<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Hypertension Diagnostics, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LETTERHEAD]
PREDICTING YOUR CARDIOVASCULAR HEALTH NON-INVASIVELY
October 30, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders.
This meeting will be held on Monday, December 7, 1998, at 10:00 a.m., at the
Minneapolis Hilton and Towers, Second Floor, 1001 Marquette Avenue, Minneapolis,
Minnesota. Details concerning the meeting are presented in the Notice of Annual
Meeting and Proxy Statement which follow.
Your vote is important. We encourage you to read the Proxy Statement and
sign and return your proxy card in the prepaid envelope provided, so that your
shares will be represented at the meeting.
Sincerely,
[SIGNATURE]
Melville R. Bois
CHAIRMAN OF THE BOARD
2915 Waters Road, Suite 108, Eagan, MN 55121-1562 USA
651-687-9999 - FAX 651-687-0485 - 1-888-PULSEWAVE
(785-7392) WWW.HDI-PULSEWAVE.COM
<PAGE>
[LOGO]
------------------------
NOTICE OF ANNUAL MEETING
---------------------
The Annual Meeting of Shareholders of Hypertension Diagnostics, Inc. (the
"Company") will be held at the Minneapolis Hilton and Towers, Second Floor, 1001
Marquette Avenue, Minneapolis, Minnesota 55403, on Monday, December 7, 1998 at
10:00 a.m., Minneapolis, Minnesota time, for the following purposes:
1. To elect five directors as follows: (a) two directors to serve a one-year
term; (b) one director to serve a two-year term; and (c) two directors to
serve a three-year term.
2. To approve the appointment of Ernst & Young LLP as independent auditors for
the fiscal year ending June 30, 1999.
3. To transact any other business properly brought before the Annual Meeting or
any adjournment of the meeting.
Shareholders of record at the close of business on October 16, 1998 will be
entitled to vote at the Annual Meeting.
Since a majority of the outstanding shares of the Company's Common Stock
must be represented either in person or by proxy to constitute a quorum for the
conduct of business, please sign, date and return the enclosed proxy card
promptly.
By Order of the Board of Directors
[LOGO]
Charles F. Chesney, D.V.M, Ph.D.
EXECUTIVE VICE PRESIDENT, CHIEF
TECHNOLOGY OFFICER AND SECRETARY
October 30, 1998
<PAGE>
HYPERTENSION DIAGNOSTICS, INC.
2915 WATERS ROAD, SUITE 108
EAGAN, MINNESOTA 55121-1562
------------------------
PROXY STATEMENT
---------------------
The Board of Directors of Hypertension Diagnostics, Inc. (the "Company") is
soliciting your proxy for use at the 1998 Annual Meeting of Shareholders on
Monday, December 7, 1998. This Proxy Statement and the enclosed form of proxy
will be mailed to shareholders commencing on or about October 30, 1998.
GENERAL INFORMATION
VOTING
Each share of the Company's Common Stock is entitled to one vote. You may
vote your shares in person by attending the Annual Meeting or you may vote by
proxy. If you vote by proxy, you must sign, date and return the enclosed proxy
card in the envelope provided.
If you sign and return the proxy card on time, the individuals named on the
proxy card will vote your shares as you have directed. If you do not specify on
your proxy card how you want your shares voted, the individuals named on the
enclosed proxy card will vote your shares FOR Proposal One--election of all five
nominees for director as described below, and FOR Proposal Two--appointment of
the independent auditors.
QUORUM AND VOTE REQUIREMENTS
On October 16, 1998, there were 5,105,235 shares of Common Stock issued and
outstanding.
A majority of the outstanding shares of Common Stock must be present in
person or by proxy in order to have a quorum to conduct business at the Annual
Meeting. Shares represented by proxies marked "Abstain" and "broker nonvotes"
are counted in determining whether a quorum is present.
Each of the proposals presented at the Annual Meeting will be approved if a
majority of the shares of Common Stock present in person or represented by proxy
vote for the proposal. Broker nonvotes are not counted as votes for or against a
proposal. Abstentions are counted in determining the total number of votes cast
on a proposal. An abstention has the effect of a negative vote.
REVOKING A PROXY
If you give a proxy and later wish to revoke it before it is voted, you may
do so by (1) sending a written notice to that effect to the Secretary of the
Company, (2) submitting a properly signed proxy with a later date, or (3) voting
in person at the Annual Meeting.
STOCK OWNERSHIP OF PRINCIPAL
STOCKHOLDERS AND MANAGEMENT
The following table shows the amount of Common Stock beneficially owned, as
of October 16, 1998, by (1) holders known by the Company to hold more than 5% of
the Common Stock, (2) each director and executive officer and (3) all directors
and executive officers of the Company as a group. Unless otherwise
<PAGE>
indicated, the persons listed below have sole voting and investment power with
respect to the shares and may be reached at the Company's address.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAME OF BENEFICIAL OWNER OWNED(1) BENEFICIALLY OWNED
- ------------------------------------------------------------------------- -------------------- -------------------
<S> <C> <C>
Greg H. Guettler(2)...................................................... 50,000 *
Charles F. Chesney, D.V.M., Ph.D., R.A.C.(3)............................. 296,046 4.8%
James S. Murphy(4)....................................................... 89,600 1.5
Jay N. Cohn, M.D.(5)..................................................... 459,718 7.5
Melville R. Bois(6)...................................................... 65,000 1.1
Kenneth W. Brimmer(7).................................................... 62,000 1.0
Stanley M. Finkelstein, Ph.D.(8)
Health Informatics Division-Box 609
UMHC, 420 Delaware St. S.E.,
Minneapolis, Minnesota 55455........................................... 312,071 5.1
All Officers and Directors as a Group (6 persons)........................ 1,022,364 16.7
</TABLE>
- ------------------------
* Less than 1%.
(1) Shares of Common Stock subject to options and warrants that are currently
exercisable or exercisable within 60 days are deemed to be beneficially
owned by the person holding the options or warrants for computing such
person's percentage, but are not treated as outstanding for computing the
percentage of any other person.
(2) Includes options and warrants to purchase 34,000 shares.
(3) Includes options to purchase 240,046 shares.
(4) Includes options to purchase 39,600 shares.
(5) Includes options to purchase 385,544 shares.
(6) Includes options to purchase 40,000 shares.
(7) Includes options and warrants to purchase 21,000 shares.
(8) Includes options to purchase 257,688 shares.
PROPOSAL 1: ELECTION OF DIRECTORS
Under the Company's Bylaws, the Board of Directors may from time to time
determine the size of the Board. The Board currently has fixed the number of
directors at five.
At the Company's special meeting of shareholders held on May 22, 1998,
shareholders approved a proposal to classify the Board into three classes of
directors for election purposes. After a transitional period, each class will be
elected in a different year for a term of three years. At this Annual Meeting
all three classes will be elected. At each subsequent Annual Meeting of
Shareholders, only directors of the class whose term is expiring will be elected
and if elected each such director will serve a term of three years.
Each nominee listed below has consented to serve if elected. If a nominee is
unable to serve for any reason, the persons named on the enclosed proxy card may
vote for a substitute nominee proposed by the Board, or the Board may reduce the
number of directors to be elected.
2
<PAGE>
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
TERM ENDING AFTER FISCAL YEAR 1999
MELVILLE R. BOIS, AGE 52. Mr. Bois was elected Chairman of the Board in 1997
and has been a director of the Company since November 1995. From January 1996
until September 1997, he was the Company's President and Chief Executive
Officer. For more than 30 years, Mr. Bois has been employed by title insurance
and financial companies. In 1979, he founded and was the owner of Universal
Title Insurance Company. This company became Universal Title and Financial
Corporation in 1984 and Mr. Bois continues as its President. Universal Title and
Financial Corporation is a private holding company which is engaged in
commercial real estate and related records and data management. Mr. Bois also is
a director of several companies, including Hilex Corporation and Grand Forks
Abstract Company. Since 1988, he has been the owner and President of the Bois
Family Foundation, a charitable organization.
CHARLES F. CHESNEY, D.V.M., PH.D., R.A.C., AGE 56. Dr. Chesney served as
President and Chief Executive Officer of the Company from its inception in 1988
until January 1996 when he was appointed Executive Vice President and Chief
Technology Officer. He has been a director and Secretary of the Company since
1988. From 1978 to 1996, Dr. Chesney was a consultant to P-T Consulting
Associates, Inc., a biomedical research, product development and consulting
firm, which he owns. From 1984 to 1987, Dr. Chesney was employed by the 3M
Company as Research and Development Manager for 3M/Riker Laboratories in its
Pharmaceutical and Health Care Division. Dr. Chesney is the founder of a small
computer firm which offers data base management systems to large drug companies
and he is the author of more than 25 scientific publications in the field of
medical pathology and toxicology. Dr. Chesney is a member of more than 30
professional societies and has been engaged in new product research and
development in the pharmaceutical, medical device and bio-technology industries
since 1974. In 1991, Dr. Chesney became "Board Certified" in regulatory affairs
by the Certification Board of the Regulatory Affairs Professional Society. Dr.
Chesney holds the degree of Doctor of Veterinary Medicine from the University of
Minnesota (1970) and a Ph.D. in Medical Pathology with a minor in Cardiovascular
Physiology from the University of Wisconsin-Madison (1973).
TERM ENDING AFTER FISCAL YEAR 2000
GREG H. GUETTLER, M.B.A., AGE 44. Mr. Guettler has been President and a
director of the Company since September 1997. Mr. Guettler has more than 19
years of experience in sales, marketing and management positions within the
medical industry. Prior to joining the Company, Mr. Guettler was a senior
manager at Universal Hospital Services, Inc. ("UHS"), a nationwide provider of
medical devices and device management services to the health care industry.
During his 14 years at UHS, Mr. Guettler held positions as Director of National
and Strategic Accounts where he led a national accounts sales team, as Director
of Alternate Care and Specialty Product Promotions where he was responsible for
the development of UHS's alternate care business unit and the nationwide
distribution of new medical products, and as Marketing Manager where he was
responsible for company-wide marketing and planning. Additionally, Mr. Guettler
has held sales, sales management, product management and marketing positions for
the St. Paul Regional Blood Services. Mr. Guettler has a Bachelor's degree from
the University of St. Thomas in St. Paul, Minnesota (1977) and a Masters degree
in Business Administration (M.B.A.) from the University of St. Thomas Graduate
School of Management in St. Paul, Minnesota (1983).
TERM ENDING AFTER FISCAL YEAR 2001
JAY N. COHN, M.D., AGE 68. Dr. Cohn has served as a director of the Company
since its inception in July 1988. Since 1974, Dr. Cohn has been a Professor of
Medicine at the University of Minnesota Medical School and was Head of the
Cardiovascular Division from 1974 through 1997. Dr. Cohn is the co-inventor of
the technology used in the Company's HDI/PulseWave-TM-CardioVascular Profiling
Instrument. Dr. Cohn is the Company's Chief Clinical Consultant and has been a
consultant to several pharmaceutical firms. He
3
<PAGE>
became Chairman of the Company's Scientific and Clinical Advisory Board in 1996.
Dr. Cohn is the immediate past President of the International Society of
Hypertension and is also a member of the editorial boards of 12 professional
journals and of approximately 17 professional societies. Since 1959, Dr. Cohn
has published more than 500 scientific articles and a new textbook on
cardiovascular medicine. Dr. Cohn received his M.D. degree from Cornell
University (1956). Dr. Cohn also is a director of Medco Research, Inc.
KENNETH W. BRIMMER, AGE 43. Mr. Brimmer has been a director of the Company
since November 1995. Mr. Brimmer is President and Secretary of Rainforest Cafe,
Inc., and has been its Treasurer since May 1995 and a director since August
1996. Mr. Brimmer was employed by Grand Casinos, Inc. and its predecessor since
October 1990 as Special Assistant to the Chairman and Chief Executive Officer.
Mr. Brimmer also is a director of New Horizons Kids Quest, Inc. and Oxboro
Medical International, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has appointed an Audit Committee and a Compensation
Committee. The Audit Committee assists the Board in overseeing the Company's
accounting policies, internal auditing procedures, internal controls and
financial reporting practices. Its functions include making recommendations
regarding the appointment and retention of the Company's independent auditors
and reviewing the scope and results of audits by the independent auditors.
Members of the Audit Committee are Messrs. Bois and Brimmer. The Compensation
Committee reviews and makes recommendations to the Board concerning salaries,
bonus awards and benefits for officers and key employees. The Committee also
administers the Company's stock option plans. Members of the Compensation
Committee are Messrs. Bois and Brimmer and Dr. Cohn.
BOARD AND COMMITTEE MEETINGS
The Board of Directors met six times and took written action in lieu of
meeting twelve times during fiscal year 1998. The Audit Committee and the
Compensation Committee each met one time during fiscal year 1998. Each incumbent
director attended at least 75% of the total number of Board meetings and all
committee meetings on which he served.
DIRECTOR COMPENSATION
Currently, the Company has no regular compensation arrangements with its
directors for serving on the Board or its committees. Employee directors receive
no additional compensation other than their normal salary. Non-employee
directors receive no cash compensation, but may receive discretionary grants of
stock options under the Company's stock option plan. The Company granted in
January 1996 to each of Mr. Bois and Mr. Brimmer and in January 1997 to Dr. Cohn
options to purchase 25,000 shares of Common Stock at an exercise price of $2.00
per share. The option grant to Dr. Cohn was subsequently canceled in connection
with the Company's initial public offering. In fiscal year 1998, no stock
options were granted to nonemployee directors for services as a director.
On October 30, 1995, the Company entered into a four-year consulting
agreement with Jay N. Cohn, M.D., a member of the Board of Directors. Dr. Cohn
is also one of the founders of the Company and serves as the Company's Chief
Clinical Consultant and Chairman of the Scientific and Clinical Advisory Board.
The agreement is cancellable for any reason by either the Company or Dr. Cohn
upon 60 days prior written notice. Under the terms of the agreement, the Company
agreed to grant Dr. Cohn nonqualified stock options to purchase 449,265 shares,
which are exercisable for a period of ten years at an exercise price of $1.70
per share, to serve as clinical liaison and spokesman for the Company's arterial
compliance technology and to use his best efforts to forward the research,
clinical penetration and marketing of the Company's Products. All of the shares
underlying these options have been fully vested. Dr. Cohn is entitled to certain
registration rights with respect to the shares underlying these options.
4
<PAGE>
On August 28, 1998, the Board of Directors agreed to amend Dr. Cohn's
consulting agreement. Under the amended consulting agreement, Dr. Cohn will
perform marketing, sales and public relations activities. As consideration for
such additional services, the Company has agreed to grant to Dr. Cohn an option
to purchase 100,000 shares of Common Stock under the Company's 1998 Stock Option
Plan, with an exercise price equal to $3.656 per share (which was the fair
market value of the Common Stock on the date of grant). The option vests in
three equal annual installments commencing on the date of grant. The consulting
agreement has been extended through August 2001.
On January 1, 1996, the Company entered into a consulting agreement with
Melville R. Bois, currently the Chairman of the Board of Directors, to serve as
the Company's President and Chief Executive Officer on a part-time basis until
such time as the Company appointed a President or Chief Executive Officer. Under
the terms of the agreement, the Company agreed to pay Mr. Bois a monthly
consulting fee of $4,000 and grant Mr. Bois nonqualified stock options to
purchase 12,500 shares, which are exercisable for a period of ten years at an
exercise price of $2.00 per share. All of the shares underlying such options
have been fully vested. The agreement was terminated by the Company in
accordance with its terms, upon the hiring of Greg H. Guettler as President in
September 1997. On July 1, 1997, the Company granted Mr. Bois a stock option to
purchase 12,500 shares at an exercise price of $2.00 per share. All of the
shares underlying such options have been fully vested. Mr. Bois is entitled to
certain registration rights with respect to the shares underlying his options.
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation for years
indicated of the Company's executive officers who earned salary and bonus in
excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------
FISCAL YEAR ----------------------- SECURITIES
NAME AND PRINCIPAL POSITION ENDED JUNE 30 SALARY BONUS UNDERLYING OPTIONS
- ------------------------------------------------------- ----------------- ---------- ----------- --------------------
<S> <C> <C> <C> <C>
Greg H. Guettler(1).................................... 1998 $ 105,000 -- 150,000
President 1997 -- -- --
1996 -- -- --
</TABLE>
- ------------------------
(1) Mr. Guettler became President in September 1997.
The following table provides information about each stock option grant made
during the fiscal year ended June 30, 1998 to the named executive officer.
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED TO EXERCISE OR
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION
NAME OPTIONS GRANTED FISCAL YEAR ($/SHARE) DATE
- --------------------------------------------- ------------------- ------------------- ------------- -----------
<S> <C> <C> <C> <C>
Greg H. Guettler............................. 150,000 51.6% $ 2.00/share 9/7/2007
</TABLE>
The following table summarizes stock option exercises during the year ended
June 30, 1998 and the total number of options held at the end of fiscal year
1998 by the named executive officer.
5
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998 AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT JUNE 30, 1998 JUNE 30, 1998(2)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Greg H. Guettler................ 6,000 $ 12,750 12,000 132,000 $ 25,500 $ 280,500
</TABLE>
- ------------------------
(1) Difference between the initial public offering price of $4.125 per unit and
option exercise price (before payment of applicable income taxes).
(2) There was no public trading market for the Common Stock as of June 30, 1998.
The values have been calculated based on the initial public offering price
of $4.125 per unit less the option exercise price (before payment of
applicable income taxes).
EMPLOYMENT AGREEMENTS
As of September 8, 1997, the Company entered into an employment agreement
with Greg H. Guettler to serve as its President. The employment agreement has a
term of one year, but provides for automatic extension for an additional year
unless either party gives written notice of the nonextension by a specified
date. Pursuant to the employment agreement, Mr. Guettler is paid a minimum
annual salary (exclusive of benefits, bonuses or incentive payments) of
$126,000, subject to adjustment annually by the Board of Directors, and a
discretionary one-time cash bonus and incentive compensation, equal to not less
than 10% and not more than 25% of Mr. Guettler's annual salary, as determined by
the Board of Directors. Payment of the bonus and incentive compensation was
contingent upon the successful completion of Mr. Guettler's first year of
employment with the Company and was payable at the time Mr. Guettler commenced
his second year of employment. (The Compensation Committee has not yet made any
determination regarding bonus and incentive payments in 1998 with respect to Mr.
Guettler or any other executive officer.) In addition, the employment agreement
provides for the one-time grant of options to purchase 150,000 shares at an
exercise price of $2.00 per share. If Mr. Guettler is terminated without cause
(as defined), he will be entitled to one year's severance payment based on his
base salary. The employment agreement is terminable by the Company with 60 days
prior written notice. Under the terms of the employment agreement, Mr. Guettler
will be entitled to accelerated vesting of his stock options and one year's
compensation in the event that there is a "change in control," as defined. The
employment agreement contains certain confidentiality obligations and a one-year
covenant not to compete.
On October 30, 1995, the Company entered into a five-year employment
agreement with Dr. Charles F. Chesney to serve as its President and Chief
Executive Officer until the Company appointed a President or Chief Executive
Officer, at which time Dr. Chesney became the Executive Vice President and Chief
Technology Officer (which occurred on January 1, 1996). Pursuant to the
employment agreement, Dr. Chesney is paid a minimum annual salary (exclusive of
benefits, bonuses or incentive payments) of $100,800, subject to annual
adjustments to reflect increases in the cost of living. Dr. Chesney's base
annual salary, plus benefits, bonuses and incentive payments, must be equal to,
or greater than, 80% of that paid to the Company's President and/or Chief
Executive Officer. Dr. Chesney also was granted a stock option to purchase
288,046 shares at an exercise price of $1.70 per share and is entitled to
certain registration rights with respect to the Shares underlying such options.
In addition, on August 18, 1997, the Company granted Dr. Chesney a stock option
under the 1995 Option Plan to purchase 75,000 shares at an exercise price of
$2.00 per share. The employment agreement is terminable by Dr. Chesney for any
reason, upon 60 days prior written notice. Dr. Chesney may be terminated by the
Company only for "reasonable cause," as defined. The employment agreement
contains certain confidentiality obligations.
6
<PAGE>
On July 1, 1997, the Company entered into a two-year employment agreement
with James S. Murphy to serve as Vice President of Finance and Chief Financial
Officer. The employment agreement provides for an annual base salary of $76,800,
subject to adjustments, if any, to increase the annual base salary by the Board
of Directors following an annual review in June 1998. In addition, the
employment agreement provides for a one-time grant of options to purchase 53,100
shares, vesting monthly over a four-year period commencing July 1, 1997, at an
exercise price of $2.00 per share. The employment agreement is terminable by the
Company if it determines, in good faith, that Mr. Murphy is not meeting
performance expectations, standards or objectives, either (a) upon 30 days
written notice, or (b) immediately by delivering one month's pay with the
termination notice. The employment agreement is terminable by Mr. Murphy upon 30
days prior written notice. The employment agreement contains certain
nondisclosure and confidentiality obligations.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 30, 1995, the Company entered into a four-year consulting
agreement with Stanley M. Finkelstein, Ph.D., one of the founders of the Company
and currently the Company's Chief Technical Consultant. The agreement is
cancellable for any reason by either the Company or Dr. Finkelstein upon 60 days
prior written notice. Under the terms of the agreement, the Company agreed to
grant Dr. Finkelstein nonqualified stock options to purchase 297,688 shares of
Common Stock, which are exercisable for a period of ten years at an exercise
price of $1.70 per share, to serve as technical liaison and spokesman for the
Company's arterial compliance technology and to use his best efforts to forward
the research, clinical penetration and marketing of the Company's Products. All
of the shares underlying these options have been fully vested. Dr. Finkelstein
is entitled to certain registration rights with respect to the shares underlying
these options.
The Company's management believes that the terms of this transaction are no
less favorable to the Company than would have been obtained from a nonaffiliated
third party for similar services. Any future transactions between the Company
and any of its officers, directors or affiliates will be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
All future material affiliated transactions must be approved by a majority of
the independent outside members of the Company's Board of Directors who do not
have an interest in the transactions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under SEC rules, the Company is required to disclose the identity of
directors, executive officers and shareholders owning more than 10% of the
Common Stock of the Company who did not file on a timely basis reports required
by Section 16(a) of the Securities Exchange Act of 1934. Since the Company
became a public reporting company after its fiscal year end June 30, 1998, such
persons were not subject to the Section 16(a) requirements during the fiscal
year 1998.
PROPOSAL 2: APPOINTMENT OF INDEPENDENT AUDITORS
Ernst & Young LLP has served as independent auditors to the Company since
1997. The Audit Committee of the Board of Directors has again recommended Ernst
& Young LLP to serve as independent auditors for fiscal year 1999. Although it
is not required to do so, the Board of Directors desires to submit the
appointment of Ernst & Young LLP for shareholder approval at the Annual Meeting.
A representative of Ernst & Young LLP will be present at the Annual Meeting
to answer appropriate questions.
If a majority of shares of Common Stock is not voted to approve the
appointment of Ernst & Young LLP, the Board of Directors will reconsider its
selection.
7
<PAGE>
OTHER INFORMATION
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any shareholder proposal intended for inclusion in the Company's proxy
material for the 1999 Annual Meeting of Shareholders must be received by the
Secretary of the Company no later than the close of business on July 2, 1999.
A shareholder who wishes to make a proposal for consideration at the 1999
Annual Meeting, but does not seek to include the proposal in the Company's proxy
material, must notify the Secretary of the Company. The notice must be received
no later than September 15, 1999. If the notice is not timely, then the persons
named on the Company's proxy card for the 1999 Annual Meeting may use their
discretionary voting authority when the proposal is raised at the meeting.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended June 30, 1998,
including financial statements, is enclosed.
COST AND METHOD OF SOLICITATION
The Company will pay the cost of soliciting proxies and may make
arrangements with brokerage firms, custodians, nominees and other fiduciaries to
send proxy materials to beneficial owners of Common Stock. The Company will
reimburse them for reasonable out-of-pocket expenses. In addition to
solicitation by mail, proxies may be solicited by telephone, electronic
transmission or in person by directors, officers and employees of the Company.
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no other matters
that may come before the Annual Meeting. However, if matters other than those
referred to above should properly come before the Annual Meeting, the
individuals named on the enclosed proxy card intend to vote such proxy in
accordance with their best judgment.
By Order of the Board of Directors
[LOGO]
Charles F. Chesney, D.V.M, Ph.D.
EXECUTIVE VICE PRESIDENT, CHIEF
TECHNOLOGY OFFICER AND SECRETARY
8
<PAGE>
PROXY
[COMPANY LOGO]
ANNUAL MEETING - DECEMBER 7, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Greg H. Guettler and Charles F. Chesney,
D.V.M., Ph.D., or either of them, with power of substitution to each, as
attorneys and proxies to represent the undersigned at the Annual Meeting of
Shareholders of Hypertension Diagnostics, Inc. to be held at the Minneapolis
Hilton and Towers, Second Floor, 1001 Marquette Avenue, Minneapolis,
Minnesota, on December 7, 1998, at 10:00 a.m. Minneapolis, Minnesota time,
and at any adjournment(s) thereof, and to vote all shares of Common Stock
which the undersigned may be entitled to vote at the meeting as directed
below with respect to the proposals set forth in the Proxy Statement and in
their discretion upon other matters that may properly come before the meeting.
THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2. PLEASE SIGN, DATE AND RETURN THE PROXY FORM USING THE
ENCLOSED ENVELOPE.
[TRIANGLE] DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED [TRIANGLE]
HYPERTENSION DIAGNOSTICS, INC. 1998 ANNUAL MEETING
1. ELECTION OF DIRECTORS:
(1-YEAR TERMS) 1-Melville R. Bois 2-Charles F. Chesney, D.V.M., Ph.D.
(2-YEAR TERM) 3-Greg H. Guettler
(3-YEAR TERMS) 4-Jay N. Cohn, M.D. 5-Kenneth W. Brimmer
/ / FOR all nominees / / WITHHOLD AUTHORITY
listed to the left (except to vote for all nominees
as specified below). listed to the left.
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right.)
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2. Appointment of Ernst & Young LLP as independent auditors for fiscal
year 1999.
/ / FOR / / AGAINST / / ABSTAIN
3. To act upon such other matters as may properly come before the meeting or
any adjournment(s) thereof.
Date NO. OF SHARES
--------------------------------
Check appropriate box
Address Change? / / Name Change? / / / / I plan to attend
Indicate changes below: the meeting.
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Signature(s) in Box
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full
corporate name by authorized officer. If a partnership, please sign in
partnership name by authorized person.
