Document:

Exhibit 10-R

                             DONALDSON COMPANY, INC.
                         DEFERRED STOCK OPTION GAIN PLAN
                               (2003 RESTATEMENT)

             As Amended and Restated Effective as of August 1, 2003

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                             DONALDSON COMPANY, INC.
                         DEFERRED STOCK OPTION GAIN PLAN
                               (2003 RESTATEMENT)

                                TABLE OF CONTENTS

                                                                           PAGE

SECTION 1.   ESTABLISHMENT AND PURPOSE.......................................1

             1.1.              Establishment
             1.2.              Purpose
             1.3.              Relation to Master Stock Plans

SECTION 2.   DEFINITIONS.....................................................2

             2.1.   Account
             2.2.   Affiliate
             2.3.   Beneficiary
             2.4.   Board
             2.5.   Change of Control
                    2.5.1.   Affiliate
                    2.5.2.   Beneficial Owner
                    2.5.3.   Exchange Act
                    2.5.4    Person
             2.6.   Committee
             2.7.   Common Stock
             2.8.   Company
             2.9.   Deferral Election
             2.10.  Disability, Disabled
             2.11.  Effective Date
             2.12.  Eligible Employee
             2.13.  Exercise Date
             2.14.  Participant
             2.15.  Plan
             2.16.  Plan Year
             2.17.  Stock Units
             2.18.  Termination of Employment
             2.19.  Vested

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SECTION 3.   ELIGIBILITY AND PARTICIPATION....................................6

             3.1.   Eligibility
             3.2.   Commencement of Participation
             3.3.   Termination of Participation
             3.4.   Overriding Exclusion

SECTION 4.   STOCK UNITS......................................................7

             4.1.   Deferral Elections
             4.2.   Stock Units
             4.3.   Adjustment
             4.4.   Dividend Units
             4.5.   Vesting

SECTION 5.   TIME AND MANNER OF PAYMENTS......................................9

             5.1.   Time of Payment
             5.2.   Manner of Payment
             5.3.   Changes in Time and Manner of Payment
             5.4.   Change in Control Distributions
             5.5.   Acceleration of Payments
                    5.5.1.   When Available
                    5.5.2.   Forfeiture
             5.6.   Death Benefit
             5.7.   Beneficiary Designation

SECTION 6.   STOCK UNIT ACCOUNTS.............................................12

             6.1.   Participant Accounts
             6.2.   Charges Against Accounts

SECTION 7.   FUNDING.........................................................13

             7.1.   Funding
             7.2.   Corporate Obligation

SECTION 8.   ADMINISTRATION..................................................14

             8.1.   Authority
             8.2.   Liability
             8.3.   Procedures
             8.4.   Claim for Benefits
             8.5.   Claims Procedure
                    8.5.1.   Original Claim
                    8.5.2.   Claims Review Procedure
                    8.5.3.   General Rules

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             8.6.   Payments upon Imposition of Federal or State Taxes
             8.7.   Legal Fees
             8.8.   Errors in Computations

SECTION 9.   MISCELLANEOUS...................................................17

             9.1.   Not an Employment Contract
             9.2.   Nontransferability
             9.3.   Tax Withholding
             9.4.   Expenses
             9.5.   Governing Law
             9.6.   Amendment and Termination
             9.7.   Rules of Interpretation

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                             DONALDSON COMPANY, INC.
                         DEFERRED STOCK OPTION GAIN PLAN
                               (2003 RESTATEMENT)

                                    SECTION 1

                            ESTABLISHMENT AND PURPOSE

1.1. ESTABLISHMENT. Effective as of August 1, 2003, Donaldson Company, Inc.
hereby amends and restates its nonqualified elective deferral plan for a select
group of highly compensated employees known as the "DONALDSON COMPANY, INC.
DEFERRED STOCK OPTION GAIN PLAN."

1.2. PURPOSE. The purposes of this Plan are to allow a select group of
management and highly compensated employees of the Company to defer the receipt
of income that would otherwise be subject to income tax upon exercise of stock
options granted by the Company and to attract and retain certain executive
employees of outstanding competence.

1.3 RELATION TO MASTER STOCK PLANS. All benefits provided by this Plan are
subject to any applicable terms, conditions and restrictions required by the
Donaldson Company, Inc. 2001 Master Stock Incentive Plan if they are
attributable to deferrals that occur after December 31, 2001, or the Donaldson
Company, Inc. 1991 Master Stock Compensation Plan if they are attributable to
deferrals that occur on or before December 31, 2001.

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                                    SECTION 2

                                   DEFINITIONS

The following words and phrases shall have the following meanings, unless a
different meaning is plainly required by the context. Any masculine terminology
used in the Plan shall also include the feminine gender and the definition of
any terms in the singular shall also include the plural.

2.1. ACCOUNT -- the deferred compensation account established under this Plan
for a Participant pursuant to Section 6.1.

2.2. AFFILIATE -- a business entity which is under "common control" with the
Company or which is a member of an "affiliated service group" that includes the
Company, as those terms are defined in section 414(b), (c) and (m) of the Code.
A business entity shall also be treated as an Affiliate if, and to the extent
that, such treatment is required by regulations under section 414(o) of the
Code. In addition to said required treatment, the Committee may, in its
discretion, designate as an Affiliate any business entity which is not such a
"common control" or "affiliated service group" business entity but which is
otherwise affiliated with the Company, subject to such limitations as the
Committee may impose.

2.3. BENEFICIARY -- any person or entity validly designated by the Participant
in accordance with Section 5 to receive the benefits, if any, payable from the
Participant's Account after the Participant's death. Designated persons or
entities shall not be considered Beneficiaries until the death of the
Participant.

2.4. BOARD -- the Board of Directors of the Company.

2.5. CHANGE OF CONTROL -- a "Change in Control" shall be deemed to have occurred
if the event set forth in any one of the following paragraphs shall have
occurred:

         (a)      any Person is or becomes the Beneficial Owner, directly or
                  indirectly, of securities of the Company representing 25% or
                  more of the combined voting power of the Company's then
                  outstanding securities, excluding any Person who becomes such
                  a Beneficial Owner in connection with a transaction described
                  in clause (i) of paragraph (c) below; or

         (b)      the following individuals cease for any reason to constitute a
                  majority of the number of directors then serving: individuals
                  who, on the date hereof, constitute the Board and any new
                  director (other than a director whose initial assumption of
                  office is in connection with an actual or threatened election
                  contest, including but not limited to a consent solicitation,
                  relating to the election of directors of the Company) whose
                  appointment or election by the Board or nomination for
                  election by the Company's stockholders was approved or
                  recommended by a vote of at least two-thirds (2/3) of the

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                  directors then still in office who either were directors on
                  the date hereof or whose appointment, election or nomination
                  for election was previously so approved or recommended; or

         (c)      there is consummated a merger or consolidation of the Company
                  or any direct or indirect subsidiary of the Company with any
                  other corporation, other than (i) a merger or consolidation
                  which would result in the voting securities of the Company
                  outstanding immediately prior to such merger or consolidation
                  continuing to represent (either by remaining outstanding or by
                  being converted into voting securities of the surviving entity
                  or any parent thereof), in combination with the ownership of
                  any trustee or other fiduciary holding securities under an
                  employee benefit plan of the Company or any subsidiary of the
                  Company, at least 60% of the combined voting power of the
                  securities of the Company or such surviving entity or any
                  parent thereof outstanding immediately after such merger or
                  consolidation, or (ii) a merger or consolidation effected to
                  implement a recapitalization of the Company (or similar
                  transaction) in which no Person is or becomes the Beneficial
                  Owner, directly or indirectly, of securities of the Company
                  representing 25% or more of the combined voting power of the
                  Company's then outstanding securities; or

         (d)      the stockholders of the Company approve a plan of complete
                  liquidation or dissolution of the Company or there is
                  consummated an agreement for the sale or disposition by the
                  Company of all or substantially all of the Company's assets,
                  other than a sale or disposition by the Company of all or
                  substantially all of the Company's assets to an entity, at
                  least 60% of the combined voting power of the voting
                  securities of which are owned by stockholders of the Company
                  in substantially the same proportions as their ownership of
                  the Company immediately prior to such sale.

Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions. Solely for
purposes of this Section 2.5, the following words and phrases shall have the
following meanings:

         2.5.1. AFFILIATE -- an "affiliate" within the meaning of Rule 12b-2
promulgated under Section 12 of the Exchange Act.

         2.5.2. BENEFICIAL OWNER -- a "beneficial owner" within the meaning of
Rule 13d-3 under the Exchange Act.

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         2.5.3. EXCHANGE ACT -- the Securities Exchange Act of 1934, as amended
from time to time.

         2.5.4 PERSON -- a "person" within the meaning of Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.

2.6. COMMITTEE -- the Human Resources Committee of the Board of Directors of the
Company.

2.7. COMMON STOCK -- the common stock of the Company.

2.8. COMPANY -- Donaldson Company, Inc. and, except in determining under Section
2.5 hereof whether or not any Change in Control has occurred, shall include any
successor by merger, purchase or otherwise.

2.9. DEFERRAL ELECTION -- an election to defer the receipt of gain on an option
to buy Common Stock made by an Eligible Employee in accordance with Section 4.1.

2.10. DISABILITY, DISABLED -- a physical or mental impairment which constitutes
total and permanent disability and during which the Eligible Employee is not
receiving any payments of an Early Retirement Pension or a Vested Benefit under
the Pension Plan, and the Eligible Employee either:

         (a)      is eligible to receive long-term disability benefits under the
                  Company's separate long-term disability insurance plan (which
                  program shall be administered on a uniform and
                  nondiscriminatory basis); if such separate long-term
                  disability coverage is elected by the Eligible Employee, or

         (b)      is eligible to receive and is actually receiving (after the
                  applicable waiting period) benefits under the federal Social
                  Security Act as in effect at the time of the Disability.

2.11. EFFECTIVE DATE -- July 25, 1997, the original effective date of the Plan.
The amended and restated Plan document as set forth herein is effective as of
August 1, 2003.

2.12. ELIGIBLE EMPLOYEE -- an officer of the Company who is selected by the
Committee as provided in Section 3.

2.13. EXERCISE DATE -- the date on which an Eligible Employee exercises an
option to purchase Common Stock that is subject to a Deferral Election; provided
however, that such date shall not be

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deemed to occur prior to the date on which the Participant tenders mature shares
of Common Stock in payment of the option exercise price, by attestation to the
ownership of shares. For the purpose of this Plan, shares of Common Stock shall
be considered mature if they have been held by the Participant for at least six
months and have not been used to pay the exercise price for another stock option
exercise during the six months prior to their tender.

2.14. PARTICIPANT -- an Eligible Employee or a former Eligible Employee of the
Company or its Affiliates who has any amount credited to his Account in this
Plan.

2.15. PLAN -- the Donaldson Company, Inc. Stock Option Gain Deferral Plan as set
forth herein, and as the same may be amended from time to time.

2.16. PLAN YEAR -- the twelve (12) consecutive month period ending on any July
31.

2.17. STOCK UNITS -- the units credited to a Participant's Account pursuant to
Section 4.2.

2.18. TERMINATION OF EMPLOYMENT -- the complete severance of an employee's
employment relationship with the Company and all Affiliates, if any, for any
reason other than the employee's death or Disability.

2.19. VESTED -- nonforfeitable.

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                                    SECTION 3

                          ELIGIBILITY AND PARTICIPATION

3.1. ELIGIBILITY. Any officer of the Company who is affirmatively selected by
the Committee shall be an Eligible Employee and may actively participate under
the Plan until the earlier of the officer's Termination of Employment or
transfer to a non-officer position with the Company or its Affiliates. The
Committee may rescind an officer's selection as an Eligible Employee and
discontinue an officer's active participation in the Plan at any time.

3.2. COMMENCEMENT OF PARTICIPATION. An Eligible Employee shall become a
Participant in the Plan when the Eligible Employee is first credited with any
amount pursuant to Section 4.

3.3. TERMINATION OF PARTICIPATION. A person shall cease to be a Participant as
soon as all amounts credited to the Participant's Account have been paid in
full.

3.4. OVERRIDING EXCLUSION. Notwithstanding anything apparently to the contrary
in this Plan Statement or in any written communication, summary, resolution or
document or oral communication, no individual shall be a Participant in this
Plan, develop benefits under this Plan or be entitled to receive benefits under
this Plan (either for himself or herself or his or her survivors) unless such
individual is a member of a select group of management or highly compensated
employees (as that expression is used in ERISA). If a court of competent
jurisdiction, any representative of the U.S. Department of Labor or any other
governmental, regulatory or similar body makes any direct or indirect, formal or
informal, determination that an individual is not a member of a select group of
management or highly compensated employees (as that expression is used in
ERISA), such individual shall not be (and shall not have ever been) a
Participant in this Plan at any time. If any person not so defined has been
erroneously treated as a Participant in this Plan, upon discovery of such error
such person's erroneous participation shall immediately terminate AB INITIO and
upon demand such person shall be obligated to reimburse the Company for all
amounts erroneously paid to him or her.

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                                    SECTION 4

                                   STOCK UNITS

4.1. DEFERRAL ELECTIONS. An Eligible Employee may file with the Committee a
Deferral Election as to any option to buy Common Stock granted to such Eligible
Employee by the Company, subject to the following:

         (a)      Except as provided in subsection (f) below and subject to the
                  modifications described in Sections 5.3 and 5.5, a Deferral
                  Election shall be irrevocable once it has been filed with the
                  Committee.

         (b)      Deferral Elections may only be made with respect to options
                  whose exercise price may be paid in shares of Common Stock,
                  and shall obligate the Eligible Employee making the Deferral
                  Election to pay the exercise price and any tax withholding
                  required at the time of exercise by attestation to the
                  ownership of shares of Common Stock that the Eligible Employee
                  has owned for at least six months and that have not been used
                  to exercise another option for at least six months.

         (c)      Each Deferral Election shall specify the time and manner in
                  which distribution of the portion of the Participant's Account
                  attributable to that Deferral Election shall be made;
                  provided, however, that distribution may not commence prior to
                  the first anniversary of the Exercise Date of the option that
                  is subject to the Deferral Election.

         (d)      Nothing in this Plan shall be deemed to extend the period
                  during which stock options may be exercised, or to otherwise
                  alter the terms of any stock option.

         (e)      Deferral Elections must be made on forms approved by the
                  Committee, must be made at such time as the Committee shall
                  determine but not less than twelve months prior to the
                  Exercise Date with respect to those options, and shall conform
                  to such other procedural and substantive rules as the
                  Committee shall make.

         (f)      Any Deferral Elections with respect to options that have not
                  been exercised shall become null and void upon an Eligible
                  Employee's Termination of Employment.

4.2. STOCK UNITS. As of each Exercise Date, a Participant's Account shall be
credited with the number of Stock Units equal to the difference between (a) and
(b):

         (a)      The number of shares of Common Stock obtained by exercise of
                  the option being exercised; and

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         (b)      The number of shares of Common Stock required to pay both the
                  exercise price of the option being exercised and any required
                  tax withholding.

4.3. ADJUSTMENT. In the event of any change in the outstanding shares of common
stock of the Company by reason of any stock split or stock dividend in the form
of a split, the Committee shall adjust the number of Stock Units in a
Participant's Account so that such number equals the number of Stock Units in
the Account prior to the event, multiplied by a fraction, the denominator of
which is the number of Stock Units in the Account prior to the event, and the
numerator of which is the number of shares of Common Stock the Participant would
have had after the event if the Participant had shares of Common Stock
immediately prior to the event equal in number to the number of Stock Units in
the Participant's Account immediately prior to the event. In the event of any
dividend (other than a stock dividend in the form of a split), recapitalization,
merger, consolidation, spinoff, reorganization, combination or exchange of
shares or other similar corporate change, then if the Committee, or the board of
directors of a successor corporation, shall determine, in its sole discretion,
that such change equitably requires an adjustment in the number of Stock Units
then held in the Participant's Account, such adjustment shall be made by the
Committee or said board and shall be conclusive and binding for all purposes of
the Plan.

4.4. DIVIDEND UNITS. The number of Stock Units in a Participant's Account shall
be automatically increased as of each Common Stock dividend payment date in an
amount equal to the number of shares of Common Stock that could be purchased on
such dividend payment date with the cash dividends that would be paid on a
number of shares of Common Stock equal to the number of Stock Units in the
Participant's Account on the record date for such dividend.

4.5. VESTING. The Accounts of all Participants shall be 100% Vested at all
times.

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                                    SECTION 5

                           TIME AND MANNER OF PAYMENTS

5.1. TIME OF PAYMENT. Payment of a Participant's Account under the Plan will
commence as soon as administratively feasible (but no more than twenty (20)
days) following the occurrence of the earliest of the following events:

         (a)      death

         (b)      Disability, or

         (c)      the date of distribution selected by the Participant in
                  writing at a time and on a form prescribed by the Committee.

Distribution of a Participant's account may begin prior to the Participant's
Termination of Employment. In no event, however, may payment of the portion of a
Participant's Account attributable to a particular option exercise begin less
than one year after the Exercise Date with respect to that option exercise.

5.2. MANNER OF PAYMENT. A Participant's Account will be paid to the Participant
in either a single lump-sum payment or in annual installments of not more than
twenty (20) years. The Participant must elect a manner of payment at the time
the Participant elects his or her date of distribution pursuant to Section
5.1(c). In the event no election was made by a Participant, payment shall be
made in a single lump-sum. Payment to the Participant shall be made, net of
withholding taxes, exclusively in shares of Common Stock, one share for each
Stock Unit distributed. For purposes of determining any tax withholding on a
payment, the value of Common Stock will be the market price of such Common Stock
as of the close of business on the day prior to the date as of which the payment
is made.

5.3. CHANGES IN TIME AND MANNER OF PAYMENT. Notwithstanding the foregoing, a
Participant may make a new election concerning selection of the time and form of
payment authorized pursuant to this Section 5.3 (the "New Election") in
accordance with the following terms and conditions, unless waived or modified by
the Committee:

         (a)      A New Election shall only be permitted once and must be made
                  and become effective as hereinafter provided, if at all, prior
                  to the Participant's Termination of Employment, death or
                  Disability, whichever happens first;

         (b)      A New Election shall become effective twelve months after it
                  is received by the Company;

         (c)      A New Election shall be subject to the limitations described
                  in Section 4.1(a) through (f); and

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         (c)      If any of the events set forth in Section 5.1 of the Plan
                  occur prior to the effective date of a New Election with
                  respect to previously credited deferrals, then payments shall
                  be paid hereunder to or with respect to the Participant
                  according to the elections in effect at the time of the event.

5.4. CHANGE IN CONTROL DISTRIBUTIONS. Notwithstanding any other provision of
this Section 5, a Participant or Beneficiary will receive a distribution of his
or her entire Account if a Change in Control occurs. Distribution of the entire
Account shall be made on the date of the Change in Control. Such distribution
shall be made in a single lump-sum cash payment.

5.5. ACCELERATION OF PAYMENTS.

         5.5.1. WHEN AVAILABLE. A Participant or Beneficiary may receive an
accelerated payment of his or her entire Account (after reduction for the
forfeiture described in Section 5.5.2). To receive such an accelerated payment,
the Participant or Beneficiary must file a written payment application with the
Committee. Payment of the accelerated payment (after reduction for the
forfeiture described in Section 5.5.2) shall be made as soon as administratively
feasible (but no more than twenty (20) days) following the approval of a
completed application by the Committee. Such accelerated payment shall be made
in a lump-sum stock distribution. The amount of the accelerated payment shall be
equal to the value of the Account as of such distribution date (after reduction
for the forfeiture described below).

         5.5.2. FORFEITURE. Upon the approval of an accelerated payment, there
shall be irrevocably forfeited from the Account of the Participant or
Beneficiary an amount equal to six percent (6%) of the Account. In addition, the
Participant will not be an Eligible Employee under this Plan for two (2) years
following such accelerated payment.

5.6. DEATH BENEFIT. In the event of a Participant's death, the Company shall pay
the amount of the Participant's Account as of the date of death (as adjusted
from time to time pursuant to Section 4.4) in a lump-sum or in installments, as
previously elected by the Participant, to the Participant's designated
Beneficiary as soon as administratively feasible. In the event no election was
made by the Participant, payment shall be in a single lump-sum stock
distribution (and cash for fractional shares).

5.7. BENEFICIARY DESIGNATION. A Participant shall submit to the Company upon
initial designation as an Eligible Employee in the Plan, and at such other times
as the Participant desires, on a form provided by the Committee, a written
designation of the beneficiary or beneficiaries to whom payment of the
Participant's Account under the Plan shall be made in the event of the
Participant's death. Beneficiary designations shall become effective only when
received by the Company. Beneficiary designations first received by the Company
after the Participant's death, and any designations in effect at the time a
valid subsequent designation is received by the Company, shall be invalid and
have no effect. If a Participant has not designated a Beneficiary, or if no
designated Beneficiary is living on the date of distribution, the Participant's
Account shall be distributed to

                                      -10-

<PAGE>

those persons entitled to receive the Participant's benefit under the Donaldson
Company, Inc. Salaried Employees' Pension Plan (1997 Restatement), as amended
from time to time.

                                      -11-

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                                    SECTION 6

                               STOCK UNIT ACCOUNTS

6.1. PARTICIPANT ACCOUNTS. The Committee shall cause a bookkeeping account to be
kept in the name of each Participant which shall reflect the Stock Units
credited to a Participant.

6.2. CHARGES AGAINST ACCOUNTS. There shall be charged against each Participant's
bookkeeping account any payments made to the Participant or the Participant's
Beneficiary in accordance with Section 5.

                                      -12-
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                                    SECTION 7

                                     FUNDING

7.1. FUNDING. The Company and its Affiliates shall be responsible for paying all
benefits due hereunder. For the purpose of facilitating the payment of benefits
due hereunder, the Company may (but shall not be required to) establish and
maintain a grantor trust pursuant to an Agreement between the Company and a
trustee selected by the Company; provided, however, that any such grantor trust
must be structured so that it does not result in any federal income tax
consequences to any Participant until distributions under Section 5 are actually
received. The Company may contribute to a grantor trust thereby created such
amounts as it may from time to time determine.

7.2. CORPORATE OBLIGATION. Neither the officers nor any member of the Board of
Directors of the Company or any of its Affiliates in any way secures or
guarantees the payment of any benefit or amount which may become due and payable
hereunder to or with respect to any Participant. Each Participant and other
person entitled at anytime to payments hereunder shall look solely to the assets
of the Company and its Affiliates for such payments as an unsecured, general
creditor. Nothing herein shall be construed to give a Participant, Beneficiary
or any other person or persons any right, title, interest or claim in or to any
specific asset, fund, reserve, account or property of any kind whatsoever owned
by the Company or in which it may have any right, title or interest now or in
the future. After benefits shall have been paid to or with respect to a
Participant and such payment purports to cover in full the benefit hereunder,
such former Participant or other person or persons, as the case may be, shall
have no further right or interest in the other assets of the Company and its
Affiliates in connection with this Plan.

                                      -13-
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                                    SECTION 8

                                 ADMINISTRATION

8.1. AUTHORITY. The Plan shall be administered by the Committee, which shall
have full discretionary power and authority to administer and interpret the Plan
and to determine all factual and legal questions under the Plan, including but
not limited to the entitlement of Participants and Beneficiaries, and the amount
of their respective interests.

8.2. LIABILITY. No member of the Committee and no director or member of the
management of the Company or its Affiliates shall be liable to any persons for
any actions taken under the Plan, or for any failure to effect any of the
objective or purposes of the Plan, by reason of insolvency or otherwise.

8.3. PROCEDURES. The Committee may from time to time adopt such rules and
procedures as it deems appropriate to assist in the administration of the Plan.

8.4. CLAIM FOR BENEFITS. No employee or other person shall have any claim or
right to payment of any amount hereunder until payment has been authorized and
directed by the Committee.

8.5. CLAIMS PROCEDURE. Until modified by the Committee, the claims procedure set
forth in this Section 8.5 shall be the claims procedure for the resolution of
disputes and disposition of claims arising under the Plan.

         8.5.1. ORIGINAL CLAIM. Any employee, former employee, or Beneficiary of
such employee or former employee may, if the employee, former employee or
Beneficiary so desires, file with the Committee a written claim for benefits
under the Plan. Within ninety (90) days after the filing of such a claim, the
Committee shall notify the claimant in writing whether the claim is upheld or
denied in whole or in part or shall furnish the claimant a written notice
describing specific special circumstances requiring a specified amount of
additional time (but not more than one hundred eighty (180) days from the date
the claim was filed) to reach a decision on the claim. If the claim is denied in
whole or in part, the Committee shall state in writing:

         (a)      the specific reasons for the denial,

         (b)      the specific references to the pertinent provisions of this
                  Plan on which the denial is based,

         (c)      a description of any additional material or information
                  necessary for the claimant to perfect the claim and an
                  explanation of why such material or information is necessary,
                  and

         (d)      an explanation of the claims review procedure set forth in
                  this Section.

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<PAGE>

         8.5.2. CLAIMS REVIEW PROCEDURE. Within sixty (60) days after receipt of
notice that the claim has been denied in whole or in part, the claimant may file
with the Committee a written request for a review and may, in conjunction
therewith, submit written issues and comments. Within sixty (60) days after the
filing of such a request for review, the Committee shall notify the claimant in
writing whether, upon review, the claim was upheld or denied in whole or in part
or shall furnish the claimant a written notice describing specific special
circumstances requiring a specified amount of additional time (but not more than
one hundred twenty days (120) from the date the request for review was filed) to
reach a decision on the request for review.

         8.5.3. GENERAL RULES.

         (a)      No inquiry or question shall be deemed to be a claim or a
                  request for a review of a denied claim unless made in
                  accordance with the claims procedure. The Committee may
                  require that any claim for benefits and any request for a
                  review of a denied claim be filed on forms to be furnished by
                  the Committee upon request.

         (b)      All decisions on original claims shall be made by the
                  Committee and requests for a review of denied claims shall be
                  made by the Committee.

         (c)      The Committee may, in its discretion, hold one or more
                  hearings on a claim or a request for a review of a denied
                  claim.

         (d)      Claimants may be represented by a lawyer or other
                  representative at their own expense, but the Committee
                  reserves the right to require the claimant to furnish written
                  authorization. A claimant's representative shall be entitled
                  to copies of all notices given to the claimant.

         (e)      The decision of the Committee on an original claim or on a
                  request for a review of a denied claim shall be served on the
                  claimant in writing. If a decision or notice is not received
                  by a claimant within the time specified, the claim or request
                  for a review of a denied claim shall be deemed to have been
                  denied.

         (f)      Prior to filing a claim or a request for a review of a denied
                  claim, the claimant or the claimant's representative shall
                  have a reasonable opportunity to review a copy of this Plan
                  Statement and all other pertinent documents in the possession
                  of the Company and its Affiliates.

8.6. PAYMENTS UPON IMPOSITION OF FEDERAL OR STATE TAXES. If any Participant is
determined to be subject to federal or state income tax on any amount accrued on
his or her behalf under this Plan prior to the time of payment hereunder,
federal or state taxes attributable to the amount determined to be so taxable
shall be distributed by the Plan to such Participant. An amount accrued on his
or her behalf under this Plan shall be determined to be subject to federal
income tax upon the earliest of:

                                      -15-

<PAGE>

                  (i)      a final determination by the United States Internal
                           Revenue Service addressed to the Participant which is
                           not appealed to the courts;

                  (ii)     a final determination by the United States Tax Court
                           or any other Federal Court affirming any such
                           determination by the Internal Revenue Service; or

                  (iii)    an opinion by the Tax Counsel of the Company,
                           addressed to the Company that, by reason of Treasury
                           Regulations, amendments to the Internal Revenue Code,
                           published Internal Revenue Service rulings, court
                           decisions or other substantial precedent, amounts
                           accrued on a Participant's behalf hereunder are
                           subject to federal or state income tax prior to
                           payment.

The Company shall undertake at its sole expense to defend any tax claims
described herein which are asserted by the Internal Revenue Service or by any
state revenue authority against any Participant, including attorney fees and
costs of appeal, and shall have the sole authority to determine whether or not
to appeal any determination made by the Internal Revenue Service, by any state
revenue authority or by a lower court. The Company also agrees to reimburse any
Participant for any interest or penalties in respect of federal or state tax
claims hereunder upon receipt of documentation of same.

8.7. LEGAL FEES. If the Company does not pay the benefits required under the
terms of the Plan for reasons other than the insolvency of the Company, the
Company agrees to reimburse any Participant for all legal fees incurred in
enforcing his or her claim to benefits under the Plan.

8.8. ERRORS IN COMPUTATIONS. The Committee shall not be liable or responsible
for any error in the computation of any benefit payable to or with respect to
any Participant resulting from any misstatement of fact made by the Participant
or by or on behalf of any Beneficiary to whom such benefit shall be payable,
directly or indirectly, to the Committee, and used by the Committee in
determining the benefit. The Committee shall not be obligated or required to
increase the benefit payable to or with respect to such Participant which, on
discovery of the misstatement, is found to be understated as a result of such
misstatement of the Participant. However, the benefit of any Participant which
is overstated by reason of any such misstatement or any other reason shall be
reduced to the amount appropriate in view of the truth (and to recover any prior
overpayment).

                                      -16-
<PAGE>

                                    SECTION 9

                                  MISCELLANEOUS

9.1. NOT AN EMPLOYMENT CONTRACT. This Plan is not and shall not be deemed to
constitute a contract of employment between the Company and any employee or
other person, nor shall anything herein contained be deemed to give any employee
or other person any right to be retained in the Company's employ or in any way
limit or restrict the Company's right or power to discharge any employee or
other person at any time and to treat him without regard to the effect which
such treatment might have upon the employee as a Participant in the Plan.

9.2. NONTRANSFERABILITY. A Participant's rights and interest under the Plan,
including amounts payable, may not be assigned, alienated, pledged or
transferred except, in the event of a Participant's death to his Beneficiary. No
benefit payable under this Plan shall be subject to attachment, garnishment,
execution following judgment or other legal process before actual payment to the
Participant or Beneficiary.

9.3. TAX WITHHOLDING. The Company shall withhold the amount of any federal,
state or local income tax or other tax required to be withheld by the Company
under applicable law with respect to any amount payable under the Plan. Any cash
payable in lieu of fractional shares shall be applied to the payment of tax
withholding. The Participant shall not be liable for any tax withholding.

9.4. EXPENSES. All expenses of administering the Plan shall be borne by the
Company.

9.5. GOVERNING LAW. Except to the extent that federal law is controlling, the
Plan shall be construed and enforced in accordance with and governed by the laws
of the State of Minnesota.

9.6. AMENDMENT AND TERMINATION. The Company reserves the power to unilaterally
amend this Plan at any time, either prospectively or retroactively or both by
action of the Committee (with the written concurrence of the Chief Executive
Officer of the Company). The Committee may likewise terminate or curtail the
benefits of this Plan both with regard to persons expecting to receive benefits
in the future and persons already receiving benefits at the time of such action;
provided, however, that the Committee may not amend or terminate the Plan with
respect to benefits that have accrued and are vested pursuant to Section 4 in
any manner that reduces the amount of such benefits or alters the effect of any
Participant election previously filed with the Company. No modification of the
terms of this Plan shall be effective unless it is in writing and signed on
behalf of the Company by a person authorized to execute such writing. No oral
representation concerning the interpretation or effect of this Plan shall be
effective to amend the Plan.

9.7. RULES OF INTERPRETATION. The titles given to the various sections of this
Plan are inserted for convenience of reference only and are not part of this
Plan, and they shall not be considered in determining the purpose, meaning or
intent of any provision hereof. This Plan shall be construed and this Plan shall
be administered to create an unfunded plan providing deferred compensation to a
select group of management or highly compensated employees so that it is exempt
from

                                      -17-

<PAGE>

the requirements of Parts 2, 3 and 4 of Title I of ERISA and qualifies for a
form of simplified, alternative compliance with the reporting and disclosure
requirements of Part 1 of Title I of ERISA.

                                       -18-Exhibit 10-T

                             DONALDSON COMPANY, INC.
                           LONG TERM COMPENSATION PLAN
                               (1999 RESTATEMENT)

            As Amended and Restated Effective as of August 1, 1999,
                          and amended December 3, 2001

<PAGE>

                             DONALDSON COMPANY, INC.
                           LONG TERM COMPENSATION PLAN
                               (1999 RESTATEMENT)

                                TABLE OF CONTENTS

                                                                           PAGE

SECTION 1.   ESTABLISHMENT AND PURPOSE.......................................1

             1.1.   Establishment
             1.2.   Purpose
             1.3.   Relation to Master Stock Plans

SECTION 2.   DEFINITIONS.....................................................2

             2.1.   Affiliate
             2.2.   Award
             2.3.   Award Agreement
             2.4.   Award Matrix
             2.5.   Beneficiary
             2.6.   Board
             2.7.   Change of Control
                    2.7.1.   Affiliate
                    2.7.2.   Beneficial Owner
                    2.7.3.   Exchange Act
                    2.7.4.   Person
             2.8.   Committee
             2.9.   Common Stock
             2.10.  Company
             2.11.  Disability, Disabled
             2.12.  Incentive Cycle
             2.13.  Participant
             2.14.  Performance Objective
             2.15.  Performance Unit
             2.16.  Plan
             2.17.  Retirement
             2.18.  Termination of Employment
             2.19.  Vested

SECTION 3.   ELIGIBILITY AND PARTICIPATION...................................6

             3.1.   Commencement of Participation
             3.2.   Termination of Participation

                                      -i-

<PAGE>

SECTION 4.   AWARDS..........................................................7

             4.1.   Grant
             4.2.   Adjustment
             4.3.   Performance Objectives Alteration
             4.4.   Vesting
                    4.4.1.   Pro Rata Vesting
                    4.4.2.   Forfeiture

SECTION 5.   TIME AND MANNER OF PAYMENTS.....................................9

             5.1.   Time of Payment
             5.2.   Manner of Payment
             5.3.   Change in Control Distributions
             5.4.   Death Benefit
             5.5.   Beneficiary Designation

SECTION 6.   FUNDING........................................................10

             6.1.   Funding
             6.2.   Corporate Obligation

SECTION 7.   ADMINISTRATION.................................................11

             7.1.   Authority
             7.2.   Liability
             7.3.   Procedures
             7.4.   Claim for Benefits
             7.5.   Claims Procedure
                    7.5.1.   Original Claim
                    7.5.2.   Claims Review Procedure
                    7.5.3.   General Rules
             7.6.   Payments upon Imposition of Federal or State Taxes
             7.7.   Legal Fees
             7.8.   Errors in Computations

SECTION 8.   MISCELLANEOUS..................................................14

             8.1.   Not an Employment Contract
             8.2.   Nontransferability
             8.3.   Tax Withholding
             8.4.   Expenses
             8.5.   Governing Law
             8.6.   Amendment and Termination
             8.7.   Rules of Interpretation

                                      -ii-

<PAGE>

                             DONALDSON COMPANY, INC.
                           LONG TERM COMPENSATION PLAN
                               (1999 RESTATEMENT)

                                    SECTION 1

                            ESTABLISHMENT AND PURPOSE

1.1. ESTABLISHMENT. Effective as of August 1, 1999, Donaldson Company, Inc.
hereby amends and restates its performance share plan for key employees, known
as the "DONALDSON COMPANY, INC. LONG TERM COMPENSATION PLAN."

Except as may be hereinafter specifically provided, this amended and restated
Plan document shall not affect any Awards made prior to August 1, 1999. All such
awards shall be governed by the plan and performance award documents in effect
at the time the Awards were granted.

1.2. PURPOSE. The purpose of this Plan is to incent key employees of the Company
by rewarding them for the Company's achievement of predetermined levels of
long-term performance.

1.3. RELATION TO MASTER STOCK PLANS. The stock-based awards provided by this
Plan are subject to any applicable terms, conditions and restrictions required
by the Donaldson Company, Inc. 2001 Master Stock Incentive Plan if they are
credited after December 31, 2001, or the Donaldson Company, Inc. 1991 Master
Stock Compensation Plan if they are credited on or before December 31, 2001. No
awards shall be made under this Plan after the last date on which awards may be
granted under the 2001 Master Stock Incentive Plan.

<PAGE>

                                    SECTION 2

                                   DEFINITIONS

The following words and phrases shall have the following meanings, unless a
different meaning is plainly required by the context. Any masculine terminology
used in the Plan shall also include the feminine gender and the definition of
any terms in the singular shall also include the plural.

2.1. AFFILIATE -- a business entity which is under "common control" with the
Company or which is a member of an "affiliated service group" that includes the
Company, as those terms are defined in section 414(b), (c) and (m) of the Code.
A business entity shall also be treated as an Affiliate if, and to the extent
that, such treatment is required by regulations under section 414(o) of the
Code. In addition to said required treatment, the Committee may, in its
discretion, designate as an Affiliate any business entity which is not such a
"common control" or "affiliated service group" business entity but which is
otherwise affiliated with the Company, subject to such limitations as the
Committee may impose.

2.2. AWARD -- the right to receive a specified number of shares of Common Stock,
a multiple thereof, or a portion thereof, based upon the satisfaction of
Performance Objectives established by the Committee, subject to the terms,
conditions and restrictions in this Plan and the Master Stock Plan, as well as
those established by the Committee and set forth in the applicable Award
Agreement.

2.3. AWARD AGREEMENT -- the agreement entered into between the Company and the
Participant setting forth certain terms and conditions applicable to an Award.

2.4. AWARD MATRIX -- determines the award percentage for the Incentive Cycle
based on the actual net sales growth and average return on investment. The award
percentage is multiplied by the number of Performance Units granted, as
identified in the Award Agreement, to determine the number of Performance Units
payable (subject to any additional adjustment required by the Award, such as for
earnings per share consistency).

2.5. BENEFICIARY -- any person or entity designated by the Participant in
accordance with Section 5 to receive the amount, if any, payable in connection
with the Participant's Award after the Participant's death. Designated persons
or entities shall not be considered Beneficiaries until the death of the
Participant.

2.6. BOARD -- the Board of Directors of the Company.

2.7. CHANGE OF CONTROL -- a "Change in Control" shall be deemed to have occurred
if the event set forth in any one of the following paragraphs shall have
occurred:

         (a)      any Person is or becomes the Beneficial Owner, directly or
                  indirectly, of securities of the Company representing 25% or
                  more of the combined voting power of the Company's then
                  outstanding securities, excluding any

                                       -2-

<PAGE>

                  Person who becomes such a Beneficial Owner in connection with
                  a transaction described in clause (i) of paragraph (c) below;
                  or

         (b)      the following individuals cease for any reason to constitute a
                  majority of the number of directors then serving: individuals
                  who, on the date hereof, constitute the Board and any new
                  director (other than a director whose initial assumption of
                  office is in connection with an actual or threatened election
                  contest, including but not limited to a consent solicitation,
                  relating to the election of directors of the Company) whose
                  appointment or election by the Board or nomination for
                  election by the Company's stockholders was approved or
                  recommended by a vote of at least two-thirds (2/3) of the
                  directors then still in office who either were directors on
                  the date hereof or whose appointment, election or nomination
                  for election was previously so approved or recommended; or

         (c)      there is consummated a merger or consolidation of the Company
                  or any direct or indirect subsidiary of the Company with any
                  other corporation, other than (i) a merger or consolidation
                  which would result in the voting securities of the Company
                  outstanding immediately prior to such merger or consolidation
                  continuing to represent (either by remaining outstanding or by
                  being converted into voting securities of the surviving entity
                  or any parent thereof), in combination with the ownership of
                  any trustee or other fiduciary holding securities under an
                  employee benefit plan of the Company or any subsidiary of the
                  Company, at least 60% of the combined voting power of the
                  securities of the Company or such surviving entity or any
                  parent thereof outstanding immediately after such merger or
                  consolidation, or (ii) a merger or consolidation effected to
                  implement a recapitalization of the Company (or similar
                  transaction) in which no Person is or becomes the Beneficial
                  Owner, directly or indirectly, of securities of the Company
                  representing 25% or more of the combined voting power of the
                  Company's then outstanding securities; or

         (d)      the stockholders of the Company approve a plan of complete
                  liquidation or dissolution of the Company or there is
                  consummated an agreement for the sale or disposition by the
                  Company of all or substantially all of the Company's assets,
                  other than a sale or disposition by the Company of all or
                  substantially all of the Company's assets to an entity, at
                  least 60% of the combined voting power of the voting
                  securities of which are owned by stockholders of the Company
                  in substantially the same proportions as their ownership of
                  the Company immediately prior to such sale.

Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate

                                       -3-

<PAGE>

ownership in an entity which owns all or substantially all of the assets of the
Company immediately following such transaction or series of transactions. Solely
for purposes of this Section 2.7, the following words and phrases shall have the
following meanings:

         2.7.1. AFFILIATE -- an "affiliate" within the meaning of Rule 12b-2
promulgated under Section 12 of the Exchange Act.

         2.7.2. BENEFICIAL OWNER -- a "beneficial owner" within the meaning of
Rule 13d-3 under the Exchange Act.

         2.7.3. EXCHANGE ACT -- the Securities Exchange Act of 1934, as amended
from time to time.

         2.7.4. PERSON -- a "person" within the meaning of Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.

2.8. COMMITTEE -- the Human Resources Committee of the Board of Directors of the
Company.

2.9. COMMON STOCK -- the common stock of the Company.

2.10. COMPANY -- Donaldson Company, Inc. and, except in determining under
Section 2.7 hereof whether or not any Change in Control has occurred, shall
include any successor by merger, purchase or otherwise.

2.11. DISABILITY, DISABLED -- a physical or mental impairment which constitutes
total and permanent disability and during which the Participant is not receiving
any payments of an Early Retirement Pension or a Vested Benefit under the
Donaldson Company, Inc. Salaried Employees' Pension Plan (1997 Restatement), as
amended from time to time, and the Participant either:

         (a)      is eligible to receive long-term disability benefits under the
                  Company's separate long-term disability insurance plan (which
                  program shall be administered on a uniform and
                  nondiscriminatory basis); if such separate long-term
                  disability coverage is elected by the Participant, or

         (b)      is eligible to receive and is actually receiving (after the
                  applicable waiting period) benefits under the federal Social
                  Security Act as in effect at the time of the Disability.

                                      -4-

<PAGE>

2.12. INCENTIVE CYCLE -- a period of three consecutive plan years designated by
the Committee.

2.13. PARTICIPANT -- an employee or former employee of the Company or its
Affiliates who has become a Participant as provided in Section 3.1, and who has
not ceased to be a Participant as provided in Section 3.2.

2.14. PERFORMANCE OBJECTIVE -- the goals for after-tax return on investment and
compound net sales growth established for an Award by the Committee and set
forth in the Participant's Award Agreement. After-tax return on investment and
compound net sales growth shall be as defined and reported in the monthly
operating reports published by the Company's Accounting Department.

2.15. PERFORMANCE UNIT -- the portion of an Award that represents the right to
receive a single share of Common Stock in the event all applicable Performance
Objectives are satisfied at target levels, before any adjustments such as an
adjustment to the target award for earnings per share consistency.

2.16. PLAN -- the Donaldson Company, Inc. Long Term Compensation Plan as set
forth herein, and as the same may be amended from time to time.

2.17. RETIREMENT -- a Termination of Employment under circumstances that entitle
the employee to a Normal or Early Retirement Pension (as defined in the
Donaldson Company, Inc. Salaried Employees' Pension Plan (1997 Restatement), as
amended from time to time).

2.18. TERMINATION OF EMPLOYMENT -- the complete severance of an employee's
employment relationship with the Company and all Affiliates, if any, for any
reason other than the employee's death or Disability.

2.19. VESTED -- nonforfeitable.

                                      -5-
<PAGE>

                                    SECTION 3

                          ELIGIBILITY AND PARTICIPATION

3.1. COMMENCEMENT OF PARTICIPATION. An officer or member of senior management
shall become a Participant in the Plan when he or she is granted an Award
pursuant to Section 4.

3.2. TERMINATION OF PARTICIPATION. A person shall cease to be a Participant as
soon as all Awards credited to the Participant have been paid in full or, if
deferred, credited to the Participant's Account under the Donaldson Company,
Inc. Deferred Compensation and 401(k) Excess Plan.

                                      -6-
<PAGE>

                                    SECTION 4

                                     AWARDS

4.1. GRANT. Prior to the start of an Incentive Cycle, or as soon as
administratively feasible thereafter, the Committee grants Awards to select
employees of the Company that establish:

         (a)      the Incentive Cycle for the Award;

         (b)      the Performance Objectives applicable to the Award;

         (c)      the Award Matrix;

         (d)      the number of Performance Units granted; and

         (e)      the manner of adjustment, if any, to the number of shares
                  payable based on earnings per share consistency, and any other
                  adjustments or special terms and conditions applicable to the
                  Award.

4.2. ADJUSTMENT. In the event of any change in the outstanding shares of common
stock of the Company by reason of any stock split or stock dividend in the form
of a split, the Committee shall adjust the number of Performance Units in a
Participant's Award so that such number equals the number of Performance Units
in the Award prior to the event, multiplied by a fraction, the denominator of
which is the number of Performance Units in the Award prior to the event, and
the numerator of which is the number of shares of Common Stock the Participant
would have had after the event if the Participant had shares of Common Stock
immediately prior to the event equal in number to the number of Performance
Units in the Participant's Award immediately prior to the event. In the event of
any dividend (other than a stock dividend in the form of a split),
recapitalization, merger, consolidation, spinoff, reorganization, combination or
exchange of shares or other similar corporate change, then if the Committee, or
the board of directors of a successor corporation, shall determine, in its sole
discretion, that such change equitably requires an adjustment in the number of
Performance Units in the Participant's Award, such adjustment shall be made by
the Committee or said board and shall be conclusive and binding for all purposes
of the Plan.

4.3. PERFORMANCE OBJECTIVES ALTERATION. In the event of an acquisition,
disposition or other change which, in the judgment of the Committee, may have a
significant effect on particular Performance Objectives, the Committee may adopt
such changes in the applicable Performance Objectives as it shall, in its sole
discretion, deem equitable and appropriate to achieve the purpose of the Plan.

4.4. VESTING. Except as otherwise indicated below and in Section 5.3, Awards
shall become Vested only at the end of the applicable Incentive Cycle, and then
only to the extent determined by the applicable Performance Objectives.

                                      -7-

<PAGE>

         4.4.1. PRO RATA VESTING. In the event that, prior to the end of the
Incentive Cycle, the Plan is terminated, the Participant is transferred to an
ineligible position, or the Participant ceases to be an employee by reason of
Retirement, death, or Disability, the Vested Award will be based on actual
results compared to the Performance Objectives at the end of the Incentive
Cycle, and multiplied by a fraction whose numerator is the number of months
completed in the cycle and denominator is thirty-six.

         4.4.2. FORFEITURE. If a Participant ceases to be an employee prior to
the end of an Incentive Cycle for any reason other than Retirement, Disability
or death, the Participant's Award with respect to that Incentive Cycle shall be
forfeited.

                                      -8-
<PAGE>

                                    SECTION 5

                           TIME AND MANNER OF PAYMENTS

5.1. TIME OF PAYMENT. Payment of a Participant's Vested Award under the Plan
will occur no more than 60 days, and no less than 30 days, after the end of the
Incentive Cycle with respect to which the Award was granted. Share certificates
are distributed as soon as administratively feasible after the effective date of
payment.

5.2. MANNER OF PAYMENT. A Participant's Account will be paid to the Participant
in a single lump sum. Payment to the Participant shall be made, net of
withholding taxes, exclusively in shares of Common Stock. For purposes of
determining any tax withholding on a payment, the value of Common Stock will be
the market price of such Common Stock on a date no more than 60 days nor less
than 30 days after the end of the Incentive Cycle.

5.3. CHANGE IN CONTROL DISTRIBUTIONS. Notwithstanding any other provision of
Section 4.4 or this Section 5 (other than Section 5.5), if a Change in Control
occurs prior to the end of the applicable Incentive Cycle, the Participant's
Award shall be immediately Vested and paid in accordance with this Section 5.3.
The amount payable will be determined as if the applicable Performance
Objectives had been met at target levels and as if the conditions for any
adjustments (such as for earnings per share consistency) were met for the entire
Incentive Cycle to the same extent as they were met through the date of the
Change in Control, and then prorated as if the employee retired on the date of
the Change in Control. Distribution of the entire amount payable shall be made
on the date of the Change in Control. Such distribution shall be made in a
single lump sum stock distribution.

5.4. DEATH BENEFIT. In the event of a Participant's death, the Company shall pay
the Participant's unpaid Vested Award (in the amount determined under Section
4.4.1 if Participant's death occurred prior to the end of the Incentive Cycle)
to the Participant's designated beneficiary. Such payment shall be made at the
time prescribed in Section 5.1 above, or as soon as administratively feasible
thereafter in a single lump sum stock distribution (and cash for fractional
shares).

5.5. BENEFICIARY DESIGNATION. A Participant shall submit to the Company upon
initial grant of an Award under the Plan, and at such other times as the
Participant desires, on a form provided by the Committee, a written designation
of the beneficiary or beneficiaries to whom payment of the Participant's Vested
Award under the Plan shall be made in the event of the Participant's death.
Beneficiary designations shall become effective only when received by the
Company. Beneficiary designations first received by the Company after the
Participant's death, and any designations in effect at the time a valid
subsequent designation is received by the Company, shall be invalid and have no
effect. If a Participant has not designated a Beneficiary, or if no designated
Beneficiary is living on the date of distribution, the Participant's Vested
Award shall be distributed to those persons entitled to receive the
Participant's benefit under the Donaldson Company, Inc. Salaried Employees'
Pension Plan (1997 Restatement), as amended from time to time.

                                      -9-

<PAGE>

                                    SECTION 6

                                     FUNDING

6.1. FUNDING. The Company and its Affiliates shall be responsible for paying all
benefits due hereunder. For the purpose of facilitating the payment of benefits
due hereunder, the Company may (but shall not be required to) establish and
maintain a grantor trust pursuant to an Agreement between the Company and a
trustee selected by the Company; provided, however, that any such grantor trust
must be structured so that it does not result in any federal income tax
consequences to any Participant until distributions under Section 5 are actually
received. The Company may contribute to a grantor trust thereby created such
amounts as it may from time to time determine.

6.2. CORPORATE OBLIGATION. Neither the officers nor any member of the Board of
Directors of the Company or any of its Affiliates in any way secures or
guarantees the payment of any benefit or amount which may become due and payable
hereunder to or with respect to any Participant. Each Participant and other
person entitled at anytime to payments hereunder shall look solely to the assets
of the Company and its Affiliates for such payments as an unsecured, general
creditor. Nothing herein shall be construed to give a Participant, Beneficiary
or any other person or persons any right, title, interest or claim in or to any
specific asset, fund, reserve, account or property of any kind whatsoever owned
by the Company or in which it may have any right, title or interest now or in
the future. After benefits shall have been paid to or with respect to a
Participant and such payment purports to cover in full the benefit hereunder,
such former Participant or other person or persons, as the case may be, shall
have no further right or interest in the other assets of the Company and its
Affiliates in connection with this Plan.

                                      -10-
<PAGE>

                                    SECTION 7

                                 ADMINISTRATION

7.1. AUTHORITY. The Plan shall be administered by the Committee, which shall
have full discretionary power and authority to administer and interpret the Plan
and to determine all factual and legal questions under the Plan, including but
not limited to the entitlement of Participants and Beneficiaries, and the amount
of their respective interests.

7.2. LIABILITY. No member of the Committee and no director or member of the
management of the Company or its Affiliates shall be liable to any persons for
any actions taken under the Plan, or for any failure to effect any of the
objective or purposes of the Plan, by reason of insolvency or otherwise.

7.3. PROCEDURES. The Committee may from time to time adopt such rules and
procedures as it deems appropriate to assist in the administration of the Plan.

7.4. CLAIM FOR BENEFITS. No employee or other person shall have any claim or
right to payment of any amount hereunder until payment has been authorized and
directed by the Committee.

7.5. CLAIMS PROCEDURE. Until modified by the Committee, the claims procedure set
forth in this Section 7.5 shall be the claims procedure for the resolution of
disputes and disposition of claims arising under the Plan.

         7.5.1. ORIGINAL CLAIM. Any employee, former employee, or Beneficiary of
such employee or former employee may, if the employee, former employee or
Beneficiary so desires, file with the Committee a written claim for benefits
under the Plan. Within ninety (90) days after the filing of such a claim, the
Committee shall notify the claimant in writing whether the claim is upheld or
denied in whole or in part or shall furnish the claimant a written notice
describing specific special circumstances requiring a specified amount of
additional time (but not more than one hundred eighty (180) days from the date
the claim was filed) to reach a decision on the claim. If the claim is denied in
whole or in part, the Committee shall state in writing:

         (a)      the specific reasons for the denial,

         (b)      the specific references to the pertinent provisions of this
                  Plan on which the denial is based,

         (c)      a description of any additional material or information
                  necessary for the claimant to perfect the claim and an
                  explanation of why such material or information is necessary,
                  and

         (d)      an explanation of the claims review procedure set forth in
                  this Section.

                                      -11-

<PAGE>

         7.5.2. CLAIMS REVIEW PROCEDURE. Within sixty (60) days after receipt of
notice that the claim has been denied in whole or in part, the claimant may file
with the Committee a written request for a review and may, in conjunction
therewith, submit written issues and comments. Within sixty (60) days after the
filing of such a request for review, the Committee shall notify the claimant in
writing whether, upon review, the claim was upheld or denied in whole or in part
or shall furnish the claimant a written notice describing specific special
circumstances requiring a specified amount of additional time (but not more than
one hundred twenty days (120) from the date the request for review was filed) to
reach a decision on the request for review.

         7.5.3. GENERAL RULES.

         (a)      No inquiry or question shall be deemed to be a claim or a
                  request for a review of a denied claim unless made in
                  accordance with the claims procedure. The Committee may
                  require that any claim for benefits and any request for a
                  review of a denied claim be filed on forms to be furnished by
                  the Committee upon request.

         (b)      All decisions on original claims shall be made by the
                  Committee and requests for a review of denied claims shall be
                  made by the Committee.

         (c)      The Committee may, in its discretion, hold one or more
                  hearings on a claim or a request for a review of a denied
                  claim.

         (d)      Claimants may be represented by a lawyer or other
                  representative at their own expense, but the Committee
                  reserves the right to require the claimant to furnish written
                  authorization. A claimant's representative shall be entitled
                  to copies of all notices given to the claimant.

         (e)      The decision of the Committee on an original claim or on a
                  request for a review of a denied claim shall be served on the
                  claimant in writing. If a decision or notice is not received
                  by a claimant within the time specified, the claim or request
                  for a review of a denied claim shall be deemed to have been
                  denied.

         (f)      Prior to filing a claim or a request for a review of a denied
                  claim, the claimant or the claimant's representative shall
                  have a reasonable opportunity to review a copy of this Plan
                  Statement and all other pertinent documents in the possession
                  of the Company and its Affiliates.

7.6. PAYMENTS UPON IMPOSITION OF FEDERAL OR STATE TAXES. If any Participant is
determined to be subject to federal or state income tax on any amount accrued on
his or her behalf under this Plan prior to the time of payment hereunder,
federal or state taxes attributable to the amount determined to be so taxable
shall be distributed by the Plan to such Participant. An amount accrued on his
or her behalf under this Plan shall be determined to be subject to federal
income tax upon the earliest of:

                                      -12-

<PAGE>

                  (i)      a final determination by the United States Internal
                           Revenue Service addressed to the Participant which is
                           not appealed to the courts;

                  (ii)     a final determination by the United States Tax Court
                           or any other Federal Court affirming any such
                           determination by the Internal Revenue Service; or

                  (iii)    an opinion by the Tax Counsel of the Company,
                           addressed to the Company that, by reason of Treasury
                           Regulations, amendments to the Internal Revenue Code,
                           published Internal Revenue Service rulings, court
                           decisions or other substantial precedent, amounts
                           accrued on a Participant's behalf hereunder are
                           subject to federal or state income tax prior to
                           payment.

The Company shall undertake at its sole expense to defend any tax claims
described herein which are asserted by the Internal Revenue Service or by any
state revenue authority against any Participant, including attorney fees and
costs of appeal, and shall have the sole authority to determine whether or not
to appeal any determination made by the Internal Revenue Service, by any state
revenue authority or by a lower court. The Company also agrees to reimburse any
Participant for any interest or penalties in respect of federal or state tax
claims hereunder upon receipt of documentation of same.

7.7. LEGAL FEES. If the Company does not pay the benefits required under the
terms of the Plan for reasons other than the insolvency of the Company, the
Company agrees to reimburse any Participant for all legal fees incurred in
enforcing his or her claim to benefits under the Plan.

7.8. ERRORS IN COMPUTATIONS. The Committee shall not be liable or responsible
for any error in the computation of any benefit payable to or with respect to
any Participant resulting from any misstatement of fact made by the Participant
or by or on behalf of any Beneficiary to whom such benefit shall be payable,
directly or indirectly, to the Committee, and used by the Committee in
determining the benefit. The Committee shall not be obligated or required to
increase the benefit payable to or with respect to such Participant which, on
discovery of the misstatement, is found to be understated as a result of such
misstatement of the Participant. However, the benefit of any Participant which
is overstated by reason of any such misstatement or any other reason shall be
reduced to the amount appropriate in view of the truth (and to recover any prior
overpayment).

                                       13
<PAGE>

                                    SECTION 8

                                  MISCELLANEOUS

8.1. NOT AN EMPLOYMENT CONTRACT. This Plan is not and shall not be deemed to
constitute a contract of employment between the Company and any employee or
other person, nor shall anything herein contained be deemed to give any employee
or other person any right to be retained in the Company's employ or in any way
limit or restrict the Company's right or power to discharge any employee or
other person at any time and to treat him without regard to the effect which
such treatment might have upon the employee as a Participant in the Plan.

8.2. NONTRANSFERABILITY. A Participant's rights and interest under the Plan,
including amounts payable, may not be assigned, alienated, pledged or
transferred except, in the event of a Participant's death to his Beneficiary. No
benefit payable under this Plan shall be subject to attachment, garnishment,
execution following judgment or other legal process before actual payment to the
Participant or Beneficiary.

8.3. TAX WITHHOLDING. The Company shall withhold the amount of any federal,
state or local income tax or other tax required to be withheld by the Company
under applicable law with respect to any amount payable under the Plan. Any cash
payable in lieu of fractional shares shall be applied to the payment of tax
withholding. The Participant shall not be liable for any tax withholding.

8.4. EXPENSES. All expenses of administering the Plan shall be borne by the
Company.

8.5. GOVERNING LAW. Except to the extent that federal law is controlling, the
Plan shall be construed and enforced in accordance with and governed by the laws
of the State of Minnesota.

8.6. AMENDMENT AND TERMINATION. The Company reserves the power to unilaterally
amend this Plan at any time, either prospectively or retroactively or both by
action of the Committee (with the written concurrence of the Chief Executive
Officer of the Company). The Committee may likewise terminate or curtail the
benefits of this Plan both with regard to persons expecting to receive benefits
in the future and persons already receiving benefits at the time of such action;
provided, however, that the Committee may not amend or terminate the Plan with
respect to benefits that have accrued and are Vested pursuant to Section 4 in
any manner that reduces the amount of such benefits, nor may the Committee,
after a Change in Control, as that term is defined in the Master Stock Plan,
directly or indirectly alter, amend, suspend, terminate or discontinue the Plan,
establish or modify rules, regulations or procedures under the Plan, make any
interpretation or determination under the Plan, or exercise any authority or
discretion vested in the Committee unless such action is permitted under Section
1.07 of the Master Stock Plan. No modification of the terms of this Plan shall
be effective unless it is in writing and signed on behalf of the Company by a
person authorized to execute such writing. No oral representation concerning the
interpretation or effect of this Plan shall be effective to amend the Plan.

                                      -14-

<PAGE>

8.7. RULES OF INTERPRETATION. The titles given to the various sections of this
Plan are inserted for convenience of reference only and are not part of this
Plan, and they shall not be considered in determining the purpose, meaning or
intent of any provision hereof.

                                      -15-

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