##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K/A
 (Amendment No. 1)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 000-51998
 Restore Medical, Inc.
  
 Delaware
    
    41-1955715(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 2800 Patton Road
St. Paul, Minnesota 55113
(651) 634-3111
 Securities Registered pursuant to Section 12(b) of the Act:
 Common Stock, $0.01 par value
    
    Nasdaq Global Market(Title of each class)
    
    (Name of each exchange on which registered)
 Securities Registered pursuant to Section 12(g) of the Act:
 
 o þ
 o þ
 þ o
 o
  Large accelerated filer
o
    
    Accelerated filer o
    
    Non-accelerated filer  
þ
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



Restore Medical, Inc.
Form 10-K/A
Table of Contents
  
 PageExplanatory Note
    
    
    1PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    1Item 11.
    
    Executive Compensation
    
    
    3Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management, and Related Stockholder Matters
    
    
    15Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    17Item 14.
    
    Principal Accountant Fees and Services
    
    
    18PART IVItem 15.
    
    Exhibits and Financial Statement Schedule
    
    
    19SignaturesExhibit Index2007 Management Incentive Plan2008 Management Incentive PlanCertification of Chief Executive Officer Pursuant to Section 302Certification of Chief Financial Officer Pursuant to Section 302Certification of Chief Executive Officer Pursuant to Section 906Certification of Chief Financial Officer Pursuant to Section 906
  i




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##### Table of Contents



EXPLANATORY NOTE
  
 PART III
 
 Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Directors and Executive Officers
  Luke Evnin, Ph.D.
 Mark B. Knudson, Ph.D.
 Stephen Kraus
 Howard Liszt
 Richard Nigon
 1




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##### Table of Contents



J. Robert Paulson, Jr .
 John
Schulte
  Audit Committee
 www.restoremedical.com.
 Code of Business Conduct and Ethics
 www.restoremedical.com.
 Section 16(a) Beneficial Ownership Reporting Compliance
  2




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Item 11. EXECUTIVE COMPENSATION
 Compensation Discussion and Analysis
    Compensation Philosophy
  Compensation Determination Process and Components
 st
  3




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##### Table of Contents



Base Salary
    Name
    
    Principal Position
    
    2007 BaseJ.Robert Paulson, Jr.
    
    President, CEO and Director & Asst. Sec.
    
    $286,000Christopher R. Geyen
    
    Sr. Vice President, CFO and Secretary
    
    $203,500Craig G. Palmer
    
    Sr. Vice President of U.S. Sales
    
    $215,000Michael Kujak
    
    Vice President of Marketing
    
    $175,000David Bremseth
    
    Vice President of Clinical, Quality and Regulatory
    
    $180,000
 Annual Cash Incentives
    4




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##### Table of Contents



Base
    
    Bonus Target
    
    Bonus EarnedName
    
    Pay
    
    %
    
    $
    
    %
    
    $J. Robert Paulson, Jr.
    
    $
    286,000
    
    
    
    50
    %
    
    $
    143,000
    
    
    
    14.7
    %
    
    $
    41,949Christopher R. Geyen
    
    $
    203,500
    
    
    
    30
    %
    
    $
    61,050
    
    
    
    8.8
    %
    
    $
    17,909Craig G. Palmer
    
    $
    215,000
    
    
    
    30
    %
    
    $
    64,500
    
    
    
    8.8
    %
    
    $
    18,921Michael Kujak
    
    $
    175,000
    
    
    
    20
    %
    
    $
    35,000
    
    
    
    5.9
    %
    
    $
    10,267David Bremseth
    
    $
    180,000
    
    
    
    20
    %
    
    $
    36,000
    
    
    
    5.9
    %
    
    $
    10,560
  Long-Term Incentives
      5




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##### Table of Contents



Other Compensation
   Severance Benefits
  Compliance with Internal Revenue Code Section 162(m)
   Compensation Committee Interlocks and Insider Participation
  6




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##### Table of Contents



Compensation Committee Report
  Compensation Committee of the Board of Directors of Restore Medical
 John Schulte, Chair
    
    Luke Evnin, Ph.D.
 7




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##### Table of Contents



Summary Compensation Table
  Summary Compensation Table
 Non-EquityIncentive Plan
    
    All OtherName and
    
    
    
    Salary
    
    Bonus
    
    Option Awards
    
    Compensation
    
    Compensation
    
    TotalPrincipal Position
    
    Year
    
    ($)
    
    ($)(1)
    
    ($)(2)
    
    ($)(3)
    
    ($)(4)
    
    ($)J. Robert Paulson, Jr.
    
    
    2007
    
    
    
    285,083
    
    
    
    
    
    
    
    713,187
    
    
    
    41,949
    
    
    
    9,242
    
    
    
    1,049,461President and
    
    
    2006
    
    
    
    262,500
    
    
    
    
    
    
    
    573,603
    
    
    
    33,433
    
    
    
    7,097
    
    
    
    876,633Chief Executive OfficerChristopher R. Geyen (5)
    
    
    2007
    
    
    
    201,958
    
    
    
    
    
    
    
    245,145
    
    
    
    17,909
    
    
    
    9,242
    
    
    
    474,254Senior Vice President and
    
    
    2006
    
    
    
    152,881
    
    
    
    
    
    
    
    145,590
    
    
    
    18,743
    
    
    
    5,826
    
    
    
    323,040Chief Financial OfficerCraig G. Palmer (6)
    
    
    2007
    
    
    
    215,000
    
    
    
    
    
    
    
    88,638
    
    
    
    18,921
    
    
    
    7,646
    
    
    
    330,205Senior Vice President  U.S. Sales
    
    
    2006
    
    
    
    62,708
    
    
    
    
    
    
    
    7,563
    
    
    
    6,266
    
    
    
    3,030
    
    
    
    79,567David L. Bremseth (7)
    
    
    2007
    
    
    
    180,000
    
    
    
    
    
    
    
    46,060
    
    
    
    10,560
    
    
    
    9,135
    
    
    
    245,755Vice President  Clinical
    
    
    2006
    
    
    
    7,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,500and Regulatory AffairsMichael R. Kujak (8)
    
    
    2007
    
    
    
    162,436
    
    
    
    
    
    
    
    57,578
    
    
    
    10,267
    
    
    
    8,599
    
    
    
    238,880Vice President  Marketing
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Under current reporting rules, only discretionary or guaranteed bonuses are disclosed
in this column. We award bonuses solely on our achievement of certain performance
targets. Accordingly, bonus payments are reported in the Non-Equity Incentive Plan
Compensation column.(2)
    
    The amounts in this column are calculated based on FAS 123R for options granted after
January 1, 2006 or the intrinsic value method for options granted prior to the adoption
of FAS 123R and equal the financial statement compensation expense as reported in our
2007 statement of operations for the fiscal year excluding the financial impact of the
estimated forfeitures related to service-based vesting conditions. A pro rata portion of
the total expense calculated at time of grant is recognized over the applicable service
period generally corresponding with the vesting schedule of the grant. The initial
expense is based on the fair value of the stock option grants as estimated using the
Black-Scholes option-pricing model for grants after January 1, 2006 or the minimum value
method for grants prior to January 1, 2006. The assumptions used to arrive at the value
are disclosed in Note 11 to our financial statements included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2007.(3)
    
    Represents bonuses earned under our Management Incentive Plan.(4)
    
    Amounts shown for each executive officer include healthcare benefit payments.(5)
    
    Mr. Geyen joined the company in March 2006.(6)
    
    Mr. Palmer joined the company in September 2006.(7)
    
    Mr. Bremseth joined the company in December 2006.(8)
    
    Mr. Kujak joined the company in January 2007. 8




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##### Table of Contents



Grants of Plan-Based Awards
  Grants of Plan-Based Awards
 Estimated Future Payouts Under
    
    
    All Other Option
    
    
    
    
    
    
    Grant DateNon-Equity Incentive Plan
    
    
    Awards: Number
    
    
    Exercise or
    
    
    Fair Value ofAwards(2)
    
    
    of Securities
    
    
    Base Price of
    
    
    Stock andGrant Date(1)(6)
    
    
    Threshold
    
    
    Target
    
    
    Maximum
    
    
    Underlying
    
    
    Option Awards
    
    
    OptionName
    
    
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    Options (#)(3)(6)
    
    
    ($/Sh)
    
    
    Awards ($)(4)J. Robert Paulson, Jr.
    
    
    2/1/2007
    
    
    
    
    
    
    
    143,000
    
    
    
    214,500
    
    
    
    75,000
    
    
    $
    3.89
    
    
    $
    190,5008/10/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,500
    
    
    $
    1.63
    
    
    $
    166,8938/10/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225,000
    
    
    $
    1.63
    
    
    $
    925,450Christopher R. Geyen (5)
    
    
    2/1/2007
    
    
    
    
    
    
    
    61,050
    
    
    
    91,575
    
    
    
    178,500
    
    
    $
    3.89
    
    
    $
    850,3302/1/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    $
    3.89
    
    
    $
    38,1008/10/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,500
    
    
    $
    1.63
    
    
    $
    33,3818/10/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160,650
    
    
    $
    1.63
    
    
    $
    720,987Craig G. Palmer
    
    
    8/10/2007
    
    
    
    
    
    
    
    64,500
    
    
    
    96,750
    
    
    
    148,500
    
    
    $
    1.63
    
    
    $
    306,407David L. Bremseth
    
    
    2/1/2007
    
    
    
    
    
    
    
    36,000
    
    
    
    54,000
    
    
    
    80,000
    
    
    $
    3.89
    
    
    $
    203,2008/10/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,000
    
    
    $
    1.63
    
    
    $
    178,020Michael R. Kujak
    
    
    2/1/2007
    
    
    
    
    
    
    
    35,000
    
    
    
    52,500
    
    
    
    100,000
    
    
    $
    3.89
    
    
    $
    254,0008/10/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,000
    
    
    $
    1.63
    
    
    $
    222,522
 
 (1)
    
    The grant date of all equity awards is the date on which the Board of Directors approved
the award.(2)
    
    Represents bonuses earned under our Management Incentive Plan. The target bonus for each
executive officer will be a percentage of the respective base salary for the executive
officer. Under the Management Incentive Plan for 2007, Mr. Paulson could have earned earn a
bonus up to 75% of his base salary with a target of 50% of his base salary. Messrs. Geyen
and Palmer could have earned a bonus of 45% of their respective base salary with a target of
30% of their respective base salaries. Messrs. Bremseth and Kujak could have earned a bonus
of 30% of their base salary with a target of 20% of their base salary. Each of their bonuses
was weighted 75% on quantitative financial objectives and 25% on qualitative corporate
objectives. Under the Management Incentive Plan, there are no guaranteed minimum payouts.
In other words, the minimum level of payout or the threshold level is zero. While the
Management Incentive Plan allows for payouts at less than the target level, all such
payments are made at the sole discretion of the Board of Directors. The bonuses are
reviewed by the Compensation Committee and, upon the recommendation of the Compensation
Committee, approved by the Board of Directors. The actual awards made to the executive
officers in the table are reported in the Non-Equity Incentive Plan Compensation column in
the Summary Compensation table and are discussed further above under the heading
Compensation Discussion and Analysis.(3)
    
    Stock options are granted under our 1999 Omnibus Stock Plan and vest 25% on the first
anniversary of the date of grant, and 1/36th per month for 36 months thereafter.(4)
    
    Valuation of awards based on the grant date fair value of the stock option grants as
estimated using the Black-Scholes option-pricing model. The assumptions used to arrive at
the Black-Scholes value are disclosed in Note 11 to our financial statements included in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2007.(5)
    
    On February 1, 2007, the Board of Directors, upon the recommendation of the Compensation
Committee, approved an
amendment to 235,250 stock options that were granted to nine company employees between May
15, 2006 and July 20, 2006 (including the initial 178,500 stock options that were granted to
Christopher R. Geyen, our Chief Financial Officer, on May 16, 2006), whereby the exercise
price of such stock options was reduced from a weighted average of $7.89 per share to $3.89
per share (the closing price of our common stock on the Nasdaq Global Market on February 1,
2007). All other terms of the stock options, including vesting and termination dates,
remained the same. Mr. Geyens stock options were the only stock options held by our
executive officers or directors that were impacted by the re-pricing. The incremental fair
value resulting from the repricing of Mr. Geyens stock option (computed as of the
modification date of February 1, 2007 in accordance with FAS 123R) was $102,974. 9




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##### Table of Contents



(6)
    
    On August 10, 2007, our Board of Directors, upon the recommendation of the Compensation
Committee, approved an amendment to the terms of stock options to purchase an aggregate of
890,100 shares of common stock granted to eight executive officers (including a portion of
the February 1, 2007 stock options that were granted as follows: Mr. Paulson 67,500, Mr.
Geyen 160,650 and 13,500, Mr. Bremseth 72,000, Mr. Kujak 90,000; and the December 5, 2006
grant of 148,500 for Mr. Palmer), with exercise prices ranging from $3.37 to $8.00 per
share, whereby the exercise price of such stock options was reduced to $1.63 per share,
which was the historical 45-day trailing average of the closing price of the companys
common stock on August 10, 2007. The closing price of the companys common stock on August
10, 2007 was $1.18 per share. The aggregate incremental fair value resulting from the
repricing of the named executive officers stock options (computed as of the modification
date of August 10, 2007 in accordance with FAS 123R) was $248,850. Outstanding Equity Awards at Fiscal Year-End
  Outstanding Equity Awards At Fiscal Year-End
 Option AwardsNumber ofNumber of
    
    SecuritiesSecurities
    
    UnderlyingUnderlying
    
    UnexercisedUnexercised Options
    
    Options
    
    Option
    
    Option(#)
    
    (#)
    
    Exercise
    
    ExpirationName
    
    Exercisable(1)
    
    Unexercisable(1)
    
    Price ($)(2)
    
    DateJ. Robert Paulson, Jr.
    
    
    272,306
    
    
    
    136,195
    
    
    $
    1.10
    
    
    
    4/11/2015
    
    
    
    292,500
    
    
    $
    1.63
    
    
    
    8/10/2017
    
    
    
    7,500
    
    
    $
    3.89
    
    
    
    2/1/201725,000
    
    
    
    
    
    
    $
    8.00
    
    
    
    5/16/2016Christopher R. Geyen
    
    
    
    
    
    
    174,150
    
    
    $
    1.63
    
    
    
    8/10/201717,850
    
    
    
    
    
    
    $
    3.89
    
    
    
    5/16/2016
    
    
    
    1,500
    
    
    $
    3.89
    
    
    
    2/1/2017Craig G. Palmer
    
    
    
    
    
    
    148,500
    
    
    $
    1.63
    
    
    
    8/10/201716,500
    
    
    
    
    
    
    $
    3.37
    
    
    
    2/1/2017David L. Bremseth
    
    
    
    
    
    
    72,000
    
    
    $
    1.63
    
    
    
    8/10/2017
    
    
    
    8,000
    
    
    $
    3.89
    
    
    
    2/1/2017Michael R. Kujak
    
    
    
    
    
    
    90,000
    
    
    $
    1.63
    
    
    
    8/10/2017
    
    
    
    10,000
    
    
    $
    3.89
    
    
    
    2/1/2017
 
 (1)
    
    Stock options are granted under our 1999 Omnibus Stock Plan and vest 25% on the
first anniversary of the date of grant, and 1/36th per month for 36 months
thereafter.(2)
    
    On February 1, 2007, the Board of Directors, upon the recommendation of the
Compensation Committee, approved an amendment to 235,250 stock options that were
granted to nine company employees between May 15, 2006 and July 20, 2006 (including
the initial 178,500 stock options that were granted to Christopher R. Geyen, our
Chief Financial Officer, on May 16, 2006), whereby the exercise price of such stock
options was reduced from a weighted average of $7.89 per share to $3.89 per share
(the closing price of our common stock on the Nasdaq Global Market on February 1,
2007). All other terms of the stock options, including vesting and termination
dates, remained the same. Mr. Geyens stock options were the only stock options held
by our executive officers or directors that were impacted by the re-pricing. On
August 10, 2007, our Board of Directors, upon the recommendation of the compensation
committee, approved an amendment to the terms of stock options to purchase an
aggregate of 890,100 shares of common stock granted to eight executive officers (including a portion of
the February 1, 2007 stock options that were granted as follows: Mr. Paulson 67,500, Mr.
Geyen 160,650 and 13,500, Mr. Bremseth 72,000, Mr. Kujak 90,000; and the December 5, 2006
grant of 148,500 for Mr. Palmer), with
exercise prices ranging from $3.37 to $8.00 per share, whereby the exercise price of
such stock options was reduced to $1.63 per share, which was the historical 45-day
trailing average of the closing price of the companys common stock on August 10,
2007. The closing price of the companys common stock on August 10, 2007 was $1.18
per share. On February 5, 2008, our Board of Directors, upon the recommendation of the Compensation Committee
in lieu of granting new options from the option pool, approved an amendment to the terms of stock
options to purchase an aggregate of 98,900 shares of common stock granted to eight executive
officers (including a portion of stock options that were originally granted between May 16, 2006
and February 1, 2007 as follows: Mr. Paulson 32,500, Mr. Geyen 19,350, Mr. Palmer 16,500, Mr. Kujak
10,000, and Mr. Bremseth 8,000), with exercise prices ranging from $3.37 to $8.00 per share,
whereby the exercise price of such stock options was reduced to $1.19 per share, which was the
closing price of the Companys stock on February 5, 2008. 10




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Option Exercises and Stock Vested
  Potential Payments Upon Termination or Change-in-Control
  Payments Made Upon Termination for Cause.
  Payments Made Upon Termination Without Cause.
  Payments Made Upon Death or Disability.
  Potential Payments Upon Change-in-Control.
   11




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12




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Potential Payments Upon Termination and Change-in-Control
 Payments UponTerminationPayments Upon
    
    
    
    
    
    
    Without Cause orTermination
    
    
    Payments Upon
    
    
    ConstructiveWithout Cause
    
    
    Change- in-
    
    
    TerminationWithout Change-
    
    
    Control Without
    
    
    After a Change-in-Name
    
    Type of Payment
    
    in-Control ($)
    
    
    Termination ($)
    
    
    Control ($)J. Robert Paulson, Jr.
    
    Base Pay
    
    $
    286,000
    
    
    $
    
    
    
    $
    286,000Total Spread Value of Stock Options(1)
    
    
    
    
    
    
    27,239
    
    
    
    54,478Health Care Benefits
    
    
    17,244
    
    
    
    
    
    
    
    17,244$
    303,244
    
    
    $
    27,239
    
    
    $
    357,722Christopher R. Geyen
    
    Base Pay
    
    $
    203,500
    
    
    $
    
    
    
    $
    203,500Total Spread Value of Stock Options(1)
    
    
    
    
    
    
    
    
    
    
    Health Care Benefits
    
    
    17,244
    
    
    
    
    
    
    
    17,244$
    220,744
    
    
    $
    
    
    
    $
    220,744Craig G. Palmer
    
    Base Pay
    
    $
    107,500
    
    
    $
    
    
    
    $
    215,000Total Spread Value of Stock Options(1)
    
    
    
    
    
    
    
    
    
    
    Health Care Benefits
    
    
    7,665
    
    
    
    
    
    
    
    12,630$
    115,165
    
    
    $
    
    
    
    $
    227,630Michael Kujak
    
    Base Pay
    
    $
    87,500
    
    
    $
    
    
    
    $
    87,500Total Spread Value of Stock Options(1)
    
    
    
    
    
    
    
    
    
    
    Health Care Benefits
    
    
    9,972
    
    
    
    
    
    
    
    9,972$
    97,472
    
    
    $
    
    
    
    $
    97,472David Bremseth
    
    Base Pay
    
    $
    90,000
    
    
    $
    
    
    
    $
    90,000Total Spread Value of Stock Options(1)
    
    
    
    
    
    
    
    
    
    
    Health Care Benefits
    
    
    9,972
    
    
    
    
    
    
    
    9,972$
    99,972
    
    
    $
    
    
    
    $
    99,972
 
 (1)
    
    Value computed for each stock option grant by multiplying (i) the difference
between (a) $1.50, the closing market price of a share of our common stock on
December 31, 2007, the last business day of the year and (b) the exercise price per
share for that option grant by (ii) the number of shares subject to that option
grant. On April 22, 2008, the Company, Medtronic, Inc. and MRM Merger Corporation, a wholly owned
subsidiary of Medtronic, entered into an Agreement and Plan of Merger (the Merger Agreement)
pursuant to which MRM Merger Corporation will be merged with and into the Company. As a result of
the merger, the separate corporate existence of MRM Merger Corporation will cease, and the Company
will continue as the surviving corporation in the merger and as a wholly owned subsidiary of
Medtronic. The Merger Agreement provides that at the effective time of the merger (the Effective
Time), and as a result thereof, the Companys shareholders will receive, in exchange for each
share of Company common stock they own immediately prior to the completion of the merger, the right
to receive a cash payment in the amount of $1.60 per share, subject to adjustment if the
outstanding capital stock, options and warrants of the Company would cause the aggregate
consideration to exceed $26,333,800. Each option and warrant to purchase Company common stock that
is outstanding as of the Effective Time will be canceled in exchange for the right to receive in
cash the amount by which the merger consideration exceeds the exercise price, multiplied by the
number of shares subject to such option or warrant. Assuming merger
consideration of $1.60 per share is applied in accordance with the
terms of the Merger Agreement to all stock options held by the named
executive officers on April 22, 2008, the total spread value of
stock options for the named executive officers would be as
follows: Mr. Paulson, $217,576; Mr. Geyen, $8,959;
Mr. Palmer, $10,250; Mr. Kujack, $9,225; and
Mr. Bremseth, $6,150.



The foregoing description of the merger and
the Merger Agreement does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the full text of the Merger Agreement, a copy of which has been filed by
the Company as Exhibit 2.1 to the Companys Current Report on Form 8-K filed with the Securities
and Exchange Commission on April 22, 2008. 13




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##### Table of Contents



Director Compensation
   Fees for attendance at Board meetings
    
    $
    2,500Additional fees for attendance at Audit, Compensation and
Nominating and Governance Committee meetings
    
    $
    500
    Director Compensation Table.
 Director Compensation
 Fees Earned or
    
    
    
    
    
    All OtherPaid in Cash
    
    Option Awards
    
    Compensation
    
    TotalName(1)
    
    ($)
    
    ($)(2)
    
    ($)(3)
    
    ($)Mark B. Knudson,Ph.D.
    
    $
    14,500
    
    
    $
    78,936
    
    
    $
    27
    
    
    $
    93,463Luke Evnin, Ph.D.
    
    $
    7,000
    
    
    $
    67,400
    
    
    $
    6,033
    
    
    $
    80,433Stephen Kraus
    
    $
    11,500
    
    
    $
    67,400
    
    
    $
    471
    
    
    $
    79,371Howard Liszt
    
    $
    15,500
    
    
    $
    67,400
    
    
    $
    257
    
    
    $
    83,157Richard Nigon
    
    $
    15,500
    
    
    $
    80,881
    
    
    $
    
    
    
    $
    96,381John Schulte
    
    $
    10,000
    
    
    $
    67,400
    
    
    $
    2,174
    
    
    $
    79,574
 
 (1)
    
    J. Robert Paulson, Jr., our President and Chief Executive Officer is not
included in this table because he is an employee of Restore Medical and thus
received no compensation for his services as a director. The compensation he
received as an employee of Restore Medical is shown in the Summary Compensation
Table.(2)
    
    The amounts in this column are calculated based on FAS 123R and equal the
financial statement compensation expense as reported in our 2007 statement of
operations for the fiscal year. Under FAS 123R, a pro rata portion of the total
expense at time of grant is recognized over the applicable service period generally
corresponding with the vesting schedule of the grant. The initial expense is based
on the fair value of the stock option grants as estimated using the Black-Scholes
option-pricing model. The assumptions used to arrive at the Black-Scholes value
are disclosed in Note 11 to our financial statements included in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2007.The full grant date FAS 123R value of option awards granted in 2007 are as follows:
Dr. Knudson: 12,500 options with a full grant date value of $15,875; Dr. Evnin:
12,500 options with a full grant date value of $15,875; Mr. Kraus: 12,500 options
with a full grant date value of $15,875; Mr. Liszt: 12,500 options with a full
grant date value of $15,875; Mr. Nigon: 15,000 options with a full grant date value
of $19,050; and Mr. Schulte: 12,500 options with a full grant date value of
$15,875. 14




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##### Table of Contents



The directors held options as of December 31, 2007, as follows: Vested
    
    UnvestedName
    
    Options
    
    OptionsDr. Knudson
    
    
    70,000
    
    
    
    12,500Dr. Evnin
    
    
    25,000
    
    
    
    12,500Mr. Kraus
    
    
    25,000
    
    
    
    12,500Mr. Liszt
    
    
    25,000
    
    
    
    12,500Mr. Nigon
    
    
    30,000
    
    
    
    15,000Mr. Schulte
    
    
    60,000
    
    
    
    12,500
 (3)
    
    Represents payment of expenses incurred while attending Board meetings.
 
 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
 (a) Equity Compensation Plans
  Number of SecuritiesNumber of
    
    
    
    
    
    
    Remaining AvailableSecurities to be
    
    
    Weighted-
    
    
    for Future IssuanceIssued Upon
    
    
    Average
    
    
    Under EquityExercise of
    
    
    Exercise Price
    
    
    Compensation PlansOutstanding
    
    
    of Outstanding
    
    
    (ExcludingOptions,
    
    
    Options,
    
    
    SecuritiesWarrants and
    
    
    Warrants and
    
    
    Reflected in SecondPlan Category
    
    Rights
    
    
    Rights
    
    
    Column)Equity compensation
plans approved by
security holders
    
    
    3,246,485
    (1)
    
    $
    1.97
    
    
    
    256,991
    (2)Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    3,246,485
    
    
    $
    1.97
    
    
    
    256,991
 
 (1)
    
    Consists of options awarded under the 1999 Omnibus Stock Plan and outstanding
warrants to purchase common stock.(2)
    
    Represents the maximum number of shares of common stock available to be
awarded as of December 31, 2007. 15




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##### Table of Contents



(b) Security Ownership
  Amount andNature of Beneficial
    
    Percent ofName of Beneficial Owner
    
    Ownership(1)
    
    ClassMPM Capital Funds
    
    
    4,435,084
    (3)(4)
    
    
    27.4Venturi I, LLC
    
    
    1,602,306
    (5)
    
    
    10.2Bessemer Venture Partners
    
    
    1,379,308
    (6)
    
    
    8.8Magnetar Financial LLC
    
    
    1,239,125
    (7)
    
    
    7.9General Electric Pension Trust
    
    
    872,069
    (8)
    
    
    5.5Putnam Investments
    
    
    862,069
    (9)
    
    
    5.5Perkins Capital Management, Inc
    
    
    824,360
    (10)
    
    
    5.2J. Robert Paulson, Jr
    
    
    350,621
    (2)
    
    
    2.2Christopher R. Geyen
    
    
    
    
    
    
    *Craig G. Palmer
    
    
    
    
    
    
    *David L. Bremseth
    
    
    
    
    
    
    *Michael R. Kujak
    
    
    
    
    
    
    *Luke Evnin, Ph.D
    
    
    4,472,584

(2)(11)
    
    
    27.6Mark B. Knudson, Ph.D
    
    
    1,692,401
    (2)(12)
    
    
    10.7Stephen Kraus
    
    
    37,500
    (2)
    
    
    *Howard Liszt
    
    
    42,500
    (2)
    
    
    *Richard Nigon
    
    
    45,000
    (2)
    
    
    *John Schulte
    
    
    77,500
    (2)
    
    
    *All directors and executive officers as a group (14 persons)
    
    
    6,797,422
    (13)
    
    
    40.1
 
 *
    
    The percentage of shares of common stock beneficially owned does not exceed one percent of
the outstanding shares of common stock.(1)
    
    For purposes of this table, a person or group of persons is deemed to have beneficial
ownership of any shares of common stock which that person has the right to acquire within 60
days following March 31, 2008. For purposes of computing the percentage of outstanding shares
of common stock held by each person or group of persons named above, any shares which that
person or persons has or have the right to acquire within 60 days following March 31, 2008, is
deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.(2)
    
    Includes the following shares subject to options exercisable currently or within 60 days of
March 31, 2008: Mr. Paulson, 314,851 shares; Dr. Evnin, 37,500 shares; Dr. Knudson, 82,500
shares; Mr. Kraus, 37,500 shares; Mr. Liszt, 37,500 shares; Mr. Nigon, 45,000 shares and Mr.
Schulte, 77,500 shares.(3)
    
    This information is based on a Schedule 13G filed with the Securities and Exchange Commission
on February 9, 2007 by MPM BioVentures II-QP, L.P. and a group of affiliated entities, which
reported sole voting and dispositive power and shared voting and dispositive power as of
December 31, 2006, as follows: (i) MPM BioVentures II-QP, L.P. (BV QP), sole voting and
dispositive power as to 2,985,706 shares; (ii) MPM BioVentures II, L.P. (BV II), sole voting
and dispositive power as to 329,524 shares; (iii) MPM BioVentures GmbH & Co.
Parallel-Beteiligungs KG (BV KG), sole voting and dispositive power as to 1,051,115 shares;
MPM Asset Management Investors 2000B LLC (AM 2000), sole voting and dispositive power as to
68,739 shares; (iv) Ansbert Gadicke, shared voting and dispositive power as to 4,435,084
shares and (v) Luke Evnin, shared voting and dispositive power as to 4,435,084 shares. MPM
Asset Management II, L.P. (AM II LP) and MPM Asset Management II LLC (AM II LLC) are the
direct and indirect general partners of BV QP, BV II and BV KG. Messrs. Gadicke and Evnin are
members and investment managers of Asset 2000 and AM II LLC and each disclaims beneficial
ownership of the shares owned by AM II LLC and its affiliates except to the extent of their
proportionate pecuniary interest therein. The address for each of these affiliated entities
is c/o MPM Capital L.P., The John Hancock Tower, 200 Clarendon Street, 54th Floor,
Boston, MA 02116.(4)
    
    Includes warrants exercisable within 60 days of March 31, 2008 as follows: (i) 306,986 by BV
QP.; (ii) 33,880 by BV II; (iii) 108,073 by BV KG and (iv) 7,067 by Asset 2000.(5)
    
    Consists of 1,560,141 shares and warrants to purchase 42,165 shares. Mark B. Knudson, the
chairman of our board of directors, holds voting and/or dispositive power over the shares held
by Venturi I, LLC. Dr. Knudson disclaims beneficial ownership of the shares held by Venturi I,
LLC except to the extent of his pecuniary interest therein.(6)
    
    This information is based on a Schedule 13G filed with the Securities and Exchange Commission
on February 9, 2007 by Deer VI & Co, LLC (Deer VI), Bessemer Venture Partners VI L.P.
(BVP), Bessemer Venture Partners Co-Investment L.P. (BVPCI) and Bessemer Venture Partners
VI Institutional L.P. (BVPI), which reported shared voting and dispositive power as of
December 31, 2006 as to 1,379,308 shares. As of December 31, 2006, BVP was the record holder
of 1,018,966 shares of common stock, BVPCI was the record holder of 343,102 shares of common
stock and BVPI was the record holder of 17,240 shares of common stock. By virtue of their
relationship as affiliated entities, whose general partner has overlapping individual
executive managers, as 16




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##### Table of Contents



the case may be, each of BVP, BVPCI and BVPI may be deemed to
beneficially own and share the power to direct the disposition and vote of the aggregate
1,379,308 shares held by BVP, BVPCI and BVPI. Deer VI, as sole general partner of BVP, BVPCI
and BVPI, may also be deemed to beneficially own these
shares. Each reporting person disclaims beneficial ownership of such shares except to the
extent of their pecuniary interest, if any. The address of each of these affiliated entities is
c/o Bessemer Venture Partners, 1865 Palmer Avenue, Larchmont, NY 10583.(7)
    
    This information is based on Amendment No. 1 to a Schedule 13G field with the Securities and
Exchange Commission on February 13, 2008 by Magnetar Financial LLC, a registered investment
advisor, and a group of affiliated entities, which reported voting and dispositive power as of
December 31, 2007, as follows: (i) Magnetar Financial LLC, shared voting and dispositive
power as to 747,398 shares held for the account of Magnetar Capital Master Fund (MCMF) and
(ii) Magnetar Capital Partners L.P., Supernova Management LLC and Alec N. Litowitz, shared
voting and dispositive power as to 1,239,125 shares, consisting of 747,398 shares held for the
account of MCMF, 2,320 shares held for the account of Magnetar SGR Fund, Ltd, 47,634 shares
held for the account of Magnetar SGR Fund, LP and 441,773 shares held for the account of
certain managed accounts (the Managed Accounts). Magnetar Financial LLC serves as
investment advisor to MCMF and in such capacity exercises voting and investment power over the
shares held for the account of MCMF. Magnetar Investment Management, a registered investment
advisor, serves as investment advisor to the Managed Accounts, Magnetar SGR Fund, Ltd and
Magetar SGR Fund, LP and in such capacity exercises voting and investment power over the
shares held by such accounts. Supernova Management is the general partner of Magnetar Capital
Partners and Mr. Litowitz is the manager of Supernova Management. The address for each of
these affiliated entities is 1603 Orrington Avenue, 13th Floor, Evanston, IL 60201.(8)
    
    This information is based on a Schedule 13G filed with the Securities and Exchange Commission
on February 13, 2008 by GE Asset Management Incorporated, a registered investment advisor and
wholly owned subsidiary of General Electric Company, which reported sole voting and
dispositive power as of December 31, 2007 to 872,069 shares. General Electric Company
disclaims beneficial ownership of the shares held by GE Asset Management Incorporated. The
address for GE Asset Management Incorporated is 3001 Summer Street, Stamford, CT 06905 and the
address for General Electric Company is 3135 Easton Turnpike, Fairfield, CT 06431.(9)
    
    This information is based on a Schedule 13G filed with the Securities and Exchange Commission
on February 1, 2008 by Putnam, LLC d/b/a Putnam Investments (PI), a parent holding company
to Putnam Investment Management, LLC (PIM) and The Putnam Advisory Company, LLC (PAC),
each wholly owned registered investment advisors, which reported shared dispositive power as
of December 31, 2007 to 862,069 shares. PIM is the investment advisor to the Putnam family of
mutual funds and PAC is the investment advisor to Putnams institutional clients. PIM and PAC
have dispositive power over the shares as investment managers, but each of the mutual funds
trustees have voting power over the shares held by each fund and PAC has shared voting power
over the shares held by the institutional clients. PI disclaims beneficial ownership of the
shares held by PIM and PAC and states that it does not have voting or dispositive power over
these shares. The address for PI, PIM and PAC is One Post Office Square, Boston, MA 02109.(10)
    
    This information is based on a Schedule 13G filed with the Securities and Exchange Commission
on January 1, 2008 by Perkins Capital Management, Inc., a registered investment advisor, which
reported sole voting power to 474,850 shares and sole dispositive power to 824,360 shares as
of December 31, 2007. The address for Perkins Capital Management, Inc. is 730 East Lake
Street, Wayzata, MN 55391.(11)
    
    Consists of 3,979,078 shares and warrants to purchase 456,006 shares owned by MPM Capital
Funds described in Footnotes (3) and (4) and options owned by Dr. Evnin described in Footnote
(2). As described in Footnote (3), Dr. Evnin, one of the members of our Board of Directors,
holds shared voting and/or dispositive power over the shares held by BV QP, BV II, BV KG and
Asset 2000. Dr. Evnin disclaims beneficial ownership of the shares owned by the MPM Capital
Funds except to the extent of his proportionate pecuniary interest therein.(12)
    
    Consists of 7,185 shares, warrants to purchase 410 shares and options owned by Dr. Knudson
described in Footnote (2). Also consists of the 1,560,141 shares and warrants to purchase
42,165 shares owned by Venturi I, LLC described in Footnote (5). Dr. Knudson, the Chairman of
our Board of Directors, holds voting and/or dispositive power over the shares held by Venturi
I, LLC. Dr. Knudson disclaims beneficial ownership of the shares owned by Venturi I LLC
except to the extent of his proportionate pecuniary interest therein.(13)
    
    Includes 1,202,548 shares of common stock issuable upon exercise of options and warrants
currently exercisable or exercisable within 60 days of March 31, 2008, inclusive of the
options exercisable as described in Footnote (2). 
 Item 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
 Review of Related Person Transactions
   Director Independence
  17




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##### Table of Contents



Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Payment of Fees to Auditor
 Audit Fees
  Audit-Related Fees
  Tax Fees
  All Other Fees
  Administration of Engagement of Independent Auditor
   18




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##### Table of Contents



PART IV
 
 Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
  19




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##### Table of Contents



SIGNATURES
  Restore Medical, Inc.By:
    /s/ J. Robert Paulson, Jr.J. Robert Paulson, Jr.President and Chief Executive Officer  Signature
    
    Title/s/ J. Robert Paulson, Jr.

J. Robert Paulson, Jr.
    
    President, Chief Executive Officer and Director
(principal executive officer)/s/ Christopher R. Geyen

Christopher R. Geyen
    
    Chief Financial Officer (principal financial
and accounting officer)*

Mark B. Knudson
    
    Chairman and Director*

Richard Nigon
    
    Director*

Howard Liszt
    
    Director*

Luke Evnin, Ph.D.
    
    Director*

Stephen Kraus
    
    Director*

John Schulte
    
    Director
 *By:
    
    /s/ J. Robert Paulson, Jr.J. Robert Paulson, Jr.As Attorney-in-Fact




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    Second Amended and Restated Certificate of Incorporation of
Restore Medical, Inc. (Incorporated herein by reference to Exhibit
3.2 to Amendment No. 4 to the registrants Registration Statement
on Form S-1 filed on May 12, 2006 (File No. 333-132368)).3.2
    
    Amended and Restated Bylaws of Restore Medical, Inc. (Incorporated
herein by reference to Exhibit 3.4 to Amendment No. 4 to the
registrants Registration Statement on Form S-1 filed on May 12,
2006 (File No. 333-132368)).10.1
    
    Commercial Lease, dated as of August 5, 2005, by and between
Roseville Properties Management Company, as agent for
Commers-Klodt III, and Restore Medical, Inc. (Incorporated herein
by reference to Exhibit 10.1 to the registrants Registration
Statement on Form S-1 filed on March 13, 2006 (File No.
333-132368)).10.2
    
    Loan and Security Agreement No. 4541, dated as of March 23, 2005,
by and between Lighthouse Capital Partners V, L.P. and Restore
Medical, Inc. (Incorporated herein by reference to Exhibit 10.2 to
the registrants Registration Statement on Form S-1 filed on March
13, 2006 (File No. 333-132368)).10.3
    
    Amendment No. 1 to the Loan and Security Agreement No. 4541, dated
as of March 23, 2005, by and between Lighthouse Capital Partners
V, L.P. and Restore Medical, Inc., dated March 3, 2006
(Incorporated herein by reference to Exhibit 10.2A to the
registrants Registration Statement on Form S-1 filed on March 13,
2006 (File No. 333-132368)).10.4
    
    1999 Omnibus Stock Plan, as amended March 2, 2006 (Incorporated
herein by reference to Exhibit 10.7 to Amendment No. 4 to the
registrants Registration Statement on Form S-1 filed on May 12,
2006 (File No. 333-132368)).10.5
    
    Standard form of Incentive Stock Option Agreement pursuant to the
1999 Omnibus Stock Plan (Incorporated herein by reference to
Exhibit 10.8 to the registrants Registration Statement on Form
S-1 filed on March 13, 2006 (File No. 333-132368)).10.6
    
    Standard form of Non-Qualified Stock Option Agreement pursuant to
the 1999 Omnibus Stock Plan (Incorporated herein by reference to
Exhibit 10.9 to the registrants Registration Statement on Form
S-1 filed on March 13, 2006 (File No. 333-132368)).10.7**
    
    2007 Management Incentive Plan.10.8**
    
    2008 Management Incentive Plan.10.9
    
    Assignment and Grant Back of License Agreement, dated as of
November 28, 2001, by and between Restore Medical, Inc. and
Venturi Development Inc. (Incorporated herein by reference to
Exhibit 10.15 to the registrants Registration Statement on Form
S-1 filed on March 13, 2006 (File No. 333-132368)).10.10
    
    Form of Indemnification Agreement entered into by and between
Restore Medical, Inc. and each of its executive officers and
directors (Incorporated herein by reference to Exhibit 10.23 to
Amendment No. 4 to the registrants Registration Statement on Form
S-1 filed on May 12, 2006 (File No. 333-132368)).10.11
    
    Form of Principal Executive Officer Employment and Change in
Control Agreement (Incorporated by reference to Exhibit 10.1 to
the registrants Current Report on Form 8-K filed on March 30,
2007)10.12
    
    Form of Executive Officer Employment and Change in Control
Agreement (Incorporated by reference to Exhibit 10.2 to the
registrants Current Report on Form 8-K filed on March 30, 2007)14.1
    
    Code of Conduct and Ethics (Incorporated herein by reference to
Exhibit 14.1 to the registrants Registration Statement on Form
S-1 filed on March 13, 2006 (File No. 333-132368)).




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##### Table of Contents



23.1*
    
    Consent of KPMG LLP, Independent Registered Public Accounting Firm.24.1*
    
    Power of Attorney (included on signature page to this Form 10-K)31.1**
    
    Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.31.2**
    
    Certificate of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.32.1**
    
    Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.32.2**
    
    Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed with Original Filing.**
    
    Filed herewith.
    
    Management contract or compensatory plan or arrangement.