<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 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
AETRIUM INCORPORATED
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/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>
AETRIUM INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 1999
The Annual Meeting of the Shareholders (the "Annual Meeting") of Aetrium
Incorporated, a Minnesota corporation (the "Company"), will be held at the
Company's corporate headquarters at 2350 Helen Street, North St. Paul,
Minnesota, beginning at 4:00 p.m. on Tuesday, May 18, 1999, for the following
purposes:
1. To elect six (6) persons to serve as directors until the next Annual
Meeting of the Shareholders or until their respective successors are
elected and qualified.
2. To transact such other business as may properly come before the
meeting.
The record date for determination of the shareholders entitled to notice of
and to vote at the meeting and any adjournments thereof is the close of business
on March 25, 1999.
You are cordially invited to attend the Annual Meeting. If you do not plan
to attend the Annual Meeting in person, please be sure you are represented at
the Annual Meeting by completing, signing, dating and promptly returning the
enclosed proxy card in the envelope provided (which requires no postage if
mailed in the United States).
By Order of the Board of Directors
/s/ Darnell L. Boehm
Darnell L. Boehm
CHIEF FINANCIAL OFFICER AND SECRETARY
April 5, 1999
North St. Paul, Minnesota
<PAGE>
AETRIUM INCORPORATED
2350 HELEN STREET
NORTH ST. PAUL, MINNESOTA 55109
(651) 704-1800
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 1999
INTRODUCTION
The Annual Meeting of the Shareholders of Aetrium Incorporated, a Minnesota
corporation (the "Company"), will be held at the Company's corporate
headquarters at 2350 Helen Street, North St. Paul, Minnesota, beginning at 4:00
p.m. on Tuesday, May 18, 1999.
A proxy card is enclosed for your use. YOU ARE SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS TO SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE. No postage is required if mailed within the United States. The cost
of soliciting proxies, including the preparation, assembly and mailing of
proxies and soliciting material, as well as the cost of forwarding such material
to the beneficial owners of the Common Stock of the Company, will be borne by
the Company. Directors, officers and regular employees of the Company may,
without compensation other than their regular compensation, solicit proxies by
telephone, telegraph or personal conversation. The Company may reimburse
brokerage firms and others for expenses in forwarding proxy materials to the
beneficial owners of Common Stock.
Any shareholder giving a proxy may revoke it at any time prior to its use
at the Annual Meeting either by giving written notice of such revocation to the
Secretary of the Company, by filing a duly executed proxy bearing a later date
with the Secretary of the Company, or by appearing at the Annual Meeting and
filing written notice of revocation with the Secretary of the Company prior to
use of the proxy. Proxies will be voted as specified by shareholders. Proxies
that are signed by shareholders but that lack any such specification will be
voted in favor of the election as directors of the nominees for directors listed
in this Proxy Statement. Abstention from any proposal set forth in the Notice of
Meeting is treated as a vote against such proposal. Broker non-votes on any
such proposals (I.E., a card returned by a broker because voting instructions
have not been received and the broker has no discretionary authority to vote)
are treated as shares with respect to which voting power has been withheld by
the beneficial holders of those shares and, therefore, as shares not entitled to
vote on such proposals.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE ELECTION AS
DIRECTORS OF THE NOMINEES FOR DIRECTOR LISTED IN THIS PROXY STATEMENT.
The Company expects that this Proxy Statement and Form of Proxy will be
first mailed to shareholders on or about April 5, 1999.
2
<PAGE>
OUTSTANDING SHARES
Only holders of Common Stock of record at the close of business on March
25, 1999 will be entitled to vote at the Annual Meeting. On March 25, 1999, the
Company had 9,483,393 outstanding shares of Common Stock, each such share
entitling the holder thereof to one vote on each matter to be voted on at the
Annual Meeting. The holders of a majority of the shares entitled to vote and
represented in person or by proxy at the Annual Meeting will constitute a quorum
for the transaction of business at the Annual Meeting. In general, shares of
Common Stock represented by a properly signed and returned proxy card will be
counted as shares present and entitled to vote at the meeting for the purposes
of determining a quorum, without regard to whether the card reflects an
abstention (or is left blank) or reflects a broker non-vote on a matter.
Holders of shares of Common Stock are not entitled to cumulate voting rights.
ELECTION OF DIRECTORS
NOMINATION
The Company's Bylaws provide that the number of directors that constitutes
the Board of Directors (the "Board") will be at least one or such other number
as may be determined by the Board or the Company's shareholders. At the 1998
Annual Meeting of the Shareholders of the Company, six directors were elected.
By resolution of the Board adopted at a meeting held on March 10, 1999, the
Board resolved to nominate the same six persons to stand for election at the
1999 Annual Meeting. Directors elected at the Annual Meeting will hold
office until the next regular meeting of shareholders or until their
successors are duly elected and qualified.
All of the nominees are currently members of the Board and have consented
to serve as a director, if elected. The election of each director requires the
affirmative vote of a majority of the shares of Common Stock represented in
person or by proxy at the Annual Meeting, provided that a quorum consisting of a
majority of the voting power of the Company's outstanding shares is represented
either in person or by proxy at the Annual Meeting. The Board recommends a vote
FOR the election of each of the nominees listed in this Proxy Statement. The
Board intends to vote the proxies solicited on its behalf (other than proxies in
which the vote is withheld) for the election of each of the nominees as
directors. If prior to the Annual Meeting the Board should learn that any of
the nominees will be unable to serve by reason of death, incapacity or other
unexpected occurrence, the proxies will be cast for another nominee to be
designated by the Board to fill such vacancy, unless a shareholder indicates to
the contrary on his or her proxy. Alternatively, the proxies may, at the
Board's discretion, be voted for such fewer nominees as results from such death,
incapacity or other unexpected occurrence. The Board has no reason to believe
that any of the nominees will be unable to serve.
INFORMATION ABOUT NOMINEES
The following table sets forth certain information as of February 19, 1999
which has been furnished to the Company by the persons who have been nominated
by the Board to serve as directors for the ensuing year.
3
<PAGE>
<TABLE>
<CAPTION>
NOMINEES DIRECTOR
FOR ELECTION AGE PRINCIPAL OCCUPATION SINCE
------------ --- -------------------- -----
<S> <C> <C> <C>
Joseph C. Levesque 54 Chairman of the Board, President and 1986
Chief Executive Officer of the Company
Darnell L. Boehm 50 Chief Financial Officer and Secretary of 1986
the Company
Terrence W. Glarner 55 President of West Concord Ventures, Inc. 1990
Andrew J. Greenshields 61 President of Pathfinder Venture Capital 1986
Funds
Douglas L. Hemer 52 Group Vice President of the Company 1986
Terrance J. Nagel 44 President and Chief Executive Officer 1996
of NOW Technologies, Inc.
</TABLE>
OTHER INFORMATION ABOUT NOMINEES
JOSEPH C. LEVESQUE has served as President, Chief Executive Officer and
Chairman of the Board of Directors of the Company since 1986. From 1973 to
1986, Mr. Levesque served in various capacities and most recently as Executive
Vice President of Micro Component Technology, Inc., a manufacturer of integrated
circuit testers and test handlers. Mr. Levesque is also a director of TSI Inc.,
a publicly held maker of measurement and instrumentation equipment, and serves
on its compensation committee.
DARNELL L. BOEHM has served as Chief Financial Officer, Secretary and as a
director of the Company since 1986. From December 1994 until July 1995, Mr.
Boehm had also assumed executive management responsibilities for the Company's
San Diego Division. Mr. Boehm is also the principal of Darnell L. Boehm &
Associates, a management consulting firm. Mr. Boehm is also a director of
Rochester Medical Corporation, a public company, and serves on the audit and
compensation committees of such company. Mr. Boehm is also a director of Versa
Companies, a privately-held company, and serves on its compensation and audit
committees.
TERRENCE W. GLARNER has served as a director of the Company since March
1990. Since February 1993, Mr. Glarner has been President of West Concord
Ventures, Inc. and has been a consultant to North Star Ventures, Inc. ("North
Star"), and Norwest Venture Capital. From 1988 to February 1993, Mr. Glarner
was President of North Star and North Star Ventures II, Inc. ("North Star II"),
an affiliate of North Star. Mr. Glarner is also a director of CIMA Labs, Inc.,
FSI International, Inc., Datakey, Inc. and Premis Corporation, all of which are
public companies. Mr. Glarner also serves on the compensation committee of each
of these four companies.
ANDREW J. GREENSHIELDS served as a director of the Company from July 1984
to October 1985 and has served continuously as a director since October 1986.
Mr. Greenshields has been President of Pathfinder Venture Capital Funds
("Pathfinder"), an investment company, since September 1980. Mr. Greenshields
is also a partner of Pathfinder Partners II and Pathfinder Partners III, the
general partners of Pathfinder Venture Capital Fund II ("Pathfinder II") and
Pathfinder Venture Capital Fund III ("Pathfinder III"), respectively, each a
Minnesota limited partnership. Pathfinder is also the management company for
Pathfinder II and Pathfinder III. Mr. Greenshields also has been a general
partner of Spell Capital
4
<PAGE>
Partners since November 1997. Mr. Greenshields is also a director and member of
the audit and compensation committees of CNS, Inc., a public company.
DOUGLAS L. HEMER has served as a director of the Company since 1986 and has
served as Group Vice President of the Company since August 1998. Prior to this
appointment, he served as the President of the San Diego Division of the Company
since February 1, 1997. From May 1, 1996 until February 1, 1997 Mr. Hemer
served as the Company's Chief Administrative Officer. Mr. Hemer was a partner
in the law firm of Oppenheimer Wolff & Donnelly LLP for more than 15 years
before joining the Company. Mr. Hemer is also a director of Versa Companies, a
privately-held company, and serves on its compensation and audit committees.
TERRANCE J. NAGEL has served as a director of the Company since June 1996.
Mr. Nagel is also the President, Chief Executive Officer and co-founder of NOW
Technologies, Inc., a wholly-owned subsidiary of ATMI Inc., a position he has
held since 1988.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The business and affairs of the Company are managed by the Board, which met
or took action in writing seven times during the fiscal year ended December 31,
1998. Committees established and maintained by the Board include an Audit
Committee and a Compensation Committee.
The function of the Audit Committee is to review the Company's financial
statements, oversee the financial reporting and disclosures prepared by
management, make recommendations regarding the Company's financial controls, and
confer with the Company's outside auditors. The Audit Committee met once during
the fiscal year ended December 31, 1998. Messrs. Glarner, Greenshields and
Nagel served as members of the Audit Committee in fiscal 1998.
The responsibilities of the Compensation Committee include approving the
compensation for those officers who are also directors of the Company and
setting the terms of and grants of awards under the Company's 1993 Stock
Incentive Plan (the "1993 Plan"). The Compensation Committee met or took action
in writing six times during the fiscal year ended December 31, 1998. Messrs.
Glarner, Greenshields and Nagel served as members of the Compensation Committee
in fiscal 1998.
All of the Directors of the Company attended 75% or more of the aggregate
meetings of the Board and all such committees on which they served.
COMPENSATION OF DIRECTORS
DIRECTORS' FEES. Directors of the Company receive no cash compensation for
their services as members of the Board, although their out-of-pocket expenses
incurred on behalf of the Company are reimbursed.
AUTOMATIC OPTION GRANT. In September of 1996, the Board of Directors
amended the 1993 Plan to eliminate the feature providing for the automatic grant
of non-statutory stock options to non-employee directors upon the non-employee
director's initial election to the Board. Prior to this amendment to the 1993
Plan in September 1996, the 1993 Plan provided for the automatic grant of
non-statutory stock options to purchase 30,000 shares of Common Stock to
non-employee directors at an exercise price equal
5
<PAGE>
to the fair market value of the Common Stock on the date of grant upon the
non-employee director's initial election to the Board. Under the 1993 Plan as
amended, therefore, there are no automatic option grants to non-employee
directors, although all directors are eligible for the grant of options under
the 1993 Plan. On August 20, 1998, the Board granted each of the non-employee
directors, Messrs. Greenshields, Glarner and Nagel, a non-statutory stock option
to purchase 30,000 shares of Common Stock at an exercise price of $6.81, the
fair market value of the Common Stock on the date of grant. The options granted
to Messrs. Greenshields and Glarner vest in 25% increments (7,500 shares)
beginning January 1, 2000 and on each of the next three anniversaries of such
date. The option granted to Mr. Nagel vests in 25% increments (7,500 shares)
beginning June 19, 2001 and on each of the next three anniversaries of such
date. The options granted to Messrs. Greenshields and Glarner expire on January
1, 2004 and the option granted to Mr. Nagel expires on June 19, 2005.
Furthermore, although the Board is not obligated to do so, it currently
anticipates that it will grant non-statutory stock options to purchase 30,000
shares of Common Stock to non-employee directors upon their initial election to
the Board at an exercise price equal to the fair market value of the Common
Stock on the date of grant.
PRINCIPAL SHAREHOLDERS AND
BENEFICIAL OWNERSHIP OF MANAGEMENT
The table below sets forth information regarding the beneficial ownership
of the Common Stock of the Company as of February 19, 1999, unless otherwise
noted, (a) by each shareholder who is known by the Company to own beneficially
more than 5% of the outstanding Common Stock, (b) by each director, nominee and
executive officer named in the Summary Compensation Table (set forth herein),
and (c) by all executive officers and directors of the Company as a group. The
address for all executive officers and directors of the Company is 2350 Helen
Street, North St. Paul, Minnesota 55109.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY OWNED (1)
---------------------------------------------
NAME AMOUNT PERCENT OF CLASS(2)
---- ------ -------------------
<S> <C> <C>
Joseph C. Levesque 249,282 (3) 2.6%
Darnell L. Boehm 50,081 (4) *
Daniel M. Koch 55,145 (5) *
Kenneth R. Lee 16,142 (6) *
Terrence W. Glarner 47,830 (7) *
Andrew J. Greenshields 33,000 (8) *
Douglas L. Hemer 57,498 (9) *
Stephen P. Weisbrod 7,242 (10) *
Terrance J. Nagel 19,000 (11) *
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
U.S. Bancorp. 898,398 (12) 9.5%
601 Second Avenue South
Minneapolis, MN 55402-4302
Kopp Investment Advisors, Inc. 1,787,245 (13) 18.8%
6600 France Avenue South
Suite 672
Edina, MN 55435
Woodland Partners LLC 512,550 (14) 5.4%
60 South Sixth Street
Suite 3750
Minneapolis, MN 55402
All executive officers and 1,026,233 (15) 10.4%
directors as a group
(16 persons)
</TABLE>
- -------------------------
*Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the right
of a person or member of a group to acquire them within 60 days are treated
as outstanding only when determining the amount and percent owned by such
person or group. Unless otherwise noted, all of the shares shown are held
by individuals or entities possessing sole voting and investment power with
respect to such shares.
(2) Based on 9,488,434 shares of Common Stock outstanding as of February 19,
1999.
(3) Includes options to purchase 153,230 shares of Common Stock exercisable
within 60 days.
(4) Includes options to purchase 25,422 shares of Common Stock exercisable
within 60 days.
(5) Includes options to purchase 18,031 shares of Common Stock exercisable
within 60 days.
(6) Includes options to purchase 16,042 shares of Common Stock exercisable
within 60 days.
(7) Includes options to purchase 30,000 shares of Common Stock exercisable
within 60 days.
(8) Includes options to purchase 30,000 shares of Common Stock exercisable
within 60 days.
(9) Includes options to purchase 40,885 shares of Common Stock exercisable
within 60 days.
(10) Includes options to purchase 1,042 shares of Common Stock exercisable
within 60 days.
(11) Includes options to purchase 18,000 shares of Common Stock exercisable
within 60 days.
7
<PAGE>
(12) Based solely on a Schedule 13G dated February 11, 1999, includes shares of
Common Stock held by The Regional Equity Fund, a mutual fund of First
American Investment Funds, Inc., an open-end investment company. U.S.
Bancorp ("US Bancorp") has sole voting power over 873,808 shares and shared
voting power over 17,590 shares. US Bancorp has sole dispositive power
over 862,908 shares and shared dispositive power over 17,590 shares.
(13) Based solely on a Schedule 13G dated January 28, 1999, includes 1,434,345
shares of Common Stock held of record by clients of Kopp Investment
Advisers, Inc. ("KIA"), over which KIA has shared dispositive power,
352,900 shares of Common Stock over which KIA has sole dispositive power.
KIA has sole voting power over 549,900 shares, and does not share voting
power over any of the shares beneficially owned. The shares reported on
Schedule 13G exclude 20,000 shares over which LeRoy C. Kopp has sole voting
and dispositive power. Mr. Kopp owns 100% of Kopp Holding Company which
owns 100% of KIA.
(14) Based solely on a Schedule 13G dated February 18, 1999, includes 512,550
shares of Common Stock held of record by Woodland Partners LLC
("Woodland"), over which Woodland has sole dispositive power, comprised of
442,950 shares over which Woodland has sole voting power and 69,600 shares
over which Woodland has shared voting power.
(15) Includes options to purchase 387,093 shares of Common Stock exercisable
within 60 days.
EXECUTIVE COMPENSATION AND OTHER BENEFITS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company whose salary and bonus exceeded $100,000 in the fiscal
year ended December 31, 1998.
8
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
NAME AND SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) COMPENSATION($)(2)
------------------ ---- --------- ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Joseph C. Levesque 1998 $192,908 $40,911 15,000 $5,000
PRESIDENT AND CHIEF 1997 189,000 80,714 --- 4,500
EXECUTIVE OFFICER 1996 187,385 51,640 200,000 (3) 4,750
Douglas L. Hemer (4) 1998 $149,237 $17,536 25,000 $4,736
GROUP VICE PRESIDENT 1997 125,000 54,750 --- 4,662
1996 80,769 27,500 52,500 ---
Kenneth R. Lee (6) 1998 $129,511 $19,779 85,000 (5) $5,000
PRESIDENT-- 1997 68,558 44,850 75,000 ---
LAWRENCE DIVISION 1996 --- --- --- ---
Daniel M. Koch 1998 $127,177 $21,914 7,500 $4,252
VICE PRESIDENT-- 1997 123,400 62,440 --- 4,569
WORLDWIDE SALES 1996 122,431 21,108 7,500 (3) 4,413
Stephen P. Weisbrod (7) 1998 $114,423 $27,338 160,000 (5) $22,615
VICE PRESIDENT-- 1997 --- --- --- ---
CORPORATE TECHNOLOGY 1996 --- --- --- ---
</TABLE>
- --------------------------
(1) Cash bonuses and sales commissions for services rendered have been included
as compensation for the year earned, even though a portion of such bonuses
and sales commissions were actually paid in the following year. Such
bonuses and sales commissions were payable pursuant to each executive's
individual bonus arrangement, which is based upon the achievement of
certain individual and Company goals.
(2) Represents amounts of matching contributions made by the Company to the
officers' respective 401(k) accounts, except for Mr. Weisbrod which amount
also includes a $20,000 signing bonus for joining the Company.
(3) The options received in 1996 by each of Mr. Levesque and Mr. Koch represent
options originally granted to such individuals in 1995 that were repriced
in September 1996.
(4) Mr. Hemer joined the Company in May 1996.
(5) 75,000 of the options received in 1998 by Mr. Lee represent a replacement
of options originally granted to Mr. Lee in 1997. 150,000 of the options
received in 1998 by Mr. Weisbrod represent 75,000 options originally
granted to Mr. Weisbrod in early 1998 and 75,000 options subsequently
issued to Mr. Weisbrod to replace such original option grant.
9
<PAGE>
(6) Mr. Lee provided executive management services as a consultant to the
Company from January 1996 through May 1997, at which time he became an
employee of the Company.
(7) Mr. Weisbrod joined the Company on a full-time basis in March 1998.
OPTION GRANTS
The following table summarizes option grants during fiscal 1998 to the
executive officers named in the Summary Compensation Table and the potential
realizable value of such options.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1998
POTENTIAL REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES PRICE APPRECIATION
UNDERLYING % OF TOTAL OPTIONS EXERCISE OR FOR OPTION TERM (1)
OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION -------------------
NAME GRANTED (#)(2) IN FISCAL YEAR 1998 ($/SHARE) DATE 5% 10%
---- -------------- ------------------- --------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Levesque 15,000 1.4% $5.63 10/23/03 $23,311 $ 51,512
Douglas L. Hemer 25,000 2.3% 5.63 10/23/03 38,852 85,853
Kenneth R. Lee 75,000 6.8% 6.81 8/20/03 141,163 311,932
10,000 0.9% 5.63 10/23/03 15,541 34,341
Daniel M. Koch 7,500 0.7% 5.63 10/23/03 11,656 25,756
Stephen P. Weisbrod 75,000 6.8% 16.63 3/02/03 176,977 549,850
10,000 0.9% 5.63 10/23/03 15,541 34,341
75,000 6.8% 6.81 8/20/03 141,163 311,932
</TABLE>
- ---------------------------
(1) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent upon the future
performance of the Company's Common Stock, overall market conditions and
the executive's continued involvement with the Company. The amounts
represented in this table will not necessarily be achieved.
(2) All options with an expiration date of August 20, 2003 reflect the
replacement of certain previously granted options to Mr. Lee in 1997 and
Mr. Weisbrod in 1998. The 1993 Plan is administered by the Compensation
Committee (the "Committee"). Mr. Lee's option for 75,000 shares which
expires on August 20, 2003 vests 15,000 on August 20, 1998 and 20,000 on
each of the first three anniversaries of such date. Mr. Weisbrod's option
for 75,000 shares with an expiration date of March 2, 2003 was replaced
with the option for 75,000 shares which expires on August 20, 2003, which
vests 15,000 on August 20, 1999 and 20,000 on each of the first three
anniversaries of such date. All other options set forth in the table above
vest in 1/48th increments each month beginning the month after the date of
grant. In the event a "change in control" of the Company occurs, then, if
approved by the Committee, all outstanding options will become immediately
exercisable in full and will remain exercisable for the remainder of their
terms, regardless of whether the participant remains in the employ or
service of the Company or any subsidiary. For purposes of the 1993 Plan, a
"change in control" of the Company will be
10
<PAGE>
deemed to have occurred upon (i) a sale or other transfer of substantially
all of the assets of the Company to an entity that is not controlled by the
Company, (ii) a merger or consolidation to which the Company is a party if,
after such merger or consolidation, the Company's shareholders do not
beneficially own more than 80% of the combined voting power of the
surviving corporation's outstanding voting securities, (iii) any person
becoming the beneficial owner of 40% or more of the combined voting power
of the Company's outstanding securities, or (iv) a change in the
composition of the Board such that the individuals constituting the Board
on the effective date of the 1993 Plan cease for any reason to constitute
at least a majority of the Board (with exceptions for individuals who are
nominated or otherwise approved by the current Board). The payment of an
option exercise price may be made either in cash or, subject to the
discretion of the Committee, in shares of Common Stock.
OPTION EXERCISES
The following table summarizes option exercises during fiscal year 1998 and
the number and value of options held by the executive officers named in the
Summary Compensation Table as of December 31, 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1998 AND 1998 YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES VALUE DECEMBER 31, 1998(#) AT DECEMBER 31, 1998($)(1)(2)
ACQUIRED ON REALIZED ---------------------- -----------------------------
NAME EXERCISE (#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Levesque 0 $ 0 135,625 64,375 $189,859 $114,766
Douglas L. Hemer 0 0 42,448 20,052 63,843 21,782
Kenneth R. Lee 0 0 15,417 69,583 65,054 302,759
Daniel M. Koch 17,750 172,737 16,938 9,062 50,234 40,036
Stephen P. Weisbrod 0 0 417 84,583 2,241 365,571
</TABLE>
(1) Based on the December 31, 1998 closing price of the Common Stock of $11.00.
(2) The "Value Realized" and the "Value of Unexercised In-the-Money Options"
amounts are calculated based on the excess of the market value of the
Common Stock on the date of exercise or December 31, 1998, respectively,
over the exercise price. The exercise price of options may be paid in cash
or, in the discretion of the Compensation Committee, in shares of the
Company's Common Stock valued at fair market value on the day prior to the
date of exercise. In addition, at the discretion of the Compensation
Committee, the exercise price of options granted may be paid pursuant to a
cashless exercise procedure under which the executive provides irrevocable
instructions to a brokerage firm to sell the purchased shares and to remit
to the Company, out of the sale proceeds, an amount equal to the exercise
price plus all applicable withholding taxes.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON REPLACEMENT OF CERTAIN OPTIONS
In August 1998, in the belief that it was in the best interests of the
Company and its shareholders to ensure that the intended incentives for
employees were maintained in accordance with the compensation philosophy of the
Compensation Committee, the Compensation Committee replaced (at a lower exercise
price) certain of the options then held by such employees that had been granted
pursuant to the Company's 1993 Stock Incentive Plan. These options were
replaced to reflect the fact that the market price of the Common Stock had been
negatively impacted in 1998 because of the overall downturn in the semiconductor
industry. Employees who received the replaced options lost the accrued vesting
benefit of the option replaced. The Compensation Committee did not reprice or
replace any options held by any director, including those directors holding
management positions with the Company. In the opinion of the Compensation
Committee, the Company's management and other personnel have dealt with the
industry downturn proactively and effectively to manage through the downturn in
a manner that has maximized the Company's revenues and operating results while
positioning the Company to take advantage of the next industry cycle.
Accordingly, the Compensation Committee determined that, in light of the reduced
market price of the Common Stock and the importance of equity based compensation
to the overall compensation philosophy of the Compensation Committee, it was
appropriate to replace these options to provide the continuing incentives
intended under the 1993 Plan to the affected employees. These replacement
options were granted on August 20, 1998 with an exercise price equal to the
market price on that date.
COMPENSATION COMMITTEE
Terrence W. Glarner
Andrew J. Greenshields
Terrance J. Nagel
12
<PAGE>
The following table sets forth certain additional information regarding all
repricings and replacements of options held by any executive officer that have
occurred in the last ten years:
<TABLE>
<CAPTION>
TEN-YEAR OPTION REPRICINGS/REPLACEMENTS
---------------------------------------
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE ORIGINAL OPTION
REPRICED UNDERLYING OF STOCK AT EXERCISE PRICE TERM REMAINING
OR OPTIONS TIME OF AT TIME OF AT DATE OF
REPLACED REPRICED OR REPRICING OR REPRICING OR NEW EXERCISE REPRICING OR
NAME AND POSITION DATE REPLACED (#) REPLACEMENT ($) REPLACEMENT($) PRICE ($) REPLACEMENT
----------------- ---- ------------ --------------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Levesque 9/18/96 200,000 $10.25 $16.50 $10.25 51 months
PRESIDENT AND CEO
Darnell L. Boehm 9/18/96 44,687 10.25 16.50 10.25 51 months
CFO
Daniel M. Koch 9/18/96 7,500 10.25 16.50 10.25 51 months
VICE PRESIDENT --
WORLDWIDE SALES
Paul H. Askegaard 12/19/95 8,925 16.50 22.69 16.50 57 months
TREASURER 9/18/96 8,925(1) 10.25 16.50 10.25 48 months
9/18/96 5,000 10.25 16.50 10.25 51 months
8/20/98 5,000 6.81 14.88 6.81 56 months
Douglas L. Hemer 9/18/96 52,500 10.25 14.88 10.25 54 months
GROUP VICE PRESIDENT
Roger J. Hopkins 12/19/95 15,000 16.50 22.69 16.50 57 months
VICE PRESIDENT AND 9/18/96 15,000(1) 10.25 16.50 10.25 48 months
GENERAL MANAGER-- 9/18/96 15,000 10.25 16.50 10.25 51 months
SAN DIEGO DIVISION
Farid J. Sabounchi 8/20/98 75,000 6.81 16.63 6.81 45 months
PRESIDENT--
GRAND PRAIRIE DIVISION
John J. Pollock 8/20/98 10,000 6.81 17.19 6.81 51 months
VICE PRESIDENT -- 8/20/98 20,000 6.81 14.88 6.81 56 months
CORPORATE MARKETING
Keith E. Williams 8/20/98 50,000 6.81 14.88 6.81 56 months
PRESIDENT--AETRIUM
WEB TECHNOLOGY
DIVISION
Kenneth R. Lee 8/20/98 75,000 6.81 16.63 6.81 45 months
PRESIDENT--
LAWRENCE DIVISION
Lee A. Schafer 8/20/98 15,000 6.81 16.63 6.81 45 months
VICE PRESIDENT-- 8/20/98 10,000 6.81 17.19 6.81 51 months
CORPORATE PLANNING
Stephen P. Weisbrod 8/20/98 75,000 6.81 16.63 6.81 56 months
VICE PRESIDENT--
CORPORATE TECHNOLOGY
</TABLE>
- ----------------------------
13
<PAGE>
(1) These options were also amended and repriced on December 19, 1995 to an
exercise price equal to $16.50, the fair market value of the Common Stock
at that date, from an exercise price of $22.69.
EMPLOYMENT AGREEMENT
Pursuant to an employment agreement effective April 1, 1986 between the
Company and Mr. Levesque, the President and Chief Executive Officer of the
Company, Mr. Levesque is entitled to receive six months salary as severance pay
in the event of an involuntary termination (including by reason of death or
disability but excluding termination for cause). In the event of voluntary
termination, the Company may elect to pay Mr. Levesque severance pay for any
portion of the employment period remaining after notice of termination in lieu
of continued employment.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors approves the
compensation for executive officers who are also directors of the Company and
acts on such other matters relating to their compensation as it deems
appropriate. During fiscal 1998, Mr. Levesque, the Company's Chairman of the
Board, President and Chief Executive Officer, Mr. Boehm, the Company's Chief
Financial Officer and Secretary, and Mr. Hemer, the Group Vice President of the
Company, were the only executive officers who were also directors of the
Company. The Compensation Committee consists of three non-employee directors
and meets at least once per year. The members of the Compensation Committee
during fiscal 1998 were Messrs. Glarner, Greenshields and Nagel. Mr. Levesque,
as the Company's President and Chief Executive Officer, establishes the
compensation of all executive officers who are not also directors of the
Company. The Compensation Committee also administers, with respect to all
eligible recipients, the Company's stock option plans and determines the
participants in such plans and the amount, timing and other terms and conditions
of awards under such plans.
COMPENSATION PHILOSOPHY AND OBJECTIVES. The Compensation Committee is
committed to the general principle that overall executive compensation should be
commensurate with performance by the Company and the individual executive
officers, and the attainment of predetermined corporate goals. The primary
objectives of the Company's executive compensation program are to:
- Reward the achievement of desired Company and individual performance
goals.
- Provide compensation that enables the Company to attract and retain
key executives.
- Provide compensation opportunities that are linked to the performance
of the Company and that directly link the interests of executives with
the interests of shareholders.
The Company's executive compensation program provides a level of
compensation opportunity that is competitive for companies in comparable
industries and of comparable development, complexity and size. In determining
compensation levels, the Compensation Committee considers a number of factors,
including Company performance, both separately and in relation to other
companies competing in the Company's markets, the individual performance of each
executive officer, comparative compensation surveys concerning compensation
levels and stock grants at other companies, historical compensation levels and
stock awards at the Company, and the overall competitive environment for
14
<PAGE>
executives and the level of compensation necessary to attract and retain key
executives. Compensation levels may be greater or less than competitive levels
in comparable companies based upon factors such as annual and long-term Company
performance and individual performance.
EXECUTIVE COMPENSATION PROGRAM COMPONENTS. The Company's executive
compensation program consists of base salary, bonuses and long-term incentive
compensation in the form of stock options. The particular elements of the
compensation program are discussed more fully below.
BASE SALARY. Base pay levels of executives, including the Chief Executive
Officer, are determined by the potential impact of the individual on the Company
and its performance, the skills and experiences required by the position, the
individual performance and potential of the executive and the Company's overall
performance. Base salaries for executives are generally evaluated and adjusted
annually. A portion of each executive officer's base salary (including the
Chief Executive Officer) has been determined based on projections related to
Company revenue, and may be increased or decreased during the year based upon
actual Company revenue levels. During the first part of fiscal 1998, the
executive officers' base salaries (including the Chief Executive Officer's
salary) were increased by an average of approximately seven percent (7%), based
upon projected revenue growth. In the fourth quarter of fiscal 1998, however,
the executive officers' base salaries (including the Chief Executive Officer's
salary) were reduced by up to fifteen percent (15%) due to the fact that actual
Company revenue was less than the projected revenue levels.
BONUSES. The Company also may pay bonuses to executive officers,
including the Chief Executive Officer, as part of its executive compensation
program. The purpose of the cash bonus component of the executive
compensation program is to provide a direct financial incentive for
executives who help the Company achieve certain Company financial objectives
and who meet individual performance goals. The maximum potential bonuses to
be awarded in any fiscal year range from thirty percent (30%) of base salary
to fifty percent (50%) of base salary for executive officers, including the
Chief Executive Officer. In fiscal 1998, bonuses were awarded to executive
officers based upon achievement of such individual's personal goals, which in
turn support the achievement of corporate goals. These bonuses ranged from
approximately twelve percent (12%) to twenty-four percent (24%) of the base
salaries of the executive officers. The Chief Executive Officer was awarded
bonuses in fiscal 1998 totaling approximately twenty-one percent (21%) of his
base salary as the result of the initiation and completion of certain
operating goals, including expense control. The Chief Executive Officer's
1998 bonus amounted to less than half of the potential bonus he could have
earned had the Company maintained profitability throughout fiscal 1998.
LONG-TERM INCENTIVE COMPENSATION. Stock options are used to enable key
executives to participate in a meaningful way in the success of the Company and
to link their interests directly with those of the shareholders. The number of
stock options granted to executives, including the Chief Executive Officer, is
based upon a number of factors, including base salary level and how such base
salary level relates to those of other companies in the Company's industry, the
number of options previously granted and individual and Company performance
during the year. See "Option Grants" and "Compensation Committee Report on
Replacement of Certain Options."
15
<PAGE>
SECTION 162(m). The Omnibus Reconciliation Act of 1993 added Section
162(m) to the Internal Revenue Code of 1986, as amended (the "Code"), limiting
corporate deductions to $1,000,000 for certain compensation paid to the chief
executive officer and each of the four other most highly compensated executives
of publicly held companies. The Company does not believe it will pay
"compensation" within the meaning of Section 162(m) to such executive officers
in excess of $1,000,000 in the foreseeable future. Therefore, the Company does
not have a policy at this time regarding qualifying compensation paid to its
executive officers for deductibility under Section 162(m), but will formulate a
policy if compensation levels ever approach $1,000,000.
<TABLE>
<CAPTION>
CHIEF EXECUTIVE OFFICER COMPENSATION COMMITTEE
----------------------- ----------------------
<S> <C>
Joseph C. Levesque Terrence W. Glarner
Andrew J. Greenshields
Terrance J. Nagel
</TABLE>
16
<PAGE>
STOCK PERFORMANCE GRAPH
In accordance with the rules of the Securities and Exchange Commission
(SEC), the following performance graph compares for the five-year period ending
on December 31, 1998, the yearly cumulative total shareholder return on the
Company's Common Stock on the Nasdaq National Market with the yearly cumulative
total return over the same period of the Nasdaq Stock Market (U.S. Companies)
Index, the old Peer Group and a Media General Industry Group Index (New Index).
The old Peer Group was a self-determined group of peer companies consisting of
Electroglas Inc., Aseco Corporation, Teradyne Inc., Cohu, Inc. and Micro
Component Technology, Inc. The Company has decided to compare its market
performance going forward with the New Index since it believes that the New
Index is more representative of the Company's industry than the prior Peer
Group. More specifically, the old Peer Group was not representative of the
Company's peers due to the inclusion of Teradyne Inc., a large capitalization
stock which alone accounted for more than half of the old Peer Group index. The
performance of the old Peer Group is displayed below for comparison purposes as
required by SEC regulation and will not be provided in the future. The
comparison assumes the investment of $100 in Common Stock in August 1993, the
date of the Company's initial public offering, the Nasdaq Stock Market (U.S.
Companies) Index, the old Peer Group and the New Index. Total return assumes
reinvestment of all dividends.
[GRAPH]
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
COMPANY/INDEX/MARKET 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Aetrium Inc. 100.00 113.58 296.15 196.20 266.53 162.88
Peer Group Index 100.00 123.86 189.97 172.26 217.56 263.88
NASDAQ U.S. 100.00 97.75 138.26 170.01 208.58 293.21
MG Group Index 100.00 130.09 205.26 191.53 243.15 273.33
</TABLE>
17
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company purchases machined parts from two partnerships controlled by
WEB Technology Inc. One of those partnerships is owned 77% by WEB Technology
Inc., which supplied the Company with $74,000 of parts in fiscal year 1998. The
other partnership is owned 76.9 % by WEB Technology Inc., and 2.6 % by Keith E.
Williams, President of the Company's Aetrium WEB Technology Division, which the
Company paid $591,000 for parts in fiscal year 1998. In addition to Mr.
William's direct ownership in the second partnership, Mr. Williams owns an 11.8
% interest in WEB Technology Inc.
The Company leases its Grand Prairie, Texas facility from Damavand Ltd., a
Texas partnership, at a cost of $133,000 in fiscal year 1998. Farid J.
Sabounchi, President of the Company's Grand Prairie Division, is the controlling
equity holder of this partnership, and is President of Octavo Enterprises, Inc.,
its general partner.
The Company believes that the above transactions between the Company and
its officers and affiliates have been on terms no less favorable than could have
been obtained from unaffiliated third parties. Any future transactions with
officers, directors or 5% beneficial shareholders of the Company's Common Stock
will be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
SELECTION OF AUDITORS
The Company does not intend to request that the shareholders approve the
selection of PricewaterhouseCoopers LLP, independent public accountants, for
fiscal 1999. The Company has requested and expects, however, one or more
representatives of PricewaterhouseCoopers LLP to be present at the Annual
Meeting. Such representatives will have an opportunity to make a statement if
they so desire and will be available to respond to appropriate questions.
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and
all persons who beneficially own more than 10% of the outstanding shares of
the Company's Common Stock to file with the SEC initial reports of ownership
and reports of changes in ownership of the Company's Common Stock. Executive
officers, directors and greater than 10% beneficial owners are also required
to furnish the Company with copies of all Section 16(a) forms they file.
Based upon a review of the copies of such reports furnished to the Company
and written representations, the Company believes that for the year ended
December 31, 1998, none of its directors, officers or beneficial owners of
greater than 10% of the Company's Common Stock failed to file on a timely
basis the forms required by Section 16 of the Exchange Act.
18
<PAGE>
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals intended to be presented in the Company's proxy
materials relating to the next Annual Meeting must be received by the Company at
its principal executive offices on or before November 30, 1999, and must satisfy
the requirements of the proxy rules promulgated by the SEC.
A shareholder who wishes to make a proposal at the next Annual Meeting
without including the proposal in the Company's proxy materials must notify the
Company by February 2, 2000. If a shareholder fails to give notice by this
date, then the persons named as proxies in the proxy card solicited by the
Company for the next Annual Meeting will have discretionary authority to vote on
the proposal.
OTHER BUSINESS
The Company knows of no business that will be presented for consideration
at the Annual Meeting other than that described in this Proxy Statement. As to
other business, if any, that may properly come before the Annual Meeting, it is
intended that proxies solicited by the Board will be voted in accordance with
the judgment of the person or persons voting the proxies.
MISCELLANEOUS
THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON
FORM 10-K (EXCLUSIVE OF EXHIBITS) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998,
TO EACH PERSON WHO WAS A SHAREHOLDER OF THE COMPANY AS OF MARCH 25, 1999, UPON
RECEIPT FROM ANY SUCH PERSON OF A WRITTEN REQUEST FOR SUCH AN ANNUAL REPORT.
SUCH REQUEST SHOULD BE SENT TO: AETRIUM INCORPORATED, 2350 HELEN STREET, NORTH
ST. PAUL, MINNESOTA 55109; ATTN.: SHAREHOLDER INFORMATION.
By Order of the Board of Directors
/s/ Joseph C. Levesque
Joseph C. Levesque
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: April 5, 1999
North St. Paul, Minnesota
19
<PAGE>
AETRIUM INCORPORATED
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints JOSEPH C. LEVESQUE and DARNELL L. BOEHM,
and each of them, as Proxies, each with full power of substitution, and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of Common Stock of Aetrium Incorporated held of record by the undersigned
on March 25, 1999, at the Annual Meeting of Shareholders to be held on May 18,
1999, or any adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
1. ELECTION OF DIRECTORS.
/ / FOR all nominees / / WITHHOLD all nominees / / FOR all nominees
listed below listed below listed below (except
nominees written below)
----------------------------------------------------------------------------
(Nominee Exceptions)
JOSEPH C. LEVESQUE ANDREW J. GREENSHIELDS
DARNELL L. BOEHM DOUGLAS L. HEMER
TERRENCE W. GLARNER TERRANCE J. NAGEL
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES NAMED IN PROPOSAL 1 ABOVE. Please sign exactly as name
appears below. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Dated: , 1999
-------------
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY USING THE
ENCLOSED ENVELOPE.
