MEDTRONIC, INC.

 

ISRAELI AMENDMENT

 

To The 2003 Long-Term Incentive Plan

 

 

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1.

GENERAL

 

 

 

1.1.

This Amendment (the “Amendment”) shall apply only to Participants who are
residents of the State of Israel or those who are deemed to be residents of the
State of Israel for the payment of tax. The provisions specified hereunder shall
form an integral part of the 2003 Long-Term Incentive Plan, as amended (the
“Plan”), of the Company as defined in the Plan.

 

 

 

 

1.2.

This Amendment is effective with respect to Options, Stock Appreciation Rights,
Shares of Restricted Stock, Other Stock-Based Awards or Other Cash-Based Awards;
to be granted according to the resolution of the Committee, as such term is
defined in the Plan and shall comply with Amendment no. 147 of the Israeli Tax
Ordinance.

 

 

 

 

1.3.

This Amendment is to be read as a continuation of the Plan and only refers to
Awards granted to Israeli Participants so that they comply with the requirements
set by the Israeli law in general, and in particular with the provisions of
Section 102 of the Israeli Income Tax Ordinance (New Version), 1961 (the
“Ordinance”), and any regulations, rules, orders or procedures promulgated
thereunder, as may be amended or replaced from time to time. For the avoidance
of doubt, this Amendment does not add to or modify the Plan in respect of any
other category of Participants.

 

 

 

 

1.4.

The Plan and this Amendment are complementary to each other and shall be deemed
one. In any case of contradiction, whether explicit or implied, between the
provisions of this Amendment and the Plan, the provisions set out in this
Amendment shall prevail with respect to Awards granted to Israeli Participants.

 

 

 

 

1.5.

Any capitalized terms not specifically defined in this Amendment shall be
construed according to the interpretation given to them in the Plan.

 

 

 

2.

DEFINITIONS

 

 

 

 

2.1

“Award” means an Option, Stock Appreciation Right, Share of Restricted Stock,
Other Stock-Based Award or Other Cash-Based Award granted pursuant to the Plan.

 

 

 

 

2.2

“Applicable Law” means the Israeli law in general, and in particular the Israeli
Companies Law -1999, the Israeli Income Tax Ordinance (New Version), 1961 and
any regulations, rules, orders or procedures promulgated thereunder, as may be
amended or replaced from time to time.

 

 

 

 

2.3

“Approved 102 Award” means an Award granted pursuant to Section 102(b) of the
Ordinance and held in trust by a Trustee for the benefit of the Grantee.

 

 

 

 

2.4

“Capital Gain Award” or “CGA” means an Approved 102 Award elected and designated
by the Company to qualify under the capital gain tax treatment in accordance
with the provisions of Section 102(b)(2) of the Ordinance.

 

 

 

 

2.5

“Controlling Shareholder” means a controlling shareholder (Ba’al Shlita) as such
term is defined in Section 32(9) of the Ordinance.

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2.6

“Employee” including an individual who is serving as a director or an office
holder, but excluding any Controlling Shareholder.

 

 

 

 

2.7

“Employing corporation” means any subsidiary or affiliated company or group
within the meaning of Section 102(a) of the Ordinance.

 

 

 

 

2.8

“ITA” means the Israeli Tax Authorities.

 

 

 

 

2.9

“Non-Employee” means a consultant, adviser, service provider, Controlling
Shareholder or any other person who is not an Employee.

 

 

 

 

2.10

“Office Holders” [“Nose Misra”] - as such term is defined in the Companies Act,
1999, including, inter alia, any other person who is part of the upper
management of the Company and who grants managerial services to the Company.

 

 

 

 

2.11

“Ordinary Income Award” or “OIA”, which means an Approved 102 Award elected and
designated by the Company to qualify under the ordinary income tax treatment in
accordance with the provisions of Section 102(b)(1) of the Ordinance.

 

 

 

 

2.12

“102 Award” means an Award that the Board intends to be a “102 Award” which
shall only be granted to employees of the Company who are not Ten Percent
shareholders, and shall be subject to and construed consistently with the
requirements of Section 102 of the Tax Ordinance. The Company shall have no
liability to a Participant or to any other party, if an Award (or any part
thereof), which is intended to be a 102 Award, is not a 102 Award. Approved 102
Awards may either be classified as Capital Gain Awards (“CGA”) or Ordinary
Income Awards (“OIA”).

 

 

 

 

2.13

“3(i) Award” means Awards that do not contain such terms as will qualify under
Section 102 of the Tax Ordinance.

 

 

 

 

2.14

“Ordinance” means the Israeli Income Tax Ordinance (New Version) 1961, as now in
effect or as hereafter amended.

 

 

 

 

2.15

“Section 102” means section 102 of the Ordinance and any regulations, rules,
orders or procedures promulgated thereunder as now in effect or as hereafter
amended.

 

 

 

 

2.16

“Trustee” shall mean any individual appointed by the Company to serve as a
trustee and approved by the ITA, all in accordance with the provisions of
Section 102(a) of the Ordinance.

 

 

 

 

2.17

“Unapproved 102 Award” means an Award granted pursuant to Section 102(c) of the
Ordinance and not held in trust by a Trustee.

 

 

 

3.

ISSUANCE OF OPTIONS; ELIGIBILITY

 

 

 

 

3.1.

The persons eligible for participation in the Plan as Participants shall include
any Employees, Office Holders and/or Non-Employees of the Company as such term
is defined in the Plan; provided, however, that (i) Employees may only be
granted 102 Awards and Office Holders may be granted 102 Awards; and (ii)

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Non-Employees and/or Controlling Shareholders may only be granted 3(i) Awards
(the “Participants”).

 

 

 

 

3.2.

The Company may designate Awards granted to Israeli Employees pursuant to
Section 102 as Unapproved 102 Awards or Approved 102 Awards.

 

 

 

 

3.3.

The grant of Approved 102 Awards shall be made under this Amendment adopted by
the Committee, and shall be conditioned upon the approval of this Amendment by
the ITA.

 

 

 

 

3.4.

Approved 102 Award may either be classified as Capital Gain Award (CGA) or
Ordinary Income Award (OIA).

 

 

 

 

3.5.

The Corporation’s election of the type of Approved 102 Awards as CGA or OIA
granted to Israeli Employees (the “Election”), shall be appropriately filed with
the ITA before the Date of Grant of an Approved 102 Award under such Election.
Such Election shall become effective beginning the first Date of Grant of an
Approved 102 Award under such Election and shall remain in effect until the end
of the year following the year during which the Company first granted Approved
102 Awards under such Election. For the avoidance of doubt, such Election shall
not prevent the Company from granting Unapproved 102 Awards simultaneously.

 

 

 

 

3.6.

All approved 102 Awards, must be held in trust by a Trustee as described in
Section 4 below.

 

 

 

 

3.7.

For the avoidance of any doubt, the designation of Unapproved 102 Awards and
Approved 102 Awards shall be subject to the terms and conditions set forth in
Section 102 of the Ordinance and the regulations promulgated thereunder.

 

 

 

 

3.8.

Anything in the Plan to the contrary notwithstanding, all grants of Awards to
directors and office holders shall be authorized and implemented in accordance
with the provisions of the Companies Law or any successor act or regulation, as
in effect from time to time.

 

 

 

 

3.9.

The Company shall notify the Income Tax Commissioner about the grant and the
capital gain course chosen at least 30 days before the Date of Grant. Grant of
Options shall be made pursuant to, (a) Section 102; and (b) the Trust Agreement,
in addition to being made pursuant to the provisions of the Plan and this
Agreement; (c) the ITA’s regulation.

 

 

 

 

3.10.

The Company’s election of the tax track according to Section 102 of the Tax
Ordinance with regards to 102 Options granted to Employees, as specified in the
Notice of Grant (the “Election”) shall be appropriately filed with the Israeli
Tax Authorities at least 30 days before the Date of Grant. The Election shall
obligate the Company to grant only under that same tax track elected for 102
Options, and shall apply to all Grantees who are granted qualified 102 Options
until the end of the year following the year during which the Company first
granted the 102 Options, all in accordance with the instructions of Section 102
(g) of the Tax Ordinance. The tax track of 102 Options elected by the Company
shall be noted in the Option Agreement.

 

 

 

 

3.11.

Notwithstanding anything to the contrary, the Trustee shall not release any
unexercised 102 award or any Share issued upon exercise of 102 Options prior to

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the full payment of the Grantee’s tax liabilities arising from 102 Options
issued to the Grantee and/or any Shares issued upon exercise of such 102
Options.

 

 

 

4.

TRUSTEE

 

 

 

 

4.1.

Approved 102 Awards which shall be granted under the Plan and/or any Shares
allocated or issued upon exercise of such Approved 102 Awards and/or other
shares received subsequently following any realization of rights including,
without limitation, bonus shares, shall be allocated or issued to the Trustee
(and registered in the Trustee’s name in the register of members of the
Corporation) and held for the benefit of the Participants for such period of
time as required by Section 102 (the “Restricted Period”). All certificates
representing Shares issued to the Trustee under the Plan shall be deposited with
the Trustee, and shall be held by the Trustee until such time that such Shares
are released from the aforesaid trust as herein provided. In case the
requirements for Approved 102 Awards are not met, then the Approved 102 Awards
may be treated as Unapproved 102 Awards, all in accordance with the provisions
of Section 102.

 

 

 

 

4.2.

Notwithstanding anything to the contrary, the Trustee shall not release any
Shares allocated or issued upon exercise of Approved 102 Awards prior to the
full payment of the Participants’ tax liabilities arising from Approved 102
Awards, which were granted to such Participant, and/or any Shares allocated or
issued upon exercise of such Awards.

 

 

 

 

4.3.

With respect to any Approved 102 Award, subject to the provisions of Section
102, a Participant shall not be entitled to sell or release from trust any Share
received upon the exercise of an Approved 102 Award and/or any share received
subsequently following any realization of rights, including without limitation,
bonus shares, until the lapse of the Restricted Period required under Section
102.

 

 

 

 

4.4.

Upon receipt of Approved 102 Award, the Participant will sign an undertaking to
release the Trustee from any liability in respect of any action or decision duly
taken and bona fide executed in relation with the Plan and this Amendment, or
any Approved 102 Award or Share granted to him thereunder.

 

 

 

5.

FAIR MARKET VALUE FOR TAX PURPOSES

 

 

 

 

Without derogating from the above, solely for the purpose of determining the tax
liability pursuant to Section 102(b)(3) of the Ordinance, if at the Date of
Grant the Company’s shares are listed on any established stock exchange or a
national market system or if the Company’s shares will be registered for trading
within ninety (90) days following the Date of Grant, the Fair Market Value of a
Share at the Date of Grant shall be determined in accordance with the average
value of the Company’s shares on the thirty (30) trading days preceding the Date
of Grant or on the thirty (30) trading days following the date of registration
for trading, as the case may be.

 

 

 

6.

EXERCISE OF OPTIONS

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Options shall be exercised by the Participant’s giving a written notice and
remitting payment of the Exercise Price to the Company or to any third party
designated by the Company (the “Representative”), in such form and method as may
be determined by the Company and the Trustee and when applicable, in accordance
with the requirements of Section 102, which exercise shall be effective upon
receipt of such notice by the Company or the Representative and the payment of
the Exercise Price at the Corporation’s or the Representative’s principal
office. The notice shall specify the nominal value of the Share with respect to
which the Option is being exercised.

 

 

 

 

With respect to Unapproved 102 Awads, if the Participant ceases to be employed
by the Company or any Affiliate, the Participant shall extend to the Company
and/or its Affiliate a security or guarantee for the payment of tax due at the
time of Sale of Shares, all in accordance with the provisions of Section 102.

 

 

 

7.

INTEGRATION OF SECTION 102 AND TAX COMMISSIONER’S PERMIT

 

 

 

 

7.1.

With regards to Approved 102 Awards, the provisions of the Plan and/or any Award
Agreement entered into in conjunction with any Award Grant (the “Award
Agreement”) shall be subject to the provisions of Section 102 and the Income Tax
Commissioner’s permit, and the said provisions and permit shall be deemed an
integral part of the Plan and of the Award Agreement.

 

 

 

 

7.2.

Any provision of Section 102 and/or the said permit which is necessary in order
to receive and/or to keep any tax benefit pursuant to Section 102, which is not
expressly specified in the Plan or the Award Agreement, shall be considered
binding upon the Company and the Participants.

 

 

 

8.

TAX CONSEQUENCES

 

 

8.1.

To the extent permitted by Applicable laws, any tax consequences arising from
the grant or exercise of any Award, from the payment for Shares covered thereby
or from any other event or act (of the Company, and/or its Affiliates, and/or
the Trustee or the Participant), hereunder, shall be borne solely by the
Participant. The Company and/or its Affiliates and/or the Trustee shall withhold
taxes according to the requirements under the applicable laws, rules, and
regulations, including withholding taxes at source. Furthermore, the
Participants agrees to indemnify the Company and/or its Affiliates and/or the
Trustee and hold them harmless against and from any and all liability for any
such tax or interest or penalty thereon, including without limitation,
liabilities relating to the necessity to withhold, or to have withheld, any such
tax from any payment made to the Participant.

 

 

 

 

8.2.

The Company and/or the Trustee shall not be required to release any Share
certificate to a Participant until all required payments have been fully made by
the Participant.

 

 

 

 

8.3.

In accordance with the Income Tax Rules (Tax Benefits Upon Issues of Shares to
Employees) 2003, the Grantee warrants and represents to the Company, the Trustee
and the Israeli Income Tax Authorities that it agrees to the provisions of
Section 102 of the Income Tax Ordinance shall apply to it and that it will not
transfer the Option Shares nor any other shares received subsequently following
any realization of rights, by a way of tax-exempt transfer or a transfer under
sections 104 (a), 104 (b) or 97 (a) of the Income Tax Ordinance.

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8.4.

The Company and the Trustee shall be entitled to apply to the Israeli Income Tax
Authorities for the purpose of ascertaining the income tax liability of the
Grantee with respect to the Option Shares.

 

 

 

 

8.5.

The Grantee acknowledges that, under the current law, if the date of termination
of employment shall be prior to the second anniversary of the date of the issue
of the Shares then (i) the tax benefits of Section 102 shall not apply (except
in the opinion of the Israeli Income Tax Authorities the employment of the
Grantee was ceased under special circumstances which were beyond its control)
and (ii) the Grantee will be responsible to immediately settle on its own
account all of the tax issues and liabilities that are related to the Options or
the Option Shares.

 

 

 

 

8.6.

The Grantee further acknowledges that the income that may be earned in
connection with the issue of the Option Shares, their transfer in the name of
the Grantee or sale thereof shall not be taken into account in calculation of
the entitlement of the Grantee to any social benefits. Such social benefits
shall include, without limitation, national insurance, managers’ insurance,
study funds, pension funds, and severance pay and vacation payments. In the
event that the Company or any of its subsidiaries shall be obligated by
applicable law to include social benefits as income or profits of the Grantee
then the Grantee shall indemnify and hold harmless the Company and the Trustee
for any cost that they may incur in this regards.

 

 

 

9.

RESTRICTED PERIOD PER SECTION 102

 

 

 

 

The following provisions shall apply for the purpose of the tax benefits under
Section 102 of the ordinance:

 

 

 

 

9.1.

Restricted Period Per Section 102. In accordance with the requirements of
Section 102 as now in place and as may be amended in the future, the Option to
be issued shall be issued to the Grantee and held in trust by the Trustee for
the benefit of Grantee for a period of no less than twenty four (24) months from
the date of which the Options were granted and placed with the Trustee (during
the Restricted Period Per Section 102 the Grantee will not be allowed to order
the Trustee to sell the Option held by him/her on behalf of the Grantee or
transfer the Option from Trustee’s hands).

 

 

 

 

9.2.

In order to apply the tax benefits of Section 102, the Options and or Shares may
not be sold or transferred (other than through a transfer by will or by
operation of law), and no power of attorney or transfer deed shall be given in
respect thereof (other than a power of attorney for the purpose of participation
in general meetings of shareholders).

 

 

 

 

9.3.

End of Restricted Period per Section 102. Upon the completion of the Restricted
Period Per Section 102 as now in place and as may be amended in the future,
Grantee shall be entitled to receive from the Trustee the Options, or the Shares
acquired in the exercise thereof, which have vested, subject to the provisions
of the Plan concerning the continued employment of Grantee at the Company or any
Parent or Subsidiary of the Company, and subject to any other provisions set
forth herein or in the Plan, and Grantee shall be entitled to exercise the
Option and sell the Options or Shares thereby obtained subject to the other
terms and conditions of this Option Agreement and the Plan, including the
provisions relating to the payment of tax set forth below.

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10.

GRANTEE’S REPRESENTATIONS

 

 

 

 

10.1.

The Grantee hereby agrees that the terms of Section 102 of the Tax Ordinance
(“Section 102”) shall apply regarding to the Options and or Shares granted.

 

 

 

 

10.2.

The Grantee is obliged not to sell or remove from the Trustee the Options/Shares
granted to him prior to the end of restricted period as defined by Section 102.

 

 

 

 

10.3.

The Grantee is aware of the directives set forth in Section 102, and of the tax
track that was chosen under Section 102 and its implications.

 

 

 

 

10.4.

The Grantee hereby accepts the terms of the Trust Agreement signed between the
Company and the Trustee.

 

 

 

 

10.5.

Grantee acknowledges that during the period in which Shares issued to the
Trustee on behalf of an Grantee upon exercise of an Approved 102 Option, are
held by the Trustee, if dividends payable in securities are declared on Approved
102 Options held by the Trustee, such securities shall also be subject to the
provisions of Section 102 and the provision of this agreement and shall be held
in trust by the Trustee. Notwithstanding anything to the contrary, in case that
a Grantee of Approved 102 Options/Shares is entitled to receive dividend in
cash, the proceeds of such dividend may be wired to the Grantee, after deduction
of all applicable taxes.

 

 

 

11.

GOVERNING LAW & JURISDICTION

 

 

 

 

The Amendment shall be governed by and construed and enforced in accordance with
the laws of the State of Israel applicable to contracts made and to be performed
therein, without giving effect to the principles of conflict of laws.
Notwithstanding anything stated herein to the contrary, if and to the extent any
issue or matter arises hereunder which involves the application of another
jurisdiction or the requirements relating to the administration of share Award
of any stock exchange or quotation system, then such laws and requirements shall
apply and shall govern such issues or matters, with accordance with any
Applicable Laws. The competent courts of Tel-Aviv, Israel shall have sole
jurisdiction to adjudicate any dispute that may arise in connection with the
application, interpretation or enforcement of Section 102 including (without
limitation) matters involving the Trustee and the Israeli tax consequences of
the Restricted of the Awards or the Shares in trust and the release and transfer
of such Awards or Shares by the Trustee.

IN WITNESS WHEREOF, the Company executed this Amendment in duplicate on the day
and year first above written.

 

Medtronic, Inc.

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