Exhibit 10.1

 
December 28, 2010

William A. Hawkins
 

 
Dear Bill:

We have sincerely appreciated your dedication and commitment to Medtronic’s
mission and success.  You have informed the Board of Directors of your decision
to retire from Medtronic, and we wish you the best as you plan for such
retirement and appreciate your efforts to facilitate a smooth transition of your
responsibilities to a successor.
 
This Letter Agreement and Attached Exhibit A (“Agreement”) sets forth the terms
and conditions of your retirement from Medtronic effective April 27, 2012 (or
earlier in accordance with this Agreement).  This Agreement also sets forth the
terms and treatment of certain of your benefits acquired during your
employment.  In consideration of the provisions and agreements set forth below
and for good and valuable consideration, the sufficiency and receipt of which
are acknowledged by both parties, we have agreed as follows.

Article 1.  Agreement.

1.1  Transition Terms.  This Agreement sets forth the terms and conditions,
including the amount, timing, and method of payments, as well as the terms and
benefits of your transition of employment.  You will be entitled to receive the
benefits and payments set forth below, provided that you have signed and not
revoked this Agreement.
 
Article 2.  Transition of Employment.

2.1  Separation and Retirement Dates.  Your last day as Chief Executive Officer
of Medtronic shall be April 29, 2011, or such earlier or later date as
Medtronic’s Board of Directors (“Board”) determines is appropriate to facilitate
a smooth transition.  Such date that you step down as Chief Executive Officer
shall be referred to as the “Separation Date.”  Thereafter, your employment with
Medtronic shall terminate on the “Retirement Date,” which is defined as the
earliest to occur of:  (a) April 27, 2012, or (b) the date of an Event of
Default (as defined in Section 2.11 below).

2.2  Continued CEO Salary, MIP and Benefits.  From the date of this Agreement
through the Separation Date, your current base salary, incentive compensation
(including under the Medtronic Management Incentive Program (“MIP”)), and
perquisites shall continue on the same terms and at such levels as currently in
effect, and your benefit plan participation shall continue under such terms and
conditions as generally apply to senior executive officers of Medtronic.

 
-1-

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

 

Payment of the actual FY11 MIP amount based on business results will be made in
accordance with the customary terms of the MIP, and consistent with Medtronic’s
customary payroll dates and practices.  For the avoidance of doubt, if the
Separation Date occurs before April 29, 2011, the commencement of the Transition
Period prior to the end of FY11 shall have no effect on your FY11 MIP payment.

2.3  Board Resignation.  You will resign from Medtronic’s Board of Directors
effective upon the Separation Date.

2.4  Transition Period.  The period from the Separation Date through the
Retirement Date shall be defined as the Transition Period.  During the
Transition Period, you will not be required to report to work.  However, you
agree to make yourself available (as is mutually convenient) until the
Retirement Date as a Medtronic employee for consultation regarding the
transition of your duties as well as appropriate matters in litigation, talent
retention, regulatory affairs, community affairs and employee engagement.  You
will also continue to provide advice and counsel on matters relating to Industry
Leadership. Although you will remain in regular employment through the end of
the Transition Period, you are expected to have a Separation from Service on the
Separation Date (as that term is defined for purposes of Medtronic’s deferred
compensation arrangements subject to Code Section 409A) due to your decreased
work commitment.  Upon the Retirement Date, you will be treated as retirement
eligible for purposes of all Medtronic plans and programs.

2.5  Transition Period Salary, MIP and Benefits.  During this Transition Period,
your current base salary, incentive compensation (MIP), and perquisites shall
continue on the same terms and at such levels as currently in effect during your
regular employment prior to the Transition Period, and your benefit plan
participation shall continue under such plan terms and conditions as generally
apply to senior executive officers of Medtronic.  During the Transition Period,
subject to the terms and conditions of this Agreement, Medtronic will pay your
current base salary at a gross monthly amount of One Hundred Four Thousand One
Hundred Sixty Seven Dollars ($104,167) (less withholdings for applicable taxes
and authorized deductions).  During the Transition Period, you will be paid
incentive bonuses under the MIP for FY11 and FY12 based upon actual MIP business
results, and in accordance with the customary terms of MIP.  For the purposes of
this Transition Period, benefits plans shall include medical, dental and vision
coverage, basic and optional life insurance, the Medtronic Retirement Plan, the
Medtronic 401(k) plan, salary continuation, long term disability, executive
physical, business allowance, and matching charitable gifts.  Additional benefit
accrual under the Supplemental Executive Retirement Program (“SERP”) will not
occur during the transition period.  Payment of this transition salary and
benefits will commence after expiration of the revocation period set forth in
Article 4 consistent with Medtronic’s customary payroll dates and practices,
provided you have signed and not revoked this Agreement.

For avoidance of doubt, we confirm that you will be permitted to rescind your
2011 deferral election under the CAP on or before December 31, 2010 and that all
voluntary deferrals you have made in prior years are included in the
compensation used in the calculation of the SERP.

 
-2-

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

 

2.6  Long Term Performance Plan (PSP/LTPP).  You will be paid the LTPP payouts
for grants awarded to you for the performance periods FY09 - FY11, FY10 - FY12
and FY11 - FY13, as calculated from corporate financial objectives and as
approved by the Compensation Committee of the Board.  Payment of the actual
amount based on business results will be made to you in accordance with the
terms of the LTPP and consistent with Medtronic’s customary payroll dates and
practices, including your status as a retiree.

2.7  FY12 Long Term Incentive award (LTI).  Notwithstanding Sections 2.2 or 2.5,
you will not be eligible for a new LTI (including LTPP, stock options
and  Restricted Stock Units)  award for FY12 – FY14 unless your Separation Date
occurs more than 60 days after the commencement of Medtronic’s FY12, in which
case the Compensation Committee of the Board will consider you for a FY12 LTPP
award at a level consistent with prior years based on your extended service as
Chief Executive Officer.

2.8  Deferred Compensation Payout.  You will receive distribution of funds in
your Capital Accumulation Plan consistent with Plan provisions and subject to
the requirements of Code Section 409A.

2.9  Stock Options and Restricted Stock.  During the Transition Period and upon
Retirement, your stock options and restricted stock grants will continue to vest
in accordance with the terms of the applicable option and/or restricted stock
agreement.  The exercise of any such option must occur no later than the last
date on which exercise is permitted under the applicable option agreement,
including terms applicable to your status as a retiree. You agree that you are
solely responsible for determining the date on which your options expire per the
terms of your option agreement(s).

2.10  No Further Rights and Benefits.  Effective on the Separation Date, you
shall have no duties and no authority to make any representations or commitments
on behalf of Medtronic or in any capacity whatsoever, except as provided by this
Agreement.  After expiration of Transition Period, you shall have no further
rights deriving from your employment by Medtronic, and shall not be entitled to
any further compensation or non-vested benefits, except as provided in this
Agreement or under the terms of any employee benefit plan in which you are then
a participant.

2.11  Event of Default.  In the event you materially breach any of your material
obligations under Sections 5.5, 5.6, 5.10 or 5.11 of this Agreement, Medtronic
will give you written notice of your alleged material breach and you will have a
reasonable time (not less than 10 days and not more than 30 days) to cure such
breach after you receive such written notice. If you fail to cure a material
breach of your obligations under this Agreement within such time period,
Medtronic may, upon written notice to you, declare an “Event of Default” and
thereupon terminate your Transition Period salary and benefits under Section 2.5
and your right to receive the payments under Section 3.2. If Medtronic gives
notice of an Event of Default and you dispute such notice and commence
arbitration pursuant to Section 5.5.3, there will be no action to terminate your
status as an employee of Medtronic prior to April 27, 2012 unless and until an
Event of Default is determined by the arbitrator.

 
-3-

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

 

Article 3.  Separation Payment.

3.1  Exhibit A Execution.  Exhibit A: Release (“Release”) of this Agreement will
be valid and enforceable, provided you sign Exhibit A no earlier than April 27,
2012. Any execution of  Exhibit A prior to April 27, 2012 or after  May 18, 2012
shall render the Release null and void and unenforceable.

3.2  Additional Consideration: Lump Sum and Annual MIP Payments.  Subject to the
terms and conditions of this Agreement, if the Retirement Date occurs on April
27, 2012, Medtronic will pay to you a lump sum separation amount of: (a) One
Million Five Hundred Sixty Two Thousand Five Hundred Dollars ($1,562,500), which
is an amount equal to one and one-fourth (1-1/4) years of your current base
salary, plus (b) Two Million One Hundred Eighty-Seven Thousand Five Hundred
Dollars ($2,187,500), which is an amount equal to one and one-fourth (1-1/4)
times your Annual MIP target amount for FY11.  Subject to the terms and
conditions of this Agreement, if the Retirement Date occurs on April 27, 2012,
Medtronic will also pay to you a lump sum equal to twenty four (24) times the
monthly COBRA premiums then in effect for continuation of your health and dental
benefits.  Provided you have signed and not revoked this Agreement, these lump
sum amounts (less withholdings for taxes) will be paid to you on June 8, 2012.

3.3  References.  All requests for information for your prospective future
employer relative to your employment at Medtronic will be forwarded to the Lead
independent Director of the Medtronic Board, who  will make a good faith
response to such requests with confirmation of your title, dates of employment,
salary, and performance.  In addition, you may use as references other current
or former Medtronic executives or directors who have agreed to provide you a
reference to your prospective employer.

3.4 Regarding COBRA Benefits.  As provided by COBRA, you shall have the right to
continue coverage in the medical plan(s) in which you are presently
participating, in accordance with state and federal law, for a period of 18
months following the Retirement Date at a cost to you as specified by such
plans, or for such longer period as may be provided by law.

3.5 Non-Required Benefits.  You acknowledge that by accepting the provisions of
this Agreement, you are receiving certain benefits to which you would not
otherwise be entitled.

Article 4.  Release.

4.1  Your Release. In consideration of the provisions of this Agreement, you,
for yourself and your heirs and executors, fully and completely release and
forever discharge Medtronic, its officers, directors, shareholders, board
members, representatives, divisions, parents, subsidiaries, successors and
assigns, employees and agents, of and from any all claims, complaints, causes of
action, demands, sums of money, covenants, contracts, agreements, promises,
liabilities, damages or judgments, whatsoever in law or in equity, which you,
ever had, now have against Medtronic or which you, hereafter, can, shall, or may
have for or by reason of or in connection with any actions, conduct, decisions,
behavior, events, transactions, omissions or accounts, occurring to the date of
this Agreement.

 
-4-

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

 

You acknowledge that this Release specifically covers, but is not limited to,
any and all claims, complaints, causes of action or demands (including related
attorneys’ fees and costs) which you have or may have against Medtronic relating
in any way to the terms, conditions and circumstances of your employment and the
termination, resignation and/or Retirement thereof, or of your service as an
officer or director of Medtronic; whether based on statutory or common law
claims for wrongful discharge, breach of contract, breach of any express or
implied promise, misrepresentation, fraud, retaliation, breach of public policy,
infliction of emotional distress, defamation, promissory estoppels, invasion of
privacy, or employment discrimination, including but not limited to claims under
the Federal Age Discrimination in Employment Act (29 U.S.C. Sec. 621, et seq.),
the Older Workers Benefit Protection Act (“OWBPA”), the Family Medical Leave
Act, Fair Labor Standards Act, Employee Retirement Income Security Act, the
Sarbanes-Oxley Act of 2002 and state statutes, if any, addressing the same
subject matters or any other theory or basis, whether legal or equitable.

Notwithstanding the forgoing, nothing in this Section 4.1 or elsewhere in this
Agreement shall be interpreted to affect or impair any right that you have to
salary or benefits under this Agreement, any right to any vested benefit under
any Medtronic employee benefit plan or program, or any right to indemnification
pursuant to Medtronic’s bylaws and certificate of incorporation or applicable
law.

4.2  Medtronic Release. In consideration of the provisions of this Agreement,
Medtronic, for itself and its officers, directors, shareholders, board members,
representatives, divisions, parents, subsidiaries, successors and assigns,
employees and agents (“Medtronic Parties”), fully and completely releases and
forever discharges you, your heirs and executors, of and from any all claims,
complaints, causes of action, demands, sums of money, covenants, contracts,
agreements, promises, liabilities, damages or judgments, whatsoever in law or in
equity, which any Medtronic Parties, ever had, now have against you or which any
Medtronic Parties, hereafter, can, shall, or may have for or by reason of or in
connection with any actions, conduct, decisions, behavior, events, transactions,
omissions or accounts, occurring to the date of this Agreement.

Medtronic Parties acknowledge that this Release specifically covers, but is not
limited to, any and all claims, complaints, causes of action or demands
(including related attorneys’ fees and costs) which any Medtronic Parties have
or may have against you relating in any way to the terms, conditions and
circumstances of your employment and the termination, resignation and/or
Retirement thereof, or of your service as an officer or director of Medtronic;
whether based on statutory or common law claims for breach of contract, breach
of any express or implied promise, misrepresentation, fraud, breach of public
policy, defamation, or promissory estoppels, or any other theory or basis,
whether legal or equitable.
 
4.3  Notice of Rights of Review and Revocation.  You acknowledge receipt of this
Agreement as notice in writing from Medtronic advising you to consult with an
attorney prior to executing this Agreement and further acknowledges that you
have been provided the right to consider this Agreement for a period of at least
twenty-one (21) days prior to executing same. The parties acknowledge that you
have fifteen (15) days from the date of execution of this Agreement to revoke
same, and that this entire Agreement shall not be effective or enforceable in
whole or in part until the revocation period has expired.  If you choose to
revoke this Agreement within

 
-5-

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

 

fifteen (15) days of execution, such revocation shall apply to the entire
Agreement, and it is understood and agreed that such revocation shall render
this entire Agreement null and void. To be effective, the revocation must be in
writing and delivered by hand or mailed to Caroline Stockdale, Senior Vice
President, Human Resources, Medtronic, Inc., 710 Medtronic Parkway, MS: LC400,
Minneapolis, MN 55432.  If mailed, the revocation must be (a) postmarked within
the fifteen-day revocation period; (b) properly addressed to Caroline Stockdale;
and (c) sent by certified mail, return receipt requested.  If you accept this
Agreement, the signed Agreement should be postmarked or returned by the
fifteenth day following your execution hereof to Caroline Stockdale at the
address stated herein.

Article 5.  General Provisions.

5.1  Vacation Pay.  You shall receive compensation for accrued and unused
vacation through April 27, 2012 in a lump sum (less withholdings for taxes) in
accordance with standard policy within five (5) business days thereafter.

5.2   Executive Placement Services.  Medtronic will make available to you senior
executive level outplacement services through a mutually acceptable vendor
during the Transition Period and for a period of one year following the
Retirement Date.  Payments for such services will be paid directly to the vendor
and will be deemed includable income.

5.3  Professional Fees.  Medtronic will reimburse you for your legal fees
incurred in connection with the review and negotiation of this agreement, and
tax planning fees in connection with your retirement, the sum total of these
fees is subject to a maximum amount of Fifty Thousand Dollars ($50,000).

5.4  Office and Secretarial Support.  During the Transition Period and for three
years thereafter, Medtronic will provide you with access to secretarial and IT
support as appropriate  and office space in a mutually acceptable location.

5.5 Post-Employment Restrictions.   For purposes of this Agreement, terms that
are CAPITALIZED have the following defined meanings with respect to those
businesses:

 
COMPETITIVE PRODUCT means any good, product, product line or service developed,
designed, produced, manufactured, marketed, promoted, sold, supported, serviced,
or in development or the subject of research by anyone other than Medtronic that
is the same as or similar to, or performs any of the same or similar functions
as, may be substituted for, or is intended or used for any of the purposes as
any good, product, product line or service you (or other PERSONS at or on behalf
of Medtronic) researched, developed, designed, produced, manufactured, marketed,
sold, solicited the sale of, or supported as of the Separation Date or about
which at any time you received or otherwise obtained or learned CONFIDENTIAL
INFORMATION.

 
COMPETITIVE RESEARCH AND SUPPORT means any research, development, analysis,
planning or support services of any kind or nature, including without limitation
theoretical and applied research, or business, technical, regulatory or systems
research, analysis, planning or

 
-6-

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

 

 
support, that assists, improves or enhances any aspect of the development,
design, production, manufacture, marketing, promotion, sale, support or service
of a COMPETITIVE PRODUCT.

 
CONFIDENTIAL INFORMATION means any information relating to Medtronic’s business
that you learned during the course of your employment by Medtronic that derives
independent economic value from not being generally known, or readily
ascertainable by proper means, by other PERSONS who can obtain economic value
from its disclosure or use. CONFIDENTIAL INFORMATION includes but is not limited
to trade secrets and inventions and, without limitation, may relate to research;
development; experiments; clinical investigations; clinical trials; clinical and
product development results and data; engineering; product specifications;
computer programs; computer software; hardware configurations; manufacturing
processes; compositions; algorithms; know-how; methods; machines; management
systems and techniques; strategic plans; long-range plans; operating plans;
organizational plans; financial plans; financial models; financial projections;
nonpublic financial information; business, financial, planning, and strategic
systems and methods; operating systems; information systems; acquisition and
divestiture goals, plans, strategies or targets; regulatory strategies, plans
and approaches; quality control systems and techniques; patent and intellectual
property strategies, plans and approaches; vendor and customer data; employee
and personnel data; human resources goals, plans and strategies; human resource
management techniques; sales volumes; pricing strategies; sales and marketing
plans and strategies, contracts and bids; and any business management techniques
that are being planned or developed, utilized or executed by Medtronic; provided
that CONFIDENTIAL INFORMATION does not include information that has been
publicly disclosed by Medtronic or is otherwise publicly available.
CONFLICTING ORGANIZATION means any PERSON or entity, and any parent, subsidiary,
partner or affiliate of any PERSON or entity, that engages in, or is intended to
become engaged in, the development, design, production, manufacture, promotion,
marketing, sale, support or service of a COMPETITIVE PRODUCT or in COMPETITIVE
RESEARCH AND SUPPORT.
 
PERSON means any natural or judicial person or entity of any kind.

5.5.1  From the Separation Date and for 24 months thereafter, you will not
engage in any of the following activities:

 
·
Be employed by or affiliated in any capacity with, become an independent
contractor or consultant for, a director or advisor to, or render any services,
directly or indirectly, on behalf of or in support of, any CONFLICTING
ORGANIZATION.
 
·
Use, disclose, or rely upon any CONFIDENTIAL INFORMATION to or for the benefit
of anyone other than Medtronic, for as long as the information retains the
characteristics described in the definition above.
 
·
Encourage or induce any PERSON to stop or refrain from doing business with
Medtronic.
 
·
On behalf of a CONFLICTING ORGANIZATION, solicit, cause to be solicited, or
participate in or promote the solicitation of any PERSON to purchase, use,
recommend or prescribe a COMPETITIVE PRODUCT.

 
-7-

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

 

 
·
On behalf of a CONFLICTING ORGANIZATION, solicit, cause to be solicited, or
participate in or promote the solicitation of any PERSON to participate in,
evaluate, comment on or otherwise be engaged in COMPETITIVE RESEARCH AND
SUPPORT.

5.5.2  Notification Process for Waiver Request.

 
·
You will provide to Medtronic advance written notice of your intention to engage
in any activity that, if accepted or undertaken by you, would constitute a
breach of the provisions of Section 5.5.1 of this Agreement.  Such advance
notice will include a description of the company and your proposed position,
scope of duties and responsibilities.
 
·
Medtronic will evaluate the nature and scope of the position and determine, in
the exercise of good faith, whether the opportunity as described in your notice
would constitute a violation of Section 5.5.1 of this Agreement.  If Medtronic
makes a determination that the opportunity would constitute a breach of Section
5.5.1, Medtronic may, in the exercise of its reasonable discretion, grant an
appropriate waiver of the provisions of Section 5.5.1.  If Medtronic grants an
appropriate waiver of the provisions of Section 5.5.1, such waiver shall be
limited to the opportunity as described, and may contain such conditions and
terms as Medtronic considers appropriate under the circumstances.
 
·
If the waiver is granted, Medtronic will request assurances of protection of
Medtronic trade secret information from your new employer.
 
·
In exercising its reasonable discretion hereunder, Medtronic will act in a
manner reasonably consistent with past practices, including favorable
consideration of opportunities you may have with private equity or venture
capital companies, or with companies primarily engaged in the pharmaceuticals
business, so long as such companies are not competitive with any material
business of Medtronic.
 
·
If you believe that Medtronic’s determination that an opportunity would
constitute a breach of Section 5.5.1 was not made in good faith or that
Medtronic did not exercise its reasonable discretion in withholding a waiver,
you may fully engage the Arbitration process set forth in Section 5.5.3 set
forth below.

 
5.5.3  Arbitration.   To the fullest extent permitted by law, all claims that
you may have against Medtronic or any other Released Party, or which Medtronic
may have against you, in any way related to the subject matter, interpretation,
application, or alleged breach of this Agreement (“Arbitrable Claims”) shall be
resolved by binding arbitration in the state of Minnesota. The Arbitration will
be held before a single arbitrator pursuant to the rules of Arbitration of the
Center for Public Resources for employment disputes. The decision of the
arbitrator shall be in writing and shall include a statement of the essential
conclusions and findings upon which the decision is based.

Arbitration shall be final and binding upon the parties and shall be the
exclusive remedy for all Arbitrable Claims. Either party may bring an action in
a Minnesota or federal court of competent jurisdiction to compel arbitration
under this Agreement and to enforce an arbitration award. Otherwise, neither
party shall initiate or prosecute any lawsuit or administrative action in any
way related to any Arbitrable Claim. Notwithstanding the foregoing, either party
may, in the

 
-8-

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

 

event of an actual or threatened breach of this Agreement, seek a temporary
restraining order or injunction in a Minnesota or federal court of competent
jurisdiction restraining breach pending a determination on the merits by the
arbitrator.

 
THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO
ARBITRABLE CLAIMS, INCLUDING WITHOUT LIMITATION ANY RIGHT TO TRIAL BY JURY AS TO
THE MAKING, EXISTENCE, VALIDITY, OR ENFORCEABILITY OF THE AGREEMENT TO
ARBITRATE.

5.6  Non-Solicitation of Employees.   Unless given prior consent by the Chief
Executive Officer of Medtronic, Inc, you shall not at any time prior to the date
24 months following the Separation Date, solicit, participate in or promote the
solicitation of any person who is employed by Medtronic, Inc. as of the
Separation Date or at any time during six months preceding the Separation Date
to leave the employ of Medtronic, Inc. to take employment with any company you
are then employed by or serve in any advisory or managerial capacity (including,
without limitation, as a member of a board of directors). You further shall not,
on your own behalf or behalf of any company you are then employed by or serve in
any advisory or managerial capacity (including, without limitation, as a member
of a board of directors), hire, employ or engage any such person or entity. You
further agree that, during such time, if an employee of Medtronic, Inc. contacts
you about prospective employment with any company you are then employed by or
serve in any advisory or managerial capacity (including, without limitation, as
a member of a board of directors), you will inform such individual that you
cannot discuss the matter further without informing the CEO of Medtronic. If a
Medtronic employee asks you provide reference to a prospective employer, you may
provide such information if you have no current employment, consultative or
advisory relationship with that prospective employer. Medtronic acknowledges
that you may not be directly and specifically involved with the recruitment and
hiring of a Medtronic employee by your employer. In such a case, you agree that,
upon Medtronic’s request, you will provide, and will use reasonable efforts to
cause your employer to provide, evidence that this provision has not been
breached with respect to such recruitment and hiring.

5.7  Agreement Not to Affect Benefits.   This Agreement shall not in any way
impair any of your existing rights with respect to pension, retirement and/or
other employee benefit plans of Medtronic applicable to former employees.

5.8  Assignment.   The parties represent and warrant that they have not assigned
or transferred to any PERSON or entity, any claim or right released, granted or
conveyed pursuant to this Agreement, and the parties covenant and agree that
neither party may assign any rights or benefits under this Agreement without the
prior written consent of the other party, which consent shall not be
unreasonably withheld.

5.9  Company Property.   You will return all proprietary or confidential
information and documents, and company property including but not limited to
credit cards, calling cards, keys, employment badges and any company provided
hardware and software no later than the Separation Date; provided that you may
retain the cellular phone, iPad and laptop computer

 
-9-

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

 

issued to you by Medtronic so long as all Medtronic information is preserved and
removed for retention by Medtronic.

5.10  Cooperation with Employer.   During the Transition Period, you agree to
cooperate with Medtronic and provide consulting as reasonably requested
regarding the transition of your duties; provided that such cooperation and
consulting shall not unreasonably interfere with any employment or business
pursuits, including consulting, that you may be engaged in from time to time.
You represent that you have fully and truthfully disclosed to Medtronic any and
all concerns you may have related to your employment and/or any alleged or
perceived violation by Medtronic, its agents or employees of Medtronic’s Code of
Conduct, its Business Conduct Standards, or any applicable legal, regulatory or
quality requirements.
 
In addition, you agree to cooperate fully with Medtronic, including its
attorneys or accountants, in connection with any potential or actual litigation,
or other real or potential disputes, which directly or indirectly involves
Medtronic; provided that such cooperation shall not unreasonably interfere with
any employment or business pursuits, including consulting, that you may be
engaged in from time to time. You agree to appear as a witness and be available
to attend depositions, consultations or meetings regarding litigation or
potential litigation as requested by Medtronic. Medtronic acknowledges that
these efforts, if necessary, will impose on your time and would likely interfere
with other commitments you may have in the future. Consequently, Medtronic shall
attempt to schedule such depositions, consultations or meetings in coordination
with your schedule, but you recognize that scheduling of certain court
proceedings, including depositions, may be beyond Medtronic’s control. Likewise,
following the Transition Period, Medtronic agrees to compensate you for your
time hereunder at a mutually agreeable per hour rate of Six Hundred Dollars
($600.00) for actual time spent traveling to and from and attending such
depositions, consultations or meetings, not to include ancillary time spent at
hotels and related locations during evenings between proceedings. Medtronic also
agrees to reimburse you for the out-of-pocket expenditures actually and
reasonably incurred by you in connection with the performance of the services
contemplated by this Section 5.10, including hotel accommodations, air fare
transportation and meals consistent with Medtronic’s generally applicable
expense reimbursement policies. It is expressly understood by the parties that
any compensation paid by Medtronic to you under this Section 5.10 shall be in
exchange for your time and is not intended or understood to be dependent upon
the character or content of any information you disclose in good faith in any
such proceedings, meetings or consultation.
 
5.11  Future Conduct.   You agree not to engage in any form of conduct, or make
any statements or representations, that disparage or otherwise harm the
reputation, goodwill or commercial interests of Medtronic or its management. You
will refrain from making any statements including disparaging, derogatory or
otherwise negative comments or statements about Medtronic to any person,
including specifically but not limited to, any person affiliated in any way with
any actual or potential employee, customer, vendor or competitor of Medtronic or
any member of the medical, business, professional or scientific community with
whom Medtronic has had or, to your knowledge, has contemplated a business,
professional, or scientific relationship.

Medtronic, its officers and directors agree not to engage in any form of
conduct, or make any

 
-10-

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

 

statements or representations, that disparage or otherwise harm you or your
reputation. Medtronic will refrain from making any statements including
disparaging, derogatory or otherwise negative comments or statements about you
to any person.

5.12  Indemnification.  In the event that any payments, benefits or other
amounts provided to you under this agreement are subject to the excise tax
imposed by Code Section 409A, Medtronic will indemnify and hold you harmless on
a net after-tax basis from such excise tax and all interest and penalties
imposed upon you with respect to such tax as well as all expenses incurred by
you in contesting such tax. In the event of a claim is made against you for an
excise tax under Code Section 409A, you agree that Medtronic may contest such
claim, at its expense, with counsel appointed by Medtronic and reasonably
acceptable to you. In addition, in the event that you are named as a defendant
in litigation, or are otherwise subject to threatened or asserted claims against
you, related to your employment or service with Medtronic, Medtronic will
indemnify and provide legal defense for you in accordance with the law and
subject to the terms and conditions of Medtronic’s directors and officer’s
liability insurance coverage. Medtronic acknowledges its continuing obligation
to defend and indemnify you in connection with acts and omissions performed in
the course of your service with Medtronic, in the same manner as other current
and former officers and directors.  The foregoing indemnification shall be
provided subject to the requirements of Treasury Regulation Section
1.409A-3(i)(l)(v).

5.13  Confidentiality, Non-Disclosure.   The parties agree that they will not
reveal, publish, disseminate or discuss any or all of the background,
negotiations or terms and conditions of this Agreement except to one’s spouse,
attorney, accountant or as may be required by law.

5.14  Voluntary Agreement.   The parties acknowledge that they have been
provided a full opportunity to review and reflect upon the terms of this
Agreement and to seek advice of legal counsel of their choice and that their
signatures are freely, voluntarily and knowingly given.  The undersigned officer
of Medtronic represents and warrants that she has full authority to enter into
this Agreement on behalf of Medtronic.

5.15 Entire Agreement.   The parties agree that, except as it relates to the
provisions of any agreements related to the grant of any stock option, other
equity grant or employee benefit plan in which you participate, this Agreement
supersedes any prior arrangements, agreements or contracts whether written, oral
or implied (in law or fact), between them (including, without limitation, your
Change of Control Agreement with Medtronic) and contains the entire
understanding and agreement between the parties and cannot be amended, modified
or supplemented in any respect, except by a subsequent written agreement
executed by both parties.
 
5.16 Choice of Law.   This Agreement shall be governed by the laws of the State
of Minnesota.

5.17  Limited Severability.   If any Article or provision(s) of this Agreement
are found by a court of competent jurisdiction to be invalid or unenforceable,
in whole or in part, then those provisions shall be deemed to be modified or
restricted in the manner necessary to render them valid and enforceable, and
this Agreement shall be construed and enforced to the maximum extent permitted
by law, if any.

 
-11-

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

 
 
5.18  Headings.   The titles and subtitles of the various sections and
paragraphs of this Agreement are inserted for convenience and shall not be
deemed to affect the meaning or construction of any of the terms, provisions,
covenants and conditions of this Agreement.

5.19  Payments to Estate. In the event of your death prior to the Retirement
Date or before payment has been made of all amounts provided under this
Agreement, the remaining payments to you under this Agreement shall be made to
your estate .

5.20  Right to Pursue Other Activities and Employment During the Transition
Period.   Subject to your compliance with the provisions of this Agreement, you
may seek and accept other employment and otherwise engage in gainful employment,
including consulting services, during the Transition Period. You shall continue
to be paid the amounts under this Agreement and have the benefits set forth in
this Agreement during the Transition Period.  If you are required to continue to
perform CEO duties beyond the anticipated Separation Date of April 29, 2011 and
you notify the Board of your intent to accept a material employment opportunity
(subject to the provisions of section 5.5 of this Agreement) after April 29,
2011, the Board will endeavor to complete the transition of CEO duties as
expeditiously as possible.

5.21  Public Announcements.  Medtronic agrees to consult with you on all public
announcements regarding your employment, retirement, the transition of your
employment, or your service or the completion of your service on the Board.

5.22 No Mitigation.   Medtronic agrees you are not required to seek other
employment or to attempt in any way to reduce any amounts payable to you by
Medtronic pursuant to this Agreement. Furthermore, the amount of any payment or
benefit provided for in this Agreement shall not be reduced by any compensation
earned by you as a result of employment by another employer or otherwise.

5.23 Section 409A of the IRS Code (“the Code”).  The intent of the parties is
that payments and benefits under this Agreement comply with Section 409A of the
Code to the extent subject thereto or be exempt therefrom and, accordingly, to
the maximum extent permitted, this Agreement shall be interpreted and
administered to be in compliance therewith.  Notwithstanding anything contained
herein to the contrary, to the extent required to avoid the application of an
accelerated or additional tax under section 409A of the Code, each amount to be
paid or benefit to be provided under this Agreement shall be construed as a
separately identified payment for purposes of section 409A of the Code, and any
payments that are due within the "short term deferral period" as defined in
section 409A of the Code shall not be treated as deferred compensation unless
applicable law requires otherwise.  To the extent required to avoid the
application of an accelerated or additional tax under section 409A of the Code,
amounts that would otherwise be payable and benefits that would otherwise be
provided pursuant to this Agreement during the six-month period immediately
following your "separation from service" (within the meaning of section 409A)
shall instead be paid on the first business day after the date that is six
months following your "separation from service" (or upon your death, if
earlier).  To the extent required to avoid an accelerated or additional tax
under section 409A of the Code, amounts reimbursable to you under this Agreement
shall be paid to you on or before the last day of the year following the year in
which the expense was incurred and the

 
-12-

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

 

amount of expenses eligible for reimbursement (and in-kind benefits provided to
you) during any one year may not affect amounts reimbursable or provided in any
subsequent year.

WHEREFORE, the parties execute this Agreement in counterparts effective the date
set forth below.
 
 
 

MEDTRONIC, INC.
        /s/ Caroline Stockdale     /s/ William A. Hawkins  
Caroline Stockdale
William A. Hawkins
Senior Vice President, Human Resources
     
Date:
  12/28/10  
Date:
  12/28/10  

 
 

 
-13-

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

 

Exhibit A

SEPARATION AGREEMENT AND RELEASE
 
This Separation Agreement and Release (“Release”) is made and entered into by
and between Medtronic, Inc. (“Medtronic”), and William A. Hawkins ("You"), whose
residence is 2650 Marshland Road, Wayzata, MN 55391.
 
WHEREAS, You are Chairman and Chief Executive Officer of Medtronic, Inc.;

WHEREAS, You and Medtronic have executed a Separation Agreement and Release
dated December 28, 2010 (the “Agreement”) relating to your termination of
employment by reason of retirement;
 
WHEREAS, the Agreement contemplated the execution (and non-revocation) of this
Release before You would be provided with additional benefits in connection with
your termination of employment;
 
WHEREAS, neither the Agreement nor this Release constitutes any admission of any
kind by either party; and
 
WHEREAS, the parties wish to document their understanding and agreement with
respect to the terms of your separation from employment with Medtronic.
 
NOW, THEREFORE, in consideration of the provisions and agreements set forth
hereinafter, and for good and valuable consideration, the sufficiency of which
is acknowledged by both parties, the parties agree as follows:
 
 
Article 1.        Separation Pay Award.
 

1.1
Separation Pay Award.  You have been granted a Separation Pay Award as set forth
in Section 3.2 of the Agreement ("Award").

Article 2.         Termination of Employment.

2.1
Termination Date.  For purposes of the Agreement, your employment with Medtronic
terminated by reason of retirement effective April 27, 2012 (“Retirement Date”).

Article 3         Separation Package.

3.1
Exhibit A Execution.  This Release will be valid and enforceable, provided You
sign this Exhibit A: Release no earlier than April 27, 2012. Any execution
of  Exhibit A prior to April 27, 2012 or after May 18, 2012 shall render this
Release null and void and unenforceable.

3.2
Additional Consideration: Lump Sum and Annual MIP Payments.  Subject to the
terms and conditions of the Agreement, if the Retirement Date occurs on April
27, 2012,

 
-14-

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

 

 
Medtronic will pay to you a lump sum separation amount of: (a) One Million Five
Hundred Sixty Two Thousand Five Hundred Dollars ($1,562,500), which is an amount
equal to one and one-fourth (1-1/4) years of your current base salary, plus (b)
Two Million One Hundred Eighty-Seven Thousand Five Hundred Dollars ($2,187,500),
which is an amount equal to one and one-fourth (1-1/4) times your Annual MIP
target amount for FY11.  Subject to the terms and conditions of the Agreement,
if the Retirement Date occurs on April 27, 2012, Medtronic will also pay to you
a lump sum equal to twenty four (24) times the monthly COBRA premiums then in
effect for continuation of your health and dental benefits.  Provided you have
signed and not revoked this Release, these lump sum amounts (less withholdings
for taxes) will be paid to you on June 8, 2012.

3.3
Non-Required Benefits.  You acknowledge that by accepting the provisions of the
Agreement and this Release, You are receiving certain benefits to which You
would not otherwise be entitled.

Article 4.         Releases.
 

4.1
Your Release. In consideration of the provisions of this Release, You, for
yourself and your  heirs and executors, fully and completely release and forever
discharge Medtronic, its officers, directors, shareholders, board members,
representatives, divisions, parents, subsidiaries, successors and assigns,
employees and agents, of and from any and all claims, complaints, causes of
action, demands, sums of money, covenants, contracts, agreements, promises,
liabilities, damages or judgments, whatsoever in law or in equity, which You
ever had, now has against Medtronic or which You hereafter, can, shall, or may
have for or by reason of or in connection with any actions, conduct, decisions,
behavior, events, transactions, omissions or accounts, occurring to the date of
this Agreement, except (i) obligations of Medtronic under this Release and under
the Agreement and (ii) indemnity obligations of Medtronic under its articles of
incorporation, bylaws, directors’ and officers’ liability trust, and applicable
laws with respect to actions taken by You as an officer and employee of
Medtronic and/or any of its subsidiaries.
     
You acknowledge that this Release specifically covers, but is not limited to,
any and all claims, complaints, causes of action or demands (including related
attorneys' fees and costs) which You have or may have against Medtronic relating
in any way to the terms, conditions and circumstances of his employment and the
termination, resignation and/or retirement thereof, whether based on statutory
or common law claims for wrongful discharge, breach of contract, breach of any
express or implied promise, misrepresentation, fraud, retaliation, breach of
public policy, infliction of emotional distress, defamation, promissory
estoppel, invasion of privacy, or employment discrimination, including but not
limited to claims under the Federal Age Discrimination in Employment Act (29
U.S.C. Sec. 621, et seq.), the Older Workers Benefit Protection Act ("OWBPA"),
the Family Medical Leave Act, Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act (“ADA”), Employee Retirement Income Security
Act, the Sarbanes-Oxley Act of 2002 and federal and state statutes, if any,
addressing the same subject matters or any other theory or basis, whether legal
or equitable, except nothing in this Release shall constitute a waiver of your
right to make

 
-15-

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

 

 
claims to enforce the Agreement or include any claim that, as a matter of law,
cannot be released by private agreement.
     
Notwithstanding the forgoing, nothing in this Section 4.1 or elsewhere in this
Release shall be interpreted to affect or impair any right that you have to
salary or benefits under the Agreement, any right to any vested benefit under
any Medtronic employee benefit plan or program, or any right to indemnification
pursuant to Medtronic’s bylaws and certificate of incorporation or applicable
law.
   
4.2
Protected Rights.  You expressly acknowledge that this Release does not
relinquish any protected rights You may have under Title VII of the Civil Rights
Act of 1964, the Equal Pay Act (“EPA”), the Americans with Disabilities Act
(“ADA”), OWBPA or the Age Discrimination in Employment Act (“ADEA”) to file a
charge, testify, assist or participate in any manner in an investigation,
hearing or proceeding conducted by the Equal Employment Opportunity Commission
or the Office of Federal Contract Compliance.  However, You may not recover
additional compensation or damages as a result of that participation.
   
4.3
Medtronic Release.  In consideration of the provisions of this Release,
Medtronic, for itself and its officers, directors, shareholders, board members,
representatives, divisions, parents, subsidiaries, successors and assigns,
employees and agents (“Medtronic Parties”), fully and completely releases and
forever discharges You, your heirs and executors, of and from any all claims,
complaints, causes of action, demands, sums of money, covenants, contracts,
agreements, promises, liabilities, damages or judgments, whatsoever in law or in
equity, which any Medtronic Parties, ever had, now have against You or which any
Medtronic Parties, hereafter, can, shall, or may have for or by reason of or in
connection with any actions, conduct, decisions, behavior, events, transactions,
omissions or accounts, occurring to the date of this Release.
     
Medtronic Parties acknowledge that this Release specifically covers, but is not
limited to, any and all claims, complaints, causes of action or demands
(including related attorneys’ fees and costs) which any Medtronic Parties have
or may have against You relating in any way to the terms, conditions and
circumstances of your employment and the termination, resignation and/or
Retirement thereof, or of your service as an officer or director of Medtronic;
whether based on statutory or common law claims for breach of contract, breach
of any express or implied promise, misrepresentation, fraud, breach of public
policy, defamation, or promissory estoppels, or any other theory or basis,
whether legal or equitable.
   
4.4
Notice of Rights of Review and Revocation.  You acknowledge receipt of this
Release as notice in writing from Medtronic advising You to consult with an
attorney prior to executing this Release and further acknowledges that You have
been provided the right to consider this Release for a period of at least
twenty-one (21) days prior to executing same. The parties acknowledge that You
have fifteen (15) days from the date of execution of this Release to revoke
same, and that this entire Release shall not be effective or enforceable in
whole or in part until the revocation period has expired.  If You choose to
revoke this Release within fifteen (15) days of execution, such revocation

 
-16-

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

 

 
shall apply to the entire Release, and it is understood and agreed that such
revocation shall render this entire Release null and void. To be effective, the
revocation must be in writing and delivered by hand or mailed to Caroline
Stockdale, Senior Vice President, Human Resources, Medtronic, Inc., 710
Medtronic Parkway, MS: LC400, Minneapolis, MN 55432.  If mailed, the revocation
must be (a) postmarked within the fifteen-day revocation period; (b) properly
addressed to Caroline Stockdale; and (c) sent by certified mail, return receipt
requested.  If You accept this Release, the signed Release should be postmarked
or returned by the fifteenth day following your execution hereof to Caroline
Stockdale at the address stated herein.

Article 5.         General Provisions.
 

5.1
Agreement Not to Affect Benefits.  This Release shall not in any way impair any
existing rights You have with respect to pension, retirement and/or other
employee benefit plans of Medtronic applicable to former employees.
   
5.2
Regarding COBRA Benefits.  As provided by COBRA, You shall have the right to
continue coverage in the medical plan(s) in which You are presently
participating for a period of 18 months following the Termination Date, or for
such longer period as may be provided by law.
   
5.3
Stock Options and Restricted Stock.  During the Transition Period and upon
Retirement, your stock options and restricted stock grants will continue to vest
in accordance with the terms of the applicable option and/or restricted stock
agreement.  The exercise of any such option must occur no later than the last
date on which exercise is permitted under the applicable option agreement,
including terms applicable to your status as a retiree. You agree that You are
solely responsible for determining the date on which his options expire per the
terms of your option agreement(s).
   
5.4
Assignment.   The parties represent and warrant that they have not assigned or
transferred to any person or entity, any claim or right released, granted or
conveyed pursuant to this Release, and the parties covenant and agree that
neither party may assign any rights or benefits under this Release without the
prior written consent of the other party, which consent shall not be
unreasonably withheld.
   
5.5
Voluntary Agreement.  The parties acknowledge that they have been provided a
full opportunity to review and reflect upon the terms of this Release and to
seek advice of legal counsel of their choice and that their signatures are
freely, voluntarily and knowingly given.  The undersigned officer of Medtronic
represents and warrants that she has full authority to enter into this Agreement
on behalf of Medtronic.
   
5.6
Entire Agreement.  This Release, together with the Agreement, except as
otherwise provided herein, and except as it relates to those agreements for
stock option grants, restricted stock units and any other equity awards, and any
other agreements related to benefit plans, supersedes any prior arrangements,
agreements or contracts, whether written, oral or implied (in law or fact),
between them (including, without limitation, your Change of Control Agreement
with Medtronic) and contains the entire understanding and

 
-17-

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

 

 
agreement between the parties and cannot be amended, modified or supplemented in
any respect, except by a subsequent written agreement executed by both parties
and expressly stating that it is intended to modify this Agreement.
   
5.8
Choice of Law.   This Release shall be governed by the laws of the State of
Minnesota.
   
5.9
Headings.   The titles and subtitles of the various sections and paragraphs of
this Release are inserted for convenience and shall not be deemed to affect the
meaning or construction of any of the terms, provisions, covenants and
conditions of this Release.
   
5.10
Section 409A of the IRS Code (“the Code”).  The intent of the parties is that
payments and benefits under this Release comply with Section 409A of the Code to
the extent subject thereto or be exempt therefrom and, accordingly, to the
maximum extent permitted, this Release shall be interpreted and administered to
be in compliance therewith.  Notwithstanding anything contained herein to the
contrary, to the extent required to avoid the application of an accelerated or
additional tax under section 409A of the Code, each amount to be paid or benefit
to be provided under this Release shall be construed as a separately identified
payment for purposes of section 409A of the Code, and any payments that are due
within the "short term deferral period" as defined in section 409A of the Code
shall not be treated as deferred compensation unless applicable law requires
otherwise.  To the extent required to avoid the application of an accelerated or
additional tax under section 409A of the Code, amounts that would otherwise be
payable and benefits that would otherwise be provided pursuant to this Release
during the six-month period immediately following your "separation from service"
(within the meaning of section 409A) shall instead be paid on the first business
day after the date that is six months following your "separation from service"
(or upon your death, if earlier).  To the extent required to avoid an
accelerated or additional tax under section 409A of the Code, amounts
reimbursable to you under this Release shall be paid to you on or before the
last day of the year following the year in which the expense was incurred and
the amount of expenses eligible for reimbursement (and in-kind benefits provided
to you) during any one year may not affect amounts reimbursable or provided in
any subsequent year.
     
WHEREFORE, the parties execute this Release on the date set forth below.

 
 
 

MEDTRONIC, INC.
        /s/ Caroline Stockdale     /s/ William A. Hawkins  
Caroline Stockdale
William A. Hawkins
Senior Vice President, Human Resources
     
Date:
  12/28/10  
Date:
  12/28/10  

-18-

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