Document:

EXHIBIT
10.1

 

HARDINGE
INC.

 

SEPARATION
AND CONSULTING AGREEMENT

 

                                THIS SEPARATION AND CONSULTING
AGREEMENT (“Agreement”) is made as of May 22, 2008 by and between HARDINGE
INC., a New York corporation with its principal office at One Hardinge Drive,
Elmira, New York 14902-1507 (the “Company”) and J. Patrick Ervin, an
individual residing at 27 Dublin Drive, Elmira, New York 14905 (“Mr. Ervin”).

 

                                WHEREAS, Mr. Ervin and the
Company have agreed that Mr. Ervin’s service as President and Chief
Executive Officer of the Company will terminate effective upon the date of this
Agreement; and

 

                                WHEREAS, because Mr. Ervin has
extensive knowledge, experience, skill and ability, and because of Mr. Ervin’s
long standing knowledge of the Company’s business, the Company desires to
engage Mr. Ervin as a consultant to the Company upon termination of Mr. Ervin’s
employment with the Company and secure Mr. Ervin’s covenant to not compete
with the Company on the terms and conditions set forth in this Agreement.

 

                                NOW, THEREFORE, in consideration of
the promises exchanged herein, the parties agree as follows:

 

                                1.             SEPARATION.

 

                                                (a)           Effective upon the date of this
Agreement (the “Separation Date”), Mr. Ervin’s service as an officer and
employee of the Company and in all capacities in which Mr. Ervin is
serving any Affiliate (as hereinafter defined) or any employee benefit plan
sponsored by the Company or any Affiliate, including, but not limited to, as
director, officer, manager, employee and trustee, is hereby terminated.

 

                                                (b)           Mr. Ervin hereby also resigns as
a director of the Company, effective on the Separation Date.

 

                                                (c)           Mr. Ervin agrees to resign,
effective upon the Separation Date, as an officer, trustee and member of the
Anderson-Evans Foundation of Elmira, NY (the “AE Foundation”) and will promptly
after his execution of this Agreement submit a written resignation, in
customary form, to the Board of Directors of the AE Foundation.

 

                                                (d)           Mr. Ervin further agrees to
expeditiously resign from any positions he holds with any trade, civic,
professional or other organizations in which he is serving as, or is identified
as, a representative of the Company.

 

                                2.             CONSULTING ENGAGEMENT.  Effective on the Separation Date, the Company
hereby engages Mr. Ervin as an independent consultant to advise and
consult with the Company during the Consulting Term (as hereinafter defined)
with respect to all matters regarding the business of the Company and its
Affiliates that are within Mr. Ervin’s knowledge,

 

 

 

 

 

 

 

experience
or expertise or are related to Mr. Ervin’s former duties as an executive
officer of the Company, and Mr. Ervin hereby accepts such engagement.  Mr. Ervin shall provide such
consultation services to the Company during normal business hours and upon
reasonable notice from the Company.  Mr. Ervin
shall not be required to devote more than forty (40) hours per month to his
consulting duties under this Agreement. 
To avoid inconvenience or conflict with respect to Mr. Ervin’s
other business or personal affairs, the Company will use reasonable efforts to
allow Mr. Ervin to provide consultation services to the Company using
telephone, electronic mail or other means of communications.

 

                                3.             TERM.  The term of Mr. Ervin’s engagement as a
consultant to Company will commence on the Separation Date and continue until March 31,
2012 (the “Consulting Term”), provided, however, that the Consulting Term shall
immediately terminate upon (i) Mr. Ervin’s death, or (ii) written
notice by the Company to Mr. Ervin that Mr. Ervin has breached, in
any respect, any of his obligations under this Agreement and Mr. Ervin’s
failure to cure such breach (if curable) within ten (10) days after
receipt of such notice.

 

                                4.             COMPENSATION.

 

                                                (a)           In consideration of Mr. Ervin’s
performance of all of his obligations under this Agreement including, but not
limited to, the consulting services provided under Section 2 and Mr. Ervin’s
compliance with the covenants set forth in Section 9, the Company will pay
Mr. Ervin as follows:

 

                                                                (i)            During the period commencing on the
Separation Date and ending on December 31, 2008, the Company will continue
to pay to Mr. Ervin his base salary at the annual rate in effect
immediately prior to the Separation Date. 
For all purposes related to income tax and payroll tax reporting and
withholding and applicable Federal, state and local laws, rules and
regulations, these payments will constitute severance payments in respect of Mr. Ervin’s
separation from the Company.  These
payments are also intended to constitute “separation pay” for purposes of
Treasury Regulation § 1.409A-1(b)(9).

 

                                                                (ii)           During the period commencing on January 1,
2009 and ending on March 31, 2012, the Company will pay Mr. Ervin the
sum of $16,666.66 per calendar month on or before the 15th day of each month
during the Consulting Term, commencing January 15, 2009.  For all purposes related to income and
payroll tax reporting and withholding and applicable Federal, state and local
laws, rules and regulations, these payments will be made to Mr. Ervin
in his capacity as an independent contractor to the Company.

 

                                                (b)           If the Consulting Term terminates
prior to March 31, 2012, the Company’s obligation to make the payments
specified in this Section 4 shall also terminate, provided, however, that
in the event of Mr. Ervin’s death prior to December 31, 2008, the
Company will continue to pay to his estate the payments specified in
Paragraph 4(a)(i) above. 

 

 

 

2

 

 

                                5.             HEALTH INSURANCE.

 

                                                (a)           The Company will amend the Company’s
group health insurance plan in which Mr. Ervin participated immediately
prior to the Separation Date (the “Health Plan”) to permit Mr. Ervin to
remain a participant in the Health Plan during the Consulting Term.  Mr. Ervin shall continue to participate
in the Health Plan during the Consulting Term on the same terms and conditions
as each other participant in the Health Plan unless and until the Company
reasonably determines that his participation is no longer possible due to
changes in the applicable group health insurance contract, the insurer’s
policies or rules, or applicable law or regulations.  If the Company so determines that Mr. Ervin’s
participation in the Health Plan is no longer possible, then commencing on the
date Mr. Ervin ceases to participate in the Health Plan and continuing
until expiration or earlier termination of the Consulting Term, the Company
will reimburse Mr. Ervin,  up to a
maximum of $1,000 per month, for the premium expense of health insurance for Mr. Ervin
and his immediate family under a plan selected and purchased by Mr. Ervin.  Such payments by the Company will be made
upon Mr. Ervin’s presentation to the Company of reasonably satisfactory
evidence of such coverage and the cost thereof, which presentation shall be
made no later than sixty (60) days after Mr. Ervin’s incurrence of
the cost.

 

                                                (b)           Commencing on April 1, 2012,
provided that the Consulting Term has not been terminated prior to March 31,
2012 pursuant to clause (i) or (ii) of Section 3, Mr. Ervin
will be permitted to remain a participant in the Health Plan provided that he
will be solely responsible for all costs of his participation including, but
not limited to, all insurance premiums and provided, further, that such
participation will terminate if the Company reasonably determines that his
participation is no longer possible due to changes in the applicable group
health insurance contract, the insurer’s policies or rules, or applicable law
or regulations.

 

                                                (c)           The Company’s obligations under this Section 5
will terminate upon written notice by the Company to Mr. Ervin that Mr. Ervin
has breached, in any respect, any of his obligations under this Agreement and Mr. Ervin’s
failure to cure such breach (if curable) within ten (10) days after
receipt of such notice.

 

                                6.             LIFE INSURANCE.  The Company is currently the owner and
beneficiary of the following life insurance policies issued by Northwestern
Mutual Life Insurance Company insuring the life of Mr. Ervin (the “Life
Policies”):

 

                                                                (i)            Policy No. 14-202-406 issued on
April 25, 1997

 

                                                                (ii)           Policy No. 15-392-726 issued on May 22,
2000

 

As soon as practicable
after the Separation Date, the Company will assign ownership of the Life
Policies to Mr. Ervin.  Mr. Ervin
will be solely responsible for any income tax consequences arising from such
assignment and for all premiums due in respect of the Life Policies from and
after the Separation Date.

 

 

 

 

3

 

 

                                7.             SERP BENEFITS.

 

                                                (a)           Mr. Ervin’s benefit under the
Hardinge Inc. Executive Supplemental Pension Plan as amended and restated
effective August 9, 2005 (the “SERP”) will be calculated as follows:

 

                                                                (i)            Mr. Ervin’s gross SERP benefit
shall be the benefit determined under Section 2(a) of the SERP as if
he continued to be employed by the Company until his 55th birthday and his
Final Average Compensation were the amount determined under the SERP on the
Separation Date.

 

                                                                (ii)           Mr. Ervin’s net SERP benefit
shall be the gross SERP benefit determined under Paragraph 7(a)(i) above
reduced by the actual amount of benefit payable to him under the Hardinge Inc.
Pension Plan as restated effective January 1, 1999 and as further amended
by Amendment Nos. 1-15 (the “Pension Plan”).

 

                                                (b)           For the purpose of calculating Mr. Ervin’s
net SERP benefit under Paragraph 7(a), the gross SERP benefit, the actual
benefit payable to Mr. Ervin under the Pension Plan, and Mr. Ervin’s
net SERP benefit shall all be calculated in the form of single life annuities
commencing on the first day of the month following his 65th birthday.  His net SERP benefit thus calculated shall be
actuarially adjusted, using the rules and actuarial assumptions contained
in the Pension Plan to reflect (i) the commencement of benefit payments
before his 65th birthday (taking into account Mr. Ervin’s deemed continued
employment for purposes of the SERP until his 55th birthday) and (ii) the
conversion of his net SERP benefit from a single life annuity to a joint and
100% survivor annuity.

 

                                                (c)           The amount due Mr. Ervin under
this Section 7 shall be paid in the form of a joint and 100% survivor
annuity with his spouse as the surviving annuitant beginning on April 1,
2012, provided, however, that if Mr. Ervin is for any reason not married
on April 1, 2012, the amount due shall be paid in the form of an
actuarially equivalent optional form of annuity (that is a permitted optional
form of annuity under the Pension Plan) beginning on such date which is elected
by Mr. Ervin on or before that date.

 

                                                (d)           The SERP shall be deemed to be
amended as of the Separation Date to be consistent with the terms of this
Agreement.

 

                                                (e)           Mr. Ervin continues to be
eligible for a pension benefit determined under the terms of the Pension Plan
and nothing in this Section 7 is intended to enlarge or diminish his
rights under the Pension Plan.

 

                                8.             RESTRICTED STOCK.  As of the date of this Agreement, Mr. Ervin
owns 55,500 shares of common stock of the Company which are unvested restricted
shares awarded pursuant to the Company’s 2002 Incentive Stock Plan (the “Restricted
Shares”).  On the Separation Date, 17,750
of the Restricted Shares will immediately vest and the Company will deliver
certificates for such Restricted Shares to Mr. Ervin.  In addition, Mr. Ervin will retain
ownership, subject to forfeiture, of 6,983 Restricted Shares (the “Contingent
Shares”).  The 

 

 

 

4

 

 

Contingent
Shares will vest on the earlier of (i) Mr. Ervin’s death, or (ii) March 31,
2009 provided that the Consulting Term has not then ended.  If the Consulting Term ends for any reason
prior to March 31, 2009 for any reason except Mr. Ervin’s death, then
the Contingent Shares are irrevocably forfeited.  The remaining 30,767 Restricted Shares are
hereby irrevocably forfeited by Mr. Ervin.

 

                                9.             NONCOMPETITION; CONFIDENTIAL
INFORMATION;

                                                INVENTIONS.

 

                                                (a)           Mr. Ervin acknowledges that the
Company (and its Affiliates), at the Company’s (and its Affiliate’s) expense,
has acquired, created and maintained and will continue to acquire, create and
maintain, significant goodwill with its customers, vendors and employees, and
that such goodwill is valuable property of the Company.  Mr. Ervin further acknowledges that, to
the extent that such goodwill has been and will be generated through Mr. Ervin’s
efforts, such efforts have been and will be funded by the Company and Mr. Ervin
has been and will be fairly compensated and reimbursed for such efforts.  Mr. Ervin acknowledges that all goodwill
developed by Mr. Ervin relative to the Company’s customers, vendors and
employees is the sole and exclusive property of the Company and is not personal
to Mr. Ervin.  Accordingly, in order
to afford the Company reasonable protection of such goodwill, for a period
commencing on the Separation Date and continuing until March 31, 2012, Mr. Ervin
shall not engage or become interested, directly or indirectly, as owner,
employee, partner, through stock ownership (except the ownership of less than
1% of the outstanding securities of a corporation publicly traded and listed on
a national securities exchange), investment of capital, lending of money or
property, rendering of services, or otherwise, whether alone or in association
with others, in the operation of any business or enterprise in any way
competitive to any business presently or hereafter conducted by the Company or
any Affiliate anywhere in the world. 
Without limiting the generality of the foregoing, Mr. Ervin shall
not, directly or indirectly: (i) solicit or accept orders for products or
services competitive to those sold or otherwise provided by the Company or any
Affiliate from any person who is then a customer or prospective customer of the
Company or any Affiliate or who was a customer of the Company or any Affiliate
during the preceding five (5) years; (ii) induce or attempt to induce
any such customer to reduce its purchase of products or services from the
Company or any Affiliate; (iii) solicit any employee or contractor of the
Company or any Affiliate to leave the employ or service of the Company or any
Affiliate; (iv) induce any employee or contractor or former employee or
contractor of the Company or any Affiliate to breach any agreement with the
Company or any Affiliate; or (v) solicit or induce any vendor of the
Company or any Affiliate to terminate or modify its relationship with the
Company or any Affiliate.

 

                                                (b)           Mr. Ervin acknowledges that the
Company and its Affiliates have devoted and will continue to devote substantial
sums of money and effort in developing, acquiring and maintaining certain
Confidential Information (as hereafter defined).  Mr. Ervin has acquired and will continue
to acquire knowledge of such Confidential Information, which Mr. Ervin
acknowledges is valuable property of the Company and its Affiliates.  Except as required in the course of his
engagement as a consultant to the Company, during the Consulting Term and at
all times thereafter, Mr. Ervin will not, directly or indirectly, disclose
to others or permit such disclosure, or make use of or permit the use of for
his own benefit or the benefit of others, any 

 

 

 

 

5

 

 

Confidential
Information, without prior written consent of the Company.  Mr. Ervin will retain such Confidential
Information in trust in a fiduciary capacity for the sole benefit of the
Company.  “Confidential Information” as
used in this Agreement means any information, which pertains to the business of
the Company or its Affiliates.  Examples
of Confidential Information include, but are not limited to, the following:

 

(A)                              lists of
customers and prospective customers;

 

(B)                                marketing
strategies, programs, and forecasts;

 

(C)                                information
about customers, including statistical information and customer profiles;

 

(D)                               information
about past, present, or future financial condition or performance;

 

(E)                                 information
relating to competitors;

 

(F)                                 information
about vendors, including information about prices and terms extended by
vendors;

 

(G)                                information
about employees, including information about salaries, wages and benefits;

 

(H)                               information
about pricing strategies and programs; and

 

(I)                                    proprietary
technology, know-how, improvements, discoveries, developments, designs,
inventions and techniques.

 

The foregoing
notwithstanding, Confidential Information will cease to be such when it becomes
generally available to the public other than as result of an improper
disclosure by Mr. Ervin or others. 
Information shall constitute Confidential Information regardless of the
form in which it appears.  For instance,
Confidential Information could be a document, electronically-stored data, or
the substance of an oral conversation.

 

(c)           Upon the earlier of termination of
the Consulting Term (for any reason) or a request from the Company, Mr. Ervin
will promptly deliver to the Company all documents, electronically-stored data,
equipment and other personal property belonging to the Company including, but
not limited to, all other  materials or
medium which include or reflect Confidential Information or which otherwise
relate to the business of the Company or its Affiliates, that are in his
possession or under his control.  Upon
such delivery, Mr. Ervin will not retain any copies of documents or
electronically stored data.

 

(d)           For purposes of this Agreement, “Invention”
means any discovery, concept or idea, whether patentable or copyrightable or
not, including but not limited to, processes, methods, formulae and techniques,
as well as improvements therefor and know-how related thereto.  Mr. Ervin will promptly and fully inform
the Company in writing (setting forth 

 

 

 

 

6

 

 

in
detail the procedures employed and the results achieved) of any Invention which
was or is conceived, made, or reduced to practice by Mr. Ervin, either
solely or jointly with another or others, during his employment with the
Company, during the Consulting Term or within twelve (12) months after
termination of the Consulting Term and which (i) is conceived, made, or
reduced to practice during Mr. Ervin’s hours of service to the Company or
any Affiliate, or (ii) is conceived, made, or reduced to practice with the
use of Confidential Information or the Company’s or any Affiliate’s equipment,
facilities, materials, personnel or other resources, or (iii) at the time
it is conceived, made or reduced to practice relates to the Company’s or any
Affiliate’s present or prospective business or actual or demonstrably
anticipated research or development, or (iv) is the result of any work
performed by Mr. Ervin for the Company or any Affiliate (each, a “Consultant
Invention”).  The Company and/or its
nominee or assign will be the sole owner, without payment of royalty or any
other compensation therefore, of any Consultant Invention.  With respect to each Consultant Invention:

 

(A)                              Mr. Ervin
will apply, at the Company’s request and expense, for United States and/or
foreign letters patent either in Mr. Ervin’s name or otherwise as the
Company desires;

 

(B)                                Mr. Ervin
will apply, at the Company’s request and expense, for United States and/or
foreign copyright registrations either in the Mr. Ervin’s name or
otherwise as the Company desires;

 

(C)                                Mr. Ervin
will assign and does hereby assign to the Company all of his right, title, and
interest in and to any such Consultant Invention and to Applications for United
States and/or foreign letters patent and the United States and/or foreign
letters patent granted upon such Consultant Invention, and to any United States
or foreign copyright registrations;

 

(D)                               Mr. Ervin
will acknowledge and deliver promptly to the Company (without charge to the
Company but at its expense) such written instruments and do such other acts as
may be necessary in the opinion of the Company to obtain and maintain United
States and/or foreign letters patent or United States or foreign copyright
registrations and to vest the entire right and title thereunto in the Company;
and

 

(E)                                 Mr. Ervin
hereby irrevocably designates and appoints the Company and its duly authorized
officers and agents as Mr. Ervin’s agent and attorney-in-fact, to act for
and in Mr. Ervin’s behalf and stead to execute and file any such
applications or other necessary documents and to do all other lawfully
permitted acts to further the prosecution, issuance, or enforcement of patents,
copyrights, or similar protections related to such Consultant Invention with
the same legal force and effect as if Mr. Ervin had executed them himself.

 

 

 

 

7

 

 

                                Mr. Ervin will keep and maintain
adequate and current written records of all Inventions made by him (in the form
of notes, sketches, drawings, and as may be specified by the Company), which
records shall be available to and remain the sole property of the Company at
all times.

 

                                                (e)           Mr. Ervin agrees that the
restrictions set forth in Paragraphs 9(a), 9(b), 9(c) and 9(d) of
this Agreement are reasonable and justified in light of the nature of the
business of the Company and in light of the Confidential Information to which Mr. Ervin
has had exposure and access as an executive officer of the Company and may
continue to have exposure and access during the Consulting Term.

 

                                                (f)            Each provision of this Section 9
will be treated as a separate and independent clause, and the unenforceability
of any one clause will in no way impair the enforceability of any of the other
clauses herein.  In the event any court
of competent jurisdiction determines that any of the provisions of this Section 9
are void and unenforceable, such court shall have the right, and is authorized
by Mr. Ervin and the Company, to modify such terms or provisions so as to
render the remaining or modified terms or provisions of this Section 9
valid and enforceable to the maximum extent possible and, as so modified, to
enforce this Agreement in accordance with its terms.  If any provision in this Section 9 shall
be held to be excessively broad, it shall be limited to the extent necessary to
comply with applicable law.  If any
provision in this Section 9 shall, notwithstanding the preceding sentence,
to held to be unenforceable, such unenforceability shall not affect any other
provision of this Agreement.

 

                                                (g)           If Mr. Ervin breaches in any
respect any provision of this Section 9 and fails to cure such breach (if
curable) within ten (10) days after his receipt of written notice thereof,
then, in addition to any other right or remedy available to the Company at law
or equity, the Company may by written notice to Mr. Ervin terminate the
Consulting Term, terminate its payments to Mr. Ervin under Section 4,
and terminate the health insurance benefits provided under Section 5.

 

                                                (h)           Mr. Ervin agrees that a remedy
at law would be insufficient, by itself, to remedy any breach by Mr. Ervin
of the provisions of this Section 9 and that the Company will be entitled
to injunctive relief to enforce the provisions of this Section 9.

 

                                                (i)            The rights of the Company and the
obligations of Mr. Ervin set forth in this Section 9 are in addition
to all rights and obligations provided by law.

 

                                10.           RELEASE.  In consideration for the Company’s
performance of its obligations under this Agreement, which include payments and
other valuable consideration that the Company is not otherwise obligated to
provide to Mr. Ervin, Mr. Ervin agrees to execute and deliver to the
Company the release attached hereto as Exhibit A (the “Release”) on
the Separation Date.  The Company’s
obligations under this Agreement will terminate in all respects if Mr. Ervin
fails to deliver the Release on the Separation Date or revokes the Release in
accordance with the terms thereof.

 

 

 

 

8

 

 

                                11.           NON-DISPARAGMENT.  The Company and Mr. Ervin agree not to
publish (in writing or orally) any disparaging statement about the other
party.  For all purposes, the Company and
Mr. Ervin will characterize the termination of Mr. Ervin’s employment
with the Company as “a mutually agreed upon separation”.

 

                                12.           MISCELLANEOUS.

 

                                                (a)           This Agreement is the sole and entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior negotiations and written, oral or implied
representations, warranties, commitments, offers, contracts, agreements,
awards, and understandings between the parties regarding Mr. Ervin’s
employment with the Company, the termination thereof, and the matters addressed
in this Agreement.  Without limiting the
generality of the foregoing, this Agreement terminates and supersedes in all
respects the Employment Agreement dated March 11, 1997 between Mr. Ervin
and the Company and neither party will have any further right or obligation
under such Employment Agreement, provided, however, that Mr. Ervin shall
remain liable for any breach by him of the covenants under Section 8 of
such Employment Agreement on or before the Separation Date.  Any addition, change or modification of this
Agreement will be void unless in writing and duly executed by each party
hereto.

 

                                                (b)           This Agreement shall inure to the
benefit of, and be binding upon,  the
Company, Mr. Ervin and their respective successors and permitted
assigns.  The obligations of Mr. Ervin
hereunder are personal and may not be assigned. 
The Company may unilaterally assign its rights and the benefits of Mr. Ervin’s
obligations under this Agreement to any Affiliate, purchaser of all or
substantially all of the Company’s assets, corporate successor by way of
merger, consolidation, or reorganization, or any other successor in interest to
its business.

 

                                                (c)           The obligations of Mr. Ervin
specified in Section 9 hereof shall survive any termination or expiration
of the Consulting Term or this Agreement.

 

                                                (d)           Mr. Ervin’s obligations
hereunder may not be modified, released, or terminated, in whole or in part,
except in a writing signed by an officer of the Company after specific written
authorization therefor approved by the Board of Directors of the Company.  Any waiver by the Company of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach thereof.

 

                                                (e)           This Agreement shall be governed,
construed and enforced in accordance with New York law without regard to
principles of conflicts of laws.

 

                                                (f)            For the purposes of this Agreement, “Affiliate”
means any entity which (i) is controlled by the Company, (ii) under
common control with the Company, or (iii) or controls the Company, with “control”
meaning the ability to vote at least fifty percent (50%) of the outstanding
voting interests of an entity.

 

                                                (g)           Notwithstanding any provision in this
Agreement to the contrary, no payment hereunder that constitutes payment from a
“nonqualified deferred compensation 

 

 

 

 

9

 

 

plan”
within the meaning of Internal Revenue Code Section 409A and the Treasury
regulations promulgated thereunder shall be paid to Mr. Ervin before December 1,
2008 (or 6 months and one day after his separation from service, if later).

 

IN WITNESS WHEREOF the parties have signed or caused
this Agreement to be signed as of the date first above written.

 

 

	
   

  	
  HARDINGE INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Kyle H. Seymour, Chairman of the Board

  
	
   

  	
   

  	
  Kyle H. Seymour, Chairman of the Board

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ J. Patrick Ervin

  
	
   

  	
   

  	
  J. Patrick Ervin

  

 

 

 

 

 

 

10

 

 

EXHIBIT A

RELEASE

 

In consideration of the
payments to be provided to me by Hardinge Inc. (the “Company”) pursuant to the
Separation and Consulting Agreement between the Company and me dated as of May 22,
2008 (the “Separation and Consulting Agreement”), on behalf of myself and my
heirs, successors executors, administrators, trustees, legal representatives,
agents and assigns, I fully and forever release and discharge the Company, its
subsidiaries, divisions and affiliates and its and all of their predecessors,
successors, assigns, directors and officers (collectively “Released Parties”)
from any and all claims, demands, suits, causes of action, obligations,
promises, damages, fees, covenants, agreements, attorneys’ fees, debts,
contracts and torts of every kind whatsoever, known or unknown, at law or in
equity, foreseen or unforeseen, which against the Released Parties I ever had,
now have or which I may have for, upon or by reason of any matter, cause or
thing whatsoever relating to or arising from my employment with the Company or
its affiliates or the termination thereof, specifically including, but not
limited to, all claims under the following: 
the Civil Rights Acts of 1866, 1871, 1964 and 1991; the Age
Discrimination in Employment Act of 1967; the Older Workers’ Benefit Protection
Act of 1990; the Americans with Disabilities Act; the Equal Pay Act; the
Employee Retirement Income Security Act; the Worker Adjustment Retraining
Notification Act; the Family and Medical Leave Act; the National Labor
Relations Act; the Occupational Safety and Health Act; the New York State Human
Rights Law; the New York City Human Rights Law; the New York State Labor Law;
§§ 120 and 241 of the New York State Workers’ Compensation Law; any
contract of employment, express or implied; and any and all other federal,
state or local laws, rules or regulations.

 

I hereby waive the right
to receive any personal relief (i.e. monetary or equitable relief) as the
result of any lawsuit or other proceeding brought by the EEOC or any other
governmental agency, based on or related to any of the matters from which I
have released the Released Parties. I also will take all actions necessary, if
any, now or in the future, to make this Release effective, including seeking
and obtaining any necessary governmental or court approval.

 

This Release shall not
operate to release the Company from its obligations under the Separation and
Consulting Agreement or from any obligation arising after the date hereof under
any employee benefit plan sponsored by the Company.

 

In connection with this
Release (i) I acknowledge that the Separation and Consulting Agreement
provides me with payments to which I would not otherwise be entitled but for my
execution and delivery to the Company of the Separation and Consulting
Agreement and this Release (collectively, this “Instrument”), (ii) I
acknowledge that I have been advised by the Company to consult with an attorney
before signing this Instrument, (iii) the Company has allowed me at least
twenty-one (21) days from the date I first receive this Instrument to consider
it before being required to sign it and return it to the Company, provided, however,
that any changes made to this Instrument shall not restart the running of the
twenty-one (21) day period, and (iv) I may revoke this Instrument, in its
entirety, within seven (7) days after signing it by

 

 

 

 

 

 

delivering written notice
of such revocation to the Company on or before 5:00 p.m. on the seventh
day of such revocation period.

 

IN WITNESS WHEREOF, the
undersigned has executed this instrument as of the 22nd day of May, 2008.

 

 

 

	
   

  	
  /s/ J. Patrick Ervin

  
	
   

  	
  J. Patrick Ervin

  

 

 

 

 

 

 

 

 

 

2Exhibit 4.6

 

MERITAGE
HOMES CORPORATION

2006 STOCK INCENTIVE PLAN

 

EFFECTIVE
DATE: MAY 17, 2006

APPROVED BY STOCKHOLDERS: MAY 17, 2006

TERMINATION DATE: MAY 16, 2016

 

ARTICLE
1

PURPOSE

 

1.1    GENERAL.    The
purpose of the Meritage Homes Corporation 2006 Stock Incentive Plan (the “Plan”) is to promote the success and
enhance the value of Meritage Homes Corporation (the “Company”) by linking the personal
interests of the members of the Board, employees, officers, executives,
consultants and advisors to those of Company stockholders and by providing such
individuals with an incentive for outstanding performance to generate superior
returns to Company stockholders. The Plan is further intended to provide
flexibility to the Company in its ability to motivate, attract, and retain the
services of Board members, employees, officers, executives, consultants and
advisors upon whose judgment, interest, and special effort the successful
conduct of the Company’s operation is largely dependent.

 

ARTICLE
2

EFFECTIVE AND EXPIRATION DATE

 

2.1    EFFECTIVE DATE.    The Plan
is effective as of the date the Plan is approved by the Company’s stockholders
(the “Effective Date”).

 

2.2    EXPIRATION DATE.    The Plan
will expire on, and no Award may be granted under the Plan after, the tenth
anniversary of the Effective Date. Any Awards that are outstanding on the tenth
anniversary of the Effective Date shall remain in force according to the terms
of the Plan and the Award Agreement.

 

ARTICLE
3

DEFINITIONS AND CONSTRUCTION

 

3.1    DEFINITIONS.    The following
words and phrases shall have the following meanings:

 

(a)   “Award” means any Option, Stock
Appreciation Right, Restricted Stock Award, Performance Share Award, or
Performance-Based Award granted to a Participant under the Plan.

 

(b)   “Award Agreement” means any written
agreement, contract, or other instrument or document evidencing an Award.

 

(c)   “Board” means the Board of Directors of the
Company.

 

(d)   “Cause” means and will exist in the
following circumstances in which the Participant: (i) is convicted of a
felony, (ii) engages in any fraudulent or other dishonest act to the
detriment of the Company, (iii) fails to report for work on a regular
basis, except for periods of authorized absence or bona fide illness, (iv) misappropriates
trade secrets, customer lists, or other proprietary information belonging to
the Company for his or her own benefit or for the benefit of a competitor, (v) engages
in any willful misconduct designed to harm the Company or its stockholders, or (vi) fails
to perform properly his or her assigned duties.

 

(e)   “Change of Control” means and includes each
of the following:

 

(1)   A
sale, transfer, or other disposition by the Company through a single
transaction or a series of transactions of securities of the Company
representing 50% or more of the combined voting power of the Company’s then
outstanding securities to any “Unrelated Person” or 

 

 

“Unrelated Persons”
acting in concert with one another. For purposes of this definition, the term “Person”
shall mean and include any individual, partnership, joint venture, association,
trust, corporation, or other entity (including a “group” as referred to in Section 13(d)(3) of
the Exchange Act). For purposes of this definition, the term “Unrelated Person”
shall mean and include any Person other than the Company, or an employee
benefit plan of the Company; or

 

(2)   A
sale, transfer, or other disposition through a single transaction or a series
of related transactions of all or substantially all of the assets of the
Company to an Unrelated Person or Unrelated Persons acting in concert with one
another; or

 

(3)   Any
consolidation or merger of the Company with or into an Unrelated Person, unless
immediately after the consolidation or merger the holders of the common stock
of the Company immediately prior to the consolidation or merger are the
beneficial owners of securities of the surviving corporation representing at
least 50% of the combined voting power of the surviving corporation’s then
outstanding securities.

 

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

 

(g)   “Committee” means the committee of the
Board described in Section 4.1.

 

(h)   “Covered Employee” means an employee who
is, or could be, a “covered employee” within the meaning of Section 162(m) of
the Code.

 

(i)    “Disability” means, for purposes of this
Plan, that the Participant qualifies to receive long term disability payments
under the Company’s long term disability insurance program, as it may be
amended from time to time.

 

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

 

(k)   “Fair Market Value” means, as of any given
date, the fair market value of Stock on a particular date determined by such
methods or procedures as may be established from time to time by the Committee.
Unless otherwise determined by the Committee, the Fair Market Value of Stock as
of any date shall be the closing price for the Stock as reported on the New
York Stock Exchange (or on any national securities exchange on which the Stock
is then listed) for that date or, if no such prices are reported for that date,
the average of the high and low trading prices on the next preceding date for
which such prices were reported.

 

(l)    “Incentive Stock Option” means an Option
that is intended to meet the requirements of Section 422 of the Code or
any successor provision thereto.

 

(m)  “Non-Employee Director” means a member of
the Board who qualifies as a “Non-Employee Director” as defined in Rule 16b-3(b)(3) of
the Exchange Act, or any successor definition adopted by the Board.

 

(n)   “Non-Qualified Stock Option” means an
Option that is not intended to be an Incentive Stock Option.

 

(o)   “Option” means a right granted to a
Participant pursuant to Article 7 of the Plan to purchase Stock at a
specified price during specified time periods. An Option may be either an
Incentive Stock Option or a Non-Qualified Stock Option.

 

(p)   “Participant” means a person who, as a
member of the Board, employee, officer, or executive of, or consultant or
advisor to, the Company or any Subsidiary, has been granted an Award pursuant
to the Plan.

 

(q)   “Performance-Based Awards” means the
Performance Share Awards and Restricted Stock Awards granted to select Covered
Employees pursuant to Articles 9 and 10, respectively, but which are
subject to the terms and conditions set forth in Article 11. All
Performance-Based Awards are intended to qualify as “performance-based
compensation” pursuant to Section 162(m) of the Code.

 

 

(r)   “Performance Criteria” means the criteria
that the Committee selects for purposes of establishing the Performance Goal or
Performance Goals for a Participant for a Performance Period. The Performance
Criteria that will be used to establish Performance Goals are limited to the
following: pre- or after-tax net earnings, earnings before interest expense
(including interest amortized to cost of sales) and income taxes (“EBIT”),
earnings before interest expense (including interest amortized to cost of
sales), income taxes, depreciation and amortization (“EBITDA”), revenue growth,
operating income, operating cash flow, return on net assets, return on
shareholders’ equity, return on assets, return on capital, share price growth,
shareholder returns, gross or net profit margin, earnings per share, price per
share, and market share, any of which may be measured either in absolute terms
or as compared to any incremental increase or as compared to results of a peer
group. The Committee shall, within the time prescribed by Section 162(m) of
the Code, define in an objective fashion the manner of calculating the
Performance Criteria it selects to use for such Performance Period for such
Participant.

 

(s)   “Performance Goals” means, for a
Performance Period, the goals established in writing by the Committee for the
Performance Period based upon the Performance Criteria. Depending on the
Performance Criteria used to establish such Performance Goals, the Performance
Goals may be expressed in terms of overall Company performance or the
performance of a division, business unit, or an individual. The Committee, in
its discretion, may, within the time prescribed by Section 162(m) of
the Code, adjust or modify the calculation of Performance Goals for such
Performance Period in order to prevent the dilution or enlargement of the
rights of Participants (i) in the event of, or in anticipation of, any
unusual or extraordinary corporate item, transaction, event, or development, or
(ii) in recognition of, or in anticipation of, any other unusual or
nonrecurring events affecting the Company, or the financial statements of the
Company, or in response to, or in anticipation of, changes in applicable laws,
regulations, accounting principles, or business conditions.

 

(t)    “Performance Period” means the one or more
periods of time, which may be of varying and overlapping durations, as the
Committee may select, over which the attainment of one or more Performance
Goals will be measured for the purpose of determining a Participant’s right to,
and the payment of, a Performance-Based Award.

 

(u)  “Performance Share Award” means a right
granted to a Participant pursuant to Article 9, to receive cash, Stock, or
other Awards, the payment of which is contingent upon achieving certain
performance goals established by the Committee.

 

(v)   “Plan” means this Meritage Homes
Corporation 2006 Stock Incentive Plan, as amended.

 

(w)  “Restricted Stock Award” means Stock
granted to a Participant pursuant to Article 10 that is subject to certain
restrictions and to risk of forfeiture.

 

(x)   “Stock” means the common stock of the
Company and such other securities of the Company that may be substituted for
Stock pursuant to Article 13.

 

(y)   “Stock Appreciation Right” or “SAR” means a right granted to a
Participant under Article 8 to receive the appreciation on Stock.

 

(z)   “Subsidiary” means any corporation or other
entity of which a majority of the outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Company.

 

 

ARTICLE
4

ADMINISTRATION

 

4.1    COMMITTEE.    The Plan shall
be administered by the Executive Compensation Committee of the Board. The
Committee (or subcommittee thereof) shall consist of at least two individuals,
each of whom qualifies as (i) a Non-Employee Director, and (ii) an “outside
director” pursuant to Section 162(m) of the Code and the regulations
issued thereunder.

 

4.2    ACTION BY THE COMMITTEE.    A
majority of the Committee shall constitute a quorum. The acts of a majority of
the members present at any meeting at which a quorum is present, and acts
approved in writing by a majority of the Committee in lieu of a meeting, shall
be deemed the acts of the Committee. Each member of the Committee is entitled
to, in good faith, rely or act upon any report or other information furnished to
that member by any officer or other employee of the Company or any Subsidiary,
the Company’s independent registered public accountants, or any executive
compensation consultant or other professional retained by the Company to assist
in the administration of the Plan.

 

4.3    AUTHORITY OF COMMITTEE.    Subject
to any specific designation in the Plan, the Committee has the exclusive power,
authority and discretion to:

 

(a)   designate
Participants to receive Awards;

 

(b)   determine
the type or types of Awards to be granted to each Participant;

 

(c)   determine
the number of Awards to be granted and the number of shares of Stock to which
an Award will relate;

 

(d)   determine
the terms and conditions of any Award granted pursuant to the Plan, including,
but not limited to, the exercise price, grant price, or purchase price, any
restrictions or limitations on the Award, any schedule for lapse of forfeiture
restrictions or restrictions on the exercisability of an Award, and
accelerations or waivers thereof, based in each case on such considerations as
the Committee in its sole discretion determines; provided, however, that the
Committee shall not (i) have the authority to accelerate the vesting or
waive the forfeiture of any Performance-Based Awards, or (ii) take any
action or fail to take any action with respect to the operation of the Plan
that would cause all or part of the payment under any Award to be subject to
the additional tax under Section 409A of the Code;

 

(e)   determine
whether, to what extent, and pursuant to what circumstances an Award may be
settled in, or the exercise price of an Award may be paid in, cash, Stock,
other Awards, or other property, or an Award may be canceled, forfeited, or
surrendered;

 

(f)    prescribe
the form of each Award Agreement, which need not be identical for each
Participant;

 

(g)   decide
all other matters that must be determined in connection with an Award;

 

(h)   establish,
adopt, or revise any rules and regulations as it may deem necessary or
advisable to administer the Plan;

 

(i)    interpret
the terms of, and any matter arising pursuant to, the Plan or any Award
Agreement; and

 

(j)    make
all other decisions and determinations that may be required pursuant to the
Plan or as the Committee deems necessary or advisable to administer the Plan.

 

4.4    DECISIONS BINDING.    The
Committee’s interpretation of the Plan, any Awards granted pursuant to the
Plan, any Award Agreement and all decisions and determinations by the Committee
with respect to the Plan are final, binding, and conclusive on all parties.

 

 

ARTICLE
5

SHARES SUBJECT TO THE PLAN

 

5.1    NUMBER OF SHARES.    Subject to adjustment provided in Article 13,
the aggregate number of shares of Stock reserved and available for grant
pursuant to the Plan shall be 1,600,000, plus (i) the number of shares of
Stock available for grant pursuant to the Meritage Homes Corporation Stock
Option Plan (“Prior Plan”) as of the Effective Date, and (ii) the number
of shares of Stock that were previously granted pursuant to the Prior Plan and
that either terminate, expire, or lapse for any reason after the Effective
Date. Any shares of Stock issued in connection with Awards other than
Options and Stock Appreciation Rights shall be counted against the shares
available for grant pursuant to the previous sentence as 1.38 shares for every
one share issued in connection with such Award or by which the Award is valued
by reference. Notwithstanding the above, the maximum number of shares of Stock
that may be awarded as Incentive Stock Options under the Plan is 1,200,000.

 

5.2    LAPSED OR ASSUMED AWARDS.    To
the extent that an Award terminates, expires, or lapses for any reason, any
shares of Stock subject to the Award will again be available for the grant of
an Award pursuant to the Plan. Additionally, to the maximum extent permitted by
applicable law or any securities exchange rule, shares of Stock issued in
assumption of, or in substitution for, any outstanding awards of any entity
acquired in any form of combination by the Company or any Subsidiary shall not
be counted against shares of Stock available for grant pursuant to this Plan.
However, for avoidance of doubt, the exercise of a stock-settled SAR or
net-cashless exercise of an Option (or a portion thereof) will reduce the
number of shares of Stock available for issuance hereunder by the entire number
of shares of Stock subject to that SAR or Option (or applicable portion
thereof), even though a smaller number of shares of Stock will be issued upon
such an exercise. Also, shares of Stock tendered to pay the exercise price of
an Option or to satisfy a tax withholding obligation arising in connection with
an Award will not become available for grant or sale under the Plan.

 

5.3    STOCK DISTRIBUTED.    Any
Stock distributed pursuant to an Award may consist, in whole or in part, of
authorized and unissued Stock, treasury Stock or Stock purchased on the open
market.

 

5.4    LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS.    Notwithstanding any provision in the Plan to
the contrary, and subject to the adjustment in Article 13, the maximum
number of shares (counted, as described in Section 5.1 above, as 1.38
shares awarded for every one share issued in connection with such Award or by
which the Award is valued by reference) of Stock with respect to one or more
Awards that may be granted to any one Participant during a calendar year shall
be 250,000.

 

ARTICLE
6

ELIGIBILITY AND PARTICIPATION

 

6.1    ELIGIBILITY.

 

        (a)    General.    Persons
eligible to participate in this Plan include all members of the Board,
employees, officers, and executives of, and consultants and advisors providing
services to, the Company or a Subsidiary, as determined by the Committee.

 

        (b)    Foreign
Participants.    In order to assure
the viability of Awards granted to Participants employed in foreign countries,
the Committee may provide for such special terms as it may consider necessary
or appropriate to accommodate differences in local law, tax policy, or custom.
Moreover, the Committee may approve such supplements to, or amendments,
restatements, or alternative versions of, the Plan as it may consider necessary
or appropriate for such purposes without thereby affecting the terms of the
Plan as in effect for any other purpose; provided, however, that no such
supplements, amendments, restatements, or alternative versions shall increase
the share limitations contained in Article 5 of the Plan.

 

6.2    ACTUAL PARTICIPATION.    Subject
to the provisions of the Plan, the Committee may, from time to time, select
from among all eligible individuals, those to whom Awards shall be granted and
shall determine the nature and amount of each Award. No individual shall have
any right to be granted an Award pursuant to this Plan.

 

 

ARTICLE
7

STOCK OPTIONS

 

7.1    GENERAL.    The Committee is
authorized to grant Options to Participants on the following terms and
conditions:

 

(a)    Exercise
Price.    The exercise price per
share of Stock pursuant to an Option shall be determined by the Committee and
set forth in the Award Agreement; provided that the exercise price for any
Option shall not be less than the Fair Market Value as of the date of grant.

 

(b)    Time
and Conditions of Exercise.    The
Committee shall determine the time or times at which an Option may be exercised
in whole or in part provided that the term of any Option granted under the Plan
shall not exceed ten years. The Committee shall also determine the performance
or other conditions, if any, that must be satisfied before all or part of an
Option may be exercised. Unless otherwise provided in an Award Agreement, an
Option will lapse immediately if a Participant’s employment is terminated for
Cause.

 

(c)    Payment.    The
Committee shall determine the methods by which the exercise price of an Option
may be paid, the form of payment, including, without limitation, cash,
promissory note, shares of Stock held for longer than six months (through
actual tender or by attestation), or other property acceptable to the Committee
(including broker-assisted “cashless exercise” arrangements), and the methods
by which shares of Stock shall be delivered or deemed to be delivered to
Participants.

 

(d)    Evidence
of Grant.    All Options shall be
evidenced by a written Award Agreement between the Company and the Participant
in the form attached to this Plan as Exhibit A. The Award Agreement shall
include such additional provisions as may be specified by the Committee.

 

7.2    INCENTIVE
STOCK OPTIONS.    Incentive Stock Options
shall be granted only to employees and the terms of any Incentive Stock Options
granted pursuant to the Plan must comply with the following additional
provisions of this Section 7.2:

 

(a)    Exercise
Price.    Subject to Section 7.2(d),
the exercise price per share of Stock shall be set by the Committee, provided
that the exercise price for any Incentive Stock Option may not be less than the
Fair Market Value as of the date of the grant.

 

(b)    Exercise.    In
no event, may any Incentive Stock Option be exercisable for more than ten years
from the date of its grant.

 

(c)    Lapse
of Option.    An Incentive Stock
Option shall lapse pursuant to the following circumstances.

 

        (1)   The
Incentive Stock Option shall lapse ten years from the date it is granted,
unless an earlier time is set in the Award Agreement.

 

        (2)   The
Incentive Stock Option shall lapse upon termination of employment for Cause or
for any other reason other than the Participant’s death or Disability, unless
otherwise provided in the Award Agreement.

 

        (3)   If
the Participant terminates employment on account of Disability or death before
the Option lapses pursuant to paragraph (1) or (2) above, the
Incentive Stock Option shall lapse, unless it is previously exercised, on the
earlier of (i) the scheduled termination date of the Option; or (ii) 12 months
after the date of the Participant’s termination of employment on account of
Disability or death. Upon the Participant’s Disability or death, any Incentive
Stock Options exercisable at the Participant’s Disability or death may be
exercised by the Participant’s legal representative or representatives, by the
person or persons entitled to do so pursuant to the Participant’s last will and
testament, or, if the Participant fails to make testamentary disposition of
such Incentive Stock Option or dies intestate, by the person or persons
entitled to receive the Incentive Stock Option pursuant to the applicable laws
of descent and distribution.

 

 

(d)    Individual
Dollar Limitation.    The aggregate
Fair Market Value (determined as of the time an Award is made) of all shares of
Stock with respect to which Incentive Stock Options are first exercisable by a
Participant in any calendar year may not exceed $100,000.00 or such other
limitation as imposed by Section 422(d) of the Code, or any successor
provision. To the extent that Incentive Stock Options are first exercisable by
a Participant in excess of such limitation, the excess shall be considered
Non-Qualified Stock Options.

 

(e)    Ten
Percent Owners.    An Incentive Stock
Option shall be granted to any individual who, at the date of grant, owns stock
possessing more than ten percent of the total combined voting power of all
classes of Stock of the Company only if such Option is granted at a price that
is not less than 110% of Fair Market Value on the date of grant and the Option
is exercisable for no more than five years from the date of grant.

 

(f)    Expiration
of Incentive Stock Options.    No
Award of an Incentive Stock Option may be made pursuant to this Plan after the
tenth anniversary of the Effective Date.

 

(g)    Right
to Exercise.    Except as provided in
Section 12.5, during a Participant’s lifetime, an Incentive Stock Option
may be exercised only by the Participant.

 

ARTICLE
8

STOCK APPRECIATION RIGHTS

 

8.1    Grant Of SARs.    The
Committee is authorized to grant SARs to Participants on the following terms
and conditions:

 

(a)    Right
to Payment.    Upon the exercise of a
SAR, the Participant to whom it is granted has the right to receive the excess,
if any, of:

 

        (1)   the
Fair Market Value of a share of Stock on the date of exercise; over

 

        (2)   the
grant price of the SAR as determined by the Committee, which shall not be less
than the Fair Market Value of a share of Stock on the date of grant.

 

(b)    Term.    The
term of each SAR shall not exceed ten years from the date of grant.

 

(c)    Other
Terms.    All SARs grants will be
evidenced by an Award Agreement. The terms, methods of exercise, methods of
settlement, and any other terms and conditions of any SAR will be determined by
the Committee at the time of the grant of the Award and as set forth in the
Award Agreement; provided that the form of consideration payable in settlement
of a SAR shall be Stock.

 

ARTICLE
9

PERFORMANCE SHARES

 

9.1    GRANT OF PERFORMANCE SHARES.    The
Committee is authorized to grant Performance Shares to Participants on such
terms and conditions as may be selected by the Committee. The Committee shall
have the complete discretion to determine the number of Performance Shares granted
to each Participant. All Awards of Performance Shares shall be evidenced by an
Award Agreement.

 

9.2    RIGHT TO PAYMENT.    A grant
of Performance Shares gives the Participant rights, valued as determined by the
Committee, and payable to, or exercisable by, the Participant to whom the
Performance Shares are granted, in whole or in part, as the Committee shall
establish at grant or thereafter. Subject to the terms of the Plan, the
Committee shall set performance goals and other terms or conditions to payment
of the Performance Shares in its discretion which, depending on the extent to
which they are met, will determine the number and value of Performance Shares
that will be paid to the Participant.

 

 

9.3    OTHER TERMS.    Performance
Shares may be payable in cash, Stock, or other property, and have such other
terms and conditions as determined by the Committee and reflected in a written
Performance Share Award Agreement. Unless otherwise provided in an Award
Agreement, Performance Shares will lapse immediately if a Participant’s
employment is terminated for Cause.

 

ARTICLE
10

RESTRICTED STOCK AWARDS

 

10.1    GRANT OF RESTRICTED STOCK.    The
Committee is authorized to make Awards of Restricted Stock to Participants in
such amounts and subject to such terms and conditions as determined by the
Committee. All Awards of Restricted Stock shall be evidenced by a written
Restricted Stock Award Agreement.

 

10.2    ISSUANCE AND RESTRICTIONS.    Restricted
Stock shall be subject to such restrictions on transferability and other
restrictions as the Committee may impose (including, without limitation,
limitations on the right to vote Restricted Stock or the right to receive
dividends on the Restricted Stock). These restrictions may lapse separately or
in combination at such times, pursuant to such circumstances, in such
installments, or otherwise, as the Committee determines at the time of the
grant of the Award or thereafter.

 

10.3    FORFEITURE.    Except as
otherwise determined by the Committee at the time of the grant of the Award or
thereafter, upon termination of employment during the applicable restriction
period, Restricted Stock that is at that time subject to restrictions shall be
forfeited; provided, however, that the Committee may provide in any Restricted
Stock Award Agreement that restrictions or forfeiture conditions relating to
Restricted Stock will be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in other
cases waive in whole or in part restrictions or forfeiture conditions relating
to Restricted Stock. Unless otherwise provided in an Award Agreement,
Restricted Stock will be forfeited immediately if a Participant’s employment is
terminated for Cause.

 

10.4    CERTIFICATES FOR RESTRICTED STOCK.    Restricted
Stock granted pursuant to the Plan may be evidenced in such manner as the
Committee shall determine. If certificates representing shares of Restricted
Stock are registered in the name of the Participant, certificates must bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Restricted Stock, and the Company may, at its discretion,
retain physical possession of the certificate until such time as all applicable
restrictions lapse.

 

ARTICLE
11

PERFORMANCE-BASED AWARDS

 

11.1    PURPOSE.    The purpose of
this Article 11 is to provide the Committee the ability to qualify the
Performance Share Awards pursuant to Article 9 and the Restricted Stock
Awards pursuant to Article 10 as “performance-based compensation” pursuant
to Section 162(m) of the Code. If the Committee, in its discretion,
decides to grant a Performance-Based Award to a Covered Employee, the
provisions of this Article 11 shall control over any contrary provision
contained in Articles 9 or 10.

 

11.2    APPLICABILITY.    This Article 11
shall apply only to those Covered Employees selected by the Committee to
receive Performance-Based Awards. The Committee may, in its discretion, grant
Restricted Stock Awards or Performance Share Awards to Covered Employees that
do not satisfy the requirements of this Article 11. The designation of a
Covered Employee as a Participant for a Performance Period shall not in any
manner entitle the Participant to receive an Award for the period. Moreover,
designation of a Covered Employee as a Participant for a particular Performance
Period shall not require designation of such Covered Employee as a Participant
in any subsequent Performance Period and designation of one Covered Employee as
a Participant shall not require designation of any other Covered Employees as a
Participant in such period or in any other period.

 

11.3    DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE AWARDS.    With
regard to a particular Performance Period, the Committee shall have full
discretion to select the length of such Performance Period, the type of
Performance-Based Awards to be issued, the kind and/or level of the Performance
Goal, and whether the Performance Goal is to apply to the Company, a Subsidiary
or any division or business unit thereof. Unless otherwise provided in an Award
Agreement, Performance- Based Awards will be forfeited if a Participant’s
employment is terminated for Cause.

 

 

11.4    PAYMENT OF PERFORMANCE AWARDS.    Unless
otherwise provided in the relevant Award Agreement, a Participant must be
employed by the Company or a Subsidiary on the day a Performance Award for such
Performance Period is paid to the Participant. Furthermore, a Participant shall
be eligible to receive payment pursuant to a Performance-Based Award for a
Performance Period only if the Performance Goals for such period are achieved.
In determining the actual size of an individual Performance-Based Award, the
Committee may reduce or eliminate the amount of the Performance-Based Award earned
for the Performance Period, if in its sole and absolute discretion, such
reduction or elimination is appropriate.

 

11.5    MAXIMUM AWARD PAYABLE.    The maximum Performance-Based Award payable
to any one Participant pursuant to the Plan for a Performance Period is 250,000
shares (counted, as described in Section 5.1 above, as 1.38 shares awarded
for every one share issued in connection with such Award or by which the Award
is valued by reference) of Stock.

 

ARTICLE
12

PROVISIONS APPLICABLE TO AWARDS

 

12.1    STAND-ALONE AND TANDEM AWARDS.    Awards
granted pursuant to the Plan may, in the discretion of the Committee, be
granted either alone, in addition to, or in tandem with, any other Award
granted pursuant to the Plan. Awards granted in addition to or in tandem with
other Awards may be granted either at the same time as or at a different time
from the grant of such other Awards.

 

12.2    TERM OF AWARD.    The term of
each Award shall be for the period as determined by the Committee, provided
that in no event shall the term of any Option or Stock Appreciation Right
granted in tandem with the Incentive Stock Option exceed a period of ten years
from the date of its grant.

 

12.3    FORM OF PAYMENT FOR AWARDS.    Subject
to the terms of the Plan and any applicable law or Award Agreement, payments or
transfers to be made by the Company or a Subsidiary on the grant or exercise of
an Award may be made in such forms as the Committee determines at or after the
time of grant, including, without limitation, cash, promissory note, Stock held
for more than six months, other Awards, or other property, or any combination,
and may be made in a single payment or transfer, in installments, or on a
deferred basis, in each case determined in accordance with rules adopted
by, and at the discretion of, the Committee.

 

12.4    LIMITS ON TRANSFER.

 

        (a)    General.    Except
as provided in Section 12.4(b) or Section 12.5, no right or
interest of a Participant in any Award may be pledged, encumbered, or
hypothecated to, or in favor of, any party other than the Company or a
Subsidiary, or shall be subject to any lien, obligation, or liability of such
Participant to any other party other than the Company or a Subsidiary. Except
as provided in Section 12.4(b) or Section 12.5, and except as
otherwise provided by the Committee, no Award shall be assigned, transferred,
or otherwise disposed of by a Participant other than by will or the laws of
descent and distribution.

 

        (b)    Transfers
to Family Members.    The Committee
shall have the authority, in its discretion, to grant (or to sanction by way of
amendment to an existing Award) Awards which may be transferred by the
Participant during his or her lifetime to any Family Member (as defined below).
Unless transfers for the Participant have been previously approved by the
Committee, a transfer of an Award pursuant hereto may only be affected by the
Company at the written request of the Participant. In the event an Award is
transferred as contemplated herein, such transferred Award may not be
subsequently transferred by the transferee (other than another transfer meeting
the conditions herein) except by will or the laws of descent and distribution.
A transferred Award shall continue to be governed by and subject to the terms
and limitations of the Plan and relevant Award Agreement, and the transferee
shall be entitled to the same rights as the Participant, as if the transfer had
not taken place. For purposes of this Section 12.4(b), the term “Family
Member” means spouse and any parent, stepparent, grandparent, child, stepchild,
or grandchild, including adoptive relationships or a trust or any other entity
in which these persons (or the Participant) have more than 50% of the
beneficial interest.

 

 

12.5    BENEFICIARIES.    Notwithstanding
Section 12.4, a Participant may, in the manner determined by the
Committee, designate a beneficiary to exercise the rights of the Participant
and to receive any distribution with respect to any Award upon the Participant’s
death. A beneficiary, legal guardian, legal representative, or other person
claiming any rights pursuant to the Plan is subject to all terms and conditions
of the Plan and any Award Agreement applicable to the Participant, except to
the extent the Plan and Award Agreement otherwise provide, and to any
additional restrictions deemed necessary or appropriate by the Committee. If
the Participant is married and resides in a community property state, a
designation of a person other than the Participant’s spouse as his beneficiary
with respect to more than 50% of the Participant’s interest in the Award shall
not be effective without the prior written consent of the Participant’s spouse.
If no beneficiary has been designated or survives the Participant, payment
shall be made to the person entitled thereto pursuant to the Participant’s will
or the laws of descent and distribution. Subject to the foregoing, a
beneficiary designation may be changed or revoked by a Participant at any time
provided the change or revocation is provided to the Committee.

 

12.6    STOCK CERTIFICATES.    Notwithstanding
anything herein to the contrary, the Company shall not be required to issue or
deliver any certificates evidencing shares of Stock pursuant to the exercise of
any Award, unless and until the Board has determined, with advice of counsel,
that the issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authorities and, if applicable,
the requirements of any exchange on which the shares of Stock are listed or
traded. All Stock certificates delivered pursuant to the Plan are subject to
any stop-transfer orders and other restrictions as the Committee deems
necessary or advisable to comply with Federal, state, or foreign jurisdiction,
securities or other laws, rules and regulations and the rules of any
national securities exchange or automated quotation system on which the Stock
is listed, quoted, or traded. The Committee may place legends on any Stock
certificate to reference restrictions applicable to the Stock. In addition to
the terms and conditions provided herein, the Board may require that a
Participant make such reasonable covenants, agreements, and representations as
the Board, in its discretion, deems advisable in order to comply with any such
laws, regulations, or requirements.

 

12.7    ACCELERATION UPON A CHANGE OF CONTROL.    If
a Change of Control occurs and Awards are converted, assumed, or replaced by a
successor, the Committee shall have the discretion to cause all outstanding
Awards to become fully exercisable and all restrictions on outstanding Awards
to lapse. If a Change of Control occurs and Awards are not converted, assumed,
or replaced by a successor, all outstanding Awards shall automatically become
fully exercisable and all restrictions on outstanding Awards shall lapse. To
the extent that this provision causes Incentive Stock Options to exceed the
dollar limitation set forth in Section 7.2(d), the excess Options shall be
deemed to be Non-Qualified Stock Options. Upon, or in anticipation of, such an
event, the Committee may cause every Award outstanding hereunder to terminate
at a specific time in the future and shall give each Participant the right to
exercise Awards during a period of time as the Committee, in its sole and
absolute discretion, shall determine.

 

ARTICLE
13

CHANGES IN CAPITAL STRUCTURE

 

13.1    SHARES AVAILABLE FOR GRANT.    In
the event of any change in the number of shares of Stock outstanding by reason
of any stock dividend or split, recapitalization, merger, consolidation,
combination or exchange of shares or similar corporate change, the maximum
aggregate number of shares of Stock with respect to which the Committee may
grant Awards, the number of shares of Stock subject to any Award, and any
numeric limitation expressed in the Plan shall be appropriately adjusted by the
Committee.

 

13.2    OUTSTANDING AWARDS—INCREASE OR DECREASE IN ISSUED SHARES WITHOUT
CONSIDERATION.    Subject to any
required action by the stockholders of the Company, in the event of any increase
or decrease in the number of issued shares of Stock resulting from a
subdivision or consolidation of shares of Stock or the payment of a stock
dividend (but only on the shares of Stock), or any other increase or decrease
in the number of such shares effected without receipt or payment of
consideration by the Company, the Committee shall proportionally adjust the
number of shares of Stock subject to each outstanding Award and the exercise
price per share of Stock of each such Award.

 

13.3    OUTSTANDING AWARDS—CERTAIN MERGERS.    Subject
to any required action by the stockholders of the Company, in the event that
the Company shall be the surviving corporation in any merger or consolidation
(except a merger or consolidation as a result of which the holders of shares of
Stock receive securities of another corporation), each Award outstanding on the
date of such merger or consolidation shall pertain to and apply to the
securities that a holder of the number of shares of Stock subject to such Award
would have received in such merger or consolidation.

 

 

13.4    OUTSTANDING AWARDS—OTHER CHANGES.    In
the event of any other change in the capitalization of the Company or corporate
change other than those specifically referred to in Article 13, the
Committee may, in its absolute discretion, make such adjustments in the number
and class of shares subject to Awards outstanding on the date on which such
change occurs and in the per share exercise price of each Award as the
Committee may consider appropriate to prevent the dilution or enlargement of
rights relating to Awards granted under the Plan.

 

13.5    NO OTHER RIGHTS.    Except as
expressly provided in the Plan, no Participant shall have any rights by reason
of any subdivision or consolidation of shares of stock of any class, the
payment of any dividend, any increase or decrease in the number of shares of
stock of any class or any dissolution, liquidation, merger, or consolidation of
the Company or any other corporation. Except as expressly provided in the Plan,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number of shares of Stock
subject to an Award or the exercise price of any Award.

 

ARTICLE
14

AMENDMENT, MODIFICATION, AND TERMINATION

 

14.1    AMENDMENT, MODIFICATION, AND TERMINATION.    With
the approval of the Board, at any time and from time to time, the Committee may
terminate, amend or modify the Plan; provided, however, that (i) to the
extent necessary and desirable to comply with any applicable law, regulation,
or stock exchange rule, the Company shall obtain stockholder approval of any
Plan amendment in such a manner and to such a degree as required, (ii) shareholder
approval is required for any amendment to the Plan that (A) increases the
number of shares available under the Plan (other than any adjustment as
provided by Article 13), (B) permits the Committee to grant Options
with an exercise price that is below Fair Market Value on the date of grant, (C) permits
the Committee to extend the exercise period for an Option beyond ten years from
the date of grant, or (D) permits the Committee to reprice previously
granted Options, and (iii) no such action shall be taken that would cause
all or part of the payment under any Award to be subject to the additional tax
under Section 409A of the Code.

 

14.2    AWARDS PREVIOUSLY GRANTED.    No
termination, amendment, or modification of the Plan shall adversely affect in
any material way any Award previously granted pursuant to the Plan without the
prior written consent of the Participant.

 

ARTICLE
15

GENERAL PROVISIONS

 

15.1    NO RIGHTS TO AWARDS.    No
Participant, employee, or other person shall have any claim to be granted any
Award pursuant to the Plan, and neither the Company nor the Committee is
obligated to treat Participants, employees, and other persons uniformly.

 

15.2    NO STOCKHOLDERS RIGHTS.    No
Award gives the Participant any of the rights of a stockholder of the Company
unless and until shares of Stock are in fact issued to such person in
connection with such Award.

 

15.3    WITHHOLDING.    The Company
or any Subsidiary shall have the authority and the right to deduct or withhold,
or require a Participant to remit to the Company, an amount sufficient to
satisfy Federal, state, and local taxes (including the Participant’s FICA
obligation) required by law to be withheld with respect to any taxable event
concerning a Participant arising as a result of this Plan. With the Committee’s
consent, a Participant may elect to (i) have the Company withhold from
those shares of Stock that would otherwise be received upon the exercise of any
Option, a number of shares having a Fair Market Value equal to the minimum
statutory amount necessary to satisfy the Company’s applicable federal, state,
local or foreign income and employment tax withholding obligations with respect
to such Participant, or (ii) tender previously-owned shares of Stock held
by the Participant for six months or longer to satisfy the Company’s applicable
federal, state, local, or foreign income and employment tax withholding
obligations with respect to the Participant.

 

 

15.4    NO RIGHT TO EMPLOYMENT OR SERVICES.    Nothing
in the Plan or any Award Agreement shall interfere with or limit in any way the
right of the Company or any Subsidiary to terminate any Participant’s
employment or services at any time, nor confer upon any Participant any right
to continue in the employ or service of the Company or any Subsidiary.

 

15.5    UNFUNDED STATUS OF AWARDS.    The
Plan is intended to be an “unfunded” plan for incentive compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award Agreement shall give the Participant
any rights that are greater than those of a general creditor of the Company or
any Subsidiary.

 

15.6    INDEMNIFICATION.    To the
extent allowable pursuant to applicable law, each member of the Committee or of
the Board shall be indemnified and held harmless by the Company from any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by
such member in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be
involved by reason of any action or failure to act pursuant to the Plan and
against and from any and all amounts paid by him or her in satisfaction of
judgment in such action, suit, or proceeding against him or her provided he or
she gives the Company an opportunity, at its own expense, to handle and defend
the same before he or she undertakes to handle and defend it on his or her own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled pursuant
to the Company’s Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.

 

15.7    RELATIONSHIP TO OTHER BENEFITS.    No
payment pursuant to the Plan shall be taken into account in determining any
benefits pursuant to any pension, retirement, savings, profit sharing, group
insurance, welfare or other benefit plan of the Company or any Subsidiary.

 

15.8    EXPENSES.    The expenses of
administering the Plan shall be borne by the Company and its Subsidiaries.

 

15.9    TITLES AND HEADINGS.    The
titles and headings of the Sections in the Plan are for convenience of
reference only and, in the event of any conflict, the text of the Plan, rather
than such titles or headings, shall control.

 

15.10    FRACTIONAL SHARES.    No
fractional shares of Stock shall be issued and the Committee shall determine,
in its discretion, whether cash shall be given in lieu of fractional shares or
whether such fractional shares shall be eliminated by rounding up or down as
appropriate.

 

15.11    SECURITIES LAW COMPLIANCE.    With
respect to any person who is, on the relevant date, obligated to file reports
pursuant to Section 16 of the Exchange Act, transactions pursuant to this
Plan are intended to comply with all applicable conditions of Rule 16b-3
or its successors pursuant to the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be void to the
extent permitted by law and voidable as deemed advisable by the Committee.

 

15.12    GOVERNMENT AND OTHER REGULATIONS.    The
obligation of the Company to make payment of awards in Stock or otherwise shall
be subject to all applicable laws, rules, and regulations, and to such
approvals by government agencies as may be required. The Company shall be under
no obligation to register pursuant to the Securities Act of 1933, as amended,
any of the shares of Stock paid pursuant to the Plan. If the shares paid
pursuant to the Plan may in certain circumstances be exempt from registration
pursuant to the Securities Act of 1933, as amended, the Company may restrict
the transfer of such shares in such manner as it deems advisable to ensure the
availability of any such exemption.

 

15.13    GOVERNING LAW.    The Plan
and all Award Agreements shall be construed in accordance with and governed by
the laws of the State of Maryland.

 

15.14    SECTION 409A.    If any
payments under this Plan are subject to the provisions of Section 409A of
the Code, it is intended that the terms of this Plan will comply fully with and
meet all the requirements of Section 409A of the Code.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00143-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00143-of-00352.parquet"}]]