EXHIBIT 10.20
THE TIMKEN COMPANY
Nonqualified Stock Option Agreement
WHEREAS, James W. Griffith (the "Optionee") is an
employee of The Timken Company (the "Company");
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 November 5, 1999 (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 December 16, 1999; 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 December 20, 1995)
(the "Plan") and subject to the terms and conditions thereof and
the terms and conditions hereinafter set forth, the Company
hereby grants to the Optionee a nonqualified stock option (the
"Option") to purchase 60,000 shares of the Company's common stock
without par value (the "Common Shares") at the exercise price of
eighteen and three-eighths ($18.375) per Common Share (the
"Exercise Price").
1. Vesting of Option. (a) Provided the Optionee
remains in the continuous employ of the Company or a subsidiary
and unless terminated as hereinafter provided, the Option shall
be exercisable (i) to the extent of one-half of the Common Shares
covered by the Option if and when the closing price of a Common
Share equals or exceeds thirty-five dollars ($35.00) per share on
any trading day and (ii) to the extent of the remaining one-half
of the Common Shares covered by the Option if and when the
closing price of a Common Share equals or exceeds fifty-three
dollars
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($53.00) per share on any trading day. The closing price of a
Common Share shall be determined in accordance with The Wall
Street Journal, Midwest Edition. For the purposes of
this agreement: "subsidiary" shall mean a corporation,
partnership, joint venture, unincorporated association or other
entity in which the Company has a direct or indirect ownership or
other equity interest; the continuous employment of the Optionee
with the Company or a subsidiary shall not be deemed to have been
interrupted, and the Optionee shall not be deemed to have ceased
to be an employee of the Company or a subsidiary, by reason of
the transfer of his employment among the Company and its
subsidiaries.
(b) Notwithstanding the provisions of Section 1(a)
hereof, the Option shall become immediately exercisable in full
upon any change in control of the Company that shall occur while
the Optionee is an employee of the Company or a subsidiary. For
the purposes of this agreement, the term "change in control"
shall mean the occurrence of any of the following events:
(i) all or substantially all of the assets of the
Company are sold or transferred to another corporation or entity,
or the Company is merged, consolidated or reorganized into or
with another corporation or entity, with the result that upon
conclusion of the transaction less than 51 percent of the
outstanding securities entitled to vote generally in the election
of directors or other capital interests of the acquiring
corporation or entity is owned, directly or indirectly, by the
shareholders of the Company generally prior to the transaction;
or
(ii) there is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report
thereto), as promulgated pursuant to the Securities Exchange Act
of 1934 (the "Exchange Act"), disclosing that any person (as the
term "person" is used in Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor
rule or regulation thereto under the
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Exchange Act) of securities representing 30 percent or more of the
combined voting power of the then-outstanding voting securities of
the Company; or
(iii) the Company shall file a report or proxy
statement with the Securities and Exchange Commission (the "SEC")
pursuant to the Exchange Act disclosing in response to Item 1 of
Form 8-K thereunder or Item 5(f) of Schedule 14A thereunder (or
any successor schedule, form, report or item thereto) that a
change in control of the Company has or may have occurred, or
will or may occur in the future, pursuant to any then-existing
contract or transaction; or
(iv) the individuals who constituted the Board at
the beginning of any period of two consecutive calendar years
cease for any reason to constitute at least a majority thereof
unless the nomination for election by the Company's shareholders
of each new member of the Board was approved by a vote of at
least two-thirds of the members of the Board still in office who
were members of the Board at the beginning of any such period.
In the event that any person described in Section 1(b)(ii) hereof
files an amendment to any report referred to in Section 1(b)(ii)
hereof that shows the beneficial ownership described in Section
1(b)(ii) hereof to have decreased to less than 30 percent, or in
the event that any anticipated change in control referred to in
Section 1(b)(iii) hereof does not occur following the filing with
the SEC of any report or proxy statement described in
Section 1(b)(iii) hereof because any contract or transaction
referred to in Section 1(b)(iii) hereof is canceled or abandoned,
the Committee may nullify the effect of Section 1(b)(ii) or
1(b)(iii) hereof, as the case may be, and reinstate the
provisions of Section 1(a) hereof by giving notice thereof to the
Optionee; provided, however, that any such action by the
Committee shall not prejudice any exercise of the Option that may
have occurred prior to the nullification and reinstatement. The
provisions of Section 1(b)(ii) hereof shall again become
automatically effective following any such nullification of the
provisions thereof and reinstatement of the provisions of Section
1(a) hereof in the event that any person described in Section 1(b)(ii)
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hereof files a further amendment to any report referred to in Section
1(b)(ii) hereof that shows the beneficial ownership described in Section
1(b)(ii) hereof to have again increased to 30 percent or more.
(c) Notwithstanding the provisions of Section 1(a)
hereof, the Option shall become immediately exercisable in full
if the Optionee should die or become permanently disabled (within
the meaning of the Company's long-term disability plan) while in
the employ of the Company or any subsidiary, or if the Optionee
should retire under a retirement plan of the Company or any
subsidiary (i) at or after age 62 or (ii) at an earlier age with
the consent of the Company.
(d) To the extent that the Option shall have become
exercisable in accordance with the terms of this agreement, it
may be exercised in whole or in part from time to time
thereafter.
2. Termination of Option. The Option shall terminate
automatically and without further notice on the earliest of the
following dates:
(a) thirty days after the date upon which the Optionee
ceases to be an employee of the Company or a subsidiary, unless
the cessation of his employment (i) is a result of his death,
disability or retirement with the Company's consent or (ii)
follows a change in control;
(b) five years after the date upon which the Optionee
ceases to be an employee of the Company or subsidiary (i) as a
result of his disability, (ii) as a result of his retirement with
the Company's consent, unless he is also a director of the
Company who continues to serve as such following his retirement
with the Company's consent, or (iii) following a change in
control, unless the cessation of his employment following a
change in control is a result of his death;
(c) one year after the date upon which the Optionee
ceases to be a director of the Company, but not less than five
years after the date upon which he ceases to be an employee of
the Company or a subsidiary, if (i) the cessation of his
employment is a result of his retirement with the
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Company's consent and (ii) he continues to serve as a director of the
Company following the cessation of his employment;
(d) one year after the date of the Optionee's death
regardless of whether he ceases to be an employee of the Company
or a subsidiary prior to his death (i) as a result of his
disability or retirement with the Company's consent or
(ii) following a change in control; or
(e) ten years after the Date of Grant.
For the purposes of this agreement: "retirement with
the Company's consent" shall mean the retirement of the Optionee
prior to age 62, if the Board or the Committee determines that
his retirement is for the convenience of the Company or a
subsidiary, or the retirement of the Optionee at or after age 62
under a retirement plan of the Company or a subsidiary;
"disability" shall mean that the Optionee has qualified for
disability benefits under the Company's Long-Term Disability
Program or any successor disability plan or program of the
Company.
In the event that the Optionee shall intentionally
commit an act that the Committee determines to be materially
adverse to the interests of the Company or a subsidiary, the
Option shall terminate at the time of that determination
notwithstanding any other provision of this agreement.
3. Payment of Exercise Price. The Exercise Price
shall be payable (a) in cash in the form of currency or check or
other cash equivalent acceptable to the Company, (b) by transfer
to the Company of nonforfeitable, unrestricted Common Shares that
have been owned by the Optionee for at least six months prior to
the date of exercise or (c) by any combination of the methods of
payment described in Sections 3(a) and 3(b) hereof.
Nonforfeitable, unrestricted Common Shares that are transferred
by the Optionee in payment of all or any part of the Exercise
Price shall be valued on the basis of their fair market value as
determined by the Committee from time to time. Subject to the
terms and conditions of Section 4 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
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any shares purchased hereunder to be delivered to the Optionee upon
payment of the Exercise Price in full.
4. 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.
5. Transferability and Exercisability.
(a) Except as provided in Section 5(b) below, the
Option or any interest in thereof 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 5(a) above, the Option or
any interest in thereof may be transferable by the Optionee,
without payment of consideration therefor, to any one or more
members of the immediate family of Optionee (as defined in
Rule 16a-1(e) under the Exchange Act), or to one or more trusts
established solely for the benefit of such members of the
immediate family or to partnerships in which the only partners
are such members of the immediate family of the Optionee;
provided, however, that such transfer will not be effective until
notice of such transfer is delivered to the Company; and
provided, further, however, that any such transferee is subject
to the same terms and conditions hereunder as the Optionee.
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6. Adjustments. The Committee shall make any
adjustments in the Exercise Price and the number or kind of
shares of stock or other securities covered by the Option 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 6(a) or 6(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.
7. 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 fair market value (as determined by the Committee from time
to time) on the date of such surrender.
8. Right to Terminate Employment. No provision of
this agreement shall limit in any way whatsoever any right that
the Company or a subsidiary may otherwise have to terminate the
employment of the Optionee at any time.
9. 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
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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.
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 the Optionee with
respect to the Option without the Optionee'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.
12. Governing Law. This agreement is made under, and
shall be construed in accordance with, the laws of the State of
Ohio.
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This agreement is executed by the Company as of this
16th day of December, 1999.
THE TIMKEN COMPANY
By /s/ Stephen A. Perry
Stephen A. Perry
Senior Vice President
Human Resources, Purchasing & Communications
The undersigned Optionee hereby acknowledges receipt of
an executed original of this agreement and accepts the Option
granted hereunder, subject to the terms and conditions of the
Plan and the terms and conditions hereinabove set forth.
/s/ James W. Griffith
Optionee
Date: 12/16/99
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