SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED
IN PROXY STATEMENT
SCHEDULE 14A
INFORMATION
Proxy Statement
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Atrion
Corporation
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| Atrion
Corporation One Allentown Pkwy. Allen, TX 75002-4211 Tel 972-390-9800 |
|
 |
|
April 7,
2010
Dear Stockholder:
You are cordially invited to attend the
2010 annual meeting of stockholders of Atrion Corporation which will be held at
our offices in Allen, Texas on Tuesday, May 18, 2010 at 10:00 a.m., Central
Time. Details regarding admission to the meeting and the business to be
conducted at the annual meeting are described in the Notice of Internet
Availability of Proxy Materials you received in the mail and in the Company's
proxy statement. A notice of the annual meeting and the Company's proxy
statement accompany this letter. We have also made a copy of our 2009 Annual
Report to Stockholders available with our proxy statement.
This year, in accordance with Securities
and Exchange Commission rules, we have again elected to furnish proxy materials
to our stockholders primarily on the Internet. We believe that this method of
distribution will lower our costs and reduce the environmental impact of our
annual meeting, as well as expedite your receipt of proxy
materials.
We encourage you to attend the meeting in
person. However, whether or not you plan to be personally present, we hope you
will 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.
| Sincerely, |
 |
| Emile A. Battat Chairman and Chief Executive Officer |
ATRION CORPORATION
One Allentown Parkway
Allen, Texas 75002
One Allentown Parkway
Allen, Texas 75002
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
To the Stockholders
of Atrion Corporation:
Notice is hereby given that the annual
meeting of stockholders of Atrion Corporation (the "Company") will be held at
the Company’s offices, One Allentown Parkway, Allen, Texas on Tuesday, May 18,
2010 at 10:00 a.m., Central Time, for the following purposes:
| 1. | To elect two Class III directors. | ||
| 2. | To approve the Amended and Restated Atrion Corporation 2006 Equity Incentive Plan. | ||
| 3. | To ratify the appointment of Grant Thornton LLP as independent accountants to audit the Company's financial statements for the year 2010. | ||
| 4. | To transact such other business as may properly come before the meeting. | ||
The Board of Directors fixed the close of
business on March 31, 2010 as the record date for the determination of
stockholders entitled to notice of and to vote at the annual meeting and at any
adjournment thereof.
| By Order of the Board of Directors |
| Jeffery Strickland Vice President and Chief Financial Officer, Secretary and Treasurer |
April 7,
2010
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
WE HOPE YOU WILL 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.
ATRION CORPORATION
One Allentown Parkway
Allen, Texas 75002
One Allentown Parkway
Allen, Texas 75002
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 2010
MAY 18, 2010
GENERAL INFORMATION
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 annual
meeting of stockholders to be held at the Company’s offices, One Allentown
Parkway, Allen, Texas on Tuesday, May 18, 2010 at 10:00 a.m., Central Time, and
at any adjournment of such meeting. This notice of annual meeting, proxy
statement and form of proxy and the Company's 2009 Annual Report are first being
made available to stockholders on or about April 7, 2010.
QUESTIONS AND ANSWERS ABOUT THE PROXY
MATERIALS
AND OUR ANNUAL MEETING
AND OUR ANNUAL MEETING
Q: What is the purpose of the annual meeting?
A: At the annual
meeting, our stockholders will consider and vote upon the following
matters:
- the election of two Class III directors;
- a proposal to approve the Amended and Restated Atrion Corporation 2006 Equity Incentive Plan, or Amended 2006 Equity Plan; and
- a proposal to ratify the appointment of Grant Thornton LLP as independent accountants to audit the Company's financial statements for the year 2010.
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 this year instead of a
full set of proxy materials?
A: The rules of the
Securities and Exchange Commission, or SEC, allow us to provide access to our
proxy materials primarily over the Internet. Accordingly, we are sending a
Notice of Internet Availability of Proxy Materials, or Notice, to our
stockholders. 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.
Q: How can I get electronic access to the
proxy materials?
A: The Notice
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 31, 2010, 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 2,021,452 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 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 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?
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 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 on your Notice 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 17, 2010.
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 bank, broker or other nominee that holds your shares and present that
proxy at the annual meeting to vote your shares.
Q: If I sign a proxy, how will it be
voted?
A: Unless you revoke
your proxy instructions, as described below under "Can I change my vote?,"
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 director of the nominees of the Board of
Directors named herein; FOR approval of our Amended 2006 Equity Plan; and FOR
ratification of the appointment of Grant Thornton LLP as independent accountants
to audit our financial statements for the year 2010. In addition, in their
discretion the persons designated as proxies will vote upon such other business
as may properly come before the meeting, including voting for any adjournment of
the meeting proposed by the Board of Directors.
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
Corporate 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 17, 2010). 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 bank, broker or other nominee that holds your
shares.
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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.
Please be aware that attendance at the annual meeting will not, by itself,
revoke a proxy. If a bank, broker 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: The annual meeting
will be held if a majority of the shares of our common stock outstanding on the
record date entitled to vote is represented in person or by proxy at the
meeting, constituting 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
holds your shares in its name and does not receive voting instructions from you,
your broker 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 is permitted to vote your
shares even if you do not provide your broker voting instructions. The election
of directors and the proposal to approve the Amended 2006 Equity Plan are not
deemed to be routine matters. Accordingly, your broker is not entitled to vote
your shares on those matters unless voting instructions are received from
you.
Q: How are votes counted?
A: Directors will be
elected at the annual meeting by a plurality of the votes cast by the
stockholders present in person or by proxy and entitled to vote. Abstentions and
broker non-votes will have no effect on the election of directors. Approval of
our Amended 2006 Equity Plan and ratification of the appointment of Grant
Thornton LLP each requires the affirmative vote of a majority of the shares
present, in person or by proxy, at the meeting. Abstentions will have the same
effect as a negative vote, and broker non-votes will be considered absent and
will have no effect, on the proposal to approve our Amended 2006 Equity Plan and
the proposal to ratify the appointment of Grant Thornton LLP.
3
ELECTION OF DIRECTORS
Our Board of Directors is divided into
three classes: Class I, Class II and Class III. Two Class III directors are to
be elected at the annual meeting, to serve until the annual meeting of
stockholders to be held in 2013 and until the election and qualification of
their successors in office. The nominees for election as Class III directors
named below are members of the Board of Directors and were previously elected by
our stockholders. It is intended that the persons named as proxies will vote for
the election of these nominees. If the nominees listed below, who have indicated
their willingness to serve as directors if elected, are not candidates when the
election occurs, proxies may be voted for the election of any substitute
nominees.
The following information is furnished
with respect to our Board of Directors' nominees for election as directors 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 Experience
Principal Occupation, Positions and Offices, Other Directorships and Business Experience
Nominees for Election as
Director
Class III - Term Ending in
2013
Roger F. Stebbing
Mr. Stebbing, age 69,
has been a director since 1992 and has been the 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
a BSc honors degree in Chemical Engineering from Salford University. Mr.
Stebbing has had 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 60,
has been a director since 1985. He is President of Stupp Bros., Inc., a
diversified holding company, and has served in such capacity since March 2004.
From April 1995 until March 2004, he served as Executive Vice President and
Chief Operating Officer of Stupp Bros., Inc., and since August 1995 he has also
served as Chief Executive Officer of Stupp Corporation, a division of Stupp
Bros., Inc. Mr. Stupp holds a Bachelor of Science degree in Business and
Economics from Lehigh University. He serves as a director and as a member of the
audit committee of The Laclede Group, Inc., a public utility holding company.
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
2011
Emile A. Battat
Mr. Battat, age 71,
has been a director since 1987 and has served as Chairman of the Board of the
Company since January 1998, as Chief Executive Officer of the Company and as
Chairman of the Board or President of each of the Company's subsidiaries since
October 1998, and as President of the Company from October 1998 until May 2007.
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 23 years
as a director and 12 years as our Chief Executive Officer enable him to provide
our Board of Directors with strong and capable leadership.
4
Ronald N. Spaulding
Mr. Spaulding, age
46, has been a director since February 2006, and is currently a private
investor. 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, 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’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 20 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 of Directors.
Class II - Term Ending in
2012
Hugh J. Morgan, Jr.
Mr. Morgan, age 81,
has been a director since 1988. Mr. Morgan is a private investor. He served as
Chairman of the Board of National Bank of Commerce of Birmingham from February
1990 until April 2003. Previously, Mr. Morgan spent over 26 years at Southern
Natural Gas Company and spent 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. 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
ELECTION OF ITS NOMINEES,
ROGER F. STEBBING AND JOHN P. STUPP, JR.
ROGER F. STEBBING AND JOHN P. STUPP, JR.
Information Regarding Board of Directors and
Committees
Board Leadership and Independence. The positions of Chairman and Chief Executive Officer are held by Mr.
Emile Battat. Mr. Stebbing, who is currently the Chair of the Corporate
Governance Committee, is serving as our lead director. We believe this
leadership structure is appropriate for the Company in that our Board of
Directors is small, currently numbering five directors, and the combined role of
Chairman of the Board and Chief Executive Officer promotes unified direction and
leadership for the Company. Our Board of Directors has determined that the
following directors are "independent" within the meaning of The Nasdaq Stock
Market ("Nasdaq") listing standards: Messrs. Morgan, Spaulding, Stebbing and
Stupp, and that Mr. Emile Battat is not independent. 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, our lead director, is responsible for calling,
establishing agendas for and moderating those executive sessions.
Meetings. Our Board of Directors held five meetings
during 2009. 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 held in 2009 during the time he
served as a director or as a member of such committees.
Nominating
Process. Because of the
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 (Messrs. Morgan, Spaulding, Stebbing and
Stupp). 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 pursuant to the procedures set forth in
our Bylaws and described in "Stockholder Nominations for Directors" at page 30
of this proxy statement. The Board of Directors, in considering possible
nominees, will take into account the following: (a) each director should be
5
an individual of the
highest character and integrity; (b) each director should have substantial
experience that is relevant to our Company; (c) each director should have
sufficient time available to devote to the affairs of the Company; and (d) each
director should represent the best interest of all of our stockholders. Our
Board of Directors believes that having directors with diverse backgrounds and
business experience is in our best interest and these factors are considered in
connection with the selection of nominees for election as directors. Our current
directors have diverse industry backgrounds, including substantial experience in
medical device, industrial, engineering, financial and energy companies. All
possible nominees are to be reviewed in the same manner, regardless of whether
they have been submitted by stockholders, directors or management.
The Board’s Role in Risk Oversight.
Our Board of Directors has
the responsibility for overseeing the Company’s exposure to risk. The Board of
Directors, directly and through its Committees, 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.
Committees. Our Board of Directors has four standing
committees: the Executive Committee, the Corporate Governance Committee, the
Compensation Committee and the Audit Committee.
Our Executive Committee is currently
comprised of Messrs. Emile Battat and Morgan.
Our Corporate Governance Committee, which
is currently comprised of Messrs. Morgan, Spaulding and Stebbing, is to assist
in the evaluation of possible nominees for election to the Board of Directors as
requested by the Board of Directors, review annually and advise the Board of
Directors with respect to the compensation of directors and recommend to the
Board of Directors (a) the number of directors to be fixed in connection with
each annual meeting of our stockholders, (b) 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, (c) corporate governance guidelines
if the Corporate Governance Committee deems them appropriate and (d) 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. The Corporate Governance Committee met
two times in 2009.
Our Compensation Committee, which is
currently comprised of Messrs. Morgan, Spaulding and Stupp, makes
recommendations to the Board of Directors as to the remuneration of our
executive officers, administers the Atrion Corporation 1997 Stock Incentive
Plan, or 1997 Stock Incentive Plan, the Atrion Corporation 2006 Equity Incentive
Plan, or 2006 Equity Plan, the Atrion Corporation Non-Employee Director Stock
Purchase Plan, or Stock Purchase Plan and the Atrion Corporation Deferred
Compensation Plan for Non-Employee Directors, or Deferred Compensation Plan, and
reviews and makes recommendations regarding our other incentive compensation
plans. The primary processes and procedures for the
consideration and determination of executive compensation, the role of 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 forth in "Compensation Discussion and Analysis" at page 9 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 three times in 2009.
In 2006 and 2007, an outside compensation
consultant, Mercer Human Resource Consulting, or Mercer Consulting, was engaged
at the request of the Compensation Committee to provide information as to the
compensation of chief executive officers, chief operating officers and chief
financial officers in public companies with annual revenues of less than $250
million and annual median revenues ranging from $75 million to $125 million.
Our Audit Committee, which is currently
comprised of Messrs. Morgan, Spaulding, Stebbing and Stupp, appoints, determines
the appropriate compensation for and oversees the work of the Company’s
independent auditors, and assists the Board of Directors in its oversight of our
accounting and financial reporting principles and policies and internal audit
controls and procedures and oversees related party transactions. Our 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. The Audit Committee reviews,
at least annually, the Audit Committee Charter and is to recommend any changes
to the Audit Committee Charter to the Board of Directors. Our Board of Directors
has determined that each member of the
6
Audit Committee is
independent within the meaning of the Nasdaq listing standards and is
financially literate, and that Mr. Stupp qualifies as an audit committee
financial expert. Our Audit Committee met seven times in 2009.
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 and
Chief Executive Officer, at our principal office in Allen, Texas. Mr. Emile
Battat will promptly send the communication to the other members of the Board of
Directors.
Attendance at Stockholder
Meetings. The Board of
Directors has adopted a policy encouraging each director to attend, if
practicable, our annual meetings of stockholders. The 2009 annual meeting was
attended by all of our directors.
Code of Ethics. The 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.
Director Compensation
During 2009, each non-employee director
was paid a fee of $60,000 for his service as a director. In addition, the
Chairmen of the Corporate Governance Committee and the Compensation Committee
were each paid an annual fee of $6,000, and the Chairman of the Audit Committee
was paid an annual fee of $12,000. Mr. Emile Battat, 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.
The Stock Purchase Plan provides
non-employee directors with a convenient method of acquiring shares of our
common stock. The Stock Purchase Plan allows non-employee directors to elect to
receive fully-vested stock and restricted stock in lieu of some or all of their
fees. The foregone fees are converted into shares of fully-vested and restricted
stock on the day the applicable 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.
The Deferred Compensation Plan allows
non-employee directors to defer all or part of their 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 fees
deferred by the non-employee director divided by the closing price of our common
stock on the day next 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.
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 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 fees for non-employee directors who
elect to participate in either the Stock Purchase Plan or the Deferred
Compensation Plan or both are paid 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.
7
The following table sets forth summary
information concerning the compensation of our non-employee directors for the
year ended December 31, 2009:
Director Compensation
Table
| Name | Fees Earned or Paid in Cash ($) | All Other Compensation ($)(1) | Total ($) | |||||||
| Hugh J. Morgan, Jr. | 66,000 | (2) | — | 66,000 | ||||||
| Ronald N. Spaulding | 60,000 | — | 60,000 | |||||||
| Roger F. Stebbing | 66,000 | 631 | 66,631 | |||||||
| John P. Stupp, Jr. | 72,000 | (3) | 198 | 72,198 | ||||||
| (1) | Amounts shown in this column represent the value of dividends paid on the number of shares represented by stock units credited to directors' stock unit accounts. | |
| (2) | Mr. Morgan elected to receive 50 percent of his fees for 2009 in shares of our common stock, pursuant to the Stock Purchase Plan described above. As a result, Mr. Morgan was issued 339 shares, valued at $97.10 per share, the closing market price of the Company's common stock on December 31, 2008, the last trading date prior to the date of issuance. | |
| (3) | Mr. Stupp elected to defer $7,200 of his fees for 2009 into stock units, pursuant to the Deferred Compensation Plan described above. As a result, Mr. Stupp's stock unit account was credited with 74.15 stock units, which amount was based on $97.10 per share, the closing market price of our common stock on December 31, 2008, the last trading date prior to the date of issuance. As of December 31, 2009, Mr. Stupp held an aggregate of 12,000 stock options and had an aggregate of 151.12 stock units in his stock unit account. |
8
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
We believe that a compensation program that is
attractive and competitive is necessary in order to attract, retain and motivate
an executive team, as well as other key personnel, who will further our
interests and enhance stockholder value. Our compensation program is designed to
reward our executive officers for high level corporate performance as reflected
by increases in our operating income and earnings per share. Elements of the
program are also intended to reward key personnel based on the performance of
our operating units and to reward them for individual responsibilities,
experience, performance and capacity to influence our results.
The principal elements of our
compensation program are: (i) base salary; (ii) annual cash bonuses; and (iii)
long term incentives in the form of equity awards. 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 elements because
we believe they are necessary or helpful in achieving the objectives of our
compensation program. For example, base salaries are designed to attract and
retain executive officers and key personnel and are intended to be at a
competitive level. Annual cash bonuses and equity awards are intended to reward
executive officers and key personnel and provide incentives for superior results
by us or one of our operating units 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 elements is designed to compensate employees fairly for the
services they provide on a regular basis.
We believe that base salary is the
most crucial element of our program in terms of attracting and retaining
executive officers and other key employees. Annual cash bonuses provide our
executive officers and other key personnel with the opportunity to receive cash
compensation in addition to their salaries and are intended to reward them for
the performance of the Company as a whole or of our operating units and for
individual performance. We consider long term incentives in the form of equity
awards as very important in aligning the interests of our executive officers and
key personnel with the interests of our stockholders. We do not have a specific
policy of awarding options as opposed to restricted stock or restricted stock
units. However, until the past few years most of our equity awards had been in
the form of stock options because of the incentive they provide to employees in
that they have to be in the money for the employees to realize any benefit from
the award. In the past few years, we have shifted the focus of our equity awards
to restricted stock and restricted stock units, principally due to the change in
accounting treatment for options. We believe that our health insurance benefits,
along with certain other benefits, are necessary components of our compensation
program insofar as attracting and retaining employees.
Our Compensation Committee
establishes the overall compensation program for our executive officers and
makes recommendations for their base salaries, salary increases, and any
discretionary bonuses. In addition, the Compensation Committee administers our
equity incentive program. To assist in the process of administering our
compensation program for our executive officers, our Compensation Committee
reviews tally sheets identifying the annual compensation for our executive
officers in previous years, including base salaries, cash bonuses, long term
incentive awards, benefits and perquisites. Each tally sheet also shows the
amount payable to the executive officers upon termination of employment under
various circumstances and equity ownership. From time to time, directors who are
not members of the Compensation Committee attend meetings of the Compensation
Committee, including Mr. Emile Battat who attends some meetings or parts of
meetings. The Compensation Committee does not delegate the authority to make
equity awards. Our executive officers are responsible for the salaries, salary
increases, and cash bonuses of key personnel in our operating units who are not
executive officers, and they administer separate incentive plans for those
units, subject, in the case of one of our units, to review by our Compensation
Committee with respect to bonuses for one of our executive officers, David A.
Battat, our President and Chief Operating Officer, who participates in that
unit’s plan. In considering the base salaries for Mr. David Battat and for
Jeffery Strickland, our Vice President and Chief Financial Officer, Secretary
and Treasurer, the Compensation Committee takes into account the recommendations
of Mr. Emile Battat. Mr. Emile Battat also assisted in the development of an
annual cash incentive plan for our chief financial officer that was first
effective in 2007 and is modeled after the bonus plan applicable to Mr. Emile
Battat. Additionally, Mr. Emile Battat has recommended that Mr. David Battat
continue participating in the incentive plan of the operating unit of which he
serves as President and is responsible for its day-to-day operations. Mr. Emile
Battat is the only executive officer with an employment agreement, which is
described below.
9
We believe that our executive
compensation program should be internally consistent and equitable. In 2009 Mr.
Emile Battat’s base salary, which is fixed by his employment agreement, was 2.0
times the base salary of Mr. David Battat and approximately 2.4 times the base
salary of Mr. Strickland. We believe that these differences were appropriate
based on the responsibilities and experience of our executive officers. As
discussed below, both Mr. Emile Battat and Mr. Strickland are entitled to annual
cash bonuses equal to certain percentages of increases in our operating income.
The percentage of the increase in operating income that is to be awarded to Mr.
Emile Battat is set forth in our employment agreement with him and was
determined based on our Compensation Committee’s discussions with him. In
determining what percentage of our operating income increase would be awarded to
Mr. Strickland under the incentive compensation plan for our chief financial
officer, the Compensation Committee took into account the responsibilities and
experience of Messrs. Emile Battat and Strickland, as well as their capacities
to influence our results, and concluded that it would be appropriate for the
maximum bonus that could be paid to Mr. Strickland under the formula applicable
to him to be approximately 25% of the maximum bonus that could be paid to Mr.
Emile Battat under the formula applicable to him. Mr. David Battat’s annual cash
bonus is based on the performance of our unit for which Mr. David Battat serves
as President and continues to be responsible for day-to-day operations. In
addition to the formula-based cash bonuses that our executive officers may be
entitled to, they also may receive discretionary cash bonuses if recommended by
our Compensation Committee and approved by our Board of Directors.
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 and we have
sufficient long-term equity compensation to motivate our executive officers and
other key personnel to focus on our performance over the longer term. We believe
that our compensation program is designed in a manner so as not to encourage
excessive risk taking. Our executive officers’ base salaries are fixed amounts
and therefore do not encourage risk taking. Our annual and long-term incentive
compensation arrangements for our executive officers are tied to our performance
on an annual basis and over the longer term. We believe that those incentive
programs, taken together with base salaries, are balanced and do not promote
excessive risk taking. Additionally, although we do not have mandatory stock
ownership requirements for our executive officers, our Compensation Committee
encourages such ownership of our common stock through equity awards to our
executive officers. Our Compensation Committee considers the following corporate
factors in establishing our compensation program and making compensation
decisions:
- increase in our earnings per share
- increase in our operating income
- total stockholder return
- safety
- efficiency of our operations
Base Salaries
In structuring the compensation
program, we start with the annual base salary and build on that element.
Salaries are based on the executive officer’s performance, responsibilities,
experience, capacity to influence our results, competitive conditions and length
of service with us. When determining the base salaries for our executive
officers, our Compensation Committee reviews the total annual compensation for
those executive officers for previous years, including base salary, cash
bonuses, long term incentive awards, benefits and perquisites. To facilitate
this review, our Compensation Committee uses tally sheets identifying each of
these elements. Our executive officers’ base salaries are not contingent on our
corporate performance. In early 2009, Mr. Emile Battat recommended to the
Compensation Committee that for 2009 the base salaries of our executive officers
and other senior management remain at 2008 levels in light of the uncertainties
in the economy. The Compensation Committee and Board of Directors agreed with
this recommendation.
Mr. Emile Battat’s annual base
salary is $500,000 and has been at that level since 2002, in accordance with the
terms of his employment agreement. Throughout the period since 2002, Mr. Emile
Battat has requested that his base salary not be increased, including when his
employment agreement was amended in 2006 to, among other things, extend the term
of employment for an additional five years.
10
When Mr. David Battat was elected as
our President and Chief Operating Officer in 2007, his responsibilities were
expanded beyond those of President of one of our operating units. In connection
with that election and expansion of responsibilities, we increased his annual
base salary to $200,000. Effective January 1, 2008, Mr. David Battat’s annual
base salary was increased to $250,000 and it remained at that level in 2009. Our
Compensation Committee believes that the 2008 increase was appropriate in light
of Mr. David Battat’s duties at the Company level as well as the significant
contribution that the operating unit of which he serves as President had been
making to the Company's overall results. The continuation of his base salary at
that level in 2009 was in accordance with Mr. Emile Battat’s recommendation
referred to above which was accepted by the Compensation Committee and our Board
of Directors.
Mr. Strickland’s annual base salary
was increased from $200,000 to $210,000 effective January 1, 2008 and remained
at that level in 2009. Our Compensation Committee believes that the 2008
increase was appropriate in light of market conditions, the continuing growth of
the Company, Mr. Strickland’s individual performance and his length of service
with the Company. The continuation of his base salary at that level in 2009 was
also consistent with Mr. Emile Battat’s recommendation for 2009 base salaries as
discussed above.
Annual Incentive Compensation
Our employment agreement with Mr.
Emile Battat and our annual bonus plan for our chief financial officer each
provide for annual cash bonuses based on increases in our operating income,
although at different levels. As provided in the employment agreement and that
plan, our Compensation Committee has the authority to exercise its discretion to
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. In
addition to serving as our President and Chief Operating Officer, Mr. David
Battat serves as President of one of our operating units and devotes a
substantial portion of his time to the operations of that unit. In reviewing Mr.
David Battat’s total compensation, our Compensation Committee, with the
recommendation of Mr. Emile Battat, concluded that for 2009 it was appropriate
for Mr. David Battat to continue participating in that unit’s incentive
compensation plan. Accordingly, the Compensation Committee has not recommended
that a separate plan similar to those under which Messrs. Emile Battat and
Strickland receive incentive compensation be implemented for Mr. David Battat.
The unit’s plan establishes a pool each year equal to a portion of the unit’s
operating profits. The pool is used to pay certain bonuses to that unit’s
manufacturing and assembly employees, other discretionary bonuses to employees
not designated as key employees and certain other expenses. The balance of the
pool, if any, is distributed to key employees, with 75% of a participant’s bonus
to be paid prior to March 15 of the year immediately following the year for
which the pool is established and 25% to be paid by March 15 of the following
year if the participant is still employed. The plan is administered by our
executive officers subject to review and adjustments by our Compensation
Committee with respect to bonuses for the one executive officer who participates
in that plan. 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 may be 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 plans and arrangements discussed above. Based on
our performance and Mr. David Battat’s individual performance, our Compensation
Committee recommended, and our Board of Directors approved, a discretionary cash
bonus of $100,000 to Mr. David Battat for 2009, 75% of which was paid prior to
March 15, 2010 and the remaining 25% of which will be paid by March 15, 2011
provided he is then employed by Halkey-Roberts or an affiliate.
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, recognizing that stock options will have little or no value if we
do not have increased profitability and that restricted stock and restricted
stock units may continue to have value, though possibly reduced, if our
profitability declines.
Our policy is that if we are going
to make equity awards, other than in connection with new hires or unusual
circumstances, those awards will be made at the meeting of our Compensation
Committee held in
11
conjunction with our
annual stockholders meetings, which usually are held each May. In May 2008, our
Compensation Committee granted options for 16,000 shares to Mr. David Battat and
awarded him 4,000 shares of restricted stock. These options and restricted stock
vest over a four-year period.
Benefits and Perquisites
As a part of our total compensation
package, we provide various benefits to our executive officers, including health
insurance and life and disability insurance. We also maintain a 401(k) Plan for
all of our employees, including our executive officers. Under our 401(k) 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 Messrs. Emile Battat, David Battat and Strickland are entitled to payments
and benefits upon termination of employment under certain circumstances. The
terms of Mr. Emile Battat’s arrangement are included 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"
at page 18.
Other
The base salaries of our executive
officers can be adjusted upwards and downwards, except in the case of Mr. Emile
Battat, 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 have not had to adjust or restate performance measures upon which awards have
been made and, accordingly, have not made any decisions nor adopted any policy
with respect to adjusting or reducing awards as a result of any such adjustment
or restatement. However, we would expect to reduce or adjust awards if such
events were to occur. We recognize that there may be circumstances where 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
addition, we recognize that it may be necessary to materially increase
compensation to retain personnel who may have attractive offers from other
companies. However, this has not been a practice that we have engaged in
regularly, though we have taken this action on occasion in the past.
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, including the number of shares of our common stock owned
by our executive officers and the number of unexercised options held and
restricted stock or restricted stock units held, as well as the potential
benefits they may realize upon the sale of the stock underlying these awards.
Although we expect that our
Compensation Committee will continue to grant options where appropriate to
provide longer term incentives to our executive officers and other key
personnel, our Compensation Committee is continually weighing the benefit
expected to be received from that element of our compensation program against
the impact that type of award will have on our corporate earnings under recent
accounting changes and the advantages and disadvantages of other types of equity
awards.
12
We have not adopted any guidelines
and have no specific requirements respecting the ownership of our securities by
our executive officers and other key personnel. However, through our equity
awards to our executive officers and other key personnel we encourage ownership
of our securities. We also have a policy that discourages hedging the risk of
ownership of our securities.
In 2006, Mercer Consulting reviewed
the compensation of chief executive officers and chief financial officers in
companies with annual revenues of less than $250 million and annual median
revenues ranging from $75 million to $125 million. A review of the
compensation of chief operating officers for companies in those categories was
provided by Mercer Consulting in early 2008. These surveys
provided us with information regarding base salary, target bonus, target total
annual compensation, long term incentives, and total direct compensation. This
information has been used by our Compensation Committee to obtain a more
thorough understanding of compensation practices in companies in those
categories so as to assist our Compensation Committee in formulating its
recommendations to our Board of Directors regarding the compensation structure
and levels of our executive officers. In addition, the Compensation Committee
reviews compensation surveys that include a broad range of companies.
Compensation Committee
Report
The Compensation Committee has
reviewed and discussed with management the Compensation Discussion and Analysis
set forth above. Based on this review and discussions, the Compensation
Committee has recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in the proxy statement.
Members of the Compensation
Committee
| Hugh J. Morgan, Jr. (Chairman) | Ronald N. Spaulding | John P. Stupp, Jr. |
13
The following table sets forth
summary information concerning the compensation of our executive officers during
the periods indicated.
Summary Compensation
Table
| Change in | |||||||||||||||||||||||
| Non- | Pension Value | ||||||||||||||||||||||
| Equity | and | ||||||||||||||||||||||
| Incentive | Nonqualified | ||||||||||||||||||||||
| Stock | Option | Plan | Deferred | All Other | |||||||||||||||||||
| Name and | Awards | Awards | Compen- | Compensation | Compen- | ||||||||||||||||||
| Principal Position | Year | Salary ($) | Bonus ($) | ($)(1) | ($)(2) | sation ($)(3) | Earnings ($)(4) | sation ($) | Total ($) | ||||||||||||||
| Emile A. Battat | 2009 | 500,000 | — | — | — | 235,494 | 3,772 | 13,871 | (5) | 753,137 | |||||||||||||
| Chairman of the | 2008 | 500,000 | — | — | — | 296,481 | 5,438 | 14,119 | 816,038 | ||||||||||||||
| Board and Chief | 2007 | 500,000 | — | — | — | 411,195 | 15,491 | 9,243 | 935,929 | ||||||||||||||
| Executive Officer | |||||||||||||||||||||||
| David A. Battat | 2009 | 250,000 | 100,000 | (6) | — | — | 275,000 | (7) | 422 | 13,291 | (8) | 638,713 | |||||||||||
| President and Chief | 2008 | 250,000 | — | 444,240 | 388,920 | 215,000 | 609 | 11,895 | 1,310,664 | ||||||||||||||
| Operating Officer | 2007 | 186,538 | — | — | — | 150,000 | 8,500 | 2,610 | 347,648 | ||||||||||||||
| Jeffery Strickland | 2009 | 210,000 | — | — | — | 58,873 | 6,858 | 10,598 | (9) | 286,329 | |||||||||||||
| Vice President and | 2008 | 210,000 | — | — | — | 74,120 | 9,886 | 10,637 | 304,643 | ||||||||||||||
| Chief Financial | 2007 | 200,000 | — | — | — | 100,000 | 18,467 | 21,106 | 339,573 | ||||||||||||||
| Officer, Secretary and | |||||||||||||||||||||||
| Treasurer | |||||||||||||||||||||||
| (1) | The amounts presented in this column represent the aggregate grant date fair value of stock awards made during the year computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation ("FASB ASC Topic 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, 2009. | |
| (2) | The amounts presented in this column represent the aggregate grant date fair value of option awards made during the year computed in accordance with FASB ASC Topic 718. The grant-date fair value was determined using a Black-Scholes valuation applied to the number of shares granted under an option. The assumptions used in the Black-Scholes valuations and the resulting values per share 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, 2009. | |
| (3) | These awards were made to Mr. Emile Battat under his employment agreement with us, to Mr. David Battat under the Halkey Roberts Incentive Compensation Plan, or Halkey-Roberts Plan, and to Mr. Strickland under the incentive compensation plan for our chief financial officer. | |
| (4) | In 2007, we terminated the Atrion Corporation Cash Balance Plan, or Cash Balance Plan. Each of our executive officers participated in the Cash Balance Plan and elected a lump sum distribution of his account which was paid in October 2009. The amounts presented in this column for 2009 represent the difference between the Present Value of Accumulated Benefits under the Cash Balance Plan at December 31, 2008 and the amounts actually distributed to our executive officers in October 2009, which distributions were as follows: Mr. Emile Battat -- $129,521; Mr. David Battat - $14,493; and Mr. Strickland -- $235,456. The amounts presented in this column for 2008 and 2007 are the amounts accumulated in the named executive officer's account under the Cash Balance Plan between January 1, 2008 and December 31, 2008 and January 1, 2007 and December 31, 2007, respectively. | |
| (5) | Includes the following paid or accrued by us or one or more at our subsidiaries: (i) matching contributions to the 401(k) Plan of $8,575; (ii) dividends on restricted stock of $4,860; and (iii) payment of life insurance premiums of $436. | |
| (6) | This bonus was awarded to Mr. David Battat for 2009, with 75% paid prior to March 15, 2010 and the remaining 25% to be paid by March 15, 2011 provided he is then employed by Halkey-Roberts or an affiliate. | |
| (7) | Mr. David Battat was awarded this amount for 2009 pursuant to the Halkey-Roberts Plan and, in accordance therewith, he received 75% of that bonus prior to March 15, 2010 and is to receive the remaining 25% by March 15, 2011 provided he is then employed by Halkey-Roberts or an affiliate. |
14
| (8) | Includes the following paid or accrued by us or one or more at our subsidiaries: (i) matching contributions to the 401(k) Plan of $8,575; (ii) dividends on restricted stock of $4,260; and (iii) payment of life insurance premiums of $456. | |
| (9) | Includes the following paid or accrued by us or one or more at our subsidiaries: (i) matching contributions to the 401(k) Plan of $7,350 and (ii) payment of life insurance premiums of $3,248. |
The following table sets forth summary
information concerning the grants of plan-based awards to our executive officers
during the year ended December 31, 2009.
Grants of Plan-Based Awards
| Estimated Possible Payouts Under | Estimated Future Payouts | |||||||||||||||||||||||
| Non-Equity Incentive Plan | Under Equity Incentive Plan | |||||||||||||||||||||||
| Awards | Awards | |||||||||||||||||||||||
| All Other | ||||||||||||||||||||||||
| Stock | All Other | Grant | ||||||||||||||||||||||
| Awards: | Option | Exercise or | Date Fair | |||||||||||||||||||||
| Number of | Awards: | Base | Value of | |||||||||||||||||||||
| Shares | Number of | Price of | Stock and | |||||||||||||||||||||
| Maxi- | of Stock | Securities | Option | Option | ||||||||||||||||||||
| Threshold | Target | Maximum | Threshold | Target | mum | or Units | Underlying | Awards | Awards | |||||||||||||||
| Name | Grant Date | ($)(1) | ($)(2) | ($)(3) | (#) | (#) | (#) | (#) | Options (#) | ($/Sh) | ($) | |||||||||||||
| Emile A. Battat(4) | — | 0 | 235,494 | — | — | — | — | — | — | — | — | |||||||||||||
| David A. Battat(4) | — | 0 | 275,000 | — | — | — | — | — | — | — | — | |||||||||||||
| Jeffery Strickland(4) | — | 0 | 58,873 | 105,000 | — | — | — | — | — | — | — | |||||||||||||
| (1) | The amounts presented in this column are $0 because Mr. Emile Battat’s employment agreement, the Halkey-Roberts Plan and the incentive compensation plan for our chief financial officer do not provide for threshold amounts if performance targets are not met. | |
| (2) | The amounts presented in this column represent the payments that Mr. Emile Battat, Mr. David Battat and Mr. Strickland received in 2009. | |
| (3) | Mr. Emile Battat’s employment agreement and the Halkey-Roberts Plan do not provide for a maximum bonus. The maximum amount shown for Mr. Strickland represents fifty percent (50%) of Mr. Strickland's base salary for 2009, the highest percentage of base salary that may be awarded under the incentive compensation plan for our chief financial officer. | |
| (4) | See "Certain Agreements, Plans and Transactions" at page 17 of this proxy statement. |
Base Salaries
Mr. Emile Battat's base salary is
fixed by his employment agreement. 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, various survey information respecting compensation of executive
officers, compensation levels for executive officers in a broad range of
companies, 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 and total stockholder
return.
Incentive Compensation
The Company and its subsidiaries
have implemented cash incentive plans covering certain key employees. Mr. Emile
Battat is eligible for cash incentive awards under the terms of his employment
agreement, and Mr. Strickland may receive cash incentive awards under the terms
of the incentive compensation plan for our chief financial officer. Mr. David
Battat participates in the Halkey-Roberts Plan and may receive cash incentive
awards under that plan. These arrangements are described in more detail in
“Certain Agreements, Plans and Transactions” at page 17 of this proxy statement.
These arrangements are intended to foster a corporate culture focused on bottom
line results by providing key employees with a substantial stake in reducing
costs and increasing sales and
15
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 following table sets forth summary
information concerning our executive officer's outstanding equity awards as of
December 31, 2009.
Outstanding Equity Awards at Fiscal Year-End
| Option Awards | Stock Awards | ||||||||||||||||||||||||
| Equity | |||||||||||||||||||||||||
| Equity | Incentive | ||||||||||||||||||||||||
| Incentive | Plan | ||||||||||||||||||||||||
| Plan | Awards: | ||||||||||||||||||||||||
| Equity Incentive | Awards: | Market or | |||||||||||||||||||||||
| Plan Awards: | Market | Number | Payout Value | ||||||||||||||||||||||
| Number of | Number of | Number of | Value of | of Unearned | of Unearned | ||||||||||||||||||||
| Securities | Securities | Shares or | Shares or | Shares, Units | Shares, | ||||||||||||||||||||
| Underlying | Number of | Underlying | Units of | Units of | or Other | Units or | |||||||||||||||||||
| Unexercised | Securities Underlying | Unexercised | Option | Option | Stock That | Stock That | Rights That | Other Rights | |||||||||||||||||
| Options (#) | Unexercised Options | Unearned | Exercise | Expiration | Have Not | Have Not | Have Not | That Have | |||||||||||||||||
| Name | Exercisable | (#) Unexercisable | Options (#) | Price ($) | Date | Vested (#) | Vested ($)(1) | Vested (#) | Not Vested ($) | ||||||||||||||||
| Emile A. Battat | 18,750 | 6,250 | (2) | — | 71.86 | 8/6/11 | 3,000 | 467,160 | — | — | |||||||||||||||
| David A. Battat | 3,104 | 9,312 | (3) | — | 111.06 | 5/9/13 | 3,000 | 467,160 | — | — | |||||||||||||||
| 896 | 2,688 | (3) | — | 111.50 | 5/9/13 | — | — | — | — | ||||||||||||||||
| Jeffery Strickland | — | — | — | — | — | — | — | — | — | ||||||||||||||||
| (1) | Based on the closing price of $155.72 per share of the common stock of the Company on December 31, 2009. | |
| (2) | This option award will vest on August 7, 2010. | |
| (3) | One-third of this option award will vest on each of May 8, 2010, May 8, 2011 and May 8, 2012. |
The following table sets forth summary
information concerning the exercise of options and the vesting of stock during
the year ended December 31, 2009 for our executive officers.
Option Exercises and Stock Vested
| Option Awards | Stock Awards | |||||||||
| Number of | ||||||||||
| Shares | Number of | |||||||||
| Acquired on | Value Realized | Shares Acquired | Value Realized | |||||||
| Name | Exercise (#) | on Exercise ($) | on Vesting (#) | on Vesting ($)(1) | ||||||
| Emile A. Battat | — | — | 1,500 | 195,083 | ||||||
| David Battat | — | — | 1,000 | 89,660 | ||||||
| Jeffery Strickland | — | — | — | — | ||||||
| (1) | Based on the average of the high and low trading prices of the Company's common stock on the vesting dates. |
Cash Balance Plan
For a number of years, we maintained a
Cash Balance Plan, which included all full-time active employees of our Company
and its subsidiaries, other than Quest Medical, Inc., that were hired prior to
May 1, 2005. Each participant had an account balance which represented his or
her benefit under the Cash Balance Plan. Generally, each participant was to
become fully vested in the benefits under such plan after five years of
employment. Messrs. Emile Battat, David Battat and Strickland participated in
the Cash Balance Plan. In 2007, the Board of Directors approved an
16
amendment to the Cash
Balance Plan to freeze all future benefit accruals to participants' account
balances after December 31, 2007, and terminated the Cash Balance Plan effective
December 31, 2007. Participants in the Cash Balance Plan continued to earn
interest credits on their account balances until such time as the Cash Balance
Plan settled all its obligations with respect to termination. For 2009, the per
annum interest rate was 4.0%. In October 2009, final distributions were made to
participants in the Cash Balance Plan. The distributions were made in a lump sum
to the named executive officers.
| Pension Benefits | ||||||||||||||
| Present Value of | ||||||||||||||
| Number of Years | Accumulated | Payments During Last | ||||||||||||
| Name | Plan Name | Credited Service (#) | Benefit ($) | Fiscal Year ($)(1) | ||||||||||
| Emile A. Battat | Cash Balance Plan | 10.25 | — | 129,521 | ||||||||||
| David A. Battat | Cash Balance Plan | 3.83 | — | 14,493 | ||||||||||
| Jeffery Strickland | Cash Balance Plan | 25.33 | — | 235,456 | ||||||||||
| (1) |
Mr. Emile
Battat rolled over $119,563 of his distribution to his account in our
401(k) Plan; Mr. David Battat rolled over the full amount of his
distribution to our 401(k) Plan; and Mr. Strickland rolled over the full
amount of his distribution to an Individual Retirement
Account.
|
Certain Agreements, Plans and Transactions
In 2002, we entered into an employment
agreement with Mr. Emile Battat which, as amended that same year, provided for
his employment for an initial term that expired on December 31, 2006. That
employment agreement provided for base salary for each calendar year of
$500,000. In addition, Mr. Emile Battat was entitled to receive a cash bonus
each year of not less than $100,000. On August 7, 2006, the Board of Directors
approved an amended employment agreement with Mr. Emile Battat which became
effective on January 1, 2007 that has an initial term expiring on December 31,
2011. That employment agreement provides that Mr. Emile Battat will receive the
same base salary for each calendar year that he was entitled to under our
original employment agreement with him and provides for 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 the discretion of the Compensation Committee. Our employment
agreement with Mr. Emile Battat also provides for certain payments to be made
and benefits provided to Mr. Emile Battat upon termination of employment, as
discussed in "Potential Termination and Change in Control Payments"
below.
Mr. David Battat participates in the
Halkey-Roberts Plan. The Halkey-Roberts Plan provides for a bonus pool equal to
15% of the excess of Halkey-Robert's operating profit, reduced by a percentage
of the amount of our corporate overhead that is allocated to Halkey-Roberts each
calendar year, over that amount required for Halkey-Roberts to realize a 15%
return on the average of total net assets excluding cash but including working
capital used in the operations of Halkey-Roberts for such calendar year. The
Halkey-Roberts Plan provides that each participant will receive 75% of his or
her bonus prior to March 15 of the year following the year to which the bonus is
attributable, and 25% by the next succeeding March 15 provided the participant
is then employed by Halkey-Roberts or an affiliate. Mr. David Battat was awarded
a bonus under the Halkey-Roberts Plan of $275,000 for 2009, $206,250 of which
was paid in early 2010 and $68,750 of which will be paid on or before March 15,
2011 if Mr. David Battat is then employed by us or a subsidiary. In March 2009,
we entered into a change in control agreement with Mr. David Battat. The change
in control agreement provides that Mr. David Battat 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, as discussed in "Potential Termination
and Change in Control Payments" below.
In May 2007, the Board of Directors approved
an incentive compensation plan for our chief financial officer. Under that plan,
Mr. Strickland is 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 the discretion of
the Compensation Committee. The bonus may not exceed 50% of Mr. Strickland’s
base salary for such calendar year. Mr. Strickland was awarded a bonus of
$58,873 for 2009 pursuant to that plan. The Company has a severance plan
pursuant to which Mr. Strickland will be entitled to certain payments if
his
17
employment is
terminated under certain circumstances in connection with a change in control of
the Company, as discussed in "Potential Termination and Change in Control
Payments" below.
In 2007, the Company’s Board of Directors
approved final settlement of the Company’s obligations to participants in the
Company's Supplemental Executive Retirement Plan and the Company's Supplemental
Executive Thrift Plan. In connection therewith, Mr. Strickland received a
payment in the amount of $15,436. Those plans had been frozen since December 31,
1998.
Potential Termination and Change in Control
Payments
Termination for 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 and vested
amounts under the 401(k) Plan.
If Mr. David Battat's employment or Mr.
Strickland's employment is terminated for cause, they will each receive their
base salary up to the termination date, accrued vacation pay, unreimbursed
business expenses and vested amounts under the 401(k) Plan.
Termination Without Just Cause or With Good
Reason or Due to Death or Disability
If Mr. Emile Battat's employment is terminated
by us without just cause, by Mr. Emile Battat with good reason or due to his
death or disability, he will be entitled to receive the same payments and other
benefits he would receive 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, they will each receive the same payments and other benefits they
would receive had the termination been with just cause.
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 receive 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 or Halkey-Roberts 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 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.
18
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 severance pay in an amount equal to his
annual base salary for the 12 months preceding termination of employment. In
addition, Mr. Strickland will be entitled to receive any bonus due under the
incentive compensation plan for our chief financial officer and his vested
amount under the 401(k) Plan.
Change in Control Without Termination of
Employment
If there is a change in control but no
termination of employment, Mr. Emile Battat's and Mr. David Battat's unvested
options and restricted stock 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,
2009:
| Name | Type of Payment
or Benefit |
Termination for Just Cause or Without Good Reason ($) |
Termination Without Just Cause, For Good Reason, or upon 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 | 235,494 | 1,004,719 | 1,773,945 | — | ||||||||||||||||
| Equity Awards | 0 | 991,285 | (1) | 991,285 | (1) | 991,285 | (1) | ||||||||||||||
| Retirement Benefits(2) | 51,681 | 51,681 | 51,681 | — | |||||||||||||||||
| Health Benefits | 0 | 11,500 | 11,500 | — | |||||||||||||||||
| Total | 287,175 | 2,059,185 | 2,828,411 | 991,285 | |||||||||||||||||
| David A. Battat | Severance Payment | — | — | 1,189,808 | — | ||||||||||||||||
| Equity Awards | — | — | 1,001,897 | (1) | 1,001,897 | (1) | |||||||||||||||
| Retirement Benefits(2) | 21,435 | 21,435 | 21,435 | — | |||||||||||||||||
| Health Benefits | — | — | 5,141 | — | |||||||||||||||||
| Total | 21,435 | 21,435 | 2,218,281 | 1,001,897 | |||||||||||||||||
| Jeffery Strickland | Severance Payment | — | — | 268,873 | (3) | — | |||||||||||||||
| Equity Awards | — | — | — | — | |||||||||||||||||
| Retirement Benefits(2) | 192,548 | 192,548 | 192,548 | — | |||||||||||||||||
| Health Benefits | — | — | — | — | |||||||||||||||||
| Total | 192,548 | 192,548 | 461,421 | — | |||||||||||||||||
| (1) |
These amounts
represent the market price as of December 31, 2009 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
retirement benefits are the market value of the vested amount contributed
by the Company to the named executive officer's account under the 401(k)
Plan, excluding amounts rolled over from the terminated Cash Balance
Plan.
|
|
| (3) |
The severance
payment includes the payment under Mr. Strickland’s severance plan and the
bonus for 2009 under the incentive compensation plan for our chief
financial officer.
|
Compensation Committee Interlocks and Insider
Participation
During 2009, Messrs. Morgan, Spaulding and
Stupp served as members of the Compensation Committee. None of the members of
the Compensation Committee was 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 2009, 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.
19
Related Party Transactions
Our Audit Committee, pursuant to the Audit
Committee Charter, is authorized to review and approve or disapprove, in its
sole discretion, in advance, any proposed related-party transaction, within the
meaning of Nasdaq listing standards 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 disapproval. The Audit
Committee will approve such a transaction only if it determines that the
transaction is in our best interest.
In considering a related party transaction,
the Audit Committee will consider all relevant factors, including as applicable
(i) our business rationale for entering into the transaction; (ii) the
alternatives to entering into a related person 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 conflicts; 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.
20
APPROVAL OF AMENDED AND
RESTATED
ATRION CORPORATION
2006 EQUITY INCENTIVE PLAN
ATRION CORPORATION
2006 EQUITY INCENTIVE PLAN
On May 22, 2006, our stockholders approved the
Atrion Corporation 2006 Equity Incentive Plan, or 2006 Equity Plan, which
provides that the maximum number of shares of our common stock that can be
issued pursuant to awards thereunder is 100,000 shares. Under the 2006 Equity
Plan awards may be in the form of incentive and non-qualified stock options,
restricted stock, restricted stock units, deferred stock units and performance
shares. On February 17, 2010, our Board of Directors voted to amend and restate
our 2006 Equity Plan and is recommending the Amended and Restated Atrion
Corporation 2006 Equity Incentive Plan, or Amended 2006 Equity Plan, to our
stockholders for approval.
As of March 26, 2010, we had 37,151 shares of
common stock available for awards under the 2006 Equity Plan. The Amended 2006
Equity Plan increases the reserved shares by 100,000 shares. The Amended 2006
Equity Plan also contains certain additional changes from the 2006 Equity Plan,
including authorizing awards of dividend equivalents and other stock-based
awards and permitting awards to our non-employee directors.
Reasons for Amendment
When our 2006 Equity Plan was adopted four
years ago, we reserved 100,000 shares of our common stock for awards thereunder.
Over the past four years, we have awarded options, restricted stock and
restricted stock units to our employees and as of March 26, 2010 we had 37,151
shares available for awards under the 2006 Equity Plan. Our Board of Directors
continues to believe that an equity incentive plan is helpful in attracting and
retaining key personnel and providing incentive compensation based on our
performance and that of our key employees. However, in order to continue
realizing the benefits of our 2006 Equity Plan, it is necessary to increase the
number of shares available for awards. Our Board of Directors believes that an
increase of 100,000 shares of our common stock is necessary and has approved
that increase, as set forth in the Amended 2006 Equity Plan. Our Board of
Directors also believes that permitting awards of dividend equivalents and other
stock-based awards provides our Compensation Committee, which has administered
the 2006 Equity Plan and will administer the Amended 2006 Equity Plan, with
additional flexibility in shaping awards in the future. Also, our Board of
Directors believes that permitting awards to non-employee directors will be
helpful in attracting and retaining members of our Board of Directors.
Summary of Amended 2006 Equity Plan
The following is a summary of the Amended 2006
Equity Plan. The statements contained herein are qualified in their entirety by
reference to the Amended 2006 Equity Plan, a copy of which is attached as
Appendix A to this Proxy Statement.
General. The
Amended 2006 Equity Plan authorizes the Company to grant to eligible persons the
following types of equity-based awards: options to purchase common stock that
qualify as "incentive stock options" within the meaning of Section 422 of the
Code; options to purchase common stock that do not qualify as incentive stock
options under the Code, which also are referred to as "nonqualified stock
options;" shares of restricted stock that are subject to certain transferability
and forfeiture restrictions that lapse after specified restricted periods;
restricted stock units, deferred stock units, dividend equivalents, stock
appreciation rights, also known as SARs; performance share units and other
stock-based awards.
Eligible Persons. Employees, non-employee directors and consultants of the Company will be
eligible to participate in the Amended 2006 Equity Plan. As of March 15, 2010,
approximately 50 employees, non-employee directors and consultants of the
Company and its subsidiaries would be eligible to participate in the Amended
2006 Equity Plan. The selection of employees, non-employee directors and
consultants to participate in the Amended 2006 Equity Plan will be entirely
within the discretion of the Compensation Committee. Under present law,
incentive stock options may be granted only to employees.
Shares Available. The maximum number of shares of common stock subject to all awards
granted under the Amended 2006 Equity Plan will be 200,000 shares, of which
approximately 137,151 will be available for new
21
awards. The maximum
number of shares of common stock which may be awarded to any one person during
any one year is 35,000 shares. The awards granted under the Amended 2006 Equity
Plan and the foregoing share limitations are subject to equitable adjustment or
substitution, as determined by the Compensation Committee in its sole
discretion, in the event of certain changes in the Company’s outstanding shares
of common stock or its capital structure resulting from a dividend or other
distribution in the form of cash (excluding ordinary cash dividends), common
stock, other securities or other property, on account of a recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of our assets, or exchange of our common stock or other
securities, issuance of warrants or other rights to purchase our common stock or
other securities, or other similar event that affects our common stock. In the
event that any stock option, restricted common stock, restricted stock unit,
deferred stock unit, dividend equivalent, SAR, performance share unit or other
stock-based award expires or is surrendered, terminated, or forfeited, the
shares of common stock no longer subject to such award will be released and
thereafter available for new awards to be granted under the Amended 2006 Equity
Plan.
Administration. The
Compensation Committee is authorized to administer the Amended 2006 Equity Plan.
The Compensation Committee has the power, subject to the provisions of the
Amended 2006 Equity Plan, to interpret the Amended 2006 Equity Plan and the
agreements pursuant to which stock options, restricted common stock, restricted
stock units, deferred stock units, dividend equivalents, SARs, performance units
and other stock-based awards are granted or awarded, and to adopt such rules for
the administration, interpretation, and application of the Amended 2006 Equity
Plan as are consistent therewith and to interpret, amend or revoke any such
rules. The Compensation Committee has the power, subject to the provisions of
the Amended 2006 Equity Plan, to determine the nature and extent of the awards
to be made to each participant; to determine the time when awards will be made
to participants; to establish the performance goals and determine the period of
time within which performance is measured with respect to performance units; to
establish the various targets and bonus amounts which may be earned by certain
employees; to specify the relationship between the performance goals and the
targets and amounts that may be earned by certain employees; to determine the
period of time during which shares of restricted stock are subject to
restrictions; to determine the conditions for the payment of awards; and to
prescribe the forms of agreements and documents evidencing the awards. The
Compensation Committee, in its absolute discretion, will determine the effect of
a participant’s termination of employment or service on unvested options,
restricted common stock and restricted stock units unless otherwise provided in
the Amended 2006 Equity Plan.
Types of Equity-Based Awards
Stock Options. The
Compensation Committee may grant stock options to eligible persons under the
Amended 2006 Equity Plan. Each option granted pursuant to the Amended 2006
Equity Plan is designated at the time of grant as either an option intended to
qualify as an incentive stock option under Section 422 of the Code, referred to
as an incentive stock option, or as an option that is not intended to so
qualify, referred to as a nonqualified stock option. Nonqualified stock options
may be granted to all eligible persons, but incentive stock options may be
granted only to our employees and employees of our related entities. The
Compensation Committee may set the exercise price of stock options, provided
that the exercise price per share is not less than the par value of a share of
common stock and is not less than the fair market value of the underlying common
stock on the date of grant. Stock options will vest and become exercisable in
such a manner and on such date or dates as are determined by the Compensation
Committee. Any incentive stock options granted pursuant to the Amended 2006
Equity Plan will expire after a period not exceeding ten years from the date of
grant, as determined by the Compensation Committee, subject to earlier
termination in the event that the participant’s employment or service with the
Company or a related entity ceases before the end of the option period. If an
incentive stock option is granted to a participant who owns or is deemed to own
more than 10% of the combined voting power of all classes of the Company’s
stock, the option period may not exceed five years and the exercise price may
not be less than 110% of the fair market value of the underlying common stock on
the date of grant. The exercise price for any option is generally payable in
cash or, in certain circumstances, by the surrender, at the fair market value on
the date on which the option is exercised, of shares of our common stock having
a value equal to the exercise price. The Amended 2006 Equity Plan permits
optionholders to exercise their options prior to the date on which the options
will vest, subject to Compensation Committee action. In such case, the
optionholder will, upon payment for the shares, receive restricted stock having
vesting terms that are identical to the vesting terms under the original option
and subject to repurchase by us while the restrictions on vesting are in effect.
Each stock option is to be evidenced by
22
an award agreement
containing such provisions, consistent with the Amended 2006 Equity Plan, as are
determined by the Compensation Committee.
Restricted Common Stock. The Compensation Committee may award restricted common stock to eligible
persons under the Amended 2006 Equity Plan. The participant’s rights to the
restricted common stock are subject to certain transferability and forfeiture
restrictions during a restricted period which commences on the date of grant of
the restricted common stock and expires from time to time in accordance with a
schedule established by the Compensation Committee. While the restrictions are
in place, the participant generally has the rights and privileges of a
stockholder as to the restricted common stock, including the right to vote the
restricted common stock and to receive dividends thereon. Upon the expiration of
the restricted period, the restrictions are of no further force or effect with
respect to the restricted common stock. Each restricted common stock award is to
be evidenced by an award agreement between us and the participant setting forth
the applicable restrictions.
Restricted Stock Units and Deferred Stock Units. The
Compensation Committee may award restricted stock units and deferred stock units
to eligible persons under the Amended 2006 Equity Plan, each for the duration
that it determines in its discretion. Each restricted stock unit and each
deferred stock unit is equivalent in value to one share of our common stock and
entitles the participant receiving the award to receive one share of common
stock for each restricted stock unit at the end of the vesting period applicable
to such restricted stock unit and for each deferred stock unit at the end of the
deferral period. Participants are not required to pay any additional
consideration in connection with the settlement of restricted stock units or
deferred stock units. A holder of restricted stock units or deferred stock units
has no voting rights, right to receive cash distributions or other rights as a
stockholder until shares of common stock are issued to the holder in settlement
of the stock units. However, participants holding restricted stock units or
deferred stock units are entitled to receive dividend equivalents with respect
to any payment of cash dividends on an equivalent number of shares of common
stock. Such dividend equivalents are credited in the form of additional stock
units.
Dividend Equivalents. The Compensation Committee is authorized to grant dividend equivalents to
participants subject to such terms and conditions as may be selected by the
Compensation Committee. Dividend equivalents will entitle the participant to
receive payments in cash, our common stock or other property equal to dividends
with respect to all or a portion of the number of shares of our common stock
that are subject to the award held by that participant, as determined by the
Compensation Committee. Dividend equivalents may be paid or distributed when
accrued or deemed to have been reinvested in additional shares of our common
stock or other awards, subject to restrictions on transferability, risk of
forfeiture and any other terms set forth in the award agreement.
Stock Appreciation Rights. The Compensation Committee may award stock appreciation rights to
eligible persons, alone or in tandem with stock options, pursuant to the Amended
2006 Equity Plan. SARs are awards that give the recipient the right to receive
an amount equal to (1) the number of shares exercised under the right,
multiplied by (2) the amount by which our stock price exceeds the exercise
price. Payment may be in cash, in shares of our common stock with equivalent
value, or in some combination, as determined by the Compensation Committee. The
Compensation Committee will determine the exercise price, vesting schedule and
other terms and conditions of stock appreciation rights; however, SARs expire
under the same rules that apply to stock options.
Performance Units.
The Compensation Committee is authorized to establish performance programs and
may award performance share units to eligible persons in accordance with such
programs under the Amended 2006 Equity Plan. Holders of performance units will
be entitled to receive payment in cash or shares of our common stock (or in some
combination of cash and shares) if the performance goals established by the
Compensation Committee are achieved or the awards otherwise vest. Each
performance unit will have an initial value established by the Compensation
Committee. The Compensation Committee will set performance objectives, and such
performance objectives may be based upon the achievement of company-wide,
divisional or individual goals.
Other Stock-Based Awards. The Compensation Committee may grant to participants other awards that
are denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, our common stock, as deemed by the
Compensation Committee to be consistent with the purposes of the Amended 2006
Equity Plan.
23
Transferability. A
participant’s interest in and rights under the Amended 2006 Equity Plan,
including amounts receivable on account of the equity-based awards thereunder,
may not be sold, assigned, donated, transferred, or otherwise disposed of, and
may not be mortgaged, pledged or encumbered, except in the event of a
participant’s death to a designated beneficiary to the extent permitted in the
Amended 2006 Equity Plan, or by will or the laws of descent and distribution in
the absence of any such designation. The Compensation Committee, however, may
allow for the transfer of awards other than incentive stock options to other
persons or entities.
Change in Control Provisions. Under the Amended 2006 Equity Plan, if we
experience a change in control, a participant's then unvested options will
automatically vest and be fully exercisable, unless otherwise provided in the
participant's award agreement or employment agreement, and restricted stock and
restricted stock units will vest and no longer be subject to forfeiture if so
provided in the participant's award agreement. A "change in control" is defined
as any of the followings events:
- any person, entity or affiliated
group, excluding the Company or any employee benefit plan of the Company, acquiring more than 25% of the then
outstanding shares of voting stock of the Company,
- the consummation of any merger or
consolidation of the Company into another company, such that the holders of the shares of the voting
stock of the Company immediately before such merger or consolidation own less than 50% of the
voting power of the securities of the surviving company or the parent of the surviving
company,
- the adoption of a plan for
complete liquidation of the Company or for the sale or disposition of all
or substantially all of the
Company's assets, such that after the transaction, the holders of the shares
of the voting stock of the
Company immediately prior to the transaction own less than 50% of the
voting securities of the acquiror or
the parent of the acquiror, or
- during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board.
Amendment and Termination. Our Board of Directors may terminate the Amended 2006 Equity Plan at any
time. The Board of Directors or the Compensation Committee may suspend and, if
suspended, reinstate the Amended 2006 Equity Plan in whole or in part at any
time and from time to time. Any amendment of the Amended 2006 Equity Plan must
be approved by our stockholders to the extent that such approval is required by
the Amended 2006 Equity Plan or applicable law, regulations or
rules.
Federal Income Tax Consequences
The following is a summary of the material
United States federal income tax consequences of the Amended 2006 Equity Plan to
the Company and the participants. The summary is based on current federal income
tax law, which is subject to change, is not complete and does not address state,
local, or foreign tax consequences or considerations.
Stock Options. The
grant of stock options under the Amended 2006 Equity Plan will not result in
taxable income at the time of the grant for either the Company or the optionee.
Upon exercising an incentive stock option, the optionee will have no taxable
income (except that the alternative minimum tax may apply) and we will receive
no deduction. Upon exercising a nonqualified stock option, the optionee will
recognize ordinary income in the amount by which the fair market value of the
common stock at the time of exercise exceeds the option exercise price, and we
will be entitled to a deduction for the same amount. The optionee’s income is
subject to withholding tax as wages. The tax treatment of the optionee upon a
disposition of shares of common stock acquired through the exercise of a stock
option is dependent upon the length of time that the shares have been held and
on whether such shares were acquired by exercising an incentive stock option or
a nonqualified stock option. If an employee exercises an incentive stock option
and holds the shares for two years from the date of grant and one year after
exercise, then any gain or loss realized based on the exercise price of the
option will be treated as long-term capital
24
gain or loss. Shares
obtained upon exercise of an incentive stock option that are sold without
satisfying these holding periods will be treated as shares received from the
exercise of a nonqualified stock option. Generally, upon the sale of shares
obtained by exercising a nonqualified stock option, the optionee will treat the
gain realized on the sale as a capital gain. Generally, there will be no tax
consequence to us in connection with the disposition of shares of common stock
acquired under an option, except that we may be entitled to a deduction in the
case of a disposition of shares acquired upon exercise of an incentive stock
option before the applicable holding periods have been satisfied.
Restricted Stock.
An award of restricted common stock will not result in taxable income to the
participant at the time of grant. Upon the lapse of the restrictions, the
participant will recognize ordinary income in the amount of the fair market
value of the shares of common stock at the time that the restriction lapses.
Alternatively, within 30 days after receipt of the restricted common stock, a
participant may make an election under Section 83(b) of the Code, in which case
the participant would include in income in the year that the restricted common
stock is awarded an amount equal to the excess of fair market value of the
restricted common stock on the date of such award, determined as if the
restricted common stock were not subject to restrictions, over the purchase
price, if any, of such restricted stock. The Company will be entitled to a
deduction for the year in which the participant recognizes ordinary income with
respect to the restricted common stock in an amount equal to such
income.
Other Awards. The
current federal income tax consequences of other awards authorized under the
Amended 2006 Equity Plan generally follow certain basic patterns: SARs,
restricted stock units and deferred stock units are taxed and deductible in
substantially the same manner as nonqualified stock options, except to the
extent Section 409A of the Code applies, in which case recipients would be taxed
at the time these items cease to be subject to substantial risk of forfeiture.
Stock based performance awards, dividend equivalents and other types of awards
are generally subject to tax at the time of payment. In each of the foregoing
cases, we will generally have a corresponding deduction at the time the
participant recognizes income.
New Plan Benefits
No awards will be granted under the Amended
2006 Equity Plan until it is approved by our stockholders. In addition, awards
granted under the Amended 2006 Equity Plan are subject to the discretion of the
Compensation Committee. Therefore, it is not possible to determine the benefits
that will be received in the future by participants in the Amended 2006 Equity
Plan or the benefits that would have been received by such participants if the
Amended 2006 Equity Plan had been in effect in the year ended December 31,
2009.
Common Stock Price
The closing price of our common stock on March
26, 2010, as reported on the NASDAQ Global Select Market, was $146.19 per
share.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE
PROPOSAL TO APPROVE THE AMENDED 2006 EQUITY PLAN.
PROPOSAL TO APPROVE THE AMENDED 2006 EQUITY PLAN.
25
Equity Compensation Plan Information
The following table provides certain information about securities
authorized for issuance under our equity compensation plans as of December 31,
2009:
| Number of securities | |||||||||
| Weighted- | remaining available for | ||||||||
| average exercise | future issuance under | ||||||||
| Number of securities to | price of | equity compensation | |||||||
| be issued upon exercise | outstanding | plans (excluding | |||||||
| of outstanding options, | options, warrants | securities reflected in | |||||||
| warrants and rights | and rights | column (a)) | |||||||
| Plan Category | (a) | (b) | (c) | ||||||
| Equity compensation plans approved | |||||||||
| by security holders(1) | 85,000 | $ | 53.56 |
(2)
|
37,592 | ||||
| Equity compensation plans not | |||||||||
| approved by security holders(3) | 632 | — | 1,868 |
(4)
|
|||||
| Total | 85,632 | $ | 53.56 | 39,460 | |||||
| (1) | Consists of shares of our common stock authorized for issuance under (i) our 1997 Stock Incentive Plan, which provides for the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock and performance shares and (ii) our 2006 Equity Plan which provides for the grant to employees and consultants of incentive and nonqualified stock options, restricted stock, restricted stock units, deferred stock units, stock appreciation rights and performance shares. The number of shares available for issuance under both plans is subject to equitable adjustment by the Compensation Committee of the Board of Directors in the event of any change in our capitalization, including, without limitation, a stock dividend or stock split. | |
| (2) |
The deferred stock units and restricted stock units awarded under
our 2006 Equity Plan are excluded from the calculation of the weighted
average exercise price.
|
|
| (3) |
Consists of the Deferred Compensation Plan for our non-employee
directors. For more information concerning the Deferred Compensation Plan,
see "Director Compensation" at page 7 of this proxy
statement.
|
|
| (4) |
The Deferred Compensation Plan does not provide for a specified
limit on the number of shares of our common stock that may be issued under
the Deferred Compensation Plan. The 1,868 shares shown as available for
future issuance reflects the number of shares initially reserved for
issuance under the Deferred Compensation Plan less the number of shares of
our common stock to be issued with respect to the stock units that have
been credited to non-employee directors' stock unit accounts as of
December 31, 2009.
|
APPROVAL OF APPOINTMENT OF INDEPENDENT
ACCOUNTANTS
Our Audit Committee has appointed the firm of Grant Thornton LLP as
independent accountants to audit our financial statements for the year 2010.
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
THE PROPOSAL TO RATIFY THE
APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT ACCOUNTANTS TO AUDIT OUR
FINANCIAL STATEMENTS FOR THE YEAR 2010.
APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT ACCOUNTANTS TO AUDIT OUR
FINANCIAL STATEMENTS FOR THE YEAR 2010.
26
Audit and Related Fees
Audit Fees
The aggregate fees billed by Grant Thornton
LLP for professional services rendered for the audit of the Company’s annual
financial statements and the reviews of the financial statements included in our
quarterly reports on Form 10-Q were $276,475 for the year ended December 31,
2009 and $254,531 for the year ended December 31, 2008.
Audit Related Fees
The aggregate fees billed by Grant Thornton
LLP for professional services rendered for consultations regarding financial and
reporting standards were $650 for the year ended December 31, 2009. No audit
related fees were billed by Grant Thornton LLP for the year ended December 31,
2008.
Tax Fees
The aggregate fees billed by Grant Thornton
LLP for professional services rendered for tax services were $36,175 for the
year ended December 31, 2009 and $11,366 for the year ended December 31, 2008.
These fees relate to federal and state tax compliance and tax advice in each
such year.
All Other Fees
There were no fees billed by Grant Thornton
LLP for services rendered for the year ended December 31, 2009 or for the year
ended December 31, 2008 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
auditor's independence. In accordance with those policies and procedures, we are
not to engage the independent auditors to render any audit or non-audit services
unless either the service is approved in advance by the Audit Committee or the
engagement to render the service is entered into pursuant to the Audit
Committee's pre-approval policies and procedures. In the fourth quarter of each
year, the Audit Committee is to review the services expected to be performed by
the independent auditor. The Audit Committee will pre-approve fee levels for the
up-coming fiscal year for each of the following categories: audit, audit-related
and tax compliance/planning services (individual projects less than $10,000).
Tax compliance/planning projects exceeding $10,000 and all other services not
pre-approved in the categories above will require specific pre-approval from the
Audit Committee on an individual project basis. Approval for such services may
be requested at the next Audit Committee meeting or, if earlier approval is
necessary, it may be obtained in accordance with the Audit Committee's
delegation to the Audit Committee Chairman as described below. The Audit
Committee will not delegate to our management its responsibilities to
pre-approve services performed by the independent auditor. 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 $10,000 per service,
provided that the aggregate amount of such services does not exceed $25,000 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, 2009, no services were
provided by Grant Thornton LLP other than in accordance with the pre-approval
policies and procedures then in place.
Audit Committee Report
The Audit Committee of the Board of
Directors has reviewed and discussed with management our audited financial
statements as of and for the year ended December 31, 2009. The Audit Committee
has discussed with Grant Thornton LLP, our auditors, the matters required to be
discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended, by the Auditing Standards Board
of the American Institute of Certified Public Accountants. The Audit Committee
has received the written disclosures and the letter from the
27
independent
accountant required by applicable requirements of the Public Company Accounting
Oversight Board regarding the independent accountant’s communications with the
Audit Committee concerning independence, and has discussed with the independent
accountant the independent accountant'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 Form 10-K for the year ended December 31, 2009.
Members of the Audit
Committee
|
John P. Stupp, Jr. (Chairman)
|
Hugh J. Morgan, Jr.
|
Roger F. Stebbing
|
Ronald N. Spaulding |
SECURITIES OWNERSHIP
The following table sets forth
information regarding the beneficial ownership of shares of our common stock as
of March 15, 2010 by (i) each of our directors, two of whom are also the Board
of Directors' nominees for election as directors 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.
| Number of Shares | Percent | |||||
| Name of Beneficial Owner | Beneficially Owned (1) | of Class (1) | ||||
| Emile A. Battat (2) | 208,006 | 10.29 | % | |||
| David A. Battat | 18,000 |
(3)
|
* | |||
| Hugh J. Morgan, Jr. | 20,220 |
(4)
|
1.00 | % | ||
| Ronald N. Spaulding | 1,117 | * | ||||
| Roger F. Stebbing | 14,000 |
(3)
|
* | |||
| John P. Stupp, Jr. | 162,240 |
(3)(5)
|
8.02 | % | ||
| Jeffery Strickland | 8,949 |
(6)
|
* | |||
| Royce & Associates, LLC(7) | 224,021 | 11.08 | % | |||
| T. Rowe Price Associates, Inc.(8) | 196,530 | 9.72 | % | |||
| All directors and executive officers as a | 432,532 |
(9)
|
21.23 | % | ||
| group | ||||||
| * | Less than 1% of class. | |
| (1) | Based on 2,021,452 shares of common stock outstanding on March 15, 2010, plus shares that can be acquired through the exercise of options within 60 days thereafter by the specified individual or group. Except as otherwise indicated in the notes to this table, beneficial ownership includes sole voting and investment power. | |
| (2) | The business address for Mr. Emile Battat is One Allentown Parkway, Allen, Texas 75002-4211. Mr. Emile Battat is the father of Mr. David Battat, who is our President and Chief Operating Officer and the President of Halkey-Roberts Corporation, one of our subsidiaries. | |
| (3) | The shares listed include the following shares issuable upon the exercise of options exercisable on March 15, 2010 or within 60 days thereafter: Mr. David Battat, 8,000 shares; Mr. Stebbing, 6,000 shares; and Mr. Stupp, 2,000 shares. All such persons are parties to award agreements setting forth certain terms of options granted to them under the 2006 Equity Incentive Plan or the 1997 Stock Incentive Plan. The shares listed do not include stock units convertible into shares of common stock at a later date. | |
| (4) | Does not include 25,000 shares held by Mr. Morgan’s children and their spouses and Mr. Morgan’s grandchildren as a result of gifts by Mr. Morgan, none of which shares is beneficially owned by Mr. Morgan. | |
| (5) | Includes 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. are pledged to that company's lenders as security for its working capital line of credit. The 135,000 shares held by Stupp Bros., Inc. |
28
| represent 6.68% of our common stock outstanding as of March 15, 2010. The business address for Mr. Stupp and Stupp Bros., Inc. is 3800 Weber Road, St. Louis, Missouri 63125. | ||
| (6) | Includes 6,049 shares held in a family trust of which Mr. Strickland is a co-trustee. | |
| (7) | The address of Royce & Associates, LLC ("Royce") is 745 Fifth Avenue, New York, New York 10151. This information is based upon a Schedule 13G dated January 22, 2010 filed with the SEC and furnished to the Company reporting that Royce has sole power to vote or direct the vote of and the sole power to dispose or direct the disposition of 224,021 shares of common stock. | |
| (8) | The address of T. Rowe Price Associates, Inc. is 100 East Pratt Street, Baltimore, Maryland 21202. This information is based upon a Schedule 13G dated February 12, 2010 filed with the SEC and furnished to the Company by T. Rowe Price Associates, Inc., or Price Associates, and T. Rowe Price Small-Cap Value Fund, Inc., or Small-Cap Value Fund, reporting that Price Associates has sole power to vote or direct the vote of 19,530 shares of common stock and has sole power to dispose of or direct the disposition of 196,530 shares of common stock and that Small-Cap Value Fund has sole power to vote or direct the vote of 177,000 shares of common stock. For purposes of the reporting requirements of the Securities Exchange Act of 1934, or Exchange Act, Price Associates is deemed to be a beneficial owner of such shares of common stock; however, Price Associates has expressly disclaimed beneficial ownership of all such shares. | |
| (9) | See notes (1)-(6) above. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Exchange Act 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 2009.
STOCKHOLDER PROPOSALS
Stockholder Proposals in Our Proxy
Statement
In order for proposals by stockholders to
be considered for inclusion in our proxy material relating to the 2011 annual
meeting of stockholders, such proposals must be received by us on or before
December 8, 2010.
Stockholder Proposals to be Presented at
Annual Meetings.
Our Bylaws provide that a stockholder who
desires to propose any business at an annual meeting of stockholders must give
us written notice of such stockholder's intent to bring that business before
such meeting. The notice is to be delivered to, or mailed, postage prepaid, and
received by, the Secretary of the Company at our principal executive offices not
later than the close of business on the 120th day prior to the first anniversary
of the date of our proxy statement released to stockholders in connection with
the preceding year's annual meeting of stockholders. However, in the event that
no annual meeting was held in the previous year or the date of the annual
meeting is more than 30 days before or more than 60 days after the anniversary
date of the previous year’s meeting, notice by the stockholder must be delivered
not later than the close of business on the later of the 120th day prior to such
annual meeting and the 10th day following the date on which public announcement
of the date of the meeting is first made. Such notice for the 2011 annual
meeting must be delivered not later than December 8, 2010, provided the date of
the 2011 annual meeting is not more than 30 days before or more than 60 days
after May 18, 2011. The stockholder's written notice must set forth (a) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting; (b) the name and address of
the stockholder who intends to propose such business; (c) a representation that
the stockholder is a holder of record of our common stock entitled to vote at
such meeting and intends to appear in person or by proxy at such meeting to
propose such business; (d) any material interest of the stockholder in such
business; and (e) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the proposal is made (i) the name and address of
such stockholder, as they appear on our books, and of such beneficial owner and
(ii) the class and number of our shares which are owned beneficially and of
record by such stockholder and such beneficial owner. The Chairman of the
meeting may refuse to transact any business presented at any meeting without
compliance with the foregoing procedure.
29
Stockholder Nominations for
Directors.
Our Bylaws provide that a stockholder who desires to nominate directors
at a meeting of stockholders must give us written notice, within the same time
period described above for a stockholder who desires to bring business before a
meeting, setting forth (a) the name and address of the stockholder who intends
to make the nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of our common stock
entitled to vote at such meeting and intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by such
stockholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the SEC had each nominee been nominated, or
intended to be nominated, by the Board of Directors; and (e) the consent of each
nominee to serve as a director of the Company if so elected. The Chairman of the
meeting may refuse to acknowledge the nomination of any person if a stockholder
has failed to comply with the foregoing procedure.
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 Committee Report" contained in this proxy statement specifically
are not incorporated by reference into any other filings with the SEC. 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, telegram, 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.
OTHER BUSINESS
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 | |
| April 7, 2010 | |
30
APPENDIX A
AMENDED AND
RESTATED
ATRION CORPORATION 2006 EQUITY
INCENTIVE PLAN
Atrion
Corporation, a Delaware corporation (the "Company"), has established the Amended
and Restated Atrion Corporation 2006 Equity Incentive Plan (the "Plan") for the
benefit of Employees, Non-Employee Directors and Consultants.
The
purposes of this Plan are (a) to recognize and compensate selected Employees,
Non-Employee Directors and Consultants who contribute to the success of the
Company and its Subsidiaries, (b) to attract and retain Employees, Non-Employee
Directors and Consultants, and (c) to provide incentive compensation to
Employees, Non-Employee Directors and Consultants based upon the performance of
the Company and its Subsidiaries.
ARTICLE 1.
DEFINITIONS
Whenever the following initially capitalized terms are used in the Plan,
they shall have the meanings specified below, unless the context clearly
indicates otherwise.
"Award"
shall mean the grant or award of Options, Restricted Common Stock, Restricted
Stock Units, Deferred Stock Units, SARs, Dividend Equivalents, Performance Units
or Other Stock-Based Awards under this Plan.
"Award
Agreement" shall mean an agreement between the Company and a Participant setting
forth the terms and conditions of an Award granted to a Participant.
"Board"
shall mean the Board of Directors of the Company, as comprised from time to
time.
"Change
in Control" shall mean the occurrence of any of the following events: (a) any
person, entity or affiliated group, excluding the Company or any employee
benefit plan of the Company, acquiring more than twenty-five percent (25%) of
the then outstanding shares of voting stock of the Company, (b) the consummation
of any merger or consolidation of the Company into another company, such that
the holders of the shares of the voting stock of the Company immediately before
such merger or consolidation own less than fifty percent (50%) of the voting
power of the securities of the surviving company or the parent of the surviving
company, (c) the adoption of a plan for complete liquidation of the Company or
the sale or disposition of all or substantially all of the Company's assets of
the Company, such that after the transaction, the holders of the shares of the
voting stock of the Company immediately prior to the transaction own less than
fifty percent (50%) of the voting securities of the acquiror or the parent of
the acquiror, or (d) during any period of two (2) consecutive years, individuals
who at the beginning of such period constituted the Board (including for this
purpose any new director whose election or nomination for election by the
Company's stockholders was approved by a vote of at least a majority of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the
Board.
"Code"
shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of the
Board.
"Common
Stock" shall mean the common stock, par value ten cents ($0.10) per share, of
the Company.
"Company" shall mean Atrion Corporation, a Delaware corporation, or any
business organization which succeeds to all or substantially all of its
business, whether by virtue of a purchase, merger, consolidation, or otherwise.
For purposes of this Plan, the term Company shall include, where applicable, a
Subsidiary that employs an Employee or engages a Consultant.
"Consultant" shall mean a professional or technical expert, consultant,
advisor or independent contractor who provides services to the Company or a
Subsidiary, and who may be selected to participate in the Plan.
"Deferred Stock Unit" shall mean a right to receive Common Stock awarded
under Article 6 of this Plan.
"Director" shall mean a member of the Board.
"Dividend Equivalent" shall mean a right granted to a Participant under
Article 9 of this Plan.
"Employee" shall mean any employee (as defined in accordance with the
regulations and revenue rulings then applicable under Section 3401(c) of the
Code) of the Company or a Subsidiary of the Company, whether such employee was
so employed at the time this Plan was initially adopted or becomes so employed
subsequent to the adoption of this Plan, who may be selected to participate in
the Plan.
"Employment Agreement" shall mean the employment, consulting or similar
contractual agreement entered into by an Employee or a Consultant,as the case
may be, and the Company governing the terms of the Employee's or Consultant's
employment or engagement with the Company, if any.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair
Market Value" of a share of Common Stock, as of a given date, means (i)with
respect to an Award of an Incentive Stock Option and an Award which is intended
to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code, the average of the high and low sales price of shares
of Common Stock on such date as reported by any national securities exchange on
which the shares of Common Stock are traded or, if no shares of Common Stock are
traded on any such exchange on such date, then on the next preceding date on
which any shares of Common Stock were traded on such exchange; and (ii)with
respect to all other Awards, the closing sales price of a share of Common Stock
on such date as reported by any national securities exchange on which the shares
of Common Stock are traded or, if no shares of Common Stock are traded on any
such exchange on such date, then on the next preceding date on which any shares
of Common Stock were traded on such exchange; or (iii) if shares of Common Stock
are not publicly traded on any exchange, the fair market value of a share of
Common Stock as determined by the Committee acting in good faith and after
consultation with independent advisors.
"Incentive Stock Option" shall mean an option which conforms to the
applicable provisions of Section 422 of the Code and which is designated as an
Incentive Stock Option by the Committee.
"Non-Employee Director" shall mean a Director who is not an
Employee.
"Non-Qualified Stock Option" shall mean an Option which the Committee
does not designate as an Incentive Stock Option.
"Option" shall mean an option to purchase shares of Common Stock that is
granted under Article 4 of this Plan. An option granted under this Plan shall,
as determined by the Committee, be either a Non-Qualified Stock Option or an
Incentive Stock Option; provided, however, that Options granted to consultants
shall be Non-Qualified Stock Options.
"Other
Stock-Based Awards" shall mean a right granted to a Participant under Article 10
of this Plan.
"Participant" shall mean an Employee or Consultant who has been granted
an Award.
"Performance Units" shall mean performance units granted under Article 8
of this Plan.
"Permanent Disability" or "Permanently Disabled" shall mean the inability
of a Participant, due to a physical or mental impairment, to perform the
material services of the Participant's position with the Company for a period of
six (6) months, whether or not consecutive, during any 365-day period. A
determination of Permanent Disability shall be made by a physician satisfactory
to both the Participant and the Committee, provided that if the Participant and
the Committee do not agree on a physician, each of them shall select a physician
and those two physicians together shall select a third physician, whose
determination as to Permanent Disability shall be binding on all
parties.
"Plan"
shall mean the Amended and Restated Atrion Corporation 2006 Equity Incentive
Plan, as embodied herein and as amended from time to time.
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"Plan
Year" shall mean the fiscal year of the Company.
"Restricted Common Stock" shall mean Common Stock awarded under Article 6
of this Plan.
"Restricted Stock Unit" shall mean a right to receive Common Stock
awarded under Article 6 of this Plan.
"Rule
16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such rule
may be amended from time to time.
"SAR"
shall mean stock appreciation rights awarded under Article 7 of this
Plan.
"Stock
Award" shall mean an Award of Restricted Common Stock, Restricted Stock Units or
Deferred Stock Units under Article 6 of this Plan.
"Stock
Award Account" shall mean the bookkeeping account reflecting Awards of
Restricted Stock Units and Deferred Stock Units under Article 6 of this
Plan.
"Subsidiary" shall mean an entity in an unbroken chain beginning with the
Company if each of the entities other than the last entity in the unbroken chain
owns fifty percent (50%) or more of the total combined voting power of all
classes of equity in one of the other entities in such chain.
"Termination of Employment" shall mean the date on which the
employee-employer, consulting, contractual, service or similar relationship
between a Participant and the Company is terminated for any reason, with or
without cause, including, but not by way of limitation, a termination of
employment by resignation, discharge, death, Permanent Disability or Retirement,
but excluding (i)termination of employment where there is a simultaneous
reemployment or continuing employment of a Participant by the Company, and
(ii)at the discretion of the Committee, termination of employment which results
in a temporary severance of the employee-employer relationship. The Committee,
in its absolute discretion, shall determine the effect of all matters and
questions relating to a Termination of Employment (subject to the provisions of
any Employment Agreement between a Participant and the Company), including, but
not limited to all questions of whether particular leaves of absence constitute
a Termination of Employment; provided, however, that, unless otherwise
determined by the Committee in its discretion, a leave of absence, change in
status from an employee to an independent contractor or other change the
employee-employer, consulting, contractual, service or similar relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section.
ARTICLE 2. COMMON STOCK SUBJECT
TO PLAN
2.1 Common Stock Subject to
Plan.
2.1.1
The Common Stock subject to an Award shall be shares of the Company's authorized
but unissued, reacquired, or treasury Common Stock. Subject to adjustment as
described in Section 12.3, the aggregate number of shares of Common Stock that
may be issued under the Plan is two hundred thousand (200,000) shares. The
Company, during the term of the Plan, will at all times reserve and keep
available such number of shares of Common Stock as shall be sufficient to
satisfy the requirements of the Plan.
2.1.2
The maximum number of shares of Common Stock which may be awarded to any individual in any calendar year shall not exceed thirty-five thousand (35,000)
shares.
2.2 Add-back of Grants.
If any
Option or SAR expires or is canceled without having been fully exercised, is
exercised in whole or in part for cash as permitted by this Plan, or is
exercised prior to becoming vested as permitted under Section 4.6.3 and is
forfeited prior to becoming vested, the number of shares of Common Stock subject
to such Option or SAR but as to which such Option, SAR or other right was not
exercised or vested prior to its expiration, cancellation or exercise may again
be optioned, granted or awarded hereunder. Shares of Common Stock which are
delivered by the Participant or withheld by the Company upon the exercise of any
Option or other Award
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under
this Plan, in payment of the exercise price thereof, may again be optioned,
granted or awarded hereunder. If any shares of Common Stock awarded as
Restricted Common Stock, Restricted Stock Units, Dividend Equivalents, Other
Stock-Based Awards or other Award hereunder or as payment for Performance Units
are forfeited by the Participant,such shares may again be optioned, granted or
awarded hereunder. Notwithstanding the provisions of this Section 2.2, no shares
of Common Stock may again be optioned, granted or awarded pursuant to an
Incentive Stock Option if such action would cause such Option to fail to qualify
as an Incentive Stock Option under Section 422 of the Code.
ARTICLE 3. ELIGIBILITY; GRANTS;
AWARD AGREEMENTS
3.1 Eligibility.
Any
Employee, Non-Employee Director or Consultant selected to participate pursuant
to Section 3.2 shall be eligible to participate in the Plan.
3.2 Awards. The Committee shall determine
which Employees and Consultants shall receive Awards, whether the Employee,
Non-Employee Director or Consultant will receive Options, Restricted Common
Stock, Restricted Stock Units, Deferred Stock Units,Dividend Equivalents, SARs,
Performance Units or Other Stock-Based Awards, whether an Option grant shall be
of Incentive Stock Options or Non-Qualified Stock Options, and the number of
shares of Common Stock subject to such Award. Notwithstanding the foregoing, the
terms and conditions of an Award intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall include, but
not be limited to, such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code.
3.3 Provisions Applicable to
Section 162(m).
3.3.1
Notwithstanding anything in the Plan to the contrary, the Committee may grant
Options, Restricted Common Stock, Restricted Stock Units,SARs, Dividend
Equivalents, Performance Units or Other Stock Based Awards to an Employee that
vest upon the attainment of performance targets for the Company which are
related to one or more of the following performance goals: (i) pre-tax income,
(ii) operating income, (iii) cash flow, (iv) earnings per share, (v) return on
equity, (vi) return on invested capital or assets, (vii) cost reductions or
savings, (viii) earnings from continuing operations, (ix) total stockholder
return, or (x) such other identifiable and measurable performance objectives, as
determined by the Committee.
3.3.2
To the extent necessary to comply with the performance-based compensation
requirements of Section 162(m)(4)(C) of the Code, no later than ninety (90) days
following the commencement of any fiscal year in question or any other
designated fiscal period (or such other time as may be required or permitted by
Section 162(m) of the Code), the Committee shall, in writing, (i) select the
performance goal or goals applicable to the fiscal year or other designated
fiscal period, (ii)establish the various targets and bonus amounts which may be
earned for such fiscal year or other designated fiscal period, (iii)specify the
relationship between performance goals and targets and the amounts to be earned
by each Employee for such fiscal year or other designated fiscal period and (iv)
take such other action as the Committee may deem appropriate to comply with the
performance-based compensation requirements of Section 162(m)(4)(C) of the Code.
Following the completion of each fiscal year or other designated fiscal period,
the Committee shall certify in writing whether the applicable performance
targets have been achieved for such fiscal year or other designated fiscal
period. In determining the amount earned by such Employee, the Committee
shall have the right to reduce (but not to increase) the amount payable at
a given level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or corporate
performance for the fiscal year or other designated fiscal period.
3.4 Award Agreement.
Upon the
selection of an Employee, Non-Employee Director or Consultant to receive an
Award, the Committee shall cause a written Award Agreement to be issued to such
individual encompassing the terms and conditions of such Award, as determined by
the Committee in its sole discretion; provided, however, that, if applicable,
the terms of such Award Agreement shall comply with the terms of such Employee’s
or Consultant’s Employment Agreement, if any. Such Award Agreement shall provide
for the exercise price for Options and SARs; the purchase price, if any, for
Restricted Common Stock, Restricted Stock Units, Deferred Stock Units and Other
Stock-Based Awards; the performance criteria for Performance Units; and the
exercisability and vesting schedule, payment terms and such other terms and
conditions of such Award that
are consistent with the Plan, as determined by the Committee in its sole
discretion. Each Award Agreement shall be
executed by the Participant and an officer of the Company authorized to sign
such Award Agreement. All Awards shall be made conditional upon the
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Participant's acknowledgment, in writing in the Award Agreement or
otherwise by acceptance of the Award, that all decisions and determinations of
the Committee shall be final and binding on the Participant,his beneficiaries
and any other person having or claiming an interest under such
Award.
ARTICLE 4.
OPTIONS
4.1 Award Agreement for Option
Grant. Option grants shall be evidenced by an Award Agreement, pursuant to
Section 3.4. All Award Agreements evidencing Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. All Award Agreements
evidencing Incentive Stock Options shall contain such terms and conditions as
may be necessary to meet the applicable provisions of Section 422 of the
Code.
4.2 Option Price.
The price
per share of the Common Stock subject to each Option shall be set by the
Committee; provided, however, that (i)such price shall not be less than the par
value of a share of Common Stock and shall not be less than one hundred percent
(100%) of the Fair Market Value of a share of Common Stock on the date the
Option is granted, (ii) in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code), such price shall not be less than one
hundred and ten percent (110%) of the Fair Market Value of a share of Common
Stock on the date the Option is granted.
4.3 Qualification for Incentive
Stock Options. The Committee may grant an Incentive Stock Option to an individual only
if such person is an employee of the Company or is an employee of a Subsidiary
as permitted under Section 422(a)(2) of the Code.
4.4 Change in Incentive Stock
Option Grant. Any Incentive Stock Option granted under this Plan may be modified by the
Committee to disqualify such Option from treatment as an Incentive Stock Option
under Section 422 of the Code. To the extent that the aggregate Fair Market
Value of shares of Common Stock with respect to which Incentive Stock Options
(within the meaning of Section 422 of the Code, but without regard to Section
422(d) of the Code) are exercisable for the first time by a Participant during
any calendar year (under the Plan and all other Incentive Stock Option plans of
the Company) exceeds one hundred thousand dollars ($100,000), such Options shall
be treated as Non-Qualified Stock Options to the extent required or permitted by
Section 422 of the Code. The rule set forth in the preceding sentence shall be
applied by taking Options into account in the order in which they were granted.
For purposes of this Section 4.4,the Fair Market Value of shares of Common Stock
shall be determined as of the time the Option with respect to such shares of
Common Stock is granted.
4.5 Option Term.
The term of
an Option shall be set by the Committee in its discretion; provided, however, in
the case of Incentive Stock Options, the term shall not be more than ten (10)
years from the date the Incentive Stock Option is granted, or five (5) years
from such date if the Incentive Stock Option is granted to an Employee then
owning (within the meaning of Section 424(d) of the Code) more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Subsidiary or parent corporation thereof (within the meaning of Section
422 of the Code). Such Incentive Stock Options shall be subject to Section 5.6,
except as limited by the requirements of Section 422 of the Code and regulations
and rulings thereunder applicable to Incentive Stock Options.
4.6 Option Exercisability and
Vesting.
4.6.1
The period during which Options in whole or in part become exercisable and vest
in the Participant shall be set by the Committee and shall be as provided for in
the Award Agreement. At any time after the grant of an Option, the Committee
may, in its sole and absolute discretion and subject to whatever terms and
conditions it selects, accelerate the period during which an Option becomes
exercisable and vests.
4.6.2
Each Award Agreement shall set forth the extent to which, if any, the
Participant shall have the right to exercise the Options after the Participant's
Termination of Employment. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among the Options granted and
may differentiate between the reasons for the Participants’ Termination of
Employment.
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4.6.3 At any time on
or after the grant of an Option, the Committee may provide in an Award Agreement
that the Participant may elect to exercise part or all of an Option before it
otherwise has become exercisable. Any shares of Common Stock so purchased shall
be restricted Common Stock and shall be subject to a repurchase right in favor
of the Company during a specified restriction period, with the repurchase price
equal to the lesser of (i) the price per share paid by the Participant for the
Common Stock, or (ii) the Fair Market Value of such Common Stock at the time of
repurchase, or such other restrictions as the Committee deems appropriate. The
Participant shall have, unless otherwise provided by the Committee in the Award
Agreement, all the rights of an owner of Common Stock, subject to the
restrictions and provisions of his Award Agreement, including the right to vote
such Common Stock and to receive all dividends and other distributions paid or
made with respect to Common Stock.
4.6.4 Any Options
which are not exercisable and vested immediately prior to a Change in Control,
including shares of restricted Common Stock received upon the exercise of an
Option as described in Section 4.6.3 above, shall, upon a Change in Control,
become one hundred percent (100%) exercisable, if not previously exercised, and
one hundred percent (100%) vested, unless the Award Agreement or the
Participant's Employment Agreement provides otherwise.
ARTICLE 5. EXERCISE OF OPTIONS
5.1 Exercise. At any time and
from time to time prior to the time when any exercisable Option or portion
thereof becomes unexercisable under the Plan or the Award Agreement, such Option
or portion thereof may be exercised in whole or in part; provided, however, that
the Company shall not be required to issue fractional shares of Common Stock and
the Committee may, by the terms of the Option, require any partial exercise to
be with respect to a minimum number of shares of Common Stock.
5.2 Manner of Exercise. An
exercisable Option, or any exercisable portion thereof, may be exercised solely
by delivery to the Company of all of the following prior to the time when such
Option or such portion becomes unexercisable under the Plan or the Award
Agreement:
5.2.1 A written
notice signed by the Participant or other person then entitled to exercise such
Option or portion thereof, stating that such Option or portion is being
exercised, provided such notice complies with all applicable rules established
by the Committee from time to time.
5.2.2 Such
representations and documents as the Committee, in its absolute discretion,
deems necessary or advisable to effect compliance with all applicable provisions
of the Securities Act of 1933, as amended, and any other federal or state
securities laws or regulations. The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, causing legends to be placed on
certificates for shares of Common Stock and issuing stop-transfer notices to
agents and registrars.
5.2.3 In the event
that the Option shall be exercised pursuant to Section 12.1 by any person or
persons other than the Participant, appropriate proof of the right of such
person or persons to exercise the Option or portion thereof.
5.2.4 Unless
otherwise determined by the Committee, the exercise price of an Option or
portion thereof, including the amount of any withholding tax due, may be paid as
follows:
5.2.4.1 In cash or by
check;
5.2.4.2 Through the
delivery of shares of Common Stock owned by the Participant, duly endorsed for
transfer to the Company with a Fair Market Value on the date of delivery equal
to the aggregate exercise price of the Option or exercised portion thereof,
provided, that shares of Common Stock used to exercise the Option have been held
by the Participant for the requisite period of time to avoid adverse accounting
consequences to the Company with respect to the Option;
5.2.4.3 Through the
surrender of shares of Common Stock then issuable upon exercise of the Option
having a Fair Market Value on the date of Option exercise equal to the aggregate
exercise price of the Option or exercised portion thereof;
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5.2.4.4 Through an
exercise complying with Regulation T as promulgated from time to time by the
Board of Governors of the Federal Reserve System; or
5.2.4.5 Through any
combination of the consideration provided for in this Section 5.2.4 or such
other method approved by the Committee consistent with applicable
law.
5.3 Conditions to Issuance of Common
Stock. The Company shall not be required to issue or deliver any
certificate or other indicia evidencing ownership of shares of Common Stock
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
5.3.1 The obtaining
of any approval or other clearance from any state or federal governmental agency
which the Committee shall, in its sole discretion, determine to be necessary or
advisable.
5.3.2 The lapse of
such reasonable period of time following the exercise of the Option as the
Committee may establish from time to time for reasons of administrative
convenience.
5.3.3 The receipt by
the Company of full payment for such Common Stock, including payment of any
applicable withholding tax.
5.3.4 The Participant
agreeing to the terms and conditions of the Plan and the Award
Agreement.
5.4 Rights as Stockholders.
The holders of Options shall not be, nor have any of the rights or privileges
of, stockholders of the Company in respect of any shares of Common Stock
purchasable upon the exercise of any part of an Option unless and until
certificates or other indicia representing such shares of Common Stock have been
issued by the Company to such holders.
5.5 Ownership and Transfer
Restrictions. The Committee, in its absolute discretion, may impose at
the time of grant such restrictions on the ownership and transferability of the
shares of Common Stock purchasable upon the exercise of an Option as it deems
appropriate. Any such restriction shall be set forth in the Award Agreement and
may be referred to on the certificates or other indicia evidencing such shares
of Common Stock.
5.6 Limitations on Exercise of
Options.
5.6.1 Vested
Incentive Stock Options may not be exercised after the earliest of (i) their
expiration date, (ii) twelve (12) months from the date of the Participant's
Termination of Employment by reason of his death, (iii) twelve (12) months from
the date of the Participant's Termination of Employment by reason of his
Permanent Disability, or (iv) the expiration of three (3) months from the date
of the Participant's Termination of Employment for any reason other than such
Participant's death or Permanent Disability, unless the Participant dies within
said three (3) month period and the Award Agreement or the Committee permits
later exercise. Leaves of absence for less than ninety (90) days shall not cause
a Termination of Employment for purposes of Incentive Stock
Options.
5.6.2 Non-Qualified
Stock Options may be exercised up until their expiration date, unless the
Committee provides otherwise in the Award Agreement.
ARTICLE 6. STOCK
AWARDS
6.1 Award Agreement. Awards of
Restricted Common Stock, Restricted Stock Units and Deferred Stock Units shall
be evidenced by an Award Agreement, pursuant to Section 3.4. All Award
Agreements evidencing Restricted Common Stock, Restricted Stock Units and
Deferred Stock Units intended to qualify as performancebased compensation as
described in Section 162(m)(4)(C) of the Code shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code.
6.2 Awards of Restricted Common
Stock, Restricted Stock Units and Deferred Stock Units.
6.2.1 The Committee
may from time to time, in its absolute discretion, consistent with this Plan:
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6.2.1.1 determine
which Employees, Non-Employee Directors and Consultants shall receive Stock
Awards;
6.2.1.2 determine the
aggregate number of shares of Common Stock to be awarded as Stock Awards to
Employees, Non-Employee Directors and Consultants;
6.2.1.3 determine the
terms and conditions applicable to such Stock Awards; and
6.2.1.4 determine
when the restrictions, if any, lapse.
6.2.2 The Committee
may establish the purchase price, if any, and form of payment for a Stock Award.
If the Committee establishes a purchase price, the purchase price shall be no
less than the par value of the Common Stock to be purchased, unless otherwise
permitted by applicable state law.
6.2.3 Upon the
selection of an Employee, Non-Employee Director or Consultant to be awarded
Restricted Common Stock, the Committee shall instruct the Secretary of the
Company to issue such Restricted Common Stock and may impose such conditions on
the issuance of such Restricted Common Stock as it deems appropriate, subject to
the provisions of Article 11.
6.2.4 Upon the
selection of an Employee, Non-Employee Director or Consultant to be awarded
Restricted Stock Units or Deferred Stock Units, the Committee shall instruct the
Secretary of the Company to establish a Stock Award Account on behalf of each
such Participant. The Committee may impose such conditions on the issuance of
such Restricted Stock Units or Deferred Stock Units as it deems
appropriate.
6.2.5 Awards of
Restricted Common Stock and Restricted Stock Units shall vest pursuant to the
Award Agreement.
6.2.6 Upon the
occurrence of a Change in Control, all Restricted Common Stock and Restricted
Stock Units shall become one hundred percent (100%) vested, unless the
Participant’s Award Agreement or the Participant’s Employment Agreement provides
otherwise.
6.2.7 A Participant
shall be one hundred percent (100%) vested in the number of Deferred Stock Units
held in his or her Stock Award Account at all times. The term for which the
Deferred Stock Units shall be deferred shall be provided for in the Award
Agreement.
6.3 Rights as
Stockholders.
6.3.1 Upon delivery
of the shares of Restricted Common Stock to the Participant or the escrow holder
pursuant to Section 6.7, the Participant shall have, unless otherwise provided
by the Committee in the Award Agreement, all the rights of an owner of Common
Stock, subject to the restrictions and provisions of his Award Agreement;
provided, however, that in the discretion of the Committee, any extraordinary
distributions with respect to the Common Stock shall be subject to the
restrictions set forth in Section 6.4.
6.3.2 Nothing in this
Plan shall be construed as giving a Participant who receives an Award of
Restricted Stock Units or Deferred Stock Units any of the rights of an owner of
Common Stock unless and until shares of Common Stock are issued and transferred
to the Participant in accordance with the terms of the Plan and the Award
Agreement. Notwithstanding the foregoing, in the event that any dividend is paid
by the Company with respect to the Common Stock (whether in the form of cash,
Common Stock or other property), then the Committee shall, in the manner it
deems equitable or appropriate, adjust the number of Restricted Stock Units or
Deferred Stock Units allocated to each Participant's Stock Award Account to
reflect such dividend.
6.4 Restriction. All shares of
Restricted Common Stock issued under this Plan (including any Common Stock
received as a result of stock dividends, stock splits or any other form of
recapitalization, if any) shall at the time of the Award, in the terms of each
individual Award Agreement, be subject to such restrictions as the Committee
shall, in its sole discretion, determine, which restrictions may include,
without limitation, restrictions concerning voting rights, transferability,
vesting, Company performance and individual performance; provided, however, that
by action taken subsequent to the time shares of Restricted Common Stock are
issued, the Committee may, on such terms and conditions as it may determine to
be appropriate, remove any or all of the restrictions imposed by the terms of
the
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Award Agreement.
Restricted Common Stock may not be sold or encumbered until all restrictions are
terminated or expire.
6.5 Lapse of Restrictions. The
restrictions on Awards of Restricted Common Stock and Restricted Stock Units
shall lapse in accordance with the terms of the Award Agreement. Each Award
Agreement shall set forth whether shares of Restricted Common Stock or
Restricted Stock Units then subject to restrictions are forfeited or if the
restrictions shall lapse upon the Participant's Termination of Employment. Such
provisions shall be determined in the sole discretion of the Committee, need not
be uniform among the Awards of Restricted Common Stock or Restricted Stock Units
and may differentiate between the reasons for the Participant's Termination of
Employment.
6.6 Repurchase of Restricted Common
Stock. The Committee may provide in the terms of the Award Agreement
awarding Restricted Common Stock that the Company shall have call rights, a
right of first offer or a right of refusal regarding shares of Restricted Common
Stock then subject to restrictions.
6.7 Escrow. The Company may
appoint an escrow holder to retain physical custody of each certificate or
control of each other indicia representing shares of Restricted Common Stock
until all of the restrictions imposed under the Award Agreement with respect to
the shares of Common Stock evidenced by such certificate expire or shall have
been removed.
6.8 Legend. In order to
enforce the restrictions imposed upon shares of Restricted Common Stock
hereunder, the Committee shall cause a legend or restrictions to be placed on
certificates of Restricted Common Stock that are still subject to restrictions
under Award Agreements, which legend or restrictions shall make appropriate
reference to the conditions imposed thereby.
6.9 Conversion. Upon vesting
in the case of Restricted Stock Units, and upon the lapse of the deferral period
in the case of Deferred Stock Units, such Restricted Stock Units or Deferred
Stock Units shall be converted into an equivalent number of shares of Common
Stock that will be distributed to the Participant, or in the case of the
Participant's death, to the Participant's legal representative. Such
distribution shall be evidenced by a stock certificate, appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company, or
other appropriate means as determined by the Company. All distributions shall be
made no later than March 15th of the calendar year
following the year, with respect to the Restricted Stock Units, in which such
Restricted Stock Units vest or, with respect to Deferred Stock Units, in which
the deferral period lapses. In the event ownership or issuance of the Common
Stock is not feasible due to applicable exchange controls, securities
regulations, tax laws or other provisions of applicable law, as determined by
the Company in its sole discretion, the Participant, or, in the case of the
Participant's death, the Participant's legal representative, shall receive cash
proceeds in an amount equal to the value of the shares of Common Stock otherwise
distributable to the Participant, net of tax withholding as provided in Section
12.5.
ARTICLE 7. STOCK APPRECIATION
RIGHTS
7.1 Award Agreement for SARs.
Awards of SARs shall be evidenced by an Award Agreement, pursuant to Section
3.4. All Award Agreements evidencing SARs intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code.
7.2 General Requirements. The
Committee may grant SARs separately or in tandem with any Option (for all or a
portion of the applicable Option). The Committee shall determine which
Employees, Non-Employee Directors and Consultants shall receive Awards of SARs
and the amount of such Awards.
7.3 Base Amount. The Committee
shall establish the base amount of the SAR at the time the SAR is granted. The
base amount of each SAR shall be equal to the price per share of the related
Option or, if there is no related Option, the Fair Market Value of a share of
Common Stock as of the date of grant of the SAR, unless the Committee determines
a higher base amount.
7.4 Tandem SARs. Tandem SARs
may be granted either at the time the Option is granted or at any time
thereafter while the Option remains outstanding; provided, however, that, in the
case of an Incentive Stock Option, SARs may be granted only at the time of grant
of the Incentive Stock Option. In the case of tandem SARs, the
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number of SARs
granted to an Employee or Consultant that shall be exercisable during a
specified period shall not exceed the number of shares of Common Stock that the
Employee, Non-Employee Director or Consultant may purchase upon the exercise of
the related Option during such period. Upon the exercise of an Option, the SARs
relating to the Common Stock covered by such Option shall terminate. Upon the
exercise of the SARs, the related Option shall terminate to the extent of an
equal number of shares of Common Stock.
7.5 SAR
Exercisability.
7.5.1 The period
during which SARs in whole or in part become exercisable shall be set by the
Committee and shall be as provided for in the Award Agreement. At any time after
the grant of an SAR, the Committee may, in its sole and absolute discretion and
subject to whatever terms and conditions its selects, accelerate the period
during which the SAR becomes exercisable.
7.5.2 In each Award
Agreement, the Committee shall indicate whether the portion of the SAR, if any,
that remains non-exercisable upon the Participant’s Termination of Employment
with the Company is forfeited. In so specifying, the Committee may differentiate
between the reason for the Participant’s Termination of Employment.
7.6 Value of SARs. When a
Participant exercises an SAR, the Participant shall receive in settlement of
such SAR an amount equal to the value of the stock appreciation for the number
of SARs exercised payable in cash, Common Stock or a combination thereof. The
stock appreciation for an SAR is the amount by which the Fair Market Value of
the underlying Common Stock on the date of exercise of the SAR exceeds the base
amount of the SAR.
7.7 Form of Payment. The
Committee shall determine whether the appreciation in an SAR shall be paid in
the form of cash, Common Stock or a combination of the two, in such proportion
as the Committee deems appropriate. For purposes of calculating the number of
shares of Common Stock to be received, shares of Common Stock shall be valued at
their Fair Market Value on the date of exercise of the SAR. If shares of Common
Stock are received upon exercise of a SAR, cash shall be delivered in lieu of
any fractional shares of Common Stock.
ARTICLE 8. PERFORMANCE
UNITS
8.1 Award Agreement for Performance
Units. Awards of Performance Units shall be evidenced by an Award
Agreement, pursuant to Section 3.4. All Award Agreements evidencing Performance
Units intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may
be necessary to meet the applicable provisions of Section 162(m) of the
Code.
8.2 General Requirements. Each
Performance Unit shall represent the right of the Participant to receive an
amount based on the value of the Performance Unit, if performance goals
established by the Committee are met. A Performance Unit shall be based on the
Fair Market Value of a share of Common Stock or such other measurement base as
the Committee deems appropriate. The Committee shall determine and set forth in
the Award Agreement the number of Performance Units to be granted and the
requirements applicable to such Performance Units. The Committee shall determine
which Employees and Consultants shall receive Awards of a Performance Unit and
the amount of such Awards.
8.3 Performance Period and
Performance Goals. When Performance Units are granted, the Committee
shall establish the performance period during which performance shall be
measured (the "Performance Period"), performance goals applicable to the
Performance Units ("Performance Goals") and such other conditions of the Award
as the Committee deems appropriate. Performance Goals may relate to the
financial performance of the Company or its Subsidiaries, the performance of
Common Stock, individual performance or such other criteria as the Committee
deems appropriate.
8.4 Payment With Respect to
Performance Units. At the end of each Performance Period, the Committee
shall determine to what extent the Performance Goals and other conditions of the
Performance Units are met, the value of the Performance Units (if applicable),
and the amount, if any, to be paid with respect to the Performance Units.
Payments with respect to Performance Units shall be made in cash, in Common
Stock or in a combination of the two, as determined by the Committee. All
payments shall be made no later than March 15 of the calendar year following the
year in which the Performance Period ends.
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ARTICLE 9. DIVIDEND
EQUIVALENTS
9.1 Grant of Dividend
Equivalents. The Committee is hereby authorized, in its sole discretion,
to grant Dividend Equivalents to Participants subject to such terms and
conditions as may be selected by the Committee. Dividend Equivalents shall
entitle the Participant to receive payments (in cash, Common Stock, other Awards
or other property as determined in the discretion of the Committee) equivalent
to the amount of cash dividends paid by the Company to holders of Common Stock.
Dividend Equivalents may be granted on a free-standing basis or in connection
with another Award. Dividend Equivalents granted in connection with another
Award may be granted with respect to all or a portion of the number of shares of
Common Stock subject to such Award. The Committee may provide that the Dividend
Equivalents be paid or distributed when accrued or be deemed to have been
reinvested in additional shares of Common Stock or otherwise reinvested;
provided, however, that the terms of any reinvestment of Dividend Equivalents
must comply with all applicable laws, rules and regulations, including, without
limitation, Section 409A of the Code, and Dividend Equivalents (other than
free-standing Dividend Equivalents) shall be subject to all conditions and
restrictions of the underlying Awards to which they relate, unless otherwise
provided by the Committee. Notwithstanding the foregoing, the Committee may not
grant Dividend Equivalents to Participants in connection with grants of Options
or SARs to such Participants.
ARTICLE 10. OTHER STOCK-BASED
AWARDS
10.1 Grant of Other Stock-Based
Awards. The Committee is authorized, subject to limitations under
applicable law, to grant to Participants such other Awards that are payable in,
valued in whole or in party by reference to, or otherwise based on or related
to, shares of Common Stock, as deemed by the Committee to be consistent with the
purposes of the Plan, including, without limitation, shares of Common Stock
awarded purely as a "bonus" and not subject to any restrictions or conditions,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares of Common Stock and other Awards valued by reference to
book value of shares of Common Stock or the value of securities of or the
performance of specified Subsidiaries. The Committee shall determine the terms
and conditions of such Awards, which shall be evidenced an Award Agreement,
pursuant to Section 3.4.
ARTICLE 11.
ADMINISTRATION
11.1 Committee. The Plan shall
be administered by the Compensation Committee of the Board. The Board may remove
members, add members, and fill vacancies on the Committee from time to time, all
in accordance with the Company's Certificate of Incorporation, Bylaws, and with
applicable law. The majority vote of the Committee, or for acts taken in writing
without a meeting by the unanimous written consent of the members of the
Committee, shall be valid acts of the Committee. Committee members may resign at
any time by delivering written notice to the Board.
11.2 Duties and Powers of
Committee. It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions. The Committee
shall have the power to designate the Employees and Consultants who shall
participate in the Plan and to construe and interpret this Plan and the
agreements pursuant to which Options, Restricted Common Stock, Restricted Stock
Units, Deferred Stock Units, SARs and Performance Units are granted or awarded,
and to adopt such rules for the administration, interpretation, and application
of this Plan as are consistent therewith and to interpret, amend or revoke any
such rules. Any such Award under this Plan need not be the same with respect to
each Participant. Any such interpretations and rules with respect to Incentive
Stock Options shall be consistent with the provisions of Section 422 of the
Code. All determinations and decisions made by the Committee pursuant to the
provisions of the Plan shall be final, conclusive and binding.
11.3 Compensation; Professional
Assistance; Good Faith Actions. Unless otherwise determined by the Board,
members of the Committee shall receive no compensation for their services
pursuant to this Plan. All expenses and liabilities which members of the
Committee incur in connection with the administration of this Plan shall be
borne by the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers, brokers, or other persons. The
Committee, the Company and the Company's officers and directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee or the Board in good faith shall be final and binding
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upon all
Participants, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or any Awards made
hereunder, and all members of the Committee and the Board shall be fully
protected by the Company in respect of any such action, determination or
interpretation.
ARTICLE 12. MISCELLANEOUS
PROVISIONS
12.1
Transferability.
12.1.1 No Award or
any right therein or part thereof, shall be liable for the debts, contracts or
engagements of the Participant or his successors in interest or shall be subject
to disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means, whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided,
however, that nothing in this Section 12.1.1 shall prevent transfers by will or
by the applicable laws of descent and distribution or as permitted in Section
12.1.2 below. The Committee shall not be required to accelerate the
exercisabilty of an Award or otherwise take any action pursuant to a divorce or
similar proceeding in the event Participant's spouse is determined to have
acquired a community property interest in all or any portion of an Award. Except
as provided below, during the lifetime of the Participant, only he may exercise
an Award (or any portion thereof) granted to him under the Plan. After the death
of the Participant, any exercisable portion of an Award, prior to the time when
such portion becomes unexercisable under the Plan or the applicable Award
Agreement or other agreement, may be exercised by his personal representative or
by any person empowered to do so under the deceased Participant's will or under
the then applicable laws of descent and distribution.
12.1.2
Notwithstanding the foregoing, the Committee may provide in an Award Agreement,
or amend an otherwise outstanding Award Agreement to provide, that a Participant
may transfer an Award that is not an Incentive Stock Option or an SAR that is
granted in relation to an Incentive Stock Option to family members, or one or
more trusts or other entities for the benefit of or owned by family members,
consistent with applicable securities laws, according to such terms as the
Committee may determine; provided that the Participant receives no consideration
for the transfer of such an Award and the transferred Award shall continue to be
subject to the same terms and conditions as were applicable to the Award
immediately before the transfer and shall be exercisable by the transferee
according to the same terms as applied to the Participant.
12.2 Amendment, Suspension or
Termination of this Plan.
12.2.1 Except as
otherwise provided in this Section 12.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board; provided, however, no action of the Board may be taken
that would otherwise require stockholder approval as a matter of applicable law,
regulation or rule, without the consent of the stockholders. In no event may any
Option or SAR be amended, other than pursuant to Section 12.3, to decrease the
exercise or grant price thereof, be cancelled in conjunction with the grant of
any new Option or SAR with a lower exercise or grant price, or otherwise be
subject to any action that would be treated, under generally accepted accounting
principles, as a "repricing" of such Option or SAR, unless the stockholders of
the Company provide prior approval. No amendment, suspension or termination of
this Plan shall impair any rights or obligations under any Award theretofore
made to a Participant, unless such right has been reserved in the Plan or the
Award Agreement, without the consent of the Participant holding such Award. No
Award may be made during any period of suspension or after termination of this
Plan. In no event may any Award be made under this Plan after December 31,
2019.
12.2.2
Notwithstanding the foregoing, the Board or the Committee may take any action
necessary to comply with a change in applicable law, irrespective of the status
of any Award as vested or unvested, exercisable or unexercisable, at the time of
such change in applicable law.
12.3 Changes in Common Stock or
Assets of the Company, Acquisition or Liquidation of the Company and Other
Corporate Events.
12.3.1 In the event
that any dividend (other than an ordinary cash dividend) or other distribution
(whether in the form of cash, Common Stock, other securities, or other
property), recapitalization, reclassification, stock split,
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reverse stock split,
reorganization, merger, consolidation, split up, spin-off, combination,
repurchase or other similar transaction or event affects the Common Stock such
that an adjustment is appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of the following:
12.3.1.1 the maximum
number of shares of Common Stock available for Awards;
12.3.1.2 the maximum
number of shares of Common Stock subject to the Plan;
12.3.1.3 the number
and kind of Company stock with respect to which an Award may be made under the
Plan;
12.3.1.4 the number
and kind of Company stock subject to an outstanding Award; and
12.3.1.5 the exercise
price or purchase price with respect to any Award.
12.3.2 In addition,
in the event of any merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company or any
unusual or nonrecurring transactions or events affecting the Company or the
financial statements of the Company, or of changes in applicable laws,
regulations, or accounting principles, the Committee in its discretion is hereby
authorized to take any one or more of the following actions whenever the
Committee determines, in its sole discretion, that such action is appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to any Award or
right under this Plan, to facilitate such transactions or events or to give
effect to such changes in laws, regulations or principles:
12.3.2.1 the
Committee may provide, by the terms of the Award Agreement or by action taken
prior to the occurrence of such transaction or event and either automatically or
upon the Participant's request, for (i) the purchase of any such Award for the
payment of an amount of cash equal to the amount that could have been attained
upon the exercise of such Award or realization of the Participant's rights had
such Award been currently exercisable, payable, fully vested or the restrictions
lapsed, or (ii) the replacement of such Award with other rights or property
selected by the Committee;
12.3.2.2 the
Committee may provide, by the terms of such Award Agreement or by action taken
prior to the occurrence of such transaction or event, that the Award cannot be
exercised after such event;
12.3.2.3 the
Committee may provide, by the terms of such Award or by action taken prior to
the occurrence of such transaction or event, that for a specified period of time
prior to such transaction or event such Award shall be exercisable,
notwithstanding anything to the contrary in Section 4.6 or the provisions of
such Award;
12.3.2.4 the
Committee may provide, by the terms of such Award or by action taken prior to
the occurrence of such transaction or event, that upon such event, such Award be
assumed by the successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar Awards covering the stock of the
successor or survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and
prices;
12.3.2.5 the
Committee may make adjustments in the number, type and kind of shares of Common
Stock subject to outstanding Options, Restricted Common Stock, Restricted Stock
Units, Deferred Stock Units, SARs and Performance Units and in the terms and
conditions of (including the grant or exercise price), and the criteria included
in, outstanding Awards, and rights and awards which may be granted in the
future; and
12.3.2.6 the
Committee may provide, by the terms of an Award of Restricted Common Stock or
Restricted Stock Units or by action taken prior to the occurrence of such event,
that for a specified period of time prior to such event, the restrictions
imposed under an Award Agreement upon some or all shares of the Restricted
Common Stock or the Restricted Stock Units may be terminated, and some or all
shares of such Restricted Common Stock or some or all of such Restricted Stock
Units may cease to be subject to forfeiture under Section 6.5 or repurchase
under Section 6.6 after such event.
A-13
12.3.3 Subject to
Section 12.7, the Committee may, in its sole discretion, at the time of grant,
include such further provisions and limitations in any Award Agreement or
certificate, as it may deem appropriate and in the best interests of the
Company; provided, however, that no such provisions or limitations shall be
contrary to the terms of the Participant's Employment Agreement or the terms of
this Plan.
12.3.4
Notwithstanding the foregoing, no action pursuant to this Section 12.3 shall be
taken that is specifically prohibited under applicable law, the rules and
regulations of any governing governmental agency or national securities
exchange, or the terms of the Participant's Employment Agreement, and no
adjustment to an Option or SAR shall be made to the extent the same constitutes
a "modification" within the meaning of Section 424(h)(3) of the Code, Regulation
§1.424-1(a) thereunder or Section 409(A) of the Code or the regulations
thereunder.
12.4 Continued Employment.
Nothing in this Plan or in any Award Agreement hereunder shall confer upon any
Participant any right to continue his employment, consulting or similar
relationship with the Company, whether as an employee or consultant or
otherwise, or shall interfere with or restrict in any way the rights of the
Company, which are hereby expressly reserved, to discharge or terminate the
relationship with any Participant at any time for any reason whatsoever, subject
to the terms of any Employment Agreement entered into by the Participant and the
Company.
12.5 Tax Withholding. The
Company shall be entitled to require payment in cash or deduction from other
compensation payable to each Participant of any sums required by federal, state
or local tax law to be withheld with respect to the issuance, vesting, exercise
or lapse of any restriction of any Option, Restricted Common Stock, Restricted
Stock Unit, Deferred Stock Unit, SAR or Performance Unit. The Committee shall be
authorized to establish procedures for election by Participants to satisfy such
obligation for the payment of such taxes (i) by delivery of, or transfer of,
shares of Common Stock to the Company or (ii) by directing the Company to retain
shares of Common Stock otherwise deliverable under an Award; provided, however,
that the total tax withholding where shares of Common Stock are being used to
satisfy such obligation shall not exceed the minimum amount required to be
withheld. Shares of Common Stock withheld or delivered in accordance with this
Section 12.5 shall be valued at Fair Market Value as of such date as may be
specified in procedures established by the Committee.
12.6 Forfeiture Provisions.
Pursuant to its general authority to determine the terms and conditions
applicable to Awards, the Committee shall have the right to provide, in the
terms of such Award, or to require the Participant to agree by separate written
instrument, that the Award shall terminate and any unexercised portion of such
Award (whether or not vested) shall be forfeited if (i) a Termination of
Employment occurs prior to a specified date, or within a specified time period
following receipt or exercise of the Award, (ii) the Participant at any time, or
during a specified time period, engages in any activity in competition with the
Company, or which is inimical, contrary or harmful to the interests of the
Company, as further defined by the Committee or as specified in the
Participant's Employment Agreement, or (iii) the Company terminates the
Participant with or without cause.
12.7 Limitations Applicable to
Section 16 Persons and Performance-Based Compensation. Notwithstanding
any other provision of this Plan, any Option, Restricted Common Stock,
Restricted Stock Unit, Deferred Stock Unit, SARs, or Performance Units granted
or awarded to any individual who is then subject to Section 16 of the Exchange
Act shall be subject to any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including any amendment to
Rule 16b-3 of the Exchange Act). To the extent permitted by applicable law,
Options granted or awarded hereunder shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan to the contrary, any Award that
is intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section 162(m)
of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described in
Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the
extent necessary to conform to such requirements.
12.8 Effect of Plan Upon Option and
Compensation Plans. The adoption of this Plan shall not affect any other
compensation or incentive plans in effect for the Company. Nothing in this Plan
shall be construed to limit the right of the Company (i) to establish any other
forms of incentives or compensation for employees or consultants, or (ii) to
grant or assume options or other rights otherwise than under this Plan in
connection with any proper corporate purpose including but not by way of
limitation, the grant or assumption of options in connection with the
acquisition
A-14
by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, limited liability company, firm or
association.
12.9 Compliance with Laws.
This Plan, the granting and vesting of Awards under this Plan and the issuance
and delivery of shares of Common Stock and the payment of money under this Plan
or under Awards awarded hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements. To the extent permitted by applicable law, the Plan shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations. No Award under this Plan (or modification thereof) shall provide
for the deferral of compensation that violates Section 409A of the Code. If any
provision of the Plan or an Award Agreement contravenes any regulations or
Treasury guidance promulgated under Section 409A of the Code or could cause an
Award to be subject to the interest and penalties under Section 409A of the
Code, such provision of the Plan or any Award Agreement shall be modified to
maintain, to the maximum extent practicable, the original intent of the
applicable provision without violating the provisions of Section 409A of the
Code. Moreover, any discretionary authority that the Board or the Committee may
have pursuant to the Plan shall not be applicable to an Award that is subject to
Section 409A of the Code to the extent such discretionary authority will
contravene Section 409A of the Code.
12.10 Titles. Titles are
provided herein for convenience only and are not to serve as a basis for
interpretation or construction of this Plan.
12.11 Governing Law. This Plan
and any agreements hereunder shall be administered, interpreted and enforced
under the laws of the State of Texas, without regard to that state’s conflicts
of laws rules.
12.12 Effective Date. The
Atrion Corporation 2006 Equity Incentive Plan first became effective on May 22,
2006. This Amended and Restated Atrion Corporation 2006 Equity Incentive Plan
shall be effective on the date it is approved by the stockholders of the
Company.
A-15
| ATRION CORPORATION ONE ALLENTOWN PARKWAY ALLEN, TX 75002 |
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| VOTE BY MAIL |
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| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS: |
M22303-P92381 |
|
KEEP THIS PORTION FOR YOUR RECORDS |
| DETACH AND RETURN THIS PORTION ONLY | |||
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | |||
| ATRION CORPORATION | ||||||
| 1. | Election of Directors | |||||
| Nominees: | ||||||
| 01) | Roger F. Stebbing | |||||
| 02) | John P. Stupp, Jr. | |||||
|
|
|||||||
| For All |
Withhold All |
For All Except |
To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | ||||
| o | o | o |
|
| For | Against | Abstain | ||||
| 2. | Approval of the Amended and Restated Atrion Corporation 2006 Equity Incentive Plan. | o | o | o | ||
| 3. | Ratification of the appointment of Grant Thornton LLP as the Company's independent accountant for 2010. | o | o | o | ||
| 4. | In their discretion, upon such other matters that may properly come before the meeting or any adjournment thereof. | |||||
| The Board of Directors recommends a vote “FOR” the election of each of the nominees listed in Item 1 and “FOR” Items 2 and 3. If this proxy is properly executed and returned, the shares represented will be voted "FOR" the nominees listed in Item 1 and "FOR" Items 2 and 3 unless you otherwise specify herein. | ||||||
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| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | ||||
Important Notice Regarding the Availability of
Proxy Materials for the Annual Meeting:
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| M22304-P92381 |
ATRION
CORPORATION
ANNUAL MEETING OF
STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
The 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 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 18, 2010, at the offices of Atrion Corporation,
One Allentown Parkway, Allen, TX 75002, and at any adjournment
thereof.
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE
Continued and to be signed on reverse
side