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, 2000.
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, 2000, 60,964,527.
PART I. FINANCIAL INFORMATION 2.
THE TIMKEN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
Mar. 31 Dec. 31
2000 1999
ASSETS ---------- ----------
Current Assets (Thousands of dollars)
Cash and cash equivalents........................... $ 9,620 $ 7,906
Accounts receivable, less allowances,
(2000-$9,792; 1999-$9,497).......................... 394,033 339,326
Deferred income taxes............................... 39,901 39,706
Inventories (Note 2) ............................... 478,387 446,588
---------- ----------
Total Current Assets...................... 921,941 833,526
Property, Plant and Equipment....................... 2,893,828 2,912,733
Less allowances for depreciation................... 1,544,049 1,531,259
---------- ----------
1,349,779 1,381,474
Costs in excess of net assets of acquired business,
less amortization, (2000-$36,570; 1999-$34,879)..... 156,270 153,847
Other assets........................................ 64,292 72,471
---------- ----------
Total Assets.................................. $2,492,282 $2,441,318
========== ==========
LIABILITIES
Current Liabilities
Accounts payable and other liabilities.............. $ 241,101 $ 236,602
Short-term debt and commercial paper................ 141,288 122,547
Accrued expenses.................................... 205,823 198,512
---------- ----------
Total Current Liabilities................. 588,212 557,661
Noncurrent Liabilities
Long-term debt (Note 3) ............................ 326,302 327,343
Accrued pension cost................................ 101,456 76,005
Accrued postretirement benefits cost................ 395,531 394,084
Deferred income taxes............................... 5,453 6,147
Other noncurrent liabilities........................ 32,643 34,097
---------- ----------
Total Noncurrent Liabilities.............. 861,385 837,676
Shareholders' Equity (Note 4)
Common stock........................................ 269,708 273,199
Earnings invested in the business................... 841,954 836,916
Accumulated other comprehensive income.............. (68,977) (64,134)
---------- ----------
Total Shareholders' Equity................ 1,042,685 1,045,981
Total Liabilities and Shareholders' Equity.... $2,492,282 $2,441,318
========== ==========
PART I. FINANCIAL INFORMATION Continued 3.
THE TIMKEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
Mar. 31 Mar. 31
2000 1999
---------- ----------
(Thousands of dollars, except per share data)
Net sales......................................... $ 685,791 $ 625,370
Cost of products sold............................. 540,826 498,811
---------- ----------
Gross Profit................................... 144,965 126,559
Selling, administrative and general expenses...... 94,145 89,330
Impairment and restructuring charges (Note 5)..... 14,759 -0-
---------- ----------
Operating Income............................... 36,061 37,229
Interest expense.................................. (7,222) (6,656)
Interest income................................... 549 427
Other income (expense)............................ (2,655) (3,415)
---------- ----------
Income Before Income Taxes..................... 26,733 27,585
Provision for income taxes (Note 6)............... 10,693 11,006
---------- ----------
Net Income..................................... $ 16,040 $ 16,579
========== ==========
Earnings Per Share * .......................... $0.26 $0.27
Earnings Per Share - assuming dilution **..... $0.26 $0.27
Dividends Per Share............................ $0.18 $0.18
========== ==========
* Average shares outstanding..................... 61,099,962 61,859,612
** Average shares outstanding - assuming dilution. 61,237,143 62,018,468
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
2000 1999
------- -------
OPERATING ACTIVITIES (Thousands of dollars)
Net Income............................................. $16,040 $16,579
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization......................... 38,221 36,597
Provision (credit) for deferred income taxes.......... 85 (5,724)
Stock issued in lieu of cash to employee benefit plans 300 2,972
Impairment and restructuring charges.................. 14,759 -0-
Changes in operating assets and liabilities:
Accounts receivable.................................. (57,277) (21,820)
Inventories.......................................... (34,968) (2,807)
Other assets......................................... 1,011 (10,196)
Accounts payable and accrued expenses................ 37,694 37,210
Foreign currency translation......................... (167) 2,623
------- -------
Net Cash Provided by Operating Activities........... 15,698 55,434
INVESTING ACTIVITIES
Purchases of property, plant and equipment - net...... (20,061) (46,599)
Acquisitions.......................................... -0- (27,923)
------- -------
Net Cash Used by Investing Activities............... (20,061) (74,522)
FINANCING ACTIVITIES
Cash dividends paid to shareholders................... (11,002) (11,138)
Purchase of Treasury Shares........................... (3,791) (339)
Payments on long-term debt............................ (964) (78)
Proceeds from issuance of long-term debt.............. 27 1,819
Short-term debt activity - net........................ 22,190 39,763
------- -------
Net Cash Provided by Financing Activities........... 6,460 30,027
Effect of exchange rate changes on cash................ (383) (247)
Increase in Cash and Cash Equivalents.................. 1,714 10,692
Cash and Cash Equivalents at Beginning of Period....... 7,906 320
------- -------
Cash and Cash Equivalents at End of Period............. $ 9,620 $11,012
======= =======
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 5.
Note 1 -- Basis of Presentation
The accompanying consolidated condensed financial statements (unaudited) for
the Timken Company (the "company") 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, 1999.
3/31/00 12/31/99
Note 2 -- Inventories -------- ---------
(Thousands of dollars)
Finished products $176,276 $172,682
Work-in-process and raw materials 247,418 235,251
Manufacturing supplies 54,693 38,655
-------- --------
$478,387 $446,588
======== ========
Note 3 -- Long-term Debt 3/31/00 12/31/99
-------- ---------
(Thousands of dollars)
State of Ohio Pollution Control Revenue Refunding Bonds,
maturing on July 1, 2003. The variable interest
rate is tied to the bank's tax exempt weekly interest
rate. The rate at March 31, 2000 is 3.95%. $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, 2000 is 3.90%. 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, 2000 is 3.90%. 21,700 21,700
State of Ohio Water Development Authority Solid Waste
Revenue Bonds, maturing on July 2, 2032. The
variable interest rate is tied to the bank's tax
exempt weekly interest rate. The rate at
March 31, 2000 is 3.95%. 24,000 24,000
Fixed Rate Medium-Term Notes, Series A, due at various
dates through May, 2028 with interest rates ranging
from 6.20% to 7.76%. 252,000 252,000
Other 8,974 9,957
-------- --------
331,674 332,657
Less: Current Maturities 5,372 5,314
-------- --------
$326,302 $327,343
======== ========
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited)
Continued 6.
Note 4 -- Shareholders' Equity 3/31/00 12/31/99
-------- --------
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 -- 200,000,000 shares
Issued (including shares in treasury)
2000 - 63,082,626 shares
1999 - 63,082,626 shares
Stated Capital 53,064 53,064
Other paid-in capital 258,587 258,287
Less cost of Common Stock in treasury
2000 - 1,963,008 shares
1999 - 1,886,537 shares 41,943 38,152
-------- --------
$269,708 $273,199
======== ========
<TABLE>
An analysis of the change in capital and earnings invested in the business is as follows:
Common Stock Earnings Accumulated
Other Invested Other
Stated Paid-In in the Comprehensive Treasury
Capital Capital Business Income Stock Total
------- -------- -------- ---------- -------- ----------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1999 $53,064 $258,287 $836,916 ($64,134) ($38,152) $1,045,981
Net Income 16,040 16,040
Foreign currency translation adjustment (4,843) (4,843)
----------
Total comprehensive income 11,197
Dividends - $.18 per share (11,002) (11,002)
Stock Options, employee benefit and dividend
reinvestment plans: 300 (3,791) (3,491)
Treasury - (issued)/acquired 231,561 shares -0-
------- -------- -------- ---------- -------- ----------
Balance March 31, 2000 $53,064 $258,587 $841,954 ($68,977) ($41,943) $1,042,685
======= ======== ======== ========== ======== ==========
The total comprehensive income for the three months ended March 31, 1999 was $3,030,000.
</TABLE>
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 7.
Continued
Note 5 -- Impairment and Restructuring Charges
In March 2000, the company announced an acceleration of its global
restucturing to position itself for profitable growth, streamline
operations, reduce costs and improve European profitability. This
restructuring is expected to save the company approximately $35 million
annually before taxes by the end of 2001. Implementation, employee
severance and non-cash impairment charges of $55 million before taxes are
expected to be recorded over the next one to two years. Of this amount,
approximately $35 million is anticipated as impairment and restructuring
charges, and the remaining $20 million will be classified as either
cost of products sold or selling, administrative and general expense.
In the first quarter 2000, the company recorded impairment and
restructuring charges of $14.8 million before taxes which was related to
the global restructuring acceleration. The charges reflected costs
associated with abandoned acquisition, affiliation and divestiture efforts
as well as the consolidation of certain operations in the company's
worldwide steel operations. In addition, approximately $1.7 million of
the charges relates to the severance costs associated with the termination
of 78 positions in the company's European distribution network. No
payments have been made through the end of the first quarter.
Key elements of the charges by industry are as follows (in thousands of
dollars):
Bearing Steel Total
Restructuring: -------- --------- ---------
Separation costs - operations $ 1,661 $ -0- $ 1,661
Exit costs 34 -0- 34
-------- --------- ---------
$ 1,695 $ -0- $ 1,695
Impaired assets:
Property, plant and equipment -0- 8,880 8,880
Abandoned acquisitions 214 3,970 4,184
-------- --------- ---------
$ 214 $ 12,850 $ 13,064
-------- --------- ---------
$ 1,909 $ 12,850 $ 14,759
======== ========= =========
Note 6 -- Income Tax Provision Three Months Ended
Mar. 31 Mar. 31
2000 1999
-------- --------
U.S. (Thousands of dollars)
Federal $ 6,931 $ 9,106
State & Local 505 1,035
Foreign 3,257 865
------- -------
$10,693 $11,006
======= =======
Taxes provided exceed the U.S. statutory rate primarily due to state and
local taxes and losses without current tax benefits.
PART I. NOTES TO FINANCIAL STATEMENTS (Unaudited) 8.
Continued
Note 7 -- Segment Information
(Thousands of Dollars) Three Months Ended
Mar. 31 Mar. 31
Bearings 2000 1999
-------- --------
Net sales to external customers $470,374 $438,717
Depreciation and amortization 21,287 20,486
Earnings before interest and taxes 32,133 23,249
Interest expense (5,534) (5,080)
Interest income 612 448
Steel
Net sales to external customers 215,418 186,653
Intersegment sales 55,582 55,378
Depreciation and amortization 16,934 16,111
Earnings before interest and taxes 2,791 11,029
Interest expense (2,662) (2,316)
Interest income 911 719
Profit Before Taxes
Total EBIT for reportable segments 34,924 34,278
Interest expense (7,222) (6,656)
Interest income 549 427
Intersegment adjustments (1,518) (464)
Income before income taxes 26,733 27,585
<PAGE>
9.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- ---------------------
The Timken Company reported net sales of $685.8 million for the first
quarter of 2000, up 9.7% from $625.4 million in 1999's first quarter.
Net income declined 3.2% to $16 million compared to $16.6 million in the
first quarter of 1999. In this first quarter of 2000, the company incurred
total pretax charges of $16.8 million related to the company's global
restructuring announced in March. Excluding these charges, net income
for the first quarter of 2000 was $26.1 million. Sales and net income,
excluding these charges, were at their highest levels since the
second quarter of 1998.
The increase in sales volume resulted in part from investments the company
made during the last few years in facilities to produce a new range of
products, which are beginning to reach the market. In addition, international
markets improved, especially industrial markets that were weakened by the
Asian financial crisis. The U.S. and European automotive industries also
remained strong.
Gross profit was approximately $145 million (21.1% of net sales) in the first
quarter of 2000, compared to $126.6 million (20.2% of net sales) in 1999's
first quarter. Continued strength in the automotive industry, increased
demand for industrial products worldwide and improvement in international
markets contributed to the increase.
Selling, administrative and general expenses were $94.1 million (13.7% of net
sales) in the first quarter of 2000, compared to $89.3 million (14.3% of net
sales) in 1999. The amount reserved for performance-based pay was higher in
the first quarter 2000 due to the company's increased level of earnings.
Also contributing to the dollar increase was the inclusion of Timken India
in consolidated results for the first quarter of 2000 as well as continued
funding of growth initiatives and reorganization costs.
In March 2000, the company announced an acceleration of its global
restructuring to position itself for profitable growth, streamline operations,
reduce costs and improve European profitability. This restructuring is
expected to save the company approximately $35 million annually before
taxes by the end of 2001 and will result in the elimination of 600 positions
worldwide. Implementation, employee severance and non-cash impairment
charges of $55 million before taxes are expected to be recorded over the next
one to two years. The restructuring was undertaken in order to accelerate
the drive to improve competitiveness and further position the company for
profitable worldwide growth. It will, in conjunction with the reorganization
initiated late in 1999, support the company's transformation to a global
business. It is an extension of actions begun during the second half of 1998
and during 1999 that included rationalization of plants and businesses to
reduce asset intensity and assure world competitiveness.
The Western European restructuring will refocus the company's bearing
manufacturing facility in Duston, England to specialize and fuel
<PAGE>
10.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
growth in advanced automotive bearings, roller production and formed products,
reflecting current strong automotive demand. In addition, the company will
shift manufacturing to facilities in Poland and Romania in order to achieve
high quality and productivity at lower costs. The company will also
consolidate the European distribution operations as well as reduce production
costs in European steel operations and redefine the company's operations in
Asia. The domestic restructuring includes the write-off of certain assets,
primarily in the company's steel business as well as the reorientation of
facilities and business systems around the global segments.
As a part of the restructuring, additional streamlining of the management
structure, which results from the reorganization into global units,
will be undertaken. The management streamlining is expected to
reduce administrative costs by about $15 million annually before taxes,
one half of which will be reinvested in growth initiatives in new products,
strengthening customer engineering and project management, and creating more
focused, entrepreneurial business entities. The new management structure is
expected to facilitate the company's ability to bring new products and
services to the market faster and more effectively.
The first quarter 2000 special charges of $16.8 million were related to the
global restructuring acceleration. Included in these special charges was an
impairment charge of approximately $13.1 million, the majority of which
occurred in the company's steel business. The impairment charge reflected
costs associated with abandoned acquisition, affiliation and divestiture
efforts as well as consolidation of certain operations in the company's
worldwide steel operations. The company also recorded charges of approximately
$1.7 million related to its efforts to consolidate the distribution effort in
Europe. The majority of this charge relates to severance costs
associated with the termination of 78 positions in the European distribution
network. Finally, the company recorded $2.0 million of consulting costs,
classified as selling, administrative and general expenses, related to
the company's realignment of businesses into global units.
"Other income (expense)" reflects lower expense in the first quarter of 2000
due primarily to higher foreign currency exchange losses recorded in the
first quarter of 1999.
Bearings
Bearings' net sales were $470.4 million in the first quarter of 2000,
up 7.2% compared to $438.7 million one year ago. Recovering North American
industrial demand, modest strengthening in Asia and Europe and continued
strong demand in North American automotive industry all combined to drive
Bearings' net sales to a record level in this first quarter of 2000.
North American automotive sales were up 11% compared to the first quarter
of 1999 due primarily to higher sales in the light and heavy truck
segments. Sales in Latin America were higher by 28% and sales in Asia
Pacific increased by 19%. North American industrial bearing
<PAGE>
11.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
sales, including original equipment and aftermarket, were up by 6%, ending
the downward trend the company experienced over the past four quarters.
Improved international economic conditions contributed to higher
construction, mining, and farm equipment production. Aerospace sales
declined by 10%. Railroad sales also declined by 25%. First quarter
sales in Europe were higher by 6% compared to a year ago.
Bearings' earnings before interest and income taxes (EBIT) for the first
quarter was $32.1 million, compared to $23.2 million in the first quarter
of 1999. This was the highest EBIT since the second quarter of 1998.
Excluding Bearing's portion of the impairment and restructuring charge,
Bearings' EBIT was $35.6 million, up 53% from 1999's first quarter.
Contributing to this increase was improved plant performance resulting
from higher manufacturing volumes and on-going efforts to reduce
manufacturing costs. Bearings' restructuring activities in England and
Western Europe are expected to reduce costs and improve European profitability
in the future.
Bearings' selling and administrative expenses in the first quarter of
2000 were higher than the year-ago quarter due in part to the addition
of Timken India Limited, in which the company acquired a majority interest
in March 1999. Continued funding of growth initiatives, an increase in the
amount reserved for performance-based compensation plans and reorganization
costs also added to first quarter costs.
Steel
Steel's net sales, including intersegment sales, were $271 million in the
first quarter of 2000, an increase of 12% over the $242 million recorded
a year earlier. Sales in the first quarter of 2000 were the strongest since
the second quarter of 1998. Shipments were higher in all segments except
aerospace. As a result, the company increased prices in the first quarter
and announced further price increases effective for the second quarter.
Sales to oil country and service center customers grew faster than
anticipated as a result of higher demand caused by a reduction in customer
inventories. Oil country sales increased by about 200% compared to the
year-ago quarter while service center sales increased by more than 90%.
Industrial sales increased by about 10%. Sales to external bearing customers
were up by about 15%. For automotive customers, first quarter sales of
precision steel components were higher by 19%; however, alloy steel
automotive sales were relatively flat compared to a year ago. Aerospace
sales declined by 12% compared to 1999's first quarter. Demand for steel
products appears strong as the industries the company serves are improving
and the Asian crisis is passing.
Steel's EBIT was $2.8 million in the first quarter of 2000 compared to
$11 million in 1999's first quarter. First quarter 2000 included impairment
and restructuring charges related primarily to asset impairment and costs
associated with abandonment of acquisition, affiliation and
divestiture efforts. Excluding Steel's portion of the
<PAGE>
12.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
impairment and restructuring charge, Steel's EBIT was $16.1 million, up 46%
from 1999's first quarter. Higher sales volume, price increases and savings
generated by cost reductions implemented in the first quarter more than
offset higher scrap and alloy prices.
Financial Condition
- -------------------
Total assets as shown on the Consolidated Condensed Balance Sheets increased
by $51 million from December 31, 1999. Inventory balances at the end of the
first quarter were higher by $31.8 million compared to year-end 1999 levels.
The number of days' supply in inventory increased by four days to 112 days
at March 31, 2000, compared to 108 days at December 31, 1999. Bearings'
inventory increased by about three days; Steel's inventory increased by about
five days. Accounts receivable increased by almost $55 million
reflecting the higher level of sales. The number of days' sales in
receivables at March 31, 2000, decreased by 1 day compared to
December 31, 1999.
As shown on the Consolidated Condensed Statement of Cash Flows, the increase
in inventories required $35 million of cash during the first three months
of 2000. The increase in accounts receivable used $57.3 million of cash.
Cash was provided as a result of a $37.7 million increase in accounts
payable and accrued expenses due primarily to higher reserves for pension
liabilities as well as amounts reserved for performance-based pay during
this first quarter of 2000. Purchases of property, plant and
equipment-net used $20.1 million of cash in the first three months of
2000, compared to $46.6 million for the same period in 1999, reflecting
lower capital spending. Company investments continue to support activities
consistent with the company's strategies to achieve industry leadership,
improve the core businesses, and increase growth and profitability
The 31% debt-to-total-capital ratio at March 31, 2000 was slightly higher
than the 30.1% at year-end 1999. Debt increased by $16.5 million during
the first three months of 2000 to $466.4 million at March 31, 2000.
In addition to capital expenditures, cash was used to pay dividends
to shareholders, to fund working capital and to buy back shares of common
stock as authorized under the company's 1998 common stock purchase
plan. Short-term borrowing and issuance of medium-term notes will meet
future cash needs that exceed cash generated from operations. Total
shareholders' equity decreased by $3.3 million since December 31, 1999
due to payment of $11 million in dividends and the buyback of
shares of the company's common stock. The $16 million increase in
equity from the first quarter's net income was also offset by a
$4.8 million foreign currency translation adjustment.
<PAGE>
13.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Other Information
- -----------------
The industry's antidumping duty orders covering imports of tapered
roller bearings from Japan, China, Hungary and Romania are currently
in the process of being reviewed by U.S. government agencies to
determine whether dumping and injury to the domestic industry are
likely to continue or recur if the orders were to be revoked. These
reviews commenced in April 1999, and should conclude by the end of
the second quarter 2000. The company is actively participating in the
proceedings. If the U.S. government determines that dumping and injury
are likely to continue or recur, the antidumping duty finding and orders
will continue in place for another five years. If, however, a
determination is made that injury to the domestic industry is unlikely
to continue or recur with respect to any of the four countries covered,
the finding or order will be revoked with respect to that country. If,
following the revocation of such an order, injurious dumping does continue
or recur, contrary to the finding of the government, the improved conditions
of trade of tapered roller bearings in the U.S., which resulted from the
existing orders, would deteriorate. If injurious dumping does occur, such
dumping could have a material adverse effect on the company's business,
financial condition or results of operations.
Assets and liabilities of subsidiaries, other than Timken Romania which
is considered to operate in a highly inflationary economy, are translated
at the rate of exchange in effect on the balance sheet date; income and
expenses are translated at the average rates of exchange prevailing during
the quarter. Related translation adjustments are reflected as a separate
component of accumulated other comprehensive income. Foreign currency
gains and losses resulting from transactions and the translation of
financial statements of Timken Romania are included in the results of
operations.
Foreign currency exchange losses included in the company's operating results
for the first quarter of 2000 totaled $0.5 million compared to $6.5 million
in the first quarter of 1999. The January 1999 devaluation of the Brazilian
Real contributed to 1999's foreign currency losses; however, the
company's operations in France and the United Kingdom recorded the most
significant translation losses. Also, in the first quarter of 2000 the
company recorded a foreign currency translation adjustment of $4.8 million,
which reduced other comprehensive income, compared to a reduction
of $13.5 million in the year-ago period.
In January 2000, the company announced that distribution facilities
would be moved from existing warehousing and shipping facilities in Germany,
England, France and Italy to a central warehouse in Strasbourg, France,
which will be operated by an external service provider. This initiative
is expected to reduce employment at the facilities by approximately 78
positions.
Also in January 2000, members of the United Steelworkers of America,
which represents the company's workers in the Canton, Columbus and
<PAGE>
14.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Wooster facilities, ratified a new five-year agreement. This new contract
will extend through September 26, 2005, and is the third consecutive early
agreement reached by the company.
In the third quarter of 1999, the company announced it would explore
strategic alternatives for its specialty steel subsidiary, Timken Latrobe
Steel. In February 2000, the company determined it would retain Timken
Latrobe Steel as a separate business within the company's Steel business.
During the first quarter of 2000, the company purchased 237,300 shares
of its common stock to be held in treasury as authorized under the
company's 1998 common stock purchase plan. To date, 2.9 million shares
of the 4 million shares authorized have been purchased pursuant to
the plan. The authorization to purchase shares under the 1998 plan
expires December 31, 2001.
On April 18, 2000, the board of directors declared a quarterly cash
dividend of 18 cents per share payable June 5, 2000, to shareholders
of record at the close of business on May 19, 2000. This is the
312th consecutive dividend paid on the common stock of the company.
Also on April 18, 2000, the shareholders of the company elected Mrs.
Jacqueline F. Woods to the board of directors for a three-year term
expiring at the 2003 annual meeting. Mrs. Woods, 52, has served as
president of Ameritech Ohio, a subsidiary of SBC Communications Inc.,
since 1993. In addition, Stanley C. Gault, John M. Timken, Jr. and
W. R. Timken, Jr. were re-elected as directors for three-year terms
to expire at the 2003 annual meeting.
In April 2000, Rail Bearing Service, a subsidiary of the company,
announced a consolidation of their Knoxville, Tennessee facilities.
The three reconditioning locations and office have been consolidated
into one newly constructed facility.
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:
a) changes in world economic conditions. This includes, but is
not limited to, the potential instability of governments
and legal systems in countries in which the company conducts
business and significant changes in currency valuations.
b) the effects of changes in customer demand on sales,
product mix, and prices. This includes the effects of
customer strikes, the impact of changes in industrial
business cycles, whether conditions of fair trade continue
in the U.S. market, and the possible revocation in the U.S.
of the anti-dumping duty orders on tapered roller bearings,
on which a decision is to be reached by the U.S. government
by the end of June 2000.
<PAGE>
15.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
c) competitive factors, including changes in market penetration,
the introduction of new products by existing and new competitors,
and new technology that may impact the way the company's products
are sold or distributed.
d) changes in operating costs. This includes the effect of
changes in the company's manufacturing processes; changes in
costs associated with varying levels of operations; changes
resulting from inventory management and cost reduction
initiatives and different levels of customer demands; the
effects of unplanned work stoppages; changes in the cost of
labor and benefits; and the cost and availability of raw
materials and energy.
e) the success of the company's operating plans, including its
ability to achieve the benefits from its ongoing continuous
improvement and rationalization programs; its ability to integrate
acquisitions into company operations; the ability of recently
acquired companies to achieve satisfactory operating results;
its ability to maintain appropriate relations with unions that
represent company associates in certain locations in order to
avoid disruptions of business and its ability to successfully
implement its new organizational structure.
f) unanticipated litigation, claims or assessments. This includes,
but is not limited to, claims or problems related to product
warranty and environmental issues.
g) changes in worldwide financial markets to the extent
they affect the company's ability or costs to raise
capital, have an impact on the overall performance of the
company's pension fund investments and/or cause changes in the
economy which affect customer demand.
<PAGE>
16.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
(1) The Board of Directors recommended the four individuals set
forth below be elected Directors in Class III at the 2000
Annual Meeting of Shareholders of The Timken Company held on
April 18, 2000, to serve a term of three years expiring at the
Annual Meeting in 2003 (or until their respective successors
elected and qualified). The first three individuals had been
previously elected as Directors by the shareholders and were
re-elected at the 2000 meeting.
Affirmative Withheld
Stanley C. Gault 55,322,161 1,575,240
John M. Timken, Jr. 54,611,517 2,285,884
W. R. Timken, Jr. 55,352,468 1,544,933
Jacqueline F. Woods 55,024,184 1,873,217
(2) Shareholders approved The Timken Company Long-Term Incentive
Plan As Amended And Restated As Of December 16, 1999.
Affirmative Negative Abstain
49,975,536 5,920,575 1,001,290
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
10 The Timken Company Long-Term Incentive Plan As Amended And
Restated As Of December 16, 1999, and approved by share-
holders April 18, 2000 was filed as Appendix A to Proxy
Statement dated February 23, 2000, and is incorporated
herein by reference.
10.1 The Timken Company Director Deferred Compensation Plan
effective as of February 4, 2000.
<PAGE>
17.
10.2 The form of The Timken Company Nonqualified Stock Option
Agreement for nontransferable options as adopted on
April 18, 2000.
10.3 The form of The Timken Company Nonqualified Stock Option
Agreement for transferable options as adopted on
April 18, 2000.
10.4 The form of The Timken Company Nonqualified Stock Option
Agreement for special award options as adopted on
April 18, 2000.
10.5 The form of The Timken Company Deferred Shares Agreement
as adopted on April 18, 2000.
10.6 Amendment to Employee Excess Benefits Agreement
11 Computation of Per Share Earnings
12 Computation of Ratio of Earnings to Fixed Charges
Item 6. Exhibits and Reports on Form 8-K cont.
27 Financial Data Schedule
The company did not file any reports on Form 8-K during the three
months ended March 31, 2000.
<PAGE>
18.
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 12, 2000 BY /s/ W. R. Timken, Jr.
________________________ _______________________________
W. R. Timken, Jr.,
Director and Chairman;
Chief Executive Officer
Date May 12, 2000 BY /s/ G. E. Little
________________________ _______________________________
G. E. Little
Senior Vice President - Finance
EXHIBIT 10.1
THE TIMKEN COMPANY
DIRECTOR DEFERRED COMPENSATION PLAN
The Timken Company hereby establishes, effective as of February 4, 2000,
the Director Deferred Compensation Plan for the Company. Such Plan provides
Directors with the opportunity to defer Compensation payable in cash,
Common Shares or Restricted Shares in accordance with the provisions
of this Plan.
ARTICLE I
DEFINITIONS
For the purposes hereof, the following words and phrases shall have the
meanings indicated.
1. "Account" shall mean a bookkeeping account in which Compensation
which is deferred by a Participant shall be recorded and to which dividends,
distributions, gains, losses and earnings may be credited in accordance with
the Plan.
2. "Beneficiary" or "Beneficiaries" shall mean the person or persons
designated by a Participant in accordance with the Plan to receive payment
of the remaining balance of the Participant's Account in the event of the
death of the Participant prior to receipt of the entire amount credited to
the Participant's Account.
3. "Board" shall mean the Board of Directors of the Company.
4. "Code" shall mean the Internal Revenue Code of 1986, as amended.
5. "Change in Control" shall mean that:
(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 of 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.
6. "Committee" shall mean the Compensation Committee of the Board or
such other Committee as may be authorized by the Board to administer the Plan.
7. "Common Shares" shall mean shares of common stock without par value
of the Company or any security into which such Common Shares may be changed by
reason of any transaction or event of the type referred to in Section 9 of
Article II of the Plan.
8. "Company" shall mean The Timken Company and its successors,
including, without limitation, the surviving corporation resulting from any
merger or consolidation of The Timken Company with any other corporation
or corporations.
9. "Compensation" shall mean (i) cash compensation earned as a
Director, including retainer and committee fees, and (ii) incentive
compensation payable in the form of Common Shares or Restricted Shares
pursuant to the Long-Term Incentive Plan or any similar plan approved
by the Committee for purposes of this Plan.
10. "Director" shall mean any member of the Board.
11. "Election Agreement" shall mean an agreement in substantially
the form attached hereto as Exhibit A, as modified from time to time by the
Company.
12. "Insolvent" shall mean that the Company has become subject to a
pending voluntary or involuntary proceeding under the United States Bankruptcy
Code or has become unable to pay its debts as they mature.
13. "Long-Term Incentive Plan" shall mean The Timken Company Long-Term
Incentive Plan, as amended from time to time, or any similar long-term
incentive plan.
14. "Participant" shall mean any Director who has at any time elected to
defer the receipt of Compensation in accordance with the Plan.
15. "Plan" shall mean this deferred compensation plan, which shall be
known as the Director Deferred Compensation Plan for The Timken Company.
16. "Restricted Shares" shall mean Common Shares granted pursuant to
Section 9 of the Long-Term Incentive Plan as to which neither the substantial
risk of forfeiture nor the restrictions on transfer has expired.
17. "Year" shall mean a calendar year.
ARTICLE II
ELECTION TO DEFER
1. Eligibility. A Director may elect to defer receipt of all or a
specified part of his or her Compensation for any Year in accordance with
Section 2 of this Article. A Director's entitlement to defer shall cease with
respect to the Year following the Year in which he or she ceases to be
a Director.
2. Election to Defer. A Director who desires to defer all or part of
his or her Compensation pursuant to this Plan must complete and deliver an
Election Agreement to the Director of Compensation and Benefits or the
Corporate Secretary of the Company prior to the beginning of the first year
of service for which such Compensation is payable; provided, however, that in
the first year in which an individual becomes a Director, the individual may
deliver an Election Agreement to the Director of Compensation and Benefits or
Corporate Secretary of the Company, with respect to Compensation for services
to be earned subsequent to filing of such Election Agreement within 30 days
after the individual becomes a Director; and provided further that, with
respect to Compensation for services to be earned in 2000, the individual may
deliver an Election Agreement to the Director of Compensation and Benefits or
Corporate Secretary of the Company on or prior to February 29, 2000, with
respect to Compensation for services to be earned
in 2000 subsequent to the filing of such Election Agreement. A Director
who timely delivers an Election Agreement to the Director of Compensation
and Benefits or Corporate Secretary of the Company shall be a Participant.
An Election Agreement that is timely delivered shall be effective for the
succeeding Year, and except as otherwise specified by a Director in his or her
Election Agreement, the Election Agreement shall continue to be effective from
Year to Year until revoked or modified by written notice to the Director of
Compensation and Benefits or Corporate Secretary of the Company or until
terminated automatically upon either the termination of the Plan or the
Company becoming Insolvent. In order to be effective to revoke or modify
an election to defer Compensation payable in any particular Year, a revocation
or modification must be delivered prior to the beginning of the Year of
service for which such Compensation is payable.
3. Amount Deferred; Period of Deferral. A Participant shall designate
on the Election Agreement the percentage or the dollar amount of his or her
Compensation that is to be deferred. A Participant may specify in the
Election Agreement that different percentages or dollar amounts shall apply
to different compensation plans or different forms of payment, i.e., cash,
Common Shares or Restricted Shares. The applicable percentage(s) or dollar
amount(s) of Compensation shall be deferred until the earlier to occur of
(i) the date the Participant ceases to be a Director by death, retirement
or otherwise or (ii) the date specified by the Participant in the Election
Agreement, including a date determined by reference to the date the
Participant ceases to be a Director by death, retirement or otherwise.
4. Accounts.
(i) Cash Compensation that a Participant elects to defer shall be
treated as if it were set aside in an Account on the date the Compensation
would otherwise have been paid to the Participant. A Participant's Account
shall be credited with gains, losses and earnings based on hypothetical
investment directions made by the Participant, in accordance with investment
deferral crediting options and procedures adopted by the Committee from time
to time. The investment deferred crediting options shall include (x) a
hypothetical Common Shares fund and (y) a hypothetical cash fund. To the
extent a Participant chooses the hypothetical Common Share fund, the
deferred cash Compensation shall be deemed to be invested in that number of
whole and fractional Common Shares determined by dividing the amount of cash
Compensation to be deferred by the fair market value per share of such Common
Shares on the date such cash Compensation would otherwise be paid. A
Participant's Account shall be credited from time to time with additional cash
amounts equal to dividends or other distributions paid on the number of Common
Shares reflected in the Account. Any additional cash amounts shall be
credited with gains, losses and earnings based on hypothetical investment
directions made by the Participant, including deemed investment in the
hypothetical Common Shares fund. To the extent a Participant chooses the
hypothetical cash fund, such amounts, unless otherwise determined by the
Committee, shall be credited with interest computed quarterly on the lowest
balance in the Account during such quarter at the prime rate in effect
according to The Wall Street Journal on the last day of such quarter plus 1%.
A Participant may change such hypothetical investment directions pursuant
to such procedures adopted by the Committee from time to time. The Company
specifically retains the right in its sole discretion to change the investment
deferral crediting options and procedures from time to time. By electing to
defer any amount pursuant to the Plan, each Participant shall thereby
acknowledge and agree that the Company is not and shall
not be required to make any investment in connection with the Plan, nor is it
required to follow the Participant's hypothetical investment directions in
any actual investment it may make or acquire in connection with the Plan or
in determining the amount of any actual or contingent liability or obligation
of the Company thereunder or relating thereto. Any amounts credited to a
Participant's Account with respect to which a Participant does not provide
investment direction shall be credited with earnings in an amount determined
by the Committee in its sole discretion or, if an amount is not so determined,
such amounts shall be credited to the hypothetical cash fund until further
ordered by the Committee or the Board of Directors. A Participant's Account
shall be adjusted as of each business day, except that interest, if any, for a
calendar quarter shall be credited on the first day of the following quarter.
(ii) Compensation payable in the form of Common Shares that a
Participant elects to defer shall be reflected in a separate Account, which
shall be credited with the number of Common Shares that would otherwise have
been issued or transferred and delivered to the Participant. Such Account
shall be credited from time to time with amounts equal to dividends or other
distributions paid on the number of Common Shares reflected in such Account,
and such Account shall be credited with gains, losses and earnings on cash
amounts credited to such Account from time to time in the manner provided in
Subsection (i) above with respect to cash Compensation.
(iii) To the extent a Participant elects deferral with respect
to Restricted Shares, the Participant agrees to forego his award of Restricted
Shares and instead a separate Account for the Participant will be credited
with the number of Common Shares that would otherwise have been covered by the
foregone award of Restricted Shares. The number of Common Shares credited to
the Participant's Account shall become vested and nonforfeitable on the same
date that
the corresponding Restricted Shares would have become vested. A Participant
shall elect a payment date for the number of Common Shares credited to his
Account that is no earlier than the later of (x) date on which the number
of Common Shares credited to his Account shall become vested and (y) three
years from the date of the award. Such Account shall be credited from time to
time with amounts equal to dividends or other distributions paid on the number
of Common Shares reflected in such Account, and such Account shall be credited
with gains, losses and earnings on cash amounts credited to such Account from
time to time in the manner provided in Subsection (i) above with respect to
cash Compensation.
5. Payment of Accounts. The amounts in Participants' Accounts shall be
paid as provided in this Section 5.
(i) The amount of a Participant's Account attributable to deferral
of cash Compensation (including any amount that is deemed to be invested in a
hypothetical Common Shares fund) shall be paid to the Participant in cash in a
lump sum or in a number of approximately equal quarterly installments (based
on initial value), not to exceed 40, as designated by the Participant in the
Election Agreement. The amount of such Account remaining unpaid shall
continue to be credited with gains, losses and earnings, as provided in
Section 4 of this Article. The lump sum payment or the first quarterly
installment, as the case may be, shall be made as soon as practicable
following the end of the period of deferral as specified in Section 3 of this
Article.
(ii) The number of Common Shares in a Participant's Account
attributable to deferral of Compensation payable in the form of Common Shares
or Restricted Shares shall be issued or transferred to the Participant in
Common Shares in one installment or in a number of approximately equal
quarterly installments, not to exceed 40, as designated by the Participant
in the Election Agreement. The one installment or first quarterly
installment, as the case may be,
shall be made as soon as practicable following the end of the period of
deferral as specified in Section 3 of this Article. All amounts credited to
such Account in respect of dividends, distributions and gains, losses and
earnings thereon as provided in Subsections (ii) or (iii) of Section 4 of this
Article shall likewise be paid to the Participant at the same time the shares
causing the dividend, distribution or interest are transferred to the
Participant.
6. Death of a Participant. In the event of the death of a Participant,
the amount of the Participant's Account or Accounts shall be paid to the
Beneficiary or Beneficiaries designated in a writing substantially in the
form attached hereto as Exhibit B (the "Beneficiary Designation"), in
accordance with the Participant's Election Agreement and Section 5 of this
Article. A Participant's Beneficiary Designation may be changed at any time
prior to his or her death by the execution and delivery of a new Beneficiary
Designation. The Beneficiary Designation on file with the Company that bears
the latest date at the time of the Participant's death shall govern. In the
absence of a Beneficiary Designation or the failure of any Beneficiary to
survive the Participant, the amount of the Participant's Account or Accounts
shall be paid to the Participant's estate in a lump sum 90 days after the
appointment of an executor or administrator. In the event of the death of
the Beneficiary or Beneficiaries after the death of a Participant, the
remaining amount of the Account or Accounts shall be paid in a lump sum to the
estate of the last Beneficiary to receive payments 90 days after the
appointment of an executor or administrator.
7. Small Payments. Notwithstanding the foregoing, if installment
payments elected by a Participant would result in a payment with a value of
less than $500, or if the total Account has a value of less than $5,000, the
entire amount of the Participant's Account or Accounts may at the discretion
of the Company be paid in a lump sum to the Participant or Beneficiary in
accordance with Section 6 of this Article.
8. Acceleration. Notwithstanding the provisions of the foregoing:
(i) if a Change in Control occurs, the amount of each Participant's Account
or Accounts shall immediately be paid to the Participant in full; (ii) in
the event of an unforeseeable emergency, as defined in section 1.457-2(h)(4)
and (5) of the Income Tax Regulations, that is caused by an event beyond the
control of the Participant or Beneficiary and that would result in severe
financial hardship to the individual if acceleration were not permitted, the
Committee may in its sole discretion accelerate the payment to the Participant
or Beneficiary of the amount of his or her Account or Accounts, but only up
to the amount necessary to meet the emergency.
9. Adjustments. The Committee may make or provide for such adjustments
in the numbers of Common Shares credited to Participants' Accounts, and in the
kind of shares so credited, as the Committee in its sole discretion, exercised
in good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of Participants that otherwise would result from
(i) any stock dividend, stock split, combination of shares, recapitalization
or other change in the capital structure of the Company, or (ii) any merger,
consolidation, spin-off, split-off, spin-out, split-up, reorganization,
partial or complete liquidation or other distribution of assets, issuance of
rights or warrants to purchase securities, or (iii) any other corporate
transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Committee, in its
discretion, may provide in substitution for any or all Common Shares
deliverable under this Plan such alternative consideration as it, in good
faith, may determine to be equitable in the circumstances.
10. Fractional Shares. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Committee may provide
for the elimination of fractions or for the settlement of fractions in cash.
ARTICLE III
ADMINISTRATION
The Company, through the Committee, shall be responsible for the
general administration of the Plan and for carrying out the provisions hereof.
The Committee shall have all such powers as may be necessary to carry out the
provisions of the Plan, including the power to (i) determine all questions
relating to eligibility for participation in the Plan and the amount in the
Account or Accounts of any Participant and all questions pertaining to claims
for benefits and procedures for claim review, (ii) resolve all other questions
arising under the Plan, including any questions of construction, and (iii) take
such further action as the Company shall deem advisable in the administration
of the Plan. The actions taken and the decisions made by the Committee
hereunder shall be final and binding upon all interested parties.
ARTICLE IV
AMENDMENT AND TERMINATION
The Company reserves the right to amend or terminate the Plan at any
time by action of the Board; provided, however, that no such action shall
adversely affect any Participant or Beneficiary who has an Account, or result
in the acceleration of payment of the amount of any Account (except as
otherwise permitted under the Plan), without the consent of the Participant
or Beneficiary.
ARTICLE V
MISCELLANEOUS
1. Non-alienation of Deferred Compensation. Except as permitted by this
Plan, no right or interest under this Plan of any Participant or Beneficiary
shall, without the written consent of the Company, be (i) assignable or
transferable in any manner, (ii) subject to alienation, anticipation, sale,
pledge, encumbrance, attachment, garnishment or other legal process or
(iii) in any manner liable for or subject to the debts or liabilities of the
Participant or Beneficiary.
2. Interest of Director. The obligation of the Company under the Plan
to make payment of amounts reflected in an Account merely constitutes the
unsecured promise of the Company to make payments from its general assets
or in the form of its Common Shares, as the case may be, as provided herein,
and no Participant or Beneficiary shall have any interest in, or a lien or
prior claim upon, any property of the Company. It is the intention of the
Company that the Plan be unfunded for tax purposes and for purposes of Title I
of ERISA. The Company may create a trust to hold funds, Common Shares or
other securities to be used in payment of its obligations under the Plan, and
may fund such trust; provided, however, that any funds contained therein shall
remain liable for the claims of the Company's general creditors.
3. Claims of Other Persons. The provisions of the Plan shall in no
event be construed as giving any other person, firm or corporation any legal
or equitable right as against the Company or the officers, employees or
Directors of the Company, except any such rights as are specifically provided
for in the Plan or are hereafter created in accordance with the terms and
provisions of the Plan.
4. Severability. The invalidity and unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the
Plan shall be construed in all respects as if such invalid or unenforceable
provision were omitted herefrom.
5. Governing Law. Except to the extent preempted by federal law, the
provisions of the Plan shall be governed and construed in accordance with the
laws of the State of Ohio.
6. Relationship to Other Plans. This Plan is intended to serve the
purposes of and to be consistent with the Long-Term Incentive Plan and any
similar plan approved by the Committee for purposes of this Plan. The
issuance or transfer of Common Shares pursuant to this Plan shall be subject
in all respects to the terms and conditions of the Long-Term Incentive Plan
and any other such plan. Without limiting the generality of the foregoing,
Common Shares credited to the Accounts of Participants pursuant to this Plan
as a result of the deferral of Compensation payable in Common Shares or
Restricted Shares shall be taken into account for purposes of Section 3 of the
Long-Term Incentive Plan (Shares Available Under the Plan) and for purposes of
the corresponding provisions of any other such plan.
EXHIBIT A
(Continuing Directors)
THE TIMKEN COMPANY DIRECTOR DEFERRED COMPENSATION PLAN
ELECTION AGREEMENT
I, ______________________, hereby elect to participate in
the Director Deferred Compensation Plan for The Timken Company (the
"Plan") with respect to the Compensation that I may receive beginning
April 1, 2000.
I hereby elect to defer payment of the Compensation which I
otherwise would be entitled to receive as follows:
Deferral of Cash Deferral of Common Shares
1. Percentage or dollar amount 1. Percentage or dollar amount
of Board retainer and Committee value of Common Shares payable
fees, if any, payable (a) in as a result of the annual
2000 only [ ] or (b) in 2000 automatic award (a) in 2000
and in later years [ ] (check only [ ] or (b) in 2000 and in
one): later years [ ] (check one):
25% [ ] 100% [ ] 25% [ ] 100% [ ]
50% [ ] ___% [ ] 50% [ ] ___% [ ]
$___ [ ] __shares [ ] $___ [ ]
2. Percentage of deferred 2. Percentage of dividend
amount to be invested in Common equivalents to be invested in
Shares fund and/or cash fund Common Shares fund and/or cash
(total of percentages must fund (total of percentages must
equal 100%): equal 100%):
a. Common Shares fund ____% a. Common Shares fund ____%
b. Cash fund ____% b. Cash fund ____%
3. To the extent of any 3. Please make payment of the
election to Common Shares fund, above specified Compensation
percentage of dividend together with all accrued
equivalents to be invested in amounts reflected in my Account
Common Shares fund and/or cash as follows:
fund (total of percentages must
equal 100%): a. Pay in lump sum [ ]
b. Pay in __ approximately
a. Common Shares fund _____% equal quarterly installments
b. Cash fund _____% (based on inital value) [ ]
4. Please make payment of the 4. Please defer my receipt of
above specified cash Common Shares together with the
Compensation together with all cash credited to my Account
accrued amounts reflected in my equal to dividends or other
Account as follows: distributions paid on the
number of shares reflected in
a. Pay in lump sum [ ] such Account, together with all
b. Pay in ___ approximately accrued amounts, as follows:
equal quarterly installments
(based on initial value) [ ]
a. Defer until the date I cease
5. Please defer payment or to be a Director [ ]
make payment of first b. Defer until _____[ ]
installment as follows: (specify date or number of
years following termination as
a. Defer until the date I member of the Board)
cease to be a Director [ ]
b. Defer until _________ [ ]
(specify date or number of
years following
termination as member of
the Board)
I acknowledge that I have reviewed the Plan and understand
that my participation will be subject to the terms and conditions
contained in the Plan. Capitalized terms used, but not otherwise
defined, in this Election Agreement shall have the respective
meanings assigned to them in the Plan.
I understand that (i) this Election Agreement shall
continue to be effective from Year to Year except as specified above
and except as otherwise provided in the Plan and (ii) in order to be
effective to revoke or modify this Election Agreement with respect to
Compensation otherwise payable in a particular Year, a revocation or
modification must be delivered to the Director of Compensation and
Benefits or Corporate Secretary of the Company prior to the beginning
of the first Year of service for which such Compensation is payable.
I acknowledge that I have been advised to consult with my
own financial, tax, estate planning and legal advisors before making
this election to defer in order to determine the tax effects and
other implications of my participation in the Plan.
Dated this _____day of _________, 2000.
____________________________ _________________________________
(Signature) (Print or type name)
EXHIBIT A
(New Directors)
THE TIMKEN COMPANY DIRECTOR DEFERRED COMPENSATION PLAN
ELECTION AGREEMENT
I, _______________________________, hereby elect to participate in
the Director Deferred Compensation Plan for The Timken Company (the
"Plan") with respect to the Compensation that I may receive beginning
April 1, 2000. I hereby elect to defer payment of the Compensation
which I otherwise would be entitled to receive as follows:
Deferral of Cash Deferral of Common Deferral of
Shares Restricted Shares
1. Percentage or
dollar amount of 1. Percentage or 1. Percentage or
Board retainer and dollar amount value dollar amount value
Committee fees, if of Common Shares of Restricted
any, payable (a) in payable as a result Shares, if any,
2000 only [ ] or of the annual payable as a result
(b) in 2000 and in automatic award (a) of the one-time
later years [ ] in 2000 only [ ] or award received upon
(check one): (b) in 2000 and in election to the
later years [ ] Board:
25% [ ] 100% [ ] (check one):
25% [ ] 100% [ ]
50% [ ] ___% [ ] 25% [ ] 100% [ ]
50% [ ] ___% [ ]
50% [ ] ___% [ ]
$___% [ ]
___ shares [ ] $[ ]
___ shares [ ] $[ ]
2. Percentage of
deferred amount to 2. Percentage of
be invested in 2. Percentage of dividend equivalents
Common Shares fund dividend equivalents to be invested in
and/or cash fund to be invested in Common Shares fund
(total of Common Shares fund and/or cash fund
percentages must and/or cash fund (total of
equal 100%): (total of percentages percentages must
must equal 100%) equal 100%)
a. Common Shares
fund ____% a. Common Shares a. Common Shares
b. Cash fund fund ____% fund ____%
____% b. Cash fund ____%
b. Cash fund ____%
3. To the extent 3. Please make
of any election to 3. Please make payment of the above
Common Shares fund,payment of the above specified
percentage of specified Compensation
dividend Compensation together together with all
equivalents to be with all accrued accrued amounts
invested in Common amounts reflected in reflected in my
Shares fund and/or my Account as Account as follows:
cash fund (total offollows:
percentages must a. Pay in lump sum
equal 100%): a. Pay in lump sum [ ]
[ ] b. Pay in __
a. Common Shares b. Pay in __ approximately
fund ____% approximately equal quarterly
equal quarterly installments
b. Cash fund ____% installments (based on
(based on initial initial value)
4. Please make value) [ ] [ ]
payment of the
above specified 4. Please defer my 4. Please defer my
cash Compensation receipt of Common receipt of Common
Together with all Shares together with Shares together with
accrued amounts the cash credited to the cash credited to
reflected in my my Account equal to my Account equal to
Account as follows: dividends or other dividends or other
distributions paid on distributions paid
a. Pay in lump the number of shares on the number of
sum [ ] reflected in such shares reflected in
b. Pay in __ Account, together such Account,
approximately with all accrued together with all
equal amounts, as follows: accrued amounts, as
quarterly follows (payment
installments a. Defer until the date may be no
(based on date I cease to earlier than the
initial value) be a Director [ ]later of (x) the
[ ] b. Defer until date the Restricted
______ [ ] Shares otherwise
5. Please defer (specify would have become
payment or make date or number of vested or (y) three
payment of first years following years from the date
installment as termination as of the award):
follows: member of the
Board) [ ] a. Defer until the
a. Defer until date I cease to
the date I be a Director
cease to be a [ ]
Director [ ] b. Defer until
b. Defer until _____ [ ]
_________ [ ] (specify date
(specify date or number of
or number of years following
years termination as
following member of the
termination as Board) [ ]
member of the
Board)
I acknowledge that I have reviewed the Plan and understand
that my participation will be subject to the terms and conditions
contained in the Plan. Capitalized terms used, but not otherwise
defined, in this Election Agreement shall have the respective
meanings assigned to them in the Plan.
I understand that (i) this Election Agreement shall
continue to be effective from Year to Year except as specified above
and except as otherwise provided in the Plan and (ii) in order to be
effective to revoke or modify this Election Agreement with respect to
Compensation otherwise payable in a particular Year, a revocation or
modification must be delivered to the Director of Compensation and
Benefits or Corporate Secretary of the Company prior to the beginning
of the first Year of service for which such Compensation is payable.
I acknowledge that I have been advised to consult with my
own financial, tax, estate planning and legal advisors before making
this election to defer in order to determine the tax effects and
other implications of my participation in the Plan.
Dated this ________day of ____________, 2000.
______________________________ _______________________________
(Signature) (Print or type name)
EXHIBIT B
DIRECTOR DEFERRED COMPENSATION PLAN
THE TIMKEN COMPANY
BENEFICIARY DESIGNATIONS
In accordance with the terms and conditions of the Director
Deferred Compensation Plan of The Timken Company (the "Plan"), I
hereby designate the person(s) indicated below as my beneficiary(ies)
to receive the amounts payable under said Plan.
Name
Address
Social Sec. Nos. of Beneficiary(ies) ___________
Relationship(s) ____________________
Date(s) of Birth ___________________
In the event that the above-named beneficiary(ies) predecease(s)
me, I hereby designate the following person as beneficiary(ies);
Name
Address
Social Sec. Nos. of Beneficiary(ies) ___________
Relationship(s) ____________________
Date(s) of Birth ___________________
I hereby expressly revoke all prior designations of
beneficiary(ies), reserve the right to change the beneficiary(ies)
herein designated and agree that the rights of said beneficiary(ies)
shall be subject to the terms of the Plan. In the event that there
is no beneficiary living at the time of my death, I understand that
the amounts payable under the Plan will be paid to my estate.
____________________
Date (Signature)
(Print or type name)
CL: 488891v4
EXHIBIT 10.2
THE TIMKEN COMPANY
Nonqualified Stock Option Agreement
WHEREAS, <<FName>> <<LName>> (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 April 18, 2000 (the "Date of
Grant"), and the execution of a stock option agreement in the
form hereof was authorized by a resolution of the Committee duly
adopted on April 18, 2000; and
WHEREAS, the option evidenced hereby is intended to be
a nonqualified stock option and shall not be treated as an
"incentive stock option" within the meaning of that term under
Section 422 of the Internal Revenue Code of 1986;
NOW, THEREFORE, pursuant to the Company's Long-term
Incentive Plan (as Amended and Restated as of December 16, 1999)
(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>> shares of the Company's
common stock without par value (the "Common Shares") at the
exercise price of fifteen and seven-eighths dollars ($15.875)
per Common Share (the "Exercise Price") and (ii) the right to
receive dividend equivalents payable in Common Shares on a
deferred basis or, at the discretion of the Committee, in cash,
with respect to the Common Shares covered by any unexercised
portion of the Option (the "Deferred Dividend Shares").
1. Vesting of Option. (a) Unless terminated as
hereinafter provided, the Option shall be exercisable to the
extent of one-fourth (1/4th) of the Common Shares covered by the
Option after the Optionee shall have been in the continuous
employ of the Company or a subsidiary for one full year from the
Date of Grant and to the extent of an additional one-fourth
(1/4th) thereof after each of the next three successive years
thereafter during which the Optionee shall have been in the
continuous employ of the Company or a subsidiary. For the
purposes of this agreement: "subsidiary" shall mean a
corporation, partnership, joint venture, unincorporated
association or other entity in which the Company has a direct or
indirect ownership or other equity interest; the continuous
employment of the Optionee with the Company or a subsidiary shall
not be deemed to have been interrupted, and the Optionee shall
not be deemed to have ceased to be an employee of the Company or
a subsidiary, by reason of the transfer of his employment among
the Company and its subsidiaries.
(b) Notwithstanding the provisions of Section 1(a)
hereof, the Option shall become immediately exercisable in full
upon any change in control of the Company that shall occur while
the Optionee is an employee of the Company or a subsidiary. For
the purposes of this agreement, the term "change in control"
shall mean the occurrence of any of the following events:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934) of 30% or more of either: (A)
the then-outstanding Common Shares or (B) the combined voting
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:
2
(1) any acquisition directly from the Company, (2) any
acquisition by the Company, (3) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, or (4) any acquisition by any Person
pursuant to a transaction which complies with clauses (A), (B)
and (C) of subsection (iii) of this Section 1(b); or
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason
(other than death or disability) to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to
such nomination) shall be considered as though such individual
were a member of the Incumbent Board, but excluding for this
purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest
(within the meaning of Rule 14a-11 of the Securities Exchange Act
of 1934) with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such 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
3
shares of common stock and the combined voting power of the then-
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the entity resulting from such Business
Combination (including, without limitation, an entity which as a result
of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions relative to each other as their
ownership, immediately prior to such Business Combination, of the Common
Shares and Voting Shares of the Company, as the case may be, (B) no Person
(excluding any entity resulting from such Business Combination or any
employee benefit plan (or related trust) sponsored or maintained
by the Company or such entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 30% or
more of, respectively, the then-outstanding shares of common
stock of the entity resulting from such Business Combination, or
the combined voting power of the then-outstanding voting securities
of such corporation except to the extent that such ownership
existed prior to the Business Combination, and (C) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(iv) Approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company.
(c) Notwithstanding the provisions of Section 1(a)
hereof, the Option shall become immediately exercisable in full
if the Optionee should die or become permanently disabled while
in the employ of the Company or any subsidiary, or if the
Optionee should retire with the Company's consent.
4
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. For purposes of
this agreement, "permanently disabled" shall mean that the
Optionee has qualified for disability benefits under a disability
plan or program of the Company or, in the absence of a disability
plan or program of the Company, under a government-sponsored
disability program.
(d) To the extent that the Option shall have become
exercisable in accordance with the terms of this agreement, it
may be exercised in whole 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,
permanent disability or retirement with the Company's consent or
(ii) follows a change in control;
(b) five years after the date upon which the Optionee
ceases to be an employee of the Company or subsidiary (i) as a
result of his permanent disability, (ii) as a result of his
retirement with the Company's consent, unless he is also a
director of the Company who continues to serve as such following
his retirement with the Company's consent, or (iii) following a
change in control, unless the cessation of his employment
following a change in control is a result of his death;
(c) five years after the date upon which the Optionee
ceases to be a director of the Company, but not less than five
years after the date upon which he ceases to be an employee of
the Company or a subsidiary, if (i) the cessation of his
5
employment is a result of his retirement with the Company's
consent and (ii) he continues to serve as a director of the
Company following the cessation of his employment;
(d) one year after the date of the Optionee's death
regardless of whether he ceases to be an employee of the Company
or a subsidiary prior to his death (i) as a result of his
permanent disability or retirement with the Company's consent or
(ii) following a change in control; or
(e) ten years after the Date of Grant.
In the event that the Optionee shall intentionally commit an
act that the Committee determines to be materially adverse to the
interests of the Company or a subsidiary, the Option shall
terminate at the time of that determination notwithstanding any
other provision of this agreement.
3. Payment of Exercise Price. The Exercise Price shall be
payable (a) in cash in the form of currency or check or other
cash equivalent acceptable to the Company, (b) by transfer to the
Company of nonforfeitable, unrestricted Common Shares that have
been owned by the Optionee for at least six months prior to the
date of exercise or (c) by any combination of the methods of
payment described in Sections 3(a) and 3(b) hereof.
Nonforfeitable, unrestricted Common Shares that are transferred
by the Optionee in payment of all or any part of the Exercise
Price shall be valued on the basis of their fair market value as
determined by the Committee from time to time. Subject to the
terms and conditions of Section 6 hereof, and subject to any
deferral election the Optionee may have made pursuant to any plan
or program of the Company, the Company shall cause certificates
for any shares purchased hereunder to be delivered to the
Optionee upon payment of the Exercise Price in full.
4. Crediting of Deferred Dividend Shares. Each
Deferred Dividend Share represents the right of the Optionee to
receive one Common Share or the cash equivalent of 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
6
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
7
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, permanent
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. Deferred Dividend Shares shall be issuable in
Common Shares or the cash equivalent of such Common Shares, as
determined in the sole discretion of the Committee at the time of
such issuance (which determination may include providing the
Optionee the right to elect to receive either Common Shares or
the cash equivalent of such Common Shares); provided, however,
that in the event of the Optionee's death, permanent disability
or retirement with the Company's consent, the Deferred Dividend
Shares issuable to the Optionee shall be issued in Common Shares
or the cash equivalent of such Common Shares, at the Optionee's
election. In the absence of any such election or determination
by the Committee, the Deferred Dividend Shares shall be paid in
Common Shares.
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
8
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
9
agreement that otherwise would result from any (a) stock
dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, (b) merger,
consolidation, separation, reorganization or partial or complete
liquidation involving the Company or (c) other transaction or
event having an effect similar to any of those referred to in
Section 8(a) or 8(b) hereof. Furthermore, in the event that any
transaction or event described or referred to in the immediately
preceding sentence shall occur, the Committee may provide in
substitution of any or all of the Optionee's rights under this
agreement such alternative consideration as the Committee may
determine in good faith to be equitable under the circumstances.
9. Withholding Taxes. If the Company shall be
required to withhold any federal, state, local or foreign tax in
connection with any exercise of the Option or payment of Deferred
Dividend Shares, the Optionee shall pay the tax or make
provisions that are satisfactory to the Company for the payment
thereof. The Optionee may elect to satisfy all or any part of
any such withholding obligation by surrendering to the Company a
portion of the Common Shares that are issuable to the Optionee
upon the exercise of the Option or payment of Deferred Dividend
Shares. If such election is made, the shares so surrendered by
the Optionee shall be credited against any such withholding
obligation at their fair market value (as determined by the
Committee from time to time) on the date of such surrender.
10. Right to Terminate Employment. No provision of
this agreement shall limit in any way whatsoever any right that
the Company or a subsidiary may otherwise have to terminate the
employment of the Optionee at any time.
11. Relation to Other Benefits. Any economic or other
benefit to the Optionee under this agreement or the Plan shall
not be taken into account in determining any benefits to which
the Optionee may be entitled under any profit-sharing, retirement
or other benefit or compensation plan maintained by the Company
or a subsidiary and shall not affect the amount of
10
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 18th
day of April, 2000.
THE TIMKEN COMPANY
By ___________________________
Stephen A. Perry
Senior Vice President
Human Resources, Purchasing & Communications
The undersigned Optionee hereby acknowledges receipt of
an executed original of this agreement and accepts the Option
granted hereunder and the right to receive Deferred Dividend
Shares with respect to the Common Shares covered thereby, subject
to the terms and conditions of the Plan and the terms and
conditions hereinabove set forth.
______________________________
Optionee
Date: _________________________
11
EXHIBIT 10.3
TRANSFERABLE
THE TIMKEN COMPANY
Nonqualified Stock Option Agreement
WHEREAS, <<FName>> <<LName>> (the "Optionee") is an
employee of The Timken Company (the "Company");
WHEREAS, the grant of stock options evidenced hereby
was authorized by a resolution of the Compensation Committee (the
"Committee") of the Board of Directors (the "Board") of the
Company that was duly adopted on April 18, 2000 (the "Date of
Grant"), and the execution of a stock option agreement in the
form hereof was authorized by a resolution of the Committee duly
adopted on April 18, 2000; and
WHEREAS, the option evidenced hereby is intended to be
a nonqualified stock option and shall not be treated as an
"incentive stock option" within the meaning of that term under
Section 422 of the Internal Revenue Code of 1986;
NOW, THEREFORE, pursuant to the Company's Long-term
Incentive Plan (as Amended and Restated as of December 16, 1999)
(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>> shares of the Company's
common stock without par value (the "Common Shares") at the
exercise price of fifteen and seven-eighths dollars ($15.875) per
Common Share (the "Exercise Price") and (ii) the right to receive
dividend equivalents payable in Common Shares on a deferred basis
or, at the discretion of the Committee, in cash, with respect to
the Common Shares covered by any unexercised portion of the
Option (the "Deferred Dividend Shares").
1. Vesting of Option. (a) Unless terminated as
hereinafter provided, the Option shall be exercisable to the
extent of one-fourth (1/4th) of the Common Shares covered by the
Option after the Optionee shall have been in the continuous
employ of the Company or a subsidiary for one full year from the
Date of Grant and to the extent of an additional one-fourth
(1/4th) thereof after each of the next three successive years
thereafter during which the Optionee shall have been in the
continuous employ of the Company or a subsidiary. For the
purposes of this agreement: "subsidiary" shall mean a
corporation, partnership, joint venture, unincorporated
association or other entity in which the Company has a direct or
indirect ownership or other equity interest; the continuous
employment of the Optionee with the Company or a subsidiary shall
not be deemed to have been interrupted, and the Optionee shall
not be deemed to have ceased to be an employee of the Company or
a subsidiary, by reason of the transfer of his employment among
the Company and its subsidiaries.
(b) Notwithstanding the provisions of Section
1(a) hereof, the Option shall become immediately exercisable in
full upon any change in control of the Company that shall occur
while the Optionee is an employee of the Company or a subsidiary.
For the purposes of this agreement, the term "change in control"
shall mean the occurrence of any of the following events:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934) of 30% or more of either: (A)
the then-outstanding Common Shares or (B) the combined voting
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:
2
(1) any acquisition directly from the Company, (2) any
acquisition by the Company, (3) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, or (4) any acquisition by any Person
pursuant to a transaction which complies with clauses (A), (B)
and (C) of subsection (iii) of this Section 1(b); or
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason
(other than death or disability) to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to
such nomination) shall be considered as though such individual
were a member of the Incumbent Board, but excluding for this
purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest
(within the meaning of Rule 14a-11 of the Securities Exchange Act
of 1934) with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such 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
3
shares of common stock and the combined voting power of the then-
outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the entity resulting from such Business
Combination (including, without limitation, an entity which as a result of
such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions relative to each other as their ownership,
immediately prior to such Business Combination, of the Common Shares and
Voting Shares of the Company, as the case may be, (B) no Person (excluding
any entity resulting from such Business Combination or any employee
benefit plan (or related trust) sponsored or maintained by the
Company or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 30% or more of, respectively,
the then-outstanding shares of common stock of the entity resulting
from such Business Combination, or the combined voting power of
the then-outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business
Combination, and (C) at least a majority of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company.
(c) Notwithstanding the provisions of Section
1(a) hereof, the Option shall become immediately exercisable in
full if the Optionee should die or become permanently disabled
while in the employ of the Company or any subsidiary, or if the
Optionee should retire with the Company's consent.
4
For the purposes of this agreement, retirement "with
the Company's consent" shall mean: (i) the retirement of the
Optionee prior to age 62 under a retirement plan of the Company
or a subsidiary, if the Board or the Committee determines that
his retirement is for the convenience of the Company or a
subsidiary, or (ii) the retirement of the Optionee at or after
age 62 under a retirement plan of the Company or a subsidiary.
For purposes of this agreement, "permanently disabled" shall mean
that the Optionee has qualified for disability benefits under a
disability plan or program of the Company or, in the absence of a
disability plan or program of the Company, under a government-
sponsored disability program.
(d) To the extent that the Option shall have
become exercisable in accordance with the terms of this
agreement, it may be exercised in whole 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, permanent disability or retirement with the Company's
consent or (ii) follows a change in control;
(b) five years after the date upon which the
Optionee ceases to be an employee of the Company or subsidiary
(i) as a result of his permanent disability, (ii) as a result of
his retirement with the Company's consent, unless he is also a
director of the Company who continues to serve as such following
his retirement with the Company's consent, or (iii) following a
change in control, unless the cessation of his employment
following a change in control is a result of his death;
(c) five years after the date upon which the
Optionee ceases to be a director of the Company, but not less
than five years after the date upon which he ceases to be an
employee of the Company or a subsidiary, if (i) the cessation of
his employment is a result of his
5
retirement with the Company's consent and (ii) he continues to
serve as a director of the Company following the cessation of his
employment;
(d) one year after the date of the Optionee's
death regardless of whether he ceases to be an employee of the
Company or a subsidiary prior to his death (i) as a result of his
permanent disability or retirement with the Company's consent or
(ii) following a change in control; or
(e) ten years after the Date of Grant.
In the event that the Optionee shall intentionally
commit an act that the Committee determines to be materially
adverse to the interests of the Company or a subsidiary, the
Option shall terminate at the time of that determination
notwithstanding any other provision of this agreement.
3. Payment of Exercise Price. The Exercise Price
shall be payable (a) in cash in the form of currency or check or
other cash equivalent acceptable to the Company, (b) by transfer
to the Company of nonforfeitable, unrestricted Common Shares that
have been owned by the Optionee for at least six months prior to
the date of exercise or (c) by any combination of the methods of
payment described in Sections 3(a) and 3(b) hereof.
Nonforfeitable, unrestricted Common Shares that are transferred
by the Optionee in payment of all or any part of the Exercise
Price shall be valued on the basis of their fair market value as
determined by the Committee from time to time. Subject to the
terms and conditions of Section 6 hereof, and subject to any
deferral election the Optionee may have made pursuant to any plan
or program of the Company, the Company shall cause certificates
for any shares purchased hereunder to be delivered to the
Optionee upon payment of the Exercise Price in full.
4. Crediting of Deferred Dividend Shares. Each
Deferred Dividend Share represents the right of the Optionee to
receive one Common Share or the cash equivalent of 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
6
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
7
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, permanent 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. Deferred Dividend Shares
shall be issuable in Common Shares or the cash equivalent of such
Common Shares, as determined in the sole discretion of the
Committee at the time of such issuance (which determination may
include providing the Optionee the right to elect to receive
either Common Shares or the cash equivalent of such Common
Shares); provided, however, that in the event of the Optionee's
death, permanent disability or retirement with the Company's
consent, the Deferred Dividend Shares issuable to the Optionee
shall be issued in Common Shares or the cash equivalent of such
Common Shares, at the Optionee's election. In the absence of any
such election or determination by the Committee, the Deferred
Dividend Shares shall be paid in Common Shares.
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
8
the Company shall not be obligated to issue any Common Shares in
payment of Deferred Dividend Shares unless the Common Shares or
other securities covered by the Option or to be issued in payment
of Deferred Dividend Shares are (a) exempt from registration
thereunder, (b) the subject of a transaction that is exempt from
compliance therewith, (c) registered by description or
qualification thereunder or (d) the subject of a transaction that
shall have been registered by description thereunder.
7. Transferability and Exercisability.
(a) Except as provided in Section 7(b) below,
neither the Option nor any Deferred Dividend Shares, including
any interest in either thereof, shall be transferable by the
Optionee except by will or the laws of descent and distribution,
and the Option shall be exercisable during the lifetime of the
Optionee only by him or, in the event of his legal incapacity to
do so, by his guardian or legal representative acting on behalf
of the Optionee in a fiduciary capacity under state law and court
supervision.
(b) Notwithstanding Section 7(a) above, the
Option, any Deferred Dividend Shares, or any interest in either
thereof, may be transferable by the Optionee, without payment of
consideration therefor, to any one or more members of the
immediate family of Optionee (as defined in Rule 16a-1(e) under
the Exchange Act), or to one or more trusts established solely
for the benefit of such members of the immediate family or to
partnerships in which the only partners are such members of the
immediate family of the Optionee; provided, however, that such
transfer will not be effective until notice of such transfer is
delivered to the Company; and provided, further, however, that
any such transferee is subject to the same terms and conditions
hereunder as the Optionee.
8. Adjustments. The Committee shall make any
adjustments in the Exercise Price and the number or kind of
shares of stock or other securities covered by the Option or to
be issued in payment of Deferred Dividend Shares that the
Committee may determine to be equitably required to prevent any
dilution or expansion of the Optionee's rights under this
9
agreement that otherwise would result from any (a) stock
dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, (b) merger,
consolidation, separation, reorganization or partial or complete
liquidation involving the Company or (c) other transaction or
event having an effect similar to any of those referred to in
Section 8(a) or 8(b) hereof. Furthermore, in the event that any
transaction or event described or referred to in the immediately
preceding sentence shall occur, the Committee may provide in
substitution of any or all of the Optionee's rights under this
agreement such alternative consideration as the Committee may
determine in good faith to be equitable under the circumstances.
9. Withholding Taxes. If the Company shall be
required to withhold any federal, state, local or foreign tax in
connection with any exercise of the Option or payment of Deferred
Dividend Shares, the Optionee shall pay the tax or make
provisions that are satisfactory to the Company for the payment
thereof. The Optionee may elect to satisfy all or any part of
any such withholding obligation by surrendering to the Company a
portion of the Common Shares that are issuable to the Optionee
upon the exercise of the Option or payment of Deferred Dividend
Shares. If such election is made, the shares so surrendered by
the Optionee shall be credited against any such withholding
obligation at their fair market value (as determined by the
Committee from time to time) on the date of such surrender.
10. Right to Terminate Employment. No provision of
this agreement shall limit in any way whatsoever any right that
the Company or a subsidiary may otherwise have to terminate the
employment of the Optionee at any time.
11. Relation to Other Benefits. Any economic or other
benefit to the Optionee under this agreement or the Plan shall
not be taken into account in determining any benefits to which
the Optionee may be entitled under any profit-sharing, retirement
or other benefit or compensation plan maintained by the Company
or a subsidiary and shall not affect the amount of
10
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 18th
day of April, 2000.
THE TIMKEN COMPANY
By ___________________________
Stephen A. Perry
Senior Vice President
Human Resources, Purchasing & Communications
The undersigned Optionee hereby acknowledges receipt of
an executed original of this agreement and accepts the Option
granted hereunder and the right to receive Deferred Dividend
Shares with respect to the Common Shares covered thereby, subject
to the terms and conditions of the Plan and the terms and
conditions hereinabove set forth.
______________________________
Optionee
Date: __________________________
11
EXHIBIT 10.4
THE TIMKEN COMPANY
Nonqualified Stock Option Agreement
WHEREAS, <<FName>> <<LName>> (the "Optionee") is an employee of The
Timken Company (the "Company");
WHEREAS, the grant of stock options evidenced hereby was authorized
by a resolution of the Compensation Committee (the "Committee") of the Board
of Directors (the "Board") of the Company that was duly adopted on April 18,
2000 (the "Date of Grant"), and the execution of a stock option agreement in
the form hereof was authorized by a resolution of the Committee duly
adopted on April 18, 2000; and
WHEREAS, the option evidenced hereby is intended to be a
nonqualified stock option and shall not be treated as an "incentive stock
option" within the meaning of that term under Section 422 of the Internal
Revenue Code of 1986;
NOW, THEREFORE, pursuant to the Company's Long-term Incentive Plan
(as Amended and Restated as of December 16, 1999) (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 <<Special_Award>> shares of the Company's
common stock without par value (the "Common Shares") at the exercise price of
fifteen and seven-eighths dollars ($15.875) per Common Share (the "Exercise
Price").
1. Vesting of Option. (a) Provided the Optionee remains in the
continuous employ of the Company or a subsidiary and unless terminated as
hereinafter provided, the Option
shall become exercisable in full with respect to all of the Common Shares
covered by the Option if and when the closing price of a Common Share equals
or exceeds thirty-five dollars ($35.00) per share on any trading day. The
closing price of a Common Share shall be determined in accordance with The Wall
Street Journal, Midwest Edition. 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, (i) by reason of the transfer of his
employment among the Company and its subsidiaries or (ii) while he is serving
as a director of the Company.
(b) 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. (a) The Option shall terminate
automatically and without further notice on the earliest of the following
dates:
(i) 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 (A) is a result of his death, permanent disability (as defined
below) or retirement with the Company's consent (as defined below) or
(B) follows a change in control (as defined below);
(ii) five years after the date upon which the Optionee ceases
to be an employee of the Company or subsidiary (A) as a result of his permanent
disability, (B) as a result of his retirement with the Company's consent,
unless he is also a director of the Company who
2
continues to serve as such following his retirement with the Company's consent,
or (C) following a change in control, unless the cessation of his employment
following a change in control is a result of his death;
(iii) five years after the date upon which the Optionee ceases
to be a director of the Company, but not less than five years after the date
upon which he ceases to be an employee of the Company or a subsidiary, if
(A) the cessation of his employment is a result of his retirement with the
Company's consent and (B) he continues to serve as a director of the Company
following the cessation of his employment;
(iv) 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 (A) as a result of his permanent disability
or retirement with the Company's consent or (B) following a change in control;
or
(v) 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.
(b) For purposes of this agreement, "permanently disabled"
shall mean that the Optionee has qualified for disability benefits under a
disability plan or program of the Company or, in the absence of a disability
plan or program of the Company, under a government-sponsored disability
program.
3
(c) For purposes of this agreement, retirement "with the
Company's consent" shall mean: (A) 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 (B) the retirement of the Optionee at or after age
62 under a retirement plan of the Company or a subsidiary.
(d) 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
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(d); 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
4
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 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)
5
sponsored or maintained by the Company or such entity resulting from such
Business Combination) beneficially owns, directly or indirectly, 30% or more
of, respectively, the then-outstanding shares of common stock of the entity
resulting from such Business Combination, or the combined voting power of
the then-outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
3. Payment of Exercise Price. The Exercise Price shall be payable
(a) in cash in the form of currency or check or other cash equivalent
acceptable to the Company, (b) by transfer to the Company of nonforfeitable,
unrestricted Common Shares that have been owned by the Optionee for at least
six months prior to the date of exercise or (c) by any combination of the
methods of payment described in Sections 3(a) and 3(b) hereof. Nonforfeitable,
unrestricted Common Shares that are transferred by the Optionee in payment of
all or any part of the Exercise Price shall be valued on the basis of their
fair market value as determined by the Committee from time to time. Subject
to the terms and conditions of Section 4 hereof, and subject to any deferral
election the Optionee may have made pursuant to any plan or program of the
Company, the Company shall cause certificates for any shares purchased
hereunder to be delivered to the Optionee upon payment of the Exercise Price
in full.
6
4. Compliance with Law. The Company shall make reasonable efforts to
comply with all applicable federal and state securities laws; provided,
however, notwithstanding any other provision of this agreement, the Option
shall not be exercisable if the exercise 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 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.
5. Transferability and Exercisability. (a) Except as provided in
Section 5(b) below, the Option shall not be transferable by the Optionee
except by will or the laws of descent and distribution, and the Option shall
be exercisable during the lifetime of the Optionee only by him or, in the
event of his legal incapacity to do so, by his guardian or legal
representative acting on behalf of the Optionee in a fiduciary capacity under
state law and court supervision.
(b) Notwithstanding Section 5(a) above, the Option, or any interest
in thereof, may be transferable by the Optionee, without payment of
consideration therefor, to any one or more members of the immediate family of
Optionee (as defined in Rule 16a-1(e) under the Exchange Act), or to one or
more trusts established solely for the benefit of such members of the
immediate family or to partnerships in which the only partners are such
members of the immediate family of the Optionee; provided, however, that such
transfer will not be effective until notice of such transfer is delivered to
the Company; and provided, further, however, that any such transferee is
subject to the same terms and conditions hereunder as the Optionee.
7
6. Adjustments. The Committee shall make any adjustments in the
Exercise Price and the number or kind of shares of stock or other securities
covered by the Option that the Committee may determine to be equitably
required to prevent any dilution or expansion of the Optionee's rights under
this agreement that otherwise would result from any (a) stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, (b) merger, consolidation, separation,
reorganization or partial or complete liquidation involving the Company or
(c) other transaction or event having an effect similar to any of those
referred to in Section 6(a) or 6(b) hereof. Furthermore, in the event that
any transaction or event described or referred to in the immediately
preceding sentence shall occur, the Committee may provide in substitution of
any or all of the Optionee's rights under this agreement such alternative
consideration as the Committee may determine in good faith to be equitable
under the circumstances.
7. Withholding Taxes. If the Company shall be required to withhold any
federal, state, local or foreign tax in connection with any exercise of the
Option, the Optionee shall pay the tax or make provisions that are satisfactory
to the Company for the payment thereof. The Optionee may elect to satisfy 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 fair market value (as determined by the Committee from time to time)
on the date of such surrender.
8
8. Right to Terminate Employment. No provision of this agreement shall
limit in any way whatsoever any right that the Company or a subsidiary may
otherwise have to terminate the employment of the Optionee at any time.
9. Relation to Other Benefits. Any economic or other benefit to the
Optionee under this agreement or the Plan shall not be taken into account in
determining any benefits to which the Optionee may be entitled under any
profit-sharing, retirement or other benefit or compensation plan maintained by
the Company or a subsidiary and shall not affect the amount of any life
insurance coverage available to any beneficiary under any life insurance plan
covering employees of the Company or a subsidiary.
10. Amendments. Any amendment to the Plan shall be deemed to be an
amendment to this agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Optionee with respect to the Option without the Optionee's consent.
11. Severability. In the event that one or more of the provisions of
this agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable
from the other provisions hereof, and the remaining provisions hereof shall
continue to be valid and fully enforceable.
12. Governing Law. This agreement is made under, and shall be
construed in accordance with, the laws of the State of Ohio.
9
This agreement is executed by the Company on this 18th
day of April, 2000.
THE TIMKEN COMPANY
By ___________________________
Stephen A. Perry
Senior Vice President
Human Resources, Purchasing & Communications
The undersigned Optionee hereby acknowledges receipt of an executed
original of this agreement and accepts the Option granted hereunder, subject
to the terms and conditions of the Plan and the terms and conditions
hereinabove set forth.
________________________________
Optionee
Date: _________________________
10
EXHIBIT 10.5
THE TIMKEN COMPANY
Deferred Shares Agreement
WHEREAS, <<FName>> <<LName>> (the "Grantee") is an employee of
The Timken Company (the "Company"); and
WHEREAS, the grant of deferred shares 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 April 18, 2000 (the "Date of
Grant"), and the execution of a deferred shares agreement in the
form hereof was authorized by a resolution of the Committee duly
adopted on April 18, 2000.
NOW, THEREFORE, pursuant to the Company's Long-term
Incentive Plan (as Amended and Restated as of December 16, 1999)
(the "Plan") and subject to the terms and conditions thereof and
the terms and conditions hereinafter set forth, the Company
hereby grants to the Grantee the right to receive (i) "Shares"
shares of the Company's common stock without par value (the
"Common Shares") and (ii) dividend equivalents payable in cash on
a deferred basis (the "Deferred Cash Dividends") with respect to
the Common Shares covered by this agreement.
1. Vesting of Awards.
(a) Subject to the terms and conditions of Sections 1(b)
and 2 hereof, the Grantee's right to receive the Common
Shares covered by this agreement and any Deferred Cash
Dividends accumulated with respect thereto shall become
nonforfeitable on the fifth anniversary of the Date of
Grant.
(b) Notwithstanding the provisions of Section 1(a)
hereof, the Grantee's right to receive the Common
Shares covered by this agreement and any Deferred Cash
Dividends then accumulated with respect thereto shall
become nonforfeitable upon any change in control of the
Company that shall occur while the Grantee 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 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 (i) of this Section 1(b); or
(ii) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any
reason (other than death or disability) to
constitute at least a majority of the Board;
provided, however, that any individual becoming a
director subsequent to the date hereof whose
election, or nomination for election by the
Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising
the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Company in
which such person is named as a nominee for
director, without objection to such nomination)
shall be considered as though such individual were a
member of the Incumbent Board, but excluding for
this purpose, any such individual whose initial
assumption of office occurs as a result of an actual
or threatened election contest (within the meaning
of Rule 14a-11 of the Securities Exchange Act of
1934) with respect to the election or removal of
directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person
other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless,
following such 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
2
Business Combination, and (C) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were
members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action
of the Board, providing for such Business
Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
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.
2.Forfeiture of Awards. The Grantee's right to receive the
Common Shares covered by this agreement and any Deferred
Cash Dividends accumulated with respect thereto shall be
forfeited automatically and without further notice on the
date that the Grantee ceases to be an employee of the
Company or a subsidiary prior to the fifth anniversary of
the Date of Grant for any reason other than his death or
disability. In the event that the Grantee ceases to be
an employee of the Company as a result of his death or
disability prior to the fifth anniversary of the Date of
Grant, the Grantee's right to receive both the Common
Shares covered by this agreement and any Deferred Cash
Dividends then accumulated with respect thereto shall
become nonforfeitable on the date of cessation of his
employment with respect to a prorated portion of each
based on the number of whole months that the Grantee
shall have been employed by the Company or a subsidiary
from the Date of Grant to the date of cessation of his
employment. In the event that the Grantee shall
intentionally commit an act that the Committee determines
to be materially adverse to the interests of the Company
or a subsidiary, the Grantee's right to receive the
Common Shares covered by this agreement and any Deferred
Cash Dividends accumulated with respect thereto shall
be forfeited at the time of that determination
notwithstanding any other provision of this agreement.
For the purposes of this agreement, "disability" shall
mean that the Grantee has qualified for disability
benefits under the Company's Long-term Disability Program
or any successor disability plan or program of the Company.
3.Crediting of Deferred Cash Dividends. With respect to
each of the Common Shares covered by this agreement, the
Grantee shall be credited on the records of the Company
with Deferred Cash Dividends in an amount equal to the
amount per share of any cash dividends declared by the
Board on the outstanding Common Shares during the period
beginning on the Date of Grant and ending on the date
upon which the Optionee's right to receive the Common
Shares covered by this agreement pursuant to Section 1
hereof or a prorated portion thereof pursuant to Section
2 hereof, as the case may be, becomes nonforfeitable.
The Deferred Cash Dividends shall accumulate without interest.
3
4.Payment of Awards. Subject to the terms and conditions
of Section 5 hereof, the Common Shares covered by this
agreement or any prorated portion thereof shall be
issuable, and any Deferred Cash Dividends accumulated
with respect thereto shall be payable, to the Grantee at
the time when they become nonforfeitable in accordance
with Section 1 or 2 hereof.
5.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 Company shall not
be obligated to issue any of the Common Shares covered by
this agreement or pay any Deferred Cash Dividends
accumulated with respect thereto if the issuance or
payment thereof would result in violation of any such
law. To the extent that the Ohio Securities Act shall be
applicable to this agreement, the Company shall not be
obligated to issue any of the Common Shares or other
securities covered by this agreement or pay any Deferred
Cash Dividends accumulated with respect thereto unless
such Common Shares and Deferred Cash Dividends 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.
6.Transferability. Neither the Grantee's right to receive
the Common Shares covered by this agreement nor his right
to receive any Deferred Cash Dividends shall be
transferable by the Grantee except by will or the laws of
descent and distribution.
7.Adjustments. The Committee shall make any adjustments in
the number or kind of shares of stock or other securities
covered by this agreement that the Committee may
determine to be equitably required to prevent any
dilution or expansion of the Grantee'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
7(a) or 7(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 Grantee's rights
under this agreement such alternative consideration as the
Committee may determine in good faith to be equitable under
the circumstances.
8.Withholding Taxes. If the Company shall be required to withhold
any federal, state, local or foreign tax in connection with any
issuance of the Common Shares or other securities covered by this
agreement or the payment of any Deferred Cash Dividends, the Grantee
shall pay the tax or make provisions that are satisfactory to the
Company for the payment thereof.
4
9.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 Grantee at any time.
10.Relation to Other Benefits. Any economic or other
benefit to the Grantee under this agreement or the Plan
shall not be taken into account in determining any
benefits to which the Grantee 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.
11.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
Grantee with respect to either the Common Shares or other
securities covered by this agreement or the Deferred Cash
Dividends without the Grantee's consent.
12.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.
13.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 ____ day
of _________, ____.
The Timken Company
By ___________________________________
Stephen A. Perry
Senior Vice President -
Human Resources, Purchasing & Communications
The undersigned Grantee hereby acknowledges receipt of an
executed original of this agreement and accepts the right to
receive the Common Shares or other securities covered hereby and
any deferred Cash Dividends accumulated with respect thereto,
subject to the terms and conditions of the Plan and the terms and
conditions herein above set forth.
_________________________________
Grantee
Date:___________________________
5
EXHIBIT 10.6
AMENDMENT TO EMPLOYEE EXCESS BENEFITS AGREEMENT
This Amendment made this ____ day of _____ 2000 by and
between _______________________ ("Employee") and THE TIMKEN
COMPANY ("Timken"), an Ohio corporation having it principal
offices at Canton, Ohio.
WHEREAS, Employee has been employed by Timken since
____ and is currently serving as
__________________________________________________ in a
capable and efficient manner; and
WHEREAS, Timken is amending the 1984 Retirement Plan
for Salaried Employees to change the way in which earnings
are calculated for participants, as of March 31, 2000; and
WHEREAS, Employee and Timken had entered into an
Employee Excess Benefits Agreement on _____________.
NOW, therefore, the parties amend the employee Excess
Benefits Agreement as follows:
____ If Employee is an elected officer of Timken
and retires at age 62 (or at Timken's discretion
retires earlier or later than age 62 but not later than
age 65), he shall be entitled to have his benefits
hereunder calculated under the 1.75% formula in the
Retirement Plans, unreduced for benefit commencement on
or after age 62. For purposes of calculating his
benefit under the 1.75% formula, Employee's average
yearly earnings shall mean his average yearly total
earnings received from Timken for the four twelve-month
periods, whether or not consecutive, during which he
was a participant which give the highest average during
the 10-year period immediately preceding his retirement
date.
Except as it is hereby amended, the Employee Excess
Benefits Agreement executed _____________ shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement in duplicate this ____ day of ______, 2000.
________________________________
("Employee")
THE TIMKEN COMPANY
By:
_____________________________
Stephen A. Perry, Senior Vice
President--Human Resources,
Purchasing & Communications
<TABLE>
Exhibit 11 - COMPUTATION OF PER SHARE EARNINGS
(Thousands of dollars, except per share data)
<CAPTION>
Three Months Ended March 31
2000 1999
------------ ------------
<S> <C> <C>
BASIC
Average shares outstanding 61,099,962 61,859,612
Net income $16,040 $16,579
Per share amount $0.26 $0.27
===== =====
DILUTED
Average shares outstanding 61,099,962 61,859,612
Effect of dilutive securities based on the
treasury stock method using the average
market price if higher than the exercise price 137,181 158,856
---------- ----------
61,237,143 62,018,468
Net income $16,040 $16,579
Per share amount $0.26 $0.27
</TABLE> ===== =====
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended
Mar. 31 Mar. 31
2000 1999
-------- --------
(Thousands of Dollars)
Income before income taxes,
extraordinary item and cumulative
effect of accounting changes $26,733 $27,585
Amortization of capitalized interest 608 608
Interest expense 7,222 6,656
Interest portion of rental expense 598 529
-------- --------
Earnings $35,161 $35,378
======== ========
Interest $ 7,586 $ 7,530
Interest portion of rental expense 598 529
-------- --------
Fixed Charges $ 8,184 $ 8,059
======== ========
Ratio of Earnings to Fixed Charges 4.30 4.39
======== ========
<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 FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,620
<SECURITIES> 0
<RECEIVABLES> 403,825
<ALLOWANCES> 9,792
<INVENTORY> 478,387
<CURRENT-ASSETS> 921,941
<PP&E> 2,893,828
<DEPRECIATION> 1,544,049
<TOTAL-ASSETS> 2,492,282
<CURRENT-LIABILITIES> 588,212
<BONDS> 326,302
0
0
<COMMON> 269,708
<OTHER-SE> 772,977
<TOTAL-LIABILITY-AND-EQUITY> 2,492,282
<SALES> 685,791
<TOTAL-REVENUES> 685,791
<CGS> 540,826
<TOTAL-COSTS> 540,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,222
<INCOME-PRETAX> 26,733
<INCOME-TAX> 10,693
<INCOME-CONTINUING> 16,040
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,040
<EPS-BASIC> 0.26
<EPS-DILUTED> 0.26
</TABLE>
