Document:

QuickLinks
 -- Click here to rapidly navigate through this document

Exhibit 10.3  

 
  MEDTRONIC, INC.
  1979 NONQUALIFIED STOCK OPTION PLAN
  (As Amended and Restated Through June 27, 1991)    
  

SECTION I

DEFINITIONS  

        Whenever used herein, the following terms shall have the meanings indicated below: 

	(a)
	"Approved Retirement" means retirement on or after age 55 provided the Optionee has been employed by the Company or a Subsidiary for at
least ten years or retirement on or after age 62.

	(b)
	"Board of Directors" or "Board" means the Board of Directors of Medtronic, Inc.
as constituted from time to time.

	(c)
	"Common Stock" means the common stock, $.10 par value per share, of Medtronic, Inc.

	(d)
	"Company" means Medtronic, Inc.

	(e)
	"Disability" means the disability of an Optionee such that he or she is considered disabled under any retirement plan of the Company
which is qualified under Section 401 of the Internal Revenue Code of 1954, as amended (the same definition of "Disability" shall apply to an Optionee who is a non-employee director
of the Company, as if the non-employee director were an employee), or as otherwise determined by the Stock Option Committee.

	(f)
	"Limited Rights" means all rights granted under Section XIII of the Plan.

	(g)
	"Optionee" means an employee of the Company or of any Subsidiary or a non-employee director of the Company to whom an
option has been granted under the Plan.

	(h)
	"Plan" means this amended and restated Medtronic, Inc. 1979 Nonqualified Stock Option Plan, as amended hereafter from time to
time.

	(i)
	"Stock Option Committee" or "Committee" means the committee of three or more members of
the Board who shall be appointed by and serve at the pleasure of the Board. Each of the members of the Stock Option Committee shall be a "disinterested person" within the meaning of
Rule 16b-3, as then in effect, of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended.

	(j)
	"Subsidiary" means a corporation of which the Company owns or controls, directly or indirectly 50% or more of the voting power.
Subsidiary includes any corporation which becomes a Subsidiary after adoption of the Plan. 

SECTION II

PURPOSE  

        The purpose of the Plan with respect to employees is to promote the success of the Company and its Subsidiaries by facilitating the employment and retention of
competent personnel and by furnishing incentive to employees upon whose efforts the success of the Company and its Subsidiaries will depend to a large degree, and with respect to
non-employee directors is to aid in attracting and retaining non-employee directors, to compensate non- employee directors for their contributions in a manner
consistent with shareholder interests, and to increase non-employee directors' holdings of Common Stock of the Company. 

SECTION III

DURATION OF THE PLAN  

        Options may be granted pursuant to the Plan from time to time until the earlier of (a) the grant of the maximum number of options which may be granted
hereunder to employees and non-employee directors as a result of the application of the limitations set forth in Section VI hereof, or (b) the termination of the Plan upon
written resolution of the Board of Directors. No termination of the Plan shall, without consent of the Optionee, adversely affect any previously granted option which has not been cancelled and is
still outstanding as of the date of the Plan's termination except as provided in Section X in the event of a sale, merger, consolidation or liquidation of the Company. 

        Notwithstanding
any contrary foregoing provisions, the amendment to the Plan as of November 20, 1990, in the form ratified by the Board on April 25, 1991, to provide for
additional non-employee director options in the form of regular annual grants and associated Limited Rights pursuant to Section VII(B)(a)(ii) of the Plan and otherwise modify
Section VII(B) of the Plan is subject to and conditioned upon obtaining approval of such amendment by the holders of a majority of the voting power of the stock of the Company present and
entitled to vote on the matter at the 1991 Annual Meeting of Shareholders of the Company. In addition, the Company has requested or will request a letter from the staff of the Securities and Exchange
Commission concurring with the Company's opinion that the regular annual grants of options and associated Limited Rights to non-employee directors pursuant to
Section VII(B)(a)(ii) of the Plan are exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended, by compliance with Rule 16b-3 promulgated
thereunder, and that existing and future non-employee directors who receive such annual option grants and Limited Rights automatically granted under the Plan will continue to be
"disinterested persons" within the meaning of Rule 16b-3 for the purpose of the Plan and other stock related benefit plans of the Company which they administer. In the event the
amendment does not receive shareholders' approval at the Company's annual meeting of shareholders to be held in 1991 or the Company does not receive the aforementioned concurring letter from the
Securities and Exchange Commission staff, then the amendment to the Plan providing for regular annual grants of options and associated Limited Rights to non-employee directors and
otherwise modifying Section VII(B) of the Plan shall be deemed null and void and the Plan shall continue thereafter in effect in the form existing prior to such amendment on November 20,
1990. 

        Upon
receiving such shareholders' approval and the aforementioned concurring letter from the staff of the Securities and Exchange Commission, this Plan, as amended, shall be effective as
of November 20, 1990. 

SECTION IV

ADMINISTRATION  

        The Plan shall be administered by the Stock Option Committee which shall have all of the powers vested in it under the provisions of the Plan, including but not
limited to exclusive authority (where
applicable and within the limitations described herein) to determine the employees to whom, and the time or times at which, options shall be granted, the number of shares to be subject to each option
and the option price and terms and conditions of each option. The Stock Option Committee shall have full power and authority to administer and interpret the Plan, to make, amend and rescind rules,
regulations and guidelines for administering the Plan, to prescribe the form and conditions of the respective stock option agreements (which may vary from Optionee to Optionee) evidencing each option,
to waive (except as to matters expressly provided for in the Plan) conditions upon the exercise of any option under the terms of any stock option agreement, to modify or amend any stock option
agreement (provided, that if any modification or amendment materially and adversely affects the interests of the Optionee party to such stock option agreement, it shall be effective only upon consent
given thereto by the Optionee), and to make all other determinations necessary or advisable for the administration of the Plan. The Stock Option Committee's interpretations of the Plan, and all
actions taken and determinations made by the Stock Option Committee pursuant to the power vested in it 

hereunder shall be conclusive and binding on all parties concerned. No member of the Stock Option Committee shall be liable for any action taken or determination made in good faith in connection with
the administration of the Plan. 

        Any
action of the Stock Option Committee with respect to the administration of the Plan shall be taken pursuant to a majority vote of such Committee members or pursuant to the written
consent of all Committee members. 

        Notwithstanding
any contrary provisions of the Plan, the Stock Option Committee shall have no discretion with respect to the granting of an option and associated Limited Rights to a
non-employee director or to alter or amend any terms, conditions and eligibility requirements of an option and associated Limited Rights granted, or to be granted, to a
non-employee director under the Plan, it being understood that the granting and terms, conditions and eligibility requirements of such options and associated Limited Rights are to be
governed solely by the provisions set forth in the Plan pertaining thereto. 

SECTION V

ELIGIBLE PARTICIPANTS  

        Options may be granted under the Plan to employees, including officers, of the Company or its Subsidiaries who are not members of the Stock Option Committee, and
such options shall have the terms and conditions specified in Section VII(A) and elsewhere in the Plan. In addition, options shall be granted under the Plan to each non-employee
director, and such options shall have the terms and conditions specified in Section VII(B) and elsewhere in the Plan. 

SECTION VI

AVAILABLE STOCK  

        An aggregate of 3,650,000 shares (after giving effect to the Company's two-for-one stock splits effected through 100% stock dividends
effective August 31, 1989 and August 30, 1991) of the Company's authorized but unissued shares of Common Stock (subject to substitution or adjustment as provided in Section X of
this Plan) has been made available for issuance upon exercise of options granted under the Plan. A maximum of 200,000 of such 3,650,000 shares shall be made subject to options granted to
non-employee directors under the Plan. In the event that any option or portion thereof under the Plan for any reason expires or terminates prior to the exercise thereof, the shares of
Common Stock allocable to the unexercised portion of such option shall continue to be reserved for options under the Plan and may again be optioned hereunder. 

SECTION VII(A)

TERMS AND CONDITIONS OF EMPLOYEE OPTIONS  

        Each option granted pursuant to the Plan to an employee shall be evidenced by a written stock option agreement (which may vary from Optionee to Optionee) signed
by an officer of the Company and by the Optionee in such form as the Stock Option Committee shall determine when the option is granted, which stock option agreement shall contain in substance the
following terms and conditions: 

        (a)    Number of Shares and Option Price.    The Committee shall specify in the stock option agreement the number of
shares to which it pertains. The option price per share of Common Stock shall be determined by the Committee, shall be stated in the stock option agreement and shall not be less than 100% of the per
share fair market value of the Company's Common Stock on the day the option is granted. In no event may the option price be less than the par value of such Common Stock. For purposes hereof, the per
share "Fair Market Value" of the Common Stock shall mean the highest closing price of such Stock on the New York Stock Exchange Composite Transactions Listing (or on another established stock
exchange, where applicable) on the date the option is granted or, if no sale of such Stock has occurred on such exchange on that date, on the next preceding date on which there was 

a sale of such Stock. In the event the Common Stock is not listed on the New York Stock Exchange Composite Transactions Listing (or on any established stock exchange) as of the date the option is
granted, the per share "Fair Market Value" of the Common Stock shall be the mean between the "bid" and the "asked" prices quoted by a recognized market maker in such Stock on the date the option is
granted. 

        (b)    Term and Exercisability of Option.    The stock option agreement shall state the term during which the option
granted under the Plan may be exercised, which term shall be established in each case by the Stock Option Committee but in no event shall the option be exercisable after the ten-year
anniversary
date of the option's grant. In each case, the Stock Option Committee shall specify in the stock option agreement whether the option is exercisable immediately, in installments of a specified amount,
or otherwise. Notwithstanding any stock option agreement's inclusion of an installment schedule or other exercise schedule or entitlement which effectively precludes full and immediate exercise of an
option, the stock option agreement may provide that the option will become immediately exercisable in full upon the occurrence of particular events or as the Stock Option Committee may thereafter
determine to be advisable. (Without limitation, such particular events may include the following: (i) the making of a tender offer, exchange offer, or similar offer for all, or any part
exceeding ten percent of, the outstanding shares of Common Stock by any party other than the Company, its Subsidiaries, or other persons or entities controlling, controlled by, or under common control
with, the Company; (ii) a filing of notification with the U.S. Department of Justice or Federal Trade Commission under Clayton Act Section 7A relative to the proposed acquisition of the
Company's voting securities, as the result of which the acquiring person will hold fifteen percent or more of such voting securities, unless the Board of Directors has first approved the proposed
acquisition; (iii) a change in control of the Company in a transaction or occurrence, or a series of related transactions or occurrences, resulting from a material change in ownership of Common
Stock and evidenced by cessation in service as Company directors of a majority of those persons theretofore serving as members of the Board; (iv) the Company's sale of all its assets in
contemplation of the discontinuance of its business, or a merger, consolidation or liquidation of the Company; or (v) a determination by the Stock Option Committee that immediate exercisability
would be in the best interests of the Company and advisable for protection of the rights intended to be granted under the option. Any such provisions included in the stock option agreement and
contingent upon stated particular events will be enforceable against the Company and its successors in interest, in accordance with the stock option agreement terms, upon the occurrence of those
events.) 

        An
Optionee may exercise his or her option granted under the Plan using as consideration in payment of the exercise price for the number of option shares being purchased, (i) cash
(or an equivalent check, money order, or other payment medium acceptable to the Company); or (ii) if approved by the Committee in its sole discretion and subject to such rules as the Committee
may adopt, other Medtronic Common Stock currently registered in the name of, or beneficially owned by, the Optionee and surrendered in due form for transfer to the Company. In the case of payment
using Medtronic Common Stock, such stock shall be valued at its Fair Market Value, as defined in Section VII(A), Paragraph (a) of the Plan except that the date for determination of such
fair market value shall be the date of proper surrender of such stock to Medtronic. 

        (c)    Withholding Taxes.    The stock option agreement shall state that when the option or a portion of the option is
exercised, the Company or a Subsidiary is authorized to deduct from any payment of any kind owed to the Optionee any federal, state, local or other taxes required by law to be withheld with respect to
the shares of Common Stock being purchased upon exercise of the option. The stock option agreement shall also state that alternatively, upon exercise of the option or a portion of the option, the
Company or a Subsidiary shall have the right to require the Optionee to remit to the Company or the Subsidiary an amount necessary to satisfy any federal, state, local or other withholding tax
requirements prior to the delivery of any certificate or certificates for the shares of Common Stock purchased upon exercise of the option or portion of such option. 

        The
Committee may permit the Optionee to elect to satisfy federal and state withholding tax obligations relating to exercise of a Plan option by having the Company withhold shares of
Medtronic 

Common Stock subject to such option in satisfaction of the obligations. Any such election by an Optionee must be made on or before the date that the amount of tax to be withheld is determined (the
"Tax Date"). Any shares of Medtronic Common Stock so withheld by the Company shall be valued at their per share "Fair Market Value", which shall mean for the purposes of this Paragraph (c) the
closing market price of Medtronic Common Stock on the New York Stock Exchange Composite Transactions Listing on the Tax Date (or such other meaning as the Committee may hereafter adopt). The use and
availability of the election to have option shares withheld to satisfy federal and state withholding tax requirements is subject in general, and in particular instances, to the Committee's complete
discretion and such rules and procedures as the Committee may adopt. 

        (d)    Termination of Employment (for Reasons Other Than Death, Disability or Approved Retirement).    If an Optionee
ceases to be employed by the Company (and ceases to be or is not employed by any Subsidiary) for any reason other than Death, Disability or Approved Retirement, any unexercised and unexpired option of
such Optionee shall terminate as of the date on which the Optionee's employment is so terminated unless, upon or as soon as practicable after such termination of the Optionee's employment, the Stock
Option Committee permits such unexercised and unexpired option to continue and be exercisable during a period then set by the Committee and expiring not later than the original stated expiration date
of the option; provided, in such event, the option shall be exercisable during such period only to the extent the option was exercisable on the date of the Optionee's termination of employment. The
Stock Option Committee shall determine in a fair and equitable manner whether sick leave or other authorized leaves of absence for military or governmental service shall constitute termination of
employment for purposes of this Paragraph and, in its sole discretion, may determine that the termination of employment of an Optionee who is re-employed by the Company or any Subsidiary
within six months after such termination shall not constitute termination of employment for purposes of this Paragraph. 

        If
an Optionee's employment is terminated for "Cause," the time at which such employee ceases to be an employee for purposes of this subparagraph shall mean the time at which such
employee is instructed or notified to cease performing his or her job responsibilities for the Company or any Subsidiary permanently, whether or not for other reasons such as payroll, benefits or
compliance with legal procedures or requirements he or she may still have other attributes of an employee. For purposes of this subparagraph, "Cause" shall mean (i) failure to comply with any
material policies and procedures of the Company, (ii) conduct reflecting dishonesty or disloyalty to the Company, or which may have a negative impact on the reputation of the Company,
(iii) commission of a felony, theft or fraud, or violations of law involving moral turpitude or (iv) failure to perform the material duties of his or her employment. 

        (e)    Termination of Employment by Reason of Disability or Approved Retirement.    If the Optionee ceases to be
employed by the Company (and ceases to be or is not employed by any Subsidiary) before the original stated expiration of an option of such Optionee and such termination of employment is due to
Disability or Approved Retirement, such option shall become exercisable in full, to the extent not previously exercised, as of the date of the Optionee's termination of employment and shall be
exercisable until the 12-month anniversary of such termination of employment or until the original stated expiration of the option, whichever shall first occur. The Stock Option Committee
may extend
the period during which an Optionee's option is exercisable under this Paragraph (e) provided such period so extended does not exceed the original stated expiration of the option. 

        (f)    Death of Optionee.    If the Optionee shall die (i) while employed by the Company or a Subsidiary,
(ii) within the period of time, if any, during which the Stock Option Committee has permitted the Optionee to exercise his or her options upon termination of employment as provided in
Paragraph (d) of this Section VII(A), or (iii) within the period of time during which the Optionee's options may be exercised after his or her Disability or Approved Retirement as
provided in Paragraph (e) of this Section VII(A), and in any case shall not have fully exercised an option of such Optionee, such option shall become exercisable in full, to the extent
not previously exercised, as of the date of the Optionee's death and shall be exercisable until the 12-month anniversary of the Optionee's death or until the original stated expiration of
the option, whichever shall first occur. The Stock Option 

Committee may extend the period during which an option is exercisable under this Paragraph (f) provided such period so extended does not exceed the original stated expiration of the option. 

        (g)    Company's Purchase Right in Certain Circumstances.    Notwithstanding any contrary provisions of the Plan set
forth other than in this subparagraph (g), if an Optionee's employment is terminated either (i) for "Cause", as defined in this subparagraph (g), or (ii) voluntarily on the part of the
Optionee (other than retirement on or after the Optionee's "normal retirement date" as defined in the Medtronic, Inc. and Participating Employer's Retirement Plan) without the express written
consent of the Chairman of the Board or Chief Executive Officer of the Company (or by the Stock Option Committee in the event the terminated Optionee is the Chairman of the Board or Chief Executive
Officer), the Company shall have the right and option (referred to herein as the "Purchase Right") to purchase from the Optionee or from the estate, legal representative or surviving joint tenant of
the Optionee, that number of shares of Common Stock of the Company which is equal to the number of shares which had been purchased pursuant to exercise by the Optionee of any option granted under the
Plan (the "Option Shares") within six months prior to the employment termination date. The decision to grant such express written consent regarding termination (which consent may be given before or
after the Optionee's employment termination) or to exercise the Company's Purchase Right shall be based solely on the judgment of the Chairman or the Chief Executive Officer, or of the Stock Option
Committee in the event the terminated Optionee is the Chairman or the Chief Executive Officer, given the facts and circumstances of each particular case, made in his, her or its complete discretion,
as to whether such consent or exercise is in the operational interest of the Company. The Purchase Right shall also cover any shares of Common Stock of the Company received from adjustments which
pertained to the Option Shares and which were made as a result of any of the types of transactions referred to in Section X. (The shares which are subject to the Company's Purchase Right are
referred to herein collectively as the "Purchase Right Shares"). Such Purchase Right may be exercised by the Company within 90 days after the date of the Optionee's employment termination for a
purchase price equal to the total amount paid as the option exercise price by the Optionee for the Option Shares so purchased by the Optionee upon his or her option exercise. Such Purchase Right shall
be deemed to be exercised upon the Company's mailing written notice of such exercise, postage prepaid, addressed to Optionee at Optionee's most recent home address as shown on the personnel records of
Company. Each stock option agreement authorized on or after November 9, 1989 under this Section VII(A) shall contain an agreement of the Optionee on Optionee's behalf and on behalf of
Optionee's estate, legal representative or surviving joint tenant, as the case may be, to deliver to the Company, on the date specified in such notice (which date shall not be less than five business
days following the date such notice is sent by the Company), a certificate or certificates for such number of Purchase Right Shares, duly endorsed for transfer to the
Company against payment of the purchase price thereof. The provisions of this subparagraph (g) shall be effective as to any option granted under the Plan on or after November 9, 1989.
The Purchase Right of the Company may not be exercised on or after the occurrence of any one or more "Event" specified in the second paragraph of Section XIII, including subparagraphs (A), (B),
and (C) thereof, as to any Shares. Solely for the purposes of this subparagraph (g), "Cause" shall mean (i) failure to comply with any material policies and procedures of the Company,
(ii) conduct reflecting dishonesty, or disloyalty to the Company, or which may have a negative impact on the reputation of the Company, (iii) commission of a felony, theft or fraud, or
violations of law involving moral turpitude, or (iv) failure to perform the material duties of his or her employment. The provisions of this subparagraph (g) are not intended to, and
shall not, modify or otherwise affect the provisions of Section XII, subparagraph (b) of the Plan (concerning employment). 

        (h)    Other Provisions.    The stock option agreement (which may vary from Optionee to Optionee) authorized under
this Section VII(A) shall contain such other provisions as the Stock Option Committee deems advisable. 

SECTION VII(B)

TERMS AND CONDITIONS OF NON-EMPLOYEE DIRECTOR OPTIONS  

        Options shall be granted to each non-employee director in accordance with the terms and conditions of this section. Notwithstanding any contrary
provisions of this Section VII(B), any employee director who terminates his employment after the 1988 Annual Meeting of Shareholders and who at any time thereafter is a non-employee
director of the Company shall not be entitled to receive a grant of an option under this section. For purposes of this Section VII(B), per share Fair Market Value shall have the meaning set
forth in Section VII(A)(a) of the Plan. 

        (a)    Eligibility and Grant of Option.    

        (i)    Initial Option Grant.    All non-employee directors elected or re-elected to the Board
at the 1988 Annual Meeting of Shareholders or elected or appointed thereafter shall be entitled to receive, by virtue of serving as directors of the Company, an initial grant of an option to purchase
authorized but unissued Common Stock. Each non-employee director elected or re-elected to the Board at the 1988 Annual Meeting of Shareholders shall be granted an option on the
date of such election or re-election to purchase the number of shares of Common Stock determined by dividing $100,000 by the per share Fair Market Value of the Common Stock on the date of
grant, and rounding up or down to the nearest whole share. After this single grant, non-employee directors elected or re-elected to the Board at the 1988 Annual Meeting of
Shareholders shall no longer be eligible to receive any additional grant of options under this Section VII(B)(a)(i). Each non-employee director elected or appointed to the Board
after the 1988 Annual Meeting of Shareholders that was not elected or re-elected at the 1988 Annual
Meeting of Shareholders shall receive an initial grant of an option, on the date such director first becomes a director, to purchase a number of shares of Common Stock determined by dividing $100,000
(or if the annual retainer fee of the non-employee directors is increased subsequent to the 1988 Annual Meeting of Shareholders from the $12,500 annual retainer fee in effect at the time
of the 1988 Annual Meeting of Shareholders, $100,000 plus a percentage increase in such $100,000 amount which is equal to the percentage increase in such $12,500 annual retainer fee subsequent to the
1988 Annual Meeting of Shareholders and prior to the initial election or appointment of such director) by the per share Fair Market Value of the Common Stock on the date of grant, and rounding up or
down to the nearest whole share. No increase in the annual retainer fee of the non-employee directors after a person becomes a non-employee director shall increase the number
of shares of Common Stock for which the options granted under this Section VII(B)(a)(i) to such non-employee director may be exercised. Options granted under this
Section VII(B)(a)(i) are hereinafter referred to collectively as "Initial Options" and individually as an "Initial Option". 

        (ii)    Annual Option Grants.    Immediately following the Annual Meeting of Shareholders in August 1991 and
every annual meeting thereafter, each non-employee director serving as a director of the Company immediately following such annual meeting who has previously been granted an Initial Option
for serving as a director of the Company prior to such annual meeting shall be entitled to receive, by virtue of serving as a director of the Company, in addition to the Initial Option previously
granted to the director, a grant, on the date of the annual meeting, of an option to purchase authorized but unissued Common Stock (hereinafter referred to collectively as "Annual Options" and
individually as an "Annual Option"). The number of shares of Common Stock subject to an Annual Option shall be the sum of (A) the annual retainer fee for non-employee directors in
effect when the grant is made, (B) the aggregate meeting fees in effect when the grant is made for seven regular Board and fourteen Board Committee meetings and (C) one annual Committee
Chairmanship fee in effect when the grant is made, divided by the per share Fair Market Value of the Common Stock on the date of the grant, and rounding up or down to the nearest whole share. No
increase in the annual retainer fee, Board or Board Committee meeting fee or Committee Chairmanship fee for non-employee directors of the Company following a grant of an Annual Option
shall increase the number of shares of Common Stock for which such Annual Option may be exercised. 

        (b)    Term and Exercisability of Options.    The Initial Option and the Annual Options granted to a
non-employee director shall vest and become exercisable one full year after the date of grant, provided, however, that in no event shall a non-employee director initially
appointed by the Board of Directors be entitled to exercise either an Initial Option or an Annual Option granted to such director under the Plan unless, and until such time as, such director shall
have been elected to the Board of Directors by the shareholders of the Company. Notwithstanding the foregoing, vesting of an option granted to a non-employee director who shall have been
elected by the shareholders of the Company shall accelerate and the option shall become immediately exercisable in full upon the occurrence of any "Event" as such term is defined in
Section XIII of the Plan, and an option granted to a non-employee director who shall have been elected by the shareholders of the Company shall accelerate and become immediately
exercisable in full in the event the non-employee director holding such option ceases to serve as a director of the Company due to Death or Disability or due to retirement under the
policies of the Company then in effect providing for retirement of directors from the Board of Directors ("Retirement"). Options granted to a non-employee director shall expire at the
earlier of (i) the 10-year anniversary date of the option's grant, or (ii) the 5-year anniversary date of the occurrence of the earliest
of the Death, Disability or Retirement of the non-employee director or the date the non-employee director otherwise ceases to be a director of the Company, provided that the
option granted to a non-employee director initially appointed by the Board of Directors shall expire on the date such director ceases to be a director of the Company unless such director
shall have been elected by the shareholders subsequent to the grant of the option to such director. 

        (c)    Option Price.    The option exercise price for shares of Common Stock subject to a non-employee
director's Initial Option or any Annual Option shall be the per share Fair Market Value of the Common Stock, as such term is defined in Section VII(A)(a) of the Plan, on the date the option is
granted. A non-employee director may exercise his or her Initial Option or Annual Option using as payment any form of consideration provided for in the final paragraph of
Section VII(A)(b) of the Plan, which form of payment shall be within the sole discretion of the non-employee director, notwithstanding anything stated in Section VII(A)(b) of
the Plan. 

        (d)    Withholding Taxes.    When an Initial Option or an Annual Option or a portion of an Initial Option or an Annual
Option is exercised, the Company is authorized to deduct from any payment of any kind owed to the Optionee any federal, state, local or other taxes required by law to be withheld with respect to the
shares of Common Stock being purchased upon exercise of the option. Upon exercise of an Initial Option or an Annual Option or a portion of an Initial Option or an Annual Option, the Company shall have
the right to require the Optionee to remit to the Company an amount necessary to satisfy any federal, state, local or other withholding tax requirements prior to the delivery of any certificate or
certificates for the shares of Common Stock purchased upon exercise of the option or portion of such option. 

        (e)    Option Agreement.    The option granted to each non-employee director under the Plan shall be
evidenced by a written stock option agreement incorporating by reference the terms of the Plan and signed by an officer of the Company and by the Optionee. 

SECTION VIII

COMPLIANCE WITH LAWS  

        No shares of Common Stock shall be issued pursuant to the Plan unless and until there has been compliance, in the opinion of the Company's counsel, with all
applicable legal requirements, including without limitation, those relating to securities laws and stock exchange listing requirements. The Company shall not be deemed by reason of granting an option
under this Plan to have any obligation to register the shares of Common Stock subject to the Plan under the Securities Act of 1933, as amended, or to maintain in effect any registration of such
shares, or to list such shares on any exchange. As a condition to the issuance of Common Stock to the Optionee, the Stock Option Committee may require the Optionee to (a) represent that the
shares of Common Stock are being acquired for investment and not resale and to make such other representations as the Committee shall 

deem necessary or appropriate to qualify the issuance of the shares as exempt from the Securities Act of 1933 and any other applicable securities laws, and (b) represent that the Optionee
shall not dispose of the shares of Common Stock in violation of the Securities Act of 1933 or any other applicable securities laws. The Company reserves the right to place a legend on any stock
certificate issued upon exercise of an option granted pursuant to the Plan to assure compliance with this Section VIII. 

SECTION IX

RIGHTS OF A SHAREHOLDER  

        An Optionee or a transferee of an option (permitted under Paragraph (d) of Section XII) shall have no rights as a shareholder with respect to any
shares covered by his or her option until a stock certificate evidencing such shares is issued to him or her. No adjustment shall be made for dividends ordinary or extraordinary (whether in cash,
securities or other property), distributions or other rights for which the record date is prior to the date such stock certificate is actually issued (except as otherwise provided in Section X
of this Plan). 

SECTION X

RECAPITALIZATION, SALE, MERGER, CONSOLIDATION OR LIQUIDATION  

        In the event of any increase or decrease in the total number of issued and outstanding shares of Common Stock resulting from a subdivision or consolidation of
shares or other capital adjustment or the payment of a stock dividend or any other increase or decrease in the number of such shares effected without receipt of consideration by the Company, the
maximum number of shares of Common Stock which may be issued under the Plan (including the maximum number of shares which shall be made subject to options granted to non-employee directors
under Section VI), the number of shares of Common Stock covered by each outstanding option and the price per share thereof shall be equitably adjusted by the Stock Option Committee to reflect
such change. 

        In
the event of a sale by the Company of all of its assets and the consequent discontinuance of its business, or in the event of a merger, consolidation or liquidation, the Stock Option
Committee may, as of the time of the adoption of the plan for sale, merger, consolidation or liquidation, amend or adjust the provisions of the Plan and the then outstanding options, including but not
limited to amendments providing for a complete termination of the Plan or providing for the continuation of the Plan with respect to the exercise of those options or the portions thereof which, under
the provisions of the Plan, were exercisable as of the date of adoption by the Board of such plan for sale, merger, consolidation or liquidation; provided, that in any event Optionees holding options
shall be given either (a) a reasonable time within which to exercise such exercisable portions of their respective options prior to the effectiveness of such sale, merger, consolidation or
liquidation, or (b) the right to exercise their respective options as to an equivalent number of shares of stock of the corporation succeeding the Company by reason of such sale, merger,
consolidation or liquidation. 

        The
grant of an option pursuant to this Plan shall not limit in any way the right or power of the Company or the Board of Directors to make adjustments, reclassifications,
reorganizations or changes in the Company's capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any portion of the Company's business or assets. 

SECTION XI

AMENDMENT OF THE PLAN  

        The Board of Directors may at any time alter, amend, revise, suspend or discontinue the Plan; provided, that such action (except as permitted in Section X
in the event of a sale, merger, consolidation or liquidation) shall not materially adversely affect options previously granted under the Plan without the consent of the Optionees and provided further,
that no alteration, amendment, revision, suspension or discontinuance of the Plan may, without the approval of the shareholders of the Company, alter the provisions of the Plan so as to
(a) materially increase the total number of shares of 

Common Stock which may be issued under the Plan except as provided in Section X hereof, (b) materially increase the benefits accruing to Optionees under the Plan, (c) materially
change the requirements as to eligibility for participation in the Plan, or (d) change the terms, conditions, or eligibility requirements of an option and associated Limited Rights granted or,
subject to the right of the Board of Directors to discontinue the Plan, to be granted to each non-employee director under the Plan. In no event shall the eligibility requirements for the
receipt of Initial Options or Annual Options by non-employee directors or the formula for determining the amount of shares of Common Stock subject to Initial Options or Annual Options
granted to non-employee directors or the timing of the grant or the exercise price of the Initial Options or Annual Options granted to non-employee directors be amended more
than once every six months other than to comply with changes in the Internal Revenue Code. 

SECTION XII

MISCELLANEOUS  

        (a)    No Obligation to Exercise Option.    The granting of an option shall impose no obligation upon the Optionee to
exercise such option. 

        (b)    Employment.    The granting of an option to an Optionee who is an employee shall neither confer upon the
Optionee any rights respecting continued employment nor limit the Company's or any Subsidiary's right to terminate such employment. 

        (c)    Disputes.    Any dispute or disagreement which arises under or as a result of, or any way relates to, the
interpretation, construction or application of the Plan or any stock option agreement issued under the Plan shall be determined by the Stock Option Committee and such determination by the Stock Option
Committee shall be final, binding and conclusive. 

        (d)    Nontransferability of Options.    No option granted under the Plan may be transferred by an Optionee otherwise
than by will or by the laws of descent and distribution, and during the Optionee's lifetime the option may be exercised only by the Optionee or his or her guardian or legal representative. 

SECTION XIII

LIMITED RIGHTS  

        The Stock Option Committee may, in its discretion, grant Limited Rights to the holder of any option granted under the Plan (the "Related Option") with respect to
all or any portion of the shares covered by the Related Option (whether heretofore or hereafter granted), provided, however, that in conjunction with the automatic one-time grant of an
Initial Option to a non-employee director under the Plan and the regular grants of Annual Options to non-employee directors under the Plan, such non-employee
director or directors shall simultaneously be granted Limited Rights with respect to all of the shares of Common Stock covered by such Initial Option and Annual Options. Each Limited Right granted to
Optionees who are not non-employee directors shall relate to a specific Related Option and may be granted at any time either concurrently with the grant of the Related Option or at any
time the Related Option is outstanding. Each Limited Right shall be evidenced by a written limited right certificate signed by an officer of the Company. 

        Limited
Rights shall be exercisable at any time within the thirty day period after any of the following events (an "Event"), whether or not the Related Option is exercisable and
regardless of whether the Optionee is an employee, or a non-employee director, at the time of exercise, so long as the Optionee is an employee, or a non-employee director,
immediately preceding the Event (provided that in no event shall a non-employee director initially appointed by the Board of Directors be entitled to exercise the Limited Rights granted to
such director under the Plan unless, and until such time as, such director shall have been elected to the Board of Directors by the shareholders of the Company): 

	(A)
	a
majority of the directors of the Company shall be persons other than persons 

	(1)
	for
whose election proxies shall have been solicited by the Board of Directors of the Company or

	(2)
	who
are then serving as directors appointed by the Board of Directors to fill vacancies on the Board of Directors caused by death or resignation (but not by removal) or to fill newly
created directorships, 

	(B)
	30%
or more of the outstanding voting stock of the Company is acquired or beneficially owned (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, or any successor rule thereto) by any person (other than the Company, a Subsidiary of the Company or the Optionee) or group of persons, not including the Optionee, acting in concert, or

	(C)
	the
stockholders of the Company approve a definitive agreement or plan to

	(i)
	merge
or consolidate the Company with or into another corporation (other than (1) a merger or consolidation with a Subsidiary of the Company or (2) a merger in which the
Company is the surviving corporation and either (a) no outstanding voting stock of the Company (other than fractional shares) held by stockholders immediately prior to the merger is converted
into cash (except upon the exercise by stockholders of the Company of statutory dissenters' rights), securities, or other property or (b) all holders of outstanding voting stock of the Company
(other than fractional shares) immediately prior to the merger (except those that exercise statutory dissenters' rights) have substantially the same proportionate ownership of the voting stock of the
Company or its parent corporation immediately after the merger),

	(ii)
	exchange,
pursuant to a statutory exchange of shares of voting stock of the Company held by stockholders of the Company immediately prior to the exchange, shares of one or more
classes or series of voting stock of the Company for shares of another corporation or other securities, cash or other property,

	(iii)
	sell
or otherwise dispose of all or substantially all of the assets of the Company (in one transaction or a series of transactions) or

	(iv)
	liquidate
or dissolve the Company, 

unless
a majority of the voting stock (or the voting equity interest) of the surviving corporation or of any corporation (or other entity) acquiring all or substantially all of the assets of the
Company (in the case of a merger, consolidation or disposition of assets) or the Company or its parent corporation (in the case of a statutory share exchange) is, immediately following the merger,
consolidation, statutory share exchange or disposition of assets, beneficially owned by the Optionee or a group of persons, including the Optionee, acting in concert. 

        Notwithstanding
the provisions of the immediately preceding paragraph, no Limited Right shall be exercised within a period of six months after the date of grant of the Limited Right. 

        If
Limited Rights are exercised, the Related Option shall no longer be exercisable to the extent of the number of shares with respect to which the Limited Rights were exercised. Upon the
exercise or termination of a Related Option (other than termination of the Related Option by reason of termination of an Optionee's employment with the Company within thirty days after an Event),
Limited Rights granted with respect thereto shall terminate to the extent of the number of shares as to which the Related Option was exercised or terminated. 

        A
person entitled to exercise a Limited Right may, subject to its terms and conditions and the terms and conditions of the Plan, exercise such Limited Right in whole or in part by giving
written notice to the Company of an election to exercise such Limited Right. The date the Company receives the notice is the exercise date. Upon exercise of Limited Rights, the holder shall promptly
be paid an amount in cash for each share with respect to which the Limited Rights are exercised equal to the 

difference between the option exercise price per share of Common Stock covered by the Related Option (or, in the case of Limited Rights which are exercised pursuant to the terms hereof after
termination of employment, the former Related Option) and the Fair Market Value per share of Common Stock covered by the Related Option as of the date of exercise of the Limited Right. 

        For
purposes of this Section XIII, "Fair Market Value" shall be defined as provided in Section VII(A)(a) hereof, except that all references in Section VII(A)(a) to
"the date the option is granted" shall, solely for purposes of this Section XIII, be deemed to be references to the date of exercise of the Limited Right. If the Common Stock of the Company is
not listed on a national securities exchange or quoted by a recognized market maker in such Stock, the fair market value, solely for purposes of this Section XIII, shall be the fair market
value of such Stock as of the date of exercise of the Limited Right as established in good faith by the Board or Committee. For purposes of the Plan, the date that a Related Option is granted shall be
the date that it is originally granted (regardless of when the related Limited Right is granted). 

        A
Limited Right may not be assigned and shall be transferable only if and to the extent that the Related Option is transferable. The Company maywithhold any applicable withholding taxes
from any cash payment due upon exercise of a Limited Right. 

QuickLinks

MEDTRONIC, INC. 1979 NONQUALIFIED STOCK OPTION PLAN (As Amended and Restated Through June 27, 1991)QuickLinks
 -- Click here to rapidly navigate through this document
  

Exhibit 10.8  

 
 

MEDTRONIC, INC.
  1998 OUTSIDE DIRECTOR STOCK COMPENSATION PLAN
  (As Amended through June 27, 2002)    
  

        1.    Purpose.    The purpose of this Plan is to facilitate recruiting and retaining non-employee
directors of outstanding ability. 

        2.    Definitions.    The capitalized terms used in this Plan have the meanings set forth below. 

        (a)  "Account"
means a bookkeeping account maintained for a Participant to which Deferred Stock Units are credited pursuant to Section 6. 

        (b)  "Affiliate"
means any corporation that is a "parent corporation" or "subsidiary corporation" of the Company, as those terms are defined in Sections 424(e) and
(f) of the Code, or any successor provision, and any joint venture in which the Company or any such "parent corporation" or "subsidiary corporation" owns an equity interest. 

        (c)  "Agreement"
means a written contract entered into between the Company or an Affiliate and a Participant containing the terms and conditions of an Option granted
hereunder (not inconsistent with this Plan). 

        (d)  "Annual
Option" means an Option granted pursuant to Section 5 (c) of this plan. 

        (e)  "Annual
Retainer" of a Participant means the fixed annual fee for such Participant in effect on the first day of the year for which such Annual Retainer is payable for
services to be rendered as a Non-Employee Director of the Company. 

        (f)    "Award
means an Option granted pursuant to Section 5 of this Plan or a credit of Deferred Stock Units pursuant to Section 6 of this Plan. 

        (g)  "Board"
means the Board of Directors of the Company. 

        (h)  "Change
in Control" shall mean: 

        (i)    Any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this clause (a), the following acquisitions shall not constitute a Change in Control:
(1) any acquisition directly from the Company, (2) any acquisition by the Company or any of its subsidiaries, (3) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries, (4) any acquisition by an underwriter temporarily holding securities pursuant to an offering of such securities or
(5) any acquisition pursuant to a transaction that complies with clauses (i), (ii) and (iii) of clause (c); or 

        (ii)  Individuals
who, as of the date hereof, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board;  provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without written objection to such nomination) shall be considered as though such individual were a 

1

 

member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other
actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or 

        (iii)  Consummation
of a reorganization, merger, statutory share exchange or consolidation (or similar corporate transaction) involving the Company or any of its
subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity (a "Business Combination"), in each case,
unless, immediately following such Business Combination, (i) substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 55% of, respectively, the then outstanding shares
of common stock and the total voting power of (A) the corporation resulting from such Business Combination (the "Surviving Corporation") or (B) if applicable, the ultimate parent
corporation that directly or indirectly has beneficial ownership of 80% or more of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), in
substantially the same proportion as their ownership, immediately prior to the Business Combination, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case
may be, (ii) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation) is or becomes the beneficial
owner, directly or indirectly, of 30% or more of the outstanding shares of common stock and the total voting power of the outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (iii) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is
no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial
agreement providing for such Business Combination; or 

        (iv)  Approval
by the shareholders of the Company of a complete liquidation or dissolution of the Company. 

        Notwithstanding
the foregoing provisions of this definition, a Change in Control shall not be deemed to occur with respect to the Participant if the acquisition of the 30% or greater
interest referred to in clause (a) is by a group, acting in concert, that includes the Participant or if at least 40% of the then outstanding common stock or combined voting power of the then
outstanding voting securities (or voting equity interests) of the Surviving Corporation or, if applicable, the Parent Corporation shall be beneficially owned, directly or indirectly, immediately after
a Business Combination by a group, acting in concert, that includes the Participant. 

        (i)    "Code"
shall mean the Internal Revenue Code of 1986, as amended and in effect from time to time, or any successor statute. 

        (j)    "Committee"
means any committee of the Board designated by the Board to administer this Plan under Section 3 hereof, of which shall be composed of not less that
two members, each of whom shall be a "non-employee director" as defined in Exchange Act Rule 16b-3. 

        (k)  "Company
means Medtronic, Inc., a Minnesota corporation, or any successor to all or substantially all of its businesses by merger, consolidation, purchase of
assets or otherwise. 

        (l)    "Deferred
Stock Unit" means the right to receive one Share pursuant to Section 6 of this Plan. 

2

 

        (m)  "Disability"
means the disability of a Participant such that the Participant would, if an employee, be considered disabled under any retirement plan of the Company which
is qualified under Section 401 of the Code. 

        (n)  "Discretionary
Option" means an Option granted pursuant to Section 5(f). 

        (o)  "Exchange
Act" means the Securities Exchange Act of 1934, as amended; "Exchange Act Rule 16b-3" means Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act as in effect with respect to the Company or any successor regulation. 

        (p)  "Fair
Market Value" as of any date means, unless otherwise expressly provided in this Plan: 

        (i)    the
closing sale price of a Share (A) on the composite tape for New York Stock Exchange ("NYSE") listed shares, or (B) if the Shares are not quoted on the
NYSE composite tape, on the principal United States securities exchange registered under the Exchange Act on which the shares are listed, or (C) if the Shares are not listed on any such
exchange, on the National Association of Securities Dealers, Inc. Automated Quotation System National Market System, in any case on the date immediately preceding that date, or, if no sale of
Shares shall have occurred on that date, on the next preceding day on which a sale of Shares occurred, or 

        (ii)  if
clause (i) is not applicable, what the Committee determines in good faith to be 100% of the fair market value of a Share on that date. However, if the
applicable securities exchange or system has closed for the day at the time the event occurs that triggers a determination of Fair Market Value, all references in this paragraph to the "date
immediately preceding that date" shall be deemed to be references to "that date." The determination of Fair Market Value shall be subject to adjustment as provided in Section 7(e) hereof. For
purposes of this definition, each Option granted and each Deferred Stock Unit credited pursuant to this Plan shall be deemed conclusively to have been granted or credited, as applicable, prior to the
close of the applicable securities exchange or system on the date of grant or credit, as applicable. 

        (q)  "Fundamental
Change" means a dissolution or liquidation of the Company, a sale of substantially all of the assets of the Company, a merger or consolidation of the
Company with or into any other
corporation, regardless of whether the Company is the surviving corporation, or a statutory share exchange involving capital stock of the Company. 

        (r)  "Initial
Option" means an Option granted pursuant to Section 5(b). 

        (s)  "Initial
Plan Year" means the period from March 5, 1998 through August 31, 1998. 

        (t)    "Meeting"
means a regular or special meeting of the Board or of a committee of the Board on which a particular Participant serves that is actually held. 

        (u)  "Non-Employee
Director" means a member of the Board who is not an employee of the Company or any Affiliate. 

        (v)  "Option"
means a right to purchase Stock. 

        (w)  "Participant"
means any Non-employee Director to whom an Award is made. 

        (x)  "Plan"
means this 1998 Outside Director Stock Compensation Plan, as amended and in effect from time to time. 

        (y)  "Plan
Year" means the Initial Plan Year, or the period from September 1 of 1998 or any subsequent year, through the following August 31. 

        (z)  "Pro-Ration
Factor" means: (A) in the case of a Participant who is a Non-Employee Director for the entire Plan Year in question and
attends at least 75 percent of the Meetings that occur during such Plan Year (such Meetings, the "Plan Year Meetings"), 100 percent; (B) in the case of a 

3

 

Participant who is a Non-Employee Director for only a portion of a Plan Year and attends at least 75 percent of the Meetings that occur during that portion of a Plan Year (such
meetings, the "Applicable Meetings"), a percentage determined by dividing the number of Applicable Meetings by the total number of Plan Year Meetings for that Plan Year; and (C) in the case of
a Non-Employee Director who fails to satisfy the Meeting attendance requirement of clause (A) or (B), as applicable, 75 percent of the percentage specified in
clause (A) or (b), as applicable. 

        (aa) "Replacement
Factor" is defined in Section 5(d)(ii). 

        (bb) "Replacement
Option" means an Option granted pursuant to Section 5(d) of this Plan. 

        (cc) "Retirement
Option" means an Option granted pursuant to Section 5(e) of this Plan. 

        (dd) "Share"
means a share of Stock. 

        (ee) "Stock"
means the common stock, $.10 par value per share (as such par value may be adjusted from time to time), of the Company. 

        (ff)  "Subsidiary"
means a "subsidiary corporation," as that term is defined in Section 424(f) of the Code, or any successor provision. 

        (gg) "Successor"
with respect to a Participant means the legal representative of an incompetent Participant and, if the Participant is deceased, the legal representative of
the estate of the Participant or the person or persons who may, by bequest or inheritance, or pursuant to a transfer permitted under Section 5(i) of this Plan, acquire the right to
exercise an Option or receive Shares issuable in satisfaction of Deferred Stock Units in the event of the Participant's death. 

        (hh) "Term"
means the period during which an Option may be exercised. 

        Except
when otherwise indicated by the context, reference to the masculine gender shall include, when used, the feminine gender and any term used in the singular shall also include the
plural. 

        3.    Administration.    

        (a)    Authority of Committee.    The Committee or its delegee shall administer this Plan. The Committee shall have
the authority to interpret this Plan and any Award or Agreement made under this Plan, to establish, amend, waive and rescind any rules and regulations relating to the administration of this Plan
(including without limitation the manner in which Participants shall make elections provided for herein), to determine the terms and provisions of any Agreements entered into hereunder (not
inconsistent with this Plan), and to make all other determinations necessary or advisable for the
administration of this Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in this Plan or in any Award in the manner and to the extent it shall deem
desirable. The determinations of the Committee in the administration of this Plan, as described herein, shall be final, binding and conclusive. 

        (b)    Indemnification.    To the full extent permitted by law, each member and former member of the Committee and
each person to whom the Committee delegates or has delegated authority under this Plan shall be entitled to indemnification by the Company against and from any loss, liability, judgment, damage, cost
and reasonable expense incurred by such member, former member or other person by reason of any action taken, failure to act or determination made in good faith under or with respect to this Plan. 

        4.    In General.    

        (a)    Shares Available.    The number of Shares available for distribution under this Plan is 3,000,000 (subject to
adjustment under Section 7(e) hereof). Any Shares subject to the terms and conditions of an Award under this Plan which are not used because the terms and conditions of the Award are not met
may again be used for an Award under this Plan. Any unexercised or undistributed 

4

 

portion of any terminated, expired, exchanged, or forfeited Award or any Award settled in cash in lieu of Shares shall be available for further Awards. 

        (b)    No Fractional Shares.    No fractional Shares may be issued under this Plan; fractional Shares will be rounded
to the nearest whole Share. 

        (c)    Rights as Shareholder.    A participant shall have no rights as a shareholder with respect to any securities
covered by an Award until the date the Participant becomes the holder of record. 

        5.    Options.    

        (a)    Agreements.    Each Option granted under this Plan shall be evidenced by an Agreement setting forth the terms
and conditions thereof. 

        (b)    Initial Option Grants.    Each Non-Employee Director first elected or appointed to the Board on or
after January 15, 1998 shall automatically be granted, on the later of (i) the date such director first becomes a director and (ii) March 5, 1998, an Option (an "Initial
Option") to purchase that number of Shares determined by dividing (i) two times the amount of the Annual Retainer as in effect immediately following such election or appointment by
(ii) the Fair Market Value of a Share on the date of grant.
No increase in the Annual Retainer of the Non-Employee Directors after a person becomes a Non-Employee Director shall increase the number of Shares subject to the Initial
Option granted to such Non-Employee Director. An employee of the Company or an Affiliate who terminates such employment and thereafter becomes a Non-Employee Director is not
entitled to receive an Initial Option but will be entitled to receive Annual Options and Replacement Options. A Non-Employee Director is not entitled to receive more than one Initial
Option during his or her lifetime. 

        (c)    Annual Option Grants.    On the first day of each Plan Year other than the Initial Plan Year, each
Non-employee Director shall automatically be granted an Option (the "Annual Option") to purchase that number of Shares equal to (i) the amount of the Annual Retainer in effect as of
such day, divided by (ii) the Fair Market Value of a Share on the date of the grant. If there is an increase in the Annual Retainer after the Annual Option is granted in a given year, each
Non-Employee Director shall automatically be granted, as of the date such increase is approved, a supplemental Annual Option to purchase that number of Shares equal to (i) the
amount of the increase in such Annual Retainer divided by (ii) the Fair Market Value of a Share on the date of the grant. 

        (d)    Replacement Option Grant.    (i) Each Non-Employee Director shall be provided with the
opportunity to elect, in advance of the first day of each Plan Year (or upon becoming a Non-Employee Director, if later), to receive the Annual Retainer and all committee chair fees for
such Plan Year (collectively, the "Eligible Earnings") in the form of a grant of an Option (a "Replacement Option") under this Section 5(d) rather than in cash. Each Non-Employee
Director who makes such an election who remains a member of the Board on the last day of the relevant Plan Year shall automatically be granted on such day an Option (the "Replacement Option") to
purchase that number of Shares equal to (A) the Replacement Factor (as defined below) times the Eligible Earnings for the Participant for the Plan Year times the Pro-Ration Factor,
divided by (B) the Fair Market Value of a Share on the date of grant. A Non-Employee Director who elects to receive a Replacement Option for a Plan Year but retires from the Board
prior to the last day of such Plan Year shall automatically be granted on the date of retirement a Replacement Option to purchase that number of Shares equal to (C) the Replacement Factor times
the Eligible Earnings for the Participant for the Plan Year times the Pro-Ration Factor divided by (D) the Fair Market Value of the Shares on the date of grant. 

        (ii)  The
"Replacement Factor means four, or such other number as the Board may designate before the beginning of any Plan Year. 

        (e)    Retirement Options.    Each Participant who has elected, in connection with the termination of the
Medtronic, Inc. Directors' Retirement Plan (the "Retirement Plan"), to receive Options pursuant to this Section 5(e) shall be granted as of March 5, 1998, an Option (a "Retirement
Option") to 

5

 

purchase that number of Shares equal to (i) four times the amount of such Participant's accrued benefit under the Retirement Plan as of March 5, 1998, divided by (ii) the Fair
Market Value of a Share on the date of grant. 

        (f)    Discretionary Options.    The Board or the Committee may, in its discretion, at any time or from time to time
grant to any Non-Employee Director additional Options ("Discretionary Options") to purchase such number of Shares, on such terms and conditions, as it shall determine. 

        (g)    Purchase Price; Term and Exercisability of Options.    The purchase price of each share subject to an Option
shall be the Fair Market Value of a Share as of the date the Option is granted. Options granted to a Non-Employee Director under this Section 5 shall vest and be exercisable in full
on the date of grant, except to the extent the Board provides otherwise with respect to Discretionary Options; provided, however, that in no event shall
a Non-Employee Director initially appointed by the Board be entitled to exercise an Option unless, and until such time as, such director shall have been elected to the Board by the
shareholders of the Company. Notwithstanding the foregoing, except as otherwise provided by the Board with respect to Discretionary Options, vesting of an Option granted to a Non-Employee
Director who shall have been elected by the shareholders of the Company shall accelerate and the Option shall become immediately exercisable in full upon the occurrence of a Change in Control or in
the event that the Non-Employee Director ceases to serve as a director of the Company due to death, Disability, resignation or retirement under the policies of the Company then in effect.
Options shall expire on the ten-year anniversary date of the Option's grant; provided, that Initial Options and Annual Options (but not
Replacement Options or Retirement Options) shall expire on the five-year anniversary date of the date the Non-Employee Director ceases to be a director of the Company for any
reason, if earlier than the ten-year anniversary date of the Option's grant; and provided, further, that the Initial Option granted to a
Non-Employee Director initially appointed by the Board shall expire on the date such director ceases to be a director of the Company unless such director shall have been elected by the
shareholders subsequent to the grant of the Initial Option to such director. 

        (h)    Payment of Option Price.    The purchase price of the Shares with respect to which an Option is exercised shall
be payable in full at the time of exercise; provided, that to the extent permitted by law, Participants may simultaneously exercise Options and sell the
Shares thereby acquired pursuant to a brokerage or similar relationship and use the proceeds from such sale to pay the purchase price of such Shares. The purchase price may also be paid in cash, or
through a reduction of the number of Shares delivered to the Participant upon exercise of the Option or by delivery to the Company of Shares held by such Participant for at least six months before
such exercise (in each case, such Shares having a Fair Market Value as of the date the Option is exercised equal to the purchase price of the Shares being purchased pursuant to the Option), or a
combination thereof, in the discretion of the Participant. In no event shall any Option be exercisable at any time after its Term. When an Option is no longer exercisable, it shall be deemed to have
lapsed or terminated. 

        (i)    Transferability.    A non-Employee Director may transfer an Option granted pursuant to this
Section 5 to any member of such Non-Employee Director's "immediate family" (as such term is defined in Rule 16a-1(e) promulgated under the Exchange Act, or any
successor rule or regulation) or to one or more trusts whose beneficiaries are members of such Non-Employee Director's "immediate family" or partnerships in which such family members are
the only partners; provided, that (i) the transferor receives no consideration for the transfer and (ii) such transferred Option shall
continue to be subject to the same terms and conditions as were applicable to such Option immediately prior to its transfer. Unless an Option granted pursuant to this Section 5 shall have
expired, in the event of a Non-Employee Director's death, an Option granted to such Non-Employee Director pursuant to this Section 5 shall be transferable to the
beneficiary, if any, designated by the Non-Employee Director in writing to the
Company prior to the Non-Employee Director's death and such beneficiary shall succeed to the rights of the Non-Employee Director to the extent permitted by law. If no such
designation of a 

6

 

beneficiary has been made, the Non-Employee Director's legal representative shall succeed to such Option, which shall be transferable by will or pursuant to the laws of descent and
distribution. 

        6.    Deferred Stock Units.    

        (a)    Annual Credit.    As of the last day of each Plan Year, there shall be credited to the Account of each
Participant who is a Non-Employee Director on such day a number of Deferred Stock Units (each representing the right to receive a Share) equal to (i) the Annual Retainer in effect
as of such day, times the Pro-Ration Factor, divided by (ii) the average of the Fair Market Value of a Share on each of the last 20 trading days during such Plan Year determined in
accordance with clause (i) of Section 2(p) or, if clause (i) of Section 2(p) is inapplicable, the Fair Market Value of a Share as of the last day of such Plan Year
determined in accordance with clause (ii) of Section 2(p). There shall be credited to the Account of any Non-Employee Director who retires from the Board prior to the last
day of the Plan Year, as of the retirement date, a number of Deferred Stock Units equal to (i) the Annual Retainer in effect as of such date, times the Pro-Ration Factor, divided by
(ii) the average of the Fair Market Value of a Share on each of the last 20 trading days during such Plan Year determined in accordance with Section 2(p). 

        (b)    Retirement Plan Credit.    The account of each Participant who has elected, in connection with the termination
of the Retirement Plan, to be credited with Deferred Stock Units pursuant to this Section 6(b) shall be credited, as of March 5, 1998, with a number of Deferred Stock Units (each
representing the right to receive a Share) equal to (i) the amount of such Participant's accrued benefit under the Retirement Plan as of March 5, 1998, divided by (ii) the average
of the Fair Market Value of a Share on each of the last 20 trading days ending with March 5, 1998 determined in accordance with clause (i) of Section 2(p) or, if clause (i)
of Section 2(p) is inapplicable, the Fair Market Value of a Share as of the last day of such Plan Year determined in accordance with clause (ii) of Section 2(p). 

        (c)    Discretionary Credits.    The Board or the Committee may, in its discretion, at any time and from time to time,
cause additional Deferred Stock Units (each representing the right to receive a Share) to be credited to the account of any Non-Employee Director. 

        (d)    Credits of Dividend Equivalents; Maintenance of Accounts.    The Company shall maintain an Account for each
Participant to which the credits provided for in Sections 6(a), (b) and (c) above shall be made. Each Participant's Account shall be credited from time to time with additional Deferred
Stock Units to reflect deemed reinvestment of any amounts that would have been paid as cash dividends with respect to the Deferred Stock Units held in such Account if they were Shares. Subject to the
provisions of Section 6(e) regarding delivery of Shares, Accounts may be credited with fractional Deferred Stock Units pursuant to this Section 6(d) and Sections 6(a), (b) and
(c). 

        (e)    Delivery of Shares from Accounts.    

        (i)    Each
Participant shall be provided the opportunity to elect, in accordance with procedures established by the Committee, whether to receive the balance in his or her
account in a single lump sum or in five annual installments. Once made, such an election may be changed, but no such changed election shall take effect until six months after the date the election is
made, and in any event such changed election shall not take effect unless it is (A) made at least six months before deliveries pursuant to Section 6(e)(ii) begin and
(B) approved by the Board or a committee of the Board if the Committee determines that such approval is necessary or appropriate in light of Exchange Act Rule 16b-3. 

        (ii)  The
balance in a Participant's Account shall be delivered to the Participant or the Participant's Successor in the form of Shares as soon as practicable after, or
beginning as soon as practicable after, the date on which the Participant ceases for any reason to be a member of the Board (the "Termination Date"). If a Participant has elected a lump sum delivery,
or if a Participant dies while a member of the Board, the Participant or the Participant's Successor, as applicable, shall receive a number of Shares equal to the total number of Deferred Stock Units
in 

7

 

the Participant's Account as of the Termination Date in full satisfaction of all of the Participant's interest in the Account; provided, that any
fractional Deferred Stock Units shall be rounded to the nearest higher whole number of Shares. If a Participant has elected installment delivery and ceases to be a member of the Board for any reason
other than the death of the Participant, then the Participant shall receive the balance in such Participant's Account in the form of five annual deliveries of Shares (and if a Participant dies after
ceasing to be a Board member, any remaining annual deliveries shall be made to the Participant's Successor). The precise number of shares delivered in each installment shall be determined in such a
manner as to cause each such delivery to represent approximately one-fifth of the Deferred Stock Units held in such Account as of the Termination Date together with any dividend
equivalents credited thereon. Notwithstanding the foregoing, no such installment shall be delivered unless and until the Board or the Committee shall have approved the delivery (unless such approval
is not necessary under Exchange Act Rule 16b-3). 

        (iii)  Notwithstanding
the foregoing, the balance in all Participants' Accounts shall be delivered to the Participants in a single lump sum delivery of Shares upon the
occurrence of a Change of Control. 

        7.    General Provisions.    

        (a)    Effective Date of this Plan.    This Plan shall become effective as of March 5, 1998. 

        (b)    Duration of this Plan.    This Plan shall remain in effect until it is terminated pursuant to
Section 7(d) hereof. 

        (c)    No Right to Board Membership.    Nothing in this Plan or in any Agreement shall confer upon any Participant the
right to continue as a member of the Board. 

        (d)    Amendment, Modification and Termination of this Plan.    Except as provided in this Section 7(d), the
Board may at any time amend, modify, terminate or suspend this Plan or any or all Agreements under this Plan to the extent permitted by law. No termination, suspension or modification of this Plan may
materially and adversely affect any right acquired by any Participant (or a Participant's legal representative) or any Successor under an Award granted before the date of termination, suspension or
modification, unless otherwise agreed by the Participant in the Agreement or otherwise or required as a matter of law. It is conclusively presumed that any adjustment for changes in capitalization
provided for in Section 7(e) hereof does not adversely affect any right of a Participant under an Award. 

        (e)    Adjustment for Changes in Capitalization.    Appropriate adjustments in the aggregate number and type of Shares
available for Awards under this Plan, in the number and type of Shares subject to Awards then outstanding and in the Option exercise price as to any outstanding Options and in the number of Defined
Stock Units in the Accounts, may be made by the Committee in its sole discretion to give effect to adjustments made in the number or type of Shares through a Fundamental Change, recapitalization,
reclassification, stock dividend, stock split, stock combination, or other relevant change, provided that fractional Shares shall be rounded to the nearest whole Share. 

        (f)    Fundamental Change.    In the event of a proposed Fundamental Change: (a) involving a merger,
consolidation or statutory share exchange, unless appropriate provision shall be made (which the Board may, but shall not be obligated to, make) for the protection of the outstanding Options by the
substitution of appropriate voting common stock of the corporation surviving any such merger or consolidation or, if appropriate, the parent corporation of the Company or such surviving corporation,
to be issuable upon the exercise of Options, or (b) involving the dissolution or liquidation of the Company, the Board may, but shall not be obligated to, declare, at least twenty days prior to
the occurrence of the Fundamental Change, and provide written notice to each holder of an Option of the declaration, that each outstanding Option, whether or not then exercisable, shall be canceled at
the 

8

 

time of, or immediately prior to the occurrence of, the Fundamental Change in exchange for payment to each holder of an Option, within 20 days after the Fundamental Change, of cash for each
Share covered by the canceled Option equal to the amount, if any, by which the Fair Market Value (as defined in this Section 7(f)) per Share exceeds the exercise price per Share covered by such
Option. At the time of the declaration provided for in the immediately preceding sentence, each Option shall immediately become exercisable in full and each person holding an Option shall have the
right, during the period preceding the time of cancellation of the Option, to exercise the Option as to all or any part of the Shares covered thereby. In the event of a declaration pursuant to this
Section 7(f), each outstanding Option that shall not have been exercised prior to the Fundamental Change shall be canceled at the time of, or immediately prior to, the Fundamental Change, as
provided in the declaration. Notwithstanding the foregoing, no person holding an Option shall be entitled to the payment provided for in this Section 7(f) if such Option shall have previously
expired. For purposes of this Section 7(f) only, "Fair Market Value" per Share means the cash plus the fair market value, as determined in good faith by the Board, of the non-cash
consideration to be received per Share by the
shareholders of the Company upon the occurrence of the Fundamental Change, notwithstanding anything to the contrary provided in this Plan. 

        (g)    Limits of Liability.    

        (i)    Any
liability of the Company to any Participant with respect to an Award shall be based solely upon contractual obligations created by this Plan and the Agreement. 

        (ii)  Except
as may be required by law, neither the Company nor any member or former member of the Board or of the Committee, nor any other person participating (including
participation pursuant to a delegation of authority under Section 3(a) hereof) in any determination of any question under this Plan, or in the interpretation, administration or application of
this Plan, shall have any liability to any party for any action taken, or not taken, in good faith under this Plan. 

        (h)    Compliance with Applicable Legal Requirements.    No certificate for Shares distributable pursuant to this Plan
shall be issued and delivered unless the issuance of such certificate complies with all applicable legal requirements including, without limitation, compliance with the provisions of applicable state
securities laws, the Securities Act of 1933, as amended and in effect from time to time or any successor statute, the Exchange Act and the requirements of the exchanges on which the Company's Shares
may, at the time, be listed. 

        (i)    Removal for Cause.    Notwithstanding any other provision of this Plan, this Section 7(i) shall
apply in the event a Participant is removed from the Board for cause before a Change of Control. In such event: (i) all of the Participant's Options shall immediately expire and be forfeited,
and (ii) unless the Board or the Committee specifically determines otherwise in connection with or after such removal, the balance in such Participant's Account shall be delivered to the
Participant in a single lump sum delivery of Shares after the expiration of six months from the date of such removal. In addition, if the Participant has received or been entitled to delivery of
Shares pursuant to the exercise of an Option within six months before such removal, the Board or the Committee, in its sole discretion, may require the Participant to return or forfeit all or a
portion of such Shares and receive back the exercise price (if any) paid therefor, or may require the Participant to pay to the Company the economic value of such Shares less such exercise price,
determined as of the date of the exercise of Options in the event of any of the following occurrences (whether before or after such removal): competition with the Company or any Affiliate,
unauthorized disclosure of material proprietary information of the Company or any Affiliate, a violation of applicable business ethics policies or business policies of the Company or any Affiliate, or
any other action or event that the Board may determine warrants such a requirement. The Board's or Committee's right to require such return or forfeiture must be exercised within 90 days after
the later of the date of such removal or the discovery of such an occurrence, but in no event later than 15 months after such removal. 

9

 

        (8)    Governing Law.    To the extent that federal laws do not otherwise control, this Plan and all determinations
made and actions taken pursuant to this Plan shall be governed by the laws of Minnesota and construed accordingly. 

        (9)    Severability.    In the event any provision of this Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 

        (10)    Effect of Prior Plan.    From and after the Effective Date of this Plan, no further awards shall be made to
Non-Employee Directors under the Company's 1994 Stock Award Plan the "Prior Plan"). Thereafter, all grants and awards made under the Prior Plan prior to such Effective Date shall continue
in accordance with the terms of the Prior Plan. 

10

QuickLinks

MEDTRONIC, INC. 1998 OUTSIDE DIRECTOR STOCK COMPENSATION PLAN (As Amended through June 27, 2002)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}]]