EXHIBIT 10.1
HARDINGE INC.
SEPARATION AND CONSULTING
AGREEMENT
THIS SEPARATION AND CONSULTING AGREEMENT (“Agreement”)
is made as of May 22, 2008 by and between HARDINGE INC., a New
York corporation with its principal office at One Hardinge Drive,
Elmira, New York 14902-1507 (the “Company”) and
J. Patrick Ervin, an individual residing at 27 Dublin
Drive, Elmira, New York 14905
(“Mr. Ervin”).
WHEREAS, Mr. Ervin and the Company have agreed that
Mr. Ervin’s service as President and Chief Executive
Officer of the Company will terminate effective upon the date of
this Agreement; and
WHEREAS, because Mr. Ervin has extensive knowledge,
experience, skill and ability, and because of
Mr. Ervin’s long standing knowledge of the
Company’s business, the Company desires to engage
Mr. Ervin as a consultant to the Company upon termination of
Mr. Ervin’s employment with the Company and secure
Mr. Ervin’s covenant to not compete with the Company on
the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the promises exchanged herein,
the parties agree as follows:
1.
SEPARATION .
(a)
Effective upon the date of this Agreement (the “Separation
Date”), Mr. Ervin’s service as an officer and
employee of the Company and in all capacities in which
Mr. Ervin is serving any Affiliate (as hereinafter defined) or
any employee benefit plan sponsored by the Company or any
Affiliate, including, but not limited to, as director, officer,
manager, employee and trustee, is hereby terminated.
(b)
Mr. Ervin hereby also resigns as a director of the Company,
effective on the Separation Date.
(c)
Mr. Ervin agrees to resign, effective upon the Separation
Date, as an officer, trustee and member of the Anderson-Evans
Foundation of Elmira, NY (the “AE Foundation”) and will
promptly after his execution of this Agreement submit a written
resignation, in customary form, to the Board of Directors of the AE
Foundation.
(d)
Mr. Ervin further agrees to expeditiously resign from any
positions he holds with any trade, civic, professional or other
organizations in which he is serving as, or is identified as, a
representative of the Company.
2.
CONSULTING ENGAGEMENT . Effective on the Separation
Date, the Company hereby engages Mr. Ervin as an independent
consultant to advise and consult with the Company during the
Consulting Term (as hereinafter defined) with respect to all
matters regarding the business of the Company and its Affiliates
that are within Mr. Ervin’s knowledge,
experience or
expertise or are related to Mr. Ervin’s former duties as
an executive officer of the Company, and Mr. Ervin hereby
accepts such engagement. Mr. Ervin shall provide such
consultation services to the Company during normal business hours
and upon reasonable notice from the Company. Mr. Ervin
shall not be required to devote more than forty (40) hours per
month to his consulting duties under this Agreement. To avoid
inconvenience or conflict with respect to Mr. Ervin’s
other business or personal affairs, the Company will use reasonable
efforts to allow Mr. Ervin to provide consultation services to
the Company using telephone, electronic mail or other means of
communications.
3.
TERM . The term of Mr. Ervin’s engagement
as a consultant to Company will commence on the Separation Date and
continue until March 31, 2012 (the “Consulting
Term”), provided, however, that the Consulting Term shall
immediately terminate upon (i) Mr. Ervin’s death,
or (ii) written notice by the Company to Mr. Ervin that
Mr. Ervin has breached, in any respect, any of his obligations
under this Agreement and Mr. Ervin’s failure to cure
such breach (if curable) within ten (10) days after receipt of
such notice.
4.
COMPENSATION .
(a) In
consideration of Mr. Ervin’s performance of all of his
obligations under this Agreement including, but not limited to, the
consulting services provided under Section 2 and
Mr. Ervin’s compliance with the covenants set forth in
Section 9, the Company will pay Mr. Ervin as
follows:
(i)
During the period commencing on the Separation Date and ending on
December 31, 2008, the Company will continue to pay to
Mr. Ervin his base salary at the annual rate in effect
immediately prior to the Separation Date. For all purposes
related to income tax and payroll tax reporting and withholding and
applicable Federal, state and local laws, rules and
regulations, these payments will constitute severance payments in
respect of Mr. Ervin’s separation from the
Company. These payments are also intended to constitute
“separation pay” for purposes of Treasury Regulation
§ 1.409A-1(b)(9).
(ii)
During the period commencing on January 1, 2009 and ending on
March 31, 2012, the Company will pay Mr. Ervin the sum of
$16,666.66 per calendar month on or before the 15th day of each
month during the Consulting Term, commencing January 15,
2009. For all purposes related to income and payroll tax
reporting and withholding and applicable Federal, state and local
laws, rules and regulations, these payments will be made to
Mr. Ervin in his capacity as an independent contractor to the
Company.
(b) If
the Consulting Term terminates prior to March 31, 2012, the
Company’s obligation to make the payments specified in this
Section 4 shall also terminate, provided, however, that in the
event of Mr. Ervin’s death prior to December 31,
2008, the Company will continue to pay to his estate the payments
specified in Paragraph 4(a)(i) above.
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5.
HEALTH INSURANCE .
(a) The
Company will amend the Company’s group health insurance plan
in which Mr. Ervin participated immediately prior to the
Separation Date (the “Health Plan”) to permit
Mr. Ervin to remain a participant in the Health Plan during
the Consulting Term. Mr. Ervin shall continue to
participate in the Health Plan during the Consulting Term on the
same terms and conditions as each other participant in the Health
Plan unless and until the Company reasonably determines that his
participation is no longer possible due to changes in the
applicable group health insurance contract, the insurer’s
policies or rules, or applicable law or regulations. If the
Company so determines that Mr. Ervin’s participation in
the Health Plan is no longer possible, then commencing on the date
Mr. Ervin ceases to participate in the Health Plan and
continuing until expiration or earlier termination of the
Consulting Term, the Company will reimburse Mr. Ervin,
up to a maximum of $1,000 per month, for the premium expense of
health insurance for Mr. Ervin and his immediate family under
a plan selected and purchased by Mr. Ervin. Such
payments by the Company will be made upon Mr. Ervin’s
presentation to the Company of reasonably satisfactory evidence of
such coverage and the cost thereof, which presentation shall be
made no later than sixty (60) days after
Mr. Ervin’s incurrence of the cost.
(b)
Commencing on April 1, 2012, provided that the Consulting Term
has not been terminated prior to March 31, 2012 pursuant to
clause (i) or (ii) of Section 3, Mr. Ervin
will be permitted to remain a participant in the Health Plan
provided that he will be solely responsible for all costs of his
participation including, but not limited to, all insurance premiums
and provided, further, that such participation will terminate if
the Company reasonably determines that his participation is no
longer possible due to changes in the applicable group health
insurance contract, the insurer’s policies or rules, or
applicable law or regulations.
(c) The
Company’s obligations under this Section 5 will
terminate upon written notice by the Company to Mr. Ervin that
Mr. Ervin has breached, in any respect, any of his obligations
under this Agreement and Mr. Ervin’s failure to cure
such breach (if curable) within ten (10) days after receipt of
such notice.
6.
LIFE INSURANCE . The Company is currently the owner
and beneficiary of the following life insurance policies issued by
Northwestern Mutual Life Insurance Company insuring the life of
Mr. Ervin (the “Life Policies”):
(i)
Policy No. 14-202-406 issued on April 25,
1997
(ii)
Policy No. 15-392-726 issued on May 22, 2000
As soon as
practicable after the Separation Date, the Company will assign
ownership of the Life Policies to Mr. Ervin.
Mr. Ervin will be solely responsible for any income tax
consequences arising from such assignment and for all premiums due
in respect of the Life Policies from and after the Separation
Date.
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7.
SERP BENEFITS .
(a)
Mr. Ervin’s benefit under the Hardinge Inc. Executive
Supplemental Pension Plan as amended and restated effective
August 9, 2005 (the “SERP”) will be calculated as
follows:
(i)
Mr. Ervin’s gross SERP benefit shall be the benefit
determined under Section 2(a) of the SERP as if he
continued to be employed by the Company until his 55th birthday and
his Final Average Compensation were the amount determined under the
SERP on the Separation Date.
(ii)
Mr. Ervin’s net SERP benefit shall be the gross SERP
benefit determined under Paragraph 7(a)(i) above reduced by
the actual amount of benefit payable to him under the Hardinge Inc.
Pension Plan as restated effective January 1, 1999 and as
further amended by Amendment Nos. 1-15 (the “Pension
Plan”).
(b) For
the purpose of calculating Mr. Ervin’s net SERP benefit
under Paragraph 7(a), the gross SERP benefit, the actual
benefit payable to Mr. Ervin under the Pension Plan, and
Mr. Ervin’s net SERP benefit shall all be calculated in
the form of single life annuities commencing on the first day of
the month following his 65th birthday. His net SERP benefit
thus calculated shall be actuarially adjusted, using the
rules and actuarial assumptions contained in the Pension Plan
to reflect (i) the commencement of benefit payments before his
65th birthday (taking into account Mr. Ervin’s deemed
continued employment for purposes of the SERP until his 55th
birthday) and (ii) the conversion of his net SERP benefit from
a single life annuity to a joint and 100% survivor
annuity.
(c) The
amount due Mr. Ervin under this Section 7 shall be paid
in the form of a joint and 100% survivor annuity with his spouse as
the surviving annuitant beginning on April 1, 2012, provided,
however, that if Mr. Ervin is for any reason not married on
April 1, 2012, the amount due shall be paid in the form of an
actuarially equivalent optional form of annuity (that is a
permitted optional form of annuity under the Pension Plan)
beginning on such date which is elected by Mr. Ervin on or
before that date.
(d) The
SERP shall be deemed to be amended as of the Separation Date to be
consistent with the terms of this Agreement.
(e)
Mr. Ervin continues to be eligible for a pension benefit
determined under the terms of the Pension Plan and nothing in this
Section 7 is intended to enlarge or diminish his rights under
the Pension Plan.
8.
RESTRICTED STOCK . As of the date of this Agreement,
Mr. Ervin owns 55,500 shares of common stock of the Company
which are unvested restricted shares awarded pursuant to the
Company’s 2002 Incentive Stock Plan (the “Restricted
Shares”). On the Separation Date, 17,750 of the
Restricted Shares will immediately vest and the Company will
deliver certificates for such Restricted Shares to
Mr. Ervin. In addition, Mr. Ervin will retain
ownership, subject to forfeiture, of 6,983 Restricted Shares (the
“Contingent Shares”). The
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Contingent
Shares will vest on the earlier of (i) Mr. Ervin’s
death, or (ii) March 31, 2009 provided that the
Consulting Term has not then ended. If the Consulting Term
ends for any reason prior to March 31, 2009 for any reason
except Mr. Ervin’s death, then the Contingent Shares are
irrevocably forfeited. The remaining 30,767 Restricted Shares
are hereby irrevocably forfeited by Mr. Ervin.
9.
NONCOMPETITION; CONFIDENTIAL INFORMATION ;
INVENTIONS .
(a)
Mr. Ervin acknowledges that the Company (and its Affiliates),
at the Company’s (and its Affiliate’s) expense, has
acquired, created and maintained and will continue to acquire,
create
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