Exhibit 10.2

 

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CREDIT AGREEMENT

New York

 

December 16, 2011

 

Borrower:  Hardinge Inc.

 

a(n) o individual  x corporation  o general partnership   o limited liability
company   o

 

organized under the laws of   New York

 

having its chief executive office at One Hardinge Drive, Elmira, New
York 14902                                                           .

 

Bank:              M&T Bank, a New York banking corporation with its chief
executive office at One M&T Plaza, Buffalo, NY 14240.  Attention:  Office of
General Counsel.

 

The Bank and the Borrower agree as follows:

 

1.              DEFINITIONS.

 

a.               “Account Debtor” means any person(s) who is obligated on a
receivable.

 

b.              “Capital Expenditures” means, for any fiscal year, the aggregate
of all expenditures (whether paid in cash or accrued as liabilities, and
including expenditures for obligations under any lease with respect to which
Borrower’s obligations thereunder should, in accordance with G.A.A.P., be
capitalized and reflected as a liability on the balance sheet of Borrower) by
Borrower during such period that are required by G.A.A.P. to be included in or
reflected by the property, plant or equipment or similar fixed asset accounts on
the balance sheet of Borrower.

 

c.               “Cash Flow” means the sum of (i) net income after tax,
dividends and distributions, plus (ii) depreciation expense and amortization,
plus (iii) Interest Expense, all determined in accordance with G.A.A.P.

 

d.              “Cash Flow Coverage” means the ratio of Cash Flow to the sum of
(i) the current portion of all Long Term Debt as specified in the financial
statement dated twelve (12) months prior, plus (ii) Interest Expense, all
determined in accordance with G.A.A.P

 

e.               “Credit” means any and all credit facilities and any other
financial accommodations made by the Bank in favor of the Borrower whether now
or hereafter in existence.

 

f.                 “Current Assets” means, at any time, the aggregate amount of
all current assets, including, but not limited to, cash, cash equivalents,
marketable securities, receivables maturing within twelve (12) months from such
time, and inventory (net of LIFO Reserve), but excluding prepaid expenses and
officer, stockholder, employee and related entity advances and receivables, all
as determined in accordance with G.A.A.P.

 

g.              “Current Liabilities” means, at any time, the aggregate amount
of all liabilities and obligations which are due and payable on demand or within
twelve (12) months from such time, or should be properly reflected as
attributable to such twelve (12) month period in accordance with G.A.A.P.

 

h.              “Current Ratio” means the ratio of Current Assets to Current
Liabilities.

 

i.                  “Eligible Account” or “Eligible Accounts” shall mean an
account receivable of the Borrower (net of any credit balance, trade discount,
or unbilled amount or retention) for which each of the following statements is
accurate and complete (and the Borrower by including such account receivable in
any computation of the collateral value of the borrowing base shall be deemed to
represent and warrant to the Bank the accuracy and completeness of such
statements): (i) said account receivable is a binding and valid obligation of
the obligor thereon, in full force and effect and enforceable in accordance with
its terms; (ii) said account receivable is genuine, in all respects as appearing
on its face or as represented in the books and records of the Borrower, and all
information set forth therein is true and correct; (iii) said account receivable
is free of all default of any party thereto, counterclaims, offsets, and
defenses and from any rescission, cancellation, or avoidance, and all right
thereof, whether by operation of law or otherwise; (iv) the payment of said
account receivable is not more than sixty (60) days past the due date nor more
than ninety (90) days past the invoice date thereof; (v) said account receivable
is free of concessions or understandings with the obligor thereon of any kind
not disclosed to and approved by Bank in writing; (vi) said account receivable
is, and at all times will be, free and clear of all liens except in favor of the
Bank; (vii) said account receivable is derived from sales made or services
rendered to the obligor in the ordinary course of business; (viii) the obligor
on said account receivable (a) is located within the United States, the District
of Columbia or Canada or are foreign receivables that are covered by a letter of
credit or appropriate credit insurance; (b) is not the subject of any bankruptcy
or insolvency proceeding nor has a trustee or receiver been appointed for all or
a substantial part of its property, nor has said obligor made an assignment for
the benefit of creditors, admitted its inability to pay its debts as they mature
or suspended its business; (c) is not affiliated, directly or indirectly, with
the Borrower as a Subsidiary or other Affiliate, employee or otherwise; and
(d) is not a state or federal governmental department, commission, board, bureau
or agency; (ix) said account receivable did not arise from sales to an obligor
as to whom twenty-five percent

 

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(25%) or more of the total accounts receivable owing by such obligor to the
Borrower are more than ninety (90) days past due the invoice date thereof;
(x) said account receivable arises from sales in excess of the amount of any
account payable owed by the Borrower to the obligor unless said obligor has
entered into a written agreement with the Borrower to waive its right of offset
against said receivable; and (xi) said account receivable is otherwise
satisfactory to the Bank, in its reasonable judgment.

 

j.                  “Eligible Inventory” shall mean inventory that consists of
inventory that is reasonably acceptable as determined in the sole discretion of
the Bank, valued at the lower of cost or market in accordance with GAAP on a
first in first out basis.  Inventory, machinery, and equipment advance rates are
subject to change based on the findings of any appraisals, field audits or other
material information that would cause them to be unreasonable or ineligible in
the Bank’s reasonable discretion.  Advances against Eligible Inventory shall not
exceed 50% of gross availability.  Advances to be made on machinery and
equipment are to be advanced at 60% of the forced liquidation thereof.  For the
purposes of this provision, Eligible Inventory shall be those of Hardinge Inc.
only.  Eligible Inventory shall be determined using the following formulas
against the gross balance in each category: (a) raw material advance rate shall
be 13.4%; (b) work in progress advance rate shall be 26.7%; (c) finished goods
advance rate shall be 40.8%; (d) in-transit and other inventory advance rate
shall be 42.5%.

 

k.               “G.A.A.P.” means, with respect to any date of determination,
generally accepted accounting principles as used by the Financial Accounting
Standards Board and/or the American Institute of Certified Public Accountants
consistently applied and maintained throughout the periods indicated.

 

l.                  “Interest Expense” means all finance charges reflected on
the income statement as interest expense for all obligations of Borrower to any
person, including, but not limited to, Bank, as shown on the balance sheet in
accordance with G.A.A.P.

 

m.            “Long Term Debt” means all obligations of Borrower to any person,
including, but not limited to, the Obligations, payable more than twelve (12)
months from the date of their creation, which in accordance with G.A.A.P. are
shown on the balance sheet as a liability (excluding reserves for deferred
income taxes) for the period then ended.

 

n.              “Obligations” means any and all indebtedness or other
obligations of the Borrower to the Bank in any capacity, now existing or
hereafter incurred, however created or evidenced, regardless of kind, class or
form, whether direct, indirect, absolute or contingent (including obligations
pursuant to any guaranty, endorsement, other assurance of payment or otherwise),
whether joint or several, whether from time to time reduced and thereafter
increased, or entirely extinguished and thereafter reincurred, together with all
extensions, renewals and replacements thereof, and all interest, fees, charges,
costs or expenses which accrue on or in connection with the foregoing, including
any indebtedness or obligations (i) not yet outstanding but contracted for, or
with regard to which any other commitment by the Bank exists; (ii) arising prior
to, during or after any pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in such
proceeding; (iii) owed by the Borrower to others and which the Bank obtained, or
may obtain, by assignment or otherwise; and (iv) payable under this Agreement.

 

o.              “Quick Ratio” means the ratio of Current Assets less inventory
(net of LIFO Reserve), to Current Liabilities.

 

p.              “Subordinated Debt” means all indebtedness of the Borrower which
has been formally subordinated to payment and collection of the Obligations.

 

q.              “Subsidiary” means any corporation or other business entity of
which at least fifty percent (50%) of the voting stock or other ownership
interest is owned by the Borrower directly or indirectly through one or more
Subsidiaries.  If the Borrower has no Subsidiaries, the provisions of this
Agreement relating to the Subsidiaries shall be disregarded, without affecting
the applicability of such provisions to the Borrower alone.

 

r.                 “Tangible Net Worth” means the aggregate assets of Borrower
excluding all intangible assets, including, but not limited to, goodwill,
licenses, trademarks, patents, copyrights, organization costs, appraisal
surplus, officer, stockholder, related entity and employee advances or
receivables, mineral rights and the like, less liabilities, plus Subordinated
Debt, all determined in accordance with G.A.A.P. (except to the extent that
under G.A.A.P. “tangible net worth” excludes leasehold improvements which are
included in “Tangible Net Worth” as defined herein).

 

s.               “Total Liabilities” means the aggregate amount of all assets of
the Borrower less the sum of shareholder equity and Subordinated Debt (if any),
as shown on the balance sheet in accordance with G.A.A.P.

 

t.                 “Transaction Documents” means this Agreement and all
documents, instruments or other agreements by the Borrower in favor of the Bank
in connection (directly or indirectly) with the Obligations, whether now or
hereafter in existence, including promissory notes, security agreements,
guaranties and letter of credit reimbursement agreements.

 

u.              “Working Capital” means that amount which is equal to the excess
of Current Assets over Current Liabilities.

 

2.              REPRESENTATIONS AND WARRANTIES.  The Borrower makes the
following representations and warranties and any “Additional Representations and
Warranties” on the schedule attached hereto and made part hereof (the
“Schedule”), all of which shall be deemed to be continuing representations and
warranties as long as this Agreement is in effect:

 

a.               Good Standing; Authority.  The Borrower and each Subsidiary (if
either is not an individual) is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was formed.  The
Borrower and each Subsidiary is duly authorized to do business in each
jurisdiction in which failure to be so qualified might have a material adverse
effect on its business or assets and has the power and authority to own each of
its assets and to use them in the ordinary course of business now and in the
future.

 

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b.              Compliance.  The Borrower and each Subsidiary conducts its
business and operations and the ownership of its assets in compliance with each
applicable statute, regulation and other law, including environmental laws.  All
approvals, including authorizations, permits, consents, franchises, licenses,
registrations, filings, declarations, reports and notices (the “Approvals”)
necessary for the conduct of the Borrower’s and each Subsidiary’s business and
for the Credit have been duly obtained and are in full force and effect.  The
Borrower and each Subsidiary is in compliance with the Approvals.  The Borrower
and each Subsidiary (if either is not an individual) is in compliance with its
certificate of incorporation, by-laws, partnership agreement, articles of
organization, operating agreement or other applicable organizational or
governing document as may be applicable to the Borrower or a Subsidiary
depending on its organizational structure (“Governing Documents”).  The Borrower
and each Subsidiary is in compliance with each material agreement to which it is
a party or by which it or any of its assets is bound.

 

c.               Legality.  The execution, delivery and performance by the
Borrower of the Transaction Documents, (i) are in furtherance of the Borrower’s
purposes and within its power and authority; (ii) do not (A) violate any
statute, regulation or other law or any judgment, order or award of any court,
agency or other governmental authority or of any arbitrator with respect to the
Borrower or any Subsidiary or (B) violate the Borrower’s or any Subsidiary’s
Governing Documents (if either is not an individual), constitute a default under
any agreement binding on the Borrower or any Subsidiary or result in a lien or
encumbrance on any assets of the Borrower or any Subsidiary; and (iii) if the
Borrower or any Subsidiary is not an individual, have been duly authorized by
all necessary organizational actions.

 

d.              Fiscal Year.  The fiscal year of the Borrower is the calendar
year unless the following blank states otherwise:  year ending December 31.

 

e.               Title to Assets.  The Borrower and each Subsidiary has good and
marketable title to each of its assets free of security interests, mortgages or
other liens or encumbrances, except as set forth on the Schedule titled
“Permitted Liens” or pursuant to the Bank’s prior written consent.

 

f.                 Judgments and Litigation.  Except for Weiner vs. Hardinge
Inc., et al. (further described in the Schedule attached hereto and made a part
hereof, there is no pending or threatened claim, audit, investigation, action or
other legal proceeding or judgment, order or award of any court, agency or other
governmental authority or arbitrator which involves the Borrower, its
Subsidiaries or their respective assets and might have a material adverse effect
upon the Borrower or any Subsidiary or threaten the validity of the Credit or
any Transaction Document (any, an “Action”).

 

g.              Full Disclosure.  Neither this Agreement nor any certificate,
financial statement or other writing provided to the Bank by or on behalf of the
Borrower or any Subsidiary contains any statement of fact that is incorrect or
misleading in any material respect or omits to state any fact necessary to make
any such statement not incorrect or misleading.  The Borrower has not failed to
disclose to the Bank any fact that might have a material adverse effect on the
Borrower or any Subsidiary.

 

3.             AFFIRMATIVE COVENANTS.  So long as this Agreement is in effect,
the Borrower will comply with any “Additional Affirmative Covenant” contained in
the Schedule and shall:

 

a.               Financial Statements and Other Information.  Promptly deliver
to the Bank (i) within ninety (90) days after the end of each of its first three
fiscal quarters, an unaudited consolidating and consolidated financial statement
of the Borrower and each Subsidiary as of the end of such quarter, which
financial statement shall consist of income and cash flows for the quarter, for
the corresponding quarter in the previous fiscal year and for the period from
the end of the previous fiscal year, with a consolidating and consolidated
balance sheet as of the quarter end all in such detail as the Bank may request;
(ii) within ninety (90) days after the end of each fiscal year, consolidating
and consolidated statements of the Borrower’s and each Subsidiary’s income and
cash flows and its consolidating and consolidated balance sheet as of the end of
such fiscal year, setting forth comparative figures for the preceding fiscal
year and to be (check applicable box, if no box is checked the financial
statements shall be audited):

 

x audited

 

o reviewed

 

o compiled

 

by an independent certified public accountant acceptable to the Bank; all such
statements shall be certified by the Borrower’s chief financial officer to be
correct and in accordance with the Borrower’s and each Subsidiary’s records and
to present fairly the results of the Borrower’s and each Subsidiary’s operations
and cash flows and its financial position at year end; and (iii) with each
statement of income, a certificate executed by the Borrower’s chief executive
and chief financial officers or other such person responsible for the financial
management of the Borrower (A) setting forth the computations required to
establish the Borrower’s compliance with each financial covenant, if any, during
the statement period, (B) stating that the signers of the certificate have
reviewed this Agreement and the operations and condition (financial or other) of
the Borrower and each of its Subsidiaries during the relevant period and
(C) stating that no Event of Default occurred during the period, or if an Event
of Default did occur, describing its nature, the date(s) of its occurrence or
period of existence and what action the Borrower has taken with respect
thereto.  The Borrower shall also promptly provide the Bank with copies of all
annual reports, proxy statements and similar information distributed to
shareholders, partners or members, and copies of all filings with the Securities
and Exchange Commission and the Pension Benefit Guaranty Corporation, and shall
provide, in form satisfactory to the Bank, such additional information, reports
or other information as the Bank may from time to time reasonably request
regarding the financial and business affairs of the Borrower or any Subsidiary. 
If the Borrower is an individual, the Borrower shall provide annually a personal
financial statement in form and detail acceptable to the Bank and such other
financial information as the Bank may from time to time reasonably request.  In
addition, Borrower shall provide monthly accounts receivable, accounts payable
aging reports and internally prepared financial statements within thirty (30)
days of the month’s end and at any time upon the reasonable request by the
Bank.   The Borrower shall provide to the Bank annually the Form 10-K that the
Borrower files with the Securities and Exchange Commission (the “SEC”).  The
Borrower shall provide to Bank quarterly the Form 10-Q that the

 

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Borrower files with the SEC.  Both the Form 10-K and the Form 10-Q shall be
provided to the Bank in conformity with the requirements of the SEC.

 

b.              Accounting; Tax Returns and Payment of Claims.  The Borrower and
each Subsidiary will maintain a system of accounting and reserves in accordance
with generally accepted accounting principles, has filed and will file each tax
return required of it and, except as disclosed in the Schedule, has paid and
will pay when due each tax, assessment, fee, charge, fine and penalty imposed by
any taxing authority upon it or any of its assets, income or franchises, as well
as all amounts owed to mechanics, materialmen, landlords, suppliers and the like
in the normal course of business.

 

c.               Inspections.  Promptly upon the Bank’s reasonable request the
Borrower will permit, and cause its Subsidiaries to permit, the Bank’s officers,
attorneys or other agents to inspect its and its Subsidiary’s premises, examine
and copy its records and discuss its and its Subsidiary’s business, operations
and financial or other condition with its and its Subsidiary’s responsible
officers and independent accountants.

 

d.              Operating Accounts.  Maintain all of its principal bank accounts
with the Bank.

 

e.               Changes in Management and Control.  If the Borrower is not an
individual, immediately upon any change in the identity of the Borrower’s chief
executive officers or any ownership change resulting in a change of control, the
Borrower will provide to the Bank a certificate executed by its senior
individual authorized to transact business on behalf of the Borrower, specifying
such change.

 

f.                 Notice of Defaults and Material Adverse Changes.  Immediately
upon acquiring reason to know of (i) any Event of Default, (ii) any event or
condition that might have a material adverse effect upon the Borrower or any
Subsidiary or (iii) any Action, the Borrower will provide to the Bank a
certificate executed by the Borrower’s senior individual authorized to transact
business on behalf of the Borrower, specifying the date(s) and nature of the
event or the Action and what action the Borrower or its Subsidiary has taken or
proposes to take with respect to it.

 

g.              Insurance.  Maintain its, and cause its Subsidiaries to
maintain, property in good repair and will on request provide the Bank with
evidence of insurance coverage satisfactory to the Bank, including fire and
hazard, liability, workers’ compensation and business interruption insurance and
flood hazard insurance as required.

 

h.              Further Assurances.  Promptly upon the request of the Bank, the
Borrower will execute, and cause its Subsidiaries to execute, and deliver each
writing and take each other action that the Bank deems necessary or desirable in
connection with any transaction contemplated by this Agreement.

 

4.               NEGATIVE COVENANTS.  As long as this Agreement is in effect,
the Borrower shall not violate, and shall not suffer or permit any of its
Subsidiaries to violate, any of the following covenants and any “Additional
Negative Covenant” on the Schedule.  The Borrower shall not:

 

a.               Indebtedness.  Permit any indebtedness (including direct and
contingent liabilities) not described on the Schedule titled “Permitted
Indebtedness” except for trade indebtedness or current liabilities for salary
and wages incurred in the ordinary course of business and not substantially
overdue.

 

b.              Guaranties.  Become a guarantor, a surety, or otherwise liable
for the debts or other obligations of another, whether by guaranty or suretyship
agreement, agreement to purchase indebtedness, agreement for furnishing funds
through the purchase of goods, supplies or services (or by way of stock
purchase, capital contribution, advance or loan) for the purpose of paying or
discharging indebtedness, or otherwise, except as an endorser of instruments for
the payment of money deposited to its bank account for collection in the
ordinary course of business and except as may be specified in the Schedule
titled “Permitted Guaranties”.

 

c.               Liens.  Permit any of its assets to be subject to any security
interest, mortgage or other lien or encumbrance, except as set forth on the
Schedule titled “Permitted Liens” and except for liens for property taxes not
yet due; pledges and deposits to secure obligations or performance for workers’
compensation, bids, tenders, contracts other than notes, appeal bonds or public
or statutory obligations; and materialmens’, mechanics’, carriers’ and similar
liens arising in the normal course of business.

 

d.              Investments.  As to the Borrower only, make any investment other
than in FDIC insured deposits or United States Treasury obligations of less than
one year, or in money market or mutual funds administering such investments,
except as set forth on the Schedule titled “Permitted Investments”.

 

e.               Loans.  Make any loan, advance or other extension of credit
except as disclosed on the Schedule titled “Permitted Indebtedness”, except for
endorsements of negotiable instruments deposited to the Borrower’s deposit
account for collection, trade credit in the normal course of business and
intercompany loans approved in writing by the Bank.

 

f.                 Distributions.  Intentionally Omitted.

 

g.              Changes In Form.  (i) Transfer or dispose of substantially all
of its assets, (ii) do business under or otherwise use any name other than its
true name or (iii) make any material change in its business, structure, purposes
or operations that might have a material adverse effect on the Borrower or any
of its Subsidiaries.  If the Borrower or any Subsidiary is not an individual,
(i) participate in any merger, consolidation or other absorption, unless the
Borrower or any Subsidiary is the survivor thereof, with notice of such
participation provided to Lender in a timely manner or (ii) make, terminate or
permit to be revoked any election pursuant to Subchapter S of the Internal
Revenue Code.

 

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h.              Additional Funded Debt.  The Borrower nor any Subsidiary shall
incur additional funded debt beyond the existing approved facilities without the
Bank’s prior written consent with the following exceptions: (i) a potential
$4,000,000.00 line of credit for the Borrower’s Chinese Subsidiary for the
issuance of guarantees and for working capital; (ii) a potential increase to a
maximum of $6,000,000.00 to the Taiwanese line of credit; and (iii) acquisition
financing in Switzerland for a potential facility and related equipment in an
amount not to exceed $6,500,000.00 to replace an existing leased facility.

 

5.              FINANCIAL COVENANTS.  During the term of this Agreement, the
Borrower shall not violate, and shall not suffer or permit any of its
Subsidiaries to violate, any of the following covenants (complete applicable
financial covenant) or any Additional Financial Covenants on the Schedule.  For
purposes of this Section, if the Borrower has any Subsidiaries all references to
the Borrower shall include the Borrower and all of its Subsidiaries on a
consolidated basis.  Unless a different measurement period is specified,
compliance for the financial covenants shall be required at all times.

 

o            A.                                   Borrower shall maintain
Tangible Net Worth of not less than $ N/A          , measured (select one:
quarterly or annually)   N/A                            as of each (select one:
quarter or fiscal year)        N/A                  end.

 

o            B.                                     Borrower shall maintain a
ratio of Total Liabilities to Tangible Net Worth of not greater than       N/A
      :  N/A         , measured (select one: quarterly or annually)        N/A
                       as of each (select one; quarter or fiscal year )  N/A
                       end.

 

o            C.                                     Borrower shall maintain a
Current Ratio of not less than      N/A                               :  N/A
                            , measured (select one: quarterly or annually)     
N/A                            as of each (select one: quarter or fiscal year)
       N/A                    end.

 

o            D.                                    Borrower shall maintain
Working Capital of not less than $         N/A
                                                      , measured (select one:
quarterly or annually)        N/A                        as of each (select one:
quarter or fiscal year)       N/A                    end.

 

o            E.                                      Borrower shall maintain
Cash Flow Coverage of not less than        N/A                         :      
N/A                       , measured for the previous four quarters as of each
(select one: quarter or fiscal year)       N/A                    end.

 

o            F.                                      Without the prior written
consent of Bank, Borrower shall not make any Capital Expenditures in excess of
$       N/A                          in the aggregate during any fiscal year of
Borrower.

 

o            G.                                     Borrower shall not pay or
accrue during any fiscal year compensation (including but not limited to all
salary, bonuses, consulting, management or other fees, rentals and other
payments to any person owning or managing 5%or more of the Borrower or any
relative or cohabitant of such a person, and to any entity under common control
with or controlling the Borrower) exceeding $     N/A
                             in the aggregate.

 

o            H.                                    Borrower shall not become
obligated as lessee pursuant to operating leases exceeding $       N/A
                           in the aggregate during any fiscal year.

 

6.              DEFAULT.

 

a.               Events of Default.  Any of the following events or conditions
shall constitute an “Event of Default”:  (i) failure by the Borrower to pay when
due (whether at the stated maturity, by acceleration, upon demand or otherwise)
the Obligations, or to pay any interest thereon or any fee or other amount
payable under the Transaction Documents and such failure continues unremedied
for a period of three (3) business days; (ii) default by the Borrower in the
performance of any obligation, term or condition of this Agreement, the other
Transaction Documents or any other agreement with the Bank or any of its
affiliates or subsidiaries (collectively, “Affiliates”); (iii) failure by the
Borrower to pay when due (whether at the stated maturity, by acceleration, upon
demand or otherwise) any material indebtedness or obligation owing to any third
party or any Affiliate, the occurrence of any event which results in
acceleration of payment of any such indebtedness or obligation or the failure to
perform any agreement with any third party or any Affiliate; (iv) the Borrower
is dissolved, becomes insolvent, generally fails to pay or admits in writing its
inability generally to pay its debts as they become due; (v) the Borrower makes
a general assignment, arrangement or composition agreement with or for the
benefit of its creditors or makes, or sends notice of any intended, bulk sale;
the sale, assignment, transfer or delivery of all or substantially all of the
assets of the Borrower to a third party; or the cessation by the Borrower as a
going business concern; (vi) the Borrower files a petition in bankruptcy or
institutes any action under federal or state law for the relief of debtors or
seeks or consents to the appointment of an administrator, receiver, custodian or
similar official for the wind up of its business (or has such a petition or
action filed against it and such petition action or appointment is not dismissed
or stayed within sixty (60) days); (vii) the reorganization, merger,
consolidation or dissolution of the Borrower (or the making of any agreement
therefor); (viii) the death or judicial declaration of incompetency of the
Borrower, if an individual; (ix) the entry of one or more judgments of any
court, other governmental authority or arbitrator against the Borrower in an
aggregate amount of $500,000.00 over and above any insurance coverage which has
been determined by the insurance carrier to be applicable to the claim
underlying the judgment, and any such judgments remain unbonded, unstayed or
undismissed for a period of thirty (30) consecutive days; (x) falsity, material
omission or inaccuracy of facts submitted to the Bank or any Affiliate (whether
in a financial statement or otherwise); (xi) an adverse change in the Borrower,
its business, assets, operations, affairs or condition (financial or otherwise)
from the status shown on any financial statement or other document submitted to
the Bank or any Affiliate, and which change the Bank reasonably determines will
have a material adverse affect on (a)  the Borrower, its business, assets,
operations or condition (financial or otherwise), or (b) the ability of the
Borrower to pay or perform the Obligations; (xii) any pension plan of the
Borrower fails to comply with applicable law or has vested unfunded liabilities
that, in the opinion of the Bank, might have a material adverse effect on the
Borrower’s ability to repay its debts; (xiii) any indication or evidence
received by the Bank that the Borrower may have directly or indirectly been
engaged in any type of activity which, in the Bank’s reasonable judgment, might
result in the forfeiture or any property of the Borrower to any governmental

 

5

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authority; or (xiv) the occurrence of any event described in
Section 6(a)(i) through and including 6(a)(xiii) with respect to any material
Subsidiary or to any endorser, guarantor or any other party liable for, or whose
assets or any interest therein secures, payment of any of the Obligations.

 

b.              Rights and Remedies Upon Default.  Upon the occurrence of any
Event of Default, the Bank without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law) to or upon the Borrower, any Subsidiary or any other person
(all and each of which demands, presentments, protests, advertisements and
notices are hereby waived), may exercise all rights and remedies under the
Borrower’s or its Subsidiaries’ agreements with the Bank or its Affiliates,
applicable law, in equity or otherwise and may declare all or any part of any
Obligations not payable on demand to be immediately due and payable without
demand or notice of any kind and terminate any obligation it may have to grant
any additional loan, credit or other financial accommodation to the Borrower or
any Subsidiary.  All or any part of any Obligations whether or not payable on
demand, shall be immediately due and payable automatically upon the occurrence
of an Event of Default in Section 6(a)(vi) above.  The provisions hereof are not
intended in any way to affect any rights of the Bank with respect to any
Obligations which may now or hereafter be payable on demand.

 

7.              EXPENSES.  The Borrower shall pay to the Bank on demand all
reasonable costs and expenses (including all fees and disbursements of counsel
retained for advice, suit, appeal or other proceedings or purpose and of any
experts or agents it may retain), which the Bank may incur in connection with
(i) the administration of the Obligations, including any administrative fees the
Bank may impose for the preparation of discharges, releases or assignments to
third-parties; (ii) the enforcement and collection of any Obligations or any
guaranty thereof; (iii) the exercise, performance, enforcement or protection of
any of the rights of the Bank hereunder; or (iv) the failure of the Borrower or
any Subsidiary to perform or observe any provisions hereof.  After such demand
for payment of any cost, expense or fee under this Section or elsewhere under
this Agreement, the Borrower shall pay interest at the highest default rate
specified in any instrument evidencing any of the Obligations from the date
payment is demanded by the Bank to the date reimbursed by the Borrower.  All
such costs, expenses or fees under this Agreement shall be added to the
Obligations.

 

8.              TERMINATION.  This Agreement shall remain in full force and
effect until (i) all Obligations outstanding, or contracted or committed for
(whether or not outstanding), shall be finally and irrevocably paid in full and
(ii) all Transaction Documents have been terminated by the Bank.

 

9.               RIGHT OF SETOFF.  If an Event of Default occurs, the Bank shall
have the right to set off against the amounts owing under this Agreement and the
other Transaction Documents any property held in a deposit or other account or
otherwise with the Bank or its Affiliates or otherwise owing by the Bank or its
Affiliates in any capacity to the Borrower, its Subsidiary or any guarantor of,
or endorser of any of the Transaction Documents evidencing, the Obligations. 
Such setoff shall be deemed to have been exercised immediately at the time the
Bank or such Affiliate elect to do so.

 

10.         MISCELLANEOUS.

 

a.               Notices.  Any demand or notice hereunder or under any
applicable law pertaining hereto shall be in writing and duly given if delivered
to Borrower (at its address on the Bank’s records) or to the Bank (at the
address on page one and separately to the Bank officer responsible for
Borrower’s relationship with the Bank).  Such notice or demand shall be deemed
sufficiently given for all purposes when delivered (i) by personal delivery and
shall be deemed effective when delivered, or (ii) by mail or courier and shall
be deemed effective three (3) business days after deposit in an official
depository maintained by the United States Post Office for the collection of
mail or one (1) business day after delivery to a nationally recognized overnight
courier service (e.g., Federal Express).  Notice by e-mail is not valid notice
under this or any other agreement between Borrower and the Bank.

 

b.              Generally Accepted Accounting Principles.  Any financial
calculation to be made, all financial statements and other financial information
to be provided, and all books and records, system of accounting and reserves to
be kept in connection with the provisions of this Agreement, shall be in
accordance with generally accepted accounting principles consistently applied
during each interval and from interval to interval; provided, however, that in
the event changes in generally accepted accounting principles shall be mandated
by the Financial Accounting Standards Board or any similar accounting body of
comparable standing, or should be recommended by Borrower’s certified public
accountants, to the extent such changes would affect any financial calculations
to be made in connection herewith, such changes shall be implemented in making
such calculations only from and after such date as Borrower and the Bank shall
have amended this Agreement to the extent necessary to reflect such changes in
the financial and other covenants to which such calculations relate.

 

c.               Indemnification.  If after receipt of any payment of all, or
any part of, the Obligations, the Bank is, for any reason, compelled to
surrender such payment to any person or entity because such payment is
determined to be void or voidable as a preference, an impermissible setoff, or a
diversion of trust funds, or for any other reason other than the gross
negligence or willful misconduct of the Bank, the Transaction Documents shall
continue in full force and the Borrower shall be liable, and shall indemnify and
hold the Bank harmless for, the amount of such payment surrendered.  The
provisions of this Section shall be and remain effective notwithstanding any
contrary action which may have been taken by the Bank in reliance upon such
payment, and any such contrary action so taken shall be without prejudice to the
Bank’s rights under the Transaction Documents and shall be deemed to have been
conditioned upon such payment having become final and irrevocable.  The
provisions of this Section shall survive the termination of this Agreement and
the Transaction Documents.

 

d.              Further Assurances.  From time to time, the Borrower shall take,
and cause its Subsidiaries to take, such action and execute and deliver to the
Bank such additional documents, instruments, certificates, and agreements as the
Bank may reasonably request to effectuate the purposes of the Transaction
Documents.

 

e.               Cumulative Nature and Non-Exclusive Exercise of Rights and
Remedies.  All rights and remedies of the Bank pursuant to this Agreement and
the Transaction Documents shall be cumulative, and no such right or remedy shall
be exclusive of any other such right or remedy.  In the event of any
unreconcilable inconsistencies, this Agreement shall control.  No single or
partial exercise by the Bank of any right or remedy

 

6

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pursuant to this Agreement or otherwise shall preclude any other or further
exercise thereof, or any exercise of any other such right or remedy, by the
Bank.

 

f.                 Governing Law; Jurisdiction.  This Agreement has been
delivered to and accepted by the Bank and will be deemed to be made in the State
of New York.  Except as otherwise provided under federal law, this Agreement
will be interpreted in accordance with the laws of the State of New York
excluding its conflict of laws rules. BORROWER HEREBY IRREVOCABLY CONSENTS TO
THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE STATE OF NEW
YORK IN A COUNTY OR JUDICIAL DISTRICT WHERE THE BANK MAINTAINS A BRANCH AND
CONSENTS THAT THE BANK MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT
BORROWER’S ADDRESS SET FORTH ABOVE FOR PROVIDING NOTICE OR DEMAND; PROVIDED THAT
NOTHING CONTAINED IN THIS AGREEMENT WILL PREVENT THE BANK FROM BRINGING ANY
ACTION, ENFORCING ANY AWARD OR JUDGMENT OR EXERCISING ANY RIGHTS AGAINST
BORROWER INDIVIDUALLY, AGAINST ANY SECURITY OR AGAINST ANY PROPERTY OF BORROWER
WITHIN ANY OTHER COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION.  
Borrower acknowledges and agrees that the venue provided above is the most
convenient forum for both the Bank and Borrower.  Borrower waives any objection
to venue and any objection based on a more convenient forum in any action
instituted under this Agreement.

 

g.              Joint and Several; Successors and Assigns.  If there is more
than one Borrower, each of them shall be jointly and severally liable for all
amounts, which become due, and the performance of all obligations under this
Agreement, and the term “the Borrower” shall include each as well as all of
them.  This Agreement shall be binding upon the Borrower and upon its heirs and
legal representatives, its successors and assignees, and shall inure to the
benefit of, and be enforceable by, the Bank, its successors and assignees and
each direct or indirect assignee or other transferee of any of the Obligations;
provided, however, that this Agreement may not be assigned by the Borrower
without the prior written consent of the Bank.

 

h.              Waivers; Changes in Writing.  No failure or delay of the Bank in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.  The Borrower expressly disclaims any reliance on any course of
dealing or usage of trade or oral representation of the Bank (including
representations to make loans to the Borrower) and agrees that none of the
foregoing shall operate as a waiver of any right or remedy of the Bank.  No
notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other circumstances.  No
waiver of any provision of this Agreement or consent to any departure by the
Borrower therefrom shall in any event be effective unless made specifically in
writing by the Bank and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given.  No modification to
any provision of this Agreement shall be effective unless made in writing in an
agreement signed by the Borrower and the Bank.

 

i.                  Interpretation.  Unless the context otherwise clearly
requires, references to plural includes the singular and references to the
singular include the plural; references to “individual” shall mean a natural
person and shall include a natural person doing business under an assumed name
(e.g., a “DBA”); the word “or” has the inclusive meaning represented by the
phrase “and/or”; the word “including”, “includes” and “include” shall be deemed
to be followed by the words “without limitation”; and captions or section
headings are solely for convenience and not part of the substance of this
Agreement.  Any representation, warranty, covenant or agreement herein shall
survive execution and delivery of this Agreement and shall be deemed
continuous.  Each provision of this Agreement shall be interpreted as consistent
with existing law and shall be deemed amended to the extent necessary to comply
with any conflicting law.  If any provision nevertheless is held invalid, the
other provisions shall remain in effect.  The Borrower agrees that in any legal
proceeding, a photocopy of this Agreement kept in the Bank’s course of business
may be admitted into evidence as an original.

 

j.                  Waiver of Jury Trial.  THE BORROWER AND THE BANK HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY THE
BORROWER AND THE BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN
EQUITY, IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTIONS RELATED HERETO. 
THE BORROWER REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF THE BANK
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WILL NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THIS JURY TRIAL WAIVER.  THE BORROWER ACKNOWLEDGES
THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE PROVISIONS OF THIS SECTION.

 

k.                                       Counterparts.  This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
and all of which shall constitute but one and the same instrument, and shall be
binding upon each of the undersigned as fully and completely as if all had
signed the same instrument.

 

7

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Acknowledgment.  Borrower acknowledges that it has read and understands all the
provisions of this Agreement, including the Governing Law, Jurisdiction and
Waiver of Jury Trial, and has been advised by counsel as necessary or
appropriate.

 

 

M&T BANK

 

 

 

By

/S/ Susan A. Burtis

 

 

 

 

 

Name:

Susan A. Burtis

 

 

 

 

 

 

Title:

Vice President

 

 

 

 

 

 

 

HARDINGE INC.

 

 

 

 

 

 

 

By

/S/ Edward J. Gaio

 

 

 

 

 

 

Name:

Edward J. Gaio

 

 

 

 

 

 

Title:

Vice President and CFO

 

ACKNOWLEDGMENT

 

STATE OF NEW YORK

)

 

 

 

: SS.

 

 

COUNTY OF BROOME

)

 

On the 16th day of December in the year 2011, before me, the undersigned, a
Notary Public in and for said State, personally appeared SUSAN A. BURTIS,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.

 

 

/S/ Patricia A. Bugonian House

 

Patricia A. Bugonian House

 

Notary Public

 

ACKNOWLEDGMENT

 

 

STATE OF NEW YORK

)

 

 

 

: SS.

 

 

COUNTY OF CHEMUNG

)

 

On the 16th day of December, in the year 2011, before me, the undersigned, a
Notary Public in and for said State, personally appeared EDWARD J. GAIO,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.

 

 

/S/ Nancy L. Curren

 

Nancy L. Curren

 

Notary Public

 

BANK USE ONLY

 

Authorization Confirmed:

 

Signature

 

8

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SCHEDULE

 

Additional Representations and Warranties (§2)

 

1.               Judgments and Litigation.   None

 

Additional Affirmative Covenants (§3)

 

1.               Accounts.  Borrower shall maintain a lock box with the Bank
into which Borrower shall cause to be deposited monies payable to it by account
debtors.  The Borrower shall maintain an interest bearing account for excess
cash balances.

 

2.               The existing outstanding letters of credit of the Borrower and
its Subsidiaries shall be blocked against the Loan and advances thereunder.

 

3.               Borrower shall provide to the Bank monthly, Borrowing Base
Certificates in form and content satisfactory to the Bank.  “Borrowing Base
Certificates” shall mean a report of the Borrower, in the form required by the
Bank, certified as true and correct by a responsible officer of the Borrower.

 

Permitted Indebtedness (§4(a)):

 

1.               the Obligations;

 

2.               Guarantees by the Borrower of Indebtedness of any Subsidiary
and by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary;

 

3.               Indebtedness that is the subject of that certain Amended and
Restated Intercreditor Agreement between Bank and Keybank International
Association dated November 29, 2011 in the amount of $1,500,000.00, and any
extension, renewal, or replacement thereof.

 

4.               Indebtedness of the Borrower to Chemung Canal Trust Company in
the amount of up to $3,000,000.00, and any extension, renewal, or replacement
thereof.

 

5.               Indebtedness of Hardinge Machine Tool, B.V., Taiwan Branch or
any other Subsidiary of the Borrower to Bank of America, N.A. in an amount of up
to $4,000,000.00 through February 29, 2012 and thereafter up to $3,000,000.00,
and any extension, renewal, or replacement thereof.

 

Permitted Guaranties (§4(b)):

 

Guaranties by the Borrower of indebtedness of any Subsidiary and by any
Subsidiary of indebtedness of the Borrower or any other Subsidiary, and any
other Guaranties constituting indebtedness permitted by Section 4(a) hereof.

 

Permitted Liens (§4(c)) means and includes:

 

1.               pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations;

 

2.               deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business;

 

3.               judgment liens in respect of judgments that do not constitute
an Event of Default under Section 6(a);

 

4.               easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the affected property or interfere with

 

9

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the ordinary conduct of business of the Borrower or any Subsidiary; and

 

5.               existing liens set forth on Schedule 4(c) hereto.

 

Permitted Investments (§4(d)) means:

 

1.               direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;

 

2.               investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition, a
short-term commercial paper rating of at least A-1 or the equivalent thereof by
S&P or at least P-1 or the equivalent thereof by Moody’s, or being guaranteed by
any industrial company with a long term unsecured debt rating of at least A or
A2, or the equivalent of each thereof, from S&P or Moody’s, as the case may be;

 

3.               investments in certificates of deposit, banker’s acceptances
and time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, any domestic office of any commercial bank organized under the
laws of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000;

 

4.               fully collateralized repurchase agreements with a term of not
more than thirty (30) days for securities described in clause #1 above and
entered into with a financial institution satisfying the criteria described in
clause #3 above;

 

5.               money market funds that (i) comply with the criteria set forth
in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act
of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio
assets of at least $5,000,000,000;

 

Permitted Loans (§4(e)):

 

Investments, capital contributions, loans or advances made by the Borrower in or
to any Subsidiary and made by any Subsidiary to the Borrower in excess of an
aggregate amount of $10,000,000.00 outstanding at any one time.  Existing
investments and capital contributions by Borrower in any Subsidiary are
permitted and are not considered Loans for purposes of the limitations of this
Section. In addition, the Parties hereto acknowledge that the Borrower is in the
process of contributing its shares of Hardinge Taiwan Precision Machinery
Limited to Hardinge Holdings, B.V. in exchange for the shares of Hardinge
Holdings, B.V. after which time Borrower will then contribute its shares in
Hardinge Holdings, B.V. to Hardinge Holdings, GmbH in exchange for additional
capital in Hardinge Holdings, GmbH.  This transfer and subsequent additional
capital shall not be considered Loans for the purposes of the limitations of
this Section.

 

Additional Miscellaneous Covenants (§11)

 

1.               Advance Formula.  Advances made pursuant to this revolving
credit facility shall be limited to a maximum of the line amount or the sum of
80% of Eligible Accounts and Eligible Inventory.

 

2.               Unused Portion Fee.  The Bank will assess an unused portion fee
of 3/8% quarterly on the daily unused portion of the commitment to be assessed
in arrears at the end of each quarter.  The Bank will bill the Borrower based on
this calculation at the end of each quarter during the Loan.  The Borrower shall
pay the Bank such unused portion fee promptly upon receipt of invoice for same.

 

10

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SCHEDULE 4(C)

 

EXISTING LIENS

 

(A)

 

Debtor

 

Secured Party

 

Jurisdiction

 

Filing Information

 

Collateral

Hardinge Machine Tools Limited

 

Hormann (UK) Limited

 

UC Companies House; England and Wales

 

Registered 02/09/2005

 

The deposit account and all money from time to time placed in the deposit
account in accordance with a certain rent deposit deed

Hardinge Machine Tools Limited

 

HMT Trustees Limited, as Trustee of the Hardinge Machine Tools Limited Staff

 

UK Companies House; England and Wales

 

To be registered following completion

 

Debenture granting security over all assets to secure performance of obligations
under deficit recovery plan in connection with £0.9 million deficit of the
Hardinge Machine Tools Limited Staff Pensions Scheme

L. Kellenberger & Co. AG (as successor by merger to HTT Hauser Tripet Tschudin,
Ag)

 

UBS AG

 

Switzerland

 

10/30/2009

 

Mortgage on real property in Biel, Switzerland

Hardinge Taiwan Precision Machinery Limited

 

Mega International Commercial Bank

 

Taiwan

 

06/2006

 

Mortgage on real property in Taiwan

L. Kellenberger & Co. AG

 

Credit Suisse

 

Switzerland

 

8/20/2009

 

Mortgage on real property in St. Gallen, Switzerland

Hardinge, Inc.

 

KeyBank National Association

 

New York

 

New York SOS — Filing No. 201112018402949

 

All personal property

Hardinge Precision Machinery (Jiaxing) Co., Ltd

 

China Construction Bank, Jiaxing Branch

 

China

 

N/A

 

Mortgage on land use right and construction in process

 

(B)                                A lien in favor of Bank of America, N.A. on
all personal property assets of Borrower, securing Borrower’s guaranty of the
indebtedness of Hardinge Machine Tool, B.V., Taiwan Branch or any other
Subsidiary of the Borrower to Bank of America, N.A. as set forth in the Schedule
to the Credit Agreement, to the extent set forth in an intercreditor agreement
between Bank and Bank of America, N.A.

 

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