<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ST. JUDE MEDICAL, 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 transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
St. Jude Medical, Inc.
One Lillehei Plaza
St. Paul, MN 55117
March 27, 1998
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
Thursday, May 14, 1998 at 9:30 a.m.
The accompanying Notice of Annual Meeting of Shareholders and Proxy
Statement describe the business to be transacted at the meeting. We also plan
to review the status of the Company's business at the meeting.
At last year's Annual Meeting over 81% 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 assure 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.
I look forward to seeing you at the meeting.
Sincerely,
/s/ Ronald A. Matricaria
Chairman of the Board and
Chief Executive Officer
St. Jude Medical, Inc. One Lillehei Plaza St. Paul, Minnesota 55117
U.S.A. 612/483-2000 Fax 612/482-8318
<PAGE>
ST. JUDE MEDICAL, INC.
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1998
------------------
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
14, 1998 at 9:30 a.m. for the following purposes:
1.To elect two (2) directors of the Company.
2.To ratify the re-appointment of independent auditors for the Company for
the current fiscal year.
3. 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 20, 1998, 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,
Kevin T. O'Malley
Secretary
St. Paul, Minnesota
March 27, 1998
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.
<PAGE>
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 14, 1998, 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, 1998.
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 20, 1998 consisted of 83,962,846 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 20, 1998 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.
1
<PAGE>
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, 1998 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 1,374,263(1) 1.5%
Patrick P. Fourteau 79,170(1) *
Terry L. Shepherd 69,723(1) *
Daniel J. Starks 1,877,805 2.0%
John P. Berdusco 89,863(1) *
Directors and Executive Officers as a
Group (19) 3,751,114(2) 4.0%
FMR Corp 10,384,517(3) 11.3%
82 Devonshire Street
Boston, Massachusetts
</TABLE>
- ------------------
* Less than .1%
(1) Includes 1,303,123, 59,500, 65,525, and 81,900 shares which Messrs.
Matricaria, Fourteau, Shepherd, and Berdusco, respectively, may acquire
within sixty days from the date hereof, pursuant to the exercise of stock
options.
(2) Includes 1,701,035 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, 1997, FMR Corp. reported it beneficially owned
10,384,517 shares of the Company's common stock of which it held sole
power to vote or direct the vote of 330,437 shares.
2
<PAGE>
1. ELECTION OF DIRECTORS
Two 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(s) as the Board of Directors may propose.
The names and ages of the nominees and other directors, their principal
occupations, and amount of Company common stock owned by each such person are
set forth below, based upon information furnished to the Company by such
persons. Ownership of Company common stock is given as of March 9, 1998.
<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 OF OFFICE ENDING IN 2001:
Fred B. Parks (50) President and COO 1997 4,000(1) *
St. Jude Medical, Inc.
St. Paul, MN
Gail R. Wilensky (54) Senior Fellow 1995 11,262(1) *
Project Hope,
Washington, D.C.
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER
THE ANNUAL MEETING AND WHOSE TERMS EXPIRE IN 1999:
Thomas H. Garrett III Business Consultant 1979 62,050(1) *
(53)
Minneapolis, MN
Roger G. Stoll (55) CEO and President 1991 25,012(1) *
Ohmeda, Inc.
Liberty Corner, NJ
(Medical Products)
Paul J. Chiapparone (58) Executive Vice President 1996 6,925(1) *
Electronic Data Systems
Corporation
Plano, Texas
(Information Management Services)
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER
THE ANNUAL MEETING AND WHOSE TERMS EXPIRE IN 2000:
Ronald A. Matricaria Chairman and CEO 1993 1,374,263(1) 1.5%
(55)
St. Jude Medical, Inc.
Walter L. Sembrowich President 1994 20,000(1) *
(55)
Aviex, Inc.
Minneapolis, MN
(Management Consulting Services)
Daniel J. Starks (43) CEO 1996 1,877,805(1) 2.0%
Cardiac Rhythm Management
Division and Daig Corporation
Minnetonka, MN
(Wholly-owned subsidiaries of
St. Jude Medical, Inc.)
Walter F. Mondale (70) Partner 1997 4,225(1) *
Dorsey & Whitney LLP
Minneapolis, MN
</TABLE>
- ------------------
* Less than .1%
3
<PAGE>
(1) Includes 0, 10,500, 42,000, 19,500, 3,000, 1,303,123, 15,000, 25,000, and
3,000 shares which Drs. Parks and Wilensky, Messrs. Garrett, Stoll,
Chiapparone, and Matricaria, Dr. Sembrowich, Messrs. Starks and Mondale,
respectively, may acquire within sixty days from the date hereof, pursuant
to the exercise of stock options.
OTHER INFORMATION REGARDING THE BOARD
BUSINESS EXPERIENCE. Dr. Parks became the President and Chief Operating
Officer of St. Jude Medical effective January 1, 1998. Dr. Parks joined the
Board of Directors of the Company in December 1997. Prior to employment at St.
Jude Medical, Dr. Parks was the President and COO of EG&G, Inc., where he
served in various capacities for over two decades. Dr. Parks has served on
business boards of various EG&G subsidiaries in both Europe and Asia, as well
as the advisory boards of various universities.
Dr. Wilensky currently serves as the John M. Olin Senior Fellow at 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 United States Health Care
Financing Administration directing the Medicaid and Medicare programs. 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, SMS Corp., NeoPath Inc., Quest
Diagnostics Incorporated, Pharmerica, and Ralin Medical Inc. - all health care
service companies; and Advanced Tissue Sciences, Inc., a tissue engineering
company.
Mr. Garrett has been self-employed as a business consultant since June 1996.
Previously, he had been a member of the law firm of Lindquist & Vennum PLLP of
Minneapolis, Minnesota and served as its Managing Partner from 1993 through
1995. Lindquist & Vennum PLLP has represented the Company on various matters
since its inception. Mr. Garrett is also a director of Check Technology
Corporation, a manufacturer of financial document printing systems, and
Lifecore Biomedical, Inc., a biomedical and surgical device manufacturer.
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 New
Jersey.
Mr. Chiapparone is an Executive Vice President of Electronic Data Systems
Corporation (EDS). He has been employed by EDS since 1966 in a variety of
operational responsibilities. He currently serves on the boards of a number of
charitable and educational organizations.
Mr. Matricaria served as President and Chief Executive Officer and director
of the Company from April 1993 to January 1995 at which time he was also
appointed as the Chairman of the Board. Since January 1998, Mr. Matricaria has
served as the Company's Chairman and Chief Executive Officer. 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 on the boards of The Home Depot, Inc., a home
improvement retailer, 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 the Health
Industry Manufacturers Association and Centocor, Inc., a biotechnology
company.
4
<PAGE>
Dr. Sembrowich is the President of Aviex, Inc., a management and investment
firm serving medical start-up companies. He was a founder of Diametrics
Medical, Inc., a manufacturer of point-of-care blood chemistry analysis
systems, and was Co-Chairman of the Board of Directors from January 1993 to
February 1995, and a director until 1996. From 1990 through January 1993, he
was President and Chief Executive Officer of the company. Currently Dr.
Sembrowich serves as director of Integ, Inc., a public company, and eMed,
Inc., a medical technology firm. He is also Chairman of the Board of Opticon
Medical, Inc., a medical technology company, and a founder and Chairman of
CuraMed Systems, Inc., a disease management company. 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 manufacturer of clinical chemistry analysis systems, and
served as its Vice President of Scientific Affairs from 1983 to 1988. Dr.
Sembrowich has served as Chairman and Review Board member for the Small
Business Innovative Research program of the National Institutes of Health, and
has served as a director for Minnesota Project Innovation.
Mr. Starks became the Chief Executive Officer of the Cardiac Rhythm
Management Division of St. Jude Medical, Inc. in September 1997. Mr. Starks is
also the Chief Executive Officer of Daig Corporation, a wholly-owned
subsidiary of St. Jude Medical, Inc. He previously served as the President,
Secretary and a director of Daig Corporation since 1988.
Mr. Mondale is currently a partner with the law firm of Dorsey & Whitney
LLP, headquartered in Minneapolis, Minnesota. From 1993 to 1996, Mr. Mondale
served as U.S. Ambassador to Japan. Prior to serving as Ambassador, he was a
partner with Dorsey & Whitney from 1987 to 1993. From 1981 to 1987, he was a
partner with the law firm of Winston & Strawn in the Washington, D.C. office.
From 1977 to 1981, he was Vice President of the United States. From 1964 to
1976, Mr. Mondale was a U.S. Senator from Minnesota and was Attorney General
of Minnesota from 1960 to 1964. Mr. Mondale serves on the boards of Blackrock
Mutual Funds, CNA Financial Corp., Northwest Airlines, Interra Financial, and
United HealthCare. He also is a board member of the Mayo Foundation, the
University of Minnesota Foundation and Minnesota Public Radio.
MEETINGS. During 1997, the Board of Directors met eight times. Each director
attended more than 75% of the meetings of the Board of Directors and any
Committee on which such director served.
BOARD COMMITTEES. The Audit Committee, consisting of Messrs. Garrett,
Mondale and Stoll met four times in 1997. Among other duties, the Audit
Committee reviews the scope and results of independent and internal audits,
the Company's financial results and presentation and comments by the auditors
regarding internal controls and accounting procedures and management's
responses to those comments.
The Compensation Committee, consisting of Messrs. Langone, Miller, and Dr.
Sembrowich, met two times in 1997. Messrs. Langone and Miller are retiring
from the Board of Directors and are not standing for reelection. 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 employee benefits provided by the Company
and review of management succession planning.
The Governance and Nominating Committee, consisting of Drs. Sembrowich and
Wilensky and Mr. Chiapparone met twice in 1997 and is responsible for
recommending good governance practices. The Governance and Nominating
Committee evaluates qualifications and candidates for positions on the Board
and recommends Board committee composition. In addition, the Governance and
Nominating Committee facilitates an annual evaluation by Board members of the
board and individual director performance and provides feedback to the entire
Board.
The Governance and Nominating Committee will consider nominees for Board
membership submitted by shareholders. Nominations by shareholders must be made
pursuant to timely notice in writing to the Company Secretary at One Lillehei
Plaza, St. Paul, Minnesota 55117. Candidates for director should be persons
with broad training and experience in their chosen fields who have earned
distinction in their activities. Notice by the shareholder to be timely must
be received between October 1 and November 30 of the year preceding the annual
meeting. The notice shall set forth certain information concerning such
shareholder and the nominees, including
5
<PAGE>
their names and addresses, their principal occupation or employment, their
beneficially owned common stock of the Company, 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 Committee may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure.
CERTAIN TRANSACTIONS. Mr. Mondale, a director of the Company, is a partner
in the law firm of Dorsey & Whitney L.L.P. which was paid for legal services
rendered to the Company during the last fiscal year. It is anticipated that
Dorsey & Whitney L.L.P. will continue to perform legal services for the
Company during the current fiscal year.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION. The following table shows,
for the fiscal years ending December 31, 1997, 1996 and 1995, the cash
compensation paid by the Company and 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
1997 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) STOCK OPTIONS(3) COMPENSATION(4)
- --------------------------- ---- -------- -------- --------------- ---------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald A. Matricaria 1997 $773,461 $ 0 $ -- -- -- $ 37,480
Chairman and CEO 1996 549,519 544,024 -- $1,568,750 1,536,000(/5/) 126,839
1995 522,981 549,130 -- -- 45,000 37,339
Patrick P. Fourteau 1997 425,000 0 126,277 -- 54,000 79,823
President 1996 274,449 132,237 147,161 -- 143,000 67,476
International Division 1995 111,400 35,417 168,184 593,788 120,000 15,061
Terry L. Shepherd 1997 253,859 60,926 -- -- -- 49,103
President 1996 223,000 107,625 -- -- 230,000 46,865
Heart Valve Division 1995 183,305 94,311 -- -- 18,000 19,150
Daniel J. Starks 1997 250,000 30,000 -- -- -- 408
CEO 1996 131,635 -- -- -- 175,000 2,049
Cardiac Rhythm 1995 -- -- -- -- -- --
Management Division
and Daig Corporation
John P. Berdusco 1997 230,242 34,191 -- -- 72,000 32,137
Vice President-- 1996 210,654 103,961 -- -- 18,000 33,595
Administration 1995 192,479 100,445 -- -- 18,000 28,612
</TABLE>
- ------------------
Note: Certain information called for in this table is not applicable to the
Company or the individuals named above for the periods indicated.
(1) "Other Annual Compensation" is included in the table to the extent it
exceeds the lesser of $50,000, or 10% of total salary and bonus, of any
named executive officer. Mr. Fourteau's 1997, 1996 and 1995 other annual
compensation includes various components of a foreign service package,
which includes items such as an automobile allowance, housing allowance,
tax equalization payments and a foreign service salary premium.
(2) Upon employment by the Company in 1995, Mr. Fourteau was granted 20,100
shares of restricted stock. The restrictions lapse annually over a five
year period. At January 2, 1998, 12,060 shares with a market value of
$391,950 remained restricted. In connection with the 1996 extension of his
employment agreement, Mr. Matricaria was granted 50,000 shares of
restricted stock. The restrictions lapse annually over a four year period.
At January 2, 1998, 37,500 shares with a market value of $1,218,750
remained restricted.
6
<PAGE>
(3) No stock appreciation rights have been granted to the named executive
officers. Figures in this column represent the number of stock option
shares granted during each year. In 1996, Messrs. Fourteau, Shepherd and
Starks were granted options of 125,000, 200,000, and 175,000 shares,
respectively, to reflect their expanded responsibilities and expected
significant contributions to the ongoing growth and profitability of the
Company. In 1996, Mr. Matricaria's employment contract was renegotiated
with terms extending through December 31, 2001. In connection with this
extension, Mr. Matricaria was granted stock options for 1,496,000 shares,
including options for 1,000,000 shares which were approved by the
shareholders in 1997.
(4) Includes Company retirement plan contributions and the value of Company
provided life insurance. For 1997, the Company's retirement plan
contributions, including contributions under the Company's Management
Savings Plan ("MSP"), were $30,530, $75,215, $47,597, $0 and $30,530 for
Messrs. Matricaria, Fourteau, Shepherd, Starks, and Berdusco,
respectively. Mr. Matricaria's 1996 other compensation included $93,225
relating to a tax gross-up in connection with Supplemental Executive
Retirement Plan taxes.
The following table contains information concerning the grant of stock
options under the Company's 1997 Stock Option Plan and 1994 Stock Option Plan
to the named executive officers during fiscal year 1997.
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 1997 PRICE/SHARE EXPIRATION DATE VALUE(4)
- ---- ---------- ------------- ----------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
Ronald A.
Matricaria -- -- $ -- -- $ --
Patrick P.
Fourteau 54,000(3) 1.1% 37.1875 December 18, 2007 707,756
Terry L.
Shepherd -- -- -- -- --
Daniel J.
Starks -- -- -- -- --
John P.
Berdusco 18,000(2) .4% 32.4375 May 1, 2007 264,263
54,000(3) 1.1% 37.1875 December 18, 2007 707,756
</TABLE>
- ------------------
(1) No stock appreciation rights were granted to the named executive officers
in 1997.
(2) Fifty percent 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 1997 through 2001. At January 2, 1998,
none of these performance options became exercisable.
(3) Fifty percent 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 1998 through 2002.
(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 as
estimated by the Black-Scholes model. The specific assumptions used in
valuing the stock options were as follows:
. Volatility ranging between 32.8% and 35.1%, representing the annual
variance in the daily percentage change in the price of the Company's
common stock over a six month period.
. Risk free rate of return of ranging between 5.62% and 6.78%,
representing the average six-year treasury rate on the date of each
specific date of grant.
. Expected term of options granted of six years, representing the average
term of options exercised in 1992 through 1997.
7
<PAGE>
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 -- $-- 1,226,623 1,350,000 $10,070,869 $1,532,250
P. Fourteau -- -- 57,250 259,750 88,750 266,250
T. Shepherd -- -- 34,525 235,975 219,769 106,856
D. Starks -- -- 25,000 150,000 -- --
J. Berdusco -- -- 73,650 97,350 753,300 78,700
</TABLE>
- ------------------
(1) The Company has no stock appreciation rights (SARs) outstanding.
(2) Values were calculated using a price of $32.50 per share, the closing sale
price of the Company's common stock as reported by the New York Stock
Exchange on January 2, 1998.
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 assuming
$100 was invested as of December 31, 1992 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.
8
<PAGE>
[GRAPH]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
St. Jude Medical, Inc. 100.0 64.1 96.8 157.1 154.8 111.4
S&P Medical Products and Supplies Index 100.0 76.3 90.3 152.2 174.5 217.4
S&P 500 Index 100.0 109.9 111.3 152.7 187.3 249.3
</TABLE>
EMPLOYMENT, TERMINATION AND CHANGE IN CONTROL AGREEMENTS
CHIEF EXECUTIVE OFFICER EMPLOYMENT AGREEMENT. In July 1996, the Compensation
Committee of the Board and Mr. Matricaria negotiated an extension to Mr.
Matricaria's original 1993 employment agreement, which would have expired on
December 31, 1997. Pursuant to the terms of the extension effective January 1,
1997, Mr. Matricaria will receive an annual base salary of $750,000 and
customary fringe benefits provided to Company officers, including an
opportunity to earn a bonus.
If Mr. Matricaria's employment is terminated prior to December 31, 2001 for
any reason other than "good cause," he will receive monthly payments for a
period of up to 24 months based on his then existing base salary and average
of bonuses for the previous two years, except that any such monthly payment
will not be made past December 31, 2001. "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.
Mr. Matricaria's existing change in control agreement was renewed and a new
change in control agreement was negotiated to provide him with a payment of
$10,000,000 upon a change in control as defined in his existing change in
control agreement, regardless of whether he remains employed by the Company or
is terminated subsequent to a change of control.
Management Savings Plan Benefit. In connection with the agreement to extend
Mr. Matricaria's 1993 employment agreement, Mr. Matricaria agreed to waive and
relinquish all rights under a Supplemental Executive Retirement Agreement (the
"SERP") and funded trust which the Company established in April, 1993, to
replace the value of the pension benefit Mr. Matricaria would have received
had he remained with his previous employer through October 1, 1996.
In exchange for his waiver, the Company credited and set aside $3,460,000
for Mr. Matricaria under the St. Jude Medical Management Savings Plan (the
"MSP") which is a non tax-qualified deferred compensation plan
9
<PAGE>
for a select group of management employees. As a result of Mr. Matricaria's
waiver of benefits, the SERP was terminated, the trust was liquidated in
September, 1996 and the amount in the trust at the time of the waiver reverted
to the Company.
The amount credited to Mr. Matricaria under the MSP is 100% vested and is
payable from the general assets of St. Jude Medical only upon Mr. Matricaria's
termination of employment or his death. Under the terms of the MSP, Mr.
Matricaria and other management employees who are eligible to participate may
elect to defer up to 50% of their base compensation and up to 100% of any cash
bonus, and to receive Company contributions that would have been payable under
the St. Jude Medical, Inc. Employee Profit Sharing and Savings Plan but for
certain limits imposed on contributions to qualified plans under the Internal
Revenue Code. In 1997, Mr. Matricaria deferred $770,000 of his base salary and
bonus under the MSP, and received $13,000 in Company contributions.
Split Dollar Life Insurance. Mr. Matricaria and the Company will share the
premiums on a whole life insurance contract providing a death benefit of at
least $3,000,000. Under this agreement, the Company is obligated to pay a
portion of the premium on the policy and, in exchange, has a lien on the cash
surrender value of the policy and on any death benefit payable under the
policy equal to the lesser of the premiums paid by the Company or the policy's
cash surrender value. Mr. Matricaria is responsible for payment of that
portion of the premium equal to the cost of the life insurance protection in
excess of the Company's security interest in the policy, which premium portion
the Company has agreed to reimburse Mr. Matricaria through a bonus. The
Company's obligation to make premium payments continues until the earlier of
the date Mr. Matricaria attains age 65 or his death. Upon Mr. Matricaria's
attaining age 65, the Company may either recover its premiums out of the cash
surrender value of the policy or Mr. Matricaria may reimburse the Company for
its premiums paid and receive full and unrestricted rights to the policy.
Other Perquisites. For both security and time management reasons, the
Company has granted Mr. Matricaria and his immediate family periodic use of
the Company plane for personal, as well as business use. The Company has
further agreed to be responsible for payment of any taxes due in connection
with such personal use.
OTHER EMPLOYMENT AGREEMENTS. Pursuant to Board of Directors approval, the
Company has entered into employment agreements with 10 of its officers,
including Mr. Matricaria and the other 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 (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.
"Cause" means conviction by a court of competent authority for felony criminal
conduct. "Good reason" means substantial reduction of principal duties,
responsibilities and reporting obligations or 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 in control had occurred at the end of 1997, the
following named executive officers would have received the payments indicated
pursuant to their employment agreements: Mr. Matricaria, $12,692,565; Mr.
Fourteau, $576,127, Mr. Shepherd, $759,280, Mr. Starks, $280,408, and Mr.
Berdusco, $706,120.
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 fullest
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
10
<PAGE>
lodging when attending meetings of the Board or otherwise engaged in Company
business. Directors may elect to receive the annual retainer fee either as
100% cash, 50% cash plus 50% restricted stock, or 100% restricted stock. The
restriction on the stock lapses on the six month anniversary after the grant
date.
Under the 1997 Stock Option Plan (the "1997 Plan"), the Company has in
effect a program of annual automatic grants of stock options to non-employee
directors. 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 annual
meeting, automatically receive an option to purchase 3,000 shares of common
stock at 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 and fully vest on the six month
anniversary from the grant date. Further, under the 1997 Plan, non-employee
directors will be eligible to receive options from time to time in addition to
the annual grants described above, but no non-employee director may receive
options which, together with the automatic grant of options described above,
exceed 5,000 shares in any calendar year. At the 1997 annual meeting of
shareholders, each non-employee director at that time received an automatic
grant of an option to purchase 3,000 shares at $32.4375 per share, the fair
market value of the common stock on the date of grant.
In March, 1996, the Board terminated the retirement plan for non-employee
directors effective April 1, 1996. No further benefits accrue under this plan
to non-employee directors from and after March 31, 1996, except that (i) any
non-employee directors at that time who had not served five years as a
director shall continue to be credited with years of service solely to qualify
for a benefit based on service prior to April 1, 1996; and (ii) each
director's benefit that accrued prior to April 1, 1996 will be paid in
accordance with the plan. Each non-employee director who has served five years
or more will receive payment of an annual benefit equal to the average of the
annual retainer paid to the director during his or her service as a director,
with a minimum annual benefit of $24,000. The retirement benefit will commence
at the later of the time of retirement as a member of the Board or when the
director becomes 60 years old. In the event of any change in control as
defined in the plan, directors become immediately vested in the plan whether
or not they have completed five years of service. The retirement benefit is
payable over a number of years equal to the director's years of service as a
member of the Board of Directors. Mr. Chiapparone waived his rights to
benefits under the terminated plan.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for establishing compensation policy and administering the
compensation programs for the Company's executive officers including the named
executive officers. The Committee is comprised 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 and approved
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.
The Committee evaluates the Company's executive compensation programs 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 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. Some of the companies included in the
S&P Medical Products and Supplies group do not 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.
11
<PAGE>
In recognition of Code Section 162(m) of the Internal Revenue Code (the
"IRC"), which limits the deductibility of certain executive compensation to
$1,000,000 per year, the Committee will, to the extent programs can be
excluded from the $1,000,000 limit and to the extent no pre-existing,
contractual obligations exist, take the necessary actions to secure full tax
deductibility under the IRC.
COMPENSATION PHILOSOPHY
The Company's continued growth and diversification activities together with
worldwide health care reform and increased competitive pressures present
significant challenges to the Company's management. The Company's compensation
program is designed to enable the Company to attract, retain and motivate
executives required for the long-term success of the Company and in growing
shareholder value. Further, the executive compensation program is designed to
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 having a strong
link between its business and strategic goals and its compensation program and
believes this philosophy is in the best interest of the Company's
shareholders. A significant portion of the executive compensation is
performance based and at risk. 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.
ST. JUDE'S MEDICAL COMPENSATION PROGRAM
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. The Company has a non-qualified deferred compensation
plan for certain highly compensated employees. This plan provides for
employees to defer base salary and annual incentive payments and for the
Company to supplementally contribute amounts to restore benefits lost due to
legal limits on qualified retirement plan contributions.
ANNUAL INCENTIVE AWARDS. Annual incentive awards are intended to provide
executive officers and key managers an additional incentive for achieving the
annual performance goals established in the yearly business plan. 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. This Plan was approved by the shareholders in
1995 and is effective through 1999.
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 1997, the Company's performance
did not meet targeted profitability levels and; therefore, the Committee
approved annual incentive awards that were significantly below the normal
levels referenced above.
EQUITY BASED COMPENSATION. The Company's overall equity compensation
philosophy is that equity based incentives should be directly related to the
creation of shareholder value, thus providing a strong link between
12
<PAGE>
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 are an important part of the Company's
performance based compensation. The primary purpose of stock options is to
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 or greater than the fair market value of the stock on
the date of grant and therefore, only have value if the price of the Company's
stock appreciates in value from the date the stock options are granted. The
executive officers and shareholders benefit equally from such stock price
appreciation.
Stock options are awarded from time to time 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 except for the "All Employee Stock Option" (see below).
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 ("performance stock
options"). If the performance measures are not met, the performance stock
options vest only at expiration of the term of the option, generally ten years
subsequent to the date of grant. See "1997 Performance Stock Option Program"
below.
In the past several years it has been the practice of the Company to issue
stock options in the first quarter of the year. In 1997, because the 1997
Stock Option Plan had not been approved by shareholders, the normal grant
occurred after May 1, when the shareholders approved the plan.
The Board decided, because of the impact of integration activities on
employees, and because the newly acquired Ventritex employees did not
participate in the first stock option grant, to accelerate the stock option
grant normally given in the first quarter of 1998 to December, 1997.
Stock ownership guidelines were established in 1995. These guidelines set
forth stock ownership targets which management and board members are expected
to achieve. Targeted stock ownership levels range from one to three times base
salary for employees and three times annual retainer for Board members.
Increased insider ownership will further align management and Board interests
with shareholder interests.
PREMIUM PRICED STOCK OPTIONS. To provide an additional vehicle for aligning
existing management and newly acquired management from the Company's
acquisition activity with shareholders' interests, the December 1997 grant
provided an election under which an optionee could receive either a stock
option equal to three times (3x) the number of shares the recipient received
in his or her normal grant or the normal grant number of shares. If an
optionee chose to receive the (3x) grant, the associated options were granted
at an exercise price that was at a twenty-five (25%) percent premium to the
fair market value on the date of grant. Previously, the Compensation Committee
had not granted a premium priced stock option.
ALL EMPLOYEE STOCK OPTION. In December 1997, the Board approved a one time
special grant of a 100 share option grant to most St. Jude Medical employees,
except for those employees who have previously been awarded stock options or
work in certain countries where tax or labor laws make it all but impossible
to grant stock options. These options vested immediately and were granted at
the fair market value on the day of grant. The purpose of the all employee
stock grant is to recognize employees for their contributions and to more
closely align the interests of the employees with those of St. Jude Medical
and its shareholders.
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,
13
<PAGE>
accelerated vesting may be available based on the achievement of performance
measures. During 1996, 50,000 restricted shares were awarded to Mr. Matricaria
as part of the extension of his employment contract discussed below.
Restrictions will lapse on twenty-five percent of the shares on each annual
anniversary date from July 16, 1996.
1997 PERFORMANCE STOCK OPTION PROGRAM. In May 1997, the Board approved a
performance stock option program under which management has the opportunity to
accelerate vesting of stock options by achieving predetermined, aggressive
annual stock price appreciation targets. The purpose of this program is to
motivate management to significantly increase shareholder value through
successful execution of the Company's strategic and operating plans. At
December 31, 1997, none of the stock options granted under this program had
vested.
CHIEF EXECUTIVE OFFICER COMPENSATION
In establishing Ronald A. Matricaria's compensation package, the Committee
periodically commissions a study by an independent compensation consulting
firm to review the Company's executive compensation program, including the
CEO's compensation. The analysis 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.
In July 1996, the Compensation Committee negotiated a five year extension to
Mr. Matricaria's 1993 employment agreement. Effective January 1, 1997, Mr.
Matricaria received a base salary of $750,000 per annum. The bonus
compensation opportunity for Mr. Matricaria affords him the opportunity to
earn an incentive payment of up to 100% of base salary each fiscal year upon
achievement of established targets mutually agreed upon by Mr. Matricaria and
the Board of Directors. Mr. Matricaria's 1997 annual incentive award was based
on the Company's performance in achieving its 1997 earnings per share target.
For fiscal year 1997, Mr. Matricaria did not receive an award.
Mr. Matricaria was granted a non-qualified stock option to purchase 500,000
shares of the Company's common stock under the 1994 Stock Option Plan, subject
to shareholder approval. The option was granted on July 16, 1996, at an
exercise price of $31.375 (the fair market value on the day of grant). These
shares will be exercisable at the rate of 25% per year on the four anniversary
dates from July 16, 1996. The shareholders at the May 1, 1997 annual meeting
approved this stock option grant.
Mr. Matricaria was granted a non-qualified performance stock option to
purchase 500,000 shares of the Company's common stock under the 1994 Stock
Option Plan, subject to shareholder approval. The option was granted on July
16, 1996, at an exercise price of $31.375 (the fair market value of a share of
common stock on the day of grant). The opportunity exists to accelerate
vesting of these performance options by achieving predetermined, aggressive
annual stock price appreciation targets. The shareholders at the May 1, 1997
annual meeting approved this performance stock option grant.
Mr. Matricaria did not receive additional stock option grants in 1997.
CONCLUSION
The Committee believes that management should be motivated, through its
compensation programs, to achieve the Company's annual performance goals. For
this reason, the Committee has designed the Company's compensation plan to
emphasize achievement of earnings per share, divisional and regional sales and
operating income targets. The Committee believes that its compensation plans
serve to focus management on the appropriate goals for the benefit of the
Company's shareholders.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Kenneth G. Langone William R. Miller Walter L. Sembrowich, Ph.D
14
<PAGE>
2. RATIFICATION OF RE-APPOINTMENT 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 re-appointment of Ernst & Young LLP should not be ratified 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" RATIFICATION OF THE RE-
APPOINTMENT OF ERNST & YOUNG LLP.
SHAREHOLDER PROPOSALS FOR 1999 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, 1998, is expected to be held on or about May 1, 1999, and proxy materials
in connection with that meeting are expected to be mailed on or about March
26, 1999. Except as indicated below, shareholder proposals prepared in
accordance with the proxy rules must be received by the Company on or before
December 1, 1998.
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.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECTION 16(A). 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. All such filings were filed on a
timely basis except for the Form 3s for Messrs. Coyle and Mondale which were
one day late and Form 5s for Messrs. Berdusco, Dennis, Fourteau, Gove,
Munzenrider, O'Malley, and Parks which were 10 days late and Mr. Langone which
was 18 days late.
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" proposal
2.
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 or a proxy solicitation firm may also solicit
in person, by telephone, by facsimile or by mail.
The Annual Report of the Company for the year ended December 31, 1997 is
enclosed herewith. Shareholders may receive without charge a copy of the
Company's Form 10-K Annual Report, 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,
KEVIN T. O'MALLEY
Secretary
March 27, 1998
16
<PAGE>
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 14, 1998
The undersigned hereby appoints Ronald A. Matricaria, Robert E. Munzenrider
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 14, 1998, 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.
(TO BE SIGNED ON REVERSE SIDE)
SEE
REVERSE
SIDE
<PAGE>
[X] Please mark your
votes as in this
example
FOR all nominees listed WITHHOLD AUTHORITY to Nominees:
below (except as marked vote for all nominees Fred B. Parks
the contrary below) listed at right Gail R. Wilensky
1. ELECTION OF
DIRECTORS. [_] [_]
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- -----------------------------------------------------------------------------
2. PROPOSAL TO RATIFY THE RE-APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS. FOR AGAINST ABSTAIN
[_] [_] [_]
3. 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) AND (2), IN
ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" THE NOMINEES LISTED ABOVE AND
PROPOSAL (2) IF THERE IS NO SPECIFICATION.
Dated: ___________________, 1998
_______________________________
Signature of Shareholder
_______________________________
Signature of Joint Shareholder
(if held jointly).
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
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.
