EXHIBIT 10.1
TRANSFERABLE
THE TIMKEN COMPANY
Nonqualified Stock Option Agreement
WHEREAS, _____________(the "Optionee") is an employee of The
Timken Company (the "Company");
WHEREAS, the execution of a stock option agreement in the form
hereof has been 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 21, 1998
(the "Date of Grant"), and is incorporated herein by this
reference; and
WHEREAS, the option granted 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 20, 1995) (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 thirty-three and three-fourths dollars ($33.75) per
Common Share (the "Exercise Price") and (ii) the right to receive
dividend equivalents payable in Common Shares on a deferred basis
(the "Deferred Dividend Shares") or, at the discretion of the
Committee, in cash, with respect to the Common Shares covered by
any unexercised portion of the Option.
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) all or substantially all of the assets of the Company are
sold or transferred to another corporation or entity, or the
Company is merged, consolidated or reorganized into or with
another corporation or entity, with the result that upon
conclusion of the transaction less than 51 percent of the
outstanding securities entitled to vote generally in the election
of directors or other capital interests of the acquiring
corporation or entity is owned, directly or indirectly, by the
shareholders of the Company generally prior to the transaction;
or
(ii) there is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report thereto), as
promulgated pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act"), disclosing that any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange
Act) has become the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor rule or
regulation thereto under the Exchange Act) of securities
representing 30 percent or more of the combined voting power of
the then-outstanding voting securities of the Company; or
(iii) the Company shall file a report or proxy statement with the
Securities and Exchange Commission (the "SEC") pursuant to the
Exchange Act disclosing in response to Item 1 of Form 8-K
thereunder or Item 5(f) of Schedule 14A thereunder (or any
successor schedule, form, report or item thereto) that a change
in control of the Company has or may have occurred, or will or
may occur in the future, pursuant to any then-existing contract
or transaction; or
(iv) the individuals who constituted the Board at the beginning
of any period of two consecutive calendar years cease for any
reason to constitute at least a majority thereof unless the
nomination for election by the Company's shareholders of each new
member of the Board was approved by a vote of at least two-thirds
of the members of the Board still in office who were members of
the Board at the beginning of any such period.
In the event that any person described in Section 1(b)(ii) hereof
files an amendment to any report referred to in Section 1(b)(ii)
hereof that shows the beneficial ownership described in Section
1(b)(ii) hereof to have decreased to less than 30 percent, or in
the event that any anticipated change in control referred to in
Section 1(b)(iii) hereof does not occur following the filing with
the SEC of any report or proxy statement described in
Section 1(b)(iii) hereof because any contract or transaction
referred to in Section 1(b)(iii) hereof is canceled or abandoned,
the Committee may nullify the effect of Section 1(b)(ii) or
1(b)(iii) hereof, as the case may be, and reinstate the
provisions of Section 1(a) hereof by giving notice thereof to the
Optionee; provided, however, that any such action by the
Committee shall not prejudice any exercise of the Option that may
have occurred prior to the nullification and reinstatement. The
provisions of Section 1(b)(ii) hereof shall again become
automatically effective following any such nullification of the
provisions thereof and reinstatement of the provisions of Section
1(a) hereof in the event that any person described in Section
1(b)(ii) hereof files a further amendment to any report referred
to in Section 1(b)(ii) hereof that shows the beneficial ownership
described in Section 1(b)(ii) hereof to have again increased to
30 percent or more.
(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 (within the
meaning of the Company's long-term disability plan) while in the
employ of the Company or any subsidiary, or if the Optionee
should retire under a retirement plan of the Company or any
subsidiary (i) at or after age 62 or (ii) at an earlier age with
the consent of the Company.
(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,
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 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) one year 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 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 disability
or retirement with the Company's consent or (ii) following a
change in control; or
(e) ten years after the Date of Grant.
For the purposes of this agreement: "retirement with the
Company's consent" shall mean the retirement of the Optionee
prior to age 62, if the Board or the Committee determines that
his retirement is for the convenience of the Company or a
subsidiary, or the retirement of the Optionee at or after age 62
under a retirement plan of the Company or a subsidiary;
"disability" shall mean that the Optionee has qualified for
disability benefits under the Company's Long-Term Disability
Program or any successor disability plan or program of the
Company.
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 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
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 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, 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.
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
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.
(a) Except as provided in Section 7(b) below, 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.
(b) Notwithstanding Section 7(a) above, the Option, any Deferred
Dividend Shares, or any interest in either 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.
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 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 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 21st day of
April, 1998.
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 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: _________________________