Exhibit 10.1


 


HARDINGE INC.


 


CASH INCENTIVE PLAN


 


(Effective January 1, 2005)


 


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


Debt reduction


Stockholder return


Earnings Before Interest
Taxes and Depreciation


Net Working Capital


Return on investment


Return on invested capital


Return on equity


Gross operating profit


Return on research and development investment


Margin


Earnings
per share


Cash
flow


Revenue


Revenue
growth


Return
on net assets


Profit
before tax


Profit
after tax


Market
capitalization


Total
stockholder return


 


Performance
goals based on financial business criteria may be set on a pre tax or after tax
basis, may be defined by absolute or relative measures, and may be valued on a
growth or fixed basis.


 


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Strategic
and Operational Business Criteria:


 


Quality improvements


Cycle time reductions


Manufacturing improvements and/or efficiencies


Strategic positioning Programs


Business/information systems improvements


Infrastructure support Programs


Human resource programs


New product releases


Market
share


Reduction
in product returns


Customer
satisfaction improvements


Operational
and strategic programs


Expense
management


New
product revenue


Customer
programs


Technology
development programs


 


(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.


 


(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.


 


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.


 


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(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.


 


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 


 


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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.


 


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.


 


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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, 2005.  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.


 


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