Exhibit 10-S

DONALDSON COMPANY, INC.
QUALIFIED PERFORMANCE-BASED COMPENSATION PLAN

SECTION 1.    ESTABLISHMENT AND PURPOSE

        The Company has previously established the 2001 Master Stock Incentive
Plan (the “Master Stock Plan”) which authorizes the issuance of, among other
awards, Performance Awards which are payable upon the achievement of such
performance goals as the Committee may establish. In furtherance of that
authorization, this Plan is hereby established under the Master Stock Plan for
the purpose of authorizing the issuance of Performance Awards specifically
intended to qualify as “qualified performance-based compensation” within the
meaning of Section 162(m) of the Code. All Performance Awards granted under this
Plan are subject to any applicable terms, conditions and restrictions required
by the Master Stock Plan, and any successor plans thereto.

SECTION 2.    DEFINITIONS

        Except as expressly defined herein, capitalized terms used in this Plan
shall have the same meanings as appear in the Master Stock Plan.

SECTION 3.    QUALIFIED PERFORMANCE-BASED COMPENSATION UNDER SECTION 162(M) OF
THE CODE

        From time to time, the Committee may designate an Award granted pursuant
to the Plan as an award of “qualified performance-based compensation” within the
meaning of Section 162(m) of the Code (a “Qualified Performance Award”). A
Qualified Performance Award granted under the Plan may be payable in cash or in
Shares (including, without limitation, Restricted Stock). Notwithstanding any
other provision of this Plan or the Master Stock Plan to the contrary, the
following additional requirements shall apply to all Qualified Performance
Awards made to any Participant under the Plan:

          (i)    Stockholder Approval of Plan.   Any Qualified Performance Award
shall be null and void and have no effect whatsoever unless the Plan shall have
been approved by the stockholders of the Company at the Company’s November 18,
2005 annual meeting of stockholders. No Qualified Performance Award under this
Plan shall be granted more than five years after such meeting of stockholders
unless the stockholders have reapproved the Plan to the extent required by
Section 162(m) of the Code.

          (ii)    Business Criteria.   Unless and until the Committee proposes
for stockholder approval and the Company’s stockholders approve a change in the
general business criteria set forth in this section, the attainment of which may
determine the amount and/or vesting with respect to Qualified Performance
Awards, the business criteria to be used for purposes of establishing
performance goals for such Qualified Performance Awards shall be selected from
among the following alternatives, each of which may be based on absolute
standards or comparisons versus specified companies or groups of companies and
may be applied at individual or various organizational levels (e.g., the Company
as a whole or identified business units, segments or the like):

•  

Earnings per share

•  

Return on investment

•  

Revenues, including net sales growth

•  

Earnings, including net operating profit after taxes

•  

Return on equity

•  

Profit margins

•  

Cost reductions

•  

Inventory levels

•  

Delivery performance

•  

Safety performance

•  

Quality performance

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•  

Core operating earnings

•  

Total stockholder return

•  

Cash flow, including operating cash flows, free cash flow, discounted cash flow
return on investment, and cash flow in excess of cost of capital

•  

Economic value added

•  

Stockholder value added

•  

Market share

•  

Price to earnings ratio

•  

Expense ratios

•  

Workforce goals

•  

Total expenditures

•  

Completion of key projects

          In the event that Section 162(m) of the Code or applicable tax and/or
securities laws change to permit Committee discretion to alter the governing
performance measures without disclosing to stockholders and obtaining
stockholder approval of such changes and without thereby exposing the Company to
potentially adverse tax or other legal consequences, the Committee shall have
the sole discretion to make such changes without obtaining stockholder approval.

          (iii)    Maximum Award.   The maximum bonus which may be paid to any
Participant pursuant to any Qualified Performance Award with respect to any
performance period shall not exceed a value of $5,000,000.

          (iv)    Payment of Qualified Performance Awards.   Qualified
Performance Awards shall be paid no later than two and one-half months following
the conclusion of the applicable performance period (unless the Participant has
elected to have such Award deferred in accordance with the terms of the
Donaldson Company, Inc. Deferred Compensation and 401(k) Excess Plan). The
Committee may, in its discretion, reduce the amount of a payout otherwise to be
made in connection with a Qualified Performance Award, but may not exercise
discretion to increase such amount.

          (v)    Certain Events.   If a Participant dies or becomes permanently
and totally disabled or has a normal retirement event before the end of a
performance period or after the performance period and before a Qualified
Performance Award is paid, the Committee may, in its discretion, determine that
the Participant shall be paid a prorated portion of the award that the
Participant would have received but for such death or disability or normal
retirement event.

          (vi)    Timing of Designations.   For a Qualified Performance Award,
the Committee shall, not later than 90 days after the beginning of each
performance period, (A) designate all Participants for such performance period,
and (B) establish the objective performance factors for each Participant for
that performance period on the basis of one or more of the criteria set forth in
(ii) above.

          (vii)    Certification.   Following the close of each performance
period and prior to payment of any amount to a Participant with respect to a
Qualified Performance Award, the Committee shall certify in writing as to the
attainment of all factors (including the performance factors for a Participant)
upon which any payments to a Participant for that performance period are to be
based.

          (viii)    Interpretation.   Each of the provisions in this Section 3,
and all of the other terms and conditions of the Plan as it applies to any
Qualified Performance Award, shall be interpreted in such a fashion as to
qualify all compensation paid thereunder as “qualified performance-based
compensation” within the meaning of Section 162(m) of the Code. Nothing in this
Plan shall be interpreted to limit the Committee’s authority to grant
non-qualifying Performance Awards under the terms of the Master Stock Plan.

SECTION 4.    EFFECTIVE DATE OF THE PLAN

        The Plan shall be effective as of the date of its approval by the
stockholders of the Company.

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