<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
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 Section240.14a-12
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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:
----------------------------------------------------------
</TABLE>
<PAGE>
[Company Logo]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FRIDAY, DECEMBER 15, 2000
------------------------
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 Four Points Hotel, 99 Erdman Way, Leominster,
Massachusetts 01453 on Friday, December 15, 2000 at 10:00 a.m., local time, for
the following purposes:
1. To elect a director, for a term of three years to expire at the 2003
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, 2000, 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 November 15, 2000 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
E. P. Marinos
Secretary
November 14, 2000
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
1101 CAPITAL OF TEXAS HIGHWAY SOUTH
BUILDING G, SUITE 200
AUSTIN, TEXAS 78746
------------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 15, 2000
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 December 15, 2000, at 10:00 a.m. at the
Four Points Hotel, 99 Erdman Way, Leominster, Massachusetts 01453, 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 November 16, 2000. 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 2000 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 $20,000.
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 2000 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
2
<PAGE>
Proxy will be voted at the 2000 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 nominee listed under "Election of Directors" as
a Director 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, 2000; and
(3) At the discretion of the Proxy holders, on any other matter that may
properly come before the 2000 Annual Meeting or any adjournment thereof.
VOTING SECURITIES
At the close of business on November 15, 2000, which is the record date for
the determination of Stockholders of the Company entitled to receive notice of
and vote at the 2000 Annual Meeting or any adjournment thereof, the Company had
outstanding 3,247,035 shares of Common Stock, $.01 par value per share (the
"Common Stock"), exclusive of 366,531 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 2000
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.
The Board of Directors has nominated Paul F. Walter, MD for election as
Class III Directors for a three-year term expiring at the 2003 annual meeting
and until his successor is duly elected and qualified. Dr. Walter is presently a
Director of the Company whose term expires at the Annual Meeting.
The Board of Directors has inquired of the nominee and has ascertained that
he will serve, if elected. In the event that this nominee should become
unavailable for election (which is unexpected), the Board of Directors may
designate a substitute nominee, in which event the shares represented by the
Proxy will be voted for such substitute nominee 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. Walter. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF DR. WALTER AS CLASS III DIRECTOR OF THE COMPANY.
INFORMATION ABOUT NOMINEE AND DIRECTORS
Biographical information for each person nominated and for each person whose
term of office as a Director will continue after the 2000 Annual Meeting is set
forth below.
3
<PAGE>
NOMINEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE, DIRECTOR
NAME AND AGE PAST FIVE YEARS AND DIRECTORSHIPS SINCE
------------ ------------------------------------------------------ --------
<S> <C> <C>
CLASS I (TERM EXPIRES 2002)
Russell C. Chambers, M.D. ........... Dr. Chambers served as the Company's Chairman of the 1982
AGE 57 Board 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 1994
AGE 58 Officer of Midcoast Interstate Transmission, Inc.
since June 1997. He also became Corporate Vice
President of Administration for Midcoast Energy
Resources, Inc. in June 1999 and President of Kansas
Pipeline Co. in December 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.
Julius Tabin ........................ Since 1949, Dr. Tabin has been a partner in the law 1982
AGE 80 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 61 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, 1999, the Board of Directors held seven meetings. Various
committees of the Board met a total of 12 times. Average attendance by incumbent
directors at Board and committee meetings was 100% and all of them attended 100%
or more of the meetings of the Board and the committees on which they served.
AUDIT COMMITTEE. The Audit Committee is composed of three non-employee
Directors, E. P. Marinos, Russell C. Chambers and Julius Tabin. 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 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 1999 fiscal year.
4
<PAGE>
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 one time during the 1999 fiscal year.
EXECUTIVE COMMITTEE. The Executive Committee is composed of two members:
Russell C. Chambers 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 ten times in fiscal year 1999.
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. As the market price increases or decreases from the
original exercise price of $3.00 a share, the exercise price increases or
decreases accordingly by an equal amount. For example, 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. The
options were repriced in 1998 to $1.0625 per share.
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 October 30, 2000:
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
-------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------------ -------- --------
<S> <C> <C>
Russell C. Chambers ........................................ 466,178 13.57%
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
5
<PAGE>
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).................................... 141,567- 4.12
Russell C. Chambers, M.D.(3)(5)............................. 466,178- 13.57
E.P. Marinos(5)............................................. 60,426- 1.76
Julius Tabin, Ph.D(5)....................................... 138,824- 4.04
Paul F. Walter, M.D(5)...................................... 73,388- 2.14
All officers and directors as a group (6 persons)(5)........ 902,355 26.27
</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.......................................... 74,000
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............................................. 18,500
-------
Total..................................................... 188,500
=======
</TABLE>
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 President 71
Nancy C. Arnold...................... President and General Counsel 52
</TABLE>
MR. CETRONE was Chairman of the Board since October 1996 and President since
July 1998. He was also President of Micron Products Inc. Mr. Cetrone retired in
July 2000.
MS. ARNOLD was named President of the Company in 1999. She had been
Executive Vice President of the Company since 1998. She was Secretary of the
Company since 1988 and General Counsel since 1990.
6
<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, 1999 by the Company and its
subsidiaries is shown in the following table:
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 Products Inc............... 1999 $110,000 15,651 -- -- -- --
Nancy C. Arnold, President
Arrhythmia Research Technology,
Inc............................... 1999 $ 82,500 $ 500 -- -- -- --
Anthony A. Cetrone, President Micron
Products Inc...................... 1998 $ 98,000 $5,282 -- -- -- --
Sidney Barbanel, President and Chief
Executive Officer................. 1998 $ 70,833 -- -- -- --
E. P. Marinos, former President and
Chief Executive Officer........... 1997 $ 62,800 $4,000 -- -- -- --
Anthony A. Cetrone, President Micro
Prodoucts Inc..................... 1997 $ 98,000 13,569 -- -- -- --
Sidney M. Barbanel, President and
Chief Executive Officer........... 1997 $ 43,800 -- -- -- --
</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 $1.0625 per share.
OPTION GRANTS TABLE
There were no option grants/SARS in fiscal year 1999.
7
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTIONS VALUES TABLE
The realized value of aggregated option exercises during 1999 and the value
of unexercised in-the-money options at December 31, 1999 held by the Named
Executive Officers are shown in the following table:
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
VALUE REALIZED OPTIONS OPTIONS AT DECEMBER 31,
SHARES (MARKET PRICE AT HELD AT DECEMBER 31, 1999 1999(1)
ACQUIRED EXERCISE LESS --------------------------- ---------------------------
NAME ON EXERCISE EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony A. Cetrone.... -- $ -- 74,000 $41,625 $ --
</TABLE>
------------------------
(1) Calculated on the basis of the closing sale price per share for the Common
Stock on the American Stock Exchange of $1.625 on December 31, 1999.
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 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.
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 1999 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.
8
<PAGE>
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. For fiscal
1999, $15,651 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. For fiscal 1999, $500 was paid to Nancy Arnold as a
bonus.
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 1999, the
Committee did not recommend the grant of any options to any Executive Officers.
COMPENSATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
Anthony A. Cetrone served as President and Chief Executive Officer of the
Company until November, 1999. In December 1998, his annual rate of base
compensation increased from $98,000 to $110,000 to compensate him for his
additional duties as President of the Company. Mr. Cetrone resigned as President
in November 1999 and Nancy C. Arnold was named to succeed him. Ms. Arnold served
as President and General Counsel and was compensated at the rate of $82,500 per
annum. No increase in salary was authorized due to uncertainties in the
marketplace and a continued effort to contain costs.
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 1999.
This report on executive compensation is made by and on behalf of the
Company's Compensation Committee.
Russell C. Chambers, M.D.
9
<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, 1994 to December 31, 1999), 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, 1994 in the
Company's Common Stock, S&P 500, and S&P Med.
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------
12/94 12/95 12/96 12/97 12/98 12/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. 100.00 170.00 100.00 62.50 52.50 65.00
S & P 500 100.00 137.58 169.17 225.61 290.09 351.13
S & P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) 100.00 169.01 193.97 241.83 348.57 322.86
</TABLE>
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ARRHYTHMIA RESEARCH TECHNOLOGY, INC., THE S & P 500 INDEX,
AND THE S & P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
<S> <C> <C> <C> <C> <C> <C>
12/94 12/95 12/96 12/97 12/98 12/99
ARRHYTHMIA RESEARCH TECHNOLOGY, INC. 100.00 170.00 100.00 62.50 52.50 65.00
S & P 500 100.00 137.58 169.17 225.61 290.09 351.13
S & P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) 100.00 169.01 193.97 241.83 348.57 322.86
</TABLE>
* $100 INVESTED ON 12/31/94 IN STOCK OR INDEX--INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
10
<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, 1999, 1998 and 1997 were $2,700, $2,700, and $6,300, 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 $40,638, $3,286, and $20,000
for the fiscal years ended December 31, 1999, 1998 and 1997, 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, 1999,
1998 and 1997, health insurance premiums paid on Dr.Chambers' behalf amounted to
approximately $8,522, $8,320, and $8,900, respectively.
The Company obtains consulting services with respect to acquisitions,
financial road shows, and other negotiations, from a shareholder and Director of
the Company. Fees for services paid to this Director were approximately $0, $0
and $25,000 for years 1999, 1998 and 1997, respectively. The amounts owed to the
Director were approximately $0, $0 and $4,200 for December 31, 1999, 1998 and
1997, 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, 1999, except 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.
11
<PAGE>
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 1999 was approximately $148,350.
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, 2000 AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY
OTHERWISE.
STOCKHOLDER PROPOSALS FOR THE 2001 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, 2001 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 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 1999 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.
12
<PAGE>
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS FOR STOCKHOLDERS MEETING
ON DECEMBER 15, 2000
The undersigned hereby appoints Richard Campbell 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 2000 Annual Meeting of Stockholders of Arrhythmia Research Technology, Inc.
to be held at the Four Points Hotel, 99 Erdman Way, Leominster, Massachusetts,
on Friday, December, 15, 2000, at 10:00 a.m. local time, and any adjournment
thereof, and to vote as follows:
1. ELECTION OF DIRECTORS: Nominee: Paul F. Walter.
/ / VOTE FOR the nominee listed above
OR
/ / VOTE WITHHELD from the nominee 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 NOMINEE LISTED IN ITEM 1, FOR
ITEM 2, 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: ______________________, 2000
___________________________________
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
