Document:

EX-10.28

Exhibit 10.28 

THE TIMKEN COMPANY

Performance-Vested Restricted Shares Agreement

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

     WHEREAS, the grant of performance-vested restricted shares evidenced hereby was authorized by
a resolution of the Compensation Committee (the “Committee”) of the Board of Directors (the
“Board”) of the Company that was duly adopted on [                    ], and the execution of a
performance-vested restricted shares agreement in the form hereof (this “Agreement”) was authorized
by a resolution of the Committee duly adopted on such date.

     NOW, THEREFORE, pursuant to The Timken Company Long-Term Incentive Plan (as Amended and
Restated as of February 4, 2008) (the “Plan”) and subject to the terms and conditions thereof, in
addition to the terms and conditions of this Agreement, the Company hereby grants to Grantee,
effective
[                    ] (the “Date of Grant”), the right to receive <<award>> shares
of the Company’s common stock without par value (the “Common Shares”).

	 	1.	 	Rights of Grantee. The Common Shares subject to this grant shall be
fully paid and nonassessable and shall be represented by a certificate or certificates
registered in Grantee’s name and endorsed with an appropriate legend referring to the
restrictions hereinafter set forth. Grantee shall have all the rights of a shareholder
with respect to such shares, including the right to vote the shares and receive all
dividends paid thereon, provided that such shares, and any additional shares that
Grantee may become entitled to receive by virtue of a share dividend, a merger or
reorganization in which the Company is the surviving corporation or any other change in
the capital structure of the Company, shall be subject to the restrictions hereinafter
set forth.
	 
	 	2.	 	Restrictions on Transfer of Common Shares. The Common Shares subject
to this grant may not be assigned, exchanged, pledged, sold, transferred or otherwise
disposed of by Grantee, except to the Company, until the Common Shares have become
nonforfeitable in accordance with Sections 3 and 4 hereof; provided,
however, that Grantee’s rights with respect to such Common Shares may be
transferred by will or pursuant to the laws of descent and distribution. Any purported
transfer in violation of the provisions of this Section 2 shall be null and void, and
the purported transferee shall obtain no rights with respect to such shares.
	 
	 	3.	 	Vesting of Common Shares.

 

 

	 	(a)	 	Normal Vesting: Subject to the terms and conditions of
Sections 4 and 5 hereof, Grantee’s right to receive the Common Shares covered
by this Agreement shall become nonforfeitable (a) if, for the calendar year in
which the Date of Grant occurs, the Company achieves the Management Objective
approved by the Committee on the Date of the Grant with respect to the Common
Shares (the “Threshold Requirement”), and (b) to the extent of one-quarter
(1/4) of the Common Shares covered by this Agreement after Grantee shall have
been in the continuous employ of the Company or a subsidiary for one full year
from the Date of Grant and to the extent of an additional one-quarter (1/4)
thereof after each of the next three successive years during which Grantee
shall have been in the continuous employ of the Company or a subsidiary. If
the Company fails to achieve the Threshold Requirement, the grant of the Common
Shares shall be cancelled. For purposes of this Agreement, “subsidiary” shall
mean a corporation, partnership, joint venture, unincorporated association or
other entity in which the Company has a direct or indirect ownership or other
equity interest. For purposes of this Agreement, the continuous employment of
Grantee with the Company or a subsidiary shall not be deemed to have been
interrupted, and Grantee shall not be deemed to have ceased to be an employee
of the Company or a subsidiary, by reason of the transfer of his employment
among the Company and its subsidiaries.
	 
	 	(b)	 	Vesting Upon Retirement with Consent: If Grantee
should retire with or without consent prior to the Company having attained the
Threshold Requirement, then all Common Shares covered by this Agreement shall
be cancelled. If, on the other hand, Grantee should retiree with the Company’s
consent after the Threshold Requirement has been met, but before the fourth
anniversary of the Date of Grant, then Grantee’s right to receive the Common
Shares covered by this Agreement shall become nonforfeitable in accordance with
the terms and conditions of Section 3(a) as if Grantee had remained in the
continuous employ of the Company or a subsidiary from the Date of Grant until
the date of the fourth anniversary or the occurrence of an event referenced in
Section 4, whichever occurs first.

     For purposes of this Agreement, retirement “with the Company’s consent” shall mean: (i) the
retirement of Grantee prior to age 62 under a retirement plan of the Company or a subsidiary, if
the Board or the Committee determines that his retirement is for the convenience of the Company or
a subsidiary, or (ii) the retirement of Grantee at or after age 62 under a retirement plan of the
Company or a subsidiary.

	 	4.	 	Accelerated Vesting of Common Shares. Notwithstanding the provisions
of Section 3 hereof, Grantee’s right to receive the Common Shares covered by this
Agreement, which have not been cancelled due to the Company’s failure to meet the
Threshold Requirement, may become nonforfeitable earlier than the time provided in such
section if any of the following circumstances apply:

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	 	(a)	 	Death or Disability: Grantee’s right to receive the
Common Shares covered by this Agreement, if not cancelled for failure to
achieve the Threshold Requirement, shall become nonforfeitable if Grantee
should die or become permanently disabled while in the employ of the Company or
any subsidiary. For purposes of this Agreement, “permanently disabled” shall
mean that Grantee has qualified for long-term disability benefits under a
disability plan or program of the Company or, in the absence of a disability
plan or program of the Company, under a government-sponsored disability
program.
	 
	 	(b)	 	Change in Control: Grantee’s right to receive the
Common Shares covered by this Agreement, if not cancelled for failure to
achieve the Threshold Requirement prior to the change of control, shall become
nonforfeitable upon any change in control of the Company that shall occur while
Grantee is an employee of the Company or a subsidiary. For the purposes of
this Agreement, the term “change in control” shall mean the occurrence of any
of the following events:

	 	(i)	 	The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934) (a “Person”) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934) of 30% or more of either: (A) the
then-outstanding Common Shares or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote
generally in the election of directors (“Voting Shares”); provided,
however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a change in control: (1) any
acquisition directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any subsidiary, or (4)
any acquisition by any Person pursuant to a transaction which complies
with clauses (A), (B) and (C) of subsection (i) of this Section 4(b);
or
	 
	 	(ii)	 	Individuals who, as of the date hereof,
constitute the Board (the “Incumbent Board”) cease for any reason
(other than death or disability) to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director,
without objection to such nomination) shall be considered as though
such individual were a member of the Incumbent Board, but excluding for
this purpose, any such individual whose initial

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	 	 	 	assumption of office occurs as a result of an actual or threatened
election contest (within the meaning of Rule 14a-11 of the Securities
Exchange Act of 1934) with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
	 
	 	(iii)	 	Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a “Business Combination”), in each case,
unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Common Shares and Voting Shares immediately prior
to such Business Combination beneficially own, directly or indirectly,
more than 66-2/3% of, respectively, the then-outstanding shares of
common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the entity resulting from such
Business Combination (including, without limitation, an entity which as
a result of such transaction owns the Company or all or substantially
all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions relative to each
other as their ownership, immediately prior to such Business
Combination, of the Common Shares and Voting Shares of the Company, as
the case may be, (B) no Person (excluding any entity resulting from
such Business Combination or any employee benefit plan (or related
trust) sponsored or maintained by the Company or such entity resulting
from such Business Combination) beneficially owns, directly or
indirectly, 30% or more of, respectively, the then-outstanding shares
of common stock of the entity resulting from such Business Combination,
or the combined voting power of the then-outstanding voting securities
of such corporation except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority of the
members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
	 
	 	(iv)	 	Approval by the shareholders of the Company of
a complete liquidation or dissolution of the Company.

	 	(c)	 	Divestiture: Grantee’s right to receive the Common
Shares covered by this Agreement, if not cancelled for failure to achieve the
Threshold Requirement, shall become nonforfeitable if Grantee’s employment with
the Company or a subsidiary terminates as the result of a divestiture. For

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	 	 	 	the purposes of this Agreement, the term “divestiture” shall mean a
permanent disposition to a Person other than the Company or any subsidiary
of a plant or other facility or property at which Grantee performs a
majority of Grantee’s services whether such disposition is effected by means
of a sale of assets, a sale of subsidiary stock or otherwise.
	 
	 	(d)	 	Layoff: If (i) Grantee’s employment with the Company
or a subsidiary terminates as the result of a layoff and (ii) Grantee is
entitled to receive severance pay pursuant to the terms of any severance pay
plan of the Company in effect at the time of Grantee’s termination of
employment that provides for severance pay calculated by multiplying Grantee’s
base compensation by a specified severance period, then the Common Shares shall
become nonforfeitable, if not cancelled for failure to achieve the Threshold
Requirement, with respect to the total number of Common Shares that would have
been exercisable under the provisions of Section 3 hereof if Grantee had
remained in the employ of the Company through the end of the severance period.

          For purposes of this Agreement, a “layoff” shall mean the involuntary
termination by the Company or any subsidiary of Grantee’s employment with the
Company or any subsidiary due to (i) a reduction in force leading to a permanent
downsizing of the salaried workforce, (ii) a permanent shutdown of the plant,
department or subdivision in which Grantee works, or (iii) an elimination of
position.

	 	5.	 	Forfeiture of Awards. In the event the Company fails to achieve the
Threshold Requirement, the grant of the Common Shares hereunder shall be cancelled
immediately and Grantee shall have no further rights under this Agreement. Further,
Grantee’s right to receive the Common Shares covered by this Agreement that are then
forfeitable shall be forfeited automatically and without further notice on the date
that Grantee ceases to be an employee of the Company or a subsidiary prior to the
fourth anniversary of the Date of Grant for any reason other than as described in
Sections 3 or 4. If Grantee shall intentionally commit an act that the Committee
determines to be materially adverse to the interests of the Company or a subsidiary,
Grantee’s right to receive the Common Shares covered by this Agreement shall be
forfeited at the time of that determination notwithstanding any other provision of this
Agreement.
	 
	 	6.	 	Retention of Certificates. During the period in which the restrictions
on transfer and risk of forfeiture provided in Sections 2 and 5 above are in effect,
the certificates representing the Common Shares covered by this grant shall be retained
by the Company, together with the accompanying stock power signed by Grantee and
endorsed in blank.
	 
	 	7.	 	Compliance with Law. The Company shall make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Company shall not be

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	 		 	obligated to issue any of the Common Shares covered by this Agreement if the
issuance thereof would result in violation of any such law. To the extent that the
Ohio Securities Act shall be applicable to this Agreement, the Company shall not be
obligated to issue any of the Common Shares or other securities covered by this
Agreement unless such Common Shares are (a) exempt from registration thereunder, (b)
the subject of a transaction that is exempt from compliance therewith, (c)
registered by description or qualification thereunder or (d) the subject of a
transaction that shall have been registered by description thereunder.
	 
	 	8.	 	Adjustments. The Committee shall make any adjustments in the number or
kind of shares of stock or other securities covered by this Agreement that the
Committee may determine to be equitably required to prevent any dilution or expansion
of Grantee’s rights under this Agreement that otherwise would result from any (a) stock
dividend, stock split, combination of shares, recapitalization or other change in the
capital structure of the Company, (b) merger, consolidation, separation, reorganization
or partial or complete liquidation involving the Company or (c) other transaction or
event having an effect similar to any of those referred to in Section 8(a) or 8(b)
hereof. Furthermore, in the event that any transaction or event described or referred
to in the immediately preceding sentence shall occur, the Committee may provide in
substitution of any or all of Grantee’s rights under this Agreement such alternative
consideration as the Committee may determine in good faith to be equitable under the
circumstances.
	 
	 	9.	 	Withholding Taxes. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any benefit received
(including income recognized) in connection with this Agreement, and the amounts
available to the Company for such withholding are insufficient, it shall be a condition
to the realization of such benefit that Grantee make arrangements satisfactory to the
Company for payment of the balance of such taxes required to be withheld. The Grantee
may elect that all or any part of such withholding requirement be satisfied by
retention by the Company of a portion of such benefit. If such election is made, the
shares so retained shall be credited against such withholding requirement at the Market
Price per Common Share on the date the shares are retained or relinquished. In no
event, however, shall the Company accept Common Shares for payment of taxes in excess
of required tax withholding rates, except that, unless otherwise determined by the
Committee at any time, Grantee may surrender Common Shares owned for more than 6 months
to satisfy any tax obligations resulting from any such transaction.
	 
	 	10.	 	Right to Terminate Employment. No provision of this Agreement shall
limit in any way whatsoever any right that the Company or a subsidiary may otherwise
have to terminate the employment of Grantee at any time.

	 	11.	 	Relation to Other Benefits. Any economic or other benefit to Grantee
under this Agreement or the Plan shall not be taken into account in determining any
benefits to which Grantee may be entitled under any profit-sharing, retirement or other
benefit or compensation plan maintained by the Company or a subsidiary and

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	 	 	 	shall not affect the amount of any life insurance coverage available to any
beneficiary under any life insurance plan covering employees of the Company or a
subsidiary.
	 
	 	12.	 	Amendments. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable hereto;
provided, however, that no amendment shall adversely affect the rights of Grantee with
respect to the Common Shares or other securities covered by this Agreement without
Grantee’s consent.
	 
	 	13.	 	Severability. In the event that one or more of the provisions of this
Agreement shall be invalidated for any reason by a court of competent jurisdiction, any
provision so invalidated shall be deemed to be separable from the other provisions
hereof, and the remaining provisions hereof shall continue to be valid and fully
enforceable.
	 
	 	14.	 	Governing Law. This agreement is made under, and shall be construed in
accordance with, the internal substantive laws of the State of Ohio.
	 
	 	15.	 	Relation to Plan. This agreement is subject to the terms and
conditions of the Plan. In the event of any inconsistency between the provisions of
this Agreement and the Plan, the Plan shall govern. Capitalized terms used herein
without definition shall have the meanings assigned to them in the Plan.

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     This
Agreement is executed by the Company on this ___ day of       
          
    ,           
          .

	 	 	 	 	 
	 	The Timken Company

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

     The undersigned Grantee hereby acknowledges receipt of an executed original of this Agreement
and accepts the right to receive the Common Shares or other securities covered hereby, subject to
the terms and conditions of the Plan and the terms and conditions herein above set forth.

   
                
               
               
                
     

Grantee

Date:                                                             

8EX-10.42

Exhibit 10.42

SEVERANCE AGREEMENT

     This Severance Agreement (the “Agreement”) is dated as of the                      day of                     , 200___,
between The Timken Company, an Ohio corporation (the “Company”), and                                          (the
“Employee”).

Recitals

     WHEREAS, the Employee is a key employee of the Company and has made and is expected to
continue to make major contributions to the profitability, growth and financial strength of the
Company;

     WHEREAS, the Company wishes to induce its key employees to remain in the employment of the
Company and to assure itself of stability and continuity of operations by providing severance
protection to those key employees who are expected to make major contributions to the success of
the Company. In addition, the Company recognizes that a termination of employment may occur
following a change in control in circumstances where the Employee should receive additional
compensation for services theretofore rendered and for other good reasons, the appropriate amount
of which would be difficult to ascertain. Hence, the Company has agreed to provide special
severance in the event of a change in control of the Company; and

     WHEREAS, the Company and the Employee desire to amend the Agreement to update its provisions
in accordance with the American Jobs Creation Act of 2004, the applicable requirements of which are
set forth in Section 409A of the Code and the Treasury Regulations promulgated thereunder, by
virtue of the specific amendments to the Agreement as set forth below; and

     NOW, THEREFORE, in consideration of the premises provided for in this Agreement, including the
Release provided for in Section 7 hereof, the Company and the Employee agree as follows:

     1. Definitions:

          1.1 Base Salary: The term “Base Salary” shall mean the Employee’s annual base salary
as in effect on the date this Agreement becomes operative, as the same may be increased from time
to time.

          1.2 Board: The term “Board” shall mean the Board of Directors of the Company.

          1.3 Change in Control: “Change in Control” means the occurrence during the Term of
any of the following events:

 

 

     (a) any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) (a “Person”) is or becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more
of the combined voting power of the then-outstanding Voting Stock of the Company;
provided, however, that:

     (i) for purposes of this Section 1.3(a), the following acquisitions
will not constitute a Change in Control: (A) any acquisition of Voting Stock
of the Company directly from the Company that is approved by a majority of
the Incumbent Directors, (B) any acquisition of Voting Stock of the Company
by the Company or any Subsidiary, (C) any acquisition of Voting Stock of the
Company by the trustee or other fiduciary holding securities under any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, and (D) any acquisition of Voting Stock of the
Company by any Person pursuant to a Business Transaction that complies with
clauses (i), (ii) and (iii) of Section 1.3(c) below;

     (ii) if any Person is or becomes the beneficial owner of 30% or more of
combined voting power of the then-outstanding Voting Stock of the Company as
a result of a transaction described in clause (A) of Section 1.3(a)(i) above
and such Person thereafter becomes the beneficial owner of any additional
shares of Voting Stock of the Company representing 1% or more of the
then-outstanding Voting Stock of the Company, other than in an acquisition
directly from the Company that is approved by a majority of the Incumbent
Directors or other than as a result of a stock dividend, stock split or
similar transaction effected by the Company in which all holders of Voting
Stock are treated equally, such subsequent acquisition shall be treated as a
Change in Control;

     (iii) a Change in Control will not be deemed to have occurred if a
Person is or becomes the beneficial owner of 30% or more of the Voting Stock
of the Company as a result of a reduction in the number of shares of Voting
Stock of the Company outstanding pursuant to a transaction or series of
transactions that is approved by a majority of the Incumbent Directors
unless and until such Person thereafter becomes the beneficial owner of any
additional shares of Voting Stock of the Company representing 1% or more of
the then-outstanding Voting Stock of the Company, other than as a result of
a stock dividend, stock split or similar transaction effected by the Company
in which all holders of Voting Stock are treated equally; and

     (iv) if at least a majority of the Incumbent Directors determine in
good faith that a Person has acquired beneficial ownership of 30% or more of
the Voting Stock of the Company inadvertently, and such Person divests as
promptly as practicable but no later than the date, if any, set by the
Incumbent Directors a sufficient number of shares so that such Person

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beneficially owns less than 30% of the Voting Stock of the Company,
then no Change in Control shall have occurred as a result of such Person’s
acquisition; or

     (b) a majority of the Board ceases to be comprised of Incumbent Directors; or

     (c) the consummation of a reorganization, merger or consolidation, or sale or
other disposition of all or substantially all of the assets of the Company or the
acquisition of the stock or assets of another corporation, or other transaction
(each, a “Business Transaction”), unless, in each case, immediately following such
Business Transaction (i) the Voting Stock of the Company outstanding immediately
prior to such Business Transaction continues to represent (either by remaining
outstanding or by being converted into Voting Stock of the surviving entity or any
parent thereof), at least 51% of the combined voting power of the then outstanding
shares of Voting Stock of the entity resulting from such Business Transaction
(including, without limitation, an entity which as a result of such transaction owns
the Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries), (ii) no Person (other than the Company, such
entity resulting from such Business Transaction, or any employee benefit plan (or
related trust) sponsored or maintained by the Company, any Subsidiary or such entity
resulting from such Business Transaction) beneficially owns, directly or indirectly,
30% or more of the combined voting power of the then outstanding shares of Voting
Stock of the entity resulting from such Business Transaction, and (iii) at least a
majority of the members of the Board of Directors of the entity resulting from such
Business Transaction were Incumbent Directors at the time of the execution of the
initial agreement or of the action of the Board providing for such Business
Transaction; or

     (d) approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company, except pursuant to a Business Transaction that complies
with clauses (i), (ii) and (iii) of Section 1.3(c).

The Company shall give the Employee written notice, delivered to the Employee in the manner
specified in Section 9 hereof, of the occurrence of any event constituting a Change in Control as
promptly as practical, and in no case later than 10 calendar days, after the occurrence of such
event.

          1.4 CIC Severance Amount: The term “CIC Severance Amount” shall mean an amount equal
to the sum of:

     (a) [Three/One and one-half] times the greater of (i) the Employee’s Base
Salary in effect immediately prior to the Employee’s Termination of Employment or
(ii) the Employee’s Base Salary in effect immediately prior to the Change in
Control;

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     (b) [Three/One and one-half] times the greater of (i) the Employee’s Incentive
Pay for the year in which the Employee’s employment is terminated or (ii) the
Employee’s Incentive Pay for the year in which the Change in Control occurred;

     (c) The Primary Supplemental Pension Benefit;

     (d) The Enhanced Supplemental Pension Benefit;

     (e) The Supplemental SIP Plan Benefit; and

     (f) The Post-Tax SIP Plan Benefit.

          1.5 Code: The term “Code” shall mean the Internal Revenue Code of 1986, as amended.

          1.6 Company Termination Event: The term “Company Termination Event” shall mean the
Termination of Employment of the Employee by the Company or otherwise in any of the following
events and prior to any Employee Termination Event:

     (a) The Employee’s death;

     (b) If the Employee shall become eligible to receive and begins actually to
receive long-term disability benefits under The Long Term Disability Program of The
Timken Company or any successor plan; or

     (c) For Cause. Termination of Employment shall be deemed to be for “Cause”
only if based on the fact that the Employee has done any of the following:

     (i) An intentional act of fraud, embezzlement or theft in connection
with his duties with the Company;

     (ii) Intentional wrongful disclosure of secret processes or
confidential information of the Company or a Company subsidiary; or

     (iii) Intentional wrongful engagement in any Competitive Activity which
would constitute a material breach of the Employee’s duty of loyalty to the
Company.

For purposes of this Agreement, no act, or failure to act, on the part of the Employee shall be
deemed “intentional” unless done or omitted to be done, by the Employee not in good faith and
without reasonable belief that his action or omission was in or not opposed to the best interest of
the Company.

     1.7 Competitive Activity: The term “Competitive Activity” shall mean the Employee’s
participation, without the written consent of an officer of the Company, in the management of any
business enterprise if such enterprise engages in substantial and direct

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competition with the Company and such enterprise’s sales of any product or service competitive
with any product or service of the Company amounted to 25% of such enterprise’s net sales for its
most recently completed fiscal year and if the Company’s net sales of said product or service
amounted to 25% of the Company’s net sales for its most recently completed fiscal year.
“Competitive Activity” shall not include (a) the mere ownership of securities in any enterprise and
exercise of rights appurtenant thereto or (b) participation in management of any enterprise or
business operation thereof other than in connection with the competitive operation of such
enterprise.

          1.8 Employee Termination Event: The term “Employee Termination Event” shall mean the
Termination of Employment of the Employee (including a decision to retire if eligible under The
1984 Retirement Plan for Salaried Employees of The Timken Company, or any successor plan (the
“Retirement Plan”)) by the Employee in any of the following events:

     (a) A determination by the Employee made in good faith that upon or after the
occurrence of a Change in Control: (i) a material reduction in the nature or scope
of the responsibilities, authorities or duties of the Employee attached to the
Employee’s position held immediately prior to the Change in Control has occurred; or
(ii) a change of more than 60 miles has occurred in the location of the Employee’s
principal office immediately prior to the Change in Control;

     (b) A material reduction by the Company in the Employee’s Base Salary upon or
after the occurrence of a Change in Control;

For purposes of this Agreement, the amount of any reduction in annual base salary
elected by the Employee pursuant to any qualified or non-qualified salary reduction
arrangement maintained by the Company, including, without limitation, The Timken
Company Savings and Investment Pension Plan (the “SIP Plan”) and The Timken Company
1996 Deferred Compensation Plan (the “Deferred Compensation Plan”), shall be
included in the determination of Base Salary; or

     (c) An action or inaction that constitutes a material breach by the Company of
this Agreement (including, but not limited to, a breach of Section 8.1 hereof) upon
or after the occurrence of a Change in Control.

     Notwithstanding the foregoing, no Termination of Employment by the Employee will be an
Employee Termination Event unless (x) the Employee gives the Company notice of the existence of a
condition described in subsection (a), (b), or (c), above within 90 days of the initial existence
of such condition, and (y) the Company does not remedy such condition described in clause (a), (b),
or (c) above, as applicable, within 30 days of receiving the notice described in the preceding
clause (x), and (z) the Employee terminates employment within 2 years after the initial existence
of a condition described in subsection (a), (b), or (c), above.

          1.9 Enhanced Supplemental Pension Benefit: The term “Enhanced Supplemental Pension
Benefit” shall mean (a) less (b), where:

     (a) is the Primary Supplemental Pension Benefit determined by assuming (i) the
Employee was credited with additional service with the

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Company equal to the period of time between the Termination Date and the first
to occur of either (A) the end of the Limited Period or (B) the end of the Severance
Period, provided that for purposes of the Retirement Plan, the Excess Agreement and
the Supplemental Plan the Employee will only be credited with such additional
service if the Employee was being credited with service for benefit accrual purposes
under such plans immediately prior to the Termination Date, and (ii) the Employee’s
compensation for purposes of benefit calculation under the Retirement Plan, the
Excess Agreement and the Supplemental Plan included a period of the Employee’s
full-time employment with the Company equal to the period of time between the
Termination Date and the first to occur of either (A) the end of the Limited Period
or (B) the end of the Severance Period during which the Employee had Base Salary
equal to the greater of (1) his Base Salary for the calendar year in which the
Employee’s employment is terminated or (2) his Base Salary for the calendar year in
which the Change in Control occurred, and Incentive Pay equal to the greater of (I)
the Employee’s Incentive Pay for the calendar year in which the Termination Date
occurs or (II) the Employee’s Incentive Pay for the calendar year in which the
Change in Control occurs; and

     (b) is the Primary Supplemental Pension Benefit.

The calculations of the Enhanced Supplemental Pension Benefit (and its actuarial equivalence) shall
be made, as of the Termination Date, by Watson Wyatt & Company or such other independent actuary
appointed by the administrator of the Retirement Plan and acceptable to the Employee (the
“Actuary”). The lump sum of actuarial equivalence shall be calculated using the applicable
mortality table promulgated by the Internal Revenue Service (“IRS”) under Section 417(e)(3) of the
Code as in effect on the Termination Date and the applicable interest rates promulgated by the IRS
under Section 417(e)(3) of the Code for the month third preceding the month in which the
Termination Date occurs, and if the IRS ceases to promulgate such interest rates, an interest rate
determined by the Actuary.

          1.10 Incentive Pay: The term “Incentive Pay” shall mean an annual amount equal to the
target annual amount of Incentive Payments payable to the Employee, without regard to any reduction
thereof elected by the Employee pursuant to any qualified or non-qualified salary reduction
arrangement maintained by the Company, including, without limitation, the SIP Plan and the Deferred
Compensation Plan; provided, however, for purposes of Section 4.2 for a Termination
of Employment other than in the Limited Period, Incentive Pay shall mean an amount equal to the
annual incentive amount earned for the calendar year in which the Termination Date occurs.

          1.11 Incentive Payments: The term “Incentive Payments” shall mean any cash incentive
compensation paid based on an annual performance period (whether pursuant to the Company’s
Management Performance Plan or any successor similar plan or through any other means).

          1.12 Incumbent Directors: The term “Incumbent Directors” means the individuals who,
as of the date hereof, are Directors of the Company and any individual

6

 

becoming a Director subsequent to the date hereof whose election, nomination for election by
the Company’s shareholders, or appointment, was approved by a vote of at least two-thirds of the
then Incumbent Directors (either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without objection to such
nomination); provided, however, that an individual shall not be an Incumbent
Director if such individual’s election or appointment to the Board occurs as a result of an actual
or threatened election contest (as described in Rule 14a-12(c) of the Exchange Act) with respect to
the election or removal of Directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.

          1.13 Limited Period: The term “Limited Period” shall mean that period of time
commencing on the date of a Change in Control and continuing for a period of three years.

          1.14 Notice of Termination: The term “Notice of Termination” shall mean a written
notice delivered to the Employee in the manner specified in Section 9 of this Agreement, which
notice indicates the specific termination provision in this Agreement relied upon and sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for termination of the
Employee’s employment.

          1.15 Post-Tax SIP Plan Benefit: The “Post-Tax SIP Plan Benefit” shall mean the sum
of:

     (a) The amount credited to the Employee’s account under The Timken Company
Post-Tax SIP Plan (the “Post-Tax SIP Plan”) as of the Termination Date; plus

     (b) The amount of Company contributions that would have been credited to the
Employee’s account under the Post-Tax SIP Plan after the Termination Date if the
Employee had remained in the full-time employment of the Company until the earlier
of (i) end of the Limited Period or (ii) the end of the Severance Period at the
greater of (I) his Base Salary and Incentive Pay for the calendar year in which the
Employee’s employment is terminated, or (II) his Base Salary and Incentive Pay for
the calendar year in which the Change in Control occurred, and assuming the
Employee’s contributions to the Post-Tax SIP Plan following the Termination Date had
been at the highest rate at which such contributions had been made at any time
during the three-year period ending on the Termination Date.

          1.16 Primary Supplemental Pension Benefit: The term “Primary Supplemental Pension
Benefit” shall mean (a) less (b), where:

     (a) is the sum of the accrued pension benefits (converted to a lump sum of
actuarial equivalence as of the Termination Date) which the Employee would have been
entitled to receive at or after the Termination Date under (i) the Retirement Plan,
(ii) any annuity distributed to the Employee as a result of the termination on
October 31, 1984 of the Retirement Plan for Salaried Employees of The Timken Company
(the “Terminated Pension Plan”), (iii) any Employee

7

 

Excess Benefits Agreement (“Excess Agreement”), and (iv) the Supplemental
Pension Plan of the Timken Company (“Supplemental Plan”), assuming for purposes of
this calculation that (A) the Employee’s benefits under the Retirement Plan, the
Excess Agreement and the Supplemental Plan were vested and non-forfeitable, (B) the
Employee satisfied any other condition under the Retirement Plan, the Excess
Agreement and the Supplemental Plan to his receipt of benefits thereunder, (C) the
Employee’s compensation for purposes of the Retirement Plan, the Excess Agreement
and the Supplemental Plan was determined without regard to any reduction in
compensation elected by the Employee pursuant to any qualified or non-qualified
salary reduction arrangement maintained by the Company, including without
limitation, the SIP Plan and the Deferred Compensation Plan, (D) solely for purposes
of determining the time at which the Employee would receive benefits under the
Retirement Plan, the Terminated Pension Plan, the Excess Agreement and the
Supplemental Plan, the Employee had continued his employment with the Company until
such time Employee would have received such benefits, and (E) the Employee commenced
receiving benefits from the Retirement Plan, the Terminated Pension Plan, the Excess
Agreement and the Supplemental Plan at the point in time when the total of the lump
sums of actuarial equivalence under the Retirement Plan, the Terminated Pension
Plan, the Excess Agreement and the Supplemental Plan is the greatest; and

     (b) is the sum of the accrued pension benefits (converted to a lump sum of
actuarial equivalence as of the Termination Date) which the Employee is entitled to
receive at or after the Termination Date under (i) the Retirement Plan, and (ii) any
annuity distributed to the Employee as a result of the termination on October 31,
1984 of the Terminated Pension Plan.

The calculations of the Primary Supplemental Pension Benefit (and its actuarial equivalence) shall
be made, as of the Termination Date, by Watson Wyatt & Company or such other independent actuary
appointed by the administrator of the Retirement Plan and acceptable to the Employee (the
“Actuary”). The lump sum of actuarial equivalence shall be calculated using the applicable
mortality table promulgated by the Internal Revenue Service (“IRS”) under Section 417(e)(3) of the
Code as in effect on the Termination Date and the applicable interest rate promulgated by the IRS
under Section 417(e)(3) of the Code for the month third preceding the month in which the
Termination Date occurs, and if the IRS ceases to promulgate such interest rates, an interest rate
determined by the Actuary.

1.17 Severance Amount: The term “Severance Amount” shall mean an amount equal to the
sum of:

     (a) [Two/One and one-half/One] times the Employee’s Base Salary in effect
immediately prior to the Employee’s termination of employment; and

     (b) [Two/One and one-half] times the Employee’s Incentive Pay for the year in
which the Employee’s employment is terminated [Deleted for Grades 12 and 13 and
non-EC Officers];

8

 

          1.18 Severance Period: The term “Severance Period” shall mean the period beginning on
the Employee’s Termination Date which precedes a Change in Control and ending on the [three
year/one and one-half year] anniversary of the Termination Date.

          1.19 Subsidiary: The term “Subsidiary” means a corporation, partnership, joint
venture, unincorporated association or other entity in which the Company directly or indirectly
beneficially owns 50% or more ownership or other equity interest.

          1.20 Supplemental SIP Plan Benefit: The “Supplemental SIP Plan Benefit” shall mean:

     (a) The amount of the Company Matching Contributions and Core Contributions (as
such terms are defined in the SIP Plan) that would have been made to the SIP Plan by
the Company and allocated to the Employee’s account thereunder as if the Employee
had remained in the full-time employment of the Company until the earlier of (i) the
end of the Limited Period or (ii) the end of the Severance Period, at the greater of
(I) his Base Salary for the calendar year in which the Employee’s employment is
terminated, or (II) his Base Salary immediately prior to the Change in Control, and
the greater of (y) the Employee’s Incentive Pay for the calendar year in which the
Termination Date occurs and (z) the Employee’s Incentive Pay for the calendar year
in which the Change in Control occurred, and assuming the Employee’s salary deferral
was at the maximum permissible level; less

     (b) The amount of the Company Matching Contributions and Core Contributions
made to the SIP Plan by the Company and allocated to the Employee’s account
thereunder as of the Termination Date.

          1.21 Termination Date: The term “Termination Date” shall mean the effective date of
the Employee’s Termination of Employment with the Company.

          1.22 Termination of Employment: The term “Termination of Employment” means
termination of employment within the meaning of Treasury Regulation Section 1.409A-1(h)(1)(ii).

          1.23 Voting Stock: The term “Voting Stock” means securities entitled to vote
generally in the election of directors.

     2. Operation of Agreement: This Agreement shall be effective immediately upon its
execution.

     3. Conditions During the Limited Period: During the Limited Period:

     (a) the Employee shall remain in the same or better office and position in the
Company (or a successor thereto) or any Subsidiary that the Employee held
immediately prior to the Change in Control;

9

 

     (b) if the Employee was a Director of the Company or a Subsidiary immediately
prior to a Change in Control, the Employee shall remain a Director of the Company
(or a successor thereto) or a Director of such Subsidiary;

     (c) Employee shall be entitled to receive Incentive Payments equal to or in
excess the Employee’s average Incentive Pay for the previous three calendar years;
and such amounts will be paid in the calendar year following the calendar year in
which the amounts are earned but in no event later than 2 1/2 months after the end of
the calendar year following the calendar year in which such amounts are earned;

     (d) (i) the Company shall continue in effect without a material negative change
to any compensation or benefit plan in which the Employee participated immediately
prior to the Change in Control and, as applicable, the Company shall continue
Employee’s participation in any such compensation or benefit plan; (ii) neither the
Company nor its Subsidiaries shall take any action that would directly or indirectly
materially reduce any of the benefits of any compensation or benefit plan enjoyed by
the Employee at the time of the Change in Control; (iii) the Employee shall continue
to be entitled to no less than the same number of paid vacation days to which the
Employee was entitled immediately prior to the Change in Control, based on years of
service with the Company or its Subsidiaries in accordance with the normal vacation
policy, in effect immediately prior to the Change in Control, of the Company or any
of its Subsidiaries that employ Employee immediately prior to the Change in Control,
and (iv) neither the Company nor any of its Subsidiaries shall take any other action
which would materially adversely change the conditions or prerequisites of the
Employee’s employment as in effect immediately prior to the Change in Control; and

     (e) the termination of Employee’s employment by the Company or its Subsidiaries
shall only be effected pursuant to a Notice of Termination satisfying the
requirements of Section 1.14 of this Agreement.

Employee acknowledges that if the Company fails to fulfill any of its obligations
under this Section 3, Employee’s only recourse is to cause such failure to be
considered an Employee Termination Event if the breach is considered a material
breach of this Agreement and Employee’s damages will be limited to the payments
provided for in Section 4, as applicable.

     4. Severance Compensation:

          4.1 Severance Compensation:

     (a) If the Employee experiences a Termination of Employment during the Limited
Period because the Company terminated the Employee’s employment during the Limited
Period other than pursuant to a Company Termination Event, or because the Employee
voluntarily terminated his employment during the Limited Period pursuant to an
Employee Termination Event, then the Company

10

 

shall pay as severance compensation to the Employee a lump sum cash payment in
the amount of the CIC Severance Amount. Anything in this Agreement to the contrary
notwithstanding, if a Change in Control occurs and not more than 90 days prior to
the date on which the Change in Control occurs, the Employee experiences a
Termination of Employment because the Company terminated the Employee’s employment,
such Termination of Employment will be deemed to be a Termination of Employment
during the Limited Period for purposes of this Agreement if the Employee has
reasonably demonstrated that such Termination of Employment (i) was at the request
of a third party who has taken steps reasonably calculated to effect a Change in
Control, or (ii) otherwise arose in connection with or in anticipation of a Change
in Control. In the event the Employee is entitled to the benefits under this
Agreement as a result of the preceding sentence, then the 60-calendar-day periods
specified in Section 4.1(c) and Section 4.5(b) shall be deemed to commence on the
date on which the Employee receives the notice contemplated by the last sentence of
Section 1.3 hereof.

     (b) If the Employee experiences a Termination of Employment because the Company
has terminated the Employee’s employment other than during the Limited Period and
other than (i) pursuant to a Company Termination Event or (ii) for reasons of (A)
criminal activity or (B) willful misconduct or gross negligence in the performance
of the Employee’s duties, then the Company shall pay as severance compensation to
the Employee a lump sum cash payment in the amount of the Severance Amount within 60
days of the Termination Event.

     (c) The payment of the Severance Amount or the CIC Severance Amount required by
this Section 4.1 and any Gross-Up Payment initially determined to be required by
Section 4.5 shall, subject to Section 19.2 and to the execution and delivery by the
Employee of the Release described in Section 7 hereof, and the expiration of all
applicable rights of the Employee to revoke the Release or any provision thereof, be
made to the Employee within 60 calendar days after the Termination Date. In no
event will the Employee have a right to designate the taxable year of any such
payment. Notwithstanding the foregoing, if the Employee is entitled to the CIC
Severance Amount by reason of a Termination of Employment that occurred more than 2
years after the Change in Control or by reason of a Change in Control that does not
constitute a permitted distribution event under Section 409A(a)(2) of the Code, then
payment of the portion of the CIC Severance Amount that is attributable to the
Primary Supplemental Pension Benefit Plan shall be paid to the Employee at the same
time and in same form as the benefits payable to participants under the Supplemental
Plan and Excess Agreement, as applicable.

Upon receipt of the CIC Severance Amount, if paid, and because the CIC
Severance Amount includes a supplemental pension benefit that the parties intend to
be paid pursuant to this Agreement in lieu of any benefits to which the Employee is
entitled under the Excess Agreement, the Supplemental Plan, and the Post-Tax SIP
Plan, the Employee hereby retroactively waives, upon his receipt of the CIC
Severance Amount, participation in any non-qualified pension plan of, or

11

 

benefits under any employee excess benefits agreement with, the Company
providing for benefits in excess of those permitted by the Code to be paid under the
Retirement Plan and SIP Plan, and which measure service and compensation under such
plan or agreement as a basis for benefits, including, without limitation, the Excess
Agreement and the Supplemental Plan.

          4.2 Compensation through Termination: If the Employee experiences a Termination of
Employment, the Company shall pay the Employee any Base Salary that has accrued but is unpaid
through the Termination Date. If the Employee experiences a Termination of Employment because his
employment is terminated by the Company other than for Cause, the Company shall pay the Employee an
amount equivalent to the Incentive Pay for the calendar year in which the Termination Date occurs
multiplied by a fraction, the numerator of which is the number of days in the calendar year in
which the Termination Date occurs that have expired prior to the Termination Date and the
denominator of which is three hundred sixty-five. Such payment shall be made, in the case of a
Termination of Employment during the Limited Period, in accordance with the provisions governing
payment of the Severance Amount or CIC Amount under Section 4.1(c), and in the case of a
Termination of Employment other than during the Limited Period, in the year following the year in
which the Termination Date occurs but no later than March 15th of such year.

          4.3 Offset: To the full extent permitted by applicable law, the Company retains the
right to offset against the Severance Amount or the Gross-Up Payment on the Severance Amount
otherwise due to the Employee hereunder any amounts then owing and payable by such Employee to the
Company or any of its affiliates. The maximum amount that will be deducted from the Gross-Up
Payment to offset an amount that the Employee owes the Company or its affiliates is $5,000, and
such deduction will be taken at the same time and in the same amount as otherwise would be taken by
the Company. The limit and timing of the deduction in the preceding sentence do not apply to
deductions from the Severance Amount.

          4.4 Interest on Overdue Payments: Without limiting the rights of the Employee at law
or in equity, if the Company fails to make any payment required to be made under this Agreement on
a timely basis, the Company shall pay interest on the amount thereof at an annualized rate of
interest equal to the “prime rate” as set forth from time to time during the relevant period in
The Wall Street Journal “Money Rates” column, plus 1%.

          4.5 Indemnification:

     (a) Anything in this Agreement to the contrary notwithstanding, in the event
that it shall be determined (as hereafter provided) that any payment or distribution
by the Company to or for the benefit of the Employee, whether paid hereunder or paid
or payable or distributed or distributable pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without limitation any
stock option, stock appreciation right or similar right, or the lapse of termination
of any of the foregoing (individually and collectively a “Payment”), would be
subject to the excise tax imposed by Section 4999 of the Code (or any successor
provision thereto) by reason of being considered “contingent on a change in
ownership or control” of the Company, within the

12

 

meaning of Section 280G of the Code (or any successor provision thereto), or to
any similar tax imposed by state or local law, or to any interest or penalties with
respect to such taxes (such taxes together with any such interest and penalties,
being hereafter collectively referred to as the “Excise Tax”), then the Employee
shall be entitled to receive an additional payment or payments (individually and
collectively, a “Gross-Up Payment”). The Gross-Up Payment shall be in an amount
such that, after payment by the Employee of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax imposed upon
the Gross-Up Payment, the Employee retains a portion of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payment.

     (b) Subject to the provisions of paragraph (e) of this Section 4.5, all
determinations required to be made under this Section 4.5, including whether an
Excise Tax is payable by the Employee and the amount of such Excise Tax and whether
a Gross-Up Payment is required to be paid by the Company to the Employee and the
amount of such Gross-Up Payment, if any, shall be made by a nationally recognized
accounting or benefits consulting firm (the “Firm”) mutually agreed upon by the
Employee and the Company. The Firm shall submit its determination and detailed
supporting calculations to both the Company and the Employee within 30 calendar days
after the Termination Date, if applicable, and any such other time or times as may
be requested by the Company or the Employee. If the Firm determines that any Excise
Tax is payable by the Employee, the Company shall pay the required Gross-Up Payment
to the Employee on the date that is 60 calendar days after the Termination Date. If
the Firm determines that no Excise Tax is payable by the Employee, it shall, at the
same time as it makes such determination, furnish the Company and the Employee an
opinion that the Employee has substantial authority not to report any Excise Tax on
his federal income tax return. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the possibility of
similar uncertainty regarding applicable state or local tax law at the time of any
determination by the Firm hereunder, it is possible that Gross-Up payments which
will not have been made by the Company should have been made (an “Underpayment”),
consistent with the calculations required to be made hereunder. In the event that
the Company exhausts or fails to pursue its remedies pursuant to paragraph (e) of
this Section 4.5 and the Employee thereafter is required to make a payment of the
Excise Tax, the Employee shall direct the Firm to determine the amount of the
Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and the Employee as promptly as
possible. Any such Underpayment shall be promptly paid by the Company to, or for
the benefit of, the Employee within five business days after receipt of such
determination and calculations.

     (c) The Company and the Employee shall each provide the Firm access to and
copies of any books, records and documents in the possession of the Company or the
Employee, as the case may be, reasonably requested by the Firm, and otherwise
cooperate with the Firm in connection with the preparation and issuance of the
determinations and calculations contemplated by paragraph (b) of

13

 

this Section 4.5. Any determination by the Firm as to the amount of the
Gross-Up Payment or the Underpayment shall be binding upon the Company and the
Employee.

     (d) The fees and expenses of the Firm for its services in connection with the
determinations and calculations contemplated by paragraph (b) of this section 4.5
shall be borne by the Company. If such fees and expenses are initially paid by the
Employee, the Company shall reimburse the Employee the full amount of such fees and
expenses within five business days after receipt from the Employee of a statement
therefor and reasonable evidence of his payment thereof.

     (e) The Employee shall notify the Company in writing of any claim by the IRS or
any other taxing authority that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be given as promptly as
practicable but no later than 10 business days after the Employee actually receives
notice of such claim and the Employee shall further apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid (in
each case, to the extent known by the Employee). The Employee shall not pay such
claim prior to the earlier of (y) the expiration of the 30-calendar-day period
following the date on which he gives such notice to the Company and (z) the date
that any payment of amount with respect to such claim is due. If the Company
notifies the Employee in writing prior to the expiration of such period that it
desires to contest such claim, the Employee shall:

     (i) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company;

     (ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such claim
by an attorney competent in respect of the subject matter and reasonably
selected by the Company;

     (iii) cooperate with the Company in good faith in order to effectively
to contest such claim; and

     (iv) permit the Company to participate in any proceedings relating to
such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such contest
and shall indemnify and hold harmless the Employee, on an after-tax basis, for and
against any Excise Tax or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of costs and
expenses. Without limiting the foregoing provisions of paragraph (e), the Company
shall control all proceedings taken in connection with

14

 

the contest of any claim contemplated by paragraph (e) and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim (provided, however,
that the Employee may participate therein at his own cost and expense) and may, at
its option, either direct the Employee to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Employee agrees to prosecute
such contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Employee to pay the
tax claimed and sue for a refund, the Company shall, if permitted by applicable law,
advance the amount of such payment to the Employee on an interest-free basis and
shall indemnify and hold the Employee harmless, on an after-tax basis, from any
Excise Tax or income tax or other tax, including interest or penalties with respect
thereto, imposed with respect to such advance; and provided further, however, that
any extension of the statute of limitations relating to payment of taxes for the
taxable year of the Employee with respect to which the contested amount is claimed
to be due is limited solely to such contested amount. Furthermore, the Company’s
control of any such contested claim shall be limited to issues with respect to which
a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to
settle or contest, as the case may be, any other issue raised by the IRS or any
other taxing authority.

     (f) If, after the receipt by the Employee of an amount advanced by the Company
pursuant to paragraph (e) of this Section 4.5, the Employee receives any refund with
respect to such claim, the Employee shall (subject to the Company’s complying with
the requirements of paragraph (e) of this Section 4.5) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon after
any taxes applicable thereto). If, after the receipt by the Employee of an amount
advanced by the Company pursuant to paragraph (e) of this Section 4.5, a
determination is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee in writing of its
intent to contest such denial or refund prior to the expiration of 30 calendar days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of any such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid by the Company to the
Employee pursuant to this Section 4.5.

     (g) The Federal, state and local income or other tax returns filed by the
Employee shall be prepared and filed on a basis consistent with the determination of
the Firm with respect to the Excise Tax payable by the Employee. The Employee shall
make proper payment of the amount of any Excise Tax, and at the request of the
Company, provide to the Company true and correct copies (with any amendments) of his
federal income tax return as filed with the IRS and corresponding state and local
tax returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of the Employee’s

15

 

federal income tax return, or corresponding state or local tax return, if
relevant, the Firm determines that the amount of the Gross-Up Payment should be
reduced, the Employee shall within five business days pay to the Company the amount
of such reduction.

     (h) Notwithstanding any provision of the Agreement to the contrary:

     (i) If the Employee is entitled to the payment of taxes pursuant to
this Section 4.5, such taxes will be paid or reimbursed no earlier than the
date on which the release provided in Section 7 becomes irrevocable and no
later than the end of the Employee’s tax year following the tax year in
which the taxes subject to the applicable claim are remitted to the
applicable taxing authority.

     (ii) If the Employee is entitled to the payment of any expenses,
including interest and penalties assessed on the taxes pursuant to this
Section 4.5, such expenses will be paid or reimbursed so long as they were
incurred during the Employee’s lifetime and will be paid or reimbursed no
earlier than the date on which the release provided in Section 7 becomes
irrevocable and no later than the last day of the year following the year in
which the Employee incurs the expense, or in the case of reimbursement of
expenses incurred due to a tax audit or litigation addressing the existence
or amount of a tax liability in which there is no remittance of taxes, no
later than the end of the year following the year in which the audit is
completed or there is a final and nonappealable settlement or other
resolution of the litigation in accordance with Treasury Regulation
Section 1.409A-3(i)(v). Each provision of reimbursements pursuant to this
Section 4.5 shall be considered a separate payment and not one of a series
of payments for purposes of Section 409A. Any expense reimbursed by the
Company in one taxable year in no event will affect the amount of expenses
required to be reimbursed by the Company in any other taxable year.

          4.6 Continuation of Certain Benefits.

     (a) If the Company terminates the Employee’s employment during the Limited
Period other than pursuant to a Company Termination Event, or if the Employee
voluntarily terminates his employment during the Limited Period pursuant to an
Employee Termination Event, then the Employee, and the Employee’s eligible
dependents, shall be entitled to continue to participate in the Company’s medical,
dental, vision and life insurance plans for which the Employee was eligible
immediately prior to the Employee’s Termination Date, until the earlier of (i)
Employee’s eligibility for any such coverage under another employer’s or any other
medical plan or (ii) [three years/eighteen months] following the termination of
Employee’s employment (the “CIC Benefit Continuation Period”). The Employee’s
continued participation in the Company’s life insurance plans shall be on the terms
(including access fees) not

16

 

less favorable than those in effect for actively employed key employees of the
Company. The Employee’s continued participation in the Company’s medical, dental,
and vision plans shall be on the terms not less favorable than those in effect for
actively employed key employees of the Company but only if the Employee makes a
payment to the Company in an amount equal to the monthly premium payments (both the
employee and employer portion) required to maintain such coverage on the first day
of each calendar month during the CIC Benefit Continuation Period commencing with
the first calendar month following the Termination Date. Subject to Section 19.2,
the Company shall reimburse the Employee on an after-tax basis for the amount of
such premiums paid by the Employee pursuant to the preceding sentence, if any, in
excess of any employee contributions (access fees) necessary to maintain such
coverage during the CIC Benefit Continuation Period (the “CIC Reimbursement
Payments”), and such CIC Reimbursement Payments shall be paid to the Employee on the
15th day of each calendar month during the CIC Benefit Continuation
Period commencing with the calendar month in which the Employee’s first premium
payment is due pursuant to the preceding sentence or, if later, the calendar month
following the calendar month in which the release provided for in Section 7 becomes
irrevocable. Each CIC Reimbursement Payment shall be considered a separate payment
and not one of a series of payments for purposes of Section 409A. Employee agrees
that the period of coverage under such plan shall count against the medical plan’s
obligation to provide continuation coverage pursuant to Part 6 of Subtitle B of
Title I of the Employee Retirement Income Security Act of 1974, as amended
(“COBRA”).

     (b) If the Company terminates the Employee’s employment other than during the
Limited Period and other than (i) pursuant to a Company Termination Event or (ii)
for reasons of (A) criminal activity or (B) willful misconduct or gross negligence
in the performance of the Employee’s duties, then the Employee, and the Employee’s
eligible dependents, shall be entitled to continue to participate in the Company’s
medical, dental, vision and life insurance plans for which the Employee was eligible
immediately prior to the Employee’s Termination Date, until the earlier of (x)
Employee’s eligibility for any such coverage under another employer’s or any other
medical plan or (y) [two years/one year/eighteen months] following the termination
of Employee’s employment (the “Severance Benefit Continuation Period”). The
Employee’s continued participation in the Company’s life insurance plans shall be on
the terms (including access fees) not less favorable than those in effect for
actively employed key employees of the Company. The Employee’s continued
participation in the Company’s medical, dental, and vision plans shall be on the
terms not less favorable than those in effect for actively employed key employees of
the Company but only if the Employee makes a payment to the Company in an amount
equal to the monthly premium payments (both the employee and employer portion)
required to maintain such coverage on the first day of each calendar month during
the Severance Benefit Continuation Period commencing with the first calendar month
following the Termination Date. Subject to Section 19.2, the Company shall
reimburse the Employee on an after-tax basis for the amount of such premiums

17

 

paid by the Employee pursuant to the preceding sentence, if any, in excess of
any employee contributions (access fees) necessary to maintain such coverage during
the Benefit Continuation Period (the “ Severance Reimbursement Payments”), and such
Severance Reimbursement Payments shall be paid to the Employee on the
15th day of each calendar month during the Severance Benefit Continuation
Period commencing with the calendar month in which the Employee’s first premium
payment is due pursuant to the preceding sentence or, if later, the calendar month
following the calendar month in which the release provided for in Section 7 becomes
irrevocable. Each Severance Reimbursement Payment shall be considered a separate
payment and not one of a series of payments for purposes of Section 409A. Employee
agrees that the period of coverage under such plan shall count against the medical
plan’s obligation to provide continuation coverage pursuant to COBRA.

     5. No Obligation to Mitigate Damages: The Employee shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by seeking other employment
or otherwise, nor, except as provided in Sections 4.6(a) and 4.6(b), shall the amount of any
payment or benefit provided for under this Agreement be reduced by any compensation earned by the
Employee as the result of employment by another employer after the Termination Date, or otherwise.

     6. Confidential Information; Covenant Not To Compete:

          6.1 The Employee acknowledges that all trade secrets, customer lists and other confidential
business information are the exclusive property of the Company. The Employee shall not (following
the execution of this Agreement, during the Limited Period, or at any time thereafter) disclose
such trade secrets, customer lists, or confidential business information without the prior written
consent of the Company. The Employee also shall not (following the execution of this Agreement,
during the Limited Period, or at any time thereafter) directly or indirectly, or by acting in
concert with others, employ or attempt to employ or solicit for any employment competitive with the
Company any person(s) employed by the Company. The Employee recognizes that any violation of this
Section 6.1 and Section 6.2 is likely to result in immediate and irreparable harm to the Company
for which money damages are likely to be inadequate. Accordingly, the Employee consents to the
entry of injunctive and other appropriate equitable relief by a court of competent jurisdiction,
after notice and hearing and the court’s finding of irreparable harm and the likelihood of
prevailing on a claim alleging violation of this Section 6, in order to protect the Company’s
rights under this Section. Such relief shall be in addition to any other relief to which the
Company may be entitled at law or in equity. The Employee agrees that the state and federal courts
located in the State of Ohio shall have jurisdiction in any action, suit or proceeding against
Employee based on or arising out of this Agreement and Employee hereby: (a) submits to the
personal jurisdiction of such courts; (b) consents to service of process in connection with any
action, suit or proceeding against Employee; and (c) waives any other requirement (whether imposed
by statute, rule of court or otherwise) with respect to personal jurisdiction, venue or service of
process.

          6.2 For a period of time beginning upon the Termination Date and ending upon the first
anniversary of the Termination Date, the Employee shall not (a) engage or

18

 

participate, directly or indirectly, in any Competitive Activity, as defined in Section 1.7 or
(b) solicit or cause to be solicited on behalf of a competitor any person or entity which was a
customer of the Company during the term of this Agreement, if the Employee had any direct
responsibility for such customer while employed by the Company.

     7. Release:

     Payment of the severance payments set forth in Section 4 hereof is conditioned upon the
Employee executing and delivering a full and complete release of all claims satisfactory to the
Company within 50 days of the Employee’s Termination Date.

     8. Successors, Binding Agreement and Complete Agreement:

          8.1 Successors: The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to the Employee, to assume
and agree to perform this Agreement.

          8.2 Binding Agreement: This Agreement shall inure to the benefit of and be
enforceable by the Employee’s personal or legal representative, executor, administrators,
successors, heirs, distributees and legatees. This Agreement shall be binding upon and inure to
the benefit of the Company and any successor of or to the Company, including, without limitation,
any person acquiring directly or indirectly all or substantially all of the assets of the Company
whether by merger, consolidation, sale or otherwise (and such successor shall thereafter be deemed
“the Company” for the purposes of this Agreement), but shall not otherwise be assignable by the
Company.

          8.3 Complete Agreement.  This Agreement embodies the complete agreement and
understanding between the parties with respect to the subject matter hereof and effective as of its
date supersedes and preempts any prior understandings, agreements or representations[, including,
but not limited to, the Severance Agreement between the Company and the Employee dated                     
___, ___,] by or between the parties, written or oral, which may have related to the subject matter
hereof in any way.

     9. Notices: For the purpose of this Agreement, all communications provided for herein
shall be in writing and shall be deemed to have been duly given when delivered or mailed by United
States registered or certified mail, return receipt requested, postage prepaid, addressed as
indicated below, or to such other address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of change of address shall be effective only upon
receipt.

	 	 	 	 	 	 	 
	 

	 	If to the Company:
	 	The Timken Company	 	 
	 

	 	 	 	1835 Dueber Avenue, S.W.	 	 
	 

	 	 	 	Canton, Ohio 44706	 	 
	 
	 	 	 	 	 	 
	 

	 	If to the Employee:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	 

	 	 

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     10. Governing Law: The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Ohio, without giving effect to the
principles of conflict of laws of such State.

     11. Miscellaneous: No provision of this Agreement may be amended, modified, waived or
discharged unless such amendment, waiver, modification or discharge is agreed to in writing signed
by the Employee and the Company. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. If the Employee files a claim
for benefits under this Agreement with the Company, the Company will follow the claims procedures
set out in 29 C.F.R. Section 2560.503-1.

     12. Validity: The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement which
shall remain in full force and effect.

     13. Counterparts: This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
Agreement.

     14. Employment Rights: Nothing expressed or implied in this Agreement shall create
any right or duty on the part of the Company or the Employee to have the Employee remain in the
employment of the Company.

     15. Withholding of Taxes: The Company may withhold from any amount payable under this
Agreement all federal, state, city or other taxes as shall be required pursuant to any law or
government regulation or ruling.

     16. Nonassignability: This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer this Agreement or any rights or
obligations, hereunder, except as provided in Sections 8.1 and 8.2 above. Without limiting the
foregoing, the Employee’s right to receive payments hereunder shall not be assignable or
transferable, whether by pledge, creation of a security interest or otherwise, other than by a
transfer by his will or by the laws of descent and distribution and in the event of any attempted
assignment or transfer contrary to this Section the Company shall have no liability to pay any
amounts so attempted to be assigned or transferred.

     17. Termination of Agreement: The term of this Agreement (the “Term”) shall commence
as of the date hereof and shall expire on the close of business on [December 31, 200___];
provided, however, that (i) commencing on [January 1, 200___] and each January 1
thereafter, the term of this Agreement will automatically be extended for an additional year
unless, not later than September 30 of the immediately preceding year, the Company or the

20

 

Employee shall have given notice that it or the Employee, as the case may be, does not wish to
have the Term extended; (ii) if a Change in Control occurs during the Term, the Term will expire on
the last day of the Limited Period; and (iii) subject to Section 4.1, if the Employee ceases for
any reason to be a key employee of the Company or any Subsidiary, thereupon without further action
the Term shall be deemed to have expired and this Agreement will immediately terminate and be of no
further effect. For purposes of this Section 17, the Employee shall not be deemed to have ceased
to be an employee of the Company or any Subsidiary by reason of the transfer of Employee’s
employment between the Company and any Subsidiary, or among any Subsidiaries.

     18. Indemnification of Legal Fees and Expenses; Security for Payment: 

          18.1 Indemnification of Legal Fees. It is the intent of the Company that in the case
of a Change in Control, the Employee not be required to incur the expenses associated with the
enforcement of his rights under this Agreement by litigation or other legal action because the cost
and expense thereof would substantially detract from the benefits intended to be extended to the
Employee hereunder. Accordingly, after a Change in Control, if it should appear to the Employee
that the Company has failed to comply with any of its obligations under this Agreement or in the
event that the Company or any other person takes any action to declare this Agreement void or
unenforceable, or institutes any litigation designed to deny, or to recover from, the Employee the
benefits intended to be provided to the Employee hereunder, the Company irrevocably authorizes the
Employee from time to time to retain counsel of his choice, at the expense of the Company as
hereafter provided, to represent the Employee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any Director, officer,
stockholder or other person affiliated with the Company, in any jurisdiction. The Company shall
pay or cause to be paid and shall be solely responsible for any and all attorneys’ and related fees
and expenses incurred by the Employee after a Change in Control and as a result of the Company’s
failure to perform this Agreement or any provision hereof or as a result of the Company or any
person contesting the validity or enforceability of this Agreement or any provision hereof as
aforesaid.

     If the Employee is entitled to reimbursement pursuant to this Section 18.1, this Section shall
apply to any such eligible costs and expenses incurred during the Employee’s lifetime. Subject to
Section 19.2, any amounts the Company owes to the Employee pursuant to this Section 18.1 will be
paid to the Employee by the Company within 30 days following the Company’s receipt of a statement
or statements prepared by Employee or Employee’s legal counsel that sets forth the amount of such
costs and expenses eligible for reimbursement but in no event will such amounts be paid later than
December 31 of the year following the year in which Employee incurs such expenses. In no event
will the costs and expenses paid by the Company pursuant to this Section 18.1 in one year affect
the amount of costs and expenses the Company is obligated to pay pursuant to this Section 18.1 in
any other taxable year.

          18.2 Trust Agreements. To ensure that the provisions of this Agreement can be
enforced by the Employee, two agreements (“Amended and Restated Trust Agreement” and “Amended and
Restated Trust Agreement No. 2”) each dated as of March 26, 1991, as they may have been or may be
amended, have been established between a Trustee selected by the members of the Compensation
Committee of the Board or any officer (the “Trustee”) and the Company. The Amended and Restated
Trust Agreement sets forth the terms and conditions relating to

21

 

payment pursuant to the Amended and Restated Trust Agreement of the CIC Severance Amount, the
Gross-Up Payment and other payments provided for in Section 4.5 hereof pursuant to this Agreement
owed by the Company, and Amended and Restated Trust Agreement No. 2 sets forth the terms and
conditions relating to payment pursuant to Amended and Restated Trust Agreement No. 2 of attorneys’
and related fees and expenses pursuant to paragraph (a) of this Section owed by the Company.
Employee shall make demand on the Company for any payments due Employee pursuant to paragraph (a)
of this Section prior to making demand therefor on the Trustee under Amended and Restated Trust
Agreement No. 2. Payments by such Trustee shall discharge the Company’s liability under paragraph
(a) of this Section only to the extent that trust assets are used to satisfy such liability.

          18.3 Obligation of the Company to Fund Trusts. Upon the earlier to occur of (x) a
Change in Control that involves a transaction that was not approved by the Board, and was not
recommended to the Company’s shareholders by the Board, (y) a declaration by the Board that the
trusts under the Amended and Restated Trust Agreement and Amended and Restated Trust Agreement No.
2 should be funded in connection with a Change in Control that involves a transaction that was
approved by the Board, or was recommended to shareholders by the Board, or (z) a declaration by the
Board that a Change in Control is imminent, the Company shall promptly to the extent it has not
previously done so, and in any event within five (5) business days:

     (a) transfer to the Trustee to be added to the principal of the trust under the
Amended and Restated Trust Agreement a sum equal to the aggregate value on the date
of the Change in Control of the CIC Severance Amount and Gross-Up Payment which
could become payable to the Employee under the provisions of Section 4.1 and Section
4.5 hereof. The payment of any CIC Severance Amount, Gross-Up Payment or other
payment by the Trustee pursuant to the Amended and Restated Trust Agreement shall,
to the extent thereof, discharge the Company’s obligation to pay the CIC Severance
Amount, Gross-Up Payment or other payment hereunder, it being the intent of the
Company that assets in such Amended and Restated Trust Agreement be held as security
for the Company’s obligation to pay the CIC Severance Amount, Gross-Up Payment and
other payments under this Agreement; and

     (b) transfer to the Trustee to be added to the principal of the trust under
Amended and Restated Trust Agreement No. 2 the sum authorized by the members of the
Compensation Committee from time to time.

Any payments of attorneys’ and related fees and expenses, which are the obligation of the Company
under Section 18.1, by the Trustee pursuant to Amended and Restated Trust Agreement No. 2 shall, to
the extent thereof, discharge the Company’s obligation hereunder, it being the intent of the
Company that such assets in such Amended and Restated Trust Agreement No. 2 be held as security for
the Company’s obligation under Section 18.1.

     Notwithstanding any provision of this Agreement to the contrary, no amounts shall be
transferred to the Trustee with respect to the Amended and Restated Trust Agreement or the Amended
and Restated Trust Agreement No. 2 for payments of any amount under this

22

 

Agreement if, pursuant to Section 409A(b)(3)(A) of the Code, such amount would, for purposes
of Section 83 of the Code, be treated as property transferred in connection with the performance of
services.

     19. Code Section 409A of the Code.

          19.1 General. To the extent applicable, it is intended that this Agreement comply
with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section
409A(a)(1) of the Code do not apply to the Employee. This Agreement shall be administered and
interpreted in a manner consistent with this intent.

          19.2 Delayed Payments. Notwithstanding any provision of this Agreement to the
contrary, if the Employee is a “specified employee,” determined pursuant to procedures adopted by
the Company in compliance with Section  409A of the Code, on his Termination Date and if any
portion of the payments or benefits to be received by the Employee upon Termination of Employment
would constitute a “deferral of compensation” subject to Section 409A, then to the extent necessary
to comply with Section 409A, amounts that would otherwise be payable pursuant to this Agreement
during the six-month period immediately following the Employee’s Termination Date will instead be
paid or made available on the earlier of (i) the first business day of the seventh month after
Employee’s Termination Date, or (ii) the Employee’s death.

          19.3 Amendments. Notwithstanding any provision of this Agreement to the contrary, in
light of the uncertainty with respect to the proper application of Section 409A of the Code, the
Company reserves the right to make amendments to this Agreement as the Company deems necessary or
desirable to avoid the imposition of taxes or penalties under Section 409A of the Code. In any
case, Employee shall be solely responsible and liable for the satisfaction of all taxes and
penalties that may be imposed on Employee in connection with this Agreement (including any taxes
and penalties under Section 409A of the Code), and neither the Company nor any of its affiliates
shall have any obligation to indemnify or otherwise hold Employee harmless from any or all of such
taxes or penalties.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of
the date first set forth above.

	 	 	 	 	 
	 	 	 
	 	By:  	 	 
	 	 	Employee 	 
	 	 	 	 

23

 

	 	 	 	 	 

	 	 	 	 	 
	 	THE TIMKEN COMPANY

 	 
	 	By:  	 	 
	 	 	W. R. Burkhart 	 

	 	 	 	 	 
	 	Its: Sr. VP & General Counsel

 	 
	 	 	 
	 	 	 
	 	 	 
	 

24

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