Common use of Outstanding Timken Equity Compensation Awards Clause in Contracts

Outstanding Timken Equity Compensation Awards. (a) Each Timken Equity Compensation Award that is outstanding as of the Distribution will be adjusted as described below, so that each holder of a Timken Equity Compensation Award will hold adjusted equity awards comprised of a TimkenSteel Equity Compensation Award and a Bearings Equity Compensation Award unless otherwise provided in this Section 10.1(a); provided, however, that, effective immediately prior to the Distribution, the Timken Compensation Committee may provide for different adjustments with respect to some or all of a holder’s Timken Equity Compensation Awards. For greater certainty, any adjustments made by the Timken Compensation Committee will be deemed incorporated by reference herein as if fully set forth below and will be binding on the parties hereto and their respective Subsidiaries. (i) Each Timken Option generally will be adjusted in the manner described below, effective as of the Distribution Date and immediately prior to the Distribution, so that immediately following the Distribution each Timken Option holder will hold Bearings Options and TimkenSteel Options in lieu of the Timken Options previously held. The following procedure will generally be applied to each Timken Option with the same grant date and exercise price held by each Timken Option holder as of the Distribution Date: (A) The Bearings Option will have an exercise price equal to the applicable Bearings Price. The number of Bearings Options will equal the number of Timken Options to which they relate. Such Bearings Options will be subject to the same vesting requirements and dates and other terms and conditions as the Timken Options to which they relate. (B) The TimkenSteel Option will have an exercise price equal to the applicable TimkenSteel Price. The number of TimkenSteel Options will equal the number of Timken Options multiplied by the Distribution Ratio, rounded down to the nearest whole option. Such TimkenSteel Options will be subject to the same vesting requirements and dates and other terms and conditions as the Timken Options to which they relate. (ii) With respect to Timken Restricted Shares, Timken Deferred Shares, and Timken Performance-Based RSUs and Timken Time-Based RSUs: (A) Each holder of Timken Restricted Shares will generally receive from TimkenSteel, as of the time of the Distribution Date and immediately prior to the Distribution, TimkenSteel Restricted Shares determined in the same manner as for other shareholders of Timken Common Shares based on the Distribution Ratio, with the value of any fractional share paid to the holder in cash, less any applicable taxes, as soon as practicable following the Distribution Date (with such cash payment to be made by TimkenSteel to TimkenSteel Employees and Former TimkenSteel Business Employees on the Distribution Date and by Timken to all other holders), except to the extent that such cash payment would result in adverse Tax consequences to the holder under Code Section 409A. Such TimkenSteel Restricted Shares will be subject to the same vesting requirements and dates and other terms and conditions as the Timken Restricted Shares to which they relate (including the right to receive dividends or other distributions paid on TimkenSteel Common Shares). Each Timken Restricted Share will continue to be one Bearings Restricted Share which will be subject to the same vesting requirements and dates and other terms and conditions as the Timken Restricted Shares to which it relates. (B) Each holder of Timken Deferred Shares will generally receive from TimkenSteel, as of the time of the Distribution Date and immediately prior to the Distribution, an award for TimkenSteel Deferred Shares, determined in the same manner as for shareholders of Timken Common Shares based on the Distribution Ratio, with the value of any fractional share paid to the holder in cash, less any applicable taxes, as soon as practicable following the Distribution Date (with such cash payment to be made by TimkenSteel to TimkenSteel Employees and Former TimkenSteel Business Employees on the Distribution Date and by Timken to all other holders), except to the extent that such cash payment would result in adverse Tax consequences to the holder under Code Section 409A. All TimkenSteel Deferred Shares will be subject to the same vesting requirements and dates and other terms and conditions as the Timken Deferred Shares to which they relate (including the right to be credited with dividends or other distributions paid on TimkenSteel Common Shares). Each Timken Deferred Share will continue to be a Bearings Deferred Share which will be subject to the same vesting requirements and dates and other terms and conditions as the Timken Deferred Share to which it relates. (C) Each holder of Timken Time-Based RSUs will generally receive from TimkenSteel, as of the time of the Distribution Date and immediately prior to the Distribution, TimkenSteel Time-Based RSUs, determined in the same manner as for shareholders of Timken Common Shares based on the Distribution Ratio, with the value of any fractional share paid to the holder in cash, less any applicable taxes, as soon as practicable following the Distribution Date (with such cash payment to be made by TimkenSteel to TimkenSteel Employees and Former TimkenSteel Business Employees on the Distribution Date and by Timken to all other holders), except to the extent that such cash payment will result in adverse Tax consequences to the holder under Code Section 409A. All TimkenSteel Time-Based RSUs will be subject to the same vesting requirements and dates and other terms and conditions as the Timken Time-Based RSUs to which they relate. Each Timken Time-Based RSU will continue to be a Bearings Time-Based RSU which will be subject to the same vesting requirements and dates and other terms and conditions as the Timken Time-Based RSU to which it relates. (D) The determination of whether any portion of a 2012 Performance-Based RSU award has been earned will be made based upon the achievement of the applicable management objectives measured as of the Distribution Date. Such determination will be made by the Timken Compensation Committee in accordance with the applicable Timken LTIP. Notwithstanding any provision of the applicable award agreement, Timken will pay each such award held by a Bearings Employee or a Former Bearings Business Employee, and TimkenSteel will pay each such award held by a TimkenSteel Employee or a Former TimkenSteel Business Employee, in cash between January 1, 2015 and March 15, 2015 based on the Timken PRSU Price for each Timken Common Share earned with respect to such 2012 Performance-Based RSU. (E) The determination of whether any portion of a 2013 Performance-Based RSU award has been earned will be made based upon the achievement of the applicable management objectives measured as of the Distribution Date, and prorated based on the percentage of the applicable performance period completed as of the Distribution Date. Such determination will be made by the Timken Compensation Committee in accordance with the applicable Timken LTIP. Notwithstanding any provision of the applicable award agreement, Timken will pay each such award held by a Bearings Employee or a Former Bearings Business Employee, and TimkenSteel will pay each such award held by a TimkenSteel Employee or a Former TimkenSteel Business Employee, in cash between January 1, 2016 and March 15, 2016 based on the Timken PRSU Price for each Timken Common Share earned with respect to such 2013 Performance-Based RSU. Timken and TimkenSteel will grant new performance-based restricted stock unit awards to their respective employees for the period from the Distribution Date through December 31, 2015. (iii) Each holder of Timken Performance Shares will generally receive from TimkenSteel, as of the time of the Distribution Date and immediately prior to the Distribution, TimkenSteel Performance Shares determined in the same manner as for other shareholders of Timken Common Shares based on the Distribution Ratio, with the value of any fractional share paid to the holder in cash, less any applicable taxes, as soon as practicable following the Distribution Date (with such cash payment to be made by TimkenSteel to TimkenSteel Employees and Former TimkenSteel Business Employees on the Distribution Date and by Timken to all other holders, except to the extent such cash payment will result in adverse tax consequences under Code Section 409A). Such TimkenSteel Performance Shares will be subject to the same vesting requirements and dates and other terms and conditions as the Timken Performance Shares to which they relate (including the right to receive dividends or other distributions paid on TimkenSteel Common Shares). Each Timken Performance Share will continue to be one Bearings Performance Share which will be subject to the same vesting requirements and dates and other terms and conditions as the Timken Performance Shares to which it relates. (b) In the event a change in control (as defined in the applicable equity incentive plan or award agreement) occurs with respect to Timken, then (i) any accelerated vesting and/or exercisability applicable to Bearings Equity Compensation Awards held by Bearings Employees and Former Bearings Business Employees shall apply to the TimkenSteel Equity Compensation Awards then held by such individuals, and (ii) all Bearings Equity Compensation Awards then held by TimkenSteel Employees and Former TimkenSteel Business Employees shall fully vest (and, to the extent applicable, become exercisable). In the event a change in control (as defined in the applicable equity incentive plan or award agreement) occurs with respect to TimkenSteel, then (i) any accelerated vesting and/or exercisability applicable to TimkenSteel Equity Compensation Awards held by TimkenSteel Employees and Former TimkenSteel Business Employees shall apply to the Bearings Equity Compensation Awards then held by such individuals, and (ii) all TimkenSteel Equity Compensation Awards then held by Bearings Employees and Former Bearings Business Employees shall fully vest (and, to the extent applicable, become exercisable). Notwithstanding the foregoing, this Section 10.1(b) will not apply to the extent that it would cause adverse tax consequences under Code Section 409A. (c) Prior to the Distribution Date, TimkenSteel will establish equity compensation plans, so that upon the Distribution, TimkenSteel will have in effect an equity compensation plan that allows grants of equity compensation awards subject to substantially the same terms as those that apply to the corresponding Timken Equity Compensation Awards. From and after the Distribution Date, each TimkenSteel Equity Compensation Award will be subject to the terms of the applicable TimkenSteel equity compensation plan, the award agreement governing such TimkenSteel Equity Compensation Award and any Employment Agreement to which the applicable holder is a party. From and after the Distribution Date, TimkenSteel will retain, pay, perform, fulfill and discharge all Liabilities arising out of or relating to the TimkenSteel Equity Compensation Awards. Timken will retain, pay, perform, fulfill and discharge all Liabilities arising out of or relating to the Bearings Equity Compensation Awards. (d) In all events, the adjustments provided for in this Section 10.1 will be made in a manner that, as determined by Timken, avoids adverse Tax consequences to holders under Code Section 409A.