<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
STRYKER CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
- - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- - --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - --------------------------------------------------------------------------------
(3) Filing Party:
- - --------------------------------------------------------------------------------
(4) Date Filed:
- - --------------------------------------------------------------------------------
<PAGE> 2
STRYKER CORPORATION
P.O. BOX 4085
KALAMAZOO, MICHIGAN 49003-4085
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 1997
-------------------------
The Annual Meeting of Stockholders of Stryker Corporation will be held on
Wednesday, April 30, 1997, at 2:00 p.m., at the Radisson Plaza Hotel at The
Kalamazoo Center, Kalamazoo, Michigan, for the following purposes:
1. To elect seven directors;
2. To consider and act upon an amendment of the 1988 Stock Option Plan to
limit the number of shares of Common Stock subject to stock options that may be
granted in any calendar year to any person to 300,000; and
3. To transact such other business as may properly come before the meeting.
All stockholders are cordially invited to attend the meeting. Only holders
of record of Common Stock at the close of business on March 3, 1997 are entitled
to notice of and to vote at the meeting. If you attend the meeting, you may vote
in person if you wish, even though you previously have returned your proxy.
A copy of the Company's 1996 Annual Report is enclosed.
STOCKHOLDERS ARE URGED TO COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ACCOMPANYING ENVELOPE
David J. Simpson,
Secretary
March 21, 1997
<PAGE> 3
STRYKER CORPORATION
P.O. BOX 4085
KALAMAZOO, MICHIGAN 49003-4085
------------------------
PROXY STATEMENT
------------------------
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Stryker Corporation of proxies to be used at the
Annual Meeting of Stockholders of the Company to be held on Wednesday, April 30,
1997, and at all adjournments thereof. The solicitation will begin on or about
March 21, 1997.
All shares represented by a properly executed proxy will be voted unless it
is revoked and, if a choice is specified, will be voted in accordance with such
specification. If no choice is specified, the proxies will be voted FOR the
election of the seven nominees named under "Election of Directors," unless
authority to do so is withheld with respect to one or more of such nominees, and
FOR the proposed amendment of the 1988 Stock Option Plan, as previously amended
(the "1988 Plan"). Directors will be elected by a plurality of the votes cast at
the meeting. Approval of the proposed amendment of the 1988 Plan will require a
majority of the votes cast. Votes that are withheld and abstentions will be
excluded entirely from the calculation and will have no effect on the outcome of
the election of directors or the approval of the amendment of the 1988 Plan but
will be counted in determining the presence of a quorum. In addition, a proxy
will be voted in the discretion of the proxyholders with respect to such other
business as may properly come before the meeting. A stockholder may revoke a
proxy at any time prior to the voting thereof.
There were outstanding as of the close of business on March 3, 1997, the
record date for the determination of stockholders entitled to notice of and to
vote at the meeting, 96,890,416 shares of Common Stock of the Company. Each
share is entitled to one vote on each matter brought before the meeting.
Any proposal that a stockholder may desire to present to the 1998 Annual
Meeting must be received by the Company at the above address on or prior to
November 21, 1997 in order for such proposal to be considered for inclusion in
the proxy statement and form of proxy for such meeting.
1
<PAGE> 4
BENEFICIAL OWNERSHIP OF MORE THAN 5%
OF THE OUTSTANDING COMMON STOCK
As used in this proxy statement, "beneficial ownership" means the sole or
shared power to direct the voting and/or disposition of shares of Common Stock.
In addition, a person is deemed to have beneficial ownership of any shares of
Common Stock that such person has the right to acquire within 60 days.
The following table sets forth, as of January 31, 1997, certain information
with respect to the beneficial ownership of Common Stock by each person known to
the Company to be the beneficial owner of more than 5% of the outstanding shares
of Common Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT
OF BENEFICIAL OWNER NUMBER OF SHARES OF CLASS
------------------- ---------------- --------
<S> <C> <C>
Arcadia Bank and Trust Company(1)........................... 22,850,100 23.6%
P.O. Box 50566
Kalamazoo, Michigan 49005
Putnam Investments, Inc.(2)................................. 8,361,186 8.6%
One Post Office Square
Boston, Massachusetts 02109
</TABLE>
- - -------------------------
(1) Arcadia Bank and Trust Company owns such shares as Trustee of a trust for
the benefit of members of the Stryker family (the "Stryker Trust"). Under
the terms of the trust agreement, an Advisory Committee, consisting of Jon
L. Stryker, Patricia A. Stryker, Ronda E. Stryker, Gerard Thomas and
Elizabeth S. Upjohn-Mason, has full voting and disposition power with
respect to the shares of Common Stock owned by the Stryker Trust. Ronda E.
Stryker is currently a director of the Company. A majority vote of the
Advisory Committee is necessary with respect to matters regarding the shares
of Common Stock held in the Stryker Trust, including voting and disposition.
(2) Based solely upon information contained in a Schedule 13G, dated January 27,
1997, filed with the Securities and Exchange Commission. According to the
Schedule 13G, Putnam Investments, Inc. ("PI") and certain registered
investment advisers that are wholly owned by PI are considered "beneficial
owners" of an aggregate of 8,361,186 shares of Common Stock that are, in
turn, beneficially owned by clients of such investment advisers, including
members of the Putnam family of mutual funds and certain other institutional
clients. Of the total amount reported beneficially owned by PI, Putnam
Investment Management, Inc. has shared dispositive power over 7,957,399
shares of Common Stock and The Putnam Advisory Company, Inc. has shared
voting power over 143,587 shares and shared dispositive power over 403,787
shares. PI is a wholly owned subsidiary of Marsh & McLennan Companies, Inc.
2
<PAGE> 5
BENEFICIAL OWNERSHIP
OF MANAGEMENT
The following table sets forth certain information with respect to the
ownership of shares of Common Stock by the current directors of the Company, all
of whom are standing for reelection, the Named Executives referred to under the
caption "Executive Compensation" and all executive officers and directors of the
Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES AND
PERCENT OF CLASS OF
COMMON STOCK OF THE
COMPANY OWNED
BENEFICIALLY AS OF
NAME JANUARY 31, 1997(1)
---- --------------------
<S> <C>
John W. Brown............................................... 4,637,278 (4.8%)
Howard E. Cox, Jr. ......................................... 177,400
Ronald A. Elenbaas.......................................... 288,472
Donald M. Engelman, Ph.D. .................................. 54,200
Jerome H. Grossman, M.D. ................................... 56,200
William T. Laube............................................ 323,590
John S. Lillard............................................. 152,820
Edward B. Lipes............................................. 143,353
William U. Parfet........................................... 20,000
David J. Simpson.......................................... 330,620
Ronda E. Stryker............................................ 25,288,220(26.1%)(2)
Executive officers and directors as a group (15 persons).... 31,582,953(32.4%)(2)
</TABLE>
- - -------------------------
(1) Except for the shared beneficial ownership of 22,850,100 shares of Common
Stock attributed to Ms. Stryker as a member of the Advisory Committee of the
Stryker Trust, all as more fully set forth above under "Beneficial Ownership
of More Than 5% of the Outstanding Common Stock," and 10,000 shares with
respect to which Mr. Lillard shares voting and disposition power, such
persons hold sole voting and disposition power with respect to the shares
shown in this column. Includes 156,000 shares for Mr. Brown, 15,200 shares
for Mr. Cox, 32,000 shares for Mr. Elenbaas, 52,800 shares for Dr. Engelman,
15,200 shares for Dr. Grossman, 64,000 shares for Mr. Laube, 10,400 shares
for Mr. Lillard, 110,000 shares for Mr. Lipes, 76,000 shares for Mr.
Simpson, 4,000 shares for Ms. Stryker and 616,400 shares for executive
officers and directors as a group that may be acquired within 60 days after
January 31, 1997 upon exercise of options. Does not include shares of Common
Stock owned by the Company's Savings and Retirement Plan as to which
executive officers may give voting instructions on certain non-routine
matters that do not include either of the matters to be considered at the
Annual Meeting. Such number of shares does not exceed 2,000 in the case of
any executive officer. Ownership percentages representing less than one
percent of the class outstanding have been omitted.
(2) Includes the shared beneficial ownership of 22,850,100 shares of Common
Stock held in the Stryker Trust and attributed to Ms. Stryker as a member of
the Advisory Committee of the Stryker Trust, all as more fully set forth
above under "Beneficial Ownership of More Than 5% of the Outstanding Common
Stock." 7,616,700 of the shares in the Stryker Trust are held for the
benefit of Ms. Stryker.
3
<PAGE> 6
ELECTION OF DIRECTORS
Seven directors are to be elected to serve until the next Annual Meeting of
Stockholders and until their successors shall have been duly elected and
qualified. All of the nominees listed below are currently members of the Board
of Directors. The nominees for directors have consented to serve if elected and
the Company has no reason to believe that any of the nominees will be unable to
serve. Should any nominee become unavailable for any reason, proxies will be
voted for the alternate candidate, if any, chosen by the Board of Directors.
Should additional persons be nominated for election as directors, the seven
persons receiving the greatest number of votes shall be elected.
The following information respecting the nominees has been furnished by
them. Unless otherwise indicated, such persons have held the positions described
below for more than five years.
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
------------------------------- --------
<S> <C>
JOHN W. BROWN, age 62....................................... 1977
Chairman of the Board, since January 1981, and President
and Chief Executive Officer of the Company, since February
1977. Also a director of Lunar Corporation, a medical
products company, First of America Bank Corporation, a
bank, the Health Industry Manufacturers Association and
the American Business Conference.
HOWARD E. COX, JR., age 53.................................. 1974
Co-Managing Partner of Greylock Capital Limited
Partnership, since February 1987, a General Partner of
Greylock Partners & Co., Greylock Ventures Limited
Partnership and Greylock Investments Limited Partnership,
venture capital limited partnerships, since January 1979,
May 1983, and January 1985, respectively, and affiliated
with Greylock Management Corporation, an investment
services organization, since August 1971. Also a director
of Arbor Health Care Company, a sub-acute care company,
HPR Inc., a clinical software company, AMISYS Managed Care
Systems, Inc., an administrative software company, and The
Vincam Group, Inc., a professional employer organization.
DONALD M. ENGELMAN, PH.D., age 56........................... 1989
Professor of Molecular Biophysics and Biochemistry, Yale
University, since 1979, with assignment to Yale College,
the Graduate School and the Medical School. Consultant to
the National Institutes of Health and the National Science
Foundation.
JEROME H. GROSSMAN, M.D., age 57............................ 1982
Chairman and Chief Executive Officer of Health Quality,
LLC, a corporation that develops and markets health
outcomes products and services, and Chairman Emeritus of
New England Medical Center, Inc., since 1995, and
Professor of Medicine, Tufts University School of
Medicine, since 1989. Prior to 1995, Chairman of the Board
and Chief Executive Officer of New England Medical Center,
Inc., from 1984, and President of New England Medical
Center Hospitals from 1979 to 1984. Also Chairman, Federal
Reserve Bank of Boston, a director of Arthur D. Little,
Inc., an international management consulting company, and
Tufts Associated Health Plan, Inc., a health maintenance
organization, and a trustee of Wellesley College.
JOHN S. LILLARD, age 66..................................... 1978
Corporate Director; Chairman-Founder of JMB Institutional
Realty Corp., a registered real estate investment advisory
firm, January 1992 to December 1996; President prior
thereto, from April 1979. Also a director of Cintas
Corporation, a uniform rental and manufacturing
corporation, and Wintrust Financial Corporation and Lake
Forest Bancorporation, bank holding companies.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
------------------------------- --------
<S> <C>
WILLIAM U. PARFET, age 50................................... 1993
Co-Chairman of MPI Research, L.L.C., a toxicology research
laboratory, since January 1996. Prior thereto, President
and Chief Executive Officer of Richard-Allan Medical
Industries, Inc., a manufacturer of medical products, from
October 1993. Prior thereto, President of The Upjohn
Company, a manufacturer of pharmaceutical, chemical and
agricultural products, from January 1991 and Executive
Vice President of The Upjohn Company from January 1989 to
January 1991. Also a director of Pharmacia & Upjohn, Inc.,
CMS Energy Corporation, Old Kent Financial Corporation and
Universal Foods Corporation.
RONDA E. STRYKER, age 42.................................... 1984
Granddaughter of the founder of the Company and daughter
of the former President of the Company. Also a director of
Comerica Bank and the Kalamazoo Foundation and a trustee
of Kalamazoo College.
</TABLE>
The Board of Directors has designated from among its members an Audit
Committee which has general charge of the review of the Company's financial and
accounting practices and controls. It also meets with the Company's independent
accountants to determine the scope of the annual audit and review the reports
and recommendations of such accountants on the results of such audit. The Audit
Committee, which currently consists of Mr. Parfet (Chairman), Dr. Engelman, Mr.
Lillard and Ms. Stryker, met twice during 1996. The Board of Directors has also
designated a Compensation Committee, which currently consists of Ms. Stryker
(Chairman), Dr. Engelman and Mr. Parfet, and a Stock Option Committee, which
currently consists of Ms. Stryker (Chairman) and Mr. Lillard. The duties of
these committees are described below under "Executive Compensation -- Report of
Compensation and Stock Option Committees on Executive Compensation." The Board
of Directors has not designated a nominating committee or other committee
performing a similar function. Such matters are discussed by the Board as a
whole.
DIRECTOR COMPENSATION
The Board of Directors held five meetings during 1996. All of the directors
attended more than 75% of the total meetings of the Board and all committees of
which they were members in 1996. Directors who are not employees received
directors' fees of $2,750 for each Board meeting attended and a fixed annual fee
of $15,000. Directors who are also members of committees of the Board received a
fee of $1,300 per day for committee meetings attended if such meetings were held
on the same day as a Board meeting and $2,750 per day if such meetings were held
on a day on which there was not a Board meeting. The Company also makes $50,000
of group life insurance available to its outside directors. In addition, Mr. Cox
and Dr. Grossman consult with the Company with respect to long-range planning.
Mr. Cox and Dr. Grossman each received $13,750 for these services in 1996. Also,
$98,588 was paid to Dr. Engelman in 1996 as a consultant to the Company on its
bone growth project.
5
<PAGE> 8
EXECUTIVE COMPENSATION
GENERAL
Set forth below is certain summary information with respect to the
compensation of the Company's Chief Executive Officer and the four most highly
compensated executive officers other than the Chief Executive Officer (based on
amounts reported as salary and bonus for 1996) who were serving as executive
officers at December 31, 1996 (the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
SHARES OF
ANNUAL COMPENSATION COMMON STOCK ALL OTHER
--------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)(1)
--------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John W. Brown............................. 1996 500,000 450,000 40,000(2) 88,000
Chairman of the Board, President and 1995 475,000 300,000 -- 33,000
Chief Executive Officer 1994 425,000 290,000 -- 33,000
Ronald A. Elenbaas........................ 1996 275,000 245,000 40,000(2) 48,950
Vice President; President, Stryker 1995 260,000 170,000 -- 27,000
Surgical Group 1994 235,000 120,000 -- 33,000
William T. Laube.......................... 1996 260,000 150,000 40,000(2) 45,100
Vice President; President, Stryker 1995 240,000 150,000 -- 33,000
Pacific Group 1994 220,000 140,000 -- 33,000
Edward B. Lipes........................... 1996 275,000 200,000 40,000(2) 50,050
Vice President; President, Osteonics 1995 250,000 180,000 -- 33,000
Corp. 1994 220,000 125,000 -- 31,075
David J. Simpson.......................... 1996 274,583 225,000 40,000(2) 49,454
Vice President, Chief Financial Officer 1995 249,583 175,000 -- 33,000
and Secretary 1994 228,750 145,000 -- 33,000
</TABLE>
- - -------------------------
(1) Represents the Company's contributions, including matching of voluntary
contributions by such person, under its tax-qualified Savings and Retirement
Plan and under its Supplemental Savings and Retirement Plan, the purpose of
which is to make available to executives certain benefits in excess of those
permitted under the tax-qualified plan.
(2) Excludes options granted on February 20, 1996 for 40,000 shares that were
canceled on April 24, 1996 upon the grant of new stock options. See "Report
of Compensation and Stock Option Committees on Executive Compensation."
6
<PAGE> 9
STOCK OPTIONS
The following table contains information covering options to purchase
shares of the Company's Common Stock granted to the Named Executives in 1996
pursuant to the 1988 Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON PERCENT OF
STOCK TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE
GRANTED EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME (#)(1) 1996 ($/SH) DATE PRESENT VALUE ($)(3)
---- ---------- ------------ -------- ---------- --------------------
<S> <C> <C> <C> <C> <C>
John W. Brown................. 40,000 2.2 25.44 (2) (2)
40,000 2.2 22.00 April 23, 2006 357,200
Ronald A. Elenbaas............ 40,000 2.2 25.44 (2) (2)
40,000 2.2 22.00 April 23, 2006 357,200
William T. Laube.............. 40,000 2.2 25.44 (2) (2)
40,000 2.2 22.00 April 23, 2006 357,200
Edward B. Lipes............... 40,000 2.2 25.44 (2) (2)
40,000 2.2 22.00 April 23, 2006 357,200
David J. Simpson.............. 40,000 2.2 25.44 (2) (2)
40,000 2.2 22.00 April 23, 2006 357,200
</TABLE>
- - -------------------------
(1) Such options were granted at 100% of fair market value on the date of grant
and become exercisable as to 20% of the shares covered thereby on each of
the first five anniversary dates of the date of grant.
(2) Options canceled on April 24, 1996 upon grant of new stock options. See
"Report of Compensation and Stock Option Committees on Executive
Compensation."
(3) The Grant Date Present Value has been calculated using the Black-Scholes
option pricing model and assumes a risk-free rate of return of 6.25%, an
option term of ten years, a dividend yield of 0.42% and a stock volatility
of 29.4%. No adjustment was made for nontransferability or forfeitures. Such
assumptions are based upon historical experience and are not a forecast of
future stock price performance or volatility or of future dividend policy.
Such information, which is presented in accordance with the requirements of
the Securities and Exchange Commission, is not necessarily indicative of the
actual value that such options will have to the Named Executives, which will
be dependent upon market prices for the Common Stock.
No options were exercised by the Named Executives during 1996. The
following table sets forth information with respect to the unexercised options
held by them at December 31, 1996.
FISCAL YEAR END OPTIONS VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996(#) DECEMBER 31, 1996($)(1)
----------------------- -----------------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
---- ------------- -------------
<S> <C> <C>
John W. Brown..................................... 156,000/64,000 3,559,500/726,000
Ronald A. Elenbaas................................ 32,000/60,000 556,400/639,980
William T. Laube.................................. 64,000/60,000 1,203,520/639,980
Edward B. Lipes................................... 136,000/64,000 3,124,720/738,480
David J. Simpson.................................. 76,000/60,000 1,474,180/639,980
</TABLE>
- - -------------------------
(1) Calculated by determining the difference between the exercise price and the
closing price of the Company's Common Stock as reported by The Nasdaq Stock
Market for December 31, 1996.
7
<PAGE> 10
The following table sets forth information concerning the repricing of
options held by any executive officer during the last ten years. See "Report of
Compensation and Stock Option Committees on Executive Compensation."
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET PRICE LENGTH OF
SECURITIES OF STOCK EXERCISE PRICE OPTION TERM
UNDERLYING AT TIME OF AT TIME OF REMAINING
OPTIONS/SARS REPRICING OR REPRICING OR NEW AT DATE OF
REPRICED OR AMENDMENT AMENDMENT EXERCISE REPRICING OR
NAME AND POSITION DATE AMENDED(#) ($) ($) PRICE($) AMENDMENT
----------------- ---- ------------ ------------ -------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dean H. Bergy.................... 4/24/96 10,000 22.00 25.44 22.00 9.8 Years
Former Controller
John W. Brown.................... 4/24/96 40,000 22.00 25.44 22.00 9.8 Years
Chairman of the Board,
President and Chief Executive
Officer
Peter H. Chang, Ph.D. ........... 12/7/87 60,000 2.17 2.69 2.17 8.9 Years
Former Vice President;
Executive Vice President,
Surgical Division
Ronald A. Elenbaas............... 12/7/87 90,000 2.17 2.69 2.17 8.9 Years
Vice President; President, 4/24/96 40,000 22.00 25.44 22.00 9.8 Years
Stryker Surgical Group
William T. Laube................. 4/24/96 40,000 22.00 25.44 22.00 9.8 Years
Vice President; President,
Stryker Pacific Group
Edward B. Lipes.................. 3/25/93 20,000 11.19 17.13 11.19 9.1 Years
Vice President; President, 4/24/96 40,000 22.00 25.44 22.00 9.8 Years
Osteonics Corp.
Robert D. Monk................... 3/25/93 12,000 11.19 17.13 11.19 9.1 Years
Former Treasurer/Controller
Julia M. Paradine-Rice........... 3/25/93 6,000 11.19 17.13 11.19 9.1 Years
Former Treasurer
David J. Simpson................. 12/7/87 120,000 2.17 3.32 2.17 9.4 Years
Vice President, Chief Financial 4/24/96 40,000 22.00 25.44 22.00 9.8 Years
Officer and Secretary
Thomas R. Winkel................. 12/7/87 120,000 2.17 2.69 2.17 8.9 Years
Vice President; President, 4/24/96 15,000 22.00 25.44 22.00 9.8 Years
Stryker Americas/Middle East
</TABLE>
8
<PAGE> 11
REPORT OF COMPENSATION AND STOCK OPTION COMMITTEES ON EXECUTIVE COMPENSATION
There are three basic elements in the Company's executive compensation
program -- base salary, bonus and stock options. The Compensation Committee,
which reviews executive compensation on an annual basis and is responsible for
determinations regarding base salary and bonuses, formally met once during 1996
and held informal discussions on several occasions during the year. The members
of the Compensation Committee, each of whom is an independent outside director,
are Ms. Stryker (Chairman), Dr. Engelman and Mr. Parfet. Stock option awards are
made by the Stock Option Committee, the members of which are Ms. Stryker
(Chairman) and Mr. Lillard.
The salaries of the Company's executive officers for 1996 were determined
at the meeting of the Compensation Committee held in December 1995. Prior to
such meeting, the members of the Committee were provided with broad-based survey
reports on executive compensation prepared by the Health Industry Management
Association and The Conference Board that provided compensation information for
companies in the health care industry and U.S. corporations generally. While
information concerning the compensation of most of the companies included in the
Standard & Poor's Healthcare (Medical Products and Supplies) 500 Index (see
"Performance Graph," below) was included in at least one of such reports, the
particular reports were selected for the general information contained therein.
The Chief Executive Officer reviewed the overall performance of each of the
other executive officers during the year with the Committee at its December
meeting. Based on a subjective evaluation of such performance and the Company's
overall performance during the prior year and, in the case of division officers,
that of the respective divisions, as well as general consideration of the
information contained in the survey reports reviewed, the base salaries of the
Company's executive officers, including Mr. Brown, were established by the
Committee.
A substantial portion of annual compensation of each of the Named
Executives consists of the bonus element. In determining the amount of the bonus
to be paid to each Named Executive, the Compensation Committee initially reviews
the results of mathematical computations in which actual performance of the
Company, in the case of Mr. Brown (the Chief Executive Officer) and Mr. Simpson
(the Chief Financial Officer), whose responsibilities are at the corporate
level, and of the operations for which such person had direct management
responsibility, in the case of the divisional officers, is compared to goals and
objectives established at the beginning of the year and a percentage so
determined is applied to the dollar bonus potential established for each person
at the beginning of the year. The bonus potential is established in the same
general manner as salaries, with the view that, if the full potential is
attained, the Named Executive's total cash compensation should be in the upper
end of the range for companies of a comparable size. The primary element in such
calculation for the Named Executives other than Mr. Brown in 1996, accounting
for approximately 60% to 75%, was earnings growth. The other factors related to
sales or order growth, asset management (accounts receivable and inventory) and
cash flow in the case of Mr. Elenbaas, Mr. Laube and Mr. Lipes, and cash flow,
tax management and expense control in the case of Mr. Simpson. In the case of
Mr. Laube and Mr. Lipes, the final determination of the actual bonuses paid
included a subjective evaluation of individual performance in light of the
competitive environment in the operations for which they have responsibility and
other challenges faced by such persons and achievements by them during the year.
In Mr. Brown's case, a number of performance targets were considered, including
growth in Company-wide earnings and orders and profit and sales growth for
specific operations.
9
<PAGE> 12
The Company has had stock option plans in effect since it became a
publicly-held company in 1979. The purpose of these plans has been to provide
executive officers and other key employees with a personal and financial
interest in the success of the Company through stock ownership, thereby aligning
the long-range interests of such persons with those of stockholders by providing
them with the opportunity to build a meaningful stake in the Company.
Historically, stock options have had significant value to optionees, reflecting
the appreciation in the market value of the Common Stock. The determination with
respect to the number of options to be granted to any particular executive
officer is subjective in nature and no specific performance measures or factors
are applied. The number and status of options previously granted to an
individual are not accorded significant weight in the determination. Current
option grants are intended to encourage performance that will result in
continued appreciation. Outstanding option grants, all of which have a ten-year
term, become exercisable as to 20% on the first anniversary of the date of grant
and as to an additional 20% on each successive anniversary. Accordingly, to
realize the full value thereof, an executive officer must remain in the
Company's employ for five years from the date of grant. Management of the
Company believes that the stock option plans have been helpful in attracting and
retaining skilled executive personnel.
On April 24, 1996, the Stock Option Committee authorized the grant of
options to purchase 40,000 shares of Common Stock to each of the Named
Executives and options to purchase an aggregate of 670,000 shares to certain
other employees, with exercise prices of $22 per share, upon surrender by such
persons and cancellation of previously granted options, with exercise prices
ranging from $22.94 to $25.44, covering the same number of shares. In
authorizing such action, the Committee took into account its belief that the
decline in the market price of the Company's Common Stock since the original
date of grant reflected external market factors rather than factors concerning
the Company and its operations and that the repricing of the options was
appropriate in order to maximize the incentives provided to option recipients.
Section 162(m) of the Internal Revenue Code limits the deductibility by a
publicly-held corporation of compensation paid in a taxable year to the Chief
Executive Officer and any other Named Executive to $1 million. Qualified
performance-based compensation will not be subject to the deduction limit if
certain conditions are met. The proposed amendment to the 1988 Plan, which will
limit the number of options that may be granted to any employee or director in
any calendar year to 300,000, will ensure that gain recognized on the exercise
of options will be treated as performance-based compensation. It is the
Committee's intent that executive compensation generally be deductible. However,
the Committee will authorize compensation that is not entirely deductible when
doing so is consistent with its other compensation objectives and overall
compensation philosophy.
Compensation Committee Stock Option Committee
Ronda E. Stryker, Chairman Ronda E. Stryker, Chairman
John S. Lillard Donald M. Engelman
William U. Parfet
10
<PAGE> 13
PERFORMANCE GRAPH
Set forth below is a graph comparing the total returns (assuming
reinvestment of dividends) of the Company, the Standard & Poor's MidCap 400
Index and the Standard & Poor's Healthcare (Medical Products and Supplies) 500
Index. The graph assumes $100 invested on December 31, 1991 in the Company's
Common Stock and each of the indices.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD STRYKER S&P MIDCAP S&P
(FISCAL YEAR COVERED) CORPORATION 400 INDEX HEALTHCARE
500 INDEX
<S> <C> <C> <C>
1991 $ 100 $ 100 $ 100
1992 78.37 111.91 85.68
1993 56.73 127.53 65.34
1994 73.96 122.96 77.48
1995 105.83 161.00 130.96
1996 120.85 191.91 150.30
</TABLE>
A similar graph that assumes $100 invested on December 31, 1986 in the
Company's Common Stock and each of the indices is set forth below in order to
illustrate the relative performance on a longer-term basis.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD STRYKER S&P MIDCAP S&P
(FISCAL YEAR COVERED) CORPORATION 400 INDEX HEALTHCARE
500 INDEX
<S> <C> <C> <C>
1986 $ 100 $ 100 $ 100
1987 109.37 97.9 106.7
1988 126.55 118.33 100.67
1989 231.98 160.39 138.11
1990 292.91 152.18 162.09
1991 938.32 228.42 265.08
1992 735.34 255.63 227.12
1993 532.28 291.29 173.2
1994 693.94 280.85 205.39
1995 993.04 367.75 347.14
1996 1,133.96 438.36 398.42
</TABLE>
11
<PAGE> 14
AMENDMENT OF THE 1988 STOCK OPTION PLAN
The Board of Directors has approved, subject to the approval of
stockholders, the setting of a limit on the number of shares of Common Stock
subject to stock options that may be granted within any calendar year to any key
employee or director under the 1988 Plan to 300,000. This amendment is intended
to ensure that the gain recognized on the exercise of stock options granted to
the Company's highest paid executive officers will be treated as
performance-based compensation and, therefore, not subject to the $1 million
limitation on the deductibility of executive compensation imposed by Section
162(m) of the Internal Revenue Code. The Company has not historically granted
stock options in numbers that approach the proposed limit. However, the Board
did not want to unduly limit the flexibility of the Stock Option Committee to
grant options in accordance with its judgment under the circumstances existing
at any particular time and, accordingly, set the limit at a relatively high
level. If the proposed amendment is not approved by the stockholders, no further
options will be granted under the 1988 Plan after the date of the Annual
Meeting.
The following is a summary of the 1988 Plan as amended by the Board of
Directors and submitted to the stockholders for approval. A copy thereof will be
sent to stockholders upon request.
The 1988 Plan provides for the grant of options covering up to 5,400,000
shares (as adjusted for stock splits) of Common Stock. If any option granted
under the 1988 Plan is canceled or expires for any reason prior to being
exercised in full, the unpurchased shares may again be subjected to an option
under the 1988 Plan. Excluding options that were canceled or expired, options
covering an aggregate of 3,819,200 shares have been granted under the 1988 Plan
as of January 31, 1997. The 1988 Plan contains an anti-dilution provision, which
provides for adjustment in the number of shares in the event of stock splits,
stock dividends and the like.
The 1988 Plan permits the Board of Directors to adopt rules and regulations
for its administration and to terminate or amend the 1988 Plan, but the Board
may not, without stockholder approval, increase the number of shares covered by
the 1988 Plan, reduce the minimum purchase price or extend the term of the 1988
Plan or of any option granted thereunder.
The Board of Directors (or Stock Option Committee if one has been
appointed, as is currently the case) is authorized to prescribe the times at
which an option may be exercised and the number of shares as to which an option
may be exercised at such times, provided that the number of shares subject to
stock options that may be granted within any calendar year to any person may not
exceed 300,000. However, no option may be exercised before the expiration of one
year from the date of grant, except in the case of the merger, consolidation,
sale of assets or dissolution of the Company or if the optionee ceases to be an
employee or director by reason of disability or death, or more than ten years
after the date of grant, and no option may be granted after April 26, 1998.
Under the 1988 Plan, the option price cannot be less than 100% of the fair
market value of the Common Stock on the date the option is granted. The option
price may be paid in cash, shares of Common Stock of the Company valued at the
fair market value thereof on the date of exercise or any combination of cash and
Common Stock. In addition, if the Board of Directors (or Stock Option Committee)
so provides, payment of the exercise price may be made by delivering the
exercise notice together with irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds necessary to pay the
exercise price in full. The closing price of the Common Stock as reported by The
Nasdaq Stock Market on March 3, 1997 was $28.375.
Options under the 1988 Plan are exercisable during the optionee's lifetime
only by the optionee and may not be transferred except by will or the laws of
descent and distribution. The options terminate one month after the optionee
ceases to be an employee or director, except that in the case of termination of
employment by retirement or if, with the approval of the Board of Directors, the
optionee ceases to be an employee or director because of disability or
otherwise, the options terminate three months thereafter and, if the optionee
ceases to be an employee or director by reason of death, one year thereafter.
Options granted under the 1988 Plan will be designated to be "non-qualified
stock options" or "incentive stock options" under Section 422A of the Internal
Revenue Code. The grant of an option will have no immediate tax consequences to
the optionee or the Company.
12
<PAGE> 15
The exercise of a non-qualified stock option will require an optionee to
include in income, as compensation, the amount by which the fair market value of
the acquired shares on the exercise date exceeds the option price. Upon a
subsequent sale or taxable exchange of shares acquired upon exercise of a non-
qualified stock option, an optionee will recognize long or short-term capital
gain or loss equal to the difference between the amount realized on the sale and
the tax basis of such shares. The Company will be entitled (provided applicable
withholding requirements are met) to a deduction at the same time and in the
same amount as the optionee is in receipt of income in connection with the
exercise of a non-qualified stock option.
If the optionee exercises an incentive stock option and does not dispose of
the acquired shares within two years after the date of grant of the option nor
within one year after the date of the transfer of such shares to him (a
"disqualifying disposition"), the optionee will realize no compensation income
and any gain or loss that the optionee realizes on a subsequent disposition of
such shares will be treated as long-term capital gain or loss. For purposes of
computing the alternative minimum tax, however, the option generally will be
treated as if it were a non-qualified stock option. If an optionee makes a
disqualifying disposition, the optionee will be required to include in income,
as compensation, the lesser of (i) the difference between the option price and
the fair market value of the acquired shares on the exercise date or (ii) the
amount of gain realized on such disposition. In addition, depending on the
amount received as a result of such disposition, the optionee may realize long
or short-term capital gain or loss. The Company will be entitled to a deduction
at the same time and in the same amount as the optionee is in receipt of
compensation income as a result of a disqualifying disposition. If there is no
disqualifying disposition, no deduction will be available to the Company.
Approval of the proposed amendment of the 1988 Plan requires the
affirmative vote of a majority of the votes cast at the Annual Meeting. The
Board of Directors recommends that stockholders vote FOR the amendment of the
1988 Plan.
MISCELLANEOUS
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP, independent
accountants, to audit the accounts of the Company and its subsidiaries for the
year 1997. Ernst & Young LLP has acted in this capacity for many years. Ernst &
Young LLP has advised the Company that neither the firm nor any of its members
or associates has any direct financial interest or any material indirect
financial interest in the Company or any of its affiliates other than as
accountants. Representatives of Ernst & Young LLP are expected to be present at
the Annual Meeting with the opportunity to make a statement if they desire to do
so and are expected to be available to respond to appropriate questions.
OTHER ACTION
The management has at this time no knowledge of any matters to be brought
before the meeting other than those referred to above. If any additional matters
should properly come before the meeting, it is the intention of the persons
named in the enclosed proxy to vote said proxy in accordance with their judgment
on such matters.
13
<PAGE> 16
EXPENSES OF SOLICITATION
The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited by officers, directors and
regular employees of the Company personally or by telephone or other means of
communication. The Company will, upon request, reimburse brokers and other
nominees for their reasonable expenses in forwarding proxy material to the
beneficial owners of the stock held of record by such person.
By Order of the Board of Directors
David J. Simpson,
Secretary
March 21, 1997
14
<PAGE> 17
STRYKER CORPORATION
P.O. BOX 4085, KALAMAZOO, MICHIGAN 49003-4085
ANNUAL MEETING OF STOCKHOLDERS
P APRIL 30, 1997
R
O THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
STRYKER CORPORATION
X
The undersigned, having received Notice of Annual Meeting of
Y Stockholders and Proxy Statement, each dated March 21, 1997, hereby
appoints John S. Lillard and Ronda E. Stryker, and each of them,
Proxies, with full power of substitution in each, to represent and to
vote, as designated below, all shares of Common Stock of Stryker
Corporation which the undersigned is entitled to vote at the Annual
Meeting of Stockholders to be held on April 30, 1997, and at all
adjournments thereof, as set forth on the reverse side hereof.
ELECTION OF DIRECTORS, NOMINEES:
John W. Brown, Howard E. Cox, Jr., COMMENTS: (change of address)
Donald M. Engelman, Ph.D., _______________________________
Jerome H. Grossman, M.D., John S. _______________________________
Lillard, William U. Parfet, _______________________________
Ronda E. Stryker. (If you have written in the
above space, please mark the
corresponding box on the
reverse side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES ON THE REVERSE SIDE. IF YOU DO NOT MARK / SEE REVERSE /
ANY BOXES, YOUR PROXY WILL BE VOTED IN ACCORDANCE WITH THE / SIDE /
RECOMMENDATIONS OF THE BOARD OF DIRECTORS. THE PROXIES
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE. 5869
EVERY PROPERLY SIGNED PROXY WILL BE VOTED AS DIRECTED. UNLESS OTHERWISE
DIRECTED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES NAMED IN ITEM 1, FOR THE
PROPOSED AMENDMENT OF THE 1988 STOCK OPTION PLAN AND IN THE DISCRETION OF THE
PROXIES WITH RESPECT TO ANY OTHER MATTERS REFERRED TO IN ITEM 3.
<TABLE>
<S> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES
AND "FOR" ITEM 2:
FOR WITHHELD
1. Election of / / / / withhold authority to 2. Approval of the proposed amendment of the 1988 Stock Option Plan
Directors. vote for all to limit the number of shares of Common Stock subject to stock
(see reverse) nominees. options that may be granted in any year to any person to
300,000.
FOR, all nominees (except those whose names are listed below):
FOR AGAINST ABSTAIN
- - ---------------------------------------------------
3. In their discretion, the proxies are authorized to vote in
accordance with their own judgment upon such other matters as
may properly come before the meeting.
Change of Address/
Comments on Reverse Side / /
(Please mark, date and sign as your name appears above and
return in the enclosed, postage paid envelope. If acting as
executor, administrator, trustee, guardian, etc., you
should so indicate when signing. If the signer is a
corporation, please sign the full corporate name by duly
authorized officer. If shares are held jointly, each
stockholder named should be signed.
--------------------------------------------------------
1997
--------------------------------------------------------
SIGNATURE(S) DATE
</TABLE>
