SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MEDTRONIC, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
[LOGO]
MEDTRONIC
WHEN LIFE DEPENDS ON MEDICAL TECHNOLOGY
7000 Central Avenue N.E.
Minneapolis, Minnesota 55432
Telephone: 612-514-4000
July 21, 1999
Dear Shareholder:
You are cordially invited to join us for our Annual Meeting of Shareholders
to be held this year on Wednesday, August 25, 1999, at 10:30 a.m. (CDT) at
Medtronic's Corporate Center at its Rice Creek facility, 7000 Central Avenue
N.E., Minneapolis (Fridley), Minnesota.
The Notice of Annual Meeting of Shareholders and the Proxy Statement that
follow describe the business to be conducted at the meeting. We will also report
on matters of current interest to our shareholders.
We invite you to join us beginning at 10:00 a.m. to view Medtronic's
product displays and talk with our employees.
YOUR VOTE IS IMPORTANT. Whether you own a few or many shares of stock, it
is important that your shares be represented. If you cannot personally attend,
we encourage you to make certain that you are represented at the meeting by
voting by telephone or internet as described in the enclosed instructions or by
signing the accompanying proxy card and promptly returning it in the enclosed
envelope.
Sincerely,
/s/ William W. George
William W. George
Chairman of the Board and Chief Executive Officer
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
WEDNESDAY, AUGUST 25, 1999
To Our Shareholders:
The 1999 Annual Meeting of Shareholders of Medtronic, Inc. will be held
Wednesday, August 25, 1999, at the Medtronic, Inc. Corporate Center at its Rice
Creek facility, 7000 Central Avenue N.E., Minneapolis (Fridley), Minnesota, at
10:30 a.m. (CDT) for the following purposes:
1. To set the size of the Board at 14 directors and to elect four Class I
directors for three-year terms.
2. To approve an amendment to the Company's Restated Articles of
Incorporation to increase the number of shares of Common Stock the
Company is authorized to issue.
3. To reapprove the performance criteria for the Company's Management
Incentive Plan.
4. To reapprove the performance criteria for the Company's 1994 Stock
Award Plan.
5. To approve appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors.
6. To take action on any other business that may properly be considered
at the Meeting or any adjournment thereof.
These items are more fully described in the following pages of the Proxy
Statement.
Shareholders of record at the close of business on July 2, 1999 will be
entitled to vote at the Meeting and any adjournments of the Meeting.
By Order of the Board of Directors,
/s/ Ronald E. Lund
Ronald E. Lund
Secretary
YOUR VOTE IS IMPORTANT.
PLEASE VOTE BY TELEPHONE OR INTERNET AS DESCRIBED IN THE ENCLOSED INSTRUCTIONS
OR DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE.
[LOGO]
MEDTRONIC
WHEN LIFE DEPENDS ON MEDICAL TECHNOLOGY
MEDTRONIC, INC.
7000 CENTRAL AVENUE N.E.
MINNEAPOLIS, MINNESOTA 55432
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 25, 1999
-------------------------------------
The Board of Directors of Medtronic, Inc. ("Medtronic" or the "Company") is
soliciting the accompanying proxy for the Annual Meeting of Shareholders of
Medtronic to be held on August 25, 1999.
A proxy card is enclosed. In order to register your vote, you may vote by
telephone or the internet as described in the enclosed instructions or complete,
date and sign the proxy card and return it in the envelope provided. When voting
by telephone or the internet, your vote authorizes the named proxies to vote
your shares in the same manner as if you completed, signed and returned your
proxy card.
When stock is registered in the name of more than one person, each such person
should sign the proxy. If the shareholder is a corporation, the proxy should be
signed in its corporate name by an executive or other authorized officer. If
signed as attorney, executor, administrator, trustee, guardian, custodian or in
any other representative capacity, the signer's full title should be given.
Shareholders are entitled to one vote for each share of Medtronic Common Stock,
$.10 par value, they hold of record as of the close of business on July 2, 1999.
On that date, 586,763,987 shares of Medtronic Common Stock were outstanding. A
quorum (a majority of the outstanding shares) must be represented at the Meeting
in person or by proxy to transact business.
Shares represented by a properly executed proxy received by Medtronic prior to
the Meeting and not revoked will be voted in accordance with the instructions of
the shareholder or, if no instructions are indicated, in accordance with the
recommendations of the Board of Directors. A proxy may be revoked at any time
before it is exercised by written revocation to the Corporate Secretary of
Medtronic or by submitting a proxy with a more recent date either by using the
telephone or internet voting procedures or by filing a new written proxy with
the Corporate Secretary. This proxy statement and enclosed proxy card are first
being mailed to shareholders on or about July 21, 1999.
ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES
The Board of Directors is divided into three classes. The members of each
class are elected to serve three-year terms with the terms of office of each
class ending in successive years. Glen D. Nelson, M.D., Jean-Pierre Rosso, Jack
W. Schuler and Gerald W. Simonson are the nominees for election to the Board as
Class I directors to serve until the year 2002 annual meeting or until their
successors are elected and qualified. All of the nominees are currently
directors and were elected to the Board of Directors by the shareholders except
for Mr. Rosso, who was elected by the Board on
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August 26, 1998. After 23 years of dedicated Board service, Richard A. Swalin,
Ph.D. will retire from the Board on August 25, 1999 in accordance with the
Board's policy of mandatory retirement. With the retirement of Dr. Swalin, the
Board will consist of 14 members.
All of the nominees have indicated a willingness to serve if elected.
However, if any nominee becomes unable to serve before the election, the shares
represented by the proxy cards may be voted for a substitute designated by the
Board, unless an instruction to the contrary is indicated on the proxy card.
THE BOARD RECOMMENDS A VOTE FOR ELECTING THE NOMINEES.
DIRECTOR NOMINEES -- CLASS I
(TERM ENDING 2002)
[PHOTO] Vice Chairman of Medtronic since July
GLEN D. NELSON, M.D., age 62 1988 and Executive Vice President from
DIRECTOR SINCE 1980 August 1986 to July 1988; Chairman and
CLASS I DIRECTOR Chief Executive Officer of American
TERM EXPIRES 1999 MedCenters, Inc. (HMO management) from
July 1984 to August 1986; Chief
Executive Officer, President and
Chairman of the Board of Trustees of
Park Nicollet Medical Center (medical
services) from 1975 to 1986; Surgeon at
Park Nicollet Medical Center from 1969
to 1986. Also a director of The St. Paul
Companies, Inc., Carlson Holdings, Inc.,
Avatar, Inc., and Advanced BioSurfaces,
Inc. Member, Johns Hopkins Board of
Visitors and Jackson Hole Group.
[PHOTO] Chairman and Chief Executive Officer of
JEAN-PIERRE ROSSO, age 59 Case Corporation (farm and construction
DIRECTOR SINCE 1998 equipment) since October 1997; Chairman,
CLASS I DIRECTOR President and Chief Executive Officer of
TERM EXPIRES 1999 Case Corporation from March 1996 to
October 1997; President and Chief
Executive Officer of Case Corporation
from April 1994 to March 1996. President
of the Home & Building Control Business
of Honeywell, Inc. from 1992 to April
1994; President of European operations
of Honeywell, Inc. from 1987 through
1991. Also a director of ADC
Telecommunications, Inc. and Crown Cork
& Seal Company, Inc.
[PHOTO] Chairman of the Board of Stericycle,
JACK W. SCHULER, age 58 Inc. (medical waste treatment and
DIRECTOR SINCE 1990 recycling) since 1990 and Chairman of
CLASS I DIRECTOR the Board of Ventana Medical Systems,
TERM EXPIRES 1999 Inc. (immunohisto-chemistry diagnostic
systems) since November 1995; President
and Chief Operating Officer of Abbott
Laboratories (health care products) from
January 1987 to August 1989; a director
of that company from April 1985 to
August 1989 and Executive Vice President
from January 1985 to January 1987. Also
a director of Chiron Corporation.
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[PHOTO] Private venture capital investor since
GERALD W. SIMONSON, age 69 June 1978; President and Chief Executive
DIRECTOR SINCE 1962 Officer of Omnetics Connector
CLASS I DIRECTOR Corporation (microminiature connectors)
TERM EXPIRES 1999 since March 1991. Also a director of
Northwest Teleproductions, Inc., The
Chromaline Corporation and Fairview
Hospital and Healthcare Services.
BOARD MEMBERS CONTINUING IN OFFICE -- CLASS II
(TERM ENDING 2000)
[PHOTO] Chairman of the Board and Chief
MICHAEL R. BONSIGNORE, age 58 Executive Officer of Honeywell, Inc.
DIRECTOR SINCE 1999 since April 1993; Executive Vice
CLASS II DIRECTOR President and Chief Operating Officer of
TERM EXPIRES 2000 the International and Home & Building
Control business of Honeywell, Inc. from
1990 to 1993; President of Honeywell's
International business from 1987 to
1990; President of Honeywell Europe from
1983 to 1987. Also a director of
Cargill, Inc. and The St. Paul
Companies, Inc. and a member of various
advisory boards and committees
including: The U.S.-China Business
Council, Investment and Services Policy
Advisory Committee, U.S.-Russia Trade
and Economic Council, the Alliance to
Save Energy Board, New Perspective Fund,
Inc. and Euro Pacific Growth Fund.
[PHOTO] Medtronic Chairman of the Board and
WILLIAM W. GEORGE, age 56 Chief Executive Officer since August
DIRECTOR SINCE 1989 1996; President and Chief Executive
CLASS II DIRECTOR Officer from May 1991 to August 1996;
TERM EXPIRES 2000 President and Chief Operating Officer
from March 1989 to April 1991.
President, Honeywell Space and Aviation
Systems, from December 1987 to March
1989; President, Honeywell Industrial
Automation and Control, from May 1987 to
December 1987 and Executive Vice
President of that business from January
1983 to May 1987. Also a director of
Dayton Hudson Corporation, Allina Health
System (Chairman), Imation Corp.,
Novartis, and Health Industry
Manufacturers Association.
3
[PHOTO] Dean, College of Medicine and Public
BERNADINE P. HEALY, M.D., age 54 Health, and Professor of Medicine, The
DIRECTOR SINCE 1993 Ohio State University, since October
(AND 1987-1991) 1995. Physician and Science Policy
CLASS II DIRECTOR Advisor, The Cleveland Clinic Foundation
TERM EXPIRES 2000 (nonprofit medical research
organization), from July 1993 to May
1995; Director of the National
Institutes of Health from April 1991 to
June 1993; Chairman of the Research
Institute of The Cleveland Clinic
Foundation from November 1985 to April
1991; President, the American Heart
Association, National Center, from 1988
to 1989; Deputy Director of Office of
Science and Technology Policy, Executive
Office of the United States President,
from 1984 to 1985; Professor of
Medicine, The Johns Hopkins University
School of Medicine, from 1977 to 1984.
Also a trustee of Battelle Memorial
Institutes and a director of National
City Corporation, Invacare, Inc. and
Ashland, Inc.
[PHOTO] Consultant. Retired Vice Chairman and
RICHARD L. SCHALL, age 69 Chief Administrative Officer and
DIRECTOR SINCE 1971 director of Dayton Hudson Corporation as
CLASS II DIRECTOR of February 1985. Also a director of
TERM EXPIRES 2000 EcoLab Inc. and a trustee of Santa
Barbara City College Foundation.
[PHOTO] President and Chief Executive Officer of
GORDON M. SPRENGER, age 62 Allina Health System (health care
DIRECTOR SINCE 1991 delivery) since June 1999; Chief
CLASS II DIRECTOR Executive Officer of Allina Health
TERM EXPIRES 2000 System from April 1999 to June 1999;
Executive Officer of Allina Health
System from July 1994 to April 1999;
Chief Executive Officer and director of
HealthSpan Health Systems Corporation
(health care delivery) from September
1992 to July 1994; President and Chief
Executive Officer of LifeSpan, Inc.
(health care delivery) from 1982 to
September 1992; Chief Executive Officer
of Abbott-Northwestern Hospital from
1982 to September 1992; President of
Abbott-Northwestern Hospital from 1982
to 1988. Also a member of Board of
Regents, St. Olaf College, and a
director of The St. Paul Companies,
Inc., Bush Foundation and Past Chair of
the Board of the American Hospital
Association.
4
BOARD MEMBERS CONTINUING IN OFFICE -- CLASS III
(TERM ENDING 2001)
WILLIAM R. BRODY, M.D., PH.D., age 55 President of The Johns Hopkins
DIRECTOR SINCE 1998 University since September 1996. Special
CLASS III DIRECTOR Assistant to the President of the
TERM EXPIRES 2001 University of Minnesota Academic Health
Center, May 1996 to July 1996; Provost
of the University of Minnesota Academic
Health Center from September 1994 to May
1996; the Martin Donner Professor and
Director of the Department of Radiology
at The Johns Hopkins University School
of Medicine from 1987 to 1994. Also a
director of Alza Corporation and
Mercantile Bankshares Corporation.
[PHOTO] Chairman of the Board and Chief
PAUL W. CHELLGREN, age 56 Executive Officer of Ashland Inc.
DIRECTOR SINCE 1997 (energy company) since January 1997 and
CLASS III DIRECTOR Chief Executive Officer since October
TERM EXPIRES 2001 1996; President and Chief Operating
Officer of Ashland Inc. from January
1992 to September 1996. Also a director
of PNC Bank Corp. and Arch Coal, Inc.
[PHOTO] Medtronic President and Chief Operating
ARTHUR D. COLLINS, JR., age 51 Officer since August 1996; Chief
DIRECTOR SINCE 1994 Operating Officer from January 1994 to
CLASS III DIRECTOR August 1996; Executive Vice President of
TERM EXPIRES 2001 the Company and President of Medtronic
International from June 1992 to January
1994. Corporate Vice President of Abbott
Laboratories (health care products) from
October 1989 to May 1992 and Divisional
Vice President of that company from May
1984 to October 1989. Held various
management positions both in the U.S.
and Europe during his 14 years with
Abbott. Also a director of U.S. Bancorp.
and Tennant Company, and member of the
Board of Overseers of The Wharton
School.
5
[PHOTO] The Stephen and Suzanne Weiss Dean of
ANTONIO M. GOTTO, JR., M.D., age 63 the Cornell University Medical Center
DIRECTOR SINCE 1992 and Provost for Medical Affairs, Cornell
CLASS III DIRECTOR University, since January 1997. Chairman
TERM EXPIRES 2001 and Professor of the Department of
Medicine at Baylor College of Medicine
and Methodist Hospital from 1977 to 1996
and former J. S. Abercrombie Chair,
Atherosclerosis and Lipoprotein Research
from 1976 to 1996. Also director and
principal investigator, Specialized
Center of Research in Arteriosclerosis,
National Heart, Lung and Blood
Institute, President, International
Atherosclerosis Society and Past
President, American Heart Association.
[PHOTO] Professor, Graduate School of Business,
THOMAS E. HOLLORAN, age 69 University of St. Thomas, St. Paul,
DIRECTOR SINCE 1960 Minnesota since June 1985; Chairman,
CLASS III DIRECTOR Minneapolis-St. Paul Metropolitan
TERM EXPIRES 2001 Airports Commission, from February 1989
to January 1991; Chairman of the Board
of Directors and Chief Executive Officer
of Inter-Regional Financial Group, Inc.
(predecessor of Dain Rauscher
Corporation) (holding company for
various financial enterprises) from 1976
to June 1985. Also a director of
Flexsteel Industries, Inc., MTS Systems
Corp., ADC Telecommunications Inc.,
National City Bank of Minneapolis and
National City Bancorporation; Chairman
and a director of Malt-O-Meal Company;
and a director of the Minnesota Center
for Corporate Responsibility and the
Bush Foundation.
Election of each director nominee requires the affirmative vote of the
holders of a majority of the shares of Common Stock present in person or by
proxy and entitled to vote on such nominee at the Annual Meeting. For this
purpose, a shareholder voting through a proxy who withholds authority to vote on
the election of directors shall not be considered present and entitled to vote
on the election of directors.
BOARD AND BOARD COMMITTEE MEETINGS
During fiscal 1999, Medtronic's Board of Directors held a total of ten
Board meetings. Each director attended 75% or more of the total meetings of the
Board of Directors and Board committees on which the director served (held
during the period he or she served as a director), except for Drs. Gotto and
Healy, who each attended more than 70% of the total such meetings held. The
standing committees of the Board of Directors include the Audit Committee, the
Compensation Committee, the Finance Committee, the Corporate Governance
Committee and the Technology and Quality Committee.
AUDIT COMMITTEE. The Audit Committee held three meetings in fiscal 1999.
Committee members are Brody, Healy, Holloran, Schuler (Chair) and Swalin. The
committee reviews Medtronic's annual financial statements; makes recommendations
regarding Medtronic's independent auditors and scope of auditor services;
reviews the adequacy of accounting and audit policies, compliance assurance
procedures and internal controls; reviews nonaudit services performed by
auditors to maintain auditors' independence; and reports to the Board of
Directors on disclosure adequacy and adherence to accounting principles.
COMPENSATION COMMITTEE. The Compensation Committee held four meetings in
fiscal 1999. Committee members are Bonsignore, Chellgren, Healy, Rosso, Schall,
Schuler and Simonson (Chair). The committee reviews compensation philosophy and
major compensation and benefits programs for employees; oversees certain stock
and benefit plans; and reviews executive officers' compensation.
FINANCE COMMITTEE. The Finance Committee held four meetings in fiscal 1999.
Committee members are Chellgren (Chair), Gotto, Rosso, Schall, Simonson and
Sprenger. The committee reviews
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and makes recommendations regarding financial policies and performance
objectives as developed by management, including review of Medtronic's annual
and long-range operating plans; assists management in evaluation of major
acquisitions and divestitures from a financial perspective; reviews changes in
capital structure; and reviews banking relationships, insurance coverage on
assets, tax strategies, and financial performance and related matters pertaining
to Medtronic's employee pension and supplemental retirement plans.
CORPORATE GOVERNANCE COMMITTEE. The Corporate Governance Committee held two
meetings in fiscal 1999. Committee members are Bonsignore, Brody, Chellgren,
Gotto, Healy, Holloran, Rosso, Schall (Chair), Schuler, Simonson, Sprenger and
Swalin. The committee addresses all matters of corporate governance; evaluates
qualifications and candidates for positions on the Board; evaluates the
performance of the chief executive officer and the Board; reviews major
organization changes and senior management performance; and reviews director
compensation philosophy. The Corporate Governance Committee maintains a
Nominating Subcommittee which considers and recommends to the full Committee
criteria for selecting new directors, nominees for Board membership and the
positions of CEO, Chairman and Chair of the Corporate Governance Committee, and
whether a director should be invited to stand for re-election. The Subcommittee
is comprised of the Chair of the Corporate Governance Committee plus one
director selected from each class of directors. The current Subcommittee held
one meeting in fiscal 1999 and includes Schall (Chair), Healy, Holloran and
Schuler.
The Corporate Governance Committee will consider nominees for Board
membership submitted by shareholders. Nominations by shareholders must be made
pursuant to timely notice in writing to the Corporate Secretary at 7000 Central
Avenue N.E., Minneapolis, Minnesota 55432. Candidates for director should be
persons with broad training and experience in their chosen fields and who have
earned distinction in their activities. Notice by the shareholder to be timely
must be received not less than 50 nor more than 90 days prior to the meeting or,
if less than 60 days disclosure of the meeting date is given, not later than the
close of business on the 10th day following the day on which notice of the
meeting date is mailed or public disclosure of such date is made. The notice
shall set forth certain information concerning such shareholder and the
nominees, including their names and addresses, their principal occupation or
employment, the capital stock of the Company which they beneficially own, such
other information as would be required in a proxy statement soliciting proxies
for the election of the nominees and the consent of each nominee to serve as a
director if so elected. The chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedure.
TECHNOLOGY AND QUALITY COMMITTEE. The Technology and Quality Committee held
two meetings in fiscal 1999. Committee members are Bonsignore, Brody, Gotto,
Healy (Chair), Holloran, Sprenger and Swalin. The committee reviews policies,
practices, processes and quality programs concerning technological and product
research; reviews efforts and investments in developing new products and
businesses; evaluates Medtronic's technological education and recognition
programs; and reviews quality process matters with Medtronic's chief quality
officer.
DIRECTOR COMPENSATION
As part of the Company's desire to further emphasize performance-based
compensation and to encourage stock ownership by the Company's management and
Board of Directors, the Company adopted the Medtronic, Inc. Outside Director
Stock Compensation Plan (the "Director Plan") effective March 5, 1998.
Director compensation has three components: an annual retainer, an annual
stock option grant and an annual credit of deferred stock units. In addition,
all new non-employee board members receive an initial stock option grant.
The annual retainer in place for the 1998-1999 plan year (September 1, 1998
through August 31, 1999) is $50,000 for all non-employee directors except the
Chair of the Corporate Governance Committee, whose retainer is $60,000.
Directors have the option of taking 100% of the annual retainer in the form of
cash, or 100% in the form of stock options. If options are chosen, the number of
shares
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covered by such options will equal four times the amount of the annual retainer
divided by the fair market value of a share of Medtronic stock on the last day
of the relevant plan year (which will also be the exercise price of such
options). These options expire on the tenth anniversary of the date of grant.
The annual retainer is reduced by 25% if a non-employee director does not attend
at least 75% of the total meetings of the Board and Board committees on which
such director served during the relevant plan year.
Under the Director Plan, each non-employee director also receives on the
first day of each plan year an annual stock option grant for a number of shares
of Medtronic stock equal to the amount of the annual retainer divided by the
fair market value of a share of Medtronic stock on the date of grant (which will
also be the exercise price of such option). These options expire at the earlier
of the tenth anniversary of the date of grant or five years after the holder
ceases to be a director of the Company.
The Director Plan also provides that on the last day of each plan year,
each non-employee director will be credited with a number of deferred stock
units (each representing the right to receive one share of Medtronic stock)
equal to one-half of the amount of the annual retainer divided by the average of
the fair market value of a share of Medtronic stock for the last 20 trading days
during the plan year. Dividends paid on Medtronic stock are credited to a
director's stock unit account in the form of additional stock units. The balance
in a director's stock unit account will be distributed to such director in the
form of shares of Medtronic stock upon resignation or retirement from the Board,
in a single distribution or, at the director's option, in five equal annual
distributions.
Each new non-employee director also receives, on the date he or she first
becomes a director, a one-time initial stock option grant under the Director
Plan for a number of shares of Medtronic stock equal to two times the amount of
the annual retainer divided by the fair market value of a share of Medtronic
stock on the date of grant (which will also be the exercise price of such
option). These options expire at the earlier of the tenth anniversary of the
date of grant or five years after the holder ceases to be a director of the
Company.
All of the non-employee director options described above vest and are
exercisable in full on the date of grant, provided that a director initially
appointed by the Board will generally not be entitled to exercise any such
option until such director has been elected to the Board by the shareholders of
the Company.
In 1998, the Company discontinued its charitable contribution plan for all
directors, which provided for a contribution of $1 million to charitable
institutions recommended by a deceased director with five or more years of
service at the time of death. However, persons who became directors prior to
July 1, 1998 will continue to be eligible for this benefit.
As part of its overall program to promote charitable giving, the Company's
Foundation matches gifts by directors to qualified educational institutions up
to $7,000 per fiscal year.
CERTAIN TRANSACTIONS
The Company uses Carlson Wagonlit Travel, which was selected through a
competitive bidding process, as its travel agency for Company business. Dr. Glen
Nelson, who is Vice Chairman and a director of the Company, is a director of
Carlson Holdings, Inc., a family-owned business which includes Carlson Wagonlit
Travel. Members of Dr. Nelson's family are owners and officers of Carlson
Holdings, Inc. The Company paid fees totaling approximately $1,458,000 to
Carlson Wagonlit Travel for services in fiscal 1999. Management believes that
these transactions were on terms no less favorable to the Company than if made
with unaffiliated third parties.
8
SHAREHOLDINGS OF CERTAIN OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS. To the best of Medtronic's knowledge, no
shareholder beneficially owned more than 5% of Medtronic's Common Stock as of
July 2, 1999.
MANAGEMENT SHAREHOLDINGS. The following table shows the number of shares of
Medtronic Common Stock beneficially owned by Medtronic's directors, executive
officers identified in the Summary Compensation Table below, and all directors
and executive officers as a group as of July 2, 1999.
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2)
- ------------------------ --------------------------
Michael R. Bonsignore .......................... 1,767
William R. Brody, Ph.D., M.D. .................. 7,365
Paul W. Chellgren .............................. 8,165
Arthur D. Collins, Jr.(3) ...................... 779,515
Bill K. Erickson ............................... 375,966
William W. George(4) ........................... 1,660,783
Antonio M. Gotto, Jr., M.D. .................... 42,297
Bernadine P. Healy, M.D. ....................... 27,973
Thomas E. Holloran ............................. 94,924
Glen D. Nelson, M.D.(5) ........................ 972,686
Jean-Pierre Rosso .............................. 22
Robert L. Ryan ................................. 349,386
Richard L. Schall .............................. 218,821
Jack W. Schuler ................................ 41,945
Gerald W. Simonson ............................. 74,957
Gordon M. Sprenger ............................. 46,615
Richard A. Swalin, Ph.D. ....................... 50,549
Directors and executive officers as a group
(26 persons)(2) ............................... 6,102,843
- ---------------------
(1) No director or executive officer beneficially owns more than 1% of the
shares outstanding. Medtronic's directors and executive officers as a group
beneficially own approximately 1.04% of the shares outstanding.
(2) Includes the following shares not currently outstanding but deemed
beneficially owned because of the right to acquire them pursuant to options
exercisable within 60 days (on or before August 31, 1999) as follows: W.R.
Brody, 4,681 shares; P.W. Chellgren, 6,802 shares; A.D. Collins, Jr.,
486,195 shares; B.K. Erickson, 195,271 shares; W.W. George, 745,312 shares;
A.M. Gotto, Jr., 35,711 shares; B.P. Healy, 17,836 shares; T.E. Holloran,
39,526 shares; G.D. Nelson, 660,466 shares; R.L. Ryan, 328,408 shares; R.L.
Schall, 34,872 shares; J.W. Schuler, 19,840 shares; G.W. Simonson, 34,573
shares; G.M. Sprenger, 37,419 shares; R.A. Swalin, 39,738 shares; and all
directors and executive officers as a group, 3,349,605 shares.
(3) Mr. Collins, disclaims beneficial ownership of 5,000 shares included in the
above table, which are held by the Collins Family Foundation, a charitable
trust of which he is one of the trustees.
(4) Mr. George disclaims beneficial ownership of 111,859 shares included in the
above table, which are held by the George Family Foundation, a charitable
trust of which he is one of the trustees. The above table also includes an
aggregate of 62,386 shares covered by currently exercisable options
transferred by Mr. George to members of his immediate family.
(5) The above table includes an aggregate of 98,835 shares covered by currently
exercisable options transferred by Dr. Nelson to members of his immediately
family.
(6) Mr. Schall disclaims beneficial ownership of 54,299 shares included in the
above table, which are held in a charitable lead annuity trust.
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 reports of ownership and changes in ownership of the
Company's Common Stock with the Securities and Exchange Commission and the New
York Stock Exchange, and the Company is required to identify any of those
individuals who failed to file such reports on a timely basis. To the best of
the Company's knowledge, based upon a review of such reports furnished to the
Company and written representations that no other reports were required, there
were no late filings by the Company's directors or executive officers in fiscal
1999 other than by Mr. Lund, who did not timely report several stock gifts in
December 1997. The report was promptly filed upon discovery of the oversight.
9
REPORT OF THE COMPENSATION COMMITTEE ON
FISCAL 1999 EXECUTIVE COMPENSATION
OVERVIEW.
The Compensation Committee of the Board of Directors (the "Committee") is
comprised solely of directors who are not current or former employees of the
Company. The Committee is responsible for establishing the compensation policy
and administering the compensation programs for the Company's executive officers
and other key employees. The Committee periodically engages independent
compensation consultants to assist them in this process. In carrying out its
duties, the Committee intends to make all reasonable attempts to comply with the
requirements to exempt executive compensation from the $1 million deduction
limitation under Section 162(m) of the Internal Revenue Code, unless the
Committee determines that such compliance in given circumstances would not be in
the best interests of the Company and its shareholders.
COMPENSATION PHILOSOPHY.
The compensation program for executive officers is designed to
* Emphasize performance-based compensation;
* Encourage strong financial performance by establishing aggressive
goals for target performance and highly leveraged incentive programs;
* Encourage executive stock ownership and alignment with shareholder
interests by providing a significant portion of compensation in
Company Common Stock.
The principal elements of the program consist of base salary, annual
incentives and long-term incentives in the form of stock options, performance
shares and restricted stock. The Company's philosophy is to position the
aggregate of these elements at a level which is commensurate with the Company's
size and performance relative to other leading medical equipment and
pharmaceutical companies, as well as a larger group of general industry
companies. The Committee periodically reviews the reasonableness of total
compensation levels and mix using public information from comparator company
proxy statements and survey information from credible general industry surveys.
BASE SALARY. The Committee annually reviews and approves the base salaries
of executive officers, taking into consideration individual performance,
retention, the level of responsibility, the scope and complexity of the position
and competitive practice.
ANNUAL INCENTIVE AWARDS. Executive officers are eligible for annual
incentives under the shareholder approved Management Incentive Plan. This is a
formula-based plan with awards based on corporate and business unit performance.
For fiscal 1999, corporate operating performance was assessed against target
measures of corporate profit after taxes, revenue growth and after-tax return on
net assets, with these measures given weights of 40%, 40% and 20%, respectively.
Business unit financial performance was assessed against target measures of
earnings before interest and taxes, revenue growth, and after-tax return on net
assets or net asset turnover, with these measures assigned respective weights
that vary for each participant.
For fiscal 1999, executive officers were eligible for Management Incentive
Plan target awards ranging from 35% to 70% of base salary. Final awards can
range from 0% to 230% of the target amounts, and a threshold level of
performance is required before any payout occurs.
STOCK OPTIONS. Stock options are granted annually to executive officers.
Target awards are based on pre-established grant guidelines that are calibrated
to competitive standards. Individual awards vary based on the individual's
responsibilities and performance, ability to impact financial performance and
future potential. All grants are made at 100% of fair market value.
PERFORMANCE SHARES. Top executives are eligible for grants of performance
shares under the Performance Share program. Grants are made annually for
overlapping three-year performance periods. Grant targets range from 30% to 50%
of base salary. Once a threshold level of performance is attained, final awards
can range from 20% to 180% of the target amounts. The 1999-2001 cycle will be
based on performance measures of basic earnings per share (40%), return on net
assets (40%) and revenue growth (20%).
10
Performance shares earned for the 1997-1999 cycle were based on earnings
per share (40%), after-tax return on net assets (40%) and revenue growth (20%).
Medtronic's performance for this performance cycle was very strong, resulting in
a payout at 158% of the target award. The value of the award is based on the
average price of the Company's Common Stock for the last 20 trading days of the
performance cycle, up to a maximum of three times the price at the date of
grant. Half of the award is paid in Company Common Stock, with the other half
paid in cash or Company Common Stock at the discretion of the Committee.
STOCK OPTION EXCHANGE PROGRAM. To encourage stock ownership by executives,
the Company offers a program which allows executives to elect to receive stock
options in lieu of some or all of the cash compensation earned under the
Management Incentive Plan and the Performance Share program. Currently under the
program, participants receive an option on $4 of stock at market value for every
$1 of compensation exchanged. Stock options granted to named executives in
fiscal 1999 under this program are disclosed in the "Option/SAR Grants in Last
Fiscal Year" table on page 14 of this Proxy Statement.
ADJUSTMENTS FOR ACQUISITIONS AND NON-RECURRING CHARGES. In determining
award payments with respect to the Company's short-term and long-term incentive
programs, the Committee has adopted a longstanding practice of excluding from
the calculation of performance results certain acquisitions and non-recurring
items of income or loss. Consistent with this practice, the performance results
for fiscal 1999 exclude all or a portion of certain acquisitions made during the
year, as well as all of the non-recurring charges related to those acquisitions.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. The CEO's compensation is
comprised of base salary, annual incentive and long-term incentives. Pay levels
and opportunity are established by the Committee in the same manner as for other
executive officers described above.
The CEO received a 14% merit increase to base salary effective at the
beginning of fiscal 1999. In determining the base salary for the CEO, the
Committee specifically considered annual operating performance (for fiscal
1998), strategic planning and succession planning for senior management.
For fiscal 1999, the CEO was eligible to receive a target award of 70% of
base salary under the Management Incentive Plan. Annual performance, adjusted
for acquisitions and non-recurring charges, was 94.6% of target.
In fiscal 1999, the CEO received a Performance Share grant with a target
payout equal to 50% of his base salary. Performance objectives for the 1999-2001
performance cycle are consistent with those for all program participants listed
above. For the three-year cycle ended in fiscal 1999, the Company achieved
cumulative earnings per share and average after-tax return on net assets
performance at or above the maximum of the performance targets. Revenue growth
was slightly below target. Consequently, the payout for this cycle for all
executive officers, including the CEO, was 158% of the target award.
CONCLUSION.
Consistent with its compensation philosophy, the Committee believes the
executive officer compensation program provides incentive to attain strong
financial performance and is strongly aligned with shareholder interests. The
Committee believes that the Company's compensation program directs the efforts
of the Company's executive officers toward the continued achievement of growth
and profitability for the benefit of the Company's shareholders.
COMPENSATION COMMITTEE:
Gerald W. Simonson, Chair Jean-Pierre Rosso
Michael R. Bonsignore Richard L. Schall
Paul W. Chellgren Jack W. Schuler
Bernadine P. Healy, M.D.
11
SHAREHOLDER RETURN PERFORMANCE GRAPH
The graph and table below compare the cumulative total shareholder return
on the Company's Common Stock for the last five fiscal years with the cumulative
total return on the S&P 500 Index and the S&P Health Care (Medical Products and
Supplies) Industry Index over the same period. The graph and table assume the
investment of $100 in each of the Company's Common Stock, the S&P 500 Index and
the S&P Health Care (Medical Products and Supplies) Industry Index on April 30,
1994 and that all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG MEDTRONIC,
S&P 500 AND S&P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) INDUSTRY INDEX
[PLOT POINTS CHART]
April 30, 1994 April 30, 1995 April 30, 1996 April 30, 1997 April 30, 1998 April 30, 1999
-------------- -------------- -------------- -------------- -------------- --------------
MEDTRONIC $100.00 $199.19 $286.02 $375.14 $576.89 $785.96
S&P 500 100.00 117.41 152.81 191.09 269.51 328.34
S&P HEALTH CARE 100.00 155.88 210.67 245.08 350.36 449.97
12
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years ended April 30, 1999 awarded to or earned by the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------ ------------------------------ ---------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARs PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(2)(3)(4) ($)(1) ($)(5) (#)(2)(3)(4)(6)(7) ($)(6)(7) ($)(8)
- --------------------------- ------ -------- ------------ ------------ ---------- ------------------ --------- ------------
William W. George 1999 $800,000 $329,480 $ -- $ -- 128,088 $ -- $40,530
Chairman and Chief 1998 700,000 239,252 -- 7,007,820 370,655 784,163 34,542
Executive Officer 1997 642,000 464,598 -- -- 32,908 1,431,161 43,331
Arthur D. Collins, Jr. 1999 700,000 430,203 -- -- 90,190 -- 35,515
President and 1998 589,607 348,103 -- 7,007,820 299,878 835,106 27,888
Chief Operating Officer 1997 471,000 214,703 -- -- 37,880 933,897 32,110
Glen D. Nelson, M.D. 1999 530,000 -- 5,958 -- 103,632 -- 29,057
Vice Chairman 1998 471,000 -- 5,556 -- 213,577 -- 24,923
1997 471,000 -- 5,694 -- 62,682 996,249 32,097
Robert L. Ryan 1999 390,000 -- -- -- 55,850 -- 22,533
Senior Vice President and 1998 370,000 -- -- -- 117,079 -- 19,638
Chief Financial Officer 1997 352,500 -- -- -- 34,390 683,599 22,368
Bill K. Erickson 1999 325,000 83,556 925 -- 43,554 -- 19,245
Senior Vice President & 1998 303,345 31,162 629 -- 67,402 282,304 16,606
President, Americas 1997 288,900 110,239 644 -- 14,860 543,293 20,611
- ------------------------
(1) Amounts payable by the Company in above-market interest under deferred
compensation plan.
(2) "Bonus" column does not include fiscal 1999 cash bonus payments of
$200,000, $325,725, $184,373 and $80,000 which Messrs. George, Nelson, Ryan
and Erickson, respectively, elected to forego in order to receive stock
options granted in lieu of part or all of their cash bonus compensation
under the Management Incentive Plan. These stock options are included in
the "Securities Underlying Options/SARs" column. See "Report of the
Compensation Committee on Fiscal 1999 Executive Compensation -- Stock
Option Exchange Program" and "Option/SAR Grants in Last Fiscal Year,"
below.
(3) "Bonus" column does not include fiscal 1998 cash bonus payments of
$200,000, $274,443, $165,841 and $75,000 which Messrs. George, Nelson, Ryan
and Erickson, respectively, elected to forego in order to receive stock
options granted in lieu of part or all of their cash bonus compensation
under the Management Incentive Plan. These stock options are included in
the "Securities Underlying Options/SARs" column. See "Report of the
Compensation Committee on Fiscal 1999 Executive Compensation -- Stock
Option Exchange Program."
(4) "Bonus" column does not include fiscal 1997 cash bonus payments of
$100,000, $314,703, $196,390 and $40,000 which Messrs. Collins, Nelson,
Ryan and Erickson, respectively, elected to forego in order to receive
stock options granted in lieu of part or all of their cash bonus
compensation under the Management Incentive Plan. These stock options are
included in the "Securities Underlying Options/SARs" column. See "Report of
the Compensation Committee on Fiscal 1999 Executive Compensation -- Stock
Option Exchange Program."
(5) Mr. George and Mr. Collins each received a special grant of 150,000 shares
of restricted stock in August 1997. Dollar value of such stock is based on
the fair market value on the date of grant. The stock vests 100% on a cliff
basis five years after the date of grant. Dividend equivalents are paid on
the stock. Aggregate shares of restricted stock held by named executive
officers at 4/30/99 and the value of such shares on that date (based on a
closing stock price of $71.9375 per share) are as follows: Mr. George and
Mr. Collins each held 150,000 shares valued at $10,790,625.
(6) "LTIP Payouts" column does not include the value of cash and/or stock
earned upon payment of performance share awards for the fiscal 1997-1999
performance cycle under the Company's long-term incentive plan of
$1,350,790, $892,044, $892,044, $593,399 and $486,353 which Messrs. George,
Collins, Nelson, Ryan and Erickson, respectively, elected to forgo in order
to receive stock options granted in lieu of part or all of such
compensation. Those stock options are included in the "Securities
Underlying Options/SARs" column. See "Report of the Compensation Committee
on Fiscal 1999 Executive Compensation -- Performance Shares" and "-- Stock
Option Exchange Program."
(7) "LTIP Payouts" column includes the value of both cash and stock earned in
fiscal 1998 under the Company's Performance Share program under the 1994
Stock Award Plan described in "Other Long-Term Incentive Awards" below. The
stock for the fiscal 1998 payment was valued at $52.4875 per share. The
column does not include the value of cash and/or stock earned upon payment
of performance share awards for the fiscal 1996-1998 performance cycle
under the Company's long-term incentive plan of $784,163, $200,000,
$1,035,106, $701,810 and $282,304 which Messrs. George, Collins,
13
Nelson, Ryan and Erickson, respectively, elected to forgo in order to
receive stock options granted in lieu of part or all of such compensation.
Those stock options are included in the "Securities Underlying
Options/SARs" column. See "Report of the Compensation Committee on Fiscal
1999 Executive Compensation -- Performance Shares" and -- "Stock Option
Exchange Program."
(8) Amounts in this column for fiscal 1999 include the following: the Company
contributed $4,144 in shares of Company stock under the employee stock
ownership plan for each of the named executive officers for fiscal 1999;
the Company contributed $7,776 to each of the named executive officers to
match employee contributions under the 401(k) supplemental retirement plan;
and the Company contributed $28,610, $23,595, $17,137, $10,613 and $7,325
to Messrs. George, Collins, Nelson, Ryan and Erickson, respectively, toward
the right to receive shares of Company stock under the non-qualified
supplemental benefit plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth for each of the named executives the stock
options granted by the Company in fiscal 1999 and the potential value of these
stock options determined pursuant to Securities and Exchange Commission
requirements. No stock appreciation rights were granted to the named executives
in fiscal 1999.
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------- -------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARs EMPLOYEES IN PRICE EXPIRATION 0% 5% 10%
NAME (#) FISCAL YEAR ($/Sh) DATE ($) ($)(5) ($)(5)
- ---- ------------ ------------ -------- ---------- --- ---------- ----------
W. W. George........... 35,260(1) 1.1% $63.8125 10/28/08 0 $1,417,518 $3,577,546
6,597(2) 0.2 75.1875 04/28/09 0 312,488 788,659
11,121(3) 0.4 71.9375 05/01/09 0 504,011 1,272,027
75,110(4) 2.4 71.9375 05/01/09 0 3,404,032 8,591,129
A. D. Collins, Jr. .... 35,260(1) 1.1 63.8125 10/28/08 0 1,417,518 3,577,546
5,328(2) 0.2 75.1875 04/28/09 0 252,377 636,952
49,602(4) 1.6 71.9375 05/01/09 0 2,247,994 5,673,508
G. D. Nelson, M.D. .... 31,342(1) 1.0 63.8125 10/28/08 0 1,260,007 3,180,018
4,576(2) 0.1 75.1875 04/28/09 0 216,757 547,052
18,112(3) 0.6 71.9375 05/01/09 0 820,847 2,071,662
49,602(4) 1.6 71.9375 05/01/09 0 2,247,994 5,673,508
R. L. Ryan ............ 9,403(1) 0.3 63.8125 10/28/08 0 378,018 954,046
3,199(2) 0.1 75.1875 04/28/09 0 151,531 382,434
10,252(3) 0.3 71.9375 05/01/09 0 464,627 1,172,630
32,996(4) 1.1 71.9375 05/01/09 0 1,495,399 3,774,103
B. K. Erickson ........ 9,403(1) 0.3 63.8125 10/28/08 0 378,018 954,046
2,658(2) 0.1 75.1875 04/28/09 0 125,904 317,759
4,449(3) 0.1 71.9375 05/01/09 0 201,631 508,879
27,044(4) 0.9 71.9375 05/01/09 0 1,225,651 3,093,310
- -----------------------
(1) These stock options granted to the named executive officers have an
exercise price equal to the fair market value on the date of grant and vest
annually in 25% increments.
(2) These stock options were granted in exchange for the elimination of a
senior officer Postretirement Survivor Benefit Plan. The options vest 100%
on a cliff basis at the earlier of the officer's earliest possible
retirement date or eight years after the date of grant.
(3) These stock options were granted in lieu of all or part of the cash
compensation earned for fiscal 1999 under the Company's annual incentive
plan. Because the executives elected to forego cash compensation to receive
the options, which were granted on 5/01/99, the options are 100% vested at
grant. See "Report of the Compensation Committee on Fiscal 1999 Executive
Compensation -- Stock Option Exchange Program."
(4) These stock options were granted in lieu of all or part of the cash and/or
stock compensation earned upon payment of performance share awards for the
fiscal 1997-1999 performance cycle under the Company's long-term incentive
plan. Because the executives elected to forego cash and/or stock
compensation to receive the options, which were granted on 5/01/99, the
options are 100% vested at grant. See "Report of the Compensation Committee
on Fiscal 1999 Executive Compensation -- Stock Option Exchange Program."
(5) The hypothetical potential appreciation shown in these columns reflects the
required calculations at annual rates of 5% and 10% set by the Securities
and Exchange Commission, and therefore is not intended to represent either
historical appreciation or anticipated future appreciation of the Company's
Common Stock price.
14
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth for each of the named executive officers the
value realized from stock options exercised during fiscal 1999 and the number
and value of exercisable and unexercisable stock options and stock appreciation
rights held at April 30, 1999.
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED VALUE OF
OPTIONS/SARs UNEXERCISED IN-THE-MONEY
AT FISCAL OPTIONS/SARs AT
YEAR-END(#) FISCAL YEAR-END($)(1)
SHARES VALUE --------------------- ------------------------
ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE ($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- --------------------- ------------------------
W. W. George(2) ......... 400,000 $25,840,620 740,756/551,165 $35,667,190/$21,537,142
A. D. Collins, Jr. ...... 0 0 482,135/359,979 24,682,899/9,528,779
G. D. Nelson, M.D.(3) ... 0 0 657,846/162,521 28,530,715/4,270,846
R. L. Ryan .............. 26,624 1,573,729 326,144/83,739 12,529,329/2,488,658
B. K. Erickson .......... 70,884 4,062,034 205,127/64,911 8,973,368/1,950,627
- -----------------------
(1) Value of unexercised in-the-money options is determined by multiplying the
difference between the exercise price per share and $71.9375, the closing
price per share on 4/30/99, by the number of shares subject to such
options. Amounts include stock options granted on 5/01/99 in lieu of cash
compensation earned for fiscal 1999 under the Company's annual incentive
plan and cash and/or stock compensation earned upon payment of performance
share awards for the fiscal 1997-1999 performance cycle under the Company's
Performance Share Program under the 1994 Stock Award Plan. See "Report of
the Compensation Committee on Fiscal 1999 Executive Compensation -- Stock
Option Exchange Program."
(2) Includes exercisable options to purchase an aggregate of 62,386 shares
transferred to members of Mr. George's immediate family.
(3) Includes exercisable options to purchase an aggregate of 98,835 shares
transferred to members of Dr. Nelson's immediate family.
OTHER LONG-TERM INCENTIVE AWARDS
The following table sets forth the number of performance share units
granted to each of the named executives in fiscal 1999 under the Company's 1994
Stock Award Plan and the performance-based award formula under such Plan.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR(1)
ESTIMATED FUTURE PAYOUTS
NUMBER OF UNDER NON-STOCK PRICE
SHARES, UNITS PERFORMANCE OR BASED-PLANS
OR OTHER OTHER PERIOD ------------------------------
RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT (#) (#) (#)
- ---- ------------- ---------------- --------- ------ -------
W. W. George ........... 7,621 5/1/98-4/30/01 1,525 7,621 13,718
A. D. Collins, Jr. ..... 6,669 5/1/98-4/30/01 1,334 6,669 12,005
G. D. Nelson, M.D. ..... 5,049 5/1/98-4/30/01 1,010 5,049 9,089
R. L. Ryan ............. 2,973 5/1/98-4/30/01 595 2,973 5,352
B. K. Erickson ......... 2,477 5/1/98-4/30/01 496 2,477 4,459
- -------------------
(1) Payout of awards is based on achieving specified levels of designated
performance objectives during a three-year performance cycle. Payout can
range from 0% to 180% of units granted, with 20% and 180% as the threshold
and maximum payouts, respectively. Payout of 100% of the units granted
represents the target payout. Awards are payable at least 50% in Common
Stock, with the remainder paid in cash or Common Stock at the discretion of
the Compensation Committee. The value of an award is determined when it is
earned based on the average fair market value per share for the last 20
trading days of the performance cycle. The Company offers a program which
allows executives to receive stock options in lieu of some or all of the
cash and/or stock compensation earned upon payment of performance share
awards. See "Report of the Compensation Committee on Fiscal 1999 Executive
Compensation -- Performance Shares" and "-- Stock Option Exchange Program,"
above.
15
PENSION PLAN
The Company's pension plan is a defined benefit, tax qualified retirement
plan covering most U.S. employees and generally provides 40% of the average of
the highest five consecutive years of compensation (including certain incentive
compensation) in the final ten years of service, offset by a Social Security
allowance as published each year by the Internal Revenue Service. The table
below illustrates the annual benefits payable to participants who retire at age
65 with the indicated years of service with Medtronic and with the indicated
five-year highest average annual compensation. The benefits have been calculated
on a 50% joint and survivor annuity basis. The compensation considered in
determining the pensions payable to the below-named executive officers is the
compensation shown in the "Salary" and "Bonus" columns of the Summary
Compensation Table on page 13.
FIVE-YEAR YEARS OF SERVICE WITH THE COMPANY
AVERAGE --------------------------------------------------------
ANNUAL
COMPENSATION(1) 15 20 25 30 35
- --------------- -------- -------- -------- -------- --------
$ 200,000 $ 33,878 $ 45,171 $ 56,463 $ 67,756 $ 72,331
400,000 70,478 93,971 117,463 140,956 150,106
600,000 107,078 142,771 178,463 214,156 227,881
800,000 143,678 191,571 239,463 287,356 305,656
1,000,000 180,278 240,371 300,463 360,556 383,431
1,200,000 216,878 289,171 361,463 433,756 461,206
1,400,000 253,478 337,971 422,463 506,956 538,981
- -------------------
(1) Calculated by considering a participant's compensation levels during the
ten-year period immediately preceding retirement. The credited years of
service (rounded to the nearest whole year) for the executive officers
named in the Summary Compensation Table were as follows at April 30, 1999:
W.W. George, 10 years; A.D. Collins, Jr., 7 years; G.D. Nelson, 13 years;
R.L. Ryan, 6 years; and B. K. Erickson, 28 years.
Certain limitations on the amount of benefits under the Company's tax
qualified retirement plan were imposed by the Employee Retirement Income
Security Act of 1974 ("ERISA") and Tax Reform Act of 1986 ("TRA"). The Company's
non-qualified supplemental benefit plan provides for the restoration of benefits
to officers who may be affected by those limitations so that, in general, total
benefits will be equal to the level of benefits which would have been payable
under the Company's pension plan and Employee Stock Ownership Plan but for the
ERISA and TRA limitations or for the fact that the executive has elected to
defer compensation under the Company's deferred compensation programs. The
amounts shown in the pension plan table above reflect the additional retirement
benefits provided under the non-qualified supplemental benefit plan.
EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
CHANGE IN CONTROL ARRANGEMENTS. The executive officers of the Company,
including those named in the Summary Compensation Table, have change in control
agreements (the "Agreements") with the Company. The Agreements operate only upon
the occurrence of a "change in control" as described below. Absent a "change in
control" the Agreements do not require the Company to retain the executives or
to pay them any specified level of compensation or benefits.
Each Agreement provides that for three years after a "change in control"
there will be no adverse change in the executive's salary, bonus, opportunity,
benefits or location of employment. If during this three-year period the
executive's employment is terminated by the Company other than for cause, or if
the executive terminates his employment for good reason (as defined in the
Agreements, and including compensation reductions, demotions, relocation and
excess travel), or voluntarily during the 30-day period following the first
anniversary of the "change in control," the executive is entitled to receive an
accrued salary and annual incentive payment through the date of termination and,
except in the event of death or disability, a lump sum severance payment ("Lump
Sum Payment") equal to three times (two times in the event of termination by the
executive in the aforementioned 30-day period) the
16
sum of his base salary and annual bonus (and certain insurance and other welfare
plan benefits). Further, an additional payment ("gross-up") is required in an
amount such that after the payment of all taxes, income and excise, the
executive will be in the same after-tax position as if no excise tax under the
Internal Revenue Code had been imposed.
Generally, and subject to certain exceptions, a "change in control" is
deemed to have occurred if: (a) a majority of Medtronic's Board of Directors
becomes comprised of persons other than persons for whose election proxies have
been solicited by the Board, or who are then serving as directors appointed by
the Board to fill vacancies caused by death or resignation (but not removal) of
a director or to fill newly created directorships; (b) another party becomes the
beneficial owner of at least 30% of Medtronic's outstanding voting stock; or (c)
Medtronic's shareholders approve a definitive agreement or plan to merge or
consolidate Medtronic with another party (other than certain limited types of
mergers), exchange shares of voting stock of Medtronic for shares of another
corporation pursuant to a statutory exchange, sell or otherwise dispose of all
or substantially all of Medtronic's assets, or liquidate or dissolve Medtronic.
In addition, events substantially identical to those described above also
constitute a "change in control" under certain of the Company's compensation
plans. If a "change in control" of the Company occurs, awards under the
Company's Management Incentive Plan will accelerate and, subject to certain
limitations set forth in the plan, each participant will be entitled to a final
award based on certain assumptions as to target performance and salary. The
Company's stock award plans and agreements thereunder provide that in the event
of a "change in control" of the Company, all restrictions under outstanding
restricted stock awards shall immediately lapse and the restricted stock period
with respect to all such shares shall be deemed to have expired, and performance
share awards shall vest immediately in a pro rata amount based on the portion of
the performance period elapsed prior to the "change in control" and certain
assumptions as to the anticipated performance which would have been achieved
during the applicable performance period.
The Company's stock award plans and agreements thereunder also provide for
or permit acceleration of the exercisability of outstanding stock options upon
the occurrence of certain events (such as certain tender offers or exchange
offers for the Company's stock, certain changes in control of the Company, a
merger or consolidation of the Company with another entity, or a sale of
substantially all of the Company's assets or certain plans therefor) or at the
discretion of the Board of Directors. Limited stock appreciation rights
("Limited Rights") granted under the stock option plans are exercisable, with
certain limitations, at any time within the thirty-day period following a
"change in control" of Medtronic. Upon exercise of Limited Rights, the holder is
entitled to receive an amount in cash for each share with respect to which the
Limited Rights are exercised equal to the difference between the option exercise
price per share of stock covered by the underlying option and the fair market
value per share as of the date of exercise. If Limited Rights are exercised, the
underlying option will no longer be exercisable to the extent of the number of
shares with respect to which the Limited Rights were exercised.
If a "change in control" occurs, subject to certain limitations,
Medtronic's contributions to the employee stock ownership plan for that year
will equal the greater of Medtronic's target percentage contribution (currently
2.5% of aggregate covered employee compensation in fiscal 1999) or, if a "change
in control" occurs after the first quarter of a plan year, the percentage
contribution Medtronic would have made upon completion of the plan year based on
performance as most recently projected by Medtronic prior to the "change in
control" and disregarding the effects of the "change in control." If a "change
in control" occurs during a plan year, subject to certain limitations,
Medtronic's matching contribution to the 401(k) supplemental retirement plan
shall equal the greater of Medtronic's target percentage matching contribution
(currently 75% of the first 6% of a participant's contribution in fiscal 1999),
or if the "change in control" occurs after the first quarter of a plan year, the
percentage contribution Medtronic would have made upon completion of the plan
year based on performance as most recently projected by Medtronic prior to the
"change in control" and disregarding the effects of the "change in control."
17
OTHER EMPLOYMENT ARRANGEMENTS. In anticipation of Mr. George's plan to
relinquish the role of CEO after ten years, the Board in November 1997 entered
into a letter agreement with A.D. Collins, Jr. in order to ensure his
availability as successor to the chief executive officer position. The agreement
provides that if Mr. Collins is not named chief executive officer by May 1,
2001, he may terminate employment and will receive severance benefits, and his
outstanding stock awards will accelerate and vest in full, all to the same
extent as if a change in control had occurred as provided in his change in
control agreement and the Company's plans, as discussed above. See "Change in
Control Arrangements" above.
APPROVAL TO AMEND RESTATED ARTICLES OF INCORPORATION TO INCREASE
AUTHORIZED SHARES OF COMMON STOCK
GENERAL
At present, Medtronic's Restated Articles of Incorporation authorize the
issuance of 800,000,000 shares of Common Stock, $.10 par value per share, and
2,5000,000 shares of Preferred Stock, $1.00 par value per share. At July 2, 1999
586,763,987 shares of Common Stock were outstanding and 213,236,013 shares of
Common Stock were authorized but unissued. Of these unissued shares,
approximately 46,398,813 were reserved for issuance pursuant to the Company's
stock award and other employee benefit plans. Accordingly, at July 2, 1999,
there were approximately 166,837,200 shares of Common Stock available for
general corporate purposes. No shares of Preferred Stock were outstanding at
such date.
The Board of Directors recommends that the authorized number of shares of
Common Stock be increased from 800,000,000 to 1,600,000,000. Such increase, if
approved, will be effected by amending Section 3.1 of Article 3 of Medtronic's
Restated Articles of Incorporation to increase the authorized shares of the
Company to 1,602,500,000, consisting of 1,600,000,000 shares of Common Stock and
2,500,000 shares of Preferred Stock. The full text of the proposed amended
Section 3.1 is set forth in Appendix A hereto.
The Board desires to increase the number of authorized shares of Common
Stock to give the Board flexibility to declare stock dividends or stock splits
at such times as the Board may deem appropriate (based upon the number of shares
of Common Stock outstanding and the number reserved for issuance at this time,
the Company does not have sufficient authorized shares of Common Stock to effect
a two-for-one stock dividend or stock split); to give the Board flexibility to
make acquisitions using stock; to adopt additional employee benefit plans or
increase the shares available under existing plans; to raise equity capital or
to use the additional shares for other general corporate purposes. Aside from
shares currently reserved for issuance under employee benefit plans, the Board
has not authorized the issuance of any additional shares, and there are no
current agreements or commitments for the issuance of any additional shares.
Shareholders of the Company have no preemptive rights with respect to the
Common Stock and Preferred Stock for the Company. If this proposed amendment is
adopted, the additional authorized shares of Common Stock will be available for
issuance from time to time at the discretion of the Board without further action
by the shareholders, except where shareholder approval is required by stock
exchange requirements or to obtain favorable tax treatment for certain employee
benefit plans. Although an increase in the authorized shares of common stock
could, under certain circumstances, also be construed as having an anti-takeover
effect (for example, by diluting the stock ownership of a person seeking to
effect a change in the composition of the Board of Directors or contemplating a
tender offer or other transaction for the combination of the Company with
another company), the Company is not proposing this amendment to the Restated
Articles of Incorporation in response to any effort to accumulate the Company's
stock or to obtain control of the Company by means of a merger, tender offer, or
solicitation in opposition to management.
18
VOTING REQUIREMENTS AND RECOMMENDATION
Approval of this amendment to the Company's Restated Articles requires the
affirmative vote of a majority of the shares of Common Stock of the Company
present in person or by proxy and entitled to vote on this item at the Annual
Meeting. Proxies solicited by the Board of Directors will be voted for approval
of the amendment unless shareholders specify otherwise in their proxies.
For this purpose a shareholder voting through a proxy who abstains with
respect to approval of the amendment is considered to be present and entitled to
vote on the approval for the amendment at the Meeting, and is in effect a
negative vote; but a shareholder (including a broker) who does not give
authority to a proxy to vote, or withholds authority to vote, on the approval of
the amendment shall not be considered present and entitled to vote on the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THIS AMENDMENT
TO THE COMPANY'S RESTATED ARTICLES OF INCORPORATION.
REAPPROVAL OF PERFORMANCE CRITERIA FOR
MANAGEMENT INCENTIVE PLAN
BACKGROUND
In April 1999, the Board of Directors approved, subject to shareholder
approval, the material terms of the performance criteria for the Company's
Management Incentive Plan ("MIP") so that performance-based bonuses paid under
the MIP continue to qualify for deduction under Section 162(m) of the Internal
Revenue Code of 1986. Code section 162(m) limits the annual federal tax
deduction for compensation paid to the Company's chief executive officer and the
other four most highly compensated executive officers (the "Covered Employees")
to $1,000,000. Certain performance-based compensation is excluded from this
limitation, and the MIP has been designed to comply with that exception.
Currently, the tax regulations provide that, every five years, the
Company's shareholders must approve the material terms of the performance
criteria specified in the MIP and which the Compensation Committee may establish
for annual bonuses payable to Covered Employees. The MIP was last approved by
the shareholders at the Company's 1994 annual meeting. Accordingly, the material
terms of the performance criteria specified in the MIP, as amended by the Board,
are being presented to the shareholders for approval at the 1999 annual meeting.
PURPOSE
The MIP is designed to motivate officers and other key employees to achieve
the Company's operating goals by providing the opportunity for incentive
compensation in addition to annual salaries. The MIP is also designed to promote
the accomplishment of management's primary annual objectives as reflected in the
Company's annual operating plan, in the various business unit annual operating
plans and in the objectives established by management for employees, and to
recognize the achievement of these objectives through the payment of incentive
compensation.
ELIGIBILITY
Eligible employees include executive officers, heads of key staff
functions, heads of operating business units and other major contributors to
business unit or corporate results. Each year, the Compensation Committee will
select those Covered Employees who may participate in the MIP. Other
participants will be selected by the chief executive officer.
PERFORMANCE CRITERIA
At the beginning of each year, each participant, including Covered
Employees, are assigned to a specific participation category. The range of
potential awards to participants under the MIP is stated as
19
percentages of each participant's salary. If minimum performance objectives are
met or exceeded, actual awards will fall within a scale ranging from designated
minimum awards to designated target awards to designated maximum awards. The
designated target award for each participation category is referred to as the
"Target Award Percentage."
Each participant, including Covered Employees, is also assigned to a
specified performance category, which will set forth the weighted combinations
of performance factors to be considered in connection with the award. Such
factors may be one or a combination of the performance of the participant
individually, as part of a team or as a member of management, the participant's
division or other business unit, and the Company as a whole. Performance
categories for Covered Employees will be based solely on one or any combination
of two or more of the following factors: revenue; revenue per employee; earnings
before income tax (profit before taxes); earnings before interest and income
tax; net earnings (profit after taxes); earnings per employee; tangible,
controllable or total asset turnover; earnings per share; operating income;
total shareholder return; market share; return on equity; before-or after-tax
return on net assets; distribution expense; inventory turnover or economic value
added (economic profit); and such criteria may relate to one or any combination
of two or more of corporate, group, unit, division, affiliate or individual
performance.
At the beginning of each year, the Committee will establish objectives by
which performance during the year will be measured, and each objective will have
a stated target. At the end of the year, the degree of achievement for each
objective will be expressed as a percentage of the stated target.
At the beginning of each year, the Committee will also establish a minimum
threshold level of financial objectives which the Company must achieve before
awards may be paid under the MIP. If those minimum threshold objectives are not
met, no awards will be paid to participants, including Covered Employees,
regardless of whether other objectives have been met. Similar minimum thresholds
may be established for a business unit.
Final awards will equal the sum of the corporate financial portion, the
unit financial portion and the management portion as determined under the terms
of the MIP. Each portion is the product of the participant's salary; the Target
Award Percentage for the participant's Participation category; the financial
percentage under the performance category; and the corporate performance, unit
financial or management score, as the case may be. No Covered Employee may
receive an award in excess of $3,000,000 (increased from $2,000,000 effective
April 30, 1999).
VOTING REQUIREMENTS AND RECOMMENDATION
Approval of the material terms of MIP's performance criteria requires the
affirmative vote of a majority of the shares of the Company's Common Stock
present in person or by proxy and entitled to vote on this item at the Annual
Meeting. Proxies solicited by the Board of Directors will be voted for approval
of the MIP, unless shareholders specify otherwise in their proxies.
For this purpose, a shareholder voting through a proxy who abstains with
respect to approval of the material terms of the performance criteria of the MIP
is considered to be present and entitled to vote on the approval of the MIP at
the Annual Meeting, and is in effect a negative vote, but a shareholder
(including a broker) who does not give authority to a proxy to vote, or
withholds authority to vote, on the approval of the MIP shall not be considered
present and entitled to vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE MATERIAL TERMS
OF THE PERFORMANCE CRITERIA OF THE MANAGEMENT INCENTIVE PLAN.
REAPPROVAL OF PERFORMANCE CRITERIA FOR
PERFORMANCE SHARE AWARDS UNDER
1994 STOCK AWARD PLAN
BACKGROUND
In April 1999, the Board of Directors approved, subject to shareholder
approval, the material terms of the performance criteria for performance share
awards under the Company's 1994 Stock Award Plan
20
("the 1994 Plan") so that such awards continue to qualify for deduction under
Section 162(m) of the Internal Revenue Code of 1986. Code Section 162(m) limits
the annual federal tax deduction for compensation paid to the Company's chief
executive officer and the other four most highly compensated executive officers
(the "Covered Employees") to $1,000,000. Certain performance-based compensation
is excluded from this limitation, and the performance share awards under the
1994 Plan have been designed to comply with that exception.
Currently, the tax regulations provide that, every five years, the
Company's shareholders must approve the material terms of the performance
criteria specified in the 1994 Plan for performance share awards and which the
Compensation Committee may establish for awards granted to Covered Employees.
The performance criteria specified in the 1994 Plan was last approved by the
shareholders at the Company's 1994 annual meeting. Accordingly, the material
terms of the performance criteria specified in the 1994 Plan, as amended by the
Board, are being presented to the shareholders for approval at the 1999 meeting.
PURPOSE
The purpose of the 1994 Plan is to motivate key personnel to produce a
superior return to the Company's shareholders by offering such individuals an
opportunity to realize stock appreciation, by facilitating stock ownership and
by rewarding them for achieving a high level of corporate performance. The 1994
Plan is also intended to facilitate recruiting and retaining key personnel of
outstanding ability.
ELIGIBILITY AND NUMBER OF SHARES
All employees of the Company and its affiliates are eligible for
performance share awards under the 1994 Plan. The Compensation Committee will
select those employees, including Covered Employees, who may receive performance
share awards. No employee may receive performance shares relating to more than
680,000 shares (as adjusted for stock splits) over a five-year period.
PERFORMANCE CRITERIA
Performance shares entitle the recipient to payment in amounts determined
by the Committee upon the achievement of specified performance targets during a
specified term. For Covered Employees, such performance targets will consist of
one or any combination of two or more of the following factors: revenue; revenue
per employee; earnings before income tax (profit before taxes); earnings before
interest and income tax; net earnings (profit after taxes); earnings per
employee; tangible, controllable or total asset turnover; earnings per share;
operating income; total shareholder return; market share; return on equity;
before- or after-tax return on net assets; distribution expense; inventory
turnover or economic value added (economic profit); and such criteria may relate
to one or any combination of two or more of corporate, group, unit, division,
affiliate or individual performance. The value in dollars is determined when the
award is earned based on the average fair market value per share for the last 20
trading days of the performance cycle.
Payments with respect to performance share awards may be paid in cash,
shares of the Company's Common Stock or a combination of cash and Common Stock
as determined by the Compensation Committee. Subject to the limit described
above, at least 25% of the value of vested performance shares must be
distributed in the form of stock (or such higher percentage as the Committee may
from time to time determine, which is currently 50%).
VOTING REQUIREMENTS AND RECOMMENDATION
Approval of the performance criteria for performance share awards under the
1994 Plan requires the affirmative vote of a majority of the shares of the
Company's Common Stock present in person or by proxy and entitled to vote on
this item at the Annual Meeting. Proxies solicited by the Board of Directors
will be voted for approval of such performance criteria, unless shareholders
specify otherwise in their proxies.
21
For this purpose, a shareholder voting through a proxy who abstains with
respect to approval of the material terms of the performance criteria for
performance share awards under the 1994 Plan is considered to be present and
entitled to vote on the approval of such performance criteria at the Annual
Meeting, and is in effect a negative vote, but a shareholder (including a
broker) who does not give authority to a proxy to vote, or withholds authority
to vote, on the approval of the performance criteria shall not be considered
present and entitled to vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE MATERIAL TERMS
OF THE PERFORMANCE CRITERIA FOR PERFORMANCE SHARE AWARDS UNDER THE 1994 STOCK
AWARD PLAN.
APPROVAL OF SELECTION OF AUDITORS
Upon recommendation of its Audit Committee, Medtronic's Board has selected
PricewaterhouseCoopers LLP, certified public accountants, as independent
auditors for Medtronic for the fiscal year ending April 30, 2000. That firm has
acted as independent auditors for Medtronic for more than 20 years, and the
Board considers it highly qualified. Although it is not required to do so, the
Board of Directors wishes to submit the selection of PricewaterhouseCoopers LLP
for shareholders' approval at the Meeting. If the shareholders do not give
approval, the Board will reconsider its selection.
Representatives of PricewaterhouseCoopers LLP will be present at the
Meeting, will have the opportunity to make a statement if they desire and will
be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THIS
APPOINTMENT.
GENERAL
The costs of soliciting proxies will be borne by Medtronic, including the
reimbursement to record holders of their expenses in forwarding proxy materials
to beneficial owners. Directors, officers and regular employees of Medtronic,
without extra compensation, may solicit proxies personally or by mail,
telephone, fax, telex, telegraph or special letter.
Medtronic has retained ChaseMellon Shareholder Services, L.L.C., a firm
that provides professional proxy soliciting services, to aid in the solicitation
of proxies for a fee of $9,500 plus reimbursement for certain out-of-pocket
expenses.
Shareholder proposals for consideration at the Company's 2000 Annual
Meeting (anticipated date August 24, 2000) must follow the procedures set forth
in Rule 14a-8 under the Securities Exchange Act of 1934 and the Company's
Restated Articles of Incorporation. To be timely under Rule 14a-8, shareholder
proposals must be received by the Company by March 23, 2000 in order to be
considered for inclusion in the Company's Proxy Statement. Under the Company's
Restated Articles of Incorporation, if a shareholder plans to bring an item of
business before a meeting of shareholders, the shareholder must notify the
Company not less than 50 days nor (except for shareholder proposals subject to
Rule 14a-8) more than 90 days prior to the meeting, provided, however, that if
less than 60 days notice of the meeting date is given, notice by the shareholder
to be timely must be received not later than the close of business on the 10th
day following the day on which notice of the meeting date is mailed or public
disclosure of such date was made. If the Company does not receive notice of a
shareholder proposal within the time requirements set forth in the Restated
Articles of Incorporation, then the Company will not be required to present such
proposal at the 2000 Annual Meeting of Shareholders. The proposals must also
comply with all applicable statutes and regulations.
22
Medtronic's 1999 Annual Shareholders Report, including financial
statements, is being sent to shareholders of record as of July 2, 1999, together
with this Proxy Statement.
MEDTRONIC WILL FURNISH TO SHAREHOLDERS WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED APRIL 30, 1999, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, UPON RECEIPT OF WRITTEN REQUEST ADDRESSED
TO: INVESTOR RELATIONS DEPARTMENT, MEDTRONIC, INC., 7000 CENTRAL AVENUE N.E.,
MINNEAPOLIS, MINNESOTA 55432.
The Board of Directors knows of no other matters to be presented at the
Annual Meeting. If any other business properly comes before the Annual Meeting
or any adjournment thereof, the proxies will vote on that business in accordance
with their best judgment.
By Order of the Board of Directors,
/s/ Ronald E. Lund
Ronald E. Lund, Secretary
MEDTRONIC, INC.
23
APPENDIX A
PROPOSED AMENDMENT TO ARTICLE 3, SECTION 3.1 OF MEDTRONIC, INC.'S RESTATED
ARTICLES OF INCORPORATION
(LANGUAGE TO BE ADDED to the text has been underlined and language to be
deleted has been enclosed in brackets"[ ]").
3.1 AUTHORIZED SHARES; ESTABLISHMENT OF CLASSES AND SERIES. The aggregate
number of shares the corporation has authority to issue shall be 1,602,500,000
-------------
[802,500,000] shares, which shall consist of 1,600,000,000
-------------
[800,000,000] shares of Common Stock with a par value of $.10 per share, and
2,500,000 shares of Preferred Stock with a par value of $1.00 per share. The
Board of Directors is authorized to establish from the shares of Preferred
Stock, by resolution adopted and filed in the manner provided by law, one of
more classes of series of Preferred Stock, and to set forth the designation of
each such class or series and fix the relative rights and preferences of each
such class or series of Preferred Stock, including, but not limited to, fixing
the relative voting rights, if any, of each class or series of Preferred Stock
to the full extent permitted by law. Holders of Common Stock shall be entitled
one vote for each share of Common Stock held of record.
24
[LOGO]
MEDTRONIC
WHEN LIFE DEPENDS ON MEDICAL TECHNOLOGY
ANNUAL MEETING
AUGUST 25, 1999
WEDNESDAY, 10:30 A.M., CENTRAL DAYLIGHT TIME
MEDTRONIC, INC.
CORPORATE CENTER
RICE CREEK FACILITY
7000 CENTRAL AVE. N.E.
MINNEAPOLIS (FRIDLEY), MINNESOTA
- --------------------------------------------------------------------------------
PROXY CARD
[LOGO] MEDTRONIC, INC.
MEDTRONIC 7000 CENTRAL AVE. N.E.
MINNEAPOLIS (FRIDLEY), MINNESOTA
- --------------------------------------------------------------------------------
The undersigned appoints WILLIAM W. GEORGE and RONALD E. LUND, and each of them,
as Proxies, each with the power to appoint his substitute, to represent and
vote, as designated below, all shares of the undersigned at the 1999 Annual
Meeting of Shareholders of Medtronic, Inc. at the Medtronic, Inc. Corporate
Center at its Rice Creek facility, 7000 Central Avenue N.E., Minneapolis
(Fridley), Minnesota, at 10:30 a.m., Central Daylight Time, on Wednesday, August
25, 1999, and at any adjournment thereof.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS, MEDTRONIC, INC.
(CONTINUED, AND TO BE SIGNED AND DATED ON OTHER SIDE)
YOU CAN NOW VOTE YOUR SHARES BY TELEPHONE OR THE INTERNET ----------------
_____________QUICK *** EASY **** IMMEDIATE COMPANY #
CONTROL #
----------------
Your telephone or internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, dated, signed and returned your proxy card.
Telephone and internet voting are available 24 hours a day, 7 days a week until
noon (ET), on August 24, 1999.
TO VOTE BY TELEPHONE:
1. Using a touch-tone phone, call 1-800-240-6326. This is a toll-free call.
Have your proxy card in hand when you call.
2. When prompted, enter the Company number and Control number shown in the
upper right corner of this proxy card. After following the voting
instructions, your vote will be confirmed when you hear "Thank you for
voting."
TO VOTE VIA THE INTERNET:
1. Go to the website http://www.eproxy.com/mdt/ and enter the Company number
and Control number in the upper right corner of this proxy card when
prompted.
2. Follow the step-by-step instructions on the computer screen.
TO VOTE BY MAIL:
1. Mark, sign and date the proxy card and return it in the postage-paid
envelope provided.
-- THANK YOU FOR VOTING --
IF YOU VOTE BY TELEPHONE OR INTERNET, DO NOT MAIL BACK THIS PROXY CARD
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR ITEMS 1, 2, 3, 4 AND 5.
1. Set board size at fourteen members and elect four Class I Directors for
three-year terms:
Nominees: 01 Glen D. Nelson, M.D. 03 Jack W. Schuler [ ] FOR [ ] WITHHOLD
02 Jean-Pierre Rosso 04 Gerald W. Simonson all nominees from all nominees
______________________________________
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), | |
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX TO THE RIGHT.) |______________________________________|
[ARROW] PLEASE FOLD HERE [ARROW]
2. To approve an amendment to the Company's Restated Articles
of Incorporation to increase the number of shares of Common
Stock the Company is authorized to issue. [ ] For [ ] Against [ ] Abstain
3. To reapprove the performance criteria for the Company's
Management Incentive Plan. [ ] For [ ] Against [ ] Abstain
4. To reapprove the performance criteria for the Company's
1994 Stock Award Plan. [ ] For [ ] Against [ ] Abstain
5. To approve appointment of PricewaterhouseCoopers LLP as
the Company's independent auditors. [ ] For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED
FOR EACH PROPOSAL.
Address Change? Mark Box [ ] [ ] Mark the box if you have more than one
Indicate changes below: account and want to discontinue receiving
multiple copies of future annual reports.
Date ____________________________, 1999
______________________________________
| |
| |
|______________________________________|
Signature(s) in Box
PLEASE DATE AND SIGN ABOVE exactly as
name appears, indicating, if appropriate,
official position or representative
capacity. If stock is held in joint
tenancy, each joint owner should sign.
[LOGO]
MEDTRONIC
WHEN LIFE DEPENDS ON MEDICAL TECHNOLOGY
ANNUAL MEETING
AUGUST 25, 1999
WEDNESDAY, 10:30 A.M., CENTRAL DAYLIGHT TIME
MEDTRONIC, INC.
CORPORATE CENTER
RICE CREEK FACILITY
7000 CENTRAL AVE. N.E.
MINNEAPOLIS (FRIDLEY), MINNESOTA
- --------------------------------------------------------------------------------
PROXY CARD
[LOGO] MEDTRONIC, INC.
MEDTRONIC 7000 CENTRAL AVE. N.E.
MINNEAPOLIS (FRIDLEY), MINNESOTA
- --------------------------------------------------------------------------------
The undersigned appoints WILLIAM W. GEORGE and RONALD E. LUND, and each of them,
as Proxies, each with the power to appoint his substitute, to represent and
vote, as designated below, all shares of the undersigned at the 1999 Annual
Meeting of Shareholders of Medtronic, Inc. at the Medtronic, Inc. Corporate
Center at its Rice Creek facility, 7000 Central Avenue N.E., Minneapolis
(Fridley), Minnesota, at 10:30 a.m., Central Daylight Time, on Wednesday, August
25, 1999, and at any adjournment thereof.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS, MEDTRONIC, INC.
(CONTINUED, AND TO BE SIGNED AND DATED ON OTHER SIDE)
TO VOTE YOUR PROXY
Mark, sign and date the proxy card and return it in the postage-paid
envelope provided.
-- THANK YOU FOR VOTING --
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR ITEMS 1, 2, 3, 4 AND 5.
1. Set board size at fourteen members and elect four Class I Directors for
three-year terms:
Nominees: 01 Glen D. Nelson, M.D. 03 Jack W. Schuler [ ] FOR [ ] WITHHOLD
02 Jean-Pierre Rosso 04 Gerald W. Simonson all nominees from all nominees
______________________________________
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), | |
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX TO THE RIGHT.) |______________________________________|
[ARROW] PLEASE FOLD HERE [ARROW]
2. To approve an amendment to the Company's Restated Articles
of Incorporation to increase the number of shares of Common
Stock the Company is authorized to issue. [ ] For [ ] Against [ ] Abstain
3. To reapprove the performance criteria for the Company's
Management Incentive Plan. [ ] For [ ] Against [ ] Abstain
4. To reapprove the performance criteria for the Company's
1994 Stock Award Plan. [ ] For [ ] Against [ ] Abstain
5. To approve appointment of PricewaterhouseCoopers LLP as
the Company's independent auditors. [ ] For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED
FOR EACH PROPOSAL.
Address Change? Mark Box [ ] [ ] Mark the box if you have more than one
Indicate changes below: account and want to discontinue receiving
multiple copies of future annual reports.
Date ____________________________, 1999
______________________________________
| |
| |
|______________________________________|
Signature(s) in Box
PLEASE DATE AND SIGN ABOVE exactly as
name appears, indicating, if appropriate,
official position or representative
capacity. If stock is held in joint
tenancy, each joint owner should sign.
PROXY CARD
[LOGO] MEDTRONIC, INC.
MEDTRONIC 7000 CENTRAL AVE. N.E.
MINNEAPOLIS (FRIDLEY), MINNESOTA
- --------------------------------------------------------------------------------
The undersigned appoints WILLIAM W. GEORGE and RONALD E. LUND, and each of them,
as Proxies, each with the power to appoint his substitute, to represent and
vote, as designated below, all shares of the undersigned at the 1999 Annual
Meeting of Shareholders of Medtronic, Inc. at the Medtronic, Inc. Corporate
Center at its Rice Creek facility, 7000 Central Avenue N.E., Minneapolis
(Fridley), Minnesota, at 10:30 a.m., Central Daylight Time, on Wednesday, August
25, 1999, and at any adjournment thereof.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS, MEDTRONIC, INC.
(CONTINUED, AND TO BE SIGNED AND DATED ON OTHER SIDE)
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR ITEMS 1, 2, 3, 4 AND 5.
1. Set board size at fourteen members and elect four Class I Directors for
three-year terms:
Nominees: 01 Glen D. Nelson, M.D. 03 Jack W. Schuler [ ] FOR [ ] WITHHOLD
02 Jean-Pierre Rosso 04 Gerald W. Simonson all nominees from all nominees
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(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), | |
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX TO THE RIGHT.) |______________________________________|
2. To approve an amendment to the Company's Restated Articles
of Incorporation to increase the number of shares of Common
Stock the Company is authorized to issue. [ ] For [ ] Against [ ] Abstain
3. To reapprove the performance criteria for the Company's
Management Incentive Plan. [ ] For [ ] Against [ ] Abstain
4. To reapprove the performance criteria for the Company's
1994 Stock Award Plan. [ ] For [ ] Against [ ] Abstain
5. To approve appointment of PricewaterhouseCoopers LLP as
the Company's independent auditors. [ ] For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED
FOR EACH PROPOSAL.
Date ____________________________, 1999
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Signature(s) in Box
PLEASE DATE AND SIGN ABOVE exactly as
name appears, indicating, if appropriate,
official position or representative
capacity. If stock is held in joint
tenancy, each joint owner should sign.