STRYKER CORP
DEF 14A, 1999-03-19
SURGICAL & MEDICAL INSTRUMENTS & APPARATUS
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<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 sec.240.14a-11(c) or sec.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 28, 1999
                           -------------------------
 
     The Annual Meeting of Stockholders of Stryker Corporation will be held on
Wednesday, April 28, 1999, 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; and
 
     2. 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 1, 1999 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 1998 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 19, 1999
<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 28,
1999, and at all adjournments thereof. The solicitation will begin on or about
March 19, 1999.
 
     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. A
stockholder may revoke a proxy at any time prior to the voting thereof.
 
     Brokers holding shares of Common Stock for beneficial owners must vote
those shares according to specific instructions they receive from the owners. If
instructions are not received, brokers may vote those shares at their
discretion. Directors will be elected by a plurality of the votes cast at the
meeting. Votes that are withheld with respect to the election of directors will
be excluded entirely from the calculation and will have no effect on the
outcome. 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.
 
     There were outstanding as of the close of business on March 1, 1999, the
record date for the determination of stockholders entitled to notice of and to
vote at the meeting, 96,775,224 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 2000 Annual
Meeting must be received by the Company at the above address on or prior to
November 20, 1999 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 certain information, as of December 31, 1998
unless otherwise indicated, 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>
Advisory Committee for the Stryker Trusts(1)................       31,572,357           32.7%
490 West South Street
Kalamazoo, Michigan 49007
W.P. Stewart & Co., Ltd.(2).................................        5,913,000            6.1%
129 Front Street
Hamilton HM12 Bermuda
FMR Corp. and related parties(3)............................        5,565,040            5.8%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
 
- -------------------------
(1) Based solely upon information as of December 31, 1998 contained in a
    Schedule 13G amendment, dated February 11, 1999, filed with the Securities
    and Exchange Commission. Under the terms of the trust agreement establishing
    certain trusts for the benefit of members of the Stryker family (the
    "Stryker Trusts"), an Advisory Committee, consisting of Jon L. Stryker,
    Patricia A. Short, Ronda E. Stryker, Gerard Thomas and Elizabeth S.
    Upjohn-Mason, has full voting and disposition power with respect to
    22,850,100 shares of Common Stock owned by the Stryker Trusts. 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 Trusts, including voting and
    disposition. Members of the Advisory Committee beneficially own in the
    aggregate an additional 8,722,257 shares of Common Stock in their individual
    or other capacities as to which they have sole voting and disposition power,
    except for 451,220 shares as to which Mrs. Upjohn-Mason has shared voting
    and disposition power.
 
(2) Based solely upon information contained in a Schedule 13G, dated December 8,
    1998, filed with the Securities and Exchange Commission. According to the
    Schedule 13G, W.P. Stewart & Co., Ltd., an investment adviser, has the sole
    power to make investment decisions, including voting and disposition, with
    respect to such shares for many unrelated clients but has no economic
    interest in such shares.
 
(3) Based solely upon information as of December 31, 1998 provided by FMR Corp.
    ("FMR"), Edward C. Johnson 3d and Abigail P. Johnson in a joint Schedule
    13G, dated February 1, 1999, filed with the Securities and Exchange
    Commission. Mr. Johnson is the Chairman of FMR and the owner of 12% of the
    aggregate outstanding voting stock of FMR and Ms. Johnson is a director of
    FMR and the owner of 24.5% of the aggregate outstanding voting stock of FMR.
    Each of them may be deemed to be members of a controlling group with respect
    to FMR. Fidelity Management & Research Company, a wholly owned subsidiary of
    FMR ("FMRC"), is the beneficial owner of 5,461,040 shares as a result of
    acting as investment adviser to various investment companies (the "Fidelity
    Funds"). Mr. Johnson, FMR, through its control of FMRC, and the Fidelity
    Funds each has sole power to dispose of the 5,461,040 shares but neither FMR
    nor Mr. Johnson has the sole power to vote or direct the voting of the
    shares owned directly by the Fidelity Funds, which power resides with the
    Funds' Boards of Trustees and is carried out by FMRC. Fidelity Management
    Trust Company, a wholly owned subsidiary of FMR ("FMTC"), is the beneficial
    owner of 104,000 shares as a result of its serving as investment manager of
    institutional accounts. Mr. Johnson and FMR, through its control of FMTC,
    each has sole disposition power over the 104,000 shares owned by FMTC, sole
    power to vote 18,500 of such shares and no power to vote 85,500 of such
    shares.
 
                                        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, 1999(1)
                            ----                                --------------------
<S>                                                             <C>
John W. Brown...............................................      4,712,378 (4.9%)
Howard E. Cox, Jr...........................................               195,800
Ronald A. Elenbaas..........................................               340,472
Donald M. Engelman, Ph.D....................................                54,000
Jerome H. Grossman, M.D.....................................                64,600
William T. Laube............................................               369,590
John S. Lillard.............................................               149,420
Edward B. Lipes.............................................               154,830
William U. Parfet...........................................                23,600
David J. Simpson............................................               370,010
Ronda E. Stryker............................................     25,244,320(26.1%)(2)
Executive officers and directors as a group (16 persons)....     31,837,220(32.6%)(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 for
    the Stryker Trusts, all as more fully set forth above under "Beneficial
    Ownership of More Than 5% of the Outstanding Common Stock," such persons
    hold sole voting and disposition power with respect to the shares shown in
    this column. Includes 186,000 shares for Mr. Brown, 23,600 shares for Mr.
    Cox, 32,000 shares for Mr. Elenbaas, 51,600 shares for Dr. Engelman, 23,600
    shares for Dr. Grossman, 98,000 shares for Mr. Laube, 12,000 shares for Mr.
    Lillard, 92,000 shares for Mr. Lipes, 3,600 shares for Mr. Parfet, 116,000
    shares for Mr. Simpson, 4,000 shares for Ms. Stryker and 753,600 shares for
    executive officers and directors as a group that may be acquired within 60
    days after January 31, 1999 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 the election of directors. Such
    number of shares does not exceed 3,000 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 Trusts and attributed to Ms. Stryker as a member
    of the Advisory Committee for the Stryker Trusts, 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 Trusts 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.
 
<TABLE>
<CAPTION>
              NAME, AGE, PRINCIPAL OCCUPATION                 DIRECTOR
                   AND OTHER INFORMATION                       SINCE
              -------------------------------                 --------
<S>                                                           <C>
JOHN W. BROWN, age 64.......................................    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, National City Corporation, a bank,
  Arthur D. Little, Inc., an international management
  consulting company, the Health Industry Manufacturers
  Association and the American Business Conference, an
  association of mid-size growth companies.
HOWARD E. COX, JR., age 55..................................    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 The Vincam Group, Inc., a professional employer
  organization.
DONALD M. ENGELMAN, PH.D., age 58...........................    1989
  Eugene Higgins Professor of Molecular Biophysics and
  Biochemistry, Yale University, since 1979, with assignment
  to Yale College, the Graduate School and the Medical
  School. Director of the Division of Biological Sciences,
  Yale University, since September 1998. Member, National
  Academy of Science, since April 1997.
JEROME H. GROSSMAN, M.D., age 59............................    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 Fellow,
  Harvard University, Kennedy School of Government, since
  1996. 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 until 1997, a director of Arthur D.
  Little, Inc., an international management consulting
  company, and a trustee of Wellesley College.
JOHN S. LILLARD, age 68.....................................    1978
  Chairman of Wintrust Financial Corporation, a bank holding
  company, since May 1998. Prior thereto, Corporate Director
  and Consultant from January 1996 to April 1998 and
  Chairman-Founder of JMB Institutional Realty Corp., a
  registered real estate investment advisory firm, from
  January 1992 to December 1995, and President thereof from
  April 1979 to January 1992. Also a director of Cintas
  Corporation, a uniform rental and manufacturing
  corporation, Lake Forest Bank and Trust, a bank, and
  Wintrust Asset Management Corporation, an investment
  manager and trustee.
</TABLE>
 
                                        4
<PAGE>   7
 
<TABLE>
<CAPTION>
              NAME, AGE, PRINCIPAL OCCUPATION                 DIRECTOR
                   AND OTHER INFORMATION                       SINCE
              -------------------------------                 --------
<S>                                                           <C>
WILLIAM U. PARFET, age 52...................................    1993
  Co-Chairman of MPI Research, a drug safety and
  pharmaceutical development company, 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, Vice
  Chairman of the Board of The Upjohn Company, a
  manufacturer of pharmaceutical, chemical and agricultural
  products, April 1992 to September 1993, President thereof
  from January 1991 to April 1992 and Executive Vice
  President from January 1989 to January 1991. Also a
  director of Pharmacia & Upjohn, Inc., a pharmaceutical and
  healthcare company, CMS Energy Corporation, a global
  utility and energy company, Sybron International Corp., a
  dental and laboratory supply company, and ClinTrials
  Research, Inc., a contract clinical research organization.
RONDA E. STRYKER, age 44....................................    1984
  Granddaughter of the founder of the Company and daughter
  of the former President of the Company. Also Vice Chairman
  and a director of Greenleaf Trust, a bank, a director of
  the Kalamazoo Foundation and a trustee of Kalamazoo
  College and Spelman 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, Dr.
Grossman and Mr. Lillard, met twice during 1998. The Board of Directors has also
designated a Compensation Committee, which currently consists of Ms. Stryker
(Chairman), Mr. Cox 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 eight meetings during 1998. All of the
directors attended more than 75% of the total meetings of the Board and all
committees of which they were members in 1998. Directors who are not employees
received directors' fees of $2,750 for each Board meeting attended and a fixed
annual fee of $22,500. Directors who are also members of committees of the Board
received a fee of $1,500 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. During 1998,
Mr. Cox, Dr. Engelman, Dr. Grossman and Mr. Parfet were each granted options
under the Company's 1998 Stock Option Plan (the "Plan") to purchase 5,000 shares
of the Company's Common Stock, exclusive of options that were granted and
subsequently canceled upon the grant of new stock options. 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 received $11,000 and Dr. Grossman received $13,750
for these services in 1998. Also, $81,400 was paid to Dr. Engelman in 1998 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 1998) who were serving as executive
officers at December 31, 1998 (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.............................    1998      600,000    700,000        40,000         121,000
  Chairman of the Board, President and        1997      550,000    500,000       200,000         110,000
  Chief Executive Officer                     1996      500,000    450,000        40,000(2)       88,000
Ronald A. Elenbaas........................    1998      335,000    475,000        40,000          69,850
  Vice President;                             1997      310,000    300,000        40,000          61,050
  Group President, MedSurg                    1996      275,000    245,000        40,000(2)       48,950
William T. Laube..........................    1998      300,000    175,000        30,000          51,150
  Vice President; President,                  1997      275,000    165,000        25,000          46,750
  Stryker Pacific Limited                     1996      260,000    150,000        40,000(2)       45,100
Edward B. Lipes...........................    1998      325,000    275,000        40,000          57,750
  Vice President; Group President,            1997      300,000    200,000        40,000          55,000
  Howmedica Osteonics                         1996      275,000    200,000        40,000(2)       50,050
David J. Simpson..........................    1998      327,500    325,000        40,000          64,625
  Vice President, Chief Financial             1997      299,583    260,000        40,000          57,704
  Officer and Secretary                       1996      274,583    225,000        40,000(2)       49,454
</TABLE>
 
- -------------------------
(1) Represents the Company's contributions, including matching of voluntary
    contributions by such person, under its 401(k) plan and its supplemental
    deferred compensation 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.
 
                                        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 1998
pursuant to the Company's 1998 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)          1998         ($/SH)         DATE        PRESENT VALUE ($)(2)
             ----                  ----------    ------------    --------     ----------     --------------------
<S>                                <C>           <C>             <C>         <C>             <C>
John W. Brown..................      40,000          4.8          38.875     May 17, 2008          693,200
Ronald A. Elenbaas.............      40,000          4.8          38.875     May 17, 2008          693,200
William T. Laube...............      30,000          3.6          38.875     May 17, 2008          519,900
Edward B. Lipes................      40,000          4.8          38.875     May 17, 2008          693,200
David J. Simpson...............      40,000          4.8          38.875     May 17, 2008          693,200
</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) The Grant Date Present Value has been calculated using the Black-Scholes
    option pricing model and assumes a risk-free rate of return of 4.75%, an
    option term of ten years, a dividend yield of approximately 0.30% and a
    stock volatility of 37.6%. 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.
 
     The following table sets forth information with respect to option exercises
during 1998 by the Named Executives and as to the unexercised options held by
them at December 31, 1998.
 
   AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
                                     VALUES
 
<TABLE>
<CAPTION>
                                                                    NUMBER OF SHARES
                                                                       UNDERLYING           VALUE OF UNEXERCISED
                                                                 UNEXERCISED OPTIONS AT    IN-THE-MONEY OPTIONS AT
                                                                   FISCAL YEAR-END(#)       FISCAL YEAR-END($)(1)
                                       SHARES                    ----------------------    -----------------------
                                      ACQUIRED        VALUE
                                     ON EXERCISE    REALIZED          EXERCISABLE/              EXERCISABLE/
              NAME                       (#)         ($)(1)          UNEXERCISABLE              UNEXERCISABLE
              ----                   -----------    --------         -------------              -------------
<S>                                  <C>            <C>          <C>                       <C>
John W. Brown....................      60,000       1,904,700       176,000/224,000          6,917,300/5,381,000
Ronald A. Elenbaas...............      52,000       1,174,630         24,000/96,000            816,500/2,295,000
William T. Laube.................      12,000         365,940         93,000/74,000          3,686,498/1,812,875
Edward B. Lipes..................      40,000       1,537,200         84,000/96,000          3,312,450/2,295,000
David J. Simpson.................          --              --        108,000/96,000          4,339,470/2,295,000
</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 New York
    Stock Exchange-Composite Transactions for the exercise date or December 31,
    1998, as the case may be.
 
                                        7
<PAGE>   10
 
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 in December 1997
and January 1999 and held informal discussions on several occasions during 1998.
The members of the Compensation Committee, each of whom is an independent
outside director, are Ms. Stryker (Chairman), Mr. Cox 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 1998 were determined
at the meeting of the Compensation Committee held in December 1997. 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 Health Care (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 other three Named Executives, 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 1998, accounting
for approximately 60% to 75%, was earnings growth. The other factors related to
sales and 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 Mr. Brown's
case, a number of performance targets were considered, including growth in sales
and earnings and asset management, cash flow, tax management and expense control
on a Company-wide basis as well as specific performance objectives for certain
operations. The final determination of the actual bonuses paid to the Named
Executives 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.
 
                                        8
<PAGE>   11
 
     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 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.
 
     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 1998 Plan limits the number of options that may
be granted to any employee or director in any calendar year to 500,000, thereby
ensuring 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
         Howard E. Cox, Jr.                       John S. Lillard
         William U. Parfet
                                    
                                    
                                    
 
                                       

                                       9
<PAGE>   12
 
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 Health Care (Medical Products and Supplies) 500
Index. The graph assumes $100 invested on December 31, 1993 in the Company's
Common Stock and each of the indices.
INDEXED RETURNS PERFORMANCE GRAPH
 
<TABLE>
<CAPTION>
                                   '1993'            '1994'            '1995'            '1996'            '1997'
                                   ------            ------            ------            ------            ------
<S>                            <C>               <C>               <C>               <C>               <C>
Stryker Corporation                100.00            130.37            186.56            213.04            266.41
S&P MidCap 400 Index               100.00             96.42            126.25            150.49            199.03
S&P Health Care 500 Index          100.00            118.58            200.42            230.03            286.78
 
<CAPTION>
                                   '1998'
                                   ------
<S>                            <C>
Stryker Corporation                394.67
S&P MidCap 400 Index               237.05
S&P Health Care 500 Index          413.36
</TABLE>
 
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
                                          1993        1994        1995        1996        1997        1998
- --------------------------------------------------------------------------------------------------------------
<S>                                    <C>         <C>         <C>         <C>         <C>         <C>
 Stryker Corporation                     $100.00     $130.37     $186.56     $213.04     $266.41     $394.67
- --------------------------------------------------------------------------------------------------------------
 S&P MidCap 400 Index                    $100.00     $ 96.42     $126.25     $150.49     $199.03     $237.05
- --------------------------------------------------------------------------------------------------------------
 S&P Health Care 500 Index               $100.00     $118.58     $200.42     $230.03     $286.78     $413.36
- --------------------------------------------------------------------------------------------------------------
</TABLE>
 
                                 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 1999. 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.
 
                                       10
<PAGE>   13
 
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 19, 1999
 
                                       11
<PAGE>   14
                                                                            5869

[X] Please mark your
    votes as in this
    example.
<TABLE>
<CAPTION>
     EVERY PROPERLY SIGNED PROXY WILL BE VOTED AS DIRECTED.  UNLESS OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED FOR
     ALL NOMINEES NAMED IN ITEM 1 AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ANY OTHER MATTERS REFERRED TO IN
     ITEM 2.
- ------------------------------------------------------------------------------------------------------------------------------------
                                   THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES:
- ------------------------------------------------------------------------------------------------------------------------------------
   <S>              <C>       <C>            <C>                     <C>      
                    FOR       WITHHELD       Withhold authority      2. In their discretion, the Proxies are authorized to vote in 
1. Election of     [   ]       [   ]         to vote for all            accordance with their own judgment upon such other matters
   directors                                 nominees.                  as may properly come before the meeting.
   (See reverse).
FOR all nominees: (except those whose names 
 are listed below):


- ---------------------------------------



                                                                                     CHANGE OF ADDRESS/       [     ]
                                                                                     COMMENTS ON REVERSE SIDE 

- ------------------------------------------------------------------------------------------------------------------------------------




                                                        (Please mark, date and sign as your name appears hereon and return in
                                                        the enclosed, postage paid envelope.  If acting as executor or 
                                                        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 sign.)


                                                        ----------------------------------------------------------------------------
                                                                                                                                1999
                                                        ----------------------------------------------------------------------------
                                                        SIGNATURE(S)                                               DATE
- ------------------------------------------------------------------------------------------------------------------------------------
                                             FOLD AND DETACH HERE
</TABLE>


P                             STRYKER CORPORATION
R                P.O. BOX 4085, KALAMAZOO, MICHIGAN 49003-4085
O                        ANNUAL MEETING OF STOCKHOLDERS
X                                APRIL 28, 1999
Y
         THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
                              STRYKER CORPORATION

The undersigned, having received the Notice of Annual Meeting of Stockholders
and Proxy Statement, each dated March 19, 1999, 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 28, 1999, and at all
adjournments thereof, as set forth on the reverse side hereof.

  ELECTION OF DIRECTORS, NOMINEES:                 COMMENTS: (change of address)
  John W. Brown, Howard E. Cox, Jr., 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 CHOICE BY MARKING THE APPROPRIATE BOX ON THE
REVERSE SIDE. IF YOU DO NOT MARK ANY BOXES, YOUR PROXY WILL BE VOTED IN
ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS. THE PROXIES
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.

                                                                 [SEE REVERSE
                                                                      SIDE]

- --------------------------------------------------------------------------------
                              FOLD AND DETACH HERE


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