Document:

Exhibit 10.2

 

Exhibit 10.2

THE TIMKEN COMPANY

Restricted Shares Agreement

     WHEREAS, ___(“Grantee”) is an employee of The Timken Company (the
“Company”); and

     WHEREAS, the grant of restricted 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 ___, and the execution of a restricted shares agreement in the form
hereof was authorized by a resolution of the Committee duly adopted on such date.

     NOW, THEREFORE, pursuant to The Timken Company Long-Term Incentive Plan (as Amended and
Restated as of February 6, 2004) (the “Plan”) and subject to the terms and conditions thereof and
the terms and conditions hereinafter set forth, the Company hereby grants to Grantee, effective
___(the “Date of Grant”), the right to receive ___shares of the Company’s common
stock without par value (the “Common Shares”).

	 	1.  	Rights of Grantee. The Common Shares subject to this grant shall be
fully paid and nonassessable and shall be represented by a certificate or certificates
registered in Grantee’s name and endorsed with an appropriate legend referring to the
restrictions hereinafter set forth. Grantee shall have all the rights of a shareholder
with respect to such shares, including the right to vote the shares and receive all
dividends paid thereon, provided that such shares, and any additional shares that
Grantee may become entitled to receive by virtue of a share dividend, a merger or
reorganization in which the Company is the surviving corporation or any other change in
the capital structure of the Company, shall be subject to the restrictions hereinafter
set forth.
	 
	 	2.  	Restrictions on Transfer of Common Shares. The Common Shares subject
to this grant may not be assigned, exchanged, pledged, sold, transferred or otherwise
disposed of by Grantee, except to the Company, until the Common Shares have become
nonforfeitable in accordance with Section 3 hereof; provided, however,
that Grantee’s rights with respect to such Common Shares may be transferred by will or
pursuant to the laws of descent and distribution. Any purported transfer in violation
of the provisions of this Section 2 shall be null and void, and the purported
transferee shall obtain no rights with respect to such shares.
	 
	 	3.  	Vesting of Common Shares.

	 	(a)  	Subject to the terms and conditions of Sections 3(b), 3(c) and 4
hereof, Grantee’s right to receive the Common Shares covered by this agreement
shall become nonforfeitable to the extent of one-quarter (1/4) of the Common Shares
covered

 

 

	 	   	by this agreement after Grantee 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-quarter (1/4) thereof after each of the next three successive
years thereafter during which Grantee shall have been in the continuous employ of
the Company or a subsidiary. For 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. For purposes of this agreement, the continuous employment of Grantee with
the Company or a subsidiary shall not be deemed to have been interrupted, and
Grantee 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 3(a) hereof, Grantee’s right
to receive the Common Shares covered by this agreement shall become nonforfeitable
if Grantee should die or become permanently disabled while in the employ of the
Company or any subsidiary, or if Grantee should retire with the Company’s consent.
For purposes of this agreement, retirement “with the Company’s consent” shall mean:
(i) the retirement of Grantee 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 Grantee 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 Grantee 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.
	 
	 	(c)  	Notwithstanding the provisions of Section 3(a) hereof, Grantee’s right
to receive the Common Shares covered by this agreement shall become nonforfeitable
upon any change in control of the Company that shall occur while 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

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	 	   	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 3(c); 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 Business Combination, and (C) at least
a majority of the members of the

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	 	   	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.

	 	4.  	Forfeiture of Awards. Grantee’s right to receive the Common Shares
covered by this agreement that are then forfeitable shall be forfeited automatically
and without further notice on the date that Grantee ceases to be an employee of the
Company or a subsidiary prior to the fourth anniversary of the Date of Grant for any
reason other than as described in Section 3(b). In the event that Grantee shall
intentionally commit an act that the Committee determines to be materially adverse to
the interests of the Company or a subsidiary, Grantee’s right to receive the Common
Shares covered by this agreement shall be forfeited at the time of that determination
notwithstanding any other provision of this agreement.
	 
	 	5.  	Retention of Certificates. During the period in which the restrictions
on transfer and risk of forfeiture provided in Sections 2 and 4 above are in effect,
the certificates representing the Common Shares covered by this grant shall be retained
by the Company, together with the accompanying stock power signed by Grantee and
endorsed in blank.
	 
	 	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 Company shall not be
obligated to issue any of the Common Shares covered by this agreement if the issuance
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 unless such Common 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.  	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 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

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	 	   	to in the immediately preceding sentence shall occur, the Committee may provide in
substitution of any or all of 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. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any delivery of
Common Shares to the Grantee, and the amounts available to the Company for such
withholding are insufficient, it shall be a condition to the receipt of such delivery
that the Grantee make arrangements satisfactory to the Company for payment of the
balance of such taxes required to be withheld. The Grantee may elect that all or any
part of such withholding requirement be satisfied by retention by the Company of a
portion of the Common Shares delivered to the Grantee. If such election is made, the shares so retained shall be credited against such withholding requirement at the Market
Price per Common Share on the date of such delivery. In no event, however, shall the
Company accept Common Shares for payment of taxes in excess of required tax withholding
rates, except that, unless otherwise determined by the Committee at any time, the
Grantee may surrender Common Shares owned for more than 6 months to satisfy any tax
obligations resulting from any such transaction.
	 
	 	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 Grantee at any time.
	 
	 	10.  	Relation to Other Benefits. Any economic or other benefit to Grantee
under this agreement or the Plan shall not be taken into account in determining any
benefits to which 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 Grantee with respect to
the Common Shares or other securities covered by this agreement without 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 internal substantive laws of the State of Ohio.

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     This agreement is executed by the Company on this ___day of ___, 2005.

	 	 	 	 	 
	 	The Timken Company

 	 
	 	By:  	 	 
	 	 	William R. Burkhart 	 
	 	 	Sr. Vice President and General Counsel 	 
	 

     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, subject to
the terms and conditions of the Plan and the terms and conditions herein above set forth.

	 	 	 	 	 
	 
	 	

	

	 	 	 	Grantee
	 
	 	 	 	 
	

	 	Date:	 	 
	

	 	 	 	

6Exhibit 10.3

 

Exhibit 10.3

THE TIMKEN COMPANY

Performance Unit Agreement

               WHEREAS, <<NAME>> (“Grantee”) is an employee of The Timken Company (the
“Company”); and

               WHEREAS, the grant of Performance Units, each with a cash value of $100.00, was authorized by
a resolution of the Compensation Committee (the “Committee”) of the Board of Directors of the
Company (the “Board”) that was duly adopted on January 31, 2005 (the “Date of Grant”), and the
execution of a Performance Unit agreement in the form hereof was authorized by a resolution of the
Committee duly adopted on January 31, 2005;

               NOW, THEREFORE, pursuant to the Company’s Long—term Incentive Plan (As Amended and Restated
as of February 6, 2004) (the “Plan”) and subject to the terms and conditions thereof and the terms
and conditions hereinafter set forth, the Company hereby grants to Grantee as of the Date of Grant
<<puaward>> Performance Units (the “Target Performance Units”). Subject to the
attainment of the performance goals set forth in Section 1 hereof, this grant enables Grantee to
earn as Performance Units from ________ of the Target Performance Units to be paid out to
Grantee pursuant to Section 3 hereof.

	1.  	Earning of Target Performance Units. (a) Grantee’s right to receive payment for any
Performance Units shall be determined (i) on the basis of the Company’s Return on Equity for
the period from January 1, 2005 through December 31, 2007 (the “Performance Period”) and (ii)
on the basis of the Company’s Sales Growth for the Performance Period as follows:

	 	(A)  	The applicable percentage of the Target Performance Units which
shall be earned by Grantee shall be determined by the Performance Matrix
approved by the Committee on the Date of Grant.

 

 

	 	(B)  	For purposes of this Agreement, “Return on Equity” shall mean
cumulative net income divided by three, divided by the average quarterly total
shareholders equity excluding the minimum pension liability in comprehensive
income for the three-year period, as adjusted pursuant to Section 1(b).
	 
	 	(C)  	For purposes of this Agreement, “Sales Growth” shall mean the
three-year compounded annualized growth in sales over the performance period,
determined using year-end total net sales for year three of the performance
period and year-end total net sales for the year-end prior to the start of the
performance period, as adjusted pursuant to Section 1(b).
	 
	 	(D)  	In the event that the Company’s Return on Equity or Sales
Growth is between the ranges set forth on the Performance Matrix, the Committee
shall interpolate the applicable percentage of the Target Performance Units
which shall be earned by Grantee.

	(b)  	If the Committee determines that a change in the business, operations,
corporate structure or capital structure of the Corporation, the manner in which it
conducts business or other events or circumstances render the Management Objectives to
be unsuitable, the Committee may modify such Management Objectives or the related
minimum acceptable level of achievement, in whole or in part, as the Committee deems
appropriate; provided, however, that no such action may result in the
loss of the otherwise available exemption of the award under Section 162(m) of the
Code.
	 
	(c)  	All determinations involving the performance goals set forth in this
Section 1 shall be calculated based on Generally Accepted Accounting Principles in
effect at

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	   	the time the goals are established without regard to any change in accounting
standards that may be required by the Financial Accounting Standards Board after the
goals are established.

	2.  	Forfeiture of Award. Except as otherwise determined by the Committee in accordance
with the terms of the Plan, Grantee’s right to receive the Performance Units shall be
forfeited automatically and without further notice on the date that Grantee ceases to be an
employee of the Company or a Subsidiary prior to the last day of the Performance Period.
	 
	3.  	Payment of Performance Units. Performance Units earned as provided in Section 1
hereof shall be payable to Grantee in cash or Common Shares (as determined by the Committee)
as soon as practicable after they are earned in accordance with Section 1 hereof, but in no
event later than two and one-half (2 1/2) months after the close of the last fiscal year of
the Company to which the award relates.
	 
	4.  	Transferability. Grantee’s right to receive the Performance Units shall not be
transferable nor assignable by Grantee other than by will or by the laws of descent and
distribution.
	 
	5.  	No Employment Contract. Nothing contained in this Agreement shall confer upon
Grantee any right with respect to continuance of employment by the Company or any Subsidiary,
nor limit or affect in any manner the right of the Company or any Subsidiary to terminate the
employment or adjust the compensation of Grantee.
	 
	6.  	Taxes and Withholding. If the Performance Units are paid in cash, such payment shall
be less any applicable federal, state, local or foreign taxes. To the extent that the Company
shall be required to withhold any federal, state, local or foreign taxes in connection with
the payment of the Performance Units in Common Shares, and the

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	   	amounts available to the Company for such withholding are insufficient, it shall be a
condition to the payment of the Performance Units that Grantee shall pay such taxes or make
provisions that are satisfactory to the Company for the payment thereof.
	 
	7.  	Compliance with Section 409A of the Code. To the extent applicable, it is intended
that this Agreement and the Plan comply with the provisions of Section 409A of the Code. This
Agreement and the Plan shall be administered in a manner consistent with this intent, and any
provision that would cause the Agreement or the Plan to fail to satisfy Section 409A of the
Code shall have no force and effect until amended to comply with Section 409A of the Code
(which amendment may be retroactive to the extent permitted by Section 409A of the Code and
may be made by the Company without the consent of the Grantee).
	 
	8.  	Compliance with Law. The Company shall make reasonable efforts to comply with all
applicable laws; provided, however, that notwithstanding any other provision
of this Agreement, the Performance Units shall not be paid if the payment thereof would result
in a violation of any such law.
	 
	9.  	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 Grantee under this
Agreement without Grantee’s consent.
	 
	10.  	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.

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	11.  	Relation to Plan. This Agreement is subject to the terms and conditions of the Plan.
In the event of any inconsistency between the provisions of this Agreement and the Plan, the
Plan shall govern. Capitalized terms used herein without definition shall have the meanings
assigned to them in the Plan. The Committee acting pursuant to the Plan, as constituted from
time to time, shall, except as expressly provided otherwise herein or in the plan, have the
right to determine any questions which arise in connection with the grant of Performance
Units.
	 
	12.  	Successors and Assigns. Without limiting Section 4 hereof, the provisions of this
Agreement shall inure to the benefit of, and be binding upon, the successors, administrators,
heirs, legal representatives and assigns of Grantee, and the successors and assigns of the
Company.
	 
	13.  	Governing Law. The interpretation, performance, and enforcement of this Agreement
shall be governed by the laws of the State of Ohio, without giving effect to the principles of
conflict of laws thereof.
	 
	14.  	Notices. Any notice to the Company provided for herein shall be in writing to the
Company and any notice to Grantee shall be addressed to Grantee at his or her address on file
with the Company. Except as otherwise provided herein, any written notice shall be deemed to
be duly given if and when delivered personally or deposited in the United States mail, first
class certified or registered mail, postage and fees prepaid, return receipt requested, and
addressed as aforesaid. Any party may change the address to which notices are to be given
hereunder by written notice to the other party as herein specified (provided that for this
purpose any mailed notice shall be deemed given on the third business day following deposit of
the same in the United States mail).

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     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its
duly authorized officer and Grantee has also executed this Agreement in duplicate, as of the day
and year first above written.

	 	 	 
	

	 	THE TIMKEN COMPANY
	 
	 	 
	

	 	 
	

	 	William R. Burkhart
	

	 	Sr. Vice President and General Counsel

     The undersigned Grantee hereby acknowledges receipt of an executed original of this Agreement.

	 	 	 	 	 
	 
	 	 
	

	 	Grantee	 	 
	 
	 	 	 	 
	

	 	Date:	 	 
	

	 	 	 	 

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