EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“ Agreement ”) is made by and between Harte-Hanks, Inc., a Delaware corporation (“ Company ”), and Robert A. Philpott (“ Executive ”).

 

W I T N E S S E T H:

 

WHEREAS , Company desires to employ Executive on the terms and conditions, and for the consideration, hereinafter set forth and Executive desires to be employed on such terms and conditions and for such consideration.

 

NOW, THEREFORE , for and in consideration of the mutual promises, covenants and obligations contained herein, Company and Executive agree as follows:

 

ARTICLE I
EMPLOYMENT AND DUTIES

 

1.1          Employment; Effective Date .  Company agrees to employ Executive and Executive agrees to be employed by Company, beginning as of July 1, 2013 (the “ Effective Date ”) and continuing for the period of time set forth in Article II of this Agreement, subject to the terms and conditions of this Agreement.

 

1.2          Positions .  From and after the Effective Date, Executive shall be employed in the position of President and Chief Executive Officer of Company or in such other position or positions as the parties mutually may agree, and Executive shall report to Company’s Board of Directors (the “ Board ”).  During the Employment Period, Company expects that Executive will also serve as a member of the Board, subject to any required approval of Company’s stockholders, without any additional compensation.

 

1.3          Duties and Services .  Executive agrees to serve in the position(s) referred to in Section 1.2 and to perform diligently and to the best of Executive’s abilities the duties and services appertaining to such position(s), as well as such additional duties and services appropriate to such position(s) that the parties mutually may agree upon from time to time.  Executive’s employment shall be subject to the policies maintained and established by Company, as such policies may exist from time to time.

 

1.4          Other Interests .  Executive agrees, during the Employment Period, to devote Executive’s full business time, energy and best efforts to the business and affairs of Company and, as applicable, its affiliates.  Notwithstanding the foregoing, the parties acknowledge and agree that Executive may (a) engage in and manage Executive’s passive personal investments, (b) engage in charitable and civic activities, and (c) serve as a member of the board of directors (or similar governing body) of one corporate board (other than the Board); provided, however , that such activities shall be permitted only so long as such activities do not violate the terms of Article V or VI of this Agreement, conflict with the business and affairs of Company or interfere with Executive’s performance of Executive’s duties hereunder.  Executive has disclosed and represented to the Company that Executive has a passive personal investment in OnePoint Global, and that he additionally serves OnePoint Global as a senior outside advisor.

 

 

1.5          Duty of Loyalty .  Executive acknowledges that Executive owes a fiduciary duty of loyalty, fidelity and allegiance to act in the best interests of Company and to do no act that would injure the business, interests, or reputation of Company or any of its affiliates.  Consistent with those duties, Executive agrees to disclose to Company all business opportunities pertaining to Company’s and its affiliates’ business and shall not appropriate for Executive’s own benefit business opportunities concerning Company’s or its affiliates’ business.  If Executive’s other business interests present a conflict of interest with Company’s business, Executive shall fully disclose the conflict.

 

ARTICLE II
TERM AND TERMINATION OF EMPLOYMENT

 

2.1          Term .  Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive hereunder for the period beginning on the Effective Date and ending on the third anniversary of the Effective Date (the “ Initial Employment Period ”).  On the third anniversary of the Effective Date, and on each anniversary of the Effective Date thereafter, if Executive’s employment under this Agreement has not terminated pursuant to Section 2.2 or 2.3, then such term of employment shall be extended automatically for an additional one-year period unless, on or before the date that is 90 days prior to any such anniversary date, either party gives written notice to the other that no such automatic extension shall occur (each such extended period is referred to herein as an “ Extension Employment Period ” and each Extension Employment Period, if any, together with the Initial Employment Period, shall be the “ Employment Period ”).

 

2.2          Company’s Right to Terminate .  Notwithstanding the provisions of Section 2.1, Executive’s employment by Company shall automatically terminate upon the death of Executive, and Company shall have the right to terminate Executive’s employment under this Agreement at any time for any of the following reasons:

 

(a)           Upon Executive’s becoming disabled within the meaning of Company’s long-term disability plan (“ Disability ”).

 

(b)           For “ Cause ,” which for purposes of this Agreement shall mean that the Board determines in good faith that Executive shall have: (i) committed an intentional material act of fraud or embezzlement in connection with his duties or in the course of his employment with Company; (ii) committed intentional wrongful material damage to property of Company; (iii) committed intentional wrongful disclosure of material secret processes or material confidential information of Company; (iv) been convicted of, or entered a guilty or no contest plea to, any crime involving dishonesty or moral turpitude or any felony; (v) committed a material breach of Company’s insider trading, corporate ethics or compliance policies, or any other Board-adopted policies applicable to management conduct; or (vi) committed substantial, willful and repeated failures to perform duties which (A) are appropriate for Executive’s position as reasonably instructed by the Board in writing, and (B) have not been cured within 30 days of Executive’s receipt of notice of such failures.  For purposes of this Agreement, no act, or failure to act, on the part of Executive will be deemed “intentional” unless done, or

 

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omitted to be done, by Executive not in good faith and without reasonable belief that his action or omission was in the best interest of Company.

 

(c)           At any time for any other reason whatsoever or for no reason at all, in the sole discretion of Company.

 

2.3          Executive’s Right to Terminate .  Notwithstanding the provisions of Section 2.1, Executive shall have the right to terminate Executive’s employment hereunder for any of the following reasons:

 

(a)           For “ Good Reason ,” which for purposes of this Agreement shall mean a material adverse change in Executive’s employment relationship with Company without Executive’s consent, which shall include the occurrence of at least one of the following events: (i) a material adverse change in the nature or scope of the authorities, functions or duties attached to the position with Company; (ii) a reduction in Executive’s salary or bonus or incentive compensation opportunity, or a significant reduction in scope or value of other monetary or nonmonetary benefits (other than benefits pursuant to a broad based employee benefit plan) to which Executive was entitled from Company (except, in the case of non-Change in Control situations, in the event (and to the degree) of a decrease applied to all other executive officers of Company); (iii) a determination by Executive made in good faith that a change in circumstances has rendered him substantially unable to carry out, or has substantially hindered him in the performance of, the authorities, functions or duties attached to his position; (iv) Company shall require Executive to materially relocate his principal location of work from the agreed location thereof (provided that neither relocation from (x) Executive’s current Lake Forest, Illinois residence nor (y) the location of Executive’s temporary residence selected pursuant to Section 3.9 shall constitute Good Reason), or to travel away from his principal location of work in the course of discharging his responsibilities or duties significantly more than currently agreed; or (v) Company commits any material breach of this Agreement; provided, however , that with regard to any alleged event described above, Executive must provide written notice to Company within 90 days of the occurrence of such event, and Company shall have 30 days following receipt of such notice in which to cure.

 

(b)          At any time for any other reason whatsoever or for no reason at all.

 

2.4          Notice of Termination and Effective Date of Termination .

 

(a)           Notice of Termination .  If Company or Executive desires to terminate Executive’s employment hereunder, Company or Executive shall do so by giving written notice to the other party that Company or Executive has elected to terminate Executive’s employment hereunder and stating the effective date of the termination and reason for such termination; provided, however , that (i) any such notice provided by Executive to Company shall be provided at least 30 days prior to the specified effective date of termination and (ii) in the case of non-renewal, any such notice provided by Company or Executive to the other party shall be provided at least 180 days prior to the first day of what would have been the next applicable Extension Employment Period.  In the event that Executive has provided notice to Company of Executive’s termination of

 

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employment, Company may determine, in its sole discretion, that such termination shall be effective on any date prior to the effective date of termination provided in such notice (and, if such earlier date is so required, then it shall not change the basis for Executive’s termination of employment nor be construed or interpreted as a termination of employment pursuant to Section 2.2), in which case the Company shall pay Executive in respect of his Base Salary for the period through the date of termination specified in such notice by the Executive, not to exceed 145 days.  No action by either party pursuant to this Section 2.4(a) shall alter or amend any other provisions hereof or rights arising hereunder, including the provisions of Articles IV, V and VI hereof.

 

(b)           Date of Termination .  The effective date of Executive’s termination (the “ Termination Date ”) shall be as follows: (i) if Executive’s employment is terminated by Executive’s death, the date of Executive’s death; (ii) if Executive’s employment is terminated by Company for any reason, then the date specified in the notice of termination delivered to Executive by Company; (iii) if Executive’s employment is terminated by Executive pursuant to Section 2.3 above, then, unless Company exercises its right pursuant to Section 2.4(a) above to specify an alternative date, the date specified in the notice of such termination delivered to Company by Executive (and, in the case of a termination by Executive for Good Reason, shall be the day following the last day of the applicable cure period if Company fails to cure the alleged Good Reason event); and (iv) if Executive’s employment terminates due to the giving of a non-renewal notice pursuant to Section 2.1 above, the day on which the Employment Period expires.  For purposes of this Agreement, references to Executive’s termination of employment (including references to Executive’s Termination Date) shall mean, and be interpreted in accordance with, Executive’s “separation from service” from Company within the meaning of Treasury regulation § 1.409A-1(h)(1)(ii).

 

2.5          Deemed Resignations .  Unless otherwise agreed to in writing by Company and Executive prior to the termination of Executive’s employment, any termination of Executive’s employment shall constitute an automatic resignation of Executive as an officer of Company and each of its affiliates (if applicable), and an automatic resignation of Executive from the Board and from the board of directors (or similar governing body) of each of Company’s affiliates (if applicable) and of any corporation, limited liability company or other entity in which Company holds an equity interest and with respect to which board (or similar governing body) Executive serves as the designee or other representative of Company.

 

ARTICLE III
COMPENSATION AND BENEFITS

 

3.1          Base Salary .  During the Employment Period, Executive shall receive an annualized base salary of $700,000 (the “ Base Salary ”).  Executive’s Base Salary shall be paid in equal installments in accordance with Company’s policy regarding payment of compensation to similarly situated executives as may exist from time to time, but no less frequently than monthly.

 

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3.2          Annual Bonuses .

 

(a)           Annual Performance Bonus.  During the Employment Period, Executive shall be eligible to receive an annual performance bonus payment (the “ Annual Bonus ”) for each calendar year pursuant to Company’s annual cash performance bonus program.  Each Annual Bonus shall be payable based on the achievement of reasonable Company and/or Executive performance objectives established by the independent members of the Board (or a committee thereof).  For each calendar year, Executive’s target Annual Bonus shall be equal to 100% of Executive’s annual Base Salary in effect on the last day of the applicable calendar year (the “ Target Bonus ”), and Executive shall be eligible to receive an Annual Bonus of up to 200% of the Target Bonus.  Company shall pay each Annual Bonus, if any, with respect to a calendar year (the “ Bonus Year ”) in accordance with and subject to Company’s practices as applied to other executive officers.  Executive shall be entitled to receive payment of an Annual Bonus for a Bonus Year, if any, only if Executive is employed by Company on the date such Annual Bonus is paid to other executive officers.

 

(b)           Bonus Restricted Stock Election.   Executive may elect to participate in Company’s “Bonus Restricted Stock” program, as then established by the Board (and/or a committee thereof).  (As currently adopted by Company, Executive could receive up to 30% of the total dollar value of an Annual Bonus in the form of restricted shares (each, a “ Bonus Restricted Stock Award ”) of Company’s common stock (“ Common Stock ”), with the number of shares of Common Stock subject to any Bonus Restricted Stock Award equaling (i) 125% of the dollar value of the portion of the Annual Bonus elected by Executive divided by (ii) the Fair Market Value of the Common Stock on the date of grant (as defined by and in accordance with Company’s then-applicable equity incentive plan).)  Bonus Restricted Stock Awards currently vest in full on the first anniversary of grant date.)  Executive may submit, on or before July 15, 2013, his election to participate in the Company’s Bonus Restricted Stock program in respect of his 2013 Annual Bonus.

 

(c)           Pro-Rated Bonus for Calendar Year 2013.  For calendar year 2013, Executive shall be eligible to receive an Annual Bonus in accordance with this Section 3.2, pro-rated to reflect the period between the Effective Date and December 31, 2013, provided that Executive shall be paid at least $250,000 irrespective of actual performance against performance criteria.

 

3.3          Review .  At least annually during the Employment Period, the independent members of the Board (or a duly empowered committee thereof) shall conduct a formal review of Executive’s performance, including a review of the amounts of Executive’s Base Salary and Target Bonus, which such amounts may, in the sole and absolute discretion of the independent members of the Board (or a duly empowered committee thereof), be increased; provided, however , that the independent members of the Board (or a duly empowered committee thereof) may decrease Executive’s Base Salary at any time and from time to time only so long as any such decrease (i) is part of similar reductions of the same degree applicable to all of Company’s executive officers and (ii) does not exceed 25% of Executive’s then-current Base Salary.

 

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3.4          Expenses .

 

(a)           Business Expenses.  Company shall promptly reimburse Executive for all reasonable business expenses actually incurred by Executive in performing services hereunder, including all such expenses of travel and living expenses while away from home on business or at the request of Company, subject to Section 3.9; in each case, that are incurred and accounted for in accordance with the policies and procedures established by Company in effect from time to time.

 

(b)           Legal Fees.   Company will reimburse Executive for up to $10,000 in legal fees incurred by Executive for review and negotiation of this Agreement.  Executive should provide an invoice from his attorney stating the fee actually charged for such review and negotiation and how that fee was determined.

 

(c)           In no event shall: (i) any reimbursement be made to Executive for expenses incurred after Executive’s Termination Date, (ii) Executive be permitted to receive a payment or other benefit in lieu of reimbursement, or (iii) the amount of expenses for which Executive is eligible to receive reimbursement during any calendar year affect the amount of expenses for which Executive is eligible to receive reimbursement during any other calendar year within the Employment Period.

 

3.5          Equity and Equity-Based Awards .

 

(a)           Sign On Awards .  On July 3, 2013 (or two days after the Effective Date, if later), Executive shall be granted the following awards, in each case, subject to the terms and conditions of the award agreements attached hereto as Exhibits A , B and C , as applicable:  (i) 400,000 nonqualified stock options to purchase Common Stock, vesting in four equal annual installments, (ii) 100,000 shares of restricted Common Stock, vesting in three equal annual installments, and (iii) 150,000 performance units, vesting based on Company’s reported operating income for 2015 at the same levels applicable to the performance awards granted in February 2013 to Company’s other executive officers, with 112,500 as the target number of performance units subject to the award.  The awards described in this Section 3.5(a) shall be treated as “employment inducement awards” within the meaning of New York Stock Exchange Listed Company Manual Rule 303A.08.

 

(b)           Future Awards .  Executive may periodically in accordance with Company’s then current procedures and terms, as determined by the Board (or a designated committee thereof) in its sole discretion, receive grants of equity, equity-based or other awards pursuant to Company’s then applicable equity incentive plan(s), subject to the respective terms and conditions thereof.

 

3.6          Employee Benefits .  During the Employment Period, and subject to the terms and conditions of the applicable plans and programs in effect from time to time, Executive (and, to the extent applicable, Executive’s spouse, dependents and beneficiaries) shall be eligible to participate in all benefit plans and programs of Company (including but not limited to any 401(k), profit sharing or thrift plan, any medical, dental, disability, or life insurance, and any

 

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pension plan or supplemental retirement plan), including improvements or modifications of the same, which are now, or may hereafter be, available to similarly situated executives of Company.  Company shall not, however, by reason of this Section 3.6, be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such plan or program, so long as such changes are similarly applicable to similarly situated executives generally.  For the avoidance of doubt, Executive shall be eligible to defer some or all of Executive’s Base Salary and Annual Bonus in Company’s nonqualified Deferred Compensation Plan in accordance with the terms of such plan.  In addition, notwithstanding any contrary terms therein, Executive shall, as of the Effective Date, be treated as a vested participant in Company’s nonqualified Restoration Pension Plan.

 

3.7          Time-Off Benefits .  In addition to Company’s standard policies regarding bereavement, jury duty and holidays, Executive shall be entitled to 20 days of paid time off each calendar year, and shall be entitled to substitute holidays upon reasonable notice to the Board, provided that doing so does not conflict with Company work schedules or priorities.  For calendar year 2013, Executive shall be entitled to a number of days of paid time off in accordance with this Section 3.7, pro-rated to reflect the period between the Effective Date and December 31, 2013.

 

3.8          Automobile Allowance .  During the Employment Period, Executive shall be entitled to receive a non-accountable automobile allowance of $1,325 per month, provided that such automobile allowance may be changed by the Board (or a committee thereof) in the same manner and degree that such automobile allowances are changed for Company’s other executive officers.

 

3.9          Temporary Living Expenses; Relocation .  During the Employment Term, Executive shall not be required to relocate his primary personal residence from Lake Forest, Illinois; however, Executive shall be required to travel away from his principal residence as reasonably necessary to discharge the duties described in Section 1.3.  If, during the first 30 months of the Employment Period, Executive establishes a primary personal residence within 30 miles of a location at which Company has significant operations, then Company shall reimburse Executive for half of the amount of any loss incurred by Executive on the sale of his Lake Forest residence, such reimbursement not to exceed $250,000.  In addition, for up to 12 months during the Employment Period, Company will pay directly (or reimburse Executive for) the costs to lease an apartment, selected by Executive, within 30 miles of a location at which Company has significant operations, such costs not to exceed $3,000 per month (including rent, utilities, furnishings and other similar items, the “ Temporary Living Assistance ”).  Company and Executive agree to take reasonable steps to avoid having the Temporary Living Assistance qualify as income to Executive.

 

3.10        Indemnification . Both during and after the Employment Period, Company shall defend, indemnify and hold harmless Executive to the fullest extent permitted by Company’s certificate, articles and bylaws and by applicable law with respect to any claims made or threatened in connection with Executive’s service as an employee, officer or director of Company and, on or promptly following the Effective Date, Company and Executive shall enter into Company’s standard form indemnification agreement for its officers and directors.

 

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ARTICLE IV
EFFECT OF TERMINATION ON COMPENSATION

 

4.1          By Company For Cause; By Executive Without Good Reason; Non-Renewal By Executive .  If Executive’s employment hereunder shall be terminated at any time (a) by Company for Cause, (b) by Executive without Good Reason, or (c) by Executive due to the giving of a non-renewal notice pursuant to Section 2.1 above, then, upon such termination, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the Termination Date, except that Executive shall be entitled to receive: (i) within 10 business days following the Termination Date, accrued but unpaid Base Salary and unused vacation earned through the Termination Date; (ii) any accrued but unpaid Annual Bonus earned for any previously completed calendar year, paid in accordance with Section 3.2 (except to the extent payment is otherwise deferred pursuant to any applicable deferred compensation arrangement with Company); (iii) reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company’s policies prior to Executive’s Termination Date (provided claims for reimbursement are accompanied by appropriate supporting documentation and are submitted to Company within 90 days following the Termination Date, reimbursement shall be made within 60 days of Executive’s claim for reimbursement); and (iv) employee benefits and equity or equity-based compensation, if any, as to which Executive may be entitled under Company’s Incentive Plan and other employee benefit plans and programs or any agreement between Company and Executive (the amounts described in clauses (i) through (iv) hereof being referred to as the “ Accrued Rights ”).

 

4.2          By Death .  If Executive’s employment hereunder shall be terminated by Executive’s death, then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with Executive’s Termination Date, except (i) for the Accrued Rights, and (ii) that a beneficiary designated by Executive in accordance with Company’s policies and procedures regarding such designation shall receive an amount in cash equal to $900,000, payable in ten equal annual installments.

 

4.3          By Disability .  If Executive’s employment hereunder shall be terminated by Company due to Executive’s Disability, then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with Executive’s Termination Date, except for the Accrued Rights, including but not limited to any benefits due in accordance with any long-term disability plan of Company in which Executive participates as of the Termination Date.

 

4.4          By Company Without Cause; By Executive For Good Reason; Non-Renewal By Company .  If Executive’s employment hereunder shall be terminated at any time (other than during the period covered in Section 4.5(b) below) (a) by Company for any reason (other than for Cause or due to Disability), (b) by Executive for Good Reason, or (c) by Company due to the giving of a non-renewal notice pursuant to Section 2.1 above, then, upon such termination, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the Termination Date, except that Executive shall be entitled to the Accrued Rights, and subject to Section 4.7 (Release and Full Settlement) and Section 8.14 (Section 409A) below, (i) Company shall pay Executive a cash payment equal to 200% of Executive’s Base Salary at the annual rate in effect as of the Termination Date (or as of a date prior to any reduction not consented to by

 

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Executive), to be paid in a lump sum on the 60th day following the Termination Date; (ii) from the Termination Date through the earliest to occur of (x) the eligibility of Executive to participate in an another employer’s employer-sponsored health plan or (y) the beginning of the 19th month following the Termination Date, the Company and the Executive agree that if the Executive elects COBRA coverage consistent with the Executive’s current healthcare elections, (A) the Executive shall pay for COBRA coverage only that amount that the Executive currently pays for the Executive’s healthcare coverage based on such elections, and (B) the Company shall pay the balance of the Executive’s COBRA premium based on such elections; and (iii) all outstanding, unvested shares of time vesting restricted Common Stock held by Executive shall automatically become fully vested as of Executive’s Termination Date ( provided that all other outstanding equity or equity-based awards held by Executive shall continue to be governed by their terms).

 

4.5          Change in Control .

 

(a)           Award Acceleration .  Upon a Change in Control (as defined below), all equity and equity-based awards previously granted by Company to Executive and not yet vested or otherwise exercisable will become fully vested and fully exercisable by Executive.  Such awards shall remain exercisable for their original term; provided, however , that Company has the right to require Executive to exercise any such awards that are subject to exercise within 90 days after receipt of written notice to Executive.  If Executive fails to exercise his awards within any such 90 day period, Company has the right to cancel such awards.  Awards that have been structured to vest on a performance basis shall accelerate and vest at the 100% level established for such awards regardless of whether the 100% level has been or will be achieved.

 

(b)           Double Trigger Severance.  If, during the 24-month period commencing on the date a Change in Control occurs, Executive’s employment hereunder shall be terminated (i) by Company for any reason (other than for Cause or due to Disability), (ii) by Executive for Good Reason, or (iii) by Company due to the giving of a non-renewal notice pursuant to Section 2.1 above, then, upon such termination, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the Termination Date, except that Executive shall be entitled to receive the Accrued Rights and, subject to Section 4.7 (Release and Full Settlement) and Section 8.14 (Section 409A) below, a cash payment, paid in a lump sum on the 60th day following the Termination Date, equal to the following:

 

A.            300% of the sum of (1) Executive’s Base Salary at the annual rate in effect as of the Termination Date (or as of a date prior to any reduction not consented to by Executive) or the Change in Control, whichever is greater, and (2) the average of the Annual Bonuses actually received by Executive from Company for the two calendar years preceding the year in which the Termination Date or the Change in Control occurred, whichever is greater; plus

 

B.            An amount equivalent to the monthly premium payment Executive would be required to make pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), to continue coverage for Executive and his eligible dependents under Company’s group health insurance plan, multiplied by 24.

 

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(c)           Definitions.  For purposes of this Agreement, the term “ Change in Control ” shall mean: (i) Company is merged, consolidated or reorganized into or with another corporation or other legal person and, as a result of such merger, consolidation or reorganization, less than 60% of the combined voting power of the then outstanding securities of the remaining corporation or legal person or its ultimate parent immediately after such transaction is received in respect of or in exchange for voting securities of Company pursuant to such transaction; (ii) Company sells all or substantially all of its assets to any other corporation or other legal person and, as a result of such sale, less than 60% of the combined voting power of the then outstanding securities of such corporation or legal person or its ultimate parent immediately after such transaction is received in respect of or in exchange for voting securities of Company pursuant to such sale; (iii) any person (including any “person” as such term is used in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) has become the beneficial owner (as such term is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities that, when added to any securities already owned by such person, would represent in the aggregate 30% or more of the combined voting power of the then outstanding securities of Company; (iv) individuals who, as of the Effective Date, constitute the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election by the Board was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an election contest with respect to the election or removal of directors or other solicitation of proxies or consents by or on behalf of a person other than the Board; or (v) such other events that cause a Change in Control of Company as determined by the Board in its sole discretion.

 

(d)           Section 280G .  Notwithstanding any other provision to the contrary, in the event any payments to which Executive becomes entitled in accordance with this Agreement would constitute a “parachute payment” under Section 280G of the Internal Revenue Code of 1986, as amended (the “ Code ”), then such payments, when added to any other payments made to Executive that would constitute “parachute payments” under Section 280G of the Code, will be subject to reduction to the extent necessary to assure that Executive receives only the greater of: (i) the amount of those payments that would not exceed 2.99 times Executive’s “base amount” within the meaning of Section 280G of the Code, or (ii) the amount that yields Executive the greatest after-tax amount after taking into account any excise tax imposed under Section 4999 of the Code on any “excess parachute payments” provided to Executive under this Agreement and on any other benefits or payments to which Executive may be entitled in connection with the Change in Control or the subsequent termination of Executive’s employment.  Any reduction pursuant to this Section 4.5(d) shall be accomplished in the following manner: (A) first, by reducing the payment required pursuant to Section 4.5(b)(A); (B) second, if necessary, by reducing the payment required by Section 4.5(b)(B); and (C) third, if necessary, by reducing the vesting of equity or equity-based awards pursuant to Section 4.5(a) in an order among such awards as is reasonably acceptable to Executive.

 

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4.6                                Liquidated Damages .  In light of the difficulties in estimating the damages for an early termination of Executive’s employment under this Agreement, Company and Executive hereby agree that the severance payments, if any, to be received by Executive pursuant to this Article IV shall be received by Executive as liquidated damages.

 

4.7                                Release and Full Settlement .  Anything to the contrary herein notwithstanding, as a condition to the receipt of any post-termination severance payments or benefits under this Article IV, Executive shall first execute on or before the Release Expiration Date (as defined below), and not revoke in the time provided to do so, a release in a form acceptable to Company (the “ Release ”), releasing Company, its affiliates, and their respective stockholders, members, partners, officers, managers, directors, fiduciaries, employees, representatives, agents and benefit plans (and fiduciaries of such plans) from any and all claims, including any and all causes of action arising out of Executive’s employment with Company and any Company affiliate or the termination of such employment, but excluding all claims to severance payments Executive may have under Article IV of this Agreement.  The performance of Company’s obligations hereunder and the receipt of any benefits provided hereunder by Executive shall constitute full settlement of all such claims and causes of action.  Executive acknowledges Executive’s understanding that if the Release is not timely executed, and the required revocation period has not fully expired, during the allowed time period, Executive shall not be entitled to any post-termination severance payments pursuant to this Article IV.  As used herein, the “ Release Expiration Date ” is that date that is 21 days following the date upon which Company delivers the Release to Executive (which shall occur no later than seven days after the Termination Date), or in the event that such termination of employment is “in connection with an exit incentive or other employment termination program” (as such phrase is defined in the Age Discrimination in Employment Act of 1967, as amended), the date that is 45 days following such delivery date.

 

4.8                                After-Acquired Evidence .  Notwithstanding any provision of this Agreement to the contrary, in the event that Company determines that Executive is eligible to receive any post-termination severance payments under this Article IV but, after such determination, Company subsequently acquires evidence or determines that: (a) Executive has failed to abide by his continuing obligations under Article V or VI of this Agreement; or (b) a Cause condition existed prior to the Termination Date that, had Company been fully aware of such condition, would have resulted in the termination of Executive’s employment pursuant to Section 2.2(b) above, then Company shall have the right to cease the payment of any future payments or installments of such severance payments and Executive shall be obliged to return to Company all payments or installments of such severance payments received by Executive prior to the date that Company determines that the conditions of this Section 4.8 have been satisfied.  Company shall notify Executive promptly if it becomes aware of facts or circumstances which may reasonably trigger Company’s rights under this Section 4.8, provided that before doing so Company shall be entitled to conduct a prompt and reasonable investigation.

 

4.9                                No Mitigation .  Executive shall have no duty to find new employment following the Termination Date under circumstances that require Company to pay any amount to Executive pursuant to this Article IV.  Any salary or other remuneration received by Executive from a third party for the provision of personal services (whether by employment or by functioning as an independent contractor) following the Termination Date shall not reduce Company’s obligation

 

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to make a payment to Executive (or the amount of any such payment) pursuant to the terms of this Article IV.

 

ARTICLE V
PROTECTION OF INFORMATION

 

5.1                                Access to Information .  For purposes of this Article V, the term “Company” shall include Company and each of its affiliates.  Executive acknowledges and agrees that he will be provided information that (a) relates to Company’s business; (b) provides Company economic value or business advantage; (c) is not generally known to the public; and (d) is learned or developed by Executive as a direct or indirect result of or during the course of Executive’s employment with Company, including but not limited to Company’s trade secrets ( i.e ., Company’s formulas, patterns, devices or compilations of information that generally facilitate the provision of services or sale of products, increase revenues, or provide an advantage over the competition, are not generally known and are identified as such) and “ Inventions ” ( i.e ., any and all inventions, discoveries, concepts, and ideas, whether or not patentable, including without limitation, devices, processes, methods, formulas, techniques, improvements, modifications or know-how related thereto, that relate to any part of Company’s business or any business contemplated by Company, that is conceived or developed by Executive during employment (or thereafter if such invention is based, derived from or related to work performed by Executive during his employment or Company’s Confidential Information) including all drawings, manuals, correspondence, notebooks, reports, and other like materials and information relating thereto) and other information related to, without limitation, any customer, business, merchandise, or marketing procedures, processes and services; hardware; software; research; marketing; developments; products; product lines; design; purchasing; finances and financial affairs; accounting; merchandising; selling; engineering; employees; training; business practices; business plans; business strategies; acquisitions; potential acquisitions; customer lists; customer contact lists; information provided by Company’s customers; proprietary information; employee lists; employee compensation information; vendor lists; supplier lists; pricing; pricing agreements; merchandise resources; supply resources; service resources; system designs; procedures manuals; policies; non-public personal information and protected health information about consumers; social security numbers; drivers license numbers (or state or federal identification card numbers); financial account numbers; credit or debit card numbers; the prices Company obtains or has obtained or at which it sells or has sold its services or products; or the names of Company personnel and those to whom the personnel report (collectively, “ Confidential Information ”).  In consideration of such Confidential Information and other valuable consideration provided hereunder, and in order to protect Company’s legitimate business interests, Executive agrees to comply with this Article V.

 

5.2                                Company Covenants .  Upon the execution of this Agreement by both parties, Company will place Executive in a position of special trust, and will provide Executive with (a) Confidential Information and access to such information; (b) specialized training, including self study materials and course work, classroom training, on-line training, on-the-job training, and instruction as to Company’s products, services and methods of operations; and (c) goodwill support such as expense reimbursements in accordance with Company policies, Confidential Information related to Company’s current and prospective clients, customers, business associates, vendors and suppliers and/or contact and relationships with current and potential

 

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clients, customers and business associates, in order to help Executive develop goodwill for Company.  The foregoing is not contingent on Executive’s continued employment for any length of time, but is contingent upon Executive not working for or assisting a Competitive Business (as defined in Article VI below) and Executive’s full compliance with the restrictions in Article V and VI hereof.  Executive specifically acknowledges that the items described in clauses (a), (b), and (c) above will be items that Executive has not previously been given and that Executive would not be given but for the execution of this Agreement.

 

5.3                                Executive Covenants .  Executive agrees not to, directly or indirectly, participate in the unauthorized use, disclosure or conversion of any Confidential Information.  Specifically, but without limitation, Executive agrees not to use Confidential Information for his sole benefit, or for the benefit of any person or entity in any other way that harms Company or diminishes the value of the Confidential Information to Company.  Executive also agrees to use the specialized training, goodwill and contacts developed with Company’s customers and contractors for the exclusive benefit of Company and agrees not to use these items at any time in a way that would harm the business interests of Company.

 

5.4                                Goodwill with Customers .  Executive acknowledges that Company has near permanent relationships with its customers and owns the goodwill in Executive’s relationships with customers that Executive will or has developed or maintained in the course and scope of Executive’s employment with Company.  If Executive owns goodwill in a relationship with a customer as of the Effective Date, Executive assigns any and all such goodwill to Company, and Company shall become the owner of such goodwill.

 

5.5                                Company’s Property .  All documents and things provided to Executive by Company for use in connection with Executive’s employment, or created by Executive in the course and scope of Executive’s employment with Company, are the sole property of Company and shall be held by Executive as a fiduciary on behalf of Company.  Immediately upon termination of Executive’s employment, without the requirement of a prior demand by Company, Executive shall surrender to Company all such documents and things, including, but not limited to, all Confidential Information and all documents and things related to Restricted Customers (as defined in Article VI hereof) or Employee-Related Service (as defined in Article VI hereof), together with all copies, recording abstracts, notes, reproductions or electronic versions of any kind made from or about the documents and things and the information they contain.

 

5.6                                Inventions .  During and after Executive’s employment, Executive shall promptly and completely disclose, in writing, to Company or its designee all conceived or developed Inventions.  Any and all Inventions shall be the absolute property of Company or its designees.  Company’s ownership in and to such Inventions shall vest without regard to Executive’s conception or development of the Inventions during or outside regular business hours, on or off Company premises, or with or without the use of Company resources or materials.  During employment and as necessary thereafter, Executive shall assist Company to obtain, perfect and maintain all intellectual property rights covering such intellectual property that Company seeks to protect, and shall execute all documents and do all things necessary to obtain for Company all such intellectual property rights.  Upon Company’s request and at Company’s expense, Executive agrees to make application in due form for United States letters patents or foreign

 

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letters patents or the like (“ Patents ”) that claim, register or disclose Inventions, in whole or in part.  Executive further agrees to assign to Company all right, title and interest in and to any Patent application and any Patent that may result.  To this end, Executive agrees to execute any and all instruments and do any and all acts necessary or desirable in connection with filing a Patent application and perfecting Company’s entire right, title and interest in and to such Patent application and any resulting Patent.  To maintain or further Company’s rights, title and interest in a Patent, Executive further agrees, both during and after his employment with Company, to execute any and all instruments and do any and all acts necessary or desirable (including giving testimony in support of Executive’s inventorship) in connection with any continuations, reissues, reexaminations or the like, in the conduct of any related proceedings or litigation.  Executive acknowledges that Company shall be the copyright proprietor of all copyrighted works created or developed by Executive, whether solely or jointly with others, during Executive’s employment, and such works created pursuant to the performance of Executive’s duties shall be “works for hire.”  Where a copyrighted work prepared by Executive does not satisfy the statutory requirements of a “work for hire,” Executive agrees to assign to Company all right, title and interest in the copyrighted work.

 

ARTICLE VI

PROTECTIVE COVENANTS

 

6.1                                Definitions .  Executive agrees that the following covenants are reasonable and necessary agreements for the protection of the business interests covered in the fully enforceable, ancillary agreements set forth in this Agreement, including those in Article V above.  For purposes of this Article VI, (a) the term “Company” shall include Company and each of its affiliates and (b) the following terms shall have the following meanings:

 

“ Competitive Business ” means any legal person (including Executive), and any parent, subsidiary, partner, agent, or affiliate of any legal person, that engages in, or plans to become engaged in, the development, design, production, manufacture, promotion, marketing, sale, support or service of a Competitive Service, Competitive Service Support, or any other product, good, process, or service that has been or is being developed, designed, produced, manufactured, marketed, promoted, sold, licensed or serviced by any legal person other than Company that would compete with or displace any services or products sold or being developed for sale by Company during Executive’s employment with Company or that engages in any other activities so similar in nature or purpose to those of Company that they would displace business opportunities or customers of Company, which include (without limitation) each company named in the peer group of Company’s then-current annual report on Form 10-K filed with the Securities and Exchange Commission.

 

“ Competing Service ” means any service, process, solution or product that has been or is being developed, designed, produced, manufactured, marketed, promoted, sold, offered, licensed or serviced by any legal person other than Company that is the same or similar to, performs any of the same or similar functions, may be substituted for, or is intended to be or is used for any of the same purposes of any Employee-Related Service.

 

“ Competitive Service Support ” means any research, development, analysis, planning or support services of any kind or nature, including, without limitation, theoretical, applied,

 

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business, technical, regulatory, or systems research, analysis, planning, or support for or by any legal person other than Company that is intended for, or may be useful in, assisting, improving, or enhancing any aspect of the development, design, production, manufacture, marketing, promotion, sale, support, or service of a Competitive Service.

 

“ Employee-Related Service ” means goods, processes or services that have been or are being developed, designed, produced, manufactured, marketed, promoted, sold, licensed or serviced by Company that either (i) relate to the services Executive performed as an employee for Company at any time in the 12 months immediately preceding Executive’s Termination Date, or (ii) that Executive had access to Confidential Information at any time in the 12 months immediately preceding Executive’s Termination Date.

 

“ Restricted Customer ” means those persons to which Company has sold, negotiated for sales, marketed, attempted to or actually promoted or provided products or services to at any time during the 12 months immediately preceding Executive’s Termination Date, and with respect to which Executive has participated in any efforts related to the sales, marketing, negotiation or provision of goods or services, had contact with or supervised employees who had contact with, or received Confidential Information about within the 12 months immediately preceding Executive’s Termination Date.

 

6.2                                Non-Competition .  Executive agrees that while employed by Company and for a period of two years following Executive’s Termination Date (or, if longer, the implied period of salary continuation provided for pursuant to Section 4.4 or 4.5(b)(A), as applicable) (the “ Restricted Period ”), regardless of the reason for termination of employment, Executive shall not, directly or indirectly, be employed by, supervise, assist, perform services, work or otherwise engage in activities for a Competitive Business in any capacity that relates to any Competitive Service or Competitive Service Support anywhere in the United States or in any foreign country in which Company is then marketing or selling services, which the parties stipulate is a reasonable geographic area because of the scope of Company’s operations and Executive’s employment with Company.  Executive may not avoid the purpose and intent of this paragraph by engaging in conduct within the geographically limited area from a remote location through means such as telecommunications, written correspondence, computer generated or assisted communications or other similar methods

 

6.3                                Non -Solicitation of Employees/Contractors .  Executive agrees that while employed by Company and during the Restricted Period following Executive’s Termination Date, regardless of the reason for termination of employment, Executive shall not directly or indirectly solicit, cause to be solicited, assist or otherwise be involved with the solicitation of, any employee, contractor or other person to terminate that person’s employment, contract or relationship with Company or to breach that person’s employment agreement or contract with Company.  Further, Executive agrees that while employed by Company and during the Restricted Period following Executive’s Termination Date, regardless of the reason for termination of employment, Executive will not, directly or indirectly, hire, recruit, solicit, or participate or assist any person or entity in hiring, recruiting or soliciting, any individual who was an employee or contractor during the 6 month period immediately following such employee or contractor’s termination of employment, contract or relationship with Company.

 

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6.4                                Non-Solicitation of Customers .  Executive agrees that while employed by Company and during the Restricted Period following Executive’s Termination Date, regardless of the reason for termination of employment, Executive shall not, on behalf of a Competitive Business, directly or indirectly solicit, cause to be solicited, sell to, contact, supervise, assist or otherwise be involved with the solicitation of, or do or otherwise attempt to do business with a Restricted Customer in connection with or relating to a Competitive Service or Competitive Service Support.  This paragraph is geographically limited to wherever any Restricted Customer can be found and is available for solicitation, or anywhere in the United States or in any foreign country in which Company is then marketing or selling services, which the parties stipulate is a reasonable geographic area because of the scope of Company’s operations and Executive’s employment with Company.  Executive may not avoid the purpose and intent of this paragraph by engaging in conduct within the geographically limited area from a remote location through means such as telecommunications, written correspondence, computer generated or assisted communications, or other similar methods.

 

6.5                                Non-Disparagement .  At all times during employment with Company and for the longest period thereafter permitted under law, (i) Executive shall not, directly or indirectly, make (or cause to be made) to any legal person any disparaging, derogatory or other negative or false statement about Company (including any of its products, services, policies, practices, operations, employees, sales representatives, agents, officers, directors, and equity holders), and (ii) Company (through its executive officers and board members) shall not directly or indirectly, make (or cause to be made) to any legal person any disparaging, derogatory or other negative or false statement about Executive.  Notwithstanding anything else to the contrary, the provision of truthful testimony to governmental, regulatory or self-regulatory authorities or in any legal proceeding shall not constitute a violation of this Agreement.  Further, it is understood and agreed that, after the Restricted Period following Executive’s Termination Date, this provision shall not be deemed to limit competitive speech or commercial comparisons by Executive on behalf of any future employer with respect to its services or products and such competitive speech or commercial comparisons by Executive shall not be deemed to violate this Agreement.

 

6.6                                Early Resolution Conference/Employee Notification Obligations . This Agreement is understood to be clear and enforceable as written and is executed by both parties on that basis.  However, should Executive later challenge any provision of Article V or VI as unclear, unenforceable, or inapplicable to any competitive activity that Executive intends to engage in, Executive will first notify Company in writing and meet with a Company representative and a neutral mediator (if Company elects to retain one at its expense) to discuss resolution of any disputes between the parties (an “ Early Resolution Conference ”).  Executive will provide this notification at least 14 days before Executive engages in any activity on behalf of a Competitive Business or engages in any other activity that could foreseeably fall within a questioned restriction.  All rights of both parties will be preserved if the Early Resolution Conference requirement is complied with even if no agreement is reached in the conference.  Executive further agrees that during the term of the restrictions in Sections 6.2, 6.3 and 6.4, Executive shall promptly inform Company in writing of the identity of any new employer, the job title of Executive’s new position and a description of any services to be rendered to that employer; and, if the new employer is a Competitive Business, will communicate Executive’s obligations under Articles V and VI to each new employer, which shall include providing each new employer with a copy of this Agreement.

 

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6.7                                Survival/Enforcement of Covenants .  Any monetary payments under this Agreement of any kind, including but not limited to, compensation, wages, separation pay or bonuses by Company to Executive are expressly conditioned upon Executive’s compliance with the restrictive covenants in Articles V and VI.  In the event of breach or threatened breach by Executive of any provision of Article V or VI hereof, Company shall be entitled to (i) injunctive relief by temporary restraining order, temporary injunction, and/or permanent injunction and (ii) any other legal and equitable relief to which Company may be entitled, including without limitation any and all monetary damages that Company may incur as a result of said breach or threatened breach.  An agreed amount for the bond to be posted if an injunction is sought by Company is $500.  Company may pursue any remedy available, without limitation, including declaratory relief, concurrently or consecutively in any order as to any breach, violation, or threatened breach or violation, and the pursuit of one such remedy at any time will not be deemed an election of remedies or waiver of the right to pursue any other remedy.  Each restriction set forth in Articles V and VI hereof shall survive the termination of Executive’s employment with Company.  The existence of any claim or cause of action of Executive against Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Company of any covenant contained in Article V or VI.  In the event an enforcement remedy is sought under Sections 6.2, 6.3, or 6.4, the time periods provided for in those sections shall be extended by one day for each day Executive failed to comply with the restriction at issue.  If any of the restrictions in Articles V or VI are deemed unenforceable under an applicable forum’s law, the parties expressly agree that such will not affect the enforceability of any of the remaining provisions of Articles V and VI.  Further, if any of the restrictions in Articles V or VI are deemed unenforceable as written, the parties expressly authorize the court or arbitrator to revise, delete, or add to those restrictions to the extent necessary to enforce the intent of the parties and to provide effective protection for Company’s goodwill, specialized training, Confidential Information and other business interests.

 

ARTICLE VII
DISPUTE RESOLUTION

 

7.1                                Choice of Law .  This Agreement shall be construed and interpreted and the rights of the parties governed by the laws of the State of Texas, without regard to its conflict of law principles.

 

7.2                                Submission to Jurisdiction .  The parties hereto submit to the exclusive jurisdiction of the state and federal courts, as applicable, located in San Antonio, Texas, and appropriate appellate courts therefrom, over any dispute, controversy or claim between Executive and Company arising out of or relating to this Agreement or Executive’s employment with Company.  Each party submits to the jurisdiction of such courts and agrees not to raise any objections to such jurisdiction.

 

ARTICLE VIII
MISCELLANEOUS

 

8.1                                Successors; Assigns .  This Agreement is personal to Executive, and neither this Agreement nor any rights or obligations hereunder shall be assignable or otherwise transferred by Executive.  Company may assign this Agreement, including to any affiliate or successor

 

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(whether by merger, purchase or otherwise) to all or substantially all of the equity, assets or businesses of Company, at any time without the consent of Executive. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and any assign of Company shall be deemed to be “Company” for purposes of this Agreement.

 

8.2                                Notices .  For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given (a) when received if delivered personally or by courier, (b) on the date receipt is acknowledged if delivered by certified mail, postage prepaid, return receipt requested or (c) one day after transmission if sent by facsimile transmission with confirmation of transmission, as follows:

 

If to Executive, addressed to:	Robert A. Philpott
	25 Shawnee Lane
	Lake Forest, Illinois 60045
If to Company, addressed to:	Harte -Hanks, Inc.
	9601 McAllister Freeway, Suite 610
	San Antonio, Texas 78216
	Attention: General Counsel
	Facsim ile: (210) 829 - 9139

 

 

or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt.

 

8.3                                No Waiver .  No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

 

8.4                                Severability .  If an arbitrator or court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.

 

8.5                                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 shall constitute one and the same Agreement.

 

8.6                                Withholding of Taxes and Other Executive Deductions .  Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other normal employee deductions made with respect to Company’s employees generally; provided, however , that no withholding pursuant to Section 4999 of the Code shall be made unless, in the opinion of tax counsel selected by Company and acceptable to Executive, such withholding relates to payments that result in the imposition of an excise tax pursuant to Section 4999 of the Code.

 

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8.7                                Headings; References; Interpretation .  The Article and Section headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.  The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole, including all Exhibits attached hereto, and not to any particular provision of this Agreement.  All references herein to Sections and Exhibits shall, unless the context requires a different construction, be deemed to be references to the Sections of this Agreement and the Exhibits attached hereto, and all such Exhibits attached hereto are hereby incorporated herein and made a part hereof for all purposes.  The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter. The word “or” as used herein is not exclusive and is deemed to have the meaning “and/or.”  Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party hereto, whether under any rule of construction or otherwise.  On the contrary, this Agreement has been reviewed by each of the parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto.

 

8.8                                Gender and Plurals .  Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.

 

8.9                                Affiliate .  As used in this Agreement, the term “ affiliate ” as used with respect to a particular person or entity shall mean any other person or entity that owns or controls, is owned or controlled by such particular person or entity.

 

8.10                         Effect of Termination .  The provisions of Articles IV, V, VI, VII and VIII, and those provisions necessary to interpret and enforce them, shall survive any termination of this Agreement and any termination of the employment relationship between Executive and Company.

 

8.11                         Entire Agreement .  This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Executive by Company. Without limiting the scope of the preceding sentence, all understandings and agreements preceding the date of execution of this Agreement and relating to the subject matter hereof are hereby null and void and of no further force or effect, and this Agreement shall supersede all other agreements, written or oral, that purport to govern the terms of Executive’s employment (including Executive’s compensation) with Company or any of its affiliates.

 

8.12                         Modification; Waiver .  Any modification to or waiver of this Agreement shall be effective only if it is in writing and signed by Company and Executive.

 

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8.13                         Advice of Counsel .  Executive acknowledges that Executive has been instructed to, and has had adequate opportunity to obtain, the advice of Executive’s own tax and legal counsel in connection with this Agreement.

 

8.14                         Section 409A of the Code .  This Agreement is intended to comply with Section 409A of the Code and the Treasury regulations and other interpretive guidance issued thereunder (collectively, “ Section 409A ”) or an exemption therefrom and shall be construed and administered in accordance with such intent. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Notwithstanding any provision in this Agreement to the contrary, if any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if Executive’s receipt of such payment or benefit is not delayed until the earlier of (a) the date of Executive’s death or (b) the date that is six months after Executive’s Termination Date (such date, the “ Section 409A Payment Date ”), then such payment or benefit shall not be provided to Executive (or Executive’s estate, if applicable) until the Section 409A Payment Date.  Notwithstanding the foregoing, Company makes no representations that the payments and benefits provided under this Agreement are exempt from, or compliant with, Section 409A and in no event shall Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by Executive on account of non-compliance with Section 409A.

 

8.15                         Compensation Recoupment .  Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “ Act ”), the compensation payable pursuant to this Agreement (including without limitation Sections 3.2 and 3.5 hereof) shall not be deemed fully earned or vested, even if paid or distributed to Executive, if such compensation or any portion thereof is deemed incentive compensation and subject to recovery, or “clawback,” by Company pursuant to the provisions of the Act and any rules or regulations promulgated thereunder or by any stock exchange on which the Common Stock is listed (the “ Rules ”).  In addition, Executive hereby acknowledges that this Agreement may be amended as necessary and/or shall be subject to any recoupment policies adopted by Company to comply with the requirements and/or limitations under the Act and the Rules or any other federal or stock exchange requirements, including by expressly permitting (or, if applicable, requiring) Company to revoke, recover, and/or clawback any compensation payable pursuant to this Agreement (including without limitation Sections 3.2 and 3.5 hereof) that is deemed incentive compensation.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, Executive and Company each have caused this Agreement to be executed in its name and on its behalf, effective for all purposes as provided above.

 

 

	HARTE-HANKS, INC.
	By:	/s/ Douglas C. Shepard
		Douglas C. Shepard
		EVP and Chief Financial Officer
		Date:		June 8, 2013
	EXECUTIVE
	/s/ Robert A. Philpott
	Robert A. Philpott
	Date:		June 8, 2013

 

EXHIBIT 10.2

 

HARTE-HANKS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT

 

To: Robert A. Philpott	Date of Grant: July     , 2013
Number of Shares: 400,000	Exercise Price Per Share: $

 

HARTE-HANKS, INC. (the “ Company ”), is pleased to grant you, as an inducement material to your entry into employment with the Company, a stock option (the “ Option ”) to purchase all or any part of a number of shares of Stock (as defined below), subject to the terms and conditions set forth in this Non-Qualified Stock Option Agreement (this “ Agreement ”).  The grant of the Option is specifically conditioned upon (i) the approval of this grant to you by the Board (as defined below), and (ii) the execution by you of this Agreement, agreeing to all of the terms and conditions set forth herein.  The Date of Grant, the number of shares issuable upon exercise of the Option (the “ Option Shares ”) and the Exercise Price are stated above.  The Option is not governed by the Harte-Hanks, Inc. 2013 Omnibus Incentive Plan, 2005 Omnibus Incentive Plan or by any other equity compensation plan of the Company (or of any of its affiliates).  This Option is not intended to be an “incentive stock option” within the meaning of section 422 of the Code (as defined below).

 

This Agreement sets forth the terms of the agreement between you and the Company with respect to the Option.  By accepting this Agreement, you agree to be bound by all of the terms hereof.

 

1.                                       Definitions .  Unless otherwise defined herein, as used in this Agreement, the following terms have the meanings set forth below:

 

(a)                                  “ Board ” means the board of directors of the Company.

 

(b)                                  “ Cause ” means deficiencies in performance or conduct, as determined in the sole discretion of the Company, resulting in termination of employment.

 

(c)                                   “ Change in Control ” means the first day that any one or more of the following conditions shall have been satisfied:

 

(i)                                      the acquisition of any outstanding voting securities by any person, after which such person (as the term is used for purposes of Section 13(d) or 14(d) of the Exchange Act) has beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the then outstanding voting securities of the Company; provided, however, that for purposes of this definition, the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any company controlled by, controlling or under common control with the Company, or (D) any acquisition by any corporation pursuant to a transaction that complies with Sections (iii)(A) and (iii)(B) of this definition;

 

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(ii)                                   individuals who, as of the Date of Grant, constitute the Board of Directors (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Date of Grant, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board;

 

(iii)                                consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “ Business Combination ”), in each case unless (A) the stockholders of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the outstanding voting securities of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), and (B) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

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

 

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

 

(e)                                   “ Committee ” means the Compensation Committee of the Board.

 

(f)                                    “ Date of Grant ” means the date designated as such on the first page of this Agreement.

 

(g)                                   “ Employment Agreement ” means that certain Employment Agreement by and between the Company and you, effective July 1, 2013.

 

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

 

(i)                                      “ Exercise Price ” means the exercise price per share designated as such on the first page of this Agreement.

 

(j)                                     “ Fair Market Value ” means with respect to Stock, as of any date, the closing price of a share of Stock on the New York Stock Exchange for the last trading day prior to that date.  If no such prices are reported, then Fair Market Value shall mean the average of the high and low sale prices for the Stock (or if no sale prices are reported, the average of the high and low bid prices) as reported by the principal regional stock exchange, or if not so reported, as

 

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reported by Nasdaq or a quotation system of general circulation to brokers and dealers; provided, however, that with respect to same day sales, Fair Market Value shall mean the per share price actually paid for shares of Stock in connection with such sale.

 

(k)                                  “ Final Exercise Date ” means the tenth (10th) anniversary of the Date of Grant.

 

(l)                                      “ Material Breach ” means the material breach of any contractual, statutory, fiduciary or other legal obligation you have to the Company, determined in the sole judgment of the Company.

 

(m)                              “ Stock ” means the Company’s $1.00 par value per share voting common stock, or any other securities that are substituted therefor.

 

(n)                                  “ Termination Date ” means the date on which your performance of services for the Company (or any affiliate) in the capacity of an employee, a non-employee member of the Board or a consultant cease.

 

2.                                       Vesting .  You cannot exercise the Option and acquire Stock until your right to exercise has vested.  This Option vests in four equal installments ( i.e ., 25% each) on each of the first four anniversaries of the Date of Grant.  Notwithstanding the foregoing, (a) in no event can this Option be exercised in whole or in part on or after the date on which the Option lapses pursuant to Section 5, (b) this Option shall automatically vest in full upon the occurrence of a Change in Control, and (c) this Option shall automatically vest in full upon the termination of your employment with the Company either (i) by the Company for any reason (other than for Cause (as defined in the Employment Agreement) or due to Disability (as defined in the Employment Agreement), (ii) by you for Good Reason (as defined in the Employment Agreement), or (iii) by the Company due to the giving of a non-renewal notice pursuant to Section 2.1 of the Employment Agreement.  This Option is exercisable to the extent vested ( i.e ., the right of exercise shall be cumulative so that to the extent the Option is not exercised in any period to the maximum extent permissible, it shall continue to be exercisable, in whole or in part, with respect to all shares for which it is vested until the earlier of the Final Exercise Date (as defined below) or the termination of this Option under Section 5).

 

3.                                       Exercise .  You may exercise this Option, in whole or in part, at any time (subject to Section 2) by delivering written notice to the Company’s Secretary along with full payment of the Exercise Price for the shares being purchased.  The notice must specify that this Option (or a portion thereof) is being exercised and the number of shares with respect to which this Option is being exercised.  This Option may only be exercised as provided in this Agreement and in accordance with such rules and regulations as may, from time to time, be adopted by the Committee. The exercise of this Option shall be deemed effective upon receipt by the Company of the notice and payment described herein.  If you exercise this Option in full, it shall be surrendered to the Company for cancellation.  If you only partially exercise this Option, it shall, upon request, be delivered to the Company for the purpose of making appropriate notation thereon, or otherwise reflecting, in such manner as the Company shall determine, the result of such partial exercise hereof.  As soon as practicable after the effective exercise of this Option, and upon satisfaction of all applicable withholding requirements, you or your nominee shall be

 

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recorded on the Company’s stock transfer books as the owner of the shares purchased.  The Company may, but is not required to, deliver to you on or more duly issued and executed stock certificates evidencing such ownership.

 

4.                                       Payments .  When this Option is exercised, payment of the total Exercise Price for the shares being purchased shall be made to the Company (a) in cash (including check, bank draft or money order); (b) by transfer from you to the Company of shares of Stock (other than shares of Stock that the Committee determines by rule may not be used to exercise this Option) that you have held for more than six months with a then current aggregate Fair Market Value equal to the total Exercise Price for the portion of this Option being exercised; (c) by the Company retaining a number of shares of the Stock deliverable upon exercise of this Option whose aggregate Fair Market Value is equal to the Exercise Price to be paid in connection with such exercise; or (d) to the extent permissible under applicable law, delivery to the Company of (i) a properly executed exercise notice, (ii) irrevocable instructions to a broker to sell a sufficient number of the shares being exercised to cover the Exercise Price and promptly deliver to the Company (on the same day that the shares of Stock issuable upon exercise are delivered) the amount of sale proceeds required to pay the Exercise Price and any required tax withholding related to the exercise, and (iii) such other documentation as the Committee and the broker shall require to effect a same day exercise and sale.  In the event the Committee subsequently determines that the aggregate Fair Market Value of Stock or any other consideration delivered as payment of the Exercise Price is insufficient to pay the entire Exercise Price, then you shall pay to the Company, immediately upon the Company’s request, the amount of the deficiency in the form of payment requested by the Committee.

 

5.                                       Expiration .

 

(a)                                  This Option shall expire (and shall cease to be outstanding) on the Final Exercise Date unless terminated prior to the Final Exercise Date pursuant to the terms of this Section 5 or as otherwise provided in this Agreement.  In addition, this Option shall expire: One year after the date of your death or disability (within the meaning of Section 22(e)(3) of the Code); provided, however, that in such event this Option may only be exercised to the extent it is vested at the time of your death or disability.

 

(b)                                  On the Final Exercise Date, if your employment with the Company ends due to your retirement in accordance with the Company’s then-current retirement policy; provided, however, that in such event this Option may only be exercised to the extent it is vested at the time of your retirement.

 

(c)                                   90 days after the Termination Date if you are then still living and if such termination is for a reason other than for death, disability or retirement, for Cause or as a result of a Material Breach; provided, however, that in such event this Option may only be exercised to the extent it is vested at the time of the Termination Date; and provided, further, however, that in the event that you die during the 90 day period immediately after the Termination Date (and you have not been terminated for Cause or as a result of a Material Breach), then this Option shall terminate one year after the date of your death; or

 

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(d)                                  On the Termination Date, if such termination was for Cause or as a result of a Material Breach.

 

6.                                       Transfer and Assignment .  The Option and the rights and privileges conferred therewith shall not be sold, transferred, encumbered, hypothecated or otherwise conveyed by you otherwise than by will or by the laws of descent and distribution.  This Option is not and will not be liable for or subject to, in whole or in part, any debts, contracts, liability or torts by you nor shall it be subject to garnishment, attachment, execution, levy or other legal or equitable process.  This Option shall be exercisable during your lifetime only by you.  To the extent exercisable after your death, this Option shall be exercised only by the person or persons entitled to receive this Option under your will, duly probated, or if you shall fail to make a testamentary disposition of this Option, by the executor or administrator of your estate.

 

7.                                       Conditions .  If at any time the Board shall determine, based on opinion of counsel to the Company, that listing, registration or qualification of the shares covered by this Option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of the exercise of this Option, this Option may not be exercised in whole or in part unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to counsel for the Company.  The Company may require you, as a condition of exercising or receiving the Option, to give written assurances in substance and form satisfactory to the Company and its counsel to the effect that you are acquiring the Stock subject to the Option for your own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate to comply with federal and applicable state securities laws.

 

8.                                       Rights as a Stockholder .  You shall not have any rights as a stockholder with respect to any shares of Stock covered by the Option until you or your nominee become the holder of record of such Stock, and no adjustments shall be made for dividends or other distributions or other rights as to which there is a record date preceding the date you or your nominee become the holder of record of such Stock.

 

9.                                       Change in Capital Structure .  In the event that the Board determines that any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, or other similar corporate transaction or event including a Change in Control, in the Board’s sole discretion, affects the Stock such that an adjustment is determined by the Board to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Agreement, then the Board shall direct the Committee to, in such manner as it determines is equitable, adjust any or all of:

 

(a)                                  The number and kind of shares of Stock (or other securities or property) subject to the Option; and

 

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(b)                                  The Exercise Price (except if such adjustment would result in a repricing of the Option or would cause the Option to become subject to Section 409A of the Code).

 

This Agreement shall not in any way affect or restrict the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Stock or the rights thereof or which are convertible into or exchangeable for Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

 

10.                                Extraordinary Events .  In the event of any transaction or event described in Section 9 or any unusual or nonrecurring transaction or event affecting the Company, any affiliate of the Company or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations or accounting principles occurs, including any Change in Control, the Board, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, is hereby authorized to direct the Committee to take any one or more of the following actions whenever the Board determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Agreement, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

 

(a)                                  To provide for the cancellation of the Option in exchange for an amount of cash equal to the amount that could have been attained upon the exercise of this Option or realization of your rights had the Option been exercised in full for all shares of Stock covered thereby (including an amount equal to zero if no cash could have been so attained or realized);

 

(b)                                  To provide that the Option cannot be exercised or become payable after such event; provided, however, that no action shall be taken pursuant to this clause (b) without your consent, which consent shall not be unreasonably withheld;

 

(c)                                   To provide that the Option shall be vested, exercisable and nonforfeitable as to all shares covered thereby and that all restrictions with respect thereto shall lapse, notwithstanding anything herein to the contrary;

 

(d)                                  To provide that the Option be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; and

 

(e)                                   To make such other adjustments in the number and type of shares of Stock (or other securities or property) subject to the Option (including the Exercise Price); provided that no such adjustment shall be affected if it would result in a repricing of the Option or would cause the Option to become subject to Section 409A of the Code.

 

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11.                                Authority of the Committee .  This Agreement and the Option granted hereunder shall be administered by the Committee except to the extent the Board elects to administer this Agreement and the Option granted hereunder, in which case references herein to the “Committee” shall be deemed to include references to the “Board.”  The Committee shall have the authority, in its sole and absolute discretion, to (i) adopt, amend, and rescind administrative and interpretive rules and regulations relating to this Agreement; (ii) accelerate the time of exercisability of the Option; (iii) construe this Agreement and the Option; (iv) make determinations of the Fair Market Value of the Stock subject to this Agreement; (v) delegate its duties under this Agreement to such agents as it may appoint from time to time; (vi) terminate, modify, or amend this Agreement, provided that, no amendment or termination may decrease your rights inherent in the Option prior to such amendment without your express written permission except to the extent such amendment is necessary to comply with applicable laws and regulations and to conform the provisions of this Agreement to any change thereto; and (vii) make all other determinations, perform all other acts, and exercise all other powers and authority necessary or advisable for administering this Agreement, including the delegation of those ministerial acts and responsibilities as the Committee deems appropriate.  The Committee may correct any defect, supply any omission, or reconcile any inconsistency in this Agreement in the manner and to the extent it deems necessary or desirable to carry the Agreement into effect, and the Committee shall be the sole and final judge of that necessity or desirability.  The determinations of the Committee on the matters referred to in this Section 11 shall be final and conclusive.

 

12.                                Section 16 .  Notwithstanding any other provisions of this Agreement, the grant of this Option shall comply with the applicable provisions of Rule 16b-3 promulgated under the Exchange Act and shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule.  To the extent permitted by applicable law, the Option shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

 

13.                                Taxes .  Any provision of this Agreement to the contrary notwithstanding, the Company may take such steps as it may deem necessary or desirable for the withholding of any taxes which it is required by law or regulation of any governmental authority, federal, state or local, domestic or foreign, to withhold in connection with any shares subject hereto.  Subject to limitations established by the Committee and/or the Board from time to time, any withholding taxes may be paid by delivery to the Company of previously owned shares of Stock or by reducing the number of shares issuable upon exercise of this Option.

 

14.                                Notices .  Any notice to be given under the terms of this Agreement or any delivery of this Option to the Company shall be made by personal delivery, through the mail, or by facsimile, electronic mail or other electronic transmission to the Company’s Secretary, Harte-Hanks, Inc., 9601 McAllister Freeway, Suite 610, San Antonio, Texas 78216, Fax: (210) 829-9139.  Any notice to be given to you shall be addressed to you at your address indicated in the Company’s payroll records, your company email address or at such other address as either party may hereafter designate in writing to the other.  Any person entitled to notice hereunder may waive such notice.

 

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15.                                Further Understandings .  The granting of this Option shall impose no obligation upon you to exercise any part of it.  You acknowledge and agree that the vesting of shares pursuant to the vesting schedule hereof is earned only by your continued service for the Company (or any affiliate) in the capacity of an employee, a non-employee member of the Board or a consultant (and not through the act of being hired, being granted this Option or acquiring shares hereunder).  You further acknowledge and agree that this Option, the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee, a non-employee member of the Board or a consultant for the vesting period, for any period, or at all, and shall not interfere in any way with your right or the right of the Company or any affiliate to terminate your relationship as an employee, a non-employee member of the Board, or a consultant at any time with or without Cause.  You acknowledge that this Option (a) is not granted by the Company as a matter of right, but is granted (and the amount of the award is granted) at the sole discretion of the Board or Committee, (b) is not part of your contractual compensation, and (c) does not create an enforceable right to further options in future years or in similar amounts.  This discretion of the Board and Committee relates to the award of options and the amount of any award.  You waive any and all acquired rights or claims in connection with past or future employment or service as a consultant or director with the Company or any affiliate.

 

16.                                Protection of Goodwill .  You acknowledge that the Company is providing you with this Option in connection with and in consideration for your promises and covenants contained herein.  Specifically, in consideration for the Option, which you acknowledge provides a material incentive for you to grow, develop and protect the goodwill and confidential and proprietary information of the Company, you agree that the Option (itself and in combination with any other awards made to you) constitutes independent and sufficient consideration for all non-competition, non-solicitation and confidentiality covenants between you and the Company, and agree and acknowledge that you will fully abide by each of such covenants.  You further acknowledge that your promise to fully abide by each of the protective covenants referenced above is a material inducement for the Company to provide you with the Option.

 

17.                                Successors & Assigns .  Subject to the limitations on the transferability of this Option, this Agreement shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and assigns of the parties hereto.

 

18.                                Governing Law .  The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to any conflict of law provisions thereof, except to the extent Delaware law is preempted by federal law.  The obligation of the Company to sell and deliver Stock hereunder is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Stock.

 

19.                                Clawback .  Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), this Option shall not be deemed fully earned or vested, even if exercised, if this Option or any portion thereof is deemed “incentive compensation” and subject to recovery, or “clawback,” by the Company pursuant to the provisions of the Act and any rules or regulations promulgated thereunder or by any stock exchange on which the Company’s securities are listed (the “ Rules ”).  In addition, you hereby acknowledge that this Agreement may

 

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be amended as necessary and/or shall be subject to any recoupment policies adopted by the Company to comply with the requirements and/or limitations under the Act and the Rules, or any other federal or stock exchange requirements, including by expressly permitting (or, if applicable, requiring) the Company to revoke, recover and/or clawback this Option or the shares of Stock issued pursuant hereto.

 

20.                                Other Benefits .  The amount of any compensation deemed to be received by you as a result of the receipt, vesting or exercise of this Option will not constitute “earnings” with respect to any other benefits provided to you by the Company or an affiliate, including without limitation benefits under any pension, profit sharing, life insurance or salary continuation plan.

 

21.                                Furnish Information .  You shall furnish to the Company all information requested by the Company to enable it to comply with any reporting or other requirements imposed upon the Company by or under any applicable statute or regulation.  From time to time, the Board and appropriate officers of the Company shall and are authorized to take whatever action is necessary to file required documents with governmental authorities and other appropriate persons to make shares of Stock available for issuance pursuant to the exercise of the Option.

 

22.                                No Liability for Good Faith Determinations .  The Company and the members of the Committee and the Board shall not be liable for any act, omission or determination taken or made in good faith with respect to this Agreement or the Option granted hereunder.

 

23.                                Execution of Receipts and Releases .  Any payment of cash or any issuance or transfer of shares of Stock or other property to you, or to your legal representative, heir, legatee or distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Company may require you or your legal representative, heir, legatee or distributee, as a condition precedent to such payment or issuance, to execute a release and receipt therefor in such form as it shall determine.

 

24.                                No Guarantee of Interests .  Neither the Committee, the Board nor the Company guarantees the Stock of the Company from loss or depreciation.

 

25.                                Company Records .  Records of the Company or its affiliates regarding your period of employment, termination of employment and the reason therefor, leaves of absence, re-employment, and other matters shall be conclusive for all purposes hereunder, unless determined by the Company to be incorrect.

 

26.                                Company Action .  Any action required of the Company shall be by resolution of its Board or by a person authorized to act by resolution of the Board.

 

27.                                Severability .  If any provision of this Agreement is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions hereof, but such provision shall be fully severable and this Agreement shall be construed and enforced as if the illegal or invalid provision had never been included herein.

 

28.                                Headings; Word Usage .  The titles and headings of Sections are included for convenience of reference only and are not to be considered in construction of the provisions

 

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hereof.  Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Agreement dictates, the plural shall be read as the singular and the singular as the plural.

 

29.                                Fractional Shares .  In no event may the Option be exercised or adjusted for any fractional shares.  The Committee shall determine whether cash or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

 

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]

 

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IN WITNESS WHEREOF , the Company has caused this Agreement to be executed by its duly authorized officer as of the Date of Grant first above written.

 

		HARTE-HANKS, INC.
		By:
			Douglas C. Shepard
			EVP and Chief Financial Officer
ACKNOWLEDGED AND AGREED:
Robert A. Philpott

 

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EXHIBIT 10.3

 

HARTE-HANKS, INC.
RESTRICTED STOCK AWARD AGREEMENT

 

To: Robert A. Philpott

Date of Grant: July     , 2013

 

Number of Shares: 100,000

 

HARTE-HANKS, INC. (the “ Company ”), is pleased to grant you, as an inducement material to your entry into employment with the Company, a restricted stock award (the “ Restricted Stock Award ”) with respect to a number of shares of Stock (as defined below), subject to the terms and conditions set forth in this Restricted Stock Award Agreement (this “ Agreement ”).  The grant of the Restricted Stock Award is specifically conditioned upon (i) the approval of this grant to you by the Board (as defined below), and (ii) the execution by you of this Agreement, agreeing to all of the terms and conditions set forth herein.  The Date of Grant and the number of shares of Stock subject to this Restricted Stock Award are stated above.  The Restricted Stock Award is not governed by the Harte-Hanks, Inc. 2013 Omnibus Incentive Plan, 2005 Omnibus Incentive Plan or by any other equity compensation plan of the Company (or of any of its affiliates).  No payment is required for the Stock that you receive pursuant to this Restricted Stock Award.

 

This Agreement sets forth the terms of the agreement between you and the Company with respect to the Restricted Stock Award.  By accepting this Agreement, you agree to be bound by all of the terms hereof.

 

1.                                       Definitions .  Unless otherwise defined herein, as used in this Agreement, the following terms have the meanings set forth below:

 

(a)                                  “ Board ” means the board of directors of the Company.

 

(b)                                  “ Cause ” means deficiencies in performance or conduct, as determined in the sole discretion of the Company, resulting in termination of employment.

 

(c)                                   “ Change in Control ” means the first day that any one or more of the following conditions shall have been satisfied:

 

(i)                                      the acquisition of any outstanding voting securities by any person, after which such person (as the term is used for purposes of Section 13(d) or 14(d) of the Exchange Act) has beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the then outstanding voting securities of the Company; provided, however, that for purposes of this definition, the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any company controlled by, controlling or under common control with the Company, or (D) any acquisition by any corporation pursuant to a transaction that complies with Sections (iii)(A) and (iii)(B) of this definition;

 

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(ii)                                   individuals who, as of the Date of Grant, constitute the Board of Directors (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Date of Grant, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board;

 

(iii)                                consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “ Business Combination ”), in each case unless (A) the stockholders of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the outstanding voting securities of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), and (B) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

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

 

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

 

(e)                                   “ Committee ” means the Compensation Committee of the Board.

 

(f)                                    “ Date of Grant ” means the date designated as such on the first page of this Agreement.

 

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

 

(h)                                  “ Fair Market Value ” means with respect to Stock, as of any date, the closing price of a share of Stock on the New York Stock Exchange for the last trading day prior to that date.  If no such prices are reported, then Fair Market Value shall mean the average of the high and low sale prices for the Stock (or if no sale prices are reported, the average of the high and low bid prices) as reported by the principal regional stock exchange, or if not so reported, as reported by Nasdaq or a quotation system of general circulation to brokers and dealers; provided, however, that with respect to same day sales, Fair Market Value shall mean the per share price actually paid for shares of Stock in connection with such sale.

 

(i)                                      “ Stock ” means the Company’s $1.00 par value per share voting common stock, or any other securities that are substituted therefor.

 

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2.                                       Vesting .  The shares of Stock subject to this Restricted Stock Award vest and become non-forfeitable (a) in three installments of equal amount (subject to whole-share rounding), with one such installment vesting on each of the first three anniversaries of the Date of Grant, or (b) to the extent sooner, upon a Change in Control; provided, however, that the Stock subject to this Restricted Stock Award will vest in accordance with the vesting schedule described above only if you are still employed by the Company on each applicable vesting date.  If your employment terminates prior to the date the Stock vests (including without limitation a termination by the Company with or without Cause, death, disability (within the meaning of Section 22(e)(3) of the Code) or retirement on or after your attainment of age 70, or a voluntary termination by you) all unvested Stock shall be forfeited at the time of such termination.

 

3.                                       Restricted Shares .  The shares of Stock you receive under this Agreement will be considered “ Restricted Shares ” until they vest.  You may not sell, transfer, pledge or otherwise dispose of, make any short sale of, grant any option for the purchase of or enter into any hedging or similar transaction with the same economic effect as a sale, any Restricted Shares.  The Restricted Shares are also restricted in the sense that they may be forfeited to the Company.  Stock that vests in accordance with the vesting schedule set forth in Section 2 above will no longer be considered Restricted Shares.

 

4.                                       Stock Certificates .  Your Restricted Shares will be held for you by the Company in book entry form at its transfer agent until it vests, after which you may request transfer or issuance of a certificate.  If you receive a stock certificate evidencing the grant of the Restricted Shares, the Committee may in its sole discretion require one or more of the following methods of enforcing the restrictions referred to in Section 3: (a) placing a legend on the stock certificates referring to the restrictions, (b) requiring you to keep the stock certificates, duly endorsed, in the custody of the Company while the restrictions remain in effect, or (c) requiring that the stock certificates, duly endorsed, be held in the custody of a third party while the restrictions remain in effect.

 

5.                                       Privileges of a Stockholder .  From and after the time the Restricted Shares are issued in your name, you will be entitled to all the rights of absolute ownership of the Restricted Shares, including the right to vote those shares and to receive dividends thereon if, as, and when declared by the Board, subject, however, to the terms, conditions and restrictions set forth in this Agreement; provided, however, that each dividend payment will be made no later than the 60 th  day following the date such dividend payment is made to stockholders generally.

 

6.                                       Conditions .  Notwithstanding any provision of this Agreement to the contrary, the issuance of Stock (including Restricted Shares) will be subject to compliance with all applicable requirements of federal, state, or foreign law with respect to such securities and with the requirements of any stock exchange or market system upon which the Stock may then be listed.  No Stock will be issued hereunder if such issuance would constitute a violation of any applicable federal, state, or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. The Company may require you, as a condition of receiving the Stock, to give written assurances in substance and form satisfactory to the Company and its counsel to the effect that you are acquiring the Stock subject to the Restricted Stock Award for your own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as

 

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the Company deems necessary or appropriate to comply with federal and applicable state securities laws.

 

7.                                       Change in Capital Structure .  In the event that the Board determines that any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, or other similar corporate transaction or event including a Change in Control, in the Board’s sole discretion, affects the Stock such that an adjustment is determined by the Board to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Agreement, then the Board shall direct the Committee to, in such manner as it determines is equitable, adjust any or all of the number and kind of shares of Stock (or other securities or property) subject to the Restricted Stock Award; provided that no such adjustment shall be affected if it would cause the Restricted Stock Award to become subject to Section 409A of the Code.  This Agreement shall not in any way affect or restrict the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Stock or the rights thereof or which are convertible into or exchangeable for Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

 

8.                                       Extraordinary Events .  In the event of any transaction or event described in Section 7 or any unusual or nonrecurring transaction or event affecting the Company, any affiliate of the Company or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations or accounting principles occurs, including any Change in Control, the Board, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, is hereby authorized to direct the Committee to take any one or more of the following actions whenever the Board determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Agreement, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

 

(a)                                  To provide for the cancellation of the Restricted Stock Award in exchange for an amount of cash equal to the amount that could have been attained upon the realization of your rights had the Restricted Stock Award been fully vested (including an amount equal to zero if no cash could have been so attained or realized);

 

(b)                                  To provide that the Restricted Stock Award cannot vest after such event; provided, however, that no action shall be taken pursuant to this clause (b) without your consent, which consent shall not be unreasonably withheld;

 

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(c)                                   To provide that such Restricted Stock Award shall be vested and nonforfeitable as to all shares covered thereby and that all restrictions with respect thereto shall lapse, notwithstanding anything to the contrary herein;

 

(d)                                  To provide that the Restricted Stock Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares; and

 

(e)                                   To make such other adjustments in the number and type of shares of Stock (or other securities or property) subject to the Restricted Stock Award; provided that no such adjustment shall be affected if it would cause the Restricted Stock Award to become subject to Section 409A of the Code.

 

9.                                       Authority of the Committee .  This Agreement and the Restricted Stock Award granted hereunder shall be administered by the Committee except to the extent the Board elects to administer this Agreement and the Restricted Shares granted hereunder, in which case references herein to the “Committee” shall be deemed to include references to the “Board.”  The Committee shall have the authority, in its sole and absolute discretion, to (i) adopt, amend, and rescind administrative and interpretive rules and regulations relating to this Agreement; (ii) accelerate the time of vesting of the Restricted Shares; (iii) construe this Agreement and the Restricted Stock Award; (iv) make determinations of the Fair Market Value of the Stock subject to this Agreement; (v) delegate its duties under this Agreement to such agents as it may appoint from time to time; (vi) terminate, modify, or amend this Agreement, provided that, no amendment or termination may decrease your rights inherent in the Restricted Stock Award prior to such amendment without your express written permission except to the extent such amendment is necessary to comply with applicable laws and regulations and to conform the provisions of this Agreement to any change thereto; and (vii) make all other determinations, perform all other acts, and exercise all other powers and authority necessary or advisable for administering this Agreement, including the delegation of those ministerial acts and responsibilities as the Committee deems appropriate.  The Committee may correct any defect, supply any omission, or reconcile any inconsistency in this Agreement in the manner and to the extent it deems necessary or desirable to carry the Agreement into effect, and the Committee shall be the sole and final judge of that necessity or desirability.  The determinations of the Committee on the matters referred to in this Section 9 shall be final and conclusive.

 

10.                                Section 16 .  Notwithstanding any other provisions of this Agreement, the grant of this Restricted Stock Award shall comply with the applicable provisions of Rule 16b-3 promulgated under the Exchange Act and shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule.  To the extent permitted by applicable law, the Restricted Stock Award shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

 

11.                                Withholding Taxes .  No Stock will be released to you unless you have made acceptable arrangements to pay any withholding taxes that may be due as a result of receipt of this Restricted Stock Award or the vesting of the Stock you receive under this Restricted Stock

 

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Award.  These arrangements may include withholding of Stock that otherwise would be released to you when the Restricted Shares vest.  The Fair Market Value of the Stock withheld (determined as of the date when the taxes otherwise would have been withheld in cash) will be applied as a credit against the taxes.  Any provision of this Agreement to the contrary notwithstanding, the Company may take such steps as it may deem necessary or desirable for the withholding of any taxes which it is required by law or regulation of any governmental authority, federal, state or local, domestic or foreign, to withhold in connection with any shares subject hereto.

 

12.                                Notices .  Any notice to be given under the terms of this Agreement shall be made by personal delivery, through the mail, or by facsimile, electronic mail or other electronic transmission to the Company’s Secretary, Harte-Hanks, Inc., 9601 McAllister Freeway, Suite 610, San Antonio, Texas 78216, Fax: (210) 829-9139.  Any notice to be given to you shall be addressed to you at your address indicated in the Company’s payroll records, your company email address or at such other address as either party may hereafter designate in writing to the other.  Any person entitled to notice hereunder may waive such notice.

 

13.                                No Guarantee of Continued Service .  You acknowledge and agree that the vesting of Stock pursuant to the vesting schedule set forth in this Agreement is earned only by continuing as an employee at the will of the Company (and not through the act of being hired or being granted this Restricted Stock Award).  You further acknowledge and agree that this Agreement, the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued employment for the vesting period, for any period, or at all, and shall not interfere in any way with your right or the right of the Company or any affiliate to dismiss you from employment, free from any liability, or any claim under this Agreement, at any time with or without Cause.

 

14.                                Protection of Goodwill .  You acknowledge that the Company is providing you with this Restricted Stock Award in connection with and in consideration for your promises and covenants contained herein.  Specifically, in consideration for the Restricted Stock Award, which you acknowledge provides a material incentive for you to grow, develop and protect the goodwill and confidential and proprietary information of the Company, you agree that the Restricted Stock Award (itself and in combination with any other awards made to you) constitutes independent and sufficient consideration for all non-competition, non-solicitation and confidentiality covenants between you and the Company, and agree and acknowledge that you will fully abide by each of such covenants.  You further acknowledge that your promise to fully abide by each of the protective covenants referenced above is a material inducement for the Company to provide you with the Restricted Stock Award.

 

15.                                Successors & Assigns .  Subject to the limitations on the transferability of this Restricted Stock Award and the Restricted Shares, this Agreement shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and assigns of the parties hereto.

 

16.                                Governing Law .  The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to any conflict of law provisions thereof, except to the extent Delaware law is preempted by federal

 

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law.  The obligation of the Company to sell and deliver Stock hereunder is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Stock.

 

17.                                Clawback .  Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “ Act ”), the Stock subject to this Agreement shall not be deemed fully earned or vested, even if distributed to you, if this Restricted Stock Award or any portion thereof is deemed “incentive compensation” and subject to recovery, or “clawback,” by the Company pursuant to the provisions of the Act and any rules or regulations promulgated thereunder or by any stock exchange on which the Company’s securities are listed (the “ Rules ”).  In addition, you hereby acknowledge that this Agreement may be amended as necessary and/or shall be subject to any recoupment policies adopted by the Company to comply with the requirements and/or limitations under the Act and the Rules, or any other federal or stock exchange requirements, including by expressly permitting (or, if applicable, requiring) the Company to revoke, recover and/or clawback the shares of Stock issued pursuant hereto.

 

18.                                Other Benefits .   The amount of any compensation deemed to be received by you as a result of the receipt or vesting of this Restricted Stock Award will not constitute “earnings” with respect to any other benefits provided to you by the Company or an affiliate, including without limitation benefits under any pension, profit sharing, life insurance or salary continuation plan.

 

19.                                Furnish Information .  You shall furnish to the Company all information requested by the Company to enable it to comply with any reporting or other requirements imposed upon the Company by or under any applicable statute or regulation.  From time to time, the Board and appropriate officers of the Company shall and are authorized to take whatever action is necessary to file required documents with governmental authorities and other appropriate persons to make shares of Stock available for issuance pursuant to this Agreement.

 

20.                                No Liability for Good Faith Determinations . The Company and the members of the Committee and the Board shall not be liable for any act, omission or determination taken or made in good faith with respect to this Agreement or the Restricted Shares granted hereunder.

 

21.                                Execution of Receipts and Releases .  Any payment of cash or any issuance or transfer of shares of Stock or other property to you, or to your legal representative, heir, legatee or distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Company may require you or your legal representative, heir, legatee or distributee, as a condition precedent to such payment or issuance, to execute a release and receipt therefor in such form as it shall determine.

 

22.                                No Guarantee of Interests .  Neither the Committee, the Board nor the Company guarantees the Stock of the Company from loss or depreciation.

 

23.                                Company Records .  Records of the Company or its affiliates regarding your period of employment, termination of employment and the reason therefor, leaves of absence, re-employment, and other matters shall be conclusive for all purposes hereunder, unless determined by the Company to be incorrect.

 

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24.                                Company Action .  Any action required of the Company shall be by resolution of its Board or by a person authorized to act by resolution of the Board.

 

25.                                Severability .  If any provision of this Agreement is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions hereof, but such provision shall be fully severable and this Agreement shall be construed and enforced as if the illegal or invalid provision had never been included herein.

 

26.                                Headings; Word Usage .   The titles and headings of Sections are included for convenience of reference only and are not to be considered in construction of the provisions hereof.  Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Agreement dictates, the plural shall be read as the singular and the singular as the plural.

 

27.                                Fractional Shares .  In no event may the Restricted Shares be adjusted for any fractional shares.  The Committee shall determine whether cash or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

 

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]

 

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IN WITNESS WHEREOF , the Company has caused this Agreement to be executed by its duly authorized officer as of the Date of Grant first above written.

 

		HARTE-HANKS, INC.
		By:
			Douglas C. Shepard
			EVP and Chief Financial Officer
ACKNOWLEDGED AND AGREED:
Robert A. Philpott

 

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EXHIBIT 10.4

 

HARTE-HANKS, INC.
PERFORMANCE UNIT AWARD AGREEMENT

 

To: Robert A. Philpott		Date of Grant: July   , 2013
Number of Shares: 150,000

 

HARTE-HANKS, INC. (the “ Company ”), is pleased to grant you, as an inducement material to your entry into employment with the Company, performance units (the “ Performance Units ”) with respect to a number of shares of Stock (as defined below), subject to the terms and conditions set forth in this Performance Unit Award Agreement (this “ Agreement ”). The grant of the Performance Units is specifically conditioned upon (i) the approval of this grant to you by the Board (as defined below), and (ii) the execution by you of this Agreement, agreeing to all of the terms and conditions set forth herein. The Date of Grant and the maximum number of shares of Stock that may be earned with respect to the Performance Units are stated above. The Performance Units are not governed by the Harte-Hanks, Inc. 2013 Omnibus Incentive Plan, 2005 Omnibus Incentive Plan or by any other equity compensation plan of the Company (or of any of its affiliates). No payment is required for the Performance Units that you receive pursuant to this Agreement.

 

This Agreement sets forth the terms of the agreement between you and the Company with respect to the Performance Units. By accepting this Agreement, you agree to be bound by all of the terms hereof.

 

1.                                       Definitions . Unless otherwise defined herein, as used in this Agreement, the following terms have the meanings set forth below:

 

(a)                                  “ Bo ard ” means the board of directors of the Company.

 

(b)                                  “ Cause ” means deficiencies in performance or conduct, as determined in the sole discretion of the Company, resulting in termination of employment.

 

(c)                                   “ Change in Control ” means the first day that any one or more of the following conditions shall have been satisfied:

 

(i)                                      the acquisition of any outstanding voting securities by any person, after which such person (as the term is used for purposes of Section 13(d) or 14(d) of the Exchange Act) has beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the then outstanding voting securities of the Company; provided, however, that for purposes of this definition, the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any company controlled by, controlling or under common control with the Company, or (D) any acquisition by any corporation pursuant to a transaction that complies with Sections (iii)(A) and (iii)(B) of this definition;

 

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(ii)                                   individuals who, as of the Date of Grant, constitute the Board of Directors (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Date of Grant, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board;

 

(iii)                                consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “ Business Combination ”), in each case unless (A) the stockholders of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the outstanding voting securities of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), and (B) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

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

 

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

 

(e)                                   “ Committee ” means the Compensation Committee of the Board.

 

(f)                                    “ Date of Grant ” means the date designated as such on the first page of this Agreement.

 

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

 

(h)                                  “ Fair Market Value ” means with respect to Stock, as of any date, the closing price of a share of Stock on the New York Stock Exchange for the last trading day prior to that date. If no such prices are reported, then Fair Market Value shall mean the average of the high and low sale prices for the Stock (or if no sale prices are reported, the average of the high and low bid prices) as reported by the principal regional stock exchange, or if not so reported, as reported by Nasdaq or a quotation system of general circulation to brokers and dealers; provided, however, that with respect to same day sales, Fair Market Value shall mean the per share price actually paid for shares of Stock in connection with such sale.

 

(i)                                      “ Stock ” means the Company’s $1.00 par value per share voting common stock, or any other securities that are substituted therefor.

 

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2.                                       Vesting . The Performance Units subject to this Agreement will vest and become payable (a) on the third anniversary of the Date of Grant, but only to the extent the Performance Criterion set forth in Section 3 below is achieved, or (b) to the extent sooner, upon a Change in Control; provided, however, that the Performance Units will vest in accordance with the vesting schedule described above only if you are still employed by the Company on the applicable vesting date. If your employment terminates prior to the vesting of the Performance Units (including without limitation a termination by the Company with or without Cause, or termination by reason of death, disability (within the meaning of Section 22(e)(3) of the Code) or retirement on or after your attainment of age 70, or a voluntary termination by you) all Performance Units shall be forfeited at the time of such termination.

 

3.                                       Performance Criterion . The Performance Criterion applicable to the Performance Units shall be the same Performance Criterion established by the Company pursuant to the 2005 Omnibus Incentive Plan for its officers as part of its January 2013 compensation determinations.

 

4.                                       Settlement . Upon vesting, in settlement of the vested Performance Units (if any) you will receive (a) one share of Stock for each vested Performance Unit, or (b) if the Committee so elects (in its sole discretion), cash in an amount equal to the Fair Market Value of the Stock multiplied by the number of Performance Units vested. Settlement shall occur no later than two and one-half months following the vesting date and will be subject to withholding for taxes and other applicable payroll adjustments. The Committee’s determination of the amount payable shall be binding upon you and your beneficiary or estate. The value received shall not bear any interest owing to the passage of time.

 

5.                                       Rights as a Stockholder . The Performance Units granted pursuant to this Agreement do not and shall not entitle you to any rights of a holder of Stock, including the right to vote or receive dividends or any dividend equivalents, prior to the date, if any, that shares of Stock are issued to you in settlement of the Performance Units pursuant to Section 4.

 

6.                                       Nontransferability of Agreement . This Agreement and all rights under this Agreement shall not be transferable by you during your life other than by will or pursuant to applicable laws of descent and distribution. Any of your rights and privileges in connection herewith shall not be transferred, assigned, pledged or hypothecated by you or by any other person or persons, in any way, whether by operation of law, or otherwise, and shall not be subject to execution, attachment, garnishment or similar process. In the event of any such occurrence, this Agreement shall automatically be terminated and shall thereafter be null and void.

 

7.                                       Conditions . Notwithstanding any provision of this Agreement to the contrary, the issuance of Stock will be subject to compliance with all applicable requirements of federal, state, or foreign law with respect to such securities and with the requirements of any stock exchange or market system upon which the Stock may then be listed. No Stock will be issued hereunder if such issuance would constitute a violation of any applicable federal, state, or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. The Company may require you, as a condition of receiving the Stock, to give written assurances in substance and form satisfactory to the Company and its counsel to the effect that you are acquiring the Stock subject to this Agreement for your own account for investment and not with any present intention of selling or otherwise

 

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distributing the same, and to such other effects as the Company deems necessary or appropriate to comply with federal and applicable state securities laws.

 

8.                                       Change in Capital Structure . In the event that the Board determines that any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, or other similar corporate transaction or event including a Change in Control, in the Board’s sole discretion, affects the Stock such that an adjustment is determined by the Board to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Agreement, then the Board shall direct the Committee to, in such manner as it determines is equitable, adjust any or all of the number and kind of shares of Stock (or other securities or property) subject to the Performance Units; provided that no such adjustment shall be affected if it would cause the Performance Units to become subject to, or otherwise fail to comply with, Section 409A of the Code. This Agreement shall not in any way affect or restrict the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Stock or the rights thereof or which are convertible into or exchangeable for Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

 

9.                                       Extraordinary Events . In the event of any transaction or event described in Section 8 or any unusual or nonrecurring transaction or event affecting the Company, any affiliate of the Company or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations or accounting principles occurs, including any Change in Control, the Board, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, is hereby authorized to direct the Committee to take any one or more of the following actions whenever the Board determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Agreement, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

 

(a)                                  To provide for the cancellation of the Performance Units in exchange for an amount of cash equal to the amount that could have been attained upon the realization of your rights had the Performance Units been currently payable or fully vested (including an amount equal to zero if no cash could have been so attained or realized);

 

(b)                                  To provide that the Performance Units cannot vest or become payable after such event; provided, however, that no action shall be taken pursuant to this clause (b) without your consent, which consent shall not be unreasonably withheld;

 

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(c)                                   To provide that such Performance Units shall be vested and nonforfeitable as to all shares covered thereby and that all restrictions with respect thereto shall lapse, notwithstanding anything to the contrary herein;

 

(d)                                  To provide that the Performance Units be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares; and

 

(e)                                   To make such other adjustments in the number and type of shares of Stock (or other securities or property) subject to the Performance Units and the criteria included herein; provided that no such adjustment shall be affected if it would cause the Performance Units to become subject to, or to otherwise fail to comply with, Section 409A of the Code.

 

10.                                Authority of the Committee . This Agreement and the Performance Units granted hereunder shall be administered by the Committee except to the extent the Board elects to administer this Agreement and the Performance Units granted hereunder, in which case references herein to the “Committee” shall be deemed to include references to the “Board.” The Committee shall have the authority, in its sole and absolute discretion, to (i) adopt, amend, and rescind administrative and interpretive rules and regulations relating to this Agreement; (ii) accelerate the time of vesting of the Performance Units; (iii) construe this Agreement and the Performance Units; (iv) make determinations of the Fair Market Value of the Stock subject to this Agreement; (v) delegate its duties under this Agreement to such agents as it may appoint from time to time; (vi) terminate, modify, or amend this Agreement, provided that, no amendment or termination may decrease your rights inherent in the Performance Units prior to such amendment without your express written permission except to the extent such amendment is necessary to comply with applicable laws and regulations and to conform the provisions of this Agreement to any change thereto; and (vii) make all other determinations, perform all other acts, and exercise all other powers and authority necessary or advisable for administering this Agreement, including the delegation of those ministerial acts and responsibilities as the Committee deems appropriate. The Committee may correct any defect, supply any omission, or reconcile any inconsistency in this Agreement in the manner and to the extent it deems necessary or desirable to carry the Agreement into effect, and the Committee shall be the sole and final judge of that necessity or desirability. The determinations of the Committee on the matters referred to in this Section 10 shall be final and conclusive.

 

11.                                Section 16 . Notwithstanding any other provisions of this Agreement, the grant of the Performance Units shall comply with the applicable provisions of Rule 16b-3 promulgated under the Exchange Act and shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Performance Units shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

 

12.                                Withholding Taxes . No Stock or cash will be released to you unless you have made acceptable arrangements to pay any withholding taxes that may be due as a result of receipt, vesting or settlement of the Performance Units pursuant to this Agreement. These arrangements

 

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may include withholding of Stock that otherwise would be released to you when the Performance Units vest and are paid to you or surrendering Stock that you already own. The Fair Market Value of the Stock withheld or that you surrender (determined as of the date when the taxes otherwise would have been withheld in cash) will be applied as a credit against the taxes. Any provision of this Agreement to the contrary notwithstanding, the Company may take such steps as it may deem necessary or desirable for the withholding of any taxes which it is required by law or regulation of any governmental authority, federal, state or local, domestic or foreign, to withhold in connection with any shares subject hereto.

 

13.                                Notices . Any notice to be given under the terms of this Agreement shall be made by personal delivery, through the mail, or by facsimile, electronic mail or other electronic transmission to the Company’s Secretary, Harte-Hanks, Inc., 9601 McAllister Freeway, Suite 610, San Antonio, Texas 78216, Fax: (210) 829-9139. Any notice to be given to you shall be addressed to you at your address indicated in the Company’s payroll records, your company email address or at such other address as either party may hereafter designate in writing to the other. Any person entitled to notice hereunder may waive such notice.

 

14.                                No Guarantee of Continued Service . You acknowledge and agree that the vesting of Performance Units pursuant to the vesting schedule set forth in this Agreement is earned only by continuing as an employee at the will of the Company (and not through the act of being hired or being granted the Performance Units). You further acknowledge and agree that this Agreement, the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued employment for the vesting period, for any period, or at all, and shall not interfere in any way with your right or the right of the Company or any affiliate to dismiss you from employment, free from any liability, or any claim under this Agreement, at any time with or without Cause.

 

15.                                Protection of Goodwill . You acknowledge that the Company is providing you with the Performance Units in connection with and in consideration for your promises and covenants contained herein. Specifically, in consideration for the Performance Units, which you acknowledge provide a material incentive for you to grow, develop and protect the goodwill and confidential and proprietary information of the Company, you agree that the Performance Units (themselves and in combination with any other awards made to you) constitute independent and sufficient consideration for all non-competition, non-solicitation and confidentiality covenants between you and the Company, and agree and acknowledge that you will fully abide by each of such covenants. You further acknowledge that your promise to fully abide by each of the protective covenants referenced above is a material inducement for the Company to provide you with the Performance Units.

 

16.                                Successors & Assigns . Subject to the limitations on the transferability of this Agreement and the Performance Units, this Agreement shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and assigns of the parties hereto.

 

17.                                Governing Law . The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to any conflict of law provisions thereof, except to the extent Delaware law is preempted by federal law. The obligation of the Company to sell and deliver Stock hereunder is subject to applicable laws and

 

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to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Stock.

 

18.                                Clawback . Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “ Act ”), the Performance Units subject to this Agreement shall not be deemed fully earned or vested, even if settled, if the Performance Units or any portion thereof are deemed “incentive compensation” and subject to recovery, or “clawback,” by the Company pursuant to the provisions of the Act and any rules or regulations promulgated thereunder or by any stock exchange on which the Company’s securities are listed (the “ Rules ”). In addition, you hereby acknowledge that this Agreement may be amended as necessary and/or shall be subject to any recoupment policies adopted by the Company to comply with the requirements and/or limitations under the Act and the Rules, or any other federal or stock exchange requirements, including by expressly permitting (or, if applicable, requiring) the Company to revoke, recover and/or clawback the Performance Units or the shares of Stock or cash issued in settlement thereof.

 

19.                                Other Benefits . The amount of any compensation deemed to be received by you as a result of the receipt, vesting or settlement of the Performance Units will not constitute “earnings” with respect to any other benefits provided to you by the Company or an affiliate, including without limitation benefits under any pension, profit sharing, life insurance or salary continuation plan.

 

20.                                Furnish Information . You shall furnish to the Company all information requested by the Company to enable it to comply with any reporting or other requirements imposed upon the Company by or under any applicable statute or regulation. From time to time, the Board and appropriate officers of the Company shall and are authorized to take whatever action is necessary to file required documents with governmental authorities and other appropriate persons to make shares of Stock available for issuance pursuant to this Agreement.

 

21.                                No Liability for Good Faith Determinations . The Company and the members of the Committee and the Board shall not be liable for any act, omission or determination taken or made in good faith with respect to this Agreement or the Performance Units granted hereunder.

 

22.                                Execution of Receipts and Releases . Any payment of cash or any issuance or transfer of shares of Stock or other property to you, or to your legal representative, heir, legatee or distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Company may require you or your legal representative, heir, legatee or distributee, as a condition precedent to such payment or issuance, to execute a release and receipt therefor in such form as it shall determine.

 

23.                                No Guarantee of Interests . Neither the Committee, the Board nor the Company guarantees the Stock of the Company from loss or depreciation.

 

24.                                Company Records . Records of the Company or its affiliates regarding your period of employment, termination of employment and the reason therefor, leaves of absence, re-employment, and other matters shall be conclusive for all purposes hereunder, unless determined by the Company to be incorrect.

 

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25.                                Company Action . Any action required of the Company shall be by resolution of its Board or by a person authorized to act by resolution of the Board.

 

26.                                Severability . If any provision of this Agreement is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions hereof, but such provision shall be fully severable and this Agreement shall be construed and enforced as if the illegal or invalid provision had never been included herein.

 

27.                                Headings; Word Usage . The titles and headings of Sections are included for convenience of reference only and are not to be considered in construction of the provisions hereof. Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Agreement dictates, the plural shall be read as the singular and the singular as the plural.

 

28.                                Fractional Shares . In no event may the Performance Units be settled or adjusted for any fractional shares. The Committee shall determine whether cash or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

 

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]

 

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IN WITNESS WHEREOF , the Company has caused this Agreement to be executed by its duly authorized officer as of the Date of Grant first above written.

 

		HARTE-HANKS, INC.
		By:
			Douglas C. Shepard
			EVP and Chief Financial Officer
ACKNOWLEDGED AND AGREED:
Robert A. Philpott

 

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EXHIBIT 10.5

 

RETIREMENT AND CONSULTING AGREEMENT

 

This RETIREMENT AND CONSULTING AGREEMENT (“ Agreement ”) is made and entered into by and between Harte-Hanks, Inc. (the “ Company ”), and Larry D. Franklin (“ Consultant ”), on June 7, 2013 (the “ Effective Date ”).  The Company and Consultant are each referred to herein individually as a “ Party ” and collectively as the “ Parties .”

 

WHEREAS , Consultant is currently employed by the Company in the positions of Chairman, President and Chief Executive Officer;

 

WHEREAS , Consultant will retire from his positions as the Company’s Chairman, President and Chief Executive Officer, and his employment with the Company will end effective June 30, 2013 (the “ Separation Date ”);

 

WHEREAS , the Company recognizes Consultant’s contributions to the Company during his employment and desires to benefit from the expertise and experience of Consultant in the capacity of a consultant to the Company;

 

WHEREAS , the Company desires to engage Consultant to perform certain professional services in accordance with this Agreement; and

 

WHEREAS , the Consultant is willing to provide such professional services on the terms and conditions of this Agreement.

 

NOW THEREFORE , in consideration of these premises and the mutual promises, covenants, and obligations contained herein, the Company and Consultant agree as follows:

 

1.                                       Retirement .  Except as hereinafter otherwise provided, Consultant will remain employed as Chairman, President and Chief Executive Officer through the Separation Date, at which time he will retire and no longer be an employee of the Company.  The Executive agrees to resign from his positions as officer of the Company and all Company subsidiaries and affiliates, and/or as director of all Company subsidiaries and affiliates, and all fiduciary positions that he may hold with respect to any Company, subsidiary, or affiliate employee benefit plans, effective as of the Separation Date.  Consultant further hereby agrees to retire as a director of the Company and consequently resign from the Board of Directors (the “ Board ”) on or before December 31, 2013.  Prior to the Separation Date, Consultant agrees that he will devote his full business time, attention, and energies to performing the duties of his positions on behalf of the Company, including those duties as from time to time may be assigned to him by the Board, including without limitation providing assistance with the transition of the Company’s new Chief Executive Officer (“ CEO ”).  Consultant’s compensation and benefits shall remain at their current levels through the Separation Date and shall thereafter terminate, except to the extent Consultant is entitled to any vested or accrued benefits under the terms of any Company-provided employee benefit plans (including but not limited to payments pursuant to the Company’s Defined Benefit Plan, Restoration Pension Plan and Deferred Compensation Plan in accordance with the terms of such Plans) or as expressly provided herein (including pursuant to the Equity Award Letter attached hereto as Exhibit A ).

 

 

2.                                       Consulting Period .  Unless terminated earlier as provided hereunder, the “ Consulting Period ” shall commence on July 1, 2013 and end on June 30, 2014.

 

2.1                                Termination of Consulting Period .  Notwithstanding the foregoing, the Consulting Period and the Company’s and Consultant’s respective obligations under Sections 1, 2, 3 and 4 of this Agreement, shall be terminated prior to June 30, 2014, upon any of the following: (a) Consultant’s termination of the Consulting Period, which termination shall be effective upon 15 days’ prior written notice to the Company; (b) the death or disability (within the meaning of §22(e)(3) of the Internal Revenue Code of 1986, as amended (the “ Code ”)) of Consultant; (c) the termination of the Consulting Period by the Company for Cause (as defined below), which shall be effective immediately upon notice to Consultant; or (d) the termination of the Consulting Period by mutual agreement of the Parties, as evidenced by a writing signed by Consultant and the Company.

 

2.2                                Cause .  As used herein, the term “ Cause ” shall mean that the Board of Directors of the Company (the “ Board ”) determines in good faith that Consultant shall have:

 

(a)                                  Committed an intentional material act of fraud or embezzlement in connection with his duties;

 

(b)                                  Committed intentional wrongful material damage to property of the Company;

 

(c)                                   Committed intentional wrongful disclosure of material secret processes or material confidential information of the Company;

 

(d)                                  Been convicted of, or entered a guilty or no contest plea to, a felony or other crime involving dishonesty or moral turpitude;

 

(e)                                   Committed a material breach of the Company’s insider trading, corporate ethics and compliance policies, or any other Board-adopted policies applicable to Consultant (in his capacity as a consultant or in any other capacity in which he serves the Company); or

 

(f)                                    Committed substantial, willful and repeated failures to perform his duties under this Agreement, which failures have not been cured within 30 days of Consultant’s receipt of written notice of such failures.

 

For the purposes of this Agreement, no act or failure to act on the part of Consultant will be deemed “intentional” unless done, or omitted to be done, by Consultant not in good faith and without reasonable belief that his action or omission was in the best interest of the Company.

 

3.                                       Services .

 

3.1                                Reporting .  During the Consulting Period, Consultant shall report to the Board.

 

3.2                                Services .  During the Consulting Period, Consultant shall make himself available to perform consulting services as reasonably requested by the Board and/or the CEO on behalf of

 

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the Company with respect to the business of the Company (collectively, the “ Services ”); provided, that, for the avoidance of doubt, there is no minimum service requirement imposed on Consultant during the Consulting Period.  In providing the Services, Consultant shall provide the Company with such of his assessments and evaluations as the Company may deem necessary.  Consultant agrees to attend such meetings as the Company may reasonably require for proper communication of his advice and consultation.  Consultant may attend such meetings by telephone.  Consultant shall coordinate the furnishing of the Services pursuant to this Agreement with the Board or CEO (as appropriate) in order that such services can be provided in such a way as to generally conform to the business schedules of the Company, but the method of performance, time of performance, place of performance, hours utilized in such performance, and other details of the manner of performance of Consultant’s services hereunder shall be within the sole control of Consultant.

 

3.3                                Independent Contractor Relationship .  Consultant shall be an independent contractor and not an agent or employee of the Company.  Neither the relationship between the Company and Consultant nor any provision of this Agreement shall be construed to authorize Consultant to take or fail to take any action, make or fail to make any decision, representation or commitment, binding upon the Company or any of its affiliated companies in the absence of written specific authorization executed by the Board.  The Company shall at all times be free to engage other consultants to perform services in addition to or in lieu of the services to be provided by Consultant.  Consultant shall be free to perform services for other companies as long as doing so does not interfere with Consultant’s obligations under this Agreement.  Consultant shall perform the services under this Agreement with minimum oversight by the Company.

 

4.                                       Payments .  Consultant shall be entitled to receive the following payments and benefits:

 

4.1                                Consulting Fee .  On January 3, 2014, the Company will pay Consultant a fee of $1,000,000 for Consultant’s Services under this Agreement.

 

4.2                                COBRA Reimbursement .  Provided Consultant elects continued coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), consistent with his health care elections in effect immediately prior to the Separation Date, then the Company will reimburse monthly premiums paid by Consultant for such continuation coverage for 18 months. The amount of such monthly reimbursement shall be limited to an amount equal to the difference between (a) the total monthly COBRA premium for such continuation coverage, and (b) the monthly premium amount paid by Consultant for health care coverage pursuant to his elections in effect immediately prior to the Separation Date.  Consultant must provide the Company with reasonably prompt documentation evidencing payment of the applicable premiums, and the Company’s reimbursement shall be made within 30 days of its receipt of such documentation.  In the event Consultant becomes eligible to participate in another employer’s group health plan, the reimbursement provided pursuant to this Section 4.3 shall immediately cease.

 

4.3                                Expenses .  During the Consulting Period, the Company shall reimburse Consultant for all ordinary and reasonable out-of-pocket business and travel expenses that are authorized in writing by the Board or CEO (as applicable) and incurred by Consultant as a direct result of providing Services under this Agreement, so long as such expenses are in accordance

 

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with the Company’s expense reimbursement policies.  Requests for reimbursement must be supported by appropriate documentation and shall be invoiced monthly to the Company by Consultant.  The Company shall reimburse Consultant within 30 days of receiving the supporting documentation for a request.  Notwithstanding any provision of this Agreement to the contrary, the amount of expenses for which Consultant is eligible to receive reimbursement under Section 4.2 or 4.3 hereof during any calendar year shall not affect the amount of expenses for which Consultant is eligible to receive reimbursement during any other calendar year during the Consulting Period.  Reimbursement of expenses under Section 4.2 or 4.3 of this Agreement shall be made no later than the last day of the calendar year following the calendar year in which the expense is incurred. Consultant is not permitted to receive a payment or benefit in lieu of reimbursement under this Agreement.

 

4.4                                Equity Awards .  Consultant’s outstanding stock option, restricted stock and performance unit awards shall remain subject to the terms and conditions of the award agreements evidencing such awards (each, an “ Award Agreement ”), as modified by the provisions of the Equity Award Letter dated June 7, 2013 that is attached hereto as Exhibit A .

 

4.5                                2013 Bonus Award .  Prior to the Separation Date, Consultant participated in the Company’s 2013 annual incentive plan for executive officers (the “ Bonus Plan ”).  The Bonus Plan provides that an executive officer must be employed by the Company on the payment date in order to qualify to receive a payment (an “ Annual Bonus ”), which is payable based on the achievement of pre-established performance objectives.  Notwithstanding such continued employment requirement, for calendar year 2013, Consultant shall be entitled to receive the Annual Bonus Consultant would have received if Consultant had remained employed through the applicable payment date, pro-rated to reflect the period between January 1, 2013 and the Separation Date, i.e. , 50%.  Except as otherwise provided in this Agreement, payment of any such Annual Bonus for calendar year 2013 shall be made based on the same performance determinations, and in accordance with and subject to the Company’s standard payment practices, as applied to its executive officers generally, but such performance determinations shall exclude the financial effects of both (i) this Agreement and transactions contemplated herein, and (ii) the expenses associated with the hiring of the Company’s CEO (including his initial equity awards).  Consultant shall not be eligible to receive an Annual Bonus for calendar year 2014.

 

4.6                                Non-Employee Director Fees .  For so long as Consultant remains a member of the Board Consultant shall be paid compensation for such Board service in accordance with the Company’s standard compensation policy for non-employee directors.

 

4.7                                No Other Payments .  Other than as set forth above in this Section 4 or pursuant to Section 5 or 6 below, the Company shall not be liable for any other payments to Consultant including, but not limited to, any costs or expenses incurred by Consultant in the course of performing Consultant’s obligations hereunder.

 

4.8                                Withholding; Benefits .  The Company will not withhold from payments to be made to Consultant any sums for income tax, unemployment insurance, social security, or any other withholding pursuant to any law, or make any contributions on Consultant’s behalf for unemployment insurance or social security; nor will the Company make available to Consultant

 

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any of the benefits afforded to employees of the Company.  Consultant expressly acknowledges and agrees that Consultant is solely responsible for the timely payment of all income and other taxes with respect to work performed by Consultant hereunder.  Consultant agrees to follow all relevant U.S. and applicable state laws in connection with this paragraph.  Notwithstanding anything in this Agreement to the contrary, Consultant shall fully indemnify the Company for all amounts, including penalties and interest, the Company incurs, if any, for the Company’s failure to withhold taxes on any payments due Consultant hereunder.

 

5.                                       Change in Control .

 

5.1                                Termination of Existing Agreement .  The Amended & Restated Severance Agreement between Consultant and the Company, dated March 15, 2011, is hereby terminated effective June 30, 2014.

 

5.2                                Change in Control .  For purposes of this Agreement, the term “ Change in Control ” shall mean: (i) the Company is merged, consolidated or reorganized into or with another corporation or other legal person and, as a result of such merger, consolidation or reorganization, less than 60% of the combined voting power of the then outstanding securities of the remaining corporation or legal person or its ultimate parent immediately after such transaction is received in respect of or in exchange for voting securities of the Company pursuant to such transaction; (ii) the Company sells all or substantially all of its assets to any other corporation or other legal person and, as a result of such sale, less than 60% of the combined voting power of the then outstanding securities of such corporation or legal person or its ultimate parent immediately after such transaction is received in respect of or in exchange for voting securities of the Company pursuant to such sale; (iii) any person (including any “person” as such term is used in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) has become the beneficial owner (as such term is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities that, when added to any securities already owned by such person, would represent in the aggregate 30% or more of the combined voting power of the then outstanding securities of the Company; (iv) individuals who, as of the Effective Date, constitute the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election by the Board was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an election contest with respect to the election or removal of directors or other solicitation of proxies or consents by or on behalf of a person other than the Board; or (v) such other events that cause a Change in Control of the Company as determined by the Board in its sole discretion.

 

5.3                                Effect of Change in Control .  Upon a Change in Control prior to the end of the Consulting Period:  (i) all Consulting Fees payable during the Consulting Period which have not been paid shall be immediately due and payable, (ii) Consultant shall be paid a lump sum in respect of payments he would have received under Section 4.2 after the Change in Control (and thereafter the Company shall not be obligated to make further payments to Consultant in respect of Section 4.2); (iii) Consultant shall be immediately paid for any expenses properly submitted

 

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pursuant to Section 4.3; and (iv) Consultant’s equity awards shall be treated as provided in the respective Award Agreements, as modified by the Equity Award Letter.  In addition, if a Change in Control occurs prior to any obligations under the 2013 Bonus Plan become payable, Consultant shall be entitled to receive, immediately upon a Change in Control, payment in respect of the 2013 Bonus Plan for the Company’s 2013 performance consistent with Section 4.5 but based on the Company’s achievement through the earlier to occur of December 31, 2013 or the Change in Control.  All payments due pursuant to this Section 5.3 shall be paid no later than March 15 of the calendar year following the calendar year in which the Change in Control occurs.

 

6.                                       Payments to Estate .  If Consultant dies or becomes Disabled prior to the end of the Consulting Period: (i) all Consulting Fees payable during the Consulting Period which have not been paid shall be immediately due and payable to Consultant (or his estate or guardian, if and as applicable), (ii) Consultant (or his estate or guardian, if and as applicable) shall be paid a lump sum in respect of payments he would have otherwise received under Section 4.2 following his death or Disability (and thereafter the Company shall not be obligated to make further payments to Consultant or his estate or guardian (if and as applicable) in respect of Section 4.2); (iii) Consultant (or his estate or guardian, if and as applicable) shall be immediately paid for any expenses properly submitted pursuant to Section 4.3; (iv) Consultant (or his estate or guardian, if and as applicable) shall be entitled to receive payment in respect of the Bonus Plan for the Company’s 2013 performance consistent with Section 4.5, and (v) Consultant’s equity awards shall be treated as provided in the respective Award Agreement, as modified by the Equity Award Letter.  All payments due pursuant to clauses (i) through (iv) of this Section 6 shall be paid no later than March 15 of the calendar year following the calendar year in which Consultant’s death or Disability occurs.

 

7.                                       Mutual Release of Claims and Non-Disparagement .

 

7.1                                Release .  Notwithstanding anything to the contrary in this Agreement, as a condition to the receipt of any payments or benefits provided pursuant to Sections 4.1, 4.2, 4.3, 4.4, 4.5, 5 or 6, Consultant shall first execute on or before the Release Expiration Date (as defined below) and not revoke in the time provided to do so, the mutual release of claims agreement attached hereto as Exhibit B (the “ Release ”).  The performance of the Company’s obligations hereunder and the receipt of any benefits provided hereunder by Consultant shall constitute full settlement of all such claims and causes of action.  The Company shall also execute the Release in consideration of the releases and waivers given by Consultant.  Consultant acknowledges Consultant’s understanding that if the Release is not timely executed, and the required revocation period has not fully expired, during the allowed time period, Consultant shall not be entitled to certain payments or benefits provided herein.  As used herein, the “ Release Expiration Date ” is the date that is 21 days following the date upon which the Company delivers the Release to Consultant (which shall occur no later than seven days after the Separation Date).  Notwithstanding anything in this Agreement to the contrary, any payments under this Agreement that would otherwise be payable to Consultant during the first 30 days following the Effective Date shall instead be paid to Consultant in a lump sum on the 30th day following the Effective Date, but only if Consultant timely executes and does not revoke the Release in accordance with this Section 7.1.

 

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7.2                                Mutual Non-Disparagement .  At all times during the Consulting Period and for the longest period thereafter permitted under law, (a) Consultant shall not, directly or indirectly, make (or cause to be made) to any legal person any disparaging, derogatory or other negative or false statement about Company (including any of its products, services, policies, practices, operations, employees, sales representatives, agents, officers, directors, and equity holders), and (b) the Company (through its executive officers and Board members) shall not directly or indirectly, make (or cause to be made) to any legal person any disparaging, derogatory or other negative or false statement about Consultant.  Notwithstanding anything else to the contrary, the provision of truthful testimony to governmental, regulatory or self-regulatory authorities or in any legal proceeding shall not constitute a violation of this Agreement.  Further, it is understood and agreed that, after the time periods for the non-competition and non-solicitation covenants contained in the ERA (as defined below and extended hereby), this provision shall not be deemed to limit competitive speech or commercial comparisons by Consultant on behalf of any future employer with respect to its services or products and such competitive speech or commercial comparisons by Consultant shall not be deemed to violate this Agreement.

 

8.                                       Restrictive Covenants .  Consultant expressly acknowledges and agrees that Consultant has been provided with the Company’s trade secrets and Confidential Information (as that term is defined in the Employment Restrictions Agreement between the Company and Consultant, effective March 15, 2011 (the “ ERA ”)).  Accordingly, Consultant reaffirms the covenants set forth in the ERA, expressly acknowledges their validity and continuing, binding effect, and agrees to abide by them in their entirety, and further agrees that any references in the ERA to the termination or end of the employee’s employment shall be deemed to refer instead to the termination or end of the Consulting Period under this Agreement.  Consultant agrees that the ERA is necessary to protect the Company’s Confidential Information and business goodwill.  Consultant further acknowledges that the time, geographic and scope limitations of the restrictive covenants in the ERA, as extended hereby, are reasonable, especially in light of the Company’s desire to protect its Confidential Information, and that Consultant will not be precluded from gainful employment pursuant to his non-competition and other obligations as provided in the ERA, as extended hereby.

 

9.                                       Miscellaneous:

 

9.1                                Notice .  Notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when delivered by national overnight delivery service with delivery confirmation, or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the appropriate party as indicated on the signature page.  Either the Company or Consultant may furnish a change of address to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

 

9.2                                Audit .  During the period of this Agreement, the Consultant shall maintain a set of accounts and records and any other evidence which shows and supports all direct reimbursable costs incurred or anticipated, and any applicable credit.  The system of accounts to be used by the Consultant shall be acceptable to and subject to approval of the Company and shall be in accordance with generally accepted accounting principles.  The Consultant shall preserve these records for a period of three years after performance of the Consulting Agreement.  The

 

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Consultant shall maintain all records of any type pertaining to this Consulting Agreement for a period of three years after final acceptance of the work performed under this Consulting Agreement.  All books of accounts, records, documents, correspondence, and any other evidence pertaining to the direct charges of this Consulting Agreement shall be subject to inspection, copying and audit at all reasonable times by the Company or its authorized representatives.

 

9.3                                Independent Parties .  Company and Consultant are independent contractors and nothing herein shall be construed to create a joint venture, partnership, principal-agent, employer-employee or any similar relationship.  Neither party shall have, nor represent that it has, any power, right or authority to bind the other party, or to assume or create any obligation on behalf of the other party.  Consultant shall not have, nor represent himself as having, the authority to make or enter into any contracts that are binding on the Company or that are otherwise in the name of the Company.

 

9.4                                Governing Law .  This Agreement shall be governed in all respects by the laws of the State of Texas, excluding any conflict-of-law rule or principle that might refer the construction of the Agreement to the laws of another State or country.  Any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or termination, which cannot be amicably resolved by the Parties, shall be brought in a court of competent jurisdiction located in the San Antonio, Texas, and the Parties irrevocably submit to the jurisdiction of any such court solely for the purpose of any such suit, action or proceeding.

 

9.5                                No Waiver .  No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

 

9.6                                Severability .  It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law.  If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person, association, or entity or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law to the fullest extent permitted by law.  In any case, the remaining provisions of this Agreement or the application thereof to any person, association, or entity or circumstances other than those to which they have been held invalid or unenforceable, shall remain in full force and effect.

 

9.7                                Assignment .  This Agreement shall be binding upon and inure to the benefit of the Company, its subsidiaries and affiliates and any other person, association, or entity which may hereafter acquire or succeed to all or a portion of the business or assets of the Company by any means, whether direct or indirect, by purchase, merger, consolidation, or otherwise.  The parties hereto expressly acknowledge that the Company’s rights under this Agreement are assignable and that such rights shall be fully enforceable by any of the Company’s assignees or successors in interest.  Consultant’s rights and obligations under this Agreement are personal and such rights, benefits, and obligations of Consultant shall not be voluntarily or involuntarily assigned,

 

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alienated, or transferred, whether by operation of law or otherwise, by Consultant without the prior written consent of the Company.

 

9.8                                Entire Agreement .  This Agreement (including all documents attached as exhibits hereto) and the ERA constitute the entire agreement of the parties with regard to the subject matters hereof, and contain all of the covenants, promises, representations, warranties, and agreements between the parties with respect to such subject matters and replace and merge previous agreements and discussions pertaining to the relationship between the Company and Consultant.

 

9.9                                Impermissible Payments .  Neither Consultant nor any officer, director, employee, beneficial owner, shareholder, representative or agent of Consultant has made or will make, or cause to be made, in connection with this Agreement, any payments, loans or gifts or promises or offers of payments, loans or gifts of any money or anything of value, directly or indirectly, (a) to or for the use or benefit of any official or employee of any government, (b) to any political party or official or candidate thereof, (c) to any other person either in advance or as a reimbursement if it knows or has reason to suspect that any part of such payment, loan or gift will be directly or indirectly given or paid by such other person, or will reimburse such other person for payments, gifts or loans previously made, to any governmental official or political party or candidate or official thereof, or (d) to any other person or entity if the payment would violate the laws, or regulations having the force of law, of the United States of America, or any country in which Consultant provides services to the Company.

 

9.10                         Cooperation .  Consultant, and his officers, directors, beneficial owners, shareholders, representatives, and agents shall answer promptly in reasonable detail any questionnaire or other written or oral communication, to the extent same pertains to compliance with the representations and warranties contained herein from Company or its outside auditors and shall, upon request, furnish adequate documentary support for such response; provided that Company will hold such responses in confidence unless disclosure of such responses is required by law or is deemed advisable by Company in connection with a governmental inquiry relating to the relationship between Company and Consultant.

 

9.11                         Survival .  Consultant’s obligations under Sections 7, 8, and 9 shall survive the termination of this Agreement and may be enforced by the Company independent of any other obligation herein.

 

9

 

IN WITNESS WHEREOF, the Company and Consultant have duly executed this Agreement in one or more counterparts to be effective as of the Effective Date.

 

HARTE-HANKS, INC.			CONSULTANT
By:	/s/ Douglas C. Shepard		/s/ Larry D. Franklin
	Douglas C. Shepard		Larry D. Franklin
	EVP and Chief Financial Officer
Date: June 7, 2013			Date: June 7, 2013
Address for Notices:			Address for Notices:
9601 McAllister Freeway, Suite 610
San Antonio, Texas 78216
Attn: Chairman of the Board

 

10

 

EXHIBIT A

 

EQUITY AWARD LETTER

 

June 7, 2013

 

Larry D. Franklin

 

Re:                              Outstanding Equity Awards

 

Dear Larry,

 

Harte-Hanks, Inc. (the “ Company ”) previously granted you certain equity awards pursuant to the Harte-Hanks, Inc. 2005 Omnibus Incentive Plan, as amended from time to time (the “ Plan ”), and associated award agreements (each, an “ Award Agreement ”).  Specifically, the Company previously awarded to you and, as of the date of this letter (the “ Equity Award Letter ”), you currently hold the outstanding non-qualified stock options (“ Options ”), restricted stock awards (“ Restricted Stock Awards ”), and performance unit awards (“ Performance Units ”) set forth on Appendix A attached hereto (collectively, such outstanding awards are referred to as the “ Awards ”).  You acknowledge and agree that, other than the Awards listed on Appendix A , you do not hold any other outstanding equity awards in the Company as of the Separation Date (as defined below).  In connection with your retirement as the Company’s President and Chief Executive Officer effective June 30, 2013 (the “ Separation Date ”), this Equity Award Letter explains the impact of your retirement on the Awards and amends certain provisions of the Award Agreements governing the Awards, as described in greater detail below (the “ Amendments ”).

 

Non-Qualified Stock Options

 

The Options granted to you on February 5, 2009 (the “ 2009 Options ”) and February 5, 2013 (the “ 2013 Options ”) generally vest and become exercisable in four equal installments.  In addition, the exercise period with respect to the Options generally expires within a specified period of time following the date you cease to provide services to the Company.

 

The Company would like to clarify that no continued services are required by you in order for the Options to continue to vest in accordance with the schedule described above.  Further, the Company would like to provide for accelerated vesting of the Options in the event of your death or disability and would like to extend the period of time you may elect to exercise your vested Options, in all cases, until the tenth anniversary of the date of grant.  Accordingly, the Award Agreements evidencing the Options are hereby amended as follows, effective June 7, 2013:

 

1.                                       The last sentence of Section 1 of the Award Agreements evidencing the Options is hereby deleted in its entirety.

 

 

2.                                       In Section 2 of the Award Agreements evidencing the Options, the text after and including the word “Notwithstanding” is hereby deleted in its entirety and replaced with the following:

 

“Notwithstanding the foregoing or any other provision herein to the contrary, (a) in no event can this Option be exercised in whole or in part on or after the date on which this Option lapses pursuant to Section 5; (b) this Option shall automatically vest in full upon the occurrence of a Change of Control (as defined in the Plan); and (c) this Option shall automatically vest in full in the event of Holder’s death or Disability.  For these purposes, “ Disability ” shall mean disability within the meaning of section 22(e)(3) of the Internal Revenue Code.  This Option is exercisable to the extent vested, i.e., the right of exercise shall be cumulative so that to the extent the Option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all shares for which it is vested until the Final Exercise Date (as defined below).  For the avoidance of doubt, notwithstanding anything herein to the contrary, Holder is not required to be employed by or otherwise providing services to the Company on a vesting date in order for the Option to become vested in accordance with the provisions set forth above.”

 

3.                                       Section 3 (for the 2009 Options) and Section 5 (for the 2013 Options) of the Award Agreements evidencing such Options is hereby deleted in its entirety and replaced with the following:

 

“ Expiration .  This Option shall expire on the 10 th  anniversary of the Award Date (the “ Final Exercise Date ”), and no termination of Holder’s employment or other service relationship with the Company shall shorten the period until, or otherwise affect, the Final Exercise Date.”

 

The procedure for exercising your vested Options, including the available methods for paying the exercise price of your vested Options, is described in the applicable Award Agreement.

 

Restricted Stock Awards

 

The Restricted Stock Awards granted to you on February 5, 2011 and February 5, 2013 vest in accordance with their respective vesting schedule only if you are still employed by the Company at the time the stock vests, and termination of your employment for any reason prior to a vesting date results in all unvested stock being forfeited at the time of such termination.

 

The Company would like to revise the continued employment requirement in the Award Agreement evidencing your Restricted Stock Awards and the related forfeiture provisions so that your retirement, death or disability prior to the end of the vesting period will not result in forfeiture of the Restricted Stock Awards.  Accordingly, the paragraph entitled “Vesting” in

 

 

Exhibit A to each Award Agreement evidencing a Restricted Stock Award is hereby deleted in its entirety and replaced with the following, effective June 7, 2013:

 

“ Vesting .

 

The Common Stock that you receive under this Award will vest in accordance with the Vesting Schedule set forth in the Award Document, provided that you are still employed by the Company at the time such Common Stock vests.  If your employment terminates prior to the date the Common Stock vests (including without limitation termination by the Company with or without Cause, or a voluntary termination by you) all unvested Common Stock shall be forfeited at the time of such termination; provided, however, that notwithstanding anything herein to the contrary, if your employment terminates prior to the end of the Vesting Schedule due to your death, Disability or Retirement, all unvested Common Stock shall become immediately vested and non-forfeitable as of such termination.  For these purposes, “ Disability ” shall mean disability within the meaning of section 22(e)(3) of the Internal Revenue Code, and “ Retirement ” shall mean your voluntary termination of employment with the Company on or after attainment of age 70.”

 

Performance Unit Awards

 

The Performance Units granted to you on February 5, 2011 generally vest and become payable on the third anniversary of the grant date, but only to the extent the applicable performance criterion is achieved.  In addition, the Award Agreement requires that you are still employed by the Company on February 5, 2014 in order to receive payment with respect to the Performance Units and provides that termination of your employment for any reason prior to that date will result in all Performance Units being forfeited at the time of such termination.

 

The Company would like to revise the continued employment requirement in the Award Agreement evidencing your Performance Units and the related forfeiture provisions so that your retirement will not result in automatic forfeiture of the Performance Units.  Accordingly, the paragraph entitled “Vesting” in Exhibit A to the Award Agreement evidencing the Performance Units is hereby deleted in its entirety and replaced with the following, effective June 7, 2013:

 

“ Vesting .

 

This Award will vest in accordance with the Vesting Schedule set forth in the Award Document, provided that you are still employed by the Company on that date.  In the event your employment terminates prior to the vesting of the Units (including, without limitation, a termination by the Company with or without Cause, due to your death or Disability, or a voluntary termination by you), all Units shall be forfeited at the time of such termination; provided, however, that notwithstanding anything herein to the contrary, if your employment terminates prior to the third anniversary of the Grant Date due to your Retirement, you will be deemed to have remained continuously employed by the Company through such third anniversary date.  For these purposes, “ Disability ” shall mean disability within the meaning of section 22(e)(3) of the Internal Revenue Code,

 

 

and “ Retirement ” shall mean your voluntary termination of employment with the Company on or after attainment of age 70.”

 

Any payment with respect to the Performance Units remains subject to attainment of the applicable performance criterion.

 

In order for the Amendments to become effective, you must sign and return this Equity Award Letter to Douglas C. Shepard no later than June 7, 2013.

 

Sincerely,
/s/ Douglas C. Shepard
Douglas C. Shepard
EVP and Chief Financial Officer
Harte-Hanks, Inc.
ACCEPTED:
/s/ Larry D. Franklin
Larry D. Franklin
Date:	June 7, 2013

 

 

APPENDIX A

 

OUTSTANDING AWARDS

 

TYPE OF AWARD

DATE OF GRANT

EXERCISE PRICE

TOTAL NUMBER OF SHARES/UNITS SUBJECT TO AWARD

NUMBER OF VESTED SHARES/UNITS IMMEDIATELY PRIOR TO THE SEPARATION DATE

ORIGINAL VESTING SCHEDULE

FINAL EXERCISE DATE

Option

2/5/2009

$

6.04

300,000

225,000

Four equal installments on the second through fifth anniversaries of the date of grant.   Remaining 75,000 shares scheduled to vest 2/5/2014.

2/5/2019

Option

2/5/2013

$

7.72

200,000

0

Four equal installments on the first through fourth anniversaries of the date of grant.   ¼ of the option is scheduled to vest on each of 2/5/2014, 2/5/2015, 2/5/2016, and 2/5/2017.

2/5/2023

Restricted Stock

2/5/2011

n/a

28,000

18,667

Three equal installments on the first through third anniversaries of the date of grant.   Remaining 9,333 shares scheduled to vest 2/5/2014.

n/a

Restricted Stock (Bonus)

2/5/2011

n/a

45,085

0

All shares cliff vest on 2/5/2014.

n/a

Restricted Stock

2/5/2013

n/a

30,000

0

Three equal installments on the first through third anniversaries of the date of grant.   1/3 of the shares is scheduled to vest on each of 2/5/2014, 2/5/2015, and 2/5/2016.

n/a

Performance Units

2/5/2011

n/a

42,000 (maximum)

0

All units vest on 2/5/2014, but only to the extent certain performance criteria is achieved.

n/a

 

 

EXHIBIT B

 

MUTUAL RELEASE

 

This Mutual Release (“ Release ”) is made and entered into as of                                      , 2013, by and between Larry D. Franklin (“ Former Executive ”) and Harte-Hanks, Inc., a Delaware corporation (“ Company ”).

 

RECITALS:

 

For good and valuable consideration set forth in the Retirement and Consulting Agreement, entered into between Former Executive and Company effective June 7, 2013 (the “ Retirement Agreement ”), and in accordance with Section 7.1 of the Retirement Agreement, the parties hereto agree as follows:

 

1.                                       Termination of Employment .  Former Executive’s employment with the Company terminated effective as of June 30, 2013 (the “ Separation Date ”).  Former Executive agrees and acknowledges that Former Executive has received all leaves (paid and unpaid) to which Former Executive was entitled through the Separation Date and, as of the Separation Date (or the immediately following regular payroll date of the Company), Former Executive has received all wages, bonuses and other compensation (including Former Executive’s salary through the Separation Date and Former Executive’s accrued, unused vacation), and has been paid all other sums, that Former Executive is owed or has been owed by the Company, and that Former Executive is not owed any additional compensation or payment by virtue of Former Executive’s employment or termination of employment, except as set forth in the Retirement Agreement (including the Equity Award Letter attached thereto as Exhibit A ) or payments with respect to any vested benefits under the Company’s Defined Benefit Plan, Restoration Pension Plan and Deferred Compensation Plan in accordance with the terms of such plans. This Release extinguishes all rights, if any, which Former Executive may have, contractual or otherwise, relating to or arising out of Former Executive’s employment with, or termination from, the Company, except as otherwise provided herein.

 

2.                                       General Release of Claims by Former Executive .  The Former Executive hereby voluntarily, completely and fully releases, remises, acquits and forever discharges the Company and its respective parents, affiliates, subsidiaries, divisions, branches, units and related entities, and its or their present and former officers, directors, employees, agents, successors and assigns (“ Company Released Parties ”), of and from any and all claims, demands, debts, suits, actions, causes of action, obligations, damages, costs, losses, interest, expenses and liabilities, of any kind or nature whatsoever, whether legal, equitable or statutory, liquidated or unliquidated, known or unknown, suspected or unsuspected, reasonably discoverable or not, present, fixed or contingent (collectively, “ Claims ”), that the Former Executive, his heirs, executors, administrators, successors, and assigns, have or may have as of the date of his execution of this Release including, but not limited to, Claims arising out of or resulting from:

 

(a) any violation of

 

·             The National Labor Relations Act, as amended;

 

 

·             Title VII of the Civil Rights Act of 1964, as amended;

 

·             The Civil Rights Act of 1991;

 

·             Sections 1981 through 1988 of Title 42 of the United States Code, as amended;

 

·             The Employee Retirement Income Security Act of 1974, as amended;

 

·             The Immigration Reform and Control Act of 1986, as amended;

 

·             Claims of retaliation under the Fair Labor Standards Act, as amended;

 

·             The Occupational Safety and Health Act, as amended;

 

·             The Family and Medical Leave Act of 1993, as amended;

 

·             The Americans with Disabilities Act;

 

·             The Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 621, et seq. ;

 

·             The Fair Credit Reporting Act;

 

·             The Equal Pay Act;

 

·             The Texas Commission on Human Rights Act, TEX. LAB. CODE ANN. § 21.001, et seq ., and the anti-retaliatory provisions of the Texas Workers’ Compensation Act, TEX. LAB. CODE ANN. § 451.001, et seq. ;

 

·             Any other federal, state or local civil or human rights law, or any other local, state or federal law, regulation or ordinance (including those related to taxes); and

 

·             Any public policy, contract, tort, or common law;

 

(b)                              the Former Executive’s employment, the Company’s decision, if any, to terminate the Former Executive’s employment or to enter into the Retirement Agreement; or the circumstances of the Former Executive’s departure, including, without limitation, Claims based upon race, national origin, gender, age, religion, sexual orientation, or disability discrimination, retaliation, contract or quasi-contract claims, or tax payments or withholdings or severance practices;

 

(c)                               any tax payments, liabilities or obligations, withholding obligations, excise taxes, interest payments or penalties;

 

(d)                              NEGLIGENCE OF ANY KIND, INCLUDING WITHOUT LIMITATION GROSS NEGLIGENCE, AGAINST THE COMPANY RELEASED PARTIES BASED UPON THE ACTION OR INACTION OF THE COMPANY RELEASED PARTIES; or

 

(e)                               any claim for costs, fees, or other expenses including attorney’s fees; provided, however, that nothing in this Release shall be deemed to be a waiver or release of the Company’s obligations to provide payments and/or benefits under the terms of the Retirement

 

 

Agreement (including the Equity Award Letter attached thereto as Exhibit A ) or payments with respect to any vested benefits under the Company’s Defined Benefit Plan, Restoration Pension Plan and Deferred Compensation Plan in accordance with the terms of such plans.

 

Although this Release cannot prevent the Former Executive from filing a charge of discrimination or retaliation with the Equal Employment Opportunity Commission with regard to the Former Executive’s employment with the Company, knowing that the compensation and benefits provided to the Former Executive under this Release are mutually intended by both the Company and the Former Executive to provide the full and only compensation to the Former Executive for all claims, damages, or other demands that the Former Executive might have or make against the Company or any of the other Company Released Parties with respect to the Former Executive’s employment or the termination of the Former Executive’s employment, the Former Executive agrees to forever waive any right to monetary recovery should any administrative agency or other individual or group of individuals pursue any claim on the Former Executive’s behalf.  The Former Executive further agrees that the Former Executive will not request or accept anything of value from the Company or the other Company Released Parties not provided for in this Release as compensation or damages related to the Former Executive’s employment or the termination of the Former Executive’s employment with the Company.  Therefore, should the Former Executive file a charge of discrimination or retaliation or pursue any other similar action with regard to the Former Executive’s employment with the Company (or the termination thereof), the Former Executive acknowledges and agrees that this Release will bar the Former Executive from receiving any compensation or personal relief in the event of such a charge or action.

 

This General Release does not act to waive any rights or claims that may arise after the date this Release is executed.

 

By executing this Release, the Former Executive acknowledges and agrees that the Company has no legal obligation to provide the compensation and benefits being provided to him pursuant to the Retirement Agreement (other than by virtue of such agreement), and such compensation and benefits are in addition to anything of value to which the Former Executive is already entitled.

 

3.                                       General Release of Claims by Company .  In consideration of the releases and waivers given by the Former Executive in this Release, the Company, for itself and on behalf of its successors and assigns, does hereby release and forever discharge Former Executive and his agents, representatives, attorneys, assignees, family members, beneficiaries, successors, heirs, executors, administrators, and anyone acting or claiming to act on his behalf (the “ Executive Released Parties ”), of and from every claim, demand, right of action or cause of action whatsoever, and from all debts, obligations, costs (including but not limited to attorneys’ fees), expenses, damages, losses and liabilities whatsoever, whether known or unknown, that the Company ever had, now has or hereafter may have against the Executive Released Parties arising out of or relating to any matter, thing or event occurring up to and including the date of this Release, relating to Former Executive’s employment by the Company and its subsidiaries, or to his separation or retirement, including claims arising under any federal, state or local statute, ordinance, rule, regulation or common law principle.  The Company’s releases, however, shall only be effective so long as Former Executive has not exercised the right of revocation in Section 6 below.

 

 

4.                                       No Admission of Wrongdoing .  Each of the parties agrees that this Release shall not be deemed or construed at any time for any purpose as an admission by either party of any liability or unlawful conduct of any kind.

 

5.                                       Time to Consider; ADEA Disclosure .  The Former Executive has been advised to consult with his attorney to obtain advice about his rights and obligations under this Release.  The Former Executive represents that he has carefully read this Release and finds that it has been written in language that he understands.  The Former Executive has been given at least 21 days to consider whether to accept this Release, and has signed it only after reading, considering and understanding it.  If the Former Executive signs this Release before the expiration of the 21 days , he is expressly waiving his right to consider this Release for any remaining portion of that period.  The parties agree that any changes made to this Release from the version originally presented to the Former Executive, whether those changes are deemed material or non-material, do not extend the 21-day period the Former Executive has been given to consider this Release.

 

6.                                       Right to Revoke .  The Former Executive may revoke this Release for a period of seven days following the day the Former Executive executes this Release.  Any revocation within this period must be submitted, in writing, to Robert L. R. Munden, Senior Vice President, General Counsel and Secretary, Harte-Hanks, Inc., 9601 McAllister Freeway, Suite 610, San Antonio, Texas 78216, and state, “I hereby revoke my Release.”  The revocation must be personally delivered to Robert L. R. Munden or his designee, or mailed to Robert L. R. Munden and postmarked on or before the date seven days after the Former Executive’s execution of this Release (and if mailed, concurrently sent via facsimile and/or electronic transmission to Robert L. R. Munden at (210) 829-9139 or Robert_Munden@harte-hanks.com).  The Former Executive understands that he has the right to revoke this Release at any time during the seven calendar day period following the date on which he first signs this Release.  Should Former Executive revoke this Release, the Company shall be relieved of any and all obligations to provide any further payments or benefits under the Retirement Agreement to the Former Executive, his heirs, executors, administrators, successors, and assigns.

 

7.                                       Effective Date .  This Release shall not become effective or enforceable until the expiration of the seven-day revocation period described in Section 6 above (“ Effective Date ”).  Upon the Effective Date, this Release shall automatically become effective without any further affirmative action on the part of the Former Executive or the Company.  This Release is entered into under, and shall be governed for all purposes by, the laws of the State of Texas without reference to the principles of conflicts of law thereof.

 

8.                                       Counterparts .  This Release may be executed in multiple counterparts, each of which is to be deemed an original, but all of which, together, constitute one and the same instrument.

 

9.                                       Understanding .  By signing this Release, the Former Executive affirms that he has read this entire Release; that he fully understands the meaning and effect of his action in executing this Release; and that his execution of this Release is knowing and voluntary.  The Former Executive further acknowledges that neither the Company nor any of the other Company Released Parties has made any promise or representation to him that is not expressed in this Release, and that in entering this Release, he is not relying on any statement or representation by

 

 

the Company or any of the other Company Released Parties, but is instead relying solely on his judgment in consultation with his attorneys, if he chooses to retain counsel.

 

IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Release as of the date first set forth above.

 

	Larry D. Franklin
	Harte-Hanks, Inc.
	By:
	Name:
	Title:

 

EXHIBIT 10.6

 

FORM OF SEVERANCE AGREEMENT

 

THIS SEVERANCE AGREEMENT (this “ Agreement ”) is made as of                            , 20    , between Harte-Hanks, Inc., a Delaware corporation (the “ Company ”), and                            (the “ Executive ”).

 

W I T N E S S E T H :

 

WHEREAS , the Executive is currently employed by the Company and is an integral part of the management of the Company;

 

WHEREAS , the Company desires to retain certain key management personnel such as the Executive and, accordingly, desires to enter into this Agreement with the Executive in order to encourage the Executive’s continued service to the Company; and

 

WHEREAS , the Executive is prepared to commit such services in return for specific arrangements with respect to severance compensation;

 

NOW, THEREFORE , in consideration of the foregoing and of the respective covenants and agreements of the parties herein contained, this Agreement sets forth benefits which the Company will pay to Executive in the event of termination of Executive’s employment under the circumstances described herein:

 

1.                                       Term .  This Agreement shall have a term of five years commencing on the date of this Agreement (the “ Effective Date ”) and ending on the fifth anniversary of such date, unless the Executive’s employment with the Company is earlier terminated under circumstances that do not give rise to any payments or benefits under Section 3(a) hereof (the “ Term ”).

 

2.                                       Definitions .

 

(a)                                  Cause .  For “ Cause ” means that the Board determines in good faith that the Executive shall have:

 

(i)                                      committed an intentional material act of fraud or embezzlement in connection with his duties or in the course of his employment with the Company;

 

(ii)                                   committed intentional wrongful material damage to property of the Company;

 

(iii)                                committed intentional wrongful disclosure of material secret processes or material confidential information of the Company;

 

(iv)                               been convicted of, or entered a guilty or no contest plea to, a felony or other crime involving dishonesty or moral turpitude;

 

 

(v)                                  committed a material breach of the Company’s insider trading, corporate ethics and compliance policies, or any other board-adopted policies applicable to management conduct; or

 

(vi)                               committed substantial, willful and repeated failures to perform duties which (x) are appropriate for Executive’s position as reasonably instructed by (or on behalf of) the Board or Chief Executive Officer of the Company in writing, and (y) have not been cured within 30 days of Executive’s receipt of notice of such failures.

 

For the purposes of this Agreement, no act, or failure to act, on the part of the Executive will be deemed “intentional” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Company.

 

(b)                                  Common Stock .  “ Common Stock ” shall mean the Company’s common stock.

 

(c)                                   Code .  The “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

 

(d)                                  Disability .  “ Disability ” shall have the meaning given to disability in the Company’s long-term disability insurance plan.

 

(e)                                   Payment Date .  “ Payment Date ” shall mean the date that is 60 days following the Termination Date, subject to Section 12 if the Executive is a specified employee.

 

(f)                                    Severance Compensation .  The “ Severance Compensation ” shall be a lump sum cash amount equal to the product of 1.5 multiplied by the annual base salary of the Executive in effect immediately prior to the Termination Date.

 

(g)                                   Termination Date .  The “ Termination Date ” shall be the date upon which the Executive or the Company terminates the employment of the Executive and such termination constitutes a “separation from service,” as defined and applied in Section 409A of the Code.

 

3.                                       Rights of Executive Upon Termination Without Cause .

 

(a)                                  Provided the Executive has executed and delivered the release described in Section 7 below, if the Company terminates the Executive’s employment ( i.e. , the Executive separates from service) during the Term other than for any of the following reasons:

 

(1)                                  the Executive dies;

 

(2)                                  the Executive suffers a Disability and is unable to work (with or without reasonable accommodation); or

 

2

 

(3)                                  for Cause.

 

then (A) the Company shall, on the Payment Date, pay the Executive a lump sum cash payment equal the Severance Compensation; (B) from the Termination Date through the earliest to occur of (i) the eligibility of Executive to participate in an another employer’s employer-sponsored health plan or (ii) the beginning of the 19 th  month following the Termination Date, the Company and the Executive agree that if the Executive elects COBRA coverage consistent with the Executive’s current healthcare elections, (x) the Executive shall pay for COBRA coverage only that amount that the Executive currently pays for the Executive’s healthcare coverage based on such elections, and (y) the Company shall pay the balance of the Executive’s COBRA premium based on such elections; and (C) all outstanding, unvested shares of time vesting restricted Common Stock held by the Executive shall automatically become fully vested as of the Executive’s Termination Date (provided, that all other outstanding equity or equity-based awards held by the Executive shall continue to be governed by their terms).

 

(b)                                  Severance Compensation pursuant to this Section 3 will not be subject to set-off or mitigation.

 

(c)                                   In the event the Executive’s termination of employment gives rise to payments and benefits under that certain Amended and Restated Severance Agreement, by and between the Company and the Executive, dated                   , 20     (the “ Change in Control Severance Agreement ”), Executive shall not be eligible to receive any payments or benefits under this Agreement.

 

(d)                                  In the event that any payments to which Executive becomes entitled in accordance with this Agreement would constitute a parachute payment under Section 280G of the Code, then such payments, when added to any other payments made to Executive that would constitute parachute payments under Section 280G of the Code will be subject to reduction to the extent necessary to assure that Executive receives only the greater of (i) the amount of those payments which would not exceed 2.99 times Executive’s “base amount” within the meaning of Section 280G of the Code or (ii) the amount which yields Executive the greatest after-tax amount after taking into account any excise tax imposed under Section 4999 of the Code on and “excess parachute payments” provided to Executive under this Agreement and on any other benefits or payments to which Executive may be entitled in connection with any change in the ownership, effective control or ownership of a substantial portion of the assets of the Company or the subsequent termination of Executive’s employment.  Any reduction pursuant to this Section 3(d) shall be accomplished in the following manner:  first , by reducing the payment of the Severance Compensation; if necessary, second by reducing the payment of any amounts equivalent to COBRA premiums; if necessary, third , by reducing the accelerated vesting of time vesting restricted Common Stock (in an order among such awards as is reasonably acceptable to Executive).

 

3

 

4.                                       Retention Bonus .  Provided that the Executive is employed by the Company or one of its subsidiaries on July 1, 2014, the Company shall on the next following payroll date pay the Executive a one-time retention bonus in an amount equal to 30% of the Executive’s then-current base salary.

 

5.                                       Successors, Binding Agreement .  This Agreement will be binding upon the Company, its successors and assigns, and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees.

 

6.                                       Notice .  For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given only if (i) delivered personally or by overnight courier, (ii) delivered by facsimile transmission with answer back confirmation, (iii) mailed (postage prepaid by certified or registered mail, return receipt requested) (effective upon actual receipt), or (iv) delivered by electronic communication to the address below.  An electronic communication (“ Electronic Notice ”) shall be deemed written notice for purposes of this letter if sent with return receipt requested to the electronic mail address specified by the receiving party.  Electronic Notice shall be deemed received at the time the party sending Electronic Notice receives verification of receipt by the receiving party.  Any party receiving Electronic Notice may request and shall be entitled to receive the notice on paper, in a non-electronic form (“ Non-electronic Notice ”) which shall be sent to the requesting party within five days after receipt of the written request for Non-electronic Notice.  Any party from time to time may change its address, facsimile number, electronic mail address, or other information for the purpose of notices to that party by giving written notice specifying such change to the other party hereto.

 

If to the Executive:

 

[Executive]

 

 

If to the Company:

 

Harte-Hanks, Inc.

9601 McAllister Freeway, Suite 610

San Antonio, Texas 78216

Attention:  General Counsel

Email:  general.counsel@harte-hanks.com

 

or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

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7.                                       Release .  In consideration for the benefits and payments provided for under Section 3(a) of this Agreement, unless such requirement is waived by the Board in its sole discretion, the Executive agrees to execute a release acceptable to the Company releasing the Company, its subsidiaries, stockholders, partners, officers, directors, employees and agents from any and all claims and from any and all causes of action of any kind, including but not limited to all claims or causes of action arising out of the Executive’s employment with the Company or the termination of such employment.  The Executive shall execute such release prior to or as soon as practicable after his Termination Date.

 

8.                                       Miscellaneous .  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 such officer as may be specifically designated by the Board. No waiver by either party hereto of, 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. No agreements or representations, oral or otherwise, express or implied, unless specifically referred to herein, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the substantive laws of the State of Texas (to the extent not preempted by federal law), without regard to principles of conflicts of law. This Agreement replaces any prior agreement between the Company and the Executive providing for benefits upon separation, severance or change in control, except for the Change in Control Severance Agreement, which shall continue in full force and effect.

 

9.                                       Validity .  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

10.                                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. Notwithstanding any other provision hereof to the contrary, the Executive may, at any time during his employment with the Company upon the giving of 30 days prior written notice, terminate his employment.  If this Agreement or the employment of the Executive is terminated under circumstances in which the Executive is not entitled to any Severance Compensation, neither the Executive nor the Company shall have any further obligation or liability hereunder.

 

11.                                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.

 

12.                                Section 409A .  Notwithstanding anything to the contrary in this Agreement, if the Executive is a “specified employee” (as defined and applied in Section 409A of the Code) as of the Termination Date, to the extent any payment under this Agreement

 

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constitutes deferred compensation (after taking into account any applicable exemptions under Section 409A of the Code) and to the extent required by Section 409A of the Code, the Executive shall not be entitled to any payments under this Agreement until the earlier of (a) the first day following the six-month anniversary of the Termination Date, or (b) the Executive’s date of death.  For purposes of Section 409A of the Code, each “payment” (as defined by Section 409A of the Code) made under this Agreement shall be considered a “separate payment.”  In addition, for purposes of Section 409A of the Code, payments shall be deemed exempt from Section 409A of the Code to the full extent possible under the “short-term deferral” exemption of Treasury Regulation § 1.409A-1(b)(4) and (with respect to amounts paid no later than the second calendar year following the calendar year containing the Termination Date) the “two-years/two-times” separation pay exemption of Treasury Regulation § 1.409A-1(b)(9)(iii), which are hereby incorporated by reference.

 

13.                                Extension of Restrictive Covenants .  Executive agrees that if Executive receives Severance Compensation, the time periods for the non-competition and non-solicitation covenants contained in Executive’s Employment Restrictions Agreement dated                      (the “ ERA ”) shall be extended to be a period of years equal to the multiple specified in 2(f) for calculation of Severance Compensation, in each case (i) only to the extent such period is longer than the one already established for such covenant under the ERA, and (ii) subject to Article Six of the ERA.  Executive agrees that the ERA is necessary to protect the Company’s confidential and proprietary information and business goodwill.  Executive further acknowledges that the time, geographic and scope limitations of the restrictive covenants in the ERA, as extended hereby in the event that Executive is to receive Severance Compensation, are reasonable, especially in light of the Company’s desire to protect its confidential and proprietary information, and that Executive will not be precluded from gainful employment pursuant to his non-competition and other obligations as provided in ERA, as extended hereby in the event that Executive is to receive Severance Compensation.

 

14.                                Compensation Recoupment .  Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “ Act ”), the Severance Compensation shall not be deemed fully earned or vested, even if paid or distributed to Executive, if the Severance Compensation or any portion thereof is deemed incentive compensation and subject to recovery, or “clawback” by the Company pursuant to the provisions of the Act and any rules or regulations promulgated thereunder or by any stock exchange on which the Company’s securities are listed (the “ Rules ”).  In addition, Executive hereby acknowledges that this Agreement may be amended as necessary and/or shall be subject to any recoupment policies adopted by the Company to comply with the requirements and/or limitations under the Act and the Rules, or any other federal or stock exchange requirements, including by expressly permitting (or, if applicable, requiring) the Company to revoke, recover and/or clawback the Severance Compensation.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the parties have executed this Severance Agreement effective as of the Effective Date.

 

	HARTE-HANKS, INC.
	By:
	Name:
	Title:
	EXECUTIVE
	By:
	Name:
	Title:

 

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