Exhibit 10.22

MEDTRONIC, INC.

2003 LONG-TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED THROUGH JUNE 22, 2006)

1.  Purpose of the Plan

        The purpose of the Plan is to aid the Company and its Affiliates in
recruiting and retaining employees and to motivate such employees and other plan
participants to exert their best efforts on behalf of the Company and its
Affiliates by providing incentives through the granting of Awards. The Company
expects that it will benefit from the stock ownership opportunities provided to
such participants to encourage alignment of their interest in the Company’s
success with that of other stakeholders.

2.  Definitions

        The following capitalized terms used in the Plan have the respective
meanings set forth in this Section:

  (a) “Act” means the Securities Exchange Act of 1934, as amended, or any
successor thereto.   (b) “Affiliate” means any entity that is consolidated with
the Company for financial reporting purposes or any other entity designated by
the Board in which the Company or an Affiliate has a direct or indirect interest
of at least forty percent (40%).   (c) “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.   (d) “Board” means the Board of
Directors of the Company.   (e) “Code” means the Internal Revenue Code of 1986,
as amended, or any successor thereto.   (f) “Committee” means the Compensation
Committee of the Board.   (g) “Company” means Medtronic, Inc., a Minnesota
corporation.   (h) “Effective Date” means the date the adoption of the Plan by
the Board of Directors is approved by the Company’s shareholders.   (i)
“Exercise Price” means the purchase price per Share under the terms of an option
as determined pursuant to Section 6(a).   (j) “Fair Market Value” means, on a
given date, (i) if there should be a public market for the Shares on such date,
the closing sale price of the Shares on The New York Stock Exchange, or, if the
Shares are not listed or admitted on any national securities exchange, the
arithmetic mean of the per Share closing bid price and per Share closing asked
price on such date as quoted on the National Association of Securities Dealers
Automated Quotation System (or such market in which such prices are regularly
quoted) (the “NASDAQ”), or, if no sale of Shares shall have been reported on The
New York Stock Exchange or quoted on the NASDAQ on such date, then the
immediately preceding date on which sales of the Shares have been so reported or
quoted shall be used, and (ii) if there should not be a public market for the
Shares on such date, the Fair Market Value shall be the value established by the
Committee in good faith.   (k) “ISO” means an Option that is an incentive stock
option granted pursuant to Section 6(d).   (l) “Option” means a stock option
granted pursuant to Section 6.   (m) “Other Stock-Based Awards” means Awards
granted pursuant to Section 9(a) or 10.   (n) “Other Cash-Based Awards” means
Awards granted pursuant to Section 9(b) or 10.

 

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  (o) “Participant” means an employee of the Company or an Affiliate who is
selected by the Committee to participate in the Plan. An Award may also be
granted to any consultant, agent, advisor or independent contractor who renders
bona fide services to the Company or an Affiliate that (i) are not in connection
with the offer and sale of the Company’s securities in a capital-raising
transaction and (ii) do not directly or indirectly promote or maintain a market
for the Company’s securities. Except where the context otherwise requires,
references in this Plan to “employment” and related terms shall apply to
services in any such capacity.   (p) “Performance-Based Awards” means certain
Restricted Stock, Other Stock-Based Awards and Other Cash-Based Awards granted
pursuant to Section 10.   (q) “Plan” means the 2003 Long-Term Incentive Plan, as
amended from time to time.   (r) “Restricted Stock” means any Share granted
under Section 8.   (s) “Shares” means shares of common stock of the Company,
$.10 par value per share.   (t) “Stock Appreciation Right” means a stock
appreciation right granted pursuant to Section 7.   (u) “Subsidiary” means a
subsidiary corporation, as defined in Section 424(f) of the Code (or any
successor section thereto), of the Company.

3.  Shares Subject to the Plan

        The total number of Shares which may be issued under the Plan is
60,000,000, of which no more than 50% may be issued in the form of Restricted
Stock or Other Stock-Based Awards payable in Shares, provided, however, that no
more than 5% of the Shares reserved under the Plan shall be granted pursuant to
Restricted Stock Awards if such Award (a) shall vest in full prior to three
years from the Award date or (b) if a condition to such vesting is based, in
whole or in part, upon performance of the Shares or any aspect of the Company’s
operations and such vesting could occur over a period of less than one year from
the Award date. The Shares may consist, in whole or in part, of unissued Shares.
The issuance of Shares upon the exercise or satisfaction of an Award shall
reduce the total number of Shares available under the Plan. Shares which are
subject to Awards that terminate, lapse or are cancelled may be granted again
under the Plan. Any Shares tendered by a Participant or retained by the Company
as full or partial payment to the Company for the purchase price of an Award or
to satisfy tax withholding obligations in connection with an Award shall be
available for Awards under the Plan. No fractional Shares will be issued in
payment for any Award, but instead the number of Shares will be rounded upward
to the next whole Share.

4.  Administration

  (a) Delegation of Authority. The Plan shall be administered by the Committee,
which may delegate its duties and powers in whole or in part to (i) any
subcommittee thereof consisting solely of at least two individuals who are
intended to qualify as “non-employee directors” within the meaning of Rule 16b-3
under the Act (or any successor rule thereto) and, to the extent required by
Section 162(m) of the Code (or any successor section thereto), “outside
directors” within the meaning thereof and (ii) persons who are not non-employee
directors for purposes of determining and administering Awards to those
Participants who are not then subject to the reporting requirements of
Section 16 of the Act.   (b) Authority of Committee. The Committee shall have
exclusive power to make Awards and to determine when and to whom Awards shall be
granted, and the form, amount and other terms and conditions of each Award,
subject to the provisions of this Plan. The Committee may determine whether, to
what extent and under what circumstances Awards may be settled, paid or
exercised in cash, Shares or other Awards or other property, or cancelled,
forfeited or suspended. The Committee shall have the authority to interpret this
Plan and any Award or agreement made under this Plan, to establish, amend, waive
and rescind any rules and regulations relating to the administration of this
Plan, to determine the terms and provisions of any agreements entered into
hereunder (not inconsistent with this Plan), and to make all other
determinations necessary or advisable for the administration of this Plan. The
Committee may

 

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    correct any defect, supply any omission or reconcile any inconsistency in
this Plan or in any Award or agreement in the manner and to the extent it shall
deem desirable. The determinations of the Committee in the administration of
this Plan, as described herein, shall be final, binding and conclusive.   (c)
Rule 16b-3. It is the intent that this Plan and all Awards granted pursuant to
it shall be administered by the Committee (or a subcommittee thereof) so as to
permit this Plan and Awards to comply with Rule 16b-3 under the Act. If any
provision of this Plan or any Award would otherwise frustrate or conflict with
the intent expressed in this Section 4(c), that provision to the extent possible
shall be interpreted and deemed amended in the manner determined by the
Committee so as to avoid such conflict.   (d) Indemnification. To the full
extent permitted by law, each member and former member of the Committee and each
person to whom the Committee delegates or has delegated authority under this
Plan shall be entitled to indemnification by the Company against and from any
loss, liability, judgment, damages, cost and reasonable expense incurred by such
member, former member or other person by reason of any action taken, failure to
act or determination made in good faith under or with respect to this Plan.  
(e) Tax Withholding. The Committee shall require payment of any amount it may
determine to be necessary to withhold for federal, state, local, non-U.S.
income, payroll or other taxes as a result of the exercise, grant or vesting of
an Award. Unless the Committee specifies otherwise, the Participant may elect to
pay a portion or all of such withholding taxes by (i) delivery in Shares, (ii)
having the Company withhold Shares with a Fair Market Value or cash equal to the
amount of such taxes that would have otherwise been payable by the Participant
or (iii) paying cash.   (f) Deferral. In the sole discretion of the Committee,
in accordance with procedures established by the Committee and consistent with
the provisions of Section 162(m) when applied to Participants who may be
“covered employees” thereunder, a Participant may be permitted to defer the
issuance of Shares or cash deliverable upon the exercise of an Option or Stock
Appreciation Right, vesting of Restricted Stock, or satisfaction of Other
Stock-Based Awards or Other Cash-Based Awards, for a specified period or until a
specified date.   (g) Dividends or Dividend Equivalents. If the Committee so
determines, any Award granted under the Plan may be credited with dividends or
dividend equivalents paid with respect to the underlying shares. The Committee
may apply any restrictions to the dividends or dividend equivalents that the
Committee deems appropriate and may determine the form of payment, including
cash, Shares, Restricted Stock or otherwise.

5.  Limitations

  (a) Term of Plan. No Award may be granted under the Plan after the tenth
anniversary of the Effective Date, but Awards granted prior to such tenth
anniversary may extend beyond that date.   (b) No Repricing. No Option or Stock
Appreciation Right, once granted hereunder, may be repriced.   (c) Maximum. No
Participant may be granted Options, Stock Appreciation Rights, Restricted Stock,
Performance-Based Awards, Other Stock-Based Awards or any combination thereof
relating to more than 2,000,000 Shares under the Plan during any fiscal year.

 

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6.  Terms and Conditions of Options

        Options granted under the Plan shall be, as determined by the Committee,
non-qualified or incentive stock options for federal income tax purposes, as
evidenced by the related Award agreements, and shall be subject to the foregoing
and the following terms and conditions and to such other terms and conditions,
not inconsistent therewith, as the Committee shall determine:

  (a) Exercise Price. The Exercise Price per Share shall be determined by the
Committee, but shall not be less than 100% of the Fair Market Value of the
Shares on the date an Option is granted.   (b) Exercisability. Options granted
under the Plan shall be exercisable at such time and upon such terms and
conditions as may be determined by the Committee, but in no event shall an
Option be exercisable more than ten years after the date it is granted, except
as provided in Section 16 of the Plan.   (c) Exercise of Options. Except as
otherwise provided in the Plan or in an Award agreement, an Option may be
exercised for all, or from time to time any part, of the Shares for which it is
then exercisable. For purposes of this Section 6, the exercise date of an Option
shall be the date a notice of written or electronic exercise and full payment of
the purchase price are received by the Company in accordance with this Section
6(c). The purchase price for the Shares as to which an Option is exercised shall
be paid to the Company pursuant to one or more of the following methods, except
as otherwise provided in an Award agreement: (i) in cash or its equivalent
(e.g., by check); (ii) in Shares having a Fair Market Value equal to the
aggregate Exercise Price for the Shares being purchased and satisfying such
other requirements as may be imposed by the Committee; (iii) partly in cash and
partly in such Shares; (iv) if there is a public market for the Shares at such
time, through the delivery of irrevocable instructions to a broker to sell
Shares obtained upon the exercise of the Option and to deliver promptly to the
Company an amount out of the proceeds of such sale equal to the aggregate
Exercise Price for the Shares being purchased; or (v) through the withholding of
Shares having a Fair Market Value equal to the aggregate Exercise Price for the
Shares being purchased from the number of Shares otherwise issuable upon the
exercise of the Option (e.g., a net share settlement). No Participant shall have
any rights of a shareholder with respect to Shares subject to an Option until
the Participant has given written or electronic notice of exercise of the
Option, paid in full for such Shares and, if applicable, has satisfied any other
conditions imposed by the Committee pursuant to the Plan.   (d) ISOs. The
Committee may grant Options under the Plan that are intended to be ISOs. Such
ISOs shall comply with the requirements of Section 422 of the Code (or any
successor section thereto). No ISO may be granted to any Participant who, at the
time of such grant, owns more than ten percent of the total combined voting
power of all classes of stock of the Company or of any Subsidiary, unless (i)
the Exercise Price for such ISO is at least 110% of the Fair Market Value of a
Share on the date the ISO is granted and (ii) the date on which such ISO
terminates is a date not later than the day preceding the fifth anniversary of
the date on which the ISO is granted Any Participant who disposes of Shares
acquired upon the exercise of an ISO either (I) within two years after the date
of grant of such ISO or (II) within one year after the transfer of such Shares
to the Participant, shall notify the Company of such disposition and of the
amount realized upon such disposition. All Options granted under the Plan are
intended to be non-qualified stock options, unless the applicable Award
agreement expressly states that the Option is an ISO. If an Option is intended
to be an ISO, and if for any reason such Option (or portion thereof) shall not
qualify as an ISO, then, to the extent of such nonqualification, such Option (or
portion thereof) shall be regarded as a non-qualified stock option granted under
the Plan; provided that such Option (or portion thereof) otherwise complies with
the Plan’s requirements relating to non-qualified stock options, In no event
shall any member of the Committee, the Company or any of its Affiliates (or
their respective employees, officers or directors) have any liability to any
Participant (or any other person or entity) due to the failure of an Option to
qualify for any reason as an ISO.

 

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  (e) Attestation. Wherever in this Plan or any agreement evidencing an Award a
Participant is permitted to pay the Exercise Price of an Option or taxes
relating to the exercise of an Option by delivering Shares, the Participant may,
subject to procedures satisfactory to the Committee, satisfy such delivery
requirement by presenting proof of beneficial ownership of such Shares rather
than physical delivery, in which case the Company shall treat the Option as
exercised without further payment and shall withhold such number of Shares from
the Shares issued upon the exercise of the Option.

7.  Terms and Conditions of Stock Appreciation Rights

  (a) Grants. The Committee may grant (i) a Stock Appreciation Right independent
of an Option or (ii) a Stock Appreciation Right in connection with an Option, or
a portion thereof. The Committee may impose such terms and conditions upon any
Stock Appreciation Right as it deems fit. A Stock Appreciation Right granted
pursuant to clause (ii) of the preceding sentence (A) may be granted at the time
the related Option is granted or at any time prior to the exercise or
cancellation of the related Option, (B) shall cover the same number of Shares
covered by an Option (or such lesser number of Shares as the Committee may
determine) and (C) shall be subject to the same terms and conditions as such
Option except for such additional limitations as are contemplated by this
Section 7 (or such additional limitations as may be included in an Award
agreement).   (b) Terms. The exercise price per Share of a Stock Appreciation
Right shall be an amount determined by the Committee but in no event shall such
amount be less than the Fair Market Value of a Share on the date the Stock
Appreciation Right is granted; provided, however, that, notwithstanding the
foregoing, in the case of a Stock Appreciation Right granted in conjunction with
an Option, or a portion thereof, the exercise price may not be less than the
Exercise Price of the related Option. Each Stock Appreciation Right granted
independent of an Option shall entitle a Participant upon exercise to an amount
equal to (i) the excess of (A) the Fair Market Value on the exercise date of one
Share over (B) the Exercise Price per Share, times (ii) the number of Shares
covered by the Stock Appreciation Right. Each Stock Appreciation Right granted
in conjunction with an Option, or a portion thereof, shall entitle a Participant
to surrender to the Company the unexercised Option, or any portion thereof, and
to receive from the Company in exchange therefor an amount equal to (I) the
excess of (x) the Fair Market Value on the exercise date of one Share over
(y) the Exercise Price per Share, times (II) the number of Shares covered by the
Option, or portion thereof, which is surrendered. Payment shall be made in
Shares or in cash, or partly in Shares and partly in cash (any such Shares
valued at such Fair Market Value), all as set forth in the Award agreement.
Stock Appreciation Rights may be exercised from time to time upon actual receipt
by the Company of written or electronic notice of exercise stating the number of
Shares with respect to which the Stock Appreciation Right is being exercised.
The date a notice of exercise is received by the Company shall be the exercise
date.

8.  Restricted Stock

  (a) Grant. Subject to the provisions of the Plan, the Committee shall
determine the number of Shares of Restricted Stock to be granted to each
Participant, the duration of the period during which, and the conditions, if
any, under which, the Restricted Stock may be forfeited to the Company, and the
other terms and conditions of such Awards.   (b) Transfer Restrictions. Shares
of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered, except as provided in the Plan or the applicable Award agreement.
Shares of Restricted Stock shall be registered in the name of the Participant
and held by the Company. After the lapse of the restrictions applicable to such
Shares of Restricted Stock, the Company shall deliver such Shares to the
Participant or the Participant’s legal representative.   (c) Dividends.
Dividends or dividend equivalents paid on any Shares of Restricted Stock may be
paid directly to the Participant, withheld by the Company subject to vesting of
the Restricted

 

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    Stock pursuant to the terms of the applicable Award agreement, or may be
reinvested in additional Shares of Restricted Stock, as determined by the
Committee in its sole discretion.

9.  Other Awards

  (a) Other Stock-Based Awards. The Committee, in its sole discretion, may grant
Awards of Shares and Awards that are valued in whole or in part by reference to,
or are otherwise based on, Shares or on the Fair Market Value thereof (“Other
Stock-Based Awards”). Such Other Stock-Based Awards shall be in such form, and
dependent on such conditions, as the Committee shall determine, including,
without limitation, the right to receive, or vest with respect to, one or more
Shares (or the equivalent cash value of such Shares) upon the completion of a
specified period of service, the occurrence of an event and/or the attainment of
performance objectives. Other Stock-Based Awards may be granted alone or in
addition to any other Awards granted under the Plan. Subject to the provisions
of the Plan, the Committee shall determine the number of Shares to be awarded to
a Participant under (or otherwise related to) such Other Stock-Based Awards;
whether such Other Stock-Based Awards shall be settled in cash, Shares or a
combination of cash and Shares; and all other terms and conditions of such
Awards (including, without limitation, the vesting provisions thereof and
provisions ensuring that all Shares so awarded and issued shall be fully paid
and non-assessable).   (b) Other Cash-Based Awards. In addition to the Awards
described above, and subject to the terms of the Plan, the Committee may grant
such other incentives denominated in cash and payable in cash under the Plan as
the Committee determines to be in the best interests of the Company and subject
to such other terms and conditions as it deems appropriate. The maximum amount
of Other Cash-Based Awards (including those that are performance-based) that may
be granted during any fiscal year shall be $3,000,000; provided, however, that
for such Awards with performance periods longer than one year the maximum shall
be $3,000,000 for each fiscal year in the performance period.

10.  Performance-Based Awards.

        Notwithstanding anything to the contrary herein, the Committee may grant
performance-based Awards of Restricted Stock, Other Stock-Based Awards and Other
Cash-Based Awards to Participants (“Performance-Based Awards”). Any such Awards
granted to Participants who may be “covered employees” under Section 162(m) of
the Code or any successor section thereto shall be consistent with the
provisions thereof. In such cases, a Participant’s Performance-Based Award shall
be determined based on the attainment of written performance goals approved by
the Committee for a performance period established by the Committee (I) while
the outcome for that performance period is substantially uncertain and (II) by
the earlier of (A) 90 days after the commencement of the performance period to
which the performance goal relates or (B) the number of days which is equal to
25 percent of the relevant performance period. The performance goals, which must
be objective, shall be based upon one or more of the following criteria: (i)
consolidated earnings before or after taxes (including earnings before interest,
taxes, depreciation and amortization); (ii) net income; (iii) operating income;
(iv) earnings per share; (v) book value per share; (vi) return on shareholders’
equity; (vii) expense management; (viii) return on investment; (ix) improvements
in capital structure; (x) profitability of an identifiable business unit or
product; (xi) maintenance or improvements of profit margins; (xii) stock price;
(xiii) market share; (xiv) revenues or sales; (xv) costs; (xvi) cash flow;
(xvii) working capital; (xviii) return on assets; (xix) asset turnover; (xx)
inventory turnover; (xxi) economic value added (economic profit); and (xxii)
total shareholder return. The foregoing criteria may relate to the Company, one
or more of its Subsidiaries or one or more of its divisions or units, or any
combination of the foregoing, and may be applied on an absolute basis and/or be
relative to one or more peer group companies or indices, or any combination
thereof, all as the Committee shall determine. In addition, to the degree
consistent with Section 162(m) of the Code (or any successor section thereto),
the performance goals may be calculated without regard to the negative effect of
unusual or nonrecurring items, extraordinary items, discontinued operations or
cumulative effects of accounting changes. The Committee shall determine whether,
with respect to a performance period, the applicable performance goals have been
met with respect to a given Participant who may be a covered employee and, if
they have, shall so certify and ascertain the amount

 

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of the applicable Performance-Based Award. No Performance-Based Awards will be
paid for such performance period until such certification is made by the
Committee. The amount of the Performance-Based Award actually paid to a given
Participant may be less than the amount determined by the applicable performance
goal formula, at the discretion of the Committee. The amount of the
Performance-Based Award determined by the Committee for a performance period
shall be paid to the Participant at such time as determined by the Committee in
its sole discretion after the end of such performance period.

11.  Adjustments Upon Certain Events

        Notwithstanding any other provisions in the Plan to the contrary, the
following provisions shall apply to all Awards granted under the Plan:

  (a) Generally. In the event of any change in the outstanding Shares after the
Effective Date by reason of any Share dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination or transaction or
exchange of Shares or other corporate exchange, or any distribution to
shareholders of Shares other than regular cash dividends or any transaction
similar to the foregoing, the Committee in its sole discretion and without
liability to any person may make such substitution or adjustment, if any, as it
deems to be equitable, as to (i) the number or kind of Shares or other
securities issued or reserved for issuance pursuant to the Plan or pursuant to
outstanding Awards, (ii) the maximum number of Shares for which Awards
(including limits established for Restricted Stock, Other Stock-Based Awards or
Other Cash-Based Awards) may be granted during a fiscal year to any Participant,
(iii) the Exercise Price or exercise price of any Stock Appreciation Right
and/or (iv) any other affected term of such Awards.   (b) Change in Control.
Notwithstanding anything contained in this Plan to the contrary, unless
otherwise provided in the applicable Award agreement at the time of grant, in
the event of a Change in Control, the following shall occur as of the effective
date of such Change in Control with respect to any and all Awards outstanding as
of the effective date of such Change in Control: (i) any and all Stock Options
and Stock Appreciation Rights granted hereunder shall vest in full and become
immediately exercisable, and shall remain exercisable throughout their entire
term; (ii) any restrictions imposed on Restricted Stock (including
Performance-Based Awards in Restricted Stock) shall lapse; (iii) a pro rata
payment of all other Performance-Based Awards equal in each case to the number
of Shares covered by the Award multiplied by the performance-based accrual
percentage applicable to such Award, and multiplied by a fraction the numerator
of which is the number of months elapsed from the date of grant through the
effective date of the Change in Control and the denominator of which is the
number of months from the date of grant through the originally scheduled
maturity date; and (iv) the maximum payout opportunities attainable under all
Other Stock-Based Awards and Other Cash-Based Awards that are not
Performance-Based Awards shall be deemed to have been fully earned for the
entire performance period(s). Such Awards shall be paid in cash, or in the sole
discretion of the Committee in Shares to Participants within thirty (30) days
following the effective date of the Change in Control, with any such Shares
valued at the Fair Market Value as of the effective date of the Change in
Control.   (c) Definition of Change of Control. For purposes of this Section 11,
“Change in Control” means:

    (i) Any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Act or any successor thereto) (a “Person”) becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated under the Act) of
30% or more of either (A) the then outstanding Shares (the “Outstanding Company
Common Stock”) or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however,
that, for purposes of this clause (c)(i), the following acquisitions shall not
constitute a Change in Control: (1) any acquisition directly from the Company,
(2) any acquisition by the Company or any of its Subsidiaries, (3) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its

 

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      Subsidiaries, (4) any acquisition by an underwriter temporarily holding
securities pursuant to an offering of such securities or (5) any acquisition
pursuant to a transaction that complies with clauses (iii) (A), (B) and (C)
below; or     (ii) Individuals who, as of the date hereof, constitute the Board
(the “Incumbent Directors”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a
majority of the Incumbent Directors then on the Board (either by a specific vote
or by approval of the proxy statement of the Company in which such person is
named as a nominee for director, without written objection to such nomination)
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or     (iii)
Consummation of a reorganization, merger, statutory share exchange or
consolidation (or similar corporate transaction) involving the Company or any of
its Subsidiaries, a sale or other disposition of all or substantially all of the
assets of the Company, or the acquisition of assets or stock of another entity
(a “Business Combination”), in each case, unless, immediately following such
Business Combination, (A) substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 55% of,
respectively, the then outstanding Shares and the total voting power of (1) the
corporation resulting from such Business Combination (the “Surviving
Corporation”) or (2) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 80% or more of the voting
securities eligible to elect directors of the Surviving Corporation (the “Parent
Corporation”), in substantially the same proportion as their ownership,
immediately prior to the Business Combination, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may be, (B) no
Person (other than any employee benefit plan (or related trust) sponsored or
maintained by the Surviving Corporation or the Parent Corporation), is or
becomes the beneficial owner, directly or indirectly, of 30% or more of the
outstanding Shares of common stock and the total voting power of the outstanding
voting securities eligible to elect directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation) and (C) at least a
majority of the members of the board of directors of the Parent Corporation (or,
if there is no Parent Corporation, the Surviving Corporation) following the
consummation of the Business Combination were Incumbent Directors at the time of
the Board’s approval of the execution of the initial agreement providing for
such Business Combination; or     (iv) Approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company.

        Notwithstanding the foregoing provisions of this definition, a Change in
Control shall not be deemed to occur with respect to the Participant if the
acquisition of the 30% or greater interest referred to in clause (i) is by a
group, acting in concert, that includes the Participant or if at least 40% of
the then outstanding common stock or combined voting power of the then
outstanding voting securities (or voting equity interests) of the Surviving
Corporation or, if applicable, the Parent Corporation shall be beneficially
owned, directly or indirectly, immediately after a Business Combination by a
group, acting in concert, that includes the Participant.

  (d) Further Adjustment of Awards. Subject to the above provisions, the
Committee shall have the discretion, exercisable at any time before a sale,
merger, consolidation, reorganization, liquidation, dissolution or Change in
Control transaction to take such further action as it determines to be necessary
or advisable with respect to Awards. Such authorized action may include (but

 

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    shall not be limited to) establishing, amending or waiving the type, terms,
conditions or duration of, or restrictions on, Awards so as to provide for
earlier, later, extended or additional time for exercise, lifting of
restrictions and other modifications, and the Committee may take such actions
with respect to all Participants, to certain categories of Participants or only
to individual Participants. The Committee may take such action before or after
granting Awards to which the action relates and before or after any public
announcement with respect to such sale, merger, consolidation, reorganization,
liquidation, dissolution or change in control that is the reason for such
action.

12.  No Right to Employment or Awards

        The granting of an Award under the Plan shall impose no obligation on
the Company or any Affiliate to continue the employment of a Participant and
shall not lessen or affect the Company’s or Affiliate’s right to terminate the
employment of such Participant. No Participant or other person shall have any
claim to be granted any Award, and there is no obligation for uniformity of
treatment of Participants, or holders or beneficiaries of Awards. The terms and
conditions of Awards and the Committee’s determinations and interpretations with
respect thereto need not be the same with respect to each Participant.

13.  Other Benefit and Compensation Programs

        Payments and other benefits received by a Participant under an Award
shall not be deemed a part of a Participant’s regular, recurring compensation
for purposes of any termination, indemnity or severance pay laws and shall not
be included in, nor have any effect on, the determination of benefits under any
other employee benefit plan, contract or similar arrangement provided by the
Company or an Affiliate, unless expressly so provided by such other plan,
contract or arrangement or the Committee determines that an Award or portion of
an Award should be included to reflect competitive compensation practices or to
recognize that an Award has been made in lieu of a portion of competitive cash
compensation.

14.  Successors and Assigns

        The Plan shall be binding on all successors and assigns of the Company
and a Participant, including without limitation, the estate of such Participant
and the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant’s creditors.

15.  Nontransferability of Awards / Beneficiaries

        No Award or interest in an Award may be sold, assigned, pledged (as
collateral for a loan or as security for the performance of an obligation or for
any other purpose) or transferred by the Participant or made subject to
attachment or similar proceedings otherwise than by will or by the applicable
laws of descent and distribution, except to the extent a Participant designates
one or more beneficiaries on a Company-approved form who may exercise the Award
or receive payment under the Award after the Participant’s death. During a
Participant’s lifetime, an Award may be exercised only by the Participant.
Notwithstanding the foregoing and to the extent permitted by Section 422 of the
Code or any successor thereto, the Committee, in its sole discretion, may permit
a Participant to assign or transfer an Award; provided, however, that any Award
so assigned or transferred shall be subject to all the terms and conditions of
the Plan and the agreement evidencing the Award.

        A Participant may designate a beneficiary to succeed to the
Participant’s Awards under the Plan in the event of the Participant’s death by
filing a beneficiary form with the Company and, upon the death of the
Participant, such beneficiary shall succeed to the rights of the Participant to
the extent permitted by law and the terms of this Plan and the applicable
agreement. In the absence of a validly designated beneficiary who is living at
the time of the Participant’s death, the Participant’s executor or administrator
of the Participant’s estate shall succeed to the Awards, which shall be
transferable by will or pursuant to laws of descent and distribution.

16.  Amendments or Termination

        The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made, (a) without the approval of the
shareholders of the Company, if such action would

 

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(except as is provided in Section 11 of the Plan), increase the total number of
Shares reserved for the purposes of the Plan or increase the maximum number of
Shares of Restricted Stock or Other Stock-Based Awards that may be awarded
hereunder, or the maximum number of Shares for which Awards may be granted to
any Participant, (b) without the consent of a Participant, if such action would
diminish any of the rights of the Participant under any Award theretofore
granted to such Participant under the Plan or (c) to Section 5(b), relating to
repricing of Options or Stock Appreciation Rights; provided, however, that the
Committee may amend the Plan in such manner as it deems necessary to permit the
granting of Awards meeting the requirements of the Code or other applicable
laws.

17.  International Participants

        With respect to Participants who reside or work outside the United
States of America, the Committee may, in its sole discretion, amend the terms of
the Plan or adopt such modifications, procedures or subplans with respect to
such Participants as are necessary or desirable to ensure the viability of the
benefits of the Plan, comply with applicable foreign laws or obtain more
favorable tax or other treatment for a Participant, the Company or an Affiliate;
provided, however, that no such changes shall apply to the Awards to
Participants who may be “covered employees” under Section 162(m) of the Code or
any successor thereto unless consistent with the provisions thereof.

18.  General

  (a) Issuance of Shares. Notwithstanding any other provision of the Plan, the
Company shall have no obligation to issue or deliver any Shares under the Plan
or make any other distribution of benefits under the Plan unless, in the opinion
of the Company’s counsel, such issuance, delivery or distribution would comply
with all applicable laws (including, without limitation, the requirements of the
Securities Act of 1933, as amended, or any successor thereto (the “Securities
Act”) or the laws of any state or foreign jurisdiction) and the applicable
requirements of any securities exchange or similar entity.

        The Company shall be under no obligation to any Participant to register
for offering or resale or to qualify for exemption under the Securities Act, or
to register or qualify under the laws of any state or foreign jurisdiction, any
Shares, security or interest in a security paid or issued under, or created by,
the Plan, or to continue in effect any such registrations or qualifications if
made.

        The Company may issue Shares with such legends and subject to such
restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal,
state and foreign securities laws. The Company may also require such other
action or agreement by the Participants as may from time to time be necessary to
comply with applicable securities laws.

        To the extent the Plan or any Award agreement provides for issuance of
stock certificates to reflect the issuance of Shares, the issuance may be
effected on a noncertificated basis, to the extent not prohibited by applicable
law or the applicable rules of any stock exchange.

  (b) No Rights as a Shareholder. Unless otherwise provided by the Committee or
in the agreement evidencing the Award or in any other written agreement between
a Participant and the Company or an Affiliate, no Award shall entitle the
Participant to any cash dividend, voting or other right of a shareholder unless
and until the date of issuance under the Plan of the Shares that are subject of
such Award.   (c) No Trust or Fund. The Plan is intended to constitute an
“unfunded” plan. Nothing contained herein shall require the Company to segregate
any monies, other property, or Shares, or to create any trusts, or to make any
special deposits for any immediate or deferred amounts payable to any
Participant, and no Participant shall have any rights that are greater than
those of a general unsecured creditor of the Company.   (d) Severability. In the
event any provision of the Plan shall be held illegal or invalid for any reason,
the illegality or invalidity shall not affect the remaining parts of the Plan,
and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.

 

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  (e) Choice of Law. The validity, construction, interpretation, administration
and effect of the Plan, and rights relating to the Plan and to Awards granted
under the Plan, shall be governed by the substantive laws, but not the choice of
law rules, of the State of Minnesota.

19.  Effectiveness of the Plan

        The Plan shall be effective as of the Effective Date.

 

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