EXHIBIT 10.5
THE TIMKEN COMPANY
Deferred Shares Agreement
WHEREAS, ________________("Grantee") is an employee of The Timken Company
(the "Company"); and
WHEREAS, the grant of deferred shares evidenced hereby was authorized by a
resolution of the Compensation Committee (the "Committee") of the Board of
Directors (the "Board") of the Company that was duly adopted on April 20, 2004
(the "Date of Grant"), and the execution of a deferred shares agreement in the
form hereof was authorized by a resolution of the Committee duly adopted on
April 20, 2004.
NOW, THEREFORE, pursuant to the Company's Long-term Incentive Plan (as
Amended and Restated as of February 6, 2004) (the "Plan") and subject to the
terms and conditions thereof and the terms and conditions hereinafter set forth,
the Company hereby grants to the Grantee the right to receive (i) _______ shares
of the Company's common stock without par value (the "Common Shares") and
(ii) dividend equivalents payable in cash on a deferred basis (the "Deferred
Cash Dividends") with respect to the Common Shares covered by this agreement.
1. Vesting of Awards.
(a) Subject to the terms and conditions of Sections 1(b) and 2 hereof,
the Grantee's right to receive the Common Shares covered by this
agreement and any Deferred Cash Dividends accumulated with respect
thereto shall become nonforfeitable on the fifth anniversary of
the Date of Grant.
(b) Notwithstanding the provisions of Section 1(a) hereof, the
Grantee's right to receive the Common Shares covered by this
agreement and any Deferred Cash Dividends then accumulated with
respect thereto shall become nonforfeitable upon any change in
control of the Company that shall occur while the Grantee is an
employee of the Company or a subsidiary. For the purposes of this
agreement, the term "change in control" shall mean the occurrence
of any of the following events:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934) of 30% or more of either:
(A) the then-outstanding Common Shares or (B) the combined
voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of
directors ("Voting Shares"); provided, however, that for
purposes of this subsection (i), the following acquisitions
shall not constitute a change in control: (1) any
acquisition directly from the Company, (2) any acquisition by
the Company, (3) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or
any Subsidiary, or (4) any acquisition by any Person pursuant
to a transaction which complies with clauses (A), (B) and (C)
of subsection (i) of this Section 1(b); or
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason (other than
death or disability) 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 shareholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without
objection to such nomination) 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 (within the meaning of Rule
14a-11 of the Securities Exchange Act of 1934) 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 or
sale or other disposition of all or substantially all of the
assets of the Company (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 Common Shares and
Voting Shares immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 66-2/3%
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 entity resulting from
such Business Combination (including, without limitation, an
entity 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 relative to each other as
their ownership, immediately prior to such Business
Combination, of the Common Shares and Voting Shares of the
Company, as the case may be, (B) no Person (excluding any
entity resulting from such Business Combination or any
employee benefit plan (or related trust) sponsored or
maintained by the Company or such entity resulting from such
Business Combination) beneficially owns, directly or
indirectly, 30% or more of, respectively, the then-
outstanding shares of common stock of the entity resulting
from such Business Combination, or the combined voting power
of the then-outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the
Business Combination, and (C) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination; or
-2-
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
For the purposes of this agreement, "subsidiary" shall mean a corporation,
partnership, joint venture, unincorporated association or other entity in
which the Company has a direct or indirect ownership or other equity
interest.
2. Forfeiture of Awards. The Grantee's right to receive the Common
Shares covered by this agreement and any Deferred Cash Dividends
accumulated with respect thereto shall be forfeited automatically
and without further notice on the date that the Grantee ceases to be
an employee of the Company or a subsidiary prior to the fifth
anniversary of the Date of Grant for any reason other than his death
or disability. In the event that the Grantee ceases to be an employee
of the Company as a result of his death or disability prior to the
fifth anniversary of the Date of Grant, the Grantee's right to receive
both the Common Shares covered by this agreement and any Deferred Cash
Dividends then accumulated with respect thereto shall become
nonforfeitable on the date of cessation of his employment with respect
to a prorated portion of each based on the number of whole months that
the Grantee shall have been employed by the Company or a subsidiary
from the Date of Grant to the date of cessation of his employment. In
the event that the Grantee shall intentionally commit an act that the
Committee determines to be materially adverse to the interests of the
Company or a subsidiary, the Grantee's right to receive the Common
Shares covered by this agreement and any Deferred Cash Dividends
accumulated with respect thereto shall be forfeited at the time of
that determination notwithstanding any other provision of this
agreement. For the purposes of this agreement, "disability" shall
mean that the Grantee has qualified for disability benefits under
the Company's Long-term Disability Program or any successor
disability plan or program of the Company.
3. Crediting of Deferred Cash Dividends. With respect to each of the
Common Shares covered by this agreement, the Grantee shall be credited
on the records of the Company with Deferred Cash Dividends in an
amount equal to the amount per share of any cash dividends declared by
the Board on the outstanding Common Shares during the period beginning
on the Date of Grant and ending on the date upon which the Optionee's
right to receive the Common Shares covered by this agreement pursuant
to Section 1 hereof or a prorated portion thereof pursuant to Section
2 hereof, as the case may be, becomes nonforfeitable. The Deferred
Cash Dividends shall accumulate without interest.
4. Payment of Awards. Subject to the terms and conditions of Section 5
hereof, the Common Shares covered by this agreement or any prorated
portion thereof shall be issuable, and any Deferred Cash Dividends
accumulated with respect thereto shall be payable, to the Grantee at
the time when they become nonforfeitable in accordance with Section
1 or 2 hereof.
5. Compliance with Law. The Company shall make reasonable efforts to
comply with all applicable federal and state securities laws;
-3-
provided, however, notwithstanding any other provision of this
agreement, the Company shall not be obligated to issue any of the
Common Shares covered by this agreement or pay any Deferred Cash
Dividends accumulated with respect thereto if the issuance or
payment thereof would result in violation of any such law. To the
extent that the Ohio Securities Act shall be applicable to this
agreement, the Company shall not be obligated to issue any of the
Common Shares or other securities covered by this agreement or pay
any Deferred Cash Dividends accumulated with respect thereto unless
such Common Shares and Deferred Cash Dividends are (a) exempt from
registration thereunder, (b) the subject of a transaction that is
exempt from compliance therewith, (c) registered by description or
qualification thereunder or (d) the subject of a transaction that
shall have been registered by description thereunder.
6. Transferability. Neither the Grantee's right to receive the Common
Shares covered by this agreement nor his right to receive any
Deferred Cash Dividends shall be transferable by the Grantee except
by will or the laws of descent and distribution.
7. Adjustments. The Committee shall make any adjustments in the number
or kind of shares of stock or other securities covered by this agree-
ment that the Committee may determine to be equitably required to
prevent any dilution or expansion of the Grantee's rights under this
agreement that otherwise would result from any (a) stock dividend,
stock split, combination of shares, recapitalization or other change
in the capital structure of the Company, (b) merger, consolidation,
separation, reorganization or partial or complete liquidation
involving the Company or (c) other transaction or event having an
effect similar to any of those referred to in Section 7(a) or 7(b)
hereof. Furthermore, in the event that any transaction or event
described or referred to in the immediately preceding sentence shall
occur, the Committee may provide in substitution of any or all of
the Grantee's rights under this agreement such alternative
consideration as the Committee may determine in good faith to be
equitable under the circumstances.
8. Withholding Taxes. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any
delivery of Common Shares to the Grantee, and the amounts available to
the Company for such withholding are insufficient, it shall be a
condition to the receipt of such delivery that the Grantee make
arrangements satisfactory to the Company for payment of the balance of
such taxes required to be withheld. The Grantee may elect that all or
any part of such withholding requirement be satisfied by retention by
the Company of a portion of the Common Shares delivered to the
Grantee. If such election is made, the shares so retained shall be
credited against such withholding requirement at the Market Price per
Common Share on the date of such delivery.
9. Right to Terminate Employment. No provision of this agreement shall
limit in any way whatsoever any right that the Company or a
subsidiary may otherwise have to terminate the employment of the
Grantee at any time.
10. Relation to Other Benefits. Any economic or other benefit to the
Grantee under this agreement or the Plan shall not be taken into
account in determining any benefits to which the Grantee may be
-4-
entitled under any profit-sharing, retirement or other benefit or
compensation plan maintained by the Company or a subsidiary and
shall not affect the amount of any life insurance coverage
available to any beneficiary under any life insurance plan covering
employees of the Company or a subsidiary.
11. 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 the Grantee with respect to either the
Common Shares or other securities covered by this agreement or the
Deferred Cash Dividends without the Grantee's consent.
12. 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.
13. Governing Law. This agreement is made under, and shall be construed
in accordance with, the laws of the State of Ohio.
This agreement is executed by the Company on this ___ day of _______, 2004.
The Timken Company
By ___________________________________
Xxxxx X. Xxxxxxx
Corporate Secretary & Asst. General Counsel
The undersigned Grantee hereby acknowledges receipt of an executed original
of this agreement and accepts the right to receive the Common Shares or
other securities covered hereby and any deferred Cash Dividends accumulated
with respect thereto, subject to the terms and conditions of the Plan and
the terms and conditions herein above set forth.
_________________________________
Grantee
Date: ___________________________
-5-
