MITMENTS AND CONTINGENCIES

We are obligated under non-terminable operating leases for manufacturing facilities, finished good distribution, office space and equipment. Total rental expense on these operating leases and on our manufacturing and office building for the years ended December 31, 2011, 2010 and 2009, approximated $4.1 million, $3.7 million and $2.8 million, respectively.

The future minimum lease payments for operating leases as of December 31, 2011, consisted of the following (in thousands):



Years Ending	Operating
December 31	Leases

2012	$	3,444
2013	2,861
2014	2,353
2015	2,177
2016	2,165
Thereafter	6,378

Total minimum lease payments	$	19,378

Irish Government Development Agency Grants. As of December 31, 2011, we had entered into several grant agreements with the Irish Government Development Agency. We have recorded the grants related to research and development projects and costs of hiring and training employees as a reduction of operating expenses for the years ended December 31, 2011, 2010 and 2009 in the amounts of approximately $261,000, $40,000 and $177,000, respectively. Grants related to the acquisition of property and equipment purchased in Ireland are amortized as a reduction to depreciation expense over lives corresponding to the depreciable lives of such property and equipment. The balance of deferred credits related to such grants as of December 31, 2011 and 2010, was approximately $2.0 million and $1.8 million, respectively. During the years ended December 31, 2011, 2010 and 2009, approximately $106,000, $111,000 and $120,000, respectively, of the deferred credit was amortized as a reduction of operating expenses.

We have committed to repay the Irish government for grants received if we were to cease production in Ireland prior to the expiration of the grant liability period. The grant liability period is usually between five and eight years from the last claim made on a grant. As of December 31, 2011, the total amount of grants that could be subject to refund was approximately $500,000. Our management does not believe we will ever have to repay any of these grant monies, as we have no intention of ceasing operations in Ireland.

Letter of Credit. As of December 31, 2011, we had a standby letter of credit with Wells Fargo in the amount of approximately $88,000 which is related to the construction of our new building in South Jordan, Utah.

Litigation. In the ordinary course of business, and other than as described herein, we are involved in litigation and claims which management believes will not have a material effect on our financial position or results of operations.

Intellectual property rights, particularly patents, play a significant role in product development and help differentiate competitors in the medical device market. Competing companies file infringement lawsuits in attempts to bolster their intellectual property portfolios or enhance their financial standing. Intellectual property litigation is time consuming, costly and unpredictable. Monetary judgments, remedies or restitution are often not determined until the conclusion of trial court proceedings, which can be modified on appeal. Accordingly, the outcomes of pending litigation are difficult to predict or quantify. A third party has asserted that certain of our product offerings infringe their patents. We believe we have well-recognized defenses and intend to vigorously defend our position. While the pending litigation is in its preliminary stages and it is not possible to assess damages or predict an outcome, an adverse outcome could limit our ability to sell certain products or reduce our operating margin on the sale of these products and could have a material effect on our financial position, results of operations or liquidity. We are self-insured with respect to intellectual property infringement.

FDA Warning Letter. On February 1, 2012, Merit Medical Ireland Ltd., one of our wholly-owned subsidiaries (“Merit Ireland”), received a warning letter from the FDA (the “Warning Letter”) alleging that certain modifications to our hydrophilic coating process for our Laureate® Hydrophilic Guidewire (the “Guidewire”) constitute a significant change that could affect the Guidewire safety or effectiveness. In the Warning Letter, the FDA claimed that we do not have an approved application for premarket approval in effect pursuant to Section 515(a) of the FDCA or an approved application for an investigational device exemption under Section 520(g) of the Act. The FDA also claims in the Warning Letter that we did not properly notify the FDA of our intent to introduce the modified Guidewire into commercial distribution, as required by Section 510(k) of the Act.

We have submitted a formal response to the FDA and have ceased all Guidewire shipments into, within and from the United States. Such shipments represent less than one percent of our worldwide revenues for the year ended December 31, 2011. There can be no assurance that the FDA will accept our response and approve the actions we have taken with respect to the Guidewire or permit us to manufacture, sell, market or distribute the Guidewire as currently offered and packaged. Even though we have timely responded to the FDA, there can be no assurances regarding the length of time or cost it will take us to resolve these issues to our satisfaction and to the satisfaction of the FDA.