Document:

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                                                                    EXHIBIT 10.3

                           QUALIFIED BORROWER GUARANTY

            UNCONDITIONAL GUARANTY OF PAYMENT (this "Guaranty"), is made as of
June 1, 2004 by AMB PROPERTY, L.P., a Delaware limited partnership (the
"Guarantor") for the benefit of JPMORGAN CHASE BANK, as Administrative Agent and
J.P. MORGAN EUROPE LIMITED, as Administrative Agent (collectively, the
"Administrative Agent") for the banks (the "Banks") that are from time to time
parties to that certain Second Amended and Restated Revolving Credit Agreement
(the "Credit Agreement"), dated as of the date hereof, among the Guarantor, the
banks listed on the signature pages thereof, the Administrative Agent, Bank of
America, N.A., as Syndication Agent, J.P. Morgan Securities Inc. and Banc of
America Securities LLC, as Joint Lead Arrangers and Joint Bookrunners,
Commerzbank Aktiengesellschaft New York and Grand Cayman Branches, PNC Bank,
National Association, and Wachovia Bank, N.A., as Documentation Agents, Keybank
National Association, The Bank of Nova Scotia, acting through its San Francisco
Agency, and Wells Fargo Bank, N.A., as Managing Agents, and ING Real Estate
Finance (USA) LLC, SouthTrust Bank and Union Bank of California, N.A., as
Co-Agents.

            Capitalized terms not otherwise defined in this Guaranty shall have
the meanings ascribed to them in the Credit Agreement.

                              W I T N E S S E T H:

            WHEREAS, pursuant to the terms of the Credit Agreement, a Qualified
Borrower may request that the Banks make one or more loans (each, a "Loan") to
the Qualified Borrower, to be guaranteed by Guarantor by this Guaranty and to be
evidenced by Qualified Borrower Notes (collectively, the "Note"), payable by the
Qualified Borrower to the order of the Banks.

            WHEREAS, this Guaranty is the "Qualified Borrower Guaranty" referred
to in the Credit Agreement;

            WHEREAS, in order to induce the Administrative Agent and the Banks
to make one or more Loans to one or more Qualified Borrowers, and to satisfy one
of the conditions contained in the Credit Agreement with respect thereto, the
Guarantor has agreed to enter into this Guaranty.

            NOW THEREFORE, in consideration of the premises and the direct and
indirect benefits to be derived from the making of the Loans by the Banks to
Qualified Borrowers, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Guarantor hereby agrees as
follows:

            i.    Guarantor, on behalf of itself and its successors and assigns,
hereby irrevocably, absolutely, and unconditionally guarantees the full and
punctual payment when due, whether at stated maturity or otherwise, of all
obligations of each and every Qualified Borrower

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now or hereafter existing under the Note (whether executed and delivered
simultaneously herewith or subsequently), or under any of the other Loan
Documents (such obligations, whenever arising, being the "Guaranteed
Obligations"), and any and all reasonable costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) incurred by the
Administrative Agent in enforcing its rights under this Guaranty.

            ii.   It is agreed that the obligations of Guarantor hereunder are
primary and this Guaranty shall be enforceable against Guarantor and its
successors and assigns without the necessity for any suit or proceeding of any
kind or nature whatsoever brought by the Administrative Agent against the
relevant Qualified Borrower or its respective successors or assigns or any other
party or against any security for the payment and performance of the Guaranteed
Obligations and without the necessity of any notice of non-payment or
non-observance or of any notice of acceptance of this Guaranty or of any notice
or demand to which Guarantor might otherwise be entitled (including, without
limitation, diligence, presentment, notice of maturity, extension of time,
change in nature or form of the Guaranteed Obligations, acceptance of further
security, release of further security, imposition or agreement arrived at as to
the amount of or the terms of the Guaranteed Obligations, notice of adverse
change in such Qualified Borrower's financial condition and any other fact which
might materially increase the risk to Guarantor), all of which Guarantor hereby
expressly waives; and Guarantor hereby expressly agrees that the validity of
this Guaranty and the obligations of the Guarantor hereunder shall in no way be
terminated, affected, diminished, modified or impaired by reason of the
assertion of or the failure to assert by the Administrative Agent against such
Qualified Borrower or its respective successors or assigns, any of the rights or
remedies reserved to the Administrative Agent pursuant to the provisions of the
Loan Documents. Guarantor hereby agrees that any notice or directive given at
any time to the Administrative Agent which is inconsistent with the waiver in
the immediately preceding sentence shall be void and may be ignored by the
Administrative Agent, and, in addition, may not be pleaded or introduced as
evidence in any litigation relating to this Guaranty for the reason that such
pleading or introduction would be at variance with the written terms of this
Guaranty, unless the Administrative Agent has specifically agreed otherwise in a
writing, signed by a duly authorized officer. Guarantor specifically
acknowledges and agrees that the foregoing waivers are of the essence of this
transaction and that, but for this Guaranty and such waivers, the Banks would
not make Loans and the Fronting Bank would not issue Letters of Credit on behalf
of any Qualified Borrower.

            iii.  Guarantor hereby waives, and covenants and agrees that it will
not at any time insist upon, plead or in any manner whatsoever claim or take the
benefit or advantage of, any and all appraisal, valuation, stay, extension,
marshaling-of-assets or redemption laws, or right of homestead or exemption,
whether now or at any time hereafter in force, which may delay, prevent or
otherwise affect the performance by Guarantor of its obligations under, or the
enforcement by the Administrative Agent of, this Guaranty. Guarantor further
covenants and agrees not to set up or claim any defense, counterclaim, offset,
set-off or other objection of any kind to any action, suit or proceeding in law,
equity or otherwise, or to any demand or claim that may be instituted or made by
the Administrative Agent other than the defense of the actual timely payment and
performance by the relevant Qualified Borrower of the Guaranteed Obligations

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hereunder; provided, however, that the foregoing shall not be deemed a waiver of
Guarantor's right to assert any compulsory counterclaim, if such counterclaim is
compelled under local law or rule of procedure, nor shall the foregoing be
deemed a waiver of Guarantor's right to assert any claim which would constitute
a defense, setoff, counterclaim or crossclaim of any nature whatsoever against
Administrative Agent or any Bank in any separate action or proceeding. Guarantor
represents, warrants and agrees that, as of the date hereof, its obligations
under this Guaranty are not subject to any counterclaims, offsets or defenses of
any kind against the Administrative Agent, the Banks or the Fronting Bank.

            iv.   The provisions of this Guaranty are for the benefit of the
Administrative Agent on behalf of the Banks and their successors and permitted
assigns, and nothing herein contained shall impair as between any Qualified
Borrower and the Administrative Agent the obligations of such Qualified Borrower
under the Loan Documents.

            v.    This Guaranty shall be a continuing, unconditional and
absolute guaranty and the liability of Guarantor hereunder shall in no way be
terminated, affected, modified, impaired or diminished by reason of the
happening, from time to time, of any of the following, all without notice or the
further consent of Guarantor:

                        (1)   any assignment, amendment, modification or waiver
                              of or change in any of the terms, covenants,
                              conditions or provisions of any of the Guaranteed
                              Obligations or the Loan Documents or the
                              invalidity or unenforceability of any of the
                              foregoing; or

                        (2)   any extension of time that may be granted by the
                              Administrative Agent to any Qualified Borrower,
                              any guarantor, or their respective successors or
                              assigns, heirs, executors, administrators or
                              personal representatives; or

                        (3)   any action which the Administrative Agent may take
                              or fail to take under or in respect of any of the
                              Loan Documents or by reason of any waiver of, or
                              failure to enforce any of the rights, remedies,
                              powers or privileges available to the
                              Administrative Agent under this Guaranty or
                              available to the Administrative Agent at law,
                              equity or otherwise, or any action on the part of
                              the Administrative Agent granting indulgence or
                              extension in any form whatsoever; or

                        (4)   any sale, exchange, release, or other disposition
                              of any property pledged, mortgaged or conveyed, or
                              any property in which the Administrative Agent
                              and/or the Banks have been granted a lien or
                              security interest to secure any indebtedness of
                              any Qualified Borrower to the Administrative Agent
                              and/or the Banks; or

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                        (5)   any release of any person or entity who may be
                              liable in any manner for the payment and
                              collection of any amounts owed by any Qualified
                              Borrower to the Administrative Agent and/or the
                              Banks; or

                        (6)   the application of any sums by whomsoever paid or
                              however realized to any amounts owing by any
                              Qualified Borrower to the Administrative Agent
                              and/or the Banks under the Loan Documents in such
                              manner as the Administrative Agent shall determine
                              in its sole discretion; or

                        (7)   any Qualified Borrower's or the Guarantor's
                              voluntary or involuntary liquidation, dissolution,
                              sale of all or substantially all of their
                              respective assets and liabilities, appointment of
                              a trustee, receiver, liquidator, sequestrator or
                              conservator for all or any part of any Qualified
                              Borrower's or Guarantor's assets, insolvency,
                              bankruptcy, assignment for the benefit of
                              creditors, reorganization, arrangement,
                              composition or readjustment, or the commencement
                              of other similar proceedings affecting any
                              Qualified Borrower or Guarantor or any of the
                              assets of any of them, including, without
                              limitation, (i) the release or discharge of any
                              Qualified Borrower or Guarantor from the payment
                              and performance of their respective obligations
                              under any of the Loan Documents by operation of
                              law, or (ii) the impairment, limitation or
                              modification of the liability of any Qualified
                              Borrower or Guarantor in bankruptcy, or of any
                              remedy for the enforcement of the Guaranteed
                              Obligations under any of the Loan Documents, or
                              Guarantor's liability under this Guaranty,
                              resulting from the operation of any present or
                              future provisions of the Bankruptcy Code or other
                              present or future federal, state or applicable
                              statute or law or from the decision in any court;
                              or

                        (8)   any improper disposition by any Qualified Borrower
                              of the proceeds of the Loans, it being
                              acknowledged by Guarantor that the Administrative
                              Agent shall be entitled to honor any request made
                              by any Qualified Borrower for a disbursement of
                              such proceeds and that the Administrative Agent
                              shall have no obligation to see the proper
                              disposition by such Qualified Borrower of such
                              proceeds.

                        (9)   Guarantor hereby agrees that if at any time all or
                              any part of any payment at any time received by
                              the Administrative Agent from any Qualified
                              Borrower under any of the Notes or other Loan
                              Documents or Guarantor under or with respect to
                              this Guaranty is or must be rescinded or returned
                              by the Administrative Agent for

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                              any reason whatsoever (including, without
                              limitation, the insolvency, bankruptcy or
                              reorganization of any Qualified Borrower or
                              Guarantor), then Guarantor's obligations hereunder
                              shall, to the extent of the payment rescinded or
                              returned, be deemed to have continued in existence
                              notwithstanding such previous receipt by the
                              Administrative Agent, and Guarantor's obligations
                              hereunder shall continue to be effective or
                              reinstated, as the case may be, as to such
                              payment, as though such previous payment to the
                              Administrative Agent had never been made.

                        (10)  Until this Guaranty is terminated pursuant to the
                              terms hereof, the Guarantor (i) shall have no
                              right of subrogation against any Qualified
                              Borrower or any entity comprising same by reason
                              of any payments or acts of performance by
                              Guarantor in compliance with the obligations of
                              Guarantor hereunder; (ii) hereby waives any right
                              to enforce any remedy which Guarantor now or
                              hereafter shall have against any Qualified
                              Borrower or any entity comprising same by reason
                              of any one or more payment or acts of performance
                              in compliance with the obligations of Guarantor
                              hereunder; and (iii) from and after an Event of
                              Default (as defined in the Credit Agreement)
                              subordinates any liability or indebtedness of any
                              Qualified Borrower or any entity comprising same
                              now or hereafter held by Guarantor to the
                              obligations of each Qualified Borrower under the
                              Loan Documents.

            vi.   Guarantor hereby represents, warrants and covenants on its own
behalf to the Administrative Agent with the knowledge that the Administrative
Agent is relying upon the same, as follows:

                        (1)   Guarantor will be familiar with the financial
                              condition of each Qualified Borrower;

                        (2)   Guarantor has determined that it is in its best
                              interest to enter into this Guaranty;

                        (3)   this Guaranty is necessary and convenient to the
                              conduct, promotion and attainment of Guarantor's
                              business, and is in furtherance of Guarantor's
                              business purposes;

                        (4)   the benefits to be derived by Guarantor from each
                              Qualified Borrower's access to funds made possible
                              by the Loan Documents are at least equal to the
                              obligations of Guarantor undertaken pursuant to
                              this Guaranty;

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                        (5)   the Guarantor is solvent and has full partnership
                              power and legal right to enter into this Guaranty
                              and to perform its obligations under the terms
                              hereof and (i) Guarantor is organized and validly
                              existing under the laws of its state of formation,
                              (ii) Guarantor has complied with all provisions of
                              applicable law in connection with all aspects of
                              this Guaranty, and (iii) the person executing this
                              Guaranty on behalf of Guarantor has all the
                              requisite power and authority to execute and
                              deliver this Guaranty; and

                        (6)   this Guaranty has been duly executed by Guarantor
                              and constitutes the legal, valid and binding
                              obligation of Guarantor, enforceable against it in
                              accordance with its terms except as enforceability
                              may be limited by applicable insolvency,
                              bankruptcy or other laws affecting creditors'
                              rights generally or general principles of equity
                              whether such enforceability is considered in a
                              proceeding in equity or at law.

      The foregoing representations and warranties shall be deemed to be made as
of the date hereof and as the date of the making any Loan or the issuance of any
Letter of Credit to or for the account on any Qualified Borrower.

            vii. Each of Guarantor and the Administrative Agent acknowledges and
agrees that this Guaranty is a guaranty of payment and not of collection and
enforcement in respect of any obligations which may accrue to the Administrative
Agent and/or the Banks from each Qualified Borrower under the provisions of any
Loan Document.

            viii. Subject to the terms and conditions of the Credit Agreement,
and in conjunction therewith, the Administrative Agent may assign any or all of
its rights under this Guaranty.

            ix. Guarantor agrees, upon the written request of the Administrative
Agent, to execute and deliver to the Administrative Agent, from time to time,
any modification or amendment hereto or any additional instruments or documents
reasonably considered necessary by the Administrative Agent or its counsel to
cause this Guaranty to be, become or remain valid and effective in accordance
with its terms, provided, that, any such modification, amendment, additional
instrument or document shall not increase Guarantor's obligations or diminish
its rights hereunder and shall be reasonably satisfactory as to form to
Guarantor and to Guarantor's counsel.

            x. The representations and warranties of the Guarantor set forth in
this Guaranty shall survive until this Guaranty shall terminate in accordance
with the terms hereof.

            xi. This Guaranty together with the Credit Agreement, each Note now
or hereafter executed and delivered by any Qualified Borrower, and the other
Loan Documents

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contain the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements relating to such subject
matter and may not be modified, amended, supplemented or discharged except by a
written agreement signed by Guarantor and the Administrative Agent.

            xii. If all or any portion of any provision contained in this
Guaranty shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, such provision or portion thereof shall be deemed
stricken and severed from this Guaranty and the remaining provisions and
portions thereof shall continue in full force and effect.

            xiii. This Guaranty may be executed in counterparts which together
shall constitute the same instrument.

            xiv. All notices, requests and other communications to any party
hereunder shall be in writing (including bank wire, telex, facsimile
transmission followed by telephonic confirmation or similar writing) and shall
be addressed to such party at the address set forth below or to such other
address as may be identified by any party in a written notice to the others:

If to a
Qualified Borrower:                 At the address identified therefor by
                                    Borrower at the time such Qualified Borrower
                                    delivers its Note or, if no such address is
                                    so identified, at the address of Borrower
                                    set forth in the Credit Agreement for
                                    notices.

If to
Guarantor:                          At the address set forth in the Credit
                                    Agreement for notices.

With Copies of
Notices to the
Qualified Borrower
or Guarantor to:                    Piper Rudnick LLP
                                    203 North LaSalle Street, Suite 1800
                                    Chicago, Illinois 60601
                                    Attention: James M. Phipps, Esq.

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If to the Administrative Agent:     JPMorgan Chase Bank
                                    707 Travis Street, 6th Floor North
                                    Houston, Texas  77002
                                    Attention: Susan M. Tate

and to:                             JPMorgan Chase Bank
                                    1111 Fannin Street, 10th Floor
                                    Houston, Texas  77002
                                    Attention: Loan and Agency Services

With Copies to:                     Skadden, Arps, Slate, Meagher & Flom LLP
                                    4 Times Square
                                    New York, New York 10036
                                    Attention:  Martha Feltenstein, Esq.

            Each such notice, request or other communication shall be effective
(i) if given by telex or facsimile transmission, when such telex or facsimile is
transmitted to the telex number or facsimile number specified in this Section
and the appropriate answerback or facsimile confirmation is received, (ii) if
given by certified registered mail, return receipt requested, with first class
postage prepaid, addressed as aforesaid, upon receipt or refusal to accept
delivery, (iii) if given by a nationally recognized overnight carrier, 24 hours
after such communication is deposited with such carrier with postage prepaid for
next day delivery, or (iv) if given by any other means, when delivered at the
address specified in this Section.

            xv. This Guaranty shall be binding upon Guarantor and its successors
and assigns and shall inure to the benefit of the Administrative Agent and its
successors and assigns.

            xvi. The failure of the Administrative Agent to enforce any right or
remedy hereunder, or promptly to enforce any such right or remedy, shall not
constitute a waiver thereof, nor give rise to any estoppel against the
Administrative Agent, nor excuse Guarantor from its obligations hereunder. Any
waiver of any such right or remedy to be enforceable against the Administrative
Agent must be expressly set forth in a writing signed by the Administrative
Agent.

            xvii.           (1)   THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS
                                  OF THE PARTIES HEREUNDER SHALL BE CONSTRUED
                                  IN ACCORDANCE WITH AND BE GOVERNED BY THE
                                  LAWS OF THE STATE OF NEW YORK.

                  (2)   Any legal action or proceeding with respect to this
                        Guaranty and any action for enforcement of any judgment
                        in respect thereof may be brought in the courts of the
                        State of New York or of the United States of America for
                        the Southern District of New York, and, by

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                        execution and delivery of this Guaranty, Guarantor
                        hereby accepts for itself and in respect of its
                        property, generally and unconditionally, the
                        non-exclusive jurisdiction of the aforesaid courts and
                        appellate courts from any thereof. Guarantor irrevocably
                        consents to the service of process out of any of the
                        aforementioned courts in any such action or proceeding
                        by the mailing of copies thereof by registered or
                        certified mail, postage prepaid, to Guarantor at the
                        address for notices set forth herein. Guarantor hereby
                        irrevocably waives any objection which it may now or
                        hereafter have to the laying of venue of any of the
                        aforesaid actions or proceedings arising out of or in
                        connection with this Guaranty brought in the courts
                        referred to above and hereby further irrevocably waives
                        and agrees not to plead or claim in any such court that
                        any such action or proceeding brought in any such court
                        has been brought in an inconvenient forum. Nothing
                        herein shall affect the right of the Administrative
                        Agent to serve process in any other manner permitted by
                        law or to commence legal proceedings or otherwise
                        proceed against Guarantor in any other jurisdiction.

                  (3)   EACH OF THE GUARANTOR AND THE ADMINISTRATIVE AGENT
                        HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY AND ALL
                        CLAIMS OR CAUSES OF ACTION BASED UPON OR ARISING OUT OF
                        THIS GUARANTY. IT IS HEREBY ACKNOWLEDGED BY GUARANTOR
                        THAT THE WAIVER OF A JURY TRIAL IS A MATERIAL INDUCEMENT
                        FOR THE ADMINISTRATIVE AGENT TO ACCEPT THIS GUARANTY AND
                        THAT THE LOANS MADE BY THE BANKS ARE MADE IN RELIANCE
                        UPON SUCH WAIVER. GUARANTOR FURTHER WARRANTS AND
                        REPRESENTS THAT SUCH WAIVER HAS BEEN KNOWINGLY AND
                        VOLUNTARILY MADE, FOLLOWING CONSULTATION WITH LEGAL
                        COUNSEL. IN THE EVENT OF LITIGATION, THIS GUARANTY MAY
                        BE FILED BY THE ADMINISTRATIVE AGENT IN COURT AS A
                        WRITTEN CONSENT TO A NON-JURY TRIAL.

                  (4)   Guarantor hereby further covenants and agrees with the
                        Administrative Agent that Guarantor may be joined in any
                        action against the Qualified Borrower in connection with
                        the Loan Documents and that recovery may be had against
                        Guarantor in such action or in any independent action
                        against Guarantor (with respect to the Guaranteed
                        Obligations), without the Administrative Agent first
                        pursuing or exhausting any remedy or claim against the
                        Qualified Borrower or its successors or assigns.
                        Guarantor also agrees that,

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                        in an action brought with respect to the Guaranteed
                        Obligations in any jurisdiction, it shall be
                        conclusively bound by the judgment in any such action by
                        the Administrative Agent (wherever brought) against any
                        Qualified Borrower or its successors or assigns, as if
                        Guarantor were a party to such action, even though
                        Guarantor was not joined as a party in such action.

                  (5)   Guarantor hereby agrees to pay all reasonable expenses
                        (including, without limitation, attorneys' fees and
                        disbursements) which may be incurred by the
                        Administrative Agent in connection with the enforcement
                        of its rights under this Guaranty, whether or not suit
                        is initiated.

            xvii. Subject to the terms of Section 5(i) hereof, this Guaranty
shall terminate and be of no further force or effect upon the full performance
and payment of the Guaranteed Obligations hereunder. Upon termination of this
Guaranty in accordance with the terms of this Guaranty, the Administrative Agent
promptly shall deliver to Guarantor such documents as Guarantor or Guarantor's
counsel reasonably may request in order to evidence such termination.

            xviii. All of the Administrative Agent's rights and remedies under
each of the Loan Documents or under this Guaranty are intended to be distinct,
separate and cumulative and no such right or remedy therein or herein mentioned
is intended to be in exclusion of or a waiver of any other right or remedy
available to the Administrative Agent.

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<PAGE>

                        IN WITNESS WHEREOF, the undersigned has cause this
Guaranty to be duly executed and delivered as of the date first set forth above.

                                  GUARANTOR:

                                  AMB PROPERTY, L.P.,
                                  a Delaware limited partnership

                                  By:   AMB Property Corporation, a Maryland
                                        corporation and its sole general partner

                                        By: /s/ Gayle P. Starr
                                           ______________________________
                                        Name:  Gayle P. Starr
                                        Title: Senior Vice President

ACCEPTED:

JPMORGAN CHASE BANK,
as Administrative Agent

By:   /s/ Susan Tate
      _____________________
      Name:  Susan Tate
      Title: Vice President

J.P. MORGAN EUROPE LIMITED, as Administrative Agent

By:   /s/ S. Gillies             By:   /s/ N. Mall
      _____________________           _____________________
      Name:  S. Gillies               Name:  N. Mall
      Title: Associate                Title: Associateexv10wxay

 

THE TORO COMPANY

2000 DIRECTORS STOCK PLAN

     1. Purpose of the Plan. The purpose of The Toro Company 2000 Directors
Stock Plan (“Plan”) is to enable The Toro Company (the “Company”) to attract
and retain experienced and knowledgeable directors to serve on the Board of
Directors of the Company or its subsidiaries, and to further align their
interests with those of the stockholders of the Company by providing for or
increasing their stock ownership interests in the Company. It is intended that
the Plan be interpreted so that transactions under the Plan are exempt under
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), to the extent applicable.

     2. Eligibility. All members of the Company’s Board of Directors who are
not current employees of the Company or any of its subsidiaries (“Nonemployee
Directors”) are eligible to participate in the Plan.

     3. Plan Awards.

a. Directors Shares. To carry out the purposes of the Plan, the Company
shall, on the first business day of each fiscal year, issue to each
person who is then a Nonemployee Director shares of the Company’s Common
Stock, $1.00 par value and related preferred share purchase rights (the
“Common Stock”), in an amount equal to $10,000 divided by the fair
market value of one share of Common Stock rounded down to the greatest
number of whole shares (“Directors Shares”) subject to adjustment as
provided in Section 5 hereof. Fair market value for this purpose shall
be the average of the 4 p.m. Eastern Time closing prices of the Common
Stock as reported by the New York Stock Exchange for each of the trading
days in the three calendar months immediately prior to the date of issue
of the Directors Shares.

b. Directors Options.

i. Annual Grant. Subject to the terms and conditions of this Section
3.b., on the first business day of each fiscal year, the Company shall grant
a nonqualified option (“Directors Option”) to purchase 2,000 shares of
Common Stock to each person who is then a Nonemployee Director. Directors
Options shall be granted at an exercise price per share equal to the fair
market value of one share of Common Stock on the date of grant, but not less
than par value. Fair market value for this purpose shall be the 4 p.m.
Eastern Time closing price of the Common Stock as reported by the New York
Stock Exchange for the date of grant. No option may be repriced, once
granted.

ii. Vesting, Transferability and Exercisability.

(a) Vesting. Except as provided in Sections 3.b.ii.(c)(1) and (2),
Directors Options shall vest and become exercisable in three equal
installments on each of the first, second and third anniversaries following
the date of grant, and shall remain exercisable for a term of ten years
after the date of grant.

(b) No Transfer. No Directors Option shall be assigned or transferred,
except by will or the laws of descent and distribution. An option so
transferred may be exercised after the death of the individual to

 

 

whom it is granted only by such individual’s legal representatives,
heirs or legatees, not later than the earlier of the date the option expires
or one year after the date of death of such individual, and only with
respect to an option exercisable at the time of death.

   (c) Exercise. During the lifetime of a Nonemployee Director, Directors
Options held by such individual may be exercised only by the Nonemployee
Director and only while serving as a member of the Board of Directors of the
Company and only if the Nonemployee Director has been continuously so
serving since the date such options were granted, except as follows:

     (1) Disability or Death. In the event of disability or death of a
Nonemployee Director, all outstanding unvested options shall vest effective
as of the date of death or termination of service by reason of disability,
and all such vested options may be exercised by such individual or his or
her legal representatives not later than the earlier of the date the option
expires or one year after the date such service as a Nonemployee Director
ceases by reason of disability or death.

     (2) Termination. If a Nonemployee Director has served as a member of
the Board of Directors for ten full fiscal years or longer and terminates
service on the Board, (A) outstanding unvested options shall remain
outstanding and continue to vest in accordance with their terms, and (B) the
Nonemployee Director may exercise all such vested outstanding options for up
to four years after the date of termination, but not later than the date an
option expires. If a Nonemployee Director has served as a member of the
Board of Directors for less than ten years and terminates service on the
Board, (C) all unvested options shall expire and be canceled and (D) the
Nonemployee Director may exercise any vested outstanding options for up to
three months after the date of termination, but not later than the date an
option expires.

   (d) Methods of Exercise and Payment of Exercise Price. Subject to the
terms and conditions of the Plan and the terms and conditions of the option
agreement, a vested option may be exercised in whole at any time or in part
from time to time, by delivery to the Company at its principal office of a
written notice of exercise specifying the number of shares with respect to
which the option is being exercised, accompanied by payment in full of the
exercise price for shares to be purchased at that time. Payment may be made
(1) in cash, (2) by tendering (either actually or by attestation) shares of
Common Stock already owned for at least six months (or shorter period
necessary to avoid a charge to the Company’s earnings for financial statement
purposes) valued at the fair market value of the Common Stock on the date of
exercise, (3) in a combination of cash and Common Stock or (4) by delivery of
a notice of exercise of options, together with irrevocable instructions,
approved in advance by proper officers of the Company, (A) to a brokerage
firm designated by the Company, to deliver promptly to the Company the
aggregate amount of sale or loan proceeds to pay the exercise price and any
related tax withholding obligations and (B) to the Company, to deliver
certificates for such purchased shares directly to such brokerage firm, all
in accordance with regulations of the Federal Reserve Board.

   No shares of Common Stock shall be issued until full payment has been
made.

c. Share Proration. If, on any date on which Directors Shares are to be
issued pursuant to Section 3.a. or Directors Options are to be granted
pursuant to Section 3.b., the number of shares of

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Common Stock is insufficient for the issuance of the entire number of
shares to be issued or for the grant of the entire number of options, as
calculated in accordance with Section 3.a. or Section 3.b., respectively,
then the number of shares to be issued and options to be granted to each
Nonemployee Director entitled to receive Directors Shares or Directors
Options on such date shall be such Nonemployee Director’s proportionate
share of the available number of shares and options (rounded down to the
greatest number of whole shares), provided that if a sufficient number of
shares of Common Stock is available to issue all of the Directors Shares,
then the entire number of Directors Shares shall be issued first and the
number of shares to be subjected to options shall be prorated in accordance
with this section.

     4. Shares in Lieu of Fees. A Nonemployee Director shall have the right to
elect to receive shares of Common Stock in lieu of annual retainer and meeting
fees otherwise payable in cash. The election to receive Common Stock shall be
made prior to the date fees are otherwise scheduled to be paid but not 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 shall be reserved
through the rest of the calendar year and shares shall be issued in December of
that year. The number of shares to be issued shall be determined by dividing
the dollar amount of reserved fees by the 4 p.m. Eastern Time closing price of
one share of Common Stock as reported by the New York Stock Exchange for the
date that the shares are issued.

     5. Stock Subject to Plan. Subject to adjustment as provided in this
paragraph and subject to increase by amendment of the Plan, the total number of
shares of Common Stock reserved and available for issuance in connection with
the Plan shall be 240,000 shares. If any Directors Option granted hereunder
expires unexercised, terminates, is exchanged for other options without the
issuance of shares of Common Stock or is exercised by delivery or constructive
delivery of shares of Common Stock already owned by the option holder, the
shares of Common Stock reserved for issuance pursuant to such option shall, to
the extent of any such termination or to the extent the shares covered by an
option are not issued or used, again be available for option grants under the
Plan, unless prohibited by applicable law or regulation. Any shares issued by
the Company in connection with the assumption or substitution of outstanding
option grants from any acquired corporation shall not reduce the shares
available for stock awards or option grants under the Plan. In the event of a
corporate transaction involving the Company, the Common Stock or the Company’s
corporate or capital structure, including but not limited to any stock
dividend, stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, reclassification, split-up, spin-off,
combination or exchange of shares, or a sale of the Company or of all or part
of its assets or any distribution to stockholders other than a normal cash
dividend, the Committee shall make such proportional adjustments as are
necessary to preserve the benefits or potential benefits of the Directors
Shares and Directors Options. Action by the Committee may include all or any of
adjustment in (a) the maximum number and kind of securities subject to the Plan
as set forth in this paragraph; (b) the maximum number and kind of securities
that may be made subject to Directors Options and the determination of the
number or kind of Directors Shares; (c) the number and kind of securities
subject to any outstanding Directors Option; and (d) any other adjustments that
the Committee determines to be equitable.

     6. Change of Control. In the event of a Change of Control of the Company
as hereinafter defined, all Directors Options shall fully vest, and be
exercisable in their entirety immediately, and notwithstanding any other
provisions of the Plan, shall continue to be exercisable for three years
following the Change of Control, but not later than ten years after the date of
grant.

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     Change of Control means:

	 	a.	 	The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
“Person”) of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of 15% or more of either (i) the
then-outstanding shares of Common Stock of the Company (the “Outstanding
Company Common Stock”) or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this subsection
a., the following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any corporation
pursuant to a transaction that complies with clauses (i), (ii) and (iii)
of subsection c. of this Section 6; or

	 	b.	 	Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or

	 	c.	 	Consummation of a reorganization, merger or consolidation of the
Company or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition by the Company of assets or
stock of another entity (a “Business Combination”), in each case,
unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 15% or more of, respectively,
the then-outstanding shares of common stock of the corporation resulting
from such Business Combination, or the combined voting power of the
then-outstanding voting securities of such corporation except to the
extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of
the corporation

4

 

resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or

	 	d.	 	Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.

     7. Administration of the Plan. The Plan shall be administered by a
committee composed of those members of the Board of Directors of the Company
who are also employees of the Company (the “Committee”). The Committee shall
have the authority to carry out all provisions of the Plan; provided, however,
that it shall have no discretion to determine which Nonemployee Directors may
receive Directors Shares or Directors Options or to set the value of such
Directors Shares or Directors Options, other than to make the calculations
required by Section 3.a., Section 3.b. Section 4 or Section 5.

     8. Tax Withholding. The Company shall have the right to deduct from any
settlement made under the Plan, including the exercise of an option or the sale
of shares of Common Stock, any federal, state or local taxes of any kind
required by law to be withheld with respect to such payments or to require the
option holder to pay the amount of any such taxes or to take such other action
as may be necessary in the opinion of the Company to satisfy all obligations
for the payment of such taxes. If Common Stock is withheld or surrendered to
satisfy tax withholding, such stock shall be valued at its fair market value as
of the date such Common Stock is withheld or surrendered. The Company may also
deduct from any such settlement any other amounts due the Company by the option
holder.

     9. Effective Date and Term of Plan. The Plan first became effective
March 14, 2001 and shall be perpetual, unless terminated by action of the Board
of Directors.

     10. Amendment. The Board may amend, suspend or terminate the Plan at any
time, with or without advance notice to Plan participants. The effective date
of any amendment to the Plan shall be the date of its adoption by the Board of
Directors, subject to stockholder approval, if required. No amendment of the
Plan shall adversely affect in a material manner any right of any option holder
with respect to any option theretofore granted without such option holder’s
written consent.

     11. Governing Law. The Plan, Directors Shares, Directors Options and
agreements entered into under the Plan shall be construed, administered and
governed in all respects under and by the applicable laws of the State of
Delaware, excluding any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of the Plan or an option or an
award or agreement to the substantive law of another jurisdiction.

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