-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NcFzxgkJZMw8rjSySOgof1RbcNRZIbQa/J60KeHlcv4tvwsmvX77AUfWFzXCytAQ 0SXMMr46fIRNV+N9TKKrkA== 0000313716-97-000002.txt : 19970514 0000313716-97-000002.hdr.sgml : 19970514 ACCESSION NUMBER: 0000313716-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARDINGE INC CENTRAL INDEX KEY: 0000313716 STANDARD INDUSTRIAL CLASSIFICATION: MACHINE TOOLS, METAL CUTTING TYPES [3541] IRS NUMBER: 160470200 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15760 FILM NUMBER: 97602869 BUSINESS ADDRESS: STREET 1: ONE HARDING DRIVE CITY: ELMIRA STATE: NY ZIP: 14902 BUSINESS PHONE: 6077342281 MAIL ADDRESS: STREET 1: ONE HARDINGE DRIVE STREET 2: ONE HARDINGE DRIVE CITY: ELMIRA STATE: NY ZIP: 14902 FORMER COMPANY: FORMER CONFORMED NAME: HARDINGE BROTHERS INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ___________ Commission file number: 000-15760 Hardinge Inc. State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) New York 16-0470200 Hardinge Inc. One Hardinge Drive Elmira, NY 14902 (607) 734-2281 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ As of March 31, 1997 there were 6,504,498 shares of Common Stock of the Registrant outstanding. HARDINGE INC. AND SUBSIDIARIES INDEX Part I Financial Information Page Item 1. Financial Statements Consolidated Balance Sheets at March 31, 1997 and December 31, 1996. 3 Consolidated Statements of Income and Retained Earnings for the three months ended March 31, 1997 and 1996. 5 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996. 6 Notes to Consolidated Financial Statements. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 Part II Other Information Item 1. Legal Proceedings 11 Item 2. Changes in Securities 11 Item 3. Default upon Senior Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 PART I, ITEM I. HARDINGE INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in Thousands) Mar. 31, Dec. 31, 1997 1996 ------------------------------- (Unaudited) Assets Current assets: Cash $ 1,321 $ 2,636 Accounts receivable 44,025 41,150 Notes receivable 6,447 5,070 Inventories 92,312 99,906 Deferred income taxes 2,158 2,158 Prepaid expenses 1,128 1,656 ------------------------------- Total current assets 147,391 152,576 Property, plant and equipment: Property, plant and equipment 117,051 117,606 Less accumulated depreciation 55,264 53,716 ------------------------------- 61,787 63,890 Other assets: Notes receivable 10,690 11,791 Deferred income taxes 651 651 Other 259 254 ------------------------------- 11,600 12,696 ------------------------------- Total assets $220,778 $229,162 =============================== See accompanying notes. HARDINGE INC. AND SUBSIDIARIES Consolidated Balance Sheets--Continued (Dollars In Thousands) Mar. 31, Dec. 31, 1997 1996 -------------------------- (Unaudited) Liabilities and shareholders' equity Current liabilities: Accounts payable $ 13,060 $ 12,067 Notes payable to bank 2,889 10,950 Accrued expenses 8,445 10,676 Accrued income taxes 3,016 1,017 Deferred income taxes 943 896 Current portion long-term debt 714 714 -------------------------- Total current liabilities 29,067 36,320 Other liabilities: Long-term debt 34,938 37,156 Accrued pension plan expense 1,485 1,485 Deferred income taxes 1,538 1,657 Accrued postretirement benefits 5,109 4,999 -------------------------- 43,070 45,297 Shareholders' equity Preferred stock, Series A, par value $.01: Authorized - 2,000,000; issued - none Common stock, $.01 par value: Authorized shares - 20,000,000 Issued shares - 6,511,703 65 65 Additional paid-in capital 57,974 57,027 Retained earnings 101,901 99,622 Treasury shares (208) (343) Cumulative foreign currency translation adjustment (5,439) (3,731) Deferred employee benefits (5,652) (5,095) -------------------------- Total shareholders' equity 148,641 147,545 -------------------------- Total liabilities and shareholders' equity $220,778 $229,162 ========================== See accompanying notes. HARDINGE INC AND SUBSIDIARIES Consolidated Statements of Income and Retained Earnings (Unaudited) (In Thousands, Except Per Share Data) Three months ended March 31, 1997 1996 ---------------------------- Net Sales $60,056 $59,622 Cost of sales 39,878 40,290 ---------------------------- Gross profit 20,178 19,332 Selling, general and administrative expenses 11,804 11,570 Unusual expense 1,960 ---------------------------- Income from operations 6,414 7,762 Interest expense 691 522 Interest (income) (166) (215) ---------------------------- Income before income taxes 5,889 7,455 Income taxes 2,375 2,985 ---------------------------- Net income 3,514 4,470 Retained earnings at beginning of period 99,622 86,666 Less dividends declared 1,235 1,101 ============================ Retained earnings at end of period $101,901 $90,035 ============================ Weighted average number of common shares outstanding 6,225 6,199 ============================ Per share data: Net Income $ .56 $ .72 ============================ Dividends Declared $ .19 $ .17 ============================ See accompanying notes. HARDINGE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In Thousands) Three Months Ended March 31, 1997 1996 ----------------------------- Net cash provided by (used in) operating activities $10,276 ($ 1,664) Investing activities: Capital expenditures (744) (996) ----------------------------- Net cash (used in) investing activities (744) (996) Financing activities: (Decrease) in short-term notes payable to bank (7,485) (1,728) (Decrease) increase in long-term debt (2,218) 6,011 Sale of treasury stock 137 171 Dividends paid (1,235) (1,099) ----------------------------- Net cash (used in) provided by financing activities (10,801) 3,355 Effect of exchange rate changes on cash (46) 6 ============================= Net (decrease) increase in cash ($ 1,315) $701 ============================= NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 1997 NOTE A--BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1997, are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report for the year ended December 31, 1996. NOTE B--INVENTORIES Inventories are summarized as follows (dollars in thousands): March 31, December 31, 1997 1996 Finished products $ 34,927 $ 34,461 Work-in-process 31,236 35,479 Raw materials and purchased components 26,149 29,966 ---------- ---------- $ 92,312 $ 99,906 ========== ========= NOTE C--UNUSUAL EXPENSE 1997's first quarter included a one-time charge of $1,960,000 (approximately $1,200,000 after tax, or $.20 per share). This non-recurrung charge involves outside costs incurred in connection with a major acquisition that the Company carried into the final stages of the due diligence process but decided not to complete. NOTE D--EARNINGS PER SHARE AND WEIGHTED SHARES OUTSTANDING Earnings per share are calculated using a monthly weighted average shares outstanding and include common stock equivalents related to restricted stock. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following are management's comments relating to significant changes in the results of operations for the three month periods ended March 31, 1997 and 1996 and in the Company's financial condition during the three month period ended March 31, 1997. Results of Operations Net Sales. Net sales for the quarter ended March 31, 1997 increased to $60,056,000 compared to $59,622,000 in the first quarter of 1996. U.S. sales increased by $7,390,000 or 20.2% over the quarter ended March 31, 1996, primarily as a result of strong deliveries to the auto industry. International sales other than in Europe increased by $1,094,000 as well. A softening in our European markets, however, partially offset these increases, as European sales declined by $8,050,000, or 44.4%, to $10,066,000. Sales of machines accounted for $41,859,000 of net sales for the first quarter of 1997, representing an increase of $3,160,000 or 8.2% over the same 1996 period. Sales of non-machine products and services in the first quarter of 1997 decreased by $2,726,000 to $18,197,000, a decline of 13.0% from 1996's first quarter. Our backlog of orders at March 31, 1997 increased slightly from a year ago, despite a decrease in new orders from the auto industry during the first quarter of 1997. Domestic demand continues stable across a wide customer base. Gross Profit. Gross margin, as a percentage of sales, was 33.6% in the first quarter of 1997, compared to 32.4% for the same period in 1996. Typically, a higher percentage of the Company's domestic sales are made through direct sales organizations as opposed to the more heavily discounted distributor based distribution channels which are more prevalent in Europe and other international markets. Thus, the higher proportion of domestic sales in the first quarter of 1997 compared to 1996 is a primary contributor to this improvement in margin percentage. Selling, General, and Administrative Expenses. Selling, general and administrative ("SG&A") expenses, at 19.7% of sales in the first quarter of 1997, remained relatively flat to the 19.4% experienced in the same period of 1996. Unusual Expense. 1997's first quarter included a one-time charge of $1,960,000 (approximately $1,200,000 after tax, or $.20 per share). This non-recurring charge involves outside costs incurred in connection with a major acquisition that the Company carried into the final stages of the due diligence process but decided not to complete. Income from Operations. Income from operations as a percentage of net sales decreased in the three month period ended March 31, 1997 to 10.7% from the 13.0% earned for the same period in 1996. The decrease is attributable to the unusual expense described above. Excluding this one-time charge, income from operations as a percentage of net sales for the first quarter of 1997 would have been 13.9%, an increase of nearly one percent over 1996. This increase is a result of the relative improvement in gross margin while holding SG&A expenses at a constant rate. Interest Expense and Income. Interest expense increased to $691,000 in the first quarter of 1997, from $522,000 in the same 1996 period. While outstanding debt at March 31, 1997 was down by $10,300,000 from the prior March 31st, average outstanding debt for the first quarter of 1997 exceeded the same quarter a year earlier by approximately 17%. Additionally, an increase in average borrowing rates contributed to higher interest cost in the first quarter of 1997. Interest income, earned primarily on customer notes, remained fairly constant over the two periods. Income Taxes. The provisions for income taxes as a percentage of net income were approximately 40% in both the first quarter of 1997 and 1996. Net Income. Net income for the first quarter of 1997 was $3,514,000 or $.56 per share compared to $4,470,000 or $.72 per share for the first quarter of 1996. Net income for the first quarter of 1997 was reduced by $1,200,000 or $.20 per share as a result of the one-time charge related to the acquisition efforts described above. Excluding that charge, net income increased by 5.5% over the first quarter of 1996 as a result of higher volume and the improvement in gross margin percentage. Adoption of Financial Accounting Standards Board Statement No. 128. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact of Statement No. 128 on the calculation of both primary and fully diluted earnings per share for the quarters ended March 31, 1997 and 1996 is not expected to be material. Quarterly Information The following table sets forth certain quarterly financial data for each of the periods indicated. Three Months Ended Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, 1996 1996 1996 1996 1997 -------------------------------------------------------------- (in thousands, except per share data) -------------------------------------------------------------- Net Sales $ 59,622 $ 55,266 $ 47,577 $57,830 $60,056 Gross Profit 19,332 18,477 17,103 20,119 20,178 SG&A expense 11,570 10,946 10,849 11,693 11,804 Unusual expense 1,960 Income from operations 7,762 7,531 6,254 8,426 6,414 Net income 4,470 4,320 3,435 5,063 3,514 Net income per share .72 .69 .56 .82 .56 Weighted average shares outstanding 6,199 6,228 6,189 6,204 6,225 Liquidity and Capital Resources Hardinge's current ratio at March 31, 1997 was 5.07:1 compared to 4.20:1 at December 31, 1996. Current assets decreased by $5,185,000 during the first three months of 1997 primarily due to a reduction in inventory of $7,594,000 resulting from deliveries during the quarter of large orders for the automotive industry. Likewise, an offsetting increase in accounts receivable of $2,875,000 attributable in part to those same deliveries accounts for the majority of the remaining change in current assets. A decrease of $7,253,000 in current liabilities during the quarter is mainly attributable to the significant reduction in current borrowing resulting from these lower working capital requirements. In the first three months of 1997, operating activities generated $10,276,000 of cash, while operating activities in the same period of 1996 used $1,664,000 of cash. This large increase was primarily a result of the reduced working capital requirements previously discussed. The major financing activity during the first quarter of 1997 was the large repayment of short and long-term debt of $9,703,000, while debt was increased by $4,283,000 during the first quarter of 1996. Additional cash was required during both periods to fund capital expenditures and dividend payments. Hardinge provides long-term financing for the purchase of its equipment by qualified customers. We periodically sell portfolios of our customer notes to financial institutions in order to reduce debt and finance current operations. Our customer financing program has an impact on our month-to-month borrowings, but it has had little long-term impact on our working capital because of the ability to sell the underlying notes. We sold $7,463,000 and $7,067,000 of customer notes in the first three months of 1997 and 1996, respectively. Hardinge maintains revolving loan agreements with several U.S. banks providing for unsecured borrowing up to $50,000,000 on a revolving basis, $30,000,000 through August 1, 1997 and $20,000,000 through November 1, 1999. At those times, the outstanding amounts convert, at the Company's option, to term loans payable quarterly over four years through 2001 and 2003, respectively. These facilities, along with other short term credit agreements, provide for immediate access of up to $55,000,000. At March 31, 1997, outstanding borrowings under these arrangements totaled $20,791,000. In March, 1996, we completed negotiations with a syndication of banks on a long term note agreement for $17,750,000. The proceeds were used to pay down the amount on the revolving loan agreement which had originally been used to finance the acquisition of Kellenberger. Quarterly interest payments began in 1996, and principal payments begin in 1998. The agreement contains financial covenants consistent with the revolving loan agreements. We believe that currently available funds and credit facilities, along with internally generated funds, will provide sufficient financial resources for ongoing operations. Part II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Default upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information On April 14, 1997 Hardinge completed a stock purchase agreement under which it acquired 100% of the outstanding shares of Hansvedt Industries, Inc., an Urbana, Illilois-based manufacturer of electrical discharge machines (EDM) and related equipment. Electrical discharge machines are used to produce complex metal parts through a process of erosion with electricity using either a cutting wire or electrode. Hansvedt Industries, which was privately held and is the largest U.S. manufacturer of EDM equipment, had 1996 revenues of $8,000,000 and has 75 employees. The acquisition was financed using Hardinge's existing credit lines. At its meeting on April 22, 1997, our Board of Directors declared a dividend of $.19 per share payable on June 10, 1997, to shareholders of record on May 30, 1997. This report contains statements of a forward-looking nature relating to the financial performance of Hardinge Inc. Such statements are based upon information known to management at this time. The Company cautions that such statements necessarily involve risk, because actual results could differ materially from those projected. Among the many factors that could cause actual results to differ from those set forth in the forward-looking statements are changes in general economic conditions in the U.S. or internationally, actions taken by customers or competitors, the receipt of more or fewer orders than expected, and changes in the cost of materials. The Company undertakes no obligation to revise its forward-looking statements if unanticipated events alter their accuracy. Item 6. Exhibits and Reports on Form 8-K A. Exhibits 10.1 Employment Agreement with Joesph P. Colvin, effective January 1, 1997. 10.2 Employment Agreement with J. Patrick Ervin, effective January 1, 1997. 10.3 Employment Agreement with Richard L. Simons, effective January 1, 1997. 10.4 Employment Agreement with Daniel P. Soroka, effective January 1, 1997. 27. Financial Data Schedule. B. Reports on Form 8-K There were no reports on Form 8-K filed during the quarter. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HARDINGE INC. By: /s/ Robert E. Agan Robert E. Agan Chairman of the Board and Chief Executive Officer Date: May 13, 1997 By: /s/ J. Allan Krul J. Allan Krul President and Chief Operating Officer Date: May 13, 1997 By: /s/ Malcolm L. Gibson Malcolm L. Gibson Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: May 13, 1997 By: /s/ Richard L. Simons Richard L. Simons Vice President - Finance (Principal Accounting Officer) Date: May 13, 1997 EX-10.1 2 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 1997 (the "Agreement"), between HARDINGE INC., a New York corporation (the "Company") and JOSEPH T. COLVIN (the "Executive"). WHEREAS, the Executive is currently employed by the Company; and WHEREAS, the Company desires to engage the Executive to provide services pursuant to the terms of this Agreement; NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, the parties hereto agree as follows: 1. EFFECTIVENESS OF AGREEMENT AND EFFECTIVE DATE This Agreement shall become effective as of the date hereof. For purposes of this Agreement, the term "Effective Date" shall mean January 1, 1997. 2. EMPLOYMENT AND DUTIES 2.1 General. The Company herebyemploys the Executive, and the Executive agrees to serve, upon the terms and conditions herein contained. The Executive shall perform such duties and services for the Company as may be designated from time to time by the Board of Directors of the Company (the "Board") or the Chief Executive Officer of the Company. The Executive agrees to serve the Company faithfully and to the best of his ability under the direction of the Board and the Chief Executive Officer of the Company. 2.2 Exclusive Services. Except as may otherwise be approved in advance by the Board or the Chief Executive Officer of the Company, and except during vacation periods and reasonable periods of absence due to sickness, personal injury or other disability, the Executive shall devote his full working time throughout the Employment Term (as defined in Section 2.3) to the services required of him hereunder. The Executive shall render his services exclusively to the Company during the Employment Term, and shall use his best efforts, judgment and energy to improve and advance the business and interests of the Company in a manner consistent with the duties of his position. 2.3 Term of Employment. The Executive's employment under this Agreement shall commence as of the date hereof and shall terminate on the earlier of (i) the second anniversary of the Effective Date or (ii) termination of the Executive's employment pursuant to this Agreement; provided, however, that the term of the Executive's employment shall be automatically extended without further action of either party for additional one year periods unless written notice of either party's intention not to extend has been given to the other party hereto at least 60 days prior to the expiration of the then effective term. The period commencing as of the Effective Date and ending on the second anniversary of the Effective Date or such later date to which the term of the Executive's employment shall have been extended is hereinafter referred to as the "Employment Term". Notwithstanding the foregoing, in the event of a Change in Control (as defined in Section 5.5) occurring during the Employment Term, the Employment Term shall be extended so that it terminates on the second anniversary of the date of the Change in Control. 2.4 Reimbursement of Expenses. The Company shall reimburse the Executive for reasonable travel and other business expenses incurred by him in the fulfillment of his duties hereunder upon presentation by the Executive of an itemized account of such expenditures, in accordance with Company practices consistently applied. 3. ANNUAL COMPENSATION 3.1 Base Salary. From the Effective Date, the Executive shall be entitled to receive a base salary ("Base Salary") at a rate of $116,000 per annum, payable in accordance with the Company's payroll practices, with such changes as may be provided in accordance with the terms hereof. Once changed, such amount shall constitute the Executive's annual Base Salary. 3.2 Annual Review. The Executive's Base Salary shall be reviewed by the Board, based upon the Executive's performance, not less often than annually. 3.3 Bonus. After the Effective Date, the Executive shall be entitled to such bonus, if any, as may be awarded to the Executive from time to time by the Board. 4. EMPLOYEE BENEFITS The Executive shall, during his employment under this Agreement, be included to the extent eligible thereunder in all employee benefit plans, programs or arrangements (including, without limitation, any plans, programs or arrangements providing for retirement benefits, incentive compensation, profit sharing, bonuses, disability benefits, health and life insurance, or vacation and paid holidays) which shall be established by the Company for, or made available to, its executives generally. 5. TERMINATION OF EMPLOYMENT 5.1 Termination Without Cause; Resignation for Good Reason. 5.1.1 Prior to a Change in Control. If, prior to the expiration of the Employment Term, the Executive's employment is terminated by the Company without Cause (as defined in Section 5.3), or the Executive resigns from his employment hereunder for Good Reason (as defined in Section 5.4.1), at any time prior to a Change in Control, the Company shall continue to pay the Executive the Base Salary (at the rate in effect immediately prior to such termination) for the greater of (i) 6 months or (ii) the remainder of the Employment Term (such period being referred to hereinafter as the "Severance Period"), at such intervals as the same would have been paid had the Executive remained in the active service of the Company. In addition, the Executive shall be entitled to continue to participate during the Severance Period in all employee welfare benefit plans that the Company provides and continues to provide generally to its employees, provided that the Executive is entitled to continue to participate in such plans under the terms thereof. The Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment except as determined in accordance with the terms of the employee benefit plans or programs of the Company. In the event of the Executive's death during the Severance Period, Base Salary continuation payments under this Section 5.1.1 shall continue to be made during the remainder of the Severance Period to the beneficiary designated in writing for this purpose by the Executive or, if no such beneficiary is specifically designated, to the Executive's estate. If,during the Severance Period, the Executive materially breaches his obligations under Section 8 of this Agreement, the Company may, upon written notice to the Executive, terminate the Severance Period and cease to make any further payments or provide any benefits described in this Section 5.1.1. 5.1.2 Following a Change in Control. If, prior to the expiration of the Employment Term, (a) the Executive's employment is terminated by the Company without Cause (as defined in Section 5.3), or the Executive terminates his employment hereunder for Good Reason (as defined in Section 5.4.2), at any time following a Change in Control or (b) the Executive resigns from his employment hereunder for any reason at any time later than six months following a Change in Control, the Company shall pay to the Executive a lump sum cash payment equal to 1.5 times the sum of (i) his Base Salary (at the rate in effect immediately prior to such termination or, if higher, as in effect immediately prior to the Change in Control) and (ii) his average annual bonus earned during the three fiscal years immediately preceding the Change in Control. In addition, the Executive shall be entitled to continue to participate for a period of three years following such termination in all employee benefit welfare plans that the Company provides and continues to provide generally to its executive employees (or, if the Executive is not entitled to participate in any such plan under the terms thereof, in a comparable substitute arrangement provided by the Company). The Company shall reimburse the Executive for any premiums or other expenses incurred by the Executive with respect to his participation and that of any of his dependents in any such employee benefit welfare plan. 5.2 Termination for Cause; Resignation Without Good Reason. If, prior to the expiration of the Employment Term, the Executive's employment is terminated by the Company for Cause, or the Executive resigns from his employment hereunder other than for Good Reason, the Executive shall (subject to Section 5.1.2) be entitled only to payment of his Base Salary as then in effect through and including the date of termination or resignation. Subject to Section 5.1.2, the Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment, except as determined in accordance with the terms of the employee benefit plans or programs of the Company. 5.3 Cause. Termination for "Cause" shall mean termination of the Executive's employment because of: (i) any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement; (ii) the continued failure or refusal of the Executive to substantially perform the duties reasonably required of him as an employee of the Company; (iii) any willful and material violation by the Executive of any Federal or state law or regulation applicable to the business of the Company or any of its subsidiaries, or the Executive's conviction of a felony, or any willful perpetration by the Executive of a common law fraud; or (iv) any other willfulmisconduct by theExecutive which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or any of its subsidiaries or affiliates. 5.4 Good Reason. 5.4.1 Prior to a Change in Control. For purposes of this Agreement, "Good Reason" shall mean a material breach by the Company of any term or provision of this Agreement (without the Executive's prior written consent). 5.4.2 Following a Change in Control. Following a Change in Control, for purposes of this Agreement, "Good Reason" shall also mean (in addition to the event or condition described in Section 5.4.1), any of the following (without the Executive's prior written consent): (i) a decrease in the Executive's base rate of compensation or a failure by the Company to pay material compensation due and payable to the Executive in connection with his employment; (ii) a material diminution of the responsibilities or title of the Executive with the Company; or (iii) a failure to continue in effect any medical, dental, accident, disability or other material employee welfare benefit plan in which the Executive is entitled to participate immediately prior to the Change in Control or any material decrease in the benefits provided under any such plan (except that employee contributions may be raised to the extent of any cost increases imposed by third parties); (iv) the Company's requiring the Executive to relocate to an office or location more than 50 miles from his principal employment location immediately prior to the Change in Control; or (v) a failure or refusal of any successor company to assume the Company's obligations under this Agreement. 5.5 Change in Control. For purposes of this Agreement, the term "Change in Control" shall mean and shall be deemed to occur if and when: (i) an offeror (other than the Company) purchases shares of Common Stock of the Company pursuant to a tender or exchange offer for such shares; (ii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), other than any employee benefit plan of the Company or any person or entity appointed or established pursuant to any such plan, who is not now but who shall hereafter become the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, excluding any such securities held by such person as trustee or other fiduciary of an employee benefit plan of the Company; (iii) the membership of the Board changes as the result of a contested election or elections, so that a majority of the individuals who are directors at any particular time were proposed by persons other than (a) directors who were members of the Board immediately prior to a first such contested election ("Continuing Directors") or (b) directors proposed by the Continuing Directors and were initially elected to the Board as a result of such a contested election or elections occurring within the previous two years; or (iv) the shareholders of the Company approve a merger, consolidation, sale or disposition of all or substantially all of the Company's assets, or a plan of partial or complete liquidation. 6. DEATH, DISABILITY OR RETIREMENT. In the event of termination of employment by reason of death, Permanent Disability (as hereinafter defined) or retirement, the Executive (or his estate, as applicable) shall be entitled to Base Salary and benefits determined under Sections 3 and 4 through the date of termination. Other benefits shall be determined in accordance with the benefit plans maintained by the Company, and the Company shall have no further obligation hereunder. For purposes of this Agreement, "Permanent Disability" means a physical or mental disability or infirmity of the Executive that prevents the normal performance of substantially all his duties as an employee of the Company, which disability or infirmity shall exist for any continuous period of 180 days. 7. MITIGATION OF DAMAGES The Executive shall be required to mitigate the amount of any payment provided for in Section 5.1.1 by seeking other employment, and any such payment will be reduced by any amounts which the Executive receives or is entitled to receive from another employer with respect to the Severance Period. The Executive shall promptly notify the Company in writing in the event that other employment is obtained during the Severance Period. 8. NONSOLICITATION; CONFIDENTIALITY; NONCOMPETITION 8.1 Nonsolicitation. For so long as the Executive is employed by the Company, and continuing for two years thereafter if termination of employment occurs prior to a Change in Control, the Executive shall not, without the prior written consent of the Company, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor, officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company: (x) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or, during the then most recent 12-month period, was employed by, or had served as an agent or key consultant of the Company or any of its subsidiaries; or (y) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or was within the then most recent 12-month period, a customer or client (or reasonably anticipated to the general knowledge of the Executive or the public to become a customer or client) of the Company or any of its subsidiaries. 8.2 Confidentiality. The Executive covenants and agrees with the Company that he will not at any time, except in performance of his obligations to the Company hereunder or with the prior written consent of the Company, directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company or any of its subsidiaries and affiliates. The term "confidential information" includes information not previously disclosed to the public or to the trade by the Company's management, or otherwise in the public domain, with respect to the Company's or any of its subsidiaries' or affiliates' products, facilities, applications and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, customer lists, technical information, financial information (including the revenues, costs or profits associated with any of the Company's products), business plans, prospects or opportunities, but shall exclude any information which (i) is or becomes available to the public or is generally known in the industry or industries in which the Company operates other than as a result of disclosure by the Executive in violation of his agreements under this Section 8.2 or (ii) the Executive is required to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law. 8.3 No Competing Employment. For so long as the Executive is employed by the Company, and continuing for one year thereafter if termination of employment occurs prior to a Change in Control, the Executive shall not, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor (other than a stockholder or investor owning not more than a 1% interest), officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company, render any service to or in any way be affiliated with a competitor (or any person or entity that is reasonably anticipated to the general knowledge of the Executive or the public to become a competitor) of the Company or any of its subsidiaries. 8.4 Exclusive Property. The Executive confirms that all confidential information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company shall be and remain the property of the Company, except for such papers customarily deemed to be the personal copies of the Executive. 8.5 Injunctive Relief. Without intending to limit the remedies available to the Company, the Executive acknowledges that a breach of any of the covenants contained in this Section 8 may result in material and irreparable injury to the Company or its affiliates or subsidiaries for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to seek a temporary restraining order and/or a preliminary or permanent injunction restraining the Executive from engaging in activities prohibited by this Section 8 or such other relief as may be required specifically to enforce any of the covenants in this Section 8. If for any reason, it is held that the restrictions under this Section 8 are not reasonable or that consideration therefor is inadequate, such restrictions shall be interpreted or modified to include as much of the duration and scope identified in this Section 8 as will render such restrictions valid and enforceable. 9. ARBITRATION Any dispute or controversy arising under or in connection with this Agreement that cannot be mutually resolved by the parties hereto shall be settled exclusively by arbitration in New York, New York, before one arbitrator of exemplary qualifications and stature, who shall be selected jointly by the Company and the Executive, or, if the Company and the Executive cannot agree on the selection of the arbitrator, shall be selected by the American Arbitration Association. Judgment may be entered on the arbitrator's award in any court having jurisdiction. The parties hereby agree that the arbitrator shall be empowered to enter an equitable decree mandating specific enforcement of the terms of this Agreement. 10. CERTAIN PAYMENTS Notwithstanding anything in this Agreement to the contrary, if any amounts due to the Executive under this Agreement and any other plan or program of the Company constitute a "parachute payment" (as defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")), then the aggregate of the amounts constituting the parachute payment shall be reduced to an amount that will equal three times his "base amount" (as defined in Section 280G(b)(3) of the Code) less $1.00. The determination to be made with respect to this Section 10 shall be made by an accounting firm jointly selected by the Company and the Executive and paid by the Company, and which may be the Company's independent auditors. 11. MISCELLANEOUS 11.1 Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: Hardinge Inc. One Hardinge Drive Elmira, New York 14902-1507 Telecopier No. (607) 734-2353 Attention: Mr. Robert E. Agan To the Executive: Joseph T. Colvin 27 Barrington Road Horseheads, New York 14845 All such notices shall be conclusively deemed to be received and shall be effective, (i) if sent by hand delivery, upon receipt, (ii) if sent by telecopy or facsimile transmission, upon confirmation of receipt by the sender of such transmission, or (iii) if sent by registered or certified mail, on the fifth day after the day on which such notice is mailed. 11.2 Severability. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 11.3 Assignment. The rights and obligations of this Agreement shall bind and inure to the benefit of any successor of the Company by reorganization, merger or consolidation, or any assignee of all or substantially all of the Company's business and properties. Neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by the Executive. 11.4 Entire Agreement. This Agreement represents the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between the Company and the Executive relating to the subject matter hereof. This Agreement may be amended at any time by mutual written agreement of the parties hereto. 11.5 Withholding. The payment of any amount pursuant to this Agreement shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required under the Company's employee benefit plans, if any. 11.6 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed entirely within that state. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and the Executive has hereunto set his hand, as of the day and year first above written. HARDINGE INC. By: /s/ Robert E. Agan Name: Robert E. Agan Title: Chairman of the Board and Chief Executive Officer /s/ Joseph T. Colvin Joseph T. Colvin. For purposes of this Agreement, I hereby designate Rita B. Colvin as my beneficiary hereunder. Date: 3/13/97 /s/ Joseph T. Colvin Joseph T. Colvin. State of New York ) : ss. County of Chemung ) On the 13th day of March, 1997, before me, personally came Robert E. Agan, to me known, who being by me duly sworn, did depose and say that he resides in the Town of Elmira, Chemung County, New York; that he is the Chairman of the Board and Chief Executive Officer of HARDINGE INC., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that it was so affixed by order of the Board of Directors of said corporation and that he signed his name thereto by like order. /s/ Malcolm L. Gibson Notary Public State of New York ) : ss. County of Chemung ) On this 13th day of March, 1997, before me, the subscriber, personally appeared JOSEPH T. COLVIN, to me personally known and known to me to be the same person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed the same. /s/ Malcolm L. Gibson Notary Public EX-10.2 3 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 1997 (the "Agreement"), between HARDINGE INC., a New Yorkcorporation (the "Company") and J. PATRICK ERVIN (the "Executive"). WHEREAS, the Executive is currently employed by the Company; and WHEREAS, the Company desires to engage the Executive to provide services pursuant to the terms of this Agreement; NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, the parties hereto agree as follows: 1. EFFECTIVENESS OF AGREEMENT AND EFFECTIVE DATE This Agreement shall become effective as of the date hereof. For purposes of this Agreement, the term "Effective Date" shall mean January 1, 1997. 2. EMPLOYMENT AND DUTIES 2.1 General. The Company herebyemploys the Executive, and the Executive agrees to serve, upon the terms and conditions herein contained. The Executive shall perform such duties and services for the Company as may be designated from time to time by the Board of Directors of the Company (the "Board") or the Chief Executive Officer of the Company. The Executive agrees to serve the Company faithfully and to the best of his ability under the direction of the Board and the Chief Executive Officer of the Company. 2.2 Exclusive Services. Except as may otherwise be approved in advance by the Board or the Chief Executive Officer of the Company, and except during vacation periods and reasonable periods of absence due to sickness, personal injury or other disability, the Executive shall devote his full working time throughout the Employment Term (as defined in Section 2.3) to the services required of him hereunder. The Executive shall render his services exclusively to the Company during the Employment Term, and shall use his best efforts, judgment and energy to improve and advance the business and interests of the Company in a manner consistent with the duties of his position. 2.3 Term of Employment. The Executive's employment under this Agreement shall commence as of the date hereof and shall terminate on the earlier of (i) the second anniversary of the Effective Date or (ii) termination of the Executive's employment pursuant to this Agreement; provided, however, that the term of the Executive's employment shall be automatically extended without further action of either party for additional one year periods unless written notice of either party's intention not to extend has been given to the other party hereto at least 60 days prior to the expiration of the then effective term. The period commencing as of the Effective Date and ending on the second anniversary of the Effective Date or such later date to which the term of the Executive's employment shall have been extended is hereinafter referred to as the "Employment Term". Notwithstanding the foregoing, in the event of a Change in Control (as defined in Section 5.5) occurring during the Employment Term, the Employment Term shall be extended so that it terminates on the second anniversary of the date of the Change in Control. 2.4 Reimbursement of Expenses. The Company shall reimburse the Executive for reasonable travel and other business expenses incurred by him in the fulfillment of his duties hereunder upon presentation by the Executive of an itemized account of such expenditures, in accordance with Company practices consistently applied. 3. ANNUAL COMPENSATION 3.1 Base Salary. From the Effective Date, the Executive shall be entitled to receive a base salary ("Base Salary") at a rate of $116,000 per annum, payable in accordance with the Company's payroll practices, with such changes as may be provided in accordance with the terms hereof. Once changed, such amount shall constitute the Executive's annual Base Salary. 3.2 Annual Review. The Executive's Base Salary shall be reviewed by the Board, based upon the Executive's performance, not less often than annually. 3.3 Bonus. After the Effective Date, the Executive shall be entitled to such bonus, if any, as may be awarded to the Executive from time to time by the Board. 4. EMPLOYEE BENEFITS The Executive shall, during his employment under this Agreement, be included to the extent eligible thereunder in all employee benefit plans, programs or arrangements (including, without limitation, any plans, programs or arrangements providing for retirement benefits, incentive compensation, profit sharing, bonuses, disability benefits, health and life insurance, or vacation and paid holidays) which shall be established by the Company for, or made available to, its executives generally. 5. TERMINATION OF EMPLOYMENT 5.1 Termination Without Cause; Resignation for Good Reason. 5.1.1 Prior to a Change in Control. If, prior to the expiration of the Employment Term, the Executive's employment is terminated by the Company without Cause (as defined in Section 5.3), or the Executive resigns from his employment hereunder for Good Reason (as defined in Section 5.4.1), at any time prior to a Change in Control, the Company shall continue to pay the Executive the Base Salary (at the rate in effect immediately prior to such termination) for the greater of (i) 6 months or (ii) the remainder of the Employment Term (such period being referred to hereinafter as the "Severance Period"), at such intervals as the same would have been paid had the Executive remained in the active service of the Company. In addition, the Executive shall be entitled to continue to participate during the Severance Period in all employee welfare benefit plans that the Company provides and continues to provide generally to its employees, provided that the Executive is entitled to continue to participate in such plans under the terms thereof. The Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment except as determined in accordance with the terms of the employee benefit plans or programs of the Company. In the event of the Executive's death during the Severance Period, Base Salary continuation payments under this Section 5.1.1 shall continue to be made during the remainder of the Severance Period to the beneficiary designated in writing for this purpose by the Executive or, if no such beneficiary is specifically designated, to the Executive's estate. If,during the Severance Period, the Executive materially breaches his obligations under Section 8 of this Agreement, the Company may, upon written notice to the Executive, terminate the Severance Period and cease to make any further payments or provide any benefits described in this Section 5.1.1. 5.1.2 Following a Change in Control. If, prior to the expiration of the Employment Term, (a) the Executive's employment is terminated by the Company without Cause (as defined in Section 5.3), or the Executive terminates his employment hereunder for Good Reason (as defined in Section 5.4.2), at any time following a Change in Control or (b) the Executive resigns from his employment hereunder for any reason at any time later than six months following a Change in Control, the Company shall pay to the Executive a lump sum cash payment equal to 1.5 times the sum of (i) his Base Salary (at the rate in effect immediately prior to such termination or, if higher, as in effect immediately prior to the Change in Control) and (ii) his average annual bonus earned during the three fiscal years immediately preceding the Change in Control. In addition, the Executive shall be entitled to continue to participate for a period of three years following such termination in all employee benefit welfare plans that the Company provides and continues to provide generally to its executive employees (or, if the Executive is not entitled to participate in any such plan under the terms thereof, in a comparable substitute arrangement provided by the Company). The Company shall reimburse the Executive for any premiums or other expenses incurred by the Executive with respect to his participation and that of any of his dependents in any such employee benefit welfare plan. 5.2 Termination for Cause; Resignation Without Good Reason. If, prior to the expiration of the Employment Term, the Executive's employment is terminated by the Company for Cause, or the Executive resigns from his employment hereunder other than for Good Reason, the Executive shall (subject to Section 5.1.2) be entitled only to payment of his Base Salary as then in effect through and including the date of termination or resignation. Subject to Section 5.1.2, the Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment, except as determined in accordance with the terms of the employee benefit plans or programs of the Company. 5.3 Cause. Termination for "Cause" shall mean termination of the Executive's employment because of: (i) any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement; (ii) the continued failure or refusal of the Executive to substantially perform the duties reasonably required of him as an employee of the Company; (iii) any willful and material violation by the Executive of any Federal or state law or regulation applicable to the business of the Company or any of its subsidiaries, or the Executive's conviction of a felony, or any willful perpetration by the Executive of a common law fraud; or (iv) any other willfulmisconduct by theExecutive which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or any of its subsidiaries or affiliates. 5.4 Good Reason. 5.4.1 Prior to a Change in Control. For purposes of this Agreement, "Good Reason" shall mean a material breach by the Company of any term or provision of this Agreement (without the Executive's prior written consent). 5.4.2 Following a Change in Control. Following a Change in Control, for purposes of this Agreement, "Good Reason" shall also mean (in addition to the event or condition described in Section 5.4.1), any of the following (without the Executive's prior written consent): (i) a decrease in the Executive's base rate of compensation or a failure by the Company to pay material compensation due and payable to the Executive in connection with his employment; (ii) a material diminution of the responsibilities or title of the Executive with the Company; or (iii) a failure to continue in effect any medical, dental, accident, disability or other material employee welfare benefit plan in which the Executive is entitled to participate immediately prior to the Change in Control or any material decrease in the benefits provided under any such plan (except that employee contributions may be raised to the extent of any cost increases imposed by third parties); (iv) the Company's requiring the Executive to relocate to an office or location more than 50 miles from his principal employment location immediately prior to the Change in Control; or (v) a failure or refusal of any successor company to assume the Company's obligations under this Agreement. 5.5 Change in Control. For purposes of this Agreement, the term "Change in Control" shall mean and shall be deemed to occur if and when: (i) an offeror (other than the Company) purchases shares of Common Stock of the Company pursuant to a tender or exchange offer for such shares; (ii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), other than any employee benefit plan of the Company or any person or entity appointed or established pursuant to any such plan, who is not now but who shall hereafter become the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, excluding any such securities held by such person as trustee or other fiduciary of an employee benefit plan of the Company; (iii) the membership of the Board changes as the result of a contested election or elections, so that a majority of the individuals who are directors at any particular time were proposed by persons other than (a) directors who were members of the Board immediately prior to a first such contested election ("Continuing Directors") or (b) directors proposed by the Continuing Directors and were initially elected to the Board as a result of such a contested election or elections occurring within the previous two years; or (iv) the shareholders of the Company approve a merger, consolidation, sale or disposition of all or substantially all of the Company's assets, or a plan of partial or complete liquidation. 6. DEATH, DISABILITY OR RETIREMENT. In the event of termination of employment by reason of death, Permanent Disability (as hereinafter defined) or retirement, the Executive (or his estate, as applicable) shall be entitled to Base Salary and benefits determined under Sections 3 and 4 through the date of termination. Other benefits shall be determined in accordance with the benefit plans maintained by the Company, and the Company shall have no further obligation hereunder. For purposes of this Agreement, "Permanent Disability" means a physical or mental disability or infirmity of the Executive that prevents the normal performance of substantially all his duties as an employee of the Company, which disability or infirmity shall exist for any continuous period of 180 days. 7. MITIGATION OF DAMAGES The Executive shall be required to mitigate the amount of any payment provided for in Section 5.1.1 by seeking other employment, and any such payment will be reduced by any amounts which the Executive receives or is entitled to receive from another employer with respect to the Severance Period. The Executive shall promptly notify the Company in writing in the event that other employment is obtained during the Severance Period. 8. NONSOLICITATION; CONFIDENTIALITY; NONCOMPETITION 8.1 Nonsolicitation. For so long as the Executive is employed by the Company, and continuing for two years thereafter if termination of employment occurs prior to a Change in Control, the Executive shall not, without the prior written consent of the Company, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor, officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company: (x) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or, during the then most recent 12-month period, was employed by, or had served as an agent or key consultant of the Company or any of its subsidiaries; or (y) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or was within the then most recent 12-month period, a customer or client (or reasonably anticipated to the general knowledge of the Executive or the public to become a customer or client) of the Company or any of its subsidiaries. 8.2 Confidentiality. The Executive covenants and agrees with the Company that he will not at any time, except in performance of his obligations to the Company hereunder or with the prior written consent of the Company, directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company or any of its subsidiaries and affiliates. The term "confidential information" includes information not previously disclosed to the public or to the trade by the Company's management, or otherwise in the public domain, with respect to the Company's or any of its subsidiaries' or affiliates' products, facilities, applications and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, customer lists, technical information, financial information (including the revenues, costs or profits associated with any of the Company's products), business plans, prospects or opportunities, but shall exclude any information which (i) is or becomes available to the public or is generally known in the industry or industries in which the Company operates other than as a result of disclosure by the Executive in violation of his agreements under this Section 8.2 or (ii) the Executive is required to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law. 8.3 No Competing Employment. For so long as the Executive is employed by the Company, and continuing for one year thereafter if termination of employment occurs prior to a Change in Control, the Executive shall not, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor (other than a stockholder or investor owning not more than a 1% interest), officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company, render any service to or in any way be affiliated with a competitor (or any person or entity that is reasonably anticipated to the general knowledge of the Executive or the public to become a competitor) of the Company or any of its subsidiaries. 8.4 Exclusive Property. The Executive confirms that all confidential information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company shall be and remain the property of the Company, except for such papers customarily deemed to be the personal copies of the Executive. 8.5 Injunctive Relief. Without intending to limit the remedies available to the Company, the Executive acknowledges that a breach of any of the covenants contained in this Section 8 may result in material and irreparable injury to the Company or its affiliates or subsidiaries for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to seek a temporary restraining order and/or a preliminary or permanent injunction restraining the Executive from engaging in activities prohibited by this Section 8 or such other relief as may be required specifically to enforce any of the covenants in this Section 8. If for any reason, it is held that the restrictions under this Section 8 are not reasonable or that consideration therefor is inadequate, such restrictions shall be interpreted or modified to include as much of the duration and scope identified in this Section 8 as will render such restrictions valid and enforceable. 9. ARBITRATION Any dispute or controversy arising under or in connection with this Agreement that cannot be mutually resolved by the parties hereto shall be settled exclusively by arbitration in New York, New York, before one arbitrator of exemplary qualifications and stature, who shall be selected jointly by the Company and the Executive, or, if the Company and the Executive cannot agree on the selection of the arbitrator, shall be selected by the American Arbitration Association. Judgment may be entered on the arbitrator's award in any court having jurisdiction. The parties hereby agree that the arbitrator shall be empowered to enter an equitable decree mandating specific enforcement of the terms of this Agreement. 10. CERTAIN PAYMENTS Notwithstanding anything in this Agreement to the contrary, if any amounts due to the Executive under this Agreement and any other plan or program of the Company constitute a "parachute payment" (as defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")), then the aggregate of the amounts constituting the parachute payment shall be reduced to an amount that will equal three times his "base amount" (as defined in Section 280G(b)(3) of the Code) less $1.00. The determination to be made with respect to this Section 10 shall be made by an accounting firm jointly selected by the Company and the Executive and paid by the Company, and which may be the Company's independent auditors. 11. MISCELLANEOUS 11.1 Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: Hardinge Inc. One Hardinge Drive Elmira, New York 14902-1507 Telecopier No. (607) 734-2353 Attention: Mr. Robert E. Agan To the Executive: J. Patrick Ervin 90 Morningside Drive Elmira, New York 14905 All such notices shall be conclusively deemed to be received and shall be effective, (i) if sent by hand delivery, upon receipt, (ii) if sent by telecopy or facsimile transmission, upon confirmation of receipt by the sender of such transmission, or (iii) if sent by registered or certified mail, on the fifth day after the day on which such notice is mailed. 11.2 Severability. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 11.3 Assignment. The rights and obligations of this Agreement shall bind and inure to the benefit of any successor of the Company by reorganization, merger or consolidation, or any assignee of all or substantially all of the Company's business and properties. Neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by the Executive. 11.4 Entire Agreement. This Agreement represents the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between the Company and the Executive relating to the subject matter hereof. This Agreement may be amended at any time by mutual written agreement of the parties hereto. 11.5 Withholding. The payment of any amount pursuant to this Agreement shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required under the Company's employee benefit plans, if any. 11.6 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed entirely within that state. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and the Executive has hereunto set his hand, as of the day and year first above written. HARDINGE INC. By: /s/ Robert E. Agan Name: Robert E. Agan Title: Chairman of the Board and Chief Executive Officer /s/ J. Patrick Ervin J. Patrick Ervin For purposes of this Agreement, I hereby designate Susan Ervin as my beneficiary hereunder. Date: 3/11/97 /s/ J. Patrick Ervin J. Patrick Ervin State of New York ) : ss. County of Chemung ) On the 11th day of March, 1997, before me, personally came Robert E. Agan, to me known, who being by me duly sworn, did depose and say that he resides in the Town of Elmira, Chemung County, New York; that he is the Chairman of the Board and Chief Executive Officer of HARDINGE INC., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that it was so affixed by order of the Board of Directors of said corporation and that he signed his name thereto by like order. /s/ Malcolm L. Gibson Notary Public State of New York ) : ss. County of Chemung ) On this 11th day of March, 1997, before me, the subscriber, personally appeared J. PATRICK ERVIN, to me personally known and known to me to be the same person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed the same. /s/ Malcolm L. Gibson Notary Public EX-10.3 4 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 1997 (the "Agreement"), between HARDINGE INC., a New Yorkcorporation (the "Company") and RICHARD L. SIMONS (the "Executive"). WHEREAS, the Executive is currently employed by the Company; and WHEREAS, the Company desires to engage the Executive to provide services pursuant to the terms of this Agreement; NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, the parties hereto agree as follows: 1. EFFECTIVENESS OF AGREEMENT AND EFFECTIVE DATE This Agreement shall become effective as of the date hereof. For purposes of this Agreement, the term "Effective Date" shall mean January 1, 1997. 2. EMPLOYMENT AND DUTIES 2.1 General. The Company herebyemploys the Executive, and the Executive agrees to serve, upon the terms and conditions herein contained. The Executive shall perform such duties and services for the Company as may be designated from time to time by the Board of Directors of the Company (the "Board") or the Chief Executive Officer of the Company. The Executive agrees to serve the Company faithfully and to the best of his ability under the direction of the Board and the Chief Executive Officer of the Company. 2.2 Exclusive Services. Except as may otherwise be approved in advance by the Board or the Chief Executive Officer of the Company, and except during vacation periods and reasonable periods of absence due to sickness, personal injury or other disability, the Executive shall devote his full working time throughout the Employment Term (as defined in Section 2.3) to the services required of him hereunder. The Executive shall render his services exclusively to the Company during the Employment Term, and shall use his best efforts, judgment and energy to improve and advance the business and interests of the Company in a manner consistent with the duties of his position. 2.3 Term of Employment. The Executive's employment under this Agreement shall commence as of the date hereof and shall terminate on the earlier of (i) the second anniversary of the Effective Date or (ii) termination of the Executive's employment pursuant to this Agreement; provided, however, that the term of the Executive's employment shall be automatically extended without further action of either party for additional one year periods unless written notice of either party's intention not to extend has been given to the other party hereto at least 60 days prior to the expiration of the then effective term. The period commencing as of the Effective Date and ending on the second anniversary of the Effective Date or such later date to which the term of the Executive's employment shall have been extended is hereinafter referred to as the "Employment Term". Notwithstanding the foregoing, in the event of a Change in Control (as defined in Section 5.5) occurring during the Employment Term, the Employment Term shall be extended so that it terminates on the second anniversary of the date of the Change in Control. 2.4 Reimbursement of Expenses. The Company shall reimburse the Executive for reasonable travel and other business expenses incurred by him in the fulfillment of his duties hereunder upon presentation by the Executive of an itemized account of such expenditures, in accordance with Company practices consistently applied. 3. ANNUAL COMPENSATION 3.1 Base Salary. From the Effective Date, the Executive shall be entitled to receive a base salary ("Base Salary") at a rate of $116,000 per annum, payable in accordance with the Company's payroll practices, with such changes as may be provided in accordance with the terms hereof. Once changed, such amount shall constitute the Executive's annual Base Salary. 3.2 Annual Review. The Executive's Base Salary shall be reviewed by the Board, based upon the Executive's performance, not less often than annually. 3.3 Bonus. After the Effective Date, the Executive shall be entitled to such bonus, if any, as may be awarded to the Executive from time to time by the Board. 4. EMPLOYEE BENEFITS The Executive shall, during his employment under this Agreement, be included to the extent eligible thereunder in all employee benefit plans, programs or arrangements (including, without limitation, any plans, programs or arrangements providing for retirement benefits, incentive compensation, profit sharing, bonuses, disability benefits, health and life insurance, or vacation and paid holidays) which shall be established by the Company for, or made available to, its executives generally. 5. TERMINATION OF EMPLOYMENT 5.1 Termination Without Cause; Resignation for Good Reason. 5.1.1 Prior to a Change in Control. If, prior to the expiration of the Employment Term, the Executive's employment is terminated by the Company without Cause (as defined in Section 5.3), or the Executive resigns from his employment hereunder for Good Reason (as defined in Section 5.4.1), at any time prior to a Change in Control, the Company shall continue to pay the Executive the Base Salary (at the rate in effect immediately prior to such termination) for the greater of (i) 6 months or (ii) the remainder of the Employment Term (such period being referred to hereinafter as the "Severance Period"), at such intervals as the same would have been paid had the Executive remained in the active service of the Company. In addition, the Executive shall be entitled to continue to participate during the Severance Period in all employee welfare benefit plans that the Company provides and continues to provide generally to its employees, provided that the Executive is entitled to continue to participate in such plans under the terms thereof. The Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment except as determined in accordance with the terms of the employee benefit plans or programs of the Company. In the event of the Executive's death during the Severance Period, Base Salary continuation payments under this Section 5.1.1 shall continue to be made during the remainder of the Severance Period to the beneficiary designated in writing for this purpose by the Executive or, if no such beneficiary is specifically designated, to the Executive's estate. If,during the Severance Period, the Executive materially breaches his obligations under Section 8 of this Agreement, the Company may, upon written notice to the Executive, terminate the Severance Period and cease to make any further payments or provide any benefits described in this Section 5.1.1. 5.1.2 Following a Change in Control. If, prior to the expiration of the Employment Term, (a) the Executive's employment is terminated by the Company without Cause (as defined in Section 5.3), or the Executive terminates his employment hereunder for Good Reason (as defined in Section 5.4.2), at any time following a Change in Control or (b) the Executive resigns from his employment hereunder for any reason at any time later than six months following a Change in Control, the Company shall pay to the Executive a lump sum cash payment equal to 1.5 times the sum of (i) his Base Salary (at the rate in effect immediately prior to such termination or, if higher, as in effect immediately prior to the Change in Control) and (ii) his average annual bonus earned during the three fiscal years immediately preceding the Change in Control. In addition, the Executive shall be entitled to continue to participate for a period of three years following such termination in all employee benefit welfare plans that the Company provides and continues to provide generally to its executive employees (or, if the Executive is not entitled to participate in any such plan under the terms thereof, in a comparable substitute arrangement provided by the Company). The Company shall reimburse the Executive for any premiums or other expenses incurred by the Executive with respect to his participation and that of any of his dependents in any such employee benefit welfare plan. 5.2 Termination for Cause; Resignation Without Good Reason. If, prior to the expiration of the Employment Term, the Executive's employment is terminated by the Company for Cause, or the Executive resigns from his employment hereunder other than for Good Reason, the Executive shall (subject to Section 5.1.2) be entitled only to payment of his Base Salary as then in effect through and including the date of termination or resignation. Subject to Section 5.1.2, the Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment, except as determined in accordance with the terms of the employee benefit plans or programs of the Company. 5.3 Cause. Termination for "Cause" shall mean termination of the Executive's employment because of: (i) any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement; (ii) the continued failure or refusal of the Executive to substantially perform the duties reasonably required of him as an employee of the Company; (iii) any willful and material violation by the Executive of any Federal or state law or regulation applicable to the business of the Company or any of its subsidiaries, or the Executive's conviction of a felony, or any willful perpetration by the Executive of a common law fraud; or (iv) any other willfulmisconduct by theExecutive which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or any of its subsidiaries or affiliates. 5.4 Good Reason. 5.4.1 Prior to a Change in Control. For purposes of this Agreement, "Good Reason" shall mean a material breach by the Company of any term or provision of this Agreement (without the Executive's prior written consent). 5.4.2 Following a Change in Control. Following a Change in Control, for purposes of this Agreement, "Good Reason" shall also mean (in addition to the event or condition described in Section 5.4.1), any of the following (without the Executive's prior written consent): (i) a decrease in the Executive's base rate of compensation or a failure by the Company to pay material compensation due and payable to the Executive in connection with his employment; (ii) a material diminution of the responsibilities or title of the Executive with the Company; or (iii) a failure to continue in effect any medical, dental, accident, disability or other material employee welfare benefit plan in which the Executive is entitled to participate immediately prior to the Change in Control or any material decrease in the benefits provided under any such plan (except that employee contributions may be raised to the extent of any cost increases imposed by third parties); (iv) the Company's requiring the Executive to relocate to an office or location more than 50 miles from his principal employment location immediately prior to the Change in Control; or (v) a failure or refusal of any successor company to assume the Company's obligations under this Agreement. 5.5 Change in Control. For purposes of this Agreement, the term "Change in Control" shall mean and shall be deemed to occur if and when: (i) an offeror (other than the Company) purchases shares of Common Stock of the Company pursuant to a tender or exchange offer for such shares; (ii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), other than any employee benefit plan of the Company or any person or entity appointed or established pursuant to any such plan, who is not now but who shall hereafter become the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, excluding any such securities held by such person as trustee or other fiduciary of an employee benefit plan of the Company; (iii) the membership of the Board changes as the result of a contested election or elections, so that a majority of the individuals who are directors at any particular time were proposed by persons other than (a) directors who were members of the Board immediately prior to a first such contested election ("Continuing Directors") or (b) directors proposed by the Continuing Directors and were initially elected to the Board as a result of such a contested election or elections occurring within the previous two years; or (iv) the shareholders of the Company approve a merger, consolidation, sale or disposition of all or substantially all of the Company's assets, or a plan of partial or complete liquidation. 6. DEATH, DISABILITY OR RETIREMENT. In the event of termination of employment by reason of death, Permanent Disability (as hereinafter defined) or retirement, the Executive (or his estate, as applicable) shall be entitled to Base Salary and benefits determined under Sections 3 and 4 through the date of termination. Other benefits shall be determined in accordance with the benefit plans maintained by the Company, and the Company shall have no further obligation hereunder. For purposes of this Agreement, "Permanent Disability" means a physical or mental disability or infirmity of the Executive that prevents the normal performance of substantially all his duties as an employee of the Company, which disability or infirmity shall exist for any continuous period of 180 days. 7. MITIGATION OF DAMAGES The Executive shall be required to mitigate the amount of any payment provided for in Section 5.1.1 by seeking other employment, and any such payment will be reduced by any amounts which the Executive receives or is entitled to receive from another employer with respect to the Severance Period. The Executive shall promptly notify the Company in writing in the event that other employment is obtained during the Severance Period. 8. NONSOLICITATION; CONFIDENTIALITY; NONCOMPETITION 8.1 Nonsolicitation. For so long as the Executive is employed by the Company, and continuing for two years thereafter if termination of employment occurs prior to a Change in Control, the Executive shall not, without the prior written consent of the Company, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor, officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company: (x) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or, during the then most recent 12-month period, was employed by, or had served as an agent or key consultant of the Company or any of its subsidiaries; or (y) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or was within the then most recent 12-month period, a customer or client (or reasonably anticipated to the general knowledge of the Executive or the public to become a customer or client) of the Company or any of its subsidiaries. 8.2 Confidentiality. The Executive covenants and agrees with the Company that he will not at any time, except in performance of his obligations to the Company hereunder or with the prior written consent of the Company, directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company or any of its subsidiaries and affiliates. The term "confidential information" includes information not previously disclosed to the public or to the trade by the Company's management, or otherwise in the public domain, with respect to the Company's or any of its subsidiaries' or affiliates' products, facilities, applications and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, customer lists, technical information, financial information (including the revenues, costs or profits associated with any of the Company's products), business plans, prospects or opportunities, but shall exclude any information which (i) is or becomes available to the public or is generally known in the industry or industries in which the Company operates other than as a result of disclosure by the Executive in violation of his agreements under this Section 8.2 or (ii) the Executive is required to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law. 8.3 No Competing Employment. For so long as the Executive is employed by the Company, and continuing for one year thereafter if termination of employment occurs prior to a Change in Control, the Executive shall not, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor (other than a stockholder or investor owning not more than a 1% interest), officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company, render any service to or in any way be affiliated with a competitor (or any person or entity that is reasonably anticipated to the general knowledge of the Executive or the public to become a competitor) of the Company or any of its subsidiaries. 8.4 Exclusive Property. The Executive confirms that all confidential information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company shall be and remain the property of the Company, except for such papers customarily deemed to be the personal copies of the Executive. 8.5 Injunctive Relief. Without intending to limit the remedies available to the Company, the Executive acknowledges that a breach of any of the covenants contained in this Section 8 may result in material and irreparable injury to the Company or its affiliates or subsidiaries for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to seek a temporary restraining order and/or a preliminary or permanent injunction restraining the Executive from engaging in activities prohibited by this Section 8 or such other relief as may be required specifically to enforce any of the covenants in this Section 8. If for any reason, it is held that the restrictions under this Section 8 are not reasonable or that consideration therefor is inadequate, such restrictions shall be interpreted or modified to include as much of the duration and scope identified in this Section 8 as will render such restrictions valid and enforceable. 9. ARBITRATION Any dispute or controversy arising under or in connection with this Agreement that cannot be mutually resolved by the parties hereto shall be settled exclusively by arbitration in New York, New York, before one arbitrator of exemplary qualifications and stature, who shall be selected jointly by the Company and the Executive, or, if the Company and the Executive cannot agree on the selection of the arbitrator, shall be selected by the American Arbitration Association. Judgment may be entered on the arbitrator's award in any court having jurisdiction. The parties hereby agree that the arbitrator shall be empowered to enter an equitable decree mandating specific enforcement of the terms of this Agreement. 10. CERTAIN PAYMENTS Notwithstanding anything in this Agreement to the contrary, if any amounts due to the Executive under this Agreement and any other plan or program of the Company constitute a "parachute payment" (as defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")), then the aggregate of the amounts constituting the parachute payment shall be reduced to an amount that will equal three times his "base amount" (as defined in Section 280G(b)(3) of the Code) less $1.00. The determination to be made with respect to this Section 10 shall be made by an accounting firm jointly selected by the Company and the Executive and paid by the Company, and which may be the Company's independent auditors. 11. MISCELLANEOUS 11.1 Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: Hardinge Inc. One Hardinge Drive Elmira, New York 14902-1507 Telecopier No. (607) 734-2353 Attention: Mr. Robert E. Agan To the Executive: Richard l. Simons 1219 West Clinton Street Elmira, New York 14905 All such notices shall be conclusively deemed to be received and shall be effective, (i) if sent by hand delivery, upon receipt, (ii) if sent by telecopy or facsimile transmission, upon confirmation of receipt by the sender of such transmission, or (iii) if sent by registered or certified mail, on the fifth day after the day on which such notice is mailed. 11.2 Severability. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 11.3 Assignment. The rights and obligations of this Agreement shall bind and inure to the benefit of any successor of the Company by reorganization, merger or consolidation, or any assignee of all or substantially all of the Company's business and properties. Neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by the Executive. 11.4 Entire Agreement. This Agreement represents the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between the Company and the Executive relating to the subject matter hereof. This Agreement may be amended at any time by mutual written agreement of the parties hereto. 11.5 Withholding. The payment of any amount pursuant to this Agreement shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required under the Company's employee benefit plans, if any. 11.6 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed entirely within that state. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and the Executive has hereunto set his hand, as of the day and year first above written. HARDINGE INC. By: /s/ Robert E. Agan Name: Robert E. Agan Title: Chairman of the Board and Chief Executive Officer /s/ Richard L. Simons Richard L. Simons For purposes of this Agreement, I hereby designate Karen B. Simons as my beneficiary hereunder. Date: 4/14/97 /s/ Richard L. Simons Richard L. Simons State of New York ) : ss. County of Chemung ) On the 14th day of April, 1997, before me, personally came Robert E. Agan, to me known, who being by me duly sworn, did depose and say that he resides in the Town of Elmira, Chemung County, New York; that he is the Chairman of the Board and Chief Executive Officer of HARDINGE INC., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that it was so affixed by order of the Board of Directors of said corporation and that he signed his name thereto by like order. /s/ Malcolm L. Gibson Notary Public State of New York ) : ss. County of Chemung ) On this 14th day of April, 1997, before me, the subscriber, personally appeared RICHARD L.SIMONS, to me personally known and known to me to be the same person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed the same. /s/ Malcolm L. Gibson Notary Public EX-10.4 5 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 1997 (the "Agreement"), between HARDINGE INC., a New Yorkcorporation (the "Company") and DANIEL P. SOROKA (the "Executive"). WHEREAS, the Executive is currently employed by the Company; and WHEREAS, the Company desires to engage the Executive to provide services pursuant to the terms of this Agreement; NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, the parties hereto agree as follows: 1. EFFECTIVENESS OF AGREEMENT AND EFFECTIVE DATE This Agreement shall become effective as of the date hereof. For purposes of this Agreement, the term "Effective Date" shall mean January 1, 1997. 2. EMPLOYMENT AND DUTIES 2.1 General. The Company herebyemploys the Executive, and the Executive agrees to serve, upon the terms and conditions herein contained. The Executive shall perform such duties and services for the Company as may be designated from time to time by the Board of Directors of the Company (the "Board") or the Chief Executive Officer of the Company. The Executive agrees to serve the Company faithfully and to the best of his ability under the direction of the Board and the Chief Executive Officer of the Company. 2.2 Exclusive Services. Except as may otherwise be approved in advance by the Board or the Chief Executive Officer of the Company, and except during vacation periods and reasonable periods of absence due to sickness, personal injury or other disability, the Executive shall devote his full working time throughout the Employment Term (as defined in Section 2.3) to the services required of him hereunder. The Executive shall render his services exclusively to the Company during the Employment Term, and shall use his best efforts, judgment and energy to improve and advance the business and interests of the Company in a manner consistent with the duties of his position. 2.3 Term of Employment. The Executive's employment under this Agreement shall commence as of the date hereof and shall terminate on the earlier of (i) the second anniversary of the Effective Date or (ii) termination of the Executive's employment pursuant to this Agreement; provided, however, that the term of the Executive's employment shall be automatically extended without further action of either party for additional one year periods unless written notice of either party's intention not to extend has been given to the other party hereto at least 60 days prior to the expiration of the then effective term. The period commencing as of the Effective Date and ending on the second anniversary of the Effective Date or such later date to which the term of the Executive's employment shall have been extended is hereinafter referred to as the "Employment Term". Notwithstanding the foregoing, in the event of a Change in Control (as defined in Section 5.5) occurring during the Employment Term, the Employment Term shall be extended so that it terminates on the second anniversary of the date of the Change in Control. 2.4 Reimbursement of Expenses. The Company shall reimburse the Executive for reasonable travel and other business expenses incurred by him in the fulfillment of his duties hereunder upon presentation by the Executive of an itemized account of such expenditures, in accordance with Company practices consistently applied. 3. ANNUAL COMPENSATION 3.1 Base Salary. From the Effective Date, the Executive shall be entitled to receive a base salary ("Base Salary") at a rate of $116,000 per annum, payable in accordance with the Company's payroll practices, with such changes as may be provided in accordance with the terms hereof. Once changed, such amount shall constitute the Executive's annual Base Salary. 3.2 Annual Review. The Executive's Base Salary shall be reviewed by the Board, based upon the Executive's performance, not less often than annually. 3.3 Bonus. After the Effective Date, the Executive shall be entitled to such bonus, if any, as may be awarded to the Executive from time to time by the Board. 4. EMPLOYEE BENEFITS The Executive shall, during his employment under this Agreement, be included to the extent eligible thereunder in all employee benefit plans, programs or arrangements (including, without limitation, any plans, programs or arrangements providing for retirement benefits, incentive compensation, profit sharing, bonuses, disability benefits, health and life insurance, or vacation and paid holidays) which shall be established by the Company for, or made available to, its executives generally. 5. TERMINATION OF EMPLOYMENT 5.1 Termination Without Cause; Resignation for Good Reason. 5.1.1 Prior to a Change in Control. If, prior to the expiration of the Employment Term, the Executive's employment is terminated by the Company without Cause (as defined in Section 5.3), or the Executive resigns from his employment hereunder for Good Reason (as defined in Section 5.4.1), at any time prior to a Change in Control, the Company shall continue to pay the Executive the Base Salary (at the rate in effect immediately prior to such termination) for the greater of (i) 6 months or (ii) the remainder of the Employment Term (such period being referred to hereinafter as the "Severance Period"), at such intervals as the same would have been paid had the Executive remained in the active service of the Company. In addition, the Executive shall be entitled to continue to participate during the Severance Period in all employee welfare benefit plans that the Company provides and continues to provide generally to its employees, provided that the Executive is entitled to continue to participate in such plans under the terms thereof. The Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment except as determined in accordance with the terms of the employee benefit plans or programs of the Company. In the event of the Executive's death during the Severance Period, Base Salary continuation payments under this Section 5.1.1 shall continue to be made during the remainder of the Severance Period to the beneficiary designated in writing for this purpose by the Executive or, if no such beneficiary is specifically designated, to the Executive's estate. If,during the Severance Period, the Executive materially breaches his obligations under Section 8 of this Agreement, the Company may, upon written notice to the Executive, terminate the Severance Period and cease to make any further payments or provide any benefits described in this Section 5.1.1. 5.1.2 Following a Change in Control. If, prior to the expiration of the Employment Term, (a) the Executive's employment is terminated by the Company without Cause (as defined in Section 5.3), or the Executive terminates his employment hereunder for Good Reason (as defined in Section 5.4.2), at any time following a Change in Control or (b) the Executive resigns from his employment hereunder for any reason at any time later than six months following a Change in Control, the Company shall pay to the Executive a lump sum cash payment equal to 1.5 times the sum of (i) his Base Salary (at the rate in effect immediately prior to such termination or, if higher, as in effect immediately prior to the Change in Control) and (ii) his average annual bonus earned during the three fiscal years immediately preceding the Change in Control. In addition, the Executive shall be entitled to continue to participate for a period of three years following such termination in all employee benefit welfare plans that the Company provides and continues to provide generally to its executive employees (or, if the Executive is not entitled to participate in any such plan under the terms thereof, in a comparable substitute arrangement provided by the Company). The Company shall reimburse the Executive for any premiums or other expenses incurred by the Executive with respect to his participation and that of any of his dependents in any such employee benefit welfare plan. 5.2 Termination for Cause; Resignation Without Good Reason. If, prior to the expiration of the Employment Term, the Executive's employment is terminated by the Company for Cause, or the Executive resigns from his employment hereunder other than for Good Reason, the Executive shall (subject to Section 5.1.2) be entitled only to payment of his Base Salary as then in effect through and including the date of termination or resignation. Subject to Section 5.1.2, the Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment, except as determined in accordance with the terms of the employee benefit plans or programs of the Company. 5.3 Cause. Termination for "Cause" shall mean termination of the Executive's employment because of: (i) any act or omission that constitutes a material breach by the Executive of any of his obligations under this Agreement; (ii) the continued failure or refusal of the Executive to substantially perform the duties reasonably required of him as an employee of the Company; (iii) any willful and material violation by the Executive of any Federal or state law or regulation applicable to the business of the Company or any of its subsidiaries, or the Executive's conviction of a felony, or any willful perpetration by the Executive of a common law fraud; or (iv) any other willfulmisconduct by theExecutive which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or any of its subsidiaries or affiliates. 5.4 Good Reason. 5.4.1 Prior to a Change in Control. For purposes of this Agreement, "Good Reason" shall mean a material breach by the Company of any term or provision of this Agreement (without the Executive's prior written consent). 5.4.2 Following a Change in Control. Following a Change in Control, for purposes of this Agreement, "Good Reason" shall also mean (in addition to the event or condition described in Section 5.4.1), any of the following (without the Executive's prior written consent): (i) a decrease in the Executive's base rate of compensation or a failure by the Company to pay material compensation due and payable to the Executive in connection with his employment; (ii) a material diminution of the responsibilities or title of the Executive with the Company; or (iii) a failure to continue in effect any medical, dental, accident, disability or other material employee welfare benefit plan in which the Executive is entitled to participate immediately prior to the Change in Control or any material decrease in the benefits provided under any such plan (except that employee contributions may be raised to the extent of any cost increases imposed by third parties); (iv) the Company's requiring the Executive to relocate to an office or location more than 50 miles from his principal employment location immediately prior to the Change in Control; or (v) a failure or refusal of any successor company to assume the Company's obligations under this Agreement. 5.5 Change in Control. For purposes of this Agreement, the term "Change in Control" shall mean and shall be deemed to occur if and when: (i) an offeror (other than the Company) purchases shares of Common Stock of the Company pursuant to a tender or exchange offer for such shares; (ii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), other than any employee benefit plan of the Company or any person or entity appointed or established pursuant to any such plan, who is not now but who shall hereafter become the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, excluding any such securities held by such person as trustee or other fiduciary of an employee benefit plan of the Company; (iii) the membership of the Board changes as the result of a contested election or elections, so that a majority of the individuals who are directors at any particular time were proposed by persons other than (a) directors who were members of the Board immediately prior to a first such contested election ("Continuing Directors") or (b) directors proposed by the Continuing Directors and were initially elected to the Board as a result of such a contested election or elections occurring within the previous two years; or (iv) the shareholders of the Company approve a merger, consolidation, sale or disposition of all or substantially all of the Company's assets, or a plan of partial or complete liquidation. 6. DEATH, DISABILITY OR RETIREMENT. In the event of termination of employment by reason of death, Permanent Disability (as hereinafter defined) or retirement, the Executive (or his estate, as applicable) shall be entitled to Base Salary and benefits determined under Sections 3 and 4 through the date of termination. Other benefits shall be determined in accordance with the benefit plans maintained by the Company, and the Company shall have no further obligation hereunder. For purposes of this Agreement, "Permanent Disability" means a physical or mental disability or infirmity of the Executive that prevents the normal performance of substantially all his duties as an employee of the Company, which disability or infirmity shall exist for any continuous period of 180 days. 7. MITIGATION OF DAMAGES The Executive shall be required to mitigate the amount of any payment provided for in Section 5.1.1 by seeking other employment, and any such payment will be reduced by any amounts which the Executive receives or is entitled to receive from another employer with respect to the Severance Period. The Executive shall promptly notify the Company in writing in the event that other employment is obtained during the Severance Period. 8. NONSOLICITATION; CONFIDENTIALITY; NONCOMPETITION 8.1 Nonsolicitation. For so long as the Executive is employed by the Company, and continuing for two years thereafter if termination of employment occurs prior to a Change in Control, the Executive shall not, without the prior written consent of the Company, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor, officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company: (x) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or, during the then most recent 12-month period, was employed by, or had served as an agent or key consultant of the Company or any of its subsidiaries; or (y) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or was within the then most recent 12-month period, a customer or client (or reasonably anticipated to the general knowledge of the Executive or the public to become a customer or client) of the Company or any of its subsidiaries. 8.2 Confidentiality. The Executive covenants and agrees with the Company that he will not at any time, except in performance of his obligations to the Company hereunder or with the prior written consent of the Company, directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company or any of its subsidiaries and affiliates. The term "confidential information" includes information not previously disclosed to the public or to the trade by the Company's management, or otherwise in the public domain, with respect to the Company's or any of its subsidiaries' or affiliates' products, facilities, applications and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, customer lists, technical information, financial information (including the revenues, costs or profits associated with any of the Company's products), business plans, prospects or opportunities, but shall exclude any information which (i) is or becomes available to the public or is generally known in the industry or industries in which the Company operates other than as a result of disclosure by the Executive in violation of his agreements under this Section 8.2 or (ii) the Executive is required to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law. 8.3 No Competing Employment. For so long as the Executive is employed by the Company, and continuing for one year thereafter if termination of employment occurs prior to a Change in Control, the Executive shall not, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor (other than a stockholder or investor owning not more than a 1% interest), officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company, render any service to or in any way be affiliated with a competitor (or any person or entity that is reasonably anticipated to the general knowledge of the Executive or the public to become a competitor) of the Company or any of its subsidiaries. 8.4 Exclusive Property. The Executive confirms that all confidential information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company shall be and remain the property of the Company, except for such papers customarily deemed to be the personal copies of the Executive. 8.5 Injunctive Relief. Without intending to limit the remedies available to the Company, the Executive acknowledges that a breach of any of the covenants contained in this Section 8 may result in material and irreparable injury to the Company or its affiliates or subsidiaries for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to seek a temporary restraining order and/or a preliminary or permanent injunction restraining the Executive from engaging in activities prohibited by this Section 8 or such other relief as may be required specifically to enforce any of the covenants in this Section 8. If for any reason, it is held that the restrictions under this Section 8 are not reasonable or that consideration therefor is inadequate, such restrictions shall be interpreted or modified to include as much of the duration and scope identified in this Section 8 as will render such restrictions valid and enforceable. 9. ARBITRATION Any dispute or controversy arising under or in connection with this Agreement that cannot be mutually resolved by the parties hereto shall be settled exclusively by arbitration in New York, New York, before one arbitrator of exemplary qualifications and stature, who shall be selected jointly by the Company and the Executive, or, if the Company and the Executive cannot agree on the selection of the arbitrator, shall be selected by the American Arbitration Association. Judgment may be entered on the arbitrator's award in any court having jurisdiction. The parties hereby agree that the arbitrator shall be empowered to enter an equitable decree mandating specific enforcement of the terms of this Agreement. 10. CERTAIN PAYMENTS Notwithstanding anything in this Agreement to the contrary, if any amounts due to the Executive under this Agreement and any other plan or program of the Company constitute a "parachute payment" (as defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")), then the aggregate of the amounts constituting the parachute payment shall be reduced to an amount that will equal three times his "base amount" (as defined in Section 280G(b)(3) of the Code) less $1.00. The determination to be made with respect to this Section 10 shall be made by an accounting firm jointly selected by the Company and the Executive and paid by the Company, and which may be the Company's independent auditors. 11. MISCELLANEOUS 11.1 Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: Hardinge Inc. One Hardinge Drive Elmira, New York 14902-1507 Telecopier No. (607) 734-2353 Attention: Mr. Robert E. Agan To the Executive: Daniel P. Soroka 117 Monroe Drive Horseheads, New York 14845 All such notices shall be conclusively deemed to be received and shall be effective, (i) if sent by hand delivery, upon receipt, (ii) if sent by telecopy or facsimile transmission, upon confirmation of receipt by the sender of such transmission, or (iii) if sent by registered or certified mail, on the fifth day after the day on which such notice is mailed. 11.2 Severability. Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 11.3 Assignment. The rights and obligations of this Agreement shall bind and inure to the benefit of any successor of the Company by reorganization, merger or consolidation, or any assignee of all or substantially all of the Company's business and properties. Neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by the Executive. 11.4 Entire Agreement. This Agreement represents the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between the Company and the Executive relating to the subject matter hereof. This Agreement may be amended at any time by mutual written agreement of the parties hereto. 11.5 Withholding. The payment of any amount pursuant to this Agreement shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required under the Company's employee benefit plans, if any. 11.6 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed entirely within that state. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and the Executive has hereunto set his hand, as of the day and year first above written. HARDINGE INC. By: /s/ Robert E. Agan Name: Robert E. Agan Title: Chairman of the Board and Chief Executive Officer /s/ Daniel P. Soroka Daniel P. Soroka For purposes of this Agreement, I hereby designate Frances K. Soroka as my beneficiary hereunder. Date: 3/12/97 /s/ Daniel P. Soroka Daniel p. Soroka State of New York ) : ss. County of Chemung ) On the 12th day of March, 1997, before me, personally came Robert E. Agan, to me known, who being by me duly sworn, did depose and say that he resides in the Town of Elmira, Chemung County, New York; that he is the Chairman of the Board and Chief Executive Officer of HARDINGE INC., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that it was so affixed by order of the Board of Directors of said corporation and that he signed his name thereto by like order. /s/ Malcolm L. Gibson Notary Public State of New York ) : ss. County of Chemung ) On this 12th day of March, 1997, before me, the subscriber, personally appeared DANIEL P. SOROKA, to me personally known and known to me to be the same person described in and who executed the foregoing instrument, and he duly acknowledged to me that he executed the same. /s/ Malcolm L. Gibson Notary Public EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS INFORMATION EXTRACTED FROM THE COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 MAR-31-1997 1,321 0 61,162 0 92,312 147,391 117,051 55,264 220,778 29,067 0 0 0 65 148,576 220,778 60,056 60,056 39,878 11,804 1,960 0 691 5,889 2,375 3,514 0 0 0 3,514 .56 .56
-----END PRIVACY-ENHANCED MESSAGE-----