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:
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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 not less than 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) options may be exercised (I) by an option holder after
such individual ceases to be an employee (for reasons other
than disability or retirement at or after age 60) up to
three months after the day of termination of employment but
not later than the date the option expires, (II) 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 (III) 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,
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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,
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(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 Person shall
have acquired or obtained the right to acquire Beneficial
Ownership (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934 (the "Exchange Act")), of 15% or more of the
outstanding shares of Common Stock of the Company, (ii) the
commencement of, 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 Person of 15% 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 earning power, 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.
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For purposes of this paragraph, Person means any individual,
corporation, partnership, trust, other entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
(excluding the Company, a subsidiary of the Company, any employee
benefit plans of the Company or any subsidiary or any entity
holding shares of Common Stock for or pursuant to the terms of any
such plan). For purposes of this paragraph, Beneficial Ownership
includes securities beneficially owned, directly or indirectly, by
a Person and such Person's affiliates and associates, as defined
under Rule 12b-2 under the Exchange Act, and securities which such
Person and its affiliates and associates have the right to acquire
or the right to vote, or by any other Person with which such
Person or any of such Person's affiliates or associates has any
agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of shares of Common Stock,
as more fully described in The Toro Company Preferred Share
Purchase Rights Plan dated as of May 20, 1998.
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
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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.
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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.
C. GOVERNING LAW. The Plan, options granted under the Plan 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, without giving effect to
principles of conflicts of laws.
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