Nonqualified Stock Option
Agreement
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.
1.
Four-Year Vesting of Option .
(a)
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.
(b)
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.
(c) 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.
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:
(a)
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.
(b)
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:
(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
2
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
(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 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
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