Document:

Medtronic, Inc. Exhibit 10.6 to Form 10-Q

Exhibit 10.6

 

 

NON-QUALIFIED STOCK OPTION AGREEMENT

2008 STOCK AWARD AND INCENTIVE PLAN

 

	
            1.
 	
            The Option. Medtronic, Inc., a Minnesota corporation (the “Company”), hereby grants to you, the individual named above, as of the above Grant Date, an option (the “Option”) to purchase the above number of shares of common stock of the Company (the “Common Stock”), for the above Option Price Per Share, on the terms and conditions set forth in this Non-Qualified Stock Option Agreement (this “Agreement”) and in the Medtronic, Inc. 2008 Stock Award and Incentive Plan (the “Plan”). In the event of any inconsistency between the terms of the Agreement and the Plan, the terms of the Plan shall govern. Capitalized terms not defined in this Agreement shall have the meanings ascribed to them in the Plan.
 

 

	
            2.
 	
            Exercise of Option. The exercise of the Option is subject to the following conditions and restrictions:
 

 

	
             
  	
            (a)
 	
            Expiration. Upon vesting of a portion of the Option, such portion may be exercised in whole or in part until the earlier of (i) the above Expiration Date, or (ii) the expiration of the applicable period following your Termination of Employment, as provided in Sections 2(c), (d) or (e) below.
 

 

	
             
  	
            (b)
 	
            Schedule of Exercisability. The Option shall become vested and exercisable to the extent of  ___% of the above number of shares of Common Stock on _____________________. Once a portion of the Option has become exercisable, that portion may be exercised at any time thereafter, subject to the provisions of Paragraph 2(a) above.
 

 

	
             
  	
            (c)
 	
            Death. Notwithstanding the schedule of exercisability set forth in Section 2(b) above, the Option shall become immediately exercisable in full upon your death, and may be exercised by your Successor (as defined below) at any time, or from time to time, within five years after the date of your death, subject to Section 2(g) below. For purposes of this Agreement, the term “Successor” shall mean the legal representative of your estate or the person or persons who may, by bequest, inheritance or valid beneficiary designation (as provided in Section 15.7 of the Plan), acquire the right to exercise the Option.
 

 

	
             
  	
            (d)
 	
            Disability or Retirement. Notwithstanding the schedule of exercisability set forth in Section 2(b) above, the Option shall become immediately exercisable in full upon your Disability or Retirement (as each such term is defined below), and you may exercise your Option at any time, or from time to time, within five years after the date of Retirement or determination of Disability, subject to Section 2(g) below. For purposes of this Agreement, the terms “Disability”  and  “Retirement” shall have the meanings ascribed to those terms under any retirement plan of the Company which is qualified under Section 401 of the Code  (which currently provides for retirement on or after age 55, provided you have been employed by the Company and/or one or more Affiliates for at least ten years, or retirement on or after age 62), or
under any disability or retirement plan of the Company or any Affiliate applicable to you due to employment by a non-U.S. Affiliate or employment in a non-U.S. location, or as otherwise determined by the Committee.
 

 

	
             
  	
            (e)
 	
            Termination for Any Other Reason. In the event you incur a Termination of Employment for any reason other than those specified in Sections 2(c) and 2(d), any unvested portion of the Option will terminate as of 11:00 p.m. CT (midnight ET) on the date of your Termination of Employment. You may exercise that portion of the Option that was vested but unexercised as of the date of your Termination of Employment for thirty (30) days following the date of your Termination of Employment, subject to Section 2(g) below. At 11:00 p.m. CT (midnight ET) on the date that is 30 days after the date of your Termination of Employment, the Option will expire. 
 

 

	
             
  	
            (f)
 	
            Change of Control. Notwithstanding any other provision of this Agreement, the Option shall be subject to the provisions of Section 10.1 of the Plan. 
 

 

	
             
  	
            (g)
 	
            Expiration of Term. Notwithstanding the foregoing paragraphs (a)-(f), in no event shall the Option be exercisable after the Expiration Date.
 

 

	
            3.
 	
            Manner of Exercise. To exercise your Option, you must deliver notice of exercise (the “Notice”) to the administrator (the “Administrator”) designated by the Company to provide services relating to the administration of the Plan at the time of your exercise. The Notice must be given in the manner specified by the Administrator and must specify the number of shares of Common Stock (the “Shares”) as to which the Option is being exercised and must be accompanied by payment of the purchase price for the Shares. Payment of the purchase price may be in cash, check, the delivery of Common Stock already owned by you, or a combination thereof. Payment of the purchase price may also be made by instructing the Company to withhold a number of Shares having a Fair Market Value (based on the Fair Market Value of the
Common stock on the date the applicable Option is exercised) equal to the product of (i) the exercise price multiplied by (ii) the number of Shares in respect of which the Option shall have been exercised.
 

 

Exercise shall be deemed to occur on the earlier of (i) the date the Notice and the purchase price for the Shares as to which the Option is being exercised are received by the Administrator and (ii) the date you simultaneously exercise the Option and sell the Shares, using the proceeds from such sale to pay the purchase price.

 

	
            4.
 	
            Withholding Taxes. You are responsible for payment of any federal, state, local or other taxes which must be withheld upon the exercise of the Option, and you must promptly pay to the Company any such taxes. The Company and its subsidiaries are authorized to deduct from any payment owed to you any taxes required to be withheld with respect to the Shares, including social security and Medicare (FICA) taxes and federal, state and local income tax with respect to income arising from the exercise of the Option. The Company shall have the right to require the payment of any such taxes before issuing any Shares pursuant to an exercise of the Option. In lieu of all or any part of a cash payment, you may elect to have a portion of the Shares otherwise issuable upon exercise of the Option withheld by the Company to satisfy all or part of the
withholding tax requirements relating to the Option exercise with such Shares valued in the same manner as used in computing such withholding taxes. Any fractional Share amount due relating to such tax withholding will be rounded up to the nearest whole Share and the additional amount will be added to your federal withholding.
 

 

	
            5.
 	
            Forfeitures.  If you have received or been entitled to receive payment in cash, delivery of Common Stock or a combination thereof pursuant to this Agreement within the period beginning six months prior to the date of your Termination of Employment and ending twelve months following the date of your Termination of Employment, the Company, in its sole discretion, may require you to return or forfeit the cash and/or Common Stock received or receivable with respect to this Option (or its economic value as of the date of the exercise of the Option), in the event that you engage in any of the following activities:
 

 

	
             
  	
            a.
 	
            performing services for or on behalf of any competitor of, or competing with, the Company or any Affiliate, within six months of the date of your Termination of Employment;
 

 

2

	
             
  	
            b.
 	
            unauthorized disclosure of material proprietary information of the Company or any Affiliate; 
 

 

	
             
  	
            c.
 	
            a violation of applicable business ethics policies or business policies of the Company or any Affiliate; or 
 

 

	
             
  	
            d.
 	
            any other occurrence determined by the Committee. 
 

 

The Company’s right to require forfeiture must be exercised not later than 90 days after the Company acquires actual knowledge of such an activity, but in no event later than twelve months after your Termination of Employment. Such right shall be deemed to be exercised upon the Company’s mailing written notice of such exercise to your most recent home address as shown on the personnel records of the Company. In addition to requiring forfeiture as described herein, the Company may exercise its rights under this Section 5 by preventing or terminating the exercise of any rights under this Option or the acquisition of Shares or cash thereunder. 

 

If you fail or refuse to forfeit the cash and/or Shares demanded by the Company (the number of such shares of Common Stock as may be adjusted for any events described in Section 3.4 of the Plan), you shall be liable to the Company for damages equal to the number of Shares demanded times the highest closing price per share of the Common Stock during the period between the date of your Termination of Employment and the date of any judgment or award to the Company, together with all costs and attorneys’ fees incurred by the Company to enforce this provision.

 

Notwithstanding the foregoing, this Section 5 shall have no application following a Change of Control, nor shall the Company’s Incentive Compensation Forfeiture Policy apply following a Change of Control to this Option or to any proceeds in respect of this Option.

 

	
            6.
 	
            Transferability. Upon prior written approval of the Corporate Secretary of the Company, in his or her discretion, this Option may be transferred to a member of your “immediate family” (as such term is defined in Rule 16a-1(e) promulgated under the Act, or any successor rule or regulation) or to one or more trusts whose beneficiaries are members of your “immediate family” or partnerships in which such family members are the only partners; provided, however, that (1) you receive no consideration for the transfer and (2) the transferred Option shall continue to be subject to the same terms and conditions as were applicable to such Option immediately prior to its transfer.
 

 

	
            7.
 	
            Conversion to Stock-Settled Stock Appreciation Rights. At any time following the Grant Date, the Company may convert this Option to a stock-settled Stock Appreciation Right. Upon exercise of a stock-settled Stock Appreciation Right, you shall receive shares of Common Stock with a value equal to the excess of (1) the Fair Market Value of the Shares on the date of exercise over (2) the Option Price Per Share multiplied by the number of Shares.
 

 

	
            8.
 	
            Agreement. Your receipt of the Option and this Agreement constitutes your agreement to be bound by the terms and conditions of this Agreement and the Plan. 
 

 

Accompanying this Agreement are instructions for accessing the Plan and the Plan Summary (prospectus) from the Administrator’s Internet website or HROC – Stock Administration’s intranet website. You may also request written copies by contacting HROC - Stock Administration at 763.514.1500.

 

HROC - Stock Administration, MS V235 

Medtronic, Inc. 

3850 Victoria Street North 

Shoreview, MN  55126-2978

 

3Medtronic, Inc. Exhibit 10.7 to Form 10-Q

Exhibit 10.7

Terms of Non-Employee Director Compensation

Under the Medtronic, Inc. 2008 Stock Award and Incentive Plan

 

Each director serving on the Board who is not an employee of the Company or an Affiliate (each, a “Non-Employee Director”) shall be compensated as provided below and as determined by the Board from time to time (the terms set forth below shall remain in effect until modified by the Board or the Compensation Committee of the Board. Equity compensation awards granted pursuant to this Exhibit A shall be granted under the Medtronic, Inc. 2008 Stock Award and Incentive Plan (the “Incentive Plan”). Unless otherwise defined below, capitalized terms set forth in this Exhibit A shall have the meaning given to them in the Incentive Plan.

 

Annual Retainers and Annual Stipends

 

Each Non-Employee Director shall be paid an annual retainer equal to $80,000 (the “Annual Retainer”). Any Non-Employee Director serving as Chair of each of the Compensation, Technology and Quality and Corporate Governance Committees of the Board shall receive, in addition to the Annual Retainer, an annual stipend of $10,000 (the “Annual Stipends”). 

 

Any Non-Employee Director serving as Chair of the Audit Committee of the Board shall receive, in addition to the Annual Retainer, an annual stipend of $15,000, and any other Non-Employee Director serving as a member of the Audit Committee shall receive an Annual Stipend of $5,000 (the “Audit Committee Annual Stipends”).

 

The Annual Retainer, Annual Stipends and Audit Committee Annual Stipends shall be paid in cash in two equal installments payable, respectively, within 10 days following the end of the Company’s second fiscal quarter and within 10 days following the end of the Company’s fiscal year. Notwithstanding the foregoing, the amount payable in respect of the Annual Retainer, Annual Stipends and Audit Committee Annual Stipends shall be reduced by 25% for each Non-Employee Director who fails to attend at least 75% of the total meetings of the Board and Committees of the Board on which such director served during the fiscal year, such reduction to be applied to payments to be made within 10 days following the end of the Company’s fiscal year.

 

Special Committee Fees

 

In addition to the foregoing amounts, each Non-Employee Director serving on a Special Committee of the Board shall be paid an annual fee of $10,000 (the “Special Committee Fees”). The Special Committee Fees shall be paid in cash in two equal installments payable, respectively, within 10 days following the end of the Company’s second fiscal quarter and within 10 days following the end of the Company’s fiscal year.

 

Annual Option Awards

 

On the first day of the fiscal year of the Company, each Non-Employee Director shall be granted a number of Options equal to the Annual Retainer divided by the Fair Market Value of a Share of Common Stock (the “Annual Option Award”). If there is an increase in the Annual Retainer after the Annual Option Award is granted, each Non-Employee Director shall automatically be granted, as of the date such increase is approved, a supplemental Annual Option Award equal to (1) the amount of such increase divided by (2) the Fair Market Value of a Share of Common Stock.

 

Initial Option Awards

 

On the first day of the fiscal quarter immediately following the fiscal quarter during which a Non-Employee Director first becomes a director, such Non-Employee Director shall be granted (1) that number of Options equal to twice the Annual Retainer divided by the Fair Market Value of a Share of Common Stock and (2) that number of Options equal to (x) the Annual Retainer divided by the Fair Market Value of a Share of Common Stock multiplied by (y) a fraction, the numerator of which is the number of days remaining in the fiscal year from the date of the Non-Employee Director’s commencement of service on the Board through the end of such fiscal year and the denominator of which is 365 (these grants are together referred to as the “Initial Option Award”). No Non-Employee Director shall receive more than one Initial Option Award during his or her lifetime.

 

The Annual Option Award and Initial Option Award shall be satisfied with Options granted under the Incentive Plan, and such Options shall be immediately vested on the date of grant; 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. The exercise price each Option granted pursuant to an Annual Option Award or Initial Option Award shall equal the Fair Market Value of a Share of Common Stock on the Grant Date. The Award Agreement in respect of such Options shall provide that the Options shall expire on the earlier of (1) the tenth anniversary of the date on which the Options are granted and (2) the fifth anniversary of the date on which the
grantee Non-Employee Director ceases to serve as a member of the Board.

 

Restricted Stock Unit Awards

 

On the first business day of each fiscal year of the Company, each Non-Employee Director who is then a member of the Board shall be granted that number of Restricted Stock Units (the “Deferred Units”) equal to (1) the Annual Retainer in effect for the preceding fiscal year divided by the Fair Market Value of a Share on such date, multiplied by (2) the Pro-Ration Factor. For each Non-Employee Director, the Pro-Ration Factor means (1) in the case of a Non-Employee Director who was a Non-Employee Director for the entire preceding fiscal year and (x) attended at least 75 percent of the regular and special meetings of the Board and the committees of the Board, during such fiscal year, on which the Non-Employee Director serves (the “Meetings”), 100% or (y) did not attend at least 75% of the Meetings, 75%; and (2) in the case of a Non-Employee Director who was a Non-Employee
Director for a portion of such fiscal year and (x) attended 75% of the Meetings occurring during such portion of the fiscal year (the “Applicable Meetings”), a percentage determined by dividing the number of days during such fiscal year that such Non-Employee Director served as a Non-Employee Director by the total number of days in such fiscal year or (y) did not attend 75% of the Applicable Meetings, the product of (A) the fraction determined pursuant to provision (2)(x) of this sentence and (B) 75%. Each Non-Employee Director who retires prior to the last day of each fiscal year shall be granted a number of Deferred Units equal to (1) the Annual Retainer paid during such year divided by the Fair Market Value of a Share on such Non-Employee Director’s retirement date, multiplied by (2) the Pro-Ration Factor. In addition, each Non-Employee Director shall subsequently be granted additional Restricted Stock Units reflecting deemed reinvestment of any amounts that would
have been paid in cash dividends with respect to the Deferred Units.

 

The Award Agreement in respect of the Deferred Units shall provide that the Deferred Units shall be immediately vested; provided, however, that Deferred Units awarded to a Non-Employee Director initially appointed by the Board shall not vest unless, and until such time as, such director shall have been elected to the Board by the shareholders of the Company. The Award Agreement shall further provide that the Deferred Units shall be settled in Shares, and that such settlement shall be governed by any election previously made by the grantee Non-Employee Director in respect of the deferred stock unit account established pursuant to the Medtronic, Inc. 1998 Outside Director Stock Compensation Plan (the “Deferred Account”), unless and until such election is changed in accordance with procedures established by the Committee.

 

If no such election in respect of the Deferred Account has been made, or no such Deferred Account for the grantee Non-Employee Director exists, the Non-Employee Director shall be provided the opportunity to elect whether the Deferred Units will be settled in a single lump sum or in five annual installments; provided, however, that any such election shall not be effective unless made on or before December 31 of the calendar year before the calendar year in respect of which such Deferred Units are granted. In the event that no election has been or may be made in respect of the Deferred Units for any Non-Employee Director, the Award Agreement shall provide that the Deferred Units shall be settled in a lump sum of Shares on the date on which the Non-Employee Director ceases for any reason to be a member of the Board. In all other respects, the
grant, settlement, and vesting of the Restricted Stock Units shall be governed by the terms of the applicable Award Agreement and the Incentive Plan.

 

Removal for Cause

 

In the event that a Non-Employee Director is removed from the Board for Cause before a Change of Control (a “Removed Director”): (1) all Options granted to the Removed Director pursuant to an Annual Option Award or Initial Option Award shall immediately expire and be forfeited and (2) unless the Board or Committee determines in connection with or after such removal to forfeit Deferred Units granted to the Removed Director,  such Deferred Units shall be settled pursuant to the Removed Director’s valid elections with respect thereto or, if no such election exists, in a lump sum of Shares on the date on which the Removed Director ceases to be a member of the Board. In addition, if the Removed Director has received or been entitled to delivery of Shares within six months before the date of removal, the Board or the Committee, in
its sole discretion, may require the Removed Director to return or forfeit all or a portion of such Shares and receive back any exercise price paid therefor, or may require the Removed Director to pay the Company the value of such Shares less any exercise price paid therefor, determined as of the date of the exercise or delivery of the Award, as the case may be, in the event that the Board or the Committee, in its sole discretion, determines that, whether before or after removal the Removed Director (1) engaged in competition with the Company or any Affiliate, (2) disclosed, without authorization, material proprietary information of the Company or any Affiliate, (3) violated applicable business ethics policies or business policies of the Company or any Affiliate or (4) engaged in any conduct that the Board, in its sole discretion, determines to warrant such return or forfeiture. The Board’s or the Committee’s right to require such return or forfeiture must be exercised
within 90 days after the later of (1) the date of removal or (2) the discovery of an occurrence described in provisions (1) through (4) of the previous sentence, but in no event later than 15 months after the date of removal.

 

Share Retention

 

Shares received pursuant to Annual Option Awards, Initial Option Awards and Deferred Units shall be subject to the Company’s Officer and Director Stock Retention Guidelines.

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