EXHIBIT 10.1
1994 STOCK AWARD PLAN
(AMENDED AND RESTATED AS OF APRIL 30, 2000)
1. PURPOSE. The purpose of this 1994 Stock Award Plan (the "Plan") is
to motivate key personnel 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 the agreement, whether in written or electronic
form, between the Company or an Affiliate and a Participant containing the terms
and conditions of an Award (not inconsistent with this Plan), together with all
amendments to such agreement, which amendments may be unilaterally made by the
Company unless such amendments are deemed by the Committee to be materially
adverse to the Participant or are not required as a matter of law. The Agreement
and any amendments thereto shall be deemed accepted and agreed upon by the
Participant upon receipt, without the necessity of obtaining the Participant's
signature.
(c) "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.
(d) "Board" means the Board of Directors of the Company.
(e) "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
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(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.
(f) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute.
(g) "Committee" means the persons designated by the Board to administer
this Plan under Section 3 hereof. The Committee shall consist of not less than
three members of the Board and, except as otherwise determined by the Board,
such persons shall be "non-employee directors" under Exchange Act Rule 16b-3 and
"outside directors" under Section 162(m) of the Code.
(h) "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.
(i) "Disability" means the disability of a Participant such that the
Participant is considered disabled under any retirement plan of the Company
which is qualified under Section 401 of the Code, or,
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in the case of a Participant employed by a non-U.S. Affiliate or in a non-U.S.
location, under any retirement plan or long-term disability plan of the Company
or such Affiliate applicable to such Participant, or as otherwise determined by
the Committee.
(j) "Employee" means any full-time or part-time regular employee
(including officers) of the Company or an Affiliate. For purposes of this Plan,
a regular employee is an employee who is on the regular payroll of the Company
or an Affiliate and who is identified in the personnel records of the Company or
an Affiliate as being an employee. Except with respect to grants of Incentive
Stock Options, "Employee" shall also include other individuals who are not
regular employees of the Company or an Affiliate but who provide services to the
Company or an Affiliate in the capacity of an independent contractor and to whom
the Company specifically chooses to grant an Award and therefore treat as a
Participant. References in this Plan to "employment" and related terms shall
include the providing of services in any such capacity.
(k) "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.
(l) "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, on 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. 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.
(m) "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.
(n) "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.
(o) "Non-Employee Director" means a member of the Board who is not an
employee of the Company or any Affiliate.
(p) "Non-Qualified Stock Option" means an Option other than an
Incentive Stock Option.
(q) "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.
(r) "Option" means a right to purchase Stock, including both
Non-Qualified Stock Options and Incentive Stock Options.
(s) "Participant" means an Employee to whom an Award is made.
(t) "Performance Period" means the period of time as specified in an
Agreement over which Performance Shares are to be earned.
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(u) "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.
(v) "Plan" means this 1994 Stock Award Plan, as amended and in effect
from time to time.
(w) "Restricted Stock" means Stock granted under Section 10 hereof so
long as such Stock remains subject to one or more restrictions.
(x) "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.
(y) "Share" means a share of Stock.
(z) "Stock" means the common stock, $.10 par value per share (as such
par value may be adjusted from time to time), of the Company.
(aa) "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.
(bb) "Subsidiary" means a "subsidiary corporation," as that term is
defined in Section 424(f) of the Code, or any successor provision.
(cc) "Successor" with respect to a Participant means the legal
representative of an incompetent Participant or, 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 valid beneficiary designation
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.
(dd) "Term" means the period during which an Option or Stock
Appreciation Right is outstanding 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.
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(b) DELEGATION OF AUTHORITY. The Committee may delegate all or any part
of its authority under this Plan to (i) one or more subcommittees which may
consist solely of "non-employee directors" under Exchange Act Rule 16b-3 and
"outside directors" under Section 162(m) of the Code and (ii) persons who are
not non-employee directors 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) RULE 16b-3. It is the intent that this Plan and all Awards granted
pursuant to it shall be administered by the Committee (or a subcommittee
thereof) 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(c), 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.
(d) 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,
damages, 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 additional Shares available for
distribution under this Plan as of April 30, 2000 is 58,000,000 (which brings
the total number of shares authorized for distribution under this Plan since
inception to 102,800,000, as adjusted to date pursuant to Section 14(f)). All
shares are 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.
(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 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. No Participant may be granted Options, Stock
Appreciation Rights, Performance Shares or any combination thereof relating to
more than 2,000,000 Shares over a one-year period under this Plan.
5. ELIGIBILITY. Awards may be granted under this Plan to any Employee
at the discretion of the Committee.
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 during which employment
must continue or 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
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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, 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) or the Performance Period be longer than ten years after the date
of grant. An Agreement with a Participant may permit acceleration of vesting 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. All provisions of the Plan which by their
terms apply to an Award shall apply regardless of whether such terms are
expressly set forth in the Award Agreement, except to the extent that the
Agreement for that Award expressly provides otherwise.
(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 Award shall be transferable to a
Successor in the event of a Participant's legal incompetency or 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, in the case of an Option or Stock Appreciation Right
granted before April 30, 2000 and within five years after the date of the
Participant's death in the case of an Option or Stock Appreciation Right granted
on or after April 30, 2000.
(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, in the case of an Option
or Stock Appreciation Right granted before April 30, 2000, and within five years
after the date of such termination in the case of an Option or Stock
Appreciation Right granted on or after April 30, 2000.
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(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 (a) on the date of termination of employment for
Awards granted before April 30, 2000, and (b) at the close of business on the
date 30 days after the date of termination of employment for Awards granted on
or after April 30, 2000, provided, however, that no further vesting shall occur
after 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 AND EXERCISABILITY 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 regular 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 on the date the Option is granted. The Agreement
shall specify a vesting schedule under which the Option becomes available to
exercise. Only the vested portion of an Option may be exercised. When exercising
an Option, the purchase price of the Shares shall be paid 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 by
delivery of cash proceeds of such a simultaneous exercise and sale or by
delivery to the Company, physically or by attestation, of Shares already owned
by such Participant, provided that any such Shares not acquired on the open
market shall have been owned for at least 6 months (with such Shares having a
total fair market value as of the date the Option is exercised equal to the
total exercise cost 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.
(b) INCENTIVE STOCK OPTIONS. In addition to the other terms and
conditions applicable to all Options:
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(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 on 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 on 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. 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.
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 (economic profit), and any such targets may relate to one or any
combination of two or more of corporate, group, unit, division, Affiliate or
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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. 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.
(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. PRIOR AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS. The provisions of
Section 12 of the Plan as in effect prior to April 30, 2000 shall be applicable
to automatic grants of Non-Qualified Stock Options (and related Limited Rights)
made prior to March 5, 1998 to Non-Employee Directors.
13. PRIOR ELECTIVE GRANTS TO NON-EMPLOYEE DIRECTORS. The provisions of
Section 13 of the Plan as in effect prior to April 30, 2000 shall be applicable
to grants of Restricted Stock made prior to March 5, 1998 to Non-Employee
Directors pursuant to their elections to receive such grants in lieu of all or a
portion of their annual fees for their services as Non-Employee Directors.
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. This Plan, as
amended and restated, is effective as of April 30, 2000.
(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 the second sentence of Section 14(a)
hereof (or such other limit
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as may be required by the Code) if such limitation is necessary to qualify the
Option as an Incentive Stock Option. 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 minimum statutory FICA, federal, state and local income tax
withholdings required under the applicable tax laws through a reduction of the
number of Shares delivered to such individual, with such Shares valued in the
same manner as used in computing such minimum withholding taxes.
(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. Plan 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. 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
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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 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 or terminated. 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. A Participant may designate a
beneficiary to succeed to the Participant's Awards under the Plan in the event
of the Participant's death by filing a beneficiary form with the Company and,
upon the death of the Participant, such beneficiary shall succeed to the rights
of the Participant to the extent permitted by law and the terms of this Plan and
the applicable Agreement. In the absence of a validly designated beneficiary who
is living at the time of the Participant's death, the Participant's executor or
administrator of the Participant's estate shall succeed to the Awards, which
shall be transferable by will or pursuant to laws of descent and distribution.
(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 the period beginning six months prior to the Employee's termination
of employment with the Company and its Affiliates and ending when the Award
terminates or is cancelled, the Company, 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: performing services for or on behalf of a
competitor of, or otherwise competing 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 Company's right to require forfeiture must be
exercised not later than 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. Such right shall be deemed to be exercised upon
the Company's mailing written notice to the Employee of such exercise, at the
Employee's most recent home address as shown on the personnel records of the
Company. In addition to requiring forfeiture as described herein, the Company
may exercise its rights under this Section 14(j) by preventing
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or terminating the exercise of any Awards or the acquisition of Shares or cash
thereunder. In the event an Employee fails or refuses to forfeit the cash and/or
Shares demanded by the Company (adjusted for any intervening stock splits), the
Employee shall be liable to the Company for damages equal to the number of
Shares demanded times the highest closing price per share of the Stock during
the period between the applicable date specified in (i) through (iii) above and
the date of any judgment or award to the Company, together with all costs and
attorneys' fees incurred by the Company to enforce this provision.
(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, without giving effect to
conflicts of law provisions, 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.
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