Document:

Ex-10.16

 

	 	 	 
	

	 	
	 

	 	1601 Shop Road, Suite E

Columbia, S.C. 29201

(803) 736.5595

Exhibit 10.16

July 12, 2004

The Scott Group

Steve Scott

27 Mill Farm Road

Stoughton, MA 02072

Dear Steve,

Following up on our conversations and emails from last week and over the
weekend I just wanted to confirm in writing our discussion. As you are aware,
IBSS would like to modify the Amended and Restated Statement of Work between
IBSS and the Scott Group dated October 2, 2003 (the “Agreement”) effective this
date, subject to Board approval.

When IBSS and The Scott Group began our joint path together last fall we had a
mutual expectation of what could be achieved both in revenues and investments
to allow IBSS to pursue a positive growth path. To date those expectations
have not been achieved for whatever reason.

IBSS recognizes that timing may be a factor in not yet achieving some of the
objectives that The Scott Group has proposed to IBSS. IBSS wants to recognize
these efforts, but believes that it is not in the best interests of IBSS to
continue under the current arrangement.

Although certain introductions The Scott Group has made of IBSS to potential
revenue producing companies namely; Arthur Blank, Xybernaut and Universal Power
Group have not yet generated any revenue for IBSS, they may have set in motion
activity that could bring significant revenue.

Following our conversations I have discussed the situation with some of our
staff, investors and board members. IBSS wants to recognize the ongoing
efforts by the Scott Group for IBSS and the future benefits possible to IBSS.
One way of doing this would be to utilize some of the stock that has been set
aside for the Scott Group in the Agreement and not possible to be utilized
under the terms of the Agreement, and pay out the months remaining under the
contract that have not yet been paid (June, July, August, and September) in
stock.

For the two months that are past due (June and July) IBSS will pay in stock in
lieu of cash at the rate of 20 cents per share valuation. IBSS would
continue the contract for the last two months (August and September) at the
same rate. At that price the $40,000 for June through September will convert
to a total of 200,000 shares of stock. The above plus the 12,500 shares for
August (completing the 10 months of 12,500 shares) would cause to be issued a
total of 212,500 shares of stock to the Scott Group for the balance due under
the contract. (The monthly shares through July that are due, a total of 62,500
have already been sent to you.) The Board of Directors and I believe this
would be a fair settlement of the contract.

In exchange, we expect that the Scott Group will continue to engender good will
on behalf of IBSS among Arthur Blank, Xybernaut, Universal Power Group and
other possible strategic partners and continue to do its best efforts at
achieving our mutual objectives as set forth in the Agreement.

 

 

We appreciate your efforts on our behalf and hope that we will be able to
continue to work together on a mutually agreeable basis. If the above meets
with your approval please indicate acceptance by signing and returning a copy
of this letter to IBSS. Thank you for your understanding in our current cash
short situation.

Sincerely,

/s/ George E. Mendenhall

George E. Mendenhall

President and Chief Executive Office

 

The Scott Group accepts the above changes in the terms of the Agreement

/s/ Steven Scott

By Steven Scott for the Scott Group

Dated: July 13, 2004EX-4(C) THE MPB EMPLOYEES' SAVINGS PLAN

 

EXHIBIT 4(c)

MPB EMPLOYEES’ SAVINGS PLAN

     The MPB Employees’ Savings Plan was originally effective October 1, 1978.
On September 1, 1998, it was amended and restated, generally effective January
1, 1998, and thereafter was further amended effective December 18, 1998,
December 31, 1998, and December 31, 1999.

     The provisions of the prior amendment and restatement dated September 1,
1998, relating to the qualification of the Plan were generally effective
January 1, 1998, except as otherwise specified herein, or to the extent earlier
or later effective dates were provided by the Tax Reform Act of 1986, the
Omnibus Budget Reconciliation Act of 1986, the Omnibus Budget Reconciliation
Act of 1987, the Technical and Miscellaneous Revenue Act of 1988, the Omnibus
Budget Reconciliation Act of 1989, the Unemployment Compensation Amendments of
1992, and the Omnibus Budget Reconciliation Act of 1993. Further, to the
extent the Plan was operated in accordance with the provisions of this
amendment and restatement as of an effective date earlier than that required by
law, such date was the Effective Date. All other provisions of the prior
amendment and restatement dated September 1, 1998, solely relating to the
administration and operation of the Plan, excluding all provisions that relate
to and affect the qualification of the Plan in form, were generally effective
January 1, 1998.

     Effective December 31, 2000, the Plan was further amended and restated.
Except as otherwise provided, that Restatement was generally effective as of
December 31, 2000. However, the changes made by that Restatement to Article I,
Sections 18 and 56 thereof (other than paragraphs (g) and (h) of Article I,
Section 18) were applied as follows: (i) such changes were not applied to any
current active Participant as of December 31, 2000, so as to alter or terminate
the coverage of such current active Participant on the basis of such current
active

 

 

Participant’s employee classification or employment arrangements as of
December 31, 2000; and (ii) such changes applied to all other circumstances,
including (a) changes after December 31, 2000, in the employee classification
or employment arrangements of any current active Participant as of December 31,
2000; and (b) all individuals who were not current active Participants as of
December 31, 2000.

     Furthermore, to the extent earlier or later effective dates, other than
December 31, 2000, were provided by the Retirement Protection Act of 1994, the
Personal Responsibility and Work Opportunity Reconciliation Act of 1996, the
Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the
Balanced Budget Act of 1997, the Consolidation Appropriations Act of 2001, and
the Economic Growth and Tax Relief Reconciliation Act of 2001, such effective
dates required by law were the effective date of that Restatement.

     The Plan was amended and restated generally effective December 31, 2002,
except as otherwise specifically stated.

     The Plan was amended and restated generally effective December 31, 2003,
except as otherwise specifically stated.

     This amendment and restatement also shall be generally effective December
31, 2003, except as otherwise specifically stated herein.

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     ARTICLE I - Definitions

     The following terms, when used herein, shall have the meanings herein stated:

     1. Account — The account maintained for a Participant to record his share
of the contributions to the Plan and adjustments relating thereto. Each
Participant’s Account shall be divided into an ESOP Account and a Non-ESOP
Account.

     2. Accrued Benefit — The balance of a Participant’s Account held under the
Trust.

     3. Administrative Delegate — One or more persons or institutions to whom
Timken has delegated certain administrative functions pursuant to a written
administrative agreement.

     4. After-Tax Employee Contributions – Those contributions to the Trust, if
any, made by a Participant on an after-tax, nondeductible basis pursuant to
Article III, Section 5 hereof. Effective December 31, 2003, After-Tax Employee
Contributions will no longer be permitted to be made to the Plan.

     5. Alternate Payee — A spouse, former spouse, child, or other dependent of
a Participant who is entitled to benefits pursuant to a qualified domestic
relations order.

     6. Beneficiary — The person last designated by a Participant to receive
any benefits as provided herein. This designation shall be in writing on a
form supplied by the Plan Administrator and filed with the Plan Administrator
prior to the Participant’s death. Beneficiaries designated under the Plan
prior to December 31, 2000, will remain as Beneficiaries until changed by
Participants.

     7. Benefit Starting Date — The first day of the first period for which a
benefit is payable.

     8. Code — The Internal Revenue Code of 1986, as amended, or any successor
Internal Revenue Code.

3

 

     9. Committee — The person or persons appointed by Timken to assist in plan
administration.

     10. Company — MPB Corporation.

     11. Company Contributions – Any Company Matching Contributions, Stock
Matching Contributions, Company Supplemental Contributions, 401(k) Plus
Contributions and Core Contributions.

     12. Company Matching Contributions — Those contributions made by the
Company to the Trust pursuant to Article IV, Section 1 hereof. Effective for
Plan Years beginning after December 30, 2003, Company Matching Contributions
will no longer be made to the Plan.

     13. Company Supplemental Contributions — Those contributions made by
Timken to the Trust pursuant to Article IV, Section 3 hereof. Effective for
Plan Years beginning after December 30, 2003, Company Supplemental
Contributions will no longer be made to the Plan.

     14. Controlled Group Member(s) — All members of a controlled group of
corporations or commonly controlled trades or businesses (as defined in Section
414(b) and (c) of the Code, as modified by Section 415(h) of the Code) or
affiliated service groups (as defined in Section 414(m) of the Code) of which
the Company is a part, and any successors thereof, provided that such
successors remain Controlled Group Members.

     15. Core Contributions — The portion of the Trust representing
contributions made pursuant to Article IV, Section 5 hereof.

     16. Credited Service — Continuous Service, adjusted to exclude Continuous
Service prior to a One Year Break in Service, unless such Continuous Service is
restored pursuant to the following sentence. If a Participant who has a One
Year Break in Service is re-employed by a Controlled Group Member and his
Continuous Service prior to such One Year Break in Service

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is taken into account under the Plan, credit for years of Continuous
Service prior to the One Year Break in Service shall be restored as Credited
Service upon the Participant’s completion of one year of Continuous Service
after the Participant’s reemployment date.

     17. Disability — Any permanent disability qualifying the Participant for
disability benefits under the federal Social Security system.

     18. Eligible Employee — A full-time Employee of the Company or an Employee
who otherwise meets the requirements of Article II hereof, except any Employee:

	(a)	 	whose compensation and conditions of employment
are covered by a collective bargaining agreement to which the
Company is a party (unless such agreement provides for
coverage hereunder of Employees in such unit);
	 
	(b)	 	who is a Leased Employee;
	 
	(c)	 	who has signed an individual employment agreement
or a personal services agreement with the Company or a
Controlled Group Member (unless such agreement provides for
coverage hereunder of such individual);
	 
	(d)	 	who is compensated through a third party and not
through the Company’s or a Controlled Group Member’s payroll;
	 
	(e)	 	who is not classified by the Company as an
Employee for federal income tax withholding purposes (whether
or not such classification is ultimately determined to be
correct as a matter of law), including any individual who is
classified by the Company as a Leased Employee or an
independent contractor;

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	(f)	 	any nonresident alien who receives no earned
income from a Controlled Group Member which constitutes United
States source income;
	 
	(g)	 	any Employee of a Controlled Group Member who
physically works at or is assigned to a location outside of
the United States unless such Employee has been specifically
designated as an Internationalist by Timken;
	 
	(h)	 	any Employee of a Controlled Group Member who
normally works at or is assigned to a location outside of the
United States, or was hired by the Controlled Group Member
with the expectation on the part of the Controlled Group
Member that such Employee’s work location would be outside the
United States except for periods of time spent in the United
States for training or related purposes, even if, in either
case, the Employee physically works in the United States and
may be on the United States payroll, unless such Employee has
been specifically designated as an Internationalist by Timken;
	 
	(i)	 	any Employee or other person who has signed a
permanent waiver of participation for initial eligibility in
the Plan;
	 
	(j)	 	any individual who is classified by a Controlled
Group Member as a “Paid Hourly for Work Performed” employee;
or
	 
	(k)	 	in the event that a business organization or the
assets thereof shall be acquired by or merged into a
Controlled Group Member, any member of any group of Employees
who were former employees of such business organization
acquired by or merged into a Controlled Group Member, unless
the group of Employees has been specifically designated by

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	 	 	Timken, by action of an authorized officer thereof, as
eligible to participate in the Plan.

     19. Employee — Any common-law employee of a Controlled Group Member and
any individual who is a Leased Employee.

     20. Employee Deferral Contributions — Pre-tax contributions to the Trust
from a Participant’s salary or wages, which the Participant could have received
currently as Gross Earnings, made pursuant to Article III, Section 1 hereof.
Except as specifically provided in the Plan, the term “Employee Deferral
Contributions” shall include Catch-Up Employee Deferral Contributions, as
defined in Article III, Section 7 hereof.

     21. ERISA — Public Law No. 93-406, the Employee Retirement Income Security
Act of 1974, as amended from time to time.

     22. ESOP — The portion of the Plan that is described in Article XIX and is
intended to be a stock bonus plan, as defined in Treasury Regulation Section
1.401-1(b)(1)(iii), and an employee stock ownership plan, satisfying the
requirements of Section 4975(e)(7) of the Code.

     23. ESOP Account — The portion of a Participant’s Account that is included
in the ESOP, which has been established pursuant to Article XIX. The ESOP
Account of each Participant shall include amounts allocated to one or more of
the following subaccounts: ESOP After-Tax Employee Contribution Account, ESOP
Company Matching Contribution Account, ESOP Company Supplemental Contribution
Account, ESOP Core Contribution Account, ESOP Employee Deferral Contribution
Account, ESOP 401(k) Plus Contribution Account, ESOP Rollover Contribution
Account and ESOP Stock Matching Contribution Account.

     24. ESOP After-Tax Employee Contribution Account — The account maintained
on behalf of a Participant in accordance with Section 2 of Article XIX that
reflects the shares of

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Timken Stock and cash, if any, allocated to such Participant under the
ESOP in accordance with Article XIX, Section 2(a), as adjusted in accordance
with the Plan.

     25. ESOP Company Matching Contribution Account — The account maintained on
behalf of a Participant in accordance with Section 2 of Article XIX that
reflects the shares of Timken Stock and cash, if any, allocated to such
Participant under the ESOP in accordance with Article XIX, Section 2(b), as
adjusted in accordance with the Plan.

     26. ESOP Company Supplemental Contribution Account — The account
maintained on behalf of a Participant in accordance with Section 2 of Article
XIX that reflects the shares of Timken Stock and cash, if any, allocated to
such Participant under the ESOP in accordance with Article XIX, Section 2(c),
as adjusted in accordance with the Plan.

     27. ESOP Core Contribution Account – The account maintained on behalf of a
Participant in accordance with Section 2 of Article XIX that reflects the
shares of Timken Stock and cash, if any, allocated to such Participant under
the ESOP in accordance with Article XIX, Section 2(d), as adjusted in
accordance with the Plan.

     28. ESOP Employee Deferral Contribution Account — The account maintained
on behalf of a Participant in accordance with Section 2 of Article XIX that
reflects the shares of Timken Stock and cash, if any, allocated to such
Participant under the ESOP in accordance with Article XIX, Section 2(e), as
adjusted in accordance with the Plan.

     29. ESOP 401(k) Plus Contribution Account — The account maintained on
behalf of a Participant in accordance with Section 2 of Article XIX that
reflects the shares of Timken Stock and cash, if any, allocated to such
Participant under the ESOP in accordance with Article XIX, Section 2(f), as
adjusted in accordance with the Plan.

8

 

     30. ESOP Rollover Contribution Account  — The account maintained on behalf
of a Participant in accordance with Section 2 of Article XIX that reflects the
shares of Timken Stock and cash, if any, allocated to such Participant under
the ESOP in accordance with Article XIX, Section 2(g), as adjusted in
accordance with the Plan.

     31. ESOP Stock Matching Contribution Account — The account maintained on
behalf of a Participant in accordance with Section 2 of Article XIX that
reflects the shares of Timken Stock or cash, if any, allocated to such
Participant under the ESOP in accordance with Article XIX, Section 2(h), as
adjusted in accordance with the Plan.

     32. Fiduciaries — Timken, the Plan Administrator and the Trustee, but only
with respect to the specific responsibilities of each for Plan and Trust
administration.

     33. Forfeitures — The nonvested portion, if any, of a Participant’s
Account forfeited as a result of termination of employment by the Participant
prior to the time he becomes one hundred percent (100%) Vested in his Account.
A Forfeiture occurs immediately after the distribution of the entire Vested
portion of a Participant’s Account or the last day of the Plan Year in which
his fifth (5th) consecutive One Year Break in Service occurs, whichever occurs
earlier, or upon approval of the Plan Administrator.

     34. 401(k) Plus Contributions — The portion of the Trust representing
contributions made pursuant to Article IV, Section 4 hereof. Effective for
Plan Years beginning after December 30, 2003, 401(k) Plus Contributions will no
longer be made to the Plan.

     35. Gross Earnings — An Employee’s regular salary or wages paid (including
any overtime, shift differential or premium payments) during his period of
participation in the Plan, and including the salary or wage reduction
contributions to the Company’s Premium Payment Plan, the Company’s Health Care
Reimbursement Plan and the Company’s Dependent Care

9

 

Reimbursement Plan, but excluding any other special types of payments,
such as, but not limited to, finder’s fees, bonuses, suggestion awards, moving
allowance, or Retirement or severance pay. Effective for Core Contributions
and Employee Deferral Contributions made to the Plan on and after April 1,
2004, Gross Earnings include payments under the Annual Performance Award Plan
and local hourly bonus plans. For purposes of this Plan, Gross Earnings cannot
exceed $200,000 during a Plan Year (or, if greater, the dollar limitation in
effect under Section 401(a)(17) of the Code). Notwithstanding the above, for
purposes of Article VIII, Gross Earnings shall mean all of each Participant’s
compensation as defined in Section 414(s) of the Code and Treasury Regulations
thereunder.

     36. Highly Compensated Employee — Any Employee who during the current Plan
Year or the preceding Plan Year

	(a)	 	was a 5 percent owner at any time of the
Company’s outstanding common stock, or
	 
	(b)	 	for the preceding year received compensation from
any Controlled Group Member in excess of $90,000 (or, if
greater, the dollar limitation in effect under Section
414(q)(l)(B) of the Code).

       For purposes of this definition, an Employee’s compensation for Limitation Years (defined in Article IV, Section 6 hereof) is
the following;

	(i)	 	wages, salaries, fees for
professional services, and other amounts received
(without regard to whether or not an amount is paid in
cash) for personal services actually rendered in the
course of employment with the Company to the extent that
the amounts are includable in gross income (including,
but not limited to,

10

 

	 	 	commissions paid salesmen, compensation for services on
the basis of a percentage of profits, commissions on
insurance premiums, tips, bonuses, fringe benefits, and
reimbursements or other expense allowances under a
non-accountable plan as described in Section 1.62-2(c)
of the Treasury regulations).
	 
	(ii)	 	in the case of an Employee who is a
self-employed employee, the Employee’s earned income;
	 
	(iii)	 	amounts described in Sections
104(a)(3), 105(a), and 105(h) of the Code, but only to
the extent that these amounts are includable in the
gross income of the Employee;
	 
	(iv)	 	amounts paid or reimbursed by the
Company for moving expenses incurred by an Employee, but
only to the extent at the time of the payment it is
reasonable to believe that these amounts are not
deductible by the Employee under Section 217 of the
Code;
	 
	(v)	 	the value of a non-qualified stock
option granted to an Employee by the Company, but only
to the extent that the value of the option is includable
in the gross income of the Employee for the taxable year
in which granted;
	 
	(vi)	 	the amount includable in the gross
income of an Employee upon making the election described
in Section 83(b) of the Code;
	 
	(vii)	 	elective salary or wage reduction
contributions to a cafeteria plan, cash or deferred
arrangement or tax sheltered annuity, and non-

11

 

	 	 	taxable salary or wage reductions utilized for
qualified transportation fringe benefits.

        The amounts described in subparagraphs (i) and (ii) above
include foreign earned income as defined in Section 911(b) of the
Code, whether or not excludable from gross income under Section 911
of the Code. Compensation described in subparagraph (i) above is to
be determined without regard to the exclusions from gross income in
Sections 931 and 933 of the Code. Similar principles are to be
applied with respect to income subject to Sections 931 and 933 in
determining compensation described in subparagraph (ii) above.
Compensation does not include the following:

	(i)	 	contributions made by the Company on
behalf of an Employee to a simplified employee pension
plan described in Section 408(k) of the Code.
Additionally, any distributions from a plan of deferred
compensation are not considered as compensation,
regardless of whether such amounts are includable in the
gross income of the Employee when distributed. However,
any amounts received by an Employee pursuant to an
unfunded non-qualified plan are permitted to be
considered as compensation in the year the amounts are
includable in the gross income of the Employee;
	 
	(ii)	 	amounts realized from the exercise of
a non-qualified stock option, or when restricted stock
(or property) held by an Employee either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;

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	(iii)	 	amounts realized from the sale,
exchange or other disposition of stock acquired under a
qualified stock option;
	 
	(iv)	 	other amounts which receive special
tax benefits, such as premiums for group term life
insurance (but only to the extent that the premiums are
not includable in the gross income of the Employee), or
contributions made by the Company (whether or not under
a salary or wage reduction agreement) toward the
purchase of an annuity contract described in Section
403(b) of the Code whether or not the contributions are
excludable from the gross income of the Employee.

        The compensation actually paid or made available to an
Employee within the limitation year is the compensation used for
purposes of applying the limitations of Section 415. Compensation
for an Employee includes compensation from all employers that are
Controlled Group Members, regardless of whether the Employee’s
particular employer has a qualified plan.

     37. Income — The net gain or loss of the Trust from investments, as
reflected by interest received and accrued, dividends received, realized and
unrealized gains and losses on securities, other investment transactions and
expenses paid from the Trust. In determining the income of the Trust for any
period, assets shall be valued on the basis of their current market value.

     38. Ineligible — The Plan status of an individual during the period in
which he is (a) an Employee of a Controlled Group Member which is not the
Company, (b) an Employee, but not an Eligible Employee, or (c) not an Employee.

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     39. Internationalist — Any Employee of a Controlled Group Member who meets
the requirements of Article II, who is not described in clauses (a) through (j)
of Section 18 of Article I, who is classified by a Controlled Group Member as a
salaried management Employee who has served, is serving or will serve on one or
more international assignments for the Company, who is expected to change
international assignments among different countries on a frequent basis during
his career with the Company and who has been designated by Timken as an
Internationalist. Timken shall offer such a designation to such an Employee
pursuant to a written agreement, which designation shall not be effective until
accepted by the Employee and which designation shall control solely for
purposes of the Plan. Timken shall have sole and absolute discretion in
making, suspending or removing such a designation, provided the above listed
business criteria shall be used.

     40. Investment Fund — Each investment fund designated by the Plan
Administrator and/or the Committee pursuant to the Plan and/or Trust.

     41. Late Retirement Date — The date, occurring after Normal Retirement
Age, on which an Employee actually terminates employment with the Company on
account of Retirement.

     42. Leased Employee — Any person who is not an employee of the Company or
a Controlled Group Member and who provides services to the Company or a
Controlled Group Member if (a) such services are provided pursuant to an
agreement between a Controlled Group Member and any leasing organization, (b)
such person has performed such services for the Company or a Controlled Group
Member on a substantially full-time basis for a period of at least one year,
and (c) such services are performed under primary direction or control by the
Company or a Controlled Group Member.

14

 

     43. Leave of Absence — A period during which an individual is deemed to be
an Employee, but is absent from active employment, provided that the absence
(i) was authorized by the Company or a Controlled Group Member or (ii) was due
to military service in the United States Armed Forces and the individual
returns to active employment within the period during which he retains
employment rights under federal law.

     44. Non-ESOP Account — The account maintained on behalf of a Participant
which does not constitute part of the ESOP. Each Participant’s Non-ESOP
Account shall consist of one or more of the following subaccounts: Non-ESOP
After-Tax Employee Contribution Account, Non-ESOP Company Matching Contribution
Account, Non-ESOP Company Supplemental Contribution Account, Non-ESOP Core
Contribution Account, Non-ESOP Employee Deferral Contribution Account, Non-ESOP
401(k) Plus Contribution Account, Non-ESOP Rollover Contribution Account and
Non-ESOP Stock Matching Contribution Account.

     45. Non-ESOP After-Tax Employee Contribution Account — The account
maintained on behalf of a Participant in accordance with the Plan that reflects
After-Tax Employee Contributions (and allocated earnings) attributable to the
Participant, other than amounts transferred pursuant to Article XIX, Section
2(a), as adjusted in accordance with the Plan.

     46. Non-ESOP Company Matching Contribution Account — The account
maintained on behalf of a Participant in accordance with the Plan that reflects
the Company Matching Contributions (and allocated earnings) attributable to the
Participant, other than amounts transferred pursuant to Article XIX, Section
2(b), as adjusted in accordance with the Plan.

     47. Non-ESOP Company Supplemental Contribution Account — The account
maintained on behalf of a Participant in accordance with the Plan that reflects
Company Supplemental Contributions (and allocated earnings) attributable to the
Participant, other than

15

 

amounts transferred pursuant to Article XIX, Section 2(c), as adjusted in
accordance with the Plan.

     48. Non-ESOP Core Contribution Account – The account maintained on behalf
of a Participant in accordance with the Plan that reflects the Core
Contributions (and allocated earnings) attributable to the Participant, other
than amounts transferred pursuant to Article XIX, Section 2(d), as adjusted in
accordance with the Plan.

     49. Non-ESOP Employee Deferral Contribution Account — The amount
maintained on behalf of a Participant in accordance with the Plan that reflects
the Employee Deferral Contributions (and allocated earnings) attributable to
the Participant, other than amounts transferred pursuant to Article XIX,
Section 2(e), as adjusted in accordance with the Plan.

     50. Non-ESOP 401(k) Plus Contribution Account — The account maintained on
behalf of a Participant in accordance with the Plan that reflects the 401(k)
Plus Contributions (and allocated earnings) attributable to the Participant,
other than amounts transferred pursuant to Article XIX, Section 2(f), as
adjusted in accordance with the Plan.

     51. Non-ESOP Rollover Contribution Account — The account maintained on
behalf of a Participant in accordance with the Plan that reflects Rollover
Contributions (and allocated earnings) attributable to the Participant, other
than amounts transferred pursuant to Article XIX, Section 2(g), as adjusted in
accordance with the Plan.

     52. Non-ESOP Stock Matching Contribution Account — The account maintained
on behalf of a Participant in accordance with the Plan that reflects Stock
Matching Contributions (and allocated earnings) attributable to the
Participant, other than amounts transferred pursuant to Article XIX, Section
2(h), as adjusted in accordance with the Plan.

16

 

     53. Normal Retirement Age — The time a Participant attains sixty-five (65)
years of age.

     54. Participant — Any Eligible Employee who participates in the Plan
pursuant to Article II hereof and a former Eligible Employee who participated
in the Plan under Article II and for whom an Account continues to be
maintained.

     55. Plan — The MPB Employees’ Savings Plan as herein set forth and as it
may be amended and restated from time to time.

     56. Plan Administrator — The Timken Company or any individuals or entities
designated by it to administer the Plan.

     57. Plan Year — The 1998 Plan Year shall begin January 1, 1998, and end
December 30, 1998. Thereafter, the Plan Year shall be a 12-month period, which
includes all pay periods for which payment is made, beginning December 31 of a
calendar year and ending December 30 of the following calendar year.

     58. Pooled Investment Account – An account established pursuant to an
administrative services agreement between Timken and the Trustee.

     59. Pretax Contributions — The portion of the Trust representing (a)
Employee Deferral Contributions, (b) Company Matching Contributions, (c)
Company Supplemental Contributions, (d) Rollover Contributions, (e) Stock
Matching Contributions, (f) 401(k) Plus Contributions for Employees at Score
International, and (g) Core Contributions.

     60. Retirement — Termination of a Participant’s employment (a) on or after
attaining age 55 with 15 or more years of Continuous Service, (b) on or after
attaining age 65 or (c) with 30 or more years of Continuous Service.

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     61. Rollover Contribution — The portion of the Trust representing
contributions made pursuant to Article III, Section 4 hereof. All or part of a
distribution a Participant receives from a qualified trust described in Section
401(a) of the Code and exempt from taxation under Section 501(a) of the Code,
from an annuity plan described in Section 403(a) of the Code, from an annuity
contract described in Section 403(b) of the Code, an eligible plan described in
Section 457(b) of the Code, or from an individual retirement account or an
individual retirement annuity described in Section 408 of the Code, including
any earnings on such distribution, but not including any portion of such
distribution (a) attributable to post-tax contributions, which is contributed
to the Trust, or (b) from a defined benefit pension plan of a Controlled Group
Member.

     62. Score International — A division of the Company.

     63. Service —

	(a)	 	“Continuous Service” shall be determined under
paragraph (i) for an Employee classified as full-time and
shall be determined under paragraph (ii) for an Employee
classified as part-time. For this purpose, a “full-time”
Employee shall mean an Employee who is customarily employed

for at least 40 hours per week and a “part-time” Employee
shall mean an Employee who is not a full-time Employee.

	(i)	 	Continuous Service for Full-Time
Employees. For Employees classified as full-time,
Continuous Service means the total of an Employee’s
Periods of Service computed in whole years and fractions
of years. For every twelve months during which the
requisite employment relationship exists, whether or not

18

 

	 	 	consecutive, the Employee is credited with a year of
Continuous Service. Partial years of Continuous
Service are credited on the basis of 1/12th of a year
for each month during which the requisite employment
relationship exists for at least 15 days during such
month.
	 
	 	 	Notwithstanding the foregoing to the contrary, if a
Participant terminates his employment and such
Participant has completed at least 1,000 Hours of
Service during the Employment Year in which he
terminates his employment, the Participant shall
receive one year of Continuous Service for such last
Employment Year in lieu of any fraction of a year of
Continuous Service that would otherwise be credited to
him for such period.
	 
	 	 	If an Employee who does not have a nonforfeitable right
to any portion of his Account incurs a One Year Break
in Service, the Employee’s Continuous Service earned
prior to such One Year Break in Service shall be
disregarded for purposes of determining the
Participant’s Vested interest in his Account after such
One Year Break in Service. If an Employee described in
the preceding sentence is re-employed by the Company,
credit for all years of Continuous Service prior to the
One Year Break in Service shall be restored upon
reemployment, unless the number of consecutive One Year
Breaks in Service in the Period of Severance equals or

19

 

	 	 	exceeds the greater of (1) five or (2) the aggregate
number of years of Continuous Service before such
break.
If an Employee incurs 5 or more consecutive One Year
Breaks in Service, the Employee’s Continuous Service
earned after such One Year Breaks in Service shall be
disregarded for purposes of determining the
Participant’s Vested interest in his Account that
accrued before such One Year Breaks in Service.
	 
	(ii)	 	Continuous Service for Part-Time
Employees. An Employee classified as part-time shall be
credited with a year of Continuous Service if the
Employee completes 1,000 Hours of Service during his
Employment Year.
	 
	 	 	If an Employee who does not have a nonforfeitable right
to any portion of his Account incurs a One Year Break
in Service, the Employee’s Continuous Service earned
prior to such One Year Break in Service shall be
disregarded for purposes of determining the
Participant’s Vested interest in his Account after such
One Year Break in Service. If an Employee described in
the preceding sentence is re-employed by the Company,
credit for all years of Continuous Service prior to the
One Year Break in Service shall be restored upon
reemployment, unless the number of consecutive One Year
Breaks in Service in the Period of Severance equals or
exceeds the greater of (1) five or (2) the aggregate
number of years of Continuous Service before such
break.

20

 

	 	 	If an Employee incurs 5 or more consecutive One Year
Breaks in Service, the Employee’s Continuous Service
earned after such One Year Breaks in Service shall be
disregarded for purposes of determining the
Participant’s Vested interest in his Account that
accrued before such One Year Breaks in Service.

	(b)	 	“Employment Year” means the 12 month period
beginning on an Employee’s Employment Commencement Date or his
latest Reemployment Commencement Date and on each anniversary
of such date thereafter.
	 
	(c)	 	“Hour of Service” means each hour (1) for which
an Employee is paid, or entitled to payment, for the
performance of duties for the Company or for which he is paid,
or entitled to payment, by the Company on account of a period
of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity including disability,
layoff, jury duty, military duty or leave of absence or (2)
for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Company. Hours of Service
shall be determined by dividing the payments received or due
for reasons other than the performance of duties by the lesser
of (i) the Employee’s most recent hourly rate of compensation
for the performance of duties, or (ii) the Employee’s average
hourly rate of compensation for the performance of duties for
the most recent Employment Year in which the Employee
completed more than five hundred (500) Hours of Service.

21

 

	 	 	An Hour of Service for reasons other than the performance of
duties and the crediting of Hours of Service to applicable
computation periods shall be determined in accordance with
Department of Labor Regulations Section 2530.200b-2(b) and
(c), which are hereby incorporated herein by reference.
	 
	 	 	In the case of an Employee who is absent from work for any
period by reason of:

	(i)	 	the pregnancy of the Employee;
	 
	(ii)	 	the birth of a child of the Employee;
	 
	(iii)	 	the placement of a child with the
Employee in connection with the adoption of such child
by such Employee; or
	 
	(iv)	 	caring for such child for a period
beginning immediately following such birth or placement,

the Plan shall treat as Hours of Service, solely for purposes
of determining whether a One Year Break in Service has
occurred, the Hours of Service which otherwise would normally
have been credited to such Employee but for such absence or,
in any case in which the Plan is unable to determine said
hours, eight Hours of Service per day of such absence, except
that the total number of hours treated as Hours of Service by
reason of any such pregnancy or placement shall not exceed
501 hours. These hours shall be treated as Hours of Service
only in the Employment Year in which the absence from work
begins, if an Employee would be prevented from incurring a
One Year Break in Service in such Employment Year solely

22

 

because periods of absence are treated as Hours of Service
or, in any other case, in the immediately following
Employment Year.

Solely for the purposes of determining whether a One Year
Break in Service has occurred, an individual who is absent
from work because of a Leave of Absence under the Family and
Medical Leave Act shall receive credit for the Hours of
Service which would otherwise have been credited to such
individual but for such absence, or in any case in which such
hours cannot be determined, eight (8) Hours of Service per
day of such absence. No more than 501 hours are required to
be credited to a Participant on a leave under the Family and
Medical Leave Act. A Participant, whose leave under the
Family and Medical Leave Act is for maternity or paternity
reasons, cannot receive credit for Hours of Service under
both this paragraph and the preceding paragraph for the same
period of time.

	(d)	 	“One Year Break in Service.” For an Employee
classified as full-time, a One Year Break in Service means a
Period of Severance for twelve consecutive months, beginning
on a Severance from Service Date and any anniversary thereof,
provided that the former Employee is not credited with an Hour
of Service at any time during such twelve month period. For
an Employee classified as part-time, a One Year Break in
Service means an Employment Year in which the Employee fails
to complete more than 500 Hours of Service.
	 
	(e)	 	“Employment Commencement Date” means the date on
which an Employee first performs an Hour of Service for the
Company.

23

 

	(f)	 	“Period of Service” means each period commencing
on an Employee’s Employment Commencement Date or an Employee’s
Reemployment Commencement Date, whichever is applicable, and
ending on his next following Severance from Service Date.
	 
	 	 	A Period of Service also includes the Period of Severance
between an Employee’s Severance from Service Date and the
Reemployment Commencement Date next following such Severance
from Service Date if such Reemployment Commencement Date
occurs within 12 months after the earlier of:

	(i)	 	the Employee’s Severance from Service
Date which occurred due to his resignation, retirement
or discharge, or
	 
	(ii)	 	the inception of the Employee’s
Period of Severance for reasons other than his
resignation, retirement or discharge, if during that
Period of Severance the Employee resigns, retires or is
discharged.

	(g)	 	“Period of Severance” means the period of time
commencing on an Employee’s Severance from Service Date and
ending on the date on which he next thereafter performs an
Hour of Service.
	 
	(h)	 	“Reemployment Commencement Date.” For an
Employee classified as full-time, Reemployment Commencement
Date means the date, following an Employee’s Period of
Severance, on which he again performs an Hour of Service for
the Company. For an Employee classified as part-time,
Reemployment Commencement Date means the date, following the

24

 

	 	 	Employee’s one or more One Year Breaks in Service, on which
he again performs an Hour of Service for the Company.
	 
	(i)	 	“Severance from Service Date” means the date on
which occurs the earliest of:

	(i)	 	the date on which an Employee quits,
is discharged by the Company, retires, or dies;
	 
	(ii)	 	the earlier of: (A) the second
anniversary of the date on which an Employee begins an
absence from service with the Company on account of
layoff or leave of absence (including an absence for
maternity or paternity reasons) or (B) the date on which
a Participant who is on a permanent layoff due to job
elimination, general reduction in the workforce, or a
plant or office closing receives a distribution from his
Account; or
	 
	(iii)	 	the first anniversary of the date on
which an Employee begins an absence from service with
the Company not described in paragraph (i) or (ii).

An absence from work for maternity or paternity reasons means
an absence (1) by reason of the pregnancy of the Employee,
(2) by reason of the birth of a child of the Employee, (3) by
reason of the placement of a child with the Employee in
connection with the adoption of such child by such Employee,
or (4) for purposes of caring for such child for a period
beginning immediately following such birth or placement.

25

 

An Employee shall not incur a Severance from Service Date
solely as a result of a leave of absence under the Family and
Medical Leave Act.

     64. Stock Matching Contributions — Contributions made by Timken to the
Trust pursuant to Article IV, Section 2 hereof.

     65. Timken — The Timken Company and any successor thereof.

     66. Timken Stock  — A share or shares of common stock of Timken, Canton,
Ohio, which is intended to be “employer securities” within the meaning of
Section 409(1) of the Code, and “qualifying employer securities” within the
meaning of Section 407(d)(5) of ERISA.

     67. Trust — The MPB Employees’ Savings Plan Trust as established under
Article VI and maintained for purposes of the Plan which is administered by the
Trustee in accordance with the provisions of the agreement of Trust between
Timken and the Trustee. The Trust is governed by a separate agreement entered
into between Timken and the Trustee (which shall be incorporated by reference
herein and become part of the Plan). To the extent the terms of such Trust
agreement conflict with the Plan, the terms of such Trust agreement will
control except to the extent that it is necessary to follow the terms of the
Plan in order to maintain the qualified status of the Plan under Section 401(a)
of the Code.

     68. Trustee — That individual or institution appointed by Timken to be the
Trustee of the contributions to the Trust as provided herein, or their
successors, who shall have exclusive authority and discretion to manage and
control the assets of the Plan. Notwithstanding the above to the extent the
Plan and/or Trust expressly provides, the Trustee shall be subject to the
discretion of the Plan Administrator and/or the Committee and/or Investment
Manager.

     69. Valuation Date — Any day that the New York Stock Exchange is open for
business or any other date chosen by Timken to make additional valuations of
the Trust as necessary.

26

 

     70. Vested — Nonforfeitable.

     71. Masculine pronouns wherever used in the Plan shall include feminine or
neuter pronouns, and the singular shall include the plural wherever
appropriate.

27

 

     ARTICLE II — Eligibility and Participation

     1. All Participants as of December 31, 2003 shall continue their
eligibility to participate. Each other Eligible Employee shall become eligible
to be a Participant in the Plan (i) for Eligible Employees who are full-time
Employees hired by a Controlled Group Member prior to December 2, 2003, on
January 1, 2004, (ii) for Eligible Employees who are full-time Employees hired
by a Controlled Group Member on or after December 2, 2003, on the first day of
the month after being employed full-time for at least one full calendar month.

     If an employee completes the above eligibility requirements, but is
Ineligible at the time participation would otherwise begin (if he were not
Ineligible), he shall become eligible to be a Participant in the Plan on the
first subsequent date on which he is an Eligible Employee.

     A Participant may not make or share in Plan contributions during the
period he is Ineligible, but he shall continue to participate for all other
purposes. An Ineligible Participant or former Participant shall automatically
become an active Participant on the date he again becomes an Eligible Employee.

     An Eligible Employee who is a part-time Employee, as defined in Section
63(a) of Article I, shall become eligible to be a Participant in the Plan on
the first day of the month after he completes one year of Continuous Service.
If such an Employee becomes eligible and elects to participate in this Plan,
the Employee will continue to be eligible if he does not have a One Year Break
in Service. If such an Employee becomes a Participant, the Participant shall
not be eligible to make Employee Deferral Contributions or receive any Company
Contributions as of the first day of the month following such One Year Break in
Service. If such an Employee loses eligibility due to a One Year Break in
Service and later completes one year of Continuous

28

 

Service, the Employee shall again participate immediately upon completion
of the one year of Continuous Service if he has not already become eligible.

     2. Except as provided in Article II, Section 4, Eligible Employees
electing to participate in this Plan for the first time or following a rehire
to active employment with the Company shall file an election to make Employee
Deferral Contributions pursuant to the Plan’s administrative procedures, which
election will be effective on the first available pay period following
satisfaction of the eligibility requirements set forth in Article II, Section 1
above.

     3. An Eligible Employee’s election to participate in this Plan through
Employee Deferral Contributions shall designate the amount of deferral elected
by the Eligible Employee to be contributed to this Plan, as provided in Article
III herein. Such election shall become effective with the first available pay
period.

     4. An Eligible Employee is automatically eligible to participate in the
Company’s 401(k) Plus Contribution, if he meets the eligibility requirements
set forth in Article IV, Section 4, or Core Contribution, if he meets the
eligibility requirements set forth in Article IV, Section 5. An Eligible
Employee will participate in the Plan not later than the earlier of the first
day of the first Plan Year after the Eligible Employee has met the service
requirements, or six (6) months after the day such requirements are met.

29

 

     ARTICLE III — Employee Deferral Contributions, Rollover Contributions, and After-Tax Employee Contributions

     1. At any time in accordance with Article II above, a Participant may
elect to have his salary or wages reduced and the subsequent reduction
contributed to this Plan, in an amount equal to any whole percent between one
percent (1%) and twenty percent (20%) of his Gross Earnings to be deducted from
his Gross Earnings payable for each pay period, provided that Timken may limit
certain Highly Compensated Employees to less than twenty percent (20%). The
percent reduction selected cannot result in more than $11,000 ($13,000
effective January 1, 2004) in Employee Deferral Contributions on behalf of a
Participant in a calendar year (or, if greater, the dollar limitation in effect
under Section 402(g)(1) of the Code) (except to the extent permitted under
Article III, Section 7 hereof and Section 414(v) of the Code). Employee
Deferral Contributions shall be deposited in a Participant’s Non-ESOP Employee
Deferral Contribution Account.

     2. A Participant’s election as to the rate of his Employee Deferral
Contributions to this Plan will remain in effect until the Participant changes
his election, or ceases to be an Eligible Employee.

     3. A Participant may change his election as to the rate of Employee
Deferral Contributions to this Plan on any day. Such election shall become
effective as of the first available pay period coincident with or following the
election. Any change made will be effective for all succeeding pay periods,
unless changed again by the same procedure.

	    4.	(a)	 	An Eligible Employee, regardless of whether or not he has
become a Participant, after filing with Timken or the Administrative
Delegate the form prescribed by the Plan Administrator, may make a
cash contribution

30

 

	 	 	 	to the Trust in the form of a Rollover Contribution. Before
completing the Rollover Contribution, the Participant shall
furnish satisfactory evidence to the Plan Administrator that
the proposed Rollover Contribution satisfies the requirements
of Section 408(d)(3) of the Code.
	 
	 	(b)	 	In the event of a Rollover Contribution on behalf
of an Eligible Employee who has not yet otherwise become a
Participant in the Plan, such Employee’s Account attributable
to his Rollover Contribution shall represent his sole interest
in the Plan until he becomes a Participant and said Eligible
Employee shall only be allowed to transfer the Rollover
Contribution between the Plan’s investments and may not
request any other type of transactions except for distribution
on account of termination of employment.
	 
	 	(c)	 	Rollover Contributions shall be deposited in a
Participant’s Non-ESOP Rollover Contribution Account.

     5. Effective for periods on and after December 31, 2003, After-Tax
Employee Contributions will no longer be made to the Plan. This Section 5 of
Article III shall be effective only for periods preceding December 31, 2003.
At any time in accordance with Article II above, a Participant may elect to
contribute to the Plan, in an amount equal to any whole percent between one
percent (1%) and sixteen percent (16%) of his Gross Earnings on an after-tax
basis, as After-Tax Employee Contributions. After-Tax Employee Contributions
are permitted on a nondiscriminatory basis as determined by the Plan
Administrator.

     Each Plan Year, the sum of each Participant’s After-Tax Employee
Contributions and Employee Deferral Contributions may not be greater than
sixteen percent (16%) of Gross

31

 

Earnings. The Plan Administrator may reduce or completely prohibit
After-Tax Employee Contributions at any time if the Plan Administrator
determines such action is necessary to ensure compliance with Section 401(k),
401(m), 402(g) or 415 of the Code. After-Tax Employee Contributions shall be
deposited in a Participant’s Non-ESOP After-Tax Employee Contribution Account.

     6. The Plan Administrator may instruct the Trustee to receive assets in
cash or in kind directly from another qualified plan; provided that a transfer
should not be directed if:

	(a)	 	any amounts are not exempted by Code Section
401(a)(11)(B) from the annuity requirements of Code Section
417;
	 
	(b)	 	any amounts include benefits protected by Code
Section 411(d)(6) which would not be preserved under
applicable Plan provisions; or
	 
	(c)	 	any amounts include benefits that were made on an
after-tax, nondeductible basis to another qualified plan.

     The Trustee may refuse the receipt of any transfer if the Trustee finds
the in-kind assets unacceptable or instructions for posting amounts to
Participants’ Accounts are incomplete.

     Such amounts shall be posted to the appropriate Accounts of Participants
as of the date received by the Trustee.

     7. All Participants who have elected to make Employee Deferral
Contributions to this Plan and who have attained age 50 before the end of a
particular calendar year shall be eligible to make catch-up contributions for
such calendar year (the “Catch-Up Employee Deferral Contributions”) in
accordance with, and subject to the limitations of, Section 414(v) of the Code;
provided, however, that Catch-Up Employee Deferral Contributions shall not be
taken into account for purposes of the provisions of the Plan implementing the
required limitations of

32

 

Sections 401(a)(30) and 415(c) of the Code (i.e., Article III, Section 1
and Article IV, Section 6, respectively). In addition, notwithstanding any
provision of the Plan to the contrary, the Plan shall not be treated as failing
to satisfy the requirements of Sections 401(k)(3), 401(k)(11), 410(b), or 416
of the Code, as applicable, by reason of the making of any such Catch-Up
Employee Deferral Contributions.

33

 

     ARTICLE IV — Company Contributions

     1. Company Matching Contributions. Effective for periods on and after
December 31, 2003, Company Matching Contributions will no longer be made to the
Plan. This Section 1 of Article IV shall be effective only for periods
preceding December 31, 2003. The Company will contribute to the account of
each Participant in this Plan, an amount equal to the sum of the Participant’s
Employee Deferral Contributions and the Participant’s After-Tax Employee
Contributions, up to the first six percent (6%) of the Participant’s Gross
Earnings, multiplied by twenty-five percent (25%). These percentages may be
changed from time to time by the Company. An allocation of Company Matching
Contributions shall be made only with respect to Participants who have
completed at least one (1) Hour of Service during the Plan Year. Company
Matching Contributions shall be deposited in a Participant’s Non-ESOP Company
Matching Contribution Account.

     2. Stock Matching Contributions. Timken will contribute to the Account of
each Participant an amount equal to the sum of (a) the Participant’s Employee
Deferral Contributions up to the first three percent (3%) of the Participant’s
Gross Earnings, multiplied by one hundred percent (100%), and (b) the
Participant’s Employee Deferral Contributions in excess of the first three
percent (3%) up to the next three percent (3%) of the Participant’s Gross
Earnings, multiplied by fifty percent (50%). Stock Matching Contributions
shall be made in Timken Stock. These percentages may be changed from time to
time by Timken. An allocation of Stock Matching Contributions shall be made
only with respect to Participants who have completed at least one (1) Hour of
Service during the Plan Year. Stock Matching Contributions shall be deposited
in a Participant’s Non-ESOP Stock Matching Contribution Account.
Notwithstanding any other provision of the Plan to the contrary, no Stock
Matching Contributions shall be made

34

 

with respect to any Catch-Up Employee Deferral Contributions (as defined
in Article III, Section 7, hereof).

     3. Company Supplemental Contributions. Effective for periods on and after
December 31, 2003, Company Supplemental Contributions will no longer be made to
the Plan. This Section 3 of Article IV shall be effective only for periods
preceding December 31, 2003. For each half of the Plan Year, the Company may
contribute a Company Supplemental Contribution, which shall be in an amount
determined by the Company and allocated in proportion to which the sum of each
eligible Participant’s Employee Deferral Contributions and After-Tax Employee
Contributions for the applicable period, bears to the total of all such
contributions for all such eligible Participants. Company Supplemental
Contributions shall be deposited in a Participant’s Non-ESOP Company
Supplemental Contribution Account.

     4. 401(k) Plus Contributions. Effective for periods on and after December
31, 2003, 401(k) Plus Contributions will no longer be made to the Plan. This
Section 4 of Article IV shall be effective only for periods preceding December
31, 2003. The Company will contribute to the Account of each Participant who
is an Employee of the Company at Score International a 401(k) Plus
Contribution. For an Employee to be eligible for a 401(k) Plus Contribution he
must be actively employed by the Company on the first day of the calendar
quarter for which the contribution is to be made, must be otherwise eligible to
participate in the Plan on the first day of the calendar quarter for which the
contribution is to be made, and must not be an elected officer of the Company
having an employee excess benefits agreement. If an Employee eligible for a
401(k) Plus Contribution transfers to another employment category or terminates
employment with the Company, he will receive a contribution based upon his
eligible Gross Earnings for that

35

 

calendar quarter. The 401(k) Plus Contributions shall be deposited in a
Participant’s Non-ESOP 401(k) Plus Contribution Account.

     The 401(k) Plus Contribution will be based on (a) the Employee’s full
years of Credited Service, with any fractional share of a year of Credited
Service disregarded, and (b) the Employee’s Gross Earnings. The 401(k) Plus
Contribution shall be calculated as follows:

	 	 	 	 	 
	Years of Credited Service	 	Contribution Percentage Rate
	Under 5
	 	 	2.50	%
	5-9
	 	 	3.00	%
	10-14
	 	 	3.50	%
	15-19
	 	 	4.50	%
	20-24
	 	 	6.00	%
	25 or more
	 	 	8.00	%

     The percentages set forth above may be changed from time to time by the
Company.

     Notwithstanding any other provision of this Section 4 to the contrary, if
a Participant who is eligible for a 401(k) Plus Contribution in a calendar
quarter transfers to another position with a Controlled Group Member during
such calendar quarter that is not eligible to receive a 401(k) Plus
Contribution in such quarter, but would be eligible for a Core Contribution or
any other similar profit sharing contribution under a defined contribution plan
of a Controlled Group Member if he had been employed in such position at the
beginning of such calendar quarter, the Participant will only receive a 401(k)
Plus Contribution for the calendar quarter in which the transfer occurs if the
401(k) Plus Contribution is greater than the Core Contribution or other similar
profit sharing contribution under a defined contribution plan of a Controlled
Group Member. If a Participant transfers to a position during a calendar
quarter in which he would have been eligible for a 401(k) Plus Contribution if
he had been a Participant on the first day of such calendar quarter from a
position with a Controlled Group Member in which he was not eligible for a
401(k) Plus Contribution, but was eligible for a Core Contribution or any other

36

 

similar profit sharing contribution under a defined contribution plan of a
Controlled Group Member, the Participant will receive a 401(k) Plus
Contribution for the calendar quarter in which the transfer occurs, but only if
the 401(k) Plus Contribution is greater than the Core Contribution or other
similar profit sharing contribution under a defined contribution plan of a
Controlled Group Member. For purposes of this paragraph, the determination of
all 401(k) Plus Contributions, Core Contributions or other similar profit
sharing contributions under a defined contribution plan of a Controlled Group
Member shall be made by taking into account all of the Participant’s Gross
Earnings with any Controlled Group Member during the relevant calendar quarter,
regardless of whether such Gross Earnings were earned while he was a
Participant in the Plan.

     5. Core Contributions. Timken will contribute to the Account of each
Participant who, (i) as of December 31, 2003, does not have (A) five (5) years
of Continuous Service, and (B) an age plus years of Continuous Service total of
at least 50 or (ii) as of December 31, 2003, does have (A) five (5) years of
Continuous Service, and (B) an age plus years of Continuous Service total of at
least 50, but is not accruing benefit service under a defined benefit pension
plan sponsored by a Controlled Group Member, a Core Contribution. For a
Participant to be eligible for a Core Contribution he must be actively employed
by the Company on the first day of the calendar quarter for which the
contribution is to be made, must be otherwise eligible to participate in the
Plan on the first day of the calendar quarter for which the contribution is to
be made, must not be an elected officer of the Company having an excess
benefits agreement, and must not be an Employee who, while eligible to
participate in the Plan, continues to accrue benefit service under a
collectively bargained defined benefit pension plan of a Controlled Group
Member.

37

 

     The Core Contribution will be based on (a) the sum of the Employee’s full
years of Credited Service and age as of December 31 of the previous calendar
year, with any fractional portion of a year of Credited Service or age
disregarded, and (b) the Employee’s Gross Earnings for the calendar quarter for
which the Core Contribution is made. The Core Contribution shall be calculated
as follows:

	 	 	 	 	 
	Age Plus Years of Credited Service	 	Contribution Percentage Rate
	0-34
	 	 	1.00	%
	35-44
	 	 	2.00	%
	45-54
	 	 	3.00	%
	55-64
	 	 	3.50	%
	65-74
	 	 	4.00	%
	75+
	 	 	4.50	%

     Notwithstanding any other provision of this Section 5 to the contrary, if
a Participant who is eligible for a Core Contribution in a calendar quarter
transfers to another position with a Controlled Group Member during such
calendar quarter that is not eligible to receive a Core Contribution in such
quarter, but would be eligible for a 401(k) Plus Contribution or any other
similar profit sharing contribution under a defined contribution plan of a
Controlled Group Member if he had been employed in such position at the
beginning of such calendar quarter, the Participant will only receive a Core
Contribution for the calendar quarter in which the transfer occurs if the Core
Contribution is greater than the 401(k) Plus Contribution or other similar
profit sharing contribution under a defined contribution plan of a Controlled
Group Member. If a Participant transfers to a position during a calendar
quarter in which he would have been eligible for a Core Contribution if he had
been a Participant on the first day of such calendar quarter from a position
with a Controlled Group Member in which he was not eligible for a Core
Contribution, but was eligible for a 401(k) Plus Contribution or any other
similar profit sharing contribution under a defined contribution plan of a
Controlled Group Member, the Participant

38

 

will receive a Core Contribution for the calendar quarter in which the
transfer occurs, but only if the Core Contribution is greater than the 401(k)
Plus Contribution or other similar profit sharing contribution under a defined
contribution plan of a Controlled Group Member. For purposes of this
paragraph, the determination of all Core Contributions, 401(k) Plus
Contributions or other similar profit sharing contributions under a defined
contribution plan of a Controlled Group Member shall be made by taking into
account all of the Participant’s Gross Earnings with any Controlled Group
Member during the relevant calendar quarter, regardless of whether such Gross
Earnings were earned while he was a Participant in the Plan.

     6. In no event shall the annual addition to a Participant’s Account under
this Plan and any other qualified defined contribution plan maintained by the
Company, except to the extent permitted under Article III, Section 7 hereof and
Section 414(v) of the Code, exceed the lesser of $40,000, or, if greater, the
dollar limitation indexed for inflation under Section 415(d) of the Code, or
100 percent (100%) of the Participant’s total compensation from the Company.
For purposes of this Article IV, Section 6 and the subsequent Sections of this
Article IV, compensation is all amounts received by a Participant from the
Company during a Plan Year for the performance of personal services, to the
extent that such amounts are includable in taxable income. In no event shall
the amount of Employee Deferral Contributions to a Participant’s account exceed
$11,000 ($13,000 effective January 1, 2004) for any Plan Year (or, if greater,
the dollar limitation in effect under Section 402(g)(1) of the Code) (except to
the extent permitted under Article III, Section 7 hereof and Section 414(v) of
the Code).

     The Annual Addition shall be the sum of the following amounts credited to
a Participant’s Account for the Limitation Year:

	(a)	 	Core Contributions,

39

 

	(b)	 	Employee Deferral Contributions,
	 
	(c)	 	Stock Matching Contributions,
	 
	(d)	 	401(k) Plus Contributions, and
	 
	(e)	 	Amounts allocated, after March 31, 1984, to an
individual medical account, as defined in Section 415(c)(2) of
the Code, which is a part of a pension or annuity plan
maintained by the Company. Amounts derived from contributions
paid or accrued after December 31, 1985, in taxable years
ending after such date, which are attributable to
post-Retirement medical benefits, allocated to the separate
account of a key employee, as defined in Section 419A(d)(3) of
the Code, under a welfare benefit fund, as defined in Section
419(e) of the Code, maintained by the Company are also treated
as annual additions to a defined contribution plan.

     The Limitation Year is the calendar year.

     For this purpose, any excess amount applied in the Limitation Year to
reduce Company Contributions will be considered Annual Additions for such
Limitation Year.

     In the event a corrective distribution is needed, following the end of the
calendar year, the Plan shall distribute such corrective distribution not later
than the first April 15 following the close of the calendar year. The income
(or loss) allocable to any excess Employee Deferral Contributions shall be
distributed as part of any corrective distribution.

     7. If the Annual Addition limitation for any Participant would be exceeded
by the amounts contributed to this Plan and any other defined contribution
plans maintained by the Company, the Company Contributions to the Participant’s
Account made under this Plan shall be reduced as necessary, in the following
order:

40

 

	(a)	 	Any portion of the excess directly attributable
to and arising from Employee Deferral Contributions, to the
extent its return would reduce the excess, will be returned to
the Participant; however, to the extent Employee Deferral
Contributions were matched, the applicable Stock Matching
Contribution shall be forfeited in proportion to the returned
Employee Deferral Contributions matched;
	 
	(b)	 	401(k) Plus Contributions;
	 
	(c)	 	Core Contributions;
	 
	(d)	 	If after the application of Paragraphs (a) and (b) an excess still exists, and the Participant is covered by
the Plan at the end of the Limitation Year, the excess in the
Participant’s Account together with any amounts forfeited
under (a) and (b) will be used to reduce Company Contributions
beginning with Employee Deferral Contributions, if any, for
the next Limitation Year, and each succeeding Limitation Year
if necessary;
	 
	(e)	 	If after the application of paragraphs (a) and
(b) an excess still exists, and the Participant is not covered
by the Plan at the end of a Limitation Year, the excess will
be held unallocated in a suspense account. The suspense
account together with any amounts forfeited under (a) and (b)
will be applied to reduce future contributions beginning with
Employee Deferral Contributions, if any, for all remaining
Participants for the next Limitation Year, and each succeeding
Limitation Year if necessary;
	 
	(f)	 	If a suspense account is in existence at any time
during a Limitation Year pursuant to this Section, it will not
receive any allocation of the

41

 

	 	 	investment gains and losses of the Trust. If a suspense
account is in existence at any time during a particular
Limitation Year, all amounts in the suspense account must be
allocated and reallocated to Participants’ Accounts before
any Company Contributions may be made to the Plan for that
Limitation Year. The excess amount may not be distributed to
Participants or former Participants.

     8. If a Participant, whose Account is credited with an excess Annual
Addition also is covered under another qualified defined contribution plan
maintained by a Controlled Group Member, a welfare benefit fund (as defined in
Section 419(e) of the Code) maintained by a Controlled Group Member, or an
individual medical account (as defined in Section 415(1)(2) of the Code)
maintained by a Controlled Group Member, which provides an Annual Addition as
defined in Article IV, Section 6 hereof, during any Limitation Year, the excess
shall be corrected by reducing the Annual Addition to this Plan only after all
possible reductions have been made to the other defined contribution plans.

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     ARTICLE V — Interests Vested

     1. Participants shall have an immediate fully Vested right to Employee
Deferral Contributions, Company Matching Contributions, Stock Matching
Contributions, Company Supplemental Contributions, After-Tax Employee
Contributions, and Rollover Contributions properly credited to their respective
subaccounts and the income attributable thereto.

     2. The Vested percentage of a Participant’s Account attributable to 401(k)
Plus Contributions and Core Contributions is determined as follows:

	 	 	 	 	 
	Years of Continuous Service:	 	The Vested Percentage is:
	Less than 3
	 	 	0	%
	3 or more
	 	 	100	%

     3. Notwithstanding the vesting schedule specified above, a Participant’s
right to his Accounts will be Vested upon the date of his Retirement or his
death or Disability while he is an Employee.

	     4.	(a)	 	If a Participant ceases to be employed but is then
reemployed by the Company after he has incurred a One Year Break in
Service, and such individual had received a distribution of his
entire Vested interest (including where the Participant had no
Vested amount in his Account) prior to reemployment, his forfeited
Account shall be restored only if he repays the full amount
distributed to him before the earlier of five (5) years after the
first date on which the Participant is subsequently reemployed by
the Company or the close of the first period of five (5) consecutive
One Year Breaks in Service commencing after the distribution.

43

 

	(b)	 	If a distribution occurs for any reason other
than a termination of employment, the time for repayment may
not end earlier than five (5) years after the date of
distribution. In the event the former Participant repays the
full amount distributed to him, the undistributed portion of
the Participant’s Account must be restored in full, unadjusted
by gains or losses occurring after the Valuation Date
preceding the distribution.

     5. If the Plan’s vesting schedule is changed or amended, or the Plan is
amended in any way that directly or indirectly affects the computation of the
Participant’s Vested percentage, each Participant with at least three (3) years
of Continuous Service with the Company may elect, within a reasonable period
after the adoption of the amendment or change, to have the Vested percentage
computed under the Plan without regard to such amendment or change. For
Participants who do not have at least one (1) Hour of Service in any Plan Year
beginning after December 31, 1988, the preceding sentence shall be applied by
substituting “five (5) years of Continuous Service” for “three (3) years of
Continuous Service” where such language appears.

     The period during which the election may be made shall commence with the
date the amendment is adopted or deemed to be made and shall end on the latest
of:

	(a)	 	60 days after the amendment is adopted;
	 
	(b)	 	60 days after the amendment becomes effective; or
	 
	(c)	 	60 days after the Participant is issued written
notice of the amendment by the Company or Plan Administrator.

     Furthermore, if the vesting schedule of a Plan is amended, in the case of
an Employee who is a Participant as of the later of the date such amendment is
adopted or the date it becomes effective, the Vested percentage (determined as
of such date) of such Employee’s right to his

44

 

Accrued Benefit derived from Company Contributions will not be less than
the percentage computed under the Plan without regard to such amendment.

     6.If a distribution is made at a time when a Participant has a Vested
right to less than 100 percent of the Account balance derived from Company
Contributions and the Participant may increase his Vested percentage in the
Account:

At any relevant time the Participant’s Vested portion will
be equal to the amount (“X”) determined by the formula:

X = P(AB+D) – D

        For purposes of applying the above formula: P is the Vested percentage at
the relevant time, AB is the Account balance at the relevant time and D is the
amount of distribution. “Relevant time” means the time at which, under the
Plan, the Vested percentage in the Account cannot increase.

     7. Any Forfeitures shall be used to reduce Company Contributions to the
Trust.

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    ARTICLE VI — Establishment and Operation of the Trust

	1.	 	(a) 	Timken and the Trustee have entered into a Trust
agreement which is set forth in a separate document and is
incorporated herein. The Trust agreement establishes a Trust
consisting of such sums of money and other property as may from time
to time be contributed or transferred to the Trustee under the terms
of the Plan, along with any property to which the Trust fund may
from time to time be converted, and which provides for the
investment of Plan assets and the operation of the Trust. The Trust
agreement, as amended from time to time, shall be deemed part of the
Plan, and all rights and benefits provided to persons under the Plan
shall be subject to the terms of the Trust agreement.
	 
		 	(b) 	Notwithstanding any provision of the Plan to the
contrary, (1) the Plan Administrator may establish rules and
procedures relating to the investments in one or more of the
investment options, which rules and procedures may be changed
from time to time by the Plan Administrator, and (2) the
investment options shall be subject to, and governed by, all
applicable legal rules and restrictions and the rules
specified by the investment option providers in the fund
prospectus(es) or other governing documents thereof (to the
extent such rules and procedures are imposed and enforced by
the investment fund provider against the Plan or a particular
Participant). Such rules, procedures and restrictions may
limit the ability of a Participant to make transfers into or
out of a particular

46

 

	 	 	    	investment option and/or may result in additional transaction
fees or other costs relating to such transfers.

     2. The Committee authorizes the Trustee to accept investment direction
from Participants. The Trustee shall invest in the Investment Funds in
accordance with investment directions given by the Participants, Beneficiaries,
and Alternate Payees for whose accounts such assets are held, to the extent
authorized in accordance with procedures established for such purpose from time
to time by the Plan Administrator. Participants, Beneficiaries, and Alternate
Payees will be deemed responsible for purposes of such investment selection and
allocation.

     Where the Committee, a Participant, a Beneficiary, an Alternate Payee, or
an Investment Manager other than the Trustee has the power and authority to
direct the investment of assets of the Trust, the Trustee does not have any
duty to question any direction, to review any securities or other property, or
to make any suggestions in connection therewith. The Trustee will promptly
comply with any direction given by the Committee, a Participant, a Beneficiary,
an Alternate Payee, or Investment Manager. The Trustee will neither be liable
for failing to invest any assets of the Trust Fund under the management and
control of the Committee, a Participant, a Beneficiary, an Alternate Payee, or
an Investment Manager in the absence of investment directions regarding such
assets.

     The provisions of this Section 2 are subject to the rules, procedures and
restrictions described in Section 1(b) of this Article VI. In furtherance of,
but without limiting the foregoing, the Trustee, the Administrative Delegate,
the Plan Administrator, the Committee, any Investment Manager, or any
investment option provider (or their delegate, as applicable) may decline to
implement any investment election or instruction where it deems appropriate.

47

 

     3. Timken may, for administrative purposes, establish unit values for one
or more Investment Funds (including Timken Stock) and maintain the Accounts
setting forth each Participant’s interest in such Investment Fund (or portion
thereof) in terms of such units, all in accordance with fair, equitable and
administratively practicable rules and procedures as Timken shall design and
adopt. Such rules and procedures shall be set forth in an administrative
services agreement between Timken and the Trustee, which agreement shall be
incorporated by reference and made a part of this Plan. In the event that unit
accounting is established for any Investment Fund (or portion thereof) the
value of a Participant’s Account at any time shall be an amount equal to the
then value of a unit in such Investment Fund (or any portion thereof)
multiplied by the number of units then credited to the Participant.

     4. A Participant can request transfers on any business day of amounts in
his Account, except for Stock Matching Contributions, from one Investment Fund
to another. The Participant may elect what percentage, if any, of those assets
in the Participant’s Account eligible for transfer will be withdrawn in one
percent (1%) increments from existing Investment Funds. The Participant may
then elect what percentage of the assets so withdrawn will be transferred to
other Investment Funds in one percent (1%) increments. In order to effectuate
a transfer into or out of the Investment Fund holding Timken Stock, shares of
Timken Stock may be (a) bought and/or sold on the open market at the market
price of the stock on any Valuation Date, or (b) bought from and/or sold to
Timken at the average of the high and low market price on the Valuation Date
the request for purchase and/or sale is received by Timken, if cash is not
available.

     The provisions of this Section 4 are subject to the rules, procedures and
restrictions described in Section 1(b) of this Article VI. In furtherance of,
but without limiting the foregoing,

48

 

the Trustee, the Administrative Delegate, the Plan Administrator, the
Committee, any Investment Manager, or any investment option provider (or their
delegate, as applicable) may decline to implement any investment election or
instruction where it deems appropriate.

	5.	(a)	 	 Stock Matching Contributions to the Plan may be
transferred to other Investment Funds only in accordance with this
Article VI, Section 5. Participants who have attained age 55 or who
have 30 years of Continuous Service will be permitted to transfer
their ESOP and Non-ESOP Stock Matching Contribution Accounts to any
other Investment Fund. A Beneficiary or Alternate Payee may direct
the investment in his ESOP and Non-ESOP Stock Matching Contribution
Accounts.
	 
	 	  (b)	 	Participants who do not meet the age or service
requirement of clause (a) of this Section 5 on January 1, 2004
will be permitted, on and after January 1, 2004, to transfer
1/3 of the value of their Account balance from Stock Matching
Contributions on December 31, 2003 into any investment options
offered by the Plan Administrator. Participants who do not
meet the age or service requirement of clause (a) of this
Section 5 on January 1, 2005 will be permitted, on and after
January 1, 2005, to transfer 1/2 of the value of their
remaining Account balance as of December 31, 2003 from Stock
Matching Contributions on December 31, 2003 into any other
Investment Fund. Participants who do not meet the age or
service requirement of clause (a) of this Section 5 on January
1, 2006 will be permitted, on and after January 1, 2006, to
transfer the remaining portion of the value of their Account
balance as of December 31, 2003 from Stock

49

 

	 	 	Matching Contributions on December 31, 2003 into any other
Investment Fund.
	 
	(c)	 	Participants who do not meet the age or service
requirement of clause (a) of this Section 5 will be permitted
to transfer Stock Matching Contributions made on and after
January 1, 2004 into any other Investment Fund beginning on
the first day of the third calendar year after the calendar
year in which the Stock Matching Contributions were made.
	 
	(d)	 	The provisions of this Section 5 are subject to
the rules, procedures and restrictions described in Section
1(b) of this Article VI. In furtherance of, but without
limiting the foregoing, the Trustee, the Administrative
Delegate, the Plan Administrator, the Committee, any
Investment Manager, or any investment option provider (or
their delegate, as applicable) may decline to implement any
investment election or instruction where it deems appropriate.

     6. Participants who have terminated service with the Company on account of
Retirement or have terminated service with the Company and who are no longer
employed by any Controlled Group Member will be permitted to transfer any
portion of their Accounts to any other Investment Fund, according to the
procedures described in Section 4 above.

     7. The Trustee shall, following the end of each Valuation Date, value all
assets of the Trust, allocate net gains or losses, and process additions to and
withdrawals from Account balances in the following manner:

	(a)	 	The Trustee shall first compute the fair market
value of securities and/or the other assets comprising each
Investment Fund. Each Account balance

50

 

	 	 	shall be adjusted each business day by applying the closing
market price of the Investment Fund on the current business
day to the share/unit balance of the Investment Fund as of
the close of business on the current business day.
	 
	(b)	 	The Trustee shall then account for any requests
for additions or withdrawals made to or from a specific
designated Investment Fund by any Participant, including
allocations of contributions. In completing the valuation
procedure described above, such adjustments in the amounts
credited to such Accounts shall be made on the business day to
which the investment activity relates. Contributions received
by the Trustee pursuant to this Plan shall not be taken into
account until the Valuation Date coinciding with or next
following the date such contribution was both actually paid to
the Trustee and allocated among the Accounts of Participants.
	 
	(c)	 	Notwithstanding Subsections (a) and (b) above, in
the event a Pooled Investment Account is created as an
Investment Fund, valuation of the Pooled Investment Account
and allocation of earnings of the Pooled Investment Account
shall be governed by the administrative services agreement for
such Pooled Investment Account. The provisions of any such
administrative services agreement shall be incorporated by
reference and made a part of this Plan.

     It is intended that this Article VI, Section 7, operate to distribute
among the Participant’s Accounts in the Trust, all income of the Trust and
changes in the value of the assets of the Trust.

51

 

     8. As soon as possible following the end of each calendar quarter, each
Participant shall receive a statement showing the details of the Participant’s
Account in the Trust.

     9. Investment fees attributable to a Participant’s choice of a particular
Investment Fund may be charged against the Participant’s Account balance in
that Investment Fund.

     10. [Reserved]

     11. The Plan Administrator shall provide notice of any Blackout Period (as
defined in Article VI, Section 12) to all Participants and Beneficiaries whose
rights under the Plan will be temporarily suspended, limited, or restricted by
the Blackout Period and shall arrange for notice to the issuer of Timken Stock
subject to such Blackout Period. The notice required shall be written in a
manner calculated to be understood by the average Participant and shall include
the following information:

	(a)	 	the reasons for the Blackout Period;
	 
	(b)	 	a description of the rights otherwise available
to Participants and Beneficiaries under the Plan which will be
temporarily suspended, limited, or restricted by the Blackout
Period;
	 
	(c)	 	the expected beginning date and ending date of
the Blackout Period;
	 
	(d)	 	in the case of investments affected, a statement
that the Participant or Beneficiary should evaluate the
appropriateness of their current investment decisions in light
of their inability to direct or diversify assets in their
Accounts during the Blackout Period;
	 
	(e)	 	in any case in which the notice required is not
furnished at least 30 days in advance of the last date on
which Participants and Beneficiaries could exercise the
affected rights immediately before the commencement of the

52

 

	 	 	Blackout Period, a statement that federal law generally
requires that such notice be furnished at least 30 days in
advance of the last date on which Participants and
Beneficiaries could exercise the affected rights immediately
before the commencement of a Blackout Period, and an
explanation why at least 30 days advance notice could not be
furnished; and
	 
	(f)	 	the name, address, and telephone number of the
Plan Administrator responsible for answering questions about
the Blackout Period.

If following the issuance of the notice there is a change in the beginning or
ending date of the Blackout Period, the Plan Administrator shall furnish all
affected Participants and Beneficiaries an updated notice and shall arrange for
an updated notice to the issuer of Timken Stock, which updated notice shall
explain the reasons for the change in the date and identify all material
changes in the information contained in the prior notice.

     12. The term “Blackout Period” means, in connection with this Plan, any
period for which any ability of Participants or Beneficiaries under the Plan,
which is otherwise available under the terms of such Plan, to direct or
diversify assets credited to their Accounts, to obtain loans from the Plan, or
to obtain distributions from the Plan, is temporarily suspended, limited, or
restricted, if such suspension, limitation, or restriction is for any period of
more than three consecutive business days. A “Blackout Period” does not
include a suspension, limitation, or restriction:

	(a)	 	which occurs by reason of the application of the
federal securities laws;
	 
	(b)	 	which is a change to the Plan which provides for
a regularly scheduled suspension, limitation, or restriction
which is disclosed to all affected

53

 

	 	 	Participants or Beneficiaries through any summary of material
modification, any materials describing specific investment
alternatives under the Plan, or any changes thereto; or
	 
	(c)	 	which applies only to one or more individuals,
each of whom is a Participant, an Alternate Payee, or any
other Beneficiary pursuant to a qualified domestic relations
order.

54

 

     ARTICLE VII — Distributions from the Trust

  1.  A  Participant’s Account shall be distributed to the Participant at the
Participant’s request upon Retirement, upon a break in Continuous Service with
the Company, upon a permanent layoff due to job elimination, general reduction
in the workforce, or plant or office closing, upon attainment of age
70 1⁄2,
upon determination of Disability, upon approval of any in-service or hardship
withdrawal or to the Participant’s Beneficiary upon the death of the
Participant, except as hereinafter provided.

	2.	  (a)	 	 A Participant’s Beneficiary shall be his spouse or, if
the Participant has no spouse or the Participant’s spouse consents
(in the manner described in this Paragraph) to the designation of
another Beneficiary, such other Beneficiary as is designated by the
Participant as his Beneficiary. The Account balance shall be
adjusted for gains and losses occurring after the Participant’s
death in accordance with usual Plan procedures for adjusting Account
balances for other types of distributions.

	 	   (b)	 	A Participant may elect at any time to waive the
surviving spouse as Beneficiary and may revoke any such
election at any time. Such an election shall not take effect
unless the spouse of the Participant consents in writing to
such election, such election designates a Beneficiary (or a
form of benefits) which may not be changed without spousal
consent (or the consent of the spouse expressly permits
designations by the Participant without any requirement of
further consent by the spouse) and the spouse’s consent
acknowledges the effect of such election and is witnessed by a
notary public, or it is established to the satisfaction of the
Plan

55

 

	 	 	 	Administrator that the consent required may not be obtained
because there is no spouse, because the spouse cannot be
located, or because of such other circumstances as the
Secretary of the Treasury may by regulations prescribe. Any
consent by a spouse (or establishment that the consent of a
spouse may not be obtained) shall be effective only with
respect to such spouse.

	(c)	 	For purposes of this Section 2, spouse means a
person who is legally married (and the marriage was performed
before proper civil or religious authority) to the
Participant.
	 
	(d)	 	If a Participant has no spouse, if the spouse has
consented in the manner described above to not being the
designated Beneficiary, if the spouse cannot be located, or
because of other circumstances prescribed by the Secretary of
the Treasury, the Participant may, by written notice delivered
to the Plan Administrator, designate or change the designation
of a Beneficiary to whom payments of benefits may be paid in
the event of his death. In the absence of such notice, such
benefits shall, to the extent permitted by law, in the
following order of preference: (a) to the deceased
Participant’s surviving spouse, (b) to the deceased
Participant’s child or children, in equal shares, per stirpes,
or (c) to the executor or administrator of the deceased
Participant’s estate.
	 
	(e)	 	A Participant may elect a tax-exempt organization
qualified under Section 501(c)(3) of the Code as a Beneficiary
of all or part of his Account. The

56

 

	 	 	Participant must furnish to the Plan Administrator the
appropriate information substantiating such Beneficiary’s
tax-exempt status.

     3. Distributions shall be made in cash, except that a Participant or
Beneficiary entitled to a distribution from the Trust may, at his option,
receive certificates for the full shares of Timken Stock held for his benefit
and cash for any fractional interests in shares and investments in other
investment options. All Investment Funds, including Timken Stock, shall be
valued by using the market value of such investments and the closing price of
Timken Stock on the day preceding the date of distribution, but not to exceed
seven (7) business days from the date forms are received by the Trustee.

	4.	  (a)	 	Such distributions shall be made in a lump sum, unless
the distribution is in installment payments as elected by the
Participant. The Distribution will commence as soon as
administratively possible following completion of a Participant’s
distribution request and approval by the Plan Administrator.
Notwithstanding the foregoing, unless the Participant otherwise
elects, distribution to a Participant will be made no later than the
sixtieth (60th) day after the close of the Plan Year in which
Continuous Service is broken, except as the minimum distribution
requirements set forth in Article VII, Section 6, may otherwise
require or if the value of the Participant’s Vested Account is
$5,000, or less. No distribution can be made from the Plan, after
the Benefit Starting Date, without the consent of the Participant,
or in cases where the Participant has died, the Participant’s
Beneficiary, except that the Plan will make an immediate lump-sum
distribution to a Participant or Beneficiary, as the case may be, if
the value

57

 

	 	 	of the Participant’s Vested Account is not more than $5,000.
For purposes of this Article VII, Section 4(a) of the Plan,
the value of a Participant’s Vested Account balance will be
calculated without including any Rollover Contributions and
any earnings allocable to Rollover Contributions.
	 
	(b)	 	If the value of a Participant’s Vested Account
balance derived from Company and Participant contributions
exceeds $5,000, and the Account balance is immediately
distributable, the Participant must consent to any
distribution of such Account balance. An Account balance is
immediately distributable if any part of the Account balance
could be distributed to the Participant before the Participant
attains Normal Retirement Age. The consent of the Participant
shall not be required to the extent that a distribution is
required to satisfy Section 401(a)(9) or Section 415 of the
Code. For purposes of this Article VII, Section 4(b) of the
Plan, the value of a Participant’s Vested Account balance will
be calculated without including any Rollover Contributions and
any earnings allocable to Rollover Contributions.
	 
	(c)	 	Participants and Beneficiaries will also have the
option to receive a distribution in installments. The
frequency of the installment payments shall be payable over a
term not exceeding the joint life expectancy of the
Participant or Beneficiary, at the Participant’s or
Beneficiary’s election as follows:

	(i)	 	monthly;
	 
	(ii)	 	quarterly;

58

 

	(iii)	 	semi-annually;
	 
	(iv)	 	annually.

	 	 	A Participant or Beneficiary must have a minimum Account
balance of $5,000 to elect installment distribution.

	 	  (d)	  	Unless the Participant otherwise elects, subject
to paragraph (b) of this Section, the payment of benefits to a
Participant shall begin not later than the sixtieth (60th) day
after the latest of the close of the Plan Year in which (i)
the Participant attains age sixty-five (65), (ii) the
Participant completes ten (10) years of Continuous Service, or
(iii) the Participant terminates his service with the Company.
Notwithstanding the foregoing, the failure of a Participant,
spouse or Beneficiary to consent to a distribution while a
benefit is immediately distributable within the meaning of
Article VII, Section 4(b) of the Plan, shall be deemed to be
an election to defer commencement of any benefit sufficient to
satisfy this Section 4. Such an election may not be made if
the exercise of such election will cause the benefits payable
under this Plan in the event of the death of the Participant
to be more than incidental.

	5.	  (a)	 	For distributions made from the Plan, the appropriate tax
withholdings will be made, unless the Participant directs the Plan
Administrator, pursuant to procedures to be implemented by the Plan
Administrator, to roll over directly his eligible rollover
distribution to an eligible retirement plan. A direct rollover is a
payment by the Plan to the eligible retirement plan specified by the
Participant. An eligible rollover distribution is any

59

 

	 	 	distribution of all or any portion of the balance to the
credit of the Participant, except that an eligible rollover
distribution does not include (i) any distribution that is
one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life
expectancy) of the Participant or the joint lives (or joint
life expectancies) of the Participant and the Participant’s
designated Beneficiary, or for a specified period of ten (10)
years or more, (ii) any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code,
and (iii) the portion of any distribution that is not
includable in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities). An eligible retirement plan is an
individual retirement account described in Section 408(a) of
the Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the Participant’s
eligible rollover distribution. However, for Plan Years
prior to December 31, 2002, in the case of an eligible
rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or
individual retirement annuity. For purposes of this
provision, a Participant includes an Employee or former
Employee, a Participant’s surviving spouse and a
Participant’s spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined
in Section 414(p) of the Code.

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	(b)	 	All components of a hardship withdrawal are not
an eligible rollover distribution.

6. Required Distributions.

	(a)	 	General Rules.

	(i)	 	The requirements of this Article VII,
Section 6, shall apply to any distribution of a
Participant’s Account and shall take precedence over any
inconsistent provisions of this Plan, provided that the
requirements of this Article VII, Section 6, shall not
enlarge the distribution options currently available to
Participants and Beneficiaries under the other
provisions of Article VII of the Plan.
	 
	(ii)	 	All distributions required under this
Section shall be determined and made in accordance with
the regulations under Code Section 401(a)(9), including
the minimum distribution incidental benefit requirement
of Section 1.401(a)(9)-2 of the regulations.
	 
	(iii)	 	The Plan will apply the minimum
distribution requirements of Section 401(a)(9) of the
Code in accordance with the regulations under Section
401(a)(9) promulgated on April 17, 2002, notwithstanding
any provisions of the Plan to the contrary.

	(b)	 	Distributions Commencing During a Participant’s
Lifetime.

	(i)	 	The entire interest of a Participant
must be distributed to such Participant no later than
the Participant’s Required Beginning Date, or must be
distributed, beginning not later than the Required
Beginning Date, over the life of the Participant or
joint lives of the

61

 

	 	 	Participant and designated Beneficiary or over a period
not extending beyond the life expectancy of the
Participant or the joint life and last survivor
expectancy of the Participant and the designated
Beneficiary.
	 
	(ii)	 	Required Beginning Date means, for a
Participant who is a 5-percent owner (as defined in
Section 416 of the Code), April 1 of the calendar year
following the calendar year in which he attains age 70
1⁄2.
	 
	(iii)	 	Required Beginning Date means, for
any Participant who is not a 5-percent owner (as defined
in Section 416 of the Code), April 1 of the calendar
year following the later of the calendar year in which
he attains age 70 1⁄2 or the calendar year in which
terminates employment with the Company on account of
Retirement. Any such Participant attaining age 70 1⁄2
who is still employed by the Company may elect to defer
distribution until the calendar year following the
calendar year of his Retirement.
	 
	(iv)	 	The applicable distribution period
for required minimum distributions for distribution
calendar years up to and including the distribution
calendar year that includes the Participant’s death is
determined using the Internal Revenue Service’s Uniform
Lifetime Table for the Participant’s age as of the
Participant’s birthday in the relevant distribution
calendar year. A “distribution calendar

62

 

	 	 	    year” is a calendar year for which a minimum
distribution is required.

	(c)	 	Distributions Before Required Beginning Date.
Lifetime distributions made before the Participant’s Required
Beginning Date for calendar years before the Participant’s
first distribution calendar year, need not be made in
accordance with this Article VII, Section 6. However, if
distributions commence before the Participant’s Required
Beginning Date under a particular distribution option, the
distribution option fails to satisfy the provisions of Section
401(a)(9) of the Code at the time distributions commence if,
under the terms of the particular distribution option,
distributions to be made for the Participant’s first
distribution calendar year or any subsequent distribution
calendar year fail to satisfy Section 401(a)(9).
	 
	(d)	 	Death After Distributions Have Begun. If
distribution of the Participant’s interest has begun and the
Participant dies before his entire interest has been
distributed to him, the remaining portion of such interest
will continue to be distributed at least as rapidly as under
the method of distribution being used prior to the
Participant’s death. The applicable distribution period for
distribution calendar years after the distribution calendar
year containing the Participant’s death is the longer of
either the remaining life expectancy of the Participant’s
designated Beneficiary or the remaining life expectancy of the
Participant. If the Beneficiary is not an individual or does
not otherwise meet the requirements of Section

63

 

	 	 	401(a)(9) of the Code, the remaining life expectancy of the
Participant must be utilized.
	 
	(e)	 	Death Before Required Beginning Date. If the
Participant dies before his Required Beginning Date and
distribution of his interest, distribution of the
Participant’s entire interest shall be completed by December
31 of the calendar year containing the fifth anniversary of
the Participant’s death except to the extent that an election
is made to receive distributions in accordance with (i) or
(ii) below:

	(i)	 	if any portion of the Participant’s
interest is payable to a designated Beneficiary,
distributions may be made over the life or over the
period certain not greater than the life expectancy of
the designated Beneficiary beginning on or before
December 31 of the calendar year immediately following
the calendar year in which the Participant died;
	 
	(ii)	 	if the designated Beneficiary is the
Participant’s surviving spouse, the date distributions
are required to begin in accordance with (i) above shall
not be earlier than the later of:

	(A)	 	December 31 of the
calendar year immediately following the calendar
year in which the Participant died, or
	 
	(B)	 	December 31 of the
calendar year in which the Participant would have
attained age 70 1⁄2.

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	(iii)	 	If the Participant has not made an
election pursuant to (e)(ii) above by the time of his
death, the Participant’s designated Beneficiary must
elect the method of distribution no later than the
earlier of:

	(A)	 	December 31 of the
calendar year in which distributions would be
required to begin under this Subparagraph, or
	 
	(B)	 	December 31 of the
calendar year which contains the fifth anniversary
of the date of death of the Participant.

	(iv)	 	If the Participant has no designated
Beneficiary, or if the designated Beneficiary does not
elect a method of distribution, distribution of the
Participant’s entire interest must be completed by
December 31 of the calendar year containing the fifth
anniversary of the Participant’s death.
	 
	(v)	 	For purposes of (e)(ii) above, if the
surviving spouse dies after the Participant, but before
payments to such spouse begin, the provisions of (e)(ii)
above, with the exception of (e)(ii)(B) therein, shall
be applied as if the surviving spouse were the
Participant.
	 
	(vi)	 	For purposes of this Paragraph (e),
distribution of a Participant’s interest is considered
to begin on the Participant’s Required Beginning Date
(or if (e)(v) above is applicable, the date distribution
is required to begin to the surviving spouse pursuant to
(e)(v) above).

	(f)	 	Minimum Distribution Amount.

	 	 	If a Participant’s benefit is to be distributed over:

65

 

	(i)	 	a period not extending beyond the
life expectancy of the Participant or the joint life and
last survivor expectancy of the Participant and the
Participant’s designated Beneficiary, or
	 
	(ii)	 	a period not extending beyond the
life expectancy of the designated Beneficiary,

	 	 	the amount required to be distributed for each calendar year
beginning with the distributions for the first distribution
calendar year, must be at least equal to the quotient
obtained by dividing the Participant’s benefit by the
applicable distribution period. For distribution calendar
years up to and including the distribution calendar year that
includes the Participant’s death, the required minimum
distribution amount is determined under the Uniform Lifetime
Tables promulgated by the Internal Revenue Service for the
Participant’s age as of his birthday in the relevant
distribution calendar year. If a Participant dies on or
after the Required Beginning Date, the distribution period
available for calculating the amount that must be distributed
during the distribution calendar year that includes the
Participant’s death is determined as if the Participant had
lived throughout the year. If the sole designated
Beneficiary of a Participant is the Participant’s surviving
spouse, for required minimum distributions during the
Participant’s lifetime, the applicable distribution period is
the longer of the distribution period determined in
accordance with the preceding three sentences or the joint
life expectancy of the Participant and spouse using the
Participant’s and spouse’s attained ages as of the
Participant’s and spouse’s birthdays in the distribution

66

 

	 	 	calendar year. The spouse is the sole designated Beneficiary
for purposes of determining the applicable distribution
period only if the spouse is the sole Beneficiary of the
Participant’s entire interest at all times during the
distribution calendar year.

	(g)	 	Life Expectancies. Life expectancies for
purposes of determining required minimum distributions must be
computed using the Single Life Table and the Joint and Last
Survivor Table promulgated by the Internal Revenue Service.
	 
	(h)	 	Minimum Distribution Incidental Benefit. If
distributions are made in accordance with this Article VII,
Section 6, the minimum distribution incidental benefit
requirement is satisfied.
	 
	(i)	 	Timing of Distributions. The minimum
distribution required for the Participant’s first distribution
calendar year must be made on or before the Participant’s
Required Beginning Date. The minimum distribution for other
calendar years, including the minimum distribution for the
distribution calendar year in which the Participant’s Required
Beginning Date occurs, must be made on or before December 31
of that calendar year.
	 
	(j)	 	Distribution to a Charitable Organization. If a
Participant selects as his Beneficiary a tax-exempt
organization qualified under Section 501(c)(3) of the Code,
any interest under the Plan payable to said tax-exempt
organization must be distributed no later than September 30 of
the calendar year following calendar year in which the
Participant dies.

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	(k)	 	Multiple Plans. If a Participant is a
Participant in more than one qualified retirement plan, the
plans in which the Participant participates are not permitted
to be aggregated for purposes of testing whether the minimum
distribution requirements are met. The distribution of the
benefit of the Participant under each plan must separately
meet the requirements.
	 
	(l)	 	Special Accounts. For purposes of this Plan, the
ESOP Account and the Non-ESOP Account for each Participant
will be aggregated for purposes of satisfying the minimum
distribution rules.

     7. A Participant otherwise entitled to a distribution from the Plan may
elect to retain or shall be deemed to retain said distribution in the Plan
until such time as the Participant shall direct the Plan to make said
distribution, provided that such distribution must be made not later than the
time specified in Article VII, Sections 4 and 6, above. Upon written notice
(or by any other method approved by Timken) from the Participant, such
distribution shall be made as soon as possible after the notice is received.

     8. The assets of the Trust to be distributed to a Participant or
Beneficiary shall include cash (or shares (or cash in lieu of fractional
shares), if the Participant or Beneficiary elects to receive shares)
attributable to dividends payable to shareholders of record as of the end of
the quarter with respect to which the calculation is being made.

     9. Distributions While In-Service. In-service distributions must be at
least $500 and shall be made, at the election of a Participant who is an
Employee, in the following circumstance(s):

	(a)	 	Over age 59 1⁄2.

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	 	 	The Plan Administrator, at the election of the Participant,
shall direct the Trustee to distribute to any Participant up
to his entire Vested Account balance after he has attained
age 59 1⁄2. The maximum number of over age 59 1⁄2
withdrawals permitted to a Participant in any Plan Year is
one.

	(1)	 	Age 59 1⁄2 withdrawals are
available from the following Accounts and will be
withdrawn from the Participant’s Accounts in the
following hierarchy with the exception that the
Participant may instead choose to have amounts taken
from his or her Non-ESOP and ESOP After-Tax Employee
Contribution Accounts first:

	(A)	 	Non-ESOP and ESOP
Rollover Accounts
	 
	(B)	 	Non-ESOP and ESOP
Employee Deferral Contribution Accounts
	 
	(C)	 	Non-ESOP and ESOP
401(k) Plus Contribution Accounts
	 
	(D)	 	Non-ESOP and ESOP
Stock Matching Contribution Accounts
	 
	(E)	 	Non-ESOP and ESOP
Company Matching Contribution Accounts
	 
	(F)	 	Non-ESOP and ESOP
Company Supplemental Contribution Accounts
	 
	(G)	 	Non-ESOP and ESOP
After-Tax Employee Contribution Accounts

69

 

	(2)	 	Withdrawals will be taken from the
investment funds on a pro-rata basis.

	 	 (b)	After-Tax Employee Contributions.

The Plan Administrator, at the election of the Participant,
shall direct the Trustee to distribute to any Participant up
to the entire balance of his Non-ESOP and ESOP After-Tax
Employee Contribution Accounts. The maximum number of such
distributions permitted to a Participant in any Plan Year is
one.
	 
	10.	 (a)	 Partial or total distributions in the case of hardship (in
the following hierarchical order of availability) of the
Participant’s Non-ESOP and ESOP After-Tax Contribution Accounts,
Non-ESOP and ESOP Rollover Accounts and Non-ESOP and ESOP Employee
Deferral Contribution Accounts may also be made to a Participant,
upon application. Any shares of Timken Stock held in any of these
Accounts which will comprise part of the distribution shall be
liquidated by the Trustee prior to the distribution to the
Participant, unless the Participant elects to receive the shares of
Timken Stock. The distribution will be drawn pro-rata from all the
available Investment Funds. If a Participant elects a withdrawal
prior to the date of his Retirement, termination of employment on
account of his Disability or termination of service with the Company,
such withdrawal will be made only if, under uniform rules and
regulations, and in conformance with procedures established by
Timken, the Trustee determines that the purpose of the withdrawal is
to meet immediate and

70

 

	 	 	heavy financial needs of the Participant, the amount of the
withdrawal does not exceed such financial need, and the
amount of the withdrawal is not reasonably available from
other resources of the Participant.
	 
	(b)	 	The determination of whether a Participant has an
immediate and heavy financial need will be made on the basis
of all relevant facts and circumstances. Financial needs
which will be deemed immediate and heavy financial need are
the purchase of a primary residence (excluding mortgage
payments) of the Participant, payment of post-secondary
educational tuition expenses, related educational fees and
room and board expenses for the Participant or his dependents,
unreimbursable health care expenses incurred by a Participant
or his dependents, and the need to prevent the eviction of the
Participant from his principal residence or foreclosure on the
mortgage of a Participant’s principal residence.
	 
	(c)	 	The determination of whether a distribution is
necessary to satisfy an immediate and heavy financial need
shall be made on the basis of all relevant facts and
circumstances. A distribution will be deemed to satisfy an
immediate and heavy financial need if it is not in excess of
the amount of the immediate and heavy financial need of the
Participant (grossed up to reflect the income taxes that will
be assessed on the distribution if the Participant so
requests), the Participant has obtained all distributions
(other than hardship distributions) and all available
nontaxable loans under all plans maintained by the Company,
the Participant has elected to receive cash dividends then
available on Timken Stock pursuant to Article

71

 

	 	 	XIX, Section 6, and the Participant agrees that all Salary
Reduction Contributions and all other Participant
contributions to all plans maintained by the Company will be
suspended until six (6) months after receipt of the hardship
distribution.
	 
	(d)	 	Such election may be made at any time, but not
more frequently than once every twelve months for reasons
other than the payment of post-secondary educational tuition
expenses, related educational fees and room and board
expenses. Elections for the payment of post-secondary
educational tuition expenses, related educational fees and
room and board expenses may be made as often as every calendar
quarter, and may be made in addition to a hardship withdrawal
for a non-tuition payment reason. All hardship withdrawal
elections shall be made by a Participant on written forms
supplied by the Trustee for that purpose. Such distributions
shall be processed immediately following completion of the
application procedures.

	11.	  (a)	 	Timken may transfer a Participant’s Account under the
Plan to another qualified defined contribution plan maintained by a
Controlled Group Member, when the Participant transfers employment
from an employee group covered by the Plan to an employee group not
so covered, provided that the other plan accepts such transfers.
The Plan Administrator may establish such nondiscriminatory
restrictions and rules applicable to such transfers as it may
determine to be necessary or desirable to maintain the qualified
status of the Plan (and any other plan sponsored by it or by a

72

 

	 	 	Controlled Group Member) under the Code; including, without
limitation, rules insuring that such transfers comply with
Sections 411(a) and 411(d)(6) of the Code and the regulations
thereunder.
	 
	(b)	 	When a Participant transfers employment from an
employee group not covered by the Plan to an employee group
covered by the Plan and has otherwise satisfied the
eligibility requirements of the Plan, Timken may transfer the
Participant’s Account balance under another qualified defined
contribution plan maintained by a Controlled Group Member
which authorizes such transfers to the Plan. The Plan
Administrator may establish such nondiscriminatory
restrictions and rules applicable to such transfers from the
Plan and transfers to the Plan as it may determine to be
necessary or desirable to maintain the qualified status of the
Plan and any other plan sponsored by it or by a Controlled
Group Member under the Code; including, without limitation,
rules insuring that such transfers comply with Section 411(a)
and 411(d)(6) of the Code and the regulations thereunder. In
no event shall any amount be transferred to the Trust from a
defined benefit pension plan or a money purchase pension plan
of the Controlled Group.
	 
	(c)	 	If any portion of a Participant’s benefit is
transferred in a distribution calendar year with respect to
that Participant in order to satisfy the minimum distribution
rules in Article VII, Section 6, the transferor plan must
determine the amount of the required minimum distribution with
respect to that Participant for the calendar year of the
transfer using the

73

 

	 	 	Participant’s benefit under the transferor plan before the
transfer. If any portion of a Participant’s benefit is
transferred in the Participant’s second distribution calendar
year, but on or before the Participant’s required beginning
date, in order to satisfy Article VII, Section 6, the
transferor plan must determine the amount of the minimum
distribution requirement for the Participant’s first
distribution calendar year based on the Participant’s benefit
under the transferor plan before the transfer. The
transferor plan may satisfy the minimum distribution
requirement for the calendar year of the transfer (and the
prior year if applicable) by segregating the amount which
must be distributed from the Participant’s benefit and not
transferring that amount. Such amount may be retained by the
transferor plan and must be distributed on or before the date
required under Article VII, Section 6, of the Plan.

     12. If overpayments or underpayments of benefits under the Plan have been
made to a Participant or Beneficiary, the amount of benefits will be
appropriately adjusted.

     13. Employee Deferral Contributions and allocable income are not
distributable to a Participant or his Beneficiary or Beneficiaries, in
accordance with such Participant’s or Beneficiary’s or Beneficiaries’ election,
earlier than upon Retirement, severance from employment, death, or Disability
other than upon the occurrence of one or more of the following events:

	(a)	 	Termination of the Plan without the establishment
of another Defined Contribution Plan other than an employee
stock ownership plan (as

74

 

	 	 	defined in Section 4975(e) or 409 of the Code), or a
simplified employee pension plan (as defined in Section
408(k) of the Code).
	 
	(b)	 	For occurrences prior to January 1, 2002, the
transfer by the Company, if a corporation, to an unrelated
corporation of substantially all of the assets (within the
meaning of Section 409(d)(2) of the Code) used in a trade or
business of such corporation if the Company continues to
maintain this Plan after the disposition, but only with
respect to Employees who continue employment with the
corporation acquiring such assets.
	 
	(c)	 	For occurrences prior to January 1, 2002, the
transfer by the Company to an unrelated entity of such
corporation’s interest in a subsidiary (within the meaning of
Section 409(d)(3) of the Code) if the Company continues to
maintain this Plan, but only with respect to Employees who
continue employment with such subsidiary.
	 
	(d)	 	A distribution made pursuant to an event
described in subsection (a), (b), or (c) above shall be made
in the form of a lump sum.
	 
	(e)	 	Distribution of Employee Deferral Contributions
may be made to a Participant in the event of hardship pursuant
to a showing of immediate and heavy financial need, as
described in Article VII, Section 9, of the Plan.

     14. Any distribution fees charged will be paid by the Participant and/or
Beneficiary from funds in the Trust.

75

 

     ARTICLE VIII — Equity Determination

     The provisions of this Article VIII shall be effective only for Plan Years
in which the Plan fails to meet the requirements of Sections 401(k)(12) and
401(m)(11) of the Code.

     1. Timken may amend or revoke the Employee Deferral Contribution election
or the After-Tax Employee Contribution election of any Participant at any time,
if Timken determines that such revocation or amendment is necessary to insure
that the annual addition to a Participant’s Account for any Plan Year will not
exceed the limitations of Article IV, Section 6, or to insure that the
discrimination tests of Section 401(k) of the Code are met for such Plan Year.
The discrimination tests shall be (1) that the Employees eligible to benefit
under this Plan shall satisfy the nondiscrimination provisions of Section
410(b)(1) of the Code and (2) that the actual deferral percentage for Highly
Compensated Employees for such Plan Year bears a relationship to the actual
deferral percentage for all other eligible Employees for the preceding Plan
Year which meets either of the following tests:

	(a)	 	the actual deferral percentage for the group of
Highly Compensated Employees is not more than the actual
deferral percentage of all other eligible Employees multiplied
by 1.25, or
	 
	(b)	 	the excess of the actual deferral percentage for
the group of Highly Compensated Employees over that of all
other eligible Employees is not more than two (2) percentage
points, and the actual deferral percentage for the group of
Highly Compensated Employees is not more than the actual
deferral percentage of all other eligible Employees multiplied
by two (2).

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     For purposes of this Section, the actual deferral percentage for a
specified group of Employees for a Plan Year shall be the average of the ratios
(calculated separately for each Employee in such group) of:

	(a)	 	the amount of Employee Deferral Contributions
actually paid to the Trust on behalf of each such Employee for
such Plan Year (excluding any Catch-Up Employee Deferral
Contributions), as well as any Company Matching Contributions,
Stock Matching Contributions, 401(k) Plus Contributions, Core
Contributions, and any Company Supplemental Contributions that
are treated by Timken as elective contributions to the Plan,
to
	 
	(b)	 	the Employee’s compensation (as defined in
Section 414(s) of the Code) for such Plan Year.

     For purposes of determining whether the Plan satisfies the actual deferral
percentage test, all Employee Deferral Contributions (excluding any Catch-Up
Employee Deferral Contributions), as well as any Company Matching
Contributions, Stock Matching Contributions, 401(k) Plus Contributions, Core
Contributions, and any Company Supplemental Contributions treated by Timken as
elective contributions that are made under two or more plans that are
aggregated for the purpose of satisfying Sections 401(a)(4) of the Code and
410(b) (other than Section 410(b)(2)(A)(ii) of the Code), are to be treated as
made under a single plan. If two or more plans are permissively aggregated for
the purpose of satisfying Section 401(k) of the Code, the aggregated plans must
also satisfy Sections 401(a)(4) and 410(b) of the Code as though they were a
single plan. In calculating the actual deferral percentage, the actual
deferral ratio of a Highly Compensated Employee will be determined by treating
all plans subject to Section 401(k)

77

 

of the Code under which the Highly Compensated Employee is eligible (other
than those that may not be permissively aggregated) as a single plan.

     2. Timken may amend or revoke the Employee Deferral Contributions election
and After-Tax Employee Contributions election of any Participant at any time,
if Timken determines that such revocation or amendment is necessary to insure
that the discrimination tests of Section 401(m) of the Code are met for such
Plan Year. The discrimination tests shall be that the actual contribution
percentage for Highly Compensated Employees for such Plan Year bears a
relationship to the actual contribution percentage for all other eligible
Employees for the preceding Plan Year which meets either of the following
tests:

	(a)	 	the actual contribution percentage for the group
of Highly Compensated Employees is not more than the actual
contribution percentage of all other eligible Employees
multiplied by 1.25, or
	 
	(b)	 	the excess of the actual contribution percentage
for the group of Highly Compensated Employees over that of all
other eligible Employees is not more than two (2) percentage
points, and the actual contribution percentage for the group
of Highly Compensated Employees is not more than the actual
contribution percentage of all other eligible Employees
multiplied by two (2).

     For purposes of this Section, the actual contribution percentage for a
specified group of Employees for a Plan Year shall be the average of the ratios
(calculated separately for each Employee in such group) of:

	(a)	 	the amount of Company Matching Contributions,
Stock Matching Contributions, 401(k) Plus Contributions, Core
Contributions, and

78

 

	 	 	Company Supplemental Contributions actually paid to the Trust
on behalf of each such Employee for such Plan Year, as well
as any Employee Deferral Contributions (excluding any
Catch-Up Employee Deferral Contributions) and any After-Tax
Employee Contributions, that are treated by Timken as
matching contributions to the Plan, to
	 
	(b)	 	the Employees’ compensation (as defined in
Section 414(s) of the Code) for such Plan Year.

     For purposes of determining whether the Plan satisfies the actual
contribution percentage test of Section 401(m) of the Code, all Matching
Contributions that are made under two or more plans that are aggregated for
purposes of satisfying Sections 401(a)(4) and 410(b) of the Code (other than
Section 410(b)(2)(A)(ii) of the Code), are to be treated as made under a single
plan. If two or more plans are permissively aggregated for purposes of
satisfying Section 401(m) of the Code, the aggregated plans must also satisfy
Sections 401(a)(4) and 410(b) of the Code as though they were a single plan.
In calculating the actual contribution percentage, the actual contribution
ratio of a Highly Compensated Employee will be determined by treating all plans
subject to Section 401(m) of the Code under which the Highly Compensated
Employee is eligible (other than those that may not be permissively aggregated)
as a single plan.

     3. In the event that the Plan should fail to meet the test set forth in
Article VIII, Section 1, the amount of excess contributions for a Highly
Compensated Employee for a Plan Year is to be determined by the following
leveling methods:

	(a)	 	the total dollar amount of excess aggregate
contributions is determined by reducing contributions on
behalf of Highly Compensated Employees in the order of their
deferral percentages, beginning with the highest of such

79

 

	 	 	percentages and continuing until the actual deferral
percentage test is satisfied;
	 
	(b)	 	the amount determined in (a) above is reallocated
beginning with the Highly Compensated Employee with the
highest dollar amount of contributions taken into account in
performing the actual deferral percentage test to equal the
dollar amount of the Highly Compensated Employee with the next
highest dollar amount of such contributions and continuing in
succeeding order of the Highly Compensated Employees until all
excess aggregate contributions are accounted for as determined
in (a) above;
	 
	(c)	 	each Highly Compensated Employee will receive a
distribution of his portion of excess aggregate contributions
determined in step (b) above.

     For each Highly Compensated Employee, the amount of excess contributions
is equal to the total Employee Deferral Contributions (excluding any Catch-Up
Employee Deferral Contributions), plus Company Matching Contributions, Stock
Matching Contributions, 401(k) Plus Contributions, Core Contributions, and
Company Supplemental Contributions treated as elective contributions, on behalf
of the Participant.

     Excess contributions (and income allocable thereto) are distributed in
accordance with this Article VIII, Section 3, only if such excess contributions
(and allocable income) are designated by Timken as a distribution of excess
contributions (and income) and are distributed to the appropriate Highly
Compensated Employees after the close of the Plan Year in which the excess
contributions occurred and within twelve months after the close of such Plan
Year.

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     A corrective distribution of excess contributions (and income) is
includable in gross income of the Participant on the earliest dates any
Employee Deferral Contributions by the Participant during the Plan Year would
have been received by the Participant had he originally elected to receive the
amounts in cash, or, if distributed more than two and a half months after the
Plan Year for which such contributions were made, in the taxable year of the
Participant in which distributed.

     The amount of excess contributions to be distributed under this Article
VIII, Section 3, with respect to a Participant for a Plan Year shall be reduced
by any excess Employee Deferral Contribution elections and After-Tax Employee
Contribution elections under Article IV, Section 6, previously distributed to
such Participant for the Participant’s taxable year ending with or within such
Plan Year. The amount of excess Employee Deferral Contributions elections that
may be distributed under Article IV, Section 6, with respect to a Participant
for a calendar year shall be reduced by any excess contributions previously
distributed with respect to such Participant for the Plan Year beginning with
or within such calendar year. In the event of a reduction under this
paragraph, the amount of excess contributions includable in the gross income of
the Participant and the amount of excess contributions reported by Timken as
includable in the gross income of the Participant shall be reduced by the
amount of the reduction under this paragraph.

     4. In the event that the Plan should fail to meet the test set forth in
Article VIII, Section 2, the amount of excess aggregate contributions for a
Highly Compensated Employee for a Plan Year is to be determined by the
following leveling methods:

	(a)	 	the total dollar amount of excess aggregate
contributions is determined by reducing contributions on
behalf of Highly Compensated Employees in

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	 	 	the order of their contribution percentages, beginning with
the highest of such percentages and continuing until the
actual contribution percentage test is satisfied;
	 
	(b)	 	the amount determined in (a) above is reallocated
beginning with the Highly Compensated Employee with the
highest dollar amount of contributions taken into account in
performing the actual contribution percentage test to equal
the dollar amount of the Highly Compensated Employee with the
next highest dollar amount of such contributions and
continuing in succeeding order of the Highly Compensated
Employees until all excess aggregate contributions are
accounted for as determined in (a) above;
	 
	(c)	 	each Highly Compensated Employee will receive a
distribution of his portion of excess aggregate contributions
determined in step (b) above.

The amount of excess aggregate contributions with respect to an Employee for a
Plan Year shall be determined only after first determining the excess
contributions that are treated as Participant contributions for the Plan Year
due to recharacterization. For each Highly Compensated Employee, the amount of
excess aggregate contributions is equal to the total Company Matching
Contributions, Stock Matching Contributions, 401(k) Plus Contributions, Core
Contributions, and Company Supplemental Contributions, plus Employee Deferral
Contributions (excluding any Catch-Up Employee Deferral Contributions) and
After-Tax Employee Contributions treated as matching contributions, on behalf
of the Participant.

     Excess aggregate contributions (and income allocable thereto) are
distributed in accordance with this Article VIII, Section 4, only if such
excess aggregate contributions (and

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allocable income) are designated by Timken as a distribution of excess
aggregate contributions (and income) and are distributed to appropriate Highly
Compensated Employees after the close of the Plan Year in which the excess
aggregate contributions occurred and within twelve months after the close of
the following Plan Year.

     A corrective distribution of excess contributions (and income) is
includable for the taxable year of the Participant ending with or within the
Plan Year for which the excess aggregate contributions were made or, if
distributed more than two and a half months after the Plan Year for which such
excess aggregate contributions were made, in the taxable year of the
Participant in which distributed.

     5. For Plan Years beginning prior to December 31, 2002, if a multiple use
of the alternative limitations described in Article VIII, Sections 1 and 2,
occurs with respect to the Plan, such multiple use shall be prevented as to any
Highly Compensated Employee according to the provisions of Section
1.401(m)-2(b) of the Treasury Regulations. Such multiple use shall be
corrected by reducing the dollar amount of contributions by and on behalf of
all Highly Compensated Employees. The amount of the reduction to the dollar
amount of such contributions of all Highly Compensated Employees shall be
calculated in the manner described in Article VIII, Section 4. The required
reduction shall be treated as an excess aggregate contribution under the Plan.

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     ARTICLE IX — Loans from the Trust

     1. A Participant or Alternate Payee may obtain a loan from the Trust upon
proper application to the Trust pursuant to procedures established by the Plan
Administrator. The nature and amount of the loan must conform to the following
rules and limits:

	(a)	 	Loan proceeds will be withdrawn pro-rata from the
following Accounts:

	(1)	 	Non-ESOP and ESOP Employee Deferral
Accounts
	 
	(2)	 	Non-ESOP and ESOP Vested 401(k) Plus
Contribution Accounts
	 
	(3)	 	Non-ESOP and ESOP Stock Matching
Contribution Accounts
	 
	(4)	 	Non-ESOP and ESOP Company Matching
Contribution Accounts
	 
	(5)	 	Non-ESOP and ESOP Company
Supplemental Contribution Accounts
	 
	(6)	 	Non-ESOP and ESOP Rollover Accounts
	 
	(7)	 	Non-ESOP and ESOP Vested Core
Contribution Accounts
	 
	(8)	 	Non-ESOP and ESOP After-Tax Employee Contribution Accounts

	(b)	 	The minimum loan amount is $1,000;
	 
	(c)	 	The maximum loan amount is 50 percent of the
Participant’s Vested Accrued Benefit provided, that no loan
may be greater than $50,000, reduced by the excess (if any) of
(A) the highest outstanding loan balance from the Plan during
the one year period ending on the day before the date on which
such loan is made over (B) the outstanding loan balance from
the Plan on the date on which such loan is made. The Trustee
will accept only the Participant’s Vested Accrued Benefit as
collateral for loans.
	 
	(d)	 	The term of the loan cannot exceed five (5)
years, except that the term of a loan made for the purpose of
purchasing a primary residence cannot

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	 	 	exceed 30 years. The term of a loan that is not for the
purchase of a primary residence may be extended beyond five
(5) years for a Participant on a Leave of Absence from the
Company or a Controlled Group Member, which is due to
military service in the United States Armed Forces, with the
term of extension not to exceed the length of such Leave of
Absence.
	 
	(e)	 	A Participant may have only one loan from this
Plan in effect at any one time and may apply for a subsequent
loan immediately after his previous loan is paid in full.
	 
	(f)	 	Timken will establish the rate of interest to be
charged on all loan balances. This rate of interest will be
one percent (1%) in excess of the prime rate as published in
the Wall Street Journal on the first business day of the month
in which the loan is granted. A Participant on a Leave of
Absence from the Company or a Controlled Group Member, which
is due to military service in the United States Armed Forces,
may be entitled to the interest rate reduction provided in the
Soldiers’ and Sailors’ Civil Relief Act of 1940.
	 
	(g)	 	If the Participant is an active Employee, the
loan shall be repaid by the Participant through payroll
deduction as established by the loan agreement. If the
borrower is not an active Employee, the borrower and Timken
shall agree to a repayment schedule which shall be
incorporated in the loan agreement.
	 
	(h)	 	The loan may be repaid in full at a date earlier
than provided in the loan agreement with no penalty.

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	(i)	 	Any loan fees charged will be paid by the
Participant from funds other than those in the Trust.
	 
	(j)	 	The loan amount will be taken on a pro-rata basis
from the Participant’s Vested Accrued Benefit in all
Investment Funds at the time of the loan and on a pro-rata
basis from Company and eligible Participant contributions at
the time of the loan.
	 
	(k)	 	Loan repayments will be redeposited into the
Participant’s current Investment Funds and contributions,
using the current ratio, except for amounts which must be
reinvested in Timken Stock. No repayments will be deposited
in ESOP Accounts.
	 
	(l)	 	The Trustee will declare a loan to be in default
when the loan is in arrears of repayment for more than 90
days. The Trustee may take steps to preserve Plan assets, if
necessary, in the event of such default. Once default has
been established, the amount of the loan in default (unpaid
principal and the interest accrued thereon) shall be treated
as a distribution from the Plan in the Plan Year in which the
default occurs. In the event of default, foreclosure on the
note and attachment of security will not occur until a
distributable event from the Trust.
	 
	(m)	 	The Plan Administrator may agree to a suspension
of loan payments for up to 12 months for a Participant who is
on a Leave of Absence without pay. During the suspension
period interest shall continue to accrue on the outstanding
loan balance. At the expiration of the suspension period all

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	 	 	outstanding loan payments and accrued interest thereon shall
be due unless otherwise agreed upon by the Plan
Administrator.
	 
	(n)	 	The proceeds of the loan cannot be applied toward
the purchase of any securities.
	 
	(o)	 	Loan repayments will be suspended under this Plan
as permitted under Section 414(u) of the Code.
	 
	(p)	 	A Participant is not required to obtain spousal
consent in order to take out a loan under the Plan.

     2. Loans may be applied for on any business day and will be processed as
soon as practicable. Any loan whose term extends beyond five (5) years must be
on a written application form available from and returned to the Trustee.

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     ARTICLE X — Voting of Shares Held by the Trustee

     Each Participant, each Beneficiary who has succeeded to the interest of a
Participant and each Alternate Payee (“Eligible Participants and
Beneficiaries”) in this Plan shall have the authority to direct the exercise of
voting rights as to whole shares of Timken Stock held for the benefit of the
Eligible Participant or Beneficiary as of the most current Valuation Date
available preceding the record date for the shareholders’ meeting. Timken
shall furnish Timken’s Annual Report, Notice of Annual Meeting, Proxy
Statement, Proxy Card and other shareholder information to each Eligible
Participant and Beneficiary and shall solicit each Eligible Participant’s and
Beneficiary’s vote; Timken reserves the option to retain the Trustee or other
service provider to perform these services. All other shares of Timken Stock
held in the Trust, including shares not voted by Eligible Participants or
Beneficiaries or not yet allocated to Eligible Participants or Beneficiaries,
are to be voted by the Trustee in the same ratio for the election of Directors
and for or against each issue as the applicable votes directed by Eligible
Participants and Beneficiaries with respect to whole shares of Timken Stock.

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     ARTICLE XI — Merger, Consolidation or Transfer

     In case of any merger or consolidation with, or transfer of assets or
liabilities to, any other plan, the benefits which would be paid to each
Participant in this Plan (if this Plan terminated immediately after the merger,
consolidation, or transfer) shall be equal to or greater than the benefit each
Participant would have been entitled to receive immediately before the merger,
consolidation or transfer (if this Plan had then terminated).

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     ARTICLE XII — Conditions to the Effectiveness and Continuance of this Plan

     1. Timken will not be required to make any contributions to the Trust
required to be established under this Plan or to place any part of the Plan
into operation, unless and until it shall have received from the Internal
Revenue Service a currently effective ruling or rulings, satisfactory to
Timken, that such Trust is a qualified Trust under Sections 401(a), 401(k) and
401(m) of the Code, and exempt from Federal income tax under Section 501(a) of
the Code. Continued contributions to the Trust and operation of the Plan shall
be conditioned upon retaining such favorable ruling or rulings from the
Internal Revenue Service.

	2. (a)	 	 In the event the Plan fails to qualify under the
applicable provisions of the Code, initially or as amended, Timken’s
current contributions shall be returned to Timken. Contributions to
the Trust by Timken are conditioned on their deductibility under
Section 404(a) of the Code. If any deduction is disallowed for all
or part of such contributions, the contributions for which the
deduction is disallowed shall, upon proper notice to the Trustee, be
returned to Timken.
	 
	(b)	 	As provided in ERISA section 403(c)(2), the
actual amount of a contribution made by Timken (or the current
value of the contribution if a net loss has occurred) may
revert to Timken if:

	(1)	 	such contribution is made by reason
of a mistake of fact;
	 
	(2)	 	initial qualification of the Plan
under Code section 401(a) is not received and a request
for such qualification is made within the time
prescribed under Code section 401(b) (the existence of
and

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	 	 	contributions under the Plan are hereby conditioned
upon such qualification); or
	 
	(3)	 	such contribution is not deductible
under Code section 404 (such contributions are hereby
conditioned upon such deductibility) in the taxable year
of the Employer for which the contribution is made.

	 	 	The reversion to Timken must be made (if at all) within one
year of the mistaken payment of the contribution, the date of
denial of qualification, or the date of disallowance of
deduction, as the case may be. A Participant shall have no
rights under the Plan with respect to such reversion.

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          ARTICLE XIII —  Amendment or Termination of Plan

	1. (a)	 	 Timken shall have the right to amend the Plan and Trust
at any time to the extent permitted under the Code and ERISA.
Timken may adopt any change by action of its Board of Directors in
accordance with its normal procedures.
	 
	(b)	 	The Committee, if acting as Plan Administrator in
accordance with Article XVII, shall have the authority to
adopt Plan amendments which have no substantial adverse
financial impact upon the Company, Timken or the Plan. The
Committee may adopt any such amendment in the manner specified
in Article XIII, Section 1(c).
	 
	(c)	 	Any amendment must be (1) set forth in writing,
and (2) signed and dated by an officer of Timken, or in the
case of an amendment adopted by the Committee, at least one of
its members.
	 
	(d)	 	No amendment affecting the rights or duties of
the Trustee shall be effective without the written consent of
the Trustee.
	 
	(e)	 	No amendment to the Plan shall be effective to
the extent that it has the effect of decreasing a
Participant’s accrued benefit in violation of Code 411(d)(6).
Notwithstanding the preceding sentence, a Participant’s
Account balance may be reduced to the extent permitted under
Section 412(c)(8) of the Code. For purposes of this
paragraph, a Plan amendment which has the effect of decreasing
a Participant’s Account balance or eliminating an optional
form of benefit, with respect to benefits

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	 	 	attributable to service before the amendment, shall be
treated as reducing an accrued benefit.
	 
	(f)	 	No amendment shall have the effect of vesting in
Timken any interest in any property held subject to the terms
of the Plan.
	 
	(g)	 	No amendment shall cause or permit any property
held subject to the terms of the Plan to be diverted to
purposes other than the exclusive benefit of Participants and
their Beneficiaries.

     2. Timken expects to continue this Plan indefinitely, but reserves the
right to terminate the Plan. The Board of Directors of Timken may authorize
and instruct any officer or delegate of an officer, except the Administrative
Delegate, to terminate the Plan. Any such authorization of termination shall
be in writing. Upon delivery of written notice from Timken to the Trustee, the
Plan and Trust agreement shall be deemed to have been terminated or amended in
the manner set forth therein, and all Participants and all persons claiming any
interest hereunder shall be bound thereby; provided that no termination:

	(a)	 	shall have the effect of vesting in Timken any
interest in any property held subject to the terms of the
Plan;
	 
	(b)	 	shall cause or permit any property held subject
to the terms of the Plan to be diverted to purposes other than
the exclusive benefit of Participants and their Beneficiaries,
including contributions to the Plan which are intended to
bridge any differences between the price at which Timken Stock
is bought and/or sold on the open market and the price at
which it is credited to a Participant’s Account;

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	(c)	 	shall reduce the interest of a Participant in the
Trust property as of that time or his right to enjoy such
interest without the written consent of the Participant;
	 
	(d)	 	shall increase the duties or liabilities of the
Trustee without its written consent.

     3. Without terminating this Plan, Timken may, at its sole discretion and
at any time, reduce or suspend its contributions to this Plan.

     4. In the event of termination or partial termination of the Plan or a
complete discontinuance of contributions, the Participants, Participants who
have terminated employment on account of Retirement, former Participants and
Beneficiaries of deceased Participants, and Alternate Payees who are affected
by such termination, partial termination or complete discontinuance of
contributions shall have a fully Vested interest in the amounts credited to
their respective Accounts at the time of such termination, partial termination
or discontinuance.

     5. Upon the termination of the Plan and Trust, after proportional
adjustment of the Accounts to reflect losses or profits and reallocations to
the date of termination, each Participant, Participant who has terminated
employment on account of Retirement, former Participant and Beneficiary of a
deceased Participant, and Alternate Payees shall be entitled to receive any
Vested amounts then credited to his Account in the Trust.

     6. The Board of Directors of Timken may delegate its duties and
responsibilities with respect to the Plan to such officer or officers (or their
designees, except the Administrative Delegate) as the Board of Directors may
determine and may allocate to and among any one or more of such officers such
duties and responsibilities, including the power to amend the Plan in any
manner or suspend or modify the level of Company Contributions to the Plan.

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     ARTICLE XIV — Nonalienation of Participants’ Interests

     1. No right to the monies contributed by a Participant or Timken under
this Plan, nor in any shares held by the Trustee, nor any dividends thereon,
shall be subject in any manner to alienation, assignment, encumbrance, pledge,
sale or transfer of any kind prior to being distributed to the Participant as
provided in the Plan. If at any time prior thereto a Participant shall attempt
to alienate, assign, encumber, pledge, sell or otherwise transfer his right to
any shares or monies held by the Trustee, such attempted alienation,
assignment, encumbrance, pledge, sale or transfer shall be of no effect. To
the extent permitted by law, the interest of a Participant shall also be
protected from involuntary attachment, garnishment or levy. In the event of an
attempted attachment, garnishment or levy of the Participant’s interest in the
Trust, the Participant will be promptly notified; but the Trustee shall have no
obligation to resist such action. In no event shall any person be entitled to
the distribution of shares or the payment of monies held by the Trustee prior
to the time when distribution is to be made to the Participant as provided in
the Plan.

     2. Section 1 of this Article XIV shall not apply if the attachment or
garnishment of the Participant’s interest in the Trust is to be made pursuant
to a qualified domestic relations order, as determined under the procedures of
this Plan. A domestic relations order is a judgment, decree or order that
relates to the provision of child support, alimony payments or marital property
rights to a spouse, former spouse, child or other dependent of a Participant
and is made pursuant to a state domestic relations law. A domestic relations
order is qualified if it creates or recognizes the existence of an Alternate
Payee’s right to, or assigns to an Alternate Payee the right to, receive all or
a portion of the benefits payable to a Participant under the Plan, specifies
(a) the name and last known mailing address of the Participant and of each
Alternate Payee

95

 

covered under the order, (b) the amount or percentage of the Participant’s
benefits to be paid to any Alternate Payee, or the manner in which such amount
or percentage is to be determined, (c) the number of payments or the period to
which the order applies, and (d) each plan to which the order relates. Such
order cannot require the Plan to provide any type or form of benefits, or any
option, not otherwise provided under the Plan; it cannot require the Plan to
provide increased benefits (determined on the basis of actuarial value), and it
cannot require the payment of benefits to an Alternate Payee which are required
to be paid to another Alternate Payee under another order previously determined
to be a qualified domestic relations order.

     3. Each Alternate Payee under a qualified domestic relations order shall
have the right from time to time to file with Timken a written request
regarding the time and manner of payment of the Alternate Payee’s interest in
the Plan pursuant to such qualified domestic relations order. Provided such
qualified domestic relations order complies with the Code, such request shall
be considered by Timken and shall be acted upon in accordance with the terms of
such qualified domestic relations order. The options available to an Alternate
Payee shall be those set forth in Article VI, Section 2, and Article VII,
Sections 4 and 5, unless otherwise modified by the qualified domestic relations
order, provided that said qualified domestic relations order cannot enlarge the
options available under Article VI, Section 2, and Article VII, Sections 4 and
5. If an Alternate Payee so desires, distribution of an Alternate Payee’s
interest in the Trust may be distributed to such Alternate Payee, as soon as
such qualified domestic relations order is approved by Timken and by the court.

     A separate Account shall be established for an Alternate Payee entitled to
any portion of a Participant’s Account under a qualified domestic relations
order as of the date and in accordance with the directions specified in the
qualified domestic relations order. In addition, a

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separate Account may be established during the period of time the Plan
Administrator, a court of competent jurisdiction or other appropriate person is
determining whether a domestic relations order qualifies as a qualified
domestic relations order. Such a separate Account shall be valued and
accounted for in the same manner as any other Account. Except to the extent
required by law, an Alternate Payee, on whose behalf a separate Account has
been established, shall not be entitled to borrow from such Account. If a
qualified domestic relations order specifies that the Alternate Payee is
entitled to any portion of the Account of a Participant who has an outstanding
loan balance, all outstanding loans shall generally continue to be held in the
Participant’s Account and shall not be divided between the Participant’s and
Alternate Payee’s Account. Where a separate Account has been established on
behalf of an Alternate Payee and has not yet been distributed, the Alternate
Payee may direct the investment of such Account in the same manner as if he or
she were a Participant.

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     ARTICLE XV — Tender Offers

     1. In the event a tender offer (as determined by the Board of Directors of
Timken) for shares of Timken Stock is commenced, then, notwithstanding any
other provision of the Plan or the Trust Agreement, each Participant, each
Beneficiary who has succeeded to the interest of a Participant and each
Alternate Payee (“Affected Participants and Beneficiaries”) shall, in
accordance with the following provisions of this Article XV, have the right to
decide if Timken Stock credited to his Account shall be tendered.

     2. In the event of a tender offer described in Section 1 of this Article
XV, Timken shall cause to be sent to each Affected Participant and Beneficiary
who at any time during the effective period of the tender offer has any Timken
Stock credited to his Account all information pertinent to such tender offer,
including all the terms and conditions thereof, together with written material
pursuant to which the Affected Participant and Beneficiary may direct the
Trustee to tender or sell pursuant to the tender offer all or part of the
Timken Stock credited to his Account. Affected Participants and Beneficiaries
also shall have the right, to the extent the terms of the tender offer so
permit, to direct the withdrawal of such shares from the tender. The Trustee
shall tender or sell only those shares of Timken Stock as to which valid and
timely directions to tender or sell are received and not validly and timely
revoked, and all other shares of Timken Stock held under the Plan shall
continue to be held by the Trustee. If, in the course of a tender offer
described in Section 1 of this Article XV, an issue shall arise on which
Affected Participants and Beneficiaries are required to have an opportunity to
alter their circumstances, Timken shall solicit the directions of such Affected
Participants and Beneficiaries with respect to each such issue and act in
response to such direction. The Trustee shall adopt a deadline, after which
directions to tender (or to withdraw from tender) Timken Stock will not be
accepted,

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sufficiently in advance of any applicable deadline under the terms of the
tender offer to allow the Trustee to implement directions received from
Affected Participants and Beneficiaries.

     3. To the extent that a tender offer described in Section 1 of this
Article XV is for cash, proceeds from the sale of any shares of Timken Stock
pursuant to such offer shall be held by the Trustee in an interest bearing
account or in short-term government bonds acquired by the Trustee upon the
receipt of any such cash proceeds. To the extent that a tender offer described
in Section 1 of this Article XV is for property other than cash, property
received by the Trustee from the sale of any shares of Timken Stock pursuant to
such offer shall be held by the Trustee in a general Investment Fund
established by the Trustee upon the receipt of any such property.

     4. Any decision by an Affected Participant or Beneficiary to tender (or
not tender) or to sell (or not sell), and any other direction by an Affected
Participant or Beneficiary, pursuant to this Article XV shall constitute an
exercise of control by such Affected Participant or Beneficiary over the assets
allocated to his Account within the meaning of Section 404(c) of ERISA.

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     ARTICLE XVI — Top-Heavy Provisions

     1. Definitions. For the purposes of this Article XVI, the following
definitions shall apply:

	(a)	 	“Key Employee” means an Employee or former
Employee who at any time during the Plan Year containing the
Determination Date (or during the four preceding Plan Years
for Plan Years commencing prior to December 31, 2002) is:

	(1)	 	an officer of the Company having an
annual compensation greater than 50 percent of the
amount in effect under Section 415(b)(1)(A) of the Code
for any such Plan Year ($160,000 effective December 31,
2003) adjusted under Section 415(d) of the Code;
	 
	(2)	 	for Plan Years commencing prior to
December 31, 2002, an owner (or considered the owner
within the meaning of Section 318 of the Code) of one of
the largest interests in the Company, if such
individual’s annual compensation exceeds 100% of the
limitation in effect under Section 415(c)(1)(A) of the
Code;
	 
	(3)	 	a five percent (5%) owner of the
Company; or
	 
	(4)	 	a one percent (1%) owner of the
Company who has an annual compensation above $150,000.

	 	 	For purposes of determining the number of officers taken into
account under clause (1) above, Employees described in Section
414(q)(8) of the Code will be excluded. For purposes of clause (2)
above, if two Employees have the same interest in the Company or
any affiliated or subsidiary Company, the Employee

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	 	 	having greater annual compensation from the Company or any
affiliated or subsidiary Company shall be treated as having a
larger interest. “Key Employee” shall also include such Employee’s
Beneficiary in the event of his death.
	 
	 	 	     The definition of Key Employee shall be interpreted in
accordance with Section 416(i) of the Code and the rules and
regulations promulgated thereunder. Any Employee who does not meet
the requirement of this definition shall be considered a non-Key
Employee.

	(b)	 	“Determination Date” means the last day of the
preceding Plan Year.

     2. Top-Heavy Determination. This Plan shall be top-heavy for any Plan
Year if, as of the Determination Date, the aggregate of the Accounts of Key
Employees under the Plan exceeds 60 percent of the aggregate of the Accounts of
all Employees under the Plan. For purposes of this determination, the
following rules shall apply:

	(a)	 	Employees shall include former Employees,
Beneficiaries and former Beneficiaries who have a benefit
greater than zero on the Determination Date.
	 
	(b)	 	The amount of the Account of any Employee shall
be increased by the aggregate distributions made with respect
to such Employee within the 5-year period ending on the
Determination Date.
	 
	(c)	 	The Account of any Employee who is not a Key
Employee as of the Determination Date but who was a Key
Employee during any prior Plan Year shall be disregarded.

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	(d)	 	The Account of any Employee who has not received
any compensation from the Company during the 5-year period
ending on the Determination Date shall not be taken into
account.
	 
	(e)	 	If the Company maintains other plans which are
qualified under Section 401 of the Code, the top-heavy
determination described above shall be made by aggregating the
Accounts under this Plan with the accounts or the present
values of the cumulative accrued benefits under (i) any such
other plan (including plans terminated in the past 5 years) in
which a Key Employee is a participant and (ii) any such other
plan (including plans terminated in the past 5 years) which
enables a plan in which a Key Employee is a participant to
meet the requirements of Section 401(a)(4) or Section 410 of
the Code. Timken may also aggregate any such other plans not
required to be aggregated, provided the resulting group of
plans, taken as a whole, continue to meet the requirements of
Sections 401(a)(4) and 410 of the Code.
	 
	(f)	 	The Accrued Benefit of any Employee (other than a
Key Employee) shall be determined by the method used for
accrual purposes for all plans of Timken.
	 
	(g)	 	The top-heavy determination under this Paragraph
shall be made in accordance with Section 416 of the Code and
the rules and regulations promulgated thereunder.

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     3. Top-Heavy Requirements. If the Plan is deemed to be top heavy under
Paragraph 2 then, notwithstanding any other provision of the Plan to the
contrary, the following shall apply with respect to each Plan Year in which the
Plan is top-heavy:

	(a)	 	Minimum Contributions. The Company Contributions
for each Participant who is not a Key Employee shall not be
less than three percent (3%) of such Participant’s
compensation or the largest percentage of the Company
Contributions of the Key Employee’s compensation allocated on
behalf of any Key Employee for that year, provided if the
highest rate allocated to a Key Employee is less than three
percent (3%), amounts contributed as a result of Employee
Deferral Contribution agreements must be included in
determining the contributions made on behalf of Key Employees.
Company Matching Contributions will be taken into account in
determining whether the minimum contribution requirement has
been satisfied. This minimum allocation shall be made even
though, under other Plan provisions, the Participant would not
otherwise be entitled to receive an allocation, or would have
received a lesser allocation for the year because of (i) the
Participant’s failure to complete 1,000 Hours of Service or
(ii) the Participant’s failure to make mandatory Participant
contributions to the Plan, provided, however, this provision
shall not apply to any Participant who was not an Employee on
the last day of the Plan Year. Company Contributions
allocated under any other defined contribution plan of the
Company, in which any Key Employee participates or which
enables another defined contribution plan to meet the

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	 	 	requirements of Section 401(a)(4) or 410 of the Code, shall
be considered contributions and Forfeitures allocated under
this Plan. In the case of any non-Key Employee Participant
who is also a Participant in any defined benefit pension plan
of the Company, the foregoing provisions of this Section
shall be applied, but with five percent (5%) substituted for
three percent (3%).
	 
	(b)	 	Adjusted Code Section 415 Limitations. In the
case of a non-Key Employee participating only in a defined
benefit pension plan, the additional minimum benefit for each
year of Continuous Service counted is one percentage point, up
to a maximum of ten percentage points, of the Employee’s
average compensation for the five consecutive years when the
Employee had the highest aggregate compensation from the
Company. In the case of a non-Key Employee participating only
in this or another defined contribution plan, the additional
minimum contribution is one percent of the Employee’s
compensation. In the case of a Non-Key Employee participating
both in a defined benefit pension plan and this or another
defined contribution plan, there is no additional minimum
benefit, but the additional minimum contribution shall be two
and one-half percent (2-1/2%) of the Employee’s compensation.
	 
	(c)	 	Vesting Schedule. For any Plan Year during which
the Plan is Top Heavy, the vesting schedule set forth in
Article V, Section 2, will automatically continue to apply to
all benefits within the meaning of Section 411(a)(7) of the
Code except those attributable to Participant

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	 	 	contributions, including benefits accrued before the
effective date of Section 416 of the Code and benefits
accrued before the Plan became Top Heavy. Further, no
decrease in a Participant’s Vested percentage may occur in
the event the Plan’s status as Top Heavy changes for any Plan
Year.

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     ARTICLE XVII — Plan Administration

     1. Timken shall be the Plan Administrator and have responsibility for the
administration of this Plan, including power to construe this Plan, to
determine all questions that shall arise hereunder, including particularly
questions on eligibility and participation of Employees and allocations of
Company Contributions to Participants’ Accounts and all matters necessary for
it properly to discharge its duties, powers and obligations and to apply its
established policies concerning the employment status of Participants. The
decision of Timken made in good faith upon any matter within the scope of its
authority shall be final, but Timken at all times in carrying out its decisions
shall act in a uniform and nondiscriminatory manner and may from time to time
set down uniform rules of interpretation and administration, which rules may be
modified from time to time in the light of its experience.

     2. Timken shall discharge its responsibility under Section 1 by appointing
a Committee, to which shall be delegated overall responsibility for
administering and operating the Plan. The Committee shall consist of officers
or other employees of Timken, or any other person(s) who shall be appointed by
Timken. The members of the Committee shall serve at the direction of Timken.
In the absence of such appointment, Timken shall serve as the Committee. Any
member of the Committee may resign by delivering his written resignation to
Timken and to the Committee, which shall become effective upon the date
specified therein. In the event of a vacancy of the Committee, the remaining
members shall constitute the Committee with full power to act until Timken
appoints a new Committee member. Timken may from time to time remove any
Committee member with or without cause and appoint a successor thereto.

     3. The Committee may employ any such person or entity as it deems
necessary to assist in the administration of the Plan and provide services
including but not limited to tax

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advice, amendment, termination and operation of the Plan, and advice
concerning reports filed with the Internal Revenue Service. Any such advisor
shall not be the Plan Administrator.

     The Committee shall have the authority and discretion to engage an
Administrative Delegate who shall perform, without discretionary authority or
control, administrative functions within the framework of policies,
interpretations, rules, practices, and procedures made by the Committee or
other Plan fiduciary. Any action made or taken by the Administrative Delegate
may be appealed by an affected Participant to the Committee in accordance with
the claims review procedures provided in Article XVII, Section 6. Any
decisions which call for interpretations of Plan provisions, not previously
made by the Committee, shall be made only by the Committee. The Administrative
Delegate shall not be considered a fiduciary with respect to the services it
provides.

	4. (a)	 	The Committee, on behalf of the Participants and
Beneficiaries of the Plan, shall enforce the Plan and Trust in
accordance with the terms thereof, and shall have all powers
necessary to carry out such provisions. The Committee shall have
the discretionary authority to interpret the Plan and Trust and
shall determine all questions arising in the administration and
application of the Plan and Trust. Any such interpretation or
determination by the Committee shall be conclusive and binding on
all persons.
	 
	 	 	     The Committee shall establish rules and regulations
necessary for the proper conduct and administration of the
Plan, and from time to time may change or amend these rules
and regulations. The Committee shall also have

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	 	 	the power to authorize all disbursements from the Trust by
the Trustee in accordance with the Plan’s terms.
	 
	(b)	 	At the direction of the Committee, distributions
to minors or persons declared incompetent may be made by the
Trustee directly to such persons or to the legal guardians or
conservators of such persons. Timken, the Committee, and the
Trustee shall not be required to see to the proper application
of such distributions made to any such persons, but his or
their receipt thereof shall be a full discharge of Timken, the
Committee, and the Trustee of any obligation under the Plan or
the Trust.
	 
	(c)	 	In the event that amendments to this Plan are
necessary or desirable for the purpose of (i) obtaining a
favorable ruling by the Internal Revenue Service concerning
the qualification of or any matter arising under this Plan,
(ii) clarifying any ambiguity, correcting any apparent error,
or supplying any omission from the provisions of this Plan, or
(iii) facilitating or improving the administration of this
Plan, such amendments may be made by the Committee; provided
that no such amendment shall adversely affect any of the
rights of Participants or prospective Participants in this
Plan, nor impose additional obligations on the Committee or
Timken, or relieve the Committee or Timken of any obligations
prescribed hereby.
	 
	5. (a)	 	The Committee shall act by a majority of its members then
in office, and such action may be taken either by vote at a meeting
or by written consent without a meeting. The Committee may
authorize any one or more of its members to execute any document or
documents on behalf of the

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	 	 	Committee, in which event the Committee shall notify Timken,
in writing, of such authorization and the name or names of
its members or members so designated. Timken thereafter
shall accept and rely on any documents executed by said
member of the Committee or members as representing action by
the Committee until the Committee shall file with Timken a
written revocation of such designation.
	 
	(b)	 	The Committee may adopt such bylaws and
regulations as it deems desirable for the conduct of its
affairs and may employ and appropriately compensate such
accountants, counsel, specialists, actuaries, and other
persons as it deems necessary or desirable in connection with
the administration and maintenance of the Plan. The Committee
shall have the discretionary authority to control and manage
the operation and administration of the Plan.
	 
	6. (a)	 	The Committee will make all determinations as to the
right of any persons to benefits under the Plan in accordance with
the governing Plan documents and will ensure that Plan provisions
are applied consistently with respect to similarly situated
claimants. Any denial by the Committee of a claim for benefits
under the Plan by a claimant, who may be a Participant or
Beneficiary, will be stated in writing by the Committee and
delivered or mailed to the claimant within a reasonable period of
time, but not later than 90 days after receipt of the claim by the
Plan, unless the Committee determines that special circumstances
require an extension of time for processing the claim. Written
notice of the extension shall be

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	 	 	furnished to the claimant prior to the termination of the
initial 90-day period. The extension notice shall indicate
the special circumstances requiring an extension of time and
the date by which the Plan expects to render the benefit
determination, which cannot exceed a period of 90 days from
the end of the initial period.
	 
	(b)	 	Manner and Content of Notification of Benefit
Determination. The Committee shall provide a claimant with
written or electronic notification of any adverse benefit
determination. The notification shall set forth in a manner
calculated to be understood by the claimant:

	(i)	 	The specific reason or reasons for
the adverse determination;
	 
	(ii)	 	Reference to the specific Plan
provisions on which the determination is based;
	 
	(iii)	 	A description of any additional
material or information necessary for the claimant to
perfect the claim and an explanation of why such
material or information is necessary; and
	 
	(iv)	 	A description of the Plan’s review
procedures and the time limits applicable to such
procedures, including a statement of the claimant’s
right to bring a civil action under Section 502(a) of
ERISA following an adverse benefit determination on
review.

	(c)	 	In addition, the Committee will provide an
opportunity to any claimant whose claim for benefits has been
denied an opportunity for a full and fair review of the
denial. As part of the review, the Committee will:

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	(i)	 	Provide a claimant a period of at
least 60 days following receipt of a notification of an
adverse benefit determination within which to appeal the
determination;
	 
	(ii)	 	Provide a claimant the opportunity to
submit written comments, documents, records, and other
information relating to the claim for benefits;
	 
	(iii)	 	Provide that a claimant shall be
provided, upon request and free of charge, reasonable
access to, and copies of, all documents, records, and
other information relevant to the claimant’s claim for
benefits;
	 
	(iv)	 	Provide for a review that takes into
account all comments, documents, records, and other
information submitted by the claimant relating to the
claim, without regard to whether such information was
submitted or considered in the initial benefit
determination.

	(d)	 	The Committee shall provide a claimant with
written or electronic notification of the Plan’s benefits
determination on review within 60 days after the Committee
receives the request for review. In the case of an adverse
benefit determination, the notification shall set forth, in a
manner calculated to be understood by the claimant:

	(i)	 	The specific reason or reasons for
the adverse determination;
	 
	(ii)	 	Reference to the specific Plan
provisions on which the benefit determination is based;

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	(iii)	 	A statement that the claimant is
entitled to receive, upon request and free of charge,
reasonable access to, and copies of, all documents,
records, and other information relevant to the
claimant’s claim for benefits; and
	 
	(iv)	 	A statement describing any voluntary
appeal procedures offered by the Plan and the claimant’s
right to obtain the information about such procedures
and a statement of the claimant’s right to bring an
action under Section 502(a) of ERISA.

	(e)	 	A claimant may designate an authorized
representative and the Committee shall deal directly with that
authorized representative.
	 
	7. (a)	 	The Committee shall be entitled to rely upon
certificates, reports, and opinions provided by an accountant, tax
or pension advisor, actuary or legal counsel employed by Timken or
Committee. The Committee shall keep a record of all its proceedings
and acts, and shall keep all such books of account, records, and
other data as may be necessary for the proper administration of the
Plan. The regularly kept records of the Committee, Timken, and the
Trustee shall be conclusive evidence of a Participant’s service,
Gross Earnings, his age, his marital status, his status as an
Employee, and all other matters contained therein and relevant to
this Plan; provided, however, that a Participant may request a
correction in the record of his age at any time prior to his
Retirement and such correction shall be made if within 90 days after
such request he furnishes a birth

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	 	 	certificate, baptismal certificate, or other documentary
proof of age satisfactory to the Committee in support of this
correction.
	 
	(b)	 	Each Participant and each Participant’s
designated Beneficiary must notify the Committee in writing of
his mailing address and each change thereof. Any
communication, statement or notice addressed to a Participant
or Beneficiary at the last mailing address filed with the
Committee, or if no address is filed with the Committee, the
last mailing address as shown on Timken’s records, will be
binding on the Participant and his Beneficiary and his
Beneficiary for all purposes of the Plan. Neither the
Committee nor the Trustee shall be required to search for or
locate a Participant or a Beneficiary.

	8.	 	A member of the Committee shall not be liable for any act, or
failure to act, of any other member of the Committee, except to the
extent that such member:

	(a)	 	Knowingly participates in, or undertakes to
conceal, an act or omission of another Committee member,
knowing that such act or omission is a breach of fiduciary
duty to the Plan;
	 
	(b)	 	Fails to comply with the specific
responsibilities given him as a member of the Committee, and
such failure enables another member of the Committee to commit
a breach of fiduciary duty to the Plan, or
	 
	(c)	 	Has knowledge of a breach of fiduciary duty to
the Plan by another member of the Committee, unless such
member makes reasonable effort under the circumstances to
remedy such breach.

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     9.   Each member of the Committee shall be liable with respect to his own
acts of willful misconduct or gross negligence concerning the Plan. Timken may
indemnify the Committee or each of its members for part of the expenses, costs,
or liabilities of the Committee and its members arising out of the performance
of the duties required by the terms of the Plan or Trust, except for those
expenses, costs, or liabilities arising out of a member’s willful misconduct or
gross negligence.

	10. (a)	 	The Committee, in any of its dealings with Participants
hereunder, may conclusively rely on any written statement,
representation, or documents made or provided by such Participants.
	 
	(b)	 	Unless otherwise determined by the Committee, the
members of the Committee shall serve without remuneration for
services to the Plan and Trust. However, all expenses of the
Committee shall be paid by the Trust except to the extent paid
by Timken. Such expenses shall include any expenses
incidental to the functioning of the Committee, including but
not limited to fees of accountants, legal counsel, and other
specialists, or any other costs entailed in administering the
Plan.
	 
	(c)	 	Title I of ERISA requires certain persons with
discretion over Plan assets to be bonded. Except as required
by ERISA or other federal law, the members of the Committee
shall serve without bond.

     11. Any decision of the Committee with respect to matters within its
jurisdiction shall be final, binding, and conclusive upon Timken and the
Trustee and upon each Employee, Participant, former Participant, Beneficiary,
Alternate Payee, and every other person or party interested or concerned, and
shall be given maximum possible deference allowed by law.

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     12. Timken may, from time to time, authorize and instruct certain of its
employees to perform any and all acts, deeds and other matters required to be
performed by Timken under the Plan and the Trust Agreement. Timken has so
authorized and instructed that the Committee, or any officer or the delegate of
an officer (except the Administrative Delegate), may sign any and all documents
on behalf of the Plan.

     13. Timken may, from time to time, retain the services of one or more
persons or firms designated as an Investment Manager for the management of
(including the power to acquire and dispose of) all or any part of the Trust,
provided that each of such persons or firms is registered as an investment
advisor under the Investment Advisors Act of 1940, is a bank (as defined in
that Act), or is an insurance company qualified to perform, manage, acquire or
dispose of trust assets under the laws of more than one State of the United
States. Each such Investment Manager shall acknowledge in writing that it is a
fiduciary with respect to the assets of the Trust under its authority and
management. Timken may by similar notice modify or terminate such designation
and authority from time to time. So long as and to the extent that any
designation is in effect, the Trustee shall invest and reinvest that portion of
the Trust assigned to an Investment Manager in accordance with the instructions
received from such Investment Manager, and, with respect to such portion of the
Trust managed by such Investment Manager, shall follow any instructions
received by it from such Investment Manager. The Trustee shall be under no
duty to review the investments made or held in any portion of the Trust over
which an Investment Manager has been given investment authority nor shall it be
under any obligation to invest or otherwise manage any assets of the Trust
which are subject to the management of such Investment Manager or Managers.
Such assets shall expressly be held by such Investment Manager as custodian of
such assets.

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     14. The Committee shall also have the authority and discretion to engage an
Administrative Delegate who shall perform, without discretionary authority or
control, administrative functions within the framework of policies,
interpretations, rules, practices, and procedures developed by Timken. Any
action made or taken by the Administrative Delegate may be appealed by an
affected Participant or Beneficiary to the Committee in accordance with the
claims review procedures provided in Section 6 of this Article XVII. Any
decisions which call for interpretations of Plan provisions not previously made
by the Committee shall only be made by the Committee. The Administrative
Delegate shall not be considered a fiduciary with respect to the services it
provides.

     15. The Plan Administrator shall have the authority to establish rules and
procedures governing investment elections and directions of Participants under
the Plan, as specified in Section 1(b) of Article VI of the Plan..

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     ARTICLE XVIII — Veterans’ Rights

     1. A Participant who is reemployed by the Company pursuant to the
provisions of the Uniformed Services Employment and Reemployment Rights Act of
1994 shall be treated as not having incurred a break in Continuous Service with
the Company by reason of such Participant’s period or periods of service in the
armed forces of the United States. Each period served by a Participant in the
armed forces shall, upon reemployment, be deemed to constitute service with the
Company for purposes of determining the nonforfeitability of benefits and the
accrual of benefits under the Plan.

     2. Timken, upon reemploying a Participant with respect to a period of
service with the armed forces, shall allocate the amount of any Company
Contribution, including a Company Matching Contribution, a Stock Matching
Contribution, a 401(k) Plus Contribution, a Core Contribution, or a Company
Supplemental Contribution, for the Participant in the same manner and to the
same extent the allocation occurs for other Participants during the period of
service. For purposes of determining the amount of any such allocation,
investment earnings shall not be included.

     3. A Participant so reemployed shall be entitled to Accrued Benefits that
are contingent on the making of, or derived from, Employee Deferral
Contributions and After-Tax Employee Contributions only to the extent such
Participant makes payment to the Plan with respect to such Employee Deferral
Contributions and After-Tax Employee Contributions. No such payment may exceed
the amount the Participant would have been permitted to contribute had the
Participant remained continuously employed by the Company through the period of
service in the armed forces. Any payment of Employee Deferral Contributions
and After-Tax Employee Contributions to the Plan shall be made during the
period beginning with the date of

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reemployment and whose duration is three times the period of the
Participant’s service in the armed forces, not to exceed a maximum duration of
five years.

     4. For purposes of computing the Company Matching Contributions, Stock
Matching Contributions, Employee Deferral Contributions, After-Tax Employee
Contributions, 401(k) Plus Contributions, Core Contributions, and Company
Supplemental Contributions under Sections 2 and 3 of this Article XVIII, the
Participant’s Gross Earnings during the period of service in the armed forces
shall be computed at the rate the Participant would have received, but for the
period of service in the armed forces, or, in the case that the determination
of such rate is not reasonably certain, on the basis of the Participant’s
average Gross Earnings from the Company during the twelve month period
immediately preceding such period of service in the armed forces, or if
shorter, the period of employment immediately preceding such period of service
in the armed services.

     5. Notwithstanding any provision of this Plan to the contrary,
contributions, benefits, loans, and service credit with respect to qualified
military service will be provided in accordance with Section 414(u) of the
Code.

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     ARTICLE XIX — ESOP Provisions

     1. Establishment
of ESOP — An employee stock ownership plan (“ESOP”) that
is intended to meet the requirements of Section 4975(e)(7) of the Code shall be
established as a component of the Plan. Such component of the Plan is designed
to invest primarily in Timken Stock and consists of the ESOP Accounts of all
Participants. This component of the Plan is segregated as a stock bonus plan
as defined in Treasury Regulation Section 1.401-1(b)(1)(iii). This Article XIX
is effective notwithstanding any other provision of the Plan to the contrary or
to the extent that the implementation of any such other provision of the Plan
would violate or otherwise limit the effect of this Article XIX.

     2. ESOP Account — The Committee shall establish an ESOP Account in the
name of each Participant and shall thereafter maintain a record thereof.

	(a)	 	Effective December 31, 2001, and as of the first
day of each subsequent Plan Year in which the ESOP is
maintained, Timken Stock allocated to a Participant’s Non-ESOP
After-Tax Employee Contribution Account shall be transferred
to the Participant’s ESOP After-Tax Employee Contribution
Account.
	 
	(b)	 	Effective December 31, 2001, and as of the first
day of each subsequent Plan Year in which the ESOP is
maintained, Timken Stock allocated to a Participant’s Non-ESOP
Company Matching Contribution Account shall be transferred to
the Participant’s ESOP Company Matching Contribution Account.
	 
	(c)	 	Effective December 31, 2001, and as of the first
day of each subsequent Plan Year in which the ESOP is
maintained, Timken Stock allocated to a

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	 	 	Participant’s Non-ESOP Company Supplemental Contribution
Account shall be transferred to the Participant’s ESOP
Company Supplemental Contribution Account.
	 
	(d)	 	Effective as of the first day of each Plan Year
after December 31, 2003 in which the ESOP is maintained,
Timken Stock allocated to a Participant’s Non-ESOP Core
Contribution Account shall be transferred to the Participant’s
ESOP Core Contribution Account.
	 
	(e)	 	Effective December 31, 2001, and as of the first
day of each subsequent Plan Year in which the ESOP is
maintained, Timken Stock allocated to a Participant’s Non-ESOP
Employee Deferral Contribution Account shall be transferred to
the Participant’s ESOP Employee Deferral Contribution Account.
	 
	(f)	 	Effective December 31, 2001, and as of the first
day of each subsequent Plan Year in which the ESOP is
maintained, Timken Stock allocated to a Participant’s Non-ESOP
401(k) Plus Contribution Account shall be transferred to the
Participant’s ESOP 401(k) Plus Contribution Account.
	 
	(g)	 	Effective December 31, 2001, and as of the first
day of each subsequent Plan Year in which the ESOP is
maintained, Timken Stock allocated to a Participant’s Non-ESOP
Rollover Contribution Account shall be transferred to the
Participant’s ESOP Rollover Contribution Account.
	 
	(h)	 	Effective December 31, 2001, and as of the first
day of each subsequent Plan Year in which the ESOP is
maintained, Timken Stock allocated to a Participant’s Non-ESOP
Stock Matching Contribution Account shall be

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	 	 	transferred to the Participant’s ESOP Stock Matching
Contribution Account.
	 
	(i)	 	The ESOP Account of each Participant shall be
credited and debited periodically during each Plan Year in
which the ESOP is maintained with any additions or reductions
in the number of shares of Timken Stock held for such
Participant in the Plan due to the reallocation of the
investment of the Participant’s Non-ESOP Account and ESOP
Account, and with any stock and cash dividends paid on Timken
Stock held in the Participant’s ESOP Account.
	 
	(j)	 	All Timken Stock purchased pursuant to a
redistribution of the investment of a Participant’s Non-ESOP
Account shall be directly credited to the Participant’s ESOP
Account, notwithstanding Sections (2)(a) through (2)(h) of
Article XIX above.
	 
	(k)	 	In the event that a Participant elects to
diversify the investment of his Account pursuant to Article
VI, Sections 4, 5, or 6, and the diversification involves a
partial liquidation of Timken Stock, Timken Stock shall be
liquidated pro-rata from the Participant’s Non-ESOP Account
and ESOP Account.
	 
	(l)	 	All After-Tax Employee Contributions, Company
Matching Contributions, Company Supplemental Contributions,
Employee Deferral Contributions, 401(k) Plus Contributions,
Core Contributions, Rollover Contributions, and Stock Matching
Contributions that are made on behalf of a Participant during
the Plan Year and initially invested in Timken

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	 	 	Stock in accordance with Article VI, shall be allocated to
the Participant’s Non-ESOP Account for such Plan Year,
subject to reallocation to the Participant’s ESOP Account as
directed in this Article XIX, Section 2.

     3. Nondiscrimination Test — For purposes of applying the tests under
Article VIII for any Plan Year in which (a) the ESOP is maintained and (b) the
requirements of Sections 401(k)(12) and 401(m)(11) of the Code are not
satisfied, a single actual deferral percentage and actual contribution
percentage under the provisions of Article VIII hereof will be calculated for
the group of Participants who are Highly Compensated Employees and a single
actual deferral percentage and actual contribution percentage will be
calculated for the group of all non-Highly Compensated Employees for a Plan
Year (notwithstanding the ESOP and disaggregation rules of Treasury Regulation
Sections 1.401(k)-1(g)(11) and 1.410(b)-7(c)(2)), by reason of the fact that,
notwithstanding the ESOP, all Employee Deferral Contributions made in such Plan
Year are allocated to the Participant’s Non-ESOP Employee Deferral Contribution
Account in such Plan Year (including any Employee Deferral Contributions that
are invested in Timken Stock) and such account is not part of the ESOP, all
After-Tax Employee Contributions made in such Plan Year are allocated to the
Participant’s Non-ESOP After-Tax Employee Contribution Account in such Plan
Year (including any After-Tax Employee Contributions that are invested in
Timken Stock) and such account is not part of the ESOP, and all Company
Matching Contributions, Company Supplemental Contributions, 401(k) Plus
Contributions, Core Contributions, and Stock Matching Contributions, made in or
for such Plan Year are allocated to the Non-ESOP Company Matching Contribution
Account, the Non-ESOP Company Supplemental Contribution Account, the Non-ESOP
401(k) Plus Contribution Account, the Non-ESOP Core Contribution Account, and
the Non-ESOP Stock Matching Contribution Account, respectively, in or for such
Plan Year

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	(including any Company Matching Contributions, Company Supplemental
Contributions, 401(k) Plus Contributions, Core Contributions, and Stock
Matching Contributions that are invested in Timken Stock) and such accounts are
not part of the ESOP.

     4. Investment Direction — To the extent a Participant’s Account includes
amounts originally allocated to an Account subject to the Participant’s
investment direction under Sections 4, 5, and 6 of Article VI of the Plan, the
Participant shall retain the right to direct investments subject to the
provisions of Sections 4, 5, and 6 of Article VI of the Plan.

     5. Vesting — A Participant shall have a Vested interest in his ESOP
After-Tax Employee Contribution Account, ESOP Company Matching Contribution
Account, ESOP Company Supplemental Contribution Account, ESOP Employee Deferral
Contribution Account, ESOP Rollover Contribution Account, and ESOP Stock
Matching Contribution Account. A Participant’s interest in his ESOP 401(k)
Plus Contribution Account, and his ESOP Core Contribution Account is subject to
the vesting provisions of Article V, Section 2.

     6. Payment of Dividends

	(a)	 	If administratively feasible and approved by
Timken, any cash dividends paid with respect to Vested shares
of Timken Stock in the ESOP as of the record date shall be
paid, at the election of the Participant (or his Beneficiary),
to the Participant (or his Beneficiary), or to the Plan and
reinvested in Timken Stock. Dividends paid to a Participant
(or his Beneficiary) in accordance with this election shall be
paid in a manner and in accordance with procedures established
by Timken (i) in cash directly to the Participant (or his
Beneficiary), or (ii) to the Plan and subsequently distributed
to the Participant (or his Beneficiary) in cash no later than
90

123

 

	 	 	days after the close of the Plan Year in which the dividends
are paid to the Plan. Dividends described in this Section 6
will be paid to the Plan and reinvested in Timken Stock with
respect to any Participant (or Beneficiary) who does not
affirmatively elect to have such dividends paid to him.
	 
	(b)	 	For purposes of this Section 6, “Participant”
includes a Participant who is no longer employed by the
Company but still has an Account in the Plan.
	 
	(c)	 	This Section 6 is intended to comply with Section
404(k) of the Code and shall be interpreted and construed
accordingly.
	 
	(d)	 	Dividends paid with respect to Timken Stock in
the ESOP that is not Vested in accordance with Section 5 of
this Article XIX shall be paid to the Plan and reinvested in
Timken Stock.

     7. Voting and Tender of ESOP Timken Stock — Each Participant shall be
entitled to direct the Trustee, in accordance with Article X of the Plan, as to
the exercise of any and all voting rights attributable to shares of Timken
Stock then allocated to the Participant’s ESOP Account.

     8. Right to Receive a Distribution of Timken Stock — In accordance with
Article VII, Section 3, distribution of a Participant’s ESOP Account when
permitted or required under Article VII, may, at the Participant’s election, be
made in cash or full shares of Timken Stock and cash for any fractional
interests in shares of Timken Stock.

     9. Commencement of Distributions — If a Participant or Beneficiary elects,
distribution of the balance of a Participant’s ESOP Account will be made or
will commence not later than one year after the close of the Plan Year:

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	(a)	 	in which the Participant separates from service
by reason of Retirement, age 70 1⁄2, Disability, or death,
or
	 
	(b)	 	which is the fifth Plan Year following the Plan
Year in which the Participant otherwise separates from
service, unless the Participant is reemployed by the Company
before distribution is required to begin under this clause.

	10.	 	Put Option

	(a)	 	At such times as Timken Stock is not readily
tradable on an established market at the time of distribution
of a Participant’s ESOP Account, Timken shall issue a put
option to each Participant, Alternate Payee or Beneficiary
receiving a distribution of Timken Stock from the Plan. The
put option shall permit the Participant or Beneficiary to sell
such Timken Stock under a fair valuation formula during the
sixty (60) consecutive day period following the date the
Timken Stock was distributed to the Participant or
Beneficiary, at which time the put option will temporarily
lapse. Upon the close of the Plan Year in which such
temporary lapse occurs, an independent appraiser (meeting
requirements similar to the requirements of the Treasury
Regulations prescribed under Section 170(a)(1) of the Code)
shall determine the value of the Timken Stock, and the Trustee
shall notify each Participant or Beneficiary who received a
distribution who did not exercise the initial put option prior
to its temporary lapse in the preceding Plan Year of the
revised value of the Timken Stock. The time during which the
put option may be exercised

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	 	 	shall recommence on the date such notice of revaluation is
given and shall permanently terminate sixty (60) days
thereafter.
	 
	(b)	 	The Trustee may, in its discretion and with the
consent of Timken, cause the Trust to assume the rights and
obligations of Timken at the time the put option is exercised,
insofar as the repurchase of Timken Stock is concerned. The
period during which the put option is exercisable shall not
include any period during which the holder is unable to
exercise such put option because Timken is prohibited from
honoring it by Federal and State law. Timken or the Trustee,
as the case may be, must pay for Timken Stock sold pursuant to
a put option no less rapidly than under one of the following
two methods, as applicable:

	(i)	 	If a put option is exercised with
respect to Timken Stock distributed as part of a total
distribution (that is, a distribution of a Participant’s
or Beneficiary’s Account balance within one taxable
year), then payment shall be made in substantially equal
periodic payments (not less frequently than annually)
commencing within thirty (30) days of the date of the
exercise of the put option and over a period not
exceeding five years, with interest payable at a
reasonable rate (as determined by Timken) on any unpaid
installment balance, with adequate security provided,
and without penalty for any prepayment of such
installments.
	 
	(ii)	 	If a put option is exercised with
respect to Timken Stock distributed as part of an
installment distribution, then the payment

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	 	 	for such Timken Stock shall be made in a lump sum no
later than thirty (30) days after such Participant or
Beneficiary exercises the put option.

     11. Share Legend — Shares of Timken Stock held in ESOP Accounts or
distributed by the Trustee from ESOP Accounts may include such legend
restrictions on transferability as Timken may reasonably require in order to
assure compliance with applicable Federal and State securities laws.

     12. Diversification — Article VI, Sections 5 and 6 provide that
Participants who have attained age 55 or have thirty (30) years of Continuous
Service or who have terminated employment with the Company and all Controlled
Group Members will be able to direct investments of their entire Account.
These Participants will be able to direct their Account, from Timken Stock,
into other investment options available under the Plan. This provision
satisfies Section 401(a)(28) of the Code.

     13. Limitation on Period of Distribution — Unless otherwise elected, the
distribution of a Participant’s ESOP Account will be in substantially equal
periodic payments (not less frequently than annually) over a period not longer
than the greater of (i) five years, or (ii) if the balance of the Participant’s
ESOP Account is in excess of $500,000 (which amount may be adjusted
periodically by the Internal Revenue Service to reflect cost-of-living
increases), five years plus one additional year (but not more than five
additional years) for each $100,000 (which amount may be adjusted periodically
by the Secretary of the Treasury to reflect cost-of-living increases) or
fraction thereof by which such balance exceeds $500,000 (as adjusted).

127

 

     14. Other Sections Superceded — This Article XIX supersedes any other
provision of the Plan solely to the extent that such other provision conflicts
with the terms of this Article XIX or is inconsistent with the treatment of the
portion of the Plan so designated as an ESOP.

128

 

     ARTICLE XX — General Provisions

	1. (a)	 	The Plan is established under, and its validity,
construction and effect shall be governed by, the laws of the State
of New Hampshire, except to the extent governed by ERISA.
	 
	(b)	 	The parties to the Trust intend that the Trust be
exempt from taxation under section 501(a) of the Code, and any
ambiguities in its construction shall be resolved in favor of
an interpretation which will effect such intention.

     2. The Plan Administrator and/or Committee shall have authority to enforce
the Plan on behalf of any and all persons having or claiming any interest in
the Trust or Plan.

     3. The Plan is not and shall not be deemed to constitute a contract
between the Company and any Employee, or to be a consideration for, or an
inducement to, or a condition of, the employment of any Employee. Nothing
contained in the Plan shall give or be deemed to give an Employee the right to
remain in the employment of the Company or to interfere with the right to be
retained in the employ of the Company, any legal or equitable right against the
Company, or to interfere with the right of the Company to discharge any
Employee at any time.

     4. Any discretionary acts to be undertaken under the Plan with respect to
the classification of Employees, contributions, or benefits shall be
nondiscriminatory and uniform in nature and applicable to all persons similarly
situated.

	5. (a)	 	Savings Clause. If any provision or provisions of the
Plan shall for any reason be invalid or unenforceable, the remaining
provisions of the Plan shall be carried into effect, unless the
effect thereof would be to materially alter or defeat the purposes
of the Plan.

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	(b)	 	Gender. Wherever appropriate, pronouns of either
gender shall be deemed synonymous as shall singular and plural
pronouns.
	 
	(c)	 	Headings. Headings and titles of sections and
subsections within the Plan document are inserted solely for
convenience of reference. They constitute no part of the Plan
itself and shall not be considered in the construction of the
Plan.

     EXECUTED by The Timken Company on             , 2004, effective December
31, 2003, except as otherwise specifically provided.

	 	 	 	 	 
	 	 	The Timken Company
	 
	 	 	 	 
	

	 	By
	 	/s/ Roger W. Lindsay
	

	 	 	 	

	

	 	Name:
	 	Roger W. Lindsay
	

	 	Title:
	 	Senior Vice President - Human Resources
	

	 	 	 	and Organizational Advancement

130

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