UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
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 [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
MEDTRONIC, INC.
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(Name of Registrant as Specified In Its Charter)
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(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:
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4) Date Filed:
________________________________________________________________________________
[LOGO]
MEDTRONIC
710 Medtronic Parkway
Minneapolis, Minnesota 55432
Telephone: 763-514-4000
August 7, 2001
Dear Shareholder:
You are cordially invited to join us for our Annual Meeting of Shareholders
to be held this year on Thursday, August 30, 2001, at 10:30 a.m. (CDT) at
Medtronic's new World Headquarters, 710 Medtronic Parkway, Minneapolis
(Fridley), Minnesota.
The Notice of Annual Meeting of Shareholders and the Proxy Statement that
follow describe the business to be conducted at the meeting. We will also report
on matters of current interest to our shareholders.
We invite you to join us beginning at 10:00 a.m. to view Medtronic's
interactive product displays and talk with our employees.
YOUR VOTE IS IMPORTANT. Whether you own a few shares or many, it is
important that your shares are represented. If you cannot attend the meeting in
person, you may vote your shares by internet or telephone as described in the
following materials or by completing and signing the proxy card and promptly
returning it in the envelope provided.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Arthur D. Collins, Jr.
Arthur D. Collins, Jr.
President and Chief Executive Officer
WHEN LIFE DEPENDS ON MEDICAL TECHNOLOGY
VOTING METHODS
If you are a shareholder of record, hold shares through a Medtronic stock
benefit plan, or through a broker or bank, you may vote your shares through the
internet, by telephone or by mail. You may also revoke your proxy any time
before the Annual Meeting. Please help us save administrative and postage costs
by voting through the internet or by telephone. Each method is available 24
hours a day until 12:00 midnight, Eastern Time, on August 29, 2001 and will
ensure that your vote is confirmed and counted immediately. To vote:
BY INTERNET
* Go to the web site at www.proxyvote.com, 24 hours a day, seven days a
week.
* Enter the company number and control number shown on your proxy card
or electronic notification.
* Follow the simple instructions.
BY TELEPHONE
* On a touch-tone telephone, please call the toll-free number printed on
your proxy card or electronic notification, 24 hours a day, seven days
a week.
* Enter the company number and control number shown on your proxy card
or electronic notification.
* Follow the simple recorded instructions.
BY MAIL
* Mark your selections on the proxy card.
* Date and sign your name exactly as it appears on your proxy card.
* Mail the proxy card in the enclosed postage-paid envelope.
If your shares are held in an account with a broker, bank or other third
party (in "street name"), you will receive instructions from that third party
(who is the holder of record) that you must follow in order for your shares to
be voted.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
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E-DELIVERY OF FUTURE ANNUAL MEETING MATERIALS
Medtronic is pleased to offer shareholders the choice to receive future
annual reports and proxy materials electronically over the internet instead of
receiving paper copies through the mail. This will save Medtronic the costs of
printing and mailing them. Whether you hold shares registered directly in your
name ("registered shareholders"), through a Medtronic stock plan, or through a
broker or bank ("street name shareholders"), you can enroll at the Web site
www.medtronic.com by following these easy steps:
* Click on INVESTOR INFORMATION under ABOUT MEDTRONIC
* Click on CONSENT FOR ELECTRONIC DELIVERY OF PROXY MATERIALS
* Follow the prompts to submit your electronic consent
Generally, brokers and banks offering this choice require that the shareholders
vote through the internet in order to enroll. Street name shareholders whose
broker or bank is not included are encouraged to contact their broker or bank
and ask about the availability of electronic delivery. As with all internet
usage, the user must pay all access fees and telephone charges. You may view
this year's proxy materials at www.medtronic.com/annualmeeting/.
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MEDTRONIC, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TIME ................ 10:30 a.m. (CDT) on Thursday, August 30, 2001
PLACE ............... Medtronic World Headquarters
710 Medtronic Parkway
Minneapolis (Fridley), Minnesota
ITEMS OF BUSINESS ... 1. To elect four Class III directors for three-year
terms.
2. To approve the appointment of PricewaterhouseCoopers
LLP as the Company's independent auditors.
3. To take action on any other business that may
properly be considered at the Meeting or any
adjournment thereof.
RECORD DATE ......... You may vote at the Meeting if you were a shareholder of
record at the close of business on July 31, 2001.
VOTING BY PROXY ..... If you cannot attend the Meeting, you may vote your
shares over the internet or by telephone, or by
completing and promptly returning the enclosed proxy
card in the envelope provided. Internet and telephone
voting procedures are described in the Questions and
Answers section on page 2, and on the proxy card
provided to you.
ANNUAL REPORT ....... Medtronic's 2001 Annual Report, which is not part of the
proxy soliciting material, is enclosed.
By Order of the Board of Directors,
/s/ David J. Scott
David J. Scott
Secretary
THIS NOTICE OF MEETING, PROXY STATEMENT AND ACCOMPANYING PROXY CARD
ARE BEING DISTRIBUTED ON OR ABOUT AUGUST 7, 2001.
i
TABLE OF CONTENTS
PAGE
----
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS .................................. i
GENERAL INFORMATION ABOUT THE MEETING AND VOTING .......................... 1
PROPOSAL 1 -- ELECTION OF DIRECTORS
Directors and Nominees .................................................. 3
Committees of the Board and Meetings .................................... 7
Corporate Governance Principles ......................................... 8
Director Compensation ................................................... 8
Certain Transactions .................................................... 9
SHARE OWNERSHIP INFORMATION
5% Owners ............................................................... 10
Management Shareholdings ................................................ 10
Section 16(a) Beneficial Ownership Reporting Compliance ................. 10
REPORT OF THE COMPENSATION COMMITTEE ON FISCAL 2001 EXECUTIVE
COMPENSATION ............................................................. 11
SHAREHOLDER RETURN PERFORMANCE GRAPH ...................................... 13
EXECUTIVE COMPENSATION
Summary Compensation Table .............................................. 14
Option/SAR Grants in Last Fiscal Year ................................... 15
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values ...................................................... 16
Other Long-Term Incentive Awards ........................................ 16
Pension Plan ............................................................ 17
Employment and Change in Control Arrangements ........................... 18
REPORT OF THE AUDIT COMMITTEE ............................................. 19
PROPOSAL 2 -- APPROVAL OF SELECTION OF AUDITORS ........................... 20
Audit Fees .............................................................. 20
OTHER INFORMATION ......................................................... 21
MEDTRONIC BOARD OF DIRECTORS AUDIT COMMITTEE CHARTER ...................... A-1
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YOUR VOTE IS IMPORTANT
If you are a shareholder of record, hold shares through a Medtronic stock
benefit plan, or through a broker or bank, you can vote your shares via the
internet or by telephone by following the instructions on your proxy card. If
voting by mail, please complete, date and sign your proxy card and return it as
soon as possible in the enclosed envelope.
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ii
[LOGO]
MEDTRONIC
710 MEDTRONIC PARKWAY
MINNEAPOLIS, MINNESOTA 55432
TELEPHONE: 763-514-4000
------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 30, 2001
------------------------------------
We are providing these proxy materials in connection with the solicitation
by the Board of Directors of Medtronic, Inc. of proxies to be voted at
Medtronic's Annual Meeting of Shareholders to be held on August 30, 2001, and at
any adjournment of the meeting.
GENERAL INFORMATION ABOUT THE MEETING AND VOTING
WHAT AM I VOTING ON?
There are two proposals scheduled to be voted on at the meeting:
* Election of four directors
* Approval of the appointment of PricewaterhouseCoopers LLP as
Medtronic's auditors
WHO IS ENTITLED TO VOTE?
The Board has set July 31, 2001 as the record date for the meeting. If you
were the owner of Medtronic common stock at the close of business on July 31,
2001, you may vote at the meeting. You are entitled to one vote for each share
of common stock you held on the record date, including shares:
* Held directly in your name with our transfer agent, Wells Fargo Bank
Minnesota, N.A., as "shareholder of record"
* Held for you in an account with a broker, bank or other nominee
(shares held in "street name")
* Credited to your account in the Company's 401(k) Supplemental
Retirement Plan or Employee Stock Ownership Plan.
Each share of our common stock has one vote on each matter to be voted on.
HOW MANY SHARES MUST BE PRESENT TO HOLD THE MEETING?
A majority of Medtronic's outstanding common shares as of the record date
must be present at the meeting in order to hold the meeting and conduct
business. This is called a quorum. On the record date, there were 1,210,019,357
shares of Medtronic common stock outstanding. Shares are counted as present at
the meeting if you:
* are present and vote in person at the meeting; or
* have properly submitted a proxy card or voted over the internet or by
telephone.
HOW MANY VOTES ARE REQUIRED TO APPROVE EACH PROPOSAL?
The election of each director nominee and the other proposal each require
the affirmative "FOR" vote of a majority of the shares present in person or by
proxy at the meeting and entitled to vote.
1
HOW ARE VOTES COUNTED?
You may either vote "FOR" or "WITHHOLD" authority to vote for each nominee
for the Board of Directors. You may vote "FOR," "AGAINST" or "ABSTAIN" on the
other proposal. If you withhold authority to vote for the election of one of the
directors, it has the same effect as a vote against that director. If you
abstain from voting on the other proposal, it has the same effect as a vote
against the proposal. If you just sign and submit your proxy card without voting
instructions, your shares will be voted "FOR" each director nominee and "FOR"
the other proposal.
If you hold your shares in street name and do not provide voting
instructions to your broker, your shares will not be voted on any proposal on
which your broker does not have discretionary authority to vote. This is called
a "broker non-vote." Shares for which there is a broker non-vote are not
considered as entitled to vote on the proposal in question. This reduces the
number of shares needed to approve the proposal.
HOW DOES THE BOARD RECOMMEND THAT I VOTE?
Medtronic's Board recommends that you vote your shares "FOR" each of the
director nominees and "FOR" the other proposal.
HOW DO I VOTE MY SHARES WITHOUT ATTENDING THE MEETING?
Whether you hold shares directly, in a Medtronic stock plan or in street
name, you may direct your vote without attending the Annual Meeting. If you are
a shareholder of record or hold shares through a Medtronic stock plan, you may
vote by granting a proxy. For shares held in street name, you may vote by
submitting voting instructions to your broker or nominee. If you are a
shareholder of record or hold stock through a Medtronic stock plan, you may
vote:
* BY INTERNET OR TELEPHONE -- If you have internet or telephone access,
you may submit your proxy by following the "Vote by Internet" or "Vote
by Telephone" instructions on the proxy card. If you vote by internet
or telephone, you do not need to return your proxy card.
* BY MAIL -- You may vote by mail by signing and dating your proxy card
and mailing it in the envelope provided. You should sign your name
exactly as it appears on the proxy card. If you are signing in a
representative capacity (for example as guardian, executor, trustee,
custodian, attorney or officer of a corporation), you should indicate
your name and title or capacity.
For shares held in street name, you should follow the voting directions
provided by your broker or nominee. You may complete and mail a voting
instruction card to your broker or nominee or, in most cases, submit voting
instructions by internet or telephone. If you provide specific voting
instructions by internet, telephone or mail, your shares will be voted by your
broker or nominee as you have directed.
Internet and telephone voting facilities will close at 12:00 midnight,
Eastern Time, on August 29, 2001.
HOW DO I VOTE MY SHARES IN PERSON AT THE MEETING?
If you are a shareholder of record, to vote your shares at the meeting you
should bring the enclosed proxy card or proof of identification. You may vote
shares held in street name at the meeting only if you obtain a signed proxy from
the record holder (broker or other nominee) giving you the right to vote the
shares.
Even if you plan to attend the meeting, we encourage you to vote by
internet, telephone or proxy card so your vote will be counted even if you later
decide not to attend the meeting.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
It means you hold shares registered in more than one account. To ensure
that all your shares are voted, sign and return each proxy card or, if you vote
by internet or telephone, vote once for each proxy card you receive.
2
MAY I CHANGE MY VOTE?
Yes. Whether you have voted by mail, internet or telephone, you may change
your vote and revoke your proxy by:
* Sending a written statement to that effect to the Secretary of
Medtronic
* Voting by internet or telephone at a later time
* Submitting a properly signed proxy card with a later date
* Voting in person at the Annual Meeting
PROPOSAL 1 -- ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES
The Board of Directors is divided into three classes of approximately equal
size. The members of each class are elected to serve a three-year term with the
term of office for each class ending in consecutive years. William R. Brody,
M.D., Ph.D., Paul W. Chellgren, Arthur D. Collins and Antonio M. Gotto, Jr.,
M.D., D. Phil. are the Class III directors whose terms expire at this Annual
Meeting and who have been nominated for re-election to the Board to serve until
the 2004 annual meeting or until their successors are elected and qualified. All
of the nominees are currently directors and were elected to the Board of
Directors by the shareholders. Dr. Douglas has chosen not to stand for election
as a Class III Director due to travel and scheduling constraints and will leave
the Board following the August 30, 2001 meeting.
All of the nominees have indicated a willingness to serve if elected.
However, if any nominee becomes unable to serve before the election, the shares
represented by proxies may be voted for a substitute designated by the Board,
unless a contrary instruction is indicated on the proxy.
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERMS ENDING IN 2004 (CLASS III):
[PHOTO] WILLIAM R. BRODY, M.D., PH.D. Director since 1998
PRESIDENT OF THE JOHNS HOPKINS UNIVERSITY age 57
Dr. Brody has been President of The Johns Hopkins University since
September 1996. He was Provost of the University of Minnesota Academic
Health Center from September 1994 to May 1996; was the Martin Donner
Professor and Director of the Department of Radiology at The Johns
Hopkins University School of Medicine from 1987 to 1994. He is also a
director of AEGON, USA, a division of AEGON, N.V., Avistar
Communications, Inc., and Mercantile Bankshares Corporation.
[PHOTO] PAUL W. CHELLGREN Director since 1997
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE age 58
OFFICER OF ASHLAND INC.
Mr. Chellgren has been Chairman of the Board and Chief Executive
Officer of Ashland Inc. (energy company) since January 1997 and Chief
Executive Officer since October 1996; was President and Chief Operating
Officer of Ashland Inc. from January 1992 to September 1996. He is also
a director of The PNC Financial Services Group, Inc.
3
[PHOTO] ARTHUR D. COLLINS, JR. Director since 1994
PRESIDENT AND CHIEF EXECUTIVE OFFICER age 53
OF MEDTRONIC, INC.
Mr. Collins has been Medtronic's President and Chief Executive Officer
since May 2001; was President and Chief Operating Officer from August
1996 to April 2001; was Chief Operating Officer from January 1994 to
August 1996; was Executive Vice President of the Company and President
of Medtronic International from June 1992 to January 1994. He was
Corporate Vice President of Abbott Laboratories (health care products)
from October 1989 to May 1992 and Divisional Vice President of that
company from May 1984 to October 1989. He held various management
positions both in the U.S. and Europe during his 14 years with Abbott.
He is also a director of U.S. Bancorp and Cargill, Inc., and a member
of the Board of Overseers of The Wharton School.
[PHOTO] ANTONIO M. GOTTO, JR., M.D., D. PHIL. Director since 1992
DEAN OF THE WEILL MEDICAL COLLEGE AND PROVOST age 65
FOR MEDICAL AFFAIRS, CORNELL UNIVERSITY
Dr. Gotto has been Dean of the Weill Medical College of Cornell
University and Provost for Medical Affairs, Cornell University, since
January 1997. He was Chairman and Professor of the Department of
Medicine at Baylor College of Medicine and Methodist Hospital from 1977
through 1996 and former J. S. Abercrombie Chair, Atherosclerosis and
Lipoprotein Research from 1976 to 1996. He is Past President,
International Atherosclerosis Society, Past President, American Heart
Association, a member of the National Institute of Medicine of the
National Academy of Sciences and a Fellow of the American Academy of
Arts and Sciences.
THE BOARD RECOMMENDS A VOTE FOR THESE NOMINEES.
DIRECTORS CONTINUING IN OFFICE UNTIL 2002 (CLASS I):
[PHOTO] GLEN D. NELSON, M.D. Director since 1980
VICE CHAIRMAN OF MEDTRONIC, INC. age 64
Dr. Nelson has been Vice Chairman of Medtronic since July 1988 and was
Executive Vice President from August 1986 to July 1988; Chairman and
Chief Executive Officer of American MedCenters, Inc. (HMO management)
from July 1984 to August 1986; Chief Executive Officer, President and
Chairman of the Board of Trustees of Park Nicollet Medical Center
(medical services) from 1975 to 1986; Surgeon at Park Nicollet Medical
Center from 1969 to 1986. He is also a director of The St. Paul
Companies, Inc. and Carlson Holdings, Inc. and a member of the Johns
Hopkins Medical Board of Visitors and the Jackson Hole Group.
4
[PHOTO] DENISE M. O'LEARY Director since 2000
PRIVATE VENTURE CAPITAL INVESTOR age 44
Ms. O'Leary is a private venture capital investor in a variety of early
stage companies. She was with Menlo Ventures, a venture capital
investment company, from 1983 to 1996 and she served as a General
Partner from 1987 to 1996. Ms. O'Leary is also a director of America
West Holdings Corporation and Del Monte Foods Company and a member of
the Stanford University Board of Trustees, Chair of the Stanford Board
Committee for the Stanford Medical Center and Chair of the Board of
Directors of Stanford Hospitals and Clinics.
[PHOTO] JEAN-PIERRE ROSSO Director since 1998
CHAIRMAN OF CNH GLOBAL N.V. age 61
Mr. Rosso has been Chairman of the CNH Global N.V. (agricultural and
construction equipment) since November 1999; was Chairman and Chief
Executive Officer of CNH Global N.V. from November 1999 to November
2000; was Chairman and Chief Executive Officer of Case Corporation
(agricultural and construction equipment) from March 1996 to November
1999; President and Chief Executive Officer of Case Corporation from
April 1994 to March 1996. He was President of the Home & Building
Control Business of Honeywell, Inc. from 1992 to April 1994; President
of European operations of Honeywell, Inc. from 1987 through 1991. He is
also a director of ADC Telecommunications, Inc. and Credit Lyonnais.
[PHOTO] JACK W. SCHULER Director since 1990
CHAIRMAN OF THE BOARD OF STERICYCLE, INC. AND age 60
VENTANA MEDICAL SYSTEMS, INC.
Mr. Schuler has been Chairman of the Board of Stericycle, Inc. (medical
waste treatment and recycling) since 1990 and Chairman of the Board of
Ventana Medical Systems, Inc. (immunohistochemistry diagnostic systems)
since November 1995; was President and Chief Operating Officer of
Abbott Laboratories (health care products) from January 1987 to August
1989; a director of that company from April 1985 to August 1989 and
Executive Vice President from January 1985 to January 1987. He is also
a director of Chiron Corporation.
DIRECTORS CONTINUING IN OFFICE UNTIL 2003 (CLASS II):
[PHOTO] MICHAEL R. BONSIGNORE Director since 1999
RETIRED CHAIRMAN OF THE BOARD age 60
HONEYWELL INTERNATIONAL, INC.
Mr. Bonsignore was Chairman of the Board of Honeywell International,
Inc. (diversified technology and manufacturing company) from April 2000
to July 2001 and Chief Executive Officer of Honeywell International
from December 1999 to July 2001; was Chairman of the Board and Chief
Executive Officer of Honeywell, Inc. from April 1993 to December 1999;
was Executive Vice President and Chief Operating Officer of the
International and Home & Building Control Business of Honeywell, Inc.
from 1990 to 1993; was President of Honeywell's International business
from 1987 to 1990; and was President of Honeywell Europe from 1983 to
1987. He is also a member of various advisory boards and committees
including the U.S.-China Business Council, U.S.-Russia Trade and
Economic Council, the Alliance to Save Energy Board, and the New
Perspectives Fund Advisory Board.
5
[PHOTO] WILLIAM W. GEORGE Director since 1989
CHAIRMAN OF THE BOARD OF MEDTRONIC, INC. age 58
Mr. George has been Medtronic's Chairman of the Board since August
1996; was Chairman of the Board and Chief Executive Officer from August
1996 to April 2001; was President and Chief Executive Officer from May
1991 to August 1996; and was President and Chief Operating Officer from
March 1989 to April 1991. He was President, Honeywell Space and
Aviation Systems, from December 1987 to March 1989; President,
Honeywell Industrial Automation and Control, from May 1987 to December
1987 and Executive Vice President of that business from January 1983 to
May 1987. He is also a director of Target Corporation (formerly Dayton
Hudson Corporation), Allina Health System (Chairman), Imation Corp.,
and Novartis AG.
[PHOTO] BERNADINE P. HEALY, M.D. Director since 1993
PRESIDENT AND CHIEF EXECUTIVE OFFICER (and 1987-1991)
OF THE AMERICAN RED CROSS age 57
Dr. Healy has been President and Chief Executive Officer of the
American Red Cross since September 1999; was Dean, College of Medicine
and Public Health, and Professor of Medicine, The Ohio State
University, from October 1995 to September 1999. She was Physician and
Science Policy Advisor, The Cleveland Clinic Foundation (nonprofit
medical research organization), from July 1993 to May 1995; Director of
the National Institutes of Health from April 1991 to June 1993;
Chairman of the Research Institute of The Cleveland Clinic Foundation
from November 1985 to April 1991; President, the American Heart
Association, National Center, from 1988 to 1989; Deputy Director of
Office of Science and Technology Policy, Executive Office of the United
States President, from 1984 to 1985; Professor of Medicine, The Johns
Hopkins University School of Medicine from 1977 to 1984. She is also a
trustee of Battelle Memorial Institutes and a director of MBNA
Corporation, Invacare Corporation and Ashland Inc.
[PHOTO] GORDON M. SPRENGER Director since 1991
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF age 64
ALLINA HEALTH SYSTEM
Mr. Sprenger has been President and Chief Executive Officer of Allina
Health System (health care delivery) since June 1999; was Chief
Executive Officer of Allina Health System from April 1999 to June 1999;
Executive Officer of Allina Health System from July 1994 to April 1999;
Chief Executive Officer and director of HealthSpan Health Systems
Corporation (health care delivery) from September 1992 to July 1994;
President and Chief Executive Officer of LifeSpan, Inc. (health care
delivery) from 1982 to September 1992; Chief Executive Officer of
Abbott-Northwestern Hospital from 1982 to September 1992; and President
of Abbott-Northwestern Hospital from 1982 to 1988. He is also a
director of The St. Paul Companies, Inc., Bush Foundation and Past
Chair of the Board of the American Hospital Association.
6
COMMITTEES OF THE BOARD AND MEETINGS
The Board has five committees with the principal functions described below.
AUDIT COMMITTEE
* Reviews accounting and audit principles and practices and adequacy of
compliance assurance procedures and internal controls
* Recommends to the Board the firm to be appointed as Medtronic's
independent auditors
* Reviews nonaudit services performed by auditors to maintain auditors'
independence
* Reviews scope of annual audit and internal audit program
* Reviews Medtronic's annual financial statements
* Meets independently with management, internal audit and independent
auditors
COMPENSATION COMMITTEE
* Evaluates executive compensation philosophy
* Establishes executive compensation policies and guiding principles
* Evaluates the design of compensation and benefit programs
* Reviews all components of compensation for outside directors
CORPORATE GOVERNANCE COMMITTEE
* Addresses all matters of corporate governance
* Evaluates qualifications and candidates for positions on the Board
* Evaluates the performance of the chief executive officer and the Board
* Reviews major organization changes and senior management performance
* Reviews director compensation philosophy
* Maintains a Nominating Subcommittee which recommends to the full
Committee criteria for selecting new directors, nominees for Board
membership and the positions of CEO, Chairman and Chair of the
Corporate Governance Committee, and whether a director should be
invited to stand for re-election. The Subcommittee is comprised of the
Chair of the Corporate Governance Committee plus one director selected
from each class of directors.
This Committee will consider a candidate for director proposed by a
shareholder. Candidates must have broad training and experience in
their chosen fields and must have achieved distinction in their
activities. If you wish to propose a candidate for director, you must
contact Medtronic's Corporate Secretary in writing. See page 21 of
this Proxy Statement for requirements regarding the content and timing
of such a notice.
FINANCE COMMITTEE
* Reviews and makes recommendations regarding financial policies and
performance objectives developed by management, including review of
Medtronic's annual and long-range operating plans
* Assists management in evaluating major acquisitions and divestitures
from a financial perspective
* Reviews changes in capital structure
* Reviews banking relationships, insurance coverage on assets, tax
strategies, and financial performance and related matters pertaining
to Medtronic's employee pension and supplemental retirement plans
TECHNOLOGY AND QUALITY COMMITTEE
* Reviews policies, practices, processes and quality programs concerning
technological and product research
7
* Reviews efforts and investments in developing new products and
businesses
* Evaluates Medtronic's technological education and recognition programs
* Reviews quality process matters with Medtronic's chief quality officer
The following table summarizes the membership of the Board and each of its
committees as well as the number of times each met during fiscal 2001.
-------------------------------------------------------------------------------------------------------------
CORPORATE TECHNOLOGY
BOARD AUDIT COMPENSATION FINANCE GOVERNANCE AND QUALITY
-------------------------------------------------------------------------------------------------------------
Mr. Bonsignore X Chair X* X
-------------------------------------------------------------------------------------------------------------
Dr. Brody X X X* Chair
-------------------------------------------------------------------------------------------------------------
Mr. Chellgren X Chair X X X
-------------------------------------------------------------------------------------------------------------
Mr. Collins X
-------------------------------------------------------------------------------------------------------------
Dr. Douglas X X X
-------------------------------------------------------------------------------------------------------------
Mr. George Chair
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Dr. Gotto X X* X X
-------------------------------------------------------------------------------------------------------------
Dr. Healy X X X X X
-------------------------------------------------------------------------------------------------------------
Dr. Nelson X
-------------------------------------------------------------------------------------------------------------
Ms. O'Leary X X X X
-------------------------------------------------------------------------------------------------------------
Mr. Rosso X X X X Chair
-------------------------------------------------------------------------------------------------------------
Mr. Schuler X X X Chair*
-------------------------------------------------------------------------------------------------------------
Mr. Sprenger X X X X
-------------------------------------------------------------------------------------------------------------
Number of fiscal 2001
meetings 8 3 3 2 2 2
-------------------------------------------------------------------------------------------------------------
------------------------
*Denotes member of Nominating Subcommittee, which met two times in fiscal 2001.
Each director attended 75% or more of the total meetings of the Board and
Board committees on which the director served (held during the period he or she
served as a director), except for Dr. Douglas, due to scheduling conflicts after
joining the Board mid-year, and Mr. Sprenger, due to an injury sustained in an
accident.
CORPORATE GOVERNANCE PRINCIPLES
In fiscal 1996, the Board of Directors adopted Principles of Corporate
Governance ("Governance Principles"). The Governance Principles charge the
Corporate Governance Committee with establishing processes and procedures to
ensure effective and responsive governance of the Company and include a
description of the skills/characteristics and the principal duties of the Chair
of the Corporate Governance Committee, a description of the duties of the
Chairman of the Board, and a Charter of the Board of Directors intended as a
tool to assist directors in fulfilling their responsibilities as Board members.
The Governance Principles also provide that:
* At least a majority of the members of the Board must be outside
directors, and no more than three directors may be Medtronic
employees.
* The Governance Committee consists of all the outside directors and is
chaired by an outside director.
* The Governance Committee periodically evaluates the performance of the
CEO and the Board as a whole, and its Nominating Subcommittee
evaluates the performance of each director whose term is expiring
based on criteria set forth in the Governance Principles.
DIRECTOR COMPENSATION
Under the Medtronic, Inc. Outside Director Stock Compensation Plan (the
"Director Plan"), non-employee director compensation has three components: an
annual retainer, an annual stock option
8
grant and an annual credit of deferred stock units. In addition, all new
non-employee directors receive an initial stock option grant.
The annual retainer for the 2000-2001 plan year (September 1, 2000 through
August 31, 2001) is $60,000 for all non-employee directors except the Chair of
the Corporate Governance Committee, whose retainer is $70,000. Each director has
the option of taking 100% of the annual retainer in the form of cash, or 100% in
the form of a stock option. If an option is chosen, the number of shares subject
to the option will equal four times the amount of the annual retainer foregone,
divided by the fair market value of a share of Medtronic stock on the last day
of the relevant plan year (which will also be the exercise price of the option).
These options expire on the tenth anniversary of the date of grant. The annual
retainer is reduced by 25% if a non-employee director does not attend at least
75% of the total meetings of the Board and Board committees on which such
director served during the relevant plan year.
Each non-employee director also receives on the first day of each plan year
an annual stock option grant for a number of shares of Medtronic stock equal to
the amount of the annual retainer divided by the fair market value of a share of
Medtronic stock on the date of grant (which will also be the exercise price of
the option). These options expire at the earlier of the tenth anniversary of the
date of grant or five years after the holder ceases to be a Medtronic director.
On the last day of each plan year, each non-employee director will be
credited with a number of deferred stock units (each representing the right to
receive one share of Medtronic stock) equal to one-half of the amount of the
annual retainer divided by the average of the fair market value of a share of
Medtronic stock for the last 20 trading days during the plan year. Dividends
paid on Medtronic stock are credited to a director's stock unit account in the
form of additional stock units. The balance in a director's stock unit account
will be distributed to the director in the form of shares of Medtronic stock
upon resignation or retirement from the Board, in a single distribution or, at
the director's option, in five equal annual distributions.
On the date he or she first becomes a director, each new non-employee
director also receives a one-time initial stock option grant for a number of
shares of Medtronic stock equal to two times the amount of the annual retainer
divided by the fair market value of a share of Medtronic stock on the date of
grant (which will also be the exercise price of such option). These options
expire at the earlier of the tenth anniversary of the date of grant or five
years after the holder ceases to be a Medtronic director.
All of the non-employee director stock options described above vest and are
exercisable in full on the date of grant, except that a director initially
appointed by the Board will generally not be entitled to exercise any such
option until the director has been elected to the Board by Medtronic's
shareholders.
On April 27, 2001, Mr. George completed his tenure as Chief Executive
Officer of the Company. He continues to serve as Chairman of the Board of
Directors of the Company through April 2002. Mr. George will be paid a retainer
of $500,000 for his services. In addition, in recognition of his years of
service to the Company, he will be provided with an office and secretarial
support through 2007.
As part of its overall program to promote charitable giving, the Medtronic
Foundation matches gifts by directors to qualified educational institutions up
to $7,000 per fiscal year. In addition, for any individual who became a director
prior to July 1, 1998 and has served five or more years at the time of his or
her death, Medtronic will contribute $1 million to charitable institutions
recommended by the director at the time of death.
CERTAIN TRANSACTIONS
Medtronic uses Carlson Wagonlit Travel, which was selected through a
competitive bidding process, as its travel agency for Company business. Dr. Glen
Nelson, who is Vice Chairman and a director of the Company, is a director of
Carlson Holdings, Inc., a family-owned business which includes Carlson Wagonlit
Travel. Members of Dr. Nelson's family are owners and officers of Carlson
Companies, Inc. Medtronic paid fees totaling approximately $1,839,000 to Carlson
Wagonlit Travel for services in fiscal 2001. Management believes that these
transactions were on terms no less favorable to Medtronic than if made with
unaffiliated third parties.
9
Medtronic has arrangements with Carlson Holdings, Inc. and Snowbird
Aviation LLC to provide Medtronic with the use of a private aircraft for
business purposes. Dr. Glen Nelson indirectly owns a 50% interest in Snowbird
Aviation in addition to his interest in Carlson Holdings, Inc., described above.
Medtronic paid fees totaling approximately $300,000 under these arrangements in
fiscal 2001. Management believes that these arrangements are on terms no less
favorable to Medtronic than if made with unaffiliated third parties.
SHARE OWNERSHIP INFORMATION
5% OWNERS. To the best of Medtronic's knowledge, no shareholder
beneficially owned more than 5% of Medtronic's Common Stock as of July 31, 2001.
MANAGEMENT SHAREHOLDINGS. The following table shows the number of shares of
Medtronic common stock beneficially owned as of July 31, 2001 by Medtronic's
directors, executive officers identified in the Summary Compensation Table
below, and all directors and executive officers as a group.
OF SHARES BENEFICIALLY
AMOUNT AND NATURE OF OWNED, AMOUNT THAT MAY BE
BENEFICIAL ACQUIRED WITHIN 60 DAYS
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2) BY OPTION EXERCISE
------------------------ -------------------- -------------------------
Michael R. Bonsignore ................. 20,657 13,170
William R. Brody, Ph.D., M.D. ......... 34,512 21,882
Paul W. Chellgren ..................... 30,115 26,124
Arthur D. Collins, Jr.(3) ............. 1,775,061 1,183,417
Frank L. Douglas, M.D., Ph.D. ......... 500 0
William W. George(4) .................. 3,757,291 1,923,030
Antonio M. Gotto, Jr., M.D., D.Phil ... 97,039 82,664
Bernadine P. Healy, M.D. .............. 68,279 46,914
Stephen H. Mahle ...................... 576,004 302,468
Glen D. Nelson, M.D.(5) ............... 2,579,381 1,856,093
Denise M. O'Leary ..................... 0 0
Jean-Pierre Rosso ..................... 18,691 16,562
Robert L. Ryan ........................ 850,385 807,420
Jack W. Schuler ....................... 97,867 52,392
Gordon M. Sprenger .................... 107,015 87,358
Directors and executive officers
as a group (22 persons) .............. 11,163,694 7,252,464
----------------------
(1) No director or executive officer beneficially owns more than 1% of the
shares outstanding. Medtronic's directors and executive officers as a group
beneficially own approximately 0.9% of the shares outstanding.
(2) Amounts include the shares shown in the last column, which are not
currently outstanding but are deemed beneficially owned because of the
right to acquire them pursuant to options exercisable within 60 days (on or
before September 29, 2001).
(3) Mr. Collins disclaims beneficial ownership of 10,000 shares included in the
above table which are held by the Collins Family Foundation, a charitable
trust of which he is one of the trustees.
(4) Mr. George disclaims beneficial ownership of 213,718 shares included in the
above table which are held by the George Family Foundation, a charitable
trust of which he is one of the trustees, and of 124,772 shares included in
the above table underlying currently exercisable options transferred by Mr.
George to members of his immediate family.
(5) Dr. Nelson disclaims beneficial ownership of 197,670 shares included in the
above table underlying currently exercisable options transferred by Dr.
Nelson to members of his immediate family.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Based upon a
review of reports and written representations furnished to it, Medtronic
believes that during fiscal year 2001 all filings with the Securities and
Exchange Commission by its executive officers and directors complied with
requirements for reporting ownership and changes in ownership of Medtronic's
common stock pursuant to Section 16(a) of the Securities Exchange Act of 1934,
except for three individuals who inadvertently did not file timely reports. Mr.
George did not file a timely report for the sale of stock by his son in
10
December 2000, Dr. Douglas did not file a timely report for the purchase of
stock in February 2001, and Mr. Rasdal did not file a timely report for receipt
of a restricted stock award in February 2000. The reports were promptly filed
upon discovery of the oversight.
REPORT OF THE COMPENSATION COMMITTEE ON
FISCAL 2001 EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Committee of the Board of Directors (the "Committee") is
comprised solely of directors who are not current or former employees of
Medtronic. The Committee is responsible for establishing the compensation
policies and evaluating the compensation programs for Medtronic's executive
officers and other key employees. The Committee periodically engages independent
compensation consultants to assist them in this process. In carrying out its
duties, the Committee intends to make all reasonable attempts to comply with the
requirements to exempt executive compensation from the $1 million deduction
limitation under Section 162(m) of the Internal Revenue Code, unless the
Committee determines that such compliance in given circumstances would not be in
the best interests of Medtronic and its shareholders.
COMPENSATION PHILOSOPHY
The compensation program for executive officers is designed to
* Emphasize performance-based compensation
* Encourage strong financial performance by establishing aggressive
goals for target performance and highly leveraged incentive programs
* Encourage executive stock ownership and alignment with shareholder
interests by providing a significant portion of compensation in
Medtronic common stock
The principal elements of the program consist of base salary, annual
incentives and long-term incentives in the form of stock options, performance
shares and restricted stock. Medtronic's philosophy is to position the aggregate
of these elements at a level which is commensurate with Medtronic's size and
performance relative to other leading medical equipment and pharmaceutical
companies, as well as a larger group of general industry companies. The
Committee periodically reviews the reasonableness of total compensation levels
and mix using public information from comparator company proxy statements and
survey information from credible general industry surveys.
BASE SALARY. The Committee annually reviews and approves the base salaries
of executive officers, taking into consideration individual performance,
retention, the level of responsibility, the scope and complexity of the position
and competitive practice.
ANNUAL INCENTIVE AWARDS. Executive officers are eligible for annual
incentives under the shareholder approved Management Incentive Plan. This is a
formula-based plan with awards based on corporate, geography, and business unit
performance. For fiscal 2001, corporate operating performance was assessed
against target measures of diluted earnings per share, revenue growth and
after-tax return on net assets, with these measures given weights of 50%, 30%
and 20%, respectively. Business unit financial performance was assessed against
target measures of earnings before interest and taxes, revenue growth, and
controllable asset turnover, with these measures assigned respective weights
that vary for each participant. For fiscal 2001, executive officers were
eligible for Management Incentive Plan target awards ranging from 35% to 90% of
base salary. Final awards can range from 0% to 230% of the target amounts, and a
threshold level of performance is required before any payout occurs. For fiscal
2001, the CEO was eligible to receive a target award of 90% of base salary under
the Management Incentive Plan. Annual performance was 96% of target.
STOCK OPTIONS. Stock options are granted annually to executive officers.
Target awards are based on pre-established grant guidelines that are calibrated
to competitive standards. Individual awards vary based on the individual's
responsibilities and performance, ability to impact financial performance and
future potential. All grants are made at 100% of fair market value.
11
PERFORMANCE SHARES. Senior executives are eligible for grants of
performance shares under the Performance Share program. Grants are made annually
for overlapping three-year performance periods. Grant targets range from 30% to
50% of base salary. Once a threshold level of performance is attained, final
awards can range from 20% to 180% of the target amounts. The 2001-2003 cycle
will be based on performance measures of diluted earnings per share (40%),
return on net assets (40%) and revenue growth (20%).
Performance shares earned for the 1999-2001 cycle were based on basic
earnings per share (40%), after-tax return on net assets (40%) and revenue
growth (20%). For the three-year cycle ended in fiscal 2001, Medtronic's
cumulative earnings per share performance was above the maximum of the
performance targets. Average after-tax return on net assets and revenue growth
were above target. Consequently, the payout for this cycle for all executive
officers, including the CEO, was 156% of the target award.
The value of the award is based on the average price of Medtronic's common
stock for the last 20 trading days of the performance cycle, up to a maximum of
three times the price at the date of grant. Half of the award is paid in
Medtronic common stock, with the other half paid in cash or Medtronic common
stock at the discretion of the Committee. In fiscal 2001, the CEO received a
Performance Share grant with a target payout equal to 50% of his base salary.
Performance objectives for the 2001-2003 performance cycle are consistent with
those for all program participants.
STOCK OPTION EXCHANGE PROGRAM. To encourage stock ownership by executives,
Medtronic offers a program which allows executives to elect to receive stock
options in lieu of some or all of the cash compensation earned under the
Management Incentive Plan and the Performance Share program. Currently under the
program, participants receive an option to acquire $4 of stock at market value
for every $1 of compensation exchanged. Stock options granted to named
executives in fiscal 2001 under this program are disclosed in the "Option/SAR
Grants in Last Fiscal Year" table on page 15 of this Proxy Statement.
ADJUSTMENTS FOR ACQUISITIONS AND NON-RECURRING CHARGES. In determining
award payments with respect to Medtronic's short-term and long-term incentive
programs, the Committee has adopted a longstanding practice of excluding from
the calculation of performance results certain acquisitions and non-recurring
items of income or loss. Consistent with this practice, the performance results
for fiscal 2001 may exclude all or a portion of certain acquisitions made during
the year, as well as all of the non-recurring charges related to those
acquisitions or other matters such as litigation settlements.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. The CEO's compensation is
comprised of base salary, annual incentive and long-term incentives. The
Committee establishes pay levels and opportunity in the same manner as for other
executive officers described above.
The CEO received a 15% merit increase to base salary effective at the
beginning of fiscal 2001. In determining the base salary for the CEO, the
Committee specifically considered annual operating performance (for fiscal
2000), strategic planning and succession planning for senior management.
The CEO's base salary, annual incentive and long-term incentive
compensation are described above in "Report of the Compensation Committee on
Fiscal 2001 Executive Compensation -- Base Salary, Annual Incentive Awards and
Performance Shares."
12
CONCLUSION
Consistent with its compensation philosophy, the Committee believes the
executive officer compensation program provides incentive to attain strong
financial performance and is strongly aligned with shareholder interests. The
Committee believes that Medtronic's compensation program directs the efforts of
Medtronic's executive officers toward the continued achievement of growth and
profitability for the benefit of the Company's shareholders.
COMPENSATION COMMITTEE:
Michael R. Bonsignore, Chair Jean-Pierre Rosso
Paul W. Chellgren Jack W. Schuler
Bernadine P. Healy, M.D.
SHAREHOLDER RETURN PERFORMANCE GRAPH
The graph and table below compare the cumulative total shareholder return
on Medtronic's common stock with the cumulative total return on the S&P 500
Index and the S&P Health Care (Medical Products and Supplies) Industry for the
five-year period beginning April 30, 1996. The graph and table assume that $100
was invested on that date in Medtronic's common stock, the S&P 500 Index and the
S&P Health Care (Medical Products and Supplies) Industry Index and that all
dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG MEDTRONIC,
S&P 500 AND S&P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) INDUSTRY INDEX
[PLOT POINTS CHART]
April 1996 April 1997 April 1998 April 1999 April 2000 April 2001
----------------------------------------------------------------------------------------
MEDTRONIC $100.00 $131.18 $201.73 $274.85 $398.40 $343.47
S&P 500 100.00 125.05 176.37 214.86 236.62 205.94
S&P HEALTH CARE 100.00 116.34 166.31 213.60 234.38 224.92
----------------------------------------------------------------------------------------
13
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years ended April 27, 2001, and April 30, 2000 and 1999
awarded to or earned by the Chief Executive Officer and each of the other four
most highly compensated executive officers of the Company. At the end of fiscal
2001, Mr. George completed his tenure as Chief Executive Officer and Mr. Collins
became President and Chief Executive Officer.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------- --------------------------- -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARs PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(2)(3)(4) ($)(1) ($)(5) (#)(2)(3)(4)(6) ($)(6) ($)(7)
--------------------------- ------ ---------- ------------ ------------ ---------- --------------- -------- ------------
William W. George 2001 $1,000,000 $860,310 $ -- $ -- 384,398 $ -- $52,043
Chairman and Chief 2000 870,000 698,582 -- -- 323,030 -- 49,683
Executive Officer 1999 800,000 329,480 -- -- 256,176 -- 40,530
Arthur D. Collins, Jr. 2001 825,000 630,894 -- -- 177,812 227,109 43,694
President and Chief 2000 760,000 647,782 -- -- 221,413 -- 43,581
Operating Officer 1999 700,000 430,203 -- -- 180,380 -- 35,515
Glen D. Nelson, M.D. 2001 551,339(8) -- 7,514 -- 484,916 -- 34,626
Vice Chairman 2000 575,000 -- 11,862 57,550 203,509 -- 36,373
1999 530,000 -- 5,958 -- 207,264 -- 29,057
Robert L. Ryan 2001 445,000 -- -- -- 120,915 -- 25,140
Senior Vice President 2000 420,000 -- -- -- 120,227 -- 27,947
& Chief Financial 1999 390,000 -- -- -- 111,700 -- 22,533
Officer
Stephen H. Mahle 2001 425,000 147,416 1,626 -- 75,653 -- 24,989
Senior Vice President & 2000 370,000 289,988 2,317 -- 85,902 -- 26,517
President, Cardiac 1999 290,000 128,992 1,164 -- 64,696 -- 17,936
Rhythm Management
-----------------------
(1) Amounts payable by the Company in above-market interest under deferred
compensation plan.
(2) "Bonus" column does not include fiscal 2001 cash bonus payments of $408,169
and $255,225, which Messrs. Nelson and Ryan, respectively, elected to
forego in order to receive stock options granted in lieu of part or all of
their cash bonus compensation under the Management Incentive Plan. These
stock options are included in the "Securities Underlying Options/SARs"
column. See "Report of the Compensation Committee on Fiscal 2001 Executive
Compensation -- Stock Option Exchange Program" and "Option/SAR Grants in
Last Fiscal Year," below.
(3) "Bonus" column does not include fiscal 2000 cash bonus payments of
$100,000, $490,098 and $275,373, which Messrs. George, Nelson and Ryan,
respectively, elected to forego in order to receive stock options granted
in lieu of part or all of their cash bonus compensation under the
Management Incentive Plan. These stock options are included in the
"Securities Underlying Options/SARs" column. See "Report of the
Compensation Committee on Fiscal 2001 Executive Compensation -- Stock
Option Exchange Program."
(4) "Bonus" column does not include fiscal 1999 cash bonus payments of
$200,000, $325,725 and $184,373 which Messrs. George, Nelson and Ryan,
respectively, elected to forego in order to receive stock options granted
in lieu of part or all of their cash bonus compensation under the
Management Incentive Plan. These stock options are included in the
"Securities Underlying Options/SARs" column. See "Report of the
Compensation Committee on Fiscal 2001 Executive Compensation -- Stock
Option Exchange Program."
(5) Mr. George and Mr. Collins each hold restricted stock units pursuant to
grants made in August 1997. Mr. George's units will be paid out in January
2003 and Mr. Collins' units will be paid out upon his retirement. As of
4/27/01, Mr. George and Mr. Collins each held stock units representing the
right to receive 301,371 shares (which reflects crediting of dividends)
valued at approximately $13,335,685 (based on a closing stock price of
$44.25 per share on 4/27/01). Dr. Nelson received an award of restricted
stock with a one-year vesting period in August 1999 upon his induction into
the Company's Bakken Society. The shares vested in August 2000.
(6) "LTIP Payouts" column includes the value of both cash and stock earned upon
payment of performance share awards as described in "Other Long-Term
Incentive Awards" below. The column does not include the value of cash
and/or stock earned upon payment of performance share awards which the
executives elected to forego
14
in order to receive stock options granted in lieu of part or all of such
compensation. Such amounts foregone by Messrs. George, Collins, Nelson,
Ryan and Mahle, respectively, for each of the three-year performance cycles
ending in the following fiscal years were: fiscal 2001, $1,038,112,
$681,327, $687,758, $404,998, and $301,178, respectively; fiscal 2000,
$1,742,436, $1,306,972, $1,172,364, $736,901 and $449,002, respectively;
fiscal 1999, $1,350,790, $892,044, $892,044, $593,399 and $358,115,
respectively. Those stock options are included in the "Securities
Underlying Options/SARs" column. See "Report of the Compensation Committee
on Fiscal 2001 Executive Compensation -- Performance Shares" and "Stock
Option Exchange Program" and "Option/SAR Grants in Last Fiscal Year,"
below.
(7) Amounts in this column for fiscal 2001 include the following: the Company
contributed $4,250 to each of the named executive officers in shares of
Company stock under the employee stock ownership plan; the Company
contributed $7,140 to each of the named executive officers to match
employee contributions under the 401(k) supplemental retirement plan; and
the Company contributed $40,653, $32,304, $23,236, $13,750 and $13,599 to
Messrs. George, Collins, Nelson, Ryan and Mahle, respectively, toward the
right to receive shares of Company stock under the non-qualified
supplemental benefit plan.
(8) "Salary" column does not include fiscal 2001 salary of $58,661 which Dr.
Nelson elected to forego in order to receive stock options granted in lieu
of part of his base salary. These stock options are included in the
"Securities Underlying Options/SARs" column. See "Report of the
Compensation Committee on Fiscal 2001 Executive Compensation -- Stock
Option Exchange Program" and "Option/SAR Grants in Last Fiscal Year,"
below.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth for each of the named executives the stock
options granted by Medtronic in fiscal 2001 and the potential value of these
stock options determined pursuant to Securities and Exchange Commission
requirements. No stock appreciation rights were granted to the named executives
in fiscal 2001.
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------- ----------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARs EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARs EMPLOYEES IN PRICE EXPIRATION 0% 5% 10%
NAME (#) FISCAL YEAR ($/SH) DATE ($) ($)(7) ($)(7)
---- ------------ ------------ -------- ---------- --- ----------- -----------
Mr. George ..... 290,557(1) 2.2% $51.625 10/26/10 $0 $ 9,433,423 $23,906,145
93,841(3) 0.7 44.250 04/27/11 0 2,611,462 6,617,959
Mr. Collins .... 116,223(1) 0.9 51.625 10/26/10 0 3,773,376 9,562,474
61,589(3) 0.5 44.250 04/27/11 0 1,713,935 4,343,447
Dr. Nelson ..... 58,112(1) 0.4 51.625 10/26/10 0 1,886,704 4,781,278
36,897(2) 0.3 44.250 04/27/11 0 1,026,791 2,602,091
3,887(5) 0.0(6) 60.375 12/31/10 0 147,587 374,016
323,849(4) 2.4 60.375 12/31/10 0 12,296,389 31,161,464
62,171(3) 0.5 44.250 04/27/11 0 1,730,131 4,384,492
Mr. Ryan ....... 46,490(1) 0.3 51.625 10/26/10 0 1,509,376 3,825,056
23,072(2) 0.2 44.250 04/27/11 0 642,061 1,627,109
14,742(4) 0.1 60.375 12/31/10 0 559,747 1,418,508
36,611(3) 0.3 44.250 04/27/11 0 1,018,832 2,581,921
Mr. Mahle ...... 48,427(1) 0.4 51.625 10/26/10 0 1,572,264 3,984,426
27,226(3) 0.2 44.250 04/27/11 0 757,661 1,920,062
---------------------
(1) These stock options granted to the named executive officers have an
exercise price equal to the fair market value on the date of grant and vest
annually in 25% increments.
(2) These stock options were granted in lieu of all or part of the cash
compensation earned for fiscal 2001 under the Company's annual incentive
plan. Because the executives elected to forego cash compensation to receive
the options, which were granted on 4/27/01, the options were 100% vested at
grant. See "Report of the Compensation Committee on Fiscal 2001 Executive
Compensation -- Stock Option Exchange Program."
(3) These stock options were granted in lieu of all or part of the cash and/or
stock compensation earned upon payment of performance share awards for the
fiscal 1999-2001 performance cycle under the Company's long-term incentive
plan. Because the executives elected to forego cash and/or stock
compensation to receive the options, which were granted on 4/27/01, the
options were 100% vested at grant. See "Report of the Compensation
Committee on Fiscal 2001 Executive Compensation -- Stock Option Exchange
Program."
(4) These stock options were granted in lieu of all or part of the cash and/or
stock compensation deferred in fiscal 2001 and prior years under the
Company's Capital Accumulation Plan. Because the executives elected to
15
forego compensation to receive the options, which were granted on 12/31/00,
the options are 100% vested at grant. See "Report of the Compensation
Committee on Fiscal 2001 Executive Compensation -- Stock Option Exchange
Program."
(5) These stock options were granted in lieu of $58,661 of deferred base salary
that Dr. Nelson elected to forego in fiscal 2001. Because Dr. Nelson
elected to forego cash compensation to receive the options, which were
granted on 12/31/00, the options were 100% vested at grant. See "Report of
the Compensation Committee on Fiscal 2001 Executive Compensation -- Stock
Option Exchange Program."
(6) The actual number is .03%.
(7) The hypothetical potential appreciation shown in these columns reflects the
required calculations at annual rates of 5% and 10% set by the Securities
and Exchange Commission, and therefore is not intended to represent either
historical appreciation or anticipated future appreciation of Medtronic's
common stock price.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth for each of the named executive officers the
value realized from stock options exercised during fiscal 2001 and the number
and value of exercisable and unexercisable stock options and stock appreciation
rights held at April 27, 2001.
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED VALUE OF
OPTIONS/SARs UNEXERCISED IN-THE-MONEY
AT FISCAL OPTIONS/SARs AT
YEAR-END (#) FISCAL YEAR-END ($)(1)
SHARES VALUE --------------------- ------------------------
ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- --------------------- ------------------------
Mr. George(2) ..... 164,800 $8,438,914 1,913,918/1,021,352 $51,361,282/14,291,134
Mr. Collins ....... 0 0 1,175,297/802,590 31,706,369/13,576,060
Dr. Nelson(3) ..... 0 0 1,850,853/331,074 36,016,858/5,083,786
Mr. Ryan .......... 0 0 802,892/197,904 16,946,182/2,995,651
Mr. Mahle ......... 0 0 300,268/168,847 6,085,467/2,205,838
--------------------
(1) Value of unexercised in-the-money options is determined by multiplying the
difference between the exercise price per share and $44.25, the closing
price per share on 4/27/01, by the number of shares subject to such
options. Amounts include stock options granted on 4/27/01 in lieu of cash
compensation earned for fiscal 2001 under the Company's annual incentive
plan and cash and/or stock compensation earned upon payment of performance
share awards for the fiscal 1999-2001 performance cycle as described in
"Other Long-Term Incentive Awards" below. See "Report of the Compensation
Committee on Fiscal 2001 Executive Compensation -- Stock Option Exchange
Program."
(2) Includes exercisable options to purchase an aggregate of 124,772 shares
transferred to members of Mr. George's immediate family. Mr. George
disclaims beneficial ownership of such options.
(3) Includes exercisable options to purchase an aggregate of 197,670 shares
transferred to members of Dr. Nelson's immediate family. Dr. Nelson
disclaims beneficial ownership of such options.
OTHER LONG-TERM INCENTIVE AWARDS
The following table sets forth the number of performance share units
granted to each of the named executives in fiscal 2001 under Medtronic's 1994
Stock Award Plan and the performance-based award formula under such Plan.
16
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR(1)
ESTIMATED FUTURE PAYOUTS
NUMBER OF UNDER NON-STOCK PRICE
SHARES, UNITS PERFORMANCE OR BASED-PLANS
OR OTHER OTHER PERIOD -------------------------------
RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT (#) (#) (#)
---- ------------- ---------------- -------------------------------
Mr. George ......... 9,347 5/1/00-4/25/03 1,870 9,347 16,825
Mr. Collins ........ 7,712 5/1/00-4/25/03 1,543 7,712 13,882
Dr. Nelson ......... 5,702 5/1/00-4/25/03 1,141 5,702 10,264
Mr. Ryan ........... 3,328 5/1/00-4/25/03 666 3,328 5,991
Mr. Mahle .......... 3,178 5/1/00-4/25/03 636 3,178 5,721
---------------------
(1) Payout of awards is based on achieving specified levels of designated
performance objectives during a three-year performance cycle. Payout can
range from 0% to 180% of units granted, with 20% and 180% as the threshold
and maximum payouts, respectively. Payout of 100% of the units granted
represents the target payout. Awards are payable in Common Stock. The value
of an award is determined when it is earned based on the average fair
market value per share for the last 20 trading days of the performance
cycle. The Company offers a program which allows executives to receive
stock options in lieu of compensation earned upon payment of performance
share awards. See "Report of the Compensation Committee on Fiscal 2001
Executive Compensation -- Performance Shares" and "-- Stock Option Exchange
Program," above.
PENSION PLAN
Medtronic's pension plan is a defined benefit, tax qualified retirement
plan covering most U.S. employees. It generally provides an annual benefit equal
to a percentage of the average of the highest five consecutive years of
compensation (including certain incentive compensation) in the final ten years
of an employee's service, offset by a Social Security allowance as published
each year by the Internal Revenue Service. The table below illustrates the
annual benefits payable to participants who retire at age 65 with the indicated
years of service with Medtronic and with the indicated five-year highest average
annual compensation. The benefits have been calculated on a 50% joint and
survivor annuity basis. The compensation considered in determining the pensions
payable to the below-named executive officers is the compensation shown in the
"Salary" and "Bonus" columns of the Summary Compensation Table on page 14.
FIVE-YEAR
AVERAGE YEARS OF SERVICE WITH THE COMPANY
ANNUAL --------------------------------------------------------
COMPENSATION(1) 15 20 25 30 35
--------------- -------- -------- -------- -------- --------
$ 200,000 $ 33,426 $ 44,568 $ 55,709 $ 66,851 $ 77,993
400,000 69,906 93,208 116,509 139,811 163,113
600,000 106,386 141,848 177,309 212,771 248,233
800,000 142,866 190,488 238,109 285,731 333,353
1,000,000 179,346 239,128 298,909 358,691 418,473
1,200,000 215,826 287,768 359,709 431,651 503,593
1,400,000 252,306 336,408 420,509 504,611 589,713
-----------------------
(1) Calculated by considering a participant's compensation levels during the
ten-year period immediately preceding retirement. The credited years of
service (rounded to the nearest whole year) for the executive officers
named in the Summary Compensation Table were as follows at April 27, 2001:
Mr. George, 12 years; Mr. Collins, 9 years; Dr. Nelson, 15 years; Mr. Ryan,
8 years; and Mr. Mahle, 28 years.
The Internal Revenue Code imposes certain limits on the amount of benefits
that may be paid from tax qualified pension plans like Medtronic's plan.
Medtronic's non-qualified supplemental benefit plan has been established to
restore benefits to executives who may be affected by those limits. The
non-qualified supplemental benefit plan provides retirees with supplemental
benefits so that, in general, they will receive total benefits equal to the
level of benefits that would have been payable under Medtronic's pension plan if
the Internal Revenue Code limits had not been in effect and if the executive had
not elected to defer compensation under Medtronic's deferred compensation
programs. The amounts shown in the pension plan table above include the
additional retirement benefits provided under the non-qualified supplemental
benefit plan.
17
EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
CHANGE IN CONTROL ARRANGEMENTS. Medtronic's executive officers, including
those named in the Summary Compensation Table, have change in control agreements
(the "Agreements") with Medtronic. The Agreements operate only upon the
occurrence of a "change in control" as described below. Absent a "change in
control," the Agreements do not require Medtronic to retain the executives or to
pay them any specified level of compensation or benefits.
Each Agreement provides that for three years after a "change in control"
there will be no adverse change in the executive's salary, bonus, opportunity,
benefits or location of employment. If during this three-year period the
executive's employment is terminated by Medtronic other than for cause, or if
the executive terminates his employment for good reason (as defined in the
Agreements, and including compensation reductions, demotions, relocation and
excess travel) or voluntarily during the 30-day period following the first
anniversary of the "change in control," the executive is entitled to receive
payment of accrued salary and annual and long-term incentives through the date
of termination and, except in the event of death or disability, a lump sum
severance payment ("Lump Sum Payment") equal to three times (two times in the
event of termination by the executive in the aforementioned 30-day period) the
sum of his base salary and annual bonus. The executive is also entitled to the
continuation of certain insurance and other welfare plan benefits for a period
of time not exceeding three (or, in certain cases, two) years. Further, if the
executive is required to pay any federal excise tax on the payments associated
with the change in control, an additional payment ("gross-up") is required in an
amount such that after the payment of all taxes, income and excise, the
executive will be in the same after-tax position as if no such excise tax had
been imposed.
Generally, and subject to certain exceptions, a "change in control" is
deemed to have occurred if: (a) a majority of Medtronic's Board of Directors
becomes comprised of persons other than persons for whose election proxies have
been solicited by the Board, or who are then serving as directors appointed by
the Board to fill vacancies caused by death or resignation (but not removal) of
a director or to fill newly created directorships; (b) another party becomes the
beneficial owner of at least 30% of Medtronic's outstanding voting stock; or (c)
Medtronic merges or consolidates with another party (other than certain limited
types of mergers), or exchanges shares of voting stock of Medtronic for shares
of another corporation pursuant to a statutory exchange, sells or otherwise
disposes of all or substantially all of Medtronic's assets, or is liquidated or
dissolved.
In addition, similar events also constitute a "change in control" under
certain of Medtronic's compensation plans. If a "change in control" of Medtronic
occurs, awards under Medtronic's Management Incentive Plan will accelerate and,
subject to certain limitations set forth in the plan, each participant will be
entitled to a final award based on certain assumptions as to target performance
and salary. Medtronic's stock award plans and related agreements provide that in
the event of a "change in control" of Medtronic, all restrictions under
outstanding restricted stock awards will immediately lapse and the restricted
stock period with respect to all such shares will be deemed to have expired, and
performance share awards will immediately vest and pay out in a pro rata amount
based on the portion of the performance period elapsed prior to the "change in
control" and on certain assumptions as to the anticipated performance which
would have been achieved during the remainder of the performance period.
Medtronic's stock award plans and related agreements also provide for or
permit acceleration of the exercisability of outstanding stock options upon the
occurrence of certain events (such as certain tender offers or exchange offers
for Medtronic's stock, certain changes in control of Medtronic, a merger or
consolidation of Medtronic with another entity, a sale of substantially all of
Medtronic's assets or certain plans therefore), or at the discretion of the
Board of Directors. In addition, limited stock appreciation rights ("Limited
Rights") previously granted under the stock option plans are exercisable, with
certain limitations, at any time within the 30-day period following a "change in
control" of Medtronic. Upon exercise of Limited Rights, the holder is entitled
to receive an amount in cash for each share with respect to which the Limited
Rights are exercised equal to the difference between the option exercise price
per share of stock covered by the underlying option and the fair market value
per share as of the date of exercise. If Limited Rights are exercised, the
underlying option will no longer be exercisable to the extent of the number of
shares with respect to which the Limited Rights were exercised.
18
If a "change in control" occurs, subject to certain limitations,
Medtronic's contributions to the employee stock ownership plan for that year
will equal the greater of Medtronic's target percentage contribution (currently
2.5% of aggregate covered employee compensation in fiscal 2001) or, if a "change
in control" occurs after the first quarter of a plan year, the percentage
contribution Medtronic would have made upon completion of the plan year based on
performance as most recently projected by Medtronic prior to the "change in
control" and disregarding the effects of the "change in control." If a "change
in control" occurs during a plan year, subject to certain limitations,
Medtronic's matching contribution to the 401(k) supplemental retirement plan
shall equal the greater of Medtronic's target percentage matching contribution
(currently 75% of the first 6% of a participant's contribution in fiscal 2001),
or if the "change in control" occurs after the first quarter of a plan year, the
percentage contribution Medtronic would have made upon completion of the plan
year based on performance as most recently projected by Medtronic prior to the
"change in control" and disregarding the effects of the "change in control."
OTHER EMPLOYMENT ARRANGEMENTS. On April 27, 2001, Mr. George completed his
tenure as Chief Executive Officer of the Company. He continues to serve as
Chairman of the Board of Directors of the Company through April 2002. Mr. George
will be paid a retainer of $500,000 for his services. In addition, in
recognition of his years of service to the Company, he will be provided with an
office and secretarial support through 2007.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reports to and acts on behalf of the Board of Directors
by providing oversight of the financial management, independent auditors and
financial reporting procedures of the Company. The Committee consists of the six
members listed below, and each is independent as defined by New York Stock
Exchange Rules. The Committee has adopted a written charter describing its
functions which has been approved by the Board and is set forth in Appendix A to
the Proxy Statement.
The Company's management is responsible for preparing the Company's
financial statements and the overall reporting process, including the Company's
system of internal controls. The Company's independent auditors,
PricewaterhouseCoopers LLP, are responsible for auditing the financial
statements and expressing an opinion on the conformity of the audited financial
statements with generally accepted accounting principles.
In this context, the Committee has held discussions with management and the
independent auditors. Management represented to the Committee that the Company's
consolidated financial statements were prepared in accordance with generally
accepted accounting principles, and the Committee has reviewed and discussed the
audited financial statements with management and the independent auditors.
The Committee has discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committees). The independent auditors provided to the
Audit Committee the written disclosures and letter required by Independent
Standards Board Standard No. 1 (Independence Discussions with Audit Committees).
The Committee considered the compatibility of non-audit services with the
auditors' independence and discussed with the auditors their independence.
Based on the considerations above, the Committee recommended to the Board
of Directors, and the Board has approved, the inclusion of the audited financial
statements in the Company's Annual Report on Form 10-K for fiscal 2001 and the
appointment of PricewaterhouseCoopers LLP as the Company's independent auditors
for fiscal 2002.
AUDIT COMMITTEE:
Paul W. Chellgren, Chair Denise M. O'Leary
William R. Brody, M.D., Ph.D. Jean-Pierre Rosso
Bernadine P. Healy, M.D. Jack W. Schuler
19
PROPOSAL 2 -- APPROVAL OF SELECTION OF AUDITORS
Upon recommendation of its Audit Committee, Medtronic's Board has selected
Pricewaterhouse-Coopers LLP, certified public accountants, as independent
auditors for Medtronic for the fiscal year ending April 26, 2002. That firm has
acted as independent auditors for Medtronic for more than 20 years, and the
Board considers it highly qualified. Although it is not required to do so, the
Board of Directors wishes to submit the selection of PricewaterhouseCoopers LLP
for shareholders' approval at the Meeting. If the shareholders do not give
approval, the Board will reconsider its selection.
Representatives of PricewaterhouseCoopers LLP will be present at the
Meeting, will have the opportunity to make a statement if they desire and will
be available to respond to appropriate questions.
AUDIT FEES
AUDIT FEES. The aggregate fees for professional services rendered by
PricewaterhouseCoopers in connection with their audit of our consolidated
financial statements for fiscal 2001 and their reviews of the consolidated
financial statements included in our Quarterly Reports on Form 10-Q for fiscal
2001 was approximately $2.3 million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES.
PricewaterhouseCoopers did not render any professional services related to
financial information systems design and implementation in fiscal 2001.
ALL OTHER FEES. The aggregate fees for all other services rendered by
PricewaterhouseCoopers in fiscal 2001 were approximately $5.5 million, of which
approximately $1.8 million was attributable to tax consulting services.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THIS
APPOINTMENT.
20
OTHER INFORMATION
EXPENSES OF SOLICITATION
Medtronic will bear the costs of soliciting proxies, including the
reimbursement to record holders of their expenses in forwarding proxy materials
to beneficial owners. Directors, officers and regular employees of Medtronic,
without extra compensation, may solicit proxies personally or by mail,
telephone, fax, telex, telegraph or special letter.
Medtronic has retained ChaseMellon Shareholder Services, L.L.C., a firm
that provides professional proxy soliciting services, to aid in the solicitation
of proxies for a fee of $10,000 plus reimbursement for certain out-of-pocket
expenses.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
In order for a shareholder proposal to be considered for inclusion in
Medtronic's proxy statement for the 2002 Annual Meeting, the written proposal
must be received by the Corporate Secretary at the Company's offices no later
than April 9, 2002. The proposal must comply with Securities and Exchange
Commission regulations regarding the inclusion of shareholder proposals in
company-sponsored proxy materials.
The Company's articles of incorporation provide that a shareholder may
present a proposal from the floor that is not included in the proxy statement if
proper written notice is received by the Corporate Secretary at the Company's
offices not less than 50 nor more than 90 days prior to the Annual Meeting date.
If less than 60 days notice of the meeting date is given, the submission will be
considered timely if it is received by the 10th day after notice of the meeting
is given. Similarly, the Company's articles of incorporation provide that a
shareholder may make a nomination for director, provided that the nomination is
received by the Company within the time period specified in the preceding two
sentences. Any such proposal or nomination must provide the information required
by the Company's articles of incorporation and comply with any applicable laws
and regulations.
All submissions to, or requests from, the Corporate Secretary should be
made to the Company's principal offices at 710 Medtronic Parkway, Minneapolis,
Minnesota 55432.
OTHER
Medtronic's 2001 Annual Report, including financial statements, is being
sent to shareholders of record as of July 31, 2001, together with this Proxy
Statement.
MEDTRONIC WILL FURNISH TO SHAREHOLDERS WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED APRIL 27, 2001, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, UPON RECEIPT OF WRITTEN REQUEST ADDRESSED
TO: INVESTOR RELATIONS DEPARTMENT, MEDTRONIC, INC., 710 MEDTRONIC PARKWAY,
MINNEAPOLIS, MINNESOTA 55432.
The Board of Directors knows of no other matters to be presented at the
Annual Meeting. If any other business properly comes before the Annual Meeting
or any adjournment thereof, the proxies will vote on that business in accordance
with their best judgment.
By Order of the Board of Directors,
/s/ David J. Scott
David J. Scott
Secretary
MEDTRONIC, INC.
21
APPENDIX A
MEDTRONIC, INC.
BOARD OF DIRECTORS
AUDIT COMMITTEE CHARTER
The purpose of the Audit Committee is to assist the Board of Directors in its
oversight of (1) the integrity of the financial reporting of the Company, (2)
the independence and performance of the Company's external and internal auditors
and (3) the Company's compliance with legal and regulatory requirements.
The Audit Committee shall consist of at least three members of the Board who
satisfy the membership requirements under the rules of the New York Stock
Exchange, as such requirements are interpreted by the Board in its business
judgment.
The Audit Committee shall have the authority to retain special legal, accounting
or other consultants to advise the Committee. The Audit Committee may request
any officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
On behalf of the Board, the Audit Committee shall:
1. Review the annual audited financial statements with management and the
independent auditor, including significant issues regarding accounting and
auditing principles and practices as well as the adequacy of internal
controls that could significantly affect the Company's financial
statements.
2. Review major changes to the Company's auditing and accounting principles
and practices as suggested by the independent auditor, internal auditors or
management.
3. Meet periodically with management to review the Company's major financial
and business risk exposures and the steps management has taken to monitor
and control such exposures.
4. Advise the Board in selecting, evaluating or replacing the independent
auditor, who is ultimately accountable to the Board and the Audit
Committee, and review the fees of the independent auditor for audit and
non-audit services.
5. Receive and discuss with the independent auditor the auditor's periodic
reports regarding its independence and, if the Audit Committee so
determines, recommend that the Board take appropriate action to satisfy
itself of the independence of the auditor.
6. Meet with the independent auditor prior to the audit to review the scope
and planning of the audit.
7. Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of the
audit.
8. Review with the independent auditor any issues the auditor may have
encountered and any management letter provided by the auditor and the
Company's response to that letter. This review should include, among other
things, issues encountered in the course of audit work, including
restrictions on the scope of activities or access to required information,
and changes required in the planned scope of the internal audit.
9. Obtain from the independent auditor assurance that the audit was conducted
in a manner consistent with Section 10A of the Securities Exchange Act of
1934, as amended, which sets forth procedures to be followed in the audit
of financial statements.
10. Review the appointment and replacement of the director of the internal
audit department.
11. Review significant adverse audit findings made by the internal audit
department and management's responses.
12. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
13. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's Code of Conduct.
A-1
14. Review with the Company's General Counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators or
governmental agencies.
15. Meet at least annually with the chief financial officer, the controller,
the director of the internal audit department and the independent auditor
in separate executive sessions.
16. Report its activities to the Board regularly and recommend action when
appropriate.
17. Review this Charter annually and recommend any changes to the Board for
approval.
The function of the Audit Committee is oversight. While the Audit Committee has
the responsibility and powers set forth in this Charter, it is not the duty of
the Audit Committee to plan or conduct audits or to determine that the Company's
financial statements are complete and accurate and are in accordance with
generally accepted accounting principles. This is the responsibility of
management and the independent auditor. It is also not the duty of the Audit
Committee to conduct investigations, to resolve disagreements, if any, between
management and the independent auditor, or to assure compliance with laws and
regulations and the Company's Code of Conduct.
A-2
This Proxy is Solicited by the Board of Directors of
MEDTRONIC, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AUGUST 30, 2001
The undersigned hereby appoints Arthur D. Collins, Jr. and David J. Scott, or
either of them, as proxies to represent the undersigned, with full power of
substitution, and hereby authorizes them to vote all shares of common stock of
Medtronic, Inc. which the undersigned is entitled to vote at the Annual Meeting
of Shareholders of Medtronic, Inc., to be held on Thursday, August 30, 2001 at
10:30 a.m. (CDT), at the Medtronic World Headquarters at 710 Medtronic Parkway,
Minneapolis (Fridley), Minnesota and any adjournments and postponements thereof.
You may vote at the Meeting if you were a shareholder of record at the close of
business on July 31, 2001.
THIS BALLOT, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. UNLESS OTHERWISE SPECIFIED, THE SHARES WILL BE
VOTED "FOR" EACH PROPOSAL.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE PROPOSALS.
(To be Signed on Reverse Side)
[LOGO] MEDTRONIC
WHEN LIFE DEPENDS ON MEDICAL TECHNOLOGY
C/O PROXY SERVICES
P.O. BOX 9141
FARMINGDALE, NY 11735
If you cannot attend the Meeting, you may vote your shares over the Internet or
by telephone, or by completing and promptly returning the enclosed proxy card in
the envelope provided. Internet and telephone voting procedures are described
below.
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
meeting date. Have your proxy card in hand when you access the web site. You
will be prompted to enter your 12-digit Control Number which is located below to
obtain your records and to create an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the meeting date. Have your proxy card in hand
when you call. You will be prompted to enter your 12-digit Control Number which
is located below and then follow the simple instructions the Vote Voice provides
you.
VOTE BY MAIL -
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Medtronic, Inc., c/o ADP, 51 Mercedes Way,
Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
MDTRNC KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
--------------------------------------------------------------------------------
MEDTRONIC, INC.
VOTE ON DIRECTORS
FOR WITHHOLD FOR ALL
1. To elect FOUR Class III directors for three- ALL ALL EXCEPT
year terms.
01) William R. Brody, M.D., Ph.D., [ ] [ ] [ ]
02) Paul W. Chellgren,
03) Arthur D. Collins, Jr.,
04) Antonio M. Gotto, Jr., M.D.
To withhold authority to vote, mark "For All
Except" and write the nominee's number on
the line below.
-------------------------------------------------
VOTE ON PROPOSALS
2. To approve the appointment of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP as the Company's
independent auditors. [ ] [ ] [ ]
3. To take action on any other business that
may properly be considered at the Meeting or
any adjournment thereof. [ ] [ ] [ ]
NOTE: Signature should agree with name on stock certificate as printed thereon.
Executors, administrators, trustees and other fiduciaries should so indicate
when signing.
-------------------------------------------- ---------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date