Table of Contents
has the expertise required to fulfill all of
its legal, regulatory and NYSE requirements, including the requirements for
each of its Committees.
In
identifying appropriate candidates to serve as a Director, the Board gives
particular weight to individuals with experience as a chief executive
officer. The Board believes that
individuals with chief executive officer experience are best able to mentor,
advise, evaluate, direct and decide when it is appropriate to replace the Companys
Chief Executive Officer, all of which are critical Board responsibilities. The Board also places great weight on
large-company experience when evaluating Director candidates. Such experience enables a Director to offer
insights to help the Company navigate the many issues that arise as it
continues its rapid growth. The Board
has not aimed to be comprised of individuals with niche expertise, such that
other members of the Board would defer to that member when issues arise within
their expertise. Rather, the Board
believes that the overall business acumen and experience of each Director,
working together with the rest of the Board, better serves the Company and its
shareholders.
Each
of our Directors has particular attributes and areas of expertise that are of
value to the Company and that, taken together, provide the strength of a
well-rounded Board. The following
describes the particular experience, qualifications, attributes or skills that
led the Board to conclude that each of our Directors should serve as a Director
of the Company.
Mr. Brown
has a unique background and skills that qualify him not only to serve on the
Board, but also to act as Presiding Director.
Mr. Brown served as the Chief Executive Officer of Stryker
Corporation from 1977 to 2004 and as Chairman from 1980 until his retirement in
2009. During his tenure as head of
Stryker, Mr. Brown turned a small medical instruments company with annual
sales of $17 million and 400 employees into a global orthopedics medical device
manufacturer that at the time of his retirement had annual sales of
approximately $6.7 billion and over 18,000 employees. Between 1979 and 2007, Stryker increased annual per share
earnings by at least 20 percent every year but two. From these experiences, Mr. Brown brings a particularly
strong understanding of the challenges and opportunities for building and
managing a global medical device company.
He brings a visionary yet disciplined approach to the Company and
provides invaluable leadership to the Board.
Mr. Devenuti
is currently the President of EMC Corporations Information Intelligence Group
(IIG), where he oversees all aspects of the IIG divisions operations,
including worldwide sales and services, channel strategy, product development,
marketing, strategic business and financial initiatives, IT, technical support
and the Total Customer Experience program.
Prior to this role, Mr. Devenuti served as Senior Vice President
and Chief Operating Officer of the CMA Division of EMC Corporation. Prior to joining EMC, Mr. Devenuti held
a variety of senior positions at Microsoft Corporation. As a result of his leadership roles with
Microsoft and EMC, Mr. Devenuti has extensive general business experience
and, in particular, experience with high growth companies in a high growth
industry. In addition,
Mr. Devenuti possesses a deep expertise in information technologies and in
creating and managing organizations to achieve operational excellence. This expertise has been particularly useful
to the Company as it has grown and needed to expand its systems and
infrastructure and build a more scalable business. Mr. Devenuti also qualifies as an audit committee financial
expert under applicable rules of the SEC, providing the Board with a
financially seasoned member of the Audit Committee.
Mr. Essig
is currently the Executive Chairman of the Board of Directors of Integra
LifeSciences Holdings Corporation, a manufacturer of medical devices and
implants, a position he has held since January 2012. Prior to such role, Mr. Essig served as Integras Chief Executive
Officer from December 1997 until January 2012 and its President from December
1997 until November 2010. In addition, he has served as a director since he
joined Integra in December 1997. Prior
to joining Integra, Mr. Essig supervised the medical technology practice
at Goldman, Sachs & Co. as a managing director. Mr. Essig has also served on the Board of Directors of the
Advanced Medical Technology Association, a trade association that represents
the medical device industry. In
addition to his demonstrated
seasoned leadership and experience as a chief executive officer, Mr. Essig
brings a broad strategic perspective in the medical device industry that is
valued by the Board and the Company.
8
Table of Contents
Mr. Garrett
has served as a Director of the Company since 1979 and is the longest tenured
Director of the Company. He was a
member and the managing partner of the Lindquist & Vennum law firm, where
he represented various companies, including St. Jude Medical from its initial
public offering in 1977 until 1995.
Mr. Garretts experiences also include representing and advising
companies on corporate governance matters and on merger and acquisition
activity. His special knowledge and
counsel in these areas is valued by the Board.
In addition, due to his long tenure with the Company, Mr. Garrett
provides the Board with valuable insight and perspective into the Companys
operational and management history.
Ms. Hill,
has an accomplished record with extensive experience in the managed healthcare
industry. Ms. Hill is currently an
Operating Partner of Moelis Capital Partners, a private equity firm, where she
focuses on healthcare-related investments and providing strategic and operating
support for Moelis healthcare portfolio companies. She previously served as Chief Executive Officer and a member of
the Board of Directors of ValueOptions, Inc., a managed behavioral health
company from March 2006 to September 2010.
Previously, Ms. Hill served as Chairman and Chief Executive Officer
of Woodhaven Health Services, an institutional pharmacy company, and President
and a member of the Board of Directors of Express Scripts, a Fortune 100
pharmacy benefits management company.
From these experiences, Ms. Hill brings deep management experience
and insight both generally and specific to the healthcare industry. In addition, Ms. Hills expertise in
understanding and evaluating benefits and compensation issues has proven to be
of great value to the Board.
Mr. Rocca
was selected to serve on the Board because of the global financial expertise he
attained through various senior financial and leadership positions at large
multinational public companies. He
served as Chief Financial Officer at Mallinckrodt, Inc., a $2.7 billion manufacturer of specialty medical technology
products, from 1994 until his retirement in 2000.
Prior to joining Mallinckrodt, from 1966
to 1994, Mr. Rocca worked at Honeywell, Inc., where he served in a variety
of finance roles, including Vice President of Finance for Honeywell Europe in
Brussels, Belgium and Vice President and Corporate Treasurer. Given Mr. Roccas extensive management
and financial experience, including serving as the current Chairman of the
Audit Committee of Hyatt Hotels Corporation and having served as the Chairman
of the Audit Committee of Lawson Software, Inc., he is uniquely qualified to
serve as Chairman of the Companys Audit Committee. Mr. Roccas considerable management and financial knowledge
and experience make him a highly valued member of the Board.
Mr. Starks,
our Chairman, President and Chief Executive Officer since 2004, has over 26
years of medical device industry experience.
Prior to joining the Company, Mr. Starks was President and Chief
Executive Officer of Daig Corporation, a manufacturer
of specialty cardiovascular devices that was acquired by St. Jude Medical in
1996. In 1998, Mr. Starks was
named Chief Executive Officer and President of the Companys Cardiac Rhythm
Management business and in 2001 was named President and Chief Operating Officer
of the Company. Mr. Starks has
been a member of the St. Jude Medical Board of Directors since the Company
acquired Daig Corporation in 1996.
Under Mr. Starks leadership, the Company has grown from $2.3
billion in revenue in 2004 to $5.6 billion in 2011 and experienced its most
profitable (on an adjusted net earnings basis) fiscal year on record in 2011,
with an adjusted earnings per share of $3.28 (refer to page 35 of this proxy
statement for a reconciliation of non-GAAP adjusted diluted net earnings per
share).
Ms. Yarno
has a 26-year history of demonstrated leadership in global operations,
marketing and human resources in the pharmaceutical industry. She is currently Chief Marketing Officer of
HemoShear LLC, a biotechnology research company and leading developer of human
cell-based surrogate systems for discovery and assessment of new drug
compounds. Prior to this role, she
served as Chief Marketing Officer of Merck & Co., Inc., a pharmaceutical
company. She also has held a series of
other executive positions at Merck, including General Manager of U.S. Human
Health, Executive Vice President of Worldwide Human Health Marketing and Senior
Vice President of Human Resources.
Additionally, Ms. Yarno served as the vice president of the Womens
Health Care Franchise at Johnson & Johnson, the worlds largest healthcare
company. Ms. Yarno was selected by
9
Table of Contents
the Board because of her management and business acumen and experience with a
large enterprise in the healthcare industry.
C
ommittees of
the Board of Directors
The
Board of Directors has three standing Committees: the Audit Committee, the
Compensation Committee and the Governance and Nominating Committee. During
2011, the Audit Committee met nine times, the Compensation Committee met four
times and the Governance and Nominating Committee met two times. Membership on
each committee as of March 7, 2012 is set forth in the following table:
|
|
|
|
Director
|
Audit Committee
|
Compensation
Committee
|
Governance and
Nominating
Committee
|
John W. Brown
|
|
|
Chair
|
Richard R. Devenuti
|
●
|
|
|
Stuart M. Essig
|
|
Chair
|
●
|
Thomas H. Garrett
|
●
|
|
|
Barbara B. Hill
|
|
●
|
|
Michael A. Rocca
|
Chair
|
|
|
Wendy L. Yarno
|
|
●
|
●
|
Each
Committee of the Board has a separate written charter which is available on the
Companys website at
www.sjm.com
.
Each
member of the Audit Committee, the Compensation Committee and the Governance
and Nominating Committee is independent under the Companys Principles of
Corporate Governance and Bylaws and the NYSE listing standards. Each member of
the Audit Committee is also independent under the rules of the SEC.
The
duties of the Audit Committee are described in its report below.
The
Compensation Committee is responsible for establishing and administering
compensation programs for the Companys executive officers and considering
matters relating to employee benefits provided by the Company. The Compensation
Committee is also responsible for making recommendations to the Board regarding
Director compensation.
The
Governance and Nominating Committee is responsible for recommending good
governance practices. The Governance and Nominating Committee evaluates the
qualifications of and nominates candidates for positions on the Board. The
procedures for shareholders to recommend Directors can be found on page 6. In
addition, the Governance and Nominating Committee facilitates an annual
evaluation by Board members of Board and individual Director performance and
provides feedback to the entire Board.
R
eport of the
Audit Committee
The
Audit Committee reviews the Companys consolidated financial statements,
financial reporting process and internal control over financial reporting on
behalf of the Board of Directors.
We
meet with management periodically to consider, among other things, the adequacy
of the Companys financial disclosures and internal control over financial
reporting. We discuss these matters with the Companys independent registered
public accounting firm, Ernst & Young LLP, and with appropriate Company
financial personnel, including the Companys internal auditor. We also conduct
an annual assessment of financial risks to the Company, as more specifically
described on page 5.
10
Table of Contents
We
regularly meet privately with the independent registered public accounting
firm, which has unrestricted access to the Audit Committee.
We
also appoint the independent registered public accounting firm, approve the
scope of, and fees associated with, their audit services, approve the
performance of, and fees associated with, non-audit services by the independent
registered public accounting firm and review periodically its performance and
independence from management.
The
Directors who serve on the Audit Committee are all independent under the
Companys Principles of Corporate Governance and Bylaws, the NYSE listing
standards and the rules of the SEC.
The
Board has adopted a written charter which describes the functions the Audit
Committee is to perform. Each year, we review the actions required to be taken
by the Audit Committee under the charter, confirm that they have been taken,
and report the same to the Board. The current Audit Committee charter is
available on the Companys website at
www.sjm.com
.
Management
has the primary responsibility for the Companys consolidated financial
statements and the overall reporting process, including the Companys system of
internal controls.
The
independent registered public accounting firm audits the annual consolidated
financial statements prepared by management, expresses an opinion as to whether
those consolidated financial statements fairly present the consolidated
financial position, results of operations and cash flows of the Company in
conformity with generally accepted accounting principles and discusses with us
any issues they believe should be raised with us.
The
independent registered public accounting firm also audits the Companys
internal control over financial reporting and expresses an opinion as to
whether the Company maintained effective internal control over financial
reporting.
This
year, we reviewed the Companys audited consolidated financial statements and
met with both management and Ernst & Young LLP to discuss these financial
statements. Management has represented to us that these financial statements
were prepared in accordance with United States generally accepted accounting
principles. We also considered the report of the independent registered public
accounting firm relating to the Companys consolidated financial statements.
This
year, we also reviewed managements assessment of the effectiveness of the
Companys internal control over financial reporting. Management has represented
to us that the Companys internal control over financial reporting was
effective as of December 31, 2011. We also considered the report of the
independent registered public accounting firm relating to the Companys
internal control over financial reporting.
We
have received the written disclosures and the letter from Ernst & Young LLP
required by applicable requirements of the Public Company Accounting Oversight
Board regarding the independent registered public accounting firms
communications with the Audit Committee concerning independence, and have
discussed with Ernst & Young LLP its independence. We have also considered
the compatibility of non-audit services with the independence of Ernst &
Young LLP. In addition, we discussed with Ernst & Young LLP any matters
required to be discussed by Statement on Auditing Standards No. 61, as amended
(AICPA,
Professional Standards
,
Vol. 1, AU section 380).
Based
on our review and discussions described above, we recommended to the Board that
the Companys audited consolidated financial statements be included in the
Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2011, filed with the SEC.
|
Michael
A. Rocca, Chairman
|
Richard R. Devenuti
|
Thomas
H. Garrett III
|
11
Table of Contents
C
ompensation of
Directors
The
Company targets compensation for service on the Board of Directors and its
committees at the 60
th
percentile of the market as defined by an
analysis of the primary peer companies identified on page 28. The Compensation
Committee engages outside consultants for assistance in determining the levels
and components of compensation that are consistent with this objective. See
discussion beginning on page 24. The Chairman of the Board reviews the data and
analyses provided by the Companys outside consultants and then makes
recommendations to the Compensation Committee regarding Director compensation.
The Compensation Committee, in turn, reviews the data and analyses provided by
the Companys outside consultants and the Chairmans recommendations and makes
its own recommendations to the Board regarding Director compensation. The Board
of Directors then approves Board and Committee compensation based on the
recommendations of the Compensation Committee. Each year, the compensation
levels approved by the Board become effective at the Companys annual meeting
of shareholders and remain in effect until the annual meeting of shareholders
held in the following year.
For
the period commencing on May 12, 2011, the date of the 2011 Annual Meeting of
Shareholders, and ending on May 3, 2012, the date of the 2012 Annual Meeting of
Shareholders, each non-employee Director received compensation as set forth in
the table below:
|
|
Annual Retainer
|
$60,000
|
Per Diem for Each Board Meeting Attended
|
$2,000
|
Committee Chairmen (except for Audit Committee)
|
$9,000
|
Audit Committee Chairman
|
$14,200
|
Committee Members
|
$4,000
|
Presiding Director
|
$5,000
|
The $60,000
annual retainer reflects an increase of $6,000 from the $54,000 annual retainer
for non-employee Directors in effect prior to May 2011. This increase was made
to align the annual retainer portion of non-employee Director compensation with
the 60
th
percentile of the Companys primary peer group. The Company
believes the compensation paid to our non-employee Directors reflects the
responsibilities and potential liabilities for audit committee chairmen and
directors generally. Directors who are Company employees are not compensated
for their services as Directors.
In
May of each year, non-employee Directors who are serving at that time may elect
to receive the annual retainer fee payable over the following 12 months either
as 100% cash, 50% cash plus 50% restricted stock, or 100% restricted stock.
Restricted stock is valued at the closing market price of our common stock on
the date of grant, which is the first business day in June after a Directors
election to receive restricted stock in lieu of half or all of the Directors
retainer. The restriction on the stock lapses on the six-month anniversary of
the grant date. In 2011, all of our non-employee Directors elected to receive
their entire annual retainer in the form of restricted stock, except for Ms.
Yarno, who elected to receive 50% of her annual retainer in cash and 50% in
stock, and Mr. Garrett, who elected to receive all of his annual retainer in
cash.
Directors
are reimbursed for expenses incurred in connection with travel and lodging when
attending meetings of the Board or otherwise engaged in Company business and
for such expenses for the Directors partner when attending the annual
strategic planning meeting.
12
Table of Contents
The
Companys 2006 Stock Plan provides that each non-employee Director who is
elected, re-elected or serving an unexpired term as a Director at any annual
meeting of shareholders will receive, as of the date of such meeting, an option
to purchase 5,600 shares of our common stock at an exercise price per share
equal to the closing market price of our common stock on such date. The number
of options awarded can be adjusted upward if approved by the Board of
Directors, and each year the Compensation Committee reviews external market
data and makes a recommendation to the Board of Directors regarding the annual
grant. All such options are designated as non-qualified stock options with
eight-year terms and fully vest on the six-month anniversary of the grant date.
Non-employee Directors appointed between annual shareholder meetings are
granted a stock option to purchase a pro-rata portion of shares on the same
terms and conditions as the stock options described above, except the exercise
price is equal to the closing market price of our common stock on the date of
appointment. At the 2011 Annual Meeting of Shareholders, each non-employee
Director received a grant of an option to purchase 9,700 shares at $52.17 per
share, the closing market price of our common stock on the date of grant. No
additional options were granted to non-employee Directors in 2011.
Each
Director may receive reimbursement for one physical examination every 12 months
up to a maximum of $1,600 per exam. Board members may also participate in our
charitable contribution matching program under which eligible charitable
contributions are matched by the Company up to a maximum of $1,000 each year.
Under
a retirement plan for non-employee Directors that was terminated April 1, 1996,
each non-employee Director serving on the Board at that time who serves five
years or more will receive payment of an annual benefit equal to the average of
the annual retainers paid to the Director during his or her service as a
Director, with a minimum annual benefit of $24,000. The retirement benefit will
commence at the later of the time of retirement from the Board or when the
Director becomes 60 years old. The retirement benefit is payable over a number
of years equal to the Directors years of service as a member of the Board of
Directors prior to April 1, 1996. Mr. Garrett is the only current Director
eligible for benefits under the discontinued retirement plan for non-employee
Directors. The actuarial present value of his benefit under this plan is
$192,000 and did not change during the last fiscal year. This amount was
expensed in prior years and is fully accrued for as of December 31, 2011.
Under
the process described above, the Board will approve compensation for its
Directors for the twelve month period commencing on May 3, 2012 at its next
regularly-scheduled meeting (to be held immediately prior to the 2012 Annual
Meeting of Shareholders).
13
Table of Contents
D
irector
Compensation Table
The following
table shows the cash and non-cash compensation for the last fiscal year awarded
to or earned by our non-employee Directors.
|
|
|
|
|
|
|
|
|
Name
|
|
Fees
Earned or
Paid in Cash
($)
(1)
|
|
Option Awards
($)
(2) (3)
|
|
All Other
Compensation
($)
(4)
|
|
Total
($)
|
|
John W. Brown
|
|
94,000
|
|
164,080
|
|
-0-
|
|
258,080
|
Richard R. Devenuti
|
|
91,250
|
|
164,080
|
|
-0-
|
|
255,330
|
Stuart M. Essig
|
|
89,000
|
|
164,080
|
|
1,000
|
|
254,080
|
Thomas H. Garrett III
|
|
77,500
|
|
164,080
|
|
1,000
|
|
242,580
|
Barbara B. Hill
|
|
84,000
|
|
164,080
|
|
-0-
|
|
248,080
|
Michael A. Rocca
|
|
94,200
|
|
164,080
|
|
-0-
|
|
258,280
|
Wendy L. Yarno
|
|
75,500
|
|
164,080
|
|
-0-
|
|
239,580
|
|
|
|
|
|
|
|
Footnotes
|
|
|
|
(1)
|
All of the non-employee Directors elected to receive
their entire $60,000 annual retainer fee for the May 2011 to May 2012 term in
the form of shares of restricted stock, except for Ms. Yarno, who elected to
receive 50% of her annual retainer in cash and 50% in stock, and Mr. Garrett,
who elected to receive all of his annual retainer in cash.
|
|
|
|
(2)
|
On May 12, 2011, each non-employee Director was
awarded options to purchase 9,700 shares of our common stock with a grant
date fair value of $164,080. The amounts in this column are computed in
accordance with Financial Accounting Standards Board Accounting Standards
Codification Topic 718 (FASB ASC Topic 718) and are based on the fair value
of the stock option awards as estimated using the Black-Scholes option
pricing model. The assumptions used to estimate fair value are discussed in
Note 7 to our consolidated financial statements included in our Annual Report
on Form 10-K for the year ended December 31, 2011.
|
|
|
|
(3)
|
As of December 31, 2011, the Directors held options
to purchase the following numbers of shares of our common stock: Mr. Brown,
58,900; Mr. Devenuti, 68,300; Mr. Essig, 68,300; Mr. Garrett, 46,050; Ms.
Hill, 44,579; Mr. Rocca, 69,632; and Ms. Yarno, 68,300. As of December 31,
2011, no Directors held any restricted stock awards.
|
|
|
|
(4)
|
Represents a company match for a charitable
contribution by the Director.
|
C
ompensation
Committee Interlocks and Insider Participation
During
2011, Stuart M. Essig (chair), Barbara B. Hill and Wendy L. Yarno served as
members of the Compensation Committee. None of these individuals has ever
served as an officer or employee of St. Jude Medical or any of our subsidiaries
or has any relationships with St. Jude Medical or any of our subsidiaries
requiring disclosure under
Related Person
Transactions
below. The members of the Compensation Committee have
no interlocking relationships requiring disclosure under the rules of the SEC.
R
elated Person
Transactions
Our
Board of Directors has adopted a written policy and procedures for related
person transactions (collectively referred to as the Policy). Under the
Policy, all related person transactions must be approved or ratified by the
Companys Governance and Nominating Committee. For purposes of the Policy,
related person transactions generally include any transaction:
|
|
|
|
|
to
which the Company is a participant;
|
|
|
|
|
|
for
which the amount involved in any calendar year is expected to exceed
$120,000; and
|
|
|
|
|
|
in which a
related person is expected to have a direct or indirect material interest.
|
Despite
otherwise falling within this definition, the following transactions have been
determined by the Board not to be related person transactions subject to the
Policy:
|
|
|
|
|
employment arrangements with management that are otherwise
approved by the Board;
|
14
Table of Contents
|
|
|
|
|
transactions for which the related persons interest is solely
due to their status as a shareholder; and
|
|
|
|
|
|
transactions with third parties in which the amounts involved
are not material to the third parties.
|
|
|
|
|
A related
person under the Policy is:
|
|
|
|
|
|
someone who is or was an executive officer, Director or nominee
for election as a Director of the Company since the beginning of the last
fiscal year;
|
|
|
|
|
|
a
person or group who is a beneficial owner of more than 5% of the Companys
voting securities; or
|
|
|
|
|
|
an
immediate family member of any of the foregoing.
|
Each
officer and Director has an affirmative obligation to inform the Company of any
transactions in which he or she or a member of his or her immediate family may
have a material interest and which may reasonably be expected to be a related
person transaction. Management of the Company is also required to inform the
Company of any potential related person transactions of which management
becomes aware in the course of business development activities.
Our
General Counsel is responsible for determining whether a particular transaction
is a related person transaction. If so, the Governance and Nominating Committee
reviews the transaction to determine whether to approve or ratify the
transaction and whether to impose any conditions on the approval or
ratification.
In
determining whether to approve or ratify a particular transaction, the
Governance and Nominating Committee will take into account any factors that it
deems relevant, which may include, among other things:
|
|
|
|
|
the
material terms of the transaction;
|
|
|
|
|
|
the
expected and potential impact of the transaction on the Companys results of
operations, financial position and cash flows;
|
|
|
|
|
|
whether the terms of the transaction are no less favorable to
the Company than if the other party did not have an affiliation with a
related person;
|
|
|
|
|
|
the
availability of, and terms to obtain, other sources of comparable products or
services, where applicable; and
|
|
|
|
|
|
the
identity of the related person and the impact of the transaction on the
related persons independence due to the expected and potential financial
interest of the related person in the transaction.
|
Under
the Policy, related persons are required to refrain from directly or indirectly
participating in the negotiation of any transactions that may reasonably be
expected to be related person transactions, or managing any existing related
person transactions. In addition, no Director of the Company may engage in the
approval under the Policy of a related person transaction in which he or she,
or a member of his or her immediate family, has a material interest, except to
the extent of providing to the Governance and Nominating Committee all material
information requested concerning the related person transaction.
15
Table of Contents
S
ection 16(a)
Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act),
requires our Directors and executive officers to file initial reports of
ownership and reports of changes in ownership of our securities with the SEC.
Based on a review of the Section 16(a) reports filed by our Directors and
executive officers in 2011 and on written representations by the Directors and
executive officers, we believe that all Section 16(a) filing requirements
applicable to our Directors and executive officers during 2011 were satisfied,
except that (i) one Form 4 reporting one transaction and one Form 5 reflecting
a late Form 4-reportable transaction were filed late on behalf of Mr. Garrett,
(ii) one Form 4 reporting one transaction was filed late on behalf of Mr.
Rousseau and (iii) one Form 4 reporting one transaction was filed late on
behalf of Mr. Northenscold.
16
Table of Contents
|
P
ROPOSAL TO ELECT DIRECTORS
|
Our
Articles of Incorporation and Bylaws provide that the Board of Directors be
divided into three classes of Directors as nearly equal in number as possible.
The members of each class are elected to serve three-year terms with the terms
of office for each class expiring at successive annual meetings.
At
this years annual meeting, the three-year terms of John W. Brown and Daniel J.
Starks will expire. John W. Brown and Daniel J. Starks have been nominated for
re-election to the Board for a three-year term ending in 2015. If elected, Mr.
Brown and Mr. Starks will continue in office until their successors have been
duly elected and qualified, or until the earlier of their death, resignation or
retirement. We expect each of the nominees to be able to serve if elected.
The
principal occupation and other information about each of the Director nominees
and each Director whose term of office will continue after the annual meeting
are provided below.
The
Board of Directors recommends a vote
FOR
the election of John W. Brown
and Daniel J. Starks as Directors. Proxies will be voted
FOR
the
election of the nominees unless otherwise specified.
|
|
|
N
ominees For Terms Expiring In 2015
|
|
|
|
|
|
John W. Brown,
Director of St. Jude Medical since August 2005. Chairman of the
Board of Stryker Corporation, an orthopedic device company, from 1997 through
December 2009. Chief Executive Officer of Stryker Corporation from 1977
through 2004. Chairman Emeritus of Stryker Corporation and Director of
Gen-Probe Incorporated. Age: 77
|
|
|
|
|
|
Daniel J. Starks,
Director of St. Jude Medical since 1996. Chairman, President and
Chief Executive Officer of St. Jude Medical since May 2004. President and
Chief Operating Officer of St. Jude Medical from January 2001 to May 2004.
From April 1998 to February 2001, President and Chief Executive Officer
of the Cardiac Rhythm Management Division of St. Jude Medical.
Previously, Chief Executive Officer and President, Daig Corporation.
Director of Urologix, Inc. from October 2002 to November 2009. Age: 57
|
17
Table of Contents
|
|
|
D
irectors Whose Terms Expire In 2013
|
|
|
|
Stuart M. Essig,
Director of St. Jude Medical since 1999. Executive Chairman of the
Board of Directors of Integra LifeSciences Holdings Corporation, a
manufacturer of medical devices and implants since January 2012, and a
director on the Integra Board of Directors since December 1997. From December
1997 to January 2012, Chief Executive Officer of Integra. President of
Integra from December 1997 to November 2010. Director of Zimmer Holdings from
March 2005 to August 2008. Age: 50
|
|
|
|
|
|
Barbara B. Hill
, Director of St. Jude Medical since December 2007. Operating Partner
of Moelis Capital Partners, a private equity firm, since March 2011.
President, Chief Executive Officer and Director of ValueOptions, Inc., a
managed behavioral health company, and FHC Health Systems, Inc., its parent
company, from March 2006 to September 2010. Chairman and Chief Executive
Officer of Woodhaven Health Services, an institutional pharmacy company, from
August 2004 to March 2006. President and Director of Express Scripts, Inc., a
pharmacy benefits management company, from April 2002 to October 2003. Age:
59
|
|
|
|
|
|
Michael A. Rocca,
Director of St. Jude Medical since March 2004. Retired in 2000
from Mallinckrodt, Inc., a pharmaceutical and medical device manufacturer,
where he was Senior Vice President and Chief Financial Officer from 1994 to
2000. Director of Hyatt Hotels Corporation. Director of Lawson Software, Inc.
from February 2003 to July 2011. Director of Ligand Pharmaceuticals, Inc.
from April 1999 to May 2007. Age: 67
|
18
Table of Contents
|
|
|
D
irectors Whose Terms Expire In 2014
|
|
|
|
|
|
Richard R. Devenuti,
Director of St. Jude Medical since 2001.
President, Information Intelligence Group, a Division of EMC
Corporation, a developer and provider of information infrastructure
technology and solutions, since October 2010. Senior Vice President and Chief
Operating Officer of the Information Intelligence Group from July 2008 to
October 2010. Senior Vice President of Worldwide Services and IT of Microsoft
Corporation, a software company, from December 2003 until January 2007. From
March 1999 to December 2003, Vice President and Chief Information Officer of
Microsoft Corporation. Director of Convergys Corporation and Director of XETA
Technologies Inc. from May 2008 to November 2009. Age: 54
|
|
|
|
|
|
Thomas H. Garrett III,
Director of St. Jude Medical since 1979. Self-employed as a
business consultant from 1996 to 2010. Previously, a member of the law firm
of Lindquist & Vennum PLLP of Minneapolis, Minnesota, and its Managing
Partner from 1993 through 1995. Director of Lifecore Biomedical, Inc.
from July 1996 to March 2008. Age: 67
|
|
|
|
|
|
Wendy L. Yarno,
Director of St. Jude Medical since 2002. Chief Marketing Officer of
HemoShear LLC, a biotechnology research company, since September
2010. From 2006 to 2008, Chief Marketing Officer for Merck & Co., Inc., a
pharmaceutical company. From 2005 to 2006, General Manager, Business Unit,
Merck & Co., Inc. From 2002 to 2005, Executive VP, Worldwide Human
Health, Merck & Co., Inc. Age: 57
|
19
Table of Contents
|
S
HARE OWNERSHIP OF MANAGEMENT AND DIRECTORS AND
|
CERTAIN BENEFICIAL OWNERS
|
The
following table presents information regarding the beneficial ownership of our
common stock as of March 7, 2012 by (a) each of our Directors, Director
nominees and executive officers appearing in the Summary Compensation Table on
page 38, (b) all of our Directors and executive officers as a group and (c)
each person known to the Company to be the beneficial owner of more than 5% of
our common stock. Unless otherwise noted, these persons have sole voting and
dispositive power with respect to the shares owned by them, and none of the
shares beneficially owned by our Directors, Director nominees and executive
officers are subject to a pledge.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
Beneficial Ownership
|
|
|
|
|
|
Name of Beneficial Owner
|
|
Number of
Common Shares
Held March 7,
2012
|
|
Stock Options to
Purchase Common
Shares Exercisable
within 60 days of
March 7, 2012
|
|
Total Beneficial
Ownership
|
|
|
Percent of
Class
|
|
|
John W. Brown
|
|
88,115
|
|
|
58,900
|
|
|
147,015
|
|
|
|
*
|
|
Richard R. Devenuti
|
|
11,042
|
|
|
68,300
|
|
|
79,342
|
|
|
|
*
|
|
Stuart M. Essig
|
|
36,588
|
|
|
68,300
|
|
|
104,888
|
|
|
|
*
|
|
Thomas H. Garrett III
|
|
97,699
|
|
|
46,050
|
|
|
143,749
|
|
|
|
*
|
|
Barbara B. Hill
|
|
8,073
|
|
|
44,579
|
|
|
52,652
|
|
|
|
*
|
|
Michael A. Rocca
|
|
11,203
|
|
|
60,300
|
|
|
71,503
|
|
|
|
*
|
|
Daniel J. Starks
|
|
6,386,116
|
|
|
1,646,000
|
|
|
8,032,116
|
(4)
|
|
|
2.51%
|
|
Wendy L. Yarno
|
|
9,353
|
|
|
68,300
|
|
|
77,653
|
|
|
|
*
|
|
John C. Heinmiller
|
|
235,136
|
|
|
888,250
|
|
|
1,123,386
|
|
|
|
*
|
|
Michael T. Rousseau
|
|
19,164
|
|
|
650,000
|
|
|
669,164
|
|
|
|
*
|
|
Eric S. Fain
|
|
71,139
|
|
|
451,125
|
|
|
522,264
|
|
|
|
*
|
|
Denis M. Gestin
|
|
5,039
|
|
|
316,000
|
|
|
321,039
|
|
|
|
*
|
|
Directors and Executive Officers as a Group
(20 persons)
|
|
7,026,958
|
|
|
5,319,884
|
|
|
12,453,779
|
|
|
|
3.89%
|
|
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116
|
|
25,431,954
|
(1)
|
|
-0-
|
|
|
25,431,954
|
|
|
|
8.00%
|
|
Capital Research Global Investors
333 South Hope Street
Los Angeles, CA 90071
|
|
23,725,300
|
(2)
|
|
-0-
|
|
|
23,725,300
|
|
|
|
7.40%
|
|
BlackRock, Inc.
40 East 52
nd
Street
New York, NY 10022
|
|
16,608,388
|
(3)
|
|
-0-
|
|
|
16,608,388
|
|
|
|
5.21%
|
|
|
|
|
|
Footnotes
|
|
*
|
Less than 1.0%
|
|
|
(1)
|
This information is
derived from a Schedule 13G/A filed on January 27, 2012 by Massachusetts
Financial Services Company (MFS), an investment adviser, which is deemed to
be the beneficial owner of 25,431,954 shares of our common stock owned by MFS
and/or certain other non-reporting entities. MFS has sole voting power over
20,871,157 shares and sole dispositive power over 25,431,954 shares.
|
|
|
(2)
|
This information is derived
from a Schedule 13G/A filed on February 8, 2012 by Capital Research Global
Investors (CRGI), which is deemed to be the beneficial owner of 23,725,300
shares of our common stock as a result of acting as an investment adviser to
various investment companies registered under the Investment Company Act of
1940 and which has sole voting and sole dispositive power over 23,725,300
shares. CRGI, a division of Capital Research and Management Company,
disclaims beneficial ownership pursuant to Rule 13d-4 under the Exchange Act.
|
|
|
(3)
|
This information is
derived from a Schedule 13G filed on February 9, 2012 by BlackRock, Inc.
(BlackRock), a parent holding company or control person in accordance with
Rule 13d-1(b) of the Exchange Act, which is deemed to be the beneficial owner
of 16,608,388 shares of our common stock. BlackRock has sole voting and sole
dispositive power over 16,608,388 shares.
|
|
|
(4)
|
Includes 2,000,000 shares
that are subject to a pledge in support of a line of credit.
|
20
Table of Contents
C
ompensation
Committee Report
We
have reviewed and discussed with management the Compensation Discussion and
Analysis. Based on this review and discussion, we have recommended to the Board
of Directors that the Compensation Discussion and Analysis be included in this
proxy statement and the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2011.
|
|
|
Stuart
M. Essig, Chairman
|
|
Barbara
B. Hill
|
|
Wendy
L. Yarno
|
C
ompensation
Discussion and Analysis
Executive Summary
This
Compensation Discussion and Analysis describes the material elements of
compensation awarded to each of the following executive officers (the Named
Executive Officers) for fiscal 2011:
|
|
|
|
|
|
Daniel
J. Starks
|
Chairman,
President and Chief Executive Officer
|
|
|
|
|
|
|
John
C. Heinmiller
|
Executive
Vice President and Chief Financial Officer
|
|
|
|
|
|
|
Michael
T. Rousseau
|
Group
President
|
|
|
|
|
|
|
Eric
S. Fain
|
President,
Cardiac Rhythm Management Division
|
|
|
|
|
|
|
Denis
M. Gestin
|
President,
International Division
|
Compensation
Philosophy and Principles
The
Compensation Committee of the Companys Board of Directors (the Committee) is
responsible for establishing and administering compensation programs for the
Companys executive officers. To achieve our business objectives, the Committee
seeks to ensure that our executive compensation programs reinforce our business
strategy and are appropriately aligned with the interests of our shareholders.
The goals of our compensation programs are to attract, retain and motivate
talented executives to enable the Company to be successful in a highly
competitive industry and to enhance shareholder value. The following principles
were used in the design of the programs:
|
|
|
|
|
A
substantial part of an executive officers compensation should be
incentive-based, tied to Company performance;
|
|
|
|
|
|
Compensation
should reflect individual job responsibilities, qualifications and
performance; and
|
|
|
|
|
|
Executive
officers and employees should be encouraged to own St. Jude Medical stock.
|
In
line with our pay for performance philosophy, the total compensation received
by the Named Executive Officers will vary based on division and corporate level
performance measured against annual and long-term performance. As an
executives level of responsibility within our organization increases, so does
the percentage of total compensation that we link to performance. Our Named
21
Table of Contents
Executive
Officers total compensation is comprised of a mix of base salary, annual
incentive compensation and stock option awards. Our
Named Executive Officer compensation program is weighted toward equity
incentives, and such officers are required to accumulate and hold Company
stock. Changes in Company stock price have a direct effect on the amount of
compensation they realize, in addition to the value of the Company stock they
own. If shareholder value declines, so does the compensation we deliver
to our executives.
We
seek to ensure the long-term growth of the Company while at the same time
delivering short-term results and maintaining a rigorous commitment to quality.
Our executive compensation program for the Named Executive Officers supports
these initiatives by way of an annual cash incentive plan based solely on
Company-wide and divisional financial objectives and stock options, which have
value only through future appreciation in share price.
The
Committee and the Board believe that the skill and motivation of our employees,
and especially our executive leaders, are essential to the Companys
performance and creation of shareholder value. St. Jude Medical
operates in a fast-paced, ever-evolving industry in which there is a high level
of competition for market share and talent. In order to attract and retain the
necessary talent, we set each component of compensation base salary, annual
cash incentive target and long-term incentive awards using the 60
th
percentile of the external market (as determined through the process described
beginning on page 26) as a reference point. We
believe our compensation program motivates performance that differentiates us
from our competitors and does not encourage excessive risk-taking, as
discussed further under
Compensation Risk Analysis
below. We will continue to provide a compensation program
that we believe is effective, serves shareholder interests and is worthy of
shareholder support.
2011
Say on Pay Results
At
the Companys 2011 Annual Meeting, the Companys shareholders had the
opportunity to cast a non-binding advisory vote on the compensation of the
Named Executive Officers. More than 94% of the shares voted at the meeting
approved the Named Executive Officers compensation. The Committee welcomed
this feedback and intends to continue its practice of linking Company
performance with executive compensation decisions.
We
also asked shareholders to select the frequency with which to hold future
advisory votes on the compensation of the Named Executive Officers. More than
85% of the shares voted at the meeting selected an annual vote. The Company has
determined to hold annual advisory votes on the compensation of the Named
Executive Officers.
Fiscal
2011 Performance
Our
executive team has successfully managed the Company through the recent
macroeconomic downturn and the challenging cardiac rhythm management market.
Despite a number of headwinds, we delivered improved financial results for fiscal
year 2011 as seen in the year-over-year comparison set forth below. For the
fiscal year ended December 31, 2011, we grew our revenue by 8.7% and adjusted
net earnings by 7.9%, resulting in, on an adjusted net earnings basis, the most
profitable year in Company history. Also in
fiscal 2011, our diluted net earnings per share (EPS) increased 9% from the
prior year. Please see
Managements
Discussion and Analysis of Financial Conditions and Results of Operations
in our Annual Report on Form 10-K for a more detailed description of our fiscal
year 2011 financial results.
22
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2011
|
|
Fiscal Year
2010
|
|
|
Change %
|
|
Net Sales (in millions)
|
|
|
$5,612
|
|
|
$5,165
|
|
|
8.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Earnings (in millions)
(1)
|
|
|
$1,074
|
|
|
$995
|
|
|
7.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Diluted Net Earnings per Share
(1)
|
|
|
$3.28
|
|
|
$3.01
|
|
|
9.0%
|
|
|
|
|
|
(1)
|
A reconciliation of
non-GAAP adjusted net earnings and non-GAAP adjusted diluted net earnings per
share is included in the Adjustments for Non-GAAP Financial Measures section
on page 35 of this proxy statement.
|
Fiscal 2011
Pay Implications
Our
fiscal year 2011 corporate performance was a key factor in the compensation
decisions and outcomes for the fiscal year. In
December 2010, the Board of Directors approved an operating plan that reflected
our expectations for Company performance and included goals for Company-wide
sales, EPS and division sales and operating earnings achievement. These goals
served as targets for our Management Incentive Compensation Plan (MICP). The
Committee determined that these goals provided appropriate incentive for
continued execution of our growth and performance strategy. While the
Company was able to grow both revenue and adjusted EPS in fiscal year 2011,
despite significant macroeconomic and industry challenges, both revenue and EPS
performance fell below that identified in the 2011 operating plan. Accordingly,
executive compensation was directly impacted by the Companys financial
performance during 2011.
2011
EPS performance equaled 94% of the MICP target and 2011 sales performance was
achieved at 93% of target. For 2011, division sales performance ranged from 90%
to 99% of the MICP target and division operating profit performance ranged from
88% to 106% of the MICP target. The payouts associated with these levels of
performance are determined by a scale on which 100% achievement of a
performance target results in a payment at 100% of target level bonus. To
increase the incentive to achieve or over-achieve target, performance below
target results in a payout that declines steeply from 100% payout at target to
no payout for performance below 90% of target, while performance above target
results in a steeply inclined scale that pays up to 200% of the individuals
bonus target for achievement of 120% of target. Fiscal 2011 performance
resulted in annual incentive awards for our Named Executive Officers that
ranged from 63.75% to 83.75% of target. The degree to which MICP payments fell
below target levels compared to the degree to which performance targets were
missed illustrates the Boards emphasis placed on meeting targeted performance
levels. It is also important to note that MICP awards are based solely on
financial performance measures and do not allow for financial performance
shortfall to be offset by the overachievement of qualitative measures. Please
see
Fiscal
2011 Annual Incentive Awards
on page 31 for more detailed annual
incentive award information for our Named Executive Officers.
Long-term
incentive awards make up a significant portion of each of the Named Executive
Officers compensation and the value of their option awards are directly linked
to the performance of our stock. For Named Executive Officers, equity awards
are made entirely in the form of stock options in order to most directly align
management compensation with the delivery of shareholder value. This alignment
was evidenced by the impact of the drop in the Companys stock price during December
2011. The year-end stock price for 2011 resulted in no in-the-money value
related to the equity awards granted to Named Executive Officers in December
2009, 2010 and 2011. In fact, the stock price would need to increase to over
$50 in order to generate aggregate in-the-money value equal to the option
award values reported for the Named Executive Officers in the Summary
Compensation Table for 2009, 2010 and 2011.
Our
executives base salaries were reviewed prior to the start of fiscal 2011.
Based on the financial performance of the Company in 2010 and benchmark data
available at the time, we granted average
23
Table of Contents
salary
increases of 3.75% to our Named Executive Officers. Please see
Fiscal 2011
Base Salaries
on page 31 for more detailed base salary information
for our Named Executive Officers.
Despite
the fact that both sales and adjusted EPS increased in 2011 and the Company
continued to position itself for future growth, performance targets were not
fully achieved. As a result, total compensation for Named Executive Officers
fell by an average of 11% as illustrated in the Summary Compensation Table on
page 38. We believe that this decrease, when considered along with the fact
that long-term incentive awards granted in 2009, 2010 and 2011 had no in the
money value at the end of 2011, illustrates the alignment between executive
pay and Company performance.
Use
of Consultants and Other Advisors
The
Committee has retained Mercer (US) Inc. (Mercer), a wholly owned subsidiary
of Marsh & McLennan Companies, Inc. (MMC), to assist the
Committee with its responsibilities related to the Companys executive and
Board of Director compensation programs. Mercers fees for executive and
Director compensation consulting to the Committee in fiscal year 2011 were
$222,162.
Mercers
responsibilities to the Committee included providing:
|
|
|
|
|
Competitive
market data and advice related to the Chief Executive Officers compensation
level and incentive program;
|
|
|
|
|
|
A review of
Company compensation levels, performance and incentive program design
(including performance objectives);
|
|
|
|
|
|
Information
on executive compensation trends and implications for the Company; and
|
|
|
|
|
|
Competitive
market data and advice on outside Director compensation.
|
During
the fiscal year, management decided to retain Mercer and its MMC affiliates to
provide other services unrelated to executive and Director compensation. These
other services provided by Mercer were not approved by the Board of Directors
or the Committee. The aggregate fees paid for these other services were
$304,873.
Although
the Company retains Mercer for other services, the Committee is confident that
the advice it receives from the executive compensation consultant is objective
and not influenced by Mercers or its affiliates relationships with the
Company because of the procedures Mercer and the Committee have in place. These
include:
|
|
|
|
|
The
consultant receives no incentive or other compensation based on the fees
charged to the Company for other services provided by Mercer or any of its
affiliates;
|
|
|
|
|
|
The
consultant is not responsible for selling other Mercer or affiliate services
to the Company;
|
|
|
|
|
|
Mercers
professional standards prohibit the individual consultant from considering
any other relationships Mercer or any of its affiliates may have with the
Company in rendering his or her advice and recommendations;
|
|
|
|
|
|
The
Committee has the sole authority to retain and terminate the executive
compensation consultant;
|
|
|
|
|
|
The
consultant has direct access to the Committee without management
intervention; and
|
|
|
|
|
|
The
Committee evaluates the quality and objectivity of the services provided by
the consultant each year and determines whether to continue to retain the
consultant.
|
24
Table of Contents
This
approach protects the Committees ability to receive objective advice from the
consultant so that the Committee may make independent decisions about executive
pay.
Overview
of Components of Named Executive Officer Compensation Program
The
tabular and narrative disclosures below describe the objectives of each of the
four major components of our Named Executive Officer compensation program and
explain how the amount of each component is determined by the Committee. For a
discussion of the specific actions and awards for fiscal 2011 for each
component, see
Overview of Fiscal 2011 Compensation
,
Fiscal 2011 Base Salaries
,
Fiscal
2011 Annual Incentive Awards
,
Fiscal 2011 Long-Term Incentive Awards
and
Fiscal
2011 Other Benefits and Perquisites
below.
|
|
|
|
|
Component
|
|
Objective
|
|
How
Determined
|
Base Salary
|
|
Competitive base salaries
are necessary to attract and retain high caliber candidates and serve as the
component of our compensation package that is not incentive-based.
|
|
Consideration of the
market 60
th
percentile data along with the factors listed under
Determination
of Targeted Compensation Levels
below.
|
Annual Incentive Awards
|
|
Serves to focus executives
on the delivery of annual performance results related to sales and
profitability. The incentives are weighted so that awards are based most
heavily on those items over which the executive has control while at the same
time providing consideration to overall corporate performance.
|
|
For target bonus award
opportunity percentages: consideration of the market 60
th
percentile data along with the factors listed under
Determination of Targeted
Compensation Levels
below as well as trends and internal equity
among positions within the Company with similar responsibilities.
For establishing performance goals: consideration of prior year
performance, current market conditions and peer company performance. Goals
are established to promote growth and profitability that exceed the previous
years performance and are at or above the historical performance of key
competitors. Existing market conditions are taken into account to ensure that
goals have a reasonable probability of being achieved.
For actual bonus payouts: achievement of predetermined performance measures
established under the Companys plan.
|
|
|
|
|
|
Long-Term Incentive Awards
(Stock Options)
|
|
Link executive compensation
to long-term shareholder return and provide a retention feature as a result
of awards vesting over time.
|
|
Consideration of the
market 60
th
percentile data along with the factors listed under
Determination
of Targeted Compensation Levels
below.
For the purpose of determining award levels, the value of the stock is
based on the average closing price for the 25 days following the third
quarter earnings release.
|
|
|
|
|
|
Other Benefits and
Perquisites
|
|
Ensure a competitive total
compensation package by providing a cash allowance to offset perquisites
typically provided by peer companies, such as car allowances, financial
planning and home security systems.
|
|
For the cash perquisite
allowance, consideration is given to the 50
th
percentile data for
primary and expanded peer companies.
The health and retirement benefits provided to the Named Executive Officers
are the same as the benefits provided to all employees.
The Management Savings Plan is consistent with the deferred compensation
plans offered by peer group companies and general industry companies.
|
Additional
information regarding annual and long-term incentive awards follows.
Annual
Incentive Awards
.
All annual incentive awards paid to the Named Executive Officers are
awarded and paid under the MICP and are based on the achievement of
predetermined, objective performance goals as established under the Companys
annual operating plan. Each objective is assigned a relative
weighting for each Named Executive Officer. The weightings result in each
executives incentives being tied most heavily to those factors over which the
executive has the greatest influence.
Under
the MICP, target award opportunities, weightings and associated performance
objectives must be determined and approved by the Committee or Board of
Directors no later than 90 days after the beginning of the fiscal year.
Typically, target award opportunities, weightings and associated performance
objectives for a particular fiscal year are approved in the December preceding
the start of that fiscal year. At that time, the Committee may identify items
that will be excluded from the
25
Table of Contents
calculation of
incentive payments, such as the impact of foreign exchange rates, transaction
costs and accretive or dilutive effect of merger and acquisition activity and
other specified items.
Upon
completion of each fiscal year, the Committee determines and certifies in
writing the payout levels associated with Company-wide and division performance
results, and incentive awards are typically paid in February. The Committee has
no discretion under the MICP to increase any executives incentive target or
payout that would be due upon the attainment of performance objectives, or
otherwise modify performance objectives associated with the performance period.
However, the Committee may, in its discretion, reduce or eliminate individual
incentive targets or payouts for a performance period. The Committee did not
exercise this discretion related to MICP awards for 2011.
In
December 2011, the Committee adopted a policy regarding the recovery of
performance-based compensation payable under our MICP from executive officers
under certain circumstances. The claw-back policy provides that executive
officers will be required to reimburse the Company for any annual MICP payment
subject to the policy received in the three-year period preceding the date on
which the Company is required to prepare an accounting restatement that was due
to material noncompliance under any financial reporting requirements. The
amount of reimbursement will be the excess, if any, of the amount actually paid
to an executive officer over the amount which should have been paid based upon
the restated results.
Long-Term
Incentive Awards
.
For 2011, long-term incentive compensation was provided to the Named
Executive Officers through awards granted under the Companys
shareholder-approved 2007 stock plan. The Committee annually reviews the
potential dilutive effect of equity award programs from both a share and
economic basis as compared to the primary peer group companies.
To
date, the Company has granted primarily stock options to our Named Executive
Officers in order to directly align management compensation with the delivery
of shareholder value. Stock options have value only to the extent that the
price of the Companys stock on the date of exercise exceeds the exercise
price, which is equal to the closing market price of our common stock on the
date of grant. To encourage a longer-term perspective and retain our employees,
stock options generally cannot be exercised immediately, and generally become
exercisable over a four-year period. Stock option awards are generally made in
December of each year on a date coinciding with a regularly scheduled Board of
Directors meeting. This date falls after the release of the Companys third
quarter earnings and prior to the end of the Companys fourth quarter. In
certain cases, stock options may be granted to new hires upon commencement of
employment with the Company or to existing employees upon promotion to a higher
level position. In those cases the grant date is determined to be the fifth day
of the month following the later of the month of commencement of employment or
written approval of the grant. If the fifth Wednesday of the month is within
seven days before an earnings release, the grant date is the third business day
following the earnings release.
Historically,
limited restricted stock grants have been made in connection with the hiring
and promotion of the Named Executive Officers, but no such grants were made to
the Named Executive Officers in fiscal 2011.
Determination
of Targeted Compensation Levels
In
December of each year, the Committee establishes base salaries, annual
incentive targets, long-term incentive awards and cash perquisite allowances.
The annual incentive targets are effective for the next year and the long-term
incentive awards are effective the day they are approved but are intended to be
compensation for the next year and beyond.
In
establishing target levels of pay for base salaries, annual incentive targets
and long-term incentive awards, the Company considers the market 60
th
percentile data along with additional factors such as:
26
Table of Contents
|
|
|
|
|
Actual
executive role as compared to the most similar external comparator
description;
|
|
|
|
|
|
Individual
executives experience and past performance;
|
|
|
|
|
|
Ability of
the position to impact key business initiatives;
|
|
|
|
|
|
Our
assessment of the risk of losing the executive to competitors;
|
|
|
|
|
|
Advancement potential;
and
|
|
|
|
|
|
Succession
planning considerations.
|
No
pre-assigned weighting is given to these factors. In establishing cash
perquisite allowances for the Named Executive Officers, consideration is given
to the 50
th
percentile data for primary and expanded peer companies.
The
Company considers standard performers to be those executives whose areas of
responsibility consistently meet or exceed annual performance targets and who
provide leadership that is consistent with the Companys core values and is
aligned with the Companys overall long-term growth strategy. Executives who
are considered to be standard performers and for whom there is a substantially
similar external market comparator typically have their base salaries, annual
incentive targets and long-term incentive awards targeted to the 60
th
percentile of the external market. We believe that targeting the 60
th
percentile for standard performers is appropriate given our practice of
recruiting the highest caliber executives, our historically aggressive
performance goals, our historically strong share price performance and the
decentralized nature of our business, which adds complexity to executive roles.
Moreover, the cost of turnover at the executive level can be high given the growth
initiatives of the Company and the potential delay to those initiatives that
could result from the loss of key executives. In general, the Company considers
compensation levels within 15% of the value associated with the 60
th
percentile reference point to be within a reasonable range of the 60
th
percentile in light of differences in external market data that can be
explained by performance, time in position or year-over-year anomalies in
market data.
In
the event that an executives position has greater responsibility than the
external market comparator, the executives performance consistently exceeds
objectives, the executive possesses a skill set that is critical to a key
business objective or the executive is in line for a key leadership position,
the executives base salary, annual incentive target and/or long-term incentive
award may be targeted above the 60
th
percentile of the external
market. In the event that an executive has not fully met performance
objectives, has duties and responsibilities which are less than those of the
closest external comparator, or is new to his or her position and has not had
the opportunity to demonstrate a consistent level of performance, the
executives base salary, annual incentive target and/or long-term incentive
award may be targeted below the 60
th
percentile.
The
Committee makes recommendations to the Board of Directors regarding the
compensation to be paid to the Chief Executive Officer of the Company. When
making such recommendations, the Committee considers the results of the review
by the Board of the Chief Executive Officers performance against specific
objectives established at the beginning of each year, the 60
th
percentile of the primary peer group for base salaries, annual incentive targets
and long-term incentive awards and the Companys overall financial performance
as compared to the performance of companies in the primary peer group. The
Chief Executive Officer attends Committee meetings but is not present for the
discussions when his own compensation is determined.
The
Committee determines, and reports to the Board of Directors, the compensation
to be paid to Named Executive Officers other than the Chief Executive Officer.
When evaluating the compensation levels of the other Named Executive Officers,
the Committee considers recommendations of our Chief Executive Officer. These
recommendations are presented to the Committee each year along with a
27
Table of Contents
written
assessment for each executive officer addressing performance against the past
years financial objectives, overall leadership effectiveness and individual
breadth and effectiveness.
In
determining compensation levels for the Named Executive Officers, the Committee
also reviews current and historical compensation levels (targeted and actually
paid) for each executive, including the current value of any outstanding equity
awards. While historical compensation levels are considered when establishing
future compensation targets, the primary objective is to establish
market-competitive programs that are highly aligned with future Company
performance goals and shareholder value creation.
Once
the performance year begins, no subjective assessment of individual performance
affects compensation, and Company and division performance alone determine
amounts payable to the Named Executive Officers, subject to the discretion of
the Compensation Committee to reduce payouts under the Companys MICP as
described on pages 25-26. Base salaries remain constant throughout the year,
annual incentives are determined at the end of the year based on a combination
of Company-wide and divisional performance and the value of equity awards is
solely attributable to the price performance of the Companys stock. This
results in executive compensation being highly correlated to annual financial
performance and long-term share price performance. On average, 83% of targeted
total compensation (base salary, annual incentive, long-term incentive and cash
perquisite allowance) for the Named Executive Officers in fiscal 2011 was tied
to Company-wide and/or division performance and at-risk insofar as annual
incentive awards and the value of stock options may be reduced or eliminated
depending on Company-wide and division performance.
Fiscal
2011 Market Data
We
evaluate the compensation paid to the Named Executive Officers in relation to
the programs offered by a primary peer group of other medical product
companies. The primary peer group is identified by the Company in May of each
year. Companies are selected based on similarities of business characteristics
and overall company size. Organizational size is measured using revenue, and
the primary peer group is developed so that the median annual sales revenue of
the companies within the primary peer group approximates the annual revenue for
the Company.
In
2010, the Committee approved the following primary peer group for use in making
2011 compensation decisions.
|
|
|
|
|
|
|
|
|
|
|
2010
Revenue
($M)
(1)
|
|
|
|
2010
Revenue
($M)
(1)
|
Medtronic, Inc.
|
|
15,933
|
|
|
Genzyme Corporation
|
|
4,049
|
|
Baxter International, Inc.
|
|
12,843
|
|
|
Hospira, Inc.
|
|
3,917
|
|
Thermo Fisher Scientific,
Inc.
|
|
10,789
|
|
|
Beckman Coulter, Inc.
|
|
3,663
|
|
Covidien Ltd.
|
|
10,429
|
|
|
CR Bard, Inc.
|
|
2,720
|
|
Boston Scientific
Corporation
|
|
7,806
|
|
|
Varian Medical Systems,
Inc.
|
|
2,357
|
|
Becton Dickinson &
Company
|
|
7,372
|
|
|
Kinetic Concepts, Inc.
|
|
2,018
|
|
Stryker Corporation
|
|
7,320
|
|
|
Hill-Rom Holdings, Inc.
|
|
1,470
|
|
Alcon, Inc.
|
|
7,179
|
|
|
Edwards Lifesciences
Corporation
|
|
1,447
|
|
Zimmer Holdings, Inc.
|
|
4,220
|
|
|
Steris Corporation
|
|
1,207
|
|
|
|
|
|
|
1
|
Median 2010
revenue of the primary peer group companies was $4,135 (million). The
Companys 2010 revenue was $5,165 (million).
|
28
Table of Contents
The table below provides information regarding the
market data used for each component of our compensation program.
|
|
|
Component
|
|
Market
Data
|
Base Salary
|
|
When a relevant data sample, typically 10 data points
or more, is available from the primary peer group, it is used to determine
market base salary levels. For fiscal 2011, the primary peer group was used
to benchmark chief executive officer and chief financial officer salaries for
Messrs. Starks and Heinmiller. For fiscal 2011, the primary peer group did
not contain a relevant sample of data for positions similar to the positions
of Messrs. Rousseau, Fain or Gestin. Therefore the following approach was
taken to generate a relevant sample.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Comparable
Positions
|
|
Data
Source
|
|
Rousseau
|
|
Chief operating officers
|
|
Data from 18 primary peers and 12 expanded peers
listed below
|
|
Fain
|
|
U.S.-based division-level executives with similar
revenue responsibility
|
|
Mercers Benchmark Database, a general industry
survey with approximately 3,000 participating organizations
|
|
Gestin
|
|
European-based division-level executives with similar
responsibility
|
|
Mercers Total Remuneration Surveys covering Belgium,
France, Italy and Spain
|
|
|
Annual and Long-Term Incentive Awards
|
To determine market competitive levels for annual and
long-term incentive awards for the Named Executive Officers, a large sample
of data was used from medical device and similar companies. The use of
industry-specific data allowed us to capture the unique characteristics of
incentive levels in the industry. The supplemental incentive market data
chosen was a large enough sample from which to gather market incentive data
for all executive levels. This sample included the primary peer group, as
well as the companies detailed in the following tables. Data was obtained
from the ORC Worldwide SIRS Benchmark Survey, Mercers United States
Benchmark Database and published compensation proxy data.
|
|
|
|
|
|
Expanded Peers
|
|
|
|
|
|
Biogen Idec, Inc.
Bio-Rad
Laboratories, Inc.
Carefusion Corporation
Cephalon, Inc.
|
|
Forest Laboratories, Inc.
Gilead Sciences,
Inc.
Invacare Corporation
Life Technologies
Corporation
|
|
Millipore Corporation
PerkinElmer Inc.
Varian, Inc.
Waters Corporation
|
|
|
|
|
|
Additional Sources of Supplemental
Incentive Market Data
|
|
|
|
|
|
Abbott Laboratories
ACIST Medical
Systems, Inc.
Agilent
Technologies, Inc.
Allergan, Inc.
Amgen, Inc.
Arthrex, Inc.
Cardinal Health,
Inc.
Celgene Corporation
Covance Inc.
Daiichi Sankyo
Company, Ltd.
Dentsply
International, Inc.
Fenwall, Inc.
|
|
Fresenius Medical Care AG & Co.
GE-Healthcare
Hu-Friedy Mfg. Co.,
Inc.
Johnson &
Johnson
Marteck Biosciences
Corporation
McKesson Corporation
Medimmune, Inc.
Novartis US
Novo Nordisk Inc.
Owens & Minor,
Inc.
Patterson Companies,
Inc.
Philips NA
Healthcare
Roche Diagnostic
Operations, Inc.
|
|
Sanofi-Aventis US
Siemens AG US
Smiths Medical ASD,
Inc.
Straumann USA, LLC
Surmodics Inc.
Sunrise Medical (US)
LLC
Teleflex
Incorporated
Thoratec Corporation
University Hospital
Services, Inc.
Vascular Solutions,
Inc.
Warner Chilcott plc
Watson
Pharmaceuticals, Inc.
|
|
|
Other Benefits
and Perquisites
|
Primary peer group data and expanded peer data
|
|
|
29
Table of Contents
Overview
of Fiscal 2011 Compensation
Pay
Mix
. The chart below
illustrates the mix of base salaries, target annual incentive awards, long-term
incentive awards and cash perquisites for our Named Executive Officers as a
group for fiscal 2011.
As reflected in the above
chart, for fiscal 2011, on average 83% of the total compensation awarded to the
Named Executive Officers was performance-based compensation.
Market
Positioning
. The
following paragraphs describe how the 2011 base salaries, target annual
incentive awards and long-term incentive awards for our Named Executive
Officers compared against the market data described above.
For
2011, base salaries for the Named Executive Officers exceeded the 60
th
percentile for the closest market comparator by an average of 5%. The Company
believes that this variance is within an acceptable range of the 60
th
percentile reference point. In addition to the factors listed on page 26, for
Mr. Gestin, the variances to the 60
th
percentile reference
point can be attributed to fluctuations in the Euro to U.S. Dollar exchange
rate in recent years.
For
2011, target annual incentive opportunities for the Named Executive Officers
exceeded the 60
th
percentile for the closest market comparator
position by an average of 11.8%. The Company believes this variance is within
an acceptable range of the 60
th
percentile and consistent with our
aggressive year-over-year growth objectives and our decentralized organization
which gives division and group presidents the ability to act autonomously and
therefore have a more direct impact on performance results.
For
2011, long-term incentive awards for the Named Executive Officers trailed the
60
th
percentile for the closest market comparator position by an
average of 3.3%. The Company believes that this position to the 60
th
percentile is reasonable and appropriate.
30
Table of Contents
Fiscal
2011 Base Salaries
The
amount of annualized base salary and year-over-year increase for each of our
Named Executive Officers for fiscal year 2011 is set forth in the following
table.
|
|
|
|
|
|
|
|
|
Base Salary
|
Name
|
|
Fiscal Year 2010
($)
|
|
Fiscal Year 2011
($)
|
|
Percent Increase in
Fiscal Year 2011
(%)
|
Daniel J. Starks
|
|
995,000
|
|
1,025,000
|
|
2.93
|
John C. Heinmiller
|
|
678,300
|
|
700,000
|
|
3.10
|
Michael T.
Rousseau
|
|
612,000
|
|
650,000
|
|
5.85
|
Eric S. Fain
|
|
561,000
|
|
585,000
|
|
4.10
|
Denis M. Gestin
|
|
626,007
|
|
625,498
|
|
2.78
(1)
|
Footnotes
(1)
|
The percentage increase in
fiscal year 2011 base salary for Mr. Gestin has been calculated using
his base salary as expressed in Euros (not U.S. Dollars). Mr. Gestins
base salary for 2011 and 2010 was Euro 482,600 and Euro 469,200,
respectively, representing an increase of 2.78%.
|
In determining 2011 base
salary rates, consideration was given to each of the factors listed on page 26
under
Determination
of Targeted Compensation Levels
and the market data on page 29
.
Fiscal
2011 Annual Incentive Awards
For
2011, targeted annual incentive opportunities for our Named Executive Officers
under the MICP ranged from 70% to 120% of base salary. The actual incentive
payout for each performance objective could range from 0% to 200% of target
depending upon the extent to which the performance objective was achieved.
Incentive payments are not made if actual performance is less than 90% of
targeted levels.
For
fiscal 2011, annual incentive payments made to the Named Executive Officers
under the MICP were based on the Companys level of achievement of Company-wide
annual sales revenue and earnings per share objectives, as well as divisional
profitability and sales objectives, all as established under the Companys
annual operating plan. When calculating fiscal year 2011 earnings per share for
determining achievement of performance measures under the MICP, we included the
accretive impact of the Companys repurchase of approximately 18.3 million
shares during such year.
Historically,
Company-wide performance objectives have been set so they require double-digit
growth over the previous years revenue and profitability results. For example,
in December 2010, the Board approved our 2011 operating plan and the
Company-wide revenue and earnings per share targets of $5.906 billion and $3.32
(excluding the impact of certain charges, acquisitions and foreign currency
translation), respectively, that were included within the operating plan. When
the Board approved the operating plan, the 2011 revenue and earnings per share
targets reflected increases of approximately 13% (on a constant currency basis)
and 11%, respectively, over the revenue and earnings per share that we expected,
at that time, to achieve for the full year 2010.
Division
goals related to sales and operating profit are established in support of
Company-wide revenue and earnings per share targets with additional
consideration given to division-specific market conditions and each divisions
stage in its growth cycle. For example, although division-specific targets in
the aggregate are intended to be consistent with Company-wide objectives,
growth rates implicit in targets for any one division may be above or below the
growth rates targeted for the entire Company, due to faster or slower growth in
relevant product markets or smaller or larger market shares.
These
considerations result in Company-wide and division goals that are consistent in
their difficulty to achieve and probability for success. Performance objectives
are set at a level that we believe is aggressive enough to inspire top
performance but reasonable enough to be realistically achievable. Goals are
established to challenge executives to maximize year-over-year growth in sales
and
31
Table of Contents
profitability but are at the
same time intended to be reasonable in that they can be achieved by the
efficient execution of operating plans.
Information
regarding the weightings of the performance measures and the potential and
actual payouts of the fiscal 2011 annual incentive awards pursuant to the MICP
is set forth below.
Fiscal 2011 Annual Incentive Award Payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Measures
|
|
Potential Payout
|
|
Actual Payout
|
|
|
Name
|
|
Measure
|
|
Weighting
|
|
Target
Payout
as a %
of
Salary
|
|
Target Payout
Level
|
|
% of
Target
|
|
Payout
Amount
|
|
% of Salary
|
|
Daniel J. Starks
|
|
EPS
|
|
75
|
%
|
|
90.00
|
%
|
|
$
|
922,500
|
|
85.00
|
%
|
|
$
|
784,125
|
|
76.50
|
%
|
|
|
|
Company
Sales
|
|
25
|
%
|
|
30.00
|
%
|
|
$
|
307,500
|
|
80.00
|
%
|
|
$
|
246,000
|
|
24.00
|
%
|
|
|
|
|
|
100
|
%
|
|
120.00
|
%
|
|
$
|
1,230,000
|
|
83.75
|
%
|
|
$
|
1,030,125
|
|
100.50
|
%
|
|
John C. Heinmiller
|
|
EPS
|
|
75
|
%
|
|
75.00
|
%
|
|
$
|
525,000
|
|
85.00
|
%
|
|
$
|
446,250
|
|
63.75
|
%
|
|
|
|
Company
Sales
|
|
25
|
%
|
|
25.00
|
%
|
|
$
|
175,000
|
|
80.00
|
%
|
|
$
|
140,000
|
|
20.00
|
%
|
|
|
|
|
|
100
|
%
|
|
100.00
|
%
|
|
$
|
700,000
|
|
83.75
|
%
|
|
$
|
586,250
|
|
83.75
|
%
|
|
Michael T. Rousseau
|
|
EPS
|
|
75
|
%
|
|
75.00
|
%
|
|
$
|
487,500
|
|
85.00
|
%
|
|
$
|
414,375
|
|
63.75
|
%
|
|
|
|
Company
Sales
|
|
25
|
%
|
|
25.00
|
%
|
|
$
|
162,500
|
|
80.00
|
%
|
|
$
|
130,000
|
|
20.00
|
%
|
|
|
|
|
|
100
|
%
|
|
100.00
|
%
|
|
$
|
650,000
|
|
83.75
|
%
|
|
$
|
544,375
|
|
83.75
|
%
|
|
Eric S. Fain
|
|
EPS
|
|
25
|
%
|
|
20.00
|
%
|
|
$
|
117,000
|
|
85.00
|
%
|
|
$
|
99,450
|
|
17.00
|
%
|
|
|
|
Division
Sales
|
|
25
|
%
|
|
20.00
|
%
|
|
$
|
117,000
|
|
60.00
|
%
|
|
$
|
70,200
|
|
12.00
|
%
|
|
|
|
Division
Operating Profit
|
|
50
|
%
|
|
40.00
|
%
|
|
$
|
234,000
|
|
60.00
|
%
|
|
$
|
140,400
|
|
24.00
|
%
|
|
|
|
|
|
100
|
%
|
|
80.00
|
%
|
|
$
|
468,000
|
|
66.25
|
%
|
|
$
|
310,050
|
|
53.00
|
%
|
|
Denis M. Gestin
(1)
|
|
EPS
|
|
25
|
%
|
|
17.50
|
%
|
|
$
|
109,462
|
|
85.00
|
%
|
|
$
|
93,043
|
|
14.88
|
%
|
|
|
|
Division
Sales
|
|
50
|
%
|
|
35.00
|
%
|
|
$
|
218,924
|
|
85.00
|
%
|
|
$
|
186,086
|
|
29.75
|
%
|
|
|
|
Division
Operating Profit
|
|
25
|
%
|
|
17.50
|
%
|
|
$
|
109,462
|
|
0.00
|
%
|
|
$
|
|
|
0.00
|
%
|
|
|
|
|
|
100
|
%
|
|
70.00
|
%
|
|
$
|
437,849
|
|
63.75
|
%
|
|
$
|
279,128
|
|
44.63
|
%
|
|
|
|
|
|
Footnotes
|
|
|
|
|
(1)
|
Mr. Gestin is paid in Euros, but for the
purposes of this proxy statement, all amounts have been converted to U.S.
Dollars using the exchange rate of 1 Euro to $1.2961, the exchange rate in
effect on the last business day of fiscal year 2011.
|
Fiscal
2011 Long-Term Incentive Awards
The
option awards granted to the Named Executive Officers during fiscal 2011 were
determined as described under
Determination of Targeted Compensation Levels
above. Grant recommendations are made to the Committee in advance of the date
they are actually approved. In making these recommendations, the fair value of
the awards was determined using the average closing price of the Companys
stock for the 25 days following the third-quarter earnings release. This
mitigates the impact of market anomalies on the value used to determine award
levels. The number of shares subject to each option award granted to the Named
Executive Officers during fiscal year 2011, as well as the grant date fair
values of these awards, is shown in the Grants of Plan-Based Awards for Fiscal
2011 table on page 39.
Fiscal
2011 Other Benefits and Perquisites
The
table below provides information regarding the other benefits and perquisites
provided to the Named Executive Officers other than Mr. Gestin. A
discussion of the other benefits and perquisites provided to Mr. Gestin
follows the table.
32
Table of Contents
|
|
|
Other
Benefits and Perquisites
|
|
Description
|
Health and Welfare Benefits
|
|
Health Benefits
: Health care, dental, vision
and disability benefits that are available to all exempt employees.
|
|
|
Life Insurance
: Life insurance with a death
benefit equal to twice the employees annual salary, commission and bonus, up
to a maximum death benefit of $1,250,000, which is available to each salaried
employee with a salary, commission and bonus exceeding $150,000. As of
December 31, 2006, Mr. Starks declined coverage under this program
and therefore no longer receives a life insurance benefit from the Company.
|
|
|
Supplemental Disability Insurance
. Payment
of supplemental disability insurance premiums for Mr. Heinmiller.
|
|
|
|
Retirement Benefits
|
|
401(k) Plan
: Company matches 100% of the
first 3% of compensation contributed by employees.
|
|
|
Management Savings Plan
: Plan provides
matching payments for each employee whose annual salary, commission and bonus
exceeds the IRS qualified plan limit.
|
|
|
Employee Stock Purchase Plan
: Allows
employees to purchase stock at a discount to the market price.
|
Perquisites
|
|
Cash Perquisite Allowance
: Cash provided in
lieu of car allowances, financial planning and other perquisites provided by
similarly-sized companies. The Company uses a cash allowance approach because
it is easily administered and can be easily adjusted on an annual basis in
response to shifts in market practices. For 2011, cash perquisite allowances
ranged from $17,250 to $26,000.
|
|
|
Physical Examination
: Reimbursement for one
physical examination every 12 months up to a maximum of $1,600 per exam.
|
|
|
Charitable Matching Program
: Eligible
charitable contributions are matched by the Company up to a maximum of $1,000
each year.
|
|
|
|
The
other benefits and perquisites described above, including the 401(k) plan, the
Management Savings Plan and Employee Stock Purchase Plan, do not factor into
decisions related to other elements of compensation for the Named Executive
Officers other than to support the Companys overall strategy to attract and
retain executive talent. Unlike base salaries, cash perquisites are excluded
from the determination of benefits under other Company programs such as the
MICP and the Companys profit sharing plan.
Because
Mr. Gestin is not based in the United States, in 2011 he did not
participate in the benefit programs discussed above, but rather participated in
health, welfare and retirement programs provided to all employees at the
Companys Brussels location. These benefits include disability insurance,
hospitalization insurance and life insurance equal to two times the employees
annual base salary plus an additional 50% of such employees annual base salary per each
dependent child. Additionally, Belgian employees participate in a
retirement plan that for 2011 provided a contribution equal to 3% of the social
security ceiling plus 11% of the difference between the social security ceiling
and the employees base salary. The Company believes these programs are
necessary in order to compete for talent and that it is appropriate to provide
Mr. Gestin benefits consistent with normal practice in his country of
residence. Consistent with European practice, Mr. Gestin did not receive a
cash perquisite allowance in 2011 but rather was provided an automobile by the
Company. The cost to the Company for this perquisite in 2011 was $33,699.
Change
in Control Severance Agreements
The
Company has entered into change in control severance agreements (the Severance
Agreements) with each of the Named Executive Officers. Each Severance
Agreement provides a benefit to the Named Executive Officer in the event that
he is involuntarily terminated, other than for cause, following a change in
control. A benefit is also provided if the Named Executive Officer terminates
his employment for good reason in the three years following a change in
control. The Company has selected this double trigger approach because it
protects the Named Executive Officer from the possibility of a termination of
his employment following a change in control while at the same
33
Table of Contents
time providing
for payment only if such a termination of employment actually occurs. The
Severance Agreements
apply solely to change in control related terminations. The Named Executive
Officers are not provided any guaranteed benefit, under the Severance
Agreements or otherwise, in the event of termination not related to a change in
control.
In
the event of a qualifying termination, each Named Executive Officer is provided
with a lump sum payment equal to 2.9 times his annual base salary, target
annual incentive and annual perquisite allowance. In addition, for a period of
three years, the Named Executive Officer is entitled to receive, at the
Companys expense, health, accident, disability and life insurance benefits
substantially similar to those provided immediately prior to termination. In
the event that any payments associated with a change in control, whether
covered by the Severance Agreement or any other plan, would be subject to
excise tax under Section 280G of the Internal Revenue Code, the Company will
provide the Named Executive Officer with a payment to cover the excise tax plus
a gross-up payment to cover any taxes applied to the excise tax payment. The
Company will also reimburse the Named Executive Officer for any legal fees and
expenses incurred by the Named Executive Officer as a result of the termination
of his employment, including costs incurred in contesting or disputing the
termination or seeking to obtain or enforce any right under the Severance
Agreement.
The
Company believes that providing change in control benefits should
eliminate or reduce the reluctance of executive management to pursue potential
change in control transactions that may be in the best interests of
shareholders. The Company also believes these arrangements are necessary in order to
retain key executives during the transition period following a change in
control and allow them to focus on Company-related matters rather than seeking
new employment opportunities. We believe the 2.9 times (annual base salary,
target annual incentive and annual perquisite allowance) benefit provided is
reasonable in light of those provided to named executive officers at
similarly-sized companies and the amount of time normally required to find
executive employment opportunities. The Severance Agreements are discussed in
greater detail on page 42. The Severance Agreements do not factor into
decisions related to other elements of compensation other than to support the
overall strategy of attracting and retaining
executive talent.
Stock
Ownership Guidelines and Anti-Hedging Policy
The
Company maintains stock ownership guidelines which set stock ownership targets
that all executive officers and Directors are expected to achieve, with the
intent of aligning the interests of management and shareholders. Targeted stock
ownership levels range from three times base salary for the Chief Executive
Officer to two times base salary for each of the other Named Executive
Officers. Stock ownership guidelines for Directors are set at five times the
annual retainer for Directors, or $300,000. Ownership levels are expected to be
reached within five years after the date of first promotion to the applicable
management level or to the Board, as applicable.
Ownership
levels are determined by including stock acquired through open market, option
plan or Employee Stock Purchase Plan purchases, shares obtained in lieu of
earned compensation, shares earned under restricted stock grants and the in
the money value of vested stock options. Each Director and those Named
Executive Officers that have been executive officers of the Company for at
least five years are in compliance with the Companys stock ownership
guidelines.
In
December 2011, the Committee adopted an anti-hedging policy prohibiting all
Directors and executive officers from engaging in the purchase or sale of
financial instruments (including puts, calls, prepaid variable forward
contracts, equity swaps, collars, exchange funds or other derivative
securities) based on the Companys securities that are designed to hedge or
offset any decrease in the market value of the Companys securities. The policy
is premised on the belief that even in those circumstances where the proposed
transaction may not constitute a violation of law or applicable regulations, it
is nonetheless considered inappropriate for any Director or executive officer
to engage in short-term or speculative transactions in our securities which may
be viewed as reducing their incentive to improve our performance or
inconsistent with the objectives of our shareholders in general.
34
Table of Contents
Tax
Implications of Executive Compensation
Section
162(m) of the
Internal Revenue Code places a limit of $1,000,000 on the amount of
compensation that the Company may deduct in any one year with respect to
certain of its executive
officers. There is an exception to the $1,000,000 limitation for
performance-based compensation, provided it is paid pursuant to a plan that has
been approved by shareholders, the performance goals are objective and
determined by a committee of the board of directors which is comprised solely
of two or more outside directors and the compensation is paid only after the
committee certifies that the performance goals and any other material terms
were in fact satisfied.
All
awards to the Named Executive Officers made for fiscal 2011 under the Companys
annual and long-term incentive plans qualify as performance-based compensation
under Section 162(m) and, therefore, are excluded from the $1,000,000 cap on
compensation for deductibility purposes.
It
is the Committees intention to use incentive compensation as a substantial
component of the Companys executive compensation program and to attempt to
structure incentive compensation so that the Company will not lose deductions
under Section 162(m). While the Committee intends to continue to provide
compensation opportunities to its executives in as tax-efficient a manner as
possible, it recognizes that from time to time it may be in the best interests of shareholders to provide
non-deductible compensation. The combination of Mr. Starks 2011 base salary
and cash perquisite allowance resulted in $51,000 that was not deductible
compensation.
Adjustments
for Non-GAAP Financial Measures
The
Company provides adjusted net earnings and adjusted net earnings per share
because St. Jude Medical management believes that in order to properly
understand the Companys short-term and long-term financial trends, investors
may wish to consider the impact of certain adjustments (such as in-process
research and development charges, acquisition-related charges, impairment
charges, restructuring charges, litigation charges or litigation reserve
adjustments and income tax adjustments). These adjustments result from facts
and circumstances (such as business development activities, acquisitions,
restructuring activities, asset impairment events or developments, settlements
and other developments relating to income taxes and litigation) that vary in
frequency and impact on the Companys results of operations. St. Jude Medical
management uses adjusted net earnings and adjusted net earnings per share to
forecast and evaluate the operational performance of the Company as well as to
compare results of current periods to prior periods on a consolidated basis.
Non-GAAP
financial measures used by the Company may be calculated differently from, and
therefore may not be comparable to, similarly titled measures used by other
companies. Investors should consider non-GAAP measures in addition to, and not
as a substitute for, or superior to, financial performance measures prepared in
accordance with GAAP.
The
following table provides a reconciliation of the Companys reported net
earnings and reported diluted net earnings per share to the Companys adjusted
net earnings and adjusted diluted net earnings per share for fiscal year 2011
and 2010:
35
Table of Contents
|
|
|
|
|
Fiscal
Year 2011
|
|
(in millions)
|
|
Description of Adjustments
|
Net Earnings, as reported
|
|
$826
|
|
|
|
Acquired inventory step-up
amortization charges
|
|
19
|
|
After-tax charges for AGA
Medical Holdings, Inc. acquired inventory step-up amortization.
|
|
|
|
|
|
Restructuring charges
|
|
121
|
|
After-tax charges related
to ongoing restructuring actions to realign certain activities in the CRM
business as well as employee termination and other costs primarily associated
with continuing efforts to improve sales & sales support organization.
|
|
|
|
|
|
Intangible asset
impairment charges
|
|
30
|
|
After-tax charges related
to the write-down of certain intangible assets which were determined to be
impaired.
|
|
|
|
|
|
Post-acquisition related
charges
|
|
19
|
|
Net after-tax charges
primarily related to post-acquisition expenses for AGA Medical Holdings, Inc.
which principally include contract termination costs and other integration
costs in international locations.
|
|
|
|
|
|
Foundation contribution
|
|
9
|
|
After-tax charges related
to contributions to the St. Jude Medical Foundation.
|
|
|
|
|
|
Accounts receivable
charges
|
|
47
|
|
After-tax charges related
to increased collection risk for accounts receivable related to customers in
Europe.
|
|
|
|
|
|
In-process research and
development charges
|
|
3
|
|
After-tax charges for the
acquisition of pre-development technology assets.
|
|
|
|
|
|
Adjusted Net Earnings
(Non-GAAP)
|
|
$1,074
|
|
|
|
|
|
|
|
Fiscal
Year 2011
|
|
|
|
Description of Adjustments
|
Diluted EPS, as reported
|
|
$2.52
|
|
|
|
|
|
|
|
Acquired inventory step-up
amortization charges
|
|
0.06
|
|
After-tax charges for AGA
Medical Holdings, Inc. acquired inventory step-up amortization.
|
|
|
|
|
|
Restructuring charges
|
|
0.37
|
|
After-tax charges related
to ongoing restructuring actions to realign certain activities in the CRM
business as well as employee termination and other costs primarily associated
with continuing efforts to improve sales & sales support organization.
|
|
|
|
|
|
Intangible asset
impairment charges
|
|
0.09
|
|
After-tax charges related
to the write-down of certain intangible assets which were determined to be
impaired.
|
|
|
|
|
|
Post-acquisition related
charges
|
|
0.06
|
|
Net after-tax charges
primarily related to post-acquisition expenses for AGA Medical Holdings, Inc.
which principally include contract termination costs and other integration
costs in international locations.
|
|
|
|
|
|
Foundation contribution
|
|
0.03
|
|
After-tax charges related
to contributions to the St. Jude Medical Foundation.
|
|
|
|
|
|
Accounts receivable
charges
|
|
0.14
|
|
After-tax charges related
to increased collection risk for accounts receivable related to customers in
Europe.
|
|
|
|
|
|
In-process research and
development charges
|
|
0.01
|
|
After-tax charges for the
acquisition of pre-development technology assets.
|
|
|
|
|
|
Adjusted Diluted EPS
(Non-GAAP)
|
|
$3.28
|
|
|
36
Table of Contents
|
|
|
|
|
Fiscal
Year 2010
|
|
(in millions)
|
|
Description of Adjustments
|
Net Earnings, as reported
|
|
$907
|
|
|
|
|
|
|
|
Inventory obsolescence
charges
|
|
18
|
|
After-tax charges for
excess ICD inventory.
|
|
|
|
|
|
Acquisition-related
charges
|
|
37
|
|
Net after-tax charges
related to closing and other costs associated with the Companys acquisition
of AGA Medical Holdings, Inc. and LightLab Imaging, Inc.
|
|
|
|
|
|
In-process research and
development charges
|
|
12
|
|
After-tax charges for the
acquisition of pre-development technology assets.
|
|
|
|
|
|
Legal settlement charges
|
|
16
|
|
After-tax charges for the
settlement of a U.S. Department of Justice investigation.
|
|
|
|
|
|
Investment impairment
charges
|
|
5
|
|
After-tax impairment
charges for the decline in the fair value of strategic cost investments that
are not considered temporary.
|
|
|
|
|
|
Adjusted Net Earnings
(Non-GAAP)
|
|
$995
|
|
|
|
|
|
|
|
Fiscal
Year 2010
|
|
|
|
Description of Adjustments
|
Diluted EPS, as reported
|
|
$2.75
|
|
|
|
|
|
|
|
Inventory obsolescence
charges
|
|
0.05
|
|
After-tax charges for
excess ICD inventory.
|
|
|
|
|
|
Acquisition-related
charges
|
|
0.11
|
|
Net after-tax charges
related to closing and other costs associated with the Companys acquisition
of AGA Medical Holdings, Inc. and LightLab Imaging, Inc.
|
|
|
|
|
|
In-process research and
development charges
|
|
0.04
|
|
After-tax charges for the
acquisition of pre-development technology assets.
|
|
|
|
|
|
Legal settlement charges
|
|
0.05
|
|
After-tax charges for the
settlement of a U.S. Department of Justice investigation.
|
|
|
|
|
|
Investment impairment
charges
|
|
0.01
|
|
After-tax impairment
charges for the decline in the fair value of strategic cost investments that
are not considered temporary.
|
|
|
|
|
|
Adjusted Diluted EPS
(Non-GAAP)
|
|
$3.01
|
|
|
C
ompensation Risk Analysis
In
October 2011, the Companys compensation consultant, Mercer, analyzed, reviewed
and discussed with the Companys Compensation Committee whether the Companys
executive compensation practices and policies encourage excessive risk-taking.
The Compensation Committee and Mercer concluded that such practices and
policies, taking into account any risk-mitigating provisions and controls
(e.g., stock ownership guidelines, the elements of long-term incentive
compensation, lack of formal non-change-in-control severance plans and funding
of the annual bonus pool based on Company performance), do not encourage
excessive risk-taking. Effective beginning in 2012, the Company has also
implemented a compensation recoupment or clawback policy that requires the
repayment of MICP awards in certain circumstances. Management applied similar
criteria in assessing whether other compensation practices and policies
encourage excessive risk-taking and concluded that they do not. Based on the
foregoing, the Company determined that the risks arising from the Companys
compensation practices and policies are not reasonably likely to have a
material adverse effect on the Company.
37
Table of Contents
S
ummary Compensation Table
The
following table shows the cash and non-cash compensation for the last three
fiscal years awarded to or earned by the individuals who served as our chief
executive officer, chief financial officer and each of our three other most
highly compensated executive officers during fiscal year 2011. These five
individuals are collectively referred to as the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
(1)
|
|
Option
Awards
($)
(2)
|
|
Non-
Equity Incentive
Plan Compen-
sation
($)
(3)
|
|
All
Other
Compen-
sation
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Starks
|
|
|
2011
|
|
|
1,025,000
|
|
|
4,481,808
|
|
|
1,030,125
|
|
|
36,350
|
(4)
|
|
6,573,283
|
|
Chairman,
President and
|
|
|
2010
|
|
|
995,000
|
|
|
6,997,200
|
|
|
1,408,920
|
|
|
36,350
|
|
|
9,437,470
|
|
Chief
Executive Officer
|
|
|
2009
|
|
|
975,000
|
|
|
5,865,795
|
|
|
1,061,775
|
|
|
36,350
|
|
|
7,938,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John C. Heinmiller
|
|
|
2011
|
|
|
700,000
|
|
|
2,801,130
|
|
|
586,250
|
|
|
39,764
|
(5)
|
|
4,127,144
|
|
Executive
Vice President and
|
|
|
2010
|
|
|
678,300
|
|
|
3,250,783
|
|
|
800,394
|
|
|
40,915
|
|
|
4,770,392
|
|
Chief
Financial Officer
|
|
|
2009
|
|
|
665,000
|
|
|
2,789,511
|
|
|
603,487
|
|
|
39,315
|
|
|
4,097,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael T. Rousseau
|
|
|
2011
|
|
|
650,000
|
|
|
2,801,130
|
|
|
544,375
|
|
|
35,565
|
(6)
|
|
4,031,070
|
|
Group
President
|
|
|
2010
|
|
|
612,000
|
|
|
2,973,810
|
|
|
722,160
|
|
|
35,160
|
|
|
4,343,130
|
|
|
|
|
2009
|
|
|
600,000
|
|
|
2,372,388
|
|
|
544,500
|
|
|
35,160
|
|
|
3,552,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric S. Fain
|
|
|
2011
|
|
|
585,000
|
|
|
1,867,420
|
|
|
310,050
|
|
|
30,703
|
(7)
|
|
2,793,173
|
|
President,
Cardiac Rhythm
|
|
|
2010
|
|
|
561,000
|
|
|
2,106,449
|
|
|
473,484
|
|
|
28,410
|
|
|
3,169,343
|
|
Management Division
|
|
|
2009
|
|
|
549,423
|
|
|
1,824,914
|
|
|
358,224
|
|
|
29,410
|
|
|
2,761,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denis M. Gestin
(8)
|
|
|
2011
|
|
|
625,498
|
|
|
1,867,420
|
|
|
279,128
|
|
|
160,541
|
(9)
|
|
2,932,588
|
|
President, International Division
|
|
|
2010
|
|
|
626,007
|
|
|
1,545,215
|
|
|
414,025
|
|
|
159,274
|
|
|
2,744,521
|
|
|
|
|
2009
|
|
|
658,720
|
|
|
1,173,159
|
|
|
386,421
|
|
|
185,125
|
|
|
2,403,425
|
|
|
|
|
|
|
Footnotes
|
|
|
|
|
(1)
|
Includes
amounts deferred at the discretion of the executive officer pursuant to our
401(k) plan and our Management Savings Plan.
|
|
|
|
|
(2)
|
The
amounts in this column are computed in accordance with FASB ASC Topic 718 and
are based on the fair value of the stock option awards as estimated using the
Black-Scholes option pricing model. The assumptions used to estimate fair
value are discussed in Note 7 to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended
December 31, 2011.
|
|
|
|
|
(3)
|
We
award bonuses to the Named Executive Officers solely based on our achievement
of certain performance targets. Accordingly, bonus amounts are reported in
the Non-Equity Incentive Plan Compensation column. The amounts in this column
relate to awards under the MICP and are described under the heading
Compensation
Discussion and Analysis
above.
|
|
|
|
|
(4)
|
Consists of a perquisite
allowance of $26,000 and retirement plan contributions of $10,350. T
he Company purchases life insurance for salaried employees generally
providing a death benefit equal to the lesser of $500,000 or twice the annual
salary, commission and bonus of such salaried employees. For employees whose
annual salary, commission and bonus exceeds $150,000 and who participate in
the Management Savings Plan, the Company purchases supplemental life
insurance providing a death benefit equal to the lesser of $1,250,000 or
twice the annual salary, commission and supplemental bonus of such salaried
employees. As of December 31, 2006, Mr. Starks declined coverage
under this program and therefore no longer receives a life insurance benefit
from the Company.
|
38
Table of Contents
|
|
|
|
(5)
|
Consists
of a perquisite allowance of $24,000, retirement plan contributions of
$10,350
, the cost of supplemental disability insurance premiums paid by the
Company and the incremental cost of life insurance premiums paid by the
Company for coverage in excess of that purchased by the Company for salaried
employees generally.
|
|
|
|
|
(6)
|
Consists
of a perquisite allowance of $24,000, retirement plan contributions of
$10,350
and the incremental cost of life insurance premiums paid by the
Company for coverage in excess of that purchased by the Company for salaried
employees generally.
|
|
|
|
|
(7)
|
Consists
of a perquisite allowance of $17,250, retirement plan contributions of
$10,350
, an award payment related to a patent filing and the incremental cost
of life insurance premiums paid by the Company for coverage in excess of that
purchased by the Company for salaried employees generally.
|
|
|
|
|
(8)
|
2011
amounts paid to Mr. Gestin in Euros were converted to U.S. dollars using
the exchange rate of 1 Euro to $1.2961 in effect on the last business day of
fiscal year 2011. 2010 amounts paid to Mr. Gestin in Euros were
converted to U.S. dollars using the exchange rate of 1 Euro to $1.3342 in
effect on the last day of fiscal year 2010. 2009 amounts paid to
Mr. Gestin in Euros were converted to U.S. dollars using the exchange
rate of 1 Euro to $1.432 in effect on the last business day of fiscal year
2009.
|
|
|
|
|
(9)
|
Consists
of statutory vacation pay of $63,011 required to be paid annually pursuant to
Belgium law, retirement plan contributions of $63,832 and the cost of a
company automobile of $33,699.
|
G
rants of Plan-Based Awards for Fiscal 2011
The
following table summarizes the 2011 grants of equity and non-equity incentive
plan-based awards to the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Possible Payouts Under
Non-Equity Incentive Plan Awards
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
All Other
Option Awards:
Number of
Securities
Underlying
Options (#)
(2)(3)
|
|
Exercise
or
Base Price
of Option
Awards
($/Sh)
|
|
Grant
Date Fair
Value of Stock
and Option
Awards($)
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel
J. Starks
|
|
|
|
|
|
738,000
|
|
|
1,230,000
|
|
|
2,460,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/12/11
|
|
|
|
|
|
|
|
|
|
|
|
480,000
|
|
|
34.96
|
|
|
4,481,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John C. Heinmiller
|
|
|
|
|
|
420,000
|
|
|
700,000
|
|
|
1,400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/12/11
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
34.96
|
|
|
2,801,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael T. Rousseau
|
|
|
|
|
|
390,000
|
|
|
650,000
|
|
|
1,300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/12/11
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
34.96
|
|
|
2,801,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric S. Fain
|
|
|
|
|
|
280,800
|
|
|
468,000
|
|
|
936,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/12/11
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
34.96
|
|
|
1,867,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denis M. Gestin
(5)
|
|
|
|
|
|
262,709
|
|
|
437,849
|
|
|
875,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/12/11
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
34.96
|
|
|
1,867,420
|
|
|
|
|
|
|
Footnotes
|
|
|
|
|
(1)
|
Actual amounts paid under
the MICP based on our 2011 performance are reported in the Non-Equity
Incentive Plan Compensation column of the Summary Compensation Table. The
performance objectives and target opportunities for awards under the MICP for
each year are typically set at the Board of Directors and Compensation
Committee meetings held in the December preceding the year for which
performance is to be measured. For example, on December 13, 2010, the
Board of Directors and Compensation Committee set the performance targets for
fiscal year 2011. The performance targets are described in
Compensation
Discussion and Analysis
above.
|
|
|
|
|
(2)
|
All option grants made to
the Named Executive Officers were made under the St. Jude Medical, Inc. 2007
Stock Incentive Plan.
|
|
|
|
|
(3)
|
These options vest 25% on
December 17 in 2012, 2013, 2014 and 2015, subject to acceleration of vesting
upon a change in control under certain circumstances.
|
|
|
|
|
(4)
|
The assumptions used to
estimate the grant date fair value of stock options are discussed in Note 7
to our consolidated financial statements included in our Annual Report on
Form 10-K for the year ended December 31, 2011.
|
|
|
|
|
(5)
|
Estimated possible payouts
under non-equity incentive plan awards for Mr. Gestin have been
converted from Euros to U.S. dollars using the exchange rate of 1 Euro to
$1.2961, the exchange rate in effect on the last business day of fiscal year
2011.
|
39
Table of Contents
O
utstanding
Equity Awards at 2011 Fiscal Year-End
The
following table sets forth the outstanding equity awards held by the Named
Executive Officers at the end of fiscal year 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(1)(2)
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(1)(2)
|
|
Option
Exercise
Price
($)
|
|
Option Grant
Date
|
|
Option
Expiration Date
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Starks
|
|
315,000
|
|
-0-
|
|
39.18
|
|
04/23/2004
|
|
04/23/2012
|
|
|
216,000
|
|
-0-
|
|
51.91
|
|
12/13/2005
|
|
12/13/2013
|
|
|
320,000
|
|
-0-
|
|
40.55
|
|
12/10/2007
|
|
12/10/2015
|
|
|
450,000
|
|
150,000
|
|
30.58
|
|
12/15/2008
|
|
12/15/2016
|
|
|
225,000
|
|
225,000
|
|
38.59
|
|
12/14/2009
|
|
12/14/2017
|
|
|
120,000
|
|
360,000
|
|
41.65
|
|
12/14/2010
|
|
12/14/2018
|
|
|
-0-
|
|
480,000
|
|
34.96
|
|
12/12/2011
|
|
12/12/2019
|
|
|
|
|
|
|
|
|
|
|
|
John C. Heinmiller
|
|
120,000
|
|
-0-
|
|
41.84
|
|
12/14/2004
|
|
12/14/2012
|
|
|
108,000
|
|
-0-
|
|
51.91
|
|
12/13/2005
|
|
12/13/2013
|
|
|
150,000
|
|
-0-
|
|
38.00
|
|
12/12/2006
|
|
12/12/2014
|
|
|
160,000
|
|
-0-
|
|
40.55
|
|
12/10/2007
|
|
12/10/2015
|
|
|
187,500
|
|
62,500
|
|
30.58
|
|
12/15/2008
|
|
12/15/2016
|
|
|
107,000
|
|
107,000
|
|
38.59
|
|
12/14/2009
|
|
12/14/2017
|
|
|
55,750
|
|
167,250
|
|
41.65
|
|
12/14/2010
|
|
12/14/2018
|
|
|
-0-
|
|
300,000
|
|
34.96
|
|
12/12/2011
|
|
12/12/2019
|
|
|
|
|
|
|
|
|
|
|
|
Michael T. Rousseau
|
|
120,000
|
|
-0-
|
|
41.84
|
|
12/14/2004
|
|
12/14/2012
|
|
|
106,000
|
|
-0-
|
|
51.91
|
|
12/13/2005
|
|
12/13/2013
|
|
|
130,000
|
|
-0-
|
|
38.00
|
|
12/12/2006
|
|
12/12/2014
|
|
|
122,000
|
|
-0-
|
|
40.55
|
|
12/10/2007
|
|
12/10/2015
|
|
|
150,000
|
|
50,000
|
|
30.58
|
|
12/15/2008
|
|
12/15/2016
|
|
|
91,000
|
|
91,000
|
|
38.59
|
|
12/14/2009
|
|
12/14/2017
|
|
|
51,000
|
|
153,000
|
|
41.65
|
|
12/14/2010
|
|
12/14/2018
|
|
|
-0-
|
|
300,000
|
|
34.96
|
|
12/12/2011
|
|
12/12/2019
|
|
|
|
|
|
|
|
|
|
|
|
Eric S. Fain
|
|
40,000
|
|
-0-
|
|
41.84
|
|
12/14/2004
|
|
12/14/2012
|
|
|
34,500
|
|
-0-
|
|
51.91
|
|
12/13/2005
|
|
12/13/2013
|
|
|
38,000
|
|
-0-
|
|
38.00
|
|
12/12/2006
|
|
12/12/2014
|
|
|
26,000
|
|
-0-
|
|
41.49
|
|
07/01/2007
|
|
07/01/2015
|
|
|
94,000
|
|
-0-
|
|
40.55
|
|
12/10/2007
|
|
12/10/2015
|
|
|
112,500
|
|
37,500
|
|
30.58
|
|
12/15/2008
|
|
12/15/2016
|
|
|
70,000
|
|
70,000
|
|
38.59
|
|
12/14/2009
|
|
12/14/2017
|
|
|
36,125
|
|
108,375
|
|
41.65
|
|
12/14/2010
|
|
12/14/2018
|
|
|
-0-
|
|
200,000
|
|
34.96
|
|
12/12/2011
|
|
12/12/2019
|
|
|
|
|
|
|
|
|
|
|
|
Denis M. Gestin
|
|
40,000
|
|
-0-
|
|
41.84
|
|
12/14/2004
|
|
12/14/2012
|
|
|
34,500
|
|
-0-
|
|
51.91
|
|
12/13/2005
|
|
12/13/2013
|
|
|
34,500
|
|
-0-
|
|
38.00
|
|
12/12/2006
|
|
12/12/2014
|
|
|
68,000
|
|
-0-
|
|
40.55
|
|
12/10/2007
|
|
12/10/2015
|
|
|
67,500
|
|
22,500
|
|
30.58
|
|
12/15/2008
|
|
12/15/2016
|
|
|
45,000
|
|
45,000
|
|
38.59
|
|
12/14/2009
|
|
12/14/2017
|
|
|
26,500
|
|
79,500
|
|
41.65
|
|
12/14/2010
|
|
12/14/2018
|
|
|
-0-
|
|
200,000
|
|
34.96
|
|
12/12/2011
|
|
12/12/2019
|
|
|
|
|
|
Footnotes
|
|
|
|
|
|
|
(1)
|
These options vest 25% on each of the first four
anniversary dates of the date of grant, subject to acceleration of vesting
upon a change in control under certain circumstances.
|
|
|
|
|
(2)
|
The options granted on December 12, 2011 will
vest 25% on December 17 in 2012, 2013, 2014 and 2015, subject to acceleration
of vesting upon a change in control under certain circumstances.
|
40
Table of Contents
O
ption Exercises
and Stock Vested During Fiscal 2011
The
following table summarizes information with respect to stock option awards
exercised and restricted stock vested during fiscal year 2011 for each of the
Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Name
|
|
Number of Shares
Acquired on
Exercise (#)
|
|
|
Value Realized on
Exercise ($)
(1)
|
|
|
Number of Shares Acquired on
Vesting (#)
|
|
|
Value Realized on
Vesting ($)
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Starks
|
|
205,000
|
|
|
999,850
|
|
|
-0-
|
|
|
-0-
|
|
|
|
John C. Heinmiller
|
|
160,000
|
|
|
3,594,494
|
|
|
-0-
|
|
|
-0-
|
|
|
|
Michael T. Rousseau
|
|
150,000
|
|
|
2,123,250
|
|
|
1,000
|
|
|
35,170
|
|
|
|
Eric S. Fain
|
|
56,800
|
|
|
1,264,448
|
|
|
500
|
|
|
24,290
|
|
|
|
Denis M. Gestin
|
|
-0-
|
|
|
-0-
|
|
|
500
|
|
|
17,585
|
|
|
|
|
|
|
|
Footnotes
|
|
|
|
|
(1)
|
Calculated by multiplying the number of shares
acquired on exercise by the difference between the closing market price per
share of our common stock on the day of exercise and the exercise price per
share.
|
|
|
|
|
(2)
|
Calculated by multiplying the number of shares
acquired on vesting by the closing market price on the date of vesting.
|
N
onqualified
Deferred Compensation
The
following table shows the executive contributions and Company contributions in
fiscal year 2011 and earnings and account balances for the Named Executive
Officers in the St. Jude Medical Management Savings Plan (the MSP), an
unfunded, unsecured non-qualified deferred compensation plan. The MSP allows
participants to defer up to 100% of their base pay, MICP bonus and other bonus
and commission compensation. The Company makes matching contributions of 100%
of deferrals up to 3% of the first $100,000 of compensation above the Internal
Revenue Code limit ($245,000 in 2011). Deferred amounts and Company
contributions are held in an irrevocable trust which remains subject to the
claims of the Companys creditors. Company contributions vest 20% for each
calendar year of a participants service. Deferred amounts and Company
contributions in each participants account are credited with the net returns
of the investment funds in which such contributions are deemed to be invested.
Participants may select among several deemed investment options made available
by the Company, and participants may change their deemed investment elections
at any time. The following investment funds were available under the MSP in fiscal
2011: Janus Balanced-I, Loomis Sayles Value-Y, Fidelity Spartan Extended Market
Index-Inv, Fidelity Spartan International Index-Inv, JPMorgan Prime Money
Market, PIMCO Total Return, Vanguard Target Retirement Income Fund, Vanguard
Institutional Index, Vanguard Target Retirement 2010, Vanguard Target
Retirement 2015, Vanguard Target Retirement 2020, Vanguard Target Retirement
2025, Vanguard Target Retirement 2030, Vanguard Target Retirement 2035,
Vanguard Target Retirement 2040, Vanguard Target Retirement 2045, Vanguard
Target Retirement 2050, Vanguard Total Bond Market Index-Inst, American Funds
Growth Fund of America-R6, JPMorgan Mid Cap Value, Morgan Stanley Inst Mid Cap
Growth, American Century Inflation Protected-Inst, American Century Small Cap Value,
Columbia Acorn Fund Z and Harbor International. The returns on these investment
funds for the calendar year ended December 31, 2011 ranged from -12.16% to
9.13%, with a median return of -1.26%.
Participants
may elect, prior to the beginning of each year, to have all amounts deferred
and Company contributions for that year distributed on a date during
employment, provided that the selected distribution date occurs at least two
years after the end of the year in which the withdrawn amounts were initially
deferred into the MSP. Participants may also elect at that time to receive the
amount in installments over a period of up to 15 years upon separation from
service, provided their
41
Table of Contents
account balance and length of service exceed certain
minimums; otherwise payment is made in a single lump
sum. If no early distribution election is made, participants will receive a
distribution of their account in the MSP upon separation from service with the
Company. To the extent necessary to comply with Section 409A of the Internal
Revenue Code, payments made to Named Executive Officers on account of their
separation from service may be delayed six months following their separation
from service.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions
in Last FY
($)
(1)
|
|
Registrant
Contributions
in Last FY
($)
(2)
|
|
Aggregate
Earnings (Loss)
in Last FY
($)
(3)
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
Aggregate Balance at Last
FYE
($)
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Starks
|
|
|
51,250
|
|
|
3,000
|
|
|
(34,609
|
)
|
|
-0-
|
|
|
806,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John C. Heinmiller
|
|
|
35,000
|
|
|
3,000
|
|
|
(15,821
|
)
|
|
-0-
|
|
|
891,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael T. Rousseau
|
|
|
1,215,308
|
|
|
3,000
|
|
|
(178,055
|
)
|
|
-0-
|
|
|
8,382,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric S. Fain
|
|
|
141,497
|
|
|
3,000
|
|
|
(14,549
|
)
|
|
-0-
|
|
|
983,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denis M. Gestin
(5)
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes
|
|
|
|
|
|
|
|
(1)
|
All of these amounts are included in the amounts
reported under the Salary and Non-Equity Incentive Plan Compensation
columns of the Summary Compensation Table on page 38.
|
|
|
|
|
|
(2)
|
All of these amounts are included in the amounts
reported under the All Other Compensation column of the Summary
Compensation Table on page 38.
|
|
|
|
|
|
(3)
|
The amounts reported in this column represent the
change during the last fiscal year in the value of the underlying mutual
funds in which the Named Executive Officers deferred amounts were deemed to
be invested. None of these amounts are reflected in the Summary Compensation
Table for the last completed fiscal year.
|
|
|
|
|
|
(4)
|
Includes the following amounts that were previously
reported as compensation to the Named Executive Officers in the Summary
Compensation Table for previous years: Mr. Starks, 622,413; Mr. Heinmiller,
714,022; Mr. Rousseau, 5,794,857; and Mr. Fain, 651,510.
|
|
|
|
|
|
(5)
|
As a Belgium resident, Mr. Gestin is not eligible to
participate in the MSP.
|
E
mployment
Agreements
The
Company has no written employment agreements with the Named Executive Officers.
The compensation arrangement for each of the Named Executive Officers is
described under Compensation Discussion and Analysis above.
C
hange in
Control Agreements
The
Company has entered into change in control severance agreements (the Severance
Agreements) with each of the Named Executive Officers. The Severance
Agreements provide for certain payments and other benefits if, following a
Change in Control, the Company terminates the Named Executive Officers
employment without Cause or the Named Executive Officer terminates his
employment for Good Reason. Such payments and benefits include: (1) severance
pay equal to 2.9 times the sum of the Named Executive Officers annual salary,
target bonus and certain other compensation paid to the Named Executive Officer
during the 12 months prior to the termination; (2) three years of health,
life, accident and disability insurance substantially similar to that in effect
at the time of termination; (3) the payment of legal fees and expenses relating
to the termination; and (4) a gross-up payment for certain excise taxes, if
they are imposed on such payments or benefits and for any tax imposed on such
gross-up payment. Under the Severance Agreements, Cause is defined as a
conviction for felony criminal conduct; Good Reason is defined to include a
change in the Named Executive Officers responsibility or status, a reduction
in salary or benefits or a mandatory relocation; and Change in Control is
defined to include a change in control of the type required to be disclosed
under SEC proxy rules, acquisition by a person or group of 35% or more of the
outstanding voting stock of the Company, a proxy fight or contested election
which results in Continuing Directors (as defined) not constituting a majority
of the Companys Board of Directors or another event the majority of the
Continuing Directors determines to be a change in control.
42
Table of Contents
P
otential
Payments Upon Termination or Change in Control
As
described above, the Named Executive Officers do not have employment agreements
with the Company but do have Severance Agreements with the Company. The
information below describes and quantifies certain compensation that would
become payable under existing plans and arrangements if a Named Executive
Officers employment had terminated on December 31, 2011, given the Named
Executive Officers compensation and service levels as of such date and, if
applicable, based on the Companys closing stock price on that date. These
benefits are in addition to benefits available generally to salaried employees,
such as distributions under our 401(k) plan, disability benefits and accrued
vacation pay. Because it is unlikely that any of the Named Executive Officers
would be affected by a layoff, the information below does not reflect benefits
that may be available in such situations under Company plans and arrangements.
Due
to the number of factors that affect the nature and amount of any benefits
provided upon the events discussed below, any actual amounts paid or
distributed may be different. Factors that could affect these amounts include
the timing during the year of any such event, the Companys stock price and the
executives age.
Equity
Awards
If
one of the Named Executive Officers were to die or become disabled, any
exercisable stock options would remain exercisable for one year following the
date of death or disability, except to the extent of the earlier expiration of
the option term. All unexercisable stock options would immediately be cancelled
and all unvested shares of restricted stock would immediately be forfeited.
Deferred
Compensation
Other
than Mr. Gestin, who is a Belgium resident and is not eligible to
participate, each of the Named Executive Officers participates in our MSP,
which permits the deferral of base salary and incentive compensation. The last
column of the Nonqualified Deferred Compensation Table on page 42 reports
each Named Executive Officers aggregate balance at December 31, 2011, under
the MSP. The Named Executive Officers are entitled to receive the amount in
their deferred compensation account in the event of termination of employment,
death or at a date during employment elected by the Named Executive Officer,
subject to any claims of creditors in the event of a Company insolvency. Until
distribution, the account balances continue to be credited with increases or
decreases reflecting changes in the value of the deemed investment funds in
which each Named Executive Officer has elected the deferred compensation to be
allocated.
Life
Insurance Benefits
The
Company purchases life insurance for salaried employees generally providing a
death benefit equal to the lesser of $500,000 or twice the annual salary,
commission and bonus of such salaried employees. For employees whose annual
salary, commission and bonus exceeds $150,000 and who participate in the MSP,
the Company purchases supplemental life insurance providing a death benefit
equal to the lesser of $1,250,000 or twice the annual salary, commission and
supplemental bonus of such salaried employees. If a Named Executive Officer had
died on December 31, 2011, their survivors would have received $1,250,000 under
this arrangement, except for Mr. Starks, who declined this benefit, and
Mr. Gestin, who would have been entitled to receive $2,189,243 pursuant to
the life insurance plan offered to our employees in Belgium.
Severance
Payments
In
the event that a Change in Control of the Company (as defined under the
Severance Agreements) had occurred on December 31, 2011, no payments would have
been due to the Named Executive Officers unless they were also terminated
without Cause or they terminated their employment for Good Reason (as those
terms are defined under the Severance Agreements). The table below sets forth
the severance payments to each of the Named Executive Officers in the event a
43
Table of Contents
Change in
Control had occurred on December 31, 2011 and there had been such a termination
and also sets forth the in the money value of options for which vesting would
have accelerated on that date, regardless of whether their employment was
terminated.
|
|
|
|
|
Change in Control Payments and Acceleration of Options
|
|
Cash Payments
|
In the Money
Value of Options for
Which Vesting
Would Have
Accelerated
(1)
|
|
|
|
|
|
Named
Executive
Officer
|
Salary, Bonus
and Perks-
Related Payments
($)
|
Healthcare
Benefits ($)
|
Total
($)
|
Daniel J. Starks
|
6,745,690
|
53,893
|
558,000
|
7,357,583
|
John C. Heinmiller
|
4,210,800
|
58,114
|
232,000
|
4,500,914
|
Michael T. Rousseau
|
4,129,600
|
58,114
|
186,000
|
4,373,714
|
Eric S. Fain
|
3,166,365
|
43,851
|
139,500
|
3,349,716
|
Denis M. Gestin
(2)
|
3,449,959
|
25,680
|
83,700
|
3,559,339
|
|
|
|
|
|
|
|
|
|
|
Footnotes
|
|
|
|
|
|
|
|
(1)
|
Calculated using the closing price of our common
stock on December 30, 2011, the last business day of fiscal year 2011.
|
|
|
|
|
|
(2)
|
Mr. Gestin is not a United States taxpayer and is not
subject to the United States tax law.
|
The salary,
bonus and perk-related payments would have been made in lump sums, and the
health care benefits would have been provided over three years following
termination. No gross-up payments would have been due for any of the Named
Executive Officers in connection with the Change in Control.
44
Table of Contents
|
P
ROPOSAL TO AMEND THE ST. JUDE
MEDICAL, INC.
|
2007 EMPLOYEE STOCK PURCHASE PLAN
|
B
ackground
The
St. Jude Medical, Inc. 2007 Employee Stock Purchase Plan (the 2007 Purchase
Plan) was approved by our shareholders on May 16, 2007. The purpose of the
2007 Purchase Plan is to provide employees of St. Jude Medical and certain of
our subsidiaries with an opportunity to share in the ownership of St. Jude
Medical by providing them with a convenient and cost-effective means to
purchase our common stock to provide a stronger incentive to work for the
continued success of St. Jude Medical. The 2007 Purchase Plan also enhances our
ability to obtain and retain the services of employees. As of March 7, 2012,
1,642,779 shares remained available for issuance under the 2007 Purchase Plan,
the majority of which are expected to be issued at the end of the current
contribution period on July 31, 2012.
A
portion of the 2007 Purchase Plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code,
and it is intended that such portion of the 2007 Purchase Plan be treated as a
separate plan which shall comply with Section 423 of the Internal Revenue Code
in all respects. Separately, certain provisions of the 2007 Purchase Plan
govern the purchase of St. Jude Medical stock other than through the portion of
the 2007 Purchase Plan governed by Section 423 of the Internal Revenue Code. It
is intended that such purchases shall not be subject to the requirements of
Section 423 of the Internal Revenue Code. As of March 7, 2012, approximately
88% of the shares issued under the 2007 Purchase Plan had been issued under the
portion of the plan that is intended to be an employee stock purchase plan
within the meaning of Section 423 of the Internal Revenue Code. We expect that
a similar percentage of the shares to be issued under the 2007 Purchase Plan in
the future will be issued under the portion of the plan that is intended to be
an employee stock purchase plan under Section 423 of the Internal Revenue
Code.
On
February 23, 2012, the Board of Directors adopted, subject to shareholder
approval, amendments to the 2007 Purchase Plan (the Purchase Plan
Amendments). If adopted by our shareholders, the Purchase Plan Amendments
would amend the 2007 Purchase Plan to:
|
|
|
|
|
increase the number of
shares authorized for issuance under the 2007 Purchase Plan by 6,000,000
shares, from 5,000,000 to 11,000,000;
|
|
|
|
|
|
provide that no
fractional shares will be purchased under the 2007 Purchase Plan;
|
|
|
|
|
|
provide that no interest
will accrue on account balances or on contributions that are returned to
terminated participants;
|
|
|
|
|
|
clarify the treatment of
an employee in the case of a leave of absence or hardship withdrawal from the
employees 401(k) account; and
|
|
|
|
|
|
include other technical
changes relating to Section 423 of the Internal Revenue Code that are not
material.
|
If approved by shareholders,
the Purchase Plan Amendments will become effective for contribution periods and
purchase dates beginning on and after August 1, 2012.
A
copy of the 2007 Purchase Plan, as amended and restated to reflect the Purchase
Plan Amendments, is attached as Appendix A to this proxy statement. The
following summary of the material terms of the 2007 Purchase Plan, as amended
and restated, is qualified in its entirety by reference to the full text of the
2007 Purchase Plan, as amended and restated. Some of the terms summarized below
do not apply to the international portion of the 2007 Purchase Plan.
45
Table of Contents
A
dministration
The
Compensation Committee administers the 2007 Purchase Plan. It has full power to
adopt, amend and rescind any rules deemed desirable and appropriate for the
administration of the 2007 Purchase Plan and not inconsistent with the 2007
Purchase Plan, to construe and interpret the 2007 Purchase Plan, and to make
all other determinations necessary or advisable for the administration of the
2007 Purchase Plan. The Compensation Committee may delegate ministerial duties
to our employees, outside entities and outside professionals as the
Compensation Committee so determines. The Board of Directors may exercise the
Compensation Committees powers and duties under the 2007 Purchase Plan.
S
hare Purchases
Participation
in the 2007 Purchase Plan is voluntary. The 2007 Purchase Plan permits shares
of our common stock to be sold to participating employees on the last calendar
day of any contribution period at a price not less than the lesser of (1) 85%
of the fair market value of our common stock on the first calendar day of the
contribution period or (2) 85% of the fair market value of our common stock on
the last calendar day of each contribution period.
Unless
otherwise determined by the Board of Directors, each one-year period is a
contribution period under the 2007 Purchase Plan. The Board of Directors may,
in its discretion and with prior notice, change the duration and/or frequency
of contribution periods from time to time, provided that in no event will a
contribution period be greater than 27 months. The latest contribution period
under the 2007 Purchase Plan commenced on August 1, 2011 and will end on July
31, 2012.
E
ligible Participants
Each
of our employees, and each employee of our subsidiaries designated by the
Compensation Committee, are eligible to participate in the 2007 Purchase Plan,
provided that:
|
|
|
|
|
The employees customary
employment is at least 20 hours per week and is more than five months per
year;
|
|
|
|
|
|
The employee has been
continuously employed by us or a designated subsidiary for at least 30 days
prior to the start of the next available contribution period; and
|
|
|
|
|
|
Immediately after the
grant of the share purchase rights under the 2007 Purchase Plan, the employee
would not own shares (including shares which such employee may purchase under
the 2007 Purchase Plan or under outstanding share purchase rights) having 5%
or more of the total combined voting power or value of all classes of our
capital stock or of any subsidiary.
|
The
Compensation Committee also has the power and authority to allow any of our
employees who work or reside outside of the United States to participate in the
international portion of the 2007 Purchase Plan in accordance with such special
terms and conditions as the Compensation Committee may establish from time to
time.
As
of March 7, 2012, approximately 14,500 employees were eligible as a class to
participate in the 2007 Purchase Plan.
N
umber of Shares
The
aggregate number of shares of our common stock that are available for purchase
under the 2007 Purchase Plan is currently 5,000,000 shares. If the Purchase
Plan Amendments are approved by our shareholders, the maximum number of shares
authorized under the 2007 Purchase Plan for purchase dates occurring on or
after August 1, 2012 will be increased by 6,000,000 to 11,000,000 shares. The
number of shares of common stock available for purchase under the 2007 Purchase
Plan,
46
Table of Contents
as well as the price per
share of our common stock covered by share purchase rights that have not been
exercised, are subject to adjustment in the event of a stock split, reverse
stock split, stock dividend, combination or reclassification of our common
stock (including any such change in the number of shares effected in connection
with a change in domicile of St. Jude Medical), reorganization,
recapitalization, rights offering or other increase or reduction of our
outstanding common stock, and in the event that St. Jude Medical is
consolidated with or merged into any other corporation.
No
participant may purchase (1) shares having a fair market value (determined at
the beginning of each contribution period) exceeding $25,000 under the 2007
Purchase Plan and all other employee stock purchase plans (if any) for any
calendar year or (2) more than 2,000 shares under the 2007 Purchase Plan for
any calendar year.
T
erms and Conditions
Participating
employees may direct us to make payroll deductions for each payroll paid during
the contribution period in full dollar amounts not less than $5 and not more
than 10% (or such other maximum as may be established by the Board of
Directors) of such participants rate of regular straight time earnings,
commissions and commission-based sales bonuses (excluding payments, if any, for
overtime, incentive compensation, incentive payments, premiums, bonuses,
including bonuses paid under our Management Incentive Compensation Plan, and
any other special compensation) in effect at the time of enrollment. A
participant may decrease the amount of his or her contributions once during a
contribution period by following the proper administrative procedures. A
participant may not increase the amount of his or her contributions during a
contribution period.
Participating
employees, other than employees who are executive officers under Section 16 of
the Exchange Act may withdraw from the 2007 Purchase Plan at least 30 days
prior to the end of a contribution period and be paid in cash (without
interest, per the Purchase Plan Amendments) all contributions in their
contribution accounts. Participants who withdraw from the 2007 Purchase Plan
will not be permitted to re-enroll in the 2007 Purchase Plan until the next
contribution period. Upon a participants termination of employment with St.
Jude Medical or a designated subsidiary for any reason, including the death or
retirement of the participant, the participants participation in the 2007
Purchase Plan will cease and the participant, or the participants beneficiary
or estate, as the case may be, will be paid in cash (without interest, per the
Purchase Plan Amendments) all contributions in the participants contribution
account.
Participants
have no interest or voting rights in shares of our common stock covered by
share purchase rights until such rights have been exercised.
D
uration, Termination and
Amendment
Unless
earlier terminated by the Board of Directors, the 2007 Purchase Plan will
continue in effect until all of the shares of common stock issuable under the
2007 Purchase Plan have been exhausted. The 2007 Purchase Plan permits the
Board of Directors to amend or terminate the 2007 Purchase Plan at any time,
except that:
|
|
|
|
|
No amendment to the 2007
Purchase Plan may make any change in any share purchase rights previously
granted that adversely affects the rights of any participant, except as
otherwise provided in the 2007 Purchase Plan; and
|
|
|
|
|
|
Prior shareholder approval
will be required for any amendment to the 2007 Purchase Plan to the extent
necessary to comply with Rule 16b-3 under the Exchange Act or Section 423 of
the Internal Revenue Code or the requirements of the NYSE or any securities
exchange that are applicable to us.
|
47
Table of Contents
T
ransferability of Contributions
and Purchase Rights
During
a participants lifetime, a participants share purchase rights under the 2007
Purchase Plan are exercisable only by the participant. Neither contributions
credited to a participants account nor any rights with regard to the exercise
of share purchase rights or the right to receive shares under the 2007 Purchase
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
(except as otherwise set forth in the 2007 Purchase Plan in the event of the
participants death) by the participant.
F
ederal Income Tax Consequences
The
following is a brief summary of the federal income tax aspects of the share
purchase rights that may be granted under the 2007 Purchase Plan based upon
federal income tax laws in effect on the date of this proxy statement. This
summary is not intended to be exhaustive and does not describe foreign, state
or local tax consequences.
The
2007 Purchase Plan, and the right of participants to make purchases of our
common stock pursuant to the 2007 Purchase Plan, are intended to be eligible
for the favorable tax treatment provided by Sections 421 and 423 of the
Internal Revenue Code. The amounts of payroll deductions under the 2007
Purchase Plan will be taxable to a participant as compensation for the year in
which such amounts otherwise would have been paid to the participant. A
participant will realize no income upon the grant of the share purchase rights
or upon the purchase of common stock under the 2007 Purchase Plan, and we will
not be entitled to any deduction at the time of grant of the rights or purchase
of the shares. Taxable income will not be recognized until there is a sale or
other disposition of the shares acquired under the 2007 Purchase Plan.
The
amount of a participants tax liability upon disposition of the shares acquired
will depend on whether or not the participant satisfies the prescribed holding
period as summarized below. If the participant holds the shares purchased for
the prescribed holding period of two years from the grant of the share purchase
right and one year from the purchase date, then upon disposition of shares we
will receive no deduction and the participant will recognize:
|
|
|
|
|
ordinary income on the
lesser of the participants gain on the sale or the purchase price discount
under the 2007 Purchase Plan, applied to the fair market value of the shares
at the first day of the contribution period; and
|
|
|
|
|
|
long-term capital gain (or
loss) on the difference between the sale price and the sum of the purchase
price and any ordinary income recognized on the disposition.
|
However,
consequences for both us and the participant would differ if the participant
did not satisfy the prescribed holding period described above. In the event that
the shares are sold or disposed of (including by way of gift) before the
expiration of the prescribed holding periods, the excess of the fair market
value of the shares on the date such shares are purchased over the purchase
price of such shares will be treated as ordinary income to the participant.
This excess will constitute ordinary income in the year of sale or other
disposition even if no gain is realized on the sale or a gratuitous transfer of
the shares is made. The balance of any gain will be treated as capital gain and
will be treated as long-term capital gain if the shares have been held more
than one year. Even if the shares are sold for less than their fair market
value on the date the shares are purchased, the same amount of ordinary income is
attributed to a participant and a capital loss is recognized equal to the
difference between the sales price and the value of the shares on such date of
purchase. We ordinarily will be allowed a tax deduction at the time and in the
amount of the ordinary income recognized by the participant.
H
istorical Purchases under the
2007 Purchase Plan
The
following table sets forth information regarding the number of shares of our
common stock that have been purchased under the 2007 Purchase Plan as of March
7, 2012 by the Named Executive
48
Table of Contents
Officers and the specified
groups set forth below. Non-employee Directors are not eligible to participate
in the 2007 Purchase Plan.
|
|
|
|
|
Name and
Principal Position
|
|
Number of Shares
Purchased
|
|
|
|
|
|
|
Daniel J. Starks
Chairman, President and Chief Executive Officer
|
|
|
-0-
|
|
|
|
|
|
|
John C. Heinmiller
Executive Vice President and Chief Financial Officer
|
|
|
2,434
|
|
|
|
|
|
|
Michael T. Rousseau
Group President
|
|
|
2,434
|
|
|
|
|
|
|
Eric S. Fain
President, Cardiac Rhythm Management Division
|
|
|
2,123
|
|
|
|
|
|
|
Denis M. Gestin
President, International Division
|
|
|
2,371
|
|
|
|
|
|
|
All executive officers as a group (13 persons)
|
|
|
19,765
|
|
|
|
|
|
|
Each other person who received or is to receive 5% of such rights
|
|
|
―
|
|
|
|
|
|
|
All employees (other than executive officers) as a group
(15,400 persons)
|
|
|
3,338,326
|
|
New Plan Benefits
Because
the amount of future benefits under the 2007 Purchase Plan will depend on
participant elections and the fair market value of our common stock, it is not
possible to determine the benefits that will be received by eligible
participants if the Purchase Plan Amendments are approved by our shareholders.
The closing price of a share of our common stock as reported on the NYSE on
March 7, 2012, was $[______].
49
Table of Contents
E
quity Compensation Plan
Information
The
following table summarizes information regarding our equity compensation plans
in effect as of December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
Plan
Category
|
|
Number
of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights (a)
(1)(2)
|
|
Weighted-
average exercise
price of
outstanding
options, warrants
and rights (b)
|
|
Number
of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (a))
(c)
(3)(4)
|
|
Stock plans approved by shareholders
(5)
|
|
|
28,843,446
|
|
|
38.58
|
|
|
22,917,352
|
|
|
|
|
|
|
|
|
|
|
|
|
St. Jude Medical, Inc. 2007 Employee Stock Purchase Plan approved by
shareholders
|
|
|
|
|
|
|
|
|
1,642,779
|
|
|
|
|
|
|
|
|
|
|
|
|
All equity compensation plans approved by shareholders
|
|
|
28,843,446
|
|
|
38.58
|
|
|
24,560,131
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
28,843,446
|
|
|
38.58
|
|
|
24,560,131
|
|
Footnotes
|
|
(1)
|
As of February 14, 2012, the
number of shares to be issued upon exercise of outstanding options, warrants
and rights was 28,070,837, the weighted-average exercise price of outstanding
options, warrants and rights was $38.57 and the remaining weighted average
contractual term was 4.9 years. As of February 14, 2012, the number of shares
to be issued upon vesting of restricted stock units was 1,286,522 and there
were 2,625 shares of restricted stock outstanding. The option amounts include
shares underlying stock options that were assumed by us in connection with
our acquisition of Advanced Neuromodulation Systems, Inc. (ANS) in November
2005.
|
|
|
(2)
|
Excludes, as of December 31,
2011, 169,562 shares underlying outstanding stock options assumed by us in
connection with our acquisition of ANS which were originally granted pursuant
to the following plans of ANS: the Quest Medical, Inc. 1995 Stock Option
Plan, the Quest Medical, Inc. 1998 Stock Option Plan, the ANS 2000 Stock
Option Plan, the ANS 2001 Employee Stock Option Plan, the ANS 2002 Stock
Option Plan and the ANS 2004 Stock Incentive Plan. The options are
administered pursuant to the terms of the plan under which they were
originally granted. No future options will be granted under these acquired
plans.
|
|
|
(3)
|
As of February 14, 2012, the
number of shares remaining available for future issuance under equity
compensation plans (excluding shares reflected in column (a)) was 22,931,221,
of which no more than 9,803,374 shares can be issued as awards other than
stock options or stock appreciation rights. This total does not include
shares available under the 2007 Employee Stock Purchase Plan. Of the
22,931,221 shares available for future awards, 22,671,507 of those shares are
under plans that provide for a maximum term of eight years, and 259,714
shares are under the St. Jude Medical, Inc. 1997 Stock Option Plan, which
provides for a maximum term of ten years. Since 2000, all stock option awards
have been granted with an eight year term, regardless of whether the plan
under which they were granted would permit a longer term.
|
|
|
(4)
|
The shares available for
future issuance as of December 31, 2011 included 107,439 shares available for
restricted stock grants under the St. Jude Medical, Inc. 2000 Stock Plan, as
amended and, if all remaining shares authorized for issuance under the 2007
Stock Incentive Plan were allocated to full value awards such that no
additional stock options could be granted under the 2007 Stock Incentive Plan,
up to 9,664,266 shares available for full value awards under the 2007 Stock
Incentive Plan. As of February 14, 2012, the shares available for future
issuance included 107,439 shares available for restricted stock grants under
the St. Jude Medical, Inc. 2000 Stock Plan, as amended and, if all remaining
shares authorized for issuance under the 2007 Stock Incentive Plan were
allocated to full value awards such that no additional stock options could be
granted under the 2007 Stock Incentive Plan, up to 9,695,935 shares available
for full value awards under the 2007 Stock Incentive Plan.
|
|
|
(5)
|
Includes the St. Jude
Medical, Inc. 1997 Stock Option Plan, the St. Jude Medical, Inc. 2000 Stock
Plan, as amended, the St. Jude Medical, Inc. 2002 Stock Plan, as amended, the
St. Jude Medical, Inc. 2006 Stock Plan and the St. Jude Medical, Inc. 2007
Stock Incentive Plan, as amended.
|
|
The Board of Directors recommends a vote
FOR
approval of the
|
2007 Purchase Plan, as amended and restated. Proxies will
be voted
FOR
approval of the
|
2007 Purchase Plan, as amended and restated, unless
otherwise specified.
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Table of Contents
|
A
MENDMENT TO OUR ARTICLES OF INCORPORATION AND BYLAWS TO
DECLASSIFY OUR BOARD OF DIRECTORS
|
Our
Board of Directors is currently divided into three classes, and members of each
class are elected to serve for staggered three-year terms. Included in the
proxy statement for our 2011 Annual Meeting of Shareholders was a shareholder
proposal requesting that our Board of Directors declassify our Board and
establish annual elections of our Directors. Our Board of Directors did not
oppose the proposal and made no voting recommendation to shareholders regarding
the proposal. The Board stated that if shareholders approved the shareholder
proposal, the Board would present for a vote of shareholders at the 2012 Annual
Meeting of Shareholders an amendment to our Articles of Incorporation to
declassify the board. The shareholder proposal to declassify the Board was
approved by shareholders, receiving approximately 94% of the votes cast on the
proposal.
Our
Articles of Incorporation (Article IX, Sections 2 and 8) and Bylaws (Article
II, Section 2(b)) contain provisions regarding the classification of the Board
of Directors and the filling of Director vacancies. In light of the shareholder
approval of last years shareholder proposal to declassify the Board, the Board
of Directors has approved amendments to these provisions in the Articles of
Incorporation and Bylaws to declassify the board, subject to shareholder
approval at the 2012 Annual Meeting of Shareholders, and is recommending such
amendments to our shareholders.
If
adopted, the amendments would become effective immediately following the 2012
Annual Meeting of Shareholders. Therefore, Directors elected at the 2013 annual
meeting and thereafter would be elected to one-year terms. In accordance with
the shareholder proposal that was approved by the shareholders last year, the
declassification of the Board would be phased in so that it does not affect the
unexpired term of any Director elected prior to the 2013 annual meeting.
Therefore, the Directors elected at the 2012 annual meeting will be elected to
three-year terms, expiring at the 2015 annual meeting. The terms of the
Directors elected at the 2011 annual meeting will expire at the 2014 annual
meeting, and the terms of the Directors elected at the 2010 annual meeting will
expire at the 2013 annual meeting. From and after the 2015 annual meeting, all
Directors would stand for election annually. Any Director chosen as a result of
a newly created directorship or to fill a vacancy on the Board of Directors
would hold office until the next annual meeting of shareholders. The amendments
would also eliminate the supermajority vote required to alter, amend or repeal
these provisions in the future.
Under
the terms of the Articles of Incorporation and Bylaws, the proposed amendments
must be adopted by the affirmative vote of at least 80% of the votes entitled
to be cast by holders of all outstanding shares of common stock at the 2012
Annual Meeting of Shareholders. If the amendments are not adopted by
shareholders, the Board of Directors will remain classified.
The
proposed amendments to our Articles of Incorporation and Bylaws are set forth
in Appendix B to this proxy statement.
|
The Board of Directors recommends a vote
FOR
the
proposal to amend our Articles of
|
Incorporation and Bylaws to declassify our Board. Proxies
|
will be voted
FOR
approval of the proposal unless
otherwise specified.
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A
DVISORY VOTE TO APPROVE THE COMPENSATION
|
OF OUR NAMED EXECUTIVE OFFICERS
|
Pursuant
to Section 14A of the Exchange Act, the Company is providing shareholders with
an advisory (non-binding) vote to approve the compensation of our Named
Executive Officers, as described in the Compensation Discussion and Analysis
section, the tabular disclosure regarding such compensation and the
accompanying narrative disclosure set forth in this proxy statement. The
Company asks that you support the compensation of our Named Executive Officers
as disclosed in this proxy statement. Because your vote is advisory, it will
not be binding on the Board of Directors or the Company. However, the Board of
Directors will review the voting results and take them into consideration when
making future decisions regarding executive compensation. The Company currently
conducts annual advisory votes on executive compensation, and the Company
expects to conduct the next advisory vote at our 2013 annual meeting of
shareholders.
The
Company has in the past obtained approval from shareholders for the most
significant incentive plans that we use to motivate, retain, and reward our
executives. Those incentive plans include our MICP and our stock incentive
plans and make up a majority of the pay that the Company provides to our Named
Executive Officers. Thus, shareholders have already had a voice in the largest
part of our executive compensation program.
Our
executive compensation program must be viewed in light of our performance. St.
Jude Medical has had a long-standing tradition of delivering results for our
shareholders, customers, and the communities in which we operate. We are one of
the largest 500 companies in the United States (based on revenue) with
facilities in more than 30 countries throughout the world, and we generate
nearly 53% of our net sales outside of the United States. We believe our
executive compensation program has played a material role in attracting and
retaining a highly experienced, successful team to drive strong financial
results and manage the Company through the recent economic downturn and
challenging cardiac rhythm management market. In 2011:
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The Companys revenue grew
to $5.612 billion, representing an increase of $447 million or 7.7% over the
prior year;
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|
|
Adjusted net earnings
(non-GAAP) grew to $1,074 million in 2011, an increase of $79 million or
nearly 8% over the prior year
1
, resulting in, on an adjusted net
earnings basis, the most profitable year in the history of the Company; and
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|
|
|
|
|
Adjusted diluted net
earnings per share (non-GAAP) grew to $3.28 in 2011, an increase of $0.27 or
9% over the prior year
1
.
|
In
addition, we are well-positioned coming out of 2011 to continue our success.
Over the last two years, St. Jude Medical has invested almost $3 billion in
medical device technologies that are designed to both help patients as well as
improve healthcare on a cost-effective basis, and we continue to make sizable
investments in research and development to support our future growth. At the
start of 2011, we laid out 18 growth drivers that would help St. Jude Medical
continue to deliver sustainable growth in the years to come, and we have made
significant strides toward the development and commercialization of these
growth drivers in 2011. We also have remained disciplined in our efforts to
streamline our manufacturing processes and leverage our sales organizations. We
continue to grow our global workforce, now with more than 16,000 St. Jude
Medical employees, whose work helps us to advance the practice of medicine and
improve patient outcomes.
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1
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A reconciliation of non-GAAP
adjusted net earnings and non-GAAP adjusted diluted net earnings per share is
included in the Adjustments for Non-GAAP Financial Measures section on page
35 of this proxy statement.
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52
Table of Contents
We
believe that our executive compensation program is structured in the best
manner possible to support the Company and its business objectives. It has been
designed to implement certain core compensation principles, which include:
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alignment of managements
interests with our shareholders interests to support long-term value
creation, including, by way of example, through equity compensation programs,
share ownership guidelines and clawback and anti-hedging policies;
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pay for performance,
demonstrated by linking bonuses paid under our MICP to key financial
deliverables; and
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linking compensation to
market levels of compensation adopted by our competitors.
|
In
particular, Mr. Starks, our Chairman, President and Chief Executive Officer,
who has been with the Company for 16 years, now owns approximately 6,386,116
shares of the Companys common stock, making him the Companys largest
individual shareholder. This assures that his interests are aligned with the
shareholders interests.
In
the course of establishing the compensation programs and awarding compensation
for fiscal 2011, our Compensation Committee reviewed the Companys business
expectations, and ultimately, performance, for fiscal 2011, and data and
analyses regarding median market compensation. In addition, the Compensation
Committee received advice and counsel on the program from its compensation
consultant. The Committee determined that performance-based incentives were
best able to motivate our Named Executive Officers to achieve short-term and
long-term business goals.
The Company believes that our executive compensation
program is worthy of your support for the following reasons:
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Our compensation programs
are substantially tied to achievement of our key business objectives, which
are designed to further the success of the Company and our shareholders. For
example, while the Company was able to grow both revenue and adjusted EPS in
fiscal year 2011, despite significant macroeconomic and industry challenges,
both revenue and EPS performance fell below that identified in the 2011
operating plan. Accordingly, executive compensation was directly impacted by
the Companys financial performance during 2011.
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Our compensation program
for executive officers delivers a large part of potential total compensation
in equity. If the value we deliver to our shareholders declines, so does the
compensation we deliver to our executives. This is evidenced by the fact that
the year-end stock price for 2011 resulted in no in-the-money value related
to the equity awards granted to Named Executive Officers in December 2009,
2010 and 2011.
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We maintain a high-quality
corporate governance framework.
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We closely monitor the
compensation programs and pay levels of executives at companies of similar
size and complexity so that we can ensure that our compensation programs are
within the range of market practices.
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Each of the Named
Executive Officers is employed at-will and is expected to demonstrate
exceptional personal performance in order to continue serving as a member of
the executive team.
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We
believe that the information we have provided above and within the
Executive Compensation
section of this
proxy statement demonstrates that our executive compensation program was
designed appropriately and is working to ensure managements interests are
aligned with our shareholders interests to support long-term value creation.
Accordingly, we are asking our shareholders to vote
FOR
the following
resolution at the annual meeting:
RESOLVED, that the
shareholders approve, on an advisory basis, the compensation of the Companys
Named Executive Officers, as described in the Compensation Discussion and
Analysis section, the tabular disclosure regarding such compensation and the
accompanying narrative disclosure set forth in this proxy statement for the
2012 Annual Meeting of Shareholders.
|
The Board of Directors recommends a vote
FOR
adoption of the resolution approving
|
the compensation of the Named Executive
Officers as set forth in this proxy statement. Proxies
|
will be voted
FOR
adoption of this
resolution unless otherwise specified.
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|
P
ROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT
|
REGISTERED
PUBLIC ACCOUNTING FIRM
|
|
The
Audit Committee of the Board of Directors has appointed Ernst & Young LLP
as the Companys independent registered public accounting firm for 2012. Ernst
& Young LLP will audit our consolidated financial statements for 2012 and
perform other services approved by the Audit Committee.
A
udit and Other
Fees
The
following table presents Ernst & Young LLP fees for professional services
by type and amount charged to the Company during fiscal years 2011 and 2010 (in
thousands):
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|
|
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2011
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2010
|
|
Audit
Fees
(1)
|
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$
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6,249
|
|
$
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5,794
|
|
Audit-Related
Fees
(2)
|
|
$
|
72
|
|
$
|
112
|
|
Tax
Fees
(3)
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$
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4,744
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$
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2,883
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All
Other Fees
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Footnotes
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(1)
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Audit fees represent fees
billed for professional services rendered for: the audit of the registrants
annual financial statements; the review of quarterly financial statements;
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements; and services that generally
only the auditor reasonably can provide. This category includes: fees for
statutory audits required domestically and internationally; comfort letters;
consents; assistance with and review of documents filed with the SEC; Section
404 attestation services; other attest services that generally only the
auditor can provide; work done by tax professionals in connection with the
audit or quarterly review; and accounting consultations billed as audit
services, as well as other accounting and financial reporting consultation
and research work necessary to comply with the standards of the Public
Company Accounting Oversight Board (United States).
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(2)
|
Audit-related fees
represent
amounts for employee benefit plan audits,
due diligence assistance and other attestation services.
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(3)
|
Tax
fees represent amounts for preparation or review of the Companys income and
related tax returns, tax planning and tax advice. Tax fees for preparation or
review of the Companys income and related tax returns totaled $904
(thousand) and $659 (thousand) in fiscal years 2011 and 2010, respectively.
|
P
re-Approval
Policy for Audit and Permissible Non-Audit Services
In
2003, the Audit Committee adopted the Pre-Approval of Independent Auditor
Services and Fees policy. The policy requires that all services by the
Companys independent registered public accounting firm be approved in advance
by the Audit Committee and expresses a preference that non-audit services be
performed by persons other than the Companys independent registered public
accounting firm. Each year, the Audit Committee authorizes the terms, including
the scope, and the fees for the annual audit. Once a year, the Audit Committee reviews
general requests to approve non-audit matters, including fees, performed by the
Companys independent registered public accounting firm. In addition, specific
requests for non-audit services by the independent registered public accounting
firm may be brought to the Audit Committee from time to time. The policy also
prohibits engaging the independent registered public accounting firm to perform
services prohibited by law.
In
2010 and 2011, there were no fees paid to Ernst & Young LLP that were not
approved in advance by the Audit Committee.
R
atification of
Appointment
A
proposal will be presented at the annual meeting to ratify the appointment of
Ernst & Young LLP as our independent registered public accounting firm for
2012 in order to ascertain the views of our shareholders on this appointment.
If the shareholders do not ratify the appointment of
Ernst & Young LLP, the Audit Committee will reconsider its
selection of the Companys independent registered public accounting firm for 2012.
Even if the appointment is ratified, the Audit Committee, which is solely
responsible for appointing and terminating the Companys independent registered
public
55
Table of Contents
accounting
firm, may, in its discretion, direct the appointment of a different independent
registered public accounting firm at any time during the year if it determines
that such a change would be in the best interests of the Company and its
shareholders. A representative of Ernst & Young LLP will be present at the
annual meeting and will have an opportunity to make a statement and to answer
your questions.
|
The Board of Directors recommends a vote
FOR
ratification of the appointment of
|
Ernst & Young LLP. Proxies will be voted
FOR
ratification of this appointment
|
unless otherwise specified.
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56
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|
S
HAREHOLDER PROPOSALS FOR THE
2013 ANNUAL MEETING
|
|
Under
SEC rules, shareholders who wish to present a proposal at the 2013 Annual
Meeting of Shareholders and have it included in our proxy statement for that
meeting must submit the proposal in writing to Jason Zellers, Corporate
Secretary, St. Jude Medical, Inc., One St. Jude Medical Drive, St. Paul,
Minnesota 55117. We must receive your written proposal no later than November
23, 2012.
Shareholders
who intend to present a proposal at the 2013 Annual Meeting of Shareholders,
but not to include the proposal in our proxy statement, must comply with the
requirements established in the Companys Bylaws. Our Bylaws require, among
other things, that a shareholder submit a written notice to the Corporate
Secretary of the Company of the intention to bring a proposal before the
meeting not less than 50 days nor more than 75 days prior to the meeting (or if
less than 60 days notice or prior public disclosure of the date of the annual
meeting is given to shareholders, not later than the tenth day following the
day on which the notice of the date of the annual meeting was mailed or such
public disclosure was made).
|
A
NNUAL REPORT TO SHAREHOLDERS
AND FORM 10-K
|
|
We
have sent to our shareholders the Notice containing instructions on how to
access this proxy statement and our 2011 Annual Report to Shareholders on-line.
Shareholders who received a paper copy of this proxy statement were also sent a
copy of our 2011 Annual Report. Both our 2011 Annual Report to Shareholders and
our Annual Report on Form 10-K for the year ended December 31, 2011 are
available on our website at www.sjm.com, by clicking on Investor Relations and
Annual Reports and SEC Filings, respectively. Copies of the Form 10-K are
available to any shareholder who submits a request in writing to St. Jude
Medical, Inc., One St. Jude Medical Drive, St. Paul, MN 55117, Attention:
Corporate Secretary. Copies of any exhibits to the Form 10-K are also available
upon written request and payment of a fee covering our reasonable expenses in
furnishing the exhibits.
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HOUSEHOLDING OF PROXY
MATERIALS
|
|
The
SEC rules allow a single copy of the Notice or proxy statement and annual
report to be delivered to multiple shareholders sharing the same address and
last name, or who we reasonably believe are members of the same family, and who
consent to receive a single copy of these materials in a manner provided by
these rules. This practice is referred to as householding and can result in
significant savings of paper and mailing costs. Although we do not household
for our registered shareholders, some brokers household St. Jude Medical
Notices or proxy statements and annual reports, delivering a single copy of
these documents to multiple shareholders sharing an address unless contrary
instructions have been received from the affected shareholders. Once you have
received notice from your broker that they will be householding materials to
your address, householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer wish to
participate in householding and would prefer to receive a separate copy of our
Notice or proxy statement and annual report, or if you are receiving multiple
copies of these documents and wish to receive only one, please notify your
broker. We will deliver promptly upon written or oral request a separate copy
of our Notice or proxy statement and annual report to a shareholder at a shared
address to which single copies of these documents were delivered. For copies of
these documents, shareholders should write to St. Jude Medical, Inc., One
St. Jude Medical Drive, St. Paul, MN 55117, Attention: Corporate
Secretary, or call (800) 328-9634.
57
Table of Contents
We
do not know of any other matters that may be presented for consideration at the
annual meeting. If any other business properly comes before the annual meeting,
the holders of the proxies will have discretionary voting authority to vote
your shares as they deem in the best interest of the Company.
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|
|
Daniel
J. Starks
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|
Chairman
of the Board of Directors,
|
|
President
and Chief Executive Officer
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March
23, 2012
58
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(This page has been left blank
intentionally.)
Table of Contents
A
PPENDIX A
ST. JUDE MEDICAL, INC.
2007 EMPLOYEE STOCK PURCHASE PLAN
As Amended Effective August 1, 2012
Table of Contents
TABLE OF CONTENTS
i
Table of Contents
ST. JUDE MEDICAL, INC.
2007 EMPLOYEE STOCK PURCHASE PLAN
As Amended Effective August 1, 2012
The
following constitute the provisions of the 2007 Employee Stock Purchase Plan of
St. Jude Medical, Inc.
|
|
S
ection 1.
|
Introduction
.
|
(a)
Purpose
.
The purpose of the Plan is to enable the Company to obtain and retain the
services of employees. In addition, the Plan provides a convenient, meaningful
opportunity for employees to purchase St. Jude Medical, Inc. stock, thereby
increasing participating employees personal interest in the Companys success.
It is the intention of the Company to have a portion of the Plan qualify as an
Employee Stock Purchase Plan within the meaning of Section 423 of the Code,
and it is intended that such portion of the Plan be treated as a separate plan
which shall comply with Section 423 of the Code in all respects. Separately,
certain provisions of this Plan document, including Section 27 and any
additional provisions or rules adopted by the Committee pursuant thereto, govern
the purchase of St. Jude Medical, Inc. stock other than through the portion of
the Plan governed by Section 423 of the Code. It is intended that such
purchases shall not be subject to the requirements of Section 423 of the Code.
(b)
Portion
of Plan to Comply with Section 423
. The Company intends to have a portion
of the Plan qualify as an employee stock purchase plan within the meaning of
Section 423 of the Code; and intends that such portion of the Plan be treated
as a separate plan. Such portion of the Plan shall, accordingly, be construed
so as to extend and limit participation in a manner that is consistent with
Section 423 of the Code.
(c)
Portions
of Plan Not Complying with Section 423
. Section 27 of this Plan, and any
additional provisions adopted by the Committee pursuant thereto, are intended
by the Company to allow creation of separate portions of the Plan providing for
the offering of Common Stock other than through the portion of the Plan
governed by Section 423 of the Code, for purchase by individuals who are either
(i) generally not subject to income taxation by the United States or (ii) are
employed by Subsidiaries other than Designated Subsidiaries.
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|
Sectio
n 2.
|
Definitions
.
|
(a) Account
means the funds accumulated with respect to a Participant as a result of
deduction from such Participants paycheck for the purpose of purchasing Shares
under the Plan. The funds allocated to a Participants Account shall remain the
property of the Participant at all times but may be commingled with the general
funds of the Company, except to the extent such commingling may be prohibited
by the laws of any applicable jurisdiction.
(b) Board
means the Board of Directors of the Company.
(c) Business
Day means any day (other than a Saturday or Sunday) on which the New York
Stock Exchange is permitted to be open for trading.
(d) Code
means the Internal Revenue Code of 1986, as amended.
1
Table of Contents
(e) Commencement
Date means the first calendar day of each Contribution Period of the Plan.
(f) Common
Stock means the Common Stock, par value $.10 per share, of the Company.
(g) Committee
means the committee described in Section 13(a) of the Plan.
(h) Company
means St. Jude Medical, Inc., a Minnesota corporation. Effective as of the date
any Subsidiary becomes a Designated Subsidiary, references herein to the Company
shall be interpreted to include such Designated Subsidiary, as appropriate.
(i) Compensation
means regular straight time earnings, commissions and commission-based sales
bonuses annualized at the time of enrollment prior to the Commencement Date,
excluding payments, if any, for overtime, incentive compensation, incentive
payments, premiums, bonuses (including bonuses paid under the Companys
Management Incentive Compensation Plan) and any other special remuneration.
(j) Continuous
Status as an Employee means the absence of any interruption or termination of
service as an Employee. Continuous Status as an Employee shall not be
considered interrupted in the case of (i) medical leave; (ii) leave allowed
under the Family and Medical Leave Act; (iii) personal leave; (iv) military
leave; (v) jury duty; (vi) any other leave of absence approved by the
Committee; provided that any such leave referred to in (i) through (vi) does
not exceed three months, unless re-employment upon the expiration of such leave
is guaranteed by contract or statute; or (vii) transfers between locations of
the Company or between the Company and its Subsidiaries. In the case of an
approved leave that exceeds 3 months and the Employees right to reemployment
is not provided either by contract or by statute, the Employee is deemed to
incur a termination of his or her Continuous Status as an Employee (for
purposes of this Plan) on the first day immediately following such three-month
period.
(k) Contribution
Period means a 1-year period; provided, however, that the Board shall have the
power to change the duration and/or frequency of Contribution Periods with
respect to future purchases without shareholder approval if such change is
announced at least 5 Business Days prior to the scheduled beginning of the
first Contribution Period to be affected; provided further, however, that no
Contribution Period shall exceed 27 months.
(l) Contributions
means all amounts credited to the Account of a Participant pursuant to the
Plan.
(m) Corporate
Transaction means (i) a sale of all or substantially all of the Companys
assets or (ii) a merger, consolidation or other capital reorganization of the Company
with or into another corporation or any other transaction or series of related
transactions in which the Companys shareholders immediately prior thereto own
less than 50% of the voting stock of the Company (or its successor or parent)
immediately thereafter.
(n) Designated
Subsidiaries means the Subsidiaries that have been designated by the Board
from time to time in its sole discretion as eligible to participate in the
portion of the Plan subject to Section 423 of the Code.
(o) Employee
means any person, including an Officer or director who is also an employee, but
excluding any person whose customary employment is (i) less than 20 hours per
week or (ii) for not more than 5 months in any calendar year.
2
Table of Contents
(p) Exchange
Act means the Securities Exchange Act of 1934, as amended.
(q) Fair
Market Value means, with respect to the Common Stock on a given date, the
closing price for the Common Stock for such date, or if such date is not a
Business Day, the last reported sale price for the Common Stock for the last
Business Day preceding such date, as quoted on the New York Stock Exchange or
another exchange; provided, however, that if the Common Stock ceases to be
listed for trading on the New York Stock Exchange or another exchange, Fair
Market Value of the Common Stock for a given date shall mean the value
determined in good faith by the Board.
(r) New
Purchase Date shall have the meaning set forth in Section 18(b) hereof.
(s) Officer
means a person who has been designated by the Board as a reporting officer for
purposes of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(t) Participant
means any Employee who is eligible and has elected to participate in the Plan
accordance with Sections 3 and 5 hereof and who has not withdrawn from the Plan
or whose participation in the Plan is not otherwise terminated.
(u) Plan
means this 2007 Employee Stock Purchase Plan, as may be amended from time to
time.
(v) Purchase
Date means the last calendar day of each Contribution Period of the Plan.
(w) Purchase
Price means with respect to a Contribution Period that price as announced by
the Committee prior to the first Business Day of that Contribution Period,
which price may, in the discretion of the Committee, be a price which is not
fixed or determinable as of the first Business Day of that Contribution Period;
provided, however, that in no event shall the Purchase Price for any
Contribution Period be less than the lesser of 85% of the Fair Market Value of
a Share on the Commencement Date or on the Purchase Date, in each case rounded
up to the next higher full cent. If the Commencement Date or the Purchase Date
is not a Business Day, then the Purchase Price for any Contribution Period
shall not be less than the lesser of 85% of the Fair Market Value of a Share on
the Business Day immediately preceding the Commencement Date or the Purchase
Date.
(x) Share
means a share of Common Stock, as adjusted in accordance with Section 18
hereof.
(y) Subsidiary
means a corporation, domestic or foreign, of which not less than 50% of the
total combined voting power of all classes of stock is held by the Company or
any such subsidiary of the Company, whether or not such corporation now exists
or is hereafter organized or acquired by the Company or another such subsidiary
of the Company. Subsidiary also means an unincorporated business entity, such
as a limited liability company or partnership, in which the Company holds
directly or indirectly not less than 50% of the total combined voting power with
respect to all classes of equity ownership of such entity, whether or not such
unincorporated business entity now exists or is hereafter organized or acquired
by the Company or another Subsidiary of the Company, but only if such entity
either (i) has duly elected under applicable treasury regulations to be an
association treated as a corporation for federal income tax purposes, and such
election continues in effect; or (ii) is disregarded as a separate entity for
federal income tax purposes, has not made an election described in clause (i)
of this sentence and, pursuant to applicable treasury regulations, its assets
are considered to be owned by another Subsidiary that is a corporation or is
treated as one under clause (i) of this sentence.
3
Table of Contents
|
|
Sec
tion 3.
|
Eligibility
.
|
(a) Any
person who is an Employee and has completed 30 days of continuous employment
service for the Company or one or more of its Designated Subsidiaries shall
become eligible to participate in the Plan on the first day of the month
coincident with or following completion of such period of service, subject to
the requirements of Section 5(a) hereof and the limitations imposed by Section
423(b) of the Code.
(b) Any
provisions of the Plan to the contrary notwithstanding, no Employee shall be
granted an option under the Plan (i) if, immediately after the grant, such
Employee (together with any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock
of the Company and/or hold outstanding options to purchase stock possessing 5%
or more of the total combined voting power or value of all classes of stock of
the Company or of any Subsidiary of the Company, or (ii) if such option would
permit his or her rights to purchase stock under all employee stock purchase
plans (described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate that exceeds $25,000 of the Fair Market Value
of such stock (determined at the time such option is granted), or that exceeds
2,000 Shares, for each calendar year in which such option is outstanding at any
time.
|
|
Sect
ion 4.
|
Contribution
Periods
.
|
The
Plan shall be implemented by a series of consecutive Contribution Periods. The
first Contribution Period shall commence on August 1, 2007 and shall end on
July 31, 2008. The Plan shall continue until terminated in accordance with
Sections 19 and 22 hereof.
|
|
Sec
tion 5.
|
Participation
.
|
(a) An
eligible Employee may become a Participant by following the established
enrollment procedure as directed by the Committee, or other entity designated
by the Committee, prior to the Commencement Date of the applicable Contribution
Period, unless an earlier or later time for completing the enrollment procedure
is set by the Committee for all eligible Employees with respect to a given
Contribution Period. The eligible Employee shall determine the amount of the
Participants Compensation (subject to Section 6(a) hereof) to be paid as
Contributions pursuant to the Plan.
(b) Payroll
deductions shall commence on the first payroll paid on or following the
Commencement Date and shall end on the last payroll paid on or prior to the
Purchase Date of the Contribution Period, unless sooner terminated as provided
in Section 10 hereof. A Participant who has elected to participate in a
Contribution Period shall automatically participate in the next Contribution
Period until such time as such Participant withdraws from the Plan or
terminates employment as provided in Section 10 hereof.
|
|
Sec
tion 6.
|
Method of
Payment of Contributions
.
|
(a)
Contribution
Amounts
. A Participant shall elect to have payroll deductions made on each
payroll paid during the Contribution Period in full dollar amounts not less
than $5 and not more than 10% of the Participants rate of Compensation in
effect at the time of enrollment (or such other maximum percentage as the Board
may establish from time to time before any Commencement Date). All payroll
deductions made by a Participant shall be credited to his or her Account under
the Plan. A Participant may not make any additional payments into his or her
Account. No assets in a Participants Account shall be subject to the debts, contracts,
liabilities, engagements or torts of the Participant.
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(b)
Contribution
Changes by a Participant
.
i. A
Participant may discontinue his or her participation in the Plan as provided in
Section 10 hereof.
ii. Unless
otherwise provided by the Committee, a Participant may decrease the amount of
his or her Contributions once during a Contribution Period by following the
established administrative procedures as directed by the Committee to authorize
a decrease in the payroll deduction amount. The decrease in amount shall be
effective as soon as administratively feasible following the date of receipt by
the Company, or other entity designated by the Committee. However, any decrease
in amount must be made at least 30 days prior to the end of the Contribution
Period to ensure such decrease shall be effective within the current
Contribution Period.
iii. Unless
otherwise provided by the Committee, a Participant may not increase the amount
of his or her Contributions during a Contribution Period. A Participant may
only increase the amount of his or her Contributions with respect to a future
Contribution Period by following the established administrative procedures as
directed by the Committee to authorize an increase in the payroll deduction
amount. The increase in amount shall be effective as of the Commencement Date
of the next Contribution Period following the date of receipt by the Company,
or other entity designated by the Committee.
(c)
Contribution
Changes by the Company
.
i. Notwithstanding
the foregoing, to the extent necessary to comply with Section 423(b)(8) of the
Code and Section 3(b) hereof, a Participants payroll deductions may be
adjusted during any Contribution Period, subject to the discretion of the
Committee. Payroll deductions shall re-commence at the amount provided in such
Participants most recently submitted enrollment materials at the beginning of
the first Contribution Period that is scheduled to end in the next succeeding
calendar year, unless terminated by the Participant as provided in Section 10
hereof.
ii. If
a Participant goes on an approved paid leave of absence during a Contribution
Period, the Participants payroll deductions shall continue in effect during
such leave unless the Participant is deemed to incur a termination of his or
her Continuous Status as an Employee prior to the Purchase Date of the
Contribution Period (
i.e
.,
because the leave exceeds three months and re-employment upon the expiration of
such leave is not guaranteed by contract or statute).
iii. If
a Participant goes on an approved unpaid leave of absence during a Contribution
Period, the Participants payroll deductions shall be suspended during such
leave. Except as otherwise provided by the Committee, if such Participant
returns from leave (without incurring a termination of his or her Continuous
Status as an Employee), payroll deductions shall resume at an adjusted amount
to account for payroll deductions in arrears, unless the Participant elects to
decrease the amount of his or her Contributions as set forth in Section 6(b)
above).
|
|
Se
ction 7.
|
Grant of
Option
.
|
On
the Commencement Date of each Contribution Period, each eligible Employee
participating in such Contribution Period shall be granted an option to
purchase on the Purchase Date a number of Shares determined by dividing such
Employees Contributions accumulated prior to such Purchase Date and retained
in the Participants Account as of the Purchase Date by the applicable Purchase
Price, subject to the limitations set forth in Sections 3(b) and 12 hereof.
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|
Sec
tion 8.
|
Exercise of
Option
.
|
Unless
a Participant ceases to be an eligible Employee as provided in Section 3 or
withdraws from the Plan as provided in Section 10 hereof, his or her option for
the purchase of Shares will be exercised automatically on each Purchase Date of
each Contribution Period, and the maximum number of Shares (rounded down to the
nearest whole Share) subject to the option will be purchased at the applicable
Purchase Price with the accumulated Contributions in his or her Account. Unused
Contributions representing the amount of any fractional Share shall be returned
to the Participant. The Shares purchased upon exercise of an option hereunder
shall be deemed to be transferred to the Participant on the Purchase Date.
During his or her lifetime, a Participants option to purchase Shares hereunder
is exercisable only by him or her.
As
promptly as practicable after each Purchase Date of each Contribution Period,
the number of Shares purchased by each Participant upon exercise of his or her
option shall be delivered in accordance with procedures established from time
to time by the Committee, and a transfer agent for the Common Stock may be
utilized or a brokerage or nominee account may be established for this purpose.
The terms of such transfer agency or brokerage or nominee account shall be at
the sole discretion of the Company, and participation in the Plan is expressly
conditioned on the acceptance of such terms.
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|
Sect
ion 10.
|
Withdrawal;
Termination of Employment
.
|
(a)
Voluntary
Withdrawal
. A Participant may withdraw from the Plan by following the
established administrative procedures as directed by the Committee, or other
entity designated by the Committee. The withdrawal request will be effective as
soon as administratively feasible. However, any withdrawal request must be made
at least 30 days prior to the end of a Contribution Period to ensure such
withdrawal request shall be effective within such Contribution Period. Once the
withdrawal request is effective, all of the Participants Contributions
credited to his or her Account will be paid to him or her, his or her option
will be automatically terminated, and no further Contributions for the purchase
of Shares will be made absent re-enrollment. Notwithstanding the foregoing, an
Officer shall not have the right to withdraw Contributions credited to his or
her account under the Plan except in accordance with Section 10(b) hereof. Upon
withdrawal from the Plan, a Participant may not re-enroll in the Plan until the
next Contribution Period. In order to re-enroll, a Participant must follow the
provisions set forth under Section 5(a) hereof.
(b)
Termination
of Continuous Status as an Employee
.
i. Upon
termination of the Participants Continuous Status as an Employee prior to the
Purchase Date of a Contribution Period for any reason, including death or
retirement, the Contributions credited to his or her Account will be returned
to him or her or, in the case of his or her death, to the person or persons
entitled thereto under Section 14 hereof, and his or her option will be
automatically terminated. Whether the Participants Continuous Status as an Employee
has been terminated shall be determined by the Committee in its sole
discretion. In the event that any Designated Subsidiary ceases to be a
Designated Subsidiary of the Company, the employees of such Designated
Subsidiary shall no longer be Employees for purposes of Section 3(a) hereof as
of the date such Designated Subsidiary ceases to be a Designated Subsidiary.
ii. Notwithstanding
the foregoing, if any Participant on an approved leave of absence is deemed to
incur a termination of the Participants Continuous Status as an Employee (
i.e
., because the leave exceeds three
months and re-employment upon the expiration of such leave is not guaranteed by
6
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contract or
statute) within three months preceding the Purchase Date of a Contribution
Period, his or her option will not be terminated, and any Contributions
previously credited to the Participants Account will remain in the Account and
be applied toward the purchase of Shares.
(c)
Hardship
Withdrawal
. If, during a Contribution Period, the Participant receives a
hardship withdrawal under the Companys tax-qualified cash or deferral
arrangement under Section 401(k) of the Code, the Participants participation
in the Plan shall be discontinued. Once the hardship withdrawal request is
effective, all of the Participants Contributions credited to his or her
Account will be paid to him or her, his or her option will be automatically
terminated, and no further Contributions for the purchase of Shares will be
made absent re-enrollment. Upon withdrawal from the Plan, a Participant may not
re-enroll in the Plan until the next Contribution Period that begins at least
six months after receipt of the hardship distribution. In order to re-enroll, a
Participant must follow the provisions set forth under Section 5(a) hereof.
(d) A
Participants withdrawal from the Plan shall not have any effect upon his or
her eligibility to participate in any similar plan that may hereafter be
adopted by the Company or any Subsidiary.
No
interest shall accrue on the Contributions or the Account balance of a
Participant in the Plan, unless otherwise determined necessary by the Committee
for the Accounts of Participants in the portion of the Plan that is not
intended to qualify under Section 423 of the Code.
(a) The
maximum number of Shares originally authorized for issuance under the Plan was
5,000,000 Shares (subject to adjustment as provided in Section 18 hereof).
Effective for Purchase Dates occuring on or after August 1, 2012, the number of
Shares available for issuance under the Plan is increased by 6,000,000 Shares
to a total of 11,000,000 Shares (subject to adjustment as provided in Section
18 hereof). If on a given Purchase Date, the number of Shares with respect to
which options are to be exercised exceeds the number of Shares available for
sale under the Plan on such Purchase Date, the Committee shall make a pro rata
allocation of the Shares available for purchase on such Purchase Date among all
Participants, and the balances in the Accounts shall be refunded to the
respective Participants.
(b) The
Participant shall have no interest or voting right in Shares covered by his or
her option until such option has been exercised.
|
|
Sec
tion 13.
|
Administration
.
|
(a)
The
Committee
. The Plan shall be administered by a committee (the Committee)
established by the Board. The members of the Committee need not be directors of
the Company and shall be appointed by and serve at the pleasure of the Board.
(b)
Powers
of Committee
. The Committee shall supervise and administer the Plan and
shall have full power to adopt, amend and rescind any rules deemed desirable
and appropriate for the administration of the Plan and not inconsistent with
the Plan, to construe and interpret the Plan, and to make all other
determinations necessary or advisable for the administration of the Plan. Decisions
of the Committee will be final and binding on all parties who have an interest
in the Plan. The Committee may
7
Table of Contents
delegate ministerial duties to such of the Companys
employees, outside entities and outside professionals as the Committee so
determines.
(c)
Power
and Authority of the Board
. Notwithstanding anything to the contrary
contained herein, the Board may, at any time and from time to time, without any
further action of the Committee, exercise the powers and duties of the
Committee under the Plan.
|
|
Section
14.
|
D
eath of Participant
.
|
In
the event of the death of a Participant, the Company shall deliver any Shares
and cash in the Participants Account to a beneficiary previously designated by
the Participant or, if there is no surviving beneficiary duly designated, to
the executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such Shares and/or cash to the
spouse or to any one or more dependents or relatives of the Participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
|
|
Section
15.
|
T
ransferability
.
|
Neither
Contributions credited to a Participants Account nor any rights with regard to
the exercise of an option or to receive Shares under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other than as
provided in Section 14 hereof) by the Participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10 hereof.
|
|
Section
16.
|
U
se of Funds
.
|
All
Contributions received or held by the Company under the Plan may be used by the
Company for any corporate purpose, and the Company shall not be obligated to
segregate such Contributions. The Plan is unfunded and shall not create nor be
construed to create a trust or separate fund of any kind or a fiduciary
relationship among the Company, the Board, the Committee and the Participant.
To the extent a Participant acquires a right to receive payment from the
Company pursuant to the Plan, such right shall be no greater than the right of
any unsecured general creditor of the Company.
Accounts
will be maintained for each Participant in the Plan. Account statements will be
made available to participating Employees by the Company and will set forth the
amounts of Contributions, the Purchase Price per Share, the number of Shares
purchased and the remaining cash balance, if any.
|
|
Section
18.
|
A
djustments Upon Changes in Capitalization; Corporate
Transactions
.
|
(a)
Adjustment
The number of Shares set forth in Section 12 hereof, the price per Share
covered by each option under the Plan that has not yet been exercised and the
maximum number of Shares that may be purchased by a Participant in a calendar
year pursuant to Section 3(b) hereof, shall be proportionately adjusted
for any increase or decrease in the number of outstanding Shares resulting from
a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock (including any such change in the number
of Shares effected in connection with a change in domicile of the Company).
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall
8
Table of Contents
affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of Shares issuable hereunder or
subject to an option hereunder.
(b)
Corporate
Transactions
. In the event of a dissolution or liquidation of the Company,
any Contribution Period then in progress will terminate immediately prior to
the consummation of such action, unless otherwise provided by the Board in its
sole discretion, and in such event, all outstanding options shall automatically
terminate and the balance in the Accounts shall be refunded to the respective
Participants. In the event of a Corporate Transaction, each option outstanding
under the Plan shall be assumed or an equivalent option shall be substituted by
the successor corporation or a parent or subsidiary of such successor
corporation. In the event that the successor corporation refuses to assume or
substitute for outstanding options, the Contribution Period then in progress
shall be shortened and a new Purchase Date shall be set (the New Purchase
Date), as of which date the Contribution Period then in progress will
terminate. The New Purchase Date shall be on or before the date of consummation
of the Corporate Transaction and the Board shall notify each Participant in
writing, at least 10 days prior to the New Purchase Date, that the Purchase
Date for his or her option has been changed to the New Purchase Date and that
his or her option will be exercised automatically on the New Purchase Date,
unless prior to such date he or she has withdrawn from the Plan as provided in
Section 10 hereof. For purposes of this Section 18, an option granted
under the Plan shall be deemed to be assumed, without limitation, if, at the
time of issuance of the stock or other consideration upon a Corporate
Transaction, each holder of an option under the Plan would be entitled to
receive upon exercise of the option the same number and kind of shares of stock
or the same amount of property, cash or securities as such holder would have
been entitled to receive upon the occurrence of the Corporate Transaction if
the holder had been, immediately prior to the Corporate Transaction, the holder
of the number of Shares covered by the option at such time (after giving effect
to any adjustments in the number of Shares covered by the option as provided
for in this Section 18); provided however that if the consideration
received in the transaction is not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the
Board may, with the consent of the successor corporation, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in fair market value, as
determined by the Committee, to the per Share consideration received by holders
of Common Stock in the Corporate Transaction.
The
Board may, if it so determines in the exercise of its sole discretion, also
make provision for adjusting the number of Shares set forth in Section 12
hereof, as well as the price per Share covered by each outstanding option, in
the event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of its
outstanding Common Stock, and in the event the Company is consolidated with or
merged into any other corporation.
|
|
Section 19.
|
A
mendment or Termination
.
|
(a) The
Board may at any time and for any reason terminate or amend the Plan. Except as
provided in Section 18 hereof, no such termination of the Plan may affect
options previously granted, provided that the Plan or the Contribution Period
may be terminated by the Board on a Purchase Date or by the Boards setting a
new Purchase Date with respect to a Contribution Period then in progress if the
Board determines that termination of the Plan and/or the Contribution Period is
in the best interests of the Company and the shareholders or if continuation of
the Plan and/or the Contribution Period would cause the Company to incur
adverse accounting charges as a result of a change after the effective date of
the Plan in the generally accepted accounting principles applicable to the
Plan. Except as provided in Section 18 hereof and in this Section 19, no
amendment to the Plan shall make any change in any option previously granted
that adversely affects the rights of any Participant. In addition, to the
extent necessary to comply with Rule 16b‑3 under the Exchange Act or
Section 423 of the Code (or, in either
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case, any successor rule or
provision or any applicable law or regulation) or the requirements of any stock
exchange upon which the Shares may then be listed, the Company shall obtain
shareholder approval in such a manner and to such a degree as so required.
(b) Without
shareholder approval and without regard to whether any Participant rights may
be considered to have been adversely affected, the Board shall be entitled to
change the Contribution Periods and/or the Purchase Price as permitted under
the Plan, limit the frequency and/or number of changes in the amount deducted
during a Contribution Period, establish the exchange ratio applicable to
amounts deducted in a currency other than U.S. dollars, permit payroll
deductions in excess of the amount designated by a Participant in order to
adjust for delays or mistakes in the Companys processing of properly completed
payroll deduction elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Shares for each Participant properly correspond
with amounts deducted from the Participants Compensation, and establish such
other limitations or procedures as the Board determines in its sole discretion
to be advisable and consistent with the Plan.
All
notices or other communications by a Participant to the Company under or in
connection with the Plan shall be deemed to have been duly given when received
in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
|
|
Section 21.
|
C
onditions Upon Issuance of Shares
.
|
Shares
shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such Shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, applicable state securities
laws and the requirements of any stock exchange upon which the Shares may then
be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As
a condition to the exercise of an option, the Company may require the person
exercising such option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
|
|
Section 22.
|
T
erm of Plan; Effective Date
.
|
The
Plan shall become effective upon approval by the Companys shareholders. It
shall continue in effect until all of the Shares set forth in Section 12
hereof are exhausted or such earlier time as the Plan is terminated pursuant to
Section 19 hereof.
|
|
Section 23.
|
A
dditional Restrictions of
Rule 16b-3
.
|
The
terms and conditions of options granted hereunder to, and the purchase of
Shares by, Officers shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options
shall be deemed to contain, and the Shares issued upon exercise thereof shall
be subject to, such additional conditions and restrictions as may be required
by Rule 16b-3 to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to Plan transactions.
10
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|
|
Section 24.
|
G
overning Law
.
|
The
internal law, and not the law of conflicts, of the State of Minnesota, shall
govern all questions concerning the validity, construction and effect of the
Plan, and any rules and regulations relating to the Plan.
|
|
Section 25.
|
S
everability
.
|
If
any provision of the Plan is or becomes invalid, illegal, or unenforceable in
any jurisdiction or would disqualify the Plan under any law, such provision
shall be construed or deemed amended to conform to applicable laws, or if it
cannot be so construed or deemed amended without materially altering the intent
of the Plan, such provision shall be stricken as to such jurisdiction, and the
remainder of the Plan shall remain in full force and effect.
|
|
Section 26.
|
N
o Rights as an Employee
.
|
This
Plan shall not form part of any contract of employment between the Company or
any of the Designated Subsidiaries or Subsidiaries not constituting Designated
Subsidiaries nor shall this Plan amend, abrogate or affect any existing
employment contract between the Company or any Designated Subsidiary or any
Subsidiary not being a Designated Subsidiary and their respective employees.
Nothing in the Plan shall be construed to give any person (including an
Employee or Participant) the right to remain in the employ of the Company or a
Subsidiary or to affect the right of the Company or a Subsidiary to terminate
the employment of any person (including the Employee or Participant) at any
time with or without cause. Nothing in this Plan shall confer on any person any
legal or equitable right against the Company or any Subsidiary, or give rise to
any cause of action at law or in equity against the Company or any Subsidiary.
Neither the Shares purchased hereunder nor any other benefits conferred hereby,
including the right to purchase Common Stock at a discount, shall form any part
of the wages or salary of any eligible Employee for purposes of severance pay
or termination indemnities, irrespective of the reason for termination of
employment. Under no circumstances shall any person ceasing to be an Employee
be entitled to any compensation for any loss of any right or benefit under this
Plan which such Employee might otherwise have enjoyed but for termination of
employment, whether such compensation is claimed by way of damages for wrongful
or unfair dismissal, breach of contract or otherwise.
|
|
Section 27.
|
I
nternational Participants
.
|
The Committee
shall have the power and authority to allow any of the Companys Subsidiaries
other than Designated Subsidiaries to adopt and join in the portion of this
Plan that is not intended to comply with Section 423 of the Code and to
allow employees of such Subsidiaries who work or reside outside of the United
States an opportunity to acquire Shares in accordance with such special terms
and conditions as the Committee may establish from time to time, which terms
and conditions may modify the terms and conditions of the Plan set forth
elsewhere in this Plan. Without limiting the authority of the Committee, the
special terms and conditions which may be established with respect to any
foreign country, and which need not be the same for all foreign countries,
include but are not limited to the right to participate, procedures for
elections to participate, the payment of any interest with respect to amounts
received from or credited to accounts held for the benefit of participants, the
purchase price of any Shares to be acquired, the length of any Contribution
Period, the maximum amount of contributions, credits or Shares which may be
acquired by any participating employees, and a participating employees rights
in the event of his or her death, disability, withdrawal from participation in
the purchase of Shares
11
Table of Contents
hereunder, or termination of employment. Any purchases
made pursuant to the provisions of this Section 27 shall not be subject to
the requirements of Section 423 of the Code.
Participants
are responsible for the payment of all income taxes, employment, social
insurance, welfare and other taxes under applicable law relating to any amounts
deemed under the laws of the country of their residency or of the organization
of the Subsidiary employing such Participant to constitute income arising out
of the Plan, the purchase and sale of Shares pursuant to the Plan and the
distribution of Shares or cash to the Participant in accordance with this Plan.
Each Participant hereby authorizes the relevant Subsidiary to make appropriate
withholding deductions from each Participants compensation, which shall be in
addition to any payroll deductions made pursuant to Section 6, and to pay
such amounts to the appropriate tax authorities in the relevant country or
countries in order to satisfy any of the above tax liabilities of the
Participant under applicable law.
|
|
Section 29.
|
A
cceptance of Terms
.
|
By
participating in the Plan, each Participant shall be deemed to have accepted
all the conditions of the Plan and the terms and conditions of any rules and
regulations adopted by the Committee and shall be fully bound thereby.
Adopted
by the Board on February 23, 2007 and approved by Shareholders on
May 16, 2007.
Amended
by the Board on February 24, 2012 and approved by Shareholders on ________,
2012, but effective for Contribution Periods and Purchase Dates beginning on
and after August 1, 2012.
12
Table of Contents
A
PPENDIX B
PROPOSED AMENDMENTS TO THE
ARTICLES OF INCORPORATION AND BYLAWS OF ST. JUDE MEDICAL, INC.
TO DECLASSIFY THE BOARD OF DIRECTORS
Articles
of Incorporation
Article
IX, Section 2 of St. Jude Medical, Inc.s Articles of Incorporation, as
amended, is hereby amended and restated to read in its entirety as follows:
|
|
|
Section 2.
Commencing with the 2013 Annual Meeting of Shareholders, directors shall be
elected annually for terms expiring at the next annual meeting of
shareholders, except that any director at the 2013 Annual Meeting of
Shareholders whose term expires at the 2014 Annual Meeting of Shareholders or
the 2015 Annual Meeting of Shareholders shall continue to hold office until
the end of the term for which such director was elected. From and after the
2015 Annual Meeting of Shareholders, all directors will stand for election
annually. In the case of any vacancy on the Board of Directors, including a
vacancy created by an increase in the number of directors, the vacancy shall
be filled by election of the Board of Directors with the director so elected
to serve until the next annual meeting of shareholders. All directors shall
continue in office until the election and qualification of their respective
successors in office. No decrease in the number of directors shall have the
effect of shortening the term of any incumbent director.
|
Article
IX, Section 8 of St. Jude Medical, Inc.s Articles of Incorporation, as
amended, is hereby amended and restated to read in its entirety as follows:
|
|
|
Section 8.
Notwithstanding any other provision of these Articles of Incorporation or of
law which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class of Voting Stock
required by law or these Articles of Incorporation, the affirmative vote of
at least 80% of the votes entitled to be cast by holders of all the
outstanding shares of Voting Stock (as defined in Article XIII hereof),
voting together as a single class, shall be required to alter, amend or
repeal Section 3 of this Article IX.
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Table of Contents
Bylaws
Section
2(b) of Article II of St. Jude Medical, Inc.s Bylaws, as amended, is hereby
amended and restated to read in its entirety as follows:
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|
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(b) Commencing with the
2013 Annual Meeting of Shareholders, directors shall be elected annually for
terms expiring at the next annual meeting of shareholders, except that any
director at the 2013 Annual Meeting of Shareholders whose term expires at the
2014 Annual Meeting of Shareholders or the 2015 Annual Meeting of
Shareholders shall continue to hold office until the end of the term for
which such director was elected. From and after the 2015 Annual Meeting of
Shareholders, all directors will stand for election annually. In the case of
any vacancy on the Board of Directors, including a vacancy created by an increase
in the number of directors, the vacancy shall be filled by election of the
Board of Directors with the director so elected to serve until the next
annual meeting of shareholders. All directors shall continue in office until
the election and qualification of their respective successors in office. No
decrease in the number of directors shall have the effect of shortening the
term of any incumbent director.
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2
Table of Contents
Table of Contents
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ST. JUDE MEDICAL, INC.
ATTN: INVESTOR RELATIONS
ONE ST. JUDE MEDICAL DRIVE
ST. PAUL, MN 55117
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Investor Address Line 1
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Investor Address Line 2
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Investor Address Line 3
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Investor Address Line 4
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Investor Address Line 5
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John Sample
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1234 ANYWHERE STREET
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ANY CITY, ON A1A 1A1
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VOTE BY INTERNET
- www.proxyvote.com
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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 and follow the instructions to obtain your
records and to create an electronic voting instruction form.
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ELECTRONIC
DELIVERY OF FUTURE PROXY MATERIALS
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If you would like to reduce the
costs incurred by our company in mailing proxy materials, you can consent to
receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet
and, when prompted, indicate that you agree to receive or access proxy
materials electronically in future years.
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VOTE BY PHONE -
1-800-690-6903
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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 and then
follow the instructions.
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VOTE BY MAIL
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Mark, sign and date your proxy
card and return it in the postage-paid envelope we have provided or return it
to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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CONTROL #
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000000000000
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NAME
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THE COMPANY NAME
INC. - COMMON
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SHARES
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123,456,789,012.12345
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THE COMPANY NAME
INC. - CLASS A
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123,456,789,012.12345
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THE COMPANY NAME
INC. - CLASS B
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123,456,789,012.12345
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THE COMPANY NAME
INC. - CLASS C
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123,456,789,012.12345
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THE COMPANY NAME
INC. - CLASS D
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123,456,789,012.12345
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THE COMPANY NAME
INC. - CLASS E
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123,456,789,012.12345
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THE COMPANY NAME
INC. - CLASS F
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123,456,789,012.12345
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THE COMPANY NAME
INC. - 401 K
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123,456,789,012.12345
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x
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PAGE 1 OF 2
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TO VOTE, MARK BLOCKS BELOW IN
BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED
AND DATED.
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The Board of
Directors recommends you vote FOR the following:
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1.
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Election of Directors
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For
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Against
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Abstain
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1a.
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John W. Brown
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o
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o
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o
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1b.
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Daniel J. Starks
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o
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o
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o
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The Board of Directors
recommends you vote FOR proposals 2, 3,
4 and 5.
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For
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Against
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Abstain
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NOTE:
In their discretion, the proxies are
authorized to vote upon such other business as may
properly come before the meeting.
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2
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To approve amendments to the 2007
Employee Stock Purchase Plan.
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o
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o
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o
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3
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To approve amendments to our
Articles of Incorporation and Bylaws to declassify our Board of Directors.
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o
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o
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o
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4
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Advisory vote to approve
compensation of our named executive officers.
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o
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o
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o
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5
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To ratify the appointment of
Ernst &Young LLP as our independent registered public accounting firm
for 2012.
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o
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o
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o
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For address change/comments,
mark here.
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o
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(see reverse for instructions)
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Yes
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No
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Please indicate if you plan to
attend this meeting
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o
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o
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Please sign exactly as your
name(s) appear(s) hereon. When signing as attorney, executor, administrator,
or other fiduciary,
please give full title as such. Joint owners should each sign personally. All
holders must sign. If a corporation or
partnership, please sign in full corporate or partnership name, by authorized
officer.
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SHARES
CUSIP #
SEQUENCE #
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JOB #
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Signature [PLEASE SIGN WITHIN
BOX]
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Date
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Signature (Joint Owners)
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Date
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0000124922_1 R1.0.0.11699
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0000000000 02
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Important Notice
Regarding the Availability of Proxy Materials for the Annual Meeting:
The
Annual Report, Notice & Proxy Statement is/ are available at
www.proxyvote.com
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ST.
JUDE MEDICAL, INC.
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Annual
Meeting of Shareholders
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May
3, 2012 8:30 AM
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This
proxy is solicited by the Board of Directors
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The undersigned hereby appoints Daniel J. Starks, John C.
Heinmiller and Jason A. Zellers or any one of them, as proxies, with full
power of substitution to vote all the shares of common stock which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Shareholders of St. Jude Medical, Inc., to be held May 3, 2012 at
8:30 a.m. central time, at the Minnesota History Center, 345 Kellogg
Boulevard West, St. Paul, Minnesota, 55102 or at any adjournment thereof,
upon any and all matters which may properly be brought before the meeting or
adjournments thereof, hereby revoking all former proxies.
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The shares represented by this proxy will
be voted as specified, but if no specification is made, the shares will be
voted FOR each of the Director nominees, FOR Proposal 2, FOR Proposal
3, FOR Proposal 4, FOR Proposal 5, and in the discretion of the named
proxies on all other matters.
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Address
change/comments:
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(If you noted any Address Changes and/or Comments above, please mark
corresponding box on the reverse side.)
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Continued and to be signed on reverse
side
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0000124922_2 R1.0.0.11699
Table of Contents
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*** Exercise Your
Right
to Vote ***
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Important Notice Regarding the Availability of Proxy Materials for the
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B
A
R
C
O
D
E
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Shareholder Meeting to Be Held on May 03, 2012
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Meeting
Information
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ST. JUDE MEDICAL, INC.
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Meeting Type:
Annual Meeting
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For holders as
of:
March 07, 2012
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Date:
May 03,
2012
Time:
8:30
AM CDT
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Location:
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Minnesota History Center
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345 Kellogg Boulevard West
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St. Paul, Minnesota 55102
For Meeting Directions:
Please call 651-259-3000
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You are receiving this communication because you hold shares in the
above named company.
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ST. JUDE MEDICAL, INC.
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ATTN: INVESTOR RELATIONS
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ONE ST. JUDE MEDICAL DRIVE
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This is not a ballot. You cannot use this notice to vote these
shares. This communication presents only an overview of the more complete
proxy materials that are available to you on the Internet. You may view the
proxy materials online at
www.proxyvote.com
or easily request a paper copy
(see reverse side).
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ST. PAUL, MN 55117
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Investor Address
Line 1
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Investor Address
Line 2
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Investor Address
Line 3
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Investor Address
Line 4
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We encourage you to access and review all of the important
information contained in the proxy materials before voting.
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Investor Address
Line 5
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John Sample
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See the reverse side of this
notice to obtain proxy materials and voting instructions.
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1234 ANYWHERE
STREET
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ANY CITY, ON A1A
1A1
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Broadridge Internal Use Only
Job #
Envelope #
Sequence #
# of # Sequence #
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0000124921_1 R1.0.0.11699
Table of Contents
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Before You Vote
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How to Access the Proxy Materials
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Proxy Materials Available to VIEW or
RECEIVE:
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1. Annual Report
2. Notice & Proxy Statement
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How to View Online:
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Have the information that is printed in the
box marked by the arrow
è
XXXX XXXX XXXX
(located on the following page) and visit:
www.proxyvote.com.
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How to Request and Receive a PAPER or
E-MAIL Copy:
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If you
want to receive a paper or e-mail copy of these documents, you must request one.
There is NO charge for requesting a copy. Please choose one of the following
methods to make your request:
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1)
BY INTERNET
:
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www.proxyvote.com
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2)
BY TELEPHONE
:
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1-800-579-1639
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3)
BY E-MAIL
*:
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sendmaterial@proxyvote.com
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* If requesting materials by e-mail, please
send a blank e-mail with the information that is printed in the box marked by
the arrow
è
XXXX XXXX XXXX
(located on the following page) in the subject
line.
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Requests,
instructions and other inquiries sent to this e-mail address will NOT be
forwarded to your investment advisor. Please make the request as instructed
above on or before April 19, 2012 to facilitate timely delivery.
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How To Vote
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Please Choose One of the Following Voting Methods
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Vote In Person:
Many shareholder
meetings have attendance requirements including, but not limited to, the
possession of an attendance ticket issued by the entity holding the meeting.
Please check the meeting materials for any special requirements for meeting
attendance. At the meeting, you will need to request a ballot to vote these
shares.
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Vote By Internet:
To vote now by
Internet, go to
www.proxyvote.com.
Have the information that is printed in the
box marked by the arrow
è
XXXX XXXX XXXX
available and follow the
instructions.
|
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Internal Use
Only
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Vote By Mail:
You can vote by mail by
requesting a paper copy of the materials, which will include a proxy
card.
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0000124921_2 R1.0.0.11699
Table of Contents
The Board of Directors recommends you vote FOR the following:
|
|
1.
|
Election of Directors
|
|
|
|
Nominees
|
|
|
1a.
|
John W. Brown
|
|
|
1b.
|
Daniel J. Starks
|
The Board of Directors recommends you vote FOR proposals 2, 3, 4 and 5.
|
|
2
|
To approve amendments to the 2007 Employee Stock Purchase Plan.
|
|
|
3
|
To approve amendments to our Articles of Incorporation and Bylaws to declassify our Board of Directors.
|
|
|
4
|
Advisory vote to approve compensation of our named executive officers.
|
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|
5
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To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2012.
|
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NOTE:
In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
meeting.
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à
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0000 0000 0000
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Broadridge Internal Use Only
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xxxxxxxxxx
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xxxxxxxxxx
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Cusip
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Job #
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Envelope #
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Sequence #
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# of # Sequence #
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0000124921_3 R1.0.0.11699
Table of Contents
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Reserved for Broadridge Internal Control Information
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NAME
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THE COMPANY
NAME INC. - COMMON
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123,456,789,012.12345
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THE COMPANY
NAME INC. - CLASS A
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123,456,789,012.12345
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THE COMPANY
NAME INC. - CLASS B
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123,456,789,012.12345
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THE COMPANY
NAME INC. - CLASS C
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123,456,789,012.12345
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THE COMPANY
NAME INC. - CLASS D
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123,456,789,012.12345
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THE COMPANY
NAME INC. - CLASS E
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123,456,789,012.12345
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THE COMPANY
NAME INC. - CLASS F
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123,456,789,012.12345
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THE COMPANY
NAME INC. - 401 K
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123,456,789,012.12345
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Broadridge Internal Use Only
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Job
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#
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Envelope
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#
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THIS SPACE RESERVED FOR SIGNATURES IF APPLICABLE
|
Sequence
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#
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# of # Sequence
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#
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0000124921_4 R1.0.0.11699
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