SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
MEDTRONIC, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing:
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
Medtronic [LOGO]
7000 Central Avenue N.E.
Minneapolis, Minnesota 55432
Telephone: 612-514-4000
July 21, 1999
Dear Shareholder:
You are cordially invited to join us for our Annual Meeting of
Shareholders to be held this year on Wednesday, August 25, 1999, at 10:30 a.m.
(CDT) at Medtronic's Corporate Center at its Rice Creek facility, 7000 Central
Avenue N.E., Minneapolis (Fridley), Minnesota.
The Notice of Annual Meeting of Shareholders and the Proxy Statement
that follow describe the business to be conducted at the meeting. We will also
report on matters of current interest to our shareholders.
We invite you to join us beginning at 10:00 a.m. to view Medtronic's
product displays and talk with our employees.
Your vote is important. Whether you own a few or many shares of stock,
it is important that your shares be represented. If you cannot personally
attend, we encourage you to make certain that you are represented at the meeting
by voting by telephone or internet as described in the enclosed instructions or
by signing the accompanying proxy card and promptly returning it in the enclosed
envelope.
Sincerely,
William W. George
Chairman of the Board and Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
Wednesday, August 25, 1999
To Our Shareholders:
The 1999 Annual Meeting of Shareholders of Medtronic, Inc. will be held
Wednesday, August 25, 1999, at the Medtronic, Inc. Corporate Center at its Rice
Creek facility, 7000 Central Avenue N.E., Minneapolis (Fridley), Minnesota, at
10:30 a.m. (CDT) for the following purposes:
1. To set the size of the Board at 14 directors and to elect four
Class I directors for three-year terms.
2. To approve an amendment to the Company's Restated Articles of
Incorporation to increase the number of shares of Common Stock
the Company is authorized to issue.
3. To reapprove the performance criteria for the Company's
Management Incentive Plan.
4. To reapprove the performance criteria for the Company's 1994
Stock Award Plan.
5. To approve appointment of PricewaterhouseCoopers LLP as the
Company's independent auditors.
6. To take action on any other business that may properly be
considered at the Meeting or any adjournment thereof.
These items are more fully described in the following pages of the
Proxy Statement.
Shareholders of record at the close of business on July 2, 1999 will be
entitled to vote at the Meeting and any adjournments of the Meeting.
By Order of the Board of Directors,
Ronald E. Lund
Secretary
YOUR VOTE IS IMPORTANT.
Please vote by telephone or internet as described in the enclosed instructions
or date and sign the enclosed proxy card and return it promptly in the enclosed
envelope.
<PAGE>
Medtronic [LOGO]
MEDTRONIC, INC.
7000 Central Avenue N.E.
Minneapolis, Minnesota 55432
PROXY STATEMENT
Annual Meeting of Shareholders
August 25, 1999
The Board of Directors of Medtronic, Inc. ("Medtronic" or the
"Company") is soliciting the accompanying proxy for the Annual Meeting of
Shareholders of Medtronic to be held on August 25, 1999.
A proxy card is enclosed. In order to register your vote, you may vote
by telephone or the internet as described in the enclosed instructions or
complete, date and sign the proxy card and return it in the envelope provided.
When voting by telephone or the internet, your vote authorizes the named proxies
to vote your shares in the same manner as if you completed, signed and returned
your proxy card.
When stock is registered in the name of more than one person, each such
person should sign the proxy. If the shareholder is a corporation, the proxy
should be signed in its corporate name by an executive or other authorized
officer. If signed as attorney, executor, administrator, trustee, guardian,
custodian or in any other representative capacity, the signer's full title
should be given.
Shareholders are entitled to one vote for each share of Medtronic
Common Stock, $.10 par value, they hold of record as of the close of business on
July 2, 1999. On that date, ______________ shares of Medtronic Common Stock were
outstanding. A quorum (a majority of the outstanding shares) must be represented
at the Meeting in person or by proxy to transact business.
Shares represented by a properly executed proxy received by Medtronic
prior to the Meeting and not revoked will be voted in accordance with the
instructions of the shareholder or, if no instructions are indicated, in
accordance with the recommendations of the Board of Directors. A proxy may be
revoked at any time before it is exercised by written revocation to the
Corporate Secretary of Medtronic or by submitting a proxy with a more recent
date either by using the telephone or internet voting procedures or by filing a
new written proxy with the Corporate Secretary. This proxy statement and
enclosed proxy card are first being mailed to shareholders on or about July 21,
1999.
ELECTION OF DIRECTORS
Directors and Nominees
The Board of Directors is divided into three classes. The members of
each class are elected to serve three-year terms with the terms of office of
each class ending in successive years. Glen D. Nelson, M.D., Jean-Pierre Rosso,
Jack W. Schuler and Gerald W. Simonson are the nominees for election to the
Board as Class I directors to serve until the year 2002 annual meeting or until
their successors are elected and qualified. All of the nominees are currently
directors and were elected to the Board of Directors by the shareholders except
for Mr. Rosso, who was elected by the Board on August 26, 1998. After 23 years
of dedicated Board service, Richard A. Swalin, Ph.D. will retire from the Board
on August 25, 1999 in accordance with the Board's policy of mandatory
retirement. With the retirement of Dr. Swalin, the Board will consist of 14
members.
<PAGE>
All of the nominees have indicated a willingness to serve if elected.
However, if any nominee becomes unable to serve before the election, the shares
represented by the proxy cards may be voted for a substitute designated by the
Board, unless an instruction to the contrary is indicated on the proxy card.
THE BOARD RECOMMENDS A VOTE FOR ELECTING THE NOMINEES.
DIRECTOR NOMINEES--CLASS I
(Term Ending 2002)
[PHOTO] Vice Chairman of Medtronic since July 1988
and Executive Vice President from August
GLEN D. NELSON, M.D., age 62 1986 to July 1988; Chairman and Chief
Director since 1980 Executive Officer of American MedCenters,
Class I Director Inc. (HMO management) from July 1984 to
Term expires 1999 August 1986; Chief Executive Officer,
President and Chairman of the Board of
Trustees of Park Nicollet Medical Center
(medical services) from 1975 to 1986;
Surgeon at Park Nicollet Medical Center from
1969 to 1986. Also a director of The St.
Paul Companies, Inc., Carlson Holdings,
Inc., Avatar, Inc., and Advanced
BioSurfaces, Inc. Member, Johns Hopkins
Board of Visitors and Jackson Hole Group.
[PHOTO] Chairman and Chief Executive Officer of Case
Corporation (farm and construction
JEAN-PIERRE ROSSO, age 59 equipment) since October 1997; Chairman,
Director since 1998 President and Chief Executive Officer of
Class I Director Case Corporation from March 1996 to October
Term expires 1999 1997; President and Chief Executive Officer
of Case Corporation from April 1994 to March
1996. President of the Home & Building
Control Business of Honeywell, Inc. from
1992 to April 1994; President of European
operations of Honeywell, Inc. from 1987
through 1991. Also a director of ADC
Telecommunications, Inc. and Crown Cork &
Seal Company, Inc.
[PHOTO] Chairman of the Board of Stericycle, Inc.
(medical waste treatment and recycling)
JACK W. SCHULER, age 58 since 1990 and Chairman of the Board of
Director since 1990 Ventana Medical Systems, Inc.
Class I Director (immunohisto-chemistry diagnostic systems)
Term expires 1999 since November 1995; President and Chief
Operating Officer of Abbott Laboratories
(health care products) from January 1987 to
August 1989; a director of that company from
April 1985 to August 1989 and Executive Vice
President from January 1985 to January 1987.
Also a director of Chiron Corporation.
[PHOTO] Private venture capital investor since June
1978; President and Chief Executive Officer
GERALD W. SIMONSON, age 69 of Omnetics Connector Corporation
Director since 1962 (microminiature connectors) since March
Class I Director 1991. Also a director of Northwest
Term expires 1999 Teleproductions, Inc., The Chromaline
Corporation and Fairview Hospital and
Healthcare Services.
<PAGE>
BOARD MEMBERS CONTINUING IN OFFICE--CLASS II
(Term Ending 2000)
[PHOTO]
MICHAEL R. BONSIGNORE, age 58 Chairman of the Board and Chief Executive
Director since 1999 Officer of Honeywell, Inc. since April 1993;
Class II Director Executive Vice President and Chief Operating
Term expires 2000 Officer of the International and Home &
Building Control business of Honeywell, Inc.
from 1990 to 1993; President of Honeywell's
International business from 1987 to 1990;
President of Honeywell Europe from 1983 to
1987. Also a director of Cargill, Inc. and
The St. Paul Companies, Inc. and a member of
various advisory boards and committees
including: The U.S. - China Business
Council, Investment and Services Policy
Advisory Committee, U.S. - Russia Trade and
Economic Council, the Alliance to Save
Energy Board, New Perspective Fund, Inc. and
Euro Pacific Growth Fund.
[PHOTO] Medtronic Chairman of the Board and Chief
Executive Officer since August 1996;
WILLIAM W. GEORGE, age 56 President and Chief Executive Officer from
Director since 1989 May 1991 to August 1996; President and Chief
Class II Director Operating Officer from March 1989 to April
Term expires 2000 1991. President, Honeywell Space and
Aviation Systems, from December 1987 to
March 1989; President, Honeywell Industrial
Automation and Control, from May 1987 to
December 1987 and Executive Vice President
of that business from January 1983 to May
1987. Also a director of Dayton Hudson
Corporation, Allina Health System, Imation
Corp., Novartis, and Health Industry
Manufacturers Association.
[PHOTO]
BERNADINE P. HEALY, M.D., age 54 Dean, College of Medicine and Public Health,
Director since 1993 and Professor of Medicine, The Ohio State
(and 1987-1991) University, since October 1995. Physician
Class II Director and Science Policy Advisor, The Cleveland
Term expires 2000 Clinic Foundation (nonprofit medical
research organization), from July 1993 to
May 1995; Director of the National
Institutes of Health from April 1991 to June
1993; Chairman of the Research Institute of
The Cleveland Clinic Foundation from
November 1985 to April 1991; President, the
American Heart Association, National Center,
from 1988 to 1989; Deputy Director of Office
of Science and Technology Policy, Executive
Office of the United States President, from
1984 to 1985; Professor of Medicine, The
Johns Hopkins University School of Medicine,
from 1977 to 1984. Also a trustee of
Battelle Memorial Institutes and a director
of National City Corporation, Invacare, Inc.
and Ashland, Inc.
[PHOTO] Consultant. Retired Vice Chairman and Chief
Administrative Officer and director of
RICHARD L. SCHALL, age 69 Dayton Hudson Corporation as of February
Director since 1971 1985. Also a director of EcoLab Inc. and a
Class II Director trustee of Santa Barbara City College
Term expires 2000 Foundation.
<PAGE>
[PHOTO] President and Chief Executive Officer of
Allina Health System (health care delivery)
GORDON M. SPRENGER, age 62 since June 1999; Chief Executive Officer of
Director since 1991 Allina Health System from April 1999 to June
Class II Director 1999; Executive Officer of Allina Health
Term expires 2000 System from July 1994 to April 1999; Chief
Executive Officer and director of HealthSpan
Health Systems Corporation (health care
delivery) from September 1992 to July 1994;
President and Chief Executive Officer of
LifeSpan, Inc. (health care delivery) from
1982 to September 1992; Chief Executive
Officer of Abbott-Northwestern Hospital from
1982 to September 1992; President of
Abbott-Northwestern Hospital from 1982 to
1988. Also a member of Board of Regents, St.
Olaf College, and a director of The St. Paul
Companies, Inc., Bush Foundation and Past
Chair of the Board of the American Hospital
Association.
BOARD MEMBERS CONTINUING IN OFFICE - CLASS III
(Term Ending 2001)
[PHOTO] President of The Johns Hopkins University
since September 1996. Special Assistant to
WILLIAM R. BRODY, M.D., PH.D., the President of the University of Minnesota
age 55 Academic Health Center, May 1996 to July
Director since 1998 1996; Provost of the University of Minnesota
Class III Director Academic Health Center from September 1994
Term expires 2001 to May 1996; the Martin Donner Professor and
Director of the Department of Radiology at
The Johns Hopkins University School of
Medicine from 1987 to 1994. Also a director
of Alza Corporation and Mercantile
Bankshares Corporation.
[PHOTO] Chairman of the Board and Chief Executive
Officer of Ashland Inc. (energy company)
PAUL W. CHELLGREN, age 56 since January 1997 and Chief Executive
Director since 1997 Officer since October 1996; President and
Class III Director Chief Operating Officer of Ashland Inc. from
Term expires 2001 January 1992 to September 1996. Also a
director of PNC Bank Corp. and Arch Coal,
Inc.
[PHOTO] Medtronic President and Chief Operating
Officer since August 1996; Chief Operating
ARTHUR D. COLLINS, JR., age 51 Officer from January 1994 to August 1996;
Director since 1994 Executive Vice President of the Company and
Class III Director President of Medtronic International from
Term expires 2001 June 1992 to January 1994. Corporate Vice
President of Abbott Laboratories (health
care products) from October 1989 to May 1992
and Divisional Vice President of that
company from May 1984 to October 1989. Held
various management positions both in the
U.S. and Europe during his 14 years with
Abbott. Also a director of U.S. Bancorp. and
Tennant Company, and member of the Board of
Overseers of The Wharton School.
[PHOTO] The Stephen and Suzanne Weiss Dean of the
Cornell University Medical Center and
ANTONIO M. GOTTO, JR., M.D., Provost for Medical Affairs, Cornell
age 63 University, since January 1997. Chairman and
Director since 1992 Professor of the Department of Medicine at
Class III Director Baylor College of Medicine and Methodist
Term expires 2001 Hospital from 1977 to 1996 and former J. S.
Abercrombie Chair, Atherosclerosis and
Lipoprotein Research from 1976 to 1996. Also
director and principal investigator,
Specialized Center of Research in
Arteriosclerosis, National Heart, Lung and
Blood Institute, President, International
Atherosclerosis Society and Past President,
American Heart Association.
<PAGE>
[PHOTO] Professor, Graduate School of Business,
University of St. Thomas, St. Paul,
THOMAS E. HOLLORAN, age 69 Minnesota since June 1985; Chairman,
Director since 1960 Minneapolis-St. Paul Metropolitan Airports
Class III Director Commission, from February 1989 to January
Term expires 2001 1991; Chairman of the Board of Directors and
Chief Executive Officer of Inter-Regional
Financial Group, Inc. (predecessor of Dain
Rauscher Corporation) (holding company for
various financial enterprises) from 1976 to
June 1985. Also a director of Flexsteel
Industries, Inc., MTS Systems Corp., ADC
Telecommunications Inc., National City Bank
of Minneapolis and National City
Bancorporation; Chairman and a director of
Malt-O-Meal Company; and a director of the
Minnesota Center for Corporate
Responsibility and the Bush Foundation.
Election of each director nominee requires the affirmative vote of the
holders of a majority of the shares of Common Stock present in person or by
proxy and entitled to vote on such nominee at the Annual Meeting. For this
purpose, a shareholder voting through a proxy who withholds authority to vote on
the election of directors shall not be considered present and entitled to vote
on the election of directors.
Board and Board Committee Meetings
During fiscal 1999, Medtronic's Board of Directors held a total of ten
Board meetings. Each director attended 75% or more of the total meetings of the
Board of Directors and Board committees on which the director served (held
during the period he or she served as a director), except for Drs. Gotto and
Healy, who each attended more than 70% of the total such meetings held. The
standing committees of the Board of Directors include the Audit Committee, the
Compensation Committee, the Finance Committee, the Corporate Governance
Committee and the Technology and Quality Committee.
Audit Committee. The Audit Committee held three meetings in fiscal
1999. Committee members are Brody, Healy, Holloran, Schuler (Chair) and Swalin.
The committee reviews Medtronic's annual financial statements; makes
recommendations regarding Medtronic's independent auditors and scope of auditor
services; reviews the adequacy of accounting and audit policies, compliance
assurance procedures and internal controls; reviews nonaudit services performed
by auditors to maintain auditors' independence; and reports to the Board of
Directors on disclosure adequacy and adherence to accounting principles.
Compensation Committee. The Compensation Committee held four meetings
in fiscal 1999. Committee members are Bonsignore, Chellgren, Healy, Rosso,
Schall, Schuler and Simonson (Chair). The committee reviews compensation
philosophy and major compensation and benefits programs for employees; oversees
certain stock and benefit plans; and reviews executive officers' compensation.
Finance Committee. The Finance Committee held four meetings in fiscal
1999. Committee members are Chellgren (Chair), Gotto, Rosso, Schall, Simonson
and Sprenger. The committee reviews and makes recommendations regarding
financial policies and performance objectives as developed by management,
including review of Medtronic's annual and long-range operating plans; assists
management in evaluation of major acquisitions and divestitures from a financial
perspective; reviews changes in capital structure; and reviews banking
relationships, insurance coverage on assets, tax strategies, and financial
performance and related matters pertaining to Medtronic's employee pension and
supplemental retirement plans.
<PAGE>
Corporate Governance Committee. The Corporate Governance Committee held
two meetings in fiscal 1999. Committee members are Bonsignore, Brody, Chellgren,
Gotto, Healy, Holloran, Rosso, Schall (Chair), Schuler, Simonson, Sprenger and
Swalin. The committee addresses all matters of corporate governance; evaluates
qualifications and candidates for positions on the Board; evaluates the
performance of the chief executive officer and the Board; reviews major
organization changes and senior management performance; and reviews director
compensation philosophy. The Corporate Governance Committee maintains a
Nominating Subcommittee which considers and recommends to the full Committee
criteria for selecting new directors, nominees for Board membership and the
positions of CEO, Chairman and Chair of the Corporate Governance Committee, and
whether a director should be invited to stand for re-election. The Subcommittee
is comprised of the Chair of the Corporate Governance Committee plus one
director selected from each class of directors. The current Subcommittee held
one meeting in fiscal 1999 and includes Schall (Chair), Healy, Holloran and
Schuler.
The Corporate Governance Committee will consider nominees for Board
membership submitted by shareholders. Nominations by shareholders must be made
pursuant to timely notice in writing to the Corporate Secretary at 7000 Central
Avenue N.E., Minneapolis, Minnesota 55432. Candidates for director should be
persons with broad training and experience in their chosen fields and who have
earned distinction in their activities. Notice by the shareholder to be timely
must be received not less than 50 nor more than 90 days prior to the meeting or,
if less than 60 days disclosure of the meeting date is given, not later than the
close of business on the 10th day following the day on which notice of the
meeting date is mailed or public disclosure of such date is made. The notice
shall set forth certain information concerning such shareholder and the
nominees, including their names and addresses, their principal occupation or
employment, the capital stock of the Company which they beneficially own, such
other information as would be required in a proxy statement soliciting proxies
for the election of the nominees and the consent of each nominee to serve as a
director if so elected. The chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedure.
Technology and Quality Committee. The Technology and Quality Committee
held two meetings in fiscal 1999. Committee members are Bonsignore, Brody,
Gotto, Healy (Chair), Holloran, Sprenger and Swalin. The committee reviews
policies, practices, processes and quality programs concerning technological and
product research; reviews efforts and investments in developing new products and
businesses; evaluates Medtronic's technological education and recognition
programs; and reviews quality process matters with Medtronic's chief quality
officer.
Director Compensation
As part of the Company's desire to further emphasize performance-based
compensation and to encourage stock ownership by the Company's management and
Board of Directors, the Company adopted the Medtronic, Inc. Outside Director
Stock Compensation Plan (the "Director Plan") effective March 5, 1998.
Director compensation has three components: an annual retainer, an
annual stock option grant and an annual credit of deferred stock units. In
addition, all new non-employee board members receive an initial stock option
grant.
The annual retainer in place for the 1998-1999 plan year (September 1,
1998 through August 31, 1999) is $50,000 for all non-employee directors except
the Chair of the Corporate Governance Committee, whose retainer is $60,000.
Directors have the option of taking 100% of the annual retainer in the form of
cash, or 100% in the form of stock options. If options are chosen, the number of
shares covered by such options will equal four times the amount of the annual
retainer divided by the fair market value of a share of Medtronic stock on the
last day of the relevant plan year (which will also be the exercise price of
such options). These options expire on the tenth anniversary of the date of
grant. The annual retainer is reduced by 25% if a non-employee director does not
attend at least 75% of the total meetings of the Board and Board committees on
which such director served during the relevant plan year.
<PAGE>
Under the Director Plan, each non-employee director also receives on
the first day of each plan year an annual stock option grant for a number of
shares of Medtronic stock equal to the amount of the annual retainer divided by
the fair market value of a share of Medtronic stock on the date of grant (which
will also be the exercise price of such option). These options expire at the
earlier of the tenth anniversary of the date of grant or five years after the
holder ceases to be a director of the Company.
The Director Plan also provides that on the last day of each plan year,
each non-employee director will be credited with a number of deferred stock
units (each representing the right to receive one share of Medtronic stock)
equal to one-half of the amount of the annual retainer divided by the average of
the fair market value of a share of Medtronic stock for the last 20 trading days
during the plan year. Dividends paid on Medtronic stock are credited to a
director's stock unit account in the form of additional stock units. The balance
in a director's stock unit account will be distributed to such director in the
form of shares of Medtronic stock upon resignation or retirement from the Board,
in a single distribution or, at the director's option, in five equal annual
distributions.
Each new non-employee director also receives, on the date he or she
first becomes a director, a one-time initial stock option grant under the
Director Plan for a number of shares of Medtronic stock equal to two times the
amount of the annual retainer divided by the fair market value of a share of
Medtronic stock on the date of grant (which will also be the exercise price of
such option). These options expire at the earlier of the tenth anniversary of
the date of grant or five years after the holder ceases to be a director of the
Company.
All of the non-employee director options described above vest and are
exercisable in full on the date of grant, provided that a director initially
appointed by the Board will generally not be entitled to exercise any such
option until such director has been elected to the Board by the shareholders of
the Company.
In 1998, the Company discontinued its charitable contribution plan for
all directors, which provided for a contribution of $1 million to charitable
institutions recommended by a deceased director with five or more years of
service at the time of death. However, persons who became directors prior to
July 1, 1998 will continue to be eligible for this benefit.
As part of its overall program to promote charitable giving, the
Company's Foundation matches gifts by directors to qualified educational
institutions up to $7,000 per fiscal year.
Certain Transactions
The Company uses Carlson Wagonlit Travel, which was selected through a
competitive bidding process, as its travel agency for Company business. Dr. Glen
Nelson, who is Vice Chairman and a director of the Company, is a director of
Carlson Holdings, Inc., a family-owned business which includes Carlson Wagonlit
Travel. Members of Dr. Nelson's family are owners and officers of Carlson
Holdings, Inc. The Company paid fees totaling approximately $1,458,000 to
Carlson Wagonlit Travel for services in fiscal 1999. Management believes that
these transactions were on terms no less favorable to the Company than if made
with unaffiliated third parties.
<PAGE>
SHAREHOLDINGS OF CERTAIN OWNERS AND MANAGEMENT
Certain Beneficial Owners. To the best of Medtronic's knowledge, no
shareholder beneficially owned more than 5% of Medtronic's Common Stock as of
June 24, 1999.
Management Shareholdings. The following table shows the number of
shares of Medtronic Common Stock beneficially owned by Medtronic's directors,
executive officers identified in the Summary Compensation Table below, and all
directors and executive officers as a group as of June 24, 1999.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1)(2)
Michael R. Bonsignore.................... 1,767
William R. Brody, Ph.D., M.D............. 7,365
Paul W. Chellgren........................ 8,165
Arthur D. Collins, Jr. (3) .............. 779,268
Bill K. Erickson......................... 375,709
William W. George(4)..................... 1,660,545
Antonio M. Gotto, Jr., M.D............... 42,297
Bernadine P. Healy, M.D.................. 27,973
Thomas E. Holloran....................... 94,924
Glen D. Nelson, M.D. (5)................. 972,432
Jean-Pierre Rosso........................ 22
Robert L. Ryan........................... 349,162
Richard L. Schall........................ 218,821
Jack W. Schuler.......................... 47,228
Gerald W. Simonson....................... 74,957
Gordon M. Sprenger....................... 46,615
Richard A. Swalin, Ph.D.................. 50,549
Directors and executive officers
as a group (26 persons)(2)............. 6,120,637
- -------------------------
(1) No director or executive officer beneficially owns more than 1% of the
shares outstanding. Medtronic's directors and executive officers as a
group beneficially own approximately 1.05% of the shares outstanding.
(2) Includes the following shares not currently outstanding but deemed
beneficially owned because of the right to acquire them pursuant to
options exercisable within 60 days (on or before _______, 1999) as
follows: W.R. Brody, 4,681 shares; P.W. Chellgren, 6,802 shares; A.D.
Collins, Jr., 486,195 shares; B.K. Erickson, 206,755 shares; W.W.
George, 745,312 shares; A.M. Gotto, Jr., 35,711 shares; B.P. Healy,
17,836 shares; T.E. Holloran, 39,526 shares; G.D. Nelson, 660,466
shares; R.L. Ryan, 328,408 shares; R.L. Schall, 34,872 shares; J.W.
Schuler, 19,840 shares; G.W. Simonson, 34,573 shares; G.M. Sprenger,
37,419 shares; R.A. Swalin, 39,738 shares; and all directors and
executive officers as a group, 3,363,745 shares.
(3) Arthur D. Collins, Jr. disclaims beneficial ownership of 5,000 shares
included in the above table, which are held by the Collins Family
Foundation, a charitable trust of which he is one of the trustees.
(4) W.W. George disclaims beneficial ownership of 111,859 shares included
in the above table, which are held by the George Family Foundation, a
charitable trust of which he is one of the trustees. The above table
also includes an aggregate of 62,386 shares covered by currently
exercisable options transferred by Mr. George to members of his
immediate family.
(5) The above table includes an aggregate of 98,835 shares covered by
currently exercisable options transferred by Dr. Nelson to members of
his immediately family.
(6) R.L. Schall disclaims beneficial ownership of 54,299 shares included in
the above table, which are held in a charitable lead annuity trust.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the Securities Exchange Act of 1934 requires the Company's directors and
executive officers to file reports of ownership and changes in ownership of the
Company's Common Stock with the Securities and Exchange Commission and the New
<PAGE>
York Stock Exchange, and the Company is required to identify any of those
individuals who failed to file such reports on a timely basis. To the best of
the Company's knowledge, based upon a review of such reports furnished to the
Company and written representations that no other reports were required, there
were no late filings by the Company's directors or executive officers in fiscal
1999 other than by Mr. Lund, who did not timely report several stock gifts in
December 1997. The report was promptly filed upon discovery of the oversight.
REPORT OF THE COMPENSATION COMMITTEE ON
FISCAL 1999 EXECUTIVE COMPENSATION
Overview. The Compensation Committee of the Board of Directors (the
"Committee") is comprised solely of directors who are not current or former
employees of the Company. The Committee is responsible for establishing the
compensation policy and administering the compensation programs for the
Company's executive officers and other key employees. The Committee periodically
engages independent compensation consultants to assist them in this process. In
carrying out its duties, the Committee intends to make all reasonable attempts
to comply with the requirements to exempt executive compensation from the $1
million deduction limitation under Section 162(m) of the Internal Revenue Code,
unless the Committee determines that such compliance in given circumstances
would not be in the best interests of the Company and its shareholders.
Compensation Philosophy. The compensation program for executive
officers is designed to
o Emphasize performance-based compensation;
o Encourage strong financial performance by establishing aggressive goals
for target performance and highly leveraged incentive programs;
o Encourage executive stock ownership and alignment with shareholder
interests by providing a significant portion of compensation in Company
Common Stock.
The principal elements of the program consist of base salary, annual
incentives and long-term incentives in the form of stock options, performance
shares and restricted stock. The Company's philosophy is to position the
aggregate of these elements at a level which is commensurate with the Company's
size and performance relative to other leading medical equipment and
pharmaceutical companies, as well as a larger group of general industry
companies. The Committee periodically reviews the reasonableness of total
compensation levels and mix using public information from comparator company
proxy statements and survey information from credible general industry surveys.
Base Salary. The Committee annually reviews and approves the base
salaries of executive officers, taking into consideration individual
performance, retention, the level of responsibility, the scope and complexity of
the position and competitive practice.
Annual Incentive Awards. Executive officers are eligible for annual
incentives under the shareholder approved Management Incentive Plan. This is a
formula-based plan with awards based on corporate and business unit performance.
For fiscal 1999, corporate operating performance was assessed against target
measures of corporate profit after taxes, revenue growth and after-tax return on
net assets, with these measures given weights of 40%, 40% and 20%, respectively.
Business unit financial performance was assessed against target measures of
earnings before interest and taxes, revenue growth, and after-tax return on net
assets or net asset turnover, with these measures assigned respective weights
that vary for each participant.
For fiscal 1999, executive officers were eligible for Management
Incentive Plan target awards ranging from 35% to 70% of base salary. Final
awards can range from 0% to 230% of the target amounts, and a threshold level of
performance is required before any payout occurs.
<PAGE>
Stock Options. Stock options are granted annually to executive
officers. Target awards are based on pre-established grant guidelines that are
calibrated to competitive standards. Individual awards vary based on the
individual's responsibilities and performance, ability to impact financial
performance and future potential. All grants are made at 100% of fair market
value.
Performance Shares. Top executives are eligible for grants of
performance shares under the Performance Share program. Grants are made annually
for overlapping three-year performance periods. Grant targets range from 30% to
50% of base salary. Once a threshold level of performance is attained, final
awards can range from 20% to 180% of the target amounts. The 1999-2001 cycle
will be based on performance measures of basic earnings per share (40%), return
on net assets (40%) and revenue growth (20%).
Performance shares earned for the 1997-1999 cycle were based on
earnings per share (40%), after-tax return on net assets (40%) and revenue
growth (20%). Medtronic's performance for this performance cycle was very strong
- - resulting in a payout at 158% of the target award. The value of the award is
based on the average price of the Company's Common Stock for the last 20 trading
days of the performance cycle, up to a maximum of three times the price at the
date of grant. Half of the award is paid in Company Common Stock, with the other
half paid in cash or Company Common Stock at the discretion of the Committee.
Stock Option Exchange Program. To encourage stock ownership by
executives, the Company offers a program which allows executives to elect to
receive stock options in lieu of some or all of the cash compensation earned
under the Management Incentive Plan and the Performance Share program. Currently
under the program, participants receive an option on $4 of stock at market value
for every $1 of compensation exchanged. Stock options granted to named
executives in fiscal 1999 under this program are disclosed in the "Option/SAR
Grants in Last Fiscal Year" table on page __ of this Proxy Statement.
Adjustments for Acquisitions and Non-Recurring Charges. In determining
award payments with respect to the Company's short-term and long-term incentive
programs, the Committee has adopted a longstanding practice of excluding from
the calculation of performance results certain acquisitions and non-recurring
items of income or loss. Consistent with this practice, the performance results
for fiscal 1999 exclude all or a portion of certain acquisitions made during the
year, as well as all of the non-recurring charges related to those acquisitions.
Compensation of Chief Executive Officer. The CEO's compensation is
comprised of base salary, annual incentive and long-term incentives. Pay levels
and opportunity are established by the Committee in the same manner as for other
executive officers described above.
The CEO received a 14% merit increase to base salary effective at the
beginning of fiscal 1999. In determining the base salary for the CEO, the
Committee specifically considered annual operating performance (for fiscal
1998), strategic planning and succession planning for senior management.
For fiscal 1999, the CEO was eligible to receive a target award of 70%
of base salary under the Management Incentive Plan. Annual performance, adjusted
for acquisitions and non-recurring charges, was 94.6% of target.
In fiscal 1999, the CEO received a Performance Share grant with a
target payout equal to 50% of his base salary. Performance objectives for the
1999-2001 performance cycle are consistent with those for all program
participants listed above. For the three-year cycle ended in fiscal 1999, the
Company achieved cumulative earnings per share and average after-tax return on
net assets performance at or above the maximum of the performance targets.
Revenue growth was slightly below target. Consequently, the payout for this
cycle for all executive officers, including the CEO, was 158% of the target
award.
<PAGE>
Conclusion. Consistent with its compensation philosophy, the Committee
believes the executive officer compensation program provides incentive to attain
strong financial performance and is strongly aligned with shareholder interests.
The Committee believes that the Company's compensation program directs the
efforts of the Company's executive officers toward the continued achievement of
growth and profitability for the benefit of the Company's shareholders.
COMPENSATION COMMITTEE:
Gerald W. Simonson, Chair Jean-Pierre Rosso
Michael R. Bonsignore Richard L. Schall
Paul W. Chellgren Jack W. Schuler
Bernadine P. Healy, M.D.
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
The graph and table below compare the cumulative total shareholder
return on the Company's Common Stock for the last five fiscal years with the
cumulative total return on the S&P 500 Index and the S&P Health Care (Medical
Products and Supplies) Industry Index over the same period. The graph and table
assume the investment of $100 in each of the Company's Common Stock, the S&P 500
Index and the S&P Health Care (Medical Products and Supplies) Industry Index on
April 30, 1994 and that all dividends were reinvested.
Comparison Of Five-Year Cumulative Total Return Among Medtronic,
S&P 500, And S&P Health Care (Medical Products & Supplies) Industry Index
[PLOT POINTS GRAPH]
<TABLE>
<CAPTION>
April 30, April 30, April 30, April 30, April 30, April 30,
1994 1995 1996 1997 1998 1999
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
MEDTRONIC $100.00 $199.19 $286.02 $375.14 $576.89 $785.96
S&P 500 100.00 117.41 152.81 191.09 269.51 328.34
S&P HEALTH CARE 100.00 155.88 210.67 245.08 350.36 449.97
</TABLE>
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years ended April 30, 1999 awarded to or earned by
the Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
---------------------------------- -------------------------- ------------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Position Fiscal Salary Bonus Compensation Awards Options/SARs Payouts Compensation
Year ($) ($)(2)(3)(4) ($)(1) ($)(5) (#)(2)(3)(4)(6) ($)(6) (7) ($)(8)
- --------------------------- ------ ------ ------------ ------------ ---------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William W. George 1999 $800,000 $329,480 $ -- $ -- 128,088 $ -- $40,530
Chairman and Chief 1998 700,000 239,252 -- 7,007,820 370,655 784,163 34,542
Executive Officer 1997 642,000 464,598 -- -- 32,908 1,431,161 43,331
Arthur D. Collins, Jr. 1999 700,000 430,203 -- 90,190 -- 35,515
President and 1998 589,607 348,103 7,007,820 299,878 835,106 27,888
Chief Operating Officer 1997 471,000 214,703 -- -- 37,880 933,897 32,110
Glen D. Nelson, M.D. 1999 530,000 -- 5,958 -- 103,632 -- 29,057
Vice Chairman 1998 471,000 -- 5,556 -- 207,821 -- 24,923
1997 471,000 -- 5,694 -- 62,682 996,249 32,097
Robert L. Ryan 1999 390,000 -- -- 55,850 -- 22,533
Senior Vice President and 1998 370,000 -- -- -- 117,079 -- 19,638
Chief Financial Officer 1997 352,500 -- -- -- 34,390 683,599 22,368
Bill K. Erickson 1999 325,000 83,556 925 -- 43,554 -- 19,245
Senior Vice President & 1998 303,345 31,162 629 -- 67,402 282,304 16,606
President, Americas 1997 288,900 110,239 644 -- 14,860 543,293 20,611
</TABLE>
- -----------------------
(1) Amounts payable by the Company in above-market interest under deferred
compensation plan.
(2) "Bonus" column does not include fiscal 1999 cash bonus payments of
$200,000, $325,725, $184,373 and $80,000 which Messrs. George, Nelson,
Ryan and Erickson, respectively, elected to forego in order to receive
stock options granted in lieu of part or all of their cash bonus
compensation under the Management Incentive Plan. These stock options
are included in the "Securities Underlying Options/SARs" column. See
"Report of the Compensation Committee on Fiscal 1998 Executive
Compensation - Stock Option Exchange Program."
(3) "Bonus" column does not include fiscal 1998 cash bonus payments of
$200,000, $274,443, $165,841 and $75,000 which Messrs. George, Nelson,
Ryan and Erickson, respectively, elected to forego in order to receive
stock options granted in lieu of part or all of their cash bonus
compensation under the Management Incentive Plan. These stock options
are included in the "Securities Underlying Options/SARs" column. See
"Report of the Compensation Committee on Fiscal 1999 Executive
Compensation - Stock Option Exchange Program" and "Option/SAR Grants in
Last Fiscal Year, " below.
(4) "Bonus" column does not include fiscal 1997 cash bonus payments of
$100,000, $314,703, $196,390 and $40,000 which Messrs. Collins, Nelson,
Ryan and Erickson, respectively, elected to forego in order to receive
stock options granted in lieu of part or all of their cash bonus
compensation under the Management Incentive Plan. These stock options
are included in the "Securities Underlying Options/SARs" column. See
"Report of the Compensation Committee on Fiscal 1999 Executive
Compensation - Stock Option Exchange Program."
(5) Mr. George and Mr. Collins each received a special grant of 150,000
shares of restricted stock in August 1997. Dollar value of such stock
is based on the fair market value on the date of grant. The stock vests
100% on a cliff basis five years after the date of grant. Dividend
equivalents are paid on the stock. Aggregate shares of restricted stock
held by named executive officers at 4/30/99 and the value of such
shares on that date (based on a closing stock price of $71.9375 per
share) are as follows: Mr. George and Mr. Collins each held 150,000
shares valued at $10,790,625.
(6) "LTIP Payouts" column does not include the value of cash and/or stock
earned upon payment of performance share awards for the fiscal
1997-1999 performance cycle under the Company's long-term incentive
plan of $1,350,790, $892,044, 892,044, $593,399 and $486,353 which
Messrs. George, Collins, Nelson, Ryan and Erickson, respectively,
elected to forgo in order to receive stock options granted in lieu of
part or all of such compensation. Those stock options are included in
the "Securities Underlying Options/SARs" column. See "Report of the
Compensation Committee on Fiscal 1999 Executive Compensation -
Performance Shares" and - "Stock Option Exchange Program."
<PAGE>
(7) "LTIP Payouts" column includes the value of both cash and stock earned
in fiscal 1998 under the Company's Performance Share program under the
1994 Stock Award Plan described in "Other Long-Term Incentive Awards"
below. The stock for the fiscal 1998 payment was valued at $52.4875 per
share. The column does not include the value of cash and/or stock
earned upon payment of performance share awards for the fiscal
1996-1998 performance cycle under the Company's long-term incentive
plan of $784,163, $200,000, $1,035,106, $701,810 and $282,304 which
Messrs. George, Collins, Nelson, Ryan and Erickson, respectively,
elected to forgo in order to receive stock options granted in lieu of
part or all of such compensation. Those stock options are included in
the "Securities Underlying Options/SARs" column. See "Report of the
Compensation Committee on Fiscal 1999 Executive Compensation -
Performance Shares" and - "Stock Option Exchange Program. "
(8) Amounts in this column for fiscal 1999 include the following: the
Company contributed $4,144 in shares of Company stock under the
employee stock ownership plan for each of the named executive officers
for fiscal 1999; the Company contributed $7,776 to each of Messrs.
George, Collins, Nelson, Ryan and Erickson, respectively, to match
employee contributions under the 401(k) supplemental retirement plan;
and the Company contributed $28,610, $23,595, $17,137, $10,613 and
$7,325 to Messrs. George, Collins, Nelson, Ryan and Erickson,
respectively, toward the right to receive shares of Company stock under
the non-qualified supplemental benefit plan.
Option/SAR Grants in Last Fiscal Year
The following table sets forth for each of the named executives the
stock options granted by the Company in fiscal 1999 and the potential value of
these stock options determined pursuant to Securities and Exchange Commission
requirements. No stock appreciation rights were granted to the named executives
in fiscal 1999.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Individual Grants Stock Price Appreciation
--------------------------------------- For Option Term
Number of % of Total -------------------------------------
Securities Options/SARs Exercise
Underlying Granted to Or Base
Options/SARs Employees in Price Expiration 0% 5% 10%
Name (#) Fiscal Year ($/Sh) Date ($) ($)(5) ($)(5)
-------------- ------------ --------- ---------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
W. W. George 35,260 (1) 1.1% $63.81255 10/28/08 0 $1,417,518 $3,577,546
6,597(2) 0.2 75.1875 04/28/09 0 312,488 788,659
11,121(3) 0.4 71.9375 05/01/09 0 504,011 1,272,027
75,110(4) 2.4 71.9375 05/01/09 0 3,404,032 8,591,129
A. D. Collins, Jr 35,260(1) 1.1 63.8125 10/28/08 0 1,417,518 3,577,546
5,328(2) 0.2 75.1875 04/28/09 0 252,377 636,952
49,602(4) 1.6 71.9375 05/01/09 0 2,247,994 5,673,508
G. D. Nelson, M.D 31,342(1) 1.0 63.8125 10/28/08 0 1,260,007 3,180,018
4,576(2) 0.1 75.1875 04/28/09 0 216,757 547,052
18,112(3) 0.6 71.9375 05/01/09 0 820,847 2,071,662
49,602(4) 1.6 71.9375 05/01/09 0 2,247,994 5,673,508
R. L. Ryan 9,403(1) 0.3 63.8125 10/28/08 0 378,018 954,046
3,199(2) 0.1 75.1875 04/28/09 0 151,531 382,434
10,252(3) 0.3 71.9375 05/01/09 0 464,627 1,172,630
32,996(4) 1.0 71.9375 05/01/09 0 1,495,399 3,774,103
B. K. Erickson 9,403(1) 0.3 63.8125 10/28/08 0 378,018 954,046
2,658(2) 0.1 75.1875 04/28/09 0 125,904 317,759
4,449(3) 0.1 71.9375 05/01/09 0 201,631 508,879
27,044(4) 0.9 71.9375 05/01/09 0 1,225,651 3,093,310
</TABLE>
<PAGE>
- -----------------------
(1) These stock options granted to the named executive officers have an
exercise price equal to the fair market value on the date of grant and
vest annually in 25% increments.
(2) These stock options were granted in exchange for the elimination of a
senior officer Postretirement Survivor Benefit Plan. The options vest
100% on a cliff basis at the earlier of the officer's earliest possible
retirement date or eight years after the date of grant.
(3) These stock options were granted in lieu of all or part of the cash
compensation earned for fiscal 1999 under the Company's annual
incentive plan. Because the executives elected to forego cash
compensation to receive the options, which were granted on 5/01/99, the
options are 100% vested at grant. See "Report of the Compensation
Committee on Fiscal 1999 Executive Compensation - Stock Option Exchange
Program. "
(4) These stock options were granted in lieu of all or part of the cash
and/or stock compensation earned upon payment of performance share
awards for the fiscal 1997-1999 performance cycle under the Company's
long-term incentive plan. Because the executives elected to forego cash
and/or stock compensation to receive the options, which were granted on
5/01/99, the options are 100% vested at grant. See "Report of the
Compensation Committee on Fiscal 1999 Executive Compensation - Stock
Option Exchange Program. "
(5) The hypothetical potential appreciation shown in these columns reflects
the required calculations at annual rates of 5% and 10% set by the
Securities and Exchange Commission, and therefore is not intended to
represent either historical appreciation or anticipated future
appreciation of the Company's Common Stock price.
Aggregated Option/SAR Exercises In Last Fiscal Year
And Fiscal Year-End Option/SAR Values
The following table sets forth for each of the named executive officers
the value realized from stock options exercised during fiscal 1999 and the
number and value of exercisable and unexercisable stock options and stock
appreciation rights held at April 30, 1999.
<TABLE>
<CAPTION>
Number of
Securities Underlying
Unexercised Value of
Options/SARs Unexercised In-the-Money
at Fiscal Options/SARs at
Year-End (#) Fiscal Year-End ($)(1)
Shares Value --------------------- ------------------------
Acquired Realized Exercisable/ Exercisable/
Name on Exercise ($) Unexercisable Unexercisable
- ---------------------------- ----------- -------------- ---------------------- ----------------------------
<S> <C> <C> <C> <C>
W. W. George(2)............. 400,000 $25,840,620 740,756/551,165 $35,667,190/$21,537,142
A. D. Collins, Jr........... 0 0 482,135/359,979 24,682,899/9,528,779
G. D. Nelson, M.D. (3)...... 0 0 657,846/162,521 28,530,715/4,270,846
R. L. Ryan.................. 26,624 1,573,729 326,144/83,739 12,529,329/2,488,658
B. K. Erickson ............. 70,884 4,062,034 205,127/64,911 8,973,368/1,950,627
</TABLE>
- -----------------
(1) Value of unexercised in-the-money options is determined by multiplying
the difference between the exercise price per share and $71.9375, the
closing price per share on 4/30/99, by the number of shares subject to
such options. Amounts include stock options granted on 5/01/99 in lieu
of cash compensation earned for fiscal 1999 under the Company's annual
incentive plan and cash and/or stock compensation earned upon payment
of performance share awards for the fiscal 1997-1999 performance cycle
under the Company's Performance Share Program under the 1994 Stock
Award Plan. See "Report of the Compensation Committee on Fiscal 1999
Executive Compensation - Stock Option Exchange Program."
(2) Includes exercisable options to purchase an aggregate of 62,386 shares
transferred to members of Mr. George's immediate family.
(3) Includes exercisable options to purchase an aggregate of 98,835 shares
transferred to members of Dr. Nelson's immediate family.
Other Long-Term Incentive Awards
The following table sets forth the number of performance share units
granted to each of the named executives in fiscal 1999 under the Company's 1994
Stock Award Plan and the performance-based award formula under such Plan.
<PAGE>
Long-Term Incentive Plans -- Awards in Last Fiscal Year(1)
<TABLE>
<CAPTION>
Estimated Future Payouts
Under Non-Stock Price
Based-Plans
Number of -------------------------------------
Shares, Units Performance or
or Other Other Period
Rights Until Maturation Threshold Target Maximum
Name (#) or Payout (#) (#) (#)
- ----- ------------- ---------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
W. W. George.......................... 7,621 5/1/98-4/30/01 1,525 7,621 13,718
A. D. Collins, Jr..................... 6,669 5/1/98-4/30/01 1,334 6,669 12,005
G. D. Nelson, M.D..................... 5,049 5/1/98-4/30/01 1,010 5,049 9,089
R. L. Ryan............................ 2,973 5/1/98-4/30/01 595 2,973 5,352
B. K. Erickson ....................... 2,477 5/1/98-4/30/01 496 2,477 4,459
</TABLE>
- ---------------------
(1) Payout of awards is based on achieving specified levels of designated
performance objectives during a three-year performance cycle. Payout
can range from 0% to 180% of units granted, with 20% and 180% as the
threshold and maximum payouts, respectively. Payout of 100% of the
units granted represents the target payout. Awards are payable at least
50% in Common Stock, with the remainder paid in cash or Common Stock at
the discretion of the Compensation Committee. The value of an award is
determined when it is earned based on the average fair market value per
share for the last 20 trading days of the performance cycle. The
Company offers a program which allows executives to receive stock
options in lieu of some or all of the cash and/or stock compensation
earned upon payment of performance share awards. See "Report of the
Compensation Committee on Fiscal 1999 Executive Compensation -
Performance Shares" above.
Pension Plan
The Company's pension plan is a defined benefit, tax qualified
retirement plan covering most U.S. employees and generally provides 40% of the
average of the highest five consecutive years of compensation (including certain
incentive compensation) in the final ten years of service, offset by a Social
Security allowance as published each year by the Internal Revenue Service. The
table below illustrates the annual benefits payable to participants who retire
at age 65 with the indicated years of service with Medtronic and with the
indicated five-year highest average annual compensation. The benefits have been
calculated on a 50% joint and survivor annuity basis. The compensation
considered in determining the pensions payable to the below-named executive
officers is the compensation shown in the "Salary" and "Bonus" columns of the
Summary Compensation Table on page __.
Years of Service with the Company
Five-Year Average ---------------------------------------------------
Annual
Compensation(1) 15 20 25 30 35
--------------------- -------- --------- -------- --------- ---------
$200,000 $33,878 $45,171 $56,463 $67,756 $72,331
400,000 70,478 93,971 117,463 140,956 150,106
600,000 107,078 142,771 178,463 214,156 227,881
800,000 143,678 191,571 239,463 287,356 305,656
1,000,000 180,278 240,371 300,463 360,556 383,431
1,200,000 216,878 289,171 361,463 433,756 461,206
1,400,000 253,478 337,971 422,463 506,956 538,981
- ------------------------
(1) Calculated by considering a participant's compensation levels during
the ten-year period immediately preceding retirement. The credited
years of service (rounded to the nearest whole year) for the executive
officers named in the Summary Compensation Table were as follows at
April 30, 1999: W.W. George, 10 years; A.D. Collins, Jr., 7 years; G.D.
Nelson, 13 years; R.L. Ryan, 6 years; and B. K. Erickson, 28 years.
Certain limitations on the amount of benefits under the Company's tax
qualified retirement plan were imposed by the Employee Retirement Income
Security Act of 1974 ("ERISA") and Tax Reform Act of 1986 ("TRA"). The Company's
non-qualified supplemental benefit plan provides for the restoration of benefits
to officers who may be affected by those limitations so that, in general, total
<PAGE>
benefits will be equal to the level of benefits which would have been payable
under the Company's pension plan and Employee Stock Ownership Plan but for the
ERISA and TRA limitations or for the fact that the executive has elected to
defer compensation under the Company's deferred compensation programs. The
amounts shown in the pension plan table above reflect the additional retirement
benefits provided under the non-qualified supplemental benefit plan.
Employment and Change in Control Arrangements
Change in Control Arrangements. The executive officers of the Company,
including those named in the Summary Compensation Table, have change in control
agreements (the "Agreements") with the Company. The Agreements operate only upon
the occurrence of a "change in control" as described below. Absent a "change in
control" the Agreements do not require the Company to retain the executives or
to pay them any specified level of compensation or benefits.
Each Agreement provides that for three years after a "change in
control" there will be no adverse change in the executive's salary, bonus,
opportunity, benefits or location of employment. If during this three-year
period the executive's employment is terminated by the Company other than for
cause, or if the executive terminates his employment for good reason (as defined
in the Agreements, and including compensation reductions, demotions, relocation
and excess travel), or voluntarily during the 30-day period following the first
anniversary of the "change in control, " the executive is entitled to receive an
accrued salary and annual incentive payment through the date of termination and,
except in the event of death or disability, a lump sum severance payment ("Lump
Sum Payment") equal to three times (two times in the event of termination by the
executive in the aforementioned 30-day period) the sum of his base salary and
annual bonus (and certain insurance and other welfare plan benefits). Further,
an additional payment ("gross-up") is required in an amount such that after the
payment of all taxes, income and excise, the executive will be in the same
after-tax position as if no excise tax under the Internal Revenue Code had been
imposed.
Generally, and subject to certain exceptions, a "change in control" is
deemed to have occurred if: (a) a majority of Medtronic's Board of Directors
becomes comprised of persons other than persons for whose election proxies have
been solicited by the Board, or who are then serving as directors appointed by
the Board to fill vacancies caused by death or resignation (but not removal) of
a director or to fill newly created directorships; (b) another party becomes the
beneficial owner of at least 30% of Medtronic's outstanding voting stock; or (c)
Medtronic's shareholders approve a definitive agreement or plan to merge or
consolidate Medtronic with another party (other than certain limited types of
mergers), exchange shares of voting stock of Medtronic for shares of another
corporation pursuant to a statutory exchange, sell or otherwise dispose of all
or substantially all of Medtronic's assets, or liquidate or dissolve Medtronic.
In addition, events substantially identical to those described above
also constitute a "change in control" under certain of the Company's
compensation plans. If a "change in control" of the Company occurs, awards under
the Company's Management Incentive Plan will accelerate and, subject to certain
limitations set forth in the plan, each participant will be entitled to a final
award based on certain assumptions as to target performance and salary. The
Company's stock award plans and agreements thereunder provide that in the event
of a "change in control" of the Company, all restrictions under outstanding
restricted stock awards shall immediately lapse and the restricted stock period
with respect to all such shares shall be deemed to have expired, and performance
share awards shall vest immediately in a pro rata amount based on the portion of
the performance period elapsed prior to the "change in control" and certain
assumptions as to the anticipated performance which would have been achieved
during the applicable performance period.
The Company's stock award plans and agreements thereunder also provide
for or permit acceleration of the exercisability of outstanding stock options
upon the occurrence of certain events (such as certain tender offers or exchange
offers for the Company's stock, certain changes in control of the Company, a
<PAGE>
merger or consolidation of the Company with another entity, or a sale of
substantially all of the Company's assets or certain plans therefor) or at the
discretion of the Board of Directors. Limited stock appreciation rights
("Limited Rights") granted under the stock option plans are exercisable, with
certain limitations, at any time within the thirty-day period following a
"change in control" of Medtronic. Upon exercise of Limited Rights, the holder is
entitled to receive an amount in cash for each share with respect to which the
Limited Rights are exercised equal to the difference between the option exercise
price per share of stock covered by the underlying option and the fair market
value per share as of the date of exercise. If Limited Rights are exercised, the
underlying option will no longer be exercisable to the extent of the number of
shares with respect to which the Limited Rights were exercised.
If a "change in control" occurs, subject to certain limitations,
Medtronic's contributions to the employee stock ownership plan for that year
will equal the greater of Medtronic's target percentage contribution (currently
2.5% of aggregate covered employee compensation in fiscal 1999) or, if a "change
in control" occurs after the first quarter of a plan year, the percentage
contribution Medtronic would have made upon completion of the plan year based on
performance as most recently projected by Medtronic prior to the "change in
control" and disregarding the effects of the "change in control. " If a "change
in control" occurs during a plan year, subject to certain limitations,
Medtronic's matching contribution to the 401(k) supplemental retirement plan
shall equal the greater of Medtronic's target percentage matching contribution
(currently 75% of the first 6% of a participant's contribution in fiscal 1999),
or if the "change in control" occurs after the first quarter of a plan year, the
percentage contribution Medtronic would have made upon completion of the plan
year based on performance as most recently projected by Medtronic prior to the
"change in control" and disregarding the effects of the "change in control. "
Other Employment Arrangements. In anticipation of Mr. George's plan to
relinquish the role of CEO after ten years, the Board in November 1997 entered
into a letter agreement with A.D. Collins, Jr. in order to ensure his
availability as successor to the chief executive officer position. The agreement
provides that if Mr. Collins is not named chief executive officer by May 1,
2001, he may terminate employment and will receive severance benefits, and his
outstanding stock awards will accelerate and vest in full, all to the same
extent as if a change in control had occurred as provided in his change in
control agreement and the Company's plans, as discussed above. See "Change in
Control Arrangements" above.
APPROVAL TO AMEND RESTATED ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
General
At present, Medtronic's Restated Articles of Incorporation authorize
the issuance of 800,000,000 shares of Common Stock, $.10 par value per share,
and 2,5000,000 shares of Preferred Stock, $1.00 par value per share. At July 2,
1999 __________ shares of Common Stock were outstanding and __________ shares of
Common Stock were authorized but unissued. Of these unissued shares,
approximately __________ were reserved for issuance pursuant to the Company's
stock award and other employee benefit plans. Accordingly, at July 2, 1999,
there were approximately __________ shares of Common Stock available for general
corporate purposes. No shares of Preferred Stock were outstanding at such date.
The Board of Directors recommends that the authorized number of shares
of Common Stock be increased from 800,000,000 to 1,600,000,000. Such increase,
if approved, will be effected by amending Section 3.1 of Article 3 of
Medtronic's Restated Articles of Incorporation to increase the authorized shares
of the Company to 1,602,500,000, consisting of 1,600,000,000 shares of Common
Stock and 2,500,000 shares of Preferred Stock. The full text of the proposed
amended Section 3.1 is set forth in Appendix A hereto.
The Board desires to increase the number of authorized shares of Common
Stock to give the Board flexibility to declare stock dividends or stock splits
at such times as the Board may deem appropriate (based upon the number of shares
<PAGE>
of Common Stock outstanding and the number reserved for issuance at this time,
the Company does not have sufficient authorized shares of Common Stock to effect
a two-for-one stock dividend or stock split); to give the Board flexibility to
make acquisitions using stock; to adopt additional employee benefit plans or
increase the shares available under existing plans; to raise equity capital or
to use the additional shares for other general corporate purposes. Aside from
shares currently reserved for issuance under employee benefit plans, the Board
has not authorized the issuance of any additional shares, and there are no
current agreements or commitments for the issuance of any additional shares.
Shareholders of the Company have no preemptive rights with respect to
the Common Stock and Preferred Stock for the Company. If this proposed amendment
is adopted, the additional authorized shares of Common Stock will be available
for issuance from time to time at the discretion of the Board without further
action by the shareholders, except where shareholder approval is required by
stock exchange requirements or to obtain favorable tax treatment for certain
employee benefit plans. Although an increase in the authorized shares of common
stock could, under certain circumstances, also be construed as having an
anti-takeover effect (for example, by diluting the stock ownership of a person
seeking to effect a change in the composition of the Board of Directors or
contemplating a tender offer or other transaction for the combination of the
Company with another company), the Company is not proposing this amendment to
the Restated Articles of Incorporation in response to any effort to accumulate
the Company's stock or to obtain control of the Company by means of a merger,
tender offer, or solicitation in opposition to management.
Voting Requirements and Recommendation
Approval of this amendment to the Company's Restated Articles requires
the affirmative vote of a majority of the shares of Common Stock of the Company
present in person or by proxy and entitled to vote on this item at the Annual
Meeting. Proxies solicited by the Board of Directors will be voted for approval
of the amendment unless shareholders specify otherwise in their proxies.
For this purpose a shareholder voting through a proxy who abstains with
respect to approval of the amendment is considered to be present and entitled to
vote on the approval for the amendment at the Meeting, and is in effect a
negative vote; but a shareholder (including a broker) who does not give
authority to a proxy to vote, or withholds authority to vote, on the approval of
the amendment shall not be considered present and entitled to vote on the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THIS AMENDMENT TO
THE COMPANY'S RESTATED ARTICLES OF INCORPORATION.
<PAGE>
REAPPROVAL OF PERFORMANCE CRITERIA FOR
MANAGEMENT INCENTIVE PLAN
Background
In April 1999, the Board of Directors approved, subject to shareholder
approval, the material terms of the performance criteria for the Company's
Management Incentive Plan ("MIP") so that performance-based bonuses paid under
the MIP continue to qualify for deduction under Section 162(m) of the Internal
Revenue Code of 1986. Code section 162(m) limits the annual federal tax
deduction for compensation paid to the Company's chief executive officer and the
other four most highly compensated executive officers (the "Covered Employees")
to $1,000,000. Certain performance-based compensation is excluded from this
limitation, and the MIP has been designed to comply with that exception.
Currently, the tax regulations provide that, every five years, the
Company's shareholders must approve the material terms of the performance
criteria specified in the MIP and which the Compensation Committee may establish
for annual bonuses payable to Covered Employees. The MIP was last approved by
the shareholders at the Company's 1994 annual meeting. Accordingly, the material
terms of the performance criteria specified in the MIP, as amended by the Board,
are being presented to the shareholders for approval at the 1999 annual meeting.
Purpose
The MIP is designed to motivate officers and other key employees to
achieve the Company's operating goals by providing the opportunity for incentive
compensation in addition to annual salaries. The MIP is also designed to promote
the accomplishment of management's primary annual objectives as reflected in the
Company's annual operating plan, in the various business unit annual operating
plans and in the objectives established by management for employees, and to
recognize the achievement of these objectives through the payment of incentive
compensation.
Eligibility
Eligible employees include executive officers, heads of key staff
functions, heads of operating business units and other major contributors to
business unit or corporate results. Each year, the Compensation Committee will
select those Covered Employees who may participate in the MIP. Other
participants will be selected by the chief executive officer.
Performance Criteria
At the beginning of each year, each participant, including Covered
Employees, are assigned to a specific participation category. The range of
potential awards to participants under the MIP is stated as percentages of each
participant's salary. If minimum performance objectives are met or exceeded,
actual awards will fall within a scale ranging from designated minimum awards to
designated target awards to designated maximum awards. The designated target
award for each participation category is referred to as the "Target Award
Percentage."
Each participant, including Covered Employees, is also assigned to a
specified performance category, which will set forth the weighted combinations
of performance factors to be considered in connection with the award. Such
factors may be one or a combination of the performance of the participant
individually, as part of a team or as a member of management, the participant's
division or other business unit, and the Company as a whole. Performance
categories for Covered Employees will be based solely on one or any combination
of two or more of the following factors: revenue; revenue per employee; earnings
before income tax (profit before taxes); earnings before interest and income
tax; net earnings (profit after taxes); earnings per employee; tangible,
controllable or total asset turnover; earnings per share; operating income;
total shareholder return; market share; return on equity; before- or after-tax
return on net assets; distribution expense; inventory turnover or economic value
added (economic profit); and such criteria may relate to one or any combination
of two or more of corporate, group, unit, division, affiliate or individual
performance.
<PAGE>
At the beginning of each year, the Committee will establish objectives
by which performance during the year will be measured, and each objective will
have a stated target. At the end of the year, the degree of achievement for each
objective will be expressed as a percentage of the stated target.
At the beginning of each year, the Committee will also establish a
minimum threshold level of financial objectives which the Company must achieve
before awards may be paid under the MIP. If those minimum threshold objectives
are not met, no awards will be paid to participants, including Covered
Employees, regardless of whether other objectives have been met. Similar minimum
thresholds may be established for a business unit.
Determination of Final Awards
Final awards will equal the sum of the corporate financial portion, the
unit financial portion and the management portion as determined under the terms
of the MIP. Each portion is the product of the participant's salary; the Target
Award Percentage for the participant's Participation category; the financial
percentage under the performance category; and the corporate performance, unit
financial or management score, as the case may be. No Covered Employee may
receive an award in excess of $3,000,000 (increased from $2,000,000 effective
April 30, 1999).
Voting Requirements and Recommendation
Approval of the material terms of MIP's performance criteria requires
the affirmative vote of a majority of the shares of the Company's Common Stock
present in person or by proxy and entitled to vote on this item at the Annual
Meeting. Proxies solicited by the Board of Directors will be voted for approval
of the MIP, unless shareholders specify otherwise in their proxies.
For this purpose, a shareholder voting through a proxy who abstains
with respect to approval of the material terms of the performance criteria of
the MIP is considered to be present and entitled to vote on the approval of the
MIP at the Annual Meeting, and is in effect a negative vote, but a shareholder
(including a broker) who does not give authority to a proxy to vote, or
withholds authority to vote, on the approval of the MIP shall not be considered
present and entitled to vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE MATERIAL TERMS OF
THE PERFORMANCE CRITERIA OF THE MANAGEMENT INCENTIVE PLAN.
REAPPROVAL OF PERFORMANCE CRITERIA FOR
PERFORMANCE SHARE AWARDS UNDER
1994 STOCK AWARD PLAN
Background
In April 1999, the Board of Directors approved, subject to shareholder
approval, the material terms of the performance criteria for performance share
awards under the Company's 1994 Stock Award Plan ("the 1994 Plan") so that such
awards continue to qualify for deduction under Section 162(m) of the Internal
Revenue Code of 1986. Code Section 162(m) limits the annual federal tax
deduction for compensation paid to the Company's chief executive officer and the
other four most highly compensated executive officers (the "Covered Employees")
to $1,000,000. Certain performance-based compensation is excluded from this
limitation, and the performance share awards under the 1994 Plan have been
designed to comply with that exception.
<PAGE>
Currently, the tax regulations provide that, every five years, the
Company's shareholders must approve the material terms of the performance
criteria specified in the 1994 Plan for performance share awards and which the
Compensation Committee may establish for awards granted to Covered Employees.
The performance criteria specified in the 1994 Plan was last approved by the
shareholders at the Company's 1994 annual meeting. Accordingly, the material
terms of the performance criteria specified in the 1994 Plan, as amended by the
Board, are being presented to the shareholders for approval at the 1999 meeting.
Purpose
The purpose of the 1994 Plan is to motivate key personnel to produce a
superior return to the Company's shareholders by offering such individuals an
opportunity to realize stock appreciation, by facilitating stock ownership and
by rewarding them for achieving a high level of corporate performance. The 1994
Plan is also intended to facilitate recruiting and retaining key personnel of
outstanding ability.
Eligibility and Number of Shares
All employees of the Company and its affiliates are eligible for
performance share awards under the 1994 Plan. The Compensation Committee will
select those employees, including Covered Employees, who may receive performance
share awards. No employee may receive performance shares relating to more than
680,000 shares (as adjusted for stock splits) over a five-year period.
Performance Criteria
Performance shares entitle the recipient to payment in amounts
determined by the Committee upon the achievement of specified performance
targets during a specified term. For Covered Employees, such performance targets
will consist of one or any combination of two or more of the following factors:
revenue; revenue per employee; earnings before income tax (profit before taxes);
earnings before interest and income tax; net earnings (profit after taxes);
earnings per employee; tangible, controllable or total asset turnover; earnings
per share; operating income; total shareholder return; market share; return on
equity; before- or after-tax return on net assets; distribution expense;
inventory turnover or economic value added (economic profit); and such criteria
may relate to one or any combination of two or more of corporate, group, unit,
division, affiliate or individual performance. The value in dollars is
determined when the award is earned based on the average fair market value per
share for the last 20 trading days of the performance cycle.
Payments with respect to performance share awards may be paid in cash,
shares of the Company's Common Stock or a combination of cash and Common Stock
as determined by the Compensation Committee. Subject to the limit described
above, at least 25% of the value of vested performance shares must be
distributed in the form of stock (or such higher percentage as the Committee may
from time to time determine, which is currently 50%).
Voting Requirements and Recommendation
Approval of the performance criteria for performance share awards under
the 1994 Plan requires the affirmative vote of a majority of the shares of the
Company's Common Stock present in person or by proxy and entitled to vote on
this item at the Annual Meeting. Proxies solicited by the Board of Directors
will be voted for approval of such performance criteria, unless shareholders
specify otherwise in their proxies.
For this purpose, a shareholder voting through a proxy who abstains
with respect to approval of the material terms of the performance criteria for
performance share awards under the 1994 Plan is considered to be present and
entitled to vote on the approval of such performance criteria at the Annual
Meeting, and is in effect a negative vote, but a shareholder (including a
broker) who does not give authority to a proxy to vote, or withholds authority
to vote, on the approval of the performance criteria shall not be considered
present and entitled to vote on the proposal.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE MATERIAL TERMS OF
THE PERFORMANCE CRITERIA FOR PERFORMANCE SHARE AWARDS UNDER THE 1994 STOCK AWARD
PLAN
APPROVAL OF SELECTION OF AUDITORS
Upon recommendation of its Audit Committee, Medtronic's Board has
selected PricewaterhouseCoopers LLP, certified public accountants, as
independent auditors for Medtronic for the fiscal year ending April 30, 2000.
That firm has acted as independent auditors for Medtronic for more than 20
years, and the Board considers it highly qualified. Although it is not required
to do so, the Board of Directors wishes to submit the selection of
PricewaterhouseCoopers LLP for shareholders' approval at the Meeting. If the
shareholders do not give approval, the Board will reconsider its selection.
Representatives of PricewaterhouseCoopers LLP will be present at the
Meeting, will have the opportunity to make a statement if they desire and will
be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THIS APPOINTMENT.
GENERAL
The costs of soliciting proxies will be borne by Medtronic, including
the reimbursement to record holders of their expenses in forwarding proxy
materials to beneficial owners. Directors, officers and regular employees of
Medtronic, without extra compensation, may solicit proxies personally or by
mail, telephone, fax, telex, telegraph or special letter.
Medtronic has retained ChaseMellon Shareholder Services, L.L.C., a firm
that provides professional proxy soliciting services, to aid in the solicitation
of proxies for a fee of $9,500 plus reimbursement for certain out-of-pocket
expenses.
Shareholder proposals for consideration at the Company's 2000 Annual
Meeting (anticipated date August 24, 2000) must follow the procedures set forth
in Rule 14a-8 under the Securities Exchange Act of 1934 and the Company's
Restated Articles of Incorporation. To be timely under Rule 14a-8, shareholder
proposals must be received by the Company by March 23, 2000 in order to be
considered for inclusion in the Company's Proxy Statement. Under the Company's
Restated Articles of Incorporation, if a shareholder plans to bring an item of
business before a meeting of shareholders, the shareholder must notify the
Company not less than 50 days nor (except for shareholder proposals subject to
Rule 14a-8) more than 90 days prior to the meeting, provided, however, that if
less than 60 days notice of the meeting date is given, notice by the shareholder
to be timely must be received not later than the close of business on the 10th
day following the day on which notice of the meeting date is mailed or public
disclosure of such date was made. If the Company does not receive notice of a
shareholder proposal within the time requirements set forth in the Restated
Articles of Incorporation, then the Company will not be required to present such
proposal at the 2000 Annual Meeting of Shareholders. The proposals must also
comply with all applicable statutes and regulations.
Medtronic's 1999 Annual Shareholders Report, including financial
statements, is being sent to shareholders of record as of July 2, 1999, together
with this Proxy Statement.
MEDTRONIC WILL FURNISH TO SHAREHOLDERS WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED APRIL 30, 1999, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, UPON RECEIPT OF WRITTEN REQUEST ADDRESSED
TO: INVESTOR RELATIONS DEPARTMENT, MEDTRONIC, INC., 7000 CENTRAL AVENUE N.E.,
MINNEAPOLIS, MINNESOTA 55432.
<PAGE>
The Board of Directors knows of no other matters to be presented at the
Annual Meeting. If any other business properly comes before the Annual Meeting
or any adjournment thereof, the proxies will vote on that business in accordance
with their best judgment.
By Order of the Board of Directors,
Ronald E. Lund, Secretary
MEDTRONIC, INC.
<PAGE>
APPENDIX A
PROPOSED AMENDMENT TO ARTICLE 3, SECTION 3.1 OF MEDTRONIC, INC.'S RESTATED
ARTICLES OF INCORPORATION
(Language to be added to the text has been underlined and language to be deleted
has been enclosed in brackets"[ ]").
3.1 Authorized Shares; Establishment of Classes and Series. The aggregate number
of shares the corporation has authority to issue shall be 1,602,500,000
[802,500,000] shares, which shall consist of 1,600,000,000 [800,000,000] shares
of Common Stock with a par value of $.10 per share, and 2,500,000 shares of
Preferred Stock with a par value of $1.00 per share. The Board of Directors is
authorized to establish from the shares of Preferred Stock, by resolution
adopted and filed in the manner provided by law, one of more classes of series
of Preferred Stock, and to set forth the designation of each such class or
series and fix the relative rights and preferences of each such class or series
of Preferred Stock, including, but not limited to, fixing the relative voting
rights, if any, of each class or series of Preferred Stock to the full extent
permitted by law. Holders of Common Stock shall be entitled one vote for each
share of Common Stock held of record.
<PAGE>
[LOGO] MEDTRONIC
MEDTRONIC, INC.
ANNUAL MEETING - August 25, 1999
The undersigned appoints WILLIAM W. GEORGE and RONALD E. LUND, and each of them,
as Proxies, each with the power to appoint his substitute, to represent and
vote, as designated below, all shares of the undersigned at the 1999 Annual
Meeting of Shareholders of Medtronic, Inc. at the Medtronic, Inc. Corporate
Center at its Rice Creek facility, 7000 Central Avenue N.E., Minneapolis
(Fridley), Minnesota, at 10:30 a.m., Central Daylight Time, on Wednesday, August
25, 1999, and at any adjournment thereof.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the Meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS, MEDTRONIC, INC.
(CONTINUED, AND TO BE SIGNED AND DATED ON OTHER SIDE)
[LOGO] MEDTRONIC
VOTE BY TELEPHONE OR INTERNET
QUICK *** EASY *** IMMEDIATE COMPANY #
CONTROL #
Your telephone or internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, dated, signed and returned your proxy card.
The deadline for telephone or internet voting is noon (ET), August 19, 1999.
TELEPHONE VOTING INSTRUCTIONS: Using a TOUCH-TONE telephone, dial
1-800-240-6326. Listen to the recorded instructions, use the Company number and
the Control number printed in the box in the upper right corner of this proxy
card to access the system, and use your telephone keypad to vote. Please make
sure you stay on the line until you receive a confirmation of your vote.
INTERNET VOTING INSTRUCTIONS: Access the World Wide Web site "http://www._____"
and follow the instructions posted on the web site, using the Company number and
the Control number printed in the box in the upper right corner of this proxy
card.
-- THANK YOU FOR VOTING --
IF YOU VOTE BY TELEPHONE OR INTERNET, DO NOT MAIL BACK YOUR PROXY
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR:
1. Set board size at fourteen members and elect four Class I Directors for
three-year terms:
Nominees: (01) Glen D. Nelson, M.D. (02) Jean-Pierre Rosso
(03) Jack W. Schuler, and (04) Gerald W. Simonson
[ ] FOR all nominees [ ] WITHHOLD from all nominees
To withhold authority to vote for any nominee(s),
write the number(s) of the nominee(s) in the box to the right. [ ]
2. To approve an amendment to the Company's Restated Articles of
Incorporation to increase the number of shares of Common Stock the
Company is authorized to issue.
[ ] For [ ] Against [ ] Abstain
3. To reapprove the performance criteria for the Company's Management
Incentive Plan.
[ ] For [ ] Against [ ] Abstain
4. To reapprove the performance criteria for the Company's 1994 Stock
Award Plan.
[ ] For [ ] Against [ ] Abstain
5. Approve appointment of PricewaterhouseCoopers LLP as independent
auditors.
[ ] For [ ] Against [ ] Abstain
[ ] Mark here for address change and note below.
<PAGE>
Date __________________________, 1999
___________________________________________
PLEASE DATE AND SIGN ABOVE exactly as name
appears, indicating, if appropriate,
official position or representative
capacity. If stock is held in joint tenancy,
each joint owner should sign.
MEDTRONIC, INC.
Annual Meeting
Medtronic, Inc.
Corporate Center
Rice Creek Facility
7000 Central Ave N.E.
Minneapolis (Fridley), Minnesota
August 25, 1999
10:30 A.M., CENTRAL DAYLIGHT TIME
<PAGE>
ATTACHMENT A
MEDTRONIC, INC.
MANAGEMENT INCENTIVE PLAN
(AMENDED EFFECTIVE APRIL 29, 1994)
I. PURPOSES
This Medtronic, Inc. Management Incentive Plan is effective as of April 29, 1994
(the "Plan") and amends and restates in its entirety the existing Restated
Medtronic, Inc. Management Incentive Plan originally adopted May 1, 1977 and
most recently restated June 27, 1991. The Plan is designed to motivate officers
and other key employees to achieve the Company's operating goals by providing
the opportunity for incentive compensation in addition to annual salaries. The
Plan is also designed to promote the accomplishment of management's primary
annual objectives as reflected in the Company's annual operating plan, in the
various business unit annual operating plans, and in the objectives established
by management for employees, and to recognize the achievement of management's
objectives through the payment of incentive compensation.
It is not the purpose of this Plan to reward employees for consistent
performance of primary job responsibilities, nor to assure the payment of fixed
salaries comparable in amount to those paid by similar companies, nor to
recognize achievements related to successful daily performance on the job, all
of which are intended to be identified, recognized, and rewarded through the
Company's ongoing administration of base salaries.
The Company intends that all amounts paid to Covered Employees under this Plan
should qualify as deductible "performance-based compensation" under Section
162(m) of the Code, and the Plan shall be interpreted in accordance with this
intent.
II. DEFINITIONS
2.01 DEFINITIONS. As used in the Plan:
(a) "Affiliate" shall mean any corporation that is a "parent corporation" or
"subsidiary corporation" of the Company, as those terms are defined in Sections
424(e) and (f) of the Code, or any successor provision, and any joint venture in
which the Company or any such "parent corporation" or "subsidiary corporation"
owns an equity interest.
(b) "Board of Directors" or "Board" shall mean the Board of Directors of the
Company.
(c) "Chief Executive Officer" shall mean the person duly elected by the Board to
the office of Chief Executive Officer of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute.
(e) "Committee" shall mean the Compensation Committee of the Board of Directors,
which shall consist of members of the Board who are not employees and who are
not eligible for participation in this Plan.
(f) "Company" shall mean Medtronic, Inc., its Affiliates and their successors
and assigns.
(g) "Covered Employee" shall mean any Employee who is a "covered employee" as
defined in section 162(m) of the Code.
(h) "Employee" shall mean any employee of the Company, whether or not an officer
or member of the Board, but excluding any temporary employee and any person
serving the Company only in the capacity of a member of the Board.
(i) "Participant" shall mean an Employee who has been selected in accordance
with the Plan's terms by the Committee or the Chief Executive Officer for
participation in this Plan.
(j) "Participation Categories" shall mean those categories which specify the
range of plan awards, one of which categories will be assigned to each Plan
Participant. The Participation Categories may be redesignated or revised (such
as by establishing more or fewer categories or by changing the percentages of
salary ranges applicable to a category) from time to time at or prior to the
commencement of an applicable Plan Year by the Committee or, except as otherwise
provided in Sections 3.02 and 3.03, by the Chief Executive Officer if such
administrative responsibility has been delegated to such officer by the
Committee.
(k) "Performance Categories" shall mean those financial and management
objective-based categories for performance measurement specified in Section 4.05
hereof.
(l) "Plan Year" shall mean the applicable fiscal year of the Company.
(m) "Salary" shall mean the direct gross (as opposed to taxable) compensation
earned by a Participant as base salary during the Plan Year, excluding any and
all commissions, bonuses, incentive payments for the current Plan Year or prior
Plan Years and other similar payments.
(n) "Subsidiary" means a "subsidiary corporation," as that term is defined in
Section 424(f) of the Code, or any successor provision.
Certain other terms used in the Plan shall have the meanings ascribed to such
terms in the text of the Plan.
III. ADMINISTRATION OF THE PLAN
3.01 COMMITTEE OVERSIGHT. The Committee will administer the Plan by majority
vote. The Committee may establish such rules and regulations as it deems
necessary for the Plan and its interpretation. In addition, the Committee may
make such determinations and take such actions in connection with the Plan as it
deems necessary. Each determination made by the Committee in accordance with the
provisions of the Plan will be final, binding and conclusive. The Committee may
rely on the financial statements certified by the Company's independent public
accountants.
3.02 CHIEF EXECUTIVE OFFICER'S OVERSIGHT. Except as provided in Section 3.03,
the Committee may delegate some or all of its administrative powers and
responsibilities under the Plan to the Chief Executive Officer for Employees
other than any Covered Employee. The Chief Executive Officer may make such
determinations and take such actions within the scope of such delegation and as
otherwise provided in the Plan as he deems necessary. Each such determination
made by the Chief Executive Officer will be final, binding and conclusive. The
Chief Executive Officer may rely on the financial statements certified by the
Company's independent public accountants. Unless the Committee determines
otherwise, the Committee shall be treated as delegating its authority to the
Chief Executive Officer to the full extent permitted hereunder.
3.03 FURTHER APPROVAL NECESSARY. The Committee in its sole discretion may
modify, suspend, terminate or reinstate the Plan; provided, however, that the
Committee must receive prior approval of the Board of Directors (a) to render
nonemployees, whether or not members of the Board of Directors, eligible to
participate in the Plan, or (b) to increase the maximum awards (expressed as a
percentage of salary) for a Participation Category beyond the maximum award
which has been previously approved by the Board for such Participation Category.
IV. ELIGIBILITY AND PARTICIPATION
4.01 CERTAIN PARTICIPANTS SELECTED BY COMMITTEE. At the beginning of each Plan
Year (or at such other time as is consistent with the requirements under Section
162(m) of the Code), the Committee will assign each Covered Employee to a
Participation Category.
4.02 OTHER PARTICIPANTS. Employees eligible to participate in the Plan shall
include executives, heads of key staff functions, heads of operating business
units and other major contributors to business unit or corporate results. At the
beginning of each Plan Year, the Chief Executive Officer will select
Participants in the Plan (other than those Participants who are to be assigned
to Participation Categories by the Committee pursuant to Section 4.01 hereof)
from among such eligible employees. In addition, the Chief Executive Officer may
select other employees (other than Covered Employees) to participate in the Plan
when the Chief Executive Officer, in his sole discretion, deems such
participation appropriate.
4.03 FUTURE PARTICIPATION. Participation in the Plan during one Plan Year does
not guarantee participation during any other Plan Year.
4.04 PARTICIPATION CATEGORY. The Chief Executive Officer shall designate for
each Participant in the Plan (other than Covered Employees) a Participation
Category for purposes of determining the Participant's award. The Participation
Categories and relative awards for such category for each Plan Year shall be set
forth in writing. The range of potential awards to Participants under the Plan
is stated for each Participation Category as percentages of each Participant's
Salary and, if minimum performance objectives are met or exceeded, actual awards
will fall within a scale ranging from designated minimum awards to designated
target awards to designated maximum awards. The designated target award for each
respective Participation Category is sometimes referred to herein as the "Target
Award Percentage." Notwithstanding any contrary provisions of this Plan, the
final award granted to any Participant under this Plan shall not be permitted to
exceed the maximum award as a percentage of Salary for such Participant's
Participation Category.
4.05 PERFORMANCE CATEGORY. Each Participant's entitlement to an award under the
Plan will be based on one or more of the weighted combinations of the
performance of the Participant individually, as part of a team or as a member of
management ("Management" performance), the Participant's division or other
business unit ("Unit Financial" performance) and the Company as a whole
("Corporate Financial" performance). The Chief Executive Officer shall designate
for each Participant in the Plan (except for Covered Employees) a Performance
Category for purposes of establishing such weighted combination from the
Participant's Performance Categories. The Committee shall designate Performance
Categories for all Covered Employees; provided however, that for Covered
Employees such Performance Categories shall be based solely on one or any
combination of two or more of revenue, revenue per employee, earnings before
income tax (profit before taxes), earnings before interest and income tax, net
earnings (profit after taxes), earnings per employee, tangible, controllable or
total asset turnover, earnings per share, operating income, total shareholder
return, market share, return on equity, before- or after-tax return on net
assets, distribution expense, inventory turnover, or economic value added. For
Covered Employees, such targets may relate to one or any combination of two or
more of corporate, group, unit, division, Affiliate, or individual performance,
and such designated targets will be treated as Corporate Financial objectives,
Unit Financial objectives, or Management objectives as appropriate.
V. PERFORMANCE OBJECTIVES
5.01 CORPORATE FINANCIAL OBJECTIVES. Subject to Section 4.05 hereof, at the
beginning of each Plan Year, or, with respect to Covered Employees, at such
other time as is consistent with the requirements under Section 162(m) of the
Code, the Committee will establish the Corporate Financial objectives by which
the Company's financial performance during the Plan Year will be measured. Each
Corporate Financial objective shall have a stated performance target. In the
event that more than one Corporate Financial objective is used, the multiple
Corporate Financial objectives shall be appropriately weighted by percentage in
accordance with their importance (with the aggregate weighted objectives
totalling 100%) at the time the objectives are established. At the end of each
Plan Year the degree of achievement of each stated Corporate Financial objective
shall be expressed as a percentage of the Corporate Financial performance target
for each such objective. When one objective is used, such percentage shall
constitute the "Corporate Financial Score" as such term is used herein. (When
more than one objective is used, the determined percentage achievement of each
objective's target must be multiplied by the percentage weight (out of 100%)
assigned to each such specific objective, and the resulting percentages for the
various objectives must then be added and such sum shall constitute the
Corporate Financial Score.) The relationship between Corporate Financial
performance and awards hereunder will be distributed to all Participants at the
beginning of each Plan Year.
5.02 OVERRIDING MINIMUM THRESHOLD. At the beginning of each Plan Year (or at
such other time as is consistent with the requirements under Section 162(m) of
the Code), the Committee will designate a minimum threshold level of Corporate
Financial performance objective(s) which the Company must achieve for there to
be any award made under the Plan. If such minimum threshold is not met or
exceeded, no awards will be paid to Participants regardless of whether other
Corporate Financial objectives, Unit Financial objectives or Management
objectives have been met.
5.03 UNIT FINANCIAL OBJECTIVES. Subject to Section 4.05 hereof, at the beginning
of each Plan Year (or at such other time as is consistent with the requirements
under Section 162(m) of the Code), the Vice President or other unit head
responsible for each business unit of the Company will recommend and the Chief
Executive Officer will adopt the Unit Financial objectives by which the business
Unit's Financial performance will be measured. The Unit Financial objective(s)
will be based on financial goals reflected in the respective business unit's
fiscal year operating plan. Each Unit Financial objective shall have a stated
performance target. In the event that more than one Unit Financial objective is
used, the multiple Unit Financial objectives shall be appropriately weighted in
accordance with their importance (with the aggregate weighted objectives
totalling 100%). At the end of each Plan Year the degree of achievement of each
stated Unit Financial objective shall be expressed as a percentage of the Unit
Financial performance target for each objective. When one objective is used,
such percentage shall constitute the "Unit Financial Score" as such term is used
herein. When more than one objective is used, the determined percentage
achievement of each objective's target must be multiplied by the percentage
weight (out of 100%) assigned to each such specific objective, and the resulting
percentages for the various objectives must then be added and such sum shall
constitute the Unit Financial Score. The relationship between Unit Financial
performance and awards hereunder shall be distributed at the beginning of each
Plan Year to all Participants to which it applies. For all Participants other
than Covered Employees, at the beginning of each Plan Year each business unit
Vice President or other unit head may recommend and the Chief Executive Officer
may adopt, in the Chief Executive Officer's sole discretion, a minimum threshold
level of the business unit's most significant financial objective which the
business unit must achieve for there to be any award based on such business
unit's financial and management performance. If such minimum is established for
any Participant (other than a Covered Employee) and is not met or exceeded, no
award will be paid for one or both of the Unit Financial and Management
portions, as determined by the Chief Executive Officer, under the Performance
Category of each Participant in the business unit. The Committee shall determine
whether a minimum threshold level shall apply in the case of a Covered Employee
and the consequences of the failure to attain such minimum threshold level.
5.04 MANAGEMENT OBJECTIVES. Subject to Section 4.05 hereof, at the beginning of
each Plan Year (or, with respect to Covered Employees, at such other time as is
consistent with the requirements under Section 162(m) of the Code), the manager
of each Participant will recommend and the Chief Executive Officer will adopt
the Management objectives by which the individual Participant's performance will
be measured. Management objectives shall relate to objectives in the business
unit's annual operating plan and/or long-range plan. Each Management objective
shall have a stated performance target. In the event that more than one
Management objective is used, the multiple Management objectives shall be
appropriately weighted by percentage, at the time they are established, in
accordance with their importance (with the aggregate weighted objectives
totalling 100%). At the end of each Plan Year the degree of achievement of each
stated Management objective shall be expressed as a percentage of the Management
performance target for each such objective. When one objective is used, such
percentage shall constitute the "Management Score" as such term is used herein.
When more than one objective is used, the determined percentage achievement of
each objective's target must be multiplied by the percentage weight (out of
100%) assigned to each such specific objective, and the resulting percentages
for the various objectives must then be added and such sum shall constitute the
Management Score. The relationship between individual performance and awards
hereunder will be distributed at the beginning of each Plan Year to all
Participants to which it applies.
5.05 FINAL AWARD FUNDING. At the end of each Plan Year, the Chief Executive
Officer will submit to the Committee a statement of the proposed final award to
be granted to each Participant (including Covered Employees) under the terms of
the Plan. The Committee shall determine and certify that the performance goals
were satisfied and shall make the final award for each such Participant;
provided that no Covered Employee may receive an award under this Plan in excess
of $2 million during any Plan Year. The Chief Executive Officer shall make the
final award for each Participant, other than Covered Employees, subject,
however, to having first received the Committee's approval of the aggregate
amount of the awards to be paid to all of such Participants.
VI. CALCULATION AND PAYMENT OF AWARDS
6.01 CALCULATION OF AWARDS. Each Participant's final award shall be equal to the
sum of the following:
(a) CORPORATE FINANCIAL PORTION. The Corporate Financial portion of each
Participant's award will be the product of (i) the Participant's Salary, (ii)
the Target Award Percentage for the Participant's applicable Participation
Category, (iii) the Corporate Financial percentage under the Participant's
Performance Category and (iv) the Corporate Performance Score;
(b) UNIT FINANCIAL PORTION. The Unit Financial portion of each Participant's
award will be the product of (i) the Participant's Salary, (ii) the Target Award
Percentage for the Participant's applicable Participation Category, (iii) the
Unit Financial percentage under the Participant's Performance Category and (iv)
the Unit Financial Score; and
(c) MANAGEMENT PORTION. The Management portion of each Participant's award will
be the product of (i) the Participant's Salary, (ii) the Target Award Percentage
for the Participant's applicable Participation Category, (iii) the Management
percentage under the Participant's Performance Category and (iv) the
individual's Management Score;
provided, however, that for Covered Employees subsection (i) of (a), (b) and (c)
above shall be equal to such Participant's annual Salary in effect on the first
day of the Plan Year, if required to comply with Section 162(m) of the Code.
6.02 PAYMENT OF AWARDS. Final awards shall be paid to each Participant in cash
within 90 days after the end of the Plan Year. Notwithstanding the preceding
sentence: (1) a Participant who is eligible to participate in the Medtronic,
Inc. Capital Accumulation Plan Deferral Program ("CAP") shall be entitled to
defer any part or all of the award granted to him or her hereunder in accordance
with the terms of the CAP, and (2) if the Committee in its discretion permits, a
Participant may elect to receive stock options granted under the Company's 1994
Stock Award Plan in lieu of any part or all of the cash award to which the
Participant would otherwise be entitled hereunder, in accordance with rules
established by the Committee for such purpose.
VII. EMPLOYMENT PROVISIONS
7.01 PROMOTIONS AND NEW EMPLOYEES. Except as to Covered Employees (as to whom
such determinations must be made by the Committee), Employees who are newly
hired or promoted into positions eligible for participation in the Plan will
participate in the degree deemed appropriate, if at all, by the Chief Executive
Officer and at the sole discretion of the Chief Executive Officer.
7.02 TERMINATION OF EMPLOYMENT.
(a) DEATH, DISABILITY OR RETIREMENT. Following termination of employment (which
shall be deemed to occur on the date on which the Participant ceases working for
the Company) during a Plan Year by reason of death, disability or normal or
early retirement, a Participant will be eligible to receive a pro rata award
equal to the portion of the final award, otherwise determined in accordance with
Section 6.01, represented by the percentage equal to the number of full months
of employment during the Plan Year divided by 12. Such pro rata award will be
paid in accordance with Section 6.02.
(b) OTHER TERMINATION. Following a termination of employment (which shall be
deemed to occur on the date on which the Participant ceases working for the
Company) during a Plan Year for any reason other than death, disability or
normal or early retirement, a Participant's eligibility to receive an award for
that Plan Year will be determined solely at the discretion of the Chief
Executive Officer, or, in the case of a Covered Employee, solely at the
discretion of the Committee. No such award may exceed a pro rata portion of the
amount that normally would be available under the Plan, with such pro rata
portion to be determined as in Section 7.02(a).
If a Participant'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 Affiliate, whether or not
for other reasons such as payroll, benefits or compliance with legal procedures
or requirements that 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.
7.03 NO EMPLOYMENT CONTRACT. Nothing contained in the Plan shall create any
right in any employee to continued employment or otherwise affect his or her
status as an employee-at-will.
VIII. MISCELLANEOUS PROVISIONS
8.01 NONASSIGNABILITY OF BENEFITS. No Participant, nor his or her legal
representative, shall have any right to assign, transfer, appropriate, encumber
or anticipate any interest in the Plan or any payments hereunder. Participants
have only the right to receive payments under this Plan if, as and when such
payments are due and payable under the terms and conditions of the Plan.
8.02 WITHHOLDING TAXES. The Company will deduct from all payments under the Plan
any taxes required to be withheld by the federal or any state or local
government and will pay over such taxes to such government for the account of
such Participant.
8.03 EXPENSES OF THE PLAN. The Company will bear all of the expenses of
administering the Plan and will not charge such expenses against amounts payable
hereunder.
8.04 APPLICABLE LAW. This Plan, all determinations made hereunder, and all
actions taken pursuant hereto will be governed by the laws of the state of
Minnesota.
IX. CHANGE IN CONTROL
9.01 CALCULATION OF AWARDS. Notwithstanding any other provisions of this Plan,
including without limitation the minimum threshold requirements of Sections 5.02
and 5.03 and the provisions of Section 7.02(b) which shall not apply,
Participants shall be entitled to a final award calculated in accordance with
Section 6.01 of the Plan during any Plan Year in which there is a Change in
Control, as defined in Section 9.03 hereof; provided, however, that for purposes
hereof the amount of the final award shall be the product of (i) the amount of
the Participant's Salary that the Participant would have earned if paid through
the end of the Plan Year at the Participant's base salary in effect at the time
of the Change in Control and (ii) the greater of (A) the target award as a
percentage of salary for the Participant's Participation Category or (B) if the
Change in Control occurs after the first quarter of a Plan Year, the award as a
percentage of salary that the Participant would have received if (1) no Change
in Control had occurred during such Plan Year, (2) Participant's employment did
not terminate during such Plan Year and (3) the applicable Management
performance, Unit Financial performance and Corporate Financial performance (or
if less than all such performance categories are to be taken into consideration
in determining the achievement of performance objectives of the Participant,
such categories as are to be taken into consideration in determining the
achievement of such performance objectives) had equalled the performance most
recently projected by the Company prior to the Change in Control with respect to
such performance categories for such Plan Year (adjusted to exclude (a) all
legal, accounting, investment banking and other costs and expenses incurred or
projected by the Company in connection with, or in opposition to, the events
resulting in the Change in Control and (b) the projected effect of the Change in
Control upon Management performance, Unit Financial performance and Corporate
Financial performance). The Company shall compute such projections for the Plan
Year at or about the end of each quarter, except the last quarter, of each Plan
Year.
9.02 PAYMENT OF AWARDS. Final awards shall be paid under this Article IX within
90 days following the occurrence of the earliest Change in Control described in
Section 9.03. Notwithstanding the preceding sentence, a Participant who is
eligible to participate in the CAP shall be entitled to defer any part or all of
the award granted to him or her hereunder in accordance with the terms of the
CAP.
9.03 CHANGE IN CONTROL. For purposes of this Article IX, a "Change in Control"
shall mean:
(i) the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either (A) the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
the following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company, (B) any acquisition by the Company or any
Subsidiary, (C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary or (D) any acquisition
by any corporation with respect to which, following such acquisition, more than
55% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in substantially
the same proportions as their ownership, immediately prior to such acquisition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(ii) individuals who, as of the effective date of this Plan, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents;
or
(iii) approval by the shareholders of the Company of a reorganization, merger,
consolidation or statutory exchange of Outstanding Company Voting Securities, in
each case, with respect to which all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such reorganization, merger, consolidation or exchange do not, following such
reorganization, merger, consolidation or exchange, beneficially own, directly or
indirectly, more than 55% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such reorganization, merger,
consolidation or exchange in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger, consolidation or
exchange of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(iv) approval by the shareholders of the Company of (A) a complete liquidation
or dissolution of the Company or (B) the sale or other disposition of all or
substantially all of the assets of the Company, other than to a corporation with
respect to which, following such sale or other disposition, more than 55% of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be.
Notwithstanding the foregoing provisions of this definition, a Change of Control
shall not be deemed to occur with respect to a Participant if the acquisition of
the 30% or greater interest referred to in subparagraph (i) of this definition
is by a group, acting in concert, that includes the Participant or if at least
40% of the then outstanding common stock or combined voting power of the then
outstanding voting securities (or voting equity interests) of the surviving
corporation or of any corporation (or other entity) acquiring all or
substantially all of the assets of the Company shall be beneficially owned,
directly or indirectly, immediately after a reorganization, merger,
consolidation, statutory share exchange or disposition of assets referred to in
subparagraph (iii) or (iv) of this definition by a group, acting in concert,
that includes that Participant.
<PAGE>
ATTACHMENT B
1994 STOCK AWARD PLAN
(EFFECTIVE APRIL 29, 1994)
(AMENDED AND RESTATED AS OF JUNE 25, 1998)
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING MEDTRONIC COMMON STOCK
THAT HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
1. PURPOSE. The purpose of this 1994 Stock Award Plan (the "Plan") is
to motivate key personnel, including non-employee directors, to produce a
superior return to the shareholders of Medtronic, Inc. (the "Company") and its
Affiliates by offering such individuals an opportunity to realize Stock
appreciation, by facilitating Stock ownership, and by rewarding them for
achieving a high level of corporate performance. This Plan is also intended to
facilitate recruiting and retaining key personnel of outstanding ability.
2. DEFINITIONS. The capitalized terms used in this Plan have the
meanings set forth below.
(a) "Affiliate" means any corporation that is a "parent corporation" or
"subsidiary corporation" of the Company, as those terms are defined in Sections
424(e) and (f) of the Code, or any successor provision, and, for purposes other
than the grant of Incentive Stock Options, any joint venture in which the
Company or any such "parent corporation" or "subsidiary corporation" owns an
equity interest.
(b) "Agreement" means a written contract entered into between the
Company or an Affiliate and a Participant containing the terms and conditions of
an Award in such form (not inconsistent with this Plan) as the Committee
approves from time to time, together with all amendments thereof, which
amendments may be unilaterally made by the Company (with the approval of the
Committee) unless such amendments are deemed by the Committee to be materially
adverse to the Participant and are not required as a matter of law.
(c) "Annual Retainer" means the fixed annual fee of a Non-Employee
Director in effect on the first day of the year for which such Annual Retainer
is payable for services to be rendered as a Non-Employee Director of the
Company. The Annual Retainer does not include meeting or chairmanship fees.
(d) "Award" means a grant made under this Plan in the form of Options,
Stock Appreciation Rights, Restricted Stock, Performance Shares or any Other
Stock-Based Award.
(e) "Board" means the Board of Directors of the Company.
(f) "Change in Control" means:
(i) acquisition by any individual, entity or group (within the
meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of
either (A) the then outstanding Shares of Stock (the "Outstanding Company Common
Stock") or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
the following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company, (B) any acquisition by the Company or any
Subsidiary, (C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary or (D) any acquisition
by any corporation with respect to which, following such acquisition, more than
55% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in substantially
the same proportions as their ownership, immediately prior to such acquisition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(ii) individuals who, as of the effective date of this Plan
provided in Section 14(a) of this Plan, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents; or
(iii) approval by the shareholders of the Company of a
reorganization, merger, consolidation or statutory exchange of Outstanding
Company Voting Securities, in each case, with respect to which all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger,
consolidation or exchange do not, following such reorganization, merger,
consolidation or exchange, beneficially own, directly or indirectly, more than
55% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger, consolidation or exchange in
substantially the same proportions as their ownership, immediately prior to such
reorganization, merger, consolidation or exchange of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be; or
(iv) approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) the sale or other
disposition of all or substantially all of the assets of the Company, other than
to a corporation with respect to which, following such sale or other
disposition, more than 55% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be.
Notwithstanding the foregoing provisions of this definition, a Change
of Control shall not be deemed to occur with respect to a Participant if the
acquisition of the 30% or greater interest referred to in subparagraph (i) of
this definition is by a group, acting in concert, that includes the Participant
or if at least 40% of the then outstanding common stock or combined voting power
of the then outstanding voting securities (or voting equity interests) of the
surviving corporation or of any corporation (or other entity) acquiring all or
substantially all of the assets of the Company shall be beneficially owned,
directly or indirectly, immediately after a reorganization, merger,
consolidation, statutory share exchange or disposition of assets referred to in
subparagraph (iii) or (iv) of this definition by a group, acting in concert,
that includes that Participant.
(g) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute.
(h) "Committee" means three or more Disinterested Persons designated by
the Board to administer this Plan under Section 3 hereof and constituted so as
to permit this Plan to comply with Exchange Act Rule 16b-3.
(i) "Company" means Medtronic, Inc., a Minnesota corporation, or any
successor to all or substantially all of its businesses by merger,
consolidation, purchase of assets or otherwise.
(j) "Disability" means the disability of a Participant such that the
Participant is (or in the case of a Non-Employee Director, would, if an
employee, be) considered disabled under any retirement plan of the Company which
is qualified under Section 401 of the Code, or, except as this term is used in
Sections 12 and 13 hereof, as otherwise determined by the Committee.
(k) "Disinterested Person" means a member of the Board who is
considered a disinterested person within the meaning of Exchange Act Rule 16b-3.
(l) "Employee" means any full-time or part-time employee (including an
officer or director who is also an employee) of the Company or an Affiliate.
Except with respect to grants of Incentive Stock Options, "Employee" shall also
include other individuals and entities who are not "employees" of the Company or
an Affiliate but who provide services to the Company or an Affiliate in the
capacity of an independent contractor. References in this Plan to "employment"
and related terms shall include the providing of services in any such capacity.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended; "Exchange Act Rule 16b-3" means Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act as in effect with
respect to the Company or any successor regulation.
(n) "Fair Market Value" as of any date means, unless otherwise
expressly provided in this Plan:
(i) the closing sale price of a Share (A) on the composite tape
for New York Stock Exchange ("NYSE") listed shares, or (B) if the Shares are not
quoted on the NYSE composite tape, on the principal United States securities
exchange registered under the Exchange Act on which the Shares are listed, or
(C) if the Shares are not listed on any such exchange, on the National
Association of Securities Dealers, Inc. Automated Quotation System National
Market System, in any case on the date immediately preceding that date, or, if
no sale of Shares shall have occurred on that date, on the next preceding day on
which a sale of Shares occurred, or
(ii) if clause (i) is not applicable, what the Committee
determines in good faith to be 100% of the fair market value of a Share on that
date. However, if the applicable securities exchange or system has closed for
the day at the time the event occurs that triggers a determination of Fair
Market Value, all references in this paragraph to the "date immediately
preceding that date" shall be deemed to be references to "that date." In the
case of an Incentive Stock Option, if such determination of Fair Market Value is
not consistent with the then current regulations of the Secretary of the
Treasury, Fair Market Value shall be determined in accordance with said
regulations. The determination of Fair Market Value shall be subject to
adjustment as provided in Section 14(f) hereof.
(o) "Fundamental Change" means a dissolution or liquidation of the
Company, a sale of substantially all of the assets of the Company, a merger or
consolidation of the Company with or into any other corporation, regardless of
whether the Company is the surviving corporation, or a statutory share exchange
involving capital stock of the Company.
(p) "Incentive Stock Option" means any Option designated as such and
granted in accordance with the requirements of Section 422 of the Code or any
successor to such section.
(q) "Non-Employee Director" means a member of the Board who is not an
employee of the Company or any Affiliate.
(r) "Non-Qualified Stock Option" means an Option other than an
Incentive Stock Option.
(s) "Other Stock-Based Award" means an Award of Stock or an Award based
on Stock other than Options, Stock Appreciation Rights, Restricted Stock or
Performance Shares.
(t) "Option" means a right to purchase Stock, including both
Non-Qualified Stock Options and Incentive Stock Options.
(u) "Participant" means an Employee or a Non-Employee Director to whom
an Award is made.
(v) "Performance Period" means the period of time as specified in an
Agreement over which Performance Shares are to be earned.
(w) "Performance Shares" means a contingent award of a specified number
of Performance Shares, with each Performance Share equivalent to one Share, a
variable percentage of which may vest depending upon the extent of achievement
of specified performance objectives during the applicable Performance Period.
(x) "Plan" means this 1994 Stock Award Plan, as amended and in effect
from time to time.
(y) "Restricted Stock" means Stock granted under Section 10 or 13
hereof so long as such Stock remains subject to one or more restrictions.
(z) "Retirement" means retirement of an Employee as defined under any
retirement plan of the Company which is qualified under Section 401 of the Code
(which currently provides for retirement on or after age 55, provided the
Employee has been employed by the Company and/or one or more Affiliates for at
least ten years, or retirement on or after age 62), or under any retirement plan
of the Company or any Affiliate applicable to the Employee due to employment by
a non-U.S. Affiliate or employment in a non-U.S. location, or as otherwise
determined by the Committee.
(aa) "Share" means a share of Stock.
(bb) "Stock" means the common stock, $.10 par value per share (as such
par value may be adjusted from time to time), of the Company.
(cc) "Stock Appreciation Right" means a right, the value of which is
determined relative to appreciation in value of Shares pursuant to an Award
granted under Section 8 hereof.
(dd) "Subsidiary" means a "subsidiary corporation," as that term is
defined in Section 424(f) of the Code, or any successor provision.
(ee) "Successor" with respect to a Participant means the legal
representative of an incompetent Participant and, if the Participant is
deceased, the legal representative of the estate of the Participant or the
person or persons who may, by bequest or inheritance, or under the terms of an
Award or of forms submitted by the Participant to the Committee under Section
14(i) hereof, acquire the right to exercise an Option or Stock Appreciation
Right or receive cash and/or Shares issuable in satisfaction of an Award in the
event of a Participant's death.
(ff) "Term" means the period during which an Option or Stock
Appreciation Right may be exercised or the period during which the restrictions
placed on Restricted Stock or any other Award are in effect.
Except when otherwise indicated by the context, reference to the
masculine gender shall include, when used, the feminine gender and any term used
in the singular shall also include the plural.
3. ADMINISTRATION.
(a) AUTHORITY OF COMMITTEE. The Committee shall administer this Plan.
The Committee shall have exclusive power to make Awards and to determine when
and to whom Awards will be granted, and the form, amount and other terms and
conditions of each Award, subject to the provisions of this Plan. The Committee
may determine whether, to what extent and under what circumstances Awards may be
settled, paid or exercised in cash, Shares or other Awards or other property, or
cancelled, forfeited or suspended. The Committee shall have the authority to
interpret this Plan and any Award or Agreement made under this Plan, to
establish, amend, waive and rescind any rules and regulations relating to the
administration of this Plan, to determine the terms and provisions of any
Agreements entered into hereunder (not inconsistent with this Plan), and to make
all other determinations necessary or advisable for the administration of this
Plan. The Committee may correct any defect, supply any omission or reconcile any
inconsistency in this Plan or in any Award in the manner and to the extent it
shall deem desirable. The determinations of the Committee in the administration
of this Plan, as described herein, shall be final, binding and conclusive.
(b) DELEGATION OF AUTHORITY. The Committee may delegate all or any part
of its authority under this Plan to persons who are not Disinterested Persons
for purposes of determining and administering Awards solely to Employees who are
not then subject to the reporting requirements of Section 16 of the Exchange
Act.
(c) AWARDS TO NON-EMPLOYEE DIRECTORS. Notwithstanding any contrary
provisions of this Plan, the granting, terms, conditions and eligibility
requirements of Awards granted to Non-Employee Directors under Sections 12 and
13 of this Plan are governed solely by the provisions of this Plan pertaining
thereto, and the Committee shall have no discretion with respect to the granting
of such Awards or to alter or amend any terms, conditions or eligibility
requirements of such Awards to Non-Employee Directors.
(d) RULE 16B-3 COMPLIANCE. It is the intent that this Plan and all
Awards granted pursuant to it shall be administered by the Committee so as to
permit this Plan and Awards to comply with Exchange Act Rule 16b-3. If any
provision of this Plan or of any Award would otherwise frustrate or conflict
with the intent expressed in this Section 3(d), that provision to the extent
possible shall be interpreted and deemed amended in the manner determined by the
Committee so as to avoid such conflict. To the extent of any remaining
irreconcilable conflict with such intent, the provision shall be deemed void as
applicable to Participants who are then subject to the reporting requirements of
Section 16 of the Exchange Act to the extent permitted by law and in the manner
deemed advisable by the Committee.
(e) INDEMNIFICATION. To the full extent permitted by law, each member
and former member of the Committee and each person to whom the Committee
delegates or has delegated authority under this Plan shall be entitled to
indemnification by the Company against and from any loss, liability, judgment,
damage, cost and reasonable expense incurred by such member, former member or
other person by reason of any action taken, failure to act or determination made
in good faith under or with respect to this Plan.
4. SHARES AVAILABLE; MAXIMUM PAYOUTS.
(a) Shares Available. The number of Shares available for distribution
under this Plan is 2,800,000 (subject to adjustment under Section 14(f) hereof).
(b) SHARES AGAIN AVAILABLE. Any Shares subject to the terms and
conditions of an Award under this Plan which are not used because the terms and
conditions of the Award are not met may again be used for an Award under this
Plan. However, Shares with respect to which a Stock Appreciation Right has been
exercised, whether paid in cash and/or in Shares, and Shares of Restricted Stock
which have been granted with dividend or voting rights during the Term of the
Restricted Stock may not again be awarded under this Plan.
(c) UNEXERCISED AWARDS. Any unexercised or undistributed portion of any
terminated, expired, exchanged, or forfeited Award or any Award settled in cash
in lieu of Shares (except as provided in Section 4(b) hereof) shall be available
for further Awards.
(d) NO FRACTIONAL SHARES. No fractional Shares may be issued under this
Plan; fractional Shares will be rounded to the nearest whole Share.
(e) MAXIMUM PAYOUTS. No more than 35% of all Shares subject to this
Plan may be granted in the aggregate pursuant to Restricted Stock, Performance
Share and Other Stock-Based Awards.
5. ELIGIBILITY. Awards may be granted under this Plan to any Employee
at the discretion of the Committee. Non-Employee Directors are eligible for
certain Awards under this Plan, as provided in Sections 12 and 13 hereof and
subject to the restrictions in Section 3(c) hereof.
6. General Terms of Awards.
(a) AWARDS. Awards under this Plan may consist of Options (either
Incentive Stock Options or Non-Qualified Stock Options), Stock Appreciation
Rights, Performance Shares, Restricted Stock and Other Stock-Based Awards.
Awards of Restricted Stock may, in the discretion of the Committee, provide the
Participant with dividends or dividend equivalents and voting rights prior to
vesting (whether vesting is based on a period of time or based on attainment of
specified performance conditions).
(b) AMOUNT OF AWARDS. Each Agreement shall set forth the number of
Shares of Restricted Stock, Stock or Performance Shares subject to such
Agreement, or the number of Shares to which the Option applies or with respect
to which payment upon the exercise of the Stock Appreciation Right is to be
determined, as the case may be, together with such other terms and conditions
applicable to the Award (not inconsistent with this Plan) as determined by the
Committee in its sole discretion.
(c) TERM. Each Agreement, other than those relating solely to Awards of
Stock without restrictions, shall set forth the Term of the Award and any
applicable Performance Period for Performance Shares, as the case may be, but in
no event shall the Term of an Award (other than Awards granted in lieu of cash
compensation pursuant to Section 13 hereof or the Company's Management Incentive
Plan as amended from time to time) or the Performance Period be longer than ten
years after the date of grant. An Agreement with a Participant may permit
acceleration of vesting requirements and of the expiration of the applicable
Term upon such terms and conditions as shall be set forth in the Agreement,
which may, but need not, include, without limitation, acceleration resulting
from the occurrence of a Change in Control, a Fundamental Change, or the
Participant's death, Disability or Retirement. Acceleration of the Performance
Period of Performance Shares shall be subject to Section 9(b) hereof.
(d) AGREEMENTS. Each Award under this Plan shall be evidenced by an
Agreement setting forth the terms and conditions, as determined by the
Committee, which shall apply to such Award, in addition to the terms and
conditions specified in this Plan.
(e) TRANSFERABILITY. During the lifetime of a Participant to whom an
Award is granted, only such Participant (or such Participant's legal
representative or, if so provided in the applicable Agreement in the case of a
Non-Qualified Stock Option, a permitted transferee as hereafter described) may
exercise an Option or Stock Appreciation Right or receive payment with respect
to Performance Shares or any other Award. No Award of Restricted Stock (prior to
the expiration of the restrictions), Options, Stock Appreciation Rights,
Performance Shares or other Award (other than an award of Stock without
restrictions) may be sold, assigned, transferred, exchanged, or otherwise
encumbered, and any attempt to do so shall be of no effect. Notwithstanding the
immediately preceding sentence, (i) an Agreement may provide that an Award shall
be transferable to a Successor in the event of a Participant's death and (ii) an
Agreement may provide that a Non-Qualified Stock Option shall be transferable to
any member of a Participant's "immediate family" (as such term is defined in
Rule 16a-1(e) promulgated under the Exchange Act, or any successor rule or
regulation) or to one or more trusts whose beneficiaries are members of such
Participant's "immediate family" or partnerships in which such family members
are the only partners; provided, however, that (1) the Participant receives no
consideration for the transfer and (2) such transferred Non-Qualified Stock
Option shall continue to be subject to the same terms and conditions as were
applicable to such Non-Qualified Stock Option immediately prior to its transfer.
(f) TERMINATION OF EMPLOYMENT. Except as otherwise determined by the
Committee or provided by the Committee in an applicable Agreement, in case of
termination of employment, the following provisions shall apply:
(1) OPTIONS AND STOCK APPRECIATION RIGHTS.
(i) DEATH. If a Participant who has been granted an Option or
Stock Appreciation Rights shall die before such Option or Stock Appreciation
Rights have expired, the Option or Stock Appreciation Rights shall become
exercisable in full, and may be exercised by the Participant's Successor at any
time, or from time to time, within three years after the date of the
Participant's death.
(ii) DISABILITY OR RETIREMENT. If a Participant's employment
terminates because of Disability or Retirement, the Option or Stock Appreciation
Rights shall become exercisable in full, and the Participant may exercise his or
her Options or Stock Appreciation Rights at any time, or from time to time,
within three years after the date of such termination.
(iii) REASONS OTHER THAN DEATH, DISABILITY OR RETIREMENT. If
a Participant's employment terminates for any reason other than death,
Disability or Retirement, the unvested or unexercised portion of any Award held
by such Participant shall terminate at the date of termination of employment.
(iv) EXPIRATION OF TERM. Notwithstanding the foregoing
paragraphs (i)-(iii), in no event shall an Option or a Stock Appreciation Right
be exercisable after expiration of the Term of such Award.
(2) PERFORMANCE SHARES. If a Participant's employment with the
Company or any of its Affiliates terminates during a Performance Period because
of death, Disability or Retirement, or under other circumstances provided by the
Committee in its discretion in the applicable Agreement, the Participant shall
be entitled to a payment of Performance Shares at the end of the Performance
Period based upon the extent to which achievement of performance targets was
satisfied at the end of such period (as determined at the end of the Performance
Period) and prorated for the portion of the Performance Period during which the
Participant was employed by the Company or any Affiliate. Except as provided in
this Section 6(f)(2) or in the applicable Agreement, if a Participant's
employment terminates with the Company or any of its Affiliates during a
Performance Period, then such Participant shall not be entitled to any payment
with respect to that Performance Period.
(3) RESTRICTED STOCK. In case of a Participant's death,
Disability or Retirement, the Participant shall be entitled to receive that
number of shares of Restricted Stock under outstanding Awards which has been pro
rated for the portion of the Term of the Awards during which the Participant was
employed by the Company or any Affiliate, and with respect to such Shares all
restrictions shall lapse. Upon termination of employment for any reason other
than death, Disability or Retirement, any shares of Restricted Stock whose
restrictions have not lapsed will automatically be forfeited in full and
cancelled by the Company upon such termination of employment.
(g) RIGHTS AS SHAREHOLDER. A Participant shall have no rights as a
shareholder with respect to any securities covered by an Award until the date
the Participant becomes the holder of record.
7. STOCK OPTIONS.
(a) TERMS OF ALL OPTIONS. Each Option shall be granted pursuant to an
Agreement as either an Incentive Stock Option or a Non-Qualified Stock Option.
Only Non-Qualified Stock Options may be granted to Employees who are not
employees of the Company or an Affiliate. The purchase price of each Share
subject to an Option shall be determined by the Committee and set forth in the
Agreement, but shall not be less than 100% of the Fair Market Value of a Share
as of the date the Option is granted. The purchase price of the Shares with
respect to which an Option is exercised shall be payable in full at the time of
exercise, provided that, to the extent permitted by law, Participants may
simultaneously exercise Options and sell the Shares thereby acquired pursuant to
a brokerage or similar relationship and use the proceeds from such sale to pay
the purchase price of such Shares. The purchase price may be paid in cash, or
through a reduction of the number of Shares delivered to the Participant upon
exercise of the Option or by delivery to the Company of Shares held by such
Participant (in each case, such Shares having a Fair Market Value as of the date
the Option is exercised equal to the purchase price of the Shares being
purchased pursuant to the Option), or a combination thereof, unless otherwise
provided in the Agreement. Each Option shall be exercisable in whole or in part
on the terms provided in the Agreement. In no event shall any Option be
exercisable at any time after its Term. When an Option is no longer exercisable,
it shall be deemed to have lapsed or terminated. No Participant may receive any
combination of Options to purchase and Stock Appreciation Rights relating to
more than 500,000 Shares in the aggregate (which amount includes up to 350,000
Shares pursuant to Awards and up to 150,000 Shares received in lieu of cash
compensation at the Participant's election as permitted by the Compensation
Committee) pursuant to Awards over a five-year period under this Plan.
(b) Incentive Stock Options. In addition to the other terms and
conditions applicable to all Options:
(i) the aggregate Fair Market Value (determined as of the date
the Option is granted) of the Shares with respect to which Incentive Stock
Options held by an individual first become exercisable in any calendar year
(under this Plan and all other incentive stock option plans of the Company and
its Affiliates) shall not exceed $100,000 (or such other limit as may be
required by the Code), if such limitation is necessary to qualify the Option as
an Incentive Stock Option, and to the extent an Option or Options granted to a
Participant exceed such limit, such Option or Options shall be treated as a
Non-Qualified Stock Option;
(ii) an Incentive Stock Option shall not be exercisable and the
Term of the Award shall not be more than ten years after the date of grant (or
such other limit as may be required by the Code) if such limitation is necessary
to qualify the Option as an Incentive Stock Option;
(iii) the Agreement covering an Incentive Stock Option shall
contain such other terms and provisions which the Committee determines necessary
to qualify such Option as an Incentive Stock Option; and
(iv) notwithstanding any other provision of this Plan to the
contrary, no Participant may receive an Incentive Stock Option under this Plan
if, at the time the Award is granted, the Participant owns (after application of
the rules contained in Section 424(d) of the Code, or its successor provision)
Shares possessing more than ten percent of the total combined voting power of
all classes of stock of the Company or its subsidiaries, unless (A) the option
price for such Incentive Stock Option is at least 110% of the Fair Market Value
of the Shares subject to such Incentive Stock Option on the date of grant and
(B) such Option is not exercisable after the date five years from the date such
Incentive Stock Option is granted.
8. STOCK APPRECIATION RIGHTS. An Award of a Stock Appreciation Right
shall entitle the Participant, subject to terms and conditions determined by the
Committee, to receive upon exercise of the Stock Appreciation Right all or a
portion of the excess of (i) the Fair Market Value of a specified number of
Shares as of the date of exercise of the Stock Appreciation Right over (ii) a
specified price which shall not be less than 100% of the Fair Market Value of
such Shares as of the date of grant of the Stock Appreciation Right. A Stock
Appreciation Right may be granted in connection with a previously or
contemporaneously granted Option, or independent of any Option. If issued in
connection with an Option, the Committee may impose a condition that exercise of
a Stock Appreciation Right cancels the Option with which it is connected and
exercise of the connected Option cancels the Stock Appreciation Right. Each
Stock Appreciation Right may be exercisable in whole or in part on the terms
provided in the Agreement. Notwithstanding anything to the contrary stated in
this Plan, no Stock Appreciation Right shall be exercisable prior to six months
from the date of grant except in the event of the death or Disability of the
Participant. No Stock Appreciation Right shall be exercisable at any time after
its Term. When a Stock Appreciation Right is no longer exercisable, it shall be
deemed to have lapsed or terminated. Except as otherwise provided in the
applicable Agreement, upon exercise of a Stock Appreciation Right, payment to
the Participant (or to his or her Successor) shall be made in the form of cash,
Stock or a combination of cash and Stock as promptly as practicable after such
exercise. The Agreement may provide for a limitation upon the amount or
percentage of the total appreciation on which payment (whether in cash and/or
Stock) may be made in the event of the exercise of a Stock Appreciation Right.
As specified in Section 7(a) hereof, no Participant may receive any combination
of Options to purchase and Stock Appreciation Rights relating to more than
500,000 Shares in the aggregate pursuant to Awards over a five-year period under
this Plan.
9. PERFORMANCE SHARES.
(a) INITIAL AWARD. An Award of Performance Shares shall entitle a
Participant (or a Successor) to future payments based upon the achievement of
performance targets established in writing by the Committee. Payment shall be
made in Stock, or a combination of cash and Stock, as determined by the
Committee, provided that at least 25% of the value of the vested Performance
Shares shall be distributed in the form of Stock. With respect to those
Participants who are "covered employees" within the meaning of Section 162(m) of
the Code and the regulations thereunder, such performance targets shall consist
of one or any combination of two or more of revenue, revenue per employee,
earnings before income tax (profit before taxes), earnings before interest and
income tax, net earnings (profits after tax), earnings per employee, tangible,
controllable or total asset turnover, earnings per share, operating income,
total shareholder return, market share, return on equity, before- or after-tax
return on net assets, distribution expense, inventory turnover, or economic
value added, and any such targets may relate to one or any combination of two or
more of corporate, group, unit, division, Affiliate or individual performance.
The Agreement may establish that a portion of the maximum amount of a
Participant's Award will be paid for performance which exceeds the minimum
target but falls below the maximum target applicable to such Award. The
Agreement shall also provide for the timing of such payment. Following the
conclusion or acceleration of each Performance Period, the Committee shall
determine the extent to which (i) performance targets have been attained, (ii)
any other terms and conditions with respect to an Award relating to such
Performance Period have been satisfied, and (iii) payment is due with respect to
a Performance Share Award. No Participant may receive Performance Shares
relating to more than 85,000 Shares pursuant to Awards over a five-year period
under this Plan.
(b) ACCELERATION AND ADJUSTMENT. The Agreement may permit an
acceleration of the Performance Period and an adjustment of performance targets
and payments with respect to some or all of the Performance Shares awarded to a
Participant, upon such terms and conditions as shall be set forth in the
Agreement, upon the occurrence of certain events, which may, but need not,
include without limitation a Change in Control, a Fundamental Change, the
Participant's death, Disability or Retirement, a change in accounting practices
of the Company or its Affiliates, or, with respect to payments in Stock for
Performance Share Awards, a reclassification, stock dividend, stock split or
stock combination as provided in Section 14(f) hereof.
(c) VALUATION. Each Performance Share earned after conclusion of a
Performance Period shall have a value equal to the average of the Fair Market
Values of a Share for the 20 consecutive business days ending on and including
the last day of such Performance Period.
10. RESTRICTED STOCK. Restricted Stock may be granted in the form of
Shares registered in the name of the Participant but held by the Company until
the end of the Term of the Award. Any employment conditions, performance
conditions and the Term of the Award shall be established by the Committee in
its discretion and included in the applicable Agreement. The Committee may
provide in the applicable Agreement for the lapse or waiver of any such
restriction or condition based on such factors or criteria as the Committee, in
its sole discretion, may determine. No Award of Restricted Stock may vest
earlier than one year from the date of grant, except as provided in the
applicable Agreement.
11. OTHER STOCK-BASED AWARDS. The Committee may from time to time grant
Awards of Stock, and other Awards under this Plan (collectively herein defined
as "Other Stock-Based Awards"), including without limitation those Awards
pursuant to which Shares may be acquired in the future, such as Awards
denominated in Stock units, securities convertible into Stock and phantom
securities. The Committee, in its sole discretion, shall determine the terms and
conditions of such Awards provided that such Awards shall not be inconsistent
with the terms and purposes of this Plan. The Committee may, in its sole
discretion, direct the Company to issue Shares subject to restrictive legends
and/or stop transfer instructions which are consistent with the terms and
conditions of the Award to which such Shares relate.
12. AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS.
(a) INITIAL OPTION GRANTS. Each Non-Employee Director first elected or
appointed to the Board on or after the date of the 1994 Annual Meeting of
Shareholders of the Company shall, without any Committee action, automatically
be granted, on the date such director first becomes a director, a Non-Qualified
Stock Option to purchase that number of Shares determined by dividing (i) an
amount equal to $152,000 plus a percentage increase in such $152,000 amount
which is equal to the percentage increase from the $19,000 Annual Retainer in
effect at the time of the 1994 Annual Meeting of Shareholders of the Company to
the Annual Retainer in effect at the date such director first becomes a director
by (ii) the Fair Market Value of a Share on the date of grant. No increase in
the Annual Retainer of the Non-Employee Directors after a person becomes a
Non-Employee Director shall increase the number of Shares for which the
Non-Qualified Stock Option granted under this Section 12(a) to such Non-Employee
Director may be exercised. An employee of the Company or an Affiliate who
terminates such employment and thereafter becomes a Non-Employee Director is not
entitled to receive a Non-Qualified Stock Option under this Section 12(a), but
will be entitled to receive Non-Qualified Stock Options under Section 12(b)
hereof. A Non-Employee Director is not entitled to receive more than one
Non-Qualified Stock Option under this Section 12(a) during his or her lifetime.
(b) ANNUAL OPTION GRANTS. Each year on the date of the Annual Meeting
of Shareholders of the Company, each Non-Employee Director who is a director of
the Company immediately following such Annual Meeting shall, without any
Committee action, automatically be granted a Non-Qualified Stock Option to
purchase that number of Shares equal to the sum of (i) the Annual Retainer for
Non-Employee Directors in effect when the grant is made, (ii) the aggregate
meeting fees in effect when the grant is made for the total number of regular
Board meetings held in the previous fiscal year and the median number of regular
Board committee meetings directors were scheduled to attend during the previous
fiscal year, and (iii) one annual committee chairmanship fee in effect when the
grant is made, divided by the Fair Market Value of a Share on the date of the
grant. No increase in the Annual Retainer, Board or Board committee meeting fee
or committee chairmanship fee for Non-Employee Directors of the Company
following the annual Non-Qualified Stock Option grant shall increase the number
of Shares for which such Non-Qualified Stock Option may be exercised.
(c) AGREEMENTS. Each such Non-Qualified Stock Option shall be evidenced
by and subject to the provisions of an agreement setting forth the terms of the
Non-Qualified Stock Option. It is intended that the provisions of this Section
12 shall not cause the Non-Employee Directors to cease to be considered
Disinterested Persons and, as a result, the provisions of this Section 12 shall
be interpreted to be consistent with the foregoing intent. Non-Employee
Directors may not be granted Options under this Plan other than pursuant to the
provisions of this Section 12.
(d) PURCHASE PRICE; TERM AND EXERCISABILITY OF OPTIONS. The purchase
price of each Share subject to a Non-Qualified Stock Option granted under this
Section 12 shall be the Fair Market Value of a Share as of the date the
Non-Qualified Stock Option is granted. Notwithstanding anything to the contrary
stated in this Plan, for purposes of this Section 12 and the definition of Fair
Market Value in Section 2(n) hereof, each Non-Qualified Stock Option granted
pursuant to this Section 12 shall be deemed conclusively to have been granted
prior to the close of the applicable securities exchange or system on the date
of grant. Non-Qualified Stock Options granted to a Non-Employee Director shall
vest and become exercisable in full one year after the date of grant, provided,
however, that in no event shall a Non-Employee Director initially appointed by
the Board be entitled to exercise a Non-Qualified Stock Option unless, and until
such time as, such director shall have been elected to the Board by the
shareholders of the Company. Notwithstanding the foregoing, vesting of a
Non-Qualified Stock Option granted to a Non-Employee Director who shall have
been elected by the shareholders of the Company shall accelerate and the
Non-Qualified Stock Option shall become immediately exercisable in full upon the
occurrence of a Change in Control or in the event that the Non-Employee Director
ceases to serve as a director of the Company due to death, Disability or
retirement under the policies of the Company then in effect providing for
retirement of directors from the Board. Non-Qualified Stock Options granted to a
Non-Employee Director shall expire at the earlier of (i) the ten-year
anniversary date of the Non-Qualified Stock Option's grant, or (ii) the
five-year anniversary date of the earlier of (A) termination as a director due
to such death, Disability or retirement or (B) the date the Non-Employee
Director otherwise ceases to be a director of the Company, provided that the
Non-Qualified Stock Option granted to a Non-Employee Director initially
appointed by the Board 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 Non-Qualified Stock Option to such
director.
(e) PAYMENT OF OPTION PRICE. A Non-Employee Director may exercise a
Non-Qualified Stock Option granted pursuant to this Section 12 using as payment
any form of consideration provided for in Section 7(a) hereof, which form of
payment shall be within the sole discretion of the Non-Employee Director,
notwithstanding anything stated in Section 7(a) hereof.
(f) LIMITED RIGHTS.
(i) In conjunction with the grant of any Non-Qualified Stock
Option pursuant to this Section 12 (a "Related Option"), the Non-Employee
Director receiving such grant shall simultaneously be granted a limited Stock
Appreciation Right ("Limited Rights") with respect to all of the Shares covered
by such Related Option. Each Limited Right shall be evidenced by a written
limited right certificate signed by an officer of the Company.
(ii) Limited Rights shall be exercisable at any time within the
thirty-day period after a Change in Control, whether or not the Related Option
is exercisable and regardless of whether the Participant is a Non-Employee
Director at the time of exercise, so long as the holder of the Related Option is
a Non-Employee Director immediately preceding the Change in Control (provided
that in no event shall a Non-Employee Director initially appointed by the Board
be entitled to exercise the Limited Rights granted to such director under this
Plan unless, and until such time as, such director shall have been elected to
the Board by the shareholders of the Company).
(iii) Notwithstanding the provisions of paragraph (ii) above, no
Limited Right shall be exercised within a period of six months after the date of
grant of the Limited Right.
(iv) 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, 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.
(v) A person entitled to exercise a Limited Right may, subject to
its terms and conditions and the terms and conditions of this 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 exercise price
per Share covered by the Related Option and the Fair Market Value per Share
covered by the Related Option as of the date of exercise of the Limited Right.
(vi) A Limited Right may not be assigned and shall be
transferable only if and to the extent that the Related Option is transferable.
(g) Transferability. During the lifetime of a Non-Employee Director who
has been granted a Non-Qualified Stock Option pursuant to this Section 12, only
the Non-Employee Director (or such Non-Employee Director's legal representative
or, if transfers to members of the Non-Employee Director's "immediate family" or
to family trusts or partnerships become permitted as hereinafter provided, a
permitted transferee) may exercise the Non-Qualified Stock Option. No such
Non-Qualified Stock Option may be sold, assigned, transferred, exchanged, or
otherwise encumbered, and any attempt to do so shall be of no effect. The
foregoing sentence notwithstanding, from and after the earlier of (i) the time
that Exchange Act Rule 16b-3 no longer prohibits such transfers as a condition
to application of such Rule or (ii) the time that the Non-Employee Director
retires from the Board and is no longer subject to the reporting requirements of
Section 16 of the Exchange Act, such Non-Employee Director may transfer a
Non-Qualified Stock Option granted pursuant to this Section 12 to any member of
such Non-Employee Director's "immediate family" (as such term is defined in Rule
16a-1(e) promulgated under the Exchange Act, or any successor rule or
regulation) or to one or more trusts whose beneficiaries are members of such
Non-Employee Director's "immediate family" or partnerships in which such family
members are the only partners; provided, however, that (i) the transferor
receives no consideration for the transfer and (ii) such transferred
Non-Qualified Stock Option shall continue to be subject to the same terms and
conditions as were applicable to such Non-Qualified Stock Option immediately
prior to its transfer. Unless a Non-Qualified Stock Option granted pursuant to
this Section 12 shall have expired, in the event of a Non-Employee Director's
death, a Non-Qualified Stock Option granted to such Non-Employee Director
pursuant to this Section 12 shall be transferable to the beneficiary, if any,
designated by the Non-Employee Director in writing to the Company prior to the
Non-Employee Director's death and such beneficiary shall succeed to the rights
of the Non-Employee Director to the extent permitted by law. If no such
designation of a beneficiary has been made, the Non-Employee Director's legal
representative shall succeed to such Non-Qualified Stock Option, which shall be
transferable by will or pursuant to the laws of descent and distribution.
(h) PRIOR PLAN. In the event that this Plan is approved and ratified by
the shareholders of the Company as provided by Section 14(a) hereof, all
Non-Employee Director Non-Qualified Stock Options granted from and after such
approval shall be deemed to have been granted pursuant to this Plan and not
pursuant to any prior plan of the Company or otherwise.
13. ELECTIVE GRANTS TO NON-EMPLOYEE DIRECTORS IN LIEU OF COMPENSATION.
(a) ISSUANCE OF RESTRICTED STOCK. Each Non-Employee Director may
irrevocably elect to receive all or any portion of the Annual Retainer, plus any
applicable fixed annual chairmanship fee payable to such Non-Employee Director,
in the form of Restricted Stock to be issued as of the first day of the year for
which such Annual Retainer is payable (currently October 1) (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 date). Each
irrevocable election shall be made by the Non-Employee Director on a form
provided by the Company and returned to the officer or other employee of the
Company designated on such form at least six months before the date the
Restricted Stock will be issued (currently April 1). In the event of such an
election, a number of shares of Restricted Stock equal to the portion of the
Annual Retainer and such chairmanship fees as to which the election is made,
divided by the Fair Market Value of a Share as of the first business day of the
month in which the Restricted Stock is issued, shall be issued in the name of
the Non-Employee Director as of such date. The remainder of the Annual Retainer
and such chairmanship fees shall be paid in cash to the Non-Employee Director at
such time or times as payments thereof are customarily made by the Company to
Non-Employee Directors who receive such payments in cash, except that each such
payment shall be prorated based upon the total percentage of the Annual Retainer
and such chairmanship fees with respect to which the Non-Employee Director has
not elected to receive Restricted Stock.
(b) LAPSE OF RESTRICTIONS. The Shares of Restricted Stock issued under
this Section 13 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:
(i) death, or resignation or removal of the Non-Employee Director
from the Board as a result of the Disability of the Non-Employee Director;
(ii) retirement of the Non-Employee Director from the Board in
accordance with the policies of the Company then in effect providing for
retirement of Non-Employee Directors;
(iii) acceptance by the Board of the offer of the Non-Employee
Director to resign from the Board 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;
(iv) termination of service as a director with the consent of a
majority of the members of the Board other than the terminating Non-Employee
Director; or
(v) a Change in Control.
The Shares of Restricted Stock shall be held by the Company until the
lapse of the restrictions pursuant to this Section 13 (at which time they shall
be delivered to the Non-Employee Director without any legend on the Share
certificates referencing this Plan); provided, however, that unless and until
the Shares of Restricted Stock are forfeited pursuant to the last sentence of
this paragraph, the Non-Employee Director shall be entitled to all voting,
dividend and distribution rights with respect to such Shares (except that
dividends in Stock and Shares issued upon stock splits shall be deemed to
constitute additional Restricted Stock to be held by the Company pursuant to
this Plan). If the Non-Employee Director ceases to be a director of the Company
before the restrictions on the Restricted Stock lapse pursuant to this Section
13, the Restricted Stock issued to the Non-Employee Director shall be forfeited
and revert to the Company.
(c) PRIOR PLAN. In the event that this Plan is approved and ratified by
the shareholders of the Company as provided by Section 14(a) hereof, all Shares
of Restricted Stock granted to Non-Employee Directors from and after such
approval shall be deemed to have been granted pursuant to this Plan and not
pursuant to any prior plan of the Company or otherwise.
14. GENERAL PROVISIONS.
(a) EFFECTIVE DATE OF THIS PLAN. This Plan shall become effective as of
April 29, 1994, provided that this Plan is approved and ratified by the
affirmative vote of the holders of a majority of the outstanding Shares of Stock
present or represented and entitled to vote in person or by proxy at a meeting
of the shareholders of the Company no later than August 31, 1994.
(b) DURATION OF THIS PLAN. This Plan shall remain in effect until all
Stock subject to it shall be distributed or all Awards have expired or lapsed,
whichever is latest to occur, or this Plan is terminated pursuant to Section
14(e) hereof. No Award of an Incentive Stock Option shall be made more than ten
years after the effective date provided in Section 14(a) hereof (or such other
limit as may be required by the Code) if such limitation is necessary to qualify
the Option as an Incentive Stock Option. Except with respect to Awards granted
pursuant to Sections 12 and 13 hereof, the date and time of approval by the
Committee of the granting of an Award shall be considered the date and time at
which such Award is made or granted, notwithstanding the date of any Agreement
with respect to such Award; provided, however, that the Committee may grant
Awards other than Incentive Stock Options to be effective and deemed to be
granted on the occurrence of certain specified contingencies.
(c) RIGHT TO TERMINATE EMPLOYMENT. Nothing in this Plan or in any
Agreement shall confer upon any Participant who is an Employee the right to
continue in the employment of the Company or any Affiliate or affect any right
which the Company or any Affiliate may have to terminate or modify the
employment of the Participant with or without cause.
(d) TAX WITHHOLDING. The Company may withhold from any payment of cash
or Stock to a Participant or other person under this Plan an amount sufficient
to cover any required withholding taxes, including the Participant's social
security and medicare taxes (FICA) and federal, state and local income tax with
respect to income arising from payment of the Award. The Company shall have the
right to require the payment of any such taxes before issuing any Stock pursuant
to the Award. In lieu of all or any part of a cash payment from a person
receiving Stock under this Plan, the individual may elect to cover all or any
part of the required withholdings, and to cover any additional withholdings up
to the amount needed to cover the individual's full FICA and federal, state and
local income tax with respect to income arising from payment of the Award,
through a reduction of the number of Shares delivered to such individual or a
subsequent return to the Company of Shares held by the Participant or other
person, in each case valued in the same manner as used in computing the
withholding taxes under the applicable laws; provided, however, that if at any
time withholding shall be required with respect to Non-Employee Directors, the
Committee is required to permit a Non-Employee Director to make such an
election, subject to the limitations of the following sentence. Such elections
are subject to the following limitations if, and to the extent, such limitations
are necessary to comply with Exchange Act Rule 16b-3 or any successor provision:
(1) Except as set forth in clause (iii) below, any such election
by a Participant who is then subject to the reporting requirements of Section 16
of the Exchange Act or any successor provision ("Section 16") or a Successor of
such a Participant may be made only if the conditions set forth in clauses (i)
and (ii) below are satisfied:
(i) (A) the election may be made during the period beginning
on the third business day following the date of public release of the Company's
quarterly or annual summary statements of sales and earnings and ending on the
twelfth business day following such date, or (B) the election may be made at
least six months prior to the date the Award is paid to the Participant;
(ii) an election may not be made within six months of the
date of grant of the Award to which the payment relates; provided, however, that
such restriction does not apply in the event death or Disability of the
Participant occurs prior to such election and during that six-month period;
(iii) notwithstanding the foregoing, a Participant who
tenders previously owned Shares to the Company in payment of the purchase price
of Shares in connection with exercise of an Option may also tender previously
owned Shares to the Company in satisfaction of any tax withholding obligations
in connection with such Option exercise without regard to the time periods set
forth in clauses (i) and (ii) above.
The foregoing restrictions do not apply to any Participant who is not
subject to the reporting requirements of Section 16 at the time of the election.
(2) Any such election by a Participant who is subject to the
reporting requirements of Section 16 at the time is irrevocable and is subject
to approval by the Committee. The Committee's approval may be granted in advance
but is subject to revocation by the Committee at any time.
(e) AMENDMENT, MODIFICATION AND TERMINATION OF THIS PLAN. Except as
provided in this Section 14(e), the Board may at any time amend, modify,
terminate or suspend this Plan. Except as provided in this Section 14(e), the
Committee may at any time alter or amend any or all Agreements under this Plan
to the extent permitted by law. Amendments are subject to approval of the
shareholders of the Company only if such approval is necessary to maintain this
Plan in compliance with the requirements of Exchange Act Rule 16b-3, Section 422
of the Code, their successor provisions, or any other applicable law or
regulation. Without the approval of the shareholders of the Company, no
amendment, modification, termination or suspension of this Plan may alter the
provisions of this Plan so as to change the terms, conditions or eligibility
requirements of Awards granted or, subject to the right of the Board to
discontinue this Plan, to be granted to Non-Employee Directors pursuant to
Section 12 or 13 hereof. In no event shall the provisions of this Plan as they
relate to Options, Limited Rights or Shares of Restricted Stock granted pursuant
to Section 12 or 13 hereof be amended more than once every six months other than
to comply with changes in the Code. No termination, suspension or modification
of this Plan may materially and adversely affect any right acquired by any
Participant (or a Participant's legal representative) or any Successor under an
Award granted before the date of termination, suspension or modification, unless
otherwise agreed by the Participant in the Agreement or otherwise or required as
a matter of law. It is conclusively presumed that any adjustment for changes in
capitalization provided for in Section 9(b) or 14(f) hereof does not adversely
affect any right of a Participant under an Award.
(f) ADJUSTMENT FOR CHANGES IN CAPITALIZATION. Appropriate adjustments
in the aggregate number and type of Shares available for Awards under this Plan,
in the limitations on the number and type of Shares that may be issued to an
individual Participant, in the number and type of Shares and amount of cash
subject to Awards then outstanding, in the Option exercise price as to any
outstanding Options and, subject to Section 9(b) hereof, in outstanding
Performance Shares and payments with respect to outstanding Performance Shares
may be made by the Committee in its sole discretion to give effect to
adjustments made in the number or type of Shares through a Fundamental Change
(subject to Section 14(g) hereof), recapitalization, reclassification, stock
dividend, stock split, stock combination, or other relevant change, provided
that fractional Shares shall be rounded to the nearest whole Share.
(g) FUNDAMENTAL CHANGE. In the event of a proposed Fundamental Change:
(a) involving a merger, consolidation or statutory share exchange, unless
appropriate provision shall be made (which the Committee may, but shall not be
obligated to, make) for the protection of the outstanding Options and Stock
Appreciation Rights by the substitution of options, stock appreciation rights
and appropriate voting common stock of the corporation surviving any such merger
or consolidation or, if appropriate, the parent corporation of the Company or
such surviving corporation, to be issuable upon the exercise of options or used
to calculate payments upon the exercise of stock appreciation rights in lieu of
Options, Stock Appreciation Rights and capital stock of the Company, or (b)
involving the dissolution or liquidation of the Company, the Committee may, but
shall not be obligated to, declare, at least twenty days prior to the occurrence
of the Fundamental Change, and provide written notice to each holder of an
Option or Stock Appreciation Right of the declaration, that each outstanding
Option and Stock Appreciation Right, whether or not then exercisable, shall be
cancelled at the time of, or immediately prior to the occurrence of, the
Fundamental Change in exchange for payment to each holder of an Option or Stock
Appreciation Right, within 20 days after the Fundamental Change, of cash equal
to (i) for each Share covered by the cancelled Option, the amount, if any, by
which the Fair Market Value (as defined in this Section 14(g)) per Share exceeds
the exercise price per Share covered by such Option or (ii) for each Stock
Appreciation Right, the price determined pursuant to Section 8 hereof, except
that Fair Market Value of the Shares as of the date of exercise of the Stock
Appreciation Right, as used in clause (i) of Section 8, shall be deemed to mean
Fair Market Value for each Share with respect to which the Stock Appreciation
Right is calculated determined in the manner hereinafter referred to in this
Section 14(g). At the time of the declaration provided for in the immediately
preceding sentence, each Stock Appreciation Right that has been outstanding for
at least six months and each Option shall immediately become exercisable in full
and each person holding an Option or a Stock Appreciation Right shall have the
right, during the period preceding the time of cancellation of the Option or
Stock Appreciation Right, to exercise the Option as to all or any part of the
Shares covered thereby or the Stock Appreciation Right in whole or in part, as
the case may be. In the event of a declaration pursuant to this Section 14(g),
each outstanding Option and Stock Appreciation Right that shall not have been
exercised prior to the Fundamental Change shall be cancelled at the time of, or
immediately prior to, the Fundamental Change, as provided in the declaration.
Notwithstanding the foregoing, no person holding an Option or Stock Appreciation
Right shall be entitled to the payment provided for in this Section 14(g) if
such Option or Stock Appreciation Right shall have expired pursuant to an
Agreement. For purposes of this Section 14(g) only, "Fair Market Value" per
Share means the cash plus the fair market value, as determined in good faith by
the Committee, of the non-cash consideration to be received per Share by the
shareholders of the Company upon the occurrence of the Fundamental Change,
notwithstanding anything to the contrary provided in this Plan.
(h) OTHER BENEFIT AND COMPENSATION PROGRAMS. Payments and other
benefits received by a Participant under an Award shall not be deemed a part of
a Participant's regular, recurring compensation for purposes of any termination,
indemnity or severance pay laws and shall not be included in, nor have any
effect on, the determination of benefits under any other employee benefit plan,
contract or similar arrangement provided by the Company or an Affiliate, unless
expressly so provided by such other plan, contract or arrangement or the
Committee determines that an Award or portion of an Award should be included to
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of competitive cash compensation.
(i) BENEFICIARY UPON PARTICIPANT'S DEATH. To the extent that the
transfer of a Participant's Award at death is permitted by this Plan or under an
Agreement, (i) a Participant's Award shall be transferable to the beneficiary,
if any, designated on forms prescribed by and filed with the Committee and (ii)
upon the death of the Participant, such beneficiary shall succeed to the rights
of the Participant to the extent permitted by law and this Plan. If no such
designation of a beneficiary has been made, the Participant's legal
representative shall succeed to the Awards, which shall be transferable by will
or pursuant to laws of descent and distribution to the extent permitted by this
Plan or under an Agreement.
(j) FORFEITURES. In the event an Employee has received or been entitled
to payment of cash, delivery of Stock or a combination thereof pursuant to an
Award within six months prior to the Employee's termination of employment with
the Company and its Affiliates, the Committee, in its sole discretion, may
require the Employee to return or forfeit the cash and/or Stock received with
respect to the Award (or its economic value as of (i) the date of the exercise
of Options or Stock Appreciation Rights, (ii) the date of, and immediately
following, the lapse of restrictions on Restricted Stock or the receipt of Stock
without restrictions, or (iii) the date on which the right of the Employee to
payment with respect to Performance Shares vests, as the case may be) in the
event of any of the following occurrences: competition with the Company or any
Affiliate, unauthorized disclosure of material proprietary information of the
Company or any Affiliate, a violation of applicable business ethics policies or
business policies of the Company or any Affiliate, or any other occurrence
specified in the related Agreement. The Committee's right to require forfeiture
must be exercised within 90 days after discovery of such an occurrence but in no
event later than 15 months after the Employee's termination of employment with
the Company and its Affiliates.
(k) UNFUNDED PLAN. This Plan shall be unfunded and the Company shall
not be required to segregate any assets that may at any time be represented by
Awards under this Plan. Neither the Company, its Affiliates, the Committee, nor
the Board shall be deemed to be a trustee of any amounts to be paid under this
Plan nor shall anything contained in this Plan or any action taken pursuant to
its provisions create or be construed to create a fiduciary relationship between
the Company and/or its Affiliates, and a Participant or Successor. To the extent
any person acquires a right to receive an Award under this Plan, such right
shall be no greater than the right of an unsecured general creditor of the
Company.
(l) LIMITS OF LIABILITY.
(i) Any liability of the Company to any Participant with respect
to an Award shall be based solely upon contractual obligations created by this
Plan and the Agreement.
(ii) Except as may be required by law, neither the Company nor
any member or former member of the Board or of the Committee, nor any other
person participating (including participation pursuant to a delegation of
authority under Section 3(b) hereof) in any determination of any question under
this Plan, or in the interpretation, administration or application of this Plan,
shall have any liability to any party for any action taken, or not taken, in
good faith under this Plan.
(m) COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS. No certificate for
Shares distributable pursuant to this Plan shall be issued and delivered unless
the issuance of such certificate complies with all applicable legal requirements
including, without limitation, compliance with the provisions of applicable
state securities laws, the Securities Act of 1933, as amended and in effect from
time to time or any successor statute, the Exchange Act and the requirements of
the exchanges on which the Company's Shares may, at the time, be listed.
(n) DEFERRALS AND SETTLEMENTS. The Committee may require or permit
Participants to elect to defer the issuance of Shares or the settlement of
Awards in cash under such rules and procedures as it may establish under this
Plan. It may also provide that deferred settlements include the payment or
crediting of interest on the deferral amounts. Participants who are eligible to
participate in the Medtronic, Inc. Capital Accumulation Plan Deferral Program
("CAP") shall be entitled to defer some or all of the cash portion of any
Performance Shares granted to them hereunder in accordance with the terms of the
CAP.
15. GOVERNING LAW. To the extent that federal laws do not otherwise
control, this Plan and all determinations made and actions taken pursuant to
this Plan shall be governed by the laws of Minnesota and construed accordingly.
16. SEVERABILITY. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of this Plan, and this Plan shall be construed and enforced
as if the illegal or invalid provision had not been included.
17. TERMINATION OF PRIOR PLANS. Effective upon the approval of this
Plan by the Company's shareholders as provided by Section 14(a) hereof, no
further grants of options, performance shares or restricted stock or any other
awards shall be made under the Company's 1979 Restricted Stock and Performance
Share Award Plan, 1979 Nonqualified Stock Option Plan, 1989 Phantom Stock Award
Plan or 1991 Restricted Stock Plan for Non-Employee Directors (the "Prior
Plans"). Thereafter, all grants and awards made under the Prior Plans prior to
such approval by the shareholders shall continue in accordance with the terms of
the Prior Plans.
