CL: 488891v4
EXHIBIT 10.2
THE TIMKEN COMPANY
Nonqualified Stock Option Agreement
WHEREAS, <> <> (the "Optionee") is an
employee of The Timken Company (the "Company"); and
WHEREAS, the grant of stock options 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 18, 2000 (the "Date of
Grant"), and the execution of a stock option agreement in the
form hereof was authorized by a resolution of the Committee duly
adopted on April 18, 2000; and
WHEREAS, the option evidenced hereby is intended to be
a nonqualified stock option and shall not be treated as an
"incentive stock option" within the meaning of that term under
Section 422 of the Internal Revenue Code of 1986;
NOW, THEREFORE, pursuant to the Company's Long-term
Incentive Plan (as Amended and Restated as of December 16, 1999)
(the "Plan") and subject to the terms and conditions thereof and
the terms and conditions hereinafter set forth, the Company
hereby grants to the Optionee (i) a nonqualified stock option
(the "Option") to purchase <> shares of the Company's
common stock without par value (the "Common Shares") at the
exercise price of fifteen and seven-eighths dollars ($15.875)
per Common Share (the "Exercise Price") and (ii) the right to
receive dividend equivalents payable in Common Shares on a
deferred basis or, at the discretion of the Committee, in cash,
with respect to the Common Shares covered by any unexercised
portion of the Option (the "Deferred Dividend Shares").
1. Vesting of Option. (a) Unless terminated as
hereinafter provided, the Option shall be exercisable to the
extent of one-fourth (1/4th) of the Common Shares covered by the
Option after the Optionee shall have been in the continuous
employ of the Company or a subsidiary for one full year from the
Date of Grant and to the extent of an additional one-fourth
(1/4th) thereof after each of the next three successive years
thereafter during which the Optionee shall have been in the
continuous employ of the Company or a subsidiary. 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; the continuous
employment of the Optionee with the Company or a subsidiary shall
not be deemed to have been interrupted, and the Optionee shall
not be deemed to have ceased to be an employee of the Company or
a subsidiary, by reason of the transfer of his employment among
the Company and its subsidiaries.
(b) Notwithstanding the provisions of Section 1(a)
hereof, the Option shall become immediately exercisable in full
upon any change in control of the Company that shall occur while
the Optionee 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:
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(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 (iii) 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
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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
(iv) Approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company.
(c) Notwithstanding the provisions of Section 1(a)
hereof, the Option shall become immediately exercisable in full
if the Optionee should die or become permanently disabled while
in the employ of the Company or any subsidiary, or if the
Optionee should retire with the Company's consent.
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For purposes of this agreement, retirement "with the
Company's consent" shall mean: (i) the retirement of the Optionee
prior to age 62 under a retirement plan of the Company or a
subsidiary, if the Board or the Committee determines that his
retirement is for the convenience of the Company or a subsidiary,
or (ii) the retirement of the Optionee at or after age 62 under a
retirement plan of the Company or a subsidiary. For purposes of
this agreement, "permanently disabled" shall mean that the
Optionee has qualified for disability benefits under a disability
plan or program of the Company or, in the absence of a disability
plan or program of the Company, under a government-sponsored
disability program.
(d) To the extent that the Option shall have become
exercisable in accordance with the terms of this agreement, it
may be exercised in whole or in part from time to time
thereafter.
2. Termination of Option. The Option shall terminate
automatically and without further notice on the earliest of the
following dates:
(a) thirty days after the date upon which the Optionee
ceases to be an employee of the Company or a subsidiary, unless
the cessation of his employment (i) is a result of his death,
permanent disability or retirement with the Company's consent or
(ii) follows a change in control;
(b) five years after the date upon which the Optionee
ceases to be an employee of the Company or subsidiary (i) as a
result of his permanent disability, (ii) as a result of his
retirement with the Company's consent, unless he is also a
director of the Company who continues to serve as such following
his retirement with the Company's consent, or (iii) following a
change in control, unless the cessation of his employment
following a change in control is a result of his death;
(c) five years after the date upon which the Optionee
ceases to be a director of the Company, but not less than five
years after the date upon which he ceases to be an employee of
the Company or a subsidiary, if (i) the cessation of his
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employment is a result of his retirement with the Company's
consent and (ii) he continues to serve as a director of the
Company following the cessation of his employment;
(d) one year after the date of the Optionee's death
regardless of whether he ceases to be an employee of the Company
or a subsidiary prior to his death (i) as a result of his
permanent disability or retirement with the Company's consent or
(ii) following a change in control; or
(e) ten years after the Date of Grant.
In the event that the Optionee shall intentionally commit an
act that the Committee determines to be materially adverse to the
interests of the Company or a subsidiary, the Option shall
terminate at the time of that determination notwithstanding any
other provision of this agreement.
3. Payment of Exercise Price. The Exercise Price shall be
payable (a) in cash in the form of currency or check or other
cash equivalent acceptable to the Company, (b) by transfer to the
Company of nonforfeitable, unrestricted Common Shares that have
been owned by the Optionee for at least six months prior to the
date of exercise or (c) by any combination of the methods of
payment described in Sections 3(a) and 3(b) hereof.
Nonforfeitable, unrestricted Common Shares that are transferred
by the Optionee in payment of all or any part of the Exercise
Price shall be valued on the basis of their fair market value as
determined by the Committee from time to time. Subject to the
terms and conditions of Section 6 hereof, and subject to any
deferral election the Optionee may have made pursuant to any plan
or program of the Company, the Company shall cause certificates
for any shares purchased hereunder to be delivered to the
Optionee upon payment of the Exercise Price in full.
4. Crediting of Deferred Dividend Shares. Each
Deferred Dividend Share represents the right of the Optionee to
receive one Common Share or the cash equivalent of one Common
Share if and when the Deferred Dividend Share becomes
nonforfeitable in accordance with Section 5(a) hereof. Upon the
determination by the Committee of the number of Deferred Dividend
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Shares to be credited in accordance with this Section 4, Deferred
Dividend Shares shall be credited annually to the Optionee as of
December 31 of each year that the Option remains in effect and
any portion thereof remains unexercised. The number of Deferred
Dividend Shares to be credited to the Optionee for any calendar
year shall be determined as follows: (a) the total amount per
share of cash dividends that were paid on the outstanding Common
Shares during the calendar year shall be multiplied by the total
number of Common Shares then covered by both exercisable and
unexercisable portions of the Option, including any Deferred
Dividend Shares that shall have been previously credited to the
Optionee hereunder and remain subject to forfeiture pursuant to
Section 5(a) hereof; (b) the product of the arithmetical
operation described in Section 4(a) hereof shall then be divided
by the average closing price of the Common Shares, as reported on
the New York Stock Exchange or other national market on which the
Common Shares are then principally traded, for the 10 trading
dates immediately preceding December 31; (c) the quotient of the
arithmetical operation described in Section 4(b) hereof shall be
the number of Deferred Dividend Shares that shall be credited to
the Optionee for the calendar year; provided, however, that no
Deferred Dividend Shares shall be credited to the Optionee for
any calendar year in which the total net income per share of the
outstanding Common Shares is not at least 250 percent of the
total amount of cash dividends per share that were paid on the
outstanding Common Shares during that calendar year, and no
Deferred Dividend Shares shall be credited to the Optionee
following the cessation of his employment with the Company or a
subsidiary, regardless of the circumstances under which the
cessation of his employment occurred and notwithstanding that the
term of the Option or any Deferred Dividend Share remains in
effect.
5. Vesting and Issuance of Deferred Dividend Shares.
(a) A Deferred Dividend Share shall become nonforfeitable
upon the earlier to occur of (i) the expiration of a period
of four years from the date as of which it is credited
to the Optionee on the records of the Company, if the Optionee
shall have remained in the continuous employ of the Company or a
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subsidiary during that period, or (ii) the termination of the
Optionee's employment with the Company or a subsidiary following
a change in control or as a result of his death, permanent
disability or retirement with the Company's consent. If the
Optionee ceases to be an employee of the Company or a subsidiary
under any circumstances other than those described in Section
5(a)(ii) hereof, any Deferred Dividend Shares that shall have
been previously credited to the Optionee hereunder and remain
subject to forfeiture at the time of the cessation of his
employment shall thereupon be forfeited automatically and without
further notice unless otherwise determined by the Committee.
(b) Subject to the terms and conditions of Section 6
hereof, and subject to any deferral election the Optionee may
have made pursuant to any plan or program of the Company,
Deferred Dividend Shares shall be issuable to the Optionee at the
time when they become nonforfeitable in accordance with Section
5(a) hereof. Deferred Dividend Shares shall be issuable in
Common Shares or the cash equivalent of such Common Shares, as
determined in the sole discretion of the Committee at the time of
such issuance (which determination may include providing the
Optionee the right to elect to receive either Common Shares or
the cash equivalent of such Common Shares); provided, however,
that in the event of the Optionee's death, permanent disability
or retirement with the Company's consent, the Deferred Dividend
Shares issuable to the Optionee shall be issued in Common Shares
or the cash equivalent of such Common Shares, at the Optionee's
election. In the absence of any such election or determination
by the Committee, the Deferred Dividend Shares shall be paid in
Common Shares.
6. Compliance with Law. The Company shall make reasonable
efforts to comply with all applicable federal and state
securities laws; provided, however, notwithstanding any other
provision of this agreement, the Option shall not be exercisable
and the Company shall not be obligated to issue any Common Shares
in payment of Deferred Dividend Shares if the exercise or
issuance thereof would result in a violation of any such law. To
the extent that the Ohio Securities Act shall be applicable to
the Option, the Option shall not be exercisable and the Company
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shall not be obligated to issue any Common Shares in payment of
Deferred Dividend Shares unless the Common Shares or other
securities covered by the Option or to be issued in payment of
Deferred Dividend Shares 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.
7. Transferability and Exercisability. Neither
the Option nor any Deferred Dividend Shares, including any
interest in either thereof, shall be transferable by the Optionee
except by will or the laws of descent and distribution, and the
Option shall be exercisable during the lifetime of the Optionee
only by him or, in the event of his legal incapacity to do so, by
his guardian or legal representative acting on behalf of the
Optionee in a fiduciary capacity under state law and court
supervision.
8. Adjustments. The Committee shall make any
adjustments in the Exercise Price and the number or kind of
shares of stock or other securities covered by the Option or to
be issued in payment of Deferred Dividend Shares that the
Committee may determine to be equitably required to prevent any
dilution or expansion of the Optionee's rights under this
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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 8(a) or 8(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 Optionee's rights under this
agreement such alternative consideration as the Committee may
determine in good faith to be equitable under the circumstances.
9. Withholding Taxes. If the Company shall be
required to withhold any federal, state, local or foreign tax in
connection with any exercise of the Option or payment of Deferred
Dividend Shares, the Optionee shall pay the tax or make
provisions that are satisfactory to the Company for the payment
thereof. The Optionee may elect to satisfy all or any part of
any such withholding obligation by surrendering to the Company a
portion of the Common Shares that are issuable to the Optionee
upon the exercise of the Option or payment of Deferred Dividend
Shares. If such election is made, the shares so surrendered by
the Optionee shall be credited against any such withholding
obligation at their fair market value (as determined by the
Committee from time to time) on the date of such surrender.
10. 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 Optionee at any time.
11. Relation to Other Benefits. Any economic or other
benefit to the Optionee under this agreement or the Plan shall
not be taken into account in determining any benefits to which
the Optionee may be 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
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any life insurance coverage available to any beneficiary under any life
insurance plan covering employees of the Company or a subsidiary.
12. 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 Optionee with
respect to the Option or the Deferred Dividend Shares without the
Optionee's consent.
13. 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.
14. 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 18th
day of April, 2000.
THE TIMKEN COMPANY
By ___________________________
Xxxxxxx X. Xxxxx
Senior Vice President
Human Resources, Purchasing & Communications
The undersigned Optionee hereby acknowledges receipt of
an executed original of this agreement and accepts the Option
granted hereunder and the right to receive Deferred Dividend
Shares with respect to the Common Shares covered thereby, subject
to the terms and conditions of the Plan and the terms and
conditions hereinabove set forth.
______________________________
Optionee
Date: _________________________
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