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
ST. JUDE MEDICAL, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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 0-11:1
(4) Proposed maximum aggregate value of transaction:
[ ] 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:
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
March 27, 1995
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of St.
Jude Medical, Inc. at the Lutheran Brotherhood Auditorium, Lutheran
Brotherhood Building, 625 Fourth Avenue South, Minneapolis, Minnesota, on
Wednesday, May 3, 1995 at 9:30 a.m.
This booklet includes the Notice of Annual Meeting and the Proxy Statement.
The Proxy Statement describes the business to be transacted at the meeting
and provides other information concerning the Company which you should be
aware of when you vote your shares.
The principal business of the Annual Meeting will be the election of
directors, approval of the Management Incentive Compensation Plan, and
approval of the appointment of the independent auditors. As in prior years,
we plan to review the status of the Company's business at the meeting.
At last year's Annual Meeting over 77% of the outstanding shares were
represented. It is important that your shares be represented whether or not
you are personally able to attend the meeting. Regardless of the number of
shares you own, your vote is important. In order to ensure that you will be
represented, we ask you to please sign, date and return the enclosed proxy
card promptly. This will not limit your right to vote in person or to attend
the Annual Meeting.
As is our usual practice, we have provided space on the proxy card for
comments from our registered shareholders. I urge you to use it to let us
know your feelings about the Company or to bring a particular matter to our
attention. If you hold your shares through an intermediary, please feel free
to write directly to us.
Sincerely yours,
Ronald A. Matricaria
Chairman, President and Chief Executive Officer
St. Jude Medical, Inc.
One Lillehei Plaza
St. Paul, Minnesota 55117 U.S.A.
612/483-2000
Telex 298453
ST. JUDE MEDICAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of St. Jude
Medical, Inc. will be held at the Lutheran Brotherhood Auditorium, Lutheran
Brotherhood Building, 625 Fourth Avenue South, Minneapolis, Minnesota on May
3, 1995 at 9:30 a.m. for the following purposes:
1. To elect three directors.
2. To ratify and approve the St. Jude Medical, Inc. Management Incentive
Compensation Plan.
3. To ratify and approve the selection of independent auditors for the Company
for the current fiscal year.
4. To transact such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 9, 1995 as
the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
By Order of the Board of Directors
Thomas H. Garrett III
Secretary
St. Paul, Minnesota
March 27, 1995
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN
YOUR PROXY ON THE ENCLOSED PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND IN
PERSON. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE
IN PERSON IF THEY DESIRE.
ST. JUDE MEDICAL, INC.
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of St. Jude Medical,
Inc. (the "Company") in connection with the solicitation of proxies by the
Board of Directors of the Company to be voted at the Annual Meeting of
Shareholders to be held on May 3, 1995, or any adjournment(s) thereof. The
Company's principal offices are located at One Lillehei Plaza, St. Paul,
Minnesota 55117. The mailing of this Proxy Statement to shareholders of the
Company commenced on or about March 27, 1995.
Any proxy may be revoked at any time before it is voted by written notice,
mailed or delivered to the Secretary of the Company, or by revocation of a
written proxy by request in person at the Annual Meeting; but if not so
revoked, the shares represented by such proxy will be voted according to your
directions. If your proxy card is signed and returned without specifying a
vote or an abstention on any proposal, it will be voted according to the
recommendation of the Board of Directors on each proposal.
Under Minnesota law, each item of business properly presented at a meeting of
shareholders generally must be approved by the affirmative vote of the
holders of a majority of the voting power of the shares present, in person or
by proxy, and entitled to vote on that item of business. However, if the
shares present and entitled to vote on that item of business would not
constitute a quorum for the transaction of business at the meeting, then the
item must be approved by a majority of the voting power of the minimum number
of shares that would constitute such a quorum. A shareholder who submits
votes by proxy (including, in the case of shares held in street name, votes
directed by brokers at their discretion on certain non-controversial matters
as allowed under New York Stock Exchange rules) but does not vote on a
specific item of business is not considered to be present and entitled to
vote with respect to such item of business. On the other hand, a shareholder
who specifically abstains with respect to an item of business but otherwise
gives a proxy authority to vote on the shareholder's behalf will be counted
as being present and entitled to vote on such item even though the proxy may
not vote on such item on the shareholder's behalf.
The total number of shares of stock outstanding and entitled to vote at the
Annual Meeting as of March 9, 1995 consisted of 46,491,032 shares of $.10 par
value common stock. Each share of common stock is entitled to one vote and
there is no cumulative voting. Only shareholders of record at the close of
business on March 9, 1995 will be entitled to vote at the meeting. The
presence, in person or by proxy, of holders of a majority of the shares of
common stock entitled to vote at the Annual Meeting of Shareholders
constitutes a quorum for the transaction of business.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information provided to the Company as to the
beneficial ownership of the Company's common stock as of March 9, 1995 by (i)
persons holding 5% or more of such stock, (ii) named executive officers and
(iii) all directors and executive officers as a group:
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
BENEFICIAL OWNERS OWNED OUTSTANDING SHARES
<S> <C> <C>
Named Executive Officers:
Ronald A. Matricaria 197,859(1) .4%
Eric W. Sivertson 65,258(1) .1%
Stephen L. Wilson 35,713(1) .1%
John P. Berdusco 14,892(1) *
Todd F. Davenport 31,453(1) .1%
Directors and Executive
Officers as a Group (18) 979,828(2) 2.1%
FMR Corp. 6,971,618(3) 15.0%
82 Devonshire Street
Boston, Massachusetts
</TABLE>
* Less than .1%
(1) Includes 178,250, 41,000, 31,200, 12,450 and 27,750, shares which Messrs.
Matricaria, Sivertson, Wilson, Berdusco and Davenport, respectively, may
acquire within sixty days from the date hereof, pursuant to the exercise of
stock options.
(2) Includes 566,800 shares which such individuals may acquire within sixty
days from the date hereof, pursuant to the exercise of stock options.
(3) As of December 31, 1994, FMR Corp. reported it beneficially owned 6,971,618
shares of the Company's common stock of which it held sole power to vote or
direct the vote of 381,278 shares.
1. ELECTION OF DIRECTORS
Three directors will be elected to three-year terms at the Annual Meeting.
Pursuant to the Company's Articles of Incorporation, the Board of Directors
is divided into three classes of directors, each director serving a
three-year term. Each year only one class of directors is subject to a
shareholder vote.
The Board of Directors has nominated for election the persons named below. It
is intended that proxies will be voted for such nominees. The Company
believes that each nominee named below will be able to serve; but should any
such nominee be unable to serve as a director, the persons named in the
proxies have advised that they will vote for the election of such substitute
nominee as the Board of Directors may propose.
The names and ages of the nominees and other directors, their principal
occupations, and amount of common stock of the Company owned by each such
person are set forth below, based upon information furnished to the Company
by such persons. Ownership of common stock of the Company is given as of
March 9, 1995.
<TABLE>
<CAPTION>
COMMON
STOCK PERCENT OF
DIRECTOR BENEFICIALLY OUTSTANDING
NAME AND AGE PRINCIPAL OCCUPATION SINCE OWNED SHARES
<S> <C> <C> <C> <C>
DIRECTORS NOMINATED FOR A TERM ENDING IN 1998:
William R. Miller (66) Director of various companies 1991 10,000(1) *
Kenneth G. Langone (59) Managing Director 1994 35,000(1) .1%
Invemed Associates, Inc.,
New York, NY
(Investment banking)
Gail R. Wilensky (51) Senior Fellow 1995 0(1) *
Project Hope, Washington, D.C.
OTHER DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER
THE ANNUAL MEETING AND WHOSE TERMS EXPIRE IN 1996:
Lawrence A. Lehmkuhl (57) Director of various companies 1985 433,702(1) .9%
Thomas H. Garrett III (50) Attorney 1979 55,850(1) .1%
Lindquist & Vennum P.L.L.P.
Minneapolis, MN
Roger G. Stoll (52) CEO and President 1991 10,900(1) *
Ohmeda, Inc.
Liberty Corner, NJ
(medical products)
OTHER DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER
THE ANNUAL MEETING AND WHOSE TERMS EXPIRE IN 1997:
Charles V. Owens, Jr. (67) Chairman of the Board 1983 18,550(1) *
Genesis Labs, Inc.
Minneapolis, MN
(medical products)
Ronald A. Matricaria (52) Chairman, President and 1993 197,859(1) .4%
CEO of the Company
Walter L. Sembrowich (52) Co-Chairman of the Board 1994 5,000(1) *
Diametrics Medical, Inc.
Roseville, MN
(medical products)
</TABLE>
* Less than .1%
(1) Includes 9,000, 0, 0, 191,750, 33,000, 9,000, 12,000, 178,250, and 3,000
shares which Messrs. Miller and Langone, Ms. Wilensky, Messrs. Lehmkuhl,
Garrett, Stoll, Owens, Matricaria and Sembrowich, respectively, may acquire
within sixty days from the date hereof, pursuant to the exercise of stock
options.
OTHER INFORMATION REGARDING THE BOARD
BUSINESS EXPERIENCE.
Mr. Miller retired as Vice Chairman of the Board of Directors of Bristol-Myers
Squibb Company, a pharmaceutical company, in 1991 after six years in that
position. Mr. Miller is a director of ISIS Pharmaceuticals, a biotechnology
company, and Westvaco Corporation, a paper, packaging and chemicals company. He
also serves on the Board of Trustees of the Cold Spring Harbor Laboratory and is
a past Chairman of the Board of the Pharmaceutical Manufacturers Association.
Mr. Langone is the founder, Chairman of the Board, President, Chief Executive
Officer and Managing Director of Invemed Associates, Inc., a New York Stock
Exchange member firm engaging in investment banking and brokerage. He is also a
co-founder of Home Depot, Inc., a retail company, and has been a director and a
member of the Executive Committee of its board since it was founded in 1978. Mr.
Langone serves on the boards of AutoFinance Group, Inc., a financial services
company, Baby Superstore, Inc., a retail company, GMIS, Inc., a computer
software and services company, and Unifi, Inc., a textile company. He also
serves on the boards of a number of charitable and educational organizations.
Dr. Wilensky currently serves as a Senior Fellow for Project HOPE, an
international health foundation. From 1992 to 1993 she served as the Deputy
Assistant to President George Bush for policy development, and from 1990 to 1992
she was the Administrator of the Health Care Financing Administration directing
the Medicaid and Medicare programs for the United States. She currently serves
as Trustee for the Combined Benefits Fund of the United Mineworkers of America,
Governor on the Board of the Research Triangle Institute and as a director on
the boards of Syncor International, United HealthCare Corporation, Suburban
Hospital, and Coram Health, all health care service companies; Marion
Merrell-Dow, a pharmaceutical company; and Advanced Tissue Sciences, a tissue
engineering company.
Mr. Lehmkuhl served as President and Chief Executive Officer of the Company from
February 1985 until April 1993, at which time he was named as the Company's
Chairman of the Board, a position he held through January 1995. Prior to joining
St. Jude Medical, Mr. Lehmkuhl was employed by American Hospital Supply
Corporation in various management capacities from 1966 to 1985 including
President of the American Converters, Hamilton and V. Mueller divisions. Mr.
Lehmkuhl is also a director of the following medical product companies:
Aequitron Medical, Inc., Mitek Surgical Products, Inc. and Fischer Imaging
Corporation.
Mr. Garrett has been a member of the law firm of Lindquist & Vennum P.L.L.P. of
Minneapolis, Minnesota since 1970 and has been managing partner since 1993.
Lindquist & Vennum P.L.L.P. has represented the Company since its inception. Mr.
Garrett is also a director of Check Technology Corporation, a manufacturer of
financial document printing systems.
Dr. Stoll is the Chief Executive Officer and President of Ohmeda, Inc., a
medical device and pharmaceutical manufacturer, and is a director of the BOC
Group, plc., of which Ohmeda is a subsidiary. He was previously employed by
Miles Inc., a wholly owned subsidiary of Bayer, AG, a German pharmaceutical
company, and served as Executive Vice President and General Manager of its
Diagnostics Business Group from 1987 to 1991 and Chief Administrative Officer
from 1986 to 1987. Dr. Stoll was also Chairman of the Board of Molecular
Diagnostics, Inc., and was a director of Bayer Diagnostics in Germany and
Miles-Sankyo in Japan. From 1976 to 1986, Dr. Stoll was employed by American
Hospital Supply Corporation, serving most recently as President of the Critical
Care Division. Dr. Stoll currently serves on the boards of the Health Industry
Manufacturing Association and St. Barnabas Medical Center in Livingston, New
Jersey.
Mr. Owens was employed by Miles Laboratories, Inc., a pharmaceutical company,
from 1951 to 1982, serving as Executive Vice President from 1977 to 1982. From
1983 to 1985 he served as Chairman and Chief Executive Officer of Kyoto
Diagnostics, Inc., a marketing organization for medical diagnostics and devices.
From 1985 to 1988, Mr. Owens served as the Chief Executive Officer of Genesis
Labs, Inc., a manufacturer of medical diagnostic products, and since 1988 has
been Chairman of the Board. He also serves as an industry consultant to various
medical diagnostic and device companies. Mr. Owens has served as Chairman of the
Diagnostics and Devices Section of the Pharmaceutical Manufacturers Association
and as a director of the Health Industry Manufacturers Association. He is also a
director of Chronimed Inc., a company which markets pharmaceuticals and
educational materials directly to patients.
Mr. Matricaria was appointed President and Chief Executive Officer and a
director of the Company in April 1993. In January 1995, Mr. Matricaria was also
appointed as the Company's Chairman of the Board. Prior to joining St. Jude
Medical, Mr. Matricaria was employed by Eli Lilly and Company since 1970 where
he most recently was Executive Vice President of the Pharmaceutical Division and
President of its North American Operations. Previously he served as President of
Eli Lilly International, President -- Medical Devices and Diagnostics Division,
and President and Chief Executive Officer -- Cardiac Pacemakers, Inc., a wholly
owned subsidiary of Eli Lilly. Mr. Matricaria previously served as a director of
the Massachusetts College of Pharmacy and Allied Health Science, the American
Foundation for Pharmaceutical Education, the American Diabetes Association and
the National Foundation for Infectious Diseases. Currently Mr. Matricaria serves
as a director on the boards of Centacor, Inc., Diametrics Medical, Inc., and
InControl, Inc., all medical device manufacturers; the Health Industry
Manufacturers Association; and the Indianhead Council of the Boy Scouts of
America.
Dr. Sembrowich is one of the founders of Diametrics Medical, Inc., a designer,
manufacturer and distributor of a point-of-care blood chemistry analysis system,
and has been a Co-Chairman of the Board of Directors since January 1993 and a
director since 1990. From 1990 through January 1993, he was President and Chief
Executive Officer of the company. Currently Dr. Sembrowich serves as director of
Inomet, Inc. and Cortrak, Inc., both start-up medical technology firms. He is
also a business advisor and limited partner of Medical Innovation Partners, a
venture capital firm. From 1988 to 1990, Dr. Sembrowich was a management
consultant to PPG Industries, Inc., a health care and industrial supply company.
Dr. Sembrowich was a founder of Arden Medical Systems, Inc., a developer and
manufacturer of clinical chemistry analysis systems, and served as its Vice
President of Scientific Affairs from 1983 through acquisition of that company by
Johnson & Johnson, Inc. in 1986. Dr. Sembrowich has served as Chairman and
Review Board member for the Small Business Innovative Research program of the
National Institute of Health, and has served as a Director for Minnesota Project
Innovation.
MEETINGS.
During 1994, the Board of Directors met eight times. Each director attended more
than 75% of the meetings of the Board of Directors or any Committee on which
such director served, with the exception of Mr. Langone who attended two of the
three meetings held after he was named as a director in August 1994.
BOARD COMMITTEES.
The Audit Committee, consisting of Messrs. Garrett, Ehmann and Owens, met three
times in 1994. Mr. Ehmann has served on the Board of Directors since 1987 and
will not stand for election in 1995. Among other duties, the Audit Committee
reviews the scope and results of independent and internal audits, the Company's
financial results and comments by the auditors regarding internal controls and
accounting procedures and management's responses to those comments.
The Technology Committee, consisting of Messrs. Lehmkuhl, Ehmann and Stoll, met
twice in 1994 and is responsible for monitoring research projects and clinical
activities. This committee was dissolved in January 1995.
The Compensation Committee, consisting of Messrs. Langone and Miller, met three
times in 1994. The Compensation Committee's duties include annual approval of
the Company's compensation policies, including salary, bonus and long-term
incentive programs, evaluation of the appropriate base salary level for
executive officers for Board of Directors approval, consideration of matters
with respect to profit sharing and other fringe benefits provided by the Company
and review of management succession planning.
The Company does not have a nominating committee.
CERTAIN TRANSACTIONS.
Mr. Garrett, a director of the Company, is a partner in the law firm of
Lindquist & Vennum P.L.L.P. which was paid for legal services rendered to the
Company during the last fiscal year. It is anticipated that Lindquist & Vennum
P.L.L.P. will continue to perform legal services for the Company during the
current fiscal year.
Mr. Lehmkuhl and the Company executed a Consulting Agreement (the "Agreement")
in February 1995 whereby Mr. Lehmkuhl agreed to provide the Company with
consulting services with respect to general corporate matters. The Agreement
expires on December 31, 1995. Total payments under the Agreement will be
$18,333.
In connection with the relocations of Messrs. Matricaria, Sivertson, and two
other executive officers, Messrs. O'Malley and Shepherd, the Company purchased
through a third party relocation company, at appraised values, the former
residences of these individuals. Home equity advances made during 1994 were
$682,916, $386,568, $160,485, and $159,394, for Messrs. Matricaria, Sivertson,
O'Malley and Shepherd, respectively. Mr. Matricaria's advance was repaid during
1994.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION.
The following table shows, for the fiscal years ending December 31, 1994, 1993
and 1992, the cash compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to the Company's Chief Executive
Officer, and to each of the other four most highly compensated named executive
officers of the Company whose total cash compensation exceeded $100,000 during
fiscal year 1994 in all capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
RESTRICTED
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) OPTIONS(3) COMPENSATION(4)
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald A. Matricaria 1994 $414,692 $414,692 $ -- $313,594 263,750 $35,334
Chairman, President 1993 284,615 358,250 -- 307,500 400,000 807
and CEO 1992 -- -- -- -- -- --
Eric W. Sivertson 1994 216,500 105,544 -- 104,531 21,250 25,005
President 1993 190,000 88,501 -- -- -- 16,034
Pacesetter 1992 174,505 83,742 52,891 -- 55,000 24,056
Stephen L. Wilson 1994 166,787 68,866 -- 83,625 17,000 24,662
VP-Finance and CFO 1993 152,900 58,738 -- -- 4,000 14,480
1992 147,000 56,448 -- -- 3,000 24,252
John P. Berdusco 1994 161,464 64,198 -- 83,625 17,000 18,270
VP-Administration 1993 69,885 79,000 -- -- 25,000 --
1992 -- -- -- -- -- --
Todd F. Davenport(5) 1994 167,487 40,988 120,447 118,719 21,250 13,185
President 1993 148,062 64,827 107,855 -- -- 3,408
St. Jude Medical 1992 51,482 31,250 -- -- 30,000 --
International Division
</TABLE>
NOTE: Certain columns have not been included in this table because the
information called for therein is not applicable to the Company or the
individuals named above for the periods indicated.
(1) "Other Annual Compensation" is listed to the extent that it exceeds the
lesser of $50,000, or 10% of total salary and bonus. Mr. Davenport's 1994
and 1993 other annual compensation included various components of his
foreign service package, which includes items such as an automobile
allowance, housing allowance, school tuition allowance, tax equalization
payments and a foreign service salary premium. These payments totalled
$102,504 and $93,240 for 1994 and 1993, respectively. Other annual
compensation payments to Mr. Sivertson in 1992 related to his foreign
service package.
(2) Upon employment by the Company in 1993, Mr. Matricaria was granted 10,000
shares of restricted stock. The restrictions lapse annually over a
four-year period. At December 31, 1994, 7,500 shares with a market value of
$298,125 remained restricted. In 1994, restricted stock awards were made to
Company officers. These restricted shares vest at December 31, 1998, but
accelerated vesting is available based on achievement of targeted stock
price levels. At December 31, 1994, 40% of the restricted shares vested as
a result of a 43% increase in the stock price from the grant date and the
market value of the remaining restricted shares was $268,313, $89,438,
$71,550, $71,550 and $89,438 for Messrs. Matricaria, Sivertson, Wilson,
Berdusco, and Davenport, respectively. Cash dividends were paid on all
restricted shares.
(3) No stock appreciation rights have been granted to the named executive
officers. Figures in this column represent the number of shares purchasable
upon exercise of stock options. In 1994, Mr. Matricaria was granted options
for 200,000 shares in recognition of his contribution to the
diversification of the Company. These options begin to vest in 1997. In
1993, Mr. Matricaria and Mr. Berdusco were granted options for 400,000
shares and 25,000 shares, respectively, upon employment by Company. In
1992, Mr. Sivertson was granted performance based options for 20,000 shares
and options for 30,000 shares in conjunction with his appointment as
President -- St. Jude Medical Division. In 1992, Mr. Davenport was granted
options for 30,000 shares upon employment by the Company. (4) Includes
Company retirement plan contributions and the value of Company provided
life insurance. For 1994, the Company's contributions to the retirement
plan, including contributions to a non-qualified retirement plan, were
$25,277, $24,660, $24,246, $16,460, and $12,777 for Messrs. Matricaria,
Sivertson, Wilson, Berdusco and Davenport, respectively. The Company and
Mr. Matricaria entered into a Supplemental Executive Retirement Agreement
pursuant to which the Company established a $2.5 million funded trust for
Mr. Matricaria in which he becomes fully vested on October 1, 1996. This
trust was established to replace the value of the pension benefit Mr.
Matricaria would have received had he remained with his previous employer
through that date. In addition, the Company provides Mr. Matricaria with a
$2.5 million face amount term life insurance policy. The 1994 premium for
this policy was $8,891.
(5) Mr. Davenport resigned from the Company effective February 28, 1995.
The following table contains information concerning the grant of stock
options under the Company's 1991 Stock Plan and the 1994 Stock Option Plan to
the named executive officers during fiscal year 1994.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF % OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES EXERCISE PRESENT
NAME GRANTED(1) IN 1994 PRICE/SHARE EXPIRATION DATE VALUE(4)
<S> <C> <C> <C> <C> <C>
Ronald A. Matricaria 63,750(2) 8.6% $27.875 February 11, 2004 $ 820,463
200,000(3) 27.0% 39.625 December 20, 2004 3,302,000
Eric W. Sivertson 21,250(2) 2.9% 27.875 February 11, 2004 273,488
Stephen L. Wilson 17,000(2) 2.3% 27.875 February 11, 2004 218,790
John P. Berdusco 17,000(2) 2.3% 27.875 February 11, 2004 218,790
Todd F. Davenport 21,250(2) 2.9% 27.875 February 11, 2004 273,488
</TABLE>
(1) No stock appreciation rights were granted to the named executive officers
during the year ended December 31, 1994.
(2) Approximately 75% of these options (the "performance options") become
exercisable if the Company's stock price reaches specified targets as of
the end of each fiscal year from 1994 through 1998. At December 31, 1994,
40% of these performance options became exercisable as a result of a 43%
increase in the stock price from grant date. The balance of these options
vest at the rate of 25% annually on each of the anniversary dates from the
grant date.
(3) These options become exercisable at the rate of 25% annually on each of the
anniversary dates starting on December 20, 1997.
(4) The Company uses a variation of the Black-Scholes option pricing model to
establish stock option value for the purposes of the above table. The
actual value, if any, will depend on the excess of the stock price over the
exercise price on the date the option is exercised. There is no assurance
that the value realized will be at or near the value estimated by the
Black-Scholes model. The specific assumptions used in valuing the stock
options were as follows:
Volatility of 37.9% and 30.2% for the February and December option grants,
respectively, represents the annual variance in the daily percentage change
in the price of the Company's common stock over the six month periods prior
to the dates of grant. The risk free rates of return of 5.43% and 7.75%
represent the average six-year treasury rates for February and December
1994, respectively. The expected term of the options is six years which is
the average term of the options exercised in 1992, 1993 and 1994. The
annual cash dividend rate of $.0 per share is consistent with the Company's
1994 termination of its cash dividend. No discounts were assumed in the
model. Option exercise prices were all equal to the stock prices on the
dates of grant. Vesting schedules were not considered in the valuation of
the options.
The following table sets forth information concerning the exercise of stock
options during the last fiscal year and unexercised options and stock
appreciation rights ("SARs") held as of the end of the fiscal year for the
named executive officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR END(1) AT FISCAL YEAR END(1)(2)
SHARES
ACQUIRED
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
R. Matricaria -- $-- 134,500 529,750 $1,050,938 $2,587,031
E. Sivertson -- -- 32,250 43,500 307,657 448,597
S. Wilson -- -- 27,950 16,800 270,438 161,500
J. Berdusco -- -- 11,450 30,550 93,000 233,875
T. Davenport -- -- 21,500 29,750 241,251 339,219
</TABLE>
(1) The Company has no stock appreciation rights (SARs) outstanding.
(2) Fiscal year end values were calculated using a price of $39.75 per share,
the closing sale price of the Company's common stock as reported by the
NASDAQ National Market System on December 30, 1994.
STOCK PERFORMANCE.
The Securities and Exchange Commission requires that the Company include in this
proxy statement a line-graph presentation comparing cumulative five-year
shareholder returns on an indexed basis with the Standard and Poor's (S&P) 500
Stock Index and either a nationally recognized industry standard or an index of
peer companies selected by the Company. The Board of Directors has approved the
use of the S&P Medical Products and Supplies Index as its peer group index. The
table below compares the cumulative total return as of the beginning of each of
the Company's last five fiscal years on $100 invested as of December 31, 1989 in
the common stock of the Company, the S&P Medical Products and Supplies Index and
the S&P 500 Stock Index, assuming the reinvestment of all dividends. The Indexes
are weighted based on market capitalization at the time of each reported data
point. The following graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 (the "1933 Act") or the Securities and
Exchange Act of 1934 (the "1934 Act"), except to the extent that the Company
specifically incorporates this information by reference and shall not otherwise
be deemed filed under the 1933 Act or the 1934 Act.
SHAREHOLDER RETURN PERFORMANCE GRAPH
(DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994
St. Jude Medical, Inc. $100 $143.0 $230.0 $175.3 $ 112.3 $169.7
S&P Medical Products
and Supplies Index $100 $117.1 $191.0 $163.5 $ 124.7 $144.7
S&P 500 Index $100 $ 96.9 $125.8 $134.9 $ 148.0 $145.7
</TABLE>
EMPLOYMENT, TERMINATION AND CHANGE-IN-CONTROL AGREEMENTS.
In April 1993, the Board approved an employment agreement for Mr. Matricaria
through December 31, 1997. Pursuant to the terms of the agreement, Mr.
Matricaria receives a minimum annual base salary of $400,000, customary fringe
benefits, a guaranteed bonus for 1993 and an opportunity to earn a bonus for
subsequent years. If Mr. Matricaria's employment is terminated prior to December
31, 1997, for any reason other than "good cause," he will receive payments based
on his then base salary plus the pro rata share of his latest actual bonus for a
period of 24 months, except that any such monthly payment will not be made past
December 31, 1997. "Good cause" means acting in bad faith or dishonesty,
violating any law of any domestic or international government to which the
Company is bound, or performing duties with gross negligence. The Company and
Mr. Matricaria entered into a Supplemental Executive Retirement Agreement
pursuant to which the Company established a $2.5 million funded trust for Mr.
Matricaria in which he becomes fully vested on October 1, 1996. This trust was
established to replace the value of the pension benefit Mr. Matricaria would
have received had he remained with his previous employer through that date.
Pursuant to Board of Directors approval, the Company has entered into employment
agreements with thirteen of its officers, including the named executive
officers. In the event of any "change in control" as defined in the agreements
and for a period of three years thereafter, if an officer's employment is
terminated (i) by the Company for reasons other than death, retirement,
disability or "cause," or (ii) by the officer for "good reason," then the
Company shall pay a severance payment equal to two times the prior twelve
months' compensation if the officer's employment with the Company has exceeded
three years and one times the prior twelve months' compensation if such
employment was less than three years, except in the case of Mr. Matricaria, who
immediately qualifies for a severance payment equal to twice his prior twelve
months' compensation. "Cause" means conviction by a court of competent authority
for felony criminal conduct. "Good reason" means substantial and material
reduction of principal duties, responsibilities and reporting obligations or a
reduction in annual compensation. In general, a change in control occurs when
there has been any change in the controlling persons reported in the Company's
proxy statements, when 40% or more of the Company's outstanding voting stock is
acquired by any person, or when current members of the Board of Directors or
their successors elected or nominated by such members cease to be a majority of
the Board of Directors. If a change of control had occurred at the end of 1994,
the following named executive officers would have received the payments
indicated pursuant to their employment agreements: Mr. Matricaria, $1,593,885,
Mr. Sivertson, $645,002, Mr. Wilson, $478,875, Mr. Berdusco,$253,264, and Mr.
Davenport, $256,096.
INDEMNIFICATION AGREEMENTS.
The Company has entered into indemnification agreements with each of its
directors and officers which provide for indemnification against certain costs
incurred by each director and officer made or threatened to be made a party to a
proceeding because of his or her official capacity as a director or officer. The
indemnification agreements, together with the Company's Bylaws, provide for
indemnification to the full extent permitted by Minnesota law.
DIRECTOR COMPENSATION.
Each non-employee director receives a retainer of $2,500 per month plus $1,000
for each Board meeting attended. Directors are reimbursed for expenses incurred
in connection with travel and lodging when attending meetings of the Board or
otherwise engaged in Company business. Payments to Mr. Garrett are charged to
legal fees invoiced by the law firm of Lindquist & Vennum P.L.L.P. to the
Company.
Under the 1991 Stock Plan (the "1991 Plan"), each person who is not an employee
of the Company and who is elected, re-elected or serving an unexpired term as a
director at any annual or special meeting of shareholders shall, as of the date
of such election or re-election, automatically receive an option to purchase
3,000 shares of common stock for an option price of not less than 100% of the
fair market value of the Company's common stock on such date. All such options
are designated as non-qualified stock options with ten-year terms. The maximum
number of shares as to which the 1991 Plan options may be granted to any
non-employee director shall be 30,000 shares. Each of the options granted under
the 1991 Plan is exercisable by the optionee after the six month anniversary
date of the option grant. At the 1994 Annual Meeting of shareholders, each
non-employee director at that time was granted an option to purchase 3,000
shares at $26.625 per share.
The Company's retirement plan for each non-employee director provides for the
payment of an annual benefit equal to the average of the annual retainer paid to
the director during his or her service as a non-employee director with a minimum
annual benefit of $24,000. The retirement benefit, which is payable to
non-employee directors who have served five years or more, will commence at the
later of the time of retirement or when the non-employee director becomes 60
years old. In the event of any change of control as defined in the plan,
directors become immediately vested whether or not they have completed five
years of service. The retirement benefit is payable over a number of years equal
to the non-employee director's years of service as a member of the Board of
Directors. For purposes of the payment term, years of service after January 1,
1988 are counted as full years and years of service prior to that time are
counted as one-half a year.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for administering the compensation program for the Company's
executive officers including the named executive officers. The Committee is
composed exclusively of independent, non-employee directors who are not
eligible to participate in any of the executive compensation programs. All
decisions by the Committee relating to the compensation of the Company's
executive officers are reviewed by the Board of Directors.
The following report shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the 1933 Act or the 1934 Act, except to the extent that the
Company specifically incorporates this information by reference, and shall
not otherwise be deemed filed under the 1933 Act or the 1934 Act.
Annually the Committee evaluates the Company's executive compensation program
in relation to the programs offered by other medical products and supplies
companies. This analysis ensures the Committee has sufficient comparative
data with respect to overall compensation levels. There were eighteen medical
products and supplies companies included in the most recent analysis. Certain
of these companies are consistent with the companies included in the S&P
Medical Products and Supplies group which is used for the purpose of
comparing shareholder returns in the shareholder return performance graph
(page 9). Some of the companies included in the S&P Medical Products and
Supplies group elected not to participate in the compensation survey. The
Committee's objective is to attract and retain talented individuals by
targeting total executive compensation at the 60th percentile of the market,
defined as the previously referenced eighteen medical products and supplies
peer group companies.
In recognition of Section 162(m) of the Internal Revenue Code (the "IRC"),
which limits the deductibility of certain executive compensation to $1
million per year, the Committee will, to the extent programs can be excluded
from the $1 million limit and to the extent no pre-existing, contractual
obligations exist, take the necessary action to secure full tax deductibility
under the IRC. The proposed shareholder approval of the Management Incentive
Compensation Plan (Proposal No. 2) is intended to exclude future compensation
under these plans from the $1 million limit under IRC Section 162 (m).
COMPENSATION PHILOSOPHY
Health care reform in the United States and increased competitive pressures
worldwide present significant challenges to the Company's management. The
Committee believes that, if the Company is to continue its success, its
executive compensation program must have the flexibility to attract and
retain the highest quality employees available worldwide. Further, the
executive compensation program must provide incentives which will reward key
managers for aggressively pursuing the actions necessary to improve the
Company's performance and enhance long-term shareholder value.
The Company's executive compensation program is based upon a
pay-for-performance philosophy. There are three components to the Company's
executive compensation program: base salary, an annual cash incentive bonus
payment and long-term stock based incentives. The Company is committed to a
strong link between its business and strategic goals and its compensation
program. The financial goals for certain elements of the compensation program
are reviewed and approved by the Board in conjunction with its approval of
the Company's strategic and operating plans.
BASE SALARY.
An executive's base salary is determined by an assessment of his or her
sustained performance, advancement potential, experience, responsibility, scope
and complexity of the position, current salary in relation to the range
designated for the job and salary levels for comparable positions at the peer
group companies referenced above. Additionally, the Committee sets base salaries
for executive officers based on the executive's contribution to the Company's
success through operational improvements and strategic initiatives. Factors
considered in determining base salary are not assigned pre-determined relative
weights. Based on the survey information available from the eighteen medical
products and supplies peer group companies, the executive officers' salary
levels are currently estimated to be at the 50th percentile. As described above,
the Committee intends to increase salaries to attain the targeted 60th
percentile level. During 1994, the Company established a deferred compensation
plan for certain highly compensated employees. This plan provides for deferral
of base salary and annual incentive payments. In addition, the Company
supplementally contributes to this deferred compensation plan profit sharing and
401(k) benefits lost due to IRC limits.
ANNUAL INCENTIVES.
Payments under the Company's annual cash incentive plan, the Management
Incentive Compensation Plan (the "Plan"), are based on the Company's level of
achievement of annual earnings per share targets, divisional profitability
targets and individual objectives, all as established under the Company's annual
operating plan. There is a pre-assigned relative weighting ascribed to each of
these factors. Payments under the Plan are based on one or a combination of
these factors. Information regarding the Plan for 1995 and future years is set
forth under "Approval of the Company's Management Incentive Plan".
Executive officers are eligible for normal annual cash incentive payments
ranging from 40% to 50% of base salary, except for the Chief Executive Officer
who is eligible for a normal incentive payment of up to 100% of base salary. The
payments can increase by up to 50% of the normal payments based on performance
above targeted levels and decrease substantially if actual results fail to meet
targeted levels. For fiscal year 1994, the performance of the Company slightly
exceeded targeted profitability levels and; therefore, the Committee approved
annual incentive awards which were approximately equal to the normal levels
referenced above.
Mr. Matricaria's annual incentive award is based on the Company's performance in
achieving its earnings per share target. For fiscal 1994, Mr. Matricaria
received an award of 100% of base salary based upon the Company's achievement of
its earnings per share target.
LONG-TERM INCENTIVES.
The Company's overall long-term compensation philosophy is that long-term
incentives should be directly related to the creation of shareholder value, thus
providing a strong link between management and shareholders. In support of this
philosophy, the Company has awarded to its executive officers stock options and
to a limited extent, restricted stock.
STOCK OPTION AWARDS.
Stock options encourage and reward executive officers for creating shareholder
value as measured by stock price appreciation. Stock options have been awarded
at an exercise price equal to the fair market value of the stock on the date of
grant and; therefore, only have value for the executive officers if the price of
the Company's stock appreciates in value from the date the stock options are
granted. Shareholders also benefit from such stock price appreciation.
Stock options are awarded annually consistent with the Company's objective to
provide (i) a long-term equity interest in the Company, and (ii) an opportunity
for a greater financial reward if long-term performance is sustained. To
encourage a longer-term perspective, the options cannot be exercised
immediately. Generally options become exercisable over a four-year period. The
number of options granted to each executive officer falls within a
pre-determined range, set and approved annually by the Committee. Individual
grant size is dependent upon the Company's future business plans and the
executive officer's ability to positively impact those plans, the executive
officer's position and level of responsibility within the Company, and an
evaluation of the executive officer's performance. No pre-assigned relative
weight is ascribed to any of these factors. Stock options may be granted which
may become exercisable at accelerated rates if certain performance measures are
met. If the performance criteria are not met, the options typically vest at
expiration of the term of the option, generally ten years subsequent to the date
of grant. See "1994 Performance Stock Program" below.
Stock ownership guidelines were communicated in 1995. These guidelines establish
stock ownership targets that management and board members are expected to
achieve within five years. Targeted stock ownership levels range from one to
three times base salary for employees or retainer for Board members. Increased
insider ownership will further align management and Board interests with
shareholder interests.
RESTRICTED STOCK AWARDS.
Restricted stock awards have been utilized as an incentive to enhance the
Company's financial performance. In addition, the Committee believes restricted
shares provide an immediate and direct link to shareholder interests. The timing
and number of shares granted is based on the Company's future business plans and
the executive's ability to positively impact those plans. Restricted stock
awards may be made subject to meeting certain performance measures and generally
vest over a four-year period. However, accelerated vesting may be available
based on the achievement of performance measures.
1994 PERFORMANCE STOCK PROGRAM.
In February 1994, the Board approved a stock-based incentive program under which
executives have the opportunity to accelerate vesting of stock options and
restricted shares by achieving predetermined, aggressive annual stock price
appreciation targets. The purpose of this program is to motivate executives to
significantly increase shareholder value through successful execution of the
Company's strategic and operating plans. At December 31, 1994, 40% of the stock
options and restricted shares granted under this program vested based on a 43%
appreciation in the stock price from the February 1994 grant date. Had the stock
price failed to appreciate to at least the preset target level, no accelerated
vesting of options or restricted shares would have occurred.
RATIONALE FOR CEO COMPENSATION.
Annually the Committee reviews a report prepared by an independent consulting
firm which covers the Company's total compensation program for executives.
The report addresses all compensation elements and compares the Company's
program to the executive compensation programs of other leading medical
products and supplies companies in the peer group noted above. This analysis
ensures the Committee has sufficient comparative data with respect to overall
compensation levels.
Mr. Matricaria's 1994 compensation considered his experience and knowledge of
the industry as well as the continued high level of profitability of the
Company during a time of industry consolidation and health care reform. Mr.
Matricaria's 1994 salary increase was based on the Committee's overall
evaluation of his performance and the Company's performance, after review of
competitive salary data provided by the independent consulting firm. Under
his leadership, the Company executed an acquisition of the worldwide cardiac
rhythm management business of Siemens AG on September 30, 1994. This
acquisition increased annual sales from approximately $250 million in 1993 to
an annualized $700 million in 1994 and the number of Company employees from
approximately 700 to 2,300.
In recognition of the Company's 50% increase in stock price from year-end
1993 to year-end 1994, the Committee accelerated vesting of 75,000
performance based stock options which were granted to Mr. Matricaria upon
employment by the Company in 1993. In addition, Mr. Matricaria was granted
options for 200,000 shares in 1994 in recognition of his contribution to the
diversification of the Company.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
KENNETH G. LANGONE
WILLIAM R. MILLER
2. PROPOSAL TO APPROVE THE COMPANY'S MANAGEMENT INCENTIVE COMPENSATION PLAN
In 1993, Section 162(m) was added to the Internal Revenue Code of 1986. The
inclusion of this section limits the Company's deduction for federal income
tax purposes of compensation in excess of $1 million per individual paid to
the Company's Chief Executive Officer and its four highest paid executive
officers. Compensation plans which are performance based within the
requirements of Section 162(m) and are approved by the Company's shareholders
will not be subject to the deduction limit. Therefore, in order to maximize
the Company's tax deductions, the Board of Directors of the Company is
requesting that shareholders approve the Management Incentive Compensation
Plan ("MICP") at the Annual Meeting.
The following is a summary of the material features of the MICP. The MICP is
attached as Appendix A to this Proxy Statement, and the following summary is
qualified in its entirety by reference to it.
PURPOSE
The St. Jude Medical, Inc. MICP is designed to attract, retain, and reward
highly qualified executives who are important to the Company's success and to
provide incentives relating directly to the financial performance of the
Company.
ADMINISTRATION
The MICP is administered by the Compensation Committee (the "Committee") of
the Board of Directors. The present members of the Committee are Kenneth G.
Langone and William R. Miller, both of whom are deemed to be outside
directors of the Company, as defined under Section 162(m). Neither member
receives compensation from the Company in any capacity other than as a
director of the Company.
The Committee may amend, modify, suspend or terminate the MICP for the
purpose of meeting or addressing any changes in legal requirements or for any
other purpose permitted by law. The Committee will seek shareholder approval
of any amendment determined to require shareholder approval or advisable
under the regulations of the Internal Revenue Service or other applicable
laws or regulations.
ELIGIBLE PARTICIPANTS
Individuals who are eligible to participate in the MICP include the executive
officers and certain other management employees of the Company as may be
determined by the Compensation Committee of the Board of Directors.
Individuals subject to the reporting requirements of Section 16 of the
Securities Exchange Act of 1934 ("Exchange Act") are considered to be
executive officers for purposes of the MICP. For the Company's current fiscal
year, 112 officers and other management employees have been selected to
participate in the MICP.
AWARDS UNDER MICP
Promptly after the beginning of the fiscal year, consistent with the
requirements stated in Section 162(m), the Committee establishes financial
objectives by which the Company's and divisions' financial performance during
the fiscal year will be measured; determines the executives eligible to
participate; determines each executive's bonus based on the attainment of the
financial objectives for the fiscal year; and determines the frequency at
which each bonus will be paid when attained.
Individual awards will be based on attainment of financial goals based on
either the stock price of the Company's shares, the Company's earnings per
share, market share, sales, return on equity, or divisional or subsidiary
expenses or earnings before income tax, or a combination of such goals. For
employees other than executive officers, subjective, individual performance
goals may also be established.
The maximum bonus amount that can be paid to any employee with respect to any
one fiscal year results cannot exceed the greater of $2,000,000 or 1.5% of
the Company's consolidated after tax net profit. For 1995, the Committee has
set the maximum bonus at 150% of each individual's base salary for the fiscal
year. Such bonus amounts shall be paid within 90 days after the close of the
Company's fiscal year unless the participant is eligible to participate in
and elects to defer some or all of the payment under the Company's deferred
compensation plan. Bonuses will be paid only when the Committee certifies
that the relevant financial goals established at the beginning of the fiscal
year have been met, and the Committee reserves the right to reduce the amount
of any award even if the goals have been attained.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock represented and entitled to vote at the Annual Meeting
is required to approve the MICP. For purposes of this vote, abstentions will
not be counted as voting on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" APPROVAL
OF THE COMPANY'S MANAGEMENT INCENTIVE COMPENSATION PLAN.
3. APPROVAL OF INDEPENDENT AUDITORS
The accounting firm of Ernst & Young LLP has been the Company's auditing firm
since its inception. Ernst & Young LLP has been re-appointed by the Board of
Directors as the Company's auditing firm for the current year. Although
shareholder approval is not required, the Board of Directors requests
shareholder ratification of Ernst & Young LLP's re-appointment. In the event
the appointment of Ernst & Young LLP should not be approved by the
shareholders, the Board of Directors will make another appointment to be
effective at the earliest possible time.
A representative from Ernst & Young LLP will be available at the Annual
Meeting of Shareholders to answer any appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE RE-APPOINTMENT
OF ERNST & YOUNG LLP.
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
The proxy rules of the Securities and Exchange Commission permit
shareholders, after timely notice to issuers, to present proposals for
shareholder action in issuer proxy statements where such proposals are
consistent with applicable law, pertain to matters appropriate for
shareholder action and are not properly omitted by issuer action in
accordance with the proxy rules. The Company's annual meeting for the fiscal
year ending December 31, 1995 is expected to be held on or about May 1, 1996,
and proxy materials in connection with that meeting are expected to be mailed
on or about March 31, 1996. Except as indicated below, shareholder proposals
prepared in accordance with the proxy rules must be received by the Company
on or before December 1, 1995.
The Bylaws of the Company establish an advance notice procedure with regard
to (i) certain business to be brought before an annual meeting of
shareholders of the Company; and (ii) the nomination by shareholders of
candidates for election as directors.
PROPERLY BROUGHT BUSINESS.
The Bylaws provide that at the annual meeting only such business may be
conducted as is of a nature that is appropriate for consideration at an annual
meeting and has been either specified in the notice of the meeting, otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or otherwise properly brought before the meeting by a shareholder who
has given timely written notice to the Secretary of the Company of such
shareholder's intention to bring such business before the meeting. To be timely,
the notice must be given by such shareholder to the Secretary of the Company not
less than 50 days nor more than 75 days prior to the meeting (or if less than 60
days' notice or prior public disclosure of the date of the annual meeting is
given or made to shareholders, not later than the tenth day following the day on
which the notice of the date of the annual meeting was mailed or such public
disclosure was made). Notice relating to the conduct of such business at an
annual meeting must contain certain information as described in Article I of the
Company's Bylaws, which are available for inspection by shareholders at the
Company's principal executive offices pursuant to Section 302A.461, subd. 4 of
the Minnesota Statutes. Nothing in the Bylaws precludes discussion by any
shareholder of any business properly brought before the annual meeting in
accordance with the Company's Bylaws.
SHAREHOLDER NOMINATIONS.
The Bylaws provide that a notice of proposed shareholder nominations for the
election of directors must be timely given in writing to the Secretary of the
Company prior to the meeting at which directors are to be elected. To be timely,
the notice must be given by such shareholder to the Secretary of the Company not
less than 50 days nor more than 75 days prior to the meeting (or if less than 60
days' notice or prior public disclosure of the date of the annual meeting is
given or made to shareholders, not later than the tenth day following the day on
which the notice of the date of the annual meeting was mailed or such public
disclosure was made). The notice to the Company from a shareholder who intends
to nominate a person at the meeting for election as a director must contain
certain information as described in Article II of the Company's Bylaws, which
are available for inspection by shareholders at the Company's principal
executive offices pursuant to Section 302A.461, subd. 4 of the Minnesota
Statutes. If the presiding officer of a meeting of shareholders determines that
a person was not nominated in accordance with the foregoing procedure, such
person will not be eligible for election as a director.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Section 16(a) of the Exchange Act requires the Company's directors and executive
officers to file with the Securities and Exchange Commission reports of
ownership and changes in ownership of the Company's Common Stock, and the
Company is required to identify any of those persons who fail to file such
reports on a timely basis. The initial reports filed by the Company on behalf of
Messrs. Shepherd and O'Malley were late and the Company failed to file an
initial report for Mr. Sembrowich at the time he was elected to the Board of
Directors. Mr. Sembrowich's initial position was reported on Form 5. The Company
also did not report on Form 4 one transaction each for Messrs. Gove and Owens.
These transactions were reported on Form 5. The Company filed a Form 5 for Mr
Garrett; however, it was subsequently amended to include a transfer by gift to a
trust in which Mr. Garrett is a trustee.
GENERAL
All proxies properly executed will be voted in the manner directed by
shareholders. If no direction is made, proxies will be voted "FOR" the
election of the Board of Director's nominees for directors and "FOR"
proposals 2 and 3.
The management of the Company knows of no matter other than the foregoing to
be brought before the meeting. However, the enclosed proxy gives
discretionary authority in the event any additional matters should be
presented.
All expenses in connection with solicitation of proxies will be borne by the
Company. The Company will pay brokers, nominees, fiduciaries, or other
custodians their reasonable expenses for sending proxy material to, and
obtaining instructions from, persons for whom they hold stock of the Company.
The Company expects to solicit proxies by mail, but directors, officers, and
other employees of the Company may also solicit in person, by telephone, by
facsimile or by mail.
The Annual Report of the Company for the year ended December 31, 1994 is
enclosed herewith. Shareholders may receive without charge a copy of the
Company's Annual Report on Form 10-K, including financial statements and
schedules thereto, as filed with the Securities and Exchange Commission, by
writing to: Investor Relations, St. Jude Medical, Inc., One Lillehei Plaza,
St. Paul, Minnesota 55117.
By Order of the Board of Directors
Thomas H. Garrett III
Secretary
March 27, 1995
APPENDIX A
ST. JUDE MEDICAL, INC.
MANAGEMENT INCENTIVE COMPENSATION PLAN
(AS ADOPTED MARCH 16, 1995)
1. PURPOSE
The St. Jude Medical, Inc. Management Incentive Compensation Plan (the
"Plan") is designed to attract, retain, and reward highly qualified
executives who are important to the Company's success and to provide
incentives relating directly to the financial performance and long-term
growth of the Company.
2. DEFINITIONS
(a) Board -- The Board of Directors of St. Jude Medical, Inc.
(b) Code -- The Internal Revenue Code of 1986, as amended.
(c) Committee -- The Compensation Committee of the Board, or such
other committee of the Board that is designated by the Board to administer
the Plan, in compliance with requirements of Section 162(m) of the Code.
(d) Company -- St. Jude Medical, Inc. and any other corporation in
which St. Jude Medical, Inc. controls, directly or indirectly, fifty
percent or more of the combined voting power of all classes of voting
securities.
(e) Executive Officer -- Any officer of the Company subject to the
reporting requirements of Section 16 of the Securities and Exchange Act of
1934 ("Exchange Act").
(f) Incentive Compensation -- The cash incentive awarded to a
Participant pursuant to terms and conditions of the Plan.
(g) Participant -- Any Executive Officer and any other management
employee or class of management employees of the Company as may be
designated by the Committee.
(h) Plan -- The St. Jude Medical, Inc., Management Incentive
Compensation Plan.
(i) Salary -- The direct gross (as opposed to taxable) compensation
earned by the Participant as base salary during the fiscal year, excluding
any and all commissions, bonuses, incentive payments payable during the
fiscal year, and other similar payments.
3. ELIGIBILITY
The Committee shall, each fiscal year, designate those management employees,
including Executive Officers of the Company who are eligible to receive
Incentive Compensation under this Plan for the fiscal year.
4. ADMINISTRATION
The awards under the Plan shall be based on the attainment of financial
performance goals for the fiscal year, as determined for each Participant by
the Committee. The Committee shall administer the Plan and shall have full
power and authority to construe, interpret, and administer the Plan necessary
to comply with the requirements of Section 162(m) of the Code. The
Committee's decisions shall be final, conclusive, and binding upon all
persons. The Committee shall certify in writing prior to commencement of
payment of the bonus that the performance goal or goals under which the bonus
is to be paid has or have been achieved. The Committee in its sole discretion
has the authority to reduce or eliminate the amount of a bonus otherwise
payable to Executives upon attainment of the performance goal established for
a fiscal year. At the beginning of each fiscal year consistent with the
requirements of Section 162(m), the Committee shall: (i) determine the
percentage of the Participant's Salary that may be awarded as Incentive
Compensation for the fiscal year, up to a maximum award under the Plan of the
greater of $2,000,000 or 1.5% of the Company's consolidated after tax net
profits for the fiscal year; (ii) determine the Participants eligible to
participate in the Plan for the fiscal year; (iii) determine the financial
performance goals as set forth in Section 5 herein for each Participant on
which Incentive Compensation will be paid; (iv) determine each Executive's
Incentive Compensation for the fiscal year; and (v) determine the frequency
at which each Participant's Incentive Compensation will be paid when
attained.
Except with respect to Incentive Compensation payable to Executive Officers
of the Company, the Committee may delegate the establishment of performance
goals, and the general powers of the Committee described above with respect
to the Plan to the Chief Executive Officer of the Company.
The Committee may amend, modify, suspend, or terminate the Plan for the
purpose of meeting or addressing any changes in legal requirements or for any
other purpose permitted by law. The Committee will seek shareholder approval
of any amendment determined to require a shareholder approval or advisable
under the regulations of the Internal Revenue Service or other applicable law
or regulation.
5. FINANCIAL PERFORMANCE GOALS
With respect to any Participant who is an Executive Officer, the Committee
shall establish performance goals based on the stock price of the Company,
the Company's earnings per share, market share, sales, return on equity, or
the expenses or profitability of the Company or any division or subsidiary,
or any combination of such goals for the fiscal year, or a portion thereof.
Any performance goal shall be established in a manner such that a third party
having knowledge of the relevant performance results could calculate the
amount to be paid to the Participant. Any such goal shall be established when
the outcome of the goal is substantially uncertain. The Committee shall not
increase the maximum amount of the Incentive Compensation payable upon
attainment of the goal after the goal has been established. The Incentive
Compensation may be paid in whole or in part upon the attainment of any one
of the goals. Any such goal shall comply with the applicable requirements of
Section 162(m) of the Code and any regulations promulgated thereunder.
With respect to any Participant other than an Executive Officer, the
Committee may establish performance goals based on other than the financial
performance of the Company specified above.
6. PAYMENT OF INCENTIVE COMPENSATION; NONASSIGNABILITY
The Incentive Compensation shall be paid only upon certification of the
attainment of the preestablished performance goals by the Committee. Such
Incentive Compensation shall be paid within 90 days of the end of the fiscal
year, but any Participant who is eligible to participate in the Company's
deferred compensation plan may elect to defer part or all of such Incentive
Compensation under such plan. No Incentive Compensation or any other benefit
under the Plan shall be assignable or transferable by the Participant during
the Participant's lifetime.
7. NO RIGHT TO CONTINUED EMPLOYMENT
Nothing in the Plan shall confer upon any employee any right to continue in
the employ of the Company or shall interfere with or restrict in any way the
right of the Company to discharge an employee at any time for any reason
whatsoever, with or without cause.
8. EFFECTIVE DATE; TERM
The Plan shall become effective as of January 1, 1995 and shall remain in
effect until December 31, 1999. The Committee may terminate or suspend the
Plan at any time.
ST. JUDE MEDICAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 3, 1995
The undersigned hereby appoints Ronald A. Matricaria, Stephen L. Wilson and
Kevin T. O'Malley or any one of them, as proxies, with full power of
substitution to vote all the shares of common stock which the undersigned would
be entitled to vote if personally present at the Annual Meeting of Shareholders
of St. Jude Medical, Inc., to be held May 3, 1995, at 9:30 a.m. at the Lutheran
Brotherhood Auditorium, Lutheran Brotherhood Building, 625 Fourth Avenue South,
Minneapolis, Minnesota, or at any adjournments thereof, upon any and all matters
which may properly be brought before the meeting or adjournments thereof, hereby
revoking all former proxies.
(1) ELECTION OF DIRECTORS
FOR all nominees listed below
(except as marked to the contrary below) [ ]
WITHHOLD AUTHORITY
to vote for all nominees listed below [ ]
William R. Miller
Gail R. Wilensky
Kenneth G. Langone
(INSTRUCTIONS: to withhold authority to vote for any individual nominee write
that nominee's name in the space provided below.)
(2) PROPOSAL TO APPROVE THE ST. JUDE MEDICAL, INC. MANAGEMENT INCENTIVE
COMPENSATION PLAN. [ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) PROPOSAL TO APPROVE THE RE-APPOINTMENT OF ERNST & YOUNG LLP AS THE
INDEPENDENT AUDITORS OF THE CORPORATION. [ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued on other side)
(continued from other side)
(4) IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1), (2) AND (3)
IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" THE NOMINEES LISTED ABOVE
AND PROPOSALS (2) AND (3) IF THERE IS NO SPECIFICATION.
PLEASE DATE AND SIGN exactly as your name(s) appears below indicating, where
proper, official position or representative capacity in which you are signing.
When signing as executor, administrator, trustee or guardian, give full title as
such; when shares have been issued in names of two or more persons, all should
sign.
Date , 1995
Signature of Shareholder
Signature of Shareholder
