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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

      Filed by the Registrant x

      Filed by a Party other than the Registrant o

      Check the appropriate box:

      o Preliminary Proxy Statement

      o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

      x Definitive Proxy Statement

      o Definitive Additional Materials

      o Soliciting Material Pursuant to o 240.14a-11(c) or o 240.14a-12

Payment of filing fee (Check the appropriate box):

      x No fee required.

      o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

      (1) Title of each class of securities to which transaction applies:

      (2) Aggregate number of securities to which transaction applies:

      (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

      (4) Proposed maximum aggregate value of transaction:

      (5) Total fee paid:

      o Fee paid previously with preliminary materials.

      o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

      (1) Amount Previously Paid:

      (2) Form, Schedule or Registration Statement No.:

      (3) Filing Party:

      (4) Date Filed:

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THE TORO COMPANY

ANNUAL MEETING OF STOCKHOLDERS
Thursday, March 14, 2002
3:00 p.m. C.S.T.
The Toro Company
8111 Lyndale Avenue South
Bloomington, MN 55420

This Proxy is solicited on behalf of the Board of Directors for use at the Annual Meeting on March 14, 2002.

The shares of stock held in your account or in a dividend reinvestment account will be voted as you specify below or by telephone or Internet. Shares held in employee benefit plans for which a proxy is not received will be voted by the trustee in the same proportion as votes actually cast by plan participants.

If no choice is specified, the proxy will be voted “FOR” Items 1, 2, 3, 4 and 5.

By signing, dating and returning this proxy card, you revoke all prior proxies, including any proxy previously given by telephone or Internet, and appoint K. B. Melrose and J. L. McIntyre, or either of them, with full power of substitution to vote your shares on the matters shown on the reverse side and any other matter which may properly come before the Annual Meeting and all adjournments.

See reverse for voting instructions.

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There are three ways to vote your Proxy

COMPANY #
CONTROL #

         Your telephone or Internet vote authorizes K. B. Melrose and J. L. McIntyre, or either of them (the Named Proxies), to vote your shares in the same manner as if you marked, signed,dated and returned your proxy card.

VOTE BY TELEPHONE — TOLL FREE — 1-800-240-6326 — QUICK *** EASY *** IMMEDIATE

VOTE BY INTERNET — http://www.eproxy.com/ttc/ — QUICK *** EASY *** IMMEDIATE

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we’ve provided or return it to The Toro Company c/o Shareowner ServicesSM, P.O. Box 64873, St. Paul, MN 55164-0873.

If you vote by telephone or Internet, please do not mail your proxy card

The Board of Directors Recommends a Vote FOR Items 1, 2, 3, 4 and 5.

1. Election of directors:

01 R. O. Baukol 02 K. J.Harless

03 D. R. Olseth

Vote FOR all nominees (except as marked)

Vote WITHHELD from all nominees

(Instructions: To withhold authority to vote for one or more nominees, write the number(s) of the nominee(s) in the box provided to the right.)

2.

Approve amendment of The Toro Company Annual Management Incentive Plan II

For

Against

Abstain

3.

Approve amendment of The Toro Company Performance Share Plan

For

Against

Abstain

4.

Approve amendment of The Toro Company 2000 Stock Option Plan

For

Against

Abstain

5.

Ratify selection of independent auditors for Fiscal 2002

For

Against

Abstain

6.

To transact any other business properly brought before the Annual Meeting or any adjournment of the meeting.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.

Address Change? Mark Box
Indicate changes below:		Date
		Signature(s) in Box
		Please sign exactly as your name(s) appear on this Proxy. If held in joint tenancy, all persons must sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy.

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Kendrick B. Melrose

January 31, 2002

Dear Fellow Stockholders:

I would like to thank you for your continued support through Toro’s Fiscal 2001 and to invite you to join us for the Toro Annual Meeting of Stockholders to be held on Thursday, March 14, 2002 at our corporate offices. Details about the meeting, nominees for the Board of Directors and other matters to be acted on are presented in the Notice of Annual Meeting and Proxy Statement that follow.

In addition to Annual Meeting formalities, we will report to stockholders generally on Toro’s business, and will be pleased to answer stockholders’ questions relating to the Company. Refreshments will be served after the meeting.

We hope you plan to attend the Annual Meeting. Please exercise your right to vote by signing, dating and returning the enclosed proxy card or using the Internet or telephone voting described in the Proxy Statement, even if you plan to attend the meeting.

On behalf of your Toro Board of Directors and management, it is my pleasure to express our appreciation for your continued support.

Sincerely,

Kendrick B. Melrose

YOUR VOTE IS IMPORTANT. PLEASE SIGN AND RETURN THE ENCLOSED

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NOTICE OF ANNUAL MEETING

          The Toro Company 2002 Annual Meeting of Stockholders will be held on Thursday, March 14, 2002 at 3:00 p.m. C.S.T. at Toro’s corporate offices at 8111 Lyndale Avenue South, Bloomington, Minnesota, for the following purposes:

      Stockholders of record at the close of business on January 17, 2002 (the “Record Date”) will be entitled to vote at the meeting or any adjournment of the meeting.

      A stockholder list will be available at the Company’s corporate offices beginning February 28, 2002 during normal business hours, for examination by any stockholder registered on the Company’s Stock Ledger as of the Record Date, for any purpose germane to the Annual Meeting.

      Since a majority of the outstanding shares of the Company’s Common Stock must be represented either in person or by proxy to constitute a quorum for the conduct of business, PLEASE PROMPTLY SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD OR VOTE BY INTERNET OR TELEPHONE.

January 31, 2002

	BY ORDER OF THE BOARD OF DIRECTORS
	J. LAWRENCE MCINTYRE
	Vice President, Secretary and
	General Counsel

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THE TORO COMPANY

          The Toro Company Board of Directors is soliciting your proxy for use at the 2002 Annual Meeting of Stockholders on Thursday, March 14, 2002. This Notice, Proxy Statement and enclosed form of proxy will be mailed to stockholders beginning Thursday, January 31, 2002.

Who Can Vote

      Only stockholders of record at the close of business on January 17, 2002 will be entitled to notice of and to vote at the Annual Meeting or any adjournment of the meeting. On that date Toro had 12,487,570 shares of Common Stock outstanding. Each share of Toro Common Stock you own entitles you to one vote.

      Dividend Reinvestment Plan Shares. If you are a participant in Toro’s Dividend Reinvestment Plan, the number shown on the enclosed proxy card includes shares held for your account in that plan.

      Employee Benefit Plan Shares. If you are a participant in a Company employee benefit plan that allows participant-directed voting of Common Stock held in the plan, the number shown on the enclosed proxy card includes shares you hold in each plan, as well as shares you own of record, if any. The trustee for each plan will cause votes to be cast confidentially in accordance with your instructions. Plan shares not voted by participants will be voted by the trustee in the same proportion as the votes actually cast by participants, in accordance with the terms of the respective plan.

How You Can Vote

      If you are a stockholder whose shares are registered in your name, you may vote your shares by one of the three following methods:

      If your shares are held in “street name” (through a broker, bank or other nominee), you may receive a separate voting instruction form with this Proxy Statement, or you may need to contact your broker, bank or other nominee to determine whether you will be able to vote electronically using the Internet or telephone.

      If you return your signed proxy card or use Internet or telephone voting before the Annual Meeting, the named proxies will vote your shares as you direct. You have three choices on each matter to be voted on. For the election of directors, you may (1) vote FOR all of the nominees, (2) WITHHOLD your vote from all nominees or (3) WITHHOLD your vote from nominees you designate. See Proposal One— Election of Directors. For each of the other proposals, you may vote “FOR”, “AGAINST” or “ABSTAIN” from voting.

      If you send in your proxy card or use Internet or telephone voting, but do not specify how you want to vote your shares, we will vote them FOR the election of all nominees for director as described under Proposal

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How You May Revoke or Change Your Vote

      If you are a stockholder whose shares are registered in your name, you may revoke your proxy at any time before it is voted by one of the following methods:

      If you hold your shares through a broker, bank or other nominee, you may revoke your proxy by following instructions provided by your broker, bank or nominee.

Quorum and Vote Requirements

      A majority of the outstanding shares of Common Stock must be present in person or by proxy in order to have a quorum to conduct business at the Annual Meeting. Shares represented by proxies marked “Abstain” or “Withheld” and “broker non-votes” are counted in determining whether a quorum is present. A “broker non-vote” is a proxy submitted by a broker that does not indicate a vote for some or all of the proposals because the broker does not have discretionary voting authority on some types of proposals and has not received instructions from its client as to how to vote on a particular proposal.

      The affirmative vote of a plurality of shares of Common Stock present in person or represented by proxy at the meeting is required for the election of directors. Other matters will be decided by the affirmative vote of a majority of the shares present in person or represented by proxy. “Broker non-votes” are not counted, but abstentions and withheld votes are counted, in determining the total number of votes cast on a proposal. An abstention or withheld vote has the effect of a negative vote.

Procedures at the Annual Meeting

      The presiding officer at the meeting will determine how business at the Annual Meeting will be conducted. Only matters brought before the Annual Meeting in accordance with the Company’s Bylaws will be considered.

      Only a natural person present at the Annual Meeting who either is a Toro stockholder or is acting on behalf of a stockholder may make a motion or second a motion. A person acting on behalf of a stockholder must present a written statement executed by the stockholder or the duly authorized representative of the stockholder on whose behalf the person purports to act.

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STOCK OWNERSHIP

      The following table shows how much Toro Common Stock each of the directors and nominees, the Chief Executive Officer and the four other most highly compensated executive officers named in the Summary Compensation Table (“named executive officers”) beneficially owned as of January 17, 2002. The table also shows beneficial ownership by all directors and executive officers as a group, including the named executive officers.

      The Company has not been notified through filings with the Securities and Exchange Commission of any holder of more than 5% of the Common Stock.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      The rules of the Securities and Exchange Commission require the Company to disclose the identity of directors, executive officers and beneficial owners of more than 10% of the Common Stock of the Company who did not file on a timely basis reports required by Section 16 of the Securities Exchange Act of 1934. Based solely on review of copies of those reports received by the Company, or written representations from reporting persons that no Form 5 reports were required for them, the Company believes that all directors, executive officers and greater than 10% owners complied with all filing requirements applicable to them during Fiscal 2001.

PROPOSAL ONE

      Under the Company’s Certificate of Incorporation, the Toro Board of Directors may be comprised of between eight and eleven directors. The Board has fixed the number of directors at eleven. The maximum and minimum number of directors can be changed only by amendment of the Certificate of Incorporation approved by the affirmative vote of 80% of the outstanding shares of Common Stock of the Company. The Board is divided into three classes, with each class elected in a different year for a term of three years. The three nominees for election at the 2002 Annual Meeting— Ronald O. Baukol, Katherine J. Harless and Dale R. Olseth— have consented to serve if elected. If any nominee is unable to stand for election, the Board may, by resolution, designate a substitute.

      The Board held six meetings during Fiscal 2001. Each incumbent director attended at least 75% of the aggregate total number of meetings held by the Board and all committees on which he or she served.

      The following information with respect to business experience of nominees for election to the Board and the continuing directors has been furnished by the respective directors or nominees or obtained from the records of the Company.

Nominees for Election to Board of Directors Continuing in Office (Term ending after Fiscal 2004)

      Ronald O. Baukol, age 64. Executive Vice President, International Operations since May 1995, Minnesota Mining and Manufacturing Company (3M), Saint Paul, Minnesota (manufacturing). Served as Vice President, Asia Pacific, Canada and Latin America from February 1994 to April 1995. First elected to the Toro Board in 1995, he is a member of the Executive Committee, Compensation Committee and Nominating Committee. Mr. Baukol is a director of Graco Inc. and 3M.

      Katherine J. Harless, age 50. President since June 2000, Verizon Information Services, Inc., Dallas, Texas (publisher). From July 1996 to August 2000, she served as President, GTE Airfone, Inc., and from May 1994 to July 1996, as regional president, GTE Corporation, Texas and New Mexico. First elected to the Toro Board in 2000, she is a member of the Compensation Committee.

      Dale R. Olseth, age 71. Chairman of the Board and Chief Executive Officer since November 1986, SurModics, Inc., Eden Prairie, Minnesota (surface modification). He also served as President of SurModics,

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Members of Board of Directors Continuing in Office (Term ending after Fiscal 2002)

      Janet K. Cooper, age 48. Chief Financial Officer and Senior Vice President of Finance and Administration since January 2001 of McDATA Corporation, Broomfield, Colorado (enterprise open network storage). From July 2000 to January 2001 she was Senior Vice President, Finance, Qwest Communications International Inc., Denver, Colorado (telecommunications). She served in several executive positions with U S West, Inc., including from June 1999 to June 2000 Vice President Finance and Controller, from February 1999 to June 1999 Vice President— Treasurer and Controller and from May 1998 to February 1999 Vice President Treasurer. She previously was employed by The Quaker Oats Company and served as Vice President, Treasurer and Tax from July 1997 to May 1998 and Vice President and Treasurer from July 1992 to July 1997. First elected to the Toro Board in 1994, she is Chair of the Audit Committee and a member of the Compensation Committee. Ms. Cooper is a director of Lennox International Inc.

      Kendrick B. Melrose, age 61. Chairman of Toro since December 1987 and Chief Executive Officer of Toro since December 1983. Employed by Toro since 1970. First elected to the Toro Board in 1981. Mr. Melrose is also Chair of the Executive Committee. Mr. Melrose is a director of SurModics, Inc. and Donaldson Company, Inc.

      Gregg W. Steinhafel, age 47. President since August 1999, Target Stores, a division of Target Corporation, Minneapolis, Minnesota (retailing). Served as Executive Vice President Merchandising from July 1994 to August 1999. First elected to the Toro Board in 1999, he is a member of the Audit Committee and the Executive Committee.

      Edwin H. Wingate, age 69. Retired. From June 1980 through August 1997 served as Senior Vice President— Personnel, Dayton Hudson Corporation, Minneapolis, Minnesota (retailing). First elected to the Toro Board in 1989, he is Chair of the Nominating Committee and a member of the Audit Committee.

Members of Board of Directors Continuing in Office (Term ending after Fiscal 2003)

      Robert C. Buhrmaster, age 54. Chairman since February 1998 and President and Chief Executive Officer since May 1994, Jostens, Inc., Minneapolis, Minnesota (consumer manufacturing). First elected to the Toro Board in 1996, he is a member of the Audit Committee, Executive Committee and Nominating Committee.

      Winslow H. Buxton, age 62. Chairman of the Board of Directors since January 1993, Pentair, Inc., Saint Paul, Minnesota (diversified manufacturing). Served as Chief Executive Officer from August 1992 through December 2000. From August 1992 to December 1999 he also served as President. First elected to the Toro Board in 1998, he is a member of the Audit Committee, Executive Committee and Nominating Committee. Mr. Buxton is a director of Bemis Company, Inc., Willamette Industries, Inc. and Pentair, Inc.

      Robert H. Nassau, age 60. Owner since February 2000, Nasly Inc., Lahaina, Hawaii (food, beverage and entertainment). From January 1997 to August 1999, he served as President and Chief Executive Officer, St. Raymond Wood Products Holding Limited. From September 1994 to December 1996 he served as Senior Vice President Ply Gem Industries, Inc., New York, New York and President and CEO of the Goldenberg Group, its wholly-owned subsidiary. Also President and Chief Executive Officer, Allied Plywood Corporation, Concord, Massachusetts, a wholly-owned subsidiary of Ply-Gem Industries, Inc. from July 1991 to December 1996. First elected to the Toro Board in 1988, he is a member of the Compensation Committee and Nominating Committee.

      Christopher A. Twomey, age 53. President and Chief Executive Officer since February 1986, Arctic Cat Inc., Thief River Falls, Minnesota (recreational vehicle manufacturer). Served as an executive officer in various capacities since 1983. First elected to the Toro Board in 1998, he is a member of the Compensation Committee and Nominating Committee. Mr. Twomey is a director of Arctic Cat Inc.

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Committees of the Board

      To assist in carrying out its duties, the Board has delegated certain authority to the following four standing committees:

      Executive Committee. The Executive Committee may exercise all of the powers and authority of the Board, including the power to declare dividends on Toro Common Stock, during intervals between meetings of the Board. No meetings of the committee were held during Fiscal 2001.

      Audit Committee. The Audit Committee assists the Board in fulfilling its responsibility to stockholders relating to the quality and integrity of the Company’s financial reports and accounting and reporting practices. Its members may not be employees of the Company (“outside directors”) and must have no relationship to the Company that would interfere with a director’s independence from management and the Company, including independence within the meaning of applicable New York Stock Exchange listing standards. Its duties include reviewing the qualifications, independence and performance of the Company’s independent public accountants; reviewing the scope, magnitude and budgets of all examinations of the Company’s financial statements by the auditors; reviewing general policies and procedures with respect to accounting and financial matters and internal controls; reviewing and approving of the cost and types of audit and nonaudit services performed by independent public accountants; meeting with independent public accountants not less than once a year without Company representatives to discuss internal controls and accuracy and completeness of the financial statements; reviewing the Company’s Code of Business Conduct and monitoring compliance; receiving analyses and comments regarding accounting pronouncements; reviewing results of audits with the independent public accountants and management with a focus on difficulties encountered, material errors or irregularities, weaknesses in internal accounting controls and similar issues; and notifying the Board of major problems or deficiencies discovered with respect to its duties.

      Additional information regarding the Audit Committee and the Company’s independent auditors is disclosed under the Audit Committee Report and Proposal Five. The Audit Committee met three times during Fiscal 2001. At one of these meetings the Committee met in private session with management and at another meeting in private session with the Company’s internal auditor.

      Compensation Committee. All members of the Compensation Committee must be outside directors. This committee’s functions include study and analysis of, and making recommendations to the Board concerning, specific and general matters of management compensation; periodic review of management compensation policies and practices, incentive compensation plans and officer salary adjustments; making incentive compensation awards and setting base salaries for officers referred to in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”); and administrative oversight of stock option plans and other incentive and compensation plans. Two meetings of the committee were held during Fiscal 2001.

      Nominating Committee. All members of this committee are outside directors. This committee’s functions include determining an appropriate size and composition of the Board; considering qualifications of prospective Board member candidates; conducting research to identify and recommend nomination of suitable candidates who are willing to serve as members of the Board; reviewing the experience, background, interests, ability and availability of prospective nominees to meet time commitments of the Board and committee responsibilities; consideration of nominees recommended by stockholders who comply with the procedures set forth in the Company’s Bylaws, described on page 25; and determining whether any prospective member of the Board has any economic or familial relationship with the Company or its directors or employees which may impair the individual’s suitability for such service. The committee also has responsibility to monitor current members of the Board in light of the same guidelines used to select candidates, and to direct the activities of the Board and management in matters of corporate governance. No meeting of the committee was held during Fiscal 2001.

      The Audit Committee Report that follows, the Compensation Committee Report on page 15 and the Performance Graph on page 14 shall not be deemed to be “soliciting material” or to be filed with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934, or

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Audit Committee Report

      This report is furnished by the Audit Committee of the Toro Board of Directors with respect to Toro’s financial statements for Fiscal 2001.

      The Committee operates pursuant to a written charter first adopted by the Board on October 11, 1988 and amended on May 13, 1999 and May 18, 2000. A copy of the charter was included in the Company’s Proxy Statement for its 2001 Annual Meeting of Stockholders.

      Toro management is responsible for the preparation and presentation of complete and accurate financial statements. The independent auditors, KPMG LLP, are responsible for performing an independent audit of the Company’s financial statements in accordance with generally accepted auditing standards and for issuing a report on their audit.

      In performing its oversight role, the Audit Committee has reviewed and discussed with management of the Company the Company’s audited financial statements for Fiscal 2001. Management represented to the Audit Committee that the Company’s financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee has also discussed with KPMG LLP, the Company’s independent auditors for Fiscal 2001, the matters required to be discussed by Statement on Auditing Standards 61, Communication with Audit Committees (Codification of Statements on Auditing Standards, AU 380), as in effect for the Company’s Fiscal 2001. The Audit Committee has received the written disclosures and the letter from KPMG LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) as in effect for the Company’s Fiscal 2001. The Committee has also considered whether the provision of nonaudit services by the independent auditors is compatible with maintaining the auditors’ independence and has discussed with KPMG LLP the auditors’ independence.

      Based on the review and discussions referred to in the foregoing paragraph, and subject to the limitations on the role and responsibilities of the Committee in the charter, the Audit Committee recommended to the Board of Directors of the Company that the Company’s audited financial statements for Fiscal 2001 be included in its Annual Report on Form 10-K for the fiscal year ended October 31, 2001, for filing with the Securities and Exchange Commission.

Board Compensation

      Fees. Compensation for Toro directors who are not employees of the Company attempts to link a director’s compensation with stockholder interests. The compensation includes cash and stock components. Cash compensation for Fiscal 2001 included an annual retainer and meeting fees ($20,000 plus a fee of $1,000 for each meeting of the Board or a committee attended, except that no more than one committee meeting fee is paid for committee meetings held in a single day). In addition in Fiscal 2001, outside directors received an annual grant of Common Stock having a $10,000 market value (valued at the average of the closing prices of Common Stock during the three months prior to the award) and a 2,000 share stock option award (with an exercise price per share equal to 100% of the fair market value of one share of Common Stock on the date of

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      Retirement Plan. On July 20, 2000, the Board of Directors voted to terminate the accrual of additional benefits under the Company’s long-standing Director Retirement Plan, effective November 1, 2000. All eligible directors elected to convert accrued cash benefits to Toro Common Stock units, which were credited to deferred compensation accounts under The Toro Company Deferred Compensation Plan for Non-Employee Directors. These units are distributed only if the director serves on the Board five full calendar years. During Fiscal 2001, additional Common Stock units were credited to these deferred compensation accounts to reflect dividends paid on Common Stock, as follows: Mr. Baukol 10 units, Mr. Buhrmaster 10 units, Mr. Buxton 5 units, Ms. Cooper 25 units, Mr. Nassau 39 units, Mr. Olseth 39 units, Mr. Steinhafel 3 units, Mr. Twomey 5 units and Mr. Wingate 39 units.

      Other Arrangements. An outside director may elect to defer receipt of Board compensation under the Deferred Compensation Plan for Non-Employee Directors. Interest is accrued quarterly on deferred cash amounts at the average prime rate charged by U. S. Bank National Association, Minneapolis, Minnesota (ranging from 9.50% to 6.57% in Fiscal 2001). Deferred stock compensation is credited as Common Stock units, which then earn dividends that are reinvested as additional units. Ms. Harless has deferred her Common Stock awards and her account was credited with three Common Stock units for dividends paid. Ms. Cooper and Ms. Harless have deferred all or a portion of their cash compensation and their accounts were credited with interest at the rates described above.

      Each director is a party to an indemnification agreement that assures the director of indemnification and advancement of expenses to the fullest extent permitted by Delaware law and the Company’s Certificate of Incorporation, and of continued coverage under the Company’s directors and officers liability insurance, to the extent it is maintained.

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SUMMARY COMPENSATION TABLE

      The table below shows compensation of the Company’s Chief Executive Officer and the named executive officers for the last three fiscal years. The named executive officers include the four most highly compensated executive officers other than the CEO, who were serving as executive officers on October 31, 2001. Mr. McIntosh retired from Toro effective January 31, 2002.

[Additional columns below]

[Continued from above table, first column(s) repeated]

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Employment Agreements

      Each of the executive officers, including those named in the Summary Compensation Table, is a party to a change of control employment agreement adopted in Fiscal 1995 and amended in Fiscal 1998. The agreements are operative only upon the occurrence of a “change in control”, which includes substantially those events described below. Absent a change in control, the agreements do not require the Company to retain the executives or to pay them any specified level of compensation or benefits.

      Each agreement provides that for three years after a change in control, there will be no adverse change in the executive’s salary, bonus opportunity, benefits or location of employment. If during this three year period the executive’s employment is terminated by the Company other than for cause, or if the executive terminates his employment for good reason (as defined in the agreements, and including compensation reductions, demotions, relocation and excess travel), or voluntarily during the 30 day period following the first anniversary of the change in control, the executive is entitled to receive all accrued salary and annual incentive payments through the date of termination and, except in the event of death or disability, a lump sum severance payment (“Lump Sum Payment”) equal to three times the sum of base salary and annual bonus (and certain insurance and other welfare plan benefits). Further, in the event an excise tax is imposed on payments under the agreement, an additional payment (“gross-up”) is required in an amount such that after the payment of all taxes, both income and excise, the executive will be in the same after-tax position as if no excise tax under the Internal Revenue Code had been imposed.

      Generally, and subject to certain exceptions, a change in control is deemed to have occurred if: (1) a majority of Toro’s Board of Directors becomes comprised of persons other than persons for whose election proxies have been solicited by the Board, or who are then serving as directors appointed by the Board to fill vacancies caused by death or resignation (but not removal) of a director or to fill newly created directorships; (2) another party becomes the beneficial owner of at least 15% of Toro’s outstanding voting stock; or (3) Toro’s stockholders approve a definitive agreement or plan to merge or consolidate Toro with another party (other than certain limited types of mergers), to exchange shares of voting stock of Toro for shares of another corporation pursuant to a statutory exchange, to sell or otherwise dispose of all or substantially all of Toro’s assets, or to liquidate or dissolve Toro.

      If a change in control of the Company had occurred on January 1, 2002 and had resulted in the involuntary termination of the named executives at such time or the termination by such executives for good reason, the Lump Sum Payment to be made to the Chief Executive Officer and the named executive officers in the aggregate would have been approximately $9,898,299. The Company has also established a trust for the benefit of these officers which, in the event of a change of control, must be funded in an amount equal to the Company’s accrued liability related to such agreements.

      The Company has two stock option plans, The Toro Company 1993 Stock Option Plan (the “1993 Plan”) and The Toro Company 2000 Stock Option Plan (the “2000 Plan”). The plans are administered by the Compensation Committee which selects employees to whom options are granted. Of the 1,600,000 shares of Common Stock authorized to be issued under the 1993 Plan, 2,043 remain available for new option grants, and of the 1,000,000 shares authorized to be issued under the 2000 Plan, 147,120 are available for new option grants. The Board has proposed amending the 2000 Plan to increase by 500,000 the shares authorized under the plan. The exercise price of an option must be not less than 100% of the fair market value of the Common Stock on the date of grant and an option may not be repriced, once granted. Options are not transferable except by will or the laws of descent and distribution. Options may have a term of up to ten years, and may be exercised immediately after grant, using cash, stock or a cashless method through a broker. For additional information on the 2000 Plan, see Proposal Four.

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      The following table shows options granted under the 2000 Plan during Fiscal 2001 to the Chief Executive Officer and the named executive officers.

      The following table summarizes stock options exercised by the Chief Executive Officer and the named executive officers during Fiscal 2001 and the total number of options held by each listed individual as of October 31, 2001.

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      The following table shows awards of long term incentive compensation made under the Performance Share Plan to the Chief Executive Officer and the named executive officers during Fiscal 2001.

[Additional columns below]

[Continued from above table, first column(s) repeated]

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      The following graph depicts total cumulative stockholder return (assuming reinvestment of dividends) of Toro Common Stock, the S&P 500 Index and an industry peer index for the preceding five fiscal years commencing with Fiscal 1997.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN

      This graph assumes $100 invested on October 31, 1996 in the Common Stock, the S&P 500 Index and the peer group index including reinvestment of dividends.

      The industry peer index is based on the Fortune 500 Industrial and Farm Equipment Index for 2000, the most recent year available, which includes: York International Corporation, Briggs & Stratton Corporation, Dover Corporation, Cummins Engine Company, Inc., Crane Co., Tecumseh Products Company, Ingersoll-Rand Company, NACCO Industries, Inc., Parker-Hannifin Corporation, Deere & Company, Timken Company, Baker-Hughes Incorporated, Caterpillar Inc., The Black & Decker Corporation, American Standard Companies, Inc., AGCO Corporation, Kennametal Inc., Teleflex, Cooper Cameron Corporation, Smith International, Inc., Terex Corporation, Nortek, Inc., Milacron Inc., ITT Industries, Inc., Unova, Inc. and Weatherford International, Inc. Three new companies added were APW Ltd., Lam Research Corporation and Pall Corporation. Harnischfeger Industries Inc. was removed from the index.

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      This report is furnished by Toro’s Compensation Committee of the Board of Directors, which reviews, establishes and approves changes to compensation policies and administers compensation plans for executive officers of the Company.

General Policies

      The compensation policies of the Company are designed to attract, retain and motivate highly qualified executives, to assure that the Company competes successfully for executive talent to accomplish the Company’s goals and to compensate executive officers for performance. A substantial portion of total compensation of individual executive officers is contingent upon achievement of financial goals of the Company and its divisions, and is linked to the Company’s stock price.

      The Committee bases its executive compensation decisions on an independent evaluation by a professional compensation consulting firm of the market competitiveness of Toro’s officer compensation program. The Committee establishes a target total compensation package for each executive position, usually within a 5% range of the median market level for similar positions in businesses with revenues comparable to those of the Company, but subject to adjustment to reflect level of experience.

Base Salary

      The Committee establishes a base salary range for each executive position, reflecting median base salaries for the comparative group. Although surveys may be conducted annually, salaries are adjusted only if market surveys indicate adjustment is necessary, so that greater weight remains on the variable incentive portion of the compensation package described below.

      A base salary within the market range is set for each executive by considering the experience and individual performance of the executive. For Fiscal 2001, base salaries for the named executive officers and Mr. Melrose were approximately 4.6% higher than the prior year, and were at the median market level. Mr. Melrose’s salary with respect to Fiscal 2001 was set at $656,663 based on the same method used in establishing other executive officers’ base salaries. For compensation purposes, the Committee evaluates Mr. Melrose’s performance on an annual basis. The other named executive officers receive evaluations by Mr. Melrose, which are used by the Committee in establishing base salaries.

Incentive Compensation

      An executive of the Company will earn total compensation that is market competitive only if incentive compensation tied to achievement of corporate financial performance goals is earned. If goals are exceeded, incentive compensation can cause total compensation to exceed median market levels. Total compensation for both Fiscal 2001 and Fiscal 2000 was above median market levels, reflecting Toro’s strong financial performance, with long term incentive compensation for the three year period of Fiscal 1999 to 2001 above median market levels and annual incentive compensation at median market levels. The incentive components of compensation are intended to encourage achievement of both short term and long term financial and operational objectives. The Committee has also increasingly placed emphasis on compensation tied to the market price of the Company’s Common Stock. For many years the Committee has granted stock options to its executives, and in Fiscal 1999, the Committee began to make awards under the Performance Share Plan. Under this plan, compensation is paid exclusively in the form of shares of Common Stock.

      For Fiscal 2001 and for the three year period ending with Fiscal 2001, the Company achieved its performance goals above target levels, so that 73.5% of Mr. Melrose’s total compensation (excluding the value of stock option grants and stock option exercise gains) consisted of incentive payments, and his total compensation package was at median market levels. The portion of other officers’ total compensation attributable to incentive award payments other than option gains was approximately 65%. Mr. Melrose’s compensation for Fiscal 2001 also included $9,347,018 in gains on stock options exercised during the year. $8,403,590 of the gain was attributable to exercise of options on 300,000 shares of Common Stock, granted to

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      Annual Incentive Compensation.  Under the Company’s stockholder-approved Annual Plan, executive officers and other key employees are eligible to receive an annual cash bonus based on a percentage of base salary (determined by the executive officer’s position) and the Company’s achievement of performance goals and, for most participants, division and individual performance. If performance goals are exceeded, award amounts increase up to a pre-established maximum, but not more than 200% of the target award amount. If goals are not met, awards are reduced or not paid at all. Proposed participants in the Annual Plan are recommended by management and selected by the Committee. The target award amount for Mr. Melrose is 60% of his base salary and for the other named executive officers is 45%. The percentage is based on the executive’s salary grade and job position and not on individual factors. These percentages are proposed to be increased. See Proposal Two.

      The Committee may also select officers to receive Stock Retention Awards, which entitle an officer to convert up to 50% of a cash award payout to shares of Common Stock or deferred Common Stock units, and to receive one additional share of stock for each two shares acquired in the conversion. The Committee did not award Stock Retention Awards for Fiscal 2001 because it was generally satisfied that officers had achieved stock ownership guidelines and that other elements of compensation were adequate.

      Under the Annual Plan as in effect for Fiscal 2001, the Committee established earnings per share and “average net asset turns” performance goals as the basis for payment of a target award amount for each corporate participant. Target award amounts for division participants were based 50% on performance goals for corporate participants and 50% on division controllable profit contribution (net income before taxes and interest expense and before certain corporate allocations) and “division average current asset turns” performance goals. Under additional Strategic Performance Measure goals, a recipient’s pre-established cash payout may be increased by up to 20% of the award payment that would otherwise be made with respect to corporate and division performance goal achievement, but to not more than 200% of the target award. If the Strategic Performance Measure Goals are not achieved, an award payment may be reduced by as much as 20%. SPM goals established for Mr. Melrose and each of the named executive officers for Fiscal 2001 included customer care (warranty and fill rate compared to plan), asset management (field inventory compared to plan) and product innovation.

      The Company achieved its corporate performance goal for Fiscal 2001 at slightly above target, with average net asset turns exceeding the target goal, even though EPS performance was below the target. Bonus payments were made under the Annual Plan at 101.6% of target awards for corporate participants, including Mr. Melrose and the named executive officers. Participants from the Irrigation and Worldwide Agricultural Irrigation divisions and one Toro-owned distribution company did not receive award payments, because performance goals were not achieved at minimum levels. Award payments of between 75.1% (for the commercial division) and 145.8% of targets (for the consumer division) were made to other division participants based 50% on the respective division’s achievement of its performance goals and 50% on the Company’s achievement of corporate goals. The Committee did not adjust total payouts for Strategic Performance Measure goal performance for either Mr. Melrose or the named executive officers.

      Long Term Incentive Compensation.  Key employees may receive long term incentive compensation in the form of Performance Shares under the Performance Share Plan and stock options under the Company’s stockholder-approved plans.

      A recipient of a Performance Share Award may receive shares of Common Stock if the Company achieves pre-established performance goals. The number of shares covered by an award is based on a target dollar value that is a component of total compensation divided by the market value of the Common Stock prior to the time of the award, discounted for projected annual forfeitures. Under awards granted in Fiscal 1999 for the three year award period Fiscal 1999 to 2001, the Committee established performance goals

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      The Committee makes stock option grants pursuant to the Company’s stock option plans. Options are granted to all key management employees, including Mr. Melrose and the named executive officers, using a target dollar value that is a percentage of target total compensation and a Black-Scholes valuation of the Common Stock. All options granted under the stock option plans have exercise prices that are equal to fair market value at the date of grant. The options granted to Mr. Melrose and the named executive officers in Fiscal 2001 were exercisable immediately after grant and remain exercisable for a period of ten years. In Fiscal 2001, the Committee granted Mr. Melrose options to purchase a total of 51,000 shares.

      Section 162(m).  In making its decisions about compensation for Mr. Melrose and other officers likely to be named executive officers, the Committee considers Section 162(m) of the Internal Revenue Code, which limits to $1 million per year the compensation expense deduction the Company may take for compensation paid to a person who is “highly-compensated” for purposes of the Internal Revenue Code, unless the compensation is “performance-based”. Although the Company’s compensation levels have not historically resulted in total compensation in excess of $1 million for named executive officers other than Mr. Melrose, it is generally the policy of the Company that the components of executive compensation that are inherently performance-based should qualify for exclusion from the deduction limitation under Section 162(m). The Committee believes that annual incentive award payments under the Annual Plan, long term incentive award payments under the Performance Share Plan and stock options currently qualify as performance-based.

      The Committee believes, however, that while tax deductibility is an important factor, it is not the sole factor to be considered in setting executive compensation policy, and therefore reserves the right, in appropriate circumstances, to pay amounts in addition to base salary that might not be deductible. The Committee’s purpose in doing so is to assure that the Company retains its best executives and remains competitive in the market for executive talent.

      If non-performance-based compensation in excess of $1 million should become payable to a person who is “highly-compensated” for purposes of the Internal Revenue Code and regulations, the Committee may consider requiring deferral of receipt of any amounts earned in excess of the cap to a tax year following the year in which the individual leaves the employment of the Company.

Stock Ownership Guidelines

      In November 1997, the Committee adopted guidelines to encourage accumulation and retention of Toro Common Stock by officers of the Company, ranging from a goal of five times base salary for the Chief Executive Officer to two or three times for other corporate officers. The recommended time period for reaching the guideline is five years. Mr. Melrose and the named executive officers have met established guidelines. The Committee will continue to review compliance with the policy on an annual basis.

Approval of Incentive Plans

      All of the recommendations of the Committee with respect to compensation attributable to Fiscal 2001 were approved and adopted by the Board of Directors. In accordance with the Company’s past practice under Section 16 of the Securities Exchange Act of 1934 and Section 162(m), decisions regarding the grant of stock options and other awards continue to be made by the Committee and reported to and ratified by the Board.

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      The members of the Compensation Committee are Dale R. Olseth, Chair, Ronald O. Baukol, Janet K. Cooper, Katherine J. Harless, Robert H. Nassau and Christopher A. Twomey. None of these directors is or has been an officer or employee of the Company. Although Mr. Melrose is not a member of the Committee, he attends the meetings for the purpose of providing continuity and detailed information about employees and compensation plans. Mr. Melrose does not participate in any option grant or incentive award decision or any decision of the Committee that might affect him personally.

      Mr. Melrose serves on the Board of Directors and Compensation Committee of SurModics, Inc., of which Mr. Olseth serves as chairman and chief executive officer. Mr. Olseth serves on the Toro Board of Directors and is Chair of the Compensation Committee of the Company.

      At its December 4, 2001 meeting, the Compensation Committee recommended, and the Board of Directors ratified, an amendment to the Annual Plan to increase the maximum percentages of annual base salary (called a “Participation Factor” in the Annual Plan) that may be paid as annual bonuses to plan participants. The amendment increases the Participation Factor for the Chief Executive Officer by 15% to 75%, and Participation Factors for other officers, by 10 to 15%, depending on the position. (See Award Amounts below.) The Company’s compensation consultants recommended this amendment to keep the Company competitive in the market for executive talent. Although the amendment would allow a Participation Factor of 75% for the Chief Executive Officer and 55% for the other named executive officers, the Committee established a Participation Factor for the Fiscal 2002 award term of only 65% for the Chief Executive Officer and 50% for other named executive officers.

      Stockholders are asked to approve this amendment to ensure that payments made under the Annual Plan continue to qualify as “performance-based” for purposes of Section 162(m) of the Internal Revenue Code and in order to satisfy New York Stock Exchange guidelines relating to equity compensation for officers. If stockholder approval of the amendment is not received, the Compensation Committee will reconsider the amendment, the Annual Plan as previously approved by stockholders will continue in effect, and the Participation Factors in the Chief Executive Officer’s and the other named executive officers’ Annual Performance Awards for Fiscal 2002 will remain at prior maximum levels of 60% and 45%, respectively.

Description of the Annual Management Incentive Plan II

      Following is a summary of the material features of the Annual Plan. Capitalized terms have the meanings set forth in the Annual Plan.

      Purpose. The purpose of the Annual Plan is to enhance stockholder value by providing participants an annual incentive to reinforce achievement of the Company’s performance goals; to link a significant portion of a participating officer’s compensation to the achievement by the Company, and in certain cases, a division or individual, of Performance Goals; to attract, motivate and retain officers on a competitive basis; and to encourage selected officers of the Company for whom stock ownership goals have been established to acquire and retain Common Stock. See the Compensation Committee Report for information on stock ownership guidelines.

      Eligibility and Participation. Participation is limited to officers of the Company, including executive officers, who through their position or performance can have a significant, positive impact on the Company’s financial results, as determined by the Compensation Committee. The Company maintains a separate annual bonus plan for key employees who are not officers. Approximately 13 individuals are expected to receive awards under the Annual Plan each year.

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      Award Amounts. The Target Payout for an Annual Performance Award is based on a Participation Factor, which is intended to reflect a participant’s level of responsibility. As amended, the Participation Factors are as follows: up to 75% for the Chairman and Chief Executive Officer; up to 65% for the President and Chief Operating Officer, if one should be elected; up to 55% for other elected officers and up to 50% for appointed officers. Actual Participation Factors for any award may be set below the maximum percentage permitted.

      The Target Payout can be earned only if Performance Goals are achieved at levels established in advance by the Compensation Committee. The Committee may establish Maximum Payouts of up to 200% of Target Payouts in the event corporate and division goals are exceeded in an amount specified by the Committee. The Committee has the discretion to reduce an award payment by up to 20% of the amount that would otherwise be paid under a division payout formula to a division vice president or general manager based on the Committee’s evaluation of quality of performance. At the time an award is made the Committee may establish additional individual strategic performance measures called SPM Performance Goals. If an SPM Performance Goal is achieved, an award payment may be increased by up to 20% of the award payment that would otherwise be made with respect to corporate and division Performance Goal achievement, but to not more than 200% of the Target Payout. If SPM Performance Goals are not achieved, an award payment may be reduced by as much as 20%.

      Performance Goals. An award payment under an Annual Performance Award will be paid only upon the achievement of Performance Goals established by the Compensation Committee in writing not later than 90 days after the beginning of the fiscal year to which the Performance Goals relate. Performance Goal measures include revenue, revenue growth, cost of goods sold, earnings per share, earnings growth, return on average net assets, return on average total assets, return on average current assets, return on equity, average net asset dollar level, average current asset turns, average net asset turns, average inventory asset turns, division profit adjustment, division controllable profit contribution, division average asset dollars, economic value added, controllable value added, product innovation, asset management, customer satisfaction scores, customer care and fill rate. Supplemental Division Performance Goals for division participants may be based on any of the foregoing division specific operating performance goals including sustained earnings, product warranty experience, product recalls or inventory levels. SPM Performance Goals may be based on quantitative or qualitative factors, and may include, but are not limited to, aggressive revenue growth, sustained earnings initiative, warranty experience, product recalls, field inventory, acquisition experience, customer satisfaction (determined by such measurements as product innovation, asset management, product quality, warranty, on-time delivery, after-market service, customer care or customer satisfaction scores or survey results), inventory reduction and inventory turnover or any of the other Performance Goals listed. Stockholders have previously approved all of these Performance Goals.

      Maximum Award. The maximum amount that may be paid under an Annual Performance Award, whether in cash or in Common Stock or Common Stock units, to a Plan Participant who is or may become a person referred to in Section 162(m) of the Internal Revenue Code with respect to any fiscal year is $1,500,000. Stockholders have previously approved this maximum.

      Payment. Before any payment is made under the Annual Plan, the Committee must certify in writing, as reflected in the minutes, that the Performance Goals established with respect to an Annual Performance Award have been met. To the extent necessary with respect to any fiscal year, in order to avoid any undue windfall or hardship due to external causes, the Committee may make the determination as to whether a Performance Goal has been achieved without regard to the effect on the Performance Goal measure, as it may otherwise be presented in the financial statements, of any change in accounting standards, any acquisition by the Company not planned for at the time the Performance Goals are established or any Board-approved extraordinary or non-recurring event or item.

      Stock Retention Award. The Annual Plan authorizes the grant of Stock Retention Awards that may be used to encourage selected participants to increase their ownership of Toro Common Stock. Under a Stock Retention Award, a participant may elect to convert up to 50% of a cash award payment to shares of Common Stock, or defer the compensation into Common Stock units under the Officers Deferred Plan. For each two

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      Shares Authorized. The number of shares of Common Stock authorized for issuance under the Annual Plan is 100,000, subject to adjustment in the event of a corporate transaction involving the Company, the Common Stock or the Company’s corporate or capital structure, including but not limited to a stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, spin-off or other similar transaction, as described in more detail in the Annual Plan. Shares of Common Stock that may be issued under the Annual 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.

      Plan Amendment and Termination. The Committee may amend, suspend or terminate the Annual Plan at any time, with or without advance notice to plan participants, but no amendment to the plan will be effective that would increase the maximum amount that may be paid to a plan participant, that would change the stated performance goal criteria or that would modify the requirements as to eligibility for participation, unless the stockholders of the Company approve the change in accordance with the requirements of Section 162(m) of the Internal Revenue Code.

      Benefits. It is not presently possible to determine the dollar value of award payments that may be made, or the individuals who may be selected for such awards, in the future under this plan. Award payments made with respect to Fiscal 2001, Fiscal 2000 and Fiscal 1999 to the Chief Executive Officer and each of the named executive officers are shown in the bonus column of the Summary Compensation Table. Award payments made to all executive officers as group for Fiscal 2001 aggregated $1,271,644 and to all non-executive officer employees as a group aggregated $133,319. Non-executive directors (outside directors) are not eligible to participate in this plan.

      On December 4, 2001, the Compensation Committee recommended, and the Board of Directors ratified, an amendment to the Performance Share Plan to increase by 500,000, to 1,000,000 shares, the number of shares of Common Stock authorized for issuance pursuant to performance awards under the plan. Of the shares previously authorized, 183,390 have been issued and the remainder are subject to outstanding Performance Share Awards.

      Stockholders are asked to approve the amendment to ensure that incentive bonus payments made under the Performance Share Plan continue to qualify as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code and to satisfy New York Stock Exchange guidelines relating to equity compensation for officers. If stockholder approval of the amendment is not received, the Compensation Committee will reconsider the amendment and the present plan will remain in effect.

      The Board of Directors has also recently adopted two amendments that are not subject to stockholder approval. One amendment permits the Committee to cancel outstanding Performance Shares prior to vesting of an award if it determines that Performance Goals cannot be achieved at maximum levels, as described below under the caption “Scale Back”. The other modifies vesting provisions in the event of a participant’s retirement.

Description of the Performance Share Plan

      Following is a summary of the material features of the Performance Share Plan. Capitalized terms have the meanings set forth in the plan.

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      Purpose. The purpose of the Performance Share Plan is to enhance long term stockholder value by reinforcing the incentives of key employees to achieve long term performance goals of the Company, to link a significant portion of a participant’s compensation to the achievement by the Company of performance goals and to the value of the Common Stock and to attract, motivate and retain executives on a competitive basis. The purpose of the Performance Share Plan is intended to be achieved by the grant of Performance Shares. A Performance Share is the right to receive shares of Common Stock (or Common Stock units) if the Company achieves Performance Goals over a three year Award Term. A shorter Award Term may be used for new participants.

      Eligibility and Participation. Participation in the plan is limited to key employees of the Company who are in a position to have a significant, positive impact on the Company’s financial results and who are selected by the Compensation Committee. Approximately 14 individuals are expected to receive awards under the plan annually.

      Performance Goals. Performance Shares will vest and be payable only upon achievement of performance goals established in advance by the Committee. Performance Goal measures include cumulative earnings, cumulative earnings per share, profit after tax, net income, return on invested capital, invested capital dollars, earnings per share, average net assets, after-tax interest expense, return on average net assets, average net asset turns, cumulative average net asset turns, return on equity, return on beginning equity, revenue growth, earnings growth, economic value added, fill rate, customer care and customer satisfaction scores. The Performance Goals have previously been approved by stockholders.

      Maximum Award. The maximum number of Performance Shares that may be granted to a plan participant with respect to any Award Term is 100,000 shares, subject to adjustment to give effect to adjustments in the Common Stock or changes in the corporate structure of the Company. This maximum has previously been approved by stockholders.

      Payment. Before any payment or delivery of Common Stock is made under the plan to any participant who is a person referred to in Section 162(m) of the Internal Revenue Code, the Compensation Committee must certify that the performance goals established with respect to the award have been achieved. Award payments are made in Common Stock, although a participant may defer award compensation into Common Stock units in accordance with the Officers Deferred Plan.

      Change of Control. In the event of a change of control of the Company (as defined in the Performance Share Plan), Performance Shares that have been awarded but have not yet vested will vest and become immediately payable.

      Scale Back. At any time during an Award Term of more than one fiscal year, the Compensation Committee may in its discretion cancel a portion of the Performance Shares in any Performance Share Award prior to the conclusion of the Award Term (a “scale back”), if the Performance Share Award has not yet vested and if the Committee determines, based on financial information contained in the Company’s financial statements or similar internal reports, that the Performance Goals for the Award Term cannot be achieved at the maximum levels established at the time of grant. Performance Share Awards must be scaled back in proportion to the estimated shortfall in achievement of Performance Goals from maximum levels, and once scaled back, may not again be increased to add or recover Performance Shares that were canceled. Performance Shares canceled in a scale back become available to the Compensation Committee for grant of new Performance Share Awards for any future Award Term. This provision may not be used in any manner that could have the effect of repricing a previous Performance Share Award grant.

      Miscellaneous. Neither Performance Shares nor Performance Share Awards may be transferred. A participant may receive payment pursuant to a Performance Share Award only while an employee and only if continuously employed since the date the award was granted, except that in the event of death, disability or retirement as defined in the plan, shares of Common Stock will be delivered with respect to an award if otherwise earned, subject to proration to reflect the portion of the applicable Award Term completed at the date of death, disability or retirement.

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      Shares Authorized. The number of shares of Common Stock authorized for issuance under the Performance Share Plan as amended is 1,000,000, subject to adjustment in the event of a stock split, recapitalization or similar change affecting the Company, the Common Stock or the capital structure of the Company, as described in the Performance Share Plan. Shares of Common Stock that may be issued under the Performance Share 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.

      Plan Amendment and Termination. The Committee may amend, suspend or terminate the Performance Share Plan at any time, with or without advance notice to plan participants, but no amendment to the plan will be effective that would increase the maximum number of Performance Shares that may be granted to a plan participant, that would change the stated performance goal criteria or that would modify the requirements as to eligibility for participation, unless the stockholders of the Company approve the change in accordance with the requirements of Section 162(m).

      Benefits. It is not presently possible to determine the dollar value of award payments that may be made, or the individuals who may be selected for such awards, in the future under this plan. Award payments with respect to the three year Award Term of Fiscal 1999 to 2001 made to the Chief Executive Officer and each of the named executive officers are shown in Note (3) to the Summary Compensation Table, and grants of awards for the three year Award Term of Fiscal 2001 through 2003 are shown in the Long Term Incentive Compensation table. The dollar value of Performance Shares awarded to all executive officers as a group in Fiscal 2001 with respect to the Award Term of Fiscal 2001 through Fiscal 2003 aggregated $4,095,525 and to non-executive officer employees as a group aggregated $430,400. The values are based on the closing price of Toro Common Stock on December 5, 2000, the date of grant. Non-executive directors (outside directors) are not eligible to participate in this plan.

      At its December 4, 2001 meeting, the Compensation Committee recommended, and the Board of Directors ratified, an amendment to The Toro Company 2000 Stock Option Plan to increase by 500,000, the number of shares of Common Stock authorized for issuance pursuant to options to be granted under the plan.

      Because only 2,043 shares remain available for the grant of options under the 1993 Plan (which will terminate on August 17, 2003 for purpose of granting options) and because only 147,120 of the 1,000,000 previously authorized shares remain available for grants under the 2000 Plan, the Board of Directors wishes to provide for additional shares of Common Stock to be made available for the grant of options to key employees.

      Stockholders are asked to approve the amendment to qualify options for treatment as incentive stock options for purposes of Section 422 of the Internal Revenue Code, to qualify compensation under the 2000 Plan as performance-based for purposes of Section 162(m) of the Internal Revenue Code, and in order to satisfy New York Stock Exchange guidelines relating to equity compensation for officers. If stockholder approval is not received, the Compensation Committee will reconsider the amendment to the 2000 Plan and the present plan will remain in effect.

      The Board of Directors has also recently adopted an amendment to prohibit repricing of options. That amendment is not subject to stockholder approval.

Summary of the 2000 Plan Features

      Following is a summary of the material features of the 2000 Plan.

      Purpose. The purpose of the 2000 Plan is to enhance stockholder value by providing an incentive to key employees, including executive officers, and consultants, to contribute significantly to long term performance and growth of the Company, to link a significant portion of a participant’s compensation to the value of the Common Stock and to attract and retain experienced and knowledgeable employees on a competitive basis.

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      Eligibility and Participation. Any employee 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 long term performance objectives of the Company, is eligible to participate in the 2000 Plan. The Compensation Committee has the power to select individuals to whom options will be granted. At the present time, approximately 100 employees are eligible to participate in the plan.

      Award of Options and Terms. Options may be granted either as incentive stock options under Section 422 of the Internal Revenue Code, or as nonqualified options. The term of each option will be fixed by the Committee, subject to the requirements of Section 422 for incentive stock options but no option may have a term longer than ten years. The exercise price of an option may not be less than 100% of fair market value of the Common Stock on the date of grant. After an option is granted, the exercise price may not be reduced. The market value of one share of the Common Stock on the New York Stock Exchange on January 17, 2002 was $46.20.

      An option may not be transferred except by will or the laws of descent and distribution. During the lifetime of the option holder, the option may be exercised only by the option holder and only while an employee of the Company or a parent or subsidiary of the Company and only if continuously so employed since the date the option was granted, unless the Committee provides otherwise. If the Committee does not establish other provisions at the time of grant, an option (1) may be exercised not later than the earlier of the date the option expires or one year after termination by reason of disability or death, (2) may be exercised not later than the earlier of the date the option expires or up to four years after the date of retirement as defined in the 2000 Plan or (3) may be exercised for up to three months after termination for reasons other than disability, death or retirement. In the event an option holder terminates employment or performance of services and is employed or retained by a competitor of the Company within one year, or violates a confidentiality or similar agreement with the Company or engages in conduct detrimental to the Company, any outstanding options held by such person may be canceled or rescinded and the Company will have the right to the return of the economic value of any option realized during the 12 month period prior to the option holder’s termination of employment or service.

      The Committee may include a provision in an option permitting the grant of a new option when payment of the exercise price of the option is made in shares of Common Stock (an accelerated ownership option). The terms of the accelerated ownership option would be the same as those of the original option, except that the exercise price would be the fair market value at the date of grant of the new accelerated ownership option. The Committee has not granted any of these options in the past.

      The 2000 Plan provides that the Committee may permit exercise of an option by a variety of methods, including payment in cash or shares of Common Stock or a combination of cash and shares of Common Stock, or a same day sale through a brokerage firm in accordance with regulations of the Federal Reserve Board.

      Maximum Award. The maximum number of shares that may be covered by options granted to any individual during any calendar year is 100,000. To the extent that the aggregate fair market value (as of the grant date) of Common Stock with respect to which incentive stock options are exercisable for the first time during any calendar year by an individual exceeds $100,000 or such other limit as may be required by the Internal Revenue Code, options that exceed such limit will be treated as nonqualified options.

      Change of Control. In the event of a change of control of the Company as defined in the 2000 Plan, all unvested options will fully vest, unless otherwise limited by the Committee at the time of grant.

      Plan Amendment and Termination. The 2000 Plan may be amended, suspended or terminated at any time by the Board of Directors, but no amendment that would increase the maximum number of shares that may be subjected to options or that may be awarded to a person referred to in Section 162(m) of the Internal Revenue Code or that would modify requirements as to eligibility for participation in the plan will be effective without approval of the stockholders, in accordance with the Internal Revenue Code. No amendment to the 2000 Plan may, without the consent of the option holder, alter or impair any option previously granted under the 2000 Plan. The 2000 Plan will remain in effect until all shares of Common Stock reserved for issuance

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      Shares Authorized. The number of shares authorized for issuance under the 2000 Plan as amended is 1,500,000, subject to adjustment in the event of a stock split, recapitalization or other similar change affecting the Common Stock. Shares of Common Stock to be issued upon the exercise of options 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. Shares of Common Stock covered by options that terminate without being exercised will again be available for option grants.

      Benefits. It is not presently possible to determine the dollar value of award payments that may be made, or the individuals who may be selected for such awards, in the future under this plan. Stock option grants under the 2000 Plan made in Fiscal 2001 to the Chief Executive Officer and each of the named executive officers are shown in the Summary Compensation Table and the Stock Options table. Options granted in Fiscal 2001 to all executive officers as a group aggregated 145,300 and to all non-executive officer employees as a group aggregated 202,253. Non-executive directors (outside directors) are not eligible to participate in this plan.

Tax Consequences Under the Plan

      Following is a brief description of the federal income tax treatment that will generally apply to options granted under the 2000 Plan, based on the Internal Revenue Code as presently in effect.

      With respect to incentive stock options, generally, the option holder is not taxed and the Company is not entitled to a deduction on either the grant or the exercise of an incentive stock option, so long as the requirements of Section 422 of the Internal Revenue Code continue to be met. If the option holder meets the employment requirements and does not dispose of the shares of Common Stock acquired upon exercise of an incentive stock option until at least (1) one year after transfer of the shares pursuant to the exercise of the option and (2) two years after the date the option was granted, gain or loss realized on sale of the shares will be treated as long term capital gain or loss. If the shares of Common Stock are disposed of before those periods expire, which is called a disqualifying disposition, the option holder will be required to recognize ordinary income in an amount equal to the lesser of (1) the excess, if any, of the fair market value of the Common Stock on the date of exercise over the exercise price or (2) if the disposition is a taxable sale or exchange, the amount of gain realized. Upon such a disqualifying disposition, the Company will generally be entitled, at the same time, to a deduction equal to the amount of ordinary income recognized by such person.

      The grant of an option that does not qualify for treatment as an incentive stock option is generally not a taxable event for the option holder. Upon exercise of the option, the option holder will generally be required to recognize ordinary income in an amount equal to the excess of the fair market value of the Common Stock acquired upon exercise (determined as of the date of exercise) over the exercise price of the option, and the Company will be entitled to a deduction in an equal amount.

      Option agreements under the 2000 Plan may provide for accelerated vesting in the event of a change of control of the Company. If such a provision becomes effective, certain amounts with respect to benefits derived may be characterized as “parachute payments” under provisions of the Internal Revenue Code. If such provisions are applicable, an employee will be subject to a 20% excise tax on any “excess parachute payment” pursuant to Internal Revenue Code Section 4999 and the Company will be denied a deduction with respect to such excess parachute payment pursuant to Internal Revenue Code Section 280G. An employee generally is deemed to have received a “parachute payment” if such employee receives compensation that (1) is contingent upon a change in the ownership or control of the Company and (2) exceeds, in the aggregate, an amount equal to three times the employee’s “base amount”. The “base amount” generally is the average of the annual compensation of such employee for the five years preceding the change in ownership or control. An “excess parachute payment” with respect to any employee is the excess of the total parachute payments to such person over such person’s base amount.

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      KPMG LLP has served as independent auditors to the Company for many years. The Audit Committee of the Board of Directors has again selected KPMG LLP to serve as independent auditors for Fiscal 2002. Although it is not required to do so, the Board of Directors wishes to submit the selection of KPMG LLP for stockholder approval at the meeting. Even if the selection is ratified, the Board of Directors and Audit Committee may in their discretion change the appointment at any time during the year, if they determine that such a change would be in the best interests of Toro and its stockholders.

      Audit Fees. The aggregate fees billed by KPMG LLP for professional services rendered for the audit of the Company’s annual financial statements for Fiscal 2001 and for the reviews of the financial statements included in Toro’s Quarterly Reports on Form 10-Q for Fiscal 2001 were $564,000.

      Financial Information Systems Design and Implementation Fees. Toro did not require the services of KPMG LLP for financial information systems design and implementation for Fiscal 2001.

      All Other Fees. The aggregate fees billed for services rendered by KPMG LLP, other than services described above under “Audit Fees”, for Fiscal 2001 were $249,000, primarily for income tax compliance and planning.

      The Audit Committee has considered whether the provision of the non-audit services is compatible with maintaining the KPMG LLP’s independence as Toro’s principal accountant.

      The Company has been informed by KPMG that no persons other than KPMG LLP’s full-time, permanent employees spent time on the KPMG LLP engagement to audit Toro’s financial statements for Fiscal 2001.

Stockholder Proposals for 2003 Annual Meeting

      The 2003 Annual Meeting of Stockholders is expected to be held on March 13, 2003. If you wish to make a proposal to be included in the Company’s Proxy Statement for the 2003 Annual Meeting, you must assure that the proposal is received by the Secretary of the Company no later than the close of business on October 4, 2002, unless the date of the meeting is delayed by more than 30 calendar days.

      If you wish to nominate a candidate for election to the Board of Directors or propose other business at the 2003 Annual Meeting, you must give complete and timely written notice to the Secretary of the Company, in accordance with the Company’s Bylaws. The deadline for the 2003 Annual Meeting is not later than December 18, 2002 nor earlier than November 3, 2002, unless the date of the meeting is advanced by more than 30 days or delayed by more than 60 days. If you would like a copy of Toro’s Bylaws, you may write to Toro’s Corporate Secretary. If a proposal is not timely and properly made in accordance with the procedures set forth in the Bylaws, it will be defective and may not be brought before the meeting. If the proposal is nonetheless brought before the meeting and the chairman of the meeting does not exercise the power and duty to declare the proposal defective, the persons named in the proxy may use their discretionary voting with respect to the proposal.

Annual Report

      The Annual Report on Form 10-K of the Company for Fiscal 2001 (the fiscal year ended October 31, 2001) is enclosed. The Form 10-K includes consolidated financial statements and notes, selected financial data and Management’s Discussion and Analysis of Financial Condition and Results of Operations. The Form 10-K is inserted in the pocket of The Toro Company Corporate Profile Fiscal Year 2001, which contains information about Toro’s businesses, but is not part of the Company’s disclosure deemed to be filed with the Securities and Exchange Commission.

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Cost and Method of Solicitation

      The Company will pay the cost of soliciting proxies and may make arrangements with brokerage houses, custodians, nominees and other fiduciaries to send proxy material to beneficial owners of the Common Stock. The Company will reimburse them for reasonable out-of-pocket expenses. In addition to solicitation by mail, certain officers and employees of the Company, who will receive no compensation for such services other than regular employee compensation, may solicit proxies by telephone, electronic transmission and personally. The Company has retained Morrow & Co., for an estimated fee of $7,500 plus out-of-pocket costs and expenses, to assist in distributing proxy materials and in making mail, telephone and personal solicitation of proxies.

Other Matters

      The Company’s management knows of no other matters that may come before the Annual Meeting. However, if matters other than those referred to above should properly come before the Annual Meeting, the persons named on the enclosed proxy card intend to vote such proxy in accordance with their best judgment.

Dated: January 31, 2002		BY ORDER OF THE BOARD OF DIRECTORS J. LAWRENCE MCINTYRE Vice President, Secretary and General Counsel

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      Appendix provided pursuant to Schedule 14A, Item 10, Instruction 3. The Company intends to register shares of Common Stock provided for under The Toro Company Performance Share Plan and The Toro Company 2000 Stock Option Plan as soon as practicable after March 14, 2002.

The Toro Company Annual Management Incentive Plan II
The Toro Company Performance Share Plan
The Toro Company 2000 Stock Option Plan

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The Toro Company
Annual Management Incentive Plan II

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The Toro Company
Performance Share Plan

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THE TORO COMPANY
2000 STOCK OPTION PLAN

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