TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
☑☒
Filed by a Party other than the Registrant
o☐
Check the appropriate box:
o
| Preliminary Proxy Statement
|
o
| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
|
☑
| Definitive Proxy Statement
|
o
| Definitive Additional Materials
|
o
| Soliciting Material under §240.14a-12
|
☐ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material under §240.14a-12
Atrion Corporation
|
(Name of Registrant as Specified In Its Charter)
|
|
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
|
Atrion Corporation
Payment of Filing Fee (Check the appropriate box):
|
☑
| No fee required.
|
o
| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 state how it was determined):
|
| |
| (4)
| Proposed maximum aggregate value of transaction:
|
| |
| (5)
| Total fee paid:
|
| |
o
| Fee paid previously with preliminary materials.
|
o
| 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:
|
| |
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ No fee required.
☐ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 state 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 Corporation
One Allentown Pkwy.
Allen, TX 75002
Tel 972-390-9800
You are
pleased to invite youcordially invited to attend the
20182019 annual meeting of stockholders of Atrion Corporation to be held
on Tuesday, May 21, 2019 at 10:00 a.m., Central Time, at our offices in Allen,
Texas on Tuesday, May 22, 2018 at 10:00 a.m., Central Time.Texas. A notice of the annual meeting and the Company’s proxy statement accompany this letter. The business to be conducted at the annual meeting is described in our proxy statement. We have also made a copy of our
20172018 Annual Report to Stockholders available with our proxy statement.
As we have done in recent years, we
We are furnishing our proxy materials to stockholders primarily over the
Internet.Internet, as we have done in recent years. Accordingly, we have mailed to our stockholders a Notice of Internet Availability of Proxy Materials with instructions on how our proxy materials may be accessed and reviewed on the Internet and how votes may be cast. This method of distribution is more resource and cost efficient than mailing to all stockholders.
We hope that you will attend the meeting in person. However, it is important for your shares to be represented at the meeting whether or not you are personally present. Accordingly, please vote as soon as possible. To vote your shares, please refer to the instructions for voting in the Company’s proxy statement or in the Notice of Internet Availability of Proxy Materials or proxy card.
Thank you for your ongoing support of, and
continued interestinvestment in, the Company.
| Sincerely,
|
| |
| |
| David A. Battat
|
| President and Chief Executive Officer
|
Sincerely,
David A. Battat
President and Chief Executive Officer
ATRION CORPORATIONOne Allentown Parkway
Allen, Texas 75002 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Atrion Corporation:
Notice is hereby given that the
20182019 annual meeting of stockholders of Atrion Corporation (the “Company”) will be held
on Tuesday, May 21, 2019, at 10:00 a.m., Central Time, at the Company’s offices, One Allentown Parkway, Allen, Texas
on Tuesday, May 22, 2018, at 10:00 a.m., Central Time,75002, for the following purposes:
| 1. | To elect two Class II directors. |
1.
| 2. | To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year 2018. |
To elect one Class III director.
| 3. | To approve, on an advisory basis, executive officer compensation. |
| 4. | To transact such other business as may properly come before the meeting. |
2.
To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year 2019.
3.
To approve, on an advisory basis, executive officer compensation.
4.
To transact such other business as may properly come before the meeting.
The Board of Directors fixed the close of business on March
23, 201822, 2019 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 | By Order of the Board of Directors
|
| |
| |
| Jeffery Strickland
|
| Vice President and Chief Financial
Officer, Secretary and Treasurer
|
April 9, 2018
8, 2019
WE HOPE YOU WILL VOTE AS SOON AS POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, WE HOPE YOU WILL VOTE AS SOON AS POSSIBLE.MEETING. TO VOTE YOUR SHARES, PLEASE REFER TO THE INSTRUCTIONS FOR VOTING IN THE COMPANY’S PROXY STATEMENT OR IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS OR PROXY CARD. ATRION CORPORATIONOne Allentown Parkway
Allen, Texas 75002 ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 201821, 2019
This proxy statement is being furnished to the stockholders of Atrion Corporation (sometimes referred to herein as “Atrion,” “we,” “us,” “our,” or the “Company”) in connection with the solicitation of proxies by our Board of Directors to be voted at the
20182019 annual meeting of stockholders to be held at the Company’s offices, One Allentown Parkway, Allen, Texas 75002 on Tuesday, May
22, 201821, 2019 at 10:00 a.m., Central Time, and at any adjournment of such meeting. The notice of annual meeting, proxy statement and form of proxy and the Company’s
20172018 Annual Report are first being made available to stockholders on or about April
9, 2018.QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS8, 2019.
questions and answers about the proxy materialsAND OUR ANNUAL MEETING | Q: | What is the purpose of the annual meeting? |
and our annual meeting
Q:
| A: | At the annual meeting, our stockholders will consider and vote upon the following matters: |
What is the purpose of the annual meeting?
A:
At the annual meeting, our stockholders will consider and vote upon the following matters:
•
election of twoone Class II directors;III director;
•
ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year 2018;2019; and
•
approval, on an advisory basis, of executive officer compensation.
Our stockholders will also transact such other business as may properly come before the meeting.
| Q: | Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? |
| A: | The rules of the Securities and Exchange Commission, or SEC, allow us to provide our proxy materials to our stockholders over the Internet if they have not requested that printed materials be provided to them on an ongoing basis. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials, or Notice of Internet Availability, to our stockholders who have not previously requested that printed materials be provided to them on an ongoing basis. Instructions on how to access our proxy materials over the Internet or to request a printed copy by mail may be found in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise. |
| Q: | How can I get electronic access to the proxy materials? |
| A: | The Notice of Internet Availability provides you with instructions regarding how you may access and review on the Internet our proxy materials for the annual meeting. |
| Q: | Who is entitled to vote at the annual meeting? |
| A: | Stockholders Entitled to Vote. Stockholders of record at the close of business on March 23, 2018, the record date for the meeting, 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, we had outstanding and entitled to vote 1,851,842 shares of common stock, our only voting securities. 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. |
Q:
Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
A:
The rules of the Securities and Exchange Commission, or SEC, allow us to provide our proxy materials to our stockholders over the Internet if they have not requested that printed materials be provided to them on an ongoing basis. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials, or Notice of Internet Availability, to our stockholders who have not previously requested that printed materials be provided to them on an ongoing basis. Instructions on how to access our proxy materials over the Internet or to request a printed copy by mail may be found in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.
Q:
How can I get electronic access to the proxy materials?
A:
The Notice of Internet Availability provides you with instructions regarding how you may access and review on the Internet our proxy materials for the annual meeting.
Q:
Who is entitled to vote at the annual meeting?
A:
Stockholders Entitled to Vote. Stockholders of record at the close of business on March 22, 2019, the record date for the meeting, 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, we had outstanding and entitled to vote 1,852,756 shares of common stock, our only voting securities. 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.
Registered Stockholders. If your shares are registered directly in your name with our transfer agent, you are considered, with respect to those shares, the stockholder of record, and we are providing the Notice of Internet Availability to you directly. As the stockholder of record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or to a third party, or to vote in person at the annual meeting.
Beneficial Owners. If your shares are held in the name of a broker, bank, or other nominee, you are considered the beneficial owner of those shares and the broker, bank, or other nominee is the record holder. As the beneficial owner, you have the right to direct your broker, bank, or other nominee how to vote, and you are also invited to attend the annual meeting. However, because you are not the record holder, you may not vote these shares in person at the annual meeting unless you follow the record holder’s procedures for obtaining a legal proxy.
| Q: | Can I attend the annual meeting in person? |
Q:
| A: | You are invited to attend the annual meeting if you are a registered stockholder or a beneficial owner as of the record date. You must present a form of photo identification acceptable to us, such as a valid driver’s license or passport, to enter the meeting. In addition, if your shares are held by your broker, bank, or other nominee, please bring your Notice of Internet Availability or other evidence of stock ownership as of the record date. The meeting will begin promptly at 10:00 a.m., Central Time. Check-in will begin at 9:30 a.m., Central Time. Please allow ample time for the check-in procedures. |
Can I attend the annual meeting in person?
| Q: | How can I vote my shares? |
| A: | Registered Stockholders. Registered stockholders may vote (i) by attending the annual meeting, (ii) by following the instructions in your Notice of Internet Availability for voting by telephone or on the Internet at www.proxyvote.com or (iii) by signing, dating and mailing in a proxy card. Please note that the Internet and telephone voting facilities will close at 11:59 p.m., Eastern Time, on May 21, 2018. |
A:
You are invited to attend the annual meeting if you are a registered stockholder or a beneficial owner as of the record date. You must present a form of photo identification acceptable to us, such as a valid driver’s license or passport, to enter the meeting. In addition, if your shares are held by your broker, bank, or other nominee, please bring your Notice of Internet Availability or other evidence of stock ownership as of the record date. The meeting will begin promptly at 10:00 a.m., Central Time. Check-in will begin at 9:30 a.m., Central Time. Please allow ample time for the check-in procedures.
Q:
How can I vote my shares?
A:
Registered Stockholders. Registered stockholders may vote (i) by attending the annual meeting, (ii) by following the instructions in your Notice of Internet Availability for voting by telephone or on the Internet at www.proxyvote.com or (iii) by signing, dating and mailing in a proxy card. Please note that the Internet and telephone voting facilities will close at 11:59 p.m., Eastern Time, on May 20, 2019.
Beneficial Owners. If you hold your shares through a broker, bank, or other nominee, that institution will instruct you as to how your shares may be voted by proxy, including whether telephone or Internet voting options are available. If you hold your shares through a broker, bank, or other nominee and would like to vote in person at the meeting, you must request a legal proxy from the broker, bank, or other nominee that holds your shares and present that proxy at the annual meeting to vote your shares.
| Q: | If I sign, date and return a proxy, how will it be voted? |
| A: | Unless you revoke your proxy instructions, as described in the answer to the question immediately below, shares of common stock represented by your proxy will be voted at the annual meeting as you specify over the Internet, by telephone or on the proxy card. If you do not specify how to vote your shares, the shares represented by your proxy will be voted “FOR” the election as directors of the nominees of the Board of Directors named herein; “FOR” ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year 2018; and “FOR” approval, on an advisory basis, of our executive officer compensation. In addition, in their discretion the persons designated as proxies will vote upon such other business as may properly come before the meeting. |
| A: | You may change your vote at any time prior to the vote at the annual meeting. To revoke your proxy instructions and change your vote if you are a holder of record, you must (i) attend the annual meeting and vote your shares in person, (ii) advise our Secretary at our principal executive office in writing before the proxy holders vote your shares, (iii) deliver later dated and signed proxy instructions, or (iv) cast a new vote by the Internet or by telephone (not later than 11:59 p.m., Eastern Time, on May 21, 2018). If your shares are held by a broker, bank, or other nominee, you must request instructions as to how to revoke your proxy from the broker, bank, or other nominee that holds your shares. |
Q:
If I sign, date and return a proxy, how will it be voted?
A:
Unless you revoke your proxy instructions, as described in the answer to the question immediately below, shares of common stock represented by your proxy will be voted at the annual meeting as you specify over the Internet, by telephone or on the proxy card. If you do not specify how to vote your shares, the shares represented by your proxy will be voted “FOR” the election as a director of the nominee of the Board of Directors named herein; “FOR” ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year 2019; and “FOR” approval, on an advisory basis, of our executive officer compensation. In addition, in their discretion the persons designated as proxies will vote upon such other business as may properly come before the meeting.
Q:
Can I change my vote?
A:
You may change your vote at any time prior to the vote at the annual meeting. To revoke your proxy instructions and change your vote if you are a holder of record, you must (i) attend the annual meeting and vote your shares in person, (ii) advise our Secretary at our principal executive office in writing before the proxy holders vote your shares, (iii) deliver later dated and signed proxy instructions, or (iv) cast a new vote by the Internet or by telephone (not later than 11:59 p.m., Eastern Time, on May 20, 2019). If your shares are held by a broker, bank, or other nominee, you must request instructions as to how to revoke your proxy from the broker, bank, or other nominee that holds your shares.
TABLE OF CONTENTS
| Q: | What happens if I decide to attend the annual meeting but I have already voted or submitted a proxy covering my shares? |
| A: | You may attend the meeting and vote in person even if you have already voted or submitted a proxy. However, please be aware that attendance at the annual meeting will not, by itself, revoke a proxy. If a broker, bank, or other nominee holds your shares and you wish to attend the annual meeting and vote in person, you must obtain a legal proxy from the record holder of the shares giving you the right to vote the shares. |
| A: | A majority of our outstanding shares entitled to vote at the annual meeting as of the record date must be present in person or represented by proxy to have a quorum. Abstentions and broker non-votes will be counted as present and represented at the annual meeting for purposes of determining a quorum. |
| Q: | What if I am a beneficial owner and do not give the nominee voting instructions? |
| A: | If your broker, bank, or other nominee holds your shares in its name and does not receive voting instructions from you, your broker, bank, or other nominee has discretion to vote these shares on certain routine matters but cannot vote on non-routine matters. The proposal to ratify the appointment of Grant Thornton LLP is a routine matter, and your broker, bank, or other nominee is permitted to vote your shares even if you do not provide your broker, bank, or other nominee voting instructions. Election of directors and advisory voting to approve our executive officer compensation are not deemed to be routine matters. Accordingly, your broker, bank, or other nominee is not entitled to vote your shares on those matters unless voting instructions are received from you. |
| Q: | What votes are necessary to elect directors and approve the other items of business at the annual meeting? |
| A: | Our Bylaws provide for a majority voting standard for uncontested director elections. Because the number of nominees properly nominated for election at the annual meeting is equal to the number of directors to be elected, the election of directors is an uncontested election. Therefore, at the annual meeting directors are to be elected by the affirmative vote of the majority of the votes cast (meaning that the number of votes cast “FOR” a nominee must exceed the number of votes cast “AGAINST” such nominee). Abstentions and broker non-votes will have no effect on the election of directors. Ratification of the appointment of Grant Thornton LLP and approval, on an advisory basis, of our executive officer compensation each requires the affirmative vote of a majority of the shares present, in person or by proxy, at the meeting and entitled to vote thereon. Abstentions will have the same effect as a negative vote, and broker non-votes will have no effect, on the proposal to ratify the appointment of Grant Thornton LLP and on the proposal to approve, on an advisory basis, our executive officer compensation. |
| Q: | Where can I find the voting results for the annual meeting? |
| A: | The voting results will be published in a current report on Form 8-K that will be filed with the SEC within four business days after the annual meeting. The Form 8-K will also be available on our website at www.atrioncorp.com. |
Q:
What happens if I decide to attend the annual meeting but I have already voted or submitted a proxy covering my shares?
A:
You may attend the meeting and vote in person even if you have already voted or submitted a proxy. However, please be aware that attendance at the annual meeting will not, by itself, revoke a proxy. If a broker, bank, or other nominee holds your shares and you wish to attend the annual meeting and vote in person, you must obtain a legal proxy from the record holder of the shares giving you the right to vote the shares.
Q:
What is a quorum?
A:
A majority of our outstanding shares entitled to vote at the annual meeting as of the record date must be present in person or represented by proxy to have a quorum. Abstentions and broker non-votes will be counted as present and represented at the annual meeting for purposes of determining a quorum.
Q:
What if I am a beneficial owner and do not give the nominee voting instructions?
A:
If your broker, bank, or other nominee holds your shares in its name and does not receive voting instructions from you, your broker, bank, or other nominee has discretion to vote these shares on certain routine matters but cannot vote on non-routine matters. The proposal to ratify the appointment of Grant Thornton LLP is a routine matter, and your broker, bank, or other nominee is permitted to vote your shares even if you do not provide your broker, bank, or other nominee voting instructions. Elections of directors and advisory voting to approve executive officer compensation are not deemed to be routine matters. Accordingly, your broker, bank, or other nominee is not entitled to vote your shares on those matters unless voting instructions are received from you.
Q:
What votes are necessary to elect directors and approve the other items of business at the annual meeting?
A:
Our Bylaws provide for a majority voting standard for uncontested director elections. Because the number of nominees properly nominated for election at the annual meeting is equal to the number of directors to be elected, the election of directors is an uncontested election. Therefore, at the annual meeting a director is to be elected by the affirmative vote of the majority of the votes cast (meaning that the number of votes cast “FOR” a nominee must exceed the number of votes cast “AGAINST” such nominee). Abstentions and broker non-votes will have no effect on the election of directors. Ratification of the appointment of Grant Thornton LLP and approval, on an advisory basis, of our executive officer compensation each requires the affirmative vote of a majority of the shares present, in person or by proxy, at the meeting and entitled to vote thereon. Abstentions will have the same effect as a negative vote, and broker non-votes will have no effect, on the proposal to ratify the appointment of Grant Thornton LLP and on the proposal to approve, on an advisory basis, our executive officer compensation.
Q:
Where can I find the voting results for the annual meeting?
A:
The voting results will be published in a current report on Form 8-K that will be filed with the SEC within four business days after the annual meeting. The Form 8-K will also be available on our website at www.atrioncorp.com.
Item 1
Our Board of Directors is divided into three classes: Class I, Class II, and Class III.
TwoOne Class
II directors areIII director is to be elected at the annual meeting, to serve until the annual meeting of stockholders to be held in
20212022 and until the election and qualification of
their successors. Both of the nomineeshis successor. The nominee for election as
a Class
II directorsIII director named below and all of the directors continuing in office after the annual meeting are currently members of our Board
of Directorsand such nominee and all of such
nominees and directors continuing in office
other than Preston G. Athey, were previously elected by our stockholders. Unless otherwise directed, the persons named as proxies intend to vote all proxies FOR the election of the
nomineesnominee named below. If
eithersuch nominee,
each of whomwho has indicated his willingness to serve as director if elected, is not a candidate when the election occurs, proxies may be voted for the election of a substitute nominee proposed by the Board of Directors or the Board
of Directors may reduce the number of directors to be elected.
The following information is furnished with respect to our Board of Directors’
nomineesnominee for election as
directorsa director and each director whose term will continue after the annual meeting:
Name, Age, Service as a Director of the Company,
Principal Occupation, Positions and Offices, Other Directorships, and Business ExperienceNominees
Nominee for Election as
DirectorsClass II - Term Ending in 2021
Preston G. Athey
Mr. Athey, age 68, has been a director since March 2017 and a private investor since his retirement in January 2017 from T. Rowe Price Associates, Inc., a subsidiary of T. Rowe Price Group, Inc., a global investment management firm. Mr. Athey was employed by T. Rowe Price Associates, Inc. from 1978 until January 2017, serving from 1981 until January 2017 as a Vice President, and from 1991 until 2014 as President and Portfolio Manager of T. Rowe Price Small Cap Value Fund. He is a Certified Investment Counselor and also holds the Chartered Financial Analyst designation. Mr. Athey received a Bachelor of Arts degree from Yale University and a Master of Business Administration degree from Stanford University. Mr. Athey’s many years of experience as a securities analyst and equity portfolio manager and his keen interest in good corporate governance are expected to provide the Board of Directors with valuable financial and governance insight.
Hugh J. Morgan, Jr.
Mr. Morgan, age 89, has been a director since 1988 and a private investor since 2003. He served as Chairman of the Board of National Bank of Commerce of Birmingham from February 1990 until April 2003. Previously, Mr. Morgan spent over 26 years at Southern Natural Gas Company and 14 years at Sonat Inc., its parent company, after its formation in 1973. At the time of his retirement in 1987, Mr. Morgan was serving as the Chairman of the Board of Southern Natural Gas Company and as Vice Chairman of the Board of Sonat Inc. Mr. Morgan holds a Bachelor of Arts degree from Princeton University and is a graduate of the Vanderbilt University Law School and the Advanced Management Program at Harvard Business School. Mr. Morgan’s legal and business background, including his substantial experience as a senior officer and director of Sonat Inc. and its subsidiary Southern Natural Gas Company, and his long-term service as a director of the Company enable him to provide our Board of Directors valuable insight into corporate operations and governance and financial matters.
Directors Continuing in Office
Director
Class III - Term Ending in
2019Roger F. Stebbing
Mr. Stebbing, age 77, has been a director since 1992 and has been our lead director since December 2007. 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. Mr. Stebbing is a licensed professional engineer and has
2022TABLE OF CONTENTS
a BSc honors degree in Chemical Engineering from Salford University. Mr. Stebbing has extensive experience in the design and development of complex projects and provides our Board of Directors valuable engineering knowledge, expertise, and insight, as well as an in-depth knowledge of the Company gained through his long-time service as a director.
John P. Stupp, Jr.
Mr. Stupp, age
68,69, has been a director since 1985. He has served as President since March 2004, and as Chief Executive Officer since March 2014, of Stupp Bros., Inc., a diversified holding company. 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.
Through its subsidiaries, Stupp Bros., Inc.
has two operating divisions: Stupp Bridge Company, a fabricator offabricates steel highway and railroad
bridges; and Stupp Corporation, a producer of custom-made high frequency weld and spiral weldbridges, produces pipe for
natural gas and oil
transmission;transmission pipelines, and
three subsidiaries: APCI, LLC, an integratoroffers general, steel, and industrial construction services. Mr. Stupp serves as a director of
linear friction welding technology; Stupp
Coatings LLC, coating applicators for steel line pipe; and Midwest BankCentre, a Missouri bank holding company.Bros., Inc. Mr. Stupp holds a Bachelor of Science degree in Business and Economics from Lehigh University. He serves as a director of Spire Inc., and
as the chairman of its audit committee andis a member of its compensation and
strategycorporate governance committees. Mr. Stupp’s substantial experience as President of Stupp Bros., Inc., as Chief Executive Officer of Stupp Corporation, and as a director of public companies and non-profit organizations, as well as his long-term relationship with the Company, provides our Board of Directors valuable financial and operational expertise.
Directors Continuing in Office
Class I - Term Ending in 2020
Mr. Battat, age
80,81, has been a director since 1987 and has served as Chairman of the Board of the Company since January 1998 and as Chairman of Halkey-Roberts Corporation, or Halkey-Roberts, one of our subsidiaries, since October 1998. He has served as our executive Chairman since May 2011. Mr. Battat served as Chief Executive Officer of the Company from October 1998 until May 2011, as President of the Company from October 1998 until May 2007 and as Chairman or President of each of the Company’s subsidiaries, other than Halkey-Roberts, from October 1998 until May 2011. 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. Mr. Battat’s many years of executive-level experience at other companies, his education and training and his in-depth knowledge of the Company’s operations and finances gained through his
3031 years as a director and 13 years as our Chief Executive Officer enable him to provide our Board
of Directors with strong and capable leadership.
Mr. Spaulding, age 54,55, has been a director since February 2006 and has been a private investor since 2008. Prior to May 2008, Mr. Spaulding was the President of Worldwide Commercial Operations of Abbott Vascular and a Vice President and corporate officer of Abbott Laboratories, which he joined in April 2006 upon its acquisition of Guidant Corporation’s vascular intervention assets. Between 2005 and April 2006, Mr. Spaulding served as the President of International Operations of Guidant Corporation, a medical device manufacturer, and also served on the Guidant Management Committee from 2002 until 2005. From 2003 to 2005, he was the President of Europe, Middle East, Africa and Canada of Guidant Corporation. From 2000 to 2003, Mr. Spaulding served as President of Guidant Corporation’s cardiac surgery business. Mr. Spaulding holds a Master’s degree in Biomedical Engineering and a Bachelor of Science degree in Mechanical Engineering from the University of Miami. Mr. Spaulding’s over 21 years of healthcare experience, including service as an officer of publicly-held companies with medical device operations, his knowledge of regulatory and operational matters affecting the development and marketing of medical devices, and his educational background enable Mr. Spaulding to bring a valuable and unique perspective to our Board.
Class II - Term Ending in 2021
Preston G. Athey
Mr. Athey, age 69, has been a director since March 2017 and a private investor since his retirement in January 2017 from T. Rowe Price Associates, Inc., a subsidiary of T. Rowe Price Group, Inc., a global investment management firm. Mr. Athey was employed by T. Rowe Price Associates, Inc. from 1978 until January 2017, serving from 1981 until January 2017 as a Vice President, and from 1991 until 2014 as President and Portfolio Manager of T. Rowe Price Small-Cap Value Fund. He is a Certified Investment Counselor and also holds the Chartered Financial Analyst designation. Mr. Athey received a Bachelor of Arts degree from Yale University and a Master of Business Administration degree from Stanford University. Mr. Athey’s many years of experience as a securities analyst and equity portfolio manager and his keen interest in good corporate governance enable him to provide the Board of
Directors.Directors with valuable financial and governance insight.
Hugh J. Morgan, Jr.
Mr. Morgan, age 90, has been a director since 1988 and a private investor since 2003. He served as Chairman of the Board of National Bank of Commerce of Birmingham from 1990 until 2003. Prior to that time, Mr. Morgan spent over 26 years at Southern Natural Gas Company and 14 years at Sonat Inc., its parent company, after its formation in 1973. At the time of his retirement in 1987, Mr. Morgan was serving as the Chairman of the Board of Southern Natural Gas Company and as Vice Chairman of the Board of Sonat Inc. Mr. Morgan holds a Bachelor of Arts degree from Princeton University and is a graduate of the Vanderbilt University Law School and the Advanced Management Program at Harvard Business School. Mr. Morgan’s legal and business background, including his substantial experience as a senior officer and director of Sonat Inc. and its subsidiary Southern Natural Gas Company, and his long-term service as a director of the Company enable him to provide our Board valuable insight into corporate operations and governance and financial matters.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF ITS
NOMINEES, PRESTON G. ATHEY AND HUGH J. MORGAN,
NOMINEE, JOHN P. STUPP, JR.
Board Leadership and Independence
We separate the roles of Chairman of the Board and Chief Executive Officer. Our Board
of Directors believes that this leadership structure is
appropriatein the best interests of the Company and
effective becauseour stockholders and that it
fosters innovative, responsive and strong leadership for the Company. This leadership structure permits Mr. Emile Battat, who has had many years of experience with the Company, to continue to play a key role as Chairman and thereby provide leadership to the Company’s Board of Directors as well as work with our Chief Executive Officer, Mr. David Battat, in the evaluation, planning, and implementation of corporate strategy and in operational and financial matters. In addition to his participation in strategic and financial matters, Mr. David Battat focuses on operational matters, including the day-to-day management of our business.
Under
the listing rules of The Nasdaq Stock Market LLC, or Nasdaq,
listing rules, a majority of the members of our Board of Directors must qualify as “independent directors,” as determined by our
Board of Directors.Board. In making the determination whether our directors are independent, our Board
of Directors applies the requirements for director independence set forth in the Nasdaq listing rules. After considering the relationship of each director with the Company, our Board
of Directors has determined that Messrs. Athey, Morgan, Spaulding,
Stebbing, and Stupp are independent directors within the meaning of those rules and that our Chairman, Mr. Emile Battat, is not an independent director. Our Audit, Compensation, and Corporate Governance Committees are comprised solely of independent directors. Our independent directors meet regularly in executive sessions without management present. Mr.
Stebbing,Spaulding, who is currently the Chair of the Corporate Governance Committee, is serving as our lead director and as such is responsible for calling, establishing agendas for, and moderating the Board of Directors’ executive sessions.
Our Board is committed to regular evaluations of itself and its committees to measure ongoing effectiveness. Every other year, directors are asked to complete a written evaluation of the Board and the committees on which they serve. To protect anonymity and the integrity of the evaluation process, our outside counsel compiles responses to these evaluations and presents a report thereon to the Board of Directors. Following such report, the Board discusses the evaluations and determines if any follow-up actions are appropriate.
Our Board of Directors held five meetings during
2017.2018. Each director attended at least 75% of the aggregate of (i) the total number of meetings of the Board
of Directors and (ii) the total number of meetings of all committees on which he served that were held in
20172018 during the time he served as a director or as a member of such committees.
Because we have a relatively small number of directors, our 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 Nasdaq independence requirements. Accordingly, our Board of Directors 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 our Board, of Directors, with the assistance of our Corporate Governance Committee, will review and evaluate candidates submitted by directors and management and by our stockholders. Stockholders who would like to suggest qualified candidates for selection by our independent directors as nominees of our Board of Directors should provide written notification thereof to the Secretary of the Company at our principal executive offices and include the candidates’ qualifications. In considering possible nominees, our independent directors are to take into account the following: (i) each director should be an individual of the highest character and integrity; (ii) each director should have substantial experience that is relevant to our Company; (iii) each director should have sufficient time available to devote to the affairs of the Company; and (iv) each director should represent the best interest of all of our stockholders. Our Board of Directors believes that having directors with diverse backgrounds, business experience, and skills is in our best interest. Under our nominating process, when we are seeking new candidates for our Board, of Directors, we consider the needs of the Company, taking into account the
skills and attributes of our current directors, and then seek to identify those individuals who meet those needs and select the most suitable candidates based on merit, including diversity of experience and skills, regardless of a candidate’s gender, race, religion, or ethnicity. We believe that our Board of Directors must be able to assess a candidate’s qualities and competencies as a whole rather than emphasizing any one of these factors. Our current directors have diverse industry backgrounds, including substantial experience in medical device, industrial, engineering, financial, and energy companies, and diverse skills. All possible nominees are to be reviewed in the same manner, regardless of whether they have been submitted by stockholders, directors, or management.
TABLE OF CONTENTS
Voting Standards for the Election of Directors
We recently amended our
Our Bylaws
to provide
for a majority voting standard for the election of directors in an uncontested election, which is an election in which the number of nominees equals the number of directors to be elected. A director nominee will be elected if the votes cast for such nominee exceeds the number of votes cast against such nominee. In the event of a contested election, which is an election in which the number of nominees exceeds the number of directors to be elected, the directors are to be elected by the vote of a plurality of the stock present in person or represented by proxy at a meeting of stockholders and entitled to vote on the election of directors.
OurThe Bylaws further provide that no incumbent director is to be a nominee for reelection as director in an uncontested election who has not agreed to tender, prior to the meeting of stockholders at which he or she is to be reelected as a director, an irrevocable resignation that will be effective upon the failure of such director to receive a majority of the votes cast with respect to that director’s reelection at such meeting of stockholders and the earlier of five business days after the date on which the voting results of such meeting are determined and the date an individual is selected by the Board of Directors to fill the office held by such director. Additionally, under our Bylaws any incumbent director who fails to receive the requisite vote for reelection in an uncontested election is not to be appointed or elected as a director by the Board
of Directors for at least one year after the meeting at which such individual fails to be reelected.
The Board’s Role in Risk Oversight
Our
The Board of Directors has the responsibility for overseeing the Company’s exposure to risk.
The Board of Directors, directlyDirectly and through its committees,
the Board of Directors reviews our material risk exposures, including operational risks, investment risks, financial risks, and compensation risks. Our Board
of Directors and its committees meet with management when necessary in performing these oversight functions.
Our Board
of Directors has four standing committees: the Executive Committee, the Corporate Governance Committee, the Compensation Committee, and the Audit Committee.
Our
The Executive Committee is currently comprised of Messrs. Emile Battat and Morgan.
Our
The Board
of Directors has determined that the members of our Corporate Governance Committee, Compensation Committee, and Audit Committee must meet the independence requirements of the Nasdaq listing rules for directors and that the Audit Committee members must also meet the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended, not have participated in the preparation of the financial statements of the Company or any current subsidiary during the past three years, and be able to read and understand fundamental financial statements. The Nasdaq listing rules also require that, in determining the independence of any director who will serve on our Compensation Committee, our Board
of Directors must consider all factors specifically relevant to determining whether such director has a relationship to the Company
whichthat is material to that director’s ability to be independent from management in connection with the duties of a Compensation Committee member, including the source of compensation of such director and whether such director is affiliated with the Company, a Company subsidiary, or an affiliate of a Company subsidiary.
Our Corporate Governance Committee, which is currently comprised of Messrs. Athey, Morgan, Spaulding, and Stebbing,Spaulding, assists in the evaluation of possible nominees for election to the Board of Directors as requested by the Board, of Directors, reviews annually and advises the Board of Directors with respect to the compensation of directors,
administers the Company’s stock ownership guidelines, and recommends to the Board
of Directors (i) the number of directors to be fixed in connection with each annual meeting of our stockholders, (ii) the directors to be appointed to each of the committees of the Board,
of Directors, after considering the recommendation of our Chairman of the Board, (iii) corporate governance guidelines if the Corporate Governance Committee deems them appropriate for the Company, and (iv) proposed changes to the charter of the Corporate Governance Committee. In making recommendations to the Board
of Directors as to director compensation, our Corporate Governance Committee considers our directors’ responsibilities and time devoted by them in fulfilling their duties as directors, the skills required, and market data on director compensation and takes into account recommendations made by Mr. Emile Battat. Except for Mr. Emile Battat, who is Chairman of our
TABLE OF CONTENTS
Board, of Directors, our executive officers are not involved in determining or recommending the amount or form of director compensation. Our Board of Directors has adopted a written charter for the Corporate Governance Committee, a copy of which is available on our website at www.atrioncorp.com. The Corporate Governance Committee met one timetwo times in 2017.
Our2018.
The Compensation Committee, which is currently comprised of Messrs. Athey, Morgan, Spaulding, and Stupp, makes recommendations to the Board of Directors as to the remuneration of our executive officers, administers the Amended and Restated Atrion Corporation 2006 Equity Incentive Plan, or 2006 Equity Plan, our Nonqualified Deferred Compensation Plan, or NQDC Plan, the Atrion Corporation Non-Employee Director Stock Purchase Plan, or Non-Employee Director Stock Purchase Plan, and the Atrion Corporation Deferred Compensation Plan for Non-Employee Directors, or Non-Employee Director Deferred Compensation Plan, and makes recommendations to our Board
of Directors with respect to annual cash incentive bonuses for our executive officers who participate in the Atrion Corporation Short-Term Incentive Compensation Plan, or Short-Term Incentive
Plan.ThePlan. The primary processes and procedures for the consideration and determination of executive compensation, the
roleroles of
our executive officers in determining or recommending the amount and form of executive officer compensation, the extent of delegation of authority, and the role of compensation consultants in determining or recommending executive officer compensation are
set forthdiscussed in “Compensation Discussion and Analysis”
atbeginning on page
1112 of this proxy statement. Our Board of Directors has adopted a written charter for the Compensation Committee, a copy of which is available on our website at
www.atrioncorp.com. The Compensation Committee met
fourthree times in
2017.2018.
Mercer, an outside compensation consultant, has been engaged from time to time at the request of the Compensation Committee to provide information as to the compensation of executive chairmen, chief executive officers, chief operating officers, chief financial officers, and directors of various companies, including certain companies in the medical products and devices industry. For further information regarding the services provided by Mercer, see “Compensation Discussion and Analysis”
atbeginning on page
1112 of this proxy statement.
Our Audit Committee, the current members of which are Messrs. Athey, Morgan, Spaulding,
Stebbing, and Stupp, appoints, determines the
appropriate compensation for, and oversees the work of the Company’s independent auditors, assists the Board
of Directors in its oversight of our accounting and financial reporting principles and policies and internal audit controls and procedures, and oversees related persons transactions. The Audit Committee reviews and assesses, at least annually, the Audit Committee Charter and is to recommend any changes
toin the Audit Committee Charter to the Board of Directors. Our Board
of Directors has determined that each member of the Audit Committee meets the independence rules and other criteria for Audit Committee membership set forth above and that Mr. Stupp qualifies as an audit committee financial expert.
OurThe Board of Directors has adopted a written charter for the Audit Committee, a copy of which is available on our website at
www.atrioncorp.com. Our Audit Committee met
sixfour times in
2017.2018.
Stockholder Communications to the Board of Directors
Any stockholder wishing to communicate with our Board of Directors about any matter should send the communication, in written form, to Emile A Battat, Chairman, at our principal office in Allen, Texas. Mr. Emile Battat will promptly send the communication to the other members of the
Board of Directors.Board.
Attendance at Stockholders Meetings
The Board
of Directors has a policy encouraging each director to attend, if practicable, our annual meetings of stockholders. All of the directors who were serving at the time of the
20172018 annual meeting attended that meeting.
Our Board
of Directors has adopted a Code of Business Conduct that applies to our employees, including our executive officers, and to the members of our Board of Directors.
Stock Ownership Guidelines for Directors
We have stock ownership guidelines that apply to our directors, executive officers, and designated officers of the Company and its subsidiaries. Each non-employee director is required to own shares of our common stock with a market value of at least $150,000 within three years of the date of election to the Board of Directors,
TABLE OF CONTENTS
except that non-employee directors who elect to receive at least 25% of the cash portion of their annual cash retainers in shares of our common stock under the Non-Employee Director Stock Purchase Plan or in stock units under the Non-Employee Director Deferred Compensation Plan and continue such election annually are permitted five years to meet the guidelines. Stock ownership that counts toward these guidelines is described in “Stock Ownership Guidelines for Officers” aton page 1517 of this proxy statement.
Social Responsibility and Sustainability
Sustainability is rooted in the Company’s respect for the environment, for our communities, for our customers, and for our employees because saving lives is the purpose of almost everything we make. We have long managed our business in a way that promotes all of these goals. As our performance over the last
2021 years demonstrates, we have done so in a manner that has also rewarded our stockholders.
For example, because we make
critical safety products for medical and other applications, quality is critical to
us.us and our end-users. As a result, we have
notnever given in to the temptation of offshoring in places with questionable ethical practices
and lower-costbut low-cost labor. Instead, we have always owned and operated all of our manufacturing facilities in the United States to ensure our products are high quality. We constantly improve our quality levels by investing in the latest technologies, which also has the effect of increasing efficiency and reducing our electricity usage. At our largest facility, from 2012 to 2017 the amount of major production equipment increased by 33%, yet electricity consumption per unit of production decreased by 15%. We also have redesigned major product lines to reduce the amount of material they require by 20% to 40%. Our facilities source a significant majority of their raw materials domestically, allowing us to more easily manage the quality of our supply chain as well as to reduce its carbon footprint.
We
also recognize that different viewpoints multiply wisdom, which is why we believe diversity at all levels of our Company is critical. In addition to their business acumen, people of different backgrounds offer valuable perspectives about our workplace and the world around us.
TwoOur Board has always been a source of
the three most recent nominees tovaluable insights and perspectives. Our first female director joined our Board
of Directors werein 2002. We look forward to again having a woman
and a man of color. We are committed to electing at least one woman toon our Board,
of Directors as vacancies occur.and our next vacancy will be filled by a woman. Some institutions look to the board as the sole test of a company’s diversity, but we go beyond this. We are proud to employ people who are too often
overlooked.overlooked by corporate America. Over half of our employees did not finish high school or ended their formal education upon obtaining a high school diploma or G.E.D. Some of these employees come to us with few skills and with challenging personal circumstances. We proudly invest in their training and, in return, we see them become some of our best employees and managers. We believe that it is telling that
44%43% of our employees have been with us at least 10 years, while, according to the U.S. Department of Labor, as of January
20162018 the median number of years that American workers had been with their current employers was 4.2 years. We also proudly employ older workers.
In 2017, oneWe have several employees at all levels of
the Company in their 70s and 80s, and they make important contributions to our
assemblers retired at the age of 89.success. We are committed to these goals, we understand their importance, and we will continue to strive to meet or exceed them going forward.
Hedging of Risk of Stock Ownership
We have a policy strongly discouraging the hedging of the risk of ownership of our securities. Any employee wishing to enter into a hedging transaction must pre-clear the proposed transaction with the our compliance officer and must provide justification for the proposed transaction.
Under our director compensation program, each non-employee director is paid an annual cash retainer of $66,000 for his
or her service as a director and is annually awarded fully-vested shares of our common stock under our 2006 Equity Plan having a market value on the date of the award of $60,000. The equity awards are made each year immediately following our annual meeting of stockholders. In addition, the Chairmen of the Corporate Governance Committee and the Compensation Committee are each paid an annual cash retainer of $6,000, and the Chairman of the Audit Committee is paid an annual cash retainer of $12,000. Mr. Emile Battat, our Chairman and our only employee director, does not receive any compensation for his service as a director. We reimburse our directors for travel and out-of-pocket expenses incurred in connection with attending meetings of the
Board of Directors.Board.
Our Non-Employee Director Stock Purchase Plan provides non-employee directors with a convenient method of acquiring shares of our common stock. This plan allows non-employee directors to elect to receive fully-vested stock and restricted stock in lieu of some or all of their cash fees. The foregone fees are converted into shares of fully-vested stock and restricted stock on the day the applicable cash fees otherwise would have been paid. The restricted stock vests in equal amounts on the first day of the second, third and fourth calendar quarters following receipt of the stock, provided the non-employee director is then serving as a member of
the Board of Directors.our Board.TABLE OF CONTENTS
The Non-Employee Director Deferred Compensation Plan allows non-employee directors to defer all or part of their cash fees into stock units. A stock unit account is set up for each participating non-employee director. The stock unit account is credited with a number of stock units equal to the cash fees deferred by the non-employee director divided by the closing price of our common stock on the day preceding the date on which the deferred fees would have been paid. The stock units vest as follows: 25% vest on the date credited to the stock unit account and 25% vest on each of the April 1, July 1, and October 1 immediately following the date credited to the stock unit account, provided the non-employee director is then serving as a member of our Board of Directors.Board. Each stock unit account is credited with additional whole or partial stock units reflecting dividends that would have been paid on the number of shares represented by that stock unit account. The stock units held in a non-employee director’s stock unit account are distributed in the form of whole shares of common stock, with cash paid for fractional stock units, in the January following the year in which his or her service as a director ceases or in January of a particular year, as specified by the non-employee director in his or her deferred fee election form.
The annual cash retainers for non-employee directors who elect to participate in either the Non-Employee Director Stock Purchase Plan or the Non-Employee Director Deferred Compensation Plan or both are payable on the first business day of January of each year for the calendar year then beginning, in each case to the extent such election or elections apply.
The following table sets forth summary information concerning the compensation of our non-employee directors for the year ended December 31,
2017:2018:
Director Compensation Table
Name | Fees Earned
or Paid in Cash
($)(1) | Stock Awards
($)(2) | All Other
Compensation
($) | Total
($) |
Preston G. Athey(3) | | 52,800 | | | 71,671 | | | — | | | 124,471 | |
Hugh J. Morgan, Jr. | | 72,000 | | | 60,000 | | | | | | 132,000 | |
Ronald N. Spaulding | | 66,000 | | | 60,000 | | | — | | | 126,000 | |
Roger F. Stebbing | | 72,000 | | | 60,000 | | | — | | | 132,000 | |
John P. Stupp, Jr. | | 78,000 | (4) | | 60,000 | | | 2,040 | (5) | | 140,040 | |
| Name | | | Fees Earned
or Paid in Cash
($)(1) | | | Stock Awards
($)(2) | | | All Other
Compensation
($) | | | Total
($) | |
| Preston G. Athey | | | | | 66,000 | | | | | | 60,000 | | | | | | — | | | | | | 126,000 | | |
| Hugh J. Morgan, Jr. | | | | | 72,000 | | | | | | 60,000 | | | | | | | | | | | | 132,000 | | |
| Ronald N. Spaulding | | | | | 70,000 | | | | | | 60,000 | | | | | | — | | | | | | 130,000 | | |
| Roger F. Stebbing | | | | | 36,000 | | | | | | — | | | | | | — | | | | | | 36,000 | | |
| John P. Stupp, Jr. | | | | | 78,000(3) | | | | | | 60,000 | | | | | | 2,220(4) | | | | | | 140,220 | | |
(1)
Each non-employee director received a cash retainer of $66,000 for his service as a director other than Mr. Stebbing who passed away during 2018. The Chairmen of the Corporate Governance Committee and the Compensation Committee are each paid an annual cash retainer of $6,000 and the Chairman of the Audit Committee is paid an annual cash retainer of $12,000.
(2)
Amounts shown reflect the aggregate fair value of the awards on the date they were granted, computed in accordance with Financial Accounting Standards Board’s Accounting Standards Codified Topic 718, or ASC 718. The assumptions used in the valuations may be found in Note 8 to the financial statements included as a part of our Annual Report on Form 10-K for the year ended December 31, 2018. The amount shown includes $81.75 paid in cash in lieu of fractional shares for each non-employee director to whom a stock award was made.
(3)
Mr. Stupp elected to defer $3,900 of his cash fees for 2018 into stock units pursuant to the Non-Employee Director Deferred Compensation Plan. As a result, Mr. Stupp’s stock unit account was credited with 6.18 stock units, which amount was based on the closing market price of our common stock on December 29, 2017, the last trading date prior to the date of issuance, which was $630.60 per share.
(4)
Amount shown represents the value of stock units credited to Mr. Stupp’s stock unit account in 2018 on account of dividends paid on our common stock during the prior calendar year, in accordance with the terms of the Non-Employee Director Deferred Compensation Plan.
| (1) | Each non-employee director who served throughout 2017 received a cash retainer of $66,000 for his service as a director. The Chairmen of the Corporate Governance Committee and the Compensation Committee are each paid an annual cash retainer of $6,000 and the Chairman of the Audit Committee is paid an annual cash retainer of $12,000. |
| (2) | Amounts shown reflect the aggregate fair value of the awards on the date they were granted, computed in accordance with Financial Accounting Standards Board’s Accounting Standards Codified Topic 718, or ASC 718. The assumptions used in the valuations may be found in Note 8 to the financial statements included as a part of our Annual Report on Form 10-K for the year ended December 31, 2017. The amount shown includes $282.00 paid in cash in lieu of fractional shares for Messrs. Morgan, Spaulding, Stebbing, and Stupp and $352.00 for Mr. Athey. |
| (3) | Mr. Athey was first elected to the Board of Directors in March 2017, and his cash retainer and stock awards for 2017 were prorated. |
| (4) | Mr. Stupp elected to defer $3,900 of his cash fees for 2017 into stock units, pursuant to the Non-Employee Director Deferred Compensation Plan. As a result, Mr. Stupp’s stock unit account was credited with 7.69 stock units, which amount was based on the closing market price of our common stock on December 30, 2016, the last trading date prior to the date of issuance, which was $507.20 per share. |
| (5) | Amount shown represents the value of stock units credited to Mr. Stupp’s stock unit account in 2017 on account of dividends paid on our common stock during the prior calendar year, in accordance with the terms of the Non-Employee Director Deferred Compensation Plan. |
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes our compensation philosophies, the factors we consider in developing and maintaining our compensation
packages,program, and the elements of our compensation
arrangementsprogram for our executives. We recognize that the medical device industry is very competitive, and our executive compensation program is intended to attract, retain, and motivate executives who lead our business and to align their interests with the long-term interests of our stockholders. The principal elements of our
compensation program are base salaries, annual cash incentive bonuses, and long-term incentives in the form of equity awards. We believe that our
compensation program provides appropriate incentives to our executives to achieve our financial and strategic goals without encouraging them to take excessive risks in their business decisions. Our compensation program is designed to reward our executive officers for high level corporate and individual performance. We believe
20172018 was another good year financially and otherwise for the Company. The financial highlights for
20162017 and
20172018 and the percentage changes from
20162017 to
20172018 are as follows:
| 2017 | 2016 | Change |
Revenues | $ | 146,595,000 | | $ | 143,487,000 | | | 2.2 | % |
Operating Income | | 41,274,000 | | | 39,126,000 | | | 5.5 | % |
Net Income | | 36,593,000 | | | 27,581,000 | | | 32.7 | % |
Income per Diluted Share | $ | 19.71 | | $ | 14.85 | | | 32.7 | % |
Operating Income as a Percentage of Year End Stockholders' Equity | | 22.4 | % | | 24.0 | % | | -1.6 | % |
| | | | 2018 | | | 2017 | | | Change | |
| Revenues | | | | $ | 152,448,000 | | | | | $ | 146,595,000 | | | | | | 4.0% | | |
| Operating Income | | | | | 41,707,000 | | | | | | 41,274,000 | | | | | | 1.0% | | |
| Net Income | | | | | 34,255,000 | | | | | | 36,593,000 | | | | | | -6.4% | | |
| Income per Diluted Share | | | | $ | 18.44 | | | | | $ | 19.71 | | | | | | -6.4% | | |
| Operating Income as a Percentage of Year End Stockholders’ Equity | | | | | 19.8% | | | | | | 22.4% | | | | | | -2.6% | | |
Our financial performance in 20172018 was an important factor in determining our incentive compensation for that year. Elements of the program are also intended to reward key personnel for individual responsibilities, experience, performance, and capacity to influence our results. We provide limited perquisites for our executive officers. We haveOur stock ownership guidelines tohelp ensure that our present and future executive officers, as well as certain other designated officers of the Company or our subsidiaries, acquire and maintain a meaningful equity stake in the Company.
Roles of the Compensation Committee, Management, and Outside Consultants
Our Compensation Committee reviews and makes recommendations to our Board of Directors for our executive officers’ base salaries, salary increases, and discretionary bonuses, as well as cash incentive bonuses for our executive officers who participate in our Short-Term Incentive Plan. Our Compensation Committee also administers our equity incentive program and our NQDC Plan. Annually, the Compensation Committee reviews tally sheets to obtain an overview of total compensation of our executive officers. These tally sheets identify the annual compensation for each of our executive officers in previous years, including base salaries, cash incentive bonuses, discretionary cash bonuses, equity awards, benefits, and perquisites. Each executive officer’s tally sheet also shows the amount payable to that executive officer upon termination of employment under certain circumstances and details the executive officer’s equity ownership, including stock owned free of restrictions, restricted stock, restricted stock units, or RSUs, and stock options.
From time to time directors who are not members of the Compensation Committee and executive officers attend meetings, or parts of meetings, of the Compensation Committee. TheCommittee at the Committee’s invitation. Although the Compensation Committee generally does not delegate the authority to make equity awards, except thatin both 2017 and 2018 it has delegated to Mr. David Battat the authority to grant awards of RSUs within specified limits to employees of the Company who are not officers of the Company or its subsidiaries at the vice-president level or above at any time and from time to time in his discretion, on or beforewith the more recent delegation extending through December 31, 2018.2019. Our executive officers are responsible for the salaries, salary increases, cash incentive bonuses, and discretionary cash bonuses for key personnel in our operating units who are not executive officers, and, as hereinafter described, they administer our Short-Term Incentive Plan, subject to our Compensation Committee’s review of, and recommendations to our Board of Directors with respect to, cash incentive bonuses for our two executive officers who are
eligible to participate in that plan. In considering the base salary for Mr. David Battat and cash incentive bonuses for him and for Jeffery Strickland, our Vice President and Chief Financial Officer, Secretary and Treasurer, under the Short-Term Incentive Plan, the Compensation Committee takes into account the recommendations of Mr. Emile Battat. In considering the base salary for Mr. Strickland, the Compensation
TABLE OF CONTENTS
Committee takes into account the recommendations of Messrs. Emile Battat and David Battat.
At various times in recent years, at the request of our Compensation Committee, we have engaged Mercer, a global consulting firm, to provide
informationmaterials regarding
the compensation
forof executive officers.
TheThese materials
from Mercer have provided us with information regarding base salary, target bonus, target total annual compensation, long-term incentives, and total direct compensation
and haveprovided by other companies. This information has been used by our Compensation Committee to obtain a more thorough
understandinganalysis of compensation practices of various companies, including
certain companies in the medical products and devices industry, and to assist
our Compensationthe Committee in formulating its recommendations to our Board of Directors regarding
the compensation structure and levels for our executive officers.
In late 2015,Most recently, Mercer was engaged
by the Companyin early 2018 at the request of the
Compensation Committee to provide market compensation data for executive officers.
The information, which was set forth in aA report delivered in
December 2015, coveredMarch 2018 set forth information as to base salaries, target
bonusbonuses as a percent of salary, total annual compensation, long-term incentives, and total direct compensation for 13 medical products and device companies with market capitalizations ranging from
$242 million to $3.5 billion. In early 2018, Mercer was again engaged at the request of the Compensation Committee to provide updated market compensation data for executive officers. A report delivered in March 2018 set forth information as to the same components of compensation as in the December 2015 report for 13 medical products and device companies with market capitalizations ranging from $343 million to $4.9 billion. Also included in
both the December 2015 report and the March 2018 report was a review of outside director compensation.
Our Compensation Committee used information in the December 2015 report in connection with its review of, and recommendations respecting, the base salaries for 2017 for Mr. David Battat and Mr. Strickland and information in the March 2018 report in connection with its review of, and recommendations respecting, their cash incentive bonuses under our Short-Term Incentive Plan for 2017.Elements
Components of Our Compensation Program
Base salaries, annual cash incentive bonuses, and long-term incentives in the form of equity awards are the principal
elementscomponents of our compensation program. Additional elements are our health insurance plan, retirement benefits under our Section 401(k) Savings Plan, or 401(k) Plan, and limited perquisites. We utilize these
elementsforms of compensation because we believe they are necessary or helpful in achieving the objectives of our compensation program. Base salaries are designed to attract and retain executive officers and key personnel and are intended to be at competitive
levels.levels and to provide a steady stream of income and security for our executive officers. Annual cash incentive bonuses and equity awards are intended to reward executive officers and key personnel and
to provide incentives for superior results by us and for individual responsibility and performance. Equity awards also are intended to align the interests of our executive officers and key personnel with the interests of our stockholders. The combination of these
elementscomponents is designed to compensate employees fairly for the services they provide on a regular basis. Generally, the Compensation Committee analyzes the individual performance of our executive officers, with input from Messrs. Emile Battat and David Battat with respect to Mr. Strickland’s individual performance.
We believe that base salaries are a significant component of our compensation program
in terms of attractingbecause they help us attract and
retainingretain executive officers and other key employees. Annual cash incentive bonuses for our executive officers and other key personnel, which provide them with the opportunity to receive cash compensation in addition to their base salaries, are intended to reward them for the
Company'sCompany’s performance and for individual performance as well. We believe that long-term incentives in the form of equity awards help align the interests of our executive officers and key personnel with the interests of our stockholders. We also believe that equity awards further our efforts to promote the profitability and growth of the Company. We do not have a specific policy of awarding options as opposed to restricted stock or RSUs, and for the past several years
stock options,RSUs, restricted stock, and
RSUsstock options have
all been
important elements ofawarded in our compensation program. We view our health insurance benefits, along with certain other benefits, as necessary to attract and retain employees.
Formula cash bonuses are provided in our employment agreement with Mr. Emile Battat and in our Short-Term Incentive Plan. Pursuant to his employment agreement, Mr. Emile Battat is entitled to annual cash bonuses equal to a fixed percentage of year-to-year increases in our operating income. This arrangement was determined based on our Compensation Committee’s discussions with him. For 2017,2018, the cash bonuses for Messrs. David Battat and Strickland were awarded under our Short-Term Incentive Plan. In addition, on the recommendation of our Compensation Committee and approval by our Board of Directors, our executive officers may also receive discretionary cash bonuses if recommended by our Compensation Committee and approved by our Board of Directors.bonuses. However, none of our executive officers is paid a fixed or guaranteed annual cash bonus. We endeavor to structure our
compensation program so that our base salaries and annual cash bonus opportunities are adequate to attract and retain key personnel. In addition, we seek to provide sufficient
TABLE OF CONTENTS
long-term equity compensation to motivate our executive officers and other key personnel to focus on our performance over the longer term. We believe
The Company, after reviewing and discussing our compensation programs with the Compensation Committee of our Board, believes that our compensation program is designed in a manner so asprograms are balanced and do not tomotivate or encourage unnecessary or excessive risk taking. Our executive officers’ basetaking because of, in part, the following:
•
Base salaries are fixed amountsin amount, and thereforefor most non-executive employees constitute the largest part of their total compensation, and thus do not encourage risk taking bytaking.
•
Although our executive officers. Our annual and long-term incentive compensation arrangements forfocuses on achievement of short-term goals, and short-term goals may encourage the taking of risks at the expense of long-term results, we believe that our annual incentive compensation programs represent a reasonable portion of employees’ total compensation opportunities. The annual incentive compensation to our executive officers who participate in the Short-Term Incentive Plan is subject to the review by the Compensation Committee and approval by our Board.
•
Long-term equity awards are important to help further align employees’ interests with those of our stockholders. The ultimate value of the awards is tied to the Company’s stock price and, because awards are staggered and subject to long-term vesting schedules, they help ensure that our performance on an annual basisexecutive officers have significant value tied to long-term stock price performance. As described above, we have established procedures related to the timing and overapproval of equity awards.
Because of the
longer term. Weabove, we believe that
those incentiveour employee compensation programs
taken together with base salaries, are balancedappropriately balance risk and the desire to focus employees on short-term goals as well as long-term goals important to the Company’s success and do not promote excessive risk taking.
Our Compensation Committee considers the following corporate factors in establishing our compensation program andwhen making compensation recommendations and decisions:
•
our earnings per share;
•
our operating income;
•
total stockholder return;
•
our return on equity;
•
safety; and
•
efficiency of our operations.
At our annual meeting of stockholders in
2017,2018, our stockholders approved, on an advisory basis, our executive compensation, with approximately
81%97% of the shares present, in person or by proxy, at the meeting and entitled to vote thereon being voted to approve the compensation of our executive officers. The Compensation Committee has
consideredtaken into account those results in deciding to retain our general approach to executive compensation.
Base Salaries
In structuring
Annual base salaries are a principal component of our compensation program, we start with the annual base salary and build on that component.program. The factors considered when fixing an executive officer’s base salary are performance, responsibilities, experience, capacity to influence our results, competitive conditions, and length of service with us. When considering the base salaries for our executive officers, our Compensation Committee reviews thetheir total annual compensation for those executive officers for previous years as set forth in the tally sheets described above, including base salaries, cash incentive bonuses, and discretionary cash bonuses, long-term incentive awards, benefits, and perquisites. For 2017,2018, the base salaries of our three executive officers were as follows: the base salary of Mr. Emile Battat, which is fixed in his employment agreement and in accordance with the recommendation of our Compensation Committee, was $600,000, unchanged from each of the years in the period 2012-2016;2012-2017; the base salary of Mr. David Battat was $620,000, unchanged from his base salary in 2015 and 2016;the period 2015-2017; and the base
salary of Mr. Strickland was fixed at $300,000,
a $20,000 increase overunchanged from his base salary in
2015 and 2016.2017. The
20172018 base salaries of Messrs. David Battat and Strickland were fixed in accordance with recommendations of our Compensation Committee, after taking into consideration information provided by Mercer
in early 2018, as well as the factors described above and recommendations of Mr. Emile Battat in the case of Mr. David
Battat'sBattat’s base salary and Messrs. Emile Battat and David Battat in the case of Mr.
Strickland'sStrickland’s base salary.
Annual Incentive Compensation
Mr. Emile Battat is entitled to annual cash incentive bonuses equal to a fixed percentage of year-to-year increases in our operating income as provided in his employment agreement. Our Compensation Committee may adjust any increase in our operating income to disregard one-time, nonrecurring extraordinary items and is to make such equitable adjustments as are required to give effect to acquisitions, divestitures or similar corporate transactions. For
2017,2018, Mr. Emile Battat was paid a cash incentive bonus based on such formula in the amount of
$171,824.$34,682.
Messrs. David Battat and Strickland, and certain key personnel are eligible to be selected to participate in our Short-Term Incentive Plan. Under this plan, an awards pool is established each year equal to a portion of our subsidiaries’ operating profits and is funded through contributions by our subsidiaries as determined under the terms of the plan. The awards pool is used to pay cash bonuses under employment agreements, other discretionary cash bonuses to employees who are not participating in the Short-Term Incentive Plan, and other
TABLE OF CONTENTS
employment-related expenses. The balance of the awards pool, if any, is available for cash incentive bonuses to participating executive officers and key personnel. Cash incentive bonuses are based in part on a bonus allocation formula that takes into account a number of factors, including the participant’s salary, an individual bonus rate, the profitability of the subsidiary employing the participant (where applicable), and individual participant performance.
The
cash incentive bonus amounts determined pursuant to that formula for
Messrs. David Battatparticipating executive officers are reviewed by our Chairman of the Board, who does not participate in the Short-Term Incentive Plan, The Chairman makes the initial determinations as to the bonus amounts, and
Stricklandthose determinations are
subject to reviewthen reviewed by our Compensation Committee, which takes into account
the recommendations of our Chairman of the Board.information provided by Mercer. The Compensation Committee
then makes recommendations
as to the bonus amounts to our Board of Directors, which
determinesfixes the
cash incentive bonus amountsbonuses for
ourthe executive
officers.officers participating in the Short-Term Incentive Plan. In the case of key personnel, the bonus amounts determined pursuant to the formula are subject to adjustments by our executive officers. Under the Short-Term Incentive Plan cash incentive bonuses for each year are to be determined by April 15 of the year immediately following the year for which the pool is established, with at least 75% of a participant’s bonus to be paid by April 15 of that year and the balance, which is generally 25% of the bonus amount, to be paid by April 15 of the following year. No participant in the Short-Term Incentive Plan has any vested right to such bonus or any part thereof until paid, and generally if a participant’s employment terminates prior to payment, his or her bonus is forfeited. The plan is administered generally by our executive officers, subject to our Compensation Committee’s review of, and recommendations to our Board of Directors with respect to, bonuses for Messrs. David Battat and Strickland. For
2017,2018, Mr. David Battat’s cash incentive bonus was
$850,000$ 900,000, which was 5.9% greater than his bonus for 2017, and Mr. Strickland’s cash incentive bonus was
$275,000. These cash incentive bonuses were 6.25%$325,000, which was 18.2% greater
than his bonus for
Mr. David Battat and 10% greater for Mr. Strickland than their bonuses for 2016.2017.
Our Compensation Committee has the authority to recommend discretionary cash bonuses based on the performance of the Company, one or more Company units or individual performance. We believe that this discretionary authority is useful because there may be circumstances that would support awards being made in addition to those under, or in the absence of attainment of the performance goals in the arrangements discussed above. No discretionary cash bonuses were paid to our executive officers for
2017.2018.
Long-Term Incentive Awards
Long-term equity-based compensation is an integral part of our total compensation package. It is intended to align the interests of our executive officers and key personnel with the interests of our stockholders in focusing on long-term growth and stock performance. We review the costs and benefits to us from the various forms of long-term compensation, including stock options, restricted stock, and RSUs.
In selecting the form of awards, we take into account that stock options will have little or no value if we do not have increased profitability and increases in the market price of our stock and that restricted stock and RSUs may continue to have value, though possibly reduced, if our profitability declines and the market price of our stock does not increase or even declines.
Our current policy on equity awards provides that equity awards, other than in connection with new hires or unusual circumstances, will be made at the meeting of our Compensation Committee held in conjunction with our annual stockholders meeting, which usually is held each May, and on the 10
th business day immediately following the last day of each “blackout period,” as defined in the Company’s Insider Trading Policy. Those equity awards are to be made only at meetings of the
Compensation Committee, including telephonic meetings, and not through actions by written consent.
During 2017, our CompensationIn 2018, the Committee
granted each of Messrs. Emile Battat and David Battat options to purchase 10,000 shares of our common stock with an exercise price equal to the market price on the date of grant and vesting 20% per year beginning one year after the grant date. In addition, Mr. Emile Battat was granted 2,900 shares of restricted stock and Mr. David Battat was granted 3,000 shares of restricted stock, also vesting 20% per year beginning one year after the grant date, with restrictions on transfer for two years after vesting. These were the first equity awards to Messrs. Emile Battat since 2011 and David Battat since 2012, other than grants to each of them of 700 shares of restricted stock in 2014. The Compensation Committee also awarded Mr. Strickland
328.68505.69 RSUs that are convertible into shares of our common stock on a one-for-one basis on the
earlierearliest of
fivethe following: four years after the award date,
his permanent disability, his death, and a change in control of the Company, provided he is then employed by the Company.
NQDC Plan
In 2017, we adopted our
Our NQDC Plan
which allows a select group of key management or highly compensated employees of the Company and
itsour subsidiaries, including our executive officers, to defer income
TABLE OF CONTENTS
under a nonqualified plan. We believe that the NQDC Plan is compliant with the regulations promulgated by the Internal Revenue Service under Section 409A of the Internal Revenue Code and provides a vehicle for the eligible employees to defer amounts higher than the limits established for our 401(k) Plan, which is a qualified plan. The Company is to credit make-up contributions to the account of each participant who makes a deferral election for base salary under the NQDC Plan that results in a reduction of the Company’s matching contribution that would have been made in our 401(k) Plan, with the make-up contribution to be in an amount equal to the amount by which our matching contribution to our 401(k) Plan is reduced as a result of the deferral election made under the NQDC Plan. Base salary and bonus compensation are eligible for deferral under the NQDC Plan, and a participant may defer not less than 10% and not more than 90% of his or her base salary and bonus compensation. Each year our Compensation Committee selects the key management or highly compensated employees who are eligible to participate in the NQDC Plan, and each of those employees makes an election whether or not to participate in the NQDC Plan and at what level he or she wishes to defer compensation. Participants may also elect how their deferred funds are deemed to be invested among the investment options designated by the Compensation Committee, which are generally the same as those available under the 401(k) Plan, as well as the Company’s common stock. In addition, participating employees choose the schedule on which these funds are to be distributed to them or their beneficiaries upon retirement, death, or certain other events. Amounts deferred or credited under the NQDC Plan are credited with notional investment earnings based on participant investment elections made from among the investment options available under the NQDC Plan. No amounts are credited with above-market earnings.
We provide various benefits to our executive officers, including health insurance and life and disability insurance, as a part of our total compensation package. Our employees, including our executive officers, are also eligible to participate in our 401(k) Plan. Under that plan, we make matching contributions of up to 3.5% of a participant’s eligible compensation. Our executive officers are fully vested in our matching contributions. Perquisites are not a significant component of compensation for our executive officers.
Termination and Change in Control Arrangements
We have agreements or plans under which our executive officers are entitled to payments and benefits upon termination of employment under certain circumstances. The terms of Mr. Emile Battat’s arrangement are set forth in his employment agreement and were determined on the basis of recommendations by our Compensation Committee after discussions with him. The terms of Mr. David Battat’s arrangement were recommended by our Compensation Committee after consideration of his responsibilities and experience. The terms of Mr. Strickland’s severance plan were recommended by our Compensation Committee after consideration of Mr. Strickland’s total compensation package and length
of service with the Company. We have structured our arrangements with our executives so that a change in control alone does not trigger any payments and, with respect to their equity awards, results only in acceleration of vesting. We believe acceleration of vesting provides our executive officers a reasonable measure of protection in the event of a change in control. For a more detailed discussion of the terms of these arrangements, see “Potential Termination and Change in Control Payments”
atbeginning on page
2223 of this proxy statement.
Stock Ownership Guidelines for Officers
Our stock ownership guidelines are designed to ensure that our executive officers and certain other designated officers of the Company and its subsidiaries acquire and maintain a meaningful equity stake in the Company so as to align their interests closely with those of our stockholders. The guidelines provide that within four years of becoming subject to the guidelines the persons serving as our Chairman and as our Chief Executive Officer are required to each own shares of our common stock with a market value of at least $2,400,000, a person serving as our Chief Operating Officer, a position not currently filled, is required to own shares of our common stock with a market value of at least $1,200,000, and the person serving as our Chief Financial Officer is required to own shares of our common stock with a market value of at least $900,000. Other officers of the Company or our subsidiaries who are designated by our Board of Directors are required to own shares of our common stock with a market value of at least $300,000 within five years from designation as being subject to the guidelines. The guidelines also provide that if an executive officer or a designated officer fails to meet the guidelines, or having met the guidelines fails to continue to meet them, two-thirds of each bonus payable to such
TABLE OF CONTENTS
executive officer or designated officer is to be paid in a form that counts toward the guidelines until the guidelines are met. Shares of our stock that count toward those guidelines are shares owned outright, shares held as restricted stock, shares underlying stock units, and shares held in certain trusts, family limited partnerships, or limited liability companies or similar investment vehicles.
We have a “clawback” policy that allows the Company to seek recovery with respect to cash incentive bonuses paid to executive officers if, within the preceding three years, any of our financial statements or financial metrics upon which cash incentive bonuses have been based have been materially misstated due to the fraud or intentional misconduct of one or more of our executive officers. In such event, our Board of Directors may direct the Company to seek to recover from any such executive officer the amount by which such executive officer’s cash incentive bonus exceeded the cash incentive bonus that would have been awarded had there been no such misstatement.
Section 162(m) of the Internal Revenue Code precludes a publicly-held corporation from taking a federal income tax deduction for compensation paid in excess of $1.0 million to certain of its executive officers.
Prior to 2018, this limitation did not apply to “performance-based” compensation. However, beginningBeginning in 2018 this limitation applies
as well to
performance-basedall forms of compensation, subject to certain “grandfather”
provisions.provisions that apply to performance-based compensation. Although the Compensation Committee is cognizant of the limitations imposed by Section 162(m), the
Compensation Committee believes that the primary purpose of our executive compensation program is to support the
Company'sCompany’s business strategy and the long-term interests of our stockholders. Therefore, the Compensation Committee maintains the flexibility to
awardrecommend or
recommendaward compensation that may not be tax-deductible if doing so furthers the objectives of our executive compensation program.
The base salaries of our executive officers can be adjusted upwards and downwards, except in the case of Mr. Emile Battat whose base salary is fixed by his employment agreement, and discretionary bonuses can be awarded based on the individual performance of the executives as well as the performance of the Company or its units. Additionally, we can make equity awards to reward individual performance. We recognize that there may be circumstances when the individual responsibilities and performance of our
executive officers or our corporate performance is so exceptional that a material increase in compensation would be appropriate. Likewise, we recognize that there could be a material downturn in our corporate performance, in which event we would consider reducing and, if appropriate, materially reducing compensation levels where permitted.
In making equity awards or considering adjustments to base salaries or cash incentives, our Compensation Committee takes into account the other elements of the compensation packages of our executive officers, as well as the number of shares of our common stock owned by them, the number of unexercised options held, the restricted stock or RSUs held, and the potential benefits they may realize upon the sale of the stock underlying these awards.
We also have a policy discouraging the hedging of the risk of ownership of our securities.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based on this review and discussions, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the proxy statement.
Members of the Compensation Committee
| Hugh J. Morgan, Jr. (Chairman) | | | Preston G. Athey | | | Ronald N. Spaulding | | | John P. Stupp, Jr. | |
TABLE OF CONTENTS
The following table sets forth summary information concerning the compensation of our three executive officers during the periods indicated:
Summary Compensation Table
Name and
Principal Position | Year | Salary
($)(1) | Stock Awards
($)(2) | Option
Awards(2) | Non-Equity
Incentive Plan
Compensation
($)(1)(3) | Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings | All Other
Compensation
($) | Total
($) |
Emile A Battat
Chairman
| | 2017 | | | 600,000 | | | 1,195,032 | | | 1,218,900 | | | 171,824 | | | 348 | | | 22,966 | (4) | | 3,209,070 | |
| 2016 | | | 600,000 | | | — | | | — | | | — | | | — | | | 11,118 | | | 611,118 | |
| 2015 | | | 600,000 | | | — | | | — | | | — | | | — | | | 15,843 | | | 615,843 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
David A. Battat
President and Chief Executive Officer
| | 2017 | | | 620,000 | | | 1,433,232 | | | 1,388,000 | | | 850,000 | (5) | | 2,151 | | | 22,338 | (6) | | 4,315,721 | |
| 2016 | | | 620,000 | | | — | | | — | | | 800,000 | | | — | | | 17,494 | | | 1,437,494 | |
| 2015 | | | 620,000 | | | — | | | — | | | 900,000 | | | — | | | 21,314 | | | 1,541,314 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Jeffery Strickland
Vice President and Chief Financial Officer, Secretary, and Treasurer
| | 2017 | | | 300,000 | | | 200,000 | | | — | | | 275,000 | (7) | | 89 | | | 19,945 | (8) | | 795,034 | |
| 2016 | | | 280,000 | | | — | | | — | | | 250,000 | | | — | | | 17,556 | | | 547,556 | |
| 2015 | | | 280,000 | | | — | | | — | | | 260,000 | | | — | | | 16,535 | | | 556,535 | |
Name and
Principal Position | | | Year | | | Salary
($)(1) | | | Stock Awards
($)(2) | | | Option
Awards
($)(2) | | | Non-Equity
Incentive Plan
Compensation
($)(1)(3) | | | Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) | | | All Other
Compensation
($) | | | Total
($) | |
Emile A Battat
Chairman | | | | | 2018 | | | | | | 600,000 | | | | | | — | | | | | | — | | | | | | 34,682 | | | | | | 8,676 | | | | | | 21,914(4) | | | | | | 665,272 | | |
| | | | 2017 | | | | | | 600,000 | | | | | | 1,195,032 | | | | | | 1,218,900 | | | | | | 171,824 | | | | | | 348 | | | | | | 22,966 | | | | | | 3,209,070 | | |
| | | | 2016 | | | | | | 600,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 11,118 | | | | | | 611,118 | | |
David A. Battat
President and Chief Executive Officer | | | | | 2018 | | | | | | 620,000 | | | | | | — | | | | | | — | | | | | | 900,000 | | | | | | —(5) | | | | | | 23,530(6) | | | | | | 1,543,530 | | |
| | | | 2017 | | | | | | 620,000 | | | | | | 1,433,232 | | | | | | 1,388,000 | | | | | | 850,000 | | | | | | 2,151 | | | | | | 22,338 | | | | | | 4,315,721 | | |
| | | | 2016 | | | | | | 620,000 | | | | | | — | | | | | | — | | | | | | 800,000 | | | | | | — | | | | | | 17,494 | | | | | | 1,437,494 | | |
Jeffery Strickland
Vice President and Chief Financial Officer, Secretary and Treasurer | | | | | 2018 | | | | | | 300,000 | | | | | | 300,000 | | | | | | — | | | | | | 325,000 | | | | | | 2,848 | | | | | | 25,151(7) | | | | | | 952,999 | | |
| | | | 2017 | | | | | | 300,000 | | | | | | 200,000 | | | | | | — | | | | | | 275,000 | | | | | | 89 | | | | | | 30,878 | | | | | | 805,967 | | |
| | | | 2016 | | | | | | 280,000 | | | | | | — | | | | | | — | | | | | | 250,000 | | | | | | — | | | | | | 27,745 | | | | | | 557,745 | | |
(1)
These columns include amounts deferred by the named executive officers under the NQDC Plan and reported in the “Executive Contributions in Last FYE” column of the Nonqualified Deferred Compensation table on page 22 of this proxy statement.
(2)
The amounts set forth in this column represent the aggregate grant date fair value of the awards made during the year indicated computed in accordance with ASC 718, with the fair value of the restricted stock awards to Messrs. Emile Battat and David Battat discounted by 11.2% to reflect post-vesting transfer restrictions. These amounts do not reflect whether the recipient has actually realized or will realize a financial benefit from the awards (such as by exercising stock options). The assumptions used in the valuations for the award made in 2018 may be found in Note 8 to the financial statements included as a part of our Annual Report on Form 10-K for the year ended December 31, 2018 and for the awards made in 2017 may be found in Note 8 to the financial statements included as a part of our Annual Report on Form 10-K for the year ended December 31, 2017.
| (1) | These columns include amounts deferred by the named executive officers under the NQDC Plan and reported in the first column of the Nonqualified Deferred Compensation table on page 20. |
| (2) | These amounts represent the aggregate grant date fair value of the awards made during the year computed in accordance with ASC 718, with the fair value of the restricted stock awards to Messrs. Emile Battat and David Battat discounted by 11.2% to reflect post-vesting transfer restrictions. These amounts do not reflect whether the recipient has actually realized or will realize a financial benefit from the awards (such as by exercising stock options). The assumptions used in the valuations may be found in Note 8 to the financial statements included as a part of our Annual Report on Form 10-K for the year ended December 31, 2017. |
| (3) | Mr. Emile Battat’s incentive compensation for 2017 was paid to him under his employment agreement with us. Mr. Emile Battat was entitled to incentive compensation of $135,464 for 2015 under his employment agreement but declined such payment. The incentive compensation to Messrs. David Battat and Strickland was provided to them under our Short-Term Incentive Plan. Under such plan, at least 75% of incentive compensation for a year is to be paid by April 15 in the year immediately succeeding the performance year and the remaining amount is to be paid by April 15 of the following year, generally, however, subject to forfeiture if the participant’s employment terminates before payment is made. |
| (4) | Includes the following paid or accrued by us or one or more of our subsidiaries: (i) matching contributions to our 401(k) Plan of $9,450; (ii) dividends on restricted stock of $13,050; and (iii) payment of life insurance premiums of $466. |
| (5) | This amount was awarded to Mr. David Battat for 2017 pursuant to the Short-Term Incentive Plan. |
| (6) | Includes the following paid or accrued by us or one or more of our subsidiaries: (i) matching contributions to our 401(k) Plan of $9,450; (ii) dividends on restricted stock of $11,925; and (iii) payment of life insurance premiums of $963. |
| (7) | This amount was awarded to Mr. Strickland for 2017 pursuant to the Short-Term Incentive Plan. |
| (8) | Includes the following paid or accrued by us or one or more of our subsidiaries: (i) matching contributions to the 401(k) Plan of $9,450; (ii) payment of life insurance premiums of $3,323; and (iii) $7,172, which is the dollar value of dividend equivalents credited in 2017 with respect to unvested RSUs in Mr. Strickland’s stock unit account under the 2006 Equity Plan. |
(3)
Mr. Emile Battat’s incentive compensation for 2018 and 2017 was paid to him under his employment agreement with us. The incentive compensation to Messrs. David Battat and Strickland was provided to them under our Short-Term Incentive Plan. Under such plan, at least 75% of incentive compensation for a year is to be paid by April 15 in the year immediately succeeding the performance year and the remaining amount is to be paid by April 15 of the following year, generally, however, subject to forfeiture if the participant’s employment terminates before payment is made.
(4)
Includes dividends on restricted stock of $11,832; matching contribution to our 401(k) Plan and make-up contribution to our NQDC Plan; and payment of life insurance premiums.
(5)
In 2018, Mr. David Battat experienced a negative change in his deferred compensation earnings of ($35,899).
(6)
Includes dividends on restricted stock of $12,960; matching contribution to our 401(k) Plan and make-up contribution to our NQDC Plan; and payment of life insurance premiums.
(7)
Includes matching contribution to our 401(k) Plan and make-up contribution to our NQDC Plan; payment of life and disability insurance premiums; medical reimbursements; personal use of Company automobile; and the dollar value of dividend equivalents credited in 2018 with respect to unvested RSUs in Mr. Strickland’s stock unit account under the 2006 Equity Plan.
The following table sets forth summary information concerning the grants of plan-based awards to our executive officers during the year ended December 31,
2017:2018:
Grants of Plan-Based Awards
| | | Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards | All Other
Stock
Awards:
Number
of Shares
of Stock
or Units (#) | All Other
Option
Awards:
Number of
Securities
Underlying
Options (#) | Exercise or
Base Price
of Option
Awards
($/Sh) | Grant Date
Fair Value
of Stock
and Option
Awards
($)(2) |
Name | Grant Type | Grant Date | Threshold
($) | Target
($)(1) | Maximum
($) |
Emile A Battat | Restricted Stock | 3/13/17 | | — | | | — | | | — | | | 2,900 | | | — | | | — | | | 1,195,032 | |
| Options | 3/13/17 | | — | | | — | | | — | | | — | | | 10,000 | | | 464.05 | | | 1,218,900 | |
| Incentive Compensation | N/A | | — | | | 171,824 | | | — | | | — | | | — | | | — | | | — | |
David A. Battat | Restricted Stock | 5/23/17 | | — | | | — | | | — | | | 3,000 | | | — | | | — | | | 1,433,232 | |
| Options | 5/23/17 | | — | | | — | | | — | | | — | | | 10,000 | | | 538.00 | | | 1,388,000 | |
| Incentive Compensation | N/A | | — | | | 850,000 | | | — | | | — | | | — | | | — | | | — | |
Jeffery Strickland | RSUs | 8/24/17 | | — | | | — | | | — | | | 323.68 | | | — | | | — | | | 200,000 | |
| Incentive Compensation | N/A | | — | | | 275,000 | | | — | | | — | | | — | | | — | | | — | |
| Name | | | Grant Type | | | Grant Date | | | Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards | | | All Other
Stock
Awards:
Number
of Shares
of Stock
or Units (#) | | | All Other
Option
Awards:
Number of
Securities
Underlying
Options (#) | | | Exercise or
Base Price
of Option
Awards
($/Sh) | | | Grant Date
Fair Value
of Stock
and Option
Awards
($)(2) | |
| | Threshold
($) | | | Target
($)(1) | | | Maximum
($) | |
| Emile A Battat | | | Restricted Stock | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | Options | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | Incentive Compensation | | | | | N/A | | | | | | — | | | | | | 34,682 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| David A. Battat | | | Restricted Stock | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | Options | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | Incentive Compensation | | | | | N/A | | | | | | — | | | | | | 900,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Jeffery Strickland | | | RSUs | | | | | 5/22/18 | | | | | | — | | | | | | — | | | | | | — | | | | | | 505.69 | | | | | | — | | | | | | — | | | | | | 300,000 | | |
| | Incentive Compensation | | | | | N/A | | | | | | — | | | | | | 325,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
(1)
See “Incentive Compensation” below. The amounts set forth in this column were awarded to Mr. Emile Battat pursuant to his employment agreement and to Messrs. David Battat and Strickland pursuant to the Short-Term Incentive Plan. Neither such employment agreement nor that plan provides for a threshold amount if performance targets are not met nor does it provide for a maximum bonus.
| (1) | See “Incentive Compensation” below. These amounts were awarded to Mr. Emile Battat pursuant to his employment agreement and to Messrs. David Battat and Strickland pursuant to the Short-Term Incentive Plan. Neither such employment agreement nor that plan provides for a threshold amount if performance targets are not met nor does it provide for a maximum bonus. |
(2)
| (2) | Represents the aggregate grant date fair value of stock and option awards computed in accordance with ASC 718, with the fair value of the restricted stock awards to Messrs. Emile Battat and David Battat discounted by 11.2% to reflect post-vesting transfer restrictions. The assumptions used in the valuation may be found in Note 8 to the financial statements included as part of our Annual Report on Form 10-K for the year ended December 31, 2017. |
Represents the aggregate grant date fair value of stock and option awards computed in accordance with ASC 718. The assumptions used in the valuation may be found in Note 8 to the financial statements included as part of our Annual Report on Form 10-K for the year ended December 31, 2018.
We have an employment agreement with Mr. Emile Battat that provides that he will serve as a senior executive officer of the Company and, subject to his election as a director by our stockholders, will serve as Chairman of the Board if so elected by our Board of Directors. Mr. Emile Battat’s employment agreement fixes his base salary for each calendar year during the term at $600,000. The term of our employment agreement with Mr. Emile Battat expires on December 31, 2021 and automatically renews for additional one-year terms unless either we or Mr. Emile Battat notifies the other of termination at least six months
prior to the expiration of the then-current term. Base salaries for Mr. Strickland and Mr. David Battat are reviewed annually, and adjustments are generally made on the basis of our performance as measured by certain financial and non-financial criteria, survey information respecting compensation of executive officers, cost-of-living information, and the individual performance of the respective executive officer. The Compensation Committee has not assigned relative weights or values to any of such criteria. With respect to our financial performance, the Compensation Committee generally takes into consideration our operating income, earnings per share, total stockholder return, return on equity, safety, and efficiency of our operations.
Pursuant to his employment agreement, Mr. Emile Battat is entitled to receive a cash bonus each year equal to a percentage of the increase in operating income for such calendar year over operating income for the prior calendar year, subject to equitable adjustments in operating income in the discretion of the Compensation Committee. Our other executive officers and certain key employees are eligible to be selected to participate in our Short-Term Incentive Plan. Our Short-Term Incentive Plan provides for the establishment each year of an awards pool that is equal to a portion of our subsidiaries’ operating profits and is funded through contributions by those subsidiaries. The awards pool is used to pay bonuses under employment agreements, other discretionary bonuses to employees who are not participating in the Short-Term Incentive Plan, and other employment-related expenses. The balance of the awards pool, if any, is available for bonuses to participating executive officers and key personnel. Bonuses under the Short-Term Incentive Plan are based in part on a bonus allocation formula that
TABLE OF CONTENTS
takes into account a number of factors, including the participant’s salary, an individual bonus rate, the profitability of the subsidiary employing the participant (where applicable), and individual participant performance. The bonus amounts determined pursuant to that formula for participating executive officers are reviewed by our Chairman of the Board who makes the initial determinations as to the bonus amounts. The Chairman’s determinations are then subject to reviewreviewed by our Compensation Committee, which takes into account themakes recommendations of the Chairman of the Board, and the Compensation Committee’s recommendation as to the bonus amounts to our Board of Directors, whichDirectors. The Board then fixes the bonuses.amount of the bonuses for our executive officers participating in the Short-Term Incentive Plan. The bonus amounts determined pursuant to the bonus formula for key personnel are subject to review and adjustment by our executive officers. Bonuses under the Short-Term Incentive Plan are determined by the April 15 immediately following the performance year, with at least 75% of a participant’s bonus to be paid by April 15 of that year and the balance, which is generally 25% of the bonus, to be paid by the following April 15. No participant in the Short-Term Incentive Plan has any vested right to such bonus or any part thereof until paid, and generally if a participant’s employment terminates prior to payment, his or her bonus is forfeited. For 2017,2018, Mr. David Battat was awarded a cash incentive bonus under the Short-Term Incentive Plan of $850,000,$ 900,000, and Mr. Strickland was awarded a cash incentive bonus of $275,000.$325,000. The Short-Term Incentive Plan has been designed to foster a corporate culture focused on bottom line results by providing participating executive officers and key employees with a substantial stake in reducing costs and increasing sales and productivity while conserving capital resources. In addition, our executive officers may receive discretionary bonuses if recommended by our Compensation Committee and approved by our Board of Directors.
The RSUs granted by our Compensation
Committee’s grants of stock options and restricted stockCommittee to
Messrs. Emile Battat and David BattatMr. Strickland in
2017 were the first equity awards made to them since 2011, in the case of Mr. Emile Battat, and 2012, in the case of Mr. David Battat, other than awards of 7002018 are convertible into shares
of restricted stock made to each of them in 2014. The 2017 awards vest over a five year period, just as the 2011 and 2012 awards vested over five year periods, except that the awards of restricted stock in 2017 also are subject to two-year post vesting transfer restrictions. The stock options expire six years after the date of grant and have an exercise price equal to the closing market price of our common stock on
a one-for-one basis on the
earliest of the following: four years after the award date,
his permanent disability, his death, and a change in control of
grant. Thethe Company, provided he is then employed by the Company. Those RSUs
were granted to Mr. Strickland
in 2017 vest in five years from the date of the award. These were the first equity awards made to Mr. Strickland since 2014. All of the 2017 equity awards granted to our executive officers were granted under our 2006 Equity Plan.
No equity awards were granted to Mr. Emile Battat or Mr. David Battat in 2018.
The following table sets forth summary information concerning our executive officers’ outstanding equity awards as of December 31,
2017:2018:
Outstanding Equity Awards at Fiscal Year-End
| Option Awards | Stock Awards |
Name | Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#) | Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) | Option
Exercise
Price
($) | Option
Expiration
Date | Number of
Shares or
Units of
Stock That
Have Not
Vested
(#) | Market Value
of Shares
or Units
of Stock
That Have
Not Vested
($)(1) |
Emile A Battat | | — | | | 10,000 | (2) | | 464.05 | | | 3/13/23 | | | 2,900 | (2) | | 1,828,740 | |
David A. Battat | | — | | | 10,000 | (3) | | 538.00 | | | 5/23/23 | | | 3,000 | (3) | | 1,891,800 | |
Jeffery Strickland | | — | | | — | | | — | | | — | | | 648.68 | (4) | | 409,058 | |
| | | | Option Awards | | | Stock Awards | |
| Name | | | Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#) | | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | | | Number of
Shares or
Units of
Stock That
Have Not
Vested
(#) | | | Market Value
of Shares or
Units of Stock
That Have
Not Vested
($)(1) | |
| Emile A Battat | | | | | 2,000 | | | | | | 8,000(2) | | | | | | 464.05 | | | | | | 3/13/23 | | | | | | 2,320(2) | | | | | | 1,719,306 | | |
| David A. Battat | | | | | 2,000 | | | | | | 8,000(3) | | | | | | 538.00 | | | | | | 5/23/23 | | | | | | 2,400(3) | | | | | | 1,778,592 | | |
| Jeffery Strickland | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,158.03(4) | | | | | | 858,193 | | |
| (1) | Based on the closing price of $630.60 per share of the common stock of the Company on December 29, 2017, the last trading day in 2017. |
| (2) | These awards vest in five equal annual installments beginning on March 13, 2018. |
| (3) | These awards vest in five equal annual installments beginning on May 23, 2018. |
| (4) | Comprised of 325 RSUs that vest on May 22, 2019 and 323.68 RSUs that vest on August 24, 2022. |
19
The amounts set forth in this column are based on the closing price of $741.08 per share of the common stock of the Company on December 31, 2018.These awards vest in five equal annual installments that began on March 13, 2018.
(3)
These awards vest in five equal annual installments that began on May 23, 2018.
(4)
Comprised of 327.46 RSUs that vest on May 22, 2019, 324.88 RSUs that vest on August 24, 2022, and 505.69 RSUs that vest on May 22, 2022 or Mr. Strickland’s earlier termination of employment due to death or disability.
The following table sets forth summary information concerning stock options exercised,
and the value realized upon exercise,
and the vesting of stock, and the value realized upon vesting for our executive officers during the year ended December 31,
2017:2018:
Option Exercises and Stock Vested
| Option Awards | Stock Awards |
Name | Number of Shares
Acquired on Exercise
(#) | Value Realized
on Exercise
($) | Number of Shares
Acquired on Vesting
(#) | Value Realized
on Vesting
($)(1) |
Emile A Battat | | 25,000 | | | 8,144,000 | | | — | | | — | |
David A. Battat | | 25,000 | | | 8,392,000 | | | 1,500 | | | 802,988 | |
Jeffery Strickland | | — | | | — | | | 1,206 | | | 648,426 | |
| | | | Option Awards | | | Stock Awards | |
| Name | | | Number of Shares
Acquired on Exercise
(#) | | | Value Realized
on Exercise
($) | | | Number of Shares
Acquired on Vesting
(#) | | | Value Realized
on Vesting
($)(1) | |
| Emile A Battat | | | | | — | | | | | | — | | | | | | 580 | | | | | | 348,319 | | |
| David A. Battat | | | | | — | | | | | | — | | | | | | 600 | | | | | | 350,700 | | |
| Jeffery Strickland | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
(1)
The amounts set forth in this column are based on the average of the high and low sales prices of the Company’s common stock on the vesting dates.
| (1) | Based on the average of the high and low sales prices of the Company’s common stock on the vesting dates. |
The following table sets forth
certain information concerning
contributions to our NQDC Plan
by our executive officers duringfor the year ended December 31,
2017:2018:
Nonqualified Deferred Compensation
Name | Executive
Contributions
in Last FY
($)(1) | Registrant
Contributions
in Last FY
($) | Aggregate
Earnings
in Last FY
($) | Aggregate
Withdrawals/
Distributions
($) | Aggregate
Balance at
Last FYE
($) |
Emile A Battat | | 145,385 | | | — | | | 348 | | | — | | | 145,733 | |
David A. Battat | | 150,231 | | | — | | | 2,151 | | | — | | | 152,382 | |
Jeffery Strickland | | 40,385 | | | — | | | 89 | | | — | | | 40,474 | |
| Name | | | Executive
Contributions
in Last FY
($)(1) | | | Registrant
Contributions
in Last FY
($)(2) | | | Aggregate
Earnings in
Last FY
($)(3) | | | Aggregate
Withdrawals/
Distributions
($) | | | Aggregate
Balance at
Last FYE
($)(4) | |
| Emile A Battat | | | | | 578,660 | | | | | | 7,525 | | | | | | 8,676 | | | | | | — | | | | | | 740,594 | | |
| David A. Battat | | | | | 433,000 | | | | | | 3,130 | | | | | | (35,899) | | | | | | — | | | | | | 552,611 | | |
| Jeffery Strickland | | | | | 210,000 | | | | | | 5,735 | | | | | | 2,848 | | | | | | — | | | | | | 259,056 | | |
(1)
The amounts set forth in this column represent the base salaries and non-equity incentive awards deferred in 2018 under the NQDC Plan. These amounts are included in the Summary Compensation Table on page 18 of this proxy statement in the “Salary” or “Non-Equity Incentive Plan Compensation” columns.
| (1) | These amounts represent the base salaries and non-equity incentive awards deferred in 2017 under the NQDC Plan. These amounts are included in the Summary Compensation Table on page 17 in the Salary or Non-Equity Incentive Plan Compensation columns. |
(2)
The amounts set forth in this column represent the make-up contributions to the NQDC Plan made by the Company and are included in the Summary Compensation Table in the “All Other Compensation” column.
(3)
The amounts set forth in this column are included in the Summary Compensation Table on page 18 of this proxy statement in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column.
(4)
The amounts set forth in this column include the following amounts previously reported in the Summary Compensation Table for prior years: $145,385 for Mr. Emile Battat; $150,231 for Mr. David Battat; and $40,385 for Mr. Strickland.
Our NQDC Plan allows a select group of key management or highly compensated employees of the Company and its subsidiaries, including our executive officers, to defer income under a nonqualified plan. As such, the plan provides a vehicle for the eligible employees to defer amounts higher than the limits established for our 401(k) Plan, which is a qualified plan. The Company is to credit make-up contributions to the account of each of each participant who makes a deferral election for base salary under the NQDC Plan that results in a reduction of the Company’s matching contribution that would have been made in our 401(k) Plan, with the make-up contribution to be in an amount equal to the amount by which our matching contribution to our 401(k) Plan is reduced as a result of the deferral election made under the NQDC Plan. Base salary and bonus compensation are eligible for deferral under the NQDC Plan. Each year our Compensation Committee selects the key management or highly compensated employees who are eligible to participate in the NQDC Plan, and each of those employees makes an election whether or not to participate in the NQDC Plan and at what level he or she wishes to defer compensation. Participants may defer not less than 10% and not more than 90% of base salary and bonus compensation. Participants elect how their deferred funds are deemed to be invested among the investment options designated by the Compensation Committee, which are generally the same as those available under the 401(k) Plan, as well as the Company’s common stock. In addition, participating employees choose the schedule on which these funds are to be distributed to them or their beneficiaries upon retirement, death, or certain other events. Amounts deferred or credited under the NQDC Plan are credited with notional investment earnings based on participant investment elections made from among the investment options available under the NQDC Plan. No amounts are credited with above-market earnings.
The NQDC Plan is unfunded. Participants have an unsecured contractual commitment from the Company to pay the amounts due under the NQDC Plan from the general assets of the Company.TABLE OF CONTENTS
Related Persons Transactions Policy
Our Audit Committee, pursuant to the Audit Committee Charter, is authorized to review and approve or ratify, in its sole discretion, any related person transaction, within the meaning of Nasdaq listing rules and rules and regulations promulgated by the SEC. Under the Audit Committee’s written policies,
transactions involving amounts in excess of $120,000 in which a related person has a direct or indirect material interest are subject to review and approval or ratification. The Audit Committee will approve or ratify such a transaction only if it determines that the transaction is in our best interest.
In considering a transaction with a related person, the Audit Committee will consider all relevant factors, including, as applicable, the following: (i) our business rationale for entering into the transaction; (ii) the alternatives to entering into such a transaction; (iii) whether the transaction is on terms comparable to those available to third parties or, in the case of employment relationships, to employees generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflict; and (v) the overall fairness of the transaction to us.
The Audit Committee will periodically monitor the transaction to ensure that there are no changed circumstances that would render it advisable for us to amend or terminate the transaction. Management or the affected director or executive officer is to bring the matter to the attention of the Audit Committee. If a member of the Audit Committee is involved in the transaction, he or she will be recused from all discussions and decisions about the transaction.
TABLE OF CONTENTS
Potential Termination and Change in Control Payments
Our employment agreement with Mr. Emile Battat provides for certain payments to be made and benefits provided to him upon termination of employment. With Mr. Emile Battat’s approval, his employment agreement was recently amended to eliminate our obligation to pay to him a gross-up payment in the event the payments or benefits provided to him are subject to an excise tax under golden parachute provisions of the Internal Revenue Code. Although we do not have an employment agreement with either Mr. David Battat or Mr. Strickland, we have a change in control agreement with Mr. David Battat that provides that he will be entitled to certain payments and benefits in the event his employment is terminated in connection with a change in control of the Company, and we have a severance plan pursuant to which Mr. Strickland will be entitled to certain payments if his employment is terminated under certain circumstances in connection with a change in control of the Company. These arrangements are discussed below.
Termination for Just Cause or Without Good Reason
If Mr. Emile Battat’s employment is terminated by us for “just cause” or by Mr. Emile Battat without “good reason” (as those terms are defined in Mr. Emile Battat’s employment agreement), he is to receive his base salary up to the termination date and the annual bonus for the calendar year in which the termination date occurs, prorated for the number of days in such calendar year prior to the termination date. He will also be entitled to receive his accrued vacation pay, unreimbursed business expenses, his aggregate account balance under the NQDC Plan, and vested amounts under the 401(k) Plan.
If Mr. David Battat’s employment or Mr. Strickland’s employment is terminated for cause, the terminated executive officer will receive his base salary up to the termination date, accrued vacation pay, unreimbursed business expenses, his aggregate account balance under the NQDC Plan, and vested amounts under the 401(k) Plan.
Termination Without Just Cause or With Good Reason or Due to Retirement, Death,
, or DisabilityIf Mr. Emile Battat’s employment is terminated by us without just cause, by Mr. Emile Battat with good reason or due to his retirement, death, or disability, he will be entitled to receive the same payments and other benefits he would have received had the termination been with just cause plus an amount equal to the sum of one year’s base salary and the average annual bonus received by him in the three years prior to the year in which the termination occurs. In addition, we will continue to provide group health plan benefits for him, his spouse and his dependents for one year and all stock options and other equity will fully vest and become exercisable on the termination date.
If Mr. David Battat’s or Mr. Strickland’s employment is terminated by us without “just cause,” by either of them with “good reason” (as those terms are defined in Mr. David Battat’s change in control agreement and Mr. Strickland’s severance plan) or due to death or disability, and such termination is not in connection with a change in control of the Company, the terminated executive officer will receive the same
payments and other benefits he would have received had the termination been with just
cause.cause, and if Mr. Strickland’s employment termination is due to his death or disability the RSUs awarded to him in May 2018 will vest and convert to common stock on the termination date.
Termination Without Just Cause or With Good Reason in Connection with Change in Control
If Mr. Emile Battat’s employment is terminated by us without just cause or by Mr. Emile Battat for good reason in contemplation of or within two years following a “change in control” (as that term is defined in Mr. Emile Battat’s employment agreement), he will be entitled to receive the same payments and other benefits he would have received had the termination been with just cause, plus an amount equal to two times the sum of one year’s base salary and the average annual bonus received by him for the three years prior to the year in which the termination occurs. In addition, we will continue to provide group health plan benefits for him, his spouse and his dependents for one year and all stock options and other equity will fully vest and become exercisable on the termination date.
If Mr. David Battat’s employment is terminated by us without just cause or by Mr. David Battat for good reason in contemplation of or within two years following a “change in control” (as defined in Mr. David Battat’s change in control agreement), he will be entitled to receive the same payments and other benefits he would have received had the termination been with just cause, plus his base salary up to the termination date and the annual bonus for the calendar year in which the termination date occurs, prorated for the number of days in such
TABLE OF CONTENTS
calendar year prior to the termination date, and an amount equal to two times the sum of one year’s base salary and the average annual bonus to which he was entitled for the three years prior to the year in which the termination occurs. In addition, Mr. David Battat’s unvested equity awards will vest, and he will be entitled to one year’s health benefits.
If there is a change in control of the Company and Mr. Strickland’s employment is terminated by us without cause or by Mr. Strickland with good reason prior to Mr. Strickland’s death, attainment of age 65 or the expiration of two years following the change in control, Mr. Strickland will be entitled to receive the same payments and other benefits he would have received had the termination been with just cause, plus severance pay in an amount equal to his annual base salary for the 12 months preceding termination of employment. In addition, Mr. Strickland’s unvested equity awards will
vest.vest and convert to common stock.
Change in Control without Termination of Employment
If there is a change in control but no termination of employment, the unvested options,
and restricted stock,
and RSUs held by Messrs. Emile Battat, David Battat, and Strickland will vest under the terms of the 2006 Equity Plan.
The following table sets forth the payments and benefits that each executive officer would have received had his employment been terminated, or had a change in control occurred, on December 31,
2017,2018, excluding amounts payable under our 401(k)
planPlan to each executive officer:
Name | Type of Payment
or Benefit | Termination for
Just Cause
or Without
Good Reason
($) | Termination
Without Just
Cause, For
Good Reason,
or upon
Retirement,
Death, or
Disability
($) | Termination
Without Just
Cause or For
Good Reason
in Connection
with a Change
in Control
($) | Change
in Control
($) |
Emile A Battat | Severance Payment | | 171,824 | | | 848,402 | | | 1,524,980 | | | — | |
| Equity Awards(1) | | — | | | 3,494,240 | | | 3,494,240 | | | 3,494,240 | |
| NQDC Plan Account Balance(2) | | 145,733 | | | 145,733 | | | 145,733 | | | — | |
| Health Benefits | | — | | | 17,756 | | | 17,756 | | | — | |
| Unreimbursed Business Expenses | | 172,000 | | | 172,000 | | | 172,000 | | | — | |
| Accrued Vacation Pay | | — | | | — | | | — | | | — | |
| Total | | 489,557 | | | 4,678,131 | | | 5,354,709 | | | 3,494,240 | |
| | | | | | | | | | | | | |
David A. Battat | Severance Payment | | — | | | — | | | 2,973,334 | | | — | |
| Equity Awards(1) | | — | | | — | | | 2,817,800 | | | 2,817,800 | |
| NQDC Plan Account Balance(2) | | 152,382 | | | 152,382 | | | 152,382 | | | — | |
| Health Benefits | | — | | | — | | | 8,472 | | | — | |
| Unreimbursed Business Expenses | | 118,000 | | | 118,000 | | | 118,000 | | | — | |
| Accrued Vacation Pay | | — | | | — | | | — | | | — | |
| Total | | 270,382 | | | 270,382 | | | 6,069,988 | | | 2,817,800 | |
| | | | | | | | | | | | | |
Jeffery Strickland | Severance Payment | | — | | | — | | | 300,000 | | | — | |
| Equity Awards(1) | | — | | | — | | | 409,058 | | | | |
| NQDC Plan Account Balance(2) | | 40,474 | | | 40,474 | | | 40,474 | | | — | |
| Health Benefits | | — | | | — | | | — | | | — | |
| Unreimbursed Business Expenses | | — | | | — | | | — | | | — | |
| Accrued Vacation Pay | | 6,923 | | | 6,923 | | | 6,923 | | | — | |
| Total | | 47,397 | | | 47,397 | | | 756,455 | | | — | |
| Name | | | Type of Payment
or Benefit | | | Termination for
Just Cause
or Without
Good Reason
($) | | | Termination
Without Just
Cause, For
Good Reason,
or upon
Retirement,
Death, or
Disability
($) | | | Termination
Without Just
Cause or For
Good Reason
in Connection
with a Change
in Control
($) | | | Change
in Control
($) | |
| Emile A Battat | | | Severance Payment | | | | | 34,682 | | | | | | 691,957 | | | | | | 1,349,231 | | | | | | — | | |
| | Equity Awards(1) | | | | | — | | | | | | 3,935,546 | | | | | | 3,935,546 | | | | | | 3,935,546 | | |
| | NQDC Plan Account Balance(2) | | | | | 740,594 | | | | | | 740,594 | | | | | | 740,594 | | | | | | — | | |
| | Health Benefits | | | | | — | | | | | | 17,974 | | | | | | 17,974 | | | | | | — | | |
| | Unreimbursed Business Expenses | | | | | 205,000 | | | | | | 205,000 | | | | | | 205,000 | | | | | | — | | |
| | Accrued Vacation Pay | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | Total | | | | | 980,276 | | | | | | 5,591,071 | | | | | | 6,248,345 | | | | | | 3,935,546 | | |
| David A. Battat | | | Severance Payment | | | | | — | | | | | | — | | | | | | 2,940,000 | | | | | | — | | |
| | Equity Awards(1) | | | | | — | | | | | | — | | | | | | 3,403,232 | | | | | | 3,403,232 | | |
| | NQDC Plan Account Balance(2) | | | | | 552,611 | | | | | | 552,611 | | | | | | 552,611 | | | | | | — | | |
| | Health Benefits | | | | | — | | | | | | — | | | | | | 8,472 | | | | | | — | | |
| | Unreimbursed Business Expenses | | | | | 163,000 | | | | | | 163,000 | | | | | | 163,000 | | | | | | — | | |
| | Accrued Vacation Pay | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | Total | | | | | 715,611 | | | | | | 715,611 | | | | | | 7,067,415, | | | | | | 3,403,232 | | |
| Jeffery Strickland | | | Severance Payment | | | | | — | | | | | | — | | | | | | 300,000 | | | | | | — | | |
| | Equity Awards(1) | | | | | — | | | | | | 374,757(3) | | | | | | 858,193 | | | | | | 858,193 | | |
| | NQDC Plan Account Balance(2) | | | | | 259,056 | | | | | | 259,056 | | | | | | 259,056 | | | | | | — | | |
| | Health Benefits | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | Unreimbursed Business Expenses | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | Accrued Vacation Pay | | | | | 5,769 | | | | | | 5,769 | | | | | | 5,769 | | | | | | — | | |
| | Total | | | | | 264,825 | | | | | | 639,582 | | | | | | 1,423,018 | | | | | | 858,193 | | |
| (1) | Represents the market price as of December 31, 2017 of equity awards vesting on termination of employment or change in control less, in the case of options, the exercise price of those options. |
| (2) | These amounts are also shown in the “Aggregate Balance at Last FYE” column of the Nonqualified Deferred Compensation table at page 20 of this proxy statement and are shown assuming payment in a single lump sum regardless of any individual election to receive payment over time. |
23
Represents the market price as of December 31, 2018 of equity awards vesting on termination of employment or change in control less, in the case of options, the exercise price of those options.These amounts are also shown in the “Aggregate Balance at Last FYE” column of the Nonqualified Deferred Compensation table on page TABLE OF CONTENTS22 of this proxy statement and are shown assuming payment in a single lump sum regardless of any individual election to receive payment over time. (3)
Represents the market price as of December 31, 2018 of an equity award vesting and converting to common stock on termination of employment due to death or disability.
Pursuant to Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934, as amended, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our Chief Executive Officer, Mr. David Battat: For
2017,2018, our Chief Executive Officer had total compensation of
$4,315,721,$ 1,543,530, as reflected in the Summary Compensation Table
aton page
1718 of this proxy statement. We determined that our median employee’s annual total compensation was
$38,242$40,559 for
2017.2018. As a result, our Chief Executive Officer’s annual total compensation for
20172018 was approximately
11338 times the annual total compensation of our median employee. We identified our median employee by examining the
20172018 total cash compensation for all individuals, excluding our Chief Executive Officer, who were employed by us on December 31,
2017.2018. We included all
employees, whether employed on a full-time, part-time, or seasonal basis. We did not make any assumptions, adjustments, or estimates in identifying the median employee or with respect to total cash compensation, and we did not annualize the compensation of any full-time employees who were not employed by us for all of
2017.We have elected to disclose a supplemental ratio that excludes the grant date fair value of the equity awards granted in 2017. Our Chief Executive Officer’s annual total compensation for 2017 includes $2,821,232 representing the grant date fair value of the restricted stock and stock options granted to him in 2017. We have generally made awards of this nature to our Chief Executive Officer at five year intervals and not annually, and none of the restricted stock or stock options granted to our Chief Executive Officer in 2017 has vested as of the date of this proxy statement. If the grant date fair value of the 2017 equity awards were excluded, our Chief Executive Officer’s annual total compensation for 2017 would have been approximately 39 times our median employee’s annual total compensation for 2017.
2018.
Compensation Committee Interlocks and Insider Participation
During
2017,2018, Messrs. Athey, Morgan, Spaulding, and Stupp served as members of the Compensation Committee. None of the members of the Compensation Committee was or had previously been an officer or employee of the Company or our subsidiaries or had any relationship requiring disclosure pursuant to Item 404 of Regulation S-K. Additionally, during
2017,2018, none of our executive officers was a member of the board of directors, or any committee thereof, of any other entity one of the executive officers of which served as a member of our Board of Directors, or any committee thereof.
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING
FIRMOur Audit Committee has appointed the firm of Grant Thornton LLP as our independent registered public accounting firm for the year
2018.2019. Although ratification by stockholders of the selection of Grant Thornton LLP is not required by law, the selection of Grant Thornton LLP is being submitted to our stockholders for ratification because we believe it is a good corporate practice. If stockholders do not ratify the selection, the Audit Committee will reconsider whether to retain Grant Thornton LLP. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interest of us and our stockholders. 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE YEAR 2018.2019.
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 our quarterly reports on Form 10-Q were
$394,796 for the year ended December 31, 2018 and were $397,397 for the year ended December 31,
2017 and were $361,865 for the year ended December 31, 2016.2017.
There were no fees billed by Grant Thornton LLP for the year ended December 31,
20172018 or for the year ended December 31,
20162017 for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees” above.
The aggregate fees billed by Grant Thornton LLP for professional services rendered for tax services were
$44,287 for the year ended December 31, 2018 and were $20,076 for the year ended December 31,
2017 and were $22,472 for the year ended December 31, 2016.2017. These fees relate to federal and state tax compliance and tax advice in each such year.
There were no fees billed by Grant Thornton LLP for the years ended December 31,
20172018 or December 31,
20162017 other than those set forth above.
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 independence of the independent registered public accounting firm. In accordance with those policies and procedures, we are not to engage the independent registered public accounting firm 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. The Audit Committee is to review the services expected to be performed by the independent registered public accounting firm to ensure that the provision of those services will not impair the independent registered public accounting firm’s independence. The Audit Committee will pre-approve fee levels for each of the following categories: audit, audit-related and tax compliance/planning services. Any proposed services
exceeding pre-approved fee levels will require specific pre-approval by the Audit Committee. 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 term of any pre-approval is 12 months
TABLE OF CONTENTS
from the date of the pre-approval unless the Audit Committee specifically provides for a different period. The Audit Committee will not delegate to our management its responsibilities to pre-approve services performed by the independent registered public accounting firm. However, the Audit Committee has delegated pre-approval 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 $15,000 per service, provided that the aggregate amount of such services does not exceed $30,000 in any calendar year. The Audit Committee Chairman must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. During the year ended December 31, 2017,2018, no services were provided by Grant Thornton LLP other than in accordance with the pre-approval policies and procedures then in place.
The Audit Committee of the Board of Directors has reviewed and discussed with management our audited financial statements as of and for the year ended December 31,
2017.2018. The Audit Committee has discussed with Grant Thornton LLP, our independent registered public accounting firm, the matters required to be discussed by Auditing Standard No. 1301,
Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board. The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting
firm'sfirm’s communications with the Audit Committee concerning independence and has discussed with the independent registered public accounting firm the independent registered public accounting
firm'sfirm’s independence.
Based on the reviews and discussions referred to above, the Audit Committee recommended to our Board of Directors that the financial statements referred to above be included in our Annual Report on our Form 10-K for the year ended December 31,
2017.2018.
Members of the Audit Committee
John P. Stupp, Jr. (Chairman)
| Preston G. Athey
| Hugh J. Morgan, Jr.
| Ronald N. Spaulding
| Roger F. Stebbing
|
John P. Stupp, Jr. (Chairman)Preston G. AtheyHugh J. Morgan, Jr.Ronald N. Spaulding
Item 3
ADVISORY VOTE TO APPROVE EXECUTIVE OFFICER COMPENSATION
Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended, our stockholders are entitled to vote to approve, on an advisory basis, the compensation of the Company’s executive officers. In accordance with the provisions of Section 14A, we are requesting our stockholders to approve, on an advisory basis, the compensation of our executive officers, each of whom is named in the Summary Compensation Table, as described in the Compensation Discussion and Analysis and disclosed in the Summary Compensation Table and related compensation tables and narrative discussion presented under “Executive Compensation” beginning
aton page
1112 of this proxy statement. This vote will be similar to the advisory votes on the compensation of our executive officers that we have held annually since 2011. We have determined to hold an advisory vote on the compensation of our executive officers annually until the next required vote on the frequency of stockholder voting on the compensation of the Company’s executive officers, which will occur at our 2023 annual meeting, unless the Board of Directors hereafter determines that a different frequency for such advisory voting is in the best interests of our stockholders. Accordingly, unless the Board of Directors makes such a determination, the next advisory vote on the compensation of our executive officers following the
20182019 annual meeting will occur at the annual meeting of stockholders to be held in
2019.2020.
Our executive compensation program has been designed to attract, retain and motivate our executive team by providing competitive compensation within our market. We believe that our executive compensation program provides an appropriate balance between salary and “at-risk” forms of incentive compensation, as well as a mix of incentives that encourage our executives to focus on both short- and long-term goals without encouraging inappropriate risks to achieve performance. We were pleased to receive a favorable vote for our compensation practices at our
20172018 annual meeting, with approximately
81%97% of the shares present, in person or by proxy, at the meeting and entitled to vote thereon being voted to approve, on an advisory basis, the compensation of our executive officers.
As an advisory vote, this proposal is not binding on the Company. However, our Compensation Committee and our Board of Directors value the opinions of our stockholders expressed through your vote on this proposal and will consider the outcome of this vote in making future compensation decisions for our executive officers.
Accordingly, we will present the following resolution to be voted on at our
20182019 annual meeting of stockholders:
“RESOLVED, that the stockholders of Atrion Corporation (the “Company”) approve, on an advisory basis, the compensation of the Company’s executive officers named in the Summary Compensation Table in the Company’s proxy statement for its
20182019 annual meeting of stockholders, as disclosed in said proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”
The proposal to approve, on an advisory basis, the compensation of our executive officers requires the affirmative vote of the majority of the shares represented in person or by proxy at the annual meeting and entitled to vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS
The Board of Directors recommends A VOTEvote “FOR” THE APPROVAL, ON ANthe approval, on anADVISORY BASIS, OFadvisory basis, of OUR EXECUTIVEexecutive OFFICER COMPENSATION AS PRESENTED IN THISas presented in this
PROXY STATEMENT.proxy statement.
The following table sets forth information regarding the beneficial ownership of shares of our common stock as of March 26,
20182019 by (i) each of our directors,
twoone of whom
are alsois the Board of Directors’
nomineesnominee for election as
directorsa director at the annual meeting; (ii) our executive officers who are named in the Summary Compensation Table herein; (iii) all of our directors and executive officers as a group; and (iv) each other person known by us to be the beneficial owner of more than 5% of our outstanding common stock:
Name of Beneficial Owner | Number of Shares
Beneficially Owned(1) | Percent
of Class(1) |
Preston G. Athey | | 236 | | | | * |
David A. Battat(2) | | 95,815 | (3) | | 5.17 | % |
Emile A Battat(4) | | 150,253 | (5) | | 8.10 | % |
Hugh J. Morgan, Jr. | | 17,351 | | | | * |
Ronald N. Spaulding | | 2,162 | (6) | | | * |
Roger F. Stebbing | | 6,261 | | | | * |
John P. Stupp, Jr. | | 140,955 | (7) | | 7.61 | % |
Jeffery Strickland | | 3,804 | (8) | | | * |
BlackRock, Inc.(9) | | 100,724 | | | 5.44 | % |
T. Rowe Price Associates, Inc.(10) | | 229,968 | | | 12.42 | % |
All directors and executive officers as a group (8 persons)(11) | | 416,837 | | | 22.46 | % |
| Name of Beneficial Owner | | | Number of Shares
Beneficially Owned(1) | | | Percent
of Class(1) | |
| Preston G. Athey | | | | | 337 | | | | | | * | | |
David A. Battat(2) | | | | | 96,815(3) | | | | | | 5.21% | | |
Emile A Battat(4) | | | | | 151,673(5) | | | | | | 8.17% | | |
| Hugh J. Morgan, Jr. | | | | | 16,852 | | | | | | * | | |
| Ronald N. Spaulding | | | | | 2,263(6) | | | | | | * | | |
| John P. Stupp, Jr. | | | | | 141,056(7) | | | | | | 7.61% | | |
| Jeffery Strickland | | | | | 1,704(8) | | | | | | * | | |
BlackRock, Inc.(9) | | | | | 98,819 | | | | | | 5.33% | | |
Kayne Anderson Rudnick Investment Management, LLC(10) | | | | | 93,462 | | | | | | 5.04% | | |
Neuberger Berman Group LLC(11) | | | | | 135,802 | | | | | | 7.33% | | |
T. Rowe Price Associates, Inc.(12) | | | | | 219,220 | | | | | | 11.83% | | |
All directors and executive officers as a group (7 persons)(13) | | | | | 410,700 | | | | | | 22.07% | | |
*
Less than 1% of class.
(1)
The percentages set forth in this column are based on 1,852,756 shares of common stock of the Company outstanding on March 26, 2019, plus shares that can be acquired through the exercise of options or vesting of RSUs 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.
(2)
The business address for Mr. David Battat is One Allentown Parkway, Allen, Texas 75002-4206. Mr. David Battat is the son of Mr. Emile Battat.
(3)
These shares include 4,000 shares of common stock of the Company issuable upon the exercise of options exercisable on March 26 , 2019 or within 60 days thereafter and 55,500 shares held in a family trust as to which shares Mr. David Battat has shared voting and investment power. Mr. David Battat is a party to award agreements setting forth certain terms of options and restricted stock granted to him under the 2006 Equity Plan.
(4)
The business address for Mr. Emile Battat is One Allentown Parkway, Allen, Texas 75002-4206.
(5)
These shares include 4,000 shares of common stock issuable upon the exercise of options exercisable on March 26, 2019 or within 60 days thereafter. Mr. Emile Battat is a party to award agreements setting forth certain terms of options and restricted stock granted to him under the 2006 Equity Plan.
(6)
These shares are held in a family trust, of which Mr. Spaulding is the trustee.
(7)
These shares include 135,000 shares held by Stupp Bros., Inc. as to which 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., which are pledged to that company’s lenders as security for its working capital line of credit, represent 7.29% of our common stock outstanding as of March 26, 2019. Mr. Stupp is the direct beneficial owner of 6,056 shares, of which 5,206 shares are pledged as collateral for a mortgage loan. These shares do not include 22,330 shares held in a family trust, the co-trustees of which are
| (1) | Based on 1,851,842 shares of common stock of the Company outstanding on March 26, 2018, plus shares that can be acquired through the exercise of options or vesting of RSUs 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. |
| (2) | The business address for Mr. David Battat is One Allentown Parkway, Allen, Texas 75002-4206. Mr. David Battat is the son of Mr. Emile Battat. |
| (3) | These shares include 2,000 shares of common stock of the Company issuable upon the exercise of options exercisable on March 26, 2018 or within 60 days thereafter and 55,500 shares held in a family trust as to which shares Mr. David Battat has shared voting and investment power. Mr. David Battat is a party to award agreements setting forth certain terms of options and restricted stock granted to him under the 2006 Equity Plan. |
| (4) | The business address for Mr. Emile Battat is One Allentown Parkway, Allen, Texas 75002-4206. |
| (5) | These shares include 2,000 shares of common stock issuable upon the exercise of options exercisable on March 26, 2018 or within 60 days thereafter. Mr. Emile Battat is a party to award agreements setting forth certain terms of options and restricted stock granted to him under the 2006 Equity Plan. |
| (6) | These shares are held in a family trust, of which Mr. Spaulding is the trustee. |
| (7) | These shares include 135,000 shares held by Stupp Bros., Inc. as to which 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., which are pledged to that company’s lenders as security for its working capital line of credit, represent 7.29% of our common stock outstanding as of March 26, 2018. Mr. Stupp is the direct beneficial owner of 5,955 shares, of which 5,206 shares are pledged as collateral for a mortgage loan. These shares do not include 22,330 shares held in a family trust, the co-trustees of which are Mr. Stupp’s wife and one of his children or 468 stock units held in Mr. Stupp’s stock unit account that will not be converted into shares of our common stock within 60 days after March 26, 2018. The business address for Mr. Stupp and Stupp Bros., Inc. is 3800 Weber Road, St. Louis, Missouri 63125. |
| (8) | These shares are held in a family limited partnership, the general partner of which is a limited liability company in which Mr. Strickland is a member. Mr. Strickland has shared voting and investment power over these shares. These shares exclude 327.46 shares of common stock issuable on the vesting of RSUs that will not vest until May 22, 2019 and 324.88 shares of common stock issuable on the vesting of RSUs that will not vest until August 24, 2022. |
Mr. Stupp’s wife and one of his children or 468 stock units held in Mr. Stupp’s stock unit account that will not be converted into shares of our common stock within 60 days after March 26, 2019. The business address for Mr. Stupp and Stupp Bros., Inc. is 3800 Weber Road, St. Louis, Missouri 63125.
| (9) | The address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10022. This information is based on a Schedule 13G/A dated January 23, 2018 filed with the SEC reporting that BlackRock, Inc. has the sole power to vote or direct the vote of 97,686 shares of our common stock and the sole power to dispose or direct the disposition of 100,724 shares of our common stock. |
(8)
| (10) | The address of T. Rowe Price Associates, Inc. is 100 East Pratt Street, Baltimore, Maryland 21202. This information is based upon a Schedule 13G/A dated February 14, 2018 filed with the SEC reporting that T. Rowe Price Associates, Inc. has sole power to vote or direct the vote of 74,045 shares of our common stock and has sole power to dispose or direct the disposition of 229,968 shares of our common stock and that T. Rowe Price Small-Cap Value Fund, Inc. has sole power to vote or direct the vote of 155,923 shares of our common stock. For purposes of the reporting requirements of the Securities Exchange Act of 1934, as amended, T. Rowe Price Associates, Inc. is deemed to be a beneficial owner of such shares of common stock but has expressly denied beneficial ownership of all such shares. |
These shares are held in a family limited partnership, the general partner of which is a limited liability company in which Mr. Strickland is a member. Mr. Strickland has shared voting and investment power over these shares. These shares exclude 327.46 shares of common stock issuable on the vesting of RSUs that not will vest until May 22, 2019, 324.88 shares of common stock issuable on the vesting of RSUs that will not vest until August 24, 2022, and 505.69 shares of our common stock issuable on the vesting of RSUs that will not vest until May 22, 2022 or Mr. Strickland’s earlier termination of employment due to death or disability.
| (11) | See notes (1)-(8) above. |
(9)
This information is based on a Schedule 13G/A dated February 4, 2019 filed with the SEC reporting that BlackRock, Inc. has the sole power to vote or direct the vote of 95, 342 shares of our common and has the sole power to dispose or direct the disposition of 98,819 shares of our common stock. The address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10022.
(10)
This information is based on a Schedule 13G dated February 15, 2019 filed with the SEC reporting that Kayne Anderson Rudnick Investment Management, LLC has the sole power to vote or direct the vote or direct the vote and the sole power to dispose or direct the disposition of 44,582 shares of our common stock and the shared power to vote or direct the vote and to dispose or direct the disposition of 48,880 shares of our common stock. The address of Kayne Anderson Rudnick Investment Management, LLC is 1800 Avenue of the Stars, 2nd Floor, Los Angeles, California 90067.
(11)
This information is based on a Schedule 13G dated February13, 2019 filed with the SEC reporting that Neuberger Berman Group LLC has the shared power to vote or direct the vote of 134,792 shares of our common stock and the shared power to dispose or direct the disposition of 135,802 shares of our common stock, that Neuberger Berman Investment Advisers LLC has the shared power to vote or direct the vote of 134,792 shares of our common stock and the shared power to dispose or direct the disposition of 135,802 shares of our common stock, that Neuberger Berman Equity Funds has the shared power to vote or direct the vote of 96,552 shares of our common stock and the shared power to dispose or direct the disposition of 96,552 shares of our common stock, and that Neuberger Berman Genesis Fund has the shared power to vote or direct the vote of 96,552 shares of our common stock and the shared power to dispose or direct the disposition of 96,552 shares of our common stock. Neuberger Berman Group LLC, Neuberger Berman Investment Advisers LLC, and certain affiliated entities have disclaimed beneficial ownership of all such shares. The address of Neuberger Berman Group LLC, Neuberger Berman Investment Advisers LLC, Neuberger Berman Equity Funds, and Neuberger Berman Genesis Fund is 1290 Avenue of the Americas, New York, New York 10104.
(12)
This information is based upon a Schedule 13G/A dated February 14, 2019 filed with the SEC reporting that T. Rowe Price Associates, Inc. has sole power to vote or direct the vote of 75,697 shares of our common stock and has sole power to dispose or direct the disposition of 219,220 shares of our common stock and that T. Rowe Price Small-Cap Value Fund, Inc. has sole power to vote or direct the vote of 143,523 shares of our common stock. T. Rowe Price Associates, Inc. has expressly denied beneficial ownership of all such shares. The address of T. Rowe Price Associates, Inc. and T. Rowe Price Small Cap-Value Fund, Inc.is 100 East Pratt Street, Baltimore, Maryland 21202.
(13)
See notes (1)-(8) above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors and persons who own more than 10% of our common stock to file initial reports of ownership and reports of changes of ownership of our common stock with the SEC and to provide copies of those reports to us. We assist our directors and officers with completing and filing these reports. Based upon a review of these filings and written representations from our directors and officers, we believe that all reports were filed timely in
2017, except that a Form 4 for Mr. Stupp reporting the crediting of 11.75 stock units to his stock unit account under our Non-Employee Director Deferred Compensation Plan was filed ten days late.2018.
Stockholder Proposals in Our Proxy Statement
In order for proposals by stockholders to be considered for inclusion in our proxy material relating to the
20192020 annual meeting of stockholders, such proposals must be received by us on or before December 10,
2018.2019.
Stockholder Proposals and Director Nominations to be Presented at Stockholder Meetings
Our Bylaws provide that a stockholder who desires to propose any business at an annual meeting of stockholders or to nominate one or more persons for election to our Board of Directors at an annual meeting or special meeting called for the purpose of electing directors must give us written notice of such stockholder’s intent to bring that business before such meeting or nominate such person or persons for election to our Board of Directors at such meeting. The notice must be received by the Secretary of the Company at our principal executive offices not earlier than the close of business on the 150th day and not later than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting of stockholders. In the event that 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 or in the case of a special meeting called for the purpose of electing directors, notice by the stockholder must be received by the Secretary not earlier than the close of business on the 150th day prior to the date of such meeting and not later than the close of business on the later of the 120th day prior to such 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
20192020 annual meeting must be delivered not earlier than December 23,
20182019 and not later than January 22,
2019,2020, provided the date of the
20192020 annual meeting is not more than 30 days before or more than 60 days after May
22, 2019.21, 2020. Our Bylaws also specify the information that must be included in the notice that stockholders must provide to the Secretary of the Company in order to propose any business to be conducted at an annual meeting or to nominate one or more persons for election to our Board of Directors at an annual meeting or a special meeting called for the purpose of electing directors. The
TABLE OF CONTENTS
Chairman of the meeting may refuse to transact any business presented or to acknowledge the nomination of any person made without compliance with the procedures set forth in our Bylaws. The foregoing summary is qualified in its entirety by reference to the full text of our Bylaws which is on file with the SEC and is available upon request to the Secretary of the Company.
NO INCORPORATION BY REFERENCE
In our filings with the SEC, information is sometimes “incorporated by reference.” This means that we are referring you to information that has previously been filed with the SEC, and that the information should be considered part of a particular filing. As provided in regulations promulgated by the SEC, the “Audit Committee Report” and the
“Compensation���Compensation Committee Report” contained in this proxy statement are not incorporated by reference into any other filings with the SEC unless specifically provided otherwise in such filings. In addition, this proxy statement includes our website address. This website address is intended to provide inactive, textual references only. The information on our website is not part of this proxy statement.
COST AND METHOD OF SOLICITATION
The cost of soliciting proxies will be borne by us. In addition to the use of the mails, proxies may be solicited personally or by telephone, facsimile and other electronic communication methods by our directors, officers and employees without additional compensation. Brokerage firms, nominees, fiduciaries and other custodians will be requested to forward soliciting materials to the beneficial owners of our common stock held in their names or in those of their nominees, and their reasonable expenses will be reimbursed upon request.
Our 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 | By Order of the Board of Directors
|
| |
| |
| Jeffery Strickland
|
| Vice President and Chief Financial
Officer, Secretary and Treasurer
|
April 9, 2018
ATRION CORPORATION
ONE ALLENTOWN PARKWAY
ALLEN, TX 75002
| VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
|
| | |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | |
| E43307-P04390 | KEEP THIS PORTION FOR YOUR RECORDS |
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
| | | | | | | | | | | | | | | | | |
| ATRION CORPORATION
| | | | | | | | | | |
| | The Board of Directors recommends you vote “FOR” the nominees listed in Item 1. | | | | | |
| | | | | | | | | | | | | |
| | 1. | Election of Directors | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Nominees: | | | For | Against | Abstain | | | | | | |
| | | | | | | | | | | | | | |
| | | 1a. Preston G. Athey | | o | o | o | | | | | | |
| | | | | | | | | | | | | |
| | | 1b. Hugh J. Morgan, Jr. | | o | o | o | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | The Board of Directors recommends you vote “FOR” Items 2 and 3. | | For | Against | Abstain | |
| | | | | | | | | | | | | | | |
| | 2. | Ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year 2018. | | o | o | o | |
| | | | | | | | |
| | 3. | Advisory vote to approve executive officer compensation. | | o | o | o | |
| | | | | | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | |
| | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | Signature [PLEASE SIGN WITHIN BOX] | Date | | | | | Signature (Joint Owners) | Date | | | | |
| | | | | | | | | | | | | | | |
![[MISSING IMAGE: tv517504_pc1.jpg]](https://files.docoh.com/DEF 14A/0001144204-19-018522/tv517504_pc1.jpg)
ATRION CORPORATIONONE ALLENTOWN PARKWAYALLEN, TX 75002VOTE BY INTERNET - www.proxyvote.comUse the Internet to transmit your voting instructions and for electronic delivery ofinformation up until 11:59 p.m. Eastern Time the day before the cut-off date ormeeting date. Have your proxy card in hand when you access the web site andfollow the instructions to obtain your records and to create an electronic votinginstruction form.ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALSIf you would like to reduce the costs incurred by our company in mailing proxymaterials, you can consent to receiving all future proxy statements, proxy cardsand annual reports electronically via e-mail or the Internet. To sign up forelectronic delivery, please follow the instructions above to vote using the Internetand, when prompted, indicate that you agree to receive or access proxy materialselectronically in future years.VOTE BY PHONE - 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions up until 11:59p.m. Eastern Time the day before the cut-off date or meeting date. Have yourproxy card in hand when you call and then follow the instructions.VOTE BY MAILMark, sign and date your proxy card and return it in the postage-paid envelope wehave provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way,Edgewood, NY 11717.TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:E68976-P19748KEEP THIS PORTION FOR YOUR RECORDSTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.DETACH AND RETURN THIS PORTION ONLYATRION CORPORATIONThe Board of Directors recommends you vote "FOR" the nominee listed in Item 1.1. Election of DirectorNominee:For Against Abstain1a. John P. Stupp, Jr. The Board of Directors recommends you vote "FOR" Items 2 and 3. For Against Abstain2. Ratification of the appointment of Grant Thornton LLP as the Company's independent registered public accounting firm for the year 2019. 3. Advisory vote to approve executive officer compensation. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor,administrator, or other fiduciary, please give full title as such. Joint owners should eachsign personally. All holders must sign. If a corporation or partnership, please sign in fullcorporate or partnership name by authorized officer.Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
![[MISSING IMAGE: tv517504_pc2.jpg]](https://files.docoh.com/DEF 14A/0001144204-19-018522/tv517504_pc2.jpg)
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
| | |
| | |
| ATRION CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Ronald N. Spaulding and John P. Stupp, Jr., or either of them, as proxies of the undersigned, with full power of substitution, and hereby authorizes them to represent and to vote, as specified on the reverse side of this proxy and in their discretion upon such other matters that may properly come before the meeting or any adjournment thereof, all of the shares of Common Stock of Atrion Corporation that the undersigned is entitled to vote at the annual meeting of stockholders of Atrion Corporation to be held at 10:00 a.m., Central Time, on Tuesday, May 22, 2018, at the offices of Atrion Corporation, One Allentown Parkway, Allen, TX 75002, and at any adjournment thereof.
This proxy, if properly executed and returned, will be voted as directed or, if no direction is given, will be voted “FOR” the nominees listed in Item 1 and “FOR” Items 2 and 3. If any other matters properly come before the meeting, this proxy will be voted as determined by the proxies in their discretion.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE.
Continuedwww.proxyvote.com.E68977-P19748ATRION CORPORATIONANNUAL MEETING OF STOCKHOLDERSTHIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSThe undersigned hereby appoints Hugh J. Morgan, Jr. and Ronald N. Spaulding, or either of them, as proxies of the undersigned,with full power of substitution, and hereby authorizes them to represent and to vote, as specified on the reverse side of this proxyand in their discretion upon such other matters that may properly come before the meeting or any adjournment thereof, all of theshares of Common Stock of Atrion Corporation that the undersigned is entitled to vote at the annual meeting of stockholders ofAtrion Corporation to be held at 10:00 a.m., Central Time, on Tuesday, May 21, 2019, at the offices of Atrion Corporation, OneAllentown Parkway, Allen, TX 75002, and at any adjournment thereof.This proxy, if properly executed and returned, will be voted as directed or, if no direction is given, will be voted "FOR" thenominee listed in Item 1 and "FOR" Items 2 and 3. If any other matters properly come before the meeting, this proxy will be votedas determined by the proxies in their discretion.PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE.Continued and to be signed on reverse side
| |
| | |
| | |
![[MISSING IMAGE: lthd_atrion.jpg]](https://files.docoh.com/DEF 14A/0001144204-19-018522/lthd_atrion.jpg)
![[MISSING IMAGE: lg_atrion.jpg]](https://files.docoh.com/DEF 14A/0001144204-19-018522/lg_atrion.jpg)
![[MISSING IMAGE: sg_david-battat.jpg]](https://files.docoh.com/DEF 14A/0001144204-19-018522/sg_david-battat.jpg)
