THE TORO COMPANY
DEFERRED COMPENSATION PLAN
FOR OFFICERS
(JULY 27, 1998 RESTATEMENT)
The Toro Company hereby amends and restates The Toro Company 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 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, as calculated in accordance with
the AMIP II.
"Board of Directors" means the Board of Directors of Toro.
"Change of Control A Change of Control means the earliest to occur of
(i) a public announcement that a Person shall have acquired or obtained the
right to acquire Beneficial Ownership (within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934 (the "Exchange Act"), of 15% or more of
the outstanding shares of Common Stock of the Company, (ii) 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 Person of 15% or more of the outstanding shares of Common Stock of the
Company or (iii) the occurrence of a tender offer, exchange offer, merger,
consolidation, sale of assets or earning power, or contested election or any
combination thereof, that causes or would cause the persons who were
directors of the Company immediately before such Change of Control to cease
to constitute a majority of the Board of Directors of the Company or any
parent of or successor to the Company.For purposes of this paragraph, Person
means any individual, corporation, partnership, trust, other entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
(excluding the Company, a subsidiary of the Company, any employee benefit
plans of the Company or any subsidiary or any entity holding shares of Common
Stock for or pursuant to the terms of any such plan).
For purposes of this paragraph, Beneficial Ownership includes securities
beneficially owned, directly or indirectly, by a Person and such Person's
affiliates and associates, as defined under Rule 12b-2 under the Exchange
Act, and securities which such Person and its affiliates and associates have
the right to acquire or the right to vote, or by any other Person with which
such Person or any of such Person's affiliates or associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of shares of Common Stock, as more fully
described in The Toro Company Preferred Share Purchase Rights Plan dated as
of May 20, 1998.
"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.
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"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 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 may become a
Participant in the Plan by executing and delivering to Toro a Deferral
Election.
Section 2.3. DEFERRAL ELECTION.
(a) DEADLINE FOR DELIVERY. An Eligible Officer 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:
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(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.
(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 (as described in the AMIP II) 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.
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(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" means the closing price of one share of
Common Stock as reported in THE WALL STREET JOURNAL, unless a
different meaning is established in the AMIP II, in which case
that meaning shall govern.
(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.
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
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shall be 100% vested at all times.
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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.
(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, but subject to the distribution election permitted
under Subsection 5.4(c), in the event of a Participant's retirement at
or after age 55 but before age 65the 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), 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
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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).
(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, as 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
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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
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 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.
(c) EARLY RETIREMENT. If a Participant has properly made an early
distribution election on a Deferral Election, and the Compensation
Committee has consented to the election, in
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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 the Participant's
termination of employment occurs. If a participant has not made such
an early distribution election, 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.
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.
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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 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 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
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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 unable to agree on a single arbitrator, three arbitrators
shall be appointed.
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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.
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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 without giving effect to principles of conflicts of laws.
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
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increase, in accordance with the provisions of paragraph 12 of the
AMIP II relating to stockholder approval.
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 11th day of August, 1998.
THE TORO COMPANY
/s/ Kendrick B. Melrose
-----------------------------------
By: K. B. Melrose
Title: Chairman & CEO
[rev. 7/98 - Change of Control Provision and Governing Law Provision]
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