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THE TORO COMPANY
2000 STOCK OPTION PLAN
1. PURPOSE. The purpose of The Toro Company 2000 Stock Option Plan (the "Plan")
is to enhance stockholder value of The Toro Company (the "Company") by
providing an incentive to key employees and other key individuals who
perform services for the Company, to contribute significantly to the
long-term performance and growth of the Company; to link a significant
portion of a participant's compensation to the value of the Company's Common
Stock, par value $1.00 per share, and related Preferred Share Purchase
Rights ("Common Stock"); and to attract and retain experienced and
knowledgeable employees on a competitive basis. These purposes are expected
to be achieved by granting options to acquire the Common Stock ("options").
2. ELIGIBILITY. Any employee of the Company who is regularly employed in an
executive, managerial, professional or technical position and any other
individual who performs services for the Company and who contributes
significantly to the strategic and long-term performance objectives of the
Company is eligible to participate in the Plan. 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.
a. LIMITATIONS. 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, and the maximum number of
shares that may be covered by options granted to any individual during
any calendar year shall be 100,000 shares. 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".
3. STOCK OPTIONS.
a. ISOS AND NONQUALIFIED OPTIONS. Options granted under the Plan may 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").
i. INCENTIVE STOCK OPTIONS. Incentive Stock Options shall meet the
applicable requirements of, and contain or be deemed to contain all
provisions required by, the Code or corresponding provisions of
subsequent revenue laws and regulations in effect at the time such
options are granted. Any ambiguities in construction shall be
interpreted in order to effectuate such intent. To the extent that
the aggregate fair market value of Common Stock (determined at the
time of grant of the Incentive Stock Option) 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. AGREEMENTS. Options shall be evidenced by stock option agreements in
such form and not inconsistent with the Plan as the Compensation
Committee (the "Committee") of the Board of Directors shall approve from
time to time.
c. NUMBER OF SHARES, DATE OF GRANT AND TERM. An option agreement shall
specify the number of shares of Common Stock to which it pertains; 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,
and the term of the option, which shall not exceed ten years.
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d. EXERCISE PRICE. The exercise price of an option shall be not less than
100% of fair market value of the Common Stock on the date of grant. Fair
market value is the 4 p.m. Eastern Time closing price for the Common
Stock as reported by the New York Stock Exchange.
e. VESTING, TRANSFERABILITY AND EXERCISABILITY.
(i) VESTING. 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.
(ii) NO TRANSFER. Options shall not be transferable by the option holder
except by will or applicable laws of descent and distribution.
(iii) EXERCISE. During the lifetime of an option holder, options 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, except as the
Committee may otherwise determine and provide for in an option
agreement at the time of grant or, if the Committee does not so
provide, as follows:
(a) DISABILITY. In the event of disability of an option holder,
options may be exercised by such individual or his or her guardian
or legal representative, 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.
(b) DEATH. An option may be exercised after the death of an
option holder 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) RETIREMENT. A nonqualified option may be exercised by an
option holder after such individual ceases to be an employee by
reason of retirement for up to four years after the date of
retirement but not later than the date the option expires.
"Retirement" shall have the meaning established by the Committee
from time to time or, if no such meaning is established, shall mean
termination of employment with the Company at an age and with a
number of years of service to the Company which, when added
together, equal at least 65.
(d) OTHER TERMINATION OF EMPLOYMENT. An option may be exercised
by an option holder after such individual ceases to be an employee
(for reasons other than disability, death or retirement) for up to
three months after the date of termination of employment but not
later than the date the option expires.
(iv) NON-COMPETE. Notwithstanding any other provision of paragraph 3.e.,
if within one year after the termination of employment with or
performance of services for the Company, an option holder is (a)
employed or retained by or renders service to any organization that,
directly or indirectly, competes with or becomes competitive with
the Company, or if the rendering of such services is prejudicial or
in conflict with the interests of the Company, or (b) violates any
confidentiality agreement or agreement governing the ownership or
assignment of intellectual property rights with the Company, or (c)
engages in any other conduct or act determined to be injurious,
detrimental or prejudicial to any interest of the Company, the
Company may cancel or rescind or restrict all options held by such
individual and shall have the right to the 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
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beginning on the date which is twelve months prior to the date of
termination to the date of the last exercise, provided however, that
this provision shall not be applicable in the event of a Change of
Control.
(v) INTERRUPTION IN SERVICE. Absence on leave from the Company, or other
interruption in the performance of services, by an option holder
shall, if approved by the Committee, not be deemed a cessation or
interruption of employment or services for the purposes of the Plan.
f. 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, 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) 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 or (iii) in a
combination of cash and Common Stock; or the Committee may also, in its
sole discretion exercised either at the time the option is granted or at
any time before an option is exercised, (iv) permit option holders to
deliver 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; or (v) authorize such other methods as it deems
appropriate and as comply with requirements of the Code, the Securities
Exchange Act of 1934 (the "Exchange Act") and other applicable laws and
regulations.
No shares of Common Stock shall be issued until full payment 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. 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
the option is exercised and shares of Common Stock are issued. 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.
4. COMMON STOCK SUBJECT TO THE PLAN. Subject to adjustment to reflect corporate
transactions provided for in paragraph 4.a. 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 1,000,000. If any option granted under the Plan 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
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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 under the Plan 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.
a. ADJUSTMENTS FOR CORPORATE TRANSACTIONS. In the event of a corporate
transaction involving the Company (including, without limitation, any
merger, consolidation, recapitalization, reorganization, split off, spin
off, reclassification, combination, stock dividend, stock split, reverse
stock split, repurchase, exchange, extraordinary cash dividend, issuance
of warrants or other rights to purchase Common Stock or other securities
of the Company, or other similar corporate transaction or 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), the Committee shall
make such proportional adjustments as are necessary to preserve the
benefits or potential benefits of the options. Action by the Committee
may include appropriate adjustments in all or any of (i) the number of
shares of the Common Stock or other new or different securities that may
be available for option grants under the Plan; (ii) the number of shares
of Common Stock or other new or different securities subject to
outstanding options; (iii) the option price per share of outstanding
options and, if deemed appropriate, cash payments; (iv) the maximum
number and kind of securities that may be made subject to options for
any individual as set forth in paragraph 2.a.; or (v) any other
adjustment the Committee determines to be equitable. The Committee may
also, in its sole discretion, make provisions in any option agreement
for the protection of outstanding options in the event of such a
corporate transaction.
5. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Committee,
provided that members of the Committee shall be "non-employee directors" as
contemplated by Rule 16b-3 under the Exchange Act or any successor rule and
shall qualify to administer the Plan as "outside directors" as contemplated
by Section 162(m) of the Code and the regulations thereunder ("Section
162(m)"). The Committee may delegate administrative duties and all decisions
not required to be exercised by it under Section 162(m) of the Code, Section
16 of the Exchange Act or the rules of the New York Stock Exchange to an
officer of the Company. 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,
including the company, its stockholders and option holders. No member of the
Board or of the Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any option
granted under the Plan.
Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to grant options; 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 to make
all other determinations deemed necessary or advisable for the
administration of the Plan.
6. FOREIGN NATIONALS AND RESIDENTS OF CALIFORNIA.
a. FOREIGN NATIONALS. Without amending the Plan, options 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
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specified in the Plan as may, in the judgment of the Committee, be
necessary or desirable to further the purposes of the Plan.
b. CALIFORNIA RESIDENTS. Without amending the Plan, and notwithstanding any
provision of the Plan to the contrary, options granted to individuals
who are residents of the State of California may contain such terms and
conditions as may be required by applicable California statutes
governing stock options.
7. CHANGE OF CONTROL. In the event of a Change of Control of the Company as
hereinafter defined, whether or not approved by the Board, 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 Change of Control, but not later
than ten years after the date of grant.
a. DEFINITION. For the purpose of this paragraph 7, a "Change of Control"
shall mean:
(i) 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 (A) the
then-outstanding shares of Common Stock of the Company (the
"Outstanding Company Common Stock") or (B) 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 (i), the following acquisitions shall not constitute
a Change of Control: (A) any acquisition directly from the Company,
(B) any acquisition by the Company, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company, or (D) any
acquisition by any corporation pursuant to a transaction that
complies with clauses (A), (B) and (C) of subsection (iii) of this
paragraph 7; or
(ii) 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
(iii) 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, (A) 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
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such Business Combination of the Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the case may be, (B)
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 (C) at least a majority of the
members of the board of directors of the corporation 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
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
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. 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,
excluding any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of the Plan or an agreement
to the substantive law of another jurisdiction.
10. PLAN AMENDMENT AND TERMINATION. The Board may amend, suspend or terminate
the Plan at any time, with or without advance notice to option holders,
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
that would increase the maximum number of shares that may be subjected to
options or that may be granted to any person referred to in Section 162(m)
of the Code or that would modify requirements as to eligibility for
participation in the Plan shall be effective unless the stockholders of the
Company shall have approved the amendment in accordance with applicable
provisions of the Code. No amendment, modification or termination of the
Plan may 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. EFFECTIVE DATE AND DURATION OF THE PLAN. The effective date of the Plan
shall be March 29, 2000 subject to approval by stockholders. Any amendment
to the Plan shall be effective on the date established by the Committee,
subject to stockholder approval, if required. The Plan shall remain in
effect until all shares reserved for issuance pursuant to the Plan have been
purchased pursuant to options granted under the Plan, provided that options
under the Plan must be granted not later than ten years after the effective
date of the Plan or any future amendment approved by stockholders.
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