EXHIBIT 10.4
PERFORMANCE PERIOD 2003-2005
[DIEBOLD LOGO]
PERFORMANCE SHARE AGREEMENT
WHEREAS, _____________ (hereinafter called the "Grantee") is a key
associate of Diebold, Incorporated (hereinafter called the "Corporation"); and
WHEREAS, the Board of Directors (the "Board"), pursuant to the 1991
Amended and Restated Equity and Performance Incentive Plan of the Corporation
(the "1991 Plan"), which is attached as Exhibit A to this Agreement encourages
executives of the Corporation to achieve the Management Objectives established
by the Compensation and Organization Committee of the Board of Directors (the
"Committee").
WHEREAS, the Committee adopted the Management Objectives for the
Performance Period (as defined below) on February 5, 2003.
NOW, THEREFORE, subject to the terms and conditions of the 1991 Plan
and the terms and conditions described below, the Corporation hereby grants to
the Grantee as of February 5, 2003, ___________ Performance Shares, together
with the opportunity to earn up to an additional 70% of such number of
Performance Shares for superior performance as described herein.
1. Definitions.
As used in this Agreement:
(a) A "Change in Control" shall be deemed to have occurred if any of
the following events shall occur:
(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, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 15% of more of either: (A) the then-outstanding shares of common
stock of the Corporation (the "Corporation Common Stock") or (B) the
combined voting power of the then-outstanding voting securities of the
Corporation entitled to vote generally in the election of directors
("Voting Stock"); provided, however, that for purposes of this subsection
(i), the following acquisition shall
not constitute a Change in Control (1) any acquisition directly from the
Corporation, (2) any acquisition by the Corporation, (3) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained by
the Corporation or any Subsidiary of the Corporation, 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 1(b); or
(ii) Individuals who, as to the date hereof, constitute the
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 Corporation'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 Corporation 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 Exchange Act) 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 Corporation (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 Corporation Common Stock and Voting Stock immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 50% 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 Corporation or all or substantially all of the
Corporation'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
Corporation Common Stock and Voting Stock of the Corporation , as the case
may be, (B) no Person (excluding any entity resulting from such Business
Combination or any
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employee benefit plan (or related trust) sponsored or maintained by the
Corporation or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 15% 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 Corporation of a
complete liquidation or dissolution of the Corporation.
(b) "Growth in Earnings Per Share" or "EPS" means the compound
annual growth rate (CAGR) in reported earnings per share, excluding
extraordinary items.
(c) "Management Objectives" means the Return on Total Capital,
Growth in Earning Per Share and Relative Total Shareholder Return goals
established by the Board for the Corporation for the Performance Period covered
by this Agreement as described in Section 2 of this Agreement.
(d) "Performance Period" means the period commencing January 1, 2003
and ending on December 31, 2005, except that solely with respect to the Relative
Total Shareholder Return goal, the term Performance Period shall mean February
1, 2003 through January 31, 2006.
(e) "Relative Total Shareholder Return" or "Relative TSR" means the
return, including reinvested dividends, shareholders earn from investing in
Company shares, relative to the return earned from an investment in a benchmark
peer group index comprised of the 13 companies (including the Corporation) set
forth on Exhibit B.
(f) "Return on Total Capital" or "ROTC" means the 3-year average of
net income before extraordinary items and special charges divided by the average
total capital employed. Any debt incurred in connection with an acquisition
consummated within the last 6 months of the Performance Period shall be excluded
from the calculation. Calculations shall be based on quarterly results, using
thirteen data points.
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(g) Capitalized terms used herein without definition shall have the
meanings assigned to them in the 1991 Plan.
2. Management Objectives.
The Management Objectives for the Performance Period covered by this
Agreement are set forth on Exhibit C. The following applies with respect to the
Management Objectives.
(a) Each Management Objective shall be evaluated separately with the
total award determined as the sum of the amounts determined under each of the
three separate Management Objectives.
(b) Each Management Objective shall have an equal weighting.
(c) Notwithstanding that the number of Performance Shares earned for
achievement of the maximum level of performance of any individual Management
Objective can amount to 200% of the number of Performance Shares earned for
achievement of the target level of performance, in no event shall the Grantee be
entitled to receive more than 170% of the Performance Shares granted hereunder.
3. Grant of Performance Shares.
The Corporation hereby grants to the Grantee the number of
Performance Shares specified above, which may be earned by the Grantee during
the Performance Period as set forth in Section 4 of this Agreement.
4. Earned Shares.
The Performance Shares granted hereby shall be earned based on the
level of the Corporation's results with respect to each of the Management
Objectives established for the Performance Period covered by this Agreement. The
number of Performance Shares earned shall be determined based on the level of
results of the Management Objectives as shown in Exhibit C.
In no event shall any Performance Shares be earned if results fall
below the threshold level of results for each Management Objective. In addition,
no additional Performance Shares shall be earned for results in excess of the
maximum level of results for any Management Objective. If results for a
Management Objective shall have been attained over the threshold level, but
under the target level, or over the threshold level and under the
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maximum level, a proportionate number of Performance Shares shall be earned, as
determined by mathematical interpolation and rounded up to the nearest whole
percent.
Once determined, the percentage of Performance Shares earned for
each Management Objective shall be used to determine the aggregate percentage
earned. The percentages earned for all of the Management Objectives so
calculated shall be added together and multiplied by the number of Performance
Shares granted hereby to determine the number of Performance Shares to be paid
out to the Grantee for the Performance Period covered by this Agreement, subject
to the limit set forth in Section 2(c) of this Agreement. For example, results
at the target level of Return on Total Capital would result in an earned
percentage of 25%. Results at the target level of Growth in Earning Per Share
would result in an earned percentage of 50%. With respect to Relative TSR, if
the Company ranks 1st out of 13 peer companies, the percentage earned would be
50%. The total percentages added together would be 125%. Since this percentage
is less than the 170% limit, the number of Performance Shares granted hereby
would then be multiplied by 125%. Any fractional share resulting from the
application of the total percentage would be rounded up to the nearest whole
share.
5. Payment of Awards.
Payment shall be made in the form of the Corporation's Common
Shares, cash or a combination of Common Shares and cash, as recommended by the
Committee in its sole discretion with approval by the Board. Final awards shall
be paid, less applicable taxes, as soon as practicable after the receipt of
audited financial statements relating to the last fiscal year of the Performance
Period covered by this Agreement and the determination by the Committee of the
level of attainment of each Management Objective, except as otherwise agreed to
by the Corporation and the Grantee.
Any payment of awards due pursuant to this Agreement to a deceased
Grantee shall be paid to the beneficiary designated by the Grantee by the latest
Designation of Death Beneficiary in the form attached as Exhibit D hereto filed
by the Grantee with the Corporation. If no such beneficiary has been designated
or survives the Grantee, payment shall be made to the Grantee's legal
representative. A beneficiary designation may be changed or revoked by a Grantee
at any time, provided the change or revocation is filed with the Corporation.
Prior to payment, the Corporation shall only have an unfunded and
unsecured obligation to make payment of earned awards to the Grantee.
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6. Effect of Death, Disability or Retirement.
If the Grantee's employment with the Corporation or one of its
Subsidiaries should terminate because of death, permanent total disability or
retirement under a retirement plan (including, without limitation, any
supplemental retirement plan) of the Corporation or a Subsidiary at or after the
earliest voluntary retirement age provided for in any such retirement plan or
should retire at an earlier age with the consent of the Board, prior to the
payment of an award, the extent to which the Performance Shares granted hereby
shall be deemed to have been earned shall be determined as if the Grantee's
employment had not terminated and the result shall be multiplied by a fraction,
the numerator of which is the number of full months the Grantee was employed
during the Performance Period and the denominator of which is the total number
of months in the Performance Period; provided, however, the Board, upon the
recommendation of the Committee may, in its discretion, increase payments made
under the foregoing circumstances up to the full amount payable for service
throughout the Performance Period.
7. Effect of Other Terminations of Employment; Detrimental Activity.
In the event that the Grantee's employment shall terminate prior to
the payment of an award in a manner other than any specified in Section 6 hereof
or if the Grantee shall at any time engage in any Detrimental Activity (as
defined below), the Grantee shall forfeit any rights he or she may have in any
Performance Shares that have not been paid out to the Grantee prior to the time
of such termination; provided, however, that the Board, upon recommendation of
the Committee, may order payment of an award in an amount determined as in
Section 6 hereof for termination owing to death, disability or retirement, under
circumstances which warrant such exceptional treatment in the judgment of the
Committee and the Board.
8. Detrimental Activity.
If the Grantee, either during employment by the Corporation or a
Subsidiary or within one year after termination of such employment, shall engage
in any Detrimental Activity, and the Board shall so find, and (except for any
Detrimental Activity described in Section 8(d)(v)(B)) if the Grantee shall not
have ceased all Detrimental Activity within 30 days after notice of such finding
given within one year after commencement of such Detrimental Activity, the
Grantee shall:
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(a) Return to the Corporation all Performance Shares that the
Grantee has not disposed of and an amount equal to all cash paid out pursuant to
this Agreement within a period of one year prior to the date of the commencement
of such Detrimental Activity, and
(b) With respect to any Performance Shares that the Grantee has
disposed of that were paid out pursuant to this Agreement within a period of one
year prior to the date of the commencement of such Detrimental Activity, pay to
the Corporation in cash the value of such Performance Shares on the date such
Performance Shares were paid out.
(c) To the extent that the amounts referred to in Section 8(a) and
(b) above are not paid to the Corporation, the Corporation may set off the
amounts so payable to it against any amounts that may be owing from time to time
by the Corporation or a Subsidiary to the Grantee, whether as wages, deferred
compensation or vacation pay or in the form of any other benefit or for any
other reason.
(d) For purposes of this Agreement, the term "Detrimental Activity"
shall include:
(i) Engaging in any activity, as an employee, principal,
agent, or consultant for another entity, and in a capacity, that directly
competes with the Corporation or any Subsidiary in any actual product,
service or business activity (or in any product, service or business
activity which was under active development while the Grantee was employed
by the Corporation if such development is being actively pursued by the
Corporation during the one-year period first referred to in this Section
8) for which the Grantee has had any direct responsibility and direct
involvement during the last two years of his or her employment with the
Corporation or a Subsidiary, in any territory in which the Corporation or
a Subsidiary manufactures, sells, markets, services, or installs such
product or service, or engages in such business activity.
(ii) Soliciting any employee of the Corporation or a
Subsidiary to terminate his or her employment with the Corporation or a
Subsidiary.
(iii) The disclosure to anyone outside the Corporation or a
Subsidiary, or the use in other than the Corporation or a Subsidiary's
business, without prior written authorization from the Corporation, of any
confidential, proprietary or trade secret information or material relating
to the business of the Corporation and its Subsidiaries, acquired by the
Grantee during his or her employment with the Corporation or its
Subsidiaries or while acting as a consultant for the Corporation or its
Subsidiaries thereafter.
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(iv) The failure or refusal to disclose promptly and to assign
to the Corporation upon request all right, title and interest in any
invention or idea, patentable or not, made or conceived by the Grantee
during employment by the Corporation and any Subsidiary, relating in any
manner to the actual or anticipated business, research or development work
of the Corporation or any Subsidiary or the failure or refusal to do
anything reasonably necessary to enable the Corporation or any Subsidiary
to secure a patent where appropriate in the United States and in other
countries.
(v) Activity that results in Termination for Cause. For the
purposes of this Section, "Termination for Cause" shall mean a
termination:
(A) due to the Grantee's willful and continuous gross neglect
of his or her duties for which he or she is employed, or
(B) due to an act of dishonesty on the part of the Grantee
constituting a felony resulting or intended to result, directly or
indirectly, in his or her gain for personal enrichment at the
expense of the Corporation or a Subsidiary.
(vi) Any other conduct or act determined to be injurious,
detrimental or prejudicial to any significant interest of the Corporation
or any Subsidiary unless the Grantee acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best
interests of the Corporation.
9. Shares Non-Transferable.
The Performance Shares granted hereby that have not yet
been paid out are not transferable other than by will or the laws of
descent and distribution.
10. Dilution and Other Adjustments.
In the event of any change in the aggregate number of outstanding
Common Shares by reason of any stock dividend or stock split, recapitalization,
reclassification, merger, consolidation, combination or exchange of shares or
other similar corporate change, then the Board, upon the recommendation of the
Committee, shall adjust the Management Objectives and/or the number of
Performance Shares then held by the Grantee. Such adjustments made by the Board
shall be conclusive and binding for all purposes of this Agreement.
11. Withholding Taxes.
To the extent that the Corporation is required to withhold federal,
state, local or foreign taxes in connection with the delivery of Common Shares
to the Grantee or other person
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under this Agreement, and the amounts available to the Corporation for such
withholding are insufficient, it shall be a condition to the receipt of such
delivery that the Grantee or such other person will make arrangements
satisfactory to the Corporation for payment of the balance of such taxes
required to be withheld, which arrangements (in the discretion of the Board) may
include relinquishment of a portion of such benefit. In no event, however, shall
the Corporation accept Common Shares for payment of taxes in excess of required
tax withholding rates, except that, in the discretion of the Board, the Grantee
or such other person may surrender Common Shares owned for more than 6 months to
satisfy any tax obligations resulting from any such transaction.
12. Employment Rights.
Neither this Agreement nor any action taken hereunder shall be
construed as giving the Grantee any right to be retained in the employ of the
Corporation, nor shall any action taken hereunder be construed as entitling the
Corporation to the services of the Grantee for any period of time. For purposes
of this Agreement, the continuous employ of the Grantee with the Corporation or
a Subsidiary shall not be deemed interrupted, and the Grantee shall not be
deemed to have ceased to be an associate of the Corporation or any Subsidiary,
by reason of the transfer of his or her employment among the Corporation and its
Subsidiaries.
13. Amendments.
Any amendment to the 1991 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 the Performance Shares without the Grantee's consent.
14. Validity.
If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, 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, unenforceable or otherwise illegal shall
be reformed to the extent (and only to the extent) necessary to make it
enforceable, valid and legal.
15. 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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Executed as of the 5th day of February, 2003.
DIEBOLD, INCORPORATED
____________________________________
Walden W. O'Dell
Chairman of the Board, President and
Chief Executive Officer
The undersigned hereby acknowledges receipt of an executed original of
this Performance Share Agreement and accepts the Performance Shares granted
thereunder on the terms and conditions set forth therein and in the 1991 Plan.
Date:___________________ __________________________________
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EXHIBIT B
DIEBOLD, INCORPORATED
- RELATIVE TSR - PEER GROUP LIST (13 PEERS) -
FEBRUARY 1, 2003 - JANUARY 31, 2006
NAME TICKER
---- ------
AFFILIATED COMPUTER SVCS-A ACS
AMERICAN MANAGEMENT SYSTEMS AMSY
BELL & HOWELL COMPANY (PROQUEST) PQE
CHECK POINT SYSTEMS CHKP
DELUXE CORP DLX
DIEBOLD, INCORPORATED DBD
FISERV INC FISV
HARRIS CORP HRS
NATIONAL DATA CORP (NDC HEATH) NDC
NCR CORPORATION NCR
SUNGARD DATA SYSTEMS SDS
SYMBOL TECHNOLOGIES INC SBL
THOMAS & BETTS CORP TNB
VARIAN INC VARI
EXHIBIT B-1
RELATIVE TOTAL SHAREHOLDER RETURN POTENTIAL
(FEBRUARY 1, 2003-JANUARY 31, 2006 PERFORMANCE PERIOD)
13 PEERS 12 PEERS 11 PEERS OR FEWER
-------- -------- -----------------
1. 50.00% 50.00% 50.00%
2. 46.00 45.00 43.75
3. 41.25 40.00 39.00
4. 37.50 35.00 125.00
5. 33.25 30.00 25.00
6. 29.25 25.00 21.00
7. 25.00 21.00 16.75
8. 21.00 16.75 12.50
9. 16.75 12.50 0
10. 12.50 0 0
11. 0 0 0
12. 0 0
13. 0
EXHIBIT C
MANAGEMENT OBJECTIVES
JANUARY 1, 2003 - DECEMBER 31, 2005
(FOR RELATIVE TSR, FEBRUARY 1, 2003 THROUGH JANUARY 31, 2006)
1. One-quarter of the Performance Shares (plus up to an additional 25%)
will be earned based upon the Corporation's Return on Total Capital
(ROTC), according to the following schedule:
Level of Achievement ROTC % Performance Shares Earned (1)
- -------------------- ---- ---------------------------
Threshold 13.0% 12.5%
Target 13.4% 25.0%
Maximum 14.2% 50.0%
2. One-half of the Performance Shares (plus up to an additional 25%)
will be earned based upon the Corporation's Growth in Earnings Per
Share (EPS - CAGR), according to the following schedule:
Level of Achievement EPS - CAGR % Performance Shares Earned (1)
- -------------------- ---------- ---------------------------
Threshold 7.5% 25%
Target 12.0% 50%
Maximum 15.0% 100%
3. One-quarter of the Performance Shares (plus up to an additional 25%)
will be earned based upon the Corporation's Relative Total
Shareholder Return (Relative TSR), according to the following
schedule:
TSR RANK (13 Peers) % Performance Shares Earned
------------------- ---------------------------
Threshold 10th(2) 12.5%
Target 7th(3) 25.0%
Maximum 1st 50.0%
(1) The percentage of Performance Shares earned for interim levels of
performance shall be calculated by mathematical interpolation.
(2) If the number of companies in the peer group drops to 12, as a result of
merger, consolidation or other cause acknowledged by the Committee*, the
threshold TSR Rank shall change to 9th. If it drops to 11 or fewer, the
threshold TSR Rank shall change to 8th.
(3) If the number of companies in the peer group drops to 12 or fewer as a
result of merger, consolidation or other cause acknowledged by the
Committee*, the target TSR Rank shall change to 6th. If it drops to 11 or
fewer, the target TSR Rank shall change to 5th.
(4) The following table illustrates the changes described in notes (2) and (3)
above.
Rank 13 Peers 12 Peers 11 Peers or fewer
- ---- -------- -------- -----------------
1 50% 50% 50%
2
3
4
5 25%
6 25%
7 25%
8 12.5%
9 12.5%
10 12.5%
11
12
13
- ----------
* (In the event of bankruptcy or liquidation, the company remains in the peer
group and is counted)
EXHIBIT D
[DIEBOLD LOGO]
DESIGNATION OF DEATH BENEFICIARY
I, the undersigned Grantee, do hereby designate the following person
or persons as my Death Beneficiary for the Performance Share Grant under the
Diebold, Incorporated, 1991 Amended and Restated Equity and Performance
Incentive Plan (the "Plan") and elect that any awards that may, after my death,
be payable under said awards be paid to my Death Beneficiary in accordance with
this designation.
NAME AND PRESENT ADDRESS RELATIONSHIP TO ME
____% to ______________________ ________________
______________________
______________________
______________________
____% to ______________________ ________________
______________________
______________________
______________________
____% to ______________________ _________________
______________________
______________________
______________________
If more than one person is designated above and not all of them are
in existence at the time of such payment, then such payment shall be made
prorata to the survivor or survivors of them at the time of such payment.
If none of the persons designated above is in existence at the time
of such payment, then such payment shall be made in accordance with the terms of
the Plan.
Subject to the terms of the Plan, I reserve the right to change or
revoke this designation by written instrument signed by me and filed in
accordance with the terms of such Plan.
Date: _________________ ____________________________
Grantee