def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.
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Filed by the Registrant x
Filed by a Party other than the Registrant o
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Check the appropriate box: |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
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Medtronic, Inc. |
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(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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Payment of Filing Fee (Check the appropriate box): |
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11. |
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1) Title of each class of securities to which transaction applies: |
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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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4) Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. |
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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. |
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1) Amount Previously Paid: |
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SEC 1913 (02-02) |
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Persons who potentially are to respond to the
collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.
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710 Medtronic Parkway
Minneapolis, Minnesota 55432
Telephone:
763-514-4000
July 18, 2008
Dear Shareholder:
Please join us for our Annual Meeting of Shareholders on
Thursday, August 21, 2008, at 10:30 a.m. (Central
Daylight Time) at Medtronics World Headquarters, 710
Medtronic Parkway, Minneapolis (Fridley), Minnesota.
The enclosed Notice of Annual Meeting of Shareholders and Proxy
Statement describe the business to be conducted at the meeting.
We also will report on matters of current interest to our
shareholders.
We invite you to join us beginning at 9:30 a.m. to view
Medtronics interactive product displays. Product
specialists will be available to answer your questions before
and after the Annual Meeting.
Your vote is important. Whether you own a few shares or many, it
is important that your shares are represented. If you cannot
attend the Annual Meeting in person, you may vote your shares by
internet or by telephone, or by completing and signing the
accompanying proxy card and promptly returning it in the
envelope provided.
We look forward to seeing you at the Annual Meeting.
Sincerely,
William A. Hawkins
President and Chief Executive Officer
Alleviating
Pain, Restoring Health, Extending Life
MEDTRONIC,
INC.
NOTICE OF ANNUAL
MEETING
OF SHAREHOLDERS
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TIME |
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10:30 a.m. (Central Daylight Time) on Thursday,
August 21, 2008. |
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PLACE |
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Medtronic World Headquarters
710 Medtronic Parkway
Minneapolis (Fridley), Minnesota 55432 |
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ITEMS OF BUSINESS |
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1. To elect six directors for a one year term.
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2. To ratify the appointment of
PricewaterhouseCoopers LLP as Medtronics independent
registered public accounting firm.
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3. To approve the Medtronic, Inc. 2008 Stock Award
and Incentive Plan.
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4. To consider such other business as may properly
come before the Annual Meeting and any adjournment thereof.
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RECORD DATE |
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You may vote at the Annual Meeting if you were a shareholder of
record at the close of business on June 23, 2008. |
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VOTING BY PROXY |
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It is important that your shares be represented and voted at the
Annual Meeting. Please vote in one of these three ways: |
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1. VOTE BY INTERNET, by going to the web address
http://www.proxyvote.com
and following the instructions for Internet voting shown on
the enclosed proxy card,
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2. VOTE BY TELEPHONE, by dialing
1-800-690-6903
and following the instructions for telephone voting shown on the
enclosed proxy card, or
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3. VOTE BY PROXY CARD, by completing, signing, dating
and mailing the enclosed proxy card in the envelope provided. If
you vote by Internet or telephone, please do not mail your proxy
card.
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ANNUAL REPORT |
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Medtronics 2008 Annual Report accompanies this Notice of
Annual Meeting of Shareholders. |
By Order of the Board of Directors,
Terrance L. Carlson
Corporate Secretary
Important Notice
Regarding the Availability of Proxy Materials for the
Shareholder Meeting to Be Held on August 21, 2008. The
Proxy Statement and Annual Report to Shareholders are available
at
http://www.medtronic.com/annualmeeting/.
This Notice of Annual Meeting, Proxy Statement and
accompanying proxy card
are being distributed on or about July 18, 2008.
TABLE OF
CONTENTS
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A-1
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710 Medtronic Parkway
Minneapolis, Minnesota 55432
Telephone:
763-514-4000
PROXY
STATEMENT
Annual Meeting of Shareholders
August 21, 2008
We are providing these proxy materials in connection with the
solicitation by the Board of Directors of Medtronic, Inc.
(Medtronic) of proxies to be voted at
Medtronics Annual Meeting of Shareholders to be held on
August 21, 2008, and at any adjournment of the meeting.
GENERAL
INFORMATION ABOUT THE MEETING AND VOTING
What am I voting
on?
There are three proposals scheduled to be voted on at the
meeting:
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Election of six directors;
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Ratification of the appointment of PricewaterhouseCoopers LLP as
Medtronics independent registered public accounting firm
for fiscal year 2009; and
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Approval of the Medtronic, Inc. 2008 Stock Award and Incentive
Plan.
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Who is entitled
to vote?
Shareholders as of the close of business on June 23, 2008
(the Record Date), may vote at the Annual Meeting.
You have one vote for each share of common stock you held on the
Record Date, including shares:
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Held directly in your name as shareholder of record
(also referred to as registered shareholder);
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Held for you in an account with a broker, bank or other nominee
(shares held in street name). Street name holders
generally cannot vote their shares directly and must instead
instruct the brokerage firm, bank or nominee how to vote their
shares; and
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Credited to your account in the Medtronic, Inc. Savings and
Investment Plan.
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What constitutes
a quorum?
A majority of the outstanding shares entitled to vote, present
or represented by proxy, constitutes a quorum for the Annual
Meeting. Abstentions are counted as present and entitled to vote
for purposes of determining a quorum. Shares represented by
broker non-votes (see below) are also counted as
present and entitled to vote for purposes of determining a
quorum. On the Record Date, 1,125,730,817 shares of
Medtronic common stock were outstanding and entitled to vote.
1
How many votes
are required to approve each proposal?
The following explains how many votes are required to approve
each proposal, provided that a majority of our shares entitled
to vote is present at the Annual Meeting (in person or by
proxy). The six candidates for election who receive a plurality
vote of the shares present and entitled to vote in the
affirmative will be elected. Ratifying PricewaterhouseCoopers
LLP as Medtronics independent registered public accounting
firm for fiscal year 2009 requires the affirmative vote of a
majority of the shares present and entitled to vote. Finally,
approval of the Medtronic, Inc. 2008 Stock Award and Incentive
Plan requires the affirmative vote of a majority of the shares
present and entitled to vote.
How are votes
counted?
You may either vote FOR or WITHHOLD
authority to vote for each nominee for the Board of Directors.
You may vote FOR, AGAINST or
ABSTAIN on the other proposals. If you abstain from
voting on any of the other proposals, it has the same effect as
a vote against the proposal. If you just sign and submit your
proxy card without voting instructions, your shares will be
voted FOR each director nominee and the other
proposals.
What is a broker
non-vote?
If you hold your shares in street name and do not provide voting
instructions to your broker, your shares will not be voted on
any proposal on which your broker does not have discretionary
authority to vote (a broker non-vote). Shares held by brokers
who do not have discretionary authority to vote on a particular
matter and who have not received voting instructions from their
customers are counted as present for the purpose of determining
whether there is a quorum at the Annual Meeting, but are not
counted or deemed to be present for the purpose of determining
whether shareholders have approved that matter.
How does the
Board recommend that I vote?
Medtronics Board recommends that you vote your shares:
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FOR each of the nominees to the Board;
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FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as Medtronics independent
registered public accounting firm for fiscal year 2009; and
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FOR the approval of the Medtronic, Inc. 2008 Stock
Award and Incentive Plan.
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How do I vote my
shares without attending the meeting?
If you are a shareholder of record or hold shares through a
Medtronic stock plan, you may vote by granting a proxy. For
shares held in street name, you may vote by submitting voting
instructions to your broker or nominee. In any circumstance, you
may vote:
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By Internet or Telephone If you have internet
or telephone access, you may submit your proxy by following the
voting instructions on the proxy card no later than
11:59 p.m., Eastern Daylight Time, on August 20, 2008 (or,
for shares held through the Medtronic, Inc. Savings and
Investment Plan and the Medtronic Puerto Rico Employees
Savings and Investment Plan, no later than 11:59 p.m.,
Eastern Daylight Time, on August 18, 2008). If you vote by
internet or telephone, you need not return your proxy card.
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By Mail You may vote by mail by signing
and dating your proxy card and mailing it in the envelope
provided. You should sign your name exactly as it appears on the
proxy card. If you are signing in a representative capacity (for
example, as guardian, executor, trustee, custodian, attorney or
officer of a corporation), you should indicate your name and
title or capacity.
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How do I vote my
shares in person at the meeting?
If you are a shareholder of record and prefer to vote your
shares at the meeting, bring the enclosed proxy card or proof of
identification. You may vote shares held in street name only if
you obtain a signed proxy from the record holder (broker or
other nominee) giving you the right to vote the shares.
Even if you plan to attend the meeting, we encourage you to vote
in advance by internet, telephone or mail so that your vote will
be counted even if you are unable to attend the meeting.
What does it mean
if I receive more than one proxy card?
It generally means you hold shares registered in more than one
account. To ensure that all your shares are voted, sign and
return each proxy card or, if you vote by internet or telephone,
vote once for each proxy card you receive.
May I change my
vote?
Yes. Whether you have voted by mail, internet or telephone, you
may change your vote and revoke your proxy by:
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Sending a written statement to that effect to the Corporate
Secretary of Medtronic;
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Voting by internet or telephone at a later time;
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Submitting a properly signed proxy card with a later
date; or
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Voting in person at the Annual Meeting and by filing a written
notice of termination of the prior appointment of a proxy with
Medtronic or by filing a new written appointment of a proxy with
Medtronic.
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Can I receive
future proxy materials electronically?
Yes. If you are a shareholder of record or hold shares through a
Medtronic stock plan, you may elect to receive future proxy
statements and annual reports online as described in the next
paragraph. If you elect this feature, you will receive an email
message notifying you when the materials are available, along
with a web address for viewing the materials. If you received
this proxy statement electronically, you do not need to do
anything to continue receiving proxy materials electronically in
the future.
Whether you hold shares registered directly in your name,
through a Medtronic stock plan, or through a broker or bank, you
can enroll for future delivery of proxy statements and annual
reports by following these easy steps:
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Go to our website at www.medtronic.com;
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Under About Medtronic, click on Investor Relations;
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In the Shareholder Services section, click on
Electronic Delivery of Proxy Materials; and
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Follow the prompts to submit your electronic consent.
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Generally, brokers and banks offering this choice require that
shareholders vote through the internet in order to enroll.
Street name shareholders whose broker or bank is not included in
this website are encouraged to contact their broker or bank and
ask about the availability of electronic delivery. As with all
internet usage, the user must pay all access fees and telephone
charges. You may view this years proxy materials at
www.medtronic.com/annualmeeting.
What are the
costs and benefits of electronic delivery of Annual Meeting
materials?
There is no cost to you for electronic delivery. You may incur
the usual expenses associated with internet access as charged by
your internet service provider. Electronic delivery ensures
quicker delivery, allows you to print the materials at your
computer and makes it convenient to vote your shares online.
Electronic delivery also conserves natural resources and saves
Medtronic significant printing, postage and processing costs.
3
PROPOSAL 1
ELECTION OF DIRECTORS
Directors and
Nominees
Commencing this year, directors whose term of office is expiring
shall be elected annually for terms of one year. Victor J.
Dzau, M.D., William A. Hawkins, Shirley Ann
Jackson, Ph.D., Denise M. OLeary,
Jean-Pierre
Rosso and Jack W. Schuler are directors who have been nominated
for re-election to the Board to serve until the 2009 Annual
Meeting and until their successors are elected and qualified.
All of the nominees are currently directors, and all of the
nominees except for Dr. Dzau were previously elected to the
Board of Directors by the shareholders. Dr. Dzau was
elected to the Board in February 2008 by the Board following
recommendation by the Nominating Subcommittee of the Corporate
Governance Committee.
All of the nominees have consented to being named as a nominee
in this Proxy Statement and have indicated a willingness to
serve if elected. However, if any nominee becomes unable to
serve before the election, the shares represented by proxies may
be voted for a substitute designated by the Board, unless a
contrary instruction is indicated on the proxy.
A plurality of votes cast is required for the election of
directors. However, under the Medtronic Principles of Corporate
Governance, any nominee for director in an uncontested election
(i.e., an election where the only nominees are those recommended
by the Board of Directors) who receives a greater number of
votes withheld from his or her election than votes
for such election (a Majority Withheld
Vote) will, within five business days of the certification
of the shareholder vote by the inspector of elections, tender a
written offer to resign from the Board of Directors. The
Corporate Governance Committee will promptly consider the
resignation offer and recommend to the Board of Directors
whether to accept it. The Corporate Governance Committee will
consider all factors its members deem relevant in considering
whether to recommend acceptance or rejection of the resignation
offer, including, without limitation:
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the perceived reasons why shareholders withheld votes
for election from the director;
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the length of service and qualifications of the director;
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the directors contributions to Medtronic;
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Medtronics compliance with securities exchange listing
standards;
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possible contractual ramifications in the event the director in
question is a management director;
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the purpose and provisions of the Medtronic Principles of
Corporate Governance; and
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the best interests of Medtronic and its shareholders.
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If a directors resignation is accepted, the Corporate
Governance Committee will recommend to the Board of Directors
whether to fill the vacancy on the Board created by the
resignation or reduce the size of the Board. Any director who
tenders his or her offer to resign pursuant to this policy shall
not participate in the Corporate Governance Committee or Board
deliberations regarding whether to accept the offer of
resignation. The Board will act on the Corporate Governance
Committees recommendation within 90 days following
the certification of the shareholder vote, which may include,
without limitation:
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acceptance of the offer of resignation;
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adoption of measures intended to address the perceived issues
underlying the Majority Withheld Vote; or
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rejection of the resignation offer.
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Thereafter, the Board of Directors will disclose its decision to
accept the resignation offer or the reasons for rejecting the
offer, if applicable, on a Current Report on
Form 8-K
to be filed with the Securities and Exchange Commission (the
SEC) within four business days of the date of the
Boards final determination.
4
NOMINEES FOR
DIRECTORS FOR ONE-YEAR TERMS ENDING IN 2009:
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VICTOR J. DZAU, M.D Director since 2008 Chancellor of Health Affairs Duke University age 62
Dr. Dzau
has served as Chancellor for Health Affairs at Duke University and President and Chief Executive Officer of the Duke University Health System since July 2004. From July 1996 until September 2004, he was the Hersey Professor of Theory and Practice of Medicine at the Harvard Medical School and Chair of the Department of Medicine, Physician in Chief and Director of Research at Brigham and Womens
Hospital. He is the previous Chairman of the National Institutes of Health (NIH) Cardiovascular Disease Advisory Committee and served on the Advisory Committee to the Director of the NIH. Dr. Dzau is a member of the Institute of Medicine. He currently serves as a director of Alnylam Pharmaceuticals, Inc., Duke University Health System, PepsiCo, Inc. and Genzyme Corporation.
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WILLIAM A. HAWKINS Director since 2007 President and Chief Executive Officer Medtronic age 54
Mr.
Hawkins has been a director of Medtronic since March 2007 and President and Chief Executive Officer since August 2007. He served as President and Chief Operating Officer of Medtronic since May 2004. He served as Senior Vice President and President, Medtronic Vascular, from January 2002 to May 2004. He served as President and Chief Executive Officer of Novoste Corporation from 1998 to 2002. Mr. Hawkins
serves on the board of visitors for the Duke University School of Engineering and the board of directors for the Guthrie Theater.
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SHIRLEY ANN JACKSON, Ph.D. Director since 2002 President of Rensselaer Polytechnic Institute age 61
Dr. Jackson
has been President of Rensselaer Polytechnic Institute since July 1999. She was Chair of the U.S. Nuclear Regulatory Commission from July 1995 to July 1999; and Professor of Physics at Rutgers University and consultant to AT&T Bell Laboratories from 1991 to 1995. She is a member of the National Academy of Engineering and the American Philosophical Society and is a Fellow of the American Academy
of Arts and Sciences, the American Association for the Advancement of Science, and the American Physical Society. She is a trustee of the Brookings Institution, a Life Trustee of M.I.T. and a member of the Council on Foreign Relations. She is also a director of NYSE Euronext, Federal Express Corporation, Marathon Oil Corporation, Public Service Enterprise Group and I
nternational Business Machines Corporation.
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DENISE M. OLEARY Director since 2000 Private Venture Capital Investor age 51
Ms.
OLeary has been a private venture capital investor in a variety of early stage companies since 1996. Ms. OLeary is also a director of US Airways Group, Inc. and Calpine Corporation. She is a director of Stanford Hospitals and Clinics, where she was chair of the board from 2000 through 2005, and Lucile Packard Childrens Hospital. She was a member of the Stanford University Board
of Trustees from 1996 through 2006, where she chaired the Committee of the Medical Center for that period.
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JEAN-PIERRE ROSSO Director since 1998 Chairman, World Economic Forum USA age 68
Mr.
Rosso has been Chairman of World Economic Forum USA since April 2006. Mr. Rosso served as Chairman of CNH Global N.V. from November 1999 until his retirement in May 2004; was Chief Executive Officer of CNH Global N.V. from November 1999 to November 2000; and Chief Executive Officer of Case Corporation from April 1994 to November 1999 and Chairman from March 1996 to November 1996. He is also a
director of Bombardier Inc. and Eurazeo.
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JACK W. SCHULER Director since 1990 Chairman of the Board of Stericycle, Inc. age 67
Mr.
Schuler has been Chairman of the Board of Stericycle, Inc. since March 1990; President and Chief Operating Officer of Abbott Laboratories from January 1987 to August 1989; and a director of that company from April 1985 to August 1989. Mr. Schuler is a director of Quidel Corporation.
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THE BOARD
RECOMMENDS A VOTE FOR THE DIRECTOR NOMINEES.
CLASS II
DIRECTORS: DIRECTORS CONTINUING IN OFFICE UNTIL 2009
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RICHARD H. ANDERSON Director since 2002 Chief Executive Officer Delta Airlines, Inc. age 53
Mr.
Anderson has been Chief Executive Officer of Delta Airlines, Inc. since September 2007. Prior to that he was Executive Vice President of UnitedHealth Group and President, Commercial Services Group, of UnitedHealth Group Incorporated from December 2006 to September 2007, Executive Vice President of UnitedHealth Group since November 2004 and was Chief Executive Officer of its Ingenix subsidiary from
December 2004. Mr. Anderson was Chief Executive Officer of Northwest Airlines Corporation and its principal subsidiary, Northwest Airlines, from February 2001 to November 2004. Mr. Anderson serves on the board of directors of Cargill, Inc. and Delta Airlines, Inc. Northwest Airlines Corporation filed for bankruptcy in September 2005, which is within two years of Mr. Anderson serving
as an executive officer of Northwest Airlines Corporation.
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ROBERT C. POZEN Director since 2004 Chairman, MFS Investment Management age 61
Mr.
Pozen has been Chairman of MFS Investment Management and a director of MFS Mutual Funds since February 2004 and previously was Secretary of Economic Affairs for the Commonwealth of Massachusetts from January 2003 to December 2003. Mr. Pozen was also John Olin Visiting Professor, Harvard Law School, from 2002 to 2003; Vice Chairman of Fidelity Investments from June 2000 to December 2001 and President
of Fidelity Management & Research from April 1997 to December 2001. He is also a director of BCE Inc., the parent company of Bell Canada, the chairman of the SEC Advisory Committee on Improvements to Financial Reporting and since January 2008 is a senior lecturer at Harvard.
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6
CLASS III
DIRECTORS: CONTINUING IN OFFICE UNTIL 2010*
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DAVID L. CALHOUN Director since 2007 Chairman and Chief Executive Officer age 51 The
Nielsen Company
Mr. Calhoun was appointed Chairman of the Executive Board and Chief Executive Officer of The Nielsen Company on August 23, 2006. Prior to joining The Nielson Company, Mr. Calhoun served as Vice Chairman of General Electric Company and President & Chief Executive Officer, GE Infrastructure. Before that, Mr. Calhoun served as President and Chief Executive
Officer of GE Aircraft Engines; President and Chief Executive Officer of Employers Reinsurance Corporation; President and Chief Executive Officer of GE Lighting; President and Chief Executive Officer of GE Transportation Systems; and Chief Executive Officer of GE Transportation.
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ARTHUR D. COLLINS, Jr. Director since 1994 Chairman of the Board age 60 Medtronic
Mr.
Collins has been Chairman of the Board of Medtronic since April 2002; and was Chief Executive Officer from April 2002 to August 2007; President and Chief Executive Officer from May 2001 to April 2002; President and Chief Operating Officer from August 1996 to April 2001; Chief Operating Officer from January 1994 to August 1996; and Executive Vice President of Medtronic and President of Medtronic International
from June 1992 to January 1994. He was Corporate Vice President of Abbott Laboratories from October 1989 to May 1992 and Divisional Vice President of that company from May 1984 to October 1989. He is also a director of The Boeing Company, U.S. Bancorp and Cargill, Inc. and a member of the Board of Overseers of The Wharton School at the University of Pennsylvania.
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JAMES T. LENEHAN Director since 2007 Financial Consultant and Retired
Vice Chairman and age 59 President of Johnson & Johnson
Mr. Lenehan served as President of Johnson & Johnson from 2002 until June 2004 and retired after 28 years of service; Vice Chairman of Johnson & Johnson
from August 2000 until June 2004; Worldwide Chairman of Johnson & Johnsons Medical Devices and Diagnostics Group from 1999 until he became Vice Chairman of the Board; and was previously Worldwide Chairman, Consumer Pharmaceuticals & Professional Group. Mr. Lenehan has been a financial consultant since October 2004.
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KENDALL J. POWELL Director since 2007 Chairman and Chief Executive Officer age 54 General
Mills
Mr. Powell has been Chairman of General Mills since May 2008 and Chief Executive Officer of General Mills since September 2007. Prior to that he was President and Chief Operating Officer and a director of General Mills from June 2006 to September 2007; Executive Vice President and Chief Operating Officer, U.S. Retail from May 2005 to June 2006; Executive Vice President of General Mills
from August 2004 to May 2005. From September 1999 to August 2004, Mr. Powell was Chief Executive Officer of Cereal Partners Worldwide. Mr. Powell joined General Mills in 1979. Mr. Powell also serves on the boards of Cereal Partners Worldwide, the Twin Cities United Way and the Minnesota Historical Society.
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* Mr. Collins is expected to retire at the 2008
Annual Meeting.
7
Director
Independence
Under the New York Stock Exchange Corporate Governance Rules, to
be considered independent, a director must be determined to have
no material relationship with Medtronic other than as a
director. The Board of Directors has determined that the
following directors, comprising all of our non-management
directors, are independent under the New York Stock Exchange
Corporate Governance Rules: Messrs. Anderson, Calhoun,
Lenehan, Powell, Pozen, Rosso and Schuler, Drs. Dzau and
Jackson and Ms. OLeary. In making this determination,
the Board considered its Director Independence Standards, which
correspond to the New York Stock Exchange standards on
independence. These standards identify types of relationships
that are categorically immaterial and do not, by themselves,
preclude the directors from being independent. The types of
relationships and the directors who had such relationships
include:
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having an immediate family member who is, or has recently been,
employed by Medtronic other than as an executive officer
(Mr. Schuler);
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being a current employee of an entity that has made payments to,
or received payments from, Medtronic for property or services
(Messrs. Anderson and Schuler and Drs. Dzau and
Jackson); and
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being an employee of a non-profit organization to which
Medtronic or The Medtronic Foundation has made contributions
(Dr. Dzau).
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All of the relationships of the types listed above were entered
into, and payments were made or received, by Medtronic in the
ordinary course of business and on competitive terms. Aggregate
payments to, transactions with or discretionary charitable
contributions to each of the relevant organizations did not
exceed the greater of $200,000 or 2% of that organizations
consolidated gross revenues for that organizations fiscal
years 2006, 2007 or 2008.
In addition, the Board considered relationships consistent with
its Director Independence Standards in which the director had a
further removed relationship with the relevant third party. This
included the director being a director (rather than an employee
or executive officer) of a Medtronic vendor or purchaser of
Medtronics products in which aggregate payments to,
transactions with or discretionary charitable contributions to
the relevant third party did not exceed the greater of $200,000
or 2% of that organizations consolidated gross revenues
for that organizations fiscal years 2006, 2007 or 2008.
This also included a directors spouse who was not an
employee of The Medtronic Foundation, but was a consultant in
which payments to the spouse did not exceed $100,000. The Board
of Directors determined that none of the relationships were
material. All of the relationships were entered into, and
payments were made or received, by Medtronic in the ordinary
course of business and on competitive terms.
Dr. Dzau is a director of Alnylam Pharmaceuticals, Inc.
(Alnylam). Medtronic is party to an agreement with
Alnylam to collaboratively research opportunities in the area of
neurodegenerative disorders. The parties have a research program
targeting Huntingtons disease, and may expand their
collaboration in the future with other research programs for
diseases such as Alzheimers and Parkinsons. In
addition, Dr. Dzau is a director of Genzyme Corporation
(Genzyme). Medtronic and Genzyme each own a portion
of a limited liability company for the research, development and
commercialization of therapies involving the local delivery of
myoblast biologics in order to produce a myogenic and angiogenic
result in the human heart. Currently, the company is still in
the research and development phase of any potential therapies.
The Board determined that these relationships were not material.
Our business relationships with Alnylam and Genzyme are
maintained on an arms length basis. Neither Dr. Dzau
nor the institutions with which he is affiliated are given
special treatment in these relationships, and Dr. Dzau does
not participate in negotiations or approvals regarding the
relationships. In addition, under the New York Stock Exchange
Corporate Governance Rules for evaluating director independence,
the Board determined that none of the amounts paid in connection
with the relationships are at a level that would compromise
Dr. Dzaus independence.
8
Mr. Pozen is Chairman of MFS Investment Management, which
manages money for MFS mutual funds and other accounts, and which
may from time to time buy or sell Medtronic stock. The Board
determined that this relationship is not material.
Mr. Pozen has no involvement with these transactions and
there is an informational barrier between him and the rest of
MFS with regard to Medtronic stock.
Certain
Relationships and Related Transactions
In January 2007, the Board of Directors of Medtronic adopted
written related party transaction policies and procedures. The
policies require that all interested transactions
(as defined below) between Medtronic and related
parties (as defined below) are subject to approval or
ratification by the Corporate Governance Committee. In
determining whether to approve or ratify such transactions, the
Corporate Governance Committee will take into account, among
other factors it deems appropriate, whether the interested
transaction is on terms no less favorable than terms generally
available to an unaffiliated third-party under the same or
similar circumstances and the extent of the related
persons interest in the transaction. In addition, the
Corporate Governance Committee has reviewed a list of interested
transactions and deemed them to be pre-approved or ratified.
Also, the Board of Directors has delegated to the chair of the
Corporate Governance Committee the authority to pre-approve or
ratify any interested transaction in which the aggregate amount
is expected to be less than $1 million. Finally, the
policies provide that no director shall participate in any
discussion or approval of an interested transaction for which he
or she is a related party, except that the director shall
provide all material information concerning the interested
transaction to the Corporate Governance Committee.
Under the policies, an interested transaction is
defined as any transaction, arrangement or relationship or
series of similar transactions, arrangements or relationships
(including any indebtedness or any guarantee of indebtedness) in
which:
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the aggregate amount involved will or may be expected to exceed
$100,000 in any fiscal year;
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Medtronic is a participant; and
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any related party has or will have a direct or indirect interest
(other than solely as a result of being a director or a less
than ten percent beneficial owner of another entity).
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A related party is defined as any:
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person who is or was (since the beginning of the last fiscal
year for which Medtronic has filed a
Form 10-K
and proxy statement, even if they do not presently serve in that
role) an executive officer, director or nominee for election as
a director;
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greater than five percent beneficial owner of Medtronics
common stock; or
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immediate family member of any of the foregoing.
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During fiscal year 2008, Tino Schuler, a son of director Jack W.
Schuler, was employed by Medtronic as one of a number of
marketing directors focused on Medtronics core ear, nose
and throat product lines reporting to a Vice President,
Marketing and Sales of our Surgical Technologies operating
segment. Mr. Tino Schuler worked for Xomed beginning in
August 1993, and Xomed, the predecessor to our core ear, nose
and throat business, was acquired by Medtronic in 1999. In
fiscal year 2008, Medtronics core ear, nose and throat
product lines represented less than 2.5% of Medtronic world-wide
revenue. Mr. Tino Schuler was paid an aggregate salary and
bonus of $211,889 and the standard benefits provided to other
non-executive Medtronic employees for his services during fiscal
year 2008. Mr. Tino Schuler is not an executive officer of,
and does not have a key strategic role within, Medtronic, and
this relationship is deemed under the Board of Directors written
related party transaction policies as being pre-approved.
Physio-Control, Inc., a subsidiary of Medtronic, and other
defendants, including Mr. Hawkins as President and Chief
Executive Officer of Medtronic, entered into a consent decree
with the U.S. Food and Drug Administration regarding
Physio-Controls quality system improvements for its
external defibrillator products. The decree addresses issues
raised by the FDA during inspections of Physio-Controls
quality
9
system processes and outlines the actions Physio-Control must
take in order to resume unrestricted distribution of its
external defibrillators.
Medtronic has one outstanding loan to an executive officer,
Catherine Szyman, who is neither a named executive officer nor a
member of the Board of Directors. The loan was extended for
relocation purposes in 2001 prior to the enactment of, and is
permissible under, the Sarbanes-Oxley Act of 2002. The principal
amount of the loan is $250,000, has a 10 year term, and
accrues interest equal to 35.22% of appreciation in the
underlying house or the maximum allowable interest under usury
law, whichever is less. Medtronic currently anticipates the loan
will be paid in full in August upon Ms. Szymans
relocation to Minnesota.
GOVERNANCE OF
MEDTRONIC
Our Corporate
Governance Principles
The Board of Directors first adopted Principles of Corporate
Governance (the Governance Principles) in fiscal
1996 and has revised these Governance Principals from time to
time, including to comply with New York Stock Exchange Corporate
Governance Rules. The Governance Principles describe
Medtronics corporate governance practices and policies,
and provide a framework for the governance of Medtronic. Among
other things, the Governance Principles include the provisions
below.
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A majority of the members of the Board must be independent
directors and no more than three directors may be Medtronic
employees. Currently two directors, Medtronics Chairman
and its President and Chief Executive Officer, are not
independent.
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Medtronic maintains Audit, Compensation, Corporate Governance
and Quality and Technology Committees, which consist entirely of
independent directors.
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The Corporate Governance Committee, which consists of all the
independent directors on the Board, oversees an annual
evaluation of the Board and its committees. The Nominating
Subcommittee of the Corporate Governance Committee evaluates the
performance of each director whose term is expiring based on
criteria set forth in the Governance Principles.
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Our Governance Principles, the charters of our Audit,
Compensation, Corporate Governance and Quality and Technology
Committees and our codes of conduct are published on our website
at www.medtronic.com under the Corporate Governance
caption. These materials are available in print to any
shareholder upon request. From time to time the Board reviews
and updates these documents as it deems necessary and
appropriate.
Lead Director;
Executive Sessions
The Chair of our Corporate Governance Committee, Mr. Rosso,
is our designated Lead Director and presides as the
chair at meetings of the independent directors. Six regular
meetings of our Board are held each year and at each Board
meeting our independent directors meet in executive session with
no company management present.
10
Committees of the
Board and Meetings
Our four standing Board committees Audit,
Compensation, Corporate Governance and Quality and
Technology consist solely of independent directors,
as defined in the New York Stock Exchange Corporate Governance
Rules. Each director attended 75% or more of the total meetings
of the Board and Board committees on which the director served
in fiscal year 2008. The Audit Committee was established in
accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended (the Exchange Act).
The following table summarizes the current membership of the
Board and each of its standing committees and the number of
times each standing committee met during fiscal year 2008.
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Corporate
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Quality and
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Board
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Audit
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Compensation
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Governance
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Technology
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Mr. Anderson
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X
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Chair
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X*
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Mr. Calhoun
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X
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X
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X
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X
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Mr. Collins
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Chair
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Dr. Dzau
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X
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X
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X
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X
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Mr. Hawkins
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X
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Dr. Jackson
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X
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X
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X
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Chair
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Mr. Lenehan
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X
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X
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X
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X
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Ms. OLeary
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X
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Chair
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X*
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Mr. Powell
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X
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X
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X
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X
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Mr. Pozen
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X
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X
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X
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X
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Mr. Rosso
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X
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X
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Chair*
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Mr. Schuler
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X
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X
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X*
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Number of fiscal year 2008 meetings
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8
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12
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7
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4
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4
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* |
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Denotes member of Nominating Subcommittee, which met four times
in fiscal year 2008. |
Effective August 21, 2008, Mr. Powell will serve as
the chair of the Corporate Governance Committee and as Lead
Director, and Mr. Hawkins will serve as Chairman of the
Board. Mr. Collins is expected to retire at the 2008 Annual
Meeting.
The Board has four standing committees the Audit
Committee, the Compensation Committee, the Corporate Governance
Committee, and the Quality and Technology Committee
with each of their principal functions described below.
Audit
Committee
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Oversees the integrity of Medtronics financial reporting
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Oversees the independence, qualifications and performance of
Medtronics independent registered public accounting firm
and the performance of Medtronics internal auditors
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Oversees Medtronics compliance with legal and regulatory
requirements
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Reviews annual financial statements with management and
Medtronics independent registered public accounting firm
and recommends to the Board whether the financial statements
should be included in our Annual Report on
Form 10-K
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Reviews and discusses with management and Medtronics
independent registered public accounting firm quarterly
financial statements and discusses with management
Medtronics earnings press releases
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Reviews major changes to Medtronics accounting and
auditing principles and practices
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11
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Hires the firm to be appointed as Medtronics independent
registered public accounting firm that reports directly to the
Audit Committee
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Pre-approves all audit and permitted non-audit services to be
provided by the independent registered public accounting firm
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Reviews the scope of the annual audit and internal audit
programs and the results of the annual audit examination
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Reviews, at least annually, a report by the independent
registered public accounting firm describing its internal
quality-control procedures and any issues raised by the most
recent internal quality-control review
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Meets periodically with management to review Medtronics
major financial and business risk exposures and steps taken to
monitor and control these exposures
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Considers, at least annually, the independence of the
independent registered public accounting firm
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Reviews the adequacy and effectiveness of Medtronics
internal controls and disclosure controls and procedures
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Establishes procedures concerning the receipt, retention and
treatment of complaints regarding accounting, internal
accounting controls or auditing matters
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Meets privately in separate executive sessions periodically with
management, internal audit and the independent registered public
accounting firm
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Audit
Committee Independence and Financial Experts
In accordance with New York Stock Exchange requirements and SEC
Rule 10A-3,
all members of the Audit Committee meet the additional
independence standards applicable to its members. In addition,
all of our current Audit Committee members are audit committee
financial experts, as that term is defined in SEC rules.
Audit
Committee Pre-Approval Policies
Rules adopted by the SEC in order to implement requirements of
the Sarbanes-Oxley Act of 2002 require public company audit
committees to pre-approve audit and non-audit services provided
by a companys independent registered public accounting
firm. Our Audit Committee has adopted detailed pre-approval
policies and procedures pursuant to which audit, and
audit-related, tax and other permissible non-audit services, are
pre-approved by category of service. The fees are budgeted, and
actual fees versus the budget are monitored throughout the year.
During the year, circumstances may arise when it may become
necessary to engage the independent registered public accounting
firm for additional services not contemplated in the original
pre-approval. In those instances, we obtain the pre-approval of
the Audit Committee before engaging the independent registered
public accounting firm. The policies require the Audit Committee
to be informed of each service, and the policies do not include
any delegation of the Audit Committees responsibilities to
management. The Audit Committee may delegate pre-approval
authority to one or more of its members. The member to whom such
authority is delegated will report any pre-approval decisions to
the Audit Committee at its next scheduled meeting.
Compensation
Committee
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Reviews compensation philosophy and major compensation programs
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Annually reviews executive compensation programs, annually
reviews and approves corporate goals and objectives relevant to
the compensation of the Chief Executive Officer and, based on
its own evaluation of performance in light of those goals and
objectives as well as input from the Corporate Governance
Committee, establishes and approves compensation of the Chief
Executive Officer and annually approves the total compensation
of all other executive officers
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12
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Administers and makes recommendations to the Board with respect
to incentive compensation plans and equity-based compensation
plans and approves stock option and other stock incentive awards
for senior executive officers
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Reviews new compensation arrangements and reviews and recommends
to the Board employment agreements and severance arrangements
for senior executive officers
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Reviews and discusses with management the Compensation
Discussion and Analysis required by the rules of the SEC and
recommends to the Board a Compensation Discussion and Analysis
for inclusion in the Companys annual proxy statement
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Establishes compensation for directors and recommends changes to
the full Board
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You should refer to the Compensation Discussion and Analysis on
page 22 for additional discussion of the Compensation
Committees processes and procedures relating to
compensation.
Compensation
Committee Interlocks and Insider Participation
None of the members of the Compensation Committee during fiscal
year 2008 was an officer or employee of Medtronic, and no
executive officer of Medtronic during fiscal year 2008 served on
the compensation committee or board of any company that employed
any member of Medtronics Compensation Committee or Board.
Corporate
Governance Committee
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Recommends to the Board corporate governance guidelines
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Leads the Board in its annual review of the Boards
performance
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Adopts, monitors and recommends to the Board changes to the
Governance Principles
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Recommends to the Board the selection and replacement, if
necessary, of the Chief Executive Officer, oversees the
evaluation of senior management and periodically provides input
to the Compensation Committee regarding the performance of the
Chief Executive Officer in light of goals and objectives set by
the Compensation Committee
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Reviews and determines the philosophy underlying directors
compensation and remains apprised of the Compensation
Committees actions in approving executive compensation and
the underlying philosophy for it
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Maintains a Nominating Subcommittee which recommends to the full
Corporate Governance Committee criteria for selecting new
directors, nominees for Board membership and the positions of
Chairman, Chief Executive Officer and Chair of the Corporate
Governance Committee and whether a director should be nominated
to stand for re-election
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The Corporate Governance Committee considers candidates for
Board membership, including those suggested by shareholders,
applying the same criteria to all candidates. Any shareholder
who wishes to recommend a prospective nominee for the Board for
consideration by the Corporate Governance Committee must notify
the Corporate Secretary in writing at Medtronics offices
at 710 Medtronic Parkway, Minneapolis, MN 55432 no later than
March 20, 2009. Any such recommendations should provide
whatever supporting material the shareholder considers
appropriate, but should at a minimum include such background and
biographical material as will enable the Corporate Governance
Committee to make an initial determination as to whether the
nominee satisfies the criteria for directors set out in the
Governance Principles.
If the Corporate Governance Committee identifies a need to
replace a current member of the Board, to fill a vacancy in the
Board or to expand the size of the Board, the Nominating
Subcommittee considers candidates from a variety of sources. The
process followed to identify and evaluate candidates includes
meetings to evaluate biographical information and background
material relating to candidates and
13
interviews of selected candidates by members of the Board.
Recommendations of candidates for inclusion in the Board slate
of director nominees are based upon the criteria set forth in
the Governance Principles. These criteria include business
experience and skills, independence, distinction in their
activities, judgment, integrity, the ability to commit
sufficient time and attention to Board activities and the
absence of potential conflicts with Medtronics interests.
The Corporate Governance Committee also considers any other
relevant factors that it may from time to time deem appropriate,
including the current composition of the Board, the balance of
management and independent directors, the need for Audit
Committee and other expertise and the evaluation of all
prospective nominees.
After completing interviews and the evaluation process, the
Corporate Governance Committee makes a recommendation to the
full Board as to persons who should be nominated by the Board.
The Board determines the nominees after considering the
recommendations and report of the Corporate Governance Committee
and making such other evaluations as it deems appropriate.
Alternatively, shareholders intending to appear at the Annual
Meeting to nominate a candidate for election by the shareholders
at the meeting (in cases where the Board does not intend to
nominate the candidate or where the Corporate Governance
Committee was not requested to consider his or her candidacy)
must comply with the procedures in Medtronics restated
articles of incorporation, which are described under Other
Information Shareholder Proposals and Director
Nominations on page 63 of this Proxy Statement.
Quality and
Technology Committee
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Provides assistance to the Board in its oversight of product
quality and safety, scientific and technical direction and human
and animal studies
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Oversees risk management in the area of product quality and
safety, including review of Medtronics overall quality
strategy and processes in place to monitor and control product
quality and safety; periodic review of results of product
quality and quality system assessments by Medtronic and external
regulators; and review of selected product quality issues and
field actions
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Oversees the scientific and technical direction of Medtronic,
including monitoring of overall effectiveness of research and
development and periodic review of Medtronics intellectual
property portfolio
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Oversees risk management in the area of human and animal
studies, including the periodic review of policies and
procedures related to the conduct of human and animal studies
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Special
Committee
In November 2005, the Board convened a Special Committee,
comprised of Jack W. Schuler (Chair), Robert C. Pozen and
Jean-Pierre Rosso, to oversee Medtronics response to a
subpoena received from the Office of the United States Attorney
for the District of Massachusetts relating to alleged fraud and
abuse and alleged violation of federal Anti-Kickback statutes.
For more information about this matter, please see Note 15
to Medtronics consolidated financial statements included
in Medtronics Annual Report for fiscal year 2008.
Annual Meeting of
the Shareholders
It is has been the longstanding practice of Medtronic for all
directors to attend the Annual Meeting of Shareholders. All
directors attended the last Annual Meeting.
14
Director
Compensation
The Director Compensation table reflects all compensation
awarded to, earned by or paid to the Companys non-employee
directors during fiscal year 2008. No additional compensation
was provided to Messrs. Collins or Hawkins for their
service as directors on the Board.
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Fees Earned or
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Stock
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Option
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All Other
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Name
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Paid in Cash
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Awards
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Awards
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Compensation(4)
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Total
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Mr. Anderson
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$
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100,000
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$
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123,333
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$
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12,898
|
|
|
$
|
8,462
|
|
|
$
|
244,693
|
|
Mr.
Bonsignore(1)
|
|
|
40,000
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
110,000
|
|
Dr. Brody(1)
|
|
|
40,000
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
110,000
|
|
Mr.
Calhoun(2)
|
|
|
70,282
|
|
|
|
65,402
|
|
|
|
52,641
|
|
|
|
|
|
|
|
188,325
|
|
Dr. Dzau(3)
|
|
|
14,342
|
|
|
|
17,778
|
|
|
|
16,119
|
|
|
|
|
|
|
|
48,239
|
|
Dr. Jackson
|
|
|
98,333
|
|
|
|
123,333
|
|
|
|
12,898
|
|
|
|
15,074
|
|
|
|
249,638
|
|
Mr. Lenehan
|
|
|
81,675
|
|
|
|
105,833
|
|
|
|
12,898
|
|
|
|
9,690
|
|
|
|
210,096
|
|
Ms. OLeary
|
|
|
98,333
|
|
|
|
123,333
|
|
|
|
12,898
|
|
|
|
|
|
|
|
234,564
|
|
Mr.
Powell(2)
|
|
|
66,949
|
|
|
|
67,333
|
|
|
|
52,641
|
|
|
|
|
|
|
|
186,923
|
|
Mr. Pozen
|
|
|
101,666
|
|
|
|
123,333
|
|
|
|
12,898
|
|
|
|
19,077
|
|
|
|
256,974
|
|
Mr. Rosso
|
|
|
113,333
|
|
|
|
123,333
|
|
|
|
12,898
|
|
|
|
24,725
|
|
|
|
274,289
|
|
Mr. Schuler
|
|
|
98,333
|
|
|
|
123,333
|
|
|
|
12,898
|
|
|
|
6,598
|
|
|
|
241,162
|
|
Mr.
Sprenger(1)
|
|
|
35,000
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
105,000
|
|
|
|
|
(1) |
|
Messrs. Bonsignore and Sprenger and Dr. Brody retired
from the Board and the committees of the Board on which they
served at the 2007 Annual Meeting. The fees shown are fees
earned in fiscal year 2008 and are prorated based upon their
retirement from the Board in August 2007. |
|
(2) |
|
The fees shown for Messrs. Calhoun and Powell are fees
earned in fiscal year 2008 and are prorated based upon their
election to the Board in June 2007. |
|
(3) |
|
The fees shown for Dr. Dzau are fees earned in fiscal year
2008 and are prorated based upon his appointment to the Board in
February 2008. |
|
(4) |
|
This column includes the value of the related spousal travel
expenses, meals and related activities paid for fiscal year
2008, including related tax
gross-ups
paid to the spouses. |
In April 2007, the Board approved changes to Medtronics
non-employee director compensation program. The changes,
effective September 1, 2007, include:
|
|
|
|
|
increasing the annual retainer from $70,000 to $80,000;
|
|
|
|
increasing the Audit Committee Chair annual cash stipend from
$10,000 to $15,000;
|
|
|
|
implementing an annual cash stipend of $5,000 for non-chair
members of the Audit Committee; and
|
|
|
|
changing the plan year from a September 1 to August 31 plan year
to a plan year consistent with Medtronics fiscal year.
|
Consequently, compensation disclosed for fiscal year 2008
includes both (i) the portion of the September 1 through
August 31 plan year that occurred within fiscal year 2008 (which
was April 28, 2007 through August 31, 2007) and
(ii) a shortened plan year for the September 1, 2007
to April 25, 2008 period.
Fees Earned or Paid in Cash. The fees earned
or paid in cash column represents the amount of annual retainer
and annual cash stipend for Board and committee service. The
annual cash retainer for the September 1 through August 31 plan
year was $70,000 (with $35,000 of that amount being earned in
fiscal year 2008), and the annual cash retainer for the
shortened 2008 plan year was $53,333.
In addition, the Chairs of each of the Compensation, Quality and
Technology, and Corporate Governance Committees received an
annual cash stipend for the September 1 through August 31 plan
year of $10,000 (with $5,000 of that amount being earned in
fiscal year 2008), and a cash stipend of $6,667 for the
shortened
2007-2008
plan year. Similarly, the chair of the Audit Committee received
a cash stipend for the
15
September 1 through August 31 plan year of $10,000 (with $5,000
of that amount being earned in fiscal year 2008), and a cash
stipend of $10,000 for the shortened
2007-2008
plan year. Finally, non-chair members of the Audit Committee
received a cash stipend of $3,333 for the shortened
2007-2008
plan year.
The annual cash retainer and annual cash stipend are paid in two
installments in the middle and at the end of a plan
year. Members of the Special Committee are paid a cash fee of
$2,500 at the end of each fiscal quarter. The annual cash
retainer and annual cash stipend are 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. The table on
page 11 of this proxy statement under the section entitled
Committees of the Board and Meetings shows on which
committees the individual directors serve.
Stock Awards. Directors are granted deferred
stock units on the last business day of the plan year in an
amount equal to the annual retainer in effect on such day (on a
pro-rata basis for participants who are directors for less than
the entire plan year and reduced by 25 percent for those
directors who fail to attend at least 75 percent of the
applicable meetings) divided by the average closing price of a
share of Medtronic common stock for the last 20 trading days
during the plan year. Dividends paid on Medtronic common stock
are credited to a directors stock unit account in the form
of additional stock units. The balance in a directors
stock unit account will be distributed to the director in the
form of shares of Medtronic common stock upon resignation or
retirement from the Board in a single distribution or, at the
directors option, in five equal annual distributions.
Amounts in the stock awards column show 100% of the grant date
fair value of stock awards granted to each director in fiscal
year 2008, which is recognized in the year of grant and equals
the share-based compensation expense recognized in fiscal year
2008 for financial statement reporting purposes in accordance
with Financial Accounting Standards Board Statement of Financial
Accounting Standards (SFAS) No. 123 (revised 2004),
Share-Based Payment (SFAS No. 123(R))
(disregarding forfeiture assumptions).
Option Awards. Directors are granted stock
options on the first business day of the plan year in an amount
equal to the annual retainer divided by the fair market value of
a share of Medtronic common stock on the date of grant (which
will also be the exercise price of the 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 Medtronic
director. On the date he or she first becomes a director, each
new non-employee director receives (1) a one-time initial
stock option grant for a number of shares of Medtronic common
stock equal to two times the amount of the annual retainer
divided by the fair market value of a share of Medtronic common
stock on the date of grant (which will also be the exercise
price of such option); and (2) a pro-rated stock option
grant for a number of shares of Medtronic common stock equal to
his or her annual retainer (pro-rated based on the number of
days remaining in the plan year) divided by the fair market
value of a share of Medtronic common stock on the date of grant
(which will also be the exercise price of the option). Amounts
in the option awards column represent the share-based
compensation expense recognized in fiscal year 2008 for
financial statement reporting purposes in accordance with
SFAS No. 123(R) (disregarding forfeiture assumptions)
based on the assumptions noted in the following table. The
following table provides the fair value of options granted to
the directors for which expense was recognized in fiscal year
2008 and the related assumptions used in the Black-Scholes model:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Grant Date
|
|
|
|
June 22,
|
|
|
September 1,
|
|
|
February 21,
|
|
|
|
2007
|
|
|
2007
|
|
|
2008
|
|
|
Fair value of options granted
|
|
$
|
13.35
|
|
|
$
|
12.77
|
|
|
$
|
12.74
|
|
Assumptions used:
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk free
rate(1)
|
|
|
5.01
|
%
|
|
|
4.25
|
%
|
|
|
3.22
|
%
|
Expected
volatility(2)
|
|
|
20.14
|
%
|
|
|
20.02
|
%
|
|
|
22.01
|
%
|
Expected
life(3)
|
|
|
5.17
|
yrs
|
|
|
5.17
|
yrs
|
|
|
6.50
|
yrs
|
Dividend
yield(4)
|
|
|
0.97
|
%
|
|
|
0.95
|
%
|
|
|
1.02
|
%
|
16
|
|
|
(1) |
|
The risk-free rate is based on the grant date yield of a
zero-coupon U.S. Treasury bond whose maturity period equals or
approximates the options expected term. |
|
(2) |
|
Beginning in the third quarter of fiscal year 2007, the expected
volatility is based on a blend of historical volatility and an
implied volatility of the Companys common stock. Implied
volatility is based on market traded options of the
Companys common stock. Prior to the third quarter of
fiscal year 2007, the Company calculated the expected volatility
based exclusively on the historical volatility. |
|
(3) |
|
The Company analyzes historical employee stock option exercise
and termination data to estimate the expected life assumption.
Beginning in the third quarter of fiscal year 2008, the Company
began to calculate the expected life assumption using the
midpoint scenario, which combines historical exercise data with
hypothetical exercise data, as the Company believes this data
currently represents the best estimate of the expected life of a
new employee option. Prior to the third quarter of fiscal year
2008, the Company calculated the expected life based solely on
historical data. |
|
(4) |
|
The dividend yield rate is calculated by dividing the
Companys annual dividend, based on the most recent
quarterly dividend rate, by the closing stock price on the grant
date. |
Directors received the following stock option grants during
fiscal year 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date
|
|
Name
|
|
# of Shares
|
|
|
Fair Value
|
|
|
Mr. Anderson
|
|
|
1,010
|
|
|
$
|
12,898
|
|
Mr. Calhoun
|
|
|
2,977
|
(1)
|
|
|
39,743
|
|
|
|
|
1,010
|
|
|
|
12,898
|
|
Dr. Dzau
|
|
|
3,269
|
(2)
|
|
|
14,793
|
|
|
|
|
293
|
(2)
|
|
|
1,326
|
|
Dr. Jackson
|
|
|
1,010
|
|
|
|
12,898
|
|
Mr. Lenehan
|
|
|
1,010
|
|
|
|
12,898
|
|
Ms. OLeary
|
|
|
1,010
|
|
|
|
12,898
|
|
Mr. Powell
|
|
|
2,977
|
(1)
|
|
|
39,743
|
|
|
|
|
1,010
|
|
|
|
12,898
|
|
Mr. Pozen
|
|
|
1,010
|
|
|
|
12,898
|
|
Mr. Rosso
|
|
|
1,010
|
|
|
|
12,898
|
|
Mr. Schuler
|
|
|
1,010
|
|
|
|
12,898
|
|
|
|
|
(1) |
|
These shares reflect the one-time initial stock option grant
made to Messrs. Calhoun and Powell in connection with their
election to the Board in June 2007. |
|
(2) |
|
These shares reflect the one-time initial stock option grant and
annual grant made to Dr. Dzau in connection with his
election to the Board in February 2008. These grants will vest
100% upon shareholder approval of Dr. Dzaus election
at the Annual Meeting of Shareholders on Thursday,
August 21, 2008. Therefore, an additional $29,261 of
expense related to these shares will be recognized in fiscal
year 2009. |
All non-employee director stock options described above vest and
are exercisable in full on the date of grant, except that a
director initially appointed by the Board will not be entitled
to exercise any stock option until the director has been elected
to the Board by Medtronics shareholders. Amounts in the
grant date fair value column represent the share-based
compensation expense recognized in fiscal year 2008 for
financial statement reporting purposes in accordance with
SFAS No. 123(R) (disregarding forfeiture assumptions).
17
Stock Holdings. Non-employee directors held
the following restricted stock, stock options, and deferred
stock units as of April 25, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
Stock
|
|
|
Deferred
|
|
Non-Employee Director
|
|
Stock
|
|
|
Options
|
|
|
Stock Units
|
|
|
Mr. Anderson
|
|
|
|
|
|
|
21,486
|
|
|
|
7,270
|
|
Mr. Calhoun
|
|
|
|
|
|
|
3,987
|
|
|
|
1,307
|
|
Dr. Dzau
|
|
|
|
|
|
|
3,562
|
|
|
|
359
|
|
Dr. Jackson
|
|
|
|
|
|
|
17,807
|
|
|
|
7,957
|
|
Mr. Lenehan
|
|
|
|
|
|
|
4,397
|
|
|
|
2,074
|
|
Ms. OLeary
|
|
|
|
|
|
|
37,409
|
|
|
|
9,034
|
|
Mr. Powell
|
|
|
|
|
|
|
3,987
|
|
|
|
1,343
|
|
Mr. Pozen
|
|
|
|
|
|
|
11,490
|
|
|
|
5,112
|
|
Mr. Rosso
|
|
|
|
|
|
|
51,962
|
|
|
|
10,225
|
|
Mr. Schuler
|
|
|
14,702
|
|
|
|
50,991
|
|
|
|
11,530
|
|
To more closely align their interests with those of
shareholders, directors are encouraged to own stock of Medtronic
in an amount equal to five times the annual Board retainer fees.
In addition, each director must retain, for a period of three
years, 75% of the net after-tax profit shares realized from
option exercises or share issuances resulting from grants made
on or after April 26, 2003. For stock options, net
after-tax profit shares are those shares remaining after payment
of the options exercise price and income taxes. For share
issuances, net gain shares are those remaining after payment of
income taxes. Shares retained may be sold after three years. In
the case of retirement or termination, the shares may be sold
after the shorter of the remaining retention period or one year
following retirement or termination, as applicable.
Deferrals. Directors may defer all or a
portion of their compensation through participation in
Medtronics Capital Accumulation Plan, a nonqualified
deferred compensation plan designed to allow participants to
make contributions of their compensation before taxes are
withheld and to earn returns or incur losses on those
contributions based upon allocations of their balances to one or
more investment alternatives, which are also investment
alternatives that Medtronic offers its employees through its
401(k) supplemental retirement plan.
Charitable Giving. As part of its overall
program to promote charitable giving, The Medtronic Foundation
matches gifts by Medtronic employees and directors to qualified
educational institutions up to $7,000 per fiscal year. In
addition, any individual who became a director prior to
July 1, 1998 and who has served as a director for five or
more years may recommend charitable institutions to which
Medtronic will make a total contribution of $1 million at
the time of the directors death.
Complaint
Procedure; Communications with Directors
The Sarbanes-Oxley Act of 2002 requires companies to maintain
procedures to receive, retain and treat complaints received
regarding accounting, internal accounting controls or auditing
matters and to allow for the confidential and anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters. We currently have such
procedures in place. Our
24-hour,
toll-free confidential compliance line is available for the
submission of concerns regarding accounting, internal controls
or auditing matters. Our independent directors may also be
contacted via
e-mail at
independentdirectors@medtronic.com. Our Lead Director may
be contacted via
e-mail at
leaddirector@medtronic.com. Communications received from
shareholders may be forwarded directly to Board members as part
of the materials sent before the next regularly scheduled Board
meeting, although the Board has authorized management, in its
discretion, to forward communications on a more expedited basis
if circumstances warrant or to exclude a communication if it is
illegal, unduly hostile or threatening or otherwise
inappropriate. Advertisements, solicitations for periodical or
other subscriptions and other similar communications generally
will not be forwarded to the directors.
18
Our Codes of
Conduct
All Medtronic employees, including our Chief Executive Officer
and other senior executives, are required to comply with our
long-standing Code of Conduct to help ensure that our business
is conducted in accordance with the highest standards of moral
and ethical behavior. Our Code of Conduct covers all areas of
professional conduct, including customer relationships,
conflicts of interest, insider trading, intellectual property
and confidential information, as well as requiring strict
adherence to all laws and regulations applicable to our
business. Employees are required to bring any violations and
suspected violations of the Code of Conduct to the attention of
Medtronic, through management or our legal counsel or by using
Medtronics confidential compliance line. Our Code of
Ethics for Senior Financial Officers, which is a part of the
Code of Conduct, includes certain specific policies applicable
to our Chief Executive Officer, Chief Financial Officer,
Treasurer and Controller and to other senior financial officers
designated from time to time by our Chief Executive Officer.
These policies relate to internal controls, the public
disclosures of Medtronic, violations of the securities or other
laws, rules or regulations and conflicts of interest. The
members of the Board of Directors are subject to a Code of
Business Conduct and Ethics relating to director
responsibilities, conflicts of interest, strict adherence to
applicable laws and regulations and promotion of ethical
behavior.
Our codes of conduct are published on our website, at
www.medtronic.com under the Corporate Governance
caption. We intend to disclose future amendments to, or
waivers for directors and executive officers of, our codes of
conduct on our website promptly following the date of such
amendment or waiver.
19
SHARE OWNERSHIP
INFORMATION
Significant
Shareholders. The following table shows
information as of June 23, 2008, concerning each person who
is known by us to beneficially own more than 5% of our common
stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Shares Beneficially
|
|
|
|
|
|
|
|
|
|
Owned, Amount that
|
|
|
|
|
|
|
Amount and Nature of
|
|
|
May Be Acquired
|
|
|
Percent
|
|
Name of Beneficial Owner
|
|
Beneficial Ownership
|
|
|
Within 60 Days
|
|
|
of Class
|
|
|
Capital World Investors 333 South Hope Street Los Angeles,
CA 90071(1)
|
|
|
61,819,620
|
|
|
|
N/A
|
|
|
|
5.5
|
%
|
|
|
|
(1) |
|
The information for security ownership of this beneficial owner
is based on a Schedule 13G filed by Capital World Investors
on February 11, 2008. The shares reported are as a result
of Capital World Investors acting as investment adviser to
various investment companies. Based upon
1,125,730,817 shares outstanding as of June 23, 2008,
the shareholder beneficially owns approximately 5.5% of our
shares outstanding. |
Beneficial Ownership of
Management. The following table shows
information as of June 23, 2008 concerning beneficial
ownership of Medtronics directors, named executive
officers identified in the Summary Compensation Table below, and
all directors and executive officers as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of Shares Beneficially
|
|
|
|
Amount and Nature of
|
|
|
Owned, Amount that May Be
|
|
Name of Beneficial Owner
|
|
Beneficial
Ownership(5)
|
|
|
Acquired Within 60 Days
|
|
|
Richard H.
Anderson(1)
|
|
|
32,851
|
|
|
|
30,346
|
|
Jean-Luc Butel
|
|
|
149,454
|
|
|
|
116,936
|
|
David L. Calhoun
|
|
|
17,234
|
|
|
|
6,884
|
|
Arthur D. Collins,
Jr.(2)
|
|
|
2,948,070
|
|
|
|
2,229,497
|
|
Michael F. DeMane
|
|
|
291,095
|
|
|
|
260,459
|
|
Victor J. Dzau, M.D.
|
|
|
5,511
|
|
|
|
5,511
|
|
Gary L. Ellis
|
|
|
324,517
|
|
|
|
270,890
|
|
William A. Hawkins
|
|
|
466,671
|
|
|
|
375,639
|
|
Shirley Ann Jackson, Ph.D.
|
|
|
27,554
|
|
|
|
27,354
|
|
James T. Lenehan
|
|
|
18,061
|
|
|
|
8,061
|
|
Stephen H. Mahle
|
|
|
994,030
|
|
|
|
760,042
|
|
Denise M. OLeary
|
|
|
48,033
|
|
|
|
48,033
|
|
Kendall J. Powell
|
|
|
6,920
|
|
|
|
6,920
|
|
Robert C.
Pozen(3)
|
|
|
42,892
|
|
|
|
18,192
|
|
Jean-Pierre Rosso
|
|
|
64,777
|
|
|
|
63,777
|
|
Jack W. Schuler
|
|
|
549,630
|
|
|
|
64,111
|
|
Directors and executive officers as a group
(28 persons)(4)
|
|
|
7,551,861
|
|
|
|
5,567,291
|
|
|
|
|
(1) |
|
Mr. Anderson disclaims beneficial ownership of
25 shares that are owned by his minor son. |
|
(2) |
|
Mr. Collins disclaims beneficial ownership of
30,000 shares that are held by The Collins Family
Foundation, a charitable trust of which he is one of the
trustees. |
|
(3) |
|
Includes 24,700 shares owned jointly with
Mr. Pozens spouse. |
|
(4) |
|
As of June 23, 2008, no director or executive officer
beneficially owns more than 1% of the shares outstanding.
Medtronics directors and executive officers as a group
beneficially own approximately .67% of the shares outstanding. |
|
(5) |
|
Amounts include the shares shown in the last column, which are
not currently outstanding but are deemed beneficially owned
because of the right to acquire shares pursuant to options
exercisable |
20
|
|
|
|
|
within 60 days (on or before August 22, 2008) and
the right to receive shares for deferred stock units issued
under the Medtronic, Inc. 1998 Outside Director Stock
Compensation Plan (as amended and restated) within 60 days
(on or before August 22, 2008) of a directors
resignation. |
Section 16(a) Beneficial Ownership
Reporting Compliance. Based upon a review of
reports and written representations furnished to it, Medtronic
believes that during fiscal year 2008 all filings with the SEC
by its executive officers and directors complied with
requirements for reporting ownership and changes in ownership of
Medtronics common stock pursuant to Section 16(a) of
the Exchange, except that Gary L. Ellis failed to accurately
report shares for taxes withheld on October 23, 2007, due
to Medtronics administrative oversight, Jack W. Schuler
failed to timely file a report for the purchase of shares on
August 23, 2007, due to an oversight by
Mr. Schulers advisors, and Kendall J. Powell failed
to timely file a report for a sale of shares by his spouse on
August 27, 2007, due to an oversight by
Mr. Powells advisors. The amended reports were filed
promptly when the errors were discovered.
21
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
The compensation discussion and analysis describes all material
elements of our compensation programs for our named executive
officers during fiscal year 2008. The accompanying Summary
Compensation Table and additional tables should be read for
additional information relating to the compensation of our named
executive officers.
The Compensation Committee of the Board of Directors has the
authority and is the decision-making body on all matters of
compensation related to our executive officers. The Compensation
Committee establishes the compensation philosophy and approves
all aspects of the executive compensation program including plan
design and administration. For more information on the
Compensation Committee, its members and its duties as identified
in its charter, you should refer to the section entitled
Committees of the Board and Meetings beginning on
page 11 of this proxy statement.
Compensation
Program Objectives and Philosophy
The goal of our compensation program for named executive
officers is to support and enhance the Medtronic Mission. Our
Mission has been in place since 1960, and it drives every aspect
of our business. Its principles, in a condensed version below,
speak to:
|
|
|
|
|
Contributing to human welfare by application of biomedical
engineering to develop instruments that alleviate pain, restore
health and extend life;
|
|
|
|
Directing growth in the biomedical engineering field;
|
|
|
|
Striving without reserve for the greatest possible reliability
and quality in our products and to be the unsurpassed standard
of comparison and to be recognized as a company of dedication,
honesty, integrity and service;
|
|
|
|
Making a fair profit to meet our obligations, sustain our growth
and reach our goals;
|
|
|
|
Recognizing the personal worth of employees by providing an
employment framework that allows personal satisfaction in work
accomplished, security, advancement opportunities and means to
share in the Companys success; and
|
|
|
|
Maintaining good citizenship as a company.
|
Our Mission lays the foundation for our unyielding standards for
ethical and legal conduct and the utmost integrity in all of our
activities. Our compensation program for named executive
officers is aligned with these principles, and its objectives
are established for this purpose. It is designed to:
|
|
|
|
|
Emphasize performance-based compensation;
|
|
|
|
Encourage strong financial performance by establishing
challenging goals and leveraged incentive programs; and
|
|
|
|
Encourage executive stock ownership and alignment with
shareholder interests by linking a meaningful portion of
compensation to the value of Medtronic common stock.
|
Our philosophy is to position total compensation at a level that
is commensurate with Medtronics size and performance
relative to other leading medical device and pharmaceutical
companies, as well as a limited number of general industry
companies. To do this, the Compensation Committee annually
reviews the total compensation levels and mix of elements using
public information from our peer groups proxy statements
and survey information from credible general industry surveys.
The variable components of the program are designed to allow for
market median pay for target performance, above-market median
pay when performance is above target performance and
below-market median pay when performance is below target
performance. In addition, the equity components of the program
align our executives with the interests of our shareholders and
ensure that their total compensation will increase or decrease
in direct correlation to the movement of our stock price.
22
Program
Overview
The following is an illustration of the major components of
Medtronics compensation programs as applied to each named
executive officer with the exception of Mr. Collins who, in
his role as Chairman of the Board, received compensation
consisting of base salary, a performance share plan (the
Performance Share Plan) payout for the 2006 to 2008
performance period and a pro-rata annual incentive payment in
fiscal year 2008.
|
|
|
|
|
Objective: Provide a base wage that is
not subject to performance risk
Generally represents 12% to 27% of total
compensation for the named executive
officers(1)
Objective: Motivate executives to
achieve annual business goals
Generally represents 14% to 19% of total
compensation for the named executive
officers(1)
All executive officers have
corporate and (if applicable) business unit annual business
goals
Objective: Motivate executives to focus
on long-term shareholder value creation and strategic
initiatives
Core long-term incentive program
consists of three distinct components targeting delivery of
long-term compensation at approximately the median of market
competitive levels
Generally represents 55% to 74% of total
compensation for the named executive officers
Objective: Supports succession planning,
recruiting and retention
Used judiciously
Generally represents a premium over and
above our competitive market
Objective: Ensure impartiality and
objectivity in the event of a change-in-control situation to
protect shareholder interests
Policy is consistent with design
provisions and benefit levels at other similar companies
Given in lieu of perquisites
Represents a nominal amount of total
compensation for the named executive officers (e.g., $40,000 for
CEO)
|
|
|
|
(1) |
|
Total compensation is defined as the sum of base salary, target
annual cash incentives, and the grant date fair value of
long-term equity incentives, and does not necessarily tie to the
values disclosed in the Summary Compensation Table and
supplemental tables. The chart is not drawn to scale for any
particular named executive officer. |
The compensation mix in the illustration above reflects our pay
philosophy, which emphasizes performance-based pay (annual and
long-term incentives represent 73% to 88% of total
compensation),
23
and a focus on long-term financial measures and stock
performance (55% to 74% of total compensation). In delivering a
relatively large percentage of total compensation in the form of
long-term incentives, our intent is to deliver maximum value to
the named executive officer only when value is delivered to
shareholders in the form of both stock performance and long-term
financial performance. The percentages are calculated based on
total direct compensation (base salary, annual incentives and
long-term incentives) excluding special time-based restricted
stock awards and excluding compensation related to relocation or
expatriate duties.
Independent
Compensation Consultant
The Compensation Committee has engaged Frederic W.
Cook & Co., Inc., an independent outside compensation
consulting firm, to advise the Compensation Committee on all
matters related to executive officer and director compensation.
Specifically, Frederic W. Cook & Co. conducts an
annual proxy review of total compensation for named executive
officers. In addition, the consultant provides relevant market
data, updates on trends in executive and director compensation,
advice on program design and specific compensation decisions for
the Chief Executive Officer and advice on the recommendations
made by the Chief Executive Officer with respect to the
compensation of other executives. The consultant attended all of
the Compensation Committee meetings in fiscal year 2008, as is
Medtronics long-standing practice. The consultant also
meets with the Compensation Committee in executive session as
requested at each meeting. The compensation consultant only
works with management with the express permission of the
Compensation Committee. Any services performed for the Company
are related to executive and director compensation and are
solely in support of decision-making by the Compensation
Committee.
Role of Chief
Executive Officer in Compensation Decisions
In making compensation decisions for the named executive
officers, the Compensation Committee solicits views of our Chief
Executive Officer, who attends all Compensation Committee
meetings at the Compensation Committees invitation. The
Chief Executive Officer is not present during the executive
session portions of the meetings, and he does not make specific
recommendations to the Compensation Committee about his own
compensation.
Change of
Leadership
At the Annual Meeting in August 2007, Mr. Collins stepped
down as Medtronics Chief Executive Officer. Since that
time, Mr. Collins has served in the capacity of Chairman of
the Board of Directors and remains an employee of the company.
It is anticipated that Mr. Collins will continue in this
role through the date of the Annual Meeting in August 2008, at
which time he will retire from Medtronic.
Mr. Collins compensation for his one-year period as
employee Chairman is $1,000,000. Although he received awards in
fiscal year 2008 under incentive programs in which he was a
participant prior to stepping down as Chief Executive Officer,
he did not receive any new grants under the Companys
long-term incentive or stock compensation programs. As the Chief
Executive Officer during part of fiscal year 2008,
Mr. Collins fiscal year 2008 compensation is reported
in this proxy statement.
Peer
Companies
The Compensation Committee regularly conducts a comprehensive
review of our peer group that includes an assessment of
companies in the peer group as well as the size, performance and
industry of companies outside the group. Such a review was
conducted for fiscal year 2008 and resulted in a peer group
consisting of twenty companies, including direct and indirect
competitors in the medical device and pharmaceutical field as
well as other leading companies. The peer group included six
companies that were not a part of the peer group in fiscal year
2007. In addition, one peer company from fiscal year 2007 was
acquired by a private group of investors. This peer group was
selected based on discussions with, and recommendations from,
the Compensation Committees independent compensation
consultant. In establishing the peer group, all
U.S.-based
companies in Global Industry Classification Standard (GICS) sub-
24
industry codes related to Medtronics industry were
identified. This group was further reduced by eliminating
companies with less than $1 billion in revenues. One
exception was made to these requirements for 3M which, although
not in one of the GICS sub-industry codes used to identify other
peer group candidates, operates a large health care segment
representing 30% of its revenue and is locally based. The final
peer group was selected such that Medtronic is at approximately
the median of the companies in terms of several size measures
such as revenues and market capitalization.
The following table lists Medtronics fiscal year 2008 peer
group, including Medtronics ranking relative to these
companies based on financial data available at the time of
consideration:
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
Market Cap
|
|
Company
|
|
(Millions)
|
|
|
(Millions)
|
|
|
3M
|
|
$
|
22,923
|
|
|
$
|
54,366
|
|
Abbott Laboratories
|
|
|
22,476
|
|
|
|
84,283
|
|
Allergan
|
|
|
3,063
|
|
|
|
17,176
|
|
Amgen
|
|
|
14,268
|
|
|
|
74,960
|
|
Bard (C.R.)
|
|
|
1,986
|
|
|
|
8,239
|
|
Baxter International
|
|
|
10,378
|
|
|
|
32,497
|
|
Becton Dickinson
|
|
|
5,840
|
|
|
|
18,577
|
|
Boston Scientific
|
|
|
7,821
|
|
|
|
24,043
|
|
Bristol-Myers Squibb
|
|
|
17,914
|
|
|
|
53,274
|
|
Genentech
|
|
|
9,284
|
|
|
|
88,899
|
|
Genzyme
|
|
|
3,187
|
|
|
|
16,245
|
|
Johnson & Johnson
|
|
|
53,194
|
|
|
|
182,125
|
|
Lilly (Eli)
|
|
|
15,691
|
|
|
|
59,510
|
|
Merck
|
|
|
22,636
|
|
|
|
95,850
|
|
Pfizer
|
|
|
48,201
|
|
|
|
179,973
|
|
St. Jude Medical
|
|
|
3,302
|
|
|
|
14,022
|
|
Schering-Plough
|
|
|
10,547
|
|
|
|
34,902
|
|
Stryker
|
|
|
5,406
|
|
|
|
25,252
|
|
Wyeth
|
|
|
20,351
|
|
|
|
74,519
|
|
Zimmer Holdings
|
|
|
3,495
|
|
|
|
19,986
|
|
|
|
|
|
|
|
|
|
|
Medtronic
|
|
$
|
11,292
|
|
|
$
|
58,094
|
|
Medtronic Percentile Rank
|
|
|
54th
%tile
|
|
|
|
62nd
%tile
|
|
Base
Salaries
With respect to base salaries, our objective is to establish
salaries within a competitive range based on the market median
base salary for our industry peer group and general industry
survey data. Establishing market competitive base salaries aids
in the attraction and retention of top talent and allows us to
develop an overall pay program that appropriately reflects the
market mix of fixed versus variable compensation.
The Compensation Committee solicits the views of our Chief
Executive Officer on compensation matters as they relate to the
Chief Operating Officer and members of senior management
reporting to the Chief Executive Officer or the Chief Operating
Officer. In making his recommendations to the Compensation
Committee, the Chief Executive Officer assesses individual
performance during the fiscal year, the individuals
current salary percentile relative to general industry labor
market data, past salary treatment and the scope and complexity
of the position.
In addition to the recommendations of the Chief Executive
Officer, the Compensation Committee receives a detailed analysis
of the named executive officers pay as compared to the
peer group, presented by the independent consultant to the
Compensation Committee, and general industry survey data
25
provided by Management. After an evaluation of the analysis and
the data presented, the Compensation Committee approves base
salaries for named executives annually at its meeting in April.
Base salary percentage increases for fiscal year 2008 and for
fiscal year 2009 (to date) are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
Fiscal Year
|
|
|
Percent Increase
|
|
|
Fiscal Year
|
|
|
Percent
|
|
Name
|
|
2007
|
|
|
2008
|
|
|
(Decrease)
|
|
|
2009
|
|
|
Increase
|
|
|
William A. Hawkins
|
|
$
|
775,000
|
|
|
$
|
1,100,000
|
|
|
|
41.9
|
|
|
$
|
1,177,000
|
|
|
|
7.0
|
|
Gary L. Ellis
|
|
|
525,000
|
|
|
|
600,000
|
|
|
|
14.3
|
|
|
|
636,000
|
|
|
|
6.0
|
|
Michael F. DeMane
|
|
|
530,000
|
|
|
|
725,000
|
|
|
|
36.8
|
|
|
|
N/A
|
(1)
|
|
|
N/A
|
(1)
|
Stephen H. Mahle
|
|
|
595,000
|
|
|
|
620,000
|
|
|
|
4.2
|
|
|
|
620,000
|
|
|
|
|
|
Jean-Luc Butel
|
|
|
410,000
|
|
|
|
440,000
|
|
|
|
7.3
|
|
|
|
525,000
|
(2)
|
|
|
19.3
|
(2)
|
Arthur D. Collins, Jr.
|
|
|
1,275,000
|
|
|
|
1,000,000
|
|
|
|
(21.6
|
)
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
(1) |
|
On April 29, 2008, it was announced that Mr. DeMane
had informed Medtronic of his decision to resign as Chief
Operating Officer effective April 30, 2008. Additional
information related to Mr. DeManes departure can be
found on page 51 of this proxy statement. |
|
(2) |
|
Effective April 29, 2008, Mr. Butel received a
promotion to the position of Senior Vice President and
President, Medtronic International. Mr. Butels fiscal
year 2009 salary increase of 19.3% consists of a 5.0% merit
increase and a 13.6% promotional increase. |
The fiscal year 2008 salaries for Mr. Hawkins and
Mr. DeMane reflect their fiscal year-end annualized pay
following mid-year promotions to Chief Executive Officer and
Chief Operating Officer, respectively. Mr. Hawkins received
an annual salary increase of 4.0% at the beginning of fiscal
year 2008, bringing his salary to $806,000. Upon his promotion
to Chief Executive Officer, Mr. Hawkins salary was
increased to $1,100,000. Mr. DeMane received an annual
salary increase of 5.1% at the beginning of fiscal year 2008,
bringing his salary to $557,000. Upon his promotion to Chief
Operating Officer, Mr. DeManes salary was increased
to $725,000. Mr. Ellis received an annual salary increase
of 6% at the beginning of fiscal year 2008, as well as a salary
adjustment to align his pay more closely with competitive market
data for his position. As a reflection of a majority of the
named executive officers short tenure in their current
roles, their salaries are approximately 86% to 95% of the
competitive market for their positions. At the beginning of
fiscal year 2008, Mr. Collins base pay in his role as
Chief Executive Officer was $1,275,000. Upon stepping down as
Chief Executive Officer and assuming the position of Chairman of
the Board of Directors, Mr. Collins base salary was
reduced by 21.6% to $1,000,000.
Annual
Performance-Based Incentives
We deliver annual performance-based incentives to our named
executive officers through the Medtronic, Inc. Executive
Incentive Plan (MIP). Our objective is to establish
MIP award targets within a competitive range based on the market
median annual incentives for our competitive market. However, we
establish an award range that allows above-market pay for
above-market performance and below-market pay for below-market
performance. It is important to note that our MIP award targets
are set at competitive levels to allow us to attract and retain
employees and offer a pay mix that is similar to those offered
in the market in which we compete for talent.
Award Targets. The Compensation Committee
reviews, discusses and approves MIP award targets for named
executive officers in June.
Our MIP award targets are established as a percentage of base
salary earned during the fiscal year. The Plan provides that no
incentives are earned unless a minimum (threshold) earning per
share target is met, and that upon meeting this threshold the
plan will provide participants a minimum award of 50% of target.
Minimum awards (at the threshold level of performance) are 50%
of the target amount and maximum payouts for named executive
officers vary from 220% to 225% of the target amount.
26
Performance Measures. MIP award measures are
reviewed and approved annually at the Compensation
Committees June meeting. Financial measures are selected
based on how effectively they impact, independently and
together, the overall success of Medtronic.
The fiscal year 2008 financial measures for the portion of our
plan based on Company performance were earnings per share,
revenue growth, cash flow and two quality-related measures, with
weights of 50%, 30%, 10%, 5% and 5%, respectively. Earnings per
share is an aggregate measure that focuses on growth and equity
management, and reflects how well we deliver value to our
shareholders from our business operations. Revenue growth is a
reflection of our ability to successfully bring new products to
market, gain market share and expand the many markets that we
serve. Cash flow is an indication of liquidity and reflects
Medtronics flexibility in making certain business
decisions, and for this purpose is defined as net income plus or
minus changes in working capital and net property, plant and
equipment. The first quality-related measure is related to
savings in the cost of materials and inventory management and
the second is related to a reduction in the number of
observations made by regulatory bodies that result from audits
or other actions. Target payouts for Company measures for fiscal
year 2008 were based on performance targets with the following
ranges: 10% to 18% growth in earnings per share, 10% to 15%
revenue growth, cash flow ranging from $2,275 million to
$2,717 million, scrap, obsolescence and physical inventory
adjustments ranging from $149 million to $105 million,
and 150% to 60% of established target for the number of
observations. These are reasonably aggressive goals as compared
to our peer group of companies and, as such, fully support our
compensation philosophy. In addition, the earnings per share
threshold was set at a 9% growth over the prior years
actual results.
Once actual performance has been determined, the achievement
percentage is determined by interpolating actual performance
relative to the performance range for each measure. These
achievement percentages are then weighted based on the
applicable plan weightings and summed to arrive at an overall
achievement percentage for the plan year. Actual payouts are
determined by multiplying the executives eligible earnings
for the plan year by their annual target percentage, and then by
the overall achievement percent for their plan.
MIP awards paid to Messrs. Hawkins, Ellis, DeMane, Mahle
and Collins are based 100% on Company performance measures.
Mr. Collins award will be pro-rated based on the
period of time in fiscal year 2008 in which he served as the
Chief Executive Officer. In order to focus Mr. Butel on the
achievement of business geography objectives, a significant
portion, 75% of his MIP, is based on the performance of the
business geography he leads. For 2008, these business unit
measures included revenue growth (40% weight), earnings before
interest and taxes (EBIT) (30%), the quality-related
measures of scrap, obsolescence and physical inventory
adjustments (7.5%) and on-time complaint reporting (7.5%), and
two measures related to asset management days sales
outstanding (7.5%) and weighted average inventory weeks (7.5%).
Target payouts for Mr. Butels business geography
measures for fiscal year 2008 were based on performance targets
within the following ranges: 12% to 21% revenue growth,
$584 million to $639.3 million in EBIT, scrap,
obsolescence and physical inventory adjustments ranging from
$11.5 million to $9.4 million, on-time complaint
reporting from 90% to 100% of target, days sales outstanding
ranging from 85.4 to 73.9 days, and weighted average
inventory weeks from 22.8 to 19.5 weeks.
In establishing performance measure targets, the Compensation
Committee considered a number of factors including prior
performance, forecast performance, industry expectations, and
the annual operating plan. Finally, the competitive market,
changes in the regulatory environment, and economic trends were
also considered.
Fiscal Year 2008 Award Payments. For fiscal
year 2008, Medtronics earnings per share and revenue
growth performance were below target. Medtronics earnings
per share exceeded the minimum threshold amount required for an
award. Return on net assets was below target, resulting in
overall Company performance at 55.8% of target. Asia Pacific
performance, which impacts Mr. Butels MIP, was at
78.5% of target.
27
An overview of the fiscal year 2008 MIP program, including
targets and award payments is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
Payout Range
|
|
|
Target
|
|
|
|
|
|
Actual Paid
|
|
|
|
Opportunity
|
|
|
(as % of Base Salary)
|
|
|
Payout
|
|
|
Actual
|
|
|
as % of
|
|
Name
|
|
as % of Salary
|
|
|
Minimum
|
|
|
Maximum
|
|
|
$
|
|
|
Amount Paid
|
|
|
Target
|
|
|
William A.
Hawkins(1)
|
|
|
114
|
|
|
|
57
|
|
|
|
250
|
|
|
$
|
1,133
|
|
|
$
|
632,295
|
|
|
|
55.8
|
|
Gary L. Ellis
|
|
|
75
|
|
|
|
38
|
|
|
|
165
|
|
|
|
450
|
|
|
|
251,145
|
|
|
|
55.8
|
|
Michael F.
DeMane(1)
|
|
|
90
|
|
|
|
45
|
|
|
|
197
|
|
|
|
602
|
|
|
|
335,926
|
|
|
|
55.8
|
|
Stephen H. Mahle
|
|
|
80
|
|
|
|
40
|
|
|
|
176
|
|
|
|
496
|
|
|
|
276,818
|
|
|
|
55.8
|
|
Jean-Luc Butel
|
|
|
70
|
|
|
|
35
|
|
|
|
156
|
|
|
|
308
|
|
|
|
241,657
|
|
|
|
78.5
|
|
Arthur D. Collins, Jr.
|
|
|
120
|
|
|
|
60
|
|
|
|
264
|
|
|
|
490
|
|
|
|
273,623
|
|
|
|
55.8
|
|
|
|
|
(1) |
|
Target opportunity as % of salary is pro-rata due to mid-year
promotion |
MIP Program
Changes for Fiscal Year 2009
At the direction of the Compensation Committee, in fiscal year
2008 Management conducted a comprehensive review of the MIP with
the intent of providing greater focus on Medtronics
overall business objectives, reducing the overall number of
performance measures and driving appropriate Company, business
unit and business geography performance. Under the revised plan,
effective for fiscal year 2009, the Company performance measures
will consist of revenue growth, earnings per share, and cash
flow, weighted 40%, 40% and 20%, respectively. For this purpose,
cash flow is defined as profit after tax exclusive of special
charges, plus or minus changes in accounts receivable,
inventories, net property, plant and equipment, certain other
operating assets and accounts payable, and excluding the
Physio-Control business and the effects of foreign exchange
rates. Performance measures for business geography heads have
been revised to include revenue growth and EBIT for the relevant
area of responsibility, weighted 40% each. The remaining 20%
will be based on performance against two quantitative
performance measures as determined annually for each business
unit or geography. This determination will be made by the Chief
Executive Officer, with the input of the respective business
leader, prior to the start of the fiscal year and approved by
the Compensation Committee to the extent that they apply to
executive officers. Awards for executive officers will be based
100% on Company performance, with awards for executive officers
who are the head of a business unit or geography weighted 50% on
the performance of the Company and 50% on the performance of the
relevant business unit or geography.
Long-Term
Compensation
Long-term compensation allows us to provide incentives and
rewards to those employees who are responsible for the strategic
and long-term success of the company. Our objective is to align
the actions of our named executive officers with the interests
of shareholders, link a significant portion of their
compensation to sustained financial results and growth in stock
price, provide a competitive total compensation package, and aid
in the attraction and retention of top talent. We provide our
named executives with four types of long-term compensation:
(1) stock options; (2) performance-based restricted
stock; (3) cash-based long-term performance plan; and
(4) time-based restricted stock units.
A goal of our program is to establish aggregate long-term
compensation pay targets within a competitive range based on the
median long-term incentives of our industry peer group of
companies. We establish a pay range that allows aggregate
payouts that are above market median pay for above target
performance and below market median pay for below target
performance.
Our program achieves an equal balance among the three primary
components of the program (stock options, performance-based
restricted stock, and performance-based cash) and to use
time-based restricted stock in more limited circumstances for
special recognition and retention purposes. This mix of
long-term incentives is similar to that used by the companies in
our peer group. By maintaining an equal balance of the three
primary components, we underscore the importance of all of them.
This supports our overall compensation philosophy and
objectives to reinforce alignment with shareholder
interests, encourage strong financial performance through
aggressive goals and highly leveraged programs, and emphasize
performance-based compensation.
28
Award Targets. The Compensation Committee
reviews, discusses and approves all long-term compensation pay
targets for named executives in June after discussing and
reviewing a comprehensive annual proxy executive compensation
study provided by our external independent consultant. Once the
market median long-term incentive compensation of the peer group
of companies is determined for each named executive officer,
that amount is allocated equally among the three primary
components to establish the award targets for stock options,
performance-based restricted stock, and the long-term
performance plan.
Stock Options. Stock options provide value
only when the price of the stock appreciates over the grant
price. This helps ensure a strong link between our executives
and our shareholders.
As discussed above, stock option grant guidelines are approved
by the Compensation Committee in June following a review of
competitive market data. These guidelines consist of an award
target and a minimum and maximum award range that varies from
50% to 200% of the targeted amount.
At the October Compensation Committee meeting, the Chief
Executive Officer presents the Compensation Committee with his
recommendations for option awards to the named executive
officers. Award recommendations may be at, above or below the
target amounts based on individual performance. The Chief
Executive Officer makes no recommendations to the Compensation
Committee regarding his own award. Based on this information,
and competitive market data provided by the independent
consultant, the Compensation Committee determines and approves
annual stock option awards to the named executive officers.
During the Compensation Committee meetings executive
session (during which neither the Chief Executive Officer nor
any other member of management is present), the Compensation
Committee approves an annual stock option award for the Chief
Executive Officer. All stock option grants have an exercise
price that is equal to the closing market price of our shares on
the date of grant, have a term of ten years and generally vest
in equal increments of 25% each year beginning one year after
the date of grant. Annual stock option awards to named executive
officers are granted on the first business day of our fiscal
third quarter.
For fiscal year 2008, stock option awards were granted at target
amounts to all of the named executive officers with the
exception of Mr. Collins, who was not granted an award.
Stock option awards accounted for approximately 31% of total
compensation for our Chief Executive Officer and approximately
18% to 25% of total compensation for the remaining named
executive officers, excluding Mr. Collins.
Mr. Hawkins 2008 stock option award was granted after
his promotion to Chief Executive Officer, slightly increasing
the proportion of his total compensation represented by the
award.
Performance-Based Restricted
Stock. Performance-based restricted stock is used
to focus executives on a key financial goal, diluted earnings
per share, align executive interests with shareholder interests,
and aid in the attraction and retention of top talent.
As discussed above, performance-based restricted stock grant
targets for named executive officers are approved by the
Compensation Committee in June following a review of our peer
companies. Actual grants are approved by the Compensation
Committee during the October meeting and made at the beginning
of our fiscal third quarter and are equal to the grant targets
(unlike stock options, there is no grant range provided). All
performance-based restricted stock grants are made in the number
of shares equal to the target award amount divided by the
closing market price of our shares on the date of grant, rounded
up to the nearest whole share. Performance-based restricted
stock awards cliff vest 100% three years after the
date of grant if the applicable performance goal is achieved.
The performance goal that must be achieved for the fiscal year
2008 performance-based restricted stock grants to vest is
cumulative diluted earnings per share growth of 9% each year
over three years. Diluted earnings per share is an appropriate
measure of overall financial well being. Performance is measured
over the three consecutive fiscal years beginning with the
fiscal year during which the grant is made. If the performance
goal is achieved, the stock will cliff vest 100% on the third
anniversary of the date of grant. If the performance goal is not
met, none of the awards vest.
29
For fiscal year 2008, performance-based restricted stock awards
were delivered at target grant amounts to all of the named
executive officers with the exception of Mr. Collins, who
was not granted an award. Performance-based restricted stock
awards accounted for approximately 31% of total compensation for
Mr. Hawkins and approximately 18% to 24% of total
compensation for the remaining named executive officers,
excluding Mr. Collins. Mr. Hawkins 2008
performance-based restricted stock award was granted after his
promotion to Chief Executive Officer, slightly increasing the
proportion of his total compensation represented by the award.
Cash-Based Long-Term Performance Plan. Our
objective with our Long-Term Performance Plan (LTPP)
is to maintain the alignment of our named executive
officers goals with our long-term financial performance
goals. We feel this approach focuses our executives on sustained
achievement of financial targets that are critical to our
long-term success.
As discussed above, our LTPP grant targets for named executive
officers are approved annually by the Compensation Committee in
June following a review of our peer groups. Grants are made
annually for overlapping three-year performance periods.
Calculations of final awards are reviewed by the Compensation
Committee each April based on year-end forecasts and confirmed
in June by the Chairman of the Compensation Committee just prior
to payout. For the
2008-2010
phase of the LTPP, no incentives are earned unless two
thresholds of earnings per share and return on net assets are
met. Minimum payouts (at the threshold level of performance) are
20% of the target amount and maximum payouts are 180% of the
target amount. The minimum, target and maximum payouts to our
named executive officers can be found in the Grants of
Plan-Based Awards table on page 41 of this proxy statement.
For the LTPP, performance measure targets are set at or close to
the same level as our long-term financial objectives. Target
payouts for the fiscal year 2008 to fiscal year 2010 period are
based on performance targets with the following ranges: average
growth in diluted earnings per share of 9% to 17% per year over
three years, average revenue growth of 8% to 16% per year over
three years, and average return on net assets of 12% to 20% over
three years. The objectives are weighted 50%, 30%, and 20%,
respectively. In setting our performance measure targets, we
consider a number of items the most important of
which is our strategic plan, which takes into account our
current product lines and our timeline for the approval and
introduction of new products.
Once actual performance over the three-year period has been
determined, the achievement percentage is calculated by
interpolating actual performance relative to the performance
range for each measure. These achievement percentages are then
weighted based on the appropriate plan weightings and summed to
arrive at an overall achievement percent for the plan year.
Actual payouts are determined by multiplying the
executives grant target by the plans overall
achievement percent.
In fiscal year 2008, LTPP awards were granted at target amounts
to all of the named executive officers, with the exception of
Mr. Collins, who was not granted an award. LTPP awards
accounted for approximately 11% of total compensation for our
Chief Executive Officer and approximately 16% to 22% of total
compensation for the remaining named executive officers,
excluding Mr. Collins. Because Mr. Hawkins 2008
LTPP grant was made prior to his promotion to Chief Executive
Officer, it is a relatively small portion of his total
fiscal-year compensation.
Fiscal year 2008 was also the final year of the
3-year
performance period for the fiscal year 2006 through fiscal year
2008 phase of the Performance Share Plan, the predecessor to the
LTPP. This predecessor plan was similar in design to the current
LTPP except the plan was denominated in performance shares and
the payout was 50% in cash and 50% in Medtronic stock.
Performance targets for the fiscal year 2006 to fiscal year 2008
plan were as follows: average growth in diluted earnings per
share of 9% to 17% per year over three years, average revenue
growth of 9% to 17% per year over three years, and average
return on net assets of 12% to 20% over three years. The
objectives were weighted 50%, 30%, and 20%, respectively.
The target value of the cash portion of the 2008 award is
determined by multiplying the participants overall target
award by 50%. The target number of shares is determined by
taking 50% of the participants
30
overall target award and dividing it by the average stock price
for the
20-day
period ending on the first day of the performance period,
rounding up to the nearest whole share. For the 2006 to 2008
Performance Share Plan, the average
20-day stock
price was $51.5745.
For the three-year performance period covered by the fiscal year
2008 Performance Share Plan, the Companys actual average
diluted earnings per share growth was 135% of target and the
actual average return on net assets was 148% of target.
Medtronics average revenue growth over the three-year
performance period was below the minimum performance level,
resulting in an overall achievement percentage of 97.23%.
The payout of the cash portion of the award is calculated as the
product of the target cash award and the plans overall
achievement percentage. Similarly, the number of plan shares
awarded is calculated as the product of the number of target
shares and the plans overall achievement percentage.
The table below provides an overview of the 2006 to 2008
Performance Share Plan, including award targets and cash and
stock award payments is presented below:
|
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|
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|
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|
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|
|
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|
|
|
|
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|
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|
Target Awards
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|
|
Actual Awards
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Overall
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Shares
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|
|
Total Value of
|
|
|
Total Award Value
|
|
Name
|
|
Target
|
|
|
Cash
|
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|
# of Shares
|
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|
|
Cash
|
|
|
Issued
|
|
|
Award(1)
|
|
|
as % of
Target(1)
|
|
William A. Hawkins
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|
$
|
698,250
|
|
|
$
|
349,125
|
|
|
|
6,770
|
|
|
|
$
|
339,454
|
|
|
|
6,583
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|
|
$
|
678,742
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|
|
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97.2
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|
Gary L. Ellis
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356,250
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|
|
|
178,125
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|
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3,454
|
|
|
|
|
173,191
|
|
|
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3,359
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|
|
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346,314
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|
|
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97.2
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|
Michael F. DeMane
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375,000
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187,500
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3,636
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|
|
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182,306
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|
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3,536
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|
|
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364,552
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|
|
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97.2
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Stephen H. Mahle
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429,000
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214,500
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|
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4,160
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|
|
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208,558
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4,045
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|
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417,038
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97.2
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Jean-Luc Butel
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292,875
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146,438
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|
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2,840
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|
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142,381
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|
|
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2,762
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|
|
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284,735
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97.2
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Arthur D. Collins, Jr.
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1,468,750
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734,375
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|
|
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14,240
|
|
|
|
|
714,033
|
|
|
|
13,846
|
|
|
|
1,427,656
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|
|
|
97.2
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|
(1) |
|
Value of the share portion of award calculated based on
Medtronics closing stock price on June 13, 2008, the
date of share issuance. |
The Stock Awards Column in the Summary Compensation Table
includes the share-based compensation expense recognized in
accordance with SFAS 123(R) in fiscal year 2008 as required
under applicable SEC rules, rather that the amounts shown in the
table above.
Time-Based Restricted Stock Units. Grants of
time-based restricted stock units are periodically made to named
executive officers for strategic reasons such as attraction,
promotion, succession planning, special recognition and
retention and must be approved by the Compensation Committee.
While vesting on these awards is generally three- to five-year
cliff vesting, specific circumstances will dictate the terms of
these grants. All time-based restricted stock unit grants are
made at a price equal to the closing market price of our shares
on the date of grant.
As a result of the Companys ongoing reviews of its
retention strategy for its top officers, management recommended
to the Compensation Committee, and the Compensation Committee
approved, the following grant of time-based restricted stock
units:
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|
|
|
|
Face Value of
|
|
|
Number of
|
|
|
Vesting
|
|
|
Name
|
|
Grant
|
|
|
Units
|
|
|
Provisions
|
|
Dividend Treatment
|
|
Jean-Luc Butel
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|
$
|
2,000,013
|
|
|
|
37,786
|
|
|
50% on the third and 50% on the fifth anniversary of grant date
|
|
Receives dividend
credits
|
There were no other grants of time-based restricted stock or
restricted stock units made to the named executive officers
during fiscal year 2008.
Adjustments for
Special Charges
Medtronics performance-based plans require that when
special charges (such as certain litigation, restructuring
charges and in-process research and development charges)
significantly impact operating income, this impact will be
reviewed and evaluated by the Compensation Committee and
potentially
31
excluded in determining financial performance. The plans define
significant as an impact in the general amount of 5% of
the operating income in the year incurred. In addition,
the Company has developed a set of principles to guide treatment
of acquisitions and non-recurring items. Specifically:
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|
Non-recurring charges from acquisitions and other non-recurring
items are generally excluded from the calculation of performance
regardless of whether the impact is greater than or less than 5%
of operating income. This exclusion occurs when the effect is
positive or negative.
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|
Operating results from acquisitions which impact operating
income below the 5% threshold can be included in the calculation
of performance at the discretion of the Compensation Committee.
|
This provision benefits shareholders by allowing management to
make decisions of material strategic importance without undue
concern for impact on compensation. When such adjustments have
been applied, they have had both a positive and negative impact
on past awards.
In accordance with Medtronics policy, for fiscal year 2008
the Compensation Committee excluded a number of items from
Medtronics results for the purposes of calculating
performance on short-term and long-term incentive programs and
the Medtronic Savings and Investment Plan. These items included
non-recurring charges related to restructuring, litigation,
intangible asset impairments and in-process research and
development as reported in the financial tables accompanying
Medtronics press release detailing 2008 fiscal year-end
earnings. The rationale for each adjustment is to encourage
management to make strategic decisions that are in the best
interests of the Company without undue concern for the impact of
those decisions on their compensation. The following table
reconciles the adjustments made in fiscal year 2008 and provides
a brief description of each adjustment:
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Twelve Months Ended
|
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|
|
|
|
April 25, 2008
|
|
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Explanation of Non-Recurring Adjustments
|
|
Diluted EPS, as reported
|
|
$
|
1.95
|
|
|
|
Special charges
|
|
|
0.04
|
|
|
Impairment charges recognized on intangible assets that were
associated with our benign prostatic hyperplasia product line
acquired in fiscal year 2002
|
Restructuring charges
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|
|
0.03
|
|
|
Charges related to restructuring initiated in fiscal year 2007
in our Physio-Control, Cardiac Rhythm Disease Management and
CardioVascular businesses as well as fiscal year 2008 related to
a global realignment initiative
|
Certain litigation charges
|
|
|
0.24
|
|
|
Litigation charges related to settlement of certain lawsuits
relating to the Marquis line of implantable cardioverter
defibrillators and a reserve associated with litigation with
Cordis Corporation
|
In-process research & development charges
|
|
|
0.34
|
|
|
In-process research & development charges representing the
cumulative impact of several acquisitions, a milestone payment
associated with a patent cross-licensing agreement and the
purchase of certain intellectual property
|
Dilution due to Kyphon acquisition
|
|
|
0.08
|
|
|
Pro-forma diluted impact on Medtronics earnings per share
as a result of the Kyphon acquisition
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Non-GAAP diluted EPS
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|
$
|
2.68
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|
The Compensation Committee reviewed and approved the above
adjustments consistent with Medtronics long-standing
principles as outlined above. These adjustments resulted in a
payout of 55.81% under the annual incentive plan (MIP) and
97.23% under the
2006-2008
Performance Share Plan.
32
Other Benefits
and Perquisites
Medtronic provides broad-based benefit plans to all of its
employees, including the named executive officers. These include:
Qualified Retirement Plans. Medtronic sponsors
a number of tax qualified retirement plans for its employees. In
the United States, Medtronic changed its retirement plans
effective May 1, 2005 in order to provide then current
employees and employees hired after that date a choice of
retirement plans in which they wish to participate. Employees
hired prior to May 1, 2005 had the option of continuing in
a defined benefit pension plan (the Medtronic Retirement
Plan) or elect to participate in one of the new plans.
Employees hired after that date choose to participate in either
of the new plans, the Personal Pension Account, or the Personal
Investment Account. The Personal Pension Account is a cash
balance component of the previous defined benefit pension plan
and the Personal Investment Account is a component of the
Companys tax qualified Savings and Investment Plan (the
Companys 401(k) plan). Additional details regarding these
pension plans are provided on page 47 of this proxy
statement.
Supplemental Retirement Plans. Medtronic
offers a Supplemental Executive Retirement Plan benefit. This
plan is a nonqualified plan which is designed to provide all
eligible employees, including the named executive officers, with
benefits which supplement those provided under certain of the
tax qualified plans maintained by Medtronic. The plans are
designed to restore benefits lost under the Personal Pension
Account, Personal Investment Account or the Medtronic Retirement
Plan due to covered compensation limits established by the
Internal Revenue Code. The Plan also restores benefits for
otherwise eligible compensation deferred into the Medtronic,
Inc. Capital Accumulation Plan Deferral Program (the
Capital Accumulation Plan). The Supplemental
Executive Retirement Plan uses the same benefit formula as the
qualified plan and includes the same elements of compensation
included in the qualified plan in addition to compensation
deferred into the Capital Accumulation Plan. As such, the plan
provides employees with no greater benefit than they would have
received under the qualified plan in which they participate were
it not for the covered compensation limits and deferrals into
our Capital Accumulation Plan.
Nonqualified Deferred Compensation
Plan. Medtronic provides all eligible employees,
including our named executive officers, with a market
competitive nonqualified deferred compensation program through
the Capital Accumulation Plan. Our plan allows named executive
officers to make voluntary deferrals from their base pay and
incentive payments. There is no Company contribution other than
a credit of gain/loss related to the investment allocation
choices made by the participants.
Business Allowance and Perquisites. With the
exception of Mr. Butel, who was on an expatriate
assignment, we provide our named executive officers with a
market competitive business allowance rather than perquisites
such as an automobile program, financial and tax planning, and
country club memberships. With the exception of Mr. Butel,
the annual business allowances provided to our named executive
officers in fiscal year 2008 ranged from $24,000 to $40,000. In
addition, we pay up to $2,000 for the cost of an annual
executive physical that exceeds coverage provided by the
executives medical plans. We offer these opportunities to
aid in the attraction and retention of top talent. For named
executive officers on expatriate assignments, rather than
providing a business allowance, we pay for certain housing and
related living costs. These amounts are sometimes a significant
part of an expatriates total compensation. These amounts
are included in the All Other Compensation column of
our summary compensation table.
Change of Control
Agreements
The principal reasons for providing compensation in a change of
control situation are two-fold: (1) to protect the
compensation already earned by executives and to ensure that
they will be treated fairly in the event of a change of control;
and (2) to help ensure the retention and dedicated
attention of key executives critical to the ongoing operation of
the Company. Our change of control provisions support these
principles. We believe that the interests of shareholders will
be best served if the interests of our executive officers are
aligned with them, and providing change of control benefits
should eliminate, or at least reduce, the
33
reluctance of senior management to pursue potential mergers or
transactions that may be in the best interest of shareholders.
For fiscal year 2008, our change of control agreements for our
named executive officers provided the following:
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|
|
Agreement Provision
|
|
Description
|
|
Severance Triggers
|
|
Termination by Medtronic other than for Cause or Disability
Termination by the Executive for Good Reason
|
Severance Benefits
|
|
3X base and bonus
|
|
|
Accrued salary, accrued vacation, annual and long-term
incentives
(pro-rata
payout on incentives)
|
|
|
Continuation of certain insurance, retirement and welfare plan
benefits for a period of time not exceeding three years
|
|
|
Full excise tax gross up, if applicable. However, amounts
payable under the agreement may be reduced in certain
circumstances if the reduction would avoid the imposition of the
excise tax and therefore the need for a gross up.
|
Our change of control agreements are discussed in more detail in
the Potential Payments Upon Termination or Change of
Control section below. Other than the agreement with
Mr. DeMane that is described on page 51 of this proxy
statement, we do not have employment contracts other than those
associated with a change of control.
Policies
Regarding Equity Holding, Sale and Transfer of Awards and
Incentive Compensation Forfeiture
Equity Holding. The Compensation Committee has
approved the implementation of stock retention requirements. The
Chief Executive Officer must retain, for a period of three
years, 75% of the net after-tax profit shares realized from
option exercises and 75% of the net gain shares relating to
share issuances resulting from grants made on or after
April 26, 2003. Other named executive officers must retain,
for a period of three years, 50% of the net after-tax profit
shares realized from option exercises or 50% of the net gain
shares relating to share issuances resulting from grants made on
or after April 26, 2003. For stock options, net after-tax
profit shares are those shares remaining after payment of the
options exercise price and applicable taxes. For share
issuances, net gain shares are those shares remaining after
payment of income taxes. Shares retained may be sold after three
years. The retention requirements were established at a higher
level for the Chief Executive Officer as a reflection of the
increased scope of decision-making inherent in this position and
to maintain increased alignment with long-term Company
performance. In the case of retirement or termination, the
shares may be sold after the shorter of the remaining retention
period or one year following retirement/termination.
Modified stock retention guidelines apply to shares awarded to
Mr. DeMane in fiscal year 2007 because he was a Swiss-based
executive at this time. The modified guidelines allow
Mr. DeMane to satisfy holding requirements by demonstrating
ownership of an equivalent number of shares rather than holding
shares from specific awards, which due to Swiss tax regulations
would result in severe tax consequences.
As of April 25, 2008, all executive officers were in
compliance with the stock retention requirements.
Sale and Transfer of Awards. All stock option,
restricted stock, restricted stock unit and performance-based
restricted stock/restricted stock unit awards are granted under
the Medtronic, Inc., 2003 Long-Term Incentive Plan. This plan
specifically prohibits the sale, assignment and transfer of
awards granted under the plan with limited exceptions such as
the death of the award recipient. In addition, the Compensation
Committee of the Board of Directors may allow an award holder to
assign or transfer an award. Medtronic does have outstanding
stock option awards granted under prior long-term incentive
plans whose terms did allow awards to be transferred, however
these plans are no longer available for new grants.
34
Incentive Compensation Forfeiture. Medtronic
has a comprehensive Incentive Compensation Forfeiture Policy,
which is designed to recoup improper payments or gains paid to
executive officers. If the Board determines that any executive
officer has received an improper payment or gain, which is an
incentive payment or grant paid or awarded to the executive
officer due to misconduct, the executive officer must return the
improper payment or gain to the extent it would not have been
paid or awarded had the misconduct had not occurred, including
interest on any cash payments. Misconduct means any
material violation of the Medtronic, Inc. Code of Conduct or
other fraudulent or illegal activity for which an executive
officer is personally responsible, as determined by the Board.
All executive officers are required to agree to this policy in
writing.
Tax and
Accounting Implications
The Compensation Committee structures all compensation to be
compliant with the $1 million deduction limitation of
Section 162(m) of the Internal Revenue Code, which limits
the amount of remuneration that Medtronic may deduct for our
Chief Executive Officer and the three other highest-paid named
executive officers, unless the Compensation Committee determines
that compliance in a specific situation would not be in the best
interests of Medtronic and its shareholders. In addition, the
Compensation Committee structures all deferred compensation
within the meaning of Section 409A of the Internal Revenue
Code such that all named executive officers are not subject to
the excise tax under Section 409A.
In light of the adoption by Medtronic of
SFAS No. 123(R), Medtronic realigned its equity grant
practices from an over reliance on stock options to a more
balanced program. Consequently, the Compensation Committee now
grants fewer stock options and more performance-based awards in
the form of performance-based restricted stock and awards under
the LTPP, which focuses our named executive officers not only on
the performance of the stock, but also on specific performance
measures that are critical to the long-term success of the
business.
Medtronic Stock
Grant Policy and Practice
All employee stock awards, which include restricted stock
grants, restricted stock units and stock options, are approved
either by the Compensation Committee of the Board or the
internal stock committee (the ISC). In order to
mitigate the effect on share dilution resulting from grants made
under our stock-based compensation programs and to take
advantage of favorable market conditions, we periodically
repurchase shares of Medtronic stock. The Compensation Committee
approves all stock awards to its executive officers as well as
all awards which cannot be delegated to the ISC due to the size
of the award. The ISC, which includes the Chief Executive
Officer and the Senior Vice President, Chief Talent Officer,
approves all other stock awards.
It is Medtronics policy to make stock and option grants on
the first business day of each fiscal quarter for all grants
approved by the Compensation Committee or the ISC during the
preceding quarter. This policy was effective beginning in fiscal
year 2007. Prior to adopting the current policy, stock grants
were effective on the date of approval or, in certain cases, on
a future effective date that was specifically identified in the
resolutions at the time of approval.
The fair market value or exercise price on all Medtronic stock
awards is established in the Medtronic, Inc. 2003 Long-Term
Incentive Plan as the closing sale price of shares on the New
York Stock Exchange on the date of grant. Medtronic has priced
stock awards consistent with the plan and no backdating of stock
options has occurred.
35
COMPENSATION
COMMITTEE REPORT
The Compensation Committee of the Company has reviewed and
discussed the section of this proxy statement entitled
Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K
with management. Based on such review and discussions, the
Compensation Committee recommended to the Board that the section
entitled Compensation Discussion and Analysis be
included in this proxy statement.
COMPENSATION COMMITTEE:
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Richard H. Anderson, Chair
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Victor J. Dzau, M.D.
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Kendall J. Powell
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James T. Lenehan
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Jack W. Schuler
|
36
EXECUTIVE
COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes all compensation for each of the
last two fiscal years awarded to, earned by or paid to the
Companys Chief Executive Officer, Chief Financial Officer
and three other most highly compensated executive officers
during fiscal year 2008, and Arthur D. Collins, Jr., who
completed his tenure as Chief Executive Officer at the beginning
of fiscal year 2008 (collectively, the named executive
officers). You should refer to the section entitled
Compensation Discussion and Analysis beginning on
page 22 of this proxy statement to understand the elements
used in setting the compensation for our named executive
officers. A narrative description of the material factors
necessary to understand the information in the table is provided
below.
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Change in
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Pension
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Value and
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Nonqualified
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Non-Equity
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Deferred
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Name and Principal
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Fiscal
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Position(1)
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Year
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Salary(2)
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Arthur D. Collins, Jr.
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2008
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$
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1,092,000
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$
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3,622,613
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$
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1,663,196
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$
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987,656
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$
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202,695
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$
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23,414
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$
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7,591,574
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Chairman
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2007
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1,275,000
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2,322,420
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5,985,461
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1,020,000
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849,071
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48,678
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11,500,630
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William A. Hawkins
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2008
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996,000
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1,465,793
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1,053,074
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971,749
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116,260
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46,010
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4,648,886
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President and Chief
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2007
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775,000
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1,726,476
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1,261,157
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490,963
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119,907
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38,809
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4,412,312
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Executive Officer
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Gary L. Ellis
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2008
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600,000
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693,968
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435,190
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424,336
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73,011
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32,910
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2,259,415
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Senior Vice President
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2007
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525,000
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462,861
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534,401
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295,313
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167,499
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33,184
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2,018,258
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and Chief Financial Officer
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Michael F.
DeMane(3)
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2008
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671,000
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1,062,106
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629,486
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518,232
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57,813
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304,104
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3,242,741
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2007
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530,000
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1,680,638
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878,660
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529,470
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92,371
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812,027
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4,523,166
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Stephen H. Mahle
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2008
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620,000
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1,054,664
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1,191,902
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485,376
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72,483
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33,935
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3,458,360
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Executive Vice
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2007
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595,000
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880,465
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1,645,264
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219,793
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562,898
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33,290
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3,936,710
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President of Healthcare Policy and Regulatory
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Jean-Luc Butel
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2008
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440,000
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869,868
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354,619
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|
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384,038
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37,855
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1,060,069
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3,146,449
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Senior Vice President and President, International
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(1) |
|
At the 2007 Annual Meeting, Mr. Collins resigned as Chief
Executive Officer of Medtronic, Mr. Hawkins was named
President and Chief Executive Officer of Medtronic and
Mr. DeMane was named Chief Operating Officer of Medtronic.
Mr. Butel was not a named executive officer during 2007. |
|
(2) |
|
At the beginning of fiscal year 2008, Mr. Collins
base pay in his role as Chief Executive Officer was $1,275,000.
Upon stepping down as Chief Executive Officer and assuming the
position of Chairman of the Board of Directors,
Mr. Collins base salary was reduced by 22% to
$1,000,000. The fiscal year 2008 salaries for Mr. Hawkins
and Mr. DeMane reflect mid-year promotions to Chief
Executive Officer and Chief Operation Officer, respectively.
Mr. Hawkins received an annual salary increase of 4.0% at
the beginning of fiscal year 2008, bringing his salary to
$806,000. Upon his promotion to Chief Executive Officer,
Mr. Hawkins salary was increased to $1,100,000.
Mr. DeMane received an annual salary increase of 5.1% at
the beginning of fiscal year 2008, bringing his salary to
$557,000. Upon his promotion to Chief Operating Officer,
Mr. DeManes salary was increased to $725,000. |
|
(3) |
|
Mr. DeMane resigned as Senior Vice President and Chief
Operating Officer effective April 30, 2008, but is
currently a Medtronic employee. |
Salary. The salary column represents the base
salary earned by the named executive officer during fiscal year
2008. This column includes any amounts that the officer may have
deferred under the Capital Accumulation Plan, which is included
in the nonqualified deferred compensation table on page 48
of this
37
proxy statement. Each of the named executive officers also
contributed a portion of his salary to the Medtronic, Inc.
Savings and Investment Plan.
Stock Awards. The stock awards column
represents the dollar amount of share-based compensation expense
recognized in fiscal year 2008 for restricted stock and
restricted stock units (including performance-based restricted
stock and performance-based restricted stock units)
(collectively, the restricted stock awards) granted
to each of the named executive officers and share-based
compensation recognized in fiscal year 2008 relating to the
equity-based portions of our LTPP (formerly our Performance
Share Plan), which includes long-term incentive compensation for
the fiscal year 2006 to fiscal year 2008 and fiscal year 2007 to
fiscal year 2009 periods. This column also includes compensation
expense recognized in fiscal year 2008 for financial statement
reporting purposes in accordance with SFAS No. 123(R)
relating to the amendment of a restricted stock agreement
originally awarded to Mr. Collins on October 30, 2006.
Under the terms of the original award, Mr. Collins was
granted 184,805 shares of performance-based restricted
stock under our 2003 Long-Term Incentive Plan. The restrictions
on the award lapse on the third anniversary of the grant date if
Medtronics cumulative diluted earnings per share growth of
9% each year over three years is achieved.
Mr. Collins October 2005 and 2004 grants provide that
in the circumstance of death, disability or retirement, the
restrictions lapse in their entirety. To clarify its intention
that the October 2006 grant was to have been on terms consistent
with the terms of the prior grants, in October 2007 the
Compensation Committee amended the terms of the October 2006
grant to provide that in the circumstance of death, disability
or retirement, the restrictions lapse in their entirety provided
the performance goal is also achieved at the end of the
three-year period. The expense recognized for restricted stock
awards is equal to the grant date fair value, which is equal to
the closing stock price on the date of grant and expensed over
the vesting period.
Option Awards. The option awards column
represents the dollar amount of share-based compensation expense
recognized in fiscal year 2008 for stock option awards granted
to each of the named executive officers for financial statement
reporting purposes in accordance with SFAS No. 123(R).
The following table provides the fair value of options granted
to the named executive officers for expense recognized in fiscal
years 2007
and/or 2008
and the related assumptions used in the Black-Scholes model:
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Grant Date
|
|
|
|
October 24,
|
|
|
August 28,
|
|
|
October 23,
|
|
|
October 21,
|
|
|
October 19,
|
|
|
October 30,
|
|
|
October 29,
|
|
|
|
2002
|
|
|
2003
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
Fair value of options granted
|
|
$
|
12.27
|
|
|
$
|
11.87
|
|
|
$
|
11.87
|
|
|
$
|
11.99
|
|
|
$
|
16.35
|
|
|
$
|
12.25
|
|
|
$
|
13.80
|
|
Assumption used:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk free
rate(1)
|
|
|
2.73
|
%
|
|
|
3.27
|
%
|
|
|
3.14
|
%
|
|
|
3.28
|
%
|
|
|
4.32
|
%
|
|
|
4.63
|
%
|
|
|
4.11
|
%
|
Expected
volatility(2)
|
|
|
26.3
|
%
|
|
|
23.9
|
%
|
|
|
23.9
|
%
|
|
|
21.8
|
%
|
|
|
25.0
|
%
|
|
|
20.0
|
%
|
|
|
22.96
|
%
|
Expected
life(3)
|
|
|
5.00 yrs
|
|
|
|
5.00 yrs
|
|
|
|
5.00 yrs
|
|
|
|
5.00 yrs
|
|
|
|
5.17 yrs
|
|
|
|
5.17 yrs
|
|
|
|
6.50 yrs
|
|
Dividend
yield(4)
|
|
|
0.56
|
%
|
|
|
0.59
|
%
|
|
|
0.63
|
%
|
|
|
0.67
|
%
|
|
|
0.70
|
%
|
|
|
0.90
|
%
|
|
|
1.05
|
%
|
|
|
|
(1) |
|
The risk-free rate is based on the grant date yield of a
zero-coupon U.S. Treasury bond whose maturity period equals or
approximates the options expected term. |
|
(2) |
|
Beginning in the third quarter of fiscal year 2007, the expected
volatility is based on a blend of historical volatility and an
implied volatility of the Companys common stock. Implied
volatility is based on market traded options of the
Companys common stock. Prior to the third quarter of
fiscal year 2007, the Company calculated the expected volatility
based exclusively on the historical volatility. |
|
(3) |
|
The Company analyzes historical employee stock option exercise
and termination data to estimate the expected life assumption.
Beginning in the third quarter of fiscal year 2008, the Company
began to calculate the expected life assumption using the
midpoint scenario, which combines historical exercise data with
hypothetical exercise data, as the Company believes this data
currently represents the best estimate of the expected life of a
new employee option. Prior to the third quarter of fiscal year
2008, the Company calculated the expected life based solely on
historical data. |
|
(4) |
|
The dividend yield rate is calculated by dividing the
Companys annual dividend, based on the most recent
quarterly dividend rate, by the closing stock price on the grant
date. |
38
Non-Equity Incentive Plan Compensation. This
column reflects the full Medtronic annual incentive plan cash
payment earned by the named executive officers during fiscal
year 2008 and payable in June 2008 and the cash portion of the
2006-2008
Performance Share Plan payable in June 2008. This column
includes any amounts that the officer may have deferred under
the Capital Accumulation Plan. These deferrals are not included
in the nonqualified deferred compensation table on page 48
of this proxy statement because the payment was made after the
end of fiscal year 2008. The table below reflects the
compensation received by the named executive officer under each
plan.
|
|
|
|
|
|
|
|
|
|
|
Executive Medtronic
|
|
|
2006-2008 Performance
|
|
Name
|
|
Incentive Plan
|
|
|
Share Plan
|
|
|
Arthur D. Collins, Jr.
|
|
$
|
273,623
|
|
|
$
|
714,033
|
|
William A. Hawkins
|
|
|
632,295
|
|
|
|
339,454
|
|
Gary L. Ellis
|
|
|
251,145
|
|
|
|
173,191
|
|
Michael F. DeMane
|
|
|
335,926
|
|
|
|
182,306
|
|
Stephen H. Mahle
|
|
|
276,818
|
|
|
|
208,558
|
|
Jean-Luc Butel
|
|
|
241,657
|
|
|
|
142,381
|
|
Change in Pension Value and Nonqualified Deferred
Compensation Earnings. This column includes the
estimated aggregate increase in the accrued pension benefit
under Medtronics defined benefit pension plan. The change
in the present value of the accrued value is impacted by
variables such as additional years of service, age and the
discount rate used to calculate the present value of the change.
The Company changed its discount rate in valuing pension
liabilities from 6.0% in fiscal year 2007 to 6.75% for the
fiscal year 2008 plan year. The higher discount rate used to
determine the change in pension value contributed to a
significant decrease in the change in pension value from fiscal
year 2007 to fiscal year 2008 in comparison with the change in
pension value from fiscal year 2006 to fiscal year 2007.
Assumptions are described in Note 13 to our consolidated
financial statements in our annual report for fiscal year 2008
accompanying this proxy statement.
Also included for fiscal year 2007 is $1,473 in above-market
earnings on Mr. Mahles deferred compensation earnings.
All Other Compensation. The all other
compensation column includes the following:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions to
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites and
|
|
|
Defined
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Other Personal
|
|
|
Contribution
|
|
|
Expatriate
|
|
|
|
|
Name
|
|
Year
|
|
|
Benefits(1)
|
|
|
Plans(2)
|
|
|
Expenses(3)
|
|
|
Total
|
|
|
Arthur D. Collins, Jr.
|
|
|
2008
|
|
|
$
|
14,504
|
|
|
$
|
8,910
|
|
|
$
|
|
|
|
$
|
23,414
|
|
|
|
|
2007
|
|
|
|
40,098
|
|
|
|
8,580
|
|
|
|
|
|
|
|
48,678
|
|
William A. Hawkins
|
|
|
2008
|
|
|
|
37,100
|
|
|
|
8,910
|
|
|
|
|
|
|
|
46,010
|
|
|
|
|
2007
|
|
|
|
30,229
|
|
|
|
8,580
|
|
|
|
|
|
|
|
38,809
|
|
Gary L. Ellis
|
|
|
2008
|
|
|
|
24,000
|
|
|
|
8,910
|
|
|
|
|
|
|
|
32,910
|
|
|
|
|
2007
|
|
|
|
24,604
|
|
|
|
8,580
|
|
|
|
|
|
|
|
33,184
|
|
Michael F. DeMane
|
|
|
2008
|
|
|
|
24,000
|
|
|
|
8,910
|
|
|
|
271,194
|
|
|
|
304,104
|
|
|
|
|
2007
|
|
|
|
97
|
|
|
|
8,580
|
|
|
|
803,350
|
|
|
|
812,027
|
|
Stephen H. Mahle
|
|
|
2008
|
|
|
|
25,025
|
|
|
|
8,910
|
|
|
|
|
|
|
|
33,935
|
|
|
|
|
2007
|
|
|
|
24,710
|
|
|
|
8,580
|
|
|
|
|
|
|
|
33,290
|
|
Jean-Luc Butel
|
|
|
2008
|
|
|
|
|
|
|
|
8,910
|
|
|
|
1,051,159
|
|
|
|
1,060,069
|
|
|
|
|
(1) |
|
The aggregate value of perquisites and other personal benefits
for Mr. Collins in fiscal year 2008 was $14,504. This
amount reflects a business allowance, paid in lieu of
perquisites, of $40,000, which was prorated to reflect the time
in fiscal year 2008 in which Mr. Collins served as the
Chief Executive Officer. The aggregate value of perquisites and
other personal benefits for Mr. Hawkins was $37,100, which
reflects a business allowance paid in lieu of perquisites as
well as a gift received upon his promotion to Chief Executive
Officer. The aggregate value of perquisites and other personal
benefits for Mr. Ellis and Mr. DeMane was $24,000,
which reflects a business allowance paid in lieu of perquisites.
The aggregate value of perquisites and other personal benefits
for Mr. Mahle was $25,025, which reflects a |
39
|
|
|
|
|
business allowance paid in lieu of perquisites, as well as
reimbursement for an annual physical examination. Amounts for
fiscal 2007 were reported in the Companys 2007 Proxy
Statement. |
|
(2) |
|
This amount reflects the contribution by Medtronic to match
named executive officer contributions to their Medtronic 401(k)
supplemental retirement plan. Medtronic matches employee
contributions of up to 6% of eligible compensation. The plan
makes a minimum contribution of $.50 and a maximum of $1.50,
with any contribution over the minimum determined based on
earnings per share performance target levels. The fiscal year
2008 match of $.66 was based on achievement of an adjusted
diluted earnings per share of $2.68. |
|
(3) |
|
For fiscal year 2008, of the $271,194 relating to
Mr. DeManes expatriate assignment in Europe, $44,989
was in the form of home purchase assistance and $51,094 was for
shipping expenses related to his repatriation. Additional
categories of expatriation expense are a cost of living
differential, an automobile allowance, family educational
expense, host housing allowance, payments for storage,
repatriation expense and miscellaneous assignment-related
expenses. All incremental costs were calculated by reference to
the actual amount paid by Medtronic for fiscal year 2008.
Medtronic paid Mr. DeMane portions of his compensation in
Swiss Francs, which was converted based on published market
exchange rates as determined on a quarterly basis. For fiscal
year 2008, of the $1,051,159 relating to Mr. Butels
expatriate assignment in Japan, $475,108 was for foreign-income
tax payments, $247,648 was in the form of a host housing
allowance and $123,444 was in the form of an automobile
allowance. Additional categories of expatriation expense are a
cost of living differential, payments for home leave and a
family allowance, family educational expense, financial planning
payments and miscellaneous assignment-related expenses. Amounts
for fiscal year 2007 for Mr. DeMane were reported in the
Companys 2007 Proxy Statement. Medtronic pays
Mr. Butel portions of his compensation in Japanese Yen,
which is converted based on published market exchange rates as
determined on a quarterly basis. |
40
GRANTS OF
PLAN-BASED AWARDS
The following table summarizes all plan-based award grants to
each of the named executive officers during fiscal year 2008.
You should refer to the Compensation Discussion and Analysis
sections entitled Annual Performance-Based
Incentives on page 26 and Long-Term
Compensation beginning on page 28 to understand how
plan-based awards are determined. A narrative description of the
material factors necessary to understand the information in the
table is provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
|
|
|
Under Non-Equity
|
|
|
|
Award
|
|
Incentive Plan Awards
|
|
Name
|
|
Type
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Arthur D. Collins,
Jr.(1)
|
|
MIP
|
|
$
|
245,138
|
|
|
$
|
490,277
|
|
|
$
|
1,078,609
|
|
|
|
LTPP
|
|
|
|
|
|
|
|
|
|
|
|
|
William A.
Hawkins(2)
|
|
MIP
|
|
|
566,471
|
|
|
|
1,132,943
|
|
|
|
2,492,474
|
|
|
|
LTPP
|
|
|
180,000
|
|
|
|
900,000
|
|
|
|
1,620,000
|
|
Gary L. Ellis
|
|
MIP
|
|
|
225,000
|
|
|
|
450,000
|
|
|
|
990,000
|
|
|
|
LTPP
|
|
|
110,000
|
|
|
|
550,000
|
|
|
|
990,000
|
|
Michael F.
DeMane(2)
|
|
MIP
|
|
|
300,955
|
|
|
|
601,910
|
|
|
|
1,324,203
|
|
|
|
LTPP
|
|
|
120,000
|
|
|
|
600,000
|
|
|
|
1,080,000
|
|
Stephen H. Mahle
|
|
MIP
|
|
|
248,000
|
|
|
|
496,000
|
|
|
|
1,091,200
|
|
|
|
LTPP
|
|
|
150,000
|
|
|
|
750,000
|
|
|
|
1,350,000
|
|
Jean-Luc Butel
|
|
MIP
|
|
|
154,000
|
|
|
|
308,000
|
|
|
|
683,760
|
|
|
|
LTPP
|
|
|
60,000
|
|
|
|
300,000
|
|
|
|
540,000
|
|
|
|
|
(1) |
|
Reflects pro-rata MIP performance target based on the time in
fiscal year 2008 in which Mr. Collins served as the Chief
Executive Officer. |
|
(2) |
|
Reflects pro-rata MIP performance target due to mid-year
promotion. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
|
|
|
Stock
|
|
|
Option
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payouts
|
|
|
Awards:
|
|
|
Awards:
|
|
|
or Base
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
Under Equity
|
|
|
Number of
|
|
|
Number of
|
|
|
Price of
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
Shares of
|
|
|
Securities
|
|
|
Option
|
|
|
of Stock
|
|
|
|
Award
|
|
Grant
|
|
|
Approve
|
|
|
Awards
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Awards
|
|
|
and Option
|
|
Name
|
|
Type
|
|
Date
|
|
|
Date
|
|
|
Target (#)
|
|
|
Units (#)
|
|
|
Options (#)
|
|
|
($/Sh)
|
|
|
Awards
|
|
|
Arthur D. Collins, Jr.
|
|
OPT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PBRSA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William A. Hawkins
|
|
OPT
|
|
|
10/29/07
|
|
|
|
10/17/07
|
|
|
|
|
|
|
|
|
|
|
|
188,403
|
|
|
|
47.77
|
|
|
|
2,599,961
|
|
|
|
PBRSA
|
|
|
10/29/07
|
|
|
|
10/17/07
|
|
|
|
52,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500,043
|
|
Gary L. Ellis
|
|
OPT
|
|
|
10/29/07
|
|
|
|
10/17/07
|
|
|
|
|
|
|
|
|
|
|
|
41,868
|
|
|
|
47.77
|
|
|
|
577,778
|
|
|
|
PBRSA
|
|
|
10/29/07
|
|
|
|
10/17/07
|
|
|
|
11,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
550,024
|
|
Michael F. DeMane
|
|
OPT
|
|
|
10/29/07
|
|
|
|
10/17/07
|
|
|
|
|
|
|
|
|
|
|
|
69,082
|
|
|
|
47.77
|
|
|
|
953,332
|
|
|
|
PBRSA
|
|
|
10/29/07
|
|
|
|
10/17/07
|
|
|
|
18,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
900,035
|
|
Stephen H. Mahle
|
|
OPT
|
|
|
10/29/07
|
|
|
|
10/17/07
|
|
|
|
|
|
|
|
|
|
|
|
56,521
|
|
|
|
47.77
|
|
|
|
779,990
|
|
|
|
PBRSA
|
|
|
10/29/07
|
|
|
|
10/17/07
|
|
|
|
15,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750,037
|
|
Jean-Luc Butel
|
|
OPT
|
|
|
10/29/07
|
|
|
|
10/17/07
|
|
|
|
|
|
|
|
|
|
|
|
23,028
|
|
|
|
47.77
|
|
|
|
317,786
|
|
|
|
PBRSA
|
|
|
10/29/07
|
|
|
|
10/17/07
|
|
|
|
6,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,043
|
|
|
|
RSU
|
|
|
04/30/07
|
|
|
|
04/18/07
|
|
|
|
|
|
|
|
37,786
|
|
|
|
|
|
|
|
|
|
|
|
2,000,013
|
|
MIP = Annual performance-based plan award granted under the
Medtronic, Inc. Executive Incentive Plan
LTPP = Long-term performance plan award granted under the
Medtronic, Inc. 2003 Long-Term Incentive Plan
OPT = Nonqualified stock options granted under the Medtronic,
Inc. 2003 Long-Term Incentive Plan
PBRSA = Performance-based restricted stock granted under the
Medtronic, Inc. 2003 Long-Term Incentive Plan
RSU = Restricted stock units granted under the Medtronic, Inc.
2003 Long-Term Incentive Plan
41
Estimated Future Payouts Under Non-Equity Incentive Plan
Awards. Amounts in these columns represent future
cash payments under the
2007-2009
LTPP and cash payments made in June 2008 under the annual
performance-based plan for fiscal year 2008 at threshold, target
and maximum performance. The LTPP provides for annual grants
that are earned over a three-year period. Upon meeting a minimum
performance threshold, awards under the LTPP can range from 20%
to 180% of the original grant based on company performance
relative to the following metrics: three-year cumulative diluted
earnings per share, three-year average annual revenue growth and
three-year average after-tax return on net assets. Similarly,
the MIP provides for annual grants based upon meeting a minimum
performance threshold. Awards under the MIP can range from 50%
to 225% of the original determination based on both company
performance relative to diluted earnings per share, average
annual revenue growth and average after-tax return on net assets
in fiscal year 2008. The maximum award under the Plan is
$3,000,000.
Estimated Future Payouts Under Equity Incentive Plan
Awards. Amounts in this column represent grants
of performance-based restricted stock, all of which have an
October 29, 2007 grant date. Performance-based restricted
stock grants vest 100% on the third anniversary of the date of
grant assuming that Medtronic achieves a minimum three-year
cumulative diluted earnings per share threshold.
All Other Stock Awards. Amounts in the all
other stock awards column represents grants of restricted stock
or restricted stock units.
All Other Option Awards/Exercise or Base Price of Option
Awards. The exercise or base price of all option
awards is the closing market price of Medtronic common stock on
the date of grant. Option awards vest 25% on each anniversary of
the date of grant over a four year period.
Grant Date Fair Value of Stock and Option
Awards. This column represents the grant date
fair value of each equity award granted in fiscal year 2008
computed in accordance with SFAS No. 123(R). For a
discussion of the assumptions used in calculating the amount
recognized for stock options granted on October 29, 2007,
see page 38 of this Proxy Statement. The expense recognized
for restricted stock awards is equal to the grant date fair
value, which is equal to the closing stock price on the date of
grant and is expensed over the vesting period.
42
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR END
The table below reflects all outstanding equity awards made to
each of the named executive officers that are outstanding at the
end of fiscal year 2008. The market or payout value of unearned
shares, units or other rights that have not vested equals
$49.42, which was the closing price of Medtronics common
stock on the New York Stock Exchange on April 25, 2008, and
for performance-based restricted stock and for Performance Share
Plan awards presumes that the target performance goals are met.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
Option Awards
|
|
|
|
|
|
|
|
|
Unearned Shares,
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units or Other
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rights That Have
|
|
|
|
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not Vested
|
|
|
|
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
|
|
|
Shares or Units of Stock That Have Not Vested
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
Options (#)
|
|
|
Exercise
|
|
|
Option
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
or Payout
|
|
|
|
Option
|
|
|
Exer-
|
|
|
Unexer-
|
|
|
Price
|
|
|
Expiration
|
|
|
Grant
|
|
|
Number
|
|
|
Value
|
|
|
Number
|
|
|
Value
|
|
Name
|
|
Grant Date
|
|
|
cisable
|
|
|
cisable
|
|
|
($)
|
|
|
Date
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Arthur D.
Collins, Jr.
|
|
|
10/28/1998
|
|
|
|
70,520
|
|
|
|
|
|
|
|
31.91
|
|
|
|
10/28/2008
|
|
|
|
10/23/2003
|
|
|
|
43,469
|
|
|
|
2,148,238
|
|
|
|
|
|
|
|
|
|
|
|
|
04/28/1999
|
|
|
|
10,656
|
|
|
|
|
|
|
|
37.59
|
|
|
|
04/28/2009
|
|
|
|
10/21/2004
|
|
|
|
40,000
|
|
|
|
1,976,800
|
|
|
|
|
|
|
|
|
|
|
|
|
05/01/1999
|
|
|
|
99,204
|
|
|
|
|
|
|
|
35.97
|
|
|
|
05/01/2009
|
|
|
|
10/19/2005
|
|
|
|
35,249
|
|
|
|
1,742,006
|
|
|
|
|
|
|
|
|
|
|
|
|
10/27/1999
|
|
|
|
120,755
|
|
|
|
|
|
|
|
33.13
|
|
|
|
10/27/2009
|
|
|
|
10/30/2006
|
|
|
|
|
|
|
|
|
|
|
|
51,335
|
|
|
|
2,536,976
|
|
|
|
|
04/30/2000
|
|
|
|
100,658
|
|
|
|
|
|
|
|
51.94
|
|
|
|
04/30/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/26/2000
|
|
|
|
116,223
|
|
|
|
|
|
|
|
51.63
|
|
|
|
10/26/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/27/2001
|
|
|
|
61,589
|
|
|
|
|
|
|
|
44.25
|
|
|
|
04/27/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/25/2001
|
|
|
|
298,851
|
|
|
|
|
|
|
|
43.50
|
|
|
|
10/25/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/26/2002
|
|
|
|
27,821
|
|
|
|
|
|
|
|
43.81
|
|
|
|
04/26/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/24/2002
|
|
|
|
289,726
|
|
|
|
|
|
|
|
44.87
|
|
|
|
10/24/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/25/2003
|
|
|
|
34,098
|
|
|
|
|
|
|
|
48.08
|
|
|
|
04/25/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/23/2003
|
|
|
|
282,548
|
|
|
|
|
|
|
|
46.01
|
|
|
|
10/23/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/30/2004
|
|
|
|
42,927
|
|
|
|
|
|
|
|
50.46
|
|
|
|
04/30/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/21/2004
|
|
|
|
195,000
|
|
|
|
65,000
|
|
|
|
50.00
|
|
|
|
10/21/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/2005
|
|
|
|
114,558
|
|
|
|
114,558
|
|
|
|
56.74
|
|
|
|
10/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
16,201
|
|
|
|
138,604
|
|
|
|
48.70
|
|
|
|
10/30/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William A. Hawkins
|
|
|
01/07/2002
|
|
|
|
82,305
|
|
|
|
|
|
|
|
48.60
|
|
|
|
01/07/2012
|
|
|
|
05/15/2006
|
|
|
|
40,775
|
|
|
|
2,015,101
|
|
|
|
|
|
|
|
|
|
|
|
|
01/07/2002
|
|
|
|
36,214
|
|
|
|
|
|
|
|
48.60
|
|
|
|
01/07/2012
|
|
|
|
10/30/2006
|
|
|
|
|
|
|
|
|
|
|
|
18,481
|
|
|
|
913,331
|
|
|
|
|
10/24/2002
|
|
|
|
49,031
|
|
|
|
|
|
|
|
44.87
|
|
|
|
10/24/2012
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
52,335
|
|
|
|
2,586,396
|
|
|
|
|
10/23/2003
|
|
|
|
65,204
|
|
|
|
|
|
|
|
46.01
|
|
|
|
10/23/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/21/2004
|
|
|
|
75,000
|
|
|
|
25,000
|
|
|
|
50.00
|
|
|
|
10/21/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/29/2005
|
|
|
|
7,591
|
|
|
|
|
|
|
|
52.70
|
|
|
|
04/29/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/29/2005
|
|
|
|
5,462
|
|
|
|
|
|
|
|
52.70
|
|
|
|
04/29/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/2005
|
|
|
|
37,892
|
|
|
|
37,893
|
|
|
|
56.74
|
|
|
|
10/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
16,940
|
|
|
|
50,822
|
|
|
|
48.70
|
|
|
|
10/30/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
188,403
|
|
|
|
47.77
|
|
|
|
10/29/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary L. Ellis
|
|
|
10/28/1998
|
|
|
|
12,538
|
|
|
|
|
|
|
|
31.91
|
|
|
|
10/28/2008
|
|
|
|
6/24/2005
|
|
|
|
9,485
|
|
|
|
468,749
|
|
|
|
|
|
|
|
|
|
|
|
|
4/28/1999
|
|
|
|
2,618
|
|
|
|
|
|
|
|
37.59
|
|
|
|
4/28/2009
|
|
|
|
7/31/2006
|
|
|
|
19,795
|
|
|
|
978,269
|
|
|
|
|
|
|
|
|
|
|
|
|
5/1/1999
|
|
|
|
13,328
|
|
|
|
|
|
|
|
35.97
|
|
|
|
5/1/2009
|
|
|
|
10/30/2006
|
|
|
|
|
|
|
|
|
|
|
|
11,294
|
|
|
|
558,149
|
|
|
|
|
10/27/1999
|
|
|
|
19,623
|
|
|
|
|
|
|
|
33.13
|
|
|
|
10/27/2009
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
11,514
|
|
|
|
569,022
|
|
|
|
|
4/30/2000
|
|
|
|
23,590
|
|
|
|
|
|
|
|
51.94
|
|
|
|
4/30/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/26/2000
|
|
|
|
17,434
|
|
|
|
|
|
|
|
51.63
|
|
|
|
10/26/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/27/2001
|
|
|
|
15,579
|
|
|
|
|
|
|
|
44.25
|
|
|
|
4/27/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/25/2001
|
|
|
|
32,184
|
|
|
|
|
|
|
|
43.50
|
|
|
|
10/25/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/26/2002
|
|
|
|
5,257
|
|
|
|
|
|
|
|
43.81
|
|
|
|
4/26/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/24/2002
|
|
|
|
33,430
|
|
|
|
|
|
|
|
44.87
|
|
|
|
10/24/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/25/2003
|
|
|
|
7,189
|
|
|
|
|
|
|
|
48.08
|
|
|
|
4/25/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/23/2003
|
|
|
|
32,602
|
|
|
|
|
|
|
|
46.01
|
|
|
|
10/23/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/30/2004
|
|
|
|
4,246
|
|
|
|
|
|
|
|
50.46
|
|
|
|
4/30/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/21/2004
|
|
|
|
22,500
|
|
|
|
7,500
|
|
|
|
50.00
|
|
|
|
10/21/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
Option Awards
|
|
|
|
|
|
|
|
|
Unearned Shares,
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units or Other
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rights That Have
|
|
|
|
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not Vested
|
|
|
|
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
|
|
|
Shares or Units of Stock That Have Not Vested
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
Options (#)
|
|
|
Exercise
|
|
|
Option
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
or Payout
|
|
|
|
Option
|
|
|
Exer-
|
|
|
Unexer-
|
|
|
Price
|
|
|
Expiration
|
|
|
Grant
|
|
|
Number
|
|
|
Value
|
|
|
Number
|
|
|
Value
|
|
Name
|
|
Grant Date
|
|
|
cisable
|
|
|
cisable
|
|
|
($)
|
|
|
Date
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
|
|
|
10/19/2005
|
|
|
|
18,505
|
|
|
|
18,506
|
|
|
|
56.74
|
|
|
|
10/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
10,267
|
|
|
|
30,801
|
|
|
|
48.70
|
|
|
|
10/30/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
41,868
|
|
|
|
47.77
|
|
|
|
10/29/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. DeMane
|
|
|
03/17/2000
|
|
|
|
5,694
|
|
|
|
|
|
|
|
52.69
|
|
|
|
03/17/2010
|
|
|
|
05/15/2006
|
|
|
|
40,775
|
|
|
|
2,015,101
|
|
|
|
|
|
|
|
|
|
|
|
|
08/09/2000
|
|
|
|
8,889
|
|
|
|
|
|
|
|
56.25
|
|
|
|
08/09/2010
|
|
|
|
10/30/2006
|
|
|
|
|
|
|
|
|
|
|
|
12,321
|
|
|
|
608,904
|
|
|
|
|
10/26/2000
|
|
|
|
19,371
|
|
|
|
|
|
|
|
51.63
|
|
|
|
10/26/2010
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
18,841
|
|
|
|
931,122
|
|
|
|
|
10/25/2001
|
|
|
|
32,184
|
|
|
|
|
|
|
|
43.50
|
|
|
|
10/25/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/24/2002
|
|
|
|
49,031
|
|
|
|
|
|
|
|
44.87
|
|
|
|
10/24/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/23/2003
|
|
|
|
65,204
|
|
|
|
|
|
|
|
46.01
|
|
|
|
10/23/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/21/2004
|
|
|
|
45,000
|
|
|
|
15,000
|
|
|
|
50.00
|
|
|
|
10/21/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/2005
|
|
|
|
23,793
|
|
|
|
23,793
|
|
|
|
56.74
|
|
|
|
10/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
11,293
|
|
|
|
33,882
|
|
|
|
48.70
|
|
|
|
10/30/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
69,082
|
|
|
|
47.77
|
|
|
|
10/29/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen H. Mahle
|
|
|
05/01/1998
|
|
|
|
3,774
|
|
|
|
|
|
|
|
26.50
|
|
|
|
05/01/2008
|
|
|
|
10/30/2006
|
|
|
|
|
|
|
|
|
|
|
|
15,401
|
|
|
|
761,117
|
|
|
|
|
05/01/1998
|
|
|
|
31,062
|
|
|
|
|
|
|
|
26.50
|
|
|
|
05/01/2008
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
15,701
|
|
|
|
775,943
|
|
|
|
|
10/28/1998
|
|
|
|
20,374
|
|
|
|
|
|
|
|
31.91
|
|
|
|
10/28/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/28/1999
|
|
|
|
4,496
|
|
|
|
|
|
|
|
37.59
|
|
|
|
04/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/01/1999
|
|
|
|
39,826
|
|
|
|
|
|
|
|
35.97
|
|
|
|
05/01/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/27/1999
|
|
|
|
51,321
|
|
|
|
|
|
|
|
33.13
|
|
|
|
10/27/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/30/2000
|
|
|
|
34,581
|
|
|
|
|
|
|
|
51.94
|
|
|
|
04/30/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/26/2000
|
|
|
|
48,427
|
|
|
|
|
|
|
|
51.63
|
|
|
|
10/26/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/27/2001
|
|
|
|
27,226
|
|
|
|
|
|
|
|
44.25
|
|
|
|
04/27/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/28/2001
|
|
|
|
31,381
|
|
|
|
|
|
|
|
47.80
|
|
|
|
06/28/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/25/2001
|
|
|
|
80,460
|
|
|
|
|
|
|
|
43.50
|
|
|
|
10/25/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/26/2002
|
|
|
|
10,841
|
|
|
|
|
|
|
|
43.81
|
|
|
|
04/26/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/24/2002
|
|
|
|
78,004
|
|
|
|
|
|
|
|
44.87
|
|
|
|
10/24/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/25/2003
|
|
|
|
14,054
|
|
|
|
|
|
|
|
48.08
|
|
|
|
04/25/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/23/2003
|
|
|
|
76,071
|
|
|
|
|
|
|
|
46.01
|
|
|
|
10/23/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/30/2004
|
|
|
|
8,144
|
|
|
|
|
|
|
|
50.46
|
|
|
|
04/30/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/21/2004
|
|
|
|
52,500
|
|
|
|
17,500
|
|
|
|
50.00
|
|
|
|
10/21/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/2005
|
|
|
|
26,436
|
|
|
|
26,437
|
|
|
|
56.74
|
|
|
|
10/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
13,860
|
|
|
|
41,582
|
|
|
|
48.70
|
|
|
|
10/30/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
56,521
|
|
|
|
47.77
|
|
|
|
10/29/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jean-Luc Butel
|
|
|
8/28/2003
|
|
|
|
40,445
|
|
|
|
|
|
|
|
49.45
|
|
|
|
8/28/2003
|
|
|
|
8/28/2003
|
|
|
|
15,167
|
|
|
|
749,553
|
|
|
|
|
|
|
|
|
|
|
|
|
10/23/2003
|
|
|
|
26,082
|
|
|
|
|
|
|
|
46.01
|
|
|
|
10/23/2013
|
|
|
|
10/30/2006
|
|
|
|
|
|
|
|
|
|
|
|
6,161
|
|
|
|
304,477
|
|
|
|
|
4/30/2004
|
|
|
|
3,964
|
|
|
|
|
|
|
|
50.46
|
|
|
|
4/30/2014
|
|
|
|
4/30/2007
|
|
|
|
|
|
|
|
|
|
|
|
37,786
|
|
|
|
1,867,384
|
|
|
|
|
10/21/2004
|
|
|
|
19,500
|
|
|
|
6,500
|
|
|
|
50.00
|
|
|
|
10/21/2014
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
6,281
|
|
|
|
310,407
|
|
|
|
|
4/29/2005
|
|
|
|
4,555
|
|
|
|
|
|
|
|
52.70
|
|
|
|
4/29/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/2005
|
|
|
|
16,743
|
|
|
|
16,744
|
|
|
|
56.74
|
|
|
|
10/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
5,647
|
|
|
|
16,941
|
|
|
|
48.70
|
|
|
|
10/30/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
23,028
|
|
|
|
47.77
|
|
|
|
10/29/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
The table below shows the vesting schedule for all unexercisable
options. All options vest on the anniversary of the grant date
in the year indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting Schedule for Unexercisable Options
|
|
Name
|
|
Grant Date
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
Arthur D. Collins, Jr.
|
|
|
10/21/2004
|
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/2005
|
|
|
|
57,279
|
|
|
|
57,279
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
46,201
|
|
|
|
46,201
|
|
|
|
46,202
|
|
|
|
|
|
William A. Hawkins
|
|
|
10/21/2004
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/2005
|
|
|
|
18,946
|
|
|
|
18,947
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
16,941
|
|
|
|
16,940
|
|
|
|
16,941
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
47,100
|
|
|
|
47,101
|
|
|
|
47,101
|
|
|
|
47,101
|
|
Gary L. Ellis
|
|
|
10/21/2004
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/2005
|
|
|
|
9,253
|
|
|
|
9,253
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
10,267
|
|
|
|
10,267
|
|
|
|
10,267
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
10,467
|
|
|
|
10,467
|
|
|
|
10,467
|
|
|
|
10,467
|
|
Michael F. DeMane
|
|
|
10/21/2004
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/2005
|
|
|
|
11,896
|
|
|
|
11,897
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
11,294
|
|
|
|
11,294
|
|
|
|
11,294
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
17,270
|
|
|
|
17,271
|
|
|
|
17,270
|
|
|
|
17,271
|
|
Stephen H. Mahle
|
|
|
10/21/2004
|
|
|
|
17,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/2005
|
|
|
|
13,218
|
|
|
|
13,219
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
13,861
|
|
|
|
13,860
|
|
|
|
13,861
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
14,130
|
|
|
|
14,130
|
|
|
|
14,130
|
|
|
|
14,131
|
|
Jean-Luc Butel
|
|
|
10/21/2004
|
|
|
|
6,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/2005
|
|
|
|
8,372
|
|
|
|
8,372
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
5,647
|
|
|
|
5,647
|
|
|
|
5,647
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
5,757
|
|
|
|
5,757
|
|
|
|
5,757
|
|
|
|
5,757
|
|
The amounts shown in the column entitled Shares or Units
of Stock That Have Not Vested of the Outstanding Equity
Awards at Fiscal Year-End table are restricted stock and
restricted stock units that have not yet vested. The table below
shows the vesting schedules for all outstanding restricted stock
and restricted stock unit grants.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting Schedule for Unvested
|
|
|
|
|
|
|
Restricted Stock and RSUs
|
|
Name
|
|
Grant Date
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Arthur D. Collins, Jr. (1)
|
|
|
10/23/2003
|
|
|
|
43,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/21/2004
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/19/2005
|
|
|
|
|
|
|
|
|
|
|
|
35,249
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
|
|
|
|
51,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William A. Hawkins
|
|
|
05/15/2006
|
|
|
|
|
|
|
|
40,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
|
|
|
|
18,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
52,335
|
|
|
|
|
|
|
|
|
|
Gary L. Ellis
|
|
|
06/24/2005
|
|
|
|
|
|
|
|
9,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
07/31/2006
|
|
|
|
|
|
|
|
|
|
|
|
19,795
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
|
|
|
|
11,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
11,514
|
|
|
|
|
|
|
|
|
|
Michael F. DeMane
|
|
|
05/15/2006
|
|
|
|
|
|
|
|
40,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
|
|
|
|
12,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
18,841
|
|
|
|
|
|
|
|
|
|
Stephen H. Mahle
|
|
|
10/30/2006
|
|
|
|
|
|
|
|
15,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
15,701
|
|
|
|
|
|
|
|
|
|
Jean-Luc Butel
|
|
|
08/28/2003
|
|
|
|
15,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/30/2006
|
|
|
|
|
|
|
|
6,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/30/2007
|
|
|
|
|
|
|
|
|
|
|
|
18,893
|
|
|
|
|
|
|
|
18,893
|
|
|
|
|
10/29/2007
|
|
|
|
|
|
|
|
|
|
|
|
6,281
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Collins 2003, 2004, 2005 and 2006 grants vest
immediately in the event of death, disability or retirement. |
45
The amounts shown in the column entitled Equity Incentive
Plan Awards: Unearned Shares, Units or Other Rights That Have
Not Vested of the Outstanding Equity Awards at Fiscal Year
End table that correspond to an October 30, 2006 and
October 29, 2007 grant date reflect performance-based
restricted stock awards that vest on the third anniversary of
the date of grant. The amount that corresponds to an
April 30, 2007 grant date reflects a time based restricted
stock unit award that vests 50% on the third anniversary and 50%
on the fifth anniversary of the grant date.
Messrs. Collins, Hawkins, DeMane and Mahle also own
355,037, 83,065, 61,249 and 62,941 restricted/deferred stock
units, respectively, that are fully vested and will be
distributed following their retirement.
OPTION EXERCISES
AND STOCK VESTED
The table below includes information related to options
exercised by each of the named executive officers and their
restricted stock awards that have vested during fiscal year
2008. The table also includes the value realized for such
options and restricted stock awards. For options, the value
realized on exercise is equal to the difference between the
market price of the underlying shares at exercise and the
exercise price of the options. For stock awards, the value
realized on vesting is equal to the market price of the
underlying shares at vesting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
Acquired
|
|
|
Value Realized
|
|
|
Acquired
|
|
|
Value Realized
|
|
|
|
on Exercise
|
|
|
on Exercise
|
|
|
on Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)(1)
|
|
|
($)
|
|
|
Arthur D. Collins, Jr.
|
|
|
599,756
|
|
|
$
|
17,968,411
|
|
|
|
58,033
|
|
|
$
|
2,826,079
|
|
William A. Hawkins
|
|
|
|
|
|
|
|
|
|
|
36,917
|
|
|
|
1,954,402
|
|
Gary L. Ellis
|
|
|
23,082
|
|
|
|
594,536
|
|
|
|
3,359
|
|
|
|
166,225
|
|
Michael F. DeMane
|
|
|
|
|
|
|
|
|
|
|
64,204
|
|
|
|
3,224,764
|
|
Stephen H. Mahle
|
|
|
31,596
|
|
|
|
995,143
|
|
|
|
34,379
|
|
|
|
1,828,805
|
|
Jean-Luc Butel
|
|
|
|
|
|
|
|
|
|
|
2,762
|
|
|
|
136,682
|
|
|
|
|
(1) |
|
Includes shares received pursuant to the Performance Share Plan
for the fiscal year 2006 to fiscal year 2008 grant cycle by each
named executive officer in June of 2008. |
46
PENSION
BENEFITS
The table below includes information with respect to
Medtronics pension plan for each of the named executive
officers as of January 31, 2008, which is the measurement
date used for financial statement reporting purposes. A
narrative description of the material factors necessary to
understand the information in the table is provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
|
|
|
|
|
|
|
|
|
Present Value of
|
|
|
During
|
|
|
|
|
|
Number of Years
|
|
|
Accumulated
|
|
|
Last Fiscal
|
|
Name
|
|
Plan Name
|
|
Credited Service
|
|
|
Benefit($)
|
|
|
Year($)
|
|
|
Arthur D. Collins, Jr.
|
|
Medtronic, Inc. Retirement Plan
|
|
|
15.7
|
|
|
$
|
420,719
|
|
|
$
|
|
|
|
|
Medtronic, Inc. SERP
|
|
|
|
|
|
|
3,373,544
|
|
|
|
|
|
William A. Hawkins
|
|
Medtronic, Inc. Retirement Plan
|
|
|
6.0
|
|
|
|
68,582
|
|
|
|
|
|
|
|
Medtronic, Inc. SERP
|
|
|
|
|
|
|
396,174
|
|
|
|
|
|
Gary L. Ellis
|
|
Medtronic, Inc. Retirement Plan
|
|
|
18.2
|
|
|
|
199,928
|
|
|
|
|
|
|
|
Medtronic, Inc. SERP
|
|
|
|
|
|
|
445,371
|
|
|
|
|
|
Michael F. DeMane
|
|
Medtronic, Inc. Retirement Plan
|
|
|
8.8
|
|
|
|
85,881
|
|
|
|
|
|
|
|
Medtronic, Inc. SERP
|
|
|
|
|
|
|
343,297
|
|
|
|
|
|
Stephen H. Mahle
|
|
Medtronic, Inc. Retirement Plan
|
|
|
35.5
|
|
|
|
1,256,723
|
|
|
|
|
|
|
|
Medtronic, Inc. SERP
|
|
|
|
|
|
|
1,919,428
|
|
|
|
|
|
Jean-Luc Butel
|
|
Medtronic, Inc. Retirement Plan
|
|
|
4.4
|
|
|
|
48,804
|
|
|
|
|
|
|
|
Medtronic, Inc. SERP
|
|
|
|
|
|
|
93,961
|
|
|
|
|
|
The Medtronic, Inc. Retirement Plan (the Plan) is a
funded, tax-qualified, noncontributory defined-benefit pension
plan that covers all eligible employees employed with the
Company prior to April 30, 2005, including the named
executive officers. Effective May 1, 2005 the Company froze
the Plan to new entrants and provided all eligible employees the
option of continuing to accrue retirement benefits under the
Plan or participate in one of two new options being offered. All
named executive officers elected to continue participation in
the Plan. Benefits under the Plan are based upon the
employees years of credited service and the average of the
employees highest five consecutive years of covered
compensation during the employees career while covered
under the Plan. Employees have the option of providing for a
survivorship benefit upon the employees death by making
the appropriate election at the time of retirement. Covered
compensation includes base salary, formula bonus and incentive
plan payments, sales commissions, salary reduction contributions
(such as a cafeteria plan or medical plan), salary continuation
payments for short-term disability, but excludes compensation
paid under the Companys LTPP or the Performance Share
Plan. In addition, the IRS limits the amount of Covered
Compensation that can be used in the benefit calculation. For
the Plan year ended April 30, 2008, that limit is $225,000.
Normal retirement age under the plan is age 65. Eligible
employees may retire upon reaching age 55 with at least ten
years of service or upon reaching age 62 without regard to
years of service. Mr. Collins and Mr. Mahle were
eligible for early retirement at the end of fiscal year 2008.
Any retirement prior to normal retirement age is considered
early retirement.
Benefits under the Plan are calculated as a monthly annuity by
taking 40% of the final average covered compensation less a
social security allowance (which varies by individual based upon
year of birth) and multiplying this result by years of credited
service under the Plan. That result is then divided by 30 to
yield the benefit at normal retirement age, with an early
retirement factor applied to calculate the early retirement
benefit.
The Plan currently limits pensions paid under the Plan to an
annual maximum of $175,000, payable at age 65 in accordance
with IRS requirements. The Company also has an unfunded
Supplemental Executive Retirement Plan (the SERP)
that provides out of the general assets of the Company an amount
substantially equal to the difference between the amount that
would have been payable to the executive under the Plan in the
absence of legislation limiting pension benefits and earnings
that may be considered in calculating pension benefits and the
amount actually payable under the Plan. Compensation
47
used in the calculation of the SERP benefit includes eligible
compensation in excess of the IRS limitation and amounts
deferred to the Capital Accumulation Plan. Upon retirement or
termination of employment the amount of retirement benefits
earned under the SERP are calculated and if the lump sum value
is less than $100,000, it is paid out as a lump sum six months
after retirement or termination. If the lump sum value exceeds
$100,000, the value is paid out over a 15 year period in
the form of a monthly annuity commencing six months after
retirement or termination. In the event of the employees
death prior to the completion of the 15 year payment cycle,
any remaining benefits from the SERP are payable per the
beneficiary designation on record. If a beneficiary is not named
the benefit is payable to the employees surviving spouse,
if there is no surviving spouse, to the children or if no
survivors, the estate.
NONQUALIFIED
DEFERRED COMPENSATION
The table below includes information with respect to the
deferral of compensation on a basis that is not tax-qualified
for each of the named executive officers for fiscal year 2008. A
narrative description of the material factors necessary to
understand the information in the table is provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Earnings
|
|
|
Balance
|
|
|
|
in Last FY
|
|
|
in Last FY
|
|
|
at Last FYE
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Arthur D. Collins, Jr.
|
|
$
|
2,336,876
|
|
|
$
|
(685,591
|
)
|
|
$
|
27,958,474
|
|
William A. Hawkins
|
|
|
1,898,922
|
|
|
|
(329,924
|
)
|
|
|
4,387,628
|
|
Gary L. Ellis
|
|
|
|
|
|
|
(4,248
|
)
|
|
|
57,843
|
|
Michael F. DeMane
|
|
|
3,645,230
|
|
|
|
(813
|
)
|
|
|
4,119,102
|
|
Stephen H. Mahle
|
|
|
1,676,470
|
|
|
|
(190,063
|
)
|
|
|
4,543,448
|
|
Jean-Luc Butel
|
|
|
|
|
|
|
(367
|
)
|
|
|
4,994
|
|
Executive Contributions in Last Fiscal
Year. This column includes the following amounts
that were reported in the Summary Compensation Table for the
most recent fiscal year as shown on page 37 of this proxy
statement: Mr. Collins base salary in the
amount of $173,077; Mr. Hawkins base salary in
the amount of $61,538; Mr. DeMane base salary
in the amount of $51,539; Mr. Ellis and Mr. Butel did
not defer income in fiscal year 2008. Fiscal year 2008 annual
incentive deferral amounts of $269,656, $200,000 and $331,055
for Mr. Collins, Mr. Hawkins and Mr. DeMane,
respectively, were made in June 2008 (which is in fiscal year
2009) and are not reflected in this column.
2006-2008
Performance Share Plan cash based award deferral amounts of
$703,679 and $179,663 for Mr. Collins and Mr. DeMane,
respectively, were made in June 2008 (which is in fiscal year
2009) and are not reflected in this column.
The Capital Accumulation Plan allows U.S. executives of
Medtronic to defer:
|
|
|
|
|
Up to 50% of their base salary;
|
|
|
|
Up to 100% of their annual incentive plan payments; and
|
|
|
|
Up to 100% of their cash long-term incentive plan payments.
|
The deferral amounts are subject to a minimum floor of $10,000.
Medtronic does not make any contributions to the deferral
plan the aggregate balances shown above represent
amounts that the named executive officers earned but elected to
defer, plus earnings (or losses).
Aggregate Earnings in Last Fiscal
Year. Participants receive credits of gains or
losses daily based on funds that are indexed to 11 investment
alternatives, which are all also available under the Medtronic
48
supplemental retirement plan 401(k). Investment returns for
these investment alternatives are shown below:
|
|
|
|
|
|
|
Return on Funds
|
|
|
|
April 27,
|
|
|
|
2007 to April 25,
|
|
|
|
2008
|
|
|
Medtronic Stock
|
|
|
(6.70
|
)%
|
Medtronic Interest Income
|
|
|
4.68
|
|
Wellington Fund Inv
|
|
|
1.67
|
|
Explorer Fund Investor
|
|
|
(10.20
|
)
|
Morgan
Growth(1)
|
|
|
(0.98
|
)
|
500 Index Fund Inv
|
|
|
(4.75
|
)
|
PRIMECAP Fund Investor
|
|
|
3.84
|
|
Windsor II Fund Inv
|
|
|
(9.99
|
)
|
U.S. Growth
Fund Investor(1)
|
|
|
(2.40
|
)
|
International Growth Inv
|
|
|
2.62
|
|
Total Bond Mkt Index Inv
|
|
|
6.20
|
|
Extended Mkt Index Inv
|
|
|
(7.65
|
)
|
|
|
|
(1) |
|
On November 12, 2007, the Vanguard Morgan Growth Fund was
added to the investment alternatives. The Vanguard Morgan Growth
Fund is a replacement for the U.S. Growth Fund Investor
which was eliminated from the plan effective February 1,
2008. The above fund returns reflect performance of these funds
over the full fiscal year. |
Participants in the deferred compensation plan prior to
amendments may also have all or a portion of their balances
earning interest based on the
10-year
average of the
10-year
T-note rate (or, in certain situations, up to 120% of that rate
for funds originally invested in the Plan). For calendar year
2007, the
10-year
T-note interest rate was 5.12%, and for calendar year 2008, the
10-year
T-note interest rate is 5.12%.
When participants elect to defer amounts, they also select when
the amounts will ultimately be distributed. Distributions may be
made on a certain date (as long as that date is at least five
years beyond the period of deferral) or at retirement, or for
specified employees under Section 409A of the Internal
Revenue Code, six months after the date of retirement (in the
form of a lump sum distribution or installments over five, 10 or
15 years). All distributions are made in cash, and there
are limited opportunities to change the distribution elections.
These include a hardship withdrawal and a redeferral
election that must be made at least 12 months prior to a
scheduled payment (and only if the redeferral is for at least an
additional five years).
Medtronic previously sponsored a non-qualified employee stock
ownership plan (ESOP) to restore certain qualified
employee benefits that could not be allocated due to IRS
limitations. The ESOP expired in May 2005, and no additional
contributions were made by Medtronic into the ESOP after that
time.
The ESOP vests 20% per year of service. When an employee retires
under Medtronics retirement eligibility rules, the account
is 100% vested. Dividends are credited to the ESOP account each
year and the account balance is distributed in a lump sum of
shares of Medtronic stock in the fiscal year following
termination or retirement. Active employees cannot take
distributions from the account.
Aggregate Balance at Last Fiscal Year-End. The
amounts in this column include 355,037 shares of restricted
stock units and 12,120 shares under the ESOP for
Mr. Collins, 83,065 shares of restricted stock units
and 803 shares under the ESOP for Mr. Hawkins,
1,170 shares under the ESOP for Mr. Ellis,
61,429 shares of restricted stock units and
1,550 shares under the ESOP for Mr. DeMane and
62,941 shares of restricted stock units and
4,408 shares under the ESOP for Mr. Mahle and
101 shares under the ESOP for Mr. Butel, all of which
have previously been deferred. This column includes the
following amounts, which were reported in the Summary
Compensation Table for the most recent fiscal year or prior
years: $14,692,473 for Mr. Collins, $4,261,612 for
Mr. Hawkins, $3,893,027 for Mr. DeMane, and $3,150,033
for Mr. Mahle.
49
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Named executive officers are not entitled to any benefits upon
death, disability, early retirement, normal retirement or
termination for cause other than those benefits that are offered
to all employees. Named executive officers are not entitled to
any additional benefits upon termination not for cause except
under circumstances of change of control as described below.
Medtronics executive officers, including the named
executive officers, have change of control agreements (the
Agreements) with Medtronic. The Agreements operate
only upon the occurrence of a change of control as
described below. Absent a change of control, the
Agreements do not require Medtronic 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 of control there will be no adverse change in
the executives salary, bonus, opportunity, benefits or
location of employment. If during this three-year period the
executives employment is terminated by Medtronic 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), the executive is entitled to receive payment of accrued
salary and annual and long-term incentives through the date of
termination as well as accrued vacation pay, accrued pension
benefits and any outstanding deferred compensation, and, except
in the event of death or disability, a lump sum severance
payment equal to three times the sum of his or her base salary
and annual bonus. The executive is also entitled to the
continuation of certain insurance and other welfare and
retirement plan benefits for a period of time not exceeding
three years. Further, if the executive is required to pay any
federal excise tax on the payments associated with the change of
control, 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 such excise tax had been imposed.
However, payments will be reduced (and no
gross-up
will be necessary) to the extent that the total value of
payments and benefits to which the executive is entitled is
equal to or less than 110% of the safe harbor amount
under the excise tax rules. To the extent payments exceed 110%
of the safe harbor, the
gross-up
will be paid.
Generally, and subject to certain exceptions, a change of
control is deemed to have occurred if: (a) a majority
of Medtronics 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 Medtronics outstanding
voting stock; or (c) Medtronic merges or consolidates with
another party (other than certain limited types of mergers), or
exchanges shares of voting stock of Medtronic for shares of
another corporation pursuant to a statutory exchange, sells or
otherwise disposes of all or substantially all of
Medtronics assets, or is liquidated or dissolved.
In addition, similar events also constitute a change of
control under certain of Medtronics compensation
plans. If a change of control of Medtronic occurs,
awards under Medtronics annual incentive plans 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.
Medtronics long-term incentive plans and related
agreements provide that in the event of a change of
control of Medtronic, all stock options will become
immediately exercisable in full, all restrictions under
outstanding restricted stock or units will immediately lapse,
and performance share awards will immediately vest and pay out
in a pro rata amount based on the portion of the performance
period elapsed prior to the change of control and,
based on certain assumptions as to the anticipated performance,
which would have been achieved during the remainder of the
performance period.
If a change of control occurs during a plan year,
subject to certain limitations, Medtronics matching
contribution to the 401(k) supplemental retirement plan shall
equal the greater of Medtronics target percentage matching
contribution (currently 75% of the first 6% of a
participants contribution in fiscal year 2007), or if the
change of control occurs after the first quarter of
a plan year, the percentage contribution
50
Medtronic would have made upon completion of the plan year based
on performance as most recently projected by Medtronic prior to
the change of control and disregarding the effects
of the change of control.
The table below reflects additional estimated payments for our
named executive officers as a result of Agreements existing, and
assuming the change of control occurred, on April 25, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
|
|
|
Accelerated
|
|
|
|
|
|
Present
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
Excess
|
|
|
Performance
|
|
|
Vesting
|
|
|
Restricted
|
|
|
Value of
|
|
|
|
|
|
Tax
|
|
|
|
|
|
|
Severance
|
|
|
Annual
|
|
|
Plan
|
|
|
of Stock
|
|
|
Stock Unit
|
|
|
Increased
|
|
|
|
|
|
Gross-
|
|
|
|
|
|
|
Amount
|
|
|
Incentive
|
|
|
Payouts
|
|
|
Options
|
|
|
Vesting
|
|
|
Pension
|
|
|
Other
|
|
|
Up(8)
|
|
|
Total
|
|
Name
|
|
($)(1)
|
|
|
Award(2)
|
|
|
($)(3)
|
|
|
($)(4)
|
|
|
($)(5)
|
|
|
Benefits(6)
|
|
|
($)(7)
|
|
|
($)
|
|
|
($)
|
|
|
Arthur D. Collins, Jr.
|
|
$
|
7,142,788
|
|
|
$
|
1,107,306
|
|
|
$
|
613,833
|
|
|
$
|
99,795
|
|
|
$
|
8,579,312
|
|
|
$
|
1,933,532
|
|
|
$
|
90,734
|
|
|
$
|
|
|
|
$
|
19,567,300
|
|
William A. Hawkins
|
|
|
5,196,886
|
|
|
|
|
|
|
|
1,387,080
|
|
|
|
347,457
|
|
|
|
5,553,128
|
|
|
|
493,272
|
|
|
|
97,945
|
|
|
|
4,726,118
|
|
|
|
17,801,885
|
|
Gary L. Ellis
|
|
|
2,667,023
|
|
|
|
37,863
|
|
|
|
847,660
|
|
|
|
91,259
|
|
|
|
2,602,902
|
|
|
|
340,988
|
|
|
|
64,452
|
|
|
|
2,082,274
|
|
|
|
8,734,421
|
|
Michael F.
DeMane(9)
|
|
|
3,574,796
|
|
|
|
130,672
|
|
|
|
924,720
|
|
|
|
138,380
|
|
|
|
3,602,224
|
|
|
|
|
|
|
|
86,985
|
|
|
|
|
|
|
|
8,457,778
|
|
Stephen H. Mahle
|
|
|
2,861,539
|
|
|
|
57,029
|
|
|
|
586,450
|
|
|
|
123,199
|
|
|
|
1,537,061
|
|
|
|
790,842
|
|
|
|
58,592
|
|
|
|
|
|
|
|
6,014,711
|
|
Jean-Luc Butel
|
|
|
2,271,682
|
|
|
|
75,571
|
|
|
|
462,360
|
|
|
|
50,194
|
|
|
|
3,251,144
|
|
|
|
403,312
|
|
|
|
97,478
|
|
|
|
1,695,163
|
|
|
|
8,306,903
|
|
|
|
|
(1) |
|
This amount is three times the sum of (1) the
executives base salary at the time of termination and
(2) the greater of the 2008 fiscal years annual bonus
or the average of the annual bonuses for the three most recently
completed fiscal years. |
|
(2) |
|
This amount represents the difference between the three-year
average bonus and the fiscal year 2008 annual bonus in
circumstances in which the three-year average bonus is greater
than the fiscal year 2008 annual bonus. |
|
(3) |
|
This amount represents the unvested projected payments of the
2007-2009
Long-Term Performance Plan and the unvested projected payments
of the
2008-2010
Long-Term Performance Plan. |
|
(4) |
|
This amount represents the market gain (or intrinsic value) of
unvested options as of April 25, 2008 at the closing price
on that date of $49.42. |
|
(5) |
|
This amount represents the value of unvested restricted stock as
of April 25, 2008 at the closing price on that date of
$49.42. |
|
(6) |
|
This amount reflects the estimated present value of additional
pension benefits due to the named executive officer upon a
change of control assuming an additional
3-years of
age and service. The change in control agreement to which
Mr. DeMane was a party does not provide for the payment of
pension benefits upon a change of control. |
|
(7) |
|
This amount represents the estimated value of the continuation
of company contributions to the Medtronic, Inc. Savings and
Investment Plan, health and miscellaneous welfare benefits. |
|
(8) |
|
This amount represents the estimated 280(g) tax
gross-up
payment. |
|
(9) |
|
Michael DeMane resigned as Chief Operating Officer of Medtronic
on April 30, 2008, and entered into an agreement with
Medtronic to address the terms of his continued employment with
Medtronic. |
|
|
|
The agreement provides that Mr. DeMane will remain an
employee until May 31, 2009 or, if earlier, the date of an
event of default under the agreement. During the term of his
employment he will continue to receive his current salary and
will be eligible to participate in the broad-based benefit
plans, programs and arrangements generally available to
Medtronic U.S. employees, including participating in
Medtronics incentive plan for fiscal year 2009. If
Mr. DeMane remains an employee until May 31, 2009,
then Medtronic will pay him lump sum separation amounts of
$362,500 and $688,750, representing six months salary and his
bonus for fiscal year 2009, respectively. Mr. DeMane also
will be entitled to tax equalization amounts for income that he
earned as an employee of Medtronic that is subject to non-US
taxes, consistent with Medtronics tax equalization policy.
The agreement contains confidentiality, non-compete and
non-solicitation provisions. |
51
EQUITY
COMPENSATION PLAN INFORMATION
The following table provides information about Medtronics
common stock that may be issued upon the exercise of options,
warrants and rights under all existing equity compensation plans
in effect as of April 25, 2008, including the Medtronic,
Inc. 2003 Long-Term Incentive Plan, the 2005 Employees Stock
Purchase Plan, the Medtronic, Inc. Kyphon Inc. 2002
Stock Plan and the 1998 Outside Director Stock Compensation Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)(1)
|
|
|
|
|
|
(c)(1)
|
|
|
|
Number of securities
|
|
|
(b)
|
|
|
Number of securities remaining
|
|
|
|
to be issued
|
|
|
Weighted average
|
|
|
available for future issuance
|
|
|
|
upon exercise
|
|
|
exercise price
|
|
|
under equity compensation
|
|
|
|
of outstanding options,
|
|
|
of outstanding options,
|
|
|
plans (excluding securities
|
|
Plan Category
|
|
warrants and rights
|
|
|
warrants and rights
|
|
|
reflected in column (a))
|
|
|
Equity compensation plans approved by security
holders(2)
|
|
|
90,939,756
|
|
|
$
|
46.89
|
|
|
|
18,882,207
|
|
Equity compensation plans not approved by security
holders(3)
|
|
|
3,828,094(4
|
)
|
|
$
|
25.93
|
|
|
|
3,034,575
|
|
|
|
|
(1) |
|
Column (a) includes 1,955,827 shares representing
deferred awards, performance awards and restricted stock units
in approved plans and 368,219 restricted stock units in
unapproved plans. These shares increase the number of shares in
column (a) and decrease the number of shares in column (c).
Column (c) includes 5,074,963 shares available for
issuance as of April 25, 2008 under the 2005 Employees
Stock Purchase Plan. |
|
(2) |
|
Awards under the 2003 Long Term Incentive Plan may consist of
stock options, stock appreciation rights, restricted stock,
other stock-based awards and cash-based awards, except that no
more than 50% (approximately 30,000,000 shares) of all
shares may be granted in the aggregate pursuant to restricted
stock or other stock-based awards payable in shares. In
addition, no more than 5% of the shares shall be granted
pursuant to restricted stock awards if such award shall vest in
full prior to three years from the award date or if a condition
to such vesting is based, in whole or in part, upon performance
of the shares or any aspect of Medtronics operations and
such vesting could occur over a period of less than one year
from the award date. |
|
(3) |
|
On November 2, 2007, Medtronic consummated the acquisition
of Kyphon Inc. (Kyphon) and it became our wholly
owned subsidiary. Kyphon was a public company and issued options
under its Kyphon Inc. 2002 Stock Plan. The Kyphon Inc. 2002
Stock Plan was adopted by Medtronics Board of Directors on
December 13, 2007 and was renamed the Medtronic,
Inc. Kyphon Inc. 2002 Stock Plan (the Kyphon
Plan). We did not seek shareholder approval of the Kyphon
Plan because Kyphons stockholders had previously approved
the plan. In connection with the acquisition, all unvested
options to purchase shares of Kyphons common stock were
converted into the right to receive an aggregate of
3,485,663 shares of Medtronics common stock with a
weighted average exercise price of $27.73 per share and all
unvested Kyphon restricted stock units were converted into an
aggregate of 401,566 Medtronic restricted stock units. Options
granted prior to the merger for new hires are generally
exercisable 25% in the first year and monthly for the next three
years and have a term of ten years. Options granted other than
for new hires prior to the merger are generally exercisable
monthly for 48 months and have a term of ten years. Options
granted post merger are generally exercisable in three or four
equal installments and have a term of ten years. |
|
(4) |
|
The table includes information regarding options, warrants or
rights assumed in connection with acquisitions completed prior
to April 25, 2008. In connection with such acquisitions,
Medtronic has assumed options, warrants and rights to purchase
securities of the acquired company that were outstanding at the
time of the acquisition, and has treated these as options,
warrants and rights to acquire Medtronic common stock based upon
conversion ratios negotiated in each acquisition. As of
April 25, 2008, 3,783,075 shares of Medtronic common
stock were issuable upon the exercise of options, warrants and
rights assumed in connection with acquisitions and the weighted
average exercise price of such options, warrants and rights was
$25.95 per share. No additional options, warrants or rights may
be granted under the plans that govern options, warrants or
rights assumed in connection with acquisitions except under the
Kyphon Plan. |
52
REPORT OF THE
AUDIT COMMITTEE
The Audit Committee represents and assists the Board of
Directors in its oversight of the integrity of Medtronics
financial reporting. In particular, the Audit Committee reviews
the independence, qualifications and performance of
Medtronics independent registered public accounting firm
and the performance of its internal auditors. The Audit
Committee also has responsibility for Medtronics
compliance with legal and regulatory requirements. As of the
date of this report, the Audit Committee consisted of the five
members listed below, each of whom is an independent director in
accordance with SEC and New York Stock Exchange requirements and
each of whom meets additional independence standards applicable
to audit committee members. Denise M. OLeary, David L.
Calhoun, Shirley Ann Jackson, Ph.D., Robert C. Pozen and
Jean-Pierre Rosso each qualify as an audit committee
financial expert within the meaning of that term as
defined by the SEC pursuant to Section 407 of the
Sarbanes-Oxley Act of 2002.
Medtronics management is responsible for preparing
Medtronics financial statements and the overall reporting
process, including Medtronics system of internal controls.
The Audit Committee is directly responsible for the
compensation, appointment and oversight of Medtronics
independent registered public accounting firm,
PricewaterhouseCoopers LLP (PricewaterhouseCoopers),
that reports directly to the Audit Committee. The independent
registered public accounting firm is responsible for auditing
the financial statements and expressing an opinion on the
conformity of the audited financial statements with generally
accepted accounting principles in the United States
(U.S. GAAP) and auditing managements
internal controls over financial reporting. The Audit Committee
also meets privately in separate executive sessions periodically
with management, internal audit and representatives from
Medtronics independent registered public accounting firm.
In this context, the Audit Committee has held discussions with
management and PricewaterhouseCoopers. Management represented to
the Audit Committee that Medtronics consolidated financial
statements were prepared in accordance with U.S. GAAP, and
the Audit Committee has reviewed and discussed the audited
financial statements with management and PricewaterhouseCoopers.
PricewaterhouseCoopers has advised the Audit Committee that, in
its opinion, the consolidated balance sheets and the related
consolidated statements of earnings, shareholders equity
and cash flows that accompany Medtronics 2008 Annual
Report present fairly, in all material respects, the financial
position of Medtronic and its subsidiaries at April 25,
2008 and April 27, 2007, and the results of
Medtronics operations and cash flows for each of the three
fiscal years in the period ended April 25, 2008 in
conformity with U.S. GAAP.
The Audit Committee also has discussed with
PricewaterhouseCoopers the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication With
Audit Committees), as amended, and requested any other relevant
input from PricewaterhouseCoopers. PricewaterhouseCoopers
provided to the Audit Committee the written disclosures and
letter required by Independent Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), and
the Audit Committee discussed with PricewaterhouseCoopers their
independence.
Based on the considerations above, the Audit Committee
recommended to the Board of Directors, and the Board has
approved, the inclusion of the audited financial statements in
Medtronics Annual Report on
Form 10-K
for fiscal year 2008 for filing with the Securities and Exchange
Commission. The Audit Committee has selected
PricewaterhouseCoopers as Medtronics independent
registered public accounting firm for fiscal year 2009. Audit
and any permitted non-audit services provided to Medtronic by
PricewaterhouseCoopers are pre-approved by the Audit Committee.
|
|
|
AUDIT COMMITTEE:
|
|
|
|
|
|
Denise M. OLeary, Chair
|
|
Robert C. Pozen
|
David L. Calhoun
|
|
Jean-Pierre Rosso
|
Shirley Ann Jackson, Ph.D.
|
|
|
53
Audit and
Non-Audit Fees
The following table presents fees for professional audit
services rendered by PricewaterhouseCoopers for the audit of
Medtronics annual financial statements for the fiscal
years ended April 27, 2007 and April 25, 2008, and
fees billed for other services rendered by
PricewaterhouseCoopers.
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
Audit
Fees(1)
|
|
$
|
5,650,000
|
|
|
$
|
7,097,000
|
|
Audit-Related
Fees(2)
|
|
|
241,000
|
|
|
|
80,000
|
|
Tax
Fees(3)
|
|
|
252,000
|
|
|
|
270,000
|
|
All Other
Fees(4)
|
|
|
39,000
|
|
|
|
36,000
|
|
|
|
|
(1) |
|
Audit services consisted principally of assistance with
Medtronics domestic and international audits, statutory
audits and Sarbanes-Oxley 404 certification. The increase in
Audit Fees in fiscal year 2008 resulted primarily by the
acquisition of Kyphon and a negative foreign exchange impact. |
|
(2) |
|
Audit-related services consisted principally of assistance with
matters related to audits of employee benefits plans and
corporate development. |
|
(3) |
|
The fiscal years 2007 and 2008 tax advisory services were
provided principally for assistance with transfer pricing and
tax compliance. |
|
(4) |
|
In fiscal years 2007 and 2008, other services included
subscriptions to audit-related software and industry benchmark
studies. |
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected PricewaterhouseCoopers,
certified public accountants and independent registered public
accounting firm, as Medtronics independent registered
public accounting firm for the fiscal year ending April 24,
2009. As required by the Audit Committee Charter, the Board of
Directors is submitting the selection of PricewaterhouseCoopers
for shareholders ratification at the Annual Meeting. If
the shareholders do not so ratify, the Audit Committee will
reconsider its selection.
Representatives of PricewaterhouseCoopers are expected to be
present at the Annual Meeting, will have the opportunity to make
a statement if they desire and are expected to be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
RATIFICATION OF THIS APPOINTMENT.
54
PROPOSAL 3
APPROVAL OF THE MEDTRONIC, INC.
2008 STOCK AWARD AND INCENTIVE PLAN
We have adopted a new omnibus incentive compensation plan called
the Medtronic, Inc. 2008 Stock Award and Incentive Plan. In this
proposal, we are asking our shareholders to approve the Stock
Award and Incentive Plan. If this plan is approved, no further
equity awards will be granted pursuant to the Amended and
Restated 1994 Stock Award Plan, the Medtronic, Inc. 1998 Outside
Director Stock Compensation Plan, the Medtronic,
Inc. Kyphon Inc. 2002 Stock Plan, and the Medtronic,
Inc. 2003 Long-Term Incentive Plan. Assuming this plan is
approved, equity awards made on and after the approval will be
made under the Stock Award and Incentive Plan. In addition, if
approved, the Stock Award and Incentive Plan will, following the
current fiscal year, replace the Medtronic, Inc. Executive
Incentive Plan as the plan governing annual bonus awards to our
executive officers.
One purpose of this request is to enable us to grant awards
under the plan that are not subject to the limits on
deductibility imposed by Section 162(m) of the Internal
Revenue Code of 1986, as amended. Section 162(m) generally
does not allow a publicly held company to obtain tax deductions
for compensation of more than $1 million paid in any year
to its chief executive officer or any of its other three
highest-paid executive officers other than the chief executive
officer and chief financial officer. Payments that are
performance-based in accordance with conditions
specified under Section 162(m) are exempt from this
limitation. One of those conditions is that shareholders approve
the material terms of the performance goals that will be used to
determine the amount of performance-based compensation to be
paid.
Our Board of Directors recommends that shareholders approve the
material terms of the Stock Award and Incentive Plan as
described below.
Summary of the
Plan
The following description of the Stock Award and Incentive
Plan is only a summary of certain provisions thereof and is
qualified in its entirety by reference to the full text of the
Stock Award and Incentive Plan, a copy of which is included as
an exhibit to this proxy statement.
Purpose of the
Plan
The purpose of the Stock Award and Incentive Plan is to give us
a competitive advantage in attracting, retaining, and motivating
officers, employees, directors, and consultants, to provide
financial rewards that are intended to be deductible to the
maximum extent possible as performance-based
compensation within the meaning of Section 162(m),
and to provide us with an incentive plan that gives officers,
employees, directors, and consultants financial incentives
directly linked to shareholder value.
Administration of
the Plan
The Stock Award and Incentive Plan will be administered by a
committee selected by our Board of Directors and composed of two
or more directors. Each committee member will be a non-employee
director as defined under federal securities law and an outside
director as defined by regulations promulgated under
Section 162(m). Unless otherwise determined by the Board of
Directors, our Compensation Committee will administer the Stock
Award and Incentive Plan.
The committee will have exclusive and final authority to
administer and interpret the Stock Award and Incentive Plan,
including the power to:
|
|
|
|
|
Determine eligibility for participation;
|
|
|
|
Establish performance goals for each participant;
|
|
|
|
Determine the types of awards to be granted to
participants; and
|
|
|
|
Interpret the terms and provisions of the plan and any award.
|
55
Any determination made by the committee under the Stock Award
and Incentive Plan will be made in the sole discretion of the
committee, and such determinations will be final and binding on
all persons.
The committee may delegate any of its powers and
responsibilities in respect of the Stock Award and Incentive
Plan, and our full Board of Directors may exercise any of the
committees powers and responsibilities. However, the
committee may not delegate any of its powers or
responsibilities, and the full Board of Directors may not
exercise any of those powers or responsibilities, to the extent
that those actions would cause an award that is intended to be
exempt from the limits on deductibility under
Section 162(m) to lose that exemption or would cause an
award to a director or executive officer to fail to be exempt
from short-swing profit recovery under Section 16(b) of the
Exchange Act.
Eligible
Participants in the Plan
The committee may select any or all of the following classes of
persons to be granted awards under the plan:
|
|
|
|
|
Members of our Board of Directors;
|
|
|
|
Officers of, employees of, and consultants to Medtronic, Inc.
and/or any
of our subsidiaries or affiliates; and
|
|
|
|
Individuals who have accepted offers of employment or
consultancy from Medtronic, Inc., or from our subsidiaries or
affiliates.
|
As of June 26, 2008, we had 12 members of the Board of
Directors, approximately 38,000 officers and employees and an
unknown number of consultants.
Limits on Awards
We May Issue Under the Plan
Share Limits. The maximum number of shares of
our common stock that may be issued pursuant to awards granted
under the Stock Award and Incentive Plan is 50,000,000. The
maximum number of shares that may be issued pursuant to
incentive stock options granted under the plan is 50,000,000.
For purposes of these limits, we will count each share issued
pursuant to a stock option or stock appreciation right as one
share, but each share issued pursuant to any other award as
three shares. No individual participant may be granted awards
under the plan relating to more than 2,000,000 shares
during any fiscal year, although for purposes of the individual
limit we will count each share issued pursuant to awards under
the plan as one share.
The committee will adjust these maximums, and the number of
shares that may be issued in respect of awards granted under the
plan, in certain specified circumstances such as stock splits,
mergers, and other transactions. The committee may also adjust
performance goals in the event of unusual or recurring events
and other extraordinary items as approved by the committee,
except to the extent that doing so would cause an award intended
to be exempt from Section 162(m) to fail to be exempt.
Shares underlying awards under the Stock Award and Incentive
Plan that expire, or that are forfeited or terminated without
being exercised, do not count towards these share limits. In
addition, if we grant awards in assumption or in substitution
for an award of a company or business we acquire, shares issued
in connection with the assumed or substituted awards will not
count towards the share limits. However, if the exercise price
of any option granted under the plan, or the tax obligations
relating to any award, are satisfied by delivering shares to us,
or if a stock appreciation right is settled for shares, the
gross number of shares subject to the award counts towards the
share limits.
Limits on Certain Cash Awards. The Stock Award
and Incentive Plan authorizes the committee to grant awards
entitling a participant to payment of cash amounts subject to
the attainment of certain performance goals established in
accordance with the requirements of Section 162(m). We
refer to such awards as performance cash awards. No
individual participant may be paid more than $10,000,000 in
respect of such awards during any fiscal year, including any
amounts earned during such fiscal year and deferred.
56
Types of Awards
We May Issue Under the Plan
The Stock Award and Incentive Plan will allow us to grant awards
based on shares of our common stock, including stock options,
stock appreciation rights, restricted stock, unrestricted stock,
restricted stock units, other stock-based awards,
performance-based restricted stock, and performance units. The
closing price of a share of our common stock on the New York
Stock Exchange on June 26, 2008 was $51.08. The Stock Award
and Incentive Plan will also allow us to grant awards
denominated in cash that are payable upon the attainment of
performance goals established by the committee.
Stock Options. The Stock Award and Incentive
Plan enables the committee to grant options to purchase our
common stock at specified exercise prices to participants.
Options may be granted as incentive stock options,
which are intended to qualify for favorable tax treatment under
federal tax law, or nonqualified stock options,
which are not intended to receive such favorable treatment.
Under the Stock Award and Incentive Plan, the committee
determines the number of options to be granted to each
participant. Unless otherwise determined by the committee, each
option grant will be evidenced by a stock option agreement that
specifies the option exercise price, whether the options are
intended to be incentive stock options or
nonqualified stock options, the duration of the
options, the number of shares underlying the options, and any
additional terms determined by the committee.
Generally, options will be subject to vesting during a period of
at least one year following the date of grant. Up to five
percent of shares available for grant as options and stock
appreciation rights, however, may be granted without regard to
these limitations on vesting conditions.
The Stock Award and Incentive Plan provides that the committee
may determine the exercise prices of options, but (except in
limited circumstances involving awards assumed in certain
corporate transactions) the exercise price of any option cannot
be less than the fair market value of a share of our common
stock on the date of grant. All options we grant under the plan
will expire no later than ten years from the date we grant them.
The methods of exercising an option under the plan are set forth
in the plan itself. Stock options issued under the Stock Award
and Incentive Plan are nontransferable except by will or the
laws of descent, except for nonqualified options,
which will be transferable on terms set by the committee. The
granting of an option under the Stock Award and Incentive Plan
does not give the participant the rights of a shareholder; the
participant gains those rights only after the option is
exercised and the shares underlying the option are registered.
The committee may not (except in limited circumstances involving
certain corporate transactions) amend an option granted under
the Stock Award and Incentive Plan to decrease its exercise
price. The committee also may not cancel any option in
conjunction with the grant of any new option with a lower
exercise price, or take any action that would be treated as a
repricing of the option, unless that action is
approved by our shareholders.
Stock Appreciation Rights. The Stock Award and
Incentive Plan also enables the committee to grant awards of
stock appreciation rights to participants. A stock appreciation
right entitles the participant to receive, upon exercise, an
amount equal to the excess, if any, of the fair market value of
a share of our common stock over the exercise price of the stock
appreciation right.
The plan provides that the committee may determine the exercise
price of any stock appreciation right, but (except in limited
circumstances involving awards assumed in certain corporate
transactions) the exercise price cannot be less than the fair
market value of a share of our common stock on the date the
stock appreciation right is granted. Stock appreciation rights
we issue under the Stock Award and Incentive Plan will, unless
otherwise determined by the committee, be evidenced by an award
agreement, which will specify the exercise price, the number of
shares underlying the rights, and other limitations, terms, and
conditions determined by the committee. Under the plan, we will
be able to grant tandem SARs, which are stock
appreciation rights granted in conjunction with an option, and
free-standing SARs, which are stock appreciation
rights not granted in conjunction with an option.
57
A tandem SAR may be granted on the same date as the
related option, will be exercisable only at the time the related
option is exercisable, and will have the same exercise price as
the related option. When the related option is exercised or
forfeited, the tandem SAR will terminate or be
forfeited; and when the tandem SAR is exercised or
forfeited, the related option will similarly terminate or be
forfeited.
Generally, stock appreciation rights will be subject to vesting
during a period of at least one year following the date of
grant. Up to five percent of shares available for grant as
options and stock appreciation rights, however, may be granted
without regard to these limitations on vesting conditions.
The methods of exercising a stock appreciation right granted
under the plan are set forth in the plan itself. Stock
appreciation rights issued under the Stock Award and Incentive
Plan will not be transferable except by will or the laws of
descent, except for free-standing SARs, which will
be transferable on terms set by the committee.
The committee may not (except in limited circumstances involving
certain corporate transactions) amend a SAR granted under the
Stock Award and Incentive Plan to decrease its exercise price.
The committee also may not cancel any SAR in conjunction with
the grant of any new SAR with a lower exercise price, or take
any action that would be treated as a repricing of
the SAR, unless that action is approved by our shareholders.
Restricted Stock. The Stock Award and
Incentive Plan also enables the committee to grant awards of
restricted stock to participants. Restricted stock awards are
actual shares of our common stock issued to a participant,
subject to conditions on grant, transferability, or vesting
based on continued service of the participant, the satisfaction
of performance goals, or both. We refer to awards of restricted
stock subject to conditions on grant, transferability, or
vesting based on the satisfaction of performance goals as
performance-based
restricted stock.
Generally, any award of restricted stock will be subject to
vesting during a period of at least three years following the
date of grant, although a vesting period of at least one year is
permissible for performance-based restricted stock. An award of
restricted stock may, however, vest in part on a pro rata basis
before the expiration of any vesting period, and up to five
percent of shares available for grant as awards other than
options and stock appreciation rights, including restricted
stock, may be granted without regard to these limitations on
vesting conditions.
Except for restrictions imposed by the committee, a recipient of
a grant of restricted stock has the rights of a shareholder with
respect to the restricted stock, including the right to vote the
stock and to receive all dividends and other distributions paid
with respect to the restricted stock. During the restriction
period set by the committee with respect to restricted stock,
however, the recipient may not sell, transfer, pledge, exchange,
or otherwise encumber shares of restricted stock.
Restricted Stock Units. The Stock Award and
Incentive Plan also enables the committee to grant restricted
stock units, which are awards representing a specified number of
hypothetical shares of our common stock. The plan enables the
committee to issue restricted stock units subject to conditions
on grant or vesting based on continued service of the
participant, conditions based on the satisfaction of performance
goals, or both. We refer to awards of restricted stock units
subject to conditions on grant or vesting based on the
satisfaction of performance goals as performance
units.
Generally, any award of restricted stock units will be subject
to vesting during a period of at least three years following the
date of grant, although a vesting period of at least one year is
permissible for performance units. An award of restricted stock
units may, however, vest in part on a pro rata basis before the
expiration of any vesting period, and up to five percent of
shares available for grant as awards other than options and
stock appreciation rights, including restricted stock units, may
be granted without regard to these limitations on vesting
conditions.
Because restricted stock units are not actual, issued shares of
our common stock, recipients do not have the rights of a
shareholder, but an award of restricted stock units may call for
the payment of dividend equivalents (see Other Stock-Based
Awards below). Restricted stock units may not be sold,
transferred,
58
pledged, or otherwise encumbered before the units have vested.
Restricted stock units that vest will be settled in cash or in
shares of our common stock or a combination thereof, as
determined by the committee. Settlement will occur either at the
time of vesting or on a deferred basis, as determined by the
committee or, if the committee permits, by election of the
recipient.
Other Stock-Based Awards. The Stock Award and
Incentive Plan also enables the committee to grant other
stock-based awards. Other stock-based awards are awards that are
valued by reference to our shares, including unrestricted stock,
dividend equivalents and convertible debentures. Awards of
unrestricted stock may only be granted in lieu of compensation
that would otherwise be due and payable to the participant.
Generally, an other stock-based award that is not an option,
stock appreciation right, or grant of unrestricted stock will be
subject to vesting during a period of at least three years
following the date of grant, although a vesting period of at
least one year is permissible if vesting of the award is
conditioned on performance goals. Such an award may, however,
vest in part on a pro rata basis before the expiration of any
vesting period, and up to five percent of shares available for
grant as awards other than options and stock appreciation
rights, including the other stock-based awards described above,
may be granted without regard to these limitations on vesting
conditions.
Performance-Based Awards. As noted above, the
Stock Award and Incentive Plan authorizes the committee to grant
performance cash awards, performance-based restricted stock, and
performance units. We refer to these kinds of awards
collectively as performance-based awards. We
anticipate that annual bonus awards for our executive officers,
as well as cash-denominated long-term incentive awards for our
executive officers, will be granted pursuant to the provisions
of the plan authorizing performance cash awards.
The committee may determine that a performance-based award is
intended to be exempt from the limits on deductibility under
Section 162(m). In such cases, in order to meet the
requirements for that exemption, the goals must be based on one
or more of the following criteria set forth in the plan: sales,
net sales, revenue, revenue growth or product revenue growth,
operating income (before or after taxes), return on invested
capital, return on capital employed, pre- or after-tax income
(before or after allocation or corporate overhead and bonus),
net earnings, earnings per share, consolidated earnings before
or after taxes (including earnings before any or all of the
following: interest, taxes, depreciation and amortization), net
income, gross profit, gross margin, year-end cash, debt
reductions, book value per share, return on equity, expense
management, return on investment, improvements in capital
structure, profitability of an identifiable business unit or
product, maintenance or improvements of profit margins, stock
price, market share, costs, cash flow, working capital, return
on assets or net assets, asset turnover, inventory turnover,
economic value added (economic profit) or equivalent metrics,
comparison with various stock market indices, appreciation in
and/or
maintenance of share price, reductions in costs, regulatory
achievements, implementation, completion or attainment of
measurable objectives with respect to research, development,
products or projects and recruiting or maintaining personnel,
and total shareholder return; each as measured with respect to
the Company or one or more affiliates, subsidiaries, divisions,
business units, or business segments of the Company, either in
absolute terms or relative to the performance of one or more
other companies or an index covering multiple companies.
Change of Control. Unless otherwise provided
in an award agreement, upon a change of control (as defined in
the plan), each award granted under the Stock Award and
Incentive Plan will immediately vest in full and become
exercisable and transferable unless the award is replaced by a
qualifying replacement award that satisfies certain conditions
set forth in the plan. (We refer to awards that replace awards
under the plan following a change of control as
replacement awards, and those being replaced as
replaced awards.) In the case of performance awards,
awards that are not replaced will be deemed to be earned and
payable, adjusted pro rata for the amount of the performance
period that has elapsed as of the date of the change of control,
based on the greater of the applicable target level or the level
of achievement of the applicable performance goals through the
date of the change of control.
Replacement awards must be of the same type as the replaced
award, have a value at least equal to that of the replaced
award, if the underlying replaced award was an equity-based
award, relate to publicly
59
traded securities, and have terms and conditions no less
favorable to the participant than the replaced award. Also,
replacement awards must become fully vested and, if applicable,
exercisable and free of restrictions, upon the termination of a
participants employment, by the Company without cause or
by the participant for good reason (as each is defined in the
Stock Award and Incentive Plan), during the two years following
the date of the change of control. Any options or stock
appreciation rights held by the participant as of the change of
control, or granted pursuant to a replacement award, will remain
exercisable following such a termination until the earlier of
(1) the third anniversary of the change of control and
(2) the expiration of the term of the option or stock
appreciation right.
Effective Date;
Term; Amendment to Plan
The Stock Award and Incentive Plan is effective as of
June 26, 2008, subject to and contingent upon approval by
at least a majority of the votes cast on the issue by our
shareholders in response to this proposal. The plan has a term
of ten years.
Our Board of Directors, or the committee, may amend, alter, or
discontinue the plan, but no amendment, alteration, or
discontinuation may be made that would materially impair the
rights of a participant with respect to a previously granted
award without the participants consent (with certain
limited exceptions). In addition, no amendment may be made
without the approval of our shareholders if (1) approval of
our shareholders is required by applicable law, (2) the
amendment would materially increase the benefits to participants
under the plan, (3) the amendment would materially increase
the number of securities to be issued under the plan,
(4) the amendment would materially modify the requirements
for participation in the plan, or (5) the amendment would
accelerate the vesting of any restricted stock or restricted
stock units under the plan, except as otherwise provided in the
plan.
Federal Income
Tax Consequences
The following is a summary of certain U.S. federal income
tax consequences of awards we may make under the Stock Award and
Incentive Plan. The discussion is general in nature; we have not
taken into account a number of considerations which may apply in
light of the circumstances of a particular participant. The
income tax consequences under applicable state and local tax
laws may not be the same as under U.S. federal income tax
laws.
Non-Qualified Stock Options. The participant
will not recognize taxable income at the time of a grant of a
non-qualified stock option, and we will not be entitled to a tax
deduction at that time. A participant will recognize
compensation taxable as ordinary income (and be subject to
income tax withholding) upon exercise of a nonqualified stock
option; the recognized compensation will be equal to the excess
of the fair market value of the shares purchased over their
exercise price. We generally will be entitled to a corresponding
deduction upon exercise of a nonqualified stock option.
Incentive Stock Options. The participant will
not recognize taxable income at the time of a grant of an
incentive stock option. The participant will also not recognize
taxable income (except for purposes of the alternative minimum
tax) upon exercise of an incentive stock option.
If the shares acquired by exercise of an incentive stock option
are held for the longer of (1) two years from the date the
option was granted and (2) one year from the date the
shares were purchased, any gain or loss arising from disposition
of those shares, based on the excess of the amount realized upon
the disposition over the original exercise price, will be taxed
as a long term capital gain or loss, and we will not be entitled
to any deduction. If, however, the shares acquired are not held
for the periods described above, then in the year of disposition
the recipient will recognize compensation taxable as ordinary
income, equal to the excess of the lesser of (1) the amount
realized upon such disposition and (2) the excess of the
fair market value of such shares on the date of exercise over
the exercise price. We generally will be entitled to a
corresponding deduction at that time. The excess of any amount
realized in the disposition over the fair market value of the
stock on the exercise date will be treated as a capital gain.
60
Stock Appreciation Rights. The recipient will
not recognize taxable income at the time of a grant of a stock
appreciation right, and we will not be entitled to a tax
deduction at that time. Upon exercise, however, the recipient
will recognize compensation taxable as ordinary income (and
subject to income tax withholding) equal to the fair market
value of any shares delivered and the amount of cash paid by us
in settlement of the rights, and we generally will be entitled
to a corresponding deduction at that time.
Restricted Stock. The recipient of restricted
stock will not recognize taxable income at the time of a grant
of shares of restricted stock, and we will not be entitled to a
tax deduction at such time, unless the participant makes an
election under Section 83(b) of the Internal Revenue Code
to be taxed at that time. If that election is made, the
participant will recognize compensation taxable as ordinary
income (and subject to income tax withholding) at the time of
the grant, equal to the excess of the fair market value of the
shares at such time over the amount, if any, paid for such
shares. If such election is not made, the participant will
recognize compensation taxable as ordinary income (and subject
to income tax withholding) at the time the restrictions lapse,
in an amount equal to the excess of the fair market value of the
shares at such time over the amount, if any, paid for such
shares. We will generally be entitled to a corresponding
deduction at the time the ordinary income is recognized by the
recipient, except to the extent that the deduction limits of
Section 162(m) apply.
In addition, a participant receiving dividends with respect to
restricted stock for which the above-described election has not
been made, and prior to the time the restrictions lapse, will
recognize compensation taxable as ordinary income (and subject
to income tax withholding) rather than dividend income. We will
generally be entitled to a corresponding deduction, except to
the extent that the deduction limits of Section 162(m)
apply.
Restricted Stock Units. The recipient will not
recognize taxable income at the time of a grant of a restricted
stock unit, and we will not be entitled to a tax deduction at
that time. The recipient will recognize compensation taxable as
ordinary income (and subject to income tax withholding),
however, at the time of the settlement of the award, equal to
the fair market value of any shares delivered and the amount of
cash paid by us. We will be entitled to a corresponding
deduction, except to the extent that the deduction limits of
Section 162(m) apply.
Unrestricted Stock. The recipient of
unrestricted stock, and of restricted stock subject only to
restrictions on transferability, will recognize compensation
taxable as ordinary income (and subject to income tax
withholding) at the time of the grant, equal to the excess of
the fair market value of the shares at such time over the
amount, if any, paid for such shares. We will generally be
entitled to a corresponding deduction at that time, except to
the extent that the deduction limits of Section 162(m)
apply.
The foregoing general tax discussion is intended for the
information of our shareholders considering how to vote with
respect to this proposal, and not as tax guidance to
participants in the Stock Award and Incentive Plan. We strongly
urge participants to consult their own tax advisors regarding
the federal, state, local, foreign, and other tax consequences
of participating in the Stock Award and Incentive Plan.
New Plan
Benefits
Performance Cash Awards. Because the amount of
performance cash awards that we will pay under the Stock Award
and Incentive Plan are based on satisfaction of certain
performance goals, we cannot determine at this time what
amounts, if any, will be paid to our executive officers under
the plan. Generally, however, we believe that, had the plan been
used to determine annual cash incentive awards for fiscal year
2008, the awards granted to our executive officers would have
been materially similar to those actually made for fiscal year
2008. The annual cash incentive awards paid to our named
executive officers for fiscal year 2008 are set forth in the
Executive Medtronic Incentive Plan column in the
Non-Equity Incentive Plan Compensation section on
page 39 of this proxy statement.
Stock Awards. We expect that, if the Stock
Award and Incentive Plan is approved by our shareholders, we
will make grants of share-based awards to our directors
consistent with the grant practices
61
currently in effect under the 1998 Outside Director Stock
Compensation Plan. We estimate the number of shares we will
grant to directors during fiscal year 2009 in the table below.
The committee has not yet determined, and we cannot now
anticipate, what other equity-based grants will be made under
the plan if it is approved. Accordingly, we cannot determine the
grants, if any, that the committee may, in its discretion,
decide to make to our executive officers under the Stock Award
and Incentive Plan during the 2009 fiscal year, and the table
below therefore does not include any information about such
grants. Generally, however, we believe that, had the plan been
used to determine equity-based awards for fiscal year 2008, the
awards granted to our executive officers would have been
materially similar to those actually made during fiscal year
2008. The equity awards granted to our named executive officers
are set forth in the Grants of Plan-Based Awards
table on page 41 of this proxy statement.
The following table shows, in the format required by the SEC,
the currently known information about the amounts that may be
paid to our executive officers and directors during fiscal year
2009 under the Stock Award and Incentive Plan. As explained
above, we are not able to determine the amount of performance
cash awards that will be granted, or the number of shares
underlying equity-based awards we will grant to our named
executive officers, under the plan in fiscal year 2009.
|
|
|
|
|
|
|
Performance Cash
|
|
Equity-Based
|
Name and Position
|
|
Awards (in Dollars)
|
|
Awards (in Shares)
|
|
Arthur D. Collins, Jr.
|
|
Not determinable
|
|
Not determinable
|
Chairman
|
|
|
|
|
William A. Hawkins
|
|
Not determinable
|
|
Not determinable
|
President and Chief Executive Officer
|
|
|
|
|
Gary L. Ellis
|
|
Not determinable
|
|
Not determinable
|
Vice President and Chief Financial Officer
|
|
|
|
|
Michael F. DeMane
|
|
Not determinable
|
|
Not determinable
|
Stephen H. Mahle
|
|
Not determinable
|
|
Not determinable
|
Executive Vice President of Healthcare Policy
|
|
|
|
|
Jean-Luc Butel
|
|
Not determinable
|
|
Not determinable
|
Senior Vice President and President, International
|
|
|
|
|
All Executive Officers, as a Group
|
|
Not determinable
|
|
Not determinable
|
All Non-Employee Directors, as a Group
|
|
Not applicable
|
|
16,109(1)
|
All Employees, as a Group
|
|
Not determinable
|
|
Not determinable
|
|
|
|
(1) |
|
This estimate reflects the anticipated award that we expect to
grant to non-employee directors during fiscal year 2009. The
number of shares granted to directors is determined based on
Medtronics closing share price on the date of grant. The
number of shares described in the table is based on a closing
share price of $49.42, which was the closing share price on
April 25, 2008. |
Vote Required;
Board Recommendation
The regulations promulgated under Section 162(m) require
the affirmative vote of a majority of the votes cast on the
issue at the meeting to approve the Medtronic, Inc. 2008 Stock
Award and Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
MEDTRONIC, INC. 2008 STOCK AWARD AND INCENTIVE PLAN.
62
OTHER
INFORMATION
Expenses of
Solicitation
Medtronic will bear the costs of soliciting proxies, 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.
We have engaged The Proxy Advisory Group, LLC to assist in the
solicitation of proxies and provide related advice and
informational support, for a services fee and the reimbursement
of customary disbursements that are not expected to exceed
$15,000 in the aggregate.
Shareholder
Proposals and Director Nominations
In order for a shareholder proposal to be considered for
inclusion in Medtronics proxy statement for the 2009
Annual Meeting, the written proposal must be received by the
Corporate Secretary at Medtronics offices no later than
March 20, 2009. The proposal must comply with SEC
regulations regarding the inclusion of shareholder proposals in
company-sponsored proxy materials.
Medtronics restated articles of incorporation provide that
a shareholder may present a proposal or nominee for director
from the floor that is not included in the proxy statement if
proper written notice is received by the Corporate Secretary at
Medtronics offices not less than 50 nor more than
90 days prior to the Annual Meeting date. If less than
60 days notice of the meeting date is given, the submission
will be considered timely if it is received by the 10th day
after notice of the meeting is given. Any such proposal or
nomination must provide the information required by
Medtronics restated articles of incorporation and comply
with any applicable laws and regulations. If the shareholder
does not also comply with the requirements of
Rule 14a-4(c)(2)
under the Exchange Act, Medtronic may exercise discretionary
voting authority under proxies it solicits to vote in accordance
with its best judgment on any such shareholder proposal or
nomination.
All submissions to, or requests from, the Corporate Secretary
should be made to Medtronics principal offices at 710
Medtronic Parkway, Minneapolis, Minnesota 55432, Attn: Corporate
Secretary.
Delivery of
Documents to Shareholders Sharing an Address
The SEC has adopted amendments to its rules regarding delivery
of proxy statements and annual reports to shareholders sharing
the same address. We may satisfy these delivery rules by
delivering a single proxy statement and annual report to an
address shared by two or more of our shareholders. This delivery
method, referred to as householding, can result in
significant cost savings for us. In order to take advantage of
this opportunity, we have delivered only one proxy statement and
annual report to multiple shareholders who share an address
unless Medtronic has received contrary instructions from one or
more of the shareholders. Medtronic will deliver promptly, upon
written or oral request, a separate copy of the proxy statement
and annual report to a shareholder at a shared address to which
a single copy of the documents was delivered. Shareholders who
wish to receive a separate copy of the proxy statement and
annual report, now or in the future, should submit their request
by contacting Broadridge, either by calling toll-free at
(800) 542-1061,
or by writing to Broadridge, Householding Department, 51
Mercedes Way, Edgewood, New York 11717. Shareholders sharing an
address who are receiving multiple copies of proxy materials and
annual reports and wish to receive a single copy of such
materials in the future should submit their request by
contacting us in the same manner. If you are the beneficial
owner, but not the record holder, of Medtronics shares and
wish to receive only one copy of the proxy statement and annual
report in the future, you will need to contact your broker, bank
or other nominee to request that only a single copy of each
document be mailed to all shareholders at the shared address in
the future.
63
Other
Medtronics 2008 Annual Report, including financial
statements, is being sent to shareholders of record as of
June 23, 2008, 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 25, 2008, UPON RECEIPT OF
WRITTEN REQUEST ADDRESSED TO: INVESTOR RELATIONS DEPARTMENT,
MEDTRONIC, INC., 710 MEDTRONIC PARKWAY, MINNEAPOLIS,
MINNESOTA 55432.
The Board of Directors knows of no other matter 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,
Terrance L. Carlson
Corporate Secretary
MEDTRONIC, INC.
64
Appendix A
MEDTRONIC,
INC.
2008 STOCK AWARD AND INCENTIVE PLAN
SECTION 1. Purpose;
Definitions.
1.1. Purpose. The
purpose of this Medtronic, Inc. 2008 Stock Award and Incentive
Plan (this Plan) is to give the Company and
its Affiliates and Subsidiaries (each as defined below) a
competitive advantage in attracting, retaining, and motivating
officers, employees, directors, and consultants, to provide
financial rewards that are intended to be deductible to the
maximum extent possible as performance-based
compensation within the meaning of Section 162(m) of
the Code (as defined below), and to provide the Company and its
Subsidiaries and Affiliates with an incentive plan that gives
officers, employees, directors, and consultants financial
incentives directly linked to shareholder value. This Plan is
intended to be a successor to the Companys Amended and
Restated 1994 Stock Award Plan, the Medtronic, Inc. 1998 Outside
Director Stock Compensation Plan, the Medtronic, Inc. Executive
Incentive Plan, the Medtronic, Inc. Kyphon Inc. 2002
Stock Plan, and the Medtronic, Inc. 2003 Long-Term Incentive
Plan, and to serve as the Companys primary vehicle for
equity compensation awards and long-term cash incentive awards
for employees, directors, and other service providers, as well
as annual bonus awards for the Companys executive
officers. Following the date that this Plan is approved by the
Companys shareholders, no further equity compensation
awards shall be granted pursuant to any other Company plan (it
being understood that outstanding awards under such plans will
continue to be settled pursuant to the terms of such plans).
1.2. Definitions. Certain
terms used herein have definitions given to them in the first
place in which they are used. In addition, for purposes of this
Plan, the following terms are defined as set forth below:
(a) Act means the Securities Exchange
Act of 1934, as amended from time to time, any regulations
promulgated thereunder, and any successor thereto.
(