exv10w1






Exhibit 10.1




THE TIMKEN COMPANY




Form of Performance Shares Agreement



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



     WHEREAS, the grant of Performance 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 Performance Shares Agreement in
the form hereof (this “Agreement”) 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 4, 2008) (the “Plan”) and subject to the terms and conditions thereof, in
addition to the terms and conditions of this Agreement, the Company and grantee agree as follows:




	 	1.	 	Grant of Performance Shares. Subject to the terms of the Plan, the
Company hereby grants to Grantee, effective [                    ] (the “Date of Grant”), the
right to receive <<award>> Performance Shares (the “Performance Shares”),
payment of which depends on the Company’s performance as set forth in this Agreement.
	 
	 	2.	 	Earning of Performance Shares.






	 	(a)	 	Generally: Subject to the terms and conditions of
Sections 3 and 4 hereof, if the Company achieves the Management Objective
approved by the Committee on the Date of Grant with respect to the Performance
Shares (the “Threshold Requirement”) for any calendar year beginning with the
calendar year in which the Date of Grant occurs and continuing through the
third calendar year following the calendar year in which the Date of Grant
occurs (the “Performance Period”), Grantee will earn a portion of the
Performance Shares covered by this Agreement on the applicable anniversary of
the Date of Grant indicated in the following chart for the first calendar year
in which the Threshold Requirement is achieved if Grantee shall have been in
the continuous employ of the Company or a subsidiary until the applicable
anniversary of the Date of Grant:














 











	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	If Calendar Year	 	% becoming	 	% becoming earned	 	% becoming	 	 
	Threshold	 	earned on first	 	on second	 	earned on third	 	% becoming earned on
	Requirement is	 	anniversary of	 	anniversary of Date	 	anniversary of	 	fourth anniversary of
	First Achieved for:	 	Date of Grant	 	of Grant	 	Date of Grant	 	Date of Grant
	Calendar year in
which Date of Grant
occurs
	 	 	25	%	 	 	25	%	 	 	25	%	 	 	25	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Calendar year
following calendar
year in which Date
of Grant occurs
	 	 	0	%	 	 	50	%	 	 	25	%	 	 	25	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Second calendar year
following calendar
year in which Date
of Grant occurs
	 	 	0	%	 	 	0	%	 	 	75	%	 	 	25	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Third calendar year
following calendar
year in which Date
of Grant occurs
	 	 	0	%	 	 	0	%	 	 	0	%	 	 	100	%







	 	 	 	Once the Threshold Requirement has been achieved for a
calendar year, the achievement or non-achievement of the Threshold Requirement
for a subsequent calendar year will have no impact on the portion of
Performance Shares that are earned or the dates on which the Performance
Shares are earned.
	 
	 	 	 	(i) If the Company fails to achieve the Threshold Requirement during the
Performance Period, the grant of the Performance Shares shall be cancelled.
	 
	 	 	 	(ii) 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)	 	Effect of Retirement: If Grantee should retire without
the Company’s consent, then all Performance Shares covered by this Agreement
that have not been earned as of such retirement shall be cancelled. If, on the
other hand, Grantee should retiree with the Company’s consent prior to or after
the Threshold Requirement being met, but before the fourth anniversary of the
Date of Grant, then Grantee shall earn the Performance Shares covered by this
Agreement in accordance with the terms and conditions of Section 2(a) as if
Grantee had remained in the continuous employ of the Company or a subsidiary
from the Date of Grant until the fourth anniversary of the Date of Grant or the
occurrence of an event referenced in Section 3, whichever occurs first.





     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



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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.





	 	3.	 	Alternative Earning Schedule of Performance Shares. Notwithstanding
the provisions of Section 2 hereof, Grantee’s right to receive the Performance Shares
covered by this Agreement may become earned if any of the following circumstances
apply:






	 	(a)	 	Death or Disability: Upon Grantee’s death or becoming
permanently disabled while in the employ of the Company or any subsidiary prior
to the fourth anniversary of the Date of Grant, Grantee shall earn all
Performance Shares that remain unearned. For purposes of this Agreement,
“permanently disabled” shall mean that Grantee has qualified for long-term
disability benefits under a disability plan or program of the Company or, in
the absence of a disability plan or program of the Company, under a
government-sponsored disability program.
	 
	 	(b)	 	Change in Control: Upon a change in control of the
Company while Grantee is an employee of the Company or any subsidiary prior to
the fourth anniversary of the Date of Grant, Grantee shall earn all Performance
Shares that remain unearned. 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 3(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




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	 	 	 	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 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.




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	 	(c)	 	Divestiture: If, prior to the fourth anniversary of
the Date of Grant, Grantee’s employment with the Company or a subsidiary
terminates as a result of a divestiture, then Grantee shall earn the
Performance Shares covered by this Agreement in accordance with the terms and
conditions of Section 2 as if Grantee had remained in the continuous employ of
the Company or a subsidiary from the Date of Grant until the date of the fourth
anniversary of the Date of Grant or the occurrence of an event referenced in
Section 3, whichever occurs first. For the purposes of this Agreement, the
term “divestiture” shall mean a permanent disposition to a Person other than
the Company or any subsidiary of a plant or other facility or property at which
Grantee performs a majority of Grantee’s services whether such disposition is
effected by means of a sale of assets, a sale of subsidiary stock or otherwise.
	 
	 	(d)	 	Layoff: If, prior to the fourth anniversary of the
Date of Grant, (i) Grantee’s employment with the Company or a subsidiary
terminates as the result of a layoff and (ii) Grantee is entitled to receive
severance pay pursuant to the terms of any severance pay plan of the Company in
effect at the time of Grantee’s termination of employment that provides for
severance pay calculated by multiplying Grantee’s base compensation by a
specified severance period, then the Grantee shall earn the Performance Shares
covered by this Agreement in accordance with the terms and conditions of
Section 2 hereof as if Grantee had remained in the employ of the Company or a
subsidiary through the end of the severance period.
	 
	 	 	 	For purposes of this Agreement, a “layoff” shall mean the
involuntary termination by the Company or any subsidiary of Grantee’s
employment with the Company or any subsidiary due to (i) a reduction in force
leading to a permanent downsizing of the salaried workforce, (ii) a permanent
shutdown of the plant, department or subdivision in which Grantee works, or
(iii) an elimination of position.






	 	4.	 	Forfeiture of Awards. Except as provided in Section 3(a) or 3(b), in
the event the Company fails to achieve the Threshold Requirement during the Performance
Period, the grant of the Performance Shares hereunder shall be cancelled immediately
and Grantee shall have no further rights under this Agreement. Further, Grantee’s
right to receive the Performance Shares covered by this Agreement that are then not
earned 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 Sections 2
or 3. If 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 Performance Shares covered by this Agreement shall be forfeited at the time
of that determination notwithstanding any other provision of this Agreement.










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	 	5.	 	Payment of Dividend Equivalents.
	 
	 	 	 	[If the Threshold Requirement is achieved during the Performance Period and Grantee
is employed, or deemed to be employed pursuant to Sections 2(b), 3(c), or 3(d), by
the Company or a subsidiary through the end of the calendar year for which the
Threshold Requirement is achieved, Grantee shall earn, for each Performance Share,
an amount equal to the dividends paid on each Common Share to shareholders of the
Company generally (the “Dividend Equivalents”) from the Date of Grant through the
end of the calendar year for which the Threshold Requirement is achieved, and
thereafter, if Grantee is employed, or deemed to be employed pursuant to Sections
2(b), 3(c), or 3(d), by the Company or a subsidiary on the date the Company pays a
dividend on Common Shares generally, Grantee shall earn corresponding Dividend
Equivalents for each Performance Share through the earlier of the fourth anniversary
of the Date of Grant or the date on which such Performance Share is paid pursuant to
Section 6. Dividend Equivalents earned through the end of the calendar year in
which the Threshold Requirement is achieved will be paid to Grantee in the second
calendar month following the calendar year for which the Threshold Requirement is
achieved. Dividend Equivalents earned after the Threshold Requirement has been
achieved will be paid to Grantee in the calendar quarter in which the corresponding
dividend is paid on Common Shares generally.]
	 
	 	6.	 	Form and Time of Payment of Performance Shares. Payment of any
Performance Shares that are earned as set forth herein will be made in the form of
Common Shares. Payment will be made on the date that the Performance Shares are earned
pursuant to Section 2 or 3, as applicable. Notwithstanding the preceding sentence, if
the event triggering the right to payment under Sections 3(a) or 3(b) does not
constitute a permitted distribution event under Section 409A(a)(2) of the Code, then
notwithstanding anything herein to the contrary, payment of the Performance Shares
earned under Section 3(a) or 3(b) will be made to Grantee, to the extent necessary to
comply with Section 409A of the Code, on the earlier of (a) the date on which payment
of the Performance Shares would otherwise be made under this Agreement (to the extent
it constitutes a permitted distribution event); or (b) Grantee’s death. If Grantee is
a “specified employee” (within the meaning of Section 409A of the Code and using the
identification methodology selected by the Company from time to time) and the Company
makes a good faith determination that a payment made pursuant to this Agreement is
considered to be a “deferral of compensation” (as such phrase is defined for purposes
of Section 409A of the Code) that is payable upon Grantee’s “separation from service”
(within the meaning of Section 409A of the Code), then the payment date for such
payment shall be the date that is the first business day of the seventh month after the
date of Grantee’s “separation from service” with the Company or a subsidiary
(determined in accordance with Section 409A of the Code). Each payment under this
Agreement shall be considered a separate payment and not one of a series of payments
for purposes of Section 409A of the Code.










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	 	7.	 	Performance Shares Nontransferable. The Performance Shares subject to this
grant of Performance Shares are personal to the Grantee and may not be assigned,
exchanged, pledged, sold, transferred or otherwise disposed of by Grantee until they
become earned as provided in this Agreement; provided, however, that
the Grantee’s rights with respect to such Performance 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 7 shall be null and void, and the
purported transferee shall obtain no rights with respect to such Performance Shares.
	 
	 	8.	 	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 Common Shares pursuant to 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
Common Shares or other securities pursuant to 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.
	 
	 	9.	 	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 9(a) or 9(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 Grantee’s rights under this Agreement such alternative
consideration as the Committee may determine in good faith to be equitable under the
circumstances.
	 
	 	10.	 	Withholding Taxes. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any benefit received
(including income recognized) in connection with this Agreement, and the amounts
available to the Company for such withholding are insufficient, it shall be a condition
to the realization of such benefit that 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 such benefit. 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 the shares are retained or relinquished. In no
event, however, shall the Company accept Common Shares for payment of taxes in excess
of required tax




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	 	 	 	withholding rates, except that, unless otherwise determined by the Committee at any
time, Grantee may surrender Common Shares owned for more than 6 months to satisfy
any tax obligations resulting from any such transaction.
	 
	 	11.	 	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.
	 
	 	12.	 	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.
	 
	 	13.	 	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 Performance Shares or other securities covered by this Agreement without
Grantee’s consent.
	 
	 	14.	 	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.
	 
	 	15.	 	Governing Law. This agreement is made under, and shall be construed in
accordance with, the internal substantive laws of the State of Ohio.
	 
	 	16.	 	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.










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     This
Agreement is executed by the Company on this ___day of
                    ,
________.



	 	 	 	 	 
	 	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 Performance 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:  	 	 
	 	 	 
	 	 	 
	 	 	 




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