<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Guidant Corporation
- --------------------------------------------------------------------------------
(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 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:
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Notes:
<PAGE>
[LOGO]
Guidant Corporation
111 Monument Circle, 29th Floor
Indianapolis, Indiana 46204-5129
March 27, 1997
Dear Shareholder:
It is our pleasure to extend to you a cordial invitation to attend the 1997
Annual Meeting of Shareholders of Guidant Corporation on Monday, May 19, 1997.
The meeting will be held at the Indiana Repertory Theatre, 140 West Washington
Street, Indianapolis, Indiana, at 1:00 p.m. (local time). Please complete and
return the enclosed Request for Admittance Card if you plan to attend the
meeting. An admittance card will be sent to shareholders who return the reply
card.
Your vote on these matters is very important. We urge you to sign, date and
return the enclosed proxy card in the envelope provided in order to be certain
your shares are represented at the meeting, even if you plan to attend the
meeting.
The Notice of Annual Meeting of Shareholders and the Proxy Statement
accompanying this letter describe the business we will consider at the
meeting.
We look forward to seeing you at the meeting in Indianapolis.
James M. Cornelius Ronald W. Dollens
Chairman of the Board of Directors President and Chief Executive
Officer
<PAGE>
GUIDANT CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 1997
----------------
The Annual Meeting of Shareholders of Guidant Corporation will be held at
the Indiana Repertory Theatre, 140 West Washington Street, Indianapolis,
Indiana, on Monday, May 19, 1997, at 1:00 p.m. (local time), for the following
purposes:
1. To elect three directors of the Company, each for a three-year term;
2. To ratify the appointment by the Board of Directors of Ernst & Young LLP
as independent auditors for the year 1997; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Holders of common stock of record at the close of business on March 18, 1997
are entitled to notice of and to vote at the Annual Meeting. If you plan to
attend the meeting, please complete the enclosed Request for Admittance Card
and return it to the Company. An admittance card will be mailed to you.
By order of the Board of Directors,
J. B. King
Secretary
March 27, 1997
Indianapolis, Indiana
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING, OR
IF YOU DO PLAN TO ATTEND BUT WISH TO VOTE BY PROXY, PLEASE DATE, SIGN AND
PROMPTLY MAIL THE ENCLOSED PROXY IN THE RETURN ENVELOPE PROVIDED.
DIRECTIONS TO THE INDIANA REPERTORY THEATRE AND INFORMATION CONCERNING PARKING
WILL BE SENT TO SHAREHOLDERS WHO REQUEST AN ADMITTANCE CARD.
<PAGE>
GUIDANT CORPORATION
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 1997
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Guidant Corporation (the "Company") of proxies to be
voted at the Annual Meeting of Shareholders to be held on Monday, May 19,
1997, and at any adjournment thereof.
The accompanying proxy may be revoked at any time before it is exercised by
giving a later proxy, notifying the Secretary of the Company in writing or
voting in person at the Annual Meeting.
At the close of business on March 18, 1997, the record date for the Annual
Meeting, there were outstanding and entitled to vote 74,100,416 shares of
common stock of the Company. Each shareholder is entitled to one vote for each
such share held of record on that date on all matters that are properly
presented for action at the Annual Meeting. The Company has no other
outstanding voting securities.
A copy of the Company's Annual Report to Shareholders, including financial
statements and a description of the Company's operations for the year 1996, is
being mailed to each shareholder along with this Proxy Statement. The
Company's Annual Report to Shareholders is not incorporated in this Proxy
Statement by reference.
The principal executive offices of the Company are located at 111 Monument
Circle, 29th Floor, Indianapolis, Indiana 46204-5129. The approximate mailing
date of this Proxy Statement and the accompanying proxy will be March 27,
1997.
1. ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
The shareholders are requested to vote for three nominees for directors
whose terms expire at this Annual Meeting. The nominees whose terms expire at
this Annual Meeting are Mr. James M. Cornelius, Dr. Mark Novitch and Mr.
Eugene L. Step. Mr. Cornelius has been a director since the formation of the
Company in 1994. Dr. Novitch and Mr. Step were elected by shareholders to
initial two-year terms in 1995.
Under the Company's Amended and Restated Articles of Incorporation, the
members of the Board of Directors are divided into three classes with
approximately one-third of the directors standing for election each year for
three-year terms. The terms of three of the present directors will expire at
the 1997 Annual Meeting. The other directors listed below will continue to
serve in their positions for the remainder of their terms.
Directors will be elected by a plurality of the votes cast. Only votes cast
for a nominee will be counted, except that the accompanying proxy will be
voted for the three nominees in the absence of instructions to the contrary.
Abstentions, broker non-votes, and instructions on the accompanying proxy to
withhold authority to vote for one or more of the nominees will result in the
respective nominees receiving fewer votes. However, the number of votes
otherwise received by the nominee will not be reduced by such action.
In the event any nominee for director declines or is unable to serve, it is
intended either that the persons designated as proxies will vote for a
substitute who will be designated by the Board of Directors or that the
authorized number of directors will be reduced accordingly by the Board. The
Board expects that each nominee will be available for election.
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY SERVED AS
NAME OR PRINCIPAL OCCUPATION AGE DIRECTOR FROM
---- ------------------------------------------- --- -------------
<S> <C> <C> <C>
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERMS ENDING IN 2000:
James M. Cornelius...... Chairman of the Board of Directors of the 53 1994
Company
Mark Novitch, M.D....... Professor of Health Care Sciences, George 64 1995
Washington University Medical Center
Eugene L. Step.......... Retired Board Member, Executive Vice 68 1995
President and President of the
Pharmaceutical Division, Eli Lilly and
Company
DIRECTORS CONTINUING IN OFFICE UNTIL 1998:
Maurice A. Cox, Jr...... President and Chief Executive Officer, The 46 1995
Ohio Partners, LLC
Ronald W. Dollens....... President and Chief Executive Officer of 50 1994
the Company
Enrique C. Falla........ Executive Vice President, The Dow Chemical 57 1995
Company
DIRECTORS CONTINUING IN OFFICE UNTIL 1999:
J. B. King.............. Vice President, General Counsel and 67 1994
Secretary of the Company
Susan B. King........... Leader in Residence and Chair of the Board 56 1996
of Advisors for the Hart Leadership
Program, Duke University
J. Kevin Moore.......... Associate Chief Operating Officer, Duke 42 1995
University Medical Center
Ruedi E. Wager, Ph.D.... President and Chief Executive Officer, ZLB 53 1995
Central Laboratory Blood Transfusion
Service SRC
</TABLE>
A brief summary of the recent business and professional experience of each
nominee and director continuing in office is set forth below.
JAMES M. CORNELIUS
Mr. Cornelius is Chairman of the Board of Directors and a Director of the
Company. Previously, he was Vice President, Finance and Chief Financial
Officer of Eli Lilly and Company ("Lilly") from 1983 until his retirement in
October 1995 and was a Director for Lilly. Mr. Cornelius has served as
Treasurer of Lilly and as President of IVAC Corporation, a former Lilly
medical device subsidiary. He joined Lilly in 1967. Mr. Cornelius is a
director of American United Life Insurance Company, Lilly Industries, Inc.,
and the National Bank of Indianapolis. Mr. Cornelius also serves as a Trustee
of the University of Indianapolis.
2
<PAGE>
MAURICE A. COX, JR.
Mr. Cox is President and Chief Executive Officer of The Ohio Partners, LLC
(a venture capital company), a position he has held since July 1995.
Previously, he served as President and Chief Executive Officer of CompuServe
Incorporated from 1990 to June 1995. Mr. Cox joined CompuServe in 1979 and has
served as Vice President, Product Management and as Executive Vice President
of CompuServe's Information Services Division. He is also a director of
Huntington National Bank.
RONALD W. DOLLENS
Mr. Dollens is President, Chief Executive Officer and a Director of the
Company. Previously, he served as President of Lilly's Medical Devices and
Diagnostics ("MDD") Division from 1991 until 1995. Mr. Dollens served as Vice
President of Lilly's MDD Division and Chairman of the Company's subsidiary,
Advanced Cardiovascular Systems, Inc. ("ACS") from 1990 to 1991. He also held
the position of President and Chief Executive Officer of ACS. Mr. Dollens
joined Lilly in 1972. Mr. Dollens currently serves on the boards of Physio-
Control International Corporation, the Eiteljorg Museum, the Health Industry
Manufacturers Association, and the Indiana State Symphony Society Board. He is
also the President of the Indiana Health Industry Forum.
ENRIQUE C. FALLA
Mr. Falla is an Executive Vice President for The Dow Chemical Company, a
position he has held since 1991, and is a member of its Board of Directors.
Previously, he served as Chief Financial Officer of The Dow Chemical Company.
He joined The Dow Chemical Company in 1967 and is a member of the Finance and
Investment Policy Committees. Mr. Falla is a director of The Dow Chemical
Company and Kmart Corporation, and is a member of the Board of Trustees of the
University of Miami.
J. B. KING
Mr. King is Vice President, General Counsel, Secretary and a Director of the
Company. Mr. King also acts as counsel to the law firm of Baker & Daniels,
which provides legal services to the Company. He previously was Vice President
and General Counsel for Lilly, a position he held from 1987 until he retired
in 1995. Before joining Lilly, Mr. King was a partner and chairman of the
management committee of Baker & Daniels. Mr. King is a director of Bank One,
Indianapolis, N.A., the Indiana Legal Foundation, IWC Resources, Inc., and the
James Whitcomb Riley Memorial Association.
SUSAN B. KING
Ms. King is the Leader in Residence and Chair of the Board of Advisors for
the Hart Leadership Program at Duke University, a position she has held since
January 1995. Prior to assuming this position, she served as Senior Vice
President, Corporate Affairs for Corning Incorporated from 1992 to December
1995. Ms. King served as President for its Steuben Glass Division from 1987 to
1992. She joined Corning Incorporated in 1982. She also served as Chair of the
U.S. Consumer Product Safety Commission from 1978 to 1981. Ms. King is a
director of The Coca-Cola Company and the Health Effects Institute. She is
also a Trustee for the Eurasia Foundation, the National Public Radio
Foundation and Duke University.
J. KEVIN MOORE
Mr. Moore is Associate Chief Operating Officer for Duke University Medical
Center, a position he has held since March 1994. Prior to assuming this
position, he served as Assistant Director, Surgical Private Diagnostic
Clinics, and Adjunct Associate Professor, Graduate School of Health
Administration, from April 1989 to March 1994. Mr. Moore served as Assistant
Director for Duke Hospital from May 1988 to April 1989 and he served as
Director of Management Services, Medical Center Administration, and Adjunct
Assistant Professor, Graduate School of Health Administration, from May 1984
to April 1988. Mr. Moore is a director of the American Red Cross Regional
Chapter.
3
<PAGE>
MARK NOVITCH, M.D.
Dr. Novitch has been Professor of Health Care Sciences at George Washington
University Medical Center since 1994. Prior to joining George Washington
University Medical Center, he retired as Vice Chairman of the Board and Chief
Compliance Officer of The Upjohn Company in December 1993. Prior to joining
Upjohn in 1985, Dr. Novitch was Deputy Commissioner of the federal Food and
Drug Administration ("FDA") from 1981 until 1985. He served as Acting
Commissioner of the FDA from 1983 to 1984. Dr. Novitch is currently serving a
five-year term as a Trustee and Past President of the U. S. Pharmacopeial
Convention. He is also a member of the Biomedical Services Board of the
American Red Cross. Dr. Novitch is a director of Alteon, Inc., Calypte
Biomedical, Inc., Neurogen Corporation, Osiris Therapeutics, Inc. and Kos
Pharmaceuticals, Inc.
EUGENE L. STEP
Mr. Step served as Director, Executive Vice President, President of the
Pharmaceutical Division and member of the Executive Committee of Lilly until
his retirement in 1992. He joined Lilly in 1956. Mr. Step is a director of
Cell Genesys, Inc., Medco Research, Inc., Pathogenesis, Inc., and Scios-Nova,
Inc.
RUEDI E. WAGER, PH.D.
Dr. Wager is President and Chief Executive Officer of ZLB Central Laboratory
Blood Transfusion Service SRC (a plasma fractionation business in
Switzerland), a position he has held since February 1994. Prior to assuming
this position, he served as Senior Vice President at Sandoz Pharma Ltd. (a
multinational pharmaceutical company) from March 1989 to January 1994. From
January 1993 to January 1994, Dr. Wager served as Head of Corporate Project
Management and member of the Executive Committee at Sandoz Pharma, Ltd., and
from March 1989 to December 1993, he served as Head of Worldwide Marketing and
member of the Executive Committee at Sandoz Pharma Ltd. Dr. Wager joined
Sandoz, Ltd. in 1973. Dr. Wager is a director of Portescap SA and Portescap
International SA.
During 1996, the Board of Directors of the Company held 11 meetings. No
director attended fewer than 75% of the aggregate of the total number of
meetings of the Board of Directors and the total number of meetings of all
committees of the Board of Directors on which the director served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors currently has four committees, the
principal functions of which are described below.
The Audit Committee is composed of Directors Falla (Chair), Moore and Wager.
During 1996, the Audit Committee held four meetings. The Audit Committee
annually recommends independent auditors for appointment by the Board of
Directors, reviews the services to be performed by the independent auditors
and receives and reviews the reports submitted by them. It also determines the
duties and responsibilities of the internal auditors, reviews the internal
audit program and receives and reviews reports submitted by the internal
auditing staff.
The Compensation Committee is composed of Directors Step (Chair), Falla, S.
King and Novitch. During 1996, the Compensation Committee held six meetings.
The Compensation Committee reviews succession planning, fixes the compensation
of executive officers and administers the Guidant Corporation 1994 Stock Plan
(the "1994 Plan").
The Corporate Governance Committee is composed of Directors Cox (Chair),
Cornelius and Step. In 1996, the Corporate Governance Committee held one
meeting. The Corporate Governance Committee recommends to the Board of
Directors the size and composition of the Board and proposes candidates for
director to be recommended by the Board to the shareholders of the Company and
oversees matters of corporate governance.
4
<PAGE>
The Corporate Governance Committee will consider nominees for the Board
recommended by shareholders. Recommendations by shareholders for nominees
should be forwarded to the Secretary of the Company and should identify the
nominee by name and provide pertinent information concerning his or her
background and experience. A shareholder recommendation must be received at
least 90 days prior to the date of the Annual Meeting of Shareholders.
The Compliance Committee is composed of Directors Novitch (Chair), Dollens,
S. King, Moore and Wager. In 1996, the Compliance Committee held five
meetings. The Compliance Committee reviews compliance with all applicable
laws, regulations and internal procedures, with the exception of financial
controls and the internal audit function.
OWNERSHIP OF COMPANY COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of common stock of the
Company beneficially owned by the directors, the Named Executive Officers
listed on page 7 and all directors and executive officers as a group, as of
February 14, 1997.
<TABLE>
<CAPTION>
NAME OF INDIVIDUALS OR IDENTITY OF GROUP SHARES OWNED BENEFICIALLY(1)
---------------------------------------- ----------------------------
<S> <C>
James M. Cornelius.............................. 126,672(2)
Maurice A. Cox, Jr.............................. 5,510(3)
Ronald W. Dollens............................... 64,059(4)
Enrique C. Falla................................ 1,596(3)
A. Jay Graf..................................... 18,396(5)
Ginger L. Howard................................ 12,762(6)
J. B. King...................................... 28,591(7)
Susan B. King................................... 1,510(3)
J. Kevin Moore.................................. 1,510(3)
Mark Novitch, M.D. ............................. 2,510(3)
Eugene L. Step.................................. 1,510(3)
Richard M. van Oostrom.......................... 53,327(8)
Ruedi E. Wager, Ph.D. .......................... 1,053(3)
All directors and executive officers as a group
(19 persons)................................... 379,318
</TABLE>
- --------
(1) Unless otherwise indicated in a footnote, each person listed in the table
possesses sole voting and sole investment power with respect to the shares
shown in the table to be owned by that person. No person listed in the
table owns more than 0.17% of the outstanding common stock of the Company.
All directors and executive officers as a group own 0.51% of the
outstanding common stock of the Company. The shares shown do not include
the following shares that may be purchased pursuant to stock options that
are exercisable within 60 days of February 14, 1997; Mr. Cornelius, 47,589
shares; Mr. Dollens, 28,449 shares; Mr. Graf, 14,393 shares; Ms. Howard,
14,252 shares; Mr. King, 16,578 shares; Mr. van Oostrom, 14,238 shares;
and all directors and executive officers as a group, 190,186 shares. The
shares shown include shares credited to the accounts of certain of those
persons listed in the table under The Guidant Employee Savings and Stock
Ownership Plan ("ESSOP").
(2) The shares shown for Mr. Cornelius include 563 shares credited to his
account under the ESSOP.
(3) Includes 510 shares of restricted stock granted pursuant to the Guidant
Corporation 1996 Nonemployee Directors Stock Plan ("Directors Stock
Plan"). The restrictions on these shares lapse on May 19, 1997.
(4) Mr. Dollens' children own 396 shares of those shown in the table, and he
disclaims any beneficial ownership therein. The shares shown for Mr.
Dollens include 12,774 shares credited to his account under the ESSOP.
(5) The shares shown for Mr. Graf include 9,690 shares credited to his account
under the ESSOP.
(6) The shares shown for Ms. Howard include 4,786 shares credited to her
account under the ESSOP.
(7) Mr. King's wife owns 1,000 shares of those shown in the table, and he
disclaims any beneficial ownership therein. The shares shown for Mr. King
include 619 shares credited to his account under the ESSOP.
(8) The shares shown for Mr. van Oostrom include 11,111 shares credited to his
account under the ESSOP.
No director, nominee for director or executive officer is the beneficial
owner of any securities of any of the Company's subsidiaries.
5
<PAGE>
PRINCIPAL HOLDERS OF COMPANY COMMON STOCK
To the best of the Company's knowledge, the following are the only
beneficial owners of 5% or more of the outstanding shares of common stock of
the Company as of December 31, 1996:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES(1) PERCENT
---------------- ------------------- -------
<S> <C> <C>
1. The Capital Group Com- 3,859,220(2) 5.2
panies, Inc............
333 South Hope Street
Los Angeles, CA 90071
2. Chancellor LGT Asset 4,541,670 6.1
Management, Inc........
Chancellor LGT Trust
Company
LGT Asset Management,
Inc.
50 California Street
San Francisco, CA 94111
3.RCM Capital Management 6,341,244(3) 8.6
L.L.C....................
RCM Limited L.P.
RCM General Corporation
Four Embarcadero Center,
Suite #2900
San Francisco, CA 94111
</TABLE>
- --------
(1) Unless otherwise indicated in a footnote, the entities listed possess sole
voting and sole dispositive power with respect to the shares shown in the
table.
(2) Sole voting power is held with respect to 2,249,220 shares.
(3) Sole voting power is held with respect to 4,380,537 shares, sole
dispositive power is held with respect to 6,218,144 shares and shared
dispositive power is held with respect to 123,100 shares. In addition,
Dresdner Bank AG has indicated that it has sole voting and sole
dispositive power with respect to an additional 9,293 shares beneficially
owned by it. RCM Capital Management L.L.C. is a wholly owned subsidiary of
Dresdner Bank AG.
The information set forth above is based on copies of statements on Schedule
13G which were filed under the Securities Exchange Act of 1934, as amended, by
the entities listed above and which were received by the Company.
DIRECTORS' COMPENSATION
On the date of each annual meeting of shareholders, each director who is not
a salaried officer or employee of the Company currently receives as an annual
retainer (i) a grant of an option to purchase 2,000 shares of the Company's
common stock at an option price equal to the fair market value on the date of
grant and (ii) a grant of a number of shares of restricted stock determined by
dividing $30,000 by the fair market value of a share of the Company's common
stock on the date of grant, rounded up to the nearest increment of ten shares.
The options have a ten year term and vest as of the next annual meeting of
shareholders following the grant. The restrictions on the restricted stock
also terminate as of the next annual meeting of shareholders following the
grant. The grants are made pursuant to the terms of the Directors Stock Plan.
The Chair of each committee also receives an annual retainer fee of $2,000. In
addition, each director who is not a salaried officer or employee of the
Company receives a fee of $2,000 for attendance at each Board meeting and each
committee meeting which is not held on the same date as a Board meeting.
Directors are reimbursed for reasonable expenses incurred in connection with
attending Board and committee meetings.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table shows the annual compensation paid
by the Company and Lilly to the Company's Chief Executive Officer for 1996,
and each of the four most highly compensated executive officers other than the
Chief Executive Officer, who were serving as executive officers as of
6
<PAGE>
December 31, 1996 (the "Named Executive Officers"). Until September 25, 1995,
the Company was an 80.2% owned subsidiary of Lilly, and was a wholly owned
subsidiary of Lilly prior to the consummation of the Company's initial public
offering (the "Offering") in December 1994. Accordingly, the compensation of
the Company's executive officers was determined for certain of the periods
reported in accordance with policies established by Lilly. The compensation of
the Named Executive Officers is reported for each of the last three years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS(1) PAYOUTS
--------------------------------------- ---------- ---------
NUMBER OF LONG-
SECURITIES TERM
UNDERLYING INCENTIVE
OTHER ANNUAL OPTIONS PLAN ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION GRANTED PAYOUT COMPENSATION
- --------------------------- ---- -------- -------- ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James M. Cornelius(2).... 1996 $625,200 $562,500 (3) $ 0 125,000 (4) $753,366 (5) $38,385(6)
Chairman of the Board 1995 600,225 464,138 (7) 812 142,769 (4) 780,550 (8) 34,376
1994 555,900 399,771 (9) 10,271 25,000(10) 442,622(11) 33,354
Ronald W. Dollens........ 1996 352,080 232,500 (3) 0 80,000 (4) 748,556 (5) 24,729(6)
President and Chief Ex- 1995 320,040 160,500 (3) 812 85,351 (4) 478,288(12) 14,935
ecutive Officer 1994 290,040 152,399 (9) 247 80,000 (4) 274,161(11) 17,402
A. Jay Graf.............. 1996 256,260 85,250 (3) 21,589(13) 40,000 (4) 405,844 (5) 19,938(6)
President, Cardiac 1995 239,040 58,580 (3) 14,898(13) 43,180 (4) 195,925(12) 11,155
Rhythm 1994 227,040 30,600(14) 22,994(13) 40,000 (4) 112,307(11) 13,260
Management Group
Richard M. van Oostrom... 1996 246,480 85,250 (3) 0 40,000 (4) 405,844 (5) 19,449(6)
President of Operations, 1995 229,920 58,580 (3) 0 42,715 (4) 259,313(12) 10,155
Europe, 1994 182,118 39,316(14) 0 40,000 (4) 148,642(11) 13,795
Middle East and Africa
Ginger L. Howard......... 1996 229,680 85,250 (3) 71,999(13) 40,000 (4) 405,844 (5) 18,609(6)
President, Vascular In- 1995 200,205 58,580 (3) 75,014(13) 42,757 (4) 195,925(12) 14,760
tervention Group 1994 177,600 35,520(14) 108,474(13) 40,000 (4) 112,307(11) 10,656
</TABLE>
- --------
(1) During the years indicated, restricted stock was not awarded and stock
appreciation rights were not granted.
(2) Mr. Cornelius was employed by both Lilly and the Company through
September 30, 1995, during which time Lilly paid Mr. Cornelius'
compensation.
(3) Includes amounts awarded in cash under the Guidant Corporation Economic
Value Added (EVA) Bonus Plan (the "EVA Bonus Plan").
(4) Options to acquire Company common stock.
(5) Amounts paid in Company common stock (except for amounts paid in cash to
satisfy federal income tax withholding requirements) in February 1997
under the Company's performance award program under the 1994 Plan for the
period January 1, 1995 through December 31, 1996.
(6) Contributions by the Company to the executive's account in the ESSOP.
(7) Includes amounts awarded in cash under Lilly bonus plans and the EVA
Bonus Plan.
(8) Amounts paid in Lilly common stock (except for amounts paid in cash to
satisfy federal income tax withholding requirements) in February 1996
under the Lilly performance award program for the period January 1, 1994
through December 31, 1995.
(9) Includes amounts awarded in cash under Lilly's Senior Executive Bonus
Plan.
(10) Options to acquire Lilly common stock.
(11) Amounts paid in Lilly common stock (except for amounts paid in cash to
satisfy federal income tax withholding requirements) in February 1995
under the Lilly performance award program for the period January 1, 1993
through December 31, 1994.
(12) Amounts awarded in cash in February 1996 under the 1994 Plan which was
based on Lilly's performance during the period January 1, 1994 through
December 31, 1995.
(13) Relocation allowances.
(14) Includes cash payments under other bonus programs.
7
<PAGE>
Stock Option Grants
The following table provides information on options to purchase Company
common stock granted in 1996 to the Named Executive Officers pursuant to the
1994 Plan.
OPTION SHARES GRANTED IN LAST FISCAL YEAR(1)
INDIVIDUAL GRANTS
<TABLE>
- ------------------------------------------------------------------------------------------
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTION SHARES
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR PER SHARE (2) DATE VALUES (3)
---- ----------- -------------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
James M. Cornelius...... 125,000 9.04% 43.06 10/20/06 $1,837,225
Ronald W. Dollens....... 80,000 5.79 43.06 10/20/06 1,175,824
A. Jay Graf............. 40,000 2.89 43.06 10/20/06 587,912
Richard M. van Oostrom.. 40,000 2.89 43.06 10/20/06 587,912
Ginger L. Howard........ 40,000 2.89 43.06 10/20/06 587,912
</TABLE>
- --------
(1) Stock appreciation rights were not granted during 1996.
(2) The fair market value of the Company's common stock on the date of grant.
Approximately one-third of these options will become exercisable each year
beginning on October 21, 1997.
(3) These values were established using the Black-Scholes stock option
valuation model that was modified to include dividends. Assumptions used
to calculate the Grant Date Present Value of option shares granted during
1996 were:
(a) Expected Volatility--The average variance in the percent change in daily
stock price during the six-month period immediately preceding the grant,
which was 26.2%.
(b) Risk Free Rate of Return--The average monthly rate for 10-year U.S.
Treasury obligations during the month of grant as published in the
Federal Reserve Statistical Release, which was 6.71%.
(c) Dividend Yield--The yield calculated by dividing the annualized dividend
rate of the Company's common stock in the amount of $.10 per share by
the fair market value of the stock on the date of grant, which resulted
in an assumed dividend yield of 0.23%.
(d) Time of Exercise--The expected option term, which was 7 years.
The disclosure above is required pursuant to executive compensation
disclosure rules of the Securities and Exchange Commission. However, the
Company does not believe that the Black-Scholes model, whether modified or
not modified, or any other valuation model, is a reliable method of
computing the present value of the Company's employee stock options. The
value ultimately realized, if any, will depend on the amount that the market
price of the stock exceeds the exercise price on the date of exercise.
Stock Option Exercises and Option Values
The following table contains information concerning Company stock options
unexercised at the end of 1996 with respect to the Named Executive Officers.
No stock options were exercised by any of the Named Executive Officers in
1996.
AGGREGATED OPTION SHARES FISCAL YEAR END VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN THE MONEY
OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END(2)
------------------------------ -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C>
James M. Cornelius...... 47,589 220,180 $ 1,213,520 $ 4,169,590
Ronald W. Dollens....... 28,449 216,902 725,450 5,966,201
A. Jay Graf............. 14,393 108,787 367,022 2,991,669
Richard M. van Oostrom.. 14,238 108,477 363,069 2,983,764
Ginger L. Howard........ 14,252 108,505 363,426 2,984,478
</TABLE>
- --------
(1) No stock appreciation rights were outstanding during 1996.
(2) Represents the amount by which the market price of the Company's common
stock exceeded the exercise prices of unexercised options on December 31,
1996.
8
<PAGE>
Retirement Plan
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL YEARS OF SERVICE
EARNINGS (HIGHEST ------------------------------------------------------------------
5 OF LAST 10 YEARS) 5 10 15 20 25 30 35
------------------- -------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 375,000.............. $ 25,421 $ 50,842 $ 76,263 $101,684 $127,105 $ 152,526 $ 177,947
525,000.............. 35,954 71,908 107,862 143,816 179,770 215,724 251,678
675,000.............. 46,487 92,974 139,461 185,948 232,435 278,922 325,409
825,000.............. 57,020 114,040 171,060 228,080 285,100 342,120 399,140
975,000.............. 67,553 135,106 202,659 270,212 337,765 405,318 472,871
1,125,000.............. 78,086 156,172 234,258 312,344 390,430 468,516 546,602
1,275,000.............. 88,619 177,238 265,857 354,476 443,095 531,714 620,333
1,425,000.............. 99,152 198,304 297,456 396,608 495,760 594,912 694,064
1,575,000.............. 109,685 219,370 329,055 438,740 548,425 658,110 767,795
1,725,000.............. 120,218 240,436 360,654 480,872 601,090 721,308 841,526
1,875,000.............. 130,751 261,502 392,253 523,004 653,755 784,506 915,257
2,025,000.............. 141,284 282,568 423,852 565,136 706,420 847,704 988,988
2,175,000.............. 151,817 303,634 455,451 607,268 759,085 910,902 1,062,719
2,325,000.............. 162,350 324,700 487,050 649,400 811,750 974,100 1,136,450
2,475,000.............. 173,883 345,766 518,649 691,532 864,415 1,037,298 1,210,181
</TABLE>
Certain of the executive officers of the Company participate in two defined
benefit pension plans that have been established by the Company: the Guidant
Retirement Plan (the "Retirement Plan") and the Guidant Excess Benefit Plan:
Retirement (the "Excess Plan"). The Retirement Plan is a tax-qualified plan
that determines benefits under a formula that takes into account a
participant's years of service through the split-off from Lilly in September
1995 and average annual earnings with the Company. The Excess Plan is a non-
qualified plan that provides the larger of the following two benefits after
offsetting any benefit due from the Retirement Plan and the Guidant Retirement
ESOP: a) a benefit which would otherwise be provided under the Retirement Plan
formula but for the application of certain limitations on tax-qualified
benefits under the Internal Revenue Code plus the benefit resulting from the
Guidant Retirement ESOP or b) a benefit which would be provided under an
alternative formula which considers all of the participant's years of service
with the Company and average annual earnings with the Company. (It is this
alternative formula which is illustrated in the above Pension Plan Table.)
Messrs. Cornelius, Dollens, Graf and van Oostrom and Ms. Howard are entitled
to receive retirement benefits under the Retirement Plan and the Excess Plan.
The Pension Plan Table sets forth a range of annual retirement benefits for
graduated levels of average annual earnings (consisting of Salary, Bonus and
Long-Term Incentive Plan Payouts as set forth in the Summary Compensation
Table on page 7) and years of service for the life of the retired employee,
assuming retirement at age 65 with a 50% survivor income benefit. The amounts
payable to the retired employee are reduced, however, for benefits payable
under the Company's employee stock ownership plan and amounts payable under
Lilly pension plans. The amounts shown in the table are not subject to
reduction for Social Security benefits.
The years of service credited to the applicable Named Executive Officers
are: Mr. Cornelius, 29 years; Mr. Dollens, 24 years; Mr. Graf, 20 years; Mr.
van Oostrom, 26 years; and Ms. Howard, 17 years. Mr. Cornelius currently
receives retirement benefits under Lilly pension plans.
Change-in-Control Severance Pay Plan
The Company has adopted a change-in-control severance pay program
("Program") covering most employees of the Company and its subsidiaries,
including the Company's executive officers. In general, the Program would
provide severance payments and benefits to eligible employees and executive
officers in the event
9
<PAGE>
of their termination of employment under certain circumstances within fixed
periods of time following a change-in-control. A "change-in-control" would
occur if 20% or more of the Company's voting stock were acquired by an entity
other than the Company, a subsidiary, or an employee benefit plan of the
Company. There are additional conditions that could result in a change-in-
control event. The Program would not be subject to amendment by the Board,
whether prior to or following a change-in-control, in any manner adverse to a
participant without his or her prior written consent.
Under the portion of the Program covering the Named Executive Officers, each
would be entitled to severance payments and benefits in the event that his or
her employment is terminated following a change-in-control (i) without "cause"
by the Company; (ii) for "good reason" by the executive officer, each as
defined in the Program; or (iii) for a limited period of time, for any reason
by the executive officer. In such case, the executive officer would be
entitled to a severance payment equal to three times his or her current annual
cash compensation and bonuses, including performance awards. Additional
benefits would include a pension supplement and full and immediate vesting of
all stock options and other equity incentives. In the event that any payments
made in connection with the change-in-control would be subject to the excise
tax imposed under Section 4999 of the Code as a result of the aggregate
compensation payments and benefits made to the individual, under the Program
or otherwise, in connection with a change-in-control, the Company is obligated
to make whole the individual with respect to such excise tax.
Compensation Committee Report
The Compensation Committee of the Company (the "Committee") consists of four
non-employee directors. The Committee is responsible for reviewing the
compensation policies and practices of the Company, including for the
Company's executive officers, and establishing the salaries of executive
officers. The Committee also administers the 1994 Plan covering executive
officers. The current Committee members are Mr. Step (Chair), Mr. Falla, Ms.
King and Dr. Novitch.
A. Executive Compensation Policy
Overview. Until September 25, 1995, the Company was an 80.2% owned
subsidiary of Lilly, and was a wholly owned subsidiary of Lilly prior to the
consummation of the Company's initial public offering ("Offering") in December
1994. Accordingly, during 1996, the Committee continued to adjust the
compensation policies of the Company to more accurately reflect the needs of
the Company and to provide a gradual transition from Lilly's historical
compensation policies. In 1996 compensation continued to include an increased
emphasis on incentives for Company performance due to the recognition of the
increased responsibilities assumed by the Company's executives since the
Company became independent from Lilly.
Consistent with past practices, compensation programs for the Company in
1996, including those for executive officers, were designed to attract, retain
and motivate highly talented individuals. In addition, the programs were
designed to be cost-effective and to treat all employees fairly. To that end,
the Company's compensation programs shared the following characteristics:
. Compensation of the Company's employees, including that of executive
officers, was based on the level of job responsibility, the individual's
level of performance and the Company's performance. Members of senior
management had a greater portion of their pay based on Company
performance than other employees.
. Compensation also reflected the value of the job in the marketplace. To
retain the Company's highly skilled work force, the Company attempted to
remain competitive with the pay of employers of a similar stature who
compete with the Company for talent.
. Compensation programs were developed and administered to foster the
long-term focus required for success in a highly-competitive,
innovation-based industry.
The Committee believes that the Company's executive compensation program in
1996 reflected the fundamental principles described above and provided
executives strong incentives to maximize Company
10
<PAGE>
performance and therefore enhance shareholder value. The program consisted of
both annual and long-term elements. The Committee believes that the various
components of compensation should be considered collectively in order to
properly assess the appropriateness of the Company's program to the attainment
of its objectives.
In establishing the Company's total compensation, a variety of measures of
historical and projected Company performance were considered. This review
included such measures as sales, net income, stock price appreciation,
economic value added, return on shareholders' equity, return on sales, return
on assets, sales and net income per employee, sales and general administrative
expenses as a percentage of net sales and total market value. This data formed
the basis for the assessment of the overall performance and prospects of the
Company that underpinned the judgment used in establishing total compensation
ranges. In evaluating these factors, relative weights or rankings were not
assigned to each factor. Rather, a subjective determination was made based on
a collective consideration of all such factors.
The Company's total compensation package (including the compensation of
individual executive officers) during 1996 continued to be in a state of
transition from the Lilly compensation package. In 1996, the Company continued
to shift its emphasis so that the Company's total compensation package was
compared with those of global medical device companies of comparable size and
stature to the Company as well as other large industrial corporations (the
"Guidant Peer Group"). A goal for the transition has been to avoid making any
abrupt changes in compensation policy.
The data generated from the Guidant Peer Group was used primarily as a
benchmark to ensure that the Company's total compensation was within the broad
range of comparative pay in the Guidant Peer Group. In some instances, it was
recognized that compensation levels would require continued adjustment over
time in order to fall within an acceptable range and to avoid an abrupt
change. The Committee did not, however, target a specific position in the
range of comparative data for each individual or for each component of
compensation. Individual amounts were established in view of the comparative
data and such other factors as level of responsibility, prior experience and
the subjective judgment as to individual contribution. These factors were not
assigned specific mathematical weights; rather, judgment and discretion were
exercised in the information reviewed and the analysis considered.
In 1996, the Company also periodically retained outside compensation and
benefits consultants to assist in the evaluation of salary and incentive
compensation programs for the Company's executive officers. Such independent
consultants provided an additional measure of assurance that the Company's
programs were reasonable and appropriate to the Company's objectives.
The Committee believes that the Company's overall compensation program in
1996 was appropriate and competitive and that the compensation levels of the
Company's executive officers were appropriate relative to the corporate
performance and the compensation levels of persons in similar positions in the
Guidant Peer Group.
B. Elements of Compensation
Annual Compensation. In 1996, annual compensation for the Company's
executive officers consisted of two components--base salary and a cash bonus.
Individual base salary increases are determined primarily by individual
performance and comparison to marketplace data. Assessment of an individual's
performance includes consideration of a person's impact on financial
performance, as well as judgment, creativity, effectiveness in developing
subordinates and a diverse organization, and contributions to improvement in
the quality of the Company's products, services and operations. Cash bonuses
are connected to economic value added milestones, which attempt to measure
economic value created for shareholders. Economic value is created when the
Company's net income exceeds the cost of the capital employed in the business.
Subject to certain adjustments, capital is the net investment employed in the
Company's operations which is calculated by subtracting current liabilities
and cash from total assets. Currently, the Company utilizes a target weighted
average after-tax cost of capital of 13 1/2%. Therefore, the size of bonuses
varies directly with the amount by which after-tax operating profit exceeds
the cost of capital.
11
<PAGE>
Long-Term Incentives. In 1996, two forms of long-term incentives were used
for executive officers-performance awards and stock options. These incentives
emphasized the long-term focus necessary for continued success in the
innovation-based medical device business. The Company has emphasized the
importance of substantial equity ownership by individuals in leadership roles,
including executive officers, to ensure proper focus on shareholder value.
Performance awards provide the recipients the opportunity to earn shares of
Company common stock if certain performance goals are achieved. In 1995,
awards were granted which were structured as a schedule of shares of common
stock based on the Company's achievement of specific cumulative earnings-per-
share ("EPS") levels over the two-year award period of January 1, 1995 through
December 31, 1996. Individual award sizes varied depending on the recipient's
level of responsibility and performance. The performance awards granted in
1995 for the 1995-1996 award period were paid in Company common stock in
February, 1997.
The Committee believes that stock options are an important part of the
performance-based compensation of the Company's management, including that of
its executive officers. Stock options provide a strong incentive to increase
shareholder value, since stock options have value only if the stock price
increases over time. The Company's options, granted at the market price on the
date of grant and with terms not to exceed 10 years, ensure that management
and other employees and consultants are oriented to growth over the long term
and not simply to short-term profits. In addition, the options create an
incentive to remain with the Company for the long term because they carry a
vesting period and, if not exercised, are forfeited if the employee leaves the
Company before retirement. Options granted during 1996 contain a vesting
schedule where the options vest approximately one-third each year over a
three-year period. During 1996, the Committee granted employees options to
purchase approximately 1,400,000 shares of the Company's common stock at
option prices ranging from $43.06 to $56.50. The exercise price for all
options was the fair market value on the date of grant. The size of the grants
to the executive officers was based on the recipient's level of responsibility
and performance. The Committee also considered the size of previous option
grants made to individuals and internal relativity.
Deductibility Cap on Executive Compensation. Beginning in 1994, a new
federal tax law disallows corporate deductibility for certain compensation
paid in excess of $1 million to the chief executive officer and the four other
most highly paid executive officers of publicly held companies. "Performance-
based compensation," as defined in the tax law, is not subject to the
deductibility limitation, provided certain shareholder approval and other
requirements are met. During 1996, the deductibility cap had an immaterial
impact on the Company. At the present time, it is not known whether the
deductibility cap will have an impact on the Company in 1997, although it is
possible. However, the Company believes that options and performance awards
granted under the 1994 Plan, which were disclosed in the Company's prospectus
for the Offering, currently qualify for an exception to the rules governing
the deductibility cap. The Committee decided, however, to not qualify the EVA
Bonus Plan as "performance-based compensation" at this time since to do so
would have limited the Committee's flexibility in the administration of the
plan. The Committee thought that flexibility was particularly important as the
Company continues to make a transition from Lilly's historical compensation
policies. The anticipated future loss of deductibility, if any, is expected to
be immaterial. The Committee will continue to review the Company's executive
compensation plans on a regular basis to determine what changes, if any,
should be made as a result of the limitation on deductibility.
C. Compensation of the Chairman and Chief Executive Officer
In 1996, the compensation of James M. Cornelius, Chairman, and Ronald W.
Dollens, President and Chief Executive Officer, consisted of the same
components as for other senior executives--base salary, bonus, performance
awards and stock options.
In 1996, Mr. Cornelius' and Mr. Dollens' initial base salaries (at the
annual rates of $625,200 and $352,080, respectively) were set so as to be
within the middle range relative to persons in similar positions in the
Guidant Peer Group. Their base salaries will be reviewed on 12-month cycles by
the Committee.
12
<PAGE>
For 1996, Mr. Cornelius and Mr. Dollens were paid $562,500 and $232,500,
respectively, under the EVA Bonus Plan. For 1996, consistent with the goal of
linking a greater portion of executive officer compensation to Company
performance, Mr. Cornelius' and Mr. Dollens' total compensation program was
structured such that if the Company achieved certain financial milestones, the
performance-based bonus would represent a higher proportion of combined salary
and bonus.
In 1995, the Committee granted performance awards to Mr. Cornelius and Mr.
Dollens which were earned over the two-year period 1995 and 1996. Mr.
Cornelius' grant was pro-rated to take into account the time he was employed
by Lilly during the award period. Based on the Company's performance during
this award period, in February 1997, Mr. Cornelius and Mr. Dollens were paid
12,530 shares and 12,450 shares, respectively, as payment of the performance
award originally granted in 1995 for the 1995-1996 award period. No
performance awards were granted in 1996.
In October 1996, the Committee granted Mr. Cornelius and Mr. Dollens options
to purchase 125,000 and 80,000 shares, respectively, of Company common stock
at $43.06, the fair market value of the Company common stock on the date of
grant. In determining the size of the grant, the Committee considered a number
of factors, including option grants to other executive officers in similar
positions in the Guidant Peer Group, the size of the option grant relative to
grants received by other Company personnel and the responsibility of Mr.
Cornelius and Mr. Dollens for the management of the Company, and considered
various value estimations which the Committee determined were consistent with
Mr. Cornelius' and Mr. Dollens' responsibilities to the Company. The Company
also considered the size of previous grants of options to these individuals.
The Committee believed the size of the grants was sufficient to give Mr.
Cornelius and Mr. Dollens a substantial equity position that would provide
appropriate incentives to increase long-term shareholder value.
D. Adjustments for Impairment and Special Obsolescence Charges
Reported earnings for 1996 were reduced as a result of non-recurring, non-
cash charges that were taken in the second quarter totaling $95.7 million.
These charges were composed of a $66.9 million impairment charge for goodwill
and other intangible assets associated with the Company's atherectomy
business, and a $28.8 million obsolescence charge to cost of sales on older-
generation Cardiac Rhythm Management products and programmers as a result of
accelerated regulatory approval for market release and customer acceptance of
new-generation products. The Committee adjusted the incentive formulas under
the Company's economic value added bonus and the 1995-1996 performance awards
to eliminate the effect of these charges, except for a portion of the charges
that the Committee believed would have been incurred by the Company in the
ordinary course of its business during 1996. The Committee believes that
employees should not be penalized by the implementation of strategic business
actions or the application of special or new accounting standards that reduce
current earnings but prepare the Company for enhanced competitiveness in the
future.
Compensation Committee
Eugene L. Step (Chair)
Enrique C. Falla Susan B. King Mark Novitch, M.D.
13
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative total shareholder
return on the Company's common stock with Standard & Poor's 500 Stock Index,
Standard & Poor's Medical Supplies & Equipment Index and Standard & Poor's
Health Care (Medical Products and Supplies) Index* for the period beginning on
December 13, 1994 (the date of the Offering) and ending on December 31, 1996.
The graph is constructed on the assumption that $100 was invested on December
13, 1994 in each of the Company's common stock, Standard & Poor's 500 Stock
Index, Standard & Poor's Medical Supplies & Equipment Index and Standard &
Poor's Health Care Index.
COMPARISON OF CUMULATIVE TOTAL RETURN**
AMONG GUIDANT, S&P 500 STOCK INDEX,
S&P MEDICAL SUPPLIES & EQUIPMENT INDEX AND
S&P HEALTH CARE INDEX
(GRAPH)
12/31/94 1994 1995 1996
-------- ---- ---- ----
Guidant 100 110 292 394
S&P 500 100 103 141 174
S&P Medical 100 104 154 181
Supplies &
Equipment
S&P Health Care 100 106 179 205
- --------
* The Company has elected to replace the S&P Medical Supplies and Equipment
Index with the S&P Health Care (Medical Products and Supplies) Index as the
industry index for purposes of the performance graph. The Company believes
that the S&P Health Care Index, which consists of 10 companies in the
medical device business, provides a better representation of companies used
by the Company to compare compensation of executive officers.
** Total return assumes reinvestment of dividends.
14
<PAGE>
2. PROPOSAL TO RATIFY APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of the Audit Committee, has
appointed the firm of Ernst & Young LLP as independent auditors for the
Company for the year 1997. In accordance with the By-laws of the Company, this
appointment will be submitted to the shareholders for ratification. Ernst &
Young LLP served as the independent auditors for the Company in 1996.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting and will be available to respond to appropriate questions. Those
representatives will have the opportunity to make a statement if they desire
to do so.
Ratification of this appointment requires that the number of votes cast in
favor of ratification exceed the number of votes cast opposing ratification.
Only votes cast for or against ratification will be counted, except that the
accompanying proxy will be voted in favor of ratification in the absence of
instructions to the contrary. Abstentions and broker non-votes will not change
the number of votes cast for or against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
FOR THE YEAR 1997.
3. OTHER MATTERS
As of the date of this Proxy Statement, the management of the Company has no
knowledge of any matters to be presented for consideration at the meeting
other than those described in this Proxy Statement. If any other matters
properly come before the meeting, the accompanying proxy confers discretionary
authority with respect to those matters, and the persons named in the
accompanying form of proxy intend to vote that proxy to the extent entitled in
accordance with their best judgment.
All expenses in connection with solicitation of proxies will be borne by the
Company. The Company will pay brokers, nominees, fiduciaries or other
custodians their reasonable expenses for sending proxy material to, and
obtaining instructions from, persons for whom they hold stock of the Company.
The Company expects to solicit proxies primarily by mail, but directors,
officers and other employees of the Company may also solicit in person, by
telephone, by telegraph, or by mail. The Company may retain D. F. King & Co.,
Inc. to assist in the solicitation of proxies. If retained, the firm will
solicit proxies by personal interview, telephone, telegraph, and mail. It is
anticipated that the fee for those services will not exceed $7,500 plus
reimbursement of customary out-of-pocket expenses.
First Chicago Trust Company of New York has been retained to receive and
tabulate proxies and to provide representatives to act as inspectors of
election for the Annual Meeting.
Shareholder Proposals for 1998 Annual Meeting.
The date by which shareholder proposals must be received by the Company for
inclusion in the proxy materials relating to the 1998 Annual Meeting of
Shareholders is November 27, 1997.
By order of the Board of Directors,
J. B. King
Secretary
March 27, 1997
15
<PAGE>
GUIDANT CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
CHANGE OF ADDRESS:
The undersigned hereby appoints J. M.
Cornelius, J. B. King and R. W. Dollens, and ------------------------
P each of them, as proxies of the undersigned,
R each with full power to act without the others
O and with full power of substitution, to vote ------------------------
X all the shares of Common Stock of GUIDANT
Y CORPORATION held in the name of the undersigned
at the close of business on March 18, 1997, at ------------------------
the Annual Meeting of Shareholders to be held
on May 19, 1997 at 1:00 p.m. (local time), and
at any adjournment thereof, with all the powers ------------------------
the undersigned would have if personally
present, as set forth on the reverse side.
------------------------
This Proxy may also reflect shares held
by employees or former employees of Guidant (IF YOU HAVE WRITTEN IN
Corporation in The Guidant Employee Savings and THE ABOVE SPACE, PLEASE
Stock Ownership Plan ("ESSOP") or The Guidant MARK THE CORRESPONDING
Corporation Employee Stock Ownership Plan for BOX ON THE REVERSE SIDE
Puerto Rico Affiliates ("ESOP"). With respect OF THIS CARD.)
to those shares, if any, the undersigned hereby
directs the trustee under the ESSOP or ESOP, as
applicable, to vote the number of shares
credited to the undersigned's account as set
forth on the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE>
[X] Please mark your |
votes as in this example. ---
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES REPRESENTED THEREBY
WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES, AND FOR PROPOSAL 2.
FOR WITHHELD Nominees:
1. Election of [_] [_] 1. J.M. Cornelius
Directors. 2. M. Novitch
3. E.L. Step
FOR, except vote withheld from the following nominee(s):
- -------------------------------------------------------------
INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided above.
FOR AGAINST ABSTAIN
2. Ratification of the appointment by the Board of [_] [_] [_]
Directors of Ernst & Young LLP as independent
auditors for 1997.
3. In their discretion, upon such other matters as may properly come before the
meeting, all in accordance with the accompanying Notice and Proxy Statement.
If you would like us to change your address on our records, [_]
please check this box and indicate your new address in the
space provided on the other side of this card.
If you plan to attend the meeting, please check this box [_]
and return the enclosed Request for Admittance Card.
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing in a representative capacity, please give full title. The undersigned
acknowledges receipt of the accompanying Notice and Proxy Statement.
---------------------------------------
---------------------------------------
Signature(s) Date
<PAGE>
[LOGO]
REQUEST FOR ADMITTANCE CARD
GUIDANT CORPORATION
1997 ANNUAL MEETING OF SHAREHOLDERS
MONDAY, MAY 19, 1997
1:00 p.m.
The 1997 Annual Meeting of Shareholders of Guidant Corporation will be
held on Monday, May 19, 1997 at 1:00 p.m. at the Indiana Repertory Theatre, in
Indianapolis, Indiana.
IF YOU PLAN TO ATTEND THE MEETING, please complete and return the
Request for Admittance Card attached below. An admittance card will be promptly
sent to you and will be required to admit you to the meeting. If you plan to
attend the meeting, you are encouraged to return this card by May 9, 1997, so
that an admittance card can be mailed to you in time for the meeting.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
REQUEST FOR ADMITTANCE CARD
GUIDANT CORPORATION [_] I plan to attend the meeting.
ANNUAL MEETING OF SHAREHOLDERS
MONDAY, MAY 19, 1997, 1:00 P.M.
INDIANAPOLIS, INDIANA Please type or print clearly:
Please return this card only if ________________________________
------- Name
you plan to attend the meeting.
- ------------------
If you do not plan to attend, you
only need to return the enclosed ________________________________
proxy. Even if you plan to attend Street Address
the meeting, you are encouraged
to return the proxy. ________________________________
City State Zip Code
An admittance card, directions to the Indiana Repertory Theatre in Indianapolis,
Indiana, and suggested parking alternatives will be sent to all shareholders who
indicate that they plan to attend the meeting. If you plan to attend, you are
encouraged to return this card by May 9, 1997 so that an admittance card can be
mailed to you in time for the meeting.
