DEFERRED COMPENSATION AGREEMENT
AGREEMENT dated as of ______________________, between The
Timken Company, an Ohio corporation (the "Company"), and
("Executive").
The Ominibus Budget Reconciliation Act of 1993 included a
new provision, Section 162(m) of the Internal Revenue Code (the
"Code"), which generally disallows a tax deduction to public
companies for compensation over $1 million paid to persons named
in the Summary Compensation Table for proxy statement purposes
and employed by the company at the end of the applicable year.
Executive and the Company desire to take action to ensure
that the Company is not denied a tax deduction for any
compensation paid to Executive owing to the limitation set forth
in Section 162(m) of the Code.
NOW, THEREFORE, in consideration of the premises, the
parties hereto have agreed, and do agree, as follows:
1. Deferral of Compensation. If, but for the application
of this Agreement, the Company's deduction of a portion of the
compensation due to Executive in a tax year would, in the
reasonable judgment of the Company, be disallowed pursuant to
Section 162(m) of the Code, then the Company shall defer payment
of that portion of the compensation due to Executive.
2. Period of Deferral. Executive may specify in a writing
substantially in the form attached hereto as Exhibit A (the
"Election Agreement") whether the period of deferral for an
amount deferred will be until (i) December 31 of the first
succeeding tax year in which such amount, when added to all other
compensation received or to be received by the Executive in such
year, would not be non-deductible by the Company by reason of
Section 162(m) of the Code, (ii) the date the Executive ceases to
be an employee of the Company by reason of death, retirement or
otherwise (or 90 days thereafter in the event the Executive
ceases to be an employee on December 31 of a year) or (iii) a
period of time following the date the Executive ceases to be an
employee by reason of death, retirement or otherwise, as
specified by the Executive in the Election Agreement. Executive
also may specify in the Election agreement whether the amount
deferred shall be paid to the Executive in a lump sum or in a
number of approximately equal quarterly installments (not to
exceed 40). Executive shall complete and deliver an initial
Election Agreement to the Vice President and General Counsel of
the Company on or before December 31, 1994. This Election
Agreement shall be effective for the 1995 tax year and shall
continue to be effective from year to year until revoked or
modified by written notice to the Vice President and General
Counsel of the Company. In order to be effective to revoke or
modify an election, a revocation or modification must be
delivered prior to the beginning of the year of service for which
such compensation is earned.
3. Interest on Deferred Amounts. Compensation that the
Executive elects to defer shall be treated as if it were set
aside in an account ("Account") on the date the compensation
would otherwise have been paid to the Executive. Such Account
will be credited with interest computed quarterly (based on
calendar quarters) on the lowest balance in the Account during
each quarter at the prime rate in effect according to The Wall
Street Journal on the last day of each calendar quarter plus one
percent. Interest for a calendar quarter shall be credited to
the Account as of the first day of the following quarter.
4. Death of the Executive. In the event of the death of
the Executive, the amount of the Executive's Account shall be
paid to the beneficiary ("Beneficiary") designated in a writing
substantially in the form attached hereto as Exhibit B (the
"Beneficiary Designation"), in accordance with the Executive's
Election Agreement. The Executive's Beneficiary Designation may
be changed at any time prior to his death by the execution and
delivery of a new Beneficiary Designation. The Beneficiary
Designation on file with the Company that bears the latest date
at the time of the Executive's death shall govern. In the
absence of a Beneficiary Designation or the failure of any
Beneficiary to survive the Executive, the amount of the
Executive's Account shall be paid to the Executive's estate in a
lump sum 90 days after the appointment of an executor or
administrator. In the event of the death of the Beneficiary or
all of the Beneficiaries after the death of the Executive, the
remaining amount of the Account shall be paid in a lump sum to
the estate of the last Beneficiary to receive payments 90 days
after the appointment of an executor or administrator.
5. Acceleration. Notwithstanding the provisions of the
foregoing: (i) if a Change in Control (as defined in the
Severance Agreement dated, (Sev Date) between (Name) and the
Company) occurs, the amount of the Executive's Account shall
immediately be paid to the Executive or Beneficiary in full; (ii)
in the event of an unforeseeable emergency, as defined in section
1.457-2(h) (4) and (5) of the Income Tax Regulations, that is
caused by an event beyond the control of the Executive or
Beneficiary and that would result in severe financial hardship to
the individual if acceleration were not permitted, the Company
may in its sole discretion accelerate the payment to the
Executive or Beneficiary of the amount of his Account, but only
up to the amount necessary to meet the emergency.
6. Non-alienation of Deferred Compensation. Except as
permitted by this Agreement, no right or interest under this
Agreement of the Executive or Beneficiary shall, without the
written consent of the Company, be (i) assignable or transferable
in any manner, (ii) subject to the alienation, anticipation,
sale, pledge, encumbrance, attachment, garnishment or other legal
process or (iii) in any manner liable for or subject to the debts
or liabilities of the Executive or Beneficiary.
7. Interest of Executive. The obligation of the Company
under this Agreement to make payment of amounts reflected in an
Account merely constitutes the unsecured promise of the Company
to make payments from its general assets as provided herein, and
neither Executive nor any Beneficiary shall have any interest in,
or a lien or prior claim upon, any property of the Company. The
Company may create a trust to hold funds, securities or other
assets to be used in payment of its obligations under this
Agreement, and may fund such trust; provided, however, that any
funds contained therein shall remain liable for the claims of the
Company's general creditors.
8. Governing Law. The provisions of this Agreement shall
be governed and construed in accordance with the laws of the
State of Ohio.
IN WITNESS WHEREOF, (Name) and the Company, by a duly
authorized officer, have executed this Agreement as of the day
and year first above written.
Attest: THE TIMKEN COMPANY
By:
Vice President and General Counsel Vice President - Human Resources
and Logistics
EXHIBIT A
THE TIMKEN COMPANY
ELECTION AGREEMENT
This Election Agreement is being filed pursuant to the
Agreement dated as of ______________________ between The Timken
Company (the "Company") and the undersigned.
1. PERIOD OF DEFERRAL
Please defer payment or make payment of the first
installment of amounts deferred under the Agreement
as follows (check one):
a. Defer until December 31 of the first succeeding
year in which the deferred amount, or portion of
such deferred amount, would not be non-
deductible to the Company by reason of Section
162(m) of the Code [ ].
b. Deferred until the date I cease to be an
employee of the Company [ ].
c. Defer until ________________ after the date I
cease to be an employee of the Company [ ]
(specify period).
2. METHOD OF PAYMENT
Please make payment of the above specified
deferred amount together with all accrued interest
as follows (check one):
a. Pay in lump sum [ ].
b. Pay in ____ approximately equal quarterly
installments (may not be more than 40) [ ].
I understand that (i) this Election Agreement shall continue
to be effective from year to year and (ii) in order to be
effective to revoke or modify this Election Agreement with
respect to compensation otherwise payable in a particular year, a
revocation or modification must be delivered to the Secretary of
the Company prior to the beginning of the year of service for
which such compensation is earned. Capitalized terms used, but
not otherwise defined, in this Election Agreement shall have the
respective meanings assigned to them in the Agreement.
Dated this ______ day of ________________, 1994.
______________________________ ______________________________
(Signature) (Print or type name)
EXHIBIT B
THE TIMKEN COMPANY
BENEFICIARY DESIGNATIONS
In accordance with the terms and conditions of the Agreement
dated as of __________________ between The Timken Company and the
undersigned, I hereby designate the person(s) indicated below as
my beneficiary(ies) to receive the amounts payable under said
Agreement.
Name
Address
Social Sec. Nos. of Beneficiary(ies)
Relationship(s)
Date(s) of Birth
In the event that the above-named beneficiary(ies)
predecease(s) me, I hereby designate the following person as
beneficiary(ies):
Name
Address
Social Sec. Nos. of Beneficiary(ies)
Relationship(s)
Date(s) of Birth
I hereby expressly revoke all prior designations of
beneficiary(ies), reserve the right to change the
beneficiary(ies) herein designated and agree that the rights of
said beneficiary(ies) shall be subject to the terms of the
Agreement. In the event that there is no beneficiary living at
the time of my death, I understand that the amounts payable under
the Agreement will be paid to my estate.
______________________ ______________________________
Date (Signature)
______________________________
(Print or type name)