Exhibit 10.18

 

ANNUAL PERFORMANCE AWARD AGREEMENT

(FISCAL [        ])

THE TORO COMPANY 2010 EQUITY AND INCENTIVE PLAN

 

This Agreement (this “Agreement”) dated [                                ]
(“Grant Date”) between The Toro Company, a Delaware corporation (“Toro”), and
[                              ] (“you”) sets forth the terms and conditions of
a grant to you of an annual performance award (this “Annual Performance Award”)
under The Toro Company 2010 Equity and Incentive Plan (the “Plan”). This Annual
Performance Award is subject to all of the terms and conditions set forth in the
Plan, this Agreement and the Annual Performance Award Acceptance Agreement
should you decide to accept this Annual Performance Award.  All of the terms in
this Agreement and the Annual Performance Award Acceptance Agreement that begin
with a capital letter are either defined in this Agreement or in the Plan.

 

1.             Annual Performance Award.  Toro hereby grants you this Annual
Performance Award denominated and to be paid if earned entirely in cash, the
amount of which will be based on the achievement of the Performance Goals during
the Performance Period (as defined below).  For purposes of this Annual
Performance Award, your “Target Potential Payout” is $[                ], which
represents an amount equal to [    ]% of your actual annual base salary on the
Grant Date, and your “Maximum Potential Payout” is $[                ], which
represents an amount equal to 200% of your Target Potential Payout.

 

2.             Performance Period.  The period of time during which the
Performance Goals described in Section 3 of this Agreement must be met in order
to determine the amount of cash payout under this Annual Performance Award
pursuant to Section 4 of this Agreement is the fiscal year ending October 31,
[        ] (the “Performance Period”).  Except as otherwise provided in
Section 8 of this Agreement, Toro intends to make payment to you only at the end
of the Performance Period and only upon the achievement of the Performance Goals
described in Section 3 of this Agreement, and except as otherwise provided in
Section 8 of this Agreement, no payment shall be made to you in settlement of
this Annual Performance Award prior to the end of the Performance Period or if
none of the Performance Goals for the Performance Measures meet the Threshold
for payment as set forth in the table in Section 3 of this Agreement.

 

3.             Performance Measures; Performance Goals and Determination of
Amount of Payment.

 

a.             Except as otherwise provided in this Section 3, the amount of
cash payable in settlement of this Annual Performance Award shall be determined
by reference to the Performance Measures and Performance Goals achieved during
the Performance Period in accordance with the table below and may range from 0%
to [      ]% of your Target Potential Payout.  The Performance Measures and the
Performance Goals to be achieved on a cumulative basis over the Performance
Period and their respective weightings and their respective Threshold, Target
and Maximum levels of performance, are set forth below:

 

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Corporate Performance Measures

 

 

 

 

 

Performance Goal

 

Weighting

 

Performance Measure

 

Threshold
([    ]% payout)

 

Target
(100% payout)

 

Maximum
([      ]% payout)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Divisional Performance Measures

 

 

 

 

 

Performance Goal

 

Weighting

 

Performance Measure

 

Threshold
([    ]% payout)

 

Target
(100% payout)

 

Maximum
([      ]% payout)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individual Performance Measures

 

 

 

 

 

Performance Goal

 

Weighting

 

Performance Measure

 

Threshold
([    ]% payout)

 

Target
(100% payout)

 

Maximum
([      ]% payout)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No payout for the Corporate Performance Measures will be made if the Threshold
“[                            ]” Performance Measure is not attained. Payouts
will be interpolated between Threshold and Target if the Performance Goals for
the Performance Measure attained for the Performance Period falls between the
Threshold and Target percentages specified in the table, and will be rounded
down to the nearest whole cent.  Payouts will be interpolated between Target and
Maximum if the Performance Goals for the Performance Measure attained for the
Performance Period falls between the Target and Maximum percentages specified in
the table, and will be rounded down to the nearest whole cent.

 

b.             Absent the occurrence of a Change of Control prior to the end of
the Performance Period, and to the extent not previously forfeited or terminated
pursuant to Section 5, 6 or 7 of this Agreement, this Annual Performance Award
shall be immediately forfeited and terminated as of the end of the Performance
Period if either:  (i) none of the Performance Goals for the Performance
Measures meet the Threshold for payment as set forth in the table above and the
Committee determines that Section 3(c) of this Agreement does not apply, or
(ii) the Committee determines that Section 3(c) of this Agreement applies but
exercises its discretion pursuant to Section 3(d) of this Agreement not to make
any payment.

 

c.             In determining whether and to what extent each Performance Goal
has been achieved, the Committee [may/shall] exclude from the calculation each
of the following events that occurs during a Performance Period, each as defined
by generally accepted accounting

 

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principles and as identified in Toro’s consolidated financial statements, notes
to the consolidated financial statements, management’s discussion and analysis
or other filings with the Securities and Exchange Commission by Toro: 
[(i) items related to a change in accounting or measurement principles;
(ii) items relating to financing activities; (iii) expenses for restructuring or
productivity initiatives; (iv) other non-operating items; (v) items related to
acquisitions; (vi) items attributable to the business operations of any entity
acquired by Toro during the Performance Period; (vii) items related to the
disposal of a business or segment of a business; (viii) items related to
discontinued operations that do not qualify as a segment of a business under
applicable accounting standards; (ix) items attributable to any stock dividend,
stock split, combination or exchange of stock occurring during the Performance
Period; (x) any other items of significant income or expense which are
determined to be appropriate adjustments; (xi) items relating to unusual or
extraordinary corporate transactions, events or developments, (xii) items
related to amortization of acquired intangible assets; (xiii) items that are
outside the scope of Toro’s core, on-going business activities; (xiv) items
related to acquired in-process research and development; (xv) items relating to
changes in tax laws; (xvi) items relating to major licensing or partnership
arrangements; (xvii) items relating to asset impairment charges; (xviii) items
relating to gains or losses for litigation, arbitration and contractual
settlements; (xix) foreign exchange gains and losses; or (xx) items relating to
any other unusual or nonrecurring events or changes in applicable laws,
accounting principles or business conditions].

 

d.             The actual amount that become payable under this Annual
Performance Award based upon achieving the Performance Goals during the
Performance Period may be adjusted downward by the Committee in its sole and
absolute discretion based on such factors as the Committee determines to be
appropriate and/or advisable.

 

4.             Settlement; Payment.

 

a.             In the event and only upon the achievement of at least the
“Threshold” level of performance with respect to at least one (1) of the
Performance Goals described in Section 3 of this Agreement during the
Performance Period (and with respect to the Corporate Performance Measures, must
include the “[                  ]” Performance Measure), which achievement must
be certified in writing by the Committee following the expiration of the
Performance Period, you will receive such amount in cash up to your Maximum
Potential Payout under this Annual Performance Award as determined pursuant to
Section 3 of this Agreement and subject to applicable withholding. If none of
the Performance Goals are achieved at the “Threshold” level of performance or
above, then this Annual Performance Award will be forfeited and canceled and you
will receive no payment in settlement thereof.  You may not receive a greater
amount in cash than your Maximum Potential Payout.

 

b.             In the event this Annual Performance Award is forfeited or
cancelled for any reason pursuant to Sections 3, 5, 6 or 7 of this Agreement or
otherwise, no payment shall be made in settlement of this Annual Performance
Award.

 

c.             Except as provided in paragraph (d) below, in no event will Toro
make payment to you later than March 15 of the calendar year following the
calendar year in which the Performance Period ends.

 

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d.             Notwithstanding any of the foregoing or any other provision of
this Agreement, in the event you have properly elected to defer your receipt of
any payment pursuant to this Annual Performance Award under The Toro Company
Deferred Compensation Plan, as such plan may be amended from time to time, or
any similar successor plan, you will receive such payment in accordance with
your deferral election.

 

e.             The payment pursuant to this Annual Performance Award shall be
subject to all applicable laws, rules and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be required.

 

5.              Effect of Death, Disability, Retirement or Other Termination of
Employment or Other Service.

 

a.             In the event your employment or other service with Toro or any
Affiliate or Subsidiary, as the case may be, is terminated for any reason other
than death, Disability or Retirement and the effective date of such termination
is prior to the date payment is made in settlement of this Annual Performance
Award pursuant to Section 4 of this Agreement or would have been made had there
not been a deferral election in place, this Annual Performance Award will be
terminated and forfeited.

 

b.             In the event your employment or other service with Toro or any
Affiliate or Subsidiary, as the case may be, is terminated by reason of death,
Disability or Retirement and the effective date of such termination is prior to
the date payment is made in settlement of this Annual Performance Award pursuant
to Section 4 of this Agreement or would have been made had there not been a
deferral election in place, this Annual Performance Award will be terminated and
forfeited; provided, however, that the Committee may, in its sole discretion,
cause payment to be made with respect this Annual Performance Award and in
accordance with the payment terms hereof, but only if otherwise earned for the
entire Performance Period and only with respect to the portion of the
Performance Period completed as of the date of such death, Disability or
Retirement.

 

6.             Adverse Action.  In addition to the other rights of the Committee
under the Plan, if you are determined by the Committee, acting in its sole
discretion, to have taken any action that would constitute an Adverse Action,
(a) all of your rights under the Plan and any agreements evidencing an Award
granted under the Plan, including this Agreement evidencing this Annual
Performance Award, then held by you shall terminate and be forfeited without
notice of any kind, and (b) the Committee in its sole discretion may require you
to disgorge all or any profits or any other economic value (however defined by
the Committee) made or realized by you, during the period beginning one (1) year
prior to your termination of employment or other service with Toro, an Affiliate
or a Subsidiary, in connection with any Awards granted under the Plan, including
this Annual Performance Award.  This Section 6 shall not apply following the
occurrence of a Change of Control.

 

7.             Clawback, Forfeiture or Recoupment.  Any amounts paid to you
under this Annual Performance Award will be subject to the forfeiture provision
contained in Section 13.6(b) of the Plan as well as any other or additional
“clawback,” forfeiture or recoupment policy adopted by Toro either prior to or
after the date of this Agreement.

 

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8.             Change of Control. Notwithstanding any provision of this
Agreement to the contrary and subject to the terms of any separate Change of
Control or similar agreement to which you are bound or Change of Control or
similar policy or plan under which you are covered, upon the occurrence of a
Change of Control prior to the end of the Performance Period, this Annual
Performance Award shall be settled by payment of your Target Potential Payout
within 60 days after the Change of Control, unless you have properly elected to
defer your receipt of any payment pursuant to this Annual Performance Award
under The Toro Company Deferred Compensation Plan, as such plan may be amended
from time to time, or any similar successor plan, in which case, you will
receive such payment in accordance with your deferral election.

 

9.             No Transfer.  You may not transfer this Annual Performance Award
or any rights granted under this Annual Performance Award other than by will or
applicable laws of descent and distribution or, if approved by the Committee,
pursuant to a qualified domestic relations order entered into by a court of
competent jurisdiction.

 

10.           Tax Withholding.  Toro will deduct or withhold from the payment
issued under this Agreement any federal, state, local or other taxes of any kind
that Toro reasonably determines are required by law to be withheld with respect
to income recognized or will take such other action as may be necessary in the
opinion of Toro to satisfy all obligations for the payment of such taxes.

 

11.           Performance-Based Compensation.  If you are a Covered Employee, it
is intended that all payments under this Annual Performance Award constitute
“qualified performance-based compensation” within the meaning Section 162(m) of
the Code and the Plan.  This Annual Performance Award is to be construed and
administered in a manner consistent with such intent.

 

12.           Successors.  All obligations of Toro under the Plan with respect
to this Annual Performance Award shall be binding on any successor to Toro,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation or otherwise, of all or substantially all of the
business or assets of Toro.

 

13.           No Right to Continue Employment or Service.  Neither the Plan,
this Annual Performance Award, the Annual Performance Award Acceptance Agreement
nor any related material shall give you the right to continue in employment by
or perform services to Toro or any Affiliate or Subsidiary or shall adversely
affect the right of Toro or any Affiliate or Subsidiary to terminate your
employment or service relationship with Toro or any Affiliate or Subsidiary with
or without cause at any time.

 

14.           Governing Law.  This Agreement and the Annual Performance Award
Acceptance Agreement shall be construed, administered and governed in all
respects under and by the applicable laws of the State of Delaware, excluding
any conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation to the substantive law of another jurisdiction.

 

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15.           Conflict.  To the extent the terms of this Agreement or the Annual
Performance Award Acceptance Agreement are inconsistent with the Plan, the
provisions of the Plan shall control and supersede any inconsistent provision of
this Agreement or the Annual Performance Award Acceptance Agreement.

 

16.           Non-Negotiable Terms.  The terms of this Annual Performance Award
and the Annual Performance Award Acceptance Agreement are not negotiable, but
you may refuse to accept this Annual Performance Award by notifying Toro’s Vice
President, Secretary and General Counsel in writing.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, this Agreement has been executed and delivered by The Toro
Company and has been executed by you by execution of the attached Annual
Performance Award Acceptance Agreement.

 

 

[                  ]

By:

 

 

 

Chairman and CEO

 

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ANNUAL PERFORMANCE AWARD ACCEPTANCE AGREEMENT

[                                ]

 

I hereby agree to the terms and conditions governing the Annual Performance
Award as set forth in the Annual Performance Award Agreement, this Annual
Performance Award Acceptance Agreement and as supplemented by the terms and
conditions set forth in the Plan.

 

In accepting the Annual Performance Award, I hereby acknowledge that:

 

(a)           The Plan is established voluntarily by Toro, it is discretionary
in nature and it may be modified, amended, suspended or terminated by Toro at
any time, unless otherwise provided in the Plan, the Annual Performance Award
Agreement or this Annual Performance Award Acceptance Agreement;

 

(b)           The grant of the Annual Performance Award is voluntary and
occasional and does not create any contractual or other right to receive future
Annual Performance Awards, or benefits in lieu of Annual Performance Awards,
even if Annual Performance Awards have been granted repeatedly in the past;

 

(c)           All decisions with respect to future Annual Performance Award
grants, if any, will be at the sole discretion of Toro;

 

(d)           I am voluntarily participating in the Plan;

 

(e)           The Annual Performance Award is not part of normal or expected
compensation or salary for any purposes, including, but not limited to,
calculating any severance, resignation, termination, redundancy, end of service
payments, bonuses, long-service awards, pension or retirement benefits or
similar payments and in no event should be considered as compensation for, or
relating in any way to, past services for Toro or any Affiliate or Subsidiary;

 

(f)            In consideration of the grant of the Annual Performance Award, no
claim or entitlement to compensation or damages shall arise from termination of
the Annual Performance Award or diminution in value of the Annual Performance
Award resulting from termination of my employment or service by Toro or any one
of its Affiliates or Subsidiaries (for any reason whatsoever and whether or not
in breach of applicable labor laws) and I hereby irrevocably release Toro and
its Affiliates and Subsidiaries from any such claim that may arise; if,
notwithstanding the foregoing, any such claim is found by a court of competent
jurisdiction to have arisen, then, by acceptance of the Annual Performance
Award, I shall be deemed irrevocably to have waived my entitlement to pursue
such claim;

 

(g)           Toro is not providing any tax, legal or financial advice, nor is
Toro making any recommendations regarding my participation in the Plan or my
acceptance of the Annual Performance Award; and

 

(h)           I have been advised to consult with my own personal tax, legal and
financial

 

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advisors regarding my participation in the Plan before taking any action related
to the Plan.

 

I hereby acknowledge that I have received electronically a copy of the Plan, the
Prospectus relating to the Plan and Toro’s most recent Annual Report on
Form 10-K.  I hereby agree to accept electronic delivery of copies of any future
amendments or supplements to the Prospectus or any future Prospectuses relating
the Plan and copies of all reports, proxy statements and other communications
distributed to Toro’s security holders generally by email directed to my Toro
email address.

 

Note:  If you do not wish to accept the Annual Performance Award on the terms
stated in the Annual Performance Award Agreement and this Annual Performance
Award Acceptance Agreement, please immediately contact Toro’s Vice President,
Secretary and General Counsel to decline the grant.

 

 

 

Signature:

 

 

Print Name:

 

 

Date:

 

 

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