SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MEDTRONIC, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions 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>
[LOGO] MEDTRONIC
7000 Central Avenue N.E.
Minneapolis, Minnesota 55432
Telephone: 612/514-4000
July 22, 1998
Dear Shareholder:
You are cordially invited to join us for our Annual Meeting of Shareholders
to be held this year on Wednesday, August 26, 1998, at 10:30 a.m. (CDT) at
Medtronic's Corporate Center at its Rice Creek facility, 7000 Central Avenue
N.E., Minneapolis (Fridley), Minnesota.
The Notice of Annual Meeting of Shareholders and the Proxy Statement that
follow describe the business to be conducted at the meeting. We will also report
on matters of current interest to our shareholders.
We will be providing refreshments prior to the meeting, which will be
available beginning at 10:00 a.m. Please also take this opportunity to view
Medtronic's products, which will be on display.
YOUR VOTE IS IMPORTANT. Whether you own a few or many shares of stock, it
is important that your shares be represented. If you cannot personally attend,
we encourage you to make certain that you are represented at the meeting by
voting by telephone as described in the enclosed instructions or by signing the
accompanying proxy card and promptly returning it in the enclosed envelope.
Sincerely,
/s/ William W. George
William W. George
Chairman of the Board and Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
WEDNESDAY, AUGUST 26, 1998
To Our Shareholders:
The 1998 Annual Meeting of Shareholders of Medtronic, Inc. will be held
Wednesday, August 26, 1998, at the Medtronic, Inc. Corporate Center at its Rice
Creek facility, 7000 Central Avenue N.E., Minneapolis (Fridley), Minnesota, at
10:30 a.m. (CDT) for the following purposes:
1. To set the size of the Board at 14 directors and to elect five Class
III directors for three-year terms.
2. To approve appointment of Price Waterhouse LLP as the Company's
independent auditors.
3. To take action on any other business that may properly be considered
at the Meeting or any adjournment thereof.
These items are more fully described in the following pages of the Proxy
Statement.
Shareholders of record at the close of business on July 2, 1998 will be
entitled to vote at the Meeting and any adjournments of the Meeting.
By Order of the Board of Directors,
/s/ Ronald E. Lund
Ronald E. Lund
Secretary
Approximate Date of Mailing
Proxy Material: July 22, 1998
YOUR VOTE IS IMPORTANT.
PLEASE VOTE BY TELEPHONE AS DESCRIBED IN THE ENCLOSED INSTRUCTIONS OR DATE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
[LOGO] MEDTRONIC MEDTRONIC, INC.
7000 Central Avenue N.E.
Minneapolis, Minnesota 55432
-------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 26, 1998
-------------------------------------
The Board of Directors of Medtronic, Inc. ("Medtronic" or the "Company")
is soliciting the accompanying proxy for the Annual Meeting of Shareholders of
Medtronic to be held on August 26, 1998.
A proxy card is enclosed. In order to register your vote, you may vote by
telephone as described in the enclosed instructions or complete, date and sign
the proxy card and return it in the envelope provided. When voting by telephone,
your vote authorizes the named proxies to vote your shares in the same manner as
if you completed, signed and returned your proxy card.
When stock is registered in the name of more than one person, each such
person should sign the proxy. If the shareholder is a corporation, the proxy
should be signed in its corporate name by an executive or other authorized
officer. If signed as attorney, executor, administrator, trustee, guardian,
custodian or in any other representative capacity, the signer's full title
should be given.
Shareholders are entitled to one vote for each share of Medtronic Common
Stock, $.10 par value, they hold of record as of the close of business on July
2, 1998. On that date, 469,350,541 shares of Medtronic Common Stock were
outstanding. A quorum (a majority of the outstanding shares) must be represented
at the Meeting in person or by proxy to transact business.
Shares represented by a properly executed proxy received by Medtronic prior
to the Meeting and not revoked will be voted in accordance with the instructions
of the shareholder or, if no instructions are indicated, in accordance with the
recommendations of the Board of Directors. A proxy may be revoked at any time
before it is exercised by written revocation to the Corporate Secretary of
Medtronic or by submitting a proxy with a more recent date either by using the
telephone voting procedures or by filing a new written proxy with the Corporate
Secretary.
ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES
The Board of Directors is divided into three classes. The members of each
class are elected to serve three-year terms with the terms of office of each
class ending in successive years. William R. Brody, M.D., Ph.D., Paul W.
Chellgren, Arthur D. Collins, Jr., Antonio M. Gotto, Jr., M.D. and Thomas E.
Holloran are the nominees for election to the Board as Class III directors to
serve until the year 2001 annual meeting or until their successors are elected
and qualified. All of the nominees are currently directors and were elected to
the Board of Directors by the shareholders except for Mr. Chellgren and Dr.
Brody, who were elected by the Board on October 30, 1997 and February 2, 1998,
respectively. All of the nominees have indicated a willingness to serve if
elected. However, if any nominee becomes unable to serve before the election,
the shares represented by the proxy cards may be voted for a substitute
designated by the Board, unless an instruction to the contrary is indicated on
the proxy card.
The Corporate Governance Committee and its Nominating Subcommittee have
been conducting an ongoing search for an additional director. The Board size is
being increased to 14 to facilitate the Board's intent to add a new director as
soon as possible.
THE BOARD RECOMMENDS A VOTE FOR ELECTING THE NOMINEES.
<PAGE>
DIRECTOR NOMINEES -- CLASS III
(TERM ENDING 2001)
[PHOTO] President of The Johns Hopkins
WILLIAM R. BRODY, M.D., PH.D., age 54 University since September 1996. Special
DIRECTOR SINCE 1998 Assistant to the President of the
CLASS III DIRECTOR University of Minnesota Academic Health
TERM EXPIRES 1998 Center, May 1996 to July 1996; Provost
of the University of Minnesota Academic
Health Center from September 1994 to May
1996; the Martin Donner Professor and
Director of the Department of Radiology
at The Johns Hopkins University School
of Medicine from 1987 to 1994. Also a
director of Alza Corporation and
Mercantile Bankshares Corporation.
[PHOTO] Chairman of the Board and Chief
PAUL W. CHELLGREN, age 55 Executive Officer of Ashland Inc.
DIRECTOR SINCE 1997 (energy company) since January 1997 and
CLASS III DIRECTOR Chief Executive Officer since October
TERM EXPIRES 1998 1996; President and Chief Operating
Officer of Ashland Inc. from January
1992 to September 1996. Also a director
of PNC Bank Corp. and Arch Coal, Inc.
[PHOTO] Medtronic's President and Chief
ARTHUR D. COLLINS, JR., age 50 Operating Officer since August 1996;
DIRECTOR SINCE 1994 Chief Operating Officer from January
CLASS III DIRECTOR 1994 to August 1996; Executive Vice
TERM EXPIRES 1998 President of the Company and President
of Medtronic International from June
1992 to January 1994. Corporate Vice
President of Abbott Laboratories (health
care products) from October 1989 to May
1992 and Divisional Vice President of
that company from May 1984 to October
1989. Held various management positions
both in the U.S. and Europe during his
14 years with Abbott. Also a director of
U.S. Bancorp, Tennant Company and the
National Association of Manufacturers.
<PAGE>
[PHOTO] The Stephen and Suzanne Weiss Dean of
ANTONIO M. GOTTO, JR., M.D., age 62 the Cornell University Medical Center
DIRECTOR SINCE 1992 and Provost for Medical Affairs, Cornell
CLASS III DIRECTOR University, since January 1997. Chairman
TERM EXPIRES 1998 and Professor of the Department of
Medicine at Baylor College of Medicine
and Methodist Hospital from 1977 to 1996
and former J. S. Abercrombie Chair,
Atherosclerosis and Lipoprotein Research
from 1976 to 1996. Also director and
principal investigator, Specialized
Center of Research in Arteriosclerosis,
National Heart, Lung and Blood
Institute, President, International
Atherosclerosis Society and Past
President, American Heart Association.
[PHOTO] Professor, Graduate School of Business,
THOMAS E. HOLLORAN, age 68 University of St. Thomas, St. Paul,
DIRECTOR SINCE 1960 Minnesota since June 1985; Chairman,
CLASS III DIRECTOR Minneapolis-St. Paul Metropolitan
TERM EXPIRES 1998 Airports Commission, from February 1989
to January 1991; Chairman of the Board
of Directors and Chief Executive Officer
of Dain Rauscher Corporation (holding
company for various financial
enterprises) from 1976 to June 1985.
Also a director of Flexsteel Industries,
Inc., MTS Systems Corp., ADC
Telecommunications Inc., National City
Bank of Minneapolis, National City
Bancorporation and Meritex, Inc.;
Chairman and a director of Malt-O-Meal
Company; and a director of the Minnesota
Center for Corporate Responsibility and
the Bush Foundation.
BOARD MEMBERS CONTINUING IN OFFICE -- CLASS I
(TERM ENDING 1999)
[PHOTO] Vice Chairman of Medtronic since July
GLEN D. NELSON, M.D., age 61 1988 and Executive Vice President from
DIRECTOR SINCE 1980 August 1986 to July 1988; Chairman and
CLASS I DIRECTOR Chief Executive Officer of American
TERM EXPIRES 1999 MedCenters, Inc. (HMO management) from
July 1984 to August 1986; Chief
Executive Officer, President and
Chairman of the Board of Trustees of
Park Nicollet Medical Center (medical
services) from 1975 to 1986; Surgeon at
Park Nicollet Medical Center from 1969
to 1986. Also a director of ReliaStar
Financial Corp., The St. Paul Companies,
Inc., Carlson Holdings, Inc., and
Communications Holdings, Inc.
[PHOTO] Chairman of the Board of Stericycle,
JACK W. SCHULER, age 57 Inc. (medical waste treatment and
DIRECTOR SINCE 1990 recycling) since 1990 and Chairman of
CLASS I DIRECTOR the Board of Ventana Medical Systems,
TERM EXPIRES 1999 Inc. (immunohisto-chemistry diagnostic
systems) since November 1995; President
and Chief Operating Officer of Abbott
Laboratories (health care products) from
January 1987 to August 1989; a director
of that company from April 1985 to
August 1989 and Executive Vice President
from January 1985 to January 1987. Also
a director of Chiron Corporation.
<PAGE>
[PHOTO] Private venture capital investor since
GERALD W. SIMONSON, age 68 June 1978; President and Chief Executive
DIRECTOR SINCE 1962 Officer of Omnetics Connector
CLASS I DIRECTOR Corporation (microminiature connectors)
TERM EXPIRES 1999 since March 1991. Also a director of
Northwest Teleproductions, Inc., The
Chromaline Corporation and Fairview
Hospital and Healthcare Services.
[PHOTO] Professor Emeritus since January 1995,
RICHARD A. SWALIN, PH.D., age 69 and Professor from August 1984 to
DIRECTOR SINCE 1980 January 1995, Materials Science and
(AND 1973-1977) Technology Management, The University of
CLASS I DIRECTOR Arizona; consultant in technology
TERM EXPIRES 1999 management since November 1987;
President and Chief Executive Officer of
Arizona Technology Development Corp.
from February 1987 to November 1987;
Dean of the College of Engineering and
Mines at The University of Arizona from
September 1984 to July 1987; Vice
President of Research and Development at
Allied-Signal Corp. from 1977 to 1984.
BOARD MEMBERS CONTINUING IN OFFICE -- CLASS II
(TERM ENDING 2000)
[PHOTO] Medtronic's Chairman and Chief Executive
WILLIAM W. GEORGE, age 55 Officer since August 1996; President and
DIRECTOR SINCE 1989 Chief Executive Officer from May 1991 to
CLASS II DIRECTOR August 1996; President and Chief
TERM EXPIRES 2000 Operating Officer from March 1989 to
April 1991. President, Honeywell Space
and Aviation Systems (products for
commercial and military aviation markets
and space and satellite applications),
from December 1987 to March 1989;
President, Honeywell Industrial
Automation and Control, from May 1987 to
December 1987 and Executive Vice
President of that business from January
1983 to May 1987. Also a director of
Dayton Hudson Corporation, Allina Health
System, Imation Corp. and Health
Industry Manufacturers Association.
<PAGE>
[PHOTO] Dean, College of Medicine and Public
BERNADINE P. HEALY, M.D., age 53 Health, and Professor of Medicine, The
DIRECTOR SINCE 1993 Ohio State University, since October
(AND 1987-1991) 1995. Physician and Science Policy
CLASS II DIRECTOR Advisor, The Cleveland Clinic Foundation
TERM EXPIRES 2000 (nonprofit medical research
organization), from July 1993 to May
1995; Director of the National
Institutes of Health from April 1991 to
June 1993; Chairman of the Research
Institute of The Cleveland Clinic
Foundation from November 1985 to April
1991; President, the American Heart
Association, National Center, from 1988
to 1989; Deputy Director of Office of
Science and Technology Policy, Executive
Office of the United States President,
from 1984 to 1985; Professor of
Medicine, The Johns Hopkins University
School of Medicine, from 1977 to 1984.
Also a trustee of Battelle Memorial
Institutes and a director of National
City Corporation, Invacare, Inc. and
Karrington Health, Inc.
[PHOTO] Consultant. Retired Vice Chairman and
RICHARD L. SCHALL, age 68 Chief Administrative Officer and
DIRECTOR SINCE 1971 director of Dayton Hudson Corporation as
CLASS II DIRECTOR of February 1985. Also a director of
TERM EXPIRES 2000 EcoLab Inc. and U.S. Bancorp and a
trustee of Santa Barbara City College
Foundation.
[PHOTO] Executive Officer of Allina Health
GORDON M. SPRENGER, age 61 System (health care delivery) since July
DIRECTOR SINCE 1991 1994; Chief Executive Officer and
CLASS II DIRECTOR director of HealthSpan Health Systems
TERM EXPIRES 2000 Corporation (health care delivery) from
September 1992 to July 1994; President
and Chief Executive Officer of LifeSpan,
Inc. (health care delivery) from 1982 to
September 1992; Chief Executive Officer
of Abbott-Northwestern Hospital from
1982 to September 1992; President of
Abbott-Northwestern Hospital from 1982
to 1988. Also a member of Board of
Regents, St. Olaf College, and a
director of The St. Paul Companies,
Inc., Bush Foundation and Past Chair of
the Board of the American Hospital
Association.
<PAGE>
The affirmative vote of a majority of the shares of Common Stock present in
person or by proxy and entitled to vote at the Meeting is necessary to elect
each director nominee. For this purpose, a shareholder voting through a proxy
who abstains with respect to the election of directors is considered to be
present and entitled to vote on the election of directors at the Meeting, and is
in effect a negative vote; but a shareholder (including a broker) who does not
give authority to a proxy to vote, or withholds authority to vote, on the
election of directors shall not be considered present and entitled to vote on
the election of directors.
BOARD AND BOARD COMMITTEE MEETINGS
During fiscal 1998, Medtronic's Board of Directors held a total of twelve
Board meetings. Each director attended 75% or more of the total meetings of the
Board of Directors and Board committees on which the director served (held
during the period he or she served as a director). The standing committees of
the Board of Directors include the Audit Committee, the Compensation Committee,
the Finance Committee, the Corporate Governance Committee and the Technology and
Quality Committee.
AUDIT COMMITTEE. The Audit Committee held three meetings in fiscal 1998.
Committee members are Brody, Healy, Holloran, Schuler (Chair) and Swalin. The
committee reviews Medtronic's annual financial statements; makes recommendations
regarding Medtronic's independent auditors and scope of auditor services;
reviews the adequacy of accounting and audit policies, compliance assurance
procedures and internal controls; reviews nonaudit services performed by
auditors to maintain auditors' independence; and reports to the Board of
Directors on disclosure adequacy and adherence to accounting principles.
COMPENSATION COMMITTEE. The Compensation Committee held six meetings in
fiscal 1998. Committee members are Chellgren, Healy, Schall, Schuler, Simonson
(Chair) and Swalin. The committee reviews compensation philosophy and major
compensation and benefits programs for employees; oversees certain stock and
benefit plans; and reviews executive officers' compensation.
FINANCE COMMITTEE. The Finance Committee held four meetings in fiscal 1998.
Committee members are Chellgren, Gotto, Schall, Simonson and Sprenger (Chair).
The committee reviews and makes recommendations regarding financial policies and
performance objectives as developed by management, including review of
Medtronic's annual and long-range operating plans; assists management in
evaluation of major acquisitions and divestitures from a financial perspective;
reviews changes in capital structure; and reviews banking relationships,
insurance coverage on assets, tax strategies, and financial performance and
related matters pertaining to Medtronic's employee pension and supplemental
retirement plans.
CORPORATE GOVERNANCE COMMITTEE. The Corporate Governance Committee held
five meetings in fiscal 1998. Committee members are Brody, Chellgren, Gotto,
Healy, Holloran, Schall (Chair), Schuler, Simonson, Sprenger and Swalin. The
committee addresses all matters of corporate governance; evaluates
qualifications and candidates for positions on the Board; evaluates the
performance of the chief executive officer and the Board; reviews major
organization changes and senior management performance; and reviews director
compensation philosophy. The Corporate Governance Committee maintains a
Nominating Subcommittee which considers and recommends to the full Committee
criteria for selecting new directors, nominees for Board membership and the
positions of CEO, Chairman and Chair of the Corporate Governance Committee, and
whether a director should be invited to stand for re-election. The Subcommittee
is comprised of the Chair of the Corporate Governance Committee plus one
director selected from each class of directors. The current Subcommittee held
three meetings in fiscal 1998 and includes Schall (Chair), Healy, Holloran and
Schuler.
The Corporate Governance Committee will consider nominees for Board
membership submitted by shareholders. Nominations by shareholders must be made
pursuant to timely notice in writing to the Corporate Secretary at 7000 Central
Avenue N.E., Minneapolis, Minnesota 55432. Candidates for director should be
persons with broad training and experience in their chosen fields and who have
earned distinction in their activities. Notice by the shareholder to be timely
must be received not less than 50 nor more than 90 days prior to the meeting or,
if less than 60 days' disclosure of the meeting date is given, not later than
the close of business on the 10th day following the day on which notice of
<PAGE>
the meeting date is mailed or public disclosure of such date is made. The notice
shall set forth certain information concerning such shareholder and the
nominees, including their names and addresses, their principal occupation or
employment, the capital stock of the Company which they beneficially own, such
other information as would be required in a proxy statement soliciting proxies
for the election of the nominees and the consent of each nominee to serve as a
director if so elected. The chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedure.
TECHNOLOGY AND QUALITY COMMITTEE. The Technology and Quality Committee held
one meeting in fiscal 1998. Committee members are Brody, Gotto, Healy (Chair),
Holloran, Sprenger and Swalin. The committee reviews policies, practices,
processes and quality programs concerning technological and product research;
reviews efforts and investments in developing new products and businesses;
evaluates Medtronic's technological education and recognition programs; and
reviews quality process matters with Medtronic's chief quality officer.
DIRECTOR COMPENSATION
As part of the Company's desire to further emphasize performance-based
compensation and to encourage stock ownership by the Company's management and
Board of Directors, the Company recently discontinued its former cash retirement
plan for non-employee directors and its charitable contribution plan for
directors. Effective March 5, 1998, the Company also adopted the Medtronic, Inc.
1998 Outside Director Stock Compensation Plan (the "Director Plan").
The new compensation program for outside directors has three components: an
annual retainer, an annual stock option grant and an annual credit of deferred
stock units. In addition, all new non-employee board members will receive an
initial stock option grant.
The annual retainer in place for the 1997-1998 plan year (September 1, 1997
through August 31, 1998) is $50,000 for all non-employee directors except the
Chair of the Corporate Governance Committee, whose retainer is $60,000.
Directors have the option of taking 100% of the annual retainer in the form of
cash, or 100% in the form of stock options. If options are chosen, the number of
shares covered by such options will equal four times the amount of the annual
retainer divided by the fair market value of a share of Medtronic stock on the
last day of the relevant plan year (which will also be the exercise price of
such options). These options expire on the tenth anniversary of the date of
grant. The annual retainer is reduced by 25% if a non-employee director does not
attend at least 75% of the total meetings of the Board and Board committees on
which such director served during the relevant plan year.
Under the Director Plan, each non-employee director also receives on the
first day of each plan year an annual stock option grant for a number of shares
of Medtronic stock equal to the amount of the annual retainer divided by the
fair market value of a share of Medtronic stock on the date of grant (which will
also be the exercise price of such option). These options expire at the earlier
of the tenth anniversary of the date of grant or five years after the holder
ceases to be a director of the Company.
The Director Plan also provides that on the last day of each plan year,
each non-employee director will be credited with a number of deferred stock
units (each representing the right to receive one share of Medtronic stock)
equal to one-half of the amount of the annual retainer divided by the average of
the fair market value of a share of Medtronic stock for the last 20 trading days
during the plan year. Dividends paid on Medtronic stock are credited to a
director's stock unit account in the form of additional stock units. The balance
in a director's stock unit account will be distributed to such director in the
form of shares of Medtronic stock upon resignation or retirement from the Board,
in a single distribution or, at the director's option, in five equal annual
distributions.
Each new non-employee director also receives, on the date he or she first
becomes a director, a one-time initial stock option grant under the Director
Plan for a number of shares of Medtronic stock equal to two times the amount of
the annual retainer divided by the fair market value of a share of Medtronic
stock on the date of grant (which will also be the exercise price of such
option). These options expire at the earlier of the tenth anniversary of the
date of grant or five years after the holder ceases to be a director of the
Company.
<PAGE>
All of the non-employee director options described above vest and are
exercisable in full on the date of grant, provided that a director initially
appointed by the Board will generally not be entitled to exercise any such
option until such director has been elected to the Board by the shareholders of
the Company.
As noted above, the Company's former retirement plan for non-employee
directors has been discontinued. Directors who had accrued retirement benefits
under that plan at the time of its discontinuance were given the option of
electing to keep the prior retirement benefit in place (annual retirement
benefit frozen at $22,000, payable for a period equal to the number of years of
service as a director through August 31, 1997, up to a maximum of 20 years) or
converting the accrued retirement benefit into either deferred stock units (on a
$1 for $1 basis) or ten-year stock options (on a $4 for $1 basis).
As noted above, the Company's charitable contribution plan for all
directors, which provided for a contribution of $1 million to charitable
institutions recommended by a deceased director with five or more years of
service at the time of death, has been discontinued. However, persons who became
directors prior to July 1, 1998 will continue to be eligible for this benefit.
As part of its overall program to promote charitable giving, the Company's
Foundation matches gifts by directors to qualified educational institutions up
to $7,000 per fiscal year.
CERTAIN TRANSACTIONS
The Company uses Carlson Wagonlit Travel, which was selected through a
competitive bidding process, as its travel agency for Company business. Dr. Glen
Nelson, who is Vice Chairman and a director of the Company, is a director of
Carlson Holdings, Inc., a family-owned business which includes Carlson Wagonlit
Travel. Members of Dr. Nelson's family are owners and officers of Carlson
Holdings, Inc. The Company paid fees totaling approximately $1,169,247 to
Carlson Wagonlit Travel for services in fiscal 1998. Management believes that
these transactions were on terms no less favorable to the Company than if made
with unaffiliated third parties.
<PAGE>
SHAREHOLDINGS OF CERTAIN OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS. To the best of Medtronic's knowledge, no
shareholder beneficially owned more than 5% of Medtronic's Common Stock as of
July 2, 1998.
MANAGEMENT SHAREHOLDINGS. The following table shows the number of shares of
Medtronic Common Stock beneficially owned by Medtronic's directors, executive
officers identified in the Summary Compensation Table below, and all directors
and executive officers as a group as of July 2, 1998.
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2)
------------------------ --------------------------
William R. Brody, Ph.D., M.D. ............. 4,406
Paul W. Chellgren ......................... 1,000
Arthur D. Collins, Jr. .................... 693,978
William W. George(3) ...................... 1,728,516
Antonio M. Gotto, Jr., M.D. ............... 39,451
Bobby I. Griffin .......................... 573,518
Bernadine P. Healy, M.D. .................. 25,362
Thomas E. Holloran ........................ 93,147
Glen D. Nelson, M.D.(4) ................... 1,044,077
Robert L. Ryan ............................ 315,322
Richard L. Schall ......................... 218,146
Jack W. Schuler ........................... 47,432
Gerald W. Simonson ........................ 71,980
Gordon M. Sprenger ........................ 44,339
Richard A. Swalin, Ph.D. .................. 47,726
Directors and executive officers as a group
(23 persons)(2) .......................... 6,622,058
- ------------------
(1) No director or executive officer beneficially owns more than 1% of the
shares outstanding. Medtronic's directors and executive officers as a group
beneficially own approximately 1.41% of the shares outstanding.
(2) Includes the following shares not currently outstanding but deemed
beneficially owned because of the right to acquire them pursuant to options
exercisable within 60 days (on or before August 31, 1998) as follows: W.R.
Brody, 1,940 shares; A.D. Collins, Jr., 401,861 shares; W.W. George, 806,104
shares; A.M. Gotto, Jr., 33,324 shares; B.I. Griffin, 292,860 shares; B.P.
Healy, 15,661 shares; T.E. Holloran, 36,785 shares; G.D. Nelson, 555,767
shares; R.L. Ryan, 295,035 shares; R.L. Schall, 36,692 shares; J.W. Schuler,
23,713 shares; G.W. Simonson; 35,880 shares; G.M. Sprenger, 35,244 shares;
R.A. Swalin, 37,351 shares; and all directors and executive officers as a
group, 3,334,543 shares.
(3) W.W. George disclaims beneficial ownership of 198,544 shares included in the
above table, which are held by the George Family Foundation, a charitable
trust of which he is one of the trustees. The above table also includes an
aggregate of 62,386 shares covered by currently exercisable options
transferred by Mr. George to members of his immediate family.
(4) The above table includes an aggregate of 98,835 shares covered by currently
exercisable options transferred by Dr. Nelson to members of his immediate
family.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of
the Securities Exchange Act of 1934 requires the Company's directors and
executive officers to file reports of ownership and changes in ownership of the
Company's Common Stock with the Securities and Exchange Commission and the New
York Stock Exchange, and the Company is required to identify any of those
individuals who failed to file such reports on a timely basis. To the best of
the Company's knowledge, based upon a review of such reports furnished to the
Company and written representations that no other reports were required, there
were no late filings by the Company's directors or executive officers in fiscal
1998 other than by Mr. Holloran, who, through the Company's oversight, did not
timely report a stock option exercise in November 1997 and Mr. Schuler, who did
not timely report two stock purchases by his spouse that occurred in 1993 and
1995, respectively. All late reports were promptly filed upon discovery of the
oversight.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON
FISCAL 1998 EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for establishing the compensation policy and administering the
compensation programs of the Company's executive officers.
The Committee will make all reasonable attempts to comply with the
requirements to exempt executive compensation from the $1 million deduction
limitation under Section 162(m) of the Internal Revenue Code, unless such
compliance would not be in the best interests of the Company and its
shareholders.
COMPENSATION PHILOSOPHY
The Company's executive compensation program is designed to:
* Emphasize performance-based compensation;
* Encourage strong financial performance by establishing aggressive
"stretch" goals for target performance and highly leveraged incentive
programs;
* Encourage executive stock ownership and alignment with shareholder
interests by providing a significant portion of compensation in Company
Common Stock.
The Committee annually evaluates Company executive compensation and
performance compared to a comparator group of medical equipment and
pharmaceutical companies as well as a larger group of general industry
companies. The Committee's goal is to position executives' base salaries
commensurate with Company size relative to the industry comparator group, and to
position executives' total compensation commensurate with Company performance
relative to the industry comparator group. In fiscal 1998, due to strong
corporate operating performance, the actual total compensation of executive
officers and of the chief executive officer (the "CEO") was generally above the
median of the above-described comparator group.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The key components of the Company's executive officer compensation program
are base salary, annual incentives and long-term incentives in the form of stock
options, performance shares and restricted stock. These elements are described
below.
BASE SALARY. The Committee annually reviews the base salaries of executive
officers, generally setting them close to the median base salary of the
comparator companies. The Committee also considers individual performance,
retention, the level of responsibility, and the scope and complexity of the
position.
ANNUAL INCENTIVE AWARDS. Executive officers are eligible for annual
incentives under the shareholder approved Management Incentive Plan. This is a
formula-based plan with awards based on corporate and business unit performance.
For fiscal 1998, corporate operating performance was assessed against target
measures of corporate profit after taxes and after-tax return on net assets,
with these measures given respective weights of 60% and 40%. Business unit
financial performance was assessed against target measures of earnings before
interest and taxes, revenue, and after-tax return on net assets or net asset
turnover, with these measures assigned respective weights that vary for each
participant. In addition, award payouts to participants could be increased by up
to 5% depending on either corporate or business unit performance against the
Company's revenue growth goal.
For fiscal 1998, executive officers were eligible for Management Incentive
Plan target awards ranging from 35% to 70% of base salary. Final awards can
range from 0% to 150% of the target amounts, and a threshold level of
performance is required before any payout occurs.
STOCK OPTIONS. Stock options are granted annually to executive officers.
Target awards are generally at or below the median level of grants of the
comparator companies. Individual awards vary based on the individual's
responsibilities and performance, ability to impact financial performance and
future potential. All grants are made at 100% of fair market value.
<PAGE>
PERFORMANCE SHARES. Top executives are eligible for grants of performance
shares under the Performance Share program. Grants are made annually for
overlapping three-year performance periods. Grant targets range from 30% to 50%
of base salary. Once a threshold level of performance is attained, final awards
can range from 20% to 180% of the target amounts. Grants for the 1998-2000 cycle
will measure performance based on earnings per share (40%), return on net assets
(40%) and revenue growth (20%).
Performance shares earned for fiscal years 1996-1998 were based on earnings
per share and after-tax return on net assets, with these two measures given
equal weight in determining overall performance. Medtronic's performance for
this performance cycle was exceptional -- as actual performance on these
measures exceeded the maximum targets -- resulting in a payout at 180%. The
value of the award is based on the average price of the Company's Common Stock
for the last 20 trading days of the performance cycle, up to a maximum of three
times the price at the date of grant. Half of the award is paid in Company
Common Stock (shares of stock or stock options), with the other half paid in
cash or Company Common Stock at the discretion of the Committee. The participant
may elect to exchange part or all of the payout for stock options as described
under the "Stock Option Exchange Program" below.
RESTRICTED STOCK. Restricted stock grants are made on a limited basis to
executive officers. Grants were made to two named executives in fiscal 1998 in
conjunction with the special grant described further below.
STOCK OPTION EXCHANGE PROGRAM. To encourage stock ownership by executives,
the Company offers a program which allows executives to elect to receive stock
options in lieu of some or all of the cash compensation earned under the
Management Incentive Plan and the Performance Share program. Currently under the
program, participants receive $4 fair market value of stock options for every $1
of compensation exchanged. Options granted to named executives in fiscal 1998
under this program are disclosed in the "Option/SAR Grants in Last Fiscal Year"
table on page 15 of this Proxy Statement.
SPECIAL GRANT. In fiscal 1998, the Committee approved special stock option
grants (in addition to the regular annual stock option grant) for the Company's
senior officers and special restricted stock grants for the CEO and the Chief
Operating Officer. The grants were awarded to unify the management team around
significant growth goals and to aid in retention. These special grants vest 100%
on a cliff basis after five years. The exercise price of the options is 100% of
the fair market value on the date of grant.
ADJUSTMENT FOR NON-RECURRING ITEMS. Consistent with past practices, the
Committee based the annual incentive and performance share awards on financial
results that do not include one-time non-recurring items. The Committee believes
awards should normally reflect ongoing Company performance and should not
include gains and losses due to these non-operating items. For purposes of
determining achievement of targets, the financial results were adjusted to
eliminate the one-time charges taken by the Company in fiscal 1998 related to
the restructuring of the Vascular organization and reduction of the Company's
global infrastructure.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. The CEO's compensation is
comprised of base salary, annual incentive and long-term incentives. Pay levels
and opportunity are established by the Committee in the same manner as for other
executive officers described above.
The CEO received a 9% merit increase to base salary effective at the
beginning of fiscal 1998. In determining the base salary for the CEO, the
Committee specifically considered annual operating performance (for fiscal
1997), strategic planning and succession planning for senior management.
For fiscal 1998, the CEO earned an award of 89.3% of the target payout on
the Management Incentive Plan. Annual performance was slightly below target.
In fiscal 1998, the CEO received a performance share grant with a target
payout equal to 50% of his base salary. Performance objectives for the 1998-2000
performance cycle are consistent with those for all program participants listed
above. For the three-year cycle ended in fiscal 1998, the Company
<PAGE>
achieved cumulative earnings per share and average after-tax return on net
assets significantly in excess of the maximum performance targets. Consequently,
the payout for this cycle for all executive officers, including the CEO, was
180% of the target award.
In addition, the CEO was a participant in the special grants of stock
options and restricted stock discussed above under "Special Grant."
CONCLUSION
Consistent with its compensation philosophy, the Committee believes the
executive officer compensation program provides incentive to attain strong
financial performance and is strongly aligned with shareholder interests. The
Committee believes that the Company's compensation program directs the efforts
of the Company's executive officers toward the continued achievement of growth
and profitability for the benefit of the Company's shareholders.
COMPENSATION COMMITTEE:
Gerald W. Simonson, Chair Richard L. Schall
Paul W. Chellgren Jack W. Schuler
Bernadine P. Healy, M.D. Richard A. Swalin, Ph.D.
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
The graph and table below compare the cumulative total shareholder return
on the Company's Common Stock for the last five fiscal years with the cumulative
total return on the S&P 500 Index and the S&P Health Care (Medical Products and
Supplies) Industry Index over the same period. The graph and table assume the
investment of $100 in each of the Company's Common Stock, the S&P 500 Index and
the S&P Health Care (Medical Products and Supplies) Industry Index on April 30,
1993 and that all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG MEDTRONIC,
S&P 500 AND S&P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) INDUSTRY INDEX
[PLOT POINTS GRAPH]
<TABLE>
<CAPTION>
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
MEDTRONIC $ 100.00 $ 116.17 $ 231.40 $ 332.27 $ 435.80 $ 670.18
S&P 500 100.00 105.32 123.66 160.95 201.26 283.85
S&P HEALTH CARE 100.00 93.80 146.21 197.59 229.87 328.62
</TABLE>
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years ended April 30, 1998 awarded to or earned by the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION --------------------------- -------
--------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARs PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($)(5) (#)(2)(3)(4)(6) ($)(6) ($)(7)
- --------------------------- ------ ------ ----- ------------ ------ -------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William W. George 1998 $700,000 $239,252(2) $ -- $7,007,820 370,655 $ 784,163 $34,542
Chairman and Chief 1997 642,000 464,598 -- -- 32,908 1,431,161 43,331
Executive Officer 1996 600,000 415,000(4) -- -- 61,526 1,295,977 50,712
Arthur D. Collins, Jr. 1998 589,607 348,103 -- 7,007,820 299,878 835,106 27,888
President and 1997 471,000 214,703(3) -- -- 37,880 933,897 32,110
Chief Operating Officer 1996 440,000 343,000(4) 787 -- 34,390 702,011 38,061
Glen D. Nelson, M.D. 1998 471,000 --(2) 5,556 -- 207,821 -- 24,923
Vice Chairman 1997 471,000 --(3) 5,694 -- 62,682 996,249 32,097
1996 440,000 --(4) 5,266 -- 86,040 899,231 39,210
Robert L. Ryan 1998 370,000 --(2) -- -- 117,079 -- 19,638
Senior Vice President and 1997 352,500 --(3) -- -- 34,390 683,599 22,368
Chief Financial Officer 1996 335,500 --(4) -- -- 52,428 648,177 27,234
Bobby I. Griffin 1998 371,000 74,557(2) 1,554 -- 107,784 -- 19,125
Executive Vice President 1997 350,000 --(3) 1,593 -- 34,850 645,233 24,210
1996 325,000 --(4) 1,462 -- 53,934 586,484 30,412
</TABLE>
- -----------------
(1) Amounts payable by the Company in above-market interest under deferred
compensation plan.
(2) "Bonus" column does not include fiscal 1998 cash bonus payments of $200,000,
$274,443, $165,841 and $80,000 which Messrs. George, Nelson, Ryan and
Griffin, respectively, elected to forego in order to receive stock options
granted in lieu of part or all of their cash bonus compensation under the
annual incentive plan. These stock options are included in the "Securities
Underlying Options/SARs" column. See "Report of the Compensation Committee
on Fiscal 1998 Executive Compensation -- Executive Officer Compensation
Program -- Stock Option Exchange Program" and "Option/SAR Grants in Last
Fiscal Year," below.
(3) "Bonus" column does not include fiscal 1997 cash bonus payments of $100,000,
$314,703, $196,390 and $175,058 which Messrs. Collins, Nelson, Ryan and
Griffin, respectively, elected to forego in order to receive stock options
granted in lieu of part or all of their cash bonus compensation under the
annual incentive plan. These stock options are included in the "Securities
Underlying Options/SARs" column. See "Report of the Compensation Committee
on Fiscal 1998 Executive Compensation -- Executive Officer Compensation
Program -- Stock Option Exchange Program."
(4) "Bonus" column does not include fiscal 1996 cash bonus payments of $200,000,
$75,000, $418,000, $268,400 and $260,000 which Messrs. George, Collins,
Nelson, Ryan and Griffin, respectively, elected to forego in order to
receive stock options granted in lieu of part or all of their cash bonus
compensation under the annual incentive plan. These stock options are
included in the "Securities Underlying Options/SARs" column. See "Report of
the Compensation Committee on Fiscal 1998 Executive Compensation --
Executive Officer Compensation Program -- Stock Option Exchange Program."
(5) Mr. George and Mr. Collins each received a special grant of 150,000 shares
of restricted stock in August 1997. See "Report of the Compensation
Committee on Fiscal 1998 Executive Compensation -- Executive Officer
Compensation Program -- Special Grant." Dollar value of such stock is based
on the fair market value on the date of grant. The stock vests 100% on a
cliff basis five years after the date of grant. Dividend equivalents are
paid on the stock. Aggregate shares of restricted stock held by named
executive officers at 4/30/98 and the value of such shares on that date
(based on a closing stock price of $53.00 per share) are as follows: Mr.
George and Mr. Collins each held 150,000 shares valued at $7,950,000.
(6) Includes the value of both cash and stock earned in fiscal 1998 under the
Company's long-term incentive plan described in "Other Long-Term Incentive
Awards" below. The stock for the fiscal 1998 payment was valued at $52.4875
per share. Does not include the value of cash and/or stock earned upon
payment of performance share awards for the fiscal 1996-1998 performance
cycle under the Company's long-term incentive plan of $784,163, $200,000,
$1,035,106, $701,810 and $679,871 which Messrs. George, Collins, Nelson,
Ryan and Griffin, respectively, elected to forego in order to receive stock
options granted in lieu of part or all of such compensation. Those stock
options are included in the "Securities Underlying Options/SARs" column. See
"Report of the Compensation Committee on Fiscal 1998 Executive Compensation
-- Executive Officer Compensation Program -- Performance Shares" and --
"Stock Option Exchange Program."
<PAGE>
(7) Amounts in this column for fiscal 1998 include the following: the Company
contributed $4,000 in shares of Company stock under the employee stock
ownership plan for each of the named executive officers for fiscal 1998; the
Company contributed $5,500, $5,280, $5,280, $5,500 and $5,500 to Messrs.
George, Collins, Nelson, Ryan and Griffin, respectively, to match employee
contributions under the 401(k) supplemental retirement plan; and the Company
contributed $25,042, $18,608, $15,643, $10,138 and $9,625 to Messrs. George,
Collins, Nelson, Ryan and Griffin, respectively, toward the right to receive
shares of Company stock under the non-qualified supplemental benefit plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth for each of the named executives the stock
options granted by the Company in fiscal 1998 and the potential value of these
stock options determined pursuant to Securities and Exchange Commission
requirements. No stock appreciation rights were granted to the named executives
in fiscal 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
---------------------------------------- ---------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARs EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARs EMPLOYEES IN PRICE EXPIRATION 0% 5% 10%
NAME (#) FISCAL YEAR ($/Sh) DATE ($) ($)(5) ($)(5)
- ---- ------------ ------------ -------- ---------- ----- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
W. W. George ........... 250,000(1) 9.8% $46.719 08/11/07 0 $7,345,301 $18,614,434
46,377(2) 1.8 43.125 10/29/07 0 1,257,794 3,187,498
15,095(3) 0.6 53.000 05/01/08 0 503,138 1,275,050
59,183(4) 2.3 53.000 05/01/08 0 1,972,653 4,999,090
A. D. Collins, Jr. ..... 250,000(1) 9.8 46.719 08/11/07 0 7,345,301 18,614,434
34,783(2) 1.4 43.125 10/29/07 0 943,353 2,390,641
15,095(4) 0.6 53.000 05/01/08 0 503,138 1,275,050
G. D. Nelson, M.D. ..... 80,000(1) 3.1 46.719 08/11/07 0 2,350,496 5,956,619
28,986(2) 1.1 43.125 10/29/07 0 786,132 1,992,212
20,713(3) 0.8 53.000 05/01/08 0 690,394 1,749,593
78,122(4) 3.1 53.000 05/01/08 0 2,603,917 6,598,836
R. L. Ryan ............. 40,000(1) 1.6 46.719 08/11/07 0 1,175,248 2,978,309
11,595(2) 0.5 43.125 10/29/07 0 314,469 796,926
12,517(3) 0.5 53.000 05/01/08 0 417,209 1,057,290
52,967(4) 2.1 53.000 05/01/08 0 1,765,465 4,474,035
B. I. Griffin .......... 40,000(1) 1.6 46.719 08/11/07 0 1,175,248 2,978,309
10,435(2) 0.4 43.125 10/29/07 0 283,008 717,199
6,038(3) 0.2 53.000 05/01/08 0 201,255 510,020
51,311(4) 2.0 53.000 05/01/08 0 1,710,268 4,334,156
</TABLE>
- ------------------
(1) These stock options granted to the named executive officers have an exercise
price equal to the fair market value as of the date of grant and vest 100%
on a cliff basis after five years. See "Report of the Compensation Committee
on Fiscal 1998 Executive Compensation -- Executive Officer Compensation
Program -- Special Grant."
(2) These stock options granted to the named executive officers have an exercise
price equal to the fair market value on the date of grant and vest annually
in 25% increments.
(3) These stock options were granted in lieu of all or part of the cash
compensation earned for fiscal 1998 under the Company's annual incentive
plan. Because the executives elected to forego cash compensation to receive
the options, which were granted on 5/1/98, the options are 100% vested at
grant. See "Report of the Compensation Committee on Fiscal 1998 Executive
Compensation -- Executive Officer Compensation Program -- Stock Option
Exchange Program."
(4) These stock options were granted in lieu of all or part of the cash and/or
stock compensation earned upon payment of performance share awards for the
fiscal 1996-1998 performance period under the Company's long-term incentive
plan. Because the executives elected to forego cash and/or stock
compensation to receive the options, which were granted on 5/1/98, the
options are 100% vested at grant. See "Report of the Compensation Committee
on Fiscal 1998 Executive Compensation -- Executive Officer Compensation
Program -- Stock Option Exchange Program."
(5) The hypothetical potential appreciation shown in these columns reflects the
required calculations at annual rates of 5% and 10% set by the Securities
and Exchange Commission, and therefore is not intended to represent either
historical appreciation or anticipated future appreciation of the Company's
Common Stock price.
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth for each of the named executive officers the
value realized from stock options exercised during fiscal 1998 and the number
and value of exercisable and unexercisable stock options and stock appreciation
rights held at April 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED VALUE OF
OPTIONS/SARs UNEXERCISED IN-THE-MONEY
AT FISCAL OPTIONS/SARs AT
YEAR-END (#) FISCAL YEAR-END ($)(1)
SHARES VALUE --------------------- ------------------------
ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE ($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- --------------------- -------------------------
<S> <C> <C> <C> <C>
W. W. George(2) ............... 400,000 $21,028,120 1,001,548/562,285 $42,358,648/12,697,229
A. D. Collins, Jr. ............ 0 0 397,801/354,123 15,588,501/4,097,129
G. D. Nelson, M.D.(3) ......... 95,600 4,182,251 553,147/163,588 16,587,493/2,386,244
R. L. Ryan .................... 13,288 490,368 292,771/87,886 7,856,554/1,541,589
B. I. Griffin ................. 0 0 291,276/82,572 8,457,313/1,299,980
</TABLE>
- ------------------
(1) Value of unexercised in-the-money options is determined by multiplying the
difference between the exercise price per share and $53.00, the closing
price per share on April 30, 1998, by the number of shares subject to such
options. Amounts include stock options granted on 5/1/98 in lieu of cash
compensation earned for fiscal 1998 under the Company's annual incentive
plan and cash and/or stock compensation earned upon payment of performance
share awards for the fiscal 1996-1998 performance period under the Company's
stock incentive plan. See "Report of the Compensation Committee on Fiscal
1998 Executive Compensation -- Executive Officer Compensation Program --
Stock Option Exchange Program."
(2) Includes exercisable options to purchase an aggregate of 62,386 shares
transferred to members of Mr. George's immediate family.
(3) Includes exercisable options to purchase an aggregate of 98,835 shares
transferred to members of Dr. Nelson's immediate family.
OTHER LONG-TERM INCENTIVE AWARDS
The following table sets forth the number of performance share units
granted to each of the named executives in fiscal 1998 under the Company's 1994
Stock Award Plan and the performance-based award formula under such plan.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
NUMBER OF UNDER NON-STOCK PRICE
SHARES, UNITS PERFORMANCE OR BASED-PLANS
OR OTHER OTHER PERIOD ----------------------------
RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT (#) (#) (#)
- ---- ------------- ---------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
W. W. George ............... 10,820 5/1/97-4/30/00 2,164 10,820 19,476
A. D. Collins, Jr. ......... 8,116 5/1/97-4/30/00 1,623 8,116 14,609
G. D. Nelson, M.D. ......... 7,280 5/1/97-4/30/00 1,456 7,280 13,104
R. L. Ryan ................. 4,576 5/1/97-4/30/00 915 4,576 8,237
B. I. Griffin .............. 4,588 5/1/97-4/30/00 918 4,588 8,258
</TABLE>
- ------------------
(1) Payout of awards is based on achieving specified levels of designated
performance objectives during a three-year performance cycle. Payout can
range from 0% to 180% of units granted, with 20% and 180% as the threshold
and maximum payouts, respectively. Payout of 100% of the units granted
represents the target payout. Awards are payable at least 50% in Common
Stock, with the remainder paid in cash or Common Stock at the discretion of
the Compensation Committee. The value of an award is determined when it is
earned based on the average fair market value per share for the last 20
trading days of the performance cycle. The Company offers a program which
allows executives to receive stock options in lieu of some or all of the
cash and/or stock compensation earned upon payment of performance share
awards. See "Report of the Compensation Committee on Fiscal 1998 Executive
Compensation -- Executive Officer Compensation Program -- Performance
Shares" above.
<PAGE>
PENSION PLAN
The Company's pension plan is a defined benefit, tax qualified retirement
plan covering most U.S. employees and generally provides 40% of the average of
the highest five consecutive years of compensation (including certain incentive
compensation) in the final ten years of service, offset by a Social Security
allowance as published each year by the Internal Revenue Service. The table
below illustrates the annual benefits payable to participants who retire at age
65 with the indicated years of service with Medtronic and with the indicated
five-year highest average annual compensation. The benefits have been calculated
on a 50% joint and survivor annuity basis, before reduction for any amounts that
may be available from Medtronic's former Retirement Account Plan. The
compensation considered in determining the pensions payable to the below-named
executive officers is the compensation shown in the "Salary" and "Bonus" columns
of the Summary Compensation Table on page 14.
YEARS OF SERVICE WITH THE COMPANY
FIVE-YEAR -----------------------------------------------------------
AVERAGE
ANNUAL
COMPENSATION(1) 15 20 25 30 35
--------------- ------- ------- ------- ------- -------
$ 200,000 $34,080 $45,440 $56,800 $68,160 $72,735
400,000 70,680 94,240 117,800 141,360 150,510
600,000 107,280 143,040 178,800 214,560 228,285
800,000 143,880 191,840 239,800 287,760 306,060
1,000,000 180,480 240,640 300,800 360,960 383,835
1,200,000 217,080 289,440 361,800 434,160 461,610
1,400,000 253,680 338,240 422,800 507,360 539,385
- ------------------
(1) Calculated by considering a participant's compensation levels during the
ten-year period immediately preceding retirement. The credited years of
service (rounded to the nearest whole year) for the executive officers named
in the Summary Compensation Table were as follows at April 30, 1998: W.W.
George, 9 years; A.D. Collins, Jr., 6 years; G.D. Nelson, 12 years; R.L.
Ryan, 5 years; and B.I. Griffin, 25 years.
Certain limitations on the amount of benefits under the Company's tax
qualified retirement plan were imposed by the Employee Retirement Income
Security Act of 1974 ("ERISA") and Tax Reform Act of 1986 ("TRA"). The Company's
non-qualified supplemental benefit plan provides for the restoration of benefits
to officers who may be affected by those limitations so that, in general, total
benefits will be equal to the level of benefits which would have been payable
under the Company's retirement plan and employee stock ownership plan but for
the ERISA and TRA limitations or for the fact that the executive has elected to
defer compensation under the Company's deferred compensation programs. The
amounts shown in the pension plan table above reflect the additional retirement
benefits provided under the non-qualified supplemental benefit plan.
EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
CHANGE IN CONTROL ARRANGEMENTS. The executive officers of the Company,
including those named in the Summary Compensation Table, have change in control
agreements (the "Agreements") with the Company. The Agreements operate only upon
the occurrence of a "change in control" as described below. Absent a "change in
control" the Agreements do not require the Company to retain the executives or
to pay them any specified level of compensation or benefits.
Each Agreement provides that for three years after a "change in control"
there will be no adverse change in the executive's salary, bonus, opportunity,
benefits or location of employment. If during this three-year period the
executive's employment is terminated by the Company other than for cause, or if
the executive terminates his employment for good reason (as defined in the
Agreements, and including compensation reductions, demotions, relocation and
excess travel), or voluntarily during the 30-day period following the first
anniversary of the "change in control," the executive is entitled to receive an
accrued salary and annual incentive payment through the date of termination and,
except in the event of death or disability, a lump sum severance payment ("Lump
Sum Payment") equal to three times (two times in the event of termination by the
executive in the aforementioned 30-day period) the sum of his base salary and
annual bonus (and certain insurance and other welfare plan benefits). Further,
an additional payment ("gross-up") is required in an amount such that after the
payment of all
<PAGE>
taxes, income and excise, the executive will be in the same after-tax position
as if no excise tax under the Internal Revenue Code had been imposed.
Generally, and subject to certain exceptions, a "change in control" is
deemed to have occurred if: (a) a majority of Medtronic's Board of Directors
becomes comprised of persons other than persons for whose election proxies have
been solicited by the Board, or who are then serving as directors appointed by
the Board to fill vacancies caused by death or resignation (but not removal) of
a director or to fill newly created directorships; (b) another party becomes the
beneficial owner of at least 30% of Medtronic's outstanding voting stock; or (c)
Medtronic's shareholders approve a definitive agreement or plan to merge or
consolidate Medtronic with another party (other than certain limited types of
mergers), exchange shares of voting stock of Medtronic for shares of another
corporation pursuant to a statutory exchange, sell or otherwise dispose of all
or substantially all of Medtronic's assets, or liquidate or dissolve Medtronic.
In addition, events substantially identical to those described above also
constitute a "change in control" under certain of the Company's compensation
plans. If a "change in control" of the Company occurs, awards under the
Company's Management Incentive Plan will accelerate and, subject to certain
limitations set forth in the plan, each participant will be entitled to a final
award based on certain assumptions as to target performance and salary. The
Company's stock award plans and agreements thereunder provide that in the event
of a "change in control" of the Company, all restrictions under outstanding
restricted stock awards shall immediately lapse and the restricted stock period
with respect to all such shares shall be deemed to have expired, and performance
share awards shall vest immediately in a pro rata amount based on the portion of
the performance period elapsed prior to the "change in control" and certain
assumptions as to the anticipated performance which would have been achieved
during the applicable performance period.
The Company's stock award plans and agreements thereunder also provide for
or permit acceleration of the exercisability of outstanding stock options upon
the occurrence of certain events (such as certain tender offers or exchange
offers for the Company's stock, certain changes in control of the Company, a
merger or consolidation of the Company with another entity, or a sale of
substantially all of the Company's assets or certain plans therefor) or at the
discretion of the Board of Directors. Limited stock appreciation rights
("Limited Rights") granted under the stock option plans are exercisable, with
certain limitations, at any time within the thirty-day period following a
"change in control" of Medtronic. Upon exercise of Limited Rights, the holder is
entitled to receive an amount in cash for each share with respect to which the
Limited Rights are exercised equal to the difference between the option exercise
price per share of stock covered by the underlying option and the fair market
value per share as of the date of exercise. If Limited Rights are exercised, the
underlying option will no longer be exercisable to the extent of the number of
shares with respect to which the Limited Rights were exercised.
If a "change in control" occurs, subject to certain limitations,
Medtronic's contributions to the employee stock ownership plan for that year
will equal the greater of Medtronic's target percentage contribution (currently
2.5% of aggregate covered employee compensation in fiscal 1998) or, if a "change
in control" occurs after the first quarter of a plan year, the percentage
contribution Medtronic would have made upon completion of the plan year based on
performance as most recently projected by Medtronic prior to the "change in
control" and disregarding the effects of the "change in control." If a "change
in control" occurs during a plan year, subject to certain limitations,
Medtronic's matching contribution to the 401(k) supplemental retirement plan
shall equal the greater of Medtronic's target percentage matching contribution
(currently 62.5% of the first 6% of a participant's contribution in fiscal
1998), or if the "change in control" occurs after the first quarter of a plan
year, the percentage contribution Medtronic would have made upon completion of
the plan year based on performance as most recently projected by Medtronic prior
to the "change in control" and disregarding the effects of the "change in
control."
OTHER EMPLOYMENT ARRANGEMENTS. Under the Company's postretirement survivor
benefit plan, designated beneficiaries or the estate of each executive officer
who retires with the Company (as defined in the Company's tax-qualified employee
retirement plans) shall be entitled to receive following the officer's death a
lump sum payment equal to the annual salary of such officer in effect at the
date of retirement.
<PAGE>
In anticipation of Mr. George's plan to relinquish the role of CEO after
ten years, the Board in November 1997 entered into a letter agreement with A.D.
Collins, Jr. in order to ensure his availability as successor to the chief
executive officer position. The agreement provides that if Mr. Collins is not
named chief executive officer by May 1, 2001, he may terminate employment and
will receive severance benefits, and his outstanding stock awards will
accelerate and vest in full, all to the same extent as if a change in control
had occurred as provided in his change in control agreement and the Company's
plans, as discussed above. See "Change in Control Arrangements" above.
APPROVAL OF SELECTION OF AUDITORS
Upon recommendation of its Audit Committee, Medtronic's Board has selected
Price Waterhouse LLP, certified public accountants, as independent auditors for
Medtronic for the fiscal year ending April 30, 1999. That firm has acted as
independent auditors for Medtronic for more than 20 years, and the Board
considers it highly qualified. Although it is not required to do so, the Board
of Directors wishes to submit the selection of Price Waterhouse LLP for
shareholders' approval at the Meeting. If the shareholders do not give approval,
the Board will reconsider its selection.
Representatives of Price Waterhouse LLP will be present at the Meeting,
will have the opportunity to make a statement if they desire and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THIS
APPOINTMENT.
GENERAL
The costs of soliciting proxies will be borne by Medtronic, including the
reimbursement to record holders of their expenses in forwarding proxy materials
to beneficial owners. Directors, officers and regular employees of Medtronic,
without extra compensation, may solicit proxies personally or by mail,
telephone, fax, telex, telegraph or special letter.
Medtronic has retained ChaseMellon Shareholder Services, L.L.C., a firm
that provides professional proxy soliciting services, to aid in the solicitation
of proxies for a fee of $9,500 plus reimbursement for certain out-of-pocket
expenses.
Any shareholder proposals for the Company's 1999 Annual Meeting of
Shareholders (anticipated date August 25, 1999) that are requested to be
included in the Company's Proxy Statement must be received by the Company by
March 25, 1999. Any other shareholder proposals for the Company's 1999 Annual
Meeting of Shareholders must be received not less than 50 nor more than 90 days
prior to the meeting or, if less than 60 days' disclosure of the meeting date is
given, not later than the close of business on the 10th day following the day on
which notice of the meeting date is mailed or public disclosure of such date is
made. The proposals also must comply with all applicable statutes and
regulations.
Medtronic's 1998 Annual Shareholders Report, including financial
statements, is being sent to shareholders of record as of July 2, 1998, together
with this Proxy Statement.
MEDTRONIC WILL FURNISH TO SHAREHOLDERS WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED APRIL 30, 1998, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, UPON RECEIPT OF WRITTEN REQUEST ADDRESSED
TO: INVESTOR RELATIONS DEPARTMENT, MEDTRONIC, INC., 7000 CENTRAL AVENUE N.E.,
MINNEAPOLIS, MINNESOTA 55432.
The Board of Directors knows of no other matters to be presented at the
Annual Meeting. If any other business properly comes before the Annual Meeting
or any adjournment thereof, the proxies will vote on that business in accordance
with their best judgment.
By Order of the Board of Directors,
/s/ Ronald E. Lund
Ronald E. Lund, Secretary
MEDTRONIC, INC.
<PAGE>
[LOGO] MEDTRONIC
MEDTRONIC, INC.
ANNUAL MEETING -- AUGUST 26, 1998
The undersigned appoints WILLIAM W. GEORGE and RONALD E. LUND, and each of them,
as Proxies, each with the power to appoint his substitute, to represent and
vote, as designated below, all shares of the undersigned at the 1998 Annual
Meeting of Shareholders of Medtronic, Inc. at the Medtronic, Inc. Corporate
Center at its Rice Creek facility, 7000 Central Avenue N.E., Minneapolis
(Fridley), Minnesota, at 10:30 a.m., Central Daylight Time, on Wednesday, August
26, 1998, and at any adjournment thereof.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS, MEDTRONIC, INC.
(CONTINUED, AND TO BE SIGNED AND DATED ON OTHER SIDE)
<PAGE>
[LOGO] MEDTRONIC VOTE BY TELEPHONE
QUICK *** EASY *** IMMEDIATE COMPANY #
CALL TOLL FREE *** ON A TOUCH TONE TELEPHONE CONTROL #
1-800-240-6326 -- ANYTIME
Your telephone vote authorizes the named proxies to vote your shares in the
same manner as if you marked, dated, signed and returned your proxy card. The
deadline for telephone voting is noon (ET), August 20, 1998.
AUTOMATED TELEPHONE VOTING INSTRUCTIONS
1. Using a TOUCH-TONE telephone, dial 1-800-240-6326. Please make sure you
stay on the line until you receive a confirmation of your vote.
2. When prompted, enter the 3-digit Company Number located in the box on the
upper right hand corner of the proxy card.
3. When prompted, enter your 7-digit numeric Control Number that follows the
Company Number.
OPTION #1: To vote as the Medtronic, Inc. Board of Directors recommends on
ALL proposals: Press "1" When asked, please confirm your vote by
pressing 1 -- THANK YOU FOR VOTING.
OPTION #2: If you choose to vote on each proposal separately: Press "0" You
will hear these instructions:
Proposal 1: To vote FOR ALL nominees, press "1"; to WITHHOLD FOR
ALL nominees, press "9"; to WITHHOLD FOR AN
INDIVIDUAL nominee, press "0" and listen to the
instructions.
Proposal 2: To vote FOR, press "1"; AGAINST, press "9"; ABSTAIN,
press "0"
When asked, please confirm your vote by pressing "1" -- THANK YOU FOR VOTING.
IF YOU VOTE BY TELEPHONE, DO NOT MAIL BACK YOUR PROXY
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR:
1. Set board size at fourteen members and elect five Class III Directors for
three-year terms:
Nominees: (01) WILLIAM R. BRODY, M.D., PH.D., (02) PAUL W. CHELLGREN,
(03) ARTHUR D. COLLINS, JR., (04) ANTONIO M. GOTTO, JR., M.D. and
(05) THOMAS E. HOLLORAN
[ ] FOR all nominees [ ] WITHHOLD from all nominees
To withhold authority to vote for any nominee(s),
write the number(s) of the nominee(s) in the box to the right. [ ]
2. Approve appointment of Price Waterhouse LLP as independent auditors.
[ ] For [ ] Against [ ] Abstain
[ ] Mark here for address change and note below.
Date _____________________________, 1998
________________________________________
PLEASE DATE AND SIGN ABOVE exactly as
name appears, indicating, if
appropriate, official position or
representative capacity. If stock is
held in joint tenancy, each joint owner
should sign.
MEDTRONIC, INC.
Annual Meeting
Medtronic, Inc.
Corporate Center
Rice Creek Facility
7000 Central Ave N.E.
Minneapolis (Fridley), Minnesota
AUGUST 26, 1998
10:30 A.M., CENTRAL DAYLIGHT TIME
<PAGE>
[LOGO] MEDTRONIC
MEDTRONIC, INC.
ANNUAL MEETING -- AUGUST 26, 1998
The undersigned appoints WILLIAM W. GEORGE and RONALD E. LUND, and each of them,
as Proxies, each with the power to appoint his substitute, to represent and
vote, as designated below, all shares of the undersigned at the 1998 Annual
Meeting of Shareholders of Medtronic, Inc. at the Medtronic, Inc. Corporate
Center at its Rice Creek facility, 7000 Central Avenue N.E., Minneapolis
(Fridley), Minnesota, at 10:30 a.m., Central Daylight Time, on Wednesday, August
26, 1998, and at any adjournment thereof.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS, MEDTRONIC, INC.
(CONTINUED, AND TO BE SIGNED AND DATED ON OTHER SIDE)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR:
1. Set board size at fourteen members and elect five Class III Directors for
three-year terms:
Nominees: (01) WILLIAM R. BRODY, M.D., PH.D., (02) PAUL W. CHELLGREN,
(03) ARTHUR D. COLLINS, JR., (04) ANTONIO M. GOTTO, JR., M.D. and
(05) THOMAS E. HOLLORAN
[ ] FOR all nominees [ ] WITHHOLD from all nominees
To withhold authority to vote for any nominee(s),
write the number(s) of the nominee(s) in the box to the right. [ ]
2. Approve appointment of Price Waterhouse LLP as independent auditors.
[ ] For [ ] Against [ ] Abstain
Date _____________________________, 1998
________________________________________
PLEASE DATE AND SIGN ABOVE exactly as
name appears, indicating, if
appropriate, official position or
representative capacity. If stock is
held in joint tenancy, each joint owner
should sign.
<PAGE>
[LOGO] MEDTRONIC
MEDTRONIC, INC.
ANNUAL MEETING -- AUGUST 26, 1998
The undersigned appoints WILLIAM W. GEORGE and RONALD E. LUND, and each of them,
as Proxies, each with the power to appoint his substitute, to represent and
vote, as designated below, all shares of the undersigned at the 1998 Annual
Meeting of Shareholders of Medtronic, Inc. at the Medtronic, Inc. Corporate
Center at its Rice Creek facility, 7000 Central Avenue N.E., Minneapolis
(Fridley), Minnesota, at 10:30 a.m., Central Daylight Time, on Wednesday, August
26, 1998, and at any adjournment thereof.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS, MEDTRONIC, INC.
(CONTINUED, AND TO BE SIGNED AND DATED ON OTHER SIDE)
<PAGE>
[LOGO] MEDTRONIC
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR:
1. Set board size at fourteen members and elect five Class III Directors for
three-year terms:
Nominees: (01) WILLIAM R. BRODY, M.D., PH.D., (02) PAUL W. CHELLGREN,
(03) ARTHUR D. COLLINS, JR., (04) ANTONIO M. GOTTO, JR., M.D. and
(05) THOMAS E. HOLLORAN
[ ] FOR all nominees [ ] WITHHOLD from all nominees
To withhold authority to vote for any nominee(s),
write the number(s) of the nominee(s) in the box to the right. [ ]
2. Approve appointment of Price Waterhouse LLP as independent auditors.
[ ] For [ ] Against [ ] Abstain
[ ] Mark here for address change and note below.
Date _____________________________, 1998
________________________________________
PLEASE DATE AND SIGN ABOVE exactly as
name appears, indicating, if
appropriate, official position or
representative capacity. If stock is
held in joint tenancy, each joint owner
should sign.
MEDTRONIC, INC.
Annual Meeting
Medtronic, Inc.
Corporate Center
Rice Creek Facility
7000 Central Ave N.E.
Minneapolis (Fridley), Minnesota
AUGUST 26, 1998
10:30 A.M., CENTRAL DAYLIGHT TIME
