THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Toll Brothers, Inc. (TOL)

2/1/2006 Proxy Information

Robert I. Toll and Bruce E. Toll are brothers.

In order to help provide for an orderly market in the Company’s common stock in the event of the death of either Robert I. Toll or Bruce E. Toll (the “Tolls”), or both of them, the Company and the Tolls entered into agreements in 1995 in which the Company agreed to purchase from the estate of each of the Tolls $10 million of the Company’s common stock (or a lesser amount under certain circumstances), at a price equal to the greater of fair market value (as defined) or book value (as defined). Each of the Tolls agreed to allow the Company to purchase $10 million of life insurance on his life. In addition, each of the Tolls granted to the Company, at no cost to it, an option to purchase up to an additional $30 million (or a lesser amount under certain circumstances) of common stock from his estate. In May 2005, these agreements with Robert I. Toll and Bruce E. Toll were terminated by mutual consent of the Company and the Tolls and the insurance policy on the life of Bruce E. Toll was cancelled. The insurance policy on the life of Robert I. Toll expired in October 2005.

In addition to the performance of their duties for the Company, the Tolls, either jointly or independently, have engaged, and continue to engage, in certain other businesses in real estate. These businesses include the purchase, sale and management of townhome, apartment, condominium, commercial and industrial real estate projects for rental. The Company leases, at what it believes to be competitive market rates, office space from a business controlled by Robert I. Toll, Bruce E. Toll, Zvi Barzilay and Joel H. Rassman. During the last fiscal year, the Company paid to such business approximately $66,618 in rent. The Company also leases, at what it believes to be competitive market rates, two apartments in an apartment complex owned by a business controlled by Robert I. Toll and Bruce E. Toll. The apartments were leased by the Company during fiscal 2005 for use by outside consultants and the lease agreements expire in March 2006. During fiscal 2005, the Company paid $15,690 in rent for the apartments. The Company provided services to other businesses controlled by the Tolls during the fiscal year, which were billed at cost and paid throughout the year in advance with monies deposited with the Company to pay for services provided by the Company to them. These transactions are reviewed and monitored by the Audit Committee. In addition to the foregoing, Mr. Robert I. Toll has agreed, with the approval of the Executive Compensation Committee, to pay for one-half of the cost of an employee of the Company who provides Mr. Toll with investment advice.

To take advantage of commercial real estate opportunities, the Company formed Toll Brothers Realty Trust Group (the “Trust”) in 1998. The Trust is effectively owned one-third by the Company, one-third by Robert I. Toll, Bruce E. Toll (and members of his family), Zvi Barzilay (and members of his family), Joel H. Rassman, and other members of the Company’s senior management, and one-third by the Pennsylvania State Employees Retirement System (collectively, the “Shareholders”). The Shareholders entered into subscription agreements whereby each group had agreed to invest additional capital in an amount not to exceed $9.3 million if required by the Trust. The subscription agreements, which originally were due to expire in August 2005, were extended until August 2006 and the commitment amounts were reduced to a maximum of $1.85 million from each of the parties. At October 31, 2005, the Company had an investment of $6.2 million in the Trust.

The Company provides development, finance and management services to the Trust and received fees under the terms of various agreements of approximately $2.2 million in fiscal 2005. The Company believes that these transactions were on terms no less favorable than it would have agreed to with unrelated parties. The Company also incurs certain costs on behalf of the Trust for which the Company is reimbursed by the Trust. These fees and reimbursements were paid to the Company throughout the year. The amount due the Company for fees and reimbursements as of October 31, 2005, was approximately $115,500. The largest amount due the Company from the Trust at any time during the last fiscal year was approximately $312,700.

During fiscal 2005, the Company sold a home site to Robert I. Toll for the price of $797,350, representing a $60,465 or 7.5% discount from the normal purchase price. The 7.5% discount was given in accordance with the Company’s policy of providing home purchase discounts to employees.

During fiscal 2005, the Company entered into a contract to build and sell a home to a daughter of Robert I. Toll and her husband, an employee of the Company, for a price of approximately $1,488,600, representing a 3% discount or approximately $46,000 from the normal purchase price. The 3% discount is consistent with the Company’s policy of providing home purchase discounts to immediate family members of Company employees, which was adopted at the beginning of fiscal 2006.

During fiscal 2005, Zvi Barzilay purchased certain materials from the Company at cost, which represented a discount of approximately 15% from what the Company would charge to an outside customer. The total paid by Mr. Barzilay for such materials during fiscal 2005 was approximately $69,200. Mr. Barzilay prepaid for the materials prior to their receipt. Mr. Barzilay is expected to purchase additional materials in fiscal 2006.

Noah Grassi, the husband of Robert I. Toll’s daughter, is employed by the Company as a Project Manager and in fiscal 2005 received $59,838 in base salary and a bonus of $8,510. Mr. Grassi also received normal fringe benefits such as medical insurance, life insurance, disability insurance, contributions to the Company’s 401(k) Plan and auto and gas allowances with an estimated value of approximately $22,198.

Adam Barzilay, the son of Zvi Barzilay, is employed by the Company as a Land Acquisition Manager and in fiscal 2005 received $104,346 in base salary. In addition to his base salary, Mr. Barzilay received a bonus of $10,000 and options for 2,500 shares of the Company’s common stock which vest over four years. Mr. Barzilay also received normal fringe benefits such as medical insurance, life insurance, disability insurance, contributions to the Company’s 401(k) Plan and auto and gas allowances with an estimated value of approximately $25,188.

The Company believes that the compensation paid to each of Messrs. Grassi and Barzilay is equivalent to the compensation it would pay to unrelated individuals for similar positions.

On November 22, 2004, the Company’s mortgage subsidiary made a $333,700 mortgage loan to a non-employee son of Zvi Barzilay. The mortgage loan was made in the normal course of the Company’s mortgage company’s business on terms no more favorable than it would have given to an unrelated borrower. The Company gave Mr. Barzilay’s son a discount on the fees which represented a normal courtesy discount offered to employees and their relatives. This loan was sold by the mortgage subsidiary to an unrelated party on December 1, 2004.

The Audit Committee, concerned with the safety and security of Company executives while traveling on Company business and the extensive amount of time lost due to such travel, approved the chartering, from time to time, for business purposes, of an aircraft that is owned and operated by Grey Falcon, LLC and Grey Falcon Management, L.P., companies solely owned by Robert I. Toll and an affiliate of Robert I. Toll. The charter rates paid by the Company were less than those generally charged in the industry for the same type aircraft. In fiscal 2005 and the period from the end of fiscal 2005 through the date of this proxy statement, Mr. Toll’s companies have received or are entitled to receive fees for chartering the aircraft of approximately $322,744 from the Company.

Ballard, Spahr, Andrews & Ingersoll, LLP, the law firm of which Richard J. Braemer, a director of the Company, is a partner, acted as counsel to the Company in various matters during fiscal 2005 and was paid aggregate fees of approximately $276,038 during fiscal 2005.

2/18/2005 Proxy Information

Robert I. Toll and Bruce E. Toll are brothers

In order to help provide for an orderly market in the Company's common stock in the event of the death of either Robert I. Toll or Bruce E. Toll (the "Tolls"), or both of them, the Company and the Tolls entered into agreements in 1995 in which the Company agreed to purchase from the estate of each of the Tolls $10 million of the Company's common stock (or a lesser amount under certain circumstances), at a price equal to the greater of fair market value (as defined) or book value (as defined). Each of the Tolls agreed to allow the Company to purchase $10 million of life insurance on his life. In addition, each of the Tolls granted to the Company, at no cost to it, an option to purchase up to an additional $30 million (or a lesser amount under certain circumstances) of common stock from his estate. The agreements expire in October 2005.

In addition to the performance of their duties for the Company, the Tolls, either jointly or independently, have engaged, and continue to engage, in certain other businesses in real estate. These businesses include the purchase, sale and management of townhome, apartment, condominium, commercial and industrial real estate projects for rental. The Company leases, at what it believes to be competitive market rates, office space from a business controlled by Robert I. Toll, Bruce E. Toll, Zvi Barzilay and Joel H. Rassman. During the last fiscal year, the Company paid to such business approximately $62,000 in rent. The Company provided services to other businesses controlled by the Tolls during the fiscal year, which were billed at cost and paid throughout the year in advance with monies deposited with the Company to pay for services provided by the Company to them. These transactions are reviewed and monitored by the Audit Committee. In addition to the foregoing, Mr. Robert I. Toll has agreed, with the approval of the Executive Compensation Committee, to pay for one-half of the cost of an employee of the Company who provides Mr. Toll with investment advice.

To take advantage of commercial real estate opportunities, the Company formed Toll Brothers Realty Trust Group (the "Trust") in 1998. The Trust is effectively owned one-third by the Company, one-third by Robert I. Toll, Bruce E. Toll (and members of his family), Zvi Barzilay (and members of his family), Joel H. Rassman, and other members of the Company's senior management, and one-third by the Pennsylvania State Employees Retirement System (collectively, the "Shareholders"). The Shareholders entered into subscription agreements whereby each group has agreed to invest additional capital in an amount not to exceed $9.3 million if required by the Trust. The subscription agreements expire in August 2005. At October 31, 2004, the Company had an investment of $5.9 million in the Trust.

The Company provides development, finance and management services to the Trust and received fees under the terms of various agreements of approximately $1.7 million in fiscal 2004. The Company believes that these transactions were on terms no less favorable than it would have agreed to with unrelated parties. The Company also incurs certain costs on behalf of the Trust for which the Company is reimbursed by the Trust. These fees and reimbursements were paid to the Company throughout the year. The amount due the Company for fees and reimbursements as of October 31, 2004, was approximately $142,400. The largest amount due the Company from the Trust at any time during the last fiscal year was approximately $285,700.

Jeffery Franz, the husband of Robert I. Toll's daughter, was employed by the Company as an Assistant Vice President, Regional Director of Eastern States Engineering until December 2004. Mr. Franz earned in fiscal 2004 $103,885 in base salary. In addition to his base salary, Mr. Franz received a bonus of $14,000 and 3,000 stock options which vest over four years. Mr. Franz forfeited 2,250 of these options when he terminated his employment. Mr. Franz also received normal fringe benefits such as medical insurance, life insurance, disability insurance, contributions to the Company's 401(k) Plan and auto and gas allowances with an estimated value of approximately $21,400.

Adam Barzilay, the son of Zvi Barzilay, is employed by the Company as Director of Development and earned in fiscal 2004 $92,461 in base salary. In addition to his base salary, Mr. Barzilay received a bonus of $8,000 and 1,000 stock options which vest over four years. Mr. Barzilay also received normal fringe benefits such as medical insurance, life insurance, disability insurance, contributions to the Company's 401(k) Plan and auto and gas allowances with an estimated value of approximately $15,600.

The Company believes that the compensation paid to each of Messrs. Franz and Barzilay is equivalent to the compensation it would pay to unrelated individuals for similar positions.

On April 6, 2004, the Company's mortgage subsidiary made a $500,000 mortgage loan to William Rassman, Joel H. Rassman's brother. The mortgage loan made to William Rassman in the normal course of the mortgage company's business on terms no more favorable than it would have given to an unrelated borrower. The mortgage company gave William Rassman a discount on the fees which represented a normal courtesy discount offered to employees and their relatives. This loan was sold by the mortgage subsidiary to an unrelated party on April 29, 2004.

On November 22, 2004, the Company's mortgage subsidiary made a $333,700 mortgage loan to Alon Barzilay, Zvi Barzilay's son. The mortgage loan made to Alon Barzilay in the normal course of the mortgage company's business on terms no more favorable than it would have given to an unrelated borrower. The mortgage company gave Alon Barzilay a discount on the fees which represented a normal courtesy discount offered to employees and their relatives. This loan was sold by the mortgage subsidiary to an unrelated party on December 1, 2004.

In June 2004, the Company's title company subsidiary issued a title insurance policy to Bruce E. Toll for a premium of $11,044. In November 2004, the Company's title company subsidiary issued a title insurance policy to Alon Barzilay for a premium of $1,461. The policies were issued in the normal course of the title company's business on terms no more favorable than it would have given to unrelated parties. The Company reimbursed each of Bruce E. Toll and Alon Barzilay an amount equal to 25% of the title insurance fees they paid which represented a normal courtesy reimbursement of certain closing costs offered to employees and their relatives.

The Audit Committee, concerned with the safety and security of Company executives while traveling on Company business and the extensive amount of time lost due to such travel, approved the chartering, from time to time, for business purposes, of an aircraft that is owned and operated by Grey Falcon, LLC and Grey Falcon Management, L.P., companies solely owned by Robert I. Toll and an affiliate of Robert I. Toll. The charter rates paid by the Company were less than those generally charged in the industry for the same type aircraft. In fiscal 2004 and the period from the end of fiscal 2004 through the date of this proxy statement, Mr. Toll's companies have received or are entitled to receive fees for chartering the aircraft of approximately $367,130 from the Company.

Ballard, Spahr, Andrews & Ingersoll, LLP, the law firm of which Richard J. Braemer, a director of the Company, is a partner, acted as counsel to the Company in various matters during fiscal 2004 and was paid aggregate fees of approximately $338,000 during fiscal 2004.

2/17/2004 Proxy Information

In order to help provide for an orderly market in the Company's common stock in the event of the death of either Robert I. Toll or Bruce E. Toll, or both of them (the "Tolls"), the Company and the Tolls entered into agreements in 1995 in which the Company agreed to purchase from the estate of each of the Tolls $10 million of the Company's common stock (or a lesser amount under certain circumstances), at a price equal to the greater of fair market value (as defined) or book value (as defined). Each of the Tolls agreed to allow the Company to purchase $10 million of life insurance on his life. In addition, each of the Tolls granted to the Company, at no cost to it, an option to purchase up to an additional $30 million (or a lesser amount under certain circumstances) of common stock from his estate. The agreements expire in October 2005.

In addition to the performance of their duties for the Company, the Tolls, either jointly or independently, have engaged, and continue to engage, in certain other businesses in real estate. These businesses include the purchase, sale and management of townhome, apartment, condominium, commercial and industrial real estate projects for rental. The Company leases, at what it believes to be competitive market rates, certain office space from a business controlled by Robert I. Toll, Bruce E. Toll, Zvi Barzilay and Joel H. Rassman. During the last fiscal year, the Company paid to such business approximately $57,500 in rent. The Company provided services to other businesses controlled by the Tolls during the fiscal year, which were billed at cost and paid throughout the year in advance with monies deposited with the Company to pay for services provided by the Company to them. These transactions are reviewed and monitored by the Audit Committee. In addition to the foregoing, Mr. Robert I. Toll has agreed, with the approval of the Executive Compensation Committee, to pay for one-half of the cost of an employee of the Company who provides Mr. Toll with investment advice.

To take advantage of commercial real estate opportunities, the Company formed Toll Brothers Realty Trust Group (the "Trust") in 1998. The Trust is effectively owned one-third by the Company, one-third by Robert I. Toll, Bruce E. Toll (and members of his family), Zvi Barzilay (and members of his family), Joel H. Rassman, and other members of the Company's senior management, and one-third by the Pennsylvania State Employees Retirement System (collectively, the "Shareholders").

The Shareholders entered into subscription agreements whereby each group has agreed to invest additional capital in an amount not to exceed $9.3 million if required by the Trust. The subscription agreements, which were to expire in August 2003, were extended until August 2005. At October 31, 2003, the Company had an investment of $5.5 million in the Trust.

In December 2002, the Company's Board of Directors, upon the recommendation of its Real Estate Utilization Committee (the "Committee"), which is comprised of members of the Board of Directors who do not have a financial interest in the Trust, approved the sale to the Trust of a 62.2-acre parcel of land, which is a portion of the Company's multi-product community known as The Estates at Princeton Junction in New Jersey, that is intended for development as multi-family rental apartment buildings (the "Property"). The Committee's recommendation that the Company sell the Property to the Trust rather than to an outside third party was based upon the following advantages of the Company: (a) the Company will be able to influence the design and construction quality so as to enhance the overall community; (b) there are synergies of development and marketing costs which may be a benefit to the Company; (c) the Trust will maintain a high quality of operations, ensuring that the existence of the apartments in the community will not negatively affect the image of the community as a whole; and (d) as has been our experience with another Trust property, apartment tenants are potential customers for the purchase of the Company's townhomes and single-family homes. Moreover, the sale has allowed the Company to recover cash, remove the Property from the Company's balance sheet, and free the Company from the need to provide capital from its credit facility to build the apartment units. The $9.8 million sales price was approved by the Committee after reviewing an offer from an independent third party and after reviewing an independent professional appraisal. The sale was completed in May 2003.

The Company provides development, finance and management services to the Trust and received fees under the terms of various agreements of approximately $1.0 million in fiscal 2003. The Company believes that these transactions, including the sale of the Property, between itself and the Trust were on terms no less favorable than it would have agreed to with unrelated third parties. The Company also incurs certain costs on behalf of the Trust for which the Company is reimbursed by the Trust. These fees and reimbursements were paid to the Company throughout the year. The amount due the Company for fees and reimbursements as of October 31, 2003, was approximately $94,000. The largest amount due the Company from the Trust at any time during the last fiscal year was approximately $377,000.

Jeffery Franz, the husband of Robert I. Toll's daughter, is employed by the Company as an Assistant Vice President, Regional Director of Eastern States Engineering, and earned in fiscal 2003 $94,000 in base salary. In addition to his base salary, Mr. Franz received a bonus of $12,500 and options for 2,500 shares of common stock which vest over four years. Mr. Franz also received normal fringe benefits such as medical insurance, life insurance, disability insurance, contributions to the Company's 401(k) Plan and auto and gas allowances with an estimated aggregate value of $23,500. Adam Barzilay, the son of Zvi Barzilay, is employed by the Company as Director of Development and earned in fiscal 2003 $85,000 in base salary. In addition to his base salary, Mr. Barzilay received a bonus of $6,000 and options for 500 shares of common stock which vest over four years. Mr. Barzilay also received normal fringe benefits such as medical insurance, life insurance, disability insurance, contributions to the Company's 401(k) Plan and auto and gas allowances with an estimated aggregate value of $15,600. The Company believes that the compensation earned by each of Messrs. Franz and Barzilay is equivalent to the compensation it would pay to unrelated individuals for similar positions.

The Audit Committee, concerned with the safety and security of Company executives while traveling on Company business, and the extensive amount of time lost due to such travel, approved the chartering, from time to time, for business purposes, of an aircraft that is owned by companies owned by Robert I. Toll. The charter rates are less than those generally charged in the industry for the same type aircraft. In fiscal 2003 and the period from the end of fiscal 2003 through the date of this proxy statement, Mr. Toll's companies have received or are entitled to receive fees for chartering the aircraft of approximately $99,000 from the Company.

A subsidiary of the Company sold an aggregate of $550 million of senior notes, guaranteed by the Company, in two offerings during the 2003 fiscal year. One of these offerings, in the principal amount of $300 million, was made to initial purchasers that included Salomon Smith Barney Inc., as a joint book running manager, and the other was made to Citigroup Global Markets Inc., as initial purchaser (by the time of the second offering, Salomon Smith Barney Inc. had become Citigroup Global Markets Inc.; both are referred to hereinafter as "Citigroup"). Both transactions were effected after extensive bidding and negotiations with several major investment banking firms specializing in such debt offerings, wherein the Company was principally concerned about obtaining the best terms under the circumstances, as well as dependable execution. The Company has been advised that Robert Snyder, the brother of Robert I. Toll's wife and a First Vice President of Citigroup, received $60,000 of compensation in connection with these two offerings. In addition, in August 2003, the Company sold three million shares of its common stock to Citigroup, as underwriter, after extensive negotiations with other investment banking firms. The Company has been informed that Mr. Snyder did not receive any compensation for the common stock offering. The Company also used Citigroup to repurchase 655,300 shares of its common stock during fiscal 2003 for which Citigroup received $32,765 in commissions. The Company has been informed that Mr. Snyder received $6,553 of these commissions for his involvement in the repurchase program. The commission rate paid to Citi group was comparable to those paid to other brokerage firms involved in the Company's repurchase program.

Ballard, Spahr, Andrews & Ingersoll, LLP, the law firm of which Richard J. Braemer, a director of the Company, is a partner, acted as counsel to the Company in various matters during fiscal 2003 and was paid aggregate fees of approximately $217,000 during that period.