Exhibit 10.4

 
 

ST. JUDE MEDICAL, INC.

2007 EMPLOYEE STOCK PURCHASE PLAN

 
 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

 

 

Page

 

SECTION 1.

PURPOSE

1

 

SECTION 2.

DEFINITIONS

1

 

SECTION 3.

ELIGIBILITY

4

 

SECTION 4.

CONTRIBUTION PERIODS

5

 

SECTION 5.

PARTICIPATION

5

 

SECTION 6.

METHOD OF PAYMENT OF CONTRIBUTIONS

5

 

SECTION 7.

GRANT OF OPTION

6

 

SECTION 8.

EXERCISE OF OPTION

6

 

SECTION 9.

DELIVERY

7

 

SECTION 10.

VOLUNTARY WITHDRAWAL; TERMINATION OF EMPLOYMENT

7

 

SECTION 11.

INTEREST

8

 

SECTION 12.

SHARES

8

 

SECTION 13.

ADMINISTRATION

8

 

SECTION 14.

DEATH OF PARTICIPANT

9

 

SECTION 15.

TRANSFERABILITY

9

 

SECTION 16.

USE OF FUNDS

9

 

SECTION 17.

REPORTS

9

 

SECTION 18.

ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS

9

 

 

i

--------------------------------------------------------------------------------

 

 

Page

 

 

 

SECTION 19.

AMENDMENT OR TERMINATION

11

 

SECTION 20.

NOTICES

12

 

SECTION 21.

CONDITIONS UPON ISSUANCE OF SHARES

12

 

SECTION 22.

TERM OF PLAN; EFFECTIVE DATE

12

 

SECTION 23.

ADDITIONAL RESTRICTIONS OF RULE 16b-3

12

 

SECTION 24.

GOVERNING LAW

13

 

SECTION 25.

SEVERABILITY

13

 

SECTION 26.

NO RIGHTS AS AN EMPLOYEE

13

 

SECTION 27.

INTERNATIONAL PARTICIPANTS

13

 

SECTION 28.

TAXES

14

 

SECTION 29.

ACCEPTANCE OF TERMS

14

 

 

ii

--------------------------------------------------------------------------------

ST. JUDE MEDICAL, INC.

2007 EMPLOYEE STOCK PURCHASE PLAN

The following constitute the provisions of the 2007 Employee Stock Purchase Plan
of St. Jude Medical, Inc.

Section 1.

Purpose.

The purpose of the Plan is to enable the Company to obtain and retain the
services of employees. In addition, the Plan provides a convenient, meaningful
opportunity for employees to purchase St. Jude Medical, Inc. stock, thereby
increasing participating employees’ personal interest in the Company’s success.
It is the intention of the Company to have a portion of the Plan qualify as an
“Employee Stock Purchase Plan” within the meaning of Section 423 of the Code,
and it is intended that such portion of the Plan be treated as a separate plan
which shall comply with Section 423 of the Code in all respects. Separately,
certain provisions of this Plan document govern the purchase of St. Jude
Medical, Inc. stock other than through the portion of the Plan governed by
Section 423 of the Code, and it is intended that such purchases shall not be
subject to the requirements of Section 423 of the Code.

Section 2.

Definitions.

(a)          “Account” means the funds accumulated with respect to a Participant
as a result of deduction from such Participant’s paycheck for the purpose of
purchasing Shares under the Plan. The funds allocated to a Participant’s Account
shall remain the property of the Participant at all times but may be commingled
with the general funds of the Company, except to the extent such commingling may
be prohibited by the laws of any applicable jurisdiction.

(b)          “Board” means the Board of Directors of the Company.

(c)          “Business Day” means any day (other than a Saturday or Sunday) on
which the New York Stock Exchange is permitted to be open for trading.

(d)          “Code” means the Internal Revenue Code of 1986, as amended.

(e)          “Commencement Date” means the first calendar day of each
Contribution Period of the Plan.

(f)          “Common Stock” means the Common Stock, par value $.10 per share, of
the Company.

 

--------------------------------------------------------------------------------

(g)          “Committee” means the committee described in Section 13(a) of the
Plan.

(h)          “Company” means St. Jude Medical, Inc., a Minnesota corporation.
Effective as of the date any Subsidiary becomes a Designated Subsidiary,
references herein to the “Company” shall be interpreted to include such
Designated Subsidiary, as appropriate.

(i)           “Compensation” means regular straight time earnings, commissions
and commission-based sales bonuses annualized at the time of enrollment prior to
the Commencement Date, excluding payments, if any, for overtime, incentive
compensation, incentive payments, premiums, bonuses (including bonuses paid
under the Company’s Management Incentive Compensation Plan) and any other
special remuneration.

(j)           “Continuous Status as an Employee” means the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of (i) medical leave;
(ii) leave allowed under the Family and Medical Leave Act; (iii) personal leave;
(iv) military leave; (v) jury duty; (vi) any other leave of absence approved by
the Committee, provided that such leave does not exceed the respective time
period designated by Company policy, unless re-employment upon the expiration of
such leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (vii) transfers between
locations of the Company or between the Company and its Subsidiaries.

(k)          “Contribution Period” means a 1-year period; provided, however,
that the Board shall have the power to change the duration and/or frequency of
Contribution Periods with respect to future purchases without shareholder
approval if such change is announced at least 5 Business Days prior to the
scheduled beginning of the first Contribution Period to be affected; provided
further, however, that no Contribution Period shall exceed 27 months.

(l)          “Contributions” means all amounts credited to the Account of a
Participant pursuant to the Plan.

(m)         “Corporate Transaction” means (i) a sale of all or substantially all
of the Company’s assets or (ii) a merger, consolidation or other capital
reorganization of the Company with or into another corporation or any other
transaction or series of related transactions in which the Company’s
shareholders immediately prior thereto own less than 50% of the voting stock of
the Company (or its successor or parent) immediately thereafter.

(n)          “Designated Subsidiaries” means the Subsidiaries that have been
designated by the Board from time to time in its sole discretion as eligible to
participate in the portion of the Plan subject to Section 423 of the Code.

2

--------------------------------------------------------------------------------

(o)          “Employee” means any person, including an Officer or director who
is also an employee, but excluding any person whose customary employment is
(i) less than 20 hours per week or (ii) for not more than 5 months in any
calendar year.

(p)          “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

(q)          “Fair Market Value” means, with respect to the Common Stock on a
given date, the closing price for the Common Stock for such date, or if such
date is not a Business Day, the last reported sale price for the Common Stock
for the last Business Day preceding such date, as quoted on the New York Stock
Exchange or another exchange; provided, however, that if the Common Stock ceases
to be listed for trading on the New York Stock Exchange or another exchange,
“Fair Market Value” of the Common Stock for a given date shall mean the value
determined in good faith by the Board.

(r)          “New Purchase Date” shall have the meaning set forth in Section
18(b) hereof.

(s)           “Officer” means a person who has been designated by the Board as a
reporting officer for purposes of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.

(t)           “Participant” means any Employee who is eligible and has elected
to participate in the Plan accordance with Sections 3 and 5 hereof and who has
not withdrawn from the Plan or whose participation in the Plan is not otherwise
terminated.

(u)          “Plan” means this 2007 Employee Stock Purchase Plan, as may be
amended from time to time.

(v)          “Purchase Date” means the last calendar day of each Contribution
Period of the Plan.

(w)         “Purchase Price” means with respect to a Contribution Period that
price as announced by the Committee prior to the first Business Day of that
Contribution Period, which price may, in the discretion of the Committee, be a
price which is not fixed or determinable as of the first Business Day of that
Contribution Period; provided, however, that in no event shall the Purchase
Price for any Contribution Period be less than the lesser of 85% of the Fair
Market Value of a Share on the Commencement Date or on the Purchase Date, in
each case rounded up to the next higher full cent. If the Commencement Date or
the Purchase Date is not a Business Day, then the Purchase Price for any
Contribution Period shall not be less than the lesser of 85% of the Fair Market
Value of a Share on the Business Day immediately preceding the Commencement Date
or the Purchase Date.

3

--------------------------------------------------------------------------------

(x)          “Share” means a share of Common Stock, as adjusted in accordance
with Section 18 hereof.

(y)          “Subsidiary” means a corporation, domestic or foreign, of which not
less than 50% of the total combined voting power of all classes of stock is held
by the Company or any such subsidiary of the Company, whether or not such
corporation now exists or is hereafter organized or acquired by the Company or
another such subsidiary of the Company. “Subsidiary” also means an
unincorporated business entity, such as a limited liability company or
partnership, in which the Company holds directly or indirectly not less than 50%
of the total combined voting power with respect to all classes of equity
ownership of such entity, whether or not such unincorporated business entity now
exists or is hereafter organized or acquired by the Company or another
Subsidiary of the Company, but only if such entity either (i) has duly elected
under applicable treasury regulations to be an association treated as a
corporation for federal income tax purposes, and such election continues in
effect; or (ii) is disregarded as a separate entity for federal income tax
purposes, has not made an election described in clause (i) of this sentence and,
pursuant to applicable treasury regulations, its assets are considered to be
owned by another Subsidiary that is a corporation or is treated as one under
clause (i) of this sentence.

Section 3.

Eligibility.

(a)          Any person who is an Employee and has completed 30 days of
continuous employment service for the Company or one or more of its Designated
Subsidiaries shall become eligible to participate in the Plan on the first day
of the month coincident with or following completion of such period of service,
subject to the requirements of Section 5(a) hereof and the limitations imposed
by Section 423(b) of the Code.

(b)          Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (together with any other person whose stock would be
attributed to such Employee pursuant to Section 424(d) of the Code) would own
capital stock of the Company and/or hold outstanding options to purchase stock
possessing 5% or more of the total combined voting power or value of all classes
of stock of the Company or of any Subsidiary of the Company, or (ii) if such
option would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate that exceeds $25,000 of the Fair Market Value
of such stock (determined at the time such option is granted), or that exceeds
2,000 Shares, for each calendar year in which such option is outstanding at any
time.

4

--------------------------------------------------------------------------------

Section 4.

Contribution Periods.

The Plan shall be implemented by a series of consecutive Contribution Periods.
The first Contribution Period shall commence on August 1, 2007 and shall end on
July 31, 2008. The Plan shall continue until terminated in accordance with
Sections 19 and 22 hereof.

Section 5.

Participation.

(a)          An eligible Employee may become a Participant by following the
established enrollment procedure as directed by the Committee, or other entity
designated by the Committee, prior to the Commencement Date of the applicable
Contribution Period, unless an earlier or later time for completing the
enrollment procedure is set by the Committee for all eligible Employees with
respect to a given Contribution Period. The eligible Employee shall determine
the amount of the Participant’s Compensation (subject to Section 6(a) hereof) to
be paid as Contributions pursuant to the Plan.

(b)          Payroll deductions shall commence on the first payroll paid on or
following the Commencement Date and shall end on the last payroll paid on or
prior to the Purchase Date of the Contribution Period, unless sooner terminated
as provided in Section 10 hereof. A Participant who has elected to participate
in a Contribution Period shall automatically participate in the next
Contribution Period until such time as such Participant withdraws from the Plan
or terminates employment as provided in Section 10 hereof.

Section 6.

Method of Payment of Contributions.

(a)          A Participant shall elect to have payroll deductions made on each
payroll paid during the Contribution Period in full dollar amounts not less than
$5 and not more than 10% (or such other maximum percentage as the Board may
establish from time to time before any Commencement Date) of such Participant’s
Compensation on each payroll paid during the Contribution Period. All payroll
deductions made by a Participant shall be credited to his or her Account under
the Plan. A Participant may not make any additional payments into his or her
Account. No assets in a Participant’s Account shall be subject to the debts,
contracts, liabilities, engagements or torts of the Participant.

(b)          A Participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof.

(c)          Unless otherwise provided by the Committee, a Participant may
decrease the amount of his or her Contributions once during a Contribution
Period by following the established administrative procedures as directed by the
Committee to authorize a decrease in the payroll deduction amount. The decrease
in amount shall be effective as soon as administratively

5

--------------------------------------------------------------------------------

feasible following the date of receipt by the Company, or other entity
designated by the Committee. However, any decrease in amount must be made at
least 30 days prior to the end of the Contribution Period to ensure such
decrease shall be effective within the current Contribution Period.

(d)          Unless otherwise provided by the Committee, a Participant may not
increase the amount of his or her Contributions during a Contribution Period. A
Participant may only increase the amount of his or her Contributions with
respect to a future Contribution Period by following the established
administrative procedures as directed by the Committee to authorize an increase
in the payroll deduction amount. The increase in amount shall be effective as of
the Commencement Date of the next Contribution Period following the date of
receipt by the Company, or other entity designated by the Committee.

(e)          Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a Participant’s
payroll deductions may be adjusted during any Contribution Period, subject to
the discretion of the Committee. Payroll deductions shall re-commence at the
amount provided in such Participant’s most recently submitted enrollment
materials at the beginning of the first Contribution Period that is scheduled to
end in the next succeeding calendar year, unless terminated by the Participant
as provided in Section 10 hereof.

Section 7.

Grant of Option.

On the Commencement Date of each Contribution Period, each eligible Employee
participating in such Contribution Period shall be granted an option to purchase
on the Purchase Date a number of Shares determined by dividing such Employee’s
Contributions accumulated prior to such Purchase Date and retained in the
Participant’s Account as of the Purchase Date by the applicable Purchase Price,
subject to the limitations set forth in Sections 3(b) and 12 hereof.

Section 8.

Exercise of Option.

Unless a Participant ceases to be an eligible Employee as provided in Section 3
or withdraws from the Plan as provided in Section 10 hereof, his or her option
for the purchase of Shares will be exercised automatically on each Purchase Date
of each Contribution Period, and the maximum number of Shares (which may include
a fractional Share) subject to the option will be purchased at the applicable
Purchase Price with the accumulated Contributions in his or her Account. The
Shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the Participant on the Purchase Date. During his or her lifetime,
a Participant’s option to purchase Shares hereunder is exercisable only by him
or her.

6

--------------------------------------------------------------------------------

Section 9.

Delivery.

As promptly as practicable after each Purchase Date of each Contribution Period,
the number of Shares purchased by each Participant upon exercise of his or her
option shall be delivered in accordance with procedures established from time to
time by the Committee, and a transfer agent for the Common Stock may be utilized
or a brokerage or nominee account may be established for this purpose. The terms
of such transfer agency or brokerage or nominee account shall be at the sole
discretion of the Company, and participation in the Plan is expressly
conditioned on the acceptance of such terms.

Section 10.

Voluntary Withdrawal; Termination of Employment.

(a)          A Participant may withdraw from the Plan by following the
established administrative procedures as directed by the Committee, or other
entity designated by the Committee. The withdrawal request will be effective as
soon as administratively feasible. However, any withdrawal request must be made
at least 30 days prior to the end of a Contribution Period to ensure such
withdrawal request shall be effective within such Contribution Period. Once the
withdrawal request is effective, all of the Participant’s Contributions credited
to his or her Account will be paid to him or her with interest, his or her
option will be automatically terminated, and no further Contributions for the
purchase of Shares will be made absent re-enrollment. Notwithstanding the
foregoing, an Officer shall not have the right to withdraw Contributions
credited to his or her account under the Plan except in accordance with Section
10(b) hereof. Upon withdrawal from the Plan, a Participant may not re-enroll in
the Plan until the next Contribution Period. In order to re-enroll, a
Participant must follow the provisions set forth under Section 5(a) hereof.

(b)          Upon termination of the Participant’s Continuous Status as an
Employee prior to the Purchase Date of a Contribution Period for any reason,
including death or retirement, the Contributions credited to his or her Account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14 hereof, in either case [with
interest, and his or her option will be automatically terminated. Whether the
Participant’s Continuous Status as an Employee has been terminated shall be
determined by the Committee in its sole discretion. In the event that any
Designated Subsidiary ceases to be a Designated Subsidiary of the Company, the
employees of such Designated Subsidiary shall no longer be Employees for
purposes of Section 3(a) hereof as of the date such Designated Subsidiary ceases
to be a Designated Subsidiary.

(c)          A Participant’s withdrawal from the Plan shall not have any effect
upon his or her eligibility to participate in any similar plan that may
hereafter be adopted by the Company or any Subsidiary.

7

--------------------------------------------------------------------------------

Section 11.

Interest.

In any situation where the Plan provides for the payment of interest on the
Contributions of a Participant in the Plan, such interest rate shall be
determined by the Committee and disclosed the Participants prior to the
Commencement Date.

Section 12.

Shares.

(a)          Subject to adjustment as provided in Section 18 hereof, the maximum
number of Shares which shall be issued under the Plan shall be 5,000,000 Shares.
If on a given Purchase Date, the number of Shares with respect to which options
are to be exercised exceeds the number of Shares available for sale under the
Plan on such Purchase Date, the Committee shall make a pro rata allocation of
the Shares available for purchase on such Purchase Date among all Participants,
and the balances in the Accounts shall be refunded without interest to the
respective Participants.

(b)          The Participant shall have no interest or voting right in Shares
covered by his or her option until such option has been exercised.

Section 13.

Administration.

(a)          The Committee. The Plan shall be administered by a committee (the
“Committee”) established by the Board. The members of the Committee need not be
directors of the Company and shall be appointed by and serve at the pleasure of
the Board.

(b)          Powers of Committee. The Committee shall supervise and administer
the Plan and shall have full power to adopt, amend and rescind any rules deemed
desirable and appropriate for the administration of the Plan and not
inconsistent with the Plan, to construe and interpret the Plan, and to make all
other determinations necessary or advisable for the administration of the Plan.
Decisions of the Committee will be final and binding on all parties who have an
interest in the Plan. The Committee may delegate ministerial duties to such of
the Company’s employees, outside entities and outside professionals as the
Committee so determines.

(c)          Power and Authority of the Board. Notwithstanding anything to the
contrary contained herein, the Board may, at any time and from time to time,
without any further action of the Committee, exercise the powers and duties of
the Committee under the Plan.

8

--------------------------------------------------------------------------------

Section 14.

Death of Participant.

In the event of the death of a Participant, the Company shall deliver any Shares
and cash in the Participant’s Account to a beneficiary previously designated by
the Participant or, if there is no surviving beneficiary duly designated, to the
executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such Shares and/or cash to the
spouse or to any one or more dependents or relatives of the Participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.

Section 15.

Transferability.

Neither Contributions credited to a Participant’s Account nor any rights with
regard to the exercise of an option or to receive Shares under the Plan may be
assigned, transferred, pledged or otherwise disposed of in any way (other than
as provided in Section 14 hereof) by the Participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10 hereof.

Section 16.

Use of Funds.

All Contributions received or held by the Company under the Plan may be used by
the Company for any corporate purpose, and the Company shall not be obligated to
segregate such Contributions. The Plan is unfunded and shall not create nor be
construed to create a trust or separate fund of any kind or a fiduciary
relationship among the Company, the Board, the Committee and the Participant. To
the extent a Participant acquires a right to receive payment from the Company
pursuant to the Plan, such right shall be no greater than the right of any
unsecured general creditor of the Company.

Section 17.

Reports.

Accounts will be maintained for each Participant in the Plan. Account statements
will be made available to participating Employees by the Company and will set
forth the amounts of Contributions, the Purchase Price per Share, the number of
Shares purchased and the remaining cash balance, if any.

Section 18.

Adjustments Upon Changes in Capitalization; Corporate Transactions.

(a)          Adjustment. The number of Shares set forth in Section 12 hereof,
the price per Share covered by each option under the Plan that has not yet been
exercised and the maximum number of Shares that may be purchased by a
Participant in a calendar year pursuant to Section

9

--------------------------------------------------------------------------------

3(b) hereof, shall be proportionately adjusted for any increase or decrease in
the number of outstanding Shares resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock
(including any such change in the number of Shares effected in connection with a
change in domicile of the Company). Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares issuable hereunder or subject to an option hereunder.

(b)          Corporate Transactions. In the event of a dissolution or
liquidation of the Company, any Contribution Period then in progress will
terminate immediately prior to the consummation of such action, unless otherwise
provided by the Board in its sole discretion, and in such event, all outstanding
options shall automatically terminate and the balance in the Accounts shall be
refunded with interest to the respective Participants. In the event of a
Corporate Transaction, each option outstanding under the Plan shall be assumed
or an equivalent option shall be substituted by the successor corporation or a
parent or subsidiary of such successor corporation. In the event that the
successor corporation refuses to assume or substitute for outstanding options,
the Contribution Period then in progress shall be shortened and a new Purchase
Date shall be set (the “New Purchase Date”), as of which date the Contribution
Period then in progress will terminate. The New Purchase Date shall be on or
before the date of consummation of the Corporate Transaction and the Board shall
notify each Participant in writing, at least 10 days prior to the New Purchase
Date, that the Purchase Date for his or her option has been changed to the New
Purchase Date and that his or her option will be exercised automatically on the
New Purchase Date, unless prior to such date he or she has withdrawn from the
Plan as provided in Section 10 hereof. For purposes of this Section 18, an
option granted under the Plan shall be deemed to be assumed, without limitation,
if, at the time of issuance of the stock or other consideration upon a Corporate
Transaction, each holder of an option under the Plan would be entitled to
receive upon exercise of the option the same number and kind of shares of stock
or the same amount of property, cash or securities as such holder would have
been entitled to receive upon the occurrence of the Corporate Transaction if the
holder had been, immediately prior to the Corporate Transaction, the holder of
the number of Shares covered by the option at such time (after giving effect to
any adjustments in the number of Shares covered by the option as provided for in
this Section 18); provided however that if the consideration received in the
transaction is not solely common stock of the successor corporation or its
parent (as defined in Section 424(e) of the Code), the Board may, with the
consent of the successor corporation, provide for the consideration to be
received upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value, as determined by the
Committee, to the per Share consideration received by holders of Common Stock in
the Corporate Transaction.

10

--------------------------------------------------------------------------------

The Board may, if it so determines in the exercise of its sole discretion, also
make provision for adjusting the number of Shares set forth in Section 12
hereof, as well as the price per Share covered by each outstanding option, in
the event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of its
outstanding Common Stock, and in the event the Company is consolidated with or
merged into any other corporation.

Section 19.

Amendment or Termination.

(a)          The Board may at any time and for any reason terminate or amend the
Plan. Except as provided in Section 18 hereof, no such termination of the Plan
may affect options previously granted, provided that the Plan or the
Contribution Period may be terminated by the Board on a Purchase Date or by the
Board’s setting a new Purchase Date with respect to a Contribution Period then
in progress if the Board determines that termination of the Plan and/or the
Contribution Period is in the best interests of the Company and the shareholders
or if continuation of the Plan and/or the Contribution Period would cause the
Company to incur adverse accounting charges as a result of a change after the
effective date of the Plan in the generally accepted accounting principles
applicable to the Plan. Except as provided in Section 18 hereof and in this
Section 19, no amendment to the Plan shall make any change in any option
previously granted that adversely affects the rights of any Participant. In
addition, to the extent necessary to comply with Rule 16b-3 under the Exchange
Act or Section 423 of the Code (or, in either case, any successor rule or
provision or any applicable law or regulation) or the requirements of any stock
exchange upon which the Shares may then be listed, the Company shall obtain
shareholder approval in such a manner and to such a degree as so required.

(b)          Without shareholder approval and without regard to whether any
Participant rights may be considered to have been adversely affected, the Board
shall be entitled to change the Contribution Periods and/or the Purchase Price
as permitted under the Plan, limit the frequency and/or number of changes in the
amount deducted during a Contribution Period, establish the exchange ratio
applicable to amounts deducted in a currency other than U.S. dollars, permit
payroll deductions in excess of the amount designated by a Participant in order
to adjust for delays or mistakes in the Company’s processing of properly
completed payroll deduction elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure that
amounts applied toward the purchase of Shares for each Participant properly
correspond with amounts deducted from the Participant’s Compensation, and
establish such other limitations or procedures as the Board determines in its
sole discretion to be advisable and consistent with the Plan.

11

--------------------------------------------------------------------------------

Section 20.

Notices.

All notices or other communications by a Participant to the Company under or in
connection with the Plan shall be deemed to have been duly given when received
in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.

Section 21.

Conditions Upon Issuance of Shares.

Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such Shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, applicable state securities
laws and the requirements of any stock exchange upon which the Shares may then
be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

As a condition to the exercise of an option, the Company may require the person
exercising such option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
applicable provisions of law.

Section 22.

Term of Plan; Effective Date.

The Plan shall become effective upon approval by the Company’s shareholders. It
shall continue in effect until all of the Shares set forth in Section 12 hereof
are exhausted or such earlier time as the Plan is terminated pursuant to
Section 19 hereof.

Section 23.

Additional Restrictions of Rule 16b-3.

The terms and conditions of options granted hereunder to, and the purchase of
Shares by, Officers shall comply with the applicable provisions of Rule 16b-3.
This Plan shall be deemed to contain, and such options shall be deemed to
contain, and the Shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.

12

--------------------------------------------------------------------------------

Section 24.

Governing Law.

The internal law, and not the law of conflicts, of the State of Minnesota, shall
govern all questions concerning the validity, construction and effect of the
Plan, and any rules and regulations relating to the Plan.

Section 25.

Severability.

If any provision of the Plan is or becomes invalid, illegal, or unenforceable in
any jurisdiction or would disqualify the Plan under any law, such provision
shall be construed or deemed amended to conform to applicable laws, or if it
cannot be so construed or deemed amended without materially altering the intent
of the Plan, such provision shall be stricken as to such jurisdiction, and the
remainder of the Plan shall remain in full force and effect.

Section 26.

No Rights as an Employee.

Nothing in the Plan shall be construed to give any person (including an Employee
or Participant) the right to remain in the employ of the Company or a Subsidiary
or to affect the right of the Company or a Subsidiary to terminate the
employment of any person (including the Employee or Participant) at any time
with or without cause. Nothing in this Plan shall confer on any person any legal
or equitable right against the Company or any Subsidiary, or give rise to any
cause of action at law or in equity against the Company or any Subsidiary.
Neither the Shares purchased hereunder nor any other benefits conferred hereby,
including the right to purchase Common Stock at a discount, shall form any part
of the wages or salary of any eligible Employee for purposes of severance pay or
termination indemnities, irrespective of the reason for termination of
employment. Under no circumstances shall any person ceasing to be an Employee be
entitled to any compensation for any loss of any right or benefit under this
Plan which such Employee might otherwise have enjoyed but for termination of
employment, whether such compensation is claimed by way of damages for wrongful
or unfair dismissal, breach of contract or otherwise.

Section 27.

International Participants.

The Committee shall have the power and authority to allow any of the Company’s
Subsidiaries other than Designated Subsidiaries to adopt and join in the portion
of this Plan that is not intended to comply with Section 423 of the Code and to
allow employees of such Subsidiaries who work or reside outside of the United
States an opportunity to acquire Shares in accordance with such special terms
and conditions as the Committee may establish from time to time, which terms and
conditions may modify the terms and conditions of the Plan set forth elsewhere
in this Plan. Without limiting the authority of the Committee, the special terms
and

13

--------------------------------------------------------------------------------

conditions which may be established with respect to any foreign country, and
which need not be the same for all foreign countries, include but are not
limited to the right to participate, procedures for elections to participate,
the payment of any interest with respect to amounts received from or credited to
accounts held for the benefit of participants, the purchase price of any Shares
to be acquired, the length of any Contribution Period, the maximum amount of
contributions, credits or Shares which may be acquired by any participating
employees, and a participating employee’s rights in the event of his or her
death, disability, withdrawal from participation in the purchase of Shares
hereunder, or termination of employment. Any purchases made pursuant to the
provisions of this Section 27 shall not be subject to the requirements of
Section 423 of the Code.

Section 28.

Taxes.

Participants are responsible for the payment of all income taxes, employment,
social insurance, welfare and other taxes under applicable law relating to any
amounts deemed under the laws of the country of their residency or of the
organization of the Subsidiary employing such Participant to constitute income
arising out of the Plan, the purchase and sale of Shares pursuant to the Plan
and the distribution of Shares or cash to the Participant in accordance with
this Plan. Each Participant hereby authorizes the relevant Subsidiary to make
appropriate withholding deductions from each Participant’s compensation, which
shall be in addition to any payroll deductions made pursuant to Section 6, and
to pay such amounts to the appropriate tax authorities in the relevant country
or countries in order to satisfy any of the above tax liabilities of the
Participant under applicable law.

Section 29.

Acceptance of Terms.

By participating in the Plan, each Participant shall be deemed to have accepted
all the conditions of the Plan and the terms and conditions of any rules and
regulations adopted by the Committee and shall be fully bound thereby.

 

Approved by the Board on February 23, 2007, subject to shareholder approval.

 

14

--------------------------------------------------------------------------------