MEDTRONIC, INC.


	
 


	
ISRAELI AMENDMENT


	
 


	
To The 2003 Long-Term Incentive Plan


	
 


	 










	
 

	
 

	
 


	
1.

	
GENERAL


	
 

	
 


	
 

	
1.1.

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


	
 

	
 

	
 


	
 

	
1.2.

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


	
 

	
 

	
 


	
 

	
1.3.

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


	
 

	
 

	
 


	
 

	
1.4.

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


	
 

	
 

	
 


	
 

	
1.5.

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


	
 

	
 

	
 


	
2.

	
DEFINITIONS


	
 

	
 

	
 


	
 

	
2.1

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


	
 

	
 

	
 


	
 

	
2.2

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


	
 

	
 

	
 


	
 

	
2.3

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


	
 

	
 

	
 


	
 

	
2.4

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


	
 

	
 

	
 


	
 

	
2.5

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











	
 

	
 

	
 


	
 

	
2.6

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


	
 

	
 

	
 


	
 

	
2.7

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


	
 

	
 

	
 


	
 

	
2.8

	
“ITA” means the Israeli Tax Authorities.


	
 

	
 

	
 


	
 

	
2.9

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


	
 

	
 

	
 


	
 

	
2.10

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


	
 

	
 

	
 


	
 

	
2.11

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


	
 

	
 

	
 


	
 

	
2.12

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


	
 

	
 

	
 


	
 

	
2.13

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


	
 

	
 

	
 


	
 

	
2.14

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


	
 

	
 

	
 


	
 

	
2.15

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


	
 

	
 

	
 


	
 

	
2.16

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


	
 

	
 

	
 


	
 

	
2.17

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


	
 

	
 

	
 


	
3.

	
ISSUANCE OF OPTIONS; ELIGIBILITY


	
 

	
 

	
 


	
 

	
3.1.

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










	
 

	
 

	
 


	
 

	
 

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


	
 

	
 

	
 


	
 

	
3.2.

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


	
 

	
 

	
 


	
 

	
3.3.

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


	
 

	
 

	
 


	
 

	
3.4.

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


	
 

	
 

	
 


	
 

	
3.5.

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


	
 

	
 

	
 


	
 

	
3.6.

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


	
 

	
 

	
 


	
 

	
3.7.

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


	
 

	
 

	
 


	
 

	
3.8.

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


	
 

	
 

	
 


	
 

	
3.9.

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


	
 

	
 

	
 


	
 

	
3.10.

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


	
 

	
 

	
 


	
 

	
3.11.

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










	
 

	
 

	
 


	
 

	
 

	

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


	
 

	
 

	
 


	
4.

	
TRUSTEE 


	
 

	
 

	
 


	
 

	
4.1.

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


	
 

	
 

	
 


	
 

	
4.2.

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


	
 

	
 

	
 


	
 

	
4.3.

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


	
 

	
 

	
 


	
 

	
4.4.

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


	
 

	
 

	
 


	
5.

	
FAIR MARKET VALUE FOR TAX PURPOSES


	
 

	
 

	
 


	
 

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


	
 

	
 

	
 


	
6.

	
EXERCISE OF OPTIONS










	
 

	
 

	
 


	
 

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


	
 

	
 

	
 


	
 

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


	
 

	
 

	
 


	
7.

	
INTEGRATION OF SECTION 102 AND TAX COMMISSIONER’S PERMIT


	
 

	
 

	
 


	
 

	
7.1.

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


	
 

	
 

	
 


	
 

	
7.2.

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


	
 

	
 

	
 


	
8.

	
TAX CONSEQUENCES


	
 


	
 

	
8.1.

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


	
 

	
 

	
 


	
 

	
8.2.

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


	
 

	
 

	
 


	
 

	
8.3.

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










	
 

	
 

	
 


	
 

	
8.4.

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


	
 

	
 

	
 


	
 

	
8.5.

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


	
 

	
 

	
 


	
 

	
8.6.

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


	
 

	
 

	
 


	
9.

	
RESTRICTED PERIOD PER SECTION 102


	
 

	
 

	
 


	
 

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


	
 

	
 

	
 


	
 

	
9.1.

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


	
 

	
 

	
 


	
 

	
9.2.

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


	
 

	
 

	
 


	
 

	
9.3.

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











	
 

	
 

	
 


	
10.

	
GRANTEE’S REPRESENTATIONS


	
 

	
 

	
 


	
 

	
10.1.

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


	
 

	
 

	
 


	
 

	
10.2.

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


	
 

	
 

	
 


	
 

	
10.3.

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


	
 

	
 

	
 


	
 

	
10.4.

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


	
 

	
 

	
 


	
 

	
10.5.

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


	
 

	
 

	
 


	
11.

	
GOVERNING LAW
 & JURISDICTION


	
 

	
 

	
 


	
 

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





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


	
 


	




	

Medtronic, Inc.