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Medtronic - Supplemental Executive Retirement Plan
Exhibit 10.1
MEDTRONIC, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as restated generally effective January 1, 2008)
TABLE OF CONTENTS
Page
ARTICLE 1
DEFERRED COMPENSATION ACCOUNT
1
Section 1.1
Establishment of Account
1
Section 1.2
Property of Company
2
ARTICLE 2
DEFINITIONS, GENDER, AND NUMBER
2
Section 2.1
Definitions
2
Section 2.2
Gender and Number
6
ARTICLE 3
PARTICIPATION
6
Section 3.1
Who May Participate
6
Section 3.2
Time and Conditions of Participation
7
Section 3.3
Termination and Suspension of Participation
7
Section 3.4
Missing Persons
7
Section 3.5
Relationship to Other Plans
7
ARTICLE 4
RETIREMENT PLAN SUPPLEMENTAL BENEFIT
7
Section 4.1
Calculation of Retirement Plan Supplemental Benefit
7
Section 4.2
Establishment of Nonqualified Retirement Plan Account
8
Section 4.3
Interest Credited to Nonqualified Retirement Plan Account
8
Section 4.4
Payment of Nonqualified Retirement Plan Account
9
ARTICLE 5
DEFINED CONTRIBUTION SUPPLEMENTAL BENEFIT
9
Section 5.1
Nonqualified Defined Contribution Account
9
Section 5.2
Gains Credited to Nonqualified Defined Contribution Account
9
Section 5.3
Payment of Nonqualified Defined Contribution Account
9
ARTICLE 6
PERSONAL INVESTMENT ACCOUNT SUPPLEMENTAL BENEFIT
9
Section 6.1
Calculation of Personal Investment Account Supplemental Benefit
9
Section 6.2
Establishment of Nonqualified Personal Investment Account
10
Section 6.3
Crediting Gains and Losses to Nonqualified Personal Investment Account
10
Section 6.4
Vested Interest in Nonqualified Personal Investment Account
11
Section 6.5
Payment of Nonqualified Personal Investment Account
11
ARTICLE 7
DEATH BENEFITS
11
Section 7.1
Form and time of Payment
11
Section 7.2
Beneficiary
11
ARTICLE 8
CHANGE IN CONTROL PROVISIONS
12
Section 8.1
Application of Article 8
12
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Section 8.2
Payments to and by the Trust
12
Section 8.3
Legal Fees and Expenses
12
Section 8.4
Late Payment and Additional Payment Provisions
12
ARTICLE 9
FUNDING
13
Section 9.1
Source of Benefits
13
Section 9.2
No Claim on Specific Assets
13
ARTICLE 10
ADMINISTRATION
13
Section 10.1
Administration
13
Section 10.2
Powers of Committee
13
Section 10.3
Actions of the Committee
14
Section 10.4
Delegation
14
Section 10.5
Reports and Records
14
Section 10.6
Claims Procedure
14
ARTICLE 11
AMENDMENTS AND TERMINATION
15
Section 11.1
Amendments
15
Section 11.2
Termination
15
ARTICLE 12
MISCELLANEOUS
16
Section 12.1
No Guarantee of Employment
16
Section 12.2
Release
16
Section 12.3
Notices
16
Section 12.4
Nonalienation
16
Section 12.5
Withholding
16
Section 12.6
Captions
16
Section 12.7
Applicable Law
16
Section 12.8
Invalidity of Certain Provisions
16
Section 12.9
No Other Agreements
16
Section 12.10
Incapacity
17
Section 12.11
Electronic Media
17
Section 12.12
Delay of Distributions Upon Certain Events
17
Section 12.13
Acceleration of Distributions Upon Certain Events
18
SCHEDULE A CREDITING RATE
20
ii
MEDTRONIC, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as restated generally effective January 1, 2008)
Medtronic, Inc. (the " Company" ) previously established the Medtronic, Inc. Executive Nonqualified Supplemental Benefit Plan (the " Plan" ) for the benefit of the Eligible Employees of the Company and certain of its Affiliates, effective May 1, 1986. The Plan was most recently amended and restated, effective May 1, 2005. The Company hereby again restates the Plan, effective January 1, 2008, to comply with the requirements of the final regulations issued under Section 409A of the Code (" Section 409A" ) on April 10, 2007.
This restatement applies to amounts deferred under the Plan on or after January 1, 2008 (the " Restatement Date" ), and to the payment of all amounts deferred under the Plan (whether such amounts were deferred before, on, or after the Restatement Date) that have not yet been distributed as of the Restatement Date. No amount deferred under the Plan is intended to be " grandfathered" under Section 409A.
The purpose of the Plan is to provide Eligible Employees with benefits that supplement those provided under certain of the tax-qualified plans maintained by the Company. More specifically, the Plan is intended to provide certain benefits on a nonqualified basis that are not otherwise provided under the Company' s tax-qualified plans as a result of the application of certain legal limitations on contributions, benefits and includible compensation and as a result of elections made by eligible employees under other plans maintained by the Company.
The Plan is intended to be (and shall be construed and administered as) an employee benefit pension plan under the provisions of ERISA, which is unfunded and maintained primarily for the purpose of providing deferred compensation for Eligible Employees who constitute a select group of management or highly-compensated employees, as described in Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
The Plan is not intended to be qualified under Section 401(a) of the Code. The Plan, as restated herein, is subject to, and intended to comply with, Section 409A of the Code.
The obligation of the Company to make payments under the Plan constitutes an unsecured (but legally enforceable) promise of the Company to make such payments and no person, including any Participant or Beneficiary, shall have any lien, prior claim or other security interest in any property of the Company as a result of the Plan.
ARTICLE 1.
DEFERRED COMPENSATION ACCOUNT
Section 1.1. Establishment of Account . The Company shall establish one or more Accounts for each Participant which shall be utilized solely as a device to measure and determine the amount of deferred compensation to be paid under the Plan.
Section 1.2. Property of Company . Any amounts set aside for benefits payable under the Plan are the property of the Company, except, and to the extent, provided in the Trust.
ARTICLE 2.
DEFINITIONS, GENDER, AND NUMBER
Section 2.1. Definitions . Whenever used in the Plan, the following words and phrases shall have the meanings set forth below unless the context plainly requires a different meaning, and when a defined meaning is intended, the term is capitalized.
2.1.1. " Account" means a bookkeeping account established by the Company on its books and records to record and determine the benefits payable to a Participant or Beneficiary under the Plan. The Company shall establish a separate Account on behalf of each Participant for:
(a) The benefit the Participant is entitled to receive pursuant to Section 4.2, if any, referred to as the " Nonqualified Retirement Plan Account;"
(b) The benefit the Participant is entitled to receive pursuant to Article 5, if any, referred to as the " Nonqualified Defined Contribution Account;" and
(c) The benefit the Participant is entitled to receive pursuant to Section 6.2, if any, entitled the " Supplemental Personal Investment Account."
The Committee may establish any number of sub-accounts on behalf of a Participant or Beneficiary as the Committee considers necessary or advisable for purposes of maintaining a proper accounting of amounts to be credited under the Plan on behalf of a Participant or Beneficiary.
2.1.2. " Affiliate" or " Affiliates" means the Company and any entity with which the Company would be considered a single employer under Section 414(b) of the Code (employees of controlled group of corporations) and Section 414(c) of the Code (employees of partnerships, proprietorships, etc., under common control).
2.1.3. " Beneficiary" or " Beneficiaries" means the persons or trusts designated by a Participant in writing pursuant to Section 7.2.1 of the Plan as being entitled to receive any benefit payable under the Plan by reason of the death of a Participant, or, in the absence of such designation, the persons specified in Section 7.2.2 of the Plan.
2.1.4. " Board" means the Board of Directors of the Company as constituted at the relevant time.
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2.1.5. " Capital Accumulation Plan" means the Medtronic, Inc. Capital Accumulation Plan Deferral Program, as amended or restated from time to time or any successor thereto.
2.1.6. " Code" means the Internal Revenue Code of 1986, as amended from time to time and any successor statute. References to a Code section shall be deemed to be to that section or to any successor to that section.
2.1.7. " Committee" means the Committee or individual appointed by the Compensation Committee of the Board (or any person or entity designated by the Committee) to administer the Plan pursuant to Section 10.4.
2.1.8. " Company" means Medtronic, Inc. and its successors and assigns, by merger, purchase or otherwise.
2.1.9. " Defined Contribution Supplemental Benefit" means the benefit under the Predecessor Plan that was commonly referred to as the " ESOP restoration benefit." This benefit equals the difference between: (a) the allocation due to Company contributions the Participant would have received under the ESOP prior to May, 1, 2005, but for the Section 401(a)(17) Limitation and Section 415 Limitation; and (b) the actual allocation actually received by the Participant under the ESOP.
2.1.10. " Domestic Relations Order" has the meaning set forth in Section 414(p)(1)(B) of the Code.
2.1.11. " Eligible Employee" means an elected or appointed officer of the Company, or any other key employee of the Company or an Affiliate designated by the Committee, excluding any individual who is neither a United States citizen nor a United States resident. In order to be an Eligible Employee an employee must be a member of a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and rules established by the Committee. The Company may make such projections or estimates as it deems desirable in applying the eligibility requirements, and its determination shall be conclusive.
2.1.12. " ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute. References to an ERISA section shall be deemed to be to that section or to any successor to that section.
2.1.13. " ESOP" means the Medtronic, Inc. Employee Stock Ownership Plan, as in effect prior to April 30, 2001. (As of April 30, 2001, the ESOP was amended to permit elective deferrals under Section 401(k) of the Code and renamed the Medtronic, Inc. Employee Stock Ownership and Supplemental Retirement Plan. As of May 1, 2005, the Medtronic, Inc. Employee Stock Ownership and Supplemental Retirement Plan was amended and renamed the Medtronic, Inc. Savings and Investment Plan.)
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2.1.14. " Event" means an event of change in control of the Company, as defined in the Trust.
2.1.15. " Option Replacement Plan" means the Medtronic, Inc. Option Replacement Plan, as amended or restated from time to time or any successor thereto.
2.1.16. " Participant" means an Eligible Employee who has commenced participation in the Plan.
2.1.17. " Personal Investment Account" has the same meaning as in the Savings and Investment Plan.
2.1.18. " Personal Investment Account Supplemental Benefit" has the meaning set forth in Article 6.
2.1.19. " Plan" means the " Medtronic, Inc. Supplemental Executive Retirement Plan" as set forth herein and as amended or restated from time to time.
2.1.20. " Plan Year" means the 12-month period commencing May 1 and ending the following April 30.
2.1.21. " Predecessor Plan" means the Plan, as in effect prior to May 1, 2005.
2.1.22. " Restatement Date" means January 1, 2008, the effective date of this restatement.
2.1.23. " Retirement Plan" means the Medtronic, Inc. Retirement Plan, as amended from time to time, and any successor thereto. In general, the Retirement Plan includes a final average pay benefit for individuals employed by the Company or an Affiliate prior to May 1, 2005. Effective May 1, 2005, the Retirement Plan provides a personal pension account benefit for individuals who become employed on or after May 1, 2005. Individuals participating in the Retirement Plan prior to May 1, 2005, may elect a personal pension account benefit in lieu of the final average pay benefit for Plan Years commencing May 1, 2005. Alternatively, an individual otherwise eligible to participate in the Retirement Plan may elect not to participate in the Retirement Plan and receive a contribution to a Personal Investment Account.
2.1.24. " Retirement Plan Supplemental Benefit" has the meaning set forth in Article 4.
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2.1.25. " Savings and Investment Plan" means the Medtronic, Inc. Savings and Investment Plan, as amended from time to time, and any successor thereto. The Savings and Investment Plan includes a salary reduction benefit under Section 401(k) of the Code and a matching contribution benefit under Section 401(m) of the Code. Effective May 1, 2005, the Savings and Investment Plan also includes a Personal Investment Account for those Participants who have elected this retirement benefit option.
2.1.26. " Section 401(a)(17) Limitation" means the limitation on the dollar amount of compensation that may be taken into account under qualified retirement plans under Section 401(a)(17) of the Code, or any successor provision thereto.
2.1.27. " Section 415 Limitation" means the limitation on benefits for qualified defined benefit pension plans and the limitation on allocations for qualified defined contribution plans, which are imposed by Section 415(b) and (c), respectively, of the Code, or any successor provision thereto.
2.1.28. " Separation from Service" or " Separate from Service ," with respect to a Participant, means the Participant' s separation from service with all Affiliates, within the meaning of Section 409A(a)(2)(A)(i) of the Code and the regulations thereunder. Solely for this purpose, a Participant will be considered to have a Separation from Service when the Participant dies, retires, or otherwise has a termination of employment with all Affiliates. The employment relationship is treated as continuing intact while the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the individual retains a right to reemployment with the an Affiliate under an applicable statute or by contract. For purposes hereof, a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for an Affiliate. If the period of leave exceeds six months and the individual does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period. Notwithstanding the foregoing, where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to last for a continuous period of not less than six months, where such impairment causes the employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, the Company may substitute a 29-month period of absence for such six-month period.
Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Affiliate and the Participant reasonably anticipated that no further services will be performed after a certain date or that the level of bona fide services the Participant will perform after such date (whether as an employee or independent contractor) will permanently decrease to no more than 40 percent of the average level of bona fide services performed (whether as an employee or independent contractor) over the immediately preceding 36-month period (or the full period of services if the Participant has been providing services for less than 36 months).
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Notwithstanding anything in Section 2.1.2 to the contrary, in determining whether a Participant has had a Separation from Service with an Affiliate, an entity' s status as an " Affiliate" shall be determined substituting " 50 percent" for " 80 percent" each place it appears in Section 1563(a)(1),(2), and (3) and in Treasury Regulation Section 1.414(c)-2.
The Company shall have discretion to determine whether a Participant has experienced a Separation from Service in connection with an asset sale transaction entered into by the Company or an Affiliate, provided that such determination conforms to the requirements of Section 409A and the regulations and other guidance issued thereunder, in which case the Company' s determination shall be binding on the Participant.
2.1.29. " Section 409A" means section 409A of the Internal Revenue Code, as amended from time to time and any successor statute.
2.1.30. " Specified Employee" means an employee of an Affiliate who is subject to the six-month delay rule described in Section 409A(2)(B)(i) of the Code. The Company shall establish a written policy for identifying Specified Employees in a manner consistent with Section 409A, which policy may be amended by the Company from time to time as permitted by Section 409A.
2.1.31. " Stock" means the Company' s common stock $.10 par value per share (as such par value may be adjusted from time to time).
2.1.32. " Trust" means the Medtronic, Inc. Compensation Trust Agreement Number One, as amended from time to time.
Section 2.2. Gender and Number . Except as otherwise indicated by context, masculine terminology used herein also includes the feminine and neuter, and terms used in the singular may also include the plural.
ARTICLE 3.
PARTICIPATION
Section 3.1. Who May Participate . Participation in the Plan is limited to Eligible Employees.
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Section 3.2. Time and Conditions of Participation . An Eligible Employee shall become a Participant on the date on which he or she first accrues a benefit under the Plan, provided that he or she is then in compliance with such terms and conditions as the Committee may from time to time establish for the implementation of the Plan, including, but not limited to, any condition the Committee may deem necessary or appropriate for the Company to meet its obligations under the Plan.
Section 3.3 Termination and Suspension of Participation . Once an individual has become a Participant, participation shall continue until payment in full of all benefits to which the Participant or Beneficiary is entitled under the Plan.
Section 3.4. Missing Persons . Each Participant and Beneficiary entitled to receive benefits under the Plan shall be obligated to keep the Company informed of his or her current address until all Plan benefits that are due to be paid to the Participant or Beneficiary have been paid to him or her. If, after having made reasonable efforts to do so, the Company is unable to locate the Participant or Beneficiary for purposes of making a distribution, the Participant' s or Beneficiary' s Plan benefit will be forfeited. In no event will a Participant' s or Beneficiary' s benefit be paid to him or her later than the date otherwise required by the Plan.
Section 3.5. Relationship to Other Plans . Participation in the Plan shall not preclude participation of the Participant in any other fringe benefit program or plan sponsored by an Affiliate for which the Participant would otherwise be eligible. Notwithstanding anything in the Plan to the contrary, to the extent permitted by Section 409A, the Committee, or anyone to whom the Committee has delegated this authority pursuant to Section 10.4, may reduce the benefits payable to a Participant under the Plan if, and to the extent that, benefits are payable to the Participant under another similar plan or arrangement maintained by the Company or an Affiliate. The Committee (or its delegate) shall have complete and absolute discretion to determine whether another benefit plan or arrangement maintained by the Company or an Affiliate is similar to the Plan, whether the benefit under the Plan can be reduced in a manner that does not cause a violation of Section 409A, and the amount of the reduction to be applied.
ARTICLE 4.
RETIREMENT PLAN SUPPLEMENTAL BENEFIT
Section 4.1. Calculation of Retirement Plan Supplemental Benefit . An Eligible Employee shall earn a Retirement Plan Supplemental Benefit as of any determination date in an amount equal to the lump sum actuarial equivalent value of his or her Unrestricted Retirement Plan Benefit less the lump sum actuarial equivalent value of his or her Actual Retirement Plan Benefit, determined as of the determination date. For purposes hereof, the determination date is the first day of the month. The lump sum actuarial equivalent value shall be determined in each case by use of the otherwise applicable interest rates and other assumptions under the Retirement Plan in determining actuarially equivalent benefits.
For purposes hereof, an Eligible Employee' s Unrestricted Retirement Plan Benefit as of any determination date equals the vested benefit that such individual would have accrued under the Retirement Plan as of such date under the otherwise applicable provisions of the Retirement Plan, but determined for periods from and after May 1, 1986, without application of the Section 415 Limitation or the Section 401(a)(17) Limitation and based upon the compensation that would have been paid to the Eligible Employee during the year but for his or her election to reduce his or her compensation under the Capital Accumulation Plan or the Option Replacement Plan.
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For purposes hereof, compensation that is reduced pursuant to such an election shall be taken into account for the Plan Year during which such compensation would have been paid to the Eligible Employee but for such election and only to the extent that such compensation would otherwise be taken into account under the Retirement Plan in calculating benefits thereunder had such compensation otherwise been paid directly to the Eligible Employee (but without regard to application of the Section 401(a)(17) Limitation).
For purposes hereof, an Eligible Employee' s Actual Retirement Plan Benefit as of any determination date equals the vested benefit that the individual has actually accrued as of such date under the provisions of the Retirement Plan, after taking into account all applicable limitations on contributions, benefits and compensation.
An Eligible Employee' s Unrestricted Retirement Plan Benefit and Actual Retirement Plan Benefit shall be determined after giving effect to the election a Participant makes under Section 3.2 of the Retirement Plan ( i.e ., the election to receive a contribution to a Personal Investment Account under the Savings and Investment Plan, the final average pay benefit under the Retirement Plan or the personal pension account benefit under the Retirement Plan) for benefits accruing under the Retirement Plan on or after May 1, 2005.
Section 4.2. Establishment of Nonqualified Retirement Plan Account . A Participant' s Retirement Plan Supplemental Benefit shall be determined as of the first day of the month following the month in which the Participant has a Separation from Service, and the lump sum value of such Retirement Plan Supplemental Benefit shall be credited as of such date to a bookkeeping account established for the Participant on the books and records of the Company, referred to as the " Nonqualified Retirement Plan Account."
In the event a Participant terminates employment as a result of death, the value of the benefits, if any, to be credited to his or her Nonqualified Retirement Account shall be based upon the lump sum actuarial equivalent value of the death benefits that would be paid under the Retirement Plan under the same assumptions as used under Section 4.1 hereof in determining the Participant' s Unrestricted Retirement Plan Benefit (that is, without regard to the Section 415 Limitation and the Section 401(a)(17) Limitation and without regard to any election the Participant may have made under the Capital Accumulation Plan or the Option Replacement Plan to reduce his or her compensation) less the lump sum actuarial equivalent value of death benefits actually payable with respect to such Participant under the Retirement Plan, if any, taking into account all applicable limitations on contributions, benefits and compensation.
Section 4.3. Interest Credited to Nonqualified Retirement Plan Account . All amounts credited to the Nonqualified Retirement Plan Account from time to time shall be credited with interest at a rate that is equal to the pre-retirement interest rate or rates used by the Retirement Plan during the period for which interest is to be so credited for purposes of determining actuarially equivalent benefits under the Retirement Plan. Interest as so determined shall be compounded monthly during the Plan Year.
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Section 4.4. Payment of Nonqualified Retirement Plan Account . Payment to a Participant of his or her Nonqualified Retirement Plan Account shall commence within 90 days following the six month anniversary of his or her Separation from Service. All distributions of the Nonqualified Retirement Account will be made in cash. If the value of the Participant' s Nonqualified Retirement Account, determined as of the date on which such Account is established, is greater that $100,000, the Account together with interest thereon shall be paid to the Participant on a monthly basis over a 15-year period in 180 equal monthly installments. If the value of the Participant' s Nonqualified Retirement Account, determined as of the date on which such Account is established, is $100,000 or less, the Account together with interest thereon shall be paid to the Participant in a lump sum.
ARTICLE 5.
DEFINED CONTRIBUTION SUPPLEMENTAL BENEFIT
Section 5.1. Nonqualified Defined Contribution Account . The Company previously established an Account on behalf of each Participant entitled to a Defined Contribution Supplemental Benefit (as defined in the Predecessor Plan and commonly referred to as the " ESOP restoration benefit" ) referred to as the " Nonqualified Defined Contribution Account." All contributions to the Nonqualified Defined Contribution Account ceased effective April 30, 2005. A Partici...
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