<PAGE>
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
- --------------------------------------------------------------------------------
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------------
1
<PAGE>
3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
---------------------------------------------------------------------------
4) Proposed maximum aggregate vale of transaction:
---------------------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------------
3) Filing Party:
---------------------------------------------------------------------------
4) Date Filed:
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2
<PAGE>
[LETTERHEAD]
September 20, 1996
Dear Stockholder:
On behalf of the Board of Directors, I am pleased to extend to you an
invitation to attend the Annual Meeting of Stockholders of Arrhythmia Research
Technology, Inc. (the "Corporation") to be held in New York, New York at the
Hotel Inter-Continental, on Wednesday, October 23, 1996, beginning at 2:30 p.m.
Eastern time.
The notice of meeting and proxy statement which appear on the following
pages contain information about matters which are to be considered at the
meeting. During the meeting we will also review operating results for the past
year and present other information concerning the Corporation and its
subsidiary. The meeting should be interesting and informative and we hope you
will be able to attend.
In order to ensure that your shares are voted at the meeting, please
complete, date, sign and return the enclosed proxy in the enclosed postage-paid
envelope at your earliest convenience. Every stockholder's vote is important,
whether you own a few shares or many.
Very truly yours,
/s/ ROBERT A. SIMMS
-----------------------------
Robert A. Simms
Chairman
<PAGE>
September 20, 1996
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
5910 COURTYARD DRIVE, SUITE 300
AUSTIN, TEXAS 78731
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 23, 1996
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited by the Board of Directors on behalf of
Arrhythmia Research Technology, Inc. (the "Company") for use at the Annual
Meeting of Stockholders to be held on October 23, 1996, at 2:30 p.m. at the
Hotel Inter-Continental, New York, New York, or any adjournment or adjournments
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. When such Proxy is properly executed and returned, the shares
it represents will be voted at the meeting in accordance with the directions
noted thereon, or if no direction is indicated, they will be voted in favor of
the proposals set forth in the accompanying Notice of Annual Meeting.
Abstentions are counted as shares present in the determination of whether the
shares represented at the meeting constitute a quorum, and are counted as votes
against proposals to be acted on by the Stockholders. Broker non-votes,
however, will not be considered as present at the meeting in determining the
presence of a quorum and are not counted for or against proposals to be acted on
by the Stockholders. An automated system administered by Continental Stock
Transfer & Trust Company, the Company's transfer agent, is used to tabulate the
votes.
This Proxy Statement and the enclosed Proxy are being sent to
Stockholders beginning on September 20, 1996. The Company will also supply
brokers or other persons holding stock in their names or in the names of their
nominees with such number of Proxies and proxy materials as they may require for
mailing to beneficial owners, and will reimburse them for their reasonable
expenses incurred in connection therewith. In addition to solicitation by mail,
certain Directors, officers, and regular employees of the Company may solicit
proxies by facsimile transmission, telephone, and personal interview.
The cost of the solicitation of proxies for the 1996 Annual Meeting
will be borne by the Company, including expenses in connection with the
preparation and mailing of this Proxy Statement and all papers which now
accompany or may hereafter supplement it. The costs of the solicitation,
preparation, and mailing of Proxies are expected to be less than $10,000.
1
<PAGE>
RIGHT TO REVOKE PROXY
Any Stockholder giving the Proxy enclosed with this Proxy Statement
has the power to revoke such Proxy at any time prior to the exercise thereof by
filing with the Company a written revocation thereof at or prior to the 1996
Annual Meeting, by executing a Proxy bearing a later date, or by attending the
Annual Meeting and voting in person the shares of stock such Stockholder is
entitled to vote. Unless the persons named in the Proxy are prevented by
circumstances beyond their control from acting, the Proxy will be voted at the
1996 Annual Meeting and at any adjournment thereof in the manner specified
therein, but unless otherwise indicated, such Proxy will be voted:
(1) FOR the election of the three nominees listed under
"Election of Directors" as Directors of the Company; and
(2) At the discretion of the Proxy holders on any other matter
that may properly come before the 1996 Annual Meeting or any
adjournment thereof.
VOTING SECURITIES
At the close of business on September 17, 1996, which is the record
date for the determination of Stockholders of the Company entitled to receive
notice of and vote at the 1996 Annual Meeting or any adjournment thereof, the
Company had outstanding 3,563,101 shares of Common Stock, $.01 par value per
share (the "Common Stock"), exclusive of 116,115 treasury shares which will not
be considered present or entitled to vote. Each share of Common Stock is
entitled to one vote.
The holders of record of a majority of the outstanding shares of
Common Stock will constitute a quorum for the transaction of business at the
1996 Annual meeting, but if a quorum should not be present, the meeting may be
adjourned from time to time until a quorum is obtained.
2
<PAGE>
ITEM NO. 1
ELECTION OF DIRECTORS
GENERAL INFORMATION
The Company's By-Laws provide that the number of Directors, as
determined from time to time by the Board of Directors, shall not be less than
one nor more than nine. The Board of Directors has fixed the number at eight.
The By-Laws further provide that Directors shall be divided into three classes
(Class I, Class II, and Class III) serving staggered three-year terms, with each
to be as nearly equal as possible.
The Board of Directors has nominated Anthony A. Cetrone, Russell C.
Chambers, M.D., and Robert A. Simms for election as Class I Directors for a
three-year term expiring at the 1999 annual meeting and until their successors
are duly elected and qualified. Messrs. Cetrone and Simms and Dr. Chambers are
presently Directors of the Company whose terms expire at the Annual Meeting.
The Board of Directors has inquired of each nominee and has
ascertained that each will serve, if elected. In the event that any of these
nominees should become unavailable for election (which is unexpected), the Board
of Directors may designate substitute nominees, in which event the shares
represented by the Proxy will be voted for such substitute nominees unless an
instruction to the contrary is indicated on the Proxy. In lieu thereof, the
Board of Directors may reduce the number of Directors in accordance with the By-
Laws of the Company.
The affirmative vote of the holders of a majority of the shares of
Common Stock present (whether in person or by proxy) and entitled to vote is
required for the election of Mr. Cetrone, Dr. Chambers and Mr. Simms. THE BOARD
OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF MR. CETRONE, DR. CHAMBERS,
AND MR. SIMMS AS CLASS I DIRECTORS OF THE COMPANY.
INFORMATION ABOUT NOMINEES AND DIRECTORS
Biographical information for each person nominated and for each person
whose term of office as a Director will continue after the 1996 Annual Meeting
is set forth below.
NOMINEES
<TABLE>
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE, DIRECTOR
NAME AND AGE PAST FIVE YEARS AND DIRECTORSHIPS SINCE
- ------------ --------------------------------------------------------- --------
<S> <C> <C>
CLASS I (TERM EXPIRES 1999)
Anthony A. Cetrone Mr. Cetrone has been President and Chief Executive Officer 1992
AGE 67 of Micron Products Inc., a wholly owned subsidiary of the
Company, since June 1990. Mr. Cetrone was President and
Chief Executive Officer of the Company from January 1993
until March 1995. He served as President of Micron Medical
Products Inc., a manufacturer of silver/silver chloride
coated
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
sensors, from 1988 until December 1993, when Micron
Medical Products Inc. was merged with and into Micron
Products Inc. From October 1991 to December 1993,
Mr. Cetrone served as Chairman of the Board of Micron
Medical Products Inc. From October 1991 to the March
1995, Mr. Cetrone served as Chairman of the Board of
Micron Products Inc. Micron Products Inc. filed a
bankruptcy petition in November 1991. Prior to
joining Micron Medical Products Inc., he was
President of Dartco Manufacturing Inc.
Russell C. Chambers, Dr. Chambers served as the Company's Chairman of the 1982
M.D. Board until August 1990. For more than the past five
AGE 53 years, Dr. Chambers has been primarily engaged in the
management of his personal investments.
Robert A. Simms Mr. Simms was elected Chairman of the Board of the Company 1990
AGE 58 in January 1993. He has been Chairman of Simms Capital
Management, Ltd., an investment advisor, since 1984.
- ----------------------------------------------------------------------------------------
CLASS II (TERM EXPIRES 1998)
E. P. Marinos President and Chief Executive Officer of the Company since 1994
AGE 54 March 1995. Mr. Marinos was appointed interim Vice
President, Chief Financial Officer and Chief Operating
Officer in June 1994. He was President and Chief
Executive Officer of AMT/EMP Associates, a consulting company
providing services in the areas of strategic planning,
mergers and acquisitions, and organizational restructuring
from March 1991 until March 1995. From June 1988 until
March 1991, he served as Senior Vice President of Finance
and. Administration of Endevco, Inc., an integrated natural
gas gathering, transmission and marketing pipeline company.
Mr. Marinos was also Executive Vice President of Finance and
Administration of Intermedics, Inc., a medical device
company.
Julius Tabin Since 1949, Dr. Tabin has been a partner in the 1982
AGE 76 law firm of Fitch, Even, Tabin & Flannery.
- ----------------------------------------------------------------------------------------
CLASS III (TERM EXPIRES 1997)
Lawrence S. Black Mr. Black is the Chairman and founder of Black & Co., 1994
AGE 67 investment bankers. He is also a director of International
Yogurt Company and Mt. Bachelor Corp.
Michael A. Mr. McManus has been President and Chief Executive Officer 1994
McManus, Jr. of New York Bancorp, Inc. since 1991 and a member of its
AGE 53 Board of Directors since 1990. He was elected Vice
Chairman of the Board of Directors of New York Bancorp, Inc.
in 1991. Prior to becoming associated with New York
Bancorp, Inc., Mr. McManus was President of
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
Galwag Investment Group from July 1990 until October 1991.
From December 1990 until October 1991, he was President of
Jamcor Pharmaceutical and from July 1986 until July 1990, he
was Vice President of Business Planning and Development,
Consumer Division of Pfizer, Inc.
Paul F. Walter, M.D Dr. Walter is an electrophysiologist and Professor of 1982
AGE 58 Medicine at Emory University.
</TABLE>
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The business of the Company is managed by or under the direction of
the Board of Directors. The Board has established several committees whose
principal functions are briefly described below. During the fiscal year ended
December 31, 1995, the Board of Directors held five meetings and took action by
Written Consent on two occasions. Various committees of the Board met a total
of three times. Average attendance by incumbent directors at Board and
committee meetings was 95% and all of them attended 88% or more of the meetings
of the Board and the committees on which they served.
AUDIT COMMITTEE. The Audit Committee is composed of one non-employee
Director, Michael A. McManus, Jr. Among its functions, it reviews the scope and
effectiveness of audits of the Company by the independent public accountants;
selects and recommends to the Board of Directors the employment of independent
public accountants for the Company, subject to approval of the Stockholders;
reviews the audit plan of the independent public accountants; reviews and
approves the fees charged by the independent public accountants; reviews the
Company's annual financial statements before their release; reviews the adequacy
of the Company's system of internal controls and recommendations of the
independent public accountants with respect thereto; reviews and acts on
comments and suggestions by the independent public accountants and by the
internal auditors with respect to their audit activities; and monitors
compliance by employees of the Company with the Company's standards of business
conduct policies. The committee met one time in the 1995 fiscal year.
COMPENSATION COMMITTEE. The two members of the Compensation
Committee, Russell C. Chambers and Lawrence S. Black, are non-employee Directors
and are ineligible to participate in any of the plans or programs which are
administered by the committee. The principal functions of the Compensation
Committee are to evaluate the performance of the Company's senior executives, to
consider the design and competitiveness of the Company's compensation plans, to
review and approve senior executive compensation and to administer the Company's
Employee Incentive Stock Option Plan. The committee met two times during the
1995 fiscal year.
The Board has no standing Executive or Nominating Committees.
5
<PAGE>
DIRECTORS' COMPENSATION
Neither employee Directors nor non-employee Directors receive cash
compensation for serving on the Board of Directors. In October 1994, the
Stockholders approved the grant of options to purchase 18,000 shares of the
Company's Common Stock to each Director. Such options became exercisable upon
approval and were granted for a term of ten years. The purchase price of each
share of Common Stock covered by an option is equal to the fair market value of
a share of Common Stock on the date the option was granted. In the event the
fair market value of the Common Stock reaches $6.00 per share, then the option
price for one share shall be the fair market value of the Common Stock on the
date the option is granted, less the difference between the average closing
price of the Common Stock for the 20 trading days immediately preceding the date
on which the Director gives notice of his intention to exercise an option and
$6.00 per share. Notwithstanding the foregoing, the exercise price may never be
less than $1 per share nor greater than the fair market value on the date of
grant.
Mr. Cetrone received options to purchase 24,000 shares of the
Company's Common Stock in March 1993. Such options vest at the rate of 1,000
shares per month for so long as the optionee remains a Director and have an
exercise price of $4 per share ($1.75 below the market price of the Company's
Common Stock on the date the options were authorized.) All options are
currently vested. The options issued to Mr. Cetrone terminate in 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth all persons known by the Company to be
the beneficial owners of more than five percent (5%) of the outstanding Common
Stock of the Company as of September 1, 1996:
BENEFICIAL OWNERSHIP
--------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
---------------------------------------------- --------------------
R.C. Chambers Irrevocable Trust (1) .......... 222,350 5.57
1807 Lake Street
Lake Charles, Louisiana 70601
1. The beneficiaries of the trust are Dr. Chambers' son and the estate of Dr.
Chambers' wife. Both Dr. Chambers' son and the estate of his wife have a 50%
interest in the assets of the trust. Dr. Chambers disclaims any beneficial
ownership of the Common Stock held by the trust.
The following table sets forth beneficial ownership of Common Stock
as of a recent date for each director of the Company, each executive officer
named in the Summary Compensation Table under "EXECUTIVE COMPENSATION" herein
and all directors and executive officers as a group. Unless otherwise stated
and subject to applicable community property laws, each beneficial owner has
sole voting and investment powers with respect to the shares shown.
6
<PAGE>
BENEFICIAL
OWNERSHIP (1)
-------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT (2)
------------------------------------------------ --------------------
Lawrence S. Black(5) ........................... 19,500 .55
Anthony A. Cetrone(4)(5)........................ 131,112 3.68
Russell C. Chambers,M.D.(3)(5).................. 43,950 1.23
E.P. Marinos(5)................................. 35,000 .98
Michael A. McManus, Jr(5)....................... 18,000 .51
Robert A. Simms(5).............................. 158,000 4.43
Julius Tabin, Ph.D(5)........................... 38,375 1.08
Paul F. Walter, M.D(5).......................... 69,375 1.95
All officers and directors as a group
(11 persons)(5)............................... 501,812 14.08
1. Unless otherwise noted, each person has sole voting and investment
power with respect to the shares of Common Stock beneficially owned.
2. The shares owned by each person, or by the group, and the shares
included in the total number of shares outstanding have been adjusted,
and the percentage owned has been computed in accordance with Rule
13d-3(d)(1) under the Securities Exchange Act.
3. Includes 7,500 shares over which Dr. Chambers has voting power
pursuant to an agreement, 12,500 shares held as custodian for his son
and 2,500 shares held as custodian for a niece.
4. Includes 66,662 shares held by the Micron Employee Stock Ownership
Plan over which Mr. Cetrone shares voting power as Trustee.
5. Includes shares which may be acquired upon the exercise of
outstanding options within the next sixty days as follows:
Lawrence S. Black .................. 18,000
Anthony A. Cetrone ................ 64,850
Russell C. Chambers, M.D. .......... 18,000
E. P. Marinos ..................... 35,000
Michael A. McManus, Jr. ........... 18,000
Robert A. Simms ................... 18,000
Julius Tabin ...................... 18,000
Paul F. Walter, M.D. .............. 18,000
Eric Chan ......................... 9,000
William E. Cooper ................. 10,000
Nancy C. Garbade .................. 9,000
-------
Total ................... 235,450
EXECUTIVE OFFICERS
The following list sets forth the names, ages and offices of the
executive officers of the Company. The periods during which such persons have
served in such capacities are indicated in the description of business
experience of such persons below.
Name Position Age
--------------------------------------------------------------------
Robert A. Simms......... Chairman of the Board of Directors 58
E. P. Marinos........... President and Chief Executive Officer 54
William E. Cooper....... Vice President, Finance 30
Eric Chan, Ph.D......... Vice President, Engineering 38
Nancy C. Garbade........ Secretary and General Counsel 49
MR. SIMMS was elected Chairman of the Board of Directors in January
1993. He has been a Director of the Company since 1990. Mr. Simms has been
Chairman of Simms Capital Management, Ltd., an investment advisor, since 1984.
7
<PAGE>
MR. MARINOS was appointed interim Vice President, Chief Operating
Officer and Chief Financial Officer of the Company in June 1994. Mr. Marinos
became President and Chief Executive Officer of the Company in March 1995. Mr.
Marinos was President and Chief Executive Officer of AMT/EMP Associates, a
consulting company providing services in the areas of strategic and financial
planning, mergers and acquisitions, and organizational restructuring from March
1991 until March 1995. From June 1988 until March 1991, he served as Senior
Vice President of Finance and Administration of Endevco, Inc., an integrated
natural gas gathering, transmission and marketing pipeline company. Mr. Marinos
was also Executive Vice President of Finance and Administration of Intermedics,
Inc., a medical device company.
MR. COOPER was appointed Vice President of Finance in November 1995.
From April 1993 until November 1995, Mr. Cooper was Controller and Chief
Accounting Officer. Prior to joining the Company, he was a Senior Associate
with Coopers & Lybrand.
DR. CHAN has been Vice President of Engineering since May 1992. Prior
to joining the Company, Dr. Chan was a Ph.D. candidate at the University of
Texas at Austin.
MS. GARBADE has been Secretary of the Company since 1988 and General
Counsel since 1990.
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The aggregate of all plan and non-plan compensation awarded to, earned
by, or paid to the Company's Chief Executive Officer, its Chief Financial
Officer and Chief Operating Officer (the "Named Executive Officers") for
services during the three fiscal years ended December 31, 1995 by the Company
and its subsidiaries is shown in the following table:
SUMMARY COMPENSATION TABLE
<TABLE>
LONG-TERM
COMPENSATION
------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- ------ ---------
STOCK LONG-TERM ALL
OPTIONS INCENTIVE OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1) (SH) PAYOUTS COMPENSATION
- ---------------------------- ---- ------ ----- ---------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
E.P. Marinos, President and
Chief Executive Officer(3) 1995 $ 92,300 $ - - 80,000 $ - $11,602(4)
Anthony A. Cetrone, President
Micron Products, Inc. (3) 1995 $ 98,000 $ - 5,250 29,000 $ - $ -
E.P. Marinos, President and
Chief Executive Officer(2) 1994 $ 38,215 $ - - 18,000 $ - $ -
Anthony A. Cetrone, President
Micron Products, Inc. (2) 1994 $ 98,000 $22,075 21,000 18,000 $ - $ 628
Wayne Schroeder, Former
Chief Operating Officer 1994 $ 95,833 $ - 26,250 5,200 $ - $10,790
Anthony A. Cetrone, Chief
Executive Officer 1993 $ 98,000 $5,000 15,750 51,000 $ - $ 699
Wayne Schroeder, Chief
Operating Officer 1993 $100,000 $ - 15,750 24,000 $ - $ 1,326
</TABLE>
(1) In April 1993, Mr. Cetrone and Mr. Schroeder were each granted 24,000
options to purchase shares at an exercise price of $4.00. At the date of the
grant the market price was $5.75. The options vest at 1,000 shares per month to
an aggregate of 24,000 per director. The difference between the grant price and
the market price is compensation and is being amortized over the vesting period.
(2) Options for the purchase of 18,000 shares at $3.00 per share were
granted to all current directors of the Company, at the Annual Meeting of
Shareholders on October 25, 1994. The options were immediately exercisable
on the date of grant. In the event the value of the Common Stock reaches
$6.00 per share, then the exercise price of one share of the Common Stock
shall be the fair market value of the Common Stock on the date the Option is
granted less the difference between the average closing price of the Common
Stock for the twenty trading days immediately preceding the date on which the
Optionee gives notice of his intention to exercise an option and $6.00 per
share. There is a floor of $1.00 per share.
(3) Mr. Marinos and Mr. Cetrone were granted 60,000 and 20,000 options to
purchase shares, respectively, under the Option Plan in October 1995. The
shares vest at the rate of 20% per year for five years until fully vested.
The exercise price approximated the market price on the date of grant. Mr.
Marinos and Mr. Cetrone were granted 20,000 and 9,000 options to purchase
shares at an exercise price of $3.00, respectively, outside the Option Plan.
Twenty-five percent of the shares vest immediately and the remainder vest at
twenty-five percent on each anniversary date, until fully vested. The shares
granted outside the Option Plan were approved by the shareholders. The
market price at the date of grant was $3.00.
(4) Represents certain perquisites, including travel and living expenses.
9
<PAGE>
OPTION GRANTS TABLE
The options granted or awarded in 1995 to the Named Executive Officers
are shown in the following table (no stock appreciation rights were granted
in 1995):
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION FOR OPTION TERM
------------------------------------------------ ----------------------------------
% OF TOTAL
OPTIONS
GRANTED TO
OPTIONS EMPLOYEES EXERCISE
NAME GRANTED IN 1995 PRICE EXPIRATION DATE 5% 10%
- ------------------ ------- ---------- -------- ----------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
E.P. Marinos........80,000 (1) 50% $3.00 November 27, 2005 $150,935 $382,498
Anthony A. Cetrone..29,000 (1) 18% $3.00 November 27, 2005 $ 54,714 $138,656
</TABLE>
(1) MR. MARINOS AND MR. CETRONE WERE GRANTED 60,000 AND 20,000 OPTIONS TO
PURCHASE SHARES, RESPECTIVELY, UNDER THE OPTION PLAN. THE SHARES VEST AT THE
RATE OF 20% PER YEAR FOR FIVE YEARS UNTIL FULLY VESTED. THE EXERCISE PRICE
APPROXIMATED THE MARKET PRICE ON THE DATE OF GRANT. MR. MARINOS AND MR.
CETRONE WERE GRANTED 20,000 AND 9,000 OPTIONS TO PURCHASE SHARES,
RESPECTIVELY, OUTSIDE THE OPTION PLAN. TWENTY-FIVE PERCENT OF THE SHARES
VEST IMMEDIATELY AND THE REMAINDER VEST AT TWENTY-FIVE PERCENT ON EACH
ANNIVERSARY DATE, UNTIL FULLY VESTED. THE SHARES GRANTED OUTSIDE THE OPTION
PLAN WERE APPROVED BY THE SHAREHOLDERS. THE MARKET PRICE AT THE DATE OF
GRANT WAS $3.00.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTIONS VALUES TABLE
The realized value of aggregated option exercises during 1995 and the
value of unexercised in-the-money options at December 31, 1995 held by the
Named Executive Officers are shown in the following table:
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE REALIZED NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
SHARES (MARKET PRICE AT HELD AT DECEMBER 31, 1995 OPTIONS AT DECEMBER 31, 1995(1)
ACQUIRED EXERCISE LESS ----------------------------- ---------------------------------
NAME ON EXERCISE EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- ---------------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
E.P. Marinos........ - - 23,000 75,000 $28,750 $93,750
Anthony A. Cetrone.. - $ - 55,050 42,950 $31,313 $33,438
__________________
</TABLE>
(1) Calculated on the basis of the closing sale price per share for the
Common Stock on the American Stock Exchange of $4.25 on December 31, 1995.
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The following report of the Compensation Committee (the "Committee"), as
well as the Performance Graph set forth herein, are not soliciting materials,
are not deemed filed with the Securities and Exchange Commission (the "SEC")
and are not incorporated by reference in any filing of the Company under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), whether made before or after the date of
this Proxy Statement and irrespective of any general incorporation language
in any such filing.
The Compensation Committee is responsible for establishing and reviewing
the Company's executive compensation policies, advising the full Board of
Directors on all compensation matters and administering the Company's stock
option plans. The Committee is comprised exclusively of outside Directors
(see page 5). All decisions of the Committee relating to compensation of the
President and Chief Executive Officer are reviewed and approved by the other
non-employee Directors.
COMPENSATION POLICY
The Company's executive compensation policies are designed to foster the
Company's business goals of achieving profitable growth and premium returns
to Stockholders. The principal objectives of these policies are as follows:
(1) to attract, motivate and retain executives of outstanding ability and
character; (2) to provide rewards that are closely related to the performance
of the Company and the individual executive by placing a portion of
compensation at risk; and (3) to align the interests of executives and
Stockholders through long-term, equity-based incentives and programs to
encourage and reward stock ownership. The Committee utilizes the services of
an independent executive compensation consultant in developing and evaluating
compensation plans in order to achieve the foregoing objectives.
This report discusses the manner in which base salaries, short-term
incentive compensation and long-term, equity-based incentives for the
Company's President and Chief Executive Officer and other executive officers
were determined for the 1995 fiscal year.
EXECUTIVE COMPENSATION
The key components of executive compensation are base salary, short-term
incentive compensation and long-term, equity-based incentives. Base salary
levels are generally targeted to be competitive with the average salaries
paid at other companies of similar size and complexity both within and
outside the medical device distribution and manufacturing industries. The
Committee works with an independent executive compensation consultant to
analyze competitive compensation levels at comparable companies.
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BASE SALARY
Salary level targets are established so that the Company can attract and
retain the most qualified employees. The Compensation Committee approves the
individual salaries of executive officers. In determining an executive
officer's salary, the Compensation Committee considers, but does not assign
specific weights to, the following factors: internal factors involving the
executive's level of responsibility, experience, individual performance, and
equity issues relating to pay for other Company executives, as well as
external factors involving competitive positioning, overall corporate
performance, and general economic conditions. No specific formula is applied
to determine the weight of each factor.
INCENTIVE COMPENSATION PROGRAM
The Company maintains an incentive compensation program for
substantially all officers and executives designed to reward such individuals
for their contributions to corporate and individual objectives. In the past,
the programs have provided additional compensation based on performance and
profits of those operations for which the various executives have
responsibility. During fiscal 1995, no amounts were paid to the Company's
officers or executives under the plans due to 1994 financial results.
LONG-TERM INCENTIVE COMPENSATION
The Company also grants stock options and other equity incentives under
the 1987 Employee Stock Option Plan in order to link compensation to the
Company's long-term growth and performance and to increases in Stockholder
value. Under the 1987 Employee Incentive Stock Option Plan, the Committee
may grant stock options to eligible employees of the Company and its
subsidiaries. The Committee has broad discretion to establish the terms of
such grants. It typically grants awards on an annual basis and may also
grant awards to designated employees upon commencement of employment or
following a significant change in an employee's responsibility or title.
Awards are based on guidelines relating to the employee's position in the
Company which are set by the Committee, as well as the employee's current
performance and anticipated future contributions. The Committee also
considers the amount and terms of stock options previously granted to each of
the employees. Each member of the Committee individually evaluates these
factors with respect to each executive and then the Committee reaches a
consensus on the appropriate award. During fiscal year 1995, the Committee
recommended the grant of options to purchase 60,000 shares of Common Stock
and 20,000 shares of Common Stock to Mr. Marinos and Mr. Cetrone,
respectively, the named Executive Officers. Such options were granted
pursuant to the 1987 Employee Incentive Stock Option Plan. Options for an
additional 20,000 and 9,000 shares were granted to Mr. Marinos and to Mr.
Cetrone, respectively. Such options were granted outside the Plan and were
approved by the Stockholders at the 1995 Annual Meeting.
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COMPENSATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
Anthony Cetrone, who served as the President and Chief Executive Officer
of the Company from January 1993 until March 1995, did not receive a salary
from the Company during 1995. Mr. Cetrone is also the President and Chief
Executive Officer of Micron Products Inc. ("Micron"), the Company's
wholly-owned subsidiary, and receives a salary of $98,000 per annum in
accordance with the terms of an Employment Contract between Mr. Cetrone and
Micron. The decision to refrain from compensating Mr. Cetrone for his
services on behalf of the Company was based on the ongoing restructuring and
cost reduction efforts within the Company. An additional consideration was
the fact that the Company was simultaneously paying to Mr. Marinos a
consulting fee in January and February of 1995 in consideration of his
efforts in managing the Company.
Mr. Marinos became President and Chief Executive Officer of the Company
in March 1995. In accordance with the terms of his Employment Contract, Mr.
Marinos earns a salary of $100,000 per annum. During fiscal year 1995, Mr.
Marinos received $92,300 in compensation as an employee of the Company. The
rate of compensation established by Mr. Marinos' employment contract is the
same as that of the former Chief Operating Officer. No increase in salary
was authorized due to uncertainties in the marketplace and a continued effort
to contain costs. The Committee's recommendation to grant to Mr. Marinos
options to purchase 80,000 shares of Common Stock, to a large extent, ties
compensation to future long-term performance.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m).
Section 162(m) of the Internal Revenue Code of 1986, as amended,
currently imposes a $1 million limitation on the deductibility of certain
compensation paid to the Company's five highest paid executives. Excluded
from the limitation is compensation that is "performance based". For
compensation to be performance based, it must meet certain criteria,
including being based on predetermined objective standards approved by the
Stockholders of the Company. The Committee intends to take into account the
potential application of Section 162(m) with respect to incentive
compensation awards and other compensation decisions made by it in the
future. The Committee does not currently anticipate that Section 162(m) will
limit the deductibility of any compensation paid by the Company to its
executive officers during 1995.
This report on executive compensation is made by and on behalf of the
Company's Compensation Committee.
Russell C. Chambers, M.D.
Lawrence S. Black
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STOCK PERFORMANCE GRAPH
The following Performance Graph compares the Company's cumulative total
shareholder return on its Common Stock for a five-year period (from January,
1990 to December 31, 1995), with the cumulative total return of the Standard
& Poor's 500 Stock Index ("S&P 500") (which does not include the Company),
the Standard & Poor's Medical Products and Supplies Stock Index (which
includes the Company)("S&P Med"), and Fidelity Medical Inc. ("Fidelity"), the
only other publicly traded company in the medical device distribution and
manufacturing business whose product line is comparable with that of the
Company. Dividend reinvestment has been assumed. The Performance Graph
assumes $100 invested in January 1990 in the Company's Common Stock, S&P 500,
S&P Med and Fidelity.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ARRHYTHMIA RESEARCH TECHNOLOGY, INC., THE S & P 500 INDEX
AND THE S & P MEDICAL PRODUCTS & SUPPLIES INDEX
[graph]
ARRHYTHMIA RESEARCH S & P MEDICAL
TECHNOLOGY, INC. S & P 500 PRODUCTS & SUPPLIES
---------------- --------- -------------------
1990 100 100 100
1991 177 130 164
1992 259 140 140
1993 300 155 107
1994 91 157 127
1995 155 215 214
* $100 INVESTED ON 12/31/90 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
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CERTAIN TRANSACTIONS
Each transaction between the Company and its officers, Directors or their
affiliates have been approved by a majority of the Directors who had no
interest in and who were not employed by the Company at the time of such
transaction. The Company believes that all transactions entered into with
affiliates of the Company were on terms no less favorable than could have
been obtained from unaffiliated third parties.
In May 1983, the Company entered into an agreement with Cardiodigital
Industries, Inc. ("CDI") pursuant to which the Company granted an exclusive
license to CDI to utilize the technology covered by the Simson Patent in
connection with the research and development of signal-averaging devices. In
consideration of the license, CDI provided $175,000 in financing and granted
the Company the option to acquire any technology developed by CDI on an
exclusive basis in consideration of either a lump-sum payment of $1,250,000
or a royalty of $150 per cardiac signal-averaging device sold by the Company,
up to a maximum of $1,250,000. The Company elected to pay to CDI a royalty
of $150 per device sold. Dr. Chambers is the son of the late G. Russell
Chambers whose estate is a shareholder in CDI. Julius Tabin, a Director of
the Company, is a shareholder of CDI. Royalty fees for the fiscal year ended
December 31, 1995 were $8,400.
Dr. Tabin, a Director of the Company, is a Partner of Fitch, Even, Tabin &
Flannery, a law firm that represents the Company with respect to patent and
other intellectual property law matters. Fees for legal services rendered by
Fitch, Even, Tabin & Flannery were approximately $43,000 in 1995. Fitch,
Even, Tabin & Flannery received customary compensation in connection with its
services to the Company.
In October 1994, the Marshalled Cherubs Trust loaned the Company $100,000,
with interest accruing at the rate of 11% per annum pursuant to a demand
note. The note was paid in August, 1995. The beneficiary of the Marshalled
Cherubs Trust is the son of Russell C. Chambers, a Director and a
Stockholder. Dr. Chambers, however, has no control over the trust or its
assets.
CERTAIN FILINGS
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Company's officers and Directors, and persons who own
more than 10 percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the American Stock Exchange and to
furnish the Company with copies of such reports. Based on Company records
and other information, the Company believes that its executive officers,
Directors, and 10 percent Stockholders timely complied with such filing
requirements with respect to the fiscal year ended December 31, 1995, except
Russell C. Chambers whose wife sold, through five transactions, 5,000 shares
of the Company's Common Stock in March 1994, but inadvertently failed to file
the pertinent SEC report until March 1996.
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INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P. has examined the financial statements of the
Company since 1987. Representatives of such firm are expected to be present
at the Annual Meeting, will have an opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions from Stockholders.
Coopers & Lybrand L.L.P. was recommended by the Audit Committee and
approved by the Stockholders to perform the audit function for 1995. No
independent public accountant has been recommended to perform the audit
function for 1996. The Audit Committee will make such a recommendation at a
Board of Directors meeting in November.
RECOMMENDATION AND VOTE
The affirmative vote of the holders of a majority of the shares of Common
Stock present at the Annual Meeting (whether in person or by proxy) and
entitled to vote is required for the ratification of the appointment of
independent accountants. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND, L.L.P. AS INDEPENDENT
ACCOUNTANTS TO EXAMINE THE FINANCIAL STATEMENTS AND BOOKS AND RECORDS OF THE
COMPANY FOR FISCAL YEAR 1996 AND YOUR PROXY WILL BE SO VOTED, UNLESS YOU
SPECIFY OTHERWISE.
STOCKHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Stockholders are entitled to submit proposals on matters appropriate for
Stockholder action consistent with regulations of the Securities and Exchange
Commission. Should a Stockholder intend to present a proposal at the 1997
Annual Meeting, it must be received by the Secretary of the Company (5910
Courtyard Drive, Suite 300, Austin, Texas 78731) not later than April 30,
1997 and must comply with all of the requirements of Rule 14a-8 under the
Securities Exchange Act of 1934 in order to be included in the Company's
Proxy Statement and form of Proxy relating to that meeting.
OTHER BUSINESS
The Board of Directors knows of no other matters to be voted upon at the
Annual Meeting. However, if any other matters properly come before the
meeting, it is the
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intention of the persons named in the enclosed form of Proxy to vote such
Proxy in accordance with their judgment on such matters.
No person is authorized to give any information or to make any
representation other than that contained in this Proxy Statement, and if
given or made, such information may not be relied upon as having been
authorized.
Copies of the Company's 1995 Annual Report on Form 10-K have previously
been sent to all Stockholders. Additional copies will be furnished without
charge to Stockholders upon written request. All written requests should be
directed to Arrhythmia Research Technology, Inc., Secretary, 5910 Courtyard
Drive, Suite 300, Austin, Texas 78731.
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ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
FOR STOCKHOLDERS MEETING ON OCTOBER 23, 1996
The undersigned hereby appoints William E. Cooper and Kathleen Watt and each
or either of them, as true and lawful agents and proxies with full power of
substitution in each to represent the undersigned in all matters coming before
the 1996 Annual Meeting of Stockholders of Arrhythmia Research Technology, Inc.
to be held at the Hotel Inter-Continental, 111 East 48th Street, New York, New
York on Wednesday, October 23, 1996 at 2:30 p.m. local time, and any adjournment
thereof, and to vote as follows:
1. ELECTION OF DIRECTORS:
Nominees: Anthony A. Cetrone, Russell C. Chambers and Robert A. Simms.
/ / VOTE FOR all nominees listed above, except withhold from following
nominees (if any): _________________________________________________________
OR
/ / VOTE WITHHELD from all nominees listed above.
2. APPROVAL OF THE APPOINTMENT OF COOPERS & LYBRAND, L.L.P.
/ / VOTE FOR / / VOTE AGAINST / / ABSTAIN
4. OTHER MATTERS
In their discretion, to vote with respect to any other matters that may come
before the Meeting or any adjournment thereof, including matters incident to its
conduct.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AND WILL BE VOTED IN THE
MANNER SPECIFIED ABOVE BY THE STOCKHOLDER. TO THE EXTENT CONTRARY SPECIFICATIONS
ARE NOT GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED IN ITEM 1, WITH
THE DISCRETIONARY AUTHORITY SET FORTH IN THE ACCOMPANYING PROXY STATEMENT, FOR
ITEM 2.
PLEASE SIGN AND DATE ON THE REVERSE SIDE.
<PAGE>
PLEASE SIGN AND DATE:
Dated: , 1996
--------------------------------------
--------------------------------------
Signature
--------------------------------------
Signature
(Joint Owners Should Each Sign,
Attorneys-in-Fact, Executors,
Administrators, Custodians, Partners
or Corporate Officers Should Give
Their Full Title.)
PLEASE DATE, SIGN AND RETURN THIS PROXY
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES
