Exhibit 10.4

 

HARTE HANKS, INC.
PERFORMANCE UNIT AWARD AGREEMENT

 

To: Karen A. Puckett

Date of Grant: September   , 2015

 

Number of Shares:

 

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).  Instead, the Performance Units are granted outside of any equity
compensation plan of the Company (or any of its affiliates), as an inducement
contemplated by Section 303A.08 of the New York Stock Exchange Listed Company
Manual.  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)                                 “Board” means the board of directors of the
Company.

 

(b)                                “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;

 

1

--------------------------------------------------------------------------------

 

(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.

 

(c)                                 “Change in Control Severance Agreement”
means that certain Change in Control Severance Agreement by and between the
Company and you, effective September   , 2015, as may be amended from time to
time with your consent.

 

(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.

 

(a)                                 “Employment Agreement” means that certain
Employment Agreement by and between the Company and you, effective September 14,
2015, as may be amended from time to time with your consent.

 

2

--------------------------------------------------------------------------------

 

(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.

 

2.                                     Vesting.  The Performance Units subject
to this Agreement will vest and become payable (a) on March 15, 2019, if you are
still employed by the Company on such date, but only to the extent the
Performance Criterion set forth in Section 3 below is achieved, or (b) to the
extent sooner, pursuant to the terms of the Change in Control Severance
Agreement.  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 or disability (as such
term is defined in the Employment Agreement or otherwise defined), your
retirement, or a voluntary termination by you) all Performance Units shall be
forfeited at the time of such termination, except to the extent, if applicable,
that Performance Units subject to this Agreement vest pursuant to the terms of
the Change in Control Severance Agreement if you deliver the required
“Irrevocable Release” (as defined in the Change in Control Severance
Agreement).  To the extent you fail to timely deliver an Irrevocable Release
required under the Change in Control Severance Agreement, such Performance Units
that otherwise would vest pursuant to such agreement following your termination
shall be forfeited.

 

3.                                     Performance Criterion.  The Performance
Criterion shall be the Company’s Total Shareholder Return (“TSR”) versus the TSR
for the S&P Small Cap 600 Index for the performance period which begins on the
Date of Grant and ends on December 31, 2018 (“Benchmark”).  Performance at the
50% percentile is the “Target” level at which half of the number of Performance
Units shall vest and become payable.  The number of the Performance Units that
will vest and become payable pursuant to this Section 3 shall be determined by
applying the “Percentage of Units Vesting” amount in the column below, with
linear interpolation used to determine payout percentages between levels;
provided that (i) no Performance Units shall vest if performance is below
25th percentile, (ii) no more than 100% of the Performance Units can vest and
(iii) in the event Company TSR is negative, the percentage of Performance Units
vesting shall in no event exceed 50%.

 

3

--------------------------------------------------------------------------------

 

Performance

 

Percentage of Target
Performance

 

Percentage of
Units Vesting

 

Below 25th percentile of Benchmark

 

0

%

0

%

At 25th percentile of Benchmark

 

50

%

25

%

At 50th percentile of Benchmark

 

100

%

50

%

At 75th percentile of Benchmark or above

 

200

%

100

%

 

Company TSR shall be determined by dividing (x) Company Average Stock Price at
the end of the performance period (December 31, 2018) plus dividends paid minus
Average Stock Price at the beginning of the performance period (the Date of
Grant) by (y) Average Stock Price at the beginning of the performance period
(the Date of Grant), with dividends treated as reinvested.  For this purpose,
“Average Stock Price” shall be the average of the reported closing prices of
Company common stock for the 30 trading day period (i) subsequent to the
beginning of the performance period (the Date of Grant), or (ii) immediately
prior to (and including) December 31, 2018, as applicable.  Benchmark TSR shall
be determined using the published methodology for the Benchmark TSR’s
calculation as of the end of performance period.

 

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

 

4

--------------------------------------------------------------------------------

 

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 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.

 

5

--------------------------------------------------------------------------------

 

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;

 

(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

 

6

--------------------------------------------------------------------------------

 

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 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 deemed to have been duly given or made 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.  The 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

 

7

--------------------------------------------------------------------------------

 

receipt of the written request for Non-electronic Notice.  Either 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:  at the most recent address reflected in the payroll
records of the Company

 

If to the Company:

Harte Hanks, Inc.

 

9601 McAllister Freeway, Suite 610

 

San Antonio, Texas 78216

 

Attention: General Counsel

 

Email: general.counsel@hartehanks.com

 

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

 

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.

 

8

--------------------------------------------------------------------------------

 

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 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.

 

9

--------------------------------------------------------------------------------

 

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.

 

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]

 

10

--------------------------------------------------------------------------------

 

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:

 

 

 

Robert L. R. Munden

 

 

Senior Vice President,

 

 

General Counsel & Secretary

 

 

ACKNOWLEDGED AND AGREED:

 

 

 

 

 

 

 

Karen A. Puckett

 

 

11

--------------------------------------------------------------------------------