UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): May 2, 2016

 

 

MEDTRONIC PUBLIC LIMITED COMPANY

(Exact name of Registrant as Specified in its Charter)

 

 

 

Ireland   1-36820   98-1183488

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

20 On Hatch, Lower Hatch Street

Dublin 2, Ireland

(Address of principal executive offices)

+353 1 438-1700

(Registrant’s telephone number, including area code):

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Gary Ellis to Transition out of Chief Financial Officer role

On May 2, 2016, Gary L. Ellis notified Medtronic plc (the “Company”) that he intends to transition out of the Executive Vice President and Chief Financial Officer role at the Company, effective as of June 20, 2016. Mr. Ellis will remain with the Company as Executive Vice President of Global Operations and Information Technology.

There has been no change to Mr. Ellis’s compensation or the other terms of his employment in connection with this transition.

Appointment of Karen Parkhill as Chief Financial Officer

On May 2, 2016, Karen L. Parkhill, age 50, agreed to serve as the Company’s Executive Vice President and Chief Financial Officer, effective as of June 20, 2016.

Since 2011, Ms. Parkhill has been the Vice Chairman and Chief Financial Officer of Comerica Incorporated. Ms. Parkhill was a member of Comerica’s Management Executive Committee and the Comerica Bank Board of Directors. Prior to joining Comerica, Ms. Parkhill worked for J.P. Morgan Chase & Co. in various capacities from 1992 to 2011, including serving as Chief Financial Officer of the Commercial Banking business from 2007 to 2011. Ms. Parkhill is also a current member of the Board of Directors for the Methodist Health System in Dallas.

The Company has entered into a letter agreement (the “Agreement”) with Ms. Parkhill regarding the terms and conditions of her employment. Ms. Parkhill’s initial annual base salary will be equal to $750,000 and she will participate in the Medtronic Incentive Plan (“MIP”), with a target payout equal to 110% of her full-year annual base salary for fiscal year 2017. In addition, Ms. Parkhill will participate in the Company’s Long-Term Incentive Plan (“LTIP”) with an aggregate target value of $3 million for fiscal year 2017, consisting of: (i) a $1 million target annualized award under the FY2017-FY2019 performance plan to be established by the Compensation Committee, (ii) a stock option with a targeted grant date fair value of $1 million, to be granted in August 2016 and vesting in 25% increments beginning on the first anniversary of the grant, and (iii) a restricted stock unit with a targeted grant date value of $1 million, to be granted in August 2016 and vesting 100% on the third anniversary of the grant if certain Company performance is achieved. Future MIP and LTIP awards will be considered on an annual basis by the Compensation Committee.

In order to compensate Ms. Parkhill in part for compensation foregone at her prior employer, she will receive a $1 million cash bonus, payable as to 50% within 30 calendar days of the effective date of her employment and as to the remaining 50% 6 months following the effective date (in each case subject to the Company’s standard clawback policy), as well as a one-time restricted stock unit (the “New Hire RSU”) on the effective date of her employment. The New Hire RSU will have a grant date value of $4.4 million with the number of shares to be calculated based on the market closing price of Company stock on the grant date. The New Hire RSU will vest in 33

1/3% increments beginning on the first anniversary of the grant date, subject to the Company attaining a diluted earnings per share threshold for the fiscal year ending prior to each vesting date.

Ms. Parkhill will be subject to the Company’s Stock Ownership Policy, requiring her to retain 50% of after-tax shares following settlement of equity compensation awards until she is able to maintain Company stock with a value equal to three times her annual salary.

The Agreement provides that Ms. Parkhill will be entitled to certain relocation and commuter benefits, an annual $24,000 allowance relating to automobile use, financial planning and other personal and job-related expenses, and will be eligible for the Company’s deferred compensation plan and employee health and welfare benefits commensurate with her job level.

Ms. Parkhill’s employment will be on an at-will basis and may be terminated at any time by either party, provided that if the Company terminates Ms. Parkhill’s employment without “cause” (as defined in the Company’s Amended and Restated Stock 2013 Award and Incentive Plan), and contingent upon Ms. Parkhill signing and complying with a severance and release agreement, the Company will pay or provide Ms. Parkhill with: (i) an amount equal to two times the sum of Ms. Parkhill’s then-current base salary and target annual cash MIP incentive, (ii) the value of 24 months of continued medical, vision and dental benefits, (iii) two years continued participation by Ms. Parkhill and eligible dependents in all medical, vision and dental plans upon the same terms as active Company employees (subject to Ms. Parkhill’s payment of COBRA premiums), and (iv) continued vesting of the New Hire RSU grant.

The Company’s Section 16 Officer Change in Control Policy will also apply to Ms. Parkhill. The Change in Control Policy provides for a severance payment if an adverse change to an executive’s salary, bonus opportunity, benefits or location of employment, including a termination without cause or a resignation for good reason, occurs within three years after a “change of control.” The payment would be equal to accrued salary and annual and long-term incentives through the date of termination as well as accrued vacation pay, accrued pension benefits and any outstanding deferred compensation, and, except in the event of death or disability, a lump sum severance payment equal to prorated value of Highest Annual Bonus (defined as greater of average of bonus received for last three completed fiscal years preceding year of termination and bonus payable for most recently completed fiscal year) and three times the sum of the executive’s base salary and Highest Annual Bonus. Additionally, the executive is entitled to certain retirement and welfare benefits. In addition, incentive awards will accelerate if not replaced by a qualifying replacement awards following a change in control or upon a termination without cause or a resignation for good reason within two years of a change in control.

Ms. Parkhill will enter into a standard Employee Agreement with the Company on the same form as all other officers, which contains provisions relating to confidentiality, post-employment restrictions and inventions. Ms. Parkhill will be subject to standard non-competition restrictions for two years and standard non-solicitation restrictions for one year following termination of her employment with the Company for any reason.

The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement, which is attached hereto as Exhibit 10.1 and incorporated by reference herein. Ms. Parkhill’s equity grants will be governed by the Company’s standard forms of non-qualified stock option and restricted stock unit award agreements for executive officers, attached as Exhibits 10.48 and 10.49, respectively, to the Company’s Quarterly Report on Form 10-Q for the quarter ended January 23, 2015, except as modified as described herein.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit
Number

  

Description

10.1    Letter Agreement dated May 2, 2016.
99.1    Press release of Medtronic plc regarding CFO transition, dated May 4, 2016.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

      MEDTRONIC PUBLIC LIMITED COMPANY
    By  

 /s/ Bradley E. Lerman

Date: May 4, 2016       Bradley E. Lerman
     

Senior Vice President, General Counsel and

Corporate Secretary

EXHIBIT INDEX

 

Exhibit
Number

  

Description

10.1    Letter Agreement dated May 2, 2016.
99.1    Press release of Medtronic plc regarding CFO transition, dated May 4, 2016.

Exhibit 10.1

Medtronlc

Office of

Chairman and Chief Executive Officer

710 Medtronic Parkway N.E.

Minneapolis, MN 55432-5604

USA

May 2, 2016

Karen Parkhill

4406 Lively Lane

Dallas, Texas 75220

Dear Karen,

It is with great pleasure that I extend this Offer Letter for Employment (herein called “Offer Letter”) with Medtronic.

 

1. Title

Executive Vice President and Chief Financial Officer, Medtronic

You will serve as a member of the Medtronic Executive Committee, reporting to me.

 

2. Employment Location

Your employment with Medtronic will be located at Medtronic’s Operating Headquarters in Fridley, Minnesota. As a condition of employment, you will be required to relocate to the Twin Cities Metro area in Minnesota within 15 months of your employment start date.

 

3. Employment Start Date

Your employment with Medtronic will commence on June 20, 2016 (herein called “Start Date”).

 

4. Base Salary

Your annual base salary will be $750,000 US Dollars (USD), less applicable withholdings and deductions, commencing upon your Start Date and paid in accordance with Medtronic’s standard U.S. payroll practices.

 

5. Medtronic Incentive Plan (“MIP”)

You will be eligible to participate in MIP beginning with Fiscal Year 2017. Your participation will begin on your Start Date with a target payout equal to 110% of your full-year annual base salary for Fiscal Year 2017. Your actual payout will be based on Medtronic’s performance against the MIP performance goals for Fiscal Year 2017.

 

Page 1 of 5    Confidential

Karen Parkhill Offer Letter of Employment, May 2, 2016

 

6. Annual Long-Term Incentive Plan (LTIP)

You will be eligible to participate in Medtronic’s Long-Term Incentive Plan (LTIP) beginning with Fiscal Year 2017. The total target grant date value of your Fiscal Year 2017 LTIP will be $3,000,000 USD and is comprised of the following components:

 

  A. Annual Long-Term Performance Plan (“LTPP”)

LTPP is granted annually and currently has a three-fiscal year performance period after which the incentive is paid in cash based on Medtronic’s performance against long-term performance goals. Beginning with the FY2017 - FY2019 performance period, you will be eligible to participate in LTPP. Your target annualized award will be $1,000,000 USD. Current performance measures used for LTPP are 1) Revenue Growth (50% of payout opportunity) and 2) Return on Invested Capital (50% of payout opportunity). Performance measures for the FY2017 - FY2019 LTPP will be confirmed by the Compensation Committee at its June 2016 meeting.

 

  B. Annual Nonqualified Stock Option Grant

You will be eligible for annual stock option award beginning with Fiscal Year 2017. The anticipated grant date is August 1, 2016. The current grant amount (aggregate exercise price) is $4,000,000 USD, with a targeted grant date value of $1,000,000 USD, as of the date of this letter, and vests 25% per year beginning one year after the date of grant. All terms and conditions of the stock option award will be described in the stock option agreement that is delivered to you following the grant date. Your nonqualified stock option awards are subject to approval by the Compensation Committee of the Board of Directors.

 

  C. Restricted Stock Unit Grant

Beginning Fiscal Year 2017, you will be eligible for annual grants of restricted stock units. The Fiscal Year 2017 grant date would be August 1, 2016. The current grant date value is $1,000,000 USD and vests 100% on the third anniversary of the date of grant, provided that a minimum company performance threshold is achieved. The performance threshold set for Fiscal Year 2016 is a 3% Cumulative Compound Annual Growth Rate for Diluted Earnings Per Share measured for FY2016 - FY2018. The Compensation Committee will establish the FY2017- FY2019 performance threshold prior to the grant date. All terms and conditions of any restricted stock unit award will be described in the restricted stock unit agreement provided following the grant date. Annual restricted stock unit awards are subject to approval by the Compensation Committee of the Board of Directors.

 

7. One Time, New Hire Cash Bonus

You will receive a new hire cash bonus in the amount of $1,000,000 total. $500,000, less applicable withholdings and deductions, is payable within 30 days of your Start Date. The remaining $500,000, less applicable withholding and deductions, is payable within six (6) months of your Start Date. Both new hire cash payments are subject to Medtronic’s standard clawback policy. To receive the bonus, you must sign and return the agreement to repay bonus, including in your new hire packet.

 

8. One-time, New Hire Restricted Stock Unit Grant

You will be granted a one-time, restricted stock unit award with a grant date value of $4,400,000 USD, which is scheduled to be granted on your Start Date. The Restricted Stock Unit grant will vest 33 1/3% on the first anniversary of the grant date, 33 1/3% on the

 

Page 2 of 5    Confidential

Karen Parkhill Offer Letter of Employment, May 2, 2016

 

second anniversary of the grant date, and the remaining 33 1/3% on the third anniversary of the grant date; and is subject to the attainment by the Company of $1.00 diluted EPS threshold for the fiscal year ending prior to each vesting date.

The actual number of units for the restricted stock unit grant will be based on the grant date value of $4,400,000 USD divided by the market closing price for Medtronic stock on the Start Date. All terms and conditions of the restricted stock unit award are described in the restricted stock unit grant agreement.

 

9. Relocation Benefits

You will be provided full executive relocation benefits to support your move from Dallas Texas to Twin Cities Metropolitan area in Minnesota. The relocation benefits apply to your primary residence in Dallas. You are also approved to commute from Dallas to Medtronic’s Operating Headquarters in Fridley, Minnesota, for up to 15 months if that should be necessary. If you commute, Medtronic will provide a taxable commuter allowance in an amount to be determined if commuting is determined to be necessary. The gross taxable amount will be calculated so that the after-tax payment provides coverage for the associated commuting costs.

 

10. Employee Health and Welfare Benefits

You will be offered the same benefits as all other U.S. employees of Medtronic, including any benefits commensurate with your job level, upon meeting eligibility requirements as provided for in the Plan documents. An overview of Medtronic’s Benefit Programs is attached. Enrollment.in Medtronic’s Benefits, including Health, Wellness, and Retirement programs will occur during your on-boarding orientation.

 

11. Business Allowance

In order to provide remuneration for business use of your personal automobile, financial planning services, and other personal, job related expenses; you will be provided with an annual allowance of $24,000 (paid bi-weekly).

 

12. Deferred Compensation Plan

You will be eligible to participate in the next calendar year phase of Medtronic’s Capital Accumulation Plan (“CAP”), subject to the terms of the CAP, which provides for the opportunity to defer a portion of calendar year 2017 compensation. If desired, you may enroll in the 2017 CAP during the annual enrollment period held in October 2016.

 

13. Termination

Your employment with Medtronic is “at will” and may be terminated at any time by Medtronic or by you. If your employment is terminated by the Company without Cause, as defined in the 2013 Stock Award and Incentive Plan, and contingent upon your signing and complying with a severance and release agreement, the Company shall pay or provide you with

 

  i. An amount equal to the product of (A) two times (B) the sum of (1) your Base Salary in effect at the time of employment termination and (2) your annual Target MIP Incentive;

 

  ii. An amount equal to the product of (A) twenty four (24) and (B) the monthly premium for COBRA continuation coverage under the Company’s medical, dental and vision plans, payable in a lump sum on the date sixty (60) days after the date of termination.

 

Page 3 of 5    Confidential

Karen Parkhill Offer Letter of Employment, May 2, 2016

 

  iii. Subject to your continued payment of the full COBRA premiums, continued participation for two (2) years in all medical, dental and vision plans which cover you (and eligible dependents) upon the same terms and conditions (except for the requirements of your continued employment) in effect for active employees of the Company;

 

  iv. Continued vesting of the One-Time, New Hire Restricted Stock Unit grant specified in section 8 of this Letter of Intent, subject to the terms and conditions of the grant agreement and the vesting provisions contained therein.

 

14. Change in Control

You will be eligible for Medtronic’s Section 16 Officer Change in Control Policy, which accompanies this Offer Letter.

 

15. Employee Agreement

The compensation and benefits provided in this Offer are contingent on you signing the Medtronic Employee Agreement, which specifies certain employment terms and conditions. That agreement is provided to you with this Offer Letter.

 

16. Stock Ownership Policy

Medtronic’s policy requires Section 16 Officers to maintain Medtronic stock equal to three (3) times annual salary. Unless noted otherwise by an equity grant agreement, Officers must retain 50% of the after-tax shares following settlement of equity compensation awards, including stock option exercises and restricted stock vesting, until the stock ownership requirement is met. All shares of Medtronic stock owned by you, including the after tax value of unexercised stock options and the after tax value of unvested restricted stock unit awards, count towards satisfying the stock ownership guideline.

 

17. Reasonable Accommodation (Americans with Disabilities Act)

Medtronic is committed to providing reasonable accommodations so that all individuals may participate fully in their employment. If you need accommodations because of a medical condition, or a religious belief or practice, please discuss your request with Carol Surface, Chief Human Resources Officer, who will work with you to evaluate accommodation options.

 

18. Eligibility Documents

As required by federal law, Medtronic must verify that its employees are eligible to work in the United States. On or before your first day of employment, you may be required to certify that you are a citizen of the U.S., a noncitizen national of the U.S., a lawful permanent resident, or an alien authorized to work in the U.S. Medtronic would assist you with completing immigration authorization documents and procedures with the United States Government.

 

Page 4 of 5    Confidential

Karen Parkhill Offer Letter of Employment, May 2, 2016

 

19. Legal Fees

Medtronic agrees to provide you with full reimbursement of any legal fees that you incur associated with legal review, counsel, or action taken in conjunction with your employment termination with Comerica, Inc., including review of documents, legal counsel associated with that review, and any legal action necessary should Comerica, Inc. decide to cancel your vested and unpaid restricted stock unit shares. Medtronic will not reimburse legal fees associated with any matter other than legal review, counsel, or action directly associated with your employment termination with Comerica to join Medtronic.

 

20. Other General Provisions

Medtronic expects you to take reasonable steps to protect proprietary information from your current employer and to abide by any other confidentiality and applicable non-solicitation agreements.

Karen, I am pleased to extend this offer of employment with Medtronic. Please review and direct any questions to Carol Surface, Chief Human Resources Officer. To accept this offer of employment, please sign and date below, sign the Medtronic Employee Agreement included with this offer, and return the two original documents to Carol Surface.

Best regards,

 

LOGO

Omar lshrak

Chairman and Chief Executive Officer

I, Karen Parkhill, accept this offer of employment as outlined above.

 

LOGO    May 2, 2016
Signature    Date

 

Page 5 of 5    Confidential

Exhibit 99.1

 

LOGO

NEWS RELEASE

 

  Contacts:  
  Fernando Vivanco   Ryan Weispfenning
  Public Relations   Investor Relations
  +1-763-505-3780   +1-763-505-4626

FOR IMMEDIATE RELEASE

MEDTRONIC WELCOMES KAREN L. PARKHILL

AS ITS NEW CHIEF FINANCIAL OFFICER

Gary Ellis to Remain on Medtronic Executive Committee

Until Retirement in Fiscal Year 2017

DUBLIN – May 4, 2016 – Medtronic plc (NYSE: MDT) announced today the appointment of Karen L. Parkhill as executive vice president and chief financial officer (CFO), effective June 20, 2016. Parkhill will succeed Gary L. Ellis in the CFO role and will report to Medtronic CEO Omar Ishrak.

Today’s announcement concludes an external search process conducted by the company to ensure a seamless succession of the CFO portion of Ellis’s current responsibilities. As part of his planned succession, Ellis will remain on the Medtronic Executive Committee, assist with the transition of the CFO office, and will continue to lead the other key functions within his portfolio of responsibilities until his retirement.

Parkhill joins Medtronic from Comerica Incorporated (NYSE:CMA), where she served as vice chairman and CFO for the past five years. Parkhill was a member of Comerica’s Management Executive Committee and the Comerica Bank Board of Directors. She is also a member of the Board of Directors for the Methodist Health System in Dallas.

In her role as Medtronic’s CFO, she will serve on the company’s Executive Committee and

be responsible for leading the Medtronic global finance organization and key supporting functions, including Treasury, Controller, Tax, Internal Audit, Investor Relations, Corporate Strategy, and Business Development.

“I am delighted to add someone with Karen’s deep expertise and insights to the Medtronic leadership team,” said Omar Ishrak, Medtronic chairman and CEO. “Given Karen’s extensive background across all of the major disciplines within finance, and her direct experience as an investment banker, CFO at JP Morgan’s Commercial banking business, and CFO at Comerica, I am confident in her ability to lead our global finance organization and believe she will be a strong representative to our investors and Wall Street. I look forward to the ideas and perspectives she will bring to our leadership team – including from her experience as a Director with the Methodist Health System - during this transformational time at Medtronic and in the healthcare industry.”

“I am extremely pleased to join Medtronic as CFO, a company with such a longstanding history and Mission of serving people with chronic disease around the world,” said Parkhill. “It is a true honor to join a company that is successfully delivering on this vital Mission, while also providing strong returns for its shareholders.”

Ellis to Continue to Provide Key Functional Leadership

Ellis is a 27-year veteran of Medtronic and has served as the CFO since 2005. He will remain a key member of the company’s Executive Committee, report to Ishrak, and will continue his leadership of the Global Operations, Information Technology and Facilities & Real Estate functions.

During Ellis’ tenure as CFO, the company’s market cap has nearly doubled to over $110 billion. In addition, Ellis played an instrumental leadership role in the company’s recent Covidien acquisition, the largest ever in the history of the medical technology industry.

“Although Gary will continue in a critical leadership role at Medtronic, I cannot thank Gary enough for the leadership he provided Medtronic over the past 11 years as CFO,” said Ishrak. “Gary has helped lead Medtronic to tremendous growth and global expansion over his tenure, which has translated into extremely meaningful returns for our shareholders. We are grateful that he will remain with us to help us achieve key integration objectives of the Covidien acquisition and transition Karen into the CFO role.”

About Karen Parkhill

Parkhill’s financial experience spans more than 25 years. She joined Comerica in 2011 as CFO and had direct management of Finance, overseeing Accounting, Business Finance, Corporate Planning and Development, Investor Relations, Treasury as well as Economics, with responsibility for all financial reporting.

Parkhill joined Comerica from JP Morgan Chase & Co., where she served as CFO for the Commercial Banking business from 2007 to 2011. She joined JP Morgan in 1992 in the Investment Bank and held various positions of increasing scope and responsibility, from an Associate in the Mergers and Acquisitions Group to a Managing Director in the Investment Banking Coverage Group.

Parkhill earned bachelor’s degrees in business administration and mathematics from Southern Methodist University in Dallas and an MBA from the University of Chicago Booth School of Business. She is a member of the International Women’s Forum and serves as a National Trustee for the Boys and Girls Club of America. Parkhill was recently named one of the “Top 25 Most Powerful Women in Banking” by American Banker Magazine.

About Medtronic

Medtronic plc ( www.medtronic.com ), headquartered in Dublin, Ireland, is among the world’s largest medical technology, services and solutions companies – alleviating pain, restoring health and extending life for millions of people around the world. Medtronic

employs more than 85,000 people worldwide, serving physicians, hospitals and patients in approximately 160 countries. The company is focused on collaborating with stakeholders around the world to take healthcare Further, Together.

Any forward-looking statements are subject to risks and uncertainties such as those described in Medtronic’s periodic reports on file with the Securities and Exchange Commission. Actual results may differ materially from anticipated results.

-end-