1.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended March 31, 1996.
Commission File No. 1-1169
THE TIMKEN COMPANY
Exact name of registrant as specified in its charter
Ohio 34-0577130
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
1835 Dueber Avenue, S.W., Canton, Ohio 44706-2798
Address of principal executive offices Zip Code
(330) 438-3000
Registrant's telephone number, including area code
Not Applicable
Former name, former address and former fiscal year if changed
since last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days.
YES X NO
___ ___
Common shares outstanding at March 31, 1996, 31,452,753.
<PAGE>
PART I. FINANCIAL INFORMATION 2.
THE TIMKEN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
Mar. 31 Dec. 31
1996 1995
ASSETS ------ ------
Current Assets
Cash and cash equivalents......................... $864 $7,262
Accounts receivable, less allowances,
(1996-$6,996; 1995-$6,632)........................ 320,583 284,924
Deferred income taxes............................. 54,040 50,183
Inventories (Note 2) ............................. 395,362 367,889
------ ------
Total Current Assets.................... 770,849 710,258
Property, Plant and Equipment..................... 2,364,061 2,337,450
Less allowances for depreciation................. 1,324,352 1,298,068
------ ------
1,039,709 1,039,382
Costs in excess of net assets of acquired business,
less amortization, (1996-$15,777; 1995-$14,985)... 102,062 102,854
Deferred income taxes............................. 30,374 31,176
Other assets...................................... 44,717 42,255
------ ------
Total Assets................................ $1,987,711 $1,925,925
====== ======
LIABILITIES
Current Liabilities
Accounts payable and other liabilities............ $234,330 $229,096
Short-term debt and commercial paper.............. 62,068 60,078
Accrued expenses.................................. 191,528 173,189
------ ------
Total Current Liabilities............... 487,926 462,363
Noncurrent Liabilities
Long-term debt (Note 3) .......................... 151,108 151,154
Accrued pension cost.............................. 105,331 97,524
Accrued postretirement benefits cost.............. 394,893 393,706
------ ------
651,332 642,384
Shareholders' Equity (Note 4)
Common stock...................................... 321,944 317,455
Earnings invested in the business................. 541,981 517,802
Cumulative foreign currency translation adjustment (15,472) (14,079)
------ ------
Total Shareholders' Equity.............. 848,453 821,178
Total Liabilities and Shareholders' Equity.. $1,987,711 $1,925,925
====== ======
<PAGE>
PART I. FINANCIAL INFORMATION 3.
Continued
THE TIMKEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
Mar. 31 Mar. 31
1996 1995
-------- --------
(Thousands of dollars, except per share data)
Net sales....................................... $595,954 $568,899
Cost of product sold............................ 456,739 430,073
------ ------
Gross Profit................................. 139,215 138,826
Selling, administrative and general expenses.... 78,917 73,639
------ ------
Operating Income............................. 60,298 65,187
Interest expense................................ (3,675) (5,436)
Other - net..................................... (2,780) (3,835)
------ ------
Other Income (Expense)....................... (6,455) (9,271)
Income Before Income Taxes................... 53,843 55,916
Provision for Income Taxes (Note 5)............. 20,245 21,640
------ ------
Net Income................................... $33,598 $34,276
====== ======
Net Income Per Share * ...................... $1.07 $1.10
====== ======
Dividends Per Share.......................... $0.30 $0.27
====== ======
* Per average shares outstanding................ 31,390,830 31,076,704
<PAGE>
PART I. FINANCIAL INFORMATION Continued 4.
THE TIMKEN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
Cash Provided (Used) Mar. 31 Mar. 31
1996 1995
------ ------
OPERATING ACTIVITIES (Thousands of dollars)
Net Income.............................................. $33,598 $34,278
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.......................... 30,891 30,810
Provision (credit) for deferred income taxes........... (2,322) 73
Stock issued in lieu of cash to employee benefit plans. 2,298 1,635
Changes in operating assets and liabilities:
Accounts receivable................................... (36,744) (42,538)
Inventories and other assets.......................... (28,929) (39,430)
Accounts payable and accrued expenses................. 31,657 37,807
Foreign currency translation.......................... (48) 1,185
------ ------
Net Cash Provided (Used) by Operating Activities..... 30,401 23,820
INVESTING ACTIVITIES
Purchases of property, plant and equipment - net....... (32,598) (28,722)
FINANCING ACTIVITIES
Cash dividends paid to shareholders.................... (7,227) (7,376)
Payments on long-term debt............................. (34) (48)
Short-term debt activity - net......................... 3,000 2,953
------ ------
Net Cash Provided (Used) by Financing Activities..... (4,261) (4,471)
Effect of exchange rate changes on cash................. 60 (183)
Increase or (Decrease) in Cash and Cash Equivalents..... (6,398) (9,556)
Cash and Cash Equivalents at Beginning of Period........ 7,262 12,121
------ ------
Cash and Cash Equivalents at End of Period.............. $864 $2,565
====== ======
<PAGE>
<TABLE>
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 5.
Note 1 -- Basis of Presentation
The accompanying consolidated condensed financial statements (unaudited) have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) and
disclosures considered necessary for a fair presentation have been included.
For further information, refer to the consolidated financial statements and
footnotes included in the company's annual report on Form 10-K for the year
ended December 31, 1995.
<CAPTION>
3/31/96 12/31/95
Note 2 -- Inventories ------ ------
(Thousands of dollars)
<S> <C> <C>
Finished products $143,844 $130,894
Work-in-process and raw materials 209,977 195,126
Manufacturing supplies 41,541 41,869
------ ------
$395,362 $367,889
====== ======
Note 3 -- Long-term Debt 3/31/96 12/31/95
------ ------
(Thousands of dollars)
7-1/2% State of Ohio Pollution Control
Revenue Refunding Bonds, maturing on
January 1, 2002 $17,000 $17,000
State of Ohio Water Development Revenue
Refunding Bond, maturing on May 1, 2007.
The variable interest rate is tied to the
bank's tax exempt weekly interest rate.
The rate at March 31, 1996 is 3.10%. 8,000 8,000
State of Ohio Air Quality and Water Development
Revenue Refunding Bonds, maturing on
June 1, 2001. The variable interest rate
is tied to the bank's tax exempt weekly
interest rate. The rate at March 31, 1996
is 3.10% 21,700 21,700
Fixed Rate Medium-term Notes, Series A, due at
various dates through September, 2002 with
interest rates ranging from 7.20% to 9.25% 103,000 103,000
Other 1,786 1,768
------ ------
151,486 151,468
Less: Current Maturities 378 314
------ ------
$151,108 $151,154
====== ======
</TABLE>
<PAGE>
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 6.
Continued
Note 4 -- Shareholders' Equity 03/31/96 12/31/95
------ ------
Class I and Class II serial preferred stock (Thousands of dollars)
without par value:
Authorized -- 10,000,000 shares each class
Issued - none $0 $0
Common Stock without par value:
Authorized -- 100,000,000 shares
Issued (including shares in treasury)
1996 - 31,452,939 shares
1995 - 31,354,307 shares
Stated Capital 53,064 53,064
Other paid-in capital 268,889 264,567
Less cost of Common Stock in treasury
1996 - 186 shares
1995 - 4444 shares 9 176
------ ------
$321,944 $317,455
====== ======
<TABLE>
An analysis of the change in capital and earnings invested in the business is as follows:
<CAPTION>
Common Stock
-------------------- Earnings Foreign
Other Invested Currency
Stated Paid-In in the Translation Treasury
Capital Capital Business Adjustment Stock Total
------ ------ ------ ------ ------ ------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1995 $53,064 $264,567 $517,802 ($14,079) ($176) $821,178
Net Income 33,598 33,598
Dividends paid - $.30 per share (9,419) (9,419)
Employee benefit and dividend reinvestment plans: 4,322 167 4,489
Treasury - issued/acquired 4,258 shares
Common Stock - issued 98,632 shares
Foreign currency translation adjustment (1,393) (1,393)
------ ------ ------ ------ ------ ------
Balance March 31, 1996 $53,064 $268,889 $541,981 ($15,472) ($9) $848,453
====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
PART I. NOTES TO FINANCIAL STATEMENTS 7.
(Unaudited) Continued
Note 5 -- Income Tax Provision Three Months Ended
Mar. 31 Mar. 31
1996 1995
------ ------
U.S. (Thousands of dollars)
Federal $15,359 $15,003
State & Local 2,770 2,503
Foreign 2,116 4,134
------ ------
$20,245 $21,640
====== ======
Taxes provided exceed the U.S. statutory rate primarily
due to state and local taxes.
<PAGE>
8.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales for the first quarter were $596 million, up 4.8% from
1995's first quarter record level of $568.9 million. During the
first quarter of 1996 The Timken Company continued to experience
strong demand for its products despite some weakness in some sectors
in both the U.S. and Europe. Sales to the U.S. automotive and
railroad segments were off somewhat, but the company achieved growth
in sales to the general industrial and aerospace segments as well as
in Europe. Sales in Mexico during the first quarter 1996 were also
higher than the same period a year ago.
Gross profit for the quarter was $139.2 million (23.4% of net sales)
compared to $138.8 million (24.4% of net sales) in the same period a
year ago. The effects on profit of higher sales volume and improved
prices were more than offset by higher raw materials and energy
costs, the effects of the General Motors Corporation work stoppage,
and the harsh winter weather in North America. Profits were also
affected by higher pension expense in the first quarter of 1996
resulting from a December 1995 reduction in the company's discount
rate for U.S.-based pension and postretirement benefit plans from
8.25% to 7.25%, and changes in other actuarial assumptions used in
its calculation of future pension and postretirement medical
expense.
Selling, administrative, and general expenses were $78.9 million
(13.2% of net sales) in the first quarter of 1996 compared to $73.6
million (12.9% of net sales) in 1995. The company experienced
higher expense in the first quarter 1996 due in part to the
company's new pay-for-performance plan for salaried associates that
was implemented in the fourth quarter of 1995. This new
compensation plan increases the linkage between company performance
and pay. The company continues to focus on continuous improvement
in its administrative functions with the intent of improving its
performance for customers and shareholders.
Bearing Business net sales increased by 3.2% to $407.5 million in the
first quarter of 1996 compared to $395 million in the year-earlier
period. Sales in the railroad segment were weak. Lower car
production in the U.S. compounded by the General Motors Corporation
work stoppage had an adverse effect on automotive sales; however,
light truck and sport utility vehicle sales remained strong. Bearing
<PAGE>
9.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
Business operating income was $40.4 million in the 1996's first
quarter, down from the $41.8 million reported in the first quarter of
1995. Although the Bearing Business experienced some improvements in
price and product mix, profits were adversely affected by higher
energy and the aforementioned employee benefit related costs.
Steel Business sales of $188.5 million were 8.4% higher than the
$173.9 million recorded a year earlier, due primarily to an increase
in steel bar sales. The General Motors Corporation work stoppage
limited steel tube shipments in the first quarter. Operating income
in the first quarter of 1996 was $19.9 million, down from the $23.4
million in the year-earlier period. Higher raw material and energy
costs, a less favorable product mix, harsh winter weather in January
and higher employee benefit related costs contributed to the decline
in profitability.
Interest expense was lower in the first quarter of 1996 compared to
the year-ago period resulting primarily from the company's lower
average outstanding debt.
Financial Condition
Total assets increased by $61.8 million from December 31, 1995,
primarily as a result of increased accounts receivable and
inventories. The $36.7 million increase in accounts receivable, as
reflected in the Consolidated Statements of Cash Flows, relates
primarily to the increase in sales. The number of days' sales in
receivables at March 31, 1996 was lower than the year-end 1995 level.
The $28.9 million increase in inventories and other assets relates
primarily to the higher level of production activity; however the
number of days' supply in inventory at the end of the first quarter
was higher than the previous year-end level.
The increase in accounts payable and accrued expenses relates to the
increased level of activity, higher pension and postretirement
medical expenses and higher income taxes. Debt of $213.2 million at
the end of the first quarter of 1996 was basically unchanged
compared to $211.2 million at year-end 1995. The ratio of debt to
total capital of 20.1% was slightly lower than the 20.5% at year-end
1995.
<PAGE>
10.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
Purchases of property, plant and equipment - net in the first
quarter of 1996 were $32.6 million compared to $28.7 million one year
earlier. The company continues to invest in activities consistent
with the strategies it is pursuing to achieve an industry leadership
position. New acquisitions and further capital investments in
technologies in the company's plants throughout the world provide
Timken with the opportunity to accelerate growth and strengthen its
position in new and existing markets.
The company continues to make good progress in its efforts, announced
in 1993, to accelerate significantly continuous improvement in its
manufacturing plants worldwide. The total annual cost reduction in
the company's manufacturing cost structure is expected to be at least
$200 million based on 1993 volume levels. The company's current
expectations are that up to 50% of this annual savings level will be
realized in 1996. This improvement in manufacturing costs will be
offset to some degree by inflation and higher costs associated with
new production initiatives. As a result of the implementation of
cost saving ideas, approximately 65 employees were laid off in the
first quarter of 1996 throughout the company's worldwide
manufacturing plants. Any separation costs associated with these
layoffs were charged to accounting reserves established in December
1993. At this point in time, management believes that the layoff
reserves remaining are adequate to cover future layoffs.
Other Information
During the first quarter of 1996, Timken acquired the bearing assets
of a business known as FLT Prema Milmet S.A. in Sosnowiec, Poland.
This subsidiary will be called Timken Polska Sp.z o.o. and will
serve mainly the automotive, agricultural and industrial machinery
markets in Central Europe.
In March, Timken and Shandong Yantai Bearing Factory entered into
a joint venture to produce bearings in China. The new company,
Yantai Timken Company Limited, will be located in Yantai Shandong
Province, on the northeast coast of China near the Yellow Sea.
Operations at the new company are expected to commence late in
the second quarter of 1996.
Also during the first quarter, the company entered into a definitive
agreement to acquire the assets of Ohio Alloy Steels, Inc., a
<PAGE>
11.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont.)
privately owned company established in 1971 to service specialty
steel customers. The transaction was finalized on May 2, 1996, at
which time operations of the new company began. Ohio Alloy Steels
will function as a subsidiary of the Latrobe Steel Company, which
has been a Timken Company subsidiary since 1975.
On April 16, 1996, the Board of Directors declared a quarterly cash
dividend of $.30 per share payable June 3,1996, to shareholders of
record at the close of business on May 17, 1996.
Some of the statements set forth in this document that are not
historical in nature are forward-looking statements. The company
cautions readers that actual results may differ materially from
those projected or implied in forward-looking statements made by
or on behalf of the company due to a variety of important
factors, such as:
- - changes in world economic conditions, including the
potential instability of governments and legal systems in
countries in which the company conducts business,
significant changes in currency valuations, and the impact
of industrial business cycles.
- - changes in customer demand on sales and product mix,
including the impact of customer strikes.
- - competitive factors, including changes in market penetration
and the introduction of new products by existing and new
competitors.
- - changes in operating costs as they relate to changes in the
company's manufacturing processes; higher cost associated
with increasing output to meet higher customer demands; the
effects of weather; unplanned work stoppages; and changes in
the cost of labor, health care and retirement benefits, raw
material, and energy.
- - the success of the company's operating plans, including its
ability to achieve the total benefits of its accelerated
continuous improvement program.
- - unanticipated product warranty and environmental claims or
problems.
<PAGE>
12.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The company is currently involved in negotiations with the
Ohio Attorney General's office regarding alleged
violations of the company's NPDES water discharge permits
at its Canton, Ohio location. The company believes it has
substantial defenses to the violations alleged by the
Attorney General, and that the matter will ultimately be
settled for an amount that will not be material to its
financial condition or results of operations.
In August 1994, the company's Latrobe Steel Company
subsidiary was served with a complaint filed by seven
former employees. Each of the employees had been
terminated from employment in late 1993 as part of the
company's administrative streamlining efforts. The
plaintiffs' claims include discrimination on account of
age and/or disability status, wrongful termination in
violation of public policy, breach of contract and
promissory estoppel. The relief requested includes
reinstatement, back pay, front pay, liquidated damages,
attorneys' fees and compensatory and punitive damages
under the Americans With Disabilities Act and Pennsylvania
law.
The company has denied all of the plaintiff's allegations
and believes that it has valid defenses to the plaintiffs'
claims. Discovery in this matter has been completed. In
April 1995, the company filed a motion to sever the trials
of each of the individual plaintiffs. The motion was
granted, and the cases will be tried seriatim. The trials
were expected to begin in March 1996 but the company
continues to be "on call" awaiting notification by the
court that it is ready to start the trials. At this time,
the company believes that the ultimate resolution of this
matter will not be material to its financial condition or
results of operations.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
<PAGE>
13.
Item 4. Submission of Matters to a Vote of Security Holders
(1) Shareholders approved The Timken Company Long-Term
Incentive Plan, as amended and restated on
December 20, 1995.
Affirmative Negative
22,383,533 4,877,564
(2) Shareholders approved the adoption of an amendment to
Article Fourth of the Company's Amended Articles of
Incorporation to increase authorized Common Stock from
100,000,000 shares without par value to
200,000,000 shares without par value.
Affirmative Negative
23,832,008 3,373,898
(3) The Board of Directors recommended the four
individuals set forth below be elected Directors in Class II
at the 1996 Annual Meeting of Shareholders of The Timken
Company held on April 16, 1996, to serve for a term of
three years expiring at the Annual Meeting in 1999
(or until their respective successors are elected
and qualified). Mr. Mahoney and Mr. Toot had been
previously elected as Directors by the shareholders and
were re-elected at the 1996 meeting.
Affirmative Withheld
J. Clayburn La Force, Jr. 27,180,528 267,856
Robert W. Mahoney 27,186,176 262,208
Jay A Precourt 27,188,335 260,049
Joseph F. Toot, Jr. 27,117,676 330,708
Item 5. Other Information
Not applicable.
<PAGE>
14.
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
(3) (i) Amended Articles of Incorporation of The
Timken Company (Effective April 16, 1996) were
filed with Form S-8 dated April 16, 1996, and
are incorporated herein by reference.
10 The Timken Company Long-Term Incentive Plan
for officers and other key employees as
amended and restated as of December 20, 1995 and
approved by shareholders on April 16, 1996, was
filed as Appendix A to Proxy Statement dated
March 6, 1996, and is incorporated herein
by reference.
10.1 Form of The Timken Company Nonqualified Stock
Option Agreement for nontransferable options as
adopted on April 16, 1996.
10.2 Form of The Timken Company Nonqualified Stock
Option Agreement for transferable options as
adopted on April 16, 1996.
11 Computation of Per Share Earnings
27 Article 5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
The Timken Company
_______________________________
Date May 14, 1996 BY /s/ J. F. Toot, Jr.
________________________ _______________________________
J. F. Toot, Jr., Director;
President and Chief
Executive Officer
Date May 14, 1996 BY /s/ G. E. Little
________________________ _______________________________
G. E. Little
Vice President - Finance
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 16, 1996 (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 forty-four and one-eighth dollars ($44.125) 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 cancelled 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 employee 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 a 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.
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. 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.
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.
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 16th
day of April, 1996.
THE TIMKEN COMPANY
By________________________
Stephen A. Perry
Vice President
Human Resources & Logistics
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:____________________________
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 16, 1996 (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 ________ of the Company's common stock
without par value (the "Common Shares") at the exercise price of
forty-four and one-eighth dollars ($44.125) 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 cancelled 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 employee 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 a 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.
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
therefore, 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.
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 16th
day of April, 1996.
THE TIMKEN COMPANY
By____________________________
Stephen A. Perry
Vice President -
Human Resources & Logistics
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:_____________________________
Exhibit 11 - COMPUTATION OF PER SHARE EARNINGS
(Thousands of dollars, except per share data)
Three Months Ended March 31
1996 1995
PRIMARY ---------------------------------
Average shares outstanding 31,390,830 31,076,704
Net effect of stock
options - based on the
treasury stock method using
average market price (1) (1)
---------------------------------
31,390,830 31,076,704
Net income (loss) $33,598 $34,276
Per-share amount $1.07 $1.10
===== =====
FULLY DILUTED
Average shares outstanding 31,390,830 31,076,704
Net effect of dilutive stock
options - based on the
treasury stock method using
the average quarterly market
price, if higher than exercise
price 388,822 149,901
---------------------------------
31,779,652 31,226,605
Net income (loss) $33,598 $34,276
Per-share amount $1.06 $1.10
===== =====
(1) Incremental number of shares excluded from calculation since they
do not have a dilutive effect.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's consolidated Balance Sheet and Profit & Loss financial statements and
is qualified in its entirety by reference to such fanancial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 864
<SECURITIES> 0
<RECEIVABLES> 327,579
<ALLOWANCES> 6,996
<INVENTORY> 395,362
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0
0
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<INCOME-TAX> 20,245
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</TABLE>
