MINIMED INC
PRER14A, 1999-04-13
ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES
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<PAGE>   1

                            SCHEDULE 14A INFORMATION

           PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
                              EXCHANGE ACT OF 1934



Filed by the Registrant  [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X]  Preliminary Proxy Statement
[ ]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

                                  MiniMed Inc.
                 ----------------------------------------------
                 Name of Registrant as Specified In Its Charter



                                   Registrant
                 ----------------------------------------------
                         Name of Person(s) Filing Proxy

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 is calculated and state how it was determined):

        4)     Proposed maximum aggregate value of transaction:

        5)     Total fee paid:

[ ]     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>   2
                                     PROXY
                                 [MINIMED LOGO]
 
                                  MINIMED INC.
                            12744 SAN FERNANDO ROAD
                            SYLMAR, CALIFORNIA 91342
 
April 19, 1999
 
Dear Stockholders:
 
     It is my pleasure to invite you to attend the 1999 Annual Meeting of
Stockholders of MiniMed Inc., which will be held on Thursday, May 20, 1999,
beginning at 10:00 a.m. (PDT), at The Odyssey Restaurant, 15600 Odyssey Drive,
Granada Hills, California. Detailed information about the meeting and the
various items on which the stockholders will act is described in the
accompanying Notice of Annual Meeting and Proxy Statement. Also included is a
Proxy Card with an accompanying postage paid return envelope. IT IS IMPORTANT
THAT YOU VOTE YOUR SHARES WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. I urge
you to review carefully the Proxy Statement and to vote your choices on the
enclosed card. Please sign, date and return your Proxy Card in the envelope
provided as soon as possible. If you do attend the meeting, your Proxy can be
revoked at your request in the event you wish to vote in person.
 
     I look forward to seeing you at the meeting.
 
                                           Sincerely,
           

                                           /s/ ALFRED E. MANN
                                           --------------------------------
                                           Alfred E. Mann
                                           Chairman of the Board and
                                           Chief Executive Officer
<PAGE>   3
 
                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
 
                            TO BE HELD MAY 20, 1999
 
     MiniMed Inc. (the "Company") will hold its Annual Meeting of Stockholders
on May 20, 1999, at 10:00 a.m., Pacific Daylight Time, at The Odyssey
Restaurant, 15600 Odyssey Drive, Granada Hills, California, for the following
purposes:
 
          1. To elect eight (8) directors until their respective successors are
     elected and qualified. The Board of Directors intends to nominate the eight
     persons identified in the accompanying Proxy Statement.
 
          2. To amend the Company's Certificate of Incorporation and Bylaws
     implementing classified Board provisions as summarized in the attached
     Proxy Statement.
 
          3. To amend the Company's Certificate of Incorporation to increase the
     Company's authorized capital stock as summarized in the attached Proxy
     Statement.
 
          4. To amend the Company's Second Amended and Restated 1994 Stock
     Incentive Plan.
 
          5. To consider and act upon a proposal to ratify the appointment of
     Deloitte & Touche LLP as auditors for the fiscal year ending December 31,
     1999.
 
          6. To act upon other matters that may properly come before the meeting
     or any adjournment or postponement thereof.
 
     The Board of Directors has fixed April 1, 1999 as the Record Date for
determining the stockholders entitled to receive notice of and to vote at the
Annual Meeting, or any adjournment or postponement thereof.
 
     Alfred E. Mann and Eric S. Kentor have been appointed as Proxy Holders,
with full rights of substitution, for the holders of MiniMed Inc. Common Stock.
 
     PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
 
                                          By order of the Board of Directors
                                          

                                          /s/ ERIC S. KENTOR
                                          --------------------------------------
                                          Eric S. Kentor
                                          Senior Vice President, General Counsel
                                          and Secretary
 
April 19, 1999
Sylmar, California
<PAGE>   4
 
                                 [MINIMED LOGO]
 
                                PROXY STATEMENT
 
                 ANNUAL MEETING OF STOCKHOLDERS -- MAY 20, 1999
 
INTRODUCTION
 
     The accompanying Proxy is solicited by the Board of Directors of MiniMed
Inc. ("MiniMed" or the "Company") for use at the 1999 Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held May 20, 1999 at
The Odyssey Restaurant, 15600 Odyssey Drive, Granada Hills, California,
beginning at 10:00 a.m. (PDT), and at any adjournments or postponements of the
Annual Meeting. This Proxy Statement and the accompanying Proxy Card are being
mailed beginning on or about April 19, 1999 to give holders of record of the
Company's Common Stock on April 1, 1999 (the "Record Date") an opportunity to
vote at the Annual Meeting. Each share of Common Stock represented at the Annual
Meeting is entitled to vote on each matter properly brought before the Annual
Meeting. In voting, please specify your choices by marking the appropriate
spaces on the enclosed Proxy Card, signing and dating the card and returning it
in the accompanying envelope. If no directions are given and the signed card is
returned, the Proxy Holders will vote the shares for the election of all listed
nominees, in accordance with the Directors' recommendations on the other
subjects listed on the Proxy Card, and at their discretion on any other matters
that may properly come before the meeting.
 
     The number of shares to be voted, as indicated on the enclosed Proxy Card,
is NOT adjusted to reflect a two-for-one stock split payable to stockholders of
record as of April 1, 1999. This is because the additional shares were not
actually issued and distributed until after the record date for determining
stockholders entitled to vote at the Annual Meeting. However, the power to vote
granted by signing the enclosed Proxy Card and returning it to the Company will
relate to all of the shares owned of record by the signing stockholder,
including the additional shares resulting from the stock split. All references
to shares of the Company's Common Stock made in this Proxy Statement ARE
adjusted to reflect such stock split. As of the close of business on the Record
Date, the Company had outstanding 28,207,356 shares of Common Stock (as adjusted
for the two-for-one stock split). A majority of the outstanding shares of Common
Stock will constitute a quorum at the Annual Meeting. The rules of the New York
and American Stock Exchanges permit member organizations ("brokers") to vote
shares held in street name on behalf of beneficial owners, in the absence of
instructions from the beneficial owners, on certain "routine" matters, including
the election of directors and ratification of the selection of independent
public accountants, but do not permit such votes on "non-routine" matters,
including the proposals to be considered at the Annual Meeting to establish a
classified Board of Directors, to increase the number of authorized shares of
capital stock and to amend the 1994 Stock Incentive Plan. In situations where
brokers are not permitted to vote on non-routine matters (so-called "broker
non-votes"), the affected shares will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, will not be
included in the vote totals and will not be counted as present for purposes of
determining whether a non-routine matter has been approved. On proposals
requiring the affirmative vote of the holders of a majority of the number of
shares outstanding, such as the proposals to establish a classified Board of
Directors for the Company and to increase the authorized number of shares of
capital stock, not counting broker non-votes means that they have the same
effect as a negative vote. Stockholders have one vote for each share on all
business at the meeting. The eight nominees for election as Directors receiving
the greatest number of votes will be elected. On all other matters the
affirmative vote of the majority of shares represented in person or by proxy at
the Annual Meeting and entitled to vote is required for approval of each of the
proposals except as indicated above for the election of Directors and for the
two proposals involving amendments to the Company's Certificate of
Incorporation.
 
                                        1
<PAGE>   5
 
     Unless otherwise directed in the accompanying proxy, the persons named
therein will vote FOR the election of the eight director nominees, FOR the
proposal to implement a classified board of directors and require a
super-majority vote for stockholders to change the authorized number of
directors, FOR the proposal to amend the Company's Certificate of Incorporation
to increase the Company's authorized capital stock, FOR the proposal to amend
the Company's Second Amended and Restated 1994 Stock Incentive Plan, and FOR the
proposal to ratify the appointment of Deloitte & Touche LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1999. Any
other business which may properly come before the meeting will be voted on by
the Proxy Holders in accordance with their best judgment, although the Company
does not presently know of any such other business which may come before the
meeting.
 
REVOCABILITY OF PROXIES
 
     Any stockholder giving a Proxy has the power to revoke it at any time
before the Proxy is actually voted at the Annual Meeting. Proxies may be revoked
by filing a written notice of revocation with the Secretary of the Company
bearing a date later than the date on the Proxy or by duly executing a
subsequently dated Proxy relating to the same shares of Common Stock. Attendance
at the Annual Meeting will not, in and of itself, constitute revocation of a
Proxy previously delivered. Any subsequently dated Proxy or written notice
revoking a Proxy should be sent to the Secretary of the Company at its executive
offices, 12744 San Fernando Road, Sylmar, California 91342.
 
SOLICITATION
 
     The expense of solicitation of the Proxies will be paid by the Company,
including preparation, assembly and mailing of this Proxy Statement, the Proxy
Card and any additional material furnished to stockholders. Proxies may be
solicited by directors, officers and regular employees of the Company personally
or by mail, telephone or telegraph, but such persons will not be specially
compensated for such services. Copies of solicitation material will be furnished
to brokerage houses, fiduciaries and custodians that hold shares of Common Stock
of record for beneficial owners for the purpose of forwarding such materials to
such beneficial owners. The Company may reimburse persons representing
beneficial owners' reasonable costs associated with their forwarding their
solicitation material to such owners.
 
     YOUR VOTE IS IMPORTANT AND YOU ARE ENCOURAGED TO MARK YOUR PROXY CARD
PROMPTLY SO THAT YOUR SHARES CAN BE REPRESENTED.
 
               PROPOSAL 1 -- NOMINATION AND ELECTION OF DIRECTORS
 
     Pursuant to the Company Bylaws, the Board of Directors of the Company is to
consist of eight persons. If Proposal 2 is approved by the stockholders, three
classes of Directors will be elected to serve terms of either one, two or three
years, will hold office until the 2000, 2001 or 2002 Annual Meeting of
Stockholders, respectively, and will continue in office until each Director's
successor is elected and has been qualified, or until such Director's earlier
death, resignation or removal. (See Proposal 2 -- AMENDMENT TO CERTIFICATE OF
INCORPORATION AND BYLAWS OF THE COMPANY IMPLEMENTING CLASSI-
 
                                        2
<PAGE>   6
 
FIED BOARD PROVISIONS). If Proposal 2 is approved, the proxies being solicited
by the Board of Directors will be voted to elect the nominees named below to the
classes designated:
 
<TABLE>
<CAPTION>
                                         TERM TO EXPIRE AT
                                         ANNUAL MEETING IN
                                         -----------------
<S>                <C>                   <C>
CLASS 1 DIRECTORS  David Chernof, M.D.         2000
                   Carolyne Kahle Davis        2000
                   John C. Villforth           2000
 
CLASS 2 DIRECTORS  William R. Grant            2001
                   David H. MacCallum          2001
                   Thomas R. Testman           2001
 
CLASS 3 DIRECTORS  Alfred E. Mann              2002
                   Terrance H. Gregg           2002
</TABLE>
 
     If Proposal 2 is not approved by the stockholders, the proxies being
solicited by the Board of Directors will be voted for the election of the
Nominees designated above, each Director who is elected will serve for a
one-year term, will hold office until the 2000 Annual Meeting of Stockholders,
and will continue in office until such Director's successor is elected and has
been qualified, or until such Director's earlier death, resignation or removal.
 
     Under the Bylaws of the Company the eight nominees receiving the greatest
number of votes will be elected. Stockholders eligible to vote at the Annual
Meeting do not have cumulative voting rights with respect to the election of
Directors. Shares represented by Proxies marked "withhold authority" for one or
more nominees will not be voted for such nominee.
 
        THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NAMED NOMINEE.
 
DIRECTOR NOMINEES
 
     The Director nominees were proposed by the Organization and Compensation
Committee of the Board of Directors and approved by the Board. If any of the
nominees should decline or be unable to act as a Director, the persons named in
the Proxy will vote in accordance with their best judgment with respect to
alternative candidates. The Company knows of no reason why the nominees would
not be available for election or, if elected, would not be able to serve.
 
     The following is information with respect to the nominees. Each of the
nominees currently serves on the Board.
 
     ALFRED E. MANN, age 73, has served as Chairman of the Board and CEO of the
Company since its incorporation and was President until 1994 and from October
1995 until October 1996. Until March 1994, Mr. Mann served as the Chairman of
the Board of the General Partner of MiniMed Technologies Limited, a California
limited partnership ("MMTL"), a predecessor of the Company which was also
engaged in the design, manufacture and marketing of hospital intravenous pumps
and electrostimulation devices primarily for restoration of hearing for the
deaf. Mr. Mann has also served as Chairman of Advanced Bionics Corporation
("ABC") since 1994 and as CEO from 1994 to February 1996. ABC is the successor
to the electrostimulation business segment of MMTL. From 1985 to September 1992,
Mr. Mann was also President and CEO of Siemens-Pacesetter, Inc., a manufacturer
and distributor of cardiac pacemakers. Mr. Mann founded and from 1972 until 1985
was Chairman of the Board and CEO of Pacesetter Systems, Inc., a California
corporation and predecessor of Siemens-Pacesetter, Inc. Prior to 1972, he was
President of Spectrolab, an electro-optical and aerospace systems company, and
Heliotek, a semiconductor and electro-optical components manufacturer. These
companies were founded by Mr. Mann in 1956 and 1960, respectively, and were sold
to Textron Inc. in 1960. Mr. Mann is currently Chairman of the Board of Trustees
of the Alfred E. Mann Foundation for Scientific Research, a medical research
foundation. Mr. Mann is also founder, Chairman and President of Medical Research
Group, Inc., a Delaware corporation that conducts research and development
activities relating to medical devices. Since March 1998, Mr. Mann has served as
a Trustee for the University
 
                                        3
<PAGE>   7
 
of Southern California. Mr. Mann holds a B.A. and an M.S. degree in physics from
the University of California, Los Angeles.
 
     DAVID CHERNOF, M.D., age 63, has been a Director of the Company since July
1994. Since January 1999, Dr. Chernof has been President of DCHC -- Health Care
Consultants, a health care consulting firm. Previously, he served as Chief
Medical Officer of LA Care Healthplan, a health maintenance organization, from
October 1996 through December 1998. Previously, Dr. Chernof was an independent
medical and health care services consultant. From 1991 to July 1995, Dr. Chernof
served as the Senior Vice President and Corporate Medical Director of Blue Cross
of California, where he was responsible for medical policies, physician
relations, utilization and quality monitoring programs and technology
assessment. Dr. Chernof was a member of the Blue Cross of California Board of
Directors from 1987 to 1991 and was in private practice from 1968 to 1991. Dr.
Chernof is a member of the Organization and Compensation Committee of the Board.
 
     CAROLYNE KAHLE DAVIS, age 67, has been a Director of the Company since May
1997. Ms. Davis currently serves as an independent business advisor to numerous
companies. Ms. Davis served as National and International Health Care Advisor to
Ernst & Young, an international auditing, accounting and consulting firm from
October 1985 until her retirement in April 1997. From March 1981 until August
1985, Ms. Davis served as Administrator of the Health Care Financing
Administration, a sub-cabinet position reporting to the Secretary of Health and
Human Services. The Health Care Financing Administration is the agency
responsible for the Medicare and Medicaid programs. Previously, Ms. Davis served
as Associate Vice President for Academic Affairs at the University of Michigan
and Dean of the University of Michigan School of Nursing. Ms. Davis currently
serves on the boards of Beckman Instruments, Merck & Co., Inc., Pharmaceutical
Marketing Services, Inc., and The Prudential Insurance Company of America. Ms.
Davis is a member of the Audit Committee of the Board.
 
     WILLIAM R. GRANT, age 74, has been a Director of the Company since June
1994. He has served as managing General Partner and Chairman of Galen
Associates, a privately held investment company, since 1989. Previously, Mr.
Grant served as President and Vice Chairman of Smith Barney Inc., as President
and Chairman of Mac-Kay Shields Financial Corporation and as Vice Chairman of
SmithKline Beecham. Mr. Grant currently serves on the boards of directors of
Witco Corporation, Allergan, Inc., Ocular Sciences, Inc., Vasogen, Inc., and
Westergaard.com, Inc. He is also a member of the General Electric Equity
Advisory Board. Mr. Grant is Chairman of the Organization and Compensation
Committee of the Board.
 
     TERRANCE H. GREGG, age 50, became a Director of the Company in August 1998.
Mr. Gregg was promoted to Executive Vice President, Operations in February 1996
and to President and Chief Operating Officer in October 1996. Mr. Gregg joined
the Company as Vice President of Regulatory Affairs and Clinical Research in
September 1994. Prior to employment with the Company, Mr. Gregg spent the
preceding nine years as Vice President of Governmental Affairs for Ioptex
Research, the ophthalmic surgical products subsidiary of Smith & Nephew, plc.
Prior to joining Ioptex Research, Mr. Gregg was responsible for regulatory
affairs, clinical research and quality assurance for divisions of Allergan, Inc.
Mr. Gregg earned a B.S. degree in zoology from Colorado State University in
1971.
 
     DAVID H. MACCALLUM, age 61, has been a Director of the Company since July
1994. In April 1998, he joined Furman Selz LLC, an investment banking firm and a
subsidiary of ING Group, a Dutch financial institution, where Mr. MacCallum
serves as an Executive Vice President and head of the health care investment
banking group. Previously, Mr. MacCallum served as Managing Director, Investment
Banking for UBS Securities LLC from May 1994 to April 1998. Mr. MacCallum served
as Co-Head of Investment Banking of Hambrecht & Quist from 1991 to 1994. Prior
to 1991, Mr. MacCallum was a Managing Director of Hambrecht & Quist. He is also
a Director of Bionx Implants, Inc., a medical device company. Mr. MacCallum is a
member of the Audit Committee.
 
     THOMAS R. TESTMAN, age 62, has been a Director of the Company since July
1994. Mr. Testman retired from his position as Managing Partner with Ernst &
Young, an international auditing, accounting and consulting services firm in
October 1992 after 30 years of continuous service. During his tenure he held the
position of National Director of Management Consulting Services, served on the
operating committee of the firm, was Western Regional Director of Health Care
Services and engaged in management consulting during
                                        4
<PAGE>   8
 
various periods. Mr. Testman currently serves as a director of Techniclone
Corp., a cancer treatment developer and in 1998 also served as its interim Chief
Executive. He is also a director of Chromavison Medical Systems, Inc., an
advanced cellular imaging company. He also formerly served as a director of
Nichols Institute, a publicly-held laboratory company that was sold to Corning,
Inc. in 1994. He currently also serves as a director of six privately held
health care companies. Mr. Testman is Chairman of the Audit Committee of the
Board.
 
     JOHN C. VILLFORTH, age 68, has been a Director of the Company since May
1996. He has served since September 1990 as President and Executive Director of
the Food and Drug Law Institute, a non-profit organization whose mission is to
increase knowledge about the laws and regulations pertaining to food, drugs,
cosmetics, medical devices and biological products. Prior to 1990 and for 29
years, Mr. Villforth was a Commissioned Officer in the U.S. Public Health
Service in the Department of Health and Human Services, the last 19 years of
which he was assigned to the Food and Drug Administration ("FDA"). Mr. Villforth
retired from the Public Health Service in August 1990 with the rank of Assistant
Surgeon General (Rear Admiral). During his tenure, he held the positions of
Director, Center for Devices and Radiological Health of the FDA (1982-1990);
Director, Bureau of Radiological Health of the FDA (1969-1982); and Chief
Engineer, U.S. Public Health Service (1985-1990), among other positions. Mr.
Villforth served on the board of Target Therapeutics, Inc. (subsequently
acquired by Boston Scientific Corporation), a medical device company, from 1992
to April 1997, and the board of BRI International (subsequently acquired by
Quintiles Transnational Corp.), a contract research organization for the
biotechnology, pharmaceutical and medical devices industries, from 1992 to 1997.
Mr. Villforth is a member of the Organization and Compensation Committee.
 
COMPENSATION OF DIRECTORS
 
     Non-employee directors receive an annual retainer of $8,000, payable
quarterly, and meeting fees of $1,000 per meeting of the Board of Directors and
$500 per meeting of a committee of the Board of Directors. For meetings convened
via telephone, non-employee directors are compensated at the rate of $500 per
Board meeting and $250 per committee meeting. Directors are entitled to defer
all or part of such cash compensation until their retirement or other
termination from the Board or other predetermined dates. Deferred amounts either
accrue interest at a fixed rate or are credited to units which are converted to
shares of Common Stock upon distribution. Directors are also reimbursed for
out-of-pocket expenses incurred in connection with attendance at Board or
committee meetings. Directors who are employees of the Company receive no
compensation for service as a member of the Board or any committee.
 
     Non-employee Directors each are granted options to purchase 5,000 shares of
the Common Stock of the Company upon election to the Board, with additional
grants of options to purchase 5,000 shares on June 1 of each successive year
that the Director serves on the Board, each at an exercise price equal to the
fair market value of the Common Stock on the date of grant. These options vest
over a three year period.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     The Company's Organization and Compensation Committee currently consists of
Mr. Grant, who serves as Chairman, Dr. Chernof, and Mr. Villforth. The following
information relates to transactions by the Company in 1998 with certain
Directors of the Company.
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     On September 1, 1998, the Company sold assets and transferred technology
related to its implantable pump program to Medical Research Group, LLC ("MRG")
and entered into a series of related transactions. MRG was founded by Alfred E.
Mann, founder, Chairman, CEO and largest stockholder of MiniMed. Mr. Mann
continues to hold a substantial equity interest in MRG. Since the transaction
with the Company, MRG has been incorporated. All references to "MRG" after its
date of incorporation refer to the successor Corporation, "Medical Research
Group, Inc."
 
                                        5
<PAGE>   9
 
     MiniMed sold assets, consisting primarily of inventories and equipment to
MRG in exchange for a note receivable of approximately $3.6 million. The note
receivable is due and payable in full on December 31, 2003, and accrued interest
is payable on December 31 of each year prior to maturity. The note bears
interest at a rate of 7.0% annually. The note is secured by the assets sold to
MRG and guaranteed by Mr. Mann. The Company has also leased facilities related
to the implantable pump program to MRG. The obligations of MRG under such lease
are guaranteed by Mr. Mann. Certain employees of the Company involved in the
manufacturing operations and research and development activities related to the
implantable pump product line became employees of MRG. The Company retained
exclusive distribution rights to the implantable pump product line for most
medical conditions, including diabetes. MiniMed is required to purchase
implantable pump units from MRG at negotiated prices, and is obligated to
purchase minimum quantities in 1999, 2000 and 2001 and must purchase minimum
quantities in future periods in order to preserve its exclusivity.
 
     Pursuant to the terms of the agreements with MRG, the Company is
responsible for pursuing regulatory approval of the implantable pump for the
treatment of diabetes and has provided MRG with a working capital line of credit
of $3.0 million, which will bear interest at 7.0% annually. Any amounts borrowed
under the line of credit are due on or before December 31, 2001 and will be
secured by a pledge of MiniMed Common Stock owned by Mr. Mann. To date MRG has
not borrowed any funds under this line of credit. Future minimum purchase
commitments for implantable pump units based upon current prices are:
 
<TABLE>
<S>                               <C>
1999............................  $ 4,575,000
2000............................    7,604,000
2001............................    8,935,000
                                  -----------
Total...........................  $21,114,000
                                  ===========
</TABLE>
 
     MRG has also granted MiniMed an option to acquire exclusive worldwide
distribution rights to MRG's long-term glucose sensor, currently under
development, for $30.0 million. The option is exercisable upon MRG's achievement
of certain development milestones. MRG is attempting to integrate its long-term
glucose sensor technology with the implantable pump. MRG has also agreed to
pursue the development of certain improvements to the electronic design of the
implantable pump.
 
     Because of Mr. Mann's interest in MRG, the Board of Directors of the
Company appointed a special committee of the Board consisting of all of the
directors except Mr. Mann (the "Committee") to consider approval of the
transaction between the Company and MRG. Mr. Testman served as Chairman of the
Committee. The Committee retained the services of legal counsel, a financial
advisory firm and a scientific advisor. The Committee engaged in extensive
negotiations with MRG over a period of many months. The Committee, exercising
the full powers of the Board which had been delegated to it with respect to this
matter, unanimously approved the transaction, as described above, and the
financial advisory firm retained by the Committee, Pacific Growth Equities,
Inc., rendered a written opinion to the effect that the transaction is fair to
the Company's stockholders (other than Mr. Mann) from a financial point of view.
Mr. Mann did not participate in any of the deliberations of the Committee with
respect to the transaction except to the extent that he was requested to do so.
 
     The Company leases an additional portion of its principal facility in
Sylmar, California to Mr. Mann. The amount of space being leased is 23,400
square feet with a monthly rent of $8,424 per month for the lease term, which
expires in 2001. Pursuant to the terms of the lease, Mr. Mann is also
responsible for paying for tenant improvements made to the facilities in the
amount of $4,050 per month over the balance of the term (which includes an
interest factor of 7.5%). The lease may be terminated by either party upon 90
days notice prior to the end of any calendar year. If the lease is terminated by
Mr. Mann, he will be obligated to continue to repay the Company for the tenant
improvements until such time as the Company occupies and utilizes such space.
The Company believes that the terms of the lease reflect the fair rental value
of the space. A portion of that space has been subleased by Mr. Mann to MRG, and
a portion has been made available to the Alfred E. Mann Foundation for
Scientific Research, a medical research foundation founded by Mr. Mann at no
charge.
 
     In 1998, the Company entered into certain agreements with, and advanced an
aggregate of $1,105,000 to, Pharmaceutical Discovery Corporation ("PDC") in
anticipation of a potential business combination and to
 
                                        6
<PAGE>   10
 
fund certain research and development activities. PDC is involved in the
research and development of novel chemical technologies, particularly
encapsulation technologies for the delivery of pharmaceutical products. PDC owns
several United States patents relating to these novel technologies.
 
     The advances made to PDC took the form of notes (the "Notes") payable by
PDC to the Company and accruing interest at the prime rate plus 1%. In December
1998, the Company utilized the outstanding principal amount of the Notes, plus
the interest accrued thereon, to purchase 2,672,703 shares of common stock of
PDC. The shares of PDC common stock acquired by the Company represent
approximately 6.2% of the total outstanding common stock of PDC.
 
     On October 14, 1997, the Company and PDC entered into a Research and
Development Agreement (the "R&D Agreement"). Pursuant to the R&D Agreement, PDC
conducted preliminary research activities relating to the encapsulation of
certain pharmaceuticals. These activities included the development of an
encapsulation technique relating to such pharmaceuticals and detailed
pharmacokinetic studies related thereto. For these activities, the Company paid
PDC $35,000. On March 9, 1998, upon the completion of activities relating to the
R&D Agreement, the Company and PDC entered into a License Agreement ( the
"License Agreement") whereby the Company licensed the technologies developed
under the R&D Agreement. Pursuant to the License Agreement, PDC will a transfer
the encapsulation technology to the Company for use with specified
pharmaceutical compounds. The Company will pay PDC a royalty based upon either
the cost of the compound to be encapsulated or upon the total net revenues
derived by the Company from the therapy utilizing such compounds. PDC also
retains certain manufacturing rights relating to the encapsulation technology.
 
     The Notes were intended to be used as part of the consideration for the
purchase by the Company of substantially all of the assets of PDC. Subsequent to
the issuance of the Notes, the Company's Board of Directors decided not to
pursue such a transaction with PDC. With the approval of the Company's Board of
Directors, in January 1999 Mr. Mann entered into an Investment Agreement (the
"Investment Agreement") with PDC. Under that Agreement, Mr. Mann purchased
25,901,642 shares of PDC Common Stock at a purchase price of $.45 per share for
a total purchase price of $11,655,738.90. The shares purchased by Mr. Mann
represent approximately 60% of the outstanding common stock of PDC. The
transaction was effective as of December 31, 1998. Concurrently with entering
into the Investment Agreement, PDC entered into a Rescission Agreement with
Encap Technologies LLC, a Delaware limited liability company ("ENCAP") of which
Mr. Mann is the principal beneficial owner. Pursuant to this agreement, the
parties mutually agreed to rescind an Option Agreement, a related Asset Purchase
Agreement, a Security Agreement, a Voting Agreement and a Loan Agreement, all
dated as of September 17, 1998 (collectively, the "Rescinded Agreements"). ENCAP
and PDC also entered into a License Agreement dated as of September 17, 1998
relating to PDC's patented technology for the microencapsulation of insulin. The
Rescinded Agreements required ENCAP to make certain payments to PDC and allowed
ENCAP an option to purchase all of the assets of PDC. The Investment Agreement
allows PDC, for a period of one year from the date thereof, to reacquire all
rights under the License Agreement for an amount equal to all expenditures paid
or incurred by ENCAP with respect to License Agreement plus accumulated interest
at the annual rate of 4.48% calculated from the date of each such expenditure.
 
     In 1998, the Company entered into a letter agreement (the "Letter
Agreement") with CTL Immunotherapies Corp. ("CTL") regarding a potential
strategic alliance. CTL is a biopharmaceutical company involved in the
development of proprietary compounds for the treatment of certain targeted
medical conditions, including certain forms of cancer. The Letter Agreement
addresses certain initial activities involving MiniMed and CTL and contemplates
a longer term strategic relationship. Pursuant to the Letter Agreement MiniMed
(1) hired certain technical personnel to support the project (who have since
become employees of CTL), (2) provided certain laboratory space for the CTL
project, (3) purchased certain capital equipment which is used in connection
with the CTL project, (4) provided certain MiniMed products for use in
connection with clinical trial activities, and (5) provided ancillary support to
CTL in its development efforts. The costs associated with personnel, supplies,
materials and related expenses incurred by MiniMed in connection with the CTL
project are reimbursed to MiniMed by CTL.
 
                                        7
<PAGE>   11
 
     MiniMed and CTL expect to finalize a definitive agreement (the "Definitive
CTL Agreement") relating to a strategic alliance, which is anticipated to relate
to the development of therapy systems involving selected CTL compounds and
MiniMed's medication infusion systems. The parties anticipate that the
Definitive CTL Agreement will contain provisions similar to those contained in
the Letter Agreement. To the extent therapies utilizing CTL compounds which are
appropriate for infusion delivery are successfully developed, the parties
anticipate that the Definitive CTL Agreement will provide that MiniMed shall be
the exclusive provider of infusion devices and supplies, on terms to be
negotiated.
 
     MiniMed was also presented with an opportunity to invest in CTL, however,
the opportunity was declined by the MiniMed Board of Directors. With the consent
of the other Directors, Mr. Mann elected to pursue the investment. Thereafter he
and MRG each agreed to lend up to $1,250,000 to CTL, and a third party agreed to
lend up to an additional $500,000. The loans are to be made upon the achievement
by CTL of certain milestones, they bear interest at 5% per annum and they are
payable in October 2002 or such earlier time as CTL completes an initial public
offering of its Class A Common Voting Shares meeting certain requirements. The
loans are convertible at the option of each lender into Preferred Stock of CTL,
which in turn is convertible into Class A Common Voting Shares, except that
conversion of the loans into Class A Common Voting Shares is mandatory at the
option of CTL in the event of an annual initial public offering described above.
As of the date hereof, Mr. Mann and MRG have each loaned CTL $500,000 pursuant
to such arrangement.
 
     The Company is currently finalizing financing arrangements relating to the
development of its new worldwide headquarters. It is anticipated that such
financing shall be structured as a "synthetic lease transaction." ING Baring
Furman Selz and certain of its affiliates are arranging the financing, will
receive a fee for arranging the financing and will also be participant in a
lender syndicate. David MacCallum, a member of the Board of Directors, is an
Executive Vice President of ING Baring Furman Selz LLP.
 
     Pursuant to the transaction, the Company is to obtain $65,000,000 in a
synthetic lease financing facility for the construction and development of
facilities, and a revolving credit facility pursuant to which the Company may
borrow up to $15,000,000 for working capital purposes. Under the terms of the
financing, a special purpose trust will sublease the land and lease the
improvements to the Company. The Company shall then make lease payments equal to
the debt service on the financing. The initial term of the synthetic lease
financing will be five (5) years, with two (2) one-year renewal options. Notes
and Certificates will be issued to fund the borrowing. The Company will have an
option to purchase the leased property at the end of the lease, for an amount
equal to the principal indebtedness.
 
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file initial reports of ownership and
reports of changes of ownership of the Company's Common Stock with the
Securities and Exchange Commission. Executive Officers and Directors are
required to furnish the Company with copies of all Section 16(a) forms that they
file. Based upon a review of these filings and written representations from
certain of the Company's directors and executive officers that no other reports
were required, the Company notes that all such reports were filed on a timely
basis by reporting persons, with the exception of one transaction whereby Mr.
Mann received an in-kind distribution of Common Stock from his charitable
remainder trust. Once Mr. Mann became aware of his filing obligation relating to
such securities, he immediately filed an amended Form 5 detailing such
transaction.
 
                                        8
<PAGE>   12
 
COMPANY STOCK PERFORMANCE
 
     The following graph summarizes cumulative total stockholder return data
(assuming reinvestment of dividends) for the period since the Company's stock
was first registered under the Securities Exchange Act of 1934, and commenced
trading on The Nasdaq National Stock Market (July 25, 1995). The graph assumes
that $100 was invested on July 25, 1995 (i) in the Common Stock of the Company,
(ii) in the Mid-Cap 400 Index (the "Broad Index") and (iii) in the Standard &
Poor's Health Care (Medical Products and Supplies) 500 Index (the "Industry
Index"). The stock price performance on the following graph is not necessarily
indicative of future stock price performance.
 
<TABLE>
<CAPTION>
                                                     HLTH CARE (MED PDS
                            MINIMED INC.                 & SUPP)-500            S&P MIDCAP 400 INDEX
                            ------------             ------------------         --------------------
<S>                   <C>                         <C>                         <C>
24Jul95                       100.00                      100.00                      100.00
Dec95                          96.15                      126.80                      108.21
Dec96                         248.08                      145.53                      128.99
Dec97                         299.04                      181.44                      170.59
Dec98                         805.77                      261.52                      203.18
</TABLE>
 
            ACTIVITIES OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
 
     The Board of Directors held 11 meetings during 1998, and its standing
committees also met from time to time to address matters within their respective
areas of responsibility. Each member of the Board of Directors was present for
75% or more of the total number of meetings of the Board of Directors and the
total meetings held by all committees of the Board of Directors of which he or
she served.
 
COMMITTEES OF THE BOARD
 
     The standing committees of the Board consist of an Audit Committee and an
Organization and Compensation Committee.
 
  AUDIT COMMITTEE
 
     The principal duties of the Audit Committee are to provide assistance to
the Board of Directors in fulfilling its responsibility to stockholders,
potential stockholders and the investment community relating to the Company's
financial reporting practices. The Audit Committee is responsible for reviewing
the annual financial statements of the Company, reviewing the scope of the plan
of annual audit, related fees and results of audits, reviewing any material
changes to the Company's accounting and financial reporting practices,
recommending to the Board the retention or replacement of the independent
accountants, reviewing periodically the adequacy of the Company's accounting,
financial and internal audit organizations, and acting upon other matters
relative to accounting or financial matters that the Audit Committee or the
Board deem
 
                                        9
<PAGE>   13
 
appropriate. The members of the Audit Committee are Mr. Testman (Chairman), Ms.
Davis and Mr. MacCallum, none of whom is a current or former officer or employee
of the Company or any of its subsidiaries. The Audit Committee held 2 meetings
during 1998, and in 1999 has held a meeting to review the 1998 results of
operations prior to the Company's public release of financial results for 1998.
The Audit Committee regularly meets privately with the Company's independent
auditors, outside of the presence of any Company officers or other personnel.
 
  ORGANIZATION AND COMPENSATION COMMITTEE
 
     The Organization and Compensation Committee is responsible for reviewing
qualifications of potential candidates for election as directors of the Company
from whatever sources obtained, and making recommendations to the Board with
respect to nominees. The Organization and Compensation Committee is also
responsible for establishing criteria to evaluate director performance,
recommending assignments of directors to committees of the Board, reviewing
proposed changes to the Company's corporate organizational structure and such
other related matters as from time to time may be assigned to the Organization
and Compensation Committee by the Board. In addition, the Organization and
Compensation Committee also reviews and approves for presentation to the Board
significant compensation and benefit plans and compensation for executive
officers of the Company, administers the Company's equity-based plans and
considers other matters relating to executive compensation. The members of the
Organization and Compensation Committee are Mr. Grant (Chairman), Dr. Chernof
and Mr. Villforth, none of whom is a current or former officer or employee of
the Company or any of its subsidiaries. The Organization and Compensation
Committee held 3 meetings during fiscal year 1998. A report of the Organization
and Compensation Committee with respect to executive compensation matters
appears below.
 
                                       10
<PAGE>   14
 
                           REPORT OF THE MINIMED INC.
                    ORGANIZATION AND COMPENSATION COMMITTEE
                           ON EXECUTIVE COMPENSATION
 
OVERALL POLICY
 
     The MiniMed Organization and Compensation Committee of the Board of
Directors, composed entirely of independent, non-employee directors, reviews and
approves corporate organization structure, monitors the performance of executive
officers, evaluates the CEO, reviews and approves management succession and
changes, establishes compensation levels and incentive programs for executive
officers, and approves directors' compensation. To keep a balanced perspective
in 1998, the Company, with approval of the Organization and Compensation
Committee, retained the services of Coopers & Lybrand LLP to advise and review
the reasonableness of the Company's executive compensation plans.
 
     In establishing the Company's executive compensation program, the
Organization and Compensation Committee takes into account current market data
and compensation trends for comparable companies, gauges achievement of
corporate and individual objectives, and considers the overall effectiveness of
the program. The Organization and Compensation Committee bases the compensation
program on the following principles:
 
     - Compensation levels for executive officers are benchmarked to market
       information from general industry surveys, additional surveys conducted
       by outside consultants and from proxy materials of other similar
       companies. A peer group of industry competitor companies is developed,
       which is selected on the basis of the following criteria: (i) medical
       products/research companies, (ii) whose securities are publicly traded
       and (iii) with a market capitalization similar to the Company.
 
     - In January 1998, the total compensation opportunity was targeted to the
       median of these companies; incremental amounts could have been earned
       above or below that level depending upon Company and individual
       performance. In 1998, the Organization and Compensation Committee
       reaffirmed its conclusion that the vitality of the Company requires that
       the total compensation opportunity for executive officers remain
       competitive with similar companies in order to retain and attract the
       talent needed to manage and build the Company's business.
 
     - Compensation is tied to performance. A significant part of the total
       compensation opportunity is in the form of annual incentive awards and
       stock options, to be earned only if specific goals are met and value is
       created for stockholders.
 
     - The compensation program has three elements: basic annual salary, annual
       incentive awards, and stock options.
 
     - Executives' interest in the business should be linked to the interests
       and benefits received by the Company's stockholders.
 
     The compensation program is described below.
 
     BASE SALARY: Competitive base salaries are determined for each executive
based on a review of the salaries in the selected group of peer companies and
similar survey data. In conjunction with the competitive data, actual salaries
are established based on executive roles and responsibilities, position titles,
and the skills, experience and performance of individual executives.
 
     ANNUAL INCENTIVES: For the 1998 fiscal year, annual bonuses were based upon
an annual incentive plan for executives approved by the Organization and
Compensation Committee in early 1997. The plan utilizes predetermined Company
financial objectives and individual executive objectives to measure performance
and the resulting incentive awards. The purpose of the plan is to (i) provide
competitive pay in order to attract and retain qualified executives, (ii)
provide incentive to meet MiniMed financial and individual/functional
objectives, (iii) reward managers who significantly impact financial
performance, (iv) encourage teamwork and (v) encourage adherence to the
corporate culture of the Company. The plan provides for bonus awards at the
market median for the achievement of predetermined Company revenue and earnings
per share objectives
                                       11
<PAGE>   15
 
and individual performance objectives. The Company believes that the achievement
of the objectives create additional value for stockholders.
 
     STOCK OPTIONS: The Company's long-term incentive program consists entirely
of stock options granted at 100% of fair market value which generally vest over
a five-year period, although the CEO's two most recent stock option awards,
granted in December 1997 and February 1999, vest over three years. The number of
shares subject to options granted to individual executives is based on a
combination of factors including competitive market practice, executive roles
and responsibilities, and prior stock option grant levels. The Organization and
Compensation Committee believes that stock options are a key ingredient in
linking executive interests to stockholder interests and represent the primary
capital accumulation opportunity for executives. Therefore, significant stock
option grants are critical to retain, attract, and motivate qualified
executives.
 
     1998 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER: In determining the 1998
salary and annual incentive award for the CEO, the Organization and Compensation
Committee considered all aspects of Company and individual performance. The
primary evaluation criteria included leadership, strategic planning, financial
results, succession planning, strategic partnering, and external and Board
relations.
 
     The Organization and Compensation Committee realizes that the total annual
cash compensation (base salary and annual bonus) for the CEO in 1998 was
slightly below the median of CEOs in industry comparators and general industry
companies of similar size and market position.
 
     Mr. Mann's leadership enabled the Company to achieve significant financial
results in 1998, while continuing to invest heavily in new development efforts,
which led to the unanimous recommendation, in February 1999, subject to certain
conditions, of an FDA Panel for approval of the Company's first-generation
continuous glucose monitoring system. For fiscal year 1998 the Company's net
sales increased 39.3%, net income grew nearly 95% and earnings per share
increased 88.5%. Pursuant to the Company's executive incentive bonus plan, Mr.
Mann received a bonus equal to approximately 63% of base salary, in recognition
of 1998 performance.
 
     The CEO was granted an option to purchase 100,000 shares of Common Stock
(adjusted to reflect the two-for-one stock split) on February 27, 1999. This
amount provides long-term incentive opportunity at the median of competitive
practice, tied directly to stockholder value creation.
 
     OMNIBUS BUDGET RECONCILIATION ACT (IRC SECTION 162(M)): The Organization
and Compensation Committee periodically reviews the implication of Section
162(m) of the Internal Revenue Code of 1986, as amended, regarding the
deductibility of executive compensation for the CEO and next four most highly
compensated executive officers. Compensation paid in 1998 for any single
executive did not exceed the limits of Section 162(m) and was therefore fully
deductible by the Company. The Organization and Compensation Committee will
continue to monitor the implications of Section 162(m) for executive
compensation programs.
 
                          William R. Grant -- Chairman
                              David Chernof, M.D.
                               John C. Villforth
 
                                       12
<PAGE>   16
 
                       EXECUTIVE OFFICERS OF THE COMPANY
 
     The Company's executive officers are generally elected annually by the
Board of Directors for a one year term and serve at the pleasure of the Board.
As of April 1, 1999, the Company's executive officers are:
 
<TABLE>
<CAPTION>
      NAME         AGE                POSITIONS WITH THE COMPANY
      ----         ---                --------------------------
<S>                <C>   <C>
Alfred E. Mann     73    Chairman of the Board and Chief Executive Officer
Terrance H. Gregg  50    Director, President and Chief Operating Officer
Stephen A. Bowman  54    Senior Vice President, Sales and Marketing
Eric S. Kentor     40    Senior Vice President, General Counsel and Secretary
David Morley       52    Senior Vice President, Operations
Kevin R. Sayer     41    Senior Vice President, Finance and Chief Financial
                         Officer
</TABLE>
 
     The following is information with respect to the Company's executive
officers who are not members of the Board.
 
     STEPHEN A. BOWMAN joined the Company as Senior Vice President, Sales and
Marketing in March 1999. Prior to joining the Company, Mr. Bowman served as Vice
President, International Sales and Marketing of SulzerIntermedics, Inc., a
manufacturer and distributor of implantable and disposable medical products,
where he served as Vice President -- International Sales and Marketing from
October 1992 until March 1999 and as Vice President -- Worldwide Marketing from
May 1992 to October 1992. Mr. Bowman served as Director -- Western Region at
Sulzer Intermedics from May 1991 to May 1992. Previously, from November 1989 to
April 1991, Mr. Bowman was General Manager of Biotronik, a manufacturer and
distributor of implantable medical products. Prior to joining Biotronik, Mr.
Bowman held various positions with Medtronic, Inc., Johnson & Johnson and Del
Monte Sales. Mr. Bowman earned a B.A. degree in Marketing from San Diego State
University in 1968.
 
     ERIC S. KENTOR was promoted to Senior Vice President in February 1996. Mr.
Kentor joined the Company in May 1995 as Vice President, General Counsel and
Secretary. Prior to joining the Company, Mr. Kentor was Vice President, Legal
Services, of Health Net, California's second largest health maintenance
organization, where he held various positions beginning in March 1994. From
March 1994 until May 1995, Mr. Kentor also served as Executive Counsel of Health
Net's parent corporation, Health Systems International, Inc. Previously, from
1987 until 1994, Mr. Kentor practiced with the law firm of McDermott, Will &
Emery, where he was elected partner in 1992. Mr. Kentor received a J.D. degree
from the UCLA School of Law in 1986.
 
     DAVID MORLEY joined the Company as Senior Vice President, Operations in
January of 1998. Prior to joining the Company, Mr. Morley served as Executive
Vice President of Operations at the Cardiac Rhythm Management division of St.
Jude Medical, Inc. (formerly Pacesetter Systems, Inc.), a manufacturer of
medical devices including cardiac pacemakers and related products. At St. Jude
Medical, Mr. Morley was responsible for all manufacturing and quality activities
at facilities in California, Arizona, South Carolina and Sweden. Mr. Morley
received a B.A. from Duquesne University in 1968, an M.A. from the University of
Pittsburgh in 1970 and an M.B.A. from California State University, Northridge.
 
     KEVIN R. SAYER was promoted to Senior Vice President, Finance, in February
1996. Mr. Sayer joined the Company in May 1994 as Vice President, Finance and
Chief Financial Officer. Prior to joining the Company, Mr. Sayer spent the
previous 11 years with Ernst & Young, where he specialized in providing
auditing, accounting and consulting services to high growth companies, primarily
in the health care and high technology industry segments. Mr. Sayer received a
B.S. in accounting from Brigham Young University in 1981 and received a Masters
degree in accounting/information systems from Brigham Young University in 1983.
 
                                       13
<PAGE>   17
 
                    EXECUTIVE COMPENSATION AND OTHER MATTERS
 
EXECUTIVE COMPENSATION
 
     The following table sets forth, for the year ended January 1, 1999, the
compensation paid by the Company to Mr. Mann, the Company's Chairman and CEO,
and each of the other four most highly compensated executive officers of the
Company during 1998, for all services rendered in all capacities in which they
serve (collectively, the "Named Executive Officers").
 
                           SUMMARY COMPENSATION TABLE
 
     The following table summarizes the compensation earned by the Named
Executive Officers during the fiscal years 1998, 1997 and 1996.
 
<TABLE>
<CAPTION>
                                                                               LONG-TERM
                                              ANNUAL COMPENSATION             COMPENSATION
                                     --------------------------------------   ------------
                                                               OTHER ANNUAL    SECURITIES    ALL OTHER
                                     SALARY        BONUS       COMPENSATION    UNDERLYING     COMPEN-
NAME AND PRINCIPAL POSITION:           ($)          ($)            ($)         OPTIONS(#)    SATION($)
- ----------------------------         -------      -------      ------------   ------------   ----------
<S>                           <C>    <C>          <C>          <C>            <C>            <C>
Alfred E. Mann                1998   274,231      173,757(1)          --              0        3,300(2)
  Chairman of the Board       1997   250,507      137,000(3)      35,784(4)     180,000           --
  and Chief Executive         1996   216,865      100,000(5)      30,615(6)      80,000           --
  Officer
Terrance H. Gregg             1998   233,769      124,031(1)          --              0        3,626(7)
  Director, President and     1997   185,000       88,708(3)          --        140,000        4,680(8)
  Chief Operating Officer     1996   154,905       50,000(5)      20,078(6)      40,000           --
Eric S. Kentor                1998   164,539       77,963(1)          --              0        2,313(9)
  Senior Vice President,      1997   150,000       61,650(3)          --         50,000        3,663(10)
  General Counsel and         1996   142,942       35,000(5)      14,754(6)      30,000           --
  Secretary
David Morley                  1998   161,539(11)   82,688(1)          --         60,000        2,393(12)
  Senior Vice President,
  Operations
Kevin R. Sayer                1998   156,631       74,183(1)          --              0        3,537(13)
  Senior Vice President,      1997   145,000       59,470(3)          --         40,000        1,465(14)
  Finance and Chief           1996   137,942       35,000(5)      15,380(6)      15,000           --
  Financial
  Officer
</TABLE>
 
- ---------------
 (1) Includes performance bonuses accrued by the Company in 1998 but paid, at
     the election of the Company, in 1999.
 
 (2) Includes a matching contribution of $3,300 to a 401(k) plan.
 
 (3) Includes performance bonuses accrued by the Company in 1997 but paid, at
     the election of the Company, in 1998.
 
 (4) Includes an automobile allowance of $18,971 and reimbursement of $16,813 in
     medical expenses.
 
 (5) Includes performance bonuses accrued by the Company in 1996 but paid, at
     the election of the Company, in 1997.
 
 (6) Consists of automobile allowance.
 
 (7) Includes a matching contribution of $1,034 to a 401(k) plan and a term life
     insurance premium of $2,592.
 
 (8) Includes a matching contribution of $3,113 to a 401(k) plan and a term life
     insurance premium of $1,566.
 
 (9) Includes a matching contribution of $1,733 to a 401(k) plan and a term life
     insurance premium of $580.
 
(10) Includes a matching contribution of $3,135 to a 401(k) plan and a term life
     insurance premium of $528.
 
(11) Mr. Morley became employed by the Company on January 19, 1998.
 
                                       14
<PAGE>   18
 
(12) Includes a term life insurance premium of $2,393.
 
(13) Includes a matching contribution of $2,686 to a 401(k) plan and a term life
     insurance premium of $851.
 
(14) Includes a matching contribution of $957 to a 401(K) plan and a term life
     insurance premium of $508.
 
OPTION GRANTS IN 1998
 
     The following table summarizes option grants in 1998 to the Named Executive
Officers.
 
                       OPTION GRANTS IN LAST FISCAL YEAR
 
<TABLE>
<CAPTION>
                                                                                          POTENTIAL REALIZABLE
                                                                                            VALUE AT ASSUMED
                                 NUMBER OF      % OF TOTAL                                   ANNUAL RATES OF
                                SECURITIES       OPTIONS      EXERCISE OR                   APPRECIATION FOR
                                UNDERLYING      GRANTED TO        BASE                       OPTION TERM(2)
                                  OPTIONS      EMPLOYEES IN      PRICE       EXPIRATION   ---------------------
            NAME:              GRANTED(#)(1)   FISCAL YEAR    ($/SHARE)(1)      DATE       5% ($)      10%($)
            -----              -------------   ------------   ------------   ----------   --------   ----------
<S>                            <C>             <C>            <C>            <C>          <C>        <C>
Alfred E. Mann...............          0            N/A             N/A           N/A         N/A          N/A
Terrance H. Gregg............          0            N/A             N/A           N/A         N/A          N/A
Eric S. Kentor...............          0            N/A             N/A           N/A         N/A          N/A
David Morley.................     60,000           6.99%         18.875       1/19/06     540,900    1,295,100
Kevin R. Sayer...............          0            N/A             N/A           N/A         N/A          N/A
</TABLE>
 
- ---------------
 (1) All options granted in 1998 were non-qualified stock options granted
     pursuant to the MiniMed Inc. Second Amended and Restated 1994 Stock
     Incentive Plan (the "1994 Plan"). All grants in 1998 were priced at fair
     market value, as defined in the 1994 Plan and become exercisable as to 20%
     of the shares during each of the first five years of the term of the
     options.
 
 (2) The potential gains shown are net of the option price and do not include
     the effect of any taxes associated with exercise. The amounts shown are for
     the assumed rates of appreciation only and may not necessarily be realized.
     Actual gains, if any, on stock option exercises depend on the future
     performance of the Company's Common Stock, continued employment of the
     optionee through the term of the option and other factors.
 
STOCK OPTIONS
 
     The Company has outstanding options to purchase shares of Common Stock,
including options granted under the 1994 Plan and options granted by MMTL,
predecessor to the Company, pursuant to its 1992 Amended and Restated Stock Plan
(the "MMTL Plan"), which options were assumed by the Company and became
exercisable to purchase shares of Common Stock of the Company. Under the MMTL
Plan, options to purchase 1,960,900 shares of Common Stock of the Company have
been granted. No additional options will be issued under the MMTL Plan. As of
April 1, 1999, under the MMTL Plan, options to purchase 517,372 shares of Common
Stock remained outstanding, and options to purchase 1,042,584 shares had been
exercised. Under the 1994 Plan, as of April 1, 1999, options to purchase
4,321,764 shares of Common Stock have been granted, of which options
representing 321,860 shares have been exercised and options representing
3,918,464 shares of Common Stock remain outstanding. Also, as of April 1, 1999,
676,200 shares of Common Stock remained available for future grants. All share
calculations in this paragraph have been adjusted to reflect the two-for-one
stock split payable to stockholders of record on April 1, 1999.
 
     The following table sets forth certain information with respect to the
unexercised options to purchase Common Stock held by the Named Executive
Officers as of January 1, 1999 and options exercised by Named Executive Officers
in the fiscal year ended January 1, 1999.
 
     The outstanding options to purchase shares of Common Stock of the Company
will, unless otherwise determined by the Board of Directors, become exercisable
in full in the event of a "change in control" of the Company. "Change in
control" under these plans is defined as (i) the acquisition of any person of
50% or more of the combined voting power of the Company's outstanding voting
securities; (ii) the sale, lease or
 
                                       15
<PAGE>   19
 
other disposition of all or substantially all of the Company's assets, such as
by merger, consolidation or otherwise; and (iii) the dissolution or liquidation
of the Company. The Organization and Compensation Committee may also, in its
discretion, accelerate the exercisability or vesting of any option in accordance
with the administration of the 1994 Plan or the MMTL Plan, or may include in any
agreement evidencing an option granted under the 1994 Plan or the MMTL Plan a
provision by which such acceleration does not apply.
 
                AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUE
 
<TABLE>
<CAPTION>
                                                            NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                                                           UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS
                               SHARES                      OPTIONS AT 1/1/99(#)(1)            AT 1/1/99($)1
                             ACQUIRED ON      VALUE      ---------------------------   ---------------------------
           NAME              EXERCISE(#)   REALIZED($)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
           ----              -----------   -----------   -----------   -------------   -----------   -------------
<S>                          <C>           <C>           <C>           <C>             <C>           <C>
Alfred E. Mann.............      --            --          272,000        288,000      12,301,500     12,231,000
Terrance H. Gregg..........      --            --          134,000        156,000       6,073,400      6,008,600
Eric S. Kentor.............      --            --           76,000         98,000       3,505,550      4,160,400
David Morley...............      --            --               --         60,000              --      2,010,000
Kevin R. Sayer.............      --            --           92,000         57,000       4,347,400      2,311,600
</TABLE>
 
- ---------------
(1) Based on the closing price of $52.38 on The Nasdaq National Stock Market on
    December 31, 1998 (as adjusted for a 2 for 1 stock split payable to
    stockholders of record on April 1, 1999).
 
CHANGE OF CONTROL AGREEMENTS
 
     In February 1999 the Company entered into agreements with Messrs. Mann,
Gregg, Kentor, Morley and Sayer providing for severance benefits to these
officers in the event of termination of their employment in connection with a
change of control of the Company occurring prior to February 2001. The severance
benefits are payable if the Company terminates the employment of the officer
without cause or the officer voluntarily terminates his employment for good
reason (generally consisting of adverse changes in responsibilities,
compensation, benefits or location of work place) within two years after a
change of control or three months prior to and in connection with, or in
anticipation of, such a change. The benefits are also payable if the officer
voluntarily terminates his employment for any reason within 30 days after the
expiration of one year after a change of control.
 
     "Change of control" is defined to mean:
 
          - the acquisition of beneficial ownership of 30% or more of the
     outstanding shares of voting stock of the Company by any person, entity or
     group, subject to certain exceptions including acquisitions by Mr. Mann and
     acquisitions of shares beneficially owned by him as a result of his death
     and transfers during his lifetime to charities or members of his family or
     certain entities in which charities or members of his family have a
     majority of the beneficial interest;
 
          - any change in the directors of the Company after which a majority of
     the directors consists of persons who are not either (1) presently serving
     as directors or (2) selected for election by stockholders, or elected to
     fill vacancies on the board, by directors who are presently serving or were
     themselves selected or nominated as described in this clause (2);
 
          - a sale of all or substantially all of the Company's assets or a
     merger, consolidation or reorganization of the Company unless the holders
     of the outstanding voting shares of the Company immediately before any such
     transaction own at least 70% of the outstanding voting shares of the
     Company or a successor company immediately after the transaction; or
 
          - a liquidation of the Company.
 
     The severance benefits generally consist of a lump sum payment equal to two
times the officer's annual base salary and two times his average annual bonus
determined over the three prior years (subject to certain exceptions), a
prorated portion of the bonus for the year of termination, continuation of
Company life, health
 
                                       16
<PAGE>   20
 
and disability insurance for two years or until any earlier date when other full
time employment is obtained providing health plan benefits without an exclusion
for pre-existing conditions, continuation of the use of a Company car or car
allowance for one year or until any earlier date when other full time employment
is obtained and acceleration of the date when outstanding stock options become
exercisable. The benefits (other than acceleration of the exercise dates of
stock options) are subject to reduction to avoid the taxes and loss of
deductions associated with "excess parachute payments" under the Internal
Revenue Code.
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
 
     Set forth below is a tabulation indicating those persons or groups who are
known to the Company to be beneficial owners of at least 5% of the outstanding
shares of Common Stock of the Company as of April 1, 1999. The following
information is based on reports on Schedules 13D or 13G filed with the
Securities and Exchange Commission or other information deemed to be reliable by
the Company.
 
<TABLE>
<CAPTION>
              NAME AND ADDRESS                 SHARES BENEFICIALLY
            OF BENEFICIAL OWNERS                      OWNED           PERCENT OF CLASS
            --------------------               -------------------    ----------------
<S>                                            <C>                    <C>
Alfred E. Mann...............................       9,304,802(1)            32.6%
  12744 San Fernando Road
  Sylmar, CA 91342
Putnam Investments, Inc......................       1,480,302(2)             5.5%
  Putnam Investment Management, Inc.
  The Putnam Advisory Company
  One Post Office Square
  Boston, MA 0219
</TABLE>
 
- ---------------
(1) Includes 378,000 shares which Mr. Mann has the right to purchase under
    outstanding stock options which are exercisable or become exercisable within
    60 days of April 1, 1999. Also includes 312,000 shares beneficially owned by
    the Alfred E. Mann Foundation for Scientific Research (the "Foundation") of
    which Mr. Mann is a trustee. As a trustee, Mr. Mann shares voting and
    investment power with respect to the shares beneficially owned by the
    Foundation. Mr. Mann disclaims any beneficial interest in the shares owned
    by the Foundation.
 
(2) As reported by Putnam Investments, Inc. ("PI"), Putnam Investment
    Management, Inc. ("PIM") and, The Putnam Advisory Company Inc. ("PAC"), in
    its Amended Schedule 13G filed on February 9, 1999 with the Securities and
    Exchange Commission. According to such filing, (1) PI shares voting power as
    to 192,502 shares and shares dispositive power as 1,480,302 shares, (2) PIM
    shares dispositive power as to 1,251,400 shares, and (3) PAC shares voting
    power as to 192,502 shares and shares dispositive power as to 228,902
    shares.
 
                                       17
<PAGE>   21
 
SECURITY OWNERSHIP OF MANAGEMENT
 
     The following table sets forth, as of April 1, 1999, information as to
shares of Common Stock beneficially owned by each of the current Directors of
the Company, each of whom is also a nominee for Director of the Company, by each
Named Executive Officer, by all Directors and executive officers as a group and
the percentage these shares bear to the total number of shares of Common Stock
outstanding as of such date. Unless otherwise indicated, all persons named as
beneficial owners of Common Stock have sole voting and investment power with
respect to such Common Stock.
 
<TABLE>
<CAPTION>
                                                    AMOUNT OF SHARES    PERCENTAGE OF
              NAME OF INDIVIDUAL OR                   BENEFICIALLY         SHARES
           NUMBER OF PERSONS IN GROUP                   OWNED(1)         OUTSTANDING
           --------------------------              ------------------   -------------
<S>                                                <C>                  <C>
Alfred E. Mann...................................       9,304,802(2)        32.6%
David Chernof, M.D...............................          33,000              *
Carolyne Kahle Davis.............................          10,232
William R. Grant.................................         816,568(3)         2.9%
Terrance H. Gregg................................         163,452              *
David H. MacCallum...............................          37,496              *
Thomas R. Testman................................          37,000              *
John C. Villforth................................          15,500              *
Eric S. Kentor...................................          96,350              *
David Morley.....................................           6,314              *
Kevin R. Sayer...................................         115,196              *
All Directors and Executive Officers as a group
  (12 persons)...................................      10,635,910           36.6%
</TABLE>
 
- ---------------
 *  The amount shown is less than 1% of the outstanding shares of Common Stock.
 
(1) Includes the following numbers of shares which the executive officer or
    Director has the right to purchase under outstanding stock options which are
    exercisable or become exercisable within 60 days: Mr. Mann -- 378,000, Dr.
    Chernof -- 33,000, Mr. Grant -- 33,000, Mr. MacCallum -- 34,000, Mr.
    Testman -- 33,000, Mr. Gregg -- 162,000, Mr. Kentor -- 93,000, Mr.
    Sayer -- 114,000, Mr. Morley -- 6,000, Mr. Villforth -- 15,500, all
    Directors and Executive Officers as a group (12 persons) -- 958,500.
 
(2) Includes 312,000 shares beneficially owned by the Foundation of which Mr.
    Mann is a trustee. As a trustee, Mr. Mann shares voting and investment power
    with respect to the shares beneficially owned by the Foundation. Mr. Mann
    disclaims any beneficial interest in the shares owned by the Foundation.
 
(3) Includes 682,222 shares of Common Stock held by certain funds managed by
    Galen Associates of which Mr. Grant is Chairman and Managing General Partner
    and may be deemed to own beneficially such shares. Mr. Grant disclaims
    beneficial ownership of such shares except for his pecuniary interest
    therein.
 
     In addition to the foregoing beneficial ownership amounts, the Directors
listed below elected to defer all or a portion of their annual retainer and
meeting fees. These amounts will be applied to the purchase of units which are
equivalent to shares of Common Stock. As of April 1, 1999, such amounts
constitute units relating to the following number of shares of Common Stock:
 
<TABLE>
<CAPTION>
                                         COMMON SHARE
                 NAME                    STOCK UNITS
                 ----                    ------------
<S>                                      <C>
Carolyne K. Davis                            770.68
William R. Grant                           3,720.46
David H. MacCallum                         1,953.40
Thomas R. Testman                          5,726.88
John C. Villforth                          2,858.76
</TABLE>
 
                                       18
<PAGE>   22
 
          PROPOSAL 2 -- AMENDMENT TO CERTIFICATE OF INCORPORATION AND
         BYLAWS OF THE COMPANY IMPLEMENTING CLASSIFIED BOARD PROVISIONS
 
     The Board of Directors has unanimously approved the amendment and
restatement of the Company's Restated Certificate of Incorporation and
amendments of its Bylaws to (a) implement a classified board consisting of eight
directors divided into three classes with staggered three year terms, (b)
provide that the authorized number of Directors will be fixed from time to time
by the Board, (c) eliminate existing special voting requirements to amend
provisions of the Company's Bylaws relating to the authorized number of
Directors, the annual election of directors and the filling of vacancies on the
Board, (d) authorize the Board to make, alter and repeal the Bylaws of the
Company and (e) make a clarifying change described below. The amendments as
summarized in this Proxy Statement will be considered and voted upon at the
Annual Meeting as a single proposal. Copies of the amendments as previously
approved by the Board of Directors are attached to this Proxy Statement as
Exhibits A and B.
 
CLASSIFIED BOARD OF DIRECTORS
 
     The Bylaws currently provide that the authorized number of directors is
eight. Currently all directors are elected to the Board annually for a term of
one year. The proposed amendments would divide the Board of Directors into three
classes: Class 1, Class 2 and Class 3. Classes 1 and 2 would have three
Directors, and Class 3 would have two Directors. Members of all three classes
would be elected at the 1999 Annual Meeting. Directors elected to Class 1 would
serve until the Annual Meeting to be held in 2000, and until their respective
successors are elected and qualified. Directors elected to Classes 2 and 3 would
serve until the Annual Meetings to be held in 2001 and 2002, respectively, and
until their respective successors are elected and qualified. Commencing with the
election of the Class 1 directors in 2000, each class of directors elected at an
Annual Meeting would be elected to three-year terms. Thus, after the initial
implementation period, each class of Directors would be elected every three
years to a three-year term.
 
     In the event of a vacancy on the Board, only a majority of the remaining
Directors can fill the vacancy (unless there are no Directors, in which case the
vacancies can be filled by the stockholders, or unless certain provisions of the
Restated Certificate of Incorporation relating to "Interested Stockholders", as
described below, apply). See "Other Anti-Takeover Defenses." The person elected
to fill the vacancy will be the same class of Director as the person he or she
succeeds and will have the same term. In the event of an increase in the
authorized number of Directors, the additional directorships will be allocated
to the classes of Directors in a manner which will cause the number of Directors
in each class to be as nearly equal as possible. If there is more than one way
to allocate the additional directorships consistent with that rule, then the
directorships will be allocated to the classes whose terms have the earliest
expiration date. No reduction in the authorized number of Directors will have
the effect of removing any Director prior to the expiration of his or her term
of office.
 
     Under Delaware law, where a company's certificate of incorporation or
bylaws provide for a classified board of directors, the stockholders of the
company may only remove a director from the board for cause unless the company's
certificate of incorporation provides otherwise. The Company's Restated
Certificate of Incorporation already provides that individual directors or the
entire board can be removed only for cause, and the proposed amendments will not
change that.
 
     The Restated Certificate of Incorporation provides for an authorized class
of 5,000,000 shares of Preferred Stock which can be issued in one or more series
having such voting and other rights, preferences and privileges as are
determined by the Board of Directors. The authorized number of shares of
Preferred Stock is proposed to be increased to 10,000,000. See "Amendment to
Certificate of Incorporation of the Company to Increase the Authorized Capital
Stock." If at any time the holders of any outstanding shares of any series of
Preferred Stock have voting rights with respect to the election of directors,
the provisions described above will be subject to whatever rights such holders
of Preferred Stock have. This may include the right of the holders of Preferred
Stock to elect one or more additional Directors not included in the classes
described above or to participate in the election of Directors to the classes
described above with the holders of the Common Stock. Whenever the holders of
any such series of Preferred Stock are divested of the right to elect Directors
in accordance with the rights fixed by the Board of Directors, unless the
Directors have otherwise provided, the
 
                                       19
<PAGE>   23
 
terms of office of those Directors or any successors elected to fill vacancies
in those directorships will terminate and the number of Directors of the Company
will be reduced accordingly.
 
     The information concerning the current nominees for election as Directors
at the Annual Meeting and the classes to which they would be elected is set
forth above under the caption "Proposal 1 -- Nomination and Election of
Directors." If the proposal to adopt a classified board is not approved and
implemented, all directors elected at the Meeting will serve for a one-year term
and until their successors are duly elected and qualified.
 
ADVANTAGES OF A CLASSIFIED BOARD OF DIRECTORS
 
     The Board of Directors believes that the adoption of the classified board
provisions is in the best interests of the Company and its stockholders. A
classified board will serve as an obstacle to any hostile attempts to obtain
control of the Company. Without classes of directors a person or entity could
make a tender offer or otherwise acquire a substantial block of shares or
solicit proxies to vote a substantial block of shares and obtain control of the
Company by electing a new majority of the board of directors at an annual
meeting without ever negotiating with the board of directors of the Company. If
carefully planned, such a result could be accomplished in a relatively short
time without affording the board of directors the opportunity to consider other
alternatives.
 
     Having a classified board of directors means that even a majority
stockholder requires two annual meetings to elect a majority of the board. As a
result, instituting a classified Board of Directors may deter certain mergers,
tender offers, proxy contests or other future attempts to acquire control of the
Company that some or a majority of stockholders may deem to be in their best
interests. The Board of Directors believes that having a classified board may
force persons or entities who desire to acquire control of the Company to
negotiate with the Company. In addition, having a classified board could provide
the Board of Directors with more time to evaluate any takeover or control
proposal and the opportunity to consider other alternatives and to negotiate
with other potential acquirers to obtain a fair price for stockholders.
 
     The classified board can also be expected to help lend continuity and
stability to the management of the Company and will assure continuity and
stability in the Board's leadership and policies. At any given time,
approximately two-thirds of the members of the Board of Directors will have had
prior experience as directors of the Company. The Board believes that this will
facilitate long-range planning, strategy and policy.
 
     The amendment to the Company's Restated Certificate of Incorporation is not
being proposed in response to any presently existing unsolicited takeover
attempt or threat. Classified boards of directors are permitted under Delaware
law, are consistent with the rules of the Nasdaq National Market and have been
adopted by numerous other public companies.
 
     The Board of Directors has considered the advantages and possible
disadvantages of this proposal and has unanimously determined that the adoption
of this proposal is in the best interests of the Company and its stockholders.
 
DISADVANTAGES OF A CLASSIFIED BOARD
 
     Because adoption of a classified board may discourage some takeover bids or
block purchases of stock by potential acquirers, stockholders may be deprived of
opportunities to sell some or all of their shares in a tender offer or other
transaction which might involve a purchase price higher than the then-current
market price or may deprive the stockholders of the benefits of a contest
between competing bidders. Moreover, to the extent having a classified board
discourages open market purchases of the Company's stock, stockholders may be
deprived of certain increases in the market price of the Company's stock. Also
having a classified board will make it more difficult for stockholders to change
the Company's Board of Directors at a time when the stockholders consider it
desirable to do so.
 
OTHER ANTI-TAKEOVER DEFENSES
 
     The Company has also adopted a Stockholder Rights Plan which also is
intended to have the effect of discouraging attempts to obtain control of the
Company. Under the Stockholder Rights Plan, the Company's stockholders have the
right to purchase additional shares of Common Stock for an exercise price of
$250 per
 
                                       20
<PAGE>   24
 
share of Common Stock held by them (subject to adjustment), after a person or
entity acquires beneficial ownership of 15% or more of the voting stock of the
Company (subject to certain exceptions). The number of shares that can be
purchased is determined by dividing the exercise price by one-half of the then
market price of the Common Stock. The person or entity acquiring 15% or more of
the voting stock of the Company is not entitled to exercise any such rights. As
a result, the exercise of the rights would have a substantial dilutive effect on
the voting power and equity investment of that person or entity.
 
     If, after a person or entity acquires 15% or more of the voting stock of
the Company (a) the Company is acquired in a merger or other business
combination in which the Company is not the surviving corporation or the Common
Stock is converted into or exchanged for stock or assets of another person or
entity or (b) 50% or more of the Company's assets or earning power is sold or
transferred, the rights become exercisable to purchase shares of the common
stock of the surviving corporation or acquirer at half of its then market price.
Until they become exercisable the rights are not evidenced by any separate
security and trade with the Common Stock. The rights are redeemable at the
option of the Board of Directors for nominal consideration, and the Board has
the right to amend or supplement the Stockholder Rights Plan any time before the
rights become exercisable. After the rights become exercisable, the Board cannot
amend or supplement the Stockholder Rights Plan in a manner that materially and
adversely affects any holder of outstanding rights other than a person or entity
that has acquired beneficial ownership of 15% or more of the outstanding shares
and entities surviving certain business combinations with the Company.
 
     The Stockholder Rights Plan is intended to protect against some of the same
risks as the classified board proposal, but the Stockholder Rights Plan provides
no protection against a proxy solicitation resulting in the election of a new
majority of directors, who could then redeem the rights under the Stockholder
Rights Plan. Having a classified board can result in the need to conduct two
proxy solicitations for two annual meetings to accomplish that result. Also, the
absence of judicial authority on the critical question of what circumstances
require the redemption of the rights under the Stockholder Rights Plan and the
fact that there is little or no experience with the triggering of such plans
makes these plans somewhat unreliable. The proposed amendments to the Company's
Restated Certificate of Incorporation and Bylaws do not affect the Stockholder
Rights Plan.
 
     The Company's Restated Certificate of Incorporation and Bylaws currently
include a number of provisions that may have the effect of discouraging persons
from pursuing non-negotiated takeover attempts. These provisions include a
requirement of a super-majority vote of the stockholders to remove one or more
Directors and to fill a vacancy on the board if a person or entity has acquired
beneficial ownership of 15% or more of the outstanding voting stock of the
Company, directly or indirectly (an "Interested Stockholder"). Persons or
entities that acquired such a 15% beneficial ownership position prior to May 23,
1995, are excluded from the definition of Interested Stockholder under the
Company's Certificate of Incorporation. If an Interested Stockholder exists,
removal of a Director, which must be for cause in any event, requires the vote
of both a majority of the shares entitled to vote on the matter and a majority
of the shares not owned beneficially by the Interested Stockholder. Filling a
vacancy on the Board when there is an Interested Stockholder requires the vote
of either (a) a majority of the Continuing Directors, or (b) the holders of 80%
or more of the outstanding voting shares and a majority of the voting shares not
held by the Interested Stockholder.
 
     Upon the effectiveness of the amendments contemplated by this Proposal, the
definition of "Continuing Director" shall be clarified to mean a Director who is
not affiliated with the Interested Stockholder and who was on the Board on June
30, 1995 or became a Director before the Interested Stockholder acquired
beneficial ownership of 15% or more of the voting shares of the Company or is
the successor to a Continuing Director who was recommended by a majority of
Continuing Directors. The present provision has a misprint referring to a
"Disinterested Stockholder." The Company's Restated Certificate of Incorporation
and Bylaws also prohibit stockholders from taking action by written consent and
calling special meetings of stockholders and impose requirements of advance
notice for the submission of stockholder proposals or Director nominees. The
proposed amendments do not change any of these provisions except for the
clarification in the definition of "Continuing Director" and the requirements
described above that vacancies on the Board can only be filled by the Board and
that a Director elected to fill vacancies be elected to the same Class of
directorship as the person that he or she succeeds. The Company's Restated
Certificate of Incorporation also imposes special voting requirements to amend
the provisions of the Bylaws relating to the authorized number of Directors, the
                                       21
<PAGE>   25
 
annual election of directors and the power of a majority of remaining directors
to fill vacancies on the Board of Directors. These requirements are proposed to
be deleted. See "Elimination of Special Voting Requirements for Amendment of
Bylaws."
 
     In addition to the Stockholder Rights Plan, the Company is subject to
Section 203 of the Delaware General Corporation Law, which restricts certain
transactions and business combinations between a corporation and an Interested
Stockholder for a period of three years from the date the stockholder became an
Interested Stockholder. Persons and entities that acquired a 15% beneficial
interest prior to December 23, 1987 and certain related parties are excluded
from the definition of Interested Stockholder in Section 203. Subject to certain
exceptions, unless the transaction is approved by the board of directors and the
holders of at least 66 2/3% of the outstanding voting stock of the corporation
(excluding shares held by the Interested Stockholder), Section 203 prohibits
significant business transactions such as a merger with, disposition of assets
to or receipt of disproportionate financial benefits by the Interested
Stockholder, or any other transaction that would increase the Interested
Stockholder's proportionate ownership of any class or series of the
corporation's stock. The statutory ban does not apply if, upon consummation of
the transaction in which any person becomes an Interested Stockholder, the
Interested Stockholder owns at least 85% of the outstanding voting stock of the
corporation (excluding shares held by persons who are both directors and
officers or by certain employee stock plans.) Although Section 203 may
discourage a person or entity from acquiring a 15% or more interest in the
Company because of the restriction on subsequent business transactions, it does
not prevent another person or entity from actually getting control of the
Company.
 
RESTRICTIONS ON AMENDMENT
 
     The Company's existing Restated Certificate of Incorporation provides that
the provisions described above under "Other Anti-Takeover Defenses" relating to
the removal of Directors, the filling of vacancies on the Board, the inability
of stockholders to take action without a meeting or to call a special meeting
and the special voting requirements for amendment to the Company's Restated
Certificate of Incorporation, can be amended only by (a) the affirmative vote or
written consent of a majority of the authorized number of Directors and the
holders of a majority of the outstanding shares entitled to vote on the
amendment or (b) an affirmative vote by the holders of 80% of the outstanding
shares. If one or more Interested Stockholders exist, an amendment to such
provisions also requires either (x) the affirmative vote or written consent of a
majority of directors who are Continuing Directors as to all Interested
Stockholders, or (y) an affirmative vote by the holders of 80% of the
outstanding shares. Also, if the amendment is proposed by or on behalf of an
Interested Stockholder by a director who is not a Continuing Director as to all
Interested Stockholders, the affirmative vote of the holders of a majority of
the shares not beneficially owned by the Interested Stockholder is required.
Changes in the provisions of the proposed Restated Certificate of Incorporation
relating to classes of Directors and filling vacancies on the Board would be
subject to the same requirements
 
     The Company is proposing to put the provisions with respect to the
classified board in the Restated Certificate of Incorporation, as opposed to
putting them solely in the Bylaws, because the Restated Certificate cannot be
amended without a vote of the Board of Directors in addition to a vote of the
stockholders. The provisions with respect to the classified board are also being
proposed as an amendment to the Bylaws, which can be amended without Board
action, so that the provisions will be effective immediately upon adoption,
thereby permitting the election of Directors to specific classes at the Annual
Meeting. The proposed Restated Certificate of Incorporation would not become
effective until it is filed with the Delaware Secretary of State, which is not
expected to happen until after the Annual Meeting is adjourned. However, once
the Restated Certificate of Incorporation becomes effective, the classified
board provisions could not be changed without a vote of the Board of Directors.
 
ELIMINATION OF SPECIAL VOTING REQUIREMENTS FOR AMENDMENT OF BYLAWS
 
     Article VI of the Company's Restated Certificate of Incorporation presently
imposes special voting requirements to amend the provisions of the Bylaws
relating to the authorized number of Directors, the requirement that Directors
be elected annually and the power of a majority of the remaining directors to
fill vacancies on the Board. Any amendment to these provisions requires a
special vote of the directors or of stockholders. The required vote by directors
is a majority of the authorized number of directors and, if one or
 
                                       22
<PAGE>   26
 
more Interested Stockholders exist, a majority of the Continuing Directors as to
all Interested Stockholders. The required vote by stockholders is the holders of
a majority of the shares entitled to vote on the matter, but if the amendment is
proposed by or on behalf of an Interested Stockholder or at any time while an
Interested Stockholder exists by a director who is not a Continuing Director as
to all Interested Stockholders, then the affirmative vote of the holders of a
majority of the shares entitled to vote on the matter that are not beneficially
owned by the Interested Stockholder is required.
 
     The proposed amendment to the Company's Restated Certificate of
Incorporation would eliminate these special voting requirements present in
Article VI. With respect to changes in the number of Directors and the annual
election of Directors, upon the effectiveness of the amendment, the Board alone
would have the power to fix the number of Directors from time to time and the
Directors would not be elected annually. As a result, the provisions of the
Bylaws dealing with these subjects will no longer be effective. With respect to
the power of a majority of the remaining directors to fill vacancies on the
Board, such provision will be deleted in Article VI because the proposed
amendment to the Restated Certificate of Incorporation would provide comparable
protection. See "Classified Board of Directors."
 
POWER OF THE BOARD OF DIRECTORS TO FIX THE AUTHORIZED NUMBER OF DIRECTORS
 
     Presently the authorized number of Directors is set forth in the Bylaws of
the Company. Under Delaware law the bylaws of a corporation can be amended by a
vote of the holders of a majority of the outstanding shares entitled to vote on
the matter. As discussed above, the Company's Restated Certificate of
Incorporation imposes special voting requirements to amend the provision of the
Bylaws fixing the number of directors. See "Elimination of Special Voting
Requirements for Amendment of Bylaws."
 
     The proposed amendment to the Restated Certificate of Incorporation would
provide that the authorized number of directors would be fixed by the directors
from time to time. There would be no need to amend the Bylaws, and the
authorized number of directors could not be changed by an amendment to the
Bylaws adopted by the stockholders. The reason for this proposal is to prevent a
person or entity who has acquired a substantial block of Company voting stock or
proxies with respect to a substantial block from evading the protection provided
by the classified Board of Directors by amending the Bylaws to increase the
authorized number of directors to such an extent that the person or entity can
gain control of the Company by electing enough additional directors to fill the
vacancies.
 
POWER TO AMEND BYLAWS
 
     Under Delaware law, the stockholders have the exclusive power to adopt,
amend or repeal bylaws unless that power is also conferred on the board of
directors in the certificate of incorporation. The Company's Restated
Certificate of Incorporation confers that power on the Board of Directors only
with respect to the provisions of the Bylaws relating to the authorized number
of directors, the annual election of directors and the filling of vacancies on
the Board. See "Elimination of Special Voting Requirements for Amendment of
Bylaws." The proposed amendment to the Restated Certificate would extend the
power of the Board to adopt, amend or repeal the Bylaws without any limitation
to particular sections. Such provisions are customary for Delaware corporations
and would not affect the power of the stockholders to also adopt, amend or
repeal Bylaws. Although no amendments to the Bylaws are presently under
consideration by the Board of Directors, it is possible that amendments could be
adopted by the Board to make it more difficult for one or more persons to obtain
control of the Company. The Company already has in place substantial defenses to
such an attempt, and the addition of a classified board of directors provides
further protection. See "Classified Board of Directors" and "Other Anti-Takeover
Defenses."
 
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
 
     The affirmative vote of the holders of a majority of the shares of Common
Stock outstanding, present or represented by proxy and entitled to vote at the
Meeting, is required to approve Proposal 2.
 
                       THE BOARD OF DIRECTORS RECOMMENDS
                     THAT STOCKHOLDERS VOTE FOR PROPOSAL 2.
 
                                       23
<PAGE>   27
 
         PROPOSAL 3 -- AMENDMENT TO CERTIFICATE OF INCORPORATION OF THE
                  COMPANY TO INCREASE AUTHORIZED CAPITAL STOCK
 
     On February 27, 1999, the Board of Directors authorized a two-for-one stock
split of the Company's Common Stock in the form of a stock dividend payable to
stockholders of record at the close of business on April 1, 1999. The Company
had a sufficient number of authorized shares of Common Stock to effect the stock
split. The Board of Directors proposes that stockholders authorize an amendment
of the Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 40,000,000 to 100,000,000 shares and to
increase the number of authorized shares of Preferred Stock from 5,000,000 to
10,000,000 shares. The par value of the Common Stock would remain at $0.01 per
share. The Board of Directors recommends that such increase in the number of
authorized shares of Common and Preferred Stock be approved by the stockholders.
 
     The proposed amendment to the Restated Certificate of Incorporation will be
effected by deleting the introductory paragraph of Article IV of the Company's
Restated Certificate of Incorporation, as amended, and substituting a new
introductory paragraph that reads in full as follows:
 
                                   ARTICLE IV
 
                            AUTHORIZED CAPITAL STOCK
 
     The total number of shares of all classes of stock which the corporation
shall have authority to issue shall be 110,000,000 shares, consisting of
100,000,000 shares of Common Stock of the par value of One Cent ($0.01) per
share and 10,000,000 shares of Preferred Stock of the par value of One Cent
($0.01) per share (the "Preferred Stock").
 
     As of April 1, 1999, there were 28,207,356 shares (as adjusted for the
two-for-one stock split payable to stockholders of record on April 1, 1999) of
Common Stock issued and outstanding (exclusive of treasury shares) and 8,576,500
shares (as adjusted) of Common Stock were reserved for issuance in connection
with all of the Company's stock plans. Adoption of the proposed amendment
provides for an additional 60,000,000 shares of Common Stock and 5,000,000
shares of Preferred Stock for future issuance. This would replenish the
authorized shares available for issuance before the stock split and provide
substantial additional shares of both Common and Preferred Stock for future
issuance. Although these additional shares would provide further flexibility,
there are no present plans for their use
 
     The Board of Directors is of the opinion that the proposed increase in the
number of authorized shares of Common Stock is in the best interest of the
Company and its stockholders. The Board of Directors believes that the Company
should have sufficient authorized but unissued shares for issuance in connection
with stock splits and stock dividends, implementation of employee benefit plans,
offer of shares for cash, mergers and acquisitions, and other proper business
purposes. In many such situations prompt action may be required which would not
permit seeking stockholder approval to authorize additional shares for the
specific transaction on a timely basis. The Board of Directors believes that it
is important to have the flexibility to act promptly in the best interests of
stockholders.
 
     The additional shares of Common and Preferred Stock sought by the amendment
will be available for issuance without further action by stockholders, unless
such action is required by applicable law or the rules of any stock exchange or
system of automated quotations on which the Company's securities may be listed.
Nasdaq National Market System requires specific stockholder approval as a
prerequisite to listing shares in several instances, including an acquisition
where the present or potential issuance of shares could result in an increase of
20% or more in the number of shares of Common Stock outstanding.
 
       THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE
      COMPANY'S RESTATED CERTIFICATE OF INCORPORATION AS DESCRIBED ABOVE.
 
                                       24
<PAGE>   28
 
                 PROPOSAL 4 -- AMENDMENT TO SECOND AMENDED AND
                       RESTATED 1994 STOCK INCENTIVE PLAN
 
     The 1994 Plan is designed to promote the interests of the Company and its
stockholders by providing eligible employees, Directors, consultants and
advisors of the Company and its subsidiaries with a proprietary interest in the
Company and the resulting incentives to continue their efforts on behalf of the
Company.
 
     The Board of Directors, subject to stockholder approval, has amended and
restated the 1994 Plan (a) to increase the maximum number of shares of Common
Stock which may be issued pursuant to the 1994 Plan from 4,500,000 shares to
7,500,000 shares (both amounts give effect to the two-for-one stock split).
 
     The affirmative vote of the holders of a majority of the shares represented
at the meeting and entitled to vote will be required to approve the amendments
to the 1994 Plan. Under applicable Delaware law, in determining whether this
proposal has received the requisite number of affirmative votes, abstentions
will be counted and will have the same effect as a vote against the proposal;
broker non-votes will be disregarded and will have no effect on the outcome of
the vote.
 
     As of April 1, 1999, options to purchase 4,435,836 shares of Common Stock
were outstanding, and not exercised, and up to 676,200 shares of Common Stock
remained available for additional Awards under the 1994 Plan.
 
            THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 4.
 
     The following is a summary of the principal features of the 1994 Plan,
including the amendments proposed for approval in this Proxy Statement.
 
GENERAL
 
     Purpose: The purpose of the 1994 Plan is to enable the Company and its
subsidiaries to attract, retain and motivate their directors, employees,
consultants and advisors by providing for or increasing the proprietary
interests of such persons in the Company, thereby increasing the mutuality of
interests of such persons and the Company's stockholders.
 
     Shares Available Under the Plan: The amendment to the 1994 Plan will
increase the number of shares of Common Stock of the Company issuable under the
1994 Plan by an aggregate of 3,000,000 shares. Currently, the maximum number of
shares of Common Stock issuable under the Plan is 4,500,000. As amended, the
1994 Plan would allow for the issuance of no more than 7,500,000 shares of
Common Stock. The aggregate number of shares issuable in any fiscal year to any
individual is limited to 500,000 shares of Common Stock. The closing price for
the Company's Common Stock on April 1, 1999, on The Nasdaq National Stock
Market, was $51.125 (as adjusted for the two-for-one stock split).
 
     The limits on the number of shares which can be issued under the 1994 Plan
and the number which can be issued to any one individual are subject to
adjustment to reflect certain events of reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, stock dividend, stock split,
reverse stock split or the like. Shares of Common Stock issuable in connection
with an Award (as defined below) that expires before they are exercised, vest or
otherwise are not subject to cancellation, or such shares which are subsequently
reacquired by the Company, will again be subject to issuance pursuant to future
awards under the 1994 Plan.
 
     Administration: The 1994 Plan provides that it is to be administered by the
Board of Directors or a committee thereof. Currently the 1994 Plan is
administered by the Organization and Compensation Committee. The 1994 Plan gives
the Organization and Compensation Committee broad authority to determine the
persons to whom awards will be granted under the 1994 Plan ("Awards"), the time
or times at which Awards granted under the 1994 Plan will expire, the types of
Awards to be granted, the number of shares of Common Stock to be covered by each
Award, and all other terms and conditions for Awards granted under the 1994
Plan. There is no discretion, however, with respect to Awards issued to
Non-Employee Directors of the Company, as described below.
 
                                       25
<PAGE>   29
 
     Participation: Any person, including any Director of the Company, who is a
director, employee, consultant or advisor of the Company or any of its
subsidiaries (a "Grantee") is eligible for the grant of Awards under the 1994
Plan. Only Grantees who are employees of the Company or any of its subsidiaries
are eligible for the grant of stock options which are eligible for favorable tax
treatment under the Internal Revenue Code, as amended (the "Code") (known as
Incentive Stock Options), and Directors who are not employees of the Company
shall be eligible only for Awards granted pursuant to the formula grant
described below.
 
TYPE OF AWARDS
 
     Under the 1994 Plan, Awards may be granted under any type of arrangement
that involves or might involve the issuance of Common Stock, including the
granting of stock options, sales or bonuses of stock or restricted stock, reload
stock options, stock purchase warrants, other rights to acquire stock,
securities convertible into or redeemable for stock, stock appreciation rights,
limited stock appreciation rights, phantom stock, dividend equivalents,
performance units or performance shares. An Award may consist of one such
security or benefit or two or more of them in tandem or in the alternative (the
foregoing collectively, "Awards").
 
     Options: Under the 1994 Plan, Grantees may be issued options which qualify
as Incentive Stock Options ("ISOs") under Section 422 of the Code, or options
not intended to so qualify, so-called non-qualified stock options ("NSOs"). Only
persons who are employees of the Company may be issued ISOs, and any person who
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company may not be granted an ISO at a price less than
110% of the fair market value of the stock or having a term of more than five
years. The exercise price for any option granted may not be less than 85% of the
fair market value of the shares subject to the option at the time of the grant.
The Code provides that ISOs may not be granted at an exercise price less than
the fair market value of the shares on the date of the grant.
 
     The Board or the Committee administering the Plan (currently the
Organization and Compensation Committee) has discretion in setting the terms of
each option, including the expiration, vesting and exercise dates. The option
exercise price may be paid in cash, by tender of shares of Common Stock, by a
combination of cash and stock or by any other means approved by the Organization
and Compensation Committee.
 
     Stock Appreciation Rights: Under the 1994 Plan, the Organization and
Compensation Committee has the power to grant stock appreciation rights ("SARs")
in connection with or independent of related stock options. An SAR entitles the
participant exercising the SAR to receive payment of an amount equal to the
difference between the fair market value of a share of Common Stock on the date
of exercise and the exercise price of the SAR multiplied by the number of shares
as to which the SAR is exercised. The grant of an SAR will be subject to such
terms and conditions as the Organization and Compensation Committee may decide.
The Organization and Compensation Committee may in its discretion settle the
amount to be paid upon exercise of an SAR in cash, shares of Common Stock or a
combination of both. The Organization and Compensation Committee may also
provide that any payment of cash received upon exercise of an SAR be used to
concurrently exercise all or a portion of an option held by a Plan participant.
 
     Restricted Stock Awards: Awards can be granted with regular or restricted
stock in the form of agreements containing such terms, provisions and conditions
that are consistent with the 1994 Plan and have been determined by the
Organization and Compensation Committee which may include, for example, purchase
price, vesting and forfeiture provisions, transferability restrictions,
performance requirements or other terms and conditions. Participants receiving
restricted stock typically are entitled to dividend and voting rights on the
shares prior to the lapsing of the restrictions.
 
     Performance Share Awards: The Organization and Compensation Committee may
grant performance share awards involving the issuance of shares of Common Stock
based upon the appreciation in the fair market value, book value or other
measure of value of the Common Stock, the performance of the Company based on
earnings or cash flow or such other factors as the Organization and Compensation
Committee may determine. Upon the receipt of a performance share award, the
person receiving the Award may enter into an agreement with the Company that
contains the terms, provisions and conditions of the Award, including the number
of shares of Common Stock subject to the Award, the price, if any, to be paid
for the Award and the
                                       26
<PAGE>   30
 
required amount of appreciation in the fair market value, book value or other
measure of value of the Common Stock necessary to cause the shares subject to
the Award to be issued or to cause restrictions on shares already issued
pursuant to the Award to lapse.
 
FEDERAL INCOME TAX TREATMENT OF OPTIONS AND OTHER AWARDS
 
     The following is a brief description of the federal income tax treatment
which will generally apply to Awards (including stock options) granted under the
1994 Plan, based on federal income tax laws in effect on the date hereof. The
exact federal income tax treatment of Awards will depend on the specific nature
of the Award of any such option. This summary does not constitute tax advice, is
not intended to be exhaustive and, among other things, does not describe any
state, local or foreign tax consequences, nor does it describe the tax rules
applicable to persons subject to Section 16(b) of the Exchange Act. Such persons
should consult their own tax advisors with respect to such rules.
 
     Nonqualified Options: The grant of an NSO generally will not result in any
taxable income to the option holder. When an NSO is exercised, the option holder
generally will be taxed at ordinary income tax rates on the excess of the fair
market value of the shares acquired on the date of exercise over the exercise
price. The Company generally will be required to withhold federal income taxes
with respect to such income and, to the extent that the option holder has
ordinary income, the Company will be entitled to a deduction. The amount
included in the option holder's taxable income on the exercise of the NSO will
be added to the exercise price in determining the optionholder's basis in the
acquired shares. Any gain or loss on the subsequent sale or disposition of the
shares generally will be treated as long-term or short-term capital gain or
loss, as the case may be.
 
     Incentive Stock Options: Generally, with ISOs granted to employees under
Section 422 of the Code the optionee is not taxed and the Company is not
entitled to a deduction on the grant or the exercise. However, if the optionee
sells the shares acquired upon the exercise of an ISO ("ISO Shares") at any time
within (a) one year after the date of transfer of ISO Shares to the optionee
pursuant to the exercise of such ISO or (b) two years from the date of grant of
such ISO, then (1) the optionee will recognize capital gain equal to the excess,
if any, of the sales price over the fair market value of the ISO Shares on the
date of exercise, (2) the optionee will recognize ordinary income in an amount
equal to the excess, if any, of the lesser of the sales price or the fair market
value of the ISO Shares on the date of exercise over the exercise price of such
ISO, (3) the optionee will recognize capital loss equal to the excess, if any,
of the exercise price of such ISO over the sales price of the ISO Shares, and
(4) the Company will generally be entitled to a deduction equal to the amount of
ordinary income recognized by the optionee. If the optionee sells the ISO Shares
at any time after the optionee has held the ISO Shares for at least (i) one year
after the date of transfer of the ISO Shares to the optionee pursuant to the
exercise of the ISO and (ii) two years from the date of grant of the ISO, then
the optionee will recognize capital gain or loss equal to the difference between
the sales price and the exercise price of such ISO, and the Company will not be
entitled to any deduction.
 
     Restricted Stock Awards: Awards under the 1994 Plan may include Awards of
restricted stock ("Restricted Stock Awards"). Unless the recipient makes an
election under Section 83(b) of the Code within 30 days after the receipt of the
restricted shares, the recipient generally will not be taxed on the receipt of a
Restricted Stock Award until the restrictions on the shares subject to the Award
expire or are removed. When the restrictions expire or are removed, the
recipient will recognize ordinary income (and the Company will be entitled to a
deduction) in an amount equal to the excess of the fair market value of the
shares at that time over the purchase price. However, if the recipient makes an
election under Section 83(b) of the Code within 30 days of the receipt of
restricted shares, he or she will recognize ordinary income (and the Company
will be entitled to a deduction) equal to the excess of the fair market value of
the shares on the date of receipt over the purchase price. For this purpose, the
fair market value of the shares will be determined without taking into account
the restrictions on the shares.
 
     Stock Appreciation Rights: Awards under the Plan may include Awards of
SARs. On the exercise of an SAR, the amount which the participant is paid,
whether in cash or shares (valued at their then fair market
 
                                       27
<PAGE>   31
 
value), generally will be taxable to the participant as ordinary income (and the
Company will be entitled to a deduction).
 
     Performance Share Awards: Awards under the 1994 Plan may include Awards of
performance shares ("Performance Share Awards"). A recipient of Performance
Share Awards will normally recognize ordinary income (and the Company will be
entitled to a deduction) upon receipt of shares at the end of the performance
period relating to such Performance Share Awards equal to the excess of the fair
market value of the shares at such time over the purchase price, if any.
 
     Golden Parachute Treatment. The 1994 Plan includes a provision that would
accelerate the vesting of options upon a change in ownership or control of the
Company or its assets. In the event of acceleration as a result of such a change
in ownership or control, and depending upon the individual circumstances of the
recipient, certain amounts with respect to such options may constitute "excess
parachute payments" under the "golden parachute" provisions of the Code.
Pursuant to those provisions, a recipient will be subject to a 20% excise tax on
any "excess parachute payments" and the Company will be denied any deduction
with respect to such payment.
 
NON-EMPLOYEE DIRECTOR AWARDS
 
     Under the 1994 Plan, directors who are not employees of the Company
("Non-Employee Directors") are eligible for Awards only issued pursuant to and
in accordance with the formula grant provided for in the 1994 Plan.
 
     Automatic Grants: Pursuant to the terms of the 1994 Plan each Non-Employee
Director is automatically awarded and issued on the date of his or her first
election and without further action, an NSO to purchase 5,000 shares of Common
Stock of the Company (an "Initial Grant"). In addition, on June 1 of each year,
(or if such day is not a trading day for the Common Stock, the first trading day
thereafter), each Non-Employee Director will be automatically awarded and issued
without further action an NSO to purchase 5,000 shares of Common Stock (an
"Annual Grant"), except for a Non-Employee Director who received an Initial
Grant within 12 months of such Annual Grant. In the event an Initial Grant is
awarded within 12 months, the first Annual Grant thereafter will be reduced so
that the number of shares covered by such Award equals 5,000 multiplied by a
fraction, the numerator of which is the number of days elapsed from the date of
such Initial Grant and the denominator of which is 365.
 
     Terms of Option: The purchase price of each automatic grant to Non-Employee
Directors is 100% of the fair market value of the Common Stock on the date of
grant. The fair market value of the share on a given day generally is equal to
the last sale price, regular way, on the business date preceding such day or, in
case no such sale takes place on such day and there were sales within 10 days
within the date for which fair market value is to be determined, the mean
between the lowest and highest sales prices, regular way, on the nearest date,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading or the principal
national securities exchange on which such shares are admitted to trading, or as
last quoted.
 
     The term of each option issued to Non-Employee Directors is for a period of
8 years from the grant date and each option becomes exercisable immediately on
the date of grant to the extent of 25% of the shares covered by such option and
as to an additional 25% of the shares on each anniversary date of the grant.
 
     Effect of Termination of Service and Related Matters: If a Non-Employee
Director ceases serving in his or her capacity as such (a "Terminating Event")
by reason of death or Permanent Disability (as defined in the 1994 Plan), then
the option terminates on the earlier of the date on which the option would
otherwise expire or first anniversary of the date of such terminating event and
becomes exercisable during that period by the Non-Employee Director or his or
her guardian or custodian or other similar representative, if applicable. If the
Terminating Event is for any reason other than death or Permanent Disability,
then the option terminates on the earlier of the date on which the option would
otherwise expire or one month after the date of the Terminating Event. If a
Non-Employee Director dies at any time after a Terminating Event, and prior to
the
 
                                       28
<PAGE>   32
 
last day the option could have been exercised, the option terminates on the
earlier of the date on which such option otherwise would expire or the first
anniversary of the date of such death.
 
CHANGE IN CONTROL
 
     The 1994 Plan includes a provision whereby the vesting, waiting or
installment period contained in any agreement or instrument evidencing any Award
is subject to acceleration. Each outstanding Award automatically becomes
exercisable in full for the aggregate number of Common Shares covered thereby,
or vests unconditionally, upon the occurrence of any of the following events:
(i) the acquisition by a single entity or any "group" (as defined in the
Exchange Act) of outstanding securities of the Company, after which such person,
entity or group owns beneficially 50% or more of the voting securities of the
Company; (ii) a sale, lease or other disposition of all or substantially all of
the Company's assets to any person, entity or group (other than an affiliate of
the Company); or (iii) a reorganization, merger, business combination or
consolidation of the Company as a result of which at least 50% of the voting
securities of the Company or its successor are held, directly or indirectly, by
persons who did not hold at least 50% of the voting securities of the Company
immediately prior to such transaction. "Person," "entity" or "group" does not
include the Company, any of its subsidiaries or affiliates or Mr. Mann or any of
his affiliates or successors. The Organization and Compensation Committee may
also, in its discretion, accelerate the exercisability or vesting of any Award
in accordance with the administration of the 1994 Plan, and may include in any
agreement evidencing any Award granted or awarded after the date of the Annual
Meeting a provision by which such acceleration does not apply.
 
AMENDMENT AND TERMINATION; EFFECTIVENESS OF AMENDMENTS
 
     The 1994 Plan may be terminated at any time by the Board, provided that no
such amendment or termination may deprive the recipient of any Award previously
granted without the consent of such recipient and no such amendment may increase
the aggregate number of Common Shares that may be issued upon exercise of ISOs
granted under the 1994 Plan. Certain amendments to the 1994 Plan must be
approved by the stockholders of the Company within 12 months after the adoption
of such amendment by the Board.
 
     The amendment which is the subject of this proposal shall become effective
at the Annual Meeting upon approval by the holders of a majority of the Common
Stock present, either by person or by proxy.
 
                    PROPOSAL 5 -- RATIFICATION OF SELECTION
                       OF INDEPENDENT PUBLIC ACCOUNTANTS
 
     Upon recommendation of the Audit Committee, the Board of Directors has
selected Deloitte & Touche LLP to audit the consolidated financial statements of
the Company and its subsidiaries for the fiscal year ending December 31, 1999.
Deloitte & Touche LLP served in this capacity for the year ending January 1,
1999. Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting and will be available to respond to appropriate questions of
stockholders and to make a statement if they desire.
 
     The Board of Directors is submitting the approval of Deloitte & Touche LLP
to stockholders as a matter of good corporate practice, although it is not
required to do so. Should the stockholders fail to provide such ratification,
the Board of Directors will reconsider its approval of Deloitte & Touche LLP as
the Company's independent public accountants for the year ending December 31,
1999. Even if the selection is ratified, the Board of Directors, in its
discretion, may direct the appointment of a new independent accounting firm at
any time during the fiscal year if the Board of Directors feels that such a
change would be in the best interests of the Company and its stockholders.
 
            THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 5.
 
                                       29
<PAGE>   33
 
                   REQUIREMENTS AND PROCEDURES FOR SUBMISSION
                       OF PROXY PROPOSALS AND NOMINATIONS
                          OF DIRECTORS BY STOCKHOLDERS
 
     Nominations for the Board of Directors: The Company expects to hold its
2000 Annual Meeting on May 18, 2000, although the Company retains the right to
change this date, as it may determine. The Company's Bylaws provide that written
notice of proposed stockholder nominations for the election of directors at the
2000 Annual Meeting of Stockholders must be received at the principal executive
offices of the Company not less than 90 days nor more than 120 days prior to the
meeting, or between January 19 and February 18, 2000, as currently scheduled.
Notice to the Company from the stockholder who proposes to nominate a person for
election as a director must satisfy the requirements of the Securities and
Exchange Commission and the Company's Bylaws. Stockholders wishing to nominate
persons should contact the Company's Secretary at 12744 San Fernando Road,
Sylmar, California 91342.
 
     Proposals: Any stockholder who intends to present a proposal to be included
in the Company's Proxy materials to be considered for action at the 2000 Annual
Meeting of Stockholders must satisfy the requirements of the Securities and
Exchange Commission, and the proposal must be received by the Secretary of the
Company on or before December 21, 1999, for review and consideration for
inclusion in the Company's Proxy Statement and Proxy Card relating to that
meeting.
 
     The Chairman of the Annual Meeting may decline to allow the transaction of
any business or the consideration of any nomination which was not properly
presented in accordance with these requirements. The requirements with respect
to nominations of persons for director do not affect the deadline for submitting
stockholder proposals for inclusion in the proxy statement, nor do they apply to
questions a stockholder may wish to ask the meeting. If the Company changes the
date of the 2000 Annual Meeting of Stockholders, stockholders will be notified
in accordance with the Company's Bylaws.
 
                                 OTHER MATTERS
 
     The Board of Directors knows of no other business that will be presented
for consideration at the Annual Meeting. If other matters are properly brought
before the meeting, however, it is the intention of the persons named in the
accompanying Proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
 
                                          By order of the Board of Directors,
                                          LOGO
                                          Eric S. Kentor
                                          Senior Vice President, General Counsel
                                          and Secretary
 
April 19, 1999
 
                                       30
<PAGE>   34
 
                                                                       EXHIBIT A
 
                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                                  MINIMED INC.
 
     MiniMed Inc., a corporation organized and existing under the laws of the
State or Delaware, hereby certifies as follows:
 
          1. The name of the corporation is MiniMed Inc. MiniMed Inc. was
     originally incorporated under the same name and the original Certificate of
     Incorporation of the corporation was filed with the Secretary of State of
     the State of Delaware on January 22, 1993.
 
          2. Pursuant to Sections 242 and 245 of the General Corporation Law of
     the State of Delaware, this Restated Certificate of Incorporation restates
     and integrates and further amends the provisions of the Certificate of
     Incorporation of this corporation.
 
          3. This Restated Certificate of Incorporation was duly adopted in
     accordance with Sections 242 and 245 of the General Corporation Law of the
     State of Delaware.
 
          4. The text of the Restated Certificate of Incorporation is hereby
     restated and further amended to read in its entirety as follows:
 
                                   ARTICLE I
 
                              NAME OF CORPORATION
 
                        The name of this corporation is
                                  MiniMed Inc.
 
                                   ARTICLE II
 
                               REGISTERED OFFICE
 
     The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, in the City or Wilmington, County of New Castle,
and the name of its registered agent at that address is Corporation Service
Company.
 
                                  ARTICLE III
 
                                    PURPOSE
 
     The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
 
                                   ARTICLE IV
 
                            AUTHORIZED CAPITAL STOCK
 
     The total number of shares of all classes of stock which the corporation
shall have the authority to issue shall be 110,000,000 shares, consisting of
100,000,000 shares of Common Stock, with a par value of one cent ($.01) per
share and 10,000,000 shares of Preferred Stock, with a par value of $.01 per
share (the "Preferred Stock").
 
     The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is expressly authorized to fix, by resolution or
resolutions providing for the issue of any series of Preferred Stock the number
of shares included in such series and the voting powers, designations,
preferences and relative participating optional or other rights, if any, of such
series, and the qualifications, limitations or restrictions
 
                                       A-1
<PAGE>   35
 
thereof and, except as otherwise provided in respect of any such series, to
increase or decrease the number of shares of any such series (but not below the
number of shares thereof then outstanding). In case the number of shares of any
such series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution or
resolutions originally fixing the number of shares of such series. The number of
authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the stock of the corporation entitled to vote
irrespective of Section 242 of the General Corporation Law or any successor
provision requiring that such an increase or decrease be voted upon by the
holders of the Preferred Stock voting as a separate class.
 
                                   ARTICLE V
 
                                  INCORPORATOR
 
     The name and mailing address of the incorporator of the corporation is:
 
                                 Alfred E. Mann
                                  MiniMed Inc.
                            12744 San Fernando Road
                            Sylmar, California 91342
 
                                   ARTICLE VI
 
                          BOARD POWER REGARDING BYLAWS
 
     In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware, the Board of Directors of the corporation is expressly
authorized to make, alter and repeal the bylaws of the corporation, subject to
the power of the stockholders of the corporation to alter or repeal any bylaw
whether adopted by them or otherwise.
 
                                  ARTICLE VII
 
                                   DIRECTORS
 
     SECTION 7.01  Definitions. For purposes of this Restated Certificate of
Incorporation:
 
          (a) "Continuing Director" means as to any Interested Stockholder, any
     member of the Board of Directors of the corporation who (i) is unaffiliated
     with and is not the Interested Stockholder and (ii) was a member of the
     Board of Directors of the corporation prior to June 30, 1995 or thereafter
     became a member of the Board prior to the time that the Interested
     Stockholder became an Interested Stockholder, and any successor of a
     Continuing Director who is recommended to succeed a Continuing Director by
     a majority of the Continuing Directors then on the Board.
 
          (b) "Disinterested Shares" means, as to any Interested Stockholder,
     shares of Voting Stock, Owned Beneficially and of record by stockholders
     other than such Interested Stockholder.
 
          (c) "Interested Stockholder" shall have the meaning set forth in
     Section 2 03 of the Delaware General Corporation Law (as such section
     exists on the date hereof) but shall not include any person who Owned
     Beneficially shares of Common Stock in excess of the 15% limitation set
     forth therein as of May 23, 1995.
 
          (d) "Owned Beneficially" refers to the ownership of shares set forth
     in Rule 13d-3 of the Securities Act of 1934 as in effect on May 23, 1995.
 
          (e) "Voting Stock" means all outstanding shares of capital stock of
     the corporation entitled to vote generally in the election of directors of
     the corporation, and each reference to a percentage or portion of
 
                                       A-2
<PAGE>   36
 
     shares of Voting Stock shall refer to such percentage or portion of the
     votes entitled to be cast by such shares."
 
     SECTION 7.02  Number; Election and Terms. Except as otherwise provided for
or fixed pursuant to the provisions of Article IV of this Restated Certificate
of Incorporation relating to the rights of the holders of any series of
Preferred Stock to elect additional directors, the total number of directors
constituting the entire Board shall be fixed from time by the Board of
Directors. Directors need not be stockholders. Other than with respect to those
directors elected by the holders of any series of Preferred Stock provided for
or fixed pursuant to the provisions of Article IV hereof, there shall be three
classes of directors (each, a "Class"), as equal in number as possible, known as
Class 1, Class 2 and Class 3. The terms of office for the initial Class 1, Class
2 and Class 3 directors shall be as follows: the term of office of the initial
Class 1 directors will expire at the 2000 annual meeting of stockholders; the
term of office of the initial Class 2 directors will expire at the 2001 annual
meeting of stockholders; and the term of office of the initial Class 3 directors
will expire at the 2002 annual meeting of stockholders. At each annual meeting
of stockholders following such initial classification and election, each
director elected to succeed those directors whose terms expire shall be elected
for a term of office to expire at the third succeeding annual meeting of
stockholders after his election unless, by intervening changes in the authorized
number of directors, the Board shall designate the vacant directorship as a
directorship of another class in order more nearly to achieve equality in the
number of directors among classes. Notwithstanding the foregoing, each of the
directors shall hold office until his successor shall have been duly elected and
shall qualify or until he shall die, resign or have been removed in the manner
hereafter provided.
 
     SECTION 7.03  Removal. Subject to the rights of the holders of any
Preferred Stock then outstanding, any director, or the entire board, may be
removed from office at any time, but only (1) for cause and (2) by the
affirmative vote of the holders of the majority of the Voting Stock; provided,
however, that if a proposal to remove a director is made by or on behalf of an
Interested Stockholder or by a director who is not a Continuing Director as to
an Interested Stockholder, then in addition to (1) and (2) above, such removal
shall require the affirmative vote of the holders of a majority of the
Disinterested Shares.
 
     SECTION 7.04  Vacancies. Vacancies resulting from the death, resignation,
removal, increase in the number of directors, or any other cause shall be filled
only by a majority vote of the remaining directors, although less than a quorum
(unless there are no directors, in which case vacancies will be filled by the
stockholders) in accordance with the rule that each Class of directors shall be
as nearly equal in number of directors as possible, provided, however, that if
one or more Interested Stockholders then exists, vacancies resulting from the
death, resignation or removal of a Continuing Director can only be filled by the
vote of a majority of the remaining Continuing Directors or, if there are no
Continuing Directors, by (i) the affirmative vote of the holders of not less
than eighty percent (80%) of the outstanding shares of Voting Stock and (ii) the
affirmative vote of the holders of a majority of the Disinterested Shares as to
all Interested Stockholders. Notwithstanding the foregoing, in the event of any
change in the authorized number of directors, each director then continuing to
serve as such will nevertheless continue as a director of the Class of which he
or she is a member until the expiration of his current term or his earlier
death, resignation or removal. If any newly created directorship or vacancy of
the Board of Directors, consistent with the rule that the three Classes shall be
as nearly equal in number as possible, may be allocated to one or two or more
Classes, the Board of Directors shall allocate it to that of the available
Classes whose term of office is due to expire at the earliest date following
such allocation. When the Board of Directors fills a vacancy, the director
chosen to fill that vacancy shall be of the same Class as the director he or she
succeeds and shall hold office until such director's successor shall have been
elected and qualified or until such director shall die, resign or shall been
removed. No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
 
     SECTION 7.05  Directors Elected by Preferred Stockholders. During any
period when the holders of the Preferred Stock have the right to elect
additional directors as provided for or fixed pursuant to the provisions of
Article IV hereof, then upon commencement and for the duration of the period
during which such right continues: (i) the then otherwise total authorized
number of directors of the corporation shall automatically be increased by such
specified number of directors, and the holders of such Preferred Stock shall be
entitled to elect the additional directors so provided for or fixed pursuant to
said provisions, and (ii) each such additional
                                       A-3
<PAGE>   37
 
director shall serve until such director's successor shall have been duly
elected and qualified, or until such director's right to hold such office
terminates pursuant to said provisions, whichever occurs earlier, subject to his
or her earlier death disqualification, resignation or removal. Except as
otherwise provided by the Board of Directors in the resolution or resolutions
establishing such series, whenever the holders of any series of Preferred Stock
having such right to elect additional directors are divested of such right
pursuant to the provisions of such stock, the terms of office of all such
additional directors elected by the holders of such stock, or elected to fill
any vacancies resulting from the death, resignation, disqualification or removal
of such additional directors shall forthwith terminate and the total and
authorized number of directors of the corporation shall be reduced accordingly.
 
     SECTION 7.06  Absence of Requirements of Ballots. The election of directors
need not be by written ballot unless the bylaws of the corporation shall so
provide.
 
                                  ARTICLE VIII
 
                        LIMITATION OF DIRECTOR LIABILITY
 
     To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or may hereafter be amended, a director of the corporation shall
not be liable to the Corporation or its stockholders for monetary damage for
breach of fiduciary duty as a director. If the Delaware General Corporation Law
is amended after the date of the filing of this Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the Liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended from time to time. No repeal
or modification of this Article VIII by the stockholders shall adversely affect
any right or protection of a director of the corporation existing by virtue of
this Article VIII in respect of any act or omission prior to such repeal or
modification.
 
                                   ARTICLE IX
 
                                CORPORATE POWER
 
     The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Restated Certificate of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation.
 
                                   ARTICLE X
 
                       CREDITOR COMPROMISE OR ARRANGEMENT
 
     Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions of
Section 291 of Title 8 of the Delaware Code, or on the application of trustees
in dissolution or of any receiver or receivers appointed for this corporation
under the provisions of Section 279 of Title 8 of the Delaware Code, order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
 
                                       A-4
<PAGE>   38
 
                                   ARTICLE XI
 
                                STOCKHOLDER VOTE
 
     Any election or other action by stockholders of this Corporation must be
effected at an annual or special meeting of stockholders and may not be effected
by written consent without a meeting.
 
                                  ARTICLE XII
 
                                SPECIAL MEETINGS
 
     Special meetings of the stockholders of the Corporation for any purpose or
purposes may be called at any time by the Board or by a majority of the members
of the Board; provided, however, that where a proposal requiring stockholder
approval is made, at any time that one or more Interested Stockholders exist, by
a director who is not a Continuing Director as to all Interested Stockholders,
then the affirmative vote of a majority of the Continuing Directors shall also
be required to call a special meeting of the stockholders for the purpose of
considering such proposal or obtaining such approval. Such special meeting may
not be called by any other person or persons or in any other manner.
 
                                  ARTICLE XIII
 
              AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION
 
     In addition to any affirmative vote required by applicable law and any
voting rights granted to or held by holders of Preferred Stock, any alteration,
amendment, repeal or rescission (any "Change") of any provision of this Restated
Certificate of Incorporation must be approved by a majority of the directors of
the corporation then in office and by the affirmative vote of the holders of a
majority of the outstanding shares of Voting Stock of the corporation; provided,
however, that if any such Change relates to Articles VI, VII, XI or XII hereof
or to this Article XIII, such Change must also be approved either (i) by a
majority of the authorized number of directors and, if one or more Interested
Stockholders then exist, by a majority of the directors who are Continuing
Directors with respect to all Interested Stockholders or (ii) by the affirmative
vote of the holders of not less than eighty percent (80%) of the outstanding
shares of Voting Stock of the corporation and, if the change is proposed by or
on behalf of an Interested Stockholder or, at any time that one or more
Interested Stockholders exist, by a director who is not a Continuing Director as
to all Interested Stockholders, by the affirmative vote of not less than a
majority of the Disinterested Shares.
 
     Subject to the foregoing the corporation reserves the right to amend,
alter, repeal or rescind any provision contained in this Restated Certificate of
Incorporation in the manner now or hereafter prescribed by law.
 
     THIS RESTATED CERTIFICATE OF INCORPORATION has been signed this
               day of                1999.
 
                                          MINIMED INC.
 
                                          By:
 
                                            ------------------------------------
                                              Alfred E. Mann, Chairman
                                              of the Board of Directors
 
                                       A-5
<PAGE>   39
 
                                                                       EXHIBIT B
 
                                BYLAW AMENDMENTS
 
     1. Section 3.02 is hereby amended and restated in its entirety to read as
follows:
 
          "SECTION 3.02  Number; Election and Terms. Except as otherwise
     provided for or fixed pursuant to the provisions of Article IV of the
     Restated Certificate of Incorporation of the Corporation and until
     otherwise fixed by the Board of Directors pursuant to the Restated
     Certificate of Incorporation, the Board of Directors shall consist of eight
     (8) persons. Directors need not be stockholders. Other than with respect to
     those directors elected by the holders of any series of Preferred Stock
     provided for or fixed pursuant to the provisions of Article IV of the
     Restated Certificate of Incorporation, there shall be three classes of
     directors (each, a "Class"), as equal in number as possible, known as Class
     1, Class 2 and Class 3. The terms of office for the initial Class 1, Class
     2 and Class 3 directors shall be as follows: the term of office of the
     intitial Class 1 directors will expire at the 2000 annual meeting of
     stockholders; the term of office of the initial Class 2 directors will
     expire at the 2001 annual meeting of stockholders; and the term of office
     of the initial Class 3 directors will expire at the 2002 annual meeting of
     stockholders. At each annual meeting of stockholders following such initial
     classification and election, each director elected to succeed those
     directors whose terms expire shall be elected for a term of office to
     expire at the third succeeding annual meeting of stockholders after his
     election unless, by intervening changes in the authorized number of
     directors, the Board shall designate the vacant directorship as a
     directorship of another Class in order more nearly to achieve equality in
     the number of directors among Classes. Notwithstanding the foregoing, each
     of the directors shall hold office until his successor shall have been duly
     elected and shall qualify or until he shall die, resign or have been
     removed in the manner hereafter provided.
 
     2. Section 3.03 is amended and restated in its entirety to read as follows:
 
        "SECTION 3.03  Intentionally Omitted."
 
     3. Section 3.05 is hereby amended and restated in its entirety to read as
follows:
 
          "SECTION 3.05  Vacancies. Vacancies resulting from the death,
     resignation, removal, an increase in the number of directors, or any other
     cause, shall be filled only by a majority vote of the remaining directors,
     although less than a quorum (unless there are no directors, in which case
     vacancies will be filled by the stockholders) and in accordance with the
     rule that each Class of directors shall be as nearly equal in number of
     directors as possible, provided, however, that if one or more Interested
     Stockholders then exists, vacancies resulting from the death, resignation
     or removal of a Continuing Director can only be filled by the vote of a
     majority of the remaining Continuing Directors or, if there are no
     Continuing Directors, by (i) the affirmative vote of the holders of not
     less than eighty percent (80%) of the outstanding shares of Voting Stock
     and (ii) the affirmataive vote of the holders of a majority of the
     Disinterested Shares as to all Interested Stockholders. (All of the
     foregoing capitalized terms shall have the meanings ascribed to them in the
     Restated Certificate of Incorporation). Notwithstanding the foregoing, in
     the event of any change in the authorized number of directors, each
     director then continuing to serve as such will nevertheless continue as a
     director of the Class of which he is a member until the expiration of his
     current term or his earlier death, resignation or removal. If any newly
     created directorship or vacancy on the Board of Directors, consistent with
     the rule that the three Classes shall be as nearly equal in number as
     possible, may be allocated to one or two or more Classes, the Board of
     Directors shall allocate it to that of the available Classes whose term of
     office is due to expire at the earliest date following such allocation.
     When the Board of Directors fills a vacancy, the director chosen to fill
     that vacancy shall be of the same Class as the director he or she succeeds
     and shall hold office until such director's successor shall have been
     elected and qualified or until such director shall resign or shall been
     removed. No reduction of the authorized number of directors shall have the
     effect of removing any director prior to the expiration of such director's
     term of office."
 
                                       B-1
<PAGE>   40
PROXY                                                                     PROXY


                                  MINIMED INC.
                            12744 SAN FERNANDO ROAD
                            SYLMAR, CALIFORNIA 91342

           PROXY FOR THE MAY 20, 1999 ANNUAL MEETING OF STOCKHOLDERS
       THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF MINIMED INC.


        The undersigned stockholder of MiniMed inc. ("MiniMed") hereby appoints 
Alfred E. Mann and Eric S. Kentor, and each of them, the lawful proxies of the 
undersigned, each with the power of substitution, to vote as designated below 
all the shares of Common Stock of MiniMed held of record by the undersigned on 
April 1, 1999, and all shares of Common Stock to be issued to the undersigned 
in the two-for-one stock split payable to holders of record at the close of 
business on April 1, 1999, at the Annual Meeting of Stockholders to be held on 
May 20, 1999 or any and all adjournments or postponements thereof.

        IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR EACH 
OF THE NOMINEES FOR DIRECTOR, FOR EACH OF THE OTHER PROPOSALS, AND IN THE 
DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTER THAT MAY PROPERLY COME 
BEFORE THE ANNUAL MEETING OF STOCKHOLDERS.


               PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
                          USING THE ENCLOSED ENVELOPE.


                 (Continued and to be signed on reverse side.)

- --------------------------------------------------------------------------------
<PAGE>   41
                                        
                                  MINIMED INC.
   PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]    
                                                                        
<TABLE>
<S>                            <C>             <C>  <C>       <C>       <C>                                <C>   <C>        <C>
1. Election of Directors                                                2. Amendment to Certificate of     For   Against    Abstain
   Nominees: D. Chernof, M.D.  D.H. MacCallum  For  Withhold  For All      Incorporation and Bylaws to     [ ]     [ ]        [ ]
             C.K. Davis        A.E. Menn       All    All     Except       Implement Classified Board
             W.R. Grant        T.R. Testman    [ ]    [ ]       [ ]        Provisions
             T.H. Gregg        J.C. Villforth
                                                                        3. Amendment to Certificate        For   Against    Abstain
                                                                           of Incorporation to Increase    [ ]     [ ]        [ ]
                                                                           Authorized Capital Stock.
- -------------------------------------------------
(Except nominee(s) written above)
                                                                        4. Amendment to Second Amended     For   Against    Abstain
If Proposal 2 is adopted, this Proxy will be                               and Restated 1994 Stock         [ ]     [ ]        [ ]
voted for the election of Dr. Chernof, Mr. Davis                           Incentive Plan.
and Mr. Villforth as Class 1 directors; Messrs.
Grant, MacCallum and Testman as Class 2 directors;                      5. Ratification of Deloitte        For   Against    Abstain
and Messrs. Mann and Gregg as Class 3 directors.                           & Touche LLP as Auditors.       [ ]     [ ]        [ ]



        The number of shares indicated on the face                      ----------------------------------------------
of this proxy, is NOT adjusted to reflect the                           Please sign as shares are owned, and date this 
two-for-one stock split payable to holders of                           proxy. If a joint account, each joint owner must 
record at the close of business on April 1, 1999,                       sign. If signing for a corporation or partnership 
but the number of shares to be voted pursuant to                        or as agent, attorney or fiduciary, indicate the
this proxy includes the shares issued in such                           capacity in which you are signing.
stock split. All references to shares of the Company's
Common Stock in the accompanying Proxy Statement ARE
adjusted to reflect such stock split.
- -----------------------------------------------------------------------------------------------------------------------------------
                                                    FOLD AND DETACH HERE

</TABLE>
                                        
                            YOUR VOTE IS IMPORTANT.
                                        
               PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
                          USING THE ENCLOSED ENVELOPE.






































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