Document:

Exhibit 10.3

 

Exhibit 10.3

KEYCORP

OFFICER GRANTS

(Award of Time-Lapsed Restricted Stock, Performance-Based Restricted Stock

and Stock Performance Shares)

«Name»

     By action of the Compensation Committee (the “Committee”) of the Board of Directors of
KeyCorp, taken pursuant to the KeyCorp 2004 Equity Compensation Plan (the “Plan”), and subject to
the terms and conditions of the Plan, you have been awarded «Stock» shares of Restricted Stock
subject to vesting upon the passing of time (the “Time-Lapsed Restricted Stock”), «Stock» shares of
Restricted Stock subject to vesting upon the achievement of specified performance criteria (the
“Performance-Based Restricted Stock”), and «Stock» Performance Shares subject to vesting upon the
achievement of specified performance criteria (the “Stock Performance Shares”) as described below.
The Time-Lapsed Restricted Stock and the Performance-Based Restricted Stock shall be referred to
herein collectively as the “Restricted Stock”. Unless otherwise indicated, the capitalized terms
used herein and in the attached Acceptance of Grant Agreement (the “Agreement”) shall have the same
meaning as set forth in the Plan.

	1.  	Date of Grant. The effective date of grant for the award of the Restricted Stock and
Stock Performance Shares shall be February 15, 2005 (the “date of grant”).

	2.  	Vesting of Time-Lapsed Restricted Stock. The Common Shares subject to this grant of
Time-Lapsed Restricted Stock may not be sold, transferred, otherwise disposed of, pledged or
otherwise hypothecated until the earlier of the following:

	 	(a)  	February 15, 2008; or
	 
	 	(b)  	the date not more than two years on or after a Change of Control upon which
your employment terminates under circumstances entitling you to receive severance
benefits or salary continuation benefits under KeyCorp’s Separation Pay Plan or under
any employment or change of control or similar arrangement or agreement.

	   	  	provided, however, that you have been in the continuous employ of KeyCorp or a Subsidiary
through such date.

	3.  	Vesting of Performance-Based Restricted Stock and Stock Performance Shares.

	 	(a)  	In General. Your right to receive the Performance-Based Restricted Stock and
the Stock Performance Shares shall be determined on the basis of KeyCorp’s

 

 

	 	   	Earnings per Share, Economic Profit Added and Return on Equity (as such terms are
defined in Appendix C to the resolutions of the Committee adopted on March
17, 2005 approving the performance goals for the Performance-Based Restricted Stock
and Stock Performance Shares (the “Resolutions”)) during the period of January 1,
2005 through December 31, 2007 (the “Performance Period”). You are able to earn up
to 100% of the Performance-Based Restricted Stock if the applicable targeted level
of performance is met or exceeded and up to 100% of the Stock Performance Shares if
the applicable maximum level of performance is met or exceeded.

	 	(b)  	Vesting of Performance-Based Restricted Stock. The Common Shares subject to
this grant of Performance-Based Restricted Stock may not be sold, transferred,
otherwise disposed of, pledged or otherwise hypothecated until February 15, 2008, but
only if (A) you have been in the continuous employ of KeyCorp or a Subsidiary through
such date and (B) the Committee shall determine that the Performance-Based Restricted
Stock has been earned as set forth on Appendix C to the Resolutions.
	 
	 	(c)  	Vesting of Stock Performance Shares. The Stock Performance Shares granted
hereunder shall be vested on February 15, 2008, but only if (A) you have been in the
continuous employ of KeyCorp or a Subsidiary through such date and (B) the Committee
shall determine that the Stock Performance Shares have been earned as set forth on
Appendix C to the Resolutions.
	 
	 	(d)  	Determination by the Committee. The amount of the Performance-Based Restricted
Stock and Stock Performance Shares that will vest and the level of attainment of the
applicable performance goals set forth on Appendix C to the Resolutions shall
be determined by the Committee as soon as practicable after the receipt of the audited
financial statements for KeyCorp relating to the last year of the Performance Period,
but in no event later than two and one-half months after the close of the last year of
the Performance Period.

	4.  	Transfers Void. Any purported transfer or encumbrance of the Time-Lapsed Restricted
Stock, Performance-Based Restricted Stock or Stock Performance Shares prior to the time that
they have vested as set forth in paragraph 2 and paragraph 3 shall be void, and the other
party to any such purported transaction shall not obtain any rights to or interest in the
Common Shares underlying such awards.

	5.  	Payment of Stock Performance Shares. Payment of any earned Stock Performance Shares
shall be made in the form of Common Shares.

	6.  	Death; Disability; Retirement at or after Age 65.

	(a)  	If you shall die or become Disabled or if you shall retire at age 65 or older prior to
vesting, then a pro rata number of the shares of Time-Lapsed Restricted Stock shall be

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	 	   	retained by you or your estate and become freely transferable upon death or Disability or
retirement at or after age 65, but the remainder shall immediately be forfeited upon your
death, Disability or retirement at or after age 65, as the case may be.

	(b)  	If you shall die or become Disabled or if you shall retire at age 65 or older prior to
vesting, then a pro rata number of the shares of Performance-Based Restricted Stock and Stock
Performance Shares actually earned as provided on Appendix C to the Resolutions shall
be retained by you or your estate and become freely transferable following the determination
of the attainment of the performance goals upon conclusion of the Performance Period, but the
remainder shall immediately be forfeited following the determination of the attainment of the
performance goals upon conclusion of the Performance Period.

	7.  	Retirement between ages 55 and 65. The Restricted Stock and the Stock Performance
Shares shall immediately be forfeited if you retire between the ages of 55 and 65 prior to
vesting; provided, however, that the Committee may in its sole discretion determine that a pro
rata number of the shares of Restricted Stock and Stock Performance Shares shall be retained
by you and become freely transferable upon retirement in the case of the Time-Lapsed
Restricted Stock and following the determination of the attainment of the performance goals
upon conclusion of the Performance Period in the case of the Performance-Based Restricted
Stock and Stock Performance Shares, but that the remainder shall immediately be forfeited.

	8.  	Upon Reaching Age 65. Notwithstanding paragraph 2 above, if you have been
continuously employed by KeyCorp or a Subsidiary, the restrictions shall lapse on a pro rata
number of the Time-Lapsed Restricted Stock when you reach age 65, and each year thereafter
that you remain employed on your birthday, the restrictions shall lapse on the lesser of an
additional one-third of the Time-Lapsed Restricted Shares or the number of Time-Lapsed
Restricted Shares remaining in this award.

	9.  	Pro-Ration. For purposes of this Agreement the pro rata number of shares of
Restricted Stock and Stock Performance Shares granted to you shall be based on a fraction the
numerator of which is the number of months beginning in February, 2005 that are completed
prior to your change of status and the denominator of which is 36.

	10.  	Forfeiture. The Restricted Stock and Stock Performance Shares shall be immediately
forfeited if your employment with KeyCorp or Subsidiary terminates prior to vesting as set
forth in paragraph 2 and paragraph 3 unless your employment terminates because of death,
Disability or retirement at or after age 65 (in which case the specific provisions of
paragraph 6 shall apply); provided, however, that the Committee may in its sole discretion
determine that a pro rata number of the shares of Restricted Stock and Stock Performance
Shares shall be retained by you and become freely transferable upon your termination of
employment in the case of the Time-Lapsed Restricted Stock and following the determination of
the attainment of the performance goals upon conclusion

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	 	  	of the Performance Period in the case of the Performance-Based Restricted Stock and Stock
Performance Shares, but that the remainder shall immediately be forfeited.

	11.  	KeyCorp Stock Ownership Guidelines. If you have not met KeyCorp’s Stock Ownership
Guidelines when vesting occurs, you may not sell or otherwise transfer the Restricted Stock or
the Stock Performance Shares until and unless you meet the Stock Ownership Guidelines or
terminate your employment with KeyCorp or a Subsidiary; provided, however, that
notwithstanding the foregoing you shall be permitted to sell the number of shares necessary to
satisfy any withholding tax obligation that may arise in connection with the vesting of the
Restricted Stock and Stock Performance Shares even if you have not met the Stock Ownership
Guidelines.

	12.  	Deferral . If you are eligible to participate in the KeyCorp Deferred Compensation
Plan (“Deferred Plan”) on the date of election, you may elect to exchange Performance-Based
Restricted Stock and Stock Performance Shares for an award of equal value which shall be
deferred into the Deferred Plan Common Stock Account; provided, however, that such election
shall be made at least one year prior to the vesting of the Performance-Based Restricted Stock
and Stock Performance Shares and provided further that the deferred award may not be
transferred to another account in the Deferred Plan. Time-Lapsed Restricted Stock is not
eligible for deferral under the Deferred Plan pursuant to this Section 12.

	13.  	Harmful Activity. Notwithstanding any other provisions of this Agreement, if you
engage in any “harmful activity” (as defined in Section 17 of the Plan) prior to or within six
months after your termination of employment with KeyCorp or a Subsidiary, then any and all shares of Restricted Stock and Stock Performance Shares which have vested on or after one year
prior to termination of employment shall be immediately forfeited to KeyCorp and any profits
realized upon your sale of any such shares of Restricted Stock or Stock Performance Shares
shall inure to and be payable to KeyCorp upon demand.

	14.  	No Acceleration. The provisions of Section 12 of the Plan entitled “Acceleration
upon Change of Control” shall not apply to the Restricted Stock and Stock Performance Shares
awarded pursuant to this Agreement; provided, however, that in the event of a Change of
Control, the performance goals relating to the Performance-Based Restricted Stock (and not the
Stock Performance Shares) shall be deemed to be satisfied at 100% of target and such
Performance-Based Restricted Stock shall become nonforfeitable on the same basis as the
Time-Lapsed Restricted Stock, which is on the earlier of: (a) February 15, 2008; or (b) the
date not more than two years on or after a Change of Control upon which your employment
terminates under circumstances entitling you to receive severance benefits or salary
continuation benefits under KeyCorp’s Separation Pay Plan or under any employment or change of
control or similar arrangement or agreement, but only if you have been in the continuous
employ of KeyCorp or a Subsidiary through such date.

	15.  	Rights as a Shareholder. From and after the date of grant, you shall have all of the
rights of a shareholder with respect to the shares of Restricted Stock granted hereby,
including

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	  	the right to vote the shares of Restricted Stock and receive any dividends that may be paid
thereon; provided however that any additional Common Shares or other securities that you may
become entitled to receive pursuant to a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, separation or reorganization or any other change in
the capital structure of the Company shall be subject to the same restrictions as the shares
of Restricted Stock covered by this award of Restricted Stock.

	16.  	Compliance with Section 409A of the Internal Revenue Code. To the extent applicable,
it is intended that this award and the Plan comply with the provisions of Section 409A of the
Internal Revenue Code. This award and the Plan shall be administrated in a manner consistent
with this intent, and any provision that would cause the award or the Plan to fail to satisfy
Section 409A shall have no force and effect until amended to comply with Section 409A (which
amendment may be retroactive to the extent permitted by Section 409A and may be made by
KeyCorp without your consent).

	17.  	Condition. The award of Restricted Stock and Stock Performance Shares granted hereby
is conditioned upon your execution and delivery to KeyCorp of the Agreement set forth
hereinafter.

	18.  	Amendment and Modification. The terms and conditions of this award may not be
modified, amended or waived except by an instrument in writing signed by a duly authorized
executive officer of KeyCorp.

	 	 	 	 	 
	 	 	, 2005	 	

	

	

	 	 	Thomas E. Helfrich
	

	 	 	 	Executive Vice President

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ACCEPTANCE OF GRANT AGREEMENT

     I acknowledge receipt of the above award of Time-Lapsed Restricted Stock, Performance-Based
Restricted Stock and Stock Performance Shares and in consideration thereof I accept such awards
subject to the terms and conditions of the Plan (including, without limitation, the harmful
activity provisions thereof) and the restrictions upon me as set forth hereinafter in this
Agreement.

     My agreement to the following restrictions is (i) in addition to (and not in limitation of)
any other agreements, plans, policies, or practices that are applicable to me as a KeyCorp or
Subsidiary (collectively “Key”) employee, (ii) independent of any Plan provisions, and (iii)
binding upon me regardless of whether I sell, transfer, otherwise dispose of, pledge, or otherwise
hypothecate the Common Shares acquired under the Restricted Stock and Performance Shares awarded to
me.

	1.  	I recognize the importance of preserving the confidentiality of Non-Public Information of
Key. Therefore, I acknowledge and agree that: (a) during my employment with Key, I will
acquire, reproduce, and use such Non-Public Information only to the extent reasonably
necessary for the proper performance of my duties; (b) during and after my employment with
Key, I will not use, publish, sell, trade or otherwise disclose such Non-Public Information;
and (c) upon termination of my employment with Key, I will immediately return to Key all
documents, data, and things in my possession or to which I have access that involve such
Non-Public Information. I agree to sign nondisclosure agreements in favor of Key and others
doing business with Key with whom Key has a confidential relationship.

	2.  	I acknowledge and agree that the duties of my position at Key may include the development of
Intellectual Property. Accordingly, any Intellectual Property which I create with any of
Key’s resources or assistance, in whole or in part, during my employment with Key, and which
pertains to the business of Key, is the property of Key; and I hereby agree to and do assign
to Key all right, title, and interest in and to such Intellectual Property, including, without
limitation, copyrights, trademarks, service marks, and patents in or to (or associated with)
such Intellectual Property and agree to sign patent applications and assignments thereof,
without additional compensation.

	3.  	Except in the proper performance of my duties for Key, I acknowledge and agree that from the
date hereof through a period of one (1) year after the termination of my employment with Key
for any reason, I will not, directly or indirectly, for myself or on behalf of any other
person or entity, hire or solicit or entice for employment any Key employee without the
written consent of Key, which consent it may grant or withhold in its discretion.

	4.  	(a) Except in the proper performance of my duties for Key, I acknowledge and agree that from
the date hereof through a period of one (1) year after the termination of my employment with
Key for any reason, I will not, directly or indirectly, for myself or on

 

 

	 	   	behalf of any other person or entity, call upon, solicit, or do business with (other than
for a business which does not compete with any business or business activity conducted by
Key) any Key customer or potential customer I interacted with, became acquainted with, or
learned of through access to information while I performed services for Key during my
employment with Key, without the written consent of Key, which consent it may grant or
withhold in its discretion.

	   	(b)  	In the event that my employment is terminated with Key as a result of a Termination
Under Limited Circumstances as defined below, the restrictions in paragraph 4(a) of this
Agreement shall become inapplicable to me; however, the restrictions in paragraphs 1, 2, and
3 of this Agreement shall remain in full force and effect nevertheless. I understand that a
“Termination Under Limited Circumstances” shall mean the termination of my employment with
Key (i) under circumstances in which I am entitled to receive severance benefits or salary
continuation benefits under the terms and conditions of the KeyCorp Separation Plan in
effect at the time of such termination, or (ii) under circumstances in which I am entitled
to receive severance benefits, salary continuation benefits, or similar benefits under the
terms and conditions of an agreement with Key, including, without limitation, a change of
control agreement or employment or letter agreement, or (iii) as otherwise expressly
approved by the Compensation Committee of KeyCorp in its sole discretion.

	5.  	In the event a court of competent jurisdiction determines that any of the restrictions
contained in the above numbered paragraphs of this Agreement are excessive because of duration
or scope or are otherwise unenforceable, the provisions hereof shall not be void but, with
respect to such limitations held to be excessive, they shall be modified to incorporate the
maximum limitations such court will permit, not exceeding the limitations contained in the
acceptance of grant. In the event I engage in any activity in violation hereof, I acknowledge
that such activity may cause serious damage and irreparable injury to Key, which will permit
Key to terminate my employment (if applicable) and seek monetary damages, and Key shall also
be entitled to injunctive, equitable, and other relief. I acknowledge and agree that the
validity, interpretation, and performance of this Agreement shall be construed under the
internal substantive laws of Ohio.

BY SIGNING THIS ACCEPTANCE OF GRANT AGREEMENT, I ACKNOWLEDGE THAT I HAVE HAD AMPLE OPPORTUNITY TO
READ THIS AGREEMENT AND THE PLAN, MAKE A DILIGENT INQUIRY, ASK QUESTIONS, AND CONSULT WITH MY
ATTORNEY IF I CHOSE TO DO SO.

	

	«Name» – Sign Your Name
	 
	

	Date<PAGE>

[DIEBOLD LOGO]

                                                                    EXHIBIT 10.1

      [No. 11, Std. U.S. & Intl. 2004]

                      NONQUALIFIED STOCK OPTION AGREEMENT
                         DATE OF GRANT: _______________

            WHEREAS, _________________ (hereinafter called the "Optionee") is a
      key associate of Diebold, Incorporated (hereinafter called the
      "Corporation") or a Subsidiary; and

            WHEREAS, the execution of a Nonqualified Stock Option Agreement
      substantially in the form hereof has been authorized by a resolution of
      the Compensation Committee (the "Committee") of the Board of Directors of
      the Corporation (the "Board") duly adopted on ____________, 20___; and

            WHEREAS, the option granted hereby is intended as a nonqualified
      stock option and shall not be treated as an "incentive stock option" (an
      "ISO") within the meaning of that term under Section 422 of the Internal
      Revenue Code of 1986, as amended.

            NOW, THEREFORE, the Corporation hereby grants to the Optionee,
      effective as of ___________, 20___ (the "Date of Grant"), an option
      pursuant to the Corporation's 1991 Equity and Performance Incentive Plan
      (As Amended and Restated as of February 7, 2001), and as further amended
      by Amendments No. 1 and No. 2 (the "Plan") to purchase _________ Common
      Shares of the Corporation at a price of $______ per share (which
      represents the Fair Market Value on the Date of Grant) (the "Option
      Price"), and agrees to cause certificates for any shares purchased
      hereunder to be delivered to the Optionee upon payment of the Option Price
      in full, all subject, however, to the terms and conditions of the Plan and
      the terms and conditions hereinafter set forth.

            1. (A) This option (until terminated as hereinafter provided) shall
      be exercisable only to the extent of __________ (_____) of the shares
      hereinabove specified after the Optionee shall have been in the continuous
      employ of the Corporation or any Subsidiary for one (1) full year from the
      Date of Grant and to the extent of an additional __________ (____) of such
      shares after each of the next ______ (__) successive full years thereafter
      during which the Optionee shall have been in the continuous employ of the
      Corporation or any Subsidiary. For the purposes of this paragraph, leaves
      of absence approved by the Chief Executive Officer of the Corporation for
      illness, military or governmental service, or other cause, shall be
      considered as employment. To the extent exercisable, this option may be
      exercised in whole or part from time to time.

               (B) Notwithstanding the provisions of paragraph (A) above, the
      option granted hereby shall become immediately exercisable in full if at
      any time during the employment of the Optionee, a "Change in Control"
      shall occur. A "Change in Control" shall be deemed to have occurred if any
      of the following events shall occur:

<PAGE>

                  (i) The acquisition by any individual, entity or group (within
            the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
            Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person")
            of beneficial ownership (within the meaning of Rule 13d-3
            promulgated under the Exchange Act) of 15% or more of either: (A)
            the then-outstanding shares of common stock of the Corporation (the
            "Corporation Common Stock") or (B) the combined voting power of the
            then-outstanding voting securities of the Corporation entitled to
            vote generally in the election of directors ("Voting Stock");
            provided, however, that for purposes of this subsection (i), the
            following acquisitions shall not constitute a Change in Control: (1)
            any acquisition directly from the Corporation, (2) any acquisition
            by the Corporation, (3) any acquisition by any employee benefit plan
            (or related trust) sponsored or maintained by the Corporation or any
            Subsidiary of the Corporation, or (4) any acquisition by any Person
            pursuant to a transaction which complies with clauses (A), (B) and
            (C) of subsection (iii) of this Section 1(b); or

                  (ii) Individuals who, as of the date hereof, constitute the
            Board cease for any reason (other than death or disability) to
            constitute at least a majority of the Board; provided, however, that
            any individual becoming a director subsequent to the date hereof
            whose election, or nomination for election by the Corporation's
            shareholders, was approved by a vote of at least a majority of the
            directors then comprising the Incumbent Board (either by a specific
            vote or by approval of the proxy statement of the Corporation in
            which such person is named as a nominee for director, without
            objection to such nomination) shall be considered as though such
            individual were a member of the Incumbent Board, but excluding for
            this purpose, any such individual whose initial assumption of office
            occurs as a result of an actual or threatened election contest
            (within the meaning of Rule 14a-11 of the Exchange Act) with respect
            to the election or removal of directors or other actual or
            threatened solicitation of proxies or consents by or on behalf of a
            Person other than the Board; or

                  (iii) Consummation of a reorganization, merger or
            consolidation or sale or other disposition of all or substantially
            all of the assets of the Corporation (a "Business Combination"), in
            each case, unless, following such Business Combination, (A) all or
            substantially all of the individuals and entities who were the
            beneficial owners, respectively, of the Corporation Common Stock and
            Voting Stock immediately prior to such Business Combination
            beneficially own, directly or indirectly, more than 50% of,
            respectively, the then-outstanding shares of common stock and the
            combined voting power of the then-outstanding voting securities
            entitled to vote generally in the election of directors, as the case
            may be, of the entity resulting from such Business Combination
            (including, without limitation, an entity which as a result of such
            transaction owns the Corporation or all or substantially all of the
            Corporation's assets either directly or through one or more
            subsidiaries) in substantially the same proportions relative to each
            other as their ownership, immediately prior to such Business
            Combination, of the Corporation Common Stock and Voting Stock of the
            Corporation, as the case may be, (B) no Person (excluding any entity
            resulting from such Business Combination or any employee benefit
            plan (or related trust) sponsored or maintained by the Corporation
            or such entity resulting from such Business Combination)
            beneficially owns, directly or indirectly, 15% or more of,
            respectively, the then-outstanding shares of common stock of the
            entity resulting from such Business Combination, or the combined
            voting power of the then-outstanding voting securities of such
            corporation except to the extent that such ownership existed prior
            to the Business Combination and (C) at least a majority of

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<PAGE>

            the members of the board of directors of the corporation resulting
            from such Business Combination were members of the Incumbent Board
            at the time of the execution of the initial agreement, or of the
            action of the Board providing for such Business Combination; or

                  (iv) Approval by the shareholders of the Corporation of a
            complete liquidation or dissolution of the Corporation.

                  (C) Notwithstanding paragraph (A) above

                  (i) If the Optionee should die or become permanently and
            totally disabled while in the employ of the Corporation or any
            Subsidiary this option shall immediately become exercisable in full
            and shall remain exercisable until terminated in accordance with
            Section 4(B) below.

                  (ii) If the Optionee should retire under a retirement plan
            (including, without limitation, any supplemental retirement plan) of
            the Corporation or any Subsidiary at or after the earliest voluntary
            retirement age provided for in any such retirement plan or should
            retire at an earlier age with the consent of the Board, this option
            shall immediately become exercisable in full and shall remain
            exercisable until terminated in accordance with Section 4(C) below.

            2. The Option Price shall be payable (A) in cash or by check
      acceptable to the Corporation, (B) by actual or constructive transfer to
      the Corporation of nonforfeitable, unrestricted Common Shares that have
      been owned by the Optionee for more than six (6) months prior to the date
      of exercise, Restricted Shares or other Common Shares that are forfeitable
      or subject to restrictions on transfer, including, without limitation,
      Common Shares issued pursuant to the earn out of Performance Shares or
      Performance Units, or (C) by a combination of such methods of payment. The
      requirement of payment in cash shall be deemed satisfied if the Optionee
      shall have made arrangements satisfactory to the Corporation with a bank
      or a broker who is a member of the National Association of Securities
      Dealers, Inc. to sell on the exercise date a sufficient number of the
      shares being purchased so that the net proceeds of the sale transaction
      will at least equal the Option Price plus payment of any applicable
      withholding taxes and pursuant to which the bank or broker undertakes to
      deliver the full Option Price plus payment of any applicable withholding
      taxes to the Corporation on a date satisfactory to the Corporation, but
      not later than the date on which the sale transaction will settle in the
      ordinary course of business.

            3. Whenever payment of the Option Price is made in whole or in part
      in any of the forms of consideration specified in Section 2(B) herein, the
      Common Shares received upon exercise of the Option Rights shall be subject
      to such risks of forfeiture or restrictions on transfer as may correspond
      to any that apply to the consideration surrendered, but only to the extent
      of the number of Restricted Shares or other Common Shares that are
      forfeitable or subject to restrictions on transfer, including, without
      limitation, Common Shares issued pursuant to the earn out of Performance
      Shares or Performance Units surrendered.

            4. This option shall terminate on the earliest of the following
      dates:

                  (A) Ninety (90) days after the Optionee ceases to be an
      associate of the Corporation or a Subsidiary, unless he or she ceases to
      be such associate by reason of death or permanent total disability or by
      reason of retirement under any retirement plan (including any supplemental
      retirement plan) of the Corporation or a Subsidiary at or after the
      earliest voluntary retirement

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<PAGE>

age provided for in any such retirement plan or retirement at an earlier age
with the consent of the Committee (in which case all outstanding options of the
Optionee become immediately exercisable in full pursuant to Section 1(C)
herein);

            (B) One (1) year after the death or permanent total disability of
the Optionee if the Optionee dies or becomes permanently and totally disabled
while an associate of the Corporation or a Subsidiary (in which case all
outstanding options of the Optionee become immediately exercisable in full
pursuant to Section 1(C) herein), or if the same occurs within the ninety (90)
day period referred to in subsection (A) hereof;

            (C) Ten (10) years from the Date of Grant; or

            (D) Immediately if the Optionee engages in any Detrimental Activity
(as hereinafter defined).

      5. If the Optionee, either during employment by the Corporation or a
Subsidiary or within one year after termination of such employment, shall engage
in any Detrimental Activity, and the Board shall so find, and (except for any
Detrimental Activity described in Section 6(v)(B)) the Optionee shall not have
ceased all Detrimental Activity within 30 days after notice of such finding
given within one year after commencement of such Detrimental Activity, the
Optionee shall:

            (A) Return to the Corporation, in exchange for payment by the
Corporation of the Option Price paid therefor, all Common Shares that the
Optionee has not disposed of that were purchased pursuant to this Agreement
within a period of one year prior to the date of the commencement of such
Detrimental Activity, and

            (B) With respect to any Common Shares that the Optionee has disposed
of that were purchased pursuant to this Agreement within a period of one year
prior to the date of the commencement of such Detrimental Activity, pay to the
Corporation in cash the difference between:

            (i) The Option Price paid therefor by the Optionee pursuant to this
      Agreement, and

            (ii) The closing price of the Common Shares on the New York Stock
      Exchange on the date of such purchase (or on the last trading day prior to
      such purchase, if there was no trading on the purchase date).

To the extent that such amounts are not paid to the Corporation, the Corporation
may set off the amounts so payable to it against any amounts that may be owing
from time to time by the Corporation or a Subsidiary to the Optionee, whether as
wages, deferred compensation or vacation pay or in the form of any other benefit
or for any other reason.

      6. For purposes of this Agreement, the term "Detrimental Activity" shall
include:

            (i) Engaging in any activity, as an employee, principal, agent, or
      consultant for another entity, and in a capacity, that directly competes
      with the Corporation or any Subsidiary in any actual product, service, or
      business activity (or in any product, service, or business activity which
      was under active development while the Optionee was employed by the
      Corporation if such development is being actively pursued by the

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<PAGE>

            Corporation during the one-year period first referred to in Section
            5) for which the Optionee has had any direct responsibility and
            direct involvement during the last two years of his or her
            employment with the Corporation or a Subsidiary, in any territory in
            which the Corporation or a Subsidiary manufactures, sells, markets,
            services, or installs such product or service, or engages in such
            business activity.

                  (ii) Soliciting any employee of the Corporation or a
            Subsidiary to terminate his or her employment with the Corporation
            or a Subsidiary.

                  (iii) The disclosure to anyone outside the Corporation or a
            Subsidiary, or the use in other than the Corporation or a
            Subsidiary's business, without prior written authorization from the
            Corporation, of any confidential, proprietary or trade secret
            information or material relating to the business of the Corporation
            and its Subsidiaries, acquired by the Optionee during his or her
            employment with the Corporation or its Subsidiaries or while acting
            as a consultant for the Corporation or its Subsidiaries thereafter.

                  (iv) The failure or refusal to disclose promptly and to assign
            to the Corporation upon request all right, title and interest in any
            invention or idea, patentable or not, made or conceived by the
            Optionee during employment by the Corporation and any Subsidiary,
            relating in any manner to the actual or anticipated business,
            research or development work of the Company or any Subsidiary or the
            failure or refusal to do anything reasonably necessary to enable the
            Corporation or any Subsidiary to secure a patent where appropriate
            in the United States and in other countries.

                  (v) Activity that results in Termination for Cause. For the
            purposes of this Section, "Termination for Cause" shall mean a
            termination:

                        (A) due to the Optionee's willful and continuous gross
                        neglect of his or her duties for which he or she is
                        employed, or

                        (B) due to an act of dishonesty on the part of the
                        Optionee constituting a felony resulting or intended to
                        result, directly or indirectly, in his or her gain for
                        personal enrichment at the expense of the Corporation or
                        a Subsidiary.

           7. This option is not transferable by the Optionee otherwise than by
      will or the laws of descent and distribution, except (so long as the
      Optionee is not a director or officer of the Corporation within the
      meaning of Section 16 of the Securities Exchange Act of 1934) to a fully
      revocable trust of which the Optionee is treated as the owner for federal
      income tax purposes.

           8. This option shall not be exercisable if such exercise would
      involve a violation of any applicable federal, state or other securities
      law.

           9. The Committee shall make such adjustments in the option price and
      in the number or kind of Common Shares or other securities covered by this
      option as the Committee in its sole discretion, exercised in good faith,
      may determine is equitably required to prevent dilution or enlargement of
      the rights of the Optionee that otherwise would result from (i) any stock
      dividend, stock split, combination of shares, recapitalization or other
      change in the capital structure of the Corporation, or (ii) any merger,
      consolidation, separation, reorganization or partial or complete
      liquidation, 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 Committee, in its

                                       5
<PAGE>

      discretion, may provide in substitution for any or all of the Option
      Rights provided for herein such alternative consideration as it, in good
      faith, may determine to be equitable in the circumstances.

           10. If the Corporation shall be required to withhold any federal,
      state, local or foreign tax in connection with exercise of this option, it
      shall be a condition to such exercise that the Optionee pay or make
      provision satisfactory to the Corporation for payment of all such taxes.
      The Optionee may elect that all or any part of such withholding
      requirement be satisfied by retention by the Corporation of a portion of
      the shares purchased upon exercise of this option. If such election is
      made, the shares so retained shall be credited against such withholding
      requirement at the fair market value on the date of exercise. In no event,
      however, shall the Corporation accept Common Shares for payment of taxes
      in excess of required tax withholding rates, except that, unless otherwise
      determined by the Committee at any time, the Optionee may surrender Common
      Shares owned for more than 6 months to satisfy any tax obligations
      resulting from any such transaction.

           11. For purposes of this Agreement, the continuous employ of the
      Optionee with the Corporation or a Subsidiary shall not be deemed
      interrupted, and the Optionee shall not be deemed to have ceased to be an
      associate of the Corporation or any Subsidiary, by reason of the transfer
      of his or her employment among the Corporation and its Subsidiaries.

           12. This option award is a voluntary, discretionary bonus being made
      on a one-time basis and it does not constitute a commitment to make any
      future awards. This option award and any payments made hereunder will not
      be considered salary or other compensation for purposes of any severance
      pay or similar allowance, except as otherwise required by law. Nothing in
      this Agreement will give the Optionee any right to continue employment
      with the Corporation or any Subsidiary, as the case may be, or interfere
      in any way with the right of the Corporation or a Subsidiary to terminate
      the employment of the Optionee.

           13. Information about the Optionee and the Optionee's participation
      in the Plan may be collected, recorded and held, used and disclosed for
      any purpose related to the administration of the Plan. The Optionee
      understands that such processing of this information may need to be
      carried out by the Corporation and its Subsidiaries and by third party
      administrators whether such persons are located within the Optionee's
      country or elsewhere, including the United States of America. The Optionee
      consents to the processing of information relating to the Optionee and the
      Optionee's participation in the Plan in any one or more of the ways
      referred to above.

           14. This Agreement is subject to the terms and conditions of the
      Plan. Capitalized terms used herein without definition shall have the
      meanings assigned to them in the Plan.

           15. If any provision of this Agreement or the application of any
      provision hereof to any person or circumstances is held invalid,
      unenforceable or otherwise illegal, the remainder of this Agreement and
      the application of such provision in any other person or circumstances
      shall not be affected, and the provisions so held to be invalid,
      unenforceable or otherwise illegal shall be reformed to the extent (and
      only to the extent) necessary to make it enforceable, valid and legal.

           16. This Agreement shall be governed by and construed in accordance
      with the internal substantive laws of the State of Ohio, without giving
      effect to any principle of law that would result in the application of the
      law of any other jurisdiction.

                                       6
<PAGE>

      The undersigned Optionee hereby accepts the Option Rights granted pursuant
to this Nonqualified Stock Option Agreement on the terms and conditions set
forth herein.

Dated:__________________                     ___________________________________
                                             [OPTIONEE NAME]

      Executed in the name and on behalf of the Corporation at North Canton,
Ohio, as of the ______ day of __________, 20___.

                                             DIEBOLD, INCORPORATED

                                             Walden W. O'Dell
                                             Chairman of the Board and
                                             Chief Executive Officer

                                       7

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