EXHIBIT 10(k)
THE TORO COMPANY
DEFERRED COMPENSATION PLAN
FOR OFFICERS
SEPTEMBER 19, 2002
CONTENTS
<Table>
I. DEFINITIONS..............................................................................1
II. ELIGIBILITY, PARTICIPATION, DEFERRAL.....................................................5
2.1 Eligibility.....................................................................5
2.2. Participation...................................................................5
2.3 Deferral Election...............................................................5
III. PARTICIPANTS' ACCOUNTS...................................................................6
3.1 General.........................................................................6
3.2 Number of Units to be Credited..................................................7
IV. VESTING..................................................................................8
4.1 Retained Units Account and Performance Share Units Account......................8
4.2 Matching Units Account..........................................................8
4.3 No Interest in Assets...........................................................9
V. DISTRIBUTIONS............................................................................9
5.1 Distributable Events............................................................9
5.2 Distribution of Benefits.......................................................10
5.3 Other Distributions............................................................11
5.4 Commencement of Distributions..................................................11
5.5 Form of Payment................................................................12
VI. THE TRUST...............................................................................12
6.1 The Trust......................................................................12
6.2 Enforcement of Funding.........................................................13
VII. NONTRANSFERABILITY......................................................................13
7.1 Anti-Alienation of Benefits....................................................13
7.2 Incompetent Participants.......................................................13
7.3 Designated Beneficiary.........................................................13
</Table>
-i-
<Table>
VIII. WITHHOLDING.............................................................................14
IX. VOTING OF STOCK.........................................................................14
X. ADMINISTRATION OF THE PLAN..............................................................14
10.1 Administrator..................................................................14
10.2 Authority of Administrator.....................................................14
10.3 Operation of Plan..............................................................15
10.4 Claims Procedures..............................................................15
10.5 Arbitration....................................................................16
10.6 Participant's Address..........................................................17
10.7 Liability......................................................................17
XI. MISCELLANEOUS PROVISIONS................................................................17
11.1 No Employment Rights...........................................................17
11.2 Unfunded and Unsecured.........................................................17
11.3 Singular and Plural............................................................18
11.4 Severability...................................................................18
11.5 Applicable Law.................................................................18
XII. AMENDMENT OR TERMINATION................................................................18
12.1 Amendment or Termination of the Plan............................................18
12.2 Accounts After Termination......................................................19
12.3 Optional Investment of Vested Accounts..........................................20
</Table>
-ii-
THE TORO COMPANY
DEFERRED COMPENSATION PLAN
FOR OFFICERS
DECEMBER 2, 1999 RESTATEMENT
The Toro Company hereby amends and restates its Deferred Compensation
Plan for Officers, originally effective as of January 21, 1998. The purpose of
the Plan is to provide the opportunity for selected officers of the Company to
defer receipt of compensation that may be payable under The Toro Company Annual
Management Incentive Plan II and The Toro Company Performance Share Plan, and to
acquire and retain Common Stock in the form of Common Stock Units.
I. DEFINITIONS
When used in the Plan, the following terms have the meanings indicated
unless a different meaning is plainly required by the context:
"Account" means a book entry account established and maintained in the
Company's records in the name of a Participant pursuant to Articles II and III
of the Plan, and includes Retained Units Accounts, Matching Units Accounts and
Performance Share Units Accounts.
"AMIP II" means The Toro Company Annual Management Incentive Plan II,
as amended from time to time, and any successor plan designated as such by the
Board of Directors.
"Annual Performance Award" means an award granted under AMIP II
pursuant to which annual incentive compensation based on achievement of annual
performance goals may be paid.
"Award Term" means the period established by the Compensation Committee
for awards granted under the Performance Share Plan.
"Base Cash Award" means the actual amount of an award payment that may
be paid under an Annual Performance Award, as calculated in accordance with AMIP
II.
"Board of Directors" means the Board of Directors of the Company.
"Change of Control" means:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of 15% or more of either (A) the then-outstanding shares of Common Stock of the
Company (the "Outstanding Company Common Stock") or (B) the combined voting
power of the then-outstanding voting securities
DEFERRED COMPENSATION PLAN FOR OFFICERS PAGE 1
of the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (i), the following acquisitions shall not constitute a Change
of Control: (A) any acquisition directly from the Company, (B) any acquisition
by the Company, (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company, or (D) any acquisition by any corporation pursuant to a transaction
that complies with clauses (A), (B) and (C) of subsection (iii) of this
definition; or
(ii) Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) Consummation of a reorganization, merger or consolidation of the
Company or sale or other disposition of all or substantially all of the assets
of the Company or the acquisition by the Company of assets or stock of another
entity (a "Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then-outstanding shares of common stock and the combined
voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 15% or more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Business Combination, or the
combined voting power of the then-outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination;
DEFERRED COMPENSATION PLAN FOR OFFICERS PAGE 2
or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, par value $1.00 per share, and
the related Preferred Share Purchase Rights, of the Company as such shares may
be adjusted in accordance with Section 3.1(c).
"Company" means The Toro Company, a Delaware corporation.
"Compensation Committee" means the Compensation Committee of the Board
of Directors, or any successor committee.
"Deferral Election" shall mean a Participant's election under Section
2.3 hereof, made in the form prescribed by the Company.
"Disability" means a Participant is permanently disabled and unable to
work and entitled to a disability benefit under a long-term disability program
sponsored or maintained by the Company. "Disability" does not include short-term
disability under any program sponsored or maintained by the Company that
provides short-term disability benefits.
"Effective Date" means January 21, 1998, the date the Plan was
originally adopted, or the date the Plan is amended, by the Board of Directors.
"Eligible Officer" means an officer of the Company or a Subsidiary,
described in Section 2.1.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fair Market Value" means the closing price of one share of Common
Stock as reported in The Wall Street Journal, except that where a different
meaning is established in AMIP II or the Performance Share Plan for any
particular purpose, that meaning shall govern for that purpose.
"Fiscal Year" means the fiscal year of the Company, which begins on
November 1 and ends on the following October 31.
"Matching Units Account" means an Account with entries denominated in
Units (including fractions) that are credited in accordance with Section 3.3.
DEFERRED COMPENSATION PLAN FOR OFFICERS PAGE 3
"Participant" means an Eligible Officer who delivers a Deferral
Election in accordance with Sections 2.2 and 2.3 of the Plan and for whom Units
are actually credited to an Account. An individual shall not cease to be a
Participant if the person ceases to be an Eligible Officer, so long as Units
remain credited to such Participant's Accounts. Neither a Beneficiary, a spouse
or former spouse nor an executor or personal administrator of a Participant's
estate shall be treated as a Participant even if such spouse or the
Participant's estate has an interest in the Participant's benefits under the
Plan.
"Performance Shares" are rights to receive shares of Common Stock or
Common Stock Units, awarded under the Performance Share Plan.
"Performance Share Units Account" means an Account with entries
denominated in Units that are credited in accordance with Section 3.4.
"Performance Share Award" means the award that sets forth the number of
Performance Shares granted under the Performance Share Plan.
"Performance Share Plan" means The Toro Company Performance Share Plan,
as amended from time to time, and any successor plan designated as such by the
Board of Directors.
"Plan" means this Deferred Compensation Plan for Officers, as amended
from time to time.
"Retained Units Account" means an Account with entries denominated in
Units (including fractions) that are credited in accordance with Section 3.2 of
the Plan.
"Stock Retention Award" means a right granted under AMIP II to elect
(i) to convert to shares of Common Stock or (ii) to defer under the Plan, into
Units, up to 50% of a Base Cash Award and to receive additional incentive
compensation in the form of one additional Unit for every two Units acquired
upon conversion.
"Subsidiary" means any corporation which is a component member of the
controlled group of companies of which the Company is the common parent.
Controlled group shall be determined with reference to Section 1563 of the Code
but including any corporation described in Section 1563(b)(2) thereof.
"Trust" means a trust which shall be established or maintained by the
Company that may be used in connection with this Plan to assist the Company in
meetings its obligations under the Plan. The Plan shall constitute an unfunded
arrangement and the Trust shall not affect the status of the Plan as an unfunded
plan. Participants and their beneficiaries shall have no preferred claim on, or
any beneficial ownership interest in, any assets of any such Trust.
"Trustee" means the corporation or person or persons selected by the
Company to serve as Trustee for the Trust.
DEFERRED COMPENSATION PLAN FOR OFFICERS PAGE 4
A "Unit" has a value equal to one share of Common Stock, subject to
adjustment by the Compensation Committee as contemplated by Section 3.1(c) of
the Plan.
II. ELIGIBILITY, PARTICIPATION, DEFERRAL
2.1 ELIGIBILITY
An officer of the Company or a Subsidiary who is granted a Stock
Retention Award under AMIP II or a Performance Share Award under the Performance
Share Plan is eligible to participate in the Plan.
2.2. PARTICIPATION
An Eligible Officer may become a Participant in the Plan by executing
and delivering to the Director of Compensation and Benefits, or successor
position, of the Company a Deferral Election in the form prescribed by the
Company.
2.3 DEFERRAL ELECTION
(a) Deadline for Delivery. An Eligible Officer may elect to defer
Base Cash Award compensation that may be earned under AMIP II
or Performance Shares that may be delivered in settlement of a
Performance Share Award, or both, by completing and submitting
a Deferral Election to the Director of Compensation and
Benefits, or successor position, not later than the December
31 immediately following the grant to such individual of a
Stock Retention Award or Performance Share Award.
(i) Notwithstanding the foregoing, the deadline for
delivering a Deferral Election in the year in which
the Plan is implemented or amended and for newly
Eligible Officers shall be as follows:
(A) In the year in which the Plan is first
implemented or amended to permit deferral of
compensation not previously subject to
deferral, an Eligible Officer may submit a
Deferral Election not later than 30 days
after the Effective Date of the Plan or such
amendment, but at least six months prior to
the date on which an award either vests or
becomes payable.
(B) In the year in which an individual first
becomes an Eligible Officer, if at a time
other than that date the Compensation
Committee typically makes awards to other
officers, the Eligible Officer may submit a
Deferral Election not later than 30 days
after the date the individual becomes an
Eligible Officer, but at least six months
prior to the date on which an award either
vests or becomes payable.
DEFERRED COMPENSATION PLAN FOR OFFICERS PAGE 5
(b) Amount to be Deferred. The Deferral Election shall relate to
compensation that may be earned with respect to the Fiscal
Year to which a Stock Retention Award relates or the Award
Term to which a Performance Share Award relates. A Deferral
Election may designate up to 50% of a Base Cash Award and up
to 100% of Performance Shares in a Performance Share Award to
be deferred.
(c) Effectiveness. The Deferral Election is irrevocable, shall be
effective upon delivery and shall remain in effect only with
respect to the Fiscal Year or Award Term for which it is made.
(d) Record of Participants. The name of each Participant and the
date on which participation commences shall be recorded, and
the record shall be maintained by the Secretary or Assistant
Secretary of the Company, or their designee.
III. PARTICIPANTS' ACCOUNTS
3.1 GENERAL
(a) Certification Required. No Units or other amount shall be
credited to any Account with respect to any Stock Retention
Award or Performance Share Award until the Compensation
Committee has certified in writing as required by AMIP II or
the Performance Share Plan that the performance goals
established with respect to such award have been achieved and,
in the case of a Performance Share Award, Performance Shares
in such award have vested.
(b) Separate Accounts. The value of each of a Participant's
Retained Units Account, Matching Units Account and Performance
Share Units Account shall be accounted for separately.
(c) Account Value. Subject to the provisions of this Section
3.1(c), the value of Units in any Account shall fluctuate with
the Fair Market Value of the Common Stock. In the event of a
corporate transaction involving the Company (including,
without limitation, any merger, consolidation,
recapitalization, reorganization, split off, spin off,
reclassification, combination, stock dividend, stock split,
reverse stock split, repurchase, exchange, issuance of
warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate
transaction or 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), the Committee
shall adjust Accounts to preserve their benefits or potential
benefits. Action by the Committee may include all or any of
(i) appropriate adjustments in the number of Units then
credited to an Account; (ii) conversion of Units to other new
or different securities into which the Common Stock may be
converted; (iii) cash payments, or (iv) any other adjustment
the Committee determines to be equitable and consistent with
the
DEFERRED COMPENSATION PLAN FOR OFFICERS PAGE 6
purposes of this Plan. In the event that Common Stock is
converted into cash in connection with a corporate transaction
described in this subsection, the value of the Units in any
Account shall be converted to a dollar amount, by multiplying
the number of Units in each Account by the Fair Market Value
of a share of Common Stock on the date of the corporate
transaction, and such amounts shall be credited with interest
at a rate and in a manner determined by the Company to be
consistent with the average prime rate of interest charged by
U.S. Bank, National Association to its individual borrowers.
If the Trust is funded in the event of a Change of Control,
the Trustee shall have authority to change the method of
determining the interest crediting rate.
(d) Dividends. In the event that the Company pays dividends on its
Common Stock, each of the Retained Units Account, Matching
Units Account and Performance Share Units Account shall be
credited with additional Units (including fractions). The
number of additional Units to be credited shall be determined
by dividing the aggregate dollar value of the dividends that
would be paid on the Units, if such Units were Common Stock,
by the Fair Market Value of one share of the Common Stock on
the dividend payment date.
(e) Continuation of Accounts. Notwithstanding that a Participant
ceases to be an Eligible Officer, any Accounts established for
such Participant shall continue to be maintained until
distribution of the assets in accordance with the Plan and the
Participant's Deferral Election.
3.2 NUMBER OF UNITS TO BE CREDITED
(a) Retained Units Account. The dollar amount of the portion of a
Base Cash Award subject to a Deferral Election with respect to
any Stock Retention Award shall be divided by the Fair Market
Value of the Common Stock and the resulting number of Units
(including fractions) shall be credited to a Participant's
Retained Units Account.
For purposes of Sections 3.2(a) and (b), Fair Market Value
shall be determined as of the date that the Compensation
Committee makes the certification required under Section
3.1(a) of this Plan.
(b) Matching Units Account. One-half of the dollar amount of the
portion of the Base Cash Award subject to the Deferral
Election with respect to any Stock Retention Award shall be
divided by the Fair Market Value of the Common Stock and the
resulting number of Units (including fractions) shall be
credited to a Participant's Matching Units Account.
(c) Performance Share Units Account. The number of Performance
Share Units to be credited to a Participant's Performance
Share Account with respect to a Performance Share Award shall
be the portion of the total number of
DEFERRED COMPENSATION PLAN FOR OFFICERS PAGE 7
Performance Shares in the award that has vested and is subject
to the Deferral Election.
IV. VESTING
4.1 RETAINED UNITS ACCOUNT AND PERFORMANCE SHARE UNITS ACCOUNT
Retained Units (including fractions) and Performance Share Units
credited to a Participant's Accounts shall be 100% vested at all times.
4.2 MATCHING UNITS ACCOUNT
(a) General Requirement. Matching Units shall vest only if
Retained Units related to the Units credited as Matching Units
remain credited to a Participant's Retained Units Account
through the requisite vesting periods and all other
requirements of AMIP II have been met by the Participant,
except as otherwise provided in AMIP II. Forfeited Units shall
not be reallocated or credited to the Accounts of remaining
Participants.
(b) Vesting Schedule. Matching Units (including fractions)
credited to a Participant's Matching Units Account with
respect to a Stock Retention Award shall vest in accordance
with the following schedule:
<Table>
<Caption>
Date Percentage of Units to Vest
---- ---------------------------
o At the end of the second year after the date Units First 25%
are first credited to a Matching Units Account
o At the end of the third year after the date Units Second 25%
are first credited to a Matching Units Account
o At the end of the fourth year after the date Units Third 25%
are first credited to a Matching Units Account
o At the end of the fifth year after the date Units Final 25%
are first credited to a Matching Units Account
</Table>
(c) Death or Disability. Notwithstanding any provision herein or
in AMIP II to the contrary, in the event of a Participant's
death or Disability, vesting shall accelerate and all Matching
Units shall vest in full.
(d) Retirement. Notwithstanding any provision herein or in AMIP II
to the contrary, in the event of a Participant's retirement
from the Company at or after age 65, vesting shall accelerate
and all Matching Units shall vest in full. Notwithstanding the
foregoing, if within one year after such retirement the
Participant is employed or retained by a company that competes
with the business of the Company, or such individual violates
any confidentiality
DEFERRED COMPENSATION PLAN FOR OFFICERS PAGE 8
agreement with the Company, the Company may require the
Participant to return the economic value of the Matching Units
which vested early under this Section 4.2(d).
(e) Early Retirement. Notwithstanding any provision herein or in
AMIP II to the contrary, but subject to the distribution
election permitted under Section 5.4(c), in the event of a
Participant's retirement from the Company at or after age 55
but before age 65, the Participant's Retained Units shall
remain credited to the Retained Units Account until the
earlier of the date the Participant reaches age 65 or until
applicable vesting requirements have been fulfilled, and
Matching Units shall continue to vest in accordance with the
vesting schedule of Section 4.2(b), or until vesting is
accelerated by Participant's attaining age 65, whichever
occurs earlier. Notwithstanding the foregoing, if within one
year after such early retirement the Participant is employed
or retained by a company that competes with the business of
Company, or violates any confidentiality agreement with the
Company, the Company may require the Participant to return the
economic value of the Matching Units which vested after the
date of early retirement under this Section 4.2(e).
(f) Voluntary Resignation. In the event that a Participant resigns
from the Company voluntarily, Matching Units held in such
Participant's Account that have not yet vested shall not vest
and shall be forfeited, unless otherwise determined by the
Chair of the Compensation Committee, in his or her discretion,
upon recommendation by the Chief Executive Officer of the
Company.
(g) Change of Control. All Matching Units that have not yet vested
shall vest upon a Change of Control.
4.3 NO INTEREST IN ASSETS
The Company may set aside or earmark funds or other assets to meet its
obligations under the Plan, but title to and ownership of such funds and assets
shall remain in the Company. No Participant nor any beneficiary shall have any
ownership rights or any property interest in any of such funds or other assets,
or in any other assets of the Company, until they are distributed in accordance
with the Plan.
V. DISTRIBUTIONS
5.1 DISTRIBUTABLE EVENTS
Benefits shall be payable under the Plan to or on behalf of a
Participant, in accordance with the elections made by the Participant under the
Plan, upon the earliest to occur of the following events:
DEFERRED COMPENSATION PLAN FOR OFFICERS PAGE 9
(a) death;
(b) Disability; or
(c) termination of employment.
5.2 DISTRIBUTION OF BENEFITS
(a) Value of Benefits. In the event a Participant becomes eligible
to receive a payment under the Plan, the Participant shall be
entitled to receive the value of the Retained Units Account,
the value of the vested portion of the Matching Units Account
and the value of the Performance Share Units Account.
(b) Election of Method of Payment. Benefits payable to a
Participant or, in the event of the Participant's death, to
the Participant's designated beneficiary under the Plan shall
be paid in accordance with one of the available methods of
payment referred to in Section 5.2(d) in accordance with the
Participant's most recent valid Deferral Election form.
(c) Change in Election of Method of Payment. An election of a
method of payment will apply to all benefits payable to or on
behalf of a participant under the Plan, including amounts
deferred in prior years and subject to a prior election. A
Participant may change the method of payment by electing
another method available under the Plan at any time up to two
years before the date of the Participant's retirement from the
Company. In no event will any such change in the method of
payment be effective if such change is elected during the
calendar year in which the distributable event occurs and no
further elections may be made once a distributable event
occurs.
(d) Available Methods of Payment. Available methods of payment are
(i) approximately equal annual, semiannual, quarterly or
monthly installment payments over a period certain (not to
exceed ten), unless a longer period is approved by the
Compensation Committee) or (ii) a single distribution.
(e) Compensation Committee Discretion. The Compensation Committee
may, in its sole discretion, reduce the period over which
distributions would have been made pursuant to the method of
payment selected by a Participant.
(f) Absence of Election of Method of Payment. Absent a Deferral
Election specifying a method of payment, benefits payable
under the Plan to or on behalf of a Participant shall be paid
in a single distribution to the Participant, or in the event
of the Participant's death, to the Participant's designated
beneficiary under the Plan.
DEFERRED COMPENSATION PLAN FOR OFFICERS PAGE 10
5.3 OTHER DISTRIBUTIONS
(a) Early Distributions. Notwithstanding Section 5.1, a
Participant may irrevocably elect to receive a distribution of
a portion or all of the Participant's Performance Share Units
Account, Retained Units Account and the vested portion of the
Matching Units Account prior to Participant's death,
Disability or termination of employment provided that the
Participant will have attained age 55 at the date such
distribution will begin, and provided further that only
benefits credited to an Account for at least two years may be
paid. The election shall be made on a Deferral Election form
not later than two years prior to the year in which the early
distribution is to begin. The election is subject to the
consent of the Compensation Committee.
(b) Tax-Related Distributions. Notwithstanding any provision in
this Plan to the contrary, if at any time a court or the
Internal Revenue Service determines that the value of any
Units credited to a Participant's Accounts under the Plan or
Trust is includable in the gross income of the Participant and
subject to tax, the Compensation Committee shall make a lump
sum distribution to the Participant of an amount equal to the
amount determined to be includable in the Participant's gross
income, and the value of the Participant's Accounts shall be
reduced by a like amount.
5.4 COMMENCEMENT OF DISTRIBUTIONS
Payment of a benefit shall begin in accordance with the provisions of
this Section 5.4.
(a) Death or Disability. If a benefit is payable because of a
Participant's death or Disability, payment shall begin on the
15th day of the first month immediately following the month in
which the Participant's death occurs or the determination of
Disability is made.
(b) Other Termination. If a benefit is payable because of a
Participant's termination of employment with the Company for
any reason other than death or Disability or pursuant to an
early retirement election approved by the Compensation
Committee, payment shall begin on or about the 15th day of
January immediately following the calendar year in which the
termination of employment occurs.
(c) Early Retirement. If a Participant retires at or after age 55,
but prior to age 65, Matching Units that have not yet vested
and related Retained Units will remain on deposit until the
Matching Units vest, unless the Participant has properly made
an irrevocable election (an "early retirement election") to
receive a distribution of all of the Participant's Retained
Units Account upon early retirement and to forfeit Matching
Units that have not vested. An early retirement election must
be made at the time the original Deferral Election is made and
must be consented to by the Compensation Committee. If a
DEFERRED COMPENSATION PLAN FOR OFFICERS PAGE 11
Participant has properly made an early retirement election to
which the Compensation Committee has consented, and if the
Participant retires from the Company at or after the
Participant attains age 55, but prior to age 65, at a time
when Units in the Participant's Matching Units Account are not
yet fully vested under Section 4.2(b) of the Plan, the
Participant shall forfeit Units that have not vested at the
date of such early retirement and distributions shall begin on
or about the 15th day of January immediately following the
calendar year in which the Participant's early retirement
occurs. If a Participant has not made such an early retirement
election, distribution of a Participant's Retained Units and
Matching Units will begin on or about the 15th day of January
immediately following the calendar year in which (i) the
applicable vesting requirements are fulfilled or (ii) the
Participant attains age 65, whichever is earlier. This
provision shall have no effect on distribution of any Account
other than a Matching Units Account that has not vested and a
related Retained Units Account.
(d) Early Distribution. If a Participant has properly made an
early distribution election to which the Compensation
Committee has consented and the Participant has attained age
55, payment shall begin on or about the 15th day of January
immediately following the calendar year in which the
Participant attains the age set forth in Participant's
Deferral Election, provided the age is not less than 55.
5.5 FORM OF PAYMENT
If a benefit is payable to or on behalf of a Participant under the
Plan, vested Units in the Participant's Accounts shall be distributed in the
form of an equal number of shares of Common Stock and any vested fractional Unit
shall be converted into cash based on the Fair Market Value of the Common Stock
immediately prior to distribution. Common Stock may be original issue shares,
treasury shares or shares purchased in the market or from private sources of a
combination thereof.
VI. THE TRUST
6.1 THE TRUST
In order to provide assets from which to pay the benefit obligations to
the Participants and their beneficiaries under the Plan, the Company shall
maintain a Trust by a trust agreement with a third party, the Trustee, to which
it may, in its discretion, contribute cash or other property, including
securities issued by the Company, to provide for the benefit payments under the
Plan. In the event of a Change of Control, the Company shall, as soon as
possible, but in no event longer than 30 days following the Change of Control,
make irrevocable contributions to the Trust in amounts that are sufficient to
pay the Participants or beneficiaries the benefits to which the Participants or
their beneficiaries would be entitled pursuant to the terms of the Plan as of
the date on which the Change of Control occurred, including benefits that vest
under the Plan as a result of the Change of Control. The Trustee
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will have the duty to invest the Trust assets and funds in accordance with the
terms of the Trust. The Company is entitled at any time or times prior to a
Change of Control, in its sole discretion, to substitute assets of equal fair
market value for any assets held in the Trust. All rights associated with the
assets of the Trust will be exercised by the Trustee or the person designated by
the Trustee, and will in no event be exercisable by or rest with Participants or
their beneficiaries. The Trust shall provide that in the event of the insolvency
of the Company, the Trustee shall hold the assets for the benefit of the general
creditors of the Company.
6.2 ENFORCEMENT OF FUNDING
If following a Change of Control, irrevocable contributions to the
Trust have not been made as required in Section 6.1 hereof, any Participant or
beneficiary shall have the right to seek specific performance from the Company
of its obligation to make such contributions. The Company consents to the
jurisdiction of the district courts of the State of Minnesota to determine any
action for such specific performance.
VII. NONTRANSFERABILITY
7.1 ANTI-ALIENATION OF BENEFITS
Units credited to a Participant's Accounts, and any rights or
privileges pertaining thereto, may not be anticipated, alienated, sold,
transferred, assigned, pledged, encumbered, or subjected to any charge or legal
process; and no interest or right to receive a benefit may be taken, either
voluntarily or involuntarily, for the satisfaction of the debts of, or other
obligations or claims against, such person or entity, including claims for
alimony, support, separate maintenance and claims in bankruptcy proceedings.
7.2 INCOMPETENT PARTICIPANTS
If any person who may be eligible to receive a benefit under the Plan
has been declared incompetent and a conservator or other person legally charged
with the care of such person or of his or her estate has been appointed, any
benefit payable under the Plan which the person is eligible to receive shall be
paid to such conservator or other person legally charged with the care of the
person or his or her estate. Except as provided above, when the Compensation
Committee has determined that such a person is unable to manage his or her
affairs, the Compensation Committee may provide for such payment or any part
thereof to be made to any other person or institution then contributing toward
or providing for the care and maintenance of such person. Any such payment shall
be a payment for the account of such person and a complete discharge of any
liability of the Company and the Plan therefor.
7.3 DESIGNATED BENEFICIARY
In the event of a Participant's death prior to the payment of all or a
portion of any benefits which may be payable with respect to the Participant
under the Plan, the payment of any benefits payable on behalf of the Participant
under the Plan shall be made to the
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Participant's beneficiary designated on the Deferral Election form provided to
the Participant by the Company. If no such beneficiary has been designated,
payment shall be made as required under the Participant's will; or, in the event
that there shall be no will under applicable state law, then to the persons who,
at the date of the Participant's death, would be entitled to share in the
distribution of such deceased Participant's personal estate under the provisions
of the applicable statute then in force governing the decedent's intestate
property.
VIII. WITHHOLDING
Any amounts payable pursuant to the Plan may be reduced by the amount
of any federal, state or local taxes required by law to be withheld with respect
to such payments, and by any amount owed by the Participant to the Company.
IX. VOTING OF STOCK
Participants shall not be entitled to voting rights with respect to
Units held in their Accounts.
X. ADMINISTRATION OF THE PLAN
10.1 ADMINISTRATOR
The Company shall be the administrator of the Plan. The Compensation
Committee shall act on behalf of the Company with respect to the administration
of the Plan and may delegate authority with respect to the administration of the
Plan to a committee, person or persons as it deems necessary or appropriate for
the administration and operation of the Plan. It is the Company's intention that
with respect to Participants subject to Section 16 of the Securities Exchange
Act of 1934, transactions under the Plan will comply with all applicable
requirements of Rule 16b-3 or its successors and with any Company policy with
respect to insider trading. To the extent any action by the administrator fails
to so comply, it shall be deemed null and void to the extent permitted by law
and deemed advisable by the Compensation Committee.
10.2 AUTHORITY OF ADMINISTRATOR
The Company shall have the authority, duty and power to interpret and
construe the provisions of the Plan as it deems appropriate; to adopt, establish
and revise rules, procedures and regulations relating to the Plan; to determine
the conditions subject to which any benefits may be payable; to resolve all
questions concerning the status and rights of Participants and others under the
Plan, including, but not limited to, eligibility for benefits, and to make any
other determinations necessary or advisable for the administration of the Plan.
The Company shall have the duty and responsibility of maintaining records,
mailing the requisite calculations and disbursing payments hereunder. The
determinations, interpretations, regulations and calculations of the Company
shall be final and binding on all persons and parties concerned. The Secretary
of the Company shall be the agent of the Plan for the service of legal process
in accordance with Section 502 of ERISA.
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10.3 OPERATION OF PLAN
The Company shall be responsible for the general operation and
administration of the Plan and for carrying out the provisions thereof. The
Company shall be responsible for the expenses incurred in the administration of
the Plan. The Company shall also be responsible for determining eligibility for
payments and the amounts payable pursuant to the Plan. The Company shall be
entitled to rely conclusively upon all tables, valuations, certificates,
opinions and reports furnished by any actuary, accountant, controller, counsel
or other person employed or engaged by the Company with respect to the Plan.
10.4 CLAIMS PROCEDURES
The Company intends to make payments under the Plan without requiring
that a Participant submit a claim form. However, a Participant who believes a
payment is due under the Plan may submit a claim for payments. For claims
procedures purposes, the "Claims Manager" shall be the Company.
(a) Claim. A claim for payments under the Plan must be made by the
Participant or his or her beneficiary (the "claimant" in this
Section and Section 10.5) in writing filed with the Claims
Manager and must state the claimant's name and the nature of
benefits payable. If a claim for payments under the Plan is
denied by the Company, the Claims Manager shall deliver to the
claimant a written explanation setting forth the reasons for
the denial, references to the pertinent provisions of the Plan
on which the denial is based, a description of any information
necessary for the claimant to perfect the claim and an
explanation of why such information is necessary, and
information on the procedures to be followed by the claimant
in obtaining a review of his or her claim, all written in a
manner calculated to be understood by the claimant. For this
purpose:
(i) The claimant's claim shall be deemed to be filed when
actually received by the Claims Manager.
(ii) The Claims Manager's denial of a claim, if there is
one, shall be delivered to the claimant not later
than 90 days after the date the claimant's claim is
filed.
(b) Claim Denial Procedures. The claimant shall have 60 days
following receipt of the denial of a claim to file with the
Claims Manager a written request for review of the denial.
(c) Claims Manager Decision. The Claims Manager shall review the
denial and furnish the claimant with a response not later than
60 days after receipt of the claimant's request for review of
the denial. The decision on review shall be in writing and
shall include reasons for the decision, written in a manner
calculated to be understood by the claimant, as well as
references to the
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pertinent provisions in the Plan on which the decision is
based. If a copy of the decision is not so furnished to the
claimant within such 60 days, the claim shall be deemed denied
on review. In no event may a claimant commence an arbitration
of a claim until the claimant has exhausted all of the
remedies and procedures afforded by this Section 10.4.
10.5 ARBITRATION
(a) In the event that a claimant has exhausted all of the remedies
afforded by the claims procedures of Section 10.4, and a claim
or controversy relating to the Plan remains, the claim or
controversy shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA"), as modified by this Section.
(b) An award rendered in connection with an arbitration pursuant
to this Section 10.5 shall be final and binding and judgment
upon such an award may be entered and enforced in any court of
competent jurisdiction.
(c) The forum for arbitration under this Plan shall be
Minneapolis, Minnesota and the governing law for such
arbitration shall be laws of the State of Delaware.
(d) Arbitration under this section shall be conducted by a single
arbitrator selected jointly by the Company and the claimant.
If within 30 days after a demand for arbitration is made, the
Company and the claimant are unable to agree on a single
arbitrator, three arbitrators shall be appointed.
Each party shall select one arbitrator and those two
arbitrators shall then select a third neutral arbitrator
within 30 days after their appointments. In connection with
the selection of the third arbitrator, consideration shall be
given to familiarity with executive compensation plans and
experience in dispute resolution between parties, as a judge
or otherwise. If the arbitrators selected by the parties
cannot agree on the third arbitrator, they shall discuss the
qualifications of such third arbitrator with the AAA, prior to
selection of such arbitrator, which selection shall be in
accordance with the Commercial Arbitration Rules of the AAA.
(e) If an arbitrator cannot continue to serve, a successor to an
arbitrator selected by a party shall be also selected by the
same party, and a successor to a neutral arbitrator shall be
selected as specified in subsection (d) of this section. A
full rehearing will be held only if the neutral arbitrator is
unable to continue to serve or if the remaining arbitrators
unanimously agree that such a rehearing is appropriate.
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(f) The arbitrator or arbitrators shall be guided, but not bound,
by the Federal Rules of Evidence and by the procedural rules,
including discovery provisions, of the Federal Rules of Civil
Procedure. Any discovery shall be limited to information
directly relevant to the controversy or claim in arbitration.
(g) The parties shall each be responsible for their own costs and
expenses, except for the fees and expenses of the arbitrators,
which shall be shared equally by the Company and the claimant.
10.6 PARTICIPANT'S ADDRESS
Each Participant shall keep the Company informed of his or her current
address and the current address of his or her beneficiary. The Company shall not
be obligated to search for any person. If the location of a Participant is not
made known to the Company within three years after the date on which payment of
the Participant's benefits payable under the Plan may be made, payment may be
made as though the Participant had died at the end of the three-year period. If,
within one additional year after such three-year period has elapsed, or, within
three years after the actual death of a Participant, the Company is unable to
locate any designated beneficiary of the Participant (including the
Participant's estate), then the Company shall have no further obligation to pay
any benefit hereunder to or on behalf of such Participant or designated
beneficiary and such benefits shall be irrevocably forfeited.
10.7 LIABILITY
Notwithstanding any of the provisions of the Plan to the contrary,
neither the Company nor any individual acting as an employee or agent of the
Company shall be liable to any Participant or any other person for any claim,
loss, liability or expense incurred in connection with the Plan, unless
attributable to fraud or willful misconduct on the part of the Company or any
such employee or agent of the Company.
XI. MISCELLANEOUS PROVISIONS
11.1 NO EMPLOYMENT RIGHTS
Neither the Plan nor any action taken hereunder shall be construed as
giving any employee a right to be employed by the Company.
11.2 UNFUNDED AND UNSECURED
The Plan shall at all times be considered entirely unfunded both for
tax purposes and for purposes of Title I of the Employee Retirement Income
Security Act of 1974, as amended. Funds invested hereunder shall continue for
all purposes to be part of the general assets of the Company and available to
the general creditors of the Company in the event of a bankruptcy (involvement
in a pending proceeding under the Federal Bankruptcy Code) or insolvency
(inability to pay debts as they mature). In the event of such a bankruptcy or
insolvency, the Company shall notify the Trustee of the Trust and each
Participant in writing of such an
DEFERRED COMPENSATION PLAN FOR OFFICERS PAGE 17
occurrence within three business days after the Company obtains knowledge of
such occurrence. No Participant or any other person shall have any interest in
any particular assets of the Company by reason of the right to receive a benefit
under the Plan and to the extent a Participant or any other person acquires a
right to receive benefits under the Plan, such right shall be no greater than
the right of any general unsecured creditor of the Company. The Plan constitutes
a mere promise by the Company to make payments to the Participants in the
future. Nothing contained in the Plan shall constitute a guaranty by the Company
or any other person or entity that any funds in any trust or the assets of the
Company will be sufficient to pay any benefit hereunder. Furthermore, no
Participant shall have any right to a benefit under the Plan except in
accordance with the terms of the Plan.
11.3 SINGULAR AND PLURAL
Except when otherwise required by the context, any singular terminology
shall include the plural.
11.4 SEVERABILITY
If a provision of the Plan shall be held to be illegal or invalid, the
illegality or invalidity shall not affect the remaining parts of the Plan and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.
11.5 APPLICABLE LAW
To the extent not preempted by the laws of the United States, the laws
of the State of Delaware shall apply with respect to the Plan and Deferral
Elections under the Plan without giving effect to any conflicts or choice of law
rule or principle that might otherwise refer construction to the substantive
laws of another jurisdiction.
XII. AMENDMENT OR TERMINATION
12.1 AMENDMENT OR TERMINATION OF THE PLAN
The Company reserves the power to amend or terminate the Plan at any
time by action of the Compensation Committee, ratified by the Board of
Directors, but
(a) no amendment or termination of the Plan may alter, impair or
reduce any benefit of a Participant under the Plan to which
such Participant may have previously become entitled prior to
the effective date of such amendment or termination, without
the written consent of such Participant, and
(b) no amendment may be made that would contravene the amendment
and termination provisions of AMIP II or the Performance Share
Plan, if applicable, and
(c) no amendment may increase the benefits payable to a
Participant who is referred to in Section 162(m) of the Code
unless AMIP II or the Performance
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Share Plan, as the case may be, has first been amended to
permit an increase, in accordance with the amendment
provisions of AMIP II or the Performance Share Plan, relating
to stockholder approval.
12.2 ACCOUNTS AFTER TERMINATION
No further Units (or fractions thereof) shall be credited to any
Account of any Participant after the date on which the Plan is terminated,
except that (a) Accounts shall continue to be credited with additional Units
(and fractions thereof) equal in value to dividends paid on an equivalent value
of Common Stock, if any, in accordance with Section 3.1(d) until all benefits
are distributed to a Participant or to the Participant's beneficiaries and (b)
the distribution provisions of the Plan shall continue in effect as if the Plan
had not been terminated. Accordingly, upon such termination of the Plan the
benefits credited to the Accounts shall be payable in accordance with the
elections made by the Participants and the distribution provisions of the Plan.
DATED as of September 19, 2002.
THE TORO COMPANY
/s/ K. B. Melrose
-------------------------------------
Chairman, Chief Executive Officer
and President
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