THE TORO COMPANY
DEFERRED COMPENSATION PLAN
FOR OFFICERS
The Toro Company hereby establishes The Toro Company Deferred Compensation
Plan for Officers. The purpose of the Plan is to provide the opportunity for
selected officers of Toro to defer receipt of compensation that may be payable
under the AMIP II and, at the same time, to acquire and retain Common Stock in
the form of Common Stock Units.
ARTICLE I.
DEFINITIONS
Section 1.1 DEFINITIONS. When used in the Plan with initial capital
letters, 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 and Matching Units Accounts.
"AMIP II" means The Toro Company Annual Management Incentive Plan II, as
amended from time to time.
"Annual Performance Award" means an award granted under the AMIP II
pursuant to which annual incentive compensation based on achievement of annual
performance goals may be paid.
"Base Cash Award" means the actual amount of an award payment that may be
paid under an Annual Performance Award and deferred under a Stock Retention
Award, as calculated in accordance with the AMIP II.
"Board of Directors" means the Board of Directors of Toro.
"Change of Control" means the earliest to occur of (a) a public
announcement that a Party has acquired or obtained the right to acquire
beneficial ownership of 20% or more of the outstanding shares of Common Stock of
Toro, (b) the commencement of, 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 20% or more of the outstanding shares of Common Stock of
Toro, or (c) 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 Toro immediately
before such Change of Control to cease to constitute a majority of the Board of
Directors of Toro or of any parent of or successor to Toro.
"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 Toro as such shares may be adjusted
in accordance with subparagraph 8.i. of the AMIP II.
"Compensation Committee" means the Compensation Committee of the Toro Board
of Directors, which has the authority to administer the AMIP II.
"Deferral Election" shall mean the written election form set forth in
Exhibit B hereto.
"Disability" means a Participant is permanently disabled and unable to work
and entitled to a disability benefit under a program sponsored or maintained by
Toro.
"Effective Date" means January 21, 1998, the date the Plan was adopted by
the Board of Directors, subject to stockholder approval at the March 18, 1998
Annual Meeting of Stockholders.
"Eligible Officer" means an officer of Toro described in Section 2.1.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fiscal Year" means the fiscal year of Toro, which year 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.
"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 have been credited
to such Participant's Accounts.
"Plan" means The Toro Company 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 the AMIP II to elect
(i) to convert to shares of Common Stock or (ii) to defer through 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.
"Toro" means The Toro Company, a Delaware corporation.
"Trust" means a trust which shall be established or maintained by Toro that
may be used in
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connection with this Plan to assist Toro in meeting its obligations under the
Plan. Such a Trust shall constitute an unfunded arrangement and 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 Toro to
serve as Trustee for the Trust.
A "Unit" has a value equal to one share of Common Stock or fraction
thereof, adjusted in accordance with paragraph 8.i. of the AMIP II.
ARTICLE II
ELIGIBILITY, PARTICIPATION AND DEFERRAL ELECTION
Section 2.1 ELIGIBILITY. An officer of Toro who is granted a Stock
Retention Award under the AMIP II is eligible to participate in the Plan.
Section 2.2. PARTICIPATION. An Eligible Officer shall become a
Participant in the Plan by executing and delivering to Toro a Deferral Election.
Section 2.3. DEFERRAL ELECTION.
(a) DEADLINE FOR DELIVERY. A Participant may elect to defer Base Cash
Award compensation that may be earned under the AMIP II by completing and
submitting to Toro a Deferral Election not later than the December 31
immediately following the grant to such individual of a Stock Retention
Award. Notwithstanding the foregoing, the deadline for delivering a
Deferral Election in the year in which the Plan is implemented and for new
Eligible Officers shall be as follows:
(i) In the year in which the Plan is first implemented, an Eligible
Officer may make a Deferral Election with respect to a Base
Cash Award that may be paid in connection with the Stock
Retention Award most recently granted not later than 30 days
after the Effective Date of the Plan, but at least six months
prior to the date on which the Base Cash Award becomes payable.
(ii) 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 make a Deferral Election with respect to a
Base Cash Award that may be paid in connection with a Stock
Retention Award granted in connection with becoming an Eligible
Officer 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 the Base Cash Award becomes payable.
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(b) AMOUNT TO BE DEFERRED. The Deferral Election shall relate to
compensation that may be earned with respect to the fiscal year to
which the Stock Retention Award relates (the fiscal year ending on the
subsequent October 31). A Deferral Election may designate up to 50%
of a Base Cash Award to be deferred and credited to the Participant's
Retained Units Account.
(c) EFFECTIVENESS. The Deferral Election is irrevocable and shall be
effective upon delivery to the Director of Compensation and Benefits
of Toro and shall remain in effect only with respect to the fiscal
year for which it is made.
(d) RECORD OF PARTICIPANTS. The name of each Participant and the date on
which participation commences with respect to each Stock Retention
Award shall be recorded on Exhibit A which is attached hereto and
which shall be revised from time to time by the Secretary or Assistant
Secretary of Toro, or their designee.
ARTICLE III
PARTICIPANTS' ACCOUNTS
Section 3.1 GENERAL.
(a) CERTIFICATION REQUIRED. No Units or other amount shall be credited to
any Account with respect to any Stock Retention Award relating to a
particular fiscal year until the Compensation Committee has certified
in writing that the performance goals established with respect to that
fiscal year have been achieved.
(b) SEPARATE ACCOUNTS. The value of each of a Participant's Retained
Units Account and Matching Units Account shall be accounted for
separately.
(c) ACCOUNT VALUE. The value of Units in any Account shall fluctuate with
the Fair Market Value of the Common Stock, as defined in Section
3.1(d)(i).
(d) DIVIDENDS. In the event that Toro pays dividends on its Common Stock,
each Retained Units Account and Matching 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 record date for payment of
dividends.
(i) "Fair Market Value" (as defined in the AMIP II) means
the closing price of one share of Common Stock as
reported in THE WALL STREET JOURNAL.
(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.
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Section 3.2. RETAINED UNITS ACCOUNT.
(a) NUMBER OF UNITS TO BE CREDITED. 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.
(i) For purposes of Sections 3.2 and 3.3, Fair Market Value
shall be determined as of the date that the
Compensation Committee makes the certification required
under paragraph 7 of the AMIP II and Subsection 3.1(a)
of this Plan.
Section 3.3. MATCHING UNITS ACCOUNT.
(a) NUMBER OF UNITS TO BE CREDITED. 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.
ARTICLE IV.
VESTING
Section 4.1 RETAINED UNITS ACCOUNT.
Retained Units (including fractions) credited to a Participant's Retained
Units Account shall be 100% vested at all times.
Section 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 the AMIP II have been met by the
Participant, except as otherwise provided in paragraph 8.f. of the
AMIP II. Forfeited Units shall not be reallocated or credited to the
Accounts of remaining Participants.
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(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:
DATE PERCENTAGE OF UNITS TO VEST
---- ---------------------------
- At the end of the second year after the First 25%
date Units are first credited to a
Matching Units Account
- At the end of the third year after the Second 25%
date Units are first credited to a
Matching Units Account
- At the end of the fourth year after the Third 25%
date Units are first credited to a
Matching Units Account
- At the end of the fifth year after the Final 25%
date Units are first credited to a
Matching Units Account
(c) DEATH OR DISABILITY. Notwithstanding any provision herein or in the
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 the AMIP II to
the contrary, in the event of a Participant's retirement 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 Toro, or such individual violates any
confidentiality agreement with Toro, Toro may demand the return of the
economic value of the Matching Units which vested early under this
Subsection 4.2.(d).
(e) EARLY RETIREMENT. Notwithstanding any provision herein or in the AMIP
II to the contrary, in the event of a Participant's retirement 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 Subsection 4.2(b),
until vesting is accelerated by Participant's attaining age 65.
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 Toro, or such individual violates any
confidentiality agreement with Toro, Toro may demand the return of the
economic value of the Matching Units which vested after the date of
early retirement under this Subsection 4.2.(e).
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(f) VOLUNTARY RESIGNATION. In the event that a Participant resigns
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 Toro.
(g) CHANGE OF CONTROL. All Matching Units that have not yet vested shall
vest if there is a Change of Control.
ARTICLE V.
DISTRIBUTIONS.
Section 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:
(a) death;
(b) Disability; or
(c) termination of employment.
Section 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 and the vested portion
of the Matching Units Account. If a Participant elects to receive
benefits under the installment payment method referred to in Subsection
5.2(d), the Participant's Accounts shall continue to be credited with
additional Units equal in value to dividends that would be paid on
Units remaining in the Accounts, if such Units were Common Stock.
(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 Subsection
5.2(d) in accordance with the Participant's most recently-dated
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, but
such change in the method of payment will not be effective until the
calendar year following the calendar year in which the change was
elected. Further, in no event
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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 installment payments over a period certain
(not to exceed ten (10), unless a longer period is approved by the
Compensation Committee) or (ii) a lump sum payment.
(e) COMPENSATION COMMITTEE DISCRETION. The Compensation Committee may, in
its sole discretion, reduce the payment period over which payments
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 lump sum payment to the
Participant, or in the event of the Participant's death, to the
Participant's designated beneficiary under the Plan.
Section 5.3 OTHER 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 may, in its sole discretion, permit a
lump sum distribution of an amount equal to the value of the units determined to
be includable in the Participant's gross income.
Section 5.4 COMMENCEMENT OF DISTRIBUTIONS. Notwithstanding any provision
in this Plan to the contrary, 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 in the event 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 occurred or the determination of such Disability is
made.
(b) OTHER TERMINATION. Except as otherwise provided in this Section 5.4,
if a benefit is payable in the event of a Participant's termination of
employment, payment shall begin on or about the 15th day of January
immediately following the calendar year in which the Participant's
termination of employment occurs.
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(c) EARLY RETIREMENT. If a Participant has properly made an early
distribution election on a Deferred Election, and the Compensation
Committee has consented to the election, in the event of a
Participant's retirement on or after the date on which the
Participant attains age 55 at a time when the Units in the
Participant's Matching Units Accounts are not yet fully vested under
Subsection 4.2(b) of the Plan, the Participant shall forfeit
Matching Units that have not vested at the date of early retirement,
and payment shall 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.
Section 5.5 FORM OF PAYMENT. If a benefit is payable to or on behalf of a
Participant under the Plan, vested Units 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, unless the Compensation Committee in its sole
discretion, determines to pay the entire benefit in cash. Common Stock may be
original issue shares, treasury shares or shares purchased in the market or from
private sources of a combination thereof.
ARTICLE VI.
THE TRUST
Section 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,
Toro shall maintain a Trust by a trust agreement with a third party, the
Trustee, to which Toro may, in its discretion, contribute cash or other
property, including securities issued by Toro, to provide for the benefit
payments under the Plan. However, in the event of a Change of Control, Toro
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 Subsection 4.2(g) as a result of the Change of Control.
The Trustee will have the duty to invest the Trust assets and funds in
accordance with the terms of the Trust. Toro is entitled at any time, and from
time to time, 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 Toro or any of its affiliated companies, the Trustee shall hold
the assets for the benefit of the general creditors of Toro and its affiliated
companies. The Trust shall be based substantially on the model trust contained
in Internal Revenue Service Revenue Procedure 92-64.
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Section 6.2 NO ASSETS REQUIRED. Neither the Plan nor any of the Accounts
shall hold or be required to hold actual shares of Common Stock, funds or
assets.
ARTICLE VII
NONTRANSFERABILITY
Section 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.
Section 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 Toro and the Plan therefor.
Section 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 Participant's beneficiary designated on the Deferred Election form provided
to the Participant by Toro. 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.
ARTICLE VIII.
WITHHOLDING
Section 8.1 WITHHOLDING. The 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.
ARTICLE IX.
VOTING OF STOCK
Section 9.1 VOTING OF COMMON STOCK. Participant's shall not be entitled
to voting rights with respect to Units.
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ARTICLE X.
ADMINISTRATION OF THE PLAN
Section 10.1 ADMINISTRATOR. The administrator of the Plan shall be Toro.
However, the Compensation Committee shall act on behalf of Toro 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
Toro'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. 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.
Section 10.2 AUTHORITY OF ADMINISTRATOR. Toro 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. Toro shall have the duty and
responsibility of maintaining records, making the requisite calculations and
disbursing payments hereunder. The determinations, interpretations, regulations
and calculations of Toro shall be final and binding on all persons and parties
concerned. The Secretary of Toro shall be the agent of the Plan for the service
of legal process in accordance with Section 502 of ERISA.
Section 10.3 OPERATION OF PLAN. Toro shall be responsible for the
general operation and administration of the Plan and for carrying. out the
provisions thereof. Toro shall be responsible for the expenses incurred in the
administration of the Plan. Toro shall also be responsible for determining
eligibility for payments and the amounts payable pursuant to the Plan. Toro
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 Toro with respect to
the Plan.
Section 10.4 CLAIMS PROCEDURES. Toro intends to make payments under the
Plan without a Participant submitting 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 Toro.
(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 Toro, 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
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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 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.
Section 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 Toro and the claimant.
If within 30 days after a demand for arbitration is made, Toro and the
claimant are
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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.
(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 Toro and the claimant.
Section 10.6 PARTICIPANT'S ADDRESS. Each Participant shall keep Toro
informed of his or her current address and the current address of his or her
beneficiary. Toro shall not be obligated to search for any person. If the
location of a Participant is not made known to Toro within three (3) 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 (1) additional year after such
three-year period has elapsed, or, within three (3) years after the actual death
of a Participant, Toro is unable to locate any designated beneficiary of the
Participant (including the Participant's estate), then Toro 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.
Section 10.7 LIABILITY. Notwithstanding any of the provisions of the Plan
to the contrary, neither Toro nor any individual acting as an employee or agent
of Toro 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 Toro or any such
employee or agent of Toro.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
Section 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
Toro.
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Section 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 Toro and available to the general creditors of Toro 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, Toro is required to notify the Trustee of the
Trust and each Participant in writing of such an occurrence within one (1) day
of Toro's knowledge of such occurrence. No Participant or any other person
shall have any interests in any particular assets of Toro 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 Toro. The Plan
constitutes a mere promise by Toro to make payments to the Participants in the
future. Nothing contained in the Plan shall constitute a guaranty by Toro or
any other person or entity that any funds in any trust or the assets of Toro
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.
Section 11.3 SINGULAR AND PLURAL. Except when otherwise required by the
context, any singular terminology shall include the plural.
Section 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.
Section 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.
ARTICLE XII.
AMENDMENT OR TERMINATION
Section 12.1 AMENDMENT OR TERMINATION OF THE PLAN. Toro 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 provisions of
paragraph 12 of the AMIP II, 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 the AMIP II has first
been amended to permit an increase, in accordance with the provisions
of paragraph 12 of the AMIP II relating to stockholder approval.
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Section 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 this 21 day of January, 1998.
THE TORO COMPANY
By: /s/ K. B. Melrose
Title: Chairman & CEO
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EXHIBIT B
DEFERRAL ELECTION
FOR
THE TORO COMPANY DEFERRED COMPENSATION PLAN FOR OFFICERS
TO: OFFICERS ELIGIBLE TO PARTICIPATE IN
THE TORO COMPANY DEFERRED COMPENSATION PLAN FOR OFFICERS
As a recipient of a Stock Retention Award under The Toro Company Annual
Management Incentive Plan II (the "AMIP II") for Fiscal 1998, you are eligible
to participate in The Toro Company Deferred Compensation Plan for Officers (the
"Plan"). If you wish to do so, please complete each of the three sections of
this Deferral Election, and sign the form in the space indicated.
This deferral election applies to Fiscal 1998 AMIP II compensation only.
The deadline for returning this form to the Director of Compensation and
Benefits is February 20, 1998. Note: If you become eligible to participate in
the Plan in future years, the deadline for returning the form will generally be
earlier--that is, December 31 of the year in which a Stock Retention Award is
granted.
If Toro stockholders do not approve AMIP II amendments which create Stock
Retention Awards at the March 18, 1998 Annual Meeting, this Deferral Election
will be null and void and of no effect.
I. DEFERRAL ELECTION
A. I hereby elect to participate in the Plan and to defer a portion of the
Base Cash Award that I may earn under the AMIP II.
B. The percentage of my Base Cash Award that I wish to defer is _______ %
(the percentage must be 50% or less). I understand that this election
is irrevocable.
Base Cash Award means the actual amount you will be paid under an
Annual Performance Award, if pre-established Performance Goals are
achieved. The amount may be more or less than the Target Payout, but
not more than the Maximum Payout, established for you by the
Compensation Committee at the beginning of the year. If Performance
Goals are not achieved at minimum levels, no Base Cash Award will be
paid and no compensation will be deferred under this Plan.
II. DISTRIBUTION OF BENEFITS
A. PAYMENT IN COMMON STOCK. I understand that benefits payable under the
Plan will be distributed in shares of Common Stock equal to the number
of Retained Units and vested Matching Units credited to my Accounts,
unless the
Compensation Committee, in its sole discretion, determines to pay
benefits in cash.
If I elect as my Method of Payment annual installment payments, the
number of shares of Common Stock that will be distributed to me in each
annual installment will be determined immediately prior to each
distribution by dividing the total number of Units then credited to my
Accounts by the number of annual installment payments remaining.
B. METHOD OF PAYMENT. I hereby elect to have the entire value of my
Retained Units Account and the vested portion of my Matching Units
Account paid to me, or to my beneficiary in the event of my death, in
the following manner:
1. DEATH OR DISABILITY. In the event of my death or Disability
(as defined in the Plan), (complete only one of the following)
____ in one lump sum payment, or
____ in approximately equal annual installment payments for
______ (a number not greater than 10) years,
in either case, beginning on or about the 15th day of the first
month immediately following the month in which my death occurs
or the determination of such Disability is made.
2. TERMINATION OF EMPLOYMENT. In the event of my termination of
employment, including retirement at or after age 65, (complete
only one of the following)
____ in one lump sum payment, or
____ in approximately equal annual installment payments for
______ (a number not greater than 10) years,
in either case, beginning on or about the 15th day of January
of the calendar year immediately following the calendar year in
which my termination of employment occurs.
3. OPTIONAL. EARLY RETIREMENT. In the event of my termination of
employment by reason of retirement at or after age 55 but prior
to age 65, at a time when the Units in my Matching Units
Account are not yet fully vested, (complete only one of the
following)
____ in one lump sum payment, or
____ in approximately equal annual installment payments for
______ (a number not greater than 10) years,
in either case, beginning on or about the 15th day of January
of the calendar year immediately following the calendar year in
which my early retirement occurs.
NOTE: This election results in forfeiture of Matching Units
that have not vested at the date of early retirement. It
requires consent of the Compensation Committee, in its sole
discretion. The election permits you to begin receiving
payments earlier than otherwise permitted under the Plan.
NOTE: The elections you make in this Deferral Election regarding Method of
Payment are binding and may be changed only in accordance with Section
5.2 of the Plan.
III. DESIGNATION OF BENEFICIARY
I hereby designate the following person, persons or trust as my
beneficiary with respect to the distribution of any benefits payable on my
behalf under the Plan:
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Name Relationship
- ----------------------------- ---------------------------------
Name Relationship
Subject to the terms of the Plan and unless otherwise provided above, all
benefits payable under the Plan by reason of my death shall be paid as follows:
(a) benefits shall be paid in equal shares to the named beneficiaries who
survive me; (b) if no named beneficiary survives me or if no beneficiary is
designated, benefits shall be paid as required under my will; or (c) in the
event I have no will, under applicable state law, to the persons who at the date
of my death would be entitled to share in the distribution of my personal estate
under the provisions of the applicable statute then in force governing my
intestate property.
I further reserve the right to change the beneficiary designation at any
time in the future on a form provided by Toro.
Date:
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Participant's Signature
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Please print name