<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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
BOSTON SCIENTIFIC CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
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
LOGO
BOSTON SCIENTIFIC CORPORATION
Natick, Massachusetts
April 1, 1997
Dear Fellow Stockholder:
You are cordially invited to attend Boston Scientific Corporation's Annual
Meeting of Stockholders to be held at 10:00 A.M., Eastern Daylight Time, on
Tuesday, May 6, 1997, at the Copley Plaza Hotel, 138 St. James Avenue, Boston,
Massachusetts.
This year you are being asked to elect three directors to the Company's
Board of Directors. Your Board of Directors urges you to read the accompanying
proxy statement and recommends that you vote "FOR" Proposal No. 1.
At the meeting, management will also report on the Company's affairs and an
opportunity will be provided for stockholders to ask questions.
The Board of Directors appreciates and encourages stockholder participation
in the Company's affairs. Whether or not you plan to attend the meeting, it is
important that your shares be represented. Accordingly, we request that you
sign, date and mail the enclosed proxy in the envelope provided at your earliest
convenience.
Thank you for your cooperation.
Very truly yours,
PETE M. NICHOLAS
Chairman and
Chief Executive Officer
<PAGE> 3
LOGO
BOSTON SCIENTIFIC CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Natick, Massachusetts
April 1, 1997
The Annual Meeting of Stockholders of Boston Scientific Corporation will be
held at the Copley Plaza Hotel, 138 St. James Avenue, Boston, Massachusetts, on
Tuesday, May 6, 1997, at 10:00 A.M., Eastern Daylight Time, for the following
purposes:
1. To elect three directors for the ensuing term; and
2. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Stockholders of record at the close of business on March 14, 1997, will be
entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof.
Stockholders are requested to complete, sign, date and return the enclosed
form of proxy in the envelope provided. No postage is required if mailed in the
United States.
By Order of the Board of Directors
PAUL W. SANDMAN
Secretary
<PAGE> 4
LOGO
BOSTON SCIENTIFIC CORPORATION
ONE BOSTON SCIENTIFIC PLACE
NATICK, MASSACHUSETTS 01760
APRIL 1, 1997
------------------------
PROXY STATEMENT
------------------------
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of the common stock, $.01
par value per share ("Common Stock"), of Boston Scientific Corporation (the
"Company") in connection with the solicitation of proxies on behalf of the Board
of Directors of the Company for use at the Annual Meeting of Stockholders to be
held on May 6, 1997, or at any adjournment or postponement thereof, pursuant to
the accompanying Notice of Annual Meeting of Stockholders. The purposes of the
meeting and the matters to be acted upon are set forth in the accompanying
Notice of Annual Meeting of Stockholders. The Board of Directors knows of no
other business that will come before the meeting.
Proxies for use at the meeting will be mailed to stockholders on or about
April 1, 1997, and will be solicited chiefly by mail, but additional
solicitations may be made by telephone or other media by the officers or regular
employees of the Company. The Company may enlist the assistance of brokerage
houses, fiduciaries, custodians and other third parties in soliciting proxies.
All solicitation expenses, including costs of preparing, assembling and mailing
proxy material, will be borne by the Company.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the meeting and a return envelope for the proxy
are enclosed. Stockholders may revoke the authority granted by their execution
of proxies at any time before their effective exercise by filing with the
Secretary of the Company a written revocation or a duly executed proxy bearing a
later date or by voting in person at the meeting. Shares represented by executed
and unrevoked proxies will be voted in accordance with the instructions
specified thereon. Shares represented by executed proxies which abstain or are
withheld from voting on any matter to be acted upon at the meeting will be
considered for the purpose of determining whether a quorum is present at the
meeting, but will not be considered in determining whether such matter is
approved by an affirmative vote of the requisite percentage of the shares voting
on such matter. Similarly, broker non-votes on any matter will be considered for
the purpose of determining whether a quorum is present, but will not be
considered in determining whether such matter is approved by an affirmative vote
of the requisite percentage of shares voting on such matter. If no specific
instructions are given, the proxies intend to vote the shares represented
thereby "For" the Proposal as set forth in the accompanying Notice of Annual
Meeting of Stockholders and in accordance with their best judgment on any other
matters that may properly come before the meeting. The form of proxy will also
serve to instruct the trustee of the Boston Scientific Corporation 401(k)
Savings Plan on how to vote any shares of Common Stock of the Company held
<PAGE> 5
by the Savings Plan. The number of shares allocated to a participant in the
Savings Plan is separately indicated on the form of proxy enclosed.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record at the close of business on March 14, 1997, are
entitled to notice of and to vote at the Annual Meeting or any adjournments or
postponements thereof. The Company had outstanding on March 14, 1997,
178,760,320 shares of Common Stock, each of which is entitled to one vote upon
the matters to be presented at the meeting. The affirmative vote of the holders
of a plurality of the shares of Common Stock present or represented at the
meeting and which have actually voted is required for the election of directors.
The affirmative vote of the holders of a majority of the shares of Common Stock
present or represented at the meeting and which have actually voted is generally
required for the approval of other matters that may properly come before the
meeting.
2
<PAGE> 6
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of February 1, 1997,
regarding the beneficial ownership of the Company's Common Stock of (i) each
person known to the Company to own beneficially more than five percent of the
Company's outstanding Common Stock, one of whom was the chief executive officer
of the Company, at December 31, 1996, (ii) those persons who were, at December
31, 1996, the other four most highly compensated executive officers of the
Company and its subsidiaries whose aggregate cash compensation exceeded
$100,000, and (iii) all present executive officers and directors of the Company
as a group. For comparable information with respect to the directors, see
"PROPOSAL NO. 1 -- ELECTION OF THREE DIRECTORS" on pages 5 through 9. The
Company had outstanding on February 1, 1997, 178,561,641 shares of Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE
OF BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNERSHIP (1) COMMON STOCK
- - ------------------------------------------------------------- ----------------- ------------
<S> <C> <C>
John E. Abele(2) c/o Boston Scientific Corporation One Boston
Scientific Place Natick, MA 01760............................ 14,259,956 8.0%
Scott M. Schooley(3) as Trustee of The Abele Children's
Irrevocable Trust Dated October 29, 1979 c/o Bingham, Dana &
Gould 100 Pearl Street Hartford, CT 06103.................... 18,000,000 10.1%
Pete M. Nicholas(4) c/o Boston Scientific Corporation One
Boston Scientific Place Natick, MA 01760..................... 17,307,622 9.7%
Promerica, L.P.(5) Pete M. Nicholas, General Partner c/o
Bingham, Dana & Gould 100 Pearl Street Hartford, CT 06103.... 16,260,210 9.1%
Scott M. Schooley and N. J. Nicholas, Jr.(6) as Trustees of
The Peter M. Nicholas 1979 Irrevocable Family Trust Dated
October 29, 1979 15 West 53rd Street New York, NY 10019...... 16,007,557 9.0%
Lawrence C. Best(7).......................................... 489,115 *
J. Daniel Cole(8)............................................ 301,398 *
James M. Corbett............................................. 2,336 *
All directors and executive officers as a group (18
persons)(2)(4)(6)(7)(8)(9)................................. 34,423,773 19.3%
</TABLE>
- - ---------------
* Reflects beneficial ownership of less than one percent (1%) of the
outstanding Common Stock of the Company.
3
<PAGE> 7
(1) Beneficial ownership has been computed in accordance with Rule 13d-3(d)(1)
promulgated under the Securities Exchange Act of 1934, as amended. Unless
otherwise indicated, the persons named have sole voting and investment power
over the shares listed.
(2) Excludes 18,000,000 shares of Common Stock held by Scott M. Schooley as
Trustee of The Abele Children's Irrevocable Trust dated October 29, 1979, an
irrevocable trust for the benefit of Mr. Abele's children, 482,400 shares
held by John E. Abele, Mary S. Abele, Alexander T. Abele, Christopher S.
Abele and Jennifer L. Abele as Trustees of The Abele Family Charitable
Trust, an irrevocable charitable trust, and 100,000 shares held by Mary S.
Abele, the spouse of Mr. Abele, with respect to all of which Mr. Abele
disclaims beneficial ownership. Includes 40,000 shares of Common Stock
subject to exercisable options granted pursuant to the Company's 1992
Long-Term Incentive Plan.
(3) Mr. Schooley disclaims beneficial ownership of these shares.
(4) Excludes 16,007,557 shares of Common Stock held by Scott M. Schooley and N.
J. Nicholas, Jr. as Trustees of The Peter M. Nicholas 1979 Irrevocable
Family Trust Dated October 29, 1979, an irrevocable trust for the benefit of
Pete Nicholas' children, and 200,000 shares of Common Stock held by Ruth V.
Lilly Nicholas and N. J. Nicholas, Jr. as Trustees of The Peter M. Nicholas
1993 Irrevocable Family Trust Dated February 1, 1993, an irrevocable trust
for the benefit of Pete Nicholas' children and spouse, with respect to all
of which Mr. Pete Nicholas disclaims beneficial ownership. Also excludes one
share owned by Mr. Pete Nicholas' daughter, with respect to which Mr. Pete
Nicholas disclaims beneficial ownership. Includes 16,260,210 shares of
Common Stock held by Promerica, L.P., a limited partnership of which Mr.
Pete Nicholas is general partner, separately presented above, with respect
to which Mr. Pete Nicholas is deemed to have beneficial ownership, and
40,000 shares subject to exercisable options granted pursuant to the
Company's 1992 Long-Term Incentive Plan.
(5) These shares are also included in the shares held by Pete M. Nicholas,
separately presented above, because as general partner of Promerica, L.P. he
is deemed to have beneficial ownership.
(6) The Peter M. Nicholas 1979 Irrevocable Family Trust Dated October 29, 1979,
for the benefit of Mr. Pete Nicholas' children, consists of three sub-trusts
among which the trust assets are equally divided. Mr. Schooley and Mr. N. J.
Nicholas, Jr. disclaim beneficial ownership of these shares. Excludes 40,000
shares of Common Stock owned by Mr. N. J. Nicholas, Jr., 1,000 shares
subject to exercisable options granted to Mr. N. J. Nicholas, Jr. pursuant
to the Company's Non-Employee Directors' Stock Option Plan and 494 share
equivalents held by Mr. N. J. Nicholas, Jr. pursuant to the Company's
Deferred Compensation Program, as well as 200,000 shares of Common Stock
held by Ruth V. Lilly Nicholas and N. J. Nicholas, Jr. as Trustees of The
Peter M. Nicholas 1993 Irrevocable Family Trust Dated
February 1, 1993, an irrevocable trust for the benefit of Mr. Pete Nicholas'
children and spouse, and 4,800 shares owned by Mr. N. J. Nicholas, Jr.'s
daughter, with respect to all of which Mr. N. J. Nicholas, Jr. disclaims
beneficial ownership.
(7) Includes 470,000 shares subject to exercisable options granted to Mr. Best
pursuant to certain Stock Option Agreements dated June 22, 1992.
(8) Includes 293,216 shares subject to exercisable options granted pursuant to
the Company's 1995 Long-Term Incentive Plan and certain SCIMED Life Systems,
Inc. employee incentive plans which were assumed by the Company in 1995.
(9) Includes 17,076 shares subject to exercisable warrants granted by SCIMED
Life Systems, Inc. to certain non-employee directors and assumed by the
Company in 1995.
4
<PAGE> 8
PROPOSAL NO. 1 -- ELECTION OF THREE DIRECTORS
The Board of Directors of the Company is divided into three classes, as
nearly equal in number as possible. Each class serves for three years, with the
terms of office of the respective classes expiring in successive years. Three
directors are to be elected at the Annual Meeting to serve as Class II directors
until the 2000 Annual Meeting of Stockholders and until their successors shall
have been duly elected and qualified. The Board of Directors proposes that the
nominees described below be elected to serve as Class II directors. Each person
named below is now a director of the Company. In the event any of these nominees
shall be unable to serve as a director, discretionary authority is reserved to
vote for a substitute. The Board of Directors has no reason to believe that any
of these nominees will be unable to serve. N. J. Nicholas, Jr., a Class III
director of the Company, is the brother of Pete M. Nicholas, Founder, Chairman,
President and Chief Executive Officer of the Company.
The directors of the Company, including the nominees for election as Class
II directors at the meeting, their ages, the year in which each first became a
director, their principal occupations or employment during the past five years,
any other public companies of which they are a director and the number and
percentage of shares of Common Stock beneficially owned by each as of February
1, 1997, are as follows:
CLASS I DIRECTORS (TERM EXPIRES 1999)
<TABLE>
<CAPTION>
YEAR AMOUNT AND
FIRST NATURE OF PERCENTAGE OF
BECAME PRINCIPAL OCCUPATION BENEFICIAL COMMON
INCUMBENT AGE DIRECTOR DURING THE LAST FIVE YEARS OWNERSHIP(1) STOCK
- - ------------------------ ---- -------- ----------------------------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Charles J. Aschauer, 68 1992 Retired; Executive Vice President 3,200 *
Jr.................... and Director, 1978-1989, Group Vice
President, 1976-1978, and Corporate
Vice President, 1971-1976, of
Abbott Laboratories (hospital
products business).
Randall F. Bellows...... 68 1995 Retired; Founder and Executive Vice 40,276(2) *
President, 1964-1990, and Director
since 1964, of Cobe Laboratories,
Inc., and Director, SCIMED Life
Systems, Inc., 1992-1995; Mr.
Bellows also serves as a director
of Ultimate Electronics Inc.
Pete M. Nicholas........ 55 1979 Founder, Chairman, President and 17,307,622(3) 9.7%
Chief Executive Officer since 1979
of the Company; Mr. Nicholas also
serves as a trustee of Duke
University.
</TABLE>
5
<PAGE> 9
CLASS II DIRECTORS (TERM EXPIRES 2000)
<TABLE>
<CAPTION>
YEAR AMOUNT AND
FIRST NATURE OF PERCENTAGE OF
BECAME PRINCIPAL OCCUPATION BENEFICIAL COMMON
NOMINEE AGE DIRECTOR DURING THE LAST FIVE YEARS OWNERSHIP(1) STOCK
- - ------------------------ ---- -------- ----------------------------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
John E. Abele........... 60 1979 Director and Founder since 1979, 14,259,956(4) 8.0%
and Treasurer, 1979-1992, of the
Company.
Joel L. Fleishman....... 62 1992 President, The Atlantic 19,750(5) *
Philanthropic Service Company,
Inc., since 1993, and Professor of
Law and Public Policy, together
with other administrative
positions, Duke University, since
1971; Mr. Fleishman is also Vice
Chairman of the Urban Institute.
Lawrence L. Horsch...... 62 1995 Acting Chief Financial Officer, 50,630(6) *
1994- 1995, Chairman of the Board,
1977- 1994, and Director,
1977-1995, SCIMED Life Systems,
Inc.; Chairman since 1990, Eagle
Management & Financial Corp.
(management consulting firm); and
Chairman and Chief Executive
Officer, 1987-1990, Munsingwear,
Inc. (an apparel company that filed
for protection under Chapter 11 of
the Federal Bankruptcy Code in July
1991 and emerged from bankruptcy in
September 1991).
</TABLE>
CLASS III DIRECTORS (TERM EXPIRES 1998)
<TABLE>
<CAPTION>
YEAR AMOUNT AND
FIRST NATURE OF PERCENTAGE OF
BECAME PRINCIPAL OCCUPATION BENEFICIAL COMMON
INCUMBENT AGE DIRECTOR DURING THE LAST FIVE YEARS OWNERSHIP(1) STOCK
- - ------------------------ ---- -------- ----------------------------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Joseph A. Ciffolillo.... 58 1992 Retired; Executive Vice President, 677,975(7) *
Office of the Chairman, February
1995-March 1996, and Executive Vice
President and Chief Operating
Officer, 1989-1995, of the Company;
President, Microvasive, Inc., 1988;
President, Medi-Tech, Incorporated,
1983-1988; Mr. Ciffolillo also
serves as a trustee of Bucknell
University and as a director of
CompDent Corporation (a dental
health maintenance organization),
Innovasive Devices, Inc. (a tissue
repair company) and CardioThoracic
Systems, Inc. (a minimally invasive
coronary artery bypass company).
N. J. Nicholas, Jr...... 57 1994 Private Investor; Co-Chief 41,494(8) *
Executive Officer, Time-Warner,
Inc., 1990-1992; President, Time,
Inc., 1986-1990; Mr. Nicholas also
serves as a director of Xerox
Corporation and Bankers Trust New
York Corporation.
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
YEAR AMOUNT AND
FIRST NATURE OF PERCENTAGE OF
BECAME PRINCIPAL OCCUPATION BENEFICIAL COMMON
INCUMBENT AGE DIRECTOR DURING THE LAST FIVE YEARS OWNERSHIP(1) STOCK
- - ------------------------ ---- -------- ----------------------------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Dale A. Spencer......... 51 1995 Executive Vice President, Office of 833,881(9) *
the Chairman, February 1995-March
1996, of the Company; Chairman of
the Board, 1994-1995, Chief
Executive Officer, 1986-1995, and
President, 1982-1995, SCIMED Life
Systems, Inc.
</TABLE>
- - ---------------
* Reflects beneficial ownership of less than one percent (1%) of the
outstanding Common Stock of the Company.
(1) Beneficial ownership has been computed in accordance with Rule 13d-3(d)(1)
promulgated under the Securities Exchange Act of 1934, as amended. Unless
otherwise indicated, the persons named have sole voting and investment power
over the shares listed.
(2) Includes 22,200 shares of Common Stock subject to exercisable options
granted pursuant to the SCIMED Life Systems, Inc. 1991 Directors' Stock
Option Plan, 17,076 shares of Common Stock subject to exercisable warrants
granted by SCIMED Life Systems, Inc. to certain non-employee directors and
assumed by the Company in 1995, and 1,000 shares of Common Stock subject to
exercisable options granted pursuant to the Company's Non-Employee
Directors' Stock Option Plan.
(3) Excludes 16,007,557 shares of Common Stock held by Scott M. Schooley and N.
J. Nicholas, Jr. as Trustees of The Peter M. Nicholas 1979 Irrevocable
Family Trust Dated October 29, 1979, an irrevocable trust for the benefit of
Pete Nicholas' children, and 200,000 shares of Common Stock held by Ruth V.
Lilly Nicholas and N. J. Nicholas, Jr. as Trustees of The Peter M. Nicholas
1993 Irrevocable Family Trust Dated February 1, 1993, an irrevocable trust
for the benefit of Pete Nicholas' children and spouse, with respect to all
of which Mr. Pete Nicholas disclaims beneficial ownership. Also excludes one
share owned by Mr. Pete Nicholas' daughter, with respect to which Mr. Pete
Nicholas disclaims beneficial ownership. Includes 16,260,210 shares of
Common Stock held by Promerica, L.P., a limited partnership of which Mr.
Pete Nicholas is general partner, with respect to which Mr. Pete Nicholas is
deemed to have beneficial ownership, and 40,000 shares subject to
exercisable options granted pursuant to the Company's 1992 Long-Term
Incentive Plan.
(4) Excludes 18,000,000 shares of Common Stock held by Scott M. Schooley as
Trustee of The Abele Children's Irrevocable Trust dated October 29, 1979, an
irrevocable trust for the benefit of Mr. Abele's children, 482,400 shares
held by John E. Abele, Mary S. Abele, Alexander T. Abele, Christopher S.
Abele and Jennifer L. Abele as Trustees of The Abele Family Charitable
Trust, an irrevocable charitable trust, and 100,000 shares held by Mary S.
Abele, the spouse of Mr. Abele, with respect to all of which Mr. Abele
disclaims beneficial ownership. Includes 40,000 shares subject to
exercisable options granted pursuant to the Company's 1992 Long-Term
Incentive Plan.
(5) Excludes 2,000 shares held by a charitable foundation of which Mr. Fleishman
is president and with respect to which Mr. Fleishman disclaims beneficial
ownership. Includes 2,500 shares subject to exercisable options granted
pursuant to the Company's 1992 Non-Employee Directors' Stock Option Plan.
(6) Includes 46,106 shares of Common Stock subject to exercisable options
granted pursuant to the SCIMED Life Systems, Inc. 1991 Directors' Stock
Option Plan and assumed by the Company in 1995 and 1,000 shares subject to
exercisable options granted pursuant to the Company's Non-Employee
7
<PAGE> 11
Directors' Stock Option Plan, as well as 3,524 shares owned jointly with Mr.
Horsch's wife with respect to which Mr. Horsch shares voting and investment
power.
(7) Excludes 357,460 shares owned by a trust of which Mr. Ciffolillo's spouse
and children are trustees or beneficiaries, with respect to which Mr.
Ciffolillo disclaims beneficial ownership. Includes 137,600 shares subject
to exercisable options granted to Mr. Ciffolillo pursuant to the Company's
1992 and 1995 Long-Term Incentive Plans.
(8) Excludes 16,007,557 shares of Common Stock held by Scott M. Schooley and N.
J. Nicholas, Jr. as Trustees of The Peter M. Nicholas 1979 Irrevocable
Family Trust Dated October 29, 1979, an irrevocable trust for the benefit of
Mr. Pete Nicholas' children, as well as 200,000 shares of Common Stock held
by Ruth V. Lilly Nicholas and N. J. Nicholas, Jr. as Trustees of The Peter
M. Nicholas 1993 Irrevocable Family Trust Dated February 1, 1993, an
irrevocable trust for the benefit of Mr. Pete Nicholas' children and spouse,
and 4,800 shares owned by Mr. N. J. Nicholas, Jr.'s daughter, with respect
to all of which Mr. N. J. Nicholas, Jr. disclaims beneficial ownership.
Includes 1,000 shares of Common Stock subject to exercisable options granted
pursuant to the Company's Non-Employee Directors' Stock Option Plan and 494
share equivalents pursuant to the Company's Deferred Compensation Program.
(9) Includes 409,824 shares of Common Stock subject to exercisable options
granted pursuant to certain SCIMED Life Systems, Inc. employee incentive
plans assumed by the Company in 1995 and 5,000 shares subject to exercisable
options granted pursuant to the Company's 1995 Long-Term Incentive Plan and
excludes 21,856 shares held by Mr. Spencer as custodian for his children and
46,000 shares held by a charitable remainder unitrust, with respect to all
of which Mr. Spencer disclaims beneficial ownership.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors has an Audit Committee, which met four times during
the 1996 fiscal year. The primary functions of the Audit Committee are to
provide assistance to the Board of Directors in fulfilling its responsibilities
relating to corporate accounting and reporting practices and to maintain, by way
of regularly scheduled meetings, a direct line of communication among the
directors, the Company's internal auditors and independent auditors. In
addition, the Audit Committee is responsible for recommending to the Board of
Directors the appointment of the independent auditors, reviewing the performance
of the independent auditors as well as their budgeted and actual fees, and
reviewing the performance of non-audit services by the Company's independent
auditors. Mr. Aschauer, Mr. Fleishman, Mr. Horsch and Mr. N. J. Nicholas, Jr.
serve on the Audit Committee of the Board.
The Board of Directors has a Compensation Committee which met five times
during the 1996 fiscal year. The Compensation Committee's functions are to grant
stock options and other awards to the Company's key employees and otherwise
administer the Company's incentive plans, to review the compensation of the
Company's executive officers and to recommend to the Board of Directors the
salaries and bonuses for the Company's executive officers. Mr. Aschauer, Mr.
Fleishman and Mr. Bellows serve on the Compensation Committee of the Board.
The Company does not have a nominating committee or committee performing a
similar function.
During the 1996 fiscal year, the Board of Directors met eight times, and
acted one time by written consent. Each director attended more than seventy-five
percent of the Board meetings and the meetings of Board committees on which the
director served.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company receive no additional
compensation for serving on the Board of Directors or its committees. Directors
who are not employees receive an annual retainer of $25,000, a
8
<PAGE> 12
meeting fee of $1,000 for each meeting attended, plus reimbursement for
traveling costs and other out-of-pocket expenses incurred in attending such
meetings. Directors who serve on one or more of the committees of the Board of
Directors receive no additional compensation. In addition, pursuant to the
Company's 1992 Non-Employee Directors' Stock Option Plan, each non-employee
director is granted an annual option, generally at each annual meeting of
stockholders of the Company, to purchase 2,000 shares of Common Stock. The
option exercise price is the fair market value on the date of grant. The options
granted become exercisable in three equal annual installments commencing on the
first anniversary of the date of grant and remain exercisable for ten years from
the date of grant. Directors may defer receipt of the annual retainer and
meeting fees pursuant to the Company's Deferred Compensation Program, which may
be invested in Common Stock equivalents as well as other investment options.
ARRANGEMENTS FOR THE ELECTION OF DIRECTORS
In accordance with the terms and conditions of the Agreement and Plan of
Merger, dated November 8, 1994 (the "Merger Agreement"), among the Company, a
wholly owned subsidiary of the Company, and SCIMED Life Systems, Inc.
("SCIMED"), the number of directors of the Company was increased from six to
nine and Lawrence L. Horsch, Randall F. Bellows and Dale A. Spencer were elected
to the Board of Directors of the Company as of February 24, 1995, the effective
date of the merger. The Merger Agreement was approved by the shareholders of the
Company at a Special Meeting of Shareholders held on February 23, 1995.
In connection with the execution of the Merger Agreement, Pete M. Nicholas,
The Peter M. Nicholas 1979 Irrevocable Trust, The Peter M. Nicholas 1993
Irrevocable Family Trust and Promerica, L.P. (a limited partnership of which Mr.
Pete Nicholas is the General Partner), John E. Abele, The Abele Children's
Irrevocable Trust and The Abele Family 1993 Charitable Trust entered into Voting
Agreements with SCIMED, pursuant to which these shareholders agreed to vote
Common Stock beneficially owned by them in favor of the election of Dale A.
Spencer as a Class III director of the Company at the Special Meeting. Common
Stock beneficially owned by these shareholders constituted at that time
approximately 44.4% of the outstanding shares of the Company entitled to vote at
the Special Meeting.
In connection with the execution of the Merger Agreement, Dale A. Spencer,
then Chairman of the Board and Chief Executive Officer of SCIMED, entered into
an Employment Agreement with the Company and SCIMED (the "Spencer Employment
Agreement") which became effective as of February 24, 1995. A summary of the
principal terms and conditions of the Spencer Employment Agreement is set forth
on pages 16 through 18 hereof under the caption "Employment Contracts,
Termination of Employment and Change-in-Control Arrangements".
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 1 TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
EXECUTIVE COMPENSATION
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report by the Compensation Committee required by rules of the
Securities and Exchange Commission to be included in this proxy statement is not
to be considered incorporated by reference in other filings by the Company with
the Securities and Exchange Commission.
9
<PAGE> 13
General
Since its inception, the Company has sought to provide a competitive
compensation program in order to recruit, motivate, reward and retain executive
talent of the caliber necessary to provide long-term growth opportunities for
the Company's stockholders. During 1993, the Compensation Committee and the
Company retained an independent compensation consultant to advise on ways of
assuring that the Company's compensation program was competitive with companies
in the same market for executive talent and provided appropriate linkage to the
creation of stockholder value. During 1995, the Compensation Committee and the
Company asked the independent compensation consultant to review the Company's
executive compensation program in light of the merger with SCIMED Life Systems,
Inc., as well as the expected significant increase in both the size of the
Company and the scope of its operations. In the course of 1996, the Committee
asked the compensation consultant to examine executive compensation among the
reference group and other companies considered comparable in light of the recent
acquisitions.
The consultant's studies assess the competitiveness of the Company's
executive compensation program, comparing base salary, annual variable bonus
pay, long-term performance incentives (principally stock option grants) and
perquisites and executive benefits, with defined industry reference groups,
including selected health industry manufacturers, high technology and
biotechnology companies with similar corporate revenues and employee
populations, and general industrial companies with similar corporate revenues.
From the reference groups, the consultant constructs a composite competitive
rate of compensation for a variety of managerial and executive positions against
which executive compensation levels are compared. The selected health industry
manufacturers reference group consists of certain companies included in the
Standard & Poor's Healthcare (Medical Products and Supplies) Index described in
the Corporate Performance Graph on page 19, as well as other companies
considered comparable.
The Company's executive compensation program is aimed at maintaining the
Company's reputation as an above-average base salary employer for management
talent within a highly competitive industry. It also is aimed at establishing a
well-articulated and measurable annual variable performance-based bonus pay
program which clearly articulates the rationale for bonus payments. In addition,
the program incorporates long-term incentives, principally in the form of
multiple year stock option grants, to attract and retain key individuals. The
overall program reflects a conscious shift toward increasing the portion of
total compensation comprised of variable and incentive pay which are based on
performance goals considered generally above levels typically established by
organizations with which the Company might compete. Generally, this shift is
intended to be accomplished by a combination of limiting annual merit increases
in base salary relative to the Company's reference groups and expanding
opportunities for enhanced variable and incentive compensation.
Executive Base Salary
Salaries paid to executive officers (other than the chief executive
officer) were based upon recommendations of the chief executive officer
presented to the Compensation Committee for approval or modification. The chief
executive officer recommended increases in base salaries of executive officers
only where responsibilities were increased as part of the Company's overall
compensation strategy to increase the percentage of total compensation
represented by incentive compensation while limiting annual merit increases in
base salaries. The Compensation Committee made certain adjustments in base
salaries for those executive officers (other than the chief executive officer)
based on the recommendation of the chief executive officer.
Annual Variable Bonus Pay
The calculation of bonuses for 1996 was based upon the 1995 report of the
independent compensation consultant and the 1996 survey information. The
Company's Performance Bonus Award Program for salaried personnel seeks to
provide pay for performance by linking bonus awards to both Company and
individual
10
<PAGE> 14
performance through a range of award opportunities which depend upon the level
of achievement of annual company and individual objectives. Corporate
achievement is measured against sales and profitability goals through a matrix
of revenue and net income objectives to create a range of bonus award
opportunities. Individual objectives are measured by comparing the performance
of the strategic corporate functions for which each executive officer is
responsible against the business plan of the Company. Generally, annual variable
bonus pay at the executive level is heavily weighted toward overall corporate
performance in accordance with the Committee's belief that a principal function
of executive personnel is to increase overall shareholder value. Corporate goals
for 1996 were intended to be very aggressive and to provide for a limited degree
of flexibility. The Company exceeded the Performance Bonus Award Program revenue
target and fell short of the net income target for 1996. In addition, the
Company performed well relative to its major competitors, the companies included
in the Standard & Poor's Healthcare (Medical Products and Supplies) Index, and
the healthcare industry as a whole. Bonus awards to executive officers approved
by the Committee reflected these achievements, based on the pre-established
matrix for bonus award opportunities.
Long Term Incentives
The Company's broad-based stock option program is intended to attract,
retain and motivate key employees for the long term. The Company has sought to
coordinate and strengthen its stock incentive program in light of its recent
acquisitions and mergers to eliminate conflicts among the various programs
previously in place and to establish common objectives for all eligible
employees. The Compensation Committee has approved, upon management
recommendation, option grants deep into the organization and across businesses
in amounts appropriate for each individual's level of responsibility and ability
to affect overall corporate objectives. Options are typically granted at fair
market value as of the date of grant and vest over a period of five years. They
are exercisable until the tenth anniversary of the date of grant or until the
expiration of various limited time periods following termination of employment.
Based on the structure established for grants throughout the Company,
options to purchase shares of common stock were granted to each of the executive
officers of the Company in 1995 and to a newly hired executive officer in 1996.
Because of the significant stock option grants made to executive officers in
1995, no other options to purchase shares of Common Stock of the Company were
granted to executive officers in 1996.
Retention Agreements
In May of 1996, the Compensation Committee recommended to the Board of
Directors of the Company, and the Board approved, retention agreements with key
executives of the Company, including the Named Officers ("Retention
Agreements"). The Committee concluded, after consultation with independent
compensation consultants and outside counsel, and the Board concurred, that (i)
entering into retention agreements providing reasonable compensation and
benefits for key executives upon a change in control of the Company would
enhance the loyalty and morale of those executives if the potential for such a
change in control were to exist, thus reducing the risk of a depletion in the
Company's human resource capital, increasing the commitment of those executives
to the Company's best interests, and preserving and enhancing the value of the
Company and its business under the circumstances of a potential change in
control, and (ii) the practice of entering into retention agreements providing
benefits and compensation to key executives upon a change in control is so
prevalent among large United States employers that it is in the Company's best
interests to enter into such agreements with its own key executives in order to
offer competitive employment conditions that would enable the Company to attract
and retain the most talented persons in key executive positions. The Retention
Agreements provide for obligations and benefits generally typical for change in
control agreements of this sort and are discussed on pages 16 through 18 of this
Proxy Statement under the caption "Employment Contracts, Termination of
Employment and Change-in-Control Arrangements".
11
<PAGE> 15
Chief Executive Officer's Compensation
As of January 1, 1996, the Compensation Committee established base salaries
for all executive officers, including the chief executive officer, based on 1995
salary levels and certain increases in executive responsibility, but without
merit increases as a part of the overall program to limit annual merit increases
in base salary. The base salary and bonus opportunity of the chief executive
officer were increased modestly for 1996 to reflect the significantly broader
responsibilities assigned to the chief executive officer as a result of the
strategic initiatives put into place in 1995 and anticipated for 1996. Near the
conclusion of the fiscal year, the Compensation Committee approved bonus awards
for the executive officers. The bonus paid to the chief executive officer
reflects the Company's achievements relative to plan and relative to its major
competitors and compares favorably with survey information provided by the
Company's compensation consultant relative to variable compensation paid to
other similarly situated chief executive officers.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the corporation's chief executive officer and four other most highly
compensated executive officers. Qualifying performance-based compensation is not
subject to the deduction limit if certain requirements are met. In 1996, the
Company modified certain portions of the performance-based components of the
compensation paid to its executive officers in a manner intended to satisfy
these requirements without negatively affecting the Company's overall
compensation strategy. One example of the Company's efforts to comply with the
statute in those circumstances where such compliance can be achieved consistent
with the Company's overall compensation philosophy is the amendment to the
Company's 1995 Long-Term Incentive Plan, approved by the Board of Directors and
shareholders of the Company in 1996, limiting aggregate Awards to individual
executive officers. For 1996, the Company elected to implement the compensation
and performance bonus award program described above taking into account the
limitations imposed by Section 162(m) but without specific attempts to comply
with the statute.
Members of the Compensation
Committee
CHARLES J. ASCHAUER, JR., Chairman
JOEL L. FLEISHMAN
RANDALL F. BELLOWS
12
<PAGE> 16
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual
compensation paid by the Company and its subsidiaries for services rendered in
all capacities for the fiscal years ended December 31, 1996, 1995 and 1994, by
those persons who were, at December 31, 1996, (i) the chief executive officer
and (ii) the other four most highly compensated (based on eligible salary and
bonus) executive officers of the Company and its subsidiaries whose aggregate
cash compensation exceeded $100,000 (collectively, the "Named Officers").
Pursuant to the rules and regulations promulgated under the Securities Exchange
Act, columns otherwise required by a table have been omitted if there has been
no compensation awarded to, earned by or paid to any of the Named Officers
required to be reported in that column in any fiscal year covered by that table.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
----------------------
SHARES
ANNUAL COMPENSATION(1) UNDERLYING
NAME AND ---------------------------- STOCK STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(2) AWARDS(3) OPTIONS COMPENSATION(4)
- - ---------------------------------------- ---- -------- -------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Pete M. Nicholas........................ 1996 $650,000 $500,000 $ 0 0 $ 22,260
Founder, Chairman, President 1995 $620,833 $430,000 $315,035 250,000 $ 19,984
and Chief Executive Officer 1994 $475,000 $265,000 $ 0 0 $ 18,042
John E. Abele........................... 1996 $475,000 $240,000 $ 0 0 $ 31,760
Director and Founder 1995 $475,000 $215,650 $ 35 0 $ 27,434
1994 $475,000 $265,000 $ 0 0 $ 24,092
Lawrence C. Best........................ 1996 $350,000 $225,000 $ 0 0 $ 2,139
Senior Vice President -- 1995 $344,167 $180,000 $225,035 200,000 $ 4,008
Finance & Administration and 1994 $315,000 $185,000 $ 0 0 $ 5,004
Chief Financial Officer
J. Daniel Cole(5)....................... 1996 $425,000 $210,000 $ 0 0 $ 21,010
Senior Vice President and 1995 $403,939 $215,000 $225,035 200,000 $ 166,386
Group President -- Vascular Businesses 1994 -- -- -- -- --
James M. Corbett(6)..................... 1996 $277,500 $200,000 $ 0 0 $ 3,972
Senior Vice President and 1995 $245,378 $200,000 $ 35 110,000 $123,740
President -- International 1994 -- -- -- -- --
</TABLE>
- - ---------------
(1) The Company provides executive officers an executive benefit package, in
addition to regular employee benefits such as contributory health insurance,
consisting of (i) supplemental term life insurance and (ii) an annual
allowance in the amount of $25,000 for other benefits such as company cars,
medical examinations and financial, estate and tax planning services. At the
initiation of the program in 1994, the Company paid each executive officer
the amount of $5,000 for prior executive benefits personally incurred. In
1996 and 1995, the Company paid $4,215 and $4,700, respectively, for
transportation services as an executive benefit for Mr. Pete Nicholas and in
1995 provided Mr. Corbett, prior to his becoming an executive officer, an
auto allowance of approximately $7,400.
(2) Includes awards aggregating approximately $650 in 1995 for the issuance of
patents in the name of Mr. Abele pursuant to an established employee
recognition program.
(3) In 1995, the Company issued with restriction an aggregate of 24,500 shares
of Common Stock (having a value on the date of issuance of $45.00 per share)
to certain executive officers of the Company (including 7,000 shares to Mr.
Pete Nicholas and 5,000 shares to each of Messrs. Best and Cole) in
recognition of their significant contribution to the consummation of the
Company's mergers and acquisitions publicly announced in 1995. The
restrictions lapsed on January 22, 1996, the closing date of the merger with
EP
13
<PAGE> 17
Technologies, Inc. Also in 1995, the Company issued without restriction one
share of Common Stock (having a value on the date of issuance of
approximately $35.00) to each employee of record as of June 1, 1995.
(4) Reflects for 1996 the dollar value of term life insurance premiums paid for
each of the Named Officers in the amount of $972 on behalf of Messrs. Abele,
Best, Cole and Nicholas and $898 on behalf of Mr. Corbett, supplemental term
life insurance premiums paid on behalf of Mr. Nicholas and Mr. Abele in the
amounts of $21,288 and $30,788, respectively, principal forgiveness, tax
effect of the forgiveness and imputed interest in the amount of $17,038
under a loan extended to Mr. Cole to offset a loss on the sale of his home
incurred in connection with his relocation to Minnesota in 1993 and employer
contributions to the Company's 401(k) Savings Plan on behalf of each of Mr.
Best, Mr. Cole and Mr. Corbett in the amount of $1,167, $3,000 and $3,000,
respectively. Reflects for 1995 the dollar value of term life insurance
premiums paid for each of the Named Officers in the amounts of $1,296 on
behalf of Messrs. Nicholas and Abele, $1,008 on behalf of Mr. Best, $192 on
behalf of Mr. Corbett and $1,224 on behalf of Mr. Cole, supplemental term
life insurance premiums paid on behalf of Mr. Nicholas and Mr. Abele in the
amounts of $18,688 and $26,138, respectively, principal forgiveness, tax
effect of the forgiveness and imputed interest in the amount of $17,817
under a loan extended to Mr. Cole to offset a loss on the sale of his home
incurred in connection with his relocation to Minnesota in 1993 and employer
contributions to the Company's 401(k) Savings Plan on behalf of each of Mr.
Best, Mr. Corbett and Mr. Cole in the amount of $3,000, $2,700 and $2,700,
respectively. In 1995, the Company reimbursed Messrs. Cole and Corbett for
expenses incurred in connection with their relocation to Massachusetts in
the amount of $138,105 and $120,848, respectively.
(5) J. Daniel Cole became an executive officer of the Company in 1995 in
connection with the merger with SCIMED Life Systems, Inc. As of December 31,
1996, Mr. Cole no longer serves as an executive officer of the Company.
(6) James M. Corbett joined the Company in 1995 in connection with the merger
with SCIMED Life Systems, Inc. and became an executive officer in 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No options to purchase the Company's Common Stock or stock appreciation
rights were granted to the five Named Officers during the fiscal year ended
December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth information with respect to options to
purchase the Company's Common Stock exercised by the Named Officers during the
fiscal year ended December 31, 1996 and unexercised options to purchase the
Company's Common Stock granted in prior years under the 1995 Long-Term Incentive
Plan, 1992 Long-Term Incentive Plan, certain SCIMED Life Systems, Inc. employee
incentive plans assumed by the Company or written agreement to the five Named
Officers and held by them at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1996(1) AT DECEMBER 31, 1996(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - --------------------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Pete M. Nicholas........... 65,000(3) 2,627,500 40,000 345,000 1,865,000 13,061,250
John E. Abele.............. 40,000(3) 1,865,000 40,000 120,000 1,935,000 5,805,000
Lawrence C. Best........... 0 0 470,000 480,000 22,976,250 20,692,500
J. Daniel Cole............. 0 0 293,216 180,000 14,252,523 5,805,000
James M. Corbett........... 11,000 233,750 0 99,000 0 3,192,750
</TABLE>
14
<PAGE> 18
- - ---------------
(1) All options may be exercised only so long as employment continues or within
various limited time periods following termination of employment (such time
periods depending upon the circumstances of termination), to the extent then
exercisable or on such accelerated basis as the Committee may determine at
or after grant. Except as described in the paragraph entitled "Options
Vesting Upon Change in Control" below, in the event of a "change in control"
of the Company, any option granted to executive officers under the 1992
Long-Term Incentive Plan not previously exercisable and vested will become
fully vested and exercisable and the value of such option will be cashed out
(other than in certain transactions accounted for as a pooling of interests)
and any options granted under the 1995 Long-Term Incentive Plan not
previously exercisable and vested will be automatically converted into an
option or other award which covers shares of stock or other securities
equivalent in kind and value to the option held as if exercised immediately
prior to the change in control. In the event of a merger, consolidation or
substantial asset sale where the Company is not the surviving entity, Mr.
Best's initial stock option agreements authorize the Board of Directors to
either make his options exercisable in full prior to a change of control or
to have the surviving corporation grant replacement options. As described in
the paragraph entitled "Options Vesting Upon Change in Control" below,
unexercisable options granted to Mr. Cole became exercisable pursuant to the
terms of a Change in Control Employment Agreement with Mr. Cole assumed by
the Company in connection with the SCIMED merger. Unless otherwise
indicated, all unexercisable options vest over a period of five years and
may be exercised until the tenth anniversary of the date of grant. Payment
of the exercise price and any required tax withholding may be satisfied in
cash or by "cashless" exercise through the surrender of shares of Common
Stock.
(2) Reflects the difference between the exercise price per share and the last
reported sales price ($60.00) of the Company's Common Stock on The New York
Stock Exchange on December 31, 1996, the last trading day of 1996,
multiplied by the applicable number of shares underlying the options.
(3) Messrs. Nicholas and Abele continue to hold the shares of Common Stock
received upon exercise of these stock options.
OPTIONS VESTING UPON CHANGE IN CONTROL
As described in footnote 1 to the table entitled "Aggregated Option/SAR
Exercises in Last Fiscal Year and Year-End Option/SAR Values" above, under
certain circumstances all stock options granted executive officers under (i) the
1992 Long-Term Incentive Plan, including those granted to the Named Officers,
become immediately vested and exercisable in full in the event of a "change in
control" of the Company, as defined in the 1992 Long-Term Incentive Plan, and
the value of all outstanding stock options will be cashed out (other than in
certain transactions accounted for as a pooling of interests) and (ii) the 1995
Long-Term Incentive Plan, including those granted to the Named Officers, will,
become immediately exercisable and be automatically converted into an option or
other award which covers shares of stock or other securities equivalent in kind
and value to the option held as if exercised immediately prior to the change in
control. In the event of a merger, consolidation or substantial asset sale where
the Company is not the surviving entity, Mr. Best's initial stock option
agreements authorize the Board of Directors to either make his options
exercisable in full prior to a change of control or to have the surviving
corporation grant replacement options. Pursuant to a Change in Control
Employment Agreement assumed by the Company in connection with the SCIMED
merger, options to purchase Common Stock held by Mr. Cole became immediately
exercisable upon a "Change in Control" as defined in the agreement and remain
exercisable until expiration according to the terms of the individual option
agreements.
15
<PAGE> 19
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former or current officer or
employee of the Company or any of its subsidiaries. To the Company's knowledge,
there were no other relationships involving members of the Committee or other
directors of the Company requiring disclosure in this Proxy Statement.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Lawrence C. Best serves as Senior Vice President -- Finance and
Administration and Chief Financial Officer of the Company pursuant to a letter
agreement dated June 22, 1992. The agreement establishes the principal
responsibilities of Mr. Best and provides for minimum annual base salary of
$300,000 and minimum annual bonus of $25,000. In addition, the agreement
provides for the grant of stock options to Mr. Best generally consistent with
the terms of the Company's 1992 Long-Term Incentive Plan but providing for
accelerated vesting upon termination without cause or following a material
reduction in position, salary or responsibilities. Mr. Best is entitled to
receive as annual retirement benefits $150,000 commencing at age 58 and
continuing for not more than twenty years. The Company, however, will have no
obligation to pay annual retirement benefits if the realizable value of
applicable stock options exceeds the gross realizable value of the retirement
benefits. The agreement provides that should Mr. Best's employment be terminated
without cause or following a material reduction prior to the fifth anniversary
of his initial employment, the Company will continue to pay to Mr. Best his
annual base salary for two years.
J. Daniel Cole served through December 31, 1996 as Senior Vice President
and Group President -- Vascular Businesses of the Company pursuant to an
executive acknowledgment issued by the Company in connection with the execution
of the Merger Agreement with SCIMED Life Systems, Inc. ("SCIMED"). The
acknowledgment provides Mr. Cole an annual base salary of $425,000, a 40%
performance bonus, at least $25,000 per annum in executive benefits and a
relocation allowance for his move to the Boston area. Boston Scientific also
acknowledged to Mr. Cole that any diminution of his respective responsibilities,
duties or compensation from that described above would constitute "Good Reason"
under his Change in Control Employment Agreement and would thereby entitle Mr.
Cole to terminate his employment and receive the benefits described below.
The Company also assumed a Change in Control Employment Agreement that
provides certain benefits to Mr. Cole in the event that during the 24-month
period following a "Change in Control" (as defined) (i) Mr. Cole's employment is
terminated for any reason other than for Cause (as defined) or (ii) Mr. Cole
terminates his employment for Good Reason (as defined). Under the Change in
Control Employment Agreement, "Good Reason" generally means the occurrence of
any one of the following events without Mr. Cole's consent: (i) a diminution of
duties or responsibilities or the assignment of duties or responsibilities that
are not reasonably commensurate with the executive's status or responsibilities;
(ii) a reduction in the executive's annual base salary; (iii) a requirement that
the executive be based at any place other than a location at which SCIMED, at
any time after the change in control, has a significant corporate facility; (iv)
the failure to (x) continue in effect any material compensation or employee
benefit plan or arrangement in which the executive was participating (unless
such plan is replaced with a plan that provides substantially equivalent
compensation or benefits to the executive) or (y) provide the executive with
compensation and benefits in the aggregate at least equal to those provided for
under each other employee benefit plan, program and practice in which the
executive was participating, or (v) the failure to obtain a satisfactory
assumption of the Change in Control Employment Agreement from any successor.
Under the Change in Control Employment Agreement, "Cause" generally means (i)
conviction of any criminal violation involving any felony or (ii) the
executive's intentionally and continually failing substantially to perform his
reasonably assigned duties or intentionally engaging in conduct that is
demonstrably and materially injurious to the
16
<PAGE> 20
Company. The Change in Control Employment Agreement does not provide severance
benefits in the event of Mr. Cole's termination of employment by virtue of
death, disability or retirement.
The benefits payable upon termination after a change in control under the
Change in Control Employment Agreement include payments (within 10 business days
of termination) equal to two times Mr. Cole's base salary plus two times the
executive's target bonus and car allowance, plus all accrued but unpaid salary
and bonus through the date of termination. Other benefits include continuation
of life insurance and medical, dental and disability benefits for 24 months. All
amounts payable under the Change in Control Employment Agreement are subject to
the limitation that no amounts that would constitute an excess parachute payment
(within the meaning of Section 280F(b) of the Code) may be paid.
In addition, during 1995 the Company extended Mr. Cole a loan bearing
interest at then prevailing market rates in the principal amount of $208,369 to
facilitate Mr. Cole's relocation to Massachusetts.
Dale A. Spencer, a director of the Company and retired Executive Vice
President, Office of the Chairman, of the Company, and formerly Chairman of the
Board and Chief Executive Officer of SCIMED, in connection with the execution of
the Merger Agreement, entered into an Employment Agreement with the Company and
SCIMED (the "Spencer Employment Agreement") which became effective as of
February 24, 1995. Under the Spencer Employment Agreement, Mr. Spencer received
certain change-in-control payments in 1995 in the amount of approximately $1.6
million.
The Spencer Employment Agreement has been amended to change Mr. Spencer's
employment status, effective March 1, 1996, to that of a regular part-time
employee reporting to the Chief Executive Officer of the Company or his
designee. Mr. Spencer will be assigned such duties and responsibilities as are
consistent with Mr. Spencer's expertise, experience and previous services to the
Company. On March 1, 1998 or upon Mr. Spencer's earlier election, Mr. Spencer
will become a consultant to the Company. Mr. Spencer's obligations during the
consulting period will be to make himself available to render such consulting
and advisory services as may be reasonably requested by the Board of Directors
or the Chief Executive Officer of the Company. The consulting period will
continue until March 1, 2001, except that the consulting period will be subject
to automatic one-year extensions unless either Mr. Spencer or the Company elects
not to extend the consulting period. Notwithstanding the foregoing, Mr. Spencer
may terminate the Spencer Employment Agreement for any reason and the Company
may terminate the Spencer Employment Agreement for cause.
During the period of regular part-time employment and of consultancy, Mr.
Spencer will be entitled to compensation equal to his base salary as a full-time
employee, and will be entitled to continued medical, dental, life insurance and
disability benefits, but will not be entitled to receive a bonus.
Under the Spencer Employment Agreement, so long as Mr. Spencer is an
employee or consultant of the Company, he will be subject to various
nonsolicitation and noncompetition restrictions, and, during that period and for
two years thereafter, Mr. Spencer will be subject to a confidentiality
undertaking with the Company.
In addition, in connection with the Spencer Employment Agreement, SCIMED
paid to Mr. Spencer $10,000 as reimbursement for his reasonable legal expenses
incurred in connection with the negotiation of the Spencer Employment Agreement.
In May of 1996, the Compensation Committee recommended to the Board of
Directors of the Company, and the Board approved, retention agreements with key
executives of the Company including the Named Officers ("Retention Agreements").
The Retention Agreements provide for severance benefits in the event
employment with the Company is terminated without Cause by the Company or by the
executive for Good Reason within two years following a Change in Control, as
well as certain nonsolicitation and confidentiality obligations. For purposes of
the
17
<PAGE> 21
Retention Agreements, Cause generally means the willful engagement of criminal
and fraudulent acts or gross misconduct that is demonstrably or materially
injurious to the Company, monetarily or otherwise; Good Reason generally means,
the happening of any of the following: (i) a meaningful and detrimental
alteration in the executive's position or in the nature or status of the
executive's responsibilities; (ii) a reduction by the Company in the executive's
annual base salary; a failure by the Company to increase the executive's salary
at a rate commensurate with that of other key executives of the Company; a
reduction in the executive's annual bonus (expressed as a percentage of base
salary) below the target in effect for the executive immediately prior to the
Change in Control or any adverse change in the executive's long-term incentive
opportunities in comparison to those in effect prior to the Change in Control;
(iii) the relocation of the office of the Company where the executive was
employed at the time of the Change in Control (the "CIC Location") to a location
which is more that 50 miles away from the CIC Location or the Company's
requiring the executive to be based more than 50 miles away from the CIC
Location; (iv) the failure by the Company to continue in effect any incentive or
deferred compensation plan in which the executive participates; (v) the failure
by the Company to continue to provide equivalent benefits; (vi) the failure of
the Company to pay the executive any amounts of salary, bonus or expense
reimbursement then owed to the executive; (vii) the failure of the Company to
obtain a satisfactory agreement from any successor to assume and agree to
perform the Retention Agreement; and (viii) any purported termination of the
executive's employment which is not effected pursuant to a proper notice of
termination; and Change in Control generally means the happening of any of the
following: (a) the acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the selection of directors (the "Company Voting Securities"); (b)
individuals who, as of the effective date of the initial registration of an
offering of stock under the Securities Act of 1933, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; (c) approval by the shareholders of
the Company of a reorganization, merger or consolidation (a "Business
Combination"), in each case, with respect to which all or substantially all of
the individuals and entities who were the respective beneficial owners of the
Outstanding Company Common Stock and Company Voting Securities immediately prior
to such Business Combination do not beneficially, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination in substantially the same proportion as
their ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and Company Voting Securities, as the case may
be; or (d) a complete liquidation or dissolution of the Company or a sale or
other disposition of all or substantially all of the assets of the Company.
Severance benefits include payments equal to three times the sum of an
executive's base salary plus the greater of the most recent bonus paid or the
current year target bonus to be paid assuming all performance targets had been
achieved, continuation of health and other welfare benefits for three years,
legal fees and expenses incurred to contest a termination or to enforce the
terms of the Retention Agreement, and a gross-up payment to offset any excise
tax imposed by Section 4999 of the Internal Revenue Code. The Retention
Agreements also provide for an amendment to the Company's 1992 Long-Term
Incentive Plan to provide for the rollover of options in certain transactions
accounted for as a pooling of interests rather than their being cashed out, and
the acknowledgment that options granted under the Company's 1995 Long-Term
Incentive Plan would become immediately exercisable upon a Change in Control.
18
<PAGE> 22
CORPORATE PERFORMANCE GRAPH
Set forth below is a line graph comparing (i) the cumulative total
stockholder return on the Company's Common Stock, with (ii) the cumulative
annual total return of the Standard & Poor's 500 Stock Index and the Standard &
Poor's Healthcare (Medical Products and Supplies) Index for the period beginning
May 19, 1992 (the date the Company's Common Stock began trading on the New York
Stock Exchange) and ending December 31, 1996. The comparison assumes $100 was
invested on May 19, 1992 in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends. The Company was added
to the Standard & Poor's 500 Stock Index commencing in February 1995.
<TABLE>
<CAPTION>
S&P HEALTHCARE
(MEDICAL PRODUCTS
MEASUREMENT PERIOD BOSTON SCIENTIFIC AND SUPPLIES) S&P 500 STOCK
(FISCAL YEAR COVERED) CORPORATION INDEX INDEX
<S> <C> <C> <C>
MAY 19, 1992 100.00 100.00 100.00
DEC. 31, 1992 122.79 99.81 107.02
DEC. 31, 1993 73.53 76.12 117.81
DEC. 31, 1994 102.20 90.26 119.36
DEC. 31, 1995 289.70 152.56 164.22
DEC. 31, 1996 352.93 175.09 201.92
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its executive officers and any persons holding more than ten percent of the
Company's Common Stock are required to report their ownership of the Company's
Common Stock and any changes in that ownership to the Securities and Exchange
Commission. Specific due dates for these reports have been established and the
Company is required to report in this Proxy Statement any failure to file by
these dates during 1996. To the best knowledge of the Company, all of these
filing requirements were timely satisfied by its directors, officers and ten
percent holders, except as follows: Mr. Spencer received shares of the Company's
Common Stock in exchange for shares of EP Technologies, Inc. which were reported
in the month the share certificates were received rather than in the month the
merger of EP Technologies, Inc. with a subsidiary of the Company became
effective. In making these statements, the Company has relied upon the written
representations of its directors, officers and ten percent holders and copies of
the reports that have been filed with the Commission.
19
<PAGE> 23
CERTAIN TRANSACTIONS
The Company leases the property at 135 Forbes Boulevard, Mansfield,
Massachusetts, from the 135 Forbes Boulevard Trust, of which Mr. Pete Nicholas
is the sole trustee and Mr. Pete Nicholas and his wife are the beneficiaries.
During 1996, the Company paid an aggregate of $442,000 to 135 Forbes Boulevard
Trust in rental payments. The Company guaranteed the obligations of the 135
Forbes Boulevard Trust under an industrial development loan due February 2001
issued with respect to the property. As of December 31, 1996, the outstanding
principal balance of the industrial development loan was approximately $300,000.
In July 1985, the Company entered into a license agreement with IABP
Corporation ("IABP") pursuant to which the Company was granted an exclusive
license for certain intra aortic balloon pump and catheter technology. Mr. Pete
Nicholas and Mr. John Abele, together with Mr. Peter Feldman and Mr. N. J.
Nicholas, Jr., who are also trustees of a trust for the benefit of the children
of Mr. Pete Nicholas, hold a majority equity interest in IABP. In consideration
of the license, the Company pays royalties to IABP on sales of covered products.
Royalties paid to IABP for 1996, 1995 and 1994 were $239,000, $380,000 and
$360,000, respectively.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP has been the independent auditors for the Company and
will serve in that capacity for the 1997 fiscal year. A representative of Ernst
& Young LLP will be present at the meeting, will have an opportunity to make a
statement if the representative desires to do so and will be available to
respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
All stockholder proposals that are intended to be presented at the 1998
Annual Meeting of Stockholders of the Company must be received by the Company
not later than December 1, 1997, for inclusion in the Board of Directors' proxy
statement and form of proxy relating to the meeting.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
meeting. However, if any other business properly comes before the meeting, it is
the intention of the persons named in the enclosed proxy to vote on such matters
in accordance with their best judgment.
The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend the
meeting, please sign the proxy and return it in the enclosed envelope.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) WILL
BE SENT WITHOUT CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM: BOSTON
SCIENTIFIC CORPORATION, ATTN: INVESTOR RELATIONS, ONE BOSTON SCIENTIFIC PLACE,
NATICK, MASSACHUSETTS 01760.
20
<PAGE> 24
[Boston Scientific Corporation Logo]
DETACH HERE
Boston Scientific Corporation
This Proxy is Solicited on Behalf of the Board of Directors
P The undersigned hereby appoints PETE M. NICHOLAS, PAUL W. SANDMAN and
LAWRENCE J. KNOPF, and each of them acting solely, proxies, with full power
R of substitution and with all powers the undersigned would possess if
personally present, to represent and vote, as designated below, all of the
O shares of Common Stock, par value $0.01 per share, and, if applicable,
hereby directs the trustee of the employee benefit plan shown on the
X reverse side hereof to vote all of the shares of Common Stock allocated to
the account of the undersigned, of Boston Scientific Corporation (the
Y "Company") which the undersigned is entitled to vote at the Annual Meeting
of Stockholders of the Company to be held at the Copley Plaza Hotel, 138
St. James Avenue, Boston, Massachusetts on Tuesday, May 6, 1997, at 10:00
A.M. (Eastern Daylight Time), and at any adjournment or postponement
thereof, upon the matters set forth on the reverse side hereof and
described in the Notice of Annual Meeting of Stockholders and accompanying
Proxy Statement and upon such other matters as may properly be brought
before such meeting.
The undersigned hereby revokes any proxy previously given and
acknowledges receipt of the Notice of and Proxy Statement for the Annual
Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSAL.
-----------
(PLEASE SIGN AND DATE ON REVERSE SIDE SEE REVERSE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE) SIDE
-----------
<PAGE> 25
[Boston Scientific Corporation Logo]
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE
---------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL
---------------------------------------------------------
<TABLE>
<S> <C>
1. Election of Directors. 2. To transact such other business as may properly come
before the meeting or any adjournment or postponement
NOMINEES: John E. Abele, Joel L. Fleishman and thereof.
Lawrence L. Horsch
FOR [ ] WITHHELD [ ]
ALL FROM ALL
NOMINEES NOMINEES
[ ]
--------------------------------------------
For all nominees except as noted above
MARK HERE [ ] MARK HERE [ ]
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
Sign exactly as name appears on this Proxy. If the shares are
registered in the names of two or more persons, each should sign.
Executors, administrators, trustees, partners, custodians, guardians,
attorneys and corporate officers should add their full titles.
Signature: Date: Signature: Date:
---------------------------- ------------------ -------------------------- -------------------
</TABLE>
