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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
=============================
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
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.
<PAGE>
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.
<PAGE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
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.
<PAGE>
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.
<PAGE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
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.
<PAGE>
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.
<PAGE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
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.
<PAGE>
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.
<PAGE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,321
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<RECEIVABLES> 61,162
<ALLOWANCES> 0
<INVENTORY> 92,312
<CURRENT-ASSETS> 147,391
<PP&E> 117,051
<DEPRECIATION> 55,264
<TOTAL-ASSETS> 220,778
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0
0
<COMMON> 65
<OTHER-SE> 148,576
<TOTAL-LIABILITY-AND-EQUITY> 220,778
<SALES> 60,056
<TOTAL-REVENUES> 60,056
<CGS> 39,878
<TOTAL-COSTS> 11,804
<OTHER-EXPENSES> 1,960
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<INTEREST-EXPENSE> 691
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<INCOME-TAX> 2,375
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</TABLE>
