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Nonqualified Stock Option Agreement - TIMKEN CO - 5-14-1998

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Nonqualified Stock Option Agreement - TIMKEN CO - 5-14-1998 Powered By Docstoc
					EXHIBIT 10 THE TIMKEN COMPANY Nonqualified Stock Option Agreement WHEREAS, _________________________ (the "Optionee") is an employee of The Timken Company (the "Company"); WHEREAS, the execution of a stock option agreement in the form hereof has been authorized by a resolution of the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of the Company that was duly adopted on April 21, 1998 (the "Date of Grant"), and is incorporated herein by this reference; and WHEREAS, the option granted hereby is intended to be a nonqualified stock option and shall not be treated as an "incentive stock option" within the meaning of that term under Section 422 of the Internal Revenue Code of 1986; NOW, THEREFORE, pursuant to the Company's Long-term Incentive Plan (as Amended and Restated as of December 20, 1995) (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 (i) a nonqualified stock option (the "Option") to purchase _____________ shares of the Company's common stock without par value (the "Common Shares") at the exercise price of thirty-three and three-fourths dollars ($33.75) per Common Share (the "Exercise Price") and (ii) the right to receive dividend equivalents payable in Common Shares on a deferred basis (the "Deferred Dividend Shares") or, at the discretion of the Committee, in cash, with respect to the Common Shares covered by any unexercised portion of the Option. 1. Vesting of Option. (a) Unless terminated as hereinafter provided, the Option shall be exercisable to the extent of one- fourth (1/4th) of the Common Shares covered by the Option after the Optionee shall have been in the continuous employ of the Company or a subsidiary for one full year from the Date of Grant and to the extent of an additional one-fourth (1/4th) thereof after each of the next three successive years thereafter during which the Optionee shall have been in the continuous employ of the Company or a subsidiary. For the purposes of this agreement: "subsidiary" shall mean a corporation, partnership, joint venture, unincorporated association or other entity in which the Company has a direct or indirect ownership or other equity interest; the continuous employment of the Optionee with the Company or a subsidiary shall not be deemed to have been interrupted, and the Optionee shall not be deemed to have ceased to be an employee of the Company or a subsidiary, by reason of the transfer of his employment among the Company and its subsidiaries.

(b) 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 an employee of the Company or a subsidiary. For the purposes of this agreement, the term "change in control" shall mean the occurrence of any of the following events: (i) 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

(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 an employee of the Company or a subsidiary. For the purposes of this agreement, the term "change in control" shall mean the occurrence of any of the following events: (i) 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. In the event that any person described in Section 1(b)(ii) hereof files an amendment to any report referred to in Section 1(b)(ii) hereof that shows the beneficial ownership described in Section 1(b)(ii) hereof to have decreased to less than 30 percent, or in the event that any anticipated change in control referred to in Section 1(b)(iii) hereof does not occur following the filing with the SEC of any report or proxy statement described in Section 1(b)(iii) hereof because any contract or transaction referred to in Section 1(b)(iii) hereof is canceled or abandoned, the

Committee may nullify the effect of Section 1(b)(ii) or 1(b)(iii) hereof, as the case may be, and reinstate the provisions of Section 1(a) hereof by giving notice thereof to the Optionee; provided, however, that any such action by the Committee shall not prejudice any exercise of the Option that may have occurred prior to the nullification and reinstatement. The provisions of Section 1(b)(ii) hereof shall again become automatically effective following any such nullification of the provisions thereof and reinstatement of the provisions of Section 1(a) hereof in the event that any person described in Section 1(b)(ii) hereof files a further amendment to any report referred to in Section 1(b)(ii) hereof that shows the beneficial ownership described in Section 1(b)(ii) hereof to have again increased to 30 percent or more. (c) Notwithstanding the provisions of Section 1(a) hereof, the Option shall become immediately exercisable in full if the Optionee should die or become permanently disabled(within the meaning of the Company's long-term disability plan) while in the employ of the Company or any subsidiary, or if the Optionee should retire under a retirement plan of the Company or any subsidiary (i) at or after age 62 or (ii) at an earlier age with the consent of the Company. (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.

Committee may nullify the effect of Section 1(b)(ii) or 1(b)(iii) hereof, as the case may be, and reinstate the provisions of Section 1(a) hereof by giving notice thereof to the Optionee; provided, however, that any such action by the Committee shall not prejudice any exercise of the Option that may have occurred prior to the nullification and reinstatement. The provisions of Section 1(b)(ii) hereof shall again become automatically effective following any such nullification of the provisions thereof and reinstatement of the provisions of Section 1(a) hereof in the event that any person described in Section 1(b)(ii) hereof files a further amendment to any report referred to in Section 1(b)(ii) hereof that shows the beneficial ownership described in Section 1(b)(ii) hereof to have again increased to 30 percent or more. (c) Notwithstanding the provisions of Section 1(a) hereof, the Option shall become immediately exercisable in full if the Optionee should die or become permanently disabled(within the meaning of the Company's long-term disability plan) while in the employ of the Company or any subsidiary, or if the Optionee should retire under a retirement plan of the Company or any subsidiary (i) at or after age 62 or (ii) at an earlier age with the consent of the Company. (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) thirty days after the date upon which the Optionee ceases to be an employee of the Company or a subsidiary, unless the cessation of his employment (i) is a result of his death, disability or retirement with the Company's consent or (ii) follows a change in control; (b) five years after the date upon which the Optionee ceases to be an employee of the Company or subsidiary (i) as a result of his disability, (ii) as a result of his retirement with the Company's consent, unless he is also a director of the Company who continues to serve as such following his retirement with the Company's consent, or (iii) following a change in control, unless the cessation of his employment following a change in control is a result of his death; (c) one year after the date upon which the Optionee ceases to be a director of the Company, but not less than five years after the date upon which he ceases to be an employee of the Company or a subsidiary, if (i) the cessation of his employment is a result of his retirement with the Company's consent and (ii) he continues to serve as a director of the Company following the cessation of his employment; (d) one year after the date of the Optionee's death regardless

of whether he ceases to be an employee of the Company or a subsidiary prior to his death (i) as a result of his disability or retirement with the Company's consent or (ii) following a change in control; or (e) ten years after the Date of Grant. For the purposes of this agreement: "retirement with the Company's consent" shall mean the retirement of the Optionee prior to age 62, if the Board or the Committee determines that his retirement is for the convenience of the Company or a subsidiary, or the retirement of the Optionee at or after age 62 under a retirement plan of the Company or a subsidiary; "disability" shall mean that the Optionee has qualified for disability benefits under the Company's Long-Term Disability Program or any successor disability plan or program of the Company. In the event that the Optionee shall intentionally commit an act that the Committee determines to be materially adverse to the interests of the Company or a subsidiary, the Option shall terminate at the time of that determination notwithstanding any other provision of this agreement. 3. Payment of Exercise Price. The Exercise Price shall be payable (a) in cash in the form of currency or check or

of whether he ceases to be an employee of the Company or a subsidiary prior to his death (i) as a result of his disability or retirement with the Company's consent or (ii) following a change in control; or (e) ten years after the Date of Grant. For the purposes of this agreement: "retirement with the Company's consent" shall mean the retirement of the Optionee prior to age 62, if the Board or the Committee determines that his retirement is for the convenience of the Company or a subsidiary, or the retirement of the Optionee at or after age 62 under a retirement plan of the Company or a subsidiary; "disability" shall mean that the Optionee has qualified for disability benefits under the Company's Long-Term Disability Program or any successor disability plan or program of the Company. In the event that the Optionee shall intentionally commit an act that the Committee determines to be materially adverse to the interests of the Company or a subsidiary, the Option shall terminate at the time of that determination notwithstanding any other provision of this agreement. 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 6 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. Crediting of Deferred Dividend Shares. Each Deferred Dividend Share represents the right of the Optionee to receive one Common Share if and when the Deferred Dividend Share becomes nonforfeitable in accordance with Section 5(a) hereof. Upon the determination by the Committee of the number of Deferred Dividend Shares to be credited in accordance with this Section 4, Deferred Dividend Shares shall be credited annually to the Optionee as of December 31 of each year that the Option remains in effect and any portion thereof remains unexercised. The number of Deferred Dividend Shares to be credited to the Optionee for any calendar year shall be determined as follows: (a) the total amount per share of cash dividends that were paid on the outstanding Common Shares during the calendar year shall be multiplied by the total number of Common Shares then covered by both exercisable and unexercisable portions of the Option, including any Deferred

Dividend Shares that shall have been previously credited to the Optionee hereunder and remain subject to forfeiture pursuant to Section 5(a) hereof; (b) the product of the arithmetical operation described in Section 4(a) hereof shall then be divided by the average closing price of the Common Shares, as reported on the New York Stock Exchange or other national market on which the Common Shares are then principally traded, for the 10 trading dates immediately preceding December 31; (c) the quotient of the arithmetical operation described in Section 4(b) hereof shall be the number of Deferred Dividend Shares that shall be credited to the Optionee for the calendar year; provided, however, that no Deferred Dividend Shares shall be credited to the Optionee for any calendar year in which the total net income per share of the outstanding Common Shares is not at least 250 percent of the total amount of cash dividends per share that were paid on the outstanding Common Shares during that calendar year, and no Deferred Dividend Shares shall be credited to the Optionee following the cessation of his employment with the Company or a subsidiary, regardless of the circumstances under which the cessation of his employment occurred and notwithstanding that the term of the Option or any Deferred Dividend Share remains in effect. 5. Vesting and Issuance of Deferred Dividend Shares. (a) A Deferred Dividend Share shall become nonforfeitable upon the earlier to occur of (i) the expiration of a period of four years from the date as of which it is credited to the Optionee on the records of the Company, if the Optionee shall have remained in the continuous employ of the Company or a subsidiary during that period, or (ii) the termination of the Optionee's employment with the Company or a subsidiary following a change in control or as a result of his death, disability or retirement with the Company's consent. If the Optionee ceases to be an employee of the Company or a subsidiary under

Dividend Shares that shall have been previously credited to the Optionee hereunder and remain subject to forfeiture pursuant to Section 5(a) hereof; (b) the product of the arithmetical operation described in Section 4(a) hereof shall then be divided by the average closing price of the Common Shares, as reported on the New York Stock Exchange or other national market on which the Common Shares are then principally traded, for the 10 trading dates immediately preceding December 31; (c) the quotient of the arithmetical operation described in Section 4(b) hereof shall be the number of Deferred Dividend Shares that shall be credited to the Optionee for the calendar year; provided, however, that no Deferred Dividend Shares shall be credited to the Optionee for any calendar year in which the total net income per share of the outstanding Common Shares is not at least 250 percent of the total amount of cash dividends per share that were paid on the outstanding Common Shares during that calendar year, and no Deferred Dividend Shares shall be credited to the Optionee following the cessation of his employment with the Company or a subsidiary, regardless of the circumstances under which the cessation of his employment occurred and notwithstanding that the term of the Option or any Deferred Dividend Share remains in effect. 5. Vesting and Issuance of Deferred Dividend Shares. (a) A Deferred Dividend Share shall become nonforfeitable upon the earlier to occur of (i) the expiration of a period of four years from the date as of which it is credited to the Optionee on the records of the Company, if the Optionee shall have remained in the continuous employ of the Company or a subsidiary during that period, or (ii) the termination of the Optionee's employment with the Company or a subsidiary following a change in control or as a result of his death, disability or retirement with the Company's consent. If the Optionee ceases to be an employee of the Company or a subsidiary under any circumstances other than those described in Section 5(a)(ii) hereof, any Deferred Dividend Shares that shall have been previously credited to the Optionee hereunder and remain subject to forfeiture at the time of the cessation of his employment shall thereupon be forfeited automatically and without further notice unless otherwise determined by the Committee. (b) Subject to the terms and conditions of Section 6 hereof, and subject to any deferral election the Optionee may have made pursuant to any plan or program of the Company, Deferred Dividend Shares shall be issuable to the Optionee at the time when they become nonforfeitable in accordance with Section 5(a) hereof. 6. 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 and the Company shall not be obligated to issue any Common Shares in payment of Deferred Dividend Shares if the exercise or issuance 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 and the Company

shall not be obligated to issue any Common Shares in payment of Deferred Dividend Shares unless the Common Shares or other securities covered by the Option or to be issued in payment of Deferred Dividend Shares are (a) exempt from registration thereunder, (b) the subject of a transaction that is exempt from compliance therewith, (c) registered by description or qualification thereunder or (d) the subject of a transaction that shall have been registered by description thereunder. 7. Transferability and Exercisability. Neither the Option nor any Deferred Dividend Shares, including any interest in either thereof, shall 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. 8. 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 or to be issued in payment of Deferred Dividend Shares 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 8(a) or 8(b) hereof. Furthermore, in the event that any transaction or event described or referred to in the immediately preceding

shall not be obligated to issue any Common Shares in payment of Deferred Dividend Shares unless the Common Shares or other securities covered by the Option or to be issued in payment of Deferred Dividend Shares are (a) exempt from registration thereunder, (b) the subject of a transaction that is exempt from compliance therewith, (c) registered by description or qualification thereunder or (d) the subject of a transaction that shall have been registered by description thereunder. 7. Transferability and Exercisability. Neither the Option nor any Deferred Dividend Shares, including any interest in either thereof, shall 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. 8. 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 or to be issued in payment of Deferred Dividend Shares 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 8(a) or 8(b) hereof. Furthermore, in the event that any transaction or event described or referred to in the immediately preceding sentence shall occur, the Committee may provide in substitution of any or all of the Optionee's rights under this agreement such alternative consideration as the Committee may determine in good faith to be equitable under the circumstances. 9. Withholding Taxes. If the Company shall be required to withhold any federal, state, local or foreign tax in connection with any exercise of the Option or payment of Deferred Dividend Shares, the Optionee shall pay the tax or make provisions that are satisfactory to the Company for the payment thereof. The Optionee may elect to satisfy all or any part of any such withholding obligation by surrendering to the Company a portion of the Common Shares that are issuable to the Optionee upon the exercise of the Option or payment of Deferred Dividend Shares. If such election is made, the shares so surrendered by the Optionee shall be credited against any such withholding obligation at their fair market value (as determined by the Committee from time to time) on the date of such surrender. 10. Right to Terminate Employment. No provision of this agreement shall limit in any way whatsoever any right that the Company or a subsidiary may otherwise have to terminate the employment of the Optionee at any time.

11. Relation to Other Benefits. Any economic or other benefit to the Optionee under this agreement or the Plan shall not be taken into account in determining any benefits to which the Optionee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company or a subsidiary and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a subsidiary. 12. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of the Optionee with respect to the Option or the Deferred Dividend Shares without the Optionee's consent. 13. Severability. In the event that one or more of the provisions of this agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable. 14. Governing Law. This agreement is made under, and shall be construed in accordance with, the laws of the State of Ohio.

11. Relation to Other Benefits. Any economic or other benefit to the Optionee under this agreement or the Plan shall not be taken into account in determining any benefits to which the Optionee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company or a subsidiary and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a subsidiary. 12. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of the Optionee with respect to the Option or the Deferred Dividend Shares without the Optionee's consent. 13. Severability. In the event that one or more of the provisions of this agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable. 14. Governing Law. This agreement is made under, and shall be construed in accordance with, the laws of the State of Ohio.

This agreement is executed by the Company on this 21st day of April, 1998. THE TIMKEN COMPANY By ___________________________ Stephen A. Perry Senior Vice President Human Resources, Purchasing &Communications The undersigned Optionee hereby acknowledges receipt of an executed original of this agreement and accepts the Option granted hereunder and the right to receive Deferred Dividend Shares with respect to the Common Shares covered thereby, subject to the terms and conditions of the Plan and the terms and conditions hereinabove set forth. Optionee Date: _________________________

EXHIBIT 10.1 TRANSFERABLE THE TIMKEN COMPANY Nonqualified Stock Option Agreement WHEREAS, _____________(the "Optionee") is an employee of The Timken Company (the "Company"); WHEREAS, the execution of a stock option agreement in the form hereof has been authorized by a resolution of the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of the Company that was duly adopted on April 21, 1998 (the "Date of Grant"), and is incorporated herein by this reference; and WHEREAS, the option granted hereby is intended to be a nonqualified stock option and shall not be treated as an "incentive stock option" within the meaning of that term under Section 422 of the Internal Revenue Code of 1986; NOW, THEREFORE, pursuant to the Company's Long-term Incentive Plan (as Amended and Restated as of

This agreement is executed by the Company on this 21st day of April, 1998. THE TIMKEN COMPANY By ___________________________ Stephen A. Perry Senior Vice President Human Resources, Purchasing &Communications The undersigned Optionee hereby acknowledges receipt of an executed original of this agreement and accepts the Option granted hereunder and the right to receive Deferred Dividend Shares with respect to the Common Shares covered thereby, subject to the terms and conditions of the Plan and the terms and conditions hereinabove set forth. Optionee Date: _________________________

EXHIBIT 10.1 TRANSFERABLE THE TIMKEN COMPANY Nonqualified Stock Option Agreement WHEREAS, _____________(the "Optionee") is an employee of The Timken Company (the "Company"); WHEREAS, the execution of a stock option agreement in the form hereof has been authorized by a resolution of the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of the Company that was duly adopted on April 21, 1998 (the "Date of Grant"), and is incorporated herein by this reference; and WHEREAS, the option granted hereby is intended to be a nonqualified stock option and shall not be treated as an "incentive stock option" within the meaning of that term under Section 422 of the Internal Revenue Code of 1986; NOW, THEREFORE, pursuant to the Company's Long-term Incentive Plan (as Amended and Restated as of December 20, 1995) (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 (i) a nonqualified stock option (the "Option") to purchase __________ shares of the Company's common stock without par value (the "Common Shares") at the exercise price of thirty-three and three-fourths dollars ($33.75) per Common Share (the "Exercise Price") and (ii) the right to receive dividend equivalents payable in Common Shares on a deferred basis (the "Deferred Dividend Shares") or, at the discretion of the Committee, in cash, with respect to the Common Shares covered by any unexercised portion of the Option. 1. Vesting of Option. (a) Unless terminated as hereinafter provided, the Option shall be exercisable to the extent of one- fourth (1/4th) of the Common Shares covered by the Option after the Optionee shall have been in the continuous employ of the Company or a subsidiary for one full year from the Date of Grant and to the extent of an additional one-fourth (1/4th) thereof after each of the next three successive years thereafter during which the Optionee shall have been in the continuous employ of the Company or a subsidiary. For the purposes of this agreement: "subsidiary" shall mean a corporation, partnership, joint venture, unincorporated association or other entity in which the Company has a direct or indirect ownership or other equity interest; the continuous employment of the Optionee with the Company or a subsidiary shall not be deemed to have been

EXHIBIT 10.1 TRANSFERABLE THE TIMKEN COMPANY Nonqualified Stock Option Agreement WHEREAS, _____________(the "Optionee") is an employee of The Timken Company (the "Company"); WHEREAS, the execution of a stock option agreement in the form hereof has been authorized by a resolution of the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of the Company that was duly adopted on April 21, 1998 (the "Date of Grant"), and is incorporated herein by this reference; and WHEREAS, the option granted hereby is intended to be a nonqualified stock option and shall not be treated as an "incentive stock option" within the meaning of that term under Section 422 of the Internal Revenue Code of 1986; NOW, THEREFORE, pursuant to the Company's Long-term Incentive Plan (as Amended and Restated as of December 20, 1995) (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 (i) a nonqualified stock option (the "Option") to purchase __________ shares of the Company's common stock without par value (the "Common Shares") at the exercise price of thirty-three and three-fourths dollars ($33.75) per Common Share (the "Exercise Price") and (ii) the right to receive dividend equivalents payable in Common Shares on a deferred basis (the "Deferred Dividend Shares") or, at the discretion of the Committee, in cash, with respect to the Common Shares covered by any unexercised portion of the Option. 1. Vesting of Option. (a) Unless terminated as hereinafter provided, the Option shall be exercisable to the extent of one- fourth (1/4th) of the Common Shares covered by the Option after the Optionee shall have been in the continuous employ of the Company or a subsidiary for one full year from the Date of Grant and to the extent of an additional one-fourth (1/4th) thereof after each of the next three successive years thereafter during which the Optionee shall have been in the continuous employ of the Company or a subsidiary. For the purposes of this agreement: "subsidiary" shall mean a corporation, partnership, joint venture, unincorporated association or other entity in which the Company has a direct or indirect ownership or other equity interest; the continuous employment of the Optionee with the Company or a subsidiary shall not be deemed to have been

interrupted, and the Optionee shall not be deemed to have ceased to be an employee of the Company or a subsidiary, by reason of the transfer of his employment among the Company and its subsidiaries. (b) 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 an employee of the Company or a subsidiary. For the purposes of this agreement, the term "change in control" shall mean the occurrence of any of the following events: (i) 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

interrupted, and the Optionee shall not be deemed to have ceased to be an employee of the Company or a subsidiary, by reason of the transfer of his employment among the Company and its subsidiaries. (b) 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 an employee of the Company or a subsidiary. For the purposes of this agreement, the term "change in control" shall mean the occurrence of any of the following events: (i) 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. In the event that any person described in Section 1(b)(ii) hereof files an amendment to any report referred to in Section 1(b)(ii) hereof that shows the beneficial ownership described in Section 1(b)(ii) hereof to have decreased to less than 30 percent, or in the event that any anticipated change in control referred to in

Section 1(b)(iii) hereof does not occur following the filing with the SEC of any report or proxy statement described in Section 1(b)(iii) hereof because any contract or transaction referred to in Section 1(b)(iii) hereof is canceled or abandoned, the Committee may nullify the effect of Section 1(b)(ii) or 1(b)(iii) hereof, as the case may be, and reinstate the provisions of Section 1(a) hereof by giving notice thereof to the Optionee; provided, however, that any such action by the Committee shall not prejudice any exercise of the Option that may have occurred prior to the nullification and reinstatement. The provisions of Section 1(b)(ii) hereof shall again become automatically effective following any such nullification of the provisions thereof and reinstatement of the provisions of Section 1 (a) hereof in the event that any person described in Section 1(b)(ii) hereof files a further amendment to any report referred to in Section 1(b)(ii) hereof that shows the beneficial ownership described in Section 1(b)(ii) hereof to have again increased to 30 percent or more. (c) Notwithstanding the provisions of Section 1(a) hereof, the Option shall become immediately exercisable in full if the Optionee should die or become permanently disabled (within the meaning of the Company's long-term disability plan) while in the employ of the Company or any subsidiary, or if the Optionee should retire under a retirement plan of the Company or any subsidiary (i) at or after age 62 or (ii) at an earlier age with the consent of the Company. (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.

Section 1(b)(iii) hereof does not occur following the filing with the SEC of any report or proxy statement described in Section 1(b)(iii) hereof because any contract or transaction referred to in Section 1(b)(iii) hereof is canceled or abandoned, the Committee may nullify the effect of Section 1(b)(ii) or 1(b)(iii) hereof, as the case may be, and reinstate the provisions of Section 1(a) hereof by giving notice thereof to the Optionee; provided, however, that any such action by the Committee shall not prejudice any exercise of the Option that may have occurred prior to the nullification and reinstatement. The provisions of Section 1(b)(ii) hereof shall again become automatically effective following any such nullification of the provisions thereof and reinstatement of the provisions of Section 1 (a) hereof in the event that any person described in Section 1(b)(ii) hereof files a further amendment to any report referred to in Section 1(b)(ii) hereof that shows the beneficial ownership described in Section 1(b)(ii) hereof to have again increased to 30 percent or more. (c) Notwithstanding the provisions of Section 1(a) hereof, the Option shall become immediately exercisable in full if the Optionee should die or become permanently disabled (within the meaning of the Company's long-term disability plan) while in the employ of the Company or any subsidiary, or if the Optionee should retire under a retirement plan of the Company or any subsidiary (i) at or after age 62 or (ii) at an earlier age with the consent of the Company. (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) thirty days after the date upon which the Optionee ceases to be an employee of the Company or a subsidiary, unless the cessation of his employment (i) is a result of his death, disability or retirement with the Company's consent or (ii) follows a change in control; (b) five years after the date upon which the Optionee ceases to be an employee of the Company or subsidiary (i) as a result of his disability, (ii) as a result of his retirement with the Company's consent, unless he is also a director of the Company who continues to serve as such following his retirement with the Company's consent, or (iii) following a change in control, unless the cessation of his employment following a change in control is a result of his death; (c) one year after the date upon which the Optionee ceases to be a director of the Company, but not less than five years after the date upon which he ceases to be an employee of the Company or a subsidiary, if (i) the cessation of his employment is a result of his retirement with the Company's consent and (ii) he continues

to serve as a director of the Company following the cessation of his employment; (d) one year after the date of the Optionee's death regardless of whether he ceases to be an employee of the Company or a subsidiary prior to his death (i) as a result of his disability or retirement with the Company's consent or (ii) following a change in control; or (e) ten years after the Date of Grant. For the purposes of this agreement: "retirement with the Company's consent" shall mean the retirement of the Optionee prior to age 62, if the Board or the Committee determines that his retirement is for the convenience of the Company or a subsidiary, or the retirement of the Optionee at or after age 62 under a retirement plan of the Company or a subsidiary; "disability" shall mean that the Optionee has qualified for disability benefits under the Company's Long-Term Disability Program or any successor disability plan or program of the Company. In the event that the Optionee shall intentionally commit an act that the Committee determines to be materially adverse to the interests of the Company or a subsidiary, the Option shall terminate at the time of that determination notwithstanding any other provision of this agreement.

to serve as a director of the Company following the cessation of his employment; (d) one year after the date of the Optionee's death regardless of whether he ceases to be an employee of the Company or a subsidiary prior to his death (i) as a result of his disability or retirement with the Company's consent or (ii) following a change in control; or (e) ten years after the Date of Grant. For the purposes of this agreement: "retirement with the Company's consent" shall mean the retirement of the Optionee prior to age 62, if the Board or the Committee determines that his retirement is for the convenience of the Company or a subsidiary, or the retirement of the Optionee at or after age 62 under a retirement plan of the Company or a subsidiary; "disability" shall mean that the Optionee has qualified for disability benefits under the Company's Long-Term Disability Program or any successor disability plan or program of the Company. In the event that the Optionee shall intentionally commit an act that the Committee determines to be materially adverse to the interests of the Company or a subsidiary, the Option shall terminate at the time of that determination notwithstanding any other provision of this agreement. 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 6 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. Crediting of Deferred Dividend Shares. Each Deferred Dividend Share represents the right of the Optionee to receive one Common Share if and when the Deferred Dividend Share becomes nonforfeitable in accordance with Section 5(a) hereof. Upon the determination by the Committee of the number of Deferred Dividend Shares to be credited in accordance with this Section 4, Deferred Dividend Shares shall be credited annually to the Optionee as of December 31 of each year that the Option remains in effect and any portion thereof remains unexercised. The number of Deferred Dividend Shares to be credited to the Optionee for any calendar year shall be determined as follows: (a) the total amount per

share of cash dividends that were paid on the outstanding Common Shares during the calendar year shall be multiplied by the total number of Common Shares then covered by both exercisable and unexercisable portions of the Option, including any Deferred Dividend Shares that shall have been previously credited to the Optionee hereunder and remain subject to forfeiture pursuant to Section 5(a) hereof; (b) the product of the arithmetical operation described in Section 4(a) hereof shall then be divided by the average closing price of the Common Shares, as reported on the New York Stock Exchange or other national market on which the Common Shares are then principally traded, for the 10 trading dates immediately preceding December 31; (c) the quotient of the arithmetical operation described in Section 4(b) hereof shall be the number of Deferred Dividend Shares that shall be credited to the Optionee for the calendar year; provided, however, that no Deferred Dividend Shares shall be credited to the Optionee for any calendar year in which the total net income per share of the outstanding Common Shares is not at least 250 percent of the total amount of cash dividends per share that were paid on the outstanding Common Shares during that calendar year, and no Deferred Dividend Shares shall be credited to the Optionee following the cessation of his employment with the Company or a subsidiary, regardless of the circumstances under which the cessation of his employment occurred and notwithstanding that the term of the Option or any Deferred Dividend Share remains in effect. 5. Vesting and Issuance of Deferred Dividend Shares. (a) A Deferred Dividend Share shall become nonforfeitable upon the earlier to occur of (i) the expiration of a period of four years from the date as of which it is credited to the Optionee on the records of the Company, if the Optionee shall have remained in the continuous

share of cash dividends that were paid on the outstanding Common Shares during the calendar year shall be multiplied by the total number of Common Shares then covered by both exercisable and unexercisable portions of the Option, including any Deferred Dividend Shares that shall have been previously credited to the Optionee hereunder and remain subject to forfeiture pursuant to Section 5(a) hereof; (b) the product of the arithmetical operation described in Section 4(a) hereof shall then be divided by the average closing price of the Common Shares, as reported on the New York Stock Exchange or other national market on which the Common Shares are then principally traded, for the 10 trading dates immediately preceding December 31; (c) the quotient of the arithmetical operation described in Section 4(b) hereof shall be the number of Deferred Dividend Shares that shall be credited to the Optionee for the calendar year; provided, however, that no Deferred Dividend Shares shall be credited to the Optionee for any calendar year in which the total net income per share of the outstanding Common Shares is not at least 250 percent of the total amount of cash dividends per share that were paid on the outstanding Common Shares during that calendar year, and no Deferred Dividend Shares shall be credited to the Optionee following the cessation of his employment with the Company or a subsidiary, regardless of the circumstances under which the cessation of his employment occurred and notwithstanding that the term of the Option or any Deferred Dividend Share remains in effect. 5. Vesting and Issuance of Deferred Dividend Shares. (a) A Deferred Dividend Share shall become nonforfeitable upon the earlier to occur of (i) the expiration of a period of four years from the date as of which it is credited to the Optionee on the records of the Company, if the Optionee shall have remained in the continuous employ of the Company or a subsidiary during that period, or (ii) the termination of the Optionee's employment with the Company or a subsidiary following a change in control or as a result of his death, disability or retirement with the Company's consent. If the Optionee ceases to be an employee of the Company or a subsidiary under any circumstances other than those described in Section 5(a)(ii) hereof, any Deferred Dividend Shares that shall have been previously credited to the Optionee hereunder and remain subject to forfeiture at the time of the cessation of his employment shall thereupon be forfeited automatically and without further notice unless otherwise determined by the Committee. (b) Subject to the terms and conditions of Section 6 hereof, and subject to any deferral election the Optionee may have made pursuant to any plan or program of the Company, Deferred Dividend Shares shall be issuable to the Optionee at the time when they become nonforfeitable in accordance with Section 5(a) hereof. 6. 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 and the Company shall not be obligated to issue any Common Shares

in payment of Deferred Dividend Shares if the exercise or issuance 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 and the Company shall not be obligated to issue any Common Shares in payment of Deferred Dividend Shares unless the Common Shares or other securities covered by the Option or to be issued in payment of Deferred Dividend Shares are (a) exempt from registration thereunder, (b) the subject of a transaction that is exempt from compliance therewith, (c) registered by description or qualification thereunder or (d) the subject of a transaction that shall have been registered by description thereunder. 7. Transferability and Exercisability. (a) Except as provided in Section 7(b) below, neither the Option nor any Deferred Dividend Shares, including any interest in either thereof, shall 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 7(a) above, the Option, any Deferred Dividend Shares, or any interest in either 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

in payment of Deferred Dividend Shares if the exercise or issuance 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 and the Company shall not be obligated to issue any Common Shares in payment of Deferred Dividend Shares unless the Common Shares or other securities covered by the Option or to be issued in payment of Deferred Dividend Shares are (a) exempt from registration thereunder, (b) the subject of a transaction that is exempt from compliance therewith, (c) registered by description or qualification thereunder or (d) the subject of a transaction that shall have been registered by description thereunder. 7. Transferability and Exercisability. (a) Except as provided in Section 7(b) below, neither the Option nor any Deferred Dividend Shares, including any interest in either thereof, shall 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 7(a) above, the Option, any Deferred Dividend Shares, or any interest in either 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. 8. 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 or to be issued in payment of Deferred Dividend Shares 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 8(a) or 8(b) hereof. Furthermore, in the event that any transaction or event described or referred to in the immediately preceding sentence shall occur, the Committee may provide in substitution of any or all of the Optionee's rights under this agreement such alternative consideration as the Committee may determine in good faith to be equitable under the circumstances.

9. Withholding Taxes. If the Company shall be required to withhold any federal, state, local or foreign tax in connection with any exercise of the Option or payment of Deferred Dividend Shares, the Optionee shall pay the tax or make provisions that are satisfactory to the Company for the payment thereof. The Optionee may elect to satisfy all or any part of any such withholding obligation by surrendering to the Company a portion of the Common Shares that are issuable to the Optionee upon the exercise of the Option or payment of Deferred Dividend Shares. If such election is made, the shares so surrendered by the Optionee shall be credited against any such withholding obligation at their fair market value (as determined by the Committee from time to time) on the date of such surrender. 10. Right to Terminate Employment. No provision of this agreement shall limit in any way whatsoever any right that the Company or a subsidiary may otherwise have to terminate the employment of the Optionee at any time. 11. Relation to Other Benefits. Any economic or other benefit to the Optionee under this agreement or the Plan shall not be taken into account in determining any benefits to which the Optionee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company or a subsidiary and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a subsidiary. 12. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the

9. Withholding Taxes. If the Company shall be required to withhold any federal, state, local or foreign tax in connection with any exercise of the Option or payment of Deferred Dividend Shares, the Optionee shall pay the tax or make provisions that are satisfactory to the Company for the payment thereof. The Optionee may elect to satisfy all or any part of any such withholding obligation by surrendering to the Company a portion of the Common Shares that are issuable to the Optionee upon the exercise of the Option or payment of Deferred Dividend Shares. If such election is made, the shares so surrendered by the Optionee shall be credited against any such withholding obligation at their fair market value (as determined by the Committee from time to time) on the date of such surrender. 10. Right to Terminate Employment. No provision of this agreement shall limit in any way whatsoever any right that the Company or a subsidiary may otherwise have to terminate the employment of the Optionee at any time. 11. Relation to Other Benefits. Any economic or other benefit to the Optionee under this agreement or the Plan shall not be taken into account in determining any benefits to which the Optionee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company or a subsidiary and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a subsidiary. 12. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of the Optionee with respect to the Option or the Deferred Dividend Shares without the Optionee's consent. 13. Severability. In the event that one or more of the provisions of this agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable. 14. Governing Law. This agreement is made under, and shall be construed in accordance with, the laws of the State of Ohio.

This agreement is executed by the Company on this 21st day of April, 1998. THE TIMKEN COMPANY By ___________________________ Stephen A. Perry Senior Vice President Human Resources, Purchasing & Communications The undersigned Optionee hereby acknowledges receipt of an executed original of this agreement and accepts the Option granted hereunder and the right to receive Deferred Dividend Shares with respect to the Common Shares covered thereby, subject to the terms and conditions of the Plan and the terms and conditions hereinabove set forth. Optionee Date: _________________________

EXHIBIT 10.2 THE TIMKEN COMPANY DEFERRAL OF STOCK OPTION GAINS PLAN The Timken Company hereby establishes, effective as of April 21, 1998, the DEFERRAL OF STOCK

This agreement is executed by the Company on this 21st day of April, 1998. THE TIMKEN COMPANY By ___________________________ Stephen A. Perry Senior Vice President Human Resources, Purchasing & Communications The undersigned Optionee hereby acknowledges receipt of an executed original of this agreement and accepts the Option granted hereunder and the right to receive Deferred Dividend Shares with respect to the Common Shares covered thereby, subject to the terms and conditions of the Plan and the terms and conditions hereinabove set forth. Optionee Date: _________________________

EXHIBIT 10.2 THE TIMKEN COMPANY DEFERRAL OF STOCK OPTION GAINS PLAN The Timken Company hereby establishes, effective as of April 21, 1998, the DEFERRAL OF STOCK OPTION GAINS PLAN for the Company. Such Plan provides key executives with the opportunity to defer stock option gains, 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 Gain Shares deferred by a Participant shall be recorded and to which dividends and distributions may becredited in accordance with the Plan. As set forth in Section 4 of Article II of the Plan, a Participant's Account shall consist of two Sub-Accounts -- (i) a "Common Share" SubAccount and (ii) a "Cash" Sub-Account. 2. "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. 3. "Board" shall mean the Board of Directors of the Company. 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. 5. "Change in Control" shall have the same meaning as defined in the 1996 Deferred Compensation Plan. 6. "Committee" shall mean the Compensation Committee of the Board or such other Committee as may be authorized by the Board to administer the Plan. 7. "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.

EXHIBIT 10.2 THE TIMKEN COMPANY DEFERRAL OF STOCK OPTION GAINS PLAN The Timken Company hereby establishes, effective as of April 21, 1998, the DEFERRAL OF STOCK OPTION GAINS PLAN for the Company. Such Plan provides key executives with the opportunity to defer stock option gains, 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 Gain Shares deferred by a Participant shall be recorded and to which dividends and distributions may becredited in accordance with the Plan. As set forth in Section 4 of Article II of the Plan, a Participant's Account shall consist of two Sub-Accounts -- (i) a "Common Share" SubAccount and (ii) a "Cash" Sub-Account. 2. "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. 3. "Board" shall mean the Board of Directors of the Company. 4. "Code" shall mean the Internal Revenue Code of 1986, as amended. 5. "Change in Control" shall have the same meaning as defined in the 1996 Deferred Compensation Plan. 6. "Committee" shall mean the Compensation Committee of the Board or such other Committee as may be authorized by the Board to administer the Plan. 7. "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.

8. "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. 9. "1996 Deferred Compensation Plan" shall mean The Timken Company 1996 Deferred Compensation Plan, as amended from time to time. 10. "Disability" shall mean a physical or mental condition of a Participant resulting from a bodily injury, disease or mental disorder which renders him incapable of continuing in the employment of the Company. Such Disability shall be determined by the Committee based upon appropriate medical evidence and examination. 11. "Election Agreement" shall mean an agreement in substantially the form attached hereto as Exhibit A, as modified from time to time by the Company. 12. "Eligible Associate" shall mean an associate of the Company, or a Subsidiary, who is an eligible associate under the 1996 Deferred Compensation Plan. Unless otherwise determined by the Committee, an Eligible Associate shall continue as such until termination of employment. For purposes of the Plan, a "termination of employment" shall not be deemed to occur upon a transfer of employment to a Subsidiary or the Company.

8. "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. 9. "1996 Deferred Compensation Plan" shall mean The Timken Company 1996 Deferred Compensation Plan, as amended from time to time. 10. "Disability" shall mean a physical or mental condition of a Participant resulting from a bodily injury, disease or mental disorder which renders him incapable of continuing in the employment of the Company. Such Disability shall be determined by the Committee based upon appropriate medical evidence and examination. 11. "Election Agreement" shall mean an agreement in substantially the form attached hereto as Exhibit A, as modified from time to time by the Company. 12. "Eligible Associate" shall mean an associate of the Company, or a Subsidiary, who is an eligible associate under the 1996 Deferred Compensation Plan. Unless otherwise determined by the Committee, an Eligible Associate shall continue as such until termination of employment. For purposes of the Plan, a "termination of employment" shall not be deemed to occur upon a transfer of employment to a Subsidiary or the Company. 13. "Gain Shares" shall mean a number of Common Shares equal to the difference between the number of Common Shares issuable upon exercise of the related Option and the number of Common Shares delivered by the Participant in satisfaction of the exercise price for such Option. 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. "Option" shall mean any stock option, other than an "incentive stock option" as defined in section 422 of the Code, granted to an Eligible Associate under the Long-Term Incentive Plans, or any similar plan of the Company. 16. "Participant" shall mean any Eligible Associate who has at any time elected to defer the receipt of Gain Shares in accordance with the Plan. 17. "Plan" shall mean this deferral plan, which shall be known as the Deferral of Stock Option Gains Plan for The Timken Company. 18. "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.

ARTICLE II ELECTION TO DEFER 1. Election to Defer. An Eligible Associate who desires to defer Gain Shares pursuant to this Plan must complete and deliver an Election Agreement to the Director of Compensation and Benefits of the Company specifying the number of shares and award date(s) of the Option(s) to which the Election Agreement applies. By delivering an Election Agreement, the Participant irrevocably waives his rights under the related Option to (i) exercise the Option for cash at any time when the Participant is an Eligible Associate and (ii) exercise the Option in any manner during the period commencing on the date of the Election Agreement and ending six months thereafter; provided, however, that such waiver shall be null and void in the event that during such six-month period (a) the Participant's employment is terminated by the Company, (b) the Participant's employment terminates as a result of his death or Disability, or (c) there is a Change in Control of the Company. 2. Effect of Election. In order to exercise Options with respect to which an Election Agreement is in effect, the Participant must tender, in satisfaction of the option exercise price, Common Shares which the Participant has owned for at least 6 months having a fair market value as of the exercise date equal to the aggregate exercise

ARTICLE II ELECTION TO DEFER 1. Election to Defer. An Eligible Associate who desires to defer Gain Shares pursuant to this Plan must complete and deliver an Election Agreement to the Director of Compensation and Benefits of the Company specifying the number of shares and award date(s) of the Option(s) to which the Election Agreement applies. By delivering an Election Agreement, the Participant irrevocably waives his rights under the related Option to (i) exercise the Option for cash at any time when the Participant is an Eligible Associate and (ii) exercise the Option in any manner during the period commencing on the date of the Election Agreement and ending six months thereafter; provided, however, that such waiver shall be null and void in the event that during such six-month period (a) the Participant's employment is terminated by the Company, (b) the Participant's employment terminates as a result of his death or Disability, or (c) there is a Change in Control of the Company. 2. Effect of Election. In order to exercise Options with respect to which an Election Agreement is in effect, the Participant must tender, in satisfaction of the option exercise price, Common Shares which the Participant has owned for at least 6 months having a fair market value as of the exercise date equal to the aggregate exercise price for the Options exercised. Upon such exercise, the Company shall (i) deliver to the Participant a number of Common Shares equal to the number of Common Shares surrendered by the Participant in payment of the exercise price and (ii) credit the Gain Shares to the Participant's Account. 3. Period of Deferral. The delivery of Gain Shares to a Participant 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. The Account of a Participant shall consist of two Sub-Accounts -- (i) the "Common Share" SubAccount and (ii) the "Cash" Sub-Account. The Common Share Sub-Account, on the exercise date of the related Option, shall be credited with the number of Gain Shares. Such Sub-Account shall be deemed to be invested in Common Shares and shall be credited with stock dividends declared thereon. In the case of cash or other property dividends, a Participant shall elect in the manner described in Subsection 4(c) of this Article whether such dividends are credited to a Participant's Common Share Sub- Account or Cash Sub-Account.

a) To the extent investment in the Participant's Common Share Sub-Account is elected, on each dividend payment date, the Participant's Common Share Sub-Account shall be credited with an additional number of Common Shares determined as follows. First, the amount of the cash (or fair market value of other property) dividend paid per Common Share shall be multiplied by the number of Common Shares covered by the Common Share Sub-Account dividend election as of the record date of the corresponding dividend. Then, that amount shall be divided by the fair market value of one Common Share on the dividend payment date to arrive at the additional number of Common Shares to credit to the Participant's Common Share Sub-Account. b) To the extent investment in the Cash Sub-Account is elected, on each dividend payment date, the Participant's Cash Sub-Account shall be credited with an amount equal to the amount of the cash (or fair market value of other property) dividend paid per Common Share multiplied by the number of Common Shares covered by the Cash Sub-Account dividend election as of the record date for the corresponding dividend. The Cash SubAccount will be credited with interest computed quarterly (based on calendar quarters) on the lowest balance in such Sub-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 Cash Sub-Account as of the first day of the following quarter. c) Each Participant in his or her Election Agreement shall specify whether cash or other property dividends shall be invested in his or her Common Share Sub-Account or Cash Sub- Account. Until revoked, this election between investment in a Participant's Common Share Sub-Account or Cash Sub-Account applies to the Gain Shares resulting from this Election Agreement and any additional Common Shares attributable to such Gain

a) To the extent investment in the Participant's Common Share Sub-Account is elected, on each dividend payment date, the Participant's Common Share Sub-Account shall be credited with an additional number of Common Shares determined as follows. First, the amount of the cash (or fair market value of other property) dividend paid per Common Share shall be multiplied by the number of Common Shares covered by the Common Share Sub-Account dividend election as of the record date of the corresponding dividend. Then, that amount shall be divided by the fair market value of one Common Share on the dividend payment date to arrive at the additional number of Common Shares to credit to the Participant's Common Share Sub-Account. b) To the extent investment in the Cash Sub-Account is elected, on each dividend payment date, the Participant's Cash Sub-Account shall be credited with an amount equal to the amount of the cash (or fair market value of other property) dividend paid per Common Share multiplied by the number of Common Shares covered by the Cash Sub-Account dividend election as of the record date for the corresponding dividend. The Cash SubAccount will be credited with interest computed quarterly (based on calendar quarters) on the lowest balance in such Sub-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 Cash Sub-Account as of the first day of the following quarter. c) Each Participant in his or her Election Agreement shall specify whether cash or other property dividends shall be invested in his or her Common Share Sub-Account or Cash Sub- Account. Until revoked, this election between investment in a Participant's Common Share Sub-Account or Cash Sub-Account applies to the Gain Shares resulting from this Election Agreement and any additional Common Shares attributable to such Gain Shares. In order to be effective to revoke an election made pursuant to this subsection, the revocation must be in writing and delivered to the Director of Compensation and Benefits of the Company prior to 30 days before a dividend payment date. 5. Payment of Accounts. The number of Common Shares in a Participant's Common Share Sub-Account 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. Unless a participant makes arrangements satisfactory to the Company for the payment of any required withholding taxes, the number of Common Shares issued or transferred in a lump sum or each installment shall be reduced by a number of Common Shares having a fair market value equal to the amount of any taxes required to be withheld with respect to such lump sum or installment 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 a Participant's Cash Sub-Account in respect of dividends, distributions and interest thereon as provided in Section 4 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 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 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 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 may at the discretion of the Committee be paid in a lump sum in accordance with Section 5 of this Article.

to a Participant's Cash Sub-Account in respect of dividends, distributions and interest thereon as provided in Section 4 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 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 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 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 may at the discretion of the Committee be paid in a lump sum in accordance with Section 5 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 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, 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 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 of 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. In accordance with the provisions of Section 503 of the Employee Retirement Income Security

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 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 of 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. In accordance with the provisions of Section 503 of the Employee Retirement Income Security Act of 1974, the Committee shall provide a procedure for handling claims of Participants or their Beneficiaries under this Plan. Such procedure shall be in accordance with regulations issued by the Secretary of Labor and shall provide adequate written notice within a reasonable period of time with respect to the denial of any such claim as well as a reasonable opportunity for a full and fair review by the Committee of any such denial. 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. 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. 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 and for 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.

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. 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. 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 and for 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. 3. 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. 4. 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. 5. 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. 6. Relationship to Other Plans. This Plan is intended to serve the purposes of and to be consistent with the LongTerm 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 shall be taken into account for purposes of Section 3 of the Long-Term Incentive Plans (Shares Available Under the Plan) and for purposes of the corresponding provisions of any other such plan.

EXHIBIT A DEFERRAL OF STOCK OPTION GAINS PLAN THE TIMKEN COMPANY ELECTION AGREEMENT I, ____________________________, hereby elect to participate in the Deferral of Stock Option Gains Plan for The Timken Company (the "Plan") as follows: I. DEFERRAL OF GAIN SHARES

Plan shall be taken into account for purposes of Section 3 of the Long-Term Incentive Plans (Shares Available Under the Plan) and for purposes of the corresponding provisions of any other such plan.

EXHIBIT A DEFERRAL OF STOCK OPTION GAINS PLAN THE TIMKEN COMPANY ELECTION AGREEMENT I, ____________________________, hereby elect to participate in the Deferral of Stock Option Gains Plan for The Timken Company (the "Plan") as follows: I. DEFERRAL OF GAIN SHARES 1. Number of Common Shares that I am entitled to receive upon exercise of the Option to which this Election Agreement applies (in the event of a partial exercise of an Option, this Election Agreement applies to the Common Shares that would be the first to be received): _______ Common Shares 2. Grant date(s) of Option:

3. Please make payment of the Gain Shares resulting from the exercise of the Option to which this Election Agreement applies, together with all cash accumulated in my Cash Sub-Account attributable to such Gain Shares and any additional Common Shares in my Common Share Sub- Account attributable to such Gain Shares, as follows: a. Pay in lump sum [ ] b. Pay in ______ approximately equal quarterly installments [ ] 4. 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)

II. DIVIDENDS 1. Please credit cash or other non-stock property dividends earned with respect to the Gain Shares, as well as additional Common Shares attributable to such Gain Shares, reflected in my Common Share Sub-Account as follows: a. Reinvest in Commmon Shares in my Common Share Sub-Account [ ] b. Credit to my Cash Sub-Account [ ] III. SIGNATURE/AUTHORIZATION 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.

EXHIBIT A DEFERRAL OF STOCK OPTION GAINS PLAN THE TIMKEN COMPANY ELECTION AGREEMENT I, ____________________________, hereby elect to participate in the Deferral of Stock Option Gains Plan for The Timken Company (the "Plan") as follows: I. DEFERRAL OF GAIN SHARES 1. Number of Common Shares that I am entitled to receive upon exercise of the Option to which this Election Agreement applies (in the event of a partial exercise of an Option, this Election Agreement applies to the Common Shares that would be the first to be received): _______ Common Shares 2. Grant date(s) of Option:

3. Please make payment of the Gain Shares resulting from the exercise of the Option to which this Election Agreement applies, together with all cash accumulated in my Cash Sub-Account attributable to such Gain Shares and any additional Common Shares in my Common Share Sub- Account attributable to such Gain Shares, as follows: a. Pay in lump sum [ ] b. Pay in ______ approximately equal quarterly installments [ ] 4. 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)

II. DIVIDENDS 1. Please credit cash or other non-stock property dividends earned with respect to the Gain Shares, as well as additional Common Shares attributable to such Gain Shares, reflected in my Common Share Sub-Account as follows: a. Reinvest in Commmon Shares in my Common Share Sub-Account [ ] b. Credit to my Cash Sub-Account [ ] III. SIGNATURE/AUTHORIZATION 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 my election under that my election under Part II relating to dividends applies to the Gain Shares resulting from this Election Agreement and any additional Common Shares attributable to such Gain Shares reflected in my Common Shares Sub-Account. I understand that, in order to revoke or modify this dividend election, the revocation or modification must be in writing and delivered to the Director - Compensation and

II. DIVIDENDS 1. Please credit cash or other non-stock property dividends earned with respect to the Gain Shares, as well as additional Common Shares attributable to such Gain Shares, reflected in my Common Share Sub-Account as follows: a. Reinvest in Commmon Shares in my Common Share Sub-Account [ ] b. Credit to my Cash Sub-Account [ ] III. SIGNATURE/AUTHORIZATION 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 my election under that my election under Part II relating to dividends applies to the Gain Shares resulting from this Election Agreement and any additional Common Shares attributable to such Gain Shares reflected in my Common Shares Sub-Account. I understand that, in order to revoke or modify this dividend election, the revocation or modification must be in writing and delivered to the Director - Compensation and Benefits prior to 30 days before a dividend payment date. 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 _____, 1998. (Signature) (Print or type name)

EXHIBIT B THE TIMKEN COMPANY DEFERRAL OF STOCK OPTION GAINS PLAN BENEFICIARY DESIGNATIONS In accordance with the terms and conditions of the Deferral of Stock Option Gains Plan (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 _______________________________

EXHIBIT B THE TIMKEN COMPANY DEFERRAL OF STOCK OPTION GAINS PLAN BENEFICIARY DESIGNATIONS In accordance with the terms and conditions of the Deferral of Stock Option Gains Plan (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 Plan. In the event that there is no beneficiary living at the time of my death, I understand that the amounts payable under the Plan will be paid to my estate.
___________________________ Date _________________________ (Signature) _________________________ (Print or type name)

Exhibit 11 - COMPUTATION OF PER SHARE EARNINGS (Thousands of dollars, except per share data) Three Months Ended March 31 1998 1997 ------------------BASIC Average shares outstanding Net income Per-share amount 62,481,627 $49,136 $0.79 ===== 62,448,532 $41,066 $0.66 =====

Exhibit 11 - COMPUTATION OF PER SHARE EARNINGS (Thousands of dollars, except per share data) Three Months Ended March 31 1998 1997 ------------------BASIC Average shares outstanding Net income Per-share amount 62,481,627 $49,136 $0.79 ===== 62,448,532 $41,066 $0.66 =====

DILUTED Average shares outstanding Effect of dilutive securities based on the treasury stock method using the average market price if higher than the exercise price

62,481,627

62,448,532

Net income Per-share amount

849,932 ---------63,331,559 $49,136 $0.78 =====

934,726 ---------63,383,258 $41,066 $0.64 =====

EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended Mar. 31 Mar. 31 1998 1997 ------------(Thousands of dollars) Income before income taxes, extraordinary item and cumulative effect of accounting changes. Amortization of capitalized interest Interest expense Interest portion of rental expense Earnings

$79,508 610 5,863 607 ------$86,588 ======= $ 7,076 607 ------$ 7,683 ======= 11.27 =======

$66,992 530 5,465 655 ------$73,642 ======= $ 5,692 655 ------$ 6,347 ======= 11.60 =======

Interest Interest portion of rental expense Fixed Charges

Ratio of Earnings to Fixed Charges

ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD END CASH SECURITIES

3 MOS DEC 31 1998 MAR 31 1998 15,985 0

EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended Mar. 31 Mar. 31 1998 1997 ------------(Thousands of dollars) Income before income taxes, extraordinary item and cumulative effect of accounting changes. Amortization of capitalized interest Interest expense Interest portion of rental expense Earnings

$79,508 610 5,863 607 ------$86,588 ======= $ 7,076 607 ------$ 7,683 ======= 11.27 =======

$66,992 530 5,465 655 ------$73,642 ======= $ 5,692 655 ------$ 6,347 ======= 11.60 =======

Interest Interest portion of rental expense Fixed Charges

Ratio of Earnings to Fixed Charges

ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY

3 MOS DEC 31 1998 MAR 31 1998 15,985 0 402,439 7,334 480,106 940,585 2,704,641 1,459,839 2,425,032 609,572 239,814 0 0 294,357 743,763 2,425,032 707,381 707,381 533,015 533,015 0 0 5,863 79,508 30,372 49,136 0 0 0 49,136 .79

ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED

3 MOS DEC 31 1998 MAR 31 1998 15,985 0 402,439 7,334 480,106 940,585 2,704,641 1,459,839 2,425,032 609,572 239,814 0 0 294,357 743,763 2,425,032 707,381 707,381 533,015 533,015 0 0 5,863 79,508 30,372 49,136 0 0 0 49,136 .79 .78