Edgar Filing: STRYKER CORP

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

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STRYKER CORPORATION
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STRYKER CORPORATION
2725 FAIRFIELD ROAD
KALAMAZOO, MICHIGAN 49002

------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 26, 2005
------------------------

The Annual Meeting of Stockholders of Stryker Corporation will be held on
Tuesday, April 26, 2005, at 2:00 p.m., at the Radisson Plaza Hotel & Suites at
The Kalamazoo Center, Kalamazoo, Michigan, for the following purposes:

1. To elect seven directors; and

2. To transact such other business as may properly come before the meeting.

All stockholders are cordially invited to attend the meeting. Only holders
of record of Common Stock at the close of business on February 28, 2005 are
entitled to notice of and to vote at the meeting. If you attend the meeting, you
may vote in person if you wish, even though you previously have returned your
proxy.

A copy of the Company's 2004 Annual Report is enclosed.

STOCKHOLDERS ARE URGED TO COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ACCOMPANYING ENVELOPE

Thomas R. Winkel
Secretary

March 17, 2005

STRYKER CORPORATION
2725 FAIRFIELD ROAD
KALAMAZOO, MICHIGAN 49002
------------------------

PROXY STATEMENT
------------------------

This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Stryker Corporation of proxies to be used at the
Annual Meeting of Stockholders of the Company to be held on Tuesday, April 26,
2005, and at all adjournments thereof. The solicitation will begin on or about
March 17, 2005.

All shares represented by a properly executed proxy will be voted unless it
is revoked and, if a choice is specified, will be voted in accordance with such
specification. If no choice is specified, a proxy will be voted FOR the election
of the seven nominees named under "Election of Directors," unless authority to
do so is withheld with respect to one or more of such nominees. In addition, a
proxy may be voted in the discretion of the proxyholders with respect to such
other business as may properly come before the meeting. A stockholder may revoke
a proxy at any time prior to the voting thereof.

Brokers holding shares of Common Stock for beneficial owners must vote
those shares according to specific instructions they receive from the owners. If
instructions are not received, brokers may vote those shares in their
discretion. Directors will be elected by a plurality of the votes cast at the
meeting. Votes that are withheld with respect to the election of directors are
not counted as votes cast.

There were 402,903,237 shares of Common Stock of the Company outstanding as
of the close of business on February 28, 2005, the record date for the
determination of stockholders entitled to notice of and to vote at the meeting.
Each share is entitled to one vote on each matter brought before the meeting.

BENEFICIAL OWNERSHIP OF MORE THAN 5%
OF THE OUTSTANDING COMMON STOCK

As used in this proxy statement, "beneficial ownership" means the sole or
shared power to direct the voting and/or disposition of shares of Common Stock.
In addition, a person is deemed to have beneficial ownership of any shares of
Common Stock that such person has the right to acquire within 60 days.

The following table sets forth certain information, as of December 31,
2004, with respect to the beneficial ownership of Common Stock by the only
person known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock.

NAME AND ADDRESS PERCENT OF
OF BENEFICIAL OWNER NUMBER OF SHARES CLASS
------------------- ---------------- ----------

Advisory Committee for the Stryker Trusts(1)................ 111,380,736 27.7%
490 West South Street
Kalamazoo, Michigan 49007

---------------

(1) Based solely upon information as of December 31, 2004 contained in a
Schedule 13G amendment filed with the Securities and Exchange Commission on
February 11, 2005. Under the terms of the trust agreement establishing
certain trusts for the benefit of members of the Stryker family (the
"Stryker Trusts"), an Advisory Committee, consisting of Jon L. Stryker, Pat
Stryker, Ronda E. Stryker, Gerard Thomas and Elizabeth S. Upjohn-Mason, has
full voting and disposition power with respect to 83,284,934 shares of
Common Stock owned by the Stryker Trusts. Ronda E. Stryker is currently a
director of the Company. A majority vote of the Advisory Committee is
necessary with respect to matters regarding the shares of Common Stock held
in the Stryker Trusts, including voting and disposition. Members of the
Advisory Committee beneficially own in the aggregate an additional
28,095,802 shares of Common Stock in their individual or other capacities,
including 48,000 shares that may be acquired by Ronda E. Stryker upon
exercise of options. The members of the Advisory Committee have sole voting
and disposition power with respect to such additional shares except for
1,804,880 shares as to which Mrs. Upjohn-Mason has shared voting and
disposition power.

BENEFICIAL OWNERSHIP OF MANAGEMENT

The following table sets forth certain information with respect to the
beneficial ownership of shares of Common Stock as of January 31, 2005 by the
current directors of the Company, all of whom except Mr. Lillard are standing
for reelection, the Named Executives referred to under the caption "Executive
Compensation" and all executive officers and directors of the Company as a
group.

PERCENTAGE OF
NUMBER OF SHARES RIGHT TO OUTSTANDING
NAME OWNED(1) ACQUIRE(2) TOTAL(3) SHARES(%)
---- ---------------- ---------- ----------- -------------

John W. Brown............................. 18,505,512 1,460,000 19,965,512 4.94
Howard E. Cox, Jr. ....................... 534,732 105,600 640,332 *
Donald M. Engelman, Ph.D. ................ 41,284 105,600 146,884 *
Jerome H. Grossman, M.D. ................. 219,000 105,600 324,600 *
Stephen Si Johnson........................ 506,000 570,000 1,076,000 *
James E. Kemler........................... 75,810 194,000 269,810 *
James R. Lawson........................... 7,538 389,300 396,838 *
John S. Lillard........................... 353,642 49,600 403,242 *
Stephen P. MacMillan...................... 107,700 60,000 167,700 *
William U. Parfet......................... 80,000 105,600 185,600 *
Ronda E. Stryker.......................... 90,211,584 49,600 90,261,184(4) 22.4
Executive officers and directors as a
group (13 persons)...................... 111,068,596 3,656,100 114,724,696(4) 28.2

---------------

* Less than one percent.

(1) Excludes shares that may be acquired through stock option exercises, but
includes, in the case of Mr. MacMillan, 80,000 shares of restricted stock
that vest in equal annual installments of 20,000 shares on May 31 of each of
the years 2005 through 2008. Until vested, the shares of restricted stock
are subject to forfeiture under certain conditions and may not be sold or
otherwise transferred by Mr. MacMillan. Mr. MacMillan has the right to
receive dividends on and to vote the restricted shares.

(2) Pursuant to Rule 13d-3(c)(1) of the Securities Exchange Act of 1934 (the
"Exchange Act"), includes shares that may be acquired within 60 days after
January 31, 2005 upon exercise of options.

(3) Except for the shared beneficial ownership of shares of Common Stock
attributed to Ms. Stryker as a member of the Advisory Committee for the
Stryker Trusts, all as more fully set forth above under "Beneficial
Ownership of More Than 5% of the Outstanding Common Stock," such persons
hold sole voting and disposition power with respect to the shares shown in
this column. Does not include 1,615,391 shares of Common Stock owned by the
Company's Savings and Retirement Plans that are voted as directed by the
Company, except in the case of certain non-routine matters, which do not
include the election of directors, as to which the individual participants,
including executive officers, may give voting instructions. Such number of
shares does not exceed 10,000 in the case of any executive officer.

(4) Includes the shared beneficial ownership of shares of Common Stock held in
the Stryker Trusts and attributed to Ms. Stryker as a member of the Advisory
Committee for the Stryker Trusts, all as more fully set forth above under
"Beneficial Ownership of More Than 5% of the Outstanding Common Stock."
30,466,800 of the shares in the Stryker Trusts are held for the benefit of
Ms. Stryker.

ELECTION OF DIRECTORS

Seven directors are to be elected to serve until the next Annual Meeting of
Stockholders and until their successors shall have been duly elected and
qualified. John S. Lillard, who is presently a director, is not standing for
reelection. All of the nominees listed below are currently members of the Board
of Directors. The nominees for directors have consented to serve if elected and
the Company has no reason to believe that any of the nominees will be unable to
serve. Should any nominee become unavailable for any reason, proxies will be
voted for the alternate candidate, if any, chosen by the Board of Directors.
Should additional persons be nominated for election as directors, the seven
persons receiving the greatest number of votes shall be elected.

The following information respecting the nominees has been furnished by
them.

NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
------------------------------- --------

JOHN W. BROWN, age 70....................................... 1977
Chairman of the Board of the Company, since January 1981,
and President and Chief Executive Officer of the Company,
from February 1977 to June 2003, and Chief Executive
Officer of the Company, from June 2003 through December
2004. Also a director of National City Corporation, a
bank, the American Business Conference, an association of
mid-size growth companies, and the Advanced Medical
Technology Association.

HOWARD E. COX, JR., age 61.................................. 1974
Partner of Greylock and its affiliated venture capital
partnerships, since August 1971.

DONALD M. ENGELMAN, PH.D., age 64........................... 1989
Eugene Higgins Professor of Molecular Biophysics and
Biochemistry, Yale University, since 1979, with assignment
to Yale College, the Graduate School and the Medical
School. Chair of the Science and Technology Steering
Committee of the Brookhaven National Laboratory, since
2000. Member, National Academy of Science, since April
1997.

JEROME H. GROSSMAN, M.D., age 65............................ 1982
Senior Fellow and Director of the Harvard/Kennedy School
Health Care Delivery Policy Program at John F. Kennedy
School of Government, Harvard University, since 2001.
Chairman and Chief Executive Officer of Lion Gate
Management Corporation, the holding company for a group of
endeavors to advance the health care delivery system, from
1999 to 2002, and Chairman of the Federal Reserve Bank of
Boston from 1994 to 1998. Also, Chairman Emeritus of New
England Medical Center, Inc., where he served as Chairman
and CEO from 1979 to 1995, honorary physician at the
Massachusetts General Hospital and Adjunct Professor of
Medicine at Tufts University School of Medicine. Also a
trustee of PennMedicine (University of Pennsylvania
Medical School Health System) and the Mayo Clinic.

STEPHEN P. MACMILLAN, age 41................................ 2005
President and Chief Executive Officer of the Company,
since January 2005, and President and Chief Operating
Officer of the Company, from June 2003 through December
2004. Prior to joining the Company in June 2003, he was
Sector Vice President, Global Specialty Operations of
Pharmacia Corporation from mid-December 1999 and was
President of Johnson & Johnson - Merck Consumer
Pharmaceuticals from January to mid-December 1999 and had
held other positions at Johnson & Johnson since 1989.

WILLIAM U. PARFET, age 58................................... 1993
Chairman and Chief Executive Officer of MPI Research,
Inc., a drug safety and pharmaceutical development
company, since May 1999. Also a director of CMS Energy
Corporation, a global utility and energy company, Monsanto
Company, a provider of agricultural products that improve
farm productivity, and PAREXEL International Corporation,
a provider of contract research, medical marketing and
consulting services to the pharmaceutical, biotechnology
and medical device industries.

NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER INFORMATION SINCE
------------------------------- --------

RONDA E. STRYKER, age 50.................................... 1984
Granddaughter of the founder of the Company and daughter
of the former President of the Company. Also Vice Chairman
and a director of Greenleaf Trust, a bank, Vice Chairman
and a trustee of Kalamazoo College and Spelman College and
a trustee of the Kalamazoo Institute of Arts and the
Kalamazoo Community Foundation.

The Board of Directors has adopted Corporate Governance Guidelines that are
available on the "Corporate Governance" page of the Company's website at
www.stryker.com. A copy will be mailed to any stockholder upon request. Pursuant
to the Guidelines, William U. Parfet has been designated the lead independent
director, with responsibility for coordinating the activities of the other
independent directors (which, for this purpose, includes all of the directors
except Mr. Brown and Mr. MacMillan) and chairing the executive session held in
connection with each meeting of the Board of Directors in order to provide the
opportunity for the independent directors to discuss topics of concern without
any member of management being present.

The Board of Directors held seven meetings during 2004 and acted by written
consent once. All of the directors attended more than 75% of the total meetings
of the Board and all committees of which they were members in 2004. A meeting of
the Board of Directors is typically scheduled in conjunction with the annual
meeting of stockholders and it is expected that directors will attend absent a
schedule conflict or other valid reason. All of the persons who were then
directors attended the 2004 Annual Meeting.

The Board of Directors has designated from among its members an Audit
Committee that currently consists of Mr. Parfet (Chairman), Mr. Cox, Dr.
Grossman and Mr. Lillard. The Audit Committee met five times during 2004. See
"Audit Committee." The Board of Directors has also designated a Compensation
Committee, which currently consists of Ms. Stryker (Chairman), Mr. Cox and Mr.
Parfet, and a Stock Option Committee, which currently consists of Ms. Stryker
(Chairman) and Mr. Lillard. The duties of these committees are described below
under "Executive Compensation -- Report of Compensation and Stock Option
Committees on Executive Compensation."

The Board of Directors has designated a Governance and Nominating
Committee, which in 2004 consisted of Ms. Stryker (Chairman), Mr. Cox, Dr.
Engelman, Dr. Grossman, Mr. Lillard and Mr. Parfet. The Governance and
Nominating Committee, which met three times during 2004, makes recommendations
to the Board of Directors regarding individuals for nomination as director and,
in addition, may consider other matters relating to corporate governance. When
seeking to identify an individual to become a director to fill a new position or
vacancy, the Governance and Nominating Committee will consult with incumbent
directors, management and others. The Governance and Nominating Committee will
consider, among other factors, the background and reputation of potential
candidates in terms of character, personal and professional integrity, business
and financial experience and acumen, how a person would complement the other
directors in providing a diversity of expertise and experience and a person's
availability to devote sufficient time to Board duties. Stockholders may
recommend director candidates for consideration by the Governance and Nominating
Committee by writing to the Secretary of the Company at 2725 Fairfield Road,
Kalamazoo, Michigan 49002, giving the candidate's name, relationship, if any, to
the stockholder making the recommendation, biographical data and qualifications.
The submission should also include a statement from the candidate consenting to
being considered and, if nominated and elected, to serving as a director.

The charter of each of the Audit Committee, the Compensation Committee, the
Stock Option Committee and the Governance and Nominating Committee is available
on the "Corporate Governance" page of the Company's website at www.stryker.com
and will be mailed to any stockholder upon request. None of the members of any
of the committees is or ever has been an employee of the Company and the Board
of Directors determined at its meeting in April 2004 that each of them was
"independent" within the meaning of the New York Stock Exchange corporate
governance listing standards and of the provisions of the Exchange Act
applicable to the committees on which he or she serves. The Board of Directors
based its determination with respect to independence for purposes of Board and
committee membership on a review of the responses

of the directors to questions regarding employment history, affiliations and
family and other relationships and on discussions with the directors.

The Code of Conduct applicable generally to employees, officers and
directors in the performance of their duties and responsibilities and the Code
of Ethics applicable to the principal executive officer, principal financial
officer and principal accounting officer and controller are also available on
the "Corporate Governance" page of the Company's website at www.stryker.com and
will be mailed to any stockholder upon request.

DIRECTOR COMPENSATION

Directors who are not employees received directors fees of $6,000 for each
Board meeting attended, $3,000 for each meeting attended via conference call and
a fixed annual fee of $50,000 in 2004. Directors who are also members of
committees of the Board received a fee of $3,000 per day for committee meetings
attended. During 2004, each outside director was granted an option under the
Company's 1998 Stock Option Plan (the "Plan") to purchase 8,000 shares of the
Company's Common Stock. The Company also makes $50,000 of group life insurance
available to its outside directors. Also, $149,100 was paid to Dr. Engelman for
services rendered in 2004 as a consultant to the Company. Dr. Engelman continues
to serve as a consultant. As a result, Dr. Engelman is no longer deemed
"independent" within the meaning of the New York Stock Exchange corporate
governance listing standards and no longer serves as a member of the Governance
and Nominating Committee.

EXECUTIVE COMPENSATION

GENERAL

Set forth below is certain summary information with respect to the
compensation of the Company's Chief Executive Officer and the four most highly
compensated executive officers other than the Chief Executive Officer (based on
amounts reported as salary and bonus for 2004) who were serving as executive
officers at December 31, 2004 (the "Named Executives").

SUMMARY COMPENSATION TABLE

LONG TERM
COMPENSATION AWARDS
--------------------------
SHARES OF
COMMON
ANNUAL COMPENSATION RESTRICTED STOCK ALL OTHER
--------------------- STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) OPTIONS(#) ($)(5)
--------------------------- ---- --------- --------- ---------- ---------- ------------

John W. Brown..................... 2004 975,000 2,000,000(2) 70,000 217,250
Chairman of the Board and 2003 925,000 1,000,000 80,000 203,500
Chief Executive Officer 2002 875,000 925,000 100,000 187,000
Stephen Si Johnson................ 2004 441,250 416,000 70,000 84,288
Vice President; 2003 416,250 325,000 80,000 80,438
Group President, MedSurg 2002 383,750 315,000 100,000 69,713
James E. Kemler................... 2004 378,334 275,000 60,000 61,508
Vice President; 2003 350,000 185,000 70,000 60,500
Group President, Biotech, Spine, 2002 333,333 200,000 80,000 54,267
Trauma
James R. Lawson................... 2004 500,000 485,000 70,000 97,350
Vice President; 2003 475,000 385,000 80,000 85,250
Group President, Orthopaedics
and International 2002 450,000 300,000 100,000 77,000
Stephen P. MacMillan(1)........... 2004 608,333 635,000 100,000 112,617
President and Chief Operating 2003 320,833 650,000(3) 3,367,000(4) 200,000 16,625
Officer

---------------

(1) Mr. MacMillan joined the Company as President and Chief Operating Officer on
June 1, 2003. See "Employment Agreement with Stephen P. MacMillan."

(2) Includes a special bonus of $1,000,000, payable on April 1, 2005, to John W.
Brown in recognition of the outstanding performance of the Company under his
leadership during his 28 years of service as Chief Executive Officer. In
accordance with Mr. Brown's wishes, the net amount of the bonus, after
giving effect to appropriate federal and state withholding taxes, will be
paid directly to the John and Rosemary Brown Family Foundation, which was
created by Mr. and Mrs. Brown to benefit those who are interested in
furthering their education.

(3) Mr. MacMillan's bonus for 2003 consisted of an inducement bonus of $300,000
pursuant to his employment agreement and a bonus of $350,000 pursuant to a
bonus arrangement similar to the arrangements with other executive officers.

(4) Pursuant to his Employment Agreement, Mr. MacMillan received a restricted
stock award of 100,000 shares of common stock of the Company as an
inducement to accepting employment with the Company. 20,000 shares of the
restricted stock vested on May 31, 2004. The balance will vest in equal
annual installments of 20,000 shares on May 31 of each of the years 2005
through 2008. Until vested, the shares of restricted stock are subject to
forfeiture under certain conditions and may not be sold or otherwise
transferred by Mr. MacMillan. Mr. MacMillan has the right to receive
dividends on and to vote the restricted shares.

(5) Represents the Company's contributions, including matching of voluntary
contributions by such person, under its 401(k) plan and its supplemental
deferred compensation plan and, in the case of Mr. MacMillan, dividends
declared on the unvested portion of his restricted stock award.

EMPLOYMENT AGREEMENT WITH STEPHEN P. MACMILLAN

The Company entered into an employment agreement with Mr. MacMillan in
connection with his employment by the Company as President and Chief Operating
Officer. The term of the agreement commenced on June 1, 2003 and continues until
May 31, 2008. As an inducement to Mr. MacMillan accepting employment with the
Company, the Company paid Mr. MacMillan $300,000 and granted him the restricted
stock award of 100,000 shares of common stock of the Company discussed in
footnote (4) to the Summary Compensation Table. Pursuant to the agreement, Mr.
MacMillan is entitled to receive a base salary of not less than $550,000 per
year and a bonus based on a potential of $500,000 per year, with the amount of
the bonus for any period being based on the Company's performance against
established goals and objectives. If Mr. MacMillan's employment is terminated by
the Company without cause or voluntarily by him with good reason, he shall be
entitled to receive, in addition to accrued amounts and a pro-rated bonus for
the year of termination, a lump sum payment of $3,150,000 if such termination
occurs prior to May 31, 2006, $2,100,000 if such termination occurs between June
1, 2006 and May 31, 2007 and $1,050,000 if such termination occurs between June
1, 2007 and May 31, 2008. In addition, Mr. MacMillan and his family will be
entitled to continue to receive benefits under any benefit plan, program,
practice or policy of the Company for 36 months if such termination occurs prior
to May 31, 2006, 24 months if such termination occurs during the 12 months
ending May 31, 2007 and 12 months if such termination occurs during the 12
months ending May 31, 2008 or for such longer period as the plan, program,
practice or policy may provide.

STOCK OPTIONS

The following table contains information covering options to purchase
shares of the Company's Common Stock granted to the Named Executives in 2004
pursuant to the Company's 1998 Stock Option Plan.

OPTION GRANTS IN LAST FISCAL YEAR

NUMBER OF
SHARES OF PERCENT OF
COMMON TOTAL
STOCK OPTIONS
UNDERLYING GRANTED
OPTIONS TO EXERCISE GRANT DATE
GRANTED EMPLOYEES PRICE PRESENT VALUE
NAME (#)(1) IN 2004 ($/SH) EXPIRATION DATE ($)(2)
---- ---------- ---------- -------- --------------- -------------

John W. Brown...................... 70,000 2.1 45.21 March 4, 2014 1,177,400
Stephen Si Johnson................. 70,000 2.1 45.21 March 4, 2014 1,177,400
James E. Kemler.................... 60,000 1.8 45.21 March 4, 2014 1,009,200
James R. Lawson.................... 70,000 2.1 45.21 March 4, 2014 1,177,400
Stephen P. MacMillan............... 100,000 3.0 45.21 March 4, 2014 1,682,000

---------------

(1) Such options were granted at 100% of fair market value on the date of grant
and become exercisable as to 20% of the shares covered thereby on each of
the first five anniversary dates of the date of grant.

(2) The Grant Date Present Value has been calculated using the Black-Scholes
option pricing model and assumes a risk-free rate of return of 1.94%, an
expected option life of 6.5 years, an expected dividend yield of
approximately 0.19% and an expected stock price volatility of 34.3%. No
adjustment was made for nontransferability or forfeitures. Such assumptions
are based upon historical experience and are not a forecast of future stock
price performance or volatility or of future dividend policy. Such
information, which is presented in accordance with the requirements of the
Securities and Exchange Commission, is not necessarily indicative of the
actual value that such options will have to the Named Executives, which will
be dependent upon future market prices for the Common Stock.

The following table sets forth information with respect to option exercises
during 2004 by the Named Executives and as to the unexercised options held by
them at December 31, 2004.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

NUMBER OF SHARES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
ON VALUE ------------------ -----------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
---- ----------- --------- ------------------ -----------------------

John W. Brown.................. 150,000 5,686,000 1,446,000/274,000 53,974,420/4,406,280
Stephen Si Johnson............. 0 0 556,000/274,000 18,433,320/4,406,280
James E. Kemler................ 0 0 182,000/208,000 5,014,680/2,998,320
James R. Lawson................ 20,700 671,021 375,300/274,000 11,233,843/4,406,280
Stephen P. MacMillan........... 0 0 40,000/260,000 376,800/1,811,200

---------------

(1) Calculated by determining the difference between the exercise price and the
closing price of the Company's Common Stock as reported by The New York
Stock Exchange-Composite Transactions for the exercise date or December 31,
2004, as the case may be.

REPORT OF COMPENSATION AND STOCK OPTION COMMITTEES ON EXECUTIVE COMPENSATION

COMPENSATION AND STOCK OPTION COMMITTEES OF THE BOARD

The Compensation and Stock Option Committees are comprised entirely of
non-employee, independent members of the Board of Directors. Their respective
responsibilities include reviewing and approving the compensation of the Chief
Executive Officer and other executive officers of the Company and administering
and reviewing the Company's stock option program and the granting of options
thereunder.

COMPENSATION PHILOSOPHY AND OBJECTIVES

The Company's executive compensation programs are designed to enable the
Company to attract, retain and motivate highly talented executives required for
the success of the business. Overall, it is the intent of the Company to provide
executives with compensation opportunities that are comparable with other large
companies in the medical device industry, as well as other competitors for
talent generally. This objective is achieved through a combination of current
and long-term compensation programs, combined with a comprehensive package of
health, welfare and retirement benefit programs. The stock option program is
designed to reward executives for sustained high rate of Company growth and
profitability for the benefit of the Company's stockholders. Non-mandatory Stock
Ownership Guidelines are in place and designed to encourage all officers of the
Company to have a significant personal stake in the continued success of the
Company.

COMPENSATION COMPONENTS

There are three basic elements in the Company's executive compensation
program -- base salary, bonus and stock options. The Compensation Committee,
which reviews executive compensation on an annual basis and is responsible for
determinations regarding base salary and bonuses, formally met in November 2003
and in November and December 2004.

The salaries of the Company's executive officers for 2004 were determined
at the meeting of the Compensation Committee held in November 2003. Prior to
such meeting, the members of the Committee were provided with broad-based survey
reports on executive compensation for U.S. corporations generally, prepared by
The Conference Board and by Buck Consultants, and publicly available
compensation information for other large companies in the medical device
industry. The Chief Executive Officer reviewed the

overall performance of each of the other executive officers during the year with
the Committee at its November 2003 meeting. Based on a subjective evaluation of
such performance and the Company's overall performance during the prior year
and, in the case of division officers, that of the respective divisions, as well
as general consideration of the information contained in the survey reports
reviewed, the base salaries for 2004 of the Company's executive officers,
including Mr. Brown, were established by the Committee.

A substantial portion of the annual compensation of each of the Named
Executives consists of the bonus element. In determining the amount of the bonus
to be paid to each Named Executive, the results of mathematical computations in
which the performance of the Company, in the case of Mr. Brown (the Chief
Executive Officer) and Mr. MacMillan (the Chief Operating Officer), whose
responsibilities are at the corporate level, and of the operations for which
such person had direct management responsibility, in the case of the other Named
Executives, is compared to goals and objectives established at the beginning of
the year (upon his employment in the case of Mr. MacMillan for 2003) and a
percentage so determined is applied to the dollar bonus potential established
for each person at the beginning of the year. The bonus potential is established
in the same general manner as salaries, with the view that, if the full
potential is attained, the Named Executive's total cash compensation should be
in the mid to upper end of the range for companies of a comparable size, taking
into account the individual's overall scope of responsibility, time in the
position and overall level of performance in the role. The primary elements in
such calculation for the Named Executives in 2004 were actual performance
relative to budgeted earnings and sales growth, asset management and cash flow
improvements, and organizational development. The final determination of the
actual bonuses paid included a subjective evaluation of individual performance
in light of the competitive environment in the operations for which they have
responsibility and other challenges faced by such persons, and other significant
achievements by them during the year. In addition to Mr. Brown's 2004 regular
bonus award, the Compensation Committee awarded Mr. Brown a special bonus of
$1,000,000 payable on April 1, 2005 in recognition of the outstanding
performance of the Company under his leadership during his 28 years of service
as Chief Executive Officer.

The Company has had stock option plans in effect since it became a
publicly-held company in 1979. The purpose of these plans has been to provide
executive officers and other employees with a personal and financial interest in
the success of the Company through stock ownership, thereby aligning the
long-range interests of such persons with those of stockholders by providing
them with the opportunity to build a meaningful stake in the Company.
Historically, stock options have had significant value to optionees, reflecting
the appreciation in the market value of the Common Stock. The determination with
respect to the number of options to be granted to any particular executive
officer is subjective in nature. While no specific performance measures are
applied, factors considered in determining the number of options awarded include
the individual's level of responsibility, demonstrated performance over time and
value to the future success of the Company. The number and status of options
previously granted to an individual are not accorded significant weight in the
determination. Current option grants are intended to encourage performance that
will result in continued appreciation. Outstanding option grants, all of which
have a ten-year term, become exercisable as to 20% on the first anniversary of
the date of grant and as to an additional 20% on each successive anniversary.
Accordingly, to realize the full value thereof, an executive officer must remain
in the Company's employ for five years from the date of grant. Management of the
Company believes that the stock option plans have been helpful in attracting and
retaining talented executive personnel.

Section 162(m) of the Internal Revenue Code limits the deductibility by a
publicly-held corporation of compensation paid in a taxable year to the Chief
Executive Officer and any other Named Executive to $1 million. Qualified
performance-based compensation will not be subject to the deduction limit if
certain conditions are met. The 1998 Stock Option Plan limits the number of
options that may be granted to any employee or director in any calendar year to
2,000,000, thereby ensuring that gain recognized on the exercise of options will
be treated as performance-based compensation. It is the Committee's intent that
executive compensation generally be deductible. However, the Committee will
authorize compensation that is not

entirely deductible when doing so is consistent with its other compensation
objectives and overall compensation philosophy.

Compensation Committee
Ronda E. Stryker, Chairman
Howard E. Cox, Jr.
William U. Parfet

Stock Option Committee
Ronda E. Stryker, Chairman
John S. Lillard

TRANSACTIONS WITH EXECUTIVE OFFICER

The Company leases a facility from a limited liability company owned by
James R. Lawson, a Vice President of the Company, pursuant to a lease that
expires on March 13, 2006. The annual rent paid was approximately $100,000 in
2004. The Company also paid approximately $1,900 for certain leasehold
improvements in 2004. Under the terms of the lease, the Company is responsible
for all taxes, insurance and maintenance expenses that arise from its use of the
facility. The Board of Directors has reviewed the transaction and concluded that
the lease terms are comparable to those that could have been obtained in an
arms-length transaction with an unaffiliated third party based on a report from
a national real estate services firm that compared the rent to similar
properties in the area and an analysis by management that found the other lease
terms to be reasonable.

Mr. Lawson's brother, T. Gary Lawson, who had been employed by various
agencies selling the Company's products for several years prior to the time Mr.
Lawson joined the Company in December 1998, serves as a sales consultant to the
Company and received compensation of $245,920 in 2004. Mr. Lawson's son, James
R. Lawson, Jr., is employed by the Company as a General Manager for the
Tennessee/Kentucky branch of its Orthopaedics business and received compensation
of $414,536 in 2004.

PERFORMANCE GRAPH

Set forth below is a graph comparing the total returns (assuming
reinvestment of dividends) of the Company, the Standard & Poor's 500 Composite
Stock Price Index and the Standard & Poor's Health Care (Medical Products and
Supplies) 500 Index. The graph assumes $100 invested on December 31, 1999 in the
Company's Common Stock and each of the indices.

(PERFORMANCE GRAPH)

--------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004
--------------------------------------------------------------------------------------------------------------

Stryker Corporation $100.00 $145.55 $168.22 $193.79 $245.84 $279.59
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S&P 500 Index $100.00 $ 90.90 $ 80.09 $ 62.39 $ 80.29 $ 89.03
--------------------------------------------------------------------------------------------------------------
S&P Health Care 500 Index $100.00 $137.05 $120.68 $ 97.96 $112.71 $114.60
--------------------------------------------------------------------------------------------------------------

AUDIT COMMITTEE

The Audit Committee acts under a written charter adopted and approved by
the Board of Directors, a copy of which is available on the "Corporate
Governance" page of the Company's website at www.stryker.com. The Audit
Committee reviews and reassesses the adequacy of the charter at least annually.
The Board of Directors has determined that William U. Parfet, the Chairman of
the Audit Committee, is an "audit committee financial expert" as that term is
defined in the rules promulgated by the Securities and Exchange Commission. Mr.
Parfet serves on the audit committees of three other publicly-held companies.
The Board of Directors reviewed Mr. Parfet's other time commitments and has
determined that such service does not impair his ability to serve on the
Company's Audit Committee.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board of Directors oversees the Company's
financial reporting process on behalf of the Board of Directors. It meets with
management and the Company's independent registered public accounting firm
throughout the year and reports the results of its activities to the Board of
Directors. In this connection, the Audit Committee has done the following:

- Reviewed and discussed the audited financial statements for the fiscal
year ended December 31, 2004 with the Company's management;

- Discussed with Ernst & Young LLP, the Company's independent registered
public accounting firm ("E&Y"), the matters required to be discussed by
SAS 61 (Codification of Statements on Auditing Standards), as amended;
and

- Received written disclosure regarding independence from E&Y as required
by Independence Standards Board Standard No. 1 (Independence Discussions
with Audit Committees) and discussed with E&Y its independence.

Based on the foregoing, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2004.

Audit Committee
William U. Parfet, Chairman
Howard E. Cox, Jr.
Jerome H. Grossman
John S. Lillard

MISCELLANEOUS

RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed E&Y to audit the accounts of the Company
and its subsidiaries for the year 2005, subject to approval of the scope of the
audit engagement and the estimated audit fees, which are to be presented to the
Committee at its July meeting. E&Y has acted in this capacity for many years.
E&Y has advised the Company that neither the firm nor any of its members or
associates has any direct financial interest or any material indirect financial
interest in the Company or any of its affiliates other than as accountants.
Representatives of E&Y are expected to be present at the Annual Meeting with the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.

The fees billed to the Company by E&Y with respect to the years ended
December 31, 2004 and 2003 were as follows:

2004 2003
---------- ----------

Audit Fees.................................................. $4,240,000 $2,567,000
Audit-Related Fees.......................................... 114,000 84,000
Tax Fees.................................................... 768,000 1,028,000

Audit Fees include amounts billed for the audit of the Company's annual
consolidated financial statements and, in 2004, the attestation of internal
controls over financial reporting, the review of the financial statements
included in the Forms 10-Q filed by the Company during each year and the
completion of statutory audits required in certain foreign jurisdictions.
Audit-Related Fees include amounts billed for audits of the Company's employee
benefit plans and general accounting consultations associated with the annual
audit. Tax Fees include fees for tax compliance services and consultation on
other tax matters. It is expected that E&Y will provide similar non-audit
services during the year 2005. In connection with its review and evaluation of
non-audit services, the Audit Committee is required to and does consider and
conclude that the provision of the non-audit services is compatible with
maintaining the independence of E&Y.

Under its charter, the Audit Committee must pre-approve all audit and
non-audit services to be performed by the independent registered public
accounting firm retained to audit the Company's financial statements other than
non-audit services that satisfy a de minimus exception provided by applicable
law. Each year, the retention of the independent registered public accounting
firm is approved at the Audit Committee's meeting in February, subject to
approval of the scope of the audit and associated fees at the July meeting. At
the February meeting, certain recurring non-audit services and the proposed fees
therefor are reviewed and evaluated by the Audit Committee. At subsequent
meetings, the Audit Committee receives updates regarding the services actually
provided and management may present additional services for approval. The Audit
Committee has delegated to the Chairman or, in his absence, any other member the
authority to evaluate and approve projects and related fees if circumstances
require approval between meetings of the Committee. Any such approval is
reported to the full Committee at its next meeting.

E&Y advised the United States Securities and Exchange Commission ("SEC"),
the Public Company Accounting Oversight Board ("PCAOB") and the Audit Committee
of the Company's Board of Directors that certain non-audit services performed by
an E&Y affiliate in China for the Company raised questions regarding E&Y's
independence. During the period September 2002 through April 2004, E&Y's
affiliate in China performed certain employment-related tax calculation and
return preparation services with respect to employees of the representative
offices of a subsidiary of the Company in China. Funds withheld by the
subsidiary were transferred to the client account of the E&Y affiliate, which
then made payment to the relevant tax authorities. The amount of the funds
transferred to E&Y was less than $50,000 in any year. For these services, the
fees paid to Ernst & Young were under $10,000 in any year. The practice of
paying withholding taxes through the E&Y affiliate was discontinued in May of
2004 and E&Y's affiliate returned approximately $5,300 of excess funds then held
by it. Under the SEC's rules regarding auditor independence, a company's
independent auditor is not permitted to have custody of an audit client's
assets. Both the Audit

Committee and E&Y have considered the effect the practice of paying taxes
through the E&Y affiliate in China may have had on E&Y's independence and have
concluded that such practice has not impaired E&Y's independence. In making its
determination, the Audit Committee considered the administrative nature of the
services, the insignificance of the amount of funds involved and the fact that
E&Y has advised the Company that none of the personnel involved in handling the
funds were involved in the audit of the Company's subsidiary. The Audit
Committee and E&Y will continue to evaluate and review issues relevant to the
maintenance of E&Y's independence.

CONTACTING THE BOARD OF DIRECTORS

Stockholders may communicate directly with the Board of Directors on a
confidential basis by mail at: Stryker Board of Directors, 2725 Fairfield Road,
Kalamazoo, Michigan 49002. All such communications will be received directly by
the Chairman of the Governance and Nominating Committee and will not be screened
or reviewed by any Company personnel.

STOCKHOLDER PROPOSALS

Any proposal that a stockholder may desire to present to the 2006 Annual
Meeting must be received by the Company on or prior to November 17, 2005 in
order for such proposal to be considered for inclusion in the proxy statement
and form of proxy for such meeting.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's directors, among
others, to file reports with respect to changes in their ownership of Common
Stock. Due to a transmission error, a Statement of Changes of Beneficial
Ownership of Securities on Form 4 with respect to one transaction in October
2004 by John W. Brown, who was then Chairman of the Board and Chief Executive
Officer of the Company, was filed one day late. In addition, Ronda E. Stryker, a
director of the Company and the beneficial owner of more than 10% of the Common
Stock, was late in filing a Form 4 with respect to one transaction in November
2004.

OTHER ACTION

Management has at this time no knowledge of any matters to be brought
before the meeting other than those referred to above. If any additional matter
should properly come before the meeting, it is the intention of the persons
named in the enclosed proxy to vote said proxy in accordance with their judgment
on such matter.

EXPENSES OF SOLICITATION

The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited by officers, directors and
regular employees of the Company personally or by telephone or other means of
communication. The Company will, upon request, reimburse brokers and other
nominees for their reasonable expenses in forwarding proxy material to the
beneficial owners of the stock held of record by such persons.

By Order of the Board of Directors

Thomas R. Winkel
Secretary

March 17, 2005

STRYKER CORPORATION
C/o National City Bank
Corporate Trust Operations
Locator 5352
P. O. Box 92301
Cleveland, OH 44101-4301

YOUR VOTE IS IMPORTANT

Regardless of whether you plan to attend the Annual Meeting of
Stockholders, you can be sure your shares are represented at
the meeting by promptly returning your proxy in the enclosed
envelope.

o PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. o

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STRYKER CORPORATION PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING TO BE HELD ON APRIL 26, 2005.

The undersigned, having received the Notice of Annual Meeting of Stockholders
and Proxy Statement, each dated March 17, 2005, hereby appoints JOHN S. LILLARD
and RONDA E. STRYKER, and each of them, as Proxies with full power of
substitution, and hereby authorize(s) them to represent and to vote all shares
of Common Stock of Stryker Corporation that the undersigned is entitled to vote
at the Annual Meeting of Stockholders to be held on April 26, 2005, or at any
adjournment thereof, as set forth on the reverse side hereof.

Dated: , 2005
----------------------------

-----------------------------------------
Signature

-----------------------------------------
Signature if held jointly

Please sign exactly as name appears
above. When shares are held by joint
tenants, both should sign. When signed as
attorney, as executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.

o PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. o

--------------------------------------------------------------------------------

STRYKER CORPORATION PROXY
--------------------------------------------------------------------------------

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES NAMED IN ITEM
(1).

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.

1. Election of Directors

Nominees: John W. Brown Howard E. Cox, Jr. Donald M. Engelman, Ph.D. Jerome H. Grossman, M.D.
Stephen P. MacMillan William U. Parfet Ronda E. Stryker

[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as otherwise marked below) to vote for all nominees listed above

Instructions: To withhold authority to vote for any individual nominee,
write that nominee's name on the line below.

2. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.

(THIS PROXY IS CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.)