Diebold, Incorporated (Form: 8-K)

AGREEMENT, made and entered into as of the Effective Date by and between Diebold, Incorporated, an Ohio corporation (together with its successors and assigns permitted under this Agreement, the “Company”), and Mr. Thomas W. Swidarski (the “Executive”).

WHEREAS, the Company desires to employ the Executive and to enter into an agreement embodying the terms of such employment (this “Agreement”) and the Executive desires to enter into this Agreement and to accept such employment, subject to the terms and provisions of this Agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Executive (individually a “Party” and together the “Parties”) agree as follows:

(a) “Affiliate” of a person or other entity shall mean a person or other entity that directly or indirectly controls, is controlled by, or is under common control with the person or other entity specified.

(b) “Base Salary” shall mean the salary provided for in Section 4 below or any increased salary granted to the Executive pursuant to Section 4.

(d) “Cause” shall mean that prior to any termination pursuant to Section 12(c), the Executive shall have committed:

(i) an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company or any subsidiary;

(iii) intentional wrongful disclosure of secret processes or confidential information of the Company or any subsidiary; or

(iv) intentional wrongful engagement in any competitive activity which would constitute a material breach of the duty of loyalty;

and any such act shall have been materially harmful to the Company and its subsidiaries taken as a whole. For purposes of this Agreement, no act, or failure to act, on the part of the Executive shall be deemed “intentional” if it was due primarily to an error in judgment or negligence, but shall be deemed “intentional” only if done, or omitted to be done, by the Executive not in good faith and without reasonable belief that his action or omission was in or not opposed to the best interest of the Company and its subsidiaries. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for “Cause” hereunder 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 Board then in office at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive had committed an act set forth above in this Section 1(d) and specifying the particulars thereof in detail.

(e) A “Change in Control” shall be as defined in the Change in Control Employment Agreement, which is attached hereto as Exhibit A.

(f) “Conditions Agreement” shall mean that certain Conditions of Employment agreement dated January 1, 2002 and executed by the Executive on February 25, 2002.

(g) “Constructive Termination Without Cause” shall mean termination by the Executive of his employment at his initiative within 30 days following the Executive’s learning of the occurrence of any of the following events without his consent:

(i) Failure to elect, reelect or otherwise maintain the Executive in the offices or positions in the Company or any subsidiary which the Executive held immediately prior to such termination, or the removal of the Executive as a Director of the Company (or any successor thereto) if the Executive shall have been a Director of the Company immediately prior to such termination, or the removal of the Executive as a member of the managing authority of any subsidiary if the Executive shall have been a member of such body immediately prior to such termination;

(ii) Failure to elect or reelect the Executive to any of the positions described in Section 3 below;

(iii) A significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position or positions with the Company and its Subsidiaries which the Executive held immediately prior to such change, a reduction in the aggregate of the Executive’s Base Salary and incentive pay potential received from the Company and its subsidiaries, or the termination of the Executive’s rights to any employee benefits to which he was entitled immediately prior to such termination which would be material when viewed in light of all of the employee benefits provided to him taken as a whole or a reduction in scope or value thereof without the prior written consent of the Executive;

(iv) any purported termination of the Executive’s employment that is not effected for Cause or Disability;

(v) the expiration or termination by the Company of the Change in Control Employment Agreement unless replaced by an agreement providing benefits to the Executive that are no less favorable than the existing Change in Control Employment Agreement ; or

(vi) the failure of the Company to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the assets of the Company within 15 days after a merger, consolidation, sale or similar transaction.

Following written notice from the Executive of any of the events described above, the Company shall have 10 calendar days in which to cure. If the Company fails to cure, the Executive’s termination shall become effective on the 11th calendar day following the written notice.

(h) “Disability” shall mean the Executive’s permanent and total disability as defined by the Social Security Administration.

(j) “Equity Incentive Plan” shall mean the Company’s 1991 Equity and Performance Incentive Plan, as amended and restated as of January 30, 1997, as amended.

(k) “Pro Rata” shall mean a fraction, the numerator of which is the number of days that the Executive was employed in the applicable performance period (a calendar year in the case of an annual bonus and a performance cycle in the case of an award under the Equity Incentive Plan) and the denominator of which shall be the number of days in the applicable performance period.

(m) “Term of Employment” shall mean the period specified in Section 2 below (including any extension as provided therein).

The Term of Employment shall begin on the Effective Date, and shall extend until the second anniversary of the Effective Date, with automatic one-year renewals thereafter unless either Party notifies the other at least 6 months before the scheduled expiration date that the term is not to renew. Notwithstanding the foregoing, the Term of Employment may be earlier terminated by either Party in accordance with the provisions of Section 12.

(a) Commencing on the Effective Date and continuing for the remainder of the Term of Employment, the Executive shall be employed as the Chief Executive Officer and President of the Company and be responsible for the general management of the affairs of the Company. The Executive also shall be nominated to become a member of the Board, effective as of the Effective Date. The Executive, in carrying out his duties under this Agreement, shall report to the Board. During the term of this Agreement, the Executive shall devote substantially all of his business time and attention to the business and affairs of the Company and shall use his best efforts, skills and abilities to promote its interests.

(b) Nothing herein shall preclude the Executive from (i) serving on the boards of directors of a reasonable number of other corporations with the concurrence of the Board, (ii) serving on the boards of a reasonable number of trade associations and/or charitable organizations, (iii) engaging in charitable activities and community affairs, and (iv) managing his personal investments and affairs, provided that such activities set forth in this Section 3(b) do not conflict or interfere with the effective discharge of his duties and responsibilities under Section 3(a).

The Executive shall be paid an annualized Base Salary, payable in accordance with the regular payroll practices of the Company, of $550,000. The Base Salary shall be reviewed annually for increase in the discretion of the Board.

During the Term of Employment, commencing in 2006 the Executive shall have a bonus opportunity each year equal to 200% of Base Salary, payable in that amount if the maximum performance goals established for the relevant year are met. If such performance goals are not met, the Executive shall receive 40% of Base Salary if the threshold performance goals are met, and 100% of Base Salary if the target performance goals are met. The Executive shall be paid his annual incentive awards no later than other senior executives of the Company are paid their annual incentive awards.

As soon as practicable following the Effective Date, the Company shall grant the Executive 150,000 options to purchase Shares with a seven year maturity, vesting as follows: one-half shall vest the day after Shares have traded at $50 per share or higher for 20 consecutive trading days, and one-half shall vest the day after the Shares have traded at $60 per share or higher for 20 consecutive trading days. Otherwise all 150,000 options will become exercisable on the sixth anniversary date of the award. The strike price for these options will be $37.87.

(a) Stock Options. The Executive shall be eligible for stock option awards commencing with awards in 2007, or sooner at the discretion of the Board, in accordance with Company practices applicable to its senior-level executives at the sole discretion of the Board.

(b) Long-Term Incentive Plans. The Executive shall be eligible to participate in the Company’s Equity Incentive Plan (for the 2006-2008 and future award cycles) with a 20,000 share target and a 40,000 share maximum. The Executive also shall be eligible to participate in any other long-term incentive plan the Company may adopt, on a basis comparable to other senior-level executives.

During the Term of Employment, the Executive shall be entitled to participate in any employee pension and welfare benefit plans and programs made available to the Company’s senior level executives, as such plans or programs may be in effect from time to time, including, without limitation, pension, profit sharing, 401(k) savings and other retirement plans or programs, medical, dental, hospitalization, short-term and long-term disability and life insurance plans, accidental death and dismemberment protection, travel accident insurance, and any other pension or retirement plans or programs and any other employee welfare benefit plans or programs that may be sponsored by the Company from time to time, including any plans that supplement the above-listed types of plans or programs, whether funded or unfunded. The Executive’s participation shall be based on, and the calculation of all benefits shall be based on, the assumptions that the Executive has met all service-period or other requirements for such participation. The Executive shall be entitled to four weeks paid vacation per year of employment, which shall be subject to the Company’s vacation policy for senior executives.

The Executive shall be provided a Supplemental Pension based upon the Company’s Supplemental Employee Retirement Plan II (the “SERP II”).

The Executive is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement and the Company shall promptly reimburse him for all reasonable business expenses incurred in connection with carrying out the business of the Company, subject to documentation in accordance with the Company’s policy.

11. Perquisites. The Executive shall receive standard Company executive perquisites, including, without limitation, the following:

(a) The Executive shall be entitled to fly first-class in the event the Company does not have its own aircraft available for his use.

(b) The Executive shall be provided a monthly car allowance for a luxury class automobile up to a maximum of $3,295 which, if taxable to the Executive, shall be provided on a tax grossed-up basis.

(c) The Company shall reimburse the Executive for reasonable financial planning and tax preparation fees up to an annual maximum of $20,000.

(d) The Executive shall be provided with dues and membership fees for one country club.

(e) The Executive shall be entitled to an annual physical at the Company’s expense at the Cleveland Clinic (or equivalent facility).

(a) Termination Due to Death. In the event that the Executive’s employment is terminated due to his death, his estate or his beneficiaries, as the case may be, shall be entitled to the following benefits;

(ii) Pro Rata annual incentive award for the year in which the Executive’s death occurs, if, and to the extent, such awards are payable, and paid when bonuses are paid to other officers;

(iii) all outstanding options, whether or not then vested, shall vest and shall remain exercisable for a period of one year or until their stated expiration date, if earlier;

(iv) Pro Rata long-term incentives shall be payable when scheduled to be paid (if, and to the extent, such awards are payable); and

(v) a pre-retirement death benefit based on Section XII of the SERP II based on the Executive being deemed to have satisfied the eligibility requirements for a Supplemental Retirement Benefit under SERP II.

(b) Termination Due to Disability. In the event that the Executive’s employment is terminated due to his Disability, he shall be entitled to the following benefits:

(i) disability benefits in accordance with the long-term disability program in effect for senior executives of the Company; provided, however, in no event shall such benefits provide the Executive with less than 60% of his Base Salary to age 65;

(ii) Base Salary through the end of the month in which disability benefits commence;

(iii) Pro Rata annual incentive award for the year in which the Executive’s termination occurs, if such awards are payable, and paid when bonuses are paid to others;

(iv) all outstanding options, whether or not then vested, shall vest and shall remain exercisable for a period of one year or until their stated expiration date, if earlier;

(v) Pro Rata long-term incentives shall be payable when scheduled to be paid (if, and to the extent, such awards are payable); and

(vi) continued participation in all medical, dental, vision and hospitalization insurance coverage and in other employee benefit plans or programs covered by Section 8 in which he was participating on the date of the termination of his employment until the earlier of 36 months following termination of employment or the date, or dates, he receives equivalent coverage and benefits from a subsequent employer; provided, however, that this continued participation does not include continued participation in either the qualified pension plan or the 401(k) plan. In the event the Company’s plans do not permit continuation of Executive’s participation in the benefit plans and programs covered by this Section 12(d)(vii), following his termination, the Company shall provide the Executive with an amount which, after taxes, is sufficient for him to purchase equivalent benefits excluding the qualified pension plan and the 401(k) plan.

In no event shall a termination of the Executive’s employment for Disability occur until the Party terminating his employment gives written notice to the other Party in accordance with Section 23 below.

(ii) all outstanding options which are not then vested shall be forfeited; vested options shall remain exercisable until the earlier of the thirtieth day after the date of termination or the originally scheduled expiration date of the options, unless the Compensation Committee determines otherwise;

(d) Termination without Cause or Constructive Termination without Cause. In the event the Executive’s employment is terminated by the Company without Cause, other than due to Disability or death, or in the event there is a Constructive Termination without Cause, the Executive shall be entitled to the following benefits:

(ii) Base Salary, at the annualized rate in effect on the date of termination, for a period of 24 months following such termination, payable promptly following the date of termination in a lump sum;

(iii) a Pro Rata annual incentive award for the year in which termination occurs, based on the time the executive was employed in that year if, and to the extent, such awards are otherwise earned, to be paid in a single installment when such awards are paid to others in the year following the year of termination;

(iv) an annual incentive award at twice the Target bonus level for the year in which termination occurs, promptly payable in a single installment after his termination;

(v) all outstanding options, whether or not then vested, shall vest and shall remain exercisable for a period of two years or until the end of their term, if less;

(vi) Pro Rata long-term incentives shall be payable when scheduled to be paid (if, and to the extent, such awards are payable), provided, however, that in the event incentives are scheduled to be paid within six months of the Executive’s termination, then the Executive’s incentives shall be paid six months after his termination; and

(vii) continued participation in all medical, dental, vision and hospitalization insurance coverage and in other employee benefit plans or programs covered by Section 8 in which he was participating on the date of the termination of his employment until the earlier of 24 months following termination of employment or the date, or dates, he receives equivalent coverage and benefits from a subsequent employer; provided, however, that this continued participation does not include continued participation in either the qualified pension plan or the 401(k) plan. In the event the Company’s plans do not permit continuation of Executive’s participation in the benefit plans and programs covered by this Section 12(d)(vii), following his termination, the Company shall provide the Executive with an amount which, after taxes, is sufficient for him to purchase equivalent benefits excluding the qualified pension plan and the 401(k) plan.

(e) Voluntary Termination. A termination of employment by the Executive on his own initiative, other than a termination due to Disability or a Constructive Termination without Cause, shall have the same consequences as provided in Section 12(c) for a termination for Cause. A voluntary termination under this Section 12(e) shall be effective on the date specified in the Executive’s written notice.

(f) Non-renewal by the Company. In the event that the Company notifies the Executive pursuant to Section 2 of this Agreement that the Term of Employment shall not renew, the Executive shall be entitled to the same benefits as provided in Section 12(d); provided, however, that the period for which entitlements are provided shall be 12 months instead of 24 months in all subsections where such period applies.

(g) Consequences of a Change in Control. The Executive’s entitlements relating to a Change in Control of the Company shall be determined in accordance with the Change in Control Employment Agreement which is attached hereto as Exhibit A. In addition, in the event of a Change in Control, the options referred to in Section 6 shall immediately vest and become fully exercisable. In the event of any conflict between this Agreement and the Change in Control Employment Agreement after the occurrence of a Change in Control, the Change in Control Employment Agreement shall control and there shall be no duplication of benefits.

(h) Other Termination Benefits. In the case of any of the foregoing terminations, the Executive or his estate shall also be entitled to:

(i) the balance of any incentive awards due for performance periods which have been completed, but which have not yet been paid;

(iii) other benefits, if any, in accordance with applicable plans and programs of the Company.

(i) No Mitigation; No Offset. In the event of any termination of employment under this Section 12, the Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that he may obtain.

(j) Nature of Payments. Any amounts due under this Section 12 are in the nature of severance payments considered to be reasonable by the Company and are not in the nature of a penalty.

(a) The Executive agrees that during the Executive’s employment with the Company and for a period of two (2) years following the termination of such employment, whether termination is by the Executive or by the Company, and regardless of the reasons therefore, the Executive shall not engage in any activity as an employee, principal, agent or consultant for another entity, and in a capacity, that directly competes with the company or any of its related entities including subsidiaries, affiliates and partnerships, in any actual product, service, or business activity (or in any product, service, or business activity which was under active development while the Executive was employed by Company if such development is being actively pursued during such two (2) year period by the Company), in any territory in which the Company or any of its related entities including subsidiaries, affiliates and partnerships, manufactures, sells, markets, services, or installs such product or service, or engages in such business activity.

(b) The Executive further acknowledges and agrees that, in the event of the termination of his employment with the Company, the Executive’s experience and capabilities are such that the Executive can obtain employment in business activities which do not compete with the Company, and that the enforcement of this Agreement by way of injunction shall not prevent the Executive from earning a reasonable livelihood. The Executive further acknowledges and agrees that the covenants contained herein are necessary for the protection of the Company’s legitimate business interests and are reasonable in scope and duration.

The Executive agrees that during his employment with the Company and for a period of two (2) years following the termination of such employment, whether termination is by the Executive or by the Company, regardless of the reasons therefore, the Executive will not directly or indirectly (a) induce or assist others in inducing any person who is an employee, officer, consultant, or agent of the Company or its affiliates to give up employment or business affiliation with the Company or its affiliates; or (b) employ or associate in business with any person who is employed by or associated in business with the Company during the two-year period prior to the termination of the Executive’s employment. In the event that the scope of the restrictions in Sections 13 or 14 are found overly broad, Executive agrees that a court should reform the restrictions by limiting them to the maximum reasonable scope.

15. Confidentiality. In addition to his obligations under the Conditions Agreement, which remain in full force and effect:

(a) The Executive agrees that he will not, at any time during the Term of Employment or thereafter, disclose or use any trade secret, proprietary or confidential information of the Company or any subsidiary or Affiliate of the Company, obtained during the course of his employment, except as required in the course of such employment or with the written permission of the Company or, as applicable, any subsidiary or Affiliate of the Company or as may be required by law, provided that, if the Executive receives legal process with regard to disclosure of such information, he shall promptly notify the Company and cooperate with the Company, at the Company’s sole expense, in seeking a protective order.

(b) The Executive agrees that at the time of the termination of his employment with the Company, whether at the instance of the Executive or the Company, and regardless of the reasons therefor, he will deliver to the Company, and not keep or deliver to anyone else, any and all notes, files, memoranda, papers and, in general, any and all physical matter containing information, including any and all documents significant to the conduct of the business of the Company or any subsidiary or Affiliate of the Company which are in his possession, except for any documents for which the Company or any subsidiary or Affiliate of the Company has given written consent to removal at the time of the termination of the Executive’s employment and his personal rolodex, personal files, phone book and similar items.

(c) The Executive agrees that the Company’s remedies at law would be inadequate in the event of a breach or threatened breach of this Section 13; accordingly, the Company shall be entitled, in addition to its rights at law, to seek an injunction and other equitable relief without the need to post a bond.

Any disputes arising under or in connection with this Agreement shall be resolved by third party mediation of the dispute and, failing that, at the election of the Executive by binding arbitration, to be held in Cleveland, Ohio, in accordance with the rules and procedures of the American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Each Party shall bear his or its own costs of the mediation, arbitration or litigation. Notwithstanding the provisions of this Section 16, the parties agree that in the event of any alleged breach by the Executive of any of his obligations under Sections 13, 14, or 15, then the arbitration requirements of this Section 16 shall not apply, and that instead, the Company may elect, in its sole discretion, to seek relief in a court of general jurisdiction in the State of Ohio, and the parties hereby consent to the exclusive jurisdiction of such court. In addition, in connection with any such court action, the Executive acknowledges and agrees that the remedy at law available to the Company for breach by Executive of any of his obligations under Sections 13, 14, and 15 of this Agreement would be inadequate and that damages flowing from such a breach would not readily be susceptible to being measured in monetary terms. Accordingly, the Executive acknowledges, consents and agrees that, in addition to any other rights or remedies which the Company may have at law, in equity or under this Agreement, upon adequate proof of the Executive’s violation of any provision of Sections 13, 14, and 15 of this Agreement, the Company shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach, without the necessity of proof of actual damage.

This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Executive) and assigns. Rights or obligations of the Company under this Agreement may be assigned or transferred by the Company pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company further agrees that, in the event of a sale of assets or liquidation as described in the preceding sentence, it shall take whatever action it reasonably can in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of the Company hereunder. No rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law.

This Agreement contains the entire understanding and agreement between the Parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the Parties with respect thereto.

No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by the Executive and an authorized officer of the Company. No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by the Executive or an authorized officer of the Company, as the case may be.

In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law so as to achieve the purposes of this Agreement.

Except as otherwise expressly set forth in this Agreement, the respective rights and obligations of the Parties hereunder shall survive any termination of the Executive’s employment. This Agreement itself (as distinguished from the Executive’s employment) may not be terminated by either Party without the written consent of the other Party. Upon the expiration of the term of the Agreement, the respective rights and obligations of the Parties shall survive such expiration to the extent necessary to carry out the intentions of the Parties an embodied in the rights (such as vested rights) and obligations of the Parties under this Agreement.

In the event of the Executive’s death or a judicial determination of his incompetence, reference in this Agreement to the Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

This Agreement shall be governed in accordance with the laws of Ohio without reference to principles of conflict of laws.

All notices and other communications required or permitted hereunder shall be in writing and shall be deemed given when (a) delivered personally, (b) delivered by certified or registered mail, postage prepaid, return receipt requested or (c) delivered by overnight courier (provided that a written acknowledgment of receipt is obtained by the overnight courier) to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give such notice of:

The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.

This EMPLOYMENT AGREEMENT (“Agreement”), dated as of December 12, 2005 by and between DIEBOLD, INCORPORATED, an Ohio corporation (the “Company”), and Thomas W. Swidarski (“Executive”);

WHEREAS, the Executive is a senior executive who has made and is expected to continue to make major contributions to the profitability, growth and financial strength of the Company and its Subsidiaries (as hereinafter defined);

WHEREAS, the Company recognizes that, as is the case for most publicly held companies, the possibility of a Change in Control (as that term is hereafter defined) exists;

WHEREAS, the Company desires to assure itself and its Subsidiaries of both present and future continuity of management in the event of a Change in Control and desires to establish certain minimum compensation rights for key senior executive officers, including the Executive, applicable in the event of a Change in Control;

WHEREAS, the Company wishes to ensure that senior executives are not practically disabled from discharging their duties upon a Change in Control;

WHEREAS, this Agreement is not intended to alter materially the compensation and benefits which the Executive could reasonably expect to receive absent a Change in Control and, accordingly, although effective and binding as of the date hereof, this Agreement shall become operative only upon the occurrence of a Change in Control; and

WHEREAS, the Executive is willing to render services on the terms and subject to the conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the premises, the Company and the Executive agree as follows:

1. Operation of Agreement: (a) This Agreement shall be effective and binding immediately upon its execution, but, anything in this Agreement to the contrary notwithstanding, this Agreement shall not become operative unless and until there shall have occurred a Change in Control. For purposes of this Agreement, a “Change in Control” shall have occurred if at any time during the Term (as that term is hereafter defined) any of the following events shall occur:

(i) The Company is merged or consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction is held in the aggregate by the holders of Voting Stock (as that term is hereafter defined) of the Company immediately prior to such transaction;

(ii) The Company sells or otherwise transfers all or substantially all of its assets to any other corporation or other legal person, and as a result of such sale or transfer less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale or transfer;

(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosing that any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the Company (“Voting Stock”);

(iv) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or

(v) If during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of each Director of the Company first elected during such period was approved by a vote of at least two-thirds of the Directors of the Company then still in office who were Directors of the Company at the beginning of any such period.

Notwithstanding the foregoing provisions of Section 1(a)(iii) or 1(a)(iv) hereof, a “Change in Control” shall not be deemed to have occurred for purposes of this Agreement either (i) solely because (A) the Company, (B) a Subsidiary of the Company, or (C) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company, either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 20% or otherwise, or because the Company reports that a change in control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership or (ii) solely because of a change in control of any Subsidiary by which the Executive may be employed. Notwithstanding the foregoing provisions of Section 1(a)(i-iv) hereof, if, prior to any event described in Sections 1(a)(i-iv) hereof instituted by any person not an officer or director of the Company, or prior to any disclosed proposal instituted by any person not an officer or director of the Company which could lead to any such event, management proposes any restructuring of the Company which ultimately leads to an event described in Sections 1(a)(i-iv) hereof pursuant to such management proposal, then a “Change in Control” shall not be deemed to have occurred for purposes of this Agreement.

(b) Upon the occurrence of a Change in Control at any time during the Term, this Agreement shall become immediately operative, except that in the event that any such agreement to merge, consolidate, reorganize or sell or otherwise transfer assets referred to in Section 1(a)(i) or 1(a)(ii) is terminated without such merger, consolidation, reorganization or sale or transfer having been consummated, or the person filing such Schedule 13D or Schedule 14D-1 referred to in Section 1(a)(iii) files an amendment to such Schedules disclosing that it no longer is the beneficial owner of securities representing 20% or more of the Voting Stock of the Company, or the Company reports that the change of control which it reported in the filing referred to in Section 1(a)(iv) will not in fact occur, the Board of Directors of the Company (the “Board”) may by notice to the Executive nullify the operation of this Agreement by reason of such Change in Control, without prejudice to any exercise by the Executive of his rights under this Agreement that may have occurred prior to such nullification.

(c) The period during which this Agreement shall be in effect (the “Term”) shall commence as of the date hereof and shall expire as of the later of (i) the close of business on December 31, 1993 and (ii) the expiration of the Period of Employment (as that term is hereafter defined), provided, however, that (A) commencing on January 1, 1991, and each January 1 thereafter, the term of this Agreement shall automatically be extended for an additional year unless, not later than September 30 of the immediately preceding year, the Company or the Executive shall have given notice that it or he, as the case may be, does not wish to have the Term extended, and (B) subject to Section 8 hereof, if, at any time prior to a Change in Control, the Executive for any reason is no longer an employee of the Company or a Subsidiary, thereupon the Term shall be deemed to have expired and this Agreement shall immediately terminate and be of no further effect.

2. Employment; Period of Employment: (a) Subject to the terms and conditions of this Agreement, upon the occurrence of a Change in Control, the Company shall continue the Executive in the employ of the Company and its Subsidiaries and the Executive shall remain in such employ for the period set forth in Section 2(b) hereof (the “Period of Employment”). During the Period of Employment, the Executive agrees to serve in such office or offices of the Company or any Subsidiary to which the Board or the managing authority of any Subsidiary may from time to time elect or appoint him. Throughout the Period of Employment, the Executive shall devote substantially all of his time during normal business hours (subject to vacations, sick leave and other absences in accordance with the policies of the Company and its Subsidiaries as in effect for senior executives immediately prior to the Change in Control) to the business and affairs of the Company and its Subsidiaries, but nothing in this Agreement shall preclude the Executive from devoting reasonable periods of time during normal business hours to (i) serving as a director, trustee or member of or participant in any organization or business so long as such activity would not constitute Competitive Activity (as that term is hereafter defined), (ii) engaging in charitable and community activities, or (iii) managing his personal investments.

(b) The Period of Employment shall commence on the date of an occurrence of a Change in Control and, subject only to the provisions of Section 4 hereof, shall continue until the earlier of (i) the expiration of the third anniversary of the occurrence of the Change in Control, (ii) the Executive’s death, or (iii) the Executive’s attainment of age 65; provided, however, that commencing on each anniversary of the Change in Control, the Period of Employment shall automatically be extended for an additional year unless, not later than 90 calendar days prior to such anniversary date, either the Company or the Executive shall have given written notice to the other that the Period of Employment shall not be so extended.

(c) As used in this Agreement, the term “Subsidiary” means a corporation, company or other entity (i) more than 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but more than 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company, but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists.

3. Compensation During Period of Employment: (a) For his services pursuant to Section 2(a) hereof, upon the occurrence of a Change in Control, the Executive shall receive during the Period of Employment (i) annual base salary at a rate not less than the Executive’s annual fixed or base compensation (payable monthly or otherwise as in effect for senior executives of the Company immediately prior to the occurrence of a Change in Control) or such higher rate as may be approved from time to time by the Board or the Compensation Committee thereof (the “Committee”) (which base salary at such rate is herein referred to as “Base Pay”) and (ii) an annual amount equal to not less than the highest aggregate annual bonus, incentive or other payments of cash compensation in addition to the amounts referred to in clause (i) above made or to be made in regard to services rendered in any calendar year during the two calendar years immediately preceding the year in which the Change in Control occurred pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar policy, plan, program or arrangement of the Company or any Subsidiary or any successor thereto providing benefits at least as great as the benefits payable thereunder prior to a Change in Control (“Incentive Pay”), provided, however, that with the prior written consent of the Executive, nothing herein shall preclude a change in the mix between Base Pay and Incentive Pay so long as the aggregate cash compensation received by the Executive in any one calendar year is not reduced in connection therewith or as a result thereof, and provided further, however, that in no event shall any increase in the Executive’s aggregate cash compensation or any portion thereof in any way diminish any other obligation of the Company under this Agreement.

(b) For his services pursuant to Section 2(a) hereof, during the Period of Employment the Executive shall be a full participant in, and shall be entitled to the perquisites, benefits and service credit for benefits as provided under, any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which senior executives of the Company or its Subsidiaries participate, including without limitation any stock option, stock purchase, stock appreciation, restricted stock grant, savings, pension, supplemental executive retirement or other retirement income or welfare benefit, deferred compensation, group and/or executive life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by the Company or any Subsidiary), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter by the Company or any Subsidiary providing perquisites, benefits and service credit for benefits at least as great as are payable thereunder prior to a Change in Control (collectively, “Employee Benefits”), provided, however, that except as expressly provided in, and subject to the terms of, Section 5(a)(ii) hereof, the Executive’s rights thereunder shall be governed by the terms thereof and shall not be enlarged hereunder or otherwise affected hereby. Subject to the proviso in the immediately preceding sentence, if and to the extent such perquisites, benefits or service credit for benefits are not payable or provided under any such policy, plan, program or arrangement as a result of the amendment or termination thereof, then the Company shall itself pay or provide therefor. Nothing in this Agreement shall preclude improvement or enhancement of any such Employee Benefits, provided that no such improvement shall in any way diminish any other obligation of the Company under this Agreement.

(c) The Company has determined that the amounts payable pursuant to this Section 3 constitute reasonable compensation for services to be rendered during the Period of Employment. Accordingly, notwithstanding any other provision hereof, unless such action would be expressly prohibited by applicable law, if any amount paid or payable pursuant to this Section 3 for services to be rendered during the Period of Employment, or pursuant to Section 5, is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the Company will pay to the Executive an additional amount in cash equal to the amount necessary to cause the aggregate remuneration received by the Executive under this Section 3 for services to be rendered during the Period of Employment, or Section 5, including such additional cash payment (net of all federal, state and local income taxes and all taxes payable as the result of the application of Sections 280G and 4999 of the Code) to be equal to the aggregate remuneration the Executive would have received under this Section 3 for services to be rendered during the Period of Employment, or Section 5, excluding such additional payment (net of all federal, state and local income taxes), as if Sections 280G and 4999 of the Code (and any successor provisions thereto) had not been enacted into law.

4. Termination Following a Change in Control: (a) In the event of the occurrence of a Change in Control, the Executive’s employment with the Company and its Subsidiaries may be terminated by the Company and its Subsidiaries during the Period of Employment and the Executive shall not be entitled to the benefits provided by Section 5 hereof only upon the occurrence of one or more of the following events:

(ii) If the Executive shall become permanently disabled within the meaning of, and begins actually to receive disability benefits pursuant to, the long-term disability plan in effect for senior executives of the Company and its Subsidiaries immediately prior to the Change in Control; or

(iii) For “Cause,” which for purposes of this Agreement shall mean that, prior to any termination pursuant to Section 4(b) hereof, the Executive shall have committed:

(A) an intentional act of fraud, embezzlement or theft in connection with his duties or in the course of his employment with the Company or any Subsidiary;

(D) intentional wrongful engagement in any competitive activity which would constitute a material breach of the duty of loyalty (“Competitive Activity”);

and any such act shall have been materially harmful to the Company and its Subsidiaries taken as a whole. For purposes of this Agreement, no act, or failure to act, on the part of the Executive shall be deemed “intentional” if it was due primarily to an error in judgment or negligence, but shall be deemed “intentional” only if done, or omitted to be done, by the Executive not in good faith and without reasonable belief that his action or omission was in or not opposed to the best interest of the Company and its Subsidiaries. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for “Cause” hereunder 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 Board then in office at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive had committed an act set forth above in this Section 4(a)(iii) and specifying the particulars thereof in detail. Nothing herein shall limit the right of the Executive or his beneficiaries to contest the validity or propriety of any such determination.

(b) In the event of the occurrence of a Change in Control, during the Period of Employment the Executive shall be entitled to the benefits as provided in Section 5 hereof upon the occurrence of one or more of the following events:

(i) Any termination by the Company and its Subsidiaries of the employment of the Executive prior to the date upon which the Executive shall have attained age 65, which termination shall be for any reason other than for Cause or as a result of the death of the Executive or by reason of the Executive’s disability and the actual receipt of disability benefits in accordance with Section 4(a)(ii) hereof; or

(ii) Termination by the Executive of his employment with the Company and its Subsidiaries during the Period of Employment after the Change in Control upon the occurrence of any of the following events:

(A) Failure to elect, reelect or otherwise maintain the Executive in the offices or positions in the Company or any Subsidiary which the Executive held immediately prior to a Change in Control, or the removal of the Executive as a Director of the Company (or any successor thereto) if the Executive shall have been a Director of the Company immediately prior to the Change in Control, or the removal of the Executive as a member of the managing authority of any Subsidiary if the Executive shall have been a member of such body immediately prior to the Change in Control;

(B) A significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position or positions with the Company and its Subsidiaries which the Executive held immediately prior to the Change in Control, a reduction in the aggregate of the Executive’s Base Pay and Incentive Pay received from the Company and its Subsidiaries, or the termination of the Executive’s rights to any Employee Benefits to which he was entitled immediately prior to the Change in Control or a reduction in scope or value thereof without the prior written consent of the Executive, any of which is not remedied within 10 calendar days after receipt by the Company of written notice from the Executive of such change, reduction or termination, as the case may be;

(C) A determination by the Executive made in good faith that as a result of a Change in Control and a change in circumstances thereafter significantly affecting his position, including without limitation a change in the scope of the business or other activities for which he was responsible immediately prior to the Change in Control, he has been rendered substantially unable to carry out, has been substantially hindered in the performance of, or has suffered a substantial reduction in, any of the authorities, powers, functions, responsibilities or duties attached to the position held by the Executive immediately prior to the Change in Control, which situation is not remedied within 10 calendar days after written notice to the Company from the Executive of such determination;

(D) The liquidation, dissolution, merger, consolidation or reorganization of the Company or transfer of all or a significant portion of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization or otherwise) to which all or a significant portion of its business and/or assets have been transferred (directly or by operation of law) shall have assumed all duties and obligations of the Company under this Agreement pursuant to Section 10 hereof;

(E) The Company shall relocate its principal executive offices, or the Company or any Subsidiary shall require the Executive to have his principal location of work changed, to any location which is in excess of 25 miles from the location thereof immediately prior to the Change in Control or the Company or any Subsidiary shall require the Executive to travel away from his office in the course of discharging his responsibilities or duties hereunder significantly more (in terms of either consecutive days or aggregate days in any calendar year) than was required of him prior to the Change in Control without, in either case, his prior written consent; or

(F) Without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Company or any successor thereto.

(c) A termination by the Company and its Subsidiaries pursuant to Section 4(a) hereof or by the Executive pursuant to Section 4(b) hereof shall not affect any rights which the Executive may have pursuant to any agreement, policy, plan, program or arrangement of the Company or any Subsidiary providing Employee Benefits, which rights shall be governed by the terms thereof. If this Agreement or the employment of the Executive is terminated under circumstances in which the Executive is not entitled to any payments under Section 3 or 5 hereof, the Executive shall have no further obligation or liability to the Company hereunder with respect to his prior or any future employment.

5. Severance Compensation: (a) If, following the occurrence of a Change in Control, the Company and its Subsidiaries shall terminate the Executive’s employment during the Period of Employment other than pursuant to Section 4(a) hereof, or if the Executive shall terminate his employment pursuant to Section 4(b) hereof, the Company shall pay to the Executive the amount specified in Section 5(a)(i) hereof within five business days after the date (the “Termination Date”) that the Executive’s employment is terminated (the effective date of which shall be the date of termination or such other date that may be specified by the Executive if the termination is pursuant to Section 4(b) hereof):

(i) In lieu of any further payments to the Executive for periods subsequent to the Termination Date, but without affecting the rights of the Executive referred to in Section 5(b) hereof, a lump sum payment (the “Severance Payment”) in an amount equal to three times the Base Pay of the Executive.

(ii) (A) On the Termination Date and continuing until the earlier of (i) the expiration of the first anniversary of the Termination Date, (ii) the Executive’s death, or (iii) the Executive’s attainment of age 65 (the “Benefits Period”), the Company shall arrange to provide the Executive with Employee Benefits (except that the Company shall not be required to grant stock options, stock purchase rights, restricted stock, or stock appreciation rights during the Benefits Period) substantially similar to those which the Executive was receiving or entitled to receive immediately prior to the Termination Date (and if and to the extent that such benefits shall not or cannot be paid or provided under any policy, plan, program or arrangement of the Company or its Subsidiaries solely due to the fact that the Executive is no longer an officer or employee of the Company and its Subsidiaries, then the Company shall itself pay or provide for the payment to the Executive, his dependents and beneficiaries, such Employee Benefits) and (B) without limiting the generality of the foregoing, the Benefits Period shall be considered service with the Company and its Subsidiaries for the purpose of service credits under the retirement income, supplemental executive retirement and other plans for Employee Benefits of the Company and its Subsidiaries applicable to the Executive or his beneficiaries immediately prior to the Termination Date. Without otherwise limiting the purposes or effect of Section 6 hereof, Employee Benefits payable to the Executive pursuant to this Section 5(a)(ii) by reason of any “welfare benefit plan” of the Company (as the term “welfare benefit plan” is defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended) shall be reduced to the extent comparable welfare benefits are actually received by the Executive from another employer during the Benefits Period.

(b) Upon written notice given by the Executive to the Company prior to the occurrence of a Change in Control, the Executive, at his sole option, without reduction to reflect the present value of such amounts as aforesaid, may elect to have all or any of the Severance Payment payable pursuant to Section 5(a)(i) hereof paid to him on a quarterly or monthly basis during the remainder of the Period of Employment.

(c) There shall be no right of set-off or counterclaim in respect of any claim, debt or obligation against any payment to or benefit for the Executive provided for in this Agreement.

(d) Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment required to be made hereunder on a timely basis, the Company shall pay interest on the amount thereof at an annualized rate of interest equal to eighteen percent (18%).

6. No Mitigation Obligation: The Company hereby acknowledges that it will be difficult, and may be impossible, for the Executive to find reasonably comparable employment following the Termination Date. In addition, the Company acknowledges that its severance pay plans applicable in general to its salaried employees do not provide for mitigation, offset or reduction of any severance payment received thereunder. Accordingly, the parties hereto expressly agree that the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement will be liquidated damages, and that the Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise.

7. Indemnification of Legal Fees and Expenses; Security for Payment: (a) Indemnification of Legal Fees. It is the intent of the Company that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Executive hereunder. Accordingly, if it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation designed to deny, or to recover from, the Executive the benefits intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of his choice, at the expense of the Company as hereafter provided, to represent the Executive in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or any Subsidiary, Director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to the Executive’s entering into an attorney-client relationship with such counsel, and in that connection the Company and the Executive agree that a confidential relationship shall exist between the Executive and such counsel. The Company shall pay or cause to be paid and shall be solely responsible for any and all attorneys’ and related fees and expenses incurred by the Executive as a result of the Company’s failure to perform this Agreement or any provision hereof or as a result of the Company or any person contesting the validity or enforceability of this Agreement or any provision hereof as aforesaid.

(b) Trust Agreements. To ensure that the provisions of this Agreement can be enforced by the Executive, two agreements (“Trust Agreement” and “Trust Agreement No. 2”) dated as of February 10, 1989, have been established between National City Bank, a national banking association (“Trustee”) and the Company. The Trust Agreement sets forth the terms and conditions relating to payment from the Trust Agreement of the Severance Payment and other Employee Benefits pursuant to Section 5(a) hereof owed by the Company, and Trust Agreement No. 2 sets forth the terms and conditions relating to payment from Trust Agreement No. 2 of attorneys’ and related fees and expenses pursuant to Section 7(a) hereof owed by the Company. Executive shall make demand on the Company for any payments due Executive pursuant to Section 7(a) hereof prior to making demand therefor on the Trustee under Trust Agreement No. 2. Payments by such Trustee shall discharge the Company’s liability under Section 7(a) hereof only to the extent that trust assets are used to satisfy such liability.

(c) Obligation of the Company to Fund Trusts. Upon the earlier to occur of (X) a Change in Control that involves a transaction that was not approved by the Board, and was not recommended to the Company’s shareholders by the Board, (Y) a declaration by the Board that the Trusts should be funded in connection with a Change in Control that involves a transaction that was approved by the Board, or was recommended to shareholders by the Board, or (Z) a declaration by the Board that a Change in Control is imminent, the Company shall promptly to the extent it has not previously done so, and in any event within five (5) business days:

(i) transfer to the Trustee to be added to the principal of the trust under the Trust Agreement a sum equal to the aggregate value on the date of the Change in Control of the Severance Payment and Employee Benefits which could become payable to Executive under the provisions of Section 5(a)(i) and Section 5(a)(ii) hereof; provided, however, that the Company shall not be required to transfer, in the aggregate, to the trust under the Trust Agreement a sum in excess of the maximum amount authorized by its Board by resolutions on February 10, 1989, which resolutions contemplate the funding of the trust under the Trust Agreement. Any Severance Payment or other payment of Employee Benefits by the Trustee pursuant to the Trust Agreement shall, to the extent thereof, discharge the Company’s obligation to pay the Severance Payment and other Employee Benefits hereunder, it being the intent of the Company that assets in such Trust be held as security for the Company’s obligation to pay the Severance Payment and other Employee Benefits under this Agreement; and

(ii) transfer to the Trustee to be added to the principal of the trust under Trust Agreement No. 2 the sum of Two Million Dollars ($2,000,000). Any payments of attorneys’ and related fees and expenses, which are the obligation of the Company under Section 7(a) hereof, by the Trustee pursuant to Trust Agreement No. 2 shall, to the extent thereof, discharge the Company’s obligation hereunder, it being the intent of the Company that such assets in such Trust be held as security for the Company’s obligation under Section 7(a) hereof.

8. Employment Rights: Nothing expressed or implied in this Agreement shall create any right or duty on the part of the Company or the Executive to have the Executive remain in the employment of the Company or any Subsidiary prior to any Change in Control, provided, however, that any termination of employment of the Executive or the removal of the Executive from such Executive’s office or position following the commencement of any discussion with a third person that ultimately results in a Change in Control shall be deemed to be a termination or removal of the Executive after a Change in Control for purposes of this Agreement.

9. Withholding of Taxes: The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or government regulation or ruling.

10. Successors and Binding Agreement: (a) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement shall be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business and/or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Agreement), but shall not otherwise be assignable, transferable or delegable by the Company.

(b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees and/or legatees.

(c) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Section 10(a) hereof. Without limiting the generality of the foregoing, the Executive’s right to receive payments hereunder shall not be assignable, transferable or delegable, whether by pledge, creation of a security interest or otherwise, other than by a transfer by his will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 10(c), the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated.

(d) The Company and the Executive recognize that each party will have no adequate remedy at law for breach by the other of any of the agreements contained herein and, in the event of any such breach, the Company and the Executive hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus or other appropriate remedy to enforce performance of this Agreement.

11. Notice: For all purposes of this Agreement, all communications including without limitation notices, consents, requests or approvals, provided for herein shall be in writing and shall be deemed to have been duly given when delivered or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive office and to the Executive at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of change of address shall be effective only upon receipt.

12. Governing Law: The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio, without giving effect to the principles of conflict of laws of such State.

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

14. Entire Agreement: This Agreement represents the entire agreement between the parties relating to the subject matter hereof and replaces any and all prior agreements pertaining thereto. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

15. Amendment: No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

16. Counterparts: This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written.

Telephone: 0141 248 6677
Facsimile: 0141 204 1351 / 221 1390
E-Mail: enquiries@mcgrigors.com
Web Site: http://www.mcgrigors.com

(1)

DIEBOLD INTERNATIONAL LIMITED, a company registered in England and Wales with registered number 02056813 and having its registered office at 21 Tudor Street, London EC4Y 0DJ (the “Company”);

(2)

DIEBOLD, INCORPORATED, a company organised under the laws of the State of Ohio with its principal office at 5995 Mayfair Road, Canton, Ohio 44720-8077 (the “Parent"); and

(3)

DANIEL JOSEPH O’BRIEN, residing at Flat 11, One Wyndham Court, Kirklee, Glasgow G12 0TY (the “Employee”).

(B)

The parties have entered into this Agreement to record and implement the terms upon which they have agreed to settle all outstanding claims which the Employee has or may have arising out of or in connection with or as a consequence of the Employee’s employment and/or its termination or otherwise against the Company, the Parent and the Group (as defined below), its or their respective shareholders, officers, employees or agents including in particular those Claims (as defined below) which the Employee has intimated and/or intimates in this Agreement;

(C)

The parties agree that the conditions regulating compromise agreements under the Acts (as defined below) are satisfied by this Agreement.

"the Acts” means the Employment Rights Act 1996 and the Working Time Regulations 1998;

(a)

unfair dismissal, wrongful dismissal or constructive dismissal, including unlawful discrimination on the basis of age;

(b)

unlawful deductions from wages under the Employment Rights Act 1996 (“the ERA”);

(e)

failure to provide or pay out any benefits under any discretionary benefit program;

(g)

any claim under Regulation 30 of the Working Time Regulations 1998 in particular for accrued holiday pay;

"Group” means any Person that directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Parent; each of the words “control”, “controlling”, or “controlled” shall mean ownership which is not less than 50% plus one share, or the right to elect the majority of the Board of Directors or such other similar governing body;

"Service Agreement” means the service agreement between the Company and the Employee dated 1 January 2004;

"Restricted Shares” means the restricted shares in the Parent granted to the Employee by the Parent prior to the Termination Date, as set forth on Schedule 3;

"Stock Options” means the options granted to the Employee by the Parent prior to the Termination Date over shares in the Parent, as set forth on Schedule 3;

Save to the extent that the context or the express provisions of this Agreement require otherwise, in this Agreement:-

(c)

references to any statute or statutory provision (including any subordinate legislation) include any statute or statutory provision which amends, extends, consolidates or replaces the same, or which has been amended, extended, consolidated or replaced by the same, and shall include any orders, regulations, instruments or other subordinate legislation made under the relevant statute or statutory provision;

(d)

references to a “person” includes any individual, firm, company, corporation, body corporate, government, state or agency of state, trust or foundation, or any association, partnership or unincorporated body (whether or not having separate legal personality);

(e)

any phrase introduced by the words “including”, “include”, “in particular” or any similar expression shall be construed as illustrative only and shall not be construed as limiting the generality of any preceding words;

(f)

the words “other” and “otherwise” shall not be construed eiusdem generis with any foregoing words where a wider construction is possible.

The headings in this Agreement are included for convenience only and shall be ignored in construing the Agreement.

The employment of the Employee with the Company terminated on the Termination Date. For the avoidance of doubt, the Employee shall pursuant to this Agreement have resigned all offices and positions held by the Employee with the Company, the Parent and/or the Group on the Termination Date.

(a)

Subject to compliance by the Employee with the terms of this Agreement and conditional upon receipt by the Company of this Agreement duly executed by the Employee and delivery of the Certificate referred to in Schedule 2 duly signed by the Employee’s solicitor, the Company will pay to the Employee the sum of £283,680 by way of compensation in connection with the termination of the Employee’s employment (the “Severance Payment”).

(b)

The Severance Payment will be paid in the following amounts at the following times:

(c)

In the event that the Employee dies before the Severance Payment has been paid in full the Company agrees and undertakes to pay the balance of the Severance Payment to the Employee’s estate on the relevant payment dates specified at Clause 3(b).

4.1

The Company and the Employee understand that £30,000 of the Severance Payment under Clause 3 will not be subject to tax pursuant to section 401 and 403 of the Income Tax (Earnings and Pensions) Act 2003, but that the balance of the Severance Payment shall be paid following deduction of tax and employee national insurance contributions at the appropriate rates.

4.2

The benefits granted to the Employee pursuant to Clauses 6 and 7 should not be taxable by way of HM Revenue and Customs concession (although should this change, the taxation of such benefits shall be subject to Clause 4.3).

4.3

The Employee will be responsible for the payment of any tax, employee’s national insurance contributions and similar charges (including any interest, penalties, costs and expenses) arising in respect of any payments (other than the payment of £30,000 made pursuant to Clause 3 and referred to in Clause 4.1) or benefits (including the Restricted Shares and the Stock Options) under this Agreement (“Tax”). Tax shall not include the tax and national insurance contributions deducted by the Company in accordance with Clause 4.1. The Employee hereby agrees to indemnify the Company, the Parent and any member of the Group and to keep them indemnified on a continuing basis against all and any liability for Tax that the Company, the Parent or any member of the Group may incur as a result of the matters set forth in this Agreement. No payment of Tax other than Tax payable pursuant to Clause 4.4 will be made to HM Revenue and Customs or any other relevant authority without first particulars of the proposed payment being given to the Employee so that the Employee is given the opportunity to dispute any such payment or liability with HM Revenue and Customs or any other relevant authority.

4.4

The Company and/or the Parent shall be entitled to deduct from any amounts deliverable or payable in cash, shares or other property to the Employee under this Agreement any tax, employee’s national insurance or similar charges the Company and/or the Parent are required to make under applicable law in respect of the Restricted Shares and the Stock Options, and in such case, the Employee shall have no liability for Tax under Clause 4.3 for the amount of such deduction.

5.1

The Parent confirms that all unvested Stock Options held by the Employee in the Parent shall automatically vest on the date hereof and shall remain exercisable until termination 10 years from their respective dates of grant. Such Stock Options shall be exercisable in accordance with the terms of the applicable plan of the Parent under which such Stock Options were granted, as such plan may be amended in accordance with its terms.

5.2

The Parent confirms, subject to Clause 4.4, that the Restricted Shares shall be released to the Employee on the date hereof.

The Company shall until 31 December 2007 continue to provide for the Employee private medical insurance on the terms and conditions provided by the Company to its employees.

7.1

The Company will pay the Employee any unused pro rata entitlement to holiday which has accrued up to the Termination Date. The Employee will not participate in any discretionary management bonus scheme nor be eligible for any equity awards or grants in respect of any period after 1 January 2006. All sums will be paid after deduction of tax and national insurance contributions.

7.2

The Employee will submit his final expenses claim made up to the Termination Date, within 14 days of the date hereof. The Company will reimburse the Employee for all expenses reasonably incurred in the proper performance of the Employee’s duties in the usual way.

8.1

The Company will pay the reasonable legal costs incurred by the Employee for the advice received regarding the termination of the Employee’s employment and entering into this Agreement up to a maximum amount of £1750 plus VAT.

8.2

Payment of this sum will be made directly to the Employee’s solicitors by the Company within 14 days of the Company receiving a VAT invoice from such solicitor.

The Company will provide the Employee with a reference in terms of the draft set out in Schedule 1, subject to the Company’s right not to include any statement that is misleading or false and the Company’s right not to give a reference in connection with any activity that would violate Clause 12.2 of this Agreement or Clause 16 of the Service Agreement. The Company shall, in respect of any enquiry for a reference, promptly provide to any prospective employer of the Employee a written reference in the agreed form and shall respond in a positive manner to any oral enquiry in a manner consistent with the terms of that reference. Any notification given by the Company to its employees, suppliers, or customers with regard to the Employee’s departure from the Company will be consistent with the terms of such reference.

10.1

The Employee accepts the terms of this Agreement in full and final settlement and discharge of all claims, demands, costs and expenses of whatever nature in all jurisdictions whether past, present, or future and whether arising under statute, common law, contract or otherwise and whether before an Employment Tribunal, court or otherwise which the Employee has or may have against the Company, the Parent, the Group or any of their shareholders, officers, employees or agents in respect of or arising out of the Employee’s employment, or the holding of any office with the Company, the Parent or the Group or the termination of that employment or office including in particular, but without limiting the general nature of this Clause 10, the Claims which, however unjustified they may be regarded by the Company, the Parent and the Group the Employee hereby intimates and asserts against the Company, the Parent and the Group while at the same time acknowledging that they are not to be pursued further, but excluding any claim:

10.1.1

in respect of the sums and benefits due to the Employee pursuant to this Agreement;

10.1.2

for damages for latent personal injuries and/or any latent industrial disease arising out of the course of the Employee’s employment with the Company.

11.1

The parties undertake to keep confidential the existence and terms of this Agreement and that neither party will disclose the same to any other person unless expressly authorised by the other party. The Employee may disclose the existence and terms of this Agreement for the purposes of:

(c)

disclosing to any actual or prospective employer that the Employee’s employment with the Company terminated by agreement upon terms which remain confidential; and

(d)

disclosing the terms of this Agreement to the Employee’s spouse or partner provided that on so doing the Employee imposes upon the Employee’s spouse or partner a like condition of confidentiality.

The Company and the Parent may disclose the existence and terms of this Agreement for the purposes set forth in sub-clauses (a) and (b) above.

11.2

The parties undertake not to do any act or thing that might reasonably be expected would damage the business, interests or reputation of the other party and will not make or publish or cause to be made or published to anyone in any circumstances any disparaging remarks concerning the other party.

12.1

The Employee will return to the Company’s premises on or before the date hereof all books, documents, papers, data (including copies or extracts and whether in printed or electronic format), materials, computer and peripherals and security codes, mobile phones, credit cards or other property of or relating to the business of the Company, the Parent, the Group or any of their clients or suppliers.

12.2

The Employee shall continue to remain bound by the provisions of Clauses 12, 13 and 16 of the Service Agreement in accordance with the terms of such provisions. The Termination Date hereunder shall be the Termination Date under Clause 16 of the Service Agreement. The power of attorney granted by the Employee under Clause 19.1 of the Service Agreement is hereby restated in this Agreement.

The parties agree that the conditions regulating compromise agreements under Section 203(3) of the Employment Rights Act 1996 and Regulation 35 of the Working Time Regulations 1998 have been satisfied by this Agreement both generally and in the following particulars:

(a)

the Employee confirms that the Employee has received independent legal advice on the terms and effect of this Agreement, and in particular its effect on the Employee’s ability to pursue the Employee’s rights before an Employment Tribunal or court;

(b)

the said legal advice has been given to the Employee by Pamela Keys of McGrigors whose address is Pacific House, 70 Wellington Street, Glasgow G2 6SB; and

(c)

the said solicitor has confirmed to the Employee that he is a qualified solicitor holding a current practising certificate and in respect of whom there is in force a policy of professional indemnity insurance covering the risk of a claim against her and the said firm in respect of loss arising in consequence of the said advice and by signing the Certificate attached to this Agreement also confirms that she complies with the Acts.

This Agreement is governed by the law of England and any dispute is subject to the exclusive jurisdiction of the English courts and tribunals.

The “without prejudice” and “subject to contract” nature of this document shall cease to apply once executed by the parties.

...............................................................
Daniel Joseph O’Brien

Witness ........................................................
Full Name ........................................................
Address .............................................................
...........................................................................
Occupation ........................................................

Danny O’Brien joined Diebold in October 2001, and served as Vice President, Global Product Management and Engineering until his retirement from Diebold on 1 April 2006.

He was an excellent team member in Diebold’s global leadership team. Under Danny’s vision and leadership, two new Self Service platforms were created — Agilis and Opteva, both of which have created a solid foundation for building our market share.

Danny is widely recognised in the industry, and we wish him the very best for the future.

I, Pamela Keys of McGrigors whose address is Pacific House, 70 Wellington Street, Glasgow G2 6SB confirm that I gave independent legal advice to Daniel Joseph O’Brien as to the terms and effect of the Agreement to which this certificate is attached and in particular its effect on the Employee’s ability to pursue the Employee’s rights before a Court or Employment Tribunal.

I confirm that I am a solicitor holding a current practising certificate and that the statutory requirements relating to compromise agreements set out in the Acts (as defined in the Agreement) have been met. Further, that there was in force at the time I gave the advice referred to above a policy of insurance covering the risk of a claim by Daniel Joseph O’Brien in respect of any loss arising in consequence of that advice.

The columns marked “Vested” and “Exercisable” in the Stock Option table shall show the full amount of all grants as being Vested and Exercisable. The column marked “Unvested” shall be “0” for all grants.


Personnel Grant Status Di	ebold, Incorporated ID: 34-0183970 Canton, Ohio 44711	Pag	e 1	File: Optstmt Date: 5/1/2006 Time: 12:01:02 PM

AS OF 5/1/2006

Daniel O’Brien Flat 11 – One Wyndham Court	ID: 0E06000074 Termination Date:	4/1/2006


Number	Grant Date		Plan		Type	Granted		Price		Exercised		Vested		Cancelled		Unvested		Outstanding		Exercisable
002262	10/1/2001		1991		NQ	15,000.00		$37.24		0.00		15,000.00		0.00		0.00		15,000.00		15,000.00
002472		2/6/2002		1991	NQ		12,000.00	$	36.59		0.00		12,000.00		0.00		0.00		12,000.00		12,000.00
002706		2/5/2003		1991	NQ		12,000.00	$	36.31		0.00		12,000.00		0.00		0.00		12,000.00		12,000.00
003150		2/11/2004		1991	NQ		9,000.00	$	53.10		0.00		9,000.00		0.00		0.00		9,000.00		9,000.00
003238		2/10/2005		1991	NQ		8,500.00	$	55.23		0.00		8,500.00		0.00		0.00		8,500.00		8,500.00

							56,500.00				0.00		56,500.00		0.00		0.00		56,500.00		56,500.00


Personnel Grant Status Di	ebold, Incorporated ID: 34-0183970 Canton, Ohio 44711	Pag	e 1	File: Optstmt Date: 5/1/2006 Time: 12:02:45 PM

AS OF 5/1/2006

Daniel O’Brien Flat 11 – One Wyndham Court	ID: 0E06000074 Termination Date:	4/1/2006


																	Next Deferral
Number	Grant Date	Plan	Type	Granted		Price	Released		Vested		Cancelled		Unvested		Deferred		Release Date
003351	2/11/2004	1991	RSA	5,000.00		$0.00	0.00		0.00		5,000.00		0.00		0.00
					5,000.00			0.00		0.00		5,000.00		0.00		0.00


Ohio	1-4879	34-0183970
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

5995 Mayfair Road, P.O.Box 3077, North Canton, Ohio		44720-8077
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	Diebold, Incorporated

May 1, 2006	By:	/s/ Kevin J. Krakora

		Name: Kevin J. Krakora
		Title: Executive Vice President and Chief Financial Officer (Principal Financial Officer)


Exhibit No.		Description

10.1		Employment Agreement between Diebold, Incorporated and Thomas W. Swidarski
10.2		Employment [Change in Control] Agreement between Diebold, Incorporated and Thomas W. Swidarski
10.3		Compromise Agreement between Diebold International Limited, Diebold, Incorporated and Daniel J. O'Brien


By: /s/Sheila M. Rutt		/s/Thomas W. Swidarskii

Sheila M. Rutt		Thomas W. Swidarski


Date of Report (Date of Earliest Event Reported):		April 25, 2006


Registrant’s telephone number, including area code:		(330) 490-4000


By: /s/Sheila M. Rutt Sheila M. Rutt		/s/Thomas W. Swidarski Thomas W. Swidarski


IT IS AGREED as follows:-

1 1.1		DEFINITIONS AND INTERPRETATION Definitions


1.2		"Termination Date” means the 1^st day of April 2006. Interpretation and Construction