Exhibit 10(g)
THE TORO COMPANY
PERFORMANCE SHARE PLAN
1. PURPOSE. The purpose of the Toro Company Performance Company Performance
Share Plan (the "Plan") is to enhance long-term stockholder value of The
Toro Company (the "Company"), by reinforcing the incentives of key
executives to achieve long-term performance goals of the Company; to link a
significant portion of a participant's compensation to the achievement by
the Company of performance goals and to the value of the Company's Common
Stock, par value $1.00 per share, and related Preferred Share Purchase
Rights ("Common Stock"); and to attract and motivate executives and to
encourage their continued employment on a competitive basis. The purposes
of the Plan are to be achieved by the grant of Performance Share Awards.
2. ELIGIBILITY AND PARTICIPATION. Key employees of the Company who, through
their position or performance, can have a significant, positive impact on
the Company's financial results, shall be eligible to participate in the
Plan. The Compensation Committee (the "Committee") shall select recipients
of Performance Shares ("Plan Participants"). Newly-hired and newly-promoted
executives may be selected as Plan Participants subject to the provisions
of subparagraph 3.c.(ii), if applicable.
3. PERFORMANCE SHARE AWARDS.
a. PERFORMANCE SHARE DEFINED. A Performance Share is a right to receive
shares of Common Stock or Common Stock units, contingent on the
achievement of performance goals of the Company during a three period,
except that a shorter period may be established for new participants
and for awards granted at the time the Plan is adopted (the "Award
Term"). A Performance Share Award shall be subject to such conditions,
restrictions and contingencies as the Committee shall determine.
b. VESTING. Performance Shares shall be subject to forfeiture until
they vest and shall vest only after the conclusion of the Award
Term, and only if the Committee makes the certification required by
subparagraph 3.c.(iii), except as may otherwise be provided in
subparagraph 3.c.(iv).
c. SECTION 162(m) CONDITIONS. Performance Share Awards may be
designated as "performance-based compensation" as that term is used
in Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code").
(i) PERFORMANCE GOALS. The Performance Goal criteria ("Performance
Goals") that may be used by the Committee for Performance Shares
shall include one or more of the following, as selected by the
Committee: cumulative earnings, cumulative earnings per share,
profit after tax, net income, return on invested capital,
invested capital dollars, earnings per share, average net assets,
after-tax interest expense, return on average net assets, return
on equity, return on beginning equity, revenue growth and
earnings growth.
(ii) ESTABLISHMENT OF PERFORMANCE GOALS. Performance Share Awards
designated "performance-based compensation" shall be granted, and
Performance Goals shall be established, by the Committee in
writing not later than 90 days after the commencement of the
period of service to which the Performance Goal relates, or such
other period required under Section 162(m) of the Code, provided
that the outcome is substantially uncertain at the time the
Committee establishes the Performance Goal; and provided further
that in no event will a Performance Goal be considered to be
pre-established if it is established after 25% of the period of
service (as scheduled in good faith at the time the Performance
Goal is established) has elapsed.
(iii)SECTION 162(m) MAXIMUM AWARD PAYMENT. With respect to a
Performance Share Award that is designated "performance-based
compensation" for purposes of Section 162(m), the maximum number
of shares that may be issued under the award shall be set at the
time the
Committee grants the award and establishes Performance Goals
under the award. Notwithstanding any other provision of this
Plan, the maximum number of Performance Shares that may be
granted to a Plan Participant with respect to any Award Term is
100,000, subject to adjustment as provided in paragraph 4.
(iv) CERTIFICATION OF PAYMENT. Before any payment or delivery of
shares of Common Stock is made under the Plan to any Participant
who is a person referred to in Section 162(m), the Committee must
certify in writing, as reflected in the minutes, that the
Performance Goals established with respect to a Performance Share
Award have been achieved. To the extent necessary with respect to
any fiscal year, in order to avoid any undue windfall or hardship
due to external causes, the Committee may make the determination
as to whether a Performance Goal has been achieved without regard
to the effect on the Performance Goal measure, as it may
otherwise be presented in the financial statements, of any change
in accounting standards, any acquisition by the Company not
planned for at the time the Performance Goals are established or
any Board-approved extraordinary or non-recurring event or item.
With respect to any Plan Participant who is a person referred to
in Section 162(m), the Committee shall have the discretion to
decrease an award payment under a Performance Share Award, but
may not under any circumstances increase such amount.
d. DELIVERY. Certificates for shares of Common Stock in the number of
Performance Shares that vest under an award will be delivered as soon
as possible after the applicable vesting requirements (including
accelerated vesting under subparagraph 3.e.) have been fulfilled,
except that if a Plan Participant has properly elected to defer income
that may be attributable to an award under a Company deferred
compensation plan, Common Stock units will be credited to the Plan
Participant's account thereunder. In the event vesting requirements
are not fulfilled, Performance Shares shall be canceled and have no
value.
e. VESTING AND CANCELLATION UNDER SPECIAL CIRCUMSTANCES.
(i) RETIREMENT, DEATH OR DISABILITY. If a Plan Participant retires on
or after age 65 or dies or becomes permanently disabled and
unable to work, shares of Common Stock shall be delivered with
respect to the participant's Performance Share Award only if
otherwise earned and only with respect to the portion of the
applicable Award Term completed at the date of such event (based
on a 360 day year and expressed as a percentage). Such shares
shall be delivered only after the conclusion of the Award Term in
accordance with the provisions of subparagraphs 3.b., 3.c. and
3.d. of the Plan.
(ii) VOLUNTARY RESIGNATION AND EARLY RETIREMENT. In the event that a
Participant resigns voluntarily or retires before age 65,
Performance Shares in such participant's name that have not yet
vested shall not vest and shall be canceled.
(iii)CHANGE OF CONTROL. Notwithstanding the provisions of
subparagraphs 3.b. and 3.c., all Performance Shares that have not
yet vested shall vest and become immediately payable if there is
a change of control of the Company.
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
(a) the then-outstanding shares of Common Stock of the Company
(the "Outstanding Company Common Stock") or (b) the combined
voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subparagraph (A), the
following acquisitions shall not constitute a Change of
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Control: (a) any acquisition directly from the Company, (b) any
acquisition by the Company, (c) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (d) any
acquisition by any corporation pursuant to a transaction that
complies with clauses (a), (b) and (c) of subparagraph (C) of
this subparagraph 3.e.(iii); 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, (a) all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then-outstanding shares of common stock
and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting
from such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of
the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (b) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 15% or more of, respectively, the
then-outstanding shares of common stock of the corporation
resulting from such Business Combination, or the combined
voting power of the then-outstanding voting securities of
such corporation except to the extent that such ownership
existed prior to the Business Combination and (c) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(D) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
f. DIVIDENDS AND VOTING. A Plan Participant shall have no rights as a
stockholder with respect to Performance Shares unless and until Common
Stock or Common Stock units are issued in settlement of the award.
Except as expressly provided in the Plan, no adjustments shall be made
for dividends or other rights for which the record date is prior to
issuance of the Common Stock or crediting of Common Stock units.
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g. NON-TRANSFERABILITY. Neither Performance Shares nor Performance Share
Awards nor any interest in any one of such awards or shares may be
anticipated, alienated, encumbered, sold, pledged, assigned,
transferred or subjected to any charge or legal process, other than by
will or the laws of descent and distribution, so long as the
Performance Shares have not vested and shares of Common Stock have not
been distributed in accordance with the Plan, and any sale, pledge,
assignment or other attempted transfer shall be null and void. A Plan
Participant may receive payment under a Performance Share Award only
while an employee of the Company and only if continuously employed
from the date the award was granted, except as may otherwise be
provided in subparagraph 3.e.
4. MAXIMUM SHARES SUBJECT TO PERFORMANCE SHARE AWARDS. Subject to the
provisions of subparagraph 4.a., the number of shares of Common Stock
reserved and available for issuance pursuant to Performance Share Awards
under the Plan is 500,000. Shares of Common Stock that may be issued
hereunder may be authorized but unissued shares, reacquired or treasury
shares or outstanding shares acquired in the market or from private sources
or a combination thereof.
a. ADJUSTMENTS. Appropriate adjustments in (i) the number or kind of
Performance Shares previously granted or (ii) the maximum number of
shares of Common Stock or number or kind of securities that may be
subject to Performance Share Awards or otherwise available for the
purposes of the Plan 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 or other security through any merger,
consolidation, recapitalization, reclassification, combination, stock
dividend, stock split or 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.
5. ADMINISTRATION. The Plan shall be administered by the Committee. The
Committee shall have the authority to administer the Plan; establish
policies under the Plan; amend the Plan, subject to the provisions of
paragraph 8; interpret provisions of the Plan; select Plan Participants;
establish Performance Goals; make Performance Share Awards; or terminate
the Plan, in its sole discretion. The Committee may delegate administrative
duties and all decisions not required to be exercised by it under
Section 162(m) or Section 16 of the Exchange Act, as it solely determines,
including to Company officers. All decisions of the Committee shall be
final and binding upon all parties including the Company, its stockholders
and Plan Participants.
6. TAX WITHHOLDING. The Company shall have the right to deduct from any
settlement made under the Plan or to require the Participant to pay the
amount of any federal, state or local taxes of any kind required by law to
be withheld with respect to the grant, vesting, payment or settlement of an
award under this Plan, or to take such other action as may be necessary in
the opinion of the Company to satisfy all obligations for the payment of
such taxes. If Common Stock is withheld or surrendered to satisfy tax
withholding, such stock shall be valued at its fair market value as of the
date it is withheld or surrendered. The Company may also deduct from any
award settlement any other amounts due the Company by the Plan Participant.
7. GOVERNING LAW. The Plan, awards granted under the Plan, agreements entered
into under the Plan and Performance Shares 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.
8. PLAN AMENDMENT AND TERMINATION. The Committee may, in its sole discretion,
amend, suspend or terminate the Plan at any time, with or without advance
notice to Plan Participants, provided that no amendment to the Plan shall
be effective that would increase the maximum number of Performance Shares
that may be granted under subparagraph 3.c.(iii) to a Participant who is a
person referred to in Section 162(m); that would change the Performance
Goal criteria applicable to a Participant who is a person referred to in
Section 162(m) for payment of awards as set forth in subparagraph 3.c.(i);
or that would modify the requirements as to eligibility for participation
under paragraph 2, unless the stockholders of the Company shall have
approved such change in accordance with the requirements of Section 162(m).
No amendment, modification or termination of the Plan may adversely affect
in a material manner any right of any Plan Participant with respect to any
Performance Share Award theretofore granted without such participant's
written consent.
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9. EFFECTIVE DATE OF THE PLAN AND AMENDMENTS. The Plan shall first become
effective on November 18, 1998, subject to stockholder approval. Any
amendment to the Plan shall be effective on the date established by the
Committee, subject to stockholder approval, if required under the
provisions of paragraph 8.
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