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