THE TIMKEN COMPANY Nonqualified Stock Option Agreement
Exhibit 10.21
TRANSFERABLE
THE TIMKEN COMPANY
WHEREAS, <<name>> (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 [DATE] (the “Date of Grant”), and the execution of a stock option
agreement in the form hereof (this “Agreement”) was authorized by a resolution of the Committee
duly adopted on [DATE]; 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, as amended;
NOW, THEREFORE, pursuant to the Company’s Long-Term Incentive Plan (as Amended and Restated as
of February 4, 2008) (the “Plan”), the Company hereby grants to the Optionee (i) a nonqualified
stock option (the “Option”) to purchase <<nqso>> shares of the Company’s common stock
without par value (the “Common Shares”) at the exercise price of [$ ] per Common Share
(the “Option Price”) which represents the Market Value per Share on the Date of Grant. The Company
agrees to cause certificates for any Common Shares purchased hereunder to be delivered to the
Optionee upon payment of the Option Price in full, subject to the terms and conditions of the Plan,
in addition to the terms and conditions of this Agreement.
Four-Year Vesting of Option.
Normal Vesting: 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 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.
Vesting Upon Retirement with Consent: If the Optionee should retiree with the Company’s
consent before the fourth anniversary of the Date of Grant, then the Optionee’s Option shall become
nonforfeitable in accordance with the terms and conditions of Section 1(a) as if the Optionee had
remained in the continuous employ of the Company or a subsidiary from the Date of Grant until the
date of the fourth anniversary or the occurrence of an event referenced in Section 2, whichever
occurs first.
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.
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.
Accelerated Vesting of Option. Notwithstanding the provisions of Sections 1(a) and 1(b)
hereof, the Option may become exercisable earlier than the time provided in such section if any of
the following circumstances apply:
Death or Disability: 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. For purposes of this Agreement, “permanently disabled” shall mean that the Optionee
has qualified for long-term 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.
Change in Control: 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:
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(b); or
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
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
Approval by the shareholders of the Company of a complete liquidation or dissolution of the
Company.
Divestiture: The Option shall become immediately exercisable in full if the Optionee’s
employment with the Company or a subsidiary terminates as the result of a divestiture. For the
purposes of this Agreement, the term “divestiture” shall mean a permanent disposition to a Person
other than the Company or any subsidiary of a plant or other facility or property at which the
Optionee performs a majority of Optionee’s services whether such disposition is effected by means
of a sale of assets, a sale of subsidiary stock or otherwise.
Layoff: If (i) the Optionee’s employment with the Company or a subsidiary terminates as
the result of a layoff and (ii) the Optionee is entitled to receive severance pay pursuant to the
terms of any severance pay plan of the Company in effect at the time of Optionee’s termination of
employment that provides for severance pay calculated by multiplying the Optionee’s base
compensation by a specified severance period, then the Option shall be exercisable with respect to
the total number of Common Shares that would have been exercisable under the provisions of Section
1(a) hereof if the Optionee had remained in the employ of the Company through the end of the
severance period.
For purposes of this Agreement, a “layoff” shall mean the involuntary termination by the
Company or any subsidiary of Optionee’s employment with the Company or any subsidiary due to (i) a
reduction in force leading to a permanent downsizing of the salaried workforce, (ii) a permanent
shutdown of the plant, department or subdivision in which Optionee works, or (iii) an elimination
of position.
Termination of Option. The Option shall terminate automatically and without further notice
on the earliest of the following dates:
thirty days after the date upon which the Optionee ceases to be an employee of the Company or a
subsidiary, unless (i) the cessation of his employment (A) is a result of his death, permanent
disability, retirement with the Company’s consent, or early retirement or (B) follows a change in
control, a divestiture, or a layoff; or (ii) the Optionee continues to serve as a director of the
Company following the cessation of his employment.
three years after the date upon which the Optionee ceases to be an employee of the Company or a
subsidiary following (i) a change in control, (ii) a divestiture, or (iii) a layoff;
three years after the date upon which the Optionee ceases to be an employee of the Company or
subsidiary as a result of early retirement. For purposes of this Agreement, “early retirement”
shall mean: the retirement of the Optionee prior to age 62 under a retirement plan of the Company
or a subsidiary when such retirement is not a retirement with the Company’s consent;
five years after the date upon which the Optionee ceases to be an employee of the Company or a
subsidiary (i) as a result of his death, or (ii) as a result of his permanent disability;
five years after the date upon which the Optionee ceases to be a director of the Company if he
continues to serve as a director of the Company following the cessation of his employment other
than as a result of his retirement with the Company’s consent;
ten years after the Date of Grant. (By way of illustration, if (i) the Optionee remains an
employee of the Company or a subsidiary until the ten-year anniversary of the Date of Grant, or
(ii) the Optionee ceases to be an employee of the Company or a subsidiary as a result of his
retirement with the Company’s consent, the Option shall terminate automatically and without further
notice 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
to the contrary.
Payment of Option Price. The Option 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 4(a) and 4(b) hereof. Nonforfeitable, unrestricted Common Shares that are
transferred by the Optionee in payment of all or any part of the Option Price shall be valued on
the basis of their Market Value per Share. Subject to the terms and conditions of Section 7
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 Option Price in full.
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.
Transferability and Exercisability.
Except as provided in Section 6(b) below, the Option, including any interest therein, 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.
Notwithstanding Section 6(a) above, the Option, may be transferable by the Optionee, without
payment of consideration therefor, to any family member of the Optionee (as defined in Form S-8),
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.
Adjustments. The Committee shall make any adjustments in the Option 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 subsection (a) or (b) herein. 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.
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 Market Value per Share on the date of such surrender. In no
event, however, shall the Company accept Common Shares for payment of taxes in excess of required
tax withholding rates, except that, unless otherwise determined by the Committee at any time, the
Optionee may surrender Common Shares owned for more than 6 months to satisfy any tax obligations
resulting from any such transaction.
No Right to Future Awards or Continued Employment. This option award is a voluntary,
discretionary bonus being made on a one-time basis and it does not constitute a commitment to make
any future awards. This option award and any payments made hereunder will not be considered salary
or other compensation for purposes of any severance pay or similar allowance, except as otherwise
required by law. Nothing in this Agreement will give the Optionee any right to continue employment
with the Company or any subsidiary, as the case may be, or interfere in any way with the right of
the Company or a subsidiary to terminate the employment of the Optionee.
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.
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.
Severability. If any provision of this Agreement or the application of any provision
hereof to any person or circumstances is held invalid or unenforceable, the remainder of this
Agreement and the application of such provision in any other person or circumstances shall not be
affected, and the provisions so held to be invalid or unenforceable shall be reformed to the extent
(and only to the extent) necessary to make it enforceable and valid.
Processing of Information. Information about the Optionee and the Optionee’s participation
in the Plan may be collected, recorded and held, used and disclosed for any purpose related to the
administration of the Plan. The Optionee understands that such processing of this information may
need to be carried out by the Company and its Subsidiaries and by third party administrators
whether such persons are located within the Optionee’s country or elsewhere, including the United
States of America. The Optionee consents to the processing of information relating to the Optionee
and the Optionee’s participation in the Plan in any one or more of the ways referred to above.
Governing Law. This Agreement is made under, and shall be construed in accordance with,
the internal substantive laws of the State of Ohio.
Relation to Plan. Capitalized terms used herein without definition shall have the meanings
assigned to them in the Plan.
This Agreement is executed by the Company on this day of
.
| THE TIMKEN COMPANY |
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| By | ||||
| ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | ||||
| ▇▇. Vice President & 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: | ||||||