EXHIBIT 10-R

 

 

 

 

DONALDSON COMPANY, INC.

LONG TERM COMPENSATION PLAN

(2006 Restatement)

As Amended and Restated Effective May 23, 2006

 

 

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DONALDSON COMPANY, INC.

LONG TERM COMPENSATION PLAN

(2006 Restatement)

 

TABLE OF CONTENTS

Page       

SECTION 1.

ESTABLISHMENT AND PURPOSE

1

 

1.1.

Establishment

 

 

1.2.

Purpose

 

 

1.3.

Relation to Master Stock Plans

 

SECTION 2.

DEFINITIONS

2

 

2.1.

Affiliate

 

 

2.2.

Award

 

 

2.3.

Award Agreement

 

 

2.4.

Award Matrix

 

 

2.5.

Beneficiary

 

 

2.6.

Board

 

 

2.7.

Change of Control

 

 

2.7.1.

Affiliate

 

 

2.7.2.

Beneficial Owner

 

 

2.7.3.

Exchange Act

 

 

2.7.4.

Person

 

 

2.8.

Committee

 

 

2.9.

Common Stock

 

 

2.10.

Company

 

 

2.11.

Disability, Disabled

 

 

2.12.

Incentive Cycle

 

 

2.13.

Participant

 

 

2.14.

Performance Objective

 

 

2.15.

Performance Unit

 

 

2.16.

Plan

 

 

2.17.

Retirement

 

 

2.18.

Termination of Employment

 

 

2.19.

Vested

 

SECTION 3.

ELIGIBILITY AND PARTICIPATION

6

 

3.1.

Commencement of Participation

 

 

3.2.

Termination of Participation

 

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SECTION 4.

AWARDS

7

 

4.1.

Grant

 

 

4.2.

Adjustment

 

 

4.3.

Performance Objectives Alteration

 

 

4.4.

Vesting

 

 

4.4.1.

Pro Rata Vesting

 

 

4.4.2.

Forfeiture

 

SECTION 5.

TIME AND MANNER OF PAYMENTS

9

 

5.1.

Time of Payment

 

 

5.2.

Manner of Payment

 

 

5.3.

Change in Control Distributions

 

 

5.4.

Death Benefit

 

 

5.5.

Beneficiary Designation

 

SECTION 6.

FUNDING

11

 

6.1.

Funding

 

 

6.2.

Corporate Obligation

 

SECTION 7.

ADMINISTRATION

12

 

7.1.

Authority

 

 

7.2.

Liability

 

 

7.3.

Procedures

 

 

7.4.

Claim for Benefits

 

 

7.5.

Claims Procedure

 

 

7.5.1.

Original Claim

 

 

7.5.2.

Claims Review Procedure

 

 

7.5.3.

General Rules

 

 

7.6.

Payments upon Imposition of Federal or State Taxes

 

 

7.7.

Legal Fees

 

 

7.8.

Errors in Computations

 

SECTION 8.

MISCELLANEOUS

15

 

8.1.

Not an Employment Contract

 

 

8.2.

Nontransferability

 

 

8.3.

Tax Withholding

 

 

8.4.

Expenses

 

 

8.5.

Governing Law

 

 

8.6.

Amendment and Termination

 

 

8.7.

Rules of Interpretation

 

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DONALDSON COMPANY, INC.

LONG TERM COMPENSATION PLAN

(2006 Restatement)

SECTION 1

 

ESTABLISHMENT AND PURPOSE

1.1.            Establishment. Effective as of May 23, 2006, Donaldson Company,
Inc. hereby amends and restates its performance share plan for key employees,
known as the “DONALDSON COMPANY, INC. LONG TERM COMPENSATION PLAN.” Except as
may be hereinafter specifically provided, this amended and restated Plan
document shall not affect any Awards made prior to May 23, 2006. All such awards
shall be governed by the plan and performance award documents in effect at the
time the Awards were granted.

1.2.            Purpose. The purpose of this Plan is to incent key employees of
the Company by rewarding them for the Company’s achievement of predetermined
levels of long-term performance.

1.3.            Relation to Master Plans. The Awards provided by this Plan are
intended to qualify as “qualified performance-based compensation” within the
meaning of section 162(m) of the Internal Revenue Code and are subject to the
terms, conditions and restrictions required by the Donaldson Company, Inc.
Qualified Performance-Based Compensation Plan. No awards shall be made under
this Plan after the last date on which awards may be granted under the Qualified
Performance Based Compensation Plan. In addition, the stock-based Awards
provided by this Plan are also subject to the Donaldson Company, Inc. 2001
Master Stock Incentive Plan if they are credited after December 31, 2001, or the
Donaldson Company, Inc. 1991 Master Stock Compensation Plan if they are credited
on or before December 31, 2001. No awards shall be made under this Plan after
the last date on which awards may be granted under the 2001 Master Stock
Incentive Plan.

 

 

 

 

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SECTION 2

 

DEFINITIONS

The following words and phrases shall have the following meanings, unless a
different meaning is plainly required by the context. Any masculine terminology
used in the Plan shall also include the feminine gender and the definition of
any terms in the singular shall also include the plural.

2.1.            Affiliate — a business entity which is under “common control”
with the Company or which is a member of an “affiliated service group” that
includes the Company, as those terms are defined in section 414(b), (c) and (m)
of the Code. A business entity shall also be treated as an Affiliate if, and to
the extent that, such treatment is required by regulations under section 414(o)
of the Code. In addition to said required treatment, the Committee may, in its
discretion, designate as an Affiliate any business entity which is not such a
“common control” or “affiliated service group” business entity but which is
otherwise affiliated with the Company, subject to such limitations as the
Committee may impose.

2.2.            Award — the right to receive a specified number of shares of
Common Stock, a multiple thereof, or a portion thereof, based upon the
satisfaction of Performance Objectives established by the Committee, subject to
the terms, conditions and restrictions in this Plan and the Master Stock Plan,
as well as those established by the Committee and set forth in the applicable
Award Agreement.

2.3.            Award Agreement — the agreement entered into between the Company
and the Participant setting forth certain terms and conditions applicable to an
Award.

2.4.            Award Matrix — determines the award percentage for the Incentive
Cycle based on the actual net sales growth and average return on investment. The
award percentage is multiplied by the number of Performance Units granted, as
identified in the Award Agreement, to determine the number of Performance Units
payable (subject to any additional adjustment required by the Award, such as for
earnings per share consistency).

2.5.            Beneficiary — any person or entity designated by the Participant
in accordance with Section 5 to receive the amount, if any, payable in
connection with the Participant’s Award after the Participant’s death.
Designated persons or entities shall not be considered Beneficiaries until the
death of the Participant.

2.6.            Board — the Board of Directors of the Company.

2.7.            Change of Control — a “Change in Control” shall be deemed to
have occurred if the event set forth in any one of the following paragraphs
shall have occurred:

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(a)

any Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power
of the Company’s then outstanding securities, excluding any Person who becomes
such a Beneficial Owner in connection with a transaction described in clause (i)
of paragraph (c) below; or

 

(b)

the following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the date hereof,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of the Company) whose appointment or election by the Board
or nomination for election by the Company’s stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or recommended;
or

 

(c)

there is consummated a merger or consolidation of the Company or any direct or
indirect subsidiary of the Company with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination with
the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any subsidiary of the Company, at least
60% of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such merger
or consolidation, or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person is
or becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of the Company’s
then outstanding securities; or

 

(d)

the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale or
disposition by the Company of all or substantially all of the Company’s assets,
other than a sale or disposition by the Company of all or substantially all of
the Company’s assets to an entity, at least 60% of the combined voting power of
the voting securities of which are owned by stockholders of the Company in
substantially the same proportions as their ownership of the Company immediately
prior to such sale.

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Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions. Solely for
purposes of this Section 2.7, the following words and phrases shall have the
following meanings:

2.7.1.                Affiliate — an “affiliate” within the meaning of
Rule 12b-2 promulgated under Section 12 of the Exchange Act.

2.7.2.                Beneficial Owner — a “beneficial owner” within the meaning
of Rule 13d-3 under the Exchange Act.

2.7.3.                Exchange Act — the Securities Exchange Act of 1934, as
amended from time to time.

2.7.4.                Person — a “person” within the meaning of Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.

2.8.            Committee — the Human Resources Committee of the Board of
Directors of the Company.

2.9.            Common Stock — the common stock of the Company.

2.10.          Company — Donaldson Company, Inc. and, except in determining
under Section 2.7 hereof whether or not any Change in Control has occurred,
shall include any successor by merger, purchase or otherwise.

2.11.          Disability, Disabled — a physical or mental impairment which
constitutes total and permanent disability and during which the Participant is
not receiving any payments of an Early Retirement Pension or a Vested Benefit
under the Donaldson Company, Inc. Salaried Employees’ Pension Plan (1997
Restatement), as amended from time to time, and the Participant either:

 

(a)

is eligible to receive long-term disability benefits under the Company’s
separate long-term disability insurance plan (which program shall be
administered on a uniform and nondiscriminatory basis); if such separate
long-term disability coverage is elected by the Participant, or

 

 

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(b)

is eligible to receive and is actually receiving (after the applicable waiting
period) benefits under the federal Social Security Act as in effect at the time
of the Disability.

2.12.          Incentive Cycle — a period of three consecutive plan years
designated by the Committee.

2.13.          Participant — an employee or former employee of the Company or
its Affiliates who has become a Participant as provided in Section 3.1, and who
has not ceased to be a Participant as provided in Section 3.2.

2.14.          Performance Objective — the goals for after-tax return on
investment and compound net sales growth established for an Award by the
Committee and set forth in the Participant’s Award Agreement. After-tax return
on investment and compound net sales growth shall be as defined and reported in
the monthly operating reports published by the Company’s Accounting Department.

2.15.          Performance Unit — the portion of an Award that represents the
right to receive a single share of Common Stock in the event all applicable
Performance Objectives are satisfied at target levels, before any adjustments
such as an adjustment to the target award for earnings per share consistency.

2.16.          Plan — the Donaldson Company, Inc. Long Term Compensation Plan as
set forth herein, and as the same may be amended from time to time.

2.17.          Retirement — a Termination of Employment under circumstances that
entitle the employee to a Normal or Early Retirement Pension (as defined in the
Donaldson Company, Inc. Salaried Employees’ Pension Plan (1997 Restatement), as
amended from time to time).

2.18.          Termination of Employment — the complete severance of an
employee’s employment relationship with the Company and all Affiliates, if any,
for any reason other than the employee’s death or Disability.

2.19.          Vested — nonforfeitable.

 

 

 

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SECTION 3

 

ELIGIBILITY AND PARTICIPATION

3.1.            Commencement of Participation. An officer or member of senior
management shall become a Participant in the Plan when he or she is granted an
Award pursuant to Section 4.

3.2.            Termination of Participation. A person shall cease to be a
Participant as soon as all Awards credited to the Participant have been paid in
full or, if deferred, credited to the Participant’s Account under the Donaldson
Company, Inc. Deferred Compensation and 401(k) Excess Plan.

 

 

 

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SECTION 4

 

AWARDS

4.1.            Grant. Prior to the start of an Incentive Cycle, or as soon as
administratively feasible thereafter, the Committee grants Awards to select
employees of the Company that establish:

 

(a)

the Incentive Cycle for the Award;

 

(b)

the Performance Objectives applicable to the Award;

 

(c)

the Award Matrix;

 

(d)

the number of Performance Units granted; and

 

(e)

the manner of adjustment, if any, to the number of shares payable based on
earnings per share consistency, and any other adjustments or special terms and
conditions applicable to the Award.

4.2.            Adjustment. In the event of any change in the outstanding shares
of common stock of the Company by reason of any stock split or stock dividend in
the form of a split, the Committee shall adjust the number of Performance Units
in a Participant’s Award so that such number equals the number of Performance
Units in the Award prior to the event, multiplied by a fraction, the denominator
of which is the number of Performance Units in the Award prior to the event, and
the numerator of which is the number of shares of Common Stock the Participant
would have had after the event if the Participant had shares of Common Stock
immediately prior to the event equal in number to the number of Performance
Units in the Participant’s Award immediately prior to the event. In the event of
any dividend (other than a stock dividend in the form of a split),
recapitalization, merger, consolidation, spinoff, reorganization, combination or
exchange of shares or other similar corporate change, then if the Committee, or
the board of directors of a successor corporation, shall determine, in its sole
discretion, that such change equitably requires an adjustment in the number of
Performance Units in the Participant’s Award, such adjustment shall be made by
the Committee or said board and shall be conclusive and binding for all purposes
of the Plan.

4.3.            Performance Objectives Alteration. In the event of an
acquisition, disposition or other change which, in the judgment of the
Committee, may have a significant effect on particular Performance Objectives,
the Committee may adopt such changes in the applicable Performance Objectives as
it shall, in its sole discretion, deem equitable and appropriate to achieve the
purpose of the Plan.

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4.4.            Vesting. Except as otherwise indicated below and in Section 5.3,
Awards shall become Vested only at the end of the applicable Incentive Cycle,
and then only to the extent determined by the applicable Performance Objectives.

4.4.1.                Pro Rata Vesting. In the event that, prior to the end of
the Incentive Cycle, the Plan is terminated, the Participant is transferred to
an ineligible position, or the Participant ceases to be an employee by reason of
Retirement, death, or Disability, the Vested Award will be based on actual
results compared to the Performance Objectives at the end of the Incentive
Cycle, and multiplied by a fraction whose numerator is the number of months
completed in the cycle and denominator is thirty-six.

4.4.2.                Forfeiture. If a Participant ceases to be an employee
prior to the end of an Incentive Cycle for any reason other than Retirement,
Disability or death, the Participant’s Award with respect to that Incentive
Cycle shall be forfeited.

 

 

 

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SECTION 5

 

TIME AND MANNER OF PAYMENTS

5.1.            Time of Payment. Payment of a Participant’s Vested Award under
the Plan will occur no more than 60 days, and no less than 30 days, after the
end of the Incentive Cycle with respect to which the Award was granted. Share
certificates are distributed as soon as administratively feasible after the
effective date of payment.

5.2.            Manner of Payment. A Participant’s Account will be paid to the
Participant in a single lump sum. Payment to the Participant shall be made, net
of withholding taxes, exclusively in shares of Common Stock. For purposes of
determining any tax withholding on a payment, the value of Common Stock will be
the market price of such Common Stock on a date no more than 60 days nor less
than 30 days after the end of the Incentive Cycle.

5.3.            Change in Control Distributions. Notwithstanding any other
provision of Section 4.4 or this Section 5 (other than Section 5.5), if a Change
in Control occurs prior to the end of the applicable Incentive Cycle, the
Participant’s Award shall be immediately Vested and paid in accordance with this
Section 5.3 (unless such Award was deferred under the Donaldson Company, Inc.
Deferred Compensation and 401(k) Excess Plan, in which case such deferred Award
shall be paid under the terms of that plan). The amount payable will be
determined as if the applicable Performance Objectives had been met at target
levels and as if the conditions for any adjustments (such as for earnings per
share consistency) were met for the entire Incentive Cycle to the same extent as
they were met through the date of the Change in Control, and then prorated as if
the employee retired on the date of the Change in Control. Distribution of the
entire amount payable shall be made on the date of the Change in Control. Such
distribution shall be made in a single lump sum stock distribution.

5.4.            Death Benefit. In the event of a Participant’s death, the
Company shall pay the Participant’s unpaid Vested Award (in the amount
determined under Section 4.4.1 if Participant’s death occurred prior to the end
of the Incentive Cycle) to the Participant’s designated beneficiary. Such
payment shall be made at the time prescribed in Section 5.1 above, or as soon as
administratively feasible thereafter in a single lump sum stock distribution
(and cash for fractional shares).

5.5.            Beneficiary Designation. A Participant shall submit to the
Company upon initial grant of an Award under the Plan, and at such other times
as the Participant desires, on a form provided by the Committee, a written
designation of the beneficiary or beneficiaries to whom payment of the
Participant’s Vested Award under the Plan shall be made in the event of the
Participant’s death. Beneficiary designations shall become effective only when
received by the Company. Beneficiary designations first received by the Company
after the Participant’s death, and any designations in effect at the time a
valid subsequent designation is received by the Company, shall be invalid and
have no effect. If a Participant has not designated a Beneficiary, or if no
designated Beneficiary is living on the date of distribution, the Participant’s
Vested Award shall be distributed to those persons entitled to receive the
Participant’s benefit under the Donaldson Company, Inc. Salaried Employees’
Pension Plan (1997 Restatement), as amended from time to time.

 

 

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SECTION 6

 

FUNDING

6.1.            Funding. The Company and its Affiliates shall be responsible for
paying all benefits due hereunder. For the purpose of facilitating the payment
of benefits due hereunder, the Company may (but shall not be required to)
establish and maintain a grantor trust pursuant to an Agreement between the
Company and a trustee selected by the Company; provided, however, that any such
grantor trust must be structured so that it does not result in any federal
income tax consequences to any Participant until distributions under Section 5
are actually received. The Company may contribute to a grantor trust thereby
created such amounts as it may from time to time determine.

6.2.            Corporate Obligation. Neither the officers nor any member of the
Board of Directors of the Company or any of its Affiliates in any way secures or
guarantees the payment of any benefit or amount which may become due and payable
hereunder to or with respect to any Participant. Each Participant and other
person entitled at anytime to payments hereunder shall look solely to the assets
of the Company and its Affiliates for such payments as an unsecured, general
creditor. Nothing herein shall be construed to give a Participant, Beneficiary
or any other person or persons any right, title, interest or claim in or to any
specific asset, fund, reserve, account or property of any kind whatsoever owned
by the Company or in which it may have any right, title or interest now or in
the future. After benefits shall have been paid to or with respect to a
Participant and such payment purports to cover in full the benefit hereunder,
such former Participant or other person or persons, as the case may be, shall
have no further right or interest in the other assets of the Company and its
Affiliates in connection with this Plan.

 

 

 

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SECTION 7

 

ADMINISTRATION

7.1.            Authority. The Plan shall be administered by the Committee,
which shall have full discretionary power and authority to administer and
interpret the Plan and to determine all factual and legal questions under the
Plan, including but not limited to the entitlement of Participants and
Beneficiaries, and the amount of their respective interests.

7.2.            Liability. No member of the Committee and no director or member
of the management of the Company or its Affiliates shall be liable to any
persons for any actions taken under the Plan, or for any failure to effect any
of the objective or purposes of the Plan, by reason of insolvency or otherwise.

7.3.            Procedures. The Committee may from time to time adopt such rules
and procedures as it deems appropriate to assist in the administration of the
Plan.

7.4.            Claim for Benefits. No employee or other person shall have any
claim or right to payment of any amount hereunder until payment has been
authorized and directed by the Committee.

7.5.            Claims Procedure. Until modified by the Committee, the claims
procedure set forth in this Section 7.5 shall be the claims procedure for the
resolution of disputes and disposition of claims arising under the Plan.

7.5.1.                Original Claim. Any employee, former employee, or
Beneficiary of such employee or former employee may, if the employee, former
employee or Beneficiary so desires, file with the Committee a written claim for
benefits under the Plan. Within ninety (90) days after the filing of such a
claim, the Committee shall notify the claimant in writing whether the claim is
upheld or denied in whole or in part or shall furnish the claimant a written
notice describing specific special circumstances requiring a specified amount of
additional time (but not more than one hundred eighty (180) days from the date
the claim was filed) to reach a decision on the claim. If the claim is denied in
whole or in part, the Committee shall state in writing:

 

(a)

the specific reasons for the denial,

 

(b)

the specific references to the pertinent provisions of this Plan on which the
denial is based,

 

(c)

a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary, and

 

(d)

an explanation of the claims review procedure set forth in this Section.

 

 

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7.5.2.                Claims Review Procedure. Within sixty (60) days after
receipt of notice that the claim has been denied in whole or in part, the
claimant may file with the Committee a written request for a review and may, in
conjunction therewith, submit written issues and comments. Within sixty
(60) days after the filing of such a request for review, the Committee shall
notify the claimant in writing whether, upon review, the claim was upheld or
denied in whole or in part or shall furnish the claimant a written notice
describing specific special circumstances requiring a specified amount of
additional time (but not more than one hundred twenty days (120) from the date
the request for review was filed) to reach a decision on the request for review.

7.5.3.                General Rules.

 

(a)

No inquiry or question shall be deemed to be a claim or a request for a review
of a denied claim unless made in accordance with the claims procedure. The
Committee may require that any claim for benefits and any request for a review
of a denied claim be filed on forms to be furnished by the Committee upon
request.

 

(b)

All decisions on original claims shall be made by the Committee and requests for
a review of denied claims shall be made by the Committee.

 

(c)

The Committee may, in its discretion, hold one or more hearings on a claim or a
request for a review of a denied claim.

 

(d)

Claimants may be represented by a lawyer or other representative at their own
expense, but the Committee reserves the right to require the claimant to furnish
written authorization. A claimant’s representative shall be entitled to copies
of all notices given to the claimant.

 

(e)

The decision of the Committee on an original claim or on a request for a review
of a denied claim shall be served on the claimant in writing. If a decision or
notice is not received by a claimant within the time specified, the claim or
request for a review of a denied claim shall be deemed to have been denied.

 

(f)

Prior to filing a claim or a request for a review of a denied claim, the
claimant or the claimant’s representative shall have a reasonable opportunity to
review a copy of this Plan Statement and all other pertinent documents in the
possession of the Company and its Affiliates.

7.6.            Payments upon Imposition of Federal or State Taxes. If any
Participant is determined to be subject to federal or state income tax on any
amount accrued on his or her behalf under this Plan prior to the time of payment
hereunder, federal or state taxes attributable to the amount determined to be so
taxable shall be distributed by the Plan to such Participant.

 

 

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An amount accrued on his or her behalf under this Plan shall be determined to be
subject to federal income tax upon the earliest of:

 

(i)

a final determination by the United States Internal Revenue Service addressed to
the Participant which is not appealed to the courts;

 

(ii)

a final determination by the United States Tax Court or any other Federal Court
affirming any such determination by the Internal Revenue Service; or

 

(iii)

an opinion by the Tax Counsel of the Company, addressed to the Company that, by
reason of Treasury Regulations, amendments to the Internal Revenue Code,
published Internal Revenue Service rulings, court decisions or other substantial
precedent, amounts accrued on a Participant’s behalf hereunder are subject to
federal or state income tax prior to payment.

The Company shall undertake at its sole expense to defend any tax claims
described herein which are asserted by the Internal Revenue Service or by any
state revenue authority against any Participant, including attorney fees and
costs of appeal, and shall have the sole authority to determine whether or not
to appeal any determination made by the Internal Revenue Service, by any state
revenue authority or by a lower court. The Company also agrees to reimburse any
Participant for any interest or penalties in respect of federal or state tax
claims hereunder upon receipt of documentation of same.

7.7.            Legal Fees. If the Company does not pay the benefits required
under the terms of the Plan for reasons other than the insolvency of the
Company, the Company agrees to reimburse any Participant for all legal fees
incurred in enforcing his or her claim to benefits under the Plan.

7.8.            Errors in Computations. The Committee shall not be liable or
responsible for any error in the computation of any benefit payable to or with
respect to any Participant resulting from any misstatement of fact made by the
Participant or by or on behalf of any Beneficiary to whom such benefit shall be
payable, directly or indirectly, to the Committee, and used by the Committee in
determining the benefit. The Committee shall not be obligated or required to
increase the benefit payable to or with respect to such Participant which, on
discovery of the misstatement, is found to be understated as a result of such
misstatement of the Participant. However, the benefit of any Participant which
is overstated by reason of any such misstatement or any other reason shall be
reduced to the amount appropriate in view of the truth (and to recover any prior
overpayment).

 

 

 

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SECTION 8

 

MISCELLANEOUS

8.1.            Not an Employment Contract. This Plan is not and shall not be
deemed to constitute a contract of employment between the Company and any
employee or other person, nor shall anything herein contained be deemed to give
any employee or other person any right to be retained in the Company’s employ or
in any way limit or restrict the Company’s right or power to discharge any
employee or other person at any time and to treat him without regard to the
effect which such treatment might have upon the employee as a Participant in the
Plan.

8.2.            Nontransferability. A Participant’s rights and interest under
the Plan, including amounts payable, may not be assigned, alienated, pledged or
transferred except, in the event of a Participant’s death to his Beneficiary. No
benefit payable under this Plan shall be subject to attachment, garnishment,
execution following judgment or other legal process before actual payment to the
Participant or Beneficiary.

8.3.            Tax Withholding. The Company shall withhold the amount of any
federal, state or local income tax or other tax required to be withheld by the
Company under applicable law with respect to any amount payable under the Plan.
Any cash payable in lieu of fractional shares shall be applied to the payment of
tax withholding. The Participant shall not be liable for any tax withholding.

8.4.            Expenses. All expenses of administering the Plan shall be borne
by the Company.

8.5.            Governing Law. Except to the extent that federal law is
controlling, the Plan shall be construed and enforced in accordance with and
governed by the laws of the State of Minnesota.

8.6.            Amendment and Termination. The Company reserves the power to
unilaterally amend this Plan at any time, either prospectively or retroactively
or both by action of the Committee (with the written concurrence of the Chief
Executive Officer of the Company). The Committee may likewise terminate or
curtail the benefits of this Plan both with regard to persons expecting to
receive benefits in the future and persons already receiving benefits at the
time of such action; provided, however, that the Committee may not amend or
terminate the Plan with respect to benefits that have accrued and are Vested
pursuant to Section 4 in any manner that reduces the amount of such benefits,
nor may the Committee, after a Change in Control, as that term is defined in the
Master Stock Plan, directly or indirectly alter, amend, suspend, terminate or
discontinue the Plan, establish or modify rules, regulations or procedures under
the Plan, make any interpretation or determination under the Plan, or exercise
any authority or discretion vested in the Committee unless such action is
permitted under Section 1.07 of the Master Stock Plan. No modification of the
terms of this Plan shall be effective unless it is in writing and signed on
behalf of the Company by a person authorized to execute such writing. No oral
representation concerning the interpretation or effect of this Plan shall be
effective to amend the Plan.

 

 

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8.7.            Rules of Interpretation. The titles given to the various
sections of this Plan are inserted for convenience of reference only and are not
part of this Plan, and they shall not be considered in determining the purpose,
meaning or intent of any provision hereof.

Date: ______________

DONALDSON COMPANY, INC.

 

 

By:                                                                    

 

Chief Executive Officer

 

 

 

 

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