<PAGE>
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
14a-6(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)
Arrhythmia Research Technology, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, NOVEMBER 11, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Arrhythmia Research Technology, Inc., a Delaware corporation (the
"Company"), will be held at the Wyndham Hotel, 2857 Paces Ferry Road, Atlanta,
Georgia, 30339 on Thursday, November 11, 1999 at 10:00 a.m., local time, for the
following purposes:
1. To elect two directors, each for a term of three years to expire at
the 2002 Annual Meeting;
2. To approve the appointment of BDO Seidman, LLP to audit the
consolidated financial statements of the Company for the fiscal year
ending December 31, 1999; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment(s) thereof.
The close of business on October 8, 1999 has been fixed by the Board of
Directors of the Company as the record date for determining the stockholders
entitled to notice of, and to vote at, the Annual Meeting.
You are cordially invited to attend the Annual Meeting. Whether or not you plan
to attend the Annual Meeting, you may insure your representation by completing,
signing, dating and promptly returning the enclosed proxy card. A return
envelope, which requires no postage if mailed in the United States, has been
provided for your use. If you attend the Annual Meeting and inform the office of
the Secretary of the Company in writing that you wish to vote your shares in
person, your proxy will not be used.
By Order of the Board of Directors
/s/ Nancy C. Arnold
Nancy C. Arnold
Secretary
October 8, 1998
1
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
1101 CAPITAL OF TEXAS HIGHWAY SOUTH
BUILDING G, SUITE 200
AUSTIN, TEXAS 78746
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 11, 1999
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 November 11, 1999, at 10:00 a.m. at the
Wyndham Hotel, 2857 Paces Ferry Road, Atlanta, Georgia 30339, 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 October 11, 1999. 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 1999 Annual Meeting
will be borne by the Company, including expenses in connection with the
preparation and mailing of this Proxy Statement and all papers that 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.
2
<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 1999
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
1999 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 two nominees listed under "Election of
Directors" as Directors of the Company;
(2) FOR the approval of appointment of BDO Seidman, LLP to audit the
consolidated financial statements of Arrhythmia Research Technology,
Inc. for the fiscal year ending December 31, 1999; and
(3) At the discretion of the Proxy holders, on any other matter that may
properly come before the 1999 Annual Meeting or any adjournment
thereof.
VOTING SECURITIES
At the close of business on October 8, 1999, which is the record date
for the determination of Stockholders of the Company entitled to receive notice
of and vote at the 1999 Annual Meeting or any adjournment thereof, the Company
had outstanding 3,449,401 shares of Common Stock, $.01 par value per share (the
"Common Stock"), exclusive of 201,415 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 1999
Annual Meeting, but if a quorum should not be present, the meeting may be
adjourned from time to time until a quorum is obtained.
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 five. 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.
3
<PAGE>
The Board of Directors has nominated Anthony A. Cetrone and Russell C.
Chambers for election as Class I Directors for a three-year term expiring at the
2002 annual meeting and until their successors are duly elected and qualified.
Mr. Cetrone 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 Dr. Chambers and Mr. Cetrone. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DR. CHAMBERS AND MR. CETRONE
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 1999 Annual Meeting
is set forth below.
NOMINEES
<TABLE>
<CAPTION>
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 of 1992
AGE 71 the Company since July 1998. Mr. Cetrone has been President
and Chief Executive Officer 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 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.
4
<PAGE>
Russell C. Chambers, M.D. Dr. Chambers served as the Company's Chairman of the Board 1982
AGE 56 until August 1990. For more than the past five years, Dr.
Chambers has been primarily engaged in the
management of his personal investments.
- ------------------------------------------------------------------------------------------------------
CLASS II (TERM EXPIRES 2001)
E. P. Marinos Mr. Marinos has been President and Chief Executive Officer 1994
AGE 57 of Midcoast Interstate Transmission, Inc. since June 1997.
He also became Corporate Vice President of
Administration for Midcoast Energy Resources, Inc.
in June 1999. From March 1995 until June 1997, he
was President and Chief Executive Officer of the
Company. Mr. Marinos was appointed interim Vice
President, Chief Financial Officer and Chief
Operating Officer of the Company 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.
Julius Tabin Since 1949, Dr. Tabin has been a partner in the 1982
AGE 79 law firm of Fitch, Even, Tabin & Flannery.
CLASS III (TERM EXPIRES 2000)
Paul F. Walter, M.D Dr. Walter is an electrophysiologist and Professor of 1982
AGE 60 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,
1998, the Board of Directors held seven meetings. Various committees of the
Board met a total of nine times. Average attendance by incumbent directors at
Board and committee meetings was 97% and all of them attended 85% 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, E. P. Marinos. 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; 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
5
<PAGE>
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 two times in the 1998 fiscal year.
COMPENSATION COMMITTEE. The one member of the Compensation Committee,
Russell C. Chambers, is a non-employee Director and is 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 1998 fiscal year.
EXECUTIVE COMMITTEE. The Executive Committee is composed of two
members: Anthony A. Cetrone and E. P. Marinos. The principal functions of the
Executive Committee are reviewing and evaluating significant business and policy
decisions and making recommendations to the full Board of Directors. The
Executive Committee met five times in fiscal year 1998.
The Board has no standing Nominating Committee.
DIRECTORS' COMPENSATION
Each non-employee Director receives cash compensation of $1,000 per
quarter. Additionally, each non-employee Director receives $500 cash for each
meeting at which such Director is present in person and $250 for each meeting at
which such Director is present by telephone. Employee directors do not receive
cash compensation. In October 1994, the Stockholders approved the grant of
options to purchase 18,000 shares of the Company's Common Stock to each
non-employee 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.
6
<PAGE>
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, 1999:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
--------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
---------------------------------------------------------------------
<S> <C> <C>
Russell C. Chambers 424,065 11.68%
772 Potato Patch
Vail, Colorado 81657
</TABLE>
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.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP(1)
----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT(2)
----------------------------------------------------------------------------------------------
<S> <C> <C>
Anthony A. Cetrone (4)(5).............................................. 134,317- 3.70
Russell C. Chambers, M.D. (3)(5)....................................... 424,065- 11.68
E.P. Marinos(5)........................................................ 54,167- 1.49
Julius Tabin, Ph.D(5).................................................. 134,811- 3.71
Paul F. Walter, M.D(5)................................................. 69,375- 1.91
All officers and directors as a group (6 persons) (5).................. 1,221,210 33.61
</TABLE>
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 2,500 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 67,567 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:
<TABLE>
<S> <C>
Anthony A. Cetrone.............................. 66,750
Russell C. Chambers, M.D ....................... 18,000
E.P. Marinos.................................... 42,000
Julius Tabin.................................... 18,000
Paul F. Walter, M.D. ........................... 18,000
Nancy C. Arnold................................. 21,000
-------
Total..................................... 183,750
</TABLE>
7
<PAGE>
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.
<TABLE>
<CAPTION>
NAME POSITION AGE
----------------------------------------------------------------------------
<S> <C> <C>
Anthony A. Cetrone.................Chairman of the Board and 71
President
Nancy C. Garbade...................Executive Vice President, Secretary 52
</TABLE>
MR. CETRONE has been Chairman of the Board since October 1996 and
President since July 1998. He is President of Micron Products Inc.
MS. ARNOLD has been Executive Vice President of the Company since
1998, Secretary of the Company since 1988 and General Counsel since 1990.
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, 1998 by the Company
and its subsidiaries is shown in the following table:
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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>
Anthony A. Cetrone, President, Micron 1998 $ 99,000 5,282 - - - -
Products Inc.
Sidney M. Barbanel, President and Chief 1998 $ 70,833 - - - - -
Executive Officer
E. P. Marinos, former President and Chief 1997 $ 62,800 $ 4,000 - - - -
Executive Officer
Anthony A. Cetrone, President, Micron 1997 $ 98,000 13,569 - - - -
Products Inc.
Sidney M. Barbanel, President and Chief 1997 $ 43,800 - - - - -
Executive Officer
E. P. Marinos, former President and Chief 1996 $100,000 $ 2,000 - - - -
Executive Officer
Anthony A. Cetrone, President, Micron 1996 $ 98,000 $17,118 - - - -
Products Inc.
</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 was based on the market price on the date of
grant. Mr. Marinos relinquished 36,000 options in June 1997. 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. Mr. Marinos relinquished all 20,000 options in June
1997. In September 1998, all outstanding options were repriced to
reflect the fair market value of $1.06 per share.
OPTION GRANTS TABLE
There were no option grants/SARS in fiscal year 1998.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTIONS VALUES TABLE
The realized value of aggregated option exercises during 1998 and
the value of unexercised in-the-money options at December 31, 1998
held by the Named Executive Officers are shown in the following
table:
9
<PAGE>
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, 1998 OPTIONS AT DECEMBER 31, 1998 (1)
ACQUIRED EXERCISE LESS ------------------------------ ----------------------------------
NAME ON EXERCISE EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony A. Cetrone..... - $ - 66,750 7,250 $ - $ -
</TABLE>
- ------------------
(1) Calculated on the basis of the closing sale price per share for
the Common Stock on the American Stock Exchange of $1 5/16 on
December 31, 1998.
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 (the "Securities Act"), 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 6). 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 1998 fiscal year.
10
<PAGE>
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.
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
1998, $5,282 was paid to Anthony A. Cetrone as a bonus, based on the
performance of Micron Products Inc., pursuant to an agreement
between Mr. Cetrone and Micron.
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
11
<PAGE>
the Committee reaches a consensus on the appropriate award. During
fiscal year 1998, the Committee did not recommend the grant of any
options to any Executive Officers.
COMPENSATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
Sidney M. Barbanel served as President and Chief Executive Officer
of the Company until July 1998. In accordance with the terms of his
Employment Contract, Mr. Barbanel earned base compensation at the
rate of $100,000 per annum. The rate of compensation established by
Mr. Barbanel's employment contract was the same as that of the
former President. Mr. Barbanel resigned as President and Chief
Executive Officer in July 1998 and Anthony A. Cetrone was named to
succeed him. From July 1998 until December 1998, Mr. Barbanel served
as Vice President of Sales and was compensated at the rate of $4,000
per month. Mr. Cetrone's compensation, as President of Micron
Products Inc., was $98,000 per annum through November 1998. In
December 1998, his annual rate of compensation increased to $110,000.
In addition, he was entitled to receive a bonus based on
performance. Mr. Cetrone received an increase in compensation
in consideration for the additional duties he assumed as President
of the Company. Mr. Cetrone's last increase in salary was in December
1992.
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 1998.
This report on executive compensation is made by and on behalf of
the Company's Compensation Committee.
Russell C. Chambers, M.D.
12
<PAGE>
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 December 31, 1993 to December 31, 1998), with the cumulative
total return of the Standard & Poor's 500 Stock Index ("S&P 500")
(which does not include the Company), and the Standard & Poor's
Medical Products and Supplies Stock Index (which includes the
Company)("S&P Med"). Dividend reinvestment has been assumed. The
Performance Graph assumes $100 invested in December 31, 1993 in the
Company's Common Stock, S&P 500, and S&P Med.
Research Data Group Peer Group Total Return Worksheet
Arrhythmia Resh Technology (HRT)
<TABLE>
<CAPTION>
CUMULATTIVE TOTAL RETURN
------------------------------------------
12/93 12/94 12/95 12/96 12/97 12/98
<S> <C> <C> <C> <C> <C> <C>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. 100 30 52 30 19 16
S & P 500 100 101 139 171 229 294
S & P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES 100 119 200 230 287 413
</TABLE>
Research Data Group Total Return Worksheet
<TABLE>
<CAPTION>
Begin: 12/31/93
FYE: 12/31/98
Arrhythmia Resh Technology (HRT) End: 12/31/98
Beginning
Transaction Closing No. Of Dividend Dividend Shares Ending Cum. Tot.
Date* Type Price** Shares*** per share Paid Reinvested Shares Return
- ----- ----------- ------- --------- --------- -------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/93 Begin 8.25 12.12 12.121 100.00
12/31/94 Year End 2.50 12.12 12.121 30.30
12/31/95 Year End 4.25 12.12 12.121 51.52
12/31/96 Year End 2.50 12.12 12.121 30.30
12/31/97 Year End 1.56 12.12 12.121 18.94
12/31/98 End 1.31 12.12 12.121 15.91
</TABLE>
* Specified ending dates or ex-dividend dates.
** All Closing Prices and Dividends are adjusted for stock splits and
stock dividends.
*** Begin Shares' based on $100 investment.
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
To date, all transactions between the Company and its officers,
directors, or their affiliates have been approved or ratified by a
majority of the directors who did not have an interest in, and who
were not employed by the Company at the time of such transaction.
The Company's Board of Directors adopted resolutions providing that
any transaction between the Company and its officers, directors or
their affiliates must be approved by a majority of the Board of
Directors who do not have an interest in and who are 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 by ART.
Julius Tabin, a Director of the Company, is a shareholder of CDI. In
addition, the estate of G. Russell Chambers (Dr. Chambers' father),
is a principal shareholder of CDI. Royalty fees for the fiscal years
ended December 31, 1998, 1997 and 1996 were $2,700, $6,300 and
$10,500, respectively.
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 $3,286, $20,000 and $30,000 for the fiscal years ended
December 31, 1998, 1997 and 1996, respectively. Fitch, Even, Tabin &
Flannery received customary compensation in connection with its
services to the Company.
Dr. Russell C. Chambers, a director and shareholder of the Company,
is engaged as a consultant to the Company. For the years ended
December 31, 1998, 1997 and 1996, health insurance premiums paid on
Dr.Chambers' behalf amounted to approximately $8,320, $8,900 and
$5,900, respectively.
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 ten 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, 1998, except
14
<PAGE>
Julius Tabin who inadvertently neglected to file with respect to
certain purchases of the Company's common stock in October 1998. Dr.
Tabin has corrected the omission.
PROPOSAL NO. 2
INDEPENDENT ACCOUNTANTS
The Directors of the Company have selected the firm of BDO Seidman,
LLP as the auditors of the Company for the fiscal year ending
December 31, 1999, subject to the approval of the stockholders. BDO
Seidman, LLP has acted for the Company as auditors since 1998.
Before the Audit Committee recommended to the full Board the
appointment of BDO Seidman, LLP, it carefully considered the
qualifications of that firm, including its performance previously
and its reputation for integrity and for competence in the fields of
accounting and auditing.
The amount of the fees for audit and tax services performed by BDO
Seidman, LLP relating to fiscal year 1998 was approximately
$74,250.00. Representatives of BDO Seidman, LLP are expected to be
present at the meeting to respond to appropriate questions and to
make a statement if they desire.
RECOMMENDATION AND VOTE
To be approved, this proposal requires the affirmative vote of the
holders of a majority of the voting stock of the Company present in
person or represented by proxy at the Annual Meeting entitled to
vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE APPOINTMENT OF
BDO SEIDMAN, LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1999 AND YOUR PROXY WILL BE SO VOTED
UNLESS YOU SPECIFY OTHERWISE.
STOCKHOLDER PROPOSALS FOR THE 2000 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 2000 Annual Meeting, it must be received by
the Secretary of the Company (1101 Capital of Texas Highway South,
Building G, Suite 200, Austin, Texas 78746) not later than April 30,
2000 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
15
<PAGE>
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 1998 Annual Report on Form 10-K are being
sent to all Stockholders along with this Proxy Statement. Additional
copies will be furnished without charge to Stockholders upon written
request. All written requests should be directed to Arrhythmia
Research Technology, Inc., Secretary, 1101 Capital of Texas Highway
South, Building G, Suite 200, Austin, Texas 78746.
16
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS
FOR STOCKHOLDERS MEETING ON NOVEMBER 11, 1999
The undersigned hereby appoints Douglas Johnson 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 1999 Annual Meeting of Stockholders of Arrhythmia Research Technology, Inc.
to be held at the Wyndham Hotel, 2857 Paces Ferry Road, Atlanta, Georgia on
Thursday, November 11, 1999 at 10:00 a.m. local time, and any adjournment
thereof, and to vote as follows:
1. ELECTION OF DIRECTORS:
Nominees: Anthony A. Cetrone and Russell Chambers
/ / 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 BDO SEIDMAN, LLP
/ / VOTE FOR / / VOTE AGAINST / / ABSTAIN
3. 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, FOR
ITEM 2 AND WITH THE DISCRETIONARY AUTHORITY SET FORTH IN THE ACCOMPANYING PROXY
STATEMENT FOR ITEM 3.
PLEASE SIGN AND DATE ON THE REVERSE SIDE.
<PAGE>
PLEASE SIGN AND DATE:
Dated: _____________________, 1999
__________________________________
Signature
__________________________________
Printed Name
__________________________________
Signature
__________________________________
Printed Name
(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
