THE TORO COMPANY
1993 STOCK OPTION PLAN
1. PURPOSE. The purpose of the 1993 Stock Option Plan (the "Plan") is to
advance the interests of The Toro Company (the "Company") and its
stockholders by providing an incentive to certain employees of the Company
and its subsidiaries and to certain other key individuals who perform
services for the Company and its subsidiaries, to contribute significantly
to the strategic and long-term performance objectives and growth of the
Company and its subsidiaries. This purpose is expected to be achieved by
granting options to acquire the Common Stock, $1.00 par value, and related
preferred share purchase rights of the Company (the "Common Stock").
Subject to the provisions of the Plan, options may contain such terms and
conditions as shall be required so as to be either nonqualified stock
options ("nonqualified options") or incentive stock options ("Incentive
Stock Options") as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). Subject to such limits as may be imposed by
the Plan, nonqualified options or Incentive Stock Options or both may be
granted to an eligible individual.
2. EFFECTIVE DATE. The effective date of the Plan shall be August 17, 1993.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Compensation Committee (the "Committee") of the Board of Directors of the
Company (the "Board"), provided that members of the Committee shall be
Non-employee Directors as contemplated by Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor rule
and shall qualify to administer the Plan as contemplated by Section 162(m)
of the Code and the regulations thereunder ("Section 162(m)"). A majority
of the members of the Committee shall constitute a quorum for any meeting
of the Committee and the acts of a majority of the members present at any
meeting at which a quorum is present or the acts unanimously approved in
writing by all members of the Committee shall be the acts of the Committee.
The decision of the Committee on any matter affecting the Plan and
obligations arising under the Plan or any option granted thereunder shall
be deemed final and binding upon all persons. No member of the Board or of
the Committee shall be liable for any action or determination taken or made
in good faith with respect to the Plan or any option granted thereunder.
Committee members shall be reimbursed for out-of-pocket expenses reasonably
incurred in the administration of the Plan.
Subject to the express provisions of the Plan, the Committee shall have
plenary authority, in its discretion, to interpret the Plan; to prescribe,
amend and rescind rules and regulations relating to the Plan; to determine
the exercise price of each option to purchase Common Stock, the individuals
to whom and the time or times at which options shall be granted, the number
of shares to be subject to each
option, when an option may be exercisable and the other terms and
provisions (and amendments thereto) of the respective option agreements
(which need not be identical); to determine whether a particular option is
to be an Incentive Stock Option and the terms and provisions thereof that
shall be required in the judgment of the Committee to provide therefor or
to conform to any change in any law or regulation applicable thereto, or to
any other law or regulation that may hereafter become effective to provide
similar or related tax benefits to option holders; and to make all other
determinations deemed necessary or advisable for the administration of the
Plan.
4. COMMON STOCK SUBJECT TO THE 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 that is reserved and available for
issuance pursuant to options granted under the Plan shall be 1,600,000
shares. If any option granted hereunder terminates, expires unexercised, is
exchanged for other options without the issuance of shares of Common Stock
or is exercised by the 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 shares covered by an option are not
issued or used, again be available for option grants under the Plan. Any
shares issued by the Company in connection with the assumption or
substitution of outstanding grants from any acquired corporation shall not
reduce the shares available for option grants under the Plan. Shares of
Common Stock that may be issued hereunder may be authorized but unissued
shares, reacquired or treasury shares, or outstanding shares acquired in
the market or from private sources, or a combination thereof. Appropriate
adjustments in the number of shares of the Common Stock that may be
available for option grants under the Plan and adjustments in the option
price per share of outstanding options may be made by the Committee in its
discretion to give effect to adjustments made in the number of shares of
Common Stock of the Company through any merger, consolidation,
recapitalization, reclassification, combination, stock dividend, stock
split or other similar change in the corporate structure of the Company
affecting the Common Stock, or a sale by the Company of all or part of its
assets or any distribution to stockholders other than a normal cash
dividend.
5. ELIGIBILITY. Options may be granted to any employee of the Company or any
subsidiary thereof who is regularly employed in an executive, managerial,
professional or technical position, and to any other individual who
performs services for the Company or any subsidiary and who contributes
significantly to the strategic and long-term performance objectives of the
Company and its subsidiaries. Options may be granted to directors of the
Company who are also employees of the Company. More than one option may be
granted to the same individual. No option may be granted to an individual
who owns, directly or indirectly, Common Stock or other capital stock of
the Company possessing more than 5% of the total combined voting power or
value of any class of capital stock
of the Company or a subsidiary immediately after such option is granted.
Except for the foregoing limitations, there is no minimum or maximum number
of shares of Common Stock with respect to which options may be granted to
any individual under the Plan. Individuals to whom options are granted are
at times referred to as "option holders".
6. DURATION OF THE PLAN. The Plan shall remain in effect until all shares
reserved for issuance pursuant to the Plan shall have been purchased
pursuant to options granted under the Plan, provided that options under the
Plan must be granted within ten years from the effective date of the Plan.
7. GENERAL TERMS OF OPTIONS. Options shall be evidenced by stock option
agreements in such form and not inconsistent with the Plan as the Committee
shall approve from time to time, which agreements shall contain in
substance the following terms and conditions:
A. DATE OF GRANT. An option agreement shall specify the date of grant,
which shall be the date on which the Committee grants an option or any
later date which the Committee specifically designates.
B. NUMBER OF SHARES OF COMMON STOCK. An option agreement shall specify
the number of shares of Common Stock to which it pertains.
Notwithstanding any other provision of the Plan, the maximum number of
shares that may be covered by any option grant during any calendar
year shall be 100,000 shares.
C. EXERCISE PRICE. The exercise price of all stock options will be
granted at fair market value, except for performance based stock
options, such as those granted in connection with the Continuous
Performance Award Plan, where the exercise price is an average and on
the date of grant could be higher or lower than fair market value.
Fair market value is generally determined to be the closing price for
the Common Stock on the New York Stock Exchange as reported by The
Wall Street Journal or other readily available quotation of composite
transactions.
D. TERM OF OPTIONS. The term of each option shall be fixed by the
Committee.
E. EXERCISABILITY AND TRANSFERABILITY.
(i) The Committee shall have the authority to determine whether an
option agreement shall specify periods after the date of grant
of an option during which the option or any portion thereof
may not yet be exercisable, including provisions applicable to
persons subject to Section 16 of the Exchange Act.
(ii) During the lifetime of an option holder, options held by such
individual may be exercised only by the option holder and only
while an employee of the Company or a parent or subsidiary of
the Company or otherwise performing services for the Company
or a parent or subsidiary and only if the option holder has
been continuously so employed or engaged since the date such
options were granted; provided, however, that (a) in the event
of disability of an option holder, options may be exercised by
such individual not later than the earlier of the date the
option expires or one year after the date such employment or
performance of services ceases by reason of disability, but
only with respect to an option exercisable at the time such
employment or performance of services ceases and (b) an option
other than an Incentive Stock Option may be exercised (I)
after such individual ceases to be an employee by reason of
retirement, either at or after age 60 but not later than the
earlier of the date the option expires or four years after the
date of retirement, or, if approved by the Committee, after
retirement at an age less than age 60 but not later than the
earlier of the date the option expires or three years after
the date of retirement; and (II) in the event a salary
replacement option is granted by the Committee and the option
holder is involuntarily terminated during the option term or
becomes disabled or dies, the Committee shall have the right
to grant to the option holder or his personal representative,
as the case may be, the right to request either (1) that the
option be cancelled and the option holder or his estate be
paid an amount equal to the compensation the option holder has
given up from the date of grant to the date of such
termination, disability or death together with interest at the
prime rate less the then market gain on that portion of the
shares covered by the option which is then vested; or (2) that
the stock option accelerates such that the option be deemed to
have vested at an appropriate rate per month (as determined by
the Committee) from the date of grant to the last date of the
month in which the date of termination, disability or death
occurs, such accelerated option to be then exercisable for a
period of three years following such date but only with
respect to an option exercisable at the time such individual
ceases to be an employee.
(iii) Notwithstanding any provision of this paragraph 7.E, if within
one year after the termination of employment with or
performance of services for the Company, an option holder is
employed or retained by a company that competes with the
business of the Company or such individual violates any
confidentiality agreement with the Company, the Company may
cancel and rescind all options held by
such individual and demand return of the economic value of any
option which was realized or obtained (measured at the date of
exercise) by such individual at any time during the period
beginning on the date which is twelve months prior to the date
of termination.
(iv) Absence on leave or any other interruption in the performance
of services by an option holder with the Company shall, if
approved by the Committee, not be deemed a cessation or
interruption of employment or services for the purposes of the
Plan.
(v) No option shall be assignable or transferable by the
individual to whom it is granted except that it may be
transferable 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.
(vi) In no event shall any option be exercisable at any time after
its expiration date unless extended by the Committee. When an
option is no longer exercisable, it shall be deemed to have
lapsed or terminated.
F. METHODS OF EXERCISE. Subject to the terms and conditions of the Plan
and the terms and conditions of the option agreement, an 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 (i) in cash, (ii) in shares of Common Stock valued at the fair
market value of the Common Stock on the date of exercise or (iii) in a
combination of cash and Common Stock. The Committee may also, in its
sole discretion, permit option holders to deliver a notice of exercise
of options and to simultaneously sell the shares of Common Stock
thereby acquired pursuant to a brokerage or similar arrangement
approved in advance by proper officers of the Company, using the
proceeds from such sale as payment of the exercise price, or may
authorize such other methods as it deems appropriate and as comply
with requirements of the Code and the Exchange Act.
No shares of Common Stock shall be issued until full payment therefor
has been made.
G. ACCELERATED OWNERSHIP FEATURE. An option may, in the discretion of the
Committee, include the right to acquire an accelerated ownership
nonqualified stock option ("AO Option"). An option which provides for
the grant of an AO Option shall entitle the option holder, upon
exercise of that option and payment of the appropriate exercise price
in shares of Common Stock that have been owned by such option holder
for not less than six months prior to the date of exercise, to receive
an AO Option. An AO Option is an option to purchase, at fair market
value at the date of grant of the AO Option, a number of shares of
Common Stock equal to the sum of the number of whole shares delivered
by the option holder in payment of the exercise price of the original
option and the number of whole shares, if any, withheld by the Company
as payment for withholding taxes. An AO Option shall expire on the
same date that the original option would have expired had it not been
exercised. All AO Options shall be nonqualified options.
H. CHANGE OF CONTROL. In the event of a threatened or actual Change of
Control of the Company as hereinafter defined, whether or not approved
by the Board of Directors, all options shall fully vest, unless
otherwise limited by the Committee at the time of the option grant,
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 later of the threatened or actual Change of
Control, but not later than ten years after the date of grant. A
Change of Control means the earliest to occur of (i) a public
announcement that a party shall have acquired or obtained the right to
acquire beneficial ownership of 20% or more of the outstanding shares
of Common Stock of the Company, (ii) the commencement or announcement
of an intention to make a tender offer or exchange offer, the
consummation of which would result in the beneficial ownership by a
party of 30% or more of the outstanding shares of Common Stock of the
Company or (iii) the occurrence of a tender offer, exchange offer,
merger, consolidation, sale of assets or contested election or any
combination thereof, that causes (or would cause) the persons who were
directors of the Company immediately before such Change of Control to
cease to constitute a majority of the Board of Directors of the
Company or any parent of or successor to the Company.
I. REORGANIZATION. The Committee may, in its sole discretion, make
provisions in any option agreement for the protection of outstanding
options in the event of a merger, consolidation, reorganization or
liquidation of the Company or the acquisition of stock or assets of
the Company by another entity.
J. RIGHTS AS A STOCKHOLDER. An option holder shall have no rights as a
stockholder with respect to any Common Stock covered by an option
until exercise of such option and issuance of shares of Common Stock.
Except
as otherwise expressly provided in the Plan, no adjustments shall be
made for dividends or other rights for which the record date is prior
to issuance of the Common Stock.
K. GENERAL RESTRICTION. Each option shall be subject to the requirement
that, if at any time the Board shall determine in its discretion that
the listing, registration or qualification of the Common Stock subject
to such option on any securities exchange or under any state or
federal law, or the consent or approval of any government regulatory
body, is necessary or desirable as a condition of, or in connection
with, the granting of such option or the issue or purchase of Common
Stock thereunder, such option may not be exercised in whole or in part
unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not
acceptable to the Board.
L. FOREIGN NATIONALS. Without amending the Plan, awards may be granted to
individuals who are foreign nationals or are employed or otherwise
performing services for the Company or any subsidiary outside the
United States or both, on such terms and conditions different from
those specified in the Plan as may, in the judgment of the Committee,
be necessary or desirable to further the purpose of the Plan.
8. INCENTIVE AND NONQUALIFIED OPTIONS. It is intended that certain options
granted under the Plan shall be Incentive Stock Options and shall meet the
applicable requirements of and contain or be deemed to contain all
provisions required under Section 422 of the Code or corresponding
provisions of subsequent revenue laws and regulations in effect at the time
such options are granted; that other options shall not meet such
requirements and shall be nonqualified stock options; and that any
ambiguities in construction shall be interpreted in order to effectuate
such intent. The Committee may grant one or more options of either type, or
of both types, to any one or more individuals either at different times or
concurrently. Such options shall be subject to the terms and conditions set
forth elsewhere in the Plan and to the following:
A. INCENTIVE STOCK OPTIONS. The term of any Incentive Stock Option shall
meet the requirements of Section 422 of the Code. Any Incentive Stock
Option shall be treated as "outstanding" until it is exercised in full
or expires by reason of lapse of time. To the extent that the
aggregate fair market value of Common Stock (determined at the time of
grant of the Incentive Stock Option in accordance with paragraph 7.C
of the Plan) with respect to which Incentive Stock Options are
exercisable for the first time by an option holder during any calendar
year (under all such plans of the Company and its parent and
subsidiary corporations) exceeds $100,000 or such other limit as may
be imposed by the Code, such options to the extent they exceed such
limit shall be treated as options which are not Incentive
Stock Options. In applying the foregoing limitation, options shall be
taken into account in the order in which they were granted.
B. NONQUALIFIED OPTIONS. There is no limitation on the maximum amount of
nonqualified options which may be exercised in any year.
9. WITHHOLDING TAXES. 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
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.
10. AMENDMENT OF THE PLAN. The Plan may be amended, suspended or discontinued
in whole or in part at any time and from time to time by the Board,
including an amendment to increase the number of shares of Common Stock
with respect to which options may be granted, provided however that no
amendment shall be effective unless and until the same is approved by
stockholders of the Company where the failure to obtain such approval would
adversely affect the availability of any exemption under Rule 16b-3 under
the Exchange Act or successor rule and with other applicable law, including
the Code. 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. MISCELLANEOUS.
A. USE OF PROCEEDS. The proceeds derived from the sale of shares of
Common Stock pursuant to options granted under the Plan shall
constitute general funds of the Company.
B. PARENT AND SUBSIDIARY. As used herein, the terms "parent" and
"subsidiary" shall mean "parent corporation" and "subsidiary
corporation", respectively, as defined in Section 424 of the Code.