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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

o

 

Preliminary Proxy Statement

o

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material Pursuant to §240.14a-12

 

The Toro Company

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

ý

 

No fee required.

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
    (1)   Title of each class of securities to which transaction applies:
        
 
    (2)   Aggregate number of securities to which transaction applies:
        
 
    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        
 
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Fee paid previously with preliminary materials.

o

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

 

Amount Previously Paid:
        
 
    (2)   Form, Schedule or Registration Statement No.:
        
 
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    (4)   Date Filed:
        
 

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GRAPHIC

NOTICE OF 2010
ANNUAL MEETING AND

PROXY STATEMENT

FOR MARCH 16, 2010


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GRAPHIC   The Toro Company
    8111 Lyndale Avenue South, Bloomington, Minnesota 55420-1196
Telephone 952-888-8801

Michael J. Hoffman
Chairman and CEO

February 2, 2010

Dear Fellow Shareholders:

I am pleased to invite you to join us for The Toro Company 2010 Annual Meeting of Shareholders to be held on Tuesday, March 16, 2010, at 1:30 p.m., Central Daylight Time, at our corporate offices. Details about the annual meeting, nominees for election to the Board of Directors and other matters to be acted on at the annual meeting are presented in the Notice of Annual Meeting and proxy statement that follow.

It is important that your shares be represented at the 2010 Annual Meeting, regardless of the number of shares you hold and whether or not you plan to attend the meeting in person. Accordingly, please exercise your right to vote by following the instructions for voting on the Notice Regarding the Availability of Proxy Materials you received for the meeting or, if you received an electronic or paper copy of our proxy materials, by completing, signing, dating and returning your proxy card or by Internet or telephone voting as described in the proxy statement.

On behalf of your Toro Board of Directors and Management, it is my pleasure to express our appreciation for your continued support.

Sincerely,

Michael J. Hoffman

Michael J. Hoffman

Your vote is important. Please exercise your right to vote as soon as possible by following the instructions for voting on the Notice Regarding the Availability of Proxy Materials you received for the meeting or, if you received an electronic or paper copy of our proxy materials, by completing, signing, dating and returning your proxy card or by Internet or telephone voting as described in the proxy statement. By doing so, you may save us the expense of additional solicitation.

You also can help us make a difference by eliminating paper proxy mailings. With your consent, we will provide all future proxy materials electronically. Instructions for consenting to electronic delivery can be found on your proxy card or Notice Regarding the Availability of Proxy Materials. Your consent to receive shareholder materials electronically will remain in effect until canceled.


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GRAPHIC


NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

        The Toro Company 2010 Annual Meeting of Shareholders will be held on Tuesday, March 16, 2010, at 1:30 p.m., Central Daylight Time, at our corporate offices located at 8111 Lyndale Avenue South, Bloomington, Minnesota, 55420-1196, for the following purposes:

        We currently are not aware of any other business to be brought before the annual meeting. Shareholders of record at the close of business on January 20, 2010, the record date, will be entitled to vote at the annual meeting or at any adjournment or postponement of the annual meeting.

        A shareholder list will be available at our corporate offices beginning March 5, 2010, during normal business hours for examination by any shareholder registered on our stock ledger as of the record date for any purpose germane to the annual meeting.

        Since a majority of the outstanding shares of our common stock must be represented either in person or by proxy to constitute a quorum for the conduct of business, please promptly vote your shares by following the instructions for voting on the Notice Regarding the Availability of Proxy Materials you received for the meeting or, if you received an electronic or paper copy of our proxy materials, by completing, signing, dating and returning your proxy card or by Internet or telephone voting as described in the proxy statement.

February 2, 2010    

 

 

BY ORDER OF THE BOARD OF DIRECTORS

 

 

GRAPHIC

 

 

TIMOTHY P. DORDELL
Vice President, Secretary and
General Counsel

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TABLE OF CONTENTS

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

    1  
     

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on Tuesday, March 16, 2010

    1  
     

Date, Time and Place of the Meeting

    2  
     

Purposes of the Meeting

    2  
     

Who Can Vote

    2  
     

How You Can Vote

    2  
     

How Does the Board Recommend that You Vote

    3  
     

How You May Revoke or Change Your Vote

    4  
     

Quorum Requirement

    4  
     

Vote Required

    4  
     

Discretionary Voting and Adjournments

    5  
     

Procedures at the 2010 Annual Meeting

    5  

STOCK OWNERSHIP

   
7
 
     

Certain Beneficial Owners

    7  
     

Directors and Executive Officers

    9  
     

Section 16(a) Beneficial Ownership Reporting Compliance

    11  

PROPOSAL ONE—ELECTION OF DIRECTORS

   
12
 
     

Number of Directors; Board Structure

    12  
     

Nominees for Director

    12  
     

Board Recommendation

    12  
     

Information About Board Nominees and Continuing Directors

    13  

CORPORATE GOVERNANCE

   
15
 
     

Corporate Governance Guidelines

    15  
     

Director Independence

    16  
     

Presiding Non-Management Director; Executive Sessions

    16  
     

Director Attendance

    17  
     

Board Committees

    17  
     

Director Compensation

    23  
     

Policies and Procedures Regarding Related Person Transactions

    30  
     

Board of Directors Business Ethics Policy Statement

    30  
     

Code of Conduct and Code of Ethics for our CEO and Senior Financial Officers

    30  
     

Complaint Procedure; Communications with Directors

    31  

EXECUTIVE COMPENSATION

   
32
 
     

Compensation & Human Resources Committee Report

    32  
     

Compensation Discussion and Analysis

    32  
     

Summary Compensation Table

    50  
     

Grants of Plan-Based Awards for Fiscal 2009

    53  
     

Outstanding Equity Awards at Fiscal Year-End for 2009

    54  
     

Option Exercises and Stock Vested for Fiscal 2009

    56  
     

Nonqualified Deferred Compensation for Fiscal 2009

    57  
     

Potential Payments Upon Termination or Change of Control

    58  

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PROPOSAL TWO—APPROVAL OF THE TORO COMPANY 2010 EQUITY AND INCENTIVE PLAN

    69  
     

Proposed New 2010 Equity and Incentive Plan

    69  
     

Board Recommendation

    70  
     

Reasons Why You Should Vote in Favor of the Approval of the 2010 Plan

    70  
     

Summary of Sound Governance Features of the 2010 Plan

    71  
     

Comparison of the 2010 Plan to Prior Plans

    73  
     

Equity Compensation Plan Information as of January 20, 2010 and Burn Rate Information

    74  
     

Summary of the 2010 Plan Features

    75  
     

Federal Income Tax Information

    87  

EQUITY COMPENSATION PLAN INFORMATION

   
90
 

PROPOSAL THREE—RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

   
91
 
     

Selection of Independent Registered Public Accounting Firm

    91  
     

Audit, Audit-Related, Tax and Other Fees

    91  
     

Pre-Approval Policies and Procedures

    92  
     

Board Recommendation

    92  
     

Audit Committee Report

    93  

OTHER INFORMATION

   
94
 
     

Shareholder Proposals and Director Nominations for the 2011 Annual Meeting

    94  
     

Householding of Annual Meeting Materials

    94  
     

Annual Report

    95  
     

Cost and Method of Solicitation

    95  

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THE TORO COMPANY
8111 Lyndale Avenue South
Bloomington, Minnesota 55420-1196

PROXY STATEMENT
2010 ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, MARCH 16, 2010
1:30 p.m. Central Daylight Time

        The Toro Company Board of Directors is using this proxy statement to solicit your proxy for use at The Toro Company 2010 Annual Meeting of Shareholders to be held at 1:30 p.m., Central Daylight Time, on Tuesday, March 16, 2010. We intend to mail Notices Regarding the Availability of Proxy Materials for the annual meeting and make proxy materials available to shareholders (or for certain shareholders and for those who request it, a paper copy of this proxy statement and the form of proxy) on or about February 2, 2010. Please note that references in this proxy statement to "Toro," the "Company," "we," "us," "our" and similar terms refer to The Toro Company.


GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on Tuesday, March 16, 2010.

        This proxy statement and our 2009 Annual Report, which includes our Annual Report on Form 10-K for the fiscal year ended October 31, 2009, are available at www.thetorocompany.com/proxy.

        Pursuant to rules adopted by the Securities and Exchange Commission, or SEC, we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice Regarding the Availability of Proxy Materials to certain of our shareholders of record and beneficial owners (excluding those beneficial owners who hold shares of our common stock in The Toro Company Investment, Savings and Employee Stock Ownership Plan, or IS&ESOP, The Toro Company Profit Sharing Plan for Plymouth Union Employees, The Toro Company Deferred Compensation Plan for Officers, The Toro Company Deferred Compensation Plan for Non-Employee Directors and those record and beneficial owners who previously have requested that they receive electronic or paper copies of our proxy materials). All shareholders have the ability to access our proxy materials on the website referred to in the Notice Regarding the Availability of Proxy Materials or request to receive a printed set of our proxy materials. Instructions on how to access our proxy materials over the Internet or to request a printed copy of our proxy materials may be found in the Notice Regarding the Availability of Proxy Materials. In addition, shareholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We believe this process should expedite your receipt of our proxy materials and reduce the environmental impact of our annual meeting.

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Date, Time and Place of the Meeting

        The annual meeting will be held on Tuesday, March 16, 2010, at 1:30 p.m., Central Daylight Time, at our corporate offices located at 8111 Lyndale Avenue South, Bloomington, Minnesota, 55420-1196.


Purposes of the Meeting

        The purposes of the annual meeting are to vote on the following:


Who Can Vote

        Shareholders of record at the close of business on January 20, 2010, the record date, will be entitled to notice of and to vote at the annual meeting or any adjournment or postponement of the annual meeting. As of January 20, 2010, there were 34,051,637 shares of our common stock outstanding. Each share of our common stock is entitled to one vote on each matter to be voted on at the annual meeting. Shares of our common stock that are held by us in our treasury are not counted as shares outstanding and will not be voted.

        Dividend Reinvestment Plan Shares.    If you are a participant in our Dividend Reinvestment Plan, the number of shares shown on your proxy card includes shares you hold in that plan.

        Employee Benefit Plan Shares.    If you are a participant in a Toro employee benefit plan that allows participant-directed voting of our common stock held in that plan, the number of shares shown on your proxy card includes shares you hold in that plan, as well as shares you own of record, if any. The trustee for each plan will cause votes to be cast confidentially in accordance with your instructions. Plan shares not voted by participants will be voted by the trustee in the same proportion as the votes actually cast by participants, in accordance with the terms of the respective plans.


How You Can Vote

        Your vote is important. If you are a shareholder whose shares are registered in your name, you may vote your shares in person at the meeting or by one of the three following methods:

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        If your shares are held in "street name" (through a broker, bank or other nominee), you may receive a separate voting instruction form with this proxy statement or you may need to contact your broker, bank or other nominee to determine whether you will be able to vote electronically using the Internet or by telephone.

        If you return your signed proxy card or use Internet or telephone voting before the annual meeting, the named proxies will vote your shares as you direct. You have three choices on each matter to be voted on. For the election of directors, you may:

For each of the other proposals, you may:

        If you send in your proxy card or use Internet or telephone voting, but do not specify how you want to vote your shares, the proxies will vote your shares FOR all of the nominees for election to the Board of Directors in Proposal One—Election of Directors, FOR Proposal Two—Approval of The Toro Company 2010 Equity and Incentive Plan and FOR Proposal Three—Ratification of Selection of Independent Registered Public Accounting Firm.


How Does the Board Recommend that You Vote

        The Board of Directors unanimously recommends that you vote:

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How You May Revoke or Change Your Vote

        If you are a shareholder whose shares are registered in your name, you may revoke your proxy at any time before it is voted by one of the following methods:

        If you hold your shares through a broker, bank or other nominee, you may revoke your proxy by following instructions the broker, bank or other nominee provides.


Quorum Requirement

        The presence at the annual meeting, in person or represented by proxy, of a majority of the outstanding shares of our common stock as of the record date will constitute a quorum for the transaction of business at the annual meeting. Shares represented by proxies marked "Abstain" or "Withheld" and "broker non-votes" are counted in determining whether a quorum is present for the transaction of business at the annual meeting. A "broker non-vote" is a proxy submitted by a broker that does not indicate a vote for some or all of the proposals because the broker does not have discretionary voting authority on certain types of proposals and has not received instructions from its client as to how to vote on a particular proposal.


Vote Required

        Proposal One—Election of Directors will be decided by the affirmative vote of a plurality of shares of our common stock as of the record date present in person or represented by proxy at the annual meeting. "Plurality" means the individuals who receive the greatest number of votes cast "For" are elected as directors. However, under our Amended and Restated Bylaws, if a majority of the votes of the shares present in person or represented by proxy at the annual meeting are designated to be "Withheld" from or are voted "Against" a nominee for director in an uncontested election, that director must tender his or her resignation for consideration by the Nominating & Governance Committee. The Nominating & Governance Committee then must evaluate the best interests of the Company and its shareholders and recommend action to be taken by the Board with respect to such tendered resignation.

        Proposal Two—Approval of The Toro Company 2010 Equity and Incentive Plan and Proposal Three—Ratification of Selection of Independent Registered Public Accounting Firm will be decided by the affirmative vote of a majority of the shares, present in person or represented by proxy, and entitled to vote at the annual meeting; provided, however, that for Proposal Two—Approval of The Toro Company 2010 Equity and Incentive Plan, under New York Stock Exchange, or NYSE, rules, the proposal also must be approved by a majority of votes cast on the proposal and the total votes cast on the proposal must represent over 50% of the outstanding shares of our common stock.

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        Under NYSE rules, if your shares are held in "street name" and you do not indicate how you wish to vote, your broker only is permitted to exercise its discretion to vote your shares on certain "routine" matters. Proposal One—Election of Directors and Proposal Two—Approval of The Toro Company 2010 Equity and Incentive Plan are not "routine" matters, whereas Proposal Three—Ratification of Selection of Independent Registered Public Accounting Firm is a "routine" matter. Accordingly, if you do not direct your broker how to vote for a director in Proposal One or how to vote for Proposal Two, your broker may not exercise discretion and may not vote your shares. This is called a "broker non-vote." For vote requirement purposes for Proposal One and Proposal Two, broker non-votes are considered to be shares represented by proxy at the annual meeting but are not considered to be shares "entitled to vote" or "votes cast" at the annual meeting. As such, a broker non-vote will not be counted as a vote "For" or "Withheld" with respect to a director in Proposal One and, therefore, will have no effect on the outcome of the vote on Proposal One. Similarly, a broker non-vote will not be counted as a vote "For" or "Against" Proposal Two and, therefore, will have no effect on the outcome of the vote on Proposal Two if the total votes cast on Proposal Two represent over 50% of the outstanding shares of our common stock. A broker non-vote will have the effect of a vote "Against" Proposal Two if the total votes cast on Proposal Two do not represent over 50% of the outstanding shares of our common stock. Proxies marked "Withheld" or "Abstain" will be counted in determining the total number of shares "entitled to vote" and "votes cast" on each of the proposals and will have the effect of a vote "Against" a director or a proposal.


Discretionary Voting and Adjournments

        We currently are not aware of any business to be acted upon at the 2010 Annual Meeting other than that described in this proxy statement. If, however, other matters properly are brought before the annual meeting, or any adjournment or postponement of the annual meeting, your proxy includes discretionary authority on the part of the individuals appointed to vote your common stock or act on those matters according to their best judgment, including to adjourn the annual meeting.

        Adjournment of the 2010 Annual Meeting may be made for the purpose of, among other things, soliciting additional proxies. Any adjournment may be made from time to time by approval of the holders of common stock representing a majority of the votes present in person or by proxy at the annual meeting, whether or not a quorum exists, without further notice other than by an announcement made at the annual meeting. We currently do not intend to seek an adjournment of the annual meeting.


Procedures at the 2010 Annual Meeting

        The presiding officer at the annual meeting will determine how business at the annual meeting will be conducted. Only nominations and other proposals brought before the annual meeting in accordance with the advance notice and information requirements of our Amended and Restated Bylaws will be considered. In order for a shareholder proposal to be included in our proxy statement for the 2010 Annual Meeting, our Vice President, Secretary and General Counsel must have received such proposal not later than October 6, 2009. Under our Amended and Restated Bylaws, complete and timely written notice of a proposed nominee for election to our Board at the 2010 Annual Meeting or a proposal for any other business to be brought before the 2010 Annual Meeting of Shareholders must

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have been given to our Vice President, Secretary and General Counsel not later than December 18, 2009, nor earlier than November 18, 2009. Additionally, such notice for any nomination or proposal must have contained the specific information required by our Amended and Restated Bylaws, including, among other things, information about any proposed nominee and his or her relationships with the shareholder submitting the nomination; information about any agreements, arrangements or understandings the shareholder may have with any proposed nominee or other parties relating to the nomination or other proposal; and information about the interests that the shareholder has related to the Company and our shares, including as a result of, among other things, derivative securities, voting arrangements, short positions or other interests. Such information was required to be updated as of January 20, 2010, the record date for the 2010 Annual Meeting, and is required to be updated as of March 2, 2010, the date that is ten business days prior to the date of the 2010 Annual Meeting. This summary information regarding our Amended and Restated Bylaws is qualified in its entirety by reference to the full text of the Amended and Restated Bylaws, which can be found on our website at www.thetorocompany.com (select the "Investor Information" link and then the "Corporate Governance" link).

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STOCK OWNERSHIP

Certain Beneficial Owners

        The following table sets forth information as to entities that have reported to the SEC or have otherwise advised us that they are a beneficial owner, as defined by the SEC's rules and regulations, of more than five percent of our outstanding common stock.

Title of Class
  Name and Address
of Beneficial Owner

  Amount and Nature
of Beneficial Ownership

  Percent
of Class(1)

 
   
Common Stock   EARNEST Partners, LLC
1180 Peachtree Street NE, Suite 2300
Atlanta, GA 30309
    3,028,961 (2)   8.90 %
Common Stock   Mairs and Power, Inc.
332 Minnesota Street
W-1520 First National Bank Building
St. Paul, MN 55101
    2,444,391 (3)   7.18 %
Common Stock   Neuberger Berman Group LLC
Neuberger Berman LLC
Neuberger Berman Management LLC
Neuberger Berman Equity Funds
605 Third Avenue
New York, NY 10158
    2,284,873 (4)   6.71 %
Common Stock   FMR LLC
Edward C. Johnson, 3rd
82 Devonshire Street
Boston, MA 02109
    1,960,450 (5)   5.76 %

(1)
Percent of class is based on 34,051,637 shares outstanding as of January 20, 2010.

(2)
EARNEST Partners, LLC, an investment advisor, filed a Schedule 13G with the SEC on February 17, 2009, reflecting beneficial ownership as of December 31, 2008 of 3,028,961 shares of our common stock, with sole voting power with respect to 1,108,902 shares, shared voting power with respect to 792,459 shares, and sole dispositive power with respect to 3,028,961 shares.

(3)
Mairs and Power, Inc., an investment adviser, filed a Schedule 13G/A with the SEC on February 13, 2009, reflecting beneficial ownership as of December 31, 2008, of 2,444,391 shares of our common stock, with sole voting power with respect to 2,057,500 shares and sole dispositive power with respect to 2,444,391 shares.

(4)
Neuberger Berman Group LLC, an investment advisor, on behalf of itself and its direct and indirect affiliates Neuberger Berman LLC, Neuberger Berman Management LLC, and Neuberger Berman Equity Funds, filed a Schedule 13G with the SEC on June 11, 2009, reflecting beneficial ownership as of May 31, 2009, of 2,284,873 shares of our common stock as follows: (a) for each of Neuberger Berman Group LLC and Neuberger Berman LLC, sole voting power with respect to 46,380 shares, shared voting power with respect to 1,897,115 shares, and shared dispositive power with respect to 2,284,873 shares, (b) for Neuberger Berman Management LLC, shared

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(5)
FMR LLC, an investment advisor, on behalf of itself and its controlling shareholder Edward C. Johnson, 3rd, filed a Schedule 13G/A with the SEC on January 11, 2010, reflecting beneficial ownership as of December 31, 2009, of 1,960,450 shares of our common stock, as follows: (a) for FMR LLC, sole voting power with respect to 750 shares and sole dispositive power with respect to 1,960,450 shares, and (b) for Edward C. Johnson, 3rd, sole dispositive power with respect to 1,960,450 shares.

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Directors and Executive Officers

        The following table sets forth information known to us regarding the beneficial ownership of our common stock as of January 20, 2010 by (a) each of our directors and nominees for director, (b) our "principal executive officer," "principal financial officer" and the next three most highly compensated executive officers named in the "Summary Compensation Table" on page 50 (we collectively refer to these persons as our "named executive officers"), and (c) all directors and executive officers as a group, including our named executive officers.

Name
  Amount and Nature of
Beneficial Ownership
of Common Stock(1)(2)(3)

  Common Stock
Beneficially Owned
as a Percent of
Common Stock
Outstanding(4)

 
   

Non-Employee Directors:

             
 

Robert C. Buhrmaster

    42,361     *  
 

Winslow H. Buxton

    64,208     *  
 

Janet K. Cooper

    31,233     *  
 

Gary L. Ellis

    13,044     *  
 

Katherine J. Harless

    25,199     *  
 

Robert H. Nassau

    28,420     *  
 

Gregg W. Steinhafel

    41,524     *  
 

Inge G. Thulin

    6,347     *  
 

Christopher A. Twomey

    41,070     *  

Named Executive Officers:

             
 

Michael J. Hoffman

    656,809     1.91 %
 

Stephen P. Wolfe

    460,228     1.35 %
 

Peter M. Ramstad

    29,956     *  
 

Timothy P. Dordell

    30,781     *  
 

William E. Brown, Jr.

    105,759     *  

All Directors and Executive Officers as a group (23)

    1,966,865     5.61 %

*
Less than one percent of the outstanding shares of our common stock

(1)
Shares are deemed to be "beneficially owned" by a person if such person, directly or indirectly, has or shares: (a) the power to vote or direct the voting of such shares, or (b) the power to dispose or direct the disposition of such shares. Except as otherwise indicated, the persons in this table have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them, subject to community property laws where applicable and subject to the information contained in the footnotes to this table.

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(2)
"Beneficial ownership" also includes shares that a person has the right to acquire within 60 days of January 20, 2010 and, as such, includes the following shares that may be acquired upon exercise of stock options within 60 days of January 20, 2010, shares allocated to executive officers under the IS&ESOP, and common stock units, matching units and performance share units, collectively referred to as units, credited under The Toro Company Deferred Compensation Plan for Non-Employee Directors and The Toro Company Deferred Compensation Plan for Officers. Directors and executive officers have no voting power with respect to units credited under these deferred compensation plans.

  Name
  Stock
Options

  IS&ESOP
  Units under the
Deferred
Compensation Plan
for Non-Employee
Directors

  Units under the
Deferred
Compensation Plan
for Officers

 
     
 

Non-Employee Directors:

                         
   

Robert C. Buhrmaster

    13,686         4,076      
   

Winslow H. Buxton

    13,686         2,195      
   

Janet K. Cooper

    13,686         9,719      
   

Gary L. Ellis

    6,140         0      
   

Katherine J. Harless

    13,686         0      
   

Robert H. Nassau

    12,352         15,050      
   

Gregg W. Steinhafel

    13,686         1,254      
   

Inge G. Thulin

    2,862         1,072      
   

Christopher A. Twomey

    13,686         2,195      
 

Named Executive Officers:

                         
   

Michael J. Hoffman

    392,401     31,017         46,964  
   

Stephen P. Wolfe

    128,919     28,270         246,013  
   

Peter M. Ramstad

    27,600     83         0  
   

Timothy P. Dordell

    27,804     73         1,070  
   

William E. Brown, Jr.

    62,867     6,734         0  
 

All Directors and Executive Officers as a group (23)

    979,239     116,312     35,560     307,438  
(3)
Includes shares held in trusts for estate planning purposes as follows: 48,327 shares for Mr. Buxton, 11,513 shares for Ms. Harless, 25,189 shares for Mr. Twomey, 57,026 shares for Mr. Wolfe, 1,833 shares for Mr. Dordell and 143,888 shares by all directors and executive officers as a group. Each of Messrs. Buxton, Twomey, Wolfe and Dordell and Ms. Harless has shared voting and investment power with respect to the shares held in trust. Additionally, includes 7,828 shares pledged by Ms. Cooper under the terms of a credit agreement under which there were no amounts outstanding as of January 20, 2010.

(4)
Percentages are calculated pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Percentage calculations assume, for each

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Section 16(a) Beneficial Ownership Reporting Compliance

        The rules of the SEC require us to disclose the identity of directors and executive officers who did not file on a timely basis reports required by Section 16 of the Exchange Act. Based on review of reports filed by these reporting persons on the SEC's electronic filing, or EDGAR, system and written representations by our directors and executive officers, we believe that all of our directors, executive officers and greater than 10% owners complied with all filing requirements applicable to them during our fiscal year ended October 31, 2009, or fiscal 2009.

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PROPOSAL ONE—ELECTION OF DIRECTORS

Number of Directors; Board Structure

        Our Restated Certificate of Incorporation provides that our Board of Directors may be comprised of between eight and 12 directors. Our Board currently is comprised of 10 directors. As provided in our Restated Certificate of Incorporation, our Board is divided into three staggered classes of directors of the same or nearly the same number, with each class elected in a different year for a term of three years. Our current directors and their respective current terms are as follows:

Current Term Ending at
2010 Annual Meeting

  Current Term Ending at
2011 Annual Meeting

  Current Term Ending at
2012 Annual Meeting

 
Robert C. Buhrmaster   Katherine J. Harless   Janet K. Cooper
Winslow H. Buxton   Michael J. Hoffman   Gary L. Ellis
Robert H. Nassau   Inge G. Thulin   Gregg W. Steinhafel
Christopher A. Twomey        

        The Board has nominated each of Robert C. Buhrmaster, Robert H. Nassau and Christopher A. Twomey for election to the Board to serve for a three-year term ending at the 2013 Annual Meeting. In connection with obtaining the age of 70, as recommended by our Corporate Governance Guidelines, Winslow H. Buxton volunteered not to be nominated for re-election to the Board and will retire from the Board upon expiration of his three-year term at the annual meeting. Mr. Buxton served as a director of the Company for 12 years and the Board wishes to thank him for his many years of dedicated service to the Company. In light of the retirement of Mr. Buxton, the Board will be comprised of nine directors effective immediately prior to the annual meeting.


Nominees for Director

        The three nominees for election to the Board to serve for a three-year term ending at the 2013 Annual Meeting are Robert C. Buhrmaster, Robert H. Nassau and Christopher A. Twomey. Each of these nominees is a current member of the Board and has consented to serve if elected. Proxies only can be voted for the number of persons named as nominees in this proxy statement, which is three.


Board Recommendation

        The Board of Directors unanimously recommends a vote FOR the election to the Board of the three nominees for director.

        If prior to the annual meeting the Board should learn that any nominee will be unable to serve for any reason, the proxies that otherwise would have been voted for this nominee will be voted for a substitute nominee as selected by the Board. Alternatively, the proxies, at the Board's discretion, may be voted for that fewer number of nominees as results from the inability of any nominee to serve. The Board has no reason to believe that any of the nominees will be unable to serve.

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Information About Board Nominees and Continuing Directors

        The following information with respect to the business experience of nominees for election to the Board and the members of the Board who will continue to serve as our directors has been furnished by the nominee or director or obtained from our records.

        Robert C. Buhrmaster, age 62.    Retired since 2004. Chairman of Jostens, Inc., Minneapolis, Minnesota (consumer manufacturing), from 1998 to 2004 and Chief Executive Officer from 1994 to 2004. From 1994 to January 2003, he also served as President of Jostens, Inc. First elected to the Toro Board in 1996, he is a member of the Audit Committee, the Nominating & Governance Committee, the Finance Committee and the Executive Committee and serves as our presiding non-management director. Mr. Buhrmaster is a director and Chairman of the Board of SurModics Inc. (SRDX).

        Robert H. Nassau, age 68.    Retired since 2006. Regional Director of Corporate Accounts of F2 Intelligence Group, Minneapolis, Minnesota (consulting), from November 2003 to November 2006. Owner and Chief Executive Officer of Nasly Inc., Lahaina, Hawaii, from February 2000 to November 2003. First elected to the Toro Board in 1988, he is a member of the Audit Committee, the Compensation & Human Resources Committee and the Nominating & Governance Committee.

        Christopher A. Twomey, age 61.    Chairman of Arctic Cat Inc., Thief River Falls, Minnesota (recreational vehicle manufacturer), since August 2003 and Chief Executive Officer since 1986. First elected to the Toro Board in 1998, he is the Chair of the Compensation & Human Resources Committee and a member of the Nominating & Governance Committee and the Executive Committee. Mr. Twomey is a director of Arctic Cat Inc. (ACAT).

        Katherine J. Harless, age 58.    Former President and Chief Executive Officer of Idearc Inc., Dallas/Fort Worth, Texas (publisher of Verizon Yellow Pages and SuperPages.com), serving from November 2006 to February 2008. On March 31, 2009, Idearc Inc. and all of its domestic subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division seeking reorganization relief under the provisions of Chapter 11 of Title 11 of the United States Bankruptcy Code. On December 31, 2009, Idearc Inc. emerged from the Chapter 11 bankruptcy proceedings and under its plan of reorganization has, among other things, changed its name to SuperMedia Inc. and begun trading on the NASDAQ Global Market under the symbol "SPMD." President of Verizon Information Services Inc. from 2000 to November 2006. First elected to the Toro Board in 2000, she is a member of the Compensation & Human Resources Committee and the Nominating & Governance Committee.

        Michael J. Hoffman, age 54.    Chairman of the Board of Toro since March 2006, Chief Executive Officer since March 2005 and President since October 2004. He also served as Chief Operating Officer from October 2004 to March 2005. First elected to the

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Toro Board in March 2005, he is the Chair of the Executive Committee and a member of the Finance Committee. Mr. Hoffman is a director of Donaldson Company, Inc. (DCI).

        Inge G. Thulin, age 55.    Executive Vice President, International Operations of 3M, Saint Paul, Minnesota (diversified technology), since 2003. Area Vice President, Asia Pacific for 3M from 2003 to 2004 and Area Vice President, Europe, Central/East Europe & Middle East for 3M from 2002 to 2003. First elected to the Toro Board in September 2008, he is a member of the Audit Committee, the Finance Committee and the Executive Committee.

        Janet K. Cooper, age 56.    Former Senior Vice President and Treasurer of Qwest Communications International Inc., Denver, Colorado (telecommunications), serving from September 2002 to June 2008. First elected to the Toro Board in 1994, she is the Chair of the Audit Committee and a member of the Finance Committee. Ms. Cooper is a director of Lennox International Inc. (LII) and MWH Global, a private firm that provides environmental engineering, construction and strategic consulting services worldwide.

        Gary L. Ellis, age 53.    Senior Vice President and Chief Financial Officer of Medtronic, Inc., Minneapolis, Minnesota (medical technology), since May 2005. From 1999 to May 2005, he served as Vice President, Corporate Controller and Treasurer of Medtronic. First elected to the Toro Board in 2006, he is the Chair of the Finance Committee and a member of the Audit Committee and the Executive Committee.

        Gregg W. Steinhafel, age 55.    Chairman of the Board of Target Corporation, Minneapolis, Minnesota (retailing), since February 2009, Chief Executive Officer since May 2008 and President since 1999. First elected to the Toro Board in 1999, he is a member of the Compensation & Human Resources Committee, the Nominating & Governance Committee and the Executive Committee. Mr. Steinhafel is a director of Target Corporation (TGT).

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CORPORATE GOVERNANCE

Corporate Governance Guidelines

        The Board has adopted Corporate Governance Guidelines, which describe our corporate governance practices and policies and provide a framework for our Board governance. The topics addressed in our Corporate Governance Guidelines include: director qualifications, responsibilities, compensation and independence; Board committees; director access to officers and employees; related party transactions; CEO evaluation and succession; and annual performance evaluations. Our Corporate Governance Guidelines provide, among other things, that:

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        Our Corporate Governance Guidelines can be found on our website at www.thetorocompany.com (select the "Investor Information" link and then the "Corporate Governance" link). From time to time, the Board, upon recommendation of the Nominating & Governance Committee, reviews and updates our Corporate Governance Guidelines as it deems necessary and appropriate.


Director Independence

        The Board, following consideration of all relevant facts and circumstances and upon recommendation of the Nominating & Governance Committee, has affirmatively determined that each director who served as a member of our Board during fiscal 2009 (Robert C. Buhrmaster, Winslow H. Buxton, Gary L. Ellis, Janet K. Cooper, Katherine J. Harless, Robert H. Nassau, Gregg W. Steinhafel, Inge G. Thulin and Christopher A. Twomey), other than Michael J. Hoffman, our Chairman and CEO, is independent in that each such person has no material relationship with the Company, our Management or our independent registered public accounting firm, and otherwise meets the independence and other requirements of the listing standards of the NYSE, the rules and regulations of the SEC and applicable law. The Board determined that Michael J. Hoffman is not independent due to his status as an executive officer of the Company. The Board based its independence determinations, in part, upon a review by the Nominating & Governance Committee and the Board of certain transactions between us and the employers of certain of our directors, each of which was deemed to be pre-approved under our Corporate Governance Guidelines in that each such transaction was made in the ordinary course of business, at arm's length, at prices and on terms customarily available to unrelated third party vendors or customers generally, in amounts that are not material to our business or the business of such unaffiliated corporation, and in which the director had no direct or indirect personal interest, nor received any personal benefit. Specifically, the pre-approved transactions reviewed by the Nominating & Governance Committee and the Board included: (a) ordinary course of business purchases by the Company from 3M, where Mr. Thulin is, and during fiscal 2009 was, an executive officer, in the aggregate amount of approximately $27,000; (b) ordinary course of business purchases from the Company by Medtronic, Inc., where Mr. Ellis is, and during fiscal 2009 was, an executive officer, in the aggregate amount of approximately $4,750; and (c) ordinary course of business purchases by the Company from Target Corporation, where Mr. Steinhafel is, and during fiscal 2009 was, an executive officer, in the aggregate amount of approximately $19,400, and ordinary course of business purchases by Target Corporation from the Company in the aggregate amount of approximately $1.3 million.


Presiding Non-Management Director; Executive Sessions

        Robert C. Buhrmaster is our presiding non-management director. Our presiding non-management director serves as the chair at independent sessions of the non-management directors. Six regular meetings of the Board are held each year and at each regular Board meeting our non-management directors meet in executive session without Management present.

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Director Attendance

        The Board held six meetings during fiscal 2009. Each incumbent director attended at least 75% of the aggregate total number of meetings held by the Board and all committees on which he or she served.

        We encourage all of our directors to attend our annual meeting of shareholders and we customarily schedule a regular Board meeting on the same day as our annual meeting. Nine of our directors attended the 2009 Annual Meeting.


Board Committees

        The Board has five committees with the principal functions and membership described below. Each committee, except the Executive Committee, has a charter which is posted on our website at www.thetorocompany.com (select the "Investor Information" link and then the "Corporate Governance" link).

        The following table summarizes the current membership of each of our five Board committees. Each of the members of the Audit Committee, Compensation & Human Resources Committee and Nominating & Governance Committee meets the independence and other requirements established by the listing standards of the NYSE, the rules and regulations of the SEC, and the Internal Revenue Code of 1986, as amended, or the Code, as applicable.

Director
  Audit
  Compensation
& Human
Resources

  Nominating
& Governance

  Finance
  Executive
 
Robert C. Buhrmaster   ü       ü   ü   ü
Winslow H. Buxton   ü   ü   Chair        
Janet K. Cooper   Chair           ü    
Gary L. Ellis   ü           Chair   ü
Katherine J. Harless       ü   ü        
Michael J Hoffman               ü   Chair
Robert H. Nassau   ü   ü   ü        
Gregg W. Steinhafel       ü   ü       ü
Inge G. Thulin   ü           ü   ü
Christopher A. Twomey       Chair   ü       ü

        Audit Committee.    The Audit Committee oversees our accounting and financial reporting processes and audits of our consolidated financial statements. The Audit Committee assists the Board in oversight of the quality and integrity of our financial reports, our compliance with legal and regulatory requirements, the qualifications and independence of our independent registered public accounting firm, or external auditor, and the performance of our internal audit function, as well as accounting and reporting processes. More specifically, the Audit Committee's duties and responsibilities include, among others:

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        The Board has determined that all members of the Audit Committee, in addition to being independent under the listing standards of the NYSE and the rules and regulations of the SEC, are financially literate and that Audit Committee Chair Janet K. Cooper meets the definition of "audit committee financial expert" as a result of her experience in senior corporate executive positions with financial oversight responsibilities, including her previous experience as the Senior Vice President and Treasurer of Qwest Communications International Inc. and as the Chief Financial Officer and Senior Vice President of Finance and Administration of McDATA Corporation, as well as other finance positions with Qwest Communications International Inc. and The Quaker Oats Company. Shareholders should understand that this designation is an SEC disclosure requirement related to Ms. Cooper's experience and understanding with respect to certain accounting and auditing matters. The designation does not impose upon her any duties, obligations or liability greater than are generally imposed on her as a member of the Audit Committee and the Board, and her designation as a financial expert pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the Audit Committee or the Board. Other members of the Audit Committee who currently are serving or have served as chief executive officers or chief financial officers of other public companies also may be considered financial experts, but the Board has not so designated them.

        The Audit Committee reviews the adequacy of its charter and its own performance on an annual basis. The Audit Committee held 11 meetings during fiscal 2009. At four of these meetings, the Audit Committee met in private session with our independent registered public accounting firm and independently without Management present. At four of these meetings, the Audit Committee met in separate private sessions with Senior Management and at three of these meetings the Audit Committee met in separate private sessions with the director of internal audit. Additional information regarding the Audit Committee and our independent registered public accounting firm is disclosed under the heading "Audit Committee Report" beginning on page 93 and under Proposal Three—Ratification of Selection of Independent Registered Public Accounting Firm beginning on page 91.

        Compensation & Human Resources Committee.    The Compensation & Human Resources Committee is responsible for discharging the Board's responsibilities relating to compensation of our CEO and other executive officers and reviewing and monitoring our human resource and organizational matters. The Compensation & Human Resources Committee has overall responsibility for approving and evaluating all of our compensation plans, policies and programs, as well as our philosophy and strategy, as they affect the CEO, other executive officers and management employees. More specifically, the Compensation & Human Resources Committee's duties and responsibilities include, among others:

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        The Compensation & Human Resources Committee reviews the adequacy of its charter and its own performance on an annual basis. The Compensation & Human Resources Committee held four meetings during fiscal 2009 and took action by written consent four times in fiscal 2009. At each of its meetings, the Compensation & Human Resources Committee met in private session without Management present.

        Determining Executive Compensation.    At the beginning of each fiscal year, the Compensation & Human Resources Committee reviews compensation for our CEO, each of our vice presidents, including each of the other named executive officers, and all general managers, which includes increases, if any, to base salary; annual incentive targets and financial business goals for the current fiscal year; and long-term incentive awards for the current fiscal year. Additionally, the Compensation & Human Resources Committee certifies the achievement at the level presented at the meeting of financial business goals and performance goals established by the Committee at the beginning of the prior fiscal year and approves annual incentive payouts, if any, for the prior fiscal year and long-term incentive payouts, if any, for the performance period ending as of the end of the prior fiscal year.

        The Compensation & Human Resources Committee has the sole authority to retain and terminate any external compensation consultant to be used to assist it in the evaluation of the compensation paid to our CEO and other executive officers, including the sole authority to approve the consultant's fees and the other terms and conditions of the consultant's retention. The Compensation & Human Resources Committee has retained Towers Watson to assist in the design and review of our executive compensation program. For additional information regarding the role of Towers Watson, please see the Compensation Discussion and Analysis beginning on page 32. Additionally, from time to time, the Compensation & Human Resources Committee has engaged Towers Watson in connection with its review of board of director compensation and to assist with stock option plan review. Towers Watson does not provide any services to the Company other than

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those for which it has been retained by the Compensation & Human Resources Committee. Representatives from Towers Watson periodically attend meetings of the Compensation & Human Resources Committee as resources for the committee in carrying out its responsibilities. The Compensation & Human Resources Committee, through its Chair, can request an independent meeting with representatives from Towers Watson at any time. The Compensation & Human Resources Committee also has the authority to obtain advice and assistance from external legal, accounting or other advisors.

        When reviewing and approving compensation for our CEO, the Compensation & Human Resources Committee reviews market data and analysis provided by Towers Watson and recommendations from our Vice President, Human Resources and Business Development and Director, Total Rewards and HR Services regarding corporate and division performance, tenure in the position and outside market factors, including general economic conditions. The Chair of the Compensation & Human Resources Committee also coordinates a performance evaluation for the CEO based on feedback from all non-employee directors in connection with the ratification of CEO compensation by the Board. When reviewing and approving compensation for each other named executive officer, the Compensation & Human Resources Committee reviews market data and analysis provided by Towers Watson and recommendations from our CEO and our Vice President, Human Resources and Business Development and Director, Total Rewards and HR Services regarding individual and corporate performance, tenure in the position and outside market factors, including general economic conditions. For information on the compensation of our named executive officers, please refer to "Executive Compensation" beginning on page 32.

        Nominating & Governance Committee.    The Nominating & Governance Committee's duties and responsibilities include, among others:

        With respect to recommending director nominees for re-election at the annual meeting, the Nominating & Governance Committee, with the participation of the Chairman of the Board, annually polls the members of the Board about each director whose term is

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expiring. If the Nominating & Governance Committee determines that a director does not continue to have the affirmative support of a majority of the members of the Board, the Nominating & Governance Committee does not recommend the director to stand for re-election.

        In identifying new nominees for election to the Board when vacancies occur, the Nominating & Governance Committee first may solicit recommendations for nominees from persons whom the Nominating & Governance Committee believes are likely to be familiar with candidates having the qualifications, skills and characteristics required for Board nominees from time to time. Such persons may include members of the Board and our Management. In addition, the Nominating & Governance Committee may engage a search firm to assist it in identifying and evaluating qualified candidates. The Nominating & Governance Committee has sole authority to retain and terminate any search firm to be used to identify director candidates and has sole authority to approve the search firm's fees and other retention terms.

        The Nominating & Governance Committee reviews and evaluates each candidate it believes merits serious consideration, taking into account available information concerning the candidate, any qualifications or criteria for Board membership established by the Board, the existing composition of the Board and other factors that it deems relevant. In conducting its review and evaluation, the Nominating & Governance Committee may solicit the views of Management, Board members and any other individuals it believes may have insight into a candidate. The Nominating & Governance Committee may designate one or more of its members and/or other Board members to interview any proposed candidate. The Nominating & Governance Committee then will make a recommendation of a director nominee to the Board based on business experience, professional expertise, industry experience and geographical representation.

        The Nominating & Governance Committee will consider director candidates recommended to it by our shareholders. Those candidates must be qualified and exhibit the experience and expertise required of the Board's own pool of candidates, as well as an interest in our business, and have the demonstrated ability to attend and prepare for Board, committee and shareholder meetings. Any candidate must state in advance his or her willingness and interest in serving on the Board. Candidates should represent the interests of all shareholders and not those of a special interest group. The Nominating & Governance Committee will evaluate candidates recommended by shareholders in the same manner as those recommended by others as described above. A shareholder that desires to nominate a person for election to the Board at a meeting of shareholders must follow the specified advanced notice requirements contained in, and provide the specific information required by, our Amended and Restated Bylaws, as described under the heading "Shareholder Proposals and Director Nominations for the 2011 Annual Meeting" on page 94.

        The Nominating & Governance Committee reviews the adequacy of its charter and its own performance on an annual basis. The Nominating & Governance Committee held two meetings during fiscal 2009. At each of these meetings, the Nominating & Governance Committee met in private session without Management present.

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        Finance Committee.    The Finance Committee's duties and responsibilities include, among others:

        The Finance Committee reviews the adequacy of its charter and its own performance on an annual basis. The Finance Committee held three meetings during fiscal 2009. At two of these meetings, the Finance Committee met in private session without Management present.

        Executive Committee.    The Executive Committee may exercise all of the powers and authority of the Board, including the power to declare dividends on our common stock, during intervals between meetings of the Board. The Executive Committee did not meet during fiscal 2009.


Director Compensation

        Overview.    Compensation for our non-employee directors is designed to attract and retain experienced and knowledgeable directors and to provide equity-based compensation in order to align the interests of our directors with those of our shareholders. A substantial portion of our director compensation is linked to our common stock performance, and directors can elect to receive their entire Board remuneration in stock compensation. In addition, to further align the interests of our directors with those of our shareholders, within five years of joining the Board, each director is expected to own a dollar value of our common stock equal to at least two times the director's annual cash retainer for Board

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service. As of January 20, 2010, each of our directors has satisfied these stock ownership guidelines.

        Our compensation for our non-employee directors for fiscal 2009 was comprised of both cash compensation, in the form of annual retainers and meeting fees, and equity compensation, in the form of automatic annual stock awards and automatic annual stock option grants. Each of these components is described in more detail below. Employee directors do not receive any additional compensation for their director service.

        Processes and Procedures for Consideration and Determination of Director Compensation.    The Board has delegated to the Compensation & Human Resources Committee the responsibility, among other things, to review no less than biannually and recommend any proposed changes in non-employee director compensation to the Nominating & Governance Committee, taking into account director compensation at comparable companies. The Compensation & Human Resources Committee most recently reviewed non-employee director compensation in fiscal 2007. In fiscal 2009, the Compensation & Human Resources Committee deferred its review of non-employee director compensation given the worldwide recessionary economic conditions and the resulting impact on the Company's business. It is anticipated that the Compensation & Human Resources Committee will review non-employee director compensation in fiscal 2010. Decisions regarding non-employee director compensation made by the Compensation & Human Resources Committee and the Nominating & Governance Committee are not considered final but are subject to review and approval by the Board.

        Annual Retainers and Meeting Fees.    All non-employee directors (including committee chairs and our presiding non-management director) are entitled to receive the following annual retainers and meeting fees:

        Additionally, committee chairs and our presiding non-management director are entitled to receive the following additional annual retainers and meeting fees:

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        Annual board, chair and additional retainers and meeting fees are paid in cash on a calendar year basis, unless a director elects to convert all or a part of his or her annual retainers and/or meeting fees into shares of our common stock under The Toro Company 2000 Directors Stock Plan, or 2000 Directors Stock Plan, or defer receipt of all or a part of his or her annual retainers and/or meeting fees under The Toro Company Deferred Compensation Plan for Non-Employee Directors. Annual retainers are paid in advance and meeting fees are paid in arrears in four quarterly installments on each of January 1, April 1, July 1 and October 1. For example, the annual retainers paid on January 1 are for the period from January 1 through March 31 and meeting fees paid on January 1 cover meetings attended from October 1 through December 31 of the previous calendar year.

        Robert C. Buhrmaster served as our presiding non-management director during fiscal 2009. The table on page 17 shows the Chair of each Board committee and on which Board committees the individual directors serve.

        Common Stock in Lieu of Annual Retainers and Meeting Fees.    Our non-employee directors may elect to convert all or a part of his or her annual retainers and meeting fees otherwise payable in cash into shares of our common stock under the 2000 Directors Stock Plan. Annual retainers and meeting fees that are earned after the date a director makes an election for a calendar year are issued in December of that year. The number of shares of our common stock to be issued is determined by dividing the dollar amount of the annual retainers and meeting fees to be converted into shares of our common stock by the closing price of our common stock, as reported on the NYSE, on the date that the shares are issued. On December 15, 2009, Gary L. Ellis received 1,618 shares of our common stock in lieu of $66,750 earned for his annual board and chair retainers and meeting fees and Inge G. Thulin received 1,041 shares of our common stock in lieu of $42,938 for his annual board retainer and meeting fees. For Messrs. Ellis and Thulin these annual retainers and meeting fees represented 100% and 75%, respectively, of (a) annual retainers for January 1, 2009 through December 31, 2009, which were accrued in quarterly installments on each of January 1, 2009, April 1, 2009, July 1, 2009 and October 1, 2009, and (b) meeting fees for October 1, 2008 through September 30, 2009, which were accrued in quarterly installments on each of January 1, 2009, April 1, 2009, July 1, 2009 and October 1, 2009.

        Stock Awards.    Stock awards are designed to link non-employee director compensation with shareholder interests. On the first business day of our fiscal year (usually November 1), each non-employee director is automatically awarded shares of our common stock under the 2000 Directors Stock Plan in an amount equal to $20,000 divided by the average of the closing prices of our common stock, as reported on the NYSE, during the three months prior to the award. Accordingly, on November 3, 2008, the first business day of fiscal 2009, 534 shares were awarded to each non-employee director based on a three-month average closing price of our common stock, as reported on the NYSE, of $37.464. The shares awarded are fully vested at the time of grant.

        Stock Option Grants.    Stock option grants also are designed to link non-employee director compensation with shareholder interests. On the first business day of our fiscal year, each non-employee director is automatically granted a stock option to purchase shares of our common stock under the 2000 Directors Stock Plan in an amount equal to $40,000 divided by the fair value of a stock option to purchase one share of common stock.

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For fiscal 2009, fair value was determined using a Black-Scholes valuation method based on assumptions for the business day prior to the date of grant. Accordingly, on November 3, 2008, each non-employee director was granted a stock option to purchase 3,337 shares of our common stock, based on a fair value of $11.99. The exercise price per share of these stock options is equal to 100% of the fair market value of one share of our common stock on the date of grant, as determined by the closing price of our common stock as reported on the NYSE, which was $33.78 on November 3, 2008. Except as described below, these stock options vest in three approximately equal installments on each of the first, second and third year anniversaries of the date of grant and remain exercisable for a term of 10 years after the date of grant.

        If a director becomes disabled or dies and the director's outstanding unvested stock options granted under the 2000 Directors Stock Plan have not expired previously, all outstanding unvested stock options will vest in full on the date the director's service ceases by reason of such disability or death. In addition, the director's guardian or legal representative may exercise the stock options not later than the earlier of the date the stock options expire or one year after the date the director's service ceased by reason of such disability or death.

        If a director has served as a member of the Board for 10 full fiscal years or longer and terminates his or her service on the Board, his or her outstanding unvested stock options will continue to vest in accordance with their terms and the director may exercise the vested portions of the stock options for up to four years after the director's date of termination, but not later than the date the stock options expire. If a director has served as a member of the Board for less than 10 full fiscal years and terminates his or her service on the Board, his or her outstanding unvested stock options will expire and be canceled and the director may exercise any vested portions of the stock options for up to three months after the director's date of termination, but not later than the date the stock options expire. The following directors have served as a member of the Board for 10 full fiscal years or longer: Robert C. Buhrmaster, Winslow H. Buxton, Janet K. Cooper, Robert H. Nassau, Gregg W. Steinhafel and Christopher A. Twomey. Additionally, upon the completion of fiscal 2010, Katherine J. Harless will have served as a member of the Board for 10 full fiscal years.

        Stock options granted under the 2000 Directors Stock Plan will vest if there is a change of control of the Company and will remain exercisable for three years following the change of control, but not later than the date the stock options expire. Generally, and subject to some exceptions, a change of control is deemed to have occurred if: (a) another person becomes the beneficial owner of at least 15% of our then-outstanding common stock or the combined voting power of our then-outstanding voting stock; (b) a majority of the Board becomes comprised of persons other than those for whom election proxies have been solicited by the Board; (c) the completion of certain business combinations, including certain mergers, consolidations, the sale of all or substantially all of our assets or the acquisition by us of assets or stock of another entity, where the shareholders before the business combination fail to beneficially own and have voting power for more than 50% of our Company or the resulting company after the business combination; or (d) our shareholders approve a complete liquidation or dissolution of our Company.

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        Deferred Compensation Plan.    Non-employee directors may elect to defer receipt of all or a part of his or her cash and/or common stock compensation under The Toro Company Deferred Compensation Plan for Non-Employee Directors, or the Director Deferred Compensation Plan. Cash amounts deferred by a director are credited to a bookkeeping cash account maintained for the director participant and common stock amounts deferred by a director are credited to a bookkeeping common stock unit account maintained for the director participant. Cash accounts accrue interest with the rate of return based on funds that are comparable to the funds available to our employees through the IS&ESOP.

        Common stock amounts deferred under the plan are deferred as common stock units that fluctuate in value with the market price of our common stock. Dividends paid on our common stock are credited to a director's account as additional common stock units.

        A director participant's cash account and common stock units are at all times fully vested. Distributions under the plan are payable in accordance with the director participant's election upon the earliest of retirement, prior to retirement if a valid election has been made or an unforeseeable financial emergency. The Director Deferred Compensation Plan does not provide for matching contributions by us.

        None of our directors deferred any cash compensation earned during fiscal 2009 under the Director Deferred Compensation Plan; however, Mr. Thulin deferred his fiscal 2009 annual stock grant under the Director Deferred Compensation Plan.

        Company Products.    Each of our non-employee directors is entitled to receive certain Company products for his or her personal use at no charge, with an $8,000 lifetime limit on installation and parts for an irrigation system. The value of any products or irrigation parts ordered by a director during a calendar year is included on the director's 1099 for that calendar year.

        Charitable Giving.    Support of our directors' charitable organizations is made in accordance with the Company's Matching Gift Program, which provides that a gift in the amount of $25 to $1,000 by a director and/or his or her spouse to educational and/or environmental institutions and public broadcasting organizations will be matched by us in an aggregate amount of up to $1,000 per director per year.

        Indemnification and D&O Insurance.    Each director is a party to an indemnification agreement with us that assures the director of indemnification and advancement of expenses to the fullest extent permitted by Delaware law and our Restated Certificate of Incorporation, and of continued coverage under our directors and officers liability insurance, to the extent it is maintained.

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        Director Compensation for Fiscal 2009.    The following table provides summary information concerning the compensation of each individual who served as a director during fiscal 2009, other than Michael J. Hoffman, our Chairman and CEO, who is not compensated separately for his service as a director and whose compensation is set forth under the heading "Executive Compensation" beginning on page 32.

Name
  Fees
Earned or
Paid in
Cash
($)(1)(2)

  Stock
Awards
($)(3)

  Stock
Option
Awards
($)(4)(5)

  Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)

  All Other
Compensation
($)(6)

  Total
($)

 
   
Robert C. Buhrmaster   $ 72,750   $ 20,006   $ 33,570   $ 0   $ 0   $ 126,326  
Winslow H. Buxton   $ 69,500   $ 20,006   $ 33,570   $ 0   $ 0   $ 123,076  
Janet K. Cooper   $ 89,750   $ 20,006   $ 33,570   $ 0   $ 3,645   $ 146,971  
Gary L. Ellis   $ 66,750   $ 20,006   $ 20,514   $ 0   $ 0   $ 107,270  
Katherine J. Harless   $ 57,250   $ 20,006   $ 20,514   $ 0   $ 0   $ 97,770  
Robert H. Nassau   $ 66,000   $ 20,006   $ 33,570   $ 0   $ 10,817   $ 130,393  
Gregg W. Steinhafel   $ 57,250   $ 20,006   $ 33,570   $ 0   $ 12,068   $ 122,894  
Inge G. Thulin   $ 57,250   $ 20,006   $ 20,514   $ 0   $ 0   $ 97,770  
Christopher A. Twomey   $ 66,250   $ 20,006   $ 33,570   $ 0   $ 0   $ 119,826  

(1)
Unless a director otherwise elects to convert all or a part of his or her annual retainers and meetings fees into shares of our common stock as described in footnote 2 below, annual retainers and meeting fees are paid in cash on a calendar year basis. Annual retainers are paid in advance and meeting fees are paid in arrears in four quarterly installments on each of January 1, April 1, July 1 and October 1. The amount reported represents: (a) annual retainers paid on each of January 1, 2009, April 1, 2009 and July 1, 2009, one-third of the annual retainers paid on October 1, 2009, and two-thirds of the annual retainers paid on October 1, 2008, and (b) meeting fees paid on January 1, 2009, with respect to meetings held during November and December 2008, meeting fees paid on April 1, 2009 with respect to meetings held during January, February and March 2009, meeting fees paid on July 1, 2009, with respect to meetings held during April, May and June 2009, meeting fees paid on October 1, 2009, with respect to meeting held during July, August and September 2009, and meeting fees paid on January 1, 2010, with respect to meetings held during October 2009.

(2)
Our non-employee directors may elect to convert all or a part of their annual retainers and meeting fees otherwise payable in cash into shares of our common stock under the 2000 Directors Stock Plan. The amount reported for each director that has received shares of our common stock in lieu of cash retainers and meeting fees includes the amount of cash retainers and meeting fees earned by such director in fiscal 2009 but paid to such director in shares of our common stock.

(3)
Amount reported represents 100% of the grant date fair value of the annual stock award granted automatically to each of our non-employee directors, which is

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(4)
Amount reported represents the share-based compensation expense recognized in fiscal 2009 for the annual stock option automatically granted to each of our non-employee directors on November 3, 2008, which were the only stock options granted to directors during fiscal 2009, and previously granted stock options that vested in fiscal 2009. Compensation expense equal to the grant date fair value of the stock options is recognized over the vesting period. The specific assumptions used in the valuation of the stock options reflected in the amount reported are summarized in the table below:

  Grant Date
  Risk Free
Rate

  Expected
Life

  Expected
Volatility

  Expected
Dividend Yield

 
     
  November 1, 2008     3.16 %   6.0 years     30.57 %   1.53 %
  November 1, 2007     4.08 %   6.5 years     25.75 %   0.95 %
  November 1, 2006     4.53 %   6.5 years     26.44 %   0.82 %
(5)
As of October 31, 2009, the aggregate number of stock options (exercisable and unexercisable) held by each director was as follows: Mr. Buhrmaster—16,784; Mr. Buxton—16,784; Ms. Cooper—16,784; Mr. Ellis—9,238; Ms. Harless—16,784; Mr. Nassau—15,450; Mr. Steinhafel—16,784; Mr. Thulin—5,960; and Mr. Twomey—16,784.

(6)
We generally do not provide perquisites and other personal benefits to our directors, other than Company products for their personal use at no charge. The amount reported represents the aggregate incremental cost to us of providing Company products to our directors as follows: Ms. Cooper—$3,645; Mr. Nassau—$10,817; and

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Policies and Procedures Regarding Related Person Transactions

        Our Corporate Governance Guidelines set forth in writing our policies and procedures regarding the review, approval and ratification of related person transactions. All reportable related person transactions must be reviewed, approved or ratified by the Nominating & Governance Committee. In determining whether to approve or ratify such transactions, the Nominating & Governance Committee will take into account, among other factors and information it deems appropriate:

        Transactions in the ordinary course of business, between us and an unaffiliated corporation of which one of our non-employee directors serves as an officer, that are at arm's length, at prices and on terms customarily available to unrelated third party vendors or customers generally, in which the non-employee director had no direct or indirect personal interest, nor received any personal benefit, and in amounts that are not material to our business or the business of such unaffiliated corporation, are deemed conclusively pre-approved.


Board of Directors Business Ethics Policy Statement

        It is our policy to maintain the highest level of moral, ethical and legal standards in the conduct of our business. Pursuant to our Corporate Governance Guidelines, the Board has adopted, and each director annually signs, a Business Ethics Policy Statement. The policy can be found on our website at www.thetorocompany.com (select the "Investor Information" link and then the "Corporate Governance" link).


Code of Conduct and Code of Ethics for our CEO and Senior Financial Officers

        All of our employees are required to comply with our Code of Conduct to help ensure that our business is conducted in accordance with the highest level of moral, ethical and legal standards. We also have a Code of Ethics for our CEO and Senior Financial Officers applicable to our CEO (our principal executive officer), our CFO (our principal financial officer), our Vice President, Corporate Controller (our principal accounting officer and controller), and to all business unit controllers and senior accounting personnel identified by our Vice President, Corporate Controller who are bound by the provisions set forth in the Code of Conduct relating to ethical conduct, conflicts of interest and compliance with the

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law. Our Code of Conduct and Code of Ethics for our CEO and Senior Financial Officers can be found on our website at www.thetorocompany.com (select the "Investor Information" link and then the "Corporate Governance" link). If necessary, we intend to satisfy the disclosure requirements of Item 5.05 of Form 8-K regarding amendments to or waivers from any provision of our Code of Ethics for our CEO and Senior Financial Officers by posting such information on our website at www.thetorocompany.com (select the "Investor Information" link and then the "Corporate Governance" link).


Complaint Procedure; Communications with Directors

        The Board has appointed Robert C. Buhrmaster as our presiding non-management director, with the responsibility to facilitate communications by shareholders, interested parties and employees directly with the independent, non-management members of the Board. Our presiding non-management director maintains a special telephone line for the purposes described below.

        As required by the Sarbanes-Oxley Act of 2002, we maintain procedures to receive, retain and treat complaints received regarding accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. Our 24-hour, toll-free confidential compliance line is available for the submission of concerns regarding these matters by any employee. Any employee who believes he or she is aware of a breach of our Code of Conduct or an incident involving financial fraud may leave a confidential or anonymous message at 800-850-7247 (in the United States) or +1-678-999-4558 (outside the United States) or for Robert C. Buhrmaster, as our presiding non-management director, at 952-887-7268.

        The Board also has established a process for shareholders and interested parties to send communications to the non-management directors. Shareholders and interested parties may communicate with the Board or the non-management directors through the presiding non-management director by calling 952-887-7268 or by writing to our Vice President, Secretary and General Counsel, 8111 Lyndale Avenue South, Bloomington, Minnesota, 55420-1196. Communications sent to us addressed to the Board of Directors or to any non-management director are reviewed by our Vice President, Secretary and General Counsel. Some types of communications may not be forwarded to our presiding non-management director. These include job inquiries, surveys and requests for information about us, offers of goods and services, requests for donations and sponsorships and product ideas, as well as communications unrelated to us or our business. If the communication does not fall in one of these categories, it will be forwarded to our presiding non-management director.

        Concerns and questions relating to accounting, internal accounting controls, financial policy, risk management or auditing matters are brought to the attention of the Chair of the Audit Committee and are handled in accordance with procedures established by the Audit Committee. These concerns also may be reported through our anonymous confidential compliance line at 800-850-7247 (in the United States) or +1-678-999-4558 (outside the United States) or to Robert C. Buhrmaster, as our presiding non-management director, at 952-887-7268. If requested, we will endeavor to keep information that has been submitted confidential, subject to any need to conduct an effective investigation and take appropriate action.

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EXECUTIVE COMPENSATION

Compensation & Human Resources Committee Report

        The Compensation & Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis with Management and, based on such review and discussions, the committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and in our Annual Report on Form 10-K for the fiscal year ended October 31, 2009.

Compensation & Human Resources Committee:
Christopher A. Twomey (Chair)
Winslow H. Buxton
Katherine J. Harless
Robert H. Nassau
Gregg W. Steinhafel


Compensation Discussion and Analysis

        Executive Summary.    This Compensation Discussion and Analysis describes the key principles and approaches used to determine material elements of compensation awarded to, earned by and/or paid to each of our named executive officers listed in the Summary Compensation Table. This discussion should be read in conjunction with the tables and corresponding footnotes set forth on pages 50 through 58, as it provides information and context to the compensation disclosures included in those tables and footnotes.

        This discussion focuses primarily on compensation awarded to, earned by and/or paid to each of our named executive officers for fiscal 2009. However, to the extent that it enhances an understanding of our fiscal 2009 compensation, it also addresses past compensation actions and changes to our executive compensation programs in fiscal 2010.

        Compensation for our named executive officers other than the CEO generally is determined by the Compensation & Human Resources Committee, which is comprised solely of independent non-employee directors who meet at least three times each fiscal year. Compensation for our CEO is determined by the Compensation & Human Resources Committee and ratified by the independent non-employee directors of the full Board. In making compensation decisions, the Compensation & Human Resources Committee considers market data, analysis and recommendations provided by Towers Watson and recommendations from our CEO, Vice President, Human Resources & Business Development and Director, Total Rewards and HR Services regarding experience, tenure, corporate/division performance, individual performance and outside market factors, including general economic conditions. The Compensation & Human Resources Committee also considers the results of the annual CEO evaluation process in making compensation decisions for the CEO. The CEO does not provide input with respect to his own compensation.

        As a result of the difficult economic environment in fiscal 2009 and its impact on our financial performance, we implemented a number of cost savings initiatives. Those initiatives included a voluntary retirement program for employees that were age 59 and had at least five years of service in December 2008, two workforce reductions for our United States office salaried employees (February 2009 and August 2009), a voluntary 10% base salary reduction for our named executive officers and other executives approved by the

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Compensation & Human Resources Committee in February 2009, suspension of regularly scheduled merit increases for all United States office salaried employees and employees in several of our international locations in March 2009, and four furlough (unpaid) days for United States office salaried employees, including our named executive officers and other executives, from February 2009 through October 2009.

        Compensation Program Objectives.    We generally use compensation to help reinforce desired financial business results to our executives, including our named executive officers, and to motivate them to make decisions to produce those results. Our guiding philosophy is to maintain an executive compensation program that will attract, retain, motivate and reward highly qualified and talented executives that will enable us to perform better than our competitors. Our Compensation & Human Resources Committee considers several core principles, which are outlined below, when determining executive compensation.

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        We believe that these core principles help ensure that when financial business goals are met, total compensation is generally at or above the market 50th percentile and when financial business goals are not met, total compensation is generally below the market 50th percentile.

        Elements of Our Executive Compensation Program.    During fiscal 2009, our executive compensation program consisted of the following elements: base salary, annual cash incentives, long-term incentives, retirement and health benefits and perquisites. We have outlined below the purpose of each of these elements, as well as target positioning in the market.

Element
  Purpose
  Target Positioning
 
Base Salary   We pay base salaries to provide a stable source of fixed income and to:
• Recognize the contributions of our executives in their day-to-day responsibilities;
• Reflect the scope and complexity of their role; and
• Reflect their current and historical levels of performance.
  We target the market 50th percentile for base salaries.

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Element
  Purpose
  Target Positioning
 
Annual Cash Incentives   We currently provide annual cash incentives to our executives that motivate attainment of annual financial business goals through The Toro Company Annual Management Incentive Plan II, or AMIP. We believe that these annual financial business goals are operational drivers of long-term value creation for our shareholders and ensure alignment of pay with performance. In fiscal 2009, annual financial business goals for corporate participants were based solely on: • Corporate revenue growth;
• Fully diluted earnings per share, or EPS; and
• Corporate average net assets turns (12 months average net assets of the Company, excluding long-term debt and excess cash, divided by the cost of goods sold).
In fiscal 2009, annual financial business goals for division participants were based 50% on the corporate financial business goals discussed above and 50% on division financial business goals of:
• Controllable profit contribution, or CPC (divisional operating earnings, excluding other income or expense); and
• Division working capital as a percent of sales (which for fiscal 2009 replaced divisional current assets turns).
  We target the market 50th percentile for total cash compensation (sum of base salary and annual cash incentives) when annual cash incentives are paid at target. Target awards for an individual may be adjusted based on internal positioning, experience, tenure within Toro or the position and individual performance. Actual payouts range from below to above the 50th percentile based on corporate performance and division performance.
Long-Term Incentives
• Stock options
• Performance share awards
  We currently provide long-term incentives in the form of stock options and performance share awards, which are paid out in shares of our common stock. We believe that the use of long-term incentives helps to:
• Align the interests of our executives and our shareholders;
• Encourage focus on long-term performance of the Company;
• Promote long-term retention of our executives; and
• Encourage significant ownership of our common stock.
Stock options vest in three approximately equal installments on each of the first, second and third year anniversaries of the date of grant and are exercisable for a period of 10 years following the date of grant.
Performance share awards are issued annually and are paid out at the end of a three-year award term. For the award term ending in fiscal 2009, the performance measures (which were weighted equally) included:
• Cumulative net income plus after-tax interest (aggregate of net income plus interest expense net of income tax effect); and
• Cumulative corporate average net assets turns (aggregate of three years of annual corporate average net assets turns).
For the fiscal 2008 to fiscal 2010 award term, we added cumulative revenue as a performance measure.
  We historically have targeted the market 50th percentile for long-term incentives. Actual long-term incentive grants for an individual may be adjusted based on internal positioning, experience, tenure within Toro or the position and individual performance. We also maintain stock ownership guidelines to encourage significant stock ownership.

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Element
  Purpose
  Target Positioning
 
Retirement and Health Benefits   We provide health and welfare benefits and a retirement plan to help provide for the physical and financial health and security of our executives. Our executives participate in the same benefit plans made available to our United States office salaried employees. These include:
• The Toro Company Investment, Savings & Employee Stock Ownership Plan, or IS&ESOP, which is a 401(k) plan with a company match and two other company contributions (an investment savings contribution and an ESOP contribution) ;
• The Toro Company Retirement Plan for Office and Hourly Employees, which is a floor offset pension plan that is intended to provide a minimum level of benefits in the event that the IS&ESOP does not provide such minimum level of benefits;
• Medical and dental insurance; and
• Life, accidental death and dismemberment, and long-term disability insurance.
We also maintain three nonqualified plans: The Toro Company Deferred Compensation Plan and The Toro Company Deferred Compensation Plan for Officers, which are plans into which the executives can defer base salaries, annual cash incentives and performance share awards, and The Toro Company Supplemental Benefit Plan which provides benefits for a select group of highly compensated employees in excess of the limits on benefits and contributions imposed by Sections 401(a)(17) and 415 of the Code.
  We review our retirement and health benefits against the market, utilizing the expertise of external consulting firms. We believe that our benefits and plans are consistent with retirement and health benefits and plans provided at other companies with whom we compete for talent.
Perquisites   We provide perquisites that we believe are typical in the market for similarly sized companies. We believe that the use of perquisites is important to retain our executives. The perquisites we provide include:
• Company-leased automobile;
• Financial planning;
• Executive physical;
• Company products;
• Additional coverage for accidental death and dismemberment; and
• Additional vacation.
  We provide perquisites that we believe commonly are provided at other similarly sized companies and review the perquisites that we provide to our executives on a periodic basis.

        We do not target a specific mix between fixed (non-performance-based) and variable (performance-based) compensation, short-term and long-term compensation, or cash and equity compensation in determining our executive compensation levels. At the beginning of each fiscal year, the Compensation & Human Resources Committee, Towers Watson, our CEO, our Vice President, Human Resources & Business Development and our Director, Total Rewards and HR Services evaluate each element of compensation and total compensation in comparison to the market. To the extent that the mix between fixed and variable compensation and individual elements of compensation change in the market, the mix may change for any individual named executive officer. In reviewing total compensation and determining compensation levels, we generally consider that compensation should vary based on actual performance and that variable compensation should include both short-term incentives in the form of cash, as well as long-term incentives in the form of stock and other equity-based incentives.

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        Each element of our executive compensation program is described in more detail below.

        General.    We provide the opportunity for our named executive officers and other executives to earn a market competitive annual base salary. Base salaries are reviewed on an annual basis at the regular meeting of the Compensation & Human Resources Committee held in November or December of each year. In fiscal 2009, salary increases, if any, for the CEO, vice presidents, including each of the other named executive officers, and all general managers were made effective as of December 1, 2008.

        Prior to the November or December meeting, Towers Watson provides an analysis that compares the current base salary for the CEO, vice presidents, including each of the other named executive officers, and general managers to the market for the position in which such executive serves. Our CEO, our Vice President, Human Resources & Business Development and our Director, Total Rewards and HR Services review such analysis with the Chair of the Compensation & Human Resources Committee or the Committee as a whole, as appropriate. In addition to reviewing base salaries relative to the market, the Compensation & Human Resources Committee, Towers Watson, our CEO, our Vice President, Human Resources & Business Development and our Director, Total Rewards and HR Services also evaluate each executive's individual performance, tenure in the position, corporate and division performance and relative positioning when determining base salary increases.

        Our Discussion and Analysis.    In considering all of the previously mentioned factors and particularly the global recessionary economic conditions, Messrs. Hoffman, Wolfe and Brown did not receive salary increases on December 1, 2008. The Compensation & Human Resources Committee approved salary increases of 5% and 16% for Messrs. Ramstad and Dordell, respectively, on December 1, 2008 for fiscal 2009. The 5% increase for Mr. Ramstad was implemented to recognize his contributions as a vice president with responsibilities for both the human resources and business development functions and to reward individual performance. The 16% increase for Mr. Dordell was implemented to bring his salary closer to the market 50th percentile and to reward individual performance. The fiscal 2009 base salaries, which include the base salary increases for Messrs. Ramstad and Dordell, and the recession-related 10% base salary reduction for each of the named executive officers, are provided below along with the corresponding positioning against the market. The 10% reduction caused most of the named executive officers' fiscal 2009 base salaries to fall below the market 50th percentile. Mr. Ramstad's fiscal 2009 base salary falls slightly above the market 50th percentile for a Vice President, Human Resources position because his base salary appropriately reflects his levels of responsibilities for both the human resources and business development functions. The fiscal 2009 base salaries also are provided in the "Summary Compensation Table" on page 50.

Name
  Fiscal 2009 Base Salary
  Position Against Market
 
Mr. Hoffman   $ 766,665     9.8% below the market 50th percentile
Mr. Wolfe   $ 375,755   11.6% below the market 50th percentile
Mr. Ramstad   $ 304,553     5.0% above the market 50th percentile
Mr. Dordell   $ 288,157   18.8% below the market 50th percentile
Mr. Brown   $ 252,753     2.9% below the market 50th percentile

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        Changes for Fiscal 2010.    In December 2009, the Compensation & Human Resources Committee evaluated the market, global economic conditions, our financial performance and levels of individual responsibilities and performance for each of the named executive officers and, at a minimum, restored individual base salaries to their levels prior to the 10% reduction. Messrs. Hoffman, Wolfe and Brown did not receive any increases to their base salaries, other than the restoration of the 10% reduction. Since base salaries were frozen in December 2008, the restoration of salaries brings salaries for these named executive officers back to fiscal 2007 levels. A 2.1% increase to the December 2008 base salary for Mr. Ramstad was implemented to reflect his contributions and performance, as well as his responsibility for both the human resources and business development functions. A 7% increase to the December 2008 base salary for Mr. Dordell was implemented to reflect his contributions and performance and to position his salary closer to the market 50th percentile.

        General.    We provide the opportunity for executives to earn an annual incentive. The incentive payout is based solely on financial business performance under our AMIP and is paid entirely in cash. At the beginning of each fiscal year, during its regular meeting held in November or December, the Compensation & Human Resources Committee approves a target award for each participant and financial business goals, or performance measures and weightings, at both the corporate and division level. The committee also approves the maximum level of AMIP payout (which cannot exceed 200% of the target award as a percentage of base salary).

        Target Awards.    Under the AMIP, target awards are established and expressed as a percentage of base salary. When determining the target award for each named executive officer, the committee reviews the market 50th percentile total cash compensation (sum of base salary and annual incentives) for the position in which such named executive officer serves. Our objective is that when our annual incentives pay out at target, total cash compensation is at the market 50th percentile. Target awards for our CEO and the other named executive officers generally differ based on market 50th percentile total cash compensation levels for their respective positions. Target awards also may differ based on the committee's consideration of experience and tenure within Toro or the position and individual performance. For fiscal 2009, the target awards, expressed as a percent of base salary, remained the same as for fiscal 2008 for the each of our named executive officers. The target and maximum awards are provided below:

Name
  Target Award
(% of base salary)

  Maximum Award
(% of base salary)

 
   

Mr. Hoffman

    85 %   170 %

Mr. Wolfe

    65 %   130 %

Mr. Ramstad

    50 %   100 %

Mr. Dordell

    50 %   100 %

Mr. Brown

    50 %   100 %

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        Fiscal 2009 Performance Measures.    Each year, the Compensation & Human Resources Committee, Towers Watson, our CEO, our Vice President, Human Resources and Business Development and our Director, Total Rewards and HR Services discuss performance measures and weightings for the AMIP. We believe that it is important to set performance goals for growth, profitability and asset performance in order to drive shareholder value and to focus our executives on improving both company and division performance. For fiscal 2009, division working capital as a percent of sales replaced division current assets turns as a divisional performance measure. The specific measures, weightings and goals for fiscal 2009, as approved by the Compensation & Human Resources Committee are provided below:

Corporate Measures (50%)
  Divisional Measures (50%)
 
40% corporate revenue growth   50% division CPC
30% fully diluted EPS   50% division working capital as a percent of sales
30% corporate average net assets turns    

        In establishing financial business goals for the fiscal year to be approved by the Compensation & Human Resources Committee, factors such as our prior fiscal year financial business results, our competitive situation, our evaluation of market data, as well as the general state of the economy and our business all are considered. For fiscal 2009, target, threshold and maximum performance goals were established for all measures. Target levels of performance are set based on our financial plan for the fiscal year. For both the corporate and division performance measures, threshold levels of performance generate payouts at 40% of plan and maximum levels of performance generate payouts of 200% of plan. For fiscal 2009, the Committee approved a payout of 20%, rather than 40%, for the EPS threshold level of performance. The EPS threshold, which is set at 80% of plan, must be met for there to be a payout for corporate participants and a corporate portion of a payout for division participants. For division participants to receive a division payout, CPC must be at 80% of plan, or the threshold level of performance.

        Our CEO, our Vice President, Human Resources & Business Development and our Director, Total Rewards and HR Services recommend corporate and division financial measures, financial business goals and weightings to the Compensation & Human Resources Committee at its regular meeting held in November or December. Additionally, target and maximum dollar awards are reviewed and approved at that meeting. During its regular meeting held in July, the Compensation & Human Resources Committee reviews progress against the corporate and division financial business goals. Following the end of the fiscal year, at the Compensation & Human Resources Committee meeting held in November or December, our CEO, our Vice President, Human Resources & Business

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Development and our Director, Total Rewards and HR Services present actual results against the corporate and division financial business goals and the corresponding payout percent (expressed as a percent of target performance). The Compensation & Human Resources Committee has the discretion to approve adjustments to previously approved performance levels or performance measures to account for irregular or non-recurring items and events. There were no irregular or non-recurring items or events during fiscal 2009. The Compensation & Human Resources Committee then verifies that the financial business goals were achieved at the levels presented at the meeting. Payouts are made in the middle of December and are contingent on our final earnings release for the fiscal year. Our CEO, our Vice President, Human Resources & Business Development and our Director, Total Rewards and HR Services also present a summary of actual dollar payouts for our CEO, vice presidents, including each of the named executive officers, and general managers, which is reviewed and approved by the committee. The committee also has the discretion to adjust the payout percent up or down by up to 20% based on certain events. Examples of factors or events that could cause the committee to adjust the payout percent include the buyback of shares of our common stock in unplanned amounts or significant acquisition or disposition transactions. The committee did not make any such adjustments to the fiscal 2009 annual cash incentive payouts.

        Our Discussion and Analysis.    Below is a table summarizing the fiscal 2009 corporate performance measures, including threshold, target, maximum and actual levels of performance.

Fiscal 2009 Performance Measure
  Threshold
  Target
  Maximum
  Actual
 
Corporate revenue growth   -6%   -3% – 2%   5%   -18.9%
Fully diluted EPS   $2.40   $3.00   $3.60   $1.73
Corporate average net assets turns   1.71234   2.01452   2.31670   1.91553

        Since actual EPS was below the threshold of $2.40, there was no payout for any corporate participants and no corporate portion payout for any divisional participants. Two of our divisions, Residential and Micro Irrigation, received divisional payouts of 200% and 35.8%, respectively, which generated overall division payouts of 100% and 17.9%, respectively.

        For fiscal 2009, all of our named executive officers with the exception of Mr. Brown were eligible for payouts based on performance against corporate performance measures. Mr. Brown and other executives with divisional responsibilities received annual incentive payouts based 50% on corporate performance and 50% on division performance for the division(s) in which they have responsibility. For fiscal 2009, Mr. Brown's divisional goals were weighted 70% on performance of the Residential division and 30% on performance of the Landscape Contractor division.

        As a result of below threshold EPS levels, there were no AMIP payouts for Messrs. Hoffman, Wolfe, Ramstad or Dordell. As a result of performance in the Residential Business, Mr. Brown received an AMIP payout of $101,029. As indicated previously, our incentive compensation programs ensure that pay varies with performance. Fiscal 2009 financial business results led to significantly lower levels of total cash compensation, which

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is the sum of base salary and annual cash incentives. The resulting fiscal 2009 total cash compensation and position against the market is summarized below for each of the named executive officers. As reflected in the table, the lack of an AMIP payout for Messrs. Hoffman, Wolfe, Ramstad and Dordell caused total cash compensation to be well below the targeted 50th percentile. Mr. Brown's AMIP payout and resulting total cash compensation were between the market 25th and 50th percentile.

Name
  Fiscal 2009 Total
Cash Compensation

  Position Against Market
 

Mr. Hoffman

  $ 766,665   54.9% below the market 50th percentile

Mr. Wolfe

  $ 375,755   45.5% below the market 50th percentile

Mr. Ramstad

  $ 304,553   29.2% below the market 50th percentile

Mr. Dordell

  $ 288,157   47.1% below the market 50th percentile

Mr. Brown

  $ 353,603     8.2% below the market 50th percentile

        Changes for Fiscal 2010.    Since division working capital as a percent of sales replaced current assets turns in fiscal 2009, our divisions have made significant progress toward our goal of driving working capital "into the teens." Continued focus on our working capital initiative and profitability remain important for fiscal 2010. Therefore, both division net working capital as a percent of sales and division controllable profit contribution, or CPC, will remain division metrics for fiscal 2010. While we want to continue our focus on asset management and profitability, we also want revenue to return to prior levels. Therefore, our CEO, our Vice President of Human Resources & Business Development and our Director, Total Rewards and HR Services recommended, and the Compensation & Human Resources Committee approved, division revenue growth as an additional divisional performance measure for fiscal 2010. Corporate performance measures and weightings remain the same for fiscal 2010.

        General.    We believe that the use of equity-based compensation programs, along with our stock ownership guidelines, help align the interests of our executives and our shareholders. Therefore, we provide the opportunity for our executives to earn competitive long-term incentives. Long-term incentives, in the form of both stock options and performance share awards, are granted to our executives by the Compensation & Human Resources Committee. Each component historically has delivered 50% of the overall targeted long-term incentive value. We generally target the market 50th percentile for long-term incentive awards and therefore, have used that market data as a key data point in determining long-term incentive grants. Actual long-term incentive grants are determined after considering the market data, individual performance, length of time in the position and internal positioning. Therefore, an executive may receive less than the full market 50th percentile long-term incentive while gaining experience in a new position. Additionally, an executive may receive more than the full market 50th percentile long-term incentive value based on superior individual performance.

        Stock Options.    Each year at its regular meeting held in November or December, which is the first meeting of the fiscal year, the Compensation & Human Resources

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Committee grants options to our executives. Options are granted by the committee under The Toro Company 2000 Stock Option Plan, or 2000 Stock Option Plan. If shareholder value is not delivered and our stock price does not increase, the options will not have any value. If we deliver strong shareholder returns, our stock price presumably will increase, thereby increasing the value of the stock options and total compensation.

        Our historical process to determine the number of options to award to our executives, including our named executive officers, has been to start with a total expected value of options to be granted to each executive officer (which historically has represented one-half of the total long-term incentive value to be awarded). That value is then divided by the expected value of one option, using the Black-Scholes option pricing method, to determine the number of options to grant. The calculation of the expected value is based on the average closing price of our common stock, as reported on the NYSE, over the last three months of the prior fiscal year.

        Stock options granted to our executives, including our named executive officers, in fiscal 2009 vest in three approximately equal installments on each of the first, second and third year anniversaries of the date of grant and are exercisable for a period of 10 years following the date of grant. The Compensation & Human Resources Committee periodically reviews vesting schedules and term schedules for similarly sized companies. The number of options awarded to our named executive officers for fiscal 2009 can be found in the "Grants of Plan-Based Awards for Fiscal 2009" table on page 53. The exercise price of the options is the closing price of our common stock, as reported on the NYSE, on the date of grant, which for fiscal 2009 was December 3, 2008. The exercise price for the fiscal 2009 stock options was $28.62.

        Performance Share Awards.    Each year at its regular meeting held in November or December, the Compensation & Human Resources Committee grants performance share awards under The Toro Company Performance Share Plan, or PSP, to our executives, including our named executive officers, and selected general managers and managing directors. Performance share awards are paid out in shares of our common stock after a three-year award term. At the beginning of the fiscal year, the committee establishes financial business goals for the next three-year award term and also establishes thresholds and maximums.

        For fiscal 2009 to fiscal 2011 awards, the following goals and weightings were established:

        Similar to how the goals are set in the AMIP, our prior fiscal year financial business results, our competitive situation, our evaluation of market data, as well as the general state of the economy and our business, including any anticipated business opportunities, are considered by the committee when establishing goals for the next three-year award term.

        Our historical process to determine the number of performance share awards to be granted to our named executive officers is to start with a total expected value of

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performance share awards to be delivered (which represents one-half of the total expected long-term incentive value to be awarded). That value then is divided by an expected value per share to determine the number of performance share awards to grant at target.

        At the end of the three-year award term, at the committee's regular meeting in November or December, our CEO, our Vice President of Human Resources & Business Development and our Director, Total Rewards and HR Services summarize performance against the financial business goals and determine a payout, which is expressed as a percent of target. The Compensation & Human Resources Committee then verifies that the financial business goals were achieved at the levels presented at the meeting. Shares of our common stock are paid out to the named executive officers in December and are contingent on our final earnings release for the fiscal year. The number of performance shares awarded to our named executive officers for the fiscal 2009 through fiscal 2011 award term can be found in the "Grants of Plan-Based Awards for Fiscal 2009" table on page 53.

        For fiscal 2007 through fiscal 2009, the following goals and weightings were established:

        Our Discussion and Analysis.    Delivering long-term incentives equally in the form of stock options and performance share awards has been effective in focusing our executives on both short-term and long-term financial business results and encouraging stock ownership. Annually, the Compensation & Human Resources Committee, Towers Watson, our CEO, our Vice President, Human Resources & Business Development and our Director, Total Rewards and HR Services review the performance measures utilized in the performance share plan to confirm that such measures are the most effective measures for driving results. The value of long-term incentives delivered to each of our named executive officers for fiscal 2009 generally was targeted at the market 50th percentile for the position in which such named executive officer serves. The long-term incentives for some of our named executive officers varied from the market 50th percentile to reflect experience in their position and individual performance.

        Below is a table summarizing the financial business goals for the fiscal 2007 to fiscal 2009 award term, including the threshold, target, maximum and actual levels of performance.

Fiscal 2007 to Fiscal 2009 Performance Measure
  Threshold
  Target
  Maximum
  Actual
 
   

Cumulative net income plus after-tax interest

  $ 305,405,000   $ 509,009,000   $ 576,876,000   $ 365,527,000  

Cumulative corporate average net assets turns

    5.14151     6.04884     6.95616     5.72275  

        Actual levels of performance translated into a payout percent of 34.4% of target. Therefore, eligible participants received 34.4% of the target shares granted for the fiscal 2007 to fiscal 2009 award term. A summary of the performance shares awarded to the

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named executive officers for the fiscal 2007 to fiscal 2009 award term can be found in the "Option Exercises and Stock Vested for Fiscal 2009" table on page 56.

        Impact on Total Direct Compensation.    The table below reflects total direct compensation in comparison to the market 50th percentile for each of the named executive officers. Total direct compensation represents the sum of fiscal 2009 base salary, fiscal 2009 annual cash incentives, grant date fair value of fiscal 2009 stock option grants and grant date fair value of the performance shares awarded at target for the fiscal 2009 to fiscal 2011 award term. Actual AMIP payouts had a significant impact, resulting in total direct compensation being well below the target of the market 50th percentile.

Name
  Fiscal 2009 Total
Direct Compensation

  Position Against Market
 

Mr. Hoffman

  $ 2,324,583   40.5% below the market 50th percentile

Mr. Wolfe

  $ 783,437   38.3% below the market 50th percentile

Mr. Ramstad

  $ 568,397   18.2% below the market 50th percentile

Mr. Dordell

  $ 583,879   39.5% below the market 50th percentile

Mr. Brown

  $ 495,118   16.8% below the market 50th percentile

        Changes for Fiscal 2010.    The market for long-term incentives has changed significantly over the last several years as companies evolved their long-term incentive grant practices to address several concerns, including the economy, state of the business, share reserves, targeted versus expected economic value and stock price volatility. When establishing grant levels for fiscal 2010, the Compensation & Human Resources Committee, our CEO, our Vice President, Human Resources & Business Development and our Director, Total Rewards and HR Services considered the fiscal 2009 grant levels in terms of the number of units, as well as targeted and expected value of those grants. Although the market continues to be an important reference point for long-term incentives, we believe that it will be important to assess historical grant levels going forward. Additionally, we are submitting for shareholder approval at the 2010 Annual Meeting The Toro Company 2010 Equity and Incentive Plan, which allows for other forms of long-term incentives, including restricted stock. Although it is not anticipated that any grants would be made under this new plan until fiscal 2011, if the plan is approved we will be in a position in the future to re-evaluate the forms of equity-based compensation to award to our CEO, our vice presidents, including the other named executive officers, our general managers and other employees.

        General.    Our executives participate in The Toro Company Investment, Savings & Employee Stock Ownership Plan, or IS&ESOP, the plan in which the majority of our United States-based employees participate. This plan includes a standard 401(k) plan with a company match and two other company contributions (an investment savings contribution and an ESOP contribution). The 401(k) portion allows all eligible United States-based employees with 90 consecutive days of service to set aside pre-tax dollars to save for retirement. We currently match $0.50 for each employee dollar contribution, up to an employee maximum of 4%. Employees are eligible to receive the company match on the

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first of the month following one year of service. In the 401(k) portion, employees whose compensation exceeded a certain level for the prior calendar year are capped at a certain contribution percent. For the investment savings contribution, we historically have contributed 5.5% of an employee's eligible compensation plus 5.5% above the social security taxable wage base into their account and for the ESOP contribution, we historically have contributed 1.5% of eligible compensation into an employee's account each calendar year. Employees are eligible to receive the investment savings and the ESOP contribution on the first of the month following two years of service. During calendar year 2009, we amended the IS&ESOP so that all company contributions, including the company match, the investment savings and the ESOP fund contribution would be defined as discretionary. Although the plan was amended, the calendar year 2009 company contributions will remain the same as in prior years.

        Our primary retirement benefits are provided through the IS&ESOP. In addition to the IS&ESOP, we also have The Toro Company Retirement Plan for Office and Hourly Employees, which is a floor offset pension plan that we provide for our United States-based office and hourly employees (excluding our union production employees). Our executives, including our named executive officers, are eligible to participate in this plan. The plan was frozen to new participants in September 2005 and no further benefits are being accrued after December 31, 2009. Messrs. Ramstad and Dordell are not participants in this plan as they were hired after September 2005. Under the plan, a minimum level of benefit is calculated based on earnings and years of service. Separately, a defined contribution offset is calculated based our investment savings and ESOP contributions and, if the defined contribution is greater than the minimum benefit, then there is no benefit due under this plan. As of December 31, 2009, none of our executives, including our named executive officers, were due a benefit under this plan.

        Our executives participate in the same health and welfare benefit plans in which our United States-based office salaried employees participate. These plans include medical, dental, life, accidental death and dismemberment and long-term disability.

        Changes for Fiscal 2010.    During fiscal 2009, we worked with an outside health and welfare benefit consultant to evaluate the competitiveness of our life insurance and disability programs and consolidate these benefits with one vendor. As a result, we implemented certain plan design changes to our accidental death and dismemberment and long-term disability benefits for calendar year 2010 (since these plans run on a calendar year rather than fiscal year basis). Those changes are summarized below:

Benefit
  Calendar Year 2009
  Calendar Year 2010
 


Basic accidental death and dismemberment


 

5X base salary commutation coverage (coverage to and from work) for eligible employees

24 hour per day coverage for director level and above employees

 

1X base salary coverage 24 hours per day for all eligible employees

Optional accidental death and dismemberment

  5x base salary coverage 24 hours per day for eligible employees   1X – 5X base salary coverage 24 hours per day for eligible employees

Basic long-term disability

  Up to maximum monthly benefit of $600 for eligible employees   60% of monthly base salary up to a maximum monthly benefit of $4,000 for eligible employees

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        General.    Our named executive officers are eligible for three nonqualified plans: The Toro Company Deferred Compensation Plan, The Toro Company Deferred Compensation Plan for Officers and The Toro Company Supplemental Benefit Plan.

        The Toro Company Deferred Compensation Plan.    This plan allows employees that are at a director-level and above to defer pre-tax calendar year base salary and/or fiscal year AMIP cash bonuses to a date in the future. Participants can defer up to 50% of their calendar year base salary and up to 100% of their AMIP cash bonus. Each year, before the new fiscal year begins, eligible employees are given the opportunity to defer their calendar year base salary and/or fiscal year AMIP bonus. Participants elect the frequency of payments and the number of payments to receive at the time of distribution. Participants must elect a distribution date that is at least two years later than the date the compensation otherwise would have been received. Amounts deferred go into an account and earn interest based on a participant's allocation of funds in the plan. Participants are always 100% vested in their accounts.

        The Toro Company Deferred Compensation Plan for Officers.    This plan allows key employees that participate in the Performance Share Plan an opportunity to defer receipt of shares of our common stock paid out under the plan to a date in the future. Participants can defer up to 100% of the common stock payout. Each year, before the third fiscal year of the three-year award term begins, executives are given the opportunity to defer the receipt of those shares to some point in the future. Participants must elect a distribution date that is at least two years later than the date the shares would have been received. Participants elect the frequency of payment and the number of payments. Participants are always 100% vested in their accounts.

        The Toro Company Supplemental Benefit Plan.    This plan is maintained for the purpose of providing benefits for a select group of management or highly compensated employees, in excess of the limitations on benefits and contributions imposed by Sections 401(a)(17) and 415 of the Code. Our contributions to this plan are made on a calendar year basis, usually in the first calendar quarter following the end of the prior calendar year. We contribute the investment savings calculation and the ESOP fund calculation above the compensation limit into this plan. Participants with a balance of less than $25,000 have their accounts distributed in a lump sum. Participants with a balance of greater than $25,000 elect the frequency of payments and the number of payments. Participants are always 100% vested in their accounts.

        Our Discussion and Analysis.    For fiscal 2009, Mr. Dordell elected to defer 10% of his calendar year 2009 base salary through the Deferred Compensation Plan and 100% of his fiscal 2007 to fiscal 2009 performance share award payout through the Deferred Compensation Plan for Officers. We believe that nonqualified deferred compensation plans are typical in the marketplace and provide a valued retirement vehicle for our eligible employees, including our named executive officers. We review our nonqualified plans on a periodic basis.

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        General.    We provide our named executive officers and other executives the opportunity to receive certain perquisites. Below is a brief description of the perquisites provided to our named executive officers in fiscal 2009.

Perquisite
  Description
 

Company-leased automobile

  We pay all costs associated with leasing, operating, maintaining and insuring a company-leased automobile.

Financial planning

  We encourage our executives to receive professional advice regarding their financial planning. Therefore, we pay up to a maximum defined amount for our CEO and each other named executive officer to cover federal and state tax planning, tax return preparation, financial counseling and estate planning. Every three years, we will pay an additional 50% of the annual allowance. The annual allowance ranges from $4,000 for certain executives to $12,000 for our CEO.

Annual executive physical

  To help further ensure the health of our named executive officers and other executives, we generally pay up to $1,000 for approved physical exam expenses not covered by insurance.

Company products

  To enable our executives, including our named executive officers, the opportunity to become more familiar with our products and use those products on a regular basis, we provide certain company products at no cost. These products generally can be replaced by the executive every two to four years.

Accidental death & dismemberment

  Under our accidental death and dismemberment plan, all of our eligible employees receive company-paid, work-related accidental death and dismemberment insurance equal to five times base pay up to a maximum of $500,000. Eligible employees can purchase optional 24-hour coverage. We provide, to all our director level employees and above, this 24-hour coverage at no cost equal to five times base pay up to a maximum of $4,000,000.

Vacation

  We provide our newly hired executives with two additional weeks of vacation, as compared to that provided to newly hired United States-based office salaried employees. After five years of service, United States-based office salaried employees are entitled to an additional week of vacation and the differential between executives and employees is one week.

        The value of the perquisites provided to our named executive officers for fiscal 2009 can be found in the "Summary Compensation Table" on page 50, in the "All Other Compensation" column and related footnote.

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        Our Discussion and Analysis.    We provide perquisites to help attract and retain highly qualified and talented executives in recognition of the fact that similar perquisites are provided at other companies with which we compete for executive talent. We believe that the perquisites provided to our named executive officers and other executives are consistent with perquisites provided at other companies and are an important part of our executive compensation program. We evaluate all of our perquisites on a periodic basis. In fiscal 2009, as part of the process of evaluating all of the retirement and health benefits, we decided to eliminate the additional accidental death and dismemberment coverage for our director-level employees and above (benefit of receiving 24 hour coverage versus commutation coverage), including our named executive officers. Effective for calendar year 2010, all United States-based office salaried employees will be eligible for the same basic benefit and will have the opportunity to purchase additional coverage.

        We adopted stock ownership guidelines approximately 10 years ago to encourage our executives to accumulate and retain our common stock. Our guidelines require five times base salary for our CEO and range from two to three times base salary for other executives, including our named executive officers. We recommend that executives reach their guideline in five years. Based on our evaluation as of October 31, 2009, each of our named executive officers with five years of service is in compliance with the established guidelines. We review compliance with the ownership guidelines on a periodic basis.

        Our compensation plans, including the AMIP, the 2000 Stock Option Plan and the PSP, have been structured with the intention that annual cash incentive payouts, options and performance share award payouts awarded under these plans can be qualified as performance-based compensation, which is tax deductible to us under Section 162(m) of the Code.

        General.    The only post-termination severance arrangements that we have with certain of our executives, including our named executive officers, are in connection with a change of control situation. If we experience a change of control, whether or not there is a qualifying termination of employment:

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The change of control employment agreements that we have with certain of our executives, including our named executive officers, more specifically provide that if during the three-year period after a change of control, or if before the change of control in anticipation of the change of control or at the request of a third party who took actions to cause the change of control, an executive's employment is terminated by us other than for "cause," or if the executive terminates his or her employment for "good reason," the executive is entitled to receive:

        Our Discussion and Analysis.    We believe that such change of control arrangements are in the best interests of our Company and our shareholders to assure that we will have the continued dedication of our executives, notwithstanding the possibility, threat or occurrence of a change of control. We also believe that we must offer such change of control arrangements in order to remain competitive because similar protections typically are provided by other companies with which we compete for executive talent. The specific terms of these arrangements, as well as an estimate of the compensation that would have been payable had they been triggered as of October 31, 2009, our fiscal year-end, are described under the heading "Potential Payments Upon Termination or Change of Control" beginning on page 58.

        More specifically, we believe that the change of control provisions in our option, performance share and deferred compensation plans and related agreements described above which are triggered by the change of control itself and are not dependent upon any qualifying termination of employment event, and thus known as "single trigger" change of control arrangements, are important because they provide retention incentives during what often can be an uncertain time for executives and provide executives with additional monetary motivation to complete a transaction that the Board believes is in the best interests of Toro and our shareholders. If an executive were to leave voluntarily prior to the completion of the change of control, any unvested options or performance share awards held by the executive would terminate.

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Summary Compensation Table

        The following table shows compensation for our Chairman, President and CEO, Vice President, Finance and CFO and for each of the other three most highly compensated executive officers. We collectively refer to the executives listed in this table as our "named executive officers." Mr. Dordell was not a named executive officer in fiscal 2007 and Mr. Brown was not a named executive officer in fiscal 2007 or fiscal 2008 and, therefore, information on their compensation for those fiscal years is not included.

Name and Principal Position
  Fiscal
Year

  Salary
($)

  Bonus
($)

  Stock
Awards(1)
($)

  Option
Awards(2)
($)

  Non-Equity
Incentive
Plan
Compensation(3)
($)

  Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(4)
($)

  All Other
Compensation(5)
($)

  Total
($)

 
   
Michael J. Hoffman     2009   $ 766,665   $ 0   $ 297,942   $ 873,242   $ 0   $ 0   $ 139,621   $ 2,077,470  
  Chairman,     2008   $ 825,110   $ 0   $ 404,016   $ 1,046,824   $ 381,531   $ 0   $ 195,214   $ 2,852,695  
  President and CEO     2007   $ 750,100   $ 0   $ 817,764   $ 960,713   $ 570,076   $ 2,669   $ 210,623   $ 3,311,945  
Stephen P. Wolfe     2009   $ 375,755   $ 0   $ 79,967   $ 187,308   $ 0   $ 0   $ 80,276   $ 723,306  
  Vice President,     2008   $ 404,400   $ 0   $ 122,336   $ 293,016   $ 142,996   $ 0   $ 101,705   $ 1,064,453  
  Finance and CFO     2007   $ 385,143   $ 0   $ 302,778   $ 330,033   $ 219,532 (6) $ 5,540   $ 137,085   $ 1,380,111  
Peter M. Ramstad     2009   $ 304,553   $ 0   $ 46,648   $ 144,839   $ 0   $ 0   $ 88,285   $ 584,325  
  Vice President,     2008   $ 313,500   $ 0   $ 88,577 (7) $ 160,419 (8) $ 85,272   $ 0   $ 40,880   $ 688,648  
  Human Resources     2007   $ 279,545 (9) $ 192,500 (10) $ 87,742 (11) $ 138,452 (12) $ 119,505   $ 0   $ 42,732   $ 860,476  
  and Business Development                                                        
Timothy P. Dordell     2009   $ 288,157 (13) $ 0   $ 52,655   $ 150,570   $ 0   $ 0   $ 65,969   $ 557,351  
  Vice President, Secretary and General Counsel     2008   $ 270,698   $ 0   $ 99,258 (14) $ 162,756 (15) $ 73,630   $ 0   $ 43,022   $ 649,364  
William E. Brown, Jr.     2009   $ 252,573   $ 0   $ 29,388   $ 86,768   $ 101,029   $ 0   $ 64,093   $ 533,851  
  Vice President, Residential and Landscape Contractor Businesses                                                        

(1)
Amount reported represents the dollar amount of performance share awards recognized in the relevant fiscal year for financial statement reporting purposes.

(2)
Amount reported represents the share-based compensation expense recognized in the relevant fiscal year for financial statement reporting purposes for options granted in fiscal 2007, fiscal 2008 and fiscal 2009 and previously granted options that vested in such fiscal year. Compensation expense equal to the grant date fair value of the options is recognized over the vesting period. The specific assumptions used in the valuation of the options granted to each of the named executive officers are summarized in the table below.

  Grant Date
  Risk Free
Rate

  Expected
Life

  Expected
Volatility

  Expected
Dividend Yield

  Black-Scholes
Value

 
     
  12/03/08     2.26 %   6.0 years     30.60 %   1.81 % $ 7.74  
  11/28/07     3.72 %   6.5 years     25.61 %   0.92 % $ 16.84  
  11/30/06     4.42 %   6.5 years     26.28 %   0.78 % $ 15.07  
  11/30/05     4.46 %   6.5 years     26.96 %   0.65 % $ 13.95  
  12/02/04     4.04 %   7.0 years     30.41 %   0.18 % $ 14.88  
  12/02/03     4.10 %   9.0 years     27.60 %   0.26 % $ 10.42  

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(3)
Amount reported represents annual incentive awards payable in cash under The Toro Company Annual Management Incentive Plan II, or AMIP, which were paid or deferred. Information regarding the AMIP is included in the "Compensation Discussion and Analysis" under "Annual Cash Incentives" beginning on page 38.

(4)
Amount reported represents the dollar value of above-market interest earned during the first two months of fiscal 2007 on accounts under the Deferred Compensation Plan and the Supplemental Benefit Plan. Both plans were amended effective January 2007 to base the rates of return on funds that are comparable to the funds available to our employees through the IS&ESOP. Information regarding the Deferred Compensation Plan and the Supplemental Benefit Plan is included in the "Compensation Discussion and Analysis" under "Nonqualified Deferred Compensation Plans" on page 46.

(5)
Includes value of company contributions for calendar year 2009 to the IS&ESOP (including the company match on contributions, an investment savings contribution and an ESOP contribution), company contributions to the Supplemental Benefit Plan and the value of perquisites including: company-paid annual lease payments for company-leased automobiles and W2 amount for gas on personal mileage; reimbursements for financial planning expenses; company-paid executive physicals; the aggregate incremental cost to Toro of providing certain company products to our named executive officers at no cost; 24-hour accidental death and dismemberment (AD&D) coverage; and the cost of additional vacation. Additional information regarding perquisites is included in the "Compensation Discussion and Analysis" under "Perquisites" beginning on page 47. The tables below summarize the details provided in the All Other Compensation column and the detail behind the perquisites provided.

  Name
  Company
Match

  ESOP
Contribution

  Investment
Fund
Contribution

  Supplemental
Benefit Plan
Contribution

  Total
Perks

  Total
All Other
Compensation

 
     
  Mr. Hoffman   $ 4,900   $ 3,675   $ 21,076   $ 64,349   $ 45,621   $ 139,621  
  Mr. Wolfe   $ 4,900   $ 3,675   $ 21,076   $ 15,923   $ 34,702   $ 80,276  
  Mr. Ramstad   $ 4,900   $ 3,675   $ 21,076   $ 7,336   $ 51,298   $ 88,285  
  Mr. Dordell   $ 4,900   $ 3,675   $ 21,076   $ 5,748   $ 30,570   $ 65,969  
  Mr. Brown   $ 4,900   $ 3,675   $ 21,076   $ 13,292   $ 21,150   $ 64,093  

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  Name
  Automobile
  Financial
Planning

  Executive
Physical

  Company
Product

  AD&D
  Vacation
  Total
Perks

 
     
  Mr. Hoffman   $ 23,164   $ 6,000   $ 0   $ 274   $ 315   $ 15,868   $ 45,621  
  Mr. Wolfe   $ 19,585   $ 6,000   $ 1,025   $ 0   $ 315   $ 7,777   $ 34,702  
  Mr. Ramstad   $ 14,806   $ 5,000   $ 427   $ 18,692   $ 315   $ 12,058   $ 51,298  
  Mr. Dordell   $ 14,344   $ 5,500   $ 0   $ 0   $ 315   $ 10,411   $ 30,570  
  Mr. Brown   $ 13,983   $ 0   $ 0   $ 1,625   $ 315   $ 5,227   $ 21,150  
(6)
Represents $219,532 (100%) of cash payouts of annual incentive awards under the AMIP deferred under the Deferred Compensation Plan.

(7)
Mr. Ramstad received an employment inducement award in the form of cash, options and restricted stock to offset a portion of the deferred compensation value that he forfeited by terminating his employment at his prior company. This amount includes $51,635 of expense for the restricted stock portion of that award.

(8)
Includes $36,680 of the stock option portion of Mr. Ramstad's employment inducement award.

(9)
Amount reported represents base salary earned from November 27, 2006, the commencement date of Mr. Ramstad's employment with Toro, through October 31, 2007.

(10)
Represents $192,500, or the cash portion of Mr. Ramstad's employment inducement award.

(11)
Includes $47,332 of expense for the restricted stock portion of Mr. Ramstad's employment inducement award.

(12)
Includes $70,913 of expense for the stock option portion of Mr. Ramstad's employment inducement award.

(13)
Includes $23,943 of base salary deferred under the Deferred Compensation Plan.

(14)
Mr. Dordell received an employment inducement award in the form of cash, options and restricted stock to offset a portion of the annual incentive award and a portion of the present value and some expected future value of unvested and unexercisable stock options that he forfeited by terminating his employment at his prior company, as well as to offset forfeiture of some defined benefit pension plan benefits. This amount includes $57,077 of expense for the restricted stock portion of that award.

(15)
Includes $20,880 of expense for the stock option portion of Mr. Dordell's employment inducement award.

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Grants of Plan-Based Awards for Fiscal 2009

        The following table shows the potential range of annual incentive cash award payouts for fiscal 2009, the potential range of payouts of performance share awards granted in fiscal 2007 and stock options granted in fiscal 2009.

 
   
   
   
   
   
   
   
  All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)

  All Other
Option
Awards:
Number of
Securities
Underlying
Options(3)
(#)

   
   
 
 
   
  Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)
  Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)
  Exercise
or Base
Price of
Option
Awards(4)
($/Sh)

   
 
 
   
  Grant Date
Fair Value of
Stock and
Option
Awards(5)(6)

 
Name
  Grant
Date

  Threshold
($)

  Target
($)

  Maximum
($)

  Threshold
(#)

  Target
(#)

  Maximum
(#)

 
   
Michael J. Hoffman                                                                    
AMIP     12/03/08   $ 260,666   $ 651,665   $ 1,303,330                                            
PSP     12/03/08                       11,800     29,500     59,000                     $ 1,688,580  
2000 Stock Option Plan     12/03/08                                               92,200   $ 28.62   $ 713,628  
Stephen P. Wolfe                                                                    
AMIP     12/03/08   $ 97,696   $ 244,241   $ 488,482                                            
PSP     12/03/08                       3,080     7,700     15,400                     $ 440,748  
2000 Stock Option Plan     12/03/08                                               24,200   $ 28.62   $ 187,308  
Peter M. Ramstad                                                                    
AMIP     12/03/08   $ 60,911   $ 152,276   $ 304,552                                            
PSP     12/03/08                       2,000     5,000     10,000                     $ 286,200  
2000 Stock Option Plan     12/03/08                                               15,600   $ 28.62   $ 120,744  
Timothy P. Dordell                                                                    
AMIP     12/03/08   $ 57,631   $ 144,079   $ 288,158                                            
PSP     12/03/08                       2,240     5,600     11,200                     $ 320,544  
2000 Stock Option Plan     12/03/08                                               17,500   $ 28.62   $ 135,450  
William E. Brown, Jr.                                                                    
AMIP     12/03/08   $ 50,515   $ 126,287   $ 252,574                                            
PSP     12/03/08                       1,080     2,700     5,400                     $ 154,548  
2000 Stock Option Plan     12/03/08                                               8,300   $ 28.62   $ 64,242  

(1)
Amount reported represents the range of cash payouts of annual incentive awards for fiscal 2009 under the AMIP. Actual payouts for fiscal 2009 are included in the "Summary Compensation Table" in the "Non-Equity Incentive Plan Compensation" column.

(2)
Amount reported represents the range of performance share award payouts for fiscal 2009 to fiscal 2011 performance under The Toro Company Performance Share Plan, or PSP. Information regarding the PSP is included in the "Compensation Discussion and Analysis" under "Performance Share Awards" beginning on page 42.

(3)
Amount reported represents options granted during fiscal 2009 under The Toro Company 2000 Stock Option Plan, or 2000 Stock Option Plan. Information regarding the 2000 Stock Option Plan is included in the "Compensation Discussion and Analysis" under "Stock Options" on page 41.

(4)
Amount reported represents the closing price of our common stock, as reported on the NYSE on the date of grant, of $28.62.

(5)
Amount reported represents the grant date fair value of performance share awards at maximum granted for the fiscal 2009 to fiscal 2011 award term based on the closing price of our common stock, as reported on the NYSE on the date of grant, of $28.62.

(6)
Amount reported represents the grant date fair value of options granted in fiscal 2009 of $7.74 per share based on the Black-Scholes option pricing model. The specific assumptions used in the valuation of the options are included in footnote 2 to the "Summary Compensation Table."

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Outstanding Equity Awards at Fiscal Year-End for 2009

 
  Option Awards   Stock Awards  
Name
  Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)

  Number of
Securities
Underlying
Unexercised
Options
Unexercisable(1)
(#)

  Equity
Incentive
Plan Awards:
Number Of
Securities
Underlying
Unexercised
Unearned
Options(2)
(#)

  Option
Exercise
Price
($)

  Option
Expiration
Date

  Number
of Shares
or Units
of Stock
That Have
Not Vested
(#)

  Market
Value of
Shares or
Units of
Stock
That Have
Not Vested
($)

  Equity
Incentive
Plan Awards:
Number Of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested(3)
(#)

  Equity
Incentive
Plan Awards:
Market or
Payout Value
Of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested(4)
($)

 
   
Michael J. Hoffman                                                        
1993 Stock Option Plan     35,804     0         $ 16.1375     12/04/2012                          
2000 Stock Option Plan     17,308     0         $ 8.4063     12/05/2010                          
      11,892     0         $ 8.4063     12/05/2010                          
      39,536     0         $ 11.8125     12/04/2011                          
      8,464     0         $ 11.8125     12/04/2011                          
      6,196     0         $ 16.1375     12/04/2012                          
      12,417     0         $ 24.16     12/04/2013                          
      14,583     0         $ 24.16     12/04/2013                          
      40,000     0         $ 37.02     12/02/2014                          
      57,700     0         $ 40.19     11/30/2015                          
      50,600     25,300         $ 44.90     11/30/2016                          
      20,934     41,866         $ 54.93     11/28/2017                          
      0     92,200         $ 28.62     12/03/2018                          
PSP—F08-F10                                               20,000   $ 740,400  
PSP—F09-F11                                               29,500   $ 1,092,090  
Stephen P. Wolfe                                                        
2000 Stock Option Plan     1,292     0         $ 8.4063     12/05/2010                          
      8,464     0         $ 11.8125     12/04/2011                          
      6,196     0         $ 16.1375     12/04/2012                          
      12,417     0         $ 24.16     12/04/2013                          
      16,583     0         $ 24.16     12/04/2013                          
      21,400     0         $ 37.02     12/02/2014                          
      21,000     0         $ 40.19     11/30/2015                          
      14,600     7,300         $ 44.90     11/30/2016                          
      5,800     11,600         $ 54.93     11/28/2017                          
      0     24,200         $ 28.62     12/03/2018                          
PSP—F08-F10                                               5,500   $ 203,610  
PSP—F09-F11                                               7,700   $ 285,054  
Peter M. Ramstad                                                        
2000 Stock Option Plan     5,333     2,667         $ 44.90     11/30/2016                          
      5,600     2,800         $ 44.90     11/30/2016                          
      3,000     6,000         $ 54.93     11/28/2017                          
      0     15,600         $ 28.62     12/03/2018                          
PSP—F08-F10                                               2,900   $ 107,358  
PSP—F09-F11                                               5,000   $ 185,100  
Timothy P. Dordell                                                        
2000 Stock Option Plan     5,670     0         $ 42.33     09/19/2016                          
      6,200     3,100         $ 44.90     11/30/2016                          
      3,500     7,000         $ 54.93     11/28/2017                          
      0     17,500         $ 28.62     12/03/2018                          
PSP—F08-F10                                               3,300   $ 122,166  
PSP—F09-F11                                               5,600   $ 207,312  
William E. Brown, Jr.                                                        
1993 Stock Option Plan     5,804     0         $ 16.1375     12/04/2012                          
2000 Stock Option Plan     3,936     0         $ 11.8125     12/04/2011                          
      8,464     0         $ 11.8125     12/04/2011                          
      6,196     0         $ 16.1375     12/04/2012                          
      8,000     0         $ 24.16     12/04/2013                          
      7,200     0         $ 37.02     12/02/2014                          
      7,700     0         $ 40.19     11/30/2015                          
      5,600     2,800         $ 44.90     11/30/2016                          
      2,200     4,400         $ 54.93     11/28/2017                          
      0     8,300         $ 28.62     12/03/2018                          
PSP—F08-F10                                               2,100   $ 77,742  
PSP—F09-F11                                               2,700   $ 99,954  

(1)
Options have a 10-year term and vest ratably in three approximately equal installments on each of the first, second and third year anniversaries of the date of grant, subject to

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Name
  Grant Date
  11/28/2009
  11/30/2009
  12/3/2009
  11/28/2010
  12/3/2010
  12/3/2011
  Option
Expiration
Date

 
   
Mr. Hoffman     11/30/2006           25,300                             11/30/2016  
      11/28/2007     20,933                 20,933                 11/28/2017  
      12/3/2008                 30,734           30,733     30,733     12/3/2018  
Mr. Wolfe     11/30/2006           7,300                             11/30/2016  
      11/28/2007     5,800                 5,800                 11/28/2017  
      12/3/2008                 8,067           8,066     8,067     12/3/2018  
Mr. Ramstad     11/30/2006           2,667                             11/30/2016  
      11/30/2006           2,800                             11/30/2016  
      11/28/2007     3,000                 3,000                 11/28/2017  
      12/3/2008                 5,200           5,200     5,200     12/3/2018  
Mr. Dordell     11/30/2006           3,100                             11/30/2016  
      11/28/2007     3,500                 3,500                 11/28/2017  
      12/3/2008                 5,834           5,833     5,833     12/3/2018  
Mr. Brown     11/30/2006           2,800                             11/30/2016  
      11/28/2007     2,200                 2,200                 11/28/2017  
      12/3/2008                 2,767           2,766     2,767     12/3/2018  
(2)
We have no option awards with performance vesting conditions.

(3)
Amount reported represents target performance share awards that are in progress.

(4)
Amount reported represents the value of target performance share awards that are in progress based on the closing price of our common stock, as reported on the NYSE on October 30, 2009, the last business day of fiscal 2009, of $37.02.

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Table of Contents


Option Exercises and Stock Vested for Fiscal 2009

 
  Option Awards   Stock Awards  
Name
  Number of
Shares Acquired
On Exercise
(#)

  Value Realized
On Exercise(1)
($)

  Number of
Shares Acquired
on Vesting
(#)

  Value Realized
on Vesting(2)
($)

 
   
Michael J. Hoffman                          
Stock Option Plan     31,960   $ 850,117              
PSP                 8,841   $ 350,722  
Stephen P. Wolfe                          
Stock Option Plan     1,200   $ 25,972              
PSP                 2,546   $ 101,000  
Peter M. Ramstad                          
Stock Option Plan     0   $ 0              
PSP                 929   $ 36,853  
Restricted Stock(3)                 2,300   $ 65,412  
Timothy P. Dordell                          
Stock Option Plan     0   $ 0              
PSP                 1,066   $ 42,288  
Restricted Stock(4)                 2,620   $ 81,927  
William E. Brown, Jr.                          
Stock Option Plan     11,600   $ 327,540              
PSP                 998   $ 39,591  

(1)
Amount reported represents the closing price of our common stock, as reported on the NYSE on the exercise date, less the exercise price, multiplied by the number of shares exercised.

(2)
Amount reported for PSP represents the closing price of our common stock, as reported on the NYSE on December 8, 2009 (the payout date for the fiscal 2007 to fiscal 2009 performance share awards) of $39.67, multiplied by the number of shares acquired.

(3)
Amount reported for restricted stock represents the closing price of our common stock, as reported on the NYSE on November 28, 2008 (the first business day following the vesting date for the restricted stock portion of the employment inducement award) of $28.44, multiplied by the number of shares acquired.

(4)
Amount reported for restricted stock represents the closing price of our common stock, as reported on the NYSE on November 6, 2008 (the vesting date for the restricted stock portion of the employment inducement award) of $31.27, multiplied by the number of shares acquired.

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Nonqualified Deferred Compensation for Fiscal 2009

        The following table reflects any named executive officer contributions and company contributions for fiscal 2009. The aggregate balance represents the total balance at October 31, 2009, the last day of fiscal year 2009, for the Deferred Compensation Plan, the Deferred Compensation Plan for Officers and the Supplemental Benefit Plan plus any named executive officer contributions or company contributions for fiscal 2009 that were paid after October 31, 2009. Information regarding the Deferred Compensation Plan, the Deferred Compensation Plan for Officers and the Supplemental Benefit Plan is included in the "Compensation Discussion and Analysis" under "Nonqualified Deferred Compensation Plans" on page 46.

Name
  Executive
Contributions
in Last FY
($)

  Registrant
Contributions
in Last FY(1)
($)

  Aggregate
Earnings in
Last FY(2)
($)

  Aggregate Withdrawals/ Distributions ($)
  Aggregate
Balance at
Last FYE
($)

 
   
Michael J. Hoffman                                
Deferred Compensation Plan   $ 0   $ 0   $ 32,044   $ 0   $ 222,809  
Deferred Compensation Plan for Officers   $ 0   $ 0   $ 187,574   $ 0   $ 1,731,458  
Supplemental Benefit Plan   $ 0   $ 64,349   $ 137,389   $ 0   $ 1,139,223  
Stephen P. Wolfe                                
Deferred Compensation Plan   $ 0   $ 0   $ 80,283   $ 0   $ 631,623  
Deferred Compensation Plan for Officers   $ 0   $ 0   $ 982,575   $ 0   $ 9,069,930  
Supplemental Benefit Plan   $ 0   $ 15,923   $ 118,803   $ 0   $ 869,077  
Peter M. Ramstad                                
Deferred Compensation Plan   $ 0   $ 0   $ 0   $ 0   $ 0  
Deferred Compensation Plan for Officers   $ 0   $ 0   $ 0   $ 0   $ 0  
Supplemental Benefit Plan   $ 0   $ 7,336   $ 0   $ 0   $ 7,336  
Timothy P. Dordell                                
Deferred Compensation Plan   $ 23,943 (3) $ 0   $ 2,379   $ 0   $ 26,322  
Deferred Compensation Plan for Officers   $ 42,288 (4) $ 0   $ 0   $ 0   $ 42,288  
Supplemental Benefit Plan   $ 0   $ 5,748   $ 0   $ 0   $ 5,748  
William E. Brown, Jr.                                
Deferred Compensation Plan   $ 0   $ 0   $ 3,255   $ 0   $ 12,959  
Deferred Compensation Plan for Officers   $ 0   $ 0   $ 0   $ 0   $ 0  
Supplemental Benefit Plan   $ 0   $ 13,292   $ 29,260   $ 0   $ 179,385  

(1)
Amount reported represents company contributions to the Supplemental Benefit Plan for calendar year 2009, which will be paid in first calendar quarter of 2010, and are included in the "All Other Compensation" column of the Summary Compensation Table for the respective named executive officer for fiscal 2009.

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(2)
Aggregate earnings are based on actual rates of return earned during the fiscal year and each named executive officer's fund allocation. The rates for calendar year 2009 are provided below:

Wells Fargo Stable Return Fund     3.2%  
Alger Small Cap Growth Institutional     43.7%  
American Century Large Company Value     20.9%  
American Funds Growth Fund of America     34.5%  
Artisan Mid Cap     50.3%  
Eaton Vance Large Cap Value     17.3%  
Fidelity Diversified International     31.8%  
Fidelity US Treasury Money Market     0.1%  
ICM Small Company     34.5%  
JPMorgan Mid Cap Value     26.3%  
JPMorgan Prime Money Market     0.2%  
Vanguard Institutional Index     26.6%  
Vanguard Total Bond Index     6.0%  
Toro Common Stock     28.6%  
(3)
Amount reported represents Mr. Dordell's base salary deferral under the Deferred Compensation Plan of $23,943, which represents 10% of his base salary earnings from January 2009 through October 2009. These contributions also are included in the "Salary" column of the Summary Compensation Table.

(4)
Amount reported represents Mr. Dordell's deferral under the Deferred Compensation Plan for Officers of $42,288, which represents 100% of his payout for the three-year award term ending in fiscal 2009. These contributions also are included in the "Value Realized on Vesting" column of the Option Exercises and Stock Vested for Fiscal 2009.


Potential Payments Upon Termination or Change of Control

        The following discussion describes the payments and benefits to which certain of our executives, including each of our named executive officers, would be entitled under various termination of employment and/or change of control scenarios.

        Retirement.    For purposes of our compensation arrangements, in most cases, "retirement" means the termination of employment at or after the age of 55 and with a number of years of service that, when added together with the named executive officer's age, equals at least 65. Mr. Wolfe currently is eligible for retirement.

        The Board has adopted an age 65 retirement policy for senior executive officers that requires such officers to submit a resignation as of the month-end following his or her 65th birthday. Only in unusual circumstances will the Board act to defer any such resignation.

        Under the terms of our stock option plans and related agreements, in the event of the retirement of a named executive officer and for a period of up to four years after his

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retirement date, the executive may exercise any outstanding stock options that had vested as of his retirement date or will vest during such four-year period (but in no event later than the date the stock options expire). Under the terms of the PSP and related agreements, if a named executive officer retires and at least one year of the three-year award term for outstanding performance share awards has elapsed as of his retirement date, then, following the end of the three-year award term, the Compensation & Human Resources Committee may cause the outstanding performance share awards to be paid to the executive but only if earned and only with respect to the portion of the award term that was completed as of the retirement date. Performance share awards, if any, would be paid in shares of our common stock and proration likely would be based on full fiscal years of employment. If Mr. Wolfe had retired on October 31, 2009, the fiscal 2007 to fiscal 2009 award term would have been completed and, accordingly, the committee could have approved that he would receive the number of shares of our common stock as payout for such award term as set forth set forth in the "Performance Share Award Payout Upon Retirement, Death or Disability as of October 31, 2009" table on page 63. Further, as two-thirds of the fiscal 2008 to fiscal 2010 award term (to be paid in December 2010) would have been completed and one-third of the fiscal 2009 to fiscal 2011 award term (to be paid in December 2011) would have been completed, the committee could have approved that he would receive the number of shares of our common stock as payout for each such award term as set forth in the "Performance Share Award Payout Upon Retirement, Death or Disability as of October 31, 2009" table on page 63.

        Although not required under the AMIP, in the event of the retirement of a named executive officer, the Compensation & Human Resources Committee may approve a prorated annual incentive award to be paid to the executive in cash following the end of the fiscal year under the AMIP. If approved by the committee, the annual incentive award likely would be determined based on achievement and weighting of performance measures against plan and the proration likely would be based on the portion of the fiscal year that was completed as of the retirement date. If Mr. Wolfe had retired on October 31, 2009, the fiscal 2009 annual award term would have been completed and, accordingly, the committee could have approved that he would receive cash payout of his entire fiscal 2009 annual incentive award paid under the AMIP, which is set forth in the "Summary Compensation Table" on page 50, in the "Non-Equity Incentive Plan Compensation" column.

        The Compensation & Human Resources Committee has adopted a policy regarding perquisites to be provided to officers, including our named executive officers, following retirement, which provides that following retirement an executive will continue to receive reimbursement for amounts incurred for: (a) one additional year of financial planning expenses; (b) one additional executive physical; and (c) 12 additional months of payments for a company-leased automobile and related insurance, or through the end of the lease term, whichever is shorter. Additionally, executives are entitled to receive certain Company products for his or her personal use at no charge for five years following retirement.

        Any deferred compensation and retirement benefits would be payable in accordance with the named executive officer's prior elections. In the event of the retirement of any of our named executive officers on October 31, 2009, the amounts reflected in the "Nonqualified Deferred Compensation for Fiscal 2009" table on page 57 would be payable to the executive in accordance with the executive's prior elections.

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        Death.    Under the terms of our stock option plans and related agreements, in the event of the death of any of our named executive officers, all outstanding stock options held by such individual immediately will vest and may be exercised by the individual's beneficiary for a period of up to one year (but not later than the date the stock options expire). Under the terms of the PSP and related agreements, if any of our named executive officers dies and at least one-third of the three-year award term for outstanding performance share awards has elapsed as of his date of death, then, following the end of the three-year award term, the Compensation & Human Resources Committee may cause the outstanding performance share awards to be paid to the executive's beneficiary but only if earned and only with respect to the portion of the award term that was completed as of the date of death. Performance share awards, if any, would be paid in shares of our common stock and proration likely would be based on full fiscal years of employment. If any of our named executive officers had died on October 31, 2009, the fiscal 2007 to fiscal 2009 award term would have been completed and, accordingly, the committee could have approved that his beneficiary would receive the number of shares of our common stock as payout for such award term as set forth in the "Performance Share Award Payout Upon Retirement, Death or Disability as of October 31, 2009" table on page 63. Further, as two-thirds of the fiscal 2008 to fiscal 2010 award term (to be paid in December 2010) would have been completed and one-third of the fiscal 2009 to fiscal 2011 award term (to be paid in December 2011) would have been completed, the committee could have approved that his beneficiary would receive the number of shares of our common stock as payout for each such award term as set forth set forth in the "Performance Share Award Payout Upon Retirement, Death or Disability as of October 31, 2009" table on page 63.

        Although not required under the AMIP, in the event of the death of a named executive officer, the Compensation & Human Resources Committee may approve a prorated annual incentive award to be paid in cash to the executive's beneficiary following the end of the fiscal year under the AMIP. If approved by the Compensation & Human Resources Committee, the annual incentive award likely would be determined based on achievement and weighting of performance measures against plan and the proration likely would be based on the portion of the fiscal year that was completed as of the date of death. If any of our named executive officers had died on October 31, 2009, the fiscal 2009 annual award term would have been completed and, accordingly, the committee could have approved that his beneficiary would receive cash payout of his entire fiscal 2009 annual incentive award paid under the AMIP, which is set forth in the "Summary Compensation Table" on page 50, in the "Non-Equity Incentive Plan Compensation" column. The Compensation & Human Resources Committee also may approve the continuation of existing perquisites or additional perquisites.

        Upon the death of a named executive officer, payments under our deferred compensation plans and retirement plans would be payable in accordance with the executive's prior elections. In the event of the death of a named executive officer on October 31, 2009, the amounts reflected in the "Nonqualified Deferred Compensation for Fiscal 2009" table on page 57 would be payable to the named beneficiaries in accordance with the executive's prior elections.

        Under The Toro Company Life Insurance Plan, our named executive officers receive company-paid life insurance equal to one times base pay, adjusted to the next higher

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multiple of a thousand and also have the ability to purchase up to five times base pay, up to a maximum of $1,500,000.

        Disability.    Under the terms of our stock option plans and related agreements, in the event of the employment of any of our named executive officers is terminated due to a disability, all outstanding stock options held by such individual will immediately vest upon termination of employment due to the disability and may be exercised by the executive or his guardian or legal representative for a period of up to one year (but not later than the date the stock options expire). Under the terms of the PSP and related agreements, in the event that any of our named executive officers becomes permanently disabled and unable to work prior to the end of an award term and if at least one-third of the three-year award term for outstanding performance share awards has elapsed as of his termination date, then, following the end of the three-year award term, the Compensation & Human Resources Committee may cause the outstanding performance share awards to be paid to the executive but only if earned and only with respect to the portion of the award term that was completed as of the termination date. Performance share awards, if any, would be paid in shares of our common stock and proration likely would be based on full fiscal years of employment. If the employment of any of our named executive officers had terminated due to a disability of the executive on October 31, 2009, the fiscal 2007 to fiscal 2009 award term would have been completed and, accordingly, the committee could have approved that his beneficiary would receive the number of shares of our common stock as payout for such award term as set forth in the "Performance Share Award Payout Upon Retirement, Death or Disability as of October 31, 2009" table on page 63. Further, as two-thirds of the fiscal 2008 to fiscal 2010 award term (to be paid in December 2010) would have been completed and one-third of the fiscal 2009 to fiscal 2011 award term (to be paid in December 2011) would have been completed, the committee could have approved that his beneficiary would receive the number of shares of our common stock as payout for each such award term as set forth in the "Performance Share Award Payout Upon Retirement, Death or Disability as of October 31, 2009" table on page 63.

        Although not required under the AMIP, in the event that a named executive officer becomes permanently disabled and unable to work prior to the end of a fiscal year, the Compensation & Human Resources Committee may approve a prorated annual incentive award to be paid to the executive or the executive's legal guardian in cash following the end of the fiscal year under the AMIP. If approved by the Compensation & Human Resources Committee, the annual incentive award amount likely would be determined based on achievement and weighting of performance measures against plan and the proration likely would be based on the portion of the fiscal year that was completed as of the date of disability. If any of our named executive officers had become disabled on October 31, 2009, the fiscal 2009 annual award term would have been completed and, accordingly, the committee could have approved that he would receive cash payout of his entire fiscal 2009 annual incentive award paid under the AMIP, which is set forth in the "Summary Compensation Table" on page 50, in the "Non-Equity Incentive Plan Compensation" column. The Compensation & Human Resources Committee may also approve the continuation of existing perquisites or additional perquisites.

        Upon the termination of a named executive officer's employment due to disability, any deferred compensation and retirement benefits would be payable in accordance with the

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executive's prior elections. In the event of the termination of a named executive officer on October 31, 2009 as a result of the disability of the executive, the amounts reflected in the "Nonqualified Deferred Compensation for Fiscal 2009" table on page 57 would be payable to the executive in accordance with his prior elections.

        Under The Toro Company Accidental Death and Dismemberment Plan, or ADD Plan, in fiscal 2009 our named executive officers were entitled to receive company-paid 24-hour accidental death and dismemberment insurance equal to five times base pay up to a maximum of $4,000,000. For changes to the ADD Plan for fiscal 2010, see the discussion on page 45 under the heading "Changes for Fiscal 2010".

        Under The Toro Company Long-Term Disability Plan, or LTD Plan, in fiscal 2009 all of our eligible employees, including our named executive officers, were eligible to receive basic long-term disability insurance. The company-sponsored portion of this plan paid 60% of monthly base salary up to a maximum benefit of $600 per month for the duration of the disability up to age 65. All eligible employees, including our named executive officers, also had the ability to purchase additional coverage up to 60% of monthly base pay with a maximum annual benefit of $180,000. For changes to the LTD Plan for fiscal 2010, see the discussion on page 45 under the heading "Changes for Fiscal 2010".

        Performance Share Award Payout Upon Retirement, Death or Disability as of October 31, 2009.    If on October 31, 2009, (a) any of our named executive officers had died or his employment was terminated due to a disability or (b) had Mr. Wolfe retired, he or his beneficiary, as applicable, could have received as payout for performance share awards for award terms completed as of, or in progress on, October 31, 2009, the number of shares of our common stock set forth in the following table, which consists of: (i) the actual number of shares of our common stock that such named executive officer received as payout for performance share awards for the fiscal 2007 to fiscal 2009 award term, which award term would have been completed on October 31, 2009 (as set forth in the "Option Exercises and Stock Vested for Fiscal 2009" table on page 56 under the "Stock Awards" and "Number of Shares Acquired on Vesting" columns), and which shares were actually issued to the executive on December 8, 2009, less the number of shares of our common stock withheld to pay tax obligations, and could have, with the approval of the committee, been issued had such named executive officer died or his employment was terminated due to a disability or had Mr. Wolfe retired on October 31, 2009, (ii) two-thirds of the maximum number of shares of our common stock that such named executive officer could receive, with the approval of the committee, as payout for performance share awards for the fiscal 2008 to fiscal 2010 award term (to be paid in December 2010), of which two-thirds of the award term would have been completed on October 31, 2009, and (iii) one-third of the maximum number of shares of our common stock that such named executive officer could receive, with the approval of the committee, as payout for performance share awards for the fiscal 2009 to fiscal 2011 award term (to be paid in December 2011), of which one-third of the award term would have been completed on October 31, 2009.

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Name
  Award Term
  Number of Shares of
Common Stock

 
   
Michael J. Hoffman   Fiscal 2007 to Fiscal 2009     8,841  
    Fiscal 2008 to Fiscal 2010     26,667  
    Fiscal 2009 to Fiscal 2011     19,667  
Stephen P. Wolfe   Fiscal 2007 to Fiscal 2009     2,546  
    Fiscal 2008 to Fiscal 2010     7,333  
    Fiscal 2009 to Fiscal 2011     5,133  
Peter M. Ramstad   Fiscal 2007 to Fiscal 2009     929  
    Fiscal 2008 to Fiscal 2010     3,867  
    Fiscal 2009 to Fiscal 2011     3,333  
Timothy P. Dordell   Fiscal 2007 to Fiscal 2009     1,066  
    Fiscal 2008 to Fiscal 2010     4,400  
    Fiscal 2009 to Fiscal 2011     3,733  
William E. Brown, Jr.   Fiscal 2007 to Fiscal 2009     998  
    Fiscal 2008 to Fiscal 2010     2,800  
    Fiscal 2009 to Fiscal 2011     1,800  

        Termination By Toro Without Cause.    Our executives, including our named executive officers, are not party to, or otherwise covered by, any general severance plans or arrangements. Any severance benefits payable to a named executive officer in the event of termination of employment by us without cause would be determined by the Compensation & Human Resources Committee. In the event a named executive officer were to be terminated by us without cause, the committee would exercise its business judgment in determining whether or not a separation arrangement was appropriate and would determine the terms of any separation arrangement in light of all relevant facts and circumstances, including the executive's term of employment, past accomplishments and reasons for termination. Any separation arrangement typically would require the executive to sign a general release and waiver of claims against us and to comply with confidentiality and non-compete restrictions. Payment of any severance benefits generally would be made in equal installments over regular payroll periods. In the absence of any agreement to the contrary, the executive would have a period of up to three months to exercise any of his or her stock options that had vested at the time of termination. All stock options that had not vested at the time of termination would be canceled and all performance share awards would be canceled. At the discretion of the committee, the vesting of any outstanding stock options may be accelerated and the exercise period extended (but not later than the date the stock options expire).

        In the event of the termination of a named executive officer on October 31, 2009, the amounts reflected in the "Nonqualified Deferred Compensation for Fiscal 2009" table on page 57 would be payable to the executive in accordance with his prior elections.

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        Voluntary Termination by a Named Executive Officer or Termination by Toro With Cause.    If any of our executives, including our named executive officers, voluntarily terminates his or her employment with us, other than in the case of his or her retirement, or if we terminate an executive's employment for cause, the executive will have a period of up to three months to exercise any of his or her stock options that had vested at the time of termination. All stock options that had not vested at the time of termination would be canceled and all performance share awards would be canceled. In the event of the termination of a named executive officer on October 31, 2009, the amounts reflected in the "Nonqualified Deferred Compensation for Fiscal 2009" table on page 57 would be payable to the executive in accordance with his prior elections.

        Change of Control.    If we experience a change of control, as generally defined below, whether or not there is a qualifying termination of employment:

        In addition, if we experience a change of control, employment agreements that we have with certain of our executives, including each of our named executive officers, automatically become effective. Unless and until we experience a change of control, the employment agreements have no effect and do not require us to retain any of our named executive officers or to pay any of them any specified level of compensation or benefits.

        For purposes of these employment agreements and other change of control arrangements, and subject to some exceptions, a "change of control" is deemed to have occurred if:

        Each employment agreement provides that for three years after a change of control:

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        The employment agreements also require us to provide certain payments and benefits to the named executive officers upon the termination of their employment if the termination occurs during the three-year period after the change of control, before the change of control in anticipation of the change of control, or at the request of a third party who took actions to cause the change of control. The type and amount of payments and benefits to be provided to the named executive officer depends upon whether the executive's employment is terminated by the Company with or without "cause," by the executive for or not for "good reason," by us as a result of the executive's disability or automatically upon the executive's death.

        If the named executive officer's employment is terminated by us other than with "cause" or if the executive terminates his employment for "good reason," the executive is entitled to receive:

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        These benefits would be paid in addition to any other amounts or benefits required to be paid or provided to the executive under any other plan, program, policy or practice of the Company or agreement between the executive and the Company. For purposes of these agreements, "cause" is defined to include the willful and continued failure of the executive to perform substantially his duties or the willful engaging by the executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. "Good reason" is defined to include a demotion, reduction in compensation, relocation, excess travel or a termination by the executive for any reason during the 30-day period immediately following the first anniversary of the employment agreement.

        If a named executive officer's employment terminates as a result of his death or disability, the executive is entitled to receive all salary, annual incentive payments and vacation pay accrued but unpaid through his termination date in one lump sum payment within 30 days of the termination date. The executive also is entitled to receive any other amounts or benefits required to be paid or provided to the executive under any other plan, program, policy or practice of the Company or agreement between the executive and the Company. If we terminate the executive's employment for "cause," the executive is entitled to receive all salary accrued but unpaid through the date of termination in one lump sum payment within 30 days of the date of termination and any other amounts or benefits required to be paid or provided to the executive under any other plan, program, policy or practice of the Company or agreement between the executive and the Company. In the event of death, disability or termination for cause, any deferred compensation and retirement benefits would be payable in accordance with the named executive officer's prior elections. In the event of the death, disability or termination for cause of a named executive officer on October 31, 2009, the amounts reflected in the "Nonqualified Deferred Compensation for Fiscal 2009" table on page 57 would be payable to the executive in accordance with his prior elections.

        We have established a trust for the benefit of our named executive officers (and certain other executives and employees) which, in the event of a change of control, must be funded in an amount equal to our accrued liability arising under the employment agreements. In addition, under our deferred compensation and retirement plans, upon the occurrence of a change of control, we must transfer cash or property to a trust for the benefit of plan participants in an amount equal to the present value of all accumulated or accrued benefits then payable to or on behalf of plan participants.

        The following tables quantify the potential payments to each of our named executive officers upon a change of control of our Company without any termination of employment

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event. For purposes of these calculations, we have assumed the change of control event occurred on October 31, 2009.

 
  Potential Payments Upon A Change Of Control
Without Any Termination Event
 
Name
  Unvested &
Accelerated
Stock Options(1)

  Unvested &
Accelerated
Performance
Share Awards(2)

  280G Tax
Gross-Up
Payment(3)

  Total
 
   
Michael J. Hoffman   $ 774,480   $ 3,664,980   $ 0   $ 4,439,460  
Stephen P. Wolfe   $ 203,280   $ 977,328   $ 0   $ 1,180,608  
Peter M. Ramstad   $ 131,040   $ 584,916   $ 0   $ 716,956  
Timothy P. Dordell   $ 147,000   $ 658,956   $ 0   $ 805,956  
William E. Brown, Jr.   $ 69,720   $ 355,392   $ 0   $ 425,112  

(1)
This amount represents the value of the automatic acceleration of the vesting of unvested stock options held by a named executive officer and is based on the difference between: (a) $37.02, the market price (closing price, as reported on the NYSE) of the shares of our common stock underlying the unvested stock options held by such executive as of October 30, 2009, the last trading day of our fiscal year ended October 31, 2009, and (b) the exercise price of the stock options. The exercise prices for unvested stock options currently held by our named executive officers range from $28.62 to $54.93.

(2)
This amount represents the value of the immediate payout of (a) the actual number of shares of our common stock that such executive received as payout for performance share awards for the fiscal 2007 to fiscal 2009 award term (as set forth in the "Option Exercises and Stock Vested for Fiscal 2009" table on page 56 under the "Stock Awards" and "Number of Shares Acquired on Vesting" columns), which was actually paid to the executive on December 8, 2009, and (b) the maximum number of shares of our common stock that such executive would have been entitled to receive as payout for performance share awards for each of the fiscal 2008 to fiscal 2010 award term and the fiscal 2009 to fiscal 2011 award term. Such value is based on: (a) the number of outstanding performance share awards held by such executive as of October 31, 2009 for each of the fiscal 2008 to fiscal 2010 award term and the fiscal 2009 to fiscal 2011 award term, multiplied by (b) $37.02, the market price (closing price, as reported on the NYSE) of our common stock on October 30, 2009, the last trading day of our fiscal year ended October 31, 2009.

(3)
These potential payments do not trigger excise taxes under Section 4999 of the Code and, accordingly, there is no gross-up payment.

        The following table quantifies the potential additional payments to each of our named executive officers under the employment agreements if, in anticipation of the change of control, at the request of a third party who took actions to cause the change of control or following a change of control, a named executive officer is terminated by us without "cause" or a named executive officer terminates his employment for "good reason." For

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purposes of these calculations, except as otherwise indicated, we have assumed the termination occurred on October 31, 2009.

 
  Potential Payments In Connection With Or Following A Change Of Control
With Termination By Toro Without Cause Or By Executive for Good Reason
 
Name
  Severance
Payment(1)

  Retirement
Plan
Benefits(2)

  Welfare
Plan
Benefits(3)

  Outplacement
Services(4)

  280G Tax
Gross-Up
Payment(5)

  Total
 
   
Michael J. Hoffman   $ 3,938,025   $ 88,953   $ 55,578   $ 30,000   $ 3,617,392   $ 7,729,948  
Stephen P. Wolfe   $ 1,750,476   $ 88,953   $ 45,621   $ 30,000   $ 0   $ 1,915,050  
Peter M. Ramstad   $ 1,247,289   $ 88,953   $ 49,779   $ 30,000   $ 928,077   $ 2,344,098  
Timothy P. Dordell   $ 1,104,837   $ 88,953   $ 17,586   $ 30,000   $ 936,346   $ 2,177,722  
William E. Brown, Jr.   $ 1,037,022   $ 88,953   $ 49,041   $ 30,000   $ 0   $ 1,205,016  

(1)
This amount represents three times the sum of the executive's: (a) then current annual base salary, which equals 12 times the highest monthly base salary paid to the executive during the fiscal year ended October 31, 2009, and (b) the higher of the (i) most recent fiscal year annual bonus paid to the executive, or (ii) the highest annual bonus paid to the executive during the last three fiscal years, in each case, including any amounts deferred by the executive.

(2)
This amount represents the lump sum value of additional retirement plan benefits equal to: (a) the value of the benefit under the plans assuming the benefit is fully vested and the executive had three additional years of service, less (b) the value of the vested benefit accrued under the retirement plans.

(3)
This amount represents the estimated value of the welfare plan benefits based on our premium levels in effect on October 31, 2009.

(4)
This amount is based on the assumption that we would incur a $30,000 one-time cost for outplacement services to be provided for the three-year period.

(5)
This amount represents the estimated value of the gross-up payment to cover excise taxes under Section 4999 of the Code for parachute payments under Section 280G of the Code.

        "Clawback" Provisions.    Our stock option plans and the related agreements with our named executive officers contain a "clawback" provision which provides that if, within one year after the termination of employment of any of our named executive officers, the executive is employed or retained by or renders services to a competitor, violates any confidentiality or agreement governing the ownership or assignment of intellectual property rights or engages in any other conduct or act determined to be injurious, detrimental or prejudicial to any interest of the Company, we have the right to cancel, rescind or restrict all stock options held by such individual and demand the return of the economic value of any stock option which was realized or obtained by such individual during the period beginning on the date that is 12 months prior to the date of termination to the date of the last exercise. The PSP and the related agreements with our named executive officers contain a similar "clawback" provision applicable to any shares of our common stock that the Compensation & Human Resources Committee determines will be paid out under performance share awards after the termination of an executive's employment with us.

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PROPOSAL TWO—APPROVAL OF
THE TORO COMPANY 2010 EQUITY AND INCENTIVE PLAN

Proposed New 2010 Equity and Incentive Plan

        The Board has approved, upon recommendation of the Compensation & Human Resources Committee, The Toro Company 2010 Equity and Incentive Plan, or 2010 Plan, subject to approval by our shareholders at the 2010 Annual Meeting. The 2010 Plan provides for the grant of nonqualified and incentive stock options, stock appreciation rights or SARs, restricted stock, restricted stock units, performance shares, performance units, annual performance awards, non-employee director awards and other cash-based and stock-based awards. The Board and the Compensation & Human Resources Committee believe the 2010 Plan provides a means (a) whereby our employees, directors and third-party service providers develop a sense of proprietorship and personal involvement in the development and financial success of our Company, encouraging them to devote their best efforts to the business of our Company, and thereby advancing the interests of our Company and our shareholders; and (b) to attract able individuals to become employees or serve as directors or third-party service providers, and whereby such individuals can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of our Company.

        If the 2010 Plan is approved by our shareholders, it will replace our three existing equity compensation plans under which stock-based awards currently are granted, namely The Toro Company 2000 Stock Option Plan, The Toro Company 2000 Directors Stock Plan, and The Toro Company Performance Share Plan, and our existing annual cash incentive plan under which annual cash awards are granted to our executive officers and certain other key employees, namely The Toro Company Annual Management Incentive Plan II, which plans we collectively refer to as the Prior Plans. If the 2010 Plan is approved by our shareholders, no new awards will be granted under the Prior Plans and any shares of our common stock available for issuance under the Prior Plans that are not subject to outstanding awards will no longer be available for issuance under the Prior Plans or the 2010 Plan. Outstanding awards under the Prior Plans will continue to be governed by the terms of the Prior Plans, as applicable, until exercised, expired, paid or otherwise terminated or canceled. Subject to adjustment, the maximum number of shares of our common stock authorized for issuance under the 2010 Plan is 2,750,000 shares, plus the number of shares subject to awards outstanding under the Prior Plans as of the date of shareholder approval of the 2010 Plan but only to the extent that such outstanding awards are forfeited, expire or otherwise terminate without the issuance of such shares.

        Our shareholders are being asked to approve the 2010 Plan in order to satisfy rules and regulations of the NYSE relating to equity compensation, to qualify compensation under the 2010 Plan as performance-based for purposes of Section 162(m) of the Code, and to qualify stock options for treatment as incentive stock options for purposes of Section 422 of the Code in the event the Compensation & Human Resources Committee decides to grant incentive stock options in the future. If our shareholders do not approve the 2010 Plan, the Prior Plans will remain in effect until they terminate in accordance with their respective terms.

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Board Recommendation

        The Board of Directors unanimously recommends a vote FOR the approval of the 2010 Plan.


Reasons Why You Should Vote in Favor of the Approval of the 2010 Plan

        The Board recommends a vote for the approval of the 2010 Plan because the Board believes the plan is in the best interests of our Company and our shareholders for the following reasons:

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Summary of Sound Governance Features of the 2010 Plan

        The Board and Compensation & Human Resources Committee believe that the 2010 Plan contains several features that are consistent with the interests of our shareholders and sound corporate governance practices, including the following:

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Comparison of the 2010 Plan to Prior Plans

        As mentioned above, if the 2010 Plan is approved by our shareholders, it will replace our three existing equity compensation plans under which stock-based awards currently are granted, namely The Toro Company 2000 Stock Option Plan, The Toro Company 2000 Directors Stock Plan and The Toro Company Performance Share Plan, and our existing annual cash incentive plan under which annual cash awards are granted to our executive officers and certain other key employees, namely The Toro Company Annual Management Incentive Plan II. The following are some of the material differences between the 2010 Plan and the Prior Plans:

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Equity Compensation Plan Information as of January 20, 2010 and Burn Rate Information

        Under the heading "Equity Compensation Plan Information" on page 90, as required by SEC rules, we provide information about shares of our common stock that may be issued under our equity compensation plans as of October 31, 2009. To facilitate the approval of the 2010 Plan, set forth below is certain additional information as of the record date, January 20, 2010.

        Additionally, the following table sets forth information regarding awards granted and earned, and the run rate for each of the last three fiscal years.

 
  Fiscal 2009
  Fiscal 2008
  Fiscal 2007
 
   

Stock options granted

    388,173     339,530     441,752  

Actual performance-based shares earned

    36,774     62,264     205,765  

Restricted stock awarded

    4,752     0     4,920  

Non-employee director stock awarded and stock in lieu of annual retainers and fees issued

    8,025     5,152     5,625  

Weighted average basic common shares outstanding during the fiscal year

    35,784,037     37,729,610     40,661,686  

Run rate

    1.36 %   1.26 %   2.15 %

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Summary of the 2010 Plan Features

        The major features of the 2010 Plan are summarized below. The summary is qualified in its entirety by reference to the full text of the 2010 Plan, a copy of which may be obtained upon request to our Vice President, Secretary and General Counsel at 8111 Lyndale Avenue South, Bloomington, Minnesota, 55420-1196, by telephone at 888-237-3054, or by email to invest@toro.com. A copy of the 2010 Plan also has been filed electronically with the SEC as an appendix to this proxy statement and is available through the SEC's website at www.sec.gov.

        Purpose.    The purpose of the 2010 Plan is to provide a means whereby our employees, directors and third-party service providers develop a sense of proprietorship and personal involvement in the development and financial success of our Company, and to encourage them to devote their best efforts to the business of our Company, thereby advancing the interests of our Company and our shareholders. A further purpose of the 2010 Plan is to provide a means through which we may attract able individuals to become employees or serve as directors or third-party service providers and to provide a means whereby those individuals for whom the responsibilities of the successful administration and management of our Company are of importance can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of our Company.

        Plan Administration.    The 2010 Plan will be administered by the Compensation & Human Resources Committee. All members of the committee are "non-employee directors" within the meaning of Rule 16b-3 under the Exchange Act, "outside directors" within the meaning of Section 162(m) of the Code, and "independent" under the listing standards of the NYSE, the rules and regulations of the SEC and applicable law. Any decision of the committee on any matter affecting the 2010 Plan and obligations arising under the 2010 Plan or any award granted under the 2010 Plan will be final and binding.

        Under the terms of the 2010 Plan, the committee will have the authority to, among other things:

        The committee may delegate to one or more of its members or to one or more officers of the Company such administrative duties or powers as it may deem advisable. The committee may authorize one or more directors or officers of the Company to designate employees, other than officers, directors, or 10% shareholders of the Company, to receive

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awards under the plan (provided, however, that if such authority is granted to an officer who is not also a director such officer may only grant options and SARs) and determine the size of any such awards, subject to certain limitations.

        Shares Authorized.    Subject to adjustment (as described below), the maximum aggregate number of shares of our common stock authorized for issuance under the 2010 Plan is 2,750,000 shares, plus the number of shares subject to awards outstanding under the Prior Plans as of the date of shareholder approval of the 2010 Plan but only to the extent that such outstanding awards are forfeited, expire, or otherwise terminate without the issuance of such shares. No more than 825,000 shares authorized for issuance under the 2010 Plan may be granted as "full value" awards and no more than 2,750,000 shares may be granted as incentive stock options.

        Shares of our common stock covered by an award granted under the 2010 Plan will not be counted as used unless and until the shares are issued and delivered to a participant, except that the full number of shares granted subject to a SAR that is settled by the issuance of shares will be counted against the shares authorized for issuance under the 2010 Plan. Shares withheld to satisfy tax withholding obligations on awards or to pay the exercise price of awards and any shares not issued or delivered as a result of a "net exercise" of an option will not become available for issuance as future award grants under the plan. Any shares of our common stock repurchased by the Company on the open market using the proceeds from the exercise of an award under the 2010 Plan will not increase the number of shares available for future grants of awards under the 2010 Plan. Any shares of our common stock that are subject to an award under the 2010 Plan or under Prior Plans that terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of shares or are settled in cash in lieu of shares, or are exchanged to the extent permitted under the 2010 Plan, prior to the issuance of shares, for awards not involving shares, will be available again for grant under the 2010 Plan. The shares of our common stock available for issuance under the 2010 Plan may be authorized and unissued shares or treasury shares.

        Annual Award Limits.    The following annual limits apply to grants of awards unless the committee specifically determines at the time of grant that the award is not intended to qualify as performance-based compensation under the 2010 Plan:

        Adjustments.    In the event of a corporate transaction involving the Company, including any merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off or other similar corporate transaction or change in our corporate structure affecting our common stock, the committee will substitute or adjust the number and kind of shares of our common stock that may be issued under the 2010 Plan or under particular forms of awards, the number and kind of shares subject to outstanding awards, the stock option or grant price applicable to outstanding awards, the annual award limits, and other value determinations

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as are necessary to preserve the benefits or potential benefits of awards under the 2010 Plan.

        Eligibility and Participation.    Awards may be granted under the 2010 Plan to employees and third-party service providers of the Company or any of its affiliates or subsidiaries and to non-employee directors of the Company. Third-party service providers include any consultant, agent, advisor, or independent contractor who renders services to the Company or any of its affiliates or subsidiaries that are not in connection with the offer and sale of our securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for our securities. As of January 20, 2010, approximately 360 employees, nine non-employee directors, and 40 third-party service providers would have been eligible to participate in the 2010 Plan had it been approved by our shareholders at such time.

        Types of Awards.    The 2010 Plan will permit us to grant nonqualified and incentive stock options, stock appreciation rights or SARs, restricted stock, restricted stock units, performance shares, performance units, annual performance awards, non-employee director awards and other cash-based and stock-based awards. Awards may be granted either alone or in addition to or in tandem with any other type of award.

        Stock Options.    Stock options entitle the holder to purchase a specified number of shares of our common stock at a specified price, which is called the exercise price, subject to the terms and conditions of the stock option grant. The 2010 Plan permits the grant of both nonqualified and incentive stock options. Each stock option granted under the 2010 Plan must be evidenced by an award agreement or statement that specifies the exercise price, the term, the number of shares underlying the stock option, the vesting and any other conditions. The exercise price of each stock option granted under the 2010 Plan must be at least 100% of the fair market value of a share of our common stock as of the date the award is granted to a participant. Fair market value is the closing price of our common stock, as reported on the NYSE. The closing price of our common stock, as reported on the NYSE, on January 20, 2010, was $42.30 per share. The committee will fix the term of each stock option (other than the non-employee director options described below), but stock options granted under the 2010 Plan will not be exercisable more than 10 years after the date the stock option is granted. Other than the non-employee director options described below, each stock option will vest and become exercisable at such time or times as determined by the committee; provided, however, that any option that becomes exercisable solely based on the continued service of a participant will become exercisable no more rapidly than ratably over a three-year period after the grant date of the option, except (a) in connection with the death, disability or retirement of the participant or a change of control; or (b) for any option granted to a participant who within six months of the grant date is first appointed or elected as an officer, hired as an employee, elected as a director or retained as a third-party service provider. Stock options may be exercised, in whole or in part, by payment in full of the exercise price in one or a combination of the following forms of payment: cash or its equivalent; the delivery of common stock already owned by the participant prior to such delivery; broker-assisted cashless exercise; by "net exercise"; a combination of such methods; or such other method as may be permitted by the committee. In the case of a "net exercise" of a stock option, we will not require payment of the exercise price or any required tax withholding obligations related to the

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exercise, but will reduce the number of shares issued upon the exercise by the largest number of whole shares that has a fair market value that does not exceed the aggregate exercise price for the shares underlying the stock option and any required tax withholding obligations.

        Stock Appreciation Rights.    Each SAR granted must be evidenced by an award agreement or statement that specifies the grant price, the term, and such other provisions as the committee may determine. The grant price of a SAR must be at least 100% of the fair market value of our common stock on the date of grant. Upon the exercise of a SAR, the holder is entitled to receive the excess of the fair market value of the shares for which the right is exercised over the grant price of the SAR. Payment upon the exercise of a SAR will be in cash, shares of our common stock, or some combination of cash and shares of our common stock as determined by the committee. The committee may impose any conditions or restrictions on the exercise of a SAR as it deems appropriate. The committee will fix the term of each SAR, but SARs granted under the 2010 Plan will not be exercisable more than 10 years after the date the SAR is granted. Each SAR granted under the 2010 Plan will vest and become exercisable at such time or times as determined by the committee; provided, however, that any SAR that becomes exercisable solely based on the continued service of a participant will become exercisable no more rapidly than ratably over a three-year period after the grant date of the SAR, except (a) in connection with the death, disability or retirement of the participant or a change of control; or (b) for any SAR granted to a participant who within six months of the grant date is first appointed or elected as an officer, hired as an employee, elected as a director or retained as a third-party service provider.

        Restricted Stock and Restricted Stock Units.    Shares of restricted stock and/or restricted stock units may be granted under the 2010 Plan. Restricted stock units are similar to restricted stock except that no shares are actually awarded to the participant on the grant date. The period(s) of restriction, the number of shares of restricted stock or the number of restricted stock units granted, the purchase price, if any, and such other conditions and/or restrictions as the committee shall determine shall be set forth in an award agreement or statement. If an award of restricted stock or restricted stock units vests solely based on the continued service of a participant, the award will vest no more rapidly than ratably over a three-year period after the grant date of the award, except (a) in connection with the death, disability or retirement of the participant or a change of control; or (b) for any such award granted to a participant who within six months of the grant date is first appointed or elected as an officer, hired as an employee, elected as a director or retained as a third-party service provider. Participants holding shares of restricted stock may be granted voting rights with respect to their shares, but participants holding restricted stock units will not have voting rights with respect to their restricted stock units. After all conditions and restrictions applicable to restricted shares and/or restricted stock units have been satisfied or have lapsed (including the satisfaction of any applicable tax withholding obligations), shares of restricted stock will become freely transferable (except as otherwise provided in the 2010 Plan) and restricted stock units will be paid in cash, shares of our common stock, or some combination of cash and shares of our common stock as determined by the committee. The committee may provide that an award of restricted stock is conditioned upon the participant making or refraining from making an election with respect to the award under Section 83(b) of the Code.

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        Performance Shares and Performance Units.    Performance shares and/or performance units may be granted under the 2010 Plan in such amounts and upon such terms as the committee may determine. Each performance unit will have an initial value that is established by the committee on the date of grant, and each performance share will have an initial value equal to the fair market value of a share on grant date. With respect to an award of performance shares and/or performance units, the committee will establish performance periods and performance goals. The performance period set forth in any award agreement for any performance shares must be at least one year, except in connection with the death or disability of a participant or a change in control of the Company. The extent to which the participant achieves his or her performance goals during the applicable performance period will determine the value and/or the number of performance shares and/or performance units earned by a participant. Payment of earned performance shares and/or performance units will be in cash, shares of our common stock, or some combination of cash and shares of our common stock, as determined by the committee and stated in the award agreement.

        If prior to the end of a performance period, a participant holding performance shares or performance units is reassigned to a position with the Company or any affiliate or subsidiary of the Company, and that position is not eligible to participate in such an award, but the participant does not terminate his or her employment or service, the committee may, in its sole discretion, cause shares of our common stock to be delivered or payment made with respect to the participant's award, but only if otherwise earned and only with respect to the portion of the applicable performance period completed at the date of such reassignment, with no shares to be delivered for partial fiscal years.

        At any time during a performance period of more than one fiscal year, the committee may, in its discretion, cancel a portion of an award or performance shares or performance units prior to the conclusion of the performance period if the award has not already vested, the committee determines that the performance goals cannot be achieved at the maximum levels established at the time of grant, the awards are scaled back in proportion to the estimated short fall in achievement of performance goals, and all awards for the same performance period are scaled back by the same percentage. Once an award is scaled back, it may not again be increased to add or recover performance shares or performance units that were canceled.

        Annual Performance Awards.    Annual performance awards payable in cash may be granted under the 2010 Plan in such amounts and upon such terms as the committee may determine, based on the achievement of specified performance goals for annual periods or other time periods as determined by the committee. The committee will determine the target amount that may be paid with respect to an annual performance award, which will be based on a percentage of a participant's actual annual base salary at the time of grant. That percentage may be up to 125% for any participant. The committee may establish a maximum potential payout amount with respect to an annual performance award of up to 200% of the target payout in the event performance goals are exceeded by an amount established by the committee at the time performance goals are established and may establish measurements for prorating the amount of payouts for achievement of performance goals at less than or greater than the target payout but less than the maximum payout.

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        Non-Employee Director Awards.    Each non-employee director of the Company will continue to receive an unrestricted stock award and an automatic stock option grant each year on the first business day of each fiscal year (usually November 1) and will be permitted to elect to receive shares of our common stock in lieu of their annual retainers and meeting fees otherwise payable in cash under the 2010 Plan, on terms substantially the same as the current terms of the 2000 Directors Stock Plan. Any additional Awards granted to non-employee directors under the 2010 Plan must be made by a committee consisting solely of directors who are "independent directors" within the meaning of the NYSE rules.

        On the first business day of each fiscal year (usually November 1), each non-employee director of the Company will receive shares of our common stock having a fair market value of $20,000 (or such other amount as may be determined by the committee from time to time), based on the average of the closing prices of our common stock, as reported on the NYSE, for each of the trading days in the three-month calendar period immediately prior to the date of issue, and will be granted a stock option to purchase the number of shares of our common stock having a grant date fair value for the option of $40,000 (or such other amount as may be determined by the committee from time to time). Under the terms of the 2010 Plan, the value is to be determined using a standard Black-Scholes, binomial or monte carlo valuation formula, based on assumptions consistent with those used to value option grants disclosed under Schedule 14A under the Exchange Act, or successor requirements, for the business day prior to the date of grant. For the fiscal 2010 options granted on November 1, 2009 under the 2000 Directors Stock Plan, we used the Black-Scholes valuation method for stock option grant valuations. Each non-employee director option granted under the 2010 Plan will have an exercise price equal to 100% of the fair market value of one share of our common stock on the date of grant, a term of 10 years and, except as described below, will vest and become exercisable in three approximately equal installments on each of the first, second and third year anniversaries following the date of grant.

        The 2010 Plan permits non-employee directors to continue to elect to receive shares of our common stock in lieu of their annual retainers and meeting fees otherwise payable in cash. The election to receive our common stock in lieu of cash must be made prior to the date such fees are otherwise scheduled to be paid to the director but no later than May 31 of the calendar year for which the fees are to be paid. Fees that are earned after the date a director makes an election are reserved through the rest of the calendar year and then are issued to the director in December of that year. The number of shares to be issued is determined by dividing the dollar amount of reserved fees by closing price, as reported on the NYSE, for the date that the shares are issued.

        Other Cash-Based Awards.    Cash-based awards that are not annual performance awards may be granted to participants in such amounts and upon such terms as the committee may determine. These other cash-based awards will be paid in cash only. If the other cash-based awards are subject to performance goals, the number and/or value of the other cash-based awards that will be paid out to the participant will depend on the extent to which the performance goals are met.

        Other Stock-Based Awards.    Other stock-based or stock-related awards (including the grant or offer for sale of unrestricted shares of our common stock or the payment in

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cash or otherwise of amounts based on the value of shares of our common stock) may be granted in such amounts and subject to such terms and conditions (including performance goals) as determined by the committee. Each other stock-based award shall be expressed in terms of shares of our common stock or units based on shares of our common stock, as determined by the committee. Other stock-based awards will be paid in cash or shares of our common stock, as determined by the committee. If the other stock-based awards are subject to performance goals, the number and/or value of other stock-based awards that will be paid out to the participant will depend on the extent to which the performance goals are met.

        Termination of Service.    Except to the extent otherwise provided in the 2010 Plan or an award agreement at the time of grant or as determined by the committee at a later date, in the event a participant's employment or other service with the Company or any of our affiliates or subsidiaries, as the case may be, is terminated by reason of death or disability, then:

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        Except to the extent otherwise provided in the 2010 Plan or an award agreement at the time of grant or as determined by the committee at a later date, in the event a participant's employment or other service with the Company or any of our affiliates or subsidiaries, as the case may be, is terminated by reason of retirement (except with respect to non-employee directors), then:

        Except to the extent otherwise provided in an award agreement at the time of grant or as determined by the committee at a later date, if a plan participant's employment or other service with the Company or any affiliate or subsidiary of the Company, as the case may be, is terminated for any reason other than death, disability or retirement (except with respect to non-employee directors), then:

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        Forfeiture and Recoupment.    If a participant is determined by the committee to have taken any action that would constitute an "adverse action," all rights of the participant under the 2010 Plan and any agreements evidencing an award then held by the participant will terminate and be forfeited and the committee may require the participant to surrender and return to the Company any shares received, and/or to disgorge any profits or any other economic value made or realized by the participant during the period beginning one year prior to the participant's termination of employment or other service with the Company or any affiliate or subsidiary, in connection with any awards or any shares issued upon the exercise or vesting of any awards. An "adverse action" includes any of the following actions that occur during or within one year after the termination of employment or other service with the Company or any affiliate or subsidiary: (a) being employed or retained by or rendering services to any organization that, directly or indirectly, competes with the Company or its affiliates or subsidiaries; (b) rendering services that are prejudicial or in conflict with the interests of the Company or any affiliate or subsidiary; (c) violating any confidentiality agreement or agreement governing the ownership or assignment of intellectual property rights with the Company; or (d) engaging in any other conduct or act determined to be injurious, detrimental or prejudicial to any interest of the Company or any

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affiliate or subsidiary. In addition, if we are required to prepare an accounting restatement due to our material noncompliance, as a result of misconduct, with any financial reporting requirement under the securities laws, then any participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 will reimburse us for the amount of any award received by such individual under the 2010 Plan during the 12-month period following the first public issuance or filing with the SEC, as the case may be, of the financial document embodying such financial reporting requirement.

        Performance Measures.    If the committee intends to qualify an award under the 2010 Plan as "performance-based compensation" under Section 162(m) of the Code, the performance goals selected by the committee must be based on the achievement of specified levels of one, or any combination, of the following performance measure elements: (a) sales and revenue measure elements, including gross revenue, sales allowances, net revenue, invoiced revenue, collected revenue, revenues from new products, and bad debts; (b) expense measurement elements, including direct material costs, direct or indirect labor costs, direct or indirect manufacturing costs, cost of goods sold, sales, general and administrative expenses, operating expenses, non-cash expenses, tax expense, non-operating expenses, and total expenses; (c) profitability and productivity measure elements, including gross margin, net operating income, EBITDA, EBIT, net operating income after taxes, net income, net cash flow, and net cash flow from operations; (d) asset utilization and effectiveness measure elements, including cash, excess cash, accounts receivable, inventory (WIP and/or finished goods), current assets, working capital, total capital, fixed assets, total assets, standard hours, plant utilization, purchase price variance, and manufacturing overhead variance; (e) debt and equity measures, including accounts payable, current accrued liabilities, total current liabilities, total debt, debt principal payments, net current borrowings, total long-term debt, credit rating, retained earnings, total preferred equity, total common equity, and total equity; (f) shareholder and return measure elements, including earnings per share (diluted and fully diluted), stock price, dividends, shares repurchased, total return to shareholders, debt coverage ratios, return on assets, return on equity, return on invested capital, and economic profit (for example, economic value added); (g) customer and market measure elements, including dealer/channel size/scope, dealer/channel performance/effectiveness, order fill rate, customer satisfaction, customer service/care, brand awareness and perception, market share, warranty rates, product quality, and channel inventory; and (h) organizational and employee measure elements, including headcount, employee performance, employee productivity, standard hours, employee engagement/satisfaction, employee turnover, and employee diversity.

        Any of the above performance measure elements can be used in an algebraic formula (e.g. averaged over a period, combined into a ratio, compared to a budget or standard, compared to previous periods and/or other formulaic combinations) based on the performance measure elements to create a performance measure. Any of the performance measures specified in the 2010 Plan may be used to measure the performance of the Company or any affiliate and/or subsidiary, as a whole, or any division or business unit, product or product group, region or territory, affiliate or subsidiary, or any combination thereof, as the committee deems appropriate. Performance measures may be compared to the performance of a group of comparator companies or a published or special index that the committee deems appropriate or, with respect to share price, various stock market

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indices. The committee also may provide for accelerated vesting of any award based on the achievement of performance goals.

        Any award that is intended to qualify as performance-based compensation under Section 162(m) of the Code will be granted, and performance goals for such an award will be established, by the committee in writing not later than 90 days after the commencement of the performance period to which the performance goals relate, 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 performance period (as scheduled in good faith at the time the performance goal is established) has elapsed. Before any payment is made in connection with any award intended to qualify as performance-based compensation under Section 162(m) of the Code, the committee must certify in writing that the performance goals established with respect to such award have been achieved.

        The committee may provide in any such award including performance goals that any evaluation of performance may include or exclude any of the following events that occur during a performance period: items relating to a change in accounting principles; items relating to financing activities; expenses for restructuring or productivity initiatives; other non-operating items; items relating to acquisitions; items attributable to the business operations of any entity acquired by the Company during the performance period; items relating to the disposal of a business or segment of a business; items relating to discontinued operations that do not qualify as a segment of a business under applicable accounting standards; items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the performance period; any other items of significant income or expense which are determined to be appropriate adjustments; items relating to unusual or extraordinary corporate transactions, events or developments, items relating to amortization of acquired intangible assets; items that are outside the scope of the Company's core, on-going business activities; items relating to acquired in-process research and development; items relating to changes in tax laws; items relating to major licensing or partnership arrangements; items relating to asset impairment charges; items relating to gains or losses for litigation, arbitration and contractual settlements; foreign exchange gains and losses; or items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions.

        The committee may adjust the amount payable pursuant to an award under the 2010 Plan that is intended to qualify as "performance-based compensation" under Section 162(m) of the Code downwards but not upwards. In the event that applicable tax or securities laws change to permit committee discretion to alter the governing performance measures without obtaining shareholder approval of such changes, the committee will have sole discretion to make such changes without obtaining shareholder approval.

        Dividend Equivalents.    With the exception of stock options, SARs and unvested performance awards, awards under the 2010 Plan may, in the committee's discretion, earn dividend equivalents with respect to the cash or stock dividends or other distributions that would have been paid on the shares of our common stock covered by such award had such shares been issued and outstanding on the dividend payment date. Such dividend

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equivalents will be converted to cash or additional shares of our common stock by such formula and at such time and subject to such limitations as determined by the committee.

     &