TB WOOD'S CORPORATION

           GRANT OF FAIR MARKET VALUE (FMV)NON-QUALIFIED STOCK OPTION

     1. Grant of Option and Exercise Price.  Subject to the terms and conditions
set forth herein and in the TB Wood's  Corporation  1996  Stock-Based  Incentive
Compensation  Plan (the "Plan"),  TB Wood's  Corporation (the "Company")  hereby
grants to ________________,  (the "Optionee"),  a stock option (the "Option") to
purchase up to ________  shares of Common Stock of the  Company,  par value $.01
per share (the "Common  Stock"),  at an exercise  price of $_____ per share (the
"Exercise Price"). The Option is a non-qualified stock option.

     2. Vesting of Options.  One-third of the shares of Common Stock  subject to
the  option  shall  vest on the  first  anniversary  of the date of grant of the
Option (the "Grant Date"), an additional one-third of the shares of Common Stock
subject to the option  shall vest on the second  anniversary  of the Grant Date,
and the final  one-third  of the  shares of Common  Stock  subject to the option
shall vest on the third anniversary of the Grant Date.

     3. Time of  Exercise.  The Option may be  exercised  from time to time with
respect  to shares  for which the  Option has vested but no later than the tenth
anniversary of the Grant Date. Upon the tenth anniversary of the Grant Date, the
Optionee's right to exercise the Option shall terminate absolutely.

     4.  Payment  for Shares of Common  Stock.  Upon  exercise  of an Option and
before delivery of the shares of Common Stock, full payment for shares of Common
Stock  purchased  upon  the  exercise  of the  Option  shall be made in cash or,
subject to the  approval of the Company  committee  administering  the Plan (the
"Committee"),  in whole or in part in shares of Common  Stock valued at the fair
market value on the date of exercise.

     5. Manner of Exercise.  The Option  shall be  exercised  by giving  written
notice of  exercise  to the  Company  (Attn:  Chief  Financial  Officer)  at the
Company's  main office at 440 North  Fifth  Avenue,  Chambersburg,  Pennsylvania
17201-1778. Such notice of exercise must include a statement of preference as to
the manner in which payment to the Company  shall be made.  Such notice shall be
deemed to have been given when hand-delivered, telecopied or mailed, first-class
postage prepaid, and shall be irrevocable once given.

                                      121
<PAGE>

     6. Issuance of Certificates. As promptly as is reasonably practicable after
the exercise of the Option as determined by the Company,  a certificate  for the
shares of Common Stock issuable on the exercise of the Option shall be delivered
to Optionee or to his personal representative, heir or legatee.

     7.  Nontransferability  of Option.  The Option  may not be  transferred  or
assigned  by  Optionee  otherwise  than  by  will or the  laws  of  descent  and
distribution  or be  exercised  other  than by  Optionee  or, in the case of his
death, by his personal representative, heir or legatee.

     8. Taxes.  Optionee shall be responsible to make appropriate  provision for
all taxes  required to be withheld in connection  with any Option,  the exercise
thereof and the  transfer  of the shares of Common  Stock.  Such  responsibility
shall extend to all  applicable  federal,  state,  local or foreign  withholding
taxes. In the case of exercise of the Option, the Company shall, at the election
of Optionee, have the right to retain the number of shares of Common Stock whose
aggregate fair market value equals the amount to be withheld in  satisfaction of
the applicable withholding taxes.

     9. Termination of Employment.  If the Optionee's  employment by the Company
(or a subsidiary  thereof) is terminated  for any reason,  all unvested  Options
shall be forfeited and the Optionee shall have no further right to exercise such
Options.  If the Optionee's  employment by the Company (or a subsidiary thereof)
is terminated by reason of disability or  retirement,  all  unexercised,  vested
Options  may be  exercised  pursuant  to the terms of the Option for a period of
three  months  from the date of such  termination  of  employment  or until  the
expiration  of the term of the Option,  whichever  period is shorter;  provided,
however,  that  if  the  Optionee's  employment  is  terminated  by  death,  all
unexercised, vested Options may be exercised pursuant to the terms of the Option
for a period of six months from the date of such  termination  of  employment or
until the expiration of the term of the Option,  whichever period is shorter. If
the Optionee's employment by the Company (or a subsidiary thereof) is terminated
for any reason other than death,  disability  or  retirement,  all  unexercised,
vested options shall terminate three months from the date of such termination of
employment.

                                      122
<PAGE>

     10.   Rights  Prior  to  Exercise.   Neither   Optionee  nor  his  personal
representative,  heir or legatee  shall have any of the rights of a  stockholder
with respect to any Common Stock until the date of the issuance to him or her of
a certificate for such Common Stock as provided herein.

     11. Amendments. The Committee may from time to time amend the terms of this
Option to the extent it deems  appropriate to carry out the terms and provisions
of the Plan.

     12.  Interpretation.  The  Committee  shall have sole power to resolve  any
dispute or disagreement  arising out of this Agreement.  The  interpretation and
construction  of any  provision of this Option or the Plan made by the Committee
shall be final and conclusive and, insofar as possible, shall be consistent with
the requirements of a non-qualified stock option.

     13. Option Not to Affect Employment. The Option granted hereunder shall not
confer upon  Optionee any right to continue in the  employment of the Company or
any Subsidiary.


                              TB WOOD'S CORPORATION




                              By:____________________________
                                 Michael L. Hurt, President

Dated as of January 29, 1998



                                      119
<PAGE>


                              TB WOOD'S CORPORATION

               GRANT OF PREMIUM PRICED NON-QUALIFIED STOCK OPTION

     1. Grant of Option and Exercise Price.  Subject to the terms and conditions
set forth herein and in the TB Wood's  Corporation  1996  Stock-Based  Incentive
Compensation  Plan (the "Plan"),  TB Wood's  Corporation (the "Company")  hereby
grants to __________________, (the "Optionee"), a stock option (the "Option") to
purchase up to ____________shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), at an exercise price of $_________per share (the
"Exercise Price"). The Option is a non-qualified stock option.

     2. Vesting of Options.  One-third of the shares of Common Stock  subject to
the  option  shall  vest on the  first  anniversary  of the date of grant of the
Option (the "Grant Date"), an additional one-third of the shares of Common Stock
subject to the option  shall vest on the second  anniversary  of the Grant Date,
and the final  one-third  of the  shares of Common  Stock  subject to the option
shall vest on the third anniversary of the Grant Date.

     3. Time of  Exercise.  The Option may be  exercised  from time to time with
respect  to shares  for which the  Option has vested but no later than the fifth
anniversary of the Grant Date. Upon the fifth anniversary of the Grant Date, the
Optionee's right to exercise the Option shall terminate absolutely.

     4.  Payment  for Shares of Common  Stock.  Upon  exercise  of an Option and
before delivery of the shares of Common Stock, full payment for shares of Common
Stock  purchased  upon  the  exercise  of the  Option  shall be made in cash or,
subject to the  approval of the Company  committee  administering  the Plan (the
"Committee"),  in whole or in part in shares of Common  Stock valued at the fair
market value on the date of exercise.

     5. Manner of Exercise.  The Option  shall be  exercised  by giving  written
notice of  exercise  to the  Company  (Attn:  Chief  Financial  Officer)  at the
Company's  main office at 440 North  Fifth  Avenue,  Chambersburg,  Pennsylvania
17201-1778. Such notice of exercise must include a statement of preference as to
the manner in which payment to the Company  shall be made.  Such notice shall be
deemed to have been given when hand-delivered, telecopied or mailed, first-class
postage prepaid, and shall be irrevocable once given.

                                      123
<PAGE>

     6. Issuance of Certificates. As promptly as is reasonably practicable after
the exercise of the Option as determined by the Company,  a certificate  for the
shares of Common Stock issuable on the exercise of the Option shall be delivered
to  Optionee  or  to  his   personal   representative,   heir  or  legatee.   7.
Nontransferability  of Option.  The Option may not be transferred or assigned by
Optionee  otherwise than by will or the laws of descent and  distribution  or be
exercised  other than by Optionee or, in the case of his death,  by his personal
representative, heir or legatee.

     8. Taxes.  Optionee shall be responsible to make appropriate  provision for
all taxes  required to be withheld in connection  with any Option,  the exercise
thereof and the  transfer  of the shares of Common  Stock.  Such  responsibility
shall extend to all  applicable  federal,  state,  local or foreign  withholding
taxes. In the case of exercise of the Option, the Company shall, at the election
of Optionee, have the right to retain the number of shares of Common Stock whose
aggregate fair market value equals the amount to be withheld in  satisfaction of
the applicable withholding taxes.

     9. Termination of Employment.  If the Optionee's  employment by the Company
(or a subsidiary  thereof) is terminated  for any reason,  all unvested  Options
shall be forfeited and the Optionee shall have no further right to exercise such
Options.  If the Optionee's  employment by the Company (or a subsidiary thereof)
is terminated by reason of disability or  retirement,  all  unexercised,  vested
Options  may be  exercised  pursuant  to the terms of the Option for a period of
three  months  from the date of such  termination  of  employment  or until  the
expiration  of the term of the Option,  whichever  period is shorter;  provided,
however,  that  if  the  Optionee's  employment  is  terminated  by  death,  all
unexercised, vested Options may be exercised pursuant to the terms of the Option
for a period of six months from the date of such  termination  of  employment or
until the expiration of the term of the Option,  whichever period is shorter. If
the Optionee's employment by the Company (or a subsidiary thereof) is terminated
for any reason other than death,  disability  or  retirement,  all  unexercised,
vested options shall terminate three months from the date of such termination of
employment.

                                      124
<PAGE>

     10.   Rights  Prior  to  Exercise.   Neither   Optionee  nor  his  personal
representative,  heir or legatee  shall have any of the rights of a  stockholder
with respect to any Common Stock until the date of the issuance to him or her of
a certificate for such Common Stock as provided herein.

     11. Amendments. The Committee may from time to time amend the terms of this
Option to the extent it deems  appropriate to carry out the terms and provisions
of the Plan.

     12.  Interpretation.  The  Committee  shall have sole power to resolve  any
dispute or disagreement  arising out of this Agreement.  The  interpretation and
construction  of any  provision of this Option or the Plan made by the Committee
shall be final and conclusive and, insofar as possible, shall be consistent with
the requirements of a non-qualified stock option.

     13. Option Not to Affect Employment. The Option granted hereunder shall not
confer upon  Optionee any right to continue in the  employment of the Company or
any Subsidiary.


                              TB WOOD'S CORPORATION


                              By:____________________________
                                 Michael L. Hurt, President

Dated as of January 29, 1998