EXHIBIT 10.5
PERFORMANCE PERIOD 2004-2006
[DIEBOLD LOGO]
PERFORMANCE SHARE AGREEMENT
WHEREAS, ___________ (hereinafter called the "Grantee") is a
key associate of Diebold, Incorporated (hereinafter called the
"Corporation") or a Subsidiary; and
WHEREAS, the execution of a Performance Share Agreement
substantially in the form hereof has been authorized by a resolution of
the Compensation Committee (the "Committee") of the Board of Directors of
the Corporation (the "Board") duly adopted on February 11, 2004.
NOW, THEREFORE, subject to the terms and conditions of the
1991 Equity and Performance Incentive Plan (As Amended and Restated as of
February 7, 2001), and as further amended by Amendment No. 1 and Amendment
No. 2 (the "Plan"), and the terms and conditions described below, the
Corporation hereby grants to the Grantee as of February 11, 2004,
____________ Performance Shares, together with the opportunity to earn up
to an additional 100% 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 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) "Management Objectives" means 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.
(c) "Performance Period" means the period commencing with the
closing price of the Common Shares of the Corporation on January 28, 2004
through the time of the determination of the closing price on the New York
Stock Exchange on the day of the Corporation's annual earnings release in
January 2007.
(d) "Relative Total Shareholder Return" or "Relative TSR"
means the return, including reinvested dividends (or as determined at the
beginning of the Performance Period in such manner as is consistent with
the index), shareholders earn from investing in Common Shares, relative to
the return earned from an investment in each of the following: (i) a
benchmark peer group index comprised of the 14 companies set forth on
Exhibit A and (ii) all the companies comprising the Standard & Poors 400
Midcap Index at the closing prices of January 28, 2004.
(e) Capitalized terms used herein without definition shall
have the meanings assigned to them in the Plan.
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2. Management Objectives.
The Management Objectives for the Performance Period covered
by this Agreement are set forth on Exhibit B. The following applies with
respect to the Management Objectives.
(a) Each Management Objective shall be evaluated separately
with the total award determined through the matrix set forth on Exhibit B,
which correlates the Corporation's performance against each Management
Objective.
(b) In no event shall the Grantee be entitled to receive more
than 200% 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 in
accordance with the matrix, which correlates performance against both
measures, as set forth on Exhibit B. No additional Performance Shares
shall be earned for results in excess of the maximum level of results for
the Management Objectives. If results for a Management Objective are
attained at interim levels of performance on the matrix, a proportionate
number of Performance Shares shall be earned, as determined by
mathematical interpolation, as described by example in Exhibit B. If the
Corporation's performance with respect to both Management Objectives is
determined to be below the 10th percentile, the number of Performance
Shares earned, if any, shall be at the discretion of the Committee, except
in the case of Covered Employees.
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 determined by
the Committee in its sole discretion. 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 C 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.
6. Effect of Change in Control.
In the event of a Change in Control prior to the end of the
Performance Period, the Performance Shares granted hereby (and under any
prior Performance Share Agreements
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between the Corporation and the Grantee) shall be deemed to have been
earned in full and shall be immediately due and payable in the form of
Common Shares as soon as practicable following such Change in Control.
7. 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
Committee, 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.
8. 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 7 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 7 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.
9. 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 9(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:
(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 9(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.
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(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 9) 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.
(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.
10. 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.
11. 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 Committee,
shall adjust the Management Objectives and/or the number of Performance
Shares then held by the Grantee. Such adjustments made by the Committee
shall be conclusive and binding for all purposes of this Agreement.
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12. 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 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 Committee) 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
Committee, 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.
13. Employment Rights.
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. 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. Nothing in this Agreement will give
the Grantee any right to continue employment with the Corporation or any
Subsidiary, as the case may be, or interfere in any way with the right of
the Corporation or a Subsidiary to terminate the employment of the
Grantee.
14. Data Protection.
Information about the Grantee and the Grantee'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 Grantee
understands that such processing of this information may need to be
carried out by the Corporation 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 participation in the Plan in any one or more of the ways
referred to above.
15. 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 the Performance Shares without the Grantee's
consent.
16. 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.
17. 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 11th day of February, 2004.
DIEBOLD, INCORPORATED
Walden W. O'Dell
Chairman of the Board 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 Plan.
Date:___________________ ________________________________
[Signature]
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EXHIBIT A
DIEBOLD, INCORPORATED
- RELATIVE TSR - PEER GROUP INDEX (14 PEERS) -
CLOSING PRICE ON JANUARY 28, 2004 - TIME OF DETERMINATION THROUGH CLOSING
PRICE ON NEW YORK STOCK EXCHANGE ON DATE OF THE CORPORATION'S ANNUAL EARNINGS
RELEASE IN JANUARY 2007
NAME TICKER
---- ------
Affiliated Computer Services, Inc. ACS
The Bisys Group, Inc. BSG
Certegy Inc. CEY
Convergys Corporation CVG
Deluxe Corporation DLX
Dover Corporation DOV
Fiserv Inc. FISV
Harris Corporation HRS
NCR Corporation NCR
Pitney Bowes Inc. PBI
Sungard Data Systems Inc. SDS
Symbol Technologies, Inc. SBL
Thomas & Betts Corporation TNB
Varian Inc. VARI
EXHIBIT B
MANAGEMENT OBJECTIVES
(FOR RELATIVE TSR, CLOSING PRICE ON JANUARY 28, 2004 TIME OF DETERMINATION
THROUGH CLOSING PRICE ON NEW YORK STOCK EXCHANGE ON DATE OF THE CORPORATION'S
ANNUAL EARNINGS RELEASE IN JANUARY 2007)
Performance Shares will be earned based upon the Corporation's Relative
Total Shareholder Return (Relative TSR), ranking against each of the 14 Company
Peer Group and all Companies comprising the Standard & Poor's 400 Midcap Index
as of January 28, 2004, as set forth in the matrix below.
> or = 80TH 1.0 1.2 1.3 1.5 1.7 1.8 2.0
70TH 0.8 1.0 1.2 1.3 1.5 1.7 1.8
60TH 0.7 0.8 1.0 1.2 1.3 1.5 1.7
50TH 0.6 0.7 0.8 1.0 1.2 1.3 1.5
S&P 400 40TH 0.5 0.6 0.7 0.8 1.0 1.2 1.3
30TH 0.4 0.5 0.6 0.7 0.8 1.0 1.2
< or = 20TH 0.3 0.4 0.5 0.6 0.7 0.8 1.0
< or = 20TH 30TH 40TH 50TH 60TH 70TH > or = 80TH
PEERS
(1) The percentage of Performance Shares earned for interim levels of
performance shall be calculated by mathematical interpolation.
(2) If Diebold performance is below the 10th percentile in both measures,
payout, if any is at the discretion of the Compensation Committee of the
Board of Directors.
Examples:
Hypothetical Results
1. Target Shares 10,000
Performance 70th percentile of S&P 400; 80th
percentile of Peers
Payout 1.8 X 10,000 = 18,000 shares
2. Hypothetical Results
Target Shares 10,000
Performance 53rd percentile of S&P 400; 67th
percentile of peers
Payout 1.32 X 10,000 = 13,200 shares
DETAILS FOR EXAMPLE #2
- Peers Interpolation = ((1.3 - 1.2) X (3/10)) + 1.2 = 1.23
- Peers Interpolation = ((1.5 - 1.3) X (3/10)) + 1.3 = 1.36
- Peers & S&P 400 Interpolation = ((1.36-1.23) X (7/10)) + 1.23 = 1.32
EXHIBIT C
[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