UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2000 Commission File Number 0-8672
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ST. JUDE MEDICAL, INC.
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(Exact name of Registrant as specified in its charter)
MINNESOTA 41-1276891
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One Lillehei Plaza, St. Paul, Minnesota 55117
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(Address of principal executive offices)
(651) 483-2000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months; and (2) has been subject to such filing
requirements for the past 90 days.
YES _X_ NO
The number of shares of common stock, par value $.10 per share, outstanding on
April 28, 2000 was 83,828,478.
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ST. JUDE MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 1999
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<S> <C> <C>
Net sales $ 295,499 $ 266,734
Cost of sales 101,978 93,461
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Gross profit 193,521 173,273
Selling, general and administrative expense 103,299 96,423
Research and development expense 32,394 27,143
Purchased in-process research and development expense -- 47,775
Special charge 26,101 --
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Operating profit 31,727 1,932
Other income (expense) (7,106) (4,631)
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Earnings (loss) before income taxes 24,621 (2,699)
Income tax expense 8,793 9,358
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Net earnings (loss) $ 15,828 $(12,057)
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Net earnings (loss) per share:
Basic $ 0.19 $ (0.14)
Diluted $ 0.19 $ (0.14)
Weighted average shares outstanding:
Basic 83,779 84,194
Diluted 83,991 84,194
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</TABLE>
See notes to condensed consolidated financial statements.
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ST. JUDE MEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31,
(UNAUDITED) 1999 (SEE NOTE)
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<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 27,164 $ 9,655
Marketable securities 80,950 79,238
Accounts receivable, less allowances of $14,721 in 2000
and $13,529 in 1999 307,153 293,815
Inventories 226,396 235,407
Other current assets 75,511 72,184
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Total current assets 717,174 690,299
Property, plant and equipment - at cost 581,061 574,531
Less accumulated depreciation (244,849) (231,751)
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Net property, plant and equipment 336,212 342,780
Other assets, net 520,512 520,959
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TOTAL ASSETS $ 1,573,898 $ 1,554,038
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 117,000 $ --
Accounts payable and accrued expenses 231,753 238,822
Income taxes payable 56,177 43,700
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Total current liabilities 404,930 282,522
Long-term debt 360,675 477,495
Commitments and contingencies -- --
Shareholders' equity
Preferred stock -- --
Common stock 8,383 8,378
Additional paid-in capital 1,281 109
Retained earnings 849,051 833,223
Accumulated other comprehensive income
Cumulative translation adjustment (57,601) (53,977)
Unrealized gain on available-for-sale securities 7,179 6,288
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Total shareholders' equity 808,293 794,021
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,573,898 $ 1,554,038
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</TABLE>
NOTE: THE BALANCE SHEET AT DECEMBER 31, 1999 HAS BEEN DERIVED FROM THE AUDITED
FINANCIAL STATEMENTS AT THAT DATE. SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
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ST. JUDE MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 1999
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<S> <C> <C>
Operating Activities
Net earnings (loss) $ 15,828 $(12,057)
Depreciation and amortization 22,894 19,608
Purchased in-process research and development expense -- 47,775
Special charge 26,101 --
Net investment gain (1,057) --
Working capital change, net of business acquisition (30,643) (6,065)
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Net cash provided by operating activities 33,123 49,261
Investing Activities
Purchase of property, plant and equipment (8,988) (9,675)
Proceeds from sale or maturity of marketable securities 1,332 --
Business acquisition -- (167,000)
Other (8,890) (7,487)
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Net cash used in investing activities (16,546) (184,162)
Financing Activities
Proceeds from exercise of stock options 971 838
Borrowings under debt facilities 1,220,100 241,500
Payments under debt facilities (1,200,600) (95,700)
Repurchase of convertible subordinated debentures (19,320) --
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Net cash provided by financing activities 1,151 146,638
Effect of currency exchange rate changes on cash (219) (1,288)
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Net increase in cash and cash equivalents 17,509 10,449
Cash and cash equivalents at beginning of period 9,655 3,775
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Cash and cash equivalents at end of period $ 27,164 $ 14,224
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</TABLE>
See notes to condensed consolidated financial statements.
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ST. JUDE MEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information, and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the interim periods are not
necessarily indicative of the results that may be expected for the full year.
For further information, refer to the consolidated financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.
Certain 1999 amounts have been reclassified to conform to the 2000 presentation.
NOTE 2 - INVENTORIES
Inventories consist of the following:
MARCH 31, DECEMBER 31,
2000 1999
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Finished goods $117,806 $ 108,449
Work in progress 35,497 41,466
Raw materials 73,093 85,492
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Total inventory $226,396 $ 235,407
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NOTE 3 - LONG-TERM DEBT
Long-term debt consists of the following:
MARCH 31, DECEMBER 31,
2000 1999
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Committed credit facility borrowings $ -- $ 299,000
Commercial paper borrowings 386,000 --
Uncommitted credit facility borrowings 81,000 148,500
Convertible subordinated debentures 10,675 29,995
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Total debt 477,675 477,495
Less current portion 117,000 --
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Total long-term debt $360,675 $ 477,495
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At March 31, 2000, the Company had a $350,000 committed revolving credit
facility that expires in March 2003 and a $150,000 committed revolving credit
facility that expires in March 2001. The Company also borrows from time to time
under uncommitted, due-on-demand credit facilities with various banks.
During the first quarter of 2000, the Company repurchased $19,320 of its
convertible subordinated debentures in open market transactions, recognizing an
immaterial gain. The Company also began issuing commercial paper with maturities
up to 270 days. These commercial paper borrowings are fully backed by committed
credit facilities and bear interest at varying market rates.
The Company classifies the above debt obligations as long-term on its balance
sheet to the extent it has the ability to repay all or a portion of the
short-term obligations with available cash under a long-term, committed credit
facility. Management continually reviews the Company's cash flow projections and
may from time to time repay a portion of the Company's borrowings.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
IRS MATTERS: The Company and the Internal Revenue Service ("IRS") have reached a
verbal agreement to settle the IRS Tax Court suit for the tax periods 1990-1991
and subsequent year disputes for the tax periods 1992-1995. The issues raised by
the IRS related primarily to the Company's Puerto Rican operations. It is
expected that an agreement between the Company and the IRS will be formalized in
writing within 60 days. The proposed settlement is not expected to impact the
Company's statement of earnings.
LITIGATION: Five separate lawsuits have been asserted against the Company
involving the Company's mechanical heart valves with a Silzone(R) coating. The
Company recalled products with the Silzone(R) coating on January 21, 2000 (see
Note 6 below) and sent a Recall Notice and Advisory concerning the recall to
physicians and others at that time. A number of these cases are seeking
monitoring of patients implanted with Silzone(R)-coated valves who have had no
injury to date. Three of the five cases that have been asserted seek class
action status. The Company intends to defend these cases.
The Company's product liability insurance policies exclude coverage for two
discontinued Pacesetter lead models. These discontinued lead models were the
subject of class action product liability suits that have been settled.
Management believes losses that might be sustained from any such future actions
would not have a material adverse effect on the Company's liquidity or financial
condition, but could potentially be material to the earnings of a particular
future period if resolved unfavorably.
The Company is involved in various other product liablilty lawsuits, claims and
proceedings of a nature considered normal to its business. Subject to
self-insured retentions, the Company has product liability insurance sufficient
to cover such claims and suits.
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NOTE 5 - SHAREHOLDERS' EQUITY
CAPITAL STOCK: The Company's authorized capital consists of 25,000 shares of
$1.00 per share par value preferred stock and 250,000 shares of $0.10 per share
par value common stock. There were no shares of preferred stock issued or
outstanding during 1999 or the first quarter of 2000. There were 83,828 and
83,781 shares of common stock outstanding at March 31, 2000 and December 31,
1999.
SHARE REPURCHASES: During the third quarter of 1999, the Company's Board of
Directors authorized the repurchase of up to $250,000 of the Company's
outstanding common stock over a three-year period. There were no share
repurchases during the first quarter of 2000.
NOTE 6 - SPECIAL CHARGES
On January 21, 2000, the Company initiated a worldwide voluntary recall of all
field inventory of heart valve replacement and repair products incorporating a
Silzone(R) coating on the sewing cuff fabric. The Company concluded that it will
no longer utilize the Silzone(R) coating. The Company recorded a special charge
accrual totaling $26,101 during the first quarter of 2000 relating to asset
write-downs ($9,465) and other costs, including monitoring expenses, ($16,636)
associated with this recall and product discontinuance. The Company has utilized
$10,631 of this special charge accrual through March 31, 2000. There can be no
assurance that the final costs associated with this recall, including
litigation-related costs, will not exceed management's estimates.
The Company recorded a $9,754 special charge accrual in 1999 relating to the
restructuring of its international operations, of which $6,055 has been utilized
through March 31, 2000. The Company also recorded special charge accruals in
1997 totaling $58,669 relating to various activities, of which $56,354 has been
utilized through March 31, 2000.
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NOTE 7 - NET EARNINGS (LOSS) PER SHARE
The table below sets forth the computation of basic and diluted net earnings
(loss) per share:
THREE MONTHS ENDED MARCH 31, 2000 1999
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Numerator:
Net earnings (loss) $ 15,828 $(12,057)
Denominator:
Basic-weighted average shares outstanding 83,779 84,194
Effect of dilutive securities:
Employee stock options 168 -
Restricted shares 44 -
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Diluted-weighted average shares outstanding 83,991 84,194
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Basic net earnings (loss) per share $ .19 $ (.14)
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Diluted net earnings (loss) per share $ .19 $ (.14)
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Net earnings (loss) and diluted-weighted average shares outstanding have not
been adjusted for the Company's convertible debentures or for certain employee
stock options and awards since the effect of these securities would have been
anti-dilutive.
NOTE 8 - COMPREHENSIVE INCOME (LOSS)
Other comprehensive income (loss) consists of unrealized gains or losses on
available-for-sale marketable securities and foreign currency translation
adjustments, net of taxes. Other comprehensive loss was $(2,733) and $(21,450)
for the three months ended March 31, 2000 and 1999. Total comprehensive income
(loss) combines reported net earnings (loss) and other comprehensive income
(loss). Total comprehensive income (loss) was $13,095 and $(33,507) for the
three months ended March 31, 2000 and 1999.
NOTE 9 - ACQUISITION
On March 16, 1999, the Company purchased the Angio-Seal(TM) business of Tyco
International Ltd. for $167,000 in cash. The Angio-Seal(TM) acquisition was
recorded using the purchase method of accounting and the operating results of
Angio-Seal(TM) was included in the Company's consolidated statement of earnings
from the date of acquisition. Pro forma results of operations have not been
presented for this acquisition since the effect of this acquisition was not
material to the Company's consolidated results of operations for the periods
presented. See the Company's 1999 Annual Report to Shareholders on Form 10-K for
further information on the Company's Angio-Seal(TM) acquisition.
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NOTE 10 - OTHER INCOME (EXPENSE)
Other income (expense), consists of the following:
THREE MONTHS ENDED MARCH 31, 2000 1999
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Interest expense $ (7,799) $ (5,822)
Other 693 1,191
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Other income (expense) $ (7,106) $ (4,631)
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NOTE 11 - SEGMENT INFORMATION
The Company has two reportable segments: Cardiac Rhythm Management (CRM) and
Heart Valve Disease Management (HVDM). The CRM segment, which includes the
results from the Company's Cardiac Rhythm Management Division and Daig Division,
develops, manufactures and distributes bradycardia pulse generator and
tachycardia implantable cardioverter defibrillator systems, electrophysiology
and interventional cardiology catheters and vascular closure devices. The HVDM
segment develops, manufactures and distributes mechanical and tissue heart
valves and valve repair products and is in the process of developing suture-free
devices to facilitate coronary artery bypass graft anastomoses.
The following table presents certain financial information about the Company's
reportable segments:
<TABLE>
<CAPTION>
CRM HVDM ALL OTHER (1) TOTAL
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<S> <C> <C> <C> <C>
QUARTER ENDED MARCH 31, 2000
External net sales $ 225,258 $ 70,241 $ -- $ 295,499
Operating profit (loss) 32,094 35,120 (35,487) 31,727
QUARTER ENDED MARCH 31, 1999
External net sales $ 192,441 $ 74,293 $ -- $ 266,734
Operating profit (loss) 18,259 39,894 (56,221) 1,932
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</TABLE>
(1) AMOUNTS RELATE PRIMARILY TO CORPORATE ACTIVITIES, SPECIAL CHARGES AND
PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT CHARGES. ALL OTHER OPERATING
PROFIT (LOSS) AMOUNTS INCLUDE A SPECIAL CHARGE TOTALING $26,101 IN 2000 AND
A PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT CHARGE OF $47,775 IN 1999.
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NOTE 12 - NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (Statement 133), which is required to be adopted in
years beginning after June 15, 2000, although early adoption as of the beginning
of any fiscal quarter is permitted. Statement 133 requires companies to
recognize all derivatives on the balance sheet at fair value. Derivatives not
qualifying as hedges must be adjusted to fair value through earnings. If the
derivative qualifies as a hedge, depending on the nature of the hedge, changes
in the fair value of derivatives will either be offset against the change in
fair value of the hedged assets, liabilities, or firm commitments through
earnings, or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings. Management is continuing to
review the impact of Statement 133 on the Company's financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS
ACQUISITIONS: The Company acquired the Angio-Seal(TM) business of Tyco
International Ltd. on March 16, 1999 and the outstanding common stock of
Vascular Science, Inc. (VSI) on September 27, 1999. These acquisitions have been
recorded using the purchase method of accounting. The operating results of each
of these acquisitions are included in the Company's consolidated statements of
earnings from the date of each acquisition.
NET SALES: Net sales for the first quarter of 2000 totaled $295,499, a 10.8%
increase over the $266,734 reported in the first quarter of 1999. Unfavorable
foreign currency effects due to a stronger U.S. dollar primarily against the
major Western European currencies reduced first quarter 2000 net sales as
compared with 1999 by approximately $7,800.
Cardiac rhythm management (CRM) net sales for the first quarter of 2000 were
$225,258, a 17.1% increase over the $192,441 recorded in the first quarter of
1999. The increase in CRM net sales for the first quarter of 2000 was primarily
attributable to increased bradycardia net sales, increased electrophysiology
(EP) catheter unit sales, and the effect of a full quarter of Angio-Seal net
sales. The increase in bradycardia net sales is due to the Company's on-going
rollout of the Affinity(R) pacemaker family and to an expanded U.S. sales
organization.
Heart valve disease management (HVDM) net sales for the first quarter of 2000
were $70,241, a 5.5% decrease from the $74,293 recorded in 1999. The decrease in
HVDM net sales was attributable to the effects of the stronger U.S. dollar and a
slight clinical preference shift from mechanical valves to tissue valves in the
U.S. market where HVDM holds significant mechanical valve market share and a
smaller share of the tissue valve market.
GROSS PROFIT: Gross profit for the first quarter of 2000 totaled $193,521 or
65.5% of net sales, as compared with $173,273, or 65.0% of net sales, during the
first quarter of 1999. The slight improvement in the gross profit percentage is
due primarily to higher CRM sales volumes and improved CRM manufacturing
efficiencies.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSE: SG&A expense for the first
quarter of 2000 totaled $103,299, a 7.1% increase over the $96,423 reported in
the first quarter of 1999. The increase in SG&A expense in the first quarter of
2000 was primarily attributable to increased sales activities and to the effect
of a full quarter of Angio-Seal expenses.
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RESEARCH AND DEVELOPMENT (R&D) EXPENSE: R&D expenses in the first quarter of
2000 totaled $32,394, or 11.0% of net sales, compared with $27,143, or 10.2% of
net sales, for the first quarter of 1999. The slight increase in R&D expenses as
a percentage of net sales is primarily attributable to increased CRM activities
relating primarily to ICDs and products treating emerging indications in atrial
fibrillation and congestive heart failure.
PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT EXPENSE: The Company recorded a
purchased in-process research and development charge totaling $47,775 during the
first quarter of 1999 in connection with its acquisition of Angio-Seal(TM).
The Company acquired certain in-process technologies in connection with its
acquisition of VSI in September 1999. The appraised value of the VSI in-process
technologies was determined to be $95,500, of which $67,453 was recorded at
close. The remaining balance of the in-process research and development
valuation ($28,047) is expected to be recorded in the Company's financial
statements as purchased in-process research and development when payment of
future contingent consideration is assured beyond a reasonable doubt. All other
contingent consideration payments in excess of the $28,047 are expected to be
capitalized as goodwill. Management currently anticipates additional in-process
research and development charges in 2000 related to VSI.
Management believes that the financial statement projections used in the
Angio-Seal and VSI acquisitions are still materially valid; however, there can
be no assurance that the projected results will be achieved. Certain in-process
technologies acquired in the Angio-Seal acquisition have been developed to the
point of commercial production and sale to customers. Management expects to
continue the development of the other in-process technologies acquired in the
Angio-Seal and VSI acquisitions and continues to believe that there is a
reasonable chance of successfully completing such development efforts. However,
there is risk associated with the completion of the in-process technologies and
there can be no assurance that any technologies will meet with either
technological or commercial success. Failure to successfully develop and
commercialize these in-process technologies would result in the loss of the
expected economic return inherent in the original fair value allocation.
Additionally, the value of other intangible assets acquired may become impaired.
SPECIAL CHARGE: On January 21, 2000, the Company initiated a worldwide voluntary
recall of all field inventory of heart valve replacement and repair products
incorporating a Silzone(R) coating on the sewing cuff fabric. The Company
concluded that it will no longer utilize the Silzone(R) coating. The Company
recorded a special charge accrual totaling $26,101 during the first quarter of
2000 relating to asset write-downs ($9,465) and other costs, including
monitoring expenses, ($16,636) associated with this recall and product
discontinuance. The Company has utilized $10,631 of the special charge accrual
through March 31, 2000. Other than the effect of this special charge, management
believes that this recall will not materially impact the Company's future
earnings or cash flows based primarily on the fact that the Company's
non-Silzone(R) coated products, which represent 75% of the Company's HVDM
shipments, are not affected by this recall. However, there can be no assurance
that the final costs associated with this recall, including litigation-related
costs, will not exceed management's estimates.
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OTHER INCOME (EXPENSE): Interest expense was $7,799 during the first quarter of
2000 as compared with $5,822 in 1999. The increase in interest expense is due
primarily to increased debt levels resulting primarily from the Company's
acquisitions and share repurchases in 1999.
INCOME TAXES: The Company's effective income tax rate was 25% for the first
quarters of 2000 and 1999, exclusive of the 2000 special charge and the 1999
purchased in-process research and development charge which were primarily
recorded in taxing jurisdictions with a low income tax rate.
OUTLOOK: The Company expects that market demand, government regulation and
societal pressures will continue to change the worldwide health care industry
resulting in further business consolidations and alliances. The Company
participates with industry groups to promote the use of advanced medical device
technology in a cost conscious environment. Customer service in the form of
cost-effective clinical outcomes will continue to be a primary focus for the
Company.
The Company's HVDM business is in a highly competitive market. The market is
segmented between mechanical heart valves, tissue heart valves, and repair
products. During 1999 and the first quarter of 2000, the U.S. market continued
its slight shift to tissue valve and repair products from mechanical heart
valves resulting in a small market share loss. Competition is anticipated to
place pressure on pricing and terms, and health care reform is expected to
result in further hospital consolidations over time.
The Company's CRM business is also in a highly competitive industry that is
undergoing consolidation. The number of principal suppliers has decreased from
four to three. The Company's two principal competitors each have substantially
more assets, sales and sales personnel than the Company. In addition, the
Company's two principal competitors in the ICD market have dual-chamber ICDs on
the market that represent an increasing percentage of the overall ICD market.
The Company began clinical evaluation of a dual-chamber ICD in late 1999, and
also received CE mark approval in March 2000. However, until the Company
commercially introduces a dual-chamber ICD into the U.S. and other global
markets, the continued growth of dual-chamber ICDs at the expense of
single-chamber ICDs could adversely affect the Company. Rapid technological
change is expected to continue, requiring the Company to invest heavily in R&D
and to effectively market its products.
The global medical device market is highly competitive. Competitors have
historically employed litigation to gain a competitive advantage. In addition,
the Company's products must continually improve technologically and provide
improved clinical outcomes due to the competitive nature of the industry.
Group purchasing organizations (GPOs) in the U.S. continue to consolidate the
purchasing for some of the Company's customers. Several such GPOs have executed
contracts with the Company's CRM market competitors, which exclude the Company.
These contracts, if enforced, may adversely affect the Company's sales of CRM
products to members of these GPOs.
The Company and the IRS have reached a verbal settlement regarding litigation
over a tax issue. See Part II, Item 1, Legal Proceedings below for further
discussion.
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FINANCIAL CONDITION
The Company's liquidity and cash flows remained strong through March 31, 2000.
The Company's current assets to current liabilities ratio was 1.8 to 1 at March
31, 2000 as compared with 2.4 to 1 at December 31, 1999. The decrease in the
current ratio is due to the classification of certain interest-bearing debt as a
current liability at March 31, 2000 (see further discussion below).
Accounts receivable increased $13,338 from December 31, 1999 to March 31, 2000
due primarily to higher sales in the first quarter of 2000 as compared with the
fourth quarter of 1999. Total interest bearing debt remained relatively constant
from December 31, 1999 through March 31, 2000.
The Company classifies its interest-bearing debt obligations as long-term on its
balance sheet to the extent it has the ability to repay all or a portion of its
short-term, interest-bearing debt obligations with available cash under a
long-term, committed credit facility. Management continually reviews the
Company's cash flow projections and may from time to time repay a portion of the
Company's borrowings.
During the third quarter of 1999, the Company's Board of Directors authorized
the repurchase of up to $250,000 of the Company's outstanding common stock over
a three-year period. There were no share repurchases during the first quarter of
2000.
Management believes that cash generated from operations and cash available under
its credit facilities will be sufficient to meet the Company's working capital
and share repurchase plan needs in the near term. Should suitable investment
opportunities arise, management believes that the Company's earnings, cash flows
and balance sheet will permit the Company to obtain additional debt financing or
equity capital, if necessary.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes from December 31, 1999 through
March 31, 2000 in the Company's market risk, other than the maturity in January
2000 of its interest rate swap contract that hedged a substantial portion of the
Company's variable interest rate risk on $138,000 of the Company's revolving
credit facility borrowings.
For further information on market risk, refer to Item 7A in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
GUIDANT LITIGATION
Guidant's Claims Against SJM: On November 26, 1996, Guidant Corporation
(a competitor of Pacesetter and Ventritex) ("Guidant") and related parties filed
a lawsuit against St. Jude Medical, Inc. ("St. Jude Medical"), Pacesetter, Inc.
("Pacesetter"), Ventritex, Inc. ("Ventritex") and certain members of the
Telectronics Group in State Superior Court in Marion County, Indiana (the
"Telectronics Action"). The lawsuit alleges, among other things, that, pursuant
to an agreement entered into in 1993, certain Guidant parties granted Ventritex
intellectual property licenses relating to cardiac stimulation devices, and that
such licenses would terminate upon the consummation of the merger of Ventritex
into Pacesetter (the "Merger"). The lawsuit further alleges that, pursuant to an
agreement entered into in 1994 (the "Telectronics Agreement"), certain Guidant
parties granted the Telectronics Group intellectual property licenses relating
to cardiac stimulation devices. The lawsuit seeks declaratory and injunctive
relief, among other things, to prevent and invalidate the transfer of the
Telectronics Agreement to Pacesetter in connection with Pacesetter's acquisition
of Telectronics' assets (the "Telectronics Acquisition") and the application of
license rights granted under the Telectronics Agreement to the manufacture and
sale by Pacesetter of Ventritex's products following the consummation of the
Merger. The court overseeing this case issued a stay of this matter in July 1998
so that the issues could be addressed in an arbitration requested by the
Telectronics Group and Pacesetter.
Guidant and related parties also filed suit against St. Jude Medical,
Pacesetter and Ventritex on November 26, 1996 in the United States District
Court for the Southern District of Indiana. This second lawsuit seeks (i) a
declaratory judgment that Pacesetter's manufacture, use or sale of cardiac
stimulation devices of the type or similar to the type which Ventritex
manufactured and sold at the time the Guidant parties filed their complaint
would, upon consummation of the Merger, be unlicensed and constitute an
infringement of patent rights owned by certain Guidant parties, (ii) to enjoin
the manufacture, use or sale by St. Jude Medical, Pacesetter or Ventritex of
cardiac stimulation devices of the type which Ventritex manufactured at the time
the Guidant parties filed their complaint, and (iii) certain damages and costs.
This second lawsuit was stayed by the court in July 1998 given the order to
arbitrate which is mentioned below.
St. Jude Medical and Pacesetter believe that the foregoing state and
federal court complaints contain a number of significant factual inaccuracies
concerning the Telectronics Acquisition and the terms and effects of the various
intellectual property license agreements referred to in such complaints. For
these reasons and others, St. Jude Medical and Pacesetter believe that the
allegations set forth in the complaints are without merit. St. Jude Medical and
Pacesetter have vigorously defended their interests in these cases, and will
continue to do so.
Order to Arbitrate/Guidant Lawsuits Stayed: As a result of the state
and federal lawsuits brought by Guidant and related parties, the Telectronics
Group and Pacesetter filed a lawsuit in the United States District Court for the
District of Minnesota seeking (i) a declaratory judgment that the Guidant
parties' claims, as reflected in the Telectronics Action, are subject to
arbitration pursuant to the arbitration provisions of the Telectronics
Agreement, (ii) an order that the defendants arbitrate their claims against the
Telectronics Group and Pacesetter in accordance with the arbitration provisions
of the Telectronics Agreement, (iii) to enjoin the defendants
15 of 19
<PAGE>
preliminarily and permanently from litigating their dispute with the
Telectronics Group and Pacesetter in any other forum, and (iv) certain costs.
After the Eighth Circuit Court of Appeals ruled on an appeal in favor of the
Telectronics Group and Pacesetter in May 1998, the United States District Court
for the District of Minnesota issued an order on July 8, 1998 directing the
arbitration requested by the Telectronics Group and Pacesetter to proceed.
Status of Arbitration: An arbitrator for the arbitration has been
selected by the parties. The arbitrator has issued some interim rulings,
including that Pacesetter and St. Jude Medical should not participate in the
initial arbitration proceeding concerning whether the Telectronics Agreement
transferred to Pacesetter. The Telectronics Group and the Guidant parties will
be involved in this initial arbitration proceeding. This initial arbitration
proceeding occurred in late April 2000. A decision in the arbitration is not
expected until a post proceeding briefing is completed, which means a decision
is not likely until June or July 2000.
Background Concerning Patents Involved In Guidant's Claims: In the
federal court lawsuit in Indiana which has been stayed pending the result of the
above-described arbitration, Guidant asserted patent infringement claims against
St. Jude Medical and its Pacesetter subsidiary involving four separate patents.
One of these patents expired May 3, 1998. The other patents involved expire
March 7, 2001, February 25, 2003 and December 22, 2003. Although Guidant has
requested injunctive relief and damages as part of the federal court lawsuit in
Indiana, the request for an injunction would be barred for any expired patent.
Guidant's claims for damages for the period prior to expiration of a patent
could still be asserted if Guidant's claims for infringement remain after the
above-mentioned arbitration is completed.
In connection with the three patents that have yet to expire, a third
party initiated a Reexamination Request in the U.S. Patent Office. The Patent
Office Reexamination Action resulted in the preliminary rejection of all of the
claims in two of the unexpired patents. With respect to the third unexpired
patent, the Patent Office preliminarily rejected some of the claims in the
patent and upheld others. It is St. Jude Medical's understanding that Guidant is
in the process of responding to the Patent Examiner's preliminary position as
part of its Reexamination procedure. If the Patent Examiner maintains his
position, St. Jude Medical management believes that Guidant will appeal the
adverse rulings by the Patent Office concerning these three patents, a process
that typically takes between six and twelve months.
IRS MATTERS
The Company and the Internal Revenue Service ("IRS") have reached a
verbal agreement to settle the IRS Tax Court suit for the tax periods 1990-1991
and subsequent year disputes for the tax periods 1992-1995. The issues raised by
the IRS related primarily to the Company's Puerto Rican operations. It is
expected that an agreement between the Company and the IRS will be formalized in
writing within 60 days. The proposed settlement is not expected to impact the
Company's statement of earnings.
SILZONE(R) MATTERS
Five separate lawsuits have been asserted against the Company involving
the Company's mechanical heart valves with a Silzone(R) coating. The Company
recalled products with the Silzone(R) coating on January 21, 2000 (see Note 6 to
the Company's March 31, 2000 financial statements) and sent a Recall Notice and
Advisory concerning the recall to physicians and others at that time. A number
of these cases are seeking monitoring of patients implanted with
Silzone(R)-coated valves who have had no injury to date. Three of the five cases
that have been asserted seek class action status. The Company intends to defend
these cases.
16 of 19
<PAGE>
OTHER LITIGATION AND PROCEEDINGS
The Company is unaware of any other pending legal proceedings which it
regards as likely to have a material adverse effect on its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on May 10, 2000. In
conjunction therewith, proxies were solicited in accordance with Regulation 14A.
The following actions were taken:
(1) Ronald A. Matricaria, Walter L. Sembrowich and Daniel J. Starks were
elected to the Board of Directors for terms ending in 2003.
Shareholders approved management's nominees to the Board of Directors
by votes as follows: 58,484,940, 58,522,162 and 58,595,575 in favor,
3,259,315, 3,222,093 and 3,148,680 withheld for Messrs Matricaria,
Sembrowich and Starks, respectively. Seven other directors are serving
unexpired terms as follows: Gail R. Wilensky, Lowell C. Anderson, David
A. Thompson, and Terry L. Shepherd - through 2001; Thomas H. Garrett
III, Roger G. Stoll, and Stuart M. Essig - through 2002.
(2) The shareholders ratified and approved the St. Jude Medical, Inc. 2000
Employee Stock Purchase Savings Plan by a vote of 41,429,400 in favor,
4,094,025 opposed and 372,554 abstaining from voting.
(3) The shareholders ratified and approved the St. Jude Medical, Inc. 2000
Stock Plan by a vote of 33,153,597 in favor, 12,176,350 opposed and
566,032 abstaining from voting.
(4) The shareholders ratified the reappointment of Ernst & Young LLP as the
Company's independent auditor for the current fiscal year by a vote of
61,101,217 in favor, 355,772 opposed and 287,266 abstaining from
voting.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Exhibit
------ -------
10.15 St. Jude Medical, Inc. 2000 Employee Stock
Purchase Savings Plan
10.16 St. Jude Medical, Inc. 2000 Stock Plan
27 Financial data schedule
(b) Reports on Form 8-K
None
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ST. JUDE MEDICAL, INC.
May 12, 2000 /s/ JOHN C. HEINMILLER
- ------------ -----------------------
DATE JOHN C. HEINMILLER
Vice President - Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
19 of 19
EXHIBIT 10.15
St. Jude Medical, Inc.
2000 Employee Stock Purchase Savings Plan
I
Purpose
The purpose of the 2000 Employee Stock Purchase Savings Plan is to
provide a greater community of interest between St. Jude Medical, Inc.
shareholders and its employees, and to facilitate purchase by employees of
additional shares of common stock in the Company. It is believed the Plan will
encourage employees to remain in the employ of the Company and will also permit
the Company to compete with other corporations offering similar plans in
obtaining and retaining the services of competent employees. It is intended that
options issued pursuant to this Plan shall constitute options issued pursuant to
an "Employee Stock Purchase Plan" within the meaning of Section 423 of the
Internal Revenue Code of 1986, as amended.
II
Definitions
A. "Plan" means the 2000 St. Jude Medical, Inc. Employee Stock Purchase
Savings Plan.
B. "Code" means the Internal Revenue Code of 1986, as amended.
C. "Company" means St. Jude Medical, Inc., and any of its subsidiaries
(as that term is defined by Section 425(f) of the Code) to which St. Jude
Medical, Inc. and such respective subsidiaries, by action of their Boards of
Directors, shall make this Plan applicable.
D. "Employee" means any person, including an officer, who is
customarily employed twenty (20) hours or more per week and more than five (5)
months in a calendar year by the Company.
E. "Eligible Employee" means an Employee of the Company who is eligible
for participation in the Plan in accordance with Article IV.
F. "Participant" means an Eligible Employee who has elected to
participate in the Plan in accordance with Article V.
G. "Committee" means the committee provided for in Article XI.
H. The "Commencement Date" of the Plan means August l, 2000 or a date
established by the Committee not to exceed fourteen days following registration
of the options and shares reserved pursuant to the Plan with the United States
Securities and Exchange Commission.
<PAGE>
I. "Base Pay" means regular straight time earnings annualized as of the
date of commencement of a phase excluding payments, if any, for overtime,
incentive compensation, commissions, incentive payments, premiums, bonuses and
any other special remuneration.
J. "Termination Date" shall mean the earlier of (i) the date of the one
year anniversary following the commencement of a particular phase of the Plan,
or (ii) such time as any merger or consolidation in which St. Jude Medical, Inc.
is not the surviving corporation becomes effective.
K. "Shares" shall mean common shares of St. Jude Medical, Inc. of the
par value of $.10, subject to adjustments which may be made in accordance with
Articles XVI and XVII.
III
Term and Phases of the Plan
A. The Plan will commence on the Commencement Date and will terminate
ten (10) years and six (6) months thereafter, except that any phase commenced
prior to such termination shall, if necessary, be allowed to continue beyond
such termination until completion. Notwithstanding the foregoing, this Plan
shall be considered of no force or effect and any options granted shall be null
and void unless the holders of a majority of shares of the common stock of the
Company, represented at a meeting in person or by proxy, approve the Plan within
twelve (12) months before or after the date of its adoption by the Board of
Directors.
B. The Plan shall be carried out in ten (10) phases, each phase being
for a period of one year. No phase shall run concurrently. A phase may commence
immediately after the termination of the preceding phase. The commencement of
each phase shall be determined by the Committee, provided that the commencement
of the first phase shall be within twelve (12) months before or after the date
of approval of the Plan by the shareholders of the Company. In the event all of
the stock reserved for grant of options hereunder is issued pursuant to the
terms hereof prior to the commencement of one or more phases scheduled by the
Committee or the number of shares remaining is so small, in the opinion of the
Committee, as to render administration of any succeeding phase impracticable,
such phase or phases shall be canceled. Phases shall be numbered successively as
Phase 1, Phase 2, Phase 3, etc.
IV
Eligibility
A. Any Employee of the Company who has completed at least one month of
continuous service on or prior to the commencement of a phase of the Plan shall
be eligible to participate in the Plan, subject to the limitations imposed by
Section 423 of the Code.
B. Any Employee who is a member of the Board of Directors of the
Company shall be eligible to participate in the Plan.
2000 Stock Purchase Plan 2
<PAGE>
C. Notwithstanding any provision of the Plan to the contrary, no
Employee shall be granted an option:
1. if such Employee, immediately after the option is granted,
owns shares possessing five percent (5%) or more of the total combined
voting power or value of all classes of shares of the Company or a
parent or a subsidiary of the Company. For purposes of determining
share ownership, the rules of Section 424(d) of the Code shall apply,
and shares which the Employee may purchase under outstanding options
shall be treated as shares owned by the Employee; or
2. which permits the Employee to purchase shares under such
plans of the Company or a subsidiary of the Company to accrue at a rate
which exceeds $25,000 of the fair market value of such shares
(determined at the time such option is granted) for each calendar year
in which such option is outstanding at any time. The term "accrue"
shall be interpreted as in Section 423(b)(8) of the Code.
V
Participation
A. An Eligible Employee may elect to enroll as, and become a
Participant in, any phase of the Plan by completing a payroll deduction
authorization on the form provided by the Company and filing it the personnel
office prior to or on the date the phase commences.
B. Payroll deductions for a Participant shall commence on the date when
his or her payroll deduction authorization becomes effective and shall end on
the last payday immediately prior to or coinciding with the Termination Date of
the particular phase, unless sooner terminated by the Participant as provided in
Article IX or as otherwise provided herein.
C. A Participant who ceases to be an Eligible Employee, although still
employed by the Company, thereupon shall be deemed to discontinue his or her
participation in the Plan, and he or she shall have the rights provided in
Article IX.
D. Participation in the Plan shall be voluntary.
VI
Payroll Deductions
A. Upon enrollment, a Participant shall elect to make contributions to
the Plan by payroll deductions (in full dollar amounts calculated to be as
uniform as practicable throughout the period of the phase), in the aggregate
amount not in excess of the sum of 10% of such Participant's Base Pay for the
term of the phase, as determined on the basis of his or her annual or annualized
Base Pay at the commencement of the phase. The minimum authorized payroll
deduction must aggregate to not less than $10 per month.
2000 Stock Purchase Plan 3
<PAGE>
B. All payroll deductions made for Participants shall be credited to
their accounts under the Plan. The Participant may not make any separate cash
payments into such account.
C. A Participant may discontinue his or her participation in the phase
and terminate his or her payroll deduction authorized at any time as provided in
Article IX.
D. A Participant may reduce the amount of his or her payroll deduction
by completing an amended payroll deduction authorization on the form provided
and filing it with his or her personnel office, but no change can be made during
a phase of the Plan which would either change the time or increase the rate of
his or her payroll deductions.
VII
Terms and Conditions of Options
A. Stock options granted pursuant to the Plan may be evidenced by
agreements in such form as the Committee shall approve, provided that all
Employees shall have the same rights and privileges and provided further that
such options shall comply with and be subject to the following terms and
conditions. The Committee may conclude that agreements are not necessary.
B. As of the commencement of a phase when a Participant's payroll
deduction authorization becomes effective, the Participant shall be granted an
option for as many full shares as he or she will be able to purchase with the
payroll deduction credited to his or her account during his or her participation
in the phase, subject to the limitations of Article X. The maximum number of
shares subject to purchase by a Participant shall equal the total amount
credited to the Participant's account under Section VI hereof divided by the
option price set forth in Section VII, Paragraph C.1 hereof.
C. The option price of shares purchased with payroll deductions for an
Employee who becomes a Participant as of the commencement of a phase shall be
the lower of:
1. 85% of the fair market value of the shares on the date the
phase commences; or,
2. 85% of the fair market value of the shares on the
Termination Date of the phase.
D. The fair market value of the shares shall be determined by the
Committee for each valuation date in a manner consistent with Section 423 of the
Code.
2000 Stock Purchase Plan 4
<PAGE>
VIII
Exercise of Option
A. Unless a Participant gives written notice to the Company as provided
in Article IX, his or her option for the purchase of shares will be exercised
automatically for him or her as of the Termination Date of the phase for the
purchase of the number of full shares which the accumulated payroll deductions
in his or her account at that time will purchase at the applicable option price;
but in no event shall the number of full shares be greater than the number of
full shares to which the Participant would have been eligible to receive when he
or she first became a Participant under the phase if he or she had elected a
payroll deduction rate of 10% of his or her then annual or annualized Base Pay
and as if the option price were solely based under Paragraph C.1 of Article VII.
B. By written notice to the Company within the period commencing three
(3) months prior to and extending five (5) business days following the
Termination Date of the phase and after delivery to the Participant of a
prospectus covering the shares to be issued under the Plan, a Participant may
elect, effective as of the Termination Date, to:
1. withdraw all the accumulated payroll deductions in his or
her account at the time, with interest; or, after receipt of a
prospectus as set forth above,
2. exercise his or her option for a specified number of full
shares less than the number of full shares which the accumulated
payroll deductions in his or her account will purchase at the
applicable option price and withdraw the balance in his or her account
without interest; but in no event shall the number of full shares be
greater than the number of full shares to which a Participant would
have been eligible to receive when he or she first became a Participant
under the phase if he or she had elected a payroll deduction rate of
10% of his or her then annual or annualized Base Pay and as if the
option price were solely based under Paragraph C.1 of Article VII.
C. Notwithstanding the provisions of Paragraphs A and B above, if a
Participant files reports pursuant to Section 16 of the Securities Exchange Act
of 1934 (at the commencement of a phase or becomes obligated to file such
reports during a phase) then such a Participant shall not have the right to
withdraw all or a portion of the accumulated payroll deductions except in
accordance with Article IX, Paragraphs A and B.
IX
Death, Withdrawal or Termination
A. In the event of death of a Participant, the person or persons
specified in Article XVIII may give notice to the Company within sixty (60) days
of the death of the Participant electing to purchase the number of full shares
which the accumulated payroll deductions in the account of such deceased
Participant will purchase under the option at the applicable option price
specified in Paragraph C of Article VII and have the balance in the account
distributed in cash
2000 Stock Purchase Plan 5
<PAGE>
without interest. If no such notice is received by the Company within said sixty
(60) days, the accumulated payroll deductions will be distributed in cash plus
interest.
B. Except as provided in the next sentence, upon termination of the
Participant's employment for any reason other than the death of the Participant,
the payroll deductions credited to his or her account, plus interest, shall be
returned to him or her. In the event the Participant's employment is terminated
by the Company due to the elimination of the Participant's position or in
connection with a corporate transaction, or such other similar circumstances as
approved by the Committee, with respect to such Participants designated by the
Committee, the Termination Date of the Phase shall be a date prior to or
coincident with their last day of employment; provided, however, that if the
termination of employment occurs within 90 days of the Termination Date of a
Phase, the original Termination Date shall apply.
C. Except for a Participant governed by Paragraph C of Article VIII, a
Participant may withdraw payroll deductions credited to his or her account under
the Plan at any time by giving written notice to the Company. All of the
Participant's payroll deductions credited to his or her account, plus interest,
shall be paid to him or her promptly after receipt of his or her notice of
withdrawal and no further payroll deductions shall be made from his or her
compensation.
X
Shares Under Option
A. The shares to be sold to a Participant under the Plan may, at the
election of the Company, be either treasury shares or shares originally issued
for such purpose. The maximum number of shares which shall be made available for
purchase under the Plan shall be 1,000,000 shares, subject to adjustment upon
changes in capitalization of the Company as provided in Articles XVI and XVII.
If the total number of shares for which options are to be granted on any date in
accordance with Article VII exceeds the number of shares then available under
the Plan (after deduction of all shares for which options have been exercised or
are then outstanding), the Committee shall make a pro rata allocation of the
shares remaining available in as nearly a uniform manner as shall be practicable
and as it shall determine to be equitable. In such event, payroll deductions to
be made shall be reduced accordingly and the Committee shall give written notice
of such reduction to each Participant affected thereby.
B. As promptly as practicable after the Termination Date of a phase,
the Company shall deliver to each Participant the full shares purchased under
exercise of his or her option, together with a cash payment equal to the balance
(without interest) of any payroll deductions credited to his or her account
which were not used for the purchase of shares.
C. The Participant will have no interest in shares covered by his or
her option until such option has been exercised.
2000 Stock Purchase Plan 6
<PAGE>
XI
Administration
The Plan shall be administered by a Committee consisting of not less
than two (2) members who shall be appointed by the Board of Directors of the
Company. Each member of such Committee shall be either a director, an officer or
an employee of the Company. Such Committee shall be vested with full authority
to make, administer, and interpret such rules and regulations as it deems
necessary to administer the Plan, and any such determination, decision or action
of such Committee with respect to any action in connection with the
construction, interpretation, administration or application of the Plan shall be
final, conclusive and binding on all Participants and any and all other persons
claiming under or through any Participant. It is provided, however, that the
provisions of the Plan shall be construed so as to extend and limit
participation in the Plan only in a manner consistent with the requirements of
Section 423 of the Code.
XII
Amendment of the Plan
The Board of Directors of the Company may at any time amend the Plan,
except that no amendment may make any change in any option theretofore granted
which would adversely affect the rights of any Participant, and no amendment
shall be made without prior approval of the shareholders of the Company if such
amendment would require sale of more shares than are authorized under Article X
of the Plan.
XIII
Non-transferability
Neither payroll deductions credited to a Participant's account nor any
rights with regard to the exercise of an option or to receive shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
by the Participant and any such attempted assignment, transfer, pledge or other
disposition shall be null and void and without effect, but the Company may treat
such act as an election to withdraw funds in accordance with Article IX.
XIV
Use of Funds
All payroll deductions received or held by the Company under this Plan
may be used by the Company for any corporate purposes and the Company shall not
be obligated to segregate such payroll deductions.
2000 Stock Purchase Plan 7
<PAGE>
XV
Interest
In any situation where the Plan provides for the payment of interest on
a Participant's payroll deductions, such interest shall be determined by
averaging the balance in the Participant's account for the period of his or her
participation and computing interest thereon at the rate of 4% per annum (simple
interest). The Committee may change the rate of interest for a particular phase,
provided such change is made prior to the commencement of the phase.
XVI
Changes in Capitalization, Merger, etc.
A. Subject to any required action by the shareholders, the number of
shares covered by each outstanding option, the price per share thereof in each
such option, and the maximum number of shares available for purchase pursuant to
options issued under the Plan shall be deemed proportionately adjusted for any
increase or decrease in the number of issued shares of the Company resulting
from a subdivision or consolidation of shares or the payment of a share dividend
(but only on the shares) or any other increase or decrease in the number of such
shares effected without receipt of consideration by the Company.
B. If the Company shall be involved in any merger or consolidation,
whether or not it is the surviving corporation, each outstanding option shall
pertain to and apply to the securities to which a holder of the number of shares
subject to the option would have been entitled. A dissolution or liquidation of
the Company shall cause each outstanding option to terminate, provided in such
event that, immediately prior to such dissolution or liquidation, each
Participant shall be repaid the payroll deductions credited to his or her
account, plus interest.
C. In the event of a change in the shares of the Company as presently
constituted, which is limited to a change of all its authorized shares with par
value into the same number of shares with a different par value or without par
value, the shares resulting from any such change shall be deemed to be the
shares within the meaning of this Plan.
XVII
Adjustments to Shares
A. To the extent that the foregoing adjustments relate to shares or
securities of the Company, such adjustments shall be made by the Committee, and
its determination in that respect shall be final, binding and conclusive,
provided that each option granted pursuant to this Plan shall not be adjusted in
a manner that causes the option to fail to continue to qualify as an option
issued pursuant to an "employee stock purchase plan" within the meaning of
Section 423 of the Code.
2000 Stock Purchase Plan 8
<PAGE>
B. Except as hereinbefore expressly provided in Articles XVI and XVII,
the optionee shall have no right by reason of any subdivision or consolidation
of shares of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of any class or by reason of any
dissolution, liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation, and any issue by the Company of shares of any
class, or securities convertible into shares of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to the option.
C. The grant of an option pursuant to this Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
XVIII
Beneficiary Designation
A Participant may file a written designation of a beneficiary who may
elect to purchase shares or receive cash to the Participant's credit under the
Plan in the event of such Participant's death prior to delivery to him or her of
such shares and cash. Such designation of beneficiary may be changed by the
Participant at any time by written notice. Upon the death of a Participant and
upon receipt by the Company of proof deemed adequate by it of the identity and
existence at the Participant's death of a beneficiary validly designated by him
or her under the Plan, the Company shall deliver such shares and cash to such
beneficiary in accordance with Section A of Article IX. If, upon the death of a
Participant, there is no surviving beneficiary duly designated as above
provided, the Company shall deliver accumulated payroll deductions to the
executor or administrator of the estate of the Participant or, if no such
executor or administrator has been appointed (to the knowledge of the Company)
within sixty (60) days following the Participant's death, the Company shall
deliver such accumulated payroll deductions to the surviving spouse, if any, as
though named as the designated beneficiary hereunder or, if there is no such
surviving spouse or child, then to such relatives of the Participant as would be
entitled to such cash under the laws of intestacy in the deceased Participant's
domicile as though named as the designated beneficiary hereunder. The Company
shall not be liable for any distribution made of shares or cash pursuant to any
will or other testamentary disposition made by such Participant, or because of
the provisions of law concerning intestacy, or otherwise. No designated
beneficiary shall, prior to the death of the Participant by whom he or she has
been designated, acquire any interest in the shares or cash credited to the
Participant under the Plan.
XIX
Registration and Qualification of Shares
The offering of the shares hereunder shall be subject to the effecting
by the Company of any registration or qualification of the shares under any
federal or state law or the obtaining of the consent or approval of any
governmental regulatory body which the Company shall determine, in its sole
discretion, is necessary or desirable as a condition to or in connection with
2000 Stock Purchase Plan 9
<PAGE>
the offering or the issue or purchase of the shares covered thereby. The Company
shall make every reasonable effort to effect such registration or qualification
or to obtain such consent or approval.
XX
Plan Preconditions
The Plan is expressly made subject to approval of shareholders of the
Company. If the Plan is not so approved by the shareholders on or before one
year after adoption by the Board of Directors, this Plan shall not come into
effect. In such case, the accumulated payroll deductions credited to the account
of each Participant shall forthwith be repaid to him or her with interest.
ADOPTED BY BOARD OF DIRECTORS: March 8, 2000
APPROVED BY SHAREHOLDERS: May 10, 2000
2000 Stock Purchase Plan 10
EXHIBIT 10.16
ST. JUDE MEDICAL, INC.
2000 STOCK PLAN
<PAGE>
SECTION CONTENTS PAGE
- ------- -------- ----
1. General Purpose of Plan; Definitions .................. 1
2. Administration ........................................ 3
3. Stock Subject to Plan ................................. 4
4. Eligibility ........................................... 4
5. Stock Options ......................................... 5
6. Transfer, Leave of Absence, etc. ...................... 9
7. Restricted Stock ...................................... 9
8. Amendments and Termination ............................ 11
9. Unfunded Status of Plan ............................... 11
10. General Provisions .................................... 12
11. Effective Date of Plan ................................ 13
<PAGE>
ST. JUDE MEDICAL, INC.
2000 STOCK PLAN
SECTION 1. General Purpose of Plan; Definitions.
The name of this plan is the St. Jude Medical, Inc. 2000 Stock Plan
(the "Plan"). The purpose of the Plan is to enable St. Jude Medical, Inc. and
its Subsidiaries (hereinafter, the "Company") to retain and attract executives
and other key employees, non-employee directors and consultants who contribute
to the Company's success by their ability, ingenuity and industry, and to enable
such individuals to participate in the long-term success and growth of the
Company by giving them a proprietary interest in the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
a. "Board" means the Board of Directors of the Company as it may be
comprised from time to time.
b. "Cause" means a felony conviction of a participant or the failure of
a participant to contest prosecution for a felony, willful misconduct,
dishonesty or intentional violation of a statute, rule or regulation, any of
which, in the judgment of the Company, is harmful to the business or reputation
of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute.
d. "Committee" means the Committee referred to in Section 2 of the
Plan. If at any time no Committee shall be in office, then the functions of the
Committee specified in the Plan shall be exercised by the Board, unless the Plan
specifically states otherwise.
e. "Consultant" means any person, including an advisor, engaged by the
Company, the Parent Corporation or a Subsidiary of the Company to render
services and who is compensated for such services and who is not an employee of
the Company, the Parent Corporation or any Subsidiary of the Company. A
Non-Employee Director may serve as a Consultant.
f. "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Administrator, provided that such leave of
absence is for a period of 90 days or less, unless reemployment after such leave
of absence is guaranteed by contract or statute.
g. "Company" means St. Jude Medical, Inc., a corporation organized
under the laws of the State of Minnesota (or any successor corporation).
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h. "Disability" means permanent and total disability as determined by
the Committee.
i. "Early Retirement" means retirement, with consent of the Committee
at the time of retirement, from active employment with the Company and any
Subsidiary or Parent Corporation of the Company.
j. "Fair Market Value" of Stock on any given date shall be determined
by the Committee as follows: (a) if the Stock is listed for trading, on the New
York Stock Exchange or one of more national securities exchanges, the last
reported sales price on the New York Stock Exchange or such principal exchange
on the date in question, or if such Stock shall not have been traded on such
principal exchange on such date, the last reported sales price on the New York
Stock Exchange or such principal exchange on the first day prior thereto on
which such Stock was so traded; or (b) if (a) is not applicable, by any means
fair and reasonable by the Committee, which determination shall be final and
binding on all parties.
k. "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
l. "Non-Employee Director" means a "Non-Employee Director" within the
meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of 1934.
m. "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option, and is intended to be and is designated as a
"Non-Qualified Stock Option" or an Incentive Stock Option that ceases to so
qualify due to an amendment to such Stock Option.
n. "Normal Retirement" means retirement from active employment with the
Company and any Subsidiary or Parent Corporation of the Company on or after age
65.
o. "Outside Director" means a Director who: (a) is not a current
employee of the Company or any member of an affiliated group which includes the
Company; (b) is not a former employee of the Company who receives compensation
for prior services (other than benefits under a tax-qualified retirement plan)
during the taxable year; (c) has not been an officer of the Company; (d) does
not receive remuneration from the Company, either directly or indirectly, in any
capacity other than as a director, except as otherwise permitted under Code
Section 162(m) and regulations thereunder. For this purpose, remuneration
includes any payment in exchange for good or services. This definition shall be
further governed by the provisions of Code Section 162(m) and regulations
promulgated thereunder.
p. "Parent Corporation" means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company if each of the
corporations (other than the Company) owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
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q. "Restricted Stock" means an award of shares of Stock that are
subject to restrictions under Section 7 below.
r. "Retirement" means Normal Retirement or Early Retirement.
s. "Stock" means the Common Stock of the Company.
t. "Stock Option" means any option to purchase shares of Stock granted
pursuant to Section 5 below.
u. "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. Administration.
The Plan shall be administered by the Board of Directors or by a
Committee appointed by the Board of Directors of the Company consisting of at
least two Directors, all of whom shall be Outside Directors and Non-Employee
Directors, who shall serve at the pleasure of the Board.
The Committee shall have the power and authority to grant to eligible
employees or Consultants, pursuant to the terms of the Plan: (i) Incentive Stock
Options, (ii) Non-Qualified Stock Options, and (iii) Restricted Stock.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the
Company and its Subsidiaries and other eligible persons to whom Stock
Options or Restricted Stock may from time to time be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options or Restricted Stock or a
combination of each, are to be granted hereunder;
(iii) to determine the number of shares to be covered by each
such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including,
but not limited to, any restriction on any Stock Option or other award
and/or the shares of Stock relating thereto), which authority shall be
exclusively vested in the Committee (and not the Board); provided,
however, that in the event of a merger or asset sale, the applicable
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provisions of Sections 5(c) of the Plan shall govern the acceleration
of the vesting of any Stock Option;
(v) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the
election of the participant.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate to the President and/or Chief Executive Officer of the Company the
authority to exercise the powers specified in (i), (ii), (iii), (iv) and (v)
above with respect to persons who are not either the chief executive officer of
the Company or the four highest paid officers of the Company other than the
chief executive officer.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
participants.
SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 5,000,000. Such shares may consist, in
whole or in part, of authorized and unissued shares. If any shares that have
been optioned cease to be subject to Stock Options, or if any shares that have
been optioned are forfeited, such shares shall again be available for
distribution in connection with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, and in the number and option price of
shares subject to outstanding options granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.
SECTION 4. Eligibility.
Officers, other key employees of the Company or any Parent Corporation
or Subsidiary, members of the Board of Directors, and Consultants who are
responsible for or contribute to the management, growth and profitability of the
business of the Company and its Subsidiaries are eligible to be granted Stock
Options under the Plan. The optionees and participants under the Plan shall be
selected from time to time by the Committee, in its sole discretion, from among
those eligible, and the Committee shall determine, in its sole discretion, the
number of shares covered by each award.
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Notwithstanding the foregoing, no person shall receive grants of Stock
Options under this Plan which exceed 500,000 shares during any fiscal year of
the Company.
SECTION 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after March 7, 2010.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options. To the
extent that any option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422 of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such Stock
Option as an Incentive Stock Option, provided the optionee consents in writing
to the modification or amendment.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be no less than 100% of Fair Market Value on the date the
option is granted. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company or any Parent
Corporation or Subsidiary and an Incentive Stock Option is granted to such
employee, the option price shall be no less than 110% of Fair Market Value of
the Stock on the date the option is granted. The Committee may not reprice
options without shareholder approval.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than eight years after
the date the option is granted. If an employee owns or is deemed to own (by
reason of the attribution rules of Section 424(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company or any Parent
Corporation or Subsidiary and an Incentive Stock Option is granted to such
employee, the term of such option shall be no more than five years from the date
of grant.
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(c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant, subject to the
restrictions stated in Section 5(b) above. If the Committee provides, in its
discretion, that any option is exercisable only in installments, the Committee
may waive such installment exercise provisions at any time. Notwithstanding
anything contained in the Plan to the contrary, the Committee may, in its
discretion, extend or vary the term of any Stock Option or any installment
thereof, whether or not the optionee is then employed by the Company, if such
action is deemed to be in the best interests of the Company; provided, however,
that in the event of a merger or sale of assets, the provisions of this Section
5(c) shall govern vesting acceleration. Notwithstanding the foregoing, unless
the Stock Option provides otherwise, any Stock Option granted under this Plan
shall be exercisable in full, without regard to any installment exercise
provisions, for a period specified by the Committee, but not to exceed sixty
(60) days, prior to the occurrence of any of the following events: (i)
dissolution or liquidation of the Company other than in conjunction with a
bankruptcy of the Company or any similar occurrence, (ii) any merger,
consolidation, acquisition, separation, reorganization, or similar occurrence,
where the Company will not be the surviving entity or (iii) the transfer of
substantially all of the assets of the Company or 50% or more of the outstanding
Stock of the Company.
The grant of an option pursuant to the Plan shall not limit in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
exchange or consolidate or to dissolve, liquidate, sell or transfer all or any
part of its business or assets.
(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by check,
or by any other form of legal consideration deemed sufficient by the Committee
and consistent with the Plan's purpose and applicable law, including promissory
notes or a properly executed exercise notice together with irrevocable
instructions to a broker acceptable to the Company to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price. As
determined by the Committee at the time of grant or exercise, in its sole
discretion, payment in full or in part may also be made in the form of Stock
already owned by the optionee (which in the case of Stock acquired upon exercise
of an option have been owned for more than six months on the date of surrender)
or, in the case of the exercise of a Non-Qualified Stock Option (based, in each
case, on Fair Market Value of the Stock on the date the option is exercised, as
determined by the Committee), provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of already owned
shares may be authorized only at the time the option is granted, and provided
further that in the event payment is made in the form of shares of restricted
stock under another plan of the Company, the optionee will receive a portion of
the option shares in the form of, and in an amount equal to, the restricted
stock tendered as payment by the optionee. If the terms of an option so permit,
an optionee may elect to pay all or part of the option exercise price by having
the Company withhold from the shares of Stock that would otherwise be issued
upon exercise that number of shares of Stock having a Fair Market Value
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equal to the aggregate option exercise price for the shares with respect to
which such election is made. No shares of Stock shall be issued until full
payment therefor has been made. An optionee shall generally have the rights to
dividends and other rights of a shareholder with respect to shares subject to
the option when the optionee has given written notice of exercise, has paid in
full for such shares, and, if requested, has given the representation described
in paragraph (a) of Section 9.
(e) Non-transferability of Options. No Incentive Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all such Incentive Stock Options shall be exercisable,
during the optionee's lifetime, only by the optionee. Non-Qualified Stock
Options may be transferred by gift, without consideration, by the optionee under
a written instrument acceptable to the Committee, to a member of the optionee's
family, as defined in Section 267 of the Code, or to a trust or similar entity
whose sole beneficiaries are the optionee and/or members of the optionee's
family; provided, however, that such transfer and the exercise thereof shall not
violate any federal or state securities laws. Upon the transfer, the donee shall
have all rights of the optionee and shall be subject to all the terms and
conditions imposed on such Options.
(f) Termination by Death. If an optionee's employment by the Company and
any Subsidiary or Parent Corporation terminates by reason of death, any Stock
Option may thereafter be exercised, to the extent then exercisable, by the legal
representative of the estate or by the legatee of the optionee under the will of
the optionee, but may not be exercised after twelve months from the date of such
death or the expiration of the stated term of the option, whichever period is
shorter. In the event of termination of employment by reason of death, if,
pursuant to its terms, any Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the
Code, the option will thereafter be treated as a Non-Qualified Stock Option.
(g) Termination by Reason of Disability. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability,
but may not be exercised after twelve months from the date of such termination
of employment or the expiration of the stated term of the option, whichever
period is the shorter. In the event of termination of employment by reason of
Disability, if, pursuant to its terms, any Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, the option will thereafter be treated as a Non-Qualified Stock
Option.
(h) Termination by Reason of Retirement. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Retirement,
but may not be exercised after thirty-six months from the date of such
termination of employment or the expiration of the stated term of the option,
whichever period is the shorter. In the event of termination of employment by
reason of Retirement, if, pursuant to its terms, any Incentive Stock Option is
exercised after the
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expiration of the exercise periods that apply for purposes of Section 422 of the
Code, the option will thereafter be treated as a Non-Qualified Stock Option.
(i) Other Termination. If an optionee's Continuous Status as an Employee
or Consultant terminates (other than upon the optionee's death, Disability or
Retirement), any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such termination, but may not be
exercised after 90 days after such termination, or the expiration of the stated
term of the option, whichever period is the shorter. In the event of termination
of employment by reason other than death, Disability or Retirement and if
pursuant to its terms any Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the
Code, the option will thereafter be treated as a Non-Qualified Stock Option. In
the event an Optionee's employment with the Company is terminated for Cause, all
unexercised Options granted to such Optionee shall immediately terminate.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Stock Option is granted) of the Common
Stock with respect to which an Incentive Stock Option under this Plan or any
other plan of the Company and any Subsidiary or Parent Corporation is
exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000.
(k) Grants of Stock Options to Non-Employee Directors. Each
Non-Employee Director who, after March 8, 2000 is (i) elected, re-elected or
serving an unexpired term as a Director of the Company at any annual meeting of
holders of the common Stock of the Company; or (ii) elected as a Director of the
Company at any special meeting of holders of common Stock of the Company, shall,
as of the date of such election, re-election or annual or special meeting,
automatically be granted a Stock Option to purchase 3,000 shares of Stock at an
option price per share equal to 100% of Fair Market Value of the Company's Stock
on such date. In the case of a special meeting, the action of the holders of
shares in electing a Non-Employee Director shall constitute the granting of the
Stock Option to such Director and, in the case of an annual meeting, the action
of the holders of shares in electing or re-electing a Non-Employee Director
shall constitute the granting of the Stock Option to such Director and to any
other Non-Employee Director who shall be designated as serving an unexpired term
as a Director of the Company in the notice or proxy materials for the meeting;
and the date when the holders of shares shall take such action shall be the date
of grant of the Stock Option. All such Options shall be designated as
Non-Qualified Stock Options and shall be subject to the same terms and
provisions as are then in effect with respect to the grant of Non-Qualified
Stock Options to officers and key employees of the Company, except that (1) the
term of each such Option shall be equal to eight years, which term,
notwithstanding the provisions in Section 5(i), shall not expire upon the
termination of service as a Director; and (2) the Option shall become
exercisable beginning six months after the date the Option is granted. Upon
termination of such Director's service as a Director of the Company, the
unvested portion of an Option held by such Director shall not thereafter be
exercisable. Subject to the foregoing, all provisions of this Plan not
inconsistent with the foregoing shall apply to Options granted pursuant to this
Section 5(k), except that any Options granted to a Non-Employee Director shall
be administered in
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accordance with the terms of this Plan solely by the Board of Directors and not
by the Committee. Options issued under this Section 5(k) shall be in lieu of and
in substitution for any new awards of Options in accordance with the St. Jude
Medical, Inc. 1997 Stock Option Plan from and after March 8, 2000. Nothing
herein shall limit the right of the Board of Directors to issue Stock Options to
any Non-Employee Director under the terms of this Plan in addition to those
provided for under this Section 5(k), provided that no Non-Employee Director
shall be granted Stock Options under this Plan, including the Options awarded
under this Section 5(k), in excess of 5,000 shares in any calendar year.
SECTION 6. Transfer, Leave of Absence, etc.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer of an employee from the Company to a Parent Corporation
or Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or
from one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.
SECTION 7. Restricted Stock.
(a) Administration. Up to 50,000 shares of Restricted Stock may be
issued either alone or in addition to other awards granted under the Plan. The
Committee shall determine the officers and key employees of the Company and
Subsidiaries to whom, and the time or times at which, grants of Restricted Stock
will be made, the number of shares to be awarded, the time or times within which
such awards may be subject to forfeiture, and all other conditions of the
awards. The Committee may also condition the grant of Restricted Stock upon the
attainment of specified performance goals. The provisions of Restricted Stock
awards need not be the same with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
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(i) Each participant shall be issued a stock certificate in
respect of shares of Restricted Stock awarded under the Plan. Such
certificate shall be registered in the name of the participant, and
shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such award, substantially in the
following form:
"The transferability of the certificate and the
shares of stock represented hereby are subject to
the terms and conditions (including forfeiture) of
the St. Jude Medical, Inc. 2000 Stock Plan and an
Agreement entered into between the registered owner
and the Company."
(ii) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock
power endorsed in blank, relating to the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the
date of such award (the "Restriction Period"), the participant shall
not be permitted to sell, transfer, pledge or assign shares of
Restricted Stock awarded under the Plan. Within these limits, the
Committee may provide for the lapse of such restrictions in
installments where deemed appropriate.
(ii) Except as provided in paragraph (c) (i) of this Section
7, the participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a shareholder of the Company, including the
right to vote the shares and the right to receive any cash dividends.
The Committee, in its sole discretion, may permit or require the
payment of cash dividends to be deferred and, if the Committee so
determines, reinvested in additional shares of Restricted Stock to the
extent shares are available under Section 3. Certificates for shares of
unrestricted Stock shall be delivered to the grantee promptly after,
and only after, the period of forfeiture shall have expired without
forfeiture in respect of such shares of Restricted Stock.
(iii) Subject to the provisions of the award agreement and
paragraph (c) (iv) of this Section 7, upon termination of employment
for any reason during the Restriction Period, all shares still subject
to restriction shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other that for Cause),
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in
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service, the Committee may, in its sole discretion, when it finds that
a waiver would be in the best interest of the Company, waive in whole
or in part any or all remaining restrictions with respect to such
participant's shares of Restricted Stock.
(v) Notwithstanding the foregoing, all restrictions with
respect to any participant's shares of Restricted Stock shall lapse, on
the date determined by the Committee, prior to, but in no event more
that sixty (60) days prior to, the occurrence of any of the following
events: (i) dissolution or liquidation of the Company, other than in
conjunction with a bankruptcy of the Company or any similar occurrence,
(ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be
the surviving entity or (iii) the transfer of substantially all of the
assets of the Company or 50% or more of the outstanding Stock of the
Company.
SECTION 8. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option theretofore granted, without
the optionee's or participant's consent, or (ii) which without the approval of
the shareholders of the Company would cause the Plan to no longer comply with
Rule 16b-3 under the Securities Exchange Act of 1934, Section 422 of the Code or
any other regulatory requirements.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively to the extent such amendment is
consistent with the terms of this Plan, but no such amendment shall impair the
rights of any holder without his or her consent except to the extent authorized
under the Plan. However, the Committee may not reprice options, either by
lowering the exercise price of outstanding options or canceling outstanding
options and granting replacement options with lower exercise prices, without
shareholder approval.
SECTION 9. Unfunded Status Of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
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SECTION 10. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to
a Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any Subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company, Parent
Corporation or a Subsidiary to terminate the employment of any of its employees
at any time.
(c) Each participant shall, no later than the date as of which any part
of the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company, Parent Corporation
and a Subsidiary shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the participant.
With respect to any award under the Plan, if the terms of such award so permit,
a participant may elect by written notice to the Company to satisfy part or all
of the withholding tax requirements associated with the award by (i) authorizing
the Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 9(c). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.
12
<PAGE>
SECTION 11. Effective Date of Plan
The Plan shall be effective on March 8, 2000 (the date of approval by
the Board of Directors), subject to the approval by shareholders of the Company.
If the Plan is not so approved by the shareholders on or before one year after
this Plan's adoption by the Board of Directors, this Plan shall not come into
effect. The offering of the shares hereunder shall be also subject to the
effecting by the Company of any registration or qualification of the shares
under any federal or state law or the obtaining of the consent or approval of
any governmental regulatory body which the Company shall determine, in its sole
discretion, is necessary or desirable as a condition to or in connection with,
the offering or the issue or purchase of the shares covered thereby. The Company
shall make every reasonable effort to effect such registration or qualification
or to obtain such consent or approval.
13
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 27,164
<SECURITIES> 80,950
<RECEIVABLES> 321,874
<ALLOWANCES> 14,721
<INVENTORY> 226,396
<CURRENT-ASSETS> 717,174
<PP&E> 581,061
<DEPRECIATION> 244,849
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0
0
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<SALES> 295,499
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<CGS> 101,978
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<INTEREST-EXPENSE> 7,799
<INCOME-PRETAX> 24,621
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<NET-INCOME> 15,828
<EPS-BASIC> .19
<EPS-DILUTED> .19
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