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SCHEDULE 14A INFORMATION
Proxy Statement
Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
| Filed by the Registrant | ý |
| Filed by a Party other than the Registrant | o |
Check the appropriate box:
| o | Preliminary Proxy Statement |
| o | Confidential, for Use of Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ý | Definitive Proxy Statement |
| o | Definitive Additional Materials |
| o | Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 |
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| ý | No fee required. | |
| o | Fee computed on table below per Exchange Act Rules 14a-6(a)(4) and 0-11. | |
| (1) | Title of each class of securities to which transaction applies: ___________________________ | |
| (2) | Aggregate number of securities to which transaction applies: ___________________________ | |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ___________________________ | |
| (4) | Proposed maximum aggregate value of transaction: ___________________________ | |
| (5) | Total fee paid: ___________________________ | |
| o | Fee paid previously with preliminary materials. | |
| o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form of 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, May 19, 2006. The Annual Meeting will begin at 10:00 a.m. local time at the Four Points Sheraton, 99 Erdman Way, Leominster, Massachusetts.
Information regarding each of the matters to be voted on at the Annual Meeting is contained in the attached Proxy Statement and Notice of Annual Meeting of Stockholders. We urge you to read the enclosed Proxy Statement carefully. Because it is important that your shares be voted at the Annual Meeting, we urge you to complete, date and sign the enclosed proxy card and return it as promptly as possible in the accompanying envelope, 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 are committed to high standards of corporate governance. With the assistance of our Nominating and Corporate Governance Committee, we continue to strive for enhanced transparency and to promote processes of management oversight and controls designed to generate long-term value for our stockholders. Thank you for your continued support of and interest in Arrhythmia Research Technology, Inc. as we strive to build a company that we are all proud to own.
We look forward to seeing you in Leominster on May 19, 2006.
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, May 19, 2006
TO THE STOCKHOLDERS OF ARRHYTHMIA RESEARCH TECHNOLOGY, INC.:
NOTICE IS HEREBY GIVEN that the 2006 Annual Meeting of Stockholders of Arrhythmia Research Technology, Inc., a Delaware corporation (the “Company”), will be held at the Four Points Sheraton, 99 Erdman Way, Leominster, Massachusetts, on Friday, May 19, 2006 at 10:00 a.m., local time, for the following purposes, as described in the accompanying Proxy Statement:
| 1. | To elect two Class II directors to hold office for three years and until their respective successors are duly elected and qualified. |
| 2. | To ratify the appointment of Carlin, Charron & Rosen LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2006. |
| 3. | 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 April 10, 2006 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.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.
By Order of the Board of Directors,
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
| /s/ E.P. Marinos | |
| E. P. Marinos Secretary |
Fitchburg, Massachusetts
April 21, 2006
TABLE OF CONTENTS
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To be held May 19, 2006
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
WHY DID YOU SEND ME THIS PROXY STATEMENT?
This proxy statement and the enclosed proxy card are furnished in connection with the solicitation of proxies by the Board of Directors of Arrhythmia Research Technology, Inc., a Delaware corporation (“ART” or the “Company”), for use at the Annual Meeting of ART stockholders to be held at the Four Points Sheraton, 99 Erdman Way, Leominster, Massachusetts, on Friday, May 19, 2006 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 the enclosed proxy card using the envelope provided.
WHAT PROPOSALS WILL BE ADDRESSED AT THE ANNUAL MEETING?
We will address the following proposals at the Annual Meeting:
| 1. | The election of the nominees for Class II director identified below to serve for three years; |
| 2. | The ratification of the appointment of Carlin, Charron & Rosen LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2006; and |
| 3. | 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.
WHO MAY VOTE ON THESE PROPOSALS?
We will send this proxy statement, the attached Notice of Annual Meeting and the enclosed proxy card on or about April 21, 2006 to all stockholders of the Company. Stockholders who owned shares of ART voting stock at the close of business on April 10, 2006 (the “Record Date”) are entitled to vote at the Annual Meeting in all matters properly brought before the Annual Meeting.
On the Record Date, the Company had 2,666,194 shares of issued and outstanding common stock, par value $0.01 per share (“Common Stock”).
HOW MANY VOTES DO I HAVE?
Each share of Common Stock is entitled to one vote on each matter presented at the Annual Meeting.
WHY WOULD THE ANNUAL MEETING BE POSTPONED?
The Annual Meeting will be postponed if a quorum is not present on May 19, 2006. The presence in person or by proxy of a majority of the voting power of outstanding shares of capital stock of the Company as of the Record Date will constitute a quorum and is required to transact business at the Annual Meeting. If a quorum is not present, the Annual Meeting may be adjourned until a quorum is obtained.
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 purposes of determining the existence of a quorum at the Annual Meeting.
HOW DO I VOTE BY PROXY?
Whether you plan to attend the Annual Meeting or not, we urge you to complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. 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 nominees for Class II director identified below; and |
| 2. | FOR the ratification of the appointment of Carlin, Charron & Rosen LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2006. |
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.
HOW DO I VOTE IN PERSON?
If you plan to attend the Annual Meeting and vote in person on May 19, 2006, 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.
MAY I REVOKE MY PROXY?
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 ART 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. |
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
Proposal 1: Election of Directors.
A plurality of the eligible votes cast is required to elect the director nominees. A nominee who receives a plurality means he has received more votes than any other nominee for the same director's seat.
Proposal 2: Ratification of independent registered public accounting firm.
The approval of Proposal 2, the ratification of the appointment of our independent registered public accounting firm, requires the affirmative vote of a majority of all of the votes cast at the Annual Meeting, in person or by proxy.
ARE THERE ANY DISSENTERS’ RIGHTS OF APPRAISAL?
The Board of Directors is not proposing any action for which the laws of the State of Delaware, the Certificate of Incorporation or the By-Laws of ART provide a right of a stockholder to dissent and obtain appraisal of or payment for such stockholder's shares.
WHO BEARS THE COST OF SOLICITING PROXIES?
ART 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.
WHERE ARE ART’S PRINCIPAL EXECUTIVE OFFICES?
The principal executive offices of ART are located at 25 Sawyer Passway, Fitchburg, Massachusetts and our telephone number is (978) 345-5000.
HOW CAN I OBTAIN ADDITIONAL INFORMATION ABOUT ART?
Copies of the Company's 2005 Annual Report on Form 10-KSB are being sent to all stockholders along with this proxy statement. Additional copies will be furnished without charge to stockholders upon written request. Exhibits to the Form 10-KSB 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.
ART is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") which requires that ART 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 ART, that file electronically with the SEC. The SEC's website address is http:\\www.sec.gov. In addition, ART'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; and at the SEC's regional offices at 233 Broadway, New York, NY 10279 and Citicorp Center, 500 West Madison Street, Room 1400, Chicago, IL 60661. Copies of the material may also be obtained upon request and payment of the appropriate fee from the Public Reference Section of the SEC located at Room 1580, 100 F Street, N.E., Washington, DC 20549.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Beneficial Owners of at Least Five Percent of the 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.
| Common Stock | |||
|---|---|---|---|
| Name and Address of Beneficial Owner | Beneficially Owned (1) | Percent of Class(1) | |
| Chambers Medical Foundation | 350,984(2) | 13% | |
| Edwin K. Hunter, Trustee | |||
| 1807 Lake Street | |||
| Lake Charles, LA 70601 | |||
| (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 filed by the Chambers Medical Foundation on November 7, 2005. Includes 49,716 shares beneficially owned by LKL Charitable Remainder Trust, for which the Chambers Medical Foundation is trustee and as to which shares the Foundation disclaims beneficial ownership except to the extent of its interest as charitable remainder beneficiary. |
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.
| Common Stock | Percent of | ||||||
| Name and Address of Beneficial Owner | Beneficially Owned(1) | Class(1) | |||||
| Julius Tabin, Ph.D. | 116,824 | (2) | 4.4 | % | |||
| Paul F. Walter, M.D. | 72,055 | (2) | 2.7 | % | |||
| E. P. Marinos | 59,448 | (2) | 2.2 | % | |||
| Jason Chambers | 48,549 | (5) | 1.8 | % | |||
| James E. Rouse | 31,000 | (3) | 1.2 | % | |||
| David A. Garrison | 18,000 | (4) | * | % | |||
| All Executive Officers and Directors as a Group (6 Persons) | 345,876 | 13.0 | % | ||||
| (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 10,000 shares issuable upon exercise of options. | |
| (3) | Includes 28,000 shares issuable upon exercise of options. | |
| (4) | Includes 18,000 shares issuable upon exercise of options; excludes options to acquire 15,000 shares which are not exercisable. | |
| (5) | Includes 45,216 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. |
Interest of Directors and Executive Officers in the Matters to be Acted Upon
E.P. Marinos and Julius Tabin have been nominated for re-election as Class II directors and therefore have 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 American Stock Exchange. Officers, directors, and greater-than-ten-percent stockholders are required by the SEC’s regulations to furnish ART with copies of all Section 16(a) forms that they file.
Based solely upon a review of Forms 3 and Forms 4 furnished to ART 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, 2005, except that the Chambers Medical Foundation filed its initial Form 3 late upon becoming a 10% or greater stockholder.
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
| Name | Age | Title |
| James E. Rouse | 51 | President, Chief Executive Officer and Director |
| David A. Garrison | 38 | Executive Vice President of Finance and Chief Financial Officer |
| E. P. Marinos | 64 | Chairman of the Board (1) |
| Julius Tabin, Ph.D. | 86 | Director (1) |
| Paul F. Walter, M.D. | 69 | Director (1) |
| Jason Chambers | 28 | Director (1) |
| (1) | E. P. Marinos, Dr. Julius Tabin, and Dr. Paul F. Walter serve as members of the audit committee and, together with Jason Chambers, 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.
James E. Rouse. Mr. Rouse has served as a director of the Company since 2002. 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 Kom TeK, 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).
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 single-barrel shotguns. He is a graduate of Miami University (B.S. in Finance, 1990) and Boston University (Masters in Business Administration, 2001).
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 company, 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. He is a graduate of Wayne State University (B.S. in Finance and Accounting, 1964) and a member of the AICPA. Mr. Marinos serves as Chairman of the Company’s Board of Directors and Audit Committee.
Julius Tabin, Ph.D. Dr. Tabin has served as a director of the Company since 1982. Since 1949, Dr. Tabin has been a partner in the law firm of Fitch, Even, Tabin & Flannery. His practice focuses 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).
Paul F. Walter, M.D. Dr. Walter has served as a director of the Company since 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 internal medicine with a focus on arrhythmias, cardiovascular disease and electrophysiology lab. He is a 1961 graduate of the University of Nebraska College of Medicine with graduate studies at the University of Michigan.
Jason R. Chambers. Mr. Chambers has served as a director of the Company since April 2006. Mr. Chambers has served as Chief Executive Officer of Life Water, LLC d/b/a 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 13% of the Company’s outstanding common stock. In addition, Mr. Chambers served from July 2004 through December 2004 as Vice-President of Startbank Advisory Services, a middle market financial services company. Mr. Chambers holds a Bachelor of Science 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 and treasurer of Global Health Action, a non-profit organization focused on providing health professionals with leadership, management and project planning training.
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 ART 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 ART, any owner of record or beneficial interest of more than five percent of any class of voting securities of ART, or any associate of any such director, officer, affiliate or security holder is a party adverse to ART or any of its subsidiaries or has a material interest adverse to ART or any of its subsidiaries.
No director, director nominee, officer or affiliate of ART, owner of record or beneficial interest of more than five percent of any class of voting securities of ART 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 ART and monitors the performance of management. Pursuant to the ART 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 2005. There were eleven formal Board meetings in person or by teleconference during 2005. During 2005, all directors attended at least 75% of the meetings of our Board and Board committees on which they served. Directors are strongly encouraged to attend the Annual Meeting, and all of the Company’s directors in office at that time attended the 2005 Annual Meeting. 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.
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 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 2005, the Audit Committee held nine meetings. Its current members are E.P. Marinos (Chairman), Dr. Julius Tabin, and Dr. Paul Walter. 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 American Stock Exchange, 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 was included as Appendix I to the proxy statement mailed to stockholders in 2005.
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 approve senior executive compensation and to administer the Company’s employee benefit plans, including the Stock Option Plan and Stock Award Plan. Its current members are Dr. Paul Walter, Mr. E.P. Marinos and Dr. Julius Tabin. During the fiscal year 2005, the Compensation Committee held two formal meetings.
Executive Committee. The Executive Committee is composed of three members: Mr. E. P. Marinos, Mr. James E. Rouse and Dr. Julius Tabin. The principal functions of the Executive Committee are reviewing and evaluating significant business and policy decisions and making recommendations to the full Board of Directors. The Executive Committee met five times in the fiscal year 2005.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee is presently composed of two members of the board: Mr. E.P. Marinos and Dr. Julius Tabin, each of whom is an independent director as independence is defined by the rules and regulations of the American Stock Exchange. 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 2005, the Committee held two meetings. A copy of the Nominating and Corporate Governance Committee Charter is available on the Company’s website: http://www.arthrt.com/corporategovernance
Succession Committee. The Succession Committee is composed of four members: Mr. E. P. Marinos, Mr. James E. Rouse, Dr. Julius Tabin and Dr. Paul Walter. The Succession Committee assists the Board in monitoring the preparation and adequacy of succession plans for executive officer positions. During the fiscal year 2005, the Committee did not hold any formal meetings.
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/codeofethics.html. 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.
Report of the Audit Committee
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 has reviewed and discussed with management and the Company’s independent registered public accounting firm, Carlin, Charron & Rosen LLP, the Company’s audited consolidated financial statements for the year ended December 31, 2005 and discussed all material accounting issues.
Management has the primary responsibility for the Company’s financial statements and the Company’s accounting, auditing and financial reporting processes. The Audit Committee is not providing any expert or special assurance as to the Company’s financial statements. The Company’s independent registered public accounting firm is responsible for expressing an opinion on the conformity of the Company’s financial statements with accounting principles generally accepted in the United States. The Audit Committee is not providing any professional certification as to the independent registered public accounting firm’s work product.
The Audit Committee’s review and discussion with the Company’s independent registered public accounting firm included matters requiring discussion pursuant to Statement on Auditing Standards No. 61 (Communications with Audit Committees). The Audit Committee further discussed with Carlin, Charron & Rosen LLP, matters relating to its independence, and has received the written disclosures and letter from it required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees).
On the basis of the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the Board approve the inclusion of the Company’s audited consolidated financial statements for the year ended December 31, 2005 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005 for filing with the SEC.
| By the members of the Audit Committee: | ||
| Mr. E.P. Marinos, Chairman | ||
| Dr. Julius Tabin | ||
| Dr. Paul F. Walter | ||
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 quarterly meeting.
Nominees to the Board of Directors
Mr. E.P. Marinos and Dr. Julius Tabin are the Board of Director’s nominees for re-election as Class II directors to the Board of Directors. See “Information about Directors and Executive Officers” above for information relative to their respective 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. 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 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.
Security holders who want to recommend to the Committee a candidate for director may do so by submitting to the Company’s Secretary in writing biographical information about the candidate, a description of the candidate’s qualifications and the candidate’s consent to the recommendation. If the candidate is to be considered for nomination at the next annual meeting of stockholders, the submission must be received by the date and in accordance with the procedures described under “Stockholder Proposals and Submissions.”
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.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Executive Officer Compensation
The following table sets forth information regarding annual and long-term compensation with respect to the fiscal years ended December 31, 2005, 2004, and 2003, paid or accrued by the Company to or on behalf of those persons who were, during the fiscal year ended December 31, 2005, the Company’s Chief Executive Officer and the Company’s most highly compensated executive officers serving as such as of December 31, 2005 whose compensation was in excess of $100,000 (the “Named Executive Officers”).
SUMMARY COMPENSATION TABLE
| Annual Compensation | Long Term Compensation |
All Other Compensation | ||||||||||||
| Name and Principal Position |
Year | Salary($) | Bonus($)(1) | Other Annual Compensation ($) |
Securities Underlying Options(2,3) |
Restricted Stock Awards(4) |
||||||||
| James E. Rouse (5) | 2005 | 175,000 | -- | -- | 10,000 | (3) | -- | -- | ||||||
| President and CEO | 2004 | 126,000 | 18,900 | -- | -- | -- | -- | |||||||
| 2003 | 128,400 | 18,900 | -- | -- | -- | -- | ||||||||
| David A. Garrison(6) | 2005 | 125,000 | -- | -- | 8,000 | (3) | -- | -- | ||||||
| EVP and CFO | 2004 | 90,000 | 13,500 | -- | -- | -- | -- | |||||||
| 2003 | 81,500 | 12,000 | -- | 25,000 | (2) | -- | -- | |||||||
| (1) | Unless otherwise indicated, bonuses shown were paid in the fiscal year for the year in which services were provided. |
| (2) | Indicates number of shares of Common Stock underlying options granted July 31, 2003 to Mr. Garrison. The options vest in equal portions over five years. |
| (3) | Indicates number of shares of Common Stock underlying options granted December 2005 to Mr. Rouse and Mr. Garrison. These options were 100% vested upon grant with an exercise price of $9.86 per share. |
| (4) | The number and value of the aggregate restricted stock holdings as of the end of the last fiscal year for each of our Named Executive Officers were as follows: Mr. James E. Rouse, 3,000 shares with a market value of $26,400; Mr. David A. Garrison, no shares. |
| (5) | Mr. Rouse was appointed President and Chief Executive Officer of the Company in October 2002. He served as President and Chief Operating Officer of the Company from October 2001 to October 2002. |
| (6) | Mr. Garrison was appointed to Executive Vice President of Finance of the Company in December 2004, and has served as Chief Financial Officer of the Company since November 2002. |
Option and Stock Appreciation Right Grants in Fiscal Year Ended December 31, 2005
The following table summarizes certain information relating to option grants to our Named Executive Officers during the 2005 fiscal year.
| Option/SAR Grants in Last Fiscal Year | ||||
|---|---|---|---|---|
| Individual Grants | ||||
| (a) | (b) | (c) | (d) | (e) |
| Name |
Number of Securities Underlying Options/ SARs Granted(#) |
% of Total Options/ SARs Granted to Employees in Fiscal Year |
Exercise or Base Price ($/Sh) |
Expiration Date |
| James E. Rouse | 10,000 | 15.3% | $ 9.86 | 12/19/2011 |
| David A. Garrison | 8,000(1) | 12.3% | $ 9.86 | 12/19/2011 |
| (1) | The options are fully vested and exercisable from the date of grant. |
Stock Option and Stock Appreciation Right Exercises and Holdings
The following table summarizes certain information related to the exercise of options to acquire shares of Common Stock by the Named Executive Officers during the fiscal year 2005. The table also sets forth the value of options and stock appreciation rights held by each of the Named Executive Officers at December 31, 2005.
AGGREGATED OPTION EXERCISES IN 2005 AND OPTION VALUES AT DECEMBER 31, 2005
| Shares | Number of Securities Underlying | Value of Unexercised in-the- | ||||
| Acquired | Value | Unexercised Options | Money Options(1) | |||
| Name | on Exercise | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable |
| James E. Rouse | -- | -- | 22,000 | 6,000 | $ 81,600 | $ 40,800 |
| David A. Garrison | -- | -- | 18,000 | 15,000 | $ 39,500 | $ 59,250 |
| (1) | The value of unexercised "in-the-money" options equals the difference between the option exercise price and the closing price of the Company's stock at year end, multiplied by the number of shares underlying the options. The closing price of the Company's stock on December 30, 2005, as reported by American Stock Exchange, was $8.80. |
Compensation Committee Report on Executive Compensation
The following report of the Compensation Committee (the “Committee”) is not soliciting materials 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 2005, the Committee was comprised of Dr. Paul F. Walter, Chairman, Dr. Julius Tabin, and Mr. E.P. Marinos.
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.
Compensation Policy
The Company’s executive compensation policies are designed to foster the Company’s business goals of achieving profitable growth and premium returns to stockholders. The principal objectives of these policies are as follows: (1) to attract, motivate and retain executives of outstanding ability and character; (2) to provide rewards that are closely related to the performance of the Company and the individual executive by placing a portion of compensation at risk; and (3) to align the interests of executives and stockholders through long-term, equity-based incentives and programs to encourage and reward stock ownership.
This report discusses the manner in which base salaries, short-term incentive compensation and long-term, equity-based incentives for the Company’s executive officers, including the Company’s President and Chief Executive Officer, were determined for the fiscal year 2005.
Executive Compensation
The key components of executive compensation are base salary, short-term incentive compensation and long-term, equity-based incentives. Base salaries are generally targeted to be competitive with the salaries paid at other companies of similar size and complexity within and outside the medical device manufacturing industry.
Base Salary. Salary level targets are established so that the Company can attract and retain the most qualified employees. In determining an executive officer’s salary, the Compensation Committee considers, but does not assign specific weights to, the following factors: internal factors involving the executive’s level of responsibility, experience, individual performance, and equity issues relating to pay for other Company executives, as well as external factors involving competitive positioning, overall corporate performance, and general economic conditions. No specific formula is applied to determine the weight of each factor.
Incentive Compensation Program. The Company maintains an incentive compensation program for substantially all officers and executives designed to reward such individuals for their contributions to corporate and individual objectives. In the past, the programs have provided additional compensation based on performance and profits of those operations for which the various executives have responsibility.
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 has broad discretion to establish the terms of such grants to eligible employees of the Company and its subsidiaries. It grants awards to designated employees upon commencement of employment or following a significant change in an employee’s responsibility or title. Awards are based on guidelines relating to the employee’s position in the Company that are set by the Committee, as well as the employee’s current performance and anticipated future contributions. The Committee also considers the amount and terms of stock options and stock awards previously granted to each of the employees. The Committee individually evaluates these factors with respect to each employee and then the Committee reaches a consensus on the appropriate award.
Compensation of President and Chief Executive Officer. James E. Rouse was named President and Chief Executive Officer of the Company in October 2002. Pursuant to the terms of his employment agreement, his annual rate of compensation in 2005 was $175,000. Mr. Rouse was awarded a fully vested stock option grant to acquire 10,000 shares at $9.86, the market price of our common stock as of the effective date of grant, in fiscal 2005 in recognition of the performance of the Company and his contribution thereto.
This report on executive compensation is made by and on behalf of the Company’s Compensation Committee.
| Dr. Paul F. Walter, Chairman | |
| Dr. Julius Tabin | |
| Mr. E.P. Marinos |
Director Compensation
For fiscal year 2005 each non-employee director receives cash compensation of $3,000 per quarter and an annual fee of $1,000 per committee membership. Additionally, the chairpersons of the audit and compensation committees receive an annual fee of $4,000 and each non-employee director receives $1,000 cash for each meeting (including committee meetings) attended in person and $500 for each meeting (including committee meetings) attended by telephone. During fiscal year 2005, our current directors who were serving in such capacity in 2005 received the following fees: Mr. Marinos $43,000, Dr. Tabin, $38,000, and Dr. Walter, $33,000. From time to time, the Board of Directors grants stock options to non-employee directors. In fiscal year 2005, a grant of 10,000 immediately vested stock options with an exercise price of $9.86 per share was made to each non-employee director.
Employment Agreements
In October 2001, the Company entered into a five year employment agreement with Mr. Rouse, the Company’s President and Chief Executive Officer, under which he receives base compensation of $100,000 per year, subject to annual review for raises in accordance with Company policy, and bonus compensation and other benefits as the Company may institute. The Company also provides Mr. Rouse with medical and dental benefits in accordance with the Company’s group plans. If the Company terminates Mr. Rouse’s employment without cause, Mr. Rouse is entitled to his then base compensation and medical and dental benefits for a period of twelve months. In the event of 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 Mr. Rouse’s employment, in which event Mr. Rouse is entitled to the greater of his current base compensation up to the date of termination or his base compensation for a period of twenty-four months, as well as eighteen months of medical and dental benefits. In addition, Mr. Rouse’s unvested employee stock options become immediately vested and exercisable upon a change of control as described above.
Consulting and Other Agreements
None.
Compensation Committee Interlocks and Insider Participation
None.
Equity Compensation Plan Information
The following table provides information, as of December 31, 2005, 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 |
138,000 | $ 7.93 | 150,000(1) |
| Equity compensation plans not approved by security holders |
-- | -- | -- |
| Total | 138,000 | $7.93 | 150,000 |
| (1) | Includes 50,000 shares available under the 2001 Stock Option Plan and 100,000 shares available under the 2005 Stock Award Plan. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following paragraphs set forth the reportable transactions in the last fiscal year between ART and its executive officers, directors or affiliates. See “Compensation of Directors and Executive Officers — Employment Agreements” for descriptions of the terms of the employment agreement between ART and the Company’s President 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.
The Company believes that all transactions entered into with affiliates of the Company were on terms no less favorable than could have been obtained from unaffiliated third parties.
Dr. Tabin, a Director and stockholder of the Company, is a partner of a law firm that represents the Company with respect to patent and other intellectual property law matters. Fees for services and patent costs paid to this firm were approximately $7,800 and $13,000 for fiscal years ended 2005 and 2004, respectively.
CHANGES IN INDEPENDENT REGISTERED ACCOUNTING FIRM
On February 3, 2006, BDO Seidman, LLP (“BDO”) resigned as the Company’s independent registered public accounting firm. On that same date, the Audit Committee of the Company’s Board of Directors recommended and approved the engagement of Carlin, Charron & Rosen, LLP to serve as the independent registered public accounting firm to audit the Company’s consolidated financial statements as of and for the fiscal year ended December 31, 2005 and to serve as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2006.
The reports of BDO on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2004 and December 31, 2003 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principle.
During the two fiscal years ended December 31, 2004 and December 31, 2003, and through February 3, 2006, there were no (1) disagreements with BDO on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to BDOs satisfaction, would have caused BDO to make reference thereto in its report on the financial statements for such years, or (2) reportable events described under Item 304(a)(1)(iv)(B) of Regulation S-B. A letter from BDO is attached to the Company’s Current Report on Form 8-K/A filed with the Commission on February 13, 2006 as Exhibit 16.1, indicating its agreement with the statements herein.
In deciding to select Carlin, Charron & Rosen, LLP, the Audit Committee reviewed auditor independence issues and existing commercial relationships with Carlin, Charron & Rosen, LLP and concluded that Carlin, Charron & Rosen, LLP has no commercial relationship with the Company that would impair its independence for the fiscal year ending December 31, 2005.
During the two fiscal years ended December 31, 2004 and December 31, 2003, and through February 3, 2006, the Company did not consult with Carlin, Charron & Rosen, LLP regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-B.
PROPOSALS RECOMMENDED FOR CONSIDERATION BY STOCKHOLDERS
PROPOSAL 1
ELECTION OF DIRECTORS
The Company’s By-Laws provide that the number of directors, as determined from time to time, shall not be less than two or more than six. 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. Following a recommendation by the Nominating and Corporate Governance Committee, the Board of Directors appointed Jason Chambers on April 12, 2006 to serve as a Class I director to fill the vacancy in such class resulting from Dr. Russell C. Chambers’ decision in May 2005 not to stand for reelection. Jason Chambers is the son of the late Dr. Chambers. The Board of Directors currently consists of five seats, namely, James E. Rouse and Jason Chambers (Class I with term expiring at the 2008 Annual Meeting); E. P. Marinos and Julius Tabin (Class II with terms expiring at the 2006 Annual Meeting) and Paul F. Walter (Class III with term expiring at the 2007 Annual Meeting).
The Board of Directors has concluded that the nomination and re-election of Mr. E.P. Marinos and Dr. Julius Tabin as Class II directors is in the best interests of the Company and recommends stockholder approval of the re-election of Mr. Marinos and Dr. Tabin for three-year terms (expiring at the 2009 Annual Meeting) and until their respective successors have 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 Mr. Marinos and Dr. Tabin, and the other ART 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 directors. Each nominee 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 of any nominee who is unable or will decline to serve as a director. If either of the nominees 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 recommends that stockholders vote FOR the nominees for election to the Board of Directors of the Company.
PROPOSAL 2
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has concluded that the continued engagement of Carlin, Charron & Rosen LLP (“CCR”) as our independent registered public accounting firm is in the best interests of ART. CCR 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, 2005 and its reappointment for the fiscal year ended December 31, 2006, 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 paid to CCR for services rendered in connection with the fiscal year ended December 31, 2005 are set forth below. All fees paid to our independent registered public accounting firm were pre-approved by the Audit Committee.
| 2005 | |
|---|---|
| Audit fees | $ 68,000 |
| Audit-related fees | -- |
| Tax fees | 12,000 |
| All other fees | -- |
Fees paid to BDO Seidman for services rendered in connection with the fiscal years ended December 31, 2005 and December 31, 2004 are set forth below. All fees paid to such firm were pre-approved by the Audit Committee.
| 2005 | 2004 | |
|---|---|---|
| Audit fees | $ 54,500 | $ 98,300 |
| Audit-related fees | -- | -- |
| Tax fees | -- | 14,000 |
| All other fees | -- | -- |
Audit Fees
Audit Fees for 2005 and 2004 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 $122,500 and $98,300, respectively.
Audit-Related Fees
There were no Audit-Related Fees for 2005 and 2004.
Tax Fees
Tax Fees for 2005 and 2004 consist of tax service fees for compliance work, as well as tax planning and tax advice and amounted to $12,000 and $14,000, respectively, all of which was approved by the Audit Committee of the Board of Directors.
All Other Fees
There were no Other Fees for 2005 and 2004.
Recommendation and Vote
To be approved, Proposal 2 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 ratification of the appointment of Carlin, Charron & Rosen LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2006.
ADDITIONAL INFORMATION
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 2007 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 January 5, 2007 and must comply with all of the requirements of Rule 14a-8 under the Exchange Act in order to be included in the Company’s Proxy Statement and proxy card relating to that meeting.
Stockholders of the Company may nominate candidates for election to the Board of Directors and submit other matters for consideration at the Company’s annual meeting by providing written notice to the Company not later than 90 days in advance of the annual meeting, unless the annual meeting is held on a date other than the second Tuesday of May, in which case the stockholder notice must be given within ten days after the first public disclosure of the scheduled date of the annual meeting. Nominations for elections of directors to take place at a special meeting are required to be received by the close of business on the seventh day following the date on which notice of such meeting is given to stockholders. In the case of director nominations, the notice must contain the stockholder’s and nominee’s name and address, a representation that the stockholder is a holder of record of the Company entitled to vote at the meeting and intends to appear at the meeting (in person or by proxy) to nominate the nominee, a description of any arrangements or understanding between the stockholder and the nominee, the consent of the nominee to serve if so elected and such other information as would be required by the rules of the SEC to be included in a proxy statement.
Notices of other business must contain a brief description of the business to be brought before the meeting, the stockholder’s name and address, a representation as to stockholder status and intent to appear at the meeting to propose the business, and a description of any material interest of the stockholder in the matter.
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 Report” 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.
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
April 21, 2006
APPENDIX I
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
This proxy is solicited by the Board of Directors
for the Annual Meeting of Stockholders to be held on
May 19, 2006
The undersigned stockholder acknowledges receipt of the Notice of Annual Meeting of Stockholders and the Proxy Statement, each dated April 21, 2006, and hereby appoints Judy Lucier and David 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 Four Points Sheraton, 99 Erdman Way, Leominster, Massachusetts, on Friday, May 19, 2006 at 10:00 a.m., local time, and at any adjournments or postponements thereof.
| 1. | Election of Class II Directors (3 year terms) | Nominees: | Julius Tabin | E.P. Marinos |
| o VOTE FOR or | o VOTE WITHHELD |
| 2. | To ratify the appointment of Carlin, Charron & Rosen LLP as the Compnay’s independent registered public accounting firm for the year ending December 31, 2006. |
| o VOTE FOR | o VOTE AGAINST | o ABSTAIN |
| 3. | 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 ________________________, 2006 | |
| 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