. Innovate. Deliver.TM
|
| | | | | | | | | | | | | | | |
| | | Executive Contributions in Last Fiscal Year | | Registrant Contributions in Last Fiscal Year | | Aggregate Earnings in Last Fiscal Year | | Aggregate Withdrawals/Distributions | | Aggregate Balance at Last Fiscal Year’s End |
| Name | | ($) (1) | | ($) | | ($) | | ($) | | ($) |
| Fred Lampropoulos | | — |
| | — |
| | — |
| | — |
| | — |
|
| Kent W. Stanger | | — |
| | — |
| | (13,643 | ) | | — |
| | 154,613 |
|
| Bernard J. Birkett | | — |
| | — |
| | — |
| | — |
| | — |
|
| Joseph C. Wright | | — |
| | — |
| | (7,201 | ) | | — |
| | 880,875 |
|
| Justin J. Lampropoulos | | — |
| | — |
| | — |
| | — |
| | — |
|
| Ronald A. Frost | | 42,769 |
| | — |
| | (25,663 | ) | | — |
| | 358,918 |
|
| Martin R. Stephens | | 82,740 |
| | — |
| | 10,952 |
| | (670,525 | ) | | — |
|
| Rashelle Perry | | — |
| | — |
| | (39,134 | ) | | — |
| | 597,968 |
|
| | Executive
Contributions in
Last Fiscal Year ($) (1) | | Registrant
Contributions in
Last Fiscal Year ($) | | Aggregate Earnings
in Last Fiscal Year ($) (2) | | Aggregate
Withdrawals /
Distributions ($) | | Aggregate
Balance at Last
Fiscal Years End ($) |
Named Executive Officer | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| |
| (1) | These amounts are also reflected in the Summary Compensation Table for the year ended December 31, 20152022 as “Salary.” |
| (2) | Earnings have not been reflected in the Summary Compensation Table for the year ended December 31, 2022 because they do not reflect compensation for services provided. |
The table below shows the funds available for notational investment under the Deferred Compensation Plan and their annual rate of return for the calendar year ended December 31,
2015.2022. These notational investments were generally the same as the mutual fund investment options offered in 20152022 under the Company’sour 401(k) Plan:
| | |
| | | |
Name of Fund | | Rate of Return |
| | |
| | |
MFS VIT III Mid Cap Value Svc | | |
Vanguard VIF Equity Index | | |
Vanguard VIF Total Stock Market Index Inv | | |
T. Rowe Price Equity Income II | | |
Model Portfolio - Global Growth | | |
T. Rowe Price Blue Chip Growth | | 11.05 | |
MFS VIT II International Value SvcModel Portfolio - Balanced Growth | | 6.32 | |
T. Rowe Price Mid Cap Growth II | | 6.27 | |
Vanguard VIF REIT Index | | 2.22 | % |
Vanguard VIF Equity Index | | 1.27 | % |
PIMCO VIT Total Return Admin | | 0.44 | % |
Vanguard VIF Total Stock Market Index Inv | | 0.37 | % |
Nationwide VIT Money Market V | | — | % |
Nationwide VIT International Index II | | (1.26 | )% |
PIMCO VIT Real Return Admin | | (2.70 | )% |
Vanguard VIF Small Company Growth Inv | | (2.75 | ) |
Model Portfolio - Balanced Moderate | | |
Nationwide VIT International Index II | | |
MFS VIT II International Value Svc | | |
Model Portfolio - Balanced Conservative | | |
Model Portfolio - Income with Growth | | (3.67 | ) |
PIMCO VIT Real Return Admin | | |
Lazard Retirement Emerging Markets Svc | | |
Nationwide VIT Money Market V | | |
PIMCO VIT Total Return Admin | | |
American Funds IS International 2 | | (4.53 | ) |
Model Portfolio - Balanced Conservative | | (4.67 | )% |
DFA VA US Targeted Value | | (5.23 | )% |
Model Portfolio - Balanced Moderate | | (5.54 | )% |
Model Portfolio - Balanced Growth | | (6.16 | )% |
T. Rowe Price Equity Income II | | (7.11 | )% |
Model Portfolio - Global Growth | | (7.33 | )% |
Goldman Sachs VIT Mid Cap Value Instl | | (9.24 | )% |
Lazard Retirement Emerging Markets Svc | | (20.05 | )% |
Van Eck VIP Global Hard Assets Initial | | (33.45 | )% |
Potential Payments Upon Termination or Change in Control
Employment Agreements.
Agreements and PSUsIn 2010,2016, the Company entered into Amendedan Employment Agreement with each of Messrs. Lampropoulos, Wright, Lloyd and RestatedFrost. These Employment Agreements were amended in 2017. In 2018, the Company entered into an Employment Agreement with Mr. Parra. In 2022, the Company entered into an Employment Agreement with Mr. Peterson. These Employment Agreements (as subsequently amended the “Employment Agreements”) with each of the NEOs asamended) are described further in the Compensation“Compensation Discussion and Analysis commencing on page tenAnalysis” discussion above.
The Employment Agreements and PSU award agreements provide payments and benefits in the event of termination of employment under certain circumstances, including in connection with a changeChange in control as follows:
(a) Control. The discussion that follows is only a summary of certain material provisions of the Employment Agreements, PSU award agreements and the 2018 Incentive Plan. This discussion is qualified in its entirety by reference to the full text of the applicable agreement or plan which can be found in the list of exhibits attached to our Annual Report.Termination Other Than in Connection with a Change in Control
. Control.If an Executive’s employment with the Company is terminated for any reason, voluntarily or involuntarily, with or without “Cause”Cause (as defined below), other than “inin Connection with a Change in Control”Control (as defined below), the Company iswe are obligated to pay the Executive a lump sum cash payment equal to his or her accrued and unpaid base salary and any accrued vacation pay earned but not yet paid through the date of termination, plus a lump sum cash payment equal to the Executive’s accrued annual bonus earned for the Company’sour last fiscal year ending immediately prior to the Executive’s date of termination, to the extent not already paid (the sum of such payments hereinafter referred to as the “Accrued Obligations”Accrued Obligations). Any additional severance benefit is solely at the discretion of the Company. A termination is deemed to be “in in Connection with a Change in Control” Controlif it occurs on or within two years after the date of a Change in Control or, in the case of involuntary termination without Cause, within six months prior to a Change in Control and in anticipation of the Change in Control. A “Change
Change in Control” means: (i)Controlhas the acquisition in one or more integrated transactions by any individual, entity or group of beneficial ownership of more than 30% of either the then outstanding shares of Common Stock or the combined voting power of the then outstanding voting securities of the Company entitledmeaning given to vote generallysuch term in the election of directors; (ii) certain changesapplicable agreement or plan. The Employment Agreements generally define a Change in Control as:
| ● | the acquisition in one or more integrated transactions by any individual, entity or group of beneficial ownership of more than 30% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; |
| ● | certain changes in a majority of the Board within a 12-month period; and |
| ● | consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of our assets. |
The PSU award agreements and 2018 Incentive Plan generally define a majority of the Board and (iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company, subject to certain exceptions set forthChange in the Employment Agreements.
Control as:| ● | certain changes in the majority of the Board within a 24-month period; |
| ● | the acquisition by any person of 30% or more of the Common Stock or other voting securities; |
| ● | consummation of a merger or reorganization of the Company that requires the approval of our shareholders, unless more than 30% of the total voting power of the surviving corporation or its parent is represented by securities held by the company’s shareholders prior to the transaction, no person (other than an employee benefit plan sponsored or maintained by the surviving corporation or its parent) owns more than 30% of the securities eligible to elect directors of the surviving corporation or its parent, and at least a majority of the directors of the parent corporation or the surviving corporation were directors of the Company for a period of 12 months preceding such transaction; |
| ● | shareholder approval of a liquidation or dissolution of the Company; or |
| ● | a sale or other disposition of all or substantially all of our assets to another entity that is not controlled by our shareholders. |
(b) ForTermination for Good Reason or Without Cause in Connection with a Change in Control
. If an NEO’s employment with the Company is terminated by the NEO for “Good Reason”Good Reason (as defined below) in Connection with a Change in Control or by the Company without Cause in Connection with a Change in Control, the Company is obligated to: (i) pay to the NEO any Accrued Obligations to the extent not already paid; (ii)
64 | Understand. Innovate. Deliver.TM
| ● | pay to the NEO any Accrued Obligations to the extent not already paid; |
| ● | pay to the NEO a cash severance benefit equal to two times (three times (three times
solely in the case of Mr. Fred Lampropoulos) the sum of (A) the NEO’s annual base salary then in effect, and (B) the NEO’s average annual bonus for the last three full fiscal years ending prior to the Change in Control; (iii) continue to provide group health benefits to the NEO and/or NEO’s eligible spouse and dependent children for two years (three years solely in the case of Mr. Fred Lampropoulos) after the date of the NEO’s termination; (iv) provide the NEO with certain outplacement services at the Company’s expense; and (v) pay or provide to the NEO certain other accrued benefits to the extent not already paid or provided.
For purposes of the CEO) the sum of (i) the NEO’s annual base salary then in effect, and (ii) the NEO’s average annual bonus for the last three full fiscal years ending prior to the Change in Control;
|
| ● | continue to provide group health benefits to the NEO and/or NEO’s eligible spouse and dependent children for two years (three years solely in the case of the CEO) after the date of the NEO’s termination; |
| ● | provide the NEO with certain outplacement services at our expense; |
| ● | pay or provide to the NEO certain other accrued benefits to the extent not already paid or provided; and |
| ● | provide the total Target PSU Shares (and the Target Cash Incentive, in the case of Mr. Lampropoulos) under the PSU award agreements, without regard to the Company’s performance or other vesting requirements. |
The Employment Agreements, “Cause” means: (i) the willfulPSU award agreements and continued failure of an NEO to perform his or her duties after a written demand for substantial performance specifically identifying the deficiencies in the Executive’s performance has been delivered to the NEO by the Board or, in the case of all NEOs other than the CEO, by the CEO; (ii) the willful engaging by an NEO in illegal conduct, intentional misconduct or gross negligence which materially and demonstrably injures the Company; or (iii) violation of written Company policies prohibiting workplace discrimination, sexual harassment, and alcohol or substance abuse. For purposes of 2018 Incentive Plan generally define Cause as:
| ● | the willful and continued failure of an NEO to perform his or her duties after a written demand for substantial performance specifically identifying the deficiencies in the Executive’s performance has been delivered to the NEO by the Board or, in the case of all NEOs other than the CEO, by the CEO; |
| ● | the willful engaging by an NEO in illegal conduct, intentional misconduct or gross negligence which materially and demonstrably injures the Company; or |
| ● | violation of written Company policies prohibiting workplace discrimination, sexual harassment, and alcohol or substance abuse. |
The Employment Agreements, “Good Reason” means: (i) the Company’s assignment to the NEO upon or within two years after a Change in Control of any duties inconsistent with or that diminishes the NEO’s duties, authority or responsibilities under the terms of the NEO’s Employment Agreement; (ii) the Company’s failure to comply with certain compensation provisions in the Employment Agreements; (iii) the Company requiring the NEO to relocate to another office or location upon or within two years of a Change in Control; (iv) the failure by the Company to require any successor entity to comply with the terms of a respective Employment Agreement; or (v) the NEO’s voluntary resignationPSU award agreements and 2018 Incentive Plan generally define Good Reason as:
| ● | our assignment to the NEO, upon or within two years after a Change in Control, of any duties inconsistent with or that diminishes the NEO’s duties, authority or responsibilities under the terms of the NEO’s Employment Agreement; |
| ● | our failure to comply with certain compensation provisions in the Employment Agreements; |
| ● | requiring the NEO to relocate to another office or location upon or within two years of a Change in Control; or |
| ● | our failure to require any successor entity to comply with the terms of a respective Employment Agreement. |
Termination for any reason, in the NEO’s sole discretion, within 30 days after the date of a Change in Control.
(c) For Cause or Without Good Reason Following a Change in Control. If the Company terminates an NEO’s employment for Cause on or after the date of a Change in Control, the Company must pay to the NEO his or her annual base salary and accrued vacation and must continue to pay and/or provide certain other welfare benefits to the extent not already provided and/or unpaid. If an NEO voluntarily terminates his or her employment without Good Reason upon or following a Change in Control, the Company is obligated to pay the NEO for Accrued Obligations and to provide certain other accrued benefits to the extent not already paid and/or provided.
(d) UponTermination upon Death or Disability
. Upon an NEO’s termination of employment as a result of death or disability, other than in Connection with a Change in Control, the Company is obligated to pay the NEO (or the NEO’s estate) an amount equal to Accrued Obligations plus any additional discretionary severance benefits approved by the Compensation Committee. If an NEO’s employment is terminated after the date of a Change in Control by reason of the NEO’s death, the Company must also continue to provide certain otherwelfare benefits to the NEOs family for a stated period. If an NEO’s
employment is terminated after the date of a Change in Control by reason of the NEO’s disability, the Company must also continue to provide certain welfare benefits.
If a Change in Control with respect to After the Company results in compensatory payments to anend of the applicable performance period under his or her PSU award agreement, each such deceased or disabled NEO including severance benefits and acceleration of vesting of an NEO’s stock options, and if the value of such severance benefits and option acceleration equals or exceeds three times(or the NEO’s average W-2 compensation with the Company for the five taxable years preceding the yearestate) shall also receive a pro rata portion of the Change in Control (the “Base Period Amount”), the Change in Control related payments and option acceleration would result in an “excess parachute payment” under Code Section 280G. An NEO would be subject to a 20% excise tax on, and the Company would be unable to deduct, the amount by which such parachute payments to the NEO exceed the NEO’s Base Period Amount. The Employment Agreements provide thatnumber of shares of Common Stock (and in the event any payments made to an NEO, when added to all other “parachute payments” to the NEO within the meaningcase of Section 280GMr. Lampropoulos, a pro rata portion of the Code, result in the payment of an “excess parachute payment” to the NEO within the meaning of Sections 280G and 4999 of the Code, then: (i) the cash payments owed to the NEO shall be reduced by the minimum amount necessary to avoid the imposition of an excise or penalty tax on the NEO, provided such reduction does not exceed $1,000, or (ii) in all other cases, the Company must pay to the NEO an additional amount (on a fully-grossed-up, after tax basis) sufficient to put the NEO in the same after-tax positionPSU Cash Incentive) that the NEO would have been received under his or her PSU award agreements had the NEO remained in had payments undercontinuous service with the respective Employment Agreement not been subject to the excise tax under Code Section 4999 (a “Tax Gross-Up Payment”).
Company.Accelerated Stock Option and PSU Vesting Upon a Change in Control
. Under the Company’s 2006our 2018 Incentive Plan, and prior stock option plan, all otherwise unvested stock options held by NEOs become fully vested upon a “changeChange in control” as defined below,Control, without regard to whether the NEO terminates employment. The Company’s 2006Additionally, the Target PSU Shares under unvested PSU award agreements (and the Target Cash Incentive Plan defines a change in control as (i) certain changes in the majoritycase of the Board within a 24-month period; (ii) the acquisition by any person of 50% or more of the Common Stock or other voting securities; (iii) consummation of a merger or reorganization of the Company in which neither the Company nor another entity controlled by the Company’s shareholders is the surviving entity; (iv) a sale or other disposition of all or substantially all of the Company’s assetsMr. Lampropoulos) shall be payable without regard to another entity that is not controlled by the Company’s shareholders; or (v) shareholder approval of a liquidation of the Company.
otherwise applicable performance conditions.Amounts Payable upon a Change in Control without Termination of Employment.
EmploymentThe following table shows for each NEO the intrinsic value of his or her otherwise unvested stock options and PSUs on December 31, 20152022 that would have vested had a “change“Change in control”Control” within the meaning of the Employment Agreements occurred on that date,date. For options, the intrinsic value is calculated by multiplying the number of underlying shares by the closing price of Common Stock on the last trading day of 20152022 and by then subtracting the applicable option exercise price:
|
| | | | |
| Name | | Intrinsic Value of Stock Options ($) |
| Fred P. Lampropoulos | | 443,360 |
|
| Kent W. Stanger | (1 | ) | 158,456 |
|
| Bernard J. Birkett | | 94,920 |
|
| Joseph C. Wright | | 195,860 |
|
| Justin J. Lampropoulos | | 223,580 |
|
| Ronald A. Frost | | 204,220 |
|
| Martin R. Stephens | (2 | ) | N/A |
|
| Rashelle Perry | (2 | ) | N/A |
|
(1) The employmentprice. For PSUs, the intrinsic value is calculated by multiplying the Target PSU Shares by the closing price of Common Stock on the last trading day of 2022, and in the case of Mr. Stanger was terminated on January 4, 2016. HisLampropoulos includes the Target Cash Incentives of $333,333, $1,000,000, and $1,000,000 under unvested stock options expired at that time.
(2) The employment of Mr. StephensPSU awards granted in 2020, 2021 and Ms. Perry was terminated during 2015, at which time unvested options awarded to them expired.
2022, respectively. The Employment Agreements do not provide for any additional payments to the NEOs merely upon a Change in Control (i.e., absent a termination of employment of the NEOs.
NEOs). | | | |
Named Executive Officer | Intrinsic Value of Stock
Options ($) | Intrinsic Value of Stock
Awards (PSUs) ($) | Total ($) |
| | | |
| | | |
| | | |
| | | |
| | | |
Amounts Payable upon Termination of Employment
Termination Withoutwithout Cause or For Good Reason Inin Connection with a Change in Control.
The following table shows the amounts that would be payable to each NEO if the Company had undergone a “ChangeChange in Control”Control within the meaning of the Employment Agreements on December 31, 2015 and the NEO’s employment with the Company terminated voluntarily for Good Reason or involuntarily without Cause, in each case, on December 31, 2015. The following amounts are2022.
Amounts shown in addition tothe table do not reflect any accrued vacation and distributions from the Company’sour 401(k) Plan that are payable to all salaried employees upon termination of employment:
| | | | | | |
Named Executive
Officer | Salary and
Bonus
Continuation | Stock Option
Vesting
Acceleration
($) (1) | Stock Award
Vesting
Acceleration
($) (2)(3) | Health Plan
Coverage
Continuation
($) (4) | Deferred
Compensation
Plan ($) (5) | Total ($) |
Fred P. Lampropoulos | 8,970,377 | 3,692,603 | 4,705,813 | 65,026 | — | 17,433,819 |
Raul Parra | 1,815,608 | 691,220 | 1,150,259 | 41,641 | — | 3,698,728 |
Neil W. Peterson | 1,449,722 | 250,158 | 325,770 | 29,201 | 371,083 | 2,425,934 |
Joseph C. Wright | 1,891,422 | 732,479 | 889,600 | 41,641 | 2,211,867 | 5,767,009 |
Brian G. Lloyd | 1,722,278 | 732,479 | 889,600 | 41,641 | — | 3,385,998 |
66 | Understand. Innovate. Deliver.TM
|
| | | | | | | | | | | | | | | | | | |
| (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) |
| | | Salary and Bonus Continuation | | Stock Option Vesting Acceleration | | Health Plan Coverage Continuation | | Deferred Compensation Plan | | Tax Gross-up | | Total |
| Name | | ($) | | ($) (1) | | ($) (2) | | ($) (3) | | ($) (4) | | ($) |
| Fred P. Lampropoulos | | 3,927,000 |
| | 443,360 |
| | 38,078 |
| | — |
| | — |
| | 4,408,438 |
|
| Kent W. Stanger | | 928,653 |
| | 158,456 |
| | 9,184 |
| | 154,613 |
| | — |
| | 1,250,906 |
|
| Bernard J. Birkett | (6) | 1,058,288 |
| | 94,920 |
| | 21,375 |
| | — |
| | — |
| | 1,174,583 |
|
| Joseph C. Wright | | 900,000 |
| | 195,860 |
| | 24,575 |
| | 880,875 |
| | — |
| | 2,001,310 |
|
| Justin J. Lampropoulos | | 1,000,000 |
| | 223,580 |
| | 24,447 |
| | — |
| | — |
| | 1,248,027 |
|
| Ronald A. Frost | | 857,600 |
| | 204,220 |
| | 24,223 |
| | 358,918 |
| | — |
| | 1,444,961 |
|
| Martin R. Stephens | (5) | — |
| | — | | — |
| | — |
| | — |
| | — |
|
| Rashelle Perry | (5) | — |
| | — | | — |
| | — |
| | — |
| | — |
|
| |
| (1) | The amounts shown in column (c) representStock Option Vesting Acceleration represents the intrinsic value of the otherwise unvested stock options held by NEOs on December 31, 20152022 calculated by multiplying the number of shares underlying such options by the closing price of Company shares on December 31, 2015, the last trading day of 20152022 ($18.59 a70.62 per share), and by then subtracting the applicable exercise price. |
| |
| (2) | TheStock Award Vesting Acceleration represents the intrinsic value of the unvested PSUs on December 31, 2022 calculated by multiplying the Target PSU Shares underlying such awards by the closing price of the Company shares on December 31, 2022 ($70.62 per share). |
| (3) | Includes the Target Cash Incentives of $1,000,000, $1,000,000, and $333,334 for Mr. Lampropoulos under unvested PSU awards granted in 2022, 2021 and 2020 respectively. |
| (4) | Health Plan Coverage Continuation amounts in column (d) represent the estimated future cost of providing continuing Company-paid coverage under the Company’s group health, disability and life insurance plans for the applicable severance period. The estimated amounts are based upon December 31, 20152022 actual premium rates, plus a 10% assumed rate of annual premium cost increases. |
| (5) | |
(3) | TheDeferred Compensation Plan amounts in column (e) represent the account balance in each NEO’s Deferred Compensation Plan account as of December 31, 2015.2022. |
| |
(4) | This amount represents the estimated Code Section 280(g) tax gross-up payment. |
| |
(5) | The employment of Mr. Stephens and Ms. Perry was terminated during 2015. As such, the disclosures in this table are not applicable. |
| |
(6) | A portion of the amount reflected in column (b) for Mr. Birkett was calculated using amounts paid to him in Euros, then converted using the average EUR/USD published foreign exchange rates. |
Involuntary Termination Withoutwithout Cause or Termination For Good Reason (Other Than in Connection with a Change in Control).
The following table shows the amounts that would be payable to each NEO if the NEO’s employment with the Company had terminated voluntarily for good reasonGood Reason or involuntarily without Cause, other than in connection with a Change in Control, on December 31, 20152022 and the Companywe had exercised itsour discretion to pay severance equal to one year’s salary and the annual bonus earned in 2015. 2022.
The following amounts are in addition to accrued vacation and distributions from the Company’sour 401(k) Plan that are payable to all salaried employees upon termination of employment:
|
| | | | | | | | | | | | |
(a) | | (b) | | (c) | | (d) | | (e) |
| | | Discretionary Severance | | Health Plan Coverage Plan Continuation | | Deferred Compensation Plan | | Total |
| Name | | ($) (1) | | ($) | | ($) (2) | | ($) |
| Fred Lampropoulos | | 1,659,999 |
| | — |
| | — |
| | 1,659,999 |
|
| Kent W. Stanger | | 405,000 |
| | — |
| | 154,613 |
| | 559,613 |
|
| Bernard J. Birkett | (4) | 548,000 |
| | — |
| | — |
| | 548,000 |
|
| Joseph C. Wright | | 637,217 |
| | — |
| | 880,875 |
| | 1,518,092 |
|
| Justin J. Lampropoulos | | 560,000 |
| | — |
| | — |
| | 560,000 |
|
| Ronald A. Frost | | 448,000 |
| | — |
| | 358,918 |
| | 806,918 |
|
| Martin R. Stephens | (3) | — |
| | — |
| | — |
| | — |
|
| Rashelle Perry | (3) | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | |
Named Executive Officer | | Discretionary
Severance
($) (1) | Stock Award
Vesting
Acceleration
($) (2)(3) | Health Plan
Coverage
Continuation
($) | Deferred
Compensation
Plan
($) (4) | Total ($) |
| | | | | | |
| | | | | | |
Neil W. Peterson | | 820,008 | 1,471,839 | — | 371,083 | 2,662,930 |
Joseph C. Wright | | 901,674 | 1,471,839 | — | 2,211,867 | 4,585,380 |
| | | | | | |
| |
| (1) | Assumes the Company had exercised its discretion to pay severance equal to one year’s salary and the 20152022 earned bonus. |
| |
| (2) | Stock Award Vesting Acceleration represents the pro rata portion of the intrinsic value of unvested PSUs on December 31, 2022, as amended. The amountspro rata portion is based on the number of full months of continuous service compared to the number of months in the performance period. The number of shares expected to be awarded is based on the estimated probable FCF and rTSR multipliers as of December 31, 2022 and is multiplied by the closing price of the Company shares on December 31, 2022 ($70.62 per share) to calculate the intrinsic value. |
| (3) | For Mr. Lampropoulos, the amount included in this column (d)includes the pro rata portion of unvested PSU Cash Incentives of $3,611,113 under unvested PSU award agreements, which is based on the estimated probable FCF and rTSR multipliers as of December 31, 2022. |
| (4) | Deferred Compensation Plan amounts represent the account balance in the NEO’s Deferred Compensation Plan account as of December 31, 2015.2022. |
| |
(3) | The employment of Mr. Stephens and Ms. Perry was terminated during 2015. As such, the disclosures in the table are not applicable. |
| |
(4) | Amounts reflected for Mr. Birkett in the foregoing table were calculated using amounts paid to him in Euros, then converted using the average EUR/USD published foreign exchange rate. |
Termination on Account of Death, Disability, Involuntary Termination Forfor Cause or Voluntary Resignation Withoutwithout Good Reason. Reason.
If, on December 31, 2015,2022, a NEO had died, his or her employment had been terminated on account of disability, his or her employment had been terminated for Cause, or he or she had voluntarily resigned without Good Reason, whether or not in connection with a changeChange in control,Control, he or she would have been entitled to receive only: (a) his or her accrued salary and bonus earned through December 31, 2015; (b) accrued but unpaid vacation pay through December 31, 2015; (c)
| ● | his accrued salary and bonus earned through December 31, 2022; |
| ● | accrued but unpaid vacation pay through December 31, 2022; |
| ● | distribution of his vested account balance from our 401(k) Plan; |
| ● | the payment of insured benefits, if applicable, under our broad-based long-term disability insurance or group term life insurance plans; |
| ● | distribution of his Deferred Compensation Plan account balance; and |
| ● | except for termination of employment involuntarily for Cause or as a result of resignation without Good Reason, a pro rata portion of the number of shares of Common Stock (and the PSU Cash Incentive in the case of Mr. Lampropoulos) that would have been received under PSU award agreements had the NEO remained in continuous service with the Company through the end of the applicable performance period. |
Pay Versus Performance
| | | | | Value of Initial Fixed $100 Investment Based on: | | |
| | | | | | | | |
Year | Summary
Compensation
Total for the
Principal
Executive
Officer (“PEO”) | Compensation
Actually Paid
to the PEO | Average
Summary
Compensation
Table Total for
Non-PEO
Named
Executive
Officers
(“NEO”s) | Average
Compensation
Actually Paid to
Non-PEO NEOs | Total
Shareholder
Return | Peer Group
Total
Shareholder
Return | Net
Income
(loss)
(in $M) | Non-GAAP
Operating
Margin
(%) |
(a) | (b)(1) | (c)(1)(2) | (d)(3) | (e)(2)(3) | (f) | (g)(4) | (h) | (i)(5) |
2022 | 8,128,833 | 12,087,645 | 2,091,141 | 2,009,224 | 126.12% | 20.22% | 74,516 | 17.0% |
2021 | 7,537,100 | 10,691,399 | 1,678,125 | 2,266,274 | 99.50% | 65.73% | 48,454 | 16.0% |
2020 | 7,703,508 | 12,603,991 | 1,722,505 | 2,903,044 | 77.78% | 45.61% | (9,843) | 13.7% |
(1) | Fred P. Lampropoulos was the PEO for all three years in the table. |
(2) | SEC rules require certain adjustments be made to the Summary Compensation Table totals to determine “compensation actually paid” as reported in the Pay versus Performance Table. “Compensation actually paid” does not necessarily represent cash and/or equity value transferred to the applicable NEO without restriction, but rather is a value calculated under the applicable SEC rules. The following table details these adjustments: |
68 | Understand. Innovate. Deliver.TM
| | | | | | | |
| | Summary Compensation Table Total | Subtract Stock Awards | Add Year-End Equity Value | Change in Value of Prior Equity Awards | Add Change in Value of Vested Equity Awards | Subtract Value of Equity Awards that Failed to Meet Vesting Conditions | Compensation Actually Paid |
Year | Executives | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
2022 | PEO | 8,128,833 | (5,330,097) | 5,376,613 | 1,434,847 | 2,477,449 | — | 12,087,645 |
| Non-PEO NEOs | 2,091,141 | (980,076) | 819,171 | 211,296 | 253,211 | (385,519) | 2,009,224 |
2021 | PEO | 7,537,100 | (4,146,759) | 5,567,123 | 756,685 | 977,250 | — | 10,691,399 |
| Non-PEO NEOs | 1,678,125 | (691,110) | 927,825 | 170,049 | 181,385 | — | 2,266,274 |
2020 | PEO | 7,703,508 | (4,976,970) | 5,425,560 | 2,390,685 | 2,061,208 | — | 12,603,991 |
| Non-PEO NEOs | 1,722,505 | (893,427) | 834,434 | 557,540 | 681,992 | — | 2,903,044 |
| (3) | For 2022, Raul Parra, Neil W. Peterson, Brian G. Lloyd, Joseph C. Wright and Ronald A. Frost were the Non-PEO NEOs. For 2021 and 2020, Raul Parra, Ronald A. Frost, Brian G. Lloyd and Joseph C. Wright were the Non-PEO NEOs. |
| (4) | Peer Group Total Shareholder return is based on NASDAQ Stocks (SIC 3840-3849 US Companies Surgical, Medical, and Dental Instruments and Supplies). |
| (5) | The Company Selected Measure is Non-GAAP Operating Margin. Non-GAAP operating income is calculated by adjusting GAAP operating income for certain items which are deemed by the Company’s management to be outside of core operations and vary in amount and frequency among periods, such as expenses related to acquisitions or other extraordinary transactions, 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, governmental proceedings, and changes in governmental or industry regulations, as well as other items. Non-GAAP operating margin is calculated by dividing non-GAAP operating income by reported net sales. 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 Company selected this measure because it is a principal metric upon which our Foundations for Growth Program is based, and a key metric considered by the Compensation Committee in making its determinations regarding compensation of our PEO and Non-PEO NEOs. |
DIRECTOR COMPENSATION
The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve as directors. In setting director compensation, the Company 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.
Cash Compensation Paid to Directors
For the year ended December 31, 2015, all non-employee directors of the Company (except for Richard W. Edelman, lead director and F. Ann Millner, Ed.D) received an annual cash retainer of $60,000. Mr. Edelman, in his role as lead director, received an annual cash retainer of $110,000. Dr. Millner, who joined the Board on July 16, 2015, received a prorated amount of $50,959 during the year as an annual retainer. Members of the Audit Committee received $10,000 for their participation on the committee, and the Audit Committee Chair received an annual retainer of $10,000. Members of the Compensation Committee received $7,500 for their participation on the committee, and the Compensation Committee Chair received an additional annual retainer of $7,500. Members of the Nominating Committee (except for Dr. Millner) were paid an additional sum of $5,000 for their participation on the committee. Dr. Millner, who joined the Board during the year, received a prorated amount of $4,246 for her participation on the Nominating Committee. The Nominating Committee Chair received an additional annual retainer of $5,000. All directors are also reimbursed by the Company for their out-of-pocket travel and related expenses incurred in attending all meetings of the Board and its committees or other events of the Company as well as up to $5,000 for educational expenses. Prior to May 2015, each director received $2,000 for each in-person or telephonic board meeting attended.
Stock Awards
Directors are also eligible to participate in the Company’s equity incentive programs. During the year ended December 31, 2015, each non-employee director who served throughout the entire year received an award of options under the 2006 Incentive Plan to purchase 25,000 shares of Common Stock at an exercise price of $20.27 per share, the per share market closing price on the date of the grant. Dr. Millner, who was appointed as a director on July 16, 2015, received an award of options under the 2006 Incentive Plan to purchase 21,233 shares of Common Stock at an exercise price of $21.98 per share, the per share market closing price on the date of the grant. Director stock options vest over five years at the rate of 20% per year.
Director Summary Compensation Table for 2015
CEO Pay Ratio
The following table summarizespay ratio and supporting information compares (x) the annual total compensation earned or paid by the Company to non-employee directors for the year ended December 31, 2015
2022 of our median employee identified as of December 31, 2022 by taking into account all of our employees other than our CEO, (including full-time and part-time employees and employees on leave) and annualizing permanent employees (full-time and part-time) that did not work a full year, (excluding employees on leave under the Family and Medical Leave Act of 1993, employees called for active military duty, and employees who took an unpaid leave of absence during the period for another reason) (Median Employee) against (y) the annual total compensation of our CEO (as reported in our Summary Compensation Table), as required by Section 953(b) of the Dodd-Frank Act.As illustrated in the table below, our 2022 CEO pay ratio was 227 to 1.
|
| | | | | | | | | | | | | | | |
| (a) | | (b) | | (c) | | (d) | | (e) | | (f) |
| Name (1) | | Fees Earned or Paid in Cash ($) | | Options Awards (2) | | Non-Equity Incentive Plan Compensation ($) | | All Other Compensation ($) | | Total Compensation ($) |
| Richard W. Edelman | | 110,000 |
| | 164,163 |
| | — |
| | — |
| | 274,163 |
|
| Nolan E. Karras | | 94,000 |
| | 164,163 |
| | — |
| | — |
| | 258,163 |
|
| Franklin J. Miller, M.D. | | 93,500 |
| | 164,163 |
| | — |
| | — |
| | 257,663 |
|
| A. Scott Anderson | | 90,000 |
| | 164,163 |
| | — |
| | — |
| | 254,163 |
|
| Michael E. Stillabower, M.D. | | 87,500 |
| | 164,163 |
| | — |
| | — |
| | 251,663 |
|
| F. Ann Millner, Ed.D | | 55,205 |
| | 150,901 |
| | — |
| | — |
| | 206,106 |
|
| |
(1) | 2022 Compensation ($) |
Fred P. Lampropoulos and Kent W. Stanger served as directors of the Company during the year ended December 31, 2015, but are not identified in the foregoing Director(1) | 8,128,833 |
Median Employee (2) | 35,793 |
| (1) | For additional information, see our Summary Compensation Table because of their dual status as NEOs and directors.beginning on page 59. |
| |
| (2) | The amounts shown in column (c) reflectAmount represents taxable compensation paid, plus the aggregate grant date fair value of all equity awards granted (if applicable) to the directorsMedian Employee during 2022, plus bonus accrued and paid in 2015. The Company calculated these amounts in accordance with financial statement reporting rules, using the same assumptions as the Company used for financial statement reporting purposes pursuant to the Company’s long-term incentive plans. Assumptions used in the calculation of these amounts are included in footnotes to the Company’s audited financial statements for the year ended December 31, 2015. As of December 31, 2015, each non-employee director had outstanding options for the following number of Company shares: Mr. Edelman, 165,000; Mr. Karras, 95,000; Dr. Miller, 155,000; Mr. Anderson, 68,000; and Dr. Stillabower, 165,000, and Dr. Millner, 21,233.
2023. |
Related Party Transactions
Joseph C. Wright, President
In calculating the median employee in 2022, we calculated the annual total compensation (annual taxable compensation, plus the fair value of Merit International, a divisionequity awards granted) for all employees of the Company is(other than the brother-in-law of Fred P. Lampropoulos, the Chairman of the Board, CEO and President of the Company. During the fiscal year ended December 31, 2015, the Company paid to Mr. Wright total compensation of $718,327, as detailed in the Summary Compensation Table set forth on page 18 above.
Justin J. Lampropoulos, Executive Vice President of Global Sales, Marketing & Strategy, a division of the Company, is the son of Fred P. Lampropoulos, the Chairman of the Board, CEO and President of the Company. During the fiscal year ended December 31, 2015, the Company paid to Mr. Justin Lampropoulos total compensation of $673,063, as detailed in the Summary Compensation Table set forth on page 18 above.
Charles Wright, Trade Representative of the Company, is the brother-in-law of Fred P. Lampropoulos, the Chairman of the Board, CEO and President of the Company. DuringCEO) for the year ended December 31, 2015, the Company paid to Mr. Charles Wright2022. We believe that annual total compensation (including salaryis a consistently applied compensation measure and bonus) of $353,949.
Matthew Stephens, Sales Representative ofappropriate for determining the
Company, is the son of Martin R. Stephens, former Executive Vice President of Sales. Duringmedian-paid employee. We used actual annual total compensation (converted, where applicable, to U.S. dollars based on an average annual exchange rate for the year ended December 31,
2015,2022) and did not make any assumptions or adjustments to the
Company paid to Mr. Matthew Stephens total compensation (including salary, bonusamounts determined.
70 | Understand. Innovate. Deliver.TM
| | |
PROPOSAL 3: Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation | The Board unanimously recommends a vote FOR ONE YEAR on this proposal | 
|
Background
Section 14A and commission) of $211,844.
Anne-Marie Wright, Vice President of Corporate Communications, isrelated rules promulgated by the wife of Fred P. Lampropoulos, the Chairman of the Board, CEO and President of the Company. During the year ended December 31, 2015, the Company paid to Ms. Wright total compensation (including salary, bonus and the value realized on the exercise of stock options) of $170,556.
Policies and Procedures Regarding Transactions with Related Parties
The Company’s Code of Ethics and Business Conduct requiresCommission require that every employee avoid situations where loyalties may be divided between the Company’s 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 the Company’s best interests.
Pursuant to its written charter, the Audit Committee reviews and approves all “related party transactions” as such term is used by ASC Topic 850 Related Party Disclosures, or as otherwise required toshareholders be disclosed in the Company’s financial statements or periodic filings with the Securities and Exchange Commission, other than (a) grants of stock options made by the Board or any committee thereof or pursuant to an automatic grant plan, or (b) payment of compensation authorized by the Board or any committee thereof. Related party transactions include transactions between the Company, its executive officers and directors. The Company has adopted written policies and procedures regarding the identification of related parties and transactions and the approval process. The Audit Committee will consider each proposed related-party 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.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of March 28, 2016, with respect to the beneficial ownership of shares of Common Stock by each person known by the Company to be the beneficial owner of more than 5% of the Common Stock, by each director, by each director nominee, by each NEO and by all directors and executive officers as a group. For each individual and group included in the table below, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the 44,285,041 shares of Common Stock outstanding as of March 28, 2016, plus the number of shares of Common Stock that such person or group had the right to acquire on or within 60 days after March 28, 2016. Unless otherwise noted, each person named has sole voting and investment power with respect to the shares indicated.
|
| | | | | | |
Principal Shareholders
| | Number of Shares | | Percentage of Class |
| | | | | |
| Blackrock, Inc. (1) | | 5,798,763 |
| | 13.1 | % |
| 55 East 52nd Street, New York, NY 10022 | | | | |
| | | | | |
| The Vanguard Group, Inc. (1) | | 3,345,879 |
| | 7.6 | % |
| 100 Vanguard Blvd., Malvern, PA 19355 | | | | |
| | | | | |
| Janus Capital Management, LLC (1) | | 2,738,779 |
| | 6.2 | % |
| 151 Detroit Street, Denver, CO 80206 | | | | |
| | | | | |
| Dimensional Fund Advisors, LP (1) | | 2,455,719 |
| | 5.5 | % |
| 6300 Bee Cave Road, Building One, Austin, TX 78746 | | | | |
| | | | | |
| | | | | |
| Officers, Directors and Nominees | | | | |
| | | | | |
| Fred P. Lampropoulos (2) (3) | | 1,308,730 |
| | 2.9 | % |
| | | | | |
| Kent W. Stanger (2) (3) | | 568,391 |
| | 1.3 | % |
| | | | | |
| Michael E. Stillabower, M.D. (3) | | 134,778 |
| | * |
|
| | | | | |
| Franklin J. Miller, M.D. (3) | | 117,527 |
| | * |
|
| | | | | |
| Richard W. Edelman (3) | | 110,000 |
| | * |
|
| | | | | |
| Rashelle Perry (2) (3) | | 58,636 |
| | * |
|
| | | | | |
| Nolan E. Karras (3) | | 47,000 |
| | * |
|
| | | | | |
| Ronald A. Frost (2) (3) | | 40,991 |
| | * |
|
| | | | | |
| Martin R. Stephens (2) (3) | | 31,729 |
| | * |
|
| | | | | |
| Joseph C. Wright (3) | | 27,000 |
| | * |
|
| | | | | |
| A. Scott Anderson (3) | | 18,400 |
| | * |
|
| | | | | |
| Justin L. Lampropoulos (3) | | 18,000 |
| | * |
|
| | | | | |
| Bernard J. Birkett (3) | | 16,075 |
| | * |
|
| | | | | |
| Total of Officers and Directors | | 2,497,257 |
| | 5.6 | % |
*Represents holdings of less than 1%
| |
(1) | Based upon the most recent Schedules 13G available on the website of the Securities and Exchange Commission as of March 28, 2016. |
| |
(2) | The computations above include the following share amounts that are held in the Company’s 401(k) Plan on behalf of participants as of March 28, 2016: Mr. Fred Lampropoulos, 92,326 shares; Mr. Stanger, 42,250 shares; Mr. Stephens, 19,729 shares; Ms. Perry, 7,558 shares; Mr. Frost, 15,991 shares; and all executive officers and directors as a group, 177,854 shares. |
| |
(3) | The computations above include the following share amounts that are subject to options exercisable within 60 days after March 28, 2016, none of which have been exercised: Mr. Fred Lampropoulos 141,000 shares; Mr. Stanger 66,000 shares; Mr. Birkett, 15,000 shares; Mr. Wright, 27,000 shares; Mr. Justin Lampropoulos, 18,000 shares; Dr. Miller, 97,000 shares; Dr. Stillabower, 107,000 shares; Mr. Edelman, 107,000 shares; Ms. Perry 41,000 shares; Mr. Karras, 41,000 shares; Mr. Stephens 12,000 shares; Mr. Frost, 25,000 shares; Mr. Anderson, 14,000 shares; and all executive officers and directors as a group, 711,000 shares. |
PROPOSAL NO. 2 - ADVISORY VOTE ON EXECUTIVE COMPENSATION
Background
Section 14A of the Exchange Act of (“Section 14A”), which was enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, requires that the Company provide its shareholders withgiven the opportunity, once every six years, to vote oncast an advisory (non-binding) resolution to approvevote on how frequently the compensationCompany should consider future Say-on-Pay proposals at its annual meetings of the NEOsshareholders (referred to as a “Say-on-Pay” proposal) as disclosed in“Say-on-Frequency” vote). As the last Say-on-Frequency vote was held at the 2017 annual meeting of the Company’s Shareholders, held on May 24, 2017, this Proxy Statement.
proposal gives the Company’s shareholders the opportunity to indicate whether they would prefer that, during the next six years, the Company’s shareholders be given a non-advisory vote on future Say-on-Pay proposals once every one, two, or three years. If they wish, shareholders may also abstain from casting a vote on this proposal. Accordingly, the following resolution will be submitted to the Company’s shareholders for approval at the Annual Meeting:
“RESOLVED, “RESOLVED, that the
option of every year (annual basis), every two years (biennial basis) or every three years (triennial basis) that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency of the Company’s shareholders,
approve, on an advisory basis,
for holding an advisory vote on the compensation of the
Named Executive Officers,Company’s named executive officers as disclosed in the Company’s
Proxy Statement for the 2016 Annual Meeting of Shareholders,proxy statement pursuant to the
compensation disclosure rules of the U.S. Securities and Exchange
Commission, includingCommission’s compensation disclosure rules.”Similar to the Compensation Discussion and Analysis, the 2015 Summary Compensation Table and the other related tables and disclosures.”
As described above under the heading “Compensation Discussion and Analysis,” the Board believes the Company’s compensation of the NEOs achieves the primary goals of (i) focusing the Company’s executives on achieving or exceeding measurable performance targets; (ii) encouraging continuation of the Company’s entrepreneurial spirit; (iii) attracting and retaining highly-qualified and motivated executives; (iv) promoting the Company’s guiding principles for adherence to a high ethical environment, as well as health and safety standards; and (v) aligning management compensation with shareholder value. The Board encourages shareholders to review in detail the Compensation Discussion and Analysis beginning on page ten of this Proxy Statement and the executive compensation tables beginning on page 18 of this Proxy Statement. In light of the information set forth in such sections of this Proxy Statement, the Board believes the compensation of the NEOs for the fiscal year ended December 31, 2015 was fair and reasonable and that the Company’s compensation programs and practices are in the best interests of the Company and its shareholders.
The advisory vote on this Say-on-Pay resolution is not intended to address any specific element of compensation; rather, the vote relates to all aspects of the compensation of the NEOs, as described in this Proxy Statement. Whileproposal, this vote is only advisory in nature which means that the vote isand will not binding onbind the Company or the Board or the Compensation Committee (which is composed solely of independent directors),to adopt any particular frequency. However, the Board and the Compensation Committee valuevalues the opinion of the Company’s shareholders and will consider the outcome of the vote when addressingdetermining how frequently to address future compensation arrangements.
InSay-on-Pay proposals. Regardless of the
2011 annual meetingoutcome of this Say-on-Frequency vote, the Board may decide that it is in the best interests of the Company’s
Shareholders, held on May 27, 2011,shareholders and the
Company’s shareholders recommended that they be given an opportunityCompany to
vote on a Say-on-Pay resolution every year at the Company’s annual meeting of shareholders. As a result of that vote, the Board currently intends to continue to submitinclude a Say-on-Pay proposal
toin the Company’s proxy statement more or less frequently than the frequency receiving the most votes cast by the Company’s shareholders at
eachthe Annual Meeting. The Board anticipates that, following the Annual Meeting, the next advisory Say-on-Frequency vote will take place in connection with the Company’s 2029 annual meeting of shareholders.
Voting
The Board expects to ask the Company’sproxy card allows shareholders in 2017 to vote on a proposal regarding the frequencyfor one of the vote on future Say-on-Pay proposals as required by Section 14A.
Voting
Approval of the resolution above (on a non-binding, advisory basis) requires that the number of votes castfour choices at the Annual Meeting, in personMeeting: one year, two years, three years, or by proxy, in favor of the resolution exceeds the number of votes cast in opposition to the resolution.
abstain from voting on this proposal. The Board recommends that shareholders vote
FOR approvalONE YEAR on the proposal to recommend, on an advisory basis, the frequency of
executive compensation votes during the
compensationnext six years.
PROPOSAL NO. 3- RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The AUDIT MATTERS
Audit Committee has recommended, and the Board has appointed, the firm of Deloitte & Touche LLP, (“Deloitte”) independent registered public accountants, to audit the financial statements of the Company for the year ending December 31, 2016, subject to ratification by the Company’s shareholders. Deloitte has acted as the independent public accounting firm for the Company since 1987. The Board anticipates that one or more representatives of Deloitte will be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
The Board recommends that shareholders vote FOR ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm.
Fees Paid to the Company’s Independent Certified Public Accounting Firm
The following table presents aggregate fees for audits of the Company’s consolidated financial statements and fees billed or other services rendered by Deloitte for the years ended December 31, 2015 and December 31, 2014.
|
| | | | | | | |
| | | 2015 ($) | | | 2014 ($) |
| Audit Fees (1) | | 714,683 |
| | | 731,686 |
|
| Audit-Related (2) | | 30,405 |
| | | 29,651 |
|
| Tax (3) | | 232,001 |
| | | 193,466 |
|
| All Other (4) | | — |
| | | — |
|
| | | | | | |
| Total | | 977,089 |
| | | 954,803 |
|
| |
(1) | Audit Fees: The aggregate fees billed by Deloitte, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, the “Deloitte Firms”) for professional services rendered for the audits and reviews of the Company’s financial statements filed with the SEC on Forms 10-K, 10-Q, 8-K and S-3. Audit fees for 2015 and 2014 also include fees for the audit of management’s assessment of the effectiveness of internal control over financial reporting and the audit of the effectiveness of the Company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002.
|
| |
(2) | Audit-Related Fees: The aggregate fees billed by the Deloitte Firms for all audit-related services, including an audit of the Company’s employee benefit plan.
|
| |
(3) | Tax Fees: The aggregate fees billed by the Deloitte Firms for tax compliance, tax advice and tax planning.
|
| |
(4) | All Other Fees: The Deloitte Firms did not provide any other non-audit services to the Company during the years ended December 31, 2015 and 2014.
|
Pre-Approval Policies and Procedures
The Audit Committee ensures that the Company engages its independent registered public accounting firm to provide only audit and non-audit services that are compatible with maintaining the independence of its public accountants. The Audit Committee approves or pre-approves all services provided by the Company’s public accountants. Permitted services include audit and audit-related services, tax and other non-audit related services. Certain services are identified as restricted. Restricted services are those services that may not be provided by the Company’s external public accountants, whether identified in statute or determined in the Company’s opinion to be incompatible with the role of an independent auditor. All fees identified in the preceding table were approved by the Audit Committee. During 2015, the Audit Committee reviewed all non-audit services provided by the Company’s independent registered public accounting firm and concluded that the provision of such non-audit services was compatible with maintaining the independence of the external public accountants.
AUDIT COMMITTEE REPORT
The Audit Committee provides oversight of the Company’sour accounting and financial reporting processes, systems of internal accounting and financial controls and the audits of the Company’sour financial statements. The Audit Committee reviewed
with the Company’sour independent registered public accounting firm and management the financial information included in the Company’sour audited financial statements. All members of the Audit Committee are “independent,” as defined in the Nasdaq Marketplace Rules of The Nasdaq Stock Market.
Rules.Management is responsible for the Company’sour internal controls and financial reporting process. The Company’sOur independent registered public accounting firm is responsible for performing an audit of the Company’sour financial statements in accordance with generally accepted auditing standards in the United States of America and for expressing an opinion on those financial statements based on its audit. The Audit Committee reviews these processes on behalf of the Board. The Audit Committee has reviewed and discussed with the Company’sour management and itsour independent registered public accounting firm the audited financial statements contained in the Company’sour Annual Report on Form 10-K for the year ended December 31, 2015.Report. The Audit Committee has also reviewed and discussed management’s assessment of the effectiveness of the Company’sour internal control over financial reporting, and the opinion of the Company’sour independent registered public accounting firm on the effectiveness of the Company’sour internal control over financial reporting.
The Audit Committee also has discussed with the Company’sour independent registered public accounting firm the matters required to be discussed by the Statement on Auditing Standards No. 61 (Communication1301 (“AS 1301” Communication with Audit Committee), as amended.
The Audit Committee has received the written disclosures and the letter from the Company’sour independent registered public accounting firm required by the Statement on Auditing Standards No. 61,AS 1301, as amended, as adopted by the Public Company Accounting Oversight Board, and has discussed with the independent registered public accounting firm its independence. The Audit Committee has also considered whether the provision of the non-audit services described herein under the caption “Proposal No. 5 - Ratification of Appointment of Independent Registered Public Accounting Firm” is compatible with maintaining the independence of the independent registered public accounting firm.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report.
|
Audit Committee Lynne N. Ward (Chair) Stephen C. Evans Thomas J. Gunderson James T. Hogan Michael R. McDonnell |
72 | Understand. Innovate. Deliver.TM
Proposal No. 4:Ratification of Appointment of Independent Registered Public Accounting Firm | The Board unanimously recommends a vote FOR this proposal |
|
Subject to shareholder ratification, the Company’s Annual Report on Form 10-KAudit Committee has recommended, and the Board has appointed Deloitte to audit the financial statements of the Company for the year ending December 31, 2023. Deloitte has acted as the independent public accounting firm for the Company since 1988.
The Board anticipates that representatives of Deloitte will be participating in the Annual Meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions.
Fees Paid to Our Independent Certified Public Accounting Firm
The following table presents aggregate fees for audits of our consolidated financial statements and fees billed for other services rendered by Deloitte for the years ended December 31, 2015,2022 and 2021.
| | |
| 2022 ($) | 2021 ($) |
Audit Fees (1) | 1,442,940 | 1,378,299 |
Audit-Related Fees (2) | 66,630 | 1,002,196 |
Tax Fees (3) | 385,472 | 588,329 |
All Other Fees | — | — |
Total | 1,895,042 | 2,968,824 |
| (1) | Audit Fees: The aggregate fees billed by Deloitte, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, the Deloitte Firms) for professional services rendered for the audits and reviews of our financial statements filed with the SEC on Forms 10-K, 10-Q and 8-K, for the audit of the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, for services provided in connection with statutory and regulatory filings or engagements, and for services provided in connection with our registration statements. |
| (2) | Audit-Related Fees: The aggregate fees billed by the Deloitte Firms for all audit-related services, including audits of our employee benefit plan, due diligence services, and certain accounting consultation services. |
| (3) | Tax Fees: The aggregate fees billed by the Deloitte Firms for tax compliance, tax advice and tax planning. |
Pre-Approval Policies and Procedures
The Audit Committee ensures that the Company engages its independent registered public accounting firm to provide only audit and non-audit services that are compatible with maintaining the independence of its public accountants. The Audit Committee approves or pre-approves all services provided by our public accountants. Permitted services include audit and audit-related services, tax and other non-audit related services. Certain services are identified as restricted. Restricted services are those services that may not be provided by our external public accountants, whether identified in statute or determined in our opinion to be incompatible with the role of an independent auditor. All fees identified in the preceding table were approved by the Audit Committee. During 2022, the Audit Committee reviewed all non-audit services provided by our independent registered public accounting firm and concluded that the provision of such non-audit services was compatible with maintaining the independence of the external public accountants.
STOCK OWNERSHIP AND TRADING
Principal Holders of Voting Securities
The following table sets forth information as of March 21, 2023, with respect to the beneficial ownership of shares of Common Stock by each person known by the Company to be the beneficial owner of more than 5% of the Common Stock, by each director, by each director nominee, by each NEO and by all directors and executive officers as a group.
For each individual and group included in the table below, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the 57,440,116 shares of Common Stock outstanding as of March 21, 2023, plus the number of shares of Common Stock that such person or group had the right to acquire on or within 60 days after March 21, 2023.
Unless otherwise noted, each person named has sole voting and investment power with respect to the shares indicated.
| | |
Principal Shareholders | Number of Shares | Percentage of Outstanding
Common Stock |
Blackrock, Inc. (1) | 9,670,688 | 16.8% |
The Vanguard Group, Inc. (1) | 6,824,344 | 11.9% |
William Blair Investment Management, LLC (1) | 3,729,980 | 6.5% |
| | |
Officers, Directors and Nominees | | |
Fred P. Lampropoulos (2) (3) | 1,565,728 | 2.7% |
Joseph C. Wright (2) (3) | 123,831 | * |
Brian G. Lloyd (3) | 84,327 | * |
Raul Parra (2) (3) | 52,547 | * |
Neil W. Peterson (3) | 45,250 | * |
Ronald A. Frost (4) | 15,144 | * |
Michel Voigt | 7,397 | * |
F. Ann Millner, Ed.D. (3) | 85,898 | * |
A. Scott Anderson (3) | 82,335 | * |
Thomas J. Gunderson (3) | 73,352 | * |
David K. Floyd | 8,686 | * |
Lynne N. Ward (3) | 8,347 | * |
Lonny J. Carpenter | 7,472 | * |
James T. Hogan | 7,102 | * |
Stephen C. Evans | 2,914 | * |
Laura S. Kaiser | - | * |
Michael R. McDonnell | - | * |
Total Officers, Directors and Nominees (16 people) | 2,170,329 | 3.7% |
* Represents a holding of less than 1.0%
| (1) | Based upon the most recent Schedules 13F or 13G available on the SEC’s website as of March 21, 2023, with holdings reported as of December 31, 2022. Number of shares listed represents aggregate number of shares of Common Stock beneficially owned by each reporting person as indicated in the applicable Schedule 13F or 13G report. |
| (2) | The computations above include the following share amounts that are held in our 401(k) Plan on behalf of participants as of March 21, 2023: |
| ● | Mr. Lampropoulos, 97,077 shares |
74 | Understand. Innovate. Deliver.TM
| ● | All executive officers and directors as a group, 99,926 shares |
| (3) | The computations above include the following share amounts that are subject to options exercisable within 60 days after March 21, 2023, none of which had been exercised as of such date: |
| |
● Mr. Lampropoulos, 493,757 shares | ● Dr. Millner, 61,250 shares |
● Mr. Wright, 93,407 shares | ● Mr. Gunderson, 66,250 shares |
● Mr. Lloyd, 68,407 shares | ● Mr. Anderson, 41,250 shares |
● Mr. Peterson, 45,250 shares | ● Ms. Ward, 5,433 shares |
● Mr. Parra, 43,026 shares ● Mr. Voigt, 6,865 shares | ● All executive officers and directors as a group, 924,895 shares |
| |
| (4) | Based upon the most recent Form 4 filed by Mr. Frost with the SEC on August 12, 2022 and our review of transactions by Mr. Frost with respect to shares previously held in our 401(k) Plan. |
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 the review of these reports and written representations from our directors and the applicable officers, we believe that in 2022 all reports, were timely filed with the Commission.SEC.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table contains information regarding our equity compensation plans as of December 31, 2022 (in thousands, except weighted-average price):
Plan Category | Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights (a) | Weighted-average
exercise price of
outstanding options,
warrants and rights (b) | Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a)) (c) |
Equity compensation plans approved by security holders | 3,326 (1)(2) | 49.62 (3) | 2,921 (4) |
| (1) | Consists of 966,907 shares of Common Stock subject to options granted under the Merit Medical Systems, Inc. 2006 Long-Term Incentive Plan, 2,109,984 shares of Common Stock subject to options granted under the 2018 Long-Term Incentive Plan, up to 218,164 shares of Common Stock subject to performance stock units granted under the 2018 Incentive Plan, and 30,500 shares of Common Stock subject to restricted stock units under the 2018 Incentive Plan. |
| (2) | Performance stock units are included in column (a) based on actual FCF and rTSR multipliers for unvested awards with completed performance periods and based on the maximum potential payout for awards with incomplete performance periods. |
| (3) | The weighted-average exercise price included in the table excludes the performance stock units and restricted stock units included in column (a), as the underlying shares are issued and distributed to the recipient upon vesting and do not have an exercise price. |
| (4) | Consists of 102,739 shares available to be issued under the 1996 Merit Medical Systems, Inc. Employee Stock Purchase Plan and 2,817,861 shares available to be issued under the 2018 Incentive Plan. |
AUDIT COMMITTEE
Nolan E. Karras, ChairmanOTHER PROXY INFORMATION
Information about the Annual Meeting and Voting
On behalf of the Company, the Board is soliciting your proxy to vote at our Annual Meeting (or at any adjournment of the meeting). This Proxy Statement includes information you need to know to vote at the Annual Meeting.
Date, Time and Place of the Annual Meeting
Date:May 18, 2023
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/MMSI2023
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 2023 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, 2023.
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 21, 2023 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 57,440,116 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 21, 2023. 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.
Richard W. Edelman76 | Understand. Innovate. Deliver.TM
Franklin J. Miller, MD
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 three director nominees identified in this Proxy Statement; |
| ● | FOR the non-binding resolution to approve the compensation of our NEOs; |
| ● | FOR the non-binding resolution to approve the one-year frequency of future advisory votes on Executive Compensation during the next six years; and |
| ● | FOR the ratification of the appointment of Deloitte to serve as our independent registered public accounting firm for the year ending December 31, 2023. |
In respect of any other matters that may properly come before the Annual Meeting, shares represented by properly executed proxies may be voted at the discretion of the proxy holder. The Board is not currently aware of any other matters to be presented at the Annual Meeting.
Revocation of Proxies
A shareholder who has executed and returned a proxy may revoke it at any time prior to its exercise at the Annual Meeting by executing and returning a proxy bearing a later date by mail, by voting via the Internet, by filing with Brian G. Lloyd, our Corporate Secretary, at the address set forth above, a written notice of revocation bearing a later date than the proxy being revoked, or by voting the Common Stock covered thereby in person at the Annual Meeting. In order to revoke a proxy executed with respect to shares held in street name, the shareholder must contact the appropriate broker or nominee.
Broker Non-Votes
Shares of Common Stock that are held in “street name,” which means shares of Common Stock held of record by a trustee or in an account at a brokerage firm, bank, dealer, or other similar organization (collectively, brokerage firms), may be voted, even if the beneficial holder does not provide the brokerage firm with voting instructions. Brokerage firms have the authority under applicable securities rules to cast votes on certain “routine” matters, even if they do not receive instructions from their customers. However, the ratification of our independent registered accounting firm is considered the only routine matter for which brokerage firms may vote un-instructed shares. The election of directors, the advisory vote to approve named executive officer compensation, and the advisory vote to determine the frequency of shareholder advisory votes on executive compensation during the next six years, are not considered routine matters under current securities rules. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.”
As all of the proposals described in this Proxy Statement, other than the proposal to ratify our independent registered accounting firm, are considered to be non-routine matters, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.
Vote Required
A majority of the issued and outstanding shares of Common Stock entitled to vote, properly represented in person or by proxy, is required for a quorum at the Annual Meeting. Abstentions and broker non-votes will be counted as “represented” for the purpose of determining the presence or absence of a quorum. Under the Utah Revised Business Corporation Act, once a quorum is established, shareholder approval with respect to a particular proposal is generally obtained when the votes cast in favor of the proposal exceed the votes cast against the proposal.
Holders of shares of Common Stock are entitled to one vote at the Annual Meeting for each share of Common Stock held of record on the Record Date. The vote required for each of the proposals described in this Proxy Statement is as follows:
Proposal 1: In the election of directors, shareholders will not be allowed to cumulate their votes. Each director-nominee who receives a majority of the votes cast with respect to his or her election will be elected as a director of the Company.
Proposal 2: The advisory vote on executive compensation is non-binding. Nevertheless, we will record the number of votes cast in favor of and against the proposal and will report the voting results.
Proposal 3: The advisory vote on the frequency of future shareholder advisory votes on executive compensation is non-binding. Nevertheless, we will record the number of votes cast in favor of and against each proposal and will report the voting results.
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, 2023 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 fourth 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/MMSI2023 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/MMSI2023, type your question into the “Ask a Question” field, and click “Submit.”
78 | Understand. Innovate. Deliver.TM
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 18, 2023. The Annual Meeting will begin promptly at 2:00 p.m. MDT on May 18, 2023. 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/MMSI2023.
The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong Wi-Fi connection wherever they intend to participate in the meeting. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior to the start of the meeting.
If you encounter any difficulties accessing the Annual Meeting during the check-in or meeting time, please call the technical support number that will be posted on the Annual Meeting login page. Technical support will be available starting at 1:45 p.m. MDT on May 18, 2023 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 |
| 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 17, 2023 for shares held directly and by 11:59 P.M. ET on May 15, 2023 for shares held in the Company’s 401(k) Profit Sharing Plan.
Holders in “Street Name”
If a shareholder holds shares in “street name,” the shareholder should have received a voting instruction form from the broker, bank or other nominee holding the shares. The shareholder should follow the instructions in the voting instruction form in order to instruct your broker, bank or other nominee on how to vote your shares. The availability of telephone and Internet voting will depend on the voting process of the broker, bank or nominee.
A large number of banks and brokerage firms are participating in the Broadridge Investor Communications Solutions, Inc. (Broadridge) online program. This program provides eligible shareholders the opportunity to vote via the Internet or by telephone. If a shareholder’s bank or brokerage firm is participating in Broadridge’s program, the voting form will provide instructions.
If a shareholder holds shares in “street name” and the shareholder wishes to vote at the Annual Meeting, the shareholder will need the 16-digit control number included on her, his or its proxy card or voting instruction form (if the shareholder received a printed copy of the proxy materials) or included in the email to the shareholder, if she, he or it received the proxy materials by email in order to be able to vote her, his or its shares at the Annual Meeting.
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 15, 2023. You may not vote your shares held in the Company’s 401(k) Profit Sharing Plan virtually at the Annual Meeting.
80 | Understand. Innovate. Deliver.TM
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:
|
Merit Medical Systems, Inc. Attn: Brian G. Lloyd, Corporate Secretary 1600 West Merit Parkway South Jordan, Utah 84095 |
OTHER MATTERS
Other Matters
As of the date of this Proxy Statement, the Board knows of no other matters to be presented for action at the Annual Meeting.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.
PROPOSALS OF SHAREHOLDERS
Shareholder Proposals for Annual Meeting 2024
If any shareholder intends to present a proposal to be considered for inclusion in the Company’sour proxy materials in connection with the Company’s 2017 Annual Meetingour 2024 annual meeting of Shareholders,shareholders, the proposal must be in proper form (per SEC Regulation 14A, Rule 14a-8-Shareholder14a-8 - Shareholder Proposals) and received by theour Corporate Secretary of the Company on or beforeno later than December 26, 2016.8, 2023. Nominations of persons for election as directors of the Company must be made consistent with the provisions of the Company’sour Bylaws, including the requirement that the shareholder must provide timely notice of the nomination in proper written form to the Secretary of the Company. To be timely with respect to the Company’s 2017 Annual Meeting of Shareholders, a shareholder’s notice to the Company’s Secretary must be delivered to or mailed and received at the principal executive offices of the Company no earlier than December 23, 2016, nor later than January 22, 2017, inour Corporate Secretary.
In accordance with the procedures set forth in the Company’s Bylaws.
ADDITIONAL INFORMATION
The Company will provide without chargeour Bylaws, shareholders who wish to any person from whomsubmit a proposal for consideration at our 2024 annual meeting of shareholders, including a nomination for director, but who do not wish to submit a proposal for inclusion in our proxy is solicited by the Board, upon the written request of that person, a copystatement, must deliver notice of the Company’s Annual Report on Form 10-K forproposal to our Corporate Secretary at our principal executive offices no earlier than December 20, 2023 and no later than January 19, 2024. Such proposals must contain all information required by our Bylaws. If the fiscal year ended December 31, 2015, including the financial statementsmonth and schedules thereto (as well as exhibits thereto, if specifically requested), required to be filed
with the Commission. Written requests for that information should be directed to the Secretaryday of the Company at 1600 West Merit Parkway, South Jordan, Utah 84095.
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS
The Company will deliver one copynext 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
to each address where multiple record holdersrelates, we will inform our shareholders of
its Common Stock reside, unless it has received instructions fromthe change in a
shareholder totimely manner, as well as any change in the
contrary. The Company will promptly deliver another copydate by which proposals of
shareholders must be received.
Non-GAAP Financial Measures
Although our financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) and the majority of the financial measures described in this Proxy Statement are calculated in accordance with GAAP, the Board and 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 operating income and margin; |
| ● | 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, certain inventory write-offs and inventory mark-up related to acquisitions. Non-GAAP gross margin is calculated by dividing non-GAAP gross profit by reported net sales. Non-GAAP Operating income and margin: Non-GAAP operating income is calculated by adjusting GAAP operating income for certain items which are deemed by Merit’s management to be outside of core operations and vary in amount and frequency among periods, such as expenses related to acquisitions or other extraordinary transactions, 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, governmental proceedings, and changes in governmental or industry regulations, as well as other items referenced in the tables below. Non-GAAP operating margin is calculated by dividing non-GAAP operating income by reported net sales. 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, gains or losses on disposal of certain assets, changes in tax regulations, and other items set forth in the tables below. Non-GAAP Earnings Per Share: Non-GAAP earnings per share is defined as non-GAAP net income divided by the diluted shares outstanding for the corresponding period. |
Our management team uses these and other non-GAAP financial measures to evaluate our profitability and efficiency, to compare operating results to prior periods, to evaluate changes in the operating results of our operating segments, and to measure and allocate financial resources internally. Our Board and Compensation Committee may also use these non-GAAP financial measures to assess the performance of certain of our NEOs. Neither our management nor our Board or Compensation Committee consider any holdersuch 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
82 | Understand. Innovate. Deliver.TM
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 (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 shared address where it has delivered only oneresult 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 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. Stockholders wishing to receive another copyStatement 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 deliver such request in writingnot be comparable with similarly titled measures of other companies. We urge readers to review the reconciliations of our non-GAAP financial measures to the Secretarycomparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business or results of the Company at 1600 West Merit Parkway, South Jordan, Utah 84095.operations.
Tables reconciling our 2022, 2021, 2020, 2019 and 2018 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 INCOME and EARINGS per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
| | | | | | | | | | | | |
| Year Ended December 31, 2022 |
| Pre-Tax | Tax Impact | After-Tax | Per Share
Impact |
GAAP net income | $ | 82,629 | | $ | (8,113) | | | $ | 74,516 | | $ | 1.29 |
| | | | | | | | | | | | |
Non-GAAP adjustments: | | | | | | | | | | | | |
Cost of Sales | | | | | | | | | | | | |
Amortization of intangibles | | 42,154 | | | (10,335) | | | | 31,819 | | | 0.55 |
Operating expenses | | | | | | | | | | | | |
Contingent consideration expense | | 4,611 | | | 14 | | | | 4,625 | | | 0.08 |
Impairment charges | | 2,219 | | | (318) | | | | 1,901 | | | 0.03 |
Amortization of intangibles | | 6,300 | | | (1,558) | | | | 4,742 | | | 0.08 |
Performance-based share-based compensation (2) | | 5,506 | | | (546) | | | | 4,960 | | | 0.09 |
Corporate transformation and restructuring (3) | | 23,757 | | | (5,516) | | | | 18,241 | | | 0.32 |
Acquisition-related | | 2,114 | | | (517) | | | | 1,597 | | | 0.03 |
Medical Device Regulation expenses (4) | | 12,933 | | | (3,166) | | | | 9,767 | | | 0.17 |
Other (5) | | 7,966 | | | (1,893) | | | | 6,073 | | | 0.11 |
Other (Income) Expense | | | | | | | | | | | | |
Amortization of long-term debt issuance costs | | 604 | | | (148) | | | | 456 | | | 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 | $ | 192,200 | | $ | (36,449) | | | $ | 155,751 | | $ | 2.70 |
| | | | |
Diluted shares | | | | 57,671 |
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, 2021 |
| Pre-Tax | Tax Impact | After-Tax | Per Share
Impact |
GAAP net income | $ | 53,917 | | $ | (5,463) | | | $ | 48,454 | | $ | 0.84 |
| | | | | | | | | | | | |
Non-GAAP adjustments: | | | | | | | | | | | | |
Cost of Sales | | | | | | | | | | | | |
Amortization of intangibles | | 42,453 | | | (10,543) | | | | 31,910 | | | 0.56 |
Inventory write-off (1) | | 1,620 | | | (202) | | | | 1,418 | | | 0.02 |
Operating expenses | | | | | | | | | | | | |
Contingent consideration expense | | 3,161 | | | 52 | | | | 3,213 | | | 0.06 |
Impairment charges | | 4,283 | | | (481) | | | | 3,802 | | | 0.07 |
Amortization of intangibles | | 7,183 | | | (1,798) | | | | 5,385 | | | 0.09 |
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 | | 8,473 | | | (2,100) | | | | 6,373 | | | 0.11 |
Medical Device Regulation expenses (4) | | 4,036 | | | (1,001) | | | | 3,035 | | | 0.05 |
Other (5) | | 16,652 | | | (2,977) | | | | 13,675 | | | 0.24 |
Other (Income) Expense | | | | | | | | | | | | |
Amortization of long-term debt issuance costs | | 604 | | | (150) | | | | 454 | | | 0.01 |
| | | | |
Non-GAAP net income | $ | 166,066 | | $ | (29,887) | | | $ | 136,179 | | $ | 2.37 |
| | | | |
Diluted shares | | | | 57,359 |
84 | Understand. Innovate. Deliver.TM
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
Impact |
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 |
Reconciliation of GAAP Net Income and earnings per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
| | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| Pre-Tax | Tax Impact | After-Tax | Per Share
Impact |
GAAP net income | $ | 2,193 | | $ | 3,258 | | | $ | 5,451 | | $ | 0.10 |
| | | | | | | | | | | | |
Non-GAAP adjustments: | | | | | | | | | | | | |
Cost of Sales | | | | | | | | | | | | |
Amortization of intangibles | | 49,707 | | | (12,730) | | | | 36,977 | | | 0.66 |
Inventory mark-up related to acquisitions | | 1,122 | | | (289) | | | | 833 | | | 0.01 |
Operating expenses | | | | | | | | | | | | |
Contingent consideration benefit | | (232) | | | (47) | | | | (279) | | | (0.00) |
Impairment charges | | 23,750 | | | (6,113) | | | | 17,637 | | | 0.31 |
Amortization of intangibles | | 10,964 | | | (2,884) | | | | 8,080 | | | 0.14 |
Corporate transformation and restructuring (3) | | 5,551 | | | (1,433) | | | | 4,118 | | | 0.07 |
Acquisition-related | | 3,497 | | | (743) | | | | 2,754 | | | 0.05 |
Medical Device Regulation expenses (4) | | 562 | | | (98) | | | | 464 | | | 0.01 |
Other (5) | | 7,282 | | | (1,874) | | | | 5,408 | | | 0.10 |
Other (Income) Expense | | | | | | | | | | | | |
Amortization of long-term debt issuance costs | | 821 | | | (211) | | | | 610 | | | 0.01 |
Tax expense related to restructuring (6) | | — | | | 93 | | | | 93 | | | 0.00 |
| | | | | | | | |
Non-GAAP net income | $ | 105,217 | | $ | (23,071) | | | $ | 82,146 | | $ | 1.46 |
| | | | |
Diluted shares | | | | 56,235 |
86 | Understand. Innovate. Deliver.TM
Reconciliation of GAAP Net Income and earnings per share
to Non-GAAP Net Income and earnings per share
(Unaudited, in thousands except per share amounts)
| | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| Pre-Tax | Tax Impact | After-Tax | Per Share
Impact |
GAAP net income | $ | 49,519 | | $ | (7,502) | | | $ | 42,017 | | $ | 0.78 |
| | | | | | | | | | | | |
Non-GAAP adjustments: | | | | | | | | | | | | |
Cost of Sales | | | | | | | | | | | | |
Amortization of intangibles | | 31,795 | | | (8,123) | | | | 23,672 | | | 0.43 |
Inventory mark-up related to acquisitions | | 5,233 | | | (1,347) | | | | 3,886 | | | 0.07 |
Operating expenses | | | | | | | | | | | | |
Contingent consideration benefit | | (698) | | | (21) | | | | (719) | | | (0.01) |
Impairment charges | | 657 | | | (169) | | | | 488 | | | 0.01 |
Amortization of intangibles | | 9,438 | | | (2,503) | | | | 6,935 | | | 0.12 |
Corporate transformation and restructuring (3) | | 920 | | | (205) | | | | 715 | | | 0.01 |
Acquisition-related | | 7,584 | | | (1,679) | | | | 5,905 | | | 0.11 |
Other (5) | | 6,445 | | | (1,659) | | | | 4,786 | | | 0.09 |
Other (Income) Expense | | | | | | | | | | | | |
Amortization of long-term debt issuance costs | | 804 | | | (207) | | | | 597 | | | 0.01 |
Tax expense related to tax reform (7) | | — | | | 3,005 | | | | 3,005 | | | 0.06 |
| | | | |
Non-GAAP net income | $ | 111,697 | | $ | (20,410) | | | $ | 91,287 | | $ | 1.69 |
| | | | |
Diluted shares | | | | 53,931 |
Reconciliation of Reported GAAP OPERATING INCOME (Loss)
to Non-GAAP OPERATING INCOME
(Unaudited, in thousands)
| | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2022 | | | | 2021 | | | | 2020 | | | 2019 | | 2018 |
Net Sales as Reported | $ | 1,150,981 | | | $ | 1,074,751 | | | $ | 963,875 | | $ | 994,852 | $ | 882,753 |
| | | | | | | | | | | | | | | |
GAAP Operating income (loss) | | 87,563 | | | | 60,916 | | | | (1,562) | | | 15,434 | | 58,617 |
Cost of Sales | | | | | | | | | | | | | | | |
Amortization of intangibles | | 42,154 | | | | 42,453 | | | | 50,696 | | | 49,707 | | 31,795 |
Inventory write-off (1) | | — | | | | 1,620 | | | | 1,752 | | | — | | — |
Inventory mark-up related to acquisitions | | — | | | | — | | | | 191 | | | 1,122 | | 5,233 |
Operating Expenses | | | | | | | | | | | | | | | |
Contingent consideration expense (benefit) | | 4,611 | | | | 3,161 | | | | (7,960) | | | (232) | | (698) |
Impairment charges | | 2,219 | | | | 4,283 | | | | 36,504 | | | 23,750 | | 657 |
Amortization of intangibles | | 6,300 | | | | 7,183 | | | | 7,943 | | | 10,964 | | 9,438 |
Performance-based share-based compensation (2) | | 5,506 | | | | 5,035 | | | | 3,735 | | | — | | — |
Corporate transformation and restructuring (3) | | 23,757 | | | | 18,649 | | | | 14,175 | | | 5,551 | | 920 |
Acquisition-related | | 2,114 | | | | 8,473 | | | | 1,229 | | | 3,497 | | 7,584 |
Medical Device Regulation expenses (4) | | 12,933 | | | | 4,036 | | | | 1,379 | | | 562 | | — |
Other (5) | | 7,966 | | | | 16,652 | | | | 24,438 | | | 7,282 | | 6,445 |
| | | | | | | | | | | | | | | |
Non-GAAP Operating Income | $ | 195,123 | | | $ | 172,461 | | | $ | 132,520 | | $ | 117,637 | $ | 119,991 |
| | | | | | | | | | | | | | | |
Non-GAAP Operating Margin | | 17.0% | | | | 16.0% | | | | 13.7% | | | 11.8% | | 13.6% |
Note: Certain per share impacts may not sum to totals due to rounding.
| (1) | Represents 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 (“MDR”). |
| (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), 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, costs to comply with Merit’s corporate integrity agreement with the DOJ, $18.7 million of settlement costs in 2020 to fully resolve an investigation conducted by the DOJ, and activist shareholder settlement fees in 2020. |
| (6) | Represents net tax expense related to non-recurring tax withholdings in connection with restructuring of certain international subsidiaries. |
| (7) | Represents net tax impact related to the enactment of the Tax Cuts and Jobs Act. |
88 | Understand. Innovate. Deliver.TM
Reconciliation of Reported Gross Margin (GAAP)
to Non-GAAP Gross Margin (Non-GAAP)
(Unaudited, as a percentage of reported revenue)
| | | | | |
| Year Ended |
| December 31, |
| 2022 | 2021 | 2020 | 2019 | 2018 |
Reported Gross Margin | 45.1% | 45.2% | 41.6% | 43.5% | 44.7% |
| | | | | |
Add back impact of: | | | | | |
Amortization of intangibles | 3.7% | 4.0% | 5.3% | 5.0% | 3.6% |
Inventory write-off (1) | — | 0.2% | 0.2% | — | — |
Inventory mark-up related to acquisitions | — | — | 0.0% | 0.1% | 0.6% |
Non-GAAP Gross Margin | 48.8% | 49.3% | 47.1% | 48.6% | 48.9% |
Note: Certain percentages may not sum to totals due to rounding
| (1) | Represents write-off of inventory related to the divestiture or exit of certain businesses or product lines. |
MERIT MEDICAL SYSTEMS, INC.
1600 W MERIT PKWY
SOUTH JORDAN, UT 84095
VOTE BY INTERNET -
Before The Meeting – Go towww.proxyvote.com
Use the Internet to transmit your voting instructions
and for electronic delivery of information up untilinformation. Vote by 11:59 P.M. Eastern Time
on May 17, 2023 for shares held directly and by 11:59 P.M. Eastern Time
on May 15, 2023 for shares held in
the day before the cut-off date or meeting date. 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.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like
During The Meeting – Go to reducewww.virtualshareholdermeeting.com/MMSI2023
You may attend the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronicallymeeting via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and when prompted, indicatevote during the meeting.
Have the information that you agree to receive or access proxy materials electronicallyis printed in future years.
the box marked by the arrow availableand follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up untilinstructions.
Vote by 11:59 P.M. Eastern Time on May 17, 2023 for shares held directly
and by 11:59 P.M. Eastern Time on May 15, 2023 for shares held
in the day before the cut-off date or meeting date. Merit Medical Systems, Inc. 401(k) Profit Sharing Plan.
Have your proxy card in hand when you call and then follow the instructions.
Mark, sign and date your proxy card and return it in the postage-paid envelope we have
provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood,
NY 11717.
| | |
| | |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | KEEP THIS PORTION FOR YOUR RECORDS |
| | DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| | | | | |
| | | | | |
MERIT MEDICAL SYSTEMS, INC. The Board of Directors recommends you vote FOR“FOR” each of the following: | | following directors: |
| ElectionThe election of three (3) directors to the Merit Medical Systems, Inc. Board of Directors | For | Withhold | for a three (3) year term or until their successors are elected and qualified. Nominees: For All | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.Against Abstain |
| Nominees | All | All | Except |
| | o | o | o | |
01) Richard W. Edelman | | |
02) Michael E. Stillabower, M.D. | | |
03) F. Ann Millner, Ed.D. | | |
The Board of Directors recommends you vote FOR“FOR” proposals 2. through2 and 4 and “3 Years” on proposal 3.: | | For Against Abstain |
| Proposal to approve, on anApproval of a non-binding, advisory basis,resolution approving the compensation of the Company's named executive officers.officers as described in the Merit Medical Systems, Inc. Proxy Statement. | | o o o |
3. | | 1 Year 2 Years 3 Years Abstain |
| Approval of a non-binding advisory resolution to determine whether, during the next six years, the Company’s shareholders will be asked to approve the compensation of the Company’s named executive officers every one, two or three years. | |
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| 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, 2016.2023. | | o o o |
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NOTE: To transact 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. | | |
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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] | | | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report Notice & Proxy Statement is/are available at www.proxyvote.com.
MERIT MEDICAL SYSTEMS, INC.
Annual Meeting of Shareholders
May 26, 2016 3:18, 2023, 2:00 PM
(Mountain Time)This proxy is solicited by the Board of Director
Directors
The undersigned hereby appoints Fred P. Lampropoulos, Brian G. Lloyd and Bernard J. BirkettRaul 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 28, 2016
21, 2023 at the Annual Meeting of Shareholders (the “Annual Meeting”) to be held virtually via live webcast at the Company’s corporate offices, 1600 West Merit Parkway, South Jordan, Utah 84095,www.virtualshareholdermeeting.com/MMSI2023, on Thursday, May 26, 2016,18, 2023, at 3:2:00 p.m., local time,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 15, 2023, 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.
recommendations (FOR Proposals 1, 2 and 4 and ONE YEAR on Proposal 3) 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 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.
side)
