As filed
with the Securities and Exchange Commission on May 6, 2010 Registration No.
333-____
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
S-8
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
ARRHYTHMIA
RESEARCH TECHNOLOGY, INC.
(Exact
name of registrant as specified in its charter)
|
|
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification
Number
)
|
25 Sawyer
Passway, Fitchburg, MA 01420; (978) 345-5000
(Address,
including zip code, and telephone number, including
area
code, of registrant’s principal executive offices)
ARRHYTHMIA
RESEARCH TECHNOLOGY, INC. 2010 EQUITY INCENTIVE PLAN
(Full
Title of the Plan)
David A.
Garrison
Executive
Vice President and Chief Financial Officer
Arrhythmia
Research Technology, Inc.
25 Sawyer
Passway
Fitchburg,
MA 01420
(Name and
address of Agent for Service)
(978)
345-5000
(Telephone
number, including area code, of agent for service)
Copies
to:
Kathleen
L. Cerveny, Esq.
Ellenoff
Grossman & Schole LLP
1133
Connecticut Ave., 11
th
Floor
Washington,
DC 20036
(202)
719-8919
Facsimile: (202)
478-1640
|
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated file, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
[ ] Large accelerated
filer
[ ] Accelerated
filer
[ ] Non-accelerated filer
(Do not check if a smaller reporting company)
[X] Smaller reporting
company
CALCULATION
OF REGISTRATION FEE
Title
Of Securities
To
Be Registered
|
Amount
To
Be
Registered
|
Proposed
Maximum Offering Price Per Share
|
Proposed
Maximum
Aggregate
Offering Price
|
Amount
Of
Registration
Fee
|
Common
Stock, $.01 par value
|
500,000
shares (1)
|
$
6.49 (2)
|
$
3,245,000 (2)
|
$231.37
|
Common
Stock, $.01 par value
|
500,000
shares (3)
|
(3)
|
(3)
|
(4)
|
Total
|
|
|
|
$125.87
(5)
|
(1)
|
Pursuant
to Rule 416 under the Securities Act of 1933, as amended, an indeterminate
amount of additional shares of common stock, which may become issuable
pursuant to the anti-dilution provisions of the 2010 Equity Incentive Plan
(the “Plan”) are also being registered hereunder. The shares
being registered consist of the following shares which may be issued and
reoffered and resold from time to time under the Plan: (a) 400,000 shares
plus (b) 100,000 shares registered on Form S-8 (File No. 333-130678) which
registration statement is incorporated herein by reference. No
shares have been issued under the Plan as of the date
hereof.
|
(2)
|
Estimated
solely for the purpose of calculating the registration fee, pursuant to
Rule 457(c) and (h)(1) under the Securities Act of 1933, as
amended. The price per share and aggregate offering price are
based on the average of the high and low prices of Registrant’s Common
Stock as reported on the NYSE Amex Exchange on May 4,
2010.
|
(3)
|
Represents
the same shares described in the line above, which may be resold by the
holder.
|
(4)
|
Pursuant
to Rule 457(h)(3), no additional fee is payable since the Shares, which
may be offered for resale, are the same shares being registered hereby
upon their initial issuance pursuant to the
Plan.
|
(5)
|
The
registration fee includes $105.50 previously paid on Registration No.
333-130678.
|
EXPLANATORY
NOTE
This
Registration Statement registers 500,000 shares of common stock of Arrhythmia
Research Technology, Inc. (the “Company”) to be offered pursuant to the
Company’s 2010 Equity Incentive Plan (the “2010 Plan”). No shares
have been issued under the 2010 Plan as of the date hereof.
The
materials which follow Part I, up to but not including the page beginning Part
II of this Registration Statement, constitutes a reoffer prospectus, prepared in
accordance with the requirements of Part I of Form S-3, in accordance with
General Instruction C of Form S-8. The reoffer prospectus may be
utilized for the reoffer and resale of up to 500,000 shares of common stock to
the extent acquired by certain affiliates of the Company pursuant to the 2010
Plan. The amount of securities to be offered or resold by means of
the reoffer prospectus by the designated selling securityholders may not exceed,
during any three month period, the amount specified in Rule 144(e).
PART
I
ITEM 1.
PLAN INFORMATION
The
Company will send or give document(s) containing the information specified in
Part I to participants as specified by Rule 428(b)(1). These
documents are not required to be filed as part of this registration
statement.
ITEM 2.
|
REGISTRANT
INFORMATION AND EMPLOYEE PLAN ANNUAL
INFORMATION
|
Upon
written or oral request by a participant in the 2010 Plan, the Company will
provide any of the documents incorporated by reference into the Section 10(a)
prospectus, without charge. Any document required to be delivered to
the participants pursuant to Rule 428(b) will also be delivered without
charge.
PROSPECTUS
ARRHYTHMIA
RESEARCH TECHNOLOGY, INC.
500,000
Shares of Common Stock, Par Value $0.01 Per Share
Issuable
Pursuant to the 2010 Equity Incentive Plan
This
prospectus covers up to 500,000 shares (the “Shares”) of common stock, par value
$.01 par share (the “Common Stock”), of Arrhythmia Research Technology, Inc., a
Delaware corporation (the “Company”). Such Shares have been or may be acquired
by certain persons who may be deemed to be affiliates of the Company, including
employees, officers, directors and consultants to the Company. Such
persons are referred to herein as the selling securityholders under the
Arrhythmia Research Technology, Inc. 2010 Equity Incentive Plan of the Company
(the “2010 Plan”). Securities issued under the 2010 Plan to affiliates will be
deemed “control securities” under Rule 144. In connection with such
resales or reoffers for sale, certain employees, officers, directors of the
Company and the brokers through whom such Shares may be sold may be deemed to be
“underwriters” as that term is defined in Section 2(11) of the Securities Act of
1933, as amended (the “Securities Act”). See “The Offering.”
The
Company’s Common Stock is currently traded on the NYSE Amex Exchange, or NYSE
Amex, under the symbol “HRT.” On May 4, 2010, the closing sale price
of the Common Stock was $ 6.98.
The
Shares may be offered by the selling securityholders from time to time through
or to brokers on the NYSE AMEX, in the over-the-counter market or otherwise at
prices acceptable to the selling securityholders. The Company will not receive
any of the proceeds from the sale of the Shares pursuant to this prospectus. All
costs incurred in connection with the registration of the Shares are being borne
by the Company. See “The Offering.”
AN
INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
SEE
RISK FACTORS BEGINNING ON PAGE 10.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of
these securities or passed upon the adequacy or accuracy of the
prospectus. Any representation to the contrary is a criminal
offense.
The
date of this prospectus is May 6, 2010.
AVAILABLE
INFORMATION
The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and under those requirements, it
files reports and other information with the Securities and Exchange Commission
(the “SEC”). The SEC maintains a website on the Internet that contains reports,
proxy and information statements and other information regarding registrants,
including our company, that file electronically with the SEC. The SEC’s website
address is www.sec.gov. In addition, the Company’s Exchange Act filings may be
inspected and copied at the SEC Public Reference Room located at 100 F Street,
N.E., Washington, DC 20549. Copies of the material may also be obtained upon
request and payment of the appropriate fee from the Public Reference Room of the
SEC located at 100 F Street, N.E., Washington, DC 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
This
prospectus is a part of a registration statement on Form S-8 (together with all
amendments and exhibits referred to as the registration statement) filed by the
Company with the SEC under the Securities Act of 1933, as amended (the
“Securities Act”). This prospectus omits certain of the information contained in
the registration statement, and reference is hereby made to the registration
statement for further information with respect to the Company and the shares
offered. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the registration statement or otherwise filed
with the SEC are not necessarily complete, and in each instance reference is
made to the copy of such document as filed. Each such statement is qualified in
its entirety by such reference.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The
following documents filed with the SEC are hereby incorporated by reference in
this prospectus:
·
|
Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, filed
with the SEC on March 10, 2010;
|
·
|
Current
Reports on Form 8-K filed with the SEC on May 5,
2010;
|
·
|
Quarterly
Report on Form 10-Q filed with the SEC on May 4, 2010;
and
|
·
|
The
description of the Company’s Common Stock contained in the Company’s
Registration Statement on Form 8-A, filed with the SEC on February 12,
1992, including any amendment or reports filed for the purpose of updating
such description.
|
All
reports and other documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference in this prospectus and to be a part hereof from the
date of filing of such reports and other documents.
You may
request a copy of these filings, at no cost, by writing to David A. Garrison,
Executive Vice President and Chief Financial Officer, Arrhythmia Research
Technology, Inc., 25 Sawyer Passway, Fitchburg, MA 01420, or by calling him at
(978) 345-5000.
THE
COMPANY
Company
Overview
Arrhythmia
Research Technology, Inc., a Delaware corporation (“ART”), is engaged in the
development of medical software, which analyzes electrical impulses of the heart
to detect and aid in the treatment of potentially lethal arrhythmias. ART’s
patented product consists of signal-averaging electrocardiographic (SAECG)
software named the PREDICTOR™ series.
Our SAECG
product is currently used in a National Institutes for Health (“NIH”) funded
investigation into “Risk Stratification in MADIT II Type Patients.” At the
completion of this study and assuming favorable study results, ART expects to
establish additional licensing contracts with original equipment manufacturers
for this product.
Sudden
cardiac death afflicts over 300,000 individuals in the United States each year.
Most sudden cardiac deaths are due to sustained ventricular tachycardia
(abnormally rapid heartbeat) or ventricular fibrillation (very fast, completely
irregular heartbeat). Ventricular late potentials may indicate a risk of
life-threatening ventricular arrhythmias. The SAECG process enables late
potentials to be amplified and enhanced, while eliminating undesired electrical
noise, allowing for clinical interpretation of that risk. Rather than having a
direct sales force, our efforts are focused on marketing ART’s product through
licensing to original equipment manufacturers. Although, there were no sales or
licensing of the software in 2009 or 2008, ART licensed the PREDICTOR software
in early 2010.
ART’s
wholly owned subsidiary, Micron Products, Inc., a Massachusetts corporation
(“Micron”), is a manufacturer and distributor of silver plated and non-silver
plated conductive resin sensors (“sensors”) used in the manufacture of
disposable integrated electrodes constituting a part of electrocardiographic
diagnostic and monitoring instruments. Micron also acts as a
distributor of metal snap fasteners (“snaps”), another component used in the
manufacture of disposable electrodes. The sensors are a critical
component of the signal pathway in many different types of disposable
electrodes. For example, the disposable electrodes used to capture the electric
impulses of the heart and enable the analysis of late potentials require sensors
which provide for an accurate, low noise signal to be transmitted to the
monitoring device. Micron also manufactures and sells or leases
electrode assembly machines to its sensor and snap customers.
ART’s
wholly owned subsidiary, Micron Products, Inc., a Massachusetts
corporation (“Micron”), is a manufacturer and distributor of silver plated
and non-silver plated conductive resin sensors (“sensors”) used in the
manufacture of disposable integrated electrodes constituting a part of
electrocardiographic diagnostic and monitoring
instruments. Micron also acts as a distributor of metal snap
fasteners (“snaps”), another component used in the manufacture of
disposable electrodes. The sensors are a critical component of
the signal pathway in many different types of disposable electrodes. For
example, the disposable electrodes used to capture the electric impulses
of the heart and enable the analysis of late potentials require sensors
which provide for an accurate, low noise signal to be transmitted to the
monitoring device. Micron also manufactures and sells or leases
electrode assembly machines to its sensor and snap
customers.
|
|
|
Figure 1: Schematic of Integrated ECG
Electrode
|
Micron is
one of a few companies providing silver / silver-chloride sensors to the medical
device industry. Micron’s customers manufacture monitoring and
transmitting electrodes which are utilized in a variety of bio-feedback and
bio-stimulation applications including, among many others, electrocardiograms
(ECG’s), electroencephalograms (EEG’s), electro-muscular stimulation (EMS), and
thermo-electrical neural stimulation (TENS). Micron also produces
high volume precision plastic products. These high volume products
leverage the production skills for the resin sensors while providing a
diversification from the dependence on a single product line.
Micron
Integrated Technologies (“MIT”), a division of Micron formed in January 2006,
specializes in the production of metal and plastic components and assemblies for
the medical and defense industries. In 2009, in order to better
leverage the high quality manufacturing of its New England Molders (“NEM”)
division’s plastic production capacity and its Leominster Tool Division’s
(“LTD”) metal machining capabilities, Micron began marketing these divisions as
a complete source of custom manufacturing. The custom manufacturing arm of
Micron, MIT provides its customers with a comprehensive portfolio of value-added
manufacturing, design and engineering services, and complete product life cycle
management: from concept to product development, prototyping, and volume
production.
PRODUCTS
The
following table sets forth for the periods specified, the revenue derived from
the products of ART and its subsidiary Micron (collectively the
"Company"):
|
|
Year
Ended December 31,
|
|
|
|
2009
|
|
|
%
|
|
|
2008
|
|
|
%
|
|
Sensors
|
|
$
|
8,837,180
|
|
|
|
42
|
|
|
$
|
9,398,287
|
|
|
|
42
|
|
Subassembly
and metal component manufacturing
|
|
|
7,252,081
|
|
|
|
34
|
|
|
|
7,384,790
|
|
|
|
33
|
|
Custom
injection molding
|
|
|
1,795,490
|
|
|
|
8
|
|
|
|
2,067,213
|
|
|
|
9
|
|
Custom
manufactured metal medical devices
|
|
|
1,568,808
|
|
|
|
7
|
|
|
|
1,186,435
|
|
|
|
5
|
|
Injection
molding tooling
|
|
|
629,595
|
|
|
|
3
|
|
|
|
1,478,970
|
|
|
|
7
|
|
High
volume precision molded products
|
|
|
353,326
|
|
|
|
2
|
|
|
|
507,088
|
|
|
|
2
|
|
Snaps
and snap machines
|
|
|
305,930
|
|
|
|
2
|
|
|
|
203,562
|
|
|
|
1
|
|
Other
products
|
|
|
397,364
|
|
|
|
2
|
|
|
|
255,874
|
|
|
|
1
|
|
Total
|
|
$
|
21,139,774
|
|
|
|
100
|
|
|
$
|
22,482,219
|
|
|
|
100
|
|
Sensors
Micron is
a manufacturer and distributor of silver-plated and non-silver plated conductive
resin sensors for use in the manufacture of disposable electrodes for ECG
diagnostic, monitoring and related instrumentation. The type of sensor
manufactured by Micron consists of a molded plastic substrate plated with a
silver / silver chloride surface, which is a highly sensitive conductor of
electrical signals. Silver / silver chloride-plated disposable electrodes are
utilized in coronary care units, telemetry units, and for other monitoring
purposes. In addition to the traditional ECG tests, disposable
electrodes incorporating Micron’s sensors are used in connection with stress
tests, holter monitoring, and event recorders.
Micron
also manufactures sensors and conductive plastic studs used in the manufacture
of radio translucent electrodes. The radio translucent conductive plastic studs
are manufactured with uniquely engineered resin to enable electrical
conductivity between the sensor and the recording instrument without the use of
a metal snap. The radio translucent electrodes are virtually invisible to X-rays
and are preferred in some medical environments such as nuclear medicine, cardiac
catheterization laboratories, and certain stress procedures. Micron
also manufactures the mating conductive resin snaps, which replace traditional
metal snap fasteners in the radio translucent applications.
Other
custom designed sensors are manufactured for specific unique applications in the
EEG, EMG or TENS markets. Recent growth in the volume of highly engineered EEG
sensors reflects the increasing demand for non-invasive measuring of
neurological impulses. Micron’s strength in design and low cost manufacturing
enables customers to grow into unique niche medical applications and
electrophysiological monitoring with custom designed sensors.
High
Volume Precision Molded Products
Micron
also sells high volume precision custom molded component parts. Sales in these
high volume molded products diversify the Company’s existing product lines while
utilizing previously unused manufacturing capacity. To defray the customer’s
upfront tooling costs and remain competitive with global competition, some high
volume customers require the financing of a customer specific tool over several
years. The cost of the tool is guaranteed by the customer and repaid
over time as the molded product is shipped.
Snaps
and Snap Machines
Metal
Snap Fasteners
Metal
snap fasteners are used as an attachment and conductive connection between the
disposable electrode and the lead wires of an ECG machine. Micron purchases the
metal snap fasteners for resale from multiple suppliers and performs additional
quality assurance tests, repackages and stocks these snap fasteners for its
customers who purchase the snaps in addition to Micron’s sensors.
High
Speed Electrode Assembly Machine
Certain
manufacturers of disposable medical electrodes use the Company’s attaching
machines in the assembly of sensors and snaps into disposable electrodes.
Manufacturing, leasing, selling, and providing replacement parts to medical
sensor and snap application machines provides Micron with a complementary
product to sell to existing sensor and snap customers. As a value added service,
a technician can be dispatched to troubleshoot and improve the performance of
the customers’ fully automated electrode assembly production lines.
Other
Products and Services
Custom
Injection Molding
The
diversification of custom molding has increased production flexibility, and
dramatically expanded the capability to produce an increased size and complexity
of products. From consumable medical products to medical equipment components,
the MIT division has decreased Micron’s dependence on sensor production for
manufacturing growth. In order to leverage the division’s thermoplastic
injection molding capabilities, the division has expanded into other value added
services including packaging, assembly with outsourced and internally produced
metal components, clean room manufacturing, and specialty coatings.
Defense
industry subassembly and metal component manufacturing
The
MIT division’s product life cycle management program is focused on the
integration of plastic and metal components into subassemblies. The value added
service of in house production capabilities combined with a network of
subcontracted specialty coatings, metallurgical treatments, and unique
production capabilities has diversified this product line to include defense
industry consumables and equipment subassemblies.
Injection
Molding Tooling
The
design, manufacture, and rehabilitation of injection molding tools for the
customer is part of the service package provided by the MIT division. The
division also provides cost savings to Micron by vertically integrating mold
making and repair into the structure of Micron’s sensor and custom injection
molding businesses. The Company’s engineers and mold designers work with
customers’ product development engineers to design and produce unique tooling
for their products. MIT’s expertise in cost effective manufacturing creates a
sustainable partnership with the customers as prototyped parts move to full
scale production. The design and manufacture of tooling is a leading indicator
of future product revenue. The division continues to generate revenues from
other customers for similar industrial applications such as metal die casting
molds, investment casting wax molds, and thermoplastic injection/extrusion blow
molds.
Custom
Manufactured Metal Medical Devices
A
climate controlled medical machining cell was built for the custom computer
aided design and computer controlled metal machining of patient specific
orthopedic medical device components. The manufacturing space includes a machine
programming office with the latest technology in computer programming for 5-axis
machining with Computer Numerical Controlled (CNC) vertical milling machines and
a state of the art 5-axis machining center. These products involve complex
machining of wrought and cast cobalt-chromium-molybdenum alloy as well as high
molecular weight polymers into unique customized products. No two components are
identical and require precision manufacturing verified by complex computer
controlled automated coordinate measuring equipment that measure up to 25 points
per square inch. Additional capabilities added to the cell include laser
marking, passivation, automated polishing, and ultra-sonic
cleaning. The space can accommodate a 50% increase in manufacturing
capacity before reaching any physical constraints.
Signal-Averaging
Electrocardiographic (SAECG) Products - PREDICTOR™
In
early 2010, the Company successfully converted its proprietary signal-averaged
electrocardiography (SAECG) software, PREDICTOR, that operates on a single
hardware based electrocardiogram acquisition platform, ART 1200-EPX, to a
customizable modular software product that is compatible with a variety of
hardware platforms. The conversion allows PREDICTOR to be used with
customer-specific electrocardiogram acquisition equipment to generate the
signal-averaged ECG analysis. The software can be customized to interface with a
variety of Original Equipment Manufacturer (“OEM”) hardware. OEM
customers can license PREDICTOR and bundle it with other cardiac diagnostic
software packages incorporated in their acquisition equipment.
PREDICTOR
utilizes the unique, patented and proprietary algorithms which have been defined
as the “Standard” by the joint AHA/ACC/ESC task force on Signal-Averaging
Electrocardiography
1
. PREDICTOR is also capable of incorporating
additional signal processing capabilities included in the Company’s software
library for clinical research. This library includes IntraSpect, a
module that permits detection of ventricular late potentials in patients with
Bundle Branch Block, P-wave signal averaging which helps predict patients at
risk for atrial fibrillation and flutter and a Heart Rate Variability
module.
PREDICTOR
is currently being used in a NIH funded investigation into “Risk Stratification
in MADIT II Type Patients.” The primary objectives of this study are: 1. To
evaluate the predictive value of a multivariate model consisting of
pre-specified clinical and ECG parameters for predicting arrhythmic events in
Multicenter Automatic Defibrillator Implantation Trial II (“MADIT II”) type
post-infarction patients; 2. To develop a multivariate risk-stratification
model, based on a broader spectrum of pre-specified clinical covariates and ECG
parameters, and from it a risk-scoring algorithm identifying high-risk and
low-risk patient groups; this algorithm will be validated by a cross-validation
study. Such an algorithm will enable an ordering of patients who may benefit
most, and benefit least, from implantable cardiac defibrillator (“ICD”)
therapy. Results from this investigation are expected in late
2011.
1
AHA/ACC/ESC Policy Statement:
”Standards for the Analysis of Ventricular Late Potentials Using High Resolution
or Signal-Averaged Electrocardiography: A Statement by a Task Force Committee of
the European Society of Cardiology, the American Heart Association and the
American College of Cardiology. JACC Vol. 17, No. 5, April
1991:999-1006
GENERAL
Customers
and Sales
During
the year ended December 31, 2009, there were three major customers, each of
which accounted for over 10% of the Company’s sales and a loss of this base may
have a material adverse effect on results. The three largest customers accounted
for 23%, 16%, and 12% of sales in 2009 as compared to 27%, 17%, and 12% of sales
for the year ended December 31, 2008.
Micron
manufactures its sensors against purchase orders from electrode manufacturers.
The Company is aware of approximately 20 significant manufacturers of disposable
snap type, radio translucent and pre-wired electrodes worldwide. Micron sells
its sensors to most of these manufacturers. Sales backlog is not
material to Micron’s sensor business due to the method of ordering employed by
its customer base in this competitive industry. Customers generally purchase on
a single purchase order basis without long-term commitments.
The
majority of the MIT divisions’ customers for injection molded thermoplastic
products are from the medical equipment, medical device and defense industries.
From single use medical or defense consumable products to equipment components,
the engineered production services provide quality design and production
capabilities which exceed the customers’ manufacturing requirements. Certain
customers require that an inventory of their products be maintained at all times
to enable just in time delivery schedules. A commitment from customers is
required by MIT to maintain the higher level of finished goods inventory and raw
material required for their products. These agreements allow for a more flexible
manufacturing schedule with longer more cost effective production cycles. MIT’s
primary target customer is a medical product or device, defense related
contractor, manufacturer, or development company with a need for complete
product life cycle management from design to full production preferably
combining multiple manufacturing technologies such as plastic injection molding,
metalworking, assembly, and packaging.
The
following table sets forth, for the periods indicated, the approximate
consolidated revenues and percentages of revenues derived from the sales of all
of the Company's products in its geographic markets:
|
|
Revenues
for the Years Ended December 31,
|
|
|
|
2009
|
|
|
%
|
|
|
2008
|
|
|
%
|
|
United
States
|
|
$
|
12,937,615
|
|
|
|
61
|
|
|
$
|
13,290,098
|
|
|
|
59
|
|
Canada
|
|
|
3,684,087
|
|
|
|
17
|
|
|
|
5,118,913
|
|
|
|
23
|
|
Europe
|
|
|
2,644,727
|
|
|
|
13
|
|
|
|
3,091,326
|
|
|
|
14
|
|
Pacific
Rim
|
|
|
818,866
|
|
|
|
4
|
|
|
|
426,764
|
|
|
|
2
|
|
Other
|
|
|
1,054,479
|
|
|
|
5
|
|
|
|
555,118
|
|
|
|
2
|
|
Total
|
|
$
|
21,139,774
|
|
|
|
100
|
|
|
$
|
22,482,219
|
|
|
|
100
|
|
While
some risks exist in foreign markets, the vast majority of the Company’s
customers are based in historically stable markets. To reduce the risks
associated with foreign shipment and currency exchange fluctuations, the title
to most of the products are transferred to the customers when shipped, and
payment is required in U.S. Dollars.
To help
offset the risk from fluctuations in the market price of silver, sensor
customers have generally been subject to a silver surcharge or discount based on
the market price of silver at the time of shipment. The Company is sensitive to
the impact of recent increases in silver cost, and continues to explore options
with the sensor customers to help mitigate the resulting increases in
surcharges.
Marketing
and Competition
Micron
sells its sensors to large, sophisticated OEM manufacturers of disposable snap
type and radio translucent ECG electrodes who compete internationally in the
electrode market against other OEM manufacturers as well as manufacturers of
tab-type electrodes. The Company has one major domestic competitor in the sensor
market along with an increasing number of minor competitors
worldwide. The sensor and snap market is extremely price sensitive
and barriers to entry are relatively low. The Company competes with respect to
its sensor products on the basis of pricing, technical capabilities, quality of
service and ability to meet customer requirements. With no import restrictions,
the Company’s foreign competitors with excess capacity can be expected to expand
sales in the U.S. In addition, many of the major OEM customers,
although not currently manufacturing silver-silver chloride sensors, have the
ability to do so with modest investment.
The
Company markets Micron and its MIT division as a highly specialized custom
injection thermoplastic molder to new and existing customers. The Company
believes it competes effectively based on its expertise in low cost
manufacturing of high volume precision products. The complex medical products
produced by the MIT division have expanded the existing customer base and
extensively diversified the product mix. It is the Company’s
intention to continue these efforts to market to the expanded customer base and
further diversify the product offerings. Global competition creates a highly
competitive environment. To meet this challenge, the MIT division focuses its
product development efforts on complex close tolerance products not readily
outsourced to offshore manufacturing. The Company’s recent ISO 13485:2003
registration, the international quality standard for medical devices, qualifies
the Company to further expand into medical products. The Company expects to
become competitive in more markets after completion of its registration as a
U.S. Food and Drug Administration (FDA) manufacturing facility in 2010. The
Company’s International Traffic in Arms Regulation (ITAR) registration with the
US State Department allows the Company to compete in defense applications
restricted by export controls and the Department of Defense.
After
success in early 2010, management is currently pursuing licensing arrangements
of its proprietary signal-averaged electrocardiography (SAECG) software,
PREDICTOR, to other Original Equipment Manufacturers for integration into
existing cardio diagnostic equipment. As previously stated, the SAECG product is
currently used in a NIH funded investigation into “Risk Stratification in MADIT
II Type Patients”.
Product
Suppliers and Manufacturing
Micron
manufactures its sensors at its Fitchburg, Massachusetts facility employing a
proprietary non-patented multi-step process. All employees sign confidentiality
agreements to protect this proprietary process. The raw materials
used by Micron are plastic resins used to mold the substrates and silver-silver
chloride chemical solutions for plating the molded plastic substrates. Both the
resins and the chemicals involved in the silver-silver chloride process are
available in adequate supply from multiple commodity sources. As insulation
against unanticipated price increases, some resins and chemicals used in the
production of sensors are purchased in large quantities to lower or stabilize
prices.
Resins
used by the MIT division are purchased for an individual customer order, with
most increases in resin costs passed on to the customer as orders are
acknowledged. Because the customer order determines the quantity of material
required, customers may, and have, guaranteed the purchase of specific large
quantities of product which allows the division to purchase raw material at a
more favorable cost thereby lowering the final cost to the customer. The metal
alloys are subject to the same customer order limitations, and prices are fixed
as the customer guarantees an order.
Micron
distributes medical grade nickel-plated brass and stainless steel snap fasteners
purchased from multiple domestic and international sources. Micron buys these
snaps in bulk, performs additional quality assurance tests, and stocks inventory
to facilitate just-in-time shipments to its customers. This business segment has
decreased significantly in revenue as price pressure has forced metal snap
customers to buy direct from the manufacturer to remain
competitive.
The
Company’s 116,000 square foot manufacturing facilities are ITAR, ISO 9001:2001
and 13485:2003 registered. Micron’s injection molding machines capacity ranges
from 15 to 300 tons and includes a class 10,000 clean room used for processes
sensitive to environmental particulates. In addition, this facility includes a
climate-controlled space for the manufacture of metal medical devices utilizing
the latest in 5-axis CNC technology.
Inventory
Requirements
Larger
customers benefit from the Company’s ability to maintain an inventory of
standard sensors and snaps. This inventory policy allows for predictable and
planned production resulting in cost efficiencies that help to offset price
erosion in the marketplace.
Custom
manufactured product is completed on an order by order basis. Finished goods
inventory is product made in advance of an acknowledged sales order, part of an
annual blanket order quantity, or for a specific safety stock requested by the
customer.
Research
and Development
ART's
research and development efforts focus primarily on maintaining the software
library in the SAECG product lines in a compatible platform. The Company
continues to provide technical support to the NIH’s research project utilizing
ART’s software. Included in this expense is development work to verify the
integrity of the analytical algorithms, and improve the stability and ease of
customization of the software to be compatible with various hardware and
software platforms. For the fiscal years ended December 31, 2009 and
2008, ART had research and development expenses of approximately $21,527 and
$69,779, respectively.
In 2009
and 2008, Micron’s research and development efforts resulted in $219,967 and
$250,261 of expense. These efforts include the development of a unique process
to eliminate certain hazardous materials from the manufacturing processes. The
2008 expense included $52,000 for equipment tested in a process improvement
project for the sensor product line as well as the impairment of equipment used
for final product testing. .
Patents
and Proprietary Technology
ART
acquired three patents related to time and frequency domain analysis of
electrocardiogram signals including U.S. Patent No. 5,117,833 entitled
“Bi-Spectral Filtering of
Electrocardiogram Signals to Determine Selected QRS Potentials,”
(the
“Bi-Spec Patent”) in 1993. These technologies are utilized in the
current version of PREDICTOR. In March 1997, the U.S. Patent Office granted
United States Patent No. 5,609,158 entitled
“Apparatus and Method for Predicting
Cardiac Arrhythmia, by Detection of Micropotentials and Analysis of all ECG
Segments and Intervals”
which covers a frequency domain analysis
technique for SAECG data.
The
Company believes that ART's products do not and will not infringe on patents or
violate proprietary rights of others. In the event that ART's
products infringe patents or proprietary rights of others, ART may be required
to modify the design of its products or obtain a license. There can be no
assurance that ART will be able to do so in a timely manner upon acceptable
terms and conditions. In addition, there can be no assurance that ART will have
the financial or other resources necessary to enforce or defend a patent
infringement or proprietary rights violation action. Moreover, if ART's products
infringe patents or proprietary rights of others, ART could, under certain
circumstances, become liable for damages, which could have a material adverse
effect on earnings.
Micron
employs a highly complex, proprietary non-patented multi-step manufacturing
process for its silver / silver chloride-plated sensors. To maintain
trade secrets associated with the manufacture of disposable electrode sensors,
all employees are required to sign non-disclosure and/or non-competition
agreements. Micron uses a patented material in the production of some
sensors. Micron paid $2,966 in 2009, and $4,288 in 2008 in royalties associated
with this patent.
Government
Regulation
ART’s
software products are subject to, and ART believes currently comply with,
material clearance and distribution requirements from governmental regulatory
authorities, principally the FDA and the European Union (EU) equivalent
agency. These agencies promulgate quality system requirements under
which a medical device is to be developed, validated and manufactured. The
development of the product line will be managed in accordance with applicable
regulatory requirements.
Micron’s
sensor elements are components used in medical devices designed and manufactured
by original equipment manufacturers. As such, these elements are not required to
be listed with regulatory agencies and do not require regulatory clearance for
distribution. However, because Micron primarily distributes sensors to
manufacturers for use in finished medical devices, Micron exercises as stringent
controls over its manufacturing processes and finished products as would be
required if the sensors were considered medical devices.
The MIT
division manufactures parts for invasive medical devices, components for medical
equipment, patented disposable medical laboratory products, and patented
military applications. Customers own the product designs and are, therefore,
subject to FDA, Department of Defense and EU regulations. While such products
are a part of a medical device or other regulated equipment, customers are the
regulated entity for the clearance of those products. MIT exercises stringent
controls over all their manufacturing operations, and complies with any special
controls required by their customers.
Environmental
Regulation
Micron’s
operations involve use of hazardous and toxic materials, and generate hazardous,
toxic and other wastes. Its operations are subject to federal, state and local
laws and regulations governing the use, storage, handling and disposal of such
materials and certain waste products. Although management believes that the
safety procedures for using, handling, storing and disposing of such materials
comply with these standards required by state and federal laws and regulations,
the Company cannot completely eliminate the risk of accidental contamination or
injury from these materials.
Since its
inception, Micron has expended significant funds to train its personnel, install
waste treatment and recovery equipment and to retain an independent
environmental consulting firm to regularly review, monitor and upgrade its air
and waste water treatment activities. Management continues to evaluate and test
many possible technological advances that reduce or eliminate the need for and
use of hazardous materials in the manufacturing processes. The acquisition of
equipment to eliminate a hazardous chemical from the process further emphasizes
the commitment to the reduction and elimination of certain hazardous processes.
Costs of compliance are not currently material to the Company’s operation.
Micron believes that the operation of its manufacturing facility is in
compliance with currently applicable safety, health and environmental laws and
regulations.
Employees
As of
December 31, 2009, the Company had 89 full-time and 4 part-time
employees. The employees of the Company are not represented by a
union, and the Company believes its relationship with the employees is
satisfactory.
FORWARD–LOOKING
STATEMENTS
In the Company’s effort to make the
information in this prospectus more meaningful, this prospectus contains both
historical and forward-looking statements within the meaning of Section 27A of
the Securities Act, Section 21E of the Exchange Act, and information relating to
the Company that is based on management’s exercise of business judgment as well
as assumptions made by and information currently available to
management.
Any
forward looking statements made herein are based on current expectations of the
Company that involves a number of risks and uncertainties and should not be
considered as guarantees of future performance. These statements are
made under the Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements may be identified by
the use of words such as “expect,” “anticipate,” “believe,” “intend,” “plans,”
“predict,” or “will”. The factors that could cause actual results to
differ materially include: impact of competitive products and pricing, product
demand and market acceptance risks, the presence of competitors with greater
financial resources than the Company, product development and commercialization
risks, changing economic conditions in developing countries, and an inability to
arrange additional debt or equity financing.
Although
the Company believes that its expectations are based on reasonable assumptions,
it can give no assurance that its expectations will materialize. Many factors
could cause actual results to differ materially from the forward-looking
statements. Several of these factors include, in addition to those contained in
“Risk Factors,” without limitation:
·
|
the
ability to maintain the Company’s current pricing model and/or decrease
the cost of sales;
|
·
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a
stable interest rate market and/or a stable currency rate environment in
the world, and specifically the countries where the Company is doing
business in or plans to do business
in;
|
·
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continued
availability of supplies or materials used in manufacturing at competitive
prices;
|
·
|
volatility
in commodity and energy prices and the Company’s ability to offset higher
costs with price increases;
|
·
|
adverse
regulatory developments in the United States or any other country the
Company plans to do business in;
|
·
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entrance
of competitive products in the Company’s
markets;
|
·
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the
ability of management to execute plans and motivate personnel in the
execution of those plans;
|
·
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no
adverse publicity related to the Company and or its
products;
|
·
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no
adverse claims relating to the Company’s intellectual
property;
|
·
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the
adoption of new, or changes in, accounting
principles;
|
·
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the
passage of new, or changes in, regulations; legal
proceedings;
|
·
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the
ability to maintain compliance with the NYSE Amex requirements for
continued listing of the common
stock;
|
·
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the
costs inherent with complying with statutes and regulations applicable to
public reporting companies, such as the Sarbanes-Oxley Act
of 2002;
|
·
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the
ability to efficiently integrate future acquisitions and other new lines
of business that the Company may enter in the future, if any;
and
|
·
|
other
risks referenced from time to time elsewhere in this report and in the
Company’s filings with the SEC.
|
The
Company is under no obligation and does not intend to update, revise or
otherwise publicly release any revisions to these forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of any unanticipated events.
RISK
FACTORS
In
addition to the other information in this prospectus and the Company’s Exchange
Act reports, the following factors should be considered in evaluating the
Company and its business. The risks and uncertainties described below
are not the only ones facing the Company. Additional risks and
uncertainties that the Company does not presently know or currently deems
immaterial may also impair the Company’s business, results of operations and
financial condition.
The
Company’s operating results may fluctuate significantly as a result of a variety
of factors.
The
Company’s operating results may fluctuate significantly in the future as a
result of a variety of factors, many of which are outside of its
control. These factors include:
·
|
the
ability to maintain the current pricing model and/or decrease the cost of
sales;
|
·
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the
ability to increase sales of higher margin
products;
|
·
|
variations
in the mix of products sold;
|
·
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the
level of demand for our products and services and those that the Company
may develop or acquire;
|
·
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volatility
in commodity and energy prices and the ability to offset higher costs with
price increases;
|
·
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variability
of customer delivery requirements;
|
·
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continued
availability of supplies or materials used in manufacturing at competitive
prices;
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·
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the
amount and timing of investments in capital equipment, sales and
marketing, engineering and information technology resources;
and
|
·
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general
economic conditions.
|
As a
strategic response to changes in the competitive environment, we may from time
to time make certain pricing, service, technology or marketing decisions or
business or technology acquisitions that could have a material adverse effect on
the quarterly and annual results. Due to all of these factors, the
operating results may fall below the expectations of securities analysts,
stockholders and investors in any future period.
Large
OEM customers can change their demand on short notice, further adding to the
unpredictability of the quarterly sales and earnings.
The
quarterly results have in the past and may in the future vary due to the lack of
dependable long-term demand forecasts from the larger OEM
customers. In addition to this risk, many of the Company’s OEM
customers have the right to change their demand schedule, either up or down,
within a relatively short time horizon. These changes may result in
the Company incurring additional working capital costs and causing increased
manufacturing expenses due to these short-term fluctuations. In
particular, the quarterly operating results have in the past fluctuated as a
result of some of the larger OEM customers changing their orders within a fiscal
quarter. The expense levels and inventory, to a large extent, are
based on shipment expectations in the quarter. If sales levels fall
below these expectations, through a delay in orders or otherwise, operating
results are likely to be adversely affected. Although we continue to
attempt to lessen the dependency on a few large customers, the Company can
provide no assurance that it will be able to materially alter this dependency in
the immediate future, if at all.
A
significant portion of our revenues are derived from the sale of a single
product line.
In fiscal
years 2009 and 2008, the Company derived 42% of its revenues from medical
electrode sensors for use in disposable electrodes. While the
technology in electrode sensors has been used for many years, there is no
assurance that a new patented or unpatented technology might not replace the
existing disposable electrode sensors. Any substantial technological
advance that eliminates the Company’s products will have a material adverse
effect on the operating results.
The
Company is dependent on a limited number of customers.
In the
fiscal years 2009 and 2008, 51% and 56%, respectively, of the Company’s revenues
were derived from individual customers with 10% or more of the total
sales. The loss of any one or more of these customers might have an
immediate significant adverse effect on our financial results. In an
effort to maintain this customer base, more favorable terms than might otherwise
be agreed to could be granted. Currently, the Company generally does
not receive purchase volume commitments extending beyond several months. Large
corporations can shift focus away from a need for the Company’s products with
little or no warning.
Failure
to comply with Quality System Regulations or industry standards could result in
a material adverse effect on the business and results of
operations.
The
Company’s Quality Management System complies with the requirements of ISO
9001:2000 and ISO 13485:2005. If the Company were not able to comply
with the Quality Management System or industry-defined standards, the Company
may not be able to fill customer orders to the satisfaction of the
customers. Failure to produce products compliant with these standards
could lead to a loss of customers which would have an adverse impact on the
business and results of operations.
If
trade secrets are not kept confidential, the secrets may be used by others to
compete against the Company.
Micron
relies on unpatented trade secrets to protect its proprietary processes and
there are no assurances that others will not independently develop or acquire
substantially equivalent technologies or otherwise gain access to the
proprietary process. Ultimately the meaningful protection of such
unpatented proprietary technology cannot be guaranteed. The Company
relies on confidentiality agreements with its employees. Remedies for
any breach by a party of these confidentiality agreements may not be adequate to
prevent such actions. Failure to maintain trade secret protection,
for any reason, could have a material adverse effect on the
Company.
The
initiatives that the Company is implementing in an effort to improve our
manufacturing productivity could be unsuccessful, which could harm its business
and results of operations.
In an
effort to improve manufacturing productivity, the Company has implemented
several strategic initiatives focusing on improving the manufacturing processes
and procedures. Management believes these initiatives should improve
customer satisfaction as well as revenue and income. However, in the
event these initiatives are not successful, due to systemic failure to fully
embrace the concepts and maximize the benefits of the investments of equipment
and technology, the results of operations will not improve as
expected.
If
the Company is unable to keep up with rapid technological changes, the
processes, products or services may become obsolete and
unmarketable.
The
medical device and medical software industries are characterized by
technological change over time. Although the Company attempts to
expand technological capabilities in order to remain competitive, discoveries by
others may make the Company’s processes or products obsolete. If the
Company cannot compete effectively in the marketplace, the potential for
profitability and financial position will suffer.
General
economic conditions, largely out of the Company’s control, may adversely affect
the Company’s financial condition and results of operations.
The
Company’s business may be affected by changes in general economic conditions,
both nationally and internationally. Recessionary economic cycles,
higher interest rates, higher fuel and other energy costs, inflation, higher
levels of unemployment, changes in the laws or industry regulations or other
economic factors may adversely affect the demand for the Company’s
products. Additionally, these economic factors, as well as higher tax
rates, increased costs of labor, insurance and healthcare, and changes in other
laws and regulations may increase the Company’s cost of sales and operating
expenses, which may adversely affect the Company’s financial condition and
results of operations.
The
Company is subject to stringent environmental regulations.
The
Company is subject to a variety of federal, state and local requirements
governing the protection of the environment. These environmental
regulations include those related to the use, storage, handling, discharge and
disposal of toxic or otherwise hazardous materials used in or resulting from the
Company’s manufacturing processes. Failure to comply with
environmental law could subject the Company to substantial liability or force us
to significantly change our manufacturing operations. In addition,
under some of these laws and regulations, the Company could be held financially
responsible for remedial measures if its properties are contaminated, even if it
did not cause the contamination.
A
product liability suit could adversely affect our operating
results.
The
testing, manufacture, marketing and sale of medical devices of the customers
entail the inherent risk of liability claims or product recalls. If the
customers are involved in a lawsuit, it is foreseeable that the Company would
also be named. Although the Company maintains product liability
insurance, coverage may not be adequate. Product liability insurance is
expensive, and in the future may not be available on acceptable terms, if at
all. A successful product liability claim or product recall could have a
material adverse effect on the business, financial condition, and ability to
market product in the future.
The
Company could become involved in litigation over intellectual property
rights.
The
medical device industry has been characterized by extensive litigation regarding
patents and other intellectual property rights. Litigation, which would likely
result in substantial cost to us, may be necessary to enforce any patents issued
or licensed to us and/or to determine the scope and validity of others'
proprietary rights. In particular, competitors and other third parties hold
issued patents, which may result in claims of infringement against the Company
or other patent litigation. The Company also may have to participate in
interference proceedings declared by the United States Patent and Trademark
Office, which could result in substantial cost, to determine the priority of
inventions.
The
Company may make acquisitions of companies, products or technologies that may
disrupt the business and divert management’s attention, adversely impacting our
results of operations and financial condition.
The
Company may make acquisitions of complementary companies, products or
technologies from time to time. Any acquisitions will require the assimilation
of the operations, products and personnel of the acquired businesses and the
training and motivation of these individuals. Management may be unable to
maintain and improve upon the uniform standards, controls, procedures and
policies if the Company fails in this integration. Acquisitions may cause
disruptions in operations and divert management’s attention from day-to-day
operations, which could impair our relationships with current employees,
customers and strategic partners. The Company also may have to, or
choose to, incur debt or issue equity securities to pay for any future
acquisitions. The issuance of equity securities for an acquisition could be
substantially dilutive to our stockholders’ holdings. In addition, profitability
may suffer because of such acquisition-related costs or amortization costs for
other intangible assets. If management is unable to fully integrate acquired
businesses, products, technologies or personnel with existing operations, the
Company may not receive the intended benefits of such acquisitions. The Company
is not currently party to any agreements, written or oral, for the acquisition
of any company, product or technology.
Healthcare
policy changes, including pending proposals to reform the U.S. healthcare
system, may have a material adverse effect on the results.
Healthcare
costs have risen significantly over the past decade. There have been and
continue to be proposals by legislators, regulators and third-party payers to
keep these costs down. Certain proposals, if passed, would impose limitations on
the prices we will be able to charge for our products, or the amounts of
reimbursement available for our products from governmental agencies or
third-party payers. These limitations could have a material adverse effect on
the Company’s financial position and results of operations.
Changes
in the health care industry in the U.S. and elsewhere could adversely affect the
demand for the products as well as the way in which the Company conducts
business. Significantly, the new administration and Congressional and state
leaders have expressed a strong desire to reform the U.S. healthcare
system. Recently, President Obama and members of Congress have
proposed significant reforms. On November 7, 2009, the House of Representatives
passed and, on December 24, 2009, the Senate passed health reform legislation
which if enacted would require most individuals to have health insurance,
establish new regulations on health plans, create insurance pooling mechanisms
and a government health insurance option to compete with private plans, and
other expanded public health care measures. This legislation also would reduce
Medicare spending on services provided by hospitals and other providers and the
House bill proposes a 2.5 percent tax on the first taxable sale of any medical
device. The Senate bill included a $2 billion annual fee or excise tax on the
medical device manufacturing sector. If the excise taxes are enacted into law,
the Company’s results of operations may be materially and adversely
affected.
The
Company may be exposed to potential risks relating to internal control over
financial reporting and the ability to have those controls attested to by the
independent registered public accounting firm.
As
directed by Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX 404”), the
Securities and Exchange Commission adopted rules requiring public companies to
include a report of management on the Company’s internal control over financial
reporting in their annual reports, including Form 10-K. In addition, the
independent registered public accounting firm auditing a company’s financial
statements must also attest to and report on the Company’s assessment of the
effectiveness of the company’s internal control over financial reporting as well
as the operating effectiveness of the company’s internal controls. The Company
was subject to the management evaluation and review portion of these
requirements for the fiscal year ended December 31, 2009. Management is
evaluating the Company’s internal control systems in order to allow the
independent auditors attest to, management’s internal controls, as a required
part of the Annual Report on Form 10-K beginning with the report for the fiscal
year ended December 31, 2010.
In the
event the Company no longer qualifies as a smaller reporting company at the end
of 2010, it may be subject to more stringent requirements under SOX 404.
Accordingly, there can be no assurance that the Company will receive any
required attestation from the independent registered public accounting firm. In
the event the independent register public accounting firm identifies significant
deficiencies or material weaknesses in the Company’s internal controls that
management cannot remediate in a timely manner or is unable to receive an
attestation from the independent registered public accounting firm with respect
to the Company’s internal controls, investors and others may lose confidence in
the reliability of the financial statements and the Company’s ability to obtain
equity or debt financing could suffer.
This
prospectus relates to the Shares which may be acquired by certain employees,
officers, directors and consultants to the Company who may be deemed affiliates
of the Company or who hold “control stock” issued to such persons pursuant to
the terms of the 2010 Plan. The 2010 Plan was adopted by the Board of Directors
on March 10, 2010, and subsequently approved by the Company’s stockholders on
April 30, 2010. No options, awards or Shares have been issued as of
the date hereof.
SELLING
SECURITYHOLDERS
Shares
may be acquired by certain employees, officers, directors and consultants to the
Company who may be deemed affiliates of the Company or who hold “control stock”
issued to such persons pursuant to the terms of the 2010 Plan. As the names and
amounts of securities to be reoffered become known, we will supplement this
prospectus with such information.
Shares
covered by this prospectus may be reoffered and resold from time to time by each
selling securityholder through brokers or dealers on the NYSE Amex or otherwise
at prices acceptable to the selling securityholder. To the Company's knowledge,
no specific brokers or dealers have been designated by any selling
securityholder nor has any agreement been entered into in respect of brokerage
commissions or for the exclusive sale of any securities, which may be offered
pursuant to this prospectus. Alternatively, the selling
securityholder may from time to time offer the Shares through underwriters,
dealers or agents, which may receive compensation in the form of underwriting
discounts, concessions or commissions from the selling securityholder and/or the
purchasers of the Shares for whom they may act as agents. The selling
securityholder and any underwriters, dealers or agents that participate in the
distribution of the Shares may be deemed to be “underwriters” under the
Securities Act and any profit on the sale of the Shares by them and any
discounts, commissions or concessions received by any such underwriters, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act.
Under
applicable rules and regulations under the Exchange Act, any person engaged in a
distribution of any of the shares may not simultaneously engage in market
activities with respect to the Common Stock for the applicable period under
Regulation M prior to the commencement of such distribution. In
addition and without limiting the foregoing, the selling securityholders will be
governed by the applicable provisions of the Securities Act and Exchange Act,
and the rules and regulations thereunder, including without limitation Rules
10b-5 and Regulation M, which provisions may limit the timing of purchases and
sales of any of the shares by the selling securityholders. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions subject to specified exceptions or
exemptions. All of the foregoing may affect the marketability of our
securities.
The
Company will pay all of the fees and expenses incident to the registration of
the Shares (other than any fees or expenses of any counsel retained by the
selling securityholder and any out-of-pocket expenses incurred by the selling
securityholder or any person retained by the selling securityholder in
connection with the registration of the Shares) and fees and expenses of
compliance with state securities or blue sky laws and commissions. The expenses
payable by the Company are estimated to be approximately $5,000.
DESCRIPTION
OF CAPITAL STOCK
The
following description of our capital stock and certain provisions of the
Certificate of Incorporation, as amended, and the By-Laws is a summary and is
qualified in its entirety by reference to the provisions of the Certificate of
Incorporation and the By-Laws, copies of which are filed with the
SEC.
The
Company’s authorized capital stock consists of 10,000,000 shares of Common
Stock, $0.01 par value and 2,000,000 shares of preferred stock, par value $1.00
per share. As of March 4, 2010, there were outstanding:
·
|
2,675,481
shares of Common Stock; and
|
·
|
254,500
shares issuable upon exercise of options issued pursuant to the Company’s
2001 Stock Option Plan.
|
Common
Stock
The
Company is authorized to issue 10,000,000 shares of Common Stock, $0.01 par
value per share. Subject to preferences that may be applicable to any
preferred stock outstanding at the time, the holders of outstanding shares of
Common Stock are entitled to receive dividends out of assets legally available
therefore at such times and in such amounts as the Board of Directors may from
time to time determine. Each shareholder is entitled to one vote for each share
of Common Stock held on all matters submitted to a vote of
shareholders. Cumulative voting for the election of directors is not
authorized.
The
Common Stock is not entitled to preemptive rights and is not subject to
conversion or redemption. Upon liquidation, dissolution or winding up
of the Company, the remaining assets legally available for distribution to
shareholders, after payment of claims of creditors and payment of liquidation
preferences, if any, on outstanding preferred stock, are distributable ratably
among the holders of the Common Stock and any participating preferred stock
outstanding at that time. Each outstanding share of Common Stock is legally
issued, fully paid and nonassessable.
Preferred
Stock
The
Certificate of Incorporation authorizes the Company to issue 2,000,000 shares of
serial “blank check” preferred stock, $1.00 par value per share. “Blank check”
preferred stock allows the Board of Directors to create one or more series of
preferred stock, and to designate the rights, privileges, restrictions,
preferences and limitations of any given series of preferred
stock. Accordingly, the Board of Directors may, without stockholder
approval, issue shares of preferred stock with dividend, liquidation,
conversion, voting or other rights that could adversely affect the voting power
or other rights of the holders of our Common Stock. “Blank check”
preferred stock could also be issued to discourage a change in control, although
we have no present intent to issue any additional series of our preferred
stock. The Board of Directors’ ability to issue “blank check”
preferred stock serves as a traditional anti-takeover measure installed to
present obstacles to takeovers. This provision of our Certificate of
Incorporation makes it difficult for a majority shareholder to gain control of
the Company and, therefore, may be beneficial to the Company’s management and
its Board in a hostile tender offer and may have an adverse impact on
shareholders who may want to participate in such a tender offer. Also, the
issuance of preferred stock with voting and conversion rights could materially
and adversely affect the voting power of the holders of the Common Stock and may
have the effect of delaying, deferring or preventing a change in control of the
Company.
As of the
date of this prospectus there are no shares of preferred stock issued and
outstanding.
Transfer
Agent
The
transfer agent for the Company’s Common Stock is Continental Stock Transfer
& Trust Co., 17 Battery Place, New York, NY 10004.
USE
OF PROCEEDS
The
Company will not receive any of the proceeds from the sale of the Shares. All
proceeds received from the sale of Shares under the 2010 Plan will be for the
account of the selling securityholders described above.
PLAN
OF DISTRIBUTION
Shares
covered by this prospectus may be reoffered and resold from time to time by the
class of eligible selling securityholders referred to above through brokers on
the NYSE Amex or otherwise at prices acceptable to the selling
securityholder. To the Company's knowledge, no specific brokers or
dealers have been designated by any selling securityholder nor has any agreement
been entered into in respect of brokerage commissions or for the exclusive sale
of any securities, which may be offered pursuant to this
prospectus. Alternatively, the selling securityholder may from time
to time offer the Shares through underwriters, dealers or agents, which may
receive compensation in the form of underwriting discounts, concessions or
commissions from the selling securityholder and/or the purchasers of the Shares
for whom they may act as agents. The selling securityholder and any
underwriters, dealers or agents that participate in the distribution of the
Shares may be deemed to be “underwriters” under the Securities Act and any
profit on the sale of the Shares by them and any discounts, commissions or
concessions received by any such underwriters, dealers or agents might be deemed
to be underwriting discounts and commissions under the Securities
Act.
Any
securities covered by this prospectus that qualify for sale pursuant to Rule 144
under the Securities Act may be sold under that Rule rather than pursuant to
this prospectus. There can be no assurance that the selling securityholders will
sell any or all of the Shares of Common Stock offered hereunder.
LEGAL
MATTERS
Certain
legal matters in connection with the Shares have been passed upon for the
Company by Ellenoff Grossman & Schole LLP, 1133 Connecticut Ave N.W.,
11
th
Floor, Washington, D.C. 20036.
EXPERTS
The
financial statements incorporated by reference in this prospectus have been
audited by CCR LLP, an independent registered public accounting firm, to the
extent and for the periods set forth in their report, incorporated herein by
reference and are incorporated herein by reference in reliance upon such report
given upon the authority of said firm as experts in auditing and
accounting.
NO
DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. THE PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR THE
FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
|
|
|
ARRHYTHMIA
RESEARCH TECHNOLOGY, INC.
|
TABLE
OF CONTENTS
|
|
|
|
Available
Information
|
2
|
|
500,000 Shares of Common
Stock
|
Incorporation
of Certain Information by Reference
|
2
|
|
|
The
Company
|
3
|
|
|
Forward-looking
Statements
|
9
|
|
PROSPECTUS
|
Risk
Factors
|
10
|
|
|
The
Offering
|
13
|
|
|
Selling
Securityholders
|
13
|
|
May 6, 2010
|
Description of
Capital Stock
|
14
|
|
|
Use of
Proceeds
|
15
|
|
|
Plan of
Distribution
|
15
|
|
|
Legal
Matters
|
15
|
|
|
Experts
|
15
|
|
|
|
|
|
|
ARRHYTHMIA RESEARCH TECHNOLOGY,
INC. HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON,
D.C., A REGISTRATION STATEMENT UNDER THE SECURITIES ACT WITH RESPECT TO
THE SHARES OFFERED HEREBY. THIS PROSPECTUS OMITS CERTAIN
INFORMATION CONTAINED IN THE REGISTRATION STATEMENT. THE
INFORMATION OMITTED MAY BE OBTAINED FROM THE SECURITIES AND EXCHANGE
COMMISSION UPON PAYMENT OF THE REGULAR CHARGE THEREFOR.
|
|
|
|
PART
II
INFORMATION
REQUIRED IN THE REGISTRATION STATEMENT
ITEM
3.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC
allows us to incorporate by reference information from other documents that we
file with them, which means that we can disclose important information by
referring to those documents. The information incorporated by
reference is considered to be part of this prospectus, and information that we
file later with the SEC will automatically update and supersede this
information.
We
incorporate by reference the documents listed below together with any amendments
thereof:
·
|
Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, filed
with the SEC on March 10, 2010;
|
·
|
Current
Reports on Form 8-K filed with the SEC on May 5,
2010;
|
·
|
Quarterly
Report on Form 10-Q filed with the SEC on May 4, 2010;
and
|
·
|
The
description of the Company’s Common Stock contained in the Company’s
Registration Statement on Form 8-A, filed with the SEC on February 12,
1992, including any amendment or reports filed for the purpose of updating
such description.
|
The
Company also incorporates by reference additional documents that may be filed
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior
to the sale of all of the shares covered by this registration
statement.
The
Company will provide to you, without charge, upon your written or oral request,
a copy of any or all of the documents that it incorporates by reference,
including exhibits. Please direct requests to: Arrhythmia Research
Technology, Inc., 25 Sawyer Passway, Fitchburg, Massachusetts 01420, Attn:
Corporate Secretary; (978) 345-5000.
ITEM
4. DESCRIPTION
OF SECURITIES
Not
applicable.
ITEM
5. INTERESTS
OF NAMED EXPERTS AND COUNSEL
Not
applicable.
ITEM
6. INDEMNIFICATION
OF OFFICERS AND DIRECTORS
Section
145 of the General Corporation Law of the State of Delaware grants each
corporation organized thereunder, such as the Company, the power to indemnify
its directors and officers against liability for certain of their acts. Section
102(b)(7) of the Delaware Corporation Law permits a provision in the certificate
of incorporation of each corporation organized thereunder eliminating or
limiting, with specified exceptions, the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. The Company’s certificate of incorporation contains this
provision. The foregoing statements are subject to the detailed provisions of
Sections 145 and 102(b)(7) of the Delaware General Corporation Law.
Article
VI of the Company’s By-Laws provides that the Company will indemnify and hold
harmless its executive officers and directors to the fullest extent permitted by
the Delaware General Corporation Law as it presently exists or may be amended
from time to time, who were or are made or are threatened to be made a party or
are or may be otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
or she, or a person for whom he or she is the legal representative, is or was a
director or executive officer of the corporation or, while a director or
executive officer of the corporation, is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust, enterprise or nonprofit entity,
including service with respect to employee benefit plans, against all expenses
(including attorneys’ fees, judgments, fines and amounts paid in settlement)
actually and reasonably incurred by such person. The Company shall also, to the
fullest extent permitted by applicable law, pay the expenses (inducing
attorneys’ fees) incurred by such directors and executive officers in defending
any civil, criminal, administrative or investigative action, suit or proceeding
in advance of its final disposition;
provided
,
however
, that, to the
extent required by law, such payment of expenses in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by such person to repay all amounts advanced if it should be ultimately
determined that such person is not entitled to be indemnified under Article VI
or otherwise. The Company may, to the extent authorized from time to time by the
Board of Directors, provide rights to indemnification and to the advancement of
expenses to officers, employees and agents of the Company similar to those
conferred in Article VI to directors and executive officers of the corporation.
The Company maintains directors’ and officers’ liability insurance, including a
reimbursement policy in favor of the Company.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.
ITEM
7. EXEMPTION
FROM REGISTRATION CLAIMED
Not
applicable.
ITEM
8. EXHIBITS
Exhibit
|
Description
|
4.1
|
Arrhythmia
Research Technology, Inc. 2010 Equity Incentive Plan
|
5.1
|
Opinion
of Ellenoff Grossman & Schole LLP
|
23.1
|
CCR
LLP Consent
|
23.2
|
Ellenoff
Grossman & Schole LLP Consent (included in Exhibit
5.1)
|
24.1
|
Power
of Attorney is contained on the signature page of this Registration
Statement
|
ITEM
9. UNDERTAKINGS
a.
|
The
undersigned Registrant will file, during any period in which it offers or
sells securities, a post-effective amendment to this registration
statement to include material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration
statement.
|
b.
|
The
undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the
registrant’s annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial
bona
fide
offering thereof.
|
c.
|
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of small business
issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-8 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Fitchburg, Massachusetts, on the 6
th
day
of May, 2010.
ARRHYTHMIA RESEARCH TECHNOLOGY, INC.
|
|
|
|
By:
|
/s/
David A. Garrison
|
|
|
David
A. Garrison
|
|
|
Chief
Financial Officer
|
POWER
OF ATTORNEY
Each of
the undersigned officers and directors of the Registrant, Arrhythmia Research
Technology, Inc., whose signature appears below, hereby appoints David A.
Garrison and James E. Rouse, jointly and individually, as attorneys-in-fact for
the undersigned with full power of substitution, to execute in his or her name
and on behalf of such person, individually, and in each capacity stated below,
this Registration Statement on Form S-8 and one or more amendments (including
post-effective amendments) to this Registration Statement and any related
registration statement under Rule 462(b) under the Securities Act of 1933 as the
attorney-in-fact shall deem appropriate, and to file any such amendment
(including exhibits thereto and other documents in connection herewith) to this
Registration Statement on Form S-8 or Rule 462(b) registration statement with
the Securities and Exchange Commission, granting unto said attorneys-in-fact,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact, or either of them, may
lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature
|
|
Title
|
Date
|
|
|
|
|
/s/
James E. Rouse
|
|
President,
Chief Executive Officer and
|
May
6, 2010
|
James
E. Rouse
|
|
Director
(principal executive officer)
|
|
|
|
|
|
/s/
David A. Garrison
|
|
Executive
Vice President and Chief Financial
|
May
6, 2010
|
David
A. Garrison
|
|
Officer
(principal financial officer)
|
|
|
|
|
|
/s/
E.P. Marinos
|
|
Chairman
of the Board and Director
|
May
6, 2010
|
E.
P. Marinos
|
|
|
|
|
|
|
|
/s/
Julius Tabin
|
|
Director
|
May
6, 2010
|
Julius
Tabin
|
|
|
|
|
|
|
|
/s/
Paul F. Walter
|
|
Director
|
May
6, 2010
|
Paul
F. Walter
|
|
|
|
|
|
|
|
/s/
Jason R. Chambers
|
|
Director
|
May
6, 2010
|
Jason
R. Chambers
|
|
|
|
EXHIBIT
INDEX
Exhibit
|
Description
|
4.1
|
Arrhythmia
Research Technology, Inc. 2010 Equity Incentive Plan
|
5.1
|
Opinion
of Ellenoff Grossman & Schole LLP
|
23.1
|
CCR
LLP Consent
|
23.2
|
Ellenoff
Grossman & Schole LLP Consent (included in Exhibit
5.1)
|
24.1
|
Power
of Attorney is contained on the signature page of this Registration
Statement
|
Exhibit
4.1
ARRHYTHMIA
RESEARCH TECHNOLOGY, INC.
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 April 30, 2010.
k.
“Employee”
means an employee of the Employer (including an officer or director who is also
an employee).
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.
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.
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 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.
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.
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.
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.
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.
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.