FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
FOR THE FISCAL YEAR ENDED APRIL 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM _______________ TO _______________
COMMISSION FILE NO. 1-7707
[LOGO]
MEDTRONIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MINNESOTA 41-0793183
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
7000 CENTRAL AVENUE N.E.
MINNEAPOLIS, MINNESOTA 55432
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE NUMBER: (612) 574-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON STOCK, PAR VALUE $.10 PER SHARE NEW YORK STOCK EXCHANGE, INC.
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE, INC.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES __X__ NO ____
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. ( )
AGGREGATE MARKET VALUE OF VOTING STOCK OF MEDTRONIC, INC. HELD BY NONAFFILIATES
OF THE REGISTRANT AS OF JULY 5, 1996, BASED ON THE CLOSING PRICE OF $53.50 AS
REPORTED ON THE NEW YORK STOCK EXCHANGE:
$12.61 BILLION.
SHARES OF COMMON STOCK OUTSTANDING ON JULY 5, 1996: 239,509,382
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S 1996 ANNUAL SHAREHOLDERS REPORT ARE INCORPORATED BY
REFERENCE INTO PARTS I, II AND IV; PORTIONS OF REGISTRANT'S PROXY STATEMENT FOR
ITS 1996 ANNUAL MEETING ARE INCORPORATED BY REFERENCE INTO PART III.
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS Medtronic, Inc. (together with its subsidiaries,
"Medtronic" or the "company") was incorporated as a Minnesota corporation in
1957. Medtronic is the world's leading therapeutic medical technology company
specializing in implantable and invasive therapies. Primary products include
implantable pacemaker systems used for treatment of bradycardia, implantable
tachyarrhythmia management systems, mechanical and tissue heart valves, balloon
and guiding catheters used in angioplasty, stents, implantable neurostimulation
and drug delivery systems, and perfusion systems including blood oxygenators,
centrifugal blood pumps, cannula products, and autotransfusion and blood
monitoring systems.
In fiscal 1996 and early fiscal 1997, the company also expanded its
opportunities to meet unmet medical needs by adding new growth platforms through
the acquisition of several companies: Pudenz-Schulte Medical Corporation ("PS
Medical"), which manufactures and distributes cerebrospinal fluid shunts and
neurosurgical implants; Micro Interventional Systems, which develops products
for the minimally invasive treatment of stroke and peripheral vascular diseases;
Synectics Medical AB of Stockholm, Sweden, the world leader in
computer-supported systems to diagnose urological and digestive disorders and
sleep apnea; AneuRx, Inc., which develops minimally invasive aneurysm repair
therapy; and InStent Inc., which develops self-expanding and balloon expandable
stents used in several of the body's fluid passageways.
Medtronic operates in a single industry segment, that of providing products for
medical applications. Its revenues, operating profits and assets for the past
three fiscal years (1994-1996) have been attributable to this single industry
segment. The company does business in more than 120 countries and reports on
three business units -- Pacing, Other Cardiovascular, and Neurological and Other
- -- and three geographic areas -- the Americas, Europe/Middle East/Africa, and
Asia/Pacific.
BUSINESS NARRATIVE. Pacing is the company's largest business unit, consisting
primarily of Bradycardia Pacing, which produces products for treating patients
with slow or irregular heartbeats, and Tachyarrhythmia Management, which
develops products to treat abnormally fast heart rhythms. The bradycardia pacing
systems include pacemakers, leads and accessories. The pacemakers can be
noninvasively programmed by the physician to adjust sensing, electrical pulse
intensity, rate, duration and other characteristics, and can produce impulses to
cause contractions in either the upper or lower heart chamber, or both, in
appropriate relation to heart activity. The company's Model 9790 programmer was
enhanced in fiscal 1996 with improved software and increased memory and, as
before, can be used interchangeably with all of the company's bradycardia
pacemakers as well as with its Jewel(r) line of tachyarrhythmia management
devices. Advances in bradycardia pacing in fiscal 1996 include the commercial
release of the Thera(r) i-series of pacemakers in the U.S., which is a family of
four pacemakers with expanded capabilities for virtually every pacing
application, and release of the CapSure(r)Z and CapSureFix(r) steroid-eluting
leads. These leads deliver more concentrated levels of electrical energy that
extend device life and, in the case of CapSureFix(r), permit anchoring of the
lead in the heart. More than half of Medtronic's revenues are generated from the
sale of implantable cardiac pacemaker systems for treatment of bradycardia.
The Tachyarrhythmia Management business produces implantable devices and
transvenous lead systems for treating ventricular tachyarrhythmias, which are
abnormally fast, and sometimes fatal, heartbeats. The systems offer a tiered
therapy of pacing, cardioversion and defibrillation, and may be implanted
without a thoracotomy, which reduces patient trauma and hospitalization time and
costs. The company's Jewel(r) line of devices was expanded in November 1995 with
the commercial release of the Jewel(r) Active Can(tm) in the U.S. This system
makes implantation possible with a single lead, resulting in faster, less costly
implantation and quicker patient recovery. In July 1996, the Micro Jewel(r)
implantable defibrillator, which offers expanded diagnostic capabilities in a
smaller size device, was cleared by the FDA for commercial release in the U.S.
The Jewel(r) line of devices, like the bradycardia pacemakers, are programmed
with the Model 9790 pacing programmer.
The company's Pacing business unit accounted for 68.2% of Medtronic's net sales
during the fiscal year ended April 30, 1996 ("fiscal 1996"), 66.0% of net sales
in fiscal 1995 and 68.5% of net sales in fiscal 1994.
The Other Cardiovascular business unit is comprised of the Vascular and Cardiac
Surgery business. The Vascular business was established in fiscal 1996 to focus
the company's involvement in minimally invasive therapies for the treatment of
disease and damage to cerebral, coronary and peripheral blood vessels.
Medtronic's primary involvement in the vascular area has been in coronary
angioplasty. The company offers coronary angioplasty balloon and guide catheters
worldwide. The company's Wiktor stent, used in coronary applications, is widely
used outside the U.S. and is awaiting FDA approval in the U.S. Medtronic also
provides EP catheters and ablation systems. Adding to the company's existing
expertise in the vascular area are three newly acquired companies: Micro
Interventional Systems, which develops products for the minimally invasive
treatment of stroke and peripheral vascular diseases; AneuRx, Inc., which
develops minimally invasive aneurysm repair therapy; and InStent Inc., which
develops self-expanding and balloon expandable stents used in several of the
body's fluid passageways.
The Cardiac Surgery business includes the Heart Valves, Cardiopulmonary,
Cannulae and Blood Management businesses. Through a series of strategic
acquisitions over the past decade, Medtronic now markets a complete line of
blood-handling products that form a life-saving circuit by maintaining blood
circulation, oxygen supply and body temperature while the patient is undergoing
emergency treatment or open-heart surgery. The company's Heart Valve business
produces tissue and mechanical valves and repair products for damaged or
diseased heart valves. In March 1996, the Blood Management business received
approval to market commercially in the U.S. its Sequestra(tm) 1000
autotransfusion system, which recovers and processes a patient's blood during
major surgery, minimizing any concern about the transmission of bloodborne
diseases.
The company's Other Cardiovascular business unit accounted for 24.1% of net
sales in fiscal 1996, 26.5% of net sales in fiscal 1995 and 24.0% of net sales
for fiscal 1994.
The company's Neurological and Other business unit consists of the Neurological
business and Developing Businesses and Ventures. The Neurological business
consists of the Neurostimulation business, which produces implantable systems
for spinal cord and brain stimulation, and the Drug Delivery business, which
produces implantable programmable drug delivery systems that are used in
treating chronic intractable pain, tremor and spasticity. These include the
Itrel(r) 3 spinal cord stimulation system, which was commercially released in
Europe and the U.S. in fiscal 1996 and features a patient-operated control unit,
as well as the SynchroMed(r) drug delivery system. The Mattrix(r) stimulator,
which was commercially released in the U.S. in June 1995, is the first
neurostimulation system that offers a dual stimulation mode for more effective
pain management. In November 1995, the company added a new growth platform in
this sector by acquiring PS Medical, which manufactures and distributes
cerebrospinal fluid shunts and neurosurgical implants.
The company's Drug Delivery business is collaborating with several biotechnology
companies to develop therapies for neurodegenerative disorders such as
Alzheimer's disease, Parkinson's disease, and amyotrophic lateral sclerosis or
Lou Gehrig's disease. Compounds for treating these diseases, called neurotrophic
factors, are still in development by these companies. Once they are proven to be
safe and effective, Medtronic believes its drug delivery technology could be
effective in administering these agents directly to their site of action in
precise doses.
The Neurological and Other business unit accounted for 7.7% of net sales for
fiscal 1996, 7.5% of net sales for fiscal 1995 and 7.5% of net sales for fiscal
1994.
Developing Businesses and Ventures focuses on using the company's core
technologies to meet unmet medical needs that are beyond the immediate areas of
focus of the other sectors. In April 1996, the company also added a new growth
platform through the acquisition of Synectics Medical AB of Stockholm, Sweden,
the world leader in computer-supported systems to diagnose urological and
digestive disorders and sleep apnea.
GOVERNMENT REGULATION. Government and private sector initiatives to limit the
growth of health care costs, including price regulation and competitive pricing,
are continuing in several countries in which the company does business,
including the United States. These changes are causing the marketplace to put
increased emphasis on the delivery of more cost-effective medical therapies.
Although the company believes it is well positioned to respond to changes
resulting from this worldwide trend toward cost containment, the uncertainty as
to the outcome of any proposed legislation or changes in the marketplace
precludes the company from predicting the impact these changes may have on
future operating results.
In the United States, the Food and Drug Administration (the "FDA"), among other
governmental agencies, is responsible for regulating the introduction of new
medical devices, including laboratory and manufacturing practices, and labeling
and recordkeeping for medical devices, and review of manufacturers' required
reports of adverse experience to identify potential problems with marketed
medical devices. The FDA can ban certain medical devices, detain or seize
adulterated or misbranded medical devices, order repair, replacement, or refund
of such devices, and require notification of health professionals and others
with regard to medical devices that present unreasonable risks of substantial
harm to the public health. The FDA may also enjoin and restrain certain
violations of the Food, Drug and Cosmetic Act and the Safe Medical Devices Act
pertaining to medical devices, or initiate action for criminal prosecution of
such violations. Many of the devices that Medtronic develops and markets are in
a category for which the FDA has implemented stringent clinical investigation
and premarket clearance requirements. Moreover, the FDA administers certain
controls over the export of such devices from the United States.
Medical device laws are also in effect in many of the countries in which
Medtronic does business outside the United States. These range from
comprehensive device approval requirements for some or all of Medtronic's
medical device products to requests for product data or certifications. The
number and scope of these requirements is increasing.
In the early 1990's the review time by the FDA to clear medical devices for
commercial release lengthened and the number of approvals, both of 510(k)
submissions and pre-market approval applications ("PMA's"), decreased. In
response to public and congressional concern, the FDA has attempted to address
these issues by approving more 510(k) submissions and approving them more
quickly. Some progress has also been made in the number of PMA's and
PMA-Supplements approved, but review times for leading-edge, innovative products
remain long. While the trend is in the right direction, the lengthy approval
time remains a significant issue and various legislative solutions to resolve
this are currently before the U.S. Congress.
In 1994, the U.S. Health Care Financing Administration ("HCFA"), which
establishes Medicare reimbursement policy and practice, determined that medical
devices not cleared for commercial release by the FDA should not be reimbursed
by Medicare. This action for a period of time virtually prevented Medicare
patients from receiving the more advanced devices used in clinical trials and
provided strong incentives for clinical research to move to non-U.S. markets. In
1995, HCFA changed its position by permitting Medicare reimbursement for devices
that are next-generation improvements of devices previously cleared for
marketing. HCFA also clarified that reimbursement would be allowed for
previously cleared devices that are used for new indications. Since most devices
in clinical trials fall into one of these two categories, these changes have
addressed the concerns created by Medicare's 1994 initiatives.
In keeping with the increased emphasis on cost effectiveness in health care
delivery, the current trend among hospitals and other customers of medical
device manufacturers is to consolidate into larger purchasing groups to enhance
purchasing power. The medical device industry has also been consolidating
rapidly, partly in order to offer a broader range of products to large
purchasers. As a result, transactions with customers are more significant, more
complex and tend to involve more long-term contracts than in the past. This
enhanced purchasing power may also increase the pressure on product pricing,
although management is unable to estimate the potential impact at this time.
Management believes that in this climate it is increasingly important to offer a
full line of products in order to better serve the many requirements of
multi-hospital purchasers.
Medtronic is also subject to various environmental laws and regulations both in
the United States and abroad. The operations of the company, like those of other
medical device companies, involve the use of substances regulated under
environmental laws, primarily in manufacturing and sterilization processes.
While it is difficult to quantify the potential impact of compliance with
environmental protection laws, management believes that such compliance will not
have a material impact on the company's financial position, results of
operations or liquidity.
The company operates in an industry susceptible to significant product liability
claims. In recent years, there has been an increased public interest in product
liability claims for implanted medical devices, including pacemakers and leads.
These claims may be brought by individuals seeking relief for themselves or,
increasingly, by groups seeking to represent a class, and the company has
experienced an increase in such claims. In June 1996, the company lost a case
(Lohr v. Medtronic) before the U.S. Supreme Court to determine whether a device
cleared by the FDA for commercial release can later be challenged as unsafe.
While this outcome could potentially increase the cost to the company, and other
medical device makers, to defend product liability claims, it is not expected to
have a material adverse financial impact on the company. In addition, product
liability claims may be asserted against the company in the future relative to
events not known to management at the present time. Management believes that the
company's risk management practices, including insurance coverage, are
reasonably adequate to protect against potential product liability losses.
SALES, MARKETS AND DISTRIBUTION METHODS. The primary markets for Medtronic's
products are hospitals, other medical institutions and physicians in the United
States and other countries around the world. No one customer individually
accounts for a material amount of Medtronic's total sales.
Medtronic sells most of its products and services directly through its staff of
trained, full-time sales representatives. Sales by these representatives
accounted for approximately 95.1% of Medtronic's U.S. sales and approximately
67.5% of its sales from other countries in fiscal 1996. The remaining sales were
made through independent distributors.
RAW MATERIALS AND PRODUCTION. Medtronic generally has vertically integrated
manufacturing operations, and makes its own lithium batteries, feedthroughs,
integrated and hybrid circuits, microprocessors, and certain other components.
Medtronic purchases many of the parts and materials used in manufacturing its
components and products from external suppliers. Medtronic's single- and
sole-sourced materials include biomaterials such as adhesives, polymers,
elastomers and resins; certain integrated circuits and other
electrical/electronic/ mechanical components; power sources, battery anodes,
pyrolytic carbon discs, pharmaceutical preparations such as Lioresal(r)
(baclofen, USP) Intrathecal (registered trademark of CIBA-GEIGY Corporation),
and computer and other peripheral equipment.
Certain of the raw materials and components (e.g., silicone adhesives and
polyurethanes) used in Medtronic products are available only from a sole U.S.
supplier. Materials are purchased from single sources for reasons of quality
assurance and cost effectiveness. Medtronic works closely with its suppliers to
assure continuity of supply while maintaining high quality and reliability.
However, in an effort to reduce potential product liability exposure, certain
suppliers have terminated or are planning to terminate sales of certain
materials and parts to companies that manufacture implantable medical devices.
Medtronic believes that various design, material or supplier alternatives can be
found for these materials and components without a significant interruption in
production.
PATENTS AND LICENSES. Medtronic owns patents on certain of its inventions, and
obtains licenses from others as it deems necessary to its business. Medtronic's
policy is to obtain patents on its inventions whenever practical. Technological
advancement characteristically has been rapid in the medical device industry,
and Medtronic does not consider its business to be materially dependent upon any
individual patent.
COMPETITION AND INDUSTRY. Medtronic sells therapeutic and diagnostic medical
devices in the United States and around the world. In the businesses in which
Medtronic competes, the company faces a mixture of competitors ranging from
large multi-national industrial manufacturers to regional or national
manufacturers that offer a limited selection of products. Important factors to
Medtronic's customers include product reliability and performance, product
technology that provides for improved patient benefits, product price, and
breadth of product lines and related product services provided by the
manufacturer. Major shifts in industry market share have occurred in connection
with product problems, physician advisories and safety alerts, reflecting the
importance and risks of product quality in the medical device industry.
Medtronic is the leading manufacturer and supplier of pacemakers in both the
U.S. and non-U.S. markets. Worldwide, approximately ten manufacturers compete
in the pacemaker industry. In the U.S., Medtronic and three other
manufacturers account for a significant portion of pacemaker sales. Medtronic
and five other manufacturers account for most of the non-U.S. pacemaker
sales.
In the tachyarrhythmia management device market, Medtronic and two other
manufacturers based in the U.S. account for most sales of implantable
defibrillators within and outside the U.S. Medtronic's Jewel(r) PCD(r) devices
are commercially available with the company's Transvene(tm) leads in U.S. and
non-U.S. markets. At least three other companies have devices in various stages
of development and clinical evaluation.
In the vascular market, which includes balloon and guiding catheters, and
implantable stents and grafts, there are numerous competitors worldwide.
Medtronic believes that it is the leading manufacturer and supplier of guiding
catheters worldwide for coronary vascular applications. Medtronic and three
other manufacturers account for most combined balloon and guiding catheter
sales. In stents, Medtronic and two competitors account for most sales
worldwide, with one competitor holding a dominant market position and numerous
new competitors emerging.
Medtronic is the second largest manufacturer and supplier of both tissue and
mechanical heart valves within and outside the U.S. A large manufacturer and
distributor of hospital products and services is the major competitor in tissue
heart valves and another company is the major competitor in mechanical heart
valves. These two companies and Medtronic are the primary manufacturers and
suppliers of heart valves within the U.S. These three companies plus a few other
competitors account for most of the worldwide heart valve sales.
In the blood oxygenator market, there are approximately seven companies that
account for a significant portion of the U. S. and non-U.S. markets.
Medtronic is the market leader in cannula products. Medtronic and four
competitors account for a significant portion of cannulae sales in the U.S.
Medtronic and three competitors account for a significant portion of
autotransfusion sales in both U.S. and non-U.S. markets.
In neurological devices, Medtronic is the leading manufacturer and supplier of
implantable neurostimulation and drug delivery systems. Medtronic and two
competitors account for most sales worldwide.
Market complexity has been intensifying in the medical device industry in recent
years. Factors such as relative patent portfolios, government regulation
(including the regulatory approval process for medical devices), a more rigorous
enforcement climate at the FDA, anticipated health care reform, government
reimbursement systems for health care costs, product liability litigation and
the rapid rate of technological change are increasingly important considerations
for existing medical device manufacturers and any potential entrants to the
industry.
RESEARCH AND DEVELOPMENT. Medtronic spent $236.7 million on research and
development (10.9% of net sales) in fiscal 1996, $191.4 million (11.0% of net
sales) in fiscal 1995 and $156.3 million (11.2% of net sales) in fiscal 1994.
These amounts have been applied toward improving existing products, expanding
their applications, and developing new products. Medtronic's research and
development projects span such areas as sensing and treatment of cardiovascular
disorders (including bradycardia and tachyarrhythmia, fibrillation, and sinus
node abnormalities); improved heart valves, membrane oxygenators and centrifugal
blood pump systems; implantable drug delivery systems for pain, spasticity and
other neurological applications; muscle and neurological stimulators;
therapeutic catheters; coronary stents and treatments for restenosis;
implantable physiologic sensors; cardiac assist systems (cardiomyoplasty) and
other applications of transformed muscle; and materials and coatings to enhance
the blood/device interface.
Medtronic has not engaged in significant customer or government sponsored
research.
EMPLOYEES. On April 30, 1996, Medtronic and its subsidiaries employed 10,526
people on a regular, full-time basis and, including temporary and part-time
employees, a total of 12,350 employees on a full-time equivalent basis.
U.S. AND NON-U.S. OPERATIONS AND EXPORT SALES. Medtronic sells products in
more than 120 countries in three geographic areas: the Americas,
Europe/Middle East/Africa, and Asia/Pacific. For financial reporting
purposes, revenues, profitability, and identifiable assets attributable to
significant geographic areas are presented in Note 13 to the consolidated
financial statements, incorporated herein by reference to Medtronic's 1996
Annual Shareholders Report on page 72. U.S. export sales to unaffiliated
customers comprised less than two percent of Medtronic's consolidated sales
in each of fiscal 1996, 1995 and 1994.
Operation in countries outside the U.S. is accompanied by certain financial and
other risks. Relationships with customers and effective terms of sale frequently
vary by country, often with longer-term receivables than are typical in the U.S.
Inventory management is an important business concern due to the potential for
rapidly changing business conditions and currency exposure. Currency exchange
rate fluctuations can affect income from, and profitability of, non-U.S.
operations. Medtronic attempts to hedge these exposures to reduce the effects of
foreign currency fluctuations on net earnings. Certain countries also limit or
regulate the repatriation of earnings to the United States. Non-U.S. operations
in general present complex tax and money management issues requiring
sophisticated analysis to meet the company's financial objectives.
EXECUTIVE OFFICERS OF MEDTRONIC
Set forth below are the names and ages of current executive officers of
Medtronic, Inc., as well as information regarding their positions with
Medtronic, Inc., their periods of service in these capacities, and their
business experience for the past five or more years. Executive officers
generally serve terms of office of approximately one year. There are no family
relationships among any of the officers named, nor is there any arrangement or
understanding pursuant to which any person was selected as an officer.
WILLIAM W. GEORGE, age 53, has been President and Chief Executive Officer since
May 1991, was President and Chief Operating Officer from March 1989 to April
1991, and has been a director since March 1989. Mr. George has been elected
Chairman of the Board of the company effective August 28, 1996. Prior to joining
the company, Mr. George was President, Space and Aviation Systems Business, at
Honeywell Inc. from December 1987 to March 1989. During his 11 years with
Honeywell, Mr. George served in several other executive positions including
President, Industrial Automation and Control, from May 1987 to December 1987;
and Executive Vice President of that business from January 1983 to May 1987.
GLEN D. NELSON, M.D., age 59, has been Vice Chairman since July 1988, and has
been a director since 1980. From August 1986 to July 1988, he was Executive Vice
President of the company. Dr. Nelson was Chairman and Chief Executive Officer of
American MedCenters, Inc., an HMO management corporation, from July 1984 to
August 1986.
ARTHUR D. COLLINS, JR., age 48, has been Chief Operating Officer since January
1994 and has been a director since August 1994. From June 1992 to January 1994,
Mr. Collins was Executive Vice President and President of Medtronic
International. Mr. Collins has been elected President of the company effective
August 28, 1996. Prior to joining the company, Mr. Collins was Corporate Vice
President, Diagnostic Products, at Abbott Laboratories from October 1989 to May
1992 and Divisional Vice President, Diagnostic Products, from May 1984 to
October 1989. During his 14 years with Abbott, Mr. Collins served in various
general management positions both in the United States and Europe.
BOBBY I. GRIFFIN, age 59, has been Executive Vice President since July 1988, and
President, Pacing, since March 1991. From September 1985 to July 1988, Mr.
Griffin was Vice President of the Pacing Business Unit.
BILL K. ERICKSON, age 52, has been Senior Vice President and President,
Americas, since January 1994. From May 1992 to January 1994, Mr. Erickson was
Senior Vice President and President, U.S. Cardiovascular Sales and Marketing
Division. Mr. Erickson was Senior Vice President, U.S. Cardiovascular Division,
from January 1990 to May 1992 and was Vice President, U.S. Cardiovascular
Distribution, from January 1982 to December 1989.
JANET S. FIOLA, age 54, has been Senior Vice President, Human Resources since
March 1994. She was Vice President, Human Resources, from February 1993 to March
1994, and was Vice President, Corporate Human Resources, from February 1988 to
February 1993.
B. KRISTINE JOHNSON, age 44, has been Senior Vice President and President,
Vascular Business since May 1996. She was Vice President and President,
Tachyarrhythmia Management from May 1995 to April 1996, and Vice President and
General Manager, Tachyarrhythmia Management from January 1990 to April 1995. She
served in various general management positions at the company from April 1982 to
December 1989. Prior to joining the company, Ms. Johnson served in several
management positions at Cargill, Inc. from 1973 to 1982.
PHILIP M. LAUGHLIN, age 49, joined the company as Senior Vice President and
President, Cardiac Surgery, in July 1995. Prior to that he served with Clintec
Nutrition company (worldwide joint venture of Baxter International and Nestle
S.A. in the field of clinical nutrition) as President, North America, from 1994
through July 1995 and as President, United States, from 1989 to 1993. From 1976
to 1989, he held numerous general management positions at Baxter International
in Europe and the Far East, and was most recently Vice President, Operations,
Global Business Group.
RONALD E. LUND, age 61, has been Senior Vice President and General Counsel since
November 1990, and Secretary since July 1992, and was Vice President and General
Counsel from February 1989 to November 1990. Prior to joining the company, Mr.
Lund served as Vice President and Associate General Counsel of The Pillsbury
company from 1984 to February 1989.
JOHN A. MESLOW, age 57, has been Senior Vice President and President,
Neurological Business, since March 1994. He was Vice President and President,
Neurological Business, from March 1991 to March 1994, and was Vice President,
Neurological Division, from March 1985 to March 1991.
ROBERT L. RYAN, age 53, has been Senior Vice President and Chief Financial
Officer since April 1993. Prior to joining the company, Mr. Ryan was Vice
President, Finance, and Chief Financial Officer of Union Texas Petroleum Corp.
from May 1984 to April 1993, Controller from May 1983 to May 1984, and Treasurer
from March 1982 to May 1983.
ITEM 2. PROPERTIES
Medtronic's principal offices are owned by the company and located in the
Minneapolis, Minnesota metropolitan area. Manufacturing or research facilities
are located in Arizona, California, Colorado, Massachusetts, Michigan,
Minnesota, Texas, Puerto Rico, Canada, France, Germany, Italy, the Netherlands,
Sweden and Japan. The company's total manufacturing and research space is
approximately 1.7 million square feet, of which approximately 81% is owned by
the company and the balance is leased.
Medtronic also maintains sales and administrative offices inside the United
States at 78 locations in 27 states or jurisdictions and outside the United
States at 101 locations in 29 countries. Most of these locations are leased.
Medtronic is utilizing substantially all of its currently available productive
space to develop, manufacture and market its products. The company's facilities
are in good operating condition, suitable for their respective uses and adequate
for current needs.
ITEM 3. LEGAL PROCEEDINGS
Note 11 to the consolidated financial statements appearing on page 71 of
Medtronic's 1996 Annual Shareholders Report is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR MEDTRONIC'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information in the sections entitled "Price Range of Medtronic Stock" and
"Investor Information" on page 76 of Medtronic's 1996 Annual Shareholders
Report is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information for the fiscal years 1986 through 1996 on page 73 of Medtronic's
1996 Annual Shareholders Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information on pages 56 through 60 of Medtronic's 1996 Annual Shareholders
Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the report thereon of
independent accountants dated May 22, 1996, appearing on pages 61 through 72 of
Medtronic's 1996 Annual Shareholders Report are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF MEDTRONIC
The information on pages 1 through 5 of Medtronic's Proxy Statement for its 1996
Annual Shareholders' Meeting and on page 9 of such Proxy Statement entitled
"Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated herein
by reference. See also "Executive Officers of Medtronic" on pages 6 and 7
hereof.
ITEM 11. EXECUTIVE COMPENSATION
The sections entitled "Election of Directors -- Director Compensation" and
"Executive Compensation" on pages 7 and 8, and 15 through 20, respectively, of
Medtronic's Proxy Statement for its 1996 Annual Shareholders' Meeting are
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
"Shareholdings of Certain Owners and Management" on page 9 of Medtronic's Proxy
Statement for its 1996 Annual Shareholders' Meeting is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information on pages 7 and 8 of Medtronic's Proxy Statement for its 1996
Annual Shareholders' Meeting concerning services provided to the company by
directors and executive officers in fiscal 1996 is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
Report of Independent Accountants (incorporated herein by reference to
page 61 of Medtronic's 1996 Annual Shareholders Report)
Statement of Consolidated Earnings -- years ended April 30, 1996, 1995,
and 1994 (incorporated herein by reference to page 62 of Medtronic's 1996
Annual Shareholders Report)
Consolidated Balance Sheet -- April 30, 1996 and 1995 (incorporated
herein by reference to page 63 of Medtronic's 1996 Annual Shareholders
Report)
Statement of Consolidated Cash Flows -- years ended April 30, 1996, 1995,
and 1994 (incorporated herein by reference to page 64 of Medtronic's 1996
Annual Shareholders Report)
Notes to Consolidated Financial Statements (incorporated herein by
reference to pages 65 through 72 of Medtronic's 1996 Annual Shareholders
Report)
2. FINANCIAL STATEMENT SCHEDULES
II Valuation and Qualifying Accounts -- years ended April 30, 1996, 1995,
and 1994
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
3. EXHIBITS
3.1 Medtronic Restated Articles of Incorporation, as amended to date
(Exhibit 3.1).(a)
3.2 Medtronic Bylaws, as amended to date.
4 Form of Rights Agreement dated as of June 27, 1991 between Medtronic
and Norwest Bank Minnesota, National Association, including as Exhibit
A thereto the form of Preferred Stock Purchase Right Certificate
(Exhibit 1).(b)
*10.1 1994 Stock Award Plan (Appendix A).(c)
*10.2 Management Incentive Plan (Appendix B).(c)
*10.3 1979 Restricted Stock and Performance Share Award Plan, as amended to
date (Exhibit 10.1).(d)
*10.4 1979 Nonqualified Stock Option Plan, as amended.
*10.5 Form of Employment Agreement for Medtronic executive officers (Exhibit
10.5).(e)
*10.6 1991 Restricted Stock Plan for Non-Employee Directors.
*10.7 Capital Accumulation Plan Deferral Program.
*10.8 Postretirement Survivor Benefit Plan (Exhibit 10.7).(d)
*10.9 Amendment effective October 1, 1993 to the Directors' Retirement Plan
(Exhibit 10.9).(f)
*10.10 Executive Nonqualified Supplemental Benefit Plan.
*10.11 Management Incentive Plan Stock Option Replacement Program (Exhibit
10.11).(e)
11 Computation of Earnings Per Share.
13 Those portions of Medtronic's 1996 Annual Shareholders Report expressly
incorporated by reference herein, which shall be deemed filed with the
Commission.
21 List of Subsidiaries.
23 Consent and Report of Price Waterhouse LLP (set forth on page 12 of
this report).
24 Powers of Attorney.
27 Financial Data Schedule.
(a) Incorporated herein by reference to the cited exhibit in Medtronic's
Quarterly Report on Form 10-Q for the quarter ended July 28, 1995, filed
with the Commission on September 8, 1995.
(b) Incorporated herein by reference to the cited exhibit in Medtronic's Form
8-A Registration Statement dated June 27, 1991, filed with the Commission on
June 28, 1991.
(c) Incorporated herein by reference to the cited appendix in Medtronic's Proxy
Statement for its 1994 Annual Meeting of Shareholders, filed with the
Commission on July 27, 1994.
(d) Incorporated herein by reference to the cited exhibit in Medtronic's Annual
Report on Form 10-K for the year ended April 30, 1992, filed with the
Commission under cover of Form SE dated July 24, 1992.
(e) Incorporated herein by reference to the cited exhibit in Medtronic's Annual
Report on Form 10-K for the year ended April 30, 1995, filed with the
Commission on July 25, 1995.
(f) Incorporated herein by reference to the cited exhibit in Medtronic's Annual
Report on Form 10-K for the year ended April 30, 1994, filed with the
Commission on July 27, 1994.
*Items that are management contracts or compensatory plans or arrangements
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(b) REPORTS ON FORM 8-K
For the purpose of updating the company's outstanding Registration Statements on
Form S-3, the company filed (i) a Report on Form 8-K dated February 13, 1996
incorporating by reference in Item 5 thereof the press release publishing at
least 30 days of post-combination results in connection with certain
acquisitions by the company in November 1995 and (ii) a Report on Form 8-K dated
March 25, 1996 reporting under Item 5 the announcement of an agreement by the
company to acquire InStent Inc. Other than these, no reports on Form 8-K were
filed by the company during the quarter ended April 30, 1996. Subsequent to the
quarter ended April 30, 1996, the company filed (i) a Report on Form 8-K dated
May 23, 1996 reporting under Item 5 the announcement of financial results for
the fiscal year ended April 30, 1996 and (ii) a Report on Form 8-K dated June
28, 1996 reporting under Item 2 the completion of the previously announced
transaction with InStent Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MEDTRONIC, INC.
Dated: July 23, 1996
BY: /s/ WILLIAM W. GEORGE
WILLIAM W. GEORGE
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, the report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: July 23, 1996
BY: /s/ WILLIAM W. GEORGE
WILLIAM W. GEORGE
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Dated: July 23, 1996
BY: /s/ ROBERT L. RYAN
ROBERT L. RYAN
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
F. CALEB BLODGETT
ARTHUR D. COLLINS, JR.
WILLIAM W. GEORGE
ANTONIO M. GOTTO, JR., M.D.
BERNADINE P. HEALY, M.D.
VERNON H. HEATH
THOMAS E. HOLLORAN DIRECTORS
GLEN D. NELSON, M.D.
RICHARD L. SCHALL
JACK W. SCHULER
GERALD W. SIMONSON
GORDON M. SPRENGER
RICHARD W. SWALIN, PH.D.
WINSTON R. WALLIN
Ronald E. Lund, by signing his name hereto, does hereby sign this document on
behalf of each of the above named directors of the registrant pursuant to powers
of attorney duly executed by such persons.
Dated: July 23, 1996
BY: /S/ RONALD E. LUND
RONALD E. LUND
ATTORNEY-IN-FACT
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Medtronic, Inc.
Our audits of the consolidated financial statements referred to in our report
dated May 22, 1996 appearing on page 61 of the 1996 Annual Shareholders Report
of Medtronic, Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
May 22, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in each Registration
Statement on Form S-8 (Registration Nos. 2-65157, 2-68408, 33-169, 33-36552,
2-65156, 33-24212, 33-37529, 33-44230, 33-55329, 33-63805, 33-64585, 333-04099
and 333-07385) and in each Prospectus constituting part of the Registration
Statements on Form S-3 (Registration Nos. 33-64455, 33-64521, 333-01585 and
333-04101) and Form S-4 (Registration Nos. 33-52751 and 333-04591) of Medtronic,
Inc. of our report dated May 22, 1996 appearing on page 61 of the 1996 Annual
Shareholders Report which is incorporated by reference in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report on
the Financial Statement Schedule as shown above.
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
July 22, 1996
MEDTRONIC, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
OTHER
BALANCE AT CHARGES/ CHANGES BALANCE
BEGINNING (CREDITS) TO (DEBIT) AT END OF
OF PERIOD EARNINGS CREDIT PERIOD
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended 4/30/96 $22,416 $ (189) $(1,371)(a) $18,094
(857)(b)
(1,905)(c)
Year ended 4/30/95 20,123 2,501 (1,464)(a) 22,416
1,256 (b)
Year ended 4/30/94 9,456 13,185 (2,902)(a) 20,123
384 (b)
</TABLE>
(a) Uncollectible accounts written off, less recoveries.
(b) Reflects primarily the effects of foreign currency fluctuations.
(c) Uncollectible accounts written off related to 1993 divestiture.
Commission File Number 1-7707
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1996
---------------
MEDTRONIC LOGO [GRAPHIC OMITTED]
Medtronic, Inc.
7000 Central Avenue N.E.
Minneapolis, Minnesota 55432
Telephone: 612/574-4000
<TABLE>
<CAPTION>
Paper(P) or
EXHIBIT INDEX Electronic(E)
<S> <C> <C>
3.1 Medtronic Restated Articles of Incorporation, as amended to --
date (Exhibit 3.1).(a)
3.2 Medtronic Bylaws, as amended to date. E
4 Form of Rights Agreement dated as of June 27, 1991 between --
Medtronic and Norwest Bank Minnesota, National Association,
including as Exhibit A thereto the form of Preferred Stock
Purchase Right Certificate (Exhibit 1).(b)
10.1 1994 Stock Award Plan (Appendix A).(c) --
10.2 Management Incentive Plan (Appendix B).(c) --
10.3 1979 Restricted Stock and Performance Share Award Plan, as --
amended to date (Exhibit 10.1).(d)
10.4 1979 Nonqualified Stock Option Plan, as amended. E
10.5 Form of Employment Agreement for Medtronic executive officers --
(Exhibit 10.5).(e)
10.6 1991 Restricted Stock Plan for Non-Employee Directors. E
10.7 Capital Accumulation Plan Deferral Program. E
10.8 Postretirement Survivor Benefit Plan (Exhibit 10.7).(d) --
10.9 Amendment effective October 1, 1993 to the Directors' --
Retirement Plan (Exhibit 10.9).(f)
10.10 Executive Nonqualified Supplemental Benefit Plan. E
10.11 Management Incentive Plan Stock Option Replacement Program --
(Exhibit 10.11).(e)
11 Computation of Earnings Per Share. E
13 Those portions of Medtronic's 1996 Annual Shareholders Report E
expressly incorporated by reference herein, which shall be
deemed filed with the Commission.
21 List of Subsidiaries. E
23 Consent and Report of Price Waterhouse LLP (set forth on page --
11 of this report).
24 Powers of Attorney. E
27 Financial Data Schedule. E
</TABLE>
(a) Incorporated herein by reference to the cited exhibit in
Medtronic's Quarterly Report on Form 10-Q for the quarter ended July 28, 1995,
filed with the Commission on September 8, 1995.
(b) Incorporated herein by reference to the cited exhibit in
Medtronic's Form 8-A Registration Statement dated June 27, 1991, filed with the
Commission on June 28, 1991.
(c) Incorporated herein by reference to the cited appendix in
Medtronic's Proxy Statement for its 1994 Annual Meeting of Shareholders, filed
with the Commission on July 27, 1994.
(d) Incorporated herein by reference to the cited exhibit in
Medtronic's Annual Report on Form 10-K for the year ended April 30, 1992, filed
with the Commission under cover Form SE dated July 24, 1992.
(e) Incorporated herein by reference to the cited exhibit in
Medtronic's Annual Report on Form 10-K for the year ended April 30, 1995, filed
with the Commission on July 25, 1995.
(f) Incorporated herein by reference to the cited exhibit in
Medtronic's Annual Report on Form 10-K for the year ended April 30, 1994, filed
with the Commission on July 27, 1994.
EXHIBIT NUMBER 3.2
MEDTRONIC BYLAWS, AS AMENDED TO DATE
EXHIBIT 3.2
BYLAWS
OF
MEDTRONIC, INC.
(AS AMENDED THROUGH APRIL 25, 1991)
ARTICLE 1 - MEETINGS OF SHAREHOLDERS
1.1 Regular Meetings. Regular meetings of the shareholders of the
corporation shall be held each year on the date and at the time set by
the Board of Directors or by the chief executive officer. At each
regular meeting the shareholders shall elect the Board of Directors and
shall transact such other business as shall come properly before the
meeting, in accordance with applicable provisions of the Articles of
Incorporation and these Bylaws.
1.2 Special Meetings. A special meeting of the shareholders may be called
for any purpose or purposes at any time by the chief executive officer;
by the chief financial officer; by the Board of Directors or any two or
more members thereof; or by one or more shareholders holding not less
than ten percent of the voting power of all shares of the corporation
entitled to vote (except that a special meeting for the purpose of
considering any action to directly or indirectly facilitate or effect a
business combination, including any action to change or otherwise
affect the composition of the Board of Directors for that purpose, must
be called by twenty-five percent or more of the voting power of all
shares of the corporation entitled to vote), who shall demand such
special meeting by written notice given to the chief executive officer
or the chief financial officer of the corporation specifying the
purposes of such meeting.
1.3 Meetings Held Upon Shareholder Demand. Within thirty days after receipt
by the chief executive officer or the chief financial officer of a
demand from any shareholder or shareholders entitled to call a meeting
of the shareholders, it shall be the duty of the Board of Director to
cause a special meeting of shareholders to be duly called and held on
notice no later than ninety days after receipt of such demand. If the
Board of Directors fails to cause such a meeting to be called and held
as required by this Section, the shareholder or shareholders making the
demand may call the meeting by giving notice as provided in Section 1.5
hereof at the expense of the corporation.
1.4 Place of Meetings. Meetings of the shareholders shall be held at the
principal executive office of the corporation or at such other place,
within or without the State of Minnesota, as is designated by the Board
of Directors or the chief executive officer, except that a meeting
called by or at the demand of a shareholder shall be held in the county
where the principal executive office of the corporation is located.
1.5 Notice of Meeting. Except as otherwise specified in Section 1.6 or
required by law, written notice of each meeting of shareholders,
setting out the place, date and time of any regular or special meeting,
shall be given not less than four days prior to the date of the meeting
to each holder of shares entitled to vote. Notice of any special
meeting shall state the purpose or purposes of the proposed meeting,
and business transacted at all special meetings shall be confined to
the purposes stated in the notice. A shareholder may waive notice of
any meeting before, at or after the meeting, in writing, orally or by
attendance. Attendance at a meeting by any shareholder is a waiver of
notice of that meeting unless the shareholder objects at the beginning
of the meeting to the transaction of business because the meeting is
not lawfully called or convened, or objects before a vote on an item of
business because the item may not lawfully be considered at the meeting
and does not participate in the consideration of the item at that
meeting.
1.6 Quorum and Adjourned Meeting. The holders of a majority of the voting
power of the shares entitled to vote at a meeting, represented either
in person or by proxy, shall constitute a quorum for the transaction of
business at any meeting of shareholders. If a quorum is present when a
duly called or held meeting is convened, the shareholders present may
continue to transact business until adjournment, even though the
withdrawal of a number of shareholders originally present leaves less
than the proportion or number otherwise required for a quorum. In case
a quorum is not present at any meeting, the meeting may be adjourned
from time to time without notice other than announcement at the time of
adjournment of the date, time and place at which the meeting will be
reconvened. At any adjourned meeting in which a quorum is present, any
business may be transacted which might have been transacted at the
original meeting.
1.7 Voting. At each meeting of the shareholders every shareholder having
the right to vote shall be entitled to vote in person or by proxy duly
appointed by an instrument in writing subscribed by such shareholder.
Each shareholder shall have one vote for each share having voting power
standing in such shareholder's name on the books of the corporation
except as may be otherwise provided in the terms of the share. Upon the
demand of any shareholder, the vote for directors or the vote upon any
question before the meeting shall be by ballot. All elections shall be
determined and all questions decided by a majority vote of the number
of shares entitled to vote and represented at any meeting at which
there is a quorum except in such cases as shall otherwise be required
by statute, the Articles of Incorporation or these Bylaws.
1.8 Record Date. The Board of Directors may fix a date, not exceeding sixty
days preceding the date of any meeting of shareholders, as a record
date for the determination of the shareholders entitled to notice of
and entitled to vote at such meeting. When a date is so fixed, only
shareholders on that date are entitled to notice of and permitted to
vote at that meeting of shareholders, notwithstanding any transfer of
any shares on the books of the corporation after any record date so
fixed.
ARTICLE 2 - DIRECTORS
2.1 Quorum and Voting. A majority of the directors currently holding office
shall constitute a quorum for the transaction of business. In the
absence of a quorum, a majority of the directors present may adjourn a
meeting from time to time without further notice until a quorum is
present. If a quorum is present when a duly called or held meeting is
convened, the directors present may continue to transact business until
adjournment, even though the withdrawal of a number of directors
originally present leaves less than the proportion or number otherwise
required for a quorum.
2.2 Place of Meetings. Each meeting of the Board of Directors shall be held
at the principal executive office of the corporation or at such other
place as may be designated from time to time by a majority of the
members of the Board, provided that if the Board shall not have
designated the place of the meeting, the chief executive officer of the
corporation (if then a director of the corporation) may designate a
place other than the principal executive office of the corporation for
any such meeting called by such chief executive officer in such
officer's capacity as a director.
2.3 Regular Meetings. Regular meetings of the Board of Directors for the
election of officers and the transaction of any other business shall be
held without notice at the place of and immediately after each regular
meeting of the shareholders.
2.4 Special Meetings. A special meeting of the Board of Directors may be
called for any purpose or purposes at any time by any member of the
Board by giving not less than twenty-four hours' notice to all
directors of the date, time and place of the meeting, provided that
when notice is mailed, at least four days' notice shall be given. The
notice need not state the purpose of the meeting. If a meeting schedule
is adopted by the Board, or if the day or date, time and place of a
Board meeting have been announced at a previous Board meeting, no
notice is required. Notice of an adjourned meeting need not be given
other than by announcement at the meeting at which adjournment is
taken.
2.5 Waiver of Notice. A director may waive notice of a meeting of the
Board. A waiver of notice by a director entitled to notice is effective
whether given before, at or after the meeting, and whether given in
writing, orally or by attendance. Attendance by a director at a meeting
is a waiver of notice of that meeting, except where the director
objects at the beginning of the meeting to the transaction of business
because the meeting is not lawfully called or convened and does not
participate thereafter in the meeting.
2.6 Absent Directors. A director may give advance written consent or
opposition to a proposal to be acted on at a Board meeting. If the
director is not present at the meeting, consent or opposition to a
proposal does not constitute presence for purposes of determining the
existence of a quorum, but consent or opposition shall be counted as a
vote in favor of or against the proposal and shall be entered in the
minutes of the meeting, if the proposal acted on at the meeting is
substantially the same or has substantially the same effect as the
proposal to which the director has consented or objected.
2.7 Electronic Communications. (a) A conference among directors by any
means of communication through which the directors may simultaneously
hear each other during the conference constitutes a Board meeting, if
the same notice is given of the conference as would be required for a
meeting, and if the number of directors participating in the conference
would be sufficient to constitute a quorum at a meeting. Participation
in a meeting by that means constitutes presence in person at the
meeting.
(b) A director may participate in a Board meeting not described in
paragraph (a) by any means of communication through which the director,
other directors so participating, and all directors physically present
at the meeting may simultaneously hear each other during the meeting.
Participation in a meeting by that means constitutes presence in person
at the meeting.
2.8 Action Without a Meeting. An action required or permitted to be taken
at a Board meeting may be taken without a meeting by written action
signed by all of the directors. If the Articles of Incorporation so
provide, any action, other than an action requiring shareholder
approval, may be taken by written action signed by the number of
directors that would be required to take the same action at a meeting
of the Board at which all directors were present. The written action is
effective when signed by the required number of directors, unless a
different effective time is provided in the written action. When
written action is permitted to be taken by less than all directors, all
directors shall be notified immediately of its text and effective date.
2.9 Compensation. Directors who are not salaried officers of the
corporation shall receive such fixed sum and expenses per meeting
attended or such fixed annual sum or both as shall be determined from
time to time by resolution of the Board of Directors. Nothing herein
contained shall be construed to preclude any director from serving this
corporation in any other capacity and receiving proper compensation
therefor.
2.10 Committees. The Board of Directors may, by resolution approved by the
affirmative vote of a majority of the Board, establish committees
having the authority of the Board in the management of the business of
the corporation only to the extent provided in the resolution. Each
such committee shall consist of one or more natural persons (who,
except as set forth below, need not be directors) appointed by
affirmative vote of a majority of the directors present at a duly held
Board meeting, and shall, except in the case of a committee of
disinterested persons, be subject at all times to the direction and
control of the Board. A majority of the members of a committee shall
constitute a quorum for the transaction of business. Such committees
include but are not limited to the following:
(a) Audit Committee. The directors shall by resolution appoint members
of the Board who are independent of management and who are free of any
relationship which, in the opinion of the Board, would interfere with
the exercise of independent judgment, as an Audit Committee with such
powers and duties as the Board may deem appropriate, subject to review
by the Board of Directors.
(b) Compensation Committee. The directors shall by resolution appoint
members of the Board who are independent of management and who are free
of any relationship which, in the opinion of the Board, would interfere
with the exercise of independent judgment, as a Compensation Committee
with such powers and duties as the Board may deem appropriate, subject
to review by the Board of Directors.
(c) Committee of Disinterested Persons. The Board may by resolution
establish a committee composed of two or more disinterested directors
or other disinterested persons to determine whether it is in the best
interests of the corporation to pursue a particular legal right or
remedy of the corporation and whether to cause the dismissal or
discontinuance of a particular proceeding that seeks to assert a right
or remedy on behalf of the corporation. The committee, once
established, is not subject to the direction or control of, or
termination by, the Board. A vacancy on the committee may be filled by
a majority vote of the remaining committee members. The good faith
determinations of the committee are binding upon the corporation and
its directors, officers and shareholders. The committee terminates when
it issues a written report of its determinations to the Board.
ARTICLE 3 - OFFICERS
3.1 Number and Designation. The corporation shall have one or more natural
persons exercising the functions of the offices of chief executive
officer and chief financial officer. The Board of Directors may elect
or appoint such other officers or agents as it deems necessary for the
operation and management of the corporation with such powers, rights,
duties and responsibilities as may be determined by the Board,
including, but not limited to, a Chairman of the Board, a President,
one or more Executive Officers, a Secretary, a Treasurer and a
Controller, each of whom shall have the powers, rights, duties and
responsibilities set forth in these Bylaws unless otherwise determined
by the Board. Any of the offices or functions of those offices may be
held by the same person.
3.2 Election, Term of Office and Qualification. At the first meeting of the
Board following each election of directors, the Board shall elect
officers who shall hold office until the next election of officers or
until their successors are elected or appointed and qualify, provided,
however, that any officer may be removed with or without cause by the
affirmative vote of a majority of the Board of Directors present
(without prejudice, however, to any contract rights of such officer).
3.3 Resignation. Any officer may resign at any time by giving written
notice to the corporation. The resignation is effective without
acceptance when the notice is given to the corporation, unless a later
effective date is specified in the notice.
3.4 Vacancies in Office. A vacancy in any office of the corporation by
reason of death, resignation, removal, disqualification or otherwise
may, or in the case of a vacancy in the office of chief executive
officer or chief financial officer, shall be filled for the unexpired
term by the Board of Directors.
3.5 Chief Executive Officer. Unless provided otherwise by a resolution
adopted by the Board of Directors, the chief executive officer (a)
shall have general active management of the business of the
corporation; (b) shall, when present and in the absence of the Chairman
of the Board, preside at all meetings of the shareholders and Board of
Directors; (c) shall see that all orders and resolutions of the Board
are carried into effect; (d) shall sign and deliver in the name of the
corporation any deeds, mortgages, bonds, contracts or other instruments
pertaining to the business of the corporation, except in cases in which
the authority to sign and deliver is required by law to be exercised by
another person or is expressly delegated by the Articles, these Bylaws
or the Board to some other officer or agent of the corporation; (e) may
appoint such divisional or staff officers, a secretary, a treasurer and
a controller, each of whom shall have the powers, rights, duties and
responsibilities delegated to him or her by the chief executive
officer; (f) may maintain records of and certify proceedings of the
Board and shareholders; and (g) shall perform such other duties as may
from time to time be assigned by the Board.
3.6 Chief Financial Officer. Unless provided otherwise by a resolution
adopted by the Board of Directors, the chief financial officer (a)
shall keep accurate financial records for the corporation; (b) shall
deposit all monies, drafts and checks in the name of and to the credit
of the corporation in such banks and depositories as the Board of
Directors shall designate from time to time; (c) shall endorse for
deposit all notes, checks and drafts received by the corporation as
ordered by the Board, making proper vouchers therefor; (d) shall
disburse corporate funds and issue checks and drafts in the name of the
corporation, as ordered by the Board; (e) shall render to the chief
executive officer and the Board of Directors, whenever requested, an
account of all of such officer's transactions as chief financial
officer and of the financial condition of the corporation; and (f)
shall perform such other duties as may be prescribed by the Board of
Directors or the chief executive officer from time to time.
3.7 (a) Chairman of the Board. The Chairman of the Board shall preside at
all meetings of the shareholders and directors and shall be an
ex-officio member of all committees of the Board, except as otherwise
prescribed by the Board of Directors. In the event of absence or
disability of the President, the Chairman of the Board shall succeed to
the powers and shall perform the duties of the President until such
absence or disability has terminated or the Board of Directors has
elected a new President or designated a Vice President or Vice
Presidents to succeed to the powers and duties of the President. In
general, the Chairman of the Board shall have the powers and duties
usually vested in the office of Chairman of the Board, and shall have
such other duties as may be prescribed by the Board of Directors.
(b) Vice Chairman. The Vice Chairman of the Board shall have such
duties as may be prescribed by the Board of Directors.
3.8 President. Unless otherwise determined by the Board, the President
shall be the chief executive officer of the corporation. The President
shall preside at all meetings of the shareholders and directors in the
absence of the Chairman of the Board.
3.9 Executive Officers. The executive officers may include Executive Vice
Presidents, divisional Presidents, Vice Presidents and other officers
who shall have such powers and shall perform such duties as may be
specified in these Bylaws or prescribed by the Board of Directors. In
the event of absence or disability of the President, the Board of
Directors may designate a Vice President or Vice Presidents to succeed
to the power and duties of the President.
3.10 Secretary. The Secretary shall be secretary of and shall attend all
meetings of the shareholders and Board of Directors. The Secretary
shall give proper notice of meetings of shareholders and directors and
shall keep minutes of such meetings and other actions of the Board. The
Secretary shall certify proceedings of the Board of Directors and
shareholders, shall have charge of the share registers and stock
transfer records of the corporation and shall perform such other duties
as may be prescribed by the Board of Directors or the chief executive
officer from time to time.
3.11 Treasurer. The Treasurer shall perform such duties as may be prescribed
by the Board of Directors or the chief executive officer from time to
time.
3.12 Controller. The Controller shall prepare financial reports, establish
controls and perform such other duties as may be prescribed by the
Board of Directors or the chief executive officer from time to time.
3.13 Delegation. Unless prohibited by a resolution approved by the
affirmative vote of a majority of the directors present, an officer
elected or appointed by the Board may, without the approval of the
Board, delegate some or all of the duties and powers of the office to
other persons.
ARTICLE 4 - INDEMNIFICATION
4.1 Indemnification. The corporation shall indemnify such persons, for such
expenses and liabilities, in such manner, under such circumstances, and
to such extent, as permitted by Minnesota Statutes, Section 302A.521,
as now enacted or hereafter amended, or as required or permitted by
other provisions of law.
4.2 Insurance. The corporation may purchase and maintain insurance on
behalf of any person in such person's official capacity against any
liability asserted against and incurred by such person in or arising
from that capacity, whether or not the corporation would otherwise be
required to indemnify the person against the liability.
ARTICLE 5 - SHARES AND THEIR TRANSFERS
5.1 Certificate of Stock. Every owner of stock of the corporation shall be
entitled to a certificate, in such form as the Board of Directors may
prescribe, certifying the number of shares of stock of the corporation
owned by such shareholder. The certificates for such stock shall be
numbered (separately for each class) in the order in which they are
issued and shall, unless otherwise determined by the Board, be signed
by the chief executive officer, the chief financial officer or any
other officer of the corporation. A signature upon a certificate may be
a facsimile. Certificates on which a facsimile signature of a former
officer, transfer agent or registrar appears may be issued with the
same effect as if such person had that capacity on the date of issue.
5.2 Stock Record. As used in these Bylaws, the term "shareholder" shall
mean the person in whose name outstanding shares of capital stock of
the corporation are currently registered on the stock record books of
the corporation. The corporation shall keep, at its principal executive
office or at another place or places within the United States
determined by the Board, a share register not more than one year old
containing the names and addresses of the shareholders and the number
and classes of shares held by each shareholder. The corporation shall
also keep at its principal executive office or at another place or
places within the United States determined by the Board, a record of
the dates on which certificates representing shares were issued. Every
certificate surrendered to the corporation for exchange or transfer
shall be canceled and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing
certificate shall have been so canceled (except as provided for in
Section 5.4 of this Article 5).
5.3 Transfer of Shares. Transfer of shares on the books of the corporation
may be authorized only by the shareholder named in the certificate (or
his legal representative or duly authorized attorney-in-fact) and upon
surrender for cancellation of the certificate or certificates for such
shares. The shareholder in whose name shares of stock stand on the
books of the corporation shall be deemed the owner thereof for all
purposes as regards the corporation, provided that when any transfer of
shares shall be made as collateral security and not absolutely, such
fact, if known to the corporation or to the transfer agent, shall be so
expressed in the entry of transfer, and provided further, that the
Board of Directors may establish a procedure whereby a shareholder may
certify that all or a portion of the shares registered in the name of
the shareholder are held for the account of one or more beneficial
owners.
5.4 Lost Certificate. Any shareholder claiming a certificate of stock to be
lost or destroyed shall make an affidavit or affirmation of that fact
in such form as the Board of Directors may require, and shall, if the
directors so require, give the corporation a bond of sufficient
indemnity in form and with one or more sureties satisfactory to the
Board in order to indemnify the corporation against any claim that may
be made against it on account of the alleged loss or destruction of
such certificate, whereupon a new certificate may be issued in the same
tenor and for the same number of shares as the one alleged to have been
destroyed or lost.
5.5 Record Date. The Board of Directors may fix a date, not exceeding sixty
days preceding the date fixed for the payment of any dividend or other
distribution, as a record date for the determination of the
shareholders entitled to receive payment of such dividend or other
distribution, and in such case only shareholders of record on the date
so fixed shall be entitled to receive payments of such dividend or
other distribution, notwithstanding any transfer of any shares on the
books of the corporation after any record date so fixed.
ARTICLE 6 - GENERAL PROVISIONS
6.1 Distributions, Acquisitions of Shares. The Board of Directors may
authorize distributions upon the shares of the corporation or
acquisitions by the corporation of such shares to the extent permitted
by law.
6.2 Fiscal Year. The fiscal year of the corporation shall be established by
the Board of Directors.
6.3 No Corporate Seal. There shall be no corporate seal.
6.4 Voting Securities Held by the Corporation. Unless otherwise ordered by
the Board of Directors, the chief executive officer shall have full
power and authority on behalf of the corporation (i) to attend and to
vote at any meeting of security holders of other companies in which the
corporation may hold securities; (ii) to execute any proxy for such
meeting on behalf of the corporation; and (iii) to execute a written
action in lieu of a meeting of such other company on behalf of this
corporation. At such meeting, by such proxy or by such writing in lieu
of meeting, the chief executive officer shall possess and may exercise
any and all rights and powers incident to the ownership of such
securities that the corporation might have possessed and exercised if
it had been present. The Board of Directors may from time to time
confer like powers upon any other person or persons.
6.5 Amendments. The Board of Directors shall have the power to adopt, amend
or repeal the Bylaws of the corporation, subject to the power of the
shareholders to change or repeal the same, provided, however, that the
Board shall not adopt, amend or repeal any Bylaw fixing a quorum for
meetings of shareholders, prescribing procedures for removing directors
or filling vacancies in the Board, or fixing the number of directors or
their classifications, qualifications or terms of office, but may adopt
or amend a Bylaw that increases the number of directors.
EXHIBIT NUMBER 10.4
1979 NONQUALIFIED STOCK OPTION PLAN, AS AMENDED
EXHIBIT 10.4
MEDTRONIC, INC.
1979 NONQUALIFIED STOCK OPTION PLAN
(As Amended and Restated Through June 27, 1991)
Section I
DEFINITIONS
Whenever used herein, the following terms shall have the meanings
indicated below:
(a) "Approved Retirement" means retirement on or after age 55 provided the
Optionee has been employed by the Company or a Subsidiary for at least
ten years or retirement on or after age 62.
(b) "Board of Directors" or "Board" means the Board of Directors of
Medtronic, Inc. as constituted from time to time.
(c) "Common Stock" means the common stock, $.10 par value per share, of
Medtronic, Inc.
(d) "Company" means Medtronic, Inc.
(e) "Disability" means the disability of an Optionee such that he or she is
considered disabled under any retirement plan of the Company which is
qualified under Section 401 of the Internal Revenue Code of 1954, as
amended (the same definition of "Disability" shall apply to an Optionee
who is a non-employee director of the Company, as if the non-employee
director were an employee), or as otherwise determined by the Stock
Option Committee.
(f) "Limited Rights" means all rights granted under Section XIII of the
Plan.
(g) "Optionee" means an employee of the Company or of any Subsidiary or a
non-employee director of the Company to whom an option has been granted
under the Plan.
(h) "Plan" means this amended and restated Medtronic, Inc. 1979
Nonqualified Stock Option Plan, as amended hereafter from time to time.
(i) "Stock Option Committee" or "Committee" means the committee of three or
more members of the Board who shall be appointed by and serve at the
pleasure of the Board. Each of the members of the Stock Option
Committee shall be a "disinterested person" within the meaning of Rule
16b-3, as then in effect, of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended.
(j) "Subsidiary" means a corporation of which the Company owns or controls,
directly or indirectly 50% or more of the voting power. Subsidiary
includes any corporation which becomes a Subsidiary after adoption of
the Plan.
SECTION II
PURPOSE
The purpose of the Plan with respect to employees is to promote the
success of the Company and its Subsidiaries by facilitating the employment and
retention of competent personnel and by furnishing incentive to employees upon
whose efforts the success of the Company and its Subsidiaries will depend to a
large degree, and with respect to non-employee directors is to aid in attracting
and retaining non-employee directors, to compensate non- employee directors for
their contributions in a manner consistent with shareholder interests, and to
increase non-employee directors' holdings of Common Stock of the Company.
SECTION III
DURATION OF THE PLAN
Options may be granted pursuant to the Plan from time to time until the
earlier of (a) the grant of the maximum number of options which may be granted
hereunder to employees and non-employee directors as a result of the application
of the limitations set forth in Section VI hereof, or (b) the termination of the
Plan upon written resolution of the Board of Directors. No termination of the
Plan shall, without consent of the Optionee, adversely affect any previously
granted option which has not been cancelled and is still outstanding as of the
date of the Plan's termination except as provided in Section X in the event of a
sale, merger, consolidation or liquidation of the Company.
Notwithstanding any contrary foregoing provisions, the amendment to the
Plan as of November 20, 1990, in the form ratified by the Board on April 25,
1991, to provide for additional non-employee director options in the form of
regular annual grants and associated Limited Rights pursuant to Section
VII(B)(a)(ii) of the Plan and otherwise modify Section VII(B) of the Plan is
subject to and conditioned upon obtaining approval of such amendment by the
holders of a majority of the voting power of the stock of the Company present
and entitled to vote on the matter at the 1991 Annual Meeting of Shareholders of
the Company. In addition, the Company has requested or will request a letter
from the staff of the Securities and Exchange Commission concurring with the
Company's opinion that the regular annual grants of options and associated
Limited Rights to non-employee directors pursuant to Section VII(B)(a)(ii) of
the Plan are exempt from Section 16(b) of the Securities Exchange Act of 1934,
as amended, by compliance with Rule 16b-3 promulgated thereunder, and that
existing and future non-employee directors who receive such annual option grants
and Limited Rights automatically granted under the Plan will continue to be
"disinterested persons" within the meaning of Rule 16b-3 for the purpose of the
Plan and other stock related benefit plans of the Company which they administer.
In the event the amendment does not receive shareholders' approval at the
Company's annual meeting of shareholders to be held in 1991 or the Company does
not receive the aforementioned concurring letter from the Securities and
Exchange Commission staff, then the amendment to the Plan providing for regular
annual grants of options and associated Limited Rights to non-employee directors
and otherwise modifying Section VII(B) of the Plan shall be deemed null and void
and the Plan shall continue thereafter in effect in the form existing prior to
such amendment on November 20, 1990.
Upon receiving such shareholders' approval and the aforementioned
concurring letter from the staff of the Securities and Exchange Commission, this
Plan, as amended, shall be effective as of November 20, 1990.
Section IV
ADMINISTRATION
The Plan shall be administered by the Stock Option Committee which
shall have all of the powers vested in it under the provisions of the Plan,
including but not limited to exclusive authority (where applicable and within
the limitations described herein) to determine the employees to whom, and the
time or times at which, options shall be granted, the number of shares to be
subject to each option and the option price and terms and conditions of each
option. The Stock Option Committee shall have full power and authority to
administer and interpret the Plan, to make, amend and rescind rules, regulations
and guidelines for administering the Plan, to prescribe the form and conditions
of the respective stock option agreements (which may vary from Optionee to
Optionee) evidencing each option, to waive (except as to matters expressly
provided for in the Plan) conditions upon the exercise of any option under the
terms of any stock option agreement, to modify or amend any stock option
agreement (provided, that if any modification or amendment materially and
adversely affects the interests of the Optionee party to such stock option
agreement, it shall be effective only upon consent given thereto by the
Optionee), and to make all other determinations necessary or advisable for the
administration of the Plan. The Stock Option Committee's interpretations of the
Plan, and all actions taken and determinations made by the Stock Option
Committee pursuant to the power vested in it hereunder shall be conclusive and
binding on all parties concerned. No member of the Stock Option Committee shall
be liable for any action taken or determination made in good faith in connection
with the administration of the Plan.
Any action of the Stock Option Committee with respect to the
administration of the Plan shall be taken pursuant to a majority vote of such
Committee members or pursuant to the written consent of all Committee members.
Notwithstanding any contrary provisions of the Plan, the Stock Option
Committee shall have no discretion with respect to the granting of an option and
associated Limited Rights to a non-employee director or to alter or amend any
terms, conditions and eligibility requirements of an option and associated
Limited Rights granted, or to be granted, to a non-employee director under the
Plan, it being understood that the granting and terms, conditions and
eligibility requirements of such options and associated Limited Rights are to be
governed solely by the provisions set forth in the Plan pertaining thereto.
Section V
ELIGIBLE PARTICIPANTS
Options may be granted under the Plan to employees, including officers,
of the Company or its Subsidiaries who are not members of the Stock Option
Committee, and such options shall have the terms and conditions specified in
Section VII(A) and elsewhere in the Plan. In addition, options shall be granted
under the Plan to each non-employee director, and such options shall have the
terms and conditions specified in Section VII(B) and elsewhere in the Plan.
Section VI
AVAILABLE STOCK
An aggregate of 3,650,000 shares (after giving effect to the Company's
two-for-one stock splits effected through 100% stock dividends effective August
31, 1989 and August 30, 1991) of the Company's authorized but unissued shares of
Common Stock (subject to substitution or adjustment as provided in Section X of
this Plan) has been made available for issuance upon exercise of options granted
under the Plan. A maximum of 200,000 of such 3,650,000 shares shall be made
subject to options granted to non-employee directors under the Plan. In the
event that any option or portion thereof under the Plan for any reason expires
or terminates prior to the exercise thereof, the shares of Common Stock
allocable to the unexercised portion of such option shall continue to be
reserved for options under the Plan and may again be optioned hereunder.
Section VII(A)
TERMS AND CONDITIONS OF EMPLOYEE OPTIONS
Each option granted pursuant to the Plan to an employee shall be
evidenced by a written stock option agreement (which may vary from Optionee to
Optionee) signed by an officer of the Company and by the Optionee in such form
as the Stock Option Committee shall determine when the option is granted, which
stock option agreement shall contain in substance the following terms and
conditions:
(a) Number of Shares and Option Price. The Committee shall specify in
the stock option agreement the number of shares to which it pertains. The option
price per share of Common Stock shall be determined by the Committee, shall be
stated in the stock option agreement and shall not be less than 100% of the per
share fair market value of the Company's Common Stock on the day the option is
granted. In no event may the option price be less than the par value of such
Common Stock. For purposes hereof, the per share "Fair Market Value" of the
Common Stock shall mean the highest closing price of such Stock on the New York
Stock Exchange Composite Transactions Listing (or on another established stock
exchange, where applicable) on the date the option is granted or, if no sale of
such Stock has occurred on such exchange on that date, on the next preceding
date on which there was a sale of such Stock. In the event the Common Stock is
not listed on the New York Stock Exchange Composite Transactions Listing (or on
any established stock exchange) as of the date the option is granted, the per
share "Fair Market Value" of the Common Stock shall be the mean between the
"bid" and the "asked" prices quoted by a recognized market maker in such Stock
on the date the option is granted.
(b) Term and Exercisability of Option. The stock option agreement shall
state the term during which the option granted under the Plan may be exercised,
which term shall be established in each case by the Stock Option Committee but
in no event shall the option be exercisable after the ten-year anniversary date
of the option's grant. In each case, the Stock Option Committee shall specify in
the stock option agreement whether the option is exercisable immediately, in
installments of a specified amount, or otherwise. Notwithstanding any stock
option agreement's inclusion of an installment schedule or other exercise
schedule or entitlement which effectively precludes full and immediate exercise
of an option, the stock option agreement may provide that the option will become
immediately exercisable in full upon the occurrence of particular events or as
the Stock Option Committee may thereafter determine to be advisable. (Without
limitation, such particular events may include the following: (i) the making of
a tender offer, exchange offer, or similar offer for all, or any part exceeding
ten percent of, the outstanding shares of Common Stock by any party other than
the Company, its Subsidiaries, or other persons or entities controlling,
controlled by, or under common control with, the Company; (ii) a filing of
notification with the U.S. Department of Justice or Federal Trade Commission
under Clayton Act Section 7A relative to the proposed acquisition of the
Company's voting securities, as the result of which the acquiring person will
hold fifteen percent or more of such voting securities, unless the Board of
Directors has first approved the proposed acquisition; (iii) a change in control
of the Company in a transaction or occurrence, or a series of related
transactions or occurrences, resulting from a material change in ownership of
Common Stock and evidenced by cessation in service as Company directors of a
majority of those persons theretofore serving as members of the Board; (iv) the
Company's sale of all its assets in contemplation of the discontinuance of its
business, or a merger, consolidation or liquidation of the Company; or (v) a
determination by the Stock Option Committee that immediate exercisability would
be in the best interests of the Company and advisable for protection of the
rights intended to be granted under the option. Any such provisions included in
the stock option agreement and contingent upon stated particular events will be
enforceable against the Company and its successors in interest, in accordance
with the stock option agreement terms, upon the occurrence of those events.)
An Optionee may exercise his or her option granted under the Plan using
as consideration in payment of the exercise price for the number of option
shares being purchased, (i) cash (or an equivalent check, money order, or other
payment medium acceptable to the Company); or (ii) if approved by the Committee
in its sole discretion and subject to such rules as the Committee may adopt,
other Medtronic Common Stock currently registered in the name of, or
beneficially owned by, the Optionee and surrendered in due form for transfer to
the Company. In the case of payment using Medtronic Common Stock, such stock
shall be valued at its Fair Market Value, as defined in Section VII(A),
Paragraph (a) of the Plan except that the date for determination of such fair
market value shall be the date of proper surrender of such stock to Medtronic.
(c) Withholding Taxes. The stock option agreement shall state that when
the option or a portion of the option is exercised, the Company or a Subsidiary
is authorized to deduct from any payment of any kind owed to the Optionee any
federal, state, local or other taxes required by law to be withheld with respect
to the shares of Common Stock being purchased upon exercise of the option. The
stock option agreement shall also state that alternatively, upon exercise of the
option or a portion of the option, the Company or a Subsidiary shall have the
right to require the Optionee to remit to the Company or the Subsidiary an
amount necessary to satisfy any federal, state, local or other withholding tax
requirements prior to the delivery of any certificate or certificates for the
shares of Common Stock purchased upon exercise of the option or portion of such
option.
The Committee may permit the Optionee to elect to satisfy federal and
state withholding tax obligations relating to exercise of a Plan option by
having the Company withhold shares of Medtronic Common Stock subject to such
option in satisfaction of the obligations. Any such election by an Optionee must
be made on or before the date that the amount of tax to be withheld is
determined (the "Tax Date"). Any shares of Medtronic Common Stock so withheld by
the Company shall be valued at their per share "Fair Market Value", which shall
mean for the purposes of this Paragraph (c) the closing market price of
Medtronic Common Stock on the New York Stock Exchange Composite Transactions
Listing on the Tax Date (or such other meaning as the Committee may hereafter
adopt). The use and availability of the election to have option shares withheld
to satisfy federal and state withholding tax requirements is subject in general,
and in particular instances, to the Committee's complete discretion and such
rules and procedures as the Committee may adopt.
(d) Termination of Employment (for Reasons Other Than Death, Disability
or Approved Retirement). If an Optionee ceases to be employed by the Company
(and ceases to be or is not employed by any Subsidiary) for any reason other
than Death, Disability or Approved Retirement, any unexercised and unexpired
option of such Optionee shall terminate as of the date on which the Optionee's
employment is so terminated unless, upon or as soon as practicable after such
termination of the Optionee's employment, the Stock Option Committee permits
such unexercised and unexpired option to continue and be exercisable during a
period then set by the Committee and expiring not later than the original stated
expiration date of the option; provided, in such event, the option shall be
exercisable during such period only to the extent the option was exercisable on
the date of the Optionee's termination of employment. The Stock Option Committee
shall determine in a fair and equitable manner whether sick leave or other
authorized leaves of absence for military or governmental service shall
constitute termination of employment for purposes of this Paragraph and, in its
sole discretion, may determine that the termination of employment of an Optionee
who is re-employed by the Company or any Subsidiary within six months after such
termination shall not constitute termination of employment for purposes of this
Paragraph.
If an Optionee's employment is terminated for "Cause," the time at
which such employee ceases to be an employee for purposes of this subparagraph
shall mean the time at which such employee is instructed or notified to cease
performing his or her job responsibilities for the Company or any Subsidiary
permanently, whether or not for other reasons such as payroll, benefits or
compliance with legal procedures or requirements he or she may still have other
attributes of an employee. For purposes of this subparagraph, "Cause" shall mean
(i) failure to comply with any material policies and procedures of the Company,
(ii) conduct reflecting dishonesty or disloyalty to the Company, or which may
have a negative impact on the reputation of the Company, (iii) commission of a
felony, theft or fraud, or violations of law involving moral turpitude or (iv)
failure to perform the material duties of his or her employment.
(e) Termination of Employment by Reason of Disability or Approved
Retirement. If the Optionee ceases to be employed by the Company (and ceases to
be or is not employed by any Subsidiary) before the original stated expiration
of an option of such Optionee and such termination of employment is due to
Disability or Approved Retirement, such option shall become exercisable in full,
to the extent not previously exercised, as of the date of the Optionee's
termination of employment and shall be exercisable until the 12-month
anniversary of such termination of employment or until the original stated
expiration of the option, whichever shall first occur. The Stock Option
Committee may extend the period during which an Optionee's option is exercisable
under this Paragraph (e) provided such period so extended does not exceed the
original stated expiration of the option.
(f) Death of Optionee. If the Optionee shall die (i) while employed by
the Company or a Subsidiary, (ii) within the period of time, if any, during
which the Stock Option Committee has permitted the Optionee to exercise his or
her options upon termination of employment as provided in Paragraph (d) of this
Section VII(A), or (iii) within the period of time during which the Optionee's
options may be exercised after his or her Disability or Approved Retirement as
provided in Paragraph (e) of this Section VII(A), and in any case shall not have
fully exercised an option of such Optionee, such option shall become exercisable
in full, to the extent not previously exercised, as of the date of the
Optionee's death and shall be exercisable until the 12-month anniversary of the
Optionee's death or until the original stated expiration of the option,
whichever shall first occur. The Stock Option Committee may extend the period
during which an option is exercisable under this Paragraph (f) provided such
period so extended does not exceed the original stated expiration of the option.
(g) Company's Purchase Right in Certain Circumstances. Notwithstanding
any contrary provisions of the Plan set forth other than in this subparagraph
(g), if an Optionee's employment is terminated either (i) for "Cause", as
defined in this subparagraph (g), or (ii) voluntarily on the part of the
Optionee (other than retirement on or after the Optionee's "normal retirement
date" as defined in the Medtronic, Inc. and Participating Employer's Retirement
Plan) without the express written consent of the Chairman of the Board or Chief
Executive Officer of the Company (or by the Stock Option Committee in the event
the terminated Optionee is the Chairman of the Board or Chief Executive
Officer), the Company shall have the right and option (referred to herein as the
"Purchase Right") to purchase from the Optionee or from the estate, legal
representative or surviving joint tenant of the Optionee, that number of shares
of Common Stock of the Company which is equal to the number of shares which had
been purchased pursuant to exercise by the Optionee of any option granted under
the Plan (the "Option Shares") within six months prior to the employment
termination date. The decision to grant such express written consent regarding
termination (which consent may be given before or after the Optionee's
employment termination) or to exercise the Company's Purchase Right shall be
based solely on the judgment of the Chairman or the Chief Executive Officer, or
of the Stock Option Committee in the event the terminated Optionee is the
Chairman or the Chief Executive Officer, given the facts and circumstances of
each particular case, made in his, her or its complete discretion, as to whether
such consent or exercise is in the operational interest of the Company. The
Purchase Right shall also cover any shares of Common Stock of the Company
received from adjustments which pertained to the Option Shares and which were
made as a result of any of the types of transactions referred to in Section X.
(The shares which are subject to the Company's Purchase Right are referred to
herein collectively as the "Purchase Right Shares"). Such Purchase Right may be
exercised by the Company within 90 days after the date of the Optionee's
employment termination for a purchase price equal to the total amount paid as
the option exercise price by the Optionee for the Option Shares so purchased by
the Optionee upon his or her option exercise. Such Purchase Right shall be
deemed to be exercised upon the Company's mailing written notice of such
exercise, postage prepaid, addressed to Optionee at Optionee's most recent home
address as shown on the personnel records of Company. Each stock option
agreement authorized on or after November 9, 1989 under this Section VII(A)
shall contain an agreement of the Optionee on Optionee's behalf and on behalf of
Optionee's estate, legal representative or surviving joint tenant, as the case
may be, to deliver to the Company, on the date specified in such notice (which
date shall not be less than five business days following the date such notice is
sent by the Company), a certificate or certificates for such number of Purchase
Right Shares, duly endorsed for transfer to the Company against payment of the
purchase price thereof. The provisions of this subparagraph (g) shall be
effective as to any option granted under the Plan on or after November 9, 1989.
The Purchase Right of the Company may not be exercised on or after the
occurrence of any one or more "Event" specified in the second paragraph of
Section XIII, including subparagraphs (A), (B), and (C) thereof, as to any
Shares. Solely for the purposes of this subparagraph (g), "Cause" shall mean (i)
failure to comply with any material policies and procedures of the Company, (ii)
conduct reflecting dishonesty, or disloyalty to the Company, or which may have a
negative impact on the reputation of the Company, (iii) commission of a felony,
theft or fraud, or violations of law involving moral turpitude, or (iv) failure
to perform the material duties of his or her employment. The provisions of this
subparagraph (g) are not intended to, and shall not, modify or otherwise affect
the provisions of Section XII, subparagraph (b) of the Plan (concerning
employment).
(h) Other Provisions. The stock option agreement (which may vary from
Optionee to Optionee) authorized under this Section VII(A) shall contain such
other provisions as the Stock Option Committee deems advisable.
Section VII(B)
TERMS AND CONDITIONS OF NON-EMPLOYEE DIRECTOR OPTIONS
Options shall be granted to each non-employee director in accordance
with the terms and conditions of this section. Notwithstanding any contrary
provisions of this Section VII(B), any employee director who terminates his
employment after the 1988 Annual Meeting of Shareholders and who at any time
thereafter is a non-employee director of the Company shall not be entitled to
receive a grant of an option under this section. For purposes of this Section
VII(B), per share Fair Market Value shall have the meaning set forth in Section
VII(A)(a) of the Plan.
(a) Eligibility and Grant of Option.
(i) Initial Option Grant. All non-employee directors elected
or re-elected to the Board at the 1988 Annual Meeting of Shareholders
or elected or appointed thereafter shall be entitled to receive, by
virtue of serving as directors of the Company, an initial grant of an
option to purchase authorized but unissued Common Stock. Each
non-employee director elected or re-elected to the Board at the 1988
Annual Meeting of Shareholders shall be granted an option on the date
of such election or re-election to purchase the number of shares of
Common Stock determined by dividing $100,000 by the per share Fair
Market Value of the Common Stock on the date of grant, and rounding up
or down to the nearest whole share. After this single grant,
non-employee directors elected or re-elected to the Board at the 1988
Annual Meeting of Shareholders shall no longer be eligible to receive
any additional grant of options under this Section VII(B)(a)(i). Each
non-employee director elected or appointed to the Board after the 1988
Annual Meeting of Shareholders that was not elected or re-elected at
the 1988 Annual Meeting of Shareholders shall receive an initial grant
of an option, on the date such director first becomes a director, to
purchase a number of shares of Common Stock determined by dividing
$100,000 (or if the annual retainer fee of the non-employee directors
is increased subsequent to the 1988 Annual Meeting of Shareholders from
the $12,500 annual retainer fee in effect at the time of the 1988
Annual Meeting of Shareholders, $100,000 plus a percentage increase in
such $100,000 amount which is equal to the percentage increase in such
$12,500 annual retainer fee subsequent to the 1988 Annual Meeting of
Shareholders and prior to the initial election or appointment of such
director) by the per share Fair Market Value of the Common Stock on the
date of grant, and rounding up or down to the nearest whole share. No
increase in the annual retainer fee of the non-employee directors after
a person becomes a non-employee director shall increase the number of
shares of Common Stock for which the options granted under this Section
VII(B)(a)(i) to such non-employee director may be exercised. Options
granted under this Section VII(B)(a)(i) are hereinafter referred to
collectively as "Initial Options" and individually as an "Initial
Option".
(ii) Annual Option Grants. Immediately following the Annual
Meeting of Shareholders in August 1991 and every annual meeting
thereafter, each non-employee director serving as a director of the
Company immediately following such annual meeting who has previously
been granted an Initial Option for serving as a director of the Company
prior to such annual meeting shall be entitled to receive, by virtue of
serving as a director of the Company, in addition to the Initial Option
previously granted to the director, a grant, on the date of the annual
meeting, of an option to purchase authorized but unissued Common Stock
(hereinafter referred to collectively as "Annual Options" and
individually as an "Annual Option"). The number of shares of Common
Stock subject to an Annual Option shall be the sum of (A) the annual
retainer fee for non-employee directors in effect when the grant is
made, (B) the aggregate meeting fees in effect when the grant is made
for seven regular Board and fourteen Board Committee meetings and (C)
one annual Committee Chairmanship fee in effect when the grant is made,
divided by the per share Fair Market Value of the Common Stock on the
date of the grant, and rounding up or down to the nearest whole share.
No increase in the annual retainer fee, Board or Board Committee
meeting fee or Committee Chairmanship fee for non-employee directors of
the Company following a grant of an Annual Option shall increase the
number of shares of Common Stock for which such Annual Option may be
exercised.
(b) Term and Exercisability of Options. The Initial Option and the
Annual Options granted to a non-employee director shall vest and become
exercisable one full year after the date of grant, provided, however, that in no
event shall a non-employee director initially appointed by the Board of
Directors be entitled to exercise either an Initial Option or an Annual Option
granted to such director under the Plan unless, and until such time as, such
director shall have been elected to the Board of Directors by the shareholders
of the Company. Notwithstanding the foregoing, vesting of an option granted to a
non-employee director who shall have been elected by the shareholders of the
Company shall accelerate and the option shall become immediately exercisable in
full upon the occurrence of any "Event" as such term is defined in Section XIII
of the Plan, and an option granted to a non-employee director who shall have
been elected by the shareholders of the Company shall accelerate and become
immediately exercisable in full in the event the non-employee director holding
such option ceases to serve as a director of the Company due to Death or
Disability or due to retirement under the policies of the Company then in effect
providing for retirement of directors from the Board of Directors
("Retirement"). Options granted to a non-employee director shall expire at the
earlier of (i) the 10-year anniversary date of the option's grant, or (ii) the
5-year anniversary date of the occurrence of the earliest of the Death,
Disability or Retirement of the non-employee director or the date the
non-employee director otherwise ceases to be a director of the Company, provided
that the option granted to a non-employee director initially appointed by the
Board of Directors shall expire on the date such director ceases to be a
director of the Company unless such director shall have been elected by the
shareholders subsequent to the grant of the option to such director.
(c) Option Price. The option exercise price for shares of Common Stock
subject to a non-employee director's Initial Option or any Annual Option shall
be the per share Fair Market Value of the Common Stock, as such term is defined
in Section VII(A)(a) of the Plan, on the date the option is granted. A
non-employee director may exercise his or her Initial Option or Annual Option
using as payment any form of consideration provided for in the final paragraph
of Section VII(A)(b) of the Plan, which form of payment shall be within the sole
discretion of the non-employee director, notwithstanding anything stated in
Section VII(A)(b) of the Plan.
(d) Withholding Taxes. When an Initial Option or an Annual Option or a
portion of an Initial Option or an Annual Option is exercised, the Company is
authorized to deduct from any payment of any kind owed to the Optionee any
federal, state, local or other taxes required by law to be withheld with respect
to the shares of Common Stock being purchased upon exercise of the option. Upon
exercise of an Initial Option or an Annual Option or a portion of an Initial
Option or an Annual Option, the Company shall have the right to require the
Optionee to remit to the Company an amount necessary to satisfy any federal,
state, local or other withholding tax requirements prior to the delivery of any
certificate or certificates for the shares of Common Stock purchased upon
exercise of the option or portion of such option.
(e) Option Agreement. The option granted to each non-employee director
under the Plan shall be evidenced by a written stock option agreement
incorporating by reference the terms of the Plan and signed by an officer of the
Company and by the Optionee.
Section VIII
COMPLIANCE WITH LAWS
No shares of Common Stock shall be issued pursuant to the Plan unless
and until there has been compliance, in the opinion of the Company's counsel,
with all applicable legal requirements, including without limitation, those
relating to securities laws and stock exchange listing requirements. The Company
shall not be deemed by reason of granting an option under this Plan to have any
obligation to register the shares of Common Stock subject to the Plan under the
Securities Act of 1933, as amended, or to maintain in effect any registration of
such shares, or to list such shares on any exchange. As a condition to the
issuance of Common Stock to the Optionee, the Stock Option Committee may require
the Optionee to (a) represent that the shares of Common Stock are being acquired
for investment and not resale and to make such other representations as the
Committee shall deem necessary or appropriate to qualify the issuance of the
shares as exempt from the Securities Act of 1933 and any other applicable
securities laws, and (b) represent that the Optionee shall not dispose of the
shares of Common Stock in violation of the Securities Act of 1933 or any other
applicable securities laws. The Company reserves the right to place a legend on
any stock certificate issued upon exercise of an option granted pursuant to the
Plan to assure compliance with this Section VIII.
Section IX
RIGHTS OF A SHAREHOLDER
An Optionee or a transferee of an option (permitted under Paragraph (d)
of Section XII) shall have no rights as a shareholder with respect to any shares
covered by his or her option until a stock certificate evidencing such shares is
issued to him or her. No adjustment shall be made for dividends ordinary or
extraordinary (whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such stock
certificate is actually issued (except as otherwise provided in Section X of
this Plan).
Section X
RECAPITALIZATION, SALE, MERGER, CONSOLIDATION OR LIQUIDATION
In the event of any increase or decrease in the total number of issued
and outstanding shares of Common Stock resulting from a subdivision or
consolidation of shares or other capital adjustment or the payment of a stock
dividend or any other increase or decrease in the number of such shares effected
without receipt of consideration by the Company, the maximum number of shares of
Common Stock which may be issued under the Plan (including the maximum number of
shares which shall be made subject to options granted to non-employee directors
under Section VI), the number of shares of Common Stock covered by each
outstanding option and the price per share thereof shall be equitably adjusted
by the Stock Option Committee to reflect such change.
In the event of a sale by the Company of all of its assets and the
consequent discontinuance of its business, or in the event of a merger,
consolidation or liquidation, the Stock Option Committee may, as of the time of
the adoption of the plan for sale, merger, consolidation or liquidation, amend
or adjust the provisions of the Plan and the then outstanding options, including
but not limited to amendments providing for a complete termination of the Plan
or providing for the continuation of the Plan with respect to the exercise of
those options or the portions thereof which, under the provisions of the Plan,
were exercisable as of the date of adoption by the Board of such plan for sale,
merger, consolidation or liquidation; provided, that in any event Optionees
holding options shall be given either (a) a reasonable time within which to
exercise such exercisable portions of their respective options prior to the
effectiveness of such sale, merger, consolidation or liquidation, or (b) the
right to exercise their respective options as to an equivalent number of shares
of stock of the corporation succeeding the Company by reason of such sale,
merger, consolidation or liquidation.
The grant of an option pursuant to this Plan shall not limit in any way
the right or power of the Company or the Board of Directors to make adjustments,
reclassifications, reorganizations or changes in the Company's capital or
business structure or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any portion of the Company's business or assets.
Section XI
AMENDMENT OF THE PLAN
The Board of Directors may at any time alter, amend, revise, suspend or
discontinue the Plan; provided, that such action (except as permitted in Section
X in the event of a sale, merger, consolidation or liquidation) shall not
materially adversely affect options previously granted under the Plan without
the consent of the Optionees and provided further, that no alteration,
amendment, revision, suspension or discontinuance of the Plan may, without the
approval of the shareholders of the Company, alter the provisions of the Plan so
as to (a) materially increase the total number of shares of Common Stock which
may be issued under the Plan except as provided in Section X hereof, (b)
materially increase the benefits accruing to Optionees under the Plan, (c)
materially change the requirements as to eligibility for participation in the
Plan, or (d) change the terms, conditions, or eligibility requirements of an
option and associated Limited Rights granted or, subject to the right of the
Board of Directors to discontinue the Plan, to be granted to each non-employee
director under the Plan. In no event shall the eligibility requirements for the
receipt of Initial Options or Annual Options by non-employee directors or the
formula for determining the amount of shares of Common Stock subject to Initial
Options or Annual Options granted to non-employee directors or the timing of the
grant or the exercise price of the Initial Options or Annual Options granted to
non-employee directors be amended more than once every six months other than to
comply with changes in the Internal Revenue Code.
Section XII
MISCELLANEOUS
(a) No Obligation to Exercise Option. The granting of an option shall
impose no obligation upon the Optionee to exercise such option.
(b) Employment. The granting of an option to an Optionee who is an
employee shall neither confer upon the Optionee any rights respecting continued
employment nor limit the Company's or any Subsidiary's right to terminate such
employment.
(c) Disputes. Any dispute or disagreement which arises under or as a
result of, or any way relates to, the interpretation, construction or
application of the Plan or any stock option agreement issued under the Plan
shall be determined by the Stock Option Committee and such determination by the
Stock Option Committee shall be final, binding and conclusive.
(d) Nontransferability of Options. No option granted under the Plan may
be transferred by an Optionee otherwise than by will or by the laws of descent
and distribution, and during the Optionee's lifetime the option may be exercised
only by the Optionee or his or her guardian or legal representative.
Section XIII
LIMITED RIGHTS
The Stock Option Committee may, in its discretion, grant Limited Rights
to the holder of any option granted under the Plan (the "Related Option") with
respect to all or any portion of the shares covered by the Related Option
(whether heretofore or hereafter granted), provided, however, that in
conjunction with the automatic one-time grant of an Initial Option to a
non-employee director under the Plan and the regular grants of Annual Options to
non-employee directors under the Plan, such non-employee director or directors
shall simultaneously be granted Limited Rights with respect to all of the shares
of Common Stock covered by such Initial Option and Annual Options. Each Limited
Right granted to Optionees who are not non-employee directors shall relate to a
specific Related Option and may be granted at any time either concurrently with
the grant of the Related Option or at any time the Related Option is
outstanding. Each Limited Right shall be evidenced by a written limited right
certificate signed by an officer of the Company.
Limited Rights shall be exercisable at any time within the thirty day
period after any of the following events (an "Event"), whether or not the
Related Option is exercisable and regardless of whether the Optionee is an
employee, or a non-employee director, at the time of exercise, so long as the
Optionee is an employee, or a non-employee director, immediately preceding the
Event (provided that in no event shall a non-employee director initially
appointed by the Board of Directors be entitled to exercise the Limited Rights
granted to such director under the Plan unless, and until such time as, such
director shall have been elected to the Board of Directors by the shareholders
of the Company):
(A) a majority of the directors of the Company shall be persons
other than persons
(1) for whose election proxies shall have been solicited
by the Board of Directors of the Company or
(2) who are then serving as directors appointed by the
Board of Directors to fill vacancies on the Board of
Directors caused by death or resignation (but not by
removal) or to fill newly created directorships,
(B) 30% or more of the outstanding voting stock of the Company is
acquired or beneficially owned (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended, or any
successor rule thereto) by any person (other than the Company,
a Subsidiary of the Company or the Optionee) or group of
persons, not including the Optionee, acting in concert, or
(C) the stockholders of the Company approve a definitive agreement
or plan to
(i) merge or consolidate the Company with or into another
corporation (other than (1) a merger or consolidation
with a Subsidiary of the Company or (2) a merger in
which the Company is the surviving corporation and
either (a) no outstanding voting stock of the Company
(other than fractional shares) held by stockholders
immediately prior to the merger is converted into
cash (except upon the exercise by stockholders of the
Company of statutory dissenters' rights), securities,
or other property or (b) all holders of outstanding
voting stock of the Company (other than fractional
shares) immediately prior to the merger (except those
that exercise statutory dissenters' rights) have
substantially the same proportionate ownership of the
voting stock of the Company or its parent corporation
immediately after the merger),
(ii) exchange, pursuant to a statutory exchange of shares
of voting stock of the Company held by stockholders
of the Company immediately prior to the exchange,
shares of one or more classes or series of voting
stock of the Company for shares of another
corporation or other securities, cash or other
property,
(iii) sell or otherwise dispose of all or substantially all
of the assets of the Company (in one transaction or a
series of transactions) or
(iv) liquidate or dissolve the Company,
unless a majority of the voting stock (or the voting equity
interest) of the surviving corporation or of any corporation
(or other entity) acquiring all or substantially all of the
assets of the Company (in the case of a merger, consolidation
or disposition of assets) or the Company or its parent
corporation (in the case of a statutory share exchange) is,
immediately following the merger, consolidation, statutory
share exchange or disposition of assets, beneficially owned by
the Optionee or a group of persons, including the Optionee,
acting in concert.
Notwithstanding the provisions of the immediately preceding paragraph,
no Limited Right shall be exercised within a period of six months after the date
of grant of the Limited Right.
If Limited Rights are exercised, the Related Option shall no longer be
exercisable to the extent of the number of shares with respect to which the
Limited Rights were exercised. Upon the exercise or termination of a Related
Option (other than termination of the Related Option by reason of termination of
an Optionee's employment with the Company within thirty days after an Event),
Limited Rights granted with respect thereto shall terminate to the extent of the
number of shares as to which the Related Option was exercised or terminated.
A person entitled to exercise a Limited Right may, subject to its terms
and conditions and the terms and conditions of the Plan, exercise such Limited
Right in whole or in part by giving written notice to the Company of an election
to exercise such Limited Right. The date the Company receives the notice is the
exercise date. Upon exercise of Limited Rights, the holder shall promptly be
paid an amount in cash for each share with respect to which the Limited Rights
are exercised equal to the difference between the option exercise price per
share of Common Stock covered by the Related Option (or, in the case of Limited
Rights which are exercised pursuant to the terms hereof after termination of
employment, the former Related Option) and the Fair Market Value per share of
Common Stock covered by the Related Option as of the date of exercise of the
Limited Right.
For purposes of this Section XIII, "Fair Market Value" shall be defined
as provided in Section VII(A)(a) hereof, except that all references in Section
VII(A)(a) to "the date the option is granted" shall, solely for purposes of this
Section XIII, be deemed to be references to the date of exercise of the Limited
Right. If the Common Stock of the Company is not listed on a national securities
exchange or quoted by a recognized market maker in such Stock, the fair market
value, solely for purposes of this Section XIII, shall be the fair market value
of such Stock as of the date of exercise of the Limited Right as established in
good faith by the Board or Committee. For purposes of the Plan, the date that a
Related Option is granted shall be the date that it is originally granted
(regardless of when the related Limited Right is granted).
A Limited Right may not be assigned and shall be transferable only if
and to the extent that the Related Option is transferable. The Company
maywithhold any applicable withholding taxes from any cash payment due upon
exercise of a Limited Right.
EXHIBIT NUMBER 10.6
1991 RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
EXHIBIT 10.6
MEDTRONIC, INC. 1991 RESTRICTED STOCK PLAN
FOR NON-EMPLOYEE DIRECTORS
("PLAN")
1. PURPOSE.
The purpose of this Plan is to permit Non-Employee Directors of
Medtronic, Inc. (the "Company") to receive all or part of their Annual
Retainers in Restricted Stock in order to provide an opportunity for
Non-Employee Directors to increase their holdings of Common Stock of
the Company.
2. DEFINITIONS.
Whenever used herein, the following terms shall have the meanings
indicated below:
(a) "Annual Retainer" means the fixed annual fee of a Non-Employee
Director in effect on the October 1 as of which the Restricted
Stock is issued pursuant to this Plan for services to be
rendered as a director of the Company. The Annual Retainer
does not include meeting fees or chairmanship fees.
(b) "Common Stock" means the common stock, $.10 par value, of the
Company.
(c) "Disability" means the physical or mental disability or
incapacity of a Non-Employee Director which, in the estimation
of a majority of the members of the Board of Directors of the
Company other than such Non-Employee Director, renders such
Non-Employee Director incapable of continuing to serve as a
director of the Company.
(d) "Fair Market Value" of the Common Stock on a per share basis
means the closing price of the Common Stock reported on the
New York Stock Exchange Composite Transactions Listing for the
first business day of the October in which the Restricted
Stock being valued is issued.
(e) "Non-Employee Director" means any person serving as a director
of the Company on the October 1 as of which the Restricted
Stock is issued, provided that such person is not an employee
of the Company as of such October 1.
(f) "Recipient" means the Non-Employee Director in whose name
Restricted Stock is issued pursuant to this Plan.
(g) "Restricted Stock" means Common Stock which may not be
assigned, sold, pledged, hypothecated or otherwise transferred
or disposed of by the Recipient prior to the lapse of
restrictions established pursuant to the terms of this Plan.
3. SHARE PAYMENTS.
(a) Each Non-Employee Director may irrevocably elect, prior to
April 1 of the calendar year in which such Restricted Stock is
to be issued, to receive 25%, 50%, 75% or 100% of the Annual
Retainer in the form of Restricted Stock to be issued as of
October 1 of such year (which issuances of Restricted Stock
shall be prorated for fractional years for those Non-Employee
Directors scheduled to retire, in accordance with the policies
of the Company then in effect, prior to the annual meeting
following such October 1). Each irrevocable election shall be
made on a form provided by the Company and returned by the
Non-Employee Director to the officer or other employee of the
Company designated on such form prior to such April 1. In the
event of such an election, a number of shares of Restricted
Stock equal to the amount of the Annual Retainer as to which
the election is made, divided by the per share Fair Market
Value of the Common Stock, shall be issued in the name of the
Recipient as of such October 1. The remainder of the Annual
Retainer shall be paid in cash to the Non-Employee Director at
such time or times as payments of the Annual Retainer are
customarily made by the Company to Non-Employee Directors who
receive Annual Retainers in cash except that each such payment
shall be prorated based upon the total percentage of the
Annual Retainer with respect to which the Recipient has not
elected to receive Restricted Stock.
(b) Notwithstanding anything stated in this Section 3, the Company
shall not be required to issue fractions of shares in payment
of an Annual Retainer. Whenever under the terms of this Plan a
fractional share would otherwise be required to be issued, an
amount in lieu thereof shall be paid in cash on October 1 for
such fractional share otherwise issuable as of such October 1,
based upon the same per share Fair Market Value which was
utilized to determine the number of shares of Restricted Stock
to be issued as of such October 1.
4. RESTRICTIONS AND LAPSE OF RESTRICTIONS
The shares of Restricted Stock issued under Section 3 may not be
assigned, sold, pledged, hypothecated or otherwise transferred or
disposed of (including, without limitation, transfer by gift or
donation) except that such restrictions shall lapse upon the first to
occur of the following events:
(a) Death or resignation or removal of the Non-Employee Director
from the Board of Directors of the Company as a result of the
Disability of the Non-Employee Director;
(b) Retirement of the Non-Employee Director from the Board of
Directors of the Company in accordance with the policies of
the Company then in effect providing for retirement of
Non-Employee Directors (including retirement by virtue of not
running for re-election);
(c) Acceptance by the Board of Directors of the Company of the
offer of the Non-Employee Director to resign from the Board of
Directors of the Company in accordance with the policies of
the Company then in effect after a material change in such
Non-Employee Director's full-time position or
responsibilities;
(d) If one or more "Events," as defined in the Amended and
Restated 1979 Nonqualified Stock Option Plan of the Company
(i.e. changes in control of the Company), shall occur.
The certificates for shares of Restricted Stock shall be held by the
Company until the lapse of the restrictions pursuant to this Section 4
(at which time they shall be delivered to the Non-Employee Director
without any legend referencing this Plan), provided, however, that
unless and until the shares of Restricted Stock are forfeited pursuant
to the last sentence of this Section, the Recipient shall be entitled
to all voting, dividend and distribution rights with respect to such
shares (except that dividends in stock of the Company and shares of
stock of the Company issued upon stock splits shall be deemed to
constitute additional Restricted Stock to be held by the Company
pursuant to this Plan). If the Recipient ceases to be a director of the
Company before the restrictions on the Restricted Stock lapse pursuant
to this Section 4, the Restricted Stock issued to the Recipient shall
be forfeited and revert to the Company.
5. WITHHOLDING TAXES.
Whenever under this Plan Restricted Stock is to be issued or
restrictions are to be changed or shall lapse, or at any other
appropriate time, the Company shall have the right to require the
Recipient to remit to the Company an amount necessary to satisfy any
federal, state, local or other withholding requirements of the Company
prior to the issuance by the Company of Restricted Stock in the name of
the Recipient or the delivery of any certificate or certificates for
shares of Common Stock to be acquired by the Recipient when the
restrictions lapse.
6. GENERAL RESTRICTION.
The issuance of Restricted Stock and the delivery of certificate for
Common Stock to Non-Employee Directors hereunder shall be subject to
the requirement that, if at any time the Secretary of the Company shall
reasonably determine, in his or her discretion, that the listing,
registration or qualification of such shares upon any securities
exchange or under any state or federal law, or the consent or approval
of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, such issuance or delivery, such
issuance or delivery shall not take place unless such listing,
registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not reasonably acceptable
to the Secretary.
7. AVAILABLE STOCK.
Subject to any adjustment hereinafter referred to in this Section, the
maximum number of shares of authorized but unissued Common Stock which
may be distributed under this Plan is 10,000 shares. If shares of
Restricted Stock are forfeited in accordance with this Plan, then the
number of shares so forfeited shall be considered not to have been
previously distributed for purposes of this Section and shall be
available for distribution as though they had not been issued as
Restricted Stock pursuant to this Plan. In the event any increase or
decrease in the total number of issued and outstanding shares of Common
Stock resulting from a subdivision or consolidation of shares or other
capital adjustment or the payment of a stock dividend or similar
recapitalization, the maximum number of shares of Common Stock which
may be issued under this Plan shall be adjusted proportionately.
8. AMENDMENTS.
Except as hereinafter provided in this Section, this Plan may be
terminated, amended, suspended or discontinued by the Board of
Directors of the Company, provided that no such action shall adversely
affect the Restricted Stock that has been issued prior to such action.
In no event shall the eligibility requirements for the receipt of
Restricted Stock or the formula for determining the amount or price of
shares of Restricted Stock to be issued to the Non-Employee Directors
or the timing of the award of Restricted Stock be amended more than
once every six months other than to comply with changes in the Internal
Revenue Code.
9. TERMINATION OF 1981 DIRECTORS' COMPENSATION DEFERMENT PLAN.
This Plan shall supersede the 1981 Directors' Compensation Deferment
Plan (the "Deferment Plan") of the Company permitting directors to
defer cash payments for services rendered from and after October 1,
1992, which Deferment Plan shall be of no further force and effect with
respect to services rendered from and after October 1, 1992.
10. SHAREHOLDER APPROVAL; EFFECTIVE DATE.
This Plan shall not be effective unless it is approved by the holders
of a majority of the voting power of the stock of the Company present
and entitled to vote on the matter at the Annual Meeting of
Shareholders on August 28, 1991. Upon receiving such shareholder
approval, this Plan shall be effective as of August 28, 1991.
EXHIBIT NUMBER 10.7
CAPITAL ACCUMULATION PLAN DEFERRAL PROGRAM
EXHIBIT 10.7
MEDTRONIC, INC.
CAPITAL ACCUMULATION PLAN
DEFERRAL PROGRAM, AS RESTATED EFFECTIVE
JANUARY 1, 1994
TABLE OF CONTENTS
ARTICLE 1. DEFERRED COMPENSATION ACCOUNT..................................1
Section 1.1. Establishment of Account............................1
Section 1.2. Property of Committee...............................1
ARTICLE 2. DEFINITIONS, GENDER, AND NUMBER................................2
Section 2.1. Definitions.........................................2
Section 2.2. Gender and Number...................................8
ARTICLE 3. PARTICIPATION..................................................8
Section 3.1. Who May Participate.................................8
Section 3.2. Time and Conditions of Participation................8
Section 3.3. Termination of Participation........................8
Section 3.4. Missing Persons.....................................9
Section 3.5. Relationship to Other Plans.........................9
ARTICLE 4. ENTRIES TO THE ACCOUNT.........................................9
Section 4.1. Contributions.......................................9
Section 4.2. Crediting Rate.....................................10
ARTICLE 5. DISTRIBUTION OF BENEFITS......................................10
Section 5.1. Distributions Pursuant to Deferral Election........10
Section 5.2. Distribution of Benefits Upon Termination of Emplo.11
Section 5.3. Death Benefits.....................................12
Section 5.4. Minimum Amount and Frequency of Payments...........13
Section 5.5. Acceleration of Distributions......................14
Section 5.6. Withdrawals........................................14
Section 5.7. Distributions on Plan Termination..................15
Section 5.8. Claims Procedure...................................15
ARTICLE 6. FUNDING.......................................................16
Section 6.1. Source of Benefits.................................16
Section 6.2 No Claim on Specific Assets.........................16
ARTICLE 7. ADMINISTRATION AND FINANCES...................................17
Section 7.1. Administration.....................................17
Section 7.2. Powers of Committee................................17
Section 7.3. Actions of the Committee...........................17
Section 7.4. Delegation.........................................18
Section 7.5. Reports and Records................................18
ARTICLE 8. AMENDMENTS AND TERMINATION....................................18
Section 8.1. Amendments.........................................18
Section 8.2. Termination........................................18
ARTICLE 9. TRANSFERS.....................................................19
ARTICLE 10. CHANGE IN CONTROL PROVISIONS.................................19
Section 10.1. Application of Article 10.........................19
Section 10.2. Payments to and by the Trust......................19
Section 10.3. Legal Fees and Expenses...........................20
Section 10.4. No Reduction in Crediting Rate....................21
Section 10.5. Late Payment and Additional Payment Provisions....21
ARTICLE 11. MISCELLANEOUS................................................22
Section 11.1. No Guarantee of Employment........................22
Section 11.2. Release...........................................23
Section 11.3. Notices...........................................23
Section 11.4. Nonalienation.....................................23
Section 11.5. Tax Liability.....................................23
Section 11.6. Captions..........................................24
Section 11.7. Applicable Law....................................24
SCHEDULE A - Minimum Compensation Level of Sales Force Members Considered
to be "Executives" Under the Plan.........................................26
SCHEDULE B - Crediting Rate...............................................27
MEDTRONIC, INC.
CAPITAL ACCUMULATION PLAN
DEFERRAL PROGRAM, AS RESTATED EFFECTIVE
JANUARY 1, 1994
Medtronic, Inc. (the "Company") established, effective January 1, 1989,
a nonqualified deferred compensation plan for the benefit of Executives of the
Company and of certain of the Company's Affiliates. This plan is known as the
Medtronic, Inc. Capital Accumulation Plan Deferral Program (the "Plan"). The
Plan was restated, effective January 1, 1992. The Company hereby restates the
Plan, effective January 1, 1994, as set forth herein.
Except as specifically provided herein, this restatement shall apply to
Permissible Deferrals first effective for Plan Years commencing on or after
January 1, 1994, and the provisions of the Plan, as in effect prior to this
restatement, shall apply to Permissible Deferrals first effective for Plan Years
prior to January 1, 1994.
The Plan is intended to be an unfunded plan maintained primarily for
the purpose of providing deferred compensation for a select group of management
or highly compensated employees as described in Sections 201(2), 301(a)(3) and
401(a)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA").
ARTICLE 1. DEFERRED COMPENSATION ACCOUNT.
Section 1.1. Establishment of Account. The Company shall establish an
account ("Account") for each Participant which shall be utilized solely as a
device to measure and determine the amount of deferred compensation to be paid
under the Plan.
Section 1.2. Property of Company. Any amounts so set aside for benefits
payable under the Plan are the property of the Company, except, and to the
extent, provided in the Trust.
ARTICLE 2. DEFINITIONS, GENDER, AND NUMBER.
Section 2.1. Definitions. Whenever used in the Plan, the following
words and phrases shall have the meanings set forth below unless the context
plainly requires a different meaning, and when a defined meaning is intended,
the term is capitalized.
2.1.1. "Account" means the device used to measure and
determine the amount of deferred compensation to be paid to a
Participant or Beneficiary under the Plan, and may refer to the
separate Accounts that represent amounts deferred by a Participant
under separate Permissible Deferral elections pursuant to Section
4.1.1, by the Company pursuant to Section 4.1.2, or as a transfer from
the Medtronic, Inc. Compensation Deferral Plan for Officers and Key
Employees pursuant to Article 9.
2.1.2. "Affiliates" or "Affiliate" means a group of entities,
including the Company, which constitutes a controlled group of
corporations (as defined in section 414(b) of the Code), a group of
trades or businesses (whether or not incorporated) under common control
(as defined in section 414(c) of the Code), and members of an
affiliated service group (within the meaning of section 414(m) of the
Code.)
2.1.3. "Age" of a Participant means the number of whole
calendar years that have elapsed since the date of the Participant's
birth.
2.1.4. "Base Salary" of a Participant for any Plan Year means
the total annual salary and wages paid by all Affiliates to such
individual for such Plan Year, including any amount which would be
included in the definition of Base Salary, but for the individual's
election to defer some of his or her salary pursuant to this Plan or
some other deferred compensation plan established by an Affiliate; but
excluding any other remuneration paid by Affiliates, such as overtime,
incentive compensation, stock options, distributions of compensation
previously deferred, restricted stock, allowances for expenses
(including moving, travel expenses, and automobile allowances), and
fringe benefits whether payable in cash or in a form other than cash.
In the case of an individual who is a participant in a plan sponsored
by an Affiliate which is described in Section 401(k) or 125 of the
Code, the term Base Salary shall include any amount which would be
included in the definition of Base Salary but for the individual's
election to reduce his salary and have the amount of the reduction
contributed to or used to purchase benefits under such plan.
2.1.5. "Beneficiary" or "Beneficiaries" means the persons or
trusts designated by a Participant in writing pursuant to Section 5.3.4
of the Plan as being entitled to receive any benefit payable under the
Plan by reason of the death of a Participant, or, in the absence of
such designation, the persons specified in Section 5.3.5 of the Plan.
2.1.6. "Board" means the Board of Directors of the Company as
constituted at the relevant time.
2.1.7. "Code" means the Internal Revenue Code of 1986, as
amended from time to time and any successor statute. References to a
Code section shall be deemed to be to that section or to any successor
to that section.
2.1.8. "Committee" means the Committee appointed by the
Company's Board, or any person or entity designated by the Committee to
administer the Plan pursuant to Section 7.4.
2.1.9. "Company" means Medtronic, Inc.
2.1.10. "Compensation" with respect to a Participant for any
period means the sum of such Participant's Base Salary and Incentive
Compensation for such period.
2.1.11. "Crediting Rate" with respect to any Plan Year means
the rate set forth on Schedule B, hereto, which schedule may be revised
from time to time by the Company's Chief Executive Officer, in his
discretion. In general, the Crediting Rate in effect with respect to a
Plan Year shall apply to all deferrals made in such Plan Year; however,
if the Chief Executive Officer subsequently makes other rates
("alternative rates") available, a Participant may elect to have an
alternate rate apply to such deferrals in accordance with rules
established by the Company.
2.1.12. "Disabled" or "Disability" with respect to a
Participant shall have the same definition as in the Company's then
existing long term group disability insurance program.
2.1.13. "Early Retirement Date" of a Participant means the
last day of the calendar month in which the Participant has (a) reached
Age 55 while in the employ of an Affiliate and has completed at least
ten (10) Years of Service, or (b) reached the Age of 62 while in the
employ of an Affiliate.
2.1.14. "Effective Date" means the date on which this Plan
became effective, i.e., January 1, 1989.
2.1.15. "Executive" means any United States employee who is
(a) an Officer or a Vice President of the Company, (b) a member of the
Sales Force of a Participating Affiliate whose Compensation for the
Participating Affiliate's fiscal year ending immediately prior to the
date on which he first enters into a Permissible Deferral election
equals or exceeds the dollar amount set forth on Schedule A, hereto,
which schedule may be revised from time to time by the Company's Chief
Executive Officer in his discretion, or (c) any individual designated
as eligible to participate in the Plan by the Company's Chief Executive
Officer.
2.1.16. "Incentive Compensation" of a Participant for any Plan
Year means the total remuneration paid under the various incentive
compensation programs maintained by Affiliates to such individual for
that Plan Year including any amount which would be included in the
definition of Incentive Compensation, but for the individual's election
to defer some or all of his or her Incentive Compensation pursuant to
this Plan or some other deferred compensation plan established by an
Affiliate; but excluding long-term incentive awards (other than the
cash portion of the Performance Share Plan) and any other remuneration
paid by Affiliates, such as Base Salary, overtime, net commissions,
stock options, distributions of compensation previously deferred,
restricted stock, allowances for expenses (including moving, travel
expenses, and automobile allowances), and fringe benefits whether
payable in cash or in a form other than cash.
2.1.17. "Maximum Annual Deferral" with respect to a
Participant for a Plan Year means the sum of (a) 50% of such
Participant's Base Salary and (b) 100% of the cash portion of such
Participant's Incentive Compensation for such Plan Year. Initially,
Participants described in Section 2.1.15(b) may defer from Incentive
Compensation only. The Committee may, in its discretion, adopt a policy
to permit such Participants to also defer from Base Salary.
2.1.18. "Normal Retirement Date" of a Participant means the
last day of the calendar month in which the Participant has reached the
Age of 65 while in the employ of an Affiliate.
2.1.19. "Officer or Vice President" means an employee who is
either elected by the Board or appointed by the Company's Chief
Executive Officer to such position.
2.1.20. "Participant" means an individual who is eligible to
participate in the Plan and has elected to participate in the Plan.
2.1.21. "Participating Affiliate" or "Participating
Affiliates" means the Company and such Affiliates as may be designated
by the Chief Executive Officer of the Company, or his designee, from
time to time.
2.1.22. "Performance Share Plan" means the Medtronic, Inc.
1979 Restricted Stock and Performance Share Award Plan, as may be
amended from time to time.
2.1.23. "Permissible Deferral" means one of the following
options as selected by the Participant:
(a) A deferral from Base Salary for one (1) Plan Year
which is not less than $3,000 nor more than the Maximum Annual
Deferral.
(b) A deferral from Incentive Compensation for one
(1) Plan Year which is not less than $3,000 nor more than the
Maximum Annual Deferral.
Initially, Participants described in Section 2.1.15(b) may
make deferrals pursuant to paragraph (b) of this Section only. The
Committee may, in its discretion, adopt a policy to permit such
Participants to also make deferrals pursuant to paragraph (a) of this
Section. Participants other than those described in Section 2.1.15(b)
may make deferrals pursuant to paragraph (a) or (b) of this Section, or
a combination of both, but in no event may any deferrals exceed the
Maximum Annual Deferral for any Plan Year.
Elections to defer from Base Salary or Incentive Compensation
shall be made annually at a date to be determined by the Committee, but
no later than December 30th of the calendar year immediately preceding
the Plan Year during which the Base Salary or Incentive Compensation
would otherwise have been paid to the Participant. All deferral
elections must specify either the percentages (stated as integers) or
dollar amounts, or combination of percentages and dollar amounts, as
determined by the Committee in its discretion, of the deferrals that
are intended to be deducted from Base Salary or Incentive Compensation,
respectively. Each installment of a deferral shall be rounded to the
nearest whole dollar amount. Only the cash portion of an award under
the Performance Share Plan may be deferred.
No Permissible Deferral election for a deferral from Incentive
Compensation payable under the Performance Share Plan or the Medtronic,
Inc. Management Incentive Plan shall be effective for any Plan Year
unless the cash amount payable to the Participant under such plan for
the Plan Year (but for the election) is sufficient to satisfy such
election.
Deferrals from Incentive Compensation for Participants
described in Section 2.1.14(b) shall be made in periodic installments,
as determined by the Committee in its discretion.
All deferrals must be completed by the end of the Plan Year in
which the Participant attains Age 70.
2.1.25. "Plan" means the "Medtronic, Inc. Capital Accumulation
Plan Deferral Program" as set forth herein and as amended or restated
from time to time.
2.1.26. "Plan Year" means January 1 through December 31.
2.1.27. "Premature Distribution" means a distribution to a
Participant at his or her request prior to the time otherwise permitted
under the Plan, subject to certain penalties, as described in Section
5.6.2.
2.1.28. "Sales Force" means employees of Participating
Affiliates whose primary employment responsibilities involve selling
the products manufactured by Participating Affiliates.
2.1.29. "Trust" means the Medtronic, Inc. Compensation Trust
Agreement Number One, as may be amended from time to time.
Section 2.2. Gender and Number. Except as otherwise indicated by
context, masculine terminology used herein also includes the feminine and
neuter, and terms used in the singular may also include the plural.
ARTICLE 3. PARTICIPATION.
Section 3.1. Who May Participate. Participation in the Plan is limited
to Executives.
Section 3.2. Time and Conditions of Participation. An eligible
Executive shall become a Participant only upon (a) the individual's completion
of a Permissible Deferral election form for the succeeding Plan Year, and (b)
compliance with such terms and conditions as the Committee may from time to time
establish for the implementation of the Plan, including, but not limited to, any
condition the Committee may deem necessary or appropriate for the Company to
meet its obligations under the Plan. To enable the Company to meet its financial
commitment under the Plan, the Company may purchase insurance on the lives of
each Participant. Consequently, participation in the Plan is contingent upon an
individual's insurability. The Committee may, in its sole discretion, accept or
reject for participation in the Plan individuals who are rated as uninsurable.
If the Committee accepts such an individual for participation in the Plan, such
individual's Account under the Plan may be credited with interest at a lesser
rate than provided in Section 4.2.
An individual may make a Permissible Deferral election for any Plan
Year provided that the Participant's remaining Compensation, after all
deferrals, is sufficient to enable the Company to withhold from the
Participant's Compensation (a) any amounts necessary to satisfy withholding
requirements under applicable tax law; and (b) the amount of any contributions
which the employee may be required to make or may have elected to make under
the Company's various benefit plans.
Section 3.3. Termination of Participation. Once an individual has
become a Participant in the Plan, participation shall continue until the first
to occur of (a) payment in full of all benefits to which the Participant or
Beneficiary is entitled under the Plan, or (b) the occurrence of an event
specified in Section 3.4 which results in loss of benefits. Except as otherwise
specified in the Plan, the Company may not terminate an individual's
participation in the Plan; provided, however, that if the Committee, in its
discretion, determines that it is likely that a Participant would not be
considered to be a member of a select group of management or highly compensated
employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA, for any period, the Committee may require that no contributions be made
to the Plan by or on behalf of such Participant during such period.
Section 3.4. Missing Persons. If the Company is unable to locate the
Participant or his Beneficiary for purposes of making a distribution, the amount
of a Participant's benefits under the Plan that would otherwise be considered as
nonforfeitable shall be forfeited effective four (4) years after (a) the last
date a payment of said benefit was made, if at least one such payment was made,
or (b) the first date a payment of said benefit was directed to be made by the
Company pursuant to the terms of the Plan, if no payments have been made. If
such person is located after the date of such forfeiture, the benefits for such
Participant or Beneficiary shall not be reinstated hereunder.
Section 3.5. Relationship to Other Plans. Participation in the Plan
shall not preclude participation of the Participant in any other fringe benefit
program or plan sponsored by an Affiliate for which such Participant would
otherwise be eligible.
ARTICLE 4. ENTRIES TO THE ACCOUNTARTICLE4.ENTRIESTOTHEACCOUNT""1".
Section 4.1. Contributions.
Section 4.1.1. Deferrals. During each Plan Year, the Company
shall post to the Account of each Participant the amount of Base Salary
and Incentive Compensation to be deferred as designated by the
Participant's Permissible Deferral election in effect for that Plan
Year.
Section 4.1.2. Company Contributions. The Company may, in its
discretion, make contributions to the Plan from time to time on behalf
of a Participant equal to all or a portion of amounts which would have
been contributed on behalf of the Participant under other benefit plans
of the Company if the Participant had not made a Permissible Deferral
election under the Plan.
Section 4.1.3. Disability. If a Participant becomes Disabled,
deferrals and Company contributions shall continue to be posted as
described in Sections 4.1.1 and 4.1.2 during the period in which the
Participant is entitled to receive Base Salary from the Company. If a
Participant continues to be Disabled after such period, deferrals and
Company contributions will cease.
Section 4.2. Crediting Rate. Except as otherwise provided in Sections
3.2, 5.2.2 and 8.2, a Participant's Account will be credited with interest at
the Crediting Rate as described in Section 2.1.11.
ARTICLE 5. DISTRIBUTION OF BENEFITS.
Section 5.1. Distributions Pursuant to Deferral Election. The
Participant shall, as part of his or her Permissible Deferral election, elect to
begin receiving distributions with respect to a Permissible Deferral at either
(a) the Participant's retirement; or (b) a date specified by the Participant in
the election, which is at least five (5) years after the Plan Year to which the
Permissible Deferral applies. If the Participant elects to defer distribution
pursuant to (a), above, the timing and manner of distribution shall be
determined in accordance with Sections 5.2 and 5.3. If a Participant elects to
defer distributions pursuant to (b), above, distributions shall commence at the
time designated by the Participant in his or her election and shall be made in
the form of a lump sum (unless the Participant terminates employment or dies
before such date, in which case Section 5.2 or 5.3, as the case may be, shall
apply).
Section 5.2. Distribution of Benefits Upon Termination of Employment.
If a Participant terminates employment for any reason, except death, prior to
distribution of the Participant's Account, the Participant's Account balance,
determined as of the first day of the first month following the date of such
termination, shall be distributed at the time and in the manner set forth in
this Section 5.2.
5.2.1. Benefits Upon Retirement. If a Participant terminates
employment with all Affiliates on or after Early Retirement Date or
Normal Retirement Date, the Participant shall receive the balance in
his Account in monthly installments over a period of fifteen (15)
years. The monthly benefit amount shall be a level amount for each
twelve-month period calculated using the balance in the Account at the
beginning of the twelve-month period and dividing it by the total
periods remaining in the entire payment period. The benefit payment
shall be adjusted each subsequent twelve-month period to reflect the
Account as of that time. The Participant's Account shall be credited
during the payment period with interest at the Crediting Rate.
Payments pursuant to this Section 5.2.1 shall commence within
an administratively practicable period of time following the date on
which the Participant terminates employment.
5.2.2. Benefits Upon Resignation or Discharge. If a
Participant terminates employment with all Affiliates before Early
Retirement Date or Normal Retirement Date for reasons other than death,
the Participant shall receive the balance in his Account in the form of
monthly installments over a five-year period. The monthly benefit
amount shall be a level amount for each twelve-month period calculated
using the balance in the Account at the beginning of the twelve-month
period and dividing it by the total periods remaining in the entire
payment period. The benefit payment shall be adjusted each subsequent
twelve-month period to reflect the Account as of that time. The rate at
which the Account has been credited with interest shall be reduced
retroactively to 90% of the Crediting Rate. The Account shall continue
to be credited with interest at this reduced rate during the payment
period.
Payments pursuant to this Section 5.2.2 shall commence within
an administratively practicable period of time following the date on
which the Participant terminates employment.
Section 5.3. Death Benefits.
5.3.1. Death After Benefit Commencement. In the event a
Participant dies after benefits have commenced pursuant to Section
5.2.1 or 5.2.2, the Participant's remaining benefits, if any, shall be
paid to the Participant's Beneficiary in the same manner such benefits
would have been paid to the Participant had the Participant survived.
5.3.2. Death Prior to Benefit Commencement. In the event a
Participant dies prior to the date on which benefits commence pursuant
to Sections 5.2.1 or 5.2.2, the Participant's Account balance shall be
paid to the Participant's Beneficiary in a lump sum within an
administratively practicable time following the Participant's death.
Notwithstanding anything in the Plan to the contrary, the provisions of
this Section 5.3.2 shall apply to the Participant's entire Account
balance as of the date of his or her death, including any portion of
the Participant's Account which may be attributable to Permissible
Deferral elections first effective for Plan Years prior to 1994.
5.3.3. Marital Deduction. If any benefits are payable under
the Plan to the surviving spouse of deceased Participant, the estate of
the Participant's spouse shall be entitled to all remaining benefits,
if any, at his or her death, unless specifically directed to the
contrary by an effective beneficiary designation.
5.3.4. Designation by Participant. Each Participant has the
right to designate primary and contingent Beneficiaries for death
benefits payable under the Plan. Such Beneficiaries may be individuals
or trusts for the benefit of individuals. A Beneficiary designation by
a Participant shall be in writing on a form acceptable to the Committee
and shall only be effective upon delivery to the Company. A Beneficiary
designation may be revoked by a Participant at any time by delivering
to the Company either written notice of revocation or a new Beneficiary
designation form. The Beneficiary designation form last delivered to
the Company prior to the death of a Participant shall control.
5.3.5. Failure to Designate Beneficiary. In the event there is
no Beneficiary designation on file with the Company, or all
Beneficiaries designated by a Participant have predeceased the
Participant, the benefits payable by reason of the death of the
Participant shall be paid to the Participant's spouse, if living; if
the Participant does not leave a surviving spouse, to the Participant's
issue by right of representation; or, if there are no such issue then
living, to the Participant's estate. In the event there are benefits
remaining unpaid at the death of a sole Beneficiary and no successor
Beneficiary has been designated, the remaining balance of such benefit
shall be paid to the deceased Beneficiary's estate. If there are
benefits remaining unpaid at the death of a Beneficiary who is one of
multiple concurrent Beneficiaries, such remaining benefits shall be
paid proportionally to the surviving Beneficiaries.
Section 5.4. Minimum Amount and Frequency of Payments. The Committee
may adjust the length of the distribution period under this Article 5 in order
to assure that each monthly installment in not less than $1,000. The Committee
may also, if it so elects, distribute benefits in installments on a basis which
is more or less frequently than monthly.
Section 5.5. Acceleration of Distributions. The Committee may, in its
discretion, accelerate the distribution of, or alter the method of payment of,
benefits payable to a Participant under the Plan. If the Internal Revenue
Service determines that a Participant or Beneficiary has received an economic
benefit or is in constructive receipt of a benefit under the Plan and has made a
final assessment of an income tax deficiency with respect to such benefit or if
a final judicial determination has been entered that an income tax deficiency
exists, the Committee shall distribute to such Participant an amount equal to
the taxable income recognized.
Section 5.6. Withdrawals.
5.6.1. Hardship Withdrawal. Upon the application of any
Participant, the Committee, in accordance with its uniform,
nondiscriminatory policy, may permit such Participant to terminate
future deferrals or to withdraw some or all of his or her Account. A
Participant must give a written petition of the termination of his or
her deferral election at least thirty (30) days (or such shorter period
of time as permitted by the Committee in its discretion) prior to the
next deferral. A Participant must give a written petition of the intent
to withdraw from his or her Account at least sixty (60) days (or such
shorter time as permitted by the Committee in its discretion) prior to
the date of withdrawal. No termination or withdrawal shall be made
under the provisions of this Section except for the purpose of enabling
a Participant to meet immediate needs created by a financial hardship
for which the Participant does not have other reasonably available
sources of funds as determined by the Committee in accordance with
uniform rules. The term "financial hardship" shall include the need for
funds to: meet uninsured medical expenses for the Participant or his
dependents, meet a significant uninsured casualty loss for the
Participant or his dependents, and meet other catastrophes of a "sudden
and serious nature."
If a withdrawal is permitted, the amount of the withdrawal shall be
distributed to the Participant in a single sum as soon as is administratively
practicable. If a termination of deferrals or a withdrawal is made under this
Section 5.6, the Participant may not enter into a new deferral election for two
(2) complete Plan Years from the date of the termination or withdrawal.
5.6.2 Premature Distributions. Upon the application of any Participant,
the Committee shall permit such Participant to receive a distribution of his or
her entire Account prior to the time otherwise specified in the Plan for reasons
other than financial hardship. A Participant must give a written petition of his
or her intent to receive such a distribution at lease sixty (60) days (or such
shorter time as permitted by the Committee in its discretion) prior to the date
of the distribution. If a Participant elects to receive such a distribution: (a)
a penalty shall be imposed such that the value of the Participant's Account,
determined immediately prior to the distribution, shall be reduced by 10%; and
(b) the Participant may not enter into a new deferral election for two (2)
complete Plan Years following the date of the distribution.
5.7. Distributions on Plan Termination. Notwithstanding anything in
this Article 5 to the contrary, if the Plan is terminated, distributions shall
be made in accordance with Section 8.2.
5.8. Claims Procedure. Except as otherwise provided in Section 5.4(c)
of the Trust, the following shall apply with respect tot he claims of
Participants for benefits under the Plan. The Committee shall notify a
Participant in writing within ninety (90) days of the Participant's written
application for benefits of his eligibility or noneligibility for benefits under
the Plan. If the Committee determines that a Participant is not eligible for
benefits or full benefits, the notice shall set forth (a) the specific reasons
for such denial, (b) a specific reference to the provision of the Plan on which
the denial is based, (c) a description of any additional information or material
necessary for the claimant to perfect his claim, and a description of why it is
needed, and (d) an explanation of the Plan's claims review procedure and other
appropriate information as to the steps to be taken if the Participant wishes to
have his claim reviewed. If the Committee determines that there are special
circumstances requiring additional time to make a decision, the Committee shall
notify the Participant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an additional
90-day period. If a Participant is determined by the Committee to be not
eligible for benefits, or if the Participant believes that he is entitled to
greater or different benefits, he shall have the opportunity to have his claim
reviewed by the Committee by filing a petition for review with the Committee
within sixty (60) days after receipt by him of the notice issued by the
Committee. Said petition shall state the specific reasons the Participant
believes he is entitled to benefits or greater or different benefits. Within
sixty (60) days after receipt by the Committee of said petition, the Committee
shall afford the Participant (and his counsel, if any) an opportunity to present
his position to the Committee orally or in writing, and said Participant (or his
counsel) shall have the right to review the pertinent documents, and the
Committee shall notify the Participant of its decision in writing within said
sixty (60) day period, stating specifically the basis of said decision written
in a manner calculated to be understood by the Participant and the specific
provisions of the Plan on which the decision is based. If, because of the need
for a hearing, the sixty (60) day period is not sufficient, the decision may be
deferred for up to another sixty (60) day period at the election of the
Committee, but notice of this deferral shall be given to the Participant.
ARTICLE 6. FUNDING
Section 6.1. Source of Benefits. All benefits under the Plan shall be
paid when due by the Company out of its assets or from the Trust.
Section 6.2. No Claim on Specific Assets. No Participant shall be
deemed to have, by virtue of being a Participant in the Plan, any claim on any
specific assets of the Company such that the Participant would be subject to
income taxation on his or her benefits under the Plan prior to distribution and
the rights of Participants and Beneficiaries to benefits to which they are
otherwise entitled under the Plan shall be those of an unsecured general
creditor of the Company.
ARTICLE 7. ADMINISTRATION AND FINANCES.
Section 7.1. Administration. The Plan shall be administered by the
Committee. The Company shall bear all administrative costs of the Plan other
than those specifically charged to a Participant or Beneficiary.
Section 7.2. Powers of Company. In addition to the other powers granted
under the Plan, the Committee shall have all powers necessary to administer the
Plan, including, without limitation, powers:
(a) to interpret the provisions of the Plan;
(b) to establish and revise the method of accounting for the
Plan and to maintain the Accounts; and
(c) to establish rules for the administration of the Plan and
to prescribe any forms required to administer the Plan.
Section 7.3. Actions of the Committee. Except as modified by the Board,
the Committee (including any person or entity to whom the Committee has
delegated duties, responsibilities or authority, to the extent of such
delegation) has total and complete discretionary authority to determine
conclusively for all parties all questions arising in the administration of the
Plan, to interpret and construe the terms of the Plan, and to determine all
questions of eligibility and status of employees, Participants and Beneficiaries
under the Plan and their respective interests. Subject to the claims procedures
of Section 5.9, all determinations, interpretations, rules and decisions of the
Committee (including those made or established by any person or entity to whom
the Committee has delegated duties, responsibilities or authority, if made or
established pursuant to such delegation) are conclusive and binding upon all
persons having or claiming to have any interest or right under the Plan.
Section 7.4. Delegation. The Committee, or any officer designated by
the Committee, shall have the power to delegate specific duties and
responsibilities to officers or other employees of the Company or other
individuals or entities. Any delegation may be rescinded by the Committee at any
time. Each person or entity to whom a duty or responsibility has been delegated
shall be responsible for the exercise of such duty or responsibility and shall
not be responsible for any act or failure to act of any other person or entity.
Section 7.5. Reports and Records. The Committee, and those to whom the
Committee has delegated duties under the Plan, shall keep records of all their
proceedings and actions and shall maintain books of account, records, and other
data as shall be necessary for the proper administration of the Plan and for
compliance with applicable law.
ARTICLE 8. AMENDMENTS AND TERMINATION.
Section 8.1. Amendments. The Company, by action of the Compensation
- -Committee of the Board, or the Chief Executive Officer of the Company, to the
extent authorized by the Compensation Committee of the Board, may amend the
Plan, in whole or in part, at any time and from time to time. Any such amendment
shall be filed with the Plan documents. No amendment, however, may be effective
to eliminate or reduce the benefits of any retired Participant or the
Beneficiary of any deceased Participant then eligible for benefits or the
benefits in any active Participant's Account immediately before the date of such
amendment.
Section 8.2. Termination. The Company expects the Plan to be permanent,
but necessarily must, and hereby does, reserve the right to terminate the Plan
at any time by action of the Board. Upon termination of the Plan, all deferrals,
transfers and Company contributions will cease and no future deferrals,
transfers or Company contributions will be made. Termination of the Plan shall
not operate to eliminate or reduce benefits of any retired Participant or the
Beneficiary of any deceased Participant then eligible for benefits or the
benefits in any active Participant's Account.
If the Plan is terminated, payments from the Accounts of all
Participants and Beneficiaries shall be made as soon as administratively
convenient in the form of monthly payments over a three-year period, credited
with interest at 90% of the Crediting Rate during the payment period; however,
the Committee in its sole discretion may pay benefits in a lump sum.
ARTICLE 9. TRANSFERS. A Participant may transfer to the Plan amounts
credited to the Participant under the Medtronic, Inc. Compensation Deferral Plan
for Officers and Key Employees. Any such transfer shall be in accordance with
procedures established by the Committee. Amounts transferred to the Plan
pursuant to this Article 9 shall be credited with interest in accordance with
Section 4.2. Distributions from the Account established pursuant to this Article
9 shall be made at the time and in the manner specified in Sections 5.2 through
5.8.
ARTICLE 10. CHANGE IN CONTROL PROVISIONS.
Section 10.1. Application of Article 10. To the extent applicable, the
provisions of this Article 10 relating to an Event of change in control of the
Company shall control, notwithstanding any other provisions of the Plan to the
contrary, and shall supersede any other provisions of the Plan to the extent
inconsistent with the provisions of this Article 10. For purposes of this
Article 10, an "Event" refers to an event of change in control of the Company as
described in Section 3.1(b)(1) through (3) of the Trust.
Section 10.2. Payments to and by the Trust. If the Company determines
that it is probable that an Event may occur within the six-month period
immediately following the date of determination, or if an Event in fact occurs
in those situations where the Company has not otherwise made such a
determination, the Company shall make a contribution to the Trust (if in
existence at the date of determination or the date of the Event, as the case may
be) in accordance with the provisions of the Trust. Solely for purposes of
determining the amount of such contribution (but in no way in limitation of the
Company's liability under the Plan as determined under other provisions of the
Plan), the Company's total liability under the Plan shall be equal to the value
of the current credit balances under all Accounts established under the Plan,
including any interest credited to such Accounts under the terms of the Plan,
which remain unpaid by the Company as of the date of determination or the date
of the Event, as the case may be, whether or not amounts are otherwise currently
payable to Participants or Beneficiaries under the Plan. All such contributions
shall be made as soon as possible after the date of determination or of the
Event, as the case may be, and shall be made in cash or property valued at fair
market value. Further, the Company may, in its discretion, make other
contributions to the Trust from time to time for purposes of providing benefits
hereunder, whether or not an Event has occurred or may occur.
Notwithstanding the foregoing, any contributions to the Trust, as well
as any income or gains thereon, shall be at all times subject to the provisions
of the Trust, including but not limited to the provisions permitting a return of
such contributions and income or gains thereon to the Company in certain
circumstances.
Payments of amounts credited to Accounts under the Plan with respect to
those Participants and their Beneficiaries for whom Trust contributions are made
shall be made first from the Trust in accordance with the terms of the Trust,
but, to the extent not paid by the Trust, shall be paid by the Company.
Section 10.3. Legal Fees and Expenses. The Company shall reimburse any
Participant or his or her Beneficiary for all reasonable legal fees and expenses
incurred by such Participant or Beneficiary after the date of any Event in
seeking to obtain any right or benefit provided by the Plan.
Section 10.4. No Reduction in Crediting Rate. If the Company determines
that it is probable that an Event may occur within the six-month period
immediately following the date of determination, or if an Event in fact occurs
in those situations where the Company has not otherwise made such a
determination, the Company shall not from and after the date of the
determination or the date of the Event, as the case may be, amend the Plan to
cause a reduction in the crediting rate applicable to a Participant's Account
under the Plan.
Section 10.5. Late Payment and Additional Payment Provisions. If, after
the date of an Event, there is a delay in the payment of any amounts credited to
an Account under the Plan beyond the final date for payment under the Plan, the
amounts otherwise payable to any Participant or Beneficiary shall be increased
by an amount equal to the stated interest which shall be credited to such
amounts from the final date for payment of such amounts through the date that
payment of such amounts (plus such credited interest) is actually made to the
Participant or Beneficiary, compounded quarterly on a calendar year basis. The
amount of stated interest to be so credited shall be equal to the lesser of (i)
the prime rate plus five (5) percentage points, or (ii) the prime rate
multiplied by two. For purposes hereof, the prime rate shall be the prime rate
of interest quoted by Norwest Bank Minnesota, N.A., as its prime rate,
determined each calendar quarter as the average of the daily prime rates in
effect throughout such calendar quarter, averaged for the number of days for
which the prime rates are quoted during such calendar quarter. In the event that
stated interest is to be credited for some period less than a full calendar
quarter, however, the stated interest shall be determined and compounded for the
fractional quarter, with the prime rate determined as the average of the daily
prime rates in effect throughout such fractional calendar quarter averaged for
the number of days during such fractional calendar quarter for which prime rates
are quoted.
The increase in amounts otherwise payable under the Plan by the
crediting of such stated interest represents a late payment penalty for the
delay in payment.
For purposes hereof, the final date for payment under the Plan shall be
determined with reference to the otherwise applicable provisions of the Plan,
provided, however, that the final date for commencement of benefit payments
pursuant to Sections 5.2 and 5.3 shall be a date which is not later than
forty-five (45) days after the earliest to occur of the Participant's
retirement, resignation, discharge or death. In the event that payment of
benefits has commenced to a Participant or Beneficiary prior to the date of an
Event, then the final date for payment shall be determined with reference to the
payment provision which was in effect prior to the date of the Event. No
adjustment may be made to any payment form which was in effect prior to the date
of an Event with respect to any Account which would have the effect of delaying
payments otherwise to be made under the payment form or otherwise increasing the
period of time over which payments are to be made.
Any payment of benefits by the Company after the final date for payment
of benefits as hereinabove determined shall be applied first against the first
due of such payment of benefits (with application first against any applicable
late payment penalty and next against the benefit amount itself) until fully
paid, and next against the next due of such payments in the same manner, and so
forth, for purposes of calculating the late payment penalties hereunder.
Participants and their Beneficiaries shall be entitled to the payment
of amounts credited to their Accounts plus the late payment penalty referred to
hereinabove first from the Trust and secondarily from the Company, as otherwise
provided in Section 10.2.
ARTICLE 11. MISCELLANEOUS.
Section 11.1. No Guarantee of Employment. Neither the adoption and
maintenance of the Plan nor the execution by the Company of a Permissible
Deferral agreement with any Participant shall be deemed to be a contract of
employment between an Affiliate and any Participant. Nothing contained herein
shall give any Participant the right to be retained in the employ of an
Affiliate or to interfere with the right of an Affiliate to discharge any
Participant at any time, nor shall it give an Affiliate the right to require any
Participant to remain in its employ or to interfere with the Participant's right
to terminate his employment at any time.
Section 11.2. Release. Any payment of benefits to or for the benefit of
a Participant or a Participant's Beneficiaries that is made in good faith by the
Company in accordance with the Company's interpretation of its obligations
hereunder, shall be in full satisfaction of all claims against the Company for
benefits under this Plan to the extent of such payment.
Section 11.3. Notices. Any notice permitted or required under the Plan
shall be in writing and shall be hand delivered or sent, postage prepaid, by
first class mail, or by certified or registered mail with return receipt
requested, to the principal office of the Company, if to the Company, or to the
address last shown on the records of the Company, if to a Participant or
Beneficiary. Any such notice shall be effective as of the date of hand delivery
or mailing.
Section 11.4. Nonalienation. No benefit payable at any time under this
Plan shall be subject in any manner to alienation, sale, transfer, assignment,
pledge, levy, attachment, or encumbrance of any kind by any Participant or
Beneficiary.
Section 11.5. Tax Liability. The Company may withhold or direct the
trustee of the Trust to withhold from any payment of benefits such amounts as
the Company determines are reasonably necessary to pay any taxes (and interest
thereon) required to be withheld or for which the trustee of the Trust may
become liable under applicable law. The Company may also forward or direct the
trustee of the Trust to forward to the appropriate taxing authority any amounts
required to be paid by the Company or the Trust under the preceding sentence.
Section 11.6. Captions. Article and section headings and captions are
provided for purposes of reference and convenience only and shall not be relied
upon in any way to construe, define, modify, limit, or extend the scope of any
provision of the Plan.
Section 11.7. Applicable Law. The Plan and all rights hereunder shall
be governed by and construed according to the laws of the State of Minnesota,
except to the extent such laws are preempted by the laws of the United States of
America.
SCHEDULE A
Minimum Compensation Level of Sales Force
Members Considered to be "Executives" Under the Plan
1989 $ 115,000
1990 $ 115,000
1991 $ 115,000
1992 $ 115,000
1993 $ 115,000
1994 $ 115,000
SCHEDULE B
Crediting Rate
The Crediting Rate for each Plan Year through 1994 is the ten-year
rolling average rate of ten-year United States Treasury Notes, determined as of
June 30th of the year immediately preceding the commencement of such Plan Year,
as published by Solomon Brothers, Inc., or any successor thereto, compounded on
a daily basis.
EXHIBIT NUMBER 10.10
EXECUTIVE NONQUALIFIED SUPPLEMENTAL BENEFIT PLAN
EXHIBIT 10.10
MEDTRONIC, INC.
EXECUTIVE NONQUALIFIED
SUPPLEMENTAL BENEFIT PLAN
(AS RESTATED EFFECTIVE MAY 1, 1994)
Medtronic, Inc. (the "Company") previously adopted the Medtronic, Inc.
Executive Nonqualified Supplemental Benefit Plan (the "Plan"), effective May 1,
1986. Effective May 1, 1994, the Company hereby amends and restates the Plan in
its entirety as set forth herein.
I. PURPOSE & DESCRIPTION OF PLAN
1.01 Purpose. The purpose of the Plan is to provide eligible employees
with benefits which supplement those provided under certain of the tax-qualified
plans maintained by Medtronic, Inc. More specifically, this Plan is intended to
provide certain benefits on a nonqualified plan basis which are not otherwise
provided under the tax-qualified plans as a result of the application of certain
legal limitations on contributions, benefits and includible compensation, and as
a result of the deferral of compensation by eligible employees under the
Medtronic, Inc. Capital Accumulation Plan Deferral Program or any other
nonqualified deferred compensation plan which may be established by the Company
from time to time.
1.02 Description of Plan. The Plan is intended to be (and shall be
construed and administered as) an employee benefit pension plan under the
provisions of the Employee Retirement Income Security Act of 1974, as amended,
which is unfunded and maintained primarily for the purpose of providing deferred
compensation for eligible employees who constitute a select group of management
or highly-compensated employees. The Plan is not intended to be qualified under
Internal Revenue Code Section 401(a), as amended.
The obligation of the Company to make payments under this Plan
constitutes an unsecured (but legally enforceable) promise of the Company to
make such payments and no person, including any participant or beneficiary under
the Plan, shall have any lien, prior claim or other security interest in any
property of the Company as a result of this Plan. The limitations set forth in
this paragraph are subject to the provisions of Article VII, however.
II. DEFINITIONS
2.01 Definitions. As used in the Plan, the following terms have the
meanings indicated below:
(a) "Affiliate" means any corporation or other trade or business under
common control with the Company, as further defined in the Company's
qualified plans.
(b) "Capital Accumulation Plan" means the Medtronic, Inc. Capital
Accumulation Plan Deferral Program, as amended from time to time and any
successor plan.
(c) "Committee" means the Compensation Committee of the Board of
Directors of the Company, or any successor committee appointed by the
Board of Directors to perform substantially similar functions.
(d) "Company" means Medtronic, Inc. and its successors and assigns, by
merger, purchase or otherwise.
(e) "Defined Contribution Supplemental Benefits" refer to those benefits
earned by a participant under Article V of the Plan.
(f) "Eligible Employee" means an elected or appointed officer of the
Company, or any other key employee of the Company or an Affiliate as
designated by the Committee, but excludes any individual who is not
either a United States citizen or resident.
(g) "ESOP" means the Medtronic, Inc. Employee Stock Ownership Plan, as
amended from time to time, and any successor plan..
(h) "Event" means an event of change in control of the Company as
defined in Section 3.1(b)(1) through ------ (3) of the Trust.
(i) "Participant" means an eligible employee who accrues benefits under
the Plan.
(j) "Plan Year" means the 12-month period commencing May 1 and ending
the following April 30. The initial plan year shall commence May 1,
1986.
(k) "Qualified Plans" means the Retirement Plan and the ESOP.
(l) "Restatement Date" means May 1, 1994.
(m) "Retirement Plan" means the Medtronic, Inc. and Participating
Employers Retirement Plan, as amended from time to time, and any
successor plan.
(n) "Retirement Plan Supplemental Benefits" refer to those benefits
earned by a participant under Article IV of the Plan.
(o) "Section 401(a)(17) Limitations" refer to the limitations on the
dollar amount of compensation which may be taken into account under the
qualified plans under Section 401(a)(17) of the Internal Revenue Code of
1986 or any successor provision.
(p) "Section 415 Limitations" refer to the limitations on benefits for
defined benefit pension plans, the limitations on allocations for
defined contribution plans, and the limitations on benefits and
contributions for combinations of plans which are imposed by Sections
415(b), 415(c) and 415(e), respectively, of the Internal Revenue Code of
1986 or any successor provisions.
(q) "Termination of Employment" means the complete termination of
employment of the individual with the Company and with all Affiliates.
(r) "Trust" means the Medtronic, Inc. Compensation Trust Agreement, as
amended from time to time.
III. ELIGIBILITY TO PARTICIPATE
3.01 Eligible Employees. Each eligible employee shall be eligible for
benefits under the Plan in accordance with the otherwise applicable provisions
of the Plan relating to the accrual and payment of benefits.
IV. RETIREMENT PLAN SUPPLEMENTAL BENEFITS
4.01 Calculation of Retirement Plan Supplemental Benefits. Eligible
employees who are participants in the Retirement Plan shall earn Retirement Plan
Supplemental Benefits as of any determination date in an amount equal to the
lump sum actuarial equivalent value of the eligible employee's Unrestricted
Retirement Plan Benefit less the lump sum actuarial equivalent value of the
eligible employee's Actual Retirement Plan Benefit, determined as of the date of
determination. For purposes hereof, the date of determination is the last day of
each plan year commencing April 30, 1987. The lump sum actuarial equivalent
value shall be determined in each case by use of the otherwise applicable
interest rates and other assumptions under the Retirement Plan in determining
actuarially equivalent benefits.
For purposes of this Plan, an eligible employee's Unrestricted
Retirement Plan Benefit as of any determination date equals the vested benefit
which such individual would have accrued under the Retirement Plan as of such
date under the otherwise applicable provisions of the Retirement Plan, but
determined for periods from and after May 1, 1986, without regard to the
limitations on such benefits which result from the application of the Section
415 Limitations. Further, the eligible employee's Unrestricted Retirement Plan
Benefit shall be determined based upon such employee's compensation which is or
would otherwise be taken into account under the Retirement Plan for purposes of
calculating benefits thereunder, but without application of the Section
401(a)(17) Limitations and taking into account the compensation which would have
been paid to the eligible employee during the plan year in question but for the
employee's election to defer compensation under the Capital Accumulation Plan
(or any other nonqualified deferred compensation plan which may be established
by the Company from time to time). For purposes hereof, compensation which is
deferred under the Capital Accumulation Plan (or other nonqualified deferred
compensation plan) shall be taken into account for the plan year during which
such compensation would have been paid to the eligible employee but for his or
her election under said Plan and only to the extent that such compensation would
otherwise be taken into account under the Retirement Plan in calculating
benefits thereunder had such compensation been paid directly to the eligible
employee rather than deferred (but without regard to application of the Section
401(a)(17) Limitations).
For purposes of this Plan, an eligible employee's Actual Retirement Plan
Benefit as of any determination date equals the vested benefit which the
individual has actually accrued as of such date under the provisions of the
Retirement Plan, after taking into account all applicable limitations on
contributions, benefits and compensation.
4.02 Establishment of Nonqualified Retirement Plan Account. The
participant's Retirement Plan Supplemental Benefit shall be determined as of the
last day of the plan year in which the participant terminates employment and the
lump sum value of such Retirement Plan Supplemental Benefit shall be credited as
of such date to a bookkeeping account established for such participant on the
books and records of the Company, which shall be referred to as the Nonqualified
Retirement Plan Account. For purposes hereof, a participant who becomes disabled
will not be considered to have terminated employment until such time as he or
she is considered to have terminated employment under the provisions of the
Retirement Plan. In the event the participant terminates employment as a result
of death, the value of the benefits, if any, to be credited to such Account
shall be based upon the lump sum actuarial equivalent value of the death
benefits which would be paid under the Retirement Plan under the same
assumptions used under Section 4.01 hereof in determining the participant's
Unrestricted Retirement Plan Benefit (that is, without regard to the Section 415
Limitations and the Section 401(a)(17) Limitations and without regard to the
participant's elections to defer compensation under the Capital Accumulation
Plan) (or other nonqualified deferred compensation plan), if any, less the lump
sum actuarial equivalent value of death benefits actually payable with respect
to such participant under the Retirement Plan, if any, taking into account all
applicable limitations on contributions, benefits and compensation.
Such Nonqualified Retirement Plan Account shall be used solely as a
device to measure and determine the amount of Retirement Plan Supplemental
Benefits to be paid to the participant under the Plan. All amounts which are
credited to such Account (including any interest credited with respect to such
amounts) are credited solely for accounting and computation purposes and are at
all times assets and property of the Company and subject to the claims of the
Company's creditors. No participant or beneficiary shall have any incidents of
ownership in such Account or in amounts credited to such Account, and the
participant's or beneficiary's position with respect to payments of Retirement
Plan Supplemental Benefits under the Plan is that of a general unsecured
creditor of the Company. Further, nothing contained in this Plan and no action
taken under this Plan shall create or be construed to create a trust of any
kind. The provisions of this paragraph, however, shall at all times be subject
to the provisions of Article VII hereof, providing for contributions to and
payments from the Trust under certain circumstances.
The Committee may establish any number of sub-accounts on behalf of a
participant or beneficiary as the Committee considers necessary or advisable for
purposes of maintaining a proper accounting of amounts to be credited under the
Plan on behalf of a participant or beneficiary.
4.03 Interest Credited to the Nonqualified Retirement Plan Account. All
amounts credited to the Nonqualified Retirement Plan Account from time to time
shall be credited with interest at a rate which is equal to the pre-retirement
interest rate or rates used by the Retirement Plan during the period for which
interest is to be so credited for purposes of determining actuarially equivalent
benefits under the Retirement Plan.
Interest as so determined shall be compounded quarterly during the plan year.
4.04 Payment of Nonqualified Retirement Plan Account. The value of any
Nonqualified Retirement Plan Account established hereunder as well as any
interest credited thereto shall be paid to the participant (or beneficiary, as
the case may be) on a monthly basis each plan year over a fifteen-year period
commencing as soon as administratively practicable within the plan year
commencing immediately after the date on which the Account is to be established
under Section 4.02 hereof. The initial balance in such Account at the time
benefits commence shall be paid in 180 equal monthly installments over the
fifteen-year period. Interest shall continue to be credited on the declining
balance in such Account in accordance with Section 4.03 hereof during the payout
period and such additional interest will be paid monthly in addition to the
regular monthly payments.
Notwithstanding the foregoing, the Committee (or any committee or
individual to whom the Committee has delegated such authority) may, in its
discretion, provide for an acceleration of payments under the payout schedule
which is otherwise applicable. The Committee (or its delegate) shall exercise
such discretion by taking into account factors including but not limited to the
participant's financial and retirement needs as determined by the Committee (or
its delegate), the Company's ability to make payment of such amounts, the total
value of benefits to be paid with respect to such Account, and the defraying of
costs and expenses associated with administration of the Plan.
4.05 Re-employment of Participant. In the event a participant with
respect to whom a Nonqualified Retirement Plan Account is established upon or
after termination of employment is subsequently re-employed by the Company or an
Affiliate, the payment of any amounts remaining to the credit of such
participant under his or her Nonqualified Retirement Plan Account (the "Original
Account") shall be suspended during such period of re-employment, and the value
of the Nonqualified Retirement Plan Account to be established on behalf of such
individual upon or after a subsequent termination of employment (the "Subsequent
Account") shall be determined with reference to the participant's aggregate
Unrestricted Retirement Plan Benefit and aggregate Actual Retirement Plan
Benefit, both determined as of the subsequent date of termination of employment,
offset by the value of the Original Account which remains to the credit of such
individual as of the subsequent date (including any interest credited thereto)
and further offset by the sum of the actuarial equivalent values of the amounts,
if any, which were previously paid from such Original Account to such
individual. For purposes hereof, the actuarial equivalent values of the amounts
which were previously paid from such Original Account, if any, shall be equal to
the value of each such amount so paid, credited with interest at the rate
specified in Section 4.03 for the period beginning with the date of payment of
such amount to the individual and ending on the date of establishment of the
Subsequent Account, compounded on a quarterly basis during the plan year.
V. DEFINED CONTRIBUTION SUPPLEMENTAL BENEFITS
5.01 Calculation of Defined Contribution Supplemental Benefits. Eligible
employees who are participants in the ESOP shall be credited hereunder with
Defined Contribution Supplemental Benefits as of the end of each plan year
commencing with the effective date of the ESOP in an amount equal to the
eligible employee's Unrestricted Defined Contribution Allocation for such plan
year less the eligible employee's Actual Defined Contribution Allocation for
such plan year. For purposes hereof, the eligible employee's Unrestricted
Defined Contribution Allocation for any plan year equals the employer
contributions (including forfeitures allocated as a reduction of employer
contributions) which would have been allocated on behalf of such eligible
employee for the plan year under the ESOP, determined under otherwise applicable
provisions of the ESOP, but without application of the Section 415 Limitations
or the Section 401(a)(17) Limitations, and based upon the compensation which
would have been paid to the eligible employee during the plan year in question
but for the employee's election to defer compensation under the Capital
Accumulation Plan (or any other nonqualified deferred compensation plan which
may be established by the Company from time to time). For purposes hereof,
compensation which is deferred under the Capital Accumulation Plan (or other
nonqualified deferred compensation plan) shall be taken into account for the
plan year during which such compensation would have been paid to the eligible
employee but for his or her election under said plan and only to the extent that
such compensation would otherwise be taken into account under the ESOP in
calculating the employee's allocation of employer contributions had such
compensation been paid directly to the eligible employee rather than deferred
(but without regard to application of the Section 401(a)(17) Limitations).
The employee's Actual Defined Contribution Allocation for any plan year
equals the employer contributions (including any forfeitures allocated as
reductions of employer contributions) actually allocated for the benefit of the
eligible employee under the ESOP for the plan year.
5.02 Establishment of Nonqualified Defined Contribution Account. The
value of the Defined Contribution Supplemental Benefit to be credited to a
participant for any plan year under Section 5.01 shall be credited as of the
last day of such plan year to an account established on the books and records of
the Company, which shall be referred to as the Nonqualified Defined Contribution
Account.
Such Account shall be used solely as a device to measure and determine
the amount of Defined Contribution Supplemental Benefits to be paid to such
participant under the Plan and all amounts which are credited to such Account
(including any interest credited with respect to such amounts) are credited
solely for accounting and computation purposes and are at all times assets and
property of the Company and subject to the claims of the Company's creditors. No
participant shall have any incidents of ownership in the Account or in amounts
credited to the Account. The participant's position with respect to payments of
Defined Contribution Supplemental Benefits under the Plan is that of a general
unsecured creditor of the Company. Further, nothing contained in this Plan and
no action taken under this Plan shall create or be construed to create a trust
of any kind. The provisions of this paragraph, however, are subject to the
provisions of Article VII hereof, relating to contributions to and benefit
payments from the Trust under certain circumstances.
The Committee may establish any number of sub-accounts on behalf of a
participant or beneficiary as the Committee considers necessary or advisable for
purposes of maintaining a proper accounting of amounts to be credited under the
Plan on behalf of the participant or beneficiary. As of the Restatement Date,
the value of the Defined Contribution Supplemental Nonqualified Benefit to be
credited to a participant for any plan year under Section 5.01 (as in effect on
and after the Restatement Date) shall be credited to a sub-account of the
Nonqualified Defined Contribution Account referred to as the "Nonqualified ESOP
Sub-Account." This Sub-Account shall also include amounts credited to a
participant under Section 5.01 of the Plan, as in effect prior to the
Restatement Date (the "Predecessor Plan"), attributable to contributions made
with respect to the ESOP, including interest credited to such amounts prior to
the Restatement Date under Section 5.03 of the Predecessor Plan.
5.03 Interest Credited to Nonqualified ESOP Sub-Account. As of the
Restatement Date, all amounts credited to a Nonqualified ESOP Sub-Account
established for a participant hereunder shall be credited with gains and losses,
generally, as if such Account were invested in the common stock of the Company.
5.04 Vested Interest in Nonqualified ESOP Sub-Account. A participant's
vested interest in any Nonqualified ESOP Sub-Account established for such
participant's benefit hereunder shall be determined in the same manner as the
participant's percentage vested interest in employer contributions is determined
under the ESOP, and the Company may forfeit the nonvested portion of the
participant's Nonqualified ESOP Sub-Account under the same rules and subject to
the same limitations as provided under the ESOP. Provided, however, that a
participant shall not earn a fully-vested interest in his or her Nonqualified
ESOP Sub-Account as a result of the termination or partial termination of the
Plan in those situations where the participant is not otherwise fully vested in
such Sub-Account.
5.05 Nonqualified SRP Sub-Account. A participant's Nonqualified Defined
Contribution Account shall include amounts credited to him or her under Section
5.01 of the Predecessor Plan attributable to contributions made with respect to
the Profit Sharing Plan and the Supplemental Retirement Plan (as such terms are
defined in the Predecessor Plan), including interest credited to such amounts
prior to the Restatement Date under Section 5.03 of the Predecessor Plan. Such
amounts (together with such interest) shall be held in a separate sub-account in
the Nonqualified Defined Contribution Account, referred to as the "Nonqualified
SRP Sub-Account." As of the Restatement Date, the Nonqualified SRP Sub-Account
shall be credited with gains and losses in such manner as may be determined by
the Committee from time to time in its sole discretion. The Nonqualified SRP
Sub-Account shall be subject to the vesting provisions set forth in Section 5.04
of the Predecessor Plan, which shall continue to apply to amounts credited to
such Sub-Account. Notwithstanding anything in this Article 5 to the contrary, as
of the Restatement Date, the Company shall no longer make contributions to the
Plan with respect to the Profit Sharing Plan and the Supplemental Retirement
Plan (as those terms are defined in the Predecessor Plan).
5.06 Payment of Vested Nonqualified Defined Contribution Account. The
value of a vested Nonqualified Defined Contribution Account established
hereunder (including the vested Nonqualified ESOP Sub-Account and vested
Nonqualified SRP Sub-Account) shall be paid to the participant or beneficiary,
as the case may be, on a monthly basis each plan year over a fifteen-year period
commencing as soon as is administratively practicable within the plan year
commencing immediately following the plan year in which the participant
terminates employment. The initial balance in the vested portion of such Account
at the time benefits commence shall be paid in 180 equal monthly installments
over the fifteen-year period. Interest shall continue to be credited on the
declining vested balance in accordance with Section 5.03 and Section 5.05 hereof
during the payout period, and such additional interest will be paid monthly in
addition to the regular monthly payments.
Notwithstanding the foregoing, the Committee (or any committee or
individual to whom the Committee has delegated such authority) may, in its
discretion, provide for an acceleration of payments under the payout schedule
which is otherwise applicable. The Committee (or its delegate) shall exercise
such discretion by taking into account factors including but not limited to the
participant's financial and retirement needs, as determined by the Committee (or
its delegate), the Company's ability to make payment of such amounts, and the
defraying of costs and expenses associated with the administration of the Plan.
VI. DEATH BENEFITS
6.01 Death Before Benefit Commencement. If the participant dies prior to
the date payment of amounts credited to an Account established under the Plan
for his or her benefit has commenced, payment of the vested portion of his or
her Account balance shall be made to the participant's beneficiary at the time
and in the manner as otherwise provided under the Plan with respect to payments
to participants, but subject to the Committee's discretion to accelerate
payments in accordance with Section 4.04 or 5.06 of the Plan, as applicable.
6.02 Death After Benefit Commencement. In the event a participant dies
after the date payment of amounts credited to an Account established for his or
her benefit under the Plan has commenced, any amounts remaining to be paid under
such Account shall continue to be paid to the participant's beneficiary under
the method of distribution in effect at the date of the participant's death, but
subject to the Committee's discretion to accelerate payments under said option
in accordance with Section 4.04 or 5.06 of the Plan, as applicable.
6.03 Designation of Beneficiary. A participant may designate a
beneficiary or beneficiaries to receive any benefit payments which may be
payable hereunder following the participant's death, and may designate the
proportions in which such beneficiaries are to receive such payments. Any such
designation shall be on a form provided by the Company and filed with the
Company before the participant's death. The participant may change such
designation from time to time and the last written designation filed with the
Company prior to the participant's death will control. If the participant fails
to specifically designate a beneficiary, if no designated beneficiary survives
the participant, or if all designated beneficiaries who survive the participant
die before complete payment of benefits is made, any remaining benefits shall be
paid to the participant's surviving spouse, or if there is no surviving spouse,
to the participant's issue, taking by right of representation from the
participant's natural and adoptive children, or if there is no surviving issue,
to the legal representatives of the participant's estate.
VII. CHANGE IN CONTROL PROVISIONS
7.01 Application of Article VII. To the extent applicable, the
provisions of this Article VII relating to an Event of change in control of the
Company shall control, notwithstanding any other provisions of the Plan to the
contrary, and shall supersede any other provisions of the Plan to the extent
inconsistent with the provisions of this Article VII.
7.02 Payments to and by the Trust. If the Company determines that it is
probable that an Event may occur within the six-month period immediately
following the date of determination, or if an Event in fact occurs in those
situations where the Company has not otherwise made such a determination, the
Company shall make a contribution to the Trust (if in existence at the date of
determination or the date of the Event, as the case may be) in accordance with
the provisions of the Trust. Solely for purposes of determining the amount of
such contribution (but in no way in limitation of the Company's liability under
the Plan as determined under other provisions of the Plan), the Company's total
liability under this Plan shall be equal to the value of the current credit
balances under all Accounts established under the Plan, including any interest
credited to such Accounts under the terms of the Plan, which remain unpaid by
the Company as of the date of determination or the date of the Event, as the
case may be, whether or not amounts are otherwise currently payable to
participants or beneficiaries under the Plan. The value of the Nonqualified
Retirement Plan Account of a participant who is actively employed as of the date
of determination or of the Event, as the case may be, shall be determined for
purposes hereof as if such participant terminated employment on such date and
the Account was established on such date. All such contributions shall be made
as soon as possible after the date of determination or of the Event, as the case
may be, and shall be made in cash or property valued at fair market value.
Further, the Company may, in its discretion, make other contributions to the
Trust from time to time for purposes of providing benefits hereunder, whether or
not an Event has occurred or may occur.
Notwithstanding the foregoing, any contributions to the Trust, as well
as any income or gains thereon, shall be at all times subject to the provisions
of the Trust, including but not limited to the provisions permitting a return of
such contributions and income or gains thereon to the Company in certain
circumstances.
Payments of benefits under the Plan with respect to those participants
and their beneficiaries for whom Trust contributions are made shall be made
first from the Trust in accordance with the terms of the Trust, but, to the
extent not paid by the Trust, shall be paid by the Company.
7.03 Legal Fees and Expenses. The Company shall reimburse any
participant or his or her beneficiary for all reasonable legal fees and expenses
incurred by such participant or beneficiary after the date of any Event in
seeking to obtain any right or benefit provided by the Plan.
7.04 Late Payment and Additional Payment Provisions. If after the date
of an Event there is a delay in the payment of any benefits under the Plan
beyond the final date for payment under the Plan, the amounts otherwise payable
to any participant or beneficiary shall be increased by an amount equal to the
stated interest which shall be credited to such amounts from the final date for
payment of such amounts through the date that payment of such amounts (plus such
credited interest) is actually made to the participant or beneficiary,
compounded quarterly on a calendar year basis. The amount of stated interest to
be so credited shall be equal to the lesser of (i) the prime rate plus five
percentage points, or (ii) the prime rate multiplied by two. For purposes
hereof, the prime rate shall be the prime rate of interest quoted by Norwest
Bank Minneapolis, N.A. as its prime rate, determined each calendar quarter as
the average of the daily prime rates in effect throughout such calendar quarter,
averaged for the number of days for which the prime rates are quoted during such
calendar quarter. In the event that stated interest is to be credited for some
period less than a full calendar quarter, however, the stated interest shall be
determined and compounded for the fractional quarter, with the prime rate
determined as the average of the daily prime rates in effect throughout such
fractional calendar quarter, averaged for the number of days during such
fractional calendar quarter for which prime rates are quoted.
The increase in amounts otherwise payable under the Plan by the crediting of
such stated interest represents a late payment penalty for the delay in payment.
Any payments of benefits by the Company after the final date for payment of
benefits under the Plan shall be applied first against the first due of such
payments of benefits (with application first against any applicable late payment
penalty and next against the benefit amount itself) until fully paid, and next
against the next due of such payments in the same manner, and so forth, for
purposes of calculating the late payment penalties hereunder.
Participants and their beneficiaries shall be entitled to the payment of
benefits under the Plan plus the late payment penalty referred to hereinabove
first from the Trust and secondarily from the Company, as otherwise provided in
Section 7.02.
VIII. MISCELLANEOUS PROVISIONS
8.01 Amendment and Termination. The Committee may terminate the Plan, or
the Committee (or any committee or individual to whom the Committee has
delegated such authority) may amend the Plan in any respect, and may thereby
effect a distribution in whole or in part of vested benefits under the Plan at
any date earlier than the date or dates otherwise provided for herein. In no
event shall any such amendment or termination reduce the total amount of vested
benefits credited to the Accounts of a participant or beneficiary under the Plan
(or which would be so credited with respect to a participant who is actively
employed immediately prior to the date of amendment or termination had the
participant terminated employment and had his or her Nonqualified Retirement
Plan Account been established immediately prior to such date), as determined
immediately prior to such amendment or termination (the "existing benefit"), or
reduce the rate of interest which is credited or to be credited to the existing
benefit, or modify the time for or manner of payment of such existing benefit
(other than to provide for an acceleration of distribution as otherwise provided
under this Section).
8.02 Administration by Committee. The Committee has full power and
authority to administer the Plan and to establish rules and procedures for the
operation of the Plan. The Committee may delegate to one or more committees or
individuals any of its authority, power to exercise discretion, duties or
responsibilities under the Plan, except that it may not delegate the power to
terminate the Plan. The Committee shall be considered the named fiduciary of the
Plan for purposes of Section 402(a)(2) of the Employee Retirement Income
Security Act of 1974, as amended.
8.03. No Assignment. No person shall have the power to transfer, assign,
anticipate, mortgage or otherwise encumber or dispose of in advance any interest
in amounts payable hereunder or any of the payments provided for herein, nor
shall any interest in amounts payable hereunder or in any payments be subject to
seizure for payment of any debts, judgments, alimony or separate maintenance, or
be reached or transferred by operation of law in the event of bankruptcy,
insolvency, or otherwise.
8.04 Successors and Assigns. The provisions of this Plan are binding
upon and inure to the benefit of the Company and its successors and assigns, by
merger, purchase or otherwise, and the participant and the participant's
beneficiaries, heirs and personal representatives.
8.05 Claims Procedure. The Committee shall notify a participant in
writing within ninety days of the participant's written application for benefits
of the participant's eligibility or noneligibility for benefits under the Plan.
If the Committee determines that a participant is not eligible for benefits or
full benefits, the notice shall set forth (a) the specific reasons for such
denial, (b) a specific reference to the provision of the Plan on which the
denial is based, (c) a description of any additional information or material
necessary to perfect his or her claim, and a description of why it is needed,
and (d) an explanation of the Plan's claims review procedure and other
appropriate information as to the steps to be taken if the participant wishes to
have his or her claim reviewed. If the Committee determines that there are
special circumstances requiring additional time to make a decision, the
Committee shall notify the participant of the special circumstances and the date
by which a decision is expected to be made, and may extend the time for up to an
additional ninety-day period. If a participant is determined by the Committee to
be not eligible for benefits, or if the participant believes that he or she is
entitled to greater or different benefits, the participant shall have the
opportunity to have his or her claim reviewed by the Committee by filing a
petition for review with the Committee within sixty days after receipt by the
participant of the notice issued by the Committee. Said petition shall state the
specific reasons the participant believes he or she is entitled to benefits or
greater or different benefits. Within sixty days after receipt by the Committee
of said petition, the Committee shall afford the participant (and his or her
counsel, if any) an opportunity to present his or her position to the Committee
orally or in writing, and said Participant (or his or her counsel) shall have
the right to review the pertinent documents, and the Committee shall notify the
participant of its decision in writing within said sixty-day period, stating
specifically the basis of said decision written in a manner calculated to be
understood by the participant and the specific provisions of the Plan on which
the decision is based. If, because of the need for a hearing, the sixty-day
period is not sufficient, the decision may be deferred for up to another
sixty-day period at the election of the Committee, but notice of this deferral
shall be given to the participant.
8.06 Construction of Agreement. This Plan shall be subject to and
construed in accordance with the laws of the State of Minnesota to the extent
not preempted by the provisions of the Employee Retirement Income Security Act
of 1974, as amended. The Committee has exclusive authority to determine
conclusively for all parties all questions arising in the administration of the
Plan. The Committee has discretionary authority to interpret and construe the
terms of the Plan and to determine all questions of eligibility of employees,
participants and beneficiaries under the Plan and the amounts of their
respective interests. Committee determinations are binding on all persons,
subject to the claims procedure under the Plan.
EXHIBIT NUMBER 11
COMPUTATION OF EARNINGS PER SHARE
EXHIBIT 11
<TABLE>
<CAPTION>
STATEMENT RE COMPUTATION OF
PER SHARE EARNINGS
MEDTRONIC, INC.
(Unaudited)
(in thousands)
Years ended April 30, 1996 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PRIMARY
Shares outstanding:
Weighted average outstanding 233,157 230,480 229,616
Share equivalents (1)(2) 4,161 2,754 1,742
------- ------- -------
Adjusted shares outstanding (2) 237,318 233,234 231,358
======= ======= =======
FULLY DILUTED
Shares outstanding:
Weighted average outstanding 233,157 230,480 229,616
Share equivalents (1)(2) 4,626 4,380 2,240
------- ------- -------
Adjusted shares outstanding (2) 237,783 234,860 231,856
======= ======= =======
Net earnings $437,804 $294,000 $232,357
======== ======== ========
</TABLE>
- -------------------
(1) Share equivalents consist primarily of nonqualified stock options.
(2) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
MANAGEMENT'S DISCUSSION AND ANALYSIS
SUMMARY
Medtronic is the world's leading medical technology company specializing in
implantable and invasive therapies. Primary products include implantable
pacemaker systems used for the treatment of bradycardia, implantable
tachyarrhythmia management devices, mechanical and tissue heart valves, balloon
and guiding catheters used in angioplasty, stents, implantable neurostimulation
and drug delivery systems, and perfusion systems including blood oxygenators,
centrifugal blood pumps, cannula products, and autotransfusion and blood
monitoring systems. The company reports on three business units (Pacing, Other
Cardiovascular, and Neurological and Other) and three geographic areas (the
Americas, Europe/Middle East/Africa, and Asia/Pacific).
Fiscal 1996 was another outstanding year for the company, evidenced by the 11th
consecutive year of increases in both revenues and earnings. Net sales of $2.2
billion represent a 24.5% increase over 1995. Net sales after adjusting for the
effects of foreign currency translation increased 23.3% compared to increases of
21.0% in 1995 and 7.0% in 1994. Net earnings and earnings per share increased
48.9% and 46.9% to $437.8 million and $1.88, respectively. The growth during
1996 was the result of solid contributions from the businesses and geographic
areas and was accelerated by progress in gaining market share, expanding our
global operations, and significant new product and therapy introductions.
The company closed on three acquisitions in fiscal 1996. In November 1995, the
company acquired Pudenz-Schulte Medical Corporation (PS Medical), a manufacturer
and distributor of cerebrospinal fluid shunts and neurosurgical implants, and
Micro Interventional Systems, a developer of products for the minimally invasive
treatment of stroke and peripheral vascular disease. In April 1996, the company
acquired Synectics Medical AB (Synectics) of Stockholm, Sweden, the world leader
in the development and marketing of computer-supported systems to diagnose
disorders of the urological and digestive systems and sleep apnea. The company
closed on two additional acquisitions in early 1997 as it acquired AneuRx, Inc.,
which develops an endovascular stented graft and delivery system used in
minimally invasive aneurysm repair therapy, and Instent Inc., which designs,
develops, manufactures and markets a variety of self-expanding and
balloon-expandable stents used in a broad range of medical indications.
NET SALES
The increase in net sales from 1995 to 1996 on a constant currency basis was
primarily the result of continued unit volume increases. Selling prices for the
company's products during 1996 remained relatively stable overall despite the
market's continued focus on cost controls and competitive pricing. Sales in the
United States in 1996 increased 27.7% over the prior year, compared to 15.2% in
1995. Sales outside the United States increased 17.8% on a constant currency
basis compared to 18.2% in 1995. Sales in non-U.S. markets accounted for 43.1%
of worldwide net sales, compared with 43.8% in 1995 and 42.5% in 1994. Foreign
exchange rate movements had a favorable year-to-year impact of $21.3 million and
$59.1 million on international net sales in 1996 and 1995, respectively, and an
unfavorable impact of $30.8 million in 1994. These exchange rate movements are
caused primarily by changes in the value of the U.S. dollar versus major
European currencies and the Japanese Yen. The impact of foreign currency
fluctuations on net sales is not necessarily indicative of the impact on net
earnings due to the offsetting foreign currency impact on costs and expenses and
the company's hedging activities (see Note 3 to the consolidated financial
statements for further details on foreign currency instruments and the company's
risk management strategies with respect thereto). As reflected in Note 3,
realized losses on the company's hedging activities were offset by the
transactions being hedged and therefore are consistent with the company's risk
management strategies.
The following is a summary of sales by business unit as a percentage of total
net sales:
Year ended April 30, 1996 1995 1994
- -----------------------------------------------------------------------
Pacing 68.2% 66.0% 68.5%
Other Cardiovascular 24.1 26.5 24.0
Neurological & Other 7.7 7.5 7.5
- -----------------------------------------------------------------------
56
<PAGE>
Net sales of the Pacing business, consisting primarily of Bradycardia Pacing and
Tachyarrhythmia Management, increased 27.4% in 1996 after removing the impact of
foreign exchange rate fluctuations, versus growth of 17.1% in 1995. This
increase was attributable to strong contributions from both Bradycardia and
Tachyarrhythmia Management devices. Bradycardia unit sales of implantable pulse
generators (IPGs) achieved double digit percentage growth. Bradycardia unit
sales continued to reflect strong growth in both U.S. and non-U.S. markets,
primarily on the strength of the Thera pacemaker family worldwide and the
improved Thera (i-Series) pacemaker in Europe and the U.S. The Thera (i-Series)
pacemakers were cleared by the Food and Drug Administration (FDA) for commercial
sale in the U.S. in November 1995. In addition, the CapSure Z and CapSureFix
pacing leads were introduced during 1996. These leads reduce pacing system
energy requirements by allowing long-term use of impulses at lower intensity to
stimulate each heartbeat. The significant sales growth in Tachyarrhythmia
Management sales was primarily attributable to the company's Jewel family of
implantable cardioverter-defibrillators. Sales outside the United States were
also led by Jewel products offering single lead, Active Can technology. The
Jewel Active Can models were commercially released in the U.S. in December 1995
after receiving FDA approval.
The Thera and Jewel product lines contributed significantly to the overall sales
growth of the Company in 1996, and are expected to continue to perform well in
the future. Management believes the Pacing business is well positioned for
continued growth based on the continued cost effectiveness of the products and
the commitment to continue to develop technologically advanced products. The
innovative successors to these Pacing products, the Medtronic.Kappa family of
dual-sensor pacemakers is currently in clinical evaluation in Europe, and the
Micro Jewel implantable defibrillator received FDA approval in July 1996.
Sales within the Other Cardiovascular Business (consisting of balloon and
guiding catheters, stents, ablation systems, heart valves, perfusion and blood
management systems, cannulae and surgical accessories) increased 12.1% and 34.0%
in 1996 and 1995, respectively, after excluding the effects of foreign currency
translation. The 1996 growth is primarily attributable to guiding catheters and
stents, which experienced strong sales growth led by the Medtronic Wiktor
coronary stent in Europe and Japan. Balloon and guiding catheter unit sales
remained solid in 1996. However, declines in the average selling price for
balloon catheters in the United States more than offset the unit growth. Balloon
catheter selling prices have deteriorated over the past three years as a result
of continued price competition. It is unclear to what extent this erosion of
selling prices will continue into 1997. Also contributing to 1996 sales were
strong performances by the cannula and surgical accessories lines and the tissue
heart valve product lines. The Freestyle stentless porcine tissue heart valve
was commercially released in Europe in January 1996, and is currently in U.S.
clinical evaluation. Revenues in 1996 also reflect the November 1995 acquisition
of Micro Interventional Systems. Growth in these product lines was partially
offset by less than anticipated sales of perfusion and blood management systems,
as these product lines were impacted by delays in the release of certain new
products. However, the fourth quarter of 1996 releases of the Hemopump cardiac
assist system in Europe, the Sequestra 1000 blood processing system and the
BioTrend oxygen saturation and hematocrit system in the United States are
expected to provide sales growth potential within these product lines in 1997.
Also contributing to the increase in Other Cardiovascular sales from 1994 to
1995 were the March 1994 and April 1994 acquisitions of DLP and Electromedics,
respectively.
Net sales of the Neurological and Other businesses, primarily consisting of
implantable neurostimulation devices and drug administration systems, continued
to experience strong growth. Exclusive of the effects of foreign currency
translation, net sales grew 27.9% over the previous year compared to growth of
22.3% in 1995. This growth was led by two new products--the Mattrix spinal cord
stimulation system, introduced in worldwide markets, and the Itrel 3 spinal cord
stimulation system, already available in Europe and launched in the U.S. in
November 1995. In addition, PS Medical, which was acquired in November 1995,
contributed to the overall revenue growth.
57
<PAGE>
COSTS AND EXPENSES
The following is a summary of major costs and expenses as a percentage of net
sales:
Year ended April 30, 1996 1995 1994
- ----------------------------------------------------------------------
Cost of Products Sold 27.2% 31.0% 31.0%
Research & Development 10.9 11.0 11.2
Selling, General & Administrative 32.1 33.0 33.8
- ----------------------------------------------------------------------
Cost of products sold as a percentage of net sales decreased in 1996 as compared
to 1995. This decrease resulted from increased productivity, the impact of
favorable product and geographic mix combined with substantially increased
volumes, and the favorable impact of foreign exchange rate fluctuations,
partially offset by increased start-up costs related to new product
introductions. The efficiencies of higher production levels were most evident in
our higher margin products including bradycardia pacemakers, tachyarrhythmia
management devices and vascular stents. The favorable geographic mix resulted
primarily from strong revenue gains in Western Europe and the United States.
Cost of products sold as a percentage of net sales remained constant at 31.0% in
1995 and 1994 as a result of cost savings from increased production levels and
cost reductions efforts offset by increased start-up costs related to new
product introductions and fluctuations in product mix. Gross margins will
continue to be impacted by regulatory and competitive pricing pressures, new
product introductions, the mix of products both within and between businesses
and geographies, and the effects of foreign currency fluctuations.
The company continued its commitment and strategy of achieving long-term growth,
in part, by investing in research and development (R&D). R&D expense increased
23.7% to $236.7 million in 1996 from $191.4 million in 1995. Investing
significant resources in R&D is intended to result in future revenue growth and
market share gains by developing technological enhancements and new indications
for existing products as well as developing minimally invasive and new
technologies to address unmet patient needs and to help reduce procedural cost
and length of hospital stay. The continued success of this strategy is reflected
in the rapid market acceptance of new, technologically advanced products during
1996.
Selling, general, and administrative expense (SG&A) as a percent of sales
decreased in both 1996 and 1995, primarily due to continued overall cost
efficiencies and accelerated revenue growth.
INCOME TAXES
The company's effective income tax rate in 1996 was 34.5%, up from 33.5% in 1995
and 33.0% in 1994. The increases in the effective tax rates since 1994 were
primarily the result of the Omnibus Budget Reconciliation Act of 1993, which
increased the U.S. income tax rate and significantly reduced U.S. tax benefits
resulting from the company's operations in Puerto Rico. During 1995, the
negative impact of these changes was in part offset by increased tax credits.
Although these changes in the tax code and the recent expiration of the R&D tax
credit will continue to put upward pressure on the company's effective tax rate
in the future, management believes that the adverse impact can be minimized by
other tax planning initiatives.
58
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
SUMMARY
The company continued to strengthen its financial position during 1996. At April
30, 1996, working capital, the excess of current assets over current
liabilities, totaled $818.2 million, an increase of 26.3% over the $647.8
million at April 30, 1995. The current ratio at April 30, 1996, was 2.6:1
compared with 2.4:1 and 1.9:1 at April 30, 1995 and 1994, respectively. The
company's net cash position, defined as the sum of cash, cash equivalents, and
short-term investments less short-term borrowings and long-term debt was $385.0
million at April 30, 1996, compared to $276.0 million at April 30, 1995, and
$103.0 million at April 30, 1994. Because of its strong financial condition, the
company is well positioned to maintain its commitment to ongoing growth
strategies which include research and development spending, internal ventures,
and acquisitions.
CASH FLOW
Cash provided by operating activities was $500.5 million in 1996 compared to
$387.2 million in 1995 and $356.9 million in 1994. These operating cash flows
were more than sufficient to fund the company's capital expenditures,
acquisitions, dividends to shareholders, and stock repurchases. Capital spending
totaled $170.2 million in 1996, an increase of 63.7% over the $104.0 million in
1995. This increase in capital spending was primarily the result of spending
associated with the enhanced model 9790 programmer and facility expansions.
Capital spending in 1995 increased 20.9% from 1994, mainly associated with
spending on the original 9790 programmer. 1994 capital spending reflected a
decrease of 1.6%. The company expects future growth in capital spending to
support increased manufacturing capacity and operational requirements. This
spending will be financed primarily by funds from operations. Repurchases of
common stock totaled $33.6 million in 1996, compared to $59.1 million and $53.4
million in 1995 and 1994, respectively.
In addition to capital spending and stock repurchase activity, significant items
affecting cash flows during 1996 included the cash purchase price paid for the
acquisition of Synectics of approximately $56.0 million, net purchases of
marketable securities totaling $190.3 million, and dividends to shareholders
totaling $60.4 million. For further details related to the acquisition of
Synectics, see Note 2 to the consolidated financial statements.
In addition to capital spending and stock repurchase activity, significant items
affecting cash flows in 1995 included $39.1 million paid for settlement of
payables related to 1994 acquisitions, dividends to shareholders totaling $47.2
million, and $36.2 million reduction of debt. Cash flows from increases and
decreases in operating assets and liabilities essentially offset each other.
During 1994, the cash portion of the purchase price paid for the acquisitions of
DLP, Electromedics, Inc., Carbon Implants, Inc., and CardioRhythm, was
approximately $189.4 million. In addition to acquisitions, capital spending, and
stock repurchases, the company's cash position was favorably impacted by the
timing of income tax payments, ongoing royalty income, and increases in
liabilities.
59
<PAGE>
DEBT AND CAPITAL
At April 30, 1996, the total common stock shares authorized by the Board of
Directors for repurchase was approximately 14.1 million shares. During 1996,
approximately 0.7 million shares were repurchased at an average cost of $51.21
per share. During 1995, approximately 3.0 million shares were repurchased at an
average price of $19.20 per share. The company repurchased shares in 1996 and
1995 to partially offset dilution resulting from the issuance of stock under
employee benefit plans, shares issued in conjunction with the acquisitions of PS
Medical, and Electromedics, Inc., and to take advantage of market conditions.
Future repurchases of common stock will depend upon market conditions, the
company's cash position, restrictions related to pooling transactions, and other
factors.
Dividends to shareholders were $60.4 million, $47.2 million, and $39.0 million
in 1996, 1995, and 1994, respectively. Consistent with the company's financial
objectives, the company expects to continue paying dividends at a rate of
approximately 20% of the previous year's net earnings.
The company's capital structure consists of equity and interest-bearing debt.
Interest-bearing debt as a percent of total capital was 4.1% at April 30, 1996,
compared with 3.4% and 6.9% at April 30, 1995, and 1994, respectively.
One of the company's key financial objectives is achieving an annual return on
equity (ROE) of at least 20%. ROE compares net earnings to average shareholders'
equity and is a key measure of management's ability to utilize the shareholders'
investment in the company effectively. In 1996, ROE was 28.0%, up 3.4 percentage
points over the 24.6% in 1995. In 1994, ROE was 24.5% and in each of the
preceding six years, ROE exceeded 20%.
GOVERNMENT REGULATION AND OTHER MATTERS
Government and private sector initiatives to limit the growth of health care
costs, including price regulation and competitive pricing, are continuing in
several countries where the company does business, including the United States.
These changes are causing the marketplace to put increased emphasis on the
delivery of more cost-effective medical therapies. Although the company believes
it is well positioned to respond to changes resulting from this worldwide trend
toward cost containment, the uncertainty as to the outcome of any proposed
legislation or changes in the marketplace preclude the company from predicting
the impact these changes may have on future operating results.
In the early 1990s the review time by the FDA to clear medical devices for
commercial release lengthened and the number of approvals, both of 510(k)
submissions and pre-market approval applications (PMAs), decreased. In response
to public and congressional concern, the FDA has attempted to address these
issues by approving more 510(k) submissions and approving them more quickly.
Some progress has also been made in the number of PMAs and PMA-Supplements
approved, but review times for leading-edge, innovative products remain long.
While the trend is in the right direction, the lengthy approval time remains a
significant issue and various legislative solutions to resolve this are
currently before the U.S. Congress.
In calendar 1994, the U.S. Health Care Financing Administration (HCFA), which
establishes Medicare reimbursement policy and practice, determined that medical
devices not cleared for commercial release by the FDA should not be reimbursed
by Medicare. This action for a period of time virtually prevented Medicare
patients from receiving the more advanced devices used in clinical trials and
provided strong incentives for clinical research to move to non-U.S. markets. In
calendar 1995, HCFA changed its position by permitting Medicare reimbursement
for devices that are next-generation improvements of devices previously cleared
for marketing. HCFA also clarified that reimbursement would be allowed for
previously cleared devices that are used for new indications. Since most devices
in clinical trials fall into one of these two categories, these changes have
addressed the concerns created by Medicare's 1994 initiatives.
In keeping with the increased emphasis on cost effectiveness in health care
delivery, the current trend among hospitals and other customers of medical
device manufacturers is to consolidate into larger purchasing groups to enhance
purchasing power. The medical device industry has also been consolidating
rapidly, partly in order to offer a broader range of products to large
purchasers. As a result, transactions with customers are more significant, more
complex and tend to involve more long-term contracts than in the past. This
enhanced purchasing power may also increase the pressure on product pricing,
although management is unable to estimate the potential impact at this time.
Management believes that in this climate it is increasingly important to offer a
full line of products in order to better serve the many requirements of
multi-hospital purchasers.
Medtronic is also subject to various environmental laws and regulations both in
the United States and abroad. The operations of the company, like those of other
medical device companies, involve the use of substances regulated under
environmental laws, primarily in manufacturing and sterilization processes.
While it is difficult to quantify the potential impact of compliance with
environmental protection laws, management believes that such compliance will not
have a material impact on the company's financial position, results of
operations or liquidity.
The company operates in an industry susceptible to significant product liability
claims. In recent years, there has been an increased public interest in product
liability claims for implanted medical devices, including pacemakers and leads.
These claims may be brought by individuals seeking relief for themselves or,
increasingly, by groups seeking to represent a class, and the company has
experienced an increase in such claims. In June 1996, the company lost a case
(Lohr v. Medtronic) before the U.S. Supreme Court to determine whether a device
cleared by the FDA for commercial release can later be challenged as unsafe.
While this outcome could potentially increase the cost to the company, and other
medical device makers, to defend product liability claims, it is not expected to
have a material adverse financial impact on the company. In addition, product
liability claims may be asserted against the company in the future relative to
events not known to management at the present time. Management believes that the
company's risk management practices, including insurance coverage, are
reasonably adequate to protect against potential product liability losses.
60
<PAGE>
REPORT OF MANAGEMENT
The management of Medtronic, Inc., is responsible for the integrity of the
financial information presented in the annual report. The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles. Where necessary, they reflect estimates based on management's
judgment.
Management relies upon established accounting procedures and related systems of
internal control for meeting its responsibilities to maintain reliable financial
records. These systems are designed to provide reasonable assurance that assets
are safeguarded and that transactions are properly recorded and executed in
accordance with management's intentions. Internal auditors periodically review
the accounting and control systems, and these systems are revised if and when
weaknesses or deficiencies are found.
The Audit Committee of the Board of Directors, composed of directors from
outside the company, meets regularly with management, the company's internal
auditors, and its independent accountants to discuss audit scope and results,
internal control evaluations, and other accounting, reporting, and financial
matters. The independent accountants and internal auditors have access to the
Audit Committee without management's presence.
/s/ William W. George
William W. George
President and Chief Executive Officer
/s/ Arthur D. Collins, Jr.
Arthur D. Collins, Jr.
Chief Operating Officer
/s/ Robert L. Ryan
Robert L. Ryan
Senior Vice President and Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of Medtronic, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
statements of consolidated earnings and consolidated cash flows present fairly,
in all material respects, the financial position of Medtronic, Inc., and its
subsidiaries at April 30, 1996 and 1995, and the results of their operations and
their cash flows for each of the three years in the period ended April 30, 1996,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Minneapolis, Minnesota
May 22, 1996
61
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED EARNINGS
(in thousands of dollars, except per share data) Medtronic, Inc.
Year ended April 30, 1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $ 2,169,114 $ 1,742,392 $ 1,390,922
COSTS AND EXPENSES:
Cost of products sold 589,710 540,080 431,668
Research and development expense 236,684 191,351 156,314
Selling, general, and administrative expense 695,550 574,624 470,266
Interest expense 7,960 9,007 8,208
Interest income (29,193) (14,775) (8,373)
Gain on sale of subsidiary -- -- (13,962)
----------- ----------- -----------
TOTAL COSTS AND EXPENSES 1,500,711 1,300,287 1,044,121
----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES 668,403 442,105 346,801
PROVISION FOR INCOME TAXES 230,599 148,105 114,444
----------- ----------- -----------
NET EARNINGS $ 437,804 $ 294,000 $ 232,357
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 233,157 230,480 229,616
EARNINGS PER SHARE $ 1.88 $ 1.28 $ 1.01
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
62
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(in thousands of dollars) Medtronic, Inc.
April 30, 1996 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 110,306 $ 98,292
Short-term investments 350,541 225,357
Accounts receivable, less allowance for doubtful
accounts of $18,094 and $22,416 456,770 413,942
Inventories:
Finished goods 118,948 97,048
Work in process 61,000 59,311
Raw materials 77,400 65,573
----------- -----------
Total Inventories 257,348 221,932
Deferred tax assets 120,899 92,563
Prepaid expenses and other current assets 47,370 51,823
----------- -----------
TOTAL CURRENT ASSETS 1,343,234 1,103,909
PROPERTY, PLANT, AND EQUIPMENT:
Land and land improvements 22,931 17,920
Buildings and leasehold improvements 189,228 174,592
Equipment 559,752 501,134
Construction in progress 61,792 21,830
----------- -----------
833,703 715,476
Accumulated depreciation (418,411) (384,415)
----------- -----------
Net Property, Plant, and Equipment 415,292 331,061
GOODWILL, net of accumulated amortization
of $52,589 and $39,990 386,046 278,724
OTHER INTANGIBLE ASSETS, net of accumulated
amortization of $40,738 and $31,482 85,605 84,622
LONG-TERM INVESTMENTS 219,838 108,404
OTHER ASSETS 53,283 40,012
----------- -----------
TOTAL ASSETS $ 2,503,298 $ 1,946,732
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 60,524 $ 33,474
Accounts payable--trade 53,899 25,369
Accounts payable--other 43,528 54,846
Accrued compensation 116,213 109,990
Accrued income taxes 110,365 119,018
Other accrued expenses 140,519 113,432
----------- -----------
TOTAL CURRENT LIABILITIES 525,048 456,129
LONG-TERM DEBT 15,336 14,200
DEFERRED TAX LIABILITIES 45,744 35,856
OTHER LONG-TERM LIABILITIES 127,865 105,534
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock--par value $1.00; 2,500,000
shares authorized, none outstanding
Common stock--par value
$.10; 800,000,000 shares authorized,
234,317,826 and 231,018,850 shares issued
and outstanding 23,432 23,102
Retained earnings 1,797,220 1,318,043
Cumulative translation adjustments (2,675) 23,848
----------- -----------
1,817,977 1,364,993
Receivable from Employee Stock Ownership Plan (28,672) (29,980)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,789,305 1,335,013
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,503,298 $ 1,946,732
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
63
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED CASH FLOWS
(in thousands of dollars) Medtronic, Inc.
Year ended April 30, 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 437,804 $ 294,000 $ 232,357
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 111,776 106,502 78,577
Gain on sale of subsidiary, net of tax -- -- (9,424)
Deferred income taxes (33,106) 692 (3,150)
Changes in operating assets and liabilities:
Increase in accounts receivable (45,974) (48,534) (8,635)
Decrease (increase) in inventories (30,589) 7,165 (8,087)
(Increase) decrease in prepaid expenses and other assets 11,956 (37,609) 8,954
Increase in accounts payable and accrued liabilities 31,479 62,103 18,137
(Decrease) increase in accrued income taxes (5,174) 7,931 37,653
(Decrease) increase in deferred income 1,230 (24,775) 400
(Decrease) increase in postretirement benefit accrual 2,272 (452) 2,156
Increase in other long-term liabilities 18,824 20,154 7,918
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 500,498 387,177 356,856
INVESTING ACTIVITIES
Additions to property, plant, and equipment (163,767) (96,862) (60,799)
Acquisitions, net of cash acquired (55,958) -- (189,440)
Proceeds from sale of subsidiary -- -- 21,000
Sales and maturities of marketable securities 465,215 158,462 92,985
Purchases of marketable securities (655,510) (289,235) (109,346)
Other investing activities (19,896) (12,361) (12,463)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (429,916) (239,996) (258,063)
FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings 14,186 (29,270) (28,285)
Payments on long-term debt (4,062) (8,150) (16,265)
Issuance of long-term debt 681 1,265 8,066
(Decrease) increase in acquisition price payable -- (39,130) 45,630
Dividends to shareholders (60,427) (47,226) (38,985)
Repurchase of common stock (33,574) (59,079) (53,423)
Issuance of common stock 24,846 21,874 16,339
--------- --------- ---------
NET CASH USED IN FINANCING ACTIVITIES (58,350) (159,716) (66,923)
Effect of exchange rate changes on cash and cash equivalents (218) 2,107 (144)
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 12,014 (10,428) 31,726
Cash and cash equivalents at beginning of year 98,292 108,720 76,994
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 110,306 $ 98,292 $ 108,720
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 258,703 $ 131,731 $ 73,858
Interest 8,005 9,249 8,346
--------- --------- ---------
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for acquisition of
subsidiary, net of cash acquired $ 73,951 $ -- $ 56,177
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
64
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars, except per share data) Medtronic, Inc.
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Medtronic operates in a single industry segment as the world's leading medical
technology company specializing in implantable and invasive therapies. The
company does business in more than 120 countries. Primary products include
implantable pacemaker systems used for the treatment of bradycardia, implantable
tachyarrhythmia management devices, mechanical and tissue heart valves, balloon
and guiding catheters used in angioplasty, stents, implantable neurostimulation
and drug delivery systems, and perfusion systems including blood oxygenators,
centrifugal blood pumps, cannula products, and autotransfusion and blood
monitoring systems. The company generally markets its products through a direct
sales force in the United States and a combination of direct sales
representatives and independent distributors in international markets. The main
markets for products are the United States, Western Europe and Japan.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Medtronic, Inc.,
and all of its subsidiaries. All significant intercompany transactions and
accounts have been eliminated. Certain prior period amounts have been
reclassified to conform to the 1996 presentation.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH EQUIVALENTS
The company considers temporary cash investments with maturities of three months
or less from the date of purchase to be cash equivalents.
REVENUE RECOGNITION
The company recognizes revenue from product sales when the goods are shipped to
its customers.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost determined on a
first-in, first-out basis.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is stated at cost. Additions and improvements are
capitalized. Maintenance and repairs are expensed as incurred. Depreciation is
provided using the straight-line method over the estimated useful lives of the
various assets.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of cost over net assets of businesses acquired,
while other intangible assets consist primarily of purchased technology and
patents. These assets are being amortized using the straight-line method over
their estimated useful lives, of which periods up to 24 years remain.
LONG-LIVED ASSETS
Statement of Financial Accounting Standard (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. SFAS No. 121 requires that impairment losses be
recorded when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The Company adopted SFAS No. 121 in 1996. Such adoption did not
have a material effect on the Company's results of operations, cash flows or
financial position.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed when incurred.
FOREIGN CURRENCY TRANSLATION
Essentially all assets and liabilities are translated to U.S. dollars at
year-end exchange rates, while elements of the income statement are translated
at average exchange rates in effect during the year. Adjustments arising from
the translation of most net assets located outside the United States are
recorded as a component of shareholders' equity.
ROYALTY INCOME
Income earned from royalty and license agreements is recorded as a reduction of
selling, general, and administrative expense.
EARNINGS PER SHARE
Earnings per share of common stock are computed by dividing net income by the
weighted average number of shares outstanding during the period.
NOTE 2--ACQUISITIONS AND DIVESTITURES
ACQUISITIONS
On November 2, 1995, the company acquired all of the outstanding capital stock
of Pudenz-Schulte Medical Corporation (PS Medical) for approximately 1,262,000
shares of the company's common stock. In March 1996, upon the achievement of a
specified milestone, the company made an additional payment of approximately
96,000 shares of the company's common stock. In addition, the company may pay
additional future payments of the company's common stock contingent upon
achieving specified milestones. These contingent payments, if any, will be
reflected as acquisition costs when the contingencies are resolved. PS Medical
manufactures and distributes cerebrospinal fluid shunts and neurosurgical
implants such as catheters, reservoirs and fluid drainage systems.
65
<PAGE>
On November 3, 1995, the company issued approximately 1,246,000 shares of the
company's common stock for all of the outstanding common stock of Micro
Interventional Systems, Inc. (MIS) a developer of products for the minimally
invasive treatment of stroke and other diseases. The merger has been accounted
for as a pooling-of-interests, and, accordingly the company's consolidated
financial statements for the first two quarters of fiscal year 1996 have been
restated to include MIS' results. Prior year activity has not been restated as
the impact of the merger in prior years is not considered material, and
restatement is therefore not required. Net sales and net results for the
individual entities are not presented as the activity is not deemed to be
material.
On April 26, 1996, the company acquired the remaining outstanding stock of
Synectics Medical AB (Synectics) at a cost of approximately $59.3 million in
cash. The company had previously purchased approximately 8% of the outstanding
stock of Synectics. Synectics, of Stockholm, Sweden, is the world leader in the
development and marketing of computer-supported systems used to diagnose
disorders of the urological and digestive systems and sleep apnea.
In March 1994, the company acquired substantially all of the assets and
liabilities of DLP, Inc., for approximately $128.3 million in cash. DLP is the
market leader in the development, manufacture, and sale of cannula products used
in heart surgery.
In April 1994, the company acquired all of the outstanding shares of
Electromedics, Inc., for approximately $95.3 million. The purchase price
consisted of approximately $39.1 million payable in cash and approximately
1,555,000 shares of the company's common stock valued at $56.2 million.
Electromedics designs, manufactures, and markets blood management and blood
conservation equipment for use in autotransfusion during major medical
procedures.
In April 1994, the company acquired all of the remaining outstanding common
stock of Carbon Implants, Inc., a designer and manufacturer of implantable
prosthetic heart valves. The total purchase price was approximately $34.6
million in cash.
The acquisitions of PS Medical, Synectics, DLP, Electromedics, and Carbon
Implants were accounted for as purchases. Accordingly, the results of operations
of the acquired entities have been included in the company's consolidated
financial statements since the respective dates of acquisition. Acquired
goodwill, patents, trademarks, and other intangible assets associated with these
acquisitions are being amortized using the straight-line method over periods
ranging from 8 to 25 years.
In 1994, the company made additional payments of $6.5 million to settle
substantially all remaining obligations existing at the acquisition date related
to the May 1992 acquisition of CardioRhythm. These payments were recorded as
additions to the initial price of the acquisition.
DIVESTITURES
In July 1993, the company sold substantially all the assets of its Andover
Medical, Inc. subsidiary for $21.0 million, recognizing a pretax gain of $14.0
million. Andover Medical developed, manufactured, and marketed external
electrodes used primarily with electrical nerve stimulation and neuromuscular
stimulation devices. Exclusive of the gain recognized, this transaction did not
have a significant impact on the company's operating results.
NOTE 3--FINANCIAL INSTRUMENTS
The fair value of cash and cash equivalents, receivables, and short-term debt
approximate their carrying value due to their short maturities. The carrying
amounts and estimated fair values of the company's other significant financial
instruments were as follows:
April 30, 1996 1995
- ---------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ---------------------------------------------------------------------------
ASSETS
Short-term investments $350,541 $350,541 $225,357 $226,031
Long-term investments 219,838 219,838 108,404 108,404
Net purchased currency
options 210 210 -- --
LIABILITIES
Short-term debt 60,524 60,524 33,474 33,474
Long-term debt 15,336 17,181 14,200 15,427
Forward exchange
contracts -- -- 29,293 29,293
- ---------------------------------------------------------------------------
The fair value of certain short-term and long-term investments are based on
quoted market prices for those or similar investments. For long-term investments
which have no quoted market prices and are accounted for on a cost basis, a
reasonable estimate of fair value was made using available market and financial
information. The fair value of long-term debt is based on the current rates
offered to the company for debt of similar maturities. The estimates presented
above on long-term financial instruments are not necessarily indicative of the
amounts that would be realized in a current market exchange. The fair value of
foreign currency instruments were estimated based on quoted market prices at
April 30, 1996 and 1995.
On May 1, 1994, the company adopted Statement of Financial Accounting Standard
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." SFAS No. 115 requires that all investments in debt securities and
investments in equity securities that have readily determinable fair values be
classified and accounted for in one of three categories: held-to-maturity,
trading, or available-for-sale. Held-to-maturity securities are recorded at
amortized cost in short-term and long-term investments. Available-for-sale
securities are recorded at fair value in short-term or long-term investments
with the change in fair value during the period excluded from earnings and
recorded net of tax as a component of shareholders' equity. Prior to May 1,
1994, investments were recorded at the lower of cost or market. Adoption of this
statement did not materially impact the company's financial position and had no
impact on operating results.
At April 30, 1996 and 1995, available-for-sale investments included only equity
securities. The cost, gross unrealized holding gains, gross unrealized holding
losses and fair value for available-for-sale securities at April 30, 1996 and
1995 were as follow:
Gross Gross
Unrealized Unrealized
Holding Holding
Cost Gains Losses Fair Value
- ------------------------------------------------------------------------
April 30, 1996 32,046 87,795 1,524 118,317
April 30, 1995 19,469 48,233 4,015 63,687
- ------------------------------------------------------------------------
At April 30, 1996 and 1995, the net unrealized gain associated with
available-for-sale securities of $55,929 and $28,742 respectively, net of tax of
$30,342 and $15,476, was included in retained earnings. Proceeds from the sale
of available-for-sale securities during 1996 were $2,829. Net gains included in
income in 1996 were $1,014. There were no sales of available-for-sale securities
during 1995.
Held-to-maturity investments at April 30, 1996 consisted primarily of U.S.
government and corporate debt securities, all of which mature within three
years. These securities were carried at amortized cost of $468,141 and have a
fair value of $468,141.
FOREIGN CURRENCY INSTRUMENTS
A significant portion of the company's cash flows is derived from sales
denominated in foreign currencies. To the extent that the U.S. dollar value of
sales denominated in foreign currencies fluctuates as a result of a
strengthening or weakening dollar, the company's ability to fund dollar-based
strategic initiatives at a consistent level may be impaired. In order to reduce
the uncertainty of foreign exchange rate movements on sales denominated in
foreign currencies, the company enters into Derivative Financial Instruments in
the form of forward exchange and option contracts with major international
financial institutions. These forward and option contracts, which typically
expire within one year, are designed to hedge anticipated foreign currency
transactions. Such transactions, primarily export intercompany sales, occur
throughout the year and are probable but not firmly committed.
The company had contracts to exchange foreign currencies, principally the
Japanese Yen and German Mark, for U.S. dollars in the following notional
amounts:
April 30, 1996 1995
- ------------------------------------------------------------------
Forward exchange contracts $ -- $431,504
- ------------------------------------------------------------------
Put options (1,686) --
Call options 1,896 --
- ------------------------------------------------------------------
Net purchased currency options $ 210 $ --
- ------------------------------------------------------------------
The company had aggregate foreign currency transaction losses, primarily related
to forward contracts, of $20,789, $57,715, and $10,025 in 1996, 1995, and 1994,
respectively. Realized losses on these contracts were offset by the gains on
assets, liabilities, and transactions being hedged. Forward contracts and net
premium on option contracts in existence at the balance sheet date are recorded
at their fair value. Gains and losses on forward and option contracts are
recorded in selling, general, and administrative expense.
CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject the company to significant
concentrations of credit risk, consist principally of cash investments, foreign
currency exchange contracts, and trade accounts receivable.
The company maintains cash and cash equivalents, investments, and certain other
financial instruments with various major financial institutions. The company
performs periodic evaluations of the relative credit standing of these financial
institutions and limits the amount of credit exposure with any institution.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of customers and their dispersion across many
geographic areas. However, a significant amount of trade receivables are with
national health care systems in several countries. Although the company does not
currently foresee a credit risk associated with these receivables, repayment is
dependent upon the financial stability of those countries' national economies.
66
<PAGE>
NOTE 4--DEBT
Debt consisted of the following at April 30:
Average
Short-Term Debt Interest Rate 1996 1995
- ----------------------------------------------------------------------
Bank borrowings 4.5% $57,880 $30,819
Current portion of
long-term debt 7.3% 2,644 2,655
- ----------------------------------------------------------------------
Total Short-Term Debt $60,524 $33,474
- ----------------------------------------------------------------------
Average Maturity
Long-Term Debt Interest Rate Date 1996 1995
- ----------------------------------------------------------------------
Various notes 6.8% 1997-2007 $11,371 $10,207
Capitalized lease
obligations 9.3% 1997-2009 3,965 3,993
- ----------------------------------------------------------------------
Total Long-Term Debt $15,336 $14,200
- ----------------------------------------------------------------------
Short-term borrowings consisted primarily of non-U.S. bank borrowings used for
foreign exchange purposes. The company has existing lines of credit of $513
million with various banks, of which $455 million was unused at April 30, 1996.
Maturities of long-term debt for the next five years are as follows: 1997,
$2,644; 1998, $6,700; 1999, $2,469; 2000, $1,869; 2001, $484; thereafter,
$3,814.
NOTE 5--SHAREHOLDERS' EQUITY
Changes in shareholders' equity accounts were as follows:
Cumulative Receivable
Common Retained Translation from
Stock Earnings Adjustments ESOP
- --------------------------------------------------------------------------
BALANCE, APRIL 30, 1993 $5,782 $ 870,303 $ (1,057) $(33,550)
Net earnings 232,357
Dividends paid (38,985)
Issuance of common stock
under employee benefit
and incentive plans 39 16,300
Issuance of common stock in
acquisition of subsidiary 78 56,099
Repurchase of common stock (86) (53,337)
Income tax benefit from
restricted stock and
nonstatutory stock options 6,944
Translation adjustments (8,645)
Repayment from ESOP 1,250
- --------------------------------------------------------------------------
BALANCE, APRIL 30, 1994 $5,813 $1,089,681 $(9,702) $(32,300)
Net earnings 294,000
Dividends paid (47,226)
Two-for-one stock split 5,745 (5,745)
Issuance of common stock
under employee benefit
and incentive plans 70 21,804
Repurchase of common stock (77) (59,002)
Unrealized gain on investments, 28,742
net of tax
Income tax benefit from
restricted stock and
nonstatutory stock options 7,340
Translation adjustments 33,550
Repayment from ESOP 2,320
- --------------------------------------------------------------------------
BALANCE, APRIL 30, 1995 $11,551 $1,329,594 $23,848 $(29,980)
as previously reported
- --------------------------------------------------------------------------
Cumulative Receivable
Common Retained Translation from
Stock Earnings Adjustments ESOP
- --------------------------------------------------------------------------
Adjustment for pooling of
interests (3,757)
- --------------------------------------------------------------------------
Balance, April 30, 1995 $11,551 $1,325,837 $23,848 $(29,980)
Net earnings 437,804
Dividends paid (60,427)
Two-for-one stock split 11,560 (11,560)
Issuance of common stock
under employee benefit
and incentive plans 126 24,720
Issuance of common stock in
acquisition of
subsidiaries 261 80,666
Repurchase of common stock (66) (33,508)
Unrealized gain on investments,
net of tax 27,187
Income tax benefit from restricted
stock and nonstatutory
stock options 6,501
Translation adjustments (26,523)
Repayment from ESOP 1,308
- --------------------------------------------------------------------------
Balance, April 30, 1996 $23,432 $1,797,220 $(2,675) $(28,672)
- --------------------------------------------------------------------------
At April 30, 1996, Board of Directors' authorization existed to repurchase
approximately 14.1 million shares of the company's common stock.
On August 30, 1995, the Board of Directors approved a two-for-one common stock
split, paid September 29, 1995 in the form of a 100 percent stock dividend to
shareholders of record at the close of business on September 14, 1995. The stock
split resulted in the issuance of 115,601 thousand additional shares and the
reclass of $11,560 from retained earnings to common stock, representing the par
value of the shares issued. On August 31, 1994, the Board of Directors approved
a two-for-one common stock split, paid September 30, 1994 in the form of a 100
percent stock dividend to shareholders of record at the close of business on
September 15, 1994. The stock split resulted in the issuance of 57,452 thousand
additional shares and the reclass of $5,745 from retained earnings to common
stock, representing the par value of the share issued. All references in the
financial statements to per share information, number of shares, except shares
authorized, and related share prices have been restated to reflect these stock
splits.
A shareholder rights plan exists which provides for a dividend distribution of
one right to be attached to each share of common stock. The rights are currently
not exercisable or transferable apart from the common stock. The basic right
entitles the holder to purchase one eight-hundredth of a share of a new series
of participating preferred stock, which is substantially equivalent to one share
of common stock, at an exercise price of $75 per share. These rights would
become exercisable if a person or group acquires 15% or more of the company's
common stock or announces a tender offer which would increase the person's or
group's beneficial ownership to 15% or more of the company's common stock,
subject to certain exceptions. After the rights become exercisable, each right
entitles the holder, (other than the 15% holder) instead, to purchase common
stock having a market price of two times the exercise price. If the company is
acquired in a merger or other business combination transaction, each exercisable
right entitles the holder to purchase common stock of the acquiring company or
an affiliate having a market price of two times the exercise price of the right.
In certain events the Board of Directors may exchange rights for common stock or
equivalent securities having a market price equal to the exercise price of the
rights. Each right is redeemable at $.00125 any time before a person or group
triggers the 15% ownership threshold. The rights expire on July 10, 2001.
67
<PAGE>
NOTE 6--EMPLOYEE STOCK OWNERSHIP PLAN
The company has an Employee Stock Ownership Plan (ESOP) for eligible U.S.
employees. In December 1989, the ESOP borrowed $40,000 from the company and used
the proceeds to purchase 4,733,232 shares of the company's common stock. The
company makes annual contributions to the plan which are used, in part, by the
ESOP to make loan and interest payments. Expenses related to the ESOP are based
on debt service requirements less any dividends received by the ESOP on the
company's common stock. This amount is further adjusted by any additional
company contribution necessary to meet an annual targeted benefit level.
Compensation and interest expense recognized were as follows:
Year ended April 30, 1996 1995 1994
- ------------------------------------------------------------------
Interest expense $2,698 $2,907 $3,020
Dividends paid 1,310 992 811
- ------------------------------------------------------------------
Net interest expense 1,388 1,915 2,209
Compensation expense 1,316 2,327 3,588
- ------------------------------------------------------------------
Total expense $2,704 $4,242 $5,797
- ------------------------------------------------------------------
Shares of common stock acquired by the plan are allocated to each employee in
amounts based on company performance and the employee's annual compensation. At
April 30, 1996 and 1995, allocated shares were 1,910,422 and 1,405,084,
respectively, shares committed-to-be released were 234,473 and 305,420,
respectively, and unallocated shares were 3,128,693 and 3,434,113, respectively.
Unallocated shares are released based on the ratio of current debt service to
total remaining principle and interest. The loan from the company to the ESOP is
repayable over 20 years, ending on April 30, 2010. Interest is payable annually
at a rate of 9.0%. The receivable from the ESOP is recorded as a reduction of
the company's shareholders' equity and allocated and unallocated shares of the
ESOP are treated as outstanding common stock in the computation of earnings per
share.
NOTE 7--STOCK PURCHASE AND AWARD PLANS
1994 STOCK AWARD PLAN EFFECTIVE
April 29, 1994, the Board of Directors and shareholders approved the 1994 stock
award plan which replaced the stock option, stock award, and non-employee
director restricted stock plans. The 1994 stock award plan provides for the
grant of nonqualified and incentive stock options, stock appreciation rights,
performance shares, restricted stock in lieu of the annual retainer to
non-employee directors, and other stock-based awards. There were 8,946,791
shares available under this plan for future grants at April 30, 1996.
Under the provisions of the 1994 stock award plan, nonqualified stock options
and other stock awards are granted to officers and key employees at prices not
less than fair market value at the date of grant. In addition, awards granted
under the previous nonqualified stock option and stock award plans as well as
stock options assumed as a result of acquisition transactions remain outstanding
though no additional awards will be made under these plans.
A summary of nonqualified option transactions is as follows:
Option Price
Range Per Number of Expiration
Share Shares Date
- ----------------------------------------------------------------------
Outstanding at
May 1, 1994 $ 1.67 - 24.50 6,371,660 1995 - 2004
Granted 18.94 - 35.00 959,350 2000 - 2005
Exercised 1.67 - 26.50 736,842 1995 - 2005
Cancelled 7.53 - 26.50 83,884 2000 - 2005
- ----------------------------------------------------------------------
Outstanding at
April 30, 1995 $ 2.67 - 35.00 6,510,284 1996 -2005
Granted 36.69 - 59.25 708,216 2001 - 2006
Exercised 2.67 - 26.50 621,671 1996 - 2006
Cancelled 7.53 - 54.13 66,459 2001 - 2006
- ----------------------------------------------------------------------
Option Price
Range Per Number of Expiration
Share Shares Date
- ----------------------------------------------------------------------
Outstanding at
April 30, 1996 $ 4.88 - 59.25 6,530,370 1997 - 2006
Exercisable at
April 30, 1995 2.67 - 26.50 3,684,158 1996 - 2005
- ----------------------------------------------------------------------
April 30, 1996 4.88 - 54.13 4,185,351 1997 - 2006
- ----------------------------------------------------------------------
In addition, stock options outstanding and exercisable at April 30, 1996 as
a result of a 1996 acquisition transaction were 44,010 and 6,825, respectively.
These options have a price range per share of $0.55 - 2.71 and $0.55 - 1.55,
respectively, and expire 1997-2005. No additional awards will be made under this
plan.
Nonqualified options are normally exercisable beginning one year from the date
of grant in cumulative yearly amounts of 25 percent of the shares under option.
However, certain nonqualified options granted in foreign locations are
exercisable immediately due to local tax law requirements.
Restricted stock and performance share awards are dependent upon continued
employment and, in the case of performance shares, achievement of certain
performance objectives. In 1996, 109,495 restricted shares were issued and
73,040 shares of common stock were issued pursuant to previous performance share
grants. At April 30, 1996, total restricted shares outstanding under both the
1994 stock award plan and the previous restricted stock and performance share
award plans were 1,020,363. Performance share awards for up to 468,152 shares,
assuming maximum performance payout, were outstanding under the two plans at
April 30, 1996. The actual number of performance shares awarded may vary
depending on the degree to which the performance objectives are met. The cost of
the restricted stock is generally expensed over five years from the date of
issuance ($4,375 in 1996, $3,797 in 1995, and $4,205 in 1994). The estimated
cost of the performance shares is expensed over three years from the date of
grant ($10,313 in 1996, $8,840 in 1995, and $3,131 in 1994).
STOCK PURCHASE PLAN
The stock purchase plan enables employees to contribute up to 10% of their wages
toward purchase of the company's common stock at 85% of the market value.
Employees purchased 761,682 shares at $22.10 per share in 1996. As of April 30,
1996, plan participants have had approximately $11,276 withheld to purchase
shares at a price of $50.89 per share, or 85% of the market value of the
company's common stock at October 31, 1996, whichever is less.
Common stock to be issued under all outstanding grants pursuant to the 1994
stock award plan, the stock purchase plan, and the previous individual stock
option and award plans does not have a material dilutive effect on reported
earnings per share.
Statement of Financial Accounting Standard (SFAS) No. 123 "Accounting for
Stock-Based Compensation" requires companies to measure employee stock
compensation plans based on the fair value method of accounting. However, the
statement allows the alternative of continued use of Accounting Principles Board
Opinion (APB) No. 25, "Accounting for Stock Issued to Employees" with pro forma
disclosure of net income and earnings per share determined as if the fair value
method had been applied in measuring compensation cost. The Company is required
to adopt SFAS No. 123 in fiscal 1997 and expects to elect the continued use of
APB No. 25.
68
<PAGE>
NOTE 8--INCOME TAXES
The company provides for income taxes in accordance with Statement of Financial
Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109
is an asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of other assets and
liabilities.
The provision for income taxes is based on earnings before income taxes reported
for financial statement purposes. The components of earnings before income taxes
were:
Year ended April 30, 1996 1995 1994
- -------------------------------------------------------------------------------
United States $532,297 $356,758 $279,220
Non-U.S. 136,106 85,347 67,581
- -------------------------------------------------------------------------------
Earnings before income taxes $668,403 $442,105 $346,801
- -------------------------------------------------------------------------------
The provision for income taxes consisted of:
Year ended April 30, 1996 1995 1994
- -------------------------------------------------------------------------------
Taxes currently payable:
U.S. federal $154,941 $ 80,023 $ 64,840
U.S. state and other 35,696 22,297 21,268
Non-U.S. 62,658 45,717 29,859
- -------------------------------------------------------------------------------
Total currently payable 253,295 148,037 115,967
Deferred tax (benefit) expense:
U.S. federal (34,232) (1,955) (7,049)
U.S. state and other (2,526) 2,755 (2,459)
Non-U.S. 3,495 (9,925) 1,539
- -------------------------------------------------------------------------------
Net deferred tax benefit (33,263) (9,125) (7,969)
Tax expense credited directly to
shareholders' equity 10,567 9,193 6,446
- -------------------------------------------------------------------------------
Total provision $230,599 $ 148,105 $114,444
- -------------------------------------------------------------------------------
Deferred tax assets (liabilities) were comprised of the following:
April 30, 1996 1995
- -------------------------------------------------------------------------------
Deferred tax assets:
Inventory (Intercompany profit in inventory
and excess of tax over book valuation) $ 98,753 $69,836
Accrued liabilities 35,071 37,526
Other 13,437 7,528
- -------------------------------------------------------------------------------
Total deferred tax assets 147,261 114,890
- -------------------------------------------------------------------------------
Deferred tax liabilities:
Intangible assets (6,835) (17,264)
Undistributed earnings of subsidiaries (14,645) (11,787)
Accumulated depreciation (13,198) (13,301)
Unrealized gain on investments (30,342) (15,476)
Other (7,086) (355)
- -------------------------------------------------------------------------------
Total deferred tax liabilities (72,106) (58,183)
- -------------------------------------------------------------------------------
Net deferred tax assets $ 75,155 $ 56,707
- -------------------------------------------------------------------------------
The company's effective income tax rate varied from the U.S. federal statutory
tax rate as follows:
Year ended April 30, 1996 1995 1994
- -------------------------------------------------------------------------------
U.S. federal statutory tax rate 35.0% 35.0% 35.0%
Increase (decrease) in tax rate
resulting from:
U.S. state taxes, net of federal
tax benefit 2.3 2.2 2.5
Tax benefits from operations in
Puerto Rico (3.4) (4.2) (8.2)
Non-U.S. taxes 1.6 1.5 1.7
Other, net (1.0) (1.0) 2.0
- -------------------------------------------------------------------------------
Effective tax rate 34.5% 33.5% 33.0%
- -------------------------------------------------------------------------------
Taxes are not provided on undistributed earnings of non-U.S. subsidiaries
because such earnings are either permanently reinvested or do not exceed
available foreign tax credits. Current U.S. tax regulations provide that
earnings of the company's manufacturing subsidiaries in Puerto Rico may be
repatriated tax free; however, the Commonwealth of Puerto Rico will assess a tax
of up to 10% in the event of repatriation of earnings prior to liquidation. The
company has provided for the anticipated tax attributable to earnings intended
for dividend repatriation. At April 30, 1996, earnings permanently reinvested in
subsidiaries outside the United States were $138,457. It is not practical to
estimate the amount of taxes that might be payable on these foreign earnings.
At April 30, 1996, approximately $12,564 of non-U.S. tax losses were available
for carryforward. These carryforwards are subject to valuation allowances and
generally expire within a period of one to five years.
NOTE 9--RETIREMENT BENEFIT PLANS
The company has various retirement benefit plans covering substantially all U.S.
employees and many employees outside the United States. The cost of these plans
was $36,598 in 1996, $28,483 in 1995, and $20,208 in 1994.
DEFINED BENEFIT PLAN (UNITED STATES)
In the United States, the company maintains a qualified pension plan designed to
provide guaranteed minimum retirement benefits to substantially all U.S.
employees. Plan benefits are calculated using a combination of years of service,
final average earnings, primary social security benefits, and age. It is the
company's policy to fund retirement costs within the limits of allowable tax
deductions. Contributions to the plan were $11,925, $13,784, and $5,075 in 1996,
1995, and 1994, respectively. Plan assets consist of a diversified portfolio of
fixed-income investments, equity securities, and cash equivalents. Plan assets
include investments in the company's common stock of $17,000 and $11,900 at
April 30, 1996 and 1995, respectively.
69
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars, except per share data) Medtronic, Inc.
- --------------------------------------------------------------------------------
Net pension cost for the U.S. plan included the following components:
Year ended April 30, 1996 1995 1994
- --------------------------------------------------------------------------------
Service cost--benefits earned during
the year $ 6,653 $ 6,391 $ 5,795
Interest cost on projected benefit
obligation 6,516 5,680 5,222
Return on assets (21,061) (9,775) (7,218)
Net amortization and deferral 11,459 2,155 819
- --------------------------------------------------------------------------------
Net pension cost $ 3,567 $ 4,451 $ 4,618
- --------------------------------------------------------------------------------
The funded status of the U.S. plan was as follows:
April 30, 1996 1995
- --------------------------------------------------------------------------------
Actuarial present value of benefit obligation:
Vested benefits $(65,725) $(49,913)
Nonvested benefits (8,245) (6,673)
- --------------------------------------------------------------------------------
Accumulated benefit obligation (73,970) (56,586)
Excess of projected benefit obligation
over accumulated benefit obligation (31,560) (25,852)
- --------------------------------------------------------------------------------
Projected benefit obligation (105,530) (82,438)
Plan assets at fair value 126,913 95,468
- --------------------------------------------------------------------------------
Plan assets in excess of
projected benefit obligation 21,383 13,030
Unrecognized May 1, 1986, net asset (432) (1,632)
Unrecognized net actuarial loss 4,309 5,593
Unrecognized prior service cost (476) (564)
- --------------------------------------------------------------------------------
Net prepaid pension cost $ 24,784 $ 16,427
- --------------------------------------------------------------------------------
The actuarial assumptions were as follows:
Year ended April, 30 1996 1995 1994
- --------------------------------------------------------------------------------
Discount rate 7.5% 8.0% 7.5%
Expected long-term return on assets 9.0% 9.0% 9.0%
Average increase in compensation 5.0% 5.0% 5.5%
- --------------------------------------------------------------------------------
In addition to the benefits provided under the qualified pension plan,
retirement benefits associated with wages in excess of the IRS allowable wages
are provided to certain employees under non-qualified plans. The net periodic
cost and accrued liability associated with these non-qualified plans were not
material. However, the Omnibus Budget Reconciliation Act of 1993 significantly
reduced the qualified wage limit which resulted in an increase in benefits under
non-qualified plans. The net periodic cost of non-qualified pension plans was
$1,427 in 1996. The unfunded accrued pension cost totaled $5,141 at April 30,
1996.
DEFINED BENEFIT PLANS (NON-U.S.)
Retirement coverage for non-U.S. employees of the company is provided, to the
extent deemed appropriate, through separate plans. Funding policies are based on
local statutes. Retirement benefits are based on years of service, final average
earnings, and social security benefits.
Net pension cost for the non-U.S. plans included the following components:
Year ended April 30, 1996 1995 1994
- --------------------------------------------------------------------------------
Service cost--benefits earned during
the year $ 5,096 $ 2,032 $ 1,374
Interest cost on projected benefit 1,357 666 268
obligation
Return on assets (36) (27) (26)
Net amortization and deferral 374 135 49
- --------------------------------------------------------------------------------
Net pension cost $6,791 $ 2,806 $1,665
- --------------------------------------------------------------------------------
In certain countries, the funding of pension plans is not a common practice as
funding provides no economic benefit. Consequently, the company has pension
plans which are underfunded. The following table sets forth the funded status of
the non-U.S. plans:
April 30, 1996 1995
- --------------------------------------------------------------------------------
Actuarial present value of benefit obligation:
Vested benefits $(11,034) $(10,176)
Nonvested benefits (657) (642)
- --------------------------------------------------------------------------------
Accumulated benefit obligation (11,691) (10,818)
Excess of projected benefit obligation
over accumulated benefit obligation (20,317) (13,943)
- --------------------------------------------------------------------------------
Projected benefit obligation (32,008) (24,761)
Plan assets at fair value 608 579
- --------------------------------------------------------------------------------
Projected benefit obligation in excess of
plan assets (31,400) (24,182)
Unrecognized May 1, 1994, net obligation 10,148 11,647
Unrecognized net actuarial loss 7,955 1,386
- --------------------------------------------------------------------------------
Net accrued pension liability $(13,297) $ (11,149)
- --------------------------------------------------------------------------------
The range of assumptions for the non-U.S. plans, reflecting the different
economic environments within the various countries, was as follows:
Year ended April, 30 1996 1995 1994
- --------------------------------------------------------------------------------
Discount rate 6.25%-8.5% 6.5%-8.5% 6.5%-8.5%
Expected long-term return on assets 8.5% 8.5% 8.5%
Average increase in compensation 3.0%-6.0% 3.0%-4.5% 4.5%
- --------------------------------------------------------------------------------
DEFINED CONTRIBUTION PLANS
The company has defined contribution savings plans that cover substantially all
U.S. employees and certain non-U.S. employees. The purpose of these plans is
generally to provide additional financial security during retirement by
providing employees with an incentive to make regular savings. Company
contributions to the plans are based on employee contributions and company
performance. Expense under the plans was $17,786 in 1996, $15,452 in 1995, and
$10,402 in 1994.
RETIREE HEALTH CARE BENEFITS
U.S. and Non-U.S. employees of the company are currently eligible to receive
specified company-paid health care and life insurance benefits during retirement
based on their age and years of service. The health care benefits include
cost-sharing features based on years of service and retirement age. The life
insurance plans require minimum retiree contributions.
The company adopted Statement of Financial Accounting Standard (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," for
U.S. plans in 1993 and for Non-U.S. plans in 1996, resulting in a one-time
transition obligation expense in 1996 of $1,237. SFAS No. 106 requires the
company to recognize expense as employees earn postretirement benefits, rather
than on the cash basis.
70
<PAGE>
The net postretirement benefit cost of U.S. and Non-U.S. plans included the
following components:
Non-U.S.
U.S. Plans Plans
Year ended April 30, 1996 1995 1994 1996
- --------------------------------------------------------------------------------
Service cost--benefits earned
during the year $ 1,585 $ 1,446 $ 1,049 $ 106
Interest cost on accumulated
benefit obligation 1,915 1,425 1,440 99
Return on assets (737) (255) -- --
Net amortization and deferral 497 299 (243) 1,237
- --------------------------------------------------------------------------------
Postretirement benefit cost $3,260 $2,915 $2,246 $1,442
- --------------------------------------------------------------------------------
The company's policy has been to fund the cost of postretirement benefits as
they are paid. In 1995, the company also began funding a trust within the limits
of allowable tax deductions for the cost of these benefits. The funded status of
the U.S. and Non-U.S. plans was as follows:
Non-U.S.
U.S. Plans Plans
Year ended April 30, 1996 1995 1996
- --------------------------------------------------------------------------------
Actuarial present value of postretirement benefit obligation:
Retirees $(6,262) $(6,251) $ (88)
Other fully eligible
participants (4,938) (4,341) (157)
Other active
participants (17,751) (14,179) (1,327)
- --------------------------------------------------------------------------------
(28,951) (24,771) (1,572)
Plan assets at fair value 5,926 2,925 --
Unrecognized net loss 3,669 3,320 130
- --------------------------------------------------------------------------------
Net accrued postretirement
benefit liability $(19,356) $(18,526) $(1,442)
- --------------------------------------------------------------------------------
The actuarial assumptions were as follows:
U.S. Plans Non-U.S.
Plans
Year ended April 30, 1996 1995 1994 1996
- --------------------------------------------------------------------------------
Discount rate 7.5% 8.0% 7.5% 7.5%
Expected long-term return
on assets 9.0% 9.0% -- --
Health care cost trend rate 10.0% 10.0% 12.0% 10%
- --------------------------------------------------------------------------------
The health care cost trend rate is assumed to decrease gradually to 6% by 2003.
Based on current estimates, increasing the health care cost trend rate by one
percentage point each year would increase the accumulated postretirement benefit
obligation for U.S. and Non-U.S. plans by $2,828 and $244, respectively, and the
annual postretirement benefit cost by $437 and $36, respectively.
NOTE 10--LEASES
The company leases offices, manufacturing and research facilities, and
warehouses, as well as transportation, data processing, and other equipment,
under capital and operating leases. A substantial number of these leases contain
options that allow the company to renew at the then fair rental value.
Future minimum payments under capitalized leases and noncancelable operating
leases at April 30, 1996, were:
Capitalized Operating
Leases Leases
- --------------------------------------------------------------------------------
1997 $ 859 $ 24,941
1998 896 18,615
1999 705 12,760
2000 571 9,674
2001 458 8,402
2002 and thereafter 3,086 8,491
- --------------------------------------------------------------------------------
Total minimum lease payments 6,575 $ 82,883
- --------------------------------------------------------------------------------
Less amounts representing interest 2,101
- --------------------------------------------------
Present value of net minimum lease
payments $ 4,474
- --------------------------------------------------
Rent expense for all operating leases was $24,089 in 1996, $22,366 in 1995 and
$18,510 in 1994.
NOTE 11--COMMITMENTS AND CONTINGENCIES
The company is involved in litigation and disputes which are normal to its
business. Management believes losses that might eventually be sustained from
such litigation and disputes would not be material to future years. Further,
product liability claims may be asserted in the future relative to events not
known to management at the present time. Management believes that the company's
risk management practices, including insurance coverage, are reasonably adequate
to protect against potential product liability losses.
The Medtronic Foundation, funded entirely by the company, was established to
maintain good corporate citizenship in its communities. In 1993, the company
made a commitment to contribute $12,000 over an approximate five-year period
ending September 30, 1997. At April 30, 1996, the remaining balance of this
commitment was $3,537. Commitments to the Medtronic Foundation are expensed when
authorized and approved by the company's Board of Directors.
71
<PAGE>
NOTE 12--QUARTERLY FINANCIAL DATA (UNAUDITED, IN MILLIONS OF DOLLARS,
EXCEPT PER SHARE DATA)
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
- --------------------------------------------------------------------------------
Net Sales
1996 $524.4 $519.4 $529.2 $596.1 $2,169.1
1995 403.8 408.2 413.7 516.7 1,742.4
Gross Profit
1996 373.6 373.6 386.0 446.2 1,579.4
1995 277.4 280.4 284.5 360.0 1,202.3
Net Earnings
1996 99.2 104.2 109.0 125.4 437.8
1995 65.1 69.7 71.4 87.8 294.0
Earnings per Share:
1996 .43 .45 .47 .54 1.88
1995 .28 .30 .31 .38 1.28
- --------------------------------------------------------------------------------
Quarterly and annual earnings per share are calculated independently based on
the weighted average number of shares outstanding during the period. The first
two quarters of fiscal year 1996 have been restated to reflect the November 1995
acquisition of Micro Interventional Systems, Inc. which was accounted for as a
pooling of interests. Prior years activity has not been restated as the impact
of the business combination in prior years is not considered material and
restatement is therefore not required.
NOTE 13--SEGMENT REPORTING
The company operates in a single industry segment--providing medical products
and services. For management purposes, the company is segmented into three
geographic areas--the Americas, Europe/Middle East/Africa (Europe), and
Asia/Pacific markets. The geographic areas are, to a significant degree,
interdependent with respect to research, product supply, and business expertise.
Sales between geographic areas are made at prices which would approximate
transfers to unaffiliated distributors. In the presentation below, the profit
derived from such transfers is attributed to the area in which the sale to the
unaffiliated customer is eventually made. Because of the interdependence of the
geographic areas, the operating profit as presented may not be representative of
the geographic distribution which would occur if the areas were not
interdependent. In addition, comparison of operating results between geographic
areas and between years may be significantly impacted by foreign currency
fluctuations.
GEOGRAPHIC AREA INFORMATION
<TABLE>
<CAPTION>
United Asia Other Elimi- Consoli-
States Europe Pacific Americas nations dated
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Sales to unaffiliated
customers $ 1,237,989 $617,554 $257,018 $56,553 $ -- $2,169,114
Intergeographic
sales 148,515 87,187 -- 5,061 (240,763) --
- ---------------------------------------------------------------------------------------------
Total sales 1,386,504 704,741 257,018 61,614 (240,763) 2,169,114
- ---------------------------------------------------------------------------------------------
Operating profit 415,684 158,984 108,806 8,223 691,697
Nonoperating
expense (23,294)
- ---------------------------------------------------------------------------------------------
Earnings before
income taxes 668,403
- ---------------------------------------------------------------------------------------------
Identifiable assets 1,428,836 367,386 179,595 35,785 (161,047) 1,850,555
Corporate assets 652,743
- ---------------------------------------------------------------------------------------------
Total assets $ 2,503,298
- ---------------------------------------------------------------------------------------------
United Asia Other Elimi- Consoli-
States Europe Pacific Americas nations dated
- ----------------------------------------------------------------------------------------------
1995
Sales to unaffiliated
customers $ 976,589 $505,914 $212,725 $47,164 $ -- $1,742,392
Intergeographic
sales 132,105 52,002 -- 3,020 (187,127) --
- ----------------------------------------------------------------------------------------------
Total sales 1,108,694 557,916 212,725 50,184 (187,127) 1,742,392
- ----------------------------------------------------------------------------------------------
Operating profit 287,824 106,243 91,046 4,746 -- 489,859
Nonoperating
expense (47,754)
- ----------------------------------------------------------------------------------------------
Earnings before
income taxes 442,105
- ----------------------------------------------------------------------------------------------
Identifiable assets 1,206,912 308,579 149,394 30,515 (123,220) 1,572,180
Corporate assets 374,552
- ----------------------------------------------------------------------------------------------
Total assets $ 1,946,732
- ----------------------------------------------------------------------------------------------
1994
Sales to unaffiliated
customers $ 880,391 $386,009 $161,279 $43,243 $ -- $1,390,922
Intergeographic
sales 163,905 18,710 -- 309 (182,924) --
- ----------------------------------------------------------------------------------------------
Total sales 964,296 404,719 161,279 43,552 (182,924) 1,390,922
- ----------------------------------------------------------------------------------------------
Operating profit 244,638 53,512 63,389 4,177 -- 365,716
Nonoperating
expense (18,915)
- ----------------------------------------------------------------------------------------------
Earnings before
income taxes 346,801
- ----------------------------------------------------------------------------------------------
Identifiable assets 1,103,222 276,047 103,247 25,604 (94,858) 1,413,262
Corporate assets 209,990
- ----------------------------------------------------------------------------------------------
Total assets $ 1,623,252
- ----------------------------------------------------------------------------------------------
</TABLE>
Nonoperating expenses consist principally of non-allocable corporate general and
administrative expenses. Intergeographic sales and the intergeographic profit
remaining in ending inventories are the principal items reflected as
eliminations.
NOTE 14--SUBSEQUENT EVENTS
On March 25, 1996, Medtronic, Inc. and InStent Inc. announced the signing of a
definitive merger agreement. The agreement calls for each share of InStent
common stock to be converted into 0.3833 share of Medtronic common stock.
InStent has approximately 10.9 million shares outstanding on a fully diluted
basis. The transaction closed in the first quarter of fiscal year 1997 and will
be accounted for as a pooling of interests. InStent designs, develops,
manufactures and markets a variety of self-expanding and balloon-expandable
stents used in a broad range of medical indications.
On May 3, 1996, the company acquired all of the outstanding common stock of
AneuRx, Inc. for approximately 1,154,000 shares of the company's common stock.
The acquisition will be accounted for as a pooling of interests transaction.
AneuRx is a developer of an endovascular stented graft and delivery system used
in minimally invasive aneurysm repair therapy.
Unaudited pro forma information related to these acquisitions is not included as
the impact of these acquisitions is not deemed to be material.
72
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(in millions of dollars, except per share data
1996 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Results for the Year:
Net sales $ 2,169.1 $ 1,742.4 $ 1,390.9 $ 1,328.2 $ 1,176.9 $ 1,021.4
Cost of products sold 589.7 540.1 431.7 420.1 381.8 331.7
Research and development expense 236.7 191.4 156.3 133.0 109.2 89.5
Selling, general, and administrative
expense 695.5 574.6 456.3* 460.0* 439.9 399.9*
Interest expense 8.0 9.0 8.2 10.4 13.4 13.8
Interest income (29.2) (14.8) (8.4) (8.8) (10.3) (9.7)
Earnings from continuing operations
before income taxes 668.4 442.1 346.8 313.5 242.9 196.2
Provision for income taxes 230.6 148.1 114.4 101.9 81.4 62.9
Earnings from continuing operations 437.8 294.0 232.4 211.6 161.5 133.4
Discontinued operations and cumulative
effect of accounting changes (net) -- -- -- (14.4) -- --
Net earnings $ 437.8 $ 294.0 $ 232.4 $ 197.2 $ 161.5 $ 133.4
Net earnings as a percent of net sales 20.2% 16.9% 16.7% 14.8% 13.7% 13.1%
Net earnings as a percent of average
shareholders' equity 28.0% 24.6% 24.5% 24.1% 21.8% 21.4%
Per share of common stock:
Earnings from continuing operations
before cumulative effects of
accounting changes $ 1.88 $ 1.28 $ 1.01 $ .89 $ .68 $ .56
Net earnings 1.88 1.28 1.01 .83 .68 .56
Cash dividends declared .26 .21 .17 .14 .12 .10
Gross margin percentage 72.8% 69.0% 69.0% 68.4% 67.6% 67.5%
Financial Position at April 30:
Working capital $ 818.2 $ 647.8 $ 406.4 $ 426.6 $ 387.3 $ 320.1
Current ratio 2.6:1 2.4:1 1.9:1 2.2:1 2.3:1 2.1:1
Property, plant, and equipment, net 415.3 331.1 301.8 282.8 256.8 217.2
Total assets 2,503.3 1,946.7 1,623.3 1,292.5 1,163.5 1,024.1
Long-term debt 15.3 14.2 20.2 10.9 8.6 7.9
Long-term debt as a percent of
shareholders' equity 0.9% 1.1% 1.9% 1.3% 1.1% 1.2%
Shareholders' equity 1,789.3 1,335.0 1,053.5 841.5 796.5 683.2
Shareholders' equity
per common share 7.64 5.78 4.53 3.64 3.35 2.87
Additional Information:
Expenditures for property, plant, and
equipment $ 170.2 $ 104.0 $ 86.0 $ 87.4 $ 83.2 $ 73.7
Full-time employees at year-end 10,526 8,896 8,709 8,334 8,314 7,560
Full-time equivalent employees
at year-end 12,350 10,313 9,856 9,247 9,392 8,470
</TABLE>
(WIDE TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
Medtronic, Inc.
1990 1989 1988 1987 1986
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Results for the Year:
Net sales $ 865.9 $ 765.8 $ 669.9 $ 515.4 $ 411.5
Cost of products sold 281.7 248.5 217.4 176.9 154.5
Research and development expense 81.5 67.7 55.1 43.6 40.1
Selling, general, and administrative
expense 331.3* 291.9* 267.2 187.7 132.6*
Interest expense 10.1 8.4 5.9 4.3 4.4
Interest income (6.2) (5.6) (7.1) (7.2) (12.5)
Earnings from continuing operations
before income taxes 167.5 155.0 131.4 110.2 92.3
Provision for income taxes 54.6 54.7 44.8 34.8 24.3
Earnings from continuing operations 112.9 100.3 86.6 75.3 68.0
Discontinued operations and cumulative
effect of accounting changes (net) -- -- -- -- -- (14.0)
Net earnings $ 112.9 $ 100.3 $ 86.6 $ 75.3 $ 54.0
Net earnings as a percent of net sales 13.0% 13.1% 12.9% 14.6% 13.1%
Net earnings as a percent of average
shareholders' equity 21.3% 22.2% 21.2% 19.8% 15.5%
Per share of common stock:
Earnings from continuing operations
before cumulative effects of
accounting changes $ .48 $ .43 $ .37 $ .31 $ .27
Net earnings .48 .43 .37 .31 .22
Cash dividends declared .09 .07 .06 .05 .05
Gross margin percentage 67.5% 67.6% 67.5% 65.7% 62.4%
Financial Position at April 30:
Working capital $ 240.4 $ 206.1 $ 244.6 $ 250.2 $ 227.8
Current ratio 1.9:1 1.9:1 2.3:1 3.0:1 2.7:1
Property, plant, and equipment, net 183.6 157.2 134.6 121.1 113.7
Total assets 885.3 783.0 661.3 580.0 540.9
Long-term debt 8.0 8.2 11.1 7.6 13.8
Long-term debt as a percent of
shareholders' equity 1.4% 1.7% 2.7% 1.9% 3.8%
Shareholders' equity 565.2 492.7 412.0 403.1 358.9
Shareholders' equity
per common share 2.40 2.12 1.72 1.61 1.42
Additional Information:
Expenditures for property, plant, and
equipment $ 59.3 $ 57.4 $ 39.1 $ 28.5 $ 17.6
Full-time employees at year-end 7,030 6,529 5,939 5,156 4,964
Full-time equivalent employees
at year-end 7,717 7,152 6,471 5,587 5,329
</TABLE>
*Certain costs and income separately disclosed on the statement of consolidated
earnings are included in selling, general, and administrative expense.
73
<PAGE>
MEDTRONIC LEADERSHIP
EXECUTIVE COMMITTEE
William W. George
President and Chief Executive Officer
(Chairman-elect, August 1996)
Glen D. Nelson, M.D.
Vice Chairman
Arthur D. Collins, Jr.
Chief Operating Officer
(President-elect, August 1996)
Bobby I. Griffin
Executive Vice President and
President, Pacing
Bill K. Erickson
Senior Vice President and
President, Americas
Janet S. Fiola
Senior Vice President, Human Resources
B. Kristine Johnson
Senior Vice President
and President, Vascular
Philip M. Laughlin
Senior Vice President
and President, Cardiac Surgery
Ronald E. Lund
Senior Vice President,
General Counsel and Secretary
John A. Meslow
Senior Vice President and
President, Neurological
Robert L. Ryan
Senior Vice President and
Chief Financial Officer
PACING
Bobby I. Griffin
President
Ivan M.G.P. Bourgeois
Vice President, Therapy Assessment
Bonnie L. Labosky
Vice President, Promeon Components
William V. Murray
Vice President and General Manager,
Micro-Rel
Kenneth M. Riff, M.D.
Vice President, Heart Failure Management
Kathleen M. Staby
Vice President, Human Resources
Lester J. Swenson
Vice President, Finance
BRADYCARDIA PACING BUSINESS
Stephen H. Mahle
President
Michael A. James
Vice President, Marketing
Ronald J. Meyer
Vice President
J. Michael Stevens
Vice President, Pulse Generator and Programming Systems
Charles H. Swanson
Vice President, Regulatory Affairs
Warren S. Watson
Vice President and General Manager, Leads
TACHYARRHYTHMIA MANAGEMENT BUSINESS
Jon T. Tremmel
President
Zach Cybulski
Vice President, Operations
Ursula Gebhardt
Vice President, Tachyarrhythmia Marketing and
Atrial Fibrillation Business Development
VASCULAR
B. Kristine Johnson
President
Michael A. Baker
Vice President and General Manager, Interventional Vascular, San Diego
Richard J. Faleschini
Vice President, Worldwide Marketing
and Business Development
Steve R. LaPorte
Vice President and General Manager, CardioRhythm
James L. Pacek
Vice President, Interventional Vascular Marketing, San Diego
Joseph M. Tartaglia
Vice President, Product Development/Operations, San Diego
Nancy L. Weston
Vice President and General Manager, Interventional Vascular, Danvers
74
<PAGE>
CARDIAC SURGERY
Philip M. Laughlin
President
Thomas L. Rooney
Vice President, Finance
HEART VALVE BUSINESS
James G. Foster
Vice President and General Manager
Walter A. Cuevas
Vice President, Operations
CARDIOPULMONARY BUSINESS
Charles L. McDaniel
Vice President and General Manager
Timothy S. Eberhardt
Vice President, Operations
Roger J. Elgas
Vice President, Technology and
New Business
MEDTRONIC DLP CANNULAE BUSINESS
James H. DeVries
Vice President and General Manager,
DLP and Cardiac Surgery Ventures
BLOOD MANAGEMENT BUSINESS
Clifton W. Owens
Vice President and General Manager
CARDIAC SURGERY VENTURES
M. Jacqueline Eastwood
Vice President, Minimally
Invasive Cardiac Surgery
Ronald A. Williams
Vice President
NEUROLOGICAL
John A. Meslow
President
Gary P. East
Vice President and General Manager, Medtronic PS Medical
Michael M. Selzer, Jr.
Vice President and General Manager, Neurostimulation
Gary E. Taylor
Vice President, U.S. Sales
Scott R. Ward
Vice President and General Manager, Drug Delivery
GLOBAL AREAS
Americas
Bill K. Erickson
President
Donald P. Brown
Vice President, U.S. Southern Region
Dennis D. Dietz
Vice President, U.S. Western Region
Lee P. Erickson
Vice President, Operations and Finance
Larry W. Found
Vice President, Human Resources
H. Russell Hamm
Vice President, U.S. Eastern Region
Robert J. Hermann
Vice President, U.S. Southwest Region
Donald A. Hurley
Vice President, Canada
Raymond L. Lavoie
Vice President,
U.S. Cardiac Surgery Sales
Emilio R. Lopez
Vice President, Latin America
Scott MacFarland
Vice President, U.S. Interventional Vascular Sales
Daniel A. Pelak
Vice President,
U.S. Cardiovascular Marketing
David R. Raich
Vice President, U.S. Midwest Region
Europe/Middle East/Africa
Barry W. Wilson
President
R. Richard Boncy
Vice President, Legal
Karl Bornschein
Vice President, Central Region
Michael J. Boris
Vice President, Finance and Administration
Medtronic Synectics
Drago A. Cerchiari
Vice President, Business Development and Developing Markets
Deborah L. Denz
Vice President, Human Resources
Jan G. Dil
Vice President and General Manager, Vitatron
Robert H. Kayser
Vice President, Pacing
Tord Lendau
Vice President and General Manager
Medtronic Synectics
Jo W. Merkun
Vice President, Northern Region
Stanton D. Myrum
Vice President, Technology and Operations
Alexis C.M. Renirie
Vice President and Director, Bakken Research Center
Frank Sprengers
Vice President and General Manager, European Service and Technology Center
Thomas M. Tefft
Vice President and Controller
Asia/Pacific
Lowell P. Jacobsen
President, Asia/Pacific
Michael J. Costello
Vice President and General Manager, Far East
Tadashi Sakuda
President, Japan
CORPORATE
Celia K. Barnes
Vice President, Communications and Corporate Relations
Dale F. Beumer
Vice President, Treasury and
Investor Relations
Peter A. Chevalier
Vice President, Chief Quality and Regulatory Officer
Paul Citron
Vice President, Science & Technology
Mary Ann Donahue
Vice President, Human Development
Gary L. Ellis
Vice President, Corporate Controller
Michael D. Ellwein
Vice President, Corporate Development and Associate General Counsel
Frederick S. Halverson
Vice President, Corporate
Regulatory Affairs
Steven B. Kelmar
Vice President, Government Affairs
Marcea Bland Lloyd
Vice President and
Assistant General Counsel
Daniel R. Luthringshauser
Vice President, International Development
Thomas E. Morin
Vice President, Corporate Services
David A. Ness
Vice President, Compensation
and Benefits
Harold R. Patton
Vice President and
Chief Patent Counsel
Richard A. Ploetz
Vice President,
Corporate Human Resources
Lawrence W. Shearon
Vice President, Corporate Technology
Robert D. Siegfried
Vice President, Corporate Finance and Administration
Steven A. Tranter
Vice President, Strategic Development
75
<PAGE>
INVESTOR INFORMATION
ANNUAL MEETING
The annual meeting of Medtronic shareholders will take place on Wednesday,
August 28, 1996, beginning at 10:30 a.m. at the Corporate Center, 7000 Central
Avenue, NE, Minneapolis (Fridley), Minnesota. The Notice of Annual Meeting and
Proxy Statement are mailed to shareholders with the annual report.
INVESTOR INFORMATION
Shareholders, securities analysts, and investors seeking additional information
about the company should call Investor Relations at 612-574-3035.
The following information may be obtained upon request from the Medtronic
Investor Relations Department, 7000 Central Avenue, NE, Minneapolis, Minnesota
55432, USA:
* News releases describing significant company events and sales and
earnings results for each quarter and the fiscal year.
* Form 10-K Annual and Form 10-Q Quarterly Reports to the Securities and
Exchange Commission detailing Medtronic's business and financial
condition.
You may also learn more about Medtronic via the Internet. Contact us at
http://www.medtronic.com.
As part of continuing efforts to reduce expenses and make information available
on a more timely basis, Medtronic has discontinued its practice of automatically
sending quarterly reports to shareholders. Quarterly financial results may be
obtained by requesting news releases as described above.
STOCK TRANSFER AGENT, REGISTRAR, AND DIVIDEND REINVESTMENT AGENT
Shareholders with questions about stockholdings, dividend checks, dividend
reinvestment, transfer requirements, and address changes should contact:
Norwest Bank Minnesota, N.A.
Shareholder Services
161 North Concord Exchange
P.O. Box 738
South St. Paul, MN 55075-0738
Telephone: 1-800-468-9716 or
1-612-450-4064
DIVIDEND REINVESTMENT PLAN
The dividend reinvestment plan provides a convenient way for shareholders to
increase their holdings of Medtronic, Inc., common stock through automatic
dividend reinvestment and voluntary cash purchase. All registered holders of
Medtronic, Inc., common stock may participate. For more information, please
contact the transfer agent.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, Minneapolis
STOCK EXCHANGE LISTING
New York Stock Exchange
(symbol: MDT)
PRICE RANGE OF MEDTRONIC STOCK
Fiscal Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
- ----------------------------------------------------
1996
High $41.19 $59.88 $59.88 $61.75
Low 35.88 40.06 47.13 51.25
1995
High 22.28 27.44 29.75 37.88
Low 18.07 21.35 24.50 27.88
- ----------------------------------------------------
Prices are closing quotations. On June 28, 1996 there were 25,939 holders of
record of the company's common stock. The regular quarterly cash dividend was
6.5 cents per share for 1996 and 5.125 cents per share for 1995.
This annual report was printed on recycled paper. Please recycle this book or
donate it to your local library.
76
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX: Graphic and Image Material
Page
Number Description
- ------ -----------
56 Bar graph of net earnings in millions of dollars for the last three
fiscal years as follows:
1996 $437.8
1995 294.0
1994 232.4
56 Bar graph of earnings per share in dollars for the last three fiscal
years as follows:
1996 $1.88
1995 1.28
1994 1.01
57 Stacked bar graph showing net sales in millions of dollars for U.S. and
international operations for the last three fiscal years. Data points
(in millions of dollars) are as follows:
1996 1995 1994
-------- -------- --------
U.S. $ 1,238.0 $ 979.7 $ 800.4
International 931.1 762.7 590.5
------- ------- -------
$2,169.1 $1,742.4 $1,390.9
======== ======== ========
57 Stacked bar graph of net sales in millions of dollars for the Pacing,
Other Cardiovascular, and Neurological and Other business units for
each of the last three fiscal years. The data points (in millions of
dollars) are as follows:
1996 1995 1994
--------- --------- --------
Pacing $1,478.8 $ 1,150.6 $ 955.8
Other Cardiovascular 522.4 461.6 331.5
Neurological & Other 167.9 130.2 103.6
------- ------- -------
$2,169.1 $1,742.4 $1,390.9
======== ======== ========
58 Bar graph of research and development expense in millions of dollars
for the last three fiscal years as follows:
1996 $236.7
1995 191.4
1994 156.3
59 Bar graph of net cash in millions of dollars for the last three fiscal
years as follows:
1996 $385.0
1995 276.0
1994 103.0
59 Bar graph of cash flows from operating activities in millions of
dollars for the last three fiscal years as follows:
1996 $500.5
1995 387.2
1994 356.9
60 Stacked bar graph of equity and interest-bearing debt in millions of
dollars for the last three fiscal years. Data points (in millions of
dollars) are as follows:
1996 1995 1994
--------- --------- ------
Equity $1,789.3 $1,335.0 $1,053.5
Interest-Bearing Debt 75.9 47.7 78.4
--------- --------- -----
$1,865.2 $1,382.7 $1,131.9
======== ======== ========
EXHIBIT NUMBER 21
LIST OF SUBSIDIARIES
EXHIBIT 21
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
ABS Synectics Sarl France
Bakken Research Center, B.V. Netherlands
Biotec International S.r.l. Italy
Cardiotron Medizintechnik G.m.b.H. Germany
CTD Synectics Ltd. Hong Kong
Electromedics Medizintechnik G.m.b.H. Germany
India Biomedical Investment, Ltd. Minnesota
InStent (Israel), Inc. Israel
Interbank Leasing Colorado
Interamerica Medtronic, Inc. Illinois
International Finance C.V. Netherlands
International Medical Education Corporation Colorado
MDTRNC International Technology AB Sweden
MDTRNC-Vingmed AB Sweden
Med Rel, Inc. Minnesota
Medtronic (Africa) (Proprietary) Limited South Africa
Medtronic Andover Medical, Inc. Delaware
Medtronic AneuRx, Inc. Minnesota
Medtronic Asia, Ltd. Minnesota
Medtronic Asset Managment, Inc. Minnesota
Medtronic Australasia Pty. Limited Austraila
Medtronic B.V. Netherlands
Medtronic Belgium, S.A. Belgium
Medtronic Bio-Medicus, Inc. Minnesota
Medtronic Carbon Implants, Inc. Delaware
Medtronic CardioRhythm California
Medtronic China, Ltd. Minnesota
Medtronic do Brasil Ltda. Brazil
Medtronic Dominicana C. por A. Dominican Republic
Medtronic Electromedics, Inc. Minnesota
Medtronic Export, Inc. Delaware
Medtronic Europe, N.V. Belgium
Medtronic FSC B.V. Netherlands
Medtronic France S.A. France
Medtronic G.m.b.H. Germany
Medtronic Ges.m.b.H. Austria
Medtronic Heart Valves, Inc. Minnesota
Medtronic HemoTec, Inc. Colorado
Medtronic Iberica, S.A. Spain
Medtronic InStent, Inc. Minnesota
Medtronic International, Ltd. Delaware
Medtronic International Technology, Inc. Minnesota
Medtronic Interventional Vascular, Inc. Delaware
Medtronic Interventional Vascular, Inc. Massachussetts
Medtronic Italia S.p.A. Italy
Medtronic Japan Co., Ltd. Japan
Medtronic Korea Co., Ltd. South Korea
Medtronic Latin America, Inc. Minnesota
Medtronic Limited United Kingdom
Medtronic Mediterranean SAL Lebanon
Medtronic Micro Interventional Systems, Inc. Minnesota
Medtronic Milaca, Inc. Minnesota
Medtronic of Canada, Ltd. Canada
Medtronic Overseas, Inc. Delaware
Medtronic PS Medical, Inc. California
Medtronic Puerto Rico, Inc. Minnesota
Medtronic S. de R.L. de C.V. Mexico
Medtronic S.A. Switzerland
Medtronic S.A.I.C. Agrentina
Medtronic (Shanghai) Ltd. China
Medtronic (Schweiz) A.G. Switzerland
Medtronic (S) Pte., Ltd. Singapore
Medtronic Treasury International, Inc. Minnesota
Medtronic Treasury Management, Inc. Minnesota
Medtronic-Vicare AS Denmark
Medtronic-Vingmed AS Norway
Medtronic World Trade Corporation Minnesota
Omikcron Ltd. Hungary
OSMED, Inc. Michigan
Sentron Europe BV Netherlands
Synectics-Dantec Finland OY Finland
Synectics-Dantec Sverige AB Sweden
Synectics GmbH Germany
Synectics IR SA Luxembourg
Synectics Medical A.B. Sweden
Synectics Medical B.V. Netherlands
Synectics Medical bvba Belgium
Synectics Medical Co., Ltd. South Korea
Synectics Medical Limited United Kingdom
Synectics Medical Poland Spolka Z.O.O. (Ltd.) Poland
Synectics Medical SA (Pty) South Africa
Synectics Medical Srl Italy
Vitafin N.V. Netherlands
Vitatron Beheersmaatschappij B.V. Netherlands
Vitatron Belgium N.V. Belgium
Vitatron G.m.b.H. Germany
Vitatron, Incorporated Delaware
Vitatron Japan Co., Ltd. Japan
Vitatron Medical B.V. Netherlands
Vitatron Medical Espana S.A. Spain
Vitatron Nederland B.V. Netherlands
Vitatron N.V. Netherlands
Vitatron S.A.R.L. France
Vitatron U.K. Limited United Kingdom
EXHIBIT NUMBER 24
POWERS OF ATTORNEY
EXHIBIT 24
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors of
Medtronic, Inc., a Minnesota corporation, hereby constitute and appoint each of
William W. George and Ronald E. Lund, acting individually or jointly, their true
and lawful attorney-in-fact and agent, with full power to act for them and in
their name, place and stead, in any and all capacities, to do any and all acts
and things and execute any and all instruments which either said attorney and
agent may deem necessary or desirable to enable Medtronic, Inc. to comply with
the Securities Exchange Act of 1934, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing with said Commission of its annual report on Form
10-K for the fiscal year ended April 30, 1996, including specifically, but
without limiting the generality of the foregoing, power and authority to sign
the names of the undersigned directors to the Form 10-K and to any instruments
and documents filed as part of or in connection with said Form 10-K or
amendments thereto; and the undersigned hereby ratify and confirm all that each
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have set their hands this 27th day
of June, 1996.
/s/ F. Caleb Blodgett /s/ Glen D. Nelson, M.D.
F. Caleb Blodgett Glen D. Nelson, M.D.
/s/ Arthur D. Collins, Jr. /s/ Richard L. Schall
Arthur D. Collins, Jr. Richard L. Schall
/s/ William W. George /s/ Jack W. Schuler
William W. George Jack W. Schuler
/s/ Antonio M. Gotto, Jr., M.D. /s/ Gerald W. Simonson
Antonio M. Gotto, Jr., M.D. Gerald W. Simonson
/s/ Bernadine P. Healy, M.D. /s/ Gordon M. Sprenger
Bernadine P. Healy, M.D. Gordon M. Sprenger
/s/ Vernon H. Heath /s/ Richard A. Swalin, Ph. D.
Vernon H. Heath Richard A. Swalin, Ph.D.
/s/ Thomas E. Holloran /s/ Winston R. Wallin
Thomas E. Holloran Winston R. Wallin
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT
OF CONSOLIDATED EARNINGS AND CONSOLIDATED BALANCE SHEET FOR THE YEAR ENDED APRIL
30, 1996 FILED WITH THE SEC ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS. THE FIRST TWO QUARTERS OF FY96 HAVE BEEN
RESTATED TO REFLECT THE NOVEMBER 1995 ACQUISITION OF MICRO INTERVENTIONAL
SYSTEMS, INC. WHICH WAS ACCOUNTED FOR AS A POOLING OF INTERESTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> APR-30-1996
<CASH> 110,306
<SECURITIES> 350,541
<RECEIVABLES> 474,864
<ALLOWANCES> 18,094
<INVENTORY> 257,348
<CURRENT-ASSETS> 1,343,234
<PP&E> 833,703
<DEPRECIATION> (418,411)
<TOTAL-ASSETS> 2,503,298
<CURRENT-LIABILITIES> 525,048
<BONDS> 0
0
0
<COMMON> 23,432
<OTHER-SE> 1,765,873
<TOTAL-LIABILITY-AND-EQUITY> 2,503,298
<SALES> 2,169,114
<TOTAL-REVENUES> 2,169,114
<CGS> 589,710
<TOTAL-COSTS> 589,710
<OTHER-EXPENSES> 903,041
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,960
<INCOME-PRETAX> 668,403
<INCOME-TAX> 230,599
<INCOME-CONTINUING> 437,804
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 437,804
<EPS-PRIMARY> 1.88
<EPS-DILUTED> 1.84
</TABLE>
