Exhibit 10(b)
THE TORO COMPANY
DIRECTORS STOCK PLAN
1. PURPOSE OF THE PLAN. The purpose of The Toro Company 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 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
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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 Change of Control of the Company as
hereinafter defined, 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 Change of Control, but not later than ten years after the
date of grant.
Change of Control means:
a. The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of 15% or more of either (i) the
then-outstanding shares of Common Stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting
power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection a., the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction that complies with clauses
(i), (ii) and (iii) of subsection c. of this Section 6; or
b. Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
c. Consummation of a reorganization, merger or consolidation of the
Company or sale or other disposition of all or substantially all of
the assets of the Company or the acquisition by the Company of
assets or stock of another entity (a "Business Combination"), in
each case, unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then-outstanding
shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either
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directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 15% or more
of, respectively, the then-outstanding shares of common stock of
the corporation resulting from such Business Combination, or the
combined voting power of the then-outstanding voting securities of
such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of
the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
d. Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
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 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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