THE TIMKEN COMPANY
1996 DEFERRED COMPENSATION PLAN
The Timken Company hereby establishes, effective as of
November 3, 1995, the 1996 Deferred Compensation Plan for
the Company. Such Plan provides key executives with the
opportunity to defer base salary or incentive compensation
payments in cash and in Common shares, in accordance with
the provisions of this Plan.
ARTICLE I
DEFINITIONS
For the purposes hereof, the following words and
phrases shall have the meanings indicated.
1. "Account" shall mean a bookkeeping account in
which Base Salary or Incentive Compensation which is
deferred by a Participant shall be recorded and to which
dividends, distributions and interest may be credited in
accordance with the Plan.
2. "Base Salary" shall mean the annual fixed or
base compensation, payable monthly or otherwise to a
Participant.
3. "Beneficiary" or "Beneficiaries" shall mean
the person or persons designated by a Participant in
accordance with the Plan to receive payment of the remaining
balance of the Participant's Account in the event of the
death of the Participant prior to receipt of the entire
amount credited to the Participant's Account.
4. "Board" shall mean the Board of Directors of
the Company.
5. "Code" shall mean the Internal Revenue Code
of 1986, as amended.
6. "Change in Control" shall mean that:
(i) All or substantially all of the assets of the
Company are sold or transferred to another corporation
or entity, or the Company is merged, consolidated or
reorganized into or with another corporation or entity, with
the result that upon conclusion of the transaction less
than 51 percent of the outstanding securities entitled to
vote generally in the election of directors or other
capital interests of the acquiring corporation or entity is
owned, directly or indirectly, by the shareholders of the
Company generally prior to the transaction; or
(ii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report
thereto), as promulgated pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"), disclosing that
any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) has
become the beneficial owner (as the term "beneficial owner"
is defined under Rule 13d-3 or any successor rule or
regulation thereto under the Exchange Act) of securities
representing 30 percent or more of the combined voting
power of the then-outstanding voting securities of the
Company; or
(iii) The Company shall file a report or proxy
statement with the Securities and Exchange Commission (the
"SEC") pursuant to the Exchange Act disclosing in
response to Item 1 of Form 8-K thereunder or Item 5(f) of
Schedule 14A thereunder (or any successor schedule, form,
report or item thereto) that a change in control of the
Company has or may have occurred, or will or may occur
in the future, pursuant to any then-existing contract or
transaction; or
(iv) The individuals who constituted the Board at
the beginning of any period of two consecutive calendar
years cease for any reason to constitute at least a
majority thereof unless the nomination for election by the
Company's shareholders of each new member of the Board
was approved by a vote of at least two-thirds of the
members of the Board still in office who were members of the
Board at the beginning of any such period.
7. "Committee" shall mean the Compensation
Committee of the Board or such other Committee as may be
authorized by the Board to administer the Plan.
8. "Common Shares" shall mean shares of common
stock without par value of the Company or any security into
which such Common Shares may be changed by reason of any
transaction or event of the type referred to in Section 9 of
Article II of the Plan.
9. "Company" shall mean The Timken Company and
its successors, including, without limitation, the surviving
corporation resulting from any merger or consolidation of
The Timken Company with any other corporation or
corporations.
10. "Election Agreement" shall mean an agreement
in substantially the form attached hereto as Exhibit A, as
modified from time to time by the Company.
11. "Eligible Associate" shall mean an associate
of the Company (or a Subsidiary that has adopted the Plan)
who is a participant in the Management Performance Plan of
the Company. In the case of associates who are residents of
the United States, an Eligible Associate shall include only
those associates whose position with the Company has a mid-
point compensation of at least $100,000 and who is a
participant in the Management Performance Plan of the
Company. Unless otherwise determined by the Committee, an
Eligible Associate shall continue as such until termination
of employment.
12. "Incentive Compensation" shall mean (i) cash
incentive compensation earned as an associate pursuant to an
incentive compensation plan now in effect or hereafter
established by the Company, including, without limitation,
the Management Performance Plan, the Long-Term Incentive
Plans, and the Post-Tax Savings and Investment Pension Plan
Employee Contributions and Match and (ii) incentive
compensation payable in the form of Common Shares pursuant
to the Long-Term Incentive Plans or any similar plan
approved by the Committee for purposes of this Plan.
13. "Insolvent" shall mean that the Company has
become subject to a pending voluntary or involuntary
proceeding under the United States Bankruptcy Code or has
become unable to pay its debts as they mature.
14. "Long-Term Incentive Plans" shall mean The
Timken Company Long-Term Incentive Plan, as amended from
time to time, and The Timken Company 1985 Incentive Plan.
15. "Participant" shall mean any Eligible
Associate who has at any time elected to defer the receipt
of Base Salary or Incentive Compensation in accordance with
the Plan.
16. "Plan" shall mean this deferred compensation
plan, which shall be known as the 1996 Deferred Compensation
Plan for The Timken Company.
17. "Subsidiary" shall mean any corporation,
joint venture, partnership, unincorporated association or
other entity in which the Company has a direct or indirect
ownership or other equity interest and directly or
indirectly owns or controls more than 50 percent of the
total combined voting or other decision-making power.
18. "Year" shall mean a calendar year.
ARTICLE II
ELECTION TO DEFER
1. Eligibility. An Eligible Associate may elect
to defer receipt of all or a specified part of his or her
Base Salary or Incentive Compensation for any Year in
accordance with Section 2 of this Article. An Eligible
Associate's entitlement to defer shall cease with respect to
the Year following the Year in which he or she ceases to be
an Eligible Associate.
2. Election to Defer. An Eligible Associate who
desires to defer all or part of his or her Base Salary or
Incentive Compensation pursuant to this Plan must complete
and deliver an Election Agreement to the Director of
Compensation and Benefits of the Company prior to the
beginning of the first year of service for which such
compensation is payable. An Eligible Associate who timely
delivers an Election Agreement to the Director of
Compensation and Benefits of the Company shall be a
Participant. An Election Agreement that is timely delivered
shall be effective for the succeeding Year and, except as
otherwise specified by an Eligible Associate in his or her
Election Agreement, shall continue to be effective from Year
to Year until revoked or modified by written notice to the
Director of Compensation and Benefits of the Company or
until terminated automatically upon either the termination
of the Plan or the Company becoming Insolvent. In order to
be effective to revoke or modify an election to defer
compensation payable in any particular Year, a revocation or
modification must be delivered prior to the beginning of the
Year of service for which such compensation is payable.
3. Amount Deferred; Period of Deferral. A
Participant shall designate on the Election Agreement the
percentage or the dollar amount of his or her Base Salary or
Incentive Compensation that is to be deferred. A
Participant may specify in the Election Agreement that
different percentages or dollar amounts shall apply to
different compensation plans or different forms of payment,
i.e., cash or Common Shares. The applicable percentage(s)
or dollar amount(s) of Base Salary or Incentive Compensation
shall be deferred until (i) the date the Participant ceases
to be an associate by death, retirement or otherwise or (ii)
the date otherwise specified by the Participant in the
Election Agreement, including a date determined by reference
to the date the Participant ceases to be an associate by
death, retirement or otherwise.
4. Accounts.
(i) Cash compensation that a Participant elects
to defer shall be treated as if it were set aside in an
Account on the date the Base Salary or Incentive
Compensation would otherwise have been paid to the
Participant. Such Account will be credited with interest
computed quarterly (based on calendar quarters) on the
lowest balance in the Account during each quarter at such
rate and in such manner as determined from time to time
by the Committee. Unless otherwise determined by the
Committee, interest to be credited hereunder shall be
credited 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.
(ii) Incentive Compensation payable in the form of
Common shares that a Participant elects to defer shall be
reflected in a separate Account, which shall be credited
with the number of Common Shares that would otherwise have
been issued or transferred and delivered to the Participant.
Such Account, following any applicable vesting period,
shall be credited from time to time with amounts equal
to dividends or other distributions paid on the number of
Common Shares reflected in such Account, and such Account
shall be credited with interest on cash amounts credited
to such Account from time to time in the manner provided
in Subsection (i) above.
5. Payment of Accounts. The amounts in
Participants' Accounts shall be paid as provided in this
Section 5.
(i) The amount of a Participant's Account
attributable to deferral of cash Incentive Compensation
shall be paid to the Participant in a lump sum or in a
number of approximately equal quarterly installments, as
designated by the Participant in the Election Agreement.
The amount of such Account remaining unpaid shall
continue to bear interest, as provided in Section 4 of this
Article. The lump sum payment or the first quarterly
installment, as the case may be, shall be made as soon as
practicable following the end of the period of deferral as
specified in Section 3 of this Article.
(ii) The number of Common Shares in a
Participant's Account attributable to deferral of
Incentive Compensation payable in the form of Common
Shares shall be issued or transferred to the Participant in
one installment or in a number of approximately equal
quarterly installments, as designated by the
Participant in the Election Agreement. The one installment
or first quarterly installment, as the case may be, shall
be made as soon as practicable following the end of the
period of deferral as specified in Section 3 of this
Article. All amounts credited to such Account in respect
of dividends, distributions and interest thereon as
provided in Subsection (ii) of Section 5 of this Article
shall likewise be paid to the Participant at the same
time the shares causing the dividend, distribution or
interest are transferred to the Participant.
6. Death of a Participant. In the event of the
death of a Participant, the amount of the Participant's
Account or Accounts shall be paid to the Beneficiary or
Beneficiaries designated in a writing substantially in the
form attached hereto as Exhibit B (the "Beneficiary
Designation"), in accordance with the Participant's Election
Agreement and Section 5 of this Article. A Participant's
Beneficiary Designation may be changed at any time prior to
his or her 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 Participant's death shall govern. In the absence of
a Beneficiary Designation or the failure of any Beneficiary
to survive the Participant, the amount of the Participant's
Account or Accounts shall be paid to the Participant'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 Beneficiaries after the death of a
Participant, the remaining amount of the Account or Accounts
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.
7. Small Payments. Notwithstanding the
foregoing, if installment payments elected by a Participant
would result in a payment with a value of less than $500,
the entire amount of the Participant's Account or Accounts
may at the discretion of the Committee be paid in a lump sum
in accordance with Section 6 of this Article.
8. Acceleration. Notwithstanding the provisions
of the foregoing: (i) if a Change in Control occurs,
the amount of each Participant's Account or Accounts shall
immediately be paid to the Participant 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 Participant
or Beneficiary and that would result in severe financial
hardship to the individual if acceleration were not
permitted, the Committee may in its sole discretion
accelerate the payment to the Participant or Beneficiary of
the amount of his or her Account or Accounts, but only up to
the amount necessary to meet the emergency.
9. Adjustments. The Committee may make or
provide for such adjustments in the numbers of Common Shares
credited to Participants' Accounts, and in the kind of
shares so credited, as the Committee in its sole discretion,
exercised in good faith, may determine is equitably required
to prevent dilution or enlargement of the rights of
Participants that otherwise would result from (i) any stock
dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of
the Company, or (ii) any merger, consolidation, spin-off,
split-off, spin-out, split-up, reorganization, partial or
complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or
(iii) any other corporate transaction or event having an
effect similar to any of the foregoing. Moreover, in the
event of any such transaction or event, the Committee, in
its discretion, may provide in substitution for any or all
Common Shares deliverable under this Plan such alternative
consideration as it, in good faith, may determine to be
equitable in the circumstances.
10. Fractional Shares. The Company 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 of fractions in cash.
ARTICLE III
ADMINISTRATION
The Company, through the Committee, shall be
responsible for the general administration of the Plan and
for carrying out the provisions hereof. The Committee shall
have all such powers as may be necessary to carry out the
provisions of the Plan, including the power to (i) determine
all questions relating to eligibility for participation in
the Plan and the amount in the Account or Accounts of any
Participant and all questions pertaining to claims for
benefits and procedures for claim review, (ii) resolve all
other questions arising under the Plan, including any
questions or construction, and (iii) take such further
action as the Company shall deem advisable in the
administration of the Plan. The actions taken and the
decisions made by the Committee hereunder shall be final and
binding upon all interested parties.
ARTICLE IV
AMENDMENT AND TERMINATION
The Company reserves the right to amend or
terminate the Plan at any time by action of the Board;
provided, however, that no such action shall adversely
affect any Participant or Beneficiary who has an Account, or
result in the acceleration of payment of the amount of any
Account (except as otherwise permitted under the Plan),
without the consent of the Participant or Beneficiary.
ARTICLE V
MISCELLANEOUS
1. Non-alienation of Deferred Compensation.
Except as permitted by this Plan, no right or interest under
this Plan of any Participant or Beneficiary shall, without
the written consent of the Company, be (i) assignable or
transferable in any manner, (ii) subject to 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
Participant or Beneficiary.
2. Participant by Associates of Subsidiaries.
An Eligible Associate who is employed by a Subsidiary and
elects to participate in the Plan shall participate on the
same basis as an associate of the Company. The Account or
Accounts of a Participant employed by a Subsidiary shall be
paid in accordance with the Plan solely by such Subsidiary
to the extent attributable to Base Salary or Incentive
Compensation that would have been paid by such Subsidiary in
the absence of deferral pursuant to the Plan.
3. Interest of Associate. The obligation of
the Company under the Plan to make payment of amounts
reflected in an Account merely constitutes the unsecured
promise of the Company to make payments from its general
assets or in the form of its Common Shares, as the case may
be, as provided herein, and no Participant or Beneficiary
shall have any interest in, or a lien or prior claim upon,
any property of the Company. Further, no Participant or
Beneficiary shall have any claim whatsoever against any
Subsidiary for amounts reflected in an Account. Nothing in
this Plan shall be construed as guaranteeing future
employment to Eligible Associates and nothing in this Plan
shall be considered in any manner a contract of employment.
It is the intention of the Company that the Plan be unfunded
for tax purposes of Title I of ERISA. The Company may
create a trust to hold funds, Common Shares or other
securities to be used in payment of its obligations under
the Plan, and may fund such trust; provided, however, that
any funds contained therein shall remain liable for the
claims of the Company's general creditors.
4. Claims of Other Persons. The provisions of
the Plan shall in no event be construed as giving any other
person, firm or corporation any legal or equitable right as
against the Company or any Subsidiary or the officers,
employees or directors of the Company or any Subsidiary,
except any such rights as are specifically provided for in
the Plan or are hereafter created in accordance with the
terms and provisions of the Plan.
5. Severability. The invalidity and
unenforceability of any particular provision of the Plan
shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or
unenforceable provision were omitted herefrom.
6. Governing Law. Except to the extent preempted
by federal law, the provisions of the Plan shall be governed
and construed in accordance with the laws of the State of
Ohio.
7. Relationship to Other Plans. This Plan is
intended to serve the purposes of and to be consistent with
the Long-Term Incentive Plans and any similar plan approved
by the Committee for purposes of this Plan. The issuance or
transfer of Common Shares pursuant to this Plan shall be
subject in all respects to the terms and conditions of the
Long-Term Incentive Plans and any other such plan. Without
limiting the generality of the foregoing, Common Shares
credited to the Accounts of Participants pursuant to this
Plan as Incentive Compensation shall be taken into account
for purposes of Section 3 of the Long-Term Incentive Plans
(Shares Available Under the Plans) and for purposes of the
corresponding provisions of any other such plan.
EXHIBIT A
Page 1 of 3
1996 DEFERRED COMPENSATION PLAN
THE TIMKEN COMPANY
ELECTION AGREEMENT
I, ____________________________, hereby elect to
participate in the 1996 Deferred Compensation
Plan for The Timken Company (the "Plan") with respect to the
compensation that I may receive beginning January 1, 1996.
I hereby elect to defer payment of the compensation
which I otherwise would be entitled to receive as follows:
Deferral of Cash
1. Percentage or dollar amount of bonus, if any, payable
under the Management Performance Plan (a) in 1996 only []
or (b) in 1996 and in later years [ ] (check one):
25% [ ] 50% [ ] 100% [ ] ___% [ ] $_______ [ ]
2. Percentage or dollar amount, if any, payable under the
Post-Tax Savings and Investment Pension Plan Employee
Contributions and Match (a) in 1996 only [ ] or (b) in
1996 and in later years [ ] (check one):
25% [ ] 50% [ ] 100% [ ] ___% [ ] $_______ [ ]
3. Percentage or dollar amount of cash award, if any,
payable as a result of the vesting of Deferred Dividend
Shares (a) in 1996 only [ ] or (b) in 1996 and in later
years [ ] (check one):
25% [ ] 50% [ ] 100% [ ] ___% [ ] $_______ [ ]
4. Percentage or dollar amount of Base Salary (a) for 1996
only [ ] or (b) for 1996 and for later years [ ]
(check one):
25% [ ] 50% [ ] 100% [ ] ___% [ ] $_______ [ ]
EXHIBIT A
Page 2 of 3
5. Please make payment of the above specified cash
compensation together with all accrued interest
reflected in my Account as follows:
a. Pay in lump sum [ ]
b. Pay in ____ approximately equal quarterly
installments [ ]
6. Please defer payment or make payment of first
installment as follows:
a. Defer until the date I cease to be an associate []
b. Defer until ________ [ ] (specify date or number
of years following termination of employment)
DEFERRAL OF COMMON SHARES
1. Percentage or dollar amount value of Common Shares, if
any, payable as a result of the vesting of Deferred
Dividend Shares (a) in 1996 only [ ] or (b) in 1996 and
in later years [ ] (check one):
25% [ ] 50% [ ] 100% [ ] ___% [ ] $_______ [ ]
2. Please make payment of the above Common Shares together
with all accrued amounts in my Account as follows:
a. Pay in lump sum [ ]
b. Pay in ____ approximately equal quarterly
installments [ ]
3. Please defer my receipt of Common Shares together with
the cash credited to my Account equal to dividends or other
distributions paid on the number of shares reflected in
such Account, together with all accrued interest, as
follows:
a. Defer until the date I cease to be an associate []
b. Defer until ________ [ ] (specify date or number
of years following termination of employment)
EXHIBIT A
Page 3 of 3
I acknowledge that I have reviewed the Plan and
understand that my participation will be subject to the
terms and conditions contained in the Plan. Capitalized
terms used, but not otherwise defined, in this Election
Agreement shall have the respective meanings assigned to
them in the Plan.
I understand that (i) this Election Agreement shall
continue to be effective from Year to Year except as
specified above and except as otherwise provided in the Plan
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 Director of Compensation and
Benefits of the Company ____ prior to the beginning of the
first Year of service for which such compensation is
payable.
I acknowledge that I have been advised to consult with
my own financial, tax, estate planning and legal advisors
before making this election to defer in order to determine
the tax effects and other implications of my participation
in the Plan.
Dated this ______ day of _____, 1995.
________________________________ ______________________________
(Signature) (Print or type name)
EXHIBIT B
1996 DEFERRED COMPENSATION PLAN
THE TIMKEN COMPANY
BENEFICIARY DESIGNATIONS
In accordance with the terms and conditions of the 1996
Deferred Compensation Plan of The Timken Company (the
"Plan"), I hereby designate the person(s) indicated below as
my beneficiary(ies) to receive the amounts payable under
said Plan.
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)