Document:

exhibit104.htm

    TEMPUR-PEDIC
INTERNATIONAL INC.

     

    AMENDED
AND RESTATED 2003 EQUITY INCENTIVE PLAN

     

    Stock
Option Agreement

     

    [Insert
Employee Name]

     

    This
Stock Option Agreement dated as of ________ __, 20__this “Agreement”), between
Tempur-Pedic International Inc., a corporation organized under the laws of the
State of Delaware (the “Company”), and the
individual identified below, residing at the address there set out (the “Optionee”).

     

    1. Grant of
Option.  Pursuant and subject to the Company’s Amended and
Restated 2003 Equity
Incentive Plan (as the same may be amended from time to time, the “Plan”), the
Company grants to the
Optionee an option (the “Option”) to purchase
from the Company all or any part
of a total of _____ shares (the “Option Shares”) of
the Company’s common stock, par value $0.01 per share (the “Stock”), at a price
of $_____ per share.  The ”Grant Date” of this
Option is
_______ __, 20__

     

    2. Character of
Option.  This Option is not to be treated as an “incentive
stock option” within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended.

     

    3. Duration of
Option.  Subject to the next sentence, this Option shall expire
at 11:59 p.m. (Lexington, KY local time) on the date immediately preceding the
tenth anniversary of the Grant Date.  However, this Option is subject
to earlier termination as provided in Section 5 below.

     

    4. Exercise of
Option.  Until the expiration of this Option pursuant to
Section 3 or Section 5 of this Agreement, the Optionee may exercise it as to the
number of Option Shares identified in the table below, in full or in part, at
any time on or after the applicable exercise date or dates identified in the
table.  However, subject to Section 5 of this Agreement, during any
period that this Option remains outstanding after the Optionee’s employment with
the Company and its Affiliates ends, the Optionee may exercise it only to the
extent it was exercisable immediately prior to the end of the Optionee’s
employment.

     

    
      	
              Number
      of Shares

              in Each Installment

            	
              Percentage
      of

              Option Shares

            	
              Initial
      Exercise Date

              for Shares in
Installment

            
	
              ________

              ________

              ________

            	
                    
                ________

                ________

                ________

              

            	
              _________
      __, ___

              _________
      __, ___

              _________
      __, ___

               

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
7.1(e) of the Plan sets forth the procedure for exercising this Option by paying
cash or a check made payable to the order of the Company in an amount equal to
the aggregate exercise price of the Stock to be purchased, or by delivering
other shares of Stock of equivalent Market Value, provided the Optionee has
owned such shares of Stock for at least six (6) months.  The Optionee
may also exercise this Option pursuant to a formal cashless exercise program as
referred to in Section 7.1(e) of the Plan, subject to the terms and conditions
referred to in Section 7.1(e) of the Plan.

     

    5. Termination or Acceleration in
Certain Cases.  The Option shall be subject to early
termination prior to the tenth anniversary of the Grant Date and accelerated
vesting in certain circumstances, as described below. Notwithstanding anything
contained in this Section 5 to the contrary, however, in no event shall the
Option become or remain exercisable to any extent after the expiration date set
forth in Section 3.

     

     

    (a)           By the Optionee’s Voluntary
Resignation Without Good Reason.  If the Optionee’s employment
with the Company or its Affiliates is terminated by the Optionee’s voluntary
resignation without Good Reason, including by any Retirement that is not an
Approved Retirement or the Optionee’s other voluntary departure, (i) the Option
shall remain exercisable for that number of Option Shares for which this Option
shall have become exercisable pursuant to Section 4 above (i.e., the “vested”
Option Shares) as of the date of such termination of employment through the last
day of the three (3) month period commencing on the later of (y) the expiration
of any applicable Blackout Period (as defined below) in which such termination
of employment occurs and (z) the date of such termination of employment; and
(ii) the Option Shares that have not yet become vested Option Shares pursuant to
Section 4 above as of the date of such termination of employment shall
irrevocably expire, and the Optionee shall have no right to purchase any such
unvested Option Shares.

     

     

    (b)           Termination by the Company
other than For Cause or By the Optionee for Good Reason.  If
the Optionee’s employment with the Company or its Affiliates is terminated by
the Company or an Affiliate, other than For Cause, or by the Optionee for Good
Reason or by reason of Optionee’s employer ceasing to be an Affiliate (in the
absence of a Change of Control), the Option shall remain outstanding and be or
become exercisable to the extent otherwise provided in Section 4 for a three (3)
year period commencing on the date of such termination of employment; provided, that in the
event the Optionee’s employment is terminated prior to the end of the twelve
(12) month period immediately following the Grant Date, the number of Option
Shares otherwise subject to the Option shall be pro-rated downward based on the
actual number of calendar months that elapsed during such twelve (12) month
period prior to such termination of employment.  For example, if the
Optionee is granted an Option to purchase 600 Option Shares on March 1, 2010 and
Optionee’s employment is terminated by the Company or any of its Affiliates
other than For Cause on September 1, 2010, the Option Shares subject to the
Option will be adjusted downward by 50% to total 300 Option Shares (and the
number of Option Shares that become vested Option Shares in each of the three
(3) years specified in Section 4 shall be correspondingly reduced by fifty
percent (50%)).  No pro-ration shall be made to the Option Shares for
a termination of employment described in this Section 5(b) that occurs after the
twelve (12) month anniversary of the Grant Date, and the Option shall remain
outstanding and be or become exercisable to the extent provided in Section 4 for
the three (3) year period commencing on the date of such termination of
employment.  Notwithstanding the foregoing, no Stock shall be issued
and all of Optionee’s rights to the Option and the Option Shares hereunder shall
be forfeited, expire and terminate unless (i) the Company shall have received a
release of all claims from the Optionee in a form reasonably acceptable to the
Company (and said release shall have become irrevocable in accordance with its
terms) prior to the date on which all of the Option Shares become vested Option
Shares (or if earlier the deadline established in the form of release delivered
by the Company to Optionee for execution) and (ii) the Optionee shall have
complied with the covenants set forth in Section 10 of this
Agreement.

     

     

    (c)           Termination by the Company
For Cause.  If the Company or any of its Affiliates terminates
the Optionee’s employment For Cause, the Option and all of the Option Shares
(whether or not then vested) shall be forfeited and shall expire and terminate
immediately as of the date of such termination of employment.

     

     

    (d)           Death or Long-Term
Disability.  If the Optionee dies or the Company or any of its
Affiliates terminates the Optionee’s employment due to the Optionee’s long-term
disability (within the meaning of Section 409A of the Code), all of the Option
Shares that have not become vested Option Shares pursuant to Section 4 as of the
date of death or such termination of employment shall immediately become vested
Option Shares, and the Option shall remain outstanding and exercisable until the
one (1) year anniversary of the date of Optionee’s death or such termination of
employment.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (e)           Approved
Retirement.  In the event of the Optionee’s Retirement, the
Committee may consent to the continued vesting of the Option in accordance with
the annual vesting schedule specified in Section 4 and the extended
exercisability of the vested Option Shares until the earlier of (i) the three
(3) year anniversary of the date on which the Option becomes fully vested, and
(ii) the three (3) year anniversary of the date of such Retirement (an “Approved
Retirement”); provided, that in the
event the date of the Optionee’s Approved Retirement occurs prior to the end of
the twelve (12) month period immediately following the Grant Date, the number of
Option Shares otherwise subject to the Option shall be pro-rated downward based
on the actual number of calendar months that elapsed during such twelve (12)
month period prior to such Approved Retirement (and, for the avoidance of doubt,
no pro-ration shall be made in the event of an Approved Retirement to the Option
Shares awarded more than twelve (12) months prior to the date of the Approved
Retirement).  Notwithstanding the foregoing, no Stock shall be issued
and all of Optionee’s rights to the Option and the Option Shares hereunder shall
be forfeited, expire and terminate unless (i) the Company shall have received a
release of all claims from the Optionee in a form reasonably acceptable to the
Company (and said release shall have become irrevocable in accordance with its
terms) prior to the date on which all of the Option Shares become vested Option
Shares (or if earlier the deadline established in the form of release delivered
by the Company to Optionee for execution) and (ii) the Optionee shall have
complied with the covenants set forth in Section 10 of this
Agreement.  If the Committee shall for any reason decline to consent
to continued vesting on the Recipient’s Retirement, then the provisions of
subsection (a) above shall instead apply.

     

     

    (f)           Change of
Control.  In lieu of the Change of Control provisions of
Section 9 (a) - (c) of the Plan and notwithstanding anything herein to the
contrary, if a Change of Control occurs this Agreement shall remain in full
force and effect in accordance with its terms subject to the
following.  In the event of such Change of Control:

     

     

    (i)    if the Optionee’s
employment is terminated by the Company or any of its Affiliates other than For
Cause or if the Optionee resigns for Good Reason within twelve (12) months after
the occurrence of a Change of Control, all of the Optionee’s Option Shares which
have not become vested Option Shares pursuant to Section 4 as of the date of
such termination of employment shall immediately become vested Option Shares and
the Option Shares shall remain outstanding and exercisable until the date that
is the one (1) year anniversary of the date of such termination of employment;
and

     

     

    (ii)           if
the Option or the Option Shares are not assumed, converted or replaced by a
successor organization following such Change of Control, all of the Optionee’s
Option Shares which have not become vested Option Shares pursuant to Section 4
as of the date of such Change of Control shall immediately become vested Option
Shares and the Option Shares shall remain outstanding and exercisable until the
date that is the one (1) year anniversary of the date of such Change of
Control.

     

     

    (g)           For
the purposes of this Agreement:

     

     

    (i)           “Blackout Period”
shall mean any period when employees are prohibited from making purchases and
sales of the Company’s securities.

     

     

    (ii)           “Change of Control”
shall have the meaning set forth in the Plan, provided, that no
event or transaction shall constitute a Change of Control for purposes of this
Agreement unless it also qualifies as a change of control for purposes of
Section 409A of the Code.

     

     

    (iii)           “Employee”, “employment,” “termination of
employment” and “cease to be
employed,” and other words or phrases of similar import, shall mean the
continued provision of substantial services to the Company or any of its
Affiliates (or the cessation or termination of such services) whether as an
employee, consultant or director.

     

     

    (iv)           “For Cause” shall mean
any of the following: (A) Optionee’s willful and continued failure to
substantially perform the reasonably assigned duties with the Company or any
Affiliate of the Company which are consistent with Optionee’s position and job
description, other than any such failure resulting from incapacity due to
physical or mental illness, after a written notice is delivered to Optionee by
the Chief Executive Officer or Global Vice President of Human Resources of the
Company, which specifically identifies the manner in which Optionee has not
substantially performed the assigned duties, (B) Optionee’s willful engagement
in illegal conduct which is materially and demonstrably injurious to the Company
or any Affiliate of the Company, (C) Optionee’s conviction by a court of
competent jurisdiction of, or pleading guilty or nolo contendere to, any felony,
or (D) Optionee’s commission of an act of fraud, embezzlement, or
misappropriation against the Company or any Affiliate of the Company, including,
but not limited to, the offer, payment, solicitation or acceptance of any
unlawful bribe or kickback with respect to the business of the Company or any
Affiliate of the Company;1

     

       1 Award agreement for
each CEO and EVP will, if applicable, define such term as it is defined in his
or her employment agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (v)           “Good Reason” shall
mean the relocation of Optionee’s principal workplace over sixty (60) miles from
the existing workplaces of the Company or any Affiliate of the Company without
the consent of Optionee (which consent shall not be unreasonably withheld,
delayed or conditioned);2 and

     

     

    (vi)   “Retirement” shall
have the meaning assigned to such term in the applicable retirement policy of
the Company or its Affiliates as in effect at such time.

     

     

    6. Transfer of
Option.  Except as provided in Section 6.4 of the Plan, neither
this Option nor any Option Shares nor any rights hereunder to the underlying
Stock may
be transferred except by will or the laws of descent and distribution, and
during the Optionee’s lifetime, only the Optionee may exercise this
Option.

     

    7. Incorporation of Plan
Terms.  Except as otherwise provided herein in Section 5 above,
this Option is granted
subject to all of the applicable terms and provisions of the Plan, including but
not limited to Section 8 of the Plan, “Adjustment Provisions”, and the
limitations on the Company's obligation to deliver Option Shares upon exercise
set forth in Section 10 of the Plan, “Settlement of
Awards”.  Capitalized terms used but not defined herein shall have the
meaning assigned under the Plan.

     

    8. Miscellaneous.  This
Agreement shall be construed and enforced in accordance with the laws of the
State of Delaware, without regard to the conflict of laws principles thereof,
and shall be binding upon and inure to the benefit of any successor or assign of
the Company and any executor, administrator, trustee, guardian, or other legal
representative of the Optionee.  This Agreement may be executed in one
or more counterparts all of which together shall constitute one
instrument.

     

    9. Tax Consequences.

     

    (a)           The
Company makes no representation or warranty as to the tax treatment of this
Option, including upon the exercise of this Option or upon the Optionee’s sale
or other disposition of the Option Shares.  The Optionee should rely
on his/her own tax advisors for such advice.

     

    (b)           All
amounts earned and paid pursuant to this Agreement are intended to be paid
in compliance with, or on a basis exempt from, Section 409A of
the Code.  This Agreement, and all terms and conditions used herein, shall
be interpreted and construed consistent with that intent.  However, the
Company does not warrant all such payments will be exempt from, or paid in
compliance with, Section 409A.  The Optionee bears the entire risk of any
adverse federal, state or local tax consequences and penalty taxes which may
result from payments made on a basis contrary to the provisions of Section 409A
or comparable provisions of any applicable state or local income tax
laws.

     

    10. Certain Remedies.

     

    (a) If at any
time prior to the later of (y) the two (2) year period after termination of the
Optionee’s employment with the Company and its Affiliates, and (z) the period
that includes the date (after a termination of Optionee’s employment with the
Company and its Affiliates) on which all of the Option Shares granted hereunder
and capable of becoming vested Option Shares so become vested Option Shares (the
last day of such later period being the “Covenant Termination
Date”), any of the following occur:

     

    (i) the
Optionee unreasonably refuses to comply with lawful requests for cooperation
made by the Company, its board of directors, or its Affiliates;

     

    (ii) the
Optionee accepts employment or a consulting or advisory engagement with any
Competitive Enterprise (as defined in Section 10(c)) of the Company or its
Affiliates or the Optionee otherwise engages in competition with the Company or
its Affiliates;

     

       2 Award agreement
for each CEO and EVP will, if applicable, define such term as it is defined in
his or her employment agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iii) the
Optionee acts against the interests of the Company and its Affiliates, including
recruiting or employing, or encouraging or assisting the Optionee’s new employer
to recruit or employ an employee of the Company or any Affiliate without the
Company’s written consent;

     

    (iv) the
Optionee fails to protect and safeguard while in his/her possession or control,
or surrender to the Company upon termination of the Optionee’s employment with
the Company or any Affiliate or such earlier time or times as the Company or its
board of directors or any Affiliate may specify, all documents, records, tapes,
disks and other media of every kind and description relating to the business,
present or otherwise, of the Company and its Affiliates and any copies, in whole
or in part thereof, whether or not prepared by the Optionee;

     

    (v) the
Optionee solicits or encourages any person or enterprise with which the Optionee
has had business-related contact, who has been a customer of the Company or any
of its Affiliates, to terminate its relationship with any of them;

     

    (vi) the
Optionee takes any action or makes any statement, written or oral, that
disparages the business, products, services or management of Company or its
Affiliates, or any of their respective directors, officers, agents, or
employees, or the Optionee takes any action that is intended to, or that does in
fact, damage the business or reputation of the Company or its Affiliates, or the
personal or business reputations of any of their respective directors, officers,
agents, or employees, or that interferes with, impairs or disrupts the normal
operations of the Company or its Affiliates; or

     

    (vii) the
Optionee breaches any confidentiality obligations the Optionee has to the
Company or an Affiliate, the Optionee fails to comply with the policies and
procedures of the Company or its Affiliates for protecting confidential
information, the Optionee uses confidential information of the Company or its
Affiliates for his/her own benefit or gain, or the Optionee discloses or
otherwise misuses confidential information or materials of the Company or its
Affiliates (except as required by applicable law); then

     

    (1) this
Option shall terminate and be cancelled effective as of the date on which the
Optionee entered into such activity, unless terminated or cancelled sooner by
operation of another term or condition of this Agreement or the
Plan;

     

    (2) any stock
acquired and held by the Optionee pursuant to the exercise of this Option during
the Applicable Period (as defined in Section 10(b) below) may be repurchased by
the Company at a purchase price of $[insert price equal to exercise price] per
share; and

     

    (3) any gain
realized by the Optionee from the sale of stock acquired through the exercise of
this Option during the Applicable Period shall be paid by the Optionee to the
Company;

     

    (b) The term
“Applicable
Period” shall
mean the period commencing on the later of the date of this Agreement or the
date which is one (1) year prior to the Optionee’s termination of employment
with the Company or any Affiliate and ending on the Covenant Termination
Date.

     

    (c) The term
“Competitive
Enterprise”
shall mean a business enterprise that engages in, or owns or controls a
significant interest in, any entity that engages in, the manufacture, sale or
distribution of mattresses or pillows or other bedding products or other
products competitive with the Company’s products.  Competitive
Enterprise shall include, but not be limited to, the entities set forth on Appendix A hereto,
which may be amended by the Company from time to time upon notice to the
Optionee.  At any time the Optionee may request in writing that the
Company make a determination whether a particular enterprise is a Competitive
Enterprise.  Such determination will be made
within  fourteen (14) days after the receipt of sufficient information
from the Optionee about the enterprise, and the determination will be valid for
a period of ninety (90) days from the date of determination.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    11. Right of Set
Off.  By executing this Agreement, the Optionee consents to a
deduction from any amounts the Company or any Affiliate owes the Optionee from
time to time, to the extent of the amounts the Optionee owes the Company under
Section 10 above, provided that this set-off right may not be applied against
wages, salary or other amounts payable to the Optionee to the extent that the
exercise of such set-off right would violate any applicable law.  If
the Company does not recover by means of set-off the full amount the Optionee
owes the Company, calculated as set forth above, the Optionee agrees to pay
immediately the unpaid balance to the Company upon the Company’s
demand.

     

    12. Nature of
Remedies.

     

    (a) The
remedies set forth in Sections 10 and 11 above are in addition to any
remedies available to the Company and its Affiliates in any non-competition,
employment, confidentiality or other agreement, and all such rights are
cumulative.  The exercise of any rights hereunder or under any such
other agreement shall not constitute an election of remedies.

     

    (b) The
Company shall be entitled to place a legend on any certificate evidencing any
stock acquired upon exercise of this Option referring to the repurchase right
set forth in Section 10(a) above.  The Company shall also be
entitled to issue stop transfer instructions to the Company’s stock transfer
agent in the event the Company believes that any event referred to in
Section 10(a) has occurred or is reasonably likely to occur.

     

    13. No Right to
Employment.  This Option does not give the Optionee any right
to continue to be employed by the Company or any of its Affiliates, or limit, in
any way, the right of the Company or any of its Affiliates to terminate the
Optionee’s employment, at any time, for any reason not specifically prohibited
by law.

     

    

     

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    In
Witness Whereof, the parties have executed this Stock Option Agreement as
of the date first above
written.

     

    TEMPUR-PEDIC
INTERNATIONAL INC.

     

    By:       

    Title:                                                        Signature of Optionee

     

                                                               

    [Name of
Optionee]

     

    Optionee’s
Address:peco_101.htm

     

    Exhibit
10.1

     

     

    VOTING
AGREEMENT

     

    This
VOTING AGREEMENT (the “Agreement”), dated as
of February 18, 2010, is made by and among the Green Family Trust U/A/D
03/16/1995 (the “Green
Family Trust”), the Green Charitable Trust U/A/D 05/09/01 (the “Green Charitable
Trust”), Matthew P. Smith, Linda H. Smith, Ashwood I, LLC (“Ashwood I”), and
Ashwood II, LLC (“Ashwood II”) (each of
the foregoing individually, a “Shareholder” and,
collectively, the “Shareholders”), PECO
II, Inc., an Ohio corporation (the “Company”), Lineage
Power Holdings, Inc., a Delaware corporation (“Parent”) and Lineage
Power Ohio Merger Sub, Inc., an Ohio corporation and wholly owned subsidiary of
Parent (“Merger
Sub”).  Capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to such terms in the Merger Agreement
(as defined below).

     

    WHEREAS,
concurrently herewith, the Company, Parent and Merger Sub are entering into an
Agreement and Plan of Merger (the “Merger Agreement”),
providing for the merger of Merger Sub with and into the Company with the
Company as the surviving corporation (the “Merger”), upon the
terms and subject to the conditions set forth in the Merger
Agreement;

     

    WHEREAS,
as of the date hereof, each of the Shareholders beneficially owns and has (or
upon exercise or exchange of a convertible security will have) the power to vote
and dispose of the number of common shares of the Company, without par value
(the “Common
Stock”) set forth opposite such Shareholder’s name on Schedule A attached
hereto (the “Owned
Shares” and, together with any securities issued or exchanged with
respect to such shares of Common Stock upon any recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up or combination of the securities of the
Company or any other similar change in the Company’s capital structure or
securities of which such Shareholder acquires beneficial ownership after the
date hereof and prior to the termination hereof, whether by purchase,
acquisition or upon exercise of options, warrants, conversion of other
convertible securities or otherwise, collectively referred to herein as, the
“Covered
Shares”); and

     

    WHEREAS,
as a condition to the willingness of Parent and Merger Sub to enter into the
Merger Agreement, each of Parent and Merger Sub has required that the
Shareholders agree, and in order to induce Parent and Merger Sub to enter into
the Merger Agreement, the Shareholders have agreed, to enter into this Agreement
with respect to (a) the Covered Shares and (b) certain other matters as set
forth herein.

     

    NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:

     

    ARTICLE I.

    VOTING
AGREEMENT

    

    Section
1.1  Voting
Agreement.  The Shareholders hereby agree, on a several but not
joint basis, that during the Voting Period (defined below), at any meeting of
the 

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    Shareholders
of the Company, however called, or at any postponement or adjournment thereof or
in any other circumstances upon which a vote, consent or other approval
(including by written consent) is sought, the Shareholders shall (a) when a
meeting is held, appear at such meeting or otherwise cause the Covered Shares to
be counted as present thereat for the purpose of establishing a quorum and (b)
vote (or cause to be voted) in person or by proxy the Covered Shares: (i) in
favor of the Merger, the Merger Agreement and the transactions contemplated by
the Merger Agreement if a vote, consent or other approval (including by written
consent) with respect to any of the foregoing is sought and (ii) against any (x)
extraordinary corporate transaction (other than the Merger or the transactions
with Parent and Merger Sub contemplated by the Merger Agreement, including, if
applicable and requested by Parent or Merger Sub, a tender offer by one of
them), such as a merger, consolidation, business combination, tender offer,
exchange offer, reorganization, recapitalization, liquidation, sale or transfer
of a material amount of the assets or securities of the Company or any of its
subsidiaries (other than pursuant to the Merger or the transactions with Parent
and Merger Sub contemplated by the Merger Agreement) or any other Acquisition
Proposal or (y) amendment of the Company’s articles of incorporation or code of
regulations or other proposal or transaction involving the Company or any of its
subsidiaries, which amendment or other proposal or transaction would in any
manner reasonably be expected to impede, delay, frustrate, prevent or nullify
the Merger, the Merger Agreement or any of the other transactions contemplated
by the Merger Agreement or result in a breach in any material respect of any
representation, warranty, covenant or agreement of the Company under the Merger
Agreement or change in any manner the voting rights of the Common
Stock.  For the purposes of this Agreement, “Voting Period” shall
mean the period commencing on the date hereof and ending immediately prior to
any termination of this Agreement pursuant to Section 6.1 hereof.

     

    Section
1.2  Acknowledgement.  The
Shareholders hereby acknowledge receipt and review of a copy of the Merger
Agreement.

     

    Section
1.3  Proxy.

     

           (a) EACH
SHAREHOLDER, ON A SEVERAL BUT NOT JOINT BASIS, HEREBY GRANTS TO, AND APPOINTS,
PARENT, THE PRESIDENT OF PARENT AND THE SECRETARY OF PARENT, IN THEIR RESPECTIVE
CAPACITIES AS OFFICERS OF PARENT, AND ANY OTHER DESIGNEE OF PARENT, EACH OF THEM
INDIVIDUALLY, SUCH SHAREHOLDER’S IRREVOCABLE (UNTIL THE VOTING AGREEMENT
TERMINATION DATE (AS DEFINED BELOW), AT WHICH TIME SUCH PROXY SHALL BE
AUTOMATICALLY REVOKED) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF
SUBSTITUTION) TO VOTE THE COVERED SHARES IN ACCORDANCE WITH SECTION 1.1
HEREOF.  EACH SHAREHOLDER INTENDS THIS PROXY TO BE IRREVOCABLE (UNTIL
THE VOTING AGREEMENT TERMINATION DATE, AT WHICH TIME SUCH PROXY SHALL BE
AUTOMATICALLY REVOKED) AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER
ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE
INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY SUCH
SHAREHOLDER WITH RESPECT TO THE COVERED SHARES.

     

    
      
         

      

      
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           (b) The
parties acknowledge and agree that neither Parent, nor Parent’s successors,
assigns, subsidiaries, divisions, employees, officers, directors, shareholders,
agents and affiliates, shall owe any duty to, whether in law or otherwise, or
incur any liability of any kind whatsoever, including without limitation, with
respect to any and all claims, losses, demands, causes of action, costs,
expenses (including reasonable attorney’s fees) and compensation of any kind or
nature whatsoever to the Shareholder in connection with, as a result of or
otherwise relating to any vote (or refrain from voting) by Parent of the Covered
Shares subject to the irrevocable proxy hereby granted to Parent at any annual,
special or other meeting or action or the execution of any consent of the
Shareholders of the Company.  The parties acknowledge that, pursuant
to the authority hereby granted under the irrevocable proxy, Parent may vote the
Covered Shares pursuant to Section 1.1 hereof in furtherance of its own
interests, and Parent is not acting as a fiduciary for the
Shareholders.

     

           (c) Except
pursuant to the terms of this Agreement or applicable Law, this irrevocable
proxy shall not be terminated by any act of a Shareholder, whether by the death
or incapacity of a Shareholder or by the occurrence of any other event or events
(including, without limiting the foregoing, the termination of any trust or
estate for which the Shareholder is acting as a fiduciary or fiduciaries or the
dissolution or liquidation of any corporation or partnership).  If
after the execution hereof a Shareholder should die or become incapacitated, or
if any trust or estate should be terminated, or if any corporation or
partnership should be dissolved or liquidated, or if any other such event or
events shall occur before the Voting Agreement Termination Date, certificates
representing the Covered Shares shall be delivered by or on behalf of such
Shareholder in accordance with the terms and conditions of the Merger Agreement
and this Agreement, and actions taken by the Parent hereunder shall be as valid
as if such death, incapacity, termination, dissolution, liquidation or other
event or events had not occurred, regardless of whether or not the Parent has
received notice of such death, incapacity, termination, dissolution, liquidation
or other event.

     

    Section
1.4  Other
Matters.  Except as set forth in Section 1.1 of this Agreement,
each Shareholder shall not be restricted from voting in favor of, against or
abstaining with respect to any matter presented to the Shareholders of the
Company.  In addition, nothing in this Agreement shall give Parent or
any of its officers or designees the right to vote any Covered Shares in
connection with the election of directors or any other matter not expressly
contemplated by Section 1.1.

     

    ARTICLE
II.

    REPRESENTATIONS AND
WARRANTIES OF THE COMPANY

     

    The
Company hereby represents and warrants to each Shareholder and Parent that the
Company has all necessary power and authority to execute and deliver this
Agreement and this Agreement has been duly and validly authorized, executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes a legal, valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at Law).  Subject to Article
IV of this Agreement, the Company Board has taken all

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    necessary
action to ensure that the restrictions on business combinations contained in
Section 1701.831 of the Ohio General Corporation Law (the “OGCL”) will not apply
to this Agreement or the transactions contemplated by this
Agreement.  The execution and delivery of this Agreement by the
Company do not, and the consummation by the Company of the transactions
contemplated hereby and compliance by the Company with the terms hereof will
not, conflict with, or result in any violation or default of (with or without
notice or lapse of time or both), any provision of, the articles of
incorporation or code of regulations of the Company, any trust agreement,
contract, loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise, license or Law
applicable to the Company or to the Company’s properties or assets.

     

    ARTICLE
III.

    REPRESENTATIONS AND
WARRANTIES

    OF THE
SHAREHOLDERS

     

    Each
Shareholder hereby represents and warrants, on a several but not joint basis, to
Parent as follows:

     

    Section
3.1  Authority Relative to This
Agreement.  Such Shareholder has all necessary power and
authority to execute and deliver this Agreement, to perform his, her, or its
obligations hereunder and to consummate the transactions contemplated
hereby.  This Agreement has been duly and validly executed and
delivered by such Shareholder and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes a legal, valid and binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms, except as enforcement may be limited by bankruptcy,
moratorium or other similar laws relating to creditors rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at Law).

     

    Section
3.2  No
Conflict.

     

        (a) The
execution and delivery of this Agreement by such Shareholder do not, and the
performance of his obligations under this Agreement by such Shareholder and the
consummation by such Shareholder of the transactions contemplated hereby will
not, (i) conflict with or violate any Law applicable to such Shareholder or by
which the Owned Shares are bound or affected or (ii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on, any of the Owned Shares pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which such Shareholder is a party or by which
such Shareholder or the Owned Shares are bound or affected.

     

                (b) The
execution and delivery of this Agreement by such Shareholder do not, and the
performance of his obligations under this Agreement will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any court or arbitrator or any governmental entity, agency or official
except (i) for applicable requirements, if any, of the Securities and Exchange
Act of 1934, as amended, or (ii) where the failure to obtain such

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not materially impair the ability of such Shareholder to perform his
obligations hereunder.

     

    Section
3.3  Ownership of
Shares.  As of the date hereof, such Shareholder has good and
marketable title to and is the record and beneficial owner of the Owned Shares
set forth opposite such Shareholder’s name on Schedule A hereto (except as
otherwise set forth on Schedule A), free and clear of all pledges, liens,
proxies, claims, charges, security interests, preemptive rights, voting trusts,
voting agreements, options, rights of first offer or refusal and any other
encumbrances or arrangements whatsoever with respect to the ownership, transfer
or other voting of the Owned Shares.  There are no outstanding
options, warrants or rights to purchase or acquire, or agreements or
arrangements relating to the voting of, any Owned Shares and such Shareholder
has the sole authority to direct the voting of the Owned Shares in accordance
with the provisions of this Agreement and the sole power of disposition with
respect to the Owned Shares, with no restrictions, subject to applicable
securities laws on its disposition pertaining thereto, except (i) with respect
to the Green Family Trust, of which James L. Green and M. Janet Green are
co-trustees and share the authority to direct the voting of the Owned Shares in
accordance with the provisions of the Agreement and share the power of
disposition with respect to the Owned Shares, (ii) with respect to the Green
Charitable Trust, of which James L. Green and M. Janet Green are co-trustees and
share the authority to direct the voting of the Owned Shares in accordance with
the provisions of the Agreement and share the power of disposition with respect
to the Owned Shares, (iii) with respect to shares held by Matthew P. Smith and
Linda H. Smith, who hold shares as joint tenants and share the authority to
direct the voting of the Owned Shares in accordance with the provisions of the
Agreement and share the power of disposition with respect to the Owned Shares,
(iv) with respect to shares held by Ashwood I, of which Matthew P. Smith and
Linda H. Smith are co-managers and who share the authority to direct the voting
of the Owned Shares in accordance with the provisions of the Agreement and share
the power of disposition with respect to the Owned Shares, and (v) with respect
to shares held by Ashwood II, of which Matthew P. Smith and Linda H. Smith are
co-managers and who share the authority to direct the voting of the Owned Shares
in accordance with the provisions of the Agreement and share the power of
disposition with respect to the Owned Shares.  As of the date hereof,
such Shareholder does not own beneficially or of record any equity securities of
the Company other than the Owned Shares set forth opposite such Shareholder’s
name on Schedule A hereto.  Such Shareholder has not appointed or
granted a proxy which is still in effect with respect to any Owned
Shares.

     

    Section
3.4  Shareholder Has Adequate
Information.  Such Shareholder is an “accredited investor” (as
defined under the Securities Act of 1933, as amended) and a sophisticated
investor with respect to the Covered Shares and has independently and without
reliance upon Parent and based on such information as such Shareholder has
deemed appropriate, made his own analysis and decision to enter into this
Agreement.  Such Shareholder acknowledges that Parent has not made nor
makes any representation or warranty, whether express or implied, of any kind or
character.  Such Shareholder acknowledges that the agreements
contained herein with respect to the Covered Shares by such Shareholder are
irrevocable, and that the Shareholder shall have no recourse to the Covered
Shares or Parent with respect to the Covered Shares, except with respect to
breaches of representations, warranties, covenants and agreements expressly set
forth in this Agreement.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

     

                Section
3.5  Parent’s Excluded
Information.  Such Shareholder acknowledges and confirms that
(a) Parent may possess or hereafter come into possession of certain non-public
information concerning the Covered Shares and the Company which is not known to
Shareholder and which may be material to Shareholder’s decision to vote in favor
of the Merger (“Parent’s Excluded
Information”), (b) Shareholder has requested not to receive Parent’s
Excluded Information and has determined to vote in favor of the Merger and sell
the Covered Shares notwithstanding his lack of knowledge of Parent’s Excluded
Information, and (c) Parent shall have no liability or obligation to Shareholder
in connection with, and Shareholder hereby waives and releases Parent from, any
claims which Shareholder or his heirs and assigns may have against Parent
(whether pursuant to applicable securities, laws or otherwise) with respect to
the non-disclosure of Parent’s Excluded Information.

     

    Section
3.6  No
Setoff.  Such Shareholder has no liability or obligation
related to or in connection with the Covered Shares other than the obligations
to Parent as set forth in this Agreement.  To the knowledge of such
Shareholder, there are no legal or equitable defenses or counterclaims that have
been or may be asserted by or on behalf of the Company, as applicable, to reduce
the amount of the Covered Shares or affect the validity or enforceability of the
Covered Shares.

     

    Section
3.7  Reliance by Parent and
Merger Sub.  Such Shareholder understands and acknowledges that
Parent and Merger Sub are entering into the Merger Agreement in reliance upon
such Shareholder’s execution and delivery of this Agreement.

     

    ARTICLE
IV.

    REPRESENTATIONS AND
WARRANTIES

    OF PARENT AND MERGER
SUB

     

    As of the
date hereof, Parent and Merger Sub hereby, jointly and severally, represent and
warrant to each Shareholder and the Company that each of Parent and Merger Sub
has all necessary power and authority to execute and deliver this Agreement and
this Agreement has been duly and validly authorized, executed and delivered by
Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes a legal, valid and binding
agreement of Parent and Merger Sub, enforceable against Parent and Merger Sub in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, moratorium or other similar laws relating to creditors rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at
Law).  The execution and delivery of this Agreement by Parent and
Merger Sub do not, and the consummation by Parent and Merger Sub of the
transactions contemplated hereby and compliance by Parent and Merger Sub with
the terms hereof will not, conflict with, or result in any violation or default
of (with or without notice or lapse of time or both), any provision of, the
certificate of incorporation or bylaws of Parent or the articles of
incorporation or code of regulations of Merger Sub. The execution and delivery
of this Agreement by Parent and Merger Sub do not, and the consummation by
Parent and Merger Sub of the transactions contemplated hereby and compliance by
Parent and Merger Sub with the terms hereof will not, conflict with, or result
in any violation or default of (with or without notice or lapse of time or
both), any provision of, the certificate of incorporation or by-laws of Parent
or Merger Sub, any trust agreement, contract, loan or credit agreement, note,
bond, mortgage, indenture, lease or other 

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    agreement,
instrument, permit, concession, franchise, license or Law applicable to Parent
or Merger Sub or to Parent or Merger Sub’s properties or assets.

    

    ARTICLE
V.

    COVENANTS OF THE
SHAREHOLDERS

     

    Each
Shareholder, on a several but not joint basis, hereby covenants and agrees as
follows:

     

    Section
5.1  No
Solicitation.

     

           (a)           Such
Shareholder hereby acknowledges that it is aware of the covenants of the Company
contained in Section 5.4 of the Merger Agreement and hereby agrees that it
shall, and shall cause his representatives to, except as allowed under Section
5.4 of the Merger Agreement, immediately cease and cause to the terminated any
solicitation, encouragement, discussion or negotiation with any parties that may
be ongoing with respect to a Acquisition Proposal and cause to be returned or
destroyed any confidential information provided by or on behalf of the Company
or any Company Subsidiary to such person.  Such Shareholder further
agrees that it shall not, nor shall it permit any of his representatives to,
directly or indirectly, (i) initiate, solicit or knowingly encourage (including
by way of providing information) any inquiries regarding, or the making of any
proposal or offer that constitutes, or could reasonably be expected to lead to,
a Acquisition Proposal or (ii) engage in any discussions or negotiations
regarding a Acquisition Proposal, or otherwise cooperate with or assist or
participate in or facilitate such inquires, proposals, offers, discussions or
negotiations or execute or enter into any agreement, understanding or
arrangement with respect to a Acquisition Proposal, except, in each case, to the
extent that the Company is permitted to engage in such solicitation, initiation,
facilitation, discussion or negotiation pursuant to Section 5.4 of the Merger
Agreement.  Such Shareholder shall promptly advise Parent orally and
in writing of the receipt by such Shareholder or any of his representatives of
any Acquisition Proposal or any inquiry with respect to, or that could
reasonably be expected to lead to, any Acquisition Proposal (in each case within
24 hours days after receipt), specifying the material terms and conditions of
such Acquisition Proposal or inquiry and the identity of the party making such
Acquisition Proposal or inquiry and any other information required to be
disclosed by the Company to Parent pursuant to Section 5.4(c) of the Merger
Agreement.  Such Shareholder shall, subject to the fiduciary duties of
the Company Board, keep Parent fully informed of the material details of any
such Acquisition Proposal or inquiry.

     

           (b)           Notwithstanding
the foregoing, nothing in this Agreement shall be deemed to prohibit the
Shareholders from fulfilling each of their obligations as directors of the
Company with respect to the taking, as a representative of the Company, any
action which is expressly permitted to be taken by the Company pursuant to
Section 5.4 of the Merger Agreement or from entering into negotiations and
discussions regarding the Covered Shares with respect to any Acquisition
Proposal at any time that the Company is permitted to engage in negotiations or
discussions with respect thereto under such Section 5.4.  The parties
acknowledge that this Agreement is entered into by each Shareholder solely in
such Shareholder’s capacity as the beneficial owner of such Shareholder’s Owned
Shares and that the taking of, or the refraining from taking, any action
contemplated in the immediately preceding sentence by either of the

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

     aforementioned representatives of either Shareholder solely
in such representative’s capacity as a director of the Company shall not be
deemed to constitute a breach of this Agreement.

     

    Section
5.2  No
Transfer.  Other than pursuant to the terms of this Agreement
or the Merger Agreement, without
the prior written consent of Parent or as otherwise provided in this Agreement,
during the term of this Agreement, such Shareholder hereby agrees to not,
directly or indirectly, (a) grant any proxies or enter into any voting trust or
other agreement or arrangement with respect to the voting of any Covered Shares
or (b) sell, pledge, assign, transfer, encumber or otherwise dispose of
(including by merger, consolidation or otherwise by operation of Law), or enter
into any contract, option or other arrangement or understanding with respect to
the direct or indirect assignment, transfer, encumbrance or other disposition of
(including by merger, consolidation or otherwise by operation of Law), any
Covered Shares.

     

    Section
5.3  No Inconsistent
Agreement.  Such Shareholder hereby covenants and agrees that
such Shareholder (a) has not entered into and shall not enter into any agreement
that would restrict, limit or interfere with the performance of such
Shareholder’s obligations hereunder and (b) shall not knowingly take any action
that would reasonably be expected to make any of his representations and
warranties contained herein untrue or incorrect or have the effect of preventing
or disabling it from performing his obligations under this
Agreement.

     

    Section
5.4  Public
Announcement.  Shareholder shall consult with Parent before
issuing any press release or otherwise making any public statements with respect
to the transactions contemplated herein and shall not issue such press release
or otherwise make any such public statement without the approval of Parent,
except as may be required by Law.

     

    Section
5.5  Additional
Shares.  Shareholder shall as promptly as practicable notify
Parent of the number of any new Covered Shares acquired by the Shareholder, if
any, after the date hereof.  Any such shares shall be subject to the
terms of this Agreement as though owned by the Shareholder on the date
hereof.

     

    ARTICLE
VI.

    MISCELLANEOUS

     

    Section
6.1  Termination.  This
Agreement and all of its provisions shall terminate upon the earlier of (i) the
Effective Time, (ii) the termination of the Merger Agreement in accordance with
its terms (including, following the payment of the Breakup Fee, if due at that
time thereunder), or (iii) written notice of termination of this Agreement by
Parent to Shareholders (such date of termination, the “Voting Agreement Termination
Date”).  Nothing in this Section 6.1 shall be deemed to release
any party from any liability for any breach by such party of the terms and
provisions of this Agreement.

     

    Section
6.2  Amendment of Merger
Agreement.  The obligations of the Shareholders under this
Agreement shall terminate if the Merger Agreement is amended or otherwise
modified after the date hereof without the prior written consent of the
Shareholders in a manner that reduces or changes the form of Merger
Consideration, adversely affects the rights of the Shareholders.

     

    
      
         

      

      
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    Section
6.3  Survival of Representations
and Warranties.  The respective representations and warranties
of the Shareholders contained herein shall not be deemed waived or otherwise
affected by any investigation made by the other party hereto.  The
representations and warranties contained herein shall expire with, and be
terminated and extinguished upon, the Voting Agreement Termination Date, and
thereafter no party hereto shall be under any liability whatsoever with respect
to any such representation or warranty.

     

    Section
6.4  Fees and
Expenses.  Except as otherwise provided herein or as set forth
in the Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such costs and expenses.

     

    Section
6.5  Liabilities
Several.  The obligations of the Shareholders under this
Agreement shall be several and not joint.

     

    Section
6.6  Notices.  Any
notices or other communications required or permitted under, or otherwise given
in connection with, this Agreement shall be in writing and shall be deemed to
have been duly given (a) when delivered or sent if delivered in Person, (b) on
the third Business Day after dispatch by registered or certified mail, or (c) on
the next Business Day if transmitted by national overnight
courier.  All notices hereunder shall be delivered to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section
6.6):

     

    if to Parent or Merger
Sub:

     

    c/o The
Gores Group, LLC

    10877
Wilshire Blvd., 18th Floor

    Los
Angeles, CA 90024

    Attention:  Fund
General Counsel

    

    with a
copy to:

     

    Latham
& Watkins LLP

    555
Eleventh Street, N.W.

    Suite
1000

    Washington,
DC 20004

    Attention: Paul
F. Sheridan, Jr.

     

    if to the
Company:

     

    PECO II,
Inc.

    1376
State Route 598

    Galion, Ohio 44833

    Attention:  John
G. Heindel, Chief Executive Officer

     

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    
       

    

    with a
copy to:

    

    Porter,
Wright, Morris & Arthur LLP

    41 S.
High St., Suite 2800

    Columbus,
Ohio 43215

    Attention:  Curtis
A. Loveland, Esq.

                 
      Jeremy D. Siegfried, Esq.

    

    if to The Green Family Trust
03/16/1995 or The Green Charitable Trust:

     

           
       1316 Riverview Circle

    Brandenton, FL 34209

    Attn:  James L.
Green

     

    if to Matthew P. Smith,
Linda H. Smith, Ashwood I, LLC or Ashwood II, LLC:

     

    647
Ashwood Drive

    Mansfield,
Ohio 44906

    Attn:  Matthew
P. Smith

     

    Section
6.7  Severability.  If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of Law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any
party.  Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the fullest extent possible.

     

    Section
6.8  Entire Agreement;
Assignment.  This Agreement and the Merger Agreement constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof and supersede all prior agreements and undertakings, both
written and oral, among the parties hereto, or any of them, with respect to the
subject matter hereof and thereof.  This Agreement shall not be
assigned (whether pursuant to a merger, by operation of law or otherwise),
except that Parent or Merger Sub may assign all or any of its rights and
obligations hereunder to Parent or any Affiliate, provided, however, that no
such assignment shall relieve the assigning party of its obligations hereunder
if such assignee does not perform such obligations.

     

    Section
6.9  Amendment.  This
Agreement may be amended by the parties at any time prior to the Effective
Time.  This Agreement may not be amended except by an instrument in
writing signed by each of the parties hereto.

     

    Section 6.10  Waiver.  At
any time prior to the Effective Time, any party hereto may (a) extend the time
for the performance of any obligation or other act of any other party

    
      
        
           

        

        
          10

          
            

          

        

        
           

        

      

    

    
 

    hereto,
(b) waive any inaccuracy in the representations and warranties of any other
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any agreement of any other party or any condition to its
or his own obligations contained herein.  Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.  The failure of any party to assert any
of its or his rights under this Agreement or otherwise shall not constitute a
waiver of those rights.

     

    Section
6.11  Parties in
Interest.  This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.

     

    Section
6.12  Governing
Law.  This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without giving effect to the
choice of law principles therein).

     

    Section
6.13  Specific Performance;
Submission to Jurisdiction.  The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached.  It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any Delaware
state court or any court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they are entitled at Law or
in equity.  In addition, each of the parties hereto (a) consents to
submit itself or himself to the personal jurisdiction of any Delaware state
court, or Federal court of the United States of America, sitting in Delaware in
the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from such court, (c) agrees
that it will not bring any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court other than any Delaware
state court, or Federal court of the United States of America, sitting in
Delaware and (d) to the fullest extent permitted by Law, consents to service
being made through the notice procedures set forth in Section
6.6.  Each party hereto hereby agrees that, to the fullest extent
permitted by Law, service of any process, summons, notice or document by U.S.
registered mail to the respective addresses set forth in Section 6.6 shall be
effective service of process for any suit or proceeding in connection with this
Agreement or the transactions contemplated hereby.

     

    Section
6.14  Waiver of Jury
Trial.  Each of the parties hereto hereby waives to the fullest
extent permitted by applicable Law any right it may have to a trial by jury with
respect to any litigation directly or indirectly arising out of, under or in
connection with this Agreement.  Each of the parties hereto (a)
certifies that no representative, agent or attorney of any other party has
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce that foregoing waiver and (b) acknowledges
that it and the other parties hereto have been induced to enter into this
Agreement by, among other things, the mutual waivers and certifications in this
Section 6.14.

    
      
        
        

      

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

    

     

    Section
6.15  Headings.  The
descriptive headings contained in this Agreement are included for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.

     

    Section
6.16  Counterparts. This
Agreement may be executed and delivered (including by facsimile transmission) in
two or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same
agreement.

     

    Section
6.17  Further
Assurances.

     

    From time
to time, at the request of another party and without further consideration, each
party hereto shall take such reasonable further action as may reasonably be
necessary or desirable to consummate and make effective the transactions
contemplated by this Agreement.

     

    [SIGNATURE PAGES
FOLLOW]

     

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    

     

    IN
WITNESS WHEREOF, the Shareholders, the Company, Parent and Merger Sub have
caused this Agreement to be duly executed on the date hereof.

     

     

    
      	 	 PARENT:	 
	 	 	 
	 	LINEAGE
      POWER HOLDINGS, INC.	 
	 	 	 	 
	
               

            	
              By:
      

            	/s/ Craig
      A. Witsoe	 
	 	 	
              Craig
      A. Witsoe

            	 
	 	 	
              Chief
      Executive Officer

            	 
	 	 	 	 

    

     

     

    

    
      	
            	 MERGER SUB:	 
	 	 	 
	 	LINEAGE
      POWER OHIO MERGER SUB, INC.	 
	 	 	 	 
	
               

            	
              By:
      

            	/s/ Craig
      A. Witsoe	 
	 	 	
              Craig
      A. Witsoe

            	 
	 	 	
              Chief
      Executive Officer

            	 
	 	 	 	 

    

     

    
 

    
      	
            	 COMPANY:	 
	 	 	 
	 	PECO
      II, INC.	 
	 	 	 	 
	
               

            	
              By:
      

            	/s/ John
      G. Heindel	 
	 	 	
              
                John
      G. Heindel

              

            	 
	 	 	
              
                Chairman,
      President, Chief Executive Officer,

              

            	 
	 	 	 Chief
      Financial Officer and Treasurer	 

    
      
        
          [Signature Page to Voting
Agreement]

          

        

         

      

      
        
        

        
          

        

      

      
         

      

    

    
      	
            	 SHAREHOLDERS:	 
	 	 	 
	 	 	 	 
	
               

            	
               

            	/s/ Matthew
      P. Smith  	 
	 	 	
              Matthew
      P. Smith

            	 
	 	 	
               

            	 

    

     

    
      	 	 	 	 
	
               

            	
               

            	/s/ Linda
      H. Smith  	 
	 	 	
              Linda
      H. Smith  

            	 
	 

    

     

    
      	
               

            	
               

            	/s/   Matthew
      P. Smith 	 
	 	
               

            	
              Ashwood I, LLC

            	 
	 	 By:	 Matthew
      P. Smith, Co-Manager	 
	 

    

    

      	
               

            	
               

            	/s/  Linda
      H. Smith 	 
	 	
               

            	
              Ashwood I, LLC

            	 
	 	 By:	 Linda
      H. Smith , Co-Manager	 
	 

      

        	
                 

              	
                 

              	/s/   Matthew
      P. Smith 	 
	 	
                 

              	
                Ashwood II, LLC

              	 
	 	 By:	 Matthew
      P. Smith, Co-Manager	 
	 

      

    

     

    
      	
               

            	
               

            	/s/  Linda
      H. Smith 	 
	 	
               

            	
              Ashwood II, LLC

            	 
	 	 By:	 Linda
      H. Smith , Co-Manager	 
	 

    

     

    
      	
               

            	
               

            	/s/  James
      L. Green 	 
	 	
               

            	
              Green Family Trust 03/16/1995,

            	 
	 	
            	 James
      L. Green, Co-Trustee	 
	 

    

     

    
      	
               

            	
               

            	/s/  Mary
      Janet Green  	 
	 	
               

            	
              Green Family Trust 03/16/1995,

            	 
	 	
            	 M.
      Janet Green, Co-Trustee	 
	 

    

     

    
      	
               

            	
               

            	/s/  James
      L. Green 	 
	 	
               

            	
              Jim Green & Mary Green TR UA 05/09/01

            	 
	 	
            	
              Green
      Charitable Trust,

              James L. Green, Co-Trustee

            	 
	 

    

     

    
      
        	
                 

              	
                 

              	/s/  Mary
      Janet Green  	 
	 	
                 

              	
                Jim Green & Mary Green TR UA 05/09/01

              	 
	 	
              	
                Green
      Charitable Trust,

                M. Janet Green, Co-Trustee

              	 
	 

      

    

    

    

    
      
         

          [Signature Page to Voting
Agreement]

        

      

      
        
        

        
          

        

      

      
         

      

    

    SCHEDULE
A

    

     

    
      	 Shareholder	 	 Shares of Common
      Stock
	 The Green
      Family Trust 03/16/1995 	 	  189,070*
	 The Green
      Charitable Trust      	 	   
      10,361
	 Matthew P.
      Smith and Linda H. Smith JT    	 	  132,495**
	 Ashwood I,
      LLC 	 	 
    100,000
	 Ashwood II,
      LLC 	 	   
      50,000

    

     

    
      	
              *

            	
              Of
      the 189,070 shares held by The Green Family Trust 03/16/1995, 187,020
      shares are held of record and beneficially and 2,050 shares are held
      beneficially in “street name.”

            

    

    
      	
              **

            	
              Of
      the 132,495 shares held by Matthew P. Smith and Linda H. Smith JT, 35,875
      shares are held of record and beneficially and 96,620 shares are held
      beneficially in “street name.”

               

            

    

     

    
      
        
        

      

      
        Schedule
A

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00168-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00168-of-00352.parquet"}]]