Document:

<PAGE>
                                                                 Exhibit 10.49.1

                                     AMENDED
                                    EXHIBIT A

                                       To
                              EMPLOYMENT AGREEMENT

                   Entered into as of August 27, 1999 between

                       FEDERATED CORPORATE SERVICES, INC.

                                       And

                               JAMES M. ZIMMERMAN

                         (Amendment as of June 8, 2001)

     (All capitalized terms used in this Exhibit are defined as set forth in
                                   Agreement)

ANNUAL BONUS: In respect of fiscal 1999, the annual bonus payable (if
              any) under the terms of the 1992 Incentive Bonus Plan (as such
              may be amended from time to time) of Federated Department
              Stores, Inc. (Federated) will be based on performance goals
              established for the senior executives of the Employer on an
              annual basis by the Board of Directors of Federated or a
              Committee thereof, with the amount of bonus equal to a sliding
              percent of Employee's annual base salary in effect as of the
              last day of the performance period based on performance
              against the targeted annual goals, as follows:

<TABLE>
<CAPTION>
                                                                            Payout as Percent
                                      Performance Against Target            of Annual Salary
                                      --------------------------            ----------------

<S>                                                                              <C>
                                      (a)  CORPORATE EBIT $
                                           ----------------
                                            Below 95% of Target                  0.0%
                                            95% of Target                        24.0%
                                            Target                               50.0%
                                            110% of Target                       90.0%

                                      (b)  CORPORATE SALES $
                                           -----------------
                                            Below Target                         0.0%
                                            Target                               10.0%
                                            101% of Target                       34.0%

                                      (c)  CORPORATE ROGI  %
                                           -----------------
                                            Below Target                         0.0%
                                            Target                               10.0%
                                            1.0 ppt above Target                 34.0%
</TABLE>

                  For each year during the Term beginning with and including
                  fiscal 2000, the annual bonus payable (if any) under the terms
                  of the 1992 Incentive Bonus Plan (as such may be amended from
                  time to time) of Federated Department Stores, Inc. (Federated)
                  will be based on performance goals established for the senior
                  executives of the employer on an

                                       1

<PAGE>

                  annual basis by the Board of Directors of Federated or a
                  Committee thereof, with the amount of bonus equal to a sliding
                  percent of Employee's annual base salary in effect as of the
                  last day of the performance period based on performance
                  against the targeted annual goals, as follows:

<TABLE>
<CAPTION>
                                                                            Payout as Percent
                                      Performance Against Target            of Annual Salary
                                      --------------------------            ----------------

<S>                                                                              <C>
                                      (a)  CORPORATE EBIT $
                                           ----------------
                                            Below 95% of Target                  0.0%
                                            95% of Target                        34.0%
                                            Target                               70.0%
                                            110% of Target                       126.0%

                                      (b)  CORPORATE SALES $
                                           -----------------
                                            Below Target                         0.0%
                                            Target                               15.0%
                                            101% of Target                       51.0%

                                      (c)  CORPORATE ROGI %
                                           ----------------
                                            Below Target                         0.0%
                                            Target                               15.0%
                                            1.0 ppt above Target                 51.0%
</TABLE>

                  The percent of base salary payable as the annual bonus is the
                  aggregate of the above designated payout based on performance
                  achieved under each of the performance components described in
                  (a), (b) and (c), above, except that if Corporate EBIT $ falls
                  below 95% of Target, no bonus is payable for any component of
                  the annual bonus plan, and failure to achieve the annual EBIT
                  percent to target reduces the bonus otherwise payable in
                  respect only of the above corporate EBIT $ performance
                  component per the approved applicable executive compensation
                  plan description.

                  Any annual bonus payable hereunder shall be paid in the fiscal
                  year following the annual performance period in respect of
                  which the bonus is payable in accordance with Federated's 1992
                  Incentive Bonus Plan (as such may be amended from time to
                  time).

                  By operation of Federated's Supplementary Executive Retirement
                  Plan, annual bonuses paid to Employee under Federated's 1992
                  Incentive Bonus Plan are included as eligible compensation
                  under Federated's Pension Plan.

  LONG TERM PLAN: For the 1997 - 1999 three year performance period, the bonus
                  payable (if any) under the terms of Federated's 1992 Incentive
                  Bonus Plan (as such may be amended from time to time) will be
                  based on performance goals established for the senior
                  executives of Federated in respect of each such three-year
                  performance period by the Board of Directors of Federated or a
                  Committee thereof, with the amount of bonus equal to a sliding
                  percent of Employee's annual base salary (prorated on an
                  annual basis for any change in Employee's base salary
                  occurring at any time during any such three-year period and
                  determined for any such year in the three-year period based on
                  the annual

                                       2
<PAGE>

                  base salary in effect as of the last day of the fiscal year)
                  based on performance against the targeted three-year goals, as
                  follows:

<TABLE>
<CAPTION>
                                                                            Payout as Percent
                                      Performance Against Target            of Annual Salary
                                      --------------------------            ----------------

<S>                                                                             <C>
                                      (a)  CORPORATE EBIT $
                                           ----------------
                                            Below 95% of Target                  0.0%
                                            95% of Target                        14.0%
                                            Target                               30.0%
                                            110% of Target                       42.0%
                                            120% of Target                       54.0%

                                      (b)  PERFORMANCE VS
                                           PEERS RANKING
                                           --------------
                                            #1 Ranking                           36%
                                            #2 Ranking                           31%
                                            #3 Ranking                           25%
                                            #4 Ranking                           20%
                                            #5 Ranking                           10%
                                            #6 Ranking                           0%
</TABLE>

                  The percent of base salary payable as the long term bonus in
                  respect of the 1997-1999 performance period is the aggregate
                  of the above designated payout based on performance achieved
                  in respect of the performance components described in (a) and
                  (b), above, except that if the three year Corporate EBIT $
                  falls below 95% of Target, no bonus is payable for any
                  component of the long-term bonus, and failure to achieve the
                  EBIT percent to target in year three reduces the bonus
                  otherwise payable in respect only of the above corporate EBIT
                  $ performance component per the approved applicable executive
                  compensation plan description.

                  For each three year performance period beginning with and
                  including the 1998 - 2000 performance period, the bonus
                  payable (if any) under the terms of Federated's 1992 Incentive
                  Bonus Plan (as such may be amended from time to time) will be
                  based on performance goals established for the senior
                  executives of Federated in respect of each such three-year
                  performance period by the Board of Directors of Federated or a
                  Committee thereof, with the amount of bonus equal to a sliding
                  percent of Employee's annual base salary (prorated on an
                  annual basis for any change in Employee's base salary
                  occurring at any time during any such three-year period and
                  determined for any such year in the three-year period based on
                  the annual base salary in effect as of the last day of the
                  fiscal year) based on performance against the targeted
                  three-year goals, as follows:

                                       3
<PAGE>

<TABLE>
<CAPTION>
                                                                            Payout as Percent
                                      Performance Against Target            of Annual Salary
                                      --------------------------            ----------------

<S>                                   <C>                                        <C>
                                      (a)  CORPORATE EBIT $
                                           ----------------
                                            Below 95% of Target                  0.0%
                                            95% of Target                        24.0%
                                            Target                               34.0%
                                            110% of Target                       75.0%

                                      (b)  CORPORATE AVG.
                                             ROGI  %
                                           ----------------
                                            Below Target                         0.0%
                                            Target                               16.0%
                                            1.0 ppt above Target                 37.0%
</TABLE>

                  The percent of base salary payable as the long-term bonus in
                  respect of each three year performance period beginning and
                  including the 1998-2000 performance period is the aggregate of
                  the above designated payout based on performance achieved in
                  respect of the performance components described in (a) and (b)
                  above, except that if the three year Corporate EBIT $ falls
                  below 95% of Target, no bonus is payable for any component of
                  the long-term bonus, and failure to achieve the EBIT percent
                  to target in year three reduces the bonus otherwise payable in
                  respect only of the above corporate EBIT $ performance
                  component per the approved applicable executive compensation
                  description.

                  Illustratively, in respect of the fiscal 1997 - 1999
                  performance period, assuming achievement of the 1997 -1999
                  goal at the 50% target level (i.e., Corporate EBIT $ achieved
                  at target and #4 ranking versus peers), the long-term
                  incentive payout in 2000 in respect of such three-year period
                  would be $625,000 (50% (30% payout re corporate EBIT $ + 20%
                  payout re peer performance) x $1,250,000 (the base salary in
                  effect at the end of 1997 fiscal year).

                  Employee shall be entitled to a pro rata portion of a
                  long-term bonus, if any is payable under the terms of
                  Federated's 1992 Incentive Bonus Plan (as such may be amended
                  from time to time), for any three-year performance period
                  commencing on or after fiscal 1997 but which performance
                  period has not ended as of the end of Term. The pro rata
                  payment is based on the length of Employee's service of
                  employment within such three-year performance period.
                  Illustratively, if the performance period covers the 1999-2001
                  fiscal years and the employment terminates on the last day of
                  the 2000 fiscal year, Employee would have been employed for
                  sixty-seven percent (67%) of the performance period and would
                  be eligible for sixty-seven percent (67%) of any long-term
                  bonus payable as provided above if and when any bonus is paid
                  in respect of that period under the terms of Federated's 1992
                  Incentive Plan (as may be amended) based upon the performance
                  goals established for the senior executives of the Employer
                  for that period by the Board of Directors of Federated or a
                  Committee thereof.

                  Any long-term bonus payable hereunder shall be paid in the
                  fiscal year following the three-year performance period in
                  respect of which the bonus is payable in accordance with
                  Federated's 1992 Incentive Bonus Plan. Any long-term bonus
                  payable for any

                                       4
<PAGE>

                  three-year performance period beginning with and including the
                  1998 - 2000 performance period will be paid 50% in cash and
                  50% in deferred stock credits in accordance with the approved
                  applicable executive compensation plan description, subject,
                  as provided in such plan, to Executive's election to allocate
                  a portion or all of any cash payout to deferred stock credits.
                  Any amounts deferred, including the required 50% deferral and
                  any optional deferral above 50%, will include a 20% premium,
                  also to be paid in deferred stock credits.

   STOCK OPTIONS: Federated shall grant, to Employee, effective August 27, 1999
                  (the "Grant Date"), options for 450,000 shares, with vesting
                  of 112,500 shares on May 1, 2000 (the "Option Vesting Date"),
                  112,500 shares on the first anniversary of the Option Vesting
                  Date, 112,500 shares on the second anniversary of the Option
                  Vesting Date, and 112,500 shares on the third anniversary of
                  the Option Vesting Date, except that 100% vesting shall occur
                  immediately upon the effective date of the termination of the
                  employment of Employee (a) by Employer other than for Cause,
                  (b) by Employee for Good Reason or (c) by Employer and
                  Employee by mutual consent; the options will be issued at one
                  hundred percent of the closing market price of Federated's
                  common stock on the New York Stock Exchange as listed in THE
                  WALL STREET JOURNAL on the trading day immediately preceding
                  the Grant Date; the term of the grant shall expire ten years
                  from the Grant Date; any options that are unvested as of the
                  time Employee discontinues his employment with Employer shall
                  continue to vest in accordance with the vesting schedule
                  described above unless the Employee's employment is terminated
                  for cause (as defined in the Non-Qualified Stock Option
                  Agreement), except that if the Employee at any time prior to
                  the third anniversary of the Option Vesting Date renders
                  personal services to The May Department Stores Company,
                  Dillard's, Inc., Saks, Inc., or Nordstrom, Inc., the grant of
                  options, and all rights of the Employee with regard to any
                  vested but unexercised options and any unvested options, shall
                  terminate on the commencement of such engagement; the grant is
                  subject to the terms of the attached form of Non-Qualified
                  Stock Option Agreement with Federated.

   RESTRICTED STOCK AWARD: Federated shall grant to Employee, effective
                  August 27, 1999 (the "Grant Date"), 100,000 restricted shares
                  of Federated's Common Stock, with restrictions as to 25,000
                  shares lapsing on May 1, 2000 (the "Lapse Date") and as to
                  25,000 shares on each of the first, second and third
                  anniversaries of the Lapse Date, except that 100% lapsing
                  shall occur immediately upon the effective date of the
                  termination of the employment of Employee (a) by Employer
                  other than for Cause, (b) the Employee for Good Reason or (c)
                  by Employer and Employee by mutual consent; the restrictions
                  on any shares that have not lapsed as of the time the Employee
                  discontinues his employment with Employer shall continue to
                  lapse in accordance with the lapsing schedule described above
                  unless the Employee's employment is terminated for cause (as
                  defined in the Restricted Stock Agreement), except that if
                  Employee at any time prior to the third anniversary of the
                  Lapse Date renders personal services to The May Department
                  Stores Company, Dillard's, Inc., Saks, Inc., or Nordstrom's,
                  Inc., all shares of restricted stock on which the restrictions
                  have not lapsed shall be forfeited on the commencement of such
                  engagement; the grant is subject to the terms of the attached
                  form of Restricted Stock Agreement.

                                       5
<PAGE>

TERM AND ADDITIONAL
RETIREMENT BENEFITS: Notwithstanding anything in the Agreement to the contrary,
                  the Term of employment shall be extended to February 1, 2004.
                  In consideration of the foregoing, provided the Employee
                  remains in the employ of Employer until February 1, 2004, the
                  Employee's age shall be deemed to be increased by five years
                  for the purpose of calculating early retirement monthly and
                  lump sum benefits under the formula used in the Supplementary
                  Executive Retirement Plan of Federated. The additional
                  benefits resulting from such age adjustment will be paid from
                  the Employer's general revenues. The foregoing will also apply
                  in the event that Employee's employment terminates prior to
                  the end of the Term for any reason, other than the Employee's
                  voluntary resignation or termination by the Employer for
                  Cause.

JAMES M. ZIMMERMAN                   FEDERATED CORPORATE SERVICES, INC.

/s/ James M. Zimmerman               /s/ Dennis J. Broderick
                                     Title:  President

                                       6<PAGE>

                                                                    Exhibit 4(c)

                   THE TIMKEN COMPANY LONG-TERM INCENTIVE PLAN
                (AS AMENDED AND RESTATED AS OF JANUARY 30, 2002)

<TABLE>
<CAPTION>
                                                                             PAGE
                                                                             ----
<S>                                                                          <C>
1.  PURPOSE ...............................................................    1

2.  DEFINITIONS ...........................................................    1

3.  SHARES AVAILABLE UNDER THE PLAN .......................................    3

4.  OPTION RIGHTS .........................................................    4

5.  APPRECIATION RIGHTS ...................................................    5

6.  RESTRICTED SHARES .....................................................    6

7.  DEFERRED SHARES .......................................................    7

8.  PERFORMANCE SHARES AND PERFORMANCE UNITS ..............................    8

9.  AUTOMATIC AWARDS TO NONEMPLOYEE DIRECTORS .............................    8

10. TRANSFERABILITY .......................................................    9

11. ADJUSTMENTS ...........................................................    9

12. FRACTIONAL SHARES .....................................................   10

13. WITHHOLDING TAXES .....................................................   10

14. PARTICIPATION BY EMPLOYEES OF A LESS-THAN-80-PERCENT SUBSIDIARY .......   10

15. CERTAIN TERMINATIONS OF EMPLOYMENT, HARDSHIP AND OTHER SPECIAL
    CIRCUMSTANCES .........................................................   10

16. FOREIGN EMPLOYEES .....................................................   10

17. ADMINISTRATION OF THE PLAN ............................................   10

18. AMENDMENTS AND OTHER MATTERS ..........................................   11
</TABLE>
<PAGE>
                   THE TIMKEN COMPANY LONG-TERM INCENTIVE PLAN
                (AS AMENDED AND RESTATED AS OF JANUARY 30, 2002)

            1. PURPOSE. The purpose of this Plan is to attract and retain
directors, officers and key employees for The Timken Company, an Ohio
corporation (the "Corporation"), and its Subsidiaries and to provide such
persons with incentives and rewards for superior performance.

            2. DEFINITIONS. As used in this Plan,

               "APPRECIATION RIGHT" means a right granted pursuant to Section 5
               of this Plan, including a Free-standing Appreciation Right and a
               Tandem Appreciation Right.

               "BASE PRICE" means the price to be used as the basis for
               determining the Spread upon the exercise of a Free-standing
               Appreciation Right.

               "BOARD" means the Board of Directors of the Corporation.

               "CODE" means the Internal Revenue Code of 1986, as amended from
               time to time.

               "COMMITTEE" means the committee described in Section 17(a) of
               this Plan.

               "COMMON SHARES" means (i) shares of the common stock of the
               Corporation without par value and (ii) any security into which
               Common Shares may be converted by reason of any transaction or
               event of the type referred to in Section 11 of this Plan.

               "DATE OF GRANT" means the date specified by the Committee on
               which a grant of Option Rights or Appreciation Rights or
               Performance Shares or Performance Units or a grant or sale of
               Restricted Shares or Deferred Shares shall become effective,
               which shall not be earlier than the date on which the Committee
               takes action with respect thereto, including the date on which an
               automatic grant of Common Shares, Restricted Shares or Option
               Rights to a Nonemployee Director becomes effective pursuant to
               Section 9 of this Plan.

               "DEFERRAL PERIOD" means the period of time during which Deferred
               Shares are subject to deferral limitations under Section 7 of
               this Plan.

               "DEFERRED SHARES" means an award pursuant to Section 7 of this
               Plan of the right to receive Common Shares at the end of a
               specified Deferral Period.

               "EVIDENCE OF AWARD" means an agreement, certificate, resolution
               or other type or form of writing or other evidence approved by
               the Committee which sets forth the terms and conditions of Option
               Rights, Appreciation Rights, Restricted Shares, Deferred Shares,
               Performance Shares, Performance Units or awards to Nonemployee
               Directors. An Evidence of Award may be in any electronic medium,
               may be limited to a notation on the books and records of the
               Company and, with the approval of the Committee, need not be
               signed by a representative of the Company or a Participant.

               "FREE-STANDING APPRECIATION RIGHT" means an Appreciation Right
               granted pursuant to Section 5 of this Plan that is not granted in
               tandem with an Option Right or similar right.

               "INCENTIVE STOCK OPTIONS" means Option Rights that are intended
               to qualify as "incentive stock options" under Section 422 of the
               Code or any successor provision.

               "LESS-THAN-80-PERCENT SUBSIDIARY" means a Subsidiary with respect
               to which the Corporation directly or indirectly owns or controls
               less than 80 percent of the total combined voting or other
               decision-making power.
<PAGE>
               "MANAGEMENT OBJECTIVES" means the achievement of a performance
               objective or objectives established pursuant to this Plan for
               Participants who have received grants of Performance Shares or
               Performance Units or, when so determined by the Committee, Option
               Rights, Appreciation Rights, Restricted Shares and dividend
               equivalents. Management Objectives may be described in terms of
               Corporation-wide objectives or objectives that are related to the
               performance of the individual Participant or of the Subsidiary,
               division, department or function within the Corporation or
               Subsidiary in which the Participant is employed. The Management
               Objectives applicable to any award to a Participant who is, or is
               determined by the Committee to be likely to become, a "covered
               employee" within the meaning of Section 162(m) of the Code (or
               any successor provision) shall be limited to specified levels of,
               growth in or peer company performance in: cash flow, cost of
               capital, debt reduction, earnings before interest and taxes,
               earnings per share, economic value added, free cash flow,
               inventory management, net income, productivity improvement,
               profit after tax, reduction of fixed costs, return on assets,
               return on equity, return on invested capital, sales and/or
               shareholder return. Management Objectives may be stated as a
               combination of the preceding factors.

               If the Committee determines that a change in the business,
               operations, corporate structure or capital structure of the
               Corporation, or the manner in which it conducts its business, or
               other events or circumstances render the Management Objectives to
               be unsuitable, the Committee may modify such Management
               Objectives or the related minimum acceptable level of
               achievement, in whole or in part, as the Committee deems
               appropriate, except in the case of a covered employee where such
               action would result in the loss of the otherwise available
               exemption of the award under Section 162(m) of the Code.

               "MARKET VALUE PER SHARE" means the fair market value of the
               Common Shares as determined by the Committee from time to time.

               "NONEMPLOYEE DIRECTOR" means a member of the Board who is not an
               employee of the Corporation or any Subsidiary.

               "OPTIONEE" means the person so designated in an agreement
               evidencing an outstanding Option Right.

               "OPTION PRICE" means the purchase price payable upon the exercise
               of an Option Right.

               "OPTION RIGHT" means the right to purchase Common Shares upon
               exercise of an option granted pursuant to Section 4 or Section 9
               of this Plan.

               "PARTICIPANT" means a person who is selected by the Committee to
               receive benefits under this Plan and who is at that time an
               officer, including without limitation an officer who may also be
               a member of the Board, or other key employee of the Corporation
               or any Subsidiary or who has agreed to commence serving in any
               such capacity, and shall also include each Nonemployee Director
               who receives an award pursuant to Section 9 of this Plan.

               "PERFORMANCE PERIOD" means, in respect of a Performance Share or
               Performance Unit, a period of time established pursuant to
               Section 8 of this Plan within which the Management Objectives
               relating thereto are to be achieved.

               "PERFORMANCE SHARE" means a bookkeeping entry that records the
               equivalent of one Common Share awarded pursuant to Section 8 of
               this Plan.

               "PERFORMANCE UNIT" means a bookkeeping entry that records a unit
               equivalent to $100.00 awarded pursuant to Section 8 of this Plan.

                                       2
<PAGE>
               "RELOAD OPTION RIGHTS" means additional Option Rights granted
               automatically to an Optionee upon the exercise of Option Rights
               pursuant to Section 4(f) of this Plan.

               "RESTRICTED SHARES" mean Common Shares granted or sold pursuant
               to Section 6 or Section 9 of this Plan as to which neither the
               substantial risk of forfeiture nor the restrictions on transfer
               referred to in Section 6 or Section 9 hereof has expired.

               "RULE 16B-3" means Rule 16b-3 of the Securities and Exchange
               Commission (or any successor rule to the same effect), as in
               effect from time to time.

               "SPREAD" means, in the case of a Free-standing Appreciation
               Right, the amount by which the Market Value per Share on the date
               when any such right is exercised exceeds the Base Price specified
               in such right or, in the case of a Tandem Appreciation Right, the
               amount by which the Market Value per Share on the date when any
               such right is exercised exceeds the Option Price specified in the
               related Option Right.

               "SUBSIDIARY" means a corporation, partnership, joint venture,
               unincorporated association or other entity in which the
               Corporation has a direct or indirect ownership or other equity
               interest; provided, however, for purposes of determining whether
               any person may be a Participant for purposes of any grant of
               Incentive Stock Options, "Subsidiary" means any corporation in
               which the Corporation owns or controls directly or indirectly
               more than 50 percent of the total combined voting power
               represented by all classes of stock issued by such corporation at
               the time of such grant.

               "TANDEM APPRECIATION RIGHT" means an Appreciation Right granted
               pursuant to Section 5 of this Plan that is granted in tandem with
               an Option Right or any similar right granted under any other plan
               of the Corporation.

            3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as
provided in Section 11 of this Plan, the maximum number of Common Shares issued
or transferred (i) upon the exercise of Option Rights or Appreciation Rights,
(ii) as Restricted Shares and released from all substantial risks of forfeiture,
(iii) as Deferred Shares, (iv) in payment of Performance Shares or Performance
Units that have been earned, (v) as automatic awards to Nonemployee Directors or
(vi) in payment of dividend equivalents paid with respect to awards made under
this Plan, shall not in the aggregate exceed 11,700,000 Common Shares, which may
be Common Shares of original issuance or Common Shares held in treasury or a
combination thereof; provided, however, that the number of Restricted Shares and
Deferred Shares shall not (after taking any forfeitures into account and
excluding all awards of Restricted Shares to Nonemployee Directors pursuant to
Section 9 of this Plan) exceed 10% of such maximum, subject to adjustment as
provided in Section 11 of this Plan. The 11,700,000 maximum number of Common
Shares described in the preceding sentence consist of 2,800,000 Common Shares
that were approved in 1992, 3,000,000 Common Shares that were approved in 1996,
3,000,000 Common Shares that were approved in 2000 and 2,900,000 Common Shares
that are being added as of this Amendment and Restatement. The foregoing figures
reflect adjustments for the 1997 stock split.

                  (b) Upon the full or partial payment of any Option Price by
the transfer to the Corporation of Common Shares or upon satisfaction of tax
withholding provisions in connection with any such exercise or any other payment
made or benefit realized under this Plan by the transfer or relinquishment of
Common Shares, there shall be deemed to have been issued or transferred under
this Plan only the net number of Common Shares actually issued or transferred by
the Corporation.

                  (c) Notwithstanding anything in this Plan to the contrary, the
aggregate number of Common Shares actually issued or transferred by the
Corporation upon the exercise of Incentive Stock Options shall not exceed the
maximum number of Common Shares first specified above in Section 3(a), subject
to adjustment as provided in Section 11 of this Plan.

                  (d) The number of Performance Units that may be granted and
paid out under this Plan shall not in the aggregate exceed 150,000.

                                       3
<PAGE>
                  (e) Upon payment in cash of the benefit provided by any award
granted under this Plan, any Common Shares that were covered by that award shall
again be available for issuance or transfer hereunder.

                  (f) Notwithstanding any other provision of this Plan to the
contrary, no Participant shall be granted Option Rights for more than 1,000,000
Common Shares during any period of five consecutive calendar years subject to
adjustment as provided in Section 11 of this Plan.

                  (g) Notwithstanding any other provision of this Plan to the
contrary, in no event shall any Participant in any period of one calendar year
receive awards of Performance Shares and Performance Units having an aggregate
value as of their respective Dates of Grant in excess of $2,000,000.

            4. OPTION RIGHTS. The Committee may from time to time authorize
grants to Participants of options to purchase Common Shares upon such terms and
conditions as the Committee may determine in accordance with the following
provisions:

            (a)   Each grant shall specify the number of Common Shares to which
                  it pertains, subject to the limitations set forth in Section 3
                  of this Plan.

            (b)   Each grant shall specify an Option Price per Common Share,
                  which shall be equal to or greater than the Market Value per
                  Share on the Date of Grant.

            (c)   Each grant shall specify the form of consideration to be paid
                  in satisfaction of the Option Price and the manner of payment
                  of such consideration, which may include (i) cash in the form
                  of currency or check or other cash equivalent acceptable to
                  the Corporation, (ii) nonforfeitable, unrestricted Common
                  Shares, which are already owned by the Optionee and have a
                  value at the time of exercise that is equal to the Option
                  Price, (iii) any other legal consideration that the Committee
                  may deem appropriate, including without limitation any form of
                  consideration authorized under Section 4(d) below, on such
                  basis as the Committee may determine in accordance with this
                  Plan and (iv) any combination of the foregoing.

            (d)   Any grant may provide that payment of the Option Price may
                  also be made in whole or in part in the form of Restricted
                  Shares or other Common Shares that are subject to risk of
                  forfeiture or restrictions on transfer. Unless otherwise
                  determined by the Committee whenever any Option Price is paid
                  in whole or in part by means of any of the forms of
                  consideration specified in this Section 4(d), the Common
                  Shares received by the Optionee upon the exercise of the
                  Option Rights shall be subject to the same risks of forfeiture
                  or restrictions on transfer as those that applied to the
                  consideration surrendered by the Optionee; provided, however,
                  that such risks of forfeiture and restrictions on transfer
                  shall apply only to the same number of Common Shares received
                  by the Optionee as applied to the forfeitable or restricted
                  Common Shares surrendered by the Optionee.

            (e)   Any grant may provide for deferred payment of the Option Price
                  from the proceeds of sale through a bank or broker on the date
                  of exercise of some or all of the Common Shares to which the
                  exercise relates.

            (f)   Any grant may provide for the automatic grant to the Optionee
                  of Reload Option Rights upon the exercise of Option Rights,
                  including Reload Option Rights, for Common Shares or any other
                  noncash consideration authorized under Sections 4(d) and (e)
                  above.

            (g)   Successive grants may be made to the same Participant
                  regardless of whether any Option Rights previously granted to
                  such Participant remain unexercised.

            (h)   Each grant (other than an award to a Nonemployee Director
                  pursuant to Section 9) shall specify the period or periods of
                  continuous employment of the Optionee by the Corporation or
                  any Subsidiary that are necessary before the Option Rights or
                  installments thereof shall become exercisable, and any such
                  grant may provide for the earlier exercisability of such

                                       4
<PAGE>
                  rights in the event of retirement, death or disability of the
                  Participant or a change in control of the Corporation or other
                  similar transaction or event.

            (i)   Any grant of Option Rights may specify Management Objectives
                  that must be achieved as a condition to the exercise of such
                  rights.

            (j)   Option Rights granted under this Plan may be (i) options that
                  are intended to qualify under particular provisions of the
                  Code, including without limitation Incentive Stock Options,
                  (ii) options that are not intended to so qualify or (iii)
                  combinations of the foregoing.

            (k)   On or after the Date of Grant of any Option Rights other than
                  Incentive Stock Options, the Committee may provide for the
                  payment to the Optionee of dividend equivalents thereon in
                  cash or Common Shares on a current, deferred or contingent
                  basis. In the case of an Optionee who is, or is determined by
                  the Committee to be likely to become, a "covered employee"
                  within the meaning of Section 162(m) of the Code (or any
                  successor provision), the payment will be contingent on the
                  achievement of Management Objectives for a specified period.
                  The payment of dividend equivalents also may be subject to
                  additional conditions. In no event shall any such Optionee in
                  any period of one calendar year earn dividend equivalents with
                  a value in excess of $750,000.

            (l)   No Option Right granted under this Plan may be exercised more
                  than 10 years from the Date of Grant.

            (m)   Each grant shall be evidenced by an Evidence of Award, which
                  shall contain such terms and provisions as the Committee may
                  determine consistent with this Plan.

            5. APPRECIATION RIGHTS. The Committee may also authorize grants to
Participants of Appreciation Rights. An Appreciation Right shall be a right of
the Participant to receive from the Corporation an amount, which shall be
determined by the Committee and shall be expressed as a percentage (not
exceeding 100 percent) of the Spread at the time of the exercise of such right.
Any grant of Appreciation Rights under this Plan shall be upon such terms and
conditions as the Committee may determine in accordance with the following
provisions:

            (a)   Any grant may specify that the amount payable upon the
                  exercise of an Appreciation Right may be paid by the
                  Corporation in cash, Common Shares or any combination thereof
                  and may (i) either grant to the Participant or reserve to the
                  Committee the right to elect among those alternatives or (ii)
                  preclude the right of the Participant to receive and the
                  Corporation to issue Common Shares or other equity securities
                  in lieu of cash; provided, however, that no form of
                  consideration or manner of payment that would cause Rule 16b-3
                  to cease to apply to this Plan shall be permitted.

            (b)   Any grant may specify that the amount payable upon the
                  exercise of an Appreciation Right shall not exceed a maximum
                  specified by the Committee on the Date of Grant.

            (c)   Any grant may specify (i) a waiting period or periods before
                  Appreciation Rights shall become exercisable and (ii)
                  permissible dates or periods on or during which Appreciation
                  Rights shall be exercisable.

            (d)   Any grant may specify that an Appreciation Right may be
                  exercised only in the event of retirement, death or disability
                  of the Participant or a change in control of the Corporation
                  or other similar transaction or event.

            (e)   Any grant may provide for the payment to the Participant of
                  dividend equivalents thereon in cash or Common Shares on a
                  current, deferred or contingent basis.

            (f)   Each grant shall be evidenced by an Evidence of Award, which
                  shall describe the subject Appreciation Rights, identify any
                  related Option Rights, state that the Appreciation Rights

                                       5
<PAGE>
                  are subject to all of the terms and conditions of this Plan
                  and contain such other terms and provisions as the Committee
                  may determine consistent with this Plan.

            (g)   Any grant of Appreciation Rights may specify Management
                  Objectives that must be achieved as a condition of the
                  exercise of such rights.

            (h)   Regarding Tandem Appreciation Rights only: Each grant shall
                  provide that a Tandem Appreciation Right may be exercised only
                  (i) at a time when the related Option Right (or any similar
                  right granted under any other plan of the Corporation) is also
                  exercisable and the Spread is positive and (ii) by surrender
                  of the related Option Right (or such other right) for
                  cancellation.

            (i)   Regarding Free-standing Appreciation Rights only:

                  (i)   Each grant shall specify in respect of each
                        Free-standing Appreciation Right a Base Price per Common
                        Share, which shall be equal to or greater than the
                        Market Value per Share on the Date of Grant;

                  (ii)  Successive grants may be made to the same Participant
                        regardless of whether any Free-standing Appreciation
                        Rights previously granted to such Participant remain
                        unexercised;

                  (iii) Each grant shall specify the period or periods of
                        continuous employment of the Participant by the
                        Corporation or any Subsidiary that are necessary before
                        the Free-standing Appreciation Rights or installments
                        thereof shall become exercisable, and any grant may
                        provide for the earlier exercise of such rights in the
                        event of retirement, death or disability of the
                        Participant or a change in control of the Corporation or
                        other similar transaction or event; and

                  (iv)  No Free-standing Appreciation Right granted under this
                        Plan may be exercised more than 10 years from the Date
                        of Grant.

            6. RESTRICTED SHARES. The Committee may also authorize grants or
sales to Participants of Restricted Shares upon such terms and conditions as the
Committee may determine in accordance with the following provisions:

            (a)   Each grant or sale shall constitute an immediate transfer of
                  the ownership of Common Shares to the Participant in
                  consideration of the performance of services, entitling such
                  Participant to dividend, voting and other ownership rights,
                  subject to the substantial risk of forfeiture and restrictions
                  on transfer hereinafter referred to.

            (b)   Each grant or sale may be made without additional
                  consideration from the Participant or in consideration of a
                  payment by the Participant that is less than the Market Value
                  per Share on the Date of Grant.

            (c)   Each grant or sale shall provide that the Restricted Shares
                  covered thereby shall be subject to a "substantial risk of
                  forfeiture" within the meaning of Section 83 of the Code for a
                  period of at least three years to be determined by the
                  Committee on the Date of Grant, and any grant or sale may
                  provide for the earlier termination of such period in the
                  event of retirement, death or disability of the Participant or
                  a change in control of the Corporation or other similar
                  transaction or event; provided, however, that the Committee
                  may authorize the grant or sale of Restricted Shares that are
                  subject to such a risk of forfeiture for periods of less than
                  three years in amounts that, when taken together with any
                  Deferred Shares granted or sold on such terms pursuant to
                  Section 7(c) of this Plan (after taking any forfeitures into
                  account and excluding all awards of Restricted Shares to
                  Nonemployee Directors pursuant to Section 9 of

                                       6
<PAGE>
                  this Plan), in the aggregate do not exceed two percent of the
                  maximum number of Common Shares specified in Section 3(a)
                  above as being available for awards pursuant to this Plan.

            (d)   Each grant or sale shall provide that, during the period for
                  which such substantial risk of forfeiture is to continue, the
                  transferability of the Restricted Shares shall be prohibited
                  or restricted in the manner and to the extent prescribed by
                  the Committee on the Date of Grant. Such restrictions may
                  include without limitation rights of repurchase or first
                  refusal in the Corporation or provisions subjecting the
                  Restricted Shares to a continuing substantial risk of
                  forfeiture in the hands of any transferee.

            (e)   Any grant of Restricted Shares may specify Management
                  Objectives which, if achieved, will result in termination or
                  early termination of the restrictions applicable to such
                  shares and each such grant shall specify in respect of such
                  specified Management Objectives, a minimum acceptable level of
                  achievement and shall set forth a formula for determining the
                  number of Restricted Shares on which restrictions will
                  terminate if performance is at or above the minimum level, but
                  falls short of full achievement of the specified Management
                  Objectives.

            (f)   Any grant or sale may require that any or all dividends or
                  other distributions paid on the Restricted Shares during the
                  period of such restrictions be automatically sequestered. Such
                  distribution may be reinvested on an immediate or deferred
                  basis in additional Common Shares, which may be subject to the
                  same restrictions as the underlying award or such other
                  restrictions as the Committee may determine.

            (g)   Each grant or sale shall be evidenced by an Evidence of Award,
                  which shall contain such terms and provisions as the Committee
                  may determine consistent with this Plan. Unless otherwise
                  authorized or directed by the Committee, all certificates
                  representing Restricted Shares, together with a stock power
                  that shall be endorsed in blank by the Participant with
                  respect to such shares, shall be held in custody by the
                  Corporation until all restrictions thereon lapse.

            7. DEFERRED SHARES. The Committee may also authorize grants or sales
of Deferred Shares to Participants upon such terms and conditions as the
Committee may determine in accordance with the following provisions:

            (a)   Each grant or sale shall constitute the agreement by the
                  Corporation to issue or transfer Common Shares to the
                  Participant in the future in consideration of the performance
                  of services, subject to the fulfillment during the Deferral
                  Period of such conditions as the Committee may specify.

            (b)   Each grant or sale may be made without additional
                  consideration from the Participant or in consideration of a
                  payment by the Participant that is less than the Market Value
                  per Share on the Date of Grant.

            (c)   Each grant or sale shall provide that the Deferred Shares
                  covered thereby shall be subject to a Deferral Period of at
                  least three years, which shall be fixed by the Committee on
                  the Date of Grant, and any grant or sale may provide for the
                  earlier termination of such period in the event of retirement,
                  death or disability of the Participant or a change in control
                  of the Corporation or other similar transaction or event;
                  provided, however, that the Committee may authorize the grant
                  or sale of Shares that are subject to Deferral Periods of less
                  than three years in amounts that, when taken together with any
                  Restricted Shares granted or sold on such terms pursuant to
                  Section 6(c) of this Plan (and after taking any forfeitures
                  into account and excluding all awards of Restricted Shares to
                  Nonemployee Directors pursuant to Section 9 of this Plan), in
                  the aggregate do not exceed two percent of the maximum number
                  of Common Shares specified in Section 3(a) above as being
                  available for awards pursuant to this Plan.

                                       7
<PAGE>
            (d)   During the Deferral Period, the Participant shall not have any
                  right to transfer any rights under the subject award, shall
                  not have any rights of ownership in the Deferred Shares and
                  shall not have any right to vote such shares, but the
                  Committee may on or after the Date of Grant authorize the
                  payment of dividend equivalents on such shares in cash or
                  additional Common Shares on a current, deferred or contingent
                  basis.

            (e)   Each grant or sale shall be evidenced by an Evidence of Award,
                  which shall contain such terms and provisions as the Committee
                  may determine consistent with this Plan.

            8. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Committee may also
authorize grants to Participants of Performance Shares and Performance Units,
which shall become payable to the Participant upon the achievement of specified
Management Objectives, upon such terms and conditions as the Committee may
determine in accordance with the following provisions:

            (a)   Each grant shall specify the number of Performance Shares or
                  Performance Units to which it pertains, subject to the
                  limitations in Section 3, which may be subject to adjustment
                  to reflect changes in compensation or other factors.

            (b)   The Performance Period with respect to each Performance Share
                  or Performance Unit shall be determined by the Committee on
                  the Date of Grant and may be subject to earlier termination in
                  the event of retirement, death or disability of the
                  Participant or a change in control of the Corporation or other
                  similar transaction or event.

            (c)   Each grant shall specify the Management Objectives that are to
                  be achieved by the Participant and each grant shall specify in
                  respect of the specified Management Objectives a minimum
                  acceptable level of achievement below which no payment will be
                  made and shall set forth a formula for determining the amount
                  of any payment to be made if performance is at or above the
                  minimum acceptable level but falls short of full achievement
                  of the specified Management Objectives.

            (d)   Each grant shall specify the time and manner of payment of
                  Performance Shares or Performance Units that shall have been
                  earned, and any grant may specify that any such amount may be
                  paid by the Corporation in cash, Common Shares or any
                  combination thereof and may either grant to the Participant or
                  reserve to the Committee the right to elect among those
                  alternatives.

            (e)   Any grant of Performance Shares may specify that the amount
                  payable with respect thereto may not exceed a maximum
                  specified by the Committee on the Date of Grant. Any grant of
                  Performance Units may specify that the amount payable, or the
                  number of Common Shares issued, with respect thereto may not
                  exceed maximums specified by the Committee on the Date of
                  Grant.

            (f)   Any grant may provide for the payment to the Participant of
                  dividend equivalents thereon in cash or in additional Common
                  Shares on a current, deferred or contingent basis.

            (g)   Each grant of Performance Shares or Performance Units shall be
                  evidenced by an Evidence of Award, which shall contain such
                  terms and provisions as the Committee may determine consistent
                  with this Plan.

            9. AUTOMATIC AWARDS TO NONEMPLOYEE DIRECTORS. Common Shares,
Restricted Shares and Option Rights shall be automatically granted to
Nonemployee Directors as follows:

            (a)   2,000 Restricted Shares shall be granted to each Nonemployee
                  Director who was not an employee of the Corporation or any
                  Subsidiary at the time of his first election or appointment to
                  the Board. Such Restricted Shares shall become transferable
                  and

                                       8
<PAGE>
                  nonforfeitable at the rate of 20 percent per year.

            (b)   500 Common Shares shall be granted to each Nonemployee
                  Director immediately following each annual meeting of
                  shareholders thereafter for so long as he continues to be a
                  Nonemployee Director. Such Common Shares shall be subject only
                  to a restriction on transfer for a period of six months
                  immediately following the Date of Grant thereof and shall bear
                  a legend to the effect.

            (c)   An Option Right to purchase 3,000 Common Shares shall be
                  granted to each Nonemployee Director immediately following
                  each annual meeting of shareholders including the annual
                  meeting at which such Nonemployee Director is first elected to
                  the Board or the first annual meeting after appointment to the
                  Board for so long as he continues to be a Nonemployee
                  Director. The purchase price per Common Share for which each
                  such Option Right is exercisable shall be a price equal to the
                  closing price on the last trading day prior to the annual
                  meeting as quoted on the New York Stock Exchange.

            Each grant of Restricted Shares shall be evidenced by an Evidence of
      Award consisting of an award agreement in substantially the form of
      Exhibit A hereto and shall be subject to all of the terms and conditions
      set forth therein.

            Each Option to purchase Common Shares shall be evidenced by an
      Evidence of Award consisting of an award agreement in substantially the
      form of Exhibit B hereto and shall be subject to all of the terms and
      conditions set forth therein.

            10. TRANSFERABILITY. (a) No Option Right or other derivative
security (as that term is used in Rule 16b-3) awarded under this Plan shall be
transferable by a Participant other than by will or the laws of descent and
distribution. Option Rights and Appreciation Rights shall be exercisable during
a Participant's lifetime only by the Participant or, in the event of the
Participant's legal incapacity, by his guardian or legal representative acting
in a fiduciary capacity on behalf of the Participant under state law and court
supervision. Notwithstanding the foregoing, the Committee, in its sole
discretion, may provide for transferability of particular awards under this
Plan.

            (b) Any award made under this Plan may provide that all or any part
of the Common Shares that are (i) to be issued or transferred by the Corporation
upon the exercise of Option Rights or Appreciation Rights or upon the
termination of the Deferral Period applicable to Deferred Shares, or in payment
of Performance Shares or Performance Units or (ii) no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 6 of this Plan, shall be subject to further restrictions upon transfer.

            11. ADJUSTMENTS. The Committee may make or provide for such
adjustments in the (a) number of Common Shares covered by outstanding Option
Rights, Appreciation Rights, Deferred Shares and Performance Shares granted
hereunder, (b) prices per share applicable to such Option Rights and
Appreciation Rights, and (c) kind of shares (including shares of another issuer)
covered thereby, as the Committee in its sole discretion may in good faith
determine to be equitably required in order to prevent dilution or enlargement
of the rights of Participants that otherwise would result from (x) any stock
dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Corporation, (y) any merger, consolidation,
spin-off, spin-out, split-off, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of rights or warrants to
purchase securities or (z) any other corporate transaction or event having an
effect similar to any of the foregoing. In the event of any such transaction or
event, the Committee may provide in substitution for any or all outstanding
awards under this Plan such alternative consideration as it may in good faith
determine to be equitable under the circumstances and may require in connection
therewith the surrender of all awards so replaced. Moreover, the Committee may
on or after the Date of Grant provide in the agreement evidencing any award
under this Plan that the holder of the award may elect to receive an equivalent
award in respect of securities of the surviving entity of any merger,
consolidation or other transaction or event having a similar effect, or the
Committee may provide that the holder will automatically be entitled to receive
such an equivalent award. The Committee may also make or provide for such
adjustments in the numbers and kind of shares specified in Section 3, and in the
number of Common Shares, Restricted Shares and Option Rights to be granted
automatically pursuant to Section 9 of this Plan as the Committee in its sole
discretion may in good faith determine to be appropriate in order to reflect any
transaction or event described in this Section 11.

                                       9
<PAGE>
            12. FRACTIONAL SHARES. The Corporation shall not be required to
issue any fractional Common Shares pursuant to this Plan. The Committee may
provide for the elimination of fractions or for the settlement thereof in cash.

            13. WITHHOLDING TAXES. To the extent that the Corporation is
required to withhold federal, state, local or foreign taxes in connection with
any payment made or benefit realized by a Participant or other person under this
Plan, and the amounts available to the Corporation for such withholding are
insufficient, it shall be a condition to the receipt of such payment or the
realization of such benefit that the Participant or such other person make
arrangements satisfactory to the Corporation for payment of the balance of such
taxes required to be withheld. At the discretion of the Committee, such
arrangements may include relinquishment of a portion of such benefit. In no
event, however, shall the Corporation accept Common Shares for payment of taxes
in excess of required tax withholding rates, except that, in the discretion of
the Committee, a Participant or such other person may surrender Common Shares
owned for more than six months to satisfy any tax obligations resulting from any
such transaction.

            14. PARTICIPATION BY EMPLOYEES OF A LESS-THAN-80-PERCENT SUBSIDIARY.
As a condition to the effectiveness of any grant or award to be made hereunder
to a Participant who is an employee of a Less-Than-80-Percent Subsidiary,
regardless whether such Participant is also employed by the Corporation or
another Subsidiary, the Committee may require the Less-Than-80-Percent
Subsidiary to agree to transfer to the Participant (as, if and when provided for
under this Plan and any applicable agreement entered into between the
Participant and the Less-Than-80-Percent Subsidiary pursuant to this Plan) the
Common Shares that would otherwise be delivered by the Corporation upon receipt
by the Less-Than-80-Percent Subsidiary of any consideration then otherwise
payable by the Participant to the Corporation. Any such award may be evidenced
by an agreement between the Participant and the Less-Than-80-Percent Subsidiary,
in lieu of the Corporation, on terms consistent with this Plan and approved by
the Committee and the Less-Than-80-Percent Subsidiary. All Common Shares so
delivered by or to a Less-Than-80-Percent Subsidiary will be treated as if they
had been delivered by or to the Corporation for purposes of Section 3 of this
Plan, and all references to the Corporation in this Plan shall be deemed to
refer to the Less-Than-80-Percent Subsidiary except with respect to the
definitions of the Board and the Committee and in other cases where the context
otherwise requires.

            15. CERTAIN TERMINATIONS OF EMPLOYMENT, HARDSHIP AND OTHER SPECIAL
CIRCUMSTANCES. Notwithstanding any other provision of this Plan to the contrary,
in the event of termination of employment by reason of death, disability, normal
retirement, early retirement with the consent of the Corporation, termination of
employment to enter public service with the consent of the Corporation or leave
of absence approved by the Corporation, or in the event of hardship or other
special circumstances, of a Participant who holds an Option Right or
Appreciation Right that is or is not immediately and fully exercisable, any
Restricted Shares as to which the substantial risk of forfeiture or the
prohibition or restriction on transfer has not lapsed, any Deferred Shares as to
which the Deferral Period is not complete, any Performance Shares or Performance
Units that have not been fully earned, or any Common Shares that are subject to
any transfer restriction pursuant to Section 10(b) of this Plan, the Committee
may in its sole discretion take any action that it deems to be equitable under
the circumstances or in the best interests of the Corporation, including,
without limitation, accelerating the date when any such Option Right becomes
exercisable, or waiving or modifying any other limitation or requirement with
respect to any award under this Plan.

            16. FOREIGN EMPLOYEES. In order to facilitate the making of any
grant or combination of grants under this Plan, the Committee may provide for
such special terms for awards to Participants who are foreign nationals, or who
are employed by the Corporation or any Subsidiary outside of the United States
of America, as the Committee may consider necessary or appropriate to
accommodate differences in local law, tax policy or custom. Moreover, the
Committee may approve such supplements to, or amendments, restatements or
alternative versions of, this Plan as it may consider necessary or appropriate
for such purposes without thereby affecting the terms of this Plan as in effect
for any other purpose, and the Secretary or other appropriate officer of the
Corporation may certify any such document as having been approved and adopted in
the same manner as this Plan. No such special terms, supplements, amendments or
restatements shall include any provisions that are inconsistent with the terms
of this Plan as then in effect unless this Plan could have been amended to
eliminate such inconsistency without further approval by the shareholders of the
Corporation.

            17. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered
by the Compensation Committee of the Board, as constituted from time to time.
The Committee shall be composed of not less than three members of the Board,
each of whom shall be a "nonemployee director" within the meaning of Rule 16b-3
and an

                                       10
<PAGE>
"outside director" within the meaning of Section 162(m) of the Code. A majority
of the Committee shall constitute a quorum, and the acts of the members of the
Committee who are present at any meeting thereof at which a quorum is present,
or acts unanimously approved by the members of the Committee in writing, shall
be the acts of the Committee.

            (b) The interpretation and construction by the Committee of any
provision of this Plan or of any agreement, notification or document evidencing
the grant of Option Rights, Appreciation Rights, Restricted Shares or Deferred
Shares, Performance Shares and Performance Units and any determination by the
Committee pursuant to any provision of this Plan or any such agreement,
notification or document, shall be final and conclusive. No member of the
Committee shall be liable for any such action taken or determination made in
good faith.

            18. AMENDMENTS AND OTHER MATTERS. (a) This Plan may be amended from
time to time by the Committee; provided, however, that any amendment that must
be approved by the shareholders of the Corporation in order to comply with
applicable law or the rules of the New York Stock Exchange or, if the Common
Shares are not traded on the New York Stock Exchange, the principal national
securities exchange upon which the Common Shares are traded or quoted, shall not
be effective unless and until such approval has been obtained. Presentation of
this Plan or any amendment hereof for shareholder approval shall not be
construed to limit the Corporation's authority to offer similar or dissimilar
benefits under other plans or otherwise with or without shareholder approval.
Without limiting the generality of the foregoing, the Committee may amend this
Plan to eliminate provisions which are no longer necessary as a result of
changes in tax or securities laws or regulations, or in the interpretation
thereof.

            (b) The Committee also may permit Participants to elect to defer the
issuance of Common Shares or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for purposes
of this Plan. In the case of an award of Restricted Shares, under Section 9, the
deferral may be effected by the Participant's agreement to forego or exchange
his or her award of Restricted Shares and receive an award of Deferred Shares.
The Committee also may provide that deferred settlements include the payment or
crediting of interest on the deferral amounts, or the payment or crediting of
dividend equivalents where the deferral amounts are denominated in Common
Shares.

            (c) The Committee may condition the grant of any award or
combination of awards under the Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other compensation
otherwise payable by the Corporation or any Subsidiary to the Participant.

            (d) This Plan shall not confer upon any Participant any right with
respect to continuance of employment or other service with the Corporation or
any Subsidiary and shall not interfere in any way with any right that the
Corporation or any Subsidiary would otherwise have to terminate any
Participant's employment or other service at any time.

            (e) To the extent that any provision of this Plan would prevent any
Option Right that was intended to qualify under particular provisions of the
Code from so qualifying, such provision of this Plan shall be null and void with
respect to such Option Right; provided, however, that such provision shall
remain in effect with respect to other Option Rights, and there shall be no
further effect on any provision of this Plan.

                                       11
<PAGE>
                                    EXHIBIT A

                               THE TIMKEN COMPANY

                         RESTRICTED SHARE AGREEMENT FOR
                              NONEMPLOYEE DIRECTORS

_______________________________, Grantee:

            The Timken Company (the "Company") pursuant to its Long-Term
Incentive Plan (as Amended and Restated as of January 30, 2002) (the "Plan") has
this day granted to you, the above-named grantee, a total of ( ) Common Shares
of the Company ("Common Shares") subject to the following terms, conditions,
limitations and restrictions:

            1. The Common Shares subject to this grant shall be fully paid and
nonassessable and shall be represented by a certificate or certificates
registered in your name and endorsed with an appropriate legend referring to the
restrictions hereinafter set forth. You 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 you 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. The Common Shares subject to this grant may not be assigned,
exchanged, pledged, sold, transferred or otherwise disposed of by you, except to
the Company, and shall be subject to forfeiture as herein provided until five
years have elapsed from the date of this grant, except that (a) 20 percent of
such shares shall become freely transferable and nonforfeitable at the end of
each year from and after the date of this grant and (b) your rights with respect
to such 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
paragraph shall be null and void, and the purported transferee shall obtain no
rights with respect to such shares.

            3. All of the Common Shares subject to this grant that are then
forfeitable shall be forfeited by you if your service as a member of the Board
of Directors of the Company (a "Director") is terminated before the fifth
anniversary of the date of this grant; provided, however, if your service as a
Director of the Company is terminated before the fifth anniversary of the date
of this grant as a result of your death or disability, or owing to your removal
as a Director without cause, a portion of the shares covered by this grant that
then remain forfeitable shall become freely transferable and nonforfeitable as
follows: that number of shares shall become freely transferable and
nonforfeitable which bears the same ratio to the total number of shares subject
to this grant that then remain forfeitable and would have become forfeitable at
the next anniversary date as the number of full months from the date of this
grant (or, if such service is terminated after the first anniversary of the date
of this grant, then from the date of the latest anniversary) to the date of
termination of such service bears to 12, and the balance of the shares subject
to this grant shall be forfeited to the Company.

            4. During the period in which the restrictions on transfer and risk
of forfeiture provided in paragraphs 2 and 3 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
you and endorsed in blank.

            5. Upon any change in control of the Company, the restrictions on
transfer and risk of forfeiture provided in paragraphs 2 and 3 above shall lapse
and terminate with respect to all of the Common Shares that are subject to this
grant to which such restriction and risk then remain applicable. For purposes of
this grant, the term "change in control" shall mean the occurrence of any of the
following events:

      (a)   The acquisition by any individual, entity or group (within the
            meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
            "Person") of beneficial ownership (within the meaning of Rule 13d-3
            promulgated under the Exchange Act) of 30% or more of either: (i)
            the then-outstanding Common Shares or (ii) 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 (a), the
            following acquisitions shall not constitute a change in control: (A)
            any acquisition directly from the Company, (B) any acquisition by
            the Company, (C) any acquisition by any employee benefit plan (or
            related trust) sponsored or maintained by the Company
<PAGE>
            or any Subsidiary, or (D) any acquisition by any Person pursuant to
            a transaction which complies with clauses (i), (ii) and (iii) of
            subsection (c) of this Section 5; or

      (b)   Individuals who, as of the date hereof, constitute the Board (the
            "Incumbent Board") cease for any reason (other than death or
            disability) to constitute at least a majority of the Board;
            provided, however, that any individual becoming a director
            subsequent to the date hereof whose election, or nomination for
            election by the Company's shareholders, was approved by a vote of at
            least a majority of the directors then comprising the Incumbent
            Board (either by a specific vote or by approval of the proxy
            statement of the Company in which such person is named as a nominee
            for director, without objection to such nomination) shall be
            considered as though such individual were a member of the Incumbent
            Board, but excluding for this purpose, any such individual whose
            initial assumption of office occurs as a result of an actual or
            threatened election contest (within the meaning of Rule 14a-11 of
            the 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; or

      (c)   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, (i) 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, (ii) 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 (iii) 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

      (d)   Approval by the shareholders of the Company of a complete
            liquidation or dissolution of the Company.

            6. This grant of restricted Common Shares is made pursuant to the
Plan, a copy of which is attached hereto. This grant is subject to all of the
terms and provisions of the Plan, which are incorporated herein by reference.
Capitalized terms used herein without definition shall have the meanings
assigned to them in the Plan.

            Dated this ____ day of ______________________, 200_

                                        THE TIMKEN COMPANY

                                        By:___________________________
                                             Name:
                                             Title:

Accepted and agreed to: _________________
Dated:_____________________

                                      A-2
<PAGE>
                                    EXHIBIT B

                               THE TIMKEN COMPANY

                     NONQUALIFIED STOCK OPTION AGREEMENT FOR
                              NONEMPLOYEE DIRECTORS

            WHEREAS, ____________ (the "Optionee") is a nonemployee Director (a
"Nonemployee Director") of The Timken Company (the "Company").

            NOW, THEREFORE, pursuant to the Company's Long-Term Incentive Plan
(as Amended and Restated as of January 30, 2002) (the "Plan") and subject to the
terms and conditions thereof and the terms and conditions hereinafter set forth,
the Company hereby grants to _____________________ (the "Optionee"), effective
as of the date of the Annual Meeting of Shareholders of the Company last written
below (the "Date of Grant") a nonqualified stock option (the "Option") to
purchase 3,000 shares of the Company's common stock without par value (the
"Common Shares") at the exercise price of _____________________ ($________) per
Common Share (the "Exercise Price").

            1. Vesting of Option. (a) Unless terminated as hereinafter provided,
the Option shall be exercisable with respect to all of the Common Shares covered
by the Option after the Optionee continuously serves as a Nonemployee Director
of the Company for a period of one (1) year following the Date of Grant.

                  (b) Notwithstanding the provisions of Section 1(a) hereof, the
Option shall become immediately exercisable in full upon any change in control
of the Company that shall occur while the Optionee is a Nonemployee Director of
the Company. 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 Exchange Act) (a
      "Person") of beneficial ownership (within the meaning of Rule 13d-3
      promulgated under the Exchange Act) 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 (iii) of this Section 1(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 assumption of office occurs as a result of an actual or threatened
      election contest (within the meaning of Rule 14a-11 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; 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
<PAGE>
      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) Notwithstanding the provisions of Section 1(a) hereof, the
Option shall become immediately exercisable in full if the Optionee should (i)
retire (within the meaning in the Board's General Policies & Procedures), (ii)
die, (iii) become permanently disabled (within the meaning of the Company's
long-term disability plan) while serving as a Nonemployee Director of the
Company, or (iv) otherwise cease to be a Nonemployee Director of the Company for
any reason; provided, however, that this Option shall become immediately
exercisable in full pursuant to Section 1(c)(iv) only if the Optionee shall have
continuously served as a Nonemployee Director for at least six months following
the Date of Grant.

                  (d) To the extent that the Option shall have become
exercisable in accordance with the terms of this agreement, it may be exercised
in whole or in part from time to time thereafter.

            2. Termination of Option. The Option shall terminate automatically
and without further notice on the earliest of the following dates:

                  (a) five years after the date upon which the Optionee ceases
to be a Nonemployee Director of the Company or subsidiary for any reason, except
death;

                  (b) one year after the date of the Optionee's death; or

                  (c) ten years after the Date of Grant.

            3. Payment of Exercise Price. The Exercise Price shall be payable
(a) in cash in the form of currency or check or other cash equivalent acceptable
to the Company, (b) by transfer to the Company of nonforfeitable, unrestricted
Common Shares that have been owned by the Optionee for at least six months prior
to the date of exercise or (c) by any combination of the methods of payment
described in Sections 3(a) and 3(b) hereof. Nonforfeitable, unrestricted Common
Shares that are transferred by the Optionee in payment of all or any part of the
Exercise Price shall be valued on the basis of their fair market value as
determined by the Committee from time to time. Subject to the terms and
conditions of Section 4 hereof, and subject to any deferral election the
Optionee may have made pursuant to any plan or program of the Company, the
Company shall cause certificates for any shares purchased hereunder to be
delivered to the Optionee upon payment of the Exercise Price in full.

            4. 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 Option shall not be
exercisable if the exercise thereof would result in a violation of any such law.
To the extent that the Ohio Securities Act shall be applicable to the Option,
the Option shall not be exercisable unless the Common Shares or other securities
covered by the Option 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.

                                      B-2
<PAGE>
            5. Transferability and Exercisability.

                  (a) Except as provided in Section 5(b) below, the Option
including any interest in thereof, shall not be transferable by the Optionee
except by will or the laws of descent and distribution, and the Option shall be
exercisable during the lifetime of the Optionee only by him or, in the event of
his legal incapacity to do so, by his guardian or legal representative acting on
behalf of the Optionee in a fiduciary capacity under state law and court
supervision.

                  (b) Notwithstanding Section 5(a) above, the Option or any
interest in thereof, may be transferable by the Optionee, without payment of
consideration therefor, to any one or more members of the immediate family of
Optionee (as defined in Rule 16a-1(e) under the Exchange Act), or to one or more
trusts established solely for the benefit of such members of the immediate
family or to partnerships in which the only partners are such members of the
immediate family of the Optionee; provided, however, that such transfer will not
be effective until notice of such transfer is delivered to the Company; and
provided, further, however, that any such transferee is subject to the same
terms and conditions hereunder as the Optionee.

            6. Adjustments. The Committee shall make any adjustments in the
Exercise Price and the number or kind of shares of stock or other securities
covered by the Option that the Committee may determine to be equitably required
to prevent any dilution or expansion of the Optionee'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 6(a) or 6(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 the Optionee's rights under this
agreement such alternative consideration as the Committee may determine in good
faith to be equitable under the circumstances.

            7. 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 the Optionee with respect to the Option without the Optionee's consent.

            8. 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.

            9. Governing Law. This agreement is made under, and shall be
construed in accordance with, the laws of the State of Ohio.

            10. Relation to Plan. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Plan.

            Dated this ____ day of ______________________, 200_

                                        THE TIMKEN COMPANY

                                        By:___________________________
                                             Name:
                                             Title:

Accepted and agreed to: _________________
Dated:_____________________

                                      B-3

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