UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
SCHEDULE 14A
(RULE 14a-101)
 
INFORMATION REQUIRED IN
PROXY STATEMENT
 
SCHEDULE 14A INFORMATION
 
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ______)
 
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x  Definitive Proxy Statement
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¨   Soliciting Material Pursuant to § Rule 240.14a-12
 
Hurco Companies Inc

 (Name of Registrant as Specified in this Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
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HURCO COMPANIES, INC.
ONE TECHNOLOGY WAY
P.O. BOX 68180
INDIANAPOLIS, INDIANA 46268
(317) 293-5309
 
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
 
To Be Held March 13, 2014
 
The 2014 Annual Meeting of Shareholders of Hurco Companies, Inc., will be held at our corporate headquarters, One Technology Way, Indianapolis, Indiana 46268, at 10:00 a.m. EDT on Thursday, March 13, 2014, for the following purposes:
 
 	1.	To elect eight directors to serve until the next annual meeting of shareholders and until their successors are duly elected and qualify,	
 
 	2.	To approve, in an advisory (non-binding) vote, the compensation paid to our named executive officers,	
 
 	3.	To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending October 31, 2014, and	
 
 	4.	To transact such other business as may properly come before the meeting or any adjournments thereof.	
 
The Board of Directors recommends a vote FOR items 1, 2 and 3. The persons named as proxies will use their discretion to vote on any other matters that may properly arise at the annual meeting.
 
The foregoing items of business are more fully described in our proxy statement accompanying this notice. Please read our proxy statement carefully.
 
If you do not expect to attend the annual meeting, please mark, sign and date the enclosed proxy card and return it in the enclosed return envelope which requires no postage if mailed in the United States or vote your shares via the Internet or by telephone as described in the proxy statement.
 
Only shareholders of record as of the close of business on January 13, 2014, are entitled to notice of and to vote at the annual meeting or any adjournments thereof. In the event there are not sufficient votes for approval of one or more of the above matters at the time of the annual meeting, the annual meeting may be adjourned in order to permit further solicitation of proxies.
 
 	By order of the Board of Directors,	
 	John G. Oblazney, Secretary	
 
Indianapolis, Indiana
January 27, 2014
 
YOUR VOTE IS IMPORTANT-Even if you plan to attend the meeting, we urge you to mark, sign and date the enclosed proxy card and return it promptly in the enclosed envelope or vote your shares via the Internet or by telephone as described in the proxy statement.
Important Notice Regarding the Availability of Proxy Materials
 
In accordance with the rules of the Securities and Exchange Commission, we are advising our shareholders of the availability on the Internet of our proxy materials related to our forthcoming annual meeting. These rules allow companies to provide access to proxy materials in one of two ways. Because we have elected to utilize the "full set delivery" option, we are delivering to all shareholders paper copies of all of the proxy materials, as well as providing access to those proxy materials on a publicly accessible website.
 
The notice of annual meeting of shareholders, proxy statement, form of proxy card and our most recent annual report on Form 10-K are available at  www.hurco.com/proxymaterials . If you plan to attend the annual meeting in person, you may obtain directions to the meeting site by written request directed to John G. Oblazney, Vice President and Chief Financial Officer, Hurco Companies, Inc., One Technology Way, P. O. Box 68180, Indianapolis, Indiana 46268 or by telephone at (317) 293-5309.

 	
 
TABLE OF CONTENTS
 	Page	
PROXY STATEMENT	1	
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING	1	
PROPOSAL 1 - ELECTION OF DIRECTORS	5	
CORPORATE GOVERNANCE	8	
PROPOSAL 2 - ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION	13	
EXECUTIVE COMPENSATION	14	
Compensation Discussion and Analysis	14	
Report of the Compensation Committee	25	
Assessment of Compensation-Related Risks	26	
Tabular Compensation Information	27	
Summary Compensation Table	27	
Grants of Plan-Based Awards Table	29	
Outstanding Equity Awards at 2013 Fiscal Year End Table	30	
Option Exercise and Stock Vested Table	31	
Equity Compensation Plan Information	32	
Nonqualified Deferred Compensation	33	
Employment Agreements	33	
Potential Payments Upon Termination	35	
Compensation of Directors	38	
Director Compensation Table	38	
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	39	
REPORT OF THE AUDIT COMMITTEE	41	
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	42	
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	42	
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS	43	
SHAREHOLDER PROPOSALS FOR OUR 2015 ANNUAL MEETING	43	
INCORPORATION BY REFERENCE	44	
ANNUAL REPORT ON FORM 10-K	44	
OTHER BUSINESS	44	
 
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HURCO COMPANIES, INC.
One Technology Way
P. O. Box 68180 
Indianapolis, Indiana 46268
 
Annual Meeting of Shareholders
March 13, 2014

 
PROXY STATEMENT
 
This proxy statement and accompanying proxy are being furnished to the holders of common stock of Hurco Companies, Inc. (the "Company," "Hurco," "we" or "us") in connection with the solicitation of proxies by the Board of Directors for the 2014 Annual Meeting of Shareholders to be held at 10:00 a.m. EDT on Thursday, March 13, 2014, at our corporate headquarters at One Technology Way, Indianapolis, Indiana, and at any adjournments thereof. This proxy statement and the accompanying form of proxy are being mailed to our shareholders on or about January 27, 2014.
 
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
 
Who may vote at the meeting?
 
Shareholders of record as of the close of business on January 13, 2014 are entitled to vote at the annual meeting or any adjournments thereof. As of that date, we had 6,482,344 shares of our common stock outstanding.
 
What are my voting rights?
 
Holders of our common stock are entitled to one vote per share with respect to each matter submitted to a vote. Therefore, a total of 6,482,344   votes are entitled to be cast at the meeting. There is no cumulative voting on election of directors or any other matter.
 
How many shares must be present to hold the meeting?
 
The presence in person or by proxy of the holders of a majority of the outstanding shares entitled to vote at the annual meeting is necessary to constitute a quorum for the transaction of business.
 
What matters will be voted on at the meeting?
 
There are three matters to be considered at the meeting, as follows:
 
 	1.	Election of eight directors to serve until the next annual meeting of shareholders and until their successors are duly elected and qualify,	
 	2.	An advisory vote to approve the compensation paid to our named executive officers, also referred to as the "say-on-pay" vote, and	
 	3.	Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending October 31, 2014.	
 
How are votes counted?
 
All shares that have been properly voted, and not revoked, will be voted at the meeting in accordance with the instructions of the voting shareholders.  

 	
 
Brokers are not entitled to exercise discretion to vote shares on any of the matters to be voted on at the meeting other than the ratification of the appointment of the auditor unless the shareholder gives voting instructions to the broker.  Accordingly, if you hold your shares in "street name" and wish your shares to be voted by your broker on the election of directors or the say-on-pay vote, you must give your broker voting instructions.
 
What vote is required to approve each proposal?
 
To approve each of the proposals, the following votes are required from the holders of voting shares. Abstentions and broker non-votes will not count as votes cast on the proposals below and will not affect the outcome of the votes.
 
Proposal	 	Vote Required	
1	Election of directors	 	The election of director nominees will be determined by a plurality of the shares voting on such election, which means that the director nominees receiving the most  FOR  votes will be elected up to the maximum number of directors to be elected at the annual meeting. Broker non-votes and abstentions will not affect the determination of whether any nominee is elected.
 	
2	Say-on-pay vote	 	More votes are cast FOR than AGAINST .
 	
3	Ratification of auditors	 	More votes are cast FOR than AGAINST .	
 
How can I vote my shares without attending the meeting?
 
Whether you hold your shares directly as a registered shareholder or beneficially in street name, you may vote without attending the meeting. If you are a shareholder of record, you can vote your shares by granting a proxy via the Internet, over the telephone or by mailing your signed proxy card. If you hold your shares in street name, your broker, bank or other nominee will provide you with materials and instructions on voting your shares.
  
How do I vote my shares in person at the meeting?
  
Proof of stock ownership and some form of government issued photo identification (such as a valid driver's license or passport) will be required for admission to the meeting.  Only shareholders who owned our common stock as of the close of business on January 13, 2014 are entitled to attend the meeting.
 
 	•	If you are a shareholder of record, you must bring some form of photo identification to be admitted to the meeting. You may vote your shares in person at the meeting by completing a ballot at the meeting.	
 
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 	•	If your shares are held in street name, you must request a proxy from your broker, bank or other nominee that holds your shares. If you do not obtain a proxy from your broker, bank or other nominee, you will not be entitled to vote your shares at the meeting, but you can still attend the meeting if you bring a recent bank or brokerage statement showing that you owned shares of common stock on January 13, 2014.	
 
Even if you currently plan to attend the meeting, we recommend that you vote by proxy, either via the Internet, by telephone or by mail, so that your vote will be counted if you later decide not to attend the meeting.
 
What can I do if I change my mind after I submit my proxy?
 
If you are a shareholder of record, you may revoke your proxy at any time before it is voted at the meeting by: (1) giving timely written notice of the revocation to our Secretary, or (2) submitting a later-dated proxy in person at the meeting, via the Internet, by telephone or by mail. If your shares are held in street name, you may submit new voting instructions by contacting your broker, bank or other nominee holder. You may also vote in person at the annual meeting if you obtain a legal proxy as described above.
 
What are the Board's recommendations on how I should vote my shares?
 
The Board recommends that you vote your shares as follows:
 
 	•	FOR the election of the eight nominees as directors.	
 
 	•	FOR the say-on-pay vote.	
 
 	•	FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending October 31, 2014.	
 
How would my shares be voted if I do not specify how they should be voted?
 
If you sign and return a proxy card without indicating how you want your shares to be voted, the persons named as proxies will vote your shares as follows:
 
 	•	FOR the election of the eight nominees as directors.	
 
 	•	FOR the say-on-pay vote.	
 
 	•	FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending October 31, 2014.	
 
What is the effect of the say-on-pay vote?
 
The say-on-pay vote is advisory and not binding on the Company, the Board of Directors or the Compensation Committee. We could, if the Board or the Committee concluded it was in our best interests to do so, choose not to follow or implement the outcome of the advisory vote.
 
What happens if additional matters are presented at the annual meeting?
 
We know of no other matters other than the items of business described in this proxy statement that will be presented at the meeting. If you grant a proxy, the persons named as proxy holders will have discretion to vote your shares on any additional matters properly presented for a vote at the meeting in accordance with Indiana law and our By-Laws.
 
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Who will count the votes?
 
Our Corporate Secretary will count the votes.
 
Can I review the list of shareholders entitled to vote at the meeting?
 
A list of shareholders entitled to vote at the meeting will be available at the meeting and for ten days prior to the meeting, between the hours of 9:00 a.m. and 4:30 p.m., at our offices at One Technology Way, Indianapolis, Indiana 46268. If you would like to view the shareholder list, please contact our Corporate Secretary to schedule an appointment.
 
Who pays for the cost of proxy preparation and solicitation?
 
We will pay the cost of preparing, assembling and mailing this proxy statement and form of proxy. We will also request banks, brokers and other holders of record to send the proxy materials to, and obtain proxies from, beneficial owners and will reimburse them for their reasonable expenses in doing so.
 
Is this proxy statement the only way that proxies are being solicited?
 
Our directors, officers and other employees may also solicit proxies personally by telephone, facsimile, electronic mail, personal contact or otherwise. They will not be specifically compensated for doing so.
Can I receive future proxy statements and annual reports electronically?
 
Yes.  If you are a shareholder of record, you may request and consent to electronic delivery of future proxy statements, annual reports and other shareholder communications by following the instructions on the proxy card to vote using the Internet and when prompted, indicate that you agree to receive or access shareholder communications electronically in future years.  You may also contact our Transfer Agent, Computershare Investor Services by calling (781) 575-2879 or toll-free at (877) 282-1169 or by writing:  Computershare Investor Services  P.O. Box 43078, Providence, RI 02940.  If your shares are held beneficially in street name, please contact your broker or other nominee and ask about the availability of electronic delivery.
 
Are you planning on making the proxy materials only available by Internet this year, unless paper copies are requested?
 
No.  Although many public companies are mailing a notice to their shareholders so they can provide proxy materials through the Internet, we have again elected to use the "full set delivery" option and so are providing paper copies of proxy materials to all of our shareholders.  Our proxy materials and Annual Report on Form 10-K are also available via the Internet at www.hurco.com/proxymaterials . We may decide not to use the "full set delivery" option in the future; however, you will still have the right to request a free set of proxy materials by mail.
 
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PROPOSAL 1. ELECTION OF DIRECTORS
 
The Board of Directors currently consists of eight members. The Board, acting on the recommendation of our Nominating and Governance Committee, has nominated the eight incumbents for election as directors. Each nominee who is elected will serve for a term of one year, which expires at our next annual meeting of shareholders or such later date as his or her successor has been elected and qualifies.
 
No fees were paid to any third parties to identify or evaluate potential nominees. Unless authority is specifically withheld, the shares voting by proxy will be voted in favor of these nominees.
 
If any of these nominees becomes unable to serve, we expect that the persons named in the proxy will exercise their voting power in favor of other such person or persons as the Board may recommend. All of the nominees have consented to being named in this proxy statement and to serve if elected. The Board of Directors knows of no reason why any of the nominees would be unable to serve.
 
The names of the persons who are nominees for election and their current positions and offices with Hurco are set forth below. There are no family relationships among any of our directors or officers.
 
Nominees	 	Positions and Offices
Held with Hurco	
Robert W. Cruickshank	 	Presiding Independent Director	
Michael Doar	 	Chairman, Chief Executive Officer and Director	
Philip James	 	Director	
Michael P. Mazza	 	Director	
Andrew Niner	 	Director	
Richard Porter	 	Director	
Janaki Sivanesan	 	Director	
Ronald Strackbein	 	Director	
 
Business Experience and Qualifications of Nominees
 
Robert W. Cruickshank, age 68, has been a member of the Board of Directors since 2000 and Presiding Independent Director since June 2012. Mr. Cruickshank has been a consultant since 1981. Mr. Cruickshank was a director of Calgon Carbon Corporation, a producer of products and services for the purification, reparation and concentration of liquids and gases, until March 2013.
 
Mr. Cruickshank brings to our Board of Directors expertise in finance and investments. Mr. Cruickshank also has experience serving as an independent director of several public companies.
 
Michael Doar, age 58, has been a member of the Board of Directors since 2000. Mr. Doar was elected Chairman of the Board of Directors and our Chief Executive Officer in fiscal 2001. He also served as our President from November 2009 to March 2013. Prior to joining Hurco, Mr. Doar served as Vice President of Sales and Marketing of Ingersoll Contract Manufacturing Company, a subsidiary of Ingersoll International, an international engineering and machine tool systems business, having previously held various management positions with Ingersoll International from 1989. Mr. Doar also serves as a director of Twin Disc, Incorporated, a manufacturer of marine and heavy duty off-highway power transmission equipment.
 
Mr. Doar has led Hurco for more than twelve years. As Chairman and Chief Executive Officer, Mr. Doar brings to our Board of Directors his in-depth knowledge of our business, strategy, people, operations, competition and financial position. Mr. Doar also provides leadership and vision for the development and execution of our strategic plans and the achievement of our business goals and objectives.
 
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Philip James, age 71, has been a member of the Board of Directors since 2007. Mr. James is President of James Consulting Associates LLC, a firm that provides strategic advice to senior management of global manufacturing companies, with special emphasis on China. Mr. James has conducted business extensively in China for over 25 years. Previously, Mr. James served as Chief Executive Officer of Ingersoll Production Systems, a subsidiary of Dalian Machine Tool Group, a Chinese machine tool manufacturer.
 
Mr. James brings to the Board of Directors substantial experience in the machine tool industry as well as international business matters, particularly with respect to the Chinese market.
 
Michael P. Mazza, age 49, has been a member of the Board of Directors since 2006. Mr. Mazza is an attorney specializing in intellectual property law, and the principal of his law firm, Michael P. Mazza, LLC in Chicago. Previously, he was associated with Niro, Scavone, Haller & Niro, a Chicago intellectual property law firm.
 
Mr. Mazza brings to our Board of Directors legal expertise in the area of intellectual property, particularly patent and trademark protection and enforcement, and provides valuable insight into the protection of our technological developments with respect to computerized machine tools.
 
Andrew Niner, age 36, has been a member of the Board of Directors since 2012. Mr. Niner is President of Niner Wine Estates in Paso Robles, California.   Prior to Niner Wine Estates, Mr. Niner was a partner at Pacific Legacy Capital, a California based private equity group focused on investing in lower middle market companies.  Additionally, Mr. Niner was a restructuring advisor at a global distribution company and a strategy manager at Levi Strauss & Company.  Mr. Niner earned his Masters of Business Administration from the University of California at Berkeley and is a CFA Charterholder.
 
Mr. Niner brings to our Board of Directors knowledge and experience in strategic business development, operations and capital market transactions.
 
Richard Porter, age 58, has been a member of the Board of Directors since 2012. Mr. Porter has managed a private equity portfolio of manufacturing companies since 2007. Previously he was President of CB Manufacturing, a cutting tool company, and President of Ingersoll Contract Manufacturing Company, a subsidiary of Ingersoll International.
 
Mr. Porter brings to the Board of Directors extensive experience in the machine tool industry, particularly in product and contract manufacturing. Mr. Porter also has experience serving on the boards of a number of private companies with annual revenues ranging from $40 million to $480 million.
 
Janaki Sivanesan, age 42, has been a member of the Board of Directors since 2008. Ms. Sivanesan is a practicing attorney and founding principal of a private equity firm focused on middle market investments.  She previously served as a partner at a large, New York law firm.  She was admitted to the bars of the State of New York and Georgia in 2007 and 1996, respectively.  Ms. Sivanesan has experience in a wide range of corporate transactions, from mergers and acquisitions to corporate finance, including private debt, equity investments and venture capital transactions.  Ms. Sivanesan also has experience in cross border transactions related to manufacturing and outsourcing, and is particularly knowledgeable with respect to business operations in India.
 
Ms. Sivanesan provides to the Board of Directors and Audit Committee thorough knowledge and understanding of complex legal and capital markets transactions as well as corporate mergers and acquisitions.
 
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Ronald Strackbein, age 72, has been a member of the Board of Directors since 2012. Mr. Strackbein has been a self-employed private investor for more than twenty years.
 
Mr. Strackbein provides to the Board of Directors significant experience in corporate operations, management and finance. Mr. Strackbein also has experience serving as a director of several other public and private corporations.
 
The Board of Directors recommends a vote "FOR" each of the nominees for director.
 
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CORPORATE GOVERNANCE
 
Policies on Corporate Governance
 
Our Board believes that good corporate governance is important to ensure that the company is managed for the long-term benefit of its shareholders. The Board or one of its committees periodically reviews our Corporate Governance Principles, the written charters for each of the standing committees of the Board and our Code of Business Conduct and Ethics and amends them as appropriate to reflect new policies or practices.
 
As discussed in the Compensation Discussion and Analysis section of this proxy statement, the Board recently amended our Corporate Governance Principles to adopt new policies on executive stock ownership, recoupment of incentive compensation and hedging activities involving our stock.
 
Board Leadership Structure
 
Our Board is currently led by Mr. Doar, our Chairman and Chief Executive Officer. Mr. Doar has held these positions since 2001 and has experience in leading the Company through a range of changes in business environments. The Board of Directors believes that it is most efficient and effective for a single individual to fulfill these two leadership roles at this time. Combining the Chairman and Chief Executive Officer roles facilitates clear leadership responsibility and accountability, effective decision-making, and a cohesive corporate strategy. Our Board of Directors possesses considerable experience and knowledge of the challenges and opportunities that we face as a company. We feel they are well qualified to evaluate our current and future needs and to judge how the capabilities of our senior management can be most effectively organized to meet those needs.
 
Our Board of Directors currently has seven independent directors. We have three standing committees and one of our independent directors serves as our Presiding Independent Director as required by our Corporate Governance Principles. In 2013, the independent directors designated Mr. Cruickshank to serve as Presiding Independent Director. The Presiding Independent Director oversees executive sessions of the independent directors and plays an active role in setting Board agendas and facilitating interactions between the independent directors and management. The Board of Directors evaluates the appropriateness of its leadership structure on an ongoing basis and may change it as circumstances warrant. We believe that each of these measures counter-balances any risk that may exist in having Mr. Doar serve as both Chairman and Chief Executive Officer. For these reasons, our Board of Directors believes this leadership structure is effective for our Company.
 
Board Role in Risk Oversight  
 
Our Board regularly receives reports from our Chief Executive Officer and other members of our senior management team regarding areas of significant risk to us, including strategic, operational, financial, legal, regulatory and reputational risks. However, management is responsible for assessing and managing our various risk exposures on a day-to-day basis. In this regard, management, with the assistance, where appropriate, of its counsel, has established functions that focus on particular risks, such as legal matters, regulatory compliance, treasury management, research and development, supply chain and quality control, and has developed a systemic and integrated approach to overall risk management, which includes the identification of risks and mitigation plans in the strategic planning process.
 
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Our Board’s role is primarily one of oversight. Our Board oversees our risk management processes to determine whether those processes are functioning as intended and are consistent with our business and strategy.  Our Board conducts this oversight primarily through the Audit Committee, although some aspects of risk oversight are performed by the full Board or another committee.  The Audit Committee is assigned with, among other things, oversight of our risks relating to accounting matters, financial reporting and legal and regulatory compliance. The Audit Committee meets regularly with our Chief Financial Officer, external auditors and management to discuss our major financial risk exposures and the steps management has taken to monitor and control such exposures, including our risk assessment and risk management policies. The Audit Committee also receives regular reports regarding issues such as the status and findings of audits being conducted by our independent auditors, the status of material litigation and material accounting changes or proposed audit adjustments that could affect our financial statements.  Our Audit Committee has standing items on its quarterly meeting agendas relating to these responsibilities.  The Audit Committee members, as well as each other director, have access to our Chief Financial Officer and any other member of our management for discussions between meetings as warranted.  The Audit Committee provides reports to the full Board on risk-related items.
 
The activities of the Compensation Committee with respect to risks relating to our compensation policies and procedures are discussed below in the Executive Compensation section of this proxy statement.
 
Director Independence and Board Meetings
 
The Board of Directors has determined that a majority of our directors are “independent directors” as defined by the listing standards of The Nasdaq Stock Market (the market in which our common stock trades), or Nasdaq, and the director independence rules of the Securities and Exchange Commission, or SEC.  The Board has affirmatively determined that none of the persons who served as independent directors during fiscal 2013 have any relationship with us that would impair their independence.
 
Directors are expected to attend Board meetings, meetings of committees on which they serve and our annual meeting of shareholders, and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. During fiscal 2013, the Board of Directors held four regular meetings. All directors attended at least 75% of the aggregate number of meetings of the Board and the committees on which they served during fiscal 2013, and all directors attended the 2013 annual meeting of shareholders.
 
Board Committees and Committee Meetings
 
The Board of Directors has three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. The members of the committees, as of the date of this proxy statement, are identified in the following table.
 
Director	 	Audit 
Committee	 	Compensation
Committee	 	Nominating and 
Governance 
Committee	
Robert W. Cruickshank	 	 	 	X	 	Chair	
Michael Doar	 	 	 	 	 	 	
Philip James	 	 	 	Chair	 	X	
Michael P. Mazza	 	 	 	X	 	 	
Andrew Niner	 	X	 	 	 	 	
Richard Porter	 	X	 	 	 	X	
Janaki Sivanesan	 	X	 	 	 	 	
Ronald Strackbein	 	Chair	 	 	 	 	
 
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Audit Committee
 
The Audit Committee oversees our accounting and financial reporting activities. It appoints our independent registered public accounting firm and meets with that firm and our Chief Financial Officer to review the scope, cost and results of our annual audit and to review our internal accounting controls, policies and procedures. The Report of the Audit Committee is included on page 41 of this proxy statement.
 
All members of the Audit Committee are "independent" as such term is defined for audit committee members under the Nasdaq rules and SEC Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act. The Board has determined that Mr. Strackbein qualifies as an "audit committee financial expert," as defined in Item 407(d)(5)(ii) of Regulation S-K of the Exchange Act.
 
The Audit Committee held five meetings during fiscal 2013.
 
The Audit Committee operates under a written charter, a copy of which is available on our website at www.hurco.com.
 
Compensation Committee
 
The Compensation Committee reviews and recommends to the Board the compensation of our officers and managers and guidelines for the general wage structure of the entire workforce. The Compensation Committee also oversees the administration of our employee benefit plans and discusses with management the Compensation Discussion and Analysis and, if appropriate, recommends its inclusion in our Annual Report on Form 10-K and proxy statement. In determining the compensation of the named executive officers other than our Chief Executive Officer, the Compensation Committee considers the recommendations of the Chief Executive Officer. The Report of the Compensation Committee is included on page 25 of this proxy statement.
 
All members of the Compensation Committee are "independent" as such term is defined for compensation committee members under the Nasdaq rules and SEC Rule 10C-1 promulgated under the Exchange Act.
 
The Compensation Committee held one meeting and acted by written consent in lieu of a meeting twice during fiscal 2013.
 
The Compensation Committee operates under a written charter, a copy of which is available on our website at www.hurco.com.
 
No member of our Compensation Committee was, at any time during fiscal 2013 or at any other time before fiscal 2013, an officer or an employee of the Company. In addition, none of the members of the Compensation Committee were involved in a relationship requiring disclosure as an interlocking executive officer or director under Item 407(e)(4) of Regulation S-K of the Exchange Act. None of our executive officers served as a member of the Compensation Committee at any time during or before fiscal 2013.
 
Nominating and Governance Committee
 
The Nominating and Governance Committee assists the Board by identifying individuals qualified to become Board members, maintains our Corporate Governance Principles and Code of Business Conduct and Ethics, leads the Board in an annual self-evaluation, recommends members and chairs for each standing committee, and determines and evaluates succession plans for our Chief Executive Officer.
 
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All members of the Nominating and Governance Committee are independent directors as defined by Nasdaq rules.
 
The Nominating and Governance Committee held one meeting during fiscal 2013.
 
The Nominating and Governance Committee is responsible for identifying potential Board members. The committee examines, among other things, the following qualifications and skills of director candidates: their business or professional experience, their integrity and judgment, their records of public service, their ability to devote sufficient time to the affairs of the Company, the diversity of backgrounds and experience they will bring to the Board, and the needs of the Board for certain skills or experiences. The Nominating and Governance Committee also believes that all nominees should be individuals of substantial accomplishment with demonstrated leadership capabilities. The committee does not have a formal policy with regard to the consideration of diversity in identifying nominees for director.
 
The Nominating and Governance Committee will consider candidates for director who are recommended by shareholders. A shareholder who wishes to recommend a director candidate for consideration by the committee should send such recommendation to our Secretary at One Technology Way, Indianapolis, Indiana 46268, who will forward it to the committee. Any such recommendation should include a description of the candidate's qualifications for Board service and contact information for the shareholder and the candidate.
 
A shareholder who wishes to nominate an individual as a candidate for director without the recommendation of the Nominating and Governance Committee must comply with the advance notice and informational requirements set forth in our By-Laws, which are more fully explained later in this proxy statement under "Shareholder Proposals for our 2015 Annual Meeting."
 
The Nominating and Governance Committee operates under a written charter, a copy of which is available on our website at www.hurco.com .
 
Shareholder Communications
 
The Board of Directors has implemented a process whereby shareholders may send communications to its attention. The process for communicating with the Board is set forth in our Corporate Governance Principles, which are available on our website at www.hurco.com .
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our common stock, to file reports of ownership with the SEC and Nasdaq. Such persons are also required to furnish us with copies of all Section 16(a) forms they file.
 
Based solely on our review of the copies of such forms received by us, and written representations from certain reporting persons that they were not required to file a Form 5 to report previously unreported ownership or changes in ownership, we believe that, during our fiscal year ended October 31, 2013, all of our officers, directors and greater than 10% beneficial owners complied with all filing requirements under Section 16(a).
 
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Code of Business Conduct and Ethics
 
We have adopted a Code of Business Conduct and Ethics, which applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. If we grant any waiver to the Code of Business Conduct and Ethics, we will disclose the nature of such waiver in a Current Report on Form 8-K that we will file with the SEC. A copy of the Code of Business Conduct and Ethics is available on our website at  www.hurco.com . We will disclose any amendments or updates to our Code of Business Conduct and Ethics by posting such amendments or updates on our website.
 
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PROPOSAL 2. ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
 
The second proposal to be considered at the annual meeting is the annual advisory vote to approve the compensation paid to our named executive officers as disclosed in this proxy statement pursuant to the SEC's compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative discussion following the compensation tables) or say-on-pay vote. Consistent with the preference expressed by shareholders at the 2011 annual meeting, we are conducting “say-on-pay” votes on an annual basis.
 
At our 2013 annual meeting of shareholders, approximately 61% of the votes cast on the annual say-on-pay vote were voted to approve the proposal. This was a significant decrease from the 2012 annual meeting of shareholders in which 99% of the votes cast were voted in favor of the proposal. As a result of the lower approval level in 2013, the Compensation Committee embarked on two significant initiatives. First, the Compensation Committee undertook an extensive review of our compensation policies and practices, engaged an independent compensation consultant, adopted a new compensation philosophy that is more performance-based and made significant changes to our executive compensation to strengthen the pay-for-performance alignment. Second, the Presiding Independent Director conducted an in-depth shareholder outreach program to gain insight into our shareholders' views and the factors that influence their "say-on-pay" vote.
 
We encourage you to read the Compensation Discussion and Analysis beginning on page 14 of this proxy statement for a description of the Board's shareholder outreach and the significant changes made by the Compensation Committee to our executive compensation program for fiscal 2014.
 
Accordingly, the Board of Directors recommends that our shareholders vote FOR the following resolution at the Annual Meeting:
 
"Resolved, that the compensation paid to Hurco Companies, Inc.'s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and narrative discussion in this proxy statement, is approved."
 
Because it is advisory, the results of the say-on-pay vote are not binding upon the Board of Directors or the Compensation Committee. However, as was the case with the results of the say-on-pay vote at the 2013 annual meeting of shareholders, we expect that the Compensation Committee, which is responsible for designing and administering our executive compensation program, will consider the outcome of the vote when making future compensation decisions for our named executive officers.
 
The Board of Directors recommends a vote "FOR" the advisory proposal to approve the compensation of our named executive officers as disclosed in this proxy statement.
 
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EXECUTIVE COMPENSATION
 
Compensation Discussion and Analysis
 
This section and the tables that follow it provide information regarding our compensation program and practices as they relate to our Chief Executive Officer, Chief Financial Officer and the three other executive officers identified in the Summary Compensation Table on page 27, and are referred to as the "named executive officers" in this analysis. We currently do not have any executive officers who are not also named executive officers.
 
The responsibilities of the Compensation Committee of the Board of Directors (referred to as the Committee in this section) include administering our compensation programs and approving or ratifying all compensation related decisions for the named executive officers.
 
Philosophy
 
The goals of our executive compensation program are to foster the creation of shareholder value while, at the same time, motivating and retaining managerial personnel. Our executive compensation program has been designed to hold executives accountable for the financial and operational performance of the Company, as well as reflecting the value of the Company's stock. Therefore, a substantial amount of an executive's compensation is at risk and tied to the performance of the Company on both a short-term and long-term basis. Our compensation program includes the use of Company common stock and stock ownership guidelines that serve to align the interests of our executives with the interests of our shareholders. Our compensation program is designed to reward executives at levels comparable to our peers to promote fairness and success in attracting and retaining executives. We believe that our compensation program does not promote excessive risk taking and various elements of our policies are in place, such as capped incentive opportunities, use of capital return metrics, stock ownership guidelines, recoupment policy and governance processes, that serve to mitigate excessive risk. The employment agreements with our executive officers include a change in control severance benefit that is "double-triggered" (requires both a change in control and termination of the executive's employment in order to receive that benefit).
 
2013 Overview
 
We are an industrial technology company that designs, produces, and sells computerized machine tools. With the lingering economic uncertainty in the global markets, we have continued to focus on our core competencies and strategic priorities, which we believe have a positive impact on our strong financial performance and our ability to remain competitive in a very diverse global market for machine tools. During fiscal 2013 our sales decreased by 5% and our operating income decreased by 38% reflecting the impact of weaker industrial demand in Europe (our primary market) and Asia and pricing pressure within those markets. However, our North American operations achieved record level performance in sales and operating profit, and we made a strategic acquisition of an Italian business that designs and manufactures key components for our higher-performance machine tools. The total compensation paid to the named executive officers for fiscal 2013 decreased by 27% reflecting alignment with the downturn experienced in our operating results.
 
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Consideration of 2013 Say on Pay Vote
 
At our 2013 annual meeting of shareholders, approximately 61% of the votes cast on the annual say-on-pay vote were voted to approve the proposal. This was a significant decrease from the 2012 annual meeting of shareholders in which 99% of the votes cast were voted in favor of the say-on-pay proposal. As a result of the lower approval level in 2013, the Committee embarked on two significant initiatives. First, they undertook a comprehensive review of our executive compensation, policies and practices, including engaging an independent compensation consultant to assist in the review. Second, Mr. Cruickshank, the Presiding Independent Director (who is also a member of the Committee), conducted an in depth shareholder outreach program to gain insight into our shareholders' views and the factors that influence their "say-on-pay" vote. As part of this process, Mr. Cruickshank contacted 16 of our largest shareholders representing nearly 63% of our outstanding shares. The results of the outreach program were then shared with other members of the Board of Directors. As a result of these two initiatives, the Committee then approved significant changes to our executive compensation to align with contemporary practices, respond to shareholder concerns, and strengthen the pay-for-performance alignment of the executive compensation program. The table below describes the key concerns our shareholders raised and the changes we have made to address them:
 
Program Feedback	 	Prior Approach	 	Changes for Fiscal 2014 Program	
Annual bonus awards not tied to achievement of pre-established performance measures	 	The only short-term incentives used were made solely on a discretionary basis	 	Adoption of the 2014 short-term incentive compensation plan pursuant to which awards will be based on pre-established performance metrics consisting of operating income margin and certain strategic objectives	
Long-term incentive compensation not tied to objective performance metrics	 	The Company's long-term incentive compensation consisted of a mix of stock options and restricted stock, both with time-based vesting over a multi-year period	 	Introduction of performance-based equity and an adjustment to the mix and vesting of equity awards, as follows:
·     25% time-based restricted shares, which vest in equal installments over three years
·     40% performance shares, which vest at the end of three years based on the satisfaction of pre-established goals related to our total shareholder return relative to our peer group
·     35% performance shares, which vest at the end of three years based on the satisfaction of pre-established goals related to our average return on invested capital	
Lack of external benchmarking	 	No benchmarking	 	Development of a peer group of similar companies and use of reputable surveys based on manufacturing companies to evaluate the competitiveness of executive compensation	
Lack of stock ownership guidelines for executives and directors and anti-hedging policy	 	No ownership guidelines	 	Amended our Corporate Governance Principles to establish stock ownership guidelines for executive officers and outside directors, and a policy prohibiting hedging of our stock	
Lack of written policy providing for recoupment of incentive compensation from executive officers	 	Recoupment policy in accordance with Sarbanes-Oxley requirements only applied to CEO and CFO	 	Amended our Corporate Governance Principles to establish a written incentive compensation recoupment policy that applies to all executive officers	
Lack of input from an independent compensation consultant	 	The Committee did not use an independent compensation consultant	 	Engagement of Pay Governance LLC to advise the Committee on compensation matters	
 
The Committee believes these changes are responsive to shareholder concerns and strengthen the pay-for-performance alignment of our executive compensation program.
 
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Alignment of Pay-for-Performance
 
The Committee's executive compensation philosophy and objectives have always included the goal of aligning executive compensation with Company performance. This was also true with the annual bonus program that was in place prior to fiscal 2014. Although these bonuses were discretionary, the Committee determined bonuses primarily on the basis of the Company's performance after the end of the fiscal year. An analysis of the operating income trend compared to total executive compensation (including stock option and restricted stock awards) of the named executive officers during each of the last three years is shown below:

 
In January 2014, the Committee made several changes to our executive compensation program to create an even stronger, more direct link between the compensation of our named executive officers and Company performance. As discussed in more detail below, with respect to fiscal 2014 executive compensation, the Committee utilized operating income margin and strategic objective performance goals for the fiscal 2014 cash short-term incentive compensation element, and utilized relative total shareholder return and return on invested capital as the performance goals for the three-year performance share vesting requirements.
 
Elements of Compensation
 
The compensation package of our named executive officers consists primarily of a base salary, short-term incentive compensation and long-term incentive compensation.
 
Base Salaries. Our industry is highly cyclical and we believe that offering competitive base salaries is a key factor in attracting and retaining talent. Base salaries generally carry over from the prior year and are reviewed annually for possible adjustments. Our Chief Executive Officer makes a recommendation on salary adjustments for each of the other named executive officers. Our Chief Executive Officer bases these recommendations on a subjective assessment of our overall performance, his assessment of each individual's contributions to that performance, and to a lesser extent, his views on competitive practices in our industry and of other similar sized public companies. The members of the Committee then use their own business experience and judgment to determine the amount of the increase, if any. The base salary of our Chief Executive Officer is determined by the Committee based on the Committee's subjective assessment of our overall performance and the Chief Executive Officer's individual contribution to that performance.
 
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Short-Term Incentive Compensation. Prior to fiscal 2014, the Committee's longstanding practice had been to pay discretionary cash bonuses to the named executive officers based on the Committee's evaluation of the Company's and the officers' performance in the preceding year. When making those determinations, the Committee had available to it our financial results for the fiscal year and our business plan that detailed anticipated revenue, profit margins, net income and cash flows for the coming fiscal year. The Committee also considered the role of, and the contributions made by, each named executive officer during the prior fiscal year. The Committee did not employ a specific formula for taking any of these factors into account. Rather, the Committee made a subjective assessment of these factors in the aggregate and applied their collective business experience and judgment to determine both how we and the executives performed in the year and the amounts of the annual bonus.
 
As described in more detail below under "Compensation Decisions for Fiscal 2014," the Committee has now implemented an entirely new short-term incentive compensation plan for fiscal 2014 that provides for cash incentives tied to the achievement of targets for objective performance measures that are based on our fiscal 2014 operating income margin and certain strategic objectives.
 
Long-Term Incentive Compensation. The Company has a shareholder-approved plan that permits the Committee to grant several types of equity-based awards. The Committee believes that equity-based awards that include three-year vesting requirements provide our executive officers with an ownership stake in the Company and promote executive retention. In fiscal 2013, the Committee awarded a combination of stock options and restricted shares to its executives, and believes stock options are an effective means to align the interests of executives with those of our shareholders because stock options only have value if our stock price increases after the stock options are granted, and that grants of restricted shares can also be an effective means to align the interests of executives more closely with those of our shareholders. As described in more detail below under "Compensation Decisions for Fiscal 2014," in January 2014, the Committee did not award any stock options to the named executive officers. Instead, the long-term incentive compensation awards were comprised of restricted shares and performance shares having three-year vesting or performance periods.
 
New Stock Ownership Guidelines and Hedging Prohibitions. In January 2014, the Board of Directors amended our Corporate Governance Principles to adopt new stock ownership guidelines for our executive officers, other members of senior management and independent directors. The Committee is responsible for interpreting and reviewing compliance with the stock ownership guidelines as they relate to the executive officers. The Committee believes that the executive stock ownership guidelines align executives' interests with those of stockholders through equity-based incentives and stock ownership guidelines that facilitate a culture of ownership. The guidelines provide that the executive officers are expected to acquire and maintain ownership of shares of our common stock (including unvested restricted stock awards) having an aggregate market value that is at least equal to five times annual base salary for the Chief Executive Officer, three times annual base salary for the President and two times annual base salary for the other named executive officers. The executive officers are expected to retain ownership of all net shares (shares of common stock acquired as a result of the exercise or vesting of equity incentive awards granted, reduced by any shares sold, tendered or retained to pay exercise price or tax withholding requirements related to such awards), acquired with respect to awards granted under the Company's equity incentive plan, until the requisite ownership has been achieved. If an executive officer fails to comply with the guidelines, the Committee may determine that such person is not eligible for awards under the Company's equity incentive plan until such time when he or she is in compliance. Any shares of stock subject to pledges or security interests will not be considered as owned in determining compliance with the stock ownership guidelines. In addition, the Board of Directors amended our Corporate Governance Principles to prohibit executive officers from hedging the economic risk of ownership of our common stock. Our Corporate Governance Principles can be accessed through our website at: http://www.hurco.com/en-us/about hurco/investors/Documents/Hurco_Corporate_Governance_Principles.pdf.
 
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Medical, Disability and Life Insurance. All full-time employees, including the named executive officers, participate in insurance benefits coverage to help manage the financial impact of ill health, disability and death. In addition, all named executive officers are provided supplemental disability benefits and our Chief Executive Officer is also provided a split-dollar life insurance benefit.
 
Retirement Benefits. We sponsor a 401(k) plan in which all full-time employees are eligible to participate. The purpose of the plan is to provide an incentive for employees to save for their retirement income needs and to assist in our attraction and retention of employees. Our named executive officers participate in the 401(k) plan on the same basis as other eligible employees. In January 2013 our matching contributions were increased from 50% to 100% of the first 6% of a participant's annual earnings that he or she contributes, up to the maximum permitted by law. We also maintain a deferred compensation program in which our named executive officers and other senior management employees may voluntarily participate. For additional information regarding the deferred compensation program see "Nonqualified Deferred Compensation."
 
Perquisites. The Committee believes that, even though the level of perquisites provided to the named executive officers is relatively minimal, perquisites are an integral component in establishing the competitiveness of our overall compensation program. Perquisites offered to the named executive officers include the use of company leased vehicles. For additional information regarding perquisites, see "Tabular Compensation Information."
 
Employment Agreements
 
We have employment agreements with each of the named executive officers. Information regarding these employment agreements is found in this section under the heading "Employment Agreements" on page 33. Under the heading "Potential Payments Upon Termination" on page 35 we also estimate the benefits that we would have paid to these executives if their employment had terminated on October 31, 2013, under various scenarios.
 
The Committee believes that these agreements are an important part of the overall compensation arrangements for the executives by helping to secure for us the continued employment and dedication of the executives while providing a reasonable amount of assurance to them of continued employment.
 
Compensation Decisions for Fiscal 2013
 
Details of the compensation payable to the named executive officers for fiscal 2013 are disclosed in the tables and related discussion that follow this Compensation Discussion and Analysis.
 
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Base Salaries. On November 15, 2012, employing the methodology described above under "Elements of Compensation," the Committee established annual base salaries for the named executive officers for fiscal 2013. The following table sets forth the annual base salary of each of the named executive officers for fiscal 2012 and the annual base salary established by the Committee for each of those officers for fiscal 2013 as well as the percentage increase between the two years:
 
 	 	Fiscal 2012
Base Salary	 	 	Fiscal 2013
Base Salary	 	 	Percentage
Increase	 	
Michael Doar	 	$	400,000	 	 	$	410,000	 	 	 	2.5	%	
John G. Oblazney	 	$	200,000	 	 	$	210,000	 	 	 	5.0	%	
John P. Donlon	 	$	210,000	 	 	$	216,000	 	 	 	2.9	%	
Sonja K. McClelland	 	$	160,000	 	 	$	170,000	 	 	 	6.3	%	
Gregory S. Volovic	 	$	240,000	 	 	$	250,000	 	 	 	4.2	%	
 
Short-Term Incentive Compensation. On December 11, 2013, the Committee approved cash bonuses for the named executive officers related to fiscal 2013 following a review of operating income margin, shareholder return and the results of individual strategic goals. The following table sets forth the cash bonus amounts awarded to each named executive officer related to fiscal 2012 and fiscal 2013, as well as the percentage decrease between the two years:
 
 	 	Fiscal 2012
Bonus Award	 	 	Fiscal 2013
Bonus Award	 	 	Percentage
Decrease	 	
Michael Doar	 	$	515,000	 	 	$	250,000	 	 	 	(51.5	)%	
John G. Oblazney	 	$	200,000	 	 	$	100,000	 	 	 	(50.0	)%	
John P. Donlon	 	$	210,000	 	 	$	100,000	 	 	 	(52.4	)%	
Sonja K. McClelland	 	$	160,000	 	 	$	100,000	 	 	 	(37.5	)%	
Gregory S. Volovic	 	$	350,000	 	 	$	200,000	 	 	 	(42.9	)%	
 
Long-Term Incentive Compensation. On December 12, 2012, the Committee granted awards of restricted shares and stock options to the named executive officers as follows:
 
 	 	Restricted	 	 	Stock	 	
 	 	Shares	 	 	Options	 	
Michael Doar	 	 	4,292	 	 	 	8,256	 	
John Oblazney	 	 	2,146	 	 	 	4,128	 	
John P. Donlon	 	 	2,253	 	 	 	4,335	 	
Sonja K. McClelland	 	 	1,717	 	 	 	3,303	 	
Gregory S. Volovic	 	 	2,575	 	 	 	4,954	 	
 
The restricted shares vest in their entirety three years from the date of grant. The grant date fair value of the restricted shares is based on the closing sales price of our common stock on the grant date. The stock options vest at the rate of one-third per year over three years, beginning one year from the grant date, and expire ten years from the grant date. The exercise price for the stock options is based on the closing sales prices of our common stock on the grant date.
 
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Compensation Decisions for Fiscal 2014
 
Base Salaries. On December 11, 2013, employing the methodology described above under "Elements of Compensation," the Committee established annual base salaries for the named executive officers for fiscal 2014. The salary increases for the executive officers were approximately 3%, the average merit increase for all U.S.-based employees of the Company, except for Mr. Volovic who received a 30% salary increase in recognition of his increased responsibilities as a result of his appointment to the office of President in March 2013, his contributions in 2013 and to better align his salary with benchmarking data. The following table sets forth the annual base salary of each of the named executive officers for fiscal 2013 and the annual base salary established by the Committee for each of those officers for fiscal 2014, as well as the percentage increase between the two years:
 
 	 	Fiscal 2013
Base Salary	 	 	Fiscal 2014
Base Salary	 	 	Percentage
Increase	 	
Michael Doar	 	$	410,000	 	 	$	423,000	 	 	 	3.2	%	
John G. Oblazney	 	$	210,000	 	 	$	216,000	 	 	 	2.9	%	
John P. Donlon	 	$	216,000	 	 	$	223,000	 	 	 	3.2	%	
Sonja K. McClelland	 	$	170,000	 	 	$	175,000	 	 	 	2.9	%	
Gregory S. Volovic	 	$	250,000	 	 	$	325,000	 	 	 	30.0	%	
 
Short-Term Incentive Compensation. On January 10, 2014, the Committee adopted a 2014 short-term incentive compensation plan, with payout to occur thereunder in early fiscal 2015, if certain performance goals are attained during fiscal 2014. The performance goals relate to our fiscal 2014 operating income margin and certain strategic objectives for the named executive officers, and payouts will be based on the relative weightings set forth below:
 
Name	 	Performance Metric	 	Weighting	 	
Michael Doar	 	Operating Income Margin	 	 	70	%	
 	 	Strategic Objectives	 	 	30	%	
 	 	 	 	 	 	 	
John G. Oblazney	 	Operating Income Margin	 	 	70	%	
 	 	Strategic Objectives	 	 	30	%	
 	 	 	 	 	 	 	
John P. Donlon	 	Operating Income Margin	 	 	50	%	
 	 	Strategic Objectives	 	 	50	%	
 	 	 	 	 	 	 	
Sonja K. McClelland	 	Operating Income Margin	 	 	70	%	
 	 	Strategic Objectives	 	 	30	%	
 	 	 	 	 	 	 	
Gregory S. Volovic	 	Operating Income Margin	 	 	70	%	
 	 	Strategic Objectives	 	 	30	%	
 
Operating income margin was chosen as a performance metric as the Committee believes it most directly correlates to our executives' performance. An executive may earn a short-term incentive award due to success in achieving individual strategic objectives, even if performance falls below threshold on the operating income margin, however, the weighting of the two performance metrics encourages decisions that should benefit our overall profitability.
 
Following the end of fiscal 2014, the Committee will determine the degree to which the operating income margin goals and the strategic objectives were attained, and the resulting payout level relative to the target amount for each metric. Participants will have the ability to earn between 50% of a target amount for achieving threshold performance and 200% of target for achieving maximum performance for each metric. If fiscal 2014 operating income margin is zero or negative, then no amounts will be paid under the 2014 short-term incentive plan, even if all or a portion of the performance goals under the strategic objectives component were attained. The weighted-average percentage payout level applicable to each officer will be multiplied by his or her target amount, which shall be determined by multiplying the base salary of the applicable officer paid during fiscal 2014 by the target amount set forth below:
 
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Name	 	Target Amount of
2014 Base Salary	 	
Michael Doar	 	 	85	%	
John G. Oblazney	 	 	55	%	
John P. Donlon	 	 	40	%	
Sonja K. McClelland	 	 	55	%	
Gregory S. Volovic	 	 	75	%	
 
The Committee retains the discretion to adjust downward, but not upward, the amount of compensation that would otherwise be payable under the 2014 short-term incentive compensation plan.
 
Long-Term Incentive Compensation. On January 10, 2014, the Committee approved a long-term incentive compensation arrangement for the named executive officers in the form of restricted shares and performance shares awarded under the 2008 Equity Incentive Plan (the "2008 Plan"). The awards were weighted as 25% time based vesting (in thirds over three years) and 75% performance based vesting (at the end of a three-year period, to the extent performance metrics are satisfied). The three-year performance period will be fiscal 2014 through fiscal 2016. The Committee granted the awards of restricted shares and performances shares to the named executive officers effective as of January 10, 2014, as follows:
 
 	 	Restricted
Shares	 	 	Performance
Shares - TSR	 	 	Performance
Shares - ROIC	 	
Michael Doar	 	 	5,206	 	 	 	7,243	 	 	 	7,289	 	
John G. Oblazney	 	 	1,978	 	 	 	2,752	 	 	 	2,770	 	
John P. Donlon	 	 	989	 	 	 	1,376	 	 	 	1,385	 	
Sonja K. McClelland	 	 	885	 	 	 	1,231	 	 	 	1,239	 	
Gregory S. Volovic	 	 	3,124	 	 	 	4,346	 	 	 	4,373	 	
 
The performance shares designated as "Performance Shares-TSR" were weighted as 40% of the overall long-term incentive compensation arrangement and will vest and be paid based on our total shareholder return over the three-year period, relative to the total shareholder return over that period of the companies in our peer group. The companies comprising the peer group for the purposes of this award are the same as the companies comprising the peer group described below under "The Committee's Processes and Analyses - Use of Peer Group Data,” except that Met-Pro Corporation and Kaydon Corporation will not be used for the Performance Shares-TSR comparison since they are no longer publicly-traded. The performance and payout standards for the Performance Shares - TSR are as follows:
 
Performance Shares - TSR	 	Threshold	 	Target	 	Maximum	
Performance Range	 	30th Percentile	 	55th Percentile	 	90th Percentile	
Payout Range	 	50% of Target Shares	 	Target Shares	 	200% of Target Shares	
Awards will be interpolated for results between the 30th and 90th percentiles
 
The performance shares designated as "Performance Shares-ROIC" were weighted as 35% of the overall long-term incentive compensation arrangement and will vest and be paid based on the achievement of pre-established goals related to our average return on invested capital over the three-year period. Average return on invested capital may be hereafter adjusted by the Committee to exclude the effects of unanticipated material transactions or events such as acquisitions, divestitures, accounting changes, restructurings and special charges or gains (determined according to objective criteria established by the Committee), but only to the extent permitted by Code Section 162(m). Participants will have the ability to earn between 50% of the target number of shares for achieving threshold performance and 200% of the target number of shares for achieving maximum performance.
 
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The Committee's Processes and Analyses
 
Role of Committee and Input from Management. The Committee is responsible for determining our executive compensation philosophy, objectives, policies and programs and approves or ratifies all compensation related decisions for the named executive officers. When making executive compensation decisions, the Committee considers the input of its independent compensation consultant and, for all executives other than our Chief Executive Officer, the recommendation of our Chief Executive Officer. Our Chief Executive Officer recommends salary levels, short-term incentive compensation awards, equity-based compensation awards and perquisites for our other named executive officers. Our Chief Executive Officer's compensation is determined solely by the Committee with the assistance of the Committee's independent compensation consultant. The Compensation Committee applies the same principles for executive compensation in determining our Chief Executive Officer's compensation that it applies in determining the compensation of our other executive officers.
 
Role of Compensation Consultant. In 2013, the Committee engaged an independent compensation consultant, Pay Governance LLC, to advise and assist the Committee related to executive compensation matters. Pay Governance is retained directly by the Committee, reports directly to the Committee and participates in certain Committee meetings. In this regard, Pay Governance advises and assists the Compensation Committee:
 
 	·	in determining the appropriate objectives and goals of our executive compensation program;	
 
 	·	in designing compensation programs that fulfill those objectives and goals;	
 
 	·	in reviewing the primary components of that compensation;	
 
 	·	in evaluating the effectiveness of our compensation programs;	
 
 	·	in identifying appropriate pay positioning strategies and pay levels in our executive compensation program; and	
 
 	·	in identifying comparable companies and compensation surveys for the Committee to use to benchmark the appropriateness and competitiveness of our executive compensation program.	
 
Pay Governance may, from time to time, contact our executive officers for information necessary to fulfill its assignment and may make reports and presentations to and on behalf of the Committee that our executive officers also receive.
 
Pay Governance and its affiliates did not provide any other services to us or our affiliates during 2013. In addition, the Committee has determined that the work of Pay Governance and its employees has not raised any conflict of interest.
 
Use of Peer Group Data. With the assistance of its consultant, the Committee approved the composition of a peer group of publicly-traded companies that were selected on the basis of industry, revenue, global operations, employee size and market capitalization.
 
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The following companies made up the peer group:
 
 	·	Ampco-Pittsburgh Corporation	 	·	Key Tronic Corporation	
 	·	The Eastern Company	 	·	The L.S. Starrett Company	
 	·	Electro Scientific Industries, Inc.	 	·	Met-Pro Corporation	
 	·	FARO Technologies, Inc.	 	·	NN, Inc.	
 	·	Flow International Corporation	 	·	PDF Solutions, Inc.	
 	·	GSI Group, Inc.	 	·	Proto Labs, Inc.	
 	·	Hardinge Inc.	 	·	QAD Inc.	
 	·	Kadant Inc.	 	·	Transcat, Inc.	
 	·	Kaydon Corporation	 	·	Zygo Corporation	
 
To assess executive compensation levels, equity usage and incentive plan design and for performance comparisons, the Committee reviewed compensation data for the peer group. The Committee used this data to analyze the competitiveness of current pay levels related to the market. In summary, the results of this compensation analysis reflected:
 
 	·	total cash compensation was aligned with the market median	
 
 	·	long term incentives were below the market median; and	
 
 	·	overall total compensation was positioned more than 10% below the market median	
 
The peer group data was used as one of several inputs the Committee considers when making compensation determinations. The Committee also reviewed survey data from Towers Watson for the manufacturing industry to obtain a general understanding of current compensation practices in that industry. In addition to the market data, the Committee may consider other factors such as an executive's individual performance, experience in his or her position and responsibilities that may not necessarily be benchmarked in market data.
 
Broader Recoupment Policy
 
Effective January 2014, our Board of Directors approved revisions to our Corporate Governance Principles to, among other things, adopt a broader recoupment policy. Our Corporate Governance Principles are available on our website at www.hurco.com.
 
The broader recoupment policy provides that in the event that the Company restates previously released financial results, the Compensation Committee shall determine whether any incentive compensation (defined as all equity-based and non-equity based compensation, the amount, payment and/or vesting of which was determined based wholly or in part on the value of the Company’s financial results or the achievement of specified performance measures) paid or awarded to executive officers during the three years preceding the restatement should be recovered by the Company. If the Committee determines that the amount of any incentive compensation paid to executive officers (the “Awarded Compensation”) during the three-year period preceding the date of restatement exceeded the amount that would have been paid based on the restated financial results (the “Adjusted Compensation”), and the restatement resulted from the Company’s material noncompliance, due in whole or part to intentional fraud or ethical misconduct, with any financial reporting requirement under the federal securities laws, then the Committee shall determine whether the Company should, except as provided below, recover the after-tax portion of the difference between the Awarded Compensation and the Adjusted Compensation for the affected executive officer.
 
- 23 -	

 	
 
In making determination whether the Company should recover any incentive compensation, the Committee will take any appropriate considerations into account, including the role the executive officer played in contributing to the events that caused the restatement, the likelihood of success in recovering the amounts under applicable law, the costs of seeking recovery, and whether the assertion of a claim may prejudice the interests of the Company in any related proceeding or investigation relating to the circumstances giving rise to the restatement.
 
In addition, the Compensation Committee is monitoring regulatory developments with respect to compensation recoupment policies and will recommend to the Board any changes to the current policy that are necessary or appropriate in light of future SEC guidance.
 
Taxes and Accounting Considerations
 
Section 162(m) of the Internal Revenue Code limits the deductibility of compensation that is not "performance-based compensation" paid to certain of our executives to $1,000,000. The deductibility of some types of compensation payments can depend upon the timing of the vesting or an executive's exercise of previously granted equity awards. Interpretations of and changes in applicable tax laws and regulations as well as other factors beyond our control also can affect deductibility of compensation. For these and other reasons, the Committee has determined that it will not necessarily seek to limit executive compensation to that sum which is deductible under Section 162(m) of the Code. During fiscal 2013, none of our officers had non-performance-based compensation in excess of $1,000,000. Thus, all such compensation will be deductible for tax purposes.
 
Our 2008 Plan contains performance-based conditions and has been approved by our shareholders, such that certain awards under the plan can qualify as performance-based compensation under Section 162(m). Although the 2014 short-term incentive compensation plan contains performance-based conditions, it has not been approved by our shareholders and therefore awards under that plan will not qualify as performance-based compensation under Section 162(m). The Committee will continue to monitor developments and assess alternatives for preserving the deductibility of compensation payments and benefits to the extent reasonably practicable, consistent with our compensation policies and what we believe is in the best interests of our shareholders.
 
Section 409A of the Internal Revenue Code affects the payments of certain types of deferred compensation to key employees and includes requirements relating to when payments under such arrangements can be made, acceleration of benefits, and timing of elections under such arrangements. Failure to satisfy these requirements will generally lead to an acceleration of the timing for including deferred compensation in an employee's income, as well as certain penalties and interest. We believe that our nonqualified deferred compensation arrangements meet the effective requirements of Section 409A as required by law or regulation.
 
- 24 -	

 	
 
Report of the Compensation Committee
 
The information contained in this report shall not be deemed to be "soliciting material," to be "filed" with the SEC, or to be subject to Regulation 14A or Regulation 14C (other than as provided in Item 407 of Regulation S-K) or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference in future filings with the SEC except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933, as amended, or the Securities Act, or the Exchange Act.
 
The Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on that review and those discussions, the Committee recommended to the Board of Directors that this Compensation Discussion and Analysis be included in this proxy statement on Schedule 14A and incorporated by reference in the Company's Annual Report on Form 10-K for its 2013 fiscal year.
 
 	Philip James, Chairman	
 	Robert Cruickshank	
 	Michael P. Mazza	
 
- 25 -	

 	
 
Assessment of Compensation-Related Risks
 
On an ongoing basis as part of our strategic business planning process, the named executive officers and key senior management conduct an assessment of the current risks arising from our compensation policies and practices. This team reviews and discusses the characteristics and approval policies of compensation programs for all employees, including salaries, equity awards, and cash bonuses, to determine whether any of these policies or programs could create risks that are reasonably likely to have a material adverse effect on us.
 
In January 2014, as part of our business planning process, we reviewed and discussed all recommended changes to our compensation policies and practices with our Board of Directors as part of our business plan review and approval process. In addition, the Compensation Committee met separately to review the management team's assessment of the risks that could arise from our compensation policies and practices in conjunction with any recommended changes that were needed. As part of their review, the Compensation Committee specifically considered factors that reduce the likelihood of excessive risk-taking such as our overall compensation levels being competitive with the market, the balance between fixed components like salary and benefits and short- and long-term incentive compensation. The Committee has discretion to adjust downward the amount of compensation that would otherwise be payable under the short-term incentive compensation program which it could do if it determines that an executive caused the Company to incur unnecessary or excessive risk. The compensation mix of cash (salary and short-term incentive) and equity incentives align with the market and the Company's peers and are linked to business performance. The short-term and long-term incentive plans are linked to specific formulas and have payout ceilings. The 2014 short-term incentive compensation plan also provides that no amounts will be paid under the strategic objectives component if our operating income margin is negative. The Company's new stock ownership guidelines link executives' and non-employee directors' interests to the interests of shareholders and the new incentive compensation recoupment policy would permit the Company to recover incentive compensation paid to executive officers in the event of wrongdoing on the part of the executives.
 
Based on such assessments, we believe that any risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on us.
 
- 26 -	

 	
 
Tabular Compensation Information
 
The following table summarizes the compensation information for each of our named executive officers for the fiscal years ended October 31, 2013, 2012 and 2011:
 
SUMMARY COMPENSATION TABLE
 
Name and Principal
Position	 	Fiscal
Year	 	 	Salary
($)	 	 	Bonus1
($)	 	 	Stock
Awards 2
($)	 	 	Option
Awards 3
($)	 	 	All Other
Compensation 4
($)	 	 	Total
 ($)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Michael Doar	 	 	2013	 	 	 	408,077	 	 	 	250,000	 	 	 	100,000	 	 	 	100,000	 	 	 	75,523	 	 	 	933,600	 	
Chairman and Chief	 	 	2012	 	 	 	395,692	 	 	 	515,000	 	 	 	187,500	 	 	 	187,500	 	 	 	73,530	 	 	 	1,359,222	 	
Executive Officer	 	 	2011	 	 	 	375,000	 	 	 	473,462	 	 	 	115,500	 	 	 	-	 	 	 	65,187	 	 	 	1,029,149	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
John G. Oblazney	 	 	2013	 	 	 	208,077	 	 	 	100,000	 	 	 	50,000	 	 	 	50,000	 	 	 	30,439	 	 	 	438,516	 	
Vice President, Secretary,	 	 	2012	 	 	 	198,327	 	 	 	200,000	 	 	 	85,000	 	 	 	85,000	 	 	 	23,770	 	 	 	592,097	 	
Treasurer	 	 	2011	 	 	 	189,038	 	 	 	204,231	 	 	 	115,500	 	 	 	-	 	 	 	19,816	 	 	 	528,585	 	
and Chief Financial Officer	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
John P. Donlon	 	 	2013	 	 	 	214,846	 	 	 	100,000	 	 	 	52,500	 	 	 	52,500	 	 	 	15,262	 	 	 	435,109	 	
Executive Vice President,	 	 	2012	 	 	 	208,077	 	 	 	210,000	 	 	 	90,000	 	 	 	90,000	 	 	 	6,407	 	 	 	604,484	 	
International Sales	 	 	2011	 	 	 	200,000	 	 	 	200,000	 	 	 	115,500	 	 	 	-	 	 	 	52,634	 	 	 	568,134	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sonja K. McClelland	 	 	2013	 	 	 	168,077	 	 	 	100,000	 	 	 	40,000	 	 	 	40,000	 	 	 	12,135	 	 	 	360,212	 	
Corporate Controller,	 	 	2012	 	 	 	157,115	 	 	 	160,000	 	 	 	62,500	 	 	 	62,500	 	 	 	6,690	 	 	 	448,805	 	
Assistant Secretary	 	 	2011	 	 	 	142,115	 	 	 	155,000	 	 	 	115,500	 	 	 	-	 	 	 	2,641	 	 	 	415,256	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gregory S. Volovic	 	 	2013	 	 	 	248,077	 	 	 	200,000	 	 	 	60,000	 	 	 	60,000	 	 	 	18,174	 	 	 	586,251	 	
President	 	 	2012	 	 	 	235,192	 	 	 	350,000	 	 	 	95,000	 	 	 	95,000	 	 	 	8,826	 	 	 	784,018	 	
 	 	 	2011	 	 	 	213,077	 	 	 	229,481	 	 	 	115,500	 	 	 	-	 	 	 	5,012	 	 	 	563,070	 	
__________
 
 	1	Represents discretionary bonuses awarded by the Committee for performance for the specified fiscal year that are paid in the following fiscal year. Fiscal 2011 also includes a one-time payment equal to 10% reductions in base salary that were in effect during fiscal 2009 and 2010.	
 
 	2	Represents the grant date fair value of restricted stock awards determined in accordance with Accounting Standards Codification Topic 718, or ASC 718. For a discussion of the assumptions made in the valuation of our restricted stock, see Note 8 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the years ended October 31, 2013, 2012 and 2011.	
 
 	3	Represents the grant date fair value of option awards determined in accordance with ASC 718. For a discussion of the assumptions made in the valuation of our stock options, see Note 8 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the years ended October 31, 2013, 2012 and 2011.	
 
- 27 -	

 	
 
 	4	The following table summarizes the information included in the All Other Compensation column in the Summary Compensation Table:	
 
Name	 	 	 	 	Leased
Auto	 	 	Supplemental
Disability
Insurance	 	 	Matching 
401(k) Plan
Contributions	 	 	Split-Dollar
Life
Insurance	 	 	Other	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Michael Doar	 	 	2013	 	 	 	27,005	 	 	 	7,585	 	 	 	14,026	 	 	 	26,908	 	 	 	-	 	 	 	75,523	 	
 	 	 	2012	 	 	 	29,795	 	 	 	3,987	 	 	 	7,168	 	 	 	32,580	 	 	 	-	 	 	 	73,530	 	
 	 	 	2011	 	 	 	27,172	 	 	 	4,023	 	 	 	3,308	 	 	 	33,684	 	 	 	-	 	 	 	65,187	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
John G. Oblazney	 	 	2013	 	 	 	16,044	 	 	 	3,699	 	 	 	10,696	 	 	 	-	 	 	 	-	 	 	 	30,439	 	
 	 	 	2012	 	 	 	16,044	 	 	 	1,394	 	 	 	6,332	 	 	 	-	 	 	 	-	 	 	 	23,770	 	
 	 	 	2011	 	 	 	16,044	 	 	 	1,363	 	 	 	2,409	 	 	 	-	 	 	 	-	 	 	 	19,816	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
John P. Donlon	 	 	2013	 	 	 	-	 	 	 	2,550	 	 	 	12,712	 	 	 	-	 	 	 	-	 	 	 	15,262	 	
 	 	 	2012	 	 	 	-	 	 	 	2,772	 	 	 	3,635	 	 	 	-	 	 	 	-	 	 	 	6,407	 	
 	 	 	2011	 	 	 	-	 	 	 	2,666	 	 	 	-	 	 	 	-	 	 	 	49,968	 	 	 	52,634	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sonja K. McClelland	 	 	2013	 	 	 	-	 	 	 	2,137	 	 	 	9,998	 	 	 	-	 	 	 	-	 	 	 	12,135	 	
 	 	 	2012	 	 	 	-	 	 	 	802	 	 	 	5,888	 	 	 	-	 	 	 	-	 	 	 	6,690	 	
 	 	 	2011	 	 	 	-	 	 	 	809	 	 	 	1,832	 	 	 	-	 	 	 	-	 	 	 	2,641	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gregory S. Volovic	 	 	2013	 	 	 	-	 	 	 	5,505	 	 	 	12,669	 	 	 	-	 	 	 	-	 	 	 	18,174	 	
 	 	 	2012	 	 	 	-	 	 	 	2,741	 	 	 	6,085	 	 	 	-	 	 	 	-	 	 	 	8,826	 	
 	 	 	2011	 	 	 	-	 	 	 	2,743	 	 	 	2,269	 	 	 	-	 	 	 	-	 	 	 	5,012	 	
 
The amounts shown in the Leased Auto column represent either the portion of the lease cost for automobiles leased by us allocable to an executive's personal use of the automobile or the sum of a monthly car allowance that is added to an executive's salary. For automobiles leased by us where the automobile is used for both business and personal purposes, the percentage of personal use is calculated and applied to the lease and operating expenses.
 
The Split-Dollar Life Insurance amounts represent a portion of the premium paid on insurance policies we own on the life of the employee. All cash contributions are returned to us upon employee separation or death of the insured. We pay the full amount of the premiums and are the beneficiary for a portion of the policies' death benefit. By policy endorsement, the employee has the right to designate the beneficiary for the death benefit.
 
The amount reported in the Other column for Mr. Donlon in fiscal 2011 represented a one-time relocation bonus and reimbursement of his moving expenses that was a condition of his hire in fiscal 2010.
 
- 28 -	

 	
 
GRANTS OF PLAN-BASED AWARDS TABLE
 
The following table provides information regarding the stock options and shares of restricted stock granted during fiscal 2013:
 
Name	 	Grant Date	 	All Other
Stock
Awards:
Number of
Shares of
Stock or
Units (#)	 	 	All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)	 	 	Exercise or
Base Price
of Option
Awards
($/sh)	 	 	Grant Date
Fair Value
of Stock and
Option
Awards 1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Michael Doar	 	12/12/12	 	 	4,292	 	 	 	-	 	 	 	-	 	 	$	100,000	 	
 	 	12/12/12	 	 	-	 	 	 	8,256	 	 	$	23.30	 	 	$	100,000	 	
John G. Oblazney	 	12/12/12	 	 	2,146	 	 	 	-	 	 	 	-	 	 	$	50,000	 	
 	 	12/12/12	 	 	-	 	 	 	4,128	 	 	$	23.30	 	 	$	50,000	 	
John P. Donlon	 	12/12/12	 	 	2,253	 	 	 	-	 	 	 	-	 	 	$	52,500	 	
 	 	12/12/12	 	 	-	 	 	 	4,335	 	 	$	23.30	 	 	$	52,500	 	
Sonja K. McClelland	 	12/12/12	 	 	1,717	 	 	 	-	 	 	 	-	 	 	$	40,000	 	
 	 	12/12/12	 	 	-	 	 	 	3,303	 	 	$	23.30	 	 	$	40,000	 	
Gregory S. Volovic	 	12/12/12	 	 	2,575	 	 	 	-	 	 	 	-	 	 	$	60,000	 	
 	 	12/12/12	 	 	-	 	 	 	4,954	 	 	$	23.30	 	 	$	60,000	 	
___________
 
 	1	Amounts represent the grant date fair value of the awards determined in accordance with ASC 718, calculated using $23.30, the closing price of our common stock as reported by Nasdaq on the date of grant.	
 
The named executive officers are eligible to participate in the 2008 Plan, which was last approved by shareholders in March 2013. The 2008 Plan provides for equity-based incentive awards in the form of stock options, stock appreciation rights settled in stock, restricted shares, performance shares and performance units. Under the 2008 Plan, the Committee has authority to determine the officers, directors and key employees who will be granted awards; determine the form and size of the award; determine the terms and conditions upon which the awards will be granted; and prescribe the form and terms of award agreements. There were 517,998 shares of our common stock available for issuance under future awards under the 2008 Plan as of October 31, 2013.
 
- 29 -	

 	
 
OUTSTANDING EQUITY AWARDS AT 2013 FISCAL YEAR END TABLE
 
The following table summarizes the outstanding equity awards held by the named executive officers as of October 31, 2013:
 
 	 	Option Awards	 	Stock Awards	 	
Name	 	Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable 1	 	 	Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable	 	 	Option
Exercise
Price	 	 	Option
Expiration
Date	 	Number of
Shares or
Units of Stock
That Have Not
Vested
(#)	 	 	Market Value
of Shares or
Units of Stock
That Have Not
Vested
($)	 	
Michael Doar	 	 	-	 	 	 	8,256	2	 	$	23.30	 	 	12/12/2022	 	 	4,292	3	 	$	100,000	 	
 	 	 	5,437	 	 	 	10,874	4	 	$	21.45	 	 	12/14/2021	 	 	8,741	5	 	$	187,500	 	
 	 	 	15,000	 	 	 	-	 	 	$	14.82	 	 	12/18/2019	 	 	5,000	6	 	$	115,500	 	
 	 	 	10,000	 	 	 	-	 	 	$	18.13	 	 	05/13/2020	 	 	 	 	 	 	 	 	
John G. Oblazney	 	 	-	 	 	 	4,128	2	 	$	23.30	 	 	12/12/2022	 	 	2,146	3	 	$	50,000	 	
 	 	 	2,465	 	 	 	4,930	4	 	$	21.45	 	 	12/14/2021	 	 	3,963	5	 	$	85,000	 	
 	 	 	15,000	 	 	 	-	 	 	$	26.69	 	 	11/16/2016	 	 	5,000	6	 	$	115,500	 	
 	 	 	6,000	 	 	 	-	 	 	$	14.82	 	 	12/18/2019	 	 	 	 	 	 	 	 	
 	 	 	4,000	 	 	 	-	 	 	$	18.13	 	 	05/13/2020	 	 	 	 	 	 	 	 	
John P. Donlon	 	 	-	 	 	 	4,335	2	 	$	23.30	 	 	12/12/2022	 	 	2,253	3	 	$	52,500	 	
 	 	 	2,609	 	 	 	5,220	4	 	$	21.45	 	 	12/14/2021	 	 	4,196	5	 	$	90,000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	5,000	6	 	$	115,500	 	
Sonja K. McClelland	 	 	-	 	 	 	3,303	2	 	$	23.30	 	 	12/12/2022	 	 	1,717	3	 	$	40,000	 	
 	 	 	1,812	 	 	 	3,625	4	 	$	21.45	 	 	12/14/2021	 	 	2,914	5	 	$	62,500	 	
 	 	 	3,000	 	 	 	-	 	 	$	14.82	 	 	12/18/2019	 	 	5,000	6	 	$	115,500	 	
 	 	 	2,000	 	 	 	-	 	 	$	18.13	 	 	05/13/2020	 	 	 	 	 	 	 	 	
Gregory S. Volovic	 	 	-	 	 	 	4,954	2	 	$	23.30	 	 	12/12/2022	 	 	2,575	3	 	$	60,000	 	
 	 	 	2,755	 	 	 	5,509	4	 	$	21.45	 	 	12/14/2021	 	 	4,429	5	 	$	95,000	 	
 	 	 	6,000	 	 	 	-	 	 	$	14.82	 	 	12/18/2019	 	 	5,000	6	 	$	115,500	 	
 	 	 	4,000	 	 	 	-	 	 	$	18.13	 	 	05/13/2020	 	 	 	 	 	 	 	 	
___________
 
 	1	These stock options were fully vested as of October 31, 2013.	
 
 	2	These stock options have a three-year vesting period, with one-third of the total shares having vested on December 12, 2013, one-third vesting on December 12, 2014, and one-third vesting on December 12, 2015.	
 
 	3	These restricted shares vest on December 12, 2015.	
 
 	4	These stock options have a three-year vesting period, with one-third of the total shares having vested on December 14, 2012, one-third having vested on December 14, 2013, and one-third vesting on December 14, 2014.	
 
 	5	These restricted shares vest on December 14, 2014.	
 
 	6	These restricted shares vested on December 22, 2013.	
 
- 30 -	

 	
 
OPTION EXERCISE AND STOCK VESTED
 
The following table provides information regarding the exercise of stock options by the named executive officers during fiscal 2013. No stock awards vested during fiscal 2013.
 
 	 	Option Awards	 	
Name	 	Number of
Shares
Acquired on
Exercise
(#)	 	 	Value Realized
on Exercise 1
($)	 	
 	 	 	 	 	 	 	
Michael Doar	 	 	-	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	
John G. Oblazney	 	 	-	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	
John P. Donlon	 	 	-	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	
Sonja K. McClelland	 	 	-	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	
Gregory S. Volovic	 	 	11,369	 	 	$	43,771	2	
 
__________
 
 	1	Represents the difference between the option exercise price and the closing price of our common stock, as reported on the Nasdaq Global Select Market, on the date of exercise, multiplied by the number of shares of our common stock underlying the stock option.	
 
 	2	Based on the exercise price of $26.69 per share and a closing price of $30.54 on July 16, 2013, the date of exercise.	
 
- 31 -	

 	

EQUITY COMPENSATION PLAN INFORMATION
 
The following table sets forth information regarding outstanding grants and shares available for grant under our existing equity compensation plans. All information is as of October 31, 2013.
 
Plan Category	 	Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights	 	 	Weighted
Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights	 	 	Number of
Securities
Remaining
Available for
Future Issuance
(Excluding
Securities
Reflected in the
First Column)	 	
Equity compensation plans approved by security holders	 	 	237,168	(1)	 	$	21.39	 	 	 	517,998	(2)	
Equity compensation plans not approved by security holders	 	 	-	 	 	 	-	 	 	 	-	 	
Total	 	 	237,168	 	 	$	21.39	 	 	 	517,998	 	
 
 	(1)	Consists of stock options granted under the 1997 Stock Option and Incentive Plan and the 2008 Plan and restricted shares granted under the 2008 Plan.	
 
 	(2)	Includes 517,998 shares available for future issuance as stock options, stock appreciation rights, restricted shares, and performance shares and performance units under the 2008 Plan. No additional grants may be made under the 1997 Stock Option and Incentive Plan.	
 
- 32 -	

 	
 
NONQUALIFIED DEFERRED COMPENSATION
 
For Mr. Doar, the only named executive officer participating in the nonqualified deferred compensation plan, the following table provides information regarding fiscal 2013 executive contributions, fiscal 2013 earnings and aggregate balances as of October 31, 2013. There were no Company contributions or aggregate withdrawals or distributions in fiscal 2013.
 
Name	 	Executive
Contributions
in Last Fiscal
Year ($)	 	 	Aggregate
Earnings in
Last Fiscal
Year ($)	 	 	Aggregate
Balance at
Last Fiscal
Year End ($)	 	
Michael Doar	 	$	34,623	 	 	$	83,905	 	 	$	534,870	 	
 
The amounts shown in this table are also included in the amounts shown in the Salary or Bonus columns of the Summary Compensation Table. All of the contributions by Mr. Doar in fiscal 2013 and prior fiscal years were reported in the Summary Compensation Table in fiscal 2013 or prior fiscal years, as applicable. The aggregate balance shown includes earnings on such contributions.
 
The Deferred Compensation Plan II, or the DCPII, is a nonqualified deferred compensation plan to which senior managers and other highly compensated employees are eligible to participate. A committee consisting of our Chief Executive Officer, Chief Financial Officer and Director of Human Resources administers the plan. This committee is authorized to interpret the plan, establish, amend and rescind any rules and regulations relating to the plan, determine the terms and provisions of any agreements made pursuant to the plan, and make all other determinations that may be necessary or advisable for the administration of the plan.
 
Eligible participants are able to defer between 2% and 50% percent of their base salary and up to 100% of their annual bonus less required and voluntary payroll deductions in a given plan year. Deferral elections are made by eligible executives in January of each year for amounts to be earned in the following year. The Board of Directors may declare a discretionary amount of matching credits for participants deferring compensation, up to a maximum of 6% of compensation. The Board of Directors has not awarded any such matching credits to the named executive officers participating in the DCPII.
 
Participants are 100% vested in all deferral and matching accounts at all times. Amounts deferred under the plan are credited with earnings at the rate of return generated by the Vanguard mutual fund investment options elected by the participants that are offered in our 401(k) plan. The earnings do not reflect any above-market or preferential rates of return. Participants may change their investment options at any time by contacting Vanguard. Account balances in the DCPII are payable at the election of the participant either in a single lump sum or in monthly, quarterly or annual installments with a term of between two and ten years. Distributions under the DCPII will not commence prior to the expiration of a six-month period from the date of separation of service or the participant's death, if earlier.
 
Employment Agreements
 
On March 15, 2012, following approval by the Compensation Committee, we entered into employment agreements with each of the named executive officers. The employment agreements terminate and supersede any previously existing employment-related engagements between the Company and the named executive officers. The current term of employment under each of the employment agreements would end October 31, 2014, with automatic one-year extensions unless either party gives 60-days' notice prior to the expiration of the then-current term.
 
- 33 -	

 	
 
The employment agreements provide for a minimum base salary, subject to increase or decrease at the discretion of the Company, and a discretionary annual cash bonus. The employment agreements provide that each of the executive officers is eligible to participate in any employee benefit plans and programs generally made available to our employees.
 
Each of the employment agreements provides that, if the Company terminates the executive's employment without Cause (as defined in the employment agreement) or he or she resigns for Good Reason (as defined in the employment agreements) prior to a Change in Control (as defined in the employment agreements), then he or she will be entitled to severance payments (1) in the form of a salary continuation benefit at his or her base salary then in effect for a period of nine months (twelve months in the case of Mr. Doar); (2) an additional monthly amount during the severance period equal to one-twelfth of the average of the executive's annual cash bonuses for the preceding three years; and (3) an additional monthly payment during the severance period equal to 140% of the Company's monthly cost at the time of termination for continuation of health insurance. In order to receive any of the severance payments, the executive must execute a release satisfactory to the Company. If an executive officer's employment is terminated by the Company without Cause or by the executive for Good Reason within twelve months following a Change in Control, then the executive will be entitled to the severance amounts disclosed in the preceding sentence for a period of eighteen months (twenty-four months in the case of Mr. Doar). In the event of termination of the executive's employment by reason of death, disability, retirement or termination by the Company for Cause, he or she is entitled to his or her base salary and benefits through the date of termination of employment.
 
The employment agreements contain certain restrictive covenants, prohibiting the executive from competing with the Company, selling products to certain customers and hiring certain employees after termination of employment. The employment agreements also contain provisions protecting our intellectual property and confidential information.
 
- 34 -	

 	
 
Potential Payments Upon Termination 
 
 	 	Resignation ($)	 	 	Death ($)	 	 	Disability ($)	 	 	Retirement ($)	 	 	Termination
Without
Cause ($) or
by Executive
for Good
Reason (1)	 	 	Termination 
For
Cause ($) (1)	 	 	Change
in
Control (1)	 	
Michael Doar	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Severance Pay2	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	835,821	 	 	 	-	 	 	 	1,671,641	 	
Deferred Compensation3	 	 	534,870	 	 	 	534,870	 	 	 	534,870	 	 	 	534,870	 	 	 	534,870	 	 	 	534,870	 	 	 	534,870	 	
Stock Options4	 	 	-	 	 	 	268,060	 	 	 	268,060	 	 	 	225,178	 	 	 	-	 	 	 	-	 	 	 	268,060	 	
Restricted Shares5	 	 	-	 	 	 	441,628	 	 	 	441,628	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	441,628	 	
Health Care Coverage6	 	 	-	 	 	 	-	 	 	 	380,084	 	 	 	-	 	 	 	43,517	 	 	 	-	 	 	 	87,035	 	
Life Insurance	 	 	-	 	 	 	1,606,000	7 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
John G. Oblazney	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Severance Pay9	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	288,058	 	 	 	-	 	 	 	576,116	 	
Deferred Compensation	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	
Stock Options4	 	 	-	 	 	 	110,853	 	 	 	110,853	 	 	 	90,954	 	 	 	-	 	 	 	-	 	 	 	110,853	 	
Restricted Shares5	 	 	-	 	 	 	272,059	 	 	 	272,059	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	272,059	 	
Health Care Coverage6	 	 	-	 	 	 	 	 	 	 	254,584	 	 	 	-	 	 	 	32,638	 	 	 	-	 	 	 	65,276	 	
Life Insurance	 	 	-	 	 	 	400,000	8 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
John P. Donlon	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Severance Pay9	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	294,750	 	 	 	-	 	 	 	589,500	 	
Deferred Compensation	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	
Stock Options4	 	 	-	 	 	 	28,959	 	 	 	28,959	 	 	 	7,933	 	 	 	-	 	 	 	-	 	 	 	28,959	 	
Restricted Shares5	 	 	-	 	 	 	280,386	 	 	 	280,386	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	280,386	 	
Health Care Coverage6	 	 	-	 	 	 	-	 	 	 	193,084	 	 	 	-	 	 	 	32,638	 	 	 	-	 	 	 	65,276	 	
Life Insurance	 	 	-	 	 	 	400,000	8 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sonja K. McClelland	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Severance Pay9	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	235,000	 	 	 	-	 	 	 	470,000	 	
Deferred Compensation	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	
Stock Options4	 	 	-	 	 	 	62,189	 	 	 	62,189	 	 	 	47,239	 	 	 	-	 	 	 	-	 	 	 	62,189	 	
Restricted Shares5	 	 	-	 	 	 	235,863	 	 	 	235,863	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	235,863	 	
Health Care Coverage6	 	 	-	 	 	 	-	 	 	 	209,834	 	 	 	-	 	 	 	32,638	 	 	 	-	 	 	 	65,276	 	
Life Insurance	 	 	-	 	 	 	350,000	8 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gregory S. Volovic	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Severance Pay9	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	438,620	 	 	 	-	 	 	 	877,241	 	
Deferred Compensation	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	
Stock Options4	 	 	-	 	 	 	114,478	 	 	 	114,478	 	 	 	91,834	 	 	 	-	 	 	 	-	 	 	 	114,478	 	
Restricted Shares5	 	 	-	 	 	 	293,978	 	 	 	293,378	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	293,378	 	
Health Care Coverage6	 	 	-	 	 	 	-	 	 	 	300,084	 	 	 	-	 	 	 	32,638	 	 	 	-	 	 	 	65,276	 	
Life Insurance	 	 	-	 	 	 	400,000	8 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	
__________
(footnotes on following page)
 
- 35 -	

 	
 
 	1	"Cause" for the Company's termination of the employment agreement would exist if the executive is (a) convicted for, or pleading no contest to, a felony, (b) engages in fraudulent or dishonest conduct, (c) fails to follow the lawful instructions of a superior or the Company's Board of Directors, (d)  breaches the terms of the employment agreement, (e) violates written policies or procedures, (f) engages in willful misconduct, or (g) misuses alcohol or drugs. "Good Reason" for the executive's termination of the employment agreement would exist if the Company (a) fails to automatically extend the term of the employment agreement, (b) decreases the executive's base salary by more than 5% a year unless the decrease is part of a broader cost reduction, (c) demotes the executive or assigns duties that are inconsistent with executive's position, (d) eliminates or materially reduces employee benefits other than as part of a broader cost reduction, (e) requires executive to relocate more than thirty miles from the Company office at which executive was based immediately prior to such relocation, (f)  materially breaches any material term of the employment agreement, or (g) fails to have the employment agreement assumed as part of a merger or sale of the Company. There are notice and cure provisions with respect to certain of the grounds for termination for Cause or Good reason. "Change in Control" means (a) the acquisition of 25% or more of the voting securities of the Company, (b) a majority of the directors of the Company being elected who were not approved by a majority of the persons who were previously serving as directors, or (c) a merger, other reorganization or liquidation involving the Company or a sale of substantially all of the assets of the Company, unless (i) the Company's shareholders would own 55% or more of the voting power of the successor entity, (ii) no individual person would own 25% or more of the successor entity and (iii) a majority of the directors of the successor entity were directors of the Company	
 
 	2	If the Company terminates Mr. Doar's employment without Cause or he resigns for Good Reason prior to a Change in Control, then he will be entitled to severance payments in the form of a salary continuation benefit at base salary then in effect for a period of twelve months; an additional monthly amount during the severance period equal to one-twelfth of the average of the executive's annual cash bonuses for the preceding three years; and an additional monthly payment during the severance period equal to 140% of the Company's monthly cost at the time of termination for continuation of health insurance. If Mr. Doar's employment is terminated by the Company without Cause or by the executive for Good Reason within twelve months following a Change in Control, then he will be entitled to the severance amounts disclosed in the preceding sentence for a period of twenty-four months.	
 
 	3	Amounts can be paid in lump sum distribution or installments depending on the participant's election.	
 
 	4	Reflects the excess of the closing price of $24.49 per share for our common stock on October 31, 2013, over the exercise price of vested stock options and unvested stock options that would vest as a result of the specified termination event occurring as of October 31, 2013, multiplied by the number of shares of common stock underlying the stock options. Stock options shall terminate upon the first occurrence of (a) the date of termination of employment by the Company for cause or voluntarily by the participant for any reason other than death, disability or retirement, (b) three months after the date on which the participant retires or employment is terminated by the Company without cause, (c) the expiration of one year after the date on which employment is terminated due to the participant's death or disability, or (d) ten years from date of grant.	
 
 	5	Reflects the value of unvested restricted shares that would vest as a result of the specified termination event occurring as of October 31, 2013, using $24.49 per share. A participant's rights with respect to the unvested portion of the restricted shares will terminate if a participant ceases continuous service for any reason other than death or disability.	
 
 	6	Amounts represent 12 months of coverage under the short-term and long-term disability plan, any supplemental disability plan payment, and COBRA payments grossed up for tax purposes.	
 
- 36 -	

 	
 
 	7	Amount includes split-dollar life insurance payment of two times annual salary plus one times bonus and $510,000 maximum benefit for accidental death insurance policy.	
 
 	8	Amounts include life insurance payment of two times annual salary up to a maximum annual salary of $200,000 under accidental death insurance policy.	
 
 	9	If the Company terminates the executive's employment without Cause or he resigns for Good Reason prior to a Change in Control, then he will be entitled to severance payments in the form of a salary continuation benefit at base salary then in effect for a period of nine months; an additional monthly amount during the severance period equal to one-twelfth of the average of the executive's annual cash bonuses for the preceding three years; and an additional monthly payment during the severance period equal to 140% of the Company's monthly cost at the time of termination for continuation of health insurance. If the executive's employment is terminated by the Company without Cause or by the executive for Good Reason within twelve months following a Change in Control, then he will be entitled to the severance amounts disclosed in the preceding sentence for a period of eighteen months.	
 
- 37 -	

 	
 
Compensation of Directors
DIRECTOR COMPENSATION TABLE 
 
Name	 	Fees Earned
or Paid in
Cash ($)	 	 	Stock
Awards1
($)	 	 	Total
($)	 	
Robert W. Cruickshank	 	 	30,000	 	 	 	24,991	 	 	 	54,991	 	
Philip James	 	 	25,000	 	 	 	24,991	 	 	 	49,991	 	
Michael P. Mazza	 	 	20,000	 	 	 	24,991	 	 	 	44,991	 	
Andrew Niner	 	 	25,000	 	 	 	24,991	 	 	 	49,991	 	
Richard Porter	 	 	25,000	 	 	 	24,991	 	 	 	49,991	 	
Janaki Sivanesan	 	 	25,000	 	 	 	24,991	 	 	 	49,991	 	
Ronald Strackbein	 	 	30,000	 	 	 	24,991	 	 	 	54,991	 	
_________
 
 	1	Amounts reflect the grant date fair value of restricted shares issued to each non-employee director during the year ended October 31, 2013, calculated in accordance with ASC 718. During fiscal 2013, each non-employee director received 890 restricted shares on March 14, 2013, the date of our annual meeting of shareholders. The grant date fair value is calculated by multiplying the closing price of our common stock on the Nasdaq on the date of grant, which was $28.08, by the number of restricted shares awarded. The restricted shares vest one year from the date of grant.	
 
In fiscal 2013, we paid directors who are not our employees a quarterly retainer of $5,000 and an annual grant of restricted shares having a fair market value of approximately $25,000 at the grant date. We pay the chair of the Audit Committee an additional quarterly retainer of $2,500 and the chair of the Compensation Committee as well as each Audit Committee member an additional quarterly retainer of $1,250. We also pay the Presiding Independent Director an additional quarterly retainer of $2,500.
 
As of October 31, 2013, non-employee directors held outstanding options to purchase the following number of shares of common stock:
 
Mr. James	5,000  shares	
 	 	
Mr. Mazza	2,500  shares	
 	 	
Ms. Sivanesan	5,000  shares	
 
Mr. Doar's compensation for fiscal 2013 is set forth in the Summary Compensation Table and the preceding tables and narrative. Mr. Doar is not included in this table because he did not receive any additional compensation for his service as a director.
 
- 38 -	

 	
  
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth information as of January 10, 2014, regarding beneficial ownership of our common stock held by each director and named executive officer, by all directors and executive officers as a group, and by all persons who are known to be beneficial owners of more than 5% of our common stock. Each such person has sole voting and investment power with respect to such securities, except as otherwise noted.
 
 	 	Shares Beneficially Owned	 	
Name	 	Number	 	 	Percent	 	
 	 	 	 	 	 	 	
Directors and Executive Officers	 	
Robert W. Cruickshank	 	 	32,318	1	 	 	             *	 	
Michael Doar	 	 	117,473	2	 	 	1.8	%	
Philip James		 	 	10,652	3	 	 	             *	 	
Michael P. Mazza	 	 	7,907	4	 	 	             *	 	
Andrew Niner	 	 	2,303	1	 	 	             *	 	
Richard Porter	 	 	1,815	1	 	 	             *	 	
Janaki Sivanesan	 	 	9,652	3	 	 	             *	 	
Ronald Strackbein	 	 	1,815	1	 	 	             *	 	
John G. Oblazney	 	 	43,851	5	 	 	             *	 	
John P. Donlon	 	 	14,102	6	 	 	             *	 	
Sonja K. McClelland	 	 	19,200	7	 	 	             *	 	
Gregory S. Volovic	 	 	27,289	8	 	 	             *	 	
Executive officers and directors as a group (12 persons)	 	 	288,377	 	 	 	4.4	%	
____________
 
(footnotes on following page)
- 39 -	

 	
 
Other Beneficial Owners
Name and Address	 	Shares Beneficially Owned	 	
 	 	Number	 	 	Percent	 	
Royce & Associates, LLC	 	 	 	 	 	 	 	 	
745 Fifth Avenue	 	 	 	 	 	 	 	 	
New York, NY 10151	 	 	872,775	9	 	 	13.5	%	
 	 	 	 	 	 	 	 	 	
FMR LLC	 	 	 	 	 	 	 	 	
82 Devonshire St	 	 	 	 	 	 	 	 	
Boston, MA 02109	 	 	677,133	9	 	 	10.4	%	
 	 	 	 	 	 	 	 	 	
Dimensional Fund Advisors LP	 	 	 	 	 	 	 	 	
Palisades West, Building One	 	 	 	 	 	 	 	 	
6300 Bee Cave Road	 	 	 	 	 	 	 	 	
Austin, TX 78746	 	 	457,145	9	 	 	7.1	%	
 	 	 	 	 	 	 	 	 	
Thomson Horstmann & Bryant Inc.	 	 	 	 	 	 	 	 	
501 Merritt 7	 	 	 	 	 	 	 	 	
Norwalk, CT 06851	 	 	418,287	9	 	 	6.5	%	
 	 	 	 	 	 	 	 	 	
Franklin Resources Inc.	 	 	 	 	 	 	 	 	
One Franklin Parkway	 	 	 	 	 	 	 	 	
San Mateo, CA 94403	 	 	379,000	9	 	 	5.8	%	
____________
 
 	*	Less than one (1) percent.	
 	1	Includes 890 unvested shares of restricted stock.	
 	2	Includes 38,626 shares subject to options that are vested and 18,239 unvested shares of restricted stock.	
 	3	Includes 5,000 shares subject to options that are vested and 890 unvested shares of restricted stock.	
 	4	Includes 2,500 shares subject to options that are vested and 890 unvested shares of restricted stock.	
 	5	Includes 31,306 shares subject to options that are vested and 8,087 unvested shares of restricted stock.	
 	6	Includes 6,664 shares subject to options that are vested and 7,438 unvested shares of restricted stock.	
 	7	Includes 9,726 shares subject to options that are vested and 5,516 unvested shares of restricted stock.	
 	8	Includes 17,161 shares subject to options that are vested and 10,128 unvested shares of restricted stock.	
 	9	Based solely on information supplied by the beneficial owner on Form 13F for the quarter ended September 30, 2013 which was filed in November 2013.	
 
- 40 -	

 	
 
REPORT OF THE AUDIT COMMITTEE
 
The Audit Committee is comprised of the four directors named below. The Board of Directors and the Audit Committee have determined that the Committee's current composition satisfies the Nasdaq listing requirements, including the requirement that all Audit Committee members be "independent directors" as defined by Nasdaq rules. The Board of Directors annually reviews the independence of the Audit Committee members under both Nasdaq rules and the SEC's definition of independence for Audit Committee members and the independence requirements in our Corporate Governance Principles. The Board has determined that Mr. Strackbein meets the SEC's definition of an "Audit Committee financial expert."
 
The primary function of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities by reviewing the financial information that will be provided to shareholders and others, the system of internal controls that management has established, and the audit process. In doing so, it is the responsibility of the Audit Committee to provide an open avenue of communication between the Board of Directors, management and the independent auditors.
 
The Audit Committee has reviewed and discussed the audited financial statements of the Company for the fiscal year ended October 31, 2013, with the Company's management.   The Audit Committee has discussed with Ernst & Young LLP, or Ernst & Young, the Company's independent registered public accounting firm, the matters required to be discussed by Statement on Auditing Standards No. 16, as adopted by the Public Accounting Oversight Board. The Audit Committee has also received the written disclosures and the letter from Ernst & Young required by applicable requirements of the Public Accounting Oversight Board regarding the independent accountant's communications with the Audit Committee concerning independence, and the Audit Committee has discussed with Ernst & Young the independence of that firm.
 
The members of the Audit Committee have also confirmed that there have been no new circumstances or developments since their appointment to the Committee that would impair any member's ability to act independently.
 
Based on the reviews and discussions referred above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2013, for filing with the SEC.
 
 	Ronald Strackbein, Chairman	
 	Andrew Niner	
 	Richard Porter	
 	Janaki Sivanesan	
 
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PROPOSAL 3. RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
The Audit Committee has appointed Ernst & Young as our independent registered public accounting firm for fiscal 2014. The Board of Directors is submitting the appointment of Ernst & Young for ratification in order to permit shareholders to express their approval or disapproval. In the event of a negative vote, the Audit Committee may reconsider this appointment. Representatives of Ernst & Young will be present at the meeting and will be given an opportunity to respond to questions and make a statement, if they desire.
 
The Board of Directors recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending October 31, 2014.
 
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
Audit and Non-Audit Fees
 
Ernst & Young has served as our independent registered public accounting firm since fiscal 2009. The following table sets forth fees paid to Ernst & Young for services provided during fiscal years 2013 and 2012, respectively:
 
 	 	2013	 	 	2012	 	
Audit Fees1	 	$	829,135	 	 	$	719,872	 	
Audit Related Fees2	 	 	60,456	 	 	 	20,433	 	
Tax Fees3	 	 	123,275	 	 	 	79,490	 	
All Other Fees4	 	 	-	 	 	 	-	 	
TOTAL	 	$	1,012,866	 	 	$	819,795	 	
__________
 
 	1	Represents fees for professional services provided in connection with the audit of annual financial statements, review of quarterly financial statements, and audit of internal controls over financial reporting.	
 
 	2	Represents fees for assurance and related services that are traditionally performed by the principal accountant for the audit or review of our consolidated financial statements and are not reported under audit fees. These services include audit of our employee benefit plan and due diligence and advisory services related to our acquisition.	
 
 	3	Represents fees for services provided in connection with tax compliance and tax planning.	
 
 	4	Represents fees for other non-audit services.	
 
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Pre-approval Policy
 
The Audit Committee's policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditor in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. For fiscal 2013 and 2012, all of the fees reported above as Audit-Related Fees, Tax Fees, and All Other Fees were pre-approved by the Audit Committee. The Audit Committee has concluded that the provision of the services listed above is compatible with maintaining that firm's independence.
 
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
 
Under our Code of Business Conduct and Ethics, which is available on our website at www.hurco.com, our directors, officers and employees are not permitted to conduct business on our behalf with a member of his or her family, or a business organization with which he or she or a family member has an interest or employment relationship that could be considered significant in terms of potential conflict of interest unless such business dealings have been disclosed to, and approved by, our Audit Committee.
 
Further, under our Audit Committee's charter, which is available on our website at www.hurco.com, our Audit Committee must review and approve all related person transactions. No related person transaction in an amount exceeding $120,000 occurred during fiscal 2013.
 
SHAREHOLDER PROPOSALS FOR OUR 2015 ANNUAL MEETING
 
The date by which shareholder proposals must be received by us for inclusion in proxy materials relating to the 2015 annual meeting of shareholders is September 29, 2014.
 
Our By-Laws provide that shareholders are required to give us advance notice of any business to be brought by a shareholder before an annual shareholders' meeting. For business to be properly brought before an annual meeting by a shareholder, the shareholder must give timely written notice thereof to our Secretary. In order to be timely, a shareholder's notice must be delivered to or mailed and received at our principal executive offices not less than 60 days prior to the meeting. In the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder must be received not later than the close of business on the tenth day following the day on which notice of the date of the meeting was mailed or public disclosure was made. The notice must contain specified information about the proposed business and the shareholder making the proposal. These procedures apply to any matter other than nomination of directors that a shareholder wishes to raise at the 2015 annual meeting, including those matters raised pursuant to 17 C.F.R. §240.14a-8 of the rules and regulations of the SEC.
 
Shareholders who wish to nominate a candidate for election as a director without the recommendation of the Nominating and Governance Committee must provide timely written notice thereof to our Secretary. In order to be timely, a shareholder's notice must be delivered to or mailed and received by dates explained in the preceding paragraph with respect to shareholder proposals. In addition, the notice must contain additional information concerning the shareholder, the nominee and any "Shareholder Associated Person," the nominee's consent to the nomination, an executed questionnaire in a form signed by our directors and nominees and representatives, and an agreement establishing that there is no undisclosed understanding with respect to the nominee's conduct as a director.
 
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Any shareholder proposals or nominations that do not meet the above requirements will be considered untimely, and any proxy solicited by us may confer discretionary authority to vote on such proposal or nominee. A copy of our By-Laws is available upon request. Such requests and any shareholder proposals or nominations should be sent to John G. Oblazney, Secretary, Hurco Companies, Inc., One Technology Way, P.O. Box 68180, Indianapolis, Indiana 46268, our principal executive offices.
 
INCORPORATION BY REFERENCE
 
Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act or the Exchange Act that may incorporate future filings (including this proxy statement, in whole or in part), the preceding Report of the Audit Committee and the Report of the Compensation Committee shall not be incorporated by reference in any such filings.
 
ANNUAL REPORT ON FORM 10-K
 
We have filed our Annual Report on Form 10-K for the fiscal year ended October 31, 2013, with the SEC. Shareholders may obtain a copy of the Annual Report on Form 10-K free of charge by writing to John G. Oblazney, Vice President and Chief Financial Officer, Hurco Companies, Inc., One Technology Way, P.O. Box 68180, Indianapolis, Indiana 46268. A copy of the Annual Report on Form 10-K can also be obtained at  www.hurco.com/proxymaterials  or  www.sec.gov .
 
OTHER BUSINESS
 
The Board of Directors knows of no other matters that may be presented at the annual meeting. If any other matters should properly come before the annual meeting, the persons named in the enclosed form of proxy will vote in accordance with their business judgment on such matter.
 
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