EXHIBIT 10.4
THE TIMKEN COMPANY
Performance Unit Agreement
WHEREAS, ___________ ("Grantee") is an employee of The Timken Company
(the "Company"); and
WHEREAS, the grant of Performance Units, each with a cash value of
$100.00, was authorized by a resolution of the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board") that was
duly adopted on _____________ (the "Date of Grant"), and the execution of a
Performance Unit agreement in the form hereof was authorized by a resolution of
the Committee duly adopted on __________;
NOW, THEREFORE, pursuant to the Company's Long-term Incentive Plan
(As Amended and Restated as of January 30, 2002) (the "Plan") and subject to
the terms and conditions thereof and the terms and conditions hereinafter set
forth, the Company hereby grants to Grantee as of the Date of Grant ____
Performance Units (the "Target Performance Units"). Subject to the attainment
of the performance goals set forth in Section 1 hereof, this grant enables
Grantee to earn as Performance Units from [50% to 150%] of the Target
Performance Units to be paid out to Grantee pursuant to Section 3 hereof.
1. Earning of Target Performance Units. (a) Grantee's right to receive
payment for any Performance Units shall be determined (i) on the basis of the
Company's Return on Equity for the period from January 1, 2002 through December
31, 2004 (the "Performance Period") and (ii) on the basis of the Company's
Sales Growth for the Performance Period as follows:
(A) The applicable percentage of the Target Performance Units which
shall be earned by Grantee shall be determined by the
Performance Matrix approved by the Committee on the Date of
Grant.
CL-668518v3
(B) For purposes of this Agreement, "Return on Equity" shall mean
cumulative net income divided by three, divided by the average
quarterly total shareholders equity for the three-year period,
as adjusted pursuant to Section 1(b).
(C) For purposes of this Agreement, "Sales Growth" shall mean the
three-year compounded annualized growth in sales over the
performance period, determined using year-end total net sales
for year three of the performance period and year-end total net
sales for the year-end prior to the start of the performance
period, as adjusted pursuant to Section 1(b).
(D) In the event that the Company's Return on Equity or Sales Growth
is between the ranges set forth on the Performance Matrix, the
Committee shall interpolate the applicable percentage of the
Target Performance Units which shall be earned by Grantee.
(b) If the Committee determines that a change in the business,
operations, corporate structure or capital structure of the Corporation, the
manner in which it conducts business or other events or circumstances render
the Management Objectives to be unsuitable, the Committee may modify such
Management Objectives or the related minimum acceptable level of achievement,
in whole or in part, as the Committee deems appropriate; provided, however,
that no such action may result in the loss of the otherwise available exemption
of the award under Section 162(m) of the Code.
2. Forfeiture of Award. Except as otherwise determined by the Committee
in accordance with the terms of the Plan, Grantee's right to receive the
Performance Units shall be forfeited automatically and without further notice
on the date that Grantee ceases to be an employee of the Company or a
Subsidiary prior to the last day of the Performance Period.
CL-668518v3
2
3. Payment of Performance Units. Performance Units earned as provided
in Section 1 hereof shall be payable to Grantee in cash or Common Shares (as
determined by the Committee) as soon as practicable after they are earned in
accordance with Section 1 hereof; provided, however, that if Performance Units
are earned and the Company did not have a positive net income as reflected on
the Company's consolidated balance sheet for the most recently ended fiscal
year prior to the last day of the Performance Period, the Committee will have
the sole discretion to defer the payment of the Performance Units until (a) the
Company reports a positive net income or (b) such other time as the committee
deems appropriate.
4. Transferability. Grantee's right to receive the Performance Units
shall not be transferable nor assignable by Grantee other than by will or by
the laws of descent and distribution.
5. No Employment Contract. Nothing contained in this Agreement shall
confer upon Grantee any right with respect to continuance of employment by the
Company or any Subsidiary, nor limit or affect in any manner the right of the
Company or any Subsidiary to terminate the employment or adjust the
compensation of Grantee.
6. Taxes and Withholding. If the Performance Units are paid in cash,
such payment shall be less any applicable federal, state, local or foreign
taxes. To the extent that the Company shall be required to withhold any
federal, state, local or foreign taxes in connection with the payment of the
Performance Units in Common Shares, and the amounts available to the Company
for such withholding are insufficient, it shall be a condition to the payment
of the Performance Units that Grantee shall pay such taxes or make provisions
that are satisfactory to the Company for the payment thereof.
7. Compliance with Law. The Company shall make reasonable efforts to
comply with all applicable laws; provided, however, that notwithstanding any
other provision of this Agreement, the Performance Units shall not be paid if
the payment thereof would result in a violation of any such law.
CL-668518v3 3
8. Amendments. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of Grantee under this Agreement without Grantee's consent.
9. Severability. In the event that one or more of the provisions of
this Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
10. Relation to Plan. This Agreement is subject to the terms and
conditions of the Plan. In the event of any inconsistency between the
provisions of this Agreement and the Plan, the Plan shall govern. Capitalized
terms used herein without definition shall have the meanings assigned to them
in the Plan. The Committee acting pursuant to the Plan, as constituted from
time to time, shall, except as expressly provided otherwise herein or in the
plan, have the right to determine any questions which arise in connection with
the grant of Performance Units.
11. Successors and Assigns. Without limiting Section 4 hereof, the
provisions of this Agreement shall inure to the benefit of, and be binding
upon, the successors, administrators, heirs, legal representatives and assigns
of Grantee, and the successors and assigns of the Company.
12. Governing Law. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of Ohio, without
giving effect to the principles of conflict of laws thereof.
13. Notices. Any notice to the Company provided for herein shall be in
writing to the Company and any notice to Grantee shall be addressed to Grantee
at his or her address on file with the Company. Except as otherwise provided
herein, any written notice shall be deemed to be duly given if and when
CL-668518v3 4
delivered personally or deposited in the United States mail, first class
certified or registered mail, postage and fees prepaid, return receipt
requested, and addressed as aforesaid. Any party may change the address to
which notices are to be given hereunder by written notice to the other party as
herein specified (provided that for this purpose any mailed notice shall be
deemed given on the third business day following deposit of the same in the
United States mail).
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Grantee has also
executed this Agreement in duplicate, as of the day and year first above
written.
THE TIMKEN COMPANY
______________________________
Xxxxxxx X. Xxxxxxxx
Xx. Vice President and General Counsel
The undersigned Grantee hereby acknowledges receipt of an executed
original of this Agreement.
______________________________
Grantee
Date: ________________________
CL-668518v3
5
EXHIBIT A
Performance Matrix
CL-668518v3 A-1
