<PAGE>
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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 23, 2000
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 May 23, 2000, 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 Annual Meeting.
The record date for determination of the shareholders entitled to
notice of and to vote at the Annual Meeting and any adjournments thereof is the
close of business on March 27, 2000.
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 7, 2000
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 23, 2000
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 May 23, 2000.
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 Company's common stock (the "Common Stock"), 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 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 Company's Secretary, by filing a duly executed proxy bearing a later date
with the Company's Secretary, or by appearing at the Annual Meeting and filing
written notice of revocation with the Company's Secretary 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 DIRECTORS 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 7, 2000.
<PAGE>
OUTSTANDING SHARES
Only holders of Common Stock of record at the close of business on
March 27, 2000 will be entitled to vote at the Annual Meeting. On March 27,
2000, the Company had 9,470,452 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 Annual 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 1999 Annual Meeting of the Shareholders of the Company, six directors were
elected. By resolution of the Board adopted at a meeting held on March 14, 2000,
the Board resolved to nominate the same six persons to stand for election at the
2000 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 18,
2000 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.
2
<PAGE>
<TABLE>
<CAPTION>
NOMINEES DIRECTOR
FOR ELECTION AGE PRINCIPAL OCCUPATION SINCE
------------ ------------------------- -----
<S> <C> <C>
Joseph C. Levesque 55 The Company's Chairman of the Board, President and 1986
Chief Executive Officer
Darnell L. Boehm 51 The Company's Chief Financial Officer and Secretary 1986
Terrence W. Glarner 56 President of West Concord Ventures, Inc. 1990
Andrew J. Greenshields 62 President of Pathfinder Venture Capital Funds 1986
Douglas L. Hemer 52 The Company's Group Vice President 1986
Terrance J. Nagel 45 President and Chief Executive Officer 1996
of NOW Technologies, Inc.
</TABLE>
OTHER INFORMATION ABOUT NOMINEES
JOSEPH C. LEVESQUE has served as the Company's President, Chief
Executive Officer and Chairman of the Board of Directors 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 the Company's Chief Financial Officer
and 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 operations. Mr. Boehm is the
principal of Darnell L. Boehm & Associates, a management consulting firm. Mr.
Boehm is also a director of each of Rochester Medical Corporation, a public
company, Versa Companies, a privately-held company and Alpnet, Inc., a public
company. Mr. Boehm serves on the audit and compensation committees of Rochester
Medical Corporation and Versa Companies, and serves on the audit committee of
Alpnet, Inc.
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 III, the general partner of Pathfinder
Venture Capital Fund III ("Pathfinder III"), a Minnesota limited partnership.
Pathfinder is also the management company for Pathfinder III. Mr. Greenshields
also has been a general partner of Spell Capital Partners since November 1997.
Mr. Greenshields is also a director and member of the audit and compensation
3
<PAGE>
committees of CNS, Inc., a public company, and a director of each of Alkota Inc.
and Ubiq, privately-held companies.
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 Company's San Diego
operations 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 committee.
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 four times during the fiscal year ended December
31, 1999. 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, 1999. Messrs. Glarner, Greenshields
and Nagel served as members of the Audit Committee in fiscal year 1999.
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 five times during the fiscal year ended December 31, 1999. Messrs.
Glarner, Greenshields and Nagel served as members of the Compensation Committee
in fiscal year 1999.
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.
OPTION GRANTS. All of the Company's directors are eligible for grants
of options under the 1993 Plan. The Company's Board did not grant any of its
directors options to purchase Common Stock during fiscal year 1999. 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.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of February 18, 2000, 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 OF BENEFICIAL OWNER AMOUNT PERCENT OF CLASS(2)
- ------------------------ ------ -------------------
<S> <C> <C>
Joseph C. Levesque 263,491 (3) 2.7%
Douglas L. Hemer 76,873 (4) *
Kenneth R. Lee 38,642 (5) *
Daniel M. Koch 49,020 (6) *
Stephen P. Weisbrod 24,742 (7) *
Darnell L. Boehm 44,795 (8) *
Terrence W. Glarner 55,330 (9) *
Andrew J. Greenshields 42,500 (10) *
Terrance J. Nagel 25,000 (11) *
Kopp Investment Advisors, Inc. 1,527,681 (12) 16.2%
7701 France Avenue South
Suite 500
Edina, MN 55435
Woodland Partners LLC 563,250 (13) 6.0%
60 South Sixth Street
Suite 3750
Minneapolis, MN 55402
Executive officers and directors as a 1,194,133 (14) 11.9%
group (17 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.
5
<PAGE>
(2) Based on 9,436,035 shares of Common Stock outstanding as of February
18, 2000.
(3) Includes options to purchase 165,313 shares of Common Stock exercisable
within 60 days.
(4) Includes options to purchase 60,260 shares of Common Stock exercisable
within 60 days.
(5) Includes options to purchase 38,542 shares of Common Stock exercisable
within 60 days.
(6) Includes options to purchase 13,073 shares of Common Stock exercisable
within 60 days.
(7) Includes options to purchase 18,542 shares of Common Stock exercisable
within 60 days.
(8) Includes options to purchase 25,136 shares of Common Stock exercisable
within 60 days.
(9) Includes options to purchase 37,500 shares of Common Stock exercisable
within 60 days.
(10) Includes options to purchase 37,500 shares of Common Stock exercisable
within 60 days.
(11) Includes options to purchase 24,000 shares of Common Stock exercisable
within 60 days.
(12) Based solely on a Schedule 13G dated February 4, 2000, includes
1,157,681 shares of Common Stock held of record by clients of Kopp
Investment Advisers, Inc. ("KIA"), over which KIA has shared
dispositive power, and 370,000 shares of Common Stock over which KIA
has sole dispositive power. KIA has sole voting power over 559,000
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.
(13) Based solely on a Schedule 13G dated January 20, 2000, includes 563,250
shares of Common Stock held of record by Woodland Partners LLC
("Woodland"), for which Woodland has sole dispositive power, comprised
of 499,750 shares over which Woodland has sole voting power and 63,500
shares over which Woodland has shared voting power.
(14) Includes options to purchase 560,176 shares of Common Stock exercisable
within 60 days.
6
<PAGE>
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 Company's Chief
Executive Officer and the four other most highly compensated executive officers
of the Company whose salary and bonus exceeded $100,000 in the fiscal year ended
December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) COMPENSATION($)(2)
- ------------------ ---- --------- ----------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Joseph C. Levesque 1999 $174,314 $38,190 --- $2,051
PRESIDENT AND CHIEF 1998 192,908 40,911 15,000 5,000
EXECUTIVE OFFICER 1997 189,000 80,714 --- 4,500
Douglas L. Hemer 1999 $145,439 $31,841 --- $1,912
GROUP VICE PRESIDENT 1998 149,237 17,536 25,000 4,736
1997 125,000 54,750 --- 4,662
Kenneth R. Lee(4) 1999 $108,619 $24,911 --- $1,496
PRESIDENT-- 1998 129,511 19,779 85,000(3) 5,000
LAWRENCE OPERATIONS 1997 68,558 44,850 75,000 ---
Daniel M. Koch 1999 $121,654 $21,444 20,000 $1,791
VICE PRESIDENT-- 1998 127,177 21,914 7,500 4,252
WORLDWIDE SALES 1997 123,400 62,440 --- 4,569
Stephen P. Weisbrod(5) 1999 $131,269 $28,814 --- $1,593
VICE PRESIDENT-- 1998 114,423 27,338 160,000(3) 22,615
CORPORATE TECHNOLOGY 1997 --- --- --- ---
</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
named executive officers' respective 401(k) accounts, except for Mr.
Weisbrod's 1998 amount which also includes a $20,000 signing bonus for
joining the Company.
(3) 75,000 of the options received in 1998 by Mr. Lee represent a
replacement of options originally granted to Mr. Lee in 1997. 150,000
of the options received in 1998 by Mr. Weisbrod represent
7
<PAGE>
75,000 options originally granted to Mr. Weisbrod in early 1998 and
75,000 options subsequently issued to Mr. Weisbrod to replace such
original option grant.
(4) Mr. Lee provided executive management services as a consultant to the
Company from January 1996 through May 1997, at which time he became an
employee of the Company.
(5) Mr. Weisbrod joined the Company on a full-time basis in March 1998.
OPTION GRANTS
The following table summarizes option grants during fiscal year 1999 to
the executive officers named in the Summary Compensation Table and the potential
realizable value of such options.
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
NUMBER OF POTENTIAL REALIZABLE VALUE AT
SECURITIES % OF TOTAL OPTIONS ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE OR PRICE APPRECIATION
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION FOR OPTION TERM(2)
NAME GRANTED(#)(1) FISCAL YEAR 1999 ($/SHARE) DATE 5% ($) 10% ($)
- ---- -------------- ----------------- ----------- ---------- -----------------------------
<S> <C> <C> <C> <C> <C>
Daniel M. Koch 20,000 11.2% $7.0781 8/31/04 $39,111 $86,425
</TABLE>
- ------------------------------
(1) The above option was granted under the 1993 Plan and vests in 1/48th
increments each month beginning the month after the date of grant. The
1993 Plan provides that, in the event of a "change in control" of the
Company, then, if approved by the Compensation 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 of the Company. For purposes of the 1993 Plan, a
"change in control" of the Company will be 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 Compensation Committee, in shares of Common Stock.
(2) 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.
8
<PAGE>
OPTION EXERCISES
The following table summarizes option exercises during fiscal year 1999
and the number and value of options held by the executive officers named in the
Summary Compensation Table as of December 31, 1999.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 AND 1999 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED ON REALIZED DECEMBER 31, 1999(#) AT DECEMBER 31, 1999($)(1)(2)
-------------------- -----------------------------
NAME EXERCISE(#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Levesque 25,000 $29,782 164,375 10,625 $4,239 $10,294
Douglas L. Hemer 7,500 41,719 54,323 23,177 7,064 17,156
Kenneth R. Lee 0 0 37,917 47,083 2,826 6,862
Daniel M. Koch 11,000 11,678 9,688 5,312 2,120 5,146
Stephen P. Weisbrod 0 0 17,917 67,083 2,826 6,862
</TABLE>
- -----------------------------------------------
(1) Based on the December 31, 1999 closing price of the Common Stock of
$6.59.
(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, 1999,
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.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Effective as of April 1, 1986, the Company and Joseph C. Levesque
entered into an employment agreement. This employment agreement provides that
the Company will review Mr. Levesque's performance and compensation package on
an annual basis and make such adjustments to his compensation package as it
deems appropriate. The employment agreement provides that Mr. Levesque may
voluntarily terminate his employment with three months' written notice to the
Company. The employment agreement also provides that if Mr. Levesque's
employment is involuntarily terminated (including by reason of death or
disability, but excluding for cause), the Company will pay Mr. Levesque six
months' salary as severance pay. Any severance pay provided to Mr. Levesque
pursuant to the terms of this employment agreement will be made according to the
Company's standard payroll practices and policies.
In January 2000, the Company announced plans to close its facility in
Lawrence, Massachusetts. The Company expects operations at the Lawrence facility
will cease by approximately March 31, 2000, and that the Company will vacate the
facility by approximately May 15, 2000. Kenneth R. Lee, President of the
Lawrence operations, will terminate his employment with the Company at the time
the Company vacates the Lawrence facility. The Company has agreed to pay Mr. Lee
as severance pay an amount
9
<PAGE>
equal to twelve months' salary, which amount will be payable over a two-year
period from the date Mr. Lee's employment with the Company terminates.
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 year 1999, 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 Company's Group Vice
President, 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 year 1999 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; and
- 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
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 salary levels of executives, including the Chief
Executive Officer, are determined by the potential impact of the individual on
the Company and the Company's performance, the skills and experience required by
the position, the individual performance and potential of the executive, and
market data for comparable positions in companies in comparable industries and
of comparable development, complexity and size. Base salaries for executives are
generally evaluated and adjusted annually. The Compensation Committee or Mr.
Levesque, as appropriate, has the discretionary
10
<PAGE>
authority to adjust such base level salaries based on the actual and projected
performance of the Company, including factors related to revenue and
profitability. Beginning in the fourth quarter of fiscal year 1998, all
individual executive salaries were reduced by up to 15% based upon such factors.
During the first nine months of fiscal year 1999, the executive officers' base
salaries (including the Chief Executive Officer's salary) were kept at these
reduced levels. In the fourth quarter of fiscal 1999, in connection with the
annual evaluation of executive salaries, the Compensation Committee and Mr.
Levesque considered a survey of base salaries for executive officers in
comparable positions within comparable companies and the Company's' performance.
The Compensation Committee or Mr. Levesque, as appropriate, then established the
base level salaries for each executive officer. Consistent with the Company's
philosophy of keeping executive salaries at reduced levels during periods of
operating losses, base salary adjustments in the fourth quarter of fiscal year
1999 were implemented at amounts which were 5 to 25% below the newly-established
potential base salary of each individual. The executive officers' base salaries,
however, may be increased up to the current potential base salary level for each
executive when and if profitable operating results are achieved.
BONUSES. The Company may also 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. Bonuses may be awarded on a quarterly basis. 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 year 1999, 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 thirteen percent (13%) to twenty-two percent
(22%) of the base salaries of the executive officers. The Chief Executive
Officer was awarded bonuses in fiscal year 1999 totaling approximately
twenty-two percent (22%) of his base salary as the result of the initiation and
completion of certain operating goals, including expense control.
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.
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.
COMPENSATION COMMITTEE
Terrence W. Glarner
Andrew J. Greenshields
Terrance J. Nagel
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<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, 1999, 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 with the Nasdaq Stock Market (U.S. Companies)
Index and a Media General Industry Group 834 Index for semiconductor equipment
(Media Index). Media General Financial Services prepared the data points and the
performance graph. The comparison assumes a $100 investment in the Company's
Common Stock, the Nasdaq Stock Market (U.S. Companies) Index, and the Media
Index, with reinvestment of all dividends.
[STOCK PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AETRIUM 100.00 260.74 172.74 234.67 143.41 85.96
INCORPORATED
MG GROUP 100.00 157.79 147.23 186.91 210.11 576.57
INDEX
NASDAQ U.S. 100.00 141.33 173.89 213.07 300.25 542.43
</TABLE>
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company purchases machined parts from two partnerships controlled
by WEB Technology Inc. ("WEB"). One of those partnerships is owned 77% by WEB,
which supplied the Company with approximately $116,000 of machined parts in
fiscal year 1999. The other partnership is owned 76.9 % by WEB, and 2.6 % by
Keith E. Williams, President of the Company's Dallas operations, which the
Company paid approximately $447,000 for parts in fiscal year 1999. In addition
to Mr. William's direct ownership in the second partnership, Mr. Williams owns
an 11.8 % interest in WEB.
The Company leased its Grand Prairie, Texas facility from Damavand
Ltd., a Texas partnership, at a cost of $146,300 in fiscal year 1999. Farid J.
Sabounchi, President of the Company's Grand Prairie operations, is the
controlling equity holder of this partnership, and is President of Octavo
Enterprises, Inc., its general partner. The Company plans to close its Grand
Prairie, Texas facility in March 2000, and intends to either sublease the
property at this facility for the remaining three years of the lease or locate a
third party to assume the obligations under this lease.
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 year 2000. 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.
13
<PAGE>
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, 1999,
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, except that the Form 3 for Mr. Venu Turlapaty
was filed after its due date.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Shareholder proposals intended to be presented in the Company's proxy
materials relating to the next Annual Meeting of the Company must be received by
the Company at its principal executive offices on or before December 1, 2000,
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
of the Company without including the proposal in the Company's proxy materials
must notify the Company by February 16, 2001. 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.
14
<PAGE>
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,
1999, TO EACH PERSON WHO WAS A SHAREHOLDER OF THE COMPANY AS OF MARCH 27, 2000,
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 7, 2000
North St. Paul, Minnesota
15
<PAGE>
Appendix A
- --------------------------------------------------------------------------------
PROXY PROXY
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 27, 2000 at the Annual Meeting of Shareholders to
be held on May 23, 2000 or any adjournment thereof.
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. The Board of Directors
recommends a vote for all nominees named in Proposal 1.
- --------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES
- --------------------------------------------------------------------------------
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- --------------------------------------------------------------------------------
<PAGE>
AETRIUM INCORPORATED
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
- -
- -
1. ELECTION OF DIRECTORS: For Withhold For All
All All (Except
withhold for
nominee written
below)
01 Joseph C. Levesque 02 Darnell L. Boehm / / / / / /
03 Terrence W. Glarner 04 Andrew J. Greenshields / / / / / /
05 Douglas L. Hemer 06 Terrance J. Nagel
-------------------------------------------
2. In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before the
meeting.
Please sign exactly as name appears above.
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.
---------------------------------------------
THIS SPACE RESERVED FOR ADDRESSING
(key lines do not print)
---------------------------------------------
Dated: ________________, 2000
-----------------------------
Signature of Shareholder
-----------------------------
Signature if held jointly
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
