SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
(X) | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2002 |
OR
( ) | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from .........to ......... |
Commission file number 1-4879
Diebold, Incorporated
Registrants telephone number, including area code: (330) 490-4000
Ohio
(State or other jurisdiction of incorporation or organization)
34-0183970
(IRS Employer Identification Number)
5995 Mayfair Road, PO Box 3077, North Canton, Ohio
(Address of principal executive offices)
44720-8077
(Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuers classes of Common Shares, as of the latest practicable date.
Class
Common Shares $1.25 Par Value |
Outstanding at November 11, 2002
72,074,380 Shares |
1
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
INDEX
Page No. | ||||||
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PART I. FINANCIAL INFORMATION
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ITEM 1. Financial Statements
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Condensed Consolidated Balance Sheets -
September 30, 2002 and December 31, 2001
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3 | |||||
Condensed Consolidated Statements of Income -
Three Months and Nine Months Ended September 30, 2002 and 2001
|
4 | |||||
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2002 and 2001
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5 | |||||
Notes to Condensed Consolidated Financial Statements
|
6 | |||||
ITEM 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
|
13 | |||||
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
|
23 | |||||
ITEM 4. Disclosure Controls and Procedures
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23 | |||||
PART II. OTHER INFORMATION
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||||||
ITEM 6. Exhibits and Reports on Form 8-K
|
24 | |||||
SIGNATURES
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28 | |||||
CERTIFICATIONS
|
29 | |||||
INDEX TO EXHIBITS
|
31 |
2
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
(Dollars in thousands)
(Unaudited ) | |||||||||||
September 30, 2002 | December 31, 2001 | ||||||||||
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|
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ASSETS
|
|||||||||||
Current assets
|
|||||||||||
Cash and cash equivalents
|
$ | 85,363 | $ | 73,768 | |||||||
Short-term investments
|
10,476 | 51,901 | |||||||||
Trade receivables less allowances of $7,677 and $7,054, respectively
|
459,042 | 387,201 | |||||||||
Notes receivable
|
1,550 | 5,870 | |||||||||
Inventories
|
251,976 | 235,923 | |||||||||
Finance receivables
|
7,076 | 20,602 | |||||||||
Deferred income taxes
|
53,320 | 48,539 | |||||||||
Prepaid expenses and other current assets
|
108,734 | 97,792 | |||||||||
|
|
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|||||||||
Total current assets
|
977,537 | 921,596 | |||||||||
Securities and other investments
|
64,008 | 65,430 | |||||||||
Property, plant and equipment, at cost
|
462,866 | 413,053 | |||||||||
Less accumulated depreciation and amortization
|
253,942 | 222,855 | |||||||||
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|
|
|||||||||
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208,924 | 190,198 | |||||||||
Deferred income taxes
|
8,179 | 2,141 | |||||||||
Finance receivables
|
16,314 | 31,382 | |||||||||
Goodwill
|
251,067 | 275,685 | |||||||||
Other assets
|
116,996 | 134,651 | |||||||||
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|
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$ | 1,643,025 | $ | 1,621,083 | |||||||
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LIABILITIES AND SHAREHOLDERS EQUITY
|
|||||||||||
Current liabilities
|
|||||||||||
Notes payable
|
$ | 236,695 | $ | 229,703 | |||||||
Accounts payable
|
96,270 | 117,541 | |||||||||
Estimated income taxes
|
32,545 | 32,584 | |||||||||
Accrued insurance
|
15,670 | 14,439 | |||||||||
Deferred income
|
116,059 | 81,011 | |||||||||
Other current liabilities
|
124,759 | 151,910 | |||||||||
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|
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|||||||||
Total current liabilities
|
621,998 | 627,188 | |||||||||
Bonds payable
|
20,800 | 20,800 | |||||||||
Pensions and other benefits
|
30,634 | 28,425 | |||||||||
Postretirement and other benefits
|
33,915 | 32,178 | |||||||||
Other long-term liabilities
|
16,488 | | |||||||||
Minority interest
|
12,587 | 9,382 | |||||||||
Shareholders equity
|
|||||||||||
Preferred Shares, no par value, authorized 1,000,000 shares,
none issued
Common shares, par value $1.25, authorized 125,000,000 shares; issued 72,936,272 and 72,195,600 shares, respectively; outstanding 72,064,909 and 71,356,670 shares, respectively |
91,170 | 90,245 | |||||||||
Additional capital
|
128,943 | 103,390 | |||||||||
Retained earnings
|
846,770 | 805,182 | |||||||||
Treasury shares, at cost (871,363 and 838,930 shares, respectively)
|
(29,946 | ) | (28,724 | ) | |||||||
Accumulated other comprehensive loss
|
(124,213 | ) | (60,446 | ) | |||||||
Other
|
(6,121 | ) | (6,537 | ) | |||||||
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|
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Total shareholders equity
|
906,603 | 903,110 | |||||||||
|
|
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$ | 1,643,025 | $ | 1,621,083 | |||||||
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|
|
See accompanying notes to condensed consolidated financial statements.
3
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands except for per share amounts)
Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
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2002 | 2001 | 2002 | 2001 | |||||||||||||||
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Net Sales
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Products
|
$ | 288,653 | $ | 235,240 | $ | 717,303 | $ | 638,757 | ||||||||||
Services
|
241,146 | 209,387 | 697,031 | 613,338 | ||||||||||||||
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529,799 | 444,627 | 1,414,334 | 1,252,095 | ||||||||||||||
Cost of sales
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Products
|
198,757 | 154,050 | 477,823 | 404,494 | ||||||||||||||
Special charges
|
| 113 | | 4,626 | ||||||||||||||
Services
|
171,489 | 154,520 | 504,895 | 452,061 | ||||||||||||||
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|
|
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370,246 | 308,683 | 982,718 | 861,181 | ||||||||||||||
Gross Profit
|
159,553 | 135,944 | 431,616 | 390,914 | ||||||||||||||
Selling and administrative expense
|
75,602 | 69,607 | 216,021 | 204,743 | ||||||||||||||
Research, development and engineering expense
|
16,892 | 17,025 | 48,577 | 47,289 | ||||||||||||||
Realignment charges
|
| 1,516 | | 31,317 | ||||||||||||||
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|
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92,494 | 88,148 | 264,598 | 283,349 | ||||||||||||||
Operating Profit
|
67,059 | 47,796 | 167,018 | 107,565 | ||||||||||||||
Other income (expense)
|
||||||||||||||||||
Investment income
|
1,970 | (17,031 | ) | 6,084 | (10,117 | ) | ||||||||||||
Interest expense
|
(3,038 | ) | (2,795 | ) | (8,976 | ) | (9,701 | ) | ||||||||||
Miscellaneous, net
|
(85 | ) | (5,853 | ) | 1,558 | (10,512 | ) | |||||||||||
Minority interest
|
(1,082 | ) | (826 | ) | (3,374 | ) | (3,188 | ) | ||||||||||
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Income before taxes
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64,824 | 21,291 | 162,310 | 74,047 | ||||||||||||||
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Taxes on income
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20,744 | 7,026 | 51,940 | 24,435 | ||||||||||||||
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Income before cumulative effect of a change in accounting principle
|
$ | 44,080 | $ | 14,265 | $ | 110,370 | $ | 49,612 | ||||||||||
Cumulative effect of a change in accounting principle, net of taxes
|
| | 33,147 | | ||||||||||||||
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Net income
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$ | 44,080 | $ | 14,265 | $ | 77,223 | $ | 49,612 | ||||||||||
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Basic weighted-average shares outstanding
|
72,049 | 71,595 | 71,951 | 71,578 | ||||||||||||||
Diluted weighted-average shares outstanding
|
72,308 | 71,868 | 72,272 | 71,802 | ||||||||||||||
Basic earnings per share:
|
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Income before cumulative effect of a change in accounting principle, net
of taxes
|
$ | 0.61 | $ | 0.20 | $ | 1.53 | $ | 0.69 | ||||||||||
Cumulative effect of a change in accounting principle, net of taxes
|
| | ( 0.46 | ) | | |||||||||||||
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Net income
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$ | 0.61 | $ | 0.20 | $ | 1.07 | $ | 0.69 | ||||||||||
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Diluted earnings per share:
|
||||||||||||||||||
Income before cumulative effect of a change in accounting principle, net
of taxes
|
$ | 0.61 | $ | 0.20 | $ | 1.53 | $ | 0.69 | ||||||||||
Cumulative effect of a change in accounting principle, net of taxes
|
| | ( 0.46 | ) | | |||||||||||||
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Net income
|
$ | 0.61 | $ | 0.20 | $ | 1.07 | $ | 0.69 | ||||||||||
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Cash dividends paid per Common Share
|
$ | 0.165 | $ | 0.160 | $ | 0.495 | $ | 0.480 |
See accompanying notes to condensed consolidated financial statements.
4
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended September 30, | |||||||||||
|
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2002 | 2001 | ||||||||||
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|
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Cash flow from operating activities:
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Net income
|
$ | 77,223 | $ | 49,612 | |||||||
Adjustments to reconcile net income to cash
provided by operating activities:
|
|||||||||||
Minority share of income
|
3,374 | 3,188 | |||||||||
Depreciation and amortization
|
46,346 | 58,190 | |||||||||
Deferred income taxes
|
(6,958 | ) | 3,626 | ||||||||
Loss on disposal of assets, net
|
123 | 3,587 | |||||||||
Loss on disposal of investments, net
|
| 20,000 | |||||||||
Loss on sale of investments, net
|
1,098 | 813 | |||||||||
Cumulative effect of accounting change
|
38,859 | | |||||||||
Cash provided (used) by changes in certain assets and liabilities:
|
|||||||||||
Trade receivables
|
(75,841 | ) | (32,906 | ) | |||||||
Inventories
|
(17,422 | ) | (67,025 | ) | |||||||
Prepaid expenses and other current assets
|
(14,142 | ) | (15,404 | ) | |||||||
Accounts payable
|
(23,045 | ) | 30,597 | ||||||||
Certain other assets and liabilities
|
(466 | ) | 36,731 | ||||||||
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|
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Net cash provided by operating activities
|
29,149 | 91,009 | |||||||||
Cash flow from investing activities:
|
|||||||||||
Payments for acquisitions, net of cash acquired
|
(3,682 | ) | (5,000 | ) | |||||||
Proceeds from maturities of investments
|
56,171 | 78,073 | |||||||||
Proceeds from sales of investments
|
2,909 | 9,636 | |||||||||
Payments for purchases of investments
|
(18,874 | ) | (55,817 | ) | |||||||
Capital expenditures
|
(31,332 | ) | (50,721 | ) | |||||||
Decrease (increase) in net finance receivables
|
27,546 | (11,652 | ) | ||||||||
Increase in certain other assets
|
(11,357 | ) | (58,215 | ) | |||||||
|
|
|
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Net cash provided (used) by investing activities
|
21,381 | (93,696 | ) | ||||||||
Cash flow from financing activities:
|
|||||||||||
Dividends paid
|
(35,648 | ) | (34,361 | ) | |||||||
Notes payable borrowings
|
507,262 | 201,390 | |||||||||
Notes payable repayments
|
(516,166 | ) | (255,146 | ) | |||||||
Net (payments) proceeds from securitization
|
(1,292 | ) | 71,160 | ||||||||
Distribution of affiliates earnings to minority interest holder
|
(185 | ) | (250 | ) | |||||||
Issuance of Common Shares
|
6,656 | 2,084 | |||||||||
Repurchase of Common Shares
|
(1,222 | ) | (8,811 | ) | |||||||
|
|
|
|||||||||
Net cash used by financing activities
|
(40,595 | ) | (23,934 | ) | |||||||
Effect of exchange rate changes on cash
|
1,660 | (3,269 | ) | ||||||||
|
|
|
|||||||||
Increase (decrease) in cash and cash equivalents
|
11,595 | (29,890 | ) | ||||||||
Cash and cash equivalents at the beginning of the period
|
73,768 | 65,184 | |||||||||
|
|
|
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Cash and cash equivalents at the end of the period
|
$ | 85,363 | $ | 35,294 | |||||||
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
(Unaudited)
(In thousands except for per share amounts)
1. | CONSOLIDATED FINANCIAL STATEMENTS |
The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto together with managements discussion and analysis of financial condition and results of operations contained in the companys Annual Report on Form 10-K for the year ended December 31, 2001. In addition, some of the companys statements in this Form 10-Q report may be considered forward-looking and involve risks and uncertainties that could significantly impact expected results. A discussion of these risks and uncertainties is contained in the managements discussion and analysis of financial condition and results of operations in this Form 10-Q. The results of operations for the nine-month period ended September 30, 2002 are not necessarily indicative of results to be expected for the full year.
The company has reclassified the presentation of certain prior-year information to conform with the current presentation format.
The basic and diluted earnings per share computations in the condensed
consolidated statements of income are based on the weighted-average number of
shares outstanding during each period reported. The following data show the
amounts used in computing earnings per share and the effect on the
weighted-average number of shares of potentially dilutive common stock.
2.
EARNINGS PER SHARE
Three Months Ended
Nine Months Ended
Septemeber 30,
September 30,
2002
2001
2002
2001
$
44,080
$
14,265
$
77,223
$
49,612
72,049
71,595
71,951
71,578
259
273
321
224
72,308
71,868
72,272
71,802
$
0.61
$
0.20
$
1.53
$
0.69
(0.46
)
$
0.61
$
0.20
$
1.07
$
0.69
$
0.61
$
0.20
$
1.53
$
0.69
(0.46
)
$
0.61
$
0.20
$
1.07
$
0.69
1,173
1,288
541
1,313
6
DIEBOLD, INCORPORATED AND SUBSIDIARIES
Inventories are valued at the lower of cost or market applied on a first-in,
first-out basis. Cost is determined on the basis of actual cost.
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In thousands except for per share amounts)
3.
INVENTORIES
September 30, 2002
December 31, 2001
$
69,164
$
58,551
147,799
127,250
35,013
50,122
$
251,976
$
235,923
4.
OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss is reported separately from retained earnings and additional paid-in-capital in the Consolidated Balance Sheets. Items considered to be other comprehensive loss include adjustments made for foreign currency translation (under SFAS No. 52), pensions (under SFAS No. 87) and unrealized holding gains and losses on available-for-sale securities (under SFAS No. 115).
Components of other accumulated comprehensive loss consist of the following:
As of September 30,
2002
2001
($118,719
)
($77,375
)
(3,623
)
(1,995
)
(1,871
)
(2,189
)
($124,213
)
($81,559
)
Components of comprehensive income (loss) consist of the following:
As of September 30,
2002
2001
$
77,223
$
49,612
(63,908
)
(69,935
)
141
1,034
$
13,456
($19,289
)
The majority of the translation adjustment losses incurred during 2002 and 2001, respectively, was due to the devaluation of the Brazilian Real. The Real has devalued by 67.9 percent from December 31, 2001 to September 30, 2002 and by 36.6 percent from December 31, 2000 to September 30, 2001.
7
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In thousands except for per share amounts)
5. | NEW ACCOUNTING STANDARDS |
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 142 Goodwill and Other Intangible Assets , which for the company, was effective January 1, 2002. SFAS 142 establishes accounting and reporting standards for acquired goodwill and other intangible assets in that goodwill and intangible assets that have indefinite useful lives will not be amortized but rather will be tested at least annually for impairment. Intangible assets that have finite useful lives will continue to be amortized over their useful lives. The nine month period of 2001 earnings per share of $0.69 included goodwill amortization of $7,728, net of tax. Had SFAS 142 been in effect as of January 1, 2001 and goodwill was not amortized, earnings per share would have been $0.23 for the three month period ended September 30, 2001 and $0.80 for the nine month period ended September 30, 2001.
Under SFAS 142, the company was required to test all existing goodwill for impairment as of January 1, 2002, on a reporting unit basis. A reporting unit is the operating segment. SFAS 142 requires that two or more component-level reporting units with similar economic characteristics be combined into a single reporting unit.
A fair value approach is used to test goodwill for impairment. An impairment charge is recognized for the amount, if any, by which the carrying amount of goodwill exceeds its implied fair value. Fair values of reporting units and the related implied fair values of their respective goodwill were established using discounted cash flows. When available and as appropriate, comparative market multiples were used to corroborate results of the discounted cash flows.
In June 2002, the company completed the transitional goodwill impairment test in accordance with SFAS 142, which resulted in a non-cash charge of $38,859 ($33,147 after tax, or $0.46 per share) and is reported in the caption Cumulative effect of a change in accounting principle. All of the charge related to the companys Latin American division. The primary factors that resulted in the impairment charge was the difficult economic environment in the Latin American market. No impairment charge was appropriate under the FASBs previous goodwill impairment standard, which was based on undiscounted cash flows.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations, which addresses the accounting and financial reporting for legal obligations and costs associated with the retirement of tangible long-lived assets. The provisions of SFAS No. 143 will be effective for the companys financial statement for the year beginning January 1, 2003. The company does not expect the adoption of this standard to have a significant impact on its financial position, earnings or cash flows.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long- Lived Assets . This statement supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of , and the accounting and reporting provisions of Accounting Principles Board (APB) Opinion No. 30, Reporting Results of Operations Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions .
8
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In thousands except for per share amounts)
SFAS No. 144 requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, and it broadens the presentation of discontinued operations to include disposal transactions. Although retaining many of the fundamental recognition and measurement provisions of SFAS No. 121, the statement significantly changes the criteria that would have to be met to classify an asset as held-for-sale. This distinction is important because assets held-for-sale are stated at lower of their fair values or carrying amounts and depreciation is no longer recognized. The company has adopted the provisions of SFAS No. 144 as of January 1, 2002 and has determined that SFAS No. 144 has no impact on its financial position and results of operations.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as defined in Issue 94-3 was recognized at the date of an entitys commitment to an exit plan. SFAS No. 146 also establishes that fair value is the objective for initial measurement of the liability. The provisions for this statement are effective for exit or disposal activities that are initiated after December 31, 2002. The company has elected early adoption as it pertains to the asset sale of the 1200 cash dispensers to Cardtronics. See footnote 6 for further information regarding the sale.
On October 4, 2002 the FASB issued an exposure draft , Accounting for Stock-Based Compensation Transition and Disclosure , which would amend SFAS 123, Accounting for Stock-Based Compensation . As part of this proposed amendment, companies electing not to expense stock options would be required to provide the pro forma net income and earnings per share information not only annually but also on a quarterly basis. While continuing to review the matter, the company has no current plans to begin expensing stock options.
The company complies with Statement of Financial Accounting Standards No. 123 Accounting for Stock Based Compensation by providing disclosure in the annual filing of the proforma effects of issuing stock options to employees and directors. The company expects the proforma effect of issued stock options, will approximate $0.05 per share for December 31, 2002.
6. | ACQUISITIONS/DIVESTITURES |
On January 22, 2002, the company announced the acquisition of Global Election Systems Inc. (GES), now known as Diebold Election Systems, Inc., a manufacturer and supplier of electronic voting terminals and solutions. GES was acquired in a combination of cash and stock for a total purchase price of $24,667. A cash payment of $4,845 was made in January 2002 with the remaining purchase price being paid with company stock valued at $19,822. The acquisition has been accounted for as a purchase business combination and, accordingly, the purchase price has been allocated to identifiable tangible and intangible assets acquired and liabilities assumed, based upon their respective fair values, with the excess allocated to goodwill. Goodwill and other intangibles acquired in the transaction amounted to $34,075.
On July 15, 2002, the company announced the acquisition of Sersi Italia, a company specializing in multi- vendor customer service and closed-circuit television monitoring of automated teller machines (ATMs) for banks and post offices throughout Italy. The purchase price was $2,000 and was paid in cash in July 2002. The acquisition has been accounted for as a purchase business combination and, accordingly, the purchase price has been allocated to identifiable tangible and intangible assets acquired and liabilities assumed, based
9
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In thousands except for per share amounts)
upon their respective fair values, with any excess allocated to goodwill. Goodwill and other intangibles acquired in the transaction amounted to $2,049.
On September 30, 2002, the company finalized the asset sale of 1,200 cash dispensers that it owned and operated to Cardtronics. The agreement included the sale of hardware and related placement contracts. The sale resulted in a gain of $1,023, net of tax or approximately $0.01 per share.
7. | CORPORATE OWNED LIFE INSURANCE (COLI) CLAIM |
As previously disclosed in prior filings, the company continues to dispute a claim by the IRS concerning the deductibility of interest on corporate owned life insurance (COLI). Since management believes that the companys facts and circumstances are meritorious and continues to vigorously contest the IRS claim, the company has made no provision for any possible earnings impact. However, if unsuccessful, a pre-tax charge of approximately $35,300 and $29,300 after-tax would result. This amount represents tax of approximately $17,600 and interest of approximately $17,700. The company expects the claim to be resolved in 2003. Now that the IRS has completed its audit for years 1990 through 1996, the company was required to pay the taxes from those years and then pursue a refund for this amount. Therefore, the company has made payments totaling approximately $31,300 in cash of which approximately $19,400 was paid in July 2002 for taxes and interest related to these years. There are two years remaining (1997 and 1998) under audit, which could result in an additional cash payment of up to $4,000, including interest. No other years after 1998 are subject to this claim.
8. | OTHER LONG-TERM LIABILITIES |
In July 2002, the company entered into a multi-year information technology outsourcing arrangement with Deloitte Consulting to transform specific business processes, administer application development, and provide related project management, maintenance and support. As part of this arrangement, the company purchased an Oracle global information technology platform, which was reflected in property, plant and equipment at a cost of $24,863. The financing arrangement is included in both other current liabilities and other long-term liabilities with a term of 5 years and an interest rate of 5.75 percent.
9. | SEGMENTS |
In determining reportable segments, the company considers its operating and management structure and the types of information subject to regular review by its executive management team. Information subject to regular review by the companys management team is aggregated in three reporting segments consisting of its three main sales channels: Diebold North America (DNA), Diebold International (DI) and Other, which combines several of the companys smaller sales channels including Diebold Election Systems Inc. These sales channels are evaluated based on Revenue from customers and operating profit contribution to the total corporation. A reconciliation between segment information and the Condensed Consolidated Financial Statements is also disclosed. All income and expense items below operating profit are not allocated to the segments and are not disclosed. Revenue by geography and revenue by product and service solution are also disclosed.
10
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In thousands except for per share amounts)
The DNA segment sells financial and retail systems and also services financial, retail and educational customers in the United States and Canada. The DI segment sells and services financial and retail systems over the remainder of the globe. The segment called Other sells voting solutions and miscellaneous parts and products to other customers. Each of the sales channels buys the goods it sells from the companys manufacturing plants through inter-company sales that are eliminated on consolidation. Each year, inter-company pricing is agreed upon which drives sales channel operating profit contribution. As permitted under SFAS 131, certain information not routinely used in the management of these segments, information not allocated back to the segments or information that is impractical to report is not shown. Items not disclosed are as follows: interest revenue, interest expense, amortization, equity in the net income of investees accounted for by the equity method, income tax expense or benefit, extraordinary items, significant noncash items and total assets.
11
DIEBOLD, INCORPORATED AND SUBSIDIARIES
Total Revenue by Geography
Total Revenue by Product and Service Solutions
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In thousands except for per share amounts)
For the three month period
For the nine month period
ending September 30:
ending September 30:
2002
2001
2002
2001
$
242,858
$
251,786
$
717,549
$
712,001
118,880
90,621
308,046
238,731
55,200
2,398
103,400
18,728
416,938
344,805
1,128,995
969,460
36,013
27,335
86,887
69,340
1,215
663
2,268
1,860
37,228
27,998
89,155
71,200
75,508
71,802
195,923
211,280
125
22
261
155
75,633
71,824
196,184
211,435
$
529,799
$
444,627
$
1,414,334
$
1,252,095
For the three month period
For the nine month period
ending September 30:
ending September 30:
2002
2001
2002
2001
$
176,736
$
194,705
$
476,004
$
518,642
177,643
156,218
524,355
473,979
354,379
350,923
1,000,359
992,621
58,380
40,314
140,836
108,505
61,840
50,992
169,739
132,241
120,220
91,306
310,575
240,746
474,599
442,229
1,310,934
1,233,367
55,200
103,400
529,799
442,229
1,414,334
1,233,367
220
2,668
2,178
16,060
$
529,799
$
444,627
$
1,414,334
$
1,252,095
12
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
Material Changes in Financial Condition
The companys financial position provides it with sufficient resources to meet
projected future capital expenditures, dividend and working capital
requirements. However, if the need were to arise, the companys strong
financial position should ensure the availability of adequate additional
financial resources.
Total Assets
Total assets for the third quarter ended September 30, 2002 were $1,643,025,
representing an increase of $21,942 or 1.4 percent from December 31, 2001.
Short-term Investments
Short-term investments decreased by $41,425 or 79.8 percent due to certain
municipal bonds maturing as of quarter end. The majority of the proceeds were
used to pay down notes payable during the quarter.
Trade Receivables
Trade receivables less allowances increased by $71,841 or 18.6 percent
primarily due to increased voting solutions revenue and a combination of
increased security sales and net service contract billings that occurred at the
end of the quarter.
Inventories
Inventories increased $16,053 or 6.8 percent, as the company prepared to
fulfill large orders associated with Diebold Election Systems Inc. as well as
positioning itself for fourth quarter business.
Finance Receivables
Net short-term and long-term finance receivables decreased by $28,594 or 55.0
percent primarily due to the securitizations of certain finance receivables
that occurred during the first quarter of 2002.
Property, Plant and Equipment
Property, plant and equipment, net increased by $18,726 or 9.8 percent
primarily due to the purchase of an Oracle global information technology
platform during third quarter of 2002.
13
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
Goodwill
Goodwill decreased by a net $24,618 or 8.9 percent. The change in goodwill was
due principally to the following: the January 2002 acquisition of the voting
solutions provider, Global Election Systems Inc., now known as Diebold Election
Systems Inc.; the impairment charge made in accordance with SFAS 142 of
$38,859; and the impact of foreign currency translation. The impairment charge
was related to the goodwill recorded in the companys Latin America division.
Current Liabilities
Total current liabilities were $621,998, representing a decrease of $5,190 or
0.8 percent from December 31, 2001.
Notes Payable
Notes payable increased by $6,992 or 3.0 percent due to short-term cash
requirements.
At September 30, 2002, the company had outstanding bank credit lines
approximating $121,095, EUR 108,142 (translation $106,094) and 17,500
Australian dollars (translation $9,506), with an additional $152,425 available
under the credit line agreements.
Deferred Income
Deferred income is largely related to service contracts and is affected by
customer service billings in advance of the period in which the service will be
performed. Deferred income is recognized in income on a straight-line basis
over the contract period. The company typically bills customers annually,
semi-annually and quarterly, depending upon the terms of the contract. The
majority of the billings occur on an annual basis with the next largest volume
occurring on a semi-annual basis. As such, deferred income increased by
$35,048 or 43.3 percent primarily due to the combination of quarterly billings
that occurred at the end of the third quarter and an increase in the customer
service base.
Other Current Liabilities
Other current liabilities decreased by $27,151 or 17.9 percent, primarily due
to the repayment of cash borrowed to fund the owner-operated retail ATMs. The
majority of these units were sold to Cardtronics on September 30, 2002.
Bonds Payable
The company has outstanding $20,800 of Industrial Development Revenue Bonds.
The proceeds of the bonds issued in 1997 were used to finance the construction
of three manufacturing facilities located in the United States.
14
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
Other Long-term Liabilities
Other long-term liabilities increased by $16,488 or 100.0 percent due to the
financing arrangement that was entered into during the third quarter related to
the purchase of the Oracle global information technology platform.
Minority Interests
Minority interests of $12,587 represented the minority interest in the following entities:
Shareholders Equity
Shareholders equity was $906,603, representing an increase of $3,493 or 0.4
percent over December 31, 2001. Shareholders equity per Common Share at
September 30, 2002 decreased to $12.58 from $12.66 at December 31, 2001.
Shareholders equity was negatively impacted by the increase in accumulated
other comprehensive loss of $63,767 or 105.5 percent, which was due to
translation adjustment losses arising principally from the devaluation of the
Brazilian Real. Partially offsetting the decrease in shareholders equity was
an increase in retained earnings, which is the combination of year to date net
income less cash dividends paid out during the nine month period of 2002. The
third quarter cash dividend of $0.165 per share was paid on September 6, 2002
to shareholders of record on August 16, 2002. On October 9, 2002, the fourth
quarter cash dividend of $0.165 per share was declared payable on December 6,
2002 to shareholders on record as of November 15, 2002. Diebold, Incorporated
shares are listed on the New York Stock Exchange under the symbol of DBD.
Managements Analysis of Cash Flows
Operating Activities
During the nine month period ended September 30, 2002, the company generated
$29,149 in cash from operating activities, compared with $91,009 for the
comparable period in 2001. In addition to net income of $77,223 adjusted for
$82,842 of non-cash items which includes depreciation, amortization, minority
interest, and the cumulative effect of an accounting change, net cash provided
by operating activities for the period was negatively impacted primarily by the
increase in trade receivables, inventories, prepaid expenses and other current
assets and decrease in accounts payable. The increase in certain other assets
and liabilities negatively impacted cash provided by operating activities.
The increase in trade receivables was primarily due to increased voting
solutions revenue and a combination of increased security sales and net service
contract billings that occurred at the end of the quarter. The increase in
inventories was primarily driven by several large orders associated with
Diebold Election Systems Inc. as well as actions to position the company to
service fourth quarter business.
15
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
The change in certain other assets and liabilities year over year was primarily
the result of the increase in estimated income tax and the use of the
realignment reserve. The increase in estimated income tax was driven by higher
income during the period. The realignment program was completed in 2001,
resulting in the use of the reserve established in the first quarter of 2001.
Investing Activities
During the nine month period ended September 30, 2002, the company generated
$21,381 in cash from investing activities, compared with a use of cash of
$93,696 for the comparable period in 2001. The change was primarily due to a
decrease in the amount that the company invested in marketable securities
during the period, a decrease in capital expenditures and a decline in the
level of securitizations in the current year versus the prior year.
Results of Operations
Third Quarter 2002 Comparison to Third Quarter 2001
Revenue
Net sales for the third quarter of 2002 totaled $529,799 and were $85,172 or
19.2 percent higher than the comparable period in 2001. The increase in net
sales occurred in the security and voting solutions markets within The Americas
as well as within the Asia-Pacific region. Total product revenue increased by
$53,413 or 22.7 percent primarily due to growth in the voting solution market.
Service revenue increased by $31,759 or 15.2 percent primarily due to an
increase in our core service customer base.
Gross Margin
The total gross margin was 30.1 percent, down from 30.6 percent in the third
quarter 2001. Excluding special charges, total gross margin was 31.8 percent in
the third quarter 2001.
Product gross margin was 31.1 percent, down from 34.5 percent in the third
quarter 2001. Despite the decrease in total product gross margins, margins for
the financial self service product increased during the quarter. The reason
for the decrease in total product gross margins was a change in product mix,
with higher security and voting sales in the current period, which carry lower
gross margins.
Service gross margin was 28.9 percent compared to 26.2 percent in the third
quarter 2001. Excluding special charges, service gross margin compared
favorably to the 28.7 percent from the third quarter 2001.
16
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
Operating Expenses
Total operating expenses were 17.4 percent, down from 19.8 percent from the
third quarter 2001. Excluding realignment and MedSelect, third quarter 2001
operating expenses were 18.4 percent. MedSelect was sold to Medecorx in the
third quarter of 2001.
Net Income
Net income was 8.3 percent of revenue compared to 3.2 percent in the third
quarter 2001. Excluding realignment, special charges and MedSelect, third
quarter 2001 net income was 8.0 percent of revenue.
Third quarter 2001 net income included goodwill amortization of $2,564, net of
tax. Had SFAS 142 been in effect as of January 1, 2001, goodwill would not
have been amortized and earnings per share in the third quarter of 2001 would
have increased from the $0.20 reported to $0.23.
Nine Month 2002 Comparison to Nine Month 2001
Revenue
Net sales for the nine month period of 2002 totaled $1,414,334 and were
$162,239 or 13.0 percent higher than the comparable period in 2001. The
increase in net sales occurred primarily in the security and voting solutions
markets within The Americas along with increased growth in the Asia Pacific
market.
Total product revenue increased by $78,546 or 12.3 percent primarily due to
growth in the voting business. Service revenue increased by $83,693 or 13.6
percent primarily due to an increase in the companys core service customer
base and approximately $36 million of additional revenue from the Bank of
America service contract.
Gross Margin
The total gross margin was 30.5 percent, down from 31.2 percent in the nine
month period of 2001. Excluding special charges, total gross margin was 32.0
percent in the nine month period of 2001. Product gross margin decreased to
33.4 percent from 36.7 percent in the nine month period of 2001 (excluding
special charges) due to geographic and product mix changes, including higher
sales of security and voting solutions, which carry a lower gross margin.
Service gross margin increased to 27.6 percent from 26.3 percent for the
comparable period in 2001.
Operating Expenses
Total operating expenses were 18.7 percent, down from 22.6 percent from the
nine month period of 2001. Excluding realignment and MedSelect, the nine month
period 2001 operating expenses were 19.4 percent. This improvement was due to
the streamlining of operations undertaken in 2001.
17
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
Net Income
Net income before cumulative effect of a change in accounting principle was 7.8
percent of revenue compared to 4.0 percent in the nine month period of 2001.
Excluding realignment, special charges and MedSelect, the nine month period of
2001 net income was 7.7 percent of revenue. Net income was 5.5 percent of
revenue in the nine month period of 2002, which includes a cumulative effect of
a change in accounting principle of $33,147, net of taxes. The change in
accounting principle was the result of adopting Statement of Financial
Accounting Standards No. 142,
Goodwill and Other Intangible Assets
(SFAS 142).
The amortization of
goodwill was discontinued effective January 1, 2002 and the transitional
impairment test of goodwill was completed in June 2002 resulting in the
impairment charge.
The nine month period of 2001 net income included goodwill amortization of
$7,728, net of tax. Had SFAS 142 been in effect as of January 1, 2001,
goodwill would not have been amortized and earnings per share in the nine month
period of 2001 would have increased from the $0.69 reported to $0.80.
Segment Information
Third Quarter Results
Diebold North America (DNA) customer revenue of $291,781 for the third
quarter ended September 30, 2002 increased by $36,509, or 14.3 percent from the
same period in 2001. The higher revenue levels were due to an increase in the
security solutions and service markets. DNA operating profits for the same
period were $53,072, which represented an increase of $3,412 or 6.9 percent
from the same period in 2001.
Diebold International (DI) customer revenue was $183,250 for the third
quarter of 2002, which represented a decrease of $7,809 or 4.1 percent from the
same period in 2001. The decrease was due to lower spending in the Europe,
Middle East and Africa and in the Latin America market. Revenue in the Asia
Pacific region continued to increase from the prior period. While activity in
the Europe, Middle East and Africa market was down, results did benefit in
total from a strengthening in the Euro. Results in Latin America, on the other
hand, were adversely impacted from a weakening in local currency, primarily in
the Brazilian Real, which has devalued by 67.9 percent since December 31, 2001.
DI operating profit for the period was $17,861, a decrease of $200 or 1.1
percent from the same period in 2001 due to geographic and product mix changes.
Other revenue was $54,768 for the third quarter of 2002, which represented an
increase of $56,472. This increase was primarily due to the increase in the
voting solutions market.
Nine Month Period
Diebold North America (DNA) customer revenue of $812,486 for the nine month
period ended September 30, 2002 increased by $79,049, or 10.8 percent from the
same period in 2001. The higher revenue levels were due to an increase in the
security solutions and service. DNA operating profits for the same period were
$133,866, which represented an increase of $11,447 or 9.4 percent from the same
period in 2001.
18
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
Diebold International (DI) customer revenue was $498,296 for the nine month
period ended September 30, 2002 which represented a decrease of $12,930 or 2.5
percent from the same period in 2001. The decrease was
primarily attributable to the decrease in Europe, Middle East and Africa due to
weaker IT spending after the prior year Euro conversion. DI operating profit
for the same period was $41,552, a decrease of $2,220 or 5.1 percent from the
same period in 2001 due to geographic and product mix changes.
Other revenue was $103,552 for the nine month period ended September 30, 2002,
which represented an increase of $96,120. This increase was primarily due to
the increase in the voting solutions market.
Significant Accounting Policies
The consolidated financial statements of the company are prepared in conformity
with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the periods presented. Management of the company uses
historical information and all available information to make these estimates
and assumptions. Actual amounts could differ from these estimates and
different amounts could be reported using different assumptions and estimates.
The companys significant accounting policies are described in the Notes to
Consolidated Financial Statements. Management believes that of its significant
accounting policies, its policies concerning trade receivables and revenue
recognition, inventory and deferred income are the most critical. Additional
information regarding these policies is included below.
Trade Receivables and Revenue Recognition
Revenue is generally recognized based on the terms of the sales contract. The
majority of sales contracts for products are written with selling terms F.O.B.
factory. However, certain sales contracts may have other terms such as
F.O.B. destination or upon installation. The company recognizes revenue on
these contracts when the appropriate event has occurred. The equipment that is
sold is usually shipped and installed within one year. Installation that
extends beyond one year is ordinarily attributable to causes not under the
control of the company. Service revenue is recognized in the period service is
performed and subject to the individual terms of the service contract.
The concentration of credit risk in the companys trade receivables with
respect to the banking and financial services industries is substantially
mitigated by the companys credit evaluation process, reasonably short
collection terms and the geographical dispersion of sales transactions from a
large number of individual customers. The company maintains allowances for
potential credit losses, and such losses have been minimal and within
managements expectations. The allowance for doubtful accounts is estimated
based on various factors including revenue, historical credit losses and
current trends.
19
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
Inventories
Inventories are valued at the lower of cost or market applied on a first-in,
first-out basis. Cost is determined on the basis of actual cost. As the
company launches new products and rationalizes its product offerings, inventory
related to discontinued product is written down to salvage value.
Deferred Income
Deferred income is largely related to service contracts and is recognized for
customer service billings in advance of the period in which the service will be
performed and is recognized in income on a straight-line basis over the
contract period.
20
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
Outlook
The following statements are based on current expectations. These statements
are forward-looking and actual results may differ materially. These statements
do not include the potential impact of any future mergers, acquisitions,
disposals or other business combinations.
The global efficiencies that Diebold has experienced by balancing
manufacturing, product rationalization, organizational alignment and process
improvements will continue to benefit the company into the fourth quarter.
Taking these factors into consideration, expectations for the fourth quarter
and year include:
Looking forward to 2003, while business unit forecasts have yet to be finalized
and visibility is difficult given uncertain global economic conditions,
management believes that through continued focus on speed, global efficiencies,
creative solutions to customer needs, the company will continue to gain market
share. The company also expects positive gains in the global voting market as a
result of our successful acquisition and integration of Diebold Elections
Systems. The following expectations do not include the potential impact of any
future mergers, acquisitions, disposals, other business combinations or any
impact from an unfavorable ruling
on the Company Owned Life Insurance claim by the IRS. Given these factors
management has the following expectations:
21
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
Forward-Looking Statement Disclosure
In the companys written or oral statements, the use of the words believes,
anticipates, expects and similar expressions is intended to identify
forward-looking statements that have been made and may in the future be made by
or on behalf of the company, including statements concerning future operating
performance, the companys share of new and existing markets, and the companys
short- and long-term revenue and earnings growth rates. Although the company
believes that its outlook is based upon reasonable assumptions regarding the
economy, its knowledge of its business, and on key performance indicators,
which impact the company, there can be no assurance that the companys goals
will be realized. The company is not obligated to report changes to its
outlook. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The
companys uncertainties could cause actual results to differ materially from
those anticipated in forward-looking statements. These include, but are not
limited to:
22
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
RESULTS OF OPERATIONS
As of September 30, 2002
(Unaudited)
(Dollars in thousands except for per share amounts)
Table of Contents
FORM 10-Q
RESULTS OF OPERATIONS (Continued)
As of September 30, 2002
(Unaudited)
(Dollars in thousands except for per share amounts)
Table of Contents
FORM 10-Q
RESULTS OF OPERATIONS (Continued)
As of September 30, 2002
(Unaudited)
(Dollars in thousands except for per share amounts)
Diebold Financial Equipment Company, Ltd (China), owned by the Aviation Industries of China;
Diebold OLTP Systems, C.A (Venezuela), owned by OLTP ATM Systems, C.A.;
Diebold Colombia, owned by Richardson and Company Ltd;
Diebold Services, S.A. (France), owned by Serse S.A and Solymatic S.A.
Table of Contents
FORM 10-Q
RESULTS OF OPERATIONS (Continued)
As of September 30, 2002
(Unaudited)
(Dollars in thousands except for per share amounts)
Table of Contents
FORM 10-Q
RESULTS OF OPERATIONS (Continued)
As of September 30, 2002
(Unaudited)
(Dollars in thousands except for per share amounts)
Table of Contents
FORM 10-Q
RESULTS OF OPERATIONS (Continued)
As of September 30, 2002
(Unaudited)
(Dollars in thousands except for per share amounts)
Table of Contents
FORM 10-Q
RESULTS OF OPERATIONS (Continued)
As of September 30, 2002
(Unaudited)
(Dollars in thousands except for per share amounts)
Table of Contents
FORM 10-Q
RESULTS OF OPERATIONS (Continued)
As of September 30, 2002
(Unaudited)
(Dollars in thousands except for per share amounts)
Table of Contents
FORM 10-Q
RESULTS OF OPERATIONS (Continued)
As of September 30, 2002
(Unaudited)
(Dollars in thousands except for per share amounts)
Fourth quarter revenue will increase in the mid single digit range vs. prior year including voting. Voting is not expected to
contribute materially to revenue in the fourth quarter.
Fourth quarter EPS to be in the range of $0.66 to $0.72.
Depreciation and amortization to be approximately $17 to $18 million for the fourth quarter.
Full year revenue growth of approximately 10 percent.
For 2002, operating profit margins, excluding pension income, for the self-service business will be approximately 14 percent,
while the security and voting business operating profit margins will be approximately 8 percent.
Full year EPS to be in the range of $2.19 to $2.25, before the effect of the cumulative accounting change, which represents
12-15 percent EPS growth over 2001.
A full year effective tax rate of approximately 32.0 percent.
2003 revenue growth of 8 to 10 percent, on a fixed rate basis.
Depreciation and amortization in the range of $70 to $75 million.
Pension expense will negatively impact earnings per share by approximately $0.08 to $0.09 versus 2002.
Effective tax rate of 32 percent.
2003 earnings per share is expected to be in the range of $2.32 to $2.45.
This represents a 10 to 13 percent increase in EPS excluding pension
impact.
Table of Contents
FORM 10-Q
RESULTS OF OPERATIONS (Continued)
As of September 30, 2002
(Unaudited)
(Dollars in thousands except for per share amounts)
competitive pressures, including pricing pressures and technological developments;
changes in the companys relationships with customers, suppliers, distributors and/or partners in its business ventures;
changes in political, economic or other factors such as currency exchange rates, inflation rates, recessionary or expansive
trends, taxes and regulations and laws affecting the worldwide business in each of the companys operations, including Brazil,
where a significant portion of the companys revenue is derived;
acceptance of the companys product and technology introductions in the marketplace;
unanticipated litigation, claims or assessments;
ability to reduce costs and expenses and improve internal operating efficiencies; and
variation in consumer demand for self-service technologies, products and services.
Table of Contents
FORM 10-Q
As of September 30, 2002
(Unaudited)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company is exposed to foreign currency exchange rate risk inherent in our international operations denominated in currencies other than the U.S. Dollar. The companys risk management strategy uses derivative financial instruments such as forwards to hedge certain foreign currency exposures. The intent is to offset gains and losses that occur on the underlying exposures, with gains and losses on the derivative contracts hedging these exposures. The company does not enter into derivatives for trading purposes.
The company performed a sensitivity analysis assuming a hypothetical 10% adverse movement in foreign exchange rates applied to the hedging contracts and underlying exposures describe above. As of September 30, 2002, the analysis indicated that these hypothetical market movements would not materially affect the results of operations. Actual gains and losses in the future may differ materially from that analysis based on changes in the timing and amount of foreign currency exchange rate movements and our actual exposures and hedges.
ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES
The company evaluated the design and operation of its disclosure controls and procedures to determine whether they are effective in ensuring that the disclosure of required information is timely made in accordance with the Exchange Act and the rules and forms of the Securities and Exchange Commission. This evaluation was made under the supervision and with the participation of management, including the companys principal executive officer and principal financial officer within the 90-day period prior to the filing of this Quarterly Report on Form 10-Q. The principal executive officer and principal financial officer have concluded, based on their review, that the companys disclosure controls and procedures, as defined at Exchange Act Rules 13a-14(c) and 15d-14(c), are effective to ensure that information required to be disclosed by the company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. No significant changes were made to the companys internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation.
23
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
24
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
25
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
26
DIEBOLD, INCORPORATED AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
27
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
PART II. OTHER INFORMATION
(a)
Exhibits (Continued)
*10.9
Long-Term Executive
Incentive Plan incorporated by reference to Exhibit 10.9 of
Registrants Annual Report on Form 10-K for the year ended December 31, 1993.
(Commission File No. 1-4879)
*10.10
(i)
1992 Deferred Incentive Compensation Plan (as amended and restated ).
*10.11
Annual Incentive Plan incorporated by reference to Exhibit 10.11 to
Registrants Annual Report on Form 10-K for the year ended December 31, 2000.
(Commission File No. 1-4879)
*10.13
(i)
Forms of Deferred Compensation Agreement and Amendment No. 1 to Deferred
Compensation Agreement incorporated by reference to Exhibit 10.13 to
Registrants Annual Report on Form 10-K for the year ended December 31, 1996.
(Commission File No. 1-4879)
*10.13
(ii)
Section 162(m) Deferred Compensation Agreement (as amended and restated January
29, 1998) incorporated by reference to Exhibit 10.13 (ii) to Registrants
Form 10-Q for the quarter ended March 31, 1998. (Commission File No. 1-4879)
*10.14
Deferral of Stock Option Gains Plan incorporated by reference to Exhibit 10.14
of Registrants Annual Report on Form 10-K for the year ended December 31, 1998.
(Commission File No. 1-4879)
*10.15
Employment Agreement
with Walden W. ODell incorporated by reference to Exhibit
10.15 of Registrants Annual Report on Form 10-K for the year ended December 31,
1999. (Commission File No. 1-4879)
*10.16
Separation Agreement with Gerald F. Morris incorporated by reference to
Exhibit 10.16 of Registrants Annual Report on Form 10-K for the year ended
December 31, 1999. (Commission File No. 1-4879)
10.17
(i)
Loan Agreement dated as of December 1, 1999 among Diebold, Incorporated, the
Subsidiary Borrowers, the Lenders and Bank One, Michigan as Agent incorporated
by reference to Exhibit 10.17 of Registrants Annual Report on Form 10-K for the
year ended December 31, 2000. (Commission File No. 1-4879)
10.17
(ii)
First Amendment to Loan Agreement dated as of December 1, 1999 among Diebold,
Incorporated, the Subsidiary Borrowers, the Lenders and Bank One, Michigan as
Agent incorporated by reference to Exhibit 10.17 (ii) of Registrants Annual
Report on Form 10-K for the year ended December 31, 2000. (Commission File No.
1-4879)
10.17
(iii)
Second Amendment to Loan Agreement dated as of December 1, 1999 among Diebold,
Incorporated, the Subsidiary Borrowers, the Lenders and Bank One, Michigan as
Agent incorporated by reference to Exhibit 10.17 (iii) of Registrants Annual
Report on Form 10-K for the year ended December 31, 2000. (Commission File No.
1-4879)
*
Reflects management contract or other compensatory arrangement required to be
filed as an exhibit pursuant to Item 14(c) of this report.
Table of Contents
FORM 10-Q
PART II. OTHER INFORMATION
(a)
Exhibits (Continued)
10.17
(iv)
Third Amendment to Loan Agreement dated as of March 30, 2001 among Diebold,
Incorporated, the Subsidiary Borrowers, the Lenders and Bank One, Michigan as
Agent incorporated by reference to Exhibit 10.17 (iv) of Registrants Form 10-Q
for the quarter ended June 30, 2001. (Commission File No. 1-4879)
10.17
(v)
Fourth Amendment to Loan Agreement dated as of February 13, 2002 among Diebold,
Incorporated, the Subsidiary Borrowers, the Lenders and Bank One, Michigan as
Agent incorporated by reference to Exhibit 10.17 (v) of Registrants Annual
Report on Form 10-K for the year ended December 31, 2001. (Commission File No.
1-4879)
10.17
(vi)
Fifth Amendment to Loan Agreement dated as of May 24, 2002 among Diebold,
Incorporated, the Subsidiary Borrowers, the Lenders and Bank One, Michigan as
Agent incorporated by reference to Exhibit 10.17 (vi) of Registrants Form 10-Q
for the quarter ended June 30, 2002. (Commission File No. 1-4879)
*10.18
(i)
Retirement and
Consulting Agreement with Robert W. Mahoney incorporated by
reference to Exhibit 10.18 of Registrants Annual Report on Form 10-K for the
year ended December 31, 2000.
*10.18
(ii)
Extension of Retirement and Consulting Agreement with Robert W. Mahoney.
*10.19
Employment Agreement with Wesley B. Vance incorporated by reference to Exhibit
10.19 of Registrants Annual Report on Form 10-K for the year ended December 31,
2000. (Commission File No. 1-4879)
10.20
(i)
Transfer and Administration Agreement by and among DCC Funding LLC, Diebold
Credit Corporation, Diebold, Incorporated, Receivables Capital Corporation and
Bank of America, National Association incorporated by reference to Exhibit
10.20 (i) on Registrants Form 10-Q for the quarter ended March 31, 2001.
(Commission File No. 1-4879)
10.20
(ii)
Amendment No. 1 to the Transfer and Administration Agreement by and among DCC
Funding LLC, Diebold Credit Corporation, Diebold, Incorporated, Receivables
Capital Corporation and Bank of America, National Association incorporated by
reference to Exhibit 10.20 (ii) on Registrants
Form 10-Q for the quarter ended March 31, 2001. (Commission File No. 1-4879)
99.1
Certification of Principal Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
99.2
Certification of Principal Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
*
Reflects management contract or other compensatory arrangement required to be
filed as an exhibit pursuant to Item 14(c) of this report.
Table of Contents
FORM 10-Q
PART II. OTHER INFORMATION
(b)
Reports on Form 8-K.
Registrant filed a Form 8-K on August 7, 2002 which included sworn statements
from the Registrants Chief Executive Officer and Chief Financial Officer as
required by the Securities and Exchange Commission Order No. 4-460, dated June
27, 2002.
Registrant filed a Form 8-K on August 9, 2002 disclosing that the Registrants
Chief Executive Officer and Chief Financial Officer each certified Form 10-Q for
the period ended June 30, 2002, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
Table of Contents
FORM 10-Q
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DIEBOLD, INCORPORATED | ||||
|
||||
(Registrant) | ||||
Date : November 12, 2002 | By: | /s/ Walden W. ODell | ||
|
||||
Walden W. ODell
Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) |
||||
Date : November 12, 2002 | By: | /s/ Gregory T. Geswein | ||
|
||||
Gregory T. Geswein
Senior Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) |
28
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
I, Walden W. ODell, Chairman of the Board, President and Chief Executive Officer, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Diebold, Incorporated; | ||
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; | ||
4. | The Registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have: |
a) | designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; | ||
b) | evaluated the effectiveness of the Registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and | ||
c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on the evaluation as of the Evaluation Date; |
5. | The Registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrants auditors and the audit committee of Registrants board of directors (or persons performing the equivalent function): |
a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrants ability to record, process, summarize and report financial data and have identified for the Registrants auditors any material weaknesses in internal controls; and | ||
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal controls; and |
6. | The Registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: November 12, 2002 | ||||
DIEBOLD, INCORPORATED
(Registrant) |
||||
By: | /s/ Walden W. ODell | |||
|
||||
Walden W. ODell
Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) |
29
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
CERTIFICATIONS (continued)
I, Gregory T. Geswein, Senior Vice President and Chief Financial Officer, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Diebold, Incorporated; | ||
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; | ||
4. | The Registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have: |
a) | designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; | ||
b) | evaluated the effectiveness of the Registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and | ||
c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on the evaluation as of the Evaluation Date; |
5. | The Registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrants auditors and the audit committee of Registrants board of directors (or persons performing the equivalent function): |
a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrants ability to record, process, summarize and report financial data and have identified for the Registrants auditors any material weaknesses in internal controls; and | ||
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal controls; and |
6. | The Registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: November 12, 2002 | ||||
DIEBOLD, INCORPORATED
(Registrant) |
||||
By: | /s/ Gregory T. Geswein | |||
|
||||
Gregory T. Geswein
Senior Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) |
30
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
31
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
INDEX TO EXHIBITS (continued)
32
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
INDEX TO EXHIBITS (continued)
33
DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
INDEX TO EXHIBITS (continued)
EXHIBIT NO. | PAGE NO. | |||||||||
|
|
|||||||||
10.20 | (i) | Transfer and Administration Agreement by and among DCC Funding LLC, Diebold Credit Corporation, Diebold, Incorporated, Receivables Capital Corporation and Bank of America, National Association incorporated by reference to Exhibit 10.20 (i) on Registrants Form 10-Q for the quarter ended March 31, 2001. (Commission File No. 1-4879) | | |||||||
10.20 | (ii) | Amendment No. 1 to the Transfer and Administration Agreement by and among DCC Funding LLC, Diebold Credit Corporation, Diebold, Incorporated, Receivables Capital Corporation and Bank of America, National Association incorporated by reference to Exhibit 10.20 (ii) on Registrants Form 10-Q for the quarter ended March, 31, 2001. (Commission File No. 1-4879) | | |||||||
99.1 | Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. | 39 | ||||||||
99.2 | Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. | 40 | ||||||||
* | Reflects management contract or other compensatory arrangement required to be filed as an exhibit pursuant to Item 14(c) of this report. |
34
EXHIBIT 10.5 (i)
DIEBOLD, INCORPORATED
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN I
AS AMENDED AND RESTATED JULY 1, 2002
DIEBOLD, INCORPORATED
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN I
(AS AMENDED AND RESTATED JULY 1, 2002)
TABLE OF CONTENTS
PAGE ARTICLE I PLAN...................................................................................................1 ARTICLE II PURPOSE OF THE PLAN...................................................................................1 ARTICLE III DEFINITIONS..........................................................................................1 (1) "Annual Compensation"............................................................................1 (2) "Beneficiary"....................................................................................1 (3) "Board"..........................................................................................1 (4) "Change in Control...............................................................................1 (5) "Change in Control Benefit"......................................................................1 (6) "Committee"......................................................................................1 (7) "Company"........................................................................................2 (8) "Company Service"................................................................................2 (9) "Disability Benefit".............................................................................2 (10) "Early Retirement Age"...........................................................................2 (11) "Early Retirement Date"..........................................................................2 (12) "Early Retirement Benefit........................................................................2 (13) "Employer".......................................................................................2 (14) "15-Year Service Benefit"........................................................................2 (15) "Final Average Monthly Compensation".............................................................2 (16) "Involuntary Termination Benefit"................................................................2 (17) "Normal Retirement Benefit"......................................................................2 (18) "Normal Retirement Date".........................................................................2 (19) "Participant"....................................................................................2 (20) "Plan"...........................................................................................2 (21) "Post-Retirement Death Benefit"..................................................................3 (22) "Pre-Retirement Death Benefit"...................................................................3 |
(23) "Qualified Retirement Plan"......................................................................3 (24) "Service Fraction"...............................................................................3 (25) "Social Security Benefit"........................................................................3 (26) "Spouse".........................................................................................3 (27) "Supplemental Retirement Benefit"................................................................3 (28) "10-Year Service Benefit"........................................................................3 (29) "Terminated For Cause"...........................................................................3 (30) "Total Disability"...............................................................................3 ARTICLE IV ELIGIBILITY, PARTICIPATION AND VESTING................................................................4 (a) Eligibility for Plan; Disqualification...........................................................4 (b) Terminated for Cause.............................................................................4 (c) Eligibility for Benefits.........................................................................5 (d) Vesting..........................................................................................5 ARTICLE V NORMAL RETIREMENT BENEFITS.............................................................................5 (a) Qualification for Benefit........................................................................7 (b) Computation of Amount of Normal Retirement Benefit...............................................5 (c) Form and Duration of Payment.....................................................................6 ARTICLE VI EARLY RETIREMENT BENEFIT..............................................................................6 (a) Qualification for Benefit........................................................................6 (b) Computation of Amount of Early Retirement Benefit................................................6 (c) Form and Duration of Payment.....................................................................7 ARTICLE VII INVOLUNTARY TERMINATION BENEFIT......................................................................7 (a) Qualification for Benefit........................................................................7 (b) Computation of Amount of Involuntary Termination Benefit.........................................7 (c) Form and Duration of Payment.....................................................................8 ARTICLE VIII 10-YEAR SERVICE BENEFIT.............................................................................8 (a) Qualification for Benefit........................................................................8 (b) Computation of Amount of 10-Year Service Benefit.................................................8 (c) Form and Duration of Payment.....................................................................9 ARTICLE IX 15-YEAR SERVICE BENEFIT...............................................................................9 (a) Qualification for Benefit........................................................................9 (b) Computation of Amount of 15-Year Service Benefit.................................................9 (c) Form and Duration of Payment....................................................................10 ARTICLE X DISABILITY BENEFIT.....................................................................................9 (a) Qualified for Benefit...........................................................................10 (b) Computation of Amount of Disability Benefit.....................................................10 |
(c) Form and Duration of Payment....................................................................10 ARTICLE XI BENEFIT UPON CHANGE IN CONTROL.......................................................................11 (a) Qualification for Benefit.......................................................................11 (b) Change in Control...............................................................................11 (c) Computation of Amount of Change in Control Benefit..............................................13 (d) Form and Duration of Payment....................................................................13 ARTICLE XII DEATH BENEFIT.......................................................................................14 (a) Pre-Retirement..................................................................................14 (b) Post-Retirement Death Benefit...................................................................14 (c) Minimum Death Benefit...........................................................................16 ARTICLE XIII PLAN ADMINISTRATION................................................................................17 ARTICLE XIV OPTIONAL FORMS OF PAYMENT...........................................................................17 (a) Annuity Options.................................................................................17 (b) Timing and Manner of Election...................................................................17 (c) Lump Sum Payments...............................................................................18 ARTICLE XV MISCELLANEOUS........................................................................................18 (a) Funding.........................................................................................18 (b) No Guaranty of Benefits.........................................................................19 (c) Assignments and Restrictions....................................................................27 (d) Headings........................................................................................19 (e) Employment......................................................................................19 (f) Applicable Law..................................................................................20 (g) Binding Effect on Employer, Participants, Spouses and Their Successors..........................20 (h) Amendment and Discontinuance....................................................................20 (i) Participant Information.........................................................................20 |
DIEBOLD, INCORPORATED
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
ARTICLE I
PLAN
The Diebold, Incorporated Supplemental Employee Retirement Plan (the "Plan") originally adopted effective January 1, 1990 is hereby amended and restated, effective as of January 1, 2001. This Amended and Restated Plan applies to any Participant who retires, is disabled or is deceased on or after July 1, 2002. Any Participant who reaches any one of these events prior to July 1, 2002 would be governed by the terms of the plan then in effect.
ARTICLE II
PURPOSE OF THE PLAN
This Plan was created for the principal purpose of providing retirement income for certain executive and highly compensated management employees of Diebold, Incorporated and its subsidiary organizations. It is intended to supplement benefits payable under the Diebold, Incorporated Retirement Plan for Salaried Employees, as well as benefits payable under the Federal Social Security Act and certain other deferred compensation arrangements.
ARTICLE III
DEFINITIONS
(a) The following definitions shall apply with respect to this Plan:
(1) "Annual Compensation" shall mean a Participant's base pay from an Employer for any Plan Year plus the Participant's Annual Cash Bonus in the Plan Year in which it is accrued. Annual Compensation shall also include amounts paid to individuals who are citizens or residents of the United States and who are employees of, or provide services to, a foreign affiliate of the Company to which an agreement entered into by the Company under Code Section 3121(l) applies.
(2) "Beneficiary" shall mean a person or entity selected by the Participant or an eligible surviving Spouse that may receive death benefits under this Plan, as are outlined in Article X. A Beneficiary so designated will not generally be a Spouse.
(3) "Board" shall mean the Board of Directors of Diebold, Incorporated.
(4) "Change in Control" shall have the meaning assigned to such term in Article XI.
(5) "Change in Control Benefit" shall mean the benefit determined in accordance with Article XI.
(6) "Committee" shall mean the Compensation Committee of the Board, as such Committee may be constituted from time to time.
(7) "Company" shall mean Diebold, Incorporated.
(8) "Company Service" shall mean years of employment (measured in years and completed months) with an Employer.
(9) "Disability Benefit" shall mean the benefit determined in accordance with Article X hereof.
(10) "Early Retirement Age" shall mean the 60th birthday of a Participant.
(11) "Early Retirement Date" shall mean the first day of the month coinciding with or next following the 60th birthday of a Participant.
(12) "Early Retirement Benefit" shall mean the benefit determined in accordance with Article VI hereof.
(13) "Employer" shall mean (a) the Company or its successors, and
(b) any affiliated corporation or other entity which may
specifically adopt this Plan with the consent of the Company,
or its successors.
(14) "15-Year Service Benefit" shall mean the benefit determined in accordance with Article IX hereof.
(15) "Final Average Monthly Compensation" shall mean one-twelfth of the average of the Participant's Annual Compensation for the five complete consecutive calendar years during his last 10 calendar years of employment with the Employer during which his compensation was the highest. In the event a Participant has been employed for a period of less than five consecutive calendar years, the Participant's Final Average Monthly Compensation shall be the average of his monthly compensation amounts in effect for all of the complete calendar months during which he was employed by the Employer.
(16) "Involuntary Termination Benefit" shall mean the benefit determined in accordance with Article VII.
(17) "Normal Retirement Benefit" shall mean the benefit determined in accordance with Article V.
(18) "Normal Retirement Date" shall mean the first day of the month coinciding with or next following the 62nd birthday of a Participant.
(19) "Participant" shall mean any executive highly paid or management employee of an Employer who is selected to participate in this Plan pursuant to the provisions of Article IV.
(20) "Plan" shall mean this Diebold, Incorporated Supplemental Employee Retirement Plan, as in effect from time to time.
(21) "Post-Retirement Death Benefit" shall mean the benefit determined in accordance with Section (b) of Article XII.
(22) "Pre-Retirement Death Benefit" shall mean the benefit determined in accordance with Section (a) of Article XII.
(23) "Qualified Retirement Plan" shall mean the Diebold, Incorporated Retirement Plan for Salaried Employees, as presently set forth and as it may subsequently be amended, or its successor.
(24) "Service Fraction" shall mean, for any Participant, a fraction, the numerator of which is the lesser of (A) the Participant's years of Company Service, or (B) 15, and the denominator of which is 15.
(25) "Social Security Benefit" shall mean the Primary Insurance Amount under the Federal Social Security Act to which a Participant would be entitled as of the later of his Normal Retirement Date or the date of his actual retirement, computed on the basis of the Participant's average wage history (estimated or actual) for years before the date of determination and, in the case of a Participant who terminates employment with the Employer prior to his Normal Retirement Date, by assuming that the Participant will earn wages after his termination of employment and prior to his Normal Retirement Date at a rate equal to the Participant's wage rate at the time of his termination of employment. If a Participant in this Plan is not eligible for full Social Security Benefits (for example, an individual who has previously worked in the military), for purposes of determining benefits under this Plan, such Social Security Benefits would be imputed as if he had been so eligible and had been covered by Social Security for his entire working career.
(26) "Spouse" shall mean the surviving spouse of a Participant at the time of his death, but only if the Participant and such spouse were married at least one year prior to the earlier of the Participant's death, retirement or other termination of employment with the Employer.
(27) "Supplemental Retirement Benefit" shall mean the Change in Control Benefit, Disability Benefit, Early Retirement Benefit, 10-Year Service Benefit, 15-Year Service Benefit, Involuntary Termination Benefit, Normal Retirement Benefit, Pre-Retirement Death Benefit or Post-Retirement Death Benefit for which a Participant or his Spouse may qualify.
(28) "10-Year Service Benefit" shall mean the benefit determined in accordance with Article VIII hereof.
(29) "Terminated For Cause" shall have the meaning assigned to such term in Article IV.
(30) "Total Disability" shall mean a condition in which a Participant is unable, by reason of sickness or accident, to fulfill the duties of his employment by the
Employer. The determination of Total Disability shall be made by the Committee in accordance with the provisions of Article X.
(b) Throughout this Plan, and whenever appropriate, the masculine gender shall be deemed to include the feminine and neuter, the singular shall be deemed to include the plural and vice versa.
ARTICLE IV
ELIGIBILITY, PARTICIPATION AND VESTING
(a) ELIGIBILITY FOR PLAN; DISQUALIFICATION. The Committee, acting in its sole discretion, shall make recommendations to the Board as to which executive or highly paid management employees of the Employer shall become Participants in the Plan. The Board shall make the final decision as to those executive or highly paid management employees who shall become Participants in the Plan and at which time such employees become Participants; provided, however, that in the absence of a Change in Control or a finding of Total Disability, a Participant's participation shall cease and no benefits under this Plan shall be payable:
(i) to a Participant if the Participant:
(A) voluntarily terminates employment before attaining age 60 with less than 10 years of Company Service; or
(B) fails to give an Employer six months written advance notice of his pending termination of employment if he is leaving Diebold prior to age 60 (or three months written advance notice if he is leaving Diebold at age 60 or later); or
(C) is Terminated for Cause; or
(ii) to a Participant's Spouse, if the Participant:
(A) dies prior to satisfying the requirements for a Spouse's Pre-Retirement or Post-Retirement Death Benefit under Article XII; or
(B) is Terminated for Cause; or
(iii) to a Participant's Beneficiary or Estate, if the Participant:
(A) dies prior to satisfying the requirements for a Pre-Retirement or Post-Retirement Spouse's Death Benefit under Article XII; or
(B) is Terminated for Cause.
(b) TERMINATED FOR CAUSE. As used in this Plan, "Terminated for Cause" shall mean termination of a Participant's employment by an Employer due to the Participant's:
(i) intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Employer;
(ii) intentional wrongful damage to property of the Employer;
(iii) intentional wrongful disclosure of secret processes or confidential information of the Employer; or
(iv) intentional wrongful engagement in any competitive activity which would constitute a material breach of the duty of loyalty to the Employer;
and any such act shall have been materially harmful to the Employer.
For purposes of the Plan, no act, or failure to act, on the part of the Participant shall be deemed "intentional" if it was due primarily to an error in judgement or negligence, but shall be deemed "intentional" only if done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his action or omission was not in or opposed to the best interest of the Employer. Notwithstanding the foregoing, a Participant shall not be deemed to have been Terminated for Cause hereunder unless and until there shall have been delivered to the Participant a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the Board then in office at a meeting of the Board called and held for such purpose, finding that, in the good faith opinion of the Board, the Participant had committed an act set forth above and specifying the particulars thereof in detail. The Participant shall receive reasonable notice and an opportunity for the Participant, together with his counsel, to be heard before the Board. Nothing herein shall limit the right of the Participant or his Beneficiaries to contest the validity or propriety of any such determination.
(c) ELIGIBILITY FOR BENEFITS. A Participant shall be entitled to receive a Supplemental Retirement Benefit (or have a Supplemental Retirement Benefit provided for his surviving Spouse or Beneficiary) only if he satisfies the foregoing conditions of this Article IV and satisfies the requirements of one of the succeeding Articles of the Plan.
(d) VESTING. A Participant shall be vested hereunder upon attaining 10 years of Company Service or upon meeting the requirements for a Normal Retirement Benefit, Early Retirement Benefit, Disability Benefit, Involuntary Termination Benefit or Change in Control Benefit hereunder.
ARTICLE V
NORMAL RETIREMENT BENEFITS
(a) QUALIFICATION FOR BENEFIT. Subject to the provisions of Article IV, a Participant who attains age 62 while employed by an Employer shall be eligible, at any time after his said attainment of age 62, to retire and receive a Normal Retirement Benefit commencing at the time set forth in Section (b) of this Article.
(b) COMPUTATION OF AMOUNT OF NORMAL RETIREMENT BENEFIT. A Participant who retires on or after his Normal Retirement Date shall be entitled to receive, commencing on the first
day of the month coincident with or following the later of his retirement or his application therefor, a monthly Supplemental Retirement Benefit equal to 65% of the Participant's Final Average Monthly Compensation multiplied by his Service Fraction, reduced by the sum of:
(i) 50% of the monthly Social Security Benefit payable to the Participant commencing on the first day of the month coincident with or following his retirement or his application for benefits, if later; and
(ii) the monthly benefit (expressed as a single life annuity, but not including any temporary supplements) payable to the Participant under the terms of the Qualified Retirement Plan commencing on the first day of the month coincident with or following his retirement or his application for benefits, if later, assuming (i) for purposes of determining whether the Participant had a vested benefit under the Qualified Retirement Plan and when the Participant could elect commencement of his benefit under the Qualified Retirement Plan (but not for purposes of determining the amount thereof), that the Participant had sufficient service under the Qualified Retirement Plan to have a vested benefit under the Qualified Retirement Plan and a right to commence receiving such benefit on the first day of the month following his retirement or his application for benefits hereunder, if later, and (ii) that the Participant elected commencement of such benefit on such date.
(c) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be an annuity payable monthly for the Participant's lifetime (except as may be provided in Sections (b) or (c) of Article XII or as provided in Article XIV, as applicable).
ARTICLE VI
EARLY RETIREMENT BENEFIT
(a) QUALIFICATION FOR BENEFIT. Subject to the provisions of Article IV, a
Participant who attains his Early Retirement Age while employed by an
Employer shall be eligible, from the time he has reached his Early
Retirement Age up to the time he reaches age 62, to retire and receive
an Early Retirement Benefit commencing at the time set forth in Section
(b) of this Article.
(b) COMPUTATION OF AMOUNT OF EARLY RETIREMENT BENEFIT. A Participant who retires on or after his Early Retirement Date and before his Normal Retirement Date shall be entitled to receive, commencing on the later of his Normal Retirement Date or the first day of the month after his application therefor, a monthly Early Retirement Benefit equal to 65% of the Participant's Final Average Monthly Compensation multiplied by his Service Fraction reduced by the sum of:
(i) 50% of the monthly Social Security Benefit payable to the Participant commencing on this Normal Retirement Date; and
(ii) the monthly benefit (expressed as a single life annuity, but not including any temporary supplements) payable to the Participant under the terms of the Qualified Retirement Plan commencing on his Normal Retirement Date (as defined herein), assuming (i) for purposes of determining whether the Participant had a vested benefit under the Qualified Retirement Plan and when the Participant could elect commencement of his benefit under the Qualified Retirement Plan (but not for purposes of determining the amount thereof), that the Participant had sufficient service under the Qualified Retirement Plan to have a vested benefit under the Qualified Retirement Plan and a right to commence receiving such benefit at his Normal Retirement Date, and (ii) that the Participant elected commencement of such benefit at his Normal Retirement Date.
The Participant, at his election, may commence his benefits under this Article on the first day of any month after his date of retirement and before his Normal Retirement Date, but in that case his monthly benefit computed under the preceding sentence shall be reduced by .7% for each full month (up to 12) by which the date of commencement precedes the Participant's Normal Retirement Date, and .6833% for each additional full month (if any) by which the date of commencement precedes the Participant's Normal Retirement Date.
(c) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be an annuity payable monthly for the Participant's lifetime (except as may be provided in Sections (b) or (c) of Article XII or as provided in Article XIV, as applicable).
ARTICLE VII
INVOLUNTARY TERMINATION BENEFIT
(a) QUALIFICATION FOR BENEFIT. Subject to the provisions of Article IV, a Participant whose employment with the Employer is involuntarily terminated before he reaches his Early Retirement Age shall be eligible to receive an Involuntary Termination Benefit commencing at the time set forth in Section (b) of this Article. The Committee, or its duly appointed representative for this purpose, shall have full discretion to determine whether the termination of a Participant's employment with the Employer is involuntary.
(b) COMPUTATION OF AMOUNT OF INVOLUNTARY TERMINATION BENEFIT. A Participant who is eligible for an Involuntary Termination Benefit shall be entitled to receive, commencing on the later of his Normal Retirement Date or the first day of the month after his application therefor, a monthly Supplemental Retirement Benefit equal to 65% of the Participant's Final Average Monthly Compensation multiplied by his Service Fraction, reduced by the sum of:
(i) 50% of the monthly Social Security Benefit payable to the Participant commencing on his Normal Retirement Date; and
(ii) the monthly benefit (expressed as a single life annuity, but not including any temporary supplements) payable to the Participant under the terms of the Qualified Retirement Plan commencing on his Normal Retirement Date (as herein
defined), assuming (i) for purposes of determining whether the Participant had a vested benefit under the Qualified Retirement Plan and when the Participant could elect commencement of his benefit under the Qualified Retirement Plan (but not for purposes of determining the amount thereof), that the Participant had sufficient service under the Qualified Retirement Plan to have a vested benefit under the Qualified Retirement Plan and a right to commence receiving such benefit at his Normal Retirement Date, and (ii) that the Participant elected commencement of such benefit at his Normal Retirement Date.
The Participant, at his election, may commence his benefits under this Article on the first day of any month after he attains age 60 and before his Normal Retirement Date, but in that case his benefit computed under the preceding sentence shall be reduced by .7% for each full month (up to 12) by which the date of commencement precedes the Participant's Normal Retirement Date, and .6833% for each additional full month (if any) by which the date of commencement precedes the Participant's Normal Retirement Date.
(c) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be an annuity payable monthly for the Participant's lifetime (except as may be provided in Sections (b) or (c) of Article XII or as provided in Article XIV, as applicable).
ARTICLE VIII
10-YEAR SERVICE BENEFIT
(a) QUALIFICATION FOR BENEFIT. Subject to the provisions of Article IV, a Participant who terminates employment with the Employer with 10 or more years of Company Service but who is not then eligible for other benefits under this Plan shall be eligible to receive a 10-Year Service Benefit commencing at the time set forth in Section (b) of this Article.
(b) COMPUTATION OF AMOUNT OF 10-YEAR SERVICE BENEFIT. A Participant who is eligible for a 10-Year Service Benefit shall be entitled to receive, commencing on the later of his Normal Retirement Date or the first day of the month after his application therefor, a monthly Supplemental Retirement Benefit equal to 55% of his Final Average Monthly Compensation, multiplied by his Service Fraction, reduced by the sum of:
(i) 50% of the monthly Social Security Benefit payable to the Participant commencing on his Normal Retirement Date; and
(ii) the monthly benefit (expressed as a single life annuity) but
not including any temporary supplements) payable to the
Participant under the terms of the Qualified Retirement Plan
at his Normal Retirement Date (as defined herein), assuming
(i) for purposes of determining when the Participant could
elect commencement of his benefit under the Qualified
Retirement Plan (but not for purposes of determining the
amount thereof) that the Participant had sufficient service
under the Qualified Retirement Plan to have a right to
commence his benefit under the Qualified Retirement Plan at
his Normal Retirement Date, and
(ii) that the Participant elected commencement of such benefit at his Normal Retirement Date.
The Participant, at his election, may commence his benefits under this Article on the first day of any month after he attains age 60 and before his Normal Retirement Date, but in that case his benefit computed under the preceding sentence shall be reduced by .7% for each full month (up to 12) by which the date of commencement precedes the Participant's Normal Retirement Date, and .6833% for each additional full month (if any) by which the date of commencement precedes the Participant's Normal Retirement Date.
(c) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be an annuity payable monthly for the Participant's lifetime (except as may be provided in Sections (b) or (c) of Article XII or as provided in Article XIV, as applicable).
ARTICLE IX
15-YEAR SERVICE BENEFIT
(a) QUALIFICATION FOR BENEFIT. Subject to the provisions of Article IV, a Participant who terminates employment with the Employer with 15 or more years of Company Service but who is not then eligible for other benefits under this Plan (other than the 10-year Service Benefit) shall be eligible to receive a 15-Year Service Benefit commencing at the time set forth in Section (b) of this Article.
(b) COMPUTATION OF AMOUNT OF 15-YEAR SERVICE BENEFIT. A Participant who is eligible for a 15-Year Service Benefit shall be entitled to receive, commencing on the later of his Normal Retirement Date or the first day of the month after his application therefor, a monthly Supplemental Retirement Benefit equal to 55% of his Final Average Monthly Compensation, reduced by the sum of:
(i) 50% of the monthly Social Security Benefit payable to the Participant commencing on his Normal Retirement Date; and
(ii) the monthly benefit (expressed as a single life annuity, but
not including any temporary supplements) payable to the
Participant under the terms of the Qualified Retirement Plan
at his Normal Retirement Date (as defined herein), assuming
(i) for purposes of determining when the Participant could
elect commencement of his benefit under the Qualified
Retirement Plan (but not for purposes of determining the
amount thereof) that the Participant had sufficient service
under the Qualified Retirement Plan to have a right to
commence his benefit under the Qualified Retirement Plan at
his Normal Retirement Date, and (ii) that the Participant
elected commencement of such benefit at his Normal Retirement
Date.
The Participant, at his election, may commence his benefits under this Article on the first day of any month after he attains age 60 and before his Normal Retirement Date, but in that case his benefit computed under the preceding sentence shall be reduced by .7% for each full month (up to 12) by which the date of commencement precedes the Participant's
Normal Retirement Date, and .6833% for each additional full month (if any) by which the date of commencement precedes the Participant's Normal Retirement Date.
(c) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be an annuity payable monthly for the Participant's lifetime (except as may be provided in Sections (b) or (c) of Article XII or as provided in Article XIV, as applicable).
ARTICLE X
DISABILITY BENEFIT
(a) QUALIFIED FOR BENEFIT. Subject to the provisions of Article IV, if a Participant's employment with the Employer is terminated before he reaches his Early Retirement Age by reason of his Total Disability (to be determined solely in the discretion of the Committee based upon satisfactory medical evidence submitted to the Committee, including recognition of the Participant's receipt of disability benefits under the Social Security Act), such Participant shall be eligible to receive a Disability Benefit commencing at the time set forth in Section (b) of this Article.
(b) COMPUTATION OF AMOUNT OF DISABILITY BENEFIT. A Participant who is eligible for a Disability Benefit shall be entitled to receive, commencing on the first day of the month following the later of the date of the Participant's termination of employment on account of total Disability or his application therefor, a monthly Supplemental Retirement Benefit equal to (1) 65% of the Participant's Final Average Monthly Compensation multiplied by his Service Fraction, reduced by (2) the sum of:
(i) 50% of the monthly Social Security Benefit that would be payable to the Participant on account of his Total Disability if he were determined to be entitled to receive a Social Security Benefit as a result of his Total Disability (whether or not the Participant in fact qualifies for such Social Security Benefit); and
(ii) the monthly benefit (expressed as a single life annuity, but not including any temporary supplements) that would be payable to the Participant under the terms of the Qualified Retirement Plan on account of his Total Disability if he were determined to be entitled to receive a monthly disability benefit under the Qualified Retirement Plan as a result of his Total Disability (whether or not the Participant in fact qualifies for such monthly disability benefit), assuming, for purposes of determining the Participant's eligibility for a disability pension under the Qualified Retirement Plan (but not for purposes of determining the amount thereof), that the Participant had sufficient service under the Qualified Retirement Plan to be eligible for a disability pension thereunder;
the difference of (i) minus (ii) then being multiplied by 83.4%.
(c) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be an annuity payable monthly until the earlier of the first day of the month for which the committee determines that the Participant no longer has a Total Disability, or the first day of the month in which occurs the Participant's death (except as may be
provided in Sections (b) or (c) of Article XII or as provided in Article XIV, as applicable). The Committee may, in its discretion, take such steps as it deems necessary to determine the continued existence of a Participant's Total Disability and may cease or reduce the Disability Benefit payable hereunder if it is established to the Committee's satisfaction (as determined under the same standards recognized at the time the Committee initially deemed the Participant as suffering a Total Disability) that such Total Disability no longer exists or Social Security Disability Benefits are no longer being paid.
ARTICLE XI
BENEFIT UPON CHANGE IN CONTROL
(a) QUALIFICATION FOR BENEFIT. A Participant who (1) terminates employment with the Employer following a Change in Control and (2) is not at the time of such termination of employment eligible for a Normal Retirement Benefit, an Early Retirement Benefit, an Involuntary Termination Benefit or a Disability Benefit, shall be eligible for a Change in Control Benefit commencing at the time set forth in Section (c) of this Article.
(b) CHANGE IN CONTROL. For purposes of the Plan, a "change in control"
shall have occurred if any of the events described in the following
paragraphs (i) through (v) of this Section (b) occur and if none of the
circumstances described in the succeeding unnumbered paragraphs of this
Section (b) also exist or subsequently come into existence:
(i) The Company is merged or consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction is held in the aggregate by the holders of Voting Stock (as that term is hereafter defined) of the Company immediately prior to such transaction; or
(ii) The Company sells or otherwise transfers all or substantially all of its assets to any other corporation or other legal person, and as a result of such sale or transfer less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale or transfer; or
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (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 promulgated under the Exchange Act) of securities representing 20% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the Company ("Voting Stock"); or
(iv) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) 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
(v) If during any period of two consecutive years individuals who, at the beginning of any such period, constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company's stockholders, of each director of the Company first elected during such period was approved by a vote of at least two-thirds of the Board then still in office who were directors of the Company at the beginning of any such period.
Notwithstanding the foregoing provisions of paragraph (iii) or (iv) of
this Section (b), a "Change in Control" shall not be deemed to have
occurred for purposes of the Plan either (i) solely because (A) the
Company (B) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting securities, or (C) any
Company-sponsored employee stock ownership plan or any other employee
benefit plan of the Company, either files or becomes obligated to file
a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule,
form or report or item therein) under the Exchange Act, disclosing
beneficial ownership by it of shares of Voting Stock whether in excess
of 20% or otherwise, or because the Company reports that a change in
control of the Company has or may have occurred or will or may occur in
the future by reason of such beneficial ownership or (ii) solely
because of a change in control of any Subsidiary by which a Participant
may be employed. Notwithstanding the foregoing provisions of paragraphs
(i) through (iv) of this Section (b), if, prior to any event described
in paragraphs (i) through (iv) of this Section (b) instituted by any
person not an officer or director of the Company, or prior to any
disclosed proposal instituted by any person not an officer or director
of the Company which could lead to any such event, the management of
the Company proposes any restructuring of the Company which ultimately
leads to an event described in paragraphs (i) through (iv) of this
Section (b) pursuant to such management proposal, then a "Change in
Control" shall not be deemed to have occurred for purposes of this
Plan.
If (i) any agreement to merge, consolidate, reorganize or sell or
otherwise transfer assets referred to in paragraph (i) or (ii) of this
Section (b) is terminated without such merger, consolidation,
reorganization or sale or transfer having been consummated, (ii) the
person filing a Schedule 13D or Schedule 14D-1 referred to in paragraph
(iii) of this Section (b) files an amendment to any such Schedule
disclosing that it no longer is the beneficial owner of securities
representing 20% or more of the Voting Stock of the Company, or (iii)
the Company reports that the change of control which it reported in the
filing referred to in paragraph (iv) of this Section (b) will not in
fact occur, the Board may, by notice to Participants, declare that a
Change in Control has not occurred for purposes of the Plan
(notwithstanding the occurrence of the previous events referred to in
paragraph (i), (ii), (iii) or (iv) of this Section (b)), provided that
such declaration shall be without
prejudice to any exercise by Participants of rights under this Article XII that may have occurred prior to such declaration.
As used in this Article XII, the term "Subsidiary" means a corporation,
company, partnership, or other entity (i) more than 50% of the
outstanding shares or securities (representing the right to vote for
the election of directors or other managing authority) of which are, or
(ii) which does not have outstanding shares or securities (as may be
the case in a partnership, joint venture or unincorporated
association), but more than 50 percent of whose ownership interest
representing the right generally to make decisions for such other
entity is, owned or controlled, directly or indirectly, by the Company,
but such corporation, company, or other entity shall be deemed to be a
Subsidiary only so long as such ownership or control exists.
(c) COMPUTATION OF AMOUNT OF CHANGE IN CONTROL BENEFIT. A Participant who is eligible for a Change in Control Benefit shall be entitled to receive, commencing at the later of his Normal Retirement Date or the first day of the month after his application therefor, a monthly Supplemental Retirement Benefit equal to 65% of the Participant's Final Average Monthly Compensation multiplied by his Service Fraction, reduced by the sum of:
(i) 50% of the monthly Social Security Benefit payable to the Participant commencing on his Normal Retirement Date; and
(ii) the monthly benefit (expressed as a single life annuity not including any temporary supplements) payable to the Participant under the terms of the Qualified Retirement Plan commencing on his Normal Retirement Date (as herein defined), assuming (i) for purposes of determining whether the Participant had a vested benefit under the Qualified Retirement Plan and when the Participant could elect commencement of his benefit under the Qualified Retirement Plan (but not for purposes of determining the amount thereof), that the Participant had sufficient service under the Qualified Retirement Plan to have a vested benefit under the Qualified Retirement Plan and a right to commence receiving such benefit at his Normal Retirement Date, and (ii) that the Participant elected commencement of such benefit at his Normal Retirement Date.
The Participant, at his election, may commence his benefits under this Article on the first day of any month after he attains age 60 and before his Normal Retirement Date, but in that case his benefit computed under the preceding sentence shall be reduced by .7% for each full month (up to 12) by which the date of commencement precedes the Participant's Normal Retirement Date, and .6833% for each additional full month (if any) by which the date of commencement precedes the Participant's Normal Retirement Date.
(d) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be an annuity payable monthly for the Participant's lifetime (except as may be provided in Sections (b) or (c) of Article XII or as provided in Article XIV, as applicable).
ARTICLE XII
DEATH BENEFIT
(a) Pre-Retirement
(i) QUALIFICATION FOR BENEFIT. Subject to the provisions of Article IV, if a Participant dies with five (5) years of Company Service but before commencing to receive payment of a Supplemental Retirement Benefit (other than a Disability Benefit), the surviving Spouse of such deceased Participant shall be eligible for a Pre-Retirement Death Benefit commencing at the time set forth in paragraph (ii) of this Section.
(ii) COMPUTATION OF AMOUNT OF PRE-RETIREMENT DEATH BENEFIT. The Pre-Retirement Death Benefit shall be a monthly benefit, commencing on the later of the Participant's Normal Retirement Date (or, in the case of a Participant who dies after his Normal Retirement Date, on the first day of the month following the Participant's death) or the first day of the month after the surviving Spouse's application therefor, equal in amount to the monthly Supplemental Retirement Benefit to which the deceased Participant would have been entitled commencing on his Normal Retirement Date (or, in the case of a Participant who dies after his Normal Retirement Date, on the first day of the month following his death).
In the case of the surviving Spouse of a Participant who dies before his Normal Retirement Date, the surviving Spouse, at the surviving Spouse's election, may commence the Pre-Retirement Death Benefit on the first day of any month after the later of the date on which the Participant would have reached age 60 had he not died or the date of the Participant's death and before the Participant's Normal Retirement Date, but in that case the Pre-Retirement Death Benefit shall be reduced by .7% for each full month (up to 12) by which the date of commencement precedes the Participant's Normal Retirement Date, and .6833% for each additional full month (if any) by which the date of commencement precedes the Participant's Normal Retirement Date.
(iii) FORM AND DURATION OF PAYMENT. The Pre-Retirement Death Benefit shall be a monthly benefit payable from the time of commencement set forth in paragraph (ii) of this Section (a) until the first day of the month coincident with the death of the surviving Spouse.
(b) POST-RETIREMENT DEATH BENEFIT
(i) For current Spouses of Participants in the Plan as of January 1, 2001:
(A) QUALIFICATION FOR BENEFIT. Upon the death of a Participant who is receiving Supplemental Retirement Benefits (including Disability Benefits) or who has qualified for a Disability Benefit, but who has not yet commenced receiving such benefits, the surviving Spouse of such deceased Participant
shall be eligible for the Post-Retirement Death Benefit described in paragraph (B) of this Section.
(B) COMPUTATION OF AMOUNT OF ANNUAL BENEFIT. The Post-Retirement Death Benefit shall be a monthly benefit in an amount equal to the amount of the Supplemental Retirement Benefit the deceased Participant was receiving at the time of his death (or, in the case of the death of a Participant entitled to a Disability Benefit, would have been receiving had he commenced receiving the benefit at the time of his death).
(C) COMMENCEMENT, FORM AND DURATION OF PAYMENT. The Post-Retirement Death Benefit shall commence as of the first day of the month immediately following the date of the Participant's death, and shall continue to be paid as of the first day of each month thereafter until the first day of the month coincident with the death of the surviving Spouse.
(ii) For future Spouses of Participants in the Plan as of January 1, 2001 or all Spouses of future Participants after January 1, 2001:
(A) QUALIFICATION FOR BENEFIT. The Surviving Spouse of a deceased Participant who has (a) died while receiving Supplemental Retirement Benefits (including Disability Benefits) under the Plan and whose optional form of payment elected at retirement provides for a survivor benefit, or (b) who has qualified for a Disability Benefit but who has not yet commenced receiving such benefits, shall be eligible for the Post-Retirement Death Benefit described in paragraph (B) of this Section.
(B) COMPUTATION OF AMOUNT OF ANNUAL BENEFIT. The Post-Retirement Death Benefit shall be a monthly benefit in an amount equal to either (a) 100%, or (b) 50% (as elected by the Participant) of the reduced Supplemental Retirement Benefit the deceased Participant was receiving at the time of his death (or, in the case of the death of a Participant entitled to a Disability Benefit, would have been receiving had he commenced receiving the benefit at the time of his death).
(C) COMMENCEMENT, FORM AND DURATION OF PAYMENT. The Post-Retirement Death Benefit shall commence as of the first day of the month immediately following the date of the Participant's death, and shall continue to be paid as of the first day of each month thereafter until the first day of the month coincident with the death of the surviving Spouse.
(c) MINIMUM DEATH BENEFIT
(i) PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. As provided in
Section (a) hereof, at the death of a Participant who
satisfies the requirements, monthly death benefits are payable
to an eligible surviving Spouse for her remaining lifetime. If
the surviving Spouse has not received at least five years of
monthly benefit payments at her death, the remainder of the
five years of monthly benefit payments, if any, will be made
monthly to the Beneficiary named by the surviving Spouse. If
no Beneficiary is so named, the remaining payments, if any,
will be made to the Spouse's estate. If it is determined by
the Board of Directors (in its sole discretion) that the
remaining benefits shall be paid in a single sum, this amount
will be computed as noted in subsection (iv) below.
(ii) POST-RETIREMENT SURVIVING SPOUSE BENEFIT. If, at the death of the Participant and the surviving Spouse, five years of benefit payments have not been paid to them totally, the remainder, if any, of the five year period, will be paid monthly to the named Beneficiary of the last to survive. If no such Beneficiary is named, the remaining payments, if any, will be made to the Estate of the Participant or last survivor, as the case may be. If it is determined by the Board of Directors (in its sole discretion) that the remaining benefits shall be paid in a single sum, this amount will be computed as noted in subsection (iv) below.
(iii) PRE-RETIREMENT BENEFIT WITH NO SPOUSE. Notwithstanding the other sections of Article XI, a death benefit will be payable at the death of a Participant who is otherwise eligible under Sections (a) above, but has no surviving Spouse (or has no eligible surviving Spouse) at his death. The monthly death benefit will be determined and start as if the Participant has a surviving Spouse and will be paid to a Beneficiary, named by the Participant, as provided in Section (a) above. For purposes of the Pre-Retirement Death Benefit only, a minimum of five years of monthly payments will be made to the Participant and/or the named Beneficiary under this provision. If no Beneficiary is named at the death of the Participant, any payments under this Section will be payable to the Participant's estate. The Board of Directors (in its sole discretion) shall determine if the remaining payments shall be payable in a single sum amount. This amount would be computed as noted in subsection (iv) below.
(iv) DETERMINATION OF SINGLE SUM DEATH BENEFIT VALUE. If decided by the Board of Directors (in its sole discretion) that a single sum amount shall be payable under the five year minimum payments provisions of (c)(i) or (c)(ii) above, it will have the single sum amount determined actuarially, based on the circumstances of the benefits. Where appropriate, the GAM83 Mortality Table, 7-1/2% interest, ages of the Participant and/or Spouse, and the timing of the payment of benefits will be used. The single sum value will be equal to the present value of the immediate or deferred payment recognizing the remainder of any five year number of payments due. The Board of Directors (in its sole discretion) does have the option of changing these assumptions, if they are deemed inappropriate and unreasonable at the time the single sum amount is determined.
ARTICLE XIII
PLAN ADMINISTRATION
The Company shall be responsible for the general administration of the Plan and for carrying out the provisions hereof. The Company shall have any and all power and authority (including discretion with respect to the exercise of that power and authority) which shall be necessary, advisable, desirable or convenient to enable it to carry out its duties under the Plan, including the powers: to resolve all questions arising under the Plan, such as questions of construction and interpretation; to adopt such rules and regulations as the Company may deem necessary or appropriate to provide for the administration of the Plan; to delegate such of its responsibilities and authorities hereunder to such individuals, committees or entities as the Company shall deem appropriate; and to take such further actions as the Company shall deem advisable in the administration of the Plan. The decision of the Company on any question concerning the interpretation or administration of this Plan shall be final and conclusive and nothing in the Plan shall be deemed to give a Participant, his surviving Spouse or other beneficiaries, or his or their legal representatives, any right to payments except to such extent, if any, as the Company may have determined subject to all the terms and conditions of the Plan. No member of the Board or the Committee, nor any individual, committee or entity to which any of the responsibilities or authority of the Committee or the Company hereunder are delegated, shall be liable for any act or determination made, in good faith, in regard to this Plan.
ARTICLE XIV
OPTIONAL FORMS OF PAYMENT
(a) ANNUITY OPTIONS. Any Participant in the Plan as of January 1, 2001 who marries a Spouse at any time after January 1, 2001 and any future Participants in the Plan after January 1, 2001, may, in lieu of the automatic single life annuity form of payment, elect to receive his benefit in any of the following optional forms of payment:
OPTION 1: 50% JOINT AND SURVIVOR ANNUITY. A reduced monthly Supplemental Retirement Benefit which is actuarially equivalent to the single life annuity under the Plan and is payable to the Participant for his life, with continuance of monthly payments of 50% of such reduced amount after his death to his surviving Spouse until the first day of the month coincident with the death of the surviving Spouse.
OPTION 2: 100% JOINT AND SURVIVOR ANNUITY. A reduced monthly Retirement Benefit which is actuarially equivalent to the single life annuity under the Plan and is payable to the Participant for his life, with continuance of monthly payments in such reduced amount after his death to his surviving Spouse until the first day of the month coincident with the death of the surviving Spouse.
(b) TIMING AND MANNER OF ELECTION. Any Participant for whom Section (a)
applies, shall make such election to waive the automatic single life
annuity benefit and in lieu thereof, to receive an alternative annuity
form of payment allowed hereunder (or a lump sum pursuant to Section
(c) below) in writing on a form provided by the Company, which form
shall be filed with the Company prior to the Participant's termination
of employment for any reason.
(c) LUMP SUM PAYMENTS. Notwithstanding any other provision of the Plan, but
subject to the approval of the Committee as described below, any
Participant under the Plan may elect to receive the benefits payable to
him under the Plan, other than benefits payable pursuant to Article X,
in the form of a single lump sum payment. The lump sum payment
described in the preceding sentence shall be calculated by converting
the benefits otherwise payable to the Participant at the time such
benefits are to commence into a lump sum amount of equivalent actuarial
value when computed using the actuarial factors described in Section
(c)(iv) of Article XII of the Plan. A Participant who elects to receive
a single lump sum payment pursuant to the second preceding sentence may
further elect that, in the event that the Participant dies while
employed, benefits payable as a result of the Participant's death,
other than benefits payable pursuant to Section (c)(i) or (c)(ii) of
Article XII of the Plan, shall be paid to the Participant's Spouse
without taking into account the election made under the second
preceding sentence. Any election by a Participant to receive benefits
under the Plan in the form of a single lump sum payment shall be in
writing on a form provided by the Company, which form shall be filed
with the Company (a) prior to the Participant's termination of
employment with the Employers because of involuntary termination of
employment (including by reason of disability) or death or (b) at least
180 days prior to the Participant's voluntary termination of employment
with the Employers. Subject to the approval of the Committee, any such
election may be changed or revoked by the Participant at any time and
from time to time by the filing of a later written election with the
Company; provided, that any election made less than 180 days prior to a
Participant's voluntary termination of employment shall not be valid,
and in such case, payment shall be made in accordance with the latest
valid election of the Participant. The payment by the Employers of a
lump sum amount to a Participant (or his Spouse, Beneficiary or estate)
pursuant to this Section shall discharge all obligations of the
Employers to such Participant (or his Spouse, Beneficiary or estate)
under the Plan. Payment of benefits in the form of a single lump sum
payment pursuant to the election of a Participant under this Article is
subject to the approval of the Committee, which may, in its sole and
absolute discretion, approve or withdraw its prior approval of such
election at any time prior to the date the lump sum payment is actually
paid to the Participant and instead require that benefits be paid in
such other form as is permitted by the Plan.
ARTICLE XV
MISCELLANEOUS
(a) FUNDING. The obligation of the Employers to pay Supplemental Retirement Benefits under the Plan constitutes the unsecured promise of the Employers to make payments from their general assets, and no Participant, Spouse or Beneficiary shall have any interest in, or a lien or prior claim upon, any property of the Employers. With respect to the Supplemental Retirement Benefits under the Plan, each Participant, Spouse or Beneficiary shall have the status of a general unsecured creditor of the Participant's Employer. The Company shall establish a so-called "rabbi trust" to hold funds, stock or other securities to be used in payment of the obligations of the Employers under the Plan, and may fund such trust; provided, however, that any funds contained therein shall remain subject to the claims of the general creditors of the Company or any other Employer for which the Participant performs services. It is the intention of the
Employers that the Plan be unfunded for tax purposes and for purposes of Title I of ERISA. No liability for the payment of benefits under the Plan shall be imposed upon any officer, director, employee or stockholder of the Company or any other Employer, or upon the Board, the Committee or any member thereof.
(b) NO GUARANTY OF BENEFITS. Nothing contained in this Plan shall constitute a guaranty by any Employer, the Committee or the Board that the assets of any Employer will be sufficient to pay any benefit hereunder.
(c) ASSIGNMENTS AND RESTRICTIONS. To the extent permitted by law, and except as otherwise provided in this Section (c), no right or interest of a Participant or Spouse under this Plan shall be transferable or assignable (either at law or in equity), nor shall any such right or interest be subject to alienation, anticipation, encumbrance, attachment, garnishment, levy, execution or other legal or equitable process of any kind, voluntary or involuntary, or in any manner be liable for or subject to the debts of any Participant or Spouse. If a Participant shall attempt to or shall transfer, assign, alienate, anticipate, sell, pledge or otherwise encumber his benefits hereunder or any part thereof, or if by reason of his bankruptcy or other event happening at any time such benefits would devolve upon anyone else or would not be enjoyed by him, then the Company, in its discretion, may terminate his interest in any such benefit to the extent the Company considers necessary or advisable to prevent or limit the effects of such occurrence. Termination shall be effected by filing a "termination declaration" with the Committee and making reasonable efforts to deliver a copy to the Participant (the "Terminated Participant") whose interest is affected thereby. As long as the Terminated Participant is alive, any benefits affected by the termination shall be retained by the Company and, in the Company's sole and absolute judgement, may be paid to or expended for the benefit of the Terminated Participant, his spouse, his children or any other person or persons in fact dependent upon him in such a manner as the Company shall deem proper. Upon the death of the Terminated Participant, all benefits withheld from him and not paid to others in accordance with the preceding sentence shall be paid to the Terminated Participant's surviving Spouse or, if none, to the Terminated Participant's then living descendants, including adopted children, per stirpes.
Notwithstanding the foregoing, amounts payable under this Plan may be withheld by the Company as they become due to the extent necessary to cover any debts or other obligations owed to the Company by the Participant, but only if such debts or other obligations are acknowledged as such in writing by the Participant or are confirmed as such by a final, nonappealable order of a court of competent jurisdiction.
(d) HEADINGS. The various headings used in this Plan are for convenience only and shall not be used in interpreting the text of the Article, Section, paragraph or subparagraph in which they appear.
(e) EMPLOYMENT. The establishment of this Plan shall not be construed to give any Participant the right to be retained in the service of the Employer.
(f) APPLICABLE LAW. The validity, interpretation, construction and performance of this Plan shall be governed by the internal substantive laws of the State of Ohio, without giving effect to the principles of conflict of laws of such State.
(g) BINDING EFFECT ON EMPLOYER, PARTICIPANTS, SPOUSES AND THEIR SUCCESSORS. This Plan shall be binding and inure to the benefit of any Employer or its successors and assigns, and the Participants, Spouses and their heirs, legatees, distributees, executors, administrators or other legal representatives.
(h) AMENDMENT AND DISCONTINUANCE. The Company reserves the right in its sole discretion to amend or terminate this Plan at any time with regard to itself or any Employer, provided that no such amendment or termination shall affect any benefits then being paid to Participants or Spouses under the Plan as of the date of such termination and the rights of or with respect to all other Participants at the time of any such termination to immediate or deferred Supplemental Retirement Benefits shall be determined as if the employment of each such Participant had been involuntarily terminated, but not Terminated for Cause, on the date of such termination. After any termination of the Plan, each Employer shall remain obligated to pay those benefits described in the preceding sentence in accordance with the terms of the Plan in effect immediately before such termination.
(i) PARTICIPANT INFORMATION. Each Participant shall keep the Committee informed of his current address and the current address of his Spouse, if applicable. The Participant shall furnish to the Committee any and all information deemed by the Committee to be necessary or desirable for the proper administration of the Plan.
IN WITNESS WHEREOF, this Diebold, Incorporated Supplemental Employee Retirement Plan has been executed this 15 day of July, 2002, effective as of July 1, 2002.
DIEBOLD, INCORPORATED
By: /s/ Charles B. Scheurer ------------------------------- Vice President, Human Resources |
EXHIBIT 10.5 (ii)
DIEBOLD, INCORPORATED
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN II
AS AMENDED AND RESTATED JULY 1, 2002
DIEBOLD, INCORPORATED
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN II
(AS AMENDED AND RESTATED JULY 1, 2002)
TABLE OF CONTENTS
PAGE ARTICLE I PLAN....................................................................................................1 ARTICLE II PURPOSE OF THE PLAN....................................................................................1 ARTICLE III DEFINITIONS...........................................................................................1 (1) "Actuarial Equivalent"..............................................................................1 (2) "Annual Compensation"...............................................................................1 (3) "Beneficiary".......................................................................................1 (4) "Board".............................................................................................1 (5) "Change in Control".................................................................................1 (6) "Change in Control Benefit".........................................................................1 (7) "Committee".........................................................................................1 (8) "Company"...........................................................................................2 (9) "Company Service"...................................................................................2 (10) "Disability Benefit"................................................................................2 (11) "Early Retirement Age"..............................................................................2 (12) "Early Retirement Date".............................................................................2 (13) "Early Retirement Benefit"..........................................................................2 (14) "Employer"..........................................................................................2 (15) "15-Year Service Benefit"...........................................................................2 (16) "Final Average Monthly Compensation"................................................................2 (17) "Involuntary Termination Benefit"...................................................................2 (18) "Normal Retirement Benefit".........................................................................2 (19) "Normal Retirement Date"............................................................................2 (20) "Participant".......................................................................................2 (21) "Plan"..............................................................................................2 (22) "Post-Retirement Death Benefit".....................................................................2 (23) "Pre-Retirement Death Benefit"......................................................................2 (24) "50% Joint and Survivor Annuity"....................................................................2 (25) "Qualified Retirement Plan".........................................................................3 |
(26) "Service Fraction"..................................................................................3 (27) "Social Security Benefit"...........................................................................3 (28) "Spouse"............................................................................................3 (29) "Supplemental Retirement Benefit"...................................................................3 (30) "10-Year Service Benefit"...........................................................................3 (31) "Terminated For Cause"..............................................................................3 (32) "Total Disability"..................................................................................3 ARTICLE IV ELIGIBILITY, PARTICIPATION AND VESTING................................................................3 (a) Eligibility for Plan; Disqualification..............................................................3 (b) Terminated for Cause................................................................................4 (c) Eligibility for Benefits............................................................................5 (d) Vesting.............................................................................................5 ARTICLE V NORMAL RETIREMENT BENEFITS..............................................................................5 (a) Qualification for Benefit...........................................................................5 (b) Computation of Amount of Normal Retirement Benefit..................................................5 (c) Form and Duration of Payment........................................................................5 ARTICLE VI EARLY RETIREMENT BENEFIT...............................................................................6 (a) Qualification for Benefit...........................................................................6 (b) Computation of Amount of Early Retirement Benefit...................................................6 (c) Form and Duration of Payment........................................................................6 ARTICLE VII INVOLUNTARY TERMINATION BENEFIT.......................................................................7 (a) Qualification for Benefit...........................................................................7 (b) Computation of Amount of Involuntary Termination Benefit............................................7 (c) Form and Duration of Payment........................................................................7 ARTICLE VIII 10-YEAR SERVICE BENEFIT..............................................................................8 (a) Qualification for Benefit...........................................................................8 (b) Computation of Amount of 15-Year Service Benefit....................................................8 (c) Form and Duration of Payment........................................................................8 ARTICLE IX 15-YEAR SERVICE BENEFIT................................................................................8 (a) Qualification for Benefit...........................................................................8 (b) Computation of Amount of 15-Year Service Benefit....................................................9 (c) Form and Duration of Payment........................................................................9 ARTICLE X DISABILITY BENEFIT......................................................................................9 (a) Qualified for Benefit...............................................................................9 (b) Computation of Amount of Disability Benefit.........................................................9 (c) Form and Duration of Payment.......................................................................10 |
ARTICLE XI BENEFIT UPON CHANGE IN CONTROL........................................................................10 (a) Qualification for Benefit..........................................................................10 (b) Change in Control..................................................................................10 (c) Computation of Amount of Change in Control Benefit.................................................12 (d) Form and Duration of Payment.......................................................................13 ARTICLE XII DEATH BENEFIT........................................................................................13 (a) Pre-Retirement.....................................................................................13 (b) Post-Retirement Death Benefit......................................................................14 (c) Minimum Death Benefit..............................................................................14 ARTICLE XIII PLAN ADMINISTRATION.................................................................................15 ARTICLE XIV OPTIONAL FORMS OF PAYMENT............................................................................16 (a) Annuity Options....................................................................................16 (b) Timing and Manner of Election......................................................................16 (c) Lump Sum Payments..................................................................................16 ARTICLE XV MISCELLANEOUS.........................................................................................17 (a) Funding............................................................................................17 (b) No Guaranty of Benefits............................................................................17 (c) Assignments and Restrictions.......................................................................17 (d) Headings...........................................................................................18 (e) Employment.........................................................................................18 (f) Applicable Law.....................................................................................18 (g) Binding Effect on Employer, Participants, Spouses and Their Successors.............................18 (h) Amendment and Discontinuance.......................................................................18 (i) Participant Information............................................................................18 |
DIEBOLD, INCORPORATED
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN II
ARTICLE I
PLAN
The Diebold, Incorporated Supplemental Employee Retirement Plan II (the "Plan") originally adopted effective as of January 1, 2001 is hereby amended and restated, effective as of July 1, 2002. This Amended and Restated Plan applies to any Participant who retires, is disabled or is deceased on or after July 1, 2002. Any Participant who reaches any one of those events prior to July 1, 2002 would be governed by the terms of the plan then in effect.
ARTICLE II
PURPOSE OF THE PLAN
This Plan was created for the principal purpose of providing retirement income for certain executive and highly compensated management employees of Diebold, Incorporated and its subsidiary organizations. It is intended to supplement benefits payable under the Diebold, Incorporated Retirement Plan for Salaried Employees, as well as benefits payable under the Federal Social Security Act and certain other deferred compensation arrangements.
ARTICLE III
DEFINITIONS
(a) The following definitions shall apply with respect to this Plan:
(1) "Actuarial Equivalent" shall mean, except where otherwise
indicated, a benefit of equivalent value to the benefit it
replaces calculated on the basis of the UP-1984 Mortality
Table and a six and one-half percent (6-1/2%) interest rate
per annum, compounded annually.
(2) "Annual Compensation" shall mean a Participant's base pay from
an Employer for any Plan Year plus the Participant's Annual
Incentive Plan in the Plan Year in which it is accrued. Annual
Compensation shall also include amounts paid to individuals
who are citizens or residents of the United States and who are
employees of, or provide services to, a foreign affiliate of
the Company to which an agreement entered into by the Company
under Code Section 3121(l) applies.
(3) "Beneficiary" shall mean a person or entity selected by the
Participant or an eligible surviving Spouse that may receive
death benefits under this Plan, as are outlined in Article
XII. A Beneficiary so designated will not generally be a
Spouse.
(4) "Board" shall mean the Board of Directors of Diebold,
Incorporated.
(5) "Change in Control" shall have the meaning assigned to such
term in Article XI.
(6) "Change in Control Benefit" shall mean the benefit determined
in accordance with Article XI.
(7) "Committee" shall mean the Compensation Committee of the
Board, as such Committee may be constituted from time to time.
(8) "Company" shall mean Diebold, Incorporated.
(9) "Company Service" shall mean years of employment (measured in
years and completed months) with an Employer.
(10) "Disability Benefit" shall mean the benefit determined in
accordance with Article X hereof.
(11) "Early Retirement Age" shall mean the 60th birthday of a
Participant.
(12) "Early Retirement Date" shall mean the first day of the month
coinciding with or next following the 60th birthday of a
Participant.
(13) "Early Retirement Benefit" shall mean the benefit determined
in accordance with Article VI hereof.
(14) "Employer" shall mean (a) the Company or its successors, and
(b) any affiliated corporation or other entity which may
specifically adopt this Plan with the consent of the Company,
or its successors.
(15) "15-Year Service Benefit" shall mean the benefit determined in
accordance with Article IX hereof.
(16) "Final Average Monthly Compensation" shall mean one-twelfth of
the average of the Participant's Annual Compensation for the
five complete consecutive calendar years during his last 10
calendar years of employment with the Employer during which
his compensation was the highest. In the event a Participant
has been employed for a period of less than five consecutive
calendar years, the Participant's Final Average Monthly
Compensation shall be the average of his monthly compensation
amounts in effect for all of the complete calendar months
during which he was employed by the Employer.
(17) "Involuntary Termination Benefit" shall mean the benefit
determined in accordance with Article VII.
(18) "Normal Retirement Benefit" shall mean the benefit determined
in accordance with Article V.
(19) "Normal Retirement Date" shall mean the first day of the month
coinciding with or next following the 65th birthday of a
Participant.
(20) "Participant" shall mean any executive highly paid or
management employee of an Employer who is selected to
participate in this Plan pursuant to the provisions of Article
IV.
(21) "Plan" shall mean this Diebold, Incorporated Supplemental
Employee Retirement Plan, as in effect from time to time.
(22) "Post-Retirement Death Benefit" shall mean the benefit determined in accordance with Section (b) of Article XII.
(23) "Pre-Retirement Death Benefit" shall mean the benefit determined in accordance with Section (a) of Article XII.
(24) "50% Joint and Survivor Annuity" shall mean a reduced monthly Supplemental Retirement Benefit which is Actuarially Equivalent to the single life annuity under the Plan and is payable to the Participant for his life, with continuance of monthly payments of 50% of such reduced amount after his death to his surviving Spouse until the first day of the month in which occurs the surviving Spouse's death.
(25) "Qualified Retirement Plan" shall mean the Diebold,
Incorporated Retirement Plan for Salaried Employees, as
presently set forth and as it may subsequently be amended, or
its successor.
(26) "Service Fraction" shall mean, for any Participant, a
fraction, the numerator of which is the lesser of (A) the
Participant's years of Company Service, or (B) 30, and the
denominator of which is 30.
(27) "Social Security Benefit" shall mean the Primary Insurance
Amount under the Federal Social Security Act to which a
Participant would be entitled as of the later of his Normal
Retirement Date or the date of his actual retirement, computed
on the basis of the Participant's average wage history
(estimated or actual) for years before the date of
determination and, in the case of a Participant who terminates
employment with the Employer prior to his Normal Retirement
Date, by assuming that the Participant will earn wages after
his termination of employment and prior to his Normal
Retirement Date at a rate equal to the Participant's wage rate
at the time of his termination of employment. If a Participant
in this Plan is not eligible for full Social Security Benefits
(for example, an individual who has previously worked in the
military), for purposes of determining benefits under this
Plan, such Social Security Benefits would be imputed as if he
had been so eligible and had been covered by Social Security
for his entire working career.
(28) "Spouse" shall mean the surviving spouse of a Participant at
the time of his death, but only if the Participant and such
spouse were married at least one year prior to the earlier of
the Participant's death, retirement or other termination of
employment with the Employer.
(29) "Supplemental Retirement Benefit" shall mean the Change in
Control Benefit, Disability Benefit, Early Retirement Benefit,
10-Year Service Benefit, 15-Year Service Benefit, Involuntary
Termination Benefit, Normal Retirement Benefit, Pre-Retirement
Death Benefit or Post-Retirement Death Benefit for which a
Participant or his Spouse may qualify.
(30) "10-Year Service Benefit" shall mean the benefit determined in
accordance with Article VIII hereof.
(31) "Terminated For Cause" shall have the meaning assigned to such
term in Article IV.
(32) "Total Disability" shall mean a condition in which a
Participant is unable, by reason of sickness or accident, to
fulfill the duties of his employment by the Employer. The
determination of Total Disability shall be made by the
Committee in accordance with the provisions of Article X.
(b) Throughout this Plan, and whenever appropriate, the masculine gender shall be deemed to include the feminine and neuter, the singular shall be deemed to include the plural and vice versa.
ARTICLE IV
ELIGIBILITY, PARTICIPATION AND VESTING
(a) ELIGIBILITY FOR PLAN; DISQUALIFICATION. The Committee, acting in its sole discretion, shall make recommendations to the Board as to which executive or highly paid management
employees of the Employer shall become Participants in the Plan. The Board shall make the final decision as to those executive or highly paid management employees who shall become Participants in the Plan and at which time such employees become Participants; provided, however, that in the absence of a Change in Control or a finding of Total Disability, a Participant's participation shall cease and no benefits under this Plan shall be payable:
(i) to a Participant if the Participant:
(A) voluntarily terminates employment before attaining age 60
with less than 10 years of Company Service; or
(B) fails to give an Employer six months written advance notice
of his pending termination of employment if he is leaving
Diebold prior to age 60 (or three months written advance
notice if he is leaving Diebold at age 60 or later); or
(C) is Terminated for Cause; or
(ii) to a Participant's Spouse, if the Participant:
(A) dies prior to satisfying the requirements for a Spouse's
Pre-Retirement or Post-Retirement Death Benefit under
Article XII; or
(B) is Terminated for Cause; or
(iii) to a Participant's Beneficiary or Estate, if the Participant:
(A) dies prior to satisfying the requirements for a
Pre-Retirement or Post-Retirement Spouse's Death Benefit
under Article XII; or
(B) is Terminated for Cause.
(b) TERMINATED FOR CAUSE. As used in this Plan, "Terminated for Cause"
shall mean termination of a Participant's employment by an Employer due
to the Participant's:
(i) intentional act of fraud, embezzlement or theft in connection
with his duties or in the course of his employment with the
Employer;
(ii) intentional wrongful damage to property of the Employer;
(iii) intentional wrongful disclosure of secret processes or
confidential information of the Employer; or
(iv) intentional wrongful engagement in any competitive activity
which would constitute a material breach of the duty of
loyalty to the Employer; and any such act shall have been
materially harmful to the Employer.
For purposes of the Plan, no act, or failure to act, on the part of the Participant shall be deemed "intentional" if it was due primarily to an error in judgement or negligence, but shall be deemed "intentional" only if done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his action or omission was not in or opposed to the best interest of the Employer. Notwithstanding the foregoing, a Participant shall not be deemed to have been Terminated for Cause hereunder unless and until there shall have been delivered to the Participant a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the Board then in office at a meeting of the Board called and held for such purpose, finding that, in the good faith opinion of the Board, the Participant had committed an act set forth above and specifying the particulars thereof in detail. The Participant shall receive reasonable notice and an opportunity for the Participant, together with his counsel, to be heard before the Board.
Nothing herein shall limit the right of the Participant or his Beneficiaries to contest the validity or propriety of any such determination.
(c) ELIGIBILITY FOR BENEFITS. A Participant shall be entitled to receive a Supplemental Retirement Benefit (or have a Supplemental Retirement Benefit provided for his surviving Spouse or Beneficiary) only if he satisfies the foregoing conditions of this Article IV and satisfies the requirements of one of the succeeding Articles of the Plan.
(d) VESTING. A Participant shall be vested hereunder upon attaining 10 years of Company Service or upon meeting the requirements for a Normal Retirement Benefit, Early Retirement Benefit, Disability Benefit, Involuntary Termination Benefit or Change in Control Benefit hereunder.
ARTICLE V
NORMAL RETIREMENT BENEFITS
(a) QUALIFICATION FOR BENEFIT. Subject to the provisions of Article IV, a Participant who attains age 65 while employed by an Employer shall be eligible, at any time after his said attainment of age 65, to retire and receive a Normal Retirement Benefit commencing at the time set forth in Section (b) of this Article.
(b) COMPUTATION OF AMOUNT OF NORMAL RETIREMENT BENEFIT. A Participant who
retires on or after his Normal Retirement Date shall be entitled to
receive, commencing on the first day of the month coincident with or
following the later of his retirement or his application therefor, a
monthly Supplemental Retirement Benefit equal to 50% of the
Participant's Final Average Monthly Compensation multiplied by his
Service Fraction, reduced by the sum of:
(i) 50% of the monthly Social Security Benefit payable to the
Participant commencing on the first day of the month
coincident with or following his retirement or his application
for benefits, if later; and
(ii) the monthly benefit (expressed as a single life annuity, but
not including any temporary supplements) payable to the
Participant under the terms of the Qualified Retirement Plan
commencing on the first day of the month coincident with or
following his retirement or his application for benefits, if
later, assuming (i) for purposes of determining whether the
Participant had a vested benefit under the Qualified
Retirement Plan and when the Participant could elect
commencement of his benefit under the Qualified Retirement
Plan (but not for purposes of determining the amount thereof),
that the Participant had sufficient service under the
Qualified Retirement Plan to have a vested benefit under the
Qualified Retirement Plan and a right to commence receiving
such benefit on the first day of the month following his
retirement or his application for benefits hereunder, if
later, and (ii) that the Participant elected commencement of
such benefit on such date.
(c) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be the same form as determined under the terms of the Qualified Retirement Plan
(single life annuity for an unmarried Participant or 50% Joint and Survivor Annuity for a married Participant), except as may be provided in Article XIV, as applicable.
ARTICLE VI
EARLY RETIREMENT BENEFIT
(a) QUALIFICATION FOR BENEFIT. Subject to the provisions of Article IV, a
Participant who attains his Early Retirement Age while employed by an
Employer shall be eligible, from the time he has reached his Early
Retirement Age up to the time he reaches age 65, to retire and receive
an Early Retirement Benefit commencing at the time set forth in Section
(b) of this Article.
(b) COMPUTATION OF AMOUNT OF EARLY RETIREMENT BENEFIT. A Participant who
retires on or after his Early Retirement Date and before his Normal
Retirement Date shall be entitled to receive, commencing on the later
of his Normal Retirement Date or the first day of the month after his
application therefor, a monthly Early Retirement Benefit equal to 50%
of the Participant's Final Average Monthly Compensation multiplied by
his Service Fraction reduced by the sum of:
(i) 50% of the monthly Social Security Benefit payable to the
Participant commencing on this Normal Retirement Date; and
(ii) the monthly benefit (expressed as a single life annuity, but
not including any temporary supplements) payable to the
Participant under the terms of the Qualified Retirement Plan
commencing on his Normal Retirement Date (as defined herein),
assuming (i) for purposes of determining whether the
Participant had a vested benefit under the Qualified
Retirement Plan and when the Participant could elect
commencement of his benefit under the Qualified Retirement
Plan (but not for purposes of determining the amount thereof),
that the Participant had sufficient service under the
Qualified Retirement Plan to have a vested benefit under the
Qualified Retirement Plan and a right to commence receiving
such benefit at his Normal Retirement Date, and (ii) that the
Participant elected commencement of such benefit at his Normal
Retirement Date.
The Participant, at his election, may commence his benefits under this
Article on the first day of any month after his date of retirement and
before his Normal Retirement Date, but in that case his monthly benefit
computed under the preceding sentence shall be actuarially reduced
using the assumptions identified in Article III(a)(1) for each full
month by which the date of commencement precedes the Participant's
Normal Retirement Date.
(c) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be the same form as determined under the terms of the Qualified Retirement Plan (single life annuity for an unmarried Participant or 50% Joint and Survivor Annuity for a married Participant), except as may be provided in Article XIV, as applicable.
ARTICLE VII
INVOLUNTARY TERMINATION BENEFIT
(a) QUALIFICATION FOR BENEFIT. Subject to the provisions of Article IV, a Participant whose employment with the Employer is involuntarily terminated before he reaches his Early Retirement Age shall be eligible to receive an Involuntary Termination Benefit commencing at the time set forth in Section (b) of this Article. The Committee, or its duly appointed representative for this purpose, shall have full discretion to determine whether the termination of a Participant's employment with the Employer is involuntary.
(b) COMPUTATION OF AMOUNT OF INVOLUNTARY TERMINATION BENEFIT. A Participant
who is eligible for an Involuntary Termination Benefit shall be
entitled to receive, commencing on the later of his Normal Retirement
Date or the first day of the month after his application therefor, a
monthly Supplemental Retirement Benefit equal to 50% of the
Participant's Final Average Monthly Compensation multiplied by his
Service Fraction, reduced by the sum of:
(i) 50% of the monthly Social Security Benefit payable to the
Participant commencing on his Normal Retirement Date; and
(ii) the monthly benefit (expressed as a single life annuity, but
not including any temporary supplements) payable to the
Participant under the terms of the Qualified Retirement Plan
commencing on his Normal Retirement Date (as herein defined),
assuming (i) for purposes of determining whether the
Participant had a vested benefit under the Qualified
Retirement Plan and when the Participant could elect
commencement of his benefit under the Qualified Retirement
Plan (but not for purposes of determining the amount thereof),
that the Participant had sufficient service under the
Qualified Retirement Plan to have a vested benefit under the
Qualified Retirement Plan and a right to commence receiving
such benefit at his Normal Retirement Date, and (ii) that the
Participant elected commencement of such benefit at his Normal
Retirement Date.
The Participant, at his election, may commence his benefits under this
Article on the first day of any month after his date of retirement and
before his Normal Retirement Date, but in that case his monthly benefit
computed under the preceding sentence shall be actuarially reduced
using the assumptions identified in Article III(a)(1) for each full
month by which the date of commencement precedes the Participant's
Normal Retirement Date.
(c) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be the same form as determined under the terms of the Qualified Retirement Plan (single life annuity for an unmarried Participant or 50% Joint and Survivor Annuity for a married Participant), except as may be provided in Article XIV, as applicable.
ARTICLE VIII
10-YEAR SERVICE BENEFIT
(a) QUALIFICATION FOR BENEFIT. Subject to the provisions of Article IV, a Participant who terminates employment with the Employer with 10 or more years of Company Service but who is not then eligible for other benefits under this Plan shall be eligible to receive a 10-Year Service Benefit commencing at the time set forth in Section (b) of this Article.
(b) COMPUTATION OF AMOUNT OF 10-YEAR SERVICE BENEFIT. A Participant who is
eligible for a 10-Year Service Benefit shall be entitled to receive,
commencing on the later of his Normal Retirement Date or the first day
of the month after his application therefore, a monthly Supplemental
Retirement Benefit equal to the excess, if any, of:
(i) the monthly benefit (expressed as a single life annuity, but
not including any temporary supplements) payable to the
Participant under the terms of the Qualified Retirement Plan
at his Normal Retirement Date but calculated without regard to
any statutory limits under Code Sections 401(a)(7) or 415(b),
minus
(ii) the monthly benefit (expressed as a single life annuity, but
not including any temporary supplements) payable to the
Participant under the terms of the Qualified Retirement Plan
at his Normal Retirement Date (as defined herein), assuming
(i) for purposes of determining when the Participant could
elect commencement of his benefit under the Qualified
Retirement Plan (but not for purposes of determining the
amount thereof) that the Participant had sufficient service
under the Qualified Retirement Plan to have a right to
commence his benefit under the Qualified Retirement Plan at
his Normal Retirement Date, and (ii) that the Participant
elected commencement of such benefit at his Normal Retirement
Date;
The Participant, at his election, may commence his benefits under this
Article on the first day of any month after his date of retirement and
before his Normal Retirement Date, but in that case his monthly benefit
computed under the preceding sentence shall be actuarially reduced
using the assumptions identified in Article III(a)(1) for each full
month by which the date of commencement precedes the Participant's
Normal Retirement Date.
(c) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be the same form as determined under the terms of the Qualified Retirement Plan (single life annuity for an unmarried Participant or 50% Joint and Survivor Annuity for a married Participant), except as may be provided in Article XIV, as applicable.
ARTICLE IX
15-YEAR SERVICE BENEFIT
(a) QUALIFICATION FOR BENEFIT. Subject to the provisions of Article IV, a Participant who terminates employment with the Employer with 15 or more years of Company Service but who is not then eligible for other benefits under this Plan (other than the 10-year Service Benefit) shall be eligible to receive a 15-Year Service Benefit commencing at the time set forth in Section (b) of this Article.
(b) COMPUTATION OF AMOUNT OF 15-YEAR SERVICE BENEFIT. A Participant who is
eligible for a 15-Year Service Benefit shall be entitled to receive,
commencing on the later of his Normal Retirement Date or the first day
of the month after his application therefor, a monthly Supplemental
Retirement Benefit equal to the excess, if any, of:
(i) the monthly benefit (expressed as a single life annuity, but
not including any temporary supplements) payable to the
Participant under the terms of the Qualified Retirement Plan
at his Normal Retirement Date but calculated without regard to
any statutory limits under Code Sections 401(a)(7) or 415(b),
minus
(ii) the monthly benefit (expressed as a single life annuity, but
not including any temporary supplements) payable to the
Participant under the terms of the Qualified Retirement Plan
at his Normal Retirement Date (as defined herein), assuming
(i) for purposes of determining when the Participant could
elect commencement of his benefit under the Qualified
Retirement Plan (but not for purposes of determining the
amount thereof) that the Participant had sufficient service
under the Qualified Retirement Plan to have a right to
commence his benefit under the Qualified Retirement Plan at
his Normal Retirement Date, and (ii) that the Participant
elected commencement of such benefit at his Normal Retirement
Date.
The Participant, at his election, may commence his benefits under this
Article on the first day of any month after his date of retirement and
before his Normal Retirement Date, but in that case his monthly benefit
computed under the preceding sentence shall be actuarially reduced
using the assumptions identified in Article III(a)(1) for each full
month by which the date of commencement precedes the Participant's
Normal Retirement Date.
(c) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be the same form as determined under the terms of the Qualified Retirement Plan (single life annuity for an unmarried Participant or 50% Joint and Survivor Annuity for a married Participant), except as may be provided in Article XIV, as applicable.
ARTICLE X
DISABILITY BENEFIT
(a) QUALIFIED FOR BENEFIT. Subject to the provisions of Article IV, if a Participant's employment with the Employer is terminated before he reaches his Early Retirement Age by reason of his Total Disability (to be determined solely in the discretion of the Committee based upon satisfactory medical evidence submitted to the Committee, including recognition of the Participant's receipt of disability benefits under the Social Security Act), such Participant shall be eligible to receive a Disability Benefit commencing at the time set forth in Section (b) of this Article.
(b) COMPUTATION OF AMOUNT OF DISABILITY BENEFIT. A Participant who is eligible for a Disability Benefit shall be entitled to receive, commencing on the first day of the month following the later of the date of the Participant's termination of employment on account of total Disability or his application therefor, a monthly Supplemental Retirement Benefit
equal to (1) 50% of the Participant's Final Average Monthly
Compensation multiplied by his Service Fraction, reduced by (2) the sum
of:
(i) 50% of the monthly Social Security Benefit that would be
payable to the Participant on account of his Total Disability
if he were determined to be entitled to receive a Social
Security Benefit as a result of his Total Disability (whether
or not the Participant in fact qualifies for such Social
Security Benefit); and
(ii) the monthly benefit (expressed as a single life annuity, but
not including any temporary supplements) that would be payable
to the Participant under the terms of the Qualified Retirement
Plan on account of his Total Disability if he were determined
to be entitled to receive a monthly disability benefit under
the Qualified Retirement Plan as a result of his Total
Disability (whether or not the Participant in fact qualifies
for such monthly disability benefit), assuming, for purposes
of determining the Participant's eligibility for a disability
pension under the Qualified Retirement Plan (but not for
purposes of determining the amount thereof), that the
Participant had sufficient service under the Qualified
Retirement Plan to be eligible for a disability pension
thereunder;
the difference of (i) minus (ii) then being multiplied by
83.4%.
(c) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be the same form as determined under the terms of the Qualified Plan (single life annuity for an unmarried Participant or 50% Joint and Survivor Annuity for a married Participant) paid monthly until the earlier of the first day of the month for which the committee determines that the Participant no longer has a Total Disability, or the first day of the month in which occurs the Participant's death (except as may be provided in Article XIV, as applicable). The Committee may, in its discretion, take such steps as it deems necessary to determine the continued existence of a Participant's Total Disability and may cease or reduce the Disability Benefit payable hereunder if it is established to the Committee's satisfaction (as determined under the same standards recognized at the time the Committee initially deemed the Participant as suffering a Total Disability) that such Total Disability no longer exists or Social Security Disability Benefits are no longer being paid.
ARTICLE XI
BENEFIT UPON CHANGE IN CONTROL
(a) QUALIFICATION FOR BENEFIT. A Participant who (1) terminates employment with the Employer following a Change in Control and (2) is not at the time of such termination of employment eligible for a Normal Retirement Benefit, an Early Retirement Benefit, an Involuntary Termination Benefit or a Disability Benefit, shall be eligible for a Change in Control Benefit commencing at the time set forth in Section (c) of this Article.
(b) CHANGE IN CONTROL. For purposes of the Plan, a "change in control"
shall have occurred if any of the events described in the following
paragraphs (i) through (v) of this Section (b) occur and if none of the
circumstances described in the succeeding unnumbered paragraphs of this
Section (b) also exist or subsequently come into existence:
(i) The Company is merged or consolidated or reorganized into or
with another corporation or other legal person, and as a
result of such merger, consolidation or reorganization less
than a majority of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transaction is held in the aggregate by
the holders of Voting Stock (as that term is hereafter
defined) of the Company immediately prior to such transaction;
or
(ii) The Company sells or otherwise transfers all or substantially
all of its assets to any other corporation or other legal
person, and as a result of such sale or transfer less than a
majority of the combined voting power of the then-outstanding
securities of such corporation or person immediately after
such sale or transfer is held in the aggregate by the holders
of Voting Stock of the Company immediately prior to such sale
or transfer; or
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(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 promulgated under the Exchange
Act) of securities representing 20% or more of the combined
voting power of the then-outstanding securities entitled to
vote generally in the election of directors of the Company
("Voting Stock"); or
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange
Act disclosing in response to Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) 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
(v) If during any period of two consecutive years individuals who,
at the beginning of any such period, constitute the Board
cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election
by the Company's stockholders, of each director of the Company
first elected during such period was approved by a vote of at
least two-thirds of the Board then still in office who were
directors of the Company at the beginning of any such period.
Notwithstanding the foregoing provisions of paragraph (iii) or (iv) of this Section (b), a "Change in Control" shall not be deemed to have occurred for purposes of the Plan either (i) solely because (A) the Company (B) an entity in which the Company directly or indirectly beneficially owns 50% or more of the voting securities, or (C) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company, either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock whether in excess of 20% or otherwise, or because the Company reports that a change in control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership or (ii) solely because of a change in control of any Subsidiary by which a Participant may be employed. Notwithstanding the foregoing provisions of paragraphs
(i) through (iv) of this Section (b), if, prior to any event described
in paragraphs (i) through (iv) of this Section (b) instituted by any
person not an officer or director of the Company, or prior to any
disclosed proposal instituted by any person not an officer or director
of the Company which could lead to any such event, the management of
the Company proposes any restructuring of the Company which ultimately
leads to an event described in paragraphs (i) through (iv) of this
Section (b) pursuant to such management proposal, then a "Change in
Control" shall not be deemed to have occurred for purposes of this
Plan.
If (i) any agreement to merge, consolidate, reorganize or sell or
otherwise transfer assets referred to in paragraph (i) or (ii) of this
Section (b) is terminated without such merger, consolidation,
reorganization or sale or transfer having been consummated, (ii) the
person filing a Schedule 13D or Schedule 14D-1 referred to in paragraph
(iii) of this Section (b) files an amendment to any such Schedule
disclosing that it no longer is the beneficial owner of securities
representing 20% or more of the Voting Stock of the Company, or (iii)
the Company reports that the change of control which it reported in the
filing referred to in paragraph (iv) of this Section (b) will not in
fact occur, the Board may, by notice to Participants, declare that a
Change in Control has not occurred for purposes of the Plan
(notwithstanding the occurrence of the previous events referred to in
paragraph (i), (ii), (iii) or (iv) of this Section (b)), provided that
such declaration shall be without prejudice to any exercise by
Participants of rights under this Article XII that may have occurred
prior to such declaration.
As used in this Article XII, the term "Subsidiary" means a corporation,
company, partnership, or other entity (i) more than 50% of the
outstanding shares or securities (representing the right to vote for
the election of directors or other managing authority) of which are, or
(ii) which does not have outstanding shares or securities (as may be
the case in a partnership, joint venture or unincorporated
association), but more than 50 percent of whose ownership interest
representing the right generally to make decisions for such other
entity is, owned or controlled, directly or indirectly, by the Company,
but such corporation, company, or other entity shall be deemed to be a
Subsidiary only so long as such ownership or control exists.
(c) COMPUTATION OF AMOUNT OF CHANGE IN CONTROL BENEFIT. A Participant who
is eligible for a Change in Control Benefit shall be entitled to
receive, commencing at the later of his Normal Retirement Date or the
first day of the month after his application therefor, a monthly
Supplemental Retirement Benefit equal to 50% of the Participant's Final
Average Monthly Compensation multiplied by his Service Fraction,
reduced by the sum of:
(i) 50% of the monthly Social Security Benefit payable to the
Participant commencing on his Normal Retirement Date; and
(ii) the monthly benefit (expressed as a single life annuity not
including any temporary supplements) payable to the
Participant under the terms of the Qualified Retirement Plan
commencing on his Normal Retirement Date (as herein defined),
assuming (i) for purposes of determining whether the
Participant had a vested benefit under the Qualified
Retirement Plan and when the Participant
could elect commencement of his benefit under the Qualified Retirement Plan (but not for purposes of determining the amount thereof), that the Participant had sufficient service under the Qualified Retirement Plan to have a vested benefit under the Qualified Retirement Plan and a right to commence receiving such benefit at his Normal Retirement Date, and (ii) that the Participant elected commencement of such benefit at his Normal Retirement Date.
The Participant, at his election, may commence his benefits under this Article on the first day of any month after his date of retirement and before his Normal Retirement Date, but in that case his monthly benefit computed under the preceding sentence shall be actuarially reduced using the assumptions identified in Article III(a)(1) for each full month by which the date of commencement precedes the Participant's Normal Retirement Date.
(d) FORM AND DURATION OF PAYMENT. The form of a Participant's benefit under this Article shall be the same form as determined under the terms of the Qualified Retirement Plan (single life annuity for an unmarried Participant or 50% Joint and Survivor Annuity for a married Participant), except as may be provided in Article XIV, as applicable.
ARTICLE XII
DEATH BENEFIT
(a) Pre-Retirement
(i) QUALIFICATION FOR BENEFIT. Subject to the provisions of
Article IV, if a Participant dies with five (5) years of
Company Service but before commencing to receive payment of a
Supplemental Retirement Benefit (other than a Disability
Benefit), the surviving Spouse of such deceased Participant
shall be eligible for a Pre-Retirement Death Benefit
commencing at the time set forth in paragraph (ii) of this
Section.
(ii) COMPUTATION OF AMOUNT OF PRE-RETIREMENT DEATH BENEFIT. The
Pre-Retirement Death Benefit shall be a monthly benefit,
commencing on the later of the Participant's Normal Retirement
Date (or, in the case of a Participant who dies after his
Normal Retirement Date, on the first day of the month
following the Participant's death) or the first day of the
month after the surviving Spouse's application therefor, equal
in amount to the monthly Supplemental Retirement Benefit to
which the deceased Participant would have been entitled
commencing on his Normal Retirement Date (or, in the case of a
Participant who dies after his Normal Retirement Date, on the
first day of the month following his death).
In the case of the surviving Spouse of a Participant who dies before his Normal Retirement Date, the surviving Spouse, at the surviving Spouse's election, may commence the Pre-Retirement Death Benefit on the first day of any month after the later of the date on which the Participant would have reached age 60 had he not died or the date of the Participant's death and before the Participant's Normal Retirement Date, but in that case the Pre-Retirement Death Benefit shall be actuarially reduced using the assumptions specified in Article III(a)(1) for each
full month by which the date of commencement precedes the Participant's Normal Retirement Date.
(iii) FORM AND DURATION OF PAYMENT. The Pre-Retirement Death Benefit shall be a monthly benefit payable from the time of commencement set forth in paragraph (ii) of this Section (a) until the first day of the month coincident with the death of the surviving Spouse.
(b) POST-RETIREMENT DEATH BENEFIT
(i) Qualification for Benefit. The surviving Spouse of a deceased
Participant who has (a) died while receiving Supplemental
Retirement Benefits (including Disability Benefits) under the
Plan and whose optional form of payment elected at retirement
provides for a survivor benefit, or (b) who has qualified for
a Disability Benefit but who has not yet commenced receiving
such benefits, shall be eligible for the Post-Retirement Death
Benefit described in paragraph (ii) of this Section.
(ii) COMPUTATION OF AMOUNT OF ANNUAL BENEFIT. The Post-Retirement
Death Benefit shall be a monthly benefit in an amount equal to
either (a) 100%, or (b) 50% (as elected by the Participant) of
the reduced Supplemental Retirement Benefit the deceased
Participant was receiving at the time of his death (or, in the
case of the death of a Participant entitled to a Disability
Benefit, would have been receiving had he commenced receiving
the benefit at the time of his death).
(iii) COMMENCEMENT, FORM AND DURATION OF PAYMENT. The
Post-Retirement Death Benefit shall commence as of the first
day of the month immediately following the date of the
Participant's death, and shall continue to be paid as of the
first day of each month thereafter until the first day of the
month coincident with the death of the surviving Spouse.
(c) MINIMUM DEATH BENEFIT
(i) PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. As provided in
Section (a) hereof, at the death of a Participant who
satisfies the requirements, monthly death benefits are payable
to an eligible surviving Spouse for her remaining lifetime. If
the surviving Spouse has not received at least five years of
monthly benefit payments at her death, the remainder of the
five years of monthly benefit payments, if any, will be made
monthly to the Beneficiary named by the surviving Spouse. If
no Beneficiary is so named, the remaining payments, if any,
will be made to the Spouse's estate. If it is determined by
the Board of Directors (in its sole discretion) that the
remaining benefits shall be paid in a single sum, this amount
will be computed as noted in subsection (iii) below
(ii) PRE-RETIREMENT BENEFIT WITH NO SPOUSE. Notwithstanding the other sections of Article XII, a death benefit will be payable at the death of a Participant who is otherwise eligible under Sections (a) above, but has no surviving Spouse (or has no eligible surviving Spouse) at his death. The monthly death benefit will be determined and start as if the Participant has a surviving Spouse and will be paid to a Beneficiary, named by the Participant, as provided in Section (a) above. For purposes of the Pre-Retirement Death Benefit only, a minimum of five years of
monthly payments will be made to the Participant and/or the
named Beneficiary under this provision. If no Beneficiary is
named at the death of the Participant, any payments under this
Section will be payable to the Participant's estate. The Board
of Directors (in its sole discretion) shall determine if the
remaining payments shall be payable in a single sum amount.
This amount would be computed as noted in subsection (iii)
below.
(iii) DETERMINATION OF SINGLE SUM DEATH BENEFIT VALUE. If decided by the Board of Directors (in its sole discretion) that a single sum amount shall be payable under the five year minimum payments provisions of (c)(i) above, it will have the single sum amount determined actuarially, based on the circumstances of the benefits. Where appropriate, the GAM 83 Mortality Table, 7-1/2% interest, ages of the Participant and/or Spouse, and the timing of the payment of benefits will be used. The single sum value will be equal to the present value of the immediate or deferred payment recognizing the remainder of any five year number of payments due. The Board of Directors (in its sole discretion) does have the option of changing these assumptions, if they are deemed inappropriate and unreasonable at the time the single sum amount is determined.
ARTICLE XIII
PLAN ADMINISTRATION
The Company shall be responsible for the general administration of the Plan and for carrying out the provisions hereof. The Company shall have any and all power and authority (including discretion with respect to the exercise of that power and authority) which shall be necessary, advisable, desirable or convenient to enable it to carry out its duties under the Plan, including the powers: to resolve all questions arising under the Plan, such as questions of construction and interpretation; to adopt such rules and regulations as the Company may deem necessary or appropriate to provide for the administration of the Plan; to delegate such of its responsibilities and authorities hereunder to such individuals, committees or entities as the Company shall deem appropriate; and to take such further actions as the Company shall deem advisable in the administration of the Plan. The decision of the Company on any question concerning the interpretation or administration of this Plan shall be final and conclusive and nothing in the Plan shall be deemed to give a Participant, his surviving Spouse or other beneficiaries, or his or their legal representatives, any right to payments except to such extent, if any, as the Company may have determined subject to all the terms and conditions of the Plan. No member of the Board or the Committee, nor any individual, committee or entity to which any of the responsibilities or authority of the Committee or the Company hereunder are delegated, shall be liable for any act or determination made, in good faith, in regard to this Plan.
ARTICLE XIV
OPTIONAL FORMS OF PAYMENT
(a) ANNUITY OPTIONS. Any married Participant in the Plan, in lieu of the
automatic 50% Joint and Survivor form of payment, may elect to receive
his benefit in any of the following optional forms of payment:
OPTION 1: 100% JOINT AND SURVIVOR ANNUITY. A reduced monthly Retirement
Benefit which is Actuarially Equivalent to the single life annuity
under the Plan and is payable to the Participant for his life, with
continuance of monthly payments in such reduced amount after his death
to his surviving Spouse until the first day of the month coincident
with the death of the surviving Spouse.
OPTION 2: SINGLE LIFE ANNUITY. A monthly Supplemental Retirement
Benefit payable to the Participant for his life with no continuation of
benefits after his death.
(b) TIMING AND MANNER OF ELECTION. Any Participant for whom Section (a) applies, shall make such election to waive the automatic form of payment and in lieu thereof, to receive an alternative annuity form of payment allowed hereunder (or a lump sum pursuant to Section (c) below) in writing on a form provided by the Company, which form shall be filed with the Company prior to the Participant's termination of employment for any reason.
(c) LUMP SUM PAYMENTS. Notwithstanding any other provision of the Plan, but
subject to the approval of the Committee as described in Section (d) of
this Article, any Participant under the Plan may elect to receive the
benefits payable to him under the Plan, other than benefits payable
pursuant to Article X, in the form of a single lump sum payment. The
lump sum payment described in the preceding sentence shall be
calculated by converting the benefits otherwise payable to the
Participant at the time such benefits are to commence into a lump sum
amount of equivalent actuarial value when computed using the actuarial
factors described in Section (c)(ii) of Article X of the Plan. A
Participant who elects to receive a single lump sum payment pursuant to
the second preceding sentence may further elect that, in the event that
the Participant dies while employed, benefits payable as a result of
the Participant's death, other than benefits payable pursuant to
Section (c)(i) of Article XII of the Plan, shall be paid to the
Participant's Spouse without taking into account the election made
under the second preceding sentence. Any election by a Participant to
receive benefits under the Plan in the form of a single lump sum
payment shall be in writing on a form provided by the Company, which
form shall be filed with the Company (a) prior to the Participant's
termination of employment with the Employers because of involuntary
termination of employment (including by reason of disability) or death
or (b) at least 180 days prior to the Participant's voluntary
termination of employment with the Employers. Subject to the approval
of the Committee, any such election may be changed or revoked by the
Participant at any time and from time to time by the filing of a later
written election with the Company; provided, that any election made
less than 180 days prior to a Participant's voluntary termination of
employment shall not be valid, and in such case, payment shall be made
in accordance with the latest valid election of the Participant. The
payment by the Employers of a lump sum amount to a Participant (or his
Spouse, Beneficiary or
estate) pursuant to this Section shall discharge all obligations of the Employers to such Participant (or his Spouse, Beneficiary or estate) under the Plan. Payment of benefits in the form of a single lump sum payment pursuant to the election of a Participant under this Article is subject to the approval of the Committee, which may, in its sole and absolute discretion, approve or withdraw its prior approval of such election at any time prior to the date the lump sum payment is actually paid to the Participant and instead require that benefits be paid in such other form as is permitted by the Plan.
ARTICLE XV
MISCELLANEOUS
(a) FUNDING. The obligation of the Employers to pay Supplemental Retirement Benefits under the Plan constitutes the unsecured promise of the Employers to make payments from their general assets, and no Participant, Spouse or Beneficiary shall have any interest in, or a lien or prior claim upon, any property of the Employers. With respect to the Supplemental Retirement Benefits under the Plan, each Participant, Spouse or Beneficiary shall have the status of a general unsecured creditor of the Participant's Employer. The Company may establish a so-called "rabbi trust" to hold funds, stock or other securities to be used in payment of the obligations of the Employers under the Plan, and may fund such trust; provided, however, that any funds contained therein shall remain subject to the claims of the general creditors of the Company or any other Employer for which the Participant performs services. It is the intention of the Employers that the Plan be unfunded for tax purposes and for purposes of Title I of ERISA. No liability for the payment of benefits under the Plan shall be imposed upon any officer, director, employee or stockholder of the Company or any other Employer, or upon the Board, the Committee or any member thereof.
(b) NO GUARANTY OF BENEFITS. Nothing contained in this Plan shall constitute a guaranty by any Employer, the Committee or the Board that the assets of any Employer will be sufficient to pay any benefit hereunder.
(c) ASSIGNMENTS AND RESTRICTIONS. To the extent permitted by law, and except as otherwise provided in this Section (c), no right or interest of a Participant or Spouse under this Plan shall be transferable or assignable (either at law or in equity), nor shall any such right or interest be subject to alienation, anticipation, encumbrance, attachment, garnishment, levy, execution or other legal or equitable process of any kind, voluntary or involuntary, or in any manner be liable for or subject to the debts of any Participant or Spouse. If a Participant shall attempt to or shall transfer, assign, alienate, anticipate, sell, pledge or otherwise encumber his benefits hereunder or any part thereof, or if by reason of his bankruptcy or other event happening at any time such benefits would devolve upon anyone else or would not be enjoyed by him, then the Company, in its discretion, may terminate his interest in any such benefit to the extent the Company considers necessary or advisable to prevent or limit the effects of such occurrence. Termination shall be effected by filing a "termination declaration" with the Committee and making reasonable efforts to deliver a copy to the Participant (the "Terminated Participant") whose interest is affected thereby. As long as the Terminated Participant is alive, any benefits affected
by the termination shall be retained by the Company and, in the Company's sole and absolute judgement, may be paid to or expended for the benefit of the Terminated Participant, his spouse, his children or any other person or persons in fact dependent upon him in such a manner as the Company shall deem proper. Upon the death of the Terminated Participant, all benefits withheld from him and not paid to others in accordance with the preceding sentence shall be paid to the Terminated Participant's surviving Spouse or, if none, to the Terminated Participant's then living descendants, including adopted children, PER STIRPES.
Notwithstanding the foregoing, amounts payable under this Plan may be withheld by the Company as they become due to the extent necessary to cover any debts or other obligations owed to the Company by the Participant, but only if such debts or other obligations are acknowledged as such in writing by the Participant or are confirmed as such by a final, nonappealable order of a court of competent jurisdiction.
(d) HEADINGS. The various headings used in this Plan are for convenience only and shall not be used in interpreting the text of the Article, Section, paragraph or subparagraph in which they appear.
(e) EMPLOYMENT. The establishment of this Plan shall not be construed to give any Participant the right to be retained in the service of the Employer.
(f) APPLICABLE LAW. The validity, interpretation, construction and performance of this Plan shall be governed by the internal substantive laws of the State of Ohio, without giving effect to the principles of conflict of laws of such State.
(g) BINDING EFFECT ON EMPLOYER, PARTICIPANTS, SPOUSES AND THEIR SUCCESSORS. This Plan shall be binding and inure to the benefit of any Employer or its successors and assigns, and the Participants, Spouses and their heirs, legatees, distributees, executors, administrators or other legal representatives.
(h) AMENDMENT AND DISCONTINUANCE. The Company reserves the right in its sole discretion to amend or terminate this Plan at any time with regard to itself or any Employer, provided that no such amendment or termination shall affect any benefits then being paid to Participants or Spouses under the Plan as of the date of such termination and the rights of or with respect to all other Participants at the time of any such termination to immediate or deferred Supplemental Retirement Benefits shall be determined as if the employment of each such Participant had been involuntarily terminated, but not Terminated for Cause, on the date of such termination. After any termination of the Plan, each Employer shall remain obligated to pay those benefits described in the preceding sentence in accordance with the terms of the Plan in effect immediately before such termination.
(i) PARTICIPANT INFORMATION. Each Participant shall keep the Committee informed of his current address and the current address of his Spouse, if applicable. The Participant shall
furnish to the Committee any and all information deemed by the Committee to be necessary or desirable for the proper administration of the Plan.
IN WITNESS WHEREOF, this Diebold, Incorporated Supplemental Employee Retirement Plan has been executed this 15 day of July, 2002, effective as of July 1, 2002.
DIEBOLD, INCORPORATED
By: /s/ Charles B. Scheurer -------------------------------- Its: Vice President, Human Resources |
[DIEBOLD LOGO] EXHIBIT 10.10
AMENDED AND RESTATED
1992 DEFERRED INCENTIVE COMPENSATION PLAN
(AS AMENDED EFFECTIVE AS OF AUGUST 8, 1998)
Diebold, Incorporated established, effective as of May 19, 1992, the 1992 Deferred Incentive Compensation Plan for Diebold, Incorporated. Such plan was amended and restated as of July 1, 1993 to provide the opportunity to defer incentive compensation payments in Common Shares, in addition to cash, in accordance with the provisions of this Plan. Such plan was further amended as of January 1, 1995 to provide for a change in the interest computation on deferred amounts, was further amended as of April 9, 1998 to provide for 162(m) compensation and was further amended as of August 8, 1998 to provide for a subsequent election of deferred funds.
ARTICLE I
DEFINITIONS
For the purposes hereof, the following words and phrases shall have the meanings indicated.
1. "Account" shall mean a bookkeeping account in which Incentive Compensation which is deferred by a Participant shall be recorded and to which gains, losses, earnings, dividends, distributions and interest may be credited in accordance with the Plan.
2. "Beneficiary" or "Beneficiaries" shall mean the person or persons designated by a Participant in accordance with the Plan to receive payment of the remaining balance of the Participant's Account in the event of the death of the Participant prior to receipt of the entire amount credited to the Participant's Account.
3. "Board" shall mean the Board of Directors of the Company.
4. "Change in Control" shall mean that:
(i) The Company is merged or consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the securities of such corporation or person that are outstanding immediately following the consummation of such transaction is held in the aggregate by the holders of Voting Stock (as hereinafter defined) of the Company immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or substantially all of its assets to any other corporation or other legal person, and as a result of such sale or transfer less than a majority of the combined voting power of the securities of such corporation or person that are outstanding immediately following the consummation of such sale or transfer is held in the aggregate by the holders of Voting Stock (as hereinafter defined) of the Company immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report) thereto, each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (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 promulgated under the Exchange Act) of securities representing 20 percent or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the Company (the "Voting Stock");
(iv) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) 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
(v) If during any period of two consecutive years, individuals who at the beginning of any such period constitute the Board cease for any reason to constitute at least a majority of the members thereof, unless the election, or the nomination for election by the Company's stockholders, of each member of the Board first elected during such period was approved by a vote of at least two-thirds of the members of the Board then still in office who were members of the Board at the beginning of any such period.
Notwithstanding the foregoing provisions of subsection (iii) or (iv) hereof, a "Change in Control" shall not be deemed to have occurred for purposes of this Agreement, either (1) solely because the Company, a Subsidiary, or any Company-sponsored employee stock ownership plan or other employee benefit plan of the Company, files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 20 percent or otherwise, or because the Company reports that a change in control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership or (2) solely because of a change in control of any Subsidiary by which any Participant may be employed. Notwithstanding the foregoing provisions of subsections (i-iv) hereof, if, prior to any event described in subsections (i-iv) hereof that may be instituted by any person who is not an officer or director of the Company, or prior to any disclosed proposal that may be instituted by any person who is not an officer or director of the Company that could lead to any such event, management proposes any restructuring of the Company that ultimately leads to an event described in subsections (i-iv) hereof pursuant to such management proposal, then a "Change in Control" shall not be deemed to have occurred for purposes of the Plan.
5. "Committee" shall mean the Compensation and Pension Committee of the Board or such other Committee as may be authorized by the Board to administer the Plan.
6. "Common Shares" shall mean Common Shares, $1.25 par value, of the Company or any security into which such Common Shares may be changed by reason of any transaction or event of the type referred to in Section 9 of Article II of the Plan.
7. "Company" shall mean Diebold, Incorporated and its successors, including, without limitation, the surviving corporation resulting from any merger or consolidation of Diebold, Incorporated with any other corporation or corporations.
8. "Election Agreement" shall mean an agreement in substantially the form attached hereto as Exhibit A, as modified from time to time by the Company.
9. "Eligible Associate" shall mean an associate of the Company (or a Subsidiary that has adopted the Plan) who is selected by the Board or a duly authorized committee thereof to participate in this Plan. Unless otherwise determined by the Board or a committee thereof, an Eligible Associate shall continue as such until termination of employment.
10. "Incentive Compensation" shall mean (i) cash incentive compensation earned as an associate pursuant to an incentive compensation plan now in effect or hereafter established by the Company, including, without limitation, the Annual Incentive Plan and the 1991 Plan, (ii) incentive compensation payable in the form of Common Shares pursuant to the 1991 Plan or any similar plan approved by the Board for purposes of this Plan, and (iii) compensation payable in either cash or Common Shares that is deferred under Section 162(m) Deferred Compensation Agreements between the Company and individual Participants.
11. "Insolvent" shall mean that the Company has become subject to a pending voluntary or involuntary proceeding under the United States Bankruptcy Code or has become unable to pay its debts as they mature.
12. "Participant" shall mean any Eligible Associate who has at any time elected to defer the receipt of Incentive Compensation in accordance with the Plan.
13. "Plan" shall mean this deferred incentive compensation plan as amended and restated hereby, together with all amendments hereto, which shall be known as the 1992 Deferred Incentive Compensation Plan for Diebold, Incorporated.
14. "Subsidiary" shall mean any corporation, joint venture, partnership, unincorporated association or other entity in which the Company has a direct or indirect ownership or other equity interest and directly or indirectly owns or controls more than 50 percent of the total combined voting or other decision-making power.
15. "Year" shall mean a calendar year.
16. "1991 Plan" shall mean the Diebold, Incorporated 1991 Equity and Performance Incentive Plan, as amended from time to time.
ARTICLE II
ELECTION TO DEFER
1. ELIGIBILITY. An Eligible Associate may elect to defer receipt of all or a specified part of his or her Incentive Compensation for any Year in accordance with Section 2 of this Article. An Eligible Associate's entitlement to defer shall cease with respect to the Year following the Year in which he or she ceases to be an Eligible Associate.
2. ELECTION TO DEFER. An Eligible Associate who desires to defer the payment of all or a portion of his or her Incentive Compensation must complete and deliver an Election Agreement to the Secretary of the Company before the first day of the Year in which Incentive Compensation would otherwise be paid. An Eligible Associate who timely delivers an Election Agreement to the Secretary of the Company shall be a Participant. An Election Agreement that is timely delivered shall be effective for the succeeding Year and, except as otherwise specified by an Eligible Associate in his or her Election Agreement, shall continue to be effective from Year to Year until revoked or modified by written notice to the Secretary of the Company or until terminated automatically upon either the termination of the Plan or the Company becoming Insolvent. Except as provided for in Subsection (iii) of Section 5 of this Article, in order to be effective to revoke or modify an election to defer Incentive Compensation otherwise payable in any particular Year, a revocation or modification must be delivered prior to the beginning of the first Year of service for which such Incentive Compensation is payable.
3. AMOUNT DEFERRED; PERIOD OF DEFERRAL. (i) Except in the case of Incentive Compensation described in Section 10(iii) of Article I of the Plan, a Participant shall designate on the Election Agreement the percentage of his or her Incentive Compensation that is to be deferred. A Participant may specify in the Election Agreement that different percentages shall apply to different Incentive Compensation plans or different forms of payment, i.e., cash or Common Shares. The applicable percentage or percentages of Incentive Compensation shall be deferred until the earlier to occur of (a) the date
the Participant ceases to be an associate by death, retirement or otherwise or
(b) the date specified by the Participant in the Election Agreement.
(ii) In the case of Incentive Compensation described in Section 10(iii) of the Plan, Participant shall specify in the Election Agreement whether the period of deferral will be until (a) December 31 of the first succeeding tax year in which such amount, when added to all other compensation received or to be received by the Participant in such year, would not be non-deductible by the Company by reason of Section 162(m) of the Internal Revenue Code of 1986, as amended, (b) the date the Participant ceases to be an associate of the Company by reason of death, retirement or otherwise (or 90 days thereafter in the event the Executive ceases to be an associate on December 31 of a year) or (c) a period of time following the date the Participant ceases to be an associate by reason of death, retirement or otherwise, as specified by the Executive in the Election Agreement.
4. ACCOUNTS. (i) Cash Incentive Compensation that a Participant elects to defer shall be treated as if it were set aside in an Account on the date the Incentive Compensation would otherwise have been paid to the Participant. A Participant's Account shall be credited with gains, losses and earnings based on hypothetical investment directions made by the Participant, in accordance with investment deferral crediting options and procedures adopted by the Committee from time to time. A Participant may change such hypothetical investment directions pursuant to such procedures adopted by the Committee from time to time. The Company specifically retains the right in its sole discretion to change the investment deferral crediting options and procedures from time to time. By electing to defer any amount pursuant to the Plan, each Participant shall thereby acknowledge and agree that the Company is not and shall not be required to make any investment in connection with the Plan, nor is it required to follow the Participant's hypothetical investment directions in any actual investment it may make or acquire in connection with the Plan or in determining the amount of any actual or contingent liability or obligation of the Company thereunder or relating thereto. Any amounts credited to a Participant's Account with respect to which a Participant does not provide investment direction shall be credited with earnings in an amount determined by the Committee in its sole discretion or, if an amount is not so determined, such amounts shall bear interest at Moody's Seasoned Bond Rate plus 3% until further ordered by the Committee or the Board of Directors. A Participant's Account shall be adjusted as of each business day, except that interest, if any, for a calendar quarter shall be credited on the first day of the following quarter.
(ii) Incentive Compensation payable in the form of Common Shares that a
Participant elects to defer shall be reflected in a separate Account, which
shall be credited with the number of Common Shares that would otherwise have
been issued or transferred and delivered to the Participant. Such Account shall
be credited from time to time with amounts equal to dividends or other
distributions paid on the number of Common Shares reflected in such Account, and
such Account shall be credited with gains, losses and earnings on cash amounts
credited to such Account from time to time in the manner provided in Subsection
(i) above with respect to Cash Incentive Compensation.
(iii) Until such time that the Committee adopts the investment deferral crediting options and procedures described in Subsection (i) above, all incentive compensation added in the form of cash to a Participant's Account shall bear interest in the manner described in Subsection (i) above, except that a Participant may direct, unless otherwise determined by the Secretary of the Company, that all or any portion of his or her Account attributable to Cash Incentive Compensation be deemed invested in Common Shares and treated in a manner similar to that prescribed in Subsection (ii) above.
5. PAYMENT OF ACCOUNTS. The amounts in Participants' Accounts shall be paid as provided in this Section 5.
(i) The amount of a Participant's Account attributable to deferral of cash Incentive Compensation shall be paid to the Participant in a lump sum or in a number of approximately equal quarterly installments (not to exceed 40), as designated by the Participant in the Election Agreement. The amount of such Account remaining unpaid shall continue to be credited with gains, losses and earnings as provided in Section 4 of this Article. The lump sum payment or the first quarterly installment, as the case may be, shall be made as soon as practicable following the end of the period of deferral as specified in Section 3 of this Article.
(ii) The number of Common Shares in a Participant's Account attributable to deferral of Incentive Compensation payable in the form of Common Shares shall be issued or transferred to the Participant as soon as practicable following the end of the period of deferral as specified in Section 3 of this Article. All amounts credited to such Account in respect of dividends and distributions, and the gains, losses and earnings thereon as provided in Subsection (ii) of Section 4 of this Article shall likewise be paid to the Participant at such time. Upon application of an Eligible Associate prior to his or her election to defer Incentive Compensation payable in the form of Common Shares, the Committee may authorize payment in installments of the amounts in his or her Account attributable to such Incentive Compensation.
(iii) Subject to the approval of the Company as described below in this Section, a Participant may make a subsequent election requesting a change in the period of deferral (subject to the limitations set forth in Section 3 of this Article) and/or the form of payment (subject to the limitations set forth in this Section 5). Such subsequent election shall be in writing on a form provided by the Company, which form must be filed with the Company (a) at a time at which the Participant is an employee of the Company and (b), except as described below in the sentence that immediately follows, at least 180 days prior to the date on which the Participant otherwise would be entitled to receive a lump sum payment or the first installment of a payment, as the case may be. The 180-day notice requirement described in (b) above, however, does not apply in the case where the Participant otherwise would be entitled to receive a lump sum payment or the first installment of a payment following an involuntary termination of the Participant's employment, including by reason of death or disability. Payment of benefits pursuant to the subsequent election of a Participant under this Section is subject to the approval of the Company, which may, at its discretion, approve or withdraw its prior approval of such subsequent election at any time prior to the date the lump sum payment is actually paid to the Participant or the first installment is actually paid to the Participant, as the case may be, and instead require that benefits be paid in accordance with the latest valid election of the Participant.
6. DEATH OF A PARTICIPANT. In the event of the death of a Participant, the amount of the Participant's Account or Accounts shall be paid to the Beneficiary or Beneficiaries designated in a writing substantially in the form attached hereto as Exhibit B (the "Beneficiary Designation"), in accordance with the Participant's Election Agreement and Section 5 of this Article. A Participant's Beneficiary Designation may be changed at any time prior to his or her death by the execution and delivery of a new Beneficiary Designation. The Beneficiary Designation on file with the Company that bears the latest date at the time of the Participant's death shall govern. In the absence of a Beneficiary Designation or the failure of any Beneficiary to survive the Participant, the amount of the Participant's Account or Accounts shall be paid to the Participant's estate in a lump sum 90 days after the appointment of an executor or administrator. In the event of the death of the Beneficiary or Beneficiaries after the death of a Participant, the remaining amount of the Account or Accounts shall be paid in a lump sum to the estate of the last Beneficiary to receive payments 90 days after the appointment of an executor or administrator.
7. SMALL PAYMENTS. Notwithstanding the foregoing, if installment payments elected by a Participant would result in a payment with a value of less than $500, the entire amount of the Participant's Account or Accounts may at the discretion of the Board be paid in a lump sum in accordance with Section 5 of this Article.
8. ACCELERATION. Notwithstanding the provisions of the foregoing: (i) if a Change in Control occurs, the amount of each Participant's Account or Accounts shall immediately be paid to the Participant in full; (ii) in the event of an unforeseeable emergency, as defined in section 1.457-2(h)(4) and (5) of the Income Tax Regulations, that is caused by an event beyond the control of the Participant or Beneficiary and that would result in severe financial hardship to the individual if acceleration were not permitted, the Board may in its sole discretion accelerate the payment to the Participant or Beneficiary of the amount of his or her Account or Accounts, but only up to the amount necessary to meet the emergency.
9. ADJUSTMENTS. The Board may make or provide for such adjustments in the numbers of Common Shares credited to Participants' Accounts, and in the kind of shares so credited, as the Board in its sole discretion, exercised in good faith, may determine is equitably required to prevent dilution or enlargement of the rights of Participants that otherwise would result
from (i) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or
(ii) any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (iii) any other
corporate transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Board, in its
discretion, may provide in substitution for any or all Common Shares deliverable
under this Plan such alternative consideration as it, in good faith, may
determine to be equitable in the circumstances.
10. FRACTIONAL SHARES. The Company shall not be required to issue any fractional Common Shares pursuant to this Plan. The Board may provide for the elimination of fractions or for the settlement of fractions in cash.
ARTICLE III
ADMINISTRATION
The Company, through its Board, shall be responsible for the general administration of the Plan and for carrying out the provisions hereof. The Board may delegate any or all of its authority under the Plan to the Committee. The Company shall have all such powers as may be necessary to carry out the provisions of the Plan, including the power to (i) determine all questions relating to eligibility for participation in the Plan and the amount in the Account or Accounts of any Participant and all questions pertaining to claims for benefits and procedures for claim review, (ii) resolve all other questions arising under the Plan, including any questions of construction, and (iii) take such further action as the Company shall deem advisable in the administration of the Plan. The actions taken and the decisions made by the Company hereunder shall be final and binding upon all interested parties. In accordance with the provisions of Section 503 of the Employee Retirement Income Security Act of 1974, the Company shall provide a procedure for handling claims of Participants or their Beneficiaries under this Plan. Such procedure shall be in accordance with regulations issued by the Secretary of Labor and shall provide adequate written notice within a reasonable period of time with respect to the denial of any such claim as well as a reasonable opportunity for a full and fair review by the Company of any such denial.
ARTICLE IV
AMENDMENT AND TERMINATION
The Company reserves the right to amend or terminate the Plan at any time by action of the Board; provided, however, that no such action shall adversely affect any Participant or Beneficiary who has an Account, or result in the acceleration of payment of the amount of any Account (except as otherwise permitted under the Plan), without the consent of the Participant or Beneficiary.
ARTICLE V
MISCELLANEOUS
1. NON-ALIENATION OF DEFERRED COMPENSATION. Except as permitted by this Plan, no right or interest under this Plan of any Participant or Beneficiary shall, without the written consent of the Company, be (i) assignable or transferable in any manner, (ii) subject to alienation, anticipation, sale, pledge, encumbrance, attachment, garnishment or other legal process or (iii) in any manner liable for or subject to the debts or liabilities of the Participant or Beneficiary.
2. PARTICIPATION BY ASSOCIATES OF SUBSIDIARIES. An Eligible Associate who is employed by a Subsidiary and elects to participate in the Plan shall participate on the same basis as an associate of the Company. The Account or Accounts of a Participant employed by a Subsidiary shall be paid in accordance with the Plan solely by such Subsidiary to the extent attributable to Incentive Compensation that would have been paid by such Subsidiary in the absence of deferral pursuant to the Plan.
3. INTEREST OF ASSOCIATE. The obligation of the Company under the Plan to make payment of amounts reflected in an Account merely constitutes the unsecured promise of the Company to make payments from its general assets or in the
form of its Common Shares, as the case may be, as provided herein, and no Participant or Beneficiary shall have any interest in, or a lien or prior claim upon, any property of the Company. Further, no Participant or Beneficiary shall have any claim whatsoever against any Subsidiary for amounts reflected in an Account. The Company shall establish a so-called "rabbi trust" to hold funds, Common Shares or other securities to be used in payment of its obligations under the Plan, and may fund such trust; provided, however, that any funds contained therein shall remain subject to the claims of the general creditors of the Company or the Subsidiary for which the Eligible Associate performs services. Nothing in this Plan shall be construed as guaranteeing future employment to Eligible Associates. It is the intention of the Company that the Plan be unfunded for tax purposes and for purposes of Title I of ERISA.
4. CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in no event be construed as giving any other person, firm or corporation any legal or equitable right as against the Company or any Subsidiary or the officers, associates or directors of the Company or any Subsidiary, except any such rights as are specifically provided for in the Plan or are hereafter created in accordance with the terms and provisions of the Plan.
5. SEVERABILITY. The invalidity and unenforceability of any particular provision of the Plan shall not affect any other provision hereof, and the Plan shall be construed in all respects as if such invalid or unenforceable provision were omitted herefrom.
6. GOVERNING LAW. Except to the extent preempted by federal law, the provisions of the Plan shall be governed and construed in accordance with the laws of the State of Ohio.
7. RELATIONSHIP TO OTHER PLANS. This Plan is intended to serve the purposes of and to be consistent with the 1991 Plan and any similar plan approved by the Board for purposes of this Plan. The issuance or transfer of Common Shares pursuant to this Plan shall be subject in all respects to the terms and conditions of the 1991 Plan and any other such plan. Without limiting the generality of the foregoing, Common Shares credited to the Accounts of Participants pursuant to this Plan as Incentive Compensation shall be taken into account for purposes of Section 3 of the 1991 Plan (Shares Available Under the Plan) and for purposes of the corresponding provisions of any other such plan.
[DIEBOLD LOGO] EXHIBIT A
AMENDED AND RESTATED 1992 DEFERRED INCENTIVE COMPENSATION PLAN
ELECTION AGREEMENT
I hereby elect to participate in the Amended and Restated 1992 Deferred Incentive Compensation Plan for Diebold, Incorporated (the "Plan") with respect to the Incentive Compensation that I may receive beginning January 1, ______.
I hereby elect to defer payment of the Incentive Compensation which I otherwise would be entitled to receive as follows:
DEFERRAL OF CASH
1. Percentage of bonus, if any, payable under Annual Incentive Plan (a) in ______ only [ ] or (b) in ______ and in later years [ ] (check one):
25% [ ] 100% [ ]
50% [ ] ___% [ ]
2. Percentage of cash award, if any, payable under the Amended and Restated 1991 Equity and Performance Incentive Plan (a) in ______ only [ ] or (b) in ______ and in later years [ ] (check one):
25% [ ] 100% [ ]
50% [ ] ___% [ ]
3. Please make payment of the above specified cash Incentive Compensation together with all accrued interest reflected in my Account as follows:
a. Pay in lump sum [ ]
b. Pay in ___ approximately equal quarterly
installments (may not be more than 40) [ ]
4. Please defer payment or make payment of first installment as follows:
a. Defer until the date I cease to be an associate
[ ]
b. Defer until _________ [ ] (specify date)
DEFERRAL OF COMMON SHARES
1. Percentage of Common Shares, if any, payable under the Amended and Restated 1991 Equity and Performance Incentive Plan (a) in ______ only [ ] or (b) in ______ and in later years [ ] (check one):
25% [ ] 100% [ ]
50% [ ] ___% [ ]
2. Percentage of Common Shares, if any, payable under the Amended and Restated 1991 Equity and Performance Incentive Plan in the form of Restricted Shares that become nonforfeitable (I.E., vested) (a) in ________ only [ ] or (b) in __________ and in later years [ ] (check one):*
25% [ ] 100% [ ] 50% [ ] ___% [ ]
3. Please defer my receipt of Common Shares together with the cash credited to my Account equal to dividends or other distributions paid on the number of shares reflected in such Account, together with all accrued interest, as follows:
a. Defer until the date I cease to be an associate
[ ]
b. Defer until _________ [ ] (specify date)
I acknowledge that I have reviewed the Plan and understand that my participation will be subject to the terms and conditions contained in the Plan. Capitalized terms used, but not otherwise defined, in this Election Agreement shall have the respective meanings assigned to them in the Plan.
I understand that (i) this Election Agreement shall continue to be effective from Year to Year except as specified above and except as otherwise provided in the Plan and (ii) in order to be effective to revoke or modify this Election Agreement with respect to Incentive Compensation otherwise payable in a particular Year, a revocation or modification must be delivered to the Secretary of the Company prior to the beginning of the first Year of service for which such Incentive Compensation is payable.
I acknowledge that I have been advised to consult with my own financial, tax, estate planning and legal advisors before making this election to defer in order to determine the tax effects and other implications of my participation in the Plan.
Dated this _____ day of ________________, _________.
___________________________________________[signature]
[printed name]
* NOTE:
If you elect to defer payment with respect to Restricted Shares, you
will be deemed, as of the date of the Company's acceptance of your election, to
have surrendered the Restricted Shares and to have your account under the Plan
credited with an equal number of Common Shares. Accordingly, as of that date,
you will no longer have voting and dividend rights with respect to the
Restricted Shares surrendered. Your account under the Plan, however, will be
credited from time to time with amounts equal to the dividends paid on the
number of Common Shares reflected in such account. In addition to being subject
to the rules of the Plan, your account for the remainder of time that the
Restricted Shares would have been subject to a risk of forfeiture will to the
same extent and under the same circumstances be subject to a risk of forfeiture.
[DIEBOLD LOGO] EXHIBIT B
AMENDED AND RESTATED
1992 DEFERRED INCENTIVE COMPENSATION PLAN
BENEFICIARY DESIGNATIONS
In accordance with the terms and conditions of the 1992 Deferred Incentive Compensation Plan of Diebold, Incorporated (the "Plan"), I hereby designate the person(s) indicated below as my beneficiary(ies) to receive the amounts payable under said Plan.
Name _____________________________________ Address _____________________________________ _____________________________________ _____________________________________ |
Social Security Nos. of Beneficiary(ies) ___________________________
Relationship(s) _____________________________________
Date(s) of Birth _____________________________________
In the event the above-named beneficiary(ies) predecease(s) me, I hereby designate the following person as beneficiary(ies):
Name _____________________________________ Address _____________________________________ _____________________________________ _____________________________________ |
Social Security Nos. of Beneficiary(ies) __________________________
Relationship(s) _____________________________________
Date(s) of Birth _____________________________________
I hereby expressly revoke all prior designations of beneficiary(ies), reserve the right to change the beneficiary(ies) herein designated and agree that the rights of said beneficiary(ies) shall be subject to the terms of the Plan. In the event there is no beneficiary living at the time of my death, I understand the amounts payable under the Plan will be paid to my estate.
_______________________ _____________________________________ Date (Signature) _____________________________________ (Print or type name) |
EXHIBIT 10.18 (ii)
June 25, 2002
Mr. Robert W. Mahoney
Diebold, Incorporated
3800 TABS Drive
Uniontown, Ohio 44685
Dear Bob:
This will confirm our recent conversation regarding your consulting services. Effective July 1, 2002, Diebold, Incorporated and you agree that your Retirement and Consulting Agreement is amended by extending the "Consulting Period," as defined in section 2a of that Agreement, such that the "Consulting Period" now will terminate on July 1, 2003.
As discussed, notwithstanding the amendment of "Consulting Period," your rights under section 3e of your Retirement and Consulting Agreement shall not be affected by this extension of your consulting arrangement. As a result, the term of the October 15, 1996 Nonqualified Stock Option Agreement shall expire on July 1, 2002.
We very much appreciate your past consulting services and look forward to working with you during the upcoming year.
If this letter accurately reflects our understanding, please indicate your agreement by signing where designated below. I am including two signed originals of this letter so please sign both, return one to me and keep one for your records. Again, thank you very much.
Sincerely yours,
DIEBOLD, INCORPORATED
/s/Charles B. Scheurer Charles B. Scheurer Vice President, Corporate Human Resources CBS/ma Accepted and Agreed by: /s/Robert W. Mahoney June 26, 2002 ------------------------------------ ------------------------ Robert W. Mahoney Date |
EXHIBIT 99.1
DIEBOLD, INCORPORATED
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350
In connection with the Quarterly Report on Form 10-Q of Diebold, Incorporated (the "Company") for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Walden W. O'Dell, Chairman of the Board, President and Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/Walden W. O'Dell ------------------------------ Walden W. O'Dell Chairman of the Board, President and Chief Executive Officer November 12, 2002 |
EXHIBIT 99.2
DIEBOLD, INCORPORATED
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350
In connection with the Quarterly Report on Form 10-Q of Diebold, Incorporated
(the "Company") for the period ending September 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Gregory
T. Geswein, Senior Vice President and Chief Financial Officer of the Company,
certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/Gregory T. Geswein ------------------------------ Gregory T. Geswein Senior Vice President and Chief Financial Officer November 12, 2002 |