EXHIBIT 10-2
TRANSFERABLE
THE TIMKEN COMPANY
Nonqualified Stock Option Agreement
WHEREAS, ____________ (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 ______________
(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
______________; 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 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 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
___________________________________ ($____) per Common Share (the "Exercise
Price").
CL: 489481v4
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
CL: 489481v4
2
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 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
CL: 489481v4
3
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
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Xxxxxxx.
XX: 489481v4
4
(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.
For the 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 xx
xx 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;
CL: 489481v4
5
(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 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,
CL: 489481v4
6
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. 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 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.
CL: 489481v4
7
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, 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.
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
CL: 489481v4
8
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 xxx
xx 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.
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.
CL: 489481v4
9
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.
This agreement is executed by the Company on this 16th day of April,
2002.
THE TIMKEN COMPANY
By ___________________________
Xxxxxxx X. Xxxxxxxx
Xx. Vice President and General Counsel
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: _______________________
CL: 489481v4
10
