EXHIBIT 10.5
HARDINGE INC.
2002 INCENTIVE STOCK
PLAN
1. Establishment of
Plan .
Hardinge Inc. (hereafter referred to
as the “Company”) proposes to grant to selected
employees of the Company and its subsidiaries:
(a) Incentive Stock Options, (b) Non-Qualified Stock
Options, (c) Stock Appreciation Rights, (d) Restricted
Stock Incentives, and (e) Performance Share Incentives
(collectively hereinafter sometimes referred to as
“Incentives”) for the purpose of enhancing the
profitability and value of the Company for the benefit of its
shareholders by providing stock awards to attract, retain and
motivate officers and other key employees who make important
contributions to the success of the Company.
The Company also proposes to grant
to Outside Directors options to purchase common stock of the
Company pursuant to the Plan. The purpose of such Director
Options is to provide incentives for highly qualified individuals
to stand for election to the Board and to continue service on the
Board and to encourage increased stock ownership by Outside
Directors in order to promote long-term stockholder value.
Restricted Stock Incentives, Incentive Stock Options (as defined in
Section 422A of the Internal Revenue Code), Stock Appreciation
Rights, Performance Share Incentives and Dividend Equivalents will
not be granted to Outside Directors under the Plan.
Incentives shall be granted pursuant
to the plan herein set forth, which shall be known as the
Hardinge Inc. 2002 Incentive Stock Plan (hereinafter referred
to as the “Plan”).
2. Definitions of
Certain Terms Used in the Plan .
a. “Affiliate”
means any subsidiary, whether directly or indirectly owned, or
parent of the Company, or any other entity designated by the
Committee.
b. “Board” means
the Company’s Board of Directors.
c. “Change of
Control” is defined in Section 18 of the
Plan.
d. “Code” means
the Internal Revenue Code of 1986, as amended, or any successor
code thereto.
e. “Committee”
means the Incentive Compensation Committee of the Board of
Directors of the Company or any successor committee the Board of
Directors may designate to administer the Plan.
f. “Common Stock”
means the Hardinge Inc. Common Stock, par value $.01 per
share.
g. “Competition”
means to manage, operate, join, control, participate in, provide
consulting advice to, act as an agent or director of, or have any
financial interest in (as a partner, stockholder, investor or
otherwise), any firm, corporation, partnership, association, joint
stock company, joint venture, unincorporated organization,
limited liability company or any such similar business operation or
activity (or any portion thereof), directly or indirectly, in
competition with any of the business operations or activities of
the Company or its Affiliates or affecting or attempting to affect
a Change of Control.
h. “Director Stock
Option” means a Nonqualified Option granted to Outside
Directors pursuant to Section 7 of the Plan.
i. “Employee”
means any person who is employed by the Company or a subsidiary of
the Company.
j. “Exchange Act”
means the Securities Exchange Act of 1934, as amended.
k. “Fair Market
Value” of Stock means the fair and reasonable value thereof
as determined by the Committee according to prices in trades as
reported on the NASDAQ National Market. If there are no
prices so reported or if, in the opinion of the Committee, such
reported prices do not represent the fair and reasonable value of
the Stock, then the Committee shall determine Fair Market Value by
any means it deems reasonable under the circumstances.
l. “Incentive Stock
Options” means stock options granted under the Plan that meet
the definition of Incentive Stock Options under Section 422 of
the Code.
m. “Nonqualified
Options” means stock options granted under the Plan that are
not Incentive Stock Options.
n. “Outside
Director” means any member of the Company’s Board of
Directors who is not also an Employee.
o. “Participant”
shall mean any employee or director selected to receive a grant
under the Plan.
p. “Performance Share
Incentives” means Incentives granted under Section 9 of
the Plan.
q. “Restricted Stock
Incentives” means Incentives granted under Section 10 of
the Plan.
r.
“Retirement” means retirement under any pension or
retirement plan of the Company or of a subsidiary, or termination
of employment with the Company or a subsidiary, by action of the
employing company, because of disability.
s. “Stock” means
the Common Stock or any other authorized class or series of common
stock or any such other security outstanding upon the
reclassification of any of such classes or series of common stock,
including, without limitation, any stock split-up, stock dividend,
creation of targeted stock, or other distributions of stock in
respect of stock, or any reverse stock split-up, or
recapitalization of the Company or any merger or consolidation of
the Company with any Affiliate.
t. “Stock Appreciation
Rights” means Incentives granted under Section 8 of the
Plan.
u. “Stock Options”
means Incentive Stock Options and Nonqualified Options granted
under the Plan.
v. A “subsidiary”
means any corporation in which the Company owns, directly or
indirectly, at least thirty-five percent (35%) of the total
combined voting power of all classes of stock; excep that for
purposes of any option subject to the provisions of
Section 424 of the Internal Revenue Code, as amended, the term
“subsidiary” means any corporation in an unbroken chain
of corporations beginning with the Company if, at the time of the
granting of an Option, each of the corporations, other than the
last corporation in the unbroken chain, owns stock possessing fifty
percent (50%) or more of the total combined voting power of all
classes of stock of one of the other corporations in such
chain.
w. “Termination for
Cause” means an Employee’s termination of employment
with the Company or an Affiliate or an Outside Director’s
removal from office as a director of the Company, in each case
because of such person’s willful engaging in gross
misconduct; provided, however, that a Termination for Cause shall
not include termination attributable to (i) poor work
performance, bad judgment or negligence, (ii) an act or
omission believed by such person in good faith to have been in or
not opposed to the best interests of the Company and reasonably
believed by such person to be lawful, or (iii) the good faith
conduct of such person in connection with a Change of Control
(including opposition to or support of such Change of
Control).
3. Stock Reserved for
Incentives .
A maximum of 450,000 shares of
Common Stock or the number of securities to which said number of
shares may be adjusted in accordance with Section 4 below, may
be issued upon granting of Restricted Stock Incentives, Performance
Share Incentives, and the exercise of Stock Options and Stock
Appreciation Rights under the Plan. Such shares may be either
authorized and unissued shares or previously issued shares
purchased by the Company for purposes of the Plan. Subject to
adjustment in accordance with Section 4 below, a maximum of
one percent (1%) of the outstanding shares of the
Company’s Common Stock as of the first business day of any
calendar year may be the subject of Incentives granted under the
Plan in that calendar year. The shares available for granting
Incentives in any year shall be increased by the number of shares
available under the Plan in previous years but not covered by
Incentives granted under the Plan in those years plus any shares as
to which options or other benefits granted under the Plan have
lapsed, expired, terminated or been cancelled. Any shares
subject to stock options, grants or Incentives may thereafter be
subject to new stock options, grants or Incentives under the Plan
if there is a forfeiture of any such grants or Incentives, or the
lapse, expiration or termination of any such option but not if
there is a surrender of an option or portion thereof pursuant to a
Stock Appreciation Right as provided hereafter in
Section 8. The maximum number of shares in respect of
which Incentives may be granted during the term of the Plan to an
individual recipient of Incentives shall be 112,500.
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The inability of the Company to
obtain authority from any regulatory body having jurisdiction,
which counsel to Company deems necessary to the proper issuance and
sale of any shares hereunder, shall relieve the Company from any
liability for failure to issue or sell such shares as to which such
authority has not been obtained.
4. Adjustment
Provisions
In the event of any extraordinary
dividend, reorganization, recapitalization, stock dividend, stock
split-up, change in par or no par value, combination of shares,
merger, consolidation, sale of all or substantially all of the
assets of the Company, warrant or rights offering or combination,
exchange or reclassification of Common Stock or any other similar
event or any other change in the corporate structure or shares of
the Company, the Committee or its delegate shall cause such
equitable adjustment as it deems appropriate to be made in the
number and kind of shares then remaining available for issue under
the Plan, and in the terms of the outstanding Incentives to reflect
such event and preserve the value of such Incentives. In the
event the Committee determines that any such event has a minimal
effect on the value of Incentives, it may elect not to cause any
such adjustments to be made. In all events, the determination
of the Committee or its delegee shall be conclusive. If any
such adjustment would result in a fractional security being
issuable or awarded under the Plan, such fractional security shall
be disregarded. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall
affect and no adjustment by reason hereof shall be made with
respect to the number or price of shares subject to a
grant.
5. Administration of the
Plan .
The authority to grant Incentives to
employees under the Plan shall be vested in the Committee;
provided, however, that the Committee shall have no authority
regarding the granting of Director Stock Options to Outside
Directors, which grants shall be non-discretionary. The
Committee shall determine those eligible to receive Incentives and
the amount, type and terms of each Incentive, subject to the
provisions of the Plan. Each member of the Committee shall be
(i) an “outside director” within the meaning of
Section 162(m) of the Code, subject to any transitional
rules applicable to the definition of outside director, and
(ii) a “disinterested person” within the meaning
of Rule 16b-3 under the Exchange Act, or otherwise qualified
to administer this Plan as contemplated by that Rule or any
successor Rule under the Exchange Act. In making any
determinations under the Plan, the Committee shall be entitled to
rely on reports, opinions or statements of officers or employees of
the Company, as well as those of counsel, public accountants and
other professional or expert persons. All determinations,
interpretations and other decisions under or with respect to the
Plan or any Incentives by the Committee shall be final, conclusive
and binding upon all parties, including without limitation, the
Company, any Employee, and any other person with rights to any
Incentive under the Plan, and no member of the Committee shall be
subject to individual liability with respect to the
Plan.
Subject to the provisions of the
Plan, the Committee from time to time shall determine the
individuals to whom, and the time or times at which, Incentives
shall be granted and the terms thereof. In the case of
officers to whom Incentives may be granted, the selection of such
officers and all of the foregoing determinations shall be made
directly by the Committee in its sole discretion. In the case
of key employees other than officers, the selection of such
employees and all of the foregoing determinations may be delegated
by the Committee to an administrative group of officers chosen by
the Committee. Incentives granted to one employee need not be
identical to those granted other employees.
The Committee shall administer and
shall have full power to construe and interpret the Plan;
prescribe, amend and rescind rules and regulations relating to
the Plan; and make all other determinations and take all other
actions that the Committee believes reasonable and proper,
including the power to delegate responsibility to others to assist
it in administering the Plan. The determinations of the
Committee shall be made in accordance with its judgment as to the
best interests of the Company and its stockholders and in
accordance with the purposes of the Plan. The
Committee’s determinations shall in all cases be
conclusive.
A majority of the members of the
Committee shall constitute a quorum, and all determinations of the
Committee shall be made by a majority of the entire
Committee. Any determination of the Committee may be made,
without notice or meeting, by the written consent of a majority of
the Committee members.
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6.
Eligibility .
Any Employee selected by the
Committee, except a member of the Committee, shall be eligible for
any Incentive contemplated under the Plan. In making its
determination, the Committee shall take into account the present
and potential contributions of the Employees to the success of the
Company and such other such factors as the Committee shall deem
relevant. Outside Directors of the Company shall be eligible
for grants of Director Stock Options under Section 7 of the
Plan. An Employee or Director who has been granted an
Incentive under this or any other plan of the Company or any of its
Affiliates may or may not be granted additional Incentives under
the Plan at the discretion of the Committee. As a condition
to the exercise of a grant, the Company may require the Participant
exercising the grant to represent and warrant that at the time of
exercise the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if,
in the opinion of counsel to the Company, such a representation is
required by applicable law.
7. Stock Options
.
The Committee may grant Incentive
Stock Options, other statutory options under the Code, and
Nonqualified Options to eligible Employees, and such Stock Options
shall be subject to the terms and conditions of this Section 7
of the Plan and such other terms and conditions as the Committee
may prescribe.
(a) Option Price.
The option price per share with respect to each Stock Option
shall be determined by the Committee, but shall not be less than
100% of the fair market value of the Common Stock on the date the
Stock Option is granted, as determined by the Committee.
Except as provided in Section 4 hereof, under no circumstances
shall the Board or the Committee lower the exercise price of
outstanding options issued under the Plan.
(b) Period of Option.
The period of each Stock Option shall be fixed by the
Committee; provided, however, that such period shall not exceed ten
(10) years from the grant date in the case of Incentive Stock
Options.
(c) Payment. The
option price shall be payable at the time the Stock Option or the
Director Stock Option is exercised in cash or, at the discretion of
the Committee, in whole or in part in the form of shares of Common
Stock already owned by the grantee (based on the fair market value
of the Common Stock on the date the option is exercised by the
Committee). No shares shall be issued until full payment
therefor has been made. A grantee of a Stock Option or a
Director Stock Option shall have none of the rights of a
stockholder until the shares are issued.
(d) Exercise of Option.
The shares covered by a Stock Option may be purchased in
such installments and on such exercise dates as the Committee may
determine. Any shares not purchased on the applicable
exercise date may be purchased thereafter at any time prior to the
final expiration of the Stock Option. In no event (including
those specified in paragraphs (e), (f) and (g) of this
section below) shall any Stock Option or any Director Stock Option
be exercisable after its specified expiration period and in no
event shall a Stock Option or Director Stock Option be exercised
after the expiration of ten (10) years from the date such
option is granted. The Committee may provide that, subject to
such conditions as it considers appropriate, upon the delivery of
shares of Common Stock to the Company in payment of the exercise
price of a Stock Option, the grantee of such Stock Option
automatically be awarded a Stock Option for up to the number of
shares of Common Stock so delivered.
(e) Retirement and
Termination. Upon Retirement or termination of
employment of the Stock Option grantee for reasons other than those
described in Section 14 of the Plan, Stock Option privileges
shall apply only to those Options immediately exercisable at the
date of such Retirement or termination. The Committee,
however, in its discretion, may provide on a case by case basis
that any Stock Options outstanding but not yet exercisable upon
such Retirement or termination of the Stock Option grantee may
become exercisable in accordance with a schedule to be determined
by the Committee. Options exercisable upon Retirement shall
remain exercisable for three (3) years after Retirement;
Options exercisable upon termination for reasons other than
Retirement or those described in Section 14 of the Plan shall
remain exercisable for six (6) months after such
termination.
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(f) Death. Upon
the death of a Stock Option or Director Stock Option grantee, Stock
Option or Director Stock Option privileges shall apply only to
those shares which were immediately exercisable at the time of
death, and options exercisable upon death shall remain exercisable
for three (3) years after death. The Committee, in its
discretion, may provide that any Stock Options or Director Stock
Options outstanding but not yet exercisable upon the death of a
Stock Option or Director Stock Option grantee may become
exercisable in accordance with a schedule to be determined by the
Committee. Such privileges shall expire unless exercised by
legal repr
