MDT-2015Q1-EX10.4




Exhibit 10.4

Medtronic, Inc.
710 Medtronic Parkway
Minneapolis, MN  55432-5604
(763) 514-4000`
May 2, 2014


Mr. Bradley E. Lerman




Dear Brad,


It is with great pleasure that I extend this offer of employment at Medtronic, Inc. (“Medtronic”).  Every employee at Medtronic plays a role in changing what it means to live with chronic disease.  We are excited to have you join us as we continue to innovate to improve the lives of patients.  The following are the terms of the offer of employment:  


		
	1.
	Title 
Senior Vice President, General Counsel and Corporate Secretary, Medtronic Inc.


 
In this role, you will serve as a member of the Medtronic Executive Committee, reporting to me.  In the position, you shall have the responsibilities and duties commensurate with the General Counsel role at Medtronic, and such other duties and responsibilities that are assigned by me. 

		
	2.
	Employment Location 
 
Your assignment with Medtronic will be located at our Medtronic world headquarters in Minneapolis (Fridley) Minnesota; subject to business travel consistent with your duties and responsibilities.  For a period of time following your Start Date, you are approved to work and travel from Medtronic’s office in Washington DC with the understanding that reimbursement of travel costs to and from the world headquarters in Minneapolis, Minnesota is considered taxable income by the IRS.  Please see Section 9 for more details regarding relocation and commuter compensation.  Relocation to the Twin Cities Metro must occur no later than August, 2016.




		
	3.
	Employment Start Date




(“Start Date”):    May 27, 2014


		
	4.
	Base Salary 
 
Your annual base salary will be $700,000 per year (less applicable withholdings and deductions) commencing upon your Start Date and paid in accordance with Medtronic’s standard payroll practices. 



		
	5.
	Medtronic Incentive Plan (“MIP”)  
 
You will be eligible to participate in the annual Medtronic Incentive Plan (“MIP”), beginning with the Fiscal Year 2015 MIP.  Your participation will be effective as of the start of Fiscal Year 2015 with a target payout of 85% of your FY15 base salary.  Your actual payout for FY15 will be determined by the achievement of Medtronic Incentive 





Medtronic General Counsel Offer Letter
May 2, 2014




Plan measures and will be based on your full-year base salary for FY15, and will not be prorated based on your Start Date.   Additional information will be provided about MIP following your Start Date.


		
	6.
	Annual Long-Term Incentive Plan




You will be eligible to participate in Medtronic’s Long-Term Incentive Plan (LTIP) beginning with Fiscal Year 2015.  The total target value of your FY15 LTIP is $1,875,000 and is comprised of the following components:


		
	•
	Annual Long-Term Performance Plan (“LTPP”)  
Beginning with the FY2015-FY2017 phase of the three-year performance cycle, you will be eligible to participate in the Long-Term Performance Plan (“LTPP”). Your target annualized award will be $625,000 (subject to the terms and conditions of the LTPP).  Your participation will begin on your Start Date, however, your LTPP award will be based on your full annual target award for the FY2015 – FY2017 LTPP period, and will not be prorated based on your Start Date.  The payout is based on company performance against pre-determined performance measures.  The LTPP award agreement will be provided to you following approval of the FY15 – FY17 LTPP by Medtronic’s Compensation Committee of the Board of Directors.  Subject to approval by the Compensation Committee, you will also be eligible to participate in subsequent 3-year phases that commence annually in succeeding fiscal years, to the extent such plans are implemented and subject to the terms and conditions of the LTPP plan document 




		
	•
	Annual Nonqualified Stock Option Grant 
You will be eligible for annual stock option awards beginning with Fiscal Year 2015.  The anticipated grant date will be July 28, 2014 for FY2015 awards. The current grant amount (aggregate exercise price) is approximately $2,500,000 (targeted grant date value of $625,000 as of the date of this letter) and vests 25% per year beginning one year after the date of grant. All terms and conditions of any stock option awards will be described in the stock option agreement that is delivered to you following the grant date.  Your nonqualified stock option awards are subject to approval by the Compensation Committee of the Board of Directors.




		
	•
	Performance-Based Restricted Stock Unit Grant


Beginning in Fiscal Year 2015, you will be eligible for annual grants of performance-based restricted stock units. The FY15 grant date will be July 28, 2014. The current grant date target is $625,000 and vests 100% on the third anniversary of the date of grant, provided that the minimum company performance threshold is met.  The performance threshold is set by the Compensation Committee and is communicated following the grant date.  All terms and conditions of any restricted stock unit awards will be described in the restricted stock unit agreement provided following the grant date.  Annual performance-based restricted stock unit awards are subject to approval by the Compensation Committee of the Board of Directors.



Page 2 of 6




Medtronic General Counsel Offer Letter
May 2, 2014






		
	7.
	Special New Hire Cash Bonus  
 
To help mitigate the loss of certain compensation from your current employer, you will be eligible to receive a new hire cash bonus in the amount of $1,000,000 (less applicable withholdings and deductions).  50% of the bonus will be paid to you within 90 calendar days following your Start Date with Medtronic; 25% will be paid 12 months following your Start Date; and the remaining 25% will be paid 24 months following your Start Date.  


 


		
	8.
	One-time, New Hire Restricted Stock Unit Grant  
 
To help mitigate the loss of certain earned, unvested compensation from your current employer, you will be granted a one-time, restricted stock unit award with a grant date value of $2,000,000, which is scheduled to be granted on July 28, 2014.  The Restricted Stock Unit grant will vest 50% on the first anniversary of the grant date with the remaining 50% vesting on the second anniversary of the grant date.  Vesting is subject to the attainment by the Company of $1.00 diluted EPS threshold for the fiscal year ending prior to each vesting date.    




The actual number of units for the total grant will be determined by the grant date value divided by the market closing price for Medtronic common stock on July 28, 2014.  The award is subject to approval by the Compensation Committee of the Board of Directors.  All terms and conditions of the restricted stock unit award will be described in the restricted stock unit agreement provided following the grant date.


		
	9.
	Relocation and Commuter Assistance




No later than August, 2016, you will be expected to relocate permanently to the Twin Cities Metro to facilitate daily access to Medtronic’s world headquarters.  Medtronic will provide you with relocation benefits under its “Comprehensive Plus” relocation plan for homeowners (attached).  


During the interim period prior to your relocation to the Twin Cities Metro area in Minnesota, you will be approved to use Medtronic’s Washington D.C. Office with the expectation that you will maintain a regular travel schedule to Medtronic’s world headquarters in Minneapolis, Minnesota as required by your job responsibilities.  You will be responsible to pay for your air travel, ground transportation, and living expenses while commuting to and from Medtronic’s world headquarters.  Medtronic’s U.S. Relocation Department is available to assist you in securing your living accommodations and can also assist if you would like to relocate any of your personal vehicles and goods in advance of your planned relocation.


Under Medtronic’s Commuter Policy, the company will provide you with a $6,000 per pay period ($156,000 annualized) before-tax commuter allowance that is intended to help defray your cost of commuting.  Commuter reimbursement is taxable under IRS rules and therefore the $6,000 will be including with your bi-weekly pay and is subject to applicable tax withholdings and deductions  





Page 3 of 6




Medtronic General Counsel Offer Letter
May 2, 2014






		
	10.
	Employee Benefits 
 
You will be offered the same benefits as all other U.S. employees of Medtronic, including any benefits commensurate with your job level, upon meeting eligibility requirements as provided for in the Plan documents.  An overview of Medtronic’s Benefit Programs will be included with the New Hire Employment Document Package that will be sent following your acceptance of this offer.   Enrollment in Medtronic’s Benefits, including Health, Wellness, and Retirement programs will occur during your new hire orientation. 






		
	11.
	Business Allowance  
 
In order to defray the cost of an automobile, tax preparation and financial planning, or other related expenses, you will be provided with an annual allowance of $24,000 (paid bi-weekly and subject to applicable withholdings and deductions).  A Business Allowance Program Brochure will be included with your New Hire Package.




		
	12.
	Executive Physical Exam


In addition, you will be provided with a periodic medical examination under the Company’s Executive Physical Examination program.  Details about the program are included with the Business Allowance Program Brochure.


		
	13.
	Stock Ownership Policy




Medtronic’s policy requires Section 16b officers to maintain Medtronic stock equal to three (3) times annual salary. Until the ownership guideline is met, officers must retain 50% of the after-tax shares following settlement of equity compensation awards, including stock option exercises and restricted stock vesting. Once the guideline is met, executives must retain 50% after-tax shares for one year following grant of equity compensation awards.  All shares of Medtronic stock owned by you, including the after tax value of vested unexercised stock options and the after tax value of unvested restricted stock unit awards, count towards satisfying the stock ownership guideline.


		
	14.
	Deferred Compensation Plan 
 
You will be eligible to participate in the next calendar year phase of Medtronic’s Capital Accumulation Plan (“CAP”), subject to the terms of the CAP, which will provide for deferral of calendar year 2014 compensation.  If desired, you may enroll in the 2014 CAP during your new hire orientation.  Enrollment for 2015 deferral will occur in October, 2014.




		
	15.
	Employee Agreement 
 
As a condition of this offer of employment with Medtronic and as a condition of receiving the benefits identified herein, you must sign the standard Employee Agreement, which specifies certain employment terms and conditions.  You must sign and return the agreement no later than your first day of employment with Medtronic.





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Medtronic General Counsel Offer Letter
May 2, 2014








		
	16.
	Eligibility Documents 



As required by federal law, Medtronic must verify that its employees are eligible to work in the United States.  On or before your first day of employment, you will be required to certify that you are a citizen of the U.S., a noncitizen national of the U.S., a lawful permanent resident, or an alien authorized to work in the U.S.  Please bring acceptable supporting documents (as listed on the reverse side of the I-9 Form) to your first day of work.  A Designated Medtronic Representative will then review your documentation and complete section 2 on Form I-9.  Failure to produce the required documentation within 72 hours (unless a government authorized extension applies) may result in termination of employment.  Medtronic is also a participant in the Department of Homeland Security’s E-Verify system.  An employee hired on or after September 8, 2009 will be subject to E-Verify only after a Form I-9 has been completed for the employee. Medtronic does not tolerate the discrimination of applicants and employees based upon their national origin and citizenship (or immigration) status or any protected status when verifying employment eligibility through completion of the Form I-9 and the use of E-Verify


		
	17.
	Substance Abuse Testing 
 
A condition of your employment at Medtronic is the successful completion of a drug screening test.  A drug screening will be arranged at a location convenient for you after your acceptance the formal offer. If you do not take the test, our offer will be rescinded.  If you do not pass the test, you will receive a letter from our medical review officer providing you with the opportunity to explain the positive test result or to ask for a retest of the same sample at your expense.




		
	18.
	Mandatory Quality, Ethics and Compliance Training




As a further condition of your employment with Medtronic, you will be required to complete Medtronic’s Quality Fundamentals training and general ethics and compliance training, including a certification related to our code of conduct within 30 days of your acceptance of this offer.  Please note that it is your responsibility to make sure that you complete this training.  



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Medtronic General Counsel Offer Letter
May 2, 2014






		
	19.
	Other General Provisions




Medtronic is offering you this position based on your skills and background, and believes you can perform your new duties without the use or reliance upon any confidential information or trade secrets of your current or former employers. Medtronic does not and will not encourage, induce, require, condone, or accept the disclosure or use of such information during your employment with the company.  


Medtronic further expects you to take reasonable steps to protect your current and former employers’ proprietary information (including returning any and all confidential or proprietary materials or documents to your current employer when you leave) and to abide by any other confidentiality and applicable non-solicitation agreements with your current or former employers.   Your signature below confirms your assurances in this regard and your agreement to abide by the guidelines above.  Medtronic has made this offer of employment to you based on these assurances.


Medtronic is committed to providing reasonable accommodations so that all individuals may participate fully in their employment. If you need accommodations because of a medical condition, or a religious belief or practice, please discuss your request with your Human Resources partner, who will work with you to evaluate accommodation options.


All payments hereunder are subject to applicable withholdings and deductions.


After you have reviewed the terms of this letter, please indicate your acceptance by signing one copy in the space provided below and returning it to me.  We look forward to your early response.


I know that you will find Medtronic a rewarding place to continue your career.  I look forward to welcoming you to Medtronic.


Best regards,

Omar Ishrak
Chairman and Chief Executive Officer


Enclosures:
		
	•
	Employee Agreement


		
	•
	Comprehensive Plus Relocation Program Brochure




I, Bradley E. Lerman, ACCEPT THIS OFFER OF EMPLOYMENT AND AGREE TO THE TERMS AND CONDITIONS OUTLINED IN THIS LETTER.  I UNDERSTAND THAT PROOF OF MY IDENTITY AND EMPLOYMENT ELIGIBILITY IS A CONDITION OF EMPLOYMENT, AND I MUST PROVIDE MEDTRONIC WITH PROOF OF MY IDENTITY AND EMPLOYMENT ELIGIBILITY TO QUALIFY FOR EMPLOYMENT.  I UNDERSTAND THAT IF I PROVIDE FALSE OR MISLEADING INFORMATION, I MAY BE DISQUALIFIED FROM EMPLOYMENT.




_________________________________    ________________________
Bradley E. Lerman                    Date

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