MEDTRONIC, INC.

1998 OUTSIDE DIRECTOR STOCK COMPENSATION PLAN

(as amended and restated effective January 1, 2008)


	
 

	
 


	
1.

	
Purpose. The purpose of this Plan is to
 facilitate recruiting and retaining non-employee directors of outstanding
 ability. The Plan has been amended and restated effective January 1, 2008 to
 comply with the requirements of Section 409A of the Internal Revenue Code.


	
 

	
 


	
2.

	
Definitions. The capitalized terms used in
 this Plan have the meanings set forth below.








	
 

	
 

	
 


	
 

	
(a)

	
“Account”
 means a bookkeeping account maintained for a Participant to which Deferred
 Stock Units are credited pursuant to Section 8 of this Plan.


	
 

	
 

	
 


	
 

	
(b)

	
“Affiliate”
 means any corporation that is a “parent corporation” or “subsidiary
 corporation” of the Company, as those terms are defined in
 Sections 424(e) and (f) of the Code, or any successor provision,
 and any joint venture in which the Company or any such “parent corporation”
 or “subsidiary corporation” owns an equity interest.


	
 

	
 

	
 


	
 

	
(c)

	
“Agreement”
 means a written contract entered into between the Company or an Affiliate and
 a Participant containing the terms and conditions of an Award granted
 hereunder (not inconsistent with this Plan).


	
 

	
 

	
 


	
 

	
(d)

	
“Annual
 Award” means an Option or Stock Appreciation Right granted pursuant to
 Section 7(c) of this Plan.


	
 

	
 

	
 


	
 

	
(e)

	
“Annual
 Retainer” of a Participant means the fixed annual fee for such Participant in
 effect on the first day of the Plan Year for which such Annual Retainer is
 payable for services to be rendered as a Non-Employee Director of the
 Company. For purposes of determining
 Awards, other than an Initial Award, for the short Plan Year beginning
 September 1, 2007 and ending on April 25, 2008, the Annual Retainer in effect
 on September 1, 2007 shall be 8/12 of the annual fee in effect as of
 September 1, 2007. 


	
 

	
 

	
 


	
 

	
(f)

	
“Award”
 means an Option granted pursuant to Section 5 of this Plan, a Stock
 Appreciation Right granted pursuant to Section 6 of this Plan, an Annual
 or Initial Award granted pursuant to Section 7 of this Plan or a credit
 of Deferred Stock Units pursuant to Section 8 of this Plan.


	
 

	
 

	
 


	
 

	
(g)

	
“Board”
 means the Board of Directors of the Company.


	
 

	
 

	
 


	
 

	
(h)

	
“Change in
 Control” shall mean: 








	
 

	
 

	
 


	
 

	
(i)

	
Any
 individual, entity or group (within the meaning of Section 13(d)(3) or
 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
 Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule
 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the
 then-outstanding Shares (the “Outstanding Company Common Stock”) or (ii)





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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 (h)(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 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 (A), (B) and (C) of clause (iii)
 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 shall be considered as though such individual was
 an Incumbent Director, 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 by the
 Company or any of its Subsidiaries (each, 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 50% of,
 respectively, the then-outstanding Shares (or, for a non-corporate entity,
 equivalent securities) and the then-outstanding voting securities entitled to
 vote generally in the election of directors (or, for a non-corporate entity,
 equivalent governing body), as the case may be, of (1) the entity resulting
 from such Business Combination (the “Surviving Corporation”) or (2) if
 applicable, the ultimate parent entity 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 





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outstanding
 Shares 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. 








	
 

	
 

	
 


	
 

	
(i)

	
“Code” shall
 mean the Internal Revenue Code of 1986, as amended and in effect from time to
 time, or any successor statute.


	
 

	
 

	
 


	
 

	
(j)

	
“Committee”
 means any committee of the Board designated by the Board to administer this
 Plan under Section 3 hereof which shall be composed of not less than two
 members, each of whom shall be a “non-employee director” as defined in
 Exchange Act Rule 16b-3.


	
 

	
 

	
 


	
 

	
(k)

	
“Company”
 means Medtronic, Inc., a Minnesota corporation, or any successor to all or
 substantially all of its businesses by merger, consolidation, purchase of
 assets or otherwise.


	
 

	
 

	
 


	
 

	
(l)

	
“Deferred
 Stock Unit” means the right to receive one Share pursuant to Section 8
 of this Plan.


	
 

	
 

	
 


	
 

	
(m)

	
“Disability”
 means the disability of a Participant such that the Participant is unable due
 to a physical or mental illness or condition that is expected to be of
 duration of twelve (12) months or more to perform the essential duties
 of a member of the Board.


	
 

	
 

	
 


	
 

	
(n)

	
“Exchange
 Act” means the Securities Exchange Act of 1934, as amended; “Exchange Act
 Rule 16b-3” means Rule 16b-3 promulgated by the Securities and
 Exchange Commission under the Exchange Act as in effect with respect to the
 Company or any successor regulation.


	
 

	
 

	
 


	
 

	
(o)

	
“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 






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such date,
 the Fair Market Value shall be the value established by the Committee in good
 faith.








	
 

	
 

	
 


	
 

	
(p)

	
“Fundamental
 Change” means a dissolution or liquidation of the Company, a sale of substantially
 all of the assets of the Company, a merger or consolidation of the Company
 with or into any other corporation, regardless of whether the Company is the
 surviving corporation, or a statutory share exchange involving capital stock
 of the Company.


	
 

	
 

	
 


	
 

	
(q)

	
“Initial
 Award” means an Option or Stock Appreciation Right granted pursuant to
 Section 7(b) of this Plan.


	
 

	
 

	
 


	
 

	
(r)

	
“Meeting”
 means a regular or special meeting of the Board or of a committee of the
 Board on which a particular Participant serves.


	
 

	
 

	
 


	
 

	
(s)

	
“Non-Employee
 Director” means a member of the Board who is not an employee of the Company
 or any Affiliate.


	
 

	
 

	
 


	
 

	
(t)

	
“Option”
 means a right to purchase Stock granted pursuant to Sections 5 and 7 of
 this Plan.


	
 

	
 

	
 


	
 

	
(u)

	
“Participant”
 means any Non-employee Director to whom an Award is made.


	
 

	
 

	
 


	
 

	
(v)

	
“Plan” means
 this 1998 Outside Director Stock Compensation Plan, as amended and in effect
 from time to time.


	
 

	
 

	
 


	
 

	
(w)

	
“Plan Year”
 means the period from September 1 of any year through the following
 August 31. Effective September
 1, 2007 the Plan Year shall be a short year ending on April 25, 2008 and
 thereafter the Plan Year shall correspond to the Company’s fiscal year. 


	
 

	
 

	
 


	
 

	
(x)

	
“Pro-Ration
 Factor” means: (A) in the case of a Participant who is a Non-Employee
 Director for the entire Plan Year in question and attends at least
 75 percent of the Meetings that occur during such Plan Year (such
 Meetings, the “Plan Year Meetings”), 100 percent; (B) in the case
 of a Participant who is a Non-Employee Director for only a portion of a Plan
 Year and attends at least 75 percent of the Meetings that occur during
 that portion of a Plan Year (such meetings, the “Applicable Meetings”), a
 percentage determined by dividing the number of Applicable Meetings by the total
 number of Plan Year Meetings for that Plan Year; and (C) in the case of
 a Non- Employee Director who fails to satisfy the Meeting attendance
 requirement of clause (A) or (B), as applicable, 75 percent of
 the percentage specified in clause (A) or (B), as applicable.


	
 

	
 

	
 


	
 

	
(y)

	
“Share”
 means a share of common stock of the Company, $.10 par value per share.





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(z)

	
“Stock
 Appreciation Right” means a stock appreciation right granted pursuant to
 Sections 6 and 7 of this Plan.


	
 

	
 

	
 


	
 

	
(aa)

	
“Subsidiary”
 means a “subsidiary corporation,” as that term is defined in
 Section 424(f) of the Code, or any successor provision.


	
 

	
 

	
 


	
 

	
(bb)

	
“Successor”
 with respect to a Participant means a court appointed conservator or guardian
 of a Participant; if the Participant is deceased, the legal representative of
 the estate of the Participant; or the person or persons who may, by bequest
 or inheritance, or pursuant to a transfer permitted under Section 9(d)
 of this Plan, acquire the right to exercise an Option or Stock Appreciation
 Right or receive Shares issuable in satisfaction of Deferred Stock Units in
 the event of the Participant’s death.


	
 

	
 

	
 


	
 

	
(cc)

	
“Term” means
 the period during which an Award may be exercised.Except when otherwise
 indicated by the context, reference to the masculine gender shall include,
 when used, the feminine gender and any term used in the singular shall also
 include the plural.








	
 

	
 


	
3.

	
Administration.








	
 

	
 

	
 


	
 

	
(a)

	
Authority of Committee. The Committee or its
 delagee shall administer this Plan. 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 (including without limitation the manner in which
 Participants shall make elections provided for herein), 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 correct
 any defect, supply any omission or reconcile any inconsistency in this Plan
 or in any Award 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.


	
 

	
 

	
 


	
 

	
(b)

	
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, damage, 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.








	
 

	
 


	
4.

	
In General.








	
 

	
 

	
 


	
 

	
(a)

	
Shares Available. The number of Shares
 available for distribution under this Plan is 3,000,000 (subject to
 adjustment under Section 9(f) hereof). Any Shares subject to the terms
 and conditions of an Award under this Plan which are not used because the 





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terms and
 conditions of the Award are not met may again be used for an Award under this
 Plan. Any undistributed portion of any terminated, expired, exchanged,
 exercised or forfeited Award or any portion of an Award settled in cash in
 lieu of Shares shall be available for further Awards.


	
 

	
 

	
 


	
 

	
(b)

	
No Fractional Shares. No fractional Shares
 may be issued under this Plan; fractional Shares will be rounded to the
 nearest whole Share.


	
 

	
 

	
 


	
 

	
(c)

	
Rights as Shareholder. A participant shall
 have no rights as a shareholder with respect to any securities covered by an
 Award until the date the Participant becomes the holder of record.








	
 

	
 

	
 


	
5.

	
Options.


	
 

	
 

	
 


	
 

	
(a)

	
Agreements. Each Option granted under this
 Plan shall be evidenced by an Option Agreement setting forth the terms and
 conditions thereof.


	
 

	
 

	
 


	
 

	
(b)

	
Discretionary Options. The Board or the
 Committee may, in its discretion, at any time or from time to time grant to
 any Non-Employee Director an Option to purchase such number of Shares, on
 such terms and conditions, as it shall determine.


	
 

	
 

	
 


	
 

	
(c)

	
Purchase Price; Term and Exercisability of Options.
 The purchase price of each share subject to an Option shall be the Fair
 Market Value of a Share as of the date the Option is granted. Options granted
 to a Non-Employee Director under this Section 5 shall vest and be
 exercisable in full on the date of grant, except to the extent the Board or
 Committee provides otherwise in the Option Agreement; provided,
 however, that in no event shall a Non-Employee Director initially appointed
 by the Board be entitled to exercise an Option unless, and until such time
 as, such director shall have been elected to the Board by the shareholders of
 the Company. Notwithstanding the foregoing, except as otherwise provided in
 the Option Agreement, vesting of an Option granted to a Non-Employee Director
 who shall have been elected by the shareholders of the Company shall
 accelerate and shall become immediately exercisable in full upon the
 occurrence of a Change in Control or in the event that the Non-Employee
 Director ceases to serve as a director of the Company due to death,
 Disability, resignation or retirement under the policies of the Company then
 in effect. Options shall expire no later than the ten-year anniversary date
 of the Option’s grant; provided, that an Option granted to a
 Non-Employee Director initially appointed by the Board shall expire on the
 date such director ceases to be a director of the Company unless such
 director shall have been elected by the shareholders subsequent to the grant
 of the Initial Award to such director.


	
 

	
 

	
 


	
 

	
(d)

	
Payment of Option Price. The purchase price
 of the Shares with respect to which an Option is exercised shall be payable
 in full at the time of exercise; provided, that to the extent
 permitted by law, Participants may simultaneously exercise Options and sell
 the Shares thereby acquired pursuant to a brokerage or similar relationship
 and use the proceeds from such sale to pay the purchase price of such Shares.
 The 





6






	
 

	
 

	
 


	
 

	
 

	
purchase
 price may also be paid in cash, or by delivery to the Company of Shares held
 by such Participant for at least six months before such exercise (in each
 case, such Shares having a Fair Market Value as of the date the Option is
 exercised equal to the purchase price of the Shares being purchased pursuant
 to the Option), or a combination thereof, in the discretion of the
 Participant. In no event shall any Option be exercisable at any time after
 its Term. When an Option is no longer exercisable, it shall be deemed to have
 lapsed or terminated.


	
 

	
 

	
 


	
6.

	
Stock Appreciation Rights.


	
 

	
 

	
 


	
 

	
(a)

	
Agreements. Each Stock Appreciation Right
 granted under this Plan shall be evidenced by an Agreement setting forth the
 terms and conditions thereof.


	
 

	
 

	
 


	
 

	
(b)

	
Discretionary Grant of Stock Appreciation Right.
 The Board or the Committee may, in its discretion, at any time or from time
 to time grant to any Non-Employee Director a Stock Appreciation Right (“Stock
 Appreciation Right”), on such terms and conditions, as it shall determine.


	
 

	
 

	
 


	
 

	
(c)

	
Term and Exercisability of Stock Appreciation Rights.
 Stock Appreciation Rights granted to a Non-Employee Director under this
 Section 6 shall vest and be exercisable in full on the date of grant,
 except to the extent the Board or Committee provides otherwise in the Stock
 Appreciation Right agreement; provided, however, that in no event
 shall a Non-Employee Director initially appointed by the Board be entitled to
 exercise a Stock Appreciation Right unless, and until such time as, such
 director shall have been elected to the Board by the shareholders of the
 Company. Notwithstanding the foregoing, except as otherwise provided in the
 Stock Appreciation Right agreement, vesting of a Stock Appreciation Right
 granted to a Non-Employee Director who shall have been elected by the
 shareholders of the Company shall accelerate and shall become immediately
 exercisable in full upon the occurrence of a Change in Control or in the event
 that the Non-Employee Director ceases to serve as a director of the Company
 due to death, Disability, resignation or retirement under the policies of the
 Company then in effect. Stock Appreciation Rights shall expire no later than
 the ten-year anniversary date of the Stock Appreciation Rights’ grant; provided,
 that a Stock Appreciation Right granted to a Non-Employee Director initially
 appointed by the Board shall expire on the date such director ceases to be a
 director of the Company unless such director shall have been elected by the
 shareholders subsequent to the grant of the Initial Award to such director.


	
 

	
 

	
 


	
 

	
(d)

	
Settlement
of Appreciation Right. Upon exercise of an Appreciation Right, the
Participant shall receive Shares with an aggregate value determined by
multiplying the number of Appreciation Rights units being exercised, by the
excess of (i) the Fair Market Value of a Share as of the date of
exercise over (ii) the Fair Market Value of a Share as of the date of
the Award.





7







	
 

	
 

	
 


	
7. 

	
Initial and Annual Awards. 


	
 

	
 


	
 

	
(a) 

	
General. Each Non-Employee Director shall
  automatically be granted an Initial Award and
  Annual Award. Such Awards may take the form of an Option or Stock
  Appreciation Right as determined by the Committee from time to time. The
  provisions of Section 5 or 6 respectively shall govern the Option or Stock
  Appreciation Rights Agreement except as otherwise provided in this Section 7.


	
 

	
 

	
 


	
 

	
(b)  

	
Initial Award. Each Non-Employee Director
  shall automatically be granted on the date such director first becomes a
  director an “Initial Award” for a number of units determined by dividing (i)
  two times the amount of the Annual Retainer as in effect immediately
  following such election or appointment by (ii) the Fair Market Value of a
  Share on the date of grant. No increase in the Annual Retainer of the
  Non-Employee Directors after a person becomes a Non-Employee Director shall
  increase the number of units subject to the Initial Award granted to such
  Non-Employee Director. An employee of the Company or an Affiliate who
  terminates such employment and thereafter becomes a Non-Employee Director is
  not entitled to receive an Initial Award but will be entitled to receive
  Annual Awards. A Non-Employee Director is not entitled to receive more than
  one Initial Award during his or her lifetime. For purposes of Section 7(b)
  and 7(c) a unit shall represent an Option or Stock Appreciation Right with
  respect to one share of Stock. 


	
 

	
 

	
 


	
 

	
(c) 

	
Annual Awards. On the first day of each Plan
  Year, each Non-Employee Director shall automatically be granted an Annual
  Award for a number of units equal to (i) the amount of the Annual Retainer in
  effect as of such day, divided by (ii) the Fair Market Value of a Share on
  the first day of the Plan Year. If there is an increase in the Annual
  Retainer after the Annual Award is granted in a given year, each Non-Employee
  Director shall automatically be granted, as of the date such increase is
  approved, a supplemental Annual Award for the number of units equal to (i)
  the amount of the increase in such Annual Retainer divided by (ii) the Fair
  Market Value of a Share on the date of the grant. In the event that a
  Non-Employee Director joins the Board in the middle of the Plan Year, then
  such Non-Employee Director shall automatically be granted an Annual Award for
  a number of units equal to (i) the product obtained by multiplying the amount
  of the Annual Retainer in effect as of such day by a fraction the numerator
  of which is the number of days remaining in the Plan Year as of the day such
  Non-Employee Director commenced her or his term as a Non-Employee Director
  and the denominator of which is 365, divided by (ii) the Fair Market Value of
  a Share on the day that such Non-Employee Director commenced her or his term
  as a Non-Employee Director. 


	
 

	
 

	
 


	
 

	
(d) 

	
Term and Exercisability of Awards. Initial
Awards and Annual Awards shall expire on the fifth anniversary of the date
the Non-Employee Director ceases to be a director of the Company for any
reason, if earlier than the tenth anniversary of the date of the grant of the
Award; and provided, further, that the Initial Award granted to a
Non-Employee Director initially appointed by the Board shall expire on the
date such director ceases to be a director of the Company unless such
director shall have  





8







	
 

	
 

	
 

	
 


	
 

	
 

	
been elected
  by the shareholders subsequent to the grant of the Initial Award to such
  director. 


	
 

	
 

	
 

	
 


	
8. 

	
Deferred Stock Units.


	
 

	
 

	
 

	
 


	
 

	
(a) 

	
Annual Credit. As of the last day of each
  Plan Year, there shall be credited to the Account of each Participant who is
  a Non-Employee Director on such day a number of Deferred Stock Units equal to
  (i) the Annual Retainer in effect as of such day, times the Pro-Ration
  Factor, divided by (ii) the average of the Fair Market Value of a Share on
  each of the last 20 trading days during such Plan Year determined in
  accordance with clause (i) of Section 2(o) or, if clause (i) of Section 2(o)
  is inapplicable, the Fair Market Value of a Share as of the last day of such
  Plan Year determined in accordance with clause (ii) of Section 2(o). There
  shall be credited to the Account of any Non-Employee Director who retires
  from the Board prior to the last day of the Plan Year, as of the retirement
  date, a number of Deferred Stock Units equal to (i) the Annual Retainer in
  effect as of such date, times the Pro-Ration Factor, divided by (ii) the
  average of the Fair Market Value of a Share on each of the last 20 trading
  days prior to such date as determined in accordance with Section 2(o).


	
 

	
 

	
 

	
 


	
 

	
(b) 

	
Discretionary Credits. The Board or the
  Committee may, in its discretion, at any time and from time to time, cause
  additional Deferred Stock Units to be credited to the account of any
  Non-Employee Director.


	
 

	
 

	
 

	
 


	
 

	
(c) 

	
Credits of Dividend Equivalents; Maintenance of Accounts. The
  Company shall maintain an Account for each Participant to which the credits
  provided for in Sections 8(a) and (b) above shall be made. Each Participant’s
  Account shall be credited from time to time with additional Deferred Stock
  Units to reflect deemed reinvestment of any amounts that would have been paid
  as cash dividends with respect to the Deferred Stock Units held in such
  Account if they were Shares. Subject to the provisions of Section 8(d)
  regarding delivery of Shares, Accounts may be credited with fractional
  Deferred Stock Units pursuant to this Section 8(c) and Sections 8(a) and (b).


	
 

	
 

	
 

	
 


	
 

	
(d) 

	
Delivery of Shares from Accounts.


	
 

	
 

	
 

	
 


	
 

	
 

	
(i) 

	
Each
  Participant shall be provided the opportunity to elect, in accordance with
  procedures established by the Committee in compliance with the requirements
  of Section 409A of the Code, whether to receive the amounts credited to the
  Participant’s Account in a single lump sum or in five annual installments.
  Such election shall be made no later than the December 31 prior to the Plan
  Year in which the Deferred Stock Units are earned (or such later date
  permitted under Section 409A of the Code); provided, however, that in the
  case of a newly appointed director such election may be made within 30 days
  of the date of such appointment. Any such election made by a newly appointed
  director shall apply only to that portion of the Deferred Stock Units that
  are earned after the election is made. Alternatively, an individual may 





9







	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
make an
  election immediately before being appointed to the Board that is conditioned
  on the individual’s actual appointment. Once made, an election may be changed
  on or before December 31 of any year, but such changed election shall take
  effect only with respect to Awards for the Plan Year beginning after such
  change. If no election is made for a Plan Year, the amounts credited to a
  Participant’s account with respects to Awards for such year shall be
  delivered in a lump sum. 


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii) 

	
If a
Participant has elected a lump sum delivery, or if a Participant dies while a
member of the Board, the Participant or the Participant’s Successor, as
applicable, shall receive a number of Shares equal to the total number of
Deferred Stock Units in the Participant’s Account as of the date on which the
Participant ceases for any reason to be a member of the Board (the
“Termination Date”) in full satisfaction of all of the Participant’s interest
in the Account; provided, that any fractional Deferred Stock Units shall be
rounded to the nearest higher whole number of Shares. Payment shall be
delivered to the Participant or the Participant’s Successor in the form of
Shares as soon as practicable, but not later than 90 days, after the
Participant’s Termination Date. If a Participant has elected installment
delivery and ceases to be a member of the Board for any reason other than the
death of the Participant, then the Participant shall receive the balance in
such Participant’s Account in the form of five annual deliveries of Shares
(and if a Participant dies after ceasing to be a Board member, any remaining
annual deliveries shall be made to the Participant’s Successor). The first
installment shall be made as soon as practicable, but not later than 90 days
after the Participant’s Termination Date. The remaining four installments
shall be made on the subsequent anniversary dates of the initial installment
payment. The precise number of shares delivered in each installment shall be
determined in such a manner as to cause each such delivery to represent approximately
one-fifth of the Deferred Stock Units held in such Account as of the
Termination Date together with any dividend equivalents credited thereon.
Notwithstanding the foregoing, no such installment shall be delivered unless
and until the Board or the Committee shall have approved the delivery (unless
such approval is not necessary under Exchange Act Rule 16b-3).  


	
 

	
 

	
 

	
 


	
 

	
 

	
(iii)

	
Notwithstanding
  anything in Section 8(d)(iii) to the contrary, if a Change in Control
  constituting a “change in control” within the meaning of Section 409A of the
  Code occurs, the balance in each Participant’s Account shall be delivered to
  the Participant in a single lump sum delivery of Shares no later than 90 days
  following the Change in Control.





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9. 

	
General Provisions. 


	
 

	
 


	
 

	
(a) 

	
Effective Date of this Plan. This Plan originally became effective as of March 5, 1998. 


	
 

	
 

	
 


	
 

	
(b)

	
Duration of this Plan. This Plan shall remain in effect until it is terminated pursuant to Section 9(e) hereof.



	
 

	
 

	
 


	
 

	
(c) 

	
No Right to Board Membership. Nothing in
  this Plan or in any Agreement shall confer upon any Participant the right to
  continue as a member of the Board. 


	
 

	
 

	
 


	
 

	
(d) 

	
Transferability. A non-Employee Director may
transfer an Award granted pursuant to Section 5, 6, or 7 to any member of
such Non-Employee Director’s “immediate family” (as such term is defined in
Rule 16a-1(e) promulgated under the Exchange Act, or any successor rule or
regulation) or to one or more trusts whose beneficiaries are members of such
Non-Employee Director’s “immediate family” or partnerships in which such
family members are the only partners; provided, that (i) the transferor
receives no consideration for the transfer and (ii) such transferred Award
shall continue to be subject to the same terms and conditions as were
applicable to such Award immediately prior to its transfer. Unless an Award
granted pursuant to Section 5, 6, or 7 shall have expired, in the event of a
Non-Employee Director’s death, an Award granted to such Non-Employee Director
pursuant to Section 5, 6, or 7 shall be transferable to the beneficiary, if
any, designated by the Non-Employee Director in writing to the Company prior
to the Non-Employee Director’s death and such beneficiary shall succeed to
the rights of the Non-Employee Director to the extent permitted by law. If no
such designation of a beneficiary has been made, the Non-Employee Director’s
legal representative shall succeed to such Award, which shall be transferable
by will or pursuant to the laws of descent and distribution.  


	
 

	
 

	
 


	
 

	
(e) 

	
Amendment, Modification and Termination of this Plan.
  Except as provided in this Section 9(e), the Board may at any time amend,
  modify, terminate or suspend this Plan or any or all Agreements under this
  Plan to the extent permitted by law. No termination, suspension or
  modification of this Plan may materially and adversely affect any right
  acquired by any Participant (or a Participant’s legal representative) or any
  Successor under an Award granted before the date of termination, suspension
  or modification, unless otherwise agreed by the Participant in the Agreement
  or otherwise or required as a matter of law. It is conclusively presumed that
  any adjustment for changes in capitalization provided for in Section 9(f)
  hereof does not adversely affect any right of a Participant under an Award. 


	
 

	
 

	
 


	
 

	
(f) 

	
Adjustment for Changes in Capitalization.
  Appropriate adjustments in the aggregate number and type of Shares available
  for Awards under this Plan, in the number and type of Shares subject to
  Awards then outstanding, in the Award exercise or conversion price as to any
  outstanding Awards, and in the number of Deferred Stock Units in the
  Accounts, may be made by the Committee in its sole discretion to give effect
  to adjustments made in the number or type of Shares through a 





11







	
 

	
 

	
 

	
 


	
 

	
 

	
Fundamental
  Change, recapitalization, reclassification, stock dividend, stock split,
  stock combination, or other relevant change, provided that fractional Shares
  shall be rounded to the nearest whole Share.


	
 

	
 


	
 

	
(g) 

	
Fundamental Change. In the event of a
  proposed Fundamental Change:


	
 

	
 

	
(a) involving a merger, consolidation or statutory share exchange, unless
  appropriate provision shall be made (which the Board may, but shall not be
  obligated to, make) for the protection of the outstanding Awards by the
  substitution of appropriate voting common stock of the corporation surviving
  any such merger or consolidation or, if appropriate, the parent corporation
  of the Company or such surviving corporation, to be issuable upon the
  exercise of Awards, or (b) involving the dissolution or liquidation of the
  Company, the Board may, but shall not be obligated to, declare, at least
  twenty days prior to the occurrence of the Fundamental Change, and provide
  written notice to each holder of an Award granted pursuant to Section 5, 6 or
  7 of the declaration, that each such outstanding Award, whether or not then
  exercisable, shall be canceled at the time of, or immediately prior to the
  occurrence of, the Fundamental Change in exchange for payment in cash to each
  holder of such Award, within 20 days after the Fundamental Change. At the
  time of the declaration provided for in the immediately preceding sentence,
  each such Award shall immediately become fully vested and each person holding
  such an Award shall have the right, during the period preceding the time of
  cancellation of the Award, to exercise the Award in full or any portion
  thereof. Payment to holders of Options for each Share covered by the canceled
  Option shall be equal to the amount, if any, by which the Fair Market Value
  (as defined in this Section 9(g)) per Share exceeds the exercise price per
  Share covered by such Option. Payment to holders of each cancelled Stock
  Appreciation Right shall be equal to the aggregate amount of appreciation, if
  any. In the event of a declaration pursuant to this Section 9(g), each
  outstanding Option or Stock Appreciation Right that shall not have been
  exercised prior to the Fundamental Change shall be canceled at the time of,
  or immediately prior to, the Fundamental Change, as provided in the
  declaration. Notwithstanding the foregoing, no person holding such an Award
  shall be entitled to the payment provided for in this Section 9(g) if such
  Award shall have previously expired. For purposes of this Section 9(g) only,
  “Fair Market Value” per Share means the cash plus the fair market value, as
  determined in good faith by the Board, of the non-cash consideration to be
  received per Share by the shareholders of the Company upon the occurrence of
  the Fundamental Change, notwithstanding anything to the contrary provided in
  this Plan. 


	
 

	
 

	
 


	
 

	
(h) 

	
Limits of Liability. 


	
 

	
 

	
 


	
 

	
 

	
(i) 

	
Any
  liability of the Company to any Participant with respect to an Award shall be
  based solely upon contractual obligations created by this Plan and the Agreement.
  


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii) 

	
Except as
  may be required by law, neither the Company nor any member or former member
  of the Board or of the Committee, nor any other person participating
  (including participation pursuant to a delegation of authority 





12







	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
under
  Section 3(a) hereof) in any determination of any question under this Plan, or
  in the interpretation, administration or application of this Plan, shall have
  any liability to any party for any action taken, or not taken, in good faith
  under this Plan.


	
 

	
 

	
 

	
 


	
 

	
(i) 

	
Compliance with Applicable Legal
  Requirements. No certificate for Shares distributable pursuant to this Plan
  shall be issued and delivered unless the issuance of such certificate
  complies with all applicable legal requirements including, without limitation,
  compliance with the provisions of applicable state securities laws, the
  Securities Act of 1933, as amended and in effect from time to time or any
  successor statute, the Exchange Act and the requirements of the exchanges on
  which the Company’s Shares may, at the time, be listed.


	
 

	
 

	
 


	
 

	
(j) 

	
Removal for Cause. Notwithstanding any other
  provision of this Plan, this Section 9(j) shall apply in the event a
  Participant is removed from the Board for cause before a Change of Control.
  In such event: (i) all of the Participant’s Awards granted pursuant to
  Sections 5, 6 and 7 shall immediately expire and be forfeited, and (ii)
  unless the Board or Committee determines in connection with or after such
  removal to forfeit all or a portion of a Participant’s Account, the balance
  in such Participant’s Account shall be delivered to the Participant at the
  time and in the manner described in Section 8. In addition, if the
  Participant has received or been entitled to delivery of Shares within six
  months before such removal, the Board or the Committee, in its sole
  discretion, may require the Participant to return or forfeit all or a portion
  of such Shares and receive back the exercise price (if any) paid therefor, or
  may require the Participant to pay to the Company the economic value of such
  Shares less such exercise price, determined as of the date of the exercise of
  Awards in the event of any of the following occurrences (whether before or
  after such removal): competition with the Company or any Affiliate,
  unauthorized disclosure of material proprietary information of the Company or
  any Affiliate, a violation of applicable business ethics policies or business
  policies of the Company or any Affiliate, or any other action or event that
  the Board may determine warrants such a requirement. The Board’s or
  Committee’s right to require such return or forfeiture must be exercised
  within 90 days after the later of the date of such removal or the discovery
  of such an occurrence, but in no event later than 15 months after such removal.


	
 

	
 

	
 


	
10. 

	
Governing Law. To the extent that federal
  laws do not otherwise control, this Plan and all determinations made and
  actions taken pursuant to this Plan shall be governed by the laws of
  Minnesota and construed accordingly.


	
 

	
 


	
11. 

	
Severability. In the event any provision of
  this Plan shall be held illegal or invalid for any reason, the illegality or
  invalidity shall not affect the remaining parts of this Plan, and this Plan
  shall be construed and enforced as if the illegal or invalid provision had
  not been included.


	
 

	
 


	
12. 

	
Effect of Prior Plan. From and after the
  effective date of this Plan, no further awards shall be made to Non-Employee
  Directors under the Company’s 1994 Stock Award Plan (the





13






“Prior Plan”).
All grants and awards made under the Prior Plan prior to the effective date of
this Plan shall continue in accordance with the terms of the Prior Plan. 


14