<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Blue Wave Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Charles D. Brockenbush
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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state how it was determined.
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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Notes:
<PAGE>
BLUE WAVE SYSTEMS INC.
2410 Luna Road
Carrollton, Texas 75006
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 16, 1999
To the holders of common stock of
Blue Wave Systems Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Blue Wave
Systems Inc. (the "Company") will be held at the offices of the Company, 2410
Luna Road, Carrollton, Texas, on November 16, 1999, at 10:00 a.m., local time,
for the following purposes:
(a) To elect five directors of the Company;
(b) To consider and vote upon a proposed amendment to the Blue Wave
Systems Inc.'s Directors' Stock Option Plan to increase the number of
shares of common stock issuable upon exercise of stock options under the
plan from 75,000 shares to 150,000 shares; and
(c) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on October 7, 1999 are
entitled to notice of, and to vote at, the meeting or any adjournment thereof.
Whether or not you plan to attend the Annual Meeting and regardless of the
number of shares you own, please date, sign and return the enclosed proxy card
in the enclosed envelope (which requires no postage if mailed in the United
States).
By Order of the Board of Directors
Toya Martin
Secretary
Carrollton, Texas
October 15, 1999
<PAGE>
BLUE WAVE SYSTEMS INC.
2410 Luna Road
Carrollton, Texas 75006
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 16, 1999
This Proxy Statement is furnished to stockholders of Blue Wave Systems
Inc., a Delaware corporation (the "Company" or "Blue Wave"), in connection with
the solicitation of proxies by the Board of Directors of the Company for use at
the Annual Meeting of Stockholders to be held on November 16, 1999, and at any
and all adjournments or postponements thereof. Proxies in the form enclosed
will be voted at the meeting, if properly executed, returned to the Company
prior to the meeting and not revoked. The proxy may be revoked at any time
before it is voted by giving written notice to the Secretary of the Company.
This Proxy Statement and accompanying form of proxy are being mailed to the
Company's stockholders on or about October 15, 1999. The Company's Annual
Report, covering the Company's fiscal year ended June 30, 1999, is enclosed
herewith but does not form any part of the materials for solicitation of
proxies.
ACTION TO BE TAKEN AT THE MEETING
Only holders of record of common stock at the close of business on October
7, 1999 (the "Record Date") are entitled to notice of, and to vote at, the
Annual Meeting. At the close of business on the Record Date, the Company had
outstanding, and entitled to vote at the Annual Meeting, approximately
14,358,000 shares of common stock. The presence, either in person or by
properly executed proxy, of the holders of record of a majority of the common
stock outstanding on the Record Date is necessary to constitute a quorum at the
Annual Meeting.
At the Annual Meeting, holders of the Company's common stock will consider
and vote for the election as directors of the Company John R. Forrest, John L.
Rynearson, Rob N. Shaddock, Sam K. Smith and Simon Yates, and to approve an
amendment to the Blue Wave Systems Inc.'s Directors' Stock Option Plan (the
"Directors' Plan") to increase the number of shares of common stock issuable
upon the exercise of stock options under the plan from 75,000 to 150,000 shares.
Should any nominee become unable or unwilling to accept nomination or election,
the proxy holders may vote the proxies for the election in his stead of any
other person the Board of Directors may recommend. Each nominee has expressed
his intention to serve the entire term for which election is sought.
<PAGE>
Holders of record of common stock are entitled to one vote per share. The
election as a director of each nominee requires the affirmative vote of the
holders of record of a plurality of the outstanding voting power of the shares
of common stock represented, in person or by proxy, at the Annual Meeting. The
proposed amendment to the Directors' Plan requires the affirmative vote of the
holders of record of a majority of shares of common stock represented, in person
or by proxy, at the Annual Meeting.
The accompanying proxy, unless the stockholder otherwise specifies in the
proxy, will be voted (i) for the election as directors of the Company of the
five nominees set forth above, (ii) for the proposed amendment to the Directors'
Plan and (iii) at the discretion of the proxy holders on any other matter that
may properly come before the meeting or any adjournment thereof. Where
stockholders have appropriately specified how their proxies are to be voted,
they will be voted accordingly. Broker non-votes will not count for or against
the matters to be voted on at the Annual Meeting.
If any other matter or business is brought before the meeting, the proxy
holders may vote the proxies in their discretion. The directors do not know of
any such other matter or business.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of September 30, 1999 for (i) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of common stock, (ii) each director of the Company, (iii)
each of the current executive officers of the Company named in the table under
"Summary of Executive Compensation" below, and (iv) all of the directors and
officers of the Company as a group. Except pursuant to applicable community
property laws and except as otherwise indicated, each stockholder identified in
the table possesses sole voting and investment power with respect to its or his
shares.
<TABLE>
<CAPTION>
Shares Beneficially Owned (1)
-----------------------------
Name Number Percent
- ---- ------ -------
<S> <C> <C>
Directors and Named Executive Officers:
Simon Yates (2) 2,567,652 17.8%
Rob N. Shaddock (3) 694,416 4.8
John L. Rynearson (4) 427,000 3.0
Sam K. Smith (5) 83,500 *
John R. Forrest 18,926 *
Kevin Parslow (6) 452,816 3.1
Julian S. Jenkins (7) 140,865 1.0
Charles D. Brockenbush (8) 53,050 *
All directors and officers as a group (9 individuals) 4,317,847 28.5
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
More than 5% Stockholders:
Special Situations Funds (9) 2,696,602 17.6
Boston Holdings Limited (2) 1,903,616 13.3
Heartland Advisors, Inc. (10) 1,736,800 12.1
Dr. G. M. Duck (11) 1,672,085 11.6
David J. Quarmby (12) 1,479,126 10.3
</TABLE>
________________________
* Less than one percent.
(1) Includes shares issuable upon exercise of stock options which will be
vested prior to December 1, 1999.
(2) The 1,903,616 shares for which Boston Holdings Limited is listed as the
beneficial owner are held under a voting trust agreement, pursuant to which
Mr. Yates is the trustee. These shares are included in the total shares
owned by Mr. Yates. Mr. Yates disclaims beneficial ownership of such
shares. The address of Boston Holdings Limited is 39 Victoria Street,
London SW1H OED, England. The total for Mr. Yates also includes 93,784
shares of common stock issuable upon the exercise of options exercisable on
December 1, 1999.
(3) Includes (i) 82,001 shares owned by Mr. Shaddock's spouse; (ii) 98,038
shares held in trust for the benefit of Mr. Shaddock; and (iii) 52,520
shares held as one of the two trustees of a trust for the benefit of Mr.
Kevin Parslow. Also includes 93,784 shares of common stock issuable upon
the exercise of options exercisable on December 1, 1999.
(4) Includes 85,000 shares of common stock issuable upon the exercise of
options exercisable on December 1, 1999.
(5) Includes 59,500 shares of common stock issuable upon the exercise of
options exercisable on December 1, 1999.
(6) Includes (i) 52,520 shares held in trust for the benefit of Mr. Parslow;
(ii) 98,038 held in trust for the benefit of Mr. Shaddock; and (iii)
253,996 shares of common stock issuable upon the exercise of options
exercisable on December 1, 1999.
(7) Consists totally of shares of common stock issuable upon the exercise of
options exercisable on December 1, 1999.
(8) Includes 46,250 shares of common stock issuable upon the exercise of
options exercisable on December 1, 1999.
(9) Based on information as of August 24, 1999, as reported on Schedule 13G
filed jointly by Special Situations Private Equity Fund, L.P. , M. G.
Advisers L.L.C., certain related funds and related individuals. The shares
indicated include 1,000,002 warrants exercisable for common stock. The
address of the Special Situations Private Equity Fund and the related funds
is 153 East 53rd Street, 51st Floor, New York, NY 10022.
(10) Based on information as of June 30, 1999, as reported on Schedule 13F. The
shares of common stock indicated are held in investment advisory accounts.
As a result, various persons have the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, the
securities. The address of Heartland Advisors, Inc. is 790 North Milwaukee
Street, Milwaukee, Wisconsin 53202.
(11) The address of Dr. Duck is St. Anne's House, St. Anne's Lane, Sutton
Bonington, Loughborough, Leicestershire LE12 5NJ, England. Includes 83,465
shares held by Dr. Duck as trustee for the G. M. Duck Children's Settlement
Trust and 101,445 shares beneficially owned by his spouse.
(12) The address of Mr. Quarmby is 16 Mayfield Terrace, Edinburgh EH9 1SA,
Scotland. Includes 123,021 shares beneficially owned by his spouse, of
which 94,632 shares are held in trust for the Quarmby Family Settlement
Account.
3
<PAGE>
ELECTION OF DIRECTORS
A brief description of each director of the Company is provided below.
Directors hold office until the next annual meeting of the stockholders or until
their successors are elected and qualified. References to "Mizar" and "LSI"
mean Mizar, Inc. and Loughborough Sound Images Ltd., respectively, which
combined (the "Combination") to form the Company in April 1998.
Simon Yates, 36, became Chief Executive Officer and a director of the
Company on the date of the Combination, and prior to the Combination, had served
as Managing Director of LSI since 1995. Mr. Yates joined LSI in 1984 and became
a board member in 1988. Mr. Yates was appointed LSI's Technical Director in
1990 and Director of PC Products in 1992. Mr. Yates is currently on medical
leave and is expected to return near the end of calendar 1999.
Rob N. Shaddock, 41, joined LSI in October 1992 as Technical Director, when
LSI merged with Data Beta Ltd. He served as Marketing Director of LSI from 1997
until the time of the Combination. In April 1998, he was named Executive Vice
President and a director of the Company. Due to the medical leave of Mr. Yates,
Mr. Shaddock was appointed Interim President and Chief Executive Officer in July
1999.
Sam K. Smith, 67, has been a director since 1994, and interim Chief
Executive Officer of Mizar from June 1997 until April 1998. In June 1997, Mr.
Smith was named Chairman of the Board of Directors of Mizar and continues to
serve in that capacity for the Company. He serves as a director of Hart
Graphics, TD Technologies and Fastsoft, Inc., and as interim CEO of
Input/Output, Inc.
John L. Rynearson, 52, has been a director since 1982. Mr. Rynearson co-
founded Mizar in 1982 and held a variety of technical and managerial positions
with Mizar until 1991. He has served as the Technical Director of VITA (the
VMEbus International Trade Association) since 1993. He is a director of Open
Systems Service Corporation, a subsidiary of VITA.
John R. Forrest, 55, a director of LSI since 1996, was elected as a
director of the Company on the date of the Combination. He was a Professor of
Electronic Engineering from 1970 to 1984 at University College London, following
which he joined Marconi Defense Systems as Technical Director. Between 1986 and
1991, he was Director of Engineering at the Independent Broadcasting Authority.
In 1991, he was appointed Chief Executive of National Transcommunications
Limited ("NTL") from which he resigned in 1994. Mr. Forrest has served since
1994 as Chairman or director of several entities based in the United Kingdom,
and currently serves as a director of 3i Group plc.
4
<PAGE>
Each of the Company's directors holds office until the next annual meeting
of stockholders and until their respective successors shall have been elected
and qualified or until their earlier death, resignation or removal.
The Board of Directors held five meetings in fiscal 1999. No director
attended fewer than 75% of the meetings of the Board (and any committees
thereof) which they were required to attend.
Committees of the Board of Directors
The Audit Committee, comprised of Messrs. Forrest, Rynearson and Smith, is
empowered to recommend to the Board the appointment of the Company's independent
public accountants and to periodically meet with such accountants to discuss
their fees, audit and non-audit services, and the internal controls and audit
results for the Company. The Audit Committee also is empowered to meet with the
Company's accounting personnel to review accounting policies and reports. The
Audit Committee met four times during fiscal 1999.
The Compensation Committee, comprised of Messrs. Forrest, Rynearson and
Smith, met two times during fiscal 1999.
EXECUTIVE COMPENSATION
Report of the Compensation Committee
The Compensation Committee (the "Committee") is responsible for setting and
administering the various elements of the Company's executive compensation
program. In carrying out its duties, the Committee reviews compensation surveys,
including that published by the American Electronics Association ("AEA"), and
other available information regarding salary, bonus and stock options with a
particular focus on companies in similar industries and of comparable size. The
goals of the Committee's executive compensation program are to (i) align
executive compensation with the Company's performance and (ii) attract, retain,
and reward executive officers who contribute to the Company's success. The
compensation philosophy of the Committee is that annual compensation should be
leveraged on the basis of the Company's performance. To achieve this leverage,
executive compensation is comprised of a base salary, contingent cash bonus, and
stock options. The annual cash compensation paid to executive officers will
generally approximate that of comparable companies if agreed-upon objectives,
such as revenues, operating income, and agreed upon personal goals for each
officer are met. As a matter of compensation philosophy, Blue Wave generally
attempts to set salaries at or near the median level of its peer group; however,
competitive market forces, particularly in the hiring of new executives, may
strongly influence salary. Total cash compensation including salary and
contingent cash bonuses is targeted to be near the median of its peer group if
company performance meets its business goals, and significantly above its peer
group if such goals are exceeded. With respect to fiscal 1999,
5
<PAGE>
agreed upon net income goals were not met; therefore, no contingent cash bonus
was earned.
The Committee strives to maintain the equity position of all executive
officers at competitive levels with comparable companies. The Committee believes
that employee equity ownership provides critical additional motivation to
executive officers to maximize value for the Company's stockholders, and
therefore makes periodic grants of stock options. Option grants to executive
officers are based upon the relative positions and responsibilities of each
executive officer, the historical and expected contributions of that officer to
Blue Wave and previous grants to that officer. The Committee believes that
stock options serve to align the interests of executive officers closely with
other stockholders because of the direct benefit executive officers receive
through improved stock performance. Consistent with this philosophy and after
taking into account increased post-merger responsibilities certain executive
officers were granted stock options during fiscal 1999.
The Committee is responsible for determining the compensation of the Chief
Executive Officer. In order to determine an appropriate level of compensation
and incentives the Committee reviewed the Company's peer group and AEA study.
For fiscal 1999, the Committee established Mr. Yates base rate of pay at
$150,000. Mr. Yates was also entitled to additional cash compensation if the
Company achieved a defined level of net income. This goal was not met and,
accordingly, the cash incentive was not earned. In order to provide a continued
long-term incentive, Mr. Yates was granted an option for 25,000 common shares
during fiscal 1999. In addition to the above mentioned compensation, the
Committee also approved the reimbursement of certain temporary living and moving
expenses for Mr. Yates and his family upon his relocation to the United States
during fiscal 1999.
Section 162(m) of the Internal Revenue Code of 1986 limits to $1,000,000
per person the amount that Blue Wave may deduct for compensation paid to any of
its most highly compensated officers in any year. The levels of salary and bonus
paid by Blue Wave have not exceeded this limit. It is the Company's policy
generally to grant options that meet the requirements of the Internal Revenue
Code and regulations so that any such compensation recognized by an optionee
will be fully deductible.
Sam K. Smith, Chair
John R. Forrest
John L. Rynearson
Summary of Executive Compensation
The following table sets forth information concerning cash compensation
paid or accrued by the Company during the three-year period ended June 30, 1999
to or for the
6
<PAGE>
Company's Chief Executive Officer and the four other highest
compensated executive officers of the Company whose total salary and bonus
exceeded $100,000.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
----------------------------------- ------------
Other Securities
Name and Fiscal Annual Com- Underlying
Principal Position Year Salary Bonus pensation Options (#) Other(2)
- ------------------ ------ ---------- ------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Simon Yates, President 1999 $150,000 -- $38,852 25,000 $32,600
and Chief Executive Officer (3) 1998 132,000 -- -- --
Rob N. Shaddock, Executive 1999 147,345 -- -- 25,000 32,600
Vice President and Interim 1998 132,000 -- -- -- --
Chief Executive Officer (3)(4)
Kevin Parslow, Vice President 1999 136,920 -- -- 25,000 32,600
Worldwide Sales(3) 1998 132,000 -- -- -- --
Julian S. Jenkins, President- 1999 130,400 -- -- 12,500 32,600
Europe(3) 1998 132,000 -- -- -- --
Charles D. Brockenbush, Vice 1999 124,218 -- -- 50,000 1,378
President-Finance and CFO 1998 107,056 -- -- -- 1,235
1997 102,941 $440 -- 15,000 713
</TABLE>
___________________
(1) The amounts reflected for Mr. Yates relate to (i) the use of a Company
owned automobile and payment of related expenses and (ii) certain living
and moving expenses in the aggregate amount of $31,440 incurred by Mr.
Yates and his family upon his relocation to the United States.
(2) Messrs. Yates, Shaddock, Parslow and Jenkins participate in a discretionary
defined contribution plan. Under the plan, participants may elect to have
any payments made under the plan paid as salary or as a tax deferred
contribution to the plan. The amounts indicated reflect the payments under
the plan accrued for these individuals in fiscal 1999. The amount with
respect to Mr. Brockenbush reflects the Company's contribution under its
401(k) plan.
(3) Messrs. Yates, Shaddock, Parslow and Jenkins were officers of LSI prior to
the Combination in April 1998. The amounts indicated in fiscal 1998
include compensation received by them while they were officers of LSI as
well as the compensation received by them from the Company after they
became executive officers of the Company in April 1998.
(4) In July 1999, Mr. Shaddock was named interim President and Chief Executive
Officer due to Mr. Yates' medical leave.
Employment Agreements
Four of the Company's executive officers (Simon Yates, Rob N. Shaddock,
Julian S. Jenkins and Kevin Parslow) entered into Service Agreements with LSI
that, upon the occurrence of the Combination, were assumed by the Company.
These agreements provide that their employment may be terminated without cause
with 12 months prior written notice. The agreements also provide for stated
salaries (in 1999 $150,000 for Mr. Yates; ,90,000 for Mr. Shaddock; ,84,000 for
Mr. Parslow; and ,80,000 for Mr. Jenkins) and other customary benefits.
7
<PAGE>
Stock Options
The Company maintains its stock option plan (the "Option Plan") which
provides for the grant of options for the purchase of common stock of the
Company. The Option Plan covers, in the aggregate, a maximum of 2,427,500 shares
of common stock. The Option Plan provides for the granting of both incentive
stock options (as defined in Section 422 of the Internal Revenue Code of 1986)
and nonqualified stock options (options which do not meet the requirements of
Section 422). Under the Option Plan, the exercise price may not be less than the
fair market value of the common stock on the date of the grant of the option.
The Compensation Committee of the Board of Directors administers and
interprets the Option Plan and is authorized to grant options thereunder to all
eligible employees of the Company, including officers. The Compensation
Committee designates the optionees, the number of shares subject to the options
and the terms and conditions of each option. Options under the Option Plan
generally vest over a 48 month period. Certain changes in control of the Company
will cause the options to vest immediately. Each option granted under the
Option Plan must be exercised, if at all, during a period established in the
grant which may not exceed 10 years from the date of grant. An optionee may not
transfer or assign any option granted and may not exercise any options after a
specified period subsequent to the termination of the optionee's employment with
the Company.
The following table sets forth certain information with respect to the
options granted during fiscal year 1999 to each of the current executive
officers of the Company named in the table under "Summary of Executive
Compensation" set forth above.
<TABLE>
<CAPTION>
Percent of Potential Realizable Value
Total at Assumed Annual Rates
Options of Stock Price
Granted to Appreciation
Options Employees Exercise or for Option Term (1)
Granted in Fiscal Base Price Expiration
Name # Year $/Sh Date 5% 10%
- ---- -------- ---- ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Mr. Yates 25,000 5.5% $2.89 9/22/08 $45,438 $115,148
Mr. Shaddock 25,000 5.5 2.63 9/22/08 41,271 104,589
Mr. Parslow 25,000 5.5 2.63 9/22/08 41,271 104,589
Mr. Jenkins 12,500 2.7 2.63 9/22/08 20,636 52,295
Mr. Brockenbush 50,000 10.9 2.63 9/22/08 82,542 209,179
</TABLE>
___________________
(1) The 5% and 10% assumed annual rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not reflect the
Company's estimates or projections of future prices of the shares of the
Company's common stock. There can be no assurance that the amounts
reflected in this table will be achieved.
8
<PAGE>
None of the named executive officers exercised options in fiscal 1999. The
following table sets forth certain information with respect to the options held
by the executive officers named above at June 30, 1999.
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised In-the-Money Options (1)
Acquired Value Options at June 30, 1999 at June 30, 1999
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Yates 0 $0 87,534 25,000 $283,172 $18,375
Mr. Shaddock 0 0 87,534 25,000 283,172 25,000
Mr. Parslow 0 0 247,746 25,000 801,458 25,000
Mr. Jenkins 0 0 137,740 12,500 202,964 12,500
Mr. Brockenbush 0 0 30,000 70,000 -- 50,000
</TABLE>
_____________________
(1) Based upon the closing price of Blue Wave's common stock on June 30, 1999,
which was $3.625 per share.
Director Compensation
The Company does not pay any annual retainer or per meeting fees to its
directors, other than to Mr. Forrest, who also served as a non-employee director
of LSI. Mr. Forrest is compensated at a rate of approximately $33,000 annually.
The Company reimburses all of the directors for their out-of-pocket expenses in
connection with performing their duties as directors of the Company. In
addition, on an annual basis each non-employee director that otherwise does not
receive cash compensation is granted options to purchase 8,500 shares of common
stock under the Directors' Plan.
Certain Filings by Executive Officers and Directors
Under the securities laws of the United States, the Company's directors,
executive officers and persons who own more than 10% of the Company's common
stock are required to report their initial ownership of the Company's common
stock and any subsequent changes in that ownership to the Securities and
Exchange Commission. Specific due dates have been established for these
reports, and the Company is required to disclose in this proxy statement any
failure to file by these dates. All of these filing requirements were
satisfied, except that Messrs. Brockenbush, Keith Burgess, Joseph Andrulis,
Julian Jenkins and John Rynearson failed to timely file reports reflecting
options granted to them in fiscal 1997 and 1998.
Compensation Committee Interlocks and Insider Participation
During fiscal 1999, no executive officer of the Company served as a member
of the board of directors or compensation committee of any entity which has one
or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee.
9
<PAGE>
APPROVAL OF AMENDMENT TO DIRECTORS' PLAN
The proposed amendment to the Directors' Plan would increase the number of
shares of the Company's common stock subject to the plan from 75,000 shares to
150,000 shares. Approval of this amendment requires the affirmative vote of the
holders of a majority of the shares of the Company's common stock represented at
the Annual Meeting. The Company's Board of Directors recommends a vote FOR
approval of the amendment of the Directors' Plan.
The Company's Board of Directors adopted the Directors' Plan in order to
provide non-employee directors with an incentive for serving as a director by
providing a proprietary interest in the Company through the granting of options.
Only non-employee directors are eligible to receive options under the Directors'
Plan. Currently, only two of the Company's directors (Sam K. Smith and John L.
Rynearson) are eligible to receive options under the Directors' Plan.
Administration of the Option Plan is vested in the Compensation Committee of the
Company's Board of Directors.
As of September 30, 1999, options to purchase an aggregate of 51,000 shares
of the Company's common stock have been granted pursuant to the Directors' Plan,
8,500 have expired or been canceled, no options have been exercised, options to
purchase 42,500 shares remain outstanding, and 32,500 shares remain available
for future grant. As of September 30, 1999, the market value of all shares of
the Company's common stock (i) subject to outstanding options under the
Directors' Plan and (ii) remaining available for future grant was approximately
$184,000 and $140,000, respectively (based on the closing sale price of the
Company's common stock as reported on the Nasdaq National Market on such date).
During the 1999 fiscal year, options covering 17,000 shares of the Company's
common stock were granted to the Company's directors.
Since adoption of the Directors' Plan, all current non-employee directors
that do not receive cash compensation, as a group, have been granted options
under the Directors' Plan covering 42,500 shares of the Company's common stock
which represents 100% of the total number of options granted (net of options
canceled or expired) pursuant to the Directors' Plan.
The purchase price of the shares for each stock option granted under the
Directors' Plan may not be less than 100% of the fair market value of the common
stock at the time of grant. The term of an option may not be more than ten
years from the date of grant. The Directors' Plan will terminate on June 30,
2005; however, options outstanding at the termination of the Option Plan will
not be affected by such termination. If an option expires or terminates before
it has been exercised in full, the shares of common stock allocable to the
unexercised portion of such option will again be available for the grant of
options under the Directors' Plan.
10
<PAGE>
Grants of stock options under the Directors' Plan are not taxable events.
However, upon exercise, the optionee generally will realize ordinary
compensation income equal to the excess of the fair market value of the shares
so acquired over the option price.
The preceding discussion summarizes the material terms of the Directors'
Plan. The full text of the Directors' Plan is available upon written request to
the Company.
STOCK PRICE PERFORMANCE
The Company completed the initial public offering of its common stock in
September 1995. Prior to such date, there was no established market for its
common stock. Set forth below is a line graph indicating a comparison of
cumulative total returns (change in stock price plus reinvested dividends) for
the Company's common stock from the initial offering price of $8.50 on September
28, 1995 through June 30, 1999 as contrasted with the Nasdaq Market Index and
the index for the electronic computer industry (SIC Code 3571). Each index
assumes $100 invested at September 28, 1995 and is calculated assuming
reinvestment of dividends.
COMPARE CUMULATIVE TOTAL RETURN
AMONG BLUE WAVE SYSTEMS INC.
NASDAQ MARKET INDEX AND SIC CODE INDEX
<TABLE>
<CAPTION>
---------------------FISCAL YEAR ENDING----------------
COMPANY/INDEX/MARKET 9/28/1995 6/28/1996 6/30/1997 6/30/1998 6/30/1999
<S> <C> <C> <C> <C> <C>
Blue Wave Systems 100.00 76.47 45.65 41.18 42.71
Electronic Computers 100.00 105.60 161.77 221.51 375.87
NASDAQ Market Index 100.00 111.47 134.28 178.00 249.44
</TABLE>
11
<PAGE>
STOCKHOLDERS' PROPOSALS
Any proposals that stockholders of the Company desire to have presented at
the 2000 annual meeting of stockholders must be received by the Company at its
principal executive offices no later than June 16, 2000.
MISCELLANEOUS
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. The expense of preparing, printing and mailing the
form of proxy and the material used in the solicitation thereof will be borne by
the Company. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by directors and regular officers and
employees of the Company. Arrangements may also be made with brokerage houses
and other custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of stock held of record by such
persons, and the Company may reimburse them for reasonable out-of-pocket
expenses incurred by them in connection therewith.
Representatives of Arthur Andersen LLP, the Company's independent public
accountants, are expected to be present at the Annual Meeting with the
opportunity to make a statement if they desire and to be available to respond to
appropriate questions.
By Order of the Board of Directors
Toya Martin
Secretary
Carrollton, Texas
October 15, 1999
12
<PAGE>
PROXY
BLUE WAVE SYSTEMS INC.
The undersigned hereby (a) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Blue Wave Systems Inc. (the "Company") to be held on
November 16, 1999, at 10:00 a.m., local time, and the Proxy Statement in
connection therewith, and (b) appoints Rob N. Shaddock and Charles D.
Brockenbush, or each of them, his proxies, with full power of substitution and
revocation, for and in the name, place and stead of the undersigned, to vote
upon and act with respect to all of the shares of Common Stock of the Company
standing in the name of the undersigned or with respect to which the undersigned
is entitled to vote and act at said meeting or at any adjournment thereof, and
the undersigned directs that his proxy be voted as follows:
1. ELECTION OF DIRECTORS [_] FOR nominees listed below except as marked to
the contrary below
[_] WITHHOLD AUTHORITY to vote for all nominees
listed below
John R. Forrest, John L. Rynearson, Rob N. Shaddock, Sam K. Smith and
Simon Yates
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.
_________________________________________________________________________
2. Proposal to amend the Blue Wave Systems Inc.'s Directors' Stock Option Plan
(the "Plan") to increase the number of shares of Common Stock issuable upon
exercise of options granted under the Plan from 75,000 to 150,000.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
If more than one of the proxies listed on the reverse side shall be present
in person or by substitute at the meeting or any adjournment thereof, the
majority of said proxies so present and voting, either in person or by
substitute, shall exercise all of the powers hereby given.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES FOR DIRECTORS
AND FOR THE NAMED PROPOSAL.
The undersigned hereby revokes any proxy or proxies heretofore given to
vote upon or act with respect to such stock and hereby ratifies and confirms all
that said proxies, their substitutes, or any of them, may lawfully do by virtue
hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Dated:_____________________________
___________________________________
Signature
___________________________________
(Signature if held jointly)
Please date the proxy and sign your name exactly
as it appears hereon. Where there is more than one
owner, each should sign. When signing as an
attorney, administrator, executor, guardian or
trustee, please add your title as such. If
executed by a corporation, the proxy should be
signed by a duly authorized officer. Please sign
the proxy and return it promptly whether or not
you expect to attend the meeting. You may
nevertheless vote in person if you do attend.
