SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or 14a-12
ATRION CORPORATION
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a(6)(i) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
[ATRION LETTERHEAD]
April 18, 2002
Dear Stockholder:
You are cordially invited to attend the 2002 annual meeting of
stockholders of Atrion Corporation which will be held at our offices in Allen,
Texas on Thursday, May 30, 2002 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 2001 Annual Report.
At the annual meeting this year, you will be asked to elect directors
and to ratify the Board of Directors' 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,
/s/ Emile A. Battat
----------------------------------------
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 30, 2002 at 10:00 a.m.,
Central Time, for the following purposes:
1. To elect Class I directors.
2. To ratify the Board of Directors' appointment of Grant
Thornton LLP as independent accountants to audit the Company's financial
statements for the year 2002.
3. To transact such other business as may properly come before
the meeting.
The Board of Directors fixed the close of business on April 8, 2002 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 18, 2002
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 30, 2002
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 30, 2002 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 18, 2002.
The Company's 2001 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 I directors and
(ii) a proposal to ratify the Board of Directors' appointment of Grant Thornton
LLP as independent accountants to audit the Company's financial statements for
the year 2002.
VOTING SECURITIES AND RECORD DATE
Stockholders of record at the close of business on April 8, 2002 (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 1,715,121 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 2002. 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 I directors are to be elected at the
annual meeting to serve until the annual meeting of stockholders to be held in
2005 and until the election and qualification of their respective successors in
office. Both of the nominees for election as Class I 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 I -- Term Ending in 2005
EMILE A. BATTAT
Mr. Battat, age 64, 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 was President and Chief Executive Officer of
Piedmont Enterprises, Inc., a privately-held consulting firm, from
1994 until 1998. Mr. Battat served as the President and Chief
Executive Officer of Minemet, Inc., a company engaged in international
trade, from August 1978 until February 1994. From 1965 to 1978, he
served with Kaiser Industries and its affiliates, a diversified
industrial group, in various functions including strategic planning,
diversification, acquisitions and divestitures, with the last nine
years as Vice President and director of Kaiser International. 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 67, has been a director since February 1996. Mr. Maley
has been a management consultant since January 1995, has served as
Chairman of Magister Corporation, a manufacturer of orthopedic and
consumer healthcare products, since July 1995 and as Chairman of
Rehabilicare, Inc., a manufacturer of rehabilitation devices, since
December 2001. From 1976 to December 1994, Mr. Maley was President and
Chief Executive Officer of Chattanooga Group, Inc., a private
corporation that became the world's leading manufacturer of products
used for physical and sports medicine. In 1971 he founded, and from
1971 to 1974 he was President and Chief Executive Officer of, Invacare
Corporation, a company that is now recognized as the world leader in
the market for wheelchairs and a broad range of home healthcare
products. From 1962 to 1970 and in 1975, Mr. Maley was associated with
the consulting firm of McKinsey & Company, Inc., becoming a partner in
1968, and worked with clients of that firm in England, Australia and
the United States. Mr. Maley holds Bachelor of Arts and Master of Arts
degrees in Economics from Cambridge University. He is a director of
Rehabilicare, Inc.
2
DIRECTORS CONTINUING IN OFFICE
Class II -- Term Ending in 2003
RICHARD O. JACOBSON
Mr. Jacobson, age 65, 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 34 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.
JEROME J. MCGRATH
Mr. McGrath, age 79, has been a director since 1988. Mr. McGrath was
Of Counsel to the law firm of Gallagher, Boland & Meiburger from
January 1988 until his retirement in June 1997 and practiced law for
over 45 years. He is a graduate of Georgetown University and
Georgetown University Law Center.
HUGH J. MORGAN, JR.
Mr. Morgan, age 73, has been a director since 1988. Mr. Morgan is
Chairman of the Board of National Bank of Commerce of Birmingham and
has served in such position since February 1990. Mr. Morgan was
employed for many years prior to 1988 by Sonat Inc., which was a
diversified energy holding company until it merged with El Paso Energy
Corporation, where he held various positions including Vice Chairman
of the Board of Sonat Inc. and Chairman of the Board of its
wholly-owned subsidiary, Southern Natural Gas Company. Mr. Morgan
holds a Bachelor of Arts degree from Princeton University and is a
graduate of the Vanderbilt University Law School.
Class III -- Term Ending in 2004
ROGER F. STEBBING
Mr. Stebbing, age 61, 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, from 1976 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 52, has been a director since 1985. He is Executive
Vice President and Chief Operating Officer of Stupp Bros., Inc., a
diversified holding company, and has served in such capacities since
April 1996 and April 1995, respectively. From January 1992 to August
1995, Mr. Stupp also served as President, and since August 1995 he has
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.
- ---------------
(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.
3
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ITS NOMINEES,
EMILE A. BATTAT AND JOHN H. P. MALEY
INFORMATION REGARDING BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held eight meetings during 2001. 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 2001 during the time he served as a director or as a member of such
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 John H. P.
Maley, Jerome J. McGrath and Roger F. Stebbing, makes recommendations to the
Board of Directors respecting nominees for election as directors, the structure
and compensation of the Board of Directors and the responsibilities of the
committees of the Board of Directors. The Corporate Governance Committee will
consider nominees recommended by stockholders, which recommendations may be
directed to the Corporate Governance Committee in care of the Secretary of the
Company at the address stated herein. The Corporate Governance Committee met
one time in 2001. 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 1990
Stock Option Plan (the "1990 Stock Option Plan"), 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 2001. The Audit
Committee, the current members of which are Jerome J. McGrath, Roger F.
Stebbing and John P. Stupp, Jr., recommends to the Board of Directors the
appointment 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, in its
oversight of the Company's financial statements and the independent audits
thereof, in its selection, evaluation and, where appropriate, the replacement
of independent accountants and in the evaluation of the independence of the
independent accountants. The Audit Committee also reviews, at least annually,
the Audit Committee Charter. The Audit Committee met five times in 2001.
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.
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.
4
SECURITIES OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of shares of common stock of the Company as of March 15, 2002 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 55,000(b) 3.2%
Richard O. Jacobson 35,180(b) 2.0%
Jerome J. McGrath 20,300(b) 1.2%
John H. P. Maley 19,000(b) 1.1%
Hugh J. Morgan, Jr. 29,000 1.7%
Roger F. Stebbing 20,800(b) 1.2%
John P. Stupp, Jr. 157,000(b)(c) 9.2%
Jeffery Strickland 19,291(b) 1.1%
Charles S. Gamble(d) 17,000(b) 1.0%
Dimensional Fund Advisors Inc.(e) 161,550 9.5%
T. Rowe Price Associates, Inc.(f) 175,000 10.3%
All directors and executive
officers as a group 355,571(g) 19.6%
- ---------------
(a) Based on 1,697,121 shares of common stock outstanding on March 15,
2001, 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 shares listed include the following shares issuable upon the
exercise of options exercisable on March 15, 2002 or within 60 days
thereafter: Mr. Battat, 31,000; Mr. Jacobson, 28,000; Mr. McGrath,
16,000; Mr. Maley, 18,000; Mr. Stebbing, 8,000; Mr. Stupp, 18,000; Mr.
Strickland, 1,000; and Mr. Gamble, 6,500. The foregoing persons are
parties to award agreements with the Company setting forth certain
terms of the options granted to them as follows: (i) all such persons
are parties to award agreements under the 1997 Stock Incentive Plan;
and (ii) all outside directors are parties to award agreements under
the Atrion Corporation 1998 Outside Directors Stock Option Plan.
(c) 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. represents 8.0% of the common stock of the
Company outstanding as of March 15, 2002. The business address for Mr.
Stupp and Stupp Bros., Inc. is 3800 Weber Road, St. Louis, Missouri
63125.
(d) Mr. Gamble ceased serving as an executive officer of the Company prior
to December 31, 2001.
(e) 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 12, 2002 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 161,550 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 the vote and the sole power to dispose or
direct the disposition of 161,550 shares of common stock of the
Company. Dimensional has disclaimed beneficial ownership of all such
shares.
5
(f) 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 March 7, 2002 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.
(g) See notes (a)-(d) 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 2001.
APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to stockholder ratification, the Board of Directors, upon
recommendation of 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 2002. 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 Board of Directors.
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 2002.
CHANGE OF INDEPENDENT ACCOUNTANTS
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 ending December 31, 2002, subject to
stockholder ratification.
Arthur Andersen LLP's reports on the Company's consolidated financial
statements for the years ended December 31, 2001 and 2000 did not contain an
adverse opinion or disclaimer of opinion, nor were the reports qualified or
modified as to uncertainty, audit scope or accounting principles.
During the years ended December 31, 2001 and 2000 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 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 two-year period 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
6
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.
A representative of Grant Thornton LLP will be at the meeting, will
have an opportunity to make a statement and will be available to respond to
appropriate questions.
AUDIT AND RELATED FEES
Audit Fees
The aggregate fees billed by Arthur Andersen LLP for professional
services rendered for the audit of the Company's annual financial statements for
the year ended December 31, 2001 and the reviews of the financial statements
included in the Company's Forms 10-Q for 2001 were $85,000.
Financial Information Systems Design and Implementation Fees
Arthur Andersen LLP did not render professional services to the Company
for financial information systems design and implementation in 2001.
All Other Fees
The aggregate fees billed to the Company for all other services
rendered by Arthur Andersen LLP in 2001 were $30,895.
The Audit Committee has determined that the provision by Arthur
Andersen LLP of the above referenced services is compatible with maintaining its
independence.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors, which is currently
comprised of Jerome J. McGrath, Roger F. Stebbing and John P. Stupp, Jr., each
of whom is an independent director as defined by Nasdaq rules, has reviewed and
discussed with management the Company's audited financial statements as of and
for the year ended December 31, 2001. The Audit Committee has discussed with
Arthur Andersen 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, 2001.
MEMBERS OF THE AUDIT COMMITTEE
John P. Stupp, Jr. (Chairman) Jerome J. McGrath Roger F. Stebbing
7
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, 2001, 2000 and 1999 of
those persons who served as the Chief Executive Officer of the Company at any
time during 2001 and other persons who served as executive officers of the
Company at any time during 2001 and whose salary and bonus for the year ended
December 31, 2001 exceeded $100,000 (such officers are referred to herein as the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL ------------
COMPENSATION(1) SECURITIES
NAME AND -------------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(2) COMPENSATION
------------------ ---- --------- --------- ---------- ------------
Emile A. Battat 2001 $ 250,000 $ 300,000 20,000 $ 5,390(3)
Chairman of the 2000 250,000 0 0 5,419
Board, President 1999 180,000 0 20,000 1,758
and Chief
Executive Officer
Jeffery Strickland 2001 $ 160,000 $ 98,400 0 $ 7,582(3)
Vice President and 2000 150,000 50,000 0 7,314
Chief Financial 1999 138,000 30,000 0 6,977
Officer, Secretary
And Treasurer
Charles S. Gamble(4) 2001 $ 170,000 $ 58,491 0 $ 44,894(3)
President- 2000 160,000 50,906 0 4,077
Halkey-Roberts 1999 150,000 75,210 0 3,745
Corporation
- ---------------
(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 2001 represent incentive stock
options under the 1997 Stock Incentive Plan and options granted in 1999
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, $4,250; Mr. Strickland, $3,995; and
Mr. Gamble, $4,163; (ii) payment of life insurance premiums for Mr.
Battat, $1,140; Mr. Strickland, $3,587; and Mr. Gamble, $77; and (iii)
payment to Mr. Gamble of $40,654 in connection with his ceasing to
serve as President of Halkey-Roberts Corporation.
(4) Mr. Gamble ceased serving as an executive officer of the Company prior
to December 31, 2001.
INFORMATION CONCERNING STOCK OPTIONS
The following table summarizes certain information concerning grants of
options to Named Executive Officers to whom options were granted during the year
ended December 31, 2001.
8
OPTION GRANTS IN 2001
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
------------------------------------------------------------- -----------------------------
PERCENT OF
TOTAL OPTIONS
OPTIONS GRANTED TO EXERCISE
NAME GRANTED(2) EMPLOYEES IN 2001 PRICE(2) EXPIRATION 5% 10%
- ---------------- ---------- ----------------- --------- ---------- ------------ --------
Emile A. Battat 20,000(3) 29% $14.063 02/20/2011 $176,884 $448,244
- ---------------
(1) Potential realizable value is based upon the assumption that the market
price of the common stock of the Company will appreciate at the
compound annual rate shown from the date of grant until the end of the
option term. The dollar amounts in the foregoing table have been
calculated based upon the Commission's requirements and do not reflect
the Company's estimate of future growth in the price of the Company's
Common Stock
(2) The options granted in 2001 were incentive stock options granted
pursuant to the 1997 Stock Incentive Plan. The exercise price of the
options granted is equal to the average of the high and low price per
share of common stock on the date of grant, as reported by The Nasdaq
Stock Market. The options are not transferable by the optionee except
by will or by the laws of descent and distribution, and each option is
exercisable during the lifetime of the optionee only by the optionee
or, in the event of disability, by the optionee's guardian or
representative. All options under the 1997 Stock Incentive Plan
terminate three months after the optionee's termination of employment
except in case of death or disability, in which case the options
terminate one year after termination of employment. The number of
options granted to key employees, the term thereof and the manner in
which those options are to be exercised under the 1997 Stock Incentive
Plan are determined by the Compensation Committee.
(3) These options are first exercisable as follows: (i) as to 7,000
options, August 20, 2001, (ii) as to 7,000 options, February 20, 2002,
and (iii) as to 6,000 options, February 20, 2003.
The following table provides information as to exercises of options by
the Named Executive Officers during the year ended December 31, 2001 and the
values of each Named Executive Officer's unexercised options at December 31,
2001.
AGGREGATED OPTION EXERCISES IN 2001
AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN THE MONEY OPTIONS
OPTIONS AT YEAR END AT YEAR END(1)
SHARES ----------------------------- ------------------------------
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ------------ ---------- ----------- ------------- ----------- -------------
Emile A. Battat 24,000 $ 336,000 24,000(2) 13,000 $ 667,884 $ 311,831
Jeffery Strickland 53,650 978,665 1,000 6,000 25,420 152,520
Charles S. Gamble 5,500 100,112 11,500 8,000 293,150 241,338
- ---------------
(1) Such value is equal to the product of (i) the closing price of the
common stock of the Company on December 31, 2001 ($38.05 per share)
less the exercise price and (ii) the number of shares subject to
in-the-money options.
(2) Includes options to purchase 4,000 shares granted to Mr. Battat in his
capacity as an outside director before he became a Named Executive
Officer.
9
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 contributions to a
participant's cash balance account in an amount equal to 5% of the participant's
eligible compensation up to the Social Security wage base and 10% 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 2001
plan year, the interest rate was 5.78%. For purposes of the Cash Balance Plan,
"eligible compensation" is the participant's salary and bonus as included in the
Summary Compensation Table above, subject to an annual limitation imposed by law
which for 2001 was $170,000 and for 2002 is $200,000. 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 2002 levels of maximum includable
compensation and Social Security wage base, and a 30 year U.S. Treasury bond
rate of 6.5%, are as follows: Mr. Battat, $5,111; Mr. Gamble, $13,839; and Mr.
Strickland, $114,034.
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 calendar year 2002 is $500,000 and increases annually thereafter by
12%. In addition, Mr. Battat is entitled to receive a cash bonus each year that
is not less than 50% of his base salary for such year. 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 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.
10
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
Base salaries, cash bonus and incentive compensation and stock
awards are the principal components of compensation for the Company's executive
officers. 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 earning 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. The
Compensation Committee generally staggers the exercise dates for options over a
period of time so that the key employee receiving stock option awards will be
rewarded only if he remains with the Company and in order to emphasize the
significance of the Company's long-term performance.
Compensation of Chief Executive Officer
In February 2001, the Compensation Committee reviewed Mr. Battat's
performance as Chief Executive Officer and concluded that he had provided
superior leadership since he had first been elected President and Chief
Executive Officer in 1998. For 2001, the Compensation Committee, after taking
into account the Corporation's and Mr. Battat's performance in 2000, survey
information on the compensation of executive officers of companies of comparable
size to the Company, and Mr. Battat's request that his annual base salary not be
increased, recommended that Mr. Battat's annual base salary be maintained at
$250,000. In doing so, the Compensation Committee also took into account that
Mr. Battat was then covered by an incentive compensation plan keyed to the
enhancement of shareholder value. That plan provided that at the time he ceased
to serve as Chief Executive Officer of the Company, Mr. Battat would be entitled
to receive incentive compensation based on appreciation in the value of the
Company's common stock. Inasmuch as Mr. Battat served as Chief Executive Officer
of the Company throughout 2001, he received no incentive compensation under the
plan that year.
11
In the course of a review begun in late 2001, management learned, and
informed the Compensation Committee, that, if continued, the incentive
compensation plan for Mr. Battat would subject the Company to an unfavorable
accounting treatment, requiring periodic accruals reflecting changes in the
market price of the Company's common stock. On the basis of that information,
upon the recommendation of the Compensation Committee, and with the approval of
Mr. Battat, the incentive compensation plan was nullified effective December 31,
2001. No incentive compensation was ever paid to Mr. Battat under the plan.
Effective as of January 1, 2002, the Company entered into an employment
agreement with Mr. Battat having a term expiring at the end of 2006. (For a
description of the terms of that employment agreement, see "EXECUTIVE
COMPENSATION - Certain Agreements and Plans.") In determining Mr. Battat's
compensation as provided in the employment agreement, the Compensation Committee
took into account the performance of the Company in 2001, as well as in the
prior years since Mr. Battat assumed the role of Chief Executive Officer, Mr.
Battat's contributions and leadership during said period, the compensation paid
to chief executive officers of other companies, and the advantages to the
Company of securing Mr. Battat's services over the longer term. The Compensation
Committee also considered that, as a result of the nullification of the
incentive compensation plan, no other bonus or incentive plan was in place to
provide long term compensation to Mr. Battat other than previously granted stock
options and that there was no change in control agreement in effect covering Mr.
Battat. In recommending that Mr. Battat be paid a bonus of $300,000 for 2001,
the Compensation Committee took into account the Company's and Mr. Battat's
performance in 2001, the compensation paid to chief executive officers of other
companies, the fact that Mr. Battat's salary had not been increased in 2001, and
that no cash bonuses had been paid to Mr. Battat since he became Chief Executive
Officer.
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,
1996 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.
- -------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
- -------------------------------------------------------------------------------------
Atrion Corporation 100.00 87.71 50.57 67.16 93.24 240.52
Surgical & Medical
Instruments 100.00 116.00 158.37 143.95 166.96 190.14
S&P Composite 100.00 133.36 171.47 207.56 188.66 166.24
12
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 2003 annual meeting
of stockholders, such proposals must be received by the Company on or before
December 19, 2002.
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 2003 annual meeting must be delivered not later
than December 19, 2002, provided the date of the 2003 annual meeting is not more
than 30 days before or more than 60 days after May 30, 2003. 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.
13
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 18, 2002
14
PROXY ATRION CORPORATION PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby appoints
Roger F. Stebbing and John P. Stupp, 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 30, 2002 at 10:00 a.m., Central Time, and at any
adjournment thereof, in the following manner:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as otherwise to vote for all nominees
instructed below) listed below
Emile A. Battat and John H. P. Maley
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE THAT NOMINEE'S NAME IN THE
SPACE PROVIDED 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" ITEMS 1 AND 2. IF THIS PROXY IS
PROPERLY SIGNED AND RETURNED, THE SHARES REPRESENTED WILL BE VOTED "FOR" ITEMS 1
AND 2 UNLESS YOU OTHERWISE SPECIFY HEREIN.
DATED: , 2002
-------------------
----------------------------------------
SIGNATURE
----------------------------------------
SIGNATURE
PLEASE SIGN THIS PROXY EXACTLY AS YOUR
NAME APPEARS HEREON.
WHEN SIGNING AS EXECUTOR, ADMINISTRATOR,
TRUSTEE, CORPORATE OFFICER, ETC., PLEASE
GIVE FULL TITLE. IN CASE OF JOINT
OWNERS, EACH JOINT OWNER SHOULD SIGN.
Please Date, Sign and Return TODAY in the Enclosed Envelope.
No Postage Required if Mailed in the United States.