<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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
MEDWAVE, 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>
MEDWAVE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Medwave, Inc. will be held on
November 17, 1998 at 3:00 p.m. (Minneapolis time), in the Auditorium of the
Lutheran Brotherhood Building, 625 Fourth Avenue, Minneapolis, Minnesota, for
the following purposes:
1. To set the number of directors at four (4).
2. To elect directors for the ensuing year.
3. To approve an amendment to the Stock Option Plan which clarifies
certain administrative provisions, permits certain transfers of
non-qualified stock options, and provides for additional automatic
option grants to outside directors of the Company.
4. To consider and act upon such other matters as may properly come
before the meeting and any adjournments thereof.
Only shareholders of record at the close of business on October 6, 1998,
are entitled to notice of and to vote at the meeting or any adjournment thereof.
Your vote is important. We ask that you complete, sign, date, and return
the enclosed proxy in the envelope provided for your convenience. The prompt
return of proxies will save the Company the expense of further requests for
proxies.
BY ORDER OF THE BOARD OF DIRECTORS
G. Kent Archibald
President and Chief Executive Officer
Arden Hills, Minnesota
October 9, 1998
<PAGE>
MEDWAVE, INC.
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 17, 1998
PROXY STATEMENT
INTRODUCTION
Your proxy is solicited by the Board of Directors of Medwave, Inc.
("the Company") for use at the Annual Meeting of Shareholders to be held on
November 17, 1998 at the location and for the purposes set forth in the
notice of meeting, and at any adjournment thereof.
The cost of soliciting proxies, including the preparation, assembly, and
mailing of the proxies and soliciting material, as well as the cost of
forwarding such material to beneficial owners of stock, will be borne by the
Company. Directors, officers, and regular employees of the Company may, without
compensation other than their regular remuneration, solicit proxies personally
or by telephone.
Any shareholder giving a proxy may revoke it at any time prior to its use
at the meeting by giving written notice of such revocation to the Secretary of
the Company. Proxies not revoked will be voted in accordance with the choice
specified by shareholders by means of the ballot provided on the proxy for that
purpose. Proxies which are signed but which lack any such specification will,
subject to the following, be voted in favor of the proposals set forth in the
Notice of Meeting and in favor of the slate of directors proposed by the Board
of Directors and listed herein. If a shareholder abstains from voting as to any
matter, then the shares held by such shareholder shall be deemed present at the
meeting for purposes of determining a quorum and for purposes of calculating the
vote with respect to such matter, but shall not be deemed to have been voted in
favor of such matter. Abstentions, therefore, as to any proposal will have the
same effect as votes against such proposal. If a broker returns a "non-vote"
proxy, indicating a lack of voting instructions by the beneficial holder of the
shares and a lack of discretionary authority on the part of the broker to vote
on a particular matter, then the shares covered by such non-vote proxy shall be
deemed present at the meeting for purposes of determining a quorum but shall not
be deemed to be represented at the meeting for purposes of calculating the vote
required for approval of such matter.
The mailing address of the principal executive office of the Company is
4382 Round Lake Road West, Arden Hills, Minnesota 55112-3923. The Company
expects that this Proxy Statement, the related proxy and notice of meeting will
first be mailed to shareholders on or about October 9, 1998.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed October 6, 1998, as the
record date for determining shareholders entitled to vote at the Annual Meeting.
Persons who were not shareholders on such date will not be allowed to vote at
the Annual Meeting. At the close of business on October 6, 1998, 5,392,396
shares of the Company's Common Stock were issued and outstanding. The Common
Stock is the only outstanding class of capital stock of the Company entitled to
vote at the meeting. Each share of Common Stock is entitled to one vote on each
matter to be voted upon at the meeting. Holders of Common Stock are not
entitled to cumulative voting rights.
- 1 -
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table provides information concerning persons known to the
Company to be the beneficial owners of more than 5% of the Company's
outstanding Common Stock as of October 6, 1998. Unless otherwise indicated,
the shareholders listed in the table have sole voting and investment powers
with respect to the shares indicated.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name and Address Beneficially Owned(1) Ownership
---------------------------------------------------------------------
<S> <C> <C>
G. Kent Archibald 565,493(2) 9.8%
4382 Round Lake Road West
Arden Hills, MN 55112
Aaron Boxer, Revocable Trust
Aaron Boxer, Trustee 396,639 7.4%
5500 Wayzata Boulevard
8th Floor - Suite 800
Minneapolis, MN 55416
William D. Corneliuson
777 East Wisconsin Avenue
Suite 3020 300,100 5.6%
Milwaukee, WI 53202
David B. Johnson 450,037(3) 8.2%
5500 Wayzata Boulevard
8th Floor - Suite 800
Minneapolis, MN 55416
</TABLE>
(1) Shares not outstanding but deemed beneficially owned by virtue of the right
of a person to acquire them as of October 6, 1998 or within sixty days of
such date are treated as outstanding only when determining the percent
owned by such individual and when determining the percent owned by a group.
(2) Includes options to purchase 391,250 shares of Common Stock which are
currently exercisable as of October 6, 1998 or will become exercisable
within 60 days of such date.
(3) Includes 28,500 shares held by Mr. Johnson's spouse and minor children,
over which he may be deemed to share voting and disposition power, and
includes warrants to purchase 70,000 shares of Common Stock which are
exercisable as of October 6, 1998 or will become exercisable within 60 days
of such date.
- 2 -
<PAGE>
MANAGEMENT SHAREHOLDINGS
The following table sets forth the number of shares of Common Stock
beneficially owned as of October 6, 1998, by the executive officers of the
Company named in the Summary Compensation Table, by each director and nominee
for director of the Company and by all directors and current executive officers
as a group. Unless otherwise indicated, the shareholders listed in the table
have sole voting and investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
Name and Address of Beneficial Number of Shares Percent of
Owner or Identity of Group Beneficially Owned(1) Ownership
------------------------------------------------------------------------
<S> <C> <C>
G. Kent Archibald 565,493(2) 9.8%
4382 Round Lake Road West
Arden Hills, MN 55112
Norman Dann 22,500(3) *
4382 Round Lake Road West
Arden Hills, MN 55112
Todd A. Erdmann ---- *
1626 Edona Road
Fort Collins, CO 80525
Jeffrey W. Green 7,500(3) *
3401 4th Avenue North
Sioux Falls, SD 57104
Jerry E. Robertson 32,500(4) *
4382 Round Lake Road West
Arden Hills, MN 55112
All current executive officers 744,993(5) 12.5%
and directors as a group (6
persons)
</TABLE>
* Less than 1%
(1) See footnote (1) to preceding table.
(2) See footnote (2) to preceding table.
(3) Such shares are not outstanding but may be purchased upon exercise of
options which are exercisable as of October 6, 1998 or will become
exercisable within 60 days of such date.
(4) Includes 10,000 shares held by a limited partnership of which Dr. Robertson
and his wife are the general partners, and 22,500 shares which may be
purchased upon exercise of options which are exercisable as of October 6,
1998 or will become exercisable within 60 days of such date.
(5) Includes 555,750 shares, which may be purchased upon exercise of options
which are exercisable as of October 6, 1998 or will become exercisable
within 60 days of such date.
- 3 -
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL #1 AND #2)
GENERAL INFORMATION
The Bylaws of the Company provide that the number of directors, which shall
not be less than one, shall be determined by the Board of Directors or by the
shareholders. The Board of Directors recommends that the number of directors be
set at four and that four directors be elected at the Annual Meeting. Under
applicable Minnesota law, approval of the proposal to set the number of
directors at four, as well as the election of each nominee, requires the
affirmative vote of the holders of the greater of (1) a majority of the voting
power of the shares represented in person or by proxy at the Annual Meeting with
authority to vote on such matter or (2) a majority of the voting power of the
minimum number of shares that would constitute a quorum for the transaction of
business at the Annual Meeting.
In the absence of other instructions, each proxy will be voted for each of
the nominees listed below. If elected, each nominee will serve until the next
annual meeting of shareholders and until his successor shall be elected and
qualified. If, prior to the meeting, it should become known that any of the
nominees will be unable to serve as a director after the meeting by reason of
death, incapacity or other unexpected occurrence, the proxies will be voted for
such substitute nominee as is selected by the Board of Directors or,
alternatively, not voted for any nominee. The Board of Directors has no reason
to believe that any nominee will be unable to serve.
The names and ages of all the director nominees and the positions held by
each with the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---------------------------------- ----- --------------------------------
<S> <C> <C>
G. Kent Archibald 58 President, Chief Executive
Officer, Secretary, and Director
Norman Dann(1)(2) 71 Director
Jeffrey W. Green 58 Director
Jerry E. Robertson(1)(2) 65 Director
</TABLE>
- -----------------------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
G. KENT ARCHIBALD is the President, Chief Executive Officer, Secretary,
and a director of the Company. He has served in these positions since
October 1991. From 1988 to 1991, Mr. Archibald was a private consultant and
investor. From 1978 to 1984, Mr. Archibald was founder, president and
director of AVI, Inc., a medical device company acquired by 3M Company's
Medical Products Division in 1984. After this acquisition, Mr. Archibald
served until 1988 as a general manager and engineering director for 3M.
Prior to his involvement with AVI, Inc., Mr. Archibald held engineering
positions at 3M, Control Data Corporation, and The Boeing Company, Inc.
Mr. Archibald holds a B.S. degree in electrical engineering and is a
professional engineer in the State of Minnesota. He serves as a director of
RayMedica, Inc., a privately held company that is developing a prosthetic
disc nucleus.
NORMAN DANN, a director of the Company since August 1995, has extensive
experience in the medical device industry. Since 1992, Mr. Dann has been a
business consultant concentrating in the areas of venture capital, strategic
planning, marketing, and product development. Mr. Dann also currently serves
as a director of Minntech Corporation, and several private companies. From
1980 to 1992, Mr. Dann served as an executive officer of and consultant to
Pathfinder Ventures, Inc., a venture capital firm ("Pathfinder"), and served
as a general partner of three of Pathfinder's funds and partnerships. From
1971 to 1977, Mr. Dann served as Vice President of Sales and Marketing and
Senior
- 4 -
<PAGE>
Vice President of Development with Medtronic, Inc., a leading manufacturer of
cardiac pacemakers and other medical products. In 1960, Mr. Dann founded The
Dann Company, an independent representative and service organization for
medical products, which was acquired by Medtronic, Inc. in 1971. Mr. Dann
holds a B.S. degree in industrial engineering from Pennsylvania State
University.
JEFFREY W. GREEN has been a director of the Company since August 1997.
Mr. Green serves as Chairman of the Board of Hutchinson Technology, Inc.
Mr. Green co-founded Hutchinson Technology, Inc. in 1965 and served as its Chief
Executive Officer from January 1983 to May 1996. Hutchinson Technology, Inc.
is the world's leading supplier of suspension assemblies for rigid magnetic
disk drives. Mr. Green is a board member of Applied Biometrics, Inc., a
maker of medical devices. Mr. Green is also a board member of the following
privately held businesses: ContiMed, Inc., which is developing urinary
catheters, and Internet Financial Securities, Inc. Mr. Green is also a board
member of the following community business organizations: the Minnesota
Chamber of Commerce and the Chamber of Commerce of South Dakota.
JERRY E. ROBERTSON, Ph.D. has been a director of the Company since
August 1995. Dr. Robertson also currently serves as a director of the
following publicly traded companies: Cardinal Health, Inc., CHOICE Hotels
International, Inc., Haemonetics Corporation, Coherent, Inc., Steris
Corporation, and Allianz Life Insurance Company of North America. From 1963
until his retirement in 1994, Dr. Robertson served in various supervisory,
management, and executive positions with 3M Company. He served as executive
vice president of 3M's Life Sciences Sector and Corporate Services from 1984
to 1994 and a member of 3M's Board of Directors from 1990 to 1994. Prior to
that time, Dr. Robertson served in various capacities in the areas of
surgical and medical products, chemical and synthetic medicinal research, and
technical planning and coordination. Dr. Robertson holds a Ph.D. in organic
chemistry.
COMMITTEE AND BOARD MEETINGS
The Company's Board of Directors has two standing committees, the Audit
Committee and the Compensation Committee. The Audit Committee is responsible
for reviewing the Company's internal control procedures and the quarterly and
annual financial statements of the Company, and reviewing with the Company's
independent public accountants the results of the annual audit. The Audit
Committee held one formal meeting during fiscal 1998. The Compensation
Committee recommends to the Board of Directors from time to time the salaries
and incentive compensation to be paid to executive officers of the Company and
administers the Company's Stock Option Plan. The Compensation Committee held
one formal meeting during fiscal 1998. Members of both of such Committees also
meet informally from time to time throughout the year on Committee matters.
The directors often communicate informally to discuss the affairs of the
Company and, when appropriate, take formal Board action by unanimous written
consent of all directors, in accordance with Minnesota law, rather than hold
formal meetings. During fiscal 1998, the Board of Directors held seven formal
meetings. Each incumbent director attended 75% or more of the total number of
meetings (held during the period(s) for which he has been a director or served
on committee(s)) of the Board and of committee(s) of which he was a member.
DIRECTOR FEES
Directors are not currently paid fees for attending Board or Committee
meetings. Under the Company's Stock Option Plan each non-employee director
receives a ten year non-qualified option, vesting over a four-year period, to
purchase 30,000 shares of the Company's Common Stock upon his or her initial
election as a director. During fiscal 1996, Messrs. Norman Dann and Jerry E.
Robertson each received an option to purchase 30,000 shares at an exercise price
of $3.00 per share and during fiscal
- 5 -
<PAGE>
1998, Mr. Jeffrey W. Green received an option to purchase 30,000 shares at an
exercise price of $13.875 per share. In addition, if the proposed amendment
of the Plan is approved by the shareholders, each non-employee director will
receive annually a non-qualified stock option under the Plan to purchase
10,000 shares which fully vests after one year upon completion of three years
of service as a director. See Proposal #3 below.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
earned or awarded to G. Kent Archibald, the President and Chief Executive
Officer and Mr. Todd A. Erdmann, formerly the Vice President of Sales of the
Company, during the Company's last three fiscal years ended April 30, 1998,
1997, and 1996. No other executive officer of the Company received total salary
and bonus compensation in excess of $100,000 for fiscal 1998.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------- ------------
Securities
Underlying
Options (# of All Other
Name and Principal Position Year Salary Bonus shares)(1) Compensation
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
G. Kent Archibald, 1998 $150,000 --- --- $4,500(2)
President and Chief 1997 150,000 --- --- 4,500(2)
Executive Officer 1996 110,425 --- 175,000 1,312(2)
- --------------------------------------------------------------------------------
Todd A. Erdmann,(3) 1998 $109,490 --- --- $3,130(2)
Former Vice President 1997 162,669 --- --- 3,206(2)
of Sales 1996 60,288 --- 175,000 ---
</TABLE>
- ---------------------
(1) Number of shares of Common Stock subject to options that were granted
during the fiscal year.
(2) Reflects the Company's contribution to executive's individual retirement
account under the Company's Simplified Employee Pension Plan.
(3) Mr. Todd A. Erdmann resigned from the Company and relinquished his position
as Vice President of Sales effective January 16, 1998.
EMPLOYMENT AGREEMENTS
Although the Company has non-compete and confidentiality agreements with
its employees, the Company does not have an employment agreement with, or
key-man life insurance on, Mr. Archibald or any other individual.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No options were granted during fiscal year 1998 to the Named Executive
Officers.
- 6 -
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth certain information concerning each exercise
of stock options during the fiscal year ended April 30, 1998 by each Named
Executive Officer and the aggregated fiscal year-end value of the unexercised
options of such Named Executive Officer.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Securities Underlying Options In-the-Money Options
at Fiscal Year-End (#)(1) at Fiscal Year-End ($)(1)
----------------------------- -----------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
G. Kent Archibald - 0 - $ - 0 - 347,500 87,500 $3,082,500 $700,000
Todd A. Erdmann 87,500 278,863(2) - 0 - - 0 - - 0 - - 0 -
</TABLE>
(1) Based on the difference between the closing price of the Company's Common
Stock at fiscal year-end and the option exercise price.
(2) Reflects the value realized by Mr. Erdmann upon the exercise of an option
to purchase 87,500 shares of Common Stock at an exercise price of $5.06 per
share on January 30, 1998, based upon the sale of the shares simultaneously
with the exercise of the option.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY The Compensation Committee is currently composed of two
of the Company's outside directors. The Compensation Committee's
responsibilities are to:
- Review and recommend compensation policies and compensation levels for
the Company's executive officers to the Board;
- Review and recommend plans to provide management continuity to the
Board; and
- Administer the Company's stock-based compensation plan. The
Compensation Committee determines who will participate in the
Company's stock-based compensation plans and the extent and terms of
such participation.
The Compensation Committee's objectives in recommending executive compensation
policies and compensation levels for the Company's executive officers are: (i)
to attract and retain qualified executive officers; (ii) to align the interest
of those executive officers with those of the Company's shareholders; and (iii)
to encourage the development of a cohesive management team. The Compensation
Committee believes that base salaries need to be competitive to attract and
retain qualified executive officers and that the executive officers need to be
provided with stock ownership opportunities to align their interests with those
of the Company's shareholders.
EXECUTIVE COMPENSATION PROGRAM COMPONENTS The Company's executive compensation
program focuses on Company and individual performance as determined by the
Compensation Committee. The Compensation Committee places primary emphasis on
Company performance rather than individual
- 7 -
<PAGE>
performance in order to inspire the Company's executives to work as a team to
accomplish Company objectives. Components of the Company's executive officer
compensation program include base salary and stock option grants, as well as
various benefits which are presently available to all employees of the Company.
Each component of the executive officer compensation program is discussed in
greater detail below.
BASE SALARY The Compensation Committee's recommendations regarding the base
salary of each of the Company's executive officers are based on a number of
factors, including the executive officer's experience and past performance, the
level of skill and responsibility required by the executive's position and his
or her qualifications for the position. The Compensation Committee also
considers competitive salary information pertaining specifically to the medical
device industry as well as to companies of similar size in other industries. In
general, the Compensation Committee seeks to set executive officer base salary
at competitive levels in relation to the companies with which the Company
competes for executives. Base salaries are determined prior to the beginning of
each fiscal year following a review of the above factors by the Compensation
Committee and may also be adjusted based on Company performance and the
executive officer's impact thereon, cost of living, promotion, or merit factors.
STOCK OPTION PROGRAM By granting options to purchase Common Stock to the
executive officers of the Company, the Compensation Committee seeks to align the
long-term interests of the Company's executive officers with those of its
shareholders by creating a strong and direct nexus between executive
compensation and shareholder return and to enable executives to develop and
maintain a significant ownership position in the Company.
The Company's Amended and Restated Stock Option Plan (Stock Option Plan)
authorizes the Compensation Committee to issue executive officers incentive
stock options having an exercise price not less than the fair market value of
the Common Stock on the date of grant (or, for an incentive option granted to a
person holding more than 10% of the Company's voting stock, at not less than
110% of fair market value), and non-statutory options having an exercise price
not less than 85% of the fair market value of the Common Stock on the date of
grant. Options granted under the Stock Option Plan have a term fixed by the
Compensation Committee at the time of grant, which term may not exceed 10 years.
All other terms of options granted under the Stock Option Plan may be determined
by the Compensation Committee and different restrictions may be established with
respect to different recipients of stock options.
The Compensation Committee determines the number of options and the terms and
conditions of such options based on certain factors, including the past
performance of the executive officer, the executive officer's potential
impact on the achievement of the Company's objectives, past grants or awards
of stock-based compensation and on comparative compensation data regarding
option grants by companies within the medical device industry as well as
within a broader group of companies of comparable size and complexity.
Additionally, options may be granted to an executive officer as an incentive
at the time the executive officer joins the Company.
BENEFITS The Company provides medical insurance benefits as well as a SEP
retirement plan to the executive officers. The same benefits are available to
all Company employees. The amount of these benefits, as determined in
accordance with the rules of the Securities and Exchange Commission relating to
executive compensation, did not exceed 10% of each executive officer's annual
salary for fiscal 1998.
SECTION 162(m) Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), limits the deductibility of certain compensation paid to the chief
executive officer and each of the four other most highly compensated executives
of a publicly held corporation to $1,000,000. In fiscal 1998, the
- 8 -
<PAGE>
Company did not pay "compensation" within the meaning of Section 162(m) to such
executive officers in excess of $1,000,000 and does not believe it will do so in
the near future. Therefore, the Company does not have a policy at this time
regarding qualifying compensation paid to its executive officers for
deductibility under Section 162(m), but will formulate such a policy if
compensation levels ever approach $1 million.
Members of the Compensation Committee
Norman Dann
Jerry E. Robertson
PERFORMANCE GRAPH
In accordance with the rules of the Securities and Exchange Commission, the
following performance graph compares the performance of the Company's Common
Stock on the Nasdaq Small Cap Market to an index for the Nasdaq Stock Market
(U.S. Companies) prepared by the Center for Research in Securities Prices and to
Nasdaq stocks for companies with an SIC code of 3840-3849, which is for
Surgical, Medical, and Dental Instruments and Supplies. The graph compares the
cumulative total stockholder return as of the end of each of the Company's
fiscal years on $100 invested since the Company went public on November 10, 1995
and assumes reinvestment of all dividends.
[PERFORMANCE GRAPH]
Comparison of Five-Year Cumulative Total Returns
Performance Report for
Medwave, Inc.
Prepared by the Center for Research in Security Prices
Produced on 06/02/98 including data to 04/30/98
Company Index: CUSTP Ticker Class Sic Exchange
58508110 MDWV 3840 NASDAQ
Fiscal Year-end is 04/30/98
Market Index: Nasdaq Stock Market (US Companies)
Peer Index: NASDAQ Stocks (SIC 3840-3849 US Companies)
Surgical, Medical, and Dental Instruments and Supplies
<TABLE>
<CAPTION>
Date Company Index Market Index Peer Index
<S> <C> <C> <C>
11/10/95 100.000 100.000 100.000
11/30/95 97.561 99.558 102.364
12/29/95 97.561 99.028 105.287
01/31/96 101.220 99.516 111.231
02/29/96 117.073 103.303 108.820
03/29/96 131.707 103.646 107.243
04/30/96 156.098 112.245 108.907
05/31/96 204.878 117.399 113.514
06/28/96 209.756 112.107 103.721
07/31/96 168.293 102.124 91.345
08/30/96 195.122 107.846 95.163
09/30/96 207.317 116.095 101.826
10/31/96 224.390 114.813 94.953
11/29/96 234.146 121.910 95.557
12/31/96 219.512 121.800 98.666
01/31/97 224.390 130.457 101.954
02/28/97 204.878 123.245 100.732
03/31/97 200.000 115.199 91.932
04/30/97 190.244 118.801 89.296
05/30/97 253.659 132.269 98.599
06/30/97 258.537 136.336 99.955
07/31/97 278.049 150.705 106.981
08/29/97 270.732 150.475 107.374
09/30/97 251.220 159.379 118.290
10/31/97 195.122 151.124 115.751
11/28/97 193.902 151.881 113.504
12/31/97 195.122 149.496 112.599
01/30/98 165.854 154.197 114.808
02/27/98 170.732 168.636 122.482
03/31/98 214.634 174.847 123.484
04/30/98 200.000 177.814 124.294
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded
daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization
on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 11/10/95.
- 9 -
<PAGE>
APPROVAL OF AMENDMENT OF STOCK OPTION PLAN
(PROPOSAL #3)
PROPOSED AMENDMENT
Currently, under the terms of the Company's Amended and Restated Stock
Option Plan (the "Plan"), each non-employee director of the Company receives a
non-qualified option for 30,000 shares of Common Stock upon his or her initial
election as a director. Such options vest over a four-year period. The Board
of Directors has adopted, subject to shareholder approval, an amendment to the
Plan (the "Amendment") to provide for an additional annual grant to each outside
director, after the completion of three years of service, of a non-qualified
option to purchase 10,000 shares of Common Stock. Each such option would become
fully exercisable on the first anniversary of the date of grant. All director
options are granted at an exercise price per share equal to 100% of the fair
market value of the Company's Common Stock on the date of grant and expire ten
years from the date of grant.
If approved by the shareholders, the Amendment will also give the Committee
the discretion to permit certain transfers of non-qualified stock options.
Finally, the Amendment updates the definition of the Compensation Committee and
the amendment provisions of the Plan to reflect recent changes in the law.
A general description of the Plan and the Amendment is set forth below, but
such description is qualified in its entirety by reference to the full text of
the Plan and Amendment, copies of which may be obtained without charge upon
written request to the Company's Chief Financial Officer.
DESCRIPTION OF PLAN
PURPOSE. The purpose of the Plan is to advance the interests of the
Company and its shareholders by enabling the Company and its subsidiaries to
attract and retain persons of ability as employees, directors, and key
consultants by providing an incentive to such individuals through equity
participation in the Company and by rewarding such employees, directors and key
consultants who contribute to the achievement by the Company of its long-term
economic objectives. A total of 1,700,000 shares of Common Stock are reserved
for options under the Plan.
TERM. Incentive stock options may be granted under the Plan for a period
of ten years from November 29, 1995, the date of its initial adoption by the
Board of Directors. Non-qualified stock options may be granted pursuant to the
Plan until it is discontinued or terminated by the Board.
ADMINISTRATION. The Plan is administered by the Compensation Committee of
the Board of Directors (the "Committee"). The Plan gives broad powers to the
Committee to administer and interpret the Plan, including the authority to
select the individuals to be granted options and to prescribe the particular
form and conditions of each option granted. As clarified by the Amendment, each
member of the Committee must be a "non-employee director" as defined in Rule
166-3 under the Securities Exchange Act of 1934, as amended.
ELIGIBILITY. All employees of the Company or any subsidiary are eligible
to receive incentive stock options pursuant to the Plan. All employees,
directors and officers of, and consultants and advisors to, the Company or any
subsidiary are eligible to receive non-qualified stock options. As of September
30, 1998, the Company had approximately 17 employees (of which three are
officers), and three directors who are not employees.
- 10 -
<PAGE>
OPTIONS. When an option is granted under the Plan, the Committee, at
its discretion, specifies the option price, the type of option (either
"incentive" or "non-qualified") to be granted, and the number of shares of
Common Stock which may be purchased upon exercise of the option. The
exercise price of an incentive stock option generally may not be less than
100% of the fair market value of the Company's Common Stock on the date of
grant and, unless otherwise determined by the Committee, the option price of
a non-qualified option will not be less than 85% of the fair market value of
the Company's Common Stock on the date of grant. The market value of the
Company's Common Stock on September 30, 1998 was $14.50. The term during
which the option may be exercised and whether the option will be exercisable
immediately, in stages or otherwise are set by the Committee, but the term of
an incentive stock option may not exceed ten years from the date of grant.
Optionees may pay for shares upon exercise of options with cash, certified
check or Common Stock of the Company valued at the stock's then fair market
value or some combination of cash and Common Stock. Each incentive stock
option granted under the Plan is nontransferable during the lifetime of the
optionee. If the Amendment is approved by the shareholders, the Committee
may, in its discretion, permit the transfer of non-qualified stock options to
immediate family members or to certain family trusts or family limited
partnerships. Each outstanding option under the Plan may terminate earlier
than its stated expiration date in the event of the optionee's termination of
employment or directorship. All outstanding options become immediately
exercisable in full upon a "change of control" which includes, (i) the
purchase of at least 60% of the Company's stock, (ii) a merger,
consolidation, sale of substantially all of the Company's assets, or
liquidation of the Company, and (iii) certain changes in the Company's Board
of Directors.
In addition to other options which may be granted under the Plan, each
non-employee director of the Company (excluding persons who were non-employee
directors on the date the Plan was adopted by the Board) will automatically
be granted a non-qualified option for 30,000 shares of Common Stock upon his
or her initial election as a director, vesting over a four-year period. In
addition, if the Amendment is approved by the shareholders, after three years
of service, each outside director will receive a non-qualified option for
10,000 shares, vesting after one year, each year he or she continues to serve
as a director. Each non-qualified option expires ten years from the date of
grant and has an exercise price per share equal to 100% of the fair market
value of the Common Stock on the date of grant. Options to purchase 90,000
shares are currently outstanding as a result of the non-employee director
automatic option provisions of the Plan. If the Amendment is approved by the
shareholders, Messrs. Norman Dann and Jerry E. Robertson will receive their
first annual 10,000 share option on the date of such shareholder approval,
and Mr. Jeffrey Green will receive his first annual 10,000 share option in
August 2000.
AMENDMENT. As clarified by the Amendment, the Board of Directors may,
from time to time, suspend or discontinue the Plan or revise or amend it in
any respect; provided, (i) no such revision or amendment may impair the terms
and conditions of any outstanding option to the material detriment of the
optionee without the consent of the optionee except as authorized in the
event of merger, consolidation or liquidation of the Company, (ii) the Plan
may not be amended in any manner that will (a) materially increase the number
of shares subject to the Restated Plan except as provided in the case of
stock splits, consolidations, stock dividends or similar events, (b) change
the designation of the class of employees eligible to receive options; (c)
decrease the price at which options will be granted; or (d) materially
increase the benefits accruing to optionees under the Plan without the
approval of the shareholders, to the extent such approval is required by
applicable law or regulation.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN. Under present law, an
optionee will not realize any taxable income on the date a non-qualified
option is granted pursuant to the Plan. Upon exercise of the option,
however, the optionee must recognize, in the year of exercise, ordinary
income equal to the difference between the option price and the fair market
value of the Company's Common Stock on the date of exercise. Upon the sale
of the shares, any resulting gain or loss will be treated as capital gain or
loss. The Company will receive an income tax deduction in its fiscal year in
which non-qualified options
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<PAGE>
are exercised equal to the amount of ordinary income recognized by those
optionees exercising options, and must withhold income and other employment
related taxes on such ordinary income.
Incentive stock options granted under the Plan are intended to qualify for
favorable tax treatment under Section 422 of the Internal Revenue Code of 1986,
as amended. Under Section 422, an optionee recognizes no taxable income when
the option is granted. Further, the optionee generally will not recognize any
taxable income when the option is exercised if he or she has at all times from
the date of the option's grant until three months before the date of exercise
been an employee of the Company. The Company ordinarily is not entitled to any
income tax deduction upon the grant or exercise of an incentive stock option.
Certain other favorable tax consequences may be available to the optionee if he
or she does not dispose of the shares acquired upon the exercise of an incentive
stock option for a period of two years from the granting of the option and one
year from the receipt of the shares.
PLAN BENEFITS. The table below shows the total number of stock options
that have been received by the following individuals and groups under the Plan
as of September 30, 1998:
<TABLE>
<CAPTION>
Total Number of
Name and Position/Group Options Received(1)
----------------------------------------------------------------------------
<S> <C>
G. Kent Archibald, President, Chief Executive Officer, 435,000
Secretary, and Director
Todd A. Erdmann, Former Vice President of Sales 175,000
Current Executive Officer Group (3 persons) 690,000
Current Non-Executive Officer Director Group (3 persons) 90,000
Current Non-Executive Officer Employee Group 268,000
(14 persons)
</TABLE>
(1) This table reflects the total stock options granted without taking into
account exercises or cancellations. Because future grants of stock options
are subject to the discretion of the Compensation Committee, the future
benefits that may be received by these individuals or groups under the Plan
cannot be determined at this time, except for the automatic option grants
to outside directors as described above.
VOTE REQUIRED
The Board of Directors recommends that the shareholders approve the
Amendment to the Plan. Approval of the Amendment requires the affirmative vote
of the greater of (i) a majority of the shares represented at the meeting with
authority to vote on such matter and (ii) a majority of the voting power of the
minimum number of shares that would constitute a quorum for the transaction of
business at the meeting.
INDEPENDENT PUBLIC ACCOUNTANT
Ernst & Young, LLP acted as the Company's independent public
accountant for fiscal 1998. Representatives from Ernst & Young LLP are expected
to be present at the meeting, will be given an opportunity to make a statement
regarding financial and accounting matters of the Company if they so desire, and
will be available at the meeting to respond to appropriate questions from the
Company's shareholders.
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<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10% of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors, and greater
than 10% shareholders ("Insiders") are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Form 5 was
required for such persons, the Company believes that during the fiscal year
ending April 30, 1998, all filing requirements applicable to its officers,
directors, and greater than 10% beneficial owners were complied with.
OTHER BUSINESS
Management knows of no other matters to be presented at the meeting.
If any other matter properly comes before the meeting, the appointees named in
the proxies will vote the proxies in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 1999 annual meeting of shareholders must be
received by the Company by June 7, 1999, to be includable in the Company's proxy
statement and related proxy for the 1999 annual meeting. Shareholder proposals
intended to be presented at the 1999 annual meeting but not included in the
Company's proxy statement and proxy will be considered untimely if received by
the Company after August 21, 1999.
FORM 10-K
A COPY OF THE COMPANY'S FORM 10-K ANNUAL REPORT FOR THE FISCAL YEAR
ENDED APRIL 30, 1998 (WITHOUT EXHIBITS) ACCOMPANIES THIS NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT. NO PORTION OF SUCH REPORT IS INCORPORATED HEREIN
OR IS TO BE CONSIDERED PROXY SOLICITING MATERIAL. THE COMPANY WILL FURNISH TO
ANY SHAREHOLDER, UPON WRITTEN REQUEST, ANY EXHIBIT DESCRIBED IN THE LIST
ACCOMPANYING THE FORM 10-K UPON THE PAYMENT, IN ADVANCE, OF REASONABLE FEES
RELATED TO THE COMPANY'S FURNISHING SUCH EXHIBIT(S). ANY SUCH REQUEST SHOULD
INCLUDE A REPRESENTATION THAT THE SHAREHOLDER WAS THE BENEFICIAL OWNER OF SHARES
OF MEDWAVE COMMON STOCK ON OCTOBER 6, 1998, THE RECORD DATE FOR THE 1998 ANNUAL
MEETING AND SHOULD BE DIRECTED TO MR. MARK T. BAKKO, CHIEF FINANCIAL OFFICER, AT
THE COMPANY'S PRINCIPAL ADDRESS.
BY ORDER OF THE BOARD OF DIRECTORS
Dated: October 6, 1998 G. Kent Archibald
Arden Hills, Minnesota President and Chief Executive Officer
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<PAGE>
MEDWAVE, INC.
------------------------------
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints G. KENT ARCHIBALD and MARK T. BAKKO, or
either of them acting alone, with full power of substitution, as proxies to
represent and vote, as designated below, all shares of Common Stock of Medwave,
Inc. registered in the name of the undersigned, at the Annual Meeting of the
Shareholders to be held on Tuesday, November 17, 1998 at 3:00 p.m., Minneapolis
Time, in the Auditorium of the Lutheran Brotherhood Building, 625 Fourth Avenue,
Minneapolis, Minnesota, and at all adjournments of such meeting. The undersigned
hereby revokes all proxies previously granted with respect to such meeting.
The Board of Directors recommends that you vote "FOR" the following
proposals:
<TABLE>
<S> <C> <C>
(1) SET NUMBER OF DIRECTORS AT FOUR:
/ / FOR / / AGAINST / / ABSTAIN
(2) ELECT DIRECTORS: Nominees: G. Kent Archibald, Norman Dann, Jeffrey W. Green and Jerry E. Robertson
/ / FOR all Nominees listed above / / WITHOUT AUTHORITY
(except those whose names have to vote for all nominees
been written on the line below) listed above
(To withhold authority to vote for any nominee, write that nominee's name on the line below.)
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(3) Approve an amendment to the Stock Option Plan which clarifies certain administrative provisions, permits certain
transfers of non-qualified stock options, and provides for additional automatic option grants to outside directors
of the Company:
/ / FOR / / AGAINST / / ABSTAIN
(4) OTHER MATTERS. In their discretion, the appointed proxies are authorized to vote upon such other business as may
properly come before the Meeting or any adjournment.
</TABLE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL.
Date ___________________________, 1998.
---------------------------------------
---------------------------------------
PLEASE DATE AND SIGN ABOVE exactly as
name appears at the left, indicating,
where appropriate, official position or
representative capacity. If stock is
held in joint tenancy, each joint owner
should sign.
