THE TORO COMPANY
1992 DIRECTORS STOCK PLAN
1. PURPOSE OF THE PLAN. The purpose of The Toro Company 1992 Directors Stock
Plan ("Plan") is to enable The Toro Company (the "Company") to attract and
retain experienced and knowledgeable independent directors to serve on the
Board of Directors of the Company or its subsidiaries, and to further align
their interests with those of the stockholders of the Company by providing
for or increasing their stock ownership interests in the Company. It is
intended that the Plan be interpreted to comply with Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to the
extent applicable.
2. ELIGIBILITY. All members of the Company's Board of Directors who are not
current employees of the Company or any of its subsidiaries ("Nonemployee
Directors") are eligible to participate in the Plan.
3. PLAN AWARDS.
a. DIRECTORS SHARES. To carry out the purposes of the Plan, the Company
shall issue shares ("Directors Shares") of the Company's Common Stock,
$1.00 par value and related preferred share purchase rights (subject
to adjustment as provided in Section 4 hereof) (the "Common Stock"),
to each person who is then a Nonemployee Director, on the first day of
each fiscal year in an amount equal to $5,000 divided by the fair
market value of one share of Common Stock; provided, however, that the
first award of Directors Shares made under the Plan shall be made on
the date that the Plan is first approved by the Company's stockholders
to Nonemployee Directors then serving. The "fair market value of one
share of Common Stock" shall be the average of the closing prices of
the Common Stock on the New York Stock Exchange as reported in The
Wall Street Journal for each of the trading days in the three calendar
months immediately prior to the date of issue of the Directors Shares.
b. DIRECTORS OPTIONS.
i. ANNUAL GRANT. Subject to the terms and conditions of this Section
3.b., the Company shall grant a nonqualified option ("Directors
Options") to purchase 1,000 shares of the Common Stock, to each
person who is then a Nonemployee Director, on the first day of
each fiscal year at an exercise price per share equal to the fair
market value of one share of Common Stock on the date of grant;
provided, however, that the first award of Directors Options made
under the Plan shall be contingent on approval by the Company's
stockholders of the grant of Directors Options. The "fair market
value of one share of Common Stock" shall be the closing price of
the Common Stock on the New York Stock Exchange on the first day
of the Company's fiscal year with respect to which the grant is
made, as reported in The Wall Street Journal.
ii. OPTION TERMS.
(a) Directors Options shall be exercisable in whole or in part
commencing six months following the date of grant and shall
remain exercisable for a term of five years after the date
of grant, except that the first Directors Options awarded
contingent upon approval by the Company's stockholders of
the grant of Directors Options shall expire on October 31,
2000.
(b) No Directors Option shall be assigned or transferred, except
by will or the laws of descent and distribution. An option
so transferred may be exercised after the death of the
individual to whom it is granted only by such individual's
legal representatives, heirs or legatees, not later than the
earlier of the date the option expires or one year after the
date of death of such individual, and only with respect to
an option exercisable at the time of death.
(c) During the lifetime of a Nonemployee Director, options held
by such individual may be exercised only by the Nonemployee
Director and only while serving as a member of the Board of
Directors of the Company and only if the Nonemployee
Director has been continuously so serving since the date
such options were granted; provided, however, that in the
event of disability of a Nonemployee Director, options may
be exercised by such individual not later than the earlier
of the date the option expires or one year after the date
such service as a member of the Board of Directors ceases by
reason of disability, but only with respect to an option
exercisable at the time such service ceases.
(d) Payment of the exercise price may be made in cash, in shares
of Common Stock valued at fair market value on the date of
exercise or in a combination of cash and Common Stock.
c. SHARE PRORATION. If, on any date on which Directors Shares are to be
issued pursuant to Section 3.a. or Directors Options are to be granted
pursuant to Section 3.b., the number of shares of Common Stock is
insufficient for the issuance of the entire number of shares to be
issued or the grant of the entire number of options as calculated in
accordance with Section 3.a. or Section 3.b., then the number of
shares to be issued to each Nonemployee Director entitled to receive
Directors Shares or Directors Options on such date shall be such
Nonemployee Director's proportionate share of such available number of
shares or options (rounded down to the greatest number of whole
shares), provided that if a sufficient number of shares of Common
Stock is available to issue all of the Directors Shares, then the
entire number of Directors Shares shall be issued first and the number
of shares to be subjected to options shall be prorated in accordance
with this section.
d. SUPPLEMENTAL BENEFIT. Directors Shares and Directors Options are a
supplemental benefit and are not a component of the annual retainer
paid to Nonemployee Directors. The value of Directors Shares and
Directors Options shall not be included in the calculation by the
Company of the amount of compensation upon which a Nonemployee
Director's retirement benefit is calculated for purposes of the
Company's Director Retirement Plan or any similar plan.
4. STOCK SUBJECT TO PLAN. Subject to adjustment as provided in this paragraph
and subject to increase by amendment of the Plan, the total number of
shares of Common Stock that is reserved and available for issuance as
Directors Shares or pursuant to Directors Options granted under the Plan
shall be 65,000 shares. If any Directors Option granted hereunder expires
unexercised or terminates, the shares of Common Stock reserved for issuance
pursuant to such option shall, to the extent of any such termination or to
the extent the shares covered by an option are not issued or used, again be
available for option grants under the Plan. Any shares issued by the
Company in connection with the assumption or substitution of outstanding
option grants from any acquired corporation shall not reduce the shares
available for stock awards or option grants under the Plan. Appropriate
adjustments in the number of shares of the Common Stock that may be
available for option grants under the Plan and adjustments in the option
price per share of outstanding options may be made by the Committee in its
discretion to give effect to adjustments made in the number of shares of
Common Stock of the Company through any merger, consolidation,
recapitalization, reclassification, combination, stock dividend, stock
split or other similar change in the corporate structure of the Company
affecting the Common Stock, or a sale by the Company of all or part of its
assets or any distribution to stockholders other than a normal cash
dividend.
5. CHANGE OF CONTROL. In the event of a threatened or actual Change of Control
of the Company as hereinafter defined, whether or not approved by the Board
of Directors , all Directors Options shall fully vest, unless otherwise
limited by the Committee at the time of grant, and be exercisable in their
entirety immediately, and notwithstanding any other provisions of the Plan,
shall continue to be exercisable for three years following the later of the
threatened or actual Change of Control, but not later than ten years after
the date of grant. A Change of Control means the earliest to occur of (i) a
public announcement that a party shall have acquired or obtained the right
to acquire beneficial ownership of 20% or more of the outstanding shares of
Common Stock of the Company, (ii) the commencement or announcement of an
intention to make a tender offer or exchange offer, the consummation of
which would result in the beneficial ownership by a party of 30% or more of
the outstanding shares of Common Stock of the Company or (iii) the
occurrence of a tender offer, exchange offer, merger, consolidation, sale
of assets or contested election or any combination thereof, that causes (or
would cause) the persons who were directors of the Company immediately
before such Change of Control to cease to constitute a majority of the
Board of Directors of the Company or any parent of or successor to the
Company.
6. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a committee
composed of those members of the Board of Directors of the Company who are
also employees of the Company (the "Committee"). The Committee shall have
the authority to carry out all provisions of the Plan; provided, however,
that it shall have no discretion to determine which Nonemployee Directors
may receive Directors Shares or Directors Options or to set the value of
such Directors Shares or Directors Options, other than to make the
calculations required by Section 3.a. and Section 3.b.
7. TERM OF PLAN. The Plan became effective on August 20, 1992 and shall
terminate ten (10) years thereafter, unless sooner terminated by action of
the Board of Directors.
8. AMENDMENT.
a. The effective date of any amendment to the Plan shall be the date of
its adoption by the Board of Directors; provided, however, that no
amendment shall be effective unless and until the same is approved by
the stockholders of the Company where the failure to obtain such
approval would adversely affect the compliance of the Plan with any
law or rule, including the Exchange Act and the Internal Revenue Code
of 1986, as amended. In the event the stockholders do not approve such
an amendment, the amendment shall be of no effect and the Plan shall
continue in effect as if such amendment had not been adopted by the
Board of Directors, unless the Board otherwise determines. No
amendment of the Plan shall adversely affect in a material manner any
right of any option
holder with respect to any option theretofore granted without such
option holder's written consent.
b. The provisions of Section 3.a. and Section 3.b. shall not be amended
more than once every six (6) months other than to comport with changes
in the Code, the Employee Retirement Income Security Act, or the rules
thereunder.