SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
ATRION CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[ATRION LETTERHEAD]
April 8, 2004
Dear Stockholder:
You are cordially invited to attend the 2004 annual meeting of
stockholders of Atrion Corporation which will be held at our offices in Allen,
Texas on Thursday, May 27, 2004 at 10:00 a.m., Central Time. A notice of the
annual meeting and the Company's proxy statement, together with a proxy card,
accompany this letter. Also enclosed is a copy of our 2003 Annual Report.
At the annual meeting this year, you will be asked to elect directors
and to ratify the appointment of Grant Thornton LLP as independent accountants.
We hope that you will attend the meeting in person. However, whether
or not you plan to be personally present, please read the accompanying proxy
statement carefully and then complete, date and sign the enclosed proxy card
and return it promptly in the envelope provided herewith. This will ensure
representation of your shares of common stock if you are unable to attend the
meeting.
Sincerely,
Emile A. Battat
Chairman and President
ATRION CORPORATION
ONE ALLENTOWN PARKWAY
ALLEN, TEXAS 75002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Atrion Corporation:
Notice is hereby given that the annual meeting of stockholders of
Atrion Corporation (the "Company") will be held at the Company's offices, One
Allentown Parkway, Allen, Texas on Thursday, May 27, 2004 at 10:00 a.m.,
Central Time, for the following purposes:
1. To elect Class III directors.
2. To ratify the appointment of Grant Thornton LLP as
independent accountants to audit the Company's financial statements for the
year 2004.
3. To transact such other business as may properly come before
the meeting.
The Board of Directors fixed the close of business on March 31, 2004
as the record date for the determination of stockholders entitled to notice of
and to vote at the annual meeting and at any adjournment thereof.
By Order of the Board of Directors
Jeffery Strickland
Vice President and Chief Financial
Officer, Secretary and Treasurer
April 8, 2004
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED HEREWITH. IF YOU ATTEND THE MEETING, YOU MAY, IF YOU WISH, WITHDRAW
YOUR PROXY AND VOTE IN PERSON.
ATRION CORPORATION
ONE ALLENTOWN PARKWAY
ALLEN, TEXAS 75002
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 27, 2004
GENERAL INFORMATION
This Proxy Statement is being furnished to the stockholders of Atrion
Corporation (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company to be voted at the annual meeting of
stockholders to be held at the Company's offices, One Allentown Parkway, Allen,
Texas on Thursday, May 27, 2004 at 10:00 a.m., Central Time, and at any
adjournment of such meeting. This Proxy Statement and the accompanying proxy
card are being first sent or given to stockholders on or about April 8, 2004.
The Company's 2003 Annual Report is being mailed to stockholders with this
Proxy Statement.
PURPOSE OF THE MEETING
At the annual meeting, the Company's stockholders will consider and
vote upon the following matters: (i) the election of two Class III directors
and (ii) a proposal to ratify the appointment of Grant Thornton LLP as
independent accountants to audit the Company's financial statements for the
year 2004.
VOTING SECURITIES AND RECORD DATE
Stockholders of record at the close of business on March 31, 2004 (the
"Record Date") will be entitled to notice of, and to vote at, the annual
meeting and at any adjournment thereof. At the close of business on the Record
Date, the Company had outstanding and entitled to vote 1,708,107 shares of
common stock, the only voting securities of the Company. Holders of record of
shares of common stock outstanding on the Record Date will be entitled to one
vote for each share held of record on that date upon each matter presented to
the stockholders to be voted upon at the meeting.
If the enclosed proxy card is properly executed and received in time
for the annual meeting, unless previously revoked, shares of common stock
represented thereby will be voted at the annual meeting as specified by the
stockholder on the proxy. If no such specification is made, shares represented
by such proxy will be voted FOR the election as directors of the nominees of
the Board of Directors named herein and FOR ratification of the appointment of
Grant Thornton LLP as independent accountants to audit the Company's financial
statements for the year 2004. In addition, in their discretion the persons
designated in the proxy card will vote upon such other business as may properly
come before the meeting, including voting for any adjournment of the meeting
proposed by the Board of Directors. A proxy may be revoked at any time before
it is voted at the meeting by delivering to the Company a later-dated proxy, by
voting by ballot at the meeting or by filing with the Inspectors of Election an
instrument of revocation.
REQUIRED VOTE
The presence, in person or by proxy, of the holders of a majority of
the shares of common stock outstanding on the Record Date is necessary to
constitute a quorum at the annual meeting. Abstentions and broker non-votes
will be counted as present and represented at the annual meeting for purposes
of determining a quorum. Directors will be elected at the annual meeting by a
plurality of the votes cast by the stockholders present in person or by proxy
and entitled to vote. Abstentions and broker non-votes will have no effect on
the outcome of the election of directors.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes: Class
I, Class II and Class III. Two Class III directors are to be elected at the
annual meeting to serve until the annual meeting of stockholders to be held in
2007 and until the election and qualification of their respective successors in
office. Both of the nominees for election as Class III directors who are named
below are members of the Board of Directors and were previously elected by the
stockholders. It is intended that the persons named in the proxy card will vote
for the election of these nominees. If either of the nominees listed below,
each of whom has indicated his willingness to serve as a director if elected,
is not a candidate when the election occurs, proxies will be voted for election
of the remaining nominee and may be voted for the election of any substitute
nominee.
The following information is furnished with respect to each of the
Board of Directors' nominees for election as a director and each director whose
term will continue after the annual meeting.
Name, Age, Service as a Director of the Company (a)
Principal Occupation, Positions and Offices,
Other Directorships and Business Experience
NOMINEES FOR ELECTION AS DIRECTORS
Class III - Term Ending in 2007
ROGER F. STEBBING
Mr. Stebbing, age 63, has been a director since 1992. Mr. Stebbing is
President and Chief Executive Officer of Stebbing and Associates,
Inc., an engineering consulting company, and has served in such
capacities since 1986. He was President and Chief Executive Officer of
Marlboro Enterprises, Inc., a company engaged in chemical plant
engineering, design, construction and operation, for many years until
the sale of that company in September 1999 and continued to serve as
an employee of Marlboro Enterprises, Inc. until September 2001. Mr.
Stebbing is a licensed professional engineer and has a BSC honors
degree in Chemical Engineering from Salford University.
JOHN P. STUPP, JR.
Mr. Stupp, age 54, has been a director since 1985. He is President of
Stupp Bros., Inc., a diversified holding company, and has served in
such capacity since March 2004. From April 1995 until March 2004, he
served as Executive Vice President and Chief Operating Officer of
Stupp Bros., Inc., and since August 1995 he has also served as Chief
Executive Officer, of Stupp Corporation, a division of Stupp Bros.,
Inc. Mr. Stupp holds a Bachelor of Science degree in Business and
Economics from Lehigh University. He serves as a director of
International Fuel Technology, Inc.
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DIRECTORS CONTINUING IN OFFICE
Class I - Term Ending in 2005
EMILE A. BATTAT
Mr. Battat, age 66, has been a director since 1987 and has served as
Chairman of the Board of the Company since January 1998 and as
President and Chief Executive Officer of the Company, and as Chairman
of the Board or President of each of the Company's subsidiaries, since
October 1998. Mr. Battat holds Bachelor of Science and Master of
Science degrees in Mechanical Engineering from Massachusetts Institute
of Technology and a Master of Business Administration degree from
Harvard University. He is an associate member of Sigma Xi, a
scientific honor society.
JOHN H. P. MALEY
Mr. Maley, age 69, has been a director since February 1996. Mr. Maley
has been a management consultant since January 1995, and has served as
Chairman of Magister Corporation, a manufacturer of rehabilitation and
fitness products, since July 1995 and as Chairman of Compex
Technologies, Inc., a manufacturer of medical and consumer
electrotherapy devices, since December 2001. Mr. Maley holds Bachelor
of Arts and Master of Arts degrees in Economics from Cambridge
University. He is a director of Compex Technologies, Inc.
Class II - Term Ending in 2006
RICHARD O. JACOBSON
Mr. Jacobson, age 67, has been a director since 1992. Mr. Jacobson is
Chairman of the Board of Jacobson Warehouse Company, Inc., a privately
held warehouse company which he founded 36 years ago. He is also
Chairman of the Board of Jacobson Transportation Company, Inc., a
truckload common carrier. Mr. Jacobson became Chairman of the Boards
of these companies in 1998, having served for many years prior to 1998
as their President and Chief Executive Officer. Mr. Jacobson has a
degree in Business Administration from the University of Iowa. Mr.
Jacobson is a director of FelCor Lodging Trust, Inc., Heartland
Express, Inc. and Firstar Bank of Des Moines, N.A.
HUGH J. MORGAN, JR.
Mr. Morgan, age 75, has been a director since 1988. Mr. Morgan is a
private investor. He served as Chairman of the Board of National Bank
of Commerce of Birmingham from February 1990 until April 2003. Mr.
Morgan holds a Bachelor of Arts degree from Princeton University and
is a graduate of the Vanderbilt University Law School.
---------
(a) Unless the context otherwise requires, references in this Proxy
Statement to the Company, Board of Directors and executive officers of
the Company prior to February 25, 1997 mean ATRION Corporation, the
Company's predecessor, and its Board of Directors and executive
officers.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ITS NOMINEES,
ROGER F. STEBBING AND JOHN P. STUPP, JR.
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INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEES
Director Independence. The Company's Board of Directors has determined
that the following directors are "independent" within the meaning of the
National Association of Securities Dealers, Inc. ("NASD") listing standards:
Richard O. Jacobson, John H.P. Maley, Hugh J. Morgan, Jr., Roger F. Stebbing
and John P. Stupp, Jr.
Meetings. The Board of Directors held four meetings during 2003. Each
director attended at least 75% of the aggregate of the number of meetings of
the Board of Directors and the number of meetings of all committees on which he
served held in 2003 during the time he served as a director or as a member of
such committees.
Nominating Process. In light of its small size, the Board of Directors
has determined, and has adopted a resolution providing, that nominees for
election to the Board of Directors will be selected by a majority vote of the
directors meeting the NASD independence requirements and, consequently, does
not have a separate nominating committee or a nominating committee charter. In
accordance with resolutions adopted by the Board of Directors, in selecting
nominees for election as directors, the Board of Directors, with the assistance
of the Corporate Governance Committee, will review and evaluate candidates
submitted by directors and management and by the Company's stockholders
pursuant to the procedures set forth in the Company's Bylaws and described in
"STOCKHOLDERS PROPOSALS -- Stockholder Nominations for Directors" below. The
Board of Directors, in considering possible nominees, will take into account
the following: (a) each director should be an individual of the highest
character and integrity; (b) each director should have substantial experience
that is relevant to the Company; (c) each director should have sufficient time
available to devote to the affairs of the Company; and (d) each director should
represent the best interest of all stockholders. All possible nominees are to
be reviewed in the same manner, regardless of whether they have been submitted
by stockholders, directors or management.
Committees. The Board of Directors has four standing committees, the
Executive Committee, the Corporate Governance Committee, the Compensation
Committee and the Audit Committee. The Executive Committee is currently
comprised of Emile A. Battat, Richard O. Jacobson, John H. P. Maley and Hugh J.
Morgan, Jr. The Corporate Governance Committee, which is currently comprised of
Richard O. Jacobson, John H. P. Maley, and Roger F. Stebbing, is to assist in
the evaluation of possible nominees for election to the Board of Directors as
requested by the Board of Directors, review annually and advise the Board of
Directors with respect to the compensation of directors and recommend to the
Board of Directors (a) the number of directors to be fixed in connection with
each annual meeting of stockholders, (b) the directors to be appointed to each
of the committees of the Board, (c) corporate governance guidelines and (d)
proposed changes to the charter of the Corporate Governance Committee. The
Corporate Governance Committee met one time in 2003. The Compensation
Committee, which is currently comprised of Richard O. Jacobson, Hugh J. Morgan,
Jr. and John P. Stupp, Jr., makes recommendations to the Board of Directors as
to the remuneration of all executive officers of the Company, administers the
Atrion Corporation 1994 Key Employee Stock Incentive Plan (the "1994 Stock
Incentive Plan"), and the Atrion Corporation 1997 Stock Incentive Plan (the
"1997 Stock Incentive Plan") and reviews and makes recommendations regarding
the Company's other incentive compensation plans. The Compensation Committee
met one time in 2003. The Audit Committee, the current members of which are
Hugh J. Morgan, Jr., Roger F. Stebbing and John P. Stupp, Jr., appoints,
determines the appropriate compensation for and oversees the work of the
Company's independent auditors, and assists the Board of Directors in its
oversight of the Company's accounting and financial reporting principles and
policies and internal audit controls and procedures and oversees related party
transactions. The Audit Committee also reviews, at least annually, the Audit
Committee Charter and is to recommend any changes to the Audit Committee
Charter to the Board of Directors. The Board of Directors has determined that
each member of the Audit Committee is independent within the meaning of the
NASD listing standards and is financially literate and that Mr. Stupp is an
audit committee financial expert. The Audit Committee met five times in 2003.
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Board Compensation. Each outside director is paid a fee of $1,000 per
month and $750 per day for each meeting of the Board of Directors at which he
is in attendance. In addition, the Chairman of the Audit Committee is paid a
fee of $333 per month. The Company reimburses each such director for travel and
out-of-pocket expenses incurred in connection with attending meetings of the
Board of Directors. The 1997 Stock Incentive Plan provides that on July 10 of
each year each outside director is to be granted automatically an option to
purchase 2,000 shares of common stock, at an exercise price equal to the fair
market value of the common stock on the date of grant. Each such option is
fully exercisable on the date of grant and expires on the first to occur of (i)
the tenth anniversary of the date of grant; (ii) six months after the date the
outside director ceases to be a director of the Company other than as a result
of his death; or (iii) one year after the outside director ceases to be a
director by reason of his death.
Stockholder Communications to the Board of Directors. Any stockholder
wishing to communicate with the Board of Directors about any matter should send
the communication, in written form, to Emile A. Battat, Chairman and President,
at the Company's principal office in Allen, Texas. Mr. Battat will promptly
send the communication to the other members of the Board of Directors.
Attendance at Stockholder Meetings. The Board of Directors has adopted
a policy encouraging each director to attend, if practicable, the annual
meeting of stockholders of the Company. The 2003 annual meeting was attended by
five directors.
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SECURITIES OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of shares of common stock of the Company as of March 15, 2004 by (i)
each of the directors of the Company, two of whom are also the Board of
Directors' nominees for election as directors at the annual meeting; (ii) the
executive officers of the Company who are named in the Summary Compensation
Table herein; (iii) all of the directors and executive officers of the Company
as a group, and (iv) each other person known by the Company to be the
beneficial owner of more than 5% of the outstanding common stock of the
Company.
NUMBER OF SHARES PERCENT
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (A) OF CLASS (A)
------------------------ ---------------------- ------------
Emile A. Battat (b) 201,900 (c) 11.3%
Richard O. Jacobson 39,180 (c) 2.3%
John H. P. Maley 23,000 (c) 1.3%
Hugh J. Morgan, Jr. 15,500 (c)(d) *
Roger F. Stebbing 24,800 (c) 1.5%
John P. Stupp, Jr. 161,000 (c)(e) 9.3%
Jeffery Strickland 25,291 1.5%
Dimensional Fund Advisors Inc. (f) 128,600 7.5%
T. Rowe Price Associates, Inc. (g) 168,000 9.8%
Oak Forest Investment Management, Inc.(h) 123,629 7.2%
All directors and executive
officers as a group 490,671 (i) 26.7%
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* Less than 1 % of class.
(a) Based on 1,705,807 shares of common stock outstanding on March 15,
2004, plus shares which can be acquired through the exercise of
options within 60 days thereafter by the specified individual or
group. Except as otherwise indicated in the notes to this table,
beneficial ownership includes sole voting and investment power.
(b) The business address for Mr. Battat is One Allentown Parkway, Allen,
Texas 75002-4211.
(c) The shares listed include the following shares issuable upon the
exercise of options exercisable on March 15, 2004 or within 60 days
thereafter: Mr. Battat, 75,000 shares; Mr. Jacobson, 6,000; Mr. Maley,
22,000; Mr. Morgan, 4,000; Mr. Stebbing, 6,000; and Mr. Stupp, 22,000.
All such persons are parties to award agreements setting forth certain
terms of options granted to them under the 1997 Stock Incentive Plan,
and Messrs. Maley and Stupp are parties to award agreements setting
forth certain terms of options granted to them under the Atrion
Corporation 1998 Outside Directors Stock Option Plan.
(d) Does not include 23,000 shares held by Mr. Morgan's children and their
spouses and Mr. Morgan's grandchildren as a result of gifts by Mr.
Morgan, none of which shares is beneficially owned by Mr. Morgan.
(e) Includes 135,000 shares held by Stupp Bros., Inc. as to which shares
Mr. Stupp shares voting power and investment power as a director and
executive officer and as a voting trustee of a voting trust which owns
100% of the voting stock of Stupp Bros., Inc. The 135,000 shares held
by Stupp Bros., Inc. represent 7.9% of the common stock of the Company
outstanding as of March 15, 2004. The business address for Mr. Stupp
and Stupp Bros., Inc. is 3800 Weber Road, St. Louis, Missouri 63125.
(f) The address of Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue,
11th Floor, Santa Monica, California 90401. This information is based
upon a Schedule 13G dated February 6, 2004 filed with the Securities
and Exchange Commission (the "Commission") and furnished to the
Company by Dimensional Fund Advisors Inc. ("Dimensional"), a
registered investment adviser, reporting that Dimensional is deemed to
have beneficial ownership of 128,600 shares of common stock of the
Company and that all of such shares are held in portfolios of
investment companies registered under the Investment Company Act of
1940 as to which Dimensional serves as investment advisor or other
investment vehicles as to which Dimensional serves as investment
manager. In its Schedule 13G, Dimensional has reported that it has
sole power to vote or direct
6
the vote and the sole power to dispose or direct the disposition of
128,600 shares of common stock of the Company. Dimensional has
disclaimed beneficial ownership of all such shares.
(g) The address of T. Rowe Price Associates, Inc. is 100 East Pratt
Street, Baltimore, Maryland 21202. This information is based upon a
Schedule 13G dated February 13, 2004 filed with the Commission and
furnished to the Company by T. Rowe Price Associates, Inc. ("Price
Associates") and T. Rowe Price Small-Cap Value Fund, Inc. reporting
that T. Rowe Price Small-Cap Value Fund, Inc. has sole power to vote
or direct the vote of such shares of common stock and that Price
Associates, which serves as investment adviser for T. Rowe Price
Small-Cap Value Fund, Inc., has sole power to dispose or direct the
disposition of such shares. For purposes of the reporting requirements
of the Exchange Act, Price Associates is deemed to be a beneficial
owner of such shares of common stock; however, Price Associates has
expressly disclaimed beneficial ownership of all such shares.
(h) The address of Oak Forest Investment Management, Inc. ("Oak Forest")
is 9705 Carmel Court, Bethesda, Maryland. This information is based
upon a Schedule 13G dated January 31, 2004 filed with the Commission
and furnished to the Company reporting that Oak Forest is the
beneficial owner of 123,629 shares of common stock of the Company.
(i) See notes (a)-(e) above.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors to file initial reports of ownership and reports of
changes of ownership of the Company's common stock with the Commission.
Executive officers and directors are required to furnish the Company with
copies of Section 16(a) forms that they file. Based upon a review of these
filings and written representations from the Company's directors and executive
officers regarding the filing of such reports, the Company believes that its
directors and executive officers complied with all applicable Section 16(a)
filing requirements during 2003, except that a Form 4 required to be filed by
Roger F. Stebbing for a transaction on February 25, 2003 was filed late.
APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to stockholder ratification, the Audit Committee has appointed
the firm of Grant Thornton LLP as independent accountants to audit the
financial statements of the Company for the year 2004. A representative of
Grant Thornton LLP will attend the annual meeting, will have an opportunity to
make a statement, and will be available to respond to appropriate questions. If
the stockholders do not ratify the appointment of Grant Thornton LLP, the
selection of independent accountants will be reconsidered by the Audit
Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY
THE APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT ACCOUNTANTS TO
AUDIT THE FINANCIAL STATEMENTS OF THE COMPANY FOR THE YEAR 2004.
CHANGE OF INDEPENDENT ACCOUNTANTS IN 2002
On April 5, 2002, the Board of Directors, on the recommendation of its
Audit Committee, dismissed Arthur Andersen LLP as the Company's independent
accountants and appointed Grant Thornton LLP to serve as the Company's
independent accountants for the year ended December 31, 2002, subject to
stockholder ratification.
Arthur Andersen LLP's report on the Company's consolidated financial
statements for the year ended December 31, 2001 did not contain an adverse
opinion or disclaimer of opinion, nor was the report qualified or modified as
to uncertainty, audit scope or accounting principles.
During the year ended December 31, 2001 and through the date of the
dismissal of Arthur Andersen LLP, there were no disagreements with Arthur
Andersen LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
Arthur Andersen LLP's
7
satisfaction, would have caused it to make reference to the subject matter in
connection with its report on the Company's consolidated financial statements
for such years; and there were no reportable events as defined in Item
304(a)(1)(v) of Regulation S-K.
During the year ended December 31, 2001 and through the date of the
dismissal of Arthur Andersen LLP, the Company did not consult Grant Thornton
LLP with respect to the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's consolidated financial statements, or any
other matters or reportable events as set forth in Items 304(a)(2)(i) and (ii)
of Regulation S-K.
AUDIT AND RELATED FEES
Audit Fees
The aggregate fees billed by Grant Thornton LLP for professional
services rendered for the audit of the Company's annual financial statements
and the reviews of the financial statements included in the Company's quarterly
reports on Form 10-Q were $91,644 for the year ended December 31, 2003 and
$74,055 for the year ended December 31, 2002.
Audit Related Fees
The aggregate fees billed by Grant Thornton LLP for professional
services rendered for the audit of the Company's benefit plans and
consultations regarding financial and reporting standards were $11,790 for the
year ended December 31, 2003 and $15,420 for the year ended December 31, 2002.
Tax Fees
The aggregate fees billed for Grant Thornton LLP for professional
services rendered for tax services were $25,055 for the year ended December 31,
2003 and $12,735 for the year ended December 31, 2002. These fees relate to
federal and state tax compliance and tax advice in each such year.
All Other Fees
There were no fees billed by Grant Thornton LLP for services rendered
for the year ended December 31, 2003 other than those set forth above. The
aggregate fees billed by Grant Thornton LLP for all other services rendered for
the year ended December 31, 2002 were $2,600 relating to consultation on
employee compensation matters.
The Audit Committee has determined that the provision by Grant
Thornton LLP of the above referenced services is compatible with maintaining
its independence.
The Audit Committee has adopted policies and procedures for
pre-approval of audit and non-audit services in order to ensure that the
provision of those services does not impair the auditor's independence. In
accordance with those policies and procedures, the Company is not to engage the
independent auditors to render any audit or non-audit services unless either
the service is approved in advance by the Audit Committee or the engagement to
render the service is entered into pursuant to the Audit Committee's
pre-approval policies and procedures. In the fourth quarter of each year, the
Audit Committee is to review the services expected to be performed by the
independent auditor. The Audit Committee will pre-approve fee levels for the
up-coming fiscal year for each of the following categories: audit,
audit-related and tax compliance/planning services (individual projects less
than $10,000). Tax compliance/planning projects exceeding $10,000 and all other
services not pre-approved in the categories above will require specific
pre-approval from the Audit Committee on an individual project basis. Approval
for such services may be requested at the next Audit Committee meeting or, if
earlier approval is necessary, it may be obtained in accordance with the Audit
Committee's delegation to the Audit Committee Chairman as described below. The
Audit Committee will not delegate its responsibilities to pre-approve services
performed by the independent auditor to management. However, the Audit
Committee has delegated pre-approval
8
authority to the Audit Committee Chairman for unplanned services that arise
during the year. The Chairman has the authority to review and approve
permissible services up to $10,000 per service, provided that the aggregate
amount of such services does not exceed the prior-year audit fee. The Audit
Committee Chairman must report, for informational purposes only, any
pre-approval decisions to the Audit Committee at its next scheduled meeting.
During 2003, no services were provided by Grant Thornton LLP other than in
accordance with the pre-approval policies and procedures then in place.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors has reviewed and
discussed with management the Company's audited financial statements as of and
for the year ended December 31, 2003. The Audit Committee has discussed with
Grant Thornton LLP, the Company's auditors, the matters required to be
discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants. The Audit Committee has received and
reviewed the written disclosures and the letter from the Company's auditors
required by Independence Standard No. 1, Independence Discussions with Audit
Committees, as amended, by the Independence Standards Board, and has discussed
with the auditors their independence.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the financial statements
referred to above be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2003.
MEMBERS OF THE AUDIT COMMITTEE
John P. Stupp, Jr. (Chairman) Hugh J. Morgan, Jr. Roger F. Stebbing
9
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
annual and long-term compensation for services in all capacities to the Company
and its subsidiaries for the years ended December 31, 2003, 2002, and 2001 of
those persons who served as the Chief Executive Officer of the Company at any
time during 2003 and other persons who served as executive officers of the
Company at any time during 2003 and whose salary and bonus for the year ended
December 31, 2003 exceeded $100,000 (such officers are referred to herein as
the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
ANNUAL AWARDS
------------
COMPENSATION(1) SECURITIES
NAME AND --------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(2) COMPENSATION
------------------ ---- ------ ------- ------------ ------------
Emile A. Battat 2003 $500,000 $100,000 0 $2,970(3)
Chairman of the 2002 500,000 250,000 150,000 5,665
Board, President 2001 250,000 300,000 20,000 5,390
And Chief
Executive Officer
Jeffery Strickland 2003 $180,000 $ 68,220 0 $5,592(3)
Vice President and 2002 170,000 66,178 10,000 7,706
Chief Financial 2001 160,000 98,400 0 7,582
Officer, Secretary
And Treasurer
---------
(1) In accordance with the regulations of the Commission, this table does
not include perquisites and other personal benefits received by Named
Executive Officers since the value of perquisites and other benefits
for each Named Executive Officer did not exceed the lesser of $50,000
or 10% of the total annual salary and bonus reported for such Named
Executive Officer.
(2) For Mr. Battat, options granted in 2002 represent nonqualified stock
options granted under the 1997 Stock Incentive Plan and options
granted in 2001 represent incentive stock options under the 1997 Stock
Incentive Plan. For Mr. Strickland, options granted in 2002 represent
both incentive stock options and nonqualified stock options granted
under the 1997 Stock Incentive Plan.
(3) Includes the following paid or accrued by the Company or one or more
of its subsidiaries: (i) matching contributions to the Atrion
Corporation 401(k) Savings Plan for Mr. Battat, $2,400; and Mr.
Strickland, $2,157; and (ii) payment of life insurance premiums for
Mr. Battat, $570; and Mr. Strickland, $3,435.
10
INFORMATION CONCERNING STOCK OPTIONS
The following table provides information as to exercises of options by
the Named Executive Officers during the year ended December 31, 2003 and the
values of each Named Executive Officer's unexercised options at December 31,
2003.
AGGREGATED OPTION EXERCISES IN 2003
AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN THE MONEY OPTIONS
SHARES OPTIONS AT YEAR END AT YEAR END(1)
ACQUIRED VALUE ------------------------------ ------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------ ----------- -------- ----------- ------------- ----------- -------------
Emile A. Battat 82,000 $42,579 75,000 0 $2,064,000 $ 0
Jeffery Strickland 1,000 28,940 5,000 10,000 164,050 140,500
---------
(1) Such value is equal to the product of (i) the closing price of the
common stock of the Company on December 31, 2003 ($45.44 per share)
less the exercise price and (ii) the number of shares subject to
in-the-money options.
RETIREMENT PLAN
The Company maintains a "cash balance" retirement plan (the "Cash
Balance Plan") that includes all full-time active employees of the Company and
its subsidiaries other than Quest Medical, Inc. Each participant has an account
balance which represents his or her benefit under the Cash Balance Plan. The
Cash Balance Plan provides for the Company to make annual allocations to a
participant's cash balance account in an amount equal to 3% of the
participant's eligible compensation up to the Social Security wage base and 6%
in excess thereof and for an interest credit each plan year equal to the rate
on 30 year U.S. Treasury bonds during November of the preceding plan year. For
the 2003 plan year, the interest rate was 4.96%. For purposes of the Cash
Balance Plan, "eligible compensation" is the participant's salary as included
in the Summary Compensation Table above, subject to an annual limitation
imposed by law which for 2003 was $200,000 and is $205,000 in 2004. Generally,
each participant becomes fully vested in the benefits under such plan after
five years of employment. Benefits may be paid, subject to certain limitations
under the Internal Revenue Code of 1986, as amended, upon termination of
employment, retirement or death. The Cash Balance Plan specifies various
options that participants may select for the distribution of their accrued
balance, including forms of annuity payments and lump sum distributions. All of
the Named Executive Officers participate in the Cash Balance Plan. The
estimated annual retirement benefits payable to the Named Executive Officers
under the Cash Balance Plan at normal retirement age of 65, assuming 4% annual
increases in eligible compensation until retirement, no change from 2004 levels
of maximum includable compensation and Social Security wage base, and a 30 year
U.S. Treasury bond rate of 5.5%, are as follows: Mr. Battat, $6,209; and Mr.
Strickland, $74,557.
CERTAIN AGREEMENTS AND PLANS
The Company has an employment agreement with Emile A. Battat, the
Company's Chairman, President and Chief Executive Officer, that provides for
his employment for an initial term that expires on December 31, 2006. The base
salary for each calendar year is $500,000. In addition, Mr. Battat is entitled
to receive a cash bonus each year that is not less than $100,000. If Mr.
Battat's employment is terminated during the term by the Company for other than
"just cause" or by Mr. Battat for "good reason" (as those terms are defined in
the agreement) or upon Mr. Battat's death or disability, Mr. Battat will
receive (1) a cash payment equal to the sum of (i) all cash
11
compensation accrued but not paid and (ii) the base salary and the annual bonus
for the remainder of the term, (2) immediate vesting of all stock options or
equity granted to him, and (3) continued participation in the Company's health
benefit plans for the remainder of the term. In addition, the Company will
reimburse Mr. Battat for excise taxes imposed on him in the event payments or
benefits received by him result in "parachute payments" under the Internal
Revenue Code and for income taxes on such reimbursement.
The Company has a severance plan pursuant to which Jeffery Strickland,
Vice President and Chief Financial Officer, Secretary and Treasurer of the
Company, will be entitled to severance compensation if his employment is
terminated under certain conditions set forth in the plan. The severance pay is
to be equal to Mr. Strickland's annual base salary for the 12 months preceding
the termination of employment.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, which is currently comprised of Richard O.
Jacobson, Hugh J. Morgan, Jr. and John P. Stupp, Jr., establishes the overall
executive compensation program for the Company and makes recommendations for
base salaries, salary increases and bonuses for the Company's executive
officers. In addition, the Compensation Committee administers the Company's
incentive programs that cover the Company's executive officers. The executive
compensation program, which is periodically reviewed and modified, as
necessary, by the Compensation Committee, is designed to attract, retain and
motivate management personnel and includes compensation that is tied to
enhanced stockholder value.
Compensation Policies
The principal components of compensation for the Company's executive
officers are base salaries, cash bonus and incentive compensation and stock
awards. Base salaries of the Company's executive officers are reviewed annually
and adjustments made generally on the basis of the Company's performance as
measured by certain financial and non-financial criteria, various survey
information respecting compensation of executive officers, compensation levels
for executive officers in a broad range of companies (which range is broader
than the group of companies included in the peer group index used in comparing
cumulative stockholder return), cost-of-living information and individual
performance of the particular executive officer. The Compensation Committee has
not assigned relative weights or values to any of such criteria. With respect
to all executive officers, the Compensation Committee takes into consideration
a review of individual performance. With respect to the financial performance
of the Company, the Compensation Committee generally takes into consideration
the Company's earnings from continuing operations, earnings per share and total
stockholder return. Executive officers of the Company are eligible for
discretionary bonuses as determined by the Compensation Committee. At the
recommendation of the Compensation Committee, the Company and its subsidiaries
have implemented cash incentive plans covering certain key employees. These
plans are intended to foster a corporate culture focused on bottom line results
by providing key employees with a substantial stake in reducing costs and
increasing sales and productivity while conserving capital resources.
Stock awards are designed to motivate executives to improve the
long-term performance of the Company's Common stock in the market, to encourage
them to achieve superior results over the long term and to align the interests
of executive officers with those of stockholders. Decisions respecting
restricted stock awards are made on the basis of the criteria referred to
above, and decisions respecting the grant of stock options are made using the
same criteria as well as the number of unexercised options held by key
employees.
Compensation of Chief Executive Officer
In early 2002, the Company entered into an employment agreement with
Mr. Battat having a term expiring at the end of 2006. The employment agreement
was amended in late 2002. (For a description of the terms of Mr. Battat's
employment agreement, as amended, see "EXECUTIVE COMPENSATION - Certain
Agreements and Plans.") Under the employment agreement, Mr. Battat's base
salary is fixed for each year of the term at $500,000 and he is to receive an
annual bonus of not less than $100,000. In making determinations regarding the
amount of such bonus, the Compensation Committee generally reviews the
performance of the Company, Mr. Battat's
12
contributions and leadership and the compensation of chief executive officers
of other companies. In addition to cash compensation under his employment
agreement, Mr. Battat is entitled to receive stock-based incentive awards. In
2003, the Compensation Committee, at Mr. Battat's request, maintained Mr.
Battat's cash bonus at the minimum contractual amount of $100,000 and did not
make stock-based awards to him.
MEMBERS OF THE COMPENSATION COMMITTEE
Richard O. Jacobson Hugh J. Morgan, Jr. John P. Stupp, Jr.
PERFORMANCE OF COMMON STOCK
The following graph compares the cumulative total return on investment
(the change in year-end stock price plus reinvestment of dividends), for each
of the last five fiscal years, assuming that $100 was invested on December 31,
1998 in each of (i) the Company, (ii) a group of stocks consisting of companies
in the Media General Index of Surgical & Medical Instruments and (iii) a group
of stocks consisting of all companies whose stocks are included in the S&P 500
Composite Index.
13
[PERFORMANCE GRAPH]
COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS
FISCAL YEAR ENDING
----------------------------------------------------------------------------------------
COMPANY/INDEX/MARKET 12/31/1998 12/31/1999 12/29/2000 12/31/2001 12/31/2002 12/31/2003
---------- ---------- ---------- ---------- ---------- ----------
ATRION Corp. 100.00 132.81 184.38 475.63 281.35 571.22
Surgical & Medical
Instruments 100.00 90.89 105.42 120.06 97.99 145.27
S&P Composite 100.00 121.04 110.02 96.95 75.52 97.18
14
STOCKHOLDER PROPOSALS
STOCKHOLDER PROPOSALS IN THE COMPANY'S PROXY STATEMENT
In order for proposals by stockholders to be considered for inclusion
in the Company's proxy material relating to the 2005 annual meeting of
stockholders, such proposals must be received by the Company on or before
December 9, 2004.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT ANNUAL MEETINGS
The Company's Bylaws provide that a stockholder who desires to propose
any business at an annual meeting of stockholders must give the Company written
notice of such stockholder's intent to bring such business before such meeting.
Such notice is to be delivered to, or mailed, postage prepaid, and received by,
the Secretary of the Company at the principal executive offices of the Company
not later than the close of business on the later of the 120th day prior to the
first anniversary of the date of the Company's proxy statement released to
Stockholders in connection with the preceding year's annual meeting of
stockholders. However, in the event that no annual meeting was held in the
previous year or the date of the annual meeting is more than 30 days before or
more than 60 days after the anniversary date of the previous year's meeting,
notice by the stockholder must be delivered not later than the close of
business on the later of the 120th day prior to such annual meeting and the
10th day following the date on which public announcement of the date of the
meeting is first made. Such notice for the 2005 annual meeting must be
delivered not later than December 9, 2004, provided the date of the 2005 annual
meeting is not more than 30 days before or more than 60 days after May 27,
2005. The stockholder's written notice must set forth (a) a brief description
of the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting; (b) the name and address of the
stockholder who intends to propose such business; (c) a representation that the
stockholder is a holder of record of shares of common stock of the Company
entitled to vote at such meeting and intends to appear in person or by proxy at
such meeting to propose such business; (d) any material interest of the
stockholder in such business; and (e) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the proposal is made (i) the
name and address of such stockholder, as they appear on the Company's books,
and of such beneficial owner and (ii) the class and number of shares of the
Company which are owned beneficially and of record by such stockholder and such
beneficial owner. The Chairman of the meeting may refuse to transact any
business presented at any meeting without compliance with the foregoing
procedure.
STOCKHOLDER NOMINATIONS FOR DIRECTORS
The Company's Bylaws provide that a stockholder who desires to
nominate directors at a meeting of stockholders must give the Company written
notice, within the same time period described above for a stockholder who
desires to bring business before a meeting, setting forth (a) the name and
address of the stockholder who intends to make the nomination and of the person
or persons to be nominated; (b) a representation that the stockholder is a
holder of record of shares of common stock of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Commission had each nominee been nominated, or intended to be
nominated, by the Board of Directors; and (e) the consent of each nominee to
serve as a director of the Company if so elected. The Chairman of the meeting
may refuse to acknowledge the nomination of any person if a stockholder has
failed to comply with the foregoing procedure.
15
COST AND METHOD OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone, telegram, facsimile and other electronic communication methods by
the directors, officers and employees of the Company without additional
compensation. Brokerage firms, nominees, fiduciaries and other custodians will
be requested to forward soliciting materials to the beneficial owners of common
stock of the Company held in their names or in those of their nominees and
their reasonable expenses will be reimbursed upon request.
OTHER BUSINESS
The Board of Directors does not intend to bring any business before
the meeting other than that stated herein and is not aware of any other matters
that may be presented for action at the meeting. However, if any other matters
should properly come before the meeting, or any adjournments thereof, it is the
intention of the persons named in the accompanying proxy to vote on such
matters as they, in their discretion, may determine.
By Order of the Board of Directors
Jeffery Strickland
Vice President and Chief Financial
Officer, Secretary and Treasurer
April 8, 2004
16
ATRION CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Richard O. Jacobson and Hugh J. Morgan, Jr., or either of them, proxies of the
undersigned, with full power of substitution, to represent and to vote all
shares of common stock of Atrion Corporation which the undersigned would be
entitled to vote at the annual meeting of stockholders of Atrion Corporation to
be held at the offices of Atrion Corporation, One Allentown Parkway, Allen,
Texas, on Thursday, May 27, 2004 at 10:00 a.m., Central Time, and at any
adjournment thereof, in the following manner:
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
3
ANNUAL MEETING OF STOCKHOLDERS OF
ATRION CORPORATION
MAY 27, 2004
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
-- Please detach along perforated line and mail in the envelope provided. --
--------------------------------------------------------------------------------
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
--------------------------------------------------------------------------------
1. Election of Directors:
[ ] FOR ALL NOMINEES
[ ] WITHHOLD AUTHORITY FOR ALL NOMINEES
[ ] FOR ALL EXCEPT (See instructions below)
NOMINEES:
Roger F. Stebbing
John P. Stupp, Jr.
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and write the nominee name(s) below:
____________________________________________
____________________________________________
2. PROPOSAL TO RATIFY THE APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT
ACCOUNTANTS OF THE COMPANY.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL NOMINEES AND
"FOR" ITEM 2. IF THIS PROXY IS PROPERLY SIGNED AND RETURNED, THE SHARES
REPRESENTED WILL BE VOTED "FOR" THE ELECTION OF ALL NOMINEES AND "FOR" ITEM 2
UNLESS YOU OTHERWISE SPECIFY HEREIN.
PLEASE DATE, SIGN AND RETURN TODAY IN THE ENCLOSED ENVELOPE.
NO POSTAGE REQUIRED IF MAILED IN THE UNITED STATES.
______________________________________________________________________________
[ ] To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method.
Signature of Stockholder ______________________________ Date: __________________
Signature of Stockholder ______________________________ Date: __________________
NOTE: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such.
If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.