Exhibit 10(e)
THE TORO COMPANY
1989 STOCK OPTION PLAN
1. PURPOSE. The purpose of the 1989 Stock Option Plan (the "Plan") is to
advance the interests of The Toro Company (the "Company") and its
stockholders by providing an incentive to certain employees of the
Company and its subsidiaries and to certain other key individuals who
perform services for the Company and its subsidiaries, to contribute
significantly to the strategic and long-term performance objectives and
growth of the Company and its subsidiaries. This purpose is expected to
be achieved by granting options to acquire the Common Stock, $1.00 par
value, and related preferred share purchase rights of the Company (the
"Common Stock"). Subject to the provisions of the Plan, options may
contain such terms and conditions as shall be required so as to be either
nonqualified stock options ("nonqualified options") or incentive stock
options ("Incentive Stock Options") as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Subject to such
limits as may be imposed by the Plan, nonqualified options or Incentive
Stock Options or both may be granted to an eligible individual.
2. EFFECTIVE DATE. The effective date of the Plan shall be August 8, 1989.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Compensation Committee (the "Committee") of the Board of Directors of the
Company (the "Board"), provided that members of the Committee shall be
Non-employee Directors as contemplated by Rule 16b-3 promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act") or any
successor rule and shall qualify to administer the Plan as contemplated
by Section 162(m) of the Code and the regulations thereunder
("Section 162(m)"). A majority of the members of the Committee shall
constitute a quorum for any meeting of the Committee and the acts of a
majority of the members present at any meeting at which a quorum is
present or the acts unanimously approved in writing by all members of
the Committee shall be the acts of the Committee. The decision of the
Committee on any matter affecting the Plan and obligations arising
under the Plan or any option granted thereunder shall be deemed final
and binding upon all persons. No member of the Board or of the
Committee shall be liable for any action or determination taken or made
in good faith with respect to the Plan or any option granted thereunder.
Committee members shall be reimbursed for out-of-pocket expenses
reasonably incurred in the administration of the Plan.
Subject to the express provisions of the Plan, the Committee shall have
plenary authority, in its discretion, to interpret the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan;
to determine the exercise price of each option to purchase Common Stock,
the individuals to whom and the time or times at which options shall be
granted, the number of shares to be subject to each option, when an
option may be exercisable and the other terms and provisions (and
amendments thereto) of the respective option agreements (which need not
be identical); to determine whether a particular option is to be an
Incentive Stock Option and the terms and provisions thereof that shall be
required in the judgment of the Committee to provide therefor or to
conform to any change in any law or regulation
applicable thereto, or to any other law or regulation that may hereafter
become effective to provide similar or related tax benefits to option
holders; and to make all other determinations deemed necessary or
advisable for the administration of the Plan.
4. COMMON STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided in
this paragraph and subject to increase by amendment of the Plan, the
total number of shares of Common Stock that is reserved and available for
issuance pursuant to options granted under the Plan shall be 1,700,000
shares. If any option granted hereunder terminates, expires unexercised,
is exchanged for other options without the issuance of shares of Common
Stock or is exercised by the delivery or constructive delivery of shares
of Common Stock already owned by the option holder, the shares of Common
Stock reserved for issuance pursuant to such option shall, to the extent
of any such termination or to the extent shares covered by an option are
not issued or used, again be available for option grants under the Plan.
Any shares issued by the Company in connection with the assumption or
substitution of outstanding grants from any acquired corporation shall
not reduce the shares available for option grants under the Plan. Shares
of Common Stock that may be issued hereunder may be authorized but
unissued shares, reacquired or treasury shares, or outstanding shares
acquired in the market or from private sources, or a combination thereof.
Appropriate adjustments in the number of shares of the Common Stock that
may be available for option grants under the Plan and adjustments in the
option price per share of outstanding options may be made by the
Committee in its discretion to give effect to adjustments made in the
number of shares of Common Stock of the Company through any merger,
consolidation, recapitalization, reclassification, combination, stock
dividend, stock split or other similar change in the corporate structure
of the Company affecting the Common Stock, or a sale by the Company of
all or part of its assets or any distribution to stockholders other than
a normal cash dividend.
5. ELIGIBILITY. Options may be granted to any employee of the Company or any
subsidiary thereof who is regularly employed in an executive, managerial,
professional or technical position, and to any other individual who
performs services for the Company or any subsidiary and who contributes
significantly to the strategic and long-term performance objectives of
the Company and its subsidiaries. Options may be granted to directors of
the Company who are also employees of the Company. More than one option
may be granted to the same individual. No option may be granted to an
individual who owns, directly or indirectly, Common Stock or other
capital stock of the Company possessing more than 5% of the total
combined voting power or value of any class of capital stock of the
Company or a subsidiary immediately after such option is granted. Except
for the foregoing limitations, there is no minimum or maximum number of
shares of Common Stock with respect to which options may be granted to
any individual under the Plan. Individuals to whom options are granted
are at times referred to as "option holders".
6. DURATION OF THE PLAN. The Plan shall remain in effect until all shares
reserved for issuance pursuant to the Plan shall have been purchased
pursuant to options granted under the Plan, provided that options under
the Plan must be granted within ten years from the effective date of the
Plan.
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7. GENERAL TERMS OF OPTIONS. Options shall be evidenced by stock option
agreements in such form and not inconsistent with the Plan as the
Committee shall approve from time to time, which agreements shall contain
in substance the following terms and conditions:
A. DATE OF GRANT. An option agreement shall specify the date of
grant, which shall be the date on which the Committee grants an
option or any later date which the Committee specifically
designates.
B. NUMBER OF SHARES OF COMMON STOCK. An option agreement shall
specify the number of shares of Common Stock to which it pertains.
Notwithstanding any other provision of the Plan, the maximum
number of shares that may be covered by any option grant during
any calendar year shall be 100,000 shares.
C. EXERCISE PRICE. The exercise price of all stock options will be
granted at fair market value, except for performance based stock
options, such as those granted in connection with the Continuous
Performance Award Plan, where the exercise price is an average and
on the date of grant could be higher or lower than fair market
value. Fair market value is generally determined to be the
closing price for the Common Stock on the New York Stock Exchange
as reported by The Wall Street Journal or other readily available
quotation of composite transactions.
D. TERM OF OPTIONS. The term of each option shall be fixed by the
Committee.
E. EXERCISABILITY AND TRANSFERABILITY.
(i) The Committee shall have the authority to determine whether
an option agreement shall specify periods after the date of
grant of an option during which the option or any portion
thereof may not yet be exercisable, including provisions
applicable to persons subject to Section 16 of the Exchange
Act.
(ii) During the lifetime of an option holder, options 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
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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.
(e) In the event a salary replacement option is
granted by the Committee and the option
holder is involuntarily terminated during the
option term or becomes disabled or dies, the
Committee shall have the right to grant to
the option holder or his personal
representative, as the case may be, the right
to request either (1) that the option be
cancelled and the option holder or his estate
be paid an amount equal to the compensation
the option holder has given up from the date
of grant to the date of such termination,
disability or death together with interest at
the prime rate less the then market gain on
that portion of the shares covered by the
option which is then vested; or (2) that the
stock option accelerates such that the option
be deemed to have vested at an appropriate
rate per month (as determined by the
Committee) from the date of grant to the last
date of the month in which the date of
termination, disability or death occurs, such
accelerated option to be then exercisable for
a period of three years following such date
but only with respect to an option
exercisable at the time such individual
ceases to be an employee.
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(iii) Notwithstanding any provision of this paragraph 7.E, if
within one year after the termination of employment with or
performance of services for the Company, an option holder
is employed or retained by a company that competes with the
business of the Company or such individual violates any
confidentiality agreement with the Company, the Company may
cancel and rescind all options held by such individual and
demand return of the economic value of any option which was
realized or obtained (measured at the date of exercise) by
such individual at any time during the period beginning on
the date which is twelve months prior to the date of
termination provided, however, that this provision shall
not be applicable in the event of a Change of Control.
(iv) Absence on leave or any other interruption in the
performance of services by an option holder with the
Company shall, if approved by the Committee, not be deemed
a cessation or interruption of employment or services for
the purposes of the Plan.
(v) No option shall be assignable or transferable by the
individual to whom it is granted except that it may be
transferable by will or the laws of descent and
distribution.
(vi) In no event shall any option be exercisable at any time
after its expiration date unless extended by the Committee.
When an option is no longer exercisable, it shall be deemed
to have lapsed or terminated.
F. METHODS OF EXERCISE. Subject to the terms and conditions of the
Plan and the terms and conditions of the option agreement, an
option may be exercised in whole at any time or in part from time
to time, by delivery to the Company at its principal office of a
written notice of exercise specifying the number of shares with
respect to which the option is being exercised, accompanied by
payment in full of the exercise price for shares to be purchased
at that time. Payment may be made (i) in cash, (ii) in shares of
Common Stock valued at the fair market value of the Common Stock
on the date of exercise or (iii) in a combination of cash and
Common Stock. The Committee may also, in its sole discretion,
permit option holders to deliver a notice of exercise of options
and to simultaneously sell the shares of Common Stock thereby
acquired pursuant to a brokerage or similar arrangement approved
in advance by proper officers of the Company, using the proceeds
from such sale as payment of the exercise price, or may authorize
such other methods as it deems appropriate and as comply with
requirements of the Code and the Exchange Act.
No shares of Common Stock shall be issued until full payment
therefor has been made.
G. ACCELERATED OWNERSHIP FEATURE. An option may, in the discretion of
the Committee, include the right to acquire an accelerated
ownership nonqualified stock option ("AO Option"). An option which
provides for the grant of an AO Option shall entitle the option
holder, upon exercise of that option and payment of the
appropriate exercise price in shares of Common Stock that have
been owned by such option holder for not less than six months
prior to the date of exercise, to receive an AO Option. An AO
Option is an option to purchase, at fair market value
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at the date of grant of the AO Option, a number of shares of
Common Stock equal to the sum of the number of whole shares
delivered by the option holder in payment of the exercise price of
the original option and the number of whole shares, if any,
withheld by the Company as payment for withholding taxes. An AO
Option shall expire on the same date that the original option
would have expired had it not been exercised. All AO Options shall
be nonqualified options.
H. CHANGE OF CONTROL. In the event of a Change of Control of the
Company as hereinafter defined, whether or not approved by the
Board of Directors, all options shall fully vest, unless otherwise
limited by the Committee at the time of the option grant, and be
exercisable in their entirety immediately, and notwithstanding any
other provisions of the Plan, shall continue to be exercisable for
three years following the Change of Control, but not later than
ten years after the date of grant.
Change of Control means:
(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 subparagraph (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 subparagraph (iii) of this subparagraph; 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
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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
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 o 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.
I. REORGANIZATION. The Committee may, in its sole discretion, make
provisions in any option agreement for the protection of
outstanding options in the event of a merger, consolidation,
reorganization or liquidation of the Company or the acquisition of
stock or assets of the Company by another entity.
J. RIGHTS AS A STOCKHOLDER. An option holder shall have no rights as
a stockholder with respect to any Common Stock covered by an
option until exercise of such option and issuance of shares of
Common Stock. Except as otherwise expressly provided in the Plan,
no adjustments shall be made for dividends or other rights for
which the record date is prior to issuance of the Common Stock.
K. GENERAL RESTRICTION. Each option shall be subject to the
requirement that, if at any time the Board shall determine in its
discretion that the listing, registration or qualification of the
Common Stock subject to such option on any securities exchange or
under any state or federal law, or the consent or approval of any
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government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such option
or the issue or purchase of Common Stock thereunder, such option
may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the
Board.
L. FOREIGN NATIONALS. Without amending the Plan, awards may be
granted to individuals who are foreign nationals or are employed
or otherwise performing services for the Company or any subsidiary
outside the United States or both, on such terms and conditions
different from those specified in the Plan as may, in the judgment
of the Committee, be necessary or desirable to further the purpose
of the Plan.
8. INCENTIVE AND NONQUALIFIED OPTIONS. It is intended that certain options
granted under the Plan shall be Incentive Stock Options and shall meet
the applicable requirements of and contain or be deemed to contain all
provisions required under Section 422 of the Code or corresponding
provisions of subsequent revenue laws and regulations in effect at the
time such options are granted; that other options shall not meet such
requirements and shall be nonqualified stock options; and that any
ambiguities in construction shall be interpreted in order to effectuate
such intent. The Committee may grant one or more options of either type,
or of both types, to any one or more individuals either at different
times or concurrently. Such options shall be subject to the terms and
conditions set forth elsewhere in the Plan and to the following:
A. INCENTIVE STOCK OPTIONS. The term of any Incentive Stock Option
shall meet the requirements of Section 422 of the Code. Any
Incentive Stock Option shall be treated as "outstanding" until it
is exercised in full or expires by reason of lapse of time. To the
extent that the aggregate fair market value of Common Stock
(determined at the time of grant of the Incentive Stock Option in
accordance with paragraph 7.C of the Plan) with respect to which
Incentive Stock Options are exercisable for the first time by an
option holder during any calendar year (under all such plans of
the Company and its parent and subsidiary corporations) exceeds
$100,000 or such other limit as may be imposed by the Code, such
options to the extent they exceed such limit shall be treated as
options which are not Incentive Stock Options. In applying the
foregoing limitation, options shall be taken into account in the
order in which they were granted.
B. NONQUALIFIED OPTIONS. There is no limitation on the maximum amount
of nonqualified options which may be exercised in any year.
9. WITHHOLDING TAXES. The Company shall have the right to deduct from any
settlement made under the Plan, including the exercise of an option or
the sale of shares of Common Stock, any federal, state or local taxes of
any kind required by law to be withheld with respect to such payments or
to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of such taxes. If
Common Stock is withheld or surrendered to satisfy tax withholding, such
stock shall be valued at its fair market value as of the date such Common
Stock is withheld or surrendered.
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10. AMENDMENT OF THE PLAN. The Plan may be amended, suspended or discontinued
in whole or in part at any time and from time to time by the Board,
including an amendment to increase the number of shares of Common Stock
with respect to which options may be granted, provided however that no
amendment shall be effective unless and until the same is approved by
stockholders of the Company where the failure to obtain such approval
would adversely affect the availability of any exemption under Rule 16b-3
under the Exchange Act or successor rule and with other applicable law,
including the Code. No amendment of the Plan shall adversely affect in a
material manner any right of any option holder with respect to any option
theretofore granted without such option holder's written consent.
11. MISCELLANEOUS.
A. USE OF PROCEEDS. The proceeds derived from the sale of shares of
Common Stock pursuant to options granted under the Plan shall
constitute general funds of the Company.
B. PARENT AND SUBSIDIARY. As used herein, the terms "parent" and
"subsidiary" shall mean "parent corporation" and "subsidiary
corporation", respectively, as defined in Section 424 of the Code.
C. GOVERNING LAW. The Plan, options granted under the Plan and
agreements entered into under the Plan shall be construed,
administered and governed in all respects under and by the
applicable laws of the State of Delaware, without giving effect to
principles of conflicts of laws.
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