Medtronic 2008 Annual Report Download - page 78

Shareholder Rights Plan On October 26, 2000, the Company’s Board of
Directors adopted a Shareholder Rights Plan and declared a dividend
of one preferred share purchase right (a “right”) for each outstanding
share of common stock with a par value $.10 per share. Each right will
allow the holder to purchase 1/5000 of a share of Series A Junior
Participating Preferred Stock at an exercise price of $400 per share, once
the rights become exercisable. The rights are not exercisable or
transferable apart from the common stock until 15 days after the public
announcement that a person or group (the Acquiring Person) has
acquired 15 percent or more of the Company’s common stock or 15
business days after the announcement of a tender offer which would
increase the Acquiring Person’s beneficial ownership to 15 percent or
more of the Company’s common stock. After any person or group has
become an Acquiring Person, each right entitles the holder (other than
the Acquiring Person) to purchase, at the exercise price, common stock
of the Company having a market price of two times the exercise price.
If the Company is acquired in a merger or other business combination
transaction, each exercisable right entitles the holder to purchase, at the
exercise price, common stock of the acquiring company or an affiliate
having a market price of two times the exercise price of the right.
The Board of Directors may redeem the rights for $0.005 per right
at any time before any person or group becomes an Acquiring Person.
The Board may also reduce the threshold at which a person or
group becomes an Acquiring Person from 15 percent to no less than
10 percent of the outstanding common stock. The rights expire on
October 26, 2010.
11. Stock Purchase and Award Plans
Effective April 29, 2006, the Company adopted SFAS No. 123(R) which
replaced SFAS No. 123, “Accounting for Stock-Based Compensation”
(SFAS No. 123) and supersedes Accounting Principles Board (APB)
Opinion No. 25, “Accounting for Stock Issued to Employees” (APB
Opinion No. 25). Under the fair value recognition provisions of SFAS
No. 123(R), the Company measures stock-based compensation cost at
the grant date based on the fair value of the award and recognizes the
compensation expense over the requisite service period, which is
generally the vesting period. The Company elected the modified-
prospective method of adopting SFAS No. 123(R), under which prior
periods are not retroactively restated. The provisions of SFAS No. 123(R)
apply to awards granted after the April 29, 2006 effective date.
Stock-based compensation expense for the non-vested portion of
awards granted prior to the effective date is being recognized over the
remaining service period using the fair-value based compensation cost
estimated for SFAS No. 123 pro forma disclosures.
Stock Options Stock option awards are granted at exercise prices equal
to the closing price of the Company’s common stock on the grant date.
The majority of the Company’s stock option awards are non-qualified
stock options with a ten-year life and a four-year ratable vesting term.
The Company currently grants stock options under the Medtronic, Inc.
2003 Long-Term Incentive Plan (2003 Plan), the Medtronic, Inc.-Kyphon
Inc. 2002 Stock Plan (Kyphon Plan) and the Medtronic, Inc. 1998 Outside
Directors Stock Compensation Plan (Directors Plan). The 2003 plan was
approved by the Company’s shareholders in August 2003 and provides
for the grant of nonqualified and incentive stock options, stock
appreciation rights, restricted stock, performance shares and other
stock and cash-based awards. The Kyphon Plan was adopted by the
Board of Directors on December 13, 2007 and provides for the grant of
nonqualified and incentive stock options, restricted stock and stock
purchase rights. The Directors Plan, a stock compensation plan for
outside directors, was adopted in fiscal year 1998 and replaced the
provisions in the 1994 stock award plan relating to awards granted to
outside directors. As of April 25, 2008, there were approximately
14 million, 3 million and 2 million shares available for future grants under
the 2003 Plan, the Kyphon Plan and the Directors Plan, respectively.
Restricted Stock Awards Restricted stock and restricted stock units
(collectively referred to as restricted stock awards) are granted to officers
and key employees. Restricted stock awards are subject to forfeiture if
employment terminates prior to the lapse of the restrictions. The
Company grants restricted stock awards that typically cliff vest in three-
and five-year periods. Restricted stock awards are expensed over the
vesting period. The Company also grants shares of performance-based
restricted stock that will cliff vest only if the Company has also achieved
certain performance objectives. Performance awards are expensed over
the performance period based on the probability of achieving the
performance objectives. Shares of restricted stock are considered issued
and outstanding shares of the Company at the grant date and have the
same dividend and voting rights as other common stock. Restricted
stock units are not considered issued or outstanding common stock
of the Company. Dividend equivalent units are accumulated on
restricted stock units during the vesting period. The Company grants
restricted stock awards under the 2003 Plan, the Kyphon Plan and the
Directors Plan.
Employee Stock Purchase Plan The Medtronic, Inc. 2005 Employee Stock
Purchase Plan (ESPP) allows participating employees to purchase shares
of the Company’s common stock at a discount through payroll
deductions. Employees can contribute up to the lesser of 10 percent of
their wages or the statutory limit under the U.S. Internal Revenue Code
toward the purchase of the Company’s common stock at 85 percent of
its market value at the end of the calendar quarter purchase period.
Notes to Consolidated Financial Statements
(continued)
(dollars in millions, except per share data)
74 Medtronic, Inc.