Document:

Exhibit
10.3

 

UNOVA, INC.

2002
DIRECTOR STOCK OPTION AND FEE PLAN

 

As
Amended Effective January 1, 2005

 

                1.     Purpose.  The UNOVA, Inc. 2002
Director Stock Option and Fee Plan (the “Plan” ) is
intended to provide an incentive to members of the board of directors of
UNOVA, Inc., a Delaware corporation (the “Company” ),
who are neither officers nor employees of the Company, to remain in the service
of the Company and increase their efforts for the success of the Company and to
encourage such directors to own shares of the Company’s stock, thereby aligning
their interests more closely with the interests of the Company’s shareholders.
The Plan is also intended to assist the Company in attracting experienced and
qualified candidates to become members of the Board.

 

                2.     Definitions.

 

                “1997
Plan” means the UNOVA, Inc. Director Stock Option and Fee Plan, adopted
September 24, 1997, and amended July 27, 1999.

 

                “Average
Quarterly Price” means the average of the Fair Market Value of Common
Stock on each trading date of a calendar quarter.

 

                “Accrued
Quarterly Meeting Fees” means the amount of Meeting Fees earned by a
Director for the preceding calendar quarter to which an Option Election
applies.

 

                “Board” means
the Board of Directors of the Company.

 

                “Cash Account” means
the bookkeeping account established by the Company for the deferral of Fees by
Directors which will be credited with interest pursuant to Section 6(d)
hereof.

 

                “Code” means
the Internal Revenue Code of 1986, as amended.

 

                “Common Stock” means
the common stock, par value $.01 per share, of the Company.

 

                “Deferral Election” means
an election pursuant to Section 6 hereof to defer receipt of Fees into a
Share Account or Cash Account.

 

                “Deferred Amounts” mean
the amounts credited to a Director’s Share Account or Cash Account pursuant to
a Deferral Election or otherwise pursuant to Section 6(h).

 

                “Director” means
a member of the Board who is neither an officer nor an employee of the Company.
A director of the Company shall not be deemed to be an employee of the Company
solely by reason of the existence of a consulting contract between such
director and the Company or any subsidiary thereof pursuant to which the
director agrees to provide consulting services as an independent consultant to
the Company or its subsidiaries on a regular or occasional basis for a stated
consideration. The term “Director” as used in this Plan shall include any
person who may hereafter become an advisory director of the Company, as that term
is used in the Company’s By-Laws.

 

                “Effective Date” means
January 1, 2002, subject to approval by the Company’s shareholders as
provided in Section 12 hereof.

 

 

                “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

                “Fair Market Value” means,
as of any given date, the average of the highest and lowest reported sales
prices of the Common Stock on the New York Stock Exchange Composite Tape or, if
not listed on such exchange, on any other national securities exchange on which
the Common Stock is listed or on NASDAQ. If there is no regular public trading
market for such Common Stock, the Fair Market Value of the Common Stock shall
be determined by the Board in good faith.

 

                “Fees” means
Retainer Fees and Meeting Fees.

 

                “Meeting Fees” means
fees scheduled to be paid to a Director for attendance at Board or committee
meetings.

 

                “Options” means
the options to purchase Common Stock granted to a Director under
(i) Section 5(d) pursuant to an Option Election or (ii) under
Section 7(a) as an annual grant.

 

                “Option Election” means
the election by a Director to receive Options in lieu of Meeting Fees as set
forth in Section 5(d) hereof.

 

                “Option Ratio” means
(i) for calendar year 2002, one (1) share of Common Stock to be
issued upon exercise of an Option divided by One Dollar ($1.00) of Accrued
Quarterly Meeting Fees, and (ii) for calendar years after 2002, such
number of shares of Common Stock per One Dollar ($1.00) of Accrued Quarterly
Meeting Fees, if any, as the Board may authorize for such calendar year; provided, however, that the Option Ratio under this Plan for
a calendar year shall be the same as the option ratio offered to the Company’s
senior management employees for such calendar year.

 

                “Retainer Fees” means
the annual retainer scheduled to be paid to a Director for the calendar year
and additional annual fees scheduled to be paid to a Director for serving as
Chair of a Board committee.

 

                “Share Account” means
the bookkeeping account established by the Company for the deferrals of Fees by
Directors, which will be credited with Share Units pursuant to
Section 6(a) hereof.

 

                “Share Election” means
the election by a Director to receive shares of Common Stock in lieu of Meeting
Fees as set forth in Section 5(b) hereof.

 

                “Share Unit” means
a share of Common Stock credited as a bookkeeping entry to a Director’s Share
Account. Each Share Unit shall represent the right to receive one share of
Common Stock.

 

                “Subsequent Election”
means a Deferral Election with respect to Fees earned during the current
calendar year or prior calendar years as set forth in Section 6(b) hereof.

 

                3.     Administration of the Plan.  Subject to the express provisions
of the Plan, the Board will have complete authority to interpret the Plan; to
prescribe, amend, and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the respective option agreements (which
need not be identical); and to make all other determinations necessary or
advisable for the administration of the Plan. The Board’s determination on the
matters referred to in this Section 3 shall be conclusive.

 

                4.     Stock Reserved for the
Plan.  The number
of shares of Common Stock authorized for issuance under this Plan is 500,000
plus (i) the number of shares reserved and available for issuance under
the 1997 Plan on the Effective Date of this Plan and (ii) any shares
subject to grants made under the 1997 

 

 

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Plan, but which subsequently
expire or are canceled, forfeited, or terminated. The number of shares of
Common Stock issuable under this Plan shall be subject to adjustment pursuant
to Section 10 hereof. Shares of Common Stock delivered hereunder may be
either authorized but unissued shares or previously issued shares reacquired
and held by the Company as treasury shares.

 

                5.     Terms and Conditions of
Payment of Fees in the Form of Shares or Options.

 

        (a)   Retainer Fees.  Subject to
Section 5(f) hereof, each Director shall receive in the form of Common
Stock (subject to a Deferral Election) all, or such lesser amount as the Board
may determine from time to time in the exercise of its judgment, of his or her
Retainer Fees earned in each calendar year. The shares of Common Stock (and
cash in lieu of fractional shares) issuable under this Section 5(a) shall
be issued quarterly in accordance with Section 5(c) hereof.

 

        (b)   Meeting Fees; Share Election.  Subject to
Section 5(f) hereof, each Director may make an annual election (the “Share Election”) to receive in the form of Common Stock
(subject to a Deferral Election) any or all of his or her Meeting Fees earned
in each calendar year; provided, however,
that such Share Election must be made with respect to at least an aggregate of
10% of the Director’s Meeting Fees, in multiples of 10%. Unless a Director has
made a Share Election with respect to 100% of his or her Meeting Fees, a
Director may also make an Option Election for a calendar year with respect to
all or any portion of the remaining percentage of his or her Meeting Fees. The
shares of Common Stock (and cash in lieu of fractional shares) issuable
pursuant to a Share Election shall be issued quarterly in accordance with
Section 5(c) hereof. The Share Election must be in writing and delivered
to the Secretary of the Company on or prior to December 31 of the calendar year
preceding the calendar year in which the applicable Fees are to be earned; provided, however, that
any Director who commences service on the Board on or subsequent to
January 1 of a calendar year may make a Share Election during the
thirty-day period immediately following the commencement of his or her
directorship. A Share Election, once made, shall be irrevocable for the
calendar year with respect to which it is made and shall remain in effect for
future calendar years unless revoked in writing or modified by a subsequent
Share Election or Option Election, as the case may be, with respect to future
calendar years on or prior to December 31 of the calendar year preceding the
calendar year in which such revocation shall take effect and in accordance with
the provisions hereof.

 

        (c)   Issuance of Shares.  Shares of
Common Stock issuable to a Director pursuant to Sections 5(a) and 5(b) shall be
issued to such Director on the first business day following the end of each
calendar quarter. The total number of shares of Common Stock to be so issued
shall be determined by dividing (x) the dollar amount of the Director’s
Retainer Fees for the preceding calendar quarter and any Meeting Fees for the
preceding calendar quarter to which a Share Election applies, by (y) the
Average Quarterly Price for the preceding quarter. In no event shall the
Company be required to issue fractional shares. In the event that a fractional
share of Common Stock would otherwise be required to be issued, an amount in
lieu thereof shall be paid in cash based upon the Fair Market Value of such
fractional share on the last business day of the preceding calendar quarter.

 

        (d)   Meeting Fees; Option Election.  If
the Board authorizes the Company for any calendar year to grant to any class of
senior management employees options to purchase Common Stock in lieu of cash
compensation, the Board may also authorize the Company to grant Options to
Directors for such calendar year in accordance with the terms of this
Section 5(d) and Section 5(e). If authorized by the Board and subject
to Section 5(f) hereof, each Director may make an annual election (the “Option Election”) to receive in the form of Options any or
all of his or her Meeting Fees earned in each calendar year; provided, however, that such Option 

 

 

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Election
must be made with respect to at least an aggregate of 10% of the Director’s
Meeting Fees, in multiples of 10%. Unless a Director has made an Option
Election with respect to 100% of his or her Meeting Fees, a Director may also
make a Share Election for a calendar year with respect to all or any portion of
the remaining percentage of his or her Meeting Fees. Options granted pursuant
to an Option Election shall be granted quarterly in accordance with
Section 5(e) hereof. The Option Election must be in writing and delivered
to the Secretary of the Company on or before December 31 of the calendar year preceding
the calendar year in which the applicable Meeting Fees are to be earned; provided, however, that any Director who commences service on
or subsequent to January 1 of a calendar year may make an Option Election
during the thirty-day period immediately following the commencement of his or
her directorship. An Option Election, once made, shall be irrevocable for the
calendar year with respect to which it is made and shall remain in effect for
future calendar years unless revoked in writing or modified by a subsequent
Share Election or Option Election, as the case may be, with respect to future
calendar years on or prior to December 31 of the calendar year preceding the
calendar year in which such revocation shall take effect and in accordance with
the provisions hereof; provided, however, that
if the Board does not authorize an Option Election for a calendar year, then a
Director’s Option Election shall become void for that year and subsequent
calendar years, a Director shall have the right to make a Share Election for
such calendar year in accordance with Section 5(b), provided that such
Share Election is made or before December 31 of the preceding calendar year,
and such Director must make a new Option Election for any subsequent calendar
year for which the Board authorizes Option Elections.

 

        (e)   Option Grants.  Options
to be granted to a Director pursuant to Section 5(d) shall be granted to
such Director on the first business day following the end of each calendar
quarter, except for the first quarter of 2002, in which case the date of grant
shall be April 15, 2002. The total number of shares of Common Stock that a
Director shall have the right to purchase pursuant to such Option shall be
equal to the Option Ratio multiplied by such Director’s Accrued Quarterly
Meeting Fees. In no event shall the Company be required to grant Options to
purchase fractional shares. If an Option to purchase a fractional share of
Common Stock would otherwise be required to be granted, the number of shares of
Common Stock subject to such Option shall be rounded up to the next highest
whole number of shares. The exercise price per share of Common Stock of each
Option so granted (i) with respect to the first calendar quarter of 2002
shall be equal to the Fair Market Value of the Common Stock on April 15,
2002, which is the date of grant, and (ii) with respect to all subsequent
calendar quarters shall be equal to the Fair Market Value of the Common Stock
on the date of grant. Options shall be exercisable immediately on the date of
grant, except that no option shall be exercisable unless and until shareholder
approval of this Plan. The Options shall have such other terms and conditions
not inconsistent with the express provisions of this Plan regarding payment,
expiration, termination, and transfer as the Board may determine from time to
time, which terms and conditions need not be identical to those of the Options
granted pursuant to Section 7 of this Plan.

 

        (f)    Termination of Services.   If
a Director ceases to be a Board member before the end of a calendar quarter,
the Director shall receive in cash the Fees such Director would otherwise have
been entitled to receive for such quarter in the absence of this Plan.

 

6.     Terms and Conditions of
Deferral Elections.

 

        (a)   In General.  Each
Director may irrevocably elect annually to defer receiving all or a portion of
(i) the shares of Common Stock that would otherwise be issued in
connection with such Director’s Retainer Fees in respect of a calendar year,
(ii) the shares of Common Stock that would otherwise be issued upon a
Share Election, or (iii) such Director’s Meeting Fees in respect of a 

 

 

4

 

calendar year that are not subject to a Share Election (a “Deferral Election”). A Director who has made a Deferral
Election with respect to shares of Common Stock shall have the number of shares
of Common Stock that are the subject of the Deferral Election credited to a
Share Account in the form of Share Units. A Director who has made a Deferral
Election with respect to Meeting Fees that are not subject to a Share Election
shall have the amount of deferred fees credited to a Cash Account.

 

        (b)   Timing of Deferral Election.  The
Deferral Election shall be in writing and delivered to the Secretary of the
Company on or prior to December 31 of the calendar year preceding the calendar
year in which the applicable Fees are to be earned; provided,
however, that a Director who commences
service on the Board on or subsequent to January 1 of a calendar year may
make a Deferral Election during the thirty-day period immediately following the
commencement of his or her directorship; and provided,
further, that such Director may not defer payment of any Fees earned
prior to the date on which such Director makes such Deferral Election. A
Deferral Election, once made, shall be irrevocable for the calendar year with
respect to which it is made and shall remain in effect for future calendar
years unless revoked or modified by a subsequent Deferral Election with respect
to future calendar years on or prior to December 31 of the calendar year
preceding the calendar year in which such revocation shall take effect and in
accordance with the provisions hereof. 
Any subsequent Deferral Election with respect to Fees earned during the
current calendar year or prior calendar years (a “Subsequent
Election”) shall be restricted as follows:

 

(i)            Any Subsequent
Election that either delays a payment or changes a payment election under
Section 6(f) hereof may not take effect for at least 12 months after the
Subsequent Election is made;

 

(ii)         Payment under a
Subsequent Election must be delayed for at least five years from the original
payment date (except as otherwise set forth in Section 6(g) hereof); and

 

(iii)      Subsequent
Elections must be made at least 12 months prior to the date of the first
scheduled payment pursuant to Section 6(f) hereof.

 

        (c)   Share Accounts.  Each
Share Account shall be deemed to be invested in shares of Common Stock.
Whenever regular cash dividends are paid by the Company on outstanding Common
Stock, there shall be credited to the Director’s Share Account additional Share
Units equal to (i) the aggregate dividend that would be payable on
outstanding shares of Common Stock equal to the number of Share Units in such
Share Account on the record date for the dividend, divided by (ii) the
Fair Market Value of the Common Stock on the payment date of the dividend.

 

        (d)   Cash Accounts.  Each
Director’s Cash Account shall be credited with interest on the last day of each
calendar quarter calculated on the basis of the average daily balance in the
Cash Account during the calendar quarter. The interest rate for any calendar
quarter shall be the prime rate of interest as reported in the Wall Street Journal as the prevailing prime rate of interest
on the first business day of the calendar quarter.

 

        (e)   Commencement of Payment.  Except
as otherwise provided in Section 6(g) hereof, a Director’s Deferred
Amounts shall become payable in the January following the year in which the
Director terminates service as a Director. Payments from a Share Account shall
be made by converting Share Units into Common Stock on a one-for-one basis,
with payment of fractional shares to be made in cash based upon the Fair Market
Value of such fractional share on the last 

 

 

5

 

business day of the preceding calendar quarter.

 

        (f)    Timing of Payments.  Subject
to Section 6(g) hereof, each Director shall elect in his or her Deferral
Election to receive payment of his or her Deferred Amounts either in a lump sum
or in two to fifteen substantially equal annual installments.

 

        (g)   Distributions Upon Death, Disability or
Unforeseeable Emergency.  In the event of
a Director’s death, payment of the remaining portion of the Director’s Deferred
Amounts will be made to the Director’s beneficiary (or, if no beneficiary has
been designated, to the Director’s estate or other legal representative) in the
same form as the Director has elected; provided, however,
that if permitted under the Code and the rules and regulations promulgated
thereunder, such payment of the remaining portion of the Director’s Deferred
Amounts will be made to the Director’s beneficiary (or, if no beneficiary has
been designated, to the Director’s estate or other legal representative) in a
lump sum as soon as practicable following the Director’s death. Notwithstanding
any Deferral Election, in the event of disability (as defined in Section
409A(a)(2)(C) of the Code) or severe financial hardship to a Director resulting
from an illness or accident of the Director, the Director’s spouse or a dependent
(as defined in Section 152(a) of the Code) of the Director, loss of the
Director’s property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Director, a Director may, by providing written notice to the Secretary of
the Company, withdraw any portion of the Share Units in his or her Share
Account (in an equivalent number of shares of Common Stock) and/or cash in his
or her Cash Account provided that, as determined under regulations of the
Secretary of the Treasury, the amounts distributed with respect to an emergency
do not exceed the amounts necessary to satisfy such emergency plus amounts
necessary to pay taxes reasonably anticipated as a result of the distribution,
after taking into account the extent to which such hardship is or may be
relieved through reimbursement or compensation by insurance or otherwise or by
liquidation of the participant’s assets (to the extent the liquidation of such
assets would not itself cause severe financial hardship).

 

        (h)   No Account Transfers.  A
Director may not transfer or convert a Share Account to a Cash Account, or vice
versa.

 

        (i)    Status of Accounts.  The
Share and Cash Accounts shall not be funded, and all Deferred Amounts shall be
held in the general assets of the Company and be subject to the general
creditors of the Company.

 

                7.     Annual Grants of Stock Options.

 

        (a)   Annual Grants.  Commencing
in 2005, Options to purchase 10,000 shares of Common Stock shall be granted to
each Director automatically on the first business day of January in each
year.  Any person who becomes a Director
at any other time of the year shall receive a pro-rata portion of the Annual
Grant, based upon the time remaining in such year. The Board shall have the
right to increase or decrease the number of shares of Common Stock subject to
the annual grant of Options to Directors as the Board may determine is
necessary or appropriate to attract and retain persons to serve as members of
the Board, it being understood that all such grants and changes in the number
of options granted shall comply with Section 16 of the Exchange Act and
the rules promulgated thereunder and the Internal Revenue Code of 1986, as
amended.

 

        (b)   Option Price Per Share.  Options
granted pursuant to this Section 7 shall be exercisable at a price per
share equal to the Fair Market Value of the Common Stock on the date of the
grant of the Option.

 

 

6

 

        (c)   Period of Option.  Each
Option granted pursuant to this Section 7 shall become exercisable on the
first anniversary of the date upon which it is granted; provided,
however, that all options granted
pursuant to this Section 7 shall become exercisable in full upon the first
to occur of (i) the retirement of the Director in accordance with the
mandatory retirement policy for members of the Board, (ii) the total and
permanent disability of the Director, or (iii) the death of the Director
while a member of the Board. Each Option granted pursuant to the Plan shall
remain exercisable until the expiration of three years following the first to
occur of the retirement or resignation of the optionee as a director of the
Company (or the failure of the optionee to be re-elected a director of the
Company), the total and permanent disability of the optionee, or the death of
the optionee.

 

        (d)   Exercise of Options.  Options
may be exercised only by written notice to the Company at its corporate office
accompanied by payment of the full consideration for the shares as to which
they are exercised. The purchase price is to be paid in full to the Company
upon the exercise of the option (i) by cash, including a personal check
payable to the order of the Company, or (ii) by delivering Common Stock
already owned by the optionee for a period of at least six months (valued at
Fair Market Value as of the date of delivery), or (iii) any combination of
cash and Common Stock so valued.

 

        (e)   Nonstatutory Options.  No
option granted hereunder shall constitute an “incentive stock option” as that
term is defined in the Code.

 

                8.     Modification, Extension,
and Renewal of Options.  The Board shall
have the power to modify, extend, or renew outstanding options and authorize
the grant of new options in substitution therefor, provided that such power may
not be exercised in a manner which would (i) alter or impair any rights or
obligations of any option previously granted without the written consent of the
optionee, (ii) adversely affect the qualification of the Plan or any other
stock-related plan of the Company under Rule 16b-3 under the Exchange Act,
(iii) lower the exercise price of existing options, or
(iv) substitute new options for previously granted options having a higher
exercise price.

 

9.     Limitation of Rights.

 

        (a)   No Right to Continue as a Director.  Neither
the Plan, nor the granting of an option or the making of a Share Election,
Option Election or Deferral Election, or any other action taken pursuant to the
Plan, shall constitute or be evidence of any agreement or understanding,
express or implied, that the Company will retain a Director for any period of
time, or at any particular rate of compensation.

 

        (b)   No Shareholder’s Rights.  An
optionee or a Director who has made a Share Election, Option Election or
Deferral Election (or his or her representative) shall have no rights as a
shareholder with respect to the shares covered by his or her options, Share
Election or Option Election or to any Share Units with respect to a Deferral
Election until the date of the actual issuance to him or her (or such
representative) of shares of Common Stock (either through the Company’s Direct Registration
System or by certification) and, subject to Sections 6(c) and 10 hereof, no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such shares are issued.

 

                10.  Effect of Certain Changes
in Capitalization.  In the event of
any change in corporate capitalization (such as a stock split), any corporate
transaction (such as any merger, consolidation or separation (including a
spinoff)), any other distribution of stock or property of the Company, any 

 

 

7

 

reorganization (whether or
not such reorganization comes within the definition of such term in Section 368
of the Code) or any partial or complete liquidation of the Company, the Board
shall equitably adjust the Share Account to reflect any such transaction and
shall make such substitution or adjustments in the aggregate number and kind of
shares reserved for issuance under the Plan, in the number, kind and option
price of shares subject to outstanding options, in the number and kind of
shares subject to option grants pursuant to an Option Election and automatic
option grants pursuant to Section 7 and/or such other equitable
substitution or adjustments in the terms of options as it may determine to be
appropriate in its sole discretion; provided, however, that the number of shares subject to any option
shall always be a whole number.

 

11.  Change in Control.

 

        (a)   Definition. 
For purposes of the Plan, a “Change in
Control” shall mean a change in the ownership or effective control
of the Company, or in the ownership of a substantial portion of the assets of
the Company as provided in Section 409A(2)(A)(v) of the Code and the
regulations thereunder and interpretations thereof, as the same may be
applicable from time to time.

 

        (b)   Consequences of Change in
Control.   Notwithstanding anything in the Plan to
the contrary, upon the occurrence of a Change in Control:

 

        (i)  all Share Units credited
to a Share Account shall be converted into Common Stock and together with all
Deferred Amounts credited to a Cash Account shall be transferred as soon as
practicable to each Director;

 

        (ii)  Fees earned in respect
of the calendar quarter in which the Change in Control occurs shall be paid in
cash as soon as practicable; and

 

        (iii)  all Options shall
immediately vest and become exercisable in full.

 

                12.  Term of Plan.  This
Plan shall be effective as of the Effective Date, subject to approval of the
Plan by the shareholders of the Company at the first annual meeting of
shareholders after the Effective Date. The Plan shall terminate on
December 31, 2011, unless earlier terminated by the Board. Notwithstanding
the Plan’s termination, amounts shall be delivered pursuant to any Deferral
Election made prior to the Plan’s termination in accordance with such election.
Options may be granted under the Plan at any time prior to the termination of
the Plan. Deferral Elections, Share Elections and Option Elections may not be
made for any Fees which would be paid following the date of the termination of
the Plan. If the shareholders of the Company do not approve this Plan, then
this Plan shall be void, all Share Elections and Deferral Elections made with
respect to this Plan shall be deemed to be Share Elections and Deferral
Elections under the 1997 Plan, and all shares of Common Stock issued, Share
Units credited to a Director’s Share Account, and Fees credited to a Director’s
Cash Account under this Plan shall be deemed to have been issued and credited
under the 1997 Plan.

 

                13.  Amendment; Termination.  The
Board may at any time and from time to time alter, amend, suspend, or terminate
the Plan in whole or in part; provided, however, that no amendment which is required by any
regulation, law or stock exchange rule to be approved by shareholders shall be
effective unless it is approved by the shareholders of the Company entitled to
vote thereon. Notwithstanding the foregoing, no amendment shall affect
adversely any of the rights of any Director, under any option or under any
election theretofore in effect under the Plan, or with respect to Deferred
Amounts, without such Director’s consent.

 

                14.  Nontransferability.  No
Option, or right or interest of any Director in Deferred Amounts, 

 

 

8

 

shall be transferable by a
Director other than (i) by will or by the laws of descent and
distribution, (ii) pursuant to a qualified domestic relations order (as
defined in the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended), or (iii) in the case of an Option, as otherwise
expressly permitted under the applicable option agreement including, if so
permitted, pursuant to a gift to such optionee’s family, whether directly or
indirectly or by means of a trust or partnership or otherwise. All Options or
rights with respect to Deferred Amounts shall be exercisable, during the
Director’s lifetime, only by the Director or by the guardian or legal
representative of the Director or an alternate payee pursuant to a qualified
domestic relations order or, in the case of an Option, by any person to whom
such Option is transferred pursuant to the preceding sentence. Under the Plan,
it is understood that the term “optionee” includes the guardian and legal
representative of the Director named in the option agreement and any person to
whom an Option is transferred by will or the laws of descent and distribution,
pursuant to a qualified domestic relations order or as otherwise described
above.

 

                15.  Beneficiaries.  The
Board shall establish such procedures as it deems appropriate for a Director to
designate a beneficiary to whom any amounts payable in the event of a Director’s
death are to be paid or by whom any Options held by a Director may be exercised
following his or her death. Directors shall make a beneficiary election with
respect to Deferred Amounts at the same time that a Deferral Election is made.

 

                16.  Compliance with Law, Etc.   Notwithstanding
any other provision of the Plan or agreements made pursuant hereto, the Company
shall not be required to issue or deliver any certificate or certificates for
shares of Common Stock under the Plan prior to fulfillment of all of the
following conditions:

 

        (a)  the
listing, or approval for listing upon notice of issuance, of such shares on the
New York Stock Exchange or such other securities exchange or NASDAQ as may at
the time be the principal market for Common Stock;

 

        (b)  any
registration or other qualification of such shares of the Company under any
state or federal law or regulation, or the maintaining in effect of any such
registration or other qualification which the Board shall, in its absolute
discretion upon the advice of counsel, deem necessary or advisable; and

 

        (c)  the
obtaining of any other consent, approval, or permit from any state or federal
governmental agency, which the Board shall, in its absolute discretion after
receiving the advice of counsel, determine to be necessary or advisable.

 

                17.  Notice.  Any
written notice to the Company required by any of the provisions of the Plan
shall be addressed to the Secretary of the Company and shall become effective
when it is received.

 

                18.  Governing Law.  The
Plan and all determinations made and actions taken pursuant hereto shall be
governed by the laws of the State of Delaware, without reference to principles
of conflict of laws, and shall be construed accordingly.

 

                19.  Headings.  The
headings of sections and subsections herein are included solely for convenience
of reference and shall not affect the meaning of any of the provisions of the
Plan.

 

                20.  Termination of the 1997
Plan.  If the shareholders of the Company
approve this Plan as provided in Section 12 hereof, the 1997 Plan shall
terminate in accordance with Section 12 thereof as of the date of such
approval. In that case, Share Accounts and Cash Accounts maintained under the
1997 Plan shall be converted to and maintained as Share Accounts and Cash
Accounts under this Plan. If the shareholders of the Company do not approve
this Plan, then the 1997 Plan shall continue in full force and 

 

 

9

 

effect until terminated in
accordance with the provisions thereof, all grants of options made pursuant to
Sections 5(d) and 5(e) shall be null and void, and all Share Elections and
Deferral Elections made under this Plan shall be deemed to have been made under
the 1997 Plan.

 

                21.  Savings Clause.  This
Plan is intended to comply in all respects with the American Jobs Creation Act
of 2004 and the rules and regulations promulgated thereunder and the
interpretations thereof (collectively, the “AJCA”). In the
event that any provision of this Plan violates AJCA or would result in
imposition of any excise tax, penalties or similar adverse tax consequences to
the Company or any Director, such provision shall without further action by the
Board be modified, restricted or nullified, as appropriate to avoid such adverse
tax consequences.  In addition, if the
time or form of any payment election is made in accordance with this Plan, but
in violation of the AJCA, then such payment election shall be null and void,
and all amounts deferred shall be paid or payments thereof shall commence on
the earliest date permitted in accordance with the AJCA without the imposition
of any excise tax, penalties or other adverse tax consequences to the Director
and the Company.

 

 

10Exhibit 10.12

CHANGE OF CONTROL EMPLOYMENT AGREEMENT

 

AGREEMENT by and between UNOVA, Inc.,
a Delaware corporation (the “Company”), and[name], dated as of the [date].

The Board of Directors of
the Company (the “Board”), has determined that it is in the best interests of
the Company and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below) of the Company.  The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive’s full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations.  Therefore, in order
to accomplish these objectives, the Board has caused the Company to enter into
this Agreement.

NOW, THEREFORE, IT IS HEREBY
AGREED AS FOLLOWS:

1.         Certain Definitions.

            (a)  The “Effective
Date” shall mean the first date during the Change of Control Period (as defined
in Section 1(b) on which a Change of Control (as defined in Section 2)
occurs.  Anything in this Agreement to
the contrary notwith­standing, if a Change of Control occurs and if the
Executive’s employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control
or (ii) otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the “Effective Date” shall
mean the date immediately prior to the date of such termination of employment.

(b)  The “Change of Control Period” shall mean the
period commencing on the date hereof and ending on the fourth anniversary of
the date hereof; provided, however, that commencing on the date two years after
the date hereof, and on each second anniversary of such date (such date and
each such second anniversary thereof shall be hereinafter referred to as the “Renewal
Date”), unless previously terminated, the Change of Control Period shall be automatically
extended so as to terminate four years from such Renewal Date, unless at least
60 days prior to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so extended.

2.         Change
of Control.  For the purpose of this
Agreement, a “Change of Control” shall mean:

 

 

 

(a)  An 
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 30 percent  or more of either (i) the then outstanding
shares of common stock of the Company (the “Outstanding Company Common Stock”)
or (ii) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); excluding, however, the following acquisitions of
Outstanding Company Common Stock and Outstanding Company Voting
Securities:   (i) any acquisition
directly from the Company, other than an acquisition by virtue of the exercise
of a conversion privilege unless the security being so converted was itself
acquired directly from the Company, (ii) any acquisition by the Company, (iii)
any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any Person pursuant to a transaction which complies with
clauses (i), (ii), and (iii) of subsection (c) of this Section 2; or

(b)  Individuals who, as of the effective date
hereof, constitute the Board (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual who becomes a member of the Board subsequent to such effective date
hereof whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but provided further,  that any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act)  or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board shall not be so considered as a member of the
Incumbent Board; or

(c)  The
approval by the shareholders of the Company of a reorganization, merger, or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (“Business Combination”) or if consummation of such
Business Combination is subject, at the time of such approval by shareholders,
to the consent of any government or governmental agency, obtaining of such
consent (either explicitly or implicitly by consummation); excluding, however,
such a Business Combination pursuant to which (i) all or sub­stantially all of
the individuals and entities who are the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination will beneficially own, directly
or indirectly, more than 60 percent of, respectively, the 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 corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company’s assets either directly
or through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (ii) no Person (other than any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or 

 

2

 

such corporation
resulting from such Business Combination) will beneficially own, directly or
indirectly, 30 percent or more of, respectively, the outstanding shares of
common stock of the corporation resulting from such Business Combination or the
combined voting power of the outstanding voting securities of such corporation
entitled to vote generally in the election of directors except to the extent
that such ownership existed prior to the Business Combination, and (iii) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination will have been 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

(d)  The approval by the stockholders of the
Company of a complete liquidation or dissolution of the Company.

3.         Employment Period. 
The Company hereby agrees to continue the Executive in its employ, and
the Executive hereby agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of such date (the “Employment
Period”).

4.         Terms of Employment.

            (a)  Position
and Duties.

(i)  During the Employment Period, (A) the
Executive’s position (including status, offices, titles, and reporting
requirements), authority, duties, and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised, and assigned at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive’s services shall be
performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35 miles from
such location.

(ii)  During the
Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive’s reasonable best
efforts to perform faithfully and efficiently such responsibilities.  During the Employment Period it shall not be
a viola­tion of this Agreement for the Executive to (A) serve on corporate,
civic, or charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements, or teach at educational institutions, and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive’s responsibilities as an employee of the
Company in accordance with this Agreement. 
It is expressly understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the Effective Date,
the continued conduct of such activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive’s
responsibilities to the Company.

 

3

 

(b)  Compensation.

(i)  Base Salary.  During the Employment Period, the Executive
shall receive an annual base salary (“Annual Base Salary”), which shall be paid
at a monthly rate, at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been earned but
deferred, to the Executive by the Company and its affiliated companies in
respect of the twelve-month period immediately preceding the month in which the
Effective Date occurs.  During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually.  Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement.  Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual Base Salary as so increased.  As used in this Agreement, the term “affiliated
companies” shall include any company controlled by, controlling, or under common
control with the Company.

(ii) Annual Bonus.  In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus in cash at least equal to the higher of
(A) the Executive’s highest award or awards for any fiscal year under the
UNOVA, Inc. Management Incentive Compensation Plan (effective for the 1999
fiscal year and thereafter) or under any predecessor or successor plan or plans
which provide for the grant of annual cash bonuses or other short-term cash
incentive awards during the last three full fiscal years prior to the Effective
Date or (B) the Target Bonus (as that term is
defined in the UNOVA, Inc. Management Incentive Compensation Plan) applicable
to the Executive for the fiscal year during which the Effective Date occurs, or
if the Management Incentive Compensation Plan is not in effect for such fiscal
year, the target bonus or award which the Executive would earn for such year
under any plan or arrangement in which the Executive participates or is
eligible to participate assuming the attainment of any performance goals or
similar criteria to the extent necessary for the Executive to qualify to
receive the target award thereunder.  The
amount which is the higher of the amounts described in clause (A) and clause
(B) above is hereinafter called the “Annual Bonus.”

Notwithstanding
the foregoing, the following additional provisions shall be applicable to the
definition of “award” or “awards” or “bonus” or “bonuses”  as those terms are used in the preceding
paragraph:

                                            (1)       When made under the UNOVA, Inc.
Management Incentive Compensation Plan or any other annual incentive plan which
provides that a portion of an annual award shall be deposited in a so-called “Bonus
Bank” and shall remain “at risk,”  the
award or bonus, in such case, shall 
(except as provided in clause (2) below ) comprise ONLY the portion of
the annual award which is paid to the Executive on a current basis and shall
NOT include any amount of the award required to be deposited to a Bonus
Bank.  However, the award or bonus shall
also include any amount paid to the Executive as a periodic payment from the
Bonus Bank during the year with respect to which the amount was made (but shall
not include any payment from the Bonus Bank made solely as a result of
termination of employment);

 

4

 

                                            (2)       The award or bonus for any fiscal year or
portion thereof shall include any part of such bonus or award, the payment of
which is deferred to a subsequent fiscal year or years at the election of the
Executive; and

                                            (3)       In the case of any bonus or award made
with respect to a period other than a full fiscal year, the amount of such
bonus shall not be annualized, and the bonus or award, if it related to more
than one fiscal year, shall be prorated so that only the portion thereof
attributable to a particular fiscal year shall be counted as part of the total
award or bonus for that fiscal year.

Any
Annual Bonus plus unpaid but due amounts from prior awards plus any amounts
payable from a so called Bonus Bank shall be paid in accordance with the
applicable plan but in no event later than the last day of the Employment
Period.  In no event shall the Executive
forfeit any balance in a Bonus Bank upon termination of employment for any
reason following a Change of Control.

(iii)  Incentive, Savings, and Retirement Plans.  During the Employment Period, the Executive
shall be entitled to participate in all incentive (including stock option or
similar incentive plans), savings and retirement plans, practices, policies and
programs applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices, policies,
and programs provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated companies
for the Executive under such plans, practices, policies, and programs as in
effect at any time during the 120-day period immediately preceding the
Effective Date or if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company
and its affiliated companies.

(iv)      Welfare Benefit Plans.  During the Employment Period, the Executive
and/or the Executive’s family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies, and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death,
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies, and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies, and programs in effect for
the Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company
and its affiliated companies.

(v)  Expenses.  During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices, and procedures of the Company and its

 

5

 

affiliated
companies in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.

(vi)      Fringe Benefits.  During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, if applicable,
tax and financial planning services, use of an automobile and payment of
related expenses, in accordance with the most favorable plans, practices,
programs, and policies of the Company and its affiliated companies in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer execu­tives of the
Company and its affiliated companies.

(vii)  Office and Support Staff.  During the Employment Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to exclusive personal secretarial and other assistance,
at least equal to the most favorable of the foregoing provided to the Executive
by the Company and its affiliated companies at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Execu­tive, as provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.

(viii)  Vacation.  During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs, and practices of the Company and its affiliated companies
as in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.

5.         Termination of Employment.

            (a)  Death or
Disability.  The Executive’s
employment shall terminate automatically upon the Executive’s death during the
Employment Period.  If the Company
determines in good faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the definition of Disability set
forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive’s
employment.  In such event, the Executive’s
employ­ment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive’s duties.  For purposes of this Agreement, “Disability”
shall mean the absence of the Executive from the Executive’s duties with the
Company on a full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive’s legal representative.

(b)  Cause.  The Company may terminate the Executive’s
employment during the Employment Period for Cause.  For purposes of this Agreement, “Cause” shall
mean:

 

6

 

(i)  the willful and continued failure of the
Executive to perform substantially the Executive’s duties with the Company or
one of its affiliates (other than any such failure resulting from incapacity
due to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief Executive
Officer of the Company which specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Executive has not
substantially performed the Executive’s duties, or

(ii)  the willful engaging by the Executive in
illegal conduct or gross misconduct which is materi­ally and demonstrably
injurious to the Company.

For purposes of this
provision, no act or failure to act, on the part of the Executive, shall be
considered “willful” unless it is done, or omitted to be done, by the Executive
in bad faith or without reasonable belief that the Execu­tive’s action or
omission was in the best interests of the Company.  Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Chief Executive Officer or a senior officer of the Company
or based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith and
in the best interests of the Company. 
The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.

(c)  Good Reason.  The Executive’s employment may be terminated
by the Executive for Good Reason.  For
purposes of this Agreement, “Good Reason” shall mean:

(i)  the
assignment to the Executive of any duties inconsistent in any respect with the
Executive’s position (including status, offices, titles, and reporting
requirements), authority, duties, or responsibilities as contemplated by
Section 4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties, or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;

 

7

 

(ii)  any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial, and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;

(iii)  the Company’s requiring the Executive to be
based at any office or location other than as provided in Section 4(a)(i)(B)
hereof or the Company’s requiring the Executive to travel on Company business
to a substantially greater extent than required immediately prior to the
Effective Date;

(iv)  any purported termination by the Com­pany of
the Executive’s employment otherwise than as expressly permitted by this
Agreement; or

(v)  any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.

For purposes of this
Section 5(c), any good faith determination of “Good Reason” made by the
Executive shall be conclusive.   
Anything in this Agreement to the contrary notwithstanding, if (A) a
Change of Control has occurred and (B) in connection with, or as a result of,
such Change of Control, prior to the first anniversary of the Effective Date,
individuals who were members of the Board immediately prior to such Change of
Control cease to constitute a majority of the Board or a majority of the board
of directors of the corporation resulting from a Business Combination that
constituted such Change of Control, then a termination by the Executive for any
reason during the Window Period (as defined in the following sentence) shall be
deemed to be a termination for Good Reason for all purposes of this
Agreement.  The “Window Period” shall
mean the 30-day period commencing on the first anniversary of the later of (1)
the Effective Date and (2) the date of the event described in clause (B) of the
preceding sentence.

(d)  Notice
of Termination.  Any termination by
the Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 12(b) of this Agreement.  For purposes of this Agreement, a “Notice of
Termination” means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive’s employment under the
provision so indicated, and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination
date (which date shall be not more than thirty days after the giving of such
notice).  The failure by the Executive or
the Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any
right of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or circum­stance
in enforcing the Executive’s or the Company’s rights hereunder.

 

8

 

(e)  Date of Termination.  “Date of Termination” means (i) if the
Executive’s employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive’s
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive’s employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.

6.         Obligations of the Company Upon
Termination.

            (a) 
Good Reason; Other Than for Cause, Death or Disability.  If, during the Employment Period, the Company
shall termi­nate the Executive’s employment other than for Cause or Disability
or the Executive shall terminate employment for Good Reason:

(i)  the Company
shall pay to the Executive in a lump sum in cash within 30 days after the Date
of Termination the aggregate of the following amounts:

        A.  the sum of (1) the Executive’s Annual Base
Salary through the Date of Termination to the extent not theretofore paid, (2)
the product of (x) the Annual Bonus, and (y) a fraction, the numerator of which
is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365, and (3) any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon), any awards under the Performance Award Plan or any
comparable or successor plan and any accrued vacation pay, in each case to the
extent not theretofore paid (the sum of the amounts described in clauses (1),
(2), and (3) shall be hereinafter referred to as the “Accrued Obligations”);
and

        B.  the amount equal to the product of (1) three
and (2) the sum of (x) the Executive’s Annual Base Salary and (y) the Annual
Bonus, or if higher, any bonus paid with respect to any fiscal year during the
Employment Period; and

        C.  utilizing actuarial assumptions no less
favorable to the Executive than those in effect immediately prior to the
Effective Date, an amount equal to the excess of (a) the actuarial equivalent
of the benefit under the Company’s qualified defined benefit retirement plan
(the “Retirement Plan”) and any excess or supplemental retirement plan in which
the Executive participates (together, the “SERP”) which the Executive would
receive if the Executive’s employment continued for three years after the Date
of Termination assuming for this purpose that all accrued benefits are fully
vested, and, assuming that the Executive’s compensation in each of the three
years is that required by Section 4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive’s actual benefit (paid or payable), if
any, under the Retirement Plan and the SERP as of the Date of Termination;

(ii)  for three
years after the Executive’s Date of Termination, or such longer period as may
be provided by the terms of the appropriate plan, practice, policy, or program,
the Company shall continue benefits to the Executive and/or the Executive’s
family at least equal to those which would have been provided to them in
accordance with the plans, programs, practices, and policies described in
Section 4(b)(iv) of this Agreement if the Executive’s

9

 

employment had not been terminated or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affili­ated companies
and their families, provided, however, that if the Executive becomes reemployed
with another employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under such other
plan during such applicable period of eligibility.  For purposes of determining eligibility (but
not the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs, and policies, the Executive shall
be considered to have remained employed until three years after the Date of
Termination and to have retired on the last day of such period;

(iii)  the
Company shall, at its sole expense as incurred, provide the Executive with
outplacement services the scope and provider of which shall be selected by the
Executive in his or her sole discretion; and

(iv)  to the
extent not theretofore paid or provided, the Company shall timely pay or
provide to the Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any plan, program,
policy, or practice or contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the “Other Benefits”).

(b)  Death. 
If the Executive’s employment is terminated by reason of the Executive’s
death during the Employment Period, this Agreement shall terminate without
further obligations to the Executive’s legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits.  Accrued
Obligations shall be paid to the Executive’s estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of
Termination.  With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this
Section 6(b) shall include, without limitation, and the Executive’s estate
and/or beneficiaries shall be entitled to receive, benefits at least equal to
the most favorable benefits provided by the Company and affiliated companies to
the estates and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices, and policies
relating to death benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive’s
estate and/or the Executive’s beneficiaries, as in effect on the date of the
Executive’s death with respect to other peer executives of the Company and its
affiliated companies and their beneficiaries.

(c)  Disability.  If the Executive’s employment is terminated
by reason of the Executive’s Disability during the Employment Period, this
Agreement shall terminate with­out further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits.  Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.  With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this
Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families in accordance
with such

 

10

 

plans, programs,
practices, and policies relating to disability, if any, as in effect generally
with respect to other peer executives and their families at any time during the
120-day period immediately preceding the Effective Date or, if more favorable
to the Executive and/or the Executive’s family, as in effect at any time
thereafter generally with respect to other peer executives of the Company and
its affiliated companies and their families.

(d)  Cause; Other than for Good Reason.  If the Executive’s employment shall be
terminated for Cause during the Employment Period or if the Executive volun­tarily
terminates employment during the Employment Period, excluding a termination for
Good Reason, this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (x) his or her
Annual Base Salary through the Date of Termination, (y) the amount of any
compensation previously deferred by the Executive, and (z) Other Benefits, in
each case to the extent theretofore unpaid. 
In such case, all Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.

7.         Non-exclusivity of Rights.  Nothing in this Agreement shall prevent or
limit the Executive’s continuing or future participation in any plan, practice,
policy, or program provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies.  Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any
plan, policy, practice, or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, practice, policy, or
program or contract or agreement except as explicitly modified by this
Agreement.

8.         Full
Settlement.  The Company’s obligation
to make the payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense, or other claim, right, or action which the Company may
have against the Executive or others.  In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment.  The Company agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed pay­ment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the “Code”).

 

11

 

9.         Certain Additional Payments by the Company.

(a)  Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it shall be
determined that any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 9) (a “Payment”) would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as (the “Excise
Tax”), then the Executive shall be entitled to receive an additional payment (a
“Gross-Up Payment”) in an amount such that after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.

(b)  Subject to the provisions of Section 9(c),
all determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Deloitte & Touche or such other certified public accounting firm as
may be designated by the Executive (the “Accounting Firm”) which shall provide
detailed supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by the Company.  In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity, or group effecting
the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm
hereunder).  All fees and expenses of the
Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as deter­mined pursuant
to this Section 9, shall be paid by the Company to the Executive within five
days of the receipt of the Accounting Firm’s determination.  Any determination by the Accounting Firm
shall be binding upon the Company and the Executive.  As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial deter­mination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder.  In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.

(c)  The
Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company
of the Gross-Up Payment.  Such
notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid.  The
Executive

 

12

 

shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due).  If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive shall:

(i)  give the Company any information reasonably
requested by the Company relating to such claim,

(ii)  take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company,

(iii)  cooperate with the Company in good faith in
order effectively to contest such claim, and

(iv)  permit the
Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional inter­est and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of
costs and expenses.  Without limitation
on the foregoing provisions of this Section 9(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all adminis­trative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. 
Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.

 

13

 

(d)  If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Company’s complying with the requirements of Section 9(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto).  If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), a determination is
made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.

                10.  Confidential Information.  The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge, or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the
Executive during the Executive’s employment by the Com­pany or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement).  After termination of the
Executive’s employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge, or data
to anyone other than the Company and those designated by it.  In no event shall an asserted violation of
the provisions of this Section 10 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.

11.       Successors.

            (a)  This Agreement
is personal to the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than by will or the
laws of descent and distribution.  This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.

(b)  This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns.

(c)  The Company
will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.  As used in this Agreement, “Company” shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid.

 

14

 

12.       Miscellaneous.

            (a)  This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware, without reference to principles of conflict of laws.  The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect.  This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.

(b)  All notices and other communications
hereunder shall be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

If to the
Executive:

 

 

 

 

	
  If to the Company:

  	
   

  	
  UNOVA, Inc.

  
	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
  6001 36th
  Avenue West

  
	
   

  	
   

  	
  Everett, WA
  98203-1264

  

 

or to such other address
as either party shall have furnished to the other in writing in accordance
herewith.  Notice and communications
shall be effective when actually received by the addressee.

(c)  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.

(d)  The Company may withhold from any amounts
payable under this Agreement such Federal, state, local, or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.

(e)  The Executive’s or the Company’s failure to
insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.

(f)  The
Executive and the Company acknowledge that, except as may otherwise be provided
under any other written agreement between the Executive and the Company, the
employment of the Executive by the Company is “at will” and, subject to Section
1(a) hereof, prior to the Effective Date, the Executive’s employment and/or
this Agreement may be terminated by either the Executive or the Company at any
time prior to the Effective Date, in which case the Execu­tive shall have no
further rights under this Agreement. 
From and after the

 

15

 

Effective Date this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof.

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s
hand and, pursuant to the authorization from its Board of Directors, the
Company has caused these presents to be executed in its name on its behalf, all
as of the day and year first above written.

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  UNOVA, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
					

 

16

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