SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a)
of the
Securities Exchange Act of 1934
Check the
appropriate box:
|
o
|
Confidential, for Use of Commission Only (as permitted by Rule
14a-6(e)(2))
|
x Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to Section 240.14a-12
ARRHYTHMIA
RESEARCH TECHNOLOGY, INC.
(Name of
Registrant as Specified in its Charter)
N/A
(Name of
Person(s) Filing Proxy Statement if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
|
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:
|
| o |
Fee
paid previously with preliminary
materials.
|
| o |
Check
box if any part of the fee is offset as provided by Exchange Act Rule
240-0-11 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:
|
To the
Stockholders of Arrhythmia Research Technology, Inc.:
You are
cordially invited to attend the Annual Meeting of Stockholders of Arrhythmia
Research Technology, Inc. on Friday, April 30, 2010. The Annual
Meeting will begin at 10:00 a.m. local time at The Charles Hotel, One Bennett
Street, Cambridge, Massachusetts.
This year
we are pleased to be again using the U.S. Securities and Exchange Commission
rule that allows us to furnish our proxy materials and annual report over the
Internet. As a result, we are mailing to our stockholders a Notice of
Internet Availability ("Notice") instead of paper copies of our Proxy Statement
and 2009 Annual Report on Form 10-K. The Notice contains instructions
on how to access these documents via the Internet. The Notice also
contains instructions on how you can receive a paper copy of our proxy
materials, including this Proxy Statement, our 2009 Annual Report on Form 10-K
and a proxy card. Stockholders who request paper copies of proxy
materials will receive them by mail. This process will conserve
natural resources and reduce the costs of printing and distributing our proxy
materials to our stockholders. Because it is important that your
shares be voted at the Annual Meeting, we urge you to complete, date and sign a
proxy card and return it as promptly as possible, whether or not you plan to
attend in person. If you are a stockholder of record and do attend
the meeting and wish to vote your shares in person, even after returning your
proxy, you still may do so.
We
appreciate your continued support of and interest in Arrhythmia Research
Technology, Inc. and are working hard to build a company that we are all proud
to own.
We look
forward to seeing you in Cambridge on April 30, 2010.
Very
truly yours,
By: /s/ E.P.
Marinos
|
E.
P. Marinos
|
|
|
Chairman
of the Board
|
ARRHYTHMIA
RESEARCH TECHNOLOGY, INC.
25
Sawyer Passway
Fitchburg,
MA 01420
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
be held Friday, April 30, 2010
TO THE
STOCKHOLDERS OF ARRHYTHMIA RESEARCH TECHNOLOGY, INC.:
NOTICE IS
HEREBY GIVEN that the 2010 Annual Meeting of Stockholders of Arrhythmia Research
Technology, Inc., a Delaware corporation (the “Company”), will be held at The
Charles Hotel, One Bennett Street, Cambridge, Massachusetts, on Friday, April
30, 2010, at 10:00 a.m., local time, for the following purposes, as described in
our Proxy Statement:
|
1.
|
To
elect one Class III director to hold office for three years and until his
successor is duly elected and
qualified.
|
|
2.
|
To
approve the adoption of the Company’s 2010 Equity Incentive
Plan.
|
|
3.
|
To
ratify the appointment of CCR LLP as the Company's independent registered
public accounting firm for the fiscal year ending December 31,
2010.
|
|
4.
|
To
consider and vote on a proposal to authorize the Board of Directors to
adjourn the Annual Meeting to a later date or dates, if necessary, to
allow time for further solicitation of proxies, in the event there are
insufficient votes present in person or represented by proxy at the Annual
Meeting to approve the proposals.
|
|
5.
|
To
transact any other business which properly may be brought before the
Annual Meeting or any adjournment or postponement
thereof.
|
All
stockholders are cordially invited to attend the Annual Meeting of
Stockholders. Only stockholders of record of the Company at the close
of business on March 4, 2010 are entitled to notice of and to vote at the Annual
Meeting or any adjournment or postponement thereof. A complete list
of these stockholders will be open for the examination of any stockholder of
record at the Company's principal executive offices located at 25 Sawyer
Passway, Fitchburg, Massachusetts for a period of ten days prior to the Annual
Meeting. The list will also be available for the examination of any
stockholder of record present at the Annual Meeting.
Your vote
is important. Your prompt response will also help reduce proxy costs
and will help you avoid receiving follow-up telephone calls or
mailings. Please vote as soon as possible. Also, the
Company has elected to take advantage of the Securities and Exchange Commission
rules that allow the Company to furnish proxy materials to you and other
shareholders on the Internet.
|
By Order of the Board of
Directors,
|
|
ARRHYTHMIA RESEARCH
TECHNOLOGY, INC.
|
|
/s/ E.P.
Marinos
|
|
E. P.
Marinos
|
|
Secretary
|
Fitchburg,
Massachusetts
March 15,
2010
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING
TO BE HELD ON APRIL 30, 2010, THE PROXY STATEMENT AND ANNUAL REPORT ARE
AVAILABLE AT WWW.CSTPROXY.COM/ARTHRT/2010.
TABLE
OF CONTENTS
ARRHYTHMIA
RESEARCH TECHNOLOGY, INC.
PROXY
STATEMENT
FOR
ANNUAL
MEETING OF STOCKHOLDERS
To
be held April 30, 2010
This
proxy statement is furnished in connection with the solicitation of proxies by
the Board of Directors of Arrhythmia Research Technology, Inc., a Delaware
corporation (the “Company”), for use at the
Annual Meeting of the Company’s stockholders to be held at The Charles Hotel,
One Bennett Street, Cambridge, Massachusetts, on April 30, 2010 at
10:00 a.m., local time, and at any adjournments or postponements of the
Annual Meeting. This proxy statement summarizes the information you
need to make an informed vote on the proposals to be considered at the Annual
Meeting. However, you do not need to attend the Annual Meeting to
vote your shares. Instead, you may simply complete, sign and return a
proxy card.
Under the
"Notice and Access Rule" that the Securities and Exchange Commission (the "SEC"), has adopted, we are
again this year furnishing proxy materials to our stockholders on the Internet
rather than mailing printed copies of those materials to each
stockholder. This will help us conserve natural resources and it will
save postage, printing and processing costs. If you received a Notice
of Internet Availability of Proxy Materials by mail, you will not receive a
printed copy of our proxy materials unless you specifically request
one. Instead, the Notice of Internet Availability will instruct you
about how you may (1) access and review our proxy materials on the Internet and
(2) access your proxy card to vote on the Internet. We anticipate
that we will mail the Notice of Internet Availability to our stockholders on or
about March 19, 2010.
The
Proxy Materials are available at www.CSTPROXY.COM/ARTHRT/2010. Enter the
12-digit control number located on the Notice of Internet Availability or proxy
card.
Instructions
for requesting a paper copy of the proxy materials are set forth on the Notice
of Internet Availability.
We will
address the following proposals at the Annual Meeting:
|
1.
|
The
election of one nominee for Class III director identified below, to serve
for three years;
|
|
2.
|
The
approval of the adoption of the Company’s 2010 Equity Incentive
Plan.
|
|
3.
|
The
ratification of the appointment of CCR LLP as the Company's independent
registered public accounting firm for the fiscal year ending December 31,
2010;
|
|
4.
|
The
authorization to adjourn the Annual Meeting to a later date or dates if
there are insufficient votes to approve the proposals;
and
|
|
5.
|
Transaction
of such other business as may properly come before the Annual Meeting or
any adjournment or postponement of the Annual
Meeting.
|
Our Board
of Directors has taken unanimous affirmative action with respect to each of the
foregoing proposals and recommends that the stockholders vote in favor of each
of the proposals.
Stockholders
who owned shares of the Company’s voting stock at the close of business on March
4, 2010 (the “Record
Date”) are entitled to vote at the Annual Meeting on all matters properly
brought before the Annual Meeting.
On the
Record Date, the Company had 2,675,481 shares of issued and outstanding common
stock, par value $0.01 per share (“Common Stock”).
1
Each
share of Common Stock is entitled to one vote on each matter presented at the
Annual Meeting.
WHAT
IS THE QUORUM REQUIREMENT?
A quorum
of stockholders is necessary to hold a valid meeting. A quorum will
be present if at least a majority of the outstanding shares are represented by
stockholders present at the Annual Meeting or by proxy. On the record
date, there were 2,675,481 shares outstanding and entitled to
vote. Thus, 1,337,741 shares must be represented by stockholders
present at the meeting or by proxy to have a quorum.
Your
shares will be counted towards the quorum only if you submit a valid proxy (or
one is submitted on your behalf by your broker, bank or other nominee) or if you
vote in person at the Annual Meeting. Abstentions and broker
non-votes will be counted towards the quorum requirement. If there is
no quorum, the chairman of the meeting or a majority of the votes present at the
meeting may adjourn the meeting to another date.
The
Annual Meeting may be adjourned if a quorum is not present or to allow time for
further solicitation of proxies in the event there are insufficient votes
present in person or represented by proxy to approve the proposals.
For
purposes of determining whether the stockholders have approved matters other
than the election of directors, abstentions are treated as shares present or
represented and voting, so abstaining has the same effect as a negative
vote. Shares held by brokers who do not have discretionary authority
to vote on a particular matter and who have not received voting instructions
from their customers are not counted or deemed to be present or represented for
the purpose of determining whether stockholders have approved that matter, but
they are counted as present for the purpose of determining the existence of a
quorum at the Annual Meeting.
Whether
you hold shares directly as the stockholder of record or beneficially in street
name, you may direct how your shares are voted without attending the Annual
Meeting. Stockholders may deliver their proxies either:
|
|
(1)
|
Electronically
over the Internet as outlined in the Notice of Internet Availability;
or
|
|
|
(2)
|
By
requesting, completing and submitting a properly signed paper proxy card
as outlined in the Notice of Internet
Availability.
|
Returning
the proxy card will not affect your right to attend the Annual Meeting and vote
in person.
If you
properly fill in your proxy card and send it to us in time to vote, your proxy
(one of the individuals named on your proxy card) will vote your shares as you
have directed. If you sign the proxy card but do not make specific
choices, your proxy will vote your shares as recommended by the Board of
Directors as follows:
|
1.
|
FOR the nominee for Class III
director identified below;
|
|
2.
|
FOR the approval of the adoption of
the Company’s 2010 Equity Incentive
Plan;
|
|
3.
|
FOR the ratification of
the appointment of CCR LLP as the Company's independent registered public
accounting firm for the fiscal year ending December 31, 2010;
and
|
|
4.
|
FOR the authorization to
adjourn the Annual Meeting to a later date or dates if there are
insufficient votes present in person or represented by proxy at the Annual
Meeting to approve the proposals.
|
If any
other matters are presented, your proxy will vote in accordance with his or her
best judgment. At the time this proxy statement went to press, we
knew of no matters that needed to be acted on at the Annual Meeting other than
those discussed in this proxy statement.
If you
plan to attend the Annual Meeting and vote in person on April 30, 2010, or at a
later date if the meeting is adjourned or postponed to a later date, we will
give you a ballot when you arrive. However, if your shares are held
in the name of your broker, bank or other nominee, you must bring a power of
attorney executed by the broker, bank or other nominee that owns the shares of
record for your benefit and authorizing you to vote the shares.
2
If you
give a proxy, you may revoke it at any time before it is
exercised. You may revoke your proxy in three ways:
1.
You may send in another proxy with a later date.
|
2.
|
You
may notify the Company in writing (by you or your attorney authorized in
writing, or if the stockholder is a corporation, under its corporate seal,
by an officer or attorney of the corporation) at our principal executive
offices before the Annual Meeting, that you are revoking your
proxy.
|
3.
You may vote in person at the Annual Meeting.
Proposal
1: Election of Directors.
A
plurality of the eligible votes cast is required to elect a director
nominee. A nominee who receives a plurality means he has received
more votes than any other nominee for the same director's
seat. Shares not represented in person or by proxy at the Annual
Meeting and broker non-votes will have no effect on the election of
directors.
Proposal
2: Approval of the adoption of the Company’s 2010 Equity
Incentive Plan.
The
approval of Proposal 2, the approval of the adoption of the Company’s 2010
Equity Incentive Plan, requires the affirmative vote of the majority of the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote thereon.
Proposal
3: Ratification of independent registered public accounting
firm.
The
approval of Proposal 3, the ratification of the appointment of our independent
registered public accounting firm, requires the affirmative vote of the majority
of the shares present in person or represented by proxy at the Annual Meeting
and entitled to vote thereon.
Proposal
4: Adjournment of the Annual Meeting.
The
approval of Proposal 4, the adjournment of the Annual Meeting, requires the
affirmative vote of the majority of the shares present in person or represented
by proxy at the Annual Meeting and entitled to vote thereon.
Abstentions
will be counted toward the tabulation of votes present or represented on
Proposals 2 through 4 and will have the same effect as votes “Against” these
proposals. New York Stock Exchange rules prohibit brokers from voting
on Proposals 1 and 2 without receiving instructions from the beneficial owner of
the shares. In the absence of instructions, shares subject to such
broker non-votes will not be counted as voted or as present or represented on
those proposals and so will have no effect on the vote. Please note that this year the rules
regarding how brokers may vote your shares have changed. Brokers may
no longer vote your shares on the election of directors in the absence of your
specific instructions as to how to vote so we encourage you to provide
instructions to your broker regarding the voting of your
shares.
The Board
of Directors is not proposing any action for which the laws of the State of
Delaware, the Company’s Certificate of Incorporation or the By-Laws provide a
right of a stockholder to dissent and obtain appraisal of or payment for such
stockholder's shares.
The
Company will bear the cost of soliciting proxies in the accompanying form and
will reimburse brokerage firms and others for expenses involved in forwarding
proxy materials to beneficial owners or soliciting their execution.
The
Company’s principal executive offices are located at 25 Sawyer Passway,
Fitchburg, Massachusetts and our telephone number is (978)
345-5000.
3
The
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009
has been made available on the Internet to all stockholders entitled to vote at
the Annual Meeting and who received the Notice of Internet
Availability. Additional copies will be furnished without charge to
stockholders upon written request. Exhibits to the Form 10-K will be provided
upon written request and payment of an appropriate fee. All written
requests should be directed to Arrhythmia Research Technology, Inc., 25 Sawyer
Passway, Fitchburg, Massachusetts 01420.
The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) which requires
that the Company file reports, proxy statements and other information with the
Securities and Exchange Commission (“SEC”). The SEC
maintains a website on the Internet that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the SEC. The SEC's website address is
http://www.sec.gov. In addition, the Company's Exchange Act filings
may be inspected and copied at the public reference facilities of the SEC
located at Room 1580, 100 F Street, N.E., Washington, DC 20549, on official
business days during the hours of 10:00 am to 3:00 pm. You may obtain
information about the operation of the public reference room by calling the SEC
at 1-800-SEC-0330.
AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Beneficial
Owners of at Least Five Percent of our Common Stock
The
following table shows, as of the Record Date and to the best of our knowledge,
all persons we know to be beneficial owners of five percent or more of the
voting securities of the Company as of the Record Date.
|
Name and Address of Beneficial
Owner
|
Common
Stock Beneficially Owned (1)
|
Percent of Class (1)
|
|
Chambers
Medical Foundation
|
276,268(2)
|
10.3%
|
|
Edwin
K. Hunter, Trustee
1807
Lake Street
Lake
Charles, LA 70601
|
||
|
FMR
LLC
|
271,041(3)
|
10.1%
|
|
Fidelity
Management & Research Co.
82
Devonshire Street
Boston,
MA 02109
|
__________________________
|
(1)
|
Unless
otherwise noted in these footnotes, the Company believes that all shares
referenced in this table are owned of record by each person named as
beneficial owner and that each person has sole voting and dispositive
power with respect to the shares of Common Stock owned by each of
them. In accordance with Rule 13d-3 under the Exchange Act,
each person’s percentage ownership is determined by assuming that the
options that are held by that person, and which are exercisable within 60
days, have been exercised.
|
|
(2)
|
Based
on information included in a Schedule 13D/A filed with the SEC on March 9,
2007 and a Form 4 filed with the SEC on April 5, 2007 by the
Chambers Medical Foundation.
|
|
(3)
|
Based
on information included a Schedule 13G/A filed with the SEC on April 9,
2009.
|
4
Security
Ownership of Directors and Executive Officers
The
following table shows, as of the Record Date, the securities owned by each
director and nominee, the Named Executive Officers as defined below, and by all
of the present executive officers and directors as a group.
|
Name and Address of Beneficial
Owner
|
Common Stock Beneficially Owned(1)
|
Percent of Class(1)
|
|
Julius
Tabin, Ph.D.
|
132,824(2)
|
4.9%
|
|
Paul
F. Walter, M.D.
|
78,055(2)
|
2.9%
|
|
E.
P. Marinos
|
67,948(2)
|
2.5%
|
|
Jason
R. Chambers
|
65,249(3)(4)
|
2.4%
|
|
James
E. Rouse
|
18,800(5)
|
*
|
|
David
A. Garrison
|
22,500(6)
|
*
|
|
All
Executive Officers and Directors as a Group (6 Persons)
|
385,376
|
14.0%
|
__________________________
|
*
|
Less
than 1%.
|
|
(1)
|
Unless
otherwise noted in these footnotes, the Company believes that all shares
referenced in this table are owned of record by each person named as
beneficial owner and that each person has sole voting and dispositive
power with respect to the shares of Common Stock owned by each of
them. In accordance with Rule 13d-3 under the Exchange Act,
each person’s percentage ownership is determined by assuming that the
options that are held by that person, and which are exercisable within 60
days, have been exercised. The address of all persons listed
above is c/o Arrhythmia Research Technology, Inc., 25 Sawyer Passway,
Fitchburg, MA 01420.
|
|
(2)
|
Includes
16,000 shares issuable upon exercise of options, but excludes options to
acquire 11,500 shares which are not currently exercisable but which vest
and will be exercisable as to an additional 2,000 shares on January 2,
2011 and 1,500 shares on January 4, 2011 and each anniversary thereafter
until fully vested.
|
|
(3)
|
Includes
35,216 shares held in the EBC Charitable Remainder Trust, for which Mr.
Chambers serves as trustee and as to which an immediate family member is
beneficiary. Mr. Chambers disclaims beneficial ownership of the shares
held by the EBC Charitable Remainder
Trust.
|
|
(4)
|
Includes
options to acquire 14,000 shares but excludes options to acquire 13,500
shares which are not currently exercisable but which vest and will be
exercisable as to an additional 2,000 shares on or after August 4, 2009
and January 2, 2011, and 1,500 shares on January 4, 2011, respectively,
and each anniversary thereafter until fully
vested.
|
|
(5)
|
Includes
options to acquire 3,800 shares but excludes options to acquire 13,200
options which are not currently exercisable but which vest and will be
exercisable as to 1,900 shares on January 2, 2011 and 1,500 shares on
January 4, 2011 and each anniversary thereafter until fully
vested.
|
|
(6)
|
Represents
12,500 shares issuable upon exercise of options; excludes options to
acquire an additional 6,000 shares which are not currently exercisable,
but which options vest and will be exercisable as to an additional 1,500
shares on or after January 2, 2010 and 1,500 shares on January 4, 2011 and
each anniversary thereafter until fully
vested.
|
Interest
of Directors and Executive Officers in the Matters to be Acted Upon
Dr. Paul
F. Walter has been nominated for re-election as a Class III director and
therefore has an interest in the outcome of Proposal 1.
Section
16(a) Beneficial Ownership Reporting Requirements
Section
16(a) of the Exchange Act requires our executive officers and directors, and
persons who own more than ten percent of any publicly traded class of our equity
securities, to file reports of ownership and changes in ownership of equity
securities of the Company with the SEC and the New York Stock
Exchange. Officers, directors, and greater-than-ten-percent
stockholders are required by the SEC's regulations to furnish the Company with
copies of all Section 16(a) forms that they file.
5
Based
solely upon a review of Forms 3 and Forms 4 furnished to the Company during the
most recent fiscal year, and Forms 5 with respect to its most recent fiscal
year, we believe that all such forms required to be filed pursuant to Section
16(a) of the Exchange Act were timely filed, as necessary, by the officers,
directors, and security holders required to file the same during the fiscal year
ended December 31, 2009, except that a Form 4 reporting five transactions was
inadvertently filed late by Mr. Garrison.
Directors
and Executive Officers
The
directors and executive officers of the Company are as follows:
|
Name
|
Age
|
Title
|
|
|
E.
P. Marinos
|
68
|
Chairman
of the Board (1)
|
|
|
James
E. Rouse
|
55
|
President,
Chief Executive Officer and Director
|
|
|
David
A. Garrison
|
41
|
Executive
Vice President of Finance and Chief Financial Officer
|
|
|
Jason
R. Chambers
|
32
|
Director
(1)
|
|
|
Julius
Tabin, Ph.D.
|
90
|
Director
(1)
|
|
|
Paul
F. Walter, M.D.
|
72
|
Director
(1)
|
|
___________________________
(1) E. P.
Marinos, Dr. Julius Tabin and Jason Chambers serve as members of the Audit
Committee and, together with Dr. Paul F. Walter, serve as independent
directors.
Set forth
below are descriptions of the backgrounds of the executive officers and
directors of the Company and their principal occupations for the past five
years.
E. P. Marinos. Mr.
Marinos has served as a director of the Company since 1994. Mr.
Marinos has been Chief Executive Officer of AMT/EPM Associates, a consulting
firm, since June 1, 2001. Mr. Marinos was President and Chief
Executive Officer of Midcoast Interstate Transmission, Inc. (MIT), an interstate
pipeline company, from June 1997 until June 2001. He also became
Corporate Vice President of Administration for Midcoast Energy Resources, Inc.
(MRS), MIT's parent company, in June 1999 and President and Chief Executive
Officer of Kansas Pipeline Co. in December 1999, a subsidiary of MRS, and held
those positions until MRS was sold in June 2001. From March 1995
until June 1997, he was President and Chief Executive Officer of the
Company. Since August
2009 he has served as a director of the Bay Area Houston Ballet & Theatre, a
non-profit organization. He is a graduate of Wayne State
University (B.S. in Business Administration with majors in Finance and
Accounting, 1964) and a member of the AICPA.
Mr.
Marinos brings upwards of 18 years prior experience with a “Big 8” accounting
firm, including years of experience providing audit and advisory services to a
variety of industries including medical, engineering, banking and
energy. His prior service as president and CEO of the Company as well
as CEO and CFO of other publicly traded companies expand his breadth of
knowledge of business and management. His advanced degree in business
administration including majors in finance and accounting, as well as prior
experience, qualify him to serve as a member of the Company’s Audit
Committee.
James E.
Rouse. Mr. Rouse was appointed President and Chief Executive
Officer of the Company in October 2002 after serving in the capacity of
President and Chief Operating Officer since October of
2001. Previously he had served as Vice President and General Manager
of the Company from December 2000 to October 2001. Mr. Rouse has also
served as President, Chief Executive Officer and Chief Operating Officer of the
Company’s subsidiary, Micron Products, since December 2000, Vice President and
General Manager from July 2000 to December 2000 and Plant Operations Manager
from December 1996 to July 2000. Prior to joining Micron Products Mr.
Rouse held the position of Operations Manager from December 1995 to December
1996 for Jarvis Surgical, Inc., a manufacturer of medical devices. He served in
positions of Biomedical Product Manager and Director of Quality Assurance during
his employment at KomTeK, Inc., a subsidiary of Kervick Enterprises, Inc., a
manufacturer of close tolerance forgings and investment castings, from 1983 to
1995. He is a graduate of the University of Massachusetts (Amherst)
(B.A. Political Science, 1977) and Worcester Polytechnic Institute, School of
Industrial Management (1997).
6
As the
only management representative on the Company’s Board, Mr. Rouse provides an
insider’s perspective in Board discussions about the business and strategic
direction of the Company. In addition, he has experience in all
aspects of the Company’s business as well as advanced studies in industrial
management. Mr. Rouse is also active in local organizations and his
contacts in the Fitchburg, Massachusetts, business and educational community
afford him the opportunity to have a working relationship with the local
leaders.
David A.
Garrison. Mr. Garrison was appointed Executive Vice President
of Finance of the Company in December 2004 and has served as Chief Financial
Officer since November 2002. He joined the Company as Corporate
Controller in September of 2002 after nine years as Controller and Chief
Financial Officer of H & R 1871, Inc., a privately held manufacturer of
consumer products. He is a graduate of Miami University (B.S. in
Finance, 1990) and Boston University (Masters in Business Administration,
2001).
Jason R.
Chambers. Mr. Chambers has served as a director of the Company
since April 2006. Mr. Chambers has served as President of Mountain
Brook Water, a water bottling and distribution company, from June 14, 2002 to
the present, and from August 2001 to the present has served as a consultant
assisting The Chambers Medical Foundation, a private foundation, in assessing
medical grant applications. The Foundation beneficially owns
approximately 10% of the Company’s outstanding common stock. Mr.
Chambers holds a Bachelor of Science degree from Vanderbilt University School of
Engineering and a Masters of Business Administration degree from Owen Graduate
School of Management, Vanderbilt University with a concentration in finance and
marketing. Mr. Chambers is also a Dana-Farber Cancer Institute
Hematologic Oncology visiting committee member and a board member of Global
Health Action, a non-profit organization focused on providing health
professionals with leadership, management and project planning
training.
Mr.
Chambers brings over 8 years practical business and finance experience as the
president of a growing enterprise along with knowledge of and relationships with
the medical community through his non-profit activities. His advanced
degree in business administration and finance experience qualify him to serve on
the Audit Committee.
Julius Tabin,
Ph.D. Dr. Tabin has served as a director of the Company since
its founding in 1982. Prior to his retirement in June 2006, Dr. Tabin
was a partner in the law firm of Fitch, Even, Tabin &
Flannery. His practice focused on client counseling, litigation, and
licensing in the areas of patents, trademarks, copyrights, trade secrets,
related contract, and antitrust law. He is a graduate of the
University of Chicago (B.S., 1940; Ph.D. Physics, 1946) and Harvard Law School
(LL.B., 1949).
Dr. Tabin
has over 27 years experience on the Company’s Board and, as a result, has a
depth of experience with the Company’s injection molding
business. His prior experience as director of other companies has
expanded his breadth of knowledge of business and management. His
advanced degrees in physics and law as well as his more than 50 years experience
counseling clients on intellectual property matters enable him to provide
valuable insights into processes and potential pitfalls.
Paul F. Walter,
M.D. Dr. Walter has served as a director of the Company since
its founding in 1982. Dr. Walter is an electrophysiologist and
Professor of Medicine at Emory University where he has served on the faculty
since 1980. He specializes in cardiology and clinical
electrophysiology. Dr. Walter started the
arrhythmia/electrophysiology service at Emory University in 1980. He
performed clinical research studies in signal averaged electrocardiography when
this test was being developed in the 1980s. He is a 1961 graduate of
the University of Nebraska, College of Medicine with graduate studies at the
University of Michigan.
Dr.
Walter has over 27 years experience on the Company’s Board and brings, in
addition, over 48 years experience in the medical field and community,
particularly as it relates to cardiology. His position on the faculty
of Emory University and depth of knowledge in and ongoing experience with
electrophysiology and developments in cardiology uniquely position him to
provide valuable insights into innovative products in the medical field as well
as markets for such products.
No
director is related to any other director or executive officer of the Company or
its subsidiaries, and there are no arrangements or understandings between a
director and any other person pursuant to which such person was elected as
director.
Each
executive officer of the Company is appointed by the Board of Directors and
holds his office(s) at the pleasure and discretion of the Board.
There are
no material proceedings to which any director, director nominee, executive
officer or affiliate of the Company, any owner of record or beneficial interest
of more than five percent of any class of voting securities of the Company, or
any associate of any such director, officer, affiliate or security holder is a
party adverse to the Company or any of its subsidiaries or has a material
interest adverse to the Company or any of its subsidiaries.
7
No
director, director nominee, officer or affiliate of the Company, owner of record
or beneficial interest of more than five percent of any class of voting
securities of the Company has, to the Company’s knowledge, during the last five
years (i) been convicted of any criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, United States federal or state securities laws or finding any violations
with respect to such laws.
The
Board of Directors
The Board
of Directors oversees the business affairs of the Company and monitors the
performance of management. Pursuant to the Company’s By-Laws, the Board of
Directors has established that the Board of Directors shall consist of no less
than two and no more than six members. Currently the number of seats on the
Board is five. The Company’s By-Laws further provide that the Board
of Directors be divided in three classes serving staggered three year terms with
each class to be as nearly equal in number as possible. See Proposal
1.
Members
of the Board of Directors discussed various business matters informally on
numerous occasions throughout the year 2009. There were nine formal
Board meetings in person or by teleconference during 2009. During
2009, all directors attended at least 75% of the meetings of our Board and Board
committees on which they served. Independent directors meet on a
regular basis as often as necessary to fulfill their responsibilities, including
at least annually in executive session without the presence of non-independent
directors and management.
Board
Leadership Structure and Role in Risk Oversight
The Board
of Directors does not have a policy, one way or the other, on whether the same
person should serve as both the chief executive officer and chairman of the
board or, if the roles are separate, whether the chairman should be selected
from the non-employee directors or should be an employee. The Board
believes that it should have the flexibility to make these determinations at any
given point in time in the way that it believes best to provide appropriate
leadership for the Company at that time. The current structure is
that of separate Chief Executive Officer and Chairman of the Board of
Directors. Mr. James Rouse serves as the Chief Executive Officer
and President and is responsible for day-to-day leadership of the
Company. Mr. E.P. Marinos serves as the Chairman of the
Board. The Board of Directors believes this is the most appropriate
structure for the Company at this time as it recognizes the time, effort and
energy that the Chief Executive Officer is required to devote to his position in
the current business environment, as well as the commitment required to serve as
the Chairman of the Board, particularly as the Board’s oversight
responsibilities continue to grow.
The
Board, either as a whole or through its Committees, regularly discusses with
management strategic and financial risks and exposures associated with the
Company’s annual operating budget, their potential impact on the Company and the
steps taken to manage them. While the Board of Directors is
ultimately responsible for risk oversight at the Company, the Board’s Committees
assist the Board in fulfilling its oversight responsibilities in certain areas
of risk. In particular, the Audit Committee focuses on financial and
enterprise risk exposures and discusses with management, the internal auditors,
and the independent registered public accountants the Company’s policies with
respect to risk assessment and risk management, including risks related to
financial reporting, tax, accounting, disclosure, internal control over
financial reporting, financial policies and credit and liquidity
matters. The Audit Committee also assists the Board of Directors in
fulfilling its duties and oversight responsibilities relating to the Company’s
compliance and ethics programs, including compliance with legal and regulatory
requirements. The Executive and Finance Committee regularly reviews
with management the Company’s financial arrangements, capital structure and
strategic opportunities. The Nominating and Corporate Governance
Committee annually reviews the Company’s corporate governance
guidelines. The Succession Committee focuses on succession planning
for the executive officers. Finally, the Compensation Committee
assists the Board in fulfilling its oversight responsibilities with respect to
the management of risks arising from the Company’s compensation policies and
programs.
Attendance
Policy
All Board
members are strongly encouraged to attend each meeting of the Board and
committees on which they serve and be prepared to discuss the business
presented. An attendance rate of at least 75% is the minimum
acceptable rate of attendance at Board and committee meetings. A
Board member’s record of attendance will be considered with respect to
recommendation of the renewal of a Board term or future assignment to a
committee. Directors are strongly encouraged to attend annual
meetings, and all of the directors in office at that time attended the 2009
Annual Meeting.
8
Committees
of the Board of Directors
The Board
of Directors has established the following standing committees, namely, an Audit
Committee, a Compensation Committee, an Executive and Finance Committee, a
Nominating and Corporate Governance Committee, and a Succession
Committee.
Audit
Committee. The Audit Committee assists the Board of Directors
in the oversight of the audit of the Company’s financial statements and the
quality and integrity of its accounting, auditing and financial reporting
processes. The Audit Committee also has the responsibility of
reviewing the qualifications, independence and performance of the Company’s
independent registered public accounting firm and is responsible for the
appointment, retention, oversight and, where appropriate, termination of the
independent registered public accounting firm. During the fiscal year
2009, the Audit Committee held six formal meetings. Its current
members are Mr. Jason Chambers (Chairman), Dr. Julius Tabin, and
Mr. E.P. Marinos. The Board of Directors has determined that
each of the members of the Audit Committee meets the criteria for independence
under the applicable listing standards of the NYSE AMEX, and that
Mr. Marinos also qualifies as an “audit committee financial expert,” as
defined by the rules adopted by the SEC. The Board of Directors has
adopted a written charter for the Audit Committee, which is reviewed annually by
the Audit Committee. The current Audit Committee Charter is available
on the Company’s web site, namely,
http://www.arthrt.com/investorrelations/corporategovernance/tabid/66/Default.aspx.
Compensation
Committee. The principal functions of the Compensation
Committee are to evaluate the performance of the Company’s senior executives, to
consider the design and competitiveness of the Company’s compensation plans, to
review and recommend senior executive compensation and to administer the
Company’s equity-based compensation plans. Its current members are
Dr. Paul F. Walter (Chairman), Mr. E.P. Marinos and
Dr. Julius Tabin. During the fiscal year 2009, the Compensation
Committee held two formal meetings. The current Compensation
Committee Charter is available on the Company’s web site, namely,
http://www.arthrt.com/investorrelations/corporategovernance/tabid/66/Default.aspx.
Executive and Finance
Committee. The Executive and Finance Committee is composed of
three members: Mr. E. P. Marinos,
Mr. James E. Rouse and
Mr. Jason R. Chambers. The principal functions of the
Executive and Finance Committee are reviewing and evaluating significant
business and policy decisions and making recommendations to the full Board of
Directors. The Executive Committee held nine formal meetings in
2009.
Nominating and Corporate Governance
Committee. The Nominating and Corporate Governance Committee
is presently composed of three members of the
board: Dr. Julius Tabin (Chairman),
Dr. Paul F. Walter, and Mr. E.P. Marinos, each of whom
is an independent director as independence is defined by the rules and
regulations of the NYSE AMEX. The Nominating and Corporate Governance
Committee assists the Board in identifying individuals qualified to be
directors, oversees the composition, structure and evaluation of the Board and
its committees, and develops and maintains a set of corporate governance
guidelines. The Nominating and Corporate Governance Committee reviews
these guidelines regularly and recommends changes as necessary or
appropriate. During the fiscal year 2009, the Committee held 2 formal
meetings. A copy of the Nominating and Corporate Governance Committee
Charter is available on the Company’s website,
http://www.arthrt.com/investorrelations/corporategovernance/tabid/66/Default.aspx.
Succession
Committee. The Succession Committee is composed of five
members: Mr. E.P. Marinos (Chairman),
Mr. James E. Rouse, Dr. Julius Tabin,
Dr. Paul F. Walter, and
Mr. Jason R. Chambers. The Succession Committee
assists the Board in monitoring the preparation and adequacy of succession plans
for executive officer positions. During the fiscal year 2009, the
Committee held no formal meetings.
Nominees
to the Board of Directors
Dr. Paul
Walter is the Board of Director’s nominee for re-election as Class III director
to the Board of Directors. See “Information about Directors and
Executive Officers” above for information relative to his business
experience.
The
Company’s Nominating and Corporate Governance Committee identifies new director
candidates through recommendations from members of the Committee, other Board
members and executive officers of the Company and will consider candidates who
are recommended by security holders, as described below. Although the
Board does not have a formal diversity policy, the Committee and the Board will
consider such factors as it deems appropriate to assist in developing a Board
and committees that are diverse in nature and comprised of experienced and
seasoned advisors. These factors focus on skills, expertise or
background and may include decision-making ability, judgment, personal integrity
and reputation, experience with businesses and other organizations of comparable
size, experience as an executive with a publicly traded company, and the extent
to which the candidate would be a desirable addition to the Board and any
committees of the Board.
9
For
nominations by a stockholder to be properly brought before an annual meeting,
the stockholder must have given written notice thereof, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of the
Company, not later than 90 days nor earlier than the 120th day
prior to the anniversary of the previous year’s annual meeting; provided,
however, that in the event that no annual meeting was held in the previous year
or the annual meeting is scheduled to be held on a date more than thirty (30)
days prior to or delayed by more than sixty (60) days after such anniversary
date, notice by the stockholder in order to be timely must be so received not
later than the later of the close of business ninety (90) days prior to the
annual meeting or the tenth (10th) day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
which may include any public filing by the Company with the Securities and
Exchange Commission, of the date of the annual meeting. For
nominations by a stockholder to be properly brought before a special meeting of
stockholders called for the purpose of electing directors, the stockholder must
have given written notice thereof, either by personal delivery or by United
States mail, postage prepaid, not later than the close of business on the tenth
(10th) day
following the day on which public announcement of the date of the special
meeting is first made by the Company.
The
notice must set forth the following:
|
·
|
the
name and record address of the stockholder and the nominee;
|
|
·
|
a
representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to propose such
business;
|
|
·
|
a
description of all arrangements or understandings between the stockholder
and each proposed nominee (naming the person) pursuant to which the
nomination is to be made by the
stockholder;
|
|
·
|
such
other information regarding each nominee proposed by such stockholder as
would be required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission were such
nominee to be nominated by the Board of Directors;
and
|
|
·
|
consent
of each proposed nominee to serve as a director of the Company if so
elected.
|
In
addition to the provisions of Section 3 of the By-laws summarized above, a
stockholder shall also comply with all of the applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth herein.
The
Committee will evaluate new director candidates in view of the criteria
described above, as well as other factors the Committee deems to be relevant,
through reviews of biographical and other information, input from others,
including members of the Board and executive officers of the Company, and
personal discussions with the candidate when warranted by the results of these
other assessments. The Committee will evaluate any director
candidates recommended by security holders under the same process. In
determining whether to recommend to the Board the nomination of a director who
is a member of the Board, the Committee will review the Board performance of
such director and solicit feedback about the director from other Board
members.
Communicating
with the Board
The Board
desires to foster open communications with its security holders regarding issues
of a legitimate business purpose affecting the Company. Each Board
member is willing to accept correspondence. Communications from
stockholders should be in the form of written correspondence and sent via
registered mail or overnight delivery to the Company’s corporate office, care of
the Secretary. Electronic submissions of security holder
correspondence will not be accepted. The correspondence shall include
supporting documentation evidencing the security holder’s stock or other
holdings in the Company. The Secretary shall pass on any such
communication, other than a solicitation for a product or service or a request
for copies of reports filed with the Commission, to the appropriate Board
member. Any security holder correspondence addressed generically to
the Board of Directors will be forwarded to the Chairman of the
Board.
Code
of Conduct and Ethics
The
Company has adopted a Code of Conduct and Ethics that applies to all its
employees as well as its principal executive, financial and accounting
officers. A copy of the Code can be found on the Company’s website at
http://www.arthrt.com/
investorrelations/corporategovernance/tabid/66/Default.aspx. The
Company intends to satisfy the disclosure requirements regarding any amendments
to or waivers from a provision of the Code that applies to its principal
executive, financial and accounting officers by posting such information on its
website at the address set forth above.
10
The
information contained in this Proxy Statement with respect to the Audit
Committee Report and charter and the independence of the members of
the Audit Committee shall not be deemed to be “soliciting material”
or to be “filed” with the SEC, nor shall such information be incorporated by
reference into any future filing under the Securities Act of 1933, as amended
(the “Securities Act”),
or the Exchange Act, except to the extent that the Company specifically
incorporates it by reference in such filing.
The Audit
Committee is directly responsible for the appointment, compensation, retention
and oversight of the accounting firm that we engage as the Company’s independent
registered public accounting firm. The Company’s management is
responsible for the Company’s internal controls, disclosure controls and
financial reporting process. The Company’s independent registered
public accounting firm is responsible for performing an independent audit of the
Company’s consolidated financial statements and expressing an opinion on the
conformity of those financial statements with generally accepted accounting
principles.
In the
performance of the Audit Committee’s oversight function, we have reviewed and
discussed with management the Company’s audited financial statements of the
Company for the fiscal year ended December 31, 2009 and management’s assessment
of the effectiveness of the Company’s internal control over financial
reporting. We have also discussed with the Company’s independent
registered public accounting firm the matters requiring discussion pursuant to
Statement on Auditing Standards No. 61, as amended (Communications with Audit
Committees) and as adopted by the Public Company accounting Oversight Board in
Rule 3200T and such other matters as we have deemed to be
appropriate. We have also discussed with CCR LLP matters relating to
its independence, and have received the written disclosures and letter from it
required by the applicable requirements of the Public Company Accounting
Oversight Board.
On the
basis of the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the Company’s audited consolidated
financial statements for the year ended December 31, 2009 be included in the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009
for filing with the Securities and Exchange Commission.
|
By the Members of the Audit
Committee:
|
|
|
Mr.
Jason R. Chambers, Chairman
|
|
|
Mr.
E.P. Marinos
|
|
|
Dr.
Julius Tabin
|
|
Audit
Committee Pre-Approval of Audit and Non-Audit Services
The Audit
Committee pre-approves all audit and permissible non-audit services provided to
the Company by the independent registered public accounting
firm. These services may include audit services, audit-related
services, tax services and other services. The Audit Committee has
adopted policies and procedures for the pre-approval of services provided by the
independent registered public accounting firm. Such policies and
procedures provide that management and the independent registered public
accounting firm shall jointly submit to the Audit Committee a schedule of audit
and non-audit services for approval as part of the annual plan for each fiscal
year. In addition, the policies and procedures provide that the Audit
Committee may also pre-approve particular services not in the annual plan on a
case-by-case basis. Management must provide a detailed description of
each proposed service and the projected fees and costs (or a range of such fees
and costs) for the service. The policies and procedures require
management and the independent registered public accounting firm to provide
quarterly updates to the Audit Committee regarding services rendered to date and
services yet to be performed.
As
permitted under the Sarbanes-Oxley Act of 2002, the Audit Committee may delegate
pre-approval authority to one or more of its members, for audit and non-audit
services to a subcommittee consisting of one or more members of the Audit
Committee. Any service pre-approved by a delegatee must be reported
to the Audit Committee at the next scheduled meeting.
11
Summary
Compensation Table
The
following table sets forth information regarding annual and long-term
compensation with respect to the fiscal years ended December 31, 2009 and 2008,
paid or accrued by the Company to or on behalf of those persons who were, during
the fiscal year ended December 31, 2009, the Company's Chief Executive Officer
and the Company's most highly compensated executive officers serving as such as
of December 31, 2009 whose compensation was in excess of $100,000 (the “Named Executive
Officers”).
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)(1)
|
Non
Equity Incentive Plan Compensation
($)(2)
|
Nonqualified
Deferred Compensation Earnings
|
All
Other Compensation
($)(3)
|
Total
($)
|
|
James
E. Rouse (4)
|
2009
|
230,500
|
--
|
--
|
--
|
--
|
--
|
--
|
230,500
|
|
President
and CEO
|
2008
|
230,500
|
--
|
--
|
26,059
|
--
|
--
|
--
|
256,559
|
|
David
A.Garrison (5)
|
2009
|
142,500
|
--
|
--
|
--
|
--
|
--
|
--
|
142,500
|
|
EVP
and CFO
|
2008
|
142,500
|
--
|
--
|
20,573
|
--
|
--
|
--
|
163,073
|
__________________________
|
(1)
|
Amounts
reflect the aggregate grant date fair value of option awards computed in
accordance with FASB ASC Topic 718. The fair value of each option award is
estimated on the date of grant using the Black-Scholes option-pricing
model. Option awards were made on January 2, 2008 with a Black-Scholes
value of $2.74 per share. A more detailed discussion of the assumptions
used in the valuation of option awards made in fiscal year 2009 may be
found in Note 10 of the Notes to the Financial Statements in the Company’s
Form 10-K for the year ended December 31,
2009.
|
|
(2)
|
The
amounts shown in this column include payments made under the annual
performance-based incentive plan.
|
|
(3)
|
Includes
prerequisites based on the aggregate incremental cost to the Company
unless the amount of such compensation is less than $10,000, gross-ups or
other amounts reimbursed during the year for payment of taxes; accrued
severance payments; contributions to defined contribution plans and the
dollar value of insurance premiums paid by the Company with respect to
life insurance for the benefit of the named executive
officer.
|
|
(4)
|
Mr.
Rouse was appointed President and Chief Executive Officer of the Company
in October 2002. He served as President and Chief Operating Officer of the
Company from October 2001 to October
2002.
|
|
(5)
|
Mr.
Garrison was appointed as Executive Vice President of Finance of the
Company in December 2004, and has served as Chief Financial Officer of the
Company since November 2002.
|
Narrative
Disclosure to Summary Compensation Table
Incentive Compensation
Program. The Company’s 2009 incentive plan was designed to
provide an incentive for employees to achieve and surpass targeted performance
goals. All of the Company’s regular full time, salaried employees,
including the executive officers, participate in this plan. The
annual bonus amount for each participant is based on one or more Company-wide
performance measures. The cash bonuses payable under the program are
determined as a percentage of a participant’s annual base salary ranging from 3%
to 17.5% for staff, managers and vice-president/manager personnel and ranging
from 15% to 20% for executive officers. The target level for
performance-based cash incentive compensation is based on the Company’s internal
budget targets, which are reviewed and approved by the Board. The
factors considered in establishing the performance target include the
aggressiveness of the budget target, the revenue and earnings growth included in
the budget target as compared to the prior year, and any significant strategic
initiatives that may impact the budget target. This is usually done
through discussions with the Company’s senior executives and with the
Board. Upon completion of the fiscal year, the Board assesses the
performance of the Company based on the performance measures that it established
for that year and approves the funding level of the cash incentive
plan. For 2009 and 2008 bonus levels for executive officers were
based on a percentage of base salary assuming targeted budgeted operating profit
levels were met. As the 2009 and 2008 incentive plan goals were not
met, no amounts were paid to the Named Executive Officers under the 2009 or 2008
incentive plan.
12
Employment
Agreements. The Company entered into an Executive Employment
Agreement as of October 4, 2006 with James E. Rouse, the Company’s President and
Chief Executive Officer, for the five year period commencing as of October 4,
2006. The agreement replaces the prior five year employment agreement
originally expiring October 4, 2006 and, as amended, extended to December 4,
2006. Under the terms of the agreement, Mr. Rouse is to receive an
annual base salary commencing as of October 5, 2006 of $230,000 subject to
annual review and modification by the Board upon the recommendation of the
Compensation Committee subject to minimum increases of $10,000 as of October 5,
2007 and 2008.
The
Company entered into an Executive Employment Agreement as of February 14, 2007,
with David A. Garrison, the Company’s Executive Vice President and Chief
Financial Officer, for the five year period commencing as of
January 1, 2007. Under the terms of the agreement, Mr. Garrison is to
receive an annual base salary commencing as of January 1, 2007 of
$150,000.
Each of
Mr. Rouse and Mr. Garrison are also entitled to participate in bonus
compensation and employee benefits plans as the Company may institute from time
to time at the discretion of the Compensation Committee, upon the approval of
the Board of Directors. The Executive Employment Agreements each
provide confidentiality, non-competition and non-solicitation restrictions
following termination of employment. In the event the Company terminates either
Mr. Rouse or Mr. Garrison’s employment agreement without “cause” or the
executive terminates the agreement for “good reason” as such terms are defined
in the agreements, the Company will be required to pay the greater of the
executive’s then current annual base compensation for the remaining period of
employment as in effect immediately prior to such termination or his then
current annual base compensation for twenty-four months and will provide certain
medical benefits for up to 24 months. In the event of a “change of
control,” including merger, consolidation, a sale of all or substantially all of
the Company's assets or a sale or transfer of the Company's voting securities
resulting in a change in the ownership of a majority of the Company's voting
securities, the Company may terminate the executive’s employment, in which event
he is entitled to the greater of his current base compensation up to the date of
termination or his base compensation for a period of 24 months, as well as 24
months of medical and dental benefits.
Outstanding
Equity Awards at Fiscal Year End
|
Option Awards
|
Stock Awards
|
||||||||
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying
Unexercised Unearned Options (#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of Shares or Units of Stock That Have Not Vested (#)
|
Market
Value of Shares or Units of Stock That Have Not Vested ($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or
Other Rights That Have Not Vested (#)
|
Equity
Incentive Plan Awards: Market or Payout Value of
Unearned Shares, Units or Other Rights That Have Not Vested
($)
|
|
James
E. Rouse
|
1,900(1)
|
7,600(1)
|
--
|
$
7.15
|
01/02/2014
|
--
|
--
|
--
|
--
|
|
David
A. Garrison
|
8,000
|
--
|
--
|
9.86
|
12/19/2011
|
--
|
--
|
--
|
--
|
|
1,500(2)
|
6,000(2)
|
--
|
7.15
|
01/02/2014
|
--
|
--
|
--
|
--
|
|
_________________________
|
(1)
|
Exercisable
as to 1,900 shares on 1/2/09 and each anniversary until all 9,500 options
are exercisable.
|
|
(2)
|
Exercisable
as to 1,500 shares on 1/2/09 and each anniversary until all 7,500 options
are exercisable.
|
13
Director
Compensation
For
fiscal year 2009 each non-employee director received cash compensation of
$25,000, payable quarterly. Additionally, the chairman of the Board
received an additional $5,000 and the chairman of the audit committee received
an annual fee of $4,000. During fiscal year 2009, our current
directors who were serving in such capacity in 2009 received the following
fees:
|
Name
|
Fees
Earned or Paid in Cash ($)(1)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation ($)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
|
All
Other Compensation
($)
|
Total
($)
|
|
E.P.
Marinos
|
$ 30,000
|
--
|
--
|
--
|
--
|
--
|
$
30,000
|
|
Julius
Tabin
|
25,000
|
--
|
--
|
--
|
--
|
--
|
25,000
|
|
Paul
F. Walter, M.D.
|
25,000
|
--
|
--
|
--
|
--
|
--
|
25,000
|
|
Jason
R. Chambers
|
29,000
|
--
|
--
|
--
|
--
|
--
|
29,000
|
__________________________
|
(1)
|
Includes
amounts earned from the annual retainer and chairperson
fees.
|
Compensation
Committee Procedures
The
following information relating to the Compensation Committee is not soliciting
material and as such is not deemed filed with the SEC nor incorporated by
reference in any filing of the Company under the Securities Act or the Exchange
Act, whether made before or after the date of this Proxy Statement and
irrespective of any general incorporation language in any such
filing.
The
Compensation Committee is responsible for establishing and reviewing the
Company’s executive compensation policies, advising the full Board of Directors
on all compensation matters and administering the Company’s employee benefit
plans including the Stock Option Plan and Stock Award Plan. In 2009,
the Committee was comprised of Dr. Paul F. Walter, Chairman, Dr.
Julius Tabin, and Mr. E.P. Marinos, each of whom is an independent
director.
The
Compensation Committee works with management to develop relationships between
pay levels, financial performance and returns to stockholders, in order to align
our compensation structure with our organizational objectives. By
tying compensation in part to particular goals, the Compensation Committee
believes that a performance-oriented environment is created for the Company’s
employees and executives. All decisions of the Committee relating to
compensation of the President and Chief Executive Officer and other Named
Executive Officers are reviewed and approved by the other non-employee
Directors.
The
Company's executive compensation policies are designed to foster the Company's
business goals of achieving profitable growth and premium returns to
stockholders. The principal objectives of these policies are as
follows: (1) to attract, motivate and retain executives of outstanding ability
and character; (2) to provide rewards based on each person’s individual
performance and the Company’s overall financial performance and
growth during the prior year by placing a portion of compensation at risk; and
(3) to align the interests of executives and stockholders through long-term,
equity-based incentives and programs to encourage and reward stock
ownership.
The
Compensation Committee has the authority under its charter to engage the
services of outside advisors, experts and others to assist the Compensation
Committee.
Base Salary. Base
salaries are intended to provide economic security for executive officers at a
level sufficient to attract and retain talent. Initial salary levels are set
based on the executive officer’s experience and performance, pay levels for
similar positions and negotiations with individual named executive
officers. Thereafter, the Compensation Committee considers increases
to base salaries each year based on its subjective assessment of our overall
performance over the preceding year, internal factors involving the executive's
experience, individual performance, and changes in responsibilities and equity
issues relating to pay for other Company executives, as well as external factors
involving competitive positioning, overall corporate performance, and general
economic conditions. No specific formula is applied to determine the
weight of each factor which may vary from one named executive officer to
another.
14
Incentive Compensation
Program. The Company’s annual cash incentive plan is designed
to provide an incentive for employees to achieve and surpass targeted
performance goals. All of the Company’s regular full time, salaried
employees, including the executive officers, participate in this
plan. The annual bonus amount for each participant is based on one or
more Company-wide performance measures. The target level for
performance-based cash incentive compensation is based on the Company’s internal
budget targets, which are reviewed and approved by the Board. The
factors that considered in evaluating the performance target include the
aggressiveness of the budget target, the revenue and earnings growth included in
the budget target as compared to the prior year, and any significant strategic
initiatives that may impact the budget target. This is usually done
through discussions with the Company’s senior executives and with the
Board. Upon completion of the fiscal year, the Compensation Committee
reviews the performance of the Company based on the performance measures
established for that year and the funding level of the cash incentive
plan.
Long-Term Incentive
Compensation. The Company also grants stock options and other
equity incentives under its Stock Option and Stock Award Plans in order to link
compensation to the Company's long-term growth and performance and to increase
stockholder value. The Committee recommends grants to designated
employees upon commencement of employment or following a significant change in
an employee's responsibility or title based in part on the recommendation of the
Company’s executive officers. Awards are based on the employee's
position in the Company, as well as the employee's current performance and
anticipated future contributions. The Committee also considers the
amount and terms of stock options and stock awards previously granted to the
employees and executive officers. The Committee individually
evaluates these factors with respect to the employees and each executive officer
and then the Committee reaches a consensus on the appropriate award to be
recommended for approval by the Board.
Compensation of President and Chief
Executive Officer. James E. Rouse was named President and
Chief Executive Officer of the Company in October 2002 and served pursuant to a
five-year employment agreement through October 4, 2006 at an annual rate of
compensation of $175,000. Based in part on advice received from the
consulting firm engaged by the Compensation Committee as to competitive
conditions for senior executive officers at similar public companies and in part
on negotiations with Mr. Rouse, a new five-year employment agreement was
negotiated and implemented providing annual compensation of $230,000 per year
commencing as of October 5, 2006. A discussion of other terms and
conditions of the employment agreement are set forth elsewhere
herein.
The
following paragraphs set forth the reportable transactions in the last fiscal
year between the Company and its executive officers, directors or affiliates.
See “Compensation of Directors and Executive Officers”, “Narrative to Summary
Compensation Table”, and “Employment Agreements” for descriptions of the terms
of the employment agreement between the Company and the Company’s Executive
Officers and “Director Compensation” for a description of terms of compensation
arrangements with our directors.
Transactions
with Management and Others
To date,
all transactions between the Company and its officers, directors or their
affiliates have been approved or ratified by a majority of the directors who did
not have an interest in, and who were not employed by the Company at the time
of, such transaction. The Company’s Audit Committee reviews and
oversees transactions between the Company and its executive officers and
directors.
15
ELECTION
OF DIRECTORS
The
Company’s By-Laws provide that the number of directors shall be fixed from time
to time by a vote of the majority of the Board of Directors. The Board has
determined the Board shall consist of no less than two or more than six
directors. The By-Laws further provide that the Board of Directors be
divided into three classes (Class I, Class II and Class III) serving staggered
three-year terms, with each class to be as nearly equal in number as possible.
The Board of Directors currently consists of five seats, namely, James E. Rouse
and Jason R. Chambers (Class I with term expiring at the 2011 Annual Meeting);
E. P. Marinos and Julius Tabin (Class II with terms expiring at the 2012 Annual
Meeting) and Paul F. Walter (Class III with term expiring at the 2010 Annual
Meeting).
The Board
of Directors, based on the recommendation of the Nominating Committee, has
concluded that the nomination and re-election of Paul F. Walter as a Class III
director is in the best interest of the Company and recommends stockholder
approval of the re-election of Dr. Walter for a three-year term (expiring at the
2013 Annual Meeting) and until his successor has been duly elected and shall
qualify.
The
remaining directors will continue to serve in their positions for the remainder
of their terms. Biographical information concerning Dr. Walter and the other
Company directors can be found under “Information About Directors and Executive
Officers.”
The
persons named in the proxy will vote FOR the nominees, except where authority
has been withheld as to the particular nominee.
The
nominees for director receiving a plurality of the votes represented by the
shares of common stock present in person or represented by proxy at the Annual
Meeting and entitled to vote thereon will be elected as director. Each of the
nominees has consented to being named in this Proxy Statement and to serve his
term if elected. As of the date of this Proxy Statement, the Board is
not aware that either nominee is unable or will decline to serve as a
director. If a nominee should for any reason become unavailable for
election, proxies may be voted with discretionary authority by the persons
appointed as proxies for any substitute designated by the Board of Directors of
the Company.
The
Board of Directors recommends that stockholders vote FOR the nominee for
election to the Board of Directors of the Company.
16
APPROVAL
OF THE ADOPTION OF THE 2010 EQUITY INCENTIVE PLAN
General
On March
10, 2010, the Company’s Board of Directors adopted the Arrhythmia Research
Technology, Inc. 2010 Equity Incentive Plan (the “2010 Plan”) upon the
recommendation of the Compensation Committee and subject to stockholder approval
at the Annual Meeting. The statements contained in this Proxy Statement
concerning the terms and provisions of the 2010 Plan are summaries only and are
qualified in their entirety by reference to the full text of the 2010 Plan, as
amended, a copy of which is attached hereto as Appendix I.
The Board
of Directors believes that the effective use of stock-based long-term incentive
compensation is important to our ability to achieve continued strong performance
in the future by aligning the interests of employees, non-employee board
members, consultants and key advisors with the interests of the Company’s
stockholders and to provide an opportunity for such persons to acquire and
maintain a proprietary interest in the Company through stock
ownership. Accordingly, the Company is seeking stockholder approval
of the 2010 Plan. There are approximately 97 persons currently
eligible to participate in the 2010 Plan, of which 93 are employees, including 2
executive officers and 4 non-employee members of the Board of
Directors.
The 2010
Plan authorizes the issuance of an aggregate of 500,000 shares, namely, 400,000
shares of our common stock plus an aggregate of 100,000 shares currently
reserved for issuance under the Company’s 2005 Stock Award Plan (the “2005 Plan”). If the
2010 Plan is approved by stockholders, it will replace in the entirety the 2005
Plan, pursuant to which no grants have been made. The Company’s 2001 Stock
Option, which expires in 2011, will continue to govern outstanding options but
it is the Company’s intention that no further options will be granted under the
2001 Plan. In the event the 2010 Plan is adopted by stockholders, we
will therefore have one plan providing the Company flexibility to award a mix of
stock options, equity incentive grants, performance awards and other types of
stock-based compensation and under which an aggregate of 500,000 shares will be
reserved for such grants.
Equity
Compensation Plan Information
The
following table provides information, as of March 9, 2010, with respect to our
equity compensation plans:
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights (a)
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a)
(c))
|
|
Equity
compensation plans approved by security holders
|
179,000
|
$ 9.29
|
268,000(1)
|
|
Equity
compensation plans not approved by security holders
|
--
|
--
|
--
|
|
Total
|
179,000
|
$ 9.29
|
268,000(1)
|
(1)
Includes 168,000 shares available under the 2001 Plan. Also includes
100,000 shares currently available under the 2005 Plan but which will be
reallocated to the 2010 Plan if approved by stockholders.
The 2010
Plan is not subject to the provisions of the Employment Retirement Income
Security Act and is not a “qualified plan” within the meaning of Section 401 of
the Internal Revenue Code, as amended (the “Code”).
The 2010
Plan will be administered by the Company’s Compensation Committee. The
Compensation Committee shall recommend to the Board the participants who will
receive awards under the 2010 Plan (each a “Participant”) and the type,
size and terms of each award. The Compensation Committee will make such other
determinations that it decides are necessary or desirable in the interpretation
and administration of the 2010 Plan.
Shares
Subject to the 2010 Plan
Pursuant
to the 2010 Plan, the aggregate number of shares of common stock that may be
issued is 500,000 shares, subject to adjustment to prevent the dilution of
rights from stock dividends, stock splits, recapitalization or similar
transactions. Shares issued under the Plan may be authorized but
unissued shares of common stock or reacquired shares of common stock, including
shares purchased by the Company on the open market.
17
Awards
under the 2010 Plan
Under the
2010 Plan, incentive stock options (“Incentive Stock Options”), as
defined in Section 422 of the Code, as well as options which do not so qualify
(“Nonqualified Stock
Options”), stock units, stock awards, stock appreciation rights (“SARs”) and other stock-based
awards my be awarded. Incentive Stock Options and Nonqualified Stock Options
together are referred to herein as “Options.”
Options. The
duration of any Option shall be recommended by the Compensation Committee and
determined by the Board; provided, however, that any Incentive Stock Option
granted to a 10% or less stockholder or any Nonqualified Stock Option shall, by
its terms, be exercised within ten years after the date the Option is granted
and any Incentive Stock Option granted to a greater than 10% stockholder shall,
by its terms, be exercised within five years after the date the Option is
granted. The price at which each share of common stock subject to an
Option shall be recommended by the Compensation Committee and determined by the
Board; provided, however, that the price for an Incentive Stock Option will be
equal to, or greater than, the fair market value of a share of common stock on
the date the Option is granted and further provided that Incentive Stock Options
may not be granted to an employee who, at the time of grant, owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary, as defined in section 424 of
the Code, unless the price per share is not less than 110% of the fair market
value of the common stock on the date of grant.
Stock Units. Stock
units may be granted to an employee, consultant or non-employee director, upon
such terms and conditions deemed appropriate under the 2010 Plan. Each stock
unit shall represent the right of the Participant to receive a share of common
stock or an amount based on the value of a share of common stock.
Stock
Awards. Shares of common stock may be issued to an employee,
consultant or non-employee director under a stock award, upon such terms and
conditions as deemed appropriate under the 2010 Plan. Shares of
common stock issued pursuant to stock awards may be issued for cash
consideration or for no cash consideration, and subject to restrictions or no
restrictions, as determined by the Board. The Board may establish
conditions under which restrictions on stock awards shall lapse over a period of
time or according to such other criteria as the Board deems appropriate,
including restrictions based upon the achievement of specific performance
goals.
SARs and Other Stock-Based
Awards. SARs may be granted to an employee, non-employee
director or consultant separately or in tandem with an Option. SARs may be
granted in tandem either at the time the Option is granted or at any time
thereafter while the Option remains outstanding; provided, however, that, in the
case of an Incentive Stock Option, SARs may be granted only at the date of the
grant of the Incentive Stock Option. In the case of tandem SARs, the
number of SARs granted to a Participant that shall be exercisable during a
specified period shall not exceed the number of shares of common stock that the
Participant may purchase upon the exercise of the related Option during such
period. Upon the exercise of an Option, the SARs relating to the common stock
covered by such Option shall terminate. Upon the exercise of SARs,
the related Option shall terminate to the extent of an equal number of shares of
common stock. The stock appreciation for an SAR is the amount by
which the fair market value of the underlying common stock on the date of
exercise of the SAR exceeds the base amount of the SAR. The
Compensation Committee shall determine whether the stock appreciation for an SAR
shall be paid in the form of shares of common stock, cash or a combination of
the two.
Other
awards may be granted that are based on or measured by common stock to
employees, consultants and non-employee directors, on such terms and conditions
as the Board deems appropriate. Other stock-based awards may be
granted subject to achievement of performance goals or other conditions and may
be payable in common stock or cash, or in a combination of the
two. The Plan will be unfunded as to amounts which may be awarded or
paid in cash and the Company will not be required to establish any special or
separate fund or to make any other segregation of assets to assure the payment
of any grants under this Plan.
Qualified Performance-Based
Compensation. Stock units, stock awards, SARs or other stock-based awards
granted to an employee may be determined to be “qualified performance-based
compensation” under Section 162(m) of the Code.
18
Termination
of Employment
If the
employment or service of a Participant is terminated for cause, as defined in
the 2010 Plan, the Options of such Participant, both accrued and future, then
held shall terminate immediately. If the employment or service of the
Participant is terminated by either the Participant or the Company for any
reason other than for cause, death, or for disability, as defined in Section
22(e)(3) of the Code, the Options of such Participant then outstanding shall be
exercisable by such Participant at any time prior to the expiration of the
Options or within three months after the date of such termination, whichever
period of time is shorter, but only to the extent of the accrued right to
exercise the Options at the date of such termination. In the case of
a Participant who becomes disabled, as defined by Section 22(e)(3) of the Code,
the rights of such Participant under any then outstanding Options shall be
exercisable by such Participant at any time prior to the expiration of the
Options or within one year after the date of termination of employment or
service due to disability, whichever period of time is shorter, but only to the
extent of the accrued right to exercise the Options at the date of such
termination. In the event of the death of a Participant, the rights of such
Participant under any then outstanding Options shall be exercisable by the
person or persons to whom these rights pass by will or by the laws of descent
and distribution, at any time prior to the expiration of the Options or within
one year after the date of death, whichever period of time is shorter, but only
to the extent of the accrued right to exercise the Options, if any, at the date
of death. If a person or estate acquires the right to exercise an award under
the 2010 Plan by bequest or inheritance, the Company may require reasonable
evidence as to the ownership of such award, and may require such consents and
releases of taxing authorities as the Company may deem advisable.
Change
in Control
In the
event of a “Change of Control”, the Company may take any one or more of the
following actions with respect to any or all outstanding grants, without the
consent of any Participant:
(i)
determine that outstanding Options and SARs shall be fully exercisable, and
restrictions on outstanding Stock Awards and Stock Units shall lapse, as of the
date of the Change of Control or at such other time or subject to specific
conditions as the Compensation Committee determines;
(ii)
require that Participants surrender their outstanding Options and SARs in
exchange for one or more payments by the Company, in cash or Company stock as
determined by the Compensation Committee, in an amount equal to the amount by
which the then Fair Market Value of the shares of Company stock subject to the
Participant’s unexercised Options and SARs exceeds the exercise price, if any,
and on such terms as the Compensation Committee determines;
(iii)
after giving Participants an opportunity to exercise their outstanding Options
and SARs, terminate any or all unexercised Options and SARs at such time as the
Compensation Committee deems appropriate;
(iv)
determine that Participants holding stock units or other stock-based awards
shall receive one or more payments in settlement of such stock units or other
stock-based awards, in such amount and form and on such terms as may be
determined by the Compensation Committee; or
(v)
determine that grants that remain outstanding after the Change of Control shall
be converted to similar grants of the surviving corporation (or a parent or
subsidiary of the surviving corporation).
Such
acceleration, surrender, termination, settlement or assumption shall take place
as of the date of the Change of Control or such other date as the Company may
specify.
“Change
of Control” shall be deemed to have occurred in the event of:
|
·
|
A
merger, consolidation, liquidation or reorganization of the Company into
or with another company or other legal person, after which merger,
consolidation, liquidation or reorganization the capital stock of the
Company outstanding prior to consummation of the transaction is not
converted into or exchanged for or does not represent more than 50% of the
aggregate voting power of the surviving or resulting
entity;
|
|
·
|
The
direct or indirect acquisition by any person (as the term “person” is used
in Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended) of more than fifty percent (50%) of the voting capital stock of
the Company, in a single or series of related transactions;
or
|
|
·
|
The
sale, exchange, or transfer of all or substantially all of the Company’s
assets (other than a sale, exchange or transfer to one or more entities
where the stockholders of the Company immediately before such sale,
exchange or transfer retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the entity or entities
to which the assets were
transferred).
|
Federal
Tax Consequences
The
federal income tax discussion set forth below is intended for general
information only. State and local income tax consequences are not
discussed, and may vary from locality to locality. The federal income
tax consequences arising with respect to awards granted under the 2010 Plan will
depend on the type of the award. The following provides only a
general description of the application of federal income tax laws to certain
awards under the 2010 Plan and is subject to future changes in the law, possibly
with retroactive effect.
19
Incentive Stock Options. A
Participant is not taxed at the time an Incentive Stock Option is
granted. The tax consequences upon exercise and later disposition
depend upon whether the Participant was an employee of the Company or its
subsidiary at all times from the date of grant until three months preceding
exercise (one year in the case of death or disability) and on whether the
Participant holds the shares for more than one year after exercise and two years
after the date of grant of the Option. If the Participant satisfies both the
employment rule and the holding rule, for regular tax purposes the Participant
will not realize income upon exercise of the Option and the Company will not be
allowed an income tax deduction at any time. The difference between
the Option exercise price and the amount realized upon disposition of the shares
by the Participant will constitute a long-term capital gain or a long-term
capital loss, as the case may be. Neither the employment rule nor the holding
rule will apply to the exercise of an Option by the estate of a Participant,
provided that the Participant satisfied the employment rule as of the date of
such Participant’s death. If the Participant meets the employment
rule but fails to observe the holding rule, a disqualifying disposition, the
Participant generally recognizes as ordinary income, in the year of the
disqualifying disposition, the excess of the fair market value of the shares at
the date of exercise over the Option exercise price. Any excess of
the sales price over the fair market value at the date of exercise will be
recognized by the Participant as capital gain (long-term or short-term depending
on the length of time the stock was held after the Option was
exercised). If, however, the sales price is less than the fair market
value at the date of exercise, then the ordinary income recognized by the
Participant is generally limited to the excess of the sales price over the
Option exercise price. In both situations, the Company’s tax
deduction is limited to the amount of ordinary income recognized by the
Participant.
Nonqualified Stock
Options. Under present regulations, a Participant who is
granted a Nonqualified Stock Option will not realize taxable income at the time
the Option is granted. In general, a Participant will be subject to
tax for the year of exercise on an amount of ordinary income equal to the excess
of the fair market value of the shares on the date of exercise over the Option
exercise price, and the Company will receive a corresponding
deduction. Income tax withholding requirements apply upon
exercise. The Participant’s basis in the shares so acquired will be
equal to the Option exercise price plus the amount of ordinary income upon which
he is taxed. Upon subsequent disposition of the shares, the
Participant will realize capital gain or loss, long-term or short-term,
depending upon the length of time the shares are held after the Option is
exercised.
Different
consequences will apply for a Participant subject to the alternative minimum
tax. With respect to both nonqualified stock options and incentive
stock options, special rules apply if a Participant uses shares of common stock
already held by the Participant to pay the exercise price.
Stock Appreciation
Rights. A Participant generally will not recognize income upon the
grant or vesting of an SAR with a grant price at least equal to the fair market
value of our common stock on the date of grant and no additional deferral
feature. Upon the exercise of an SAR, a Participant generally will
recognize compensation taxable as ordinary income in an amount equal to the
difference between the fair market value of the shares underlying the SAR on the
date of exercise and the grant price of the SAR.
Unrestricted Stock
Awards. Upon receipt of an unrestricted stock award, a Participant
generally will recognize compensation taxable as ordinary income in an amount
equal to the excess of the fair market value of the shares at such time over the
amount, if any, paid by the Participant with respect to the shares.
Restricted Stock
Awards. Upon receipt of a restricted stock award, a Participant
generally will recognize compensation taxable as ordinary income when the shares
cease to be subject to restrictions in an amount equal to the excess of the fair
market value of the shares at such time over the amount, if any, paid for the
shares. Instead of postponing the federal income tax consequences of
a restricted stock award until the restrictions lapse, a Participant may elect
to recognize compensation taxable as ordinary income in the year of the award in
an amount equal to the fair market value of the shares at the time of
receipt. This election is made under Section 83(b) of the Code.
In general, a Section 83(b) election is made by filing a written notice
with the Internal Revenue Service within 30 days of the date of grant of
the restricted stock award for which the election is made and must meet certain
technical requirements.
The tax
treatment of a subsequent disposition of restricted stock will depend upon
whether a Participant has made a timely and proper Section 83(b)
election. If a Participant makes a timely and proper
Section 83(b) election, when the Participant sells the restricted shares,
the Participant generally will recognize short-term or long-term capital gain or
loss, as the case may be, equal to the difference between the amount the
Participant receives from the sale and the tax basis of the shares
sold. If no Section 83(b) election is made, any disposition
after the restriction lapses generally will result in short-term or long-term
capital gain or loss, as the case may be, equal to the difference between the
amount the Participant received from the sale and the tax basis of the shares
sold. The tax basis of the shares generally will be equal to the
amount, if any, the Participant paid for the shares plus the amount of taxable
ordinary income recognized either at the time the restrictions lapsed or at the
time of the Section 83(b) election, if an election was made. If
a Participant has to forfeit the shares to us (e.g., upon the Participant’s
termination prior to expiration of the restriction period), the Participant may
not claim a deduction for the amount of compensation income recognized as a
result of making the Section 83(b) election, and the Participant generally
will have a capital loss equal to the amount, if any, paid for the
shares.
20
Restricted Stock Units.
A Participant generally will not recognize income at the time a stock unit is
granted. When any part of a stock unit is issued or paid, the
Participant generally will recognize compensation taxable as ordinary income at
the time of such issuance or payment in an amount equal to the then fair market
value of any shares, cash or property the Participant receives.
Performance Shares and Performance
Units. A Participant generally will not recognize income upon the
grant of performance shares or performance units. Upon the distribution of cash,
shares or other property to the Participant pursuant to the terms of the
performance shares or units, the Participant generally will recognize
compensation taxable as ordinary income equal to the excess of the amount of
cash or the fair market value of any property transferred to the Participant
over any amount paid by the Participant with respect to the performance shares
or units.
Tax Consequences to the
Company. In the foregoing cases, the Company generally will be
entitled to a deduction at the same time and in the same amount as a Participant
recognizes ordinary income, subject to certain limitations imposed under the
Code.
Withholding. The
Company shall have the right to reduce the number of shares of common stock
deliverable pursuant to the 2010 Plan by an amount which would have a fair
market value equal to the amount of all federal, state or local taxes to be
withheld, based on the tax rates then in effect or the tax rates that the
Company reasonably believes will be in effect for the applicable tax year, or to
deduct the amount of such taxes from any cash payment to be made to a
Participant, pursuant to the 2010 Plan or otherwise.
New
Plan Benefits
It is not
possible to predict the individuals who will receive future awards under the
2010 Plan or the number of shares of common stock covered by any future award
because such awards are wholly within the discretion of the Compensation
Committee. The last reported sales price of the common stock
underlying the 2010 Plan on March 9, 2010 was $7.03.
Termination
or Amendment of the 2010 Plan
The Board
of Directors may at any time terminate the 2010 Plan or make such amendments
thereto as it shall deem advisable and in the best interests of the Company,
without action on the part of the stockholders of the Company unless such
approval is required pursuant to applicable law; provided, however, that no such
termination or amendment shall, without the consent of the individual to whom
any grant shall theretofore have been granted, affect or impair the rights of
such individual under such grant. Pursuant to Section 422(b)(2) of
the Code, no Incentive Stock Option may be granted pursuant to this Plan more
than ten years from the date the 2010 Plan is adopted or the date the 2010 Plan
is approved by the stockholders of the Company, whichever is
earlier.
Stockholder
Approval
To be
approved, this proposal requires the affirmative vote of the majority of the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote thereon.
The
Board recommends that stockholders vote FOR the proposal to approve the
Company’s 2010 Equity Incentive Plan.
21
APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit
Committee has concluded that the continued engagement of CCR LLP (“CCR”) as our independent
registered public accounting firm is in the best interests of the Company. CCR,
formerly known as Carlin, Charon & Rosen LLP, has served as the Company’s
registered public accounting firm since February 2006.
The
stockholders of the Company are being asked to ratify this
appointment. The Company has been informed that neither CCR nor any
of its partners have any direct financial interest or any material indirect
financial interest in the Company nor have had any connection during the past
three years with the Company in the capacity of promoter, underwriter, voting
trustee, director, officer or employee. A representative of CCR is expected to
be present at the Annual Meeting, to make a statement if so desired, and to
respond to any appropriate questions.
The Audit
Committee, prior to recommending the appointment of CCR in connection with the
audit for the fiscal year ended December 31, 2009 and its reappointment for the
fiscal year ended December 31, 2010, considered the qualifications of that firm,
including its performance previously, its reputation for integrity, competence
in the fields of accounting and auditing and its independence.
Fees
earned by CCR for services rendered in connection with the fiscal years ended
December 31, 2009 and 2008 are set forth below. All fees earned by our
independent registered public accounting firm were pre-approved by the Audit
Committee.
|
2009
|
2008
|
|
|
Audit
fees
|
$
97,500
|
$
100,900
|
|
Audit-related
fees
|
-
|
-
|
|
Tax
fees
|
15,200
|
17,600
|
|
All
other fees
|
-
|
-
|
Audit
Fees
Audit
Fees for 2009 and 2008 consist of fees for the audit of the Company’s annual
financial statements, the review of financial statements included in the
Company’s quarterly reports, and audit services provided in connection with
other statutory or regulatory requirements and amounted to $97,500 and $100,900
respectively.
Audit-Related
Fees
There
were no Audit-Related Fees for 2009 and 2008.
Tax
Fees
Tax Fees
for 2009 and 2008 consist of tax service fees for compliance work, as well as
tax planning and tax advice and amounted to $15,200 and $17,600 respectively,
all of which was approved by the Audit Committee of the Board of
Directors.
All
Other Fees
There
were no Other Fees for 2009 and 2008.
Recommendation
and Vote
To be
approved, Proposal 3 requires the affirmative vote of the majority of the shares
present in person or represented by proxy at the Annual Meeting and entitled to
vote thereon.
The
Board of Directors recommends that stockholders vote FOR the ratification of the
appointment of CCR LLP as the Company's independent registered public accounting
firm for the fiscal year ending December 31, 2010.
22
AUTHORIZATION
TO ADJOURN THE ANNUAL MEETING
General
If, at
the Annual Meeting, the number of shares of common stock, present in person or
by proxy, is insufficient to constitute a quorum or the number or shares of
common stock voting in favor is insufficient to approve any of the proposals,
namely to elect Dr. Paul F. Walter to the Board of Directors, to approve the
adoption of the Company’s 2010 Equity Incentive Plan and to ratify the
independent public accountants for the year ending December 31, 2010, management
intends to move to adjourn the Annual Meeting to a later date or dates, if
necessary, in order to enable the Board of Directors to solicit additional
proxies. In that event, we will ask our stockholders to vote only
upon the adjournment proposal and not the proposals relating to election of Dr.
Paul F. Walter to the Board of Directors, to approve the adoption of the 2010
Equity Incentive Plan and the ratification of the appointment of the independent
public accountants for the fiscal year ending December 31,
2010.
In this
proposal, we are asking you to grant discretionary authority to the holder of
any proxy solicited by the Board of Directors so that such holder can vote in
favor of the proposal to adjourn the Annual Meeting to a later date or dates, if
necessary, to solicit additional proxies. If our stockholders approve
the adjournment proposal, we could adjourn the Annual Meeting, and any adjourned
session of the Annual Meeting, and use the additional time to solicit additional
proxies, including the solicitation of proxies from stockholders who have
previously voted. Among other things, approval of the adjournment proposal could
mean that, even if we had received proxies representing a sufficient number of
votes against any of the proposals to defeat the proposal, we could adjourn the
Annual Meeting without a vote on the election of directors and ratification of
accountants and seek to convince the holders of those shares to change their
votes in favor of the proposals.
Generally,
if the Annual Meeting is adjourned, no notice of the adjourned meeting is
required to be given to stockholders, other than announcement at the Annual
Meeting of the place, date and time to which the meeting is
adjourned. However, the Company’s By-laws provide that if the
adjournment or adjournments are for more than 30 days, or if after adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting will be given to each stockholder of record entitled to vote at the
adjourned meeting.
Recommendation
and Vote
To be
approved, the adjournment proposal requires the affirmative vote of the holders
of a majority of the shares of common stock present in person or represented by
proxy at the Annual Meeting, whether or not a quorum is present. Abstentions and
broker non-votes will not affect the vote on the adjournment
proposal.
The
Board of Directors recommends that stockholders vote FOR the proposal to
authorize the Board of Directors to adjourn the Annual Meeting of stockholders
to allow time for the further solicitation of proxies to approve the election of
Dr. Walter to the Board of Directors, the approval of the adoption of the 2010
Equity Incentive Plan and the ratification of the appointment of the independent
registered accounting firm for the fiscal year ending December 31,
2010.
23
Stockholder
Proposals and Submissions
Stockholders are entitled
to submit proposals on matters appropriate for stockholder action and have that
proposal included in the Company's proxy statement consistent with the Company’s
By-Laws and the regulations of the SEC. Should a stockholder intend
to present a proposal at the 2011 Annual Meeting and have that proposal included
in the Company's proxy statement, it must be received by the Secretary of the
Company c/o Arrhythmia Research Technology, Inc., 25 Sawyer Passway, Fitchburg,
MA 01420, not later than 90 nor earlier than 120 days prior to
the anniversary of the previous year’s annual meeting; provided, however, that
in the event that no annual meeting was held in the previous year or the annual
meeting is scheduled to be held on a date more than 30 days prior to or delayed
by more than 60 days after such anniversary date, notice by the stockholder in
order to be timely must be received not later than the day on which such notice
of the date of the annual meeting was mailed or such public disclosure of the
date of the annual meeting was made including through public
filings. For nominations by a stockholder relating to a special
meeting of stockholders called for the purpose of electing directors, the
stockholder must have given written notice, either by personal delivery or by
mail not later than the close of business on the 10th day
following the day on which public announcement of the date of the meeting is
first made by the Company.
The
notice must set forth as to each matter the stockholder proposes to bring before
the annual meeting:
|
·
|
a
brief description of the business desired to be brought before the annual
meeting, the text of the proposal or business and the reasons for
conducting such business at the annual meeting;
and
|
|
·
|
any
material interest of the stockholder in such business; and as
to the stockholder giving the
notice:
|
|
·
|
the
name and record address of the stockholder;
|
|
·
|
A
description of all arrangements or understandings between the stockholder
and any other person or persons (naming the person) in connection with the
proposal of such business by the stockholder and any material interest of
the stockholder in such business;
|
|
·
|
the
class, series and number of shares of capital stock of the Company which
are owned beneficially and of record by the stockholder and by the
beneficial owner, if any, on whose behalf the proposal is
made;
|
|
·
|
a
representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to propose such
business.
|
Any
proposal of a stockholder intended to be presented at the Company’s next annual
meeting of stockholders and included in the proxy statement and form of proxy
for that meeting must be received by the Company no later than January 30, 2011
nor earlier than December 31, 2010.
A copy of
the relevant By-Law provisions containing the requirements for making
stockholder proposals may be obtained by contacting the Company's Secretary at
the executive offices of the Company.
No
Incorporation by Reference
In the
Company’s filings with the SEC, information is sometimes “incorporated by
reference.” This means that we are referring you to information that
has previously been filed with the SEC and the information should be considered
as part of the filing. Based on SEC regulations, the “Audit Committee
Report” and the “Compensation Committee Procedures,” specifically are not
incorporated by reference into any other filings with the SEC. In
addition, this proxy statement includes website addresses. These website
addresses are intended to provide inactive, textual references only. The
information on these websites is not part of this proxy statement.
24
Householding
of Proxy Statements
The SEC
has adopted rules that permit companies and intermediaries (e.g., brokers) to
satisfy the delivery requirements for proxy statements and annual reports with
respect to two or more stockholders sharing the same address by delivering a
single proxy statement addressed to those stockholders. This process,
which is commonly referred to as “householding,” potentially means extra
convenience for stockholders and cost savings for companies.
A number
of brokers with account holders who are our stockholders may “household” our
proxy materials. In that event, a single proxy statement will be
delivered to multiple stockholders sharing an address unless contrary
instructions have been received from the affected stockholders. Once
you have received notice from your broker that they will be householding
communications to your address, householding will continue until you are
notified otherwise or until you revoke your consent. If, at any time,
you no longer wish to participate in householding and would prefer to receive a
separate proxy statement and annual report, please notify your broker and our
Secretary in writing at 25 Sawyer Passway, Fitchburg, MA 01420 or by telephone
at (978) 345-5000. Stockholders who currently receive multiple copies
of the proxy statement at their address and would like to request householding
of their communications should contact their broker.
Other
Proposed Action
The Board
of Directors does not intend to bring any other matters before the Annual
Meeting, nor does the Board of Directors know of any matters which other persons
intend to bring before the Annual Meeting. If, however, other matters
not mentioned in this proxy statement properly come before the Annual Meeting,
the persons named in the accompanying form of proxy will vote thereon in
accordance with the recommendation of the Board of Directors.
|
By Order of the
Board of Directors,
|
|
ARRHYTHMIA
RESEARCH TECHNOLOGY, INC.
|
|
/s/ E.P. Marinos
|
|
E. P. Marinos,
Secretary
|
Fitchburg,
Massachusetts
March 15,
2010
25
2010 EQUITY INCENTIVE
PLAN
1. Purpose
and Objectives
The
Arrhythmia Research Technology, Inc. 2010 Equity Incentive Plan (the “Plan”) is
designed to align the interests of (i) designated employees of Arrhythmia
Research Technology, Inc. (the “Company”) and its subsidiaries, (ii)
non-employee members of the board of directors of the Company, and (iii)
consultants and key advisors of the Company and its subsidiaries with the
interests of the Company’s stockholders and to provide an opportunity for such
persons to acquire and maintain a proprietary interest in the Company through
stock ownership. By extending the opportunity to receive grants of
stock options, stock units, stock awards, stock appreciation rights and other
stock-based awards, the Company believes that the Plan will encourage the
participants to contribute materially to the growth of the Company, thereby
benefitting the Company’s shareholders, and will align the economic interests of
the participants with those of the shareholders. The Plan may
furthermore be expected to benefit the Company and its stockholders by making it
possible for the Company to attract and retain the best available
talent. The Plan shall become effective if and at the time it is
approved by the shareholders of the Company.
2. Definitions
Whenever
used in this Plan, the following terms will have the respective meanings set
forth below:
a. “Board”
means the Company’s Board of Directors.
b. “Cause,”
unless otherwise defined in the instrument evidencing an award or in a written
employment, services or other agreement between the Participant and the Company,
means dishonesty, fraud, serious or willful misconduct, violation of Company
policies and procedures including the Code of Ethics, unauthorized use or
disclosure of confidential information or trade secrets, or conduct prohibited
by law (except minor violations), in each case as determined by the Compensation
Committee, whose determination shall be conclusive and binding.
c. “Change
of Control” shall be deemed to have occurred if:
i. A merger,
consolidation, liquidation or reorganization of the Company into or with another
company or other legal person, after which merger, consolidation, liquidation or
reorganization of the capital stock of the Company outstanding prior to
consummation of the transaction is not converted into or exchanged for or does
not represent more than 50% of the aggregate voting power of the surviving or
resulting entity;
ii. The
direct or indirect acquisition by any person (as the term “person” is used in
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended)
of more than fifty percent (50%) of the voting capital stock of the Company, in
a single or series of related transactions; or
iii. The sale,
exchange, or transfer of all or substantially all of the Company’s assets (other
than a sale, exchange or transfer to one or more entities where the stockholders
of the Company immediately before such sale, exchange or transfer retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the entity or entities to which the assets were
transferred).
d. “Code”
means the Internal Revenue Code of 1986, as amended.
e. “Committee”
means the Compensation Committee of the Board or another committee appointed by
the Board to administer the Plan. Grants that are intended to be
“qualified performance-based compensation” under section 162(m) of the Code
shall be made by a committee that consists of two or more persons appointed by
the Board, all of whom shall be “outside directors” as defined under
section 162(m) of the Code and related Treasury regulations.
f. “Company”
means Arrhythmia Research Technology, Inc., any present or future subsidiary,
and any successor corporation.
g. “Company
Stock” means the common stock, $0.01 par value, of the Company.
h. “Consultant”
means a consultant or advisor who performs services for the Employer and who
renders bona fide services to the Employer, if the services are not in
connection with the offer and sale of securities in a capital-raising
transaction and the Consultant does not directly or indirectly promote or
maintain a market for the Employer’s securities.
i. “Disability”
means a Participant’s becoming disabled within the meaning of section 22(e)(3)
of the Code, within the meaning of the Employer’s long-term disability plan
applicable to the Participant, or as otherwise determined by the
Committee.
j. “Effective
Date” of the Plan means ____________, 2010 [the date of approval by
stockholders].
k. “Employee”
means an employee of the Employer (including an officer or director who is also
an employee).
I-1
l. “Employer”
means the Company and its subsidiaries.
m. “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
n. “Exercise
Price” means the per share price at which shares of Company Stock may be
purchased under an Option, as designated by the Committee.
o. “Fair
Market Value” means, with respect to a share of Common Stock, the fair market
value thereof as of the relevant date of determination, as determined in
accordance with the valuation methodology approved by the
Committee. In the absence of any alternative valuation methodology
approved by the Committee, the Fair Market Value of a share of Common Stock
shall equal the closing price for the Common Stock on any given date during
regular trading, or if not trading on that date, such price on the last
preceding date on which the Common Stock was traded.
p. “Grant”
means an Option, Stock Unit, Stock Award, SAR or Other Stock-Based Award granted
under the Plan.
q. “Grant
Agreement” means the written instrument that sets forth the terms and conditions
of a Grant, including all amendments thereto.
r. “Incentive
Stock Option” means an Option that is intended to meet the requirements of an
incentive stock option under section 422 of the Code.
s. “Non-Employee
Director” means a member of the Board who is not an employee of the
Employer.
t. “Nonqualified
Stock Option” means an Option that is not intended to be taxed as an incentive
stock option under section 422 of the Code.
u. “Option”
means an option to purchase shares of Company Stock, as described in Section
7.
v. “Other
Stock-Based Award” means any Grant based on, measured by or payable in Company
Stock (other than a Grant described in Sections 7, 8 or 9 of the Plan), as
described in Section 10.
w. “Participant”
means an Employee, Consultant or Non-Employee Director designated by the
Committee to participate in the Plan.
x. “Plan”
means this Arrhythmia Research Technology, Inc. 2010 Equity Incentive Plan, as
in effect from time to time.
y. “SAR”
means a stock appreciation right as described in Section 10.
z. “Stock
Award” means an award of Company Stock as described in Section 9.
aa. “Stock
Unit” means an award of a phantom unit representing a share of Company Stock, as
described in Section 8.
3. Administration
a. Committee. The
Plan shall be administered and interpreted by the Committee. The
Committee may delegate to officers or managers of the Company or any subsidiary
of the Company the authority, subject to such terms as the Committee shall
determine, to perform functions designated by the Committee, to the extent that
such delegation is permitted under the Delaware General Corporation Law and
other applicable laws. Other provisions of the Plan notwithstanding,
the Board may perform any function of the Committee under the Plan, in order to
ensure that transactions under the Plan are exempt under Rule 16b-3 or for
any other reason; provided,
however, that authority specifically reserved to the Board under the
terms of the Plan, the Company’s Certificate of Incorporation or By-Laws, or
applicable law shall be exercised by the Board and not by the
Committee.
b. Committee
Authority. Except as otherwise provided herein or as required
by law, the Committee shall have the authority to make recommendations to the
Board as to (i) the Participants to whom Grants shall be made under the Plan,
(ii) the type, size and terms and conditions of the Grants to be made to each
such Participant, (iii) the time when the grants will be made and the duration
of any applicable exercise or restriction period, including the criteria for
exercisability and the acceleration of exercisability, and (iv) amendment of the
terms and conditions of any previously issued Grant, subject to the provisions
of Section 17 below, and to deal with any other matters arising under the
Plan.
c. Committee
Determinations. The Committee shall have full power and
express discretionary authority to administer and interpret the Plan, to make
factual determinations and to adopt or amend such rules, regulations, agreements
and instruments for implementing the Plan and for the conduct of its business as
it deems necessary or advisable. The interpretations of the Plan and
all determinations made by the Committee and/or the Board pursuant to the powers
vested in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers
of the Committee and/or the Board shall be executed in its sole discretion, in
the best interest of the Company, not as a fiduciary, and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated
Participants.
I-2
d. Limitation of
Liability. Each member of the Committee or the Board shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
subsidiary, the Company’s independent certified public accountants, or any
executive compensation consultant, legal counsel, or other professional retained
by the Company to assist in the administration of the Plan. No member
of the Committee or the Board, nor any officer or employee of the Company acting
on behalf of the Committee or the Board, shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Committee or the Board and any
officer or employee of the Company acting on behalf of the Committee or the
Board or members thereof shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination, or interpretation.
4. Grants
a. Grants
under the Plan may consist of Options as described in Section 7, Stock Units as
described in Section 8, Stock Awards as described in Section 9, and SARs or
Other Stock-Based Awards as described in Section 10. All Grants shall
be subject to such terms and conditions as the Committee deems appropriate and
as are specified in writing by the Committee to the Participant in the Grant
Agreement.
b. All
Grants shall be made conditional upon the Participant’s acknowledgement, in
writing or by acceptance of the Grant, that all decisions and determinations of
the Committee shall be final and binding on the Participant, his or her
beneficiaries and any other person having or claiming an interest under such
Grant. Grants under a particular Section of the Plan need not be
uniform as among the Participants.
5. Shares
Subject to the Plan
a. Shares
Authorized. The aggregate number of shares of Company Stock
that may be issued under the Plan shall be, subject to adjustment as described
in subsection (d) below:
i. 400,000
shares plus
ii. 100,000
shares reserved for issuance pursuant to the 2005 Stock Award Plan, which shares
shall cease, as of the Effective Date, to be available for grant and issuance
under the 2005 Stock Award Plan but shall be available for issuance under the
Plan.
b. Source of Shares; Share
Counting. Shares issued under the Plan may be authorized but
unissued shares of Company Stock or reacquired shares of Company Stock,
including shares purchased by the Company on the open market. If and
to the extent Options and SARs granted under the Plan terminate, expire, or are
canceled, forfeited, exchanged or surrendered without having been exercised, and
if and to the extent that any Stock Awards, Stock Units or Other Stock-Based
Awards are forfeited or terminated, or otherwise are not paid in full, the
shares reserved for such Grants shall again be available for purposes of the
Plan.
c. Individual
Limits. In no event shall the aggregate fair market value
(determined at the time the option is granted) of Common Stock for which ISOs
granted to any employee are exercisable for the first time by such employee
during any calendar year (under all stock plans of the Company) exceed
$100,000.
d. Adjustments. If
there is any change in the number or kind of shares of Company Stock outstanding
(i) by reason of a stock dividend, spinoff, recapitalization, stock split, or
combination or exchange of shares, (ii) by reason of a merger, reorganization or
consolidation, (iii) by reason of a reclassification or change in par value, or
(iv) by reason of any other extraordinary or unusual event affecting the
outstanding Company Stock as a class without the Company’s receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company’s payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for issuance under the Plan, the maximum number of shares of
Company Stock for which any individual may receive Grants in any year, the
number of shares covered by outstanding Grants, the kind of shares issued and to
be issued under the Plan, and the price per share or the applicable market value
of such Grants may be appropriately adjusted by the Board to reflect any
increase or decrease in the number of, or change in the kind or value of, issued
shares of Company Stock to preclude, to the extent practicable, the enlargement
or dilution of rights and benefits under such Grants; provided, however, that
any fractional shares resulting from such adjustment shall be
eliminated. Any adjustments determined by the Board shall be final,
binding and conclusive.
6. Eligibility
for Participation
a. Eligible
Persons. All Employees, Consultants and Non-Employee Directors
shall be eligible to participate in the Plan.
b. Selection of
Participants. The Committee shall recommend and the Board
shall select the Employees, Consultants and Non-Employee Directors to receive
Grants, and shall determine the type of Grant and the number of shares of
Company Stock subject to each Grant.
I-3
7. Options
a. General Requirements.
The Committee may recommend and the Board may grant Options to an Employee,
Consultant or Non-Employee Director upon such terms and conditions as the Board
deems appropriate under this Section 7. The Committee shall recommend
to the Board for its determination the number of shares of Company Stock that
will be subject to each Grant of Options to Employees, Consultants and
Non-Employee Directors.
b. Type of Option, Price and
Term. The Committee may recommend and the Board may grant Incentive
Stock Options or Nonqualified Stock Options or any combination of the two, all
in accordance with the terms and conditions set forth
herein. Incentive Stock Options may be granted only to Employees of
the Company or its parents or subsidiaries, as defined in section 424 of the
Code. Nonqualified Stock Options may be granted to Employees,
Consultants or Non-Employee Directors.
i. The
Exercise Price of Company Stock subject to an Option shall be determined by the
Board; provided, however, that the Exercise Price for an Incentive Stock Option
will be equal to, or greater than, the Fair Market Value of a share of Company
Stock on the date the Option is granted and further provided that an Incentive
Stock Option may not be granted to an Employee who, at the time of grant, owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any parent or subsidiary, as defined in section 424
of the Code, unless the Exercise Price per share is not less than 110% of the
Fair Market Value of the Company Stock on the date of grant.
ii. The
Committee shall recommend to and the Board shall determine the term of each
Option, which shall not exceed ten years from the date of
grant. However, an Incentive Stock Option that is granted to an
Employee who, at the time of grant, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any parent
or subsidiary, as defined in section 424 of the Code, may not have a term that
exceeds five years from the date of grant.
iii. Exercisability
of Options.
iv. Options
shall become exercisable in accordance with such terms and conditions as may be
determined by the Board and specified in the Grant Agreement. The
Board upon the recommendation of the Committee may accelerate the exercisability
of any or all outstanding Options at any time for any reason.
v. Options
granted to persons who are non-exempt employees under the Fair Labor Standards
Act of 1938, as amended, may not be exercisable for at least six months after
the date of grant (except that such Options may become exercisable, as
determined by the Board upon the recommendation of the Committee, upon the
Participant’s death, Disability or retirement, or upon a Change of Control or
other circumstances permitted by applicable regulations).
c. Termination of Employment or
Service. Unless otherwise specifically provided in the
instrument evidencing an award or in a written employment, services or other
agreement between the Participant and the Company, upon termination of
employment or the services of a Participant, an Option may only be exercised as
follows:
i. In the
event that a Participant ceases to be employed by, or provide service to, the
Employer for any reason other than Disability, death, or termination for Cause,
any Option which is otherwise exercisable by the Participant shall terminate
unless exercised within three months after the date on which the Participant
ceases to be employed by, or provide service to, the Employer (or within such
other period of time as may be specified by the Board upon the recommendation of
the Committee), but in any event no later than the date of expiration of the
Option term. Any of the Participant’s Options that are not otherwise exercisable
as of the date on which the Participant ceases to be employed by, or provide
service to, the Employer shall terminate as of such date.
ii. In the
event the Participant ceases to be employed by, or provide service to, the
Employer on account of a termination for Cause by the Employer, any Option held
by the Participant shall terminate as of the date the Participant ceases to be
employed by, or provide service to, the Employer. In addition,
notwithstanding any other provisions of this Section 7, if the Board determines
that the Participant has engaged in conduct that constitutes Cause at any time
while the Participant is employed by, or providing service to, the Employer or
after the Participant’s termination of employment or service, any Option held by
the Participant shall immediately terminate and the Participant shall
automatically forfeit all shares underlying any exercised portion of an Option
for which the Company has not yet delivered the share certificates, upon refund
by the Company of the Exercise Price paid by the Participant for such
shares. Upon any exercise of an Option, the Company may withhold
delivery of share certificates pending resolution of an inquiry that could lead
to a finding resulting in a forfeiture.
iii. In the
event the Participant ceases to be employed by, or provide service to, the
Employer on account of the Participant’s Disability, any Option which is
otherwise exercisable by the Participant shall terminate unless exercised within
one year after the date on which the Participant ceases to be employed by, or
provide service to, the Employer (or within such other period of time as may be
specified by the Board), but in any event no later than the date of expiration
of the Option term. Except as otherwise provided by the Board, any of
the Participant’s Options which are not otherwise exercisable as of the date on
which the Participant ceases to be employed by, or provide service to, the
Employer shall terminate as of such date.
I-4
iv. If the
Participant dies while employed by, or providing service to, the Employer or
while an Option remains outstanding under Section 7(d)(i) or 7(d)(iii) above (or
within such other period of time as may be specified by the Board), any Option
that is otherwise exercisable by the Participant shall terminate unless
exercised within one year after the date on which the Participant ceases to be
employed by, or provide service to, the Employer (or within such other period of
time as may be specified by the Board), but in any event no later than the date
of expiration of the Option term. Except as otherwise provided by the
Board, any of the Participant’s Options that are not otherwise exercisable as of
the date on which the Participant ceases to be employed by, or provide service
to, the Employer shall terminate as of such date.
d. Exercise of
Options. A Participant may exercise an Option that has become
exercisable, in whole or in part, by delivering a notice of exercise to the
Company. The Participant shall pay the Exercise Price for the Option
(i) in cash, (ii) by delivering shares of Company Stock owned by the Participant
and having a Fair Market Value on the date of exercise equal to the Exercise
Price or by attestation to ownership of shares of Company Stock having an
aggregate Fair Market Value on the date of exercise equal to the Exercise Price,
(iii) by payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board, or (iv) by such other method as the
Committee may approve. Shares of Company Stock used to exercise an
Option shall have been held by the Participant for the requisite period of time
to avoid adverse accounting consequences to the Company with respect to the
Option. Payment for the shares pursuant to the Option, and any
required withholding taxes, must be received by the time specified by the
Committee depending on the type of payment being made, but in all cases prior to
the issuance of the Company Stock.
e. Limits on Incentive Stock
Options. Each Incentive Stock Option shall provide that, if
the aggregate Fair Market Value of the stock on the date of the grant with
respect to which Incentive Stock Options are exercisable for the first time by a
Participant during any calendar year, under the Plan or any other stock option
plan of the Company or a parent or subsidiary, as defined in section 424 of the
Code, exceeds $100,000, then the Option, as to the excess, shall be treated as a
Nonqualified Stock Option. An Incentive Stock Option shall not be
granted to any person who is not an Employee of the Company or a parent or
subsidiary, as defined in section 424 of the Code.
8. Stock
Units
a. General
Requirements. The Committee may recommend and the Board may
grant Stock Units to an Employee, Consultant or Non-Employee Director, upon such
terms and conditions as it deems appropriate under this Section
8. Each Stock Unit shall represent the right of the Participant to
receive a share of Company Stock or an amount based on the value of a share of
Company Stock. All Stock Units shall be credited to bookkeeping
accounts on the Company’s records for purposes of the Plan.
b. Terms of Stock
Units. The Committee may recommend and the Board may grant
Stock Units that are payable on terms and conditions determined by it, which may
include payment based on achievement of performance goals. Stock
Units may be paid at the end of a specified vesting or performance period, or
payment may be deferred to a date authorized by the Committee. The
Committee shall recommend and the Board shall determine the number of Stock
Units to be granted and the requirements applicable to such Stock
Units.
c. Payment With Respect to
Stock Units. Payment with respect to Stock Units shall be made
in cash, in Company Stock, or in a combination of the two, as determined by the
Committee. The Grant Agreement shall specify the maximum number of
shares that can be issued under the Stock Units.
d. Requirement of Employment or
Service. The Committee shall recommend and the Board shall
determine in the Grant Agreement under what circumstances a Participant may
retain Stock Units after termination of the Participant’s employment or service,
and the circumstances under which Stock Units may be forfeited.
9. Stock
Awards
a. General Requirements.
The Committee may recommend and the Board may issue shares of Company Stock to
an Employee, Consultant or Non-Employee Director under a Stock Award, upon such
terms and conditions as it deems appropriate under this Section
9. Shares of Company Stock issued pursuant to Stock Awards may be
issued for cash consideration or for no cash consideration, and subject to
restrictions or no restrictions, as determined by the Board. The
Committee may recommend and the Board may establish conditions under which
restrictions on Stock Awards shall lapse over a period of time or according to
such other criteria as the Committee deems appropriate, including restrictions
based upon the achievement of specific performance goals. The
Committee shall recommend and the Board shall determine the number of shares of
Company Stock to be issued pursuant to a Stock Award.
I-5
b. Requirement of Employment or
Service. The Committee shall recommend and the Board shall
determine in the Grant Agreement under what circumstances a Participant may
retain Stock Awards after termination of the Participant’s employment or
service, and the circumstances under which Stock Awards may be
forfeited.
c. Restrictions on
Transfer. While Stock Awards are subject to restrictions, a
Participant may not sell, assign, transfer, pledge or otherwise dispose of the
shares subject thereof except upon death as described in Section
14(a). Each certificate for a share subject of a Stock Award shall
contain a legend giving appropriate notice of the restrictions in the
Grant. The Participant shall be entitled to have the legend removed
when all restrictions on such shares have lapsed. The Company may
retain possession of any certificates for Stock Awards until all restrictions on
such shares have lapsed.
d. Right to Vote and to Receive
Dividends. The Committee shall recommend and the Board shall
determine to what extent, and under what conditions, the Participant shall have
the right to vote shares subject of Stock Awards and to receive any dividends or
other distributions paid on such shares during the restriction
period.
10. Stock
Appreciation Rights and Other Stock-Based Awards
a. The
Committee may recommend and the Board may grant SARs to an Employee,
Non-Employee Director or Consultant separately or in tandem with an
Option. The following provisions are applicable to SARs:
i. Base
Amount. The base amount of the SAR shall be established at the
time the SAR is granted. The base amount of each SAR shall be equal
to the per share Exercise Price of the related Option or, if there is no related
Option, an amount that is at least equal to the Fair Market Value of a share of
Company Stock as of the date of Grant of the SAR.
ii. Tandem
SARs. Tandem SARs may be granted either at the time the Option
is granted or at any time thereafter while the Option remains outstanding;
provided, however, that, in the case of an Incentive Stock Option, SARs may be
granted only at the date of the grant of the Incentive Stock
Option. In the case of tandem SARs, the number of SARs granted to a
Participant that shall be exercisable during a specified period shall not exceed
the number of shares of Company Stock that the Participant may purchase upon the
exercise of the related Option during such period. Upon the exercise
of an Option, the SARs relating to the Company Stock covered by such Option
shall terminate. Upon the exercise of SARs, the related Option shall
terminate to the extent of an equal number of shares of Company
Stock.
iii. Exercisability. An
SAR shall be exercisable during the period specified in the Grant Agreement and
shall be subject to such vesting and other restrictions as may be specified in
the Grant Agreement. SARs may be granted that are subject to
achievement of performance goals or other conditions. The Board may
accelerate the exercisability of any or all outstanding SARs at any time for any
reason. SARs may only be exercised while the Participant is employed
by, or providing service to, the Employer or during the applicable period after
termination of employment or service as described in Section 7(d). A
tandem SAR shall be exercisable only during the period when the Option to which
it is related is also exercisable.
iv. Grants to Non-Exempt
Employees. SARs granted to persons who are non-exempt
employees under the Fair Labor Standards Act of 1938, as amended, may not be
exercisable for at least six months after the date of grant (except that such
SARs may become exercisable, as determined by the Committee, upon the
Participant’s death, Disability or retirement, or upon a Change of Control or
other circumstances permitted by applicable regulations).
v. Value of
SARs. When a Participant exercises SARs, the Participant shall
receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised. The stock appreciation
for an SAR is the amount by which the Fair Market Value of the underlying
Company Stock on the date of exercise of the SAR exceeds the base amount of the
SAR as described in subsection (i).
vi. Form of
Payment. The Committee shall determine whether the stock
appreciation for an SAR shall be paid in the form of shares of Company Stock,
cash or a combination of the two. For purposes of calculating the
number of shares of Company Stock to be received, shares of Company Stock shall
be valued at their Fair Market Value on the date of exercise of the
SAR. If shares of Company Stock are to be received upon exercise of
an SAR, cash shall be delivered in lieu of any fractional share.
b. Other Stock-Based
Awards. The Committee may recommend and the Board may grant
other awards not specified in Sections 7, 8 or 9 above that are based on or
measured by Company Stock to Employees, Consultants and Non-Employee Directors,
on such terms and conditions as it deems appropriate. Other
Stock-Based Awards may be granted subject to achievement of performance goals or
other conditions and may be payable in Company Stock or cash, or in a
combination of the two, as determined by the Committee in the Grant
Agreement.
I-6
11. Qualified
Performance-Based Compensation
a. Designation as Qualified
Performance-Based Compensation. The Committee may recommend
and the Board may determine that Stock Units, Stock Awards, SARs or Other
Stock-Based Awards granted to an Employee shall be considered “qualified
performance-based compensation” under section 162(m) of the Code, in which case
the provisions of this Section 11 shall apply to such Grants. The
Committee may recommend and the Board may also grant Options under which the
exercisability of the Options is subject to achievement of performance goals as
described in this Section 11 or otherwise.
b. Performance
Goals. When Grants are made under this Section 11, the Grant
shall set forth in writing (i) the objective performance goals that must be met,
(ii) the period during which performance will be measured, (iii) the maximum
amounts that may be paid if the performance goals are met, and (iv) any other
conditions that the Committee deems appropriate and consistent with the
requirements of section 162(m) of the Code for “qualified performance-based
compensation.” The performance goals shall satisfy the requirements
for “qualified performance-based compensation,” including the requirement that
the achievement of the goals be substantially uncertain at the time they are
established and that the performance goals be established in such a way that a
third party with knowledge of the relevant facts could determine whether and to
what extent the performance goals have been met. The Board shall not
have discretion to increase the amount of compensation that is payable, but may
reduce the amount of compensation that is payable, pursuant to Grants identified
by the Board as “qualified performance-based compensation.”
c. Criteria Used for Objective
Performance Goals. Objectively determinable performance goals
shall be based on one or more of the following criteria: stock price,
earnings per share, price-earnings multiples, gross profit, net earnings,
operating earnings, revenue, revenue growth, number of days sales outstanding in
accounts receivable, number of days of cost of sales in inventory, productivity,
margin, EBITDA (earnings before interest, taxes, depreciation and amortization),
net capital employed, return on assets, shareholder return, return on equity,
return on capital employed, growth in assets, unit volume, sales, cash flow,
market share, performance relative to a designated comparison group, debt
reduction, market capitalization or strategic business criteria consisting of
one or more objectives based on meeting specified R&D programs, new product
releases, revenue goals, market penetration goals, customer growth, geographic
business expansion goals, cost targets, quality improvements, cycle time
reductions, manufacturing improvements and/or efficiencies, human resource
programs, customer programs, or goals relating to acquisitions or
divestitures. The performance goals may relate to one or more
business units or the performance of the Company as a whole, or any combination
of the foregoing. Performance goals need not be uniform among
Participants. Performance goals may be set on a pre tax or after tax
basis, may be defined by absolute or relative measures, and may be valued on a
growth or fixed basis.
d. Timing of Establishment of
Goals. Performance goals shall be established in writing
either before the beginning of the performance period or during a period ending
no later than the earlier of (i) 90 days after the beginning of the performance
period or (ii) the date on which 25% of the performance period has been
completed, or such other date as may be required or permitted under applicable
regulations under section 162(m) of the Code.
e. Certification of
Results. The Board shall certify the performance results for
the performance period specified in the Grant Agreement after the performance
period ends. The Board shall determine the amount, if any, to be paid
pursuant to each Grant based on the achievement of the performance goals and the
satisfaction of all other terms of the Grant Agreement.
f. Death, Disability or Other
Circumstances. The Grant Agreement may provide that Grants
under this Section 11 shall be payable, in whole or in part, in the event of the
Participant’s death or Disability, a Change of Control or under other
circumstances consistent with the Treasury regulations and rulings under section
162(m) of the Code.
12. Deferrals
The
Company may permit or require a Participant to defer receipt of the payment of
cash or the delivery of shares that would otherwise be due to the Participant in
connection with any Grant. The Company shall establish rules and
procedures for any such deferrals, consistent with applicable requirements of
section 409A of the Code.
13. Withholding
of Taxes
a. Required
Withholding. All Grants under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. The Company may require that the Participant or other
person receiving or exercising Grants pay to the Company the amount of any
federal, state or local taxes that the Company is required to withhold with
respect to such Grants, or the Company may deduct from other wages paid by the
Company the amount of any withholding taxes due with respect to such
Grants.
I-7
b. Election to Withhold
Shares. If the Committee so permits, a Participant may elect
to satisfy the Company’s tax withholding obligation with respect to Grants paid
in Company Stock by having shares withheld, at the time such Grants become
taxable, up to an amount that does not exceed the minimum applicable withholding
tax rate for federal (including FICA), state and local tax
liabilities. The election must be in a form and manner prescribed by
the Committee.
14. Transferability
of Grants
a. Restrictions on
Transfer. Except as described in subsection (b) below, only
the Participant may exercise rights under a Grant during the Participant’s
lifetime, and a Participant may not transfer those rights except by will or by
the laws of descent and distribution. When a Participant dies, the
personal representative or other person entitled to succeed to the rights of the
Participant may exercise such rights. Any such successor must furnish
proof satisfactory to the Company of his or her right to receive the Grant under
the Participant’s will or under the applicable laws of descent and
distribution.
b. Transfer of Nonqualified
Stock Options to or for Family Members. Notwithstanding the
foregoing, the Company may provide, in a Grant Agreement, that a Participant may
transfer Nonqualified Stock Options to family members, or one or more trusts or
other entities for the benefit of or owned by family members, consistent with
the applicable securities laws, according to such terms as the Company may
determine; provided that the Participant receives no consideration for the
transfer of an Option and the transferred Option shall continue to be subject to
the same terms and conditions as were applicable to the Option immediately
before the transfer.
15. Consequences
of a Change of Control
In the
event of a Change of Control, the Company may take any one or more of the
following actions with respect to any or all outstanding Grants, without the
consent of any Participant: (i) determine that outstanding Options and SARs
shall be fully exercisable, and restrictions on outstanding Stock Awards and
Stock Units shall lapse, as of the date of the Change of Control or at such
other time or subject to specific conditions as the Committee recommends, (ii)
require that Participants surrender their outstanding Options and SARs in
exchange for one or more payments by the Company, in cash or Company Stock as
recommended by the Committee, in an amount equal to the amount by which the then
air Market Value of the shares of Company Stock subject to the Participant’s
unexercised Options and SARs exceeds the Exercise Price, if any, and on such
terms as the Committee determines, (iii) after giving Participants an
opportunity to exercise their outstanding Options and SARs, terminate any or all
unexercised Options and SARs at such time as the Committee recommends, (iv) with
respect to Participants holding Stock Units or Other Stock-Based Awards,
determine that such Participants shall receive one or more payments in
settlement of such Stock Units or Other Stock-Based Awards, in such amount and
form and on such terms as may be determined by the Committee, or (v) determine
that Grants that remain outstanding after the Change of Control shall be
converted to similar grants of the surviving corporation (or a parent or
subsidiary of the surviving corporation). Such acceleration,
surrender, termination, settlement or assumption shall take place as of the date
of the Change of Control or such other date as the Company may
specify.
16. Requirements
for Issuance of Shares
No
Company Stock shall be issued in connection with any Grant hereunder unless and
until all legal requirements applicable to the issuance of such Company Stock
have been complied with to the satisfaction of the Company. The
Company shall have the right to condition any Grant made to any Participant
hereunder on such Participant’s undertaking in writing to comply with such
restrictions on his or her subsequent disposition of such shares of Company
Stock as the Company shall deem necessary or advisable, and certificates
representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock
issued under the Plan will be subject to such stop-transfer orders and other
restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed
thereon. No Participant shall have any right as a shareholder with
respect to Company Stock covered by a Grant until shares have been issued to the
Participant.
17. Amendment
and Termination of the Plan
a. Amendment. The
Board may amend or terminate the Plan at any time; provided, however, that the
Board shall not amend the Plan without approval of the shareholders of the
Company if such approval is required in order to comply with the Code or
applicable laws, or to comply with applicable stock exchange
requirements. No amendment or termination of this Plan shall, without
the consent of the Participant, materially impair any rights or obligations
under any Grant previously made to the Participant under the Plan, unless such
right has been reserved in the Plan or the Grant Agreement, or except as
provided in Section 18(b) below. Notwithstanding anything in the Plan
to the contrary, the Board may amend the Plan in such manner as it deems
appropriate in the event of a change in applicable law or
regulations.
b. Stockholder Approval for
“Qualified Performance-Based Compensation.” If Grants are made
under Section 11 above, the Plan must be reapproved by the Company’s
shareholders no later than the first stockholders meeting that occurs in the
fifth year following the year in which the stockholders previously approved the
provisions of Section 11, if additional Grants are to be made under Section 11
and if required by section 162(m) of the Code or the regulations
thereunder.
I-8
c. Termination of
Plan. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its Effective Date, unless the Plan is
terminated earlier by the Board or is extended by the Board with the approval of
the shareholders. The termination of the Plan shall not impair the
power and authority of the Board or the Committee with respect to an outstanding
Grant.
18. Miscellaneous
a. Grants in Connection with
Corporate Transactions and Otherwise. Nothing contained in
this Plan shall be construed to (i) limit the right of the Board to make Grants
under this Plan in connection with the acquisition, by purchase, lease, merger,
consolidation or otherwise, of the business or assets of any corporation, firm
or association, including Grants to employees thereof who become Employees, or
for other proper corporate purposes, or (ii) limit the right of the Company to
grant stock options or make other stock-based awards outside of this
Plan. Without limiting the foregoing, the Grant may be made to an
employee of another corporation who becomes an Employee by reason of a corporate
merger, consolidation, acquisition of stock or property, reorganization or
liquidation involving the Company in substitution for a grant made by such
corporation. The terms and conditions of the Grants may vary from the
terms and conditions required by the Plan and from those of the substituted
stock incentives, as recommended by the Committee and determined by the
Board.
b. Compliance with
Law. The Plan, the exercise of Options and the obligations of
the Company to issue or transfer shares of Company Stock under Grants shall be
subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required. With respect to persons subject
to section 16 of the Exchange Act, it is the intent of the Company that the Plan
and all transactions under the Plan comply with all applicable provisions of
Rule 16b-3 or its successors under the Exchange Act. In addition, it
is the intent of the Company that Incentive Stock Options comply with the
applicable provisions of section 422 of the Code, that Grants of “qualified
performance-based compensation” comply with the applicable provisions of section
162(m) of the Code and that, to the extent applicable, Grants comply with the
requirements of section 409A of the Code. To the extent that any
legal requirement of section 16 of the Exchange Act or section 422, 162(m) or
409A of the Code as set forth in the Plan ceases to be required under section 16
of the Exchange Act or section 422, 162(m) or 409A of the Code, that Plan
provision shall cease to apply. The Board may revoke any Grant if it
is contrary to law or modify a Grant to bring it into compliance with any valid
and mandatory government regulation. The Committee may also adopt
rules regarding the withholding of taxes on payments to
Participants. The Committee may, in its sole discretion, agree to
limit its authority under this Section.
c. Enforceability. The
Plan shall be binding upon and enforceable against the Company and its
successors and assigns.
d. Funding of the Plan;
Limitation on Rights. This Plan shall be
unfunded. The Company shall not be required to establish any special
or separate fund or to make any other segregation of assets to assure the
payment of any Grants under this Plan. Nothing contained in the Plan
and no action taken pursuant hereto shall create or be construed to create a
fiduciary relationship between the Company and any Participant or any other
person. No Participant or any other person shall under any
circumstances acquire any property interest in any specific assets of the
Company. To the extent that any person acquires a right to receive
payment from the Company hereunder, such right shall be no greater than the
right of any unsecured general creditor of the Company.
e. Rights of
Participants. Nothing in this Plan shall entitle any Employee,
Non-Employee Director or other person to any claim or right to receive a Grant
under this Plan. Neither this Plan nor any action taken hereunder
shall be construed as giving any individual any rights to be retained by or in
the employment or service of the Employer nor shall it interfere in any way with
the right of the Company or any subsidiary to terminate such person’s employment
or service at any time. Unless otherwise specified in the applicable
Grant Agreement, an approved leave of absence shall not be considered a
termination of employment or service for purposes of a Grant under the
Plan
f. No Fractional
Shares. No fractional shares of Company Stock shall be issued
or delivered pursuant to the Plan or any Grant. The Company shall
determine whether cash, other awards or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
g. Employees Subject to
Taxation Outside the United States. With respect to
Participants who are subject to taxation in countries other than the United
States, the Board may make Grants on such terms and conditions as the Committee
recommends to comply with the laws of the applicable countries, and the
Committee may adopt such procedures, or recommend the Board adopt such addenda
and subplans and make such modifications as may be necessary or advisable to
comply with such laws.
h. Governing
Law. The validity, construction, interpretation and effect of
the Plan and Grant Agreements issued under the Plan shall be governed and
construed by and determined in accordance with the laws of the State of
Delaware, without giving effect to the conflict of laws provisions
thereof.
I-9
This
proxy is solicited by the Board of Directors
for
the Annual Meeting of Stockholders to be held on
April
30, 2010
The
undersigned stockholder acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement, each dated March 15, 2010, and
hereby appoints Judy Lucier and David A. Garrison, or either of them, proxies
for the undersigned, each with full power of substitution, to vote all of the
undersigned's shares of common stock of Arrhythmia Research Technology, Inc.
(the “Company”) at the
Annual Meeting of Stockholders of the Company to be held at The Charles Hotel,
One Bennett Street, Cambridge, Massachusetts, on April 30, 2010 at 10:00
a.m., local time, and at any adjournments or postponements thereof.
|
1.
|
Election
of Class III Director (3 year
term) Nominee: Paul
F. Walter
|
oVOTE FOR THE
NOMINEE
or
o VOTE WITHHELD FOR THE
NOMINEE
2. Approval of the adoption of the Company’s 2010 Equity
Incentive Plan.
o VOTE
FOR o VOTE
AGAINST o
ABSTAIN
|
|
3. To
ratify the appointment of CCR LLP as the Company’s independent registered
public accounting firm for the year ending December 31,
2010.
|
o VOTE
FOR
o VOTE
AGAINST o ABSTAIN
4. Authorization
to adjourn the Annual Meeting.
o VOTE
FOR o VOTE
AGAINST o ABSTAIN
5. Other Matters
In their
discretion, to vote with respect to any other matters that may come before the
Annual Meeting or any adjournment thereof, including matters incident to its
conduct.
Please sign and date on the reverse
side.
The board
of directors recommends a vote FOR the nominees and proposals above and if no
specification is made, the shares will be voted for such nominees and
proposals.
PLEASE SIGN AND
DATE.
Dated_______________________ ,
2010
| Signature |
|
|
| Printed Name |
|
|
| Signature |
|
|
|
Printed
Name
|
|
(Joint
Owners Should Each Sign, Attorneys-in-Fact, Executors, Administrators,
Custodians, Partners, or Corporate Officers Should Give Their Full
Title.)
|
Signature
should agree with name printed hereon. If stock is held in the name
of more than one person, EACH joint owner should sign. Executors,
administrators, trustees, guardians, and attorneys should indicate the capacity
in which they sign. Attorneys should submit powers of
attorney.
PLEASE
DATE, SIGN AND RETURN THIS PROXY
NO
POSTAGE NECESSARY IF MAILED IN THE UNITED STATES