Document:

EX-10.3 FORM OF RESTIRCTED STOCK UNIT GRANT

 

Exhibit 10.3

ARRIS GROUP, INC.

                                                            
PLAN

Restricted Stock Unit Grant

Participant:      
               
               
     

No. of Units subject to

Restricted Stock Unit Grant:            
         

     THIS RESTRICTED
STOCK UNIT GRANT (this “Grant”) dated as of the        
              day of  
                  
  
               
   ,
 20                
    , is made by ARRIS Group, Inc., a Delaware corporation (the “Company”),
to the participant
named above (the “Participant”), pursuant and subject to the provisions of the plan referenced
above (the “Plan”). All terms used herein that are defined in the Plan have the same meaning given
them in the Plan. Paragraph 22 of this Grant provides definitions of additional terms used herein.

     1. Grant of Restricted Stock Units. Pursuant to the Plan, the Company, on
                
                
        , 20        
              (the “Date of Grant”), granted to the Participant, subject to the terms and
conditions of the Plan and subject further to the terms and conditions set forth herein, an award
of the number of restricted stock units set forth above (the “RSUs”).

     2. Restrictions. Except as otherwise provided in this Grant, the RSUs are
nontransferable and are subject to a substantial risk of forfeiture.

     3. No Shareholder Rights. Before shares of the common stock of the Company, par value
$0.01 per share (the “Shares”), are issued upon conversion as provided herein, the Participant will
have none of the rights of a shareholder in the Shares, including without limitation, the right to
vote the Shares or to receive dividends and distributions thereon. Additionally, during such
period, the Participant may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose
of RSUs or Shares, which shall remain subject to a substantial risk of forfeiture and
nontransferable as described in this Grant. Notwithstanding the preceding sentence, the
Participant may designate a beneficiary or beneficiaries to receive, in the event of the
Participant’s death, any rights to which the Participant would be entitled under this Grant. Such
designation shall be filed with the Company, and may be changed or revoked, all in accordance with
uniform procedures specified by the Committee.

     4. Vesting. The Participant’s interest in the RSUs shall become vested (“Vested”) at
the time or times set forth on Exhibit A attached hereto.  If the Participant ceases to be
employed by the Company or any Affiliate for any reason (except as may be provided on Exhibit
A), all RSUs that are not then Vested shall be forfeited, without any payment whatsoever to the
Participant.

     5. Conversion. Except as provided in paragraph 6 and subject to paragraph 20, the
Company shall issue to Participant one Shares for each RSU that has Vested in accordance with
paragraph 4. This obligation is an unsecured obligation of the Company.

 

 

     6. Securities Law Restrictions.

     (a) Notwithstanding any other provision of this Grant, no Shares shall be issued and no
certificates for Shares shall be delivered except in compliance with all applicable federal
and state laws and regulations (including, without limitation, withholding tax
requirements), any listing agreement to which the Company is a party, and the rules of all
domestic stock exchanges on which the Company’s Shares may be listed. The Company shall
have the right to rely on an opinion of its counsel as to such compliance. Any stock
certificate evidencing Shares issued pursuant to this Grant may bear such legends and
statements as the Committee may deem advisable to assure compliance with federal and state
laws and regulations and to reflect any other restrictions applicable to such shares as the
Committee otherwise deems appropriate. No Shares shall be issued and no certificates for
Shares shall be delivered until the Company has obtained such consent or approval as the
Committee may deem advisable from regulatory bodies having jurisdiction over such matters.

     (b) Notwithstanding any other provision of this Grant, the Committee may postpone the
issuance of Shares for such time as the Committee in its sole discretion may deem necessary
in order to permit the Company (i) to effect, amend or maintain any necessary registration
of the Plan or the Shares subject to this Grant under the securities laws; (ii) to take any
action in order to (A) list such Shares on a stock exchange if Shares are not then listed on
such exchange or (B) comply with restrictions or regulations incident to the maintenance of
a public market for its Shares, including any rules or regulations of any stock exchange on
which the Shares are listed; (iii) to determine that such Shares are exempt from such
registration or that no action of the kind referred to in (ii)(B) above needs to be taken;
(iv) to comply with any other applicable law, including without limitation, securities laws;
(v) to comply with any legal or contractual requirements during any such time the Company or
any Affiliate is prohibited from doing any of such acts under applicable law, including
without limitation, during the course of an investigation of the Company or any Affiliate,
or under any contract, loan Grant or covenant or other Grant to which the Company or any
Affiliate is a party or (vi) to otherwise comply with any prohibition on such acts or
payments during any applicable blackout period; and the Company shall not be obligated by
virtue of any terms and conditions of the Grant or any provision of the Plan to recognize
the grant or vesting of any RSUs or to issue Shares in violation of the securities laws or
the laws of any government having jurisdiction thereof or any of the provisions hereof. Any
such postponement shall not extend the term of the RSUs (unless expressly agreed to by the
Company) and neither the Company nor its directors and officers nor the Committee shall have
any obligation or liability to the Participant or to any other person with respect to RSUs
or Shares as to which this award shall lapse because of such postponement.

     7. Additional Restrictions. The Participant can only become Vested in RSUs or receive
Shares during the Participant’s lifetime. Neither this grant of RSUs nor the Participant’s right
or interest in any Shares shall be liable for, or subject to, any lien, obligation or liability of
the Participant. To the extent that the Company adopts, pursuant to Section 304 of the
Sarbanes-Oxley Act of 2002 or otherwise, a plan generally applicable to the company’s senior
management that provides for the forfeiture or repayment of bonuses, incentive-based or equity-

2

 

based compensation or proceeds from the sale of Company securities, as a result of
non-compliance with securities laws or other misconduct, whether by the Participant or some other
person, the RSUs, Shares and proceeds there from shall be subject to forfeiture or repayment in
accordance wit the terms of such plan.

     8. Delivery of Certificates. Subject to the other terms and conditions hereof, within
ten (10) days after RSUs convert into Shares, the Company will deliver to the Participant the stock
certificates evidencing the Shares.

     9. Non-Competition and Non-Solicitation Grant. By accepting the RSUs, the Participant
agrees as follows:

     (a) During employment and for a period of four (4) months from the date of termination
of the Participant’s employment with the Company and its Affiliates for any reason
whatsoever, the Participant will not, directly or indirectly, compete with the Company or
any Affiliate by providing to any entity that is in a Competing Business services
substantially similar to the services provided by the Participant at the time of
termination.

     (b) During employment and for a period of two (2) years after the termination of the
Participant’s employment with the Company and its Affiliates for any reason whatsoever, the
Participant will not, on his own behalf or on behalf of any other person, partnership,
association, corporation or other entity, solicit or in any manner attempt to influence or
induce any employee of the Company or its Affiliates (known by the Participant to be such)
to leave the employment of the Company or its Affiliates, nor shall the Participant use or
disclose to any person, partnership, association, corporation or other entity any
information obtained while an employee of the Company or any Affiliate concerning the name
and addresses of the Company’s or any Affiliate’s employees.

If the Participant violates any of the provisions of (a) or (b) of this paragraph 9, the
Participant shall pay the Company any profits the Participant received as a result of the Vesting
of the RSUs, provided that the RSUs became Vested subsequent to six months prior to termination of
the Participant’s employment.

     10. Agreement to Terms of the Plan and Grant. The Participant has received a copy of
the Plan, has read and understands the terms of the Plan and this Grant, and by accepting the RSU
(which acceptance shall conclusively be evidenced by either the failure of Participant to promptly
reject this Grant following receipt or Participant’s acceptance of any benefits hereunder) agrees
to be bound by their terms and conditions.

     11. Fractional Shares. Fractional Shares shall not be issuable hereunder, and when
any provision hereof may entitle the Participant to a fractional Share, such fractional Share shall
be rounded up to the nearest whole Share.

     12. Change in Capital Structure. The terms of the RSUs shall be adjusted in
accordance with the terms and conditions of the Plan as the Committee determines is equitably
required in the event the Company effects one or more stock dividends, subdivisions or

3

 

consolidations of Shares, reorganizations, recapitalizations, spin-offs or other similar
changes in capitalization.

     13. Notice. Any notice or other communication given pursuant to this Grant, or in any
way with respect to the RSUs, shall be in writing and shall be personally delivered or mailed by
United States registered or certified mail, postage prepaid, return receipt requested, to the
following addresses or such other address as the addressee may provide to the other party in
writing:

	 	 	 	 	 
	 

	 	If to the Company:
	 	ARRIS Group, Inc.
	 

	 	 	 	3871 Lakefield Drive
	 

	 	 	 	Suwanee, Georgia 30024
	 

	 	 	 	Attn: Secretary
	 
	 	 	 	 
	 

	 	If to the Participant:
	 	The address of the Participant as it
appears in the employment records of the Company

     14. No Right to Continued Employment. Neither this Grant nor the RSUs confer upon the
Participant any right with respect to continued employment by the Company or any Affiliate, nor
shall it interfere in any way with the right of the Company or any Affiliate to terminate the
Participant’s employment at any time without assigning a reason therefor.

     15. Impact on Other Plans and Arrangements. The determination of whether the value of
the RSUs or Shares will be included or excluded in calculating any severance, resignation,
redundancy, end of service payments, bonuses or long-service awards, any payments or benefits under
any pension or retirement plans or any other compensation or benefits will be based on the terms of
the applicable plan, program or arrangement. If such plan, program or arrangement would not
otherwise require the inclusion of RSUs or Shares in such calculation, then the RSUs and Shares
shall be excluded from such calculation.

     16. Binding Effect. Subject to the limitations stated above and in the Plan, this
Grant shall be binding upon and inure to the benefit of the legatees, distributees, transferees and
personal representatives of the Participant and the successors of the Company.

     17. Conflicts. In the event of any conflict between the provisions of the Plan and
the provisions of this Grant, the provisions of the Plan shall govern. All references herein to
the Plan shall mean the Plan as in effect on the date hereof.

     18. Governing Law. This Grant shall be governed by the laws of the State of Delaware,
except to the extent federal law applies.

     19. Tax Consequences and Section 409A. The Participant acknowledges that there may be
tax consequences upon the vesting of the RSUs and the receipt of Shares and that the Participant
should consult a tax advisor. The RSUs and Shares are intended to be exempt from the requirements
of Section 409A of the Code. Notwithstanding the preceding, the Company and its Affiliates shall
not be liable to the Participant or any other person if the Internal Revenue Service or any court
or other authority having jurisdiction over such matter determines for any

4

 

reason that this Grant is subject to taxes, penalties or interest as a result of failing to
comply with Section 409A of the Code.

     20. Withholding Obligations. At the applicable time, the Participant shall remit to
the Company amounts sufficient to satisfy any federal, state or local withholding tax requirements
before the delivery of any certificate or certificates for Shares by making payment in cash or cash
equivalent or such other form of payment acceptable to the Committee (which may include Shares) or
shall arrange for the withholding from other payments due the Participant of the applicable
amounts.

     21. Amendment or Termination. This Grant may be amended or terminated at any time by
the mutual Grant and written consent of the Participant and the Company, but only to the extent
permitted under the Plan.

     22. Definitions. For purposes of this Grant, the following words shall have the
meanings set forth below:

     (a) “Affiliate” means any entity that is part of a controlled group of
corporations or is under common control with the Company within the meaning of Code Sections
1563(a), 414(b) or 414(c), except that, in making any such determination, 50 percent shall
be substituted for 80 percent under such Code Sections and the related regulations.

     (b) “Cause” shall have the same meaning as under any employment agreement
between the Company or any Affiliate and the Participant or, if no such employment agreement
exists or if such employment agreement does not contain any such definition, Cause means
Participant’s termination of employment by the Company or any Affiliate by reason of his or
her misconduct in respect of the Participant’s obligations to the Company or Affiliate,
including, but not limited to, the Participant’s dishonesty, disloyalty, insubordination,
unsatisfactory performance, or failure to follow policies, rules, or procedures of the
Company or Affiliate.

     (c) “Change in Control” means (1) any Person (as such term is used in Section
13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) becomes the
“beneficial owner” (as determined pursuant to Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company’s then outstanding securities; or (2) during any period
of twelve (12) consecutive months, individuals who at the beginning of such period
constitute the members of the board of directors of the corporation and any new director,
whose election to the board or nomination for election to the board of directors by the
corporation’s stockholders was approved by a vote of a majority of the directors then still
in office who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to constitute a
majority of the board of directors (for this purpose “corporation” shall be determined in
accordance with Treas. Reg. Section 1.409A-3(i)(5)(vi)(A)(2)); or (3) the Company shall
merge with or consolidate into any other corporation, other than a merger or consolidation
which would result in the holders of the

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voting securities of the Company outstanding immediately prior thereto holding
immediately thereafter securities representing more than fifty percent (50%) of the combined
voting power of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (4) the sale or disposition of all or
substantially all of the Company’s assets during a period of twelve (12) consecutive months
to any Person. Whether a Change in Control shall have occurred shall be determined in
accordance with Section 409A(a)(2)(A)(v) of the Code and the regulations thereunder.

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

     (e) “Competing Business” means any business that engages, in whole or in part,
in the equipment and supply for broadband communications systems in the United States.

     (f) “Disabled” means fully and permanently disabled within the meaning of the
Company’s group long term disability plan then in effect. The Committee, in its sole
discretion, shall determine whether the Participant is Disabled for purposes of this Grant.

     IN WITNESS WHEREOF, the Company has caused this Grant to be signed by a duly authorized
officer.

	 	 	 	 	 	 	 
	 	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	ARRIS GROUP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 

6

 

EXHIBIT A

Vesting Provisions

 

     Except as provided in paragraph 5 of the Grant, the Participant’s interest in RSUs shall Vest
as set forth below.  For purposes of the Grant, including the vesting provisions in this
Exhibit A, the Participant will be deemed to have terminated employment as of his or her
last day of active work for the Company and its Affiliates; provided, however, that the Participant
shall be deemed to be actively at work during any period the Participant is on approved paid
medical leave or during the protected reemployment period applicable to military leave. To the
extent, under General Vesting below both Service-Based and Performance-Based Vesting are indicated,
Vesting shall occur only when both Vesting conditions are met.

I. General Vesting

Service-Based Vesting

[   ]  The RSUs shall become Vested as set forth below:

 

	 	 	 
	Percentage of Shares That Vest	 	Vesting Date
	 
	 	 
	 
	 	 
	 
	 	 

Performance -Based Vesting

[   ]  The RSUs shall Vest with respect to the percentage of shares of Restricted Stock set forth
below with respect to each applicable vesting date, provided that, at each such time, (a) the
Participant is still employed by the Company or any Affiliate and (b) the performance measures set
forth below have been met and certified by the Committee.  [Notwithstanding the foregoing, if the
applicable performance measures are not met at a specified vesting date, but the cumulative
performance measures are met at a subsequent vesting date, then the RSUs shall Vest with respect to
that percentage of shares specified for the applicable vesting date plus the percentage of shares
for prior vesting dates that did not Vest solely because of a failure to meet the performance
measures for the prior vesting dates.]

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Percentage of RSUs	 	[Cumulative Performance
	Vesting Date	 	Performance Target	 	Vested	 	Target]

7

 

II. Accelerated Vesting

Accelerated Vesting on Death

[   ]  Notwithstanding the foregoing, one-hundred percent (100%) of the RSUs shall Vest if the
Participant dies or becomes Disabled while still employed by the Company or any Affiliate. 
 

Accelerated Vesting on Disability

[   ]  Notwithstanding the foregoing, one-hundred percent (100%) of the shares of the RSUs shall
Vest if the Participant dies or becomes Disabled while still employed by the Company or any
Affiliate. 
 

Accelerated Vesting On Retirement

[   ]  Notwithstanding the foregoing, one-hundred percent (100%) of the RSUs shall Vest if the
Participant voluntarily terminates employment with the Company and its Affiliates after reaching
age      .
 

Accelerated Vesting on Change in Control

[   ]  Notwithstanding the foregoing, one-hundred percent (100%) of the RSUs shall Vest (a) if,
following a Change in Control, Participant is discharged from employment with the Company or any
Affiliate other than for Cause or (b) as otherwise provided in any employment agreement between the
Company or any Affiliate and the Participant.

8Exhibit 10.1

 

	 	 	 
	 

	 	SETTLEMENT AGREEMENT, dated this 11th day of April,
2008 (this “Agreement”), by and among Steel Partners
II, L.P., Steel Partners II GP LLC, Steel Partners II
Master Fund L.P., Steel Partners LLC, Warren G.
Lichtenstein, James R. Henderson, John J. Quicke,
Kevin C. King, Don DeFosset and Delyle Bloomquist
(the foregoing individuals and entities being
collectively referred to herein as the “Steel
Partners Group”), and EnPro Industries, Inc., a North
Carolina corporation (the “Company”).

     WHEREAS, the Steel Partners Group (i) is engaged in a solicitation of proxies for the election
of an opposition slate of nominees (the “Contested Election”) to the Company’s Board of Directors
(the “Board”) at the 2008 annual meeting of shareholders of the Company (the “2008 Annual Meeting”)
and (ii) has taken certain actions in furtherance thereof, including but not limited to filing a
definitive proxy statement with the United States Securities and Exchange Commission (the “SEC”) on
March 26, 2008 (the “Steel Partners Group Proxy Statement”) and, in the letter dated as of February
12, 2008 and other communications related thereto, requesting to inspect certain of the Company’s
books and records pursuant to Section 55-16-02 of the North Carolina Business Corporation Act (such
letter and related requests, the “Demand”); and

     WHEREAS, the Company and the members of the Steel Partners Group have determined that the
interests of the Company and its shareholders would be best served at this time by, among other
things, avoiding the Contested Election and the substantial expense and disruption that may result
therefrom.

     NOW, THEREFORE, in consideration of the foregoing premises and the respective representations,
warranties and agreements hereinafter set forth, and, intending to be legally bound hereby, the
parties hereby agree as follows:

     Section 1. Board Composition; Charter Amendment; Recommendation; Revised Proxy
Statement.

          (a) The Company and the Steel Partners Group agree that there shall be 8 nominees to the Board
for election at the 2008 Annual Meeting. Such nominees shall be William R. Holland, Stephen E.
Macadam, J.P. Bolduc, Peter C. Browning, Joe T. Ford, Gordon D. Harnett, David L. Hauser and Wilbur
J. Prezzano, Jr. (the “Nominees”). If any of such individuals shall be unwilling or unable to
serve as directors, the Board may nominate such substitute nominees as it deems appropriate in its
sole discretion (any such substitute nominee shall also be referred to as a Nominee for purposes of
this Agreement). The Board shall recommend at the 2008 Annual Meeting that the shareholders of the
Company vote to elect the Nominees as directors of the Company.

          (b) The Board has taken all action necessary to provide that, effective at the close of
business on the second business day following the completion of the 2008 Annual Meeting (the
“Vacancy Date”), the size of the Board shall be reset from eight (8) to nine (9) directors and,
subject to Section 3(b), Don DeFosset shall be appointed to fill the vacancy created by such
increase in the size of the Board. Other than as provided in this Section 1(b), the Board will not
increase the size of the Board prior to the annual meeting of Company shareholders in 2009 (the
“2009 Annual Meeting”).

 

 

          (c) The Company shall submit a proposal (the “Article 5 Proposal”) to its shareholders at the
2008 Annual Meeting to amend and restate Article 5(a) and 5(b) of the Company’s Restated Articles
of Incorporation as follows:

          “(a) The number of the directors of the Corporation shall be not less than
five (5) nor more than eleven (11). The number of directors of the Corporation may
be increased or decreased, from time to time, within the range above specified, by
the Board of Directors and by the shareholders by a majority of the votes then
entitled to be cast for the election of directors; provided, however, that the
tenure of office of a director shall not be affected by any decrease in the number
of directors so made by the Board of Directors or the shareholders.

          (b) (i) Those persons who receive the highest number of votes at a
shareholders meeting at which a quorum is present shall be deemed to have been
elected.

               (ii) A director shall hold office until the annual meeting for the year in
which his or her term expires and until his or her successor shall be elected and
shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.

               (iii) Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred shares issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of shareholders, the election, term of office, filling of vacancies
and other features of such directorships shall be governed by the terms of these
Articles of Incorporation or the resolution or resolutions adopted by the Board of
Directors pursuant to Article 2(b) of these Articles of Incorporation applicable
thereto.”

The Board shall recommend in its Revised Proxy Statement (as hereinafter defined in Section
1(e)) and at the 2008 Annual Meeting that the shareholders of the Company vote to approve
the Article 5 Proposal.

          (d) The Company shall set a new record date of April 24, 2008 (the “Record Date”) and
meeting date of June 9, 2008 (the “Meeting Date”) for the 2008 Annual Meeting; provided,
however, that if the Company has not received the requisite number of votes necessary to
approve the Article 5 Proposal by June 9, 2008, the Meeting Date will be adjourned (by
keeping the polls open but for no other purpose) as reasonably necessary for up to thirty
(30) days to allow the Company to solicit the additional votes necessary to approve the
Article 5 Proposal.

          (e) As promptly as practicable following the date hereof, the Company shall prepare and file
with the SEC a revised proxy statement (the “Revised Proxy Statement”) that will replace the
Company’s definitive proxy statement, dated as of March 25, 2008 (the “Existing Proxy Statement”).
The Revised Proxy Statement will give effect to the foregoing items (a), (c) and (d) of this
Section 1 and the Company shall mail the Revised Proxy Statement concurrently therewith as soon as
practicable following the Record Date to the Company’s shareholders. Thereafter, the Company shall
(i) solicit proxies in accordance with the Revised Proxy Statement, (ii) recommend that the
shareholders of the Company vote all proxies pursuant to the Revised Proxy Statement and in
accordance with the instructions specified in the related proxy card, (iii) use all reasonable
efforts to obtain shareholder approval for all of the proposals submitted for shareholder action,
including, but not limited to, employing the services of MacKenzie Partners, Inc. to assist in the
solicitation of proxies and requesting the New York Stock Exchange (“NYSE”) to designate the
Article 5 Proposal a “routine” proposal for purposes of NYSE Rule

- 2 -

 

452, and (iv) use all reasonable efforts to cause the current members of the Board and their
“Affiliates” and “Associates” (as such terms are defined in Rule 12b-2 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and including Persons who become Affiliates or
Associates subsequent to the date hereof) to vote all shares of the Voting Securities (as
hereinafter defined in Section 7) which they are entitled to vote at the 2008 Annual Meeting in
favor of all of the proposals submitted for shareholder action. The Company agrees that the
Revised Proxy Statement and any other solicitation materials to be delivered to shareholders in
connection with the 2008 Annual Meeting shall be prepared in accordance with the terms of this
Agreement. The proposals in the Existing Proxy Statement and the Article 5 Proposal shall be the
only proposals included in the Revised Proxy Statement and submitted to shareholders at the 2008
Annual Meeting.

     Section 2. Contested Election; Voting; Steel Partners Group Schedule 13D; Proxy
Statement and Demand Withdrawal.

          (a) The Steel Partners Group shall promptly cease, and shall cause all of their Affiliates and
Associates to cease, any and all efforts with respect to the Contested Election, except as
hereinafter provided in this Section 2.

          (b) The Steel Partners Group hereby irrevocably withdraws the nominations of James R.
Henderson, John J. Quicke, Kevin C. King, Don DeFosset and Delyle Bloomquist and the related
advance notice submitted to the Company on January 30, 2008.

          (c) The Steel Partners Group and their Affiliates and Associates shall not make any objection
to the election of each of the Nominees at the 2008 Annual Meeting or any other public statement
inconsistent with the provisions of this Agreement. The Steel Partners Group and their Affiliates
and Associates shall vote all shares of the Voting Securities which they are entitled to vote at
the 2008 Annual Meeting (1) in favor of the election of each of the Nominees at the 2008 Annual
Meeting and (2) with respect to every other proposal submitted to the Company’s shareholders at the
2008 Annual Meeting, in accordance with the Board’s recommendation.

          (d) The Steel Partners Group shall promptly file an amendment to its Schedule 13D with respect
to the Company (the “Schedule 13D”) reporting the entry into this Agreement, amending applicable
items to conform to its obligations hereunder and appending this Agreement and the Press Release
(as hereinafter defined in Section 6) as exhibits thereto.

          (e) The Steel Partners Group shall promptly notify the SEC
that it is terminating the Contested Election and the solicitation
pursuant to  the Steel
Partners Group Proxy Statement.

          (f) The Steel Partners Group hereby irrevocably withdraws its Demand, and shall promptly
return to the Company all materials and summaries or duplicates thereof that have been delivered to
the Steel Partners Group or its representatives prior to the date hereof in response to the Demand.

          (g) The Steel Partners Group shall not vote or cause to be voted any proxies that may be
received pursuant to the Contested Election.

     Section 3. Additional Agreements.

          (a) Charter Amendment. If the Article 5 Proposal is not approved by shareholders at the 2008
Annual Meeting:

- 3 -

 

          (i) the Company shall submit the Article 5 Proposal at the 2009 Annual Meeting, and the
Board shall recommend at the 2009 Annual Meeting that the shareholders of the Company vote
to approve the Article 5 Proposal; if the Article 5 Proposal is approved at the 2009 Annual
Meeting, the Company agrees to use all reasonable efforts to arrange for all directors of
the Company to stand for election at the 2010 annual meeting of shareholders of the Company;

          (ii) the Company shall have the same obligations as set forth in Section 1(e)(iii)-(iv)
with respect to the solicitation of votes to approve the Article 5 Proposal at the 2009
Annual Meeting; and

          (iii) the Board shall become classified as set forth in the Company’s Restated Articles
of Incorporation and Mr. DeFosset shall be designated as a Class I director.

          (b) Replacement Nominee. If, on or prior to the Vacancy Date, Mr. DeFosset becomes unable to
serve as a director of the Company, the Steel Partners Group shall be entitled to nominate an
individual reasonably deemed to be qualified by the Company to serve on the Board (such
qualifications to be measured on a scale comparable to Mr. DeFosset’s qualifications); provided
that such nominee cannot be a current or former employee of Steel Partners II, L.P. or an Affiliate
or Associate of Steel Partners II, L.P. (a “Replacement Nominee”). If, after the Vacancy Date, Mr.
DeFosset or a Replacement Nominee (i) resigns or is otherwise unable or unwilling to serve as a
director of the Company or (ii) is removed by a vote of shareholders in accordance with the
Company’s Restated Articles of Incorporation, the Steel Partners Group shall be entitled to
nominate a Replacement Nominee. In the case of clause (i) of the prior sentence, the Board shall
promptly appoint such nominee to the Board to serve for the remainder of Mr. DeFosset’s (or
Replacement Nominee’s) term and, in the case of clause (ii) of the prior sentence, such nominee
shall be submitted to a shareholder vote at the same meeting at which the shareholders take action
to remove Mr. DeFosset (or Replacement Nominee) in accordance with the Company’s Restated Articles
of Incorporation and the Board shall recommend the election of such nominee.

          (c) Committee Participation. Promptly following the Vacancy Date and subject to applicable
law and the New York Stock Exchange listing standards, the Board shall appoint Mr. DeFosset (or
Replacement Nominee) to each of the Audit and Risk Management Committee, Compensation and Human
Resources Committee, and Nominating and Corporate Governance Committee.

          (d) Expenses. Immediately following the certification of the results of the votes taken at
the 2008 Annual Meeting, the Company shall reimburse the Steel Partners Group for its reasonable,
documented and actual out-of-pocket fees and expenses incurred by the Steel Partners Group prior to
the date hereof in connection with the Contested Election and the negotiation of this Agreement and
the preparation and filing of all filings with the SEC required hereunder, not to exceed $350,000
in the aggregate. All other fees and expenses incurred by each of the parties hereto in connection
with the matters contemplated by this Agreement will be borne by such party.

     Section 4. Representations and Warranties.

          (a) The members of the Steel Partners Group jointly and severally represent and warrant as
follows:

          (i) Each member of the Steel Partners Group has the power and authority to execute,
deliver and carry out the terms and provisions of this Agreement and to consummate the
transactions contemplated hereby.

- 4 -

 

          (ii) This Agreement has been duly and validly authorized, executed and delivered by
each member of the Steel Partners Group, constitutes a valid and binding obligation and
agreement of each such member and is enforceable against each such member in accordance with
its terms.

          (iii) The members of the Steel Partners Group, together with their Affiliates and
Associates, beneficially own, directly or indirectly, an aggregate of
2,433,838 shares of
Common Stock as set forth by beneficial owner and amount on Exhibit A hereto and
such shares of Common Stock constitute all of the Voting Securities of the Company
beneficially owned by the members of the Steel Partners Group and their Affiliates and
Associates.

          (b) The Company hereby represents and warrants as follows:

          (i) The Company has the power and authority to execute, deliver and carry out the terms
and provisions of this Agreement and to consummate the transactions contemplated hereby.

          (ii) This Agreement has been duly and validly authorized, executed and delivered by the
Company, constitutes a valid and binding obligation and agreement of the Company and is
enforceable against the Company in accordance with its terms.

     Section 5. Specific Performance. Each of the members of the Steel Partners Group, on
the one hand, and the Company, on the other hand, acknowledges and agrees that irreparable injury
to the other party hereto would occur in the event any of the provisions of this Agreement were not
performed in accordance with its specific terms or was otherwise breached and that such injury
would not be adequately compensable in damages. It is accordingly agreed that the members of the
Steel Partners Group, on the one hand, and the Company, on the other hand, shall each be entitled
to specific enforcement of, and injunctive relief to prevent any violation of, the terms hereof and
the other party hereto will not take any action, directly or indirectly, in opposition to the party
seeking relief on the grounds that any other remedy or relief is available at law or in equity.

     Section 6. Press Release and Other Public Disclosures. Immediately following the
execution and delivery of this Agreement, the Company and the Steel Partners Group shall issue the
joint press release attached hereto as Exhibit B (the “Press Release”). None of the
parties hereto will make any public statements (including in any filing with the SEC or any other
regulatory or governmental agency, including any stock exchange) that are inconsistent with, or
otherwise contrary to, the statements in the Press Release issued pursuant to this Section 6.

     Section 7. Certain Definitions. As used in this Agreement, (a) the term “Person”
shall mean any individual, partnership, corporation, group, syndicate, trust, government or agency
thereof, or any other association or entity; (b) the term “Voting Securities” shall mean the Common
Stock and any other securities of the Company entitled to vote in the election of directors, or
securities convertible into, or exercisable or exchangeable for Common Stock or other securities,
whether or not subject to the passage of time or other contingencies; and (c) the term “Common
Stock” shall mean the common stock of the Company, par value $0.01 per share.

     Section 8. No Waiver. Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Agreement. The failure of a party to insist upon
strict adherence to any term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that

- 5 -

 

party of the right thereafter to insist upon strict adherence to that term or any other term of
this Agreement.

     Section 9. Successors and Assigns. All the terms and provisions of this Agreement
shall inure to the benefit of and shall be enforceable by the successors and assigns of the parties
hereto.

     Section 10. Entire Agreement; Amendments. This Agreement contains the entire
understanding of the parties with respect to its subject matter. There are no restrictions,
agreements, promises, representations, warranties, covenants or other undertakings other than those
expressly set forth in this Agreement. This Agreement may be amended only by a written instrument
duly executed by the parties or their respective successors or assigns.

     Section 11. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or interpretation of this
Agreement.

     Section 12. Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in writing and shall be
deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b)
upon sending if sent by electronic mail or facsimile, with electronic confirmation of sending,
provided, however, that a copy is sent on the same day by registered mail, return receipt
requested, in each case to the appropriate mailing and electronic mail or facsimile addresses set
forth below, (c) one (1) day after being sent by nationally recognized overnight carrier to the
addresses set forth below or (d) when actually delivered if sent by any other method that results
in delivery (with written confirmation of receipt):

If to the Company:

EnPro Industries, Inc.

5605 Carnegie Boulevard, Suite 500

Charlotte, North Carolina 28209

Attn: Richard L. Magee, Esq.

Facsimile: (704) 731-1511

with a copy to:

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Attn: Elliott V. Stein, Esq.

David E. Shapiro, Esq.

Facsimile: (212) 403-2327

If to the Steel Partners Group:

Steel Partners II, L.P.

590 Madison Avenue

32nd Floor

New York, New York 10022

Attn: Warren G. Lichtenstein

Facsimile: (212) 520-2321

with a copy to:

- 6 -

 

Olshan Grundman Frome Rosenzweig & Wolosky LLP

Park Avenue Tower

65 East 55th Street

New York, New York 10022

Attn: Steven Wolosky, Esq.

Facsimile: (212) 451-2222

in each case, or to such other address as the Person to whom notice is given may have previously
furnished to the others in writing in the manner set forth above.

     Section 13. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without reference to the conflict of
laws principles thereof, except to the extent that the North Carolina Business Corporation Act
applies.

     Section 14. Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and the same Agreement.

     Section 15. Severability. If any provision of this Agreement or the application
thereof to any Person or circumstance is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions hereof, or the application of such
provision to Persons or circumstances other than those as to which it has been held invalid or
unenforceable, will remain in full force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such determination, the
parties shall negotiate in an effort to agree upon a suitable and equitable substitute provision to
effect the original intent of the parties.

[Remainder of page intentionally left blank.]

- 7 -

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and
year first above written.

	 	 	 	 	 
	 	ENPRO INDUSTRIES, INC.

 	 
	 	By:  	/s/ William Dries
 	 
	 	 	Name:  	William Dries 	 
	 	 	Title:  	Senior Vice President and Chief Financial Officer 	 
	 	 	 
	 	By:  	                                              /s/ J. Milton Childress II
 	 
	 	 	Name:  	J. Milton Childress II 	 
	 	 	Title:  	Vice President, Strategic Planning and Business Development 	 
	 
	 	STEEL PARTNERS II, L.P.

 	 
	 	By:  	Steel Partners II GP LLC
 	 
	 	 	General Partner 	 
	 	 	 	 
	 	By:  	                                              /s/ Warren G. Lichtenstein
 	 
	 	 	Name:  	Warren G. Lichtenstein 	 
	 	 	Title:  	Managing Member 	 
	 
	 	STEEL PARTNERS II GP LLC

 	 
	 	By:  	/s/ Warren G. Lichtenstein
 	 
	 	 	Name:  	Warren G. Lichtenstein 	 
	 	 	Title:  	Managing Member 	 
	 
	 	STEEL PARTNERS II MASTER FUND L.P.

 	 
	 	By:  	Steel Partners II GP LLC
 	 
	 	 	General Partner 	 
	 	 	 	 
	 	By:  	                                              /s/ Warren G. Lichtenstein
 	 
	 	 	Name:  	Warren G. Lichtenstein 	 
	 	 	Title:  	Managing Member 	 
	 
	 	STEEL PARTNERS LLC

 	 
	 	By:  	/s/ Warren G. Lichtenstein
 	 
	 	 	Name:  	Warren G. Lichtenstein 	 
	 	 	Title:  	Manager 	 
	 

[Settlement Agreement Signature Page]

 

 

	 	 	 	 	 
	 	            /s/ Warren G. Lichtenstein
 	 
	 	WARREN G. LICHTENSTEIN 	 
	 	 	 
	 	                                              /s/ James R. Henderson
 	 
	 	JAMES R. HENDERSON 	 
	 	 	 
	 	                                              /s/ John J. Quicke
 	 
	 	JOHN J. QUICKE 	 
	 	 	 
	 	                                              /s/ Don DeFosset
 	 
	 	DON DEFOSSET 	 
	 	 	 
	 	                                              /s/ Kevin C. King
 	 
	 	KEVIN C. KING 	 
	 	 	 
	 	                                              /s/ Delyle Bloomquist
 	 
	 	DELYLE BLOOMQUIST 	 
	 	 	 
	 

[Settlement Agreement Signature Page]

 

 

EXHIBIT A

	 	 	 
	Beneficial Owner
	 	Amount
	 
	 	 
	 	 	 
	Steel Partners II, L.P.
	 	2,433,838

     No
other member of the Steel Partners Group directly owns any shares of
Common Stock. As a member
of a “group” for purposes of Section 13(d)(3) of the Exchange Act, each other member of the Steel
Partners Group may be deemed to beneficially own the shares of Common Stock directly owned by Steel
Partners II, L.P.

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