Attached files
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| 8-K - FORM 8-K - TIMKEN CO | l39753e8vk.htm |
Exhibit 10.1
THE TIMKEN COMPANY
SENIOR EXECUTIVE MANAGEMENT PERFORMANCE PLAN,
AS AMENDED AND RESTATED AS OF FEBRUARY 8, 2010
SENIOR EXECUTIVE MANAGEMENT PERFORMANCE PLAN,
AS AMENDED AND RESTATED AS OF FEBRUARY 8, 2010
1. Purpose. The purpose of the Senior Executive Management Performance Plan (the “Plan”)
is to attract and retain key executives for The Timken Company, an Ohio corporation (the
“Corporation”), and its Subsidiaries and to provide such persons with incentives and rewards for
superior performance. Incentive bonus payments made under the Plan are intended to constitute
qualified “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue
Code of 1986, as amended, and Section 1.162-27 of the Regulations promulgated there under, and the
Plan shall be construed consistently with such intention.
2. Definitions. As used in this Plan,
“Board” means the Board of Directors of the Corporation.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Committee” means the Compensation Committee of the Board or any other committee appointed
by the Board to administer the Plan; provided, however, that in any event the Committee
shall be comprised of not less than two directors of the Corporation, each of whom shall
qualify as an “outside director” for purposes of Section 162(m) of the Code and Section
1.162-27(e)(3) of the Regulations.
“Eligible Executive” means the Corporation’s Chief Executive Officer and any other
designated executive officer of the Corporation that in the Committee’s judgment could, in
the absence of the Plan, be paid compensation the deductibility of which, to the
Corporation, could be limited by Section 162(m) of the Code.
“Incentive Bonus” shall mean, for each Eligible Executive, a bonus opportunity amount
determined by the Committee pursuant to Section 5 below.
“Management Objectives” means the achievement of a performance objective or objectives
established pursuant to this Plan for Eligible Executives. Management Objectives may be
described in terms of Corporation-wide objectives or objectives that are related to the
performance of the individual Eligible Executive or of the Subsidiary, division, department
or function within the Corporation or Subsidiary in which the Eligible Executive is
employed. The Management Objectives shall be limited to specified levels of, growth in or
relative peer company performance in—cash flow, cost of capital, debt reduction, earnings,
earnings before interest and taxes, earnings per share, economic value added, free cash
flow, working capital, inventory management, net income, productivity improvement, profit
after tax, reduction of fixed costs, return on assets, return on equity, return on invested
capital, sales, customer service, shareholder return, gross profits and/or comparisons with
various stock market indices. Management objectives may be stated as a combination of the
preceding factors.
“Regulations” mean the Treasury Regulations promulgated under the Code, as amended from time
to time.
“Restatement” means a restatement of any part of the Corporation’s financial statements for
any fiscal year or years after 2009 due to material noncompliance with any financial
reporting requirement under the U.S. securities laws applicable to such fiscal year or
years.
“Subsidiary” means a corporation, partnership, joint venture, unincorporated association or
other entity in which the Corporation has a direct or indirect ownership or other equity
interest.
3. Administration of the Plan. The Plan shall be administered by the Committee, which shall
have full power and authority to construe, interpret and administer the Plan and shall have the
exclusive right to establish Management Objectives and the amount of Incentive Bonus payable to
each Eligible Executive upon the achievement of the specified Management Objectives.
4. Eligibility. Eligibility under this Plan is limited to Eligible Executives designated by
the Committee in its sole and absolute discretion.
5. Awards.
(a) Not later than the 90th day of each fiscal year of the Corporation, the Committee
shall establish the Management Objectives for each Eligible Executive and the amount of
Incentive Bonus payable (or formula for determining such amount) upon full achievement of
the specified Management Objectives. The Committee may further specify in respect of the
specified Management Objectives a minimum acceptable level of achievement below which no
Incentive Bonus payment will be made and shall set forth a formula for determining the
amount of any payment to be made if performance is at or above the minimum acceptable level
but falls short of full achievement of the specified Management Objectives. The Committee
may not modify any terms of awards established pursuant to this section, except to the
extent that after such modification the Incentive Bonus would continue to constitute
qualified “performance-based compensation” for purposes of Section 162(m) of the Code.
(b) The Committee retains the discretion to reduce the amount of any Incentive Bonus
that would be otherwise payable to an Eligible Executive (including a reduction in such
amount to zero).
(c) Notwithstanding any other provision of the Plan to the contrary, in no event shall
the Incentive Bonus paid to an Eligible Executive under the Plan for a year exceed
$4,000,000.
6. Committee Certification. As soon as reasonably practicable after the end of each fiscal
year of the Corporation, the Committee shall determine whether the Management Objective has been
achieved and the amount of the Incentive Bonus to be paid to each Eligible Executive for such
fiscal year and shall certify such determinations in writing.
7. Payment of Incentive Bonuses. Subject to a valid election made by an Eligible Executive
with respect to the deferral of all or a portion of his or her Incentive Bonus, Incentive Bonuses
shall be paid within 30 days after written certification pursuant to Section 6, but in no event
later than two and one-half months after the close of the Company’s fiscal year.
8. Recovery of Incentive Bonuses. If a Restatement occurs and the Committee determines that an
Eligible Executive is personally responsible for causing the Restatement as a result of the
Eligible Executive’s personal misconduct or any fraudulent activity on the part of the Eligible
Executive, then the Committee has discretion to, based on applicable facts and circumstances and
subject to applicable law, cause the Corporation to recover all or any portion (but no more than
100%) of the Incentive Bonus paid or payable to the Eligible Executive for some or all of the years
covered by the Restatement.
The amount of any Incentive Bonus recovered by the Corporation shall be limited to the amount
by which such Incentive Bonus exceeded the amount that would have been paid to or received by the
Eligible Executive had the Corporation’s financial statements for the applicable restated fiscal
year or years been initially filed as restated, as reasonably determined by the Committee.
The Committee shall also determine whether the Corporation shall effect any recovery under
this Section 8 by: (a) seeking repayment from the Eligible Executive; (b) reducing, except with
respect to any non-qualified deferred compensation under Section 409A of the Code, the amount that
would otherwise be payable to the Eligible Executive under any compensatory plan, program or
arrangement maintained by the Corporation (subject to applicable law and the terms and conditions
of such plan, program or arrangement); (c) by withholding, except with respect to any non-qualified
deferred compensation under Section 409A of the Code, payment of future increases in compensation
(including the payment of any discretionary bonus amount) that would otherwise have been made to
the Eligible Executive in accordance with the Corporation’s compensation practices; or (d) by any
combination of these alternatives.
9. No Right to Bonus for Continued Employment. Neither the establishment of the Plan, the
provision for or payment of any amounts hereunder nor any action of the Corporation, the Board or
the Committee with respect to the Plan shall be held or construed to confer upon any person (a) any
legal right to receive, or any interest in, an Incentive Bonus or any other benefit under the Plan
or (b) any legal right to continue to serve as an officer or employee of the Corporation or any
Subsidiary of the Corporation.
10. Withholding. The Corporation shall have the right to withhold, or require an Eligible
Executive to remit to the Corporation, an amount sufficient to satisfy any applicable federal,
state, local or foreign withholding tax requirements imposed with respect to the payment of any
Incentive Bonus.
11. Nontransferability. Except as expressly provided by the Committee, the rights and benefits
under the Plan shall not be transferable or assignable other than by will or the laws of descent
and distribution.
12. Effective Date. Subject to its approval by the shareholders, this Plan shall remain
effective until the first shareholders’ meeting in 2015, subject to any further shareholder
approvals (or reapprovals) mandated for performance-based compensation under Section 162(m) of the
Code, and subject to the right of the Board to terminate the Plan, on a prospective basis only, at
any time.