8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):      February 6, 2006

THE TIMKEN COMPANY

(Exact Name of Registrant as Specified in its Charter)

Ohio

(State or Other Jurisdiction of Incorporation)

1-1169	34-0577130
(Commission File Number)	(I.R.S. Employer Identification No.)

1835 Dueber Avenue, S.W., Canton, Ohio 44706-2798

(Address of Principal Executive Offices) (Zip Code)

(330) 438-3000

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

2005 Management Performance Plan

     On February 10, 2006, the Compensation Committee (the “Committee”) of the Board of Directors of The Timken Company (the “Company”) approved award payments for 2005 performance under the Company’s Management Performance Plan. The performance goals were earnings before interest and taxes as a percentage of beginning invested capital (“EBIT/BIC”), working capital as a percentage of sales, customer service and individual performance. For 2005, officers (including executive officers, other than the Chief Executive Officer of the Company and the four other most highly compensated executive officers listed in the Company’s Proxy Statement for the 2005 Annual Meeting (the “Named Executive Officers”)) and other key employees of the Company are eligible to receive awards under the Management Performance Plan.

2005 Performance Units

     The Company awards performance units to officers (including executive officers) of the Company under its Long-Term Incentive Plan, as Amended and Restated (the “LTIP”). Payouts under performance units are subject to the attainment of performance goals for return on equity and sales growth over a three-year performance cycle. Actual performance for the 2003 – 2005 performance cycle exceeded the threshold levels for both performance goals. On February 6, 2006, the Committee approved award payments of performance units for the 2003 – 2005 performance cycle.

2005 Senior Executive Management Performance Plan

     On February 6, 2006, the Committee approved the award payments for 2005 performance under the Company’s Senior Executive Management Performance Plan. For 2005, the Named Executive Officers were eligible to receive awards under the Senior Executive Management Performance Plan. The performance goals were corporate EBIT/BIC and working capital as a percentage of sales. The Committee exercised negative discretion under the terms of the plan and reduced the calculated awards payable under the Senior Executive Management Performance Plan. The awards ranged from 88% to 125% of the salary of the Named Executive Officers.

2006 Management Performance Plan

     On February 6, 2006, the Committee established the performance goals for the 2006 Management Performance Plan, which are EBIT/BIC, working capital as a percentage of sales, customer service and individual performance. For 2006, officers (including executive officers, but not including Named Executive Officers) and other key employees of the Company are eligible to receive awards under the Management Performance Plan.

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2006 Performance Units

     The Company awards performance units to officers (including executive officers) of the Company under the LTIP. On February 6, 2006, the Committee established performance goals for the 2006 – 2008 performance cycle. Payouts under performance units are subject to the attainment of performance goals for Return on Equity and Sales Growth over a three-year performance cycle.

2006 Senior Executive Management Performance Plan

     On February 6, 2006, the Committee established the performance goals for the 2006 Senior Executive Management Performance Plan, which are EBIT/BIC and working capital as a percentage of sales. For 2006, the Named Executive Officers and the President–Steel are eligible to receive awards under the Senior Executive Management Performance Plan.

Nonemployee Director Compensation

     Following the Committee’s review of the existing terms of compensation for Nonemployee Directors, on February 7, 2006 the Company’s Board of Directors approved modifications to the compensation package for Nonemployee Directors. Effective as of January 1, 2006, Nonemployee Directors will be paid at the annual rate of $60,000 for services as a Director. The Chairman of the Audit Committee of the Board of Directors will now receive a cash retainer of $30,000. Members of the Audit Committee, other than the Chairman, will now receive a cash retainer of $15,000.

     Members of the Board of Directors will now receive a grant of 2,500 shares of Common Stock of the Company at each Annual Meeting of Shareholders as long as they serve as Nonemployee Directors. The net number of shares, after deductions for taxes, must be held by a Nonemployee Director until his or her departure from the Board of Directors. Previously, Nonemployee Directors also received a grant of 3,000 Non-Qualified Stock Options at each Annual Meeting of Shareholders. That grant of options has been discontinued.

     Other terms of Nonemployee Director compensation did not change.

Deferred Share Grant

     On February 6, 2006, the Committee awarded 25,000 Deferred Shares to Michael C. Arnold, President of the Company’s Industrial Business. All of these shares vest on February 6, 2010 if Mr. Arnold is still employed by the Company.

Amendments to Form Agreements

     On February 6, 2006 the Committee approved changes to the Company’s forms of Non-Qualified Stock Option Agreement, Restricted Share Agreement and Performance Unit Agreement. These revised forms of agreements are filed as exhibits to this Form 8-K.

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Item 9.01 Financial Statements and Exhibits

(c) Exhibits

Exhibit
Number	Description of Document
10.1	Form of Non-Qualified Stock Option Agreement for Officers.
10.2	Form of Restricted Share Agreement.
10.3	Form of Officer Performance Unit Agreement.
10.4	Deferred Share Agreement — Michael C. Arnold.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

THE TIMKEN COMPANY
By:	/s/ William R. Burkhart
	William R. Burkhart
	Senior Vice President and General Counsel

Date: February 10, 2006

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EXHIBIT INDEX

Exhibit
Number	Description of Document
10.1	Form of Non-Qualified Stock Option Agreement for Officers.
10.2	Form of Restricted Share Agreement.
10.3	Form of Officer Performance Unit Agreement.
10.4	Deferred Share Agreement — Michael C. Arnold.

EX-10.1

Exhibit 10.1

THE TIMKEN COMPANY

Nonqualified Stock Option Agreement

          WHEREAS, [NAME] (the “Optionee”) is an employee of The Timken Company (the “Company”); and

          WHEREAS, the grant of stock options evidenced hereby was authorized by a resolution of the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company that was duly adopted on [DATE] (the “Date of Grant”), and the execution of a stock option agreement in the form hereof was authorized by a resolution of the Committee duly adopted on [DATE]; and

          WHEREAS, the option evidenced 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 February 6, 2004) (the “Plan”), the Company hereby grants to the Optionee (i) a nonqualified stock option (the “Option”) to purchase [NUMBER] shares of the Company’s common stock without par value (the “Common Shares”) at the exercise price of [OPTION PRICE] per Common Share (the “Option Price”) which represents the Market Value per Share on the Date of Grant. The Company agrees to cause certificates for any shares purchased hereunder to be delivered to the Optionee upon payment of the Option Price in full, subject to the terms and conditions of the Plan and the terms and conditions hereinafter set forth.

     1. Four-Year 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) 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. Accelerated Vesting of Option. Notwithstanding the provisions of Section 1(a) hereof, the Option may become exercisable earlier than the time provided in such section if any of the following circumstances apply:

          (a) Death, Disability or Retirement: The Option shall become immediately exercisable in full if the Optionee should die or become permanently disabled while in the employ of the Company or any subsidiary, or if the Optionee should retire with the Company’s consent.

          For purposes of this agreement, retirement “with the Company’s consent” shall mean: (i) the retirement of the Optionee prior to age 62 under a retirement plan of the Company or a subsidiary, if the Board or the Committee determines that his retirement is for the convenience of the Company or a subsidiary, or (ii) the retirement of the Optionee at or after age 62 under a retirement plan of the Company or a subsidiary. For purposes of this agreement, “permanently disabled” shall mean that the Optionee has qualified for long-term disability benefits under a disability plan or program of the Company or, in the absence of a disability plan or program of the Company, under a government-sponsored disability program.

          (b) Change in Control: 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) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of 30% or more of either: (A) the then-outstanding Common Shares or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (“Voting Shares”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a change in control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary, or (4) any acquisition by any Person pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 2(b); or

               (ii) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason (other than death or disability) to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Securities Exchange Act of 1934) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

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

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

          (c) Divestiture: The Option shall become immediately exercisable in full if the Optionee’s employment with the Company or a subsidiary terminates as the result of a divestiture. For the purposes of this agreement, the term “divestiture” shall mean a permanent disposition to a Person other than the Company or any subsidiary of a plant or other facility or property at which the Optionee performs a majority of Optionee’s services whether such disposition is effected by means of a sale of assets, a sale of subsidiary stock or otherwise.

          (d) Layoff: If (i) the Optionee’s employment with the Company or a subsidiary terminates as the result of a layoff and (ii) the Optionee is entitled to receive severance pay pursuant to the terms of any severance pay plan of the Company in effect at the time of Optionee’s termination of employment which provides for severance pay calculated by multiplying the Optionee’s base compensation by a specified severance period, then the Option shall be exercisable with respect to the total number of Common Shares that would have been exercisable under the provisions of Section 1(a) hereof if the Optionee had remained in the employ of the Company through the end of the severance period.

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

     3. 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, permanent disability or retirement with the Company’s consent or (ii) follows a change in control; a divestiture, or a layoff;

          (b) three years after the date upon which the Optionee ceases to be an employee of the Company or subsidiary following (i) a change in control, (ii) a divestiture or (iii) a layoff;

          (c) 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 death, (ii) as a result of his permanent disability or, (iii) 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;

          (d) five years 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; or

          (e) ten years after the Date of Grant.

     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.

     4. Payment of Option Price. The Option 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 4(a) and 4(b) hereof. Nonforfeitable, unrestricted Common Shares that are transferred by the Optionee in payment of all or any part of the Option Price shall be valued on the basis of their Market Value per Share. Subject to the terms and conditions of Section 7 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 Option Price in full.

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     5. Compliance with Law. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, notwithstanding any other provision of this agreement, the Option shall not be exercisable if the exercise thereof would result in a violation of any such law. To the extent that the Ohio Securities Act shall be applicable to the Option, the Option shall not be exercisable unless the Common Shares or other securities covered by the Option are (a) exempt from registration thereunder, (b) the subject of a transaction that is exempt from compliance therewith, (c) registered by description or qualification thereunder or (d) the subject of a transaction that shall have been registered by description thereunder.

     6. Transferability and Exercisability.

          (a) Except as provided in Section 6(b) below, the Option, including any interest therein, shall not be transferable by the Optionee except by will or the laws of descent and distribution, and the Option shall be exercisable during the lifetime of the Optionee only by him or, in the event of his legal incapacity to do so, by his guardian or legal representative acting on behalf of the Optionee in a fiduciary capacity under state law and court supervision.

          (b) Notwithstanding Section 6(a) above, the Option, may be transferable by the Optionee, without payment of consideration therefor, to any family member of the Optionee (as defined in Form S-8), 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.

     7. Adjustments. The Committee shall make any adjustments in the Option Price and the number or kind of shares of stock or other securities covered by the Option that the Committee may determine to be equitably required to prevent any dilution or expansion of the Optionee’s rights under this agreement that otherwise would result from any (a) stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) merger, consolidation, separation, reorganization or partial or complete liquidation involving the Company or (c) other transaction or event having an effect similar to any of those referred to in Section 7(a) or 7(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.

     8. 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, 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. If such election is made, the shares so surrendered by the Optionee shall be credited against any such withholding obligation at their Market Value per Share on the date

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of such surrender. In no event, however, shall the Company accept Common Shares for payment of taxes in excess of required tax withholding rates, except that, unless otherwise determined by the Committee at any time, the Optionee may surrender Common Shares owned for more than 6 months to satisfy any tax obligations resulting from any such transaction.

     9. No Right to Future Awards or Continued Employment. This option award is a voluntary, discretionary bonus being made on a one-time basis and it does not constitute a commitment to make any future awards. This option award and any payments made hereunder will not be considered salary or other compensation for purposes of any severance pay or similar allowance, except as otherwise required by law. Nothing in this Agreement will give the Optionee any right to continue employment with the Company or any subsidiary, as the case may be, or interfere in any way with the right of the Company or a subsidiary to terminate the employment of the Optionee.

     10. 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.

     11. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of the Optionee with respect to the Option without the Optionee’s consent.

     12. Severability. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid or unenforceable, the remainder of this Agreement and the application of such provision in any other person or circumstances shall not be affected, and the provisions so held to be invalid or unenforceable shall be reformed to the extent (and only to the extent) necessary to make it enforceable and valid.

     13. Processing of Information. Information about the Optionee and the Optionee’s participation in the Plan may be collected, recorded and held, used and disclosed for any purpose related to the administration of the Plan. The Optionee understands that such processing of this information may need to be carried out by the Company and its Subsidiaries and by third party administrators whether such persons are located within the Optionee’s country or elsewhere, including the United States of America. The Optionee consents to the processing of information relating to the Optionee and the Optionee’s participation in the Plan in any one or more of the ways referred to above.

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

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

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          This agreement is executed by the Company on this        day of                     .

THE TIMKEN COMPANY
By
	William R. Burkhart
	Sr. Vice President & General Counsel

          The undersigned Optionee hereby acknowledges receipt of an executed original of this agreement and accepts the Option granted hereunder, subject to the terms and conditions of the Plan and the terms and conditions hereinabove set forth.

Optionee

Date:

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EX-10.2

EXHIBIT 10.2

THE TIMKEN COMPANY

Restricted Shares Agreement

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

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

            NOW, THEREFORE, pursuant to The Timken Company Long-Term Incentive Plan (as Amended and Restated as of February 6, 2004) (the “Plan”) and subject to the terms and conditions thereof and the terms and conditions hereinafter set forth, the Company hereby grants to Grantee, effective                          (the “Date of Grant”), the right to receive                      shares of the Company’s common stock without par value (the “Common Shares”).

1.	Rights of Grantee. The Common Shares subject to this grant shall be fully paid and nonassessable and shall be represented by a certificate or certificates registered in Grantee’s name and endorsed with an appropriate legend referring to the restrictions hereinafter set forth. Grantee shall have all the rights of a shareholder with respect to such shares, including the right to vote the shares and receive all dividends paid thereon, provided that such shares, and any additional shares that Grantee may become entitled to receive by virtue of a share dividend, a merger or reorganization in which the Company is the surviving corporation or any other change in the capital structure of the Company, shall be subject to the restrictions hereinafter set forth.
2.	Restrictions on Transfer of Common Shares. The Common Shares subject to this grant may not be assigned, exchanged, pledged, sold, transferred or otherwise disposed of by Grantee, except to the Company, until the Common Shares have become nonforfeitable in accordance with Sections 3 and 4 hereof; provided, however, that Grantee’s rights with respect to such Common Shares may be transferred by will or pursuant to the laws of descent and distribution. Any purported transfer in violation of the provisions of this Section 2 shall be null and void, and the purported transferee shall obtain no rights with respect to such shares.
3.	Four-Year Vesting of Common Shares. Subject to the terms and conditions of Sections 4 and 5 hereof, Grantee’s right to receive the Common Shares covered by this agreement shall become nonforfeitable to the extent of one-quarter (1/4) of the Common Shares covered by this agreement after Grantee shall have been in

the continuous employ of the Company or a subsidiary for one full year from the Date of Grant and to the extent of an additional one-quarter (1/4) thereof after each of the next three successive years thereafter during which Grantee shall have been in the continuous employ of the Company or a subsidiary. For purposes of this agreement, “subsidiary” shall mean a corporation, partnership, joint venture, unincorporated association or other entity in which the Company has a direct or indirect ownership or other equity interest. For purposes of this agreement, the continuous employment of Grantee with the Company or a subsidiary shall not be deemed to have been interrupted, and Grantee shall not be deemed to have ceased to be an employee of the Company or a subsidiary, by reason of the transfer of his employment among the Company and its subsidiaries.

4. Accelerated Vesting of Common Shares. Notwithstanding the provisions of Section 3 hereof, Grantee’s right to receive the Common Shares covered by this agreement may become nonforfeitable earlier than the time provided in such section if any of the following circumstances apply:

(a)

Death, Disability or Retirement: Grantee’s right to receive the Common Shares covered by this agreement shall become nonforfeitable if Grantee should die or become permanently disabled while in the employ of the Company or any subsidiary, or if Grantee should retire with the Company’s consent. For purposes of this agreement, retirement “with the Company’s consent” shall mean: (i) the retirement of Grantee prior to age 62 under a retirement plan of the Company or a subsidiary, if the Board or the Committee determines that his retirement is for the convenience of the Company or a subsidiary, or (ii) the retirement of Grantee at or after age 62 under a retirement plan of the Company or a subsidiary. For purposes of this agreement, “permanently disabled” shall mean that Grantee has qualified for long-term disability benefits under a disability plan or program of the Company or, in the absence of a disability plan or program of the Company, under a government-sponsored disability program.

(b)

Change in Control: Grantee’s right to receive the Common Shares covered by this agreement shall become nonforfeitable upon any change in control of the Company that shall occur while Grantee is an employee of the Company or a subsidiary. For the purposes of this agreement, the term “change in control” shall mean the occurrence of any of the following events:

(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of 30% or more of either: (A) the then-outstanding Common Shares or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote

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generally in the election of directors (“Voting Shares”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a change in control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary, or (4) any acquisition by any Person pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (i) of this Section 4(b); or

(ii)

Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason (other than death or disability) to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Securities Exchange Act of 1934) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(iii)

Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Common Shares and Voting Shares immediately prior to such Business Combination beneficially own, directly or indirectly, more than 66-2/3% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions relative to each other as their ownership, immediately prior to such Business Combination, of

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the Common Shares and Voting Shares of the Company, as the case may be, (B) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) sponsored or maintained by the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

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

(c)

Divestiture: Grantee’s right to receive the Common Shares covered by this agreement shall become nonforfeitable if Grantee’s employment with the Company or a subsidiary terminates as the result of a divestiture. For the purposes of this agreement, the term “divestiture” shall mean a permanent disposition to a Person other than the Company or any subsidiary of a plant or other facility or property at which Grantee performs a majority of Grantee’s services whether such disposition is effected by means of a sale of assets, a sale of subsidiary stock or otherwise.

(d)

Layoff: If (i) Grantee’s employment with the Company or a subsidiary terminates as the result of a layoff and (ii) Grantee is entitled to receive severance pay pursuant to the terms of any severance pay plan of the Company in effect at the time of Grantee’s termination of employment which provides for severance pay calculated by multiplying Grantee’s base compensation by a specified severance period, then the Common Shares shall become nonforfeitable with respect to the total number of Common Shares that would have been exercisable under the provisions of Section 3 hereof if Grantee had remained in the employ of the Company through the end of the severance period.

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

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5.	Forfeiture of Awards. Grantee’s right to receive the Common Shares covered by this agreement that are then forfeitable shall be forfeited automatically and without further notice on the date that Grantee ceases to be an employee of the Company or a subsidiary prior to the fourth anniversary of the Date of Grant for any reason other than as described in Section 4. In the event that Grantee shall intentionally commit an act that the Committee determines to be materially adverse to the interests of the Company or a subsidiary, Grantee’s right to receive the Common Shares covered by this agreement shall be forfeited at the time of that determination notwithstanding any other provision of this agreement.
6.	Retention of Certificates. During the period in which the restrictions on transfer and risk of forfeiture provided in Sections 2 and 5 above are in effect, the certificates representing the Common Shares covered by this grant shall be retained by the Company, together with the accompanying stock power signed by Grantee and endorsed in blank.
7.	Compliance with Law. The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, notwithstanding any other provision of this agreement, the Company shall not be obligated to issue any of the Common Shares covered by this agreement if the issuance thereof would result in violation of any such law. To the extent that the Ohio Securities Act shall be applicable to this agreement, the Company shall not be obligated to issue any of the Common Shares or other securities covered by this agreement unless such Common Shares are (a) exempt from registration thereunder, (b) the subject of a transaction that is exempt from compliance therewith, (c) registered by description or qualification thereunder or (d) the subject of a transaction that shall have been registered by description thereunder.
8.	Adjustments. The Committee shall make any adjustments in the number or kind of shares of stock or other securities covered by this agreement that the Committee may determine to be equitably required to prevent any dilution or expansion of Grantee’s rights under this agreement that otherwise would result from any (a) stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) merger, consolidation, separation, reorganization or partial or complete liquidation involving the Company or (c) other transaction or event having an effect similar to any of those referred to in Section 8(a) or 8(b) hereof. Furthermore, in the event that any transaction or event described or referred to in the immediately preceding sentence shall occur, the Committee may provide in substitution of any or all of Grantee’s rights under this agreement such alternative consideration as the Committee may determine in good faith to be equitable under the circumstances.
9.	Withholding Taxes. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any delivery of Common Shares to the Grantee, and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such delivery

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that the Grantee make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld. The Grantee may elect that all or any part of such withholding requirement be satisfied by retention by the Company of a portion of the Common Shares delivered to the Grantee. If such election is made, the shares so retained shall be credited against such withholding requirement at the Market Price per Common Share on the date of such delivery. In no event, however, shall the Company accept Common Shares for payment of taxes in excess of required tax withholding rates, except that, unless otherwise determined by the Committee at any time, the Grantee may surrender Common Shares owned for more than 6 months to satisfy any tax obligations resulting from any such transaction.

10.	Right to Terminate Employment. No provision of this agreement shall limit in any way whatsoever any right that the Company or a subsidiary may otherwise have to terminate the employment of Grantee at any time.
11.	Relation to Other Benefits. Any economic or other benefit to Grantee under this agreement or the Plan shall not be taken into account in determining any benefits to which Grantee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company or a subsidiary and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company or a subsidiary.
12.	Amendments. Any amendment to the Plan shall be deemed to be an amendment to this agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of Grantee with respect to the Common Shares or other securities covered by this agreement without Grantee’s consent.
13.	Severability. In the event that one or more of the provisions of this agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.
14.	Governing Law. This agreement is made under, and shall be construed in accordance with, the internal substantive laws of the State of Ohio.

[SIGNATURES ON FOLLOWING PAGE]

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

The Timken Company
By
	William R. Burkhart
	Sr. Vice President and General Counsel

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

Grantee

Date:

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EX-10.3

Exhibit 10.3

THE TIMKEN COMPANY

Performance Unit Agreement

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

          WHEREAS, the grant of Performance Units, each with a cash value of $100.00, was authorized by a resolution of the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) that was duly adopted on [DATE] (the “Date of Grant”), and the execution of a Performance Unit agreement in the form hereof was authorized by a resolution of the Committee duly adopted on [DATE];

          NOW, THEREFORE, pursuant to the Company’s Long-Term Incentive Plan (As Amended and Restated as of February 6, 2004) (the “Plan”) and subject to the terms and conditions thereof and the terms and conditions hereinafter set forth, the Company hereby grants to Grantee as of the Date of Grant <<puaward>> Performance Units (the “Target Performance Units”). Subject to the attainment of the performance goals set forth in Section 1 hereof, this grant enables Grantee to earn as Performance Units from [50% to 150%] of the Target Performance Units to be paid out to Grantee pursuant to Section 4 hereof.

1.      Earning of Target Performance Units. (a) Grantee’s right to receive payment for any Performance Units shall be determined (i) on the basis of the Company’s Return on Equity for the period from January 1, 2006 through December 31, 2008 (the “Performance Period”) and (ii) on the basis of the Company’s Sales Growth for the Performance Period as follows:

(i) The applicable percentage of the Target Performance Units which shall be earned by Grantee shall be determined by the Performance Matrix approved by the Committee on the Date of Grant.

(ii)	For purposes of this Agreement, “Return on Equity” shall mean cumulative net income divided by three, divided by the average quarterly total shareholders equity excluding the minimum pension liability in comprehensive income for the three-year period, as adjusted pursuant to Section 1(b).
(iii)	For purposes of this Agreement, “Sales Growth” shall mean the three-year compounded annualized growth in sales over the performance period, determined using year-end total net sales for year three of the performance period and year-end total net sales for the year-end prior to the start of the performance period, as adjusted pursuant to Section 1(b).
(iv)	In the event that the Company’s Return on Equity or Sales Growth is between the ranges set forth on the Performance Matrix, the Committee shall interpolate the applicable percentage of the Target Performance Units which shall be earned by Grantee.

(b)      If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Corporation, the manner in which it conducts business or other events or circumstances render the Management Objectives to be unsuitable, the Committee may modify such Management Objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate; provided, however, that no such action may result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code.

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(c)

All determinations involving the performance goals set forth in this Section 1 shall be calculated based on Generally Accepted Accounting Principles in effect at the time the goals are established without regard to any change in accounting standards that may be required by the Financial Accounting Standards Board after the goals are established.

(d)

Subject to Sections 1(a), (b), and (c), Grantee shall have a right to receive payment for the Target Performance Units if Grantee is in the continuous employ of the Company or a subsidiary from the Date of Grant through the last day of the Performance Period. For purposes of this agreement, Grantee’s continuous employment with the Company or a subsidiary shall not be deemed to have been interrupted, and Grantee shall not be deemed to have ceased to be an employee of the Company or a subsidiary, by reason of transfer of employment among the Company and its subsidiaries.

2.      Pro Rata Earning of Target Performance Units. Notwithstanding Section 1(d) hereof and subject to the payment provisions of Section 4(b) hereof, Grantee shall be entitled to receive payment of a prorated portion of the Performance Units based on the number of whole months that Grantee was employed by the Company or any subsidiary during the Performance Period on the date Grantee ceases to be an employee of the Company or any subsidiary prior to the last day of the Performance Period as the result of one of the following circumstances:

(a)      Death, Disability or Retirement: Grantee dies or becomes permanently disabled while in the employ of the Company or any subsidiary, or Grantee retires with the Company’s consent. For purposes of this agreement, retirement “with

3

the Company’s consent” shall mean: (i) the retirement of Grantee prior to age 62 under a retirement plan of the Company or a subsidiary, if the Board or the Committee determines that his retirement is for the convenience of the Company or a subsidiary, or (ii) the retirement of Grantee at or after age 62 under a retirement plan of the Company or a subsidiary. For purposes of this agreement, “permanently disabled” shall mean that Grantee has qualified for long-term disability benefits under a disability plan or program of the Company or, in the absence of a disability plan or program of the Company, under a government-sponsored disability program.

(b)      Change in Control: A change in control of the Company occurs while Grantee is an employee of the Company or a subsidiary. For the purposes of this agreement, the term “change in control” shall mean the occurrence of any of the following events:

(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of 30% or more of either: (A) the then-outstanding Common Shares or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (“Voting Shares”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a change in control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any

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acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, or (4) any acquisition by any Person pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (i) of this Section 2(b); or

(ii)

Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason (other than death or disability) to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Securities Exchange Act of 1934) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(iii)

Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business

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Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Common Shares and Voting Shares immediately prior to such Business Combination beneficially own, directly or indirectly, more than 66-2/3% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions relative to each other as their ownership, immediately prior to such Business Combination, of the Common Shares and Voting Shares of the Company, as the case may be, (B) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) sponsored or maintained by the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business

6

Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

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

(c)

Divestiture: Grantee’s employment with the Company or a subsidiary terminates as the result of a divestiture. For the purposes of this agreement, the term “divestiture” shall mean a permanent disposition to a Person other than the Company or any subsidiary of a plant or other facility or property at which Grantee performs a majority of Grantee’s services whether such disposition is effected by means of a sale of assets, a sale of subsidiary stock or otherwise.

(d)

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

3.      Forfeiture of Award. Except to the extent Grantee has earned the right to receive payment for Performance Units pursuant to Sections 1 or 2 hereof, Grantee’s right to receive payment for the Performance Units shall be forfeited automatically and without further notice on the date that Grantee ceases to be an employee of the Company or a Subsidiary prior to the last day of the Performance Period.

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4.      Payment of Performance Units. (a) Performance Units earned as provided in Section 1 hereof shall be payable to Grantee in cash or Common Shares (as determined by the Committee) as soon as practicable after they are earned in accordance with Section 1 hereof, but in no event later than two and one-half (2 1/2) months after the close of the last fiscal year of the Company to which the award relates.

(b)      The prorated portion of Performance Units earned as provided in Section 2 hereof shall be payable to Grantee in cash or Common Shares (as determined by the Committee) as soon as practicable after the last day of the Performance Period, but in no event later than two and one-half (2 1/2) months after the close of the last fiscal year of the Company to which the award relates.

5.      Transferability. Grantee’s right to receive the Performance Units shall not be transferable nor assignable by Grantee other than by will or by the laws of descent and distribution.

6.      No Employment Contract. Nothing contained in this Agreement shall confer upon Grantee any right with respect to continuance of employment by the Company or any Subsidiary, nor limit or affect in any manner the right of the Company or any Subsidiary to terminate the employment or adjust the compensation of Grantee.

7.      Taxes and Withholding. If the Performance Units are paid in cash, such payment shall be less any applicable federal, state, local or foreign taxes. To the extent that the Company shall be required to withhold any federal, state, local or foreign taxes in connection with the payment of the Performance Units in Common Shares, and the amounts available to the Company for such withholding are insufficient, it shall be a

8

condition to the payment of the Performance Units that Grantee shall pay such taxes or make provisions that are satisfactory to the Company for the payment thereof.

8.      Compliance with Section 409A of the Code. To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code. This Agreement and the Plan shall be administered in a manner consistent with this intent, and any provision that would cause the Agreement or the Plan to fail to satisfy Section 409A of the Code shall have no force and effect until amended to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Company without the consent of the Grantee).

9.      Compliance with Law. The Company shall make reasonable efforts to comply with all applicable laws; provided, however, that notwithstanding any other provision of this Agreement, the Performance Units shall not be paid if the payment thereof would result in a violation of any such law.

10.      Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of Grantee under this Agreement without Grantee’s consent.

11.      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.

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12.      Relation to Plan. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistency between the provisions of this Agreement and the Plan, the Plan shall govern. Capitalized terms used herein without definition shall have the meanings assigned to them in the Plan. The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein or in the plan, have the right to determine any questions which arise in connection with the grant of Performance Units.

13.      Successors and Assigns. Without limiting Section 5 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of Grantee, and the successors and assigns of the Company.

14.      Governing Law. The interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of Ohio, without giving effect to the principles of conflict of laws thereof.

15.      Notices. Any notice to the Company provided for herein shall be in writing to the Company and any notice to Grantee shall be addressed to Grantee at his or her address on file with the Company. Except as otherwise provided herein, any written notice shall be deemed to be duly given if and when delivered personally or deposited in the United States mail, first class certified or registered mail, postage and fees prepaid, return receipt requested, and addressed as aforesaid. Any party may change the address to which notices are to be given hereunder by written notice to the other party as herein specified (provided that for this purpose any mailed notice shall be deemed given on the third business day following deposit of the same in the United States mail).

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          IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer and Grantee has also executed this Agreement in duplicate, as of the day and year first above written.

THE TIMKEN COMPANY

William R. Burkhart

Sr. Vice President and General Counsel

          The undersigned Grantee hereby acknowledges receipt of an executed original of this Agreement.

Grantee

 Date:

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EX-10.4

Exhibit 10.4

THE TIMKEN COMPANY

Deferred Shares Agreement

     WHEREAS, Michael C. Arnold (“Grantee”) is an employee of The Timken Company (the “Company”); and

     WHEREAS, the grant of deferred shares evidenced hereby was authorized by a resolution of the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company that was duly adopted on February 6, 2006 (the “Date of Grant”), and the execution of a deferred shares agreement in the form hereof was authorized by a resolution of the Committee duly adopted on February 6, 2006.

     NOW, THEREFORE, pursuant to the Company’s Long-Term Incentive Plan (as Amended and Restated as of February 6, 2004) (the “Plan”) and subject to the terms and conditions thereof and the terms and conditions hereinafter set forth, the Company hereby grants to the Grantee the right to receive (i) 25,000 shares of the Company’s common stock without par value (the “Common Shares”) and (ii) dividend equivalents payable in cash on a deferred basis (the “Deferred Cash Dividends”) with respect to the Common Shares covered by this agreement.

1. Four-Year Vesting of Awards. Subject to the terms and conditions of Sections 2 and 3 hereof, the Grantee’s right to receive the Common Shares covered by this agreement and any Deferred Cash Dividends accumulated with respect thereto shall become nonforfeitable on the fourth anniversary of the Date of Grant if the Grantee has been in the continuous employ of the Company or a subsidiary from the Date of Grant until such date. For purposes of this agreement, “subsidiary” shall mean a corporation, partnership, joint venture, unincorporated association or other entity in which the Company has a direct or indirect ownership or other equity interest. For purposes of this agreement, the Grantee’s continuous employment with the Company or a subsidiary shall not be deemed to have been interrupted, and the Grantee shall not be deemed to have ceased to be an employee of the Company or a subsidiary, by reason of transfer of employment among the Company and its subsidiaries.

2. Accelerated Vesting of Awards.

Notwithstanding the provisions of Section 1 hereof, the Grantee’s right to receive the Common Shares covered by this agreement and any Deferred Cash Dividends then accumulated with respect thereto may become nonforfeitable earlier than the time provided in such section if any of the following circumstances apply:

(a) Death, Disability or Retirement: The Grantee’s right to receive the Common Shares covered by this agreement and any Deferred Cash Dividends then accumulated with respect thereto shall become nonforfeitable if the Grantee should die or become permanently disabled while in the employ of the Company or any subsidiary, or if the Grantee should retire with the Company’s consent.

               For purposes of this agreement, retirement “with the Company’s consent” shall mean: (i) the retirement of Grantee prior to age 62 under a retirement plan of the Company or a subsidiary, if the Board or the Committee determines that his retirement is for the convenience of the Company or a subsidiary, or (ii) the retirement of Grantee at or after age 62 under a retirement plan of the Company or a subsidiary. For purposes of this agreement, “permanently disabled” shall mean that Grantee has qualified for long-term disability benefits under a disability plan or program of the Company or, in the absence of a disability plan or program of the Company, under a government-sponsored disability program.

(b) Change in Control: The Grantee’s right to receive the Common Shares covered by this agreement and any Deferred Cash Dividends then accumulated with respect thereto shall become nonforfeitable upon any change in control of the Company that shall occur while the Grantee is an employee of the Company or a subsidiary. For the purposes of this agreement, the term “change in control” shall mean the occurrence of any of the following events:

(i)

The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of 30% or more of either: (A) the then-outstanding Common Shares or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (“Voting Shares”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a change in control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary, or (4) any acquisition by any Person pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (i) of this Section 2(b); or

(ii)

Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason (other than death or disability) to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Securities Exchange Act of 1934) with respect to the election or removal of directors or other actual or

2

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

(c) Divestiture: The Grantee’s right to receive the Common Shares covered by this agreement and any Deferred Cash Dividends then accumulated with respect thereto shall become nonforfeitable if the Grantee’s employment with the Company or a subsidiary terminates as the result of a divestiture. For the purposes of this agreement, the term “divestiture” shall mean a permanent disposition to a Person other than the Company or any subsidiary of a plant or other facility or property at which the Grantee performs a majority of Grantee’s services whether such disposition is effected by means of a sale of assets, a sale of subsidiary stock or otherwise.

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(d) Layoff: If (i) the Grantee’s employment with the Company or a subsidiary terminates as the result of a layoff and (ii) the Grantee is entitled to receive severance pay pursuant to the terms of any severance pay plan of the Company in effect at the time of Grantee’s termination of employment which provides for severance pay calculated by multiplying the Grantee’s base compensation by a specified severance period, then the Grantee’s right to receive the Common Shares covered by this agreement and any Deferred Cash Dividends then accumulated with respect thereto shall become nonforfeitable with respect to the total number of Common Shares that would have been received under the provisions of Section 1 hereof if the Grantee had remained in the employ of the Company through the end of the severance period.

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

3. Forfeiture of Awards. The Grantee’s right to receive the Common Shares covered by this agreement and any Deferred Cash Dividends accumulated with respect thereto shall be forfeited automatically and without further notice on the date that the Grantee ceases to be an employee of the Company or a subsidiary prior to the fourth anniversary of the Date of Grant for any reason other than as described in Section 2 hereof. In the event that the Grantee shall intentionally commit an act that the Committee determines to be materially adverse to the interests of the Company or a subsidiary, the Grantee’s right to receive the Common Shares covered by this agreement and any Deferred Cash Dividends accumulated with respect thereto shall be forfeited at the time of that determination notwithstanding any other provision of this agreement.

4. Crediting of Deferred Cash Dividends. With respect to each of the Common Shares covered by this agreement, the Grantee shall be credited on the records of the Company with Deferred Cash Dividends in an amount equal to the amount per share of any cash dividends declared by the Board on the outstanding Common Shares during the period beginning on the Date of Grant and ending on the date upon which the Grantee’s right to receive the Common Shares covered by this agreement pursuant to Section 1 hereof or Section 2 hereof, as the case may be, becomes nonforfeitable. The Deferred Cash Dividends shall accumulate without interest.

5. Payment of Awards. Subject to the terms and conditions of Section 6 hereof, the Common Shares covered by this agreement shall be issuable, and any Deferred Cash Dividends accumulated with respect thereto shall be payable, to the Grantee at the time when they become nonforfeitable in accordance with Section 1 or 2 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 Company shall not be obligated to issue any of the

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Common Shares covered by this agreement or pay any Deferred Cash Dividends accumulated with respect thereto if the issuance or payment thereof would result in violation of any such law. To the extent that the Ohio Securities Act shall be applicable to this agreement, the Company shall not be obligated to issue any of the Common Shares or other securities covered by this agreement or pay any Deferred Cash Dividends accumulated with respect thereto unless such Common Shares and Deferred Cash Dividends 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. Neither the Grantee’s right to receive the Common Shares covered by this agreement nor his right to receive any Deferred Cash Dividends shall be transferable by the Grantee except by will or the laws of descent and distribution. Any purported transfer in violation of this Section 7 shall be null and void, and the purported transferee shall obtain no rights with respect to such Shares.

8. Compliance with Section 409A of the Code. To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code. This Agreement and the Plan shall be administered in a manner consistent with this intent, and any provision that would cause the Agreement or the Plan to fail to satisfy Section 409A of the Code shall have no force and effect until amended to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Company without the consent of the Grantee).

9. Adjustments. The Committee shall make any adjustments in the number or kind of shares of stock or other securities covered by this agreement that the Committee may determine to be equitably required to prevent any dilution or expansion of the Grantee’s rights under this agreement that otherwise would result from any (a) stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) merger, consolidation, separation, reorganization or partial or complete liquidation involving the Company or (c) other transaction or event having an effect similar to any of those referred to in Section 9(a) or 9(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 Grantee’s rights under this agreement such alternative consideration as the Committee may determine in good faith to be equitable under the circumstances.

10. Withholding Taxes. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any delivery of Common Shares to the Grantee, and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such delivery that the Grantee make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld. The Grantee may elect that all or any part of such withholding requirement be satisfied by retention by the Company of a portion of the Common Shares delivered to the

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Grantee. If such election is made, the shares so retained shall be credited against such withholding requirement at the closing price per Common Share on the date of such delivery.

11. No Right to Future Awards or Employment. This award is a voluntary, discretionary bonus being made on a one-time basis and it does not constitute a commitment to make any future awards. This award and any payments made hereunder will not be considered salary or other compensation for purposes of any severance pay or similar allowance, except as otherwise required by law. 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 Grantee’s employment at any time.

12. Relation to Other Benefits. Any economic or other benefit to the Grantee under this agreement or the Plan shall not be taken into account in determining any benefits to which the Grantee 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.

13. Processing of Information. Information about the Grantee and the Grantee’s award of Share Equivalents may be collected, recorded and held, used and disclosed for any purpose related to the administration of the award. The Grantee understands that such processing of this information may need to be carried out by the Company and its Subsidiaries and by third party administrators whether such persons are located within the Grantee’s country or elsewhere, including the United States of America. The Grantee consents to the processing of information relating to the Grantee and the Grantee’s receipt of the Share Equivalents in any one or more of the ways referred to above.

14. 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 Grantee with respect to either the Common Shares or other securities covered by this agreement or the Deferred Cash Dividends without the Grantee’s consent.

15. Severability. If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid or unenforceable, the remainder of this Agreement and the application of such provision in any other person or circumstances shall not be affected, and the provisions so held to be invalid or unenforceable shall be reformed to the extent (and only to the extent) necessary to make it enforceable and valid.

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

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

The Timken Company
By:
	Scott A. Scherff
	Corporate Secretary & Asst. General Counsel

     The undersigned Grantee hereby acknowledges receipt of an executed original of this agreement and accepts the right to receive the Common Shares or other securities covered hereby and any deferred Cash Dividends accumulated with respect thereto, subject to the terms and conditions of the Plan and the terms and conditions herein above set forth.

Michael C. Arnold

Date:

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