Exhibit 10.1

 

HARDINGE INC.

 

CASH INCENTIVE PLAN

 

(Effective January 1, 2006)

 

 

1.             Objectives.

 

                The Hardinge Inc. Cash Incentive Plan (the “Plan”) is designed
to retain executives and reward them for making major contributions to the
success and profitability of the Company.  These objectives are accomplished by
making incentive Awards under the Plan.

 

2.             Definitions.

 

                (a)           Award—The Award to a Plan participant pursuant to
terms and conditions of the Plan.

 

                (b)           Award Agreement—An agreement between the Company
and a participant that sets forth the terms, conditions and limitations
applicable to an Award.

 

                (c)           Board—The non-management Directors of Hardinge
Inc.

 

                (d)           Committee—The Compensation Committee of the Board.

 

                (e)           Company—Hardinge Inc. (“Hardinge”) and any other
corporation in which Hardinge controls, directly or indirectly, fifty percent
(50%) or more of the combined voting power of all classes of voting securities.

 

                (f)            Executive Officer—Any officer of the Company
identified by the Company in its annual report on Form 10-K filed with the
Securities and Exchange Commission as an executive officer of the Company.

 

                (g)           Target Award—The Award expressed as a percentage
of annualized base remuneration, which shall include Retention Bonuses, that may
be earned by a participant for achievement of the target level of performance.

 

3.             Eligibility.

 

                Only Executive Officers are eligible for participation in the
Plan.

 

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

 

4.             Administration.

 

                The Plan shall be administered by the Committee which shall have
full power and authority to construe, interpret and administer the Plan.  Each
decision of the Committee shall be final, conclusive and binding upon all
persons.  No later than ninety (90) days after the start of each calendar year,
the Committee shall recommend to the Board and the Board shall finally:  (i)
determine which Executive Officers are in positions in which they are likely to
make substantial contributions to the Company’s success and therefore
participate in the Plan for the year; (ii) set Target Awards for each
participant; (iii) establish performance goals and performance goal measures as
provided by Section 5; and (iv) establish the terms and conditions of the Award
in effect for the year.

 

5.             Performance Goals.

 

                (a)           The Committee shall recommend to the Board and the
Board shall finally establish performance goals applicable to a particular
calendar year no later than ninety (90) days after the start of the year while
the outcome of the performance goal is substantially uncertain.

 

                (b)           Each performance goal applicable to a year shall
identify one or more business criteria that is to be monitored during the year. 
Such business criteria include any of the following:

 

                Financial Business Criteria:

 

 

 

Net income

 

Margin

 

 

Debt reduction

 

Earnings per share

 

 

Stockholder return

 

Cash flow

 

 

Earnings Before Interest

 

Revenue

 

 

Taxes and Depreciation

 

Revenue growth

 

 

Net Working Capital

 

Return on net assets

 

 

Return on investment

 

Profit before tax

 

 

Return on invested capital

 

Profit after tax

 

 

Return on equity

 

Market capitalization

 

 

Gross operating profit

 

Total stockholder return

 

 

Return on research and development investment

 

 

 

                Performance goals based on financial business criteria may be
set on an earnings before interest and taxes, earnings before interest, taxes
and depreciation or an after tax basis, may be defined by absolute or relative
measures, and may be valued on a growth or fixed basis.

 

 

2

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

 

                Strategic and Operational Business Criteria:

 

 

 

Quality improvements

 

Market share

 

 

Cycle time reductions

 

Reduction in product returns

 

 

Manufacturing improvements and/or efficiencies

 

Customer satisfaction
improvements

 

 

Strategic positioning

 

Operational and strategic

 

 

programs

 

programs

 

 

Business/information

 

Expense management

 

 

systems improvements

 

New product revenue

 

 

Infrastructure support

 

Customer programs

 

 

programs

 

Technology development

 

 

Human resource programs

 

programs

 

 

New product releases

 

Maintain appropriate capital

 

 

Inventory turns

 

structure

 

                (c)           The Committee shall recommend to the Board and the
Board shall finally determine the target level of performance that must be
achieved with respect to each criteria that is identified in a performance goal
in order for a performance goal to be treated as attained.  In establishing the
target level, the Board will specify the measures to be used to evaluate
performance goal achievement and the weighting of each performance goal.  The
Board may also establish minimum threshold and maximum performance criteria and
may make Target Awards based on its discretion without precise objective
measurements.  Profit, earnings and revenues used for any performance criteria
measurements may exclude in the Committee’s discretion:  gains or losses on
operating asset sales or dispositions; asset write-downs; litigation or claim
judgments or settlements; accruals for historic obligations; effect of changes
in tax law or rate on deferred tax liabilities; accruals for reorganization and
restructuring programs; uninsured catastrophic property losses; the cumulative
effect of changes in accounting principles; and any extraordinary non-recurring
items as described in Accounting Principles Board Opinion No. 30 and/or in
management’s discussion and analysis of financial performance appearing in the
Company’s annual report to shareholders for the applicable year.

 

                (d)           The Board may base performance goals on one or
more of the foregoing business criteria.  In the event performance goals are
based on more than one business criteria, the Board may determine to make Awards
upon attainment of the performance goal relating to any one or more of such
criteria, provided the performance goals, when established, are stated as
alternatives to one another.

 

                (e)           At the time the Board sets performance goals, the
Board will establish the Target Award for each participant.

 

 

3

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

 

6.             Awards.

 

                (a)           The Committee shall make Awards only in the event
the Committee certifies in writing prior to payment of the Award that the
performance goal or goals under which the Award is to be paid has or have been
attained.

 

                (b)           Depending on performance, actual Awards may vary
from the Target Award, reflecting the minimum threshold to the maximum
performance level of goal achievement.

 

                (c)           The Committee in its sole and absolute discretion
may reduce but not increase the amount of an Award otherwise payable to a
participant upon attainment of the performance goal or goals established for a
year.

 

                (d)           A participant’s performance must be satisfactory,
regardless of Company performance, before he or she may be paid an Award.

 

                (e)           In the event the performance goals for a year are
attained, the Committee shall grant all or such portion of an Award for the year
as has been earned based on performance achievement to any participant who is
appointed or promoted to an Executive Officer position covered by this Plan
during the year, or whose employment is terminated during the year, or who
suffers a permanent disability.

 

7.             Payment of Awards.

 

                Each participant shall be paid the Award in cash as soon as
practicable after the Committee has determined that Awards have been earned and
are payable.

 

8.             Tax Withholding.

 

                The Company shall have the right to deduct applicable taxes from
any Award payment.

 

9.             Amendment, Modification, Suspension or Discontinuance of this
Plan.

 

                The Board may amend, modify, suspend or terminate the Plan for
the purpose of meeting or addressing any changes in legal requirements or for
any other purpose permitted by law.  No amendment, suspension, termination or
discontinuance may impair the right of a participant or his or her designated
beneficiary to receive any Award accrued prior to the later of the date of
adoption or the effective date of such amendment, suspension, termination or
discontinuance.  The exercise of the Committee’s discretion as permitted by
Section 6(c) shall not be deemed to constitute an amendment or modification
subject to the provisions of this Section 9.

 

 

4

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

 

10.          Termination of Employment.

 

                If the employment of a participant terminates, other than
pursuant to paragraphs (a) and (b) of this Section 10, all unpaid Awards shall
be cancelled immediately, unless the Committee in its discretion determines
otherwise.

 

                (a)           Retirement—When a participant’s employment
terminates as a result of retirement, the participant will receive an Award
reflecting performance and actual period of employment during the calendar year
of retirement.

 

                (b)           Death or Disability of a Participant.

 

                (i)            In the event of a participant’s death, the
participant’s estate or beneficiaries shall have the right to receive an Award
reflecting performance and actual period of employment during the calendar year
of death or disability.  Rights to any such outstanding Awards shall pass by
will or the laws of descent and distribution in the following order:  (a) to
beneficiaries so designated by the participant; if none, then (b) to a legal
representative of the participant; if none, then (c) to the persons entitled
thereto as determined by a court of competent jurisdiction.  Awards so passing
shall be made at such times and in such manner as if the participant were
living.

 

                (ii)           In the event a participant is disabled, the
participant will receive an Award reflecting performance and actual period of
employment during the calendar year.  In the event the participant is
incapacitated, the Award will be paid to the participant’s authorized legal
representative.

 

                (iii)          After the death or disability of a participant,
the Committee may in its sole discretion at any time (a) terminate restrictions
in Award Agreements; (b) accelerate any or all Awards; and (c) instruct the
Company to pay the total of any accelerated payments in a lump sum to the
participant, the participant’s estate, beneficiaries or representative.

 

                (iv)          In the event of uncertainty as to interpretation
of or controversies concerning this paragraph (b) of Section 10, the Committee’s
determinations shall be binding and conclusive.

 

11.          Cancellation and Rescission of Awards.

 

                Unless the Award Agreement specifies otherwise, the Committee
may cancel any unpaid Awards at any time if the participant is not in compliance
with all other applicable provisions of the Award Agreement and the Plan. 
Awards may also be cancelled if the Committee determines that the participant
has at any time engaged in activity harmful to the interest of or in competition
with the Company.

 

 

5

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

 

12.          Nonassignability.

 

                No award or any other benefit under the Plan shall be assignable
or transferable by the participant during the participant’s lifetime.

 

13.          Unfunded Plan.

 

                The Plan shall be unfunded.  Although bookkeeping accounts may
be established with respect to participants, any such accounts shall be used
merely as a bookkeeping convenience.  The Company shall not be required to
segregate any assets for payment under the Plan, nor shall the Plan be construed
as providing for such segregation, nor shall the Company nor the Board nor the
Committee be deemed to be a trustee of any Award under the Plan.  Any liability
of the Company to any participant with respect to an Award under the Plan shall
be based solely upon any contractual obligations that may be created by the Plan
and any Award Agreement; no such obligation of the Company shall be deemed to be
secured by any pledge or other encumbrance on any property of the Company. 
Neither the Company nor the Board nor the Committee shall be required to give
any security or bond for the performance of any obligation that may be created
by the Plan.

 

14.          No Right to Continued Employment.

 

                Nothing in this Plan shall confer upon any employee any right to
continue in the employ of the Company or shall interfere with or restrict in any
way the right of the Company to discharge an employee at any time for any reason
whatsoever, with or without good cause.

 

15.          Effective Date.

 

                The Plan became effective as of January 1, 2006.  The Board may
terminate or suspend the Plan at any time.  No Awards may be made while the Plan
is suspended or after it is terminated.

 

6

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