Medtronic 2009 Annual Report Download - page 84

80 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
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.
12. 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 10-year life and a four-year
ratable vesting term. In fiscal year 2009, the Company granted
stock options under the Medtronic, Inc. 2008 Stock Award and
Incentive Plan (2008 Plan), the Medtronic, Inc. 2003 Long-Term
Incentive Plan (2003 Plan) and the Medtronic, Inc. 1998 Outside
Directors Stock Compensation Plan (Directors Plan). The 2008 and
2003 Plans were approved by the Company’s shareholders in
August 2008 and August 2003, respectively, and provide for the
grant of nonqualified and incentive stock options, stock
appreciation rights, restricted stock, performance awards, and
other stock and cash-based awards. 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. Upon
adoption of the 2008 Plan, Medtronic no longer grants awards
from any prior plan. As of April 24, 2009, there were approximately
31 million shares available for future grants under the 2008 Plan.
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 between three and five years.
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. In fiscal year 2009, the
Company granted restricted stock awards under the 2008 Plan
and the 2003 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. Employees
purchased 3 million shares at an average price of $33.05 per
share in the fiscal year ended April 24, 2009. As of April 24, 2009,
plan participants have had approximately $6 million withheld to
purchase Company common stock at 85 percent of its market
value on June 30, 2009, the last trading day before the end of the
calendar quarter purchase period. At April 24, 2009, approximately
2 million shares of common stock were available for future
purchase under the ESPP.