Document:

exv10w1

 

Exhibit
10.1

ZIMMER, INC. MONITOR AGREEMENT

          This
Zimmer, Inc. Monitor Agreement (this “Agreement”), dated
October 25, 2007, is entered
into between Zimmer, Inc. (“Zimmer”), a Delaware corporation, pursuant to the authority granted by
the Board of Directors of its parent company, Zimmer Holdings, Inc. (“Zimmer Holdings”) and The
Ashcroft Group Consulting Services, LLC (“AGCS”), which includes consultants, advisors, and other
professionals who are employed by AGCS or who are contract employees of AGCS and whom, in its sole
discretion, AGCS determines are necessary to fulfill the terms of this Agreement (collectively
“AGCS” or “Monitor”).

RECITALS

          WHEREAS, Zimmer and the United States Attorney’s Office for the District of New Jersey (the
“Office”) entered into a deferred prosecution agreement, dated September 27, 2007 (“Deferred
Prosecution Agreement”), which is incorporated herein and attached hereto as Exhibit A;

          WHEREAS, Zimmer desires to retain AGCS, chaired by John D. Ashcroft, to act as the Monitor
under the terms of the Deferred Prosecution Agreement;

          WHEREAS, AGCS has agreed to act as the Monitor in accordance with the Deferred Prosecution
Agreement and this Agreement;

          WHEREAS, the Board of Directors and management of Zimmer recognize the responsibility the
Monitor has in monitoring the Deferred Prosecution Agreement and that this responsibility has been
placed upon it by the Office to ensure that the terms of the Deferred Prosecution Agreement are
fully complied with.

          NOW, THEREFORE, in consideration of the foregoing, and the respective agreements set forth
herein, and intended to be legally bound hereby, Zimmer and the Monitor hereby agree as follows:

ARTICLE I

APPOINTMENT AND TERM OF THE MONITOR

          Section 1.1. Appointment as Monitor. Zimmer hereby retains the Monitor to perform all
of the powers and responsibilities of the Monitor as set forth in the Deferred Prosecution
Agreement and as set forth in this Agreement.

          Section 1.2. No Client Relationship. As a result of the appointment of the Monitor
under the Deferred Prosecution Agreement, and by this express Agreement, no client relationship
will be formed between the Monitor and Zimmer. The Monitor is not a law firm, although the Monitor
will employ legal counsel solely to provide it advice and counsel in order to fulfill its duties
under the Deferred Prosecution Agreement. The Monitor asserts that communications between the
Monitor and its counsel regarding legal advice to the Monitor are privileged and confidential.

 

 

          In addition, the Monitor will perform its duties and responsibilities under the terms of the
Deferred Prosecution Agreement and at the direction of the Office. The Office has indicated both
to the Monitor and Zimmer that the Office intends to rely on oral and written representations made
to the Monitor by Zimmer and by Zimmer’s employees and agents. Notwithstanding the previous terms
of this paragraph, the Monitor shall at all times be an independent contractor of Zimmer, and no
client, contractor, agent, or other relationship shall be formed between the Monitor and the
Office or any other agency or department of the United States.

          Section 1.3. Term, This Agreement shall be for a term commencing on the date the
Deferred Prosecution Agreement becomes effective and ending on the date of the Monitor’s
submission of the final report to the Office, or on such earlier date as the Office may determine
that the Monitor shall no longer serve as “Monitor” under the Deferred Prosecution Agreement. The
Monitor may terminate this Agreement at any time by providing thirty (30) days prior written
notice to the General Counsel of Zimmer. Zimmer may not terminate this Agreement.

ARTICLE II

POWERS AND RESPONSIBILITIES OF THE MONITOR

          Zimmer and the Monitor agree that the Monitor shall have all of the powers and
responsibilities set forth in the Deferred Prosecution Agreement, which is incorporated herein and
attached hereto as Exhibit A.

ARTICLE III

ADVISORS AND COMPENSATION

          Section 3.1. Advisors. The Monitor may determine it is necessary to engage other
consultants, accountants, or professionals who are not employees or contract employees of AGCS (the
Monitor). Under these circumstances, the Monitor will separately retain these consultants,
accountants, or professionals pursuant to Section 19(d) of the Deferred Prosecution Agreement.

          Section 3.2. Monitor’s Compensation. The Monitor and all professionals engaged shall
be reasonably compensated by Zimmer for its work on this engagement pursuant to the terms and
provisions negotiated and agreed upon between the Monitor and Zimmer in the Agreement Regarding
Fees and Reimbursements executed contemporaneous herewith. The Monitor will submit estimated
budgets and invoices for fees and reimbursements to Zimmer as set forth in the Agreement Regarding
Fees and Reimbursements. John D. Ashcroft may have a financial interest in some of the
professional or consulting groups retained.

          Section 3.3. Reimbursement for Other Professionals. In addition to any fees, costs,
and reimbursable expenses payable to the Monitor and all professionals employed or engaged by AGCS
or the Ashcroft Law Firm, LLC under this Agreement, Zimmer agrees to reimburse and/or advance the
Monitor for all out-of-pocket expenses incurred in connection with this engagement under this
Agreement, including reasonable fees and disbursements to professionals engaged by AGCS or the
Ashcroft Law Firm, LLC.

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          Section 3.4. Reimbursable Expenses. Zimmer agrees to reimburse and/or advance the
Monitor for all out-of-pocket expenses reasonably incurred in performing the duties and
responsibilities under this Agreement. Such reimbursable expenses include transportation expenses,
including both commercial and private aircraft transportation, as well as travel, lodging, meals,
telephone, and all other necessary expenses.

ARTICLE IV

INDEMNIFICATION

          Zimmer and Zimmer Holdings agree to indemnify the Monitor against any and all losses, claims,
damages and liabilities, joint or several, to which the Monitor may become subject under any
applicable Federal or state law, or otherwise, and related to or arising out of the engagement of
the Monitor pursuant to, and the performance by the Monitor of the services contemplated by, this
Agreement and will reimburse and/or advance the Monitor for all reasonable expenses (including
counsel fees and expenses) as they are incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim or any action or proceeding arising
therefrom, whether or not the Monitor is a party and whether or not such claim, action or
proceeding is initiated or brought by or on behalf of Zimmer or Zimmer Holdings. Zimmer and Zimmer
Holdings also agree that the Monitor shall have no liability (whether direct or indirect, in
contract or tort or otherwise) to Zimmer or Zimmer Holdings or their security holders or creditors
related to or arising out of the engagement of the Monitor pursuant to, or the performance by the
Monitor of the services contemplated by, this Agreement except to the extent that any loss, claim,
damage or liability is found in a final judgment by a court to have resulted from the Monitor’s bad
faith or gross negligence.

          Zimmer and Zimmer Holdings agree that, without the Monitor’s prior written consent, it will
not settle, compromise or consent to the entry of any judgment in any pending or threatened claim,
action or proceeding in respect of which indemnification could be sought under the indemnification
provision in this Agreement (where the Monitor is an actual or potential party to such claim,
action or proceeding), unless such settlement, compromise or consent includes an unconditional
release of the Monitor from all liability arising out of such claim, action or proceeding.

          In the event that the Monitor is requested or required to appear as a witness in any action
brought by or on behalf of or against Zimmer, Zimmer Holdings, or any Zimmer affiliate in which
the Monitor is not named as a defendant, Zimmer and Zimmer Holdings agree to reimburse and advance
the Monitor for all reasonable expenses incurred by it in connection with the Monitor’s appearing
and preparing to appear as such a witness, including, without limitation, the fees and
disbursements of its outside legal counsel, and to compensate the Monitor commensurate with the
Agreement Regarding Fees and Reimbursements.

          Zimmer’s and Zimmer Holding’s obligations under Article IV will survive any termination of
this Agreement.

          The indemnification set forth in Article IV shall apply to all professionals and consultants
engaged by AGCS or the Ashcroft Law Firm, LLC.

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ARTICLE V

MISCELLANEOUS

          Section 5.1. Waiver, Amendment etc. No waiver, amendment or other modification of
this Agreement shall be effective unless in writing and signed by each party to be bound
thereby.

          Section 5.2. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Missouri applicable to contracts executed in and to be
performed in that state.

          Section 5.3. Assignment. The Monitor may at its sole discretion assign this
Agreement to the Ashcroft Law Firm, LLC.

          Section 5.4. Controlling Agreement. Nothing in this Agreement shall be construed to
alter, change, or amend the Deferred Prosecution Agreement.

          IN WITNESS THEREOF, Zimmer and the Monitor have executed this Agreement as of the date
first written above.

	 	 	 	 	 
	 	THE ASHCROFT GROUP CONSULTING SERVICES, LLC

 	 
	 	By:  	/s/
Stacy W. Taylor
 	 
	 	 	Name:  	Stacy W. Taylor 	 
	 	 	Title:  	President 	 
	 
	 	ZIMMER HOLDINGS, INC., parent company

of ZIMMER, INC.

 	 
	 	By: 	/s/ Chad F. Phipps
 	 
	 	 	Name:  	Chad F. Phipps 	 
	 	 	Title:  	SVP, General Counsel & Secretary 	 

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EXHIBIT A

Deferred Prosecution Agreement

 

 

AGREEMENT REGARDING FEES AND REIMBURSEMENTS

          This Agreement, dated October 25, 2007, is entered into between Zimmer, Inc.
(“Zimmer”), a Delaware corporation, pursuant to the authority granted by the Board of Directors of
its parent company, Zimmer Holdings, Inc. (“Zimmer Holdings”), and The Ashcroft Group Consulting
Services, LLC (“AGCS”).

          WHEREAS, Zimmer and the United States Attorney’s Office for the District of New Jersey entered
into a Deferred Prosecution Agreement, dated September 27, 2007;

          WHEREAS, Zimmer and AGCS entered into the Zimmer, Inc. Monitor Agreement (the “Monitor
Agreement”), dated October 25, 2007, which specifically references this Agreement;

          WHEREAS, pursuant to the terms and provisions of the Monitor Agreement, Zimmer and AGCS
negotiated and agreed that AGCS shall be reasonably compensated by Zimmer for its work in
performing the duties and responsibilities set forth in the Deferred Prosecution Agreement;

          WHEREAS, pursuant to the terms and provisions of the Monitor Agreement, Zimmer and AGCS
negotiated and agreed that AGCS shall be paid reasonable fees and shall be reimbursed and/or
advanced for all expenses incurred in connection with performing the duties and responsibilities
set forth in the Deferred Prosecution Agreement, including reasonable fees and disbursements to
professionals and advisors employed by or affiliated with AGCS, and outside professionals and
advisors not affiliated with AGCS;

          WHEREAS, pursuant to the terms and provisions of the Monitor Agreement, Zimmer and AGCS
negotiated and agreed that AGCS shall be reimbursed and/or advanced for all other out-of-pocket
expenses reasonably incurred in performing the duties and responsibilities set forth in the
Deferred Prosecution Agreement, including but not limited to travel, private and commercial air
transportation, meals, telephone, and lodging expenses.

          NOW, THEREFORE, in consideration of the foregoing, and the respective agreements set forth
herein, and intended to be legally bound hereby, Zimmer and AGCS agree as follows:

          A. Zimmer will pay AGCS a fixed monthly fee of $750,000 for engagement
of AGCS’s Senior Leadership Group to perform the duties and responsibilities set forth in the
Monitor Agreement and the Deferred Prosecution Agreement. This amount shall be due on the
first business day of each month until the termination of this Agreement.

          B. Zimmer will also pay fees on an hourly basis for engagement of legal and business professionals, including but not limited to accountants, consultants, attorneys, and
other professionals employed or engaged by AGCS or the Ashcroft Law Firm, LLC, to perform the
duties and responsibilities set forth in the Monitor Agreement and the Deferred Prosecution
Agreement. The hourly rates for professionals employed or engaged by AGCS or the Ashcroft

 

 

Law Firm, LLC will be as defined in Exhibit A, which is incorporated herein and attached hereto.

          C. Zimmer also agrees to reimburse and/or advance AGCS and the Ashcroft Law Firm, LLC for all other expenses incurred in connection with its performance of the
duties and responsibilities set forth in the Monitor Agreement and the Deferred Prosecution
Agreement, including but not limited to reasonable fees and disbursements to professionals and outside
advisors engaged by AGCS or the Ashcroft Law Firm, LLC.

          D. Zimmer also agrees to reimburse and/or advance AGCS and the Ashcroft
Law Firm, LLC for all other out-of-pocket expenses reasonably incurred in performing the
duties and responsibilities set forth in the Monitor Agreement and the Deferred Prosecution
Agreement. Such reimbursable expenses include but are not limited to transportation expenses, including
both commercial and private aircraft transportation, as well as lodging, meals, telephone,
and all other necessary expenses. Zimmer understands that the estimated monthly budget for such
reimbursable expenses will average between $150,000 and $250,000 (but may exceed this range)
and agrees that these budget estimates are approved.

          E. Zimmer understands and agrees that AGCS’s total estimated monthly
budget, which includes the Ashcroft Law Firm, LLC, for all compensation, fees, and expenses
will average between $1,550,000 and $2,900,000 (but may exceed this range). Zimmer further
agrees that AGCS’s inclusion in the estimated monthly budget for the Ashcroft Law Firm, LLC
satisfies the requirements of section 19. d under the Deferred Prosecution Agreement. Zimmer
further agrees to make payment on monthly invoices submitted by AGCS within thirty (30) days
of receipt.

          F. Zimmer understands and agrees that the estimated monthly budgets set
forth above may need to be adjusted from time to time based on potential or actual changes in
the scope of AGCS’s services, including the Ashcroft Law Firm, LLC, and/or the need to add
additional professionals necessary to perform the duties and responsibilities set forth in
the Monitor Agreement and the Deferred Prosecution Agreement.

          G. Zimmer also agrees to pay, reimburse, and/or advance AGCS and any
professionals or consultants for work performed and expenses incurred prior to the execution
of this Agreement. Zimmer further agrees that payments, reimbursements, and advancements to
AGCS for work performed prior to the execution this Agreement shall be paid in the manner and
amounts set forth in Paragraphs A through F above. Additionally, Zimmer agrees that the work
performed prior to the execution of this agreement was reasonable and necessary under the
Monitor Agreement and the Deferred Prosecution Agreement, and Zimmer will make payment
on invoices for such work within thirty (30) days of receipt.

          IN WITNESS THEREOF, Zimmer and AGCS have executed this Agreement as of the date first written
above.

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	 	THE ASHCROFT GROUP CONSULTING SERVICES, LLC

 	 
	 	By:  	/s/ Stacy W. Taylor
 	 
	 	 	Name:  	Stacy W. Taylor 	 
	 	 	Title:  	President 	 
	 
	 	ZIMMER HOLDINGS, INC.,

parent company of ZIMMER, INC.

 	 
	 	By:  	/s/ Chad F. Phipps
 	 
	 	 	Name:  	Chad F. Phipps 	 
	 	 	Title:  	SVP, General Counsel & Secretary 	 
	 

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EXHIBIT A

The Ashcroft Group Consulting Services, LLC — Hourly Billing Rates

	 	 	 	 	 
	Personnel	 	Rates	 	 
	Senior Advisor

	 	$695-895/hour
	 	 
	Senior Manager

	 	$550-795/hour	 	 
	Senior Associate

	 	$350-550/hour	 	 
	Associate

	 	$250-325/hour	 	 
	Non-professional support

	 	$50-150/hour	 	 

The Ashcroft Law Firm, LLC — Hourly Billing Rates

	 	 	 	 	 
	Personnel	 	Rates	 	 
	Senior Counsel

	 	$695-895/hour
	 	 
	Counsel/Senior Associate

	 	$495-695/hour	 	 
	Associate

	 	$295-495/hour	 	 
	Paralegal

	 	$95-195/hour	 	 
	Administrative

	 	$50-175/hour	 	 

4exv10wa

 

 Exhibit 10. a

POLARIS INDUSTRIES INC.

SENIOR EXECUTIVE

ANNUAL INCENTIVE COMPENSATION PLAN

As Amended and Restated

Effective January 1, 2008

	 	1.	 	Purpose. The Polaris Industries Inc. Senior Executive Annual Incentive Compensation
Plan is intended to provide incentives for Eligible Senior Executives to attain and maintain
the highest standards of performance, to attract and retain key executives of outstanding
competence and ability, to stimulate the active interest of key executives in the development
and financial success of the Company, to further align the identity of interests of employees
with those of the Company’s shareholders generally and to reward executives for outstanding
performance when certain objectives are achieved. This amendment and restatement of the Plan
is effective as of January 1, 2008.
	 
	 	2.	 	Definitions. As used herein, the terms set forth below shall have the following
respective meanings:

	 	(a)	 	“Board” means the Board of Directors of the Company.
	 
	 	(b)	 	“Business Criteria” means the business criteria listed in Section 6 of this Plan.
	 
	 	(c)	 	“Code” means the Internal Revenue Code of 1986, as amended from time to time.
	 
	 	(d)	 	“Committee” means the Committee appointed by the Board to administer the Plan.
The Committee shall be constituted at all times so as to meet the outside director
requirements of Section 162(m) of the Code.
	 
	 	(e)	 	“Company” means Polaris Industries Inc., a Minnesota corporation and its
successors and assigns.
	 
	 	(f)	 	“Effective Date” means January 1, 2004.
	 
	 	(g)	 	“Eligible Senior Executive” means any senior executive employee of the Company
designated by the Committee as an Eligible Senior Executive.
	 
	 	(h)	 	“Incentive Compensation Award” means an incentive compensation award payable
under this Plan.
	 
	 	(i)	 	“Incentive Compensation Award Period” means, with respect to an Incentive
Compensation Award, as determined by the Committee, the calendar year beginning on or
after the Effective Date with respect to which such Incentive Compensation Award is to
be determined. It is expressly intended that any particular calendar year may be
included in the Incentive Compensation Award Period of multiple Incentive Compensation
Awards.

 

 

	 	(j)	 	“Participant” means, with respect to an Incentive Compensation Award Period, the
Eligible Senior Executives selected by the Committee to be eligible to receive an
Incentive Compensation Award for such Incentive Compensation Award Period as provided in
Section 5 of this Plan.
	 
	 	(k)	 	“Performance Objective” means the performance objective or objectives established
pursuant to Section 5 of the Plan.
	 
	 	(l)	 	“Plan” means the Polaris Industries Inc. Senior Executive Annual Incentive
Compensation Plan, as it may be amended from time to time.

	 	3.	 	Administration. The Committee shall interpret the Plan, prescribe, amend, and
rescind rules relating to it, select eligible Participants, and take all other actions
necessary for its administration, which actions shall be final and binding upon all
Participants. To the extent permitted by law, all members of the Board of Directors, including
the members of the Committee, shall be indemnified and held harmless by the Company with
respect to any loss, cost, liability or expense that may be reasonably incurred in connection
with any claim, action, suit or proceeding which arises by reason of any act or omission under
the Plan so long as such act or omission is taken in good faith and within the scope of the
authority delegated herein.
	 
	 	4.	 	Compliance with Sections 162(m) and 409A. The Plan shall be administered to comply
with Sections 162(m) and 409A of the Code and regulations promulgated thereunder, and if any
Plan provision is found not to be in compliance with Sections 162(m) or 409A of the Code, the
provision shall be deemed modified as necessary to meet the requirements of Sections 162(m)
and 409A of the Code.
	 
	 	5.	 	Selection of Participants and Performance Objective. Prior to the commencement of
each Incentive Compensation Award Period, or at such later time as permitted by Section 162(m)
of the Code and regulations thereunder, the Committee shall determine in writing (i) the
Participants who shall be eligible to receive an Incentive Compensation Award for such
Incentive Compensation Award Period, (ii) the Performance Objective, which shall consist of
any one or more of the Business Criteria, and (iii) the formula for computing the amount of
the Incentive Compensation Award payable to each Participant if the Performance Objective is
achieved, which formula shall comply with the requirements applicable to performance-based
compensation plans under Section 162(m) of the Code. The amount of an Incentive Compensation
Award may be denominated in cash and/or in shares of the Company’s common stock, provided that
all amounts paid under the Plan shall be in cash.
	 
	 	6.	 	Business Criteria. The Business Criteria will include specified levels of one or
more of the following:

	 	 	 
	    Operating Income

	 	Net Income
	    Pre-Tax Income

	 	Customer Retention
	    Cash Flow

	 	Return on Investment

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	     Return on Capital

	 	Revenue
	     Return on Equity

	 	Revenue Growth
	     Return on Assets

	 	Total Shareholder Return
	     Return on Sales

	 	Stock Price
	     Expense Targets

	 	Market Share
	     Customer Satisfaction

	 	Productivity Targets
	     Sales

	 	Earnings Per Share
	     Sales Growth

	 	Earnings Per Share Growth
	 

	 	Economic Value Added

The above terms shall have the same meaning as in the Company’s financial statements, or if the
terms are not used in the Company’s financial statements, as applied pursuant to generally accepted
accounting principles, or as used in the Company’s industry, as applicable. As
determined by the Committee, the Business Criteria shall be applied (i) in absolute terms or
relative to one or more other companies or indices and (ii) to a business unit, geographic region,
one or more separately incorporated entities, or the Company as a whole.

	 	7.	 	Incentive Compensation Award Certification. The Committee shall certify in writing
prior to payment of the Incentive Compensation Award that the Performance Objective has been
attained and the Incentive Compensation Award is payable. With respect to Committee
certification, approved minutes of the meeting in which the certification is made shall be
treated as written certification.
	 
	 	8.	 	Maximum Incentive Compensation Award Payable. The maximum amount payable with
respect to an Incentive Compensation Award to any Participant is $2,500,000.
	 
	 	9.	 	Extraordinary or Unusual Events. The Committee may, in its discretion, disregard the
impact of any extraordinary or unusual event (in accordance with generally accepted accounting
procedures) in determining whether a Performance Objective has been obtained or may make
appropriate adjustments in any Performance Objective to reflect such extraordinary or unusual
event.
	 
	 	10.	 	Discretion to Reduce Awards. The Committee, in its sole and absolute discretion, may
reduce the amount of any award otherwise payable to a Participant.
	 
	 	11.	 	Active Employment Requirement. Except as provided below, an Incentive Compensation
Award shall be paid for an Incentive Compensation Award Period only to a Participant who is
actively employed by the Company (or on approved vacation or other approved leave of absence)
throughout the Incentive Compensation Award Period and who is employed by the Company on the
date the Incentive Compensation Award is paid. To the extent consistent with the
deductibility of awards under Section 162(m) of the Code and regulations thereunder, the
Committee may in its sole discretion grant an Incentive Compensation Award for the Incentive
Compensation Award Period to a Participant who is first employed or who is promoted to a
position eligible to become a Participant under this Plan during the Incentive Compensation
Award Period, or whose employment is terminated during the Incentive Compensation Award Period
because of the Participant’s retirement under the Company’s 401(k) plan, death, or because of

3

 

	 	 	 	disability as defined in Section 22(e)(3) of the Code. In such cases of active employment for
part of an Incentive Compensation Award Period, a pro rata Incentive Compensation Award may be
paid for the Incentive Compensation Award Period.
	 
	 	12.	 	Payment and Deferrals of Incentive Compensation Award.
	 
	 	 	 	An Incentive Compensation Award shall be paid to the Participant for the Incentive
Compensation Award Period as provided in this Plan. The Company shall pay the Incentive
Compensation Award to the Participant in such form as the Committee may determine and at such
time as the Committee may determine after the Committee certifies that the Incentive
Compensation Award is payable as provided in Section 7, but no later than March
15th of the year following the year in which the Incentive Compensation Award
Period ends. In the event of the Participant’s death, any Incentive Compensation Award shall
be paid to the Participant’s spouse or, if there is no surviving spouse, the Participant’s
estate. Payments under this Section shall operate as a complete discharge of the Committee
and the Company. The Company shall deduct from any Incentive Compensation Award paid under
the Plan the amount of any taxes required to be withheld by the federal or any state or local
government.
	 
	 	 	 	The Committee may, in its sole and absolute discretion, permit an Eligible Senior Executive
who is entitled to receive an Incentive Compensation Award to elect to defer receipt of such
Incentive Compensation Award in accordance with the terms of the Polaris Industries
Inc.Supplemental Retirement/Savings Plan.
	 
	 	13.	 	Shareholder Approval. No Incentive Compensation Award shall be payable under this
Plan unless the Plan is disclosed to and approved by the shareholders of the Company in
accordance with Section 162(m) of the Code and regulations thereunder.
	 
	 	14.	 	Limitation of Rights. Nothing in this Plan shall be construed to (a) give any
employee of the Company any right to be awarded any Incentive Compensation Award other than
that set forth herein, as determined by the Committee; (b) give a Participant any rights
whatsoever with respect to shares of common stock of the Company; (c) limit in any way the
right of the Company to terminate an employee’s employment with the Company at any time for
any reason or no reason; (d) give a Participant or any other person any interest in any fund
or in any specific asset or assets of the Company; or (e) be evidence of any agreement or
understanding, express or implied, that the Company will employ an employee in any particular
position or at any particular rate of remuneration.
	 
	 	15.	 	Non-Exclusive Arrangement. The adoption and operation of this Plan shall not
preclude the Board or the Committee from approving other short-term incentive compensation
arrangements for the benefit of individuals who are Participants hereunder as the Board or
Committee, as the case may be, deems appropriate and in the best interests of the Company.
	 
	 	16.	 	Nonassignment. The right of a Participant to the payment of any Incentive
Compensation Award under the Plan may not be assigned, transferred, pledged, or encumbered,
nor

4

 

	 	 	 	shall such right or other interests be subject to attachment, garnishment, execution, or
other legal process.
	 
	 	17.	 	Amendment or Termination of the Plan. The Board may amend or terminate the Plan at
any time, except that no amendment or termination shall be made that would impair the rights
of any Participant to an Incentive Compensation Award that would be payable were the
Participant to terminate employment on the effective date of such amendment or termination,
unless the Participant consents to such amendment or termination. The Plan shall automatically
terminate on January 1, 2009 unless sooner terminated by action of the Board or extended with
the approval of the Board and the Company’s shareholders.
	 
	 	18.	 	Governing Law. The validity, construction, interpretation, administration and effect
of the Plan and of its rules and regulations, and rights relating to the Plan, shall be
determined solely in accordance with the laws of the State of Minnesota, other than the
conflict of law provisions of such laws.

5

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