EXHIBIT 10.4
THE TIMKEN COMPANY
Nonqualified Stock Option Agreement
WHEREAS, <<FName>> <<LName>> (the "Optionee") is an employee of The
Timken Company (the "Company");
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 <<Special_Award>> 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").
1. Vesting of Option. (a) Provided the Optionee remains in the
continuous employ of the Company or a subsidiary and unless terminated as
hereinafter provided, the Option
shall become exercisable in full with respect to all of the Common Shares
covered by the Option if and when the closing price of a Common Share equals
or exceeds thirty-five dollars ($35.00) per share on any trading day. The
closing price of a Common Share shall be determined in accordance with The Wall
Street Journal, Midwest Edition. 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, (i) by reason of the transfer of his
employment among the Company and its subsidiaries or (ii) while he is serving
as a director of the Company.
(b) 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. (a) The Option shall terminate
automatically and without further notice on the earliest of the following
dates:
(i) 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 (A) is a result of his death, permanent disability (as defined
below) or retirement with the Company's consent (as defined below) or
(B) follows a change in control (as defined below);
(ii) five years after the date upon which the Optionee ceases
to be an employee of the Company or subsidiary (A) as a result of his permanent
disability, (B) as a result of his retirement with the Company's consent,
unless he is also a director of the Company who
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continues to serve as such following his retirement with the Company's consent,
or (C) following a change in control, unless the cessation of his employment
following a change in control is a result of his death;
(iii) 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
(A) the cessation of his employment is a result of his retirement with the
Company's consent and (B) he continues to serve as a director of the Company
following the cessation of his employment;
(iv) 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 (A) as a result of his permanent disability
or retirement with the Company's consent or (B) following a change in control;
or
(v) 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.
(b) 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.
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(c) For purposes of this agreement, retirement "with the
Company's consent" shall mean: (A) 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 (B) the retirement of the Optionee at or after age
62 under a retirement plan of the Company or a subsidiary.
(d) 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
(iii) of this Section 2(d); 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
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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)
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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.
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 4 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.
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4. 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 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 unless
the Common Shares or other securities covered by the Option 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.
5. Transferability and Exercisability. (a) Except as provided in
Section 5(b) below, the Option shall not 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.
(b) Notwithstanding Section 5(a) above, the Option, or any interest
in thereof, may be transferable by the Optionee, without payment of
consideration therefor, to any one or more members of the immediate family of
Optionee (as defined in Rule 16a-1(e) under the Exchange Act), or to one or
more trusts established solely for the benefit of such members of the
immediate family or to partnerships in which the only partners are such
members of the immediate family of the Optionee; provided, however, that such
transfer will not be effective until notice of such transfer is delivered to
the Company; and provided, further, however, that any such transferee is
subject to the same terms and conditions hereunder as the Optionee.
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6. 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 that the Committee may determine to be equitably
required to prevent any dilution or expansion of the Optionee'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 6(a) or 6(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.
7. 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, 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. 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.
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8. 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.
9. 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 any life
insurance coverage available to any beneficiary under any life insurance plan
covering employees of the Company or a subsidiary.
10. 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 without the Optionee's consent.
11. 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.
12. Governing Law. This agreement is made under, and shall be
construed in accordance with, the laws of the State of Ohio.
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This agreement is executed by the Company on this 18th
day of April, 2000.
THE TIMKEN COMPANY
By ___________________________
Stephen A. Perry
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, subject
to the terms and conditions of the Plan and the terms and conditions
hereinabove set forth.
________________________________
Optionee
Date: _________________________
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