Document:

edhibit10_2.htm

Exhibit 10.2

 

FOURTH AMENDMENT TO SENIOR SUBORDINATED NOTE

PURCHASE AND SECURITY AGREEMENT

 

THIS FOURTH AMENDMENT TO SENIOR SUBORDINATED NOTE PURCHASE AND SECURITY AGREEMENT dated as of February 28, 2011 (the “Amendment”) amends the Senior Subordinated Note Purchase and Security Agreement dated as of November 6, 2009 (as amended, the “Original Agreement”), by and among Mill Road Capital, L.P., a Delaware limited partnership (the “Holder”), Physicians Formula, Inc., a New York corporation (the “Borrower”), Physicians Formula Holdings, Inc., a Delaware corporation (“Holdings”) and the Guarantors party to the Original Agreement.

 

WHEREAS, the Holder, the Borrower, Holdings and the Guarantors desire to amend the Original Agreement to change the terms of the financial covenants under the Original Agreement;

 

WHEREAS, the Holder holds Notes representing at least a majority of the aggregate principal amount of the Notes outstanding on the date hereof;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties to this Amendment hereby agree as follows:

 

1. Defined Terms.  Capitalized terms used herein, unless specified otherwise, shall have the same meanings and/or references as contained in the Original Agreement.

 

2. Amendment to Original Agreement.  Sections 7.2(a), (b), (c) and (d) of the Original Agreement are amended and restated to read in their entirety as follows:

 

“(a)           Minimum Book Net Worth.  Borrower shall maintain its Book Net Worth during each period set forth below in an amount not less than the amount set forth below:

 

	
Month Ending

	
Minimum Book Net Worth

	December 31, 2010	$37,200,000
	 January 31, 2011	 $37,200,000
	February 28, 2011	 $37,200,000
	March 31, 2011 	 $38,400,000
	April 30, 2011	 $38,000,000
	 May 31, 2011	  $38,000,000
	 June 30, 2011	  $38,000,000
	 July 31, 2011	  $37,600,000
	 August 31, 2011	  $37,600,000
	 September 30, 2011	  $37,600,000
	 October 31, 2011	  $37,800,000
	 November 30, 2011	  $37,400,000
	 December 31, 2011	  $38,400,000
	 January 31, 2012	  $38,400,000
	 February 29, 2012	  $38,400,000

 

  

  

  

(b)           Minimum Adjusted EBITDA.

 

(i)           Borrower shall achieve Adjusted EBITDA each fiscal quarter, for the twelve-month period then ended, of not less than the amount set forth below for each such period:

 

 

	
12-Month Period Ending

	
Minimum Adjusted EBITDA

	December 31, 2010	$7,160,000
	March 31, 2011 	 $3,883,200
	 June 30, 2011	  $1,872,000
	 September 30, 2011	  $1,576,800
	 December 31, 2011	  $4,783,200

 

(ii)           In addition to the immediately preceding clause (i), Borrower shall achieve Adjusted EBITDA of not less than negative $300,000 for each two consecutive calendar quarter period, commencing with the quarter ending March 31, 2011, and continuing to be tested as of the end of each calendar quarter thereafter.

 

(c)           Capital Expenditures.  Borrower shall not incur or contract to incur Capital Expenditures of more than $5,400,000 for the fiscal year ending December 31, 2011.

 

(d)           Future Financial Covenants.  With respect to future periods not covered by the foregoing Sections 5.2(a), (b), and (c), Borrower and Holder agree to negotiate in good faith to establish, no later than April 30, 2012, minimum Book Net Worth, minimum Adjusted EBITDA, and maximum Capital Expenditures requirements for such future periods through the Maturity Date; provided that such requirements will reflect a 20% cushion from those agreed to with the Senior Lender for such future periods.”

 

3. Confirmation of Certain Terms and Other Matters.  Each of the Borrower, Holdings, the Guarantors and the Holder hereby ratify and confirm all terms and provisions of the Operative Documents and all other documents, instruments, or agreements executed in connection therewith and agree that, except as expressly amended herein, all of such terms and provisions remain in full force and effect.  The Borrower, Holdings, the Guarantors and the Holder hereby confirm and acknowledge that the obligations of the Borrower, Holdings and the Guarantors under the Original Agreement include all obligations and liabilities of the Borrower, Holdings and the Guarantors under the Original Agreement, as amended from time to time including, but not limited to, this Amendment.  Each of the Borrower, Holdings and the Guarantors also confirm and acknowledge that this Amendment and the documents, instruments or agreements executed in connection herewith, if any, shall constitute Operative Documents.  Except as expressly provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Operative Document and shall not be deemed to prejudice any right or rights which the Holder may now have or may have in the future under or in connection with any Operative Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time.

 

  

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4. Collateral Security.  Each of the Borrower, Holdings and the Guarantors further acknowledges and agrees that the Security Documents continue to secure the Borrower’s prompt, punctual and faithful payment and performance of (i) the Original Agreement, as amended by this Amendment and any future extensions, renewals, substitutions, modifications, amendments or replacements thereof; (ii) the Notes and any further extensions, renewals, substitutions, modifications, amendments or replacements of any thereof; (iii) any and all liabilities of the Borrower to the Holders (including, without limitation, those arising under the Operative Documents and this Amendment); (iv) any and all liabilities, debts and obligations, whether now existing or hereafter arising, or at any time owing by the Borrower to the Holders, including without limitation, costs, costs of collection, attorneys’ reasonable fees and all court and litigation costs and expenses, and (v) all sums, bearing interest at the rate provided in the Original Agreement, as modified, advanced to or on behalf of the Borrower by the Holders for any purposes, whether dependent or independent of this transaction, all of which shall be equally secured with and have the same priority as the original advances under the Notes.

 

5. Representations and Warranties.  Each of the Borrower, Holdings and the Guarantors hereby represent and warrant that except as otherwise disclosed on the list of “Exceptions to Representations” annexed hereto as Annex A:  (a) they have complied and are now in compliance with, all of the terms and provisions set forth in the Operative Documents, as amended, on their part to be observed and performed; (b) no Event of Default specified in Section 8.1 of the Original Agreement has occurred or is continuing or would occur as a result of the transactions contemplated by this Amendment; and (c) the execution, delivery and performance of this Amendment: (i) has been duly authorized by all requisite corporation action, (ii) will not violate either (x) any provision of law applicable to the Borrower, Holdings or any Guarantor, any governmental regulation, or its charter documents, or (y) any order of any court or other agency of government binding on the Borrower, Holdings or any Guarantor or any indenture, agreement, or other instrument to which the Borrower, Holdings or any Guarantor is a party, or by which they or any of its property is bound, and (iii) will not be in conflict with, result in a breach of, or constitute (with due notice and/or lapse in time) a default under, any such indenture, agreement, or other instrument.

 

6. Conditions to Holder’s Obligations.

 

(a) The Holder shall have received approving resolutions of the Board of Directors (or other appropriate governing body) of each of the Borrower, Holdings and the Guarantors, certified as of the date hereof by the Secretary of the Borrower, Holdings and the Guarantors, authorizing the execution and delivery by the Borrower, Holdings and the Guarantors of this Amendment and all documents referenced herein.

 

(b) The Borrower, Holdings and the Guarantors shall have executed and delivered to the Holder this Amendment.

 

(c) The Holder shall have received a certificate of a Responsible Officer of each of the Borrower and Holdings as to the accuracy of the Borrower’s and Holdings’ representations and warranties in the Original Note Purchase Agreement in all material respects and in this Amendment and as to such other matters as the Holder may reasonably request.

 

  

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(d) The Borrower shall have paid to the Holder all outstanding legal and other out of pocket fees and expenses incurred relative to the Holder’s relationship with the Borrower and all costs and fees associated with this Amendment.

 

(e) The Holder shall have received such other documents, certificates, instruments, and agreements from the Borrower as the Holder may reasonably request.

 

7. Miscellaneous.

 

(a) This Amendment shall be governed by, and construed and enforced in accordance with, the substantive laws of the State of New York, without regard to its principles of conflicts of laws.

 

(b) This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

(c) Each of the Borrower, Holdings and the Guarantors shall, from time to time, at its expense, execute and deliver to the Holder all such other and further instruments, agreements and documents and take or cause to be taken all such other and future action as the Holder shall reasonably request in order to effect and confirm or vest more securely all rights contemplated by this Amendment, the Original Agreement or any Operative Document.

 

[The remainder of this page is intentionally left blank.]

 

  

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

 

	 	
BORROWER:

	 
	 	PHYSICIANS FORMULA, INC.,	 
	 	a New York Corporation	 
	 	 	 	 
	 	By: 	/s/ Jeff Rogers 	 
	 	Name: 	Jeff Rogers 	 
	 	Title 	President 	 
	 	 	 	 
	 	 	 	 
	 	
GUARANTORS:

	 
	 	PHYSICIANS FORMULA HOLDINGS, INC.,	 
	 	a Delaware Corporation	 
	 	 	 	 
	 	By: 	/s/ Jeff Rogers 	 
	 	Name: 	Jeff Rogers 	 
	 	Title: 	President 	 
	 	 	 	 
	 	 	 	 
	 	PHYSICIANS FORMULA COSMETICS, INC., 	 
	 	a Delaware Corporation 	 
	 	 	 	 
	 	By: 	/s/ Jeff Rogers 	 
	 	Name: 	Jeff Rogers 	 
	 	Title: 	President 	 
	 	 	 	 
	 	 	 	 
	 	PHYSICIANS FORMULA DRTV, LLC	 
	 	a Delaware Limited Liability Company 	 
	 	 	 	 
	 	By: 	/s/ Jeff Rogers 	 
	 	Name: 	Jeff Rogers 	 
	 	Title: 	President 	 
	 	 	 	 
	 	 	 	 
	 	HOLDER:	 
	 	MILL ROAD CAPITAL, L.P., 	 
	 	a Delaware Limited Partnership 	 
	 	 	 	 
	 	By: 	/s/ Charles Goldman 	 
	 	Name: 	Charles Goldman 	 
	 	Title: 	Managing Director 	 

  

S-1EX-10.1

EXHIBIT 10.1

MATERION CORPORATION

Restricted Stock Units Agreement (Stock-Settled) 

WHEREAS,       , (the “Grantee”) is an employee of Materion Corporation, an Ohio
corporation (the “Corporation”) or a Subsidiary; and

WHEREAS, the execution of an agreement in the form hereof (this “Agreement”) has been
authorized by a resolution of the Compensation Committee (the “Committee”) of the Board of
Directors of the Corporation that was duly adopted on March 1, 2011.

NOW, THEREFORE, pursuant to the Corporation’s 2006 Stock Incentive Plan (the “Plan”), the
Corporation hereby confirms to the Grantee the grant, effective on May 4, 2011 (the “Date of
Grant”), of        Restricted Stock Units (as defined in the Plan) (“RSUs”), subject to the terms
and conditions of the Plan and the following additional terms, conditions, limitations and
restrictions:

ARTICLE I

DEFINITIONS

All terms used herein with initial capital letters that are defined in the Plan shall have the
meanings assigned to them in the Plan when used herein with initial capital letters.

ARTICLE II

CERTAIN TERMS OF RESTRICTED STOCK UNITS

1. RSUs Not Transferable. The RSUs covered by the Agreement shall not be transferable
other than by will or pursuant to the laws of descent and distribution prior to payment.

2. Vesting and Payment of RSUs.

(a) General. Subject to the provisions of Sections 2(b), 2(c) and 2(d) of this
Article II, all of the RSUs covered by this Agreement shall become nonforfeitable if the
Grantee shall have remained in the continuous employ of the Corporation or a Subsidiary for
three years from the Date of Grant and shall be payable by the issuance of Common Shares to
the Grantee on such date.

(b) Death or Disability. Notwithstanding the provisions of Section 2(a) of
this Article II, all of the RSUs covered by this Agreement shall immediately become
nonforfeitable and shall be immediately payable if the Grantee dies or becomes permanently
disabled (as hereinafter defined) while in the employ of the Corporation or a Subsidiary
during the three-year period from the Date of Grant. The Grantee shall be considered to
have become permanently disabled if the Grantee has suffered a permanent disability within
the meaning of the long-term disability plan in effect for, or applicable to, the Grantee
and is “disabled” within the meaning of Section 409A(a)(2)(C) of the Code.

(c) Retirement.

(i) If the Grantee should Retire (as hereinafter defined) one year or more
after the Date of Grant, notwithstanding the requirement of continuous employment
contained in Section 2(a) of this Article II, the RSUs covered by this Agreement
shall continue to vest and shall become payable three years from the Date of Grant,
provided that the RSUs shall be paid on any earlier date when payment would
otherwise have been made under Section 2 of this Article II if the Grantee had
continued employment through such date.

(ii) If the Grantee should Retire less than one year from the Date of Grant,
the RSUs covered by this Agreement shall be forfeited, unless the Committee
determines that such RSUs will continue to vest and become nonforfeitable three
years from the Date of Grant.

(iii) “Retire” shall mean the Grantee’s retirement from the Corporation or a
Subsidiary at (A) age 65 or older or (B) at age 55 or older with 10 or more years of
continuous employment with the Corporation or a Subsidiary.

(d) Change in Control.

(i) Notwithstanding Section 2(a) of this Article II above, the RSUs granted
hereby shall immediately become nonforfeitable and payable if at any time during the
employment of the Grantee and prior to the end of the three-year vesting period:

	 	(A)	 	a Change in Control shall occur after the Date
of Grant; and

	 	(B)	 	within two years following the Change in
Control the Grantee’s employment with the Corporation or a Subsidiary
is terminated by the Grantee as a Termination for Good Cause (as
defined in Section 2(f) of this Article) or the Grantee is
terminated by the Corporation other than as a Termination for Cause (as
defined in Section 2(e) of this Article II). If the Change in Control
constitutes a “change in control” for purposes of Section 409A of the
Code and if the Grantee incurs a “separation from service” for purposes
of Section 409A of the Code within two years following such Change in
Control, payment for the RSUs will be made upon the Grantee’s
separation from service, provided however, that if at
such time the Grantee is a “specified employee” as determined pursuant
to the identification methodology adopted by the Corporation in
compliance with Section 409A of the Code, the date of payment for the
RSUs shall be the first business day of the seventh month after the
date of the Grantee’s separation from service (or if earlier the
Grantee’s death). If payment is not made pursuant to the preceding
sentence because the Change in Control does not constitute a
“change-in-control” for purposes of Section 409A of the Code, then
payment shall be made at the earliest date that payment otherwise would
have been made under Section 2 of this Article II if no Change in
Control had occurred, assuming continued employment through such date.

(ii) Notwithstanding anything in this Section 2(d) to the contrary, in
connection with a Business Combination, the result of which is that the Outstanding
Corporation Voting Stock is exchanged for or becomes exchangeable for securities of
another entity, cash or a combination thereof, if the entity resulting from such
Business Combination does not assume the RSUs evidenced hereby and the Corporation’s
obligations hereunder, or replace the RSUs evidenced hereby with a substantially
equivalent security of the entity resulting from such Business Combination, then the
RSUs evidenced hereby shall become exercisable as of immediately prior to such
Business Combination. Payment for the RSUs will be upon such Change in Control;
provided, however, if the Change in Control does not constitute a
“change in control” for purposes of Section 409A(a)(2)(A)(v) of the Code, then
payment for the RSUs will be made upon the date that payment otherwise would have
been made under Section 2 of this Article II if no Change in Control had occurred,
assuming continued employment through such date.

(e) “Termination for Cause” means a termination of Grantee’s employment by
the Corporation for “Cause” (as defined in Section 7(f) of this Article II).

(f) “Termination for Good Cause” shall mean the Grantee’s termination of the Grantee’s
employment with the Corporation or a Subsidiary as a result of the occurrence of any of the
following:

(i) a change in the Grantee’s principal location of employment that is greater
than 50 miles from its location as of the date hereof without the Grantee’s consent;
provided, however, that the Grantee hereby acknowledges that the Grantee may be
required to engage in travel in connection with the performance of the Grantee’s
duties hereunder and that such travel shall not constitute a change in the Grantee’s
principal location of employment for purposes hereof;

(ii) a material diminution in the Grantee’s base compensation;

(iii) a change in the Grantee’s position with the Corporation without the
Grantee’s consent such that there is a material diminution in the Grantee’s
authority, duties or responsibilities; or

(iv) any other action or inaction that constitutes a material breach by the
Corporation of the agreement under which the Grantee provides services.

Notwithstanding the foregoing, the Grantee’s termination of the Grantee’s employment with the
Corporation as a result of the occurrence of any of the foregoing shall not constitute a
“Termination for Good Cause” unless (A) the Grantee gives the Corporation written notice of such
occurrence within 90 days of such occurrence and such occurrence is not cured by the Corporation
within 30 days of the date on which such written notice is received by the Corporation and (B) the
Grantee actually terminates his or her employment with the Corporation prior to the 365th day
following such occurrence.

3. Form and Time of Payment of RSUs. Except as otherwise provided for in Section 2 of
Article III, payment for the RSUs shall be made in form of the Common Shares at the time the RSUs
vest and become nonforfeitable or otherwise become payable in accordance with Section 2 of this
Article II. To the extent that the Corporation is required to withhold federal, state, local or
foreign taxes in connection with the delivery of Common Shares to the Grantee or any other person
under this Agreement, the number of Common Shares to be delivered to the Grantee or such other
person shall be reduced (based on the Market Value per Share ) as of the date the RSUs are reduced)
to provide for the taxes required to be withheld, with any fractional shares that would otherwise
be delivered being rounded up to the next nearest whole share. The Committee may, at its
discretion, adopt any alternative method of providing for taxes required to be withheld.

4. Forfeiture of RSUs. The RSUs shall be forfeited, except as otherwise provided in
Section 2(b), 2(c) or 2(d) of this Article II above, if the Grantee ceases to be employed by the
Corporation or a Subsidiary prior to three years from the Date of Grant.

5. Dividend Equivalents. From and after the Date of Grant and until the earlier of
(a) the time when the RSUs vest and become nonforfeitable and payable in accordance with Section 2
of this Article II or (b) the time when the Grantee’s right to receive Common Shares in payment of
the RSUs is forfeited in accordance with Section 4 of this Article II, on the date that the
Corporation pays a cash dividend (if any) to holders of Common Shares generally, the Grantee shall
be entitled to a number of additional whole RSUs determined by dividing (i) the product of (A) the
dollar amount of the cash dividend paid per Common Share on such date and (B) the total number of
RSUs (including dividend equivalents paid thereon) previously credited to the Grantee as of such
date, by (ii) the Market Value per Share on such date. Such dividend equivalents (if any) shall be
subject to the same terms and conditions and shall be paid or forfeited in the same manner and at
the same time as the RSUs to which the dividend equivalents were credited.

6. Effect of Detrimental Activity. Notwithstanding anything herein to the contrary,
if the Grantee, either during employment by the Corporation or a Subsidiary or within one year
after termination of such employment, shall engage in any Detrimental Activity, (as hereinafter
defined) and the Board shall so find, the Grantee shall:

(a) Forfeit all RSUs held by the Grantee.

(b) Return to the Corporation all Common Shares that the Grantee has not disposed of
that were paid out pursuant to this Agreement within a period of one year prior to the date
of the commencement of such Detrimental Activity.

(c) With respect to any Common Shares that the Grantee has disposed of that were paid
out pursuant to this Agreement within a period of one year prior to the date of the
commencement of such Detrimental Activity, pay to the Corporation in cash the value of such
Common Shares on the date such Common Shares were paid out.

(d) To the extent that the amounts referred to above in Section 6(b) and 6(c) of this
Article II are not paid to the Corporation, the Corporation may set off the amounts so
payable to it against any amounts that may be owing from time to time by the Corporation or
a Subsidiary to the Grantee, whether as wages, deferred compensation or vacation pay or in
the form of any other benefit or for any other reason, except that no setoff shall be
permitted against any amount that constitutes “deferred compensation” within the meaning of
Section 409A of the Code.

7. For purposes of this Agreement, the term “Detrimental Activity” shall include:

(a) (i) Engaging in any activity in violation of the Section entitled “Competitive
Activity; Confidentiality; Nonsolicitation” in the Severance Agreement between the
Corporation and the Grantee, if such agreement is in effect at the date hereof, or in
violation of any corresponding provision in any other agreement between the Corporation and
the Grantee in effect on the date hereof providing for the payment of severance
compensation; or

(ii) If no such severance agreement is in effect as of the date hereof or if a
severance agreement does not contain a Section corresponding to “Competitive
Activity; Confidentiality; Nonsolicitation”:

(A) Competitive Activity During Employment. Competing with the
Corporation anywhere within the United States during the term of the Grantee’s
employment, including, without limitation:

(I) entering into or engaging in any business which competes with the
business of the Corporation;

(II) soliciting customers, business, patronage or orders for, or
selling, any products or services in competition with, or for any business
that competes with, the business of the Corporation;

(III) diverting, enticing or otherwise taking away any customers,
business, patronage or orders of the Corporation or attempting to do so; or

(IV) promoting or assisting, financially or otherwise, any person,
firm, association, partnership, corporation or other entity engaged in any
business which competes with the business of the Corporation.

(B) Following Termination. For a period of one year following the
Grantee’s termination date:

(I) entering into or engaging in any business which competes with the
Corporation’s business within the Restricted Territory (as hereinafter
defined);

(II) soliciting customers, business, patronage or orders for, or
selling, any products or services in competition with, or for any business,
wherever located, that competes with, the Corporation’s business within the
Restricted Territory;

(III) diverting, enticing or otherwise taking away any customers,
business, patronage or orders of the Corporation within the Restricted
Territory, or attempting to do so; or

(IV) promoting or assisting, financially or otherwise, any person,
firm, association, partnership, corporation or other entity engaged in any
business which competes with the Corporation’s business within the
Restricted Territory.

For the purposes of Sections 7(a)(ii)(A) and (B) above, inclusive, but
without limitation thereof, the Grantee will be in violation thereof if the
Grantee engages in any or all of the activities set forth therein directly
as an individual on the Grantee’s own account, or indirectly as a partner,
joint venturer, employee, agent, salesperson, consultant, officer and/or
director of any firm, association, partnership, corporation or other entity,
or as a stockholder of any corporation in which the Grantee or the Grantee’s
spouse, child or parent owns, directly or indirectly, individually or in the
aggregate, more than five percent (5%) of the outstanding stock.

(C) “The Corporation.” For the purposes of this Section 7(a)(ii) of
Article II, the “Corporation” shall include any and all direct and indirect
subsidiaries, parents, and affiliated, or related companies of the Corporation for
which the Grantee worked or had responsibility at the time of termination of the
Grantee’s employment and at any time during the two year period prior to such
termination.

(D) “The Corporation’s Business.” For the purposes of this Section 7
of Article II inclusive, the Corporation’s business is defined to be the
manufacture, marketing and sale of high performance engineered materials serving
global telecommunications and computer, magnetic and optical data storage, aerospace
and defense, automotive electronics, industrial components and appliance markets, as
further described in any and all manufacturing, marketing and sales manuals and
materials of the Corporation as the same may be altered, amended, supplemented or
otherwise changed from time to time, or of any other products or services
substantially similar to or readily substitutable for any such described products
and services.

(E) “Restricted Territory.” For the purposes of Section 7(a)(ii)(B) of
Article II, the Restricted Territory shall be defined as and limited to:

(I) the geographic area(s) within a one hundred mile radius of any and
all of the Corporation’s location(s) in, to, or for which the Grantee
worked, to which the Grantee was assigned or had any responsibility (either
direct or supervisory) at the time of termination of the Grantee’s
employment and at any time during the two-year period prior to such
termination; and

(II) all of the specific customer accounts, whether within or outside
of the geographic area described in (I) above, with which the Grantee had
any contact or for which the Grantee had any responsibility (either direct
or supervisory) at the time of termination of the Grantee’s employment and
at any time during the two-year period prior to such termination.

(F) Extension. If it shall be judicially determined that the Grantee
has violated any of the Grantee’s obligations under Section 7(a)(ii)(B) of Article
II, then the period applicable to each obligation that the Grantee shall have been
determined to have violated shall automatically be extended by a period of time
equal in length to the period during which such violation(s) occurred.

(b) Non-Solicitation. Except as otherwise provided in Section 7(a)(i) of
Article II, Detrimental Activity shall also include directly or indirectly at any time
soliciting or inducing or attempting to solicit or induce any employee(s), sales
representative(s), agent(s) or consultant(s) of the Corporation and/or of its parents, or
its other subsidiaries or affiliated or related companies to terminate their employment,
representation or other association with the Corporation and/or its parent or its other
subsidiary or affiliated or related companies.

(c) Further Covenants. Except as otherwise provided in Section 7(a)(i) of
Article II, Detrimental Activity shall also include:

(i) directly or indirectly, at any time during or after the Grantee’s
employment with the Corporation, disclosing, furnishing, disseminating, making
available or, except in the course of performing the Grantee’s duties of employment,
using any trade secrets or confidential business and technical information of the
Corporation or its customers or vendors, including without limitation as to when or
how the Grantee may have acquired such information. Such confidential information
shall include, without limitation, the Corporation’s unique selling, manufacturing
and servicing methods and business techniques, training, service and business
manuals, promotional materials, training courses and other training and
instructional materials, vendor and product information, customer and prospective
customer lists, other customer and prospective customer information and other
business information. The Grantee specifically acknowledges that all such
confidential information, whether reduced to writing, maintained on any form of
electronic media, or maintained in the Grantee’s mind or memory and whether compiled
by the Corporation, and/or the Grantee, derives independent economic value from not
being readily known to or ascertainable by proper means by others who can obtain
economic value from its disclosure or use, that reasonable efforts have been made by
the Corporation to maintain the secrecy of such information, that such information
is the sole property of the Corporation and that any retention and use of such
information by the Grantee during the Grantee’s employment with the Corporation
(except in the course of performing the Grantee’s duties and obligations to the
Corporation) or after the termination of the Grantee’s employment shall constitute a
misappropriation of the Corporation’s trade secrets.

(ii) Upon termination of the Grantee’s employment with the Corporation, for any
reason, the Grantee’s failure to return to the Corporation, in good condition, all
property of the Corporation, including without limitation, the originals and all
copies of any materials which contain, reflect, summarize, describe, analyze or
refer or relate to any items of information listed in Section 7(c)(i) of Article II
of this Agreement.

(d) Discoveries and Inventions. Except as otherwise provided in Section
7(a)(i) of Article II, Detrimental Activity shall also include the failure or refusal of the
Grantee to assign to the Corporation, its successors, assigns or nominees, all of the
Grantee’s rights to any discoveries, inventions and improvements, whether patentable or not,
made, conceived or suggested, either solely or jointly with others, by the Grantee while in
the Corporation’s employ, whether in the course of the Grantee’s employment with the use of
the Corporation’s time, material or facilities or that is in any way within or related to
the existing or contemplated scope of the Corporation’s business. Any discovery, invention
or improvement relating to any subject matter with which the Corporation was concerned
during the Grantee’s employment and made, conceived or suggested by the Grantee, either
solely or jointly with others, within one year following termination of the Grantee’s
employment under this Agreement or any successor agreements shall be irrebuttably presumed
to have been so made, conceived or suggested in the course of such employment with the use
of the Corporation’s time, materials or facilities. Upon request by the Corporation with
respect to any such discoveries, inventions or improvements, the Grantee will execute and
deliver to the Corporation, at any time during or after the Grantee’s employment, all
appropriate documents for use in applying for, obtaining and maintaining such domestic and
foreign patents as the Corporation may desire, and all proper assignments therefor, when so
requested, at the expense of the Corporation, but without further or additional
consideration.

(e) Work Made For Hire. Except as otherwise provided in Section 7(a)(i) of
Article II, Detrimental Activity shall also include violation of the Corporation’s rights in
any or all work papers, reports, documentation, drawings, photographs, negatives, tapes and
masters therefore, prototypes and other materials (hereinafter, “items”), including without
limitation, any and all such items generated and maintained on any form of electronic media,
generated by Grantee during the Grantee’s employment with the Corporation. The Grantee
acknowledges that, to the extent permitted by law, all such items shall be considered a
“work made for hire” and that ownership of any and all copyrights in any and all such items
shall belong to the Corporation. The item will recognize the Corporation as the copyright
owner, will contain all proper copyright notices, e.g., “(creation date) [Corporation’s
Name], All Rights Reserved,” and will be in condition to be registered or otherwise placed
in compliance with registration or other statutory requirements throughout the world.

(f) Termination for Cause. Except as otherwise provided in Section 8(a)(i) of
Article II, Detrimental Activity shall also include activity that results in termination for
Cause. For the purposes of this Section, “Cause” shall mean that, the Grantee shall have:

(i) been convicted of a criminal violation involving fraud, embezzlement, theft
or violation of federal antitrust statutes or federal securities laws in connection
with his duties or in the course of his employment with the Corporation or any
affiliate of the Corporation;

(ii) committed intentional wrongful damage to property of the Corporation or
any affiliate of the Corporation; or

(iii) committed intentional wrongful disclosure of secret processes or
confidential information of the Corporation or any affiliate of the Corporation;

and any such act shall have been demonstrably and materially harmful to the
Corporation.

(g) Other Injurious Conduct. Detrimental Activity shall also include any
action contributing to a restatement of the Corporation’s financials if this award of RSUs
to the Grantee is favorably affected by such restatement as provided under Section 10D of
the Exchange Act and any applicable rules or regulations promulgated by the Securities and
Exchange Commission or any national securities exchange or national securities association
on which the Common Shares may be traded, and any other conduct or act determined to be
injurious, detrimental or prejudicial to any significant interest of the Corporation or any
subsidiary unless the Grantee acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation.

(h) Reasonableness. The Grantee acknowledges that the Grantee’s obligations
under this Section 7 of Article II are reasonable in the context of the nature of the
Corporation’s business and the competitive injuries likely to be sustained by the
Corporation if the Grantee were to violate such obligations. The Grantee further
acknowledges that this Agreement is made in consideration of, and is adequately supported by
the agreement of the Corporation to perform its obligations under this Agreement and by
other consideration, which the Grantee acknowledges constitutes good, valuable and
sufficient consideration.

ARTICLE III

GENERAL PROVISIONS

1. Compliance with Law. The Corporation shall make reasonable efforts to comply with
all applicable federal and state securities laws.

2. Dilution and Other Adjustments. The Committee shall make such adjustments in the
RSUs covered by this Agreement as such Committee in its sole discretion, exercised in good faith,
may determine is equitably required to prevent dilution or enlargement of the rights of the Grantee
that otherwise would result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Corporation, or (b) any merger,
consolidation, spin-off, reorganization, partial or complete liquidation or other distribution of
assets, or issuance of warrants or other rights to purchase securities, or (c) any other corporate
transaction or event having an effect similar to any of the foregoing. In the event of any such
transaction or event, the Committee may provide in substitution for this award of RSUs such
alternative consideration as it may in good faith determine to be equitable under the circumstances
and may require in connection therewith the surrender of this award of RSUs so replaced.

3. Continuous Employment. For purposes of this Agreement, the continuous employment
of the Grantee with the Corporation or a Subsidiary shall not be deemed to have been interrupted,
and the Grantee shall not be deemed to have ceased to be an employee of the Corporation or a
Subsidiary, by reason of the transfer of his employment among the Corporation and its Subsidiaries
or a leave of absence approved by the Board.

4. No Employment Contract; Right to Terminate Employment. The grant of the RSUs to
the Grantee is a voluntary, discretionary award being made on a one-time basis and it does not
constitute a commitment to make any future awards. The grant of the RSUs and any payments made
hereunder will not be considered salary or other compensation for purposes of any severance pay or
similar allowance, except as otherwise required by law. Nothing in this Agreement will give the
Grantee any right to continue employment with the Corporation or any Subsidiary, as the case may
be, or interfere in any way with the right of the Corporation or a Subsidiary to terminate the
employment of the Grantee at any time.

5. Relation to Other Benefits. Any economic or other benefit to the Grantee under
this Agreement or the Plan shall not be taken into account in determining any benefits to which the
Grantee may be entitled under any profit-sharing, retirement or other benefit or compensation plan
maintained by the Corporation or a Subsidiary and shall not affect the amount of any life insurance
coverage available to any beneficiary under any life insurance plan covering employees of the
Corporation or a Subsidiary.

6. Information. Information about the Grantee and the Grantee’s participation in the
Plan may be collected, recorded and held, used and disclosed for any purpose related to the
administration of the Plan. The Grantee understands that such processing of this information may
need to be carried out by the Corporation and its Subsidiaries and by third party administrators
whether such persons are located within the Grantee’s country or elsewhere, including the United
States of America. The Grantee consents to the processing of information relating to the Grantee
and the Grantee’s participation in the Plan in any one or more of the ways referred to above.

7. Amendments. Any amendment to the Plan shall be deemed to be an amendment to this
Agreement to the extent that the amendment is applicable hereto; provided, however,
that no amendment shall adversely affect the rights of the Grantee under this Agreement without the
Grantee’s consent. Notwithstanding the foregoing, the limitation requiring the consent of a
Grantee to certain amendments shall not apply to any amendment that is deemed necessary by the
Corporation to ensure compliance with Section 409A of the Code.

8. Severability. In the event that one or more of the provisions of this Agreement
shall be invalidated for any reason by a court of competent jurisdiction, any provision so
invalidated shall be deemed to be separable from the other provisions hereof, and the remaining
provisions hereof shall continue to be valid and fully enforceable.

9. Governing Law. This agreement is made under, and shall be construed in accordance
with, the internal substantive laws of the State of Ohio.

10. Compliance with Section 409A of the Code. To the extent applicable, it is
intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code,
so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the
Grantee. This Agreement and the Plan shall be administered in a manner consistent with this
intent. Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of
1986, as amended, and will also include any regulations or any other formal guidance promulgated
with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue
Service.

11. Relation to Severance Agreement. Section 2(d) of Article II hereof shall
supersede the provisions of any Severance Agreement between the Grantee and the Corporation, in
effect at the Date of Grant, providing for earlier vesting of the RSUs granted hereby in the event
of a Change in Control.

The undersigned Grantee hereby accepts the award granted pursuant to this Agreement on the
terms and conditions set forth herein.

Dated:

Grantee

Executed in the name of and on behalf of the Corporation at Mayfield Heights, Ohio as of this
     day of      , 2011.

BRUSH ENGINEERED MATERIALS INC.

By

[NAME]

[TITLE]

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