MEDTRONIC INC
MEDTRONIC INCENTIVE PLAN
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<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>medtronic080932_ex10-2.htm
<DESCRIPTION>MEDTRONIC INCENTIVE PLAN
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<P ALIGN=CENTER><FONT SIZE=2><B>MEDTRONIC, INC.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>MEDTRONIC INCENTIVE PLAN<BR></B><B>(As amended and restated effective January 1, 2008)</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>SECTION 1.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>BACKGROUND, PURPOSE AND DURATION</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.
<B><I>Effective Date.</I></B> The Company previously established the
Medtronic Incentive Plan effective as of April&nbsp;26, 2003 (the &#147;Effective
Date&#148;). The Company hereby restates the Plan
in its entirety, effective January 1, 2008 to comply with the provisions of
Section 409A of the Internal Revenue Code.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2.
<B><I>Purpose of the Plan.</I></B> The Plan is designed to motivate employees
to achieve the Company&#146;s primary annual objectives as reflected in the
Company&#146;s annual operating plan by providing the opportunity for incentive
compensation in addition to annual salaries.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Plan is intended to amend, incorporate and restate prior incentive compensation
plans established by the Company, including the Management Incentive Plan and
the Employee Incentive Plan. The terms of the Plan, as set forth herein, shall
apply to awards granted under the Plan on and after the Effective Date. Awards
granted under the Company&#146;s incentive compensation plans in effect prior to the
Effective Date shall be governed by the terms of such plans.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>SECTION 2.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>DEFINITIONS</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1.
&#147;<B>Actual Award</B>&#148; means as to any
Performance Period, the actual award of incentive compensation (if any) payable
to a Participant for the Performance Period. Each Actual Award is determined by
the Payout Formula for the Performance Period, subject to the Committee&#146;s
authority under Section&nbsp;4.6 to increase, reduce or eliminate the award
determined by the Payout Formula.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2.
&#147;<B>Affiliate</B>&#148; means any corporation
that is a &#147;parent corporation&#148; or &#147;subsidiary corporation&#148; of the Company, as
those terms are defined in Sections 424(e) and (f) of the Code, or any
successor provision, and any joint venture in which the Company or any such
&#147;parent corporation&#148; or &#147;subsidiary corporation&#148; owns a controlling equity
interest.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3.
&#147;<B>Board</B>&#148; means the Board of
Directors of the Company.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4.
&#147;<B>Code</B>&#148; means the Internal Revenue
Code of 1986, as amended.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5.
&#147;<B>Committee</B>&#148; means the Compensation
Committee of the Board or its delegate as set forth in Section 3.4 hereof.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6.
&#147;<B>Company</B>&#148; means Medtronic, Inc., a
Minnesota corporation.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7.
&#147;<B>Disability</B>&#148; means the disability
of a Participant such that the Participant is considered disabled under any
retirement plan of the Company which is qualified under Section 401 of the
Code, or, in the case of a Participant employed by a non-U.S. Affiliate or in a
non-U.S. location, under any retirement plan or long-term disability plan of
the Company or such Affiliate applicable to such Participant, or as otherwise
determined by the Committee.</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8.
&#147;<B>Employee</B>&#148; means any employee of
the Company or of an Affiliate, whether such employee is so employed at the
time the Plan is adopted or becomes so employed subsequent to the adoption of
the Plan.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.9.
&#147;<B>Fiscal Year</B>&#148; means the fiscal
year of the Company.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.10.
&#147;<B>Participant</B>&#148; means as to any
Performance Period, an Employee who has been selected by the Committee for
participation in the Plan for that Performance Period.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.11.
&#147;<B>Payout Formula</B>&#148; means as to any
Performance Period, the formula or payout matrix established by the Committee
pursuant to Section&nbsp;4.4 in order to determine the Actual Awards (if any)
to be paid to Participants. The formula or matrix may differ from Participant
to Participant.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.12.
&#147;<B>Performance Period</B>&#148; means
generally, the Fiscal Year. However, the Committee may, at its discretion,
designate a shorter period.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.13.
&#147;<B>Plan</B>&#148; means the
Medtronic,&nbsp;Inc. Medtronic Incentive Plan, as set forth herein and as
hereafter amended from time to time.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.14.
&#147;<B>Retirement</B>&#148; means retirement of
an Employee as defined 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 the Employee has 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 retirement plan of the Company or any Affiliate
applicable to the Employee due to employment by a non-U.S. Affiliate or
employment in a non-U.S. location, or as otherwise determined by the Committee.</FONT></P>

<div><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.15.
&#147;<B>Salary</B>&#148; of a Participant for a
Performance Period, means the Participant&#146;s eligible earnings during such
period, determined in accordance with the Company&#146;s normal payroll practices:</FONT></div>

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<P><FONT SIZE=2>a.
  including:</FONT></P>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.
  base salary;</FONT></P>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.
  any other individual performance-based forms of compensation such as lump sum
  merit, development or promotional payments;</FONT></P>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.
  the amount of any reduction in Salary to which a Participant has agreed as
  part of any plan of the Company to use the amount of such reduction to
  purchase benefits under a cafeteria plan under Code Section 125, a
  transportation fringe benefit plan under Code Section 132(f), or in
  connection with any qualified cash or deferred arrangement under Code Section
  401(k);</FONT></P>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv.
  any Participant payments by salary reduction or its equivalent to a Company-sponsored
  nonqualified deferred compensation plan; and</FONT></P>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v.
  if applicable, overtime, sick pay, and shift differentials; but</FONT></P>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.
  excluding: (i)&nbsp;any discretionary bonuses (such as hiring bonuses);
  (ii)&nbsp;workers compensation payments; (iii)&nbsp;short-term disability
  benefit payments from a third party; (iv)&nbsp;long-term disability benefit
  payments; (v)&nbsp;other payments made by a third party; (vi)&nbsp;service
  awards; (vii)&nbsp;tuition reimbursements; (viii)&nbsp;relocation allowances;
  (ix)&nbsp;severance payments; (x)&nbsp;any one-time payment, or other payment
  not directly related to base salary (such as referral bonuses, incentive
  payments for a current Performance Period or prior Performance Period and
  other similar payments); (xi)&nbsp;payments of deferred compensation, whether
  qualified or nonqualified; (xii)&nbsp;payments made to the Participant under
  the Company&#146;s salary continuance plan for absence due to illness, injury, or
  approved medical leave of absence; and (xiii)&nbsp;expatriate allowances.</FONT></P>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.16.
&#147;<B>Target Award</B>&#148; means the target
award payable under the Plan to a Participant for the Performance Period,
expressed as a percentage of his or her Salary or a specific dollar amount, as
determined by the Committee in accordance with Section 4.2 hereof.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.17.
&#147;<B>Termination of Employment</B>&#148; means
a cessation of the employee-employer relationship between an Employee and the
Company or an Affiliate for any reason, including, but not limited to, a
termination by resignation, discharge, death, Disability, Retirement, or the
cessation of Affiliate status, whether through sale, decrease in equity
ownership or otherwise, but excluding any such termination where there is a
simultaneous reemployment by the Company or an Affiliate.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>SECTION 3.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>ADMINISTRATION</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.
<B><I>Committee is the
Administrator.</I></B><I></I> The
Plan shall be administered by the Compensation Committee of the Board (the
&#147;Committee&#148;). The Committee shall consist of not less than two (2)&nbsp;members
of the Board. The members of the Committee shall be appointed from time to time
by the Board.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.
<B><I>Committee Authority.</I></B> It shall be the duty of the Committee to
administer the Plan in accordance with the Plan&#146;s provisions. The Committee
shall have all powers and discretion necessary or appropriate to administer the
Plan and to control its operation, including, but not limited to, the power to
(a)&nbsp;determine which Employees shall be Participants, (b)&nbsp;prescribe
the terms and conditions of awards, (c)&nbsp;interpret the Plan and the awards,
(d)&nbsp;adopt such procedures and subplans as are necessary or appropriate to
permit participation in the Plan by Employees who are foreign nationals or
employed outside of the United States, (e)&nbsp;adopt rules for the
administration, interpretation and application of the Plan as are consistent
therewith, and (f)&nbsp;interpret, amend or revoke any such rules.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3.
<B><I>Decisions Binding.</I></B><I></I> All determinations and decisions made by
the Committee, the Board, and any delegate of the Committee pursuant to the
provisions of the Plan shall be final, conclusive, and binding on all persons,
and shall be given the maximum deference permitted by law.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4.
<B><I>Chief Executive Officer
Oversight and Delegation.</I></B>
The Committee may delegate all or any part of its authority to other Board
members or Medtronic employees. Unless the Committee determines otherwise, the
Committee shall be treated as having delegated its authority to the Company&#146;s
Chief Executive Officer (&#147;CEO&#148;) to the fullest extent permitted hereunder. The
CEO may make such determinations and take such actions within the scope of such
delegation as the CEO deems necessary. In his or her sole discretion, the CEO
may delegate all or part of the CEO&#146;s authority and powers under the Plan to
one or more directors, officers, or other employees of the Company on such
terms and conditions as he or she may provide.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5
<B><I>Indemnification.</I></B> To the full extent permitted by law,
each member and former member of the Committee and each person to whom the
Committee or the CEO delegates or has delegated authority under this Plan shall
be entitled to indemnification by the Company against and from any loss,
liability, judgment, damages, cost and reasonable expense incurred by such
member, former member or other person by reason of any action taken, failure to
act or determination made in good faith under or with respect to this Plan.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>SECTION 4.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>SELECTION OF PARTICIPANTS AND DETERMINATION
OF AWARDS</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.
<B><I>Selection of
Participants.</I></B> The
Committee, in its sole discretion, shall select the Employees who shall be
Participants for any Performance Period based upon the recommendation of
appropriate management. In addition, the Committee, in its sole discretion,
shall determine whether Employees who are hired after the commencement of a
Performance Period shall participate in the Plan for that Performance Period.
Participation in the Plan is in the sole discretion of the Committee, and on a
Performance Period by </FONT></P>

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<P><FONT SIZE=2>Performance
Period basis. Accordingly, an Employee who is a Participant for a given
Performance Period in no way is guaranteed or assured of being selected for
participation in any subsequent Performance Period.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.
<B><I>Determination of Target
Awards.</I></B><I></I> The
Committee, in its sole discretion, shall establish a Target Award for each
Participant, which shall be set forth in writing. The amount of each
Participant&#146;s Target Award shall be determined by the Committee in its sole
discretion, based upon the Participant&#146;s level of responsibility within the
Company or such other objective criteria as the Committee may determine is
appropriate.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.
<B><I>Determination of
Performance Objectives.</I></B><I></I>
The Committee, in its sole discretion, shall establish the Performance
Objectives for the Performance Period. Such Performance Objectives shall be set
forth in writing. &#147;Performance Objectives&#148; means the Corporate Financial
Performance, Sector Financial Performance, and/or Unit/Individual Performance
Category goal(s) (or combined goal(s)) determined by the Committee (in its sole
discretion) to be applicable to the Participants for a Target Award for a
Performance Period. As determined by the Committee, the Performance Objectives
for any Target Award applicable to the Participants may provide for a targeted
level or levels of achievement in the Performance Categories using one or more
financial or other measures. The Performance Objectives may differ from award
to award.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minimum
threshold(s) may be set by the Committee for any or all of the Performance
Categories (as defined in Section 4.4) for a Participant, below which no Actual
Awards may be payable to the Participant for that Category.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
Participant may be assigned multiple Performance Objectives in the same
Performance Category. In such cases the Performance Objectives shall be given a
percentage weight that is dependent on the assessment of the importance of the
Performance Objective and the sum of the percentage weights in a Performance
Category shall equal 100%.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4.
<B><I>Determination of Payout
Formula or Formulas.</I></B><I></I>
The Committee, in its sole discretion, shall establish a Payout Formula or
Formulas for purposes of determining the Actual Award (if any) payable to each
Participant. Each Payout Formula shall (a)&nbsp;be in writing, (b)&nbsp;be
based on a combination of Performance Categories (as defined below) designated
for the Participant, (c)&nbsp;be based on a comparison of actual performance to
the Performance Objectives, (d)&nbsp;provide for the payment of a Participant&#146;s
Target Award if the Performance Objectives for the Performance Period are
achieved, and (e)&nbsp;provide for an Actual Award greater than or less than
the Participant&#146;s Target Award, depending upon the extent to which actual
performance exceeds or falls below the Performance Objectives.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Participant&#146;s entitlement to an Actual Award will be based on one or more of
the percentage-weighted combination(s) of the performance of the Company as a
whole (&#147;Corporate Financial Performance&#148;), the Participant&#146;s sector (&#147;Sector
Financial Performance&#148;), and/or the Participant&#146;s Unit (e.g., business unit,
division, work group, department, country, geography, etc.) and/or individual
performance (&#147;Unit/Individual Performance&#148;) (each defined as a &#147;Performance
Category&#148;). The Committee shall designate for each Participant in the Plan a
combination of Performance Categories based upon the level of impact and
responsibility the Participant&#146;s job has on corporate, sector and/or business
unit specific financial results and/or individual performance. The
Participant&#146;s Payout Formula shall include one or a combination of the
foregoing Performance Categories. For instance, the Payout Formula for
Participant&nbsp;A may contain only the Corporate Financial Performance
Category, in which case the Participant&#146;s Payout Formula would be based solely
on attainment of Performance Objectives in the Corporate Financial Performance
Category. Likewise, the Payout Formula for Participant&nbsp;B may contain both
the Corporate Financial Performance Category and Sector Financial Performance
Category, and the Participant&#146;s Payout Formula would be based on attainment of
Performance Objectives in both the Corporate Financial Performance Category and
the Sector Financial Performance Category.</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.
<B><I>Date for Determinations.</I></B>
The Committee shall make all determinations under Section 4.1 through 4.4 on or
before the 90th day of each Performance Period, but in no event after 25% of
the applicable Performance Period has elapsed.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6.
<B><I>Determination of Actual
Awards.</I></B><I></I> After the
end of each Performance Period, the Committee shall certify in writing the
extent to which the Performance Objectives applicable to each Participant for
the Performance Period were achieved or exceeded. The Actual Award for each
Participant shall be determined by applying the Payout Formula to the level of
actual performance that has been certified by the Committee. Notwithstanding
any contrary provision of the Plan, the Committee, in its sole discretion, may
(a)&nbsp;eliminate or reduce the Actual Award payable to any Participant below
that which otherwise would be payable under the Payout Formula,
(b)&nbsp;increase the Actual Award payable to any Participant above that which
otherwise would be payable under the Payout Formula, and (c)&nbsp;as further
set forth in Section 5.4 below, determine whether or not a Participant will
receive an Actual Award in the event the Participant incurs a Termination of
Employment prior to the date the Actual Award is to be paid pursuant to Section
5.2 below.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>SECTION 5.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>PAYMENT OF AWARDS</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.
<B><I>Right to Receive Payment.</I></B> The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any amounts under the Plan, and rights to the
payment hereunder shall be no greater than the rights of the Company&#146;s unsecured
creditors. All expenses involved in administering the Plan shall be borne by
the Company.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.
<B><I>Timing of Payment.</I></B> A Participant&#146;s Actual Award for a
Performance Period shall be paid to him or her within two and one-half months
following the close of the Fiscal Year. A Participant may, however, elect to
defer or exchange some or all of his or her Actual Award under other Company
plans in effect at that time.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3.
<B><I>Form of Payment.</I></B> Except as set forth in Section 5.2,
payment of an Actual Award shall be in cash in the form of a lump sum.</FONT></P>

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<P><FONT SIZE=2>5.4. <B><I>Termination of Employment During
  Performance Period.</I></B></FONT></P>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.
  If the Participant&#146;s employment is terminated during a Performance Period due
  to the Participant&#146;s death, Disability, or Retirement, the Participant (or
  the Participant&#146;s beneficiary in the case of the Participant&#146;s death) will be
  entitled to receive a pro rata portion of the Actual Award for which the
  Participant otherwise would have been eligible, determined at the end of the
  applicable Performance Period based upon the portion of the Performance
  Period the Participant was employed by the Company or Affiliate.</FONT></P>
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<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.
  Following a Termination of Employment during a Performance Period, or after
  completion of a Performance Period but prior to the time an Actual Award is
  paid, for any reason other than death, Disability or Retirement, a
  Participant&#146;s eligibility to receive an Actual Award for such Performance
  Period shall be determined solely at the discretion of the Committee. No such
  Actual Award may exceed a pro rata portion of the Actual Award for which the
  Participant otherwise would have been eligible, determined at the end of the
  applicable Performance Period based upon the portion of the Performance
  Period the Participant was employed by the Company or Affiliate.</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.
  Notwithstanding anything in this Section 5.4 to the contrary, a Participant
  shall not be entitled to any Actual Award for a Performance Period if the
  Participant&#146;s employment is terminated by the Company or Affiliate during the
  Performance Period or during the period between the end of the Performance
  Period and the date on which the Actual Award is otherwise payable to the
  Participant for the following reasons: (a)&nbsp;failure to comply with any
  material policies and procedures of the Company or Affiliate;
  (b)&nbsp;conduct reflecting dishonesty or disloyalty to the Company or </FONT></P>
</TD>
</TR>
</table>
<BR>
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</TD>
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<P><FONT>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
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<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>Affiliate,
  or which may have a negative impact on the reputation of the Company or
  Affiliate; (c)&nbsp;allegation of commission of a felony, theft or fraud, or
  violations of law involving moral turpitude; or (d)&nbsp;failure to perform
  the material duties of his or her employment. If a Participant&#146;s employment
  is terminated for any of the foregoing reasons, the time at which the Participant
  ceases to be an employee for purposes of this Section 5.4 shall mean the time
  at which such Participant is instructed or notified to cease performing his
  or her job responsibilities for the Company or any Affiliate, whether or not
  for other reasons, such as payroll, benefits or compliance with legal
  procedures or requirements, he or she may still have other attributes of an
  employee.</FONT></P>
</TD>
</TR>
</table>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5.
<B><I>Beneficiary.</I></B><I></I> The Committee or its delegate shall
create a procedure whereby a Participant may file, on a form to be provided by
the Company, a written election designating one or more beneficiaries with
respect to the amount, if any, payable in the event of the Participant&#146;s death.
The Participant may amend such beneficiary designation in writing at any time
prior to the Participant&#146;s death without the consent of any previously
designated beneficiary. Such designation or amended designation, as the case
may be, shall not be effective unless and until received by the authorized
representatives of the Company prior to the Participant&#146;s death. In the absence
of any such designation, the amount payable, if any, shall be delivered to the
legal representative of such Participant&#146;s estate.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>SECTION 6.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>CHANGE IN CONTROL</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1.
<B><I>Calculation of Awards.</I></B> Notwithstanding any other provisions of
the Plan (including, without limitation, minimum thresholds provided under
Section 4.3 and the provisions of Section 5.4, none of which shall apply), if a
Change in Control (as defined below) occurs during a Performance Period, each
Participant shall be entitled to an Actual Award under the Plan for the full
Performance Period (typically 12&nbsp;months), calculated in accordance with
Section 4.6, but with payment accelerated to the time of the Change in Control.
A Participant&#146;s Actual Award for such Performance Period shall be the greater
of (a)&nbsp;the Target Award for which the Participant would have been eligible
had the Participant&#146;s Salary, determined as of the day immediately prior to the
Change in Control, remained the same throughout the Performance Period; or
(b)&nbsp;if the Change in Control occurs after the first quarter of a Fiscal
Year, the Actual Award that the Participant would have received if (i)&nbsp;no
Change in Control had occurred during such Fiscal Year, (ii)&nbsp;the Participant&#146;s
Salary, determined as of the day immediately prior to the Change in Control,
remained the same throughout the Performance Period, and (iii)&nbsp;the
achievement of the Participant&#146;s Performance Objectives for the Performance
Period had equaled the performance most recently projected by the Company for
such Performance Period prior to the Change in Control, adjusted to exclude:
(A)&nbsp;all non-recurring or special charges incurred by the Company during
the Performance Period; (B)&nbsp;all legal, accounting, investment banking and
other costs and expenses incurred or projected by the Company in connection
with, or in opposition to, the events resulting in the Change in Control; and
(C)&nbsp;the projected effect of the Change in Control upon the achievement of
Participant&#146;s Performance Objectives.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2.
  <B><I>Definition.</I></B><I></I> For purposes of this Section 6, a
  &#147;Change in Control&#148; means: </FONT></P>

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<P><FONT>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
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<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.
  Any individual, entity or group (within the meaning of Section 13(d)(3) or
  14(d)(2) of the Securities Exchange Act of 1934, as amended (the &#147;Exchange
  Act&#148;)) (a &#147;Person&#148;) becomes the beneficial owner (within the meaning of Rule
  13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the
  then-outstanding shares of common stock of the Company (the &#147;Outstanding Company
  Common Stock&#148;) or (ii) the combined voting power of the then-outstanding
  voting securities of the Company entitled to vote generally in the election
  of directors (the &#147;Outstanding Company Voting Securities&#148;); <U>provided</U>, <U>however</U>,
  that, for purposes of this clause (a), the following acquisitions shall not
  constitute a Change in Control: (1) any acquisition directly from the
  Company, (2) any acquisition by the Company or any of its subsidiaries, (3)
  any acquisition by any employee benefit plan (or related trust) sponsored or
  maintained by the Company or any of its subsidiaries, (4) any acquisition by
  an underwriter temporarily holding securities pursuant to an offering of such
  securities or (5) any acquisition pursuant to a transaction that complies
  with clauses (i), (ii) and (iii) of clause (c) below; or</FONT></P>
</TD>
</TR>
</table>
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</TD>
<TD WIDTH="95%" VALIGN=TOP>
<P><FONT>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.
  Individuals who, as of the date hereof, constitute the Board (the &#147;Incumbent
  Directors&#148;) cease for any reason to constitute at least a majority of the
  Board; <U>provided</U>, <U>however</U>, that any individual becoming a
  director subsequent to the date hereof whose election, or nomination for
  election by the Company&#146;s shareholders, was approved by a vote of at least a
  majority of the Incumbent Directors then on the Board shall be considered as
  though such individual was an Incumbent Director, but excluding, for this purpose,
  any such individual whose initial assumption of office occurs as a result of
  either an actual or threatened election contest or other actual or threatened
  solicitation of proxies or consents by or on behalf of a Person other than
  the Board; or</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.
  Consummation of a reorganization, merger, statutory share exchange or
  consolidation (or similar corporate transaction) involving the Company or any
  of its subsidiaries, a sale or other disposition of all or substantially all
  of the assets of the Company, or the acquisition of assets or stock of
  another entity by the Company or any of its subsidiaries (each, a &#147;Business
  Combination&#148;), in each case, unless, immediately following such Business
  Combination, (i) substantially all of the individuals and entities who were
  the beneficial owners, respectively, of the Outstanding Company Common Stock
  and the Outstanding Company Voting Securities immediately prior to such
  Business Combination beneficially own, directly or indirectly, more than 50%
  of, respectively, the then-outstanding shares of common stock (or, for a
  non-corporate entity, equivalent securities) and the then-outstanding voting
  securities entitled to vote generally in the election of directors (or, for a
  non-corporate entity, equivalent governing body), as the case may be, of (A)
  the entity resulting from such Business Combination (the &#147;Surviving Corporation&#148;)
  or (B) if applicable, the ultimate parent entity that directly or indirectly
  has beneficial ownership of 80% or more of the voting securities eligible to
  elect directors of the Surviving Corporation (the &#147;Parent Corporation&#148;), in
  substantially the same proportion as their ownership, immediately prior to
  the Business Combination, of the Outstanding Company Common Stock and the
  Outstanding Company Voting Securities, as the case may be, (ii) no person
  (other than any employee benefit plan (or related trust) sponsored or
  maintained by the Surviving Corporation or the Parent Corporation), is or
  becomes the beneficial owner, directly or indirectly, of 30% or more of the
  outstanding shares of common stock and the total voting power of the
  outstanding voting securities eligible to elect directors of the Parent
  Corporation (or, if there is no Parent Corporation, the Surviving
  Corporation) and (iii) at least a majority of the members of the board of
  directors of the Parent Corporation (or, if there is no Parent Corporation,
  the Surviving Corporation) following the consummation of the Business
  Combination were Incumbent Directors at the time of the Board&#146;s approval of
  the execution of the initial agreement providing for such Business Combination;
  or</FONT></P>
</TD>
</TR>
<TR>
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<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
</TR>
<TR>
<TD VALIGN=TOP>
<P><FONT SIZE=1>&nbsp;</FONT></P>
</TD>
<TD VALIGN=TOP>
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.
  Approval by the shareholders of the Company of a complete liquidation or
  dissolution of the Company.</FONT></P>
</TD>
</TR>
</table>

<P>
<FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3.
<B><I>Payment of Awards. </I></B>Actual Awards
shall be paid under this Section 6 within two and one-half months following the
date of the first Change in Control to occur during the Performance Period.
Notwithstanding the preceding sentence, a Participant may, however, elect to
defer or exchange some or all of his or her Actual Awards under other Company
plans in effect at that time. </FONT></P>

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<P ALIGN=CENTER><FONT SIZE=2><B>SECTION 7.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>GENERAL PROVISIONS</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1.
<B><I>Tax Withholding.</I></B><I></I> The Company or an Affiliate shall have
the right to deduct from any payment made under the Plan any federal, state,
local or non-U.S. income, payroll or other taxes required by law to be withheld
with respect to such payment.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2.
<B><I>No Effect on Employment.</I></B><I></I> Neither the Plan nor any action taken
hereunder shall be construed as giving any employee or other person any right
to continue to be employed by or perform services for the Company or any
Affiliate of the Company, and the right to terminate the employment of or
performance of services by any Participant at any time and for any reason is
specifically reserved to the Company and its Affiliates.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3.
<B><I>Participation.</I></B><I></I> No Employee shall have the right to be
selected to receive an award under this Plan, or, having been so selected, to
be selected to receive a future award.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4.
<B><I>Release.</I></B><I></I> Any payment of an Actual Award to or for
the benefit of a Participant or beneficiary that is made in good faith by the
Company in accordance with the Company&#146;s interpretation of its obligations
hereunder, shall be in full satisfaction of all claims against the Company for
payments under the Plan.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5.
<B><I>Notices.</I></B><I></I> Any notice provided by the Company under
the Plan may be posted to a Company-designated website.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6.
<B><I>Benefits Not
Transferable.</I></B><I></I>
Except as may be approved by the Committee, a Participant&#146;s rights and interest
under the Plan may not be assigned or transferred, hypothecated or encumbered,
in whole or in part, either directly or by operation of law or otherwise
(except in the event of a Participant&#146;s death) including, but not by way of
limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in
any other manner; provided, however, that, subject to applicable law, any
amounts payable to any Participant hereunder are subject to reduction to
satisfy any liabilities owed to the Company or any of its Affiliates by the
Participant.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7.
<B><I>Successors.</I></B> All obligations of the Company and any
Affiliate under the Plan, with respect to awards granted hereunder, shall be
binding on any successor to the Company and/or such Affiliate, whether the
existence of such successor is the result of a direct or indirect purchase,
merger or consolidation of all or substantially all of the business or assets
of the Company or such Affiliate, or otherwise.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8.
<B><I>Actions and Decision
Regarding the Business or Operations of the Company.</I></B> Notwithstanding anything in the Plan to
the contrary, none of the Company, its officers, directors, employees or agents
shall have any liability to any Participant (or his or her beneficiaries or
heirs) under the Plan or otherwise on account of any action taken, or not
taken, in good faith by any of the foregoing persons with respect to the
business or operations of the Company or any Affiliates.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>SECTION 8.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>AMENDMENT, TERMINATION AND DURATION</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1.
<B><I>Plan Amendment or
Suspension.</I></B> The
Plan may be amended or suspended in whole or in part at any time and from time
to time by the Committee.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.
<B><I>Plan Termination.</I></B> This Plan shall terminate upon the
adoption of a resolution of the Committee terminating the Plan.</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3.
<B><I>Duration of the Plan.</I></B><I></I> The Plan shall commence on the date
specified herein, and subject to Sections 8.1 and 8.2 (regarding the Board&#146;s
right to amend or terminate the Plan, respectively), shall remain in effect
thereafter.</FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>SECTION 9.</B></FONT></P>

<P ALIGN=CENTER><FONT SIZE=2><B>LEGAL CONSTRUCTION</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.
<B><I>Gender and Number.</I></B><I></I> Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2.
<B><I>Severability.</I></B><I></I> In the event any provision of the Plan
shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.
<B><I>Requirements of Law.</I></B><I></I> The granting and payment of awards under
the Plan shall be subject to all applicable laws, rules and regulations, and to
such approvals by any governmental agencies or national securities exchanges as
may be required.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4.
<B><I>Governing Law.</I></B><I></I> The validity, construction,
interpretation, administration and effect of the Plan, and rights relating to
the Plan and to awards granted under the Plan, shall be governed by the
substantive laws, but not the choice of law rules, of the State of Minnesota.</FONT></P>

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