HARDINGE INC (Form: 10-Q, Received: 08/08/2013 16:04:14)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-15760

Hardinge Inc.

(Exact name of Registrant as specified in its charter)

New York		16-0470200
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

Hardinge Inc.

One Hardinge Drive

Elmira, NY 14902

(Address of principal executive offices) (Zip code)

(607) 734-2281

(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted to its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12b-2 in the Exchange Act.

Large accelerated filer o		Accelerated filer x
Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined by Exchange Act Rule 12b-2). Yes o No x

As of June 30, 2013 there were 11,758,543 shares of Common Stock of the registrant outstanding.

Table of Contents

HARDINGE INC. AND SUBSIDIARIES

TABLE OF CONTENTS

			Page
Part I	Financial Information

	Item 1.	Financial Statements

		Consolidated Balance Sheets at June 30, 2013 and December 31, 2012	3

		Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012	4

		Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2013 and 2012	5

		Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012	6

		Notes to Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

	Item 4.	Controls and Procedures	32

Part II	Other Information

	Item 1.	Legal Proceedings	33

	Item 1A.	Risk Factors	33

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

	Item 3.	Defaults upon Senior Securities	33

	Item 4.	Mine Safety Disclosures	33

	Item 5.	Other Information	33

	Item 6.	Exhibits	34

	Signatures		36

	Certifications		37

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HARDINGE INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In Thousands Except Share and Per Share Data)

	June 30,			December 31,
	2013			2012
	(Unaudited)
Assets
Cash and cash equivalents	$	18,716		$	26,855
Restricted cash	2,845			2,634
Accounts receivable, net	55,233			51,871
Inventories, net	130,182			128,000
Other current assets	12,953			12,580
Total current assets	219,929			221,940

Property, plant and equipment, net	74,064			71,035
Goodwill	14,506			8,497
Other intangible assets, net	35,446			21,824
Other non-current assets	2,744			2,358
Total non-current assets	126,760			103,714
Total assets	$	346,689		$	325,654

Liabilities and shareholders’ equity
Accounts payable	$	27,248		$	27,779
Notes payable to bank	17,060			11,500
Accrued expenses	26,051			29,307
Customer deposits	19,592			15,720
Accrued income taxes	650			3,952
Deferred income taxes	3,217			2,980
Current portion of long-term debt	4,835			2,873
Total current liabilities	98,653			94,111

Long-term debt	25,071			5,616
Pension and postretirement liabilities	48,397			50,312
Deferred income taxes	3,617			3,431
Other liabilities	10,959			10,977
Total non-current liabilities	88,044			70,336

Common stock ($0.01 par value, 12,472,992 issued)	125			125
Additional paid-in capital	114,125			114,072
Retained earnings	83,791			81,961
Treasury shares	(9,192		)	(9,442		)
Accumulated other comprehensive loss	(28,857		)	(25,509		)
Total shareholders’ equity	159,992			161,207
Total liabilities and shareholders’ equity	$	346,689		$	325,654

See accompanying notes to the consolidated financial statements

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HARDINGE INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In Thousands Except Per Share Data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(unaudited)						(unaudited)

Net sales	$	80,814		$	86,320		$	148,033		$	160,970
Cost of sales	57,463			62,348			105,709			115,809
Gross profit	23,351			23,972			42,324			45,161

Selling, general and administrative expenses	20,258			19,047			38,503			36,646
Loss (gain) on sale of assets	31			(12		)	(11		)	(14		)
Other expense	136			99			454			303
Income from operations	2,926			4,838			3,378			8,226

Interest expense	311			269			516			409
Interest income	(14		)	(27		)	(29		)	(51		)
Income before income taxes	2,629			4,596			2,891			7,868

Income tax expense	364			956			586			1,785
Net income	$	2,265		$	3,640		$	2,305		$	6,083

Basic and diluted earnings per share:	$	0.19		$	0.31		$	0.20		$	0.52

Cash dividends declared per share:	$	0.02		$	0.02		$	0.04		$	0.04

See accompanying notes to the consolidated financial statements

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HARDINGE INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

	Three Months Ended June 30,					Six Months Ended June 30,
	2013		2012			2013			2012
	(unaudited)					(unaudited)

Net income	$	2,265	$	3,640		$	2,305		$	6,083
Other comprehensive income (loss), net of tax	1,001		(4,231		)	(3,348		)	577
Comprehensive income (loss), net of tax	$	3,266	$	(591	)	$	(1,043	)	$	6,660

See accompanying notes to the consolidated financial statements

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HARDINGE INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In Thousands)

	Six Months Ended
	June 30,
	2013			2012
	(Unaudited)

Operating activities
Net income	$	2,305		$	6,083
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	4,350			3,658
Debt issuance amortization	34			32
(Benefit) provision for deferred income taxes	(20		)	1,001
Gain on sale of assets	(11		)	(14		)
Unrealized intercompany foreign currency transaction loss	67			290
Changes in operating assets and liabilities:
Accounts receivable	1,263			11,685
Inventories	311			(10,586		)
Other assets	(49		)	(540		)
Accounts payable	(1,174		)	(2,906		)
Customer deposits	3,901			(2,399		)
Accrued expenses	(8,771		)	(5,732		)
Accrued postretirement benefits	(197		)	(258		)
Net cash provided by operating activities	2,009			314

Investing activities
Acquisition of business, net of cash acquired	(34,250		)	—
Capital expenditures	(1,627		)	(5,364		)
Proceeds on sale of assets	102			22
Net cash used in investing activities	(35,775		)	(5,342		)

Financing activities
Proceeds from short-term notes payable to bank	32,458			35,584
Repayments of short-term notes payable to bank	(26,674		)	(35,726		)
Proceeds from long-term debt	23,000			475
Repayments of long-term debt	(1,432		)	(465		)
Dividends paid	(467		)	(465		)
Other financing activities	(667		)	9
Net cash provided by (used in) financing activities	26,218			(588		)

Effect of exchange rate changes on cash	(591		)	29
Net decrease in cash	(8,139		)	(5,587		)

Cash and cash equivalents at beginning of period	26,855			21,736

Cash and cash equivalents at end of period	$	18,716		$	16,149

See accompanying notes to the consolidated financial statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2013

NOTE 1. BASIS OF PRESENTATION

In these notes, the terms “Hardinge,” “Company,” “we,” “us,” or “our” mean Hardinge Inc. and its predecessors together with its subsidiaries.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2012. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the timing and amount of assets, liabilities, equity, revenue, and expenses reported and disclosed. Actual amounts could differ from our estimates. In our opinion, we made all adjustments that are necessary for a fair presentation, and those adjustments are of a normal recurring nature unless otherwise noted. Due to differing business conditions and some seasonality, our operating results for the three and six months ended June 30, 2013 are not necessarily indicative of the results that may be expected in subsequent quarters or for the full year ended December 31, 2013.

NOTE 2. ACQUISITION

On May 9, 2013, Forkardt Inc. (“Forkardt”, formerly Cherry Acquisition Corporation) and Hardinge Holdings GmbH (“Holdings GmbH”), direct wholly owned subsidiaries of the Company, and Hardinge GmbH, an indirect wholly owned subsidiary of the Company, acquired the Forkardt operations from Illinois Tool Works for $34.5 million, net of cash acquired. The acquisition was funded through $24.3 million in bank debt and $10.0 million in cash. Forkardt is a leading global provider of high-precision, specialty workholding devices with headquarters in Traverse City, Michigan. Forkardt has operations in the U.S., France, Germany, and Switzerland. The results of operations of Forkardt have been included in the consolidated financial statements from the date of acquisition. During the three and six months ended June 30, 2013, we recorded $6.5 million in sales and $0.1million in net loss related to Forkardt. We expensed acquisition related costs of $1.0 million and $1.6 million for the three months and six months ended June 30, 2013 and reported them in selling, general and administration expenses in the Consolidated Statements of Operations.

The purchase price has been preliminarily allocated to the assets acquired and the liabilities assumed based on their fair values. The identifiable intangible assets acquired, which primarily consist of customer relationships, trade name and technical know-how, were valued using an income approach. The weighted average life of the acquired identifiable intangible assets subject to amortization was estimated at 17.3 years at the time of acquisition. The excess purchase price over the fair value of the assets acquired and the liabilities assumed was recorded as goodwill, of which $0.3 million is deductible for tax purposes. At June 30, 2013, the purchase price allocation is preliminary pending the finalization of the fair value of the net assets acquired and working capital adjustment, if any.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

The preliminary allocation of purchase price to the assets acquired and liabilities assumed is as follows:

	May 9,
	2013
	(in thousands)

Assets Acquired
Accounts receivable	5,521
Inventory	5,357
Other current assets	1,180
Property, plant and equipment	6,271
Other non-current assets	105
Trade name, customer list, and other intangible assets	14,614
Total assets acquired	33,048
Liabilities Assumed
Accounts payable and other current liabilities	3,342
Other non-current liabilities	1,211
Net assets acquired	28,495
Total estimated purchase price	34,504
Goodwill	$	6,009

Supplemental Pro Forma Information

The following table illustrates the unaudited pro forma effect on operating results as if the Forkardt acquisition had been completed as of January 1, 2012.

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(unaudited)				(unaudited)

Sales	$	85,018	$	98,108	$	162,934	$	185,053
Net income	2,973		4,213		4,162		6,755
Diluted earnings per share	$	0.25	$	0.36	$	0.35	$	0.58

For purposes of the unaudited pro forma disclosures, incremental expenses associated with fixed asset depreciation, intangible asset amortization, inventory step up in basis and interest expense on the borrowings associated with the acquisition have been reflected in the applicable periods. Additionally, expenses associated with the acquisition of Forkardt have been excluded from the three and six months ended June 30, 2013.

The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what our results of operations would have been had we completed the acquisition on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

NOTE 3. NEW FINANCING ARRANGEMENT

On May 9, 2013, the Company, Usach Technologies, Inc. (“Usach”), a direct wholly owned subsidiary of the Company, and Forkardt amended and restated the existing $25.0 million domestic revolving credit agreement (the “Amendment”). The Amendment added Usach and Forkardt as additional borrowers and extended the maturity of the credit facility from March 31, 2014 to May 1, 2018. The revolving credit facility is guaranteed by Hardinge Technology Systems Inc. (“Technology”), a direct wholly owned subsidiary and owner of the real property comprising the Company’s world headquarters in Elmira, New York, and is secured by liens on all of the U.S. assets (exclusive of real property) of the Company, Usach, Forkardt and Technology, a pledge of 65% of the Company’s investment in Holdings GmbH, and a negative pledge on the Company’s world headquarters in Elmira, New York.

Also on May 9, 2013, the Company and Holdings GmbH entered into a term loan agreement with a bank. This term loan agreement, which has a maturity date of May 9, 2018, provides for a $23.0 million senior secured term loan facility for the acquisition of Forkardt. The agreement calls for scheduled annual principal repayment in the amount of $0.8 million, $2.0 million, $3.2 million, $4.0 million, $4.0 million and $9.0 million in 2013, 2014, 2015, 2016, 2017, and 2018 respectively. The term loan is secured by the same collateral as the revolving credit facility and is guaranteed by Usach, Forkardt, and Technology.

The interest rate on the revolving credit facility and the term loan is determined from pricing grids with London Interbank Offered Rate (“Libor”) and base rate options based on the Company’s leverage ratio and is initially set at Libor plus 2.75%. The interest rate was 3.0% at June 30, 2013.

Both the revolving credit facility and term loan have financial covenants requiring a minimum Fixed Charge Coverage Ratio of not less than 1.15 to 1.00 (tested quarterly on a rolling four-quarter basis), a maximum consolidated Total Leverage Ratio of 3.0 to 1.0 (tested quarterly on a rolling four-quarter basis), and maximum annual consolidated capital expenditures of $10,000,000 along with other customary representations, affirmative and negative covenants, prepayment provisions and events of default.

NOTE 4. NET INVENTORIES

Net inventories are stated at the lower of cost (computed in accordance with the first-in, first-out method) or market. Elements of the cost include materials, labor and overhead.

Net inventories consist of the following:

	June 30,		December 31,
	2013		2012
	(in thousands)
Finished products	$	57,931	$	56,596
Work-in-process	37,713		32,468
Raw materials and purchased components	34,538		38,936
Inventories, net	$	130,182	$	128,000

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	June 30,			December 31,
	2013			2012
	(in thousands)
Land, buildings and improvements	$	83,267		$	83,032
Machinery, equipment and fixtures	77,593			73,169
Office furniture, equipment and vehicles	17,786			18,058
Construction in progress	388			325
	179,034			174,584
Accumulated depreciation	(104,970		)	(103,549		)
Property, plant and equipment, net	$	74,064		$	71,035

NOTE 6. GOODWILL AND INTANGIBLE ASSETS

A summary of goodwill amount follows:

	Gross Carrying Value		Accumulated Impairment Losses			Net
	(in thousands)

Balance at December 31, 2012	$	32,274	$	(23,777	)	$	8,497
Addition due to acquisition	6,009		—			6,009
Balance at June 30, 2013	$	38,283	$	(23,777	)	$	14,506

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

The major components of intangible assets other than goodwill are as follows:

	June 30,			December 31,
	2013			2012
	(in thousands)

Gross amortizable intangible assets:
Land rights	$	2,803		$	2,784
Patents	3,023			3,006
Technical know-how, customer list, and other	21,584			12,392
Total gross amortizable intangible assets	27,410			18,182

Accumulated amortization:
Land rights	(145		)	(116		)
Patents	(2,850		)	(2,807		)
Technical know-how, customer list, and other	(4,390		)	(3,870		)
Total accumulated amortization	(7,385		)	(6,793		)
Amortizable intangible assets, net	20,025			11,389

Intangible asset not subject to amortization:
Assets associated with Bridgeport acquisition (1)	7,271			7,595
Usach and Forkardt trade names(2)	8,150			2,840
	15,421			10,435
Intangible assets other than goodwill, net	$	35,446		$	21,824

(1) Represents the aggregate value of the trade name, trademarks and copyrights associated with the former worldwide operations of Bridgeport. We use the Bridgeport brand name on all of our machining center lines. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life. The $0.3 million decrease in the balance from 2012 was the impact of foreign currency exchange.

(2) Represents the value of the trade names associated with Usach and Forkardt which the Company acquired in 2012 and 2013, respectively. We use the Usach trade name on all of the grinding machines and grinding systems manufactured by Usach. We use the Forkardt trade name on all of the workholding products manufactured by Forkardt. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.

Amortization expense related to these amortizable intangible assets was $0.4 million and $0.7 million for the three and six months ended June 30, 2013, respectively, and $0.2 million and $0.4 million for the three and six months ended June 30, 2012, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

NOTE 7. INCOME TAXES

We continue to maintain a valuation allowance against all or a portion of our deferred tax assets in the U.S., Canada, U.K., Germany, Switzerland, and the Netherlands.

Each quarter, we update the estimate of our full year tax rate for jurisdictions not subject to valuation allowances based upon our most recent forecast of full year anticipated results and adjust the year-to-date tax expense to reflect our full year anticipated tax rate. The rate is an estimate based upon projected results for the year, estimated annual permanent differences, the statutory tax rates in the various jurisdictions in which we operate, and the non-recognition of tax benefits for entities with full valuation allowances. The overall effective tax rates were 13.8% and 20.3% for the three and six months ended June 30, 2013, respectively. The effective tax rates for the three and six months ended June 30, 2013 differ from the U.S. statutory rate primarily due to no tax benefit being recorded for certain entities in a loss position for which a full valuation allowance has been recorded, and due to the rate difference between the U.S. and non-US entities.

The tax years 2011 and 2012 remain open to examination by the U.S. federal taxing authorities. The tax years 2008 through 2012 remain open to examination by the U.S. state taxing authorities. For our other major jurisdictions (Switzerland, U.K., Taiwan, Germany, Netherlands and China); the tax years between 2006 and 2012 generally remain open to routine examination by foreign taxing authorities, depending on the jurisdiction.

The increase to the accrued liability associated with uncertain tax positions in the three and six months ended June 30, 2013 was $0.4 million. The increase is primarily attributable to the acquisition of Forkardt. At June 30, 2013 and December 31, 2012, we recorded a $2.9 million and $2.5 million liability, respectively, with respect to uncertain income tax positions, which included related interest and penalties of $1.0 million at June 30, 2013 and $0.9 million at December 31, 2012. If recognized, essentially all of the uncertain tax positions and related interest at June 30, 2013 would be recorded as a benefit to income tax expense on the Consolidated Statement of Operations. It is reasonably possible that certain of our uncertain tax positions pertaining to our foreign operations may change within the next 12 months due to audit settlements and statute of limitations expirations. We estimate the change in uncertain tax positions for these items to be between $0.1 million and $0.8 million.

NOTE 8. WARRANTIES

Warranty liabilities are reported as accrued expenses on our Consolidated Balance Sheets. A reconciliation of the changes in our product warranty accrual is as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
	(in thousands)						(in thousands)
Balance at the beginning of period	$	3,094		$	3,432		$	3,432		$	3,800
Warranties issued	707			832			1,395			1,494
Warranty settlement costs	(706		)	(481		)	(1,328		)	(1,274		)
Changes in accruals for pre-existing warranties	(183		)	(207		)	(470		)	(551		)
Other adjustments (1)	331			—			331			—
Currency translation adjustment	6			(99		)	(111		)	8
Balance at the end of period	$	3,249		$	3,477		$	3,249		$	3,477

(1) Represents the warranty liabilities assumed in connection with the Forkardt acquisition. Refer to Note 2 - Acquisition for details.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

NOTE 9. PENSION AND POST RETIREMENT PLANS

A summary of the components of net periodic pension benefit costs for the three and six months ended June 30, 2013 and 2012 is presented below.

	Pension Benefits
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
	(in thousands)						(in thousands)
Service cost	$	342		$	310		$	690		$	627
Interest cost	1,835			2,037			3,678			4,085
Expected return on plan assets	(2,352		)	(2,371		)	(4,717		)	(4,756		)
Amortization of prior service cost	(101		)	(13		)	(204		)	(27		)
Amortization of transition asset	(67		)	(67		)	(135		)	(135		)
Amortization of loss	797			602			1,601			1,213
Net periodic benefit cost	$	454		$	498		$	913		$	1,007

A summary of the components of net postretirement benefits costs for the three and six months ended June 30, 2013 and 2012 is presented below.

	Post Retirement Benefits
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
	(in thousands)						(in thousands)
Service cost	$	4		$	4		$	8		$	8
Interest cost	23			28			46			56
Amortization of prior service cost	(64		)	(88		)	(128		)	(176		)
Amortization of loss	(1		)	(2		)	(2		)	(4		)
Net periodic benefit (credit) cost	$	(38	)	$	(58	)	$	(76	)	$	(116	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

NOTE 10. FAIR VALUE AND DERIVATIVE INSTRUMENTS

Fair Value

The inputs to the valuation techniques used to measure fair value are classified into the following categories:

Level 1 — Quoted prices in active markets for identical assets and liabilities.

Level 2 — Observable inputs other than quoted prices in active markets for similar assets and liabilities.

Level 3 — Inputs for which significant valuation assumptions are unobservable in a market and therefore value is based on the best available data, some of which is internally developed and accounts for risk premiums that a market participant would require.

The following table presents the carrying amount, fair values and classification of our financial instruments measured on a recurring basis:

	June 30, 2013
	Total			Level 1		Level 2			Level 3
	(in thousands)
Cash and cash equivalents	$	18,716		$	18,716	$	—		$	—
Restricted cash	2,845			2,845		—			—
Notes payable to bank	(17,060		)	—		(17,060		)	—
Variable interest rate debt	(29,906		)	—		(29,006		)	—
Contingent purchase price payment	(7,000		)	—		—			(7,000		)
Foreign currency forward contracts, net	(403		)	—		(403		)	—

	December 31, 2012
	Total			Level 1		Level 2			Level 3
	(in thousands)
Cash and cash equivalents	$	26,855		$	26,855	$	—		$	—
Restricted cash	2,634			2,634		—			—
Notes payable to bank	(11,500		)	—		(11,500		)	—
Variable interest rate debt	(8,489		)	—		(8,489		)	—
Contingent purchase price payment	(7,484		)	—		—			(7,484		)
Foreign currency forward contracts, net	(205		)	—		(205		)	—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

The fair value of cash and cash equivalents and restricted cash are based on the fair values of identical assets in active markets. The fair value of notes payable to bank and variable interest rate debt are based on the present value of expected future cash flows. Due to the short period to maturity or the nature of the underlying liability, the fair value of notes payable to bank and variable interest rate debt approximates their respective carrying amounts. The contingent purchase price payment represents the contingent liabilities associated with the earn-out provisions from the 2012 acquisition of Usach and 2010 acquisition of Jones & Shipman. During the first quarter of 2013, the contingent purchase price payment related to the Jones & Shipman acquisition was paid. The fair value of the contingent purchase price payment is based on the present value of the estimated aggregated payment amount. The fair value of foreign currency forward contracts is measured using internal models based on observable market inputs such as spot and forward rates. Based on our continued ability to enter into forward contracts, we consider the markets for our fair value instruments to be active. As of June 30, 2013 and December 31, 2012, there were no transfers in and out of Level 1, Level 2 or Level 3.

As described in Note 2, Acquisition, the Company completed the acquisition of Forkardt in May 2013. The fair value measurements for the acquired intangible assets were calculated using discounted cash flow analysis which rely upon significant unobservable Level 3 inputs which include the following:

Unobservable inputs		Range
Discount rate		19.0% - 20.0%
Royalty rate		2.0% - 3.0%
Long term growth rate		3.0%

Derivative Instruments

We utilize foreign currency forward contracts to mitigate the impact of currency fluctuations on assets and liabilities denominated in foreign currencies as well as on forecasted transactions denominated in foreign currencies. These contracts are considered derivative instruments and are recognized as either assets or liabilities and measured at fair value. For contracts that are designated and qualify as cash flow hedges, the gain or loss on the contracts is reported as a component of other comprehensive income (“OCI”) and reclassified from accumulated other comprehensive income (“AOCI”) into “Sales” or “Other expense” line items on the Consolidated Statements of Operations when the hedged transaction affects earnings. As of June 30, 2013, we do not expect material amount of the gain or loss will be reclassified from AOCI into “Sales” or “Other expense” in the next 12 months. For contracts that are not designated as hedges, the gain and loss on the contract is recognized in current earnings as “Other expense” line item on the Consolidated Statements of Operations.

As of June 30, 2013 and December 31, 2012, the notional amounts of the derivative financial instruments not qualifying or otherwise designated as hedges were $48.2 million and $60.5 million, respectively. For the three and six months ended June 30, 2013, we recorded losses of $0.7 million and $1.3 million, respectively, related to this type of derivative financial instruments. For three months and six months ended June 30, 2012, we recorded an immaterial loss and $0.2 million gain related to this type of derivative financial instruments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

Derivative financial instruments qualifying and designated as hedges are as follows:

	June 30, 2013				December 31, 2012
	Notional Amount		Unrealized Loss		Notional Amount		Unrealized Loss
	(in thousands)
Foreign currency forwards	$	41,212	$	115	$	49,750	$	22

The following table presents the fair value on our Consolidated Balance Sheets of the foreign currency forward contracts:

	June 30,			December 31,
	2012			2012
	(in thousands)
Foreign currency forwards designated as hedges:
Other current assets	$	257		$	191
Accrued expenses	(372		)	(213		)
Foreign currency forwards not designated as hedges:
Other current assets	166			284
Accrued expenses	(454		)	(467		)
Foreign currency forwards, net	$	(403	)	$	(205	)

NOTE 11. COMMITMENTS AND CONTINGENCIES

The Company is a defendant in various lawsuits as a result of normal operations and in the ordinary course of business. Management believes the outcome of these lawsuits will not have a material effect on our financial position or results of operations.

Our operations are subject to extensive federal, state, local and foreign laws and regulations relating to environmental matters. Certain environmental laws can impose joint and several liabilities for releases or threatened releases of hazardous substances upon certain statutorily defined parties regardless of fault or the lawfulness of the original activity or disposal. Hazardous substances and adverse environmental effects have been identified with respect to real property we own and on adjacent parcels of real property.

In particular, our Elmira, NY manufacturing facility is located within the Kentucky Avenue Wellfield on the National Priorities List of hazardous waste sites designated for cleanup by the United States Environmental Protection Agency (“EPA”) because of groundwater contamination. The Kentucky Avenue Wellfield Site (the “Site”) encompasses an area which includes sections of the Town of Horseheads and the Village of Elmira Heights in Chemung County, NY. In February 2006, the Company received a Special Notice Concerning a Remedial Investigation/Feasibility Study (“RI/FS”) for the Koppers Pond (the “Pond”) portion of the Site. The EPA documented the release and threatened release of hazardous substances into the environment at the Site, including releases into and in the vicinity of the Pond. The hazardous substances, including metals and polychlorinated biphenyls, have been detected in sediments in the Pond.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

Until receipt of this Special Notice in February 2006, the Company had never been named as a potentially responsible party (“PRP”) at the Site nor had the Company received any requests for information from the EPA concerning the Site. Environmental sampling on our property within this Site under supervision of regulatory authorities had identified off-site sources for such groundwater contamination and sediment contamination in the Pond, and found no evidence that our operations or property have contributed or are contributing to the contamination. We have notified all appropriate insurance carriers and are actively cooperating with them, but whether coverage will be available has not yet been determined and possible insurance recovery cannot now be estimated with any degree of certainty.

A substantial portion of the Pond is located on our property. The Company, along with Beazer East, Inc., the Village of Horseheads, the Town of Horseheads, the County of Chemung, CBS Corporation and Toshiba America, Inc., the PRPs, have agreed to voluntarily participate in the Remedial Investigation and Feasibility Study (“RI/FS”) by signing an Administrative Settlement Agreement and Order of Consent on September 29, 2006. On September 29, 2006, the Director of Emergency and Remedial Response Division of the EPA, Region II, approved and executed the Agreement on behalf of the EPA. The PRPs also signed a PRP Member Agreement, agreeing to share the cost of the RI/FS study on a per capita basis.

The EPA approved the RI/FS Work Plan in May of 2008. On September 7, 2011, the PRPs submitted the draft Remedial Investigation Report to the EPA and on January 10, 2013, the draft Feasibility Study. The PRPs are currently working with the EPA to finalize the Feasibility Study.

The draft Feasibility Study identified alternative remedial actions with estimated life-cycle costs ranging from $0.7 million to $3.4 million. We estimate that our portion of the potential costs range from $0.1 million to $0.5 million. Based on the current estimated costs of the various remedial alternatives now under consideration by the EPA, we have recorded a reserve of $0.2 million for the Company’s share of remediation expenses at the Pond. This reserve is reported as an accrued expense on the Consolidated Balance Sheets.

We believe, based upon information currently available that, except as described in the preceding paragraphs, we will not have material liabilities for environmental remediation. Though the foregoing reflects the Company’s current assessment as it relates to environmental remediation obligations, it is possible that future remedial requirements or changes in the enforcement of existing laws and regulations, which are subject to extensive regulatory discretion, will result in material liabilities to the Company.

NOTE 12. STOCK BASED COMPENSATION

All of our stock based compensation to employees is recorded as selling, general and administrative expenses in our Consolidated Statements of Operations based on the fair value at the grant date of the award. These non-cash compensation costs were included in the depreciation and amortization amounts in the Consolidated Statements of Cash Flows.

A summary of stock based compensation expense is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in thousands)				(in thousands)
Restricted stock/unit awards (“RSA”)	$	92	$	118	$	191	$	241
Performance share incentives (“PSI”)	43		66		61		101
	$	135	$	184	$	252	$	342

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

We did not grant any RSAs during the six months ended June 30, 2013. We granted 18,000 RSAs during the six months ended June 30, 2012. The fair value of the 2012 grant was $0.2 million. The deferred compensation is being amortized on a straight-line basis over the specified service period. Unrecognized compensation and the expected weighted-average recognition periods with respect to the outstanding RSAs as of June 30, 2013 and December 31, 2012, are as follows:

	June 30,		December 31,
	2013		2012
Unrecognized compensation cost, in thousands	$	755	$	945

Expected weighted-average recognition period for unrecognized compensation cost, in years	2.4		2.6

We did not grant any PSIs during the six months ended June 30, 2013 and 2012, respectively. The deferred compensation with respect to the PSI is being recognized into earnings based on the passage of time and achievement of performance targets. All outstanding PSIs are unvested.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

NOTE 13. EARNINGS PER SHARE

Details of the computation of earnings per share are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in thousands except per share data)
Basic earnings per share computation:
Net income	$	2,265	$	3,640	$	2,305	$	6,083
Less income allocated to participating awards	1		23		1		48
Net income applicable to common shareholders	$	2,264	$	3,617	$	2,304	$	6,035

Weighted average common shares outstanding	11,663		11,562		11,662		11,543
Basic earnings per share	$	0.19	$	0.31	$	0.20	$	0.52

Diluted earnings per share computation:
Net income	$	2,265	$	3,640	$	2,305	$	6,083
Less income allocated to participating awards	1		23		1		48
Net income applicable to common shareholders	$	2,264	$	3,617	$	2,304	$	6,035

Weighted average common shares outstanding	11,663		11,562		11,662		11,543
Assumed exercise of stock options	27		24		27		24
Assumed satisfaction of RSA conditions	64		14		60		11
Weighted average common shares outstanding	11,754		11,600		11,749		11,578
Diluted earnings per share	$	0.19	$	0.31	$	0.20	$	0.52

For the three months ended June 30, 2013 and 2012, 49,166 and 136,910 shares, respectively, of certain stock-based awards were excluded from the calculation of diluted earnings per share as they were anti-dilutive. For the six months ended June 30, 2013 and 2012, 56,390 and 157,385 shares, respectively, of certain stock-based awards were excluded from the calculation of diluted earnings per share as they were anti-dilutive.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

NOTE 14. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive income (loss) (“AOCI”) by component for the three months ended June 30, 2013 are as follows:

	Three Months Ended June 30, 2013
	Foreign currency translation adjustment		Retirement plan related adjustment			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
	(in thousands)
Beginning balance, net of tax	$	31,309	$	(61,115	)	$	(52	)	$	(29,858	)
Other comprehensive income before reclassifications	215		1,048			138			1,401
Less income reclassified from AOCI	—		564			80			644
Net other comprehensive (loss) income	215		484			58			757
Income tax benefit (expense)	322		(26		)	(52		)	244
Ending balance, net of tax	$	31,846	$	(60,657	)	$	(46	)	$	(28,857	)

Changes in accumulated other comprehensive income (loss) (“AOCI”) by component for the six months ended June 30, 2013 are as follows:

	Six Months Ended June 30, 2013
	Foreign currency translation adjustment			Retirement plan related adjustment			Unrealized gain (loss) on cash flow hedges			Accumulated other comprehensive loss
	(in thousands)
Beginning balance, net of tax	$	36,830		$	(62,375	)	$	36		$	(25,509	)
Other comprehensive (loss) income before reclassifications	(4,844		)	3,060			(108		)	(1,892		)
Less income (loss) reclassified from AOCI	—			1,132			(10		)	1,122
Net other comprehensive (loss) income	(4,844		)	1,928			(98		)	(3,014		)
Income tax (expense) benefit	(140		)	(210		)	16			(334		)
Ending balance, net of tax	$	31,846		$	(60,657	)	(46		)	(28,857		)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

Details about reclassification out of AOCI for the three months ended June 30, 2013 are as follows:

	Three Months Ended June 30, 2013
Details of AOCI components	Amount reclassified from AOCI			Affected line item on the Consolidated Statement of Operations
	(in thousands)
Unrealized gain (loss) on cash flow hedges:
	$	55		Sales
	25			Other expense
	80			Total before tax
	(13		)	Tax expense
	$	67		Net of tax
Retirement plan related adjustment:
Amortization of prior service cost	$	(165	)	(a)
Amortization of transition asset	(67		)	(a)
Amortization of actuarial loss	796			(a)
	564			Total before tax
	(42		)	Tax expense
	$	522		Net of tax

Details about reclassification out of AOCI for the six months ended June 30, 2013 are as follows:

	Six Months Ended June 30, 2013
Details of AOCI components	Amount reclassified from AOCI			Affected line item on the Consolidated Statement of Operations
	(in thousands)
Unrealized gain (loss) on cash flow hedges:
	$	(44	)	Sales
	34			Other expense
	(10		)	Total before tax
	5			Tax benefit
	$	(5	)	Net of tax
Retirement plan related adjustment:
Amortization of prior service cost	$	(332	)	(a)
Amortization of transition asset	(135		)	(a)
Amortization of actuarial loss	1,599			(a)
	1,132			Total before tax
	(85		)	Tax expense
	$	1,047		Net of tax

(a) These AOCI components are included in the computation of net period pension and post retirement costs. See Note 9 - Pension and Post Retirement Plans for details.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

NOTE 15. NEW ACCOUNTING STANDARDS

In December 2011, Financial Accounting Standards Board (the “FASB”) issued authoritative guidance on the presentation of netting assets and liabilities as a single amount in the balance sheet. This pronouncement amends and expands current disclosure requirements on offsetting and requires companies to disclose information about offsetting and related arrangements. We adopted this pronouncement on January 1, 2013. The adoption of this pronouncement did not have a material effect on our consolidated results of operations and financial condition.

In February 2013, the FASB issued authoritative guidance that requires companies to report, in one place, information about reclassification of items out of accumulated other comprehensive income. We adopted this pronouncement on January 1, 2013. The adoption of this pronouncement did not have a material effect on our consolidated results of operations and financial condition other than additional disclosure provided in Note 14 - Changes in Accumulated Other Comprehensive Income (Loss).

NOTE 16. SUBSEQUENT EVENTS

New Credit Facilities

On July 12, 2013, Holdings GmbH and L. Kellenberger & Co. AG, an indirect wholly-owned subsidiary of the Company (“Kellenberger”, and together with Holdings GmbH, the “Borrower”), entered into a Credit Facilities Agreement with Credit Suisse AG (the “Lender”) whereby the Lender has made available CHF 2,550,000 (approximately $2.7 million) mortgage loan facility (“Facility A”) and a CHF 18,000,000 (approximately $19.0 million) multi-currency revolving working capital facility (“Facility B”) for the purposes described below.

Facility A is to be used by Kellenberger and replaces an existing mortgage loan that Kellenberger maintained with the Lender. Interest on Facility A accrues at a fixed rate of 2.50% per annum, compared to 2.65% fixed interest rate on the existing mortgage loan. Effective as of December 2013, payments of principal in the amount of CHF 150,000 (approximately $0.2 million) will due on June 30 and December 31 in each year of the term, with the remaining outstanding balance of principal and accrued interest due in full at the final maturity date of December 23, 2016.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2013

Facility B is to be used by Holdings GmbH and its subsidiaries (collectively, the “Holdings Group”) for general corporate and working capital purposes, including without limitation standby letters of credits and standby letters of guarantee. In addition to Swiss Francs, loan proceeds available under Facility B can be drawn upon in Euros, British Pounds Sterling and United States Dollars (“Optional Currencies”). Under the terms of Facility B, the maximum amount of borrowings available to Holdings Group (on an aggregate basis) under the facility for working capital purposes shall not exceed CHF 8,000,000 (approximately $8.4 million) or its equivalent in Optional Currencies, as applicable. The interest rate on the borrowings drawn in the form of fixed term advances (excluding Euro-based fixed term advances) is calculated based on the applicable London Interbank Offered Rate (“LIBOR”). With respect to fixed term advances in Euros, the interest rate on borrowings is calculated based on the applicable Euro Interbank Offered Rate (“EURIBOR”), plus an applicable margin, (initially set at 2.25% per annum) that is determined by the Lender based on the financial performance of the Borrower.

The terms of the credit facilities also contain customary representations, affirmative, negative and financial covenants and events of default. The credit facilities are also secured by a series of mortgage notes in an aggregate amount of CHF 9,175,000 on two buildings owned by Kellenberger. In addition to the mortgage notes provided by Kellenberger to the Lender, Holdings GmbH serves as a guarantor with respect to Facility B.

“At-The-Market” Stock Offering

On August 6, 2013, the Company's Board of Directors authorized the Company to enter into a sales agreement with an agent pursuant to which we may sell shares of our common stock with an aggregate price of up to $25.0 million in sales deemed to be “at-the-market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. Sales of our common stock pursuant to the agreement, if any, will be made from time to time. There can be no assurance that we will sell any shares of our common stock under the sales agreement. Also, we may elect to sell less than the $25.0 million maximum amount under the agreement.

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PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview. The following Management’s Discussion and Analysis (“MD&A”) contains information that the Company believes is necessary to an understanding of the Company’s financial condition and associated matters, including the Company’s liquidity, capital resources and results of operations. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited financial statements, the accompanying notes to the financial statements (“Notes”) appearing elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2012.

Our primary business is designing, manufacturing, and distributing high-precision computer controlled metal-cutting turning, grinding, and milling machines and related accessories . We are geographically diversified with manufacturing facilities in China, France, Germany, Switzerland, Taiwan, the United States (“U.S.”), and the United Kingdom (“U.K.”) with sales to most industrialized countries. Approximately 75% o f our 2012 sales were to customers outside of North America, 80% of our 2012 products sold were manufactured outside of North America, and 69% of our employees were employed outside of North America .

Our machine products are considered to be capital goods and are part of what has historically been a highly cyclical industry . Our management believes that a key performance indicator is our order level as compared to industry measures of market activity levels.

Metrics on machine tool market activity monitored by our management include world machine tool consumption (a proxy for shipments), as reported annually by Gardner Publications in the Metalworking Insiders Report and metal-cutting machine orders as reported by the Association of Manufacturing Technology, the primary industry group for U.S. machine tool manufacturers. Other closely followed U.S. market indicators are tracked to determine activity levels in U.S. manufacturing plants that are prospective customers for our products. One such measurement is the Purchasing Managers Index, as reported by the Institute for Supply Management . Another measurement is capacity utilization of U.S. manufacturing plants, as reported by the Federal Reserve Board. Similar information regarding machine tool consumption in foreign countries is published by trade associations in those countries.

Non-machine sales, which include collets, accessories, repair parts and service revenue, historically account for approximately 24% of overall sales and are an important part of our business due to an installed base of thousands of machines. We believe that the acquisition of Forkardt in May 2013 will increase non-machine sales to overall sales by 8% to 10% on a full year basis. In the past, sales of these products and services have not fluctuated on a year-to-year basis as significantly as the sales of our machines have from time to time, but demand for these products and services typically track the direction of the related machine metrics.

Other key performance indicators are geographic distribution of net sales (“sales”) and net orders (“orders”), gross profit as a percent of sales, income from operations, working capital changes, and debt level trends. In an industry where constant product technology development has led to an average model life of three to five years, effectiveness of technological innovation and development of new products are also key performance indicators.

We are exposed to financial market risk resulting from changes in interest and foreign currency rates. Global economic conditions and related disruptions within the financial markets have also increased our exposure to the possible liquidity and credit risks of our counterparties. We believe we have sufficient liquidity to fund our foreseeable business needs, including cash and cash equivalents, cash flows from operations, and our bank financing arrangements.

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We monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety of principal. Our cash and cash equivalents are diversified among counterparties to minimize exposure to any one of these entities.

We are subject to credit risks relating to the ability of counterparties of hedging transactions to meet their contractual payment obligations. The risks related to creditworthiness and nonperformance have been considered in the fair value measurements of our foreign currency forward exchange contracts.

We expect that some of our customers and vendors may experience difficulty in maintaining the liquidity required to buy inventory or raw materials. We continue to monitor our customers’ financial condition in order to mitigate the risk associated with our ability to collect on our accounts receivable.

Foreign currency exchange rate changes can be significant to reported results for several reasons. Our primary competitors, particularly for the most technologically advanced products, are now largely manufacturers in Japan, Germany, Switzerland, Korea, and Taiwan which causes the worldwide valuation of their respective currencies to be central to competitive pricing in all of our markets . The major functional currencies of our subsidiaries are the British Pound Sterling (“GBP”), Chinese Renminbi (“CNY”), Euro (“EUR”), New Taiwanese Dollar (“TWD”), and Swiss Franc (“CHF”). Under U.S. generally accepted accounting principles, results of foreign subsidiaries are translated into U.S. Dollars (“USD”) at the average exchange rate during the periods presented. Period-to-period changes in the exchange rate between their local currency and the USD may affect comparative data significantly. We also purchase computer controls and other components from suppliers throughout the world, with purchase costs reflecting currency changes.

Below is a summary of the percentage changes for the average rates of our functional currencies for the three and six months ended June 30, 2013 as compared to their respective USD equivalents during the same periods in 2012:

	Three Months Ended June 30		Six Months Ended June 30
	increase / (decrease)		increase / (decrease)
CHF	(0.4	)%	(3.6	)%
CNY	2.8	%	5.7	%
EUR	1.8	%	(6.5	)%
GBP	(2.9	)%	(4.6	)%
TWD	(0.9	)%	(2.1	)%

The fluctuations of the foreign currency exchange rates during the three months ended June 30, 2013 resulted in favorable currency translation impact of approximately $0.4 million on new orders and $0.5 million on sales, as compared to the same period in 2012. The fluctuations of the foreign currency exchange rates during the six months ended June 30, 2013 resulted in favorable currency translation impact of approximately $0.4 million on new orders and $0.6 million on sales, as compared to the same period in 2012.

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Results of Operations

Summarized selected financial data for the three and six months ended June 30, 2013 and 2012:

	Three Months Ended											Six Months Ended
	June 30,											June 30,
	2013			2012			$ Change			% Change		2013			2012			$ Change			% Change
	(in thousands, except per share data)
Orders	$	78,568		$	80,342		$	(1,774	)	(2	)%	$	145,339		$	161,704		$	(16,365	)	(10	)%
Sales	80,814			86,320			(5,506		)	(6	)%	148,033			160,970			(12,937		)	(8	)%
Gross profit	23,351			23,972			(621		)	(3	)%	42,324			45,161			(2,837		)	(6	)%
% of sales	28.9		%	27.8		%	1.1		pts.			28.6		%	28.1		%	0.5		pts.
Selling, general & administrative expenses	20,258			19,047			1,211			6	%	38,503			36,646			1,857			5	%
% of sales	25.1		%	22.1		%	3.0		pts.			26.0		%	22.8		%	3.2		pts.
Other expense (income)	136			99			37			37	%	454			303			151			50	%
Income from operations	2,926			4,838			(1,912		)	(40	)%	3,378			8,226			(4,848		)	(59	)%
% of sales	3.6		%	5.6		%	(2.0		)pts.			2.3		%	5.1		%	(2.8		)pts.
Net income	2,265			3,640			(1,375		)	(38	)%	2,305			6,083			(3,778		)	(62	)%
% of sales	2.8		%	4.2		%	(1.4		)pts.			1.6		%	3.8		%	(2.2		)pts.

Basic and diluted earnings per share	$	0.19		$	0.31		(0.12		)			$	0.20		$	0.52		(0.32		)

Weighted average shares outstanding - basic	11,663			11,562			101					11,662			11,543			119

Weighted average shares outstanding - diluted	11,754			11,600			154					11,749			11,578			171

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Orders. The table below summarizes orders by each corresponding geographical region for the three and six months ended June 30, 2013 compared to the same periods in 2012:

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2013		2012		$ Change			% Change		2013		2012		$ Change			% Change
	(in thousands)									(in thousands)
North America	$	24,891	$	19,960	$	4,931		25	%	$	42,339	$	40,659	$	1,680		4	%
Europe	22,632		32,489		(9,857		)	(30	)%	45,457		62,285		(16,828		)	(27	)%
Asia	31,045		27,893		3,152			11	%	57,543		58,760		(1,217		)	(2	)%
	$	78,568	$	80,342	$	(1,774	)	(2	)%	$	145,339	$	161,704	$	(16,365	)	(10	)%

Orders during the three months ended June 30, 2013 were $78.6 million, a decrease of $1.8 million, or 2%, when compared to the same period in 2012. Orders during the six months ended June 30, 2013 were $145.3 million, a decrease of $16.4 million or 10%, when compared to the same period in 2012. The decrease in order level over the prior year periods was the result of lower demand which was attributable to the current difficult economic and financial conditions in Europe. The acquisition of Forkardt contributed $7.4 million in incremental orders during the three and six months ended June 30, 2013. Currency exchange rates fluctuations had a favorable impact of $0.4 million on new orders during the three and six months ended June 30, 2013, when compared to the same periods in 2012.

North America orders increased by $4.9 million, or 25%, and $1.7 million, or 4%, for the respective three and six months ended June 30, 2013, when compared to the same periods in 2012. The acquisition of Forkardt contributed $2.5 million in incremental orders to North America during the three and six months ended June 30, 2013. Excluding orders from Forkardt, North America orders increased by $2.4 million during the three months ended June 30, 2013, when compared to the same period in 2012, principally driven by grinding activity. Excluding orders from Forkardt, North America orders decreased by $0.8 million during the six months ended June 30, 2013, when compared to the same period in 2012. The decrease was attributable, in part, to the decline in order activity during the first quarter of 2013 from our U.S.-based distributors as they managed their existing inventory.

Europe orders decreased by $9.9 million, or 30%, and $16.8 million, or 27%, for the respective three and six months ended June 30, 2013, when compared to the same periods in 2012. The acquisition of Forkardt contributed $4.4 million in incremental orders to Europe during the three and six months ended June 30, 2013. Excluding orders from Forkardt, Europe orders decreased by $14.3 and $21.2 million, respectively, during the three and six months ended June 30, 2013, when compared to the same periods in 2012. The decrease in Europe order activity was primarily driven by decline in demand due to continued challenging economic and fiscal conditions in the region. Currency exchange rates fluctuations had an unfavorable impact of $0.1 million and $0.4 million on new orders during the three and six months ended June 30, 2013, respectively, when compared to the same periods in 2012.

Asia orders represented 40% of total orders for the three and six months ended June 30, 2013, compared to 35% and 36%, respectively of the same periods in 2012. Asia orders increased by $3.2 million, or 11%, and decreased by $1.2 million, or 2%, for the respective three and six months ended June 30, 2013, when compared to the same periods in 2012. Multiple machine orders from suppliers to the consumer electronics industry in China decreased by $2.2 million and $4.6 million, respectively, during the three and six months ended June 30, 2013, when compared to the same periods in 2012. Excluding these multiple machine orders, Asia orders increased by $5.4 million and $3.4 million during the three and six months ended June 30, 2013, when compared to the same periods in 2012. The increase in Asia orders was driven by solid order activity in China, attributable, in part, to favorable activities with our customers and the industry segments we serve. Currency exchange rates fluctuations had a favorable impact of $0.5 million and $0.8 million on new orders during the three and six months ended June 30, 2013, respectively, when compared to the same periods in 2012.

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Sales . The table below summarizes sales by each corresponding geographical region for the three and six months ended June 30, 2013 compared to the same periods in 2012:

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2013		2012		$ Change			% Change		2013		2012		$ Change			% Change
	(in thousands)									(in thousands)
North America	$	26,116	$	20,735	$	5,381		26	%	$	50,964	$	39,356	$	11,608		29	%
Europe	24,743		34,028		(9,285		)	(27	)%	45,739		58,685		(12,946		)	(22	)%
Asia	29,955		31,557		(1,602		)	(5	)%	51,330		62,929		(11,599		)	(18	)%
	$	80,814	$	86,320	$	(5,506	)	(6	)%	$	148,033	$	160,970	$	(12,937	)	(8	)%

Sales for the three months ended June 30, 2013 were $80.8 million, a decrease of $5.5 million, or 6%, when compared to the same period in 2012. Sales for the six months ended June 30, 2013 were $148.0 million, a decrease of $12.9 million, or 8%, when compared to the same period in 2012. We believe that the decrease in sales level over prior year periods was attributable to reduction in global economic activities which started during the second half of 2012. The acquisition of Forkardt contributed $6.5 million in incremental sales during the three and six months ended June 30, 2013. Currency exchange rates fluctuations had a favorable impact of $0.5 million and $0.6 million on sales during the three and six months ended June 30, 2013, respectively, when compared to the same periods in 2012.

North America sales increased by $5.4 million, or 26%, and $11.6 million, or 29%, for the respective three and six months ended June 30, 2013, when compared to the same periods in 2012. The acquisitions of Usach in December 2012 and Forkardt in May 2013 contributed $7.2 million and $7.5 million in incremental sales during the three and six months ended June 30, 2013, respectively. Excluding sales from Usach and Forkardt, North America sales decreased by $1.8 million during the three months ended June 30, 2013, when compared to the same period in 2012, and increased by $4.1 million during the six months ended June 30, 2013, when compared to the same period in 2012. The increase in North America sales was primarily driven by the sales of grinding products as a result of solid order backlog.

Europe sales decreased by $9.3 million, or 27%, and $12.9 million, or 22%, for the respective three and six month periods ended June 30, 2013, when compared to the same periods in 2012. The acquisition of Forkardt in 2013 contributed $3.6 million in incremental sales during the three and six months ended June 30, 2013. Excluding sales from Forkardt, Europe sales decreased by $12.9 million and $16.5 million during the three and six months ended June 30, 2013, respectively, when compared to the same periods in 2012. The decrease in Europe sales was the result of lower demand for machine tools attributable to continued economic and fiscal uncertainties in the region. Currency exchange rates fluctuations had an unfavorable impact of $0.1 million and $0.2 million on sales during the three and six months ended June 30, 2013, respectively, when compared to the same periods in 2012.

Asia sales decreased by $1.6 million, or 5%, and $11.6 million, or 18%, for the respective three and six months ended June 30, 2013, when compared to the same periods in 2012. Multiple machine sales to suppliers to the consumer electronics industry in China decreased by $0.9 million and $3.6 million, respectively, during the three and six months ended June 30, 2013, when compared to the same periods in 2012. Excluding these multiple machine sales, Asia sales decreased by $0.7 million and $8.0 million during the three and six months ended June 30, 2013, when compared to the same periods in 2012. We believe that the decrease in Asia sales was driven by lower backlog as a result of a decelerating Chinese economy during the second half of 2012. Currency exchange rates fluctuations had a favorable impact of $0.6 million and $0.8 million on Asia sales during the three and six months ended June 30, 2013, respectively, when compared to the same periods in 2012.

Sales of machines accounted for approximately 70% and 71% of the consolidated sales for the three and six months ended June 30, 2013, respectively, compared to 79% and 77% for the same periods in 2012.

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Sales of non-machine products and services, primarily workholding, repair parts, and accessories, accounted for 30% and 29% of the consolidated sales for the three and six months ended June 30, 2013, respectively, compared to 21% and 23% for the same periods in 2012. The increase in the portion of non-machine sales over total sales during the three and six months ended June 30, 2013, when compared to the same periods in 2012, was driven by $6.5 million incremental sales as a result of the Forkardt acquisition.

Gross Profit. Gross profit for the three months ended June 30, 2013 was $23.4 million, a decrease of $0.6 million, or 2.6%, when compared to the same period in 2012. Gross profit for the six months ended June 30, 2013 was $42.3 million, a decrease of $2.8 million, or 6.3%, when compared to the six months ended June 30, 2012. The decrease in gross profit for the three and six months ended June 30, 2013 was attributable to lower sales volume as well as the negative impact of $0.8 million in inventory valuation step-up charges associated with acquisitions. Gross margin for the three and six month period ended June 30, 2013 were 28.9% and 28.6%, respectively, compared to 27.8% and 28.1% for the same periods in 2012. The increase in gross margin for the three and six months ended June 30, 2013 was primarily attributable to favorable product mix due to higher portion of non-machine sales as a result of the Forkardt acquisition, offset by the unfavorable impact of inventory valuation step-up charges of 1.0% and 0.5% for the three and six months ended June 30, 2013, respectively.

Selling, General and Administrative Expenses. Selling, general and administrative (SG&A) expenses were $20.3 million, or 25.1% of net sales for the three months ended June 30, 2013, an increase of $1.2 million or 6.4%, compared to $19.0 million, or 22.1% of net sales for the three months ended June 30, 2012. SG&A expenses were $38.5 million, or 26.0% of net sales for the six months ended June 30, 2013, an increase of $1.9 million or 5.1%, compared to $36.6 million, or 22.8% of net sales for the six months ended June 30, 2012. SG&A expenses for the three and six months ended June 30, 2013 included $1.0 million and $1.6 million, respectively, in transaction related expenses related to the acquisition of Forkardt. In addition, our acquisition of Usach and Forkardt resulted in a $2.5 million and $2.9 million incremental SG&A expense for the three and six months ended June 30, 2013, respectively.

Other Expense (Income). Other expense was $0.1 million for the three months ended June 30, 2013, which was relatively flat when compared to the same period in 2012. Other expense for the six months ended June 30, 2013 was $0.5 million, an increase of $0.2 million when compared to $0.3 million during the same period in 2012.

Income from Operations . Income from operations was $2.9 million for the three months ended June 30, 2013 compared to $4.8 million for the same period in 2012. Income from operations was $3.4 million for the six months ended June 30, 2013 compared to $8.2 million for the same period in 2012. The decrease in income from operations was driven by lower sales volume, the $0.8 million in acquisition related inventory valuation step-up charges, and the $1.6 million in transaction related expenses associated with the Forkardt acquisition.

Interest Expense, Net . Net interest expense was $0.3 million for the three months ended June 30, 2013 compared to $0.2 million for the same period in 2012. Net interest expense was $0.5 million for the six months ended June 30, 2013 compared to $0.4 million for the same period in 2012. The increase in interest expense was attributable to the additional interest on the $23.0 million term loan which the Company entered into in May 2013 to fund the acquisition of Forkardt.

Income Taxes. The provision for income taxes was $0.4 million and $0.6 million for the three and six months ended June 30, 2013, respectively, compared to $1.0 million and $1.8 million for the three and six months ended June, 30 2012, respectively. The effective tax rates were 13.8% and 20.3% for the three and six months ended June 30, 2013 compared to 20.8% and 22.7% for the three and six months ended June 30, 2012, respectively.

The difference in effective tax rates between these two periods was driven by the mix of earnings by country and by the non-recognition of tax benefits for certain entities in a loss position for which a full valuation allowance has been recorded.

Each quarter, an estimate of the full year tax rate for jurisdictions not subject to a full valuation allowance is developed based upon anticipated annual results and an adjustment is made, if required, to the year-to-date income tax expense to reflect the full year anticipated effective tax rate.

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We continue to maintain a full valuation allowance on the tax benefits of our U.S. net deferred tax assets and we expect to continue to record a full valuation allowance on future tax benefits until an appropriate level of profitability in the U.S. is sustained. We also maintain a valuation allowance against all or a portion of our deferred tax assets in Canada, U.K., Germany, Switzerland, and the Netherlands.

The effective tax rate for the six months ended June 30, 2013 of 20.3% differs from the U.S. statutory rate primarily due to no tax benefit being recorded for certain entities in a loss position for which a full valuation allowance has been recorded, and due to the rate difference between the U.S. and non-US entities.

Net Income. Net income for the three months ended June 30, 2013 was $2.3 million, or 2.8% of net sales, compared to $3.6 million, or 4.2% of net sales, for the same period in 2012. Net income for the six months ended June 30, 2013 was $2.3 million, or 1.6% of net sales, compared to $6.1 million, or 3.8% of net sales, for the same period in 2012. The decrease in net income is attributable to lower gross profit due to the decrease in sales volume, acquisition related inventory valuation step-up charges and acquisition related expenses. Earnings per share, both basic and diluted, for the three and six months ended June 30, 2013 were $0.19 and $0.20, respectively, compared to $0.31 and $0.52, respectively, for the same periods ended June 30, 2012.

Summary of Cash Flows for the six months ended June 30, 2013 and 2012:

	Six Months Ended June 30,
	2013			2012
	(in thousands)
Net cash provided by operating activities	$	2,009		$	314
Net cash used in investing activities	(35,775		)	(5,342		)
Net cash provided by (used in) financing activities	26,218			(588		)
Effect of exchange rate changes on cash	(591		)	29
Decrease in cash and cash equivalents	$	(8,139	)	$	(5,587	)

Capital expenditures (included in investing activities)	$	(1,627	)	$	(5,364	)

During the six months ended June 30, 2013, we generated $2.0 million net cash from operating activities, an improvement of $1.7 million compared to $0.3 million net cash provided by operating activities during the same period in 2012. During the six months ended June 30, 2013, net cash was primarily used for vendor payments, to pay accrued expenses, including bonuses and taxes, and contributions made to our defined contribution plan. The cash outflow was offset by collections on accounts receivable, decreases in inventory levels, as well as increases in customer deposits as a result of improving order activities in North America and Asia.

During the six months ended June 30, 2012, we generated $0.3 million net cash from operating activities. Net cash was primarily provided by collections on accounts receivables. The cash inflow was offset by cash used in inventory purchases to support production, vendor payments, and contributions to the pension plans.

Net cash used in investing activities was $35.8 million for the six months ended June 30, 2013 compared to $5.3 million for the same period in 2012. In May of 2013, we used $34.3 million net cash to acquire Forkardt. Excluding this use of cash, net cash used in investing activities decreased by $3.8 million due to lower capital expenditures as we completed our facility expansion projects in Switzerland and China in 2012.

Net cash flow provided by financing activities was $26.2 million for the six months ended June 30, 2013 compared to $0.6 million net cash used in financing activities for the same period in 2012. The increase was primarily due to $23.0 million in term loan proceeds used to partially fund the acquisition of Forkardt as well as additional borrowings under our existing credit facilities to align financing activities to current working capital needs.

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Liquidity and Capital Resources

Our liquidity requirements primarily include funding for operations, including working capital requirements, and funding for capital investments and acquisitions. We expect to meet these requirements in the long term through cash provided by operating activities and availability under various credit facilities and other financing arrangements. Cash flows from operating activities are primarily driven by earnings before noncash charges and change in working capital needs. During the six months ended June 30, 2013, cash flows from operating activities and available cash were sufficient to fund our normal investment activities, primarily capital expenditures for property, plant and equipment and other productive assets. We had additional borrowing capacity of $44.3 million at June 30, 2013, and $54.3 million at December 31, 2012, available under various credit facilities maintained by the Company and certain Company subsidiaries.

We assess on an ongoing basis our portfolio of operations, as well as our financial and capital structures, to ensure we have sufficient capital and liquidity to meet our strategic objectives. As part of this process, from time to time we evaluate and pursue acquisition opportunities that we believe will enhance our strategic position.

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Accordingly, there can be no assurance that our expectations will be realized. Such statements are based upon information known to management at this time. The Company cautions that such statements necessarily involve uncertainties and risk and deal with matters beyond the Company’s ability to control, and in many cases the Company cannot predict what factors would cause actual results to differ materially from those indicated. Among the many factors that could cause actual results to differ from those set forth in the forward-looking statements are fluctuations in the machine tool business cycles, changes in general economic conditions in the U.S. or internationally, the mix of products sold and the profit margins thereon, the relative success of the Company’s entry into new product and geographic markets, the Company’s ability to manage its operating costs, actions taken by customers such as order cancellations or reduced bookings by customers or distributors, competitors’ actions such as price discounting or new product introductions, governmental regulations and environmental matters, changes in the availability and cost of materials and supplies, the implementation of new technologies and currency fluctuations. Any forward-looking statement should be considered in light of these factors. The Company undertakes no obligation to revise its forward-looking statements if unanticipated events alter their accuracy.

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PART I.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

There have been no material changes to our market risk exposures during the first six months of 2013. For a discussion of our exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risks, contained in our 2012 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2013, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, and determined that these controls and procedures were effective.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2013 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1.A RISK FACTORS

There is no change to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULT UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION

None

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ITEM 6. EXHIBITS

3.1		Restated Certificate of Incorporation of Hardinge Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission on March 15, 2010 (File No. 001-34639)).

3.2		Certificate of Amendment of the Restated Certificate of Incorporation of Hardinge Inc. (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 23, 2010 (File No. 000-15760)).

3.3		By-Laws of Hardinge Inc. (incorporated by reference to Exhibit 3.3 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission on March 14, 2012 (File No. 001-34639)).

4.1		Specimen of certificate for shares of Common Stock, par value $.01 per share, of Hardinge Inc. (incorporated by reference to Exhibit 3 to Registrant’s Registration Statement on Form 8-A, filed with the Securities and Exchange Commission on May 19, 1995 (File No. 000-15760)).

10.1		Amended and Restated Credit Agreement, dated May 9, 2013, by and among M&T Bank, Hardinge Inc., Cherry Acquisition Corporation (n/k/a Forkardt Inc.) and Usach Technologies, Inc.

10.2		Replacement Standard LIBOR Grid Note, dated May 9, 2013, issued by Hardinge, Inc., Cherry Acquisition Corporation (n/k/a Forkardt Inc.) and Usach Technologies, Inc. for the benefit of M&T Bank.

10.3		General Security Agreement, dated May 9, 2013, by and between Hardinge Inc. and M&T Bank.

10.4		Schedule Required by Instruction 2 to Item 601 of Regulation S-K.

10.5		Credit Agreement, dated May 9, 2013, by and between Hardinge Inc., Hardinge Holdings GmbH and M&T Bank.

10.6		Term Note, dated May 9, 2013, issued by Hardinge Inc. and Hardinge Holdings GmbH for the benefit of M&T Bank.

10.7		General Security Agreement, dated May 9, 2013, by and between Hardinge Inc. and M&T Bank.

10.8		Schedule Required by Instruction 2 to Item 601 of Regulation S-K.

31.1		Chief Executive Officer Certification pursuant to Rule 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Chief Financial Officer Certification pursuant to Rule 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

*In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Hardinge Inc.

August 8, 2013	By:	/s/ Richard L. Simons
Date		Richard L. Simons
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)


August 8, 2013	By:	/s/ Edward J. Gaio
Date		Edward J. Gaio.
		Vice President and Chief Financial Officer
		(Principal Financial Officer)


August 8, 2013	By:	/s/ Douglas J. Malone
Date		Douglas J. Malone
		Corporate Controller and Chief Accounting Officer
		(Principal Accounting Officer)

Exhibit 10.1

AMENDED AND RESTATED

CREDIT AGREEMENT

New York

May 9, 2013

Borrower: Hardinge, Inc., a New York corporation having an address of One Hardinge Drive, Elmira, New York 14902;

Cherry Acquisition Corporation, or its successors and/or assigns, a New York corporation having an address of 2155 Traversefield Drive, Traverse City, Michigan 49686; and

Usach Technologies, Inc., an Illinois corporation having an address of 1524 Davis Road, Elgin, Illinois 60123 (collectively, “Borrower”)

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 . “Capital Expenditures” means, for any period, the sum of (without duplication) all expenditures (except permitted acquisitions) during such period for fixed or capital assets that are required to be capitalized under G.A.A.P. .

b. “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.

c. “ 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

d. “ 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.

e. “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.

f. “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.

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

h . “EBITDA” means, for any period, Net Income for such period plus (to the extent deducted in the computation of such net income): (i) Interest Expense, (ii) Taxes, (iii) depreciation and amortization, (iv) transaction costs associated with permitted acquisitions and (v) purchase accounting adjustments.

i. “Fixed Charges” means for any period, the sum of the following determined on a consolidated basis, without duplication, for the Borrower and its Subsidiaries: (a) scheduled principal payments on Indebtedness (including imputed principal payments in respect of Capital Leases and synthetic leases but excluding mandatory prepayments and (b) consolidated Interest Expense.

j. “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.

k. “Indebtedness” means (of any entity, without duplication): (a) all indebtedness for borrowed money; (b) all obligations for the deferred purchase price of property or services; (c) all obligations evidenced by notes, bonds, debentures or other similar instruments; (d) all indebtedness created or arising under any conditional sale or other title retention agreement; (e) all capital lease obligations; (f) all obligations, contingent or otherwise under acceptance, letter of credit or similar facilities; (g) all obligations to purchase, redeem, retire, defease or otherwise acquire for value any capital stock; (h) all obligations under interest rate protection agreements; (i) all guarantees; (j) all obligations secured by any lien on the assets of such entity; (k) all payments required by such entity under non-compete agreements; (l) all indebtedness of any partnership in which such entity is a general partner; (m) all obligations of such entity under synthetic leases or other obligations that are the functional equivalent of the

Indebtedness referred to in clauses (a) through (l).

l. “Interest Expense” means for any period, the sum of (a) the amount of interest accrued on, or with respect to, Indebtedness for such period, including, without limitation, imputed interest on capital leases and imputed or accreted interest in respect of deep discount or zero coupon obligations, plus (b) the net amount payable under all interest rate protection agreements in respect of such period (or minus the net amount receivable under all interest rate protection agreements in respect of such period) plus (c) annual fees or commitment fees payable during such period plus (d) letter of credit fees payable during such period.

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. “Net Income” means for any period, the aggregate net income (or loss) of the Borrower and its Subsidiaries for such period on a Consolidated basis determined in accordance with GAAP, provided , the following items, without duplication shall be excluded from the calculation of Net Income: (a) after-tax gains and losses from asset sales or abandonment or reserves relating thereto; (b) items classified as extraordinary or nonrecurring gains, losses or charges, and the related tax effects, each determined in accordance with GAAP; (c) the net income of any Person acquired in a “pooling of interests” transaction accrued prior to the date it becomes a Subsidiary of the Borrower or is merged or consolidated with the Borrower or any Subsidiary of the Borrower; (d) the net income (but not loss) of any Subsidiary of the Borrower to the extent that the declaration of dividends, the making of intercompany loans or similar payments by that Subsidiary of that income is restricted by a contract, operation of law or otherwise; (e) the net income of any Person, other than the Borrower or a Subsidiary of the Borrower, except to the extent of cash dividends or distributions paid to the Borrower or a Subsidiary of the Borrower by such Person; (f) any restoration to income of any contingency reserve; (g) income or loss attributable to discontinued operations (including operations disposed of during such period whether or not such operations were classified as discontinued); (h) income attributable to insurance proceeds, condemnation awards or litigation awards or settlements; (i) restructuring expenses related to pension, severance and plant closure subject to limitations to be determined; (j) write-offs of inventory subject to limitations to be determined; (k) expenses associated with any hostile takeover; (l) expenses associated with any internal legal entity restructuring, limited to two restructuring events during the term of the facility and (m) any other non-cash gains and non-cash losses.

o. “Non-Financed Capital Expenditures” means for any period, Capital Expenditures paid out of operating cash flow or the proceeds of revolving credit Loans, as determined for the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP.

p . “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.

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

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

s. “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.

t. “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).

u. “ Tax Expense” means, for any period, expenses for income and similar taxes of the Borrower and its consolidated subsidiaries for that period, provided that the following items should be excluded from the calculation of Tax Expense: (a) changes in tax valuation allowances; (b) tax expense (benefit) related to uncertain tax positions recorded under FASB Interpretation No. 48 (FIN 48) and (c) tax expense (benefit) related to a change in the Company’s assertion regarding indefinite reinvestment of the Company’s foreign subsidiaries’ undistributed earnings pursuant to ASC 740-30-25-17 (formerly APB 23).

v. “ Total Indebtedness”, means at any time all Indebtedness of Hardinge Inc. and its Subsidiaries determined on a consolidated basis other than Indebtedness described in clauses (g) or (h) of the definition of “Indebtedness”.

w. “ 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.

x. “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.

y. “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.

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. 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 forty-five (45) 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 (not to be audited) 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

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, within forty-five (45) days of each fiscal year end, Borrower shall provide a copy of its annual operating budget for the Borrower’s consolidated operations, which shall include a balance sheet, income statement, statement of cash flows and assumptions relating to the budget. 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 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 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.

i. Licenses. Borrower shall maintain any and all required licenses and registrations required to operate the business of Borrower in the ordinary course.

j. Material Changes. Borrower shall provide the Bank prior written notification of any material changes or modifications to the Credit Suisse credit facility issued pursuant to an Indicative Term Sheet dated on or about April 19, 2013.

k. Mandatory Prepayments. During the term of this Note, Borrower shall make the following mandatory prepayments (a) 100% of the net cash proceeds in connection with any asset sales, insurance proceeds or condemnation recoveries unless proceeds are reinvested in equivalent assets within six (6) months (b) 75% of the net cash proceeds in connection with any issuance of debt and (c) 75% of the net cash proceeds in connection with any issuance or sale of equity. All mandatory prepayments by Hardinge Inc. shall be posted the date received and applied to scheduled principal payments under that certain Term Note dated of even date herewith in the amount of $23,000,000.00 by Hardinge Inc. and Hardinge Holdings GmbH to Bank in inverse order of maturity until all such amounts due thereunder have been paid. Thereafter, any mandatory prepayments shall be applied to other Obligations due to the Bank, in the Bank’s sole discretion.

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, investments 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) acquire substantially all of the assets of any other entity, (iii) do business under or otherwise use any name other than its true name or (iv) 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, acquisition 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.

h. Changes of Address. Change its address without the written approval of the Bank.

i. Negative Pledges to Third Parties. Shall not execute any type of negative pledge agreement with any other third parties.

j. Transactions with Affiliates. Shall not participate or enter into any transactions with any affiliates of Borrower, except for transactions in the ordinary course of business upon fair and reasonable terms no less favorable to Borrower or any Subsidiary than would apply in a comparable arm’s length transaction with any person or entity who is not an affiliate..

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.

All acquisitions and dispositions will be included in the calculation of the financial covenants set forth below, as if it were acquired or dispose of during the entire four (4) quarters being measured.

x A. Minimum Fixed Charge Coverage Ratio. Permit the Minimum Fixed Charge Coverage Ratio to be less than 1.15: 1.00. The Fixed Charge Coverage Ratio shall be measured at the end of each fiscal quarter, for the previous four quarters and be defined as EBITDA minus Non-Financed Capital Expenditures minus Tax Expense minus dividends to Fixed Charges.

x B. Total Leverage Ratio. Borrower’s Total Indebtedness less unrestricted cash in an amount not to exceed $10,000,000.00 and subject to a floor of $10,000,000.00 to combined EBITDA for the previous four (4) quarters shall not exceed 3.00: 1.00 . This covenant shall be tested quarterly.

x C. Without the prior written consent of Bank, Borrower shall not make any Capital Expenditures in excess of $ 10,000,000.00 in the aggregate during any fiscal year of Borrower.

6. DEFAULT.

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 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; (iv) the exercise, performance ,enforcement or protection of any of the rights of the Bank hereunder; or (v) 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 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 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.

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

CHERRY ACQUISITION CORPORATION

By	/s/ Richard L. Simons

	Name:	Richard L. Simons

	Title:	President

USACH TECHNOLOGIES, INC.

By	/s/ Edward J. Gaio

	Name:	Edward J. Gaio

	Title:	Vice President

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

On the 30th day of April in the year 2013, 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/ Nancy L. Curren
	Notary Public

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

On the 30th day of April in the year 2013, 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
	Notary Public

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

On the 30th day of April in the year 2013, in the year 2013, before me, the undersigned, a Notary Public in and for said State, personally appeared RICHARD L. SIMONS , 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
	Notary Public

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

	/s/ Nancy L. Curren
	Notary Public

BANK USE ONLY

Authorization Confirmed:
	Signature

SCHEDULE

Additional Representations and Warranties (§2)

1. Judgments and Litigation. None

Additional Affirmative Covenants (§3)

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

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, as amended November 29, 2012 in the amount of $1,500,000.00, and any extension, renewal, or replacement thereof.

4. Indebtedness of Hardinge Inc. 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 Inc. and its direct and indirect Subsidiaries to Bank of America, N.A. in connection with foreign exchange transactions which is secured by certain domestic assets of Hardinge Inc. up to $4,000,000.00 at any given time and subject to an Intercreditor Agreement dated as of December 13, 2011, as amended July 27, 2012, between Bank and Bank of America, N.A., and any extension, renewal, or replacement thereof.

6. In connection with the acquisition of the stock of USACH Technologies, Inc. (“USACH”) for an aggregate purchase price of up to $18,000,000 (the “USACH Investment”), plus or minus a customary working capital adjustment, comprised, in part, of certain contingent indebtedness based on future earnings (the “Contingent Payment Obligation”), pursuant to which USACH became a subsidiary of Hardinge Inc.

a. Indebtedness of Hardinge Inc. to the former owners of USACH under the Contingent Payment Obligation, and any extension, renewal, or replacement thereof.

7. Indebtedness of Hardinge Holdings GmbH (“Holdings”), L. Kellenberger & Co. AG (“Kellenberger”), Jones & Shipman Hardinge Ltd. (“Jones”) or Forkardt Deutschland GmbH (“Forkardt” and collectively with Holdings, Kellenberger and Jones, the “Credit Suisse Borrowers”) to Credit Suisse AG pursuant to that certain Credit Facilities Agreement dated on or about the date hereof (the “Credit Suisse Facility”), including (i) a senior term loan to Holdings in the amount of up to CHF 5,000,000;(ii) a secured loan to Kellenberger in the initial outstanding amount of CHF 2,700,000; and (iii) a revolving working capital facility to the Credit Suisse Borrowers in the amount of up to CHF 18,000,000 outstanding at any one time.

8. Indebtedness of Cherry Acquisition Corporation or its successor and/or assigns (“Cherry”) with respect to Assumed Liabilities, as defined in that certain Purchase Agreement between Cherry and Illinois Tool Works Inc. dated on or about the date hereof (“Purchase Agreement”), and any amounts payable by Cherry pursuant to Section 2.7 of the Purchase Agreement entitled “Post-Closing Adjustments”.

9. Indebtedness of Holdings to Manufacturers and Traders Trust Company under that certain Foreign Exchange Master Netting Agreement dated as of August 14, 2012, as amended.

10. Unsecured indebtedness of Hardinge Machine Tools B.V., Taiwan Branch in the amount of $12,000,000.

11. Unsecured indebtedness of Hardinge Machine (Shanghai) Co., Ltd. in the amount of CHY 20,000,000.00.

12. Indebtedness related to the existing liens set forth on Schedule 4(c) hereto.

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

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

6. any liens in favor of M&T Bank or its affiliates.

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, the USACH Investment, and capital contributions by Borrower in any Subsidiary are permitted and are not considered Loans for purposes of the limitations of this Section.

Additional Miscellaneous Covenants (§11)

None

SCHEDULE 4(C)

EXISTING LIENS

(A)

Debtor	Secured Party	Jurisdiction	Filing Information	Collateral
Jones & Shipman Hardinge Ltd.	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

Jones & Shipman Hardinge Ltd.	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 £4.2 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 and Romanshorn, 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

Hardinge, Inc.	The Robert E. Morris Company	New York	New York SOS — Filing No. 201203028075963	Specific Equipment

Hardinge, Inc.	Machine Tool Systems, LLC	New York	New York SOS — Filing No. 201203218099177	Specific Equipment

Hardinge, Inc.	Bank of America, N.A	New York	New York SOS — Filing No. 201206110331952	All assets

(B) A lien in favor of American Chartered Bank on all personal property assets of USACH Technologies, Inc. securing indebtedness of USACH Technologies, Inc. to American Chartered Bank.

(C) Any security transfer of mortgage notes by Kellenberger in favor of Credit Suisse AG in connection with the Credit Suisse Facility.

Exhibit 10.2

REPLACEMENT STANDARD LIBOR GRID NOTE

(LIBOR & PRIME)

New York

May 9, 2013

$25,000,000.00

BORROWER:	Hardinge, Inc., a New York corporation having an address of One Hardinge Drive, Elmira, New York 14902; Cherry Acquisition Corporation, or its successors and/or assigns, a New York corporation having an address of 2155 Traversfield Drive, Traverse, MI 49686; and
	Usach Technologies, Inc., an Illinois corporation having an address of 1524 Davis Road, Elgin, IL 60123 (collectively, “Borrower”)

BANK: M&T BANK , a New York banking corporation with its principal banking office at One M&T Plaza, Buffalo, NY 14203. Attention: Office of General Counsel

1. DEFINITIONS. Each capitalized term shall have the meaning specified herein and the following terms shall have the indicated meanings:

a. “Applicable Margin” shall mean for each variable base rate loan, the applicable rate per annum on the table next following under the caption “Base Rate Margin” or “LIBOR Margin”, respectively, under the Pricing Level then in effect based upon Borrower’s Leverage Ratio as reflected in the Financials for the immediately preceding four Fiscal Quarters for income statement items and the most recently ended Fiscal Quarter for balance sheet items, computed as provided below.

Pricing Level	Leverage Ratio	Base Rate Margin	LIBOR Margin	Commitment Fee
Level I	Equal to or greater than 2.50	100 Basis Points	300 Basis Points	0.38	%

Level II	Equal to or greater than 2.0 but less than 2.5	75 Basis Points	275 Basis Points	0.25	%

Level III	Equal to or greater than 1.5 but less than 2.0	50 Basis Points	250 Basis Points	0.25	%

Level IV	Less than 1.5	25 Basis Points	225 Basis Points	0.25	%

b. “Authorized Person” shall mean, each individually, with respect to Hardinge Inc., Edward J. Gaio, as Vice President and Chief Financial Officer and Douglas J. Malone, as Corporate Controller; with respect to Usach Technologies, Inc., Edward J. Gaio, as Vice President; and with respect to Cherry Acquisition Corporation, Edward J. Gaio, as Vice President .

Mention of the Authorized Person’s name is for reference purposes only and the Bank may rely on a person’s title to ascertain whether someone is an Authorized Person who may act on behalf of the Borrower in connection herewith.

c. “Automatic Adjustment Rate Determination Date” , when applicable, shall mean two (2) London Business Days before the first day of the applicable Interest Period.

d. “Automatic Continuation Option” shall, with respect to any LIBOR Rate Loan, mean the option to have the then-current Interest Period duration, as previously selected by Borrower, remain the same for the succeeding Interest Period.

e. “Base Rate” shall mean the Applicable Margin (Base Rate Margin) above the rate of interest announced by the Bank as its prime rate of interest (“Prime Rate”).

f. “Base Rate Loan” shall mean a Loan which bears interest at the Base Rate.

g. “Continuation Date” shall mean the date that Borrower’s election to continue a LIBOR Rate Loan for another Interest Period becomes effective in accordance with this Note.

h. “Conversion Date” shall mean the date that Borrower’s election to convert a Base Rate Loan to a LIBOR Rate Loan, or a LIBOR Rate Loan to a Base Rate Loan, becomes effective in accordance with this Note.

i. “Draw Date” shall mean, in relation to each Loan, the date that such Loan is made or deemed to be made to Borrower pursuant to this Note.

j. “Expiration Date” shall mean, May 1, 2018.

k. “Interest Period” shall mean, with respect to any LIBOR Rate Loan, the period commencing on the Draw Date, Conversion Date or Continuation Date for such LIBOR Rate Loan and ending on the date that shall be the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) of the calendar month that is one (1), two (2), three (3) or six (6) months after the commencement of such period, in accordance with Borrower’s election made pursuant to the terms of this Note; provided, however, that if an Interest Period would end on a day that is not a Joint Business Day, such Interest Period shall be extended to the next succeeding Joint Business Day, unless such next succeeding Joint Business Day would fall in the next calendar month, in which case such Interest Period shall end on the immediately preceding Joint Business Day. To the extent that the preceding clause results in either the extension or shortening of an Interest Period for a particular Loan, the Bank shall have the right (but not the obligation) to shorten or extend, respectively, the succeeding Interest Period so that it shall end on a day that numerically corresponds to the Draw Date for such Loan. initial pricing will be at level II as set forth in 1(a), above.

l. “Joint Business Day” shall mean a day that is both a New York Business Day and a London Business Day

m. “ Leverage Ratio ” means, as of the date of its determination, with respect to the Borrower, the ratio of (a) funded debt, excluding subordinate debt existing at the time of execution of this Note as of such date, over (b) EBITDA for the twelve (12) months ending as of such date, measured quarterly.

n. “LIBOR” shall mean the rate per annum (rounded upward, if necessary, to the nearest 1/16 th of 1%) obtained by dividing (i) the applicable London Interbank Offered Rate (in accordance with the LIBOR Rate selected by Borrower for each Loan; see LIBOR Rate definition below) as fixed by the British Bankers Association for United States dollar deposits in the London interbank market at approximately 11:00 a.m. London, England time (or as soon thereafter as practicable), as determined by the Bank from any broker, quoting service or commonly available source utilized by the Bank, by (ii) a percentage equal to 100% minus the stated maximum rate of all reserves required to be maintained against “Eurocurrency Liabilities” as specified in Regulation D (or against any other category of liabilities which includes deposits by reference to which the interest rate on any LIBOR Rate Loan or Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States’ office of a bank to United States’ residents) on such date to any member bank of the Federal Reserve System. Notwithstanding any provision above, the practice of rounding to determine LIBOR may be discontinued at any time in the Bank’s sole discretion.

o. “LIBOR Rate” shall mean, as selected by Borrower for each LIBOR Rate Loan and/or as otherwise applicable, in accordance with the terms of this Note, the greater of (a) the Applicable Margin (LIBOR Margin) above the one-month, two-month, three-month or six-month LIBOR (as selected by the Borrower for each LIBOR Rate Loan), each with an Interest Period of equal duration.

p. “LIBOR Rate Loan” shall mean a Loan that bears interest at a LIBOR Rate. Each advance of funds hereunder, to the extent originally priced at the LIBOR Rate, shall be treated as a separate LIBOR Rate Loan.

q. “Loan” shall mean a loan made to Borrower by the Bank pursuant to this Note.

r. “London Business Day” shall mean any day on which dealings in United States dollar deposits are carried on by banking institutions in the London interbank market.

s. “Maximum Principal Amount” shall mean Twenty Five Million Dollars ($25,000,000.00), inclusive of letters of credit , provided however, that Borrower shall be permitted from time to reduce the Maximum Principal Amount at any time upon notice to Bank, provided that such reduction shall be in an amount not less than $3,000,000.00 .

t. “Minimum Borrowing Amount” shall mean (i) for any Base Rate Loan, any whole dollar increment, and (ii) for all other LIBOR Rate Loans, $200,000.00, with minimum increments thereafter of $50,000.00.

u. “New York Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banking institutions in New York, New York are authorized or required by law or other governmental action to remain closed for business.

v. “Outstanding Principal Amount” shall mean, at any point in time, the actual outstanding principal amount under this Note.

2. PAYMENT OF PRINCIPAL, INTEREST AND EXPENSES.

a. Promise to Pay. For value received, and intending to be legally bound, Borrower promises to pay to the order of the Bank, on or before the Expiration Date, the Maximum Principal Amount or the Outstanding Principal Amount, if less; plus interest as set forth below and all fees and costs (including without limitation the Bank’s attorneys’ fees and disbursements, whether for internal or outside counsel) the Bank incurs in order to collect any amount due under this Note, to negotiate or document a workout or restructuring, or to preserve its rights or realize upon any guaranty or other security for the payment of this Note (“Expenses”).

b. Interest. Each Loan shall earn interest on the Outstanding Principal Amount thereof calculated on the basis of a 360-day year for the actual number of days of each year (365 or 366) as follows:

i. LIBOR Rate Loans . Interest shall accrue each day on each LIBOR Rate Loan from and including the first day of each Interest Period applicable thereto until, but not including, the last day of each such Interest Period or the day the LIBOR Rate Loan is paid in full (if sooner) at a rate per annum equal to the LIBOR Rate, as determined using LIBOR in effect on the following dates, as applicable: (a) for new LIBOR Rate Loans, two (2) London Business Days before the Draw Date; (b) for continuations of and conversions to LIBOR Rate Loans (other than as provided for in subsection 4(c) below), the Joint Business Day the Bank receives (or is deemed to receive) the required Notice of Continuation or Notice of Conversion in accordance with the terms of this Note; (c) for LIBOR Rate Loans where the Automatic Continuation Option is in effect, the applicable Automatic Adjustment Rate Determination Date for such LIBOR Rate Loan.

ii. Base Rate Loans . Interest shall accrue on a Base Rate Loan from and including the first date a Loan becomes a Base Rate Loan (e.g., the Draw Date or the Conversion Date) to, but not including, the day such Base Rate Loan is paid in full or converted back to a LIBOR Rate Loan, at the rate per annum equal to the Base Rate. Any change in the Base Rate resulting from a change in the Prime Rate shall be effective on the date of such change.

c. Maximum Legal Rate. It is the intent of the Bank and Borrower that in no event shall interest be payable at a rate in excess of the maximum rate permitted by applicable law (the “Maximum Legal Rate”). Solely to the extent necessary to prevent interest under this Note from exceeding the Maximum Legal Rate, any amount that would be treated as excessive under a final judicial interpretation of applicable law shall be deemed to have been a mistake and automatically canceled, and, if received by the Bank, shall be refunded to Borrower.

d. Payments; Late Charge; Default Rate. Payments shall be made in immediately available United States funds at any banking office of the Bank. Absent demand for payment in full, Borrower shall pay all accrued and unpaid interest, in amounts that may vary, monthly, or as otherwise invoiced by the Bank. If any payment is not received within five days of its due date, Borrower shall pay a late charge equal to the greatest of (a) 5% of the delinquent amount, (b) the Bank’s then current late charge as announced by the Bank from time to time, or (c) $50.00. In addition, if the Bank has not actually received any payment due under this Note within thirty days after its due date, from and after such thirtieth day the interest rate for all amounts outstanding under this Note shall automatically increase to 5 percentage points above the higher of the Base Rate or the highest LIBOR

Rate (“Default Rate”), and any judgment entered hereon or otherwise in connection with any suit to collect amounts due hereunder shall bear interest at such Default Rate. Payments may be applied in any order in the sole discretion of the Bank, but prior to demand, shall be applied first to past due interest, Expenses, late charges, and principal payments, if any, which are past due, then to current interest and Expenses and late charges, and last to remaining principal.

e. Voluntary Prepayment of LIBOR Rate Loans; Breakage Fee; Commitment Fee . If Borrower (i) pays the principal balance, in whole or in part in minimum amounts of $3,000,000.00, on any LIBOR Rate Loan, on any day other than the last day of an Interest Period, (ii) fails to draw down or accept an advance, in whole or in part, on a LIBOR Rate Loan after giving a Request therefor, or (iii) otherwise tries to revoke any LIBOR Rate Loan, in whole or in part, or if there occurs a Bankruptcy Event (as defined below) or the applicable interest rate on any Loan is converted from the LIBOR Rate to the Base Rate pursuant to this Note, then Borrower shall be liable for and shall pay the Bank, on demand, the higher of $250.00 or the actual amount of the liabilities, expenses, costs or funding losses that are a direct or indirect result of such prepayment or other condition described above, whether such liability, expense, cost or loss is by reason of (a) any reduction in yield, by reason of the liquidation or reemployment of any deposit or other funds acquired by the Bank, (b) the fixing of the interest rate payable on any LIBOR Rate Loans, or (c) otherwise (collectively, the “Breakage Fee”). The determination by the Bank of the foregoing amount shall, in the absence of manifest error, be conclusive and binding upon Borrower. Borrower shall pay a Commitment Fee quarterly in arrears (calculated on the basis of a 360-day year for the actual number of days elapsed) equal to (a) the applicable Commitment Fee set forth in Section 1 (a) multiplied by (b) an amount equal to the average daily unused portion of the Maximum Principal Amount less the sum of the aggregate principal amount of outstanding loan, the face amount of any outstanding letters of credit and any unreimbursed drawings in respect of letters of credit.

f. Mandatory Prepayments. During the term of this Note, Borrower shall make the following mandatory prepayments (a) 100% of the net cash proceeds in connection with any asset sales, insurance proceeds or condemnation recoveries unless proceeds are reinvested in equivalent assets within six (6) months (b) 75% of the net cash proceeds in connection with any issuance of debt and (c) 75% of the net cash proceeds in connection with any issuance or sale of equity. All mandatory prepayments by Hardinge Inc. shall be posted the date received and applied to scheduled principal payments under that certain Term Note dated of even date herewith in the amount of $23,000,000.00 by Hardinge Inc. and Harding Holdings GmbH to Bank in inverse order of maturity until all such amounts due thereunder have been paid. Thereafter, any mandatory prepayments shall be applied to other Obligations due to the Bank, in the Bank’s sole discretion.

3. LOANS.

a. General. This Note is issue by Borrower in connection with a certain line of credit or loan limit made available by the Bank to the Borrower (the “Credit”). Each Loan advanced hereunder shall either be in the form of a LIBOR Rate Loan or a Base Rate Loan.

b. Authorized Representatives. The Bank may make any Loan pursuant to the Credit in reliance upon any oral, telephonic, written, teletransmitted or other request (the “Request(s)”) that the Bank in good faith believes to be valid and to have been made by Borrower or on behalf of Borrower by an Authorized Person. The Bank may act on the Request of any Authorized Person until the Bank shall have received from Borrower, and had a reasonable time to act on, written notice revoking the authority of such Authorized Person. Borrower acknowledges that the transmission between Borrower and Bank of any Request or other instructions with respect to the Credit involves the possibility of errors, omissions, misinterpretations, fraud and mistakes, and agrees to adopt such internal measures and operational procedures as may be necessary to prevent such occurrences. By reason thereof, Borrower hereby assumes all risk of loss and responsibility for, and releases and discharges the Bank from any and all responsibility or liability for, and agrees to indemnify, reimburse on demand and hold Bank harmless from, any and all claims, actions, damages, losses, liability and expenses by reason of, arising out of, or in any way connected with or related to: (i) Bank’s accepting, relying on and acting upon any Request or other instructions with respect to the Credit; or (ii) any such error, omission, misinterpretation, fraud or mistake, provided such error, omission, misinterpretation, fraud or mistake is not directly caused by the Bank’s gross negligence or willful misconduct. The Bank shall incur no liability to Borrower or to any other person as a direct or indirect result of making any Loan pursuant to this paragraph.

c. Lending Limit . Any Request for a Loan hereunder shall be limited in amount, such that the sum of (i) the principal amount of such Request; (ii) the Outstanding Principal Amount under this Note; and (iii) the aggregate face amounts of (or, if greater, Borrower’s aggregate reimbursement obligations to the Bank (or any of its affiliates) in connection with) any letters of credit issued by the Bank (or any of its affiliates) at the request (or for the benefit) of Borrower, pursuant to this Credit; does not exceed the Maximum Principal Amount under this Note.

d. Request for LIBOR Rate Loans. Borrower shall give the Bank its irrevocable Request for each LIBOR Rate Loan specifying:

i. the Draw Date for the LIBOR Rate Loan, which shall be at least two (2) Joint Business Days following the date of the Request;

ii. the aggregate amount of such LIBOR Rate Loan, which amount shall not be less than the Minimum Borrowing Amount;

iii. the applicable LIBOR Rate selection and corresponding Interest Period duration (see LIBOR Rate definition above); and

iv. whether the Automatic Continuation Option will be in effect for such LIBOR Rate Loan. The Automatic Continuation Option shall be in effect for each LIBOR Rate Loan, unless otherwise specified by Borrower in writing.

e. Requests for Base Rate Loans. Borrower may request any Base Rate Loan not later than 2:00 p.m. (Eastern Standard Time) on any New York Business Day, specifying the proposed Draw Date (which may be the same day) and the aggregate amount of such Base Rate Loan.

f. Letters of Credit. Letter of credit issued by the Bank (or any of its affiliates) at the request (or for the benefit) of Borrower, pursuant to this Credit shall have an expiration date of the earlier of eighteen (18) months after the date of issuance or thirty (30) days prior to the Expiration Date. Letter of credit fees shall be an amount equal to the Applicable Margin for LIBOR Loans multiplied by the face amount of each letter of credit, payable quarterly in advance.

g. Delivery of Requests and Notices. Delivery of a Notice or Request for a Loan shall be made to the Bank at the following address, or such other address designated by the Bank from time to time:

M&T Bank

68 Exchange Street, 2 nd Floor

Binghamton, New York 13901

Attn: Susan A. Burtis

Fax No. (607) 779-2346

Telephone No. (607) 779-5902

h. Events of Default. The following constitute an event of default (“Event of Default”): (i) failure by Borrower to make any payment when due (whether at the stated maturity, by acceleration or otherwise) of any of the amounts due under this Note, or any part thereof, or to pay any interest thereon or any fee or other amount payable under this Note and such failure continues unremedied for a period of three (3) business days or there occurs any event or condition which after notice, lapse of time or both will permit such acceleration; (ii) Borrower defaults in the performance of any covenant or other provision with respect to this Note or any other agreement between Borrower and the Bank or any of its affiliates or subsidiaries (collectively, “Affiliate”); (iii) Borrower fails to pay when due (whether at the stated maturity, by acceleration or otherwise) any material indebtedness for borrowed money owing to the Bank (other than under this Note), any third party or Affiliate or the occurrence of any event which results in acceleration of payment of any such indebtedness or the failure to perform any agreement with any third party or Affiliate; (iv) the reorganization, merger, consolidation or dissolution of Borrower (or the making of any agreement therefore); the sale, assignment, transfer or deliver of all or substantially all of the assets of Borrower to a third party; or the cessation by Borrower as a going business concern; (v) the death or judicial declaration of incompetency of Borrower, if an individual; (vi) failure to pay, withhold or collect any tax as required by law; the service or filing against Borrower or any of its assets of any lien (other than a lien permitted in writing by the Bank), one or more judgments, garnishments, orders or awards 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, garnishment, order or award, and any such judgments, garnishments, orders or awards remain unbonded, unstayed or undismissed for a period of thirty (30) consecutive days; (vii) if Borrower becomes insolvent or is generally not paying its debts as such debts become due; (viii) the making of any general assignment by Borrower for the benefit of creditors; the appointment of a receiver or similar trustee for Borrower or its assets; or the making of any, or sending notice of any intended, bulk sale; (ix) Borrower commences, or has commenced against it, any proceeding or request for relief under any bankruptcy, insolvency or similar laws now or hereafter in effect in the United States of America or any state or territory thereof or any foreign jurisdiction of any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against or winding up of affairs of Borrower which is not dismissed or stayed within sixty (60) days of commencement; (x) any representation or warranty made in this Note, any related document, any agreement between Borrower and the Bank or any Affiliate or if any financial statement of Borrower proves to have been misleading in any material respect when made; Borrower omits to state a material fact necessary to make the statements made in this Note, any related document, any agreement between Borrower and the Bank or any Affiliate or any financial statement of Borrower not misleading in light of the circumstances in which they were made; or, if upon the date of execution of this Note, there shall have been any material adverse change in any of the facts disclosed in any financial statement, representation or warranty that was not disclosed in writing to the Bank at or prior to the time of execution hereof; (xi) any pension plan of 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 Borrower’s ability to repay its debts; (xii) an adverse change in the Borrower, its business, assets, operations, management, ownership, 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 the Bank reasonably determines will have a material adverse effect on (a) the Borrower, its business, assets, operations or condition (financial or otherwise), or (b) the ability of the Borrower to pay or perform any obligation to the Bank; and (xiii) the occurrence of any event described in subparagraph (i) through and including (xii) hereof with respect to any guarantor or any other party liable for, or whose assets or any interest therein secures, payment of any of the amounts due under this Note (“Guarantor”).

i. 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 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 agreements with the Bank or its Affiliates, applicable law, in equity or otherwise and may declare all or any part of any amounts due hereunder 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. All or any part of any amounts due hereunder whether or not payable on demand, shall be immediately due and payable automatically upon the occurrence of an Event of Default in sub-paragraph 3(d)(ix) above, or at the Bank’s option, upon the occurrence of any other Event of Default. The provisions hereof are not intended in any way to affect any rights of the Bank with respect to any amounts due hereunder which may now or hereafter be payable on demand.

4. CONTINUATION AND CONVERSION.

a. Elections. An Authorized Person may, upon irrevocable Request to the Bank in accordance with subsection (b) below:

i. elect to convert, as of any New York Business Day, any Base Rate Loan into a LIBOR Rate Loan, provided the amount converted is not less than the Minimum Borrowing Amount; or

ii. elect to convert, as of the last day of the applicable Interest Period, any or a portion of any LIBOR Rate Loan into a Base Rate Loan, provided no partial conversion of a LIBOR Rate Loan shall reduce the outstanding principal amount of such LIBOR Rate Loan to less than the Minimum Borrowing Amount; or

iii. elect to continue, as of the last day of the applicable Interest Period, any or a portion (subject to the Minimum Borrowing Amount limitation) of any LIBOR Rate Loan with the same or a different Interest Period, provided no partial continuation of a LIBOR Rate Loan with a different Interest Period shall reduce the outstanding principal amount of the remaining LIBOR Rate Loan with the same Interest Period to less than the Minimum Borrowing Amount.

b. Notice of Conversion/Continuation.

i. For an election under Section 4(a)(i) or 4(a)(iii) above, an Authorized Person must deliver to the Bank, by 2:00 p.m. (Eastern Standard Time) on a New York Business Day, a written notice for an election under Section 4(a)(i) (“Notice of Conversion”) or a written notice for an election under Section 4(a)(iii) (“Notice of Continuation”) (either, a “Notice”), specifying:

(a) the aggregate amount of each LIBOR Rate Loan to be continued;

(b) the applicable LIBOR Rate selection and corresponding Interest Period duration for each LIBOR Rate Loan to be continued (see LIBOR Rate definition above); and

(c) whether the Automatic Continuation Option will be in effect for each such LIBOR Rate Loan. The Automatic Continuation Option shall be in effect for each LIBOR Rate Loan, unless otherwise specified by Borrower in writing.

ii. For any election in accordance with Section 4(b)(i) above, the Conversion Date shall be two (2) Joint Business Days following the date the Bank receives the Notice of Conversion, and the Continuation Date shall be the later of (A) the last day of the applicable Interest Period, or (B) two (2) Joint Business Days following the date the Bank receives the Notice of Continuation, except as otherwise determined by the Bank in its sole discretion. If a Notice is received after 2:00 p.m. (Eastern Standard Time) on any New York Business Day, such Notice will be deemed to have been received on the next New York Business Day. Accordingly, as an example, if Borrower has a LIBOR Rate Loan with a one month Interest Period ending on June 15 and wants to continue the LIBOR Rate Loan with a two month Interest Period, Borrower must deliver to the Bank an appropriate Notice of Continuation by no later than 2:00 p.m. (Eastern Standard Time) on June 13 (assuming that June 13 is a New York Business Day and June 14 and 15 are Joint Business Days).

iii. For LIBOR Rate Loans with the Automatic Continuation Option in effect, the Bank shall, at the end of each Interest Period, automatically continue such LIBOR Rate Loan with the same Interest Period.

iv. For an election under Section 4(a)(ii), an Authorized Person may deliver to the Bank a Notice of Conversion at any time during an Interest Period up to the last day of such Interest Period or may have the LIBOR Rate Loan automatically convert to a Base Rate Loan pursuant to Section 4(c). Any such Notice of Conversion delivered during an Interest Period shall be deemed effective on the last day of the Interest Period.

v. The Bank may take action on any Notice in reliance upon any oral, telephonic, written or teletransmitted Notice that the Bank in good faith believes to be valid and to have been made by Borrower or on behalf of Borrower by an Authorized Person. No Notice may be delivered by e-mail. The Bank may act on the Notice from any Authorized Person until the Bank shall have received from Borrower, and had a reasonable time to act on, written notice revoking the authority of such Authorized Person. The Bank shall incur no liability to Borrower or to any other person as a direct or indirect result of acting on any Notice under this Note. The Bank, in its sole discretion, may reject any Notice that is incomplete.

c. Expiration of Interest Period. With respect to any LIBOR Rate Loan for which an Automatic Continuation Option is not in effect, if Borrower does not deliver to the Bank an appropriate Notice of Continuation (in accordance with the terms hereof) at least two (2) Joint Business Days before the end of an Interest Period, the Bank shall have the right (but not the obligation) to immediately, and without notice, convert such LIBOR Rate Loan into a Base Rate Loan and such Loan shall accrue interest at the Base Rate until two (2) Joint Business Days after the Bank receives an appropriate Notice (in accordance with the terms hereof) electing to convert the Loan from a Base Rate Loan to a LIBOR Rate Loan. A Notice of Continuation received one (1) Joint Business Day before the end of an Interest Period may not effectuate a continuation of such Loan as a LIBOR Rate Loan as of the last day of the Interest Period. Rather, such LIBOR Rate Loan may be converted (in the manner described above) to a Base Rate Loan on the last day of the Interest Period. Such Notice of Continuation, however, will be deemed to be a Notice of Conversion that will be effective two (2) Joint Business Days from the date it is received (or deemed to be received) by the Bank.

d. Conversion upon Default. Unless the Bank shall otherwise consent in writing, if (i) Borrower fails to pay when due, in whole or in part, the indebtedness under the Note (whether by demand or otherwise), or (ii) there exists any condition or event which with the passage of time, the giving of notice or both shall constitute an event of default under any of Borrower’s agreement with the Bank, if any, no conversion or continuation elections by the Borrower shall be permitted, and the Bank, in its sole discretion, may (i) permit any outstanding LIBOR Rate Loans to continue until the last day of the applicable Interest Period at which time such Loan shall automatically be converted into a Base Rate Loan or (ii) convert any outstanding LIBOR Rate Loans into a Base Rate Loan before the end of the applicable Interest Period applicable to such LIBOR Rate Loan. Nothing herein shall be construed to be a waiver by the Bank to have any Loan accrue interest at the Default Rate of interest (which shall be calculated from the higher of the LIBOR Rate or the Base Rate) or the right of the Bank to charge and collect a Breakage Fee.

5. SETOFF. The Bank shall have the right to set off against the amounts owing under this Note any property held in a deposit or other account with the Bank or any of its affiliates or otherwise owing by the Bank or any of its affiliates in any capacity to Borrower or any guarantor or endorser of this Note. Such set-off shall be deemed to have been exercised immediately at the time the Bank or such affiliate elects to do so.

6. INTENTIONALLY OMITTED

7. BANK RECORDS CONCLUSIVE. The Bank shall set forth on a schedule attached to this Note or maintained on computer, the date and original principal amount of each Loan and the date and amount of each payment to be applied to the Outstanding Principal Amount of this Note. The Outstanding Principal Amount set forth on any such schedule shall be presumptive evidence of the Outstanding Principal Amount of this Note and of all Loans. No failure by the Bank to make, and no error by the Bank in making, any annotation on any such schedule shall affect the Borrower’s obligation to pay the principal and interest of each Loan or any other obligation of Borrower to the Bank pursuant to this Note.

8. PURPOSE. Borrower certifies (a) that no Loan will be used to purchase margin stock except with the Bank’s express prior written consent for each such purchase and (b) that all Loans shall be used for a business purpose, and not for any personal, family or household purpose.

9. AUTHORIZATION. Borrower, if a corporation, partnership, limited liability company, trust or other entity, represents that it is duly organized and in good standing or duly constituted in the state of its organization and is duly authorized to do business in all jurisdictions material to the conduct of its business; that the execution, delivery and performance of this Note have been duly authorized by all necessary regulatory and corporate or partnership action or by its governing instrument; that this Note has been duly executed by an authorized officer, partner or trustee and constitutes a binding obligation enforceable against Borrower and not in violation of any law, court order or agreement by which Borrower is bound; and that Borrower’s performance is not threatened by any pending or threatened litigation.

10. INABILITY TO DETERMINE LIBOR RATES, INCREASED COSTS, ILLEGALITY.

a. Increased Costs. If the Bank shall determine that due to either (a) the introduction of any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the LIBOR) in or in the interpretation of any requirement of law, or (b) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to the Bank of agreeing to make or making, funding or maintaining any LIBOR Rate Loans, then Borrower shall be liable for, and shall from time to time, upon demand therefor by the Bank, pay to the Bank such additional amounts as are sufficient to compensate the Bank for such increased costs.

b. Inability to Determine Rates. If the Bank shall determine that for any reason adequate and reasonable means do not exist for ascertaining LIBOR for any requested Interest Period with respect to a proposed LIBOR Rate Loan, the Bank will give notice of such determination to Borrower. Thereafter, the Bank may not make or maintain LIBOR Rate Loans, as the case may be, hereunder until the Bank revokes such notice in writing. Upon receipt of such notice, Borrower may revoke any pending Request or Notice with respect to a LIBOR Rate Loan. If Borrower does not revoke such Request or Notice, the Bank may make, or continue the Loans, as proposed by Borrower, in the amount specified in the applicable Request or Notice submitted by Borrower, but such Loans shall be made or continued as Base Rate Loans instead of LIBOR Rate Loans, as the case may be.

c. Illegality. If the Bank shall determine that the introduction of any law (statutory or common), treaty, rule, regulation, guideline or determination of an arbitrator or of a governmental authority or in the interpretation or administration thereof, has made it unlawful, or that any central bank or other governmental authority has asserted that it is unlawful for the Bank to make LIBOR Rate Loans, then, on notice thereof by the Bank to Borrower, the Bank may suspend the making of LIBOR Rate Loans until the Bank shall have notified Borrower that the circumstances giving rise to such determination shall no longer exist. If the Bank shall determine that it is unlawful to maintain any LIBOR Rate Loans, Borrower shall prepay in full all LIBOR Rate Loans then outstanding, together with accrued interest, either on the last date of the Interest Period thereof if the Bank may lawfully continue to maintain such LIBOR Rate Loans to such day, or immediately, if the Bank may not lawfully continue to maintain such LIBOR Rate Loans. If Borrower is required to prepay any LIBOR Rate Loan immediately as set forth in this subsection, then concurrently with such prepayment, Borrower may borrow from the Bank, in the amount of such repayment, a Base Rate Loan.

11. MISCELLANEOUS. This Note, together with any related loan and security agreements and guaranties, contains the entire agreement between the Bank and Borrower with respect to the Note, and supersedes every course of dealing, other conduct, oral agreement and representation previously made by the Bank. All rights and remedies of the Bank under applicable law and this Note or amendment of any provision of this Note are cumulative and not exclusive. No single, partial or delayed exercise by the Bank of any right or remedy shall preclude the subsequent exercise by the Bank at any time of any right or remedy of the Bank without notice. No waiver or amendment of any provision of this Note shall be effective unless made specifically in writing by the Bank. No course of dealing or other conduct, no oral agreement or representation made by the Bank, and no usage of trade, shall operate as a waiver of any right or remedy of the Bank. No waiver of any right or remedy of the Bank shall be effective unless made specifically in writing by the Bank. Borrower agrees that in any legal proceeding a copy of this Note kept in the Bank’s course of business may be admitted into evidence as an original. This Note is a binding obligation enforceable against Borrower and its successors and assigns and shall inure to the benefit of the Bank and its successors and assigns. If a court deems any provision of this Note invalid, the remainder of the Note shall remain in effect. Section headings are for convenience only. Singular number includes plural and neuter gender includes masculine and feminine as appropriate.

12. 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) New York Business Days after deposit in an official depository maintained by the United States Post Office for the collection of mail or one (1) New York 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.

13. JOINT AND SEVERAL. If there is more than one Borrower, each of them shall be jointly and severally liable for all amounts which become due under this Note and the term “Borrower” shall include each as well as all of them.

14. GOVERNING LAW; JURISDICTION. This Note has been delivered to and accepted by the Bank and will be deemed to be made in the State of New York. This Note 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 NOTE 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 Note.

15. WAIVER OF JURY TRIAL. BORROWER AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY BORROWER AND THE BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THIS NOTE OR THE TRANSACTIONS RELATED HERETO. 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. BORROWER ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS NOTE BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION.

x Amended and Restated Note. The Borrower acknowledges, agrees and understands that this Note is given in replacement of and in substitution for, but not in payment of, a prior Replacement Daily Adjusting LIBOR Grid Note dated on or about December 24, 2012, in the original principal amount of $25,000,000.00, given by Hardinge Inc. in favor of the Bank, as the same may have been amended or modified from time to time (“Prior Note”) , and further, that: (a) the obligations of Hardinge Inc. as evidenced by the Prior Note shall continue in full force and effect, as amended and restated by this Note, all of such obligations being hereby ratified and confirmed by the Borrower; (b) any and all liens, pledges, assignments and security interests securing Hardinge Inc.’s obligations under the Prior Note shall continue in full force and effect, are hereby ratified and confirmed by Hardinge Inc. , and are hereby acknowledged by the Borrower to now secure, among other things, all of the Borrower’s obligations to the Bank under this Note, and for purposes of Hardinge Inc., with the same priority, operation and effect as that relating to the obligations under the Prior Note; and (c) nothing herein contained shall be construed to extinguish, release, or discharge, or constitute, create, or effect a novation of, or an agreement to extinguish, the obligations of Hardinge Inc. with respect to the indebtedness originally described in the Prior Note or any of the liens, pledges, assignments and security interests securing such obligations.

Preauthorized Transfers from Deposit Account. If a deposit account number is provided in the following blank Borrower hereby authorizes the Bank to debit available funds in Borrower’s deposit account # with the Bank automatically for any amount which becomes due under this Note or as directed by an Authorized Person, by telephone.

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

HARDINGE INC.


By	/s/ Edward J. Gaio

	Name:	Edward J. Gaio

	Title:	Vice President and CFO


CHERRY ACQUISITION CORPORATION


By	/s/ Richard L. Simons

	Name:	Richard L. Simons

	Title:	President


USACH TECHNOLOGIES, INC.


By	/s/ Edward J. Gaio

	Name:	Edward J. Gaio

	Title:	Vice President

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

On the 30th day of April , in the year 2013, 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
	Notary Public

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

On the 30th day of April , in the year 2013, before me, the undersigned, a Notary Public in and for said State, personally appeared RICHARD L. SIMONS , 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
	Notary Public

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

	/s/ Nancy L. Curren
	Notary Public

FOR BANK USE ONLY

Authorization Confirmed:

Product Code: 11900

Disbursement of Funds:

Credit A/C	#	Off Ck	#	Payoff Obligation	#

	$		$		$

Exhibit 10.3

GENERAL SECURITY AGREEMENT

New York

Debtor (Name): Hardinge Inc.

(Organizational Structure): Corporation

(State Law organized under): New York

(Organizational Identification Number, if any; note that this is NOT a request for the Taxpayer Identification Number):

(Address of residence/chief executive office): One Hardinge Drive, Elmira, New York 14902

Bank/Secured Party: M&T Bank , a New York banking corporation with its banking offices at One M&T Plaza, Buffalo, New York 14203 Attention: Office of General Counsel.

For good and valuable consideration, the receipt and sufficiency of which is acknowledged, and intending to be legally bound, Debtor agrees with Secured Party as follows:

1. Security Interests.

1.1 Grant . As security for the prompt and complete payment and performance when due of all of the Obligations, Debtor does hereby grant to Secured Party a continuing security interest (“Security Interest”) in all personal property and fixtures of Debtor, wherever located, whether now existing or owned or hereafter arising or acquired, whether or not subject to the Uniform Commercial Code, as the same may be in effect in the State of New York, as amended from time to time (“UCC”), and whether or not affixed to any realty, including, without limitation, (i) all accounts, chattel paper, investment property, deposit accounts, documents, goods, equipment, farm products, general intangibles (including trademarks, service marks, trade names, patents, copyrights, licenses and franchises), instruments, inventory, money, letter of credit rights, causes of action (including tort claims) and other personal property (including agreements and instruments not constituting chattel paper or a document, general intangible or instrument); (ii) all additions to, accessions to, substitutions for, replacements of and supporting obligations of the foregoing; (iii) all proceeds and products of the foregoing, including, without limitation, insurance proceeds; and (iv) all business records and information relating to any of the foregoing and any software or other programs for accessing and manipulating such information (collectively, the “Collateral”). Debtor acknowledges and agrees that the foregoing collateral description is intended to cover all assets of Debtor, other than real property assets. Nothing herein shall be construed to be a grant of a security interest in more than sixty-five percent (65%) of Debtor’s equity interests in any foreign subsidiary.

1.2 Obligations . The term “Obligations” means any and all indebtedness or other obligations of Debtor , Cherry Acquisition Corporation, or its successors and/or assigns, and Usach Technologies, Inc. (collectively, the “Borrowers”) to Secured Party 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, without limitation, any indebtedness or obligations (i) not yet outstanding but contracted for, or with regard to which any other commitment by Secured Party 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 Borrowers to others and which Secured Party obtained, or may obtain, by assignment or otherwise; or (iv) payable under this Agreement.

2. Covenants. Debtor covenants and agrees as follows:

2.1 Perfection of Security Interest . Debtor shall execute and deliver to Secured Party such financing statements, control agreements or other documents, in form and content satisfactory to Secured Party, as Secured Party may from time to time request to perfect and continue the Security Interest. Upon the request of Secured Party, Debtor shall deliver to Secured Party any and all instruments, chattel paper, negotiable documents or other documents evidencing or constituting any part of the Collateral properly endorsed or assigned, in a manner satisfactory to Secured Party. Until such delivery, Debtor shall hold such portion of the Collateral in trust for Secured Party. Borrowers shall pay all expenses for the preparation, filing, searches and related costs in connection with the grant and perfection of the Security Interest. Debtor authorizes (both prospectively and retroactively) Secured Party to file financing statements, and any continuations and amendments thereof, with respect to the Collateral without Debtor’s signature. A photocopy or other reproduction of any financing statement or this Agreement shall be sufficient as a financing statement for filing in any jurisdiction.

2.2 Negative Pledge; Disposition of Collateral . Debtor shall not grant or allow the imposition of any lien, security interest or encumbrance on, or assignment of, the Collateral unless consented to in writing by Secured Party. Debtor shall not make or permit to be made any sale, transfer or other disposition of the Collateral; provided, however, prior to the occurrence of an Event of Default, Debtor may in the ordinary course of business consistent with its past practices and with prudent and standard practices used in the industry that is the same or similar to that in which Debtor is engaged: (i) dispose of any Collateral consisting of equipment that is obsolete or worn-out; (ii) sell or exchange any Collateral consisting of equipment in connection with the acquisition of other equipment that is at least as valuable as such equipment, that Debtor intends to use for substantially the same purposes as such equipment and that is not subject to any security interest or other lien or encumbrance; (iii) collect Collateral

consisting of accounts or assign such Collateral for purposes of collection; or (iv) sell or lease Collateral consisting of inventory. A sale, lease or other transfer of such Collateral consisting of inventory in the ordinary course of Debtor’s business does not include a transfer in partial or complete satisfaction of any liability or obligation or any bulk sale.

2.3 Condition of Collateral; Impermissible Use . Debtor shall keep the Collateral consisting of goods in good condition and shall not commit or permit damage or destruction (other than ordinary wear and tear) to such Collateral. Debtor shall not permit any Collateral consisting of goods (i) to be used in such a manner that would violate any insurance policy or warranty covering the Collateral or that would violate any applicable law of any governmental authority (including any environmental law) now or hereafter in effect; (ii) to become fixtures on any real property on which Secured Party does not have a first priority mortgage lien (unless Secured Party has been provided with an acceptable landlord/mortgagee waiver) or become an accession to any goods not included in the Collateral; or (iii) to be placed in any warehouse that may issue a negotiable document with regard to such Collateral.

2.4 Modification to Collateral . Debtor shall not, without Secured Party’s prior written consent, grant any extension on, compound, settle for less than the full amount of, release (in whole or in part), modify, cancel, or allow for any substitution, credit or adjustment on Collateral consisting of accounts, chattel paper, general intangibles, instruments, documents or investment property, except that in the absence of an Event of Default, Debtor may grant to account debtors, or other persons obligated with respect to the Collateral, extensions, credits, discounts, compromises or settlements in the ordinary course of business consistent with its past practices and consistent with prudent and standard practices used in the industries that are the same or similar to those in which Debtor is engaged.

2.5 Titled Goods . Debtor shall cause all goods included in the Collateral to be properly titled and registered to the extent required by applicable law. Upon the request of Secured Party, Debtor shall cause the interest of Secured Party to be properly indicated on any certificate of title relating to such goods and deliver to Secured Party each such certificate, and any additional evidence of ownership, certificates of origin or other documents evidencing any interest in such goods.

2.6 Insurance . Debtor shall, at its own expense and at all times, maintain effective insurance policies covering damage to persons and against fire, flood, theft and all other risks to which the Collateral may be subject, all in such amounts, with such deductibles and issued by such insurance company as shall be satisfactory to Secured Party. Such insurance policies shall have all endorsements that Secured Party may require and shall further (i) name Secured Party, exclusively, as the additional insured on the casualty insurance and the lender’s loss payee and/or mortgagee on the hazard insurance; (ii) provide that Secured Party shall receive a minimum of thirty (30) days prior written notice of any amendment or cancellation; and (iii) insure Secured Party notwithstanding any act or neglect of Debtor or other owner of the property described in such insurance. If Debtor fails to obtain the required insurance as provided herein, Secured Party may, but is not obligated, to obtain such insurance as Secured Party may deem appropriate, including, without limitation, if Secured Party so chooses, “single interest insurance” which will cover only Secured Party’s interest in the Collateral. Debtor shall pay or reimburse to Secured Party the cost of such insurance. Secured Party shall have the option, in its sole discretion, to hold insurance proceeds as part of the Collateral, apply any insurance proceeds toward the Obligations or allow the Debtor to apply the insurance proceeds towards repair or replacement of the item of Collateral in respect of which such proceeds were received. Upon the request of Secured Party, Debtor shall from time to time deliver to Secured Party such insurance policies, or other evidence of such policies satisfactory to Secured Party, and such other related information Secured Party may request.

2.7 Collateral Information . Debtor shall provide all information, in form and substance satisfactory to Secured Party, that Secured Party shall from time to time request to (i) identify the nature, extent, value, age and location of any of the Collateral, or (ii) identify any account debtor or other party obligated with respect to any chattel paper, general intangible, instrument, investment property, document or deposit account included in the Collateral.

2.8 Financial Information . Debtor and Borrowers shall furnish to Secured Party financial statements as required by Credit Agreement dated as of the date hereof among the Secured Party, the Debtor and the Borrower.

2.9 Taxes; Licenses; Compliance with Laws . Before the end of any applicable grace period, Debtor shall pay each tax, assessment, fee and charge imposed by any governmental authority upon the Collateral, the ownership, disposition or use of any of the Collateral, this Agreement or any instrument evidencing any of the Obligations. Debtor shall maintain in full force and effect each license, franchise or other authorization needed for any ownership, disposition or use of the Collateral and the conduct of its business, operations or affairs. Debtor shall comply with all applicable law of any governmental authority (including any environmental law), now or hereafter in effect, applicable to the ownership, disposition or use of the Collateral or the conduct of its business, operations or affairs.

2.10 Records; Legend . Debtor shall maintain accurate and complete books and records relating to the Collateral in conformity with generally accepted accounting principles consistently applied. At Secured Party’s request, Debtor will legend, in form and manner satisfactory to Secured Party, its books and records to indicate the Security Interest.

2.11 Notifications of Change . Immediately upon acquiring knowledge or reason to know of any of the following, Debtor shall notify Secured Party of the occurrence or existence of (i) any Event of Default; (ii) any event or condition that, after notice, lapse of time or after both notice and lapse of time, would constitute an Event of Default; (iii) any account or general intangible that arises out of a contract with any governmental authority (including the United States); (iv) any event or condition that has or (so far as can be foreseen) will or might have any material adverse effect on the Collateral (including a material loss, destruction or theft of, or of any damage to, the Collateral, material decline in value of the Collateral or a material default by an account debtor or other party’s performance of obligations with respect to the Collateral), on Debtor or its business, operations, affairs or condition (financial or otherwise).

give Secured Party notice of such fact; (ii) receive and hold any money advanced by Secured Party with respect to such account or general intangible as a trust fund to be first applied to the payment of trust claims as such term and/or concept is defined in the Lien Law (in Section 71 thereof, or otherwise); and (iii) until such trust claim is paid, not use or permit the use of any such money for any purpose other than the payment of such trust claims.

2.13 Protection of Collateral; Further Assurances . Debtor shall, at its own cost, faithfully preserve, defend and protect the Security Interest as a prior perfected security interest in the Collateral under the UCC and other applicable law, superior and prior to the rights of all third parties (other than those permitted pursuant to Section 3.1) and shall defend the Collateral against all setoffs, claims, counterclaims, demands and defenses. At the request of Secured Party, Debtor shall do, obtain, make, execute and deliver all such additional and further acts, things, deeds, assurances and instruments as Secured Party may deem necessary or advisable from time to time in order to attach, continue, preserve, perfect or protect the Security Interest and Secured Party’s rights hereunder including obtaining waivers (in form and content acceptable to Secured Party) from landlords, warehousemen and mortgagees. Debtor hereby irrevocably appoints Secured Party, its officers, employees and agents, or any of them, as attorneys-in-fact for Debtor with full power and authority in the place and stead of Debtor and in the name of Debtor or its own name from time to time in Secured Party’s discretion, to perform all acts which Secured Party deems appropriate to attach, continue, preserve or perfect and continue the Security Interest, including signing for Debtor (to the extent such signature may be required by applicable law) UCC-1 financing statements, UCC-3 amendment or other instruments and documents to accomplish the purposes of this Agreement. This power of attorney, being coupled with an interest, is irrevocable and shall not be affected by the subsequent disability or incompetence of Debtor.

3. Representations and Warranties. Debtor represents, warrants and agrees as follows:

3.1 Title . Debtor holds good and marketable title to the Collateral free and clear from any security interest or other lien or encumbrance of any party, other than the Security Interest or such liens, security interests or other liens or encumbrances specifically permitted by Secured Party and set forth on Exhibit A hereto (“Permitted Liens”). Debtor has not made any prior sale, pledge, encumbrance, assignment or other disposition of any of the Collateral except for the Permitted Liens.

3.2 Authority . If Debtor is a business entity, it is duly organized, validly existing and in good standing under the laws of the above-named state of organization. Debtor has the full power and authority to grant the Security Interest and to execute, deliver and perform its obligations in accordance with this Agreement. The execution and delivery of this Agreement will not (i) violate any applicable law of any governmental authority or any judgment or order of any court, other governmental authority or arbitrator; (ii) violate any agreement governing Debtor or to which Debtor is a party; or (iii) result in a security interest or other lien or encumbrance on any of Debtor’s assets, except in favor of Secured Party. Debtor’s certificate of incorporation, by-laws or other organizational documents do not prohibit any term or condition of this Agreement. Each authorization, approval or consent from, each registration and filing with, each declaration and notice to, and each other act by or relating to, any party required as a condition of Debtor’s execution, delivery or performance of this Agreement (including any shareholder or board of directors or similar approvals) has been duly obtained and is in full force and effect. Debtor has the power and authority to transact the business in which it is engaged and is duly licensed or qualified and in good standing in each jurisdiction in which the conduct of its business or ownership of property requires such licensing or such qualifications.

3.3 Judgments and Litigation . There is no pending or threatened claim, audit, investigation, action or other legal proceeding or judgment or order of any court, agency or other governmental authority or arbitrator which involves Debtor or the Collateral and which might have a material adverse effect upon the Collateral, the Debtor, its business, operations, affairs or condition (financial or otherwise), or threaten the validity of this Agreement or any related document or action. Debtor will immediately notify Secured Party upon acquiring knowledge of the foregoing.

3.4 Enforceability of Collateral . Instruments, chattel paper, accounts or documents which constitute any part of the Collateral are genuine and enforceable in accordance with their terms, comply with the applicable law of any governmental authority concerning form, content, manner of preparation and execution, and all persons appearing to be obligated on such Collateral have authority and capacity to contract and are in fact obligated as they appear to be on such Collateral. There are no restrictions on any assignment or other transfer or grant of the Security Interest by Debtor. Each sum represented by Debtor from time to time as owing on accounts, instruments, deposit accounts, chattel paper and general intangibles constituting any part of the Collateral by account debtors and other parties with respect to such Collateral is the sum actually and unconditionally owing by account debtors and other parties with respect thereto at such time, except for applicable normal cash discounts. None of the Collateral is subject to any defense, set-off, claim or counterclaim of a material nature against Debtor except as to which Debtor has notified Secured Party in writing.

3.5 Location of Chief Executive Office, Records, Collateral . The locations of the following are listed on page one of this Agreement or, if different or additional, on Exhibit A hereto: (i) Debtor’s residence, principal place of business and chief executive office; (ii) the office in which Debtor maintains its books or records relating to the Collateral; (iii) the facility (including any storage facility) at which now owned or subsequently acquired inventory, equipment and fixtures constituting any part of the Collateral shall be kept; and (iv) the real property on which any crop included in the Collateral is growing or is to be grown, or on which any timber constituting any part of the Collateral is or is to be standing. Debtor will not effect or permit any change in any of the foregoing locations (or remove or permit the removal of the records or Collateral therefrom, except for mobile equipment included in the Collateral which may be moved to another location for not more than thirty (30) days) without thirty (30) days prior written notice to Secured Party and all actions deemed necessary by Secured Party to maintain the Security Interest intended to be granted hereby at all times fully perfected and in full force and effect have been taken. All of the locations listed on page one or Exhibit A are owned by Debtor, or if not, by the party(ies) identified on Exhibit A.

3.6 Structure; Name . Debtor’s organizational structure, state of registration and organizational identification number (if any) are stated accurately on page one of this Agreement, and its full legal name and any trade name used to identify it are stated accurately on page one of this Agreement, or if different or additional are listed on Exhibit A hereto. Debtor will not change its name, any trade names or its identity, its organizational structure, state of registration or organizational identification number without thirty (30) days prior written notice to Secured Party.

All actions deemed necessary by Secured Party to maintain the Security Interest intended to be granted hereby at all times fully perfected and in full force and effect have been taken.

4. Performance and Expenditures by Secured Party. If Debtor fails to perform or comply with any of the terms hereof, Secured Party, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such terms including the payment or discharge of all taxes, fees, security interest or other liens, encumbrances or claims, at any time levied or placed on the Collateral. An election to make expenditures or to take action or perform an obligation of Debtor under this Agreement, after Debtor’s failure to perform, shall not affect Secured Party’s right to declare an Event of Default and to exercise its remedies. Nor shall the provisions of this Section relieve Debtor of any of its obligations hereunder with respect to the Collateral or impose any obligation on Secured Party to proceed in any particular manner with respect to the Collateral.

5. Duty of Secured Party. Secured Party’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession shall be to deal with it in the same manner as Secured Party deals with similar property for its own account. Neither Secured Party nor its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of the Collateral upon the request of Debtor or any other person or to take any other action whatsoever with regard to the Collateral. The powers conferred on Secured Party hereunder are solely to protect Secured Party’s interests in the Collateral and shall not impose any duty upon any Secured Party to exercise any such powers. Secured Party shall be accountable only for amounts that it actually receives as a result of the exercise of its powers under this Agreement, and neither it nor its officers, directors, employees or agents shall be responsible to Debtor for any act or failure to act hereunder, except for its own gross negligence or willful misconduct.

6. Certain Rights and Remedies.

6.1 Inspection; Verification . Secured Party, and such persons as it may designate, shall have the right from time to time to (i) audit and inspect (a) the Collateral, (b) all books and records related thereto (and make extracts and copies from such records), and (c) the premises upon which any of the Collateral or books and records may be located; (ii) discuss Debtor’s business, operations, affairs or condition (financial or otherwise) with its officers, accountants; and (iii) verify the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to the Collateral in any manner and through any medium Secured Party may consider appropriate (including contacting account debtors or third party possessing the Collateral for purpose of making such verification). Debtor shall furnish all assistance and information and perform any acts Secured Party may require regarding thereto. Debtor shall bear the cost and expense of any such inspection and verification.

6.2 Notification of Security Interest . After, and during the continuance of any Event of Default , Secured Party may notify any or all account debtors and other person obligated with respect to the Collateral of the Security Interest therein. Upon the request of Secured Party, Debtor agrees to enter into such warehousing, lockbox or other custodial arrangement with respect to any of the Collateral that Secured Party shall deem necessary or desirable.

6.3 Application of Proceeds . Secured Party may apply the proceeds from the sale, lease or other disposition or realization upon the Collateral to the Obligations in such order and manner and at such time as Secured Party shall, in its sole discretion, determine. Debtor shall remain liable for any deficiency if the proceeds of any sale, lease or other disposition or realization upon the Collateral are insufficient to pay the Obligations. Any proceeds received by Debtor from the Collateral after an Event of Default shall (i) be held by Debtor in trust for Secured Party in the same medium in which received; (ii) not be commingled with any assets of Debtor; and (iii) be delivered to Secured Party in the form received, properly indorsed to permit collection. After an Event of Default, Debtor shall promptly notify Secured Party of the return to or repossession by Debtor of goods constituting part of the Collateral, and Debtor shall hold the same in trust for Secured Party and shall dispose of the same as Secured Party directs.

6.4 Income and Proceeds of Instruments and Investment Property . Until the occurrence of an Event of Default, Debtor reserves the right to request to receive all cash income or cash distribution (whether in cash or evidenced by check) payable on account of any instrument or investment property constituting part of the Collateral (collectively, “Cash Distribution”). Until actually paid, all rights in the foregoing shall remain subject to the Security Interest. Any other income, dividend, distribution, increase in or profits (including any stock issued as a result of any stock split or dividend, any capital distributions and the like) on account of any instrument or investment property constituting part of the Collateral and, upon the occurrence of an Event of Default, all Cash Distributions, shall be delivered to Secured Party immediately upon receipt, in the exact form received and without commingling with other property which may be received by, paid or delivered to Debtor or for Debtor’s account, whether as an addition to, in discharge of, in substitution of, or in exchange of the Collateral. Until delivery, such Collateral shall be held in trust for Secured Party.

6.5 Registered Holder of the Collateral . While an Event of Default exists, Secured Party shall have the right to transfer to or register (with or without reference to this Agreement) in the name of Secured Party or its nominee any investment property, general intangible, instrument or deposit account constituting part of the Collateral so that Secured Party or such nominee shall appear as the sole owner of record thereof; provided, however, that so long as no Event of Default has occurred, Secured Party shall deliver to Debtor all notices, statements or other communications received by it or its nominee as such registered owner, and upon demand and receipt of payment of necessary expenses thereof, shall give to Debtor or its designee a proxy or proxies to vote and take all action with respect to such Collateral. After the occurrence and during the continuance of any Event of Default, Debtor waives all rights to be advised of or to receive any notices, statements or communications received by Secured Party or its nominee as such record owner, and agrees that no proxy or proxies given by Secured Party to Debtor or its designee as aforesaid shall thereafter be effective.

7. Default.

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 Debtor in the performance of any obligation, term or condition of this Agreement or any other agreement with Secured Party or any of its affiliates or subsidiaries (collectively, “Affiliates”); (iii) failure by Borrowers 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 could result 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) Debtor or Borrowers are dissolved, becomes insolvent, generally fails to pay or admits in writing its inability generally to pay its debts as they become due; (v) Debtor or Borrowers 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 Debtor or Borrowers to a third party; or the cessation by Debtor or Borrowers as a going business concern; (vi) Debtor or Borrowers 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 Debtor or Borrowers (or the making of any agreement therefor); (viii) the death or judicial declaration of incompetency of Debtor or Borrowers , if an individual; (ix) the entry of any judgment or order of any court, other governmental authority or arbitrator against Debtor or Borrowers 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 unbounded, unstayed or undismissed for a period of thirty (30) consecutive days ; (x) falsity, material omission or inaccuracy of facts submitted to Secured Party or any Affiliate (whether in a financial statement or otherwise); (xi) an adverse change in the Collateral, Debtor or Borrowers , their business, operations, affairs or condition (financial or otherwise) from the status shown on any financial statement or other document submitted to Secured Party, and which change Secured Party reasonably determines will have a material adverse effect on (a) Debtor, its business, operations or condition (financial or otherwise), or (b) the ability of Borrowers to pay or perform the Obligations; (xii) any pension plan of Debtor fails to comply with applicable law or has vested unfunded liabilities that, in the opinion of Secured Party, might have a material adverse effect on Debtor’s ability to repay its debts; (xiii) any indication or evidence received by Secured Party that Debtor may have directly or indirectly been engaged in any type of activity which, in Secured Party’s reasonable judgment , might result in the forfeiture of any property of Debtor to any governmental authority; or (xiv) the occurrence of any event described in Section 7.1(i) through and including 7.1(xiii) with respect to any material endorser, guarantor or any other party liable for, or whose assets or any interest therein secures, payment of any of the Obligations.

7.2 Rights and Remedies Upon Default . Upon the occurrence and during the continuation of any Event of Default, Secured Party without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law) to or upon Debtor or any other person (all and each of which demands, presentments, protests, advertisements and notices are hereby waived), may exercise all rights and remedies of a secured party under the UCC, under other applicable law, in equity or otherwise or available under in this Agreement including:

7.2.1 Access to Collateral . Secured Party, or its agents, may peaceably retake possession of the Collateral with or without notice or process of law, and for that purpose may enter upon any premises where the Collateral is located and remove the same. At Secured Party’s request, Debtor shall assemble the Collateral and deliver it to Secured Party or any place designated by Secured Party, at Debtor’s expense.

7.2.2 Sell Collateral . Secured Party shall have the right to sell, lease or otherwise dispose of the Collateral in one or more parcels at public or private sale or sales upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Each purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of Debtor. Debtor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which Debtor now has or may at any time in the future have under any applicable law now existing or hereafter enacted. Secured Party shall have the right to use Debtor’s premises and any materials or rights of Debtor (including any intellectual property rights) without charge for such sales or disposition of the Collateral or the completion of any work in progress for such times as Secured Party may see fit. Without in any way requiring notice to be given in the following time and manner, Debtor agrees that with respect to any notice by Secured Party of any sale, lease or other disposition or realization or other intended action hereunder or in connection herewith, whether required by the UCC or otherwise, such notice shall be deemed reasonable and proper if given at least ten (10) days before such action in the manner described below in the Section entitled “Notices”.

7.2.3 Collect Revenues . Secured Party may either directly or through a receiver (i) demand, collect and sue on any Collateral consisting of accounts or any other Collateral including notifying account debtors or any other persons obligated on the Collateral to make payment on the Collateral directly to Secured Party; (ii) file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Secured Party with respect to the Collateral or to enforce any other right in respect of the Collateral; (iii) take control, in any manner, of any payment or proceeds from the Collateral; (iv) prosecute or defend any suit, action or proceeding brought against Debtor with respect to the Collateral; (v) settle, compromise or adjust any and all claims arising under the Collateral or, to give such discharges or releases as Secured Party may deem appropriate; (vi) receive and collect all mail addressed to Debtor, direct the place of delivery thereof to any location designated by Secured Party; to open such mail; to remove all contents therefrom; to retain all contents thereof constituting or relating to the Collateral; (vii) execute, sign or endorse any and all claims, endorsements, assignments, checks or other instruments with respect to the Collateral; or (viii) generally, use, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral; and Debtor hereby irrevocably appoints Secured Party, its officers, employees and agents, or any of them, as attorneys-in-fact for Debtor with full power and authority in the place and stead of Debtor and in the name of Debtor or in its own name from time to time in Secured Party’s discretion, to take any and all appropriate action Secured Party deems necessary or desirable to accomplish any of the foregoing or otherwise to protect, preserve, collect or realize upon the Collateral or to accomplish the purposes of this Agreement. Debtor revokes each power of attorney (including any proxy) heretofore granted by Debtor with regard to the Collateral. This power of attorney, being coupled with an interest, is irrevocable and shall not be affected by the subsequent disability or incompetence of Debtor.

7.2.4 Setoff . Secured Party may place an administrative hold on and set off against the Obligations any property held in a deposit or other account with Secured Party or any of its Affiliates or otherwise owing by Secured Party or any of its Affiliates in any capacity to Debtor. Such set-off shall be deemed to have been exercised immediately at the time Secured Party or such Affiliate elects to do so.

8. Expenses. Debtor shall pay to Secured Party on demand all costs and expenses (including all reasonable fees and disbursements of all counsel retained for advice, suit, appeal or other proceedings or purpose and of any experts or agents it may retain), which Secured Party may incur in connection with (i) the administration of this Agreement, including any administrative fees Secured Party may impose for the preparation of discharges, releases or assignments to third-parties; (ii) the custody or preservation of, or the sale, lease or other disposition or realization on the Collateral; (iii) the enforcement and collection of any Obligations or any guaranty thereof; (iv) the exercise, performance, enforcement or protection of any of the rights of Secured Party hereunder; or (v) the failure of Debtor or Borrowers 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, Borrowers shall pay interest at the highest default rate specified in any instrument evidencing any of the Obligations from the date payment is demanded by Secured Party to the date reimbursed by Debtor or Borrowers . All such costs, expenses or fees under this Agreement shall be added to the Obligations.

9. Indemnification. Debtor shall indemnify Secured Party and its Affiliates and each officer, employee, accountant, attorney and other agent thereof (each such person being an “Indemnified Party”) on demand, without any limitation as to amount, against each liability, cost and expense (including all reasonable fees and disbursements of all counsel retained for advice, suit, appeal or other proceedings or purpose, and of any expert or agents an Indemnified Party may retain) heretofore or hereafter imposed on, incurred by or asserted against any Indemnified Party (including any claim involving any allegation of any violation of applicable law of any governmental authority (including any environmental law or criminal law)), however asserted and whether now existing or hereafter arising, arising out of any ownership, disposition or use of any of the Collateral; provided, however, the foregoing indemnity shall not apply to liability, cost or expense solely attributable to an Indemnified Party’s gross negligence or willful misconduct. This indemnity agreement shall survive the termination of this Agreement. Any amounts payable under this or any other section of this Agreement shall be additional Obligations secured hereby.

10. Miscellaneous.

10.1 Notices . Any demand or notice hereunder or under any applicable law pertaining hereto shall be in writing and duly given if delivered to Debtor (at its address on Secured Party’s records) or to Secured Party (at the address on page one and separately to Secured Party’s officer responsible for Debtor’s relationship with Secured Party). 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 Debtor and Secured Party.

10.2 Governing Law; Jurisdiction . This Agreement has been delivered to and accepted by Secured Party 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. DEBTOR AND BORROWERS 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 SECURED PARTY MAINTAINS A BRANCH AND CONSENTS THAT SECURED PARTY MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT DEBTOR’S AND BORROWERS’ ADDRESS SET FORTH ABOVE FOR PROVIDING NOTICE OR DEMAND; PROVIDED THAT NOTHING CONTAINED IN THIS AGREEMENT WILL PREVENT SECURED PARTY FROM BRINGING ANY ACTION, ENFORCING ANY AWARD OR JUDGMENT OR EXERCISING ANY RIGHTS AGAINST DEBTOR INDIVIDUALLY, AGAINST ANY SECURITY OR AGAINST ANY PROPERTY OF DEBTOR WITHIN ANY OTHER COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. Debtor and Borrowers acknowledge and agrees that the venue provided above is the most convenient forum for both Secured Party, Debtor and Borrowers . Debtor and Borrowers waive any objection to venue and any objection based on a more convenient forum in any action instituted under this Agreement.

10.3 Security Interest Absolute . All rights of Secured Party hereunder, the Security Interest and all obligations of Debtor and Borrowers hereunder shall be absolute and unconditional irrespective of (i) any filing by or against Debtor of any petition in bankruptcy or any action under federal or state law for the relief of debtors or the seeking or consenting to of the appointment of an administrator, receiver, custodian or similar officer for the wind up of its business; (ii) any lack of validity or enforceability of any agreement with respect to any of the Obligations, (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from any agreement or instrument with respect to the Obligations, (iv)any exchange, release or non-perfection of any lien or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (v) any other circumstance that might otherwise constitute a defense available to, or a discharge of, Debtor in respect of the Obligations or this Agreement. If, after receipt of any payment of all or any part of the Obligations, Secured Party 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, impermissible setoff, or a diversion of trust funds, or for any other reason, such payment shall be reinstated as part of the Obligations and this Agreement shall continue in full force notwithstanding any contrary action which may have been taken by Secured Party in reliance upon such payment, and any such contrary action so taken shall be without prejudice to Secured Party’s rights under this Agreement and shall be deemed to have been conditioned upon such payment having become final and irrevocable.

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. Debtor expressly disclaims any reliance on any course of dealing or usage of trade or oral representation of Secured Party including representations to make loans to Debtor. No notice to or demand on Debtor in any case shall entitle Debtor to any other or further notice or demand in similar or other circumstances.

10.5 Joint and Several; Successors and Assigns . If there is more than one Debtor or 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 “Debtor” shall include each as well as all of them. This Agreement shall be binding upon Debtor and Borrowers and upon their heirs and legal representatives, its successors and assignees, and shall inure to the benefit of, and be enforceable by, Secured Party, 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 any party without the prior written consent of Secured Party.

10.6 Waivers; Changes in Writing . No course of dealing or other conduct, no oral agreement or representation made by Secured Party or usage of trade shall operate as a waiver of any right or remedy of Secured Party. No waiver of any provision of this Agreement or consent to any departure by Debtor therefrom shall in any event be effective unless made specifically in writing by Secured Party 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 Debtor , Borrowers and Secured Party.

10.7 Interpretation . Unless the context otherwise clearly requires, references to plural includes the singular and references to the singular include the plural; 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. Debtor agrees that in any legal proceeding, a photocopy of this Agreement kept in Secured Party’s course of business may be admitted into evidence as an original. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the UCC.

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

[The remainder of this page has been intentionally left blank]

Dated May 9, 2013	HARDINGE INC.


/s/ Douglas J. Malone	By:	/s/ Edward J. Gaio
Signature of Witness	Name:	Edward J. Gaio
Douglas J. Malone	Title:	Vice President and CFO
Typed Name of Witness

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

On the 30th day of April, in the year 2013, 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
	Notary Public

FOR SECURED PARTY USE ONLY:

Authorization confirmed:

If Debtor’s Obligations arise under a guaranty in favor of Secured Party, list the name whose indebtedness is being guaranteed under such guaranty:

Exhibit A

1. Permitted Liens (§3.1) means and includes:

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

b. 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;

c. judgment liens in respect of judgments that do not constitute an Event of Default under Section 7;

d. 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 the ordinary conduct of business of the Debtor or any Subsidiary; and

e. existing liens set forth on Exhibit B hereto.

f. any liens in favor of M&T Bank or its affiliates.

2. Residence, principal place of business or chief executive office (§3.5(i))

3. Location of Books and Records (§3.5(ii))

4. Location of Inventory, Equipment, Fixtures, Crops or Timber (§3.5(iii) and §3.5(iv))

5. Locations Not Owned by Debtor and Name of Record Owner (§3.5)

6. Trade Name, “Doing Business As” Name or Assumed Name (§3.6)

EXHIBIT B

EXISTING LIENS

(A)

Debtor	Secured Party	Jurisdiction	Filing Information	Collateral
Jones & Shipman Hardinge Ltd.	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

Jones & Shipman Hardinge Ltd.	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 £4.2 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 and Romanshorn, Switzerland

EXHIBIT B (Continued)

EXISTING LIENS

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

Hardinge, Inc.	The Robert E. Morris Company	New York	New York SOS — Filing No. 201203028075963	Specific Equipment

Hardinge, Inc.	Machine Tool Systems, LLC	New York	New York SOS — Filing No. 201203218099177	Specific Equipment

Hardinge, Inc.	Bank of America, N.A	New York	New York SOS — Filing No. 201206110331952	All assets

(B) A lien in favor of American Chartered Bank on all personal property assets of USACH Technologies, Inc. securing indebtedness of USACH Technologies, Inc. to American Chartered Bank.

(C) Any security transfer of mortgage notes by Kellenberger in favor of Credit Suisse AG in connection with the Credit Suisse Facility.

Exhibit 10.4

Schedule Required by Instruction 2 to Item 601
of Regulation S-K

The General Security Agreements entered into in connection with the Amended and Restated Credit Agreement, dated May 9, 2013, by and among M&T Bank, Hardinge Inc., Cherry Acquisition Coporation (n/k/a Forkardt Inc.) and Usach Technologies, Inc. are substantially identical in all material respects to the General Security Agreement, dated May 9, 2013, by and between Hardinge Inc. and M&T Bank (which is featured as Exhibit 10.3 to the Form 10-Q for the quarter ended June 30, 2013) (the “Hardinge Security Agreement”) except as to (i) the parties thereto, (ii) the inclusion of the provision referenced below, which appears in Section 1.1 of the Hardinge Security Agreement and (iii) the inclusion of “Borrowers” in Section 7.1(v) as highlighted in brackets in the text of Section 7.1(v) referenced below (which appears in the Hardinge Security Agreement):

Section 1.1 Provision

Nothing herein shall be construed to be a grant of a security interest in more than sixty-five percent (65%) of Debtor’s equity interests in any foreign subsidiary.

Text of Section 7.1(v) (as highlighted with bracketed language)

(vi) Debtor or Borrowers 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 Debtor [or Borrowers] to a third party; or the cessation by Debtor or Borrowers as a going business concern;

Party to General Security Agreement with M&T Bank	Inclusion of Language in Section 1.1	Inclusion of Bracketed Language in Section 7.1(v)
Cherry Acquisition Corporation (n/k/a Forkardt Inc.)	No	No
Hardinge Technology Systems, Inc.	No	Yes
Usach Technologies, Inc.	No	No

Exhibit 10.5

CREDIT AGREEMENT

New York

May 9, 2013

Borrower: Hardinge, Inc., a New York corporation having an address of One Hardinge Drive, Elmira, New York 14902;

Hardinge Holdings GmbH a Swiss limited liability having an address of Heilig Kreuzstrasse 28, CH-9009,

St. Gallen, Switzerland

(collectively, “Borrower”)

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 . “Capital Expenditures” means, for any period, the sum of (without duplication) all expenditures (except permitted acquisitions) during such period for fixed or capital assets that are required to be capitalized under G.A.A.P. .

b. “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.

c. “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

d. “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.

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

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

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

t. “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).

v. Total Indebtedness, means at any time all Indebtedness of Hardinge, Inc. and its Subsidiaries determined on a consolidated basis other than Indebtedness described in clauses (g) or (h) of the definition of “Indebtedness”.

w. “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.

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

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

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:

x audited

o reviewed

o compiled

by an independent certified public accountant acceptable to the Bank , and all such statements shall be certified by the Borrower’s Chief Financial Officer , Chief Executive Officer or President 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, within forty-five (45) days of each fiscal year end, Borrower shall provide a copy of its annual operating budget for the Borrower’s consolidated operations, which shall include a balance sheet, income statement, statement of cash flows and assumptions relating to the budget. 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 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.

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

i. Licenses. Borrower shall maintain any and all required licenses and registrations required to operate the business of Borrower in the ordinary course.

k. Mandatory Prepayments. During the term of this Note, Borrower shall make the following mandatory prepayments (a) 100% of the net cash proceeds in connection with any asset sales, insurance proceeds or condemnation recoveries unless proceeds are reinvested in equivalent assets within six (6) months (b) 75% of the net cash proceeds in connection with any issuance of debt and (c) 75% of the net cash proceeds in connection with any issuance or sale of equity. All mandatory prepayments by Hardinge Inc. shall be posted the date received and applied to scheduled principal payments under that certain Term Note dated of even date herewith in the amount of $23,000,000.00 by Borrower to Bank in inverse order of maturity until all such amounts due thereunder have been paid. Thereafter, any mandatory prepayments shall be applied to other Obligations due to the Bank, in the Bank’s sole discretion.

l. Obligations to Hardinge Inc. under that certain Term Note dated of even date herewith in the amount of $23,000,000.00, are limited to and shall not exceed $12,000,000.00.

f. Distributions. Intentionally omitted.

h. Changes of Address. Change its address without the written approval of the Bank.

i. Negative Pledges to Third Parties. Shall not execute any type of negative pledge agreement with any other third parties.

x A. Minimum Fixed Charge Coverage Ratio. Permit the Minimum Fixed Charge Coverage Ratio to be less than 1.15 : 1.00. The Fixed Charge Coverage Ratio shall be measured at the end of each fiscal quarter, for the previous four quarters and be defined as EBITDA minus Non-Financed Capital Expenditures minus Tax Expense minus dividends to Fixed Charges.

x B. Total Leverage Ratio. Borrower’s Total Indebtedness less unrestricted cash in an amount not to exceed $10,000,000.00 and subject to a floor of $10,000,000.00 to combined EBITDA for the previous four (4) quarters shall not exceed 3.00 : 1.00 . This covenant shall be tested quarterly.

x C. Without the prior written consent of Bank, Borrower shall not make any Capital Expenditures in excess of $ 10,000,000.00 in the aggregate during any fiscal year of Borrower.

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) any principal installments on 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 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.

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; (iv) the exercise, performance, enforcement or protection of any of the rights of the Bank hereunder; or (v) 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.

10. MISCELLANEOUS.

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.

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.

g. Joint and Several; Successors and Assigns. Borrower Hardinge Inc. shall be jointly and severally liable for all amounts and obligations that become due under this Note. Borrower Hardinge Holdings GmbH shall be severally liable under this Note only for loans made to, and obligations incurred by Hardinge Holdings GmbH under this Note, but shall not be jointly liable under this Note for any loans made to, or obligations incurred solely by or on behalf of, Hardinge Inc. As to Hardinge Inc., where there is more than one Borrower, the term “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.

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.

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

HARDINGE HOLDINGS GMBH

By	/s/ Edward J. Gaio

	Name:			Edward J. Gaio

	Title:			Director


HARDINGE HOLDINGS GMBH

By	/s/ Peter Huersch

	Name:		Peter Huersch

	Title:		President

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF BROOME	)

	/s/ Douglas C. Tifft
	Notary Public

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

On the 30th day of April, in the year 2013, 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/ Douglas C. Tifft
	Notary Public

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

On the 30th day of April, in the year 2013, 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/ Douglas C. Tifft
	Notary Public

ACKNOWLEDGMENT

STATE OF	)
	: SS.
COUNTY OF	)

On the 29th day of April, in the year 2013, before me, the undersigned, a Notary Public in and for said State, personally appeared PETER HUERSCH , 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/ Christian Beutter
	Notary Public

BANK USE ONLY

Authorization Confirmed:
	Signature

SCHEDULE

Additional Representations and Warranties (§2)

1. Judgments and Litigation. None

Additional Affirmative Covenants (§3)

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

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;

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

a. Indebtedness of Hardinge Inc. to the former owners of USACH under the Contingent Payment Obligation, and any extension, renewal, or replacement thereof.

9. Indebtedness of Holdings to Manufacturers and Traders Trust Company under that certain Foreign Exchange Master Netting Agreement dated as of August 14, 2012, as amended.

10. Unsecured indebtedness of Hardinge Machine Tools B.V., Taiwan Branch in the amount of $12,000,000.

11. Unsecured indebtedness of Hardinge Machine (Shanghai) Co., Ltd. in the amount of CHY 20,000,000.00.

12. Indebtedness related to the existing liens set forth on Schedule 4(c) hereto.

Permitted Guaranties (§4(b)):

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;

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

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

6. any liens in favor of M&T Bank or its affiliates.

Permitted Investments (§4(d)) means:

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)):

Additional Miscellaneous Covenants (§11)

None

SCHEDULE 4(C)

EXISTING LIENS

(A)

Debtor	Secured Party	Jurisdiction	Filing Information	Collateral
Jones & Shipman Hardinge Ltd.	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
Jones & Shipman Hardinge Ltd.	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 £4.2 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 and Romanshorn, Switzerland
Hardinge, Inc.	KeyBank National Association	New York	New York SOS — Filing No. 201112018402949	All personal property
Hardinge Precision Machinery (Jiaxing)	China Construction Bank, Jiaxing Branch	China	N/A	Mortgage on land use right and construction in process

Co., Ltd
Hardinge, Inc.	The Robert E. Morris Company	New York	New York SOS — Filing No. 201203028075963	Specific Equipment
Hardinge, Inc.	Machine Tool Systems, LLC	New York	New York SOS — Filing No. 201203218099177	Specific Equipment
Hardinge, Inc.	Bank of America, N.A	New York	New York SOS — Filing No. 201206110331952	All assets

(B) A lien in favor of American Chartered Bank on all personal property assets of USACH Technologies, Inc. securing indebtedness of USACH Technologies, Inc. to American Chartered Bank.

(C) Any security transfer of mortgage notes by Kellenberger in favor of Credit Suisse AG in connection with the Credit Suisse Facility.

Exhibit 10.6

TERM NOTE

(Actual Balance Interest Accrual Method)

New York

May 9, 2013

$ 23,000,000.00

BORROWER: Hardinge, Inc., a New York corporation having an address of One Hardinge Drive, Elmira, New York 14902; and

Hardinge Holdings GmbH, a Swiss limited liability company having an address of Heilig Kreuzstrasse 28, CH-9009, St. Gallen, Switzerland

(collectively, “Borrower”)

BANK: M&T BANK , a New York banking corporation with its banking offices at One M&T Plaza, Buffalo, NY 14203. Attention: Office of the General Counsel.

Promise to Pay. For value received, intending to be legally bound, Borrower promises to pay to the order of the Bank, on the dates set forth below, the principal sum of Twenty-Three Million and 00/100 Dollars ($23,000,000.00) (the “Principal Amount”) plus interest as agreed below, all payments required by the Bank to fund any escrow accounts for the payment of taxes, insurance and/or other charges (collectively, “Escrow”), and all fees and costs (including without limitation attorneys’ fees and disbursements whether for internal or outside counsel) the Bank incurs in order to collect any amount due under this Note, to negotiate or document a workout or restructuring, or to preserve its rights or realize upon any guaranty or other security for the payment of this Note (“Expenses”).

Interest. The unpaid Principal Amount of this Note shall earn interest calculated on the basis of a 360-day year for the actual number of days of each year (365 or 366), from and including the date the proceeds of this Note are disbursed to, but not including, the date all amounts hereunder are paid in full, at a rate per year which shall be:

i. LIBOR Rate Loans . Interest shall accrue on the Principal Amount from and including the first day of the Interest Period (with the duration selected herein) until, but not including, the last day of such Interest Period or the day the Principal Amount is paid in full (if sooner), at a rate per annum equal to the LIBOR Rate determined and in effect on the applicable Rate Adjustment Date, plus the Eurocurrency Margin as defined on the LIBOR Rate Rider.

ii. Base Rate Loans . Interest shall accrue on a Base Rate Loan from and including the first date the Base Rate Loan was made ( i.e. , the Draw Date or the Conversion Date, as the case may be) to, but not including, the day such Base Rate Loan is paid in full or converted, at the rate per annum equal to the Base Rate, plus or minus the Variable Base Margin defined on the LIBOR Rate Rider. Any change in the Base Rate resulting from a change in the Bank’s prime rate shall be effective on the date of such change.

Maximum Legal Rate. It is the intent of the Bank and Borrower that in no event shall interest be payable at a rate in excess of the maximum rate permitted by applicable law (the “Maximum Legal Rate”). Solely to the extent necessary to prevent interest under this Note from exceeding the Maximum Legal Rate, Borrower agrees that any amount that would be treated as excessive under a final judicial interpretation of applicable law shall be deemed to have been a mistake and automatically canceled, and, if received by the Bank, shall be refunded to Borrower, without interest.

Default Rate. If an Event of Default (defined below) occurs, the interest rate on the unpaid Principal Amount shall immediately be automatically increased to two ( 2 ) percentage points per year above the otherwise applicable rate per year, and any judgment entered hereon or otherwise in connection with any suit to collect amounts due hereunder shall bear interest at such default rate.

Payments. Payments shall be made in immediately available United States funds at any banking office of the Bank.

Preauthorized Transfers from Deposit Account. If a deposit account number is provided in the following blank, Borrower hereby authorizes the Bank to debit Borrower’s deposit account # with the Bank automatically for any amount which becomes due under this Note.

Interest Accrual; Application of Payments. Interest will continue to accrue on the actual principal balance outstanding until the Principal Amount is paid in full. All installment payments (excluding voluntary prepayments of principal) will be applied as of the date each payment is received and processed. Payments may be applied in any order in the sole discretion of the Bank, but, prior to an Event of Default, may be applied chronologically (i.e., oldest invoice first) to unpaid amounts due and owing, in the following order: first to accrued interest, then to principal, then to Escrow, then to late charges and other fees, and then to all other Expenses.

“ Payment Due Date ” shall mean the 9th day of the month as it relates to interest payments and of August, November, February and May as it relates to scheduled principal payments . If there is no numerically corresponding calendar day in a particular month, the Payment Due Date shall be the last calendar day of such month); provided, however, to the extent, if at all, that a LIBOR-based interest rate is applicable, if in any applicable month the day identified above is not a Joint Business Day, the Payment Due Date shall be extended to the next succeeding Joint Business Day unless such next succeeding Joint Business Day would fall in the next calendar month, in which case such Payment Due Date shall be the immediately preceding Joint Business Day, so as to, in all instances, coincide with the end of the applicable Interest Period. See attached LIBOR Rate Rider, the terms of which are incorporated herein by reference, for definitions and additional provisions.

The “First Installment Payment Date” shall be, as it relates to interest, the Payment Due Date in the month of June 2013 and, as it relates to principal, the Payment Due Date in the month of August, 2013 . Initial pricing will be at Level II as provided for on the LIBOR Rate Rider.

The “ LIBOR Rate Rider ” shall mean the rider attached to this Note and made part hereof.

The “ Maturity Date” of this Note is the Payment Due Date in the month of May, 2018 .

Repayment Terms.

x Borrower shall pay to the Bank the Principal Amount plus interest owing pursuant to this Note in installments as follows:

(i) Twenty (20) consecutive quarterly (corresponding to the duration of the applicable Interest Period; see attached LIBOR Rate Rider) installments of principal as follows:

Year 1 — Four (4) quarterly principal payments, each in the amount of $375,000.00;

Year 2 — Four (4) quarterly principal payments, each in the amount of $625,000.00;

Years 3 to 5 — Twelve (12) quarterly principal payments, each in the amount of $1,000,000.00;

together with installments of interest payable monthly in arrears in amounts that may vary, due and payable on the First Installment Payment Date and each applicable Payment Due Date thereafter, and

(ii) ONE (1) FINAL INSTALLMENT, due and payable on the Maturity Date, in an amount equal to the outstanding Principal Amount, together with all other amounts outstanding hereunder, including, without limitation, accrued interest, costs and expenses.

The amortization period for this loan is 7 years, meaning that this is the approximate number of years that would be needed to repay the Principal Amount in full, based on the installment amount and payment frequency stated above. The amortization period may be longer than the term of this loan and shall not compromise the enforceability of the Maturity Date. To the extent, if at all, that (i) the repayment terms of this Note contemplate level installments of principal and interest during any period in which the applicable interest rate is a variable rate (“Variable Rate P&I Period”), and (ii) during any such Variable Rate Interest Period, the applicable interest rate changes in accordance with the terms of this Note, the Bank may, but shall be under no obligation to, recalculate and adjust at any time the installment amount due and payable to the Bank, so as to appropriately reamortize the unpaid Principal Amount, as of the date of such adjustment through the Maturity Date (or such other date as may be provided for herein). Borrower understands that non-adjustment of the installment amount as described herein could result in a greater portion of the unadjusted installment amount being applied to interest due, leaving less available to reduce the Principal Amount balance, resulting in a higher than expected Principal Amount balance due and payable to the Bank on the Maturity Date. Absent manifest error, the Bank’s determination of any amount due in connection herewith shall be conclusive.

Late Charge. If Borrower fails to pay, within five (5) days of its due date, any amount due and owing pursuant to this Note or any other agreement executed and delivered to the Bank in connection with this Note, including, without limitation, any Escrow payment due and owing, Borrower shall immediately pay to the Bank a late charge equal to the greatest of (a) $50.00, (b) five percent (5%) of the delinquent amount or (c) the Bank’s then current late charge as announced from time to time. Notwithstanding the above, if this Note is secured by a one- to six-family owner-occupied residence, the late charge shall equal 2% of the delinquent amount and shall be payable if payment is not received within fifteen days of its due date.

Voluntary Prepayment Premium. During the term of this Note, Borrower shall have the option of paying the unpaid Principal Amount to the Bank in advance of the Maturity Date, in whole or in part in minimum amounts of $1,000,000.00 , at any time and from time to time upon written notice received by the Bank at least three (3) days prior to making such payment; provided, however, as consideration for the privilege of making such prepayment, Borrower shall pay to the Bank a fee (the “Premium”) equal to the amount provided for on the attached LIBOR Rate Rider . Any partial prepayment of principal shall be posted as of the date received and applied on a pro-rata basis to scheduled principal payments . With any prepayment in full of the Principal Amount balance, Borrower shall also pay to the Bank all accrued interest and Expenses owing pursuant to this Note. In the event the Maturity Date of this Note is accelerated following an Event of Default, the Bank’s right to collect the Premium, as liquidated damages, shall accrue immediately, with the amount of the Premium to be determined in accordance with the terms of this Note at the time of any actual prepayment or other satisfaction, in whole or in part, by any means, of the principal indebtedness evidenced by this Note. Any tender of payment by or on behalf of the Borrower made after such Event of Default to satisfy or reduce the principal indebtedness shall be expressly deemed a voluntary prepayment, in which case, to the extent permitted by law, the Bank shall be entitled to the amount necessary to satisfy the entire indebtedness, plus the appropriate Premium calculated in accordance with the terms of this Note.

Mandatory Prepayments. During the term of this Note, Borrower shall make the following mandatory prepayments (a) 100% of the net cash proceeds in connection with any asset sales, insurance proceeds or condemnation recoveries unless proceeds are reinvested in equivalent assets within six (6) months (b) 75% of the net cash proceeds in connection with any issuance of debt and (c) 75% of the net cash proceeds in connection with any issuance or sale of equity. All mandatory prepayments shall be posted the date received and applied to scheduled principal payments due hereunder in inverse order of maturity until all such amounts due hereunder have been paid. Thereafter, any prepayments shall be applied to other Obligations due to the Bank, in the Bank’s sole discretion.

Representations, Warranties and Covenants. Borrower represents and warrants to and agrees and covenants with the Bank that now and until this Note is paid in full:

b. Business Purpose. The Loan proceeds shall be used only for a business purpose and not for any personal, family or household purpose.

c. Good Standing; Authority. Borrower is an entity or sole proprietor (i) duly organized and existing and in good standing under the laws of the jurisdiction in which it was formed, (ii) duly qualified, in good standing and authorized to do business in every jurisdiction in which failure to be so qualified might have a material adverse effect on its business or assets and (iii) has the power and authority to own each of its assets and to use them as contemplated now or in the future.

d. Legality. The execution, issuance, delivery to the Bank and performance by Borrower of this Note (i) are in furtherance of 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 or (B) violate Borrower’s certificate of incorporation or other governing instrument, constitute a default under any agreement binding on Borrower, or result in a lien or encumbrance on any assets of Borrower; and (iii) have been duly authorized by all necessary corporate or partnership action.

e. Compliance. The Borrower conducts its business and operations and the ownership of its assets in compliance with each applicable statute, regulation and other law, including without limitation environmental laws. All approvals, including without limitation authorizations, permits, consents, franchises, licenses, registrations, filings, declarations, reports and notices (the “Approvals”) necessary to the conduct of

Borrower’s business and for Borrower’s due issuance of this Note have been duly obtained and are in full force and effect. The Borrower is in compliance with all conditions of each Approval.

f. Financial and Other Information. For each year until this Note is paid in full, Borrower shall provide to the Bank in form and number of copies and by accountants satisfactory to the Bank, within ninety (90) days after the end of each fiscal year of the Borrower, statements of income and cash flows and the financial position and balance sheet of the Borrower as of the fiscal year end, each in reasonable detail and certified by an officer or member of Borrower to have been prepared in accordance with generally accepted accounting principles to present fairly the results of Borrower’s operations and cash flows and its financial position in conformity with such principles, and to be correct, complete and in accordance with Borrower’s records. Promptly upon the request of the Bank from time to time, Borrower shall supply all additional information requested and permit the Bank’s officers, employees, accountants, attorneys and other agents to (i) visit and inspect each of Borrower’s premises, (ii) examine, audit, copy and extract from Borrower’s records and (iii) discuss Borrower’s or its affiliates’ business, operations, assets, affairs or condition (financial or other) with its responsible officers and independent accountants.

g. Accounting; Tax Returns and Payment of Claims. Borrower 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 an attached schedule, has paid and will pay when due each tax, assessment, fee, charge, fine and penalty imposed by any taxing authority upon Borrower or any of its assets, income or franchises, as well as all amounts owed to mechanics, materialmen, landlords, suppliers and the like in the ordinary course of business.

h. Title to Assets; Insurance. Borrower has good and marketable title to each of its assets free of security interests and mortgages and other liens except as disclosed in its financial statements or on a schedule attached to this Note or pursuant to the Bank’s prior written consent. Borrower will maintain its property in good repair and will maintain and on request provide the Bank with evidence of insurance coverage satisfactory to the Bank including without limitation fire and hazard, liability, worker’s compensation and business interruption insurance and flood hazard insurance as required.

i. Judgments and Litigation. 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 (each an “Action”) which involves Borrower or its assets and might have a material adverse effect upon Borrower or threaten the validity of this Note or any related document or transaction. Borrower will immediately notify the Bank in writing upon acquiring knowledge of any such Action.

j. Notice of Change of Address and of Default. Borrower will immediately notify the Bank in writing (i) of any change in its address or of the location of any collateral securing this Note, (ii) of the occurrence of any Event of Default defined below, (iii) of any material change in Borrower’s ownership or management and (iv) of any material adverse change in Borrower’s ability to repay this Note.

k. No Transfer of Assets. Until this Note is paid in full, Borrower shall not without the prior written consent of the Bank (i) sell or otherwise dispose of substantially all of its assets, (ii) acquire substantially all of the assets of another entity, (iii) if it is a corporation, participate in any merger, consolidation or other absorption or (iv) agree to do any of these things.

Events of Default. The following constitute an event of default (“Event of Default”): (i) failure by Borrower to make any payment when due (whether at the stated maturity, by acceleration or otherwise) of any principal installments of the amounts due under this Note, or any part thereof, or to pay any interest thereon or any fee or other amount payable under this Note and such failure continues unremedied for a period of three (3) business days or there occurs any event or condition which after notice, lapse of time or both will permit such acceleration; (ii) Borrower defaults in the performance of any covenant or other provision with respect to this Note or any other agreement between Borrower and the Bank or any of its affiliates or subsidiaries (collectively, “Affiliate”); (iii) Borrower fails to pay when due (whether at the stated maturity, by acceleration or otherwise) any material indebtedness for borrowed money owing to the Bank (other than under this Note), any third party or Affiliate or the occurrence of any event which results in acceleration of payment of any such indebtedness or the failure to perform any agreement with any third party or Affiliate; (iv) the reorganization, merger, consolidation or dissolution of Borrower (or the making of any agreement therefor); the sale, assignment, transfer or delivery of all or substantially all of the assets of Borrower to a third party; or the cessation by Borrower as a going business concern; (v) the death or judicial declaration of incompetency of Borrower, if an individual; (vi) failure to pay, withhold or collect any tax as required by law; the service or filing against Borrower or any of its assets of any lien (other than a lien permitted in writing by the Bank), on or more judgments, garnishments, orders or awards 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, garnishment, order or award, and any such judgments, garnishments, orders or awards remain unbonded, unstayed or undismissed for a period of thirty (30) consecutive days ; (vii) if Borrower becomes insolvent or is generally not paying its debts as such debts become due; (viii) the making of any general assignment by Borrower for the benefit of creditors; the appointment of a receiver or similar trustee for Borrower or its assets; or the making of any, or sending notice of any intended, bulk sale; (ix) Borrower commences, or has commenced against it, any proceeding or request for relief under any bankruptcy, insolvency or similar laws now or hereafter in effect in the United States of America or any state or territory thereof or any foreign jurisdiction or any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against or winding up of affairs of Borrower which is not dismissed or stayed within sixty (60) days of commencement ; (x) any representation or warranty made in this Note, any related document, any agreement between Borrower and the Bank or any Affiliate or in any financial statement of Borrower proves to have been misleading in any material respect when made; Borrower omits to state a material fact necessary to make the statements made in this Note, any related document, any agreement between Borrower and the Bank or any Affiliate or any financial statement of Borrower not misleading in light of the circumstances in which they were made; or, if upon the date of execution of this Note, there shall have been any material adverse change in any of the facts disclosed in any financial statement, representation or warranty that was not disclosed in writing to the Bank at or prior to the time of execution hereof; (xi) any pension plan of 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 Borrower’s ability to repay its debts; (xii) an adverse change in the Borrower, its business, assets, operations, management, ownership, 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 effect on (a) the Borrower, its business, assets, operations or condition (financial or otherwise), or (b) the ability of the Borrower to pay or perform any obligation to the Bank; and (xiii) the occurrence of any event described in sub-paragraph (i) through and including (xii) hereof with respect to any guarantor or any other party liable for, or whose assets or any interest therein secures, payment of any of the amounts due under this Note (“Guarantor”).

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 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 agreements with the Bank or its Affiliates, applicable law, in equity or otherwise and may declare all or any part of any amounts due hereunder 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. All or any part of any amounts due hereunder whether or not payable on demand, shall be immediately due and payable automatically upon the occurrence of an Event of Default in sub-paragraph (ix) above, or at the Bank’s option, upon the occurrence of any other Event of Default. The provisions hereof are not intended in any way to affect any rights of the Bank with respect to any amounts due hereunder which may now or hereafter be payable on demand.

Right of Setoff. The Bank shall have the right to set off against the amounts owing under this Note any property held in a deposit or other account with the Bank or any Affiliates or otherwise owing by the Bank or any Affiliates in any capacity to Borrower or any Guarantor or endorser of this Note. Such setoff shall be deemed to have been exercised immediately at the time the Bank or such Affiliate elects to do so.

Miscellaneous. This Note, together with any related loan and collateral agreements and guaranties, contains the entire agreement between the Bank and Borrower with respect to the Note, and supersedes every course of dealing, other conduct, oral agreement and representation previously made by the Bank. All rights and remedies of the Bank under applicable law and this Note or amendment of any provision of this Note are cumulative and not exclusive. No single, partial or delayed exercise by the Bank of any right or remedy shall preclude the subsequent exercise by the Bank at any time of any right or remedy of the Bank without notice. No waiver or amendment of any provision of this Note shall be effective unless made specifically in writing by the Bank. No course of dealing or other conduct, no oral agreement or representation made by the Bank, and no usage of trade, shall operate as a waiver of any right or remedy of the Bank. No waiver of any right or remedy of the Bank shall be effective unless made specifically in writing by the Bank. Borrower agrees that in any legal proceeding, a copy of this Note kept in the Bank’s course of business may be admitted into evidence as an original. This Note is a binding obligation enforceable against Borrower and its successors and assigns and shall inure to the benefit of the Bank and its successors and assigns. If a court deems any provision of this Note invalid, the remainder of the Note shall remain in effect. Section headings are for convenience only. Singular number includes plural and neuter gender includes masculine and feminine as appropriate.

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.

Joint and Several. Borrower Hardinge Inc. shall be jointly and severally liable for all amounts and obligations that become due under this Note. Borrower Hardinge Holdings GmbH shall be severally liable under this Note only for loans made to, and obligations incurred by Hardinge Holdings GmbH under this Note, but shall not be jointly liable under this Note for any loans made to, or obligations incurred solely by or on behalf of, Hardinge Inc. As to Hardinge Inc., where there is more than one Borrower, the term “Borrower” shall include each as well as all of them. For purposes of this paragraph, obligations to Hardinge Inc. are limited to and shall not exceed $12,000,000.00.

Governing Law; Jurisdiction. This Note 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 Note 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 NEW YORK STATE 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 NOTE 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 Note.

Waiver of Jury Trial. BORROWER AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY BORROWER AND THE BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THIS NOTE OR THE TRANSACTIONS RELATED HERETO. 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. BORROWER ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS NOTE BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION.

o Amended and Restated Note . The Borrower acknowledges, agrees and understands that this Note is given in replacement of and in substitution for, but not in payment of, a prior note dated on or about , , in the original principal amount of $ , given by Borrower in favor of the Bank (or its predecessor-in-interest), as the same may have been amended or modified from time to time (“Prior Note”), and further, that: (a) the obligations of the Borrower as evidenced by the Prior Note shall continue in full force and effect, as amended and restated by this Note, all of such obligations being hereby ratified and confirmed by the Borrower; (b) any and all liens, pledges, assignments and security interests securing the Borrower’s obligations under the Prior Note shall continue in full force and effect, are hereby ratified and confirmed by the Borrower, and are hereby acknowledged by the Borrower to secure, among other things, all of the Borrower’s obligations to the Bank under this Note, with the same priority, operation and effect as that relating to the obligations under the Prior Note; and (c) nothing herein contained shall be construed to extinguish, release, or discharge, or constitute, create, or effect a novation of, or an agreement to extinguish, the obligations of the Borrower with respect to the indebtedness originally described in the Prior Note or any of the liens, pledges, assignments and security interests securing such obligations.

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

HARDINGE INC.


By	/s/ Edward J. Gaio

	Name:	Edward J. Gaio

	Title:	Vice President and CFO

HARDINGE HOLDINGS GMBH


By	/s/ Edward J. Gaio

	Name:		Edward J. Gaio

	Title:		Director

HARDINGE HOLDINGS GMBH


By	/s/ Peter Huersch

	Name:		Peter Huersch

	Title:

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

On the 30th day of April, in the year 2013, 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
	Notary Public

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

On the 30th day of April, in the year 2013, 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
	Notary Public

ACKNOWLEDGMENT

STATE OF	)
	: SS.
COUNTY OF	)

	/s/ Christian Beutter
	Notary Public

FOR BANK USE ONLY

Authorization Confirmed:
Disbursement of Funds:
Credit A/C	#	Off Ck	#	Payoff Obligation	#
	$		$		$

LIBOR RATE RIDER

(For Actual Balance Promissory Notes)

Borrower:	Hardinge Inc. and Hardinge Holdings GmbH (collectively, the “Borrower”)

Promissory Note Original Principal Amount:		$ 23,000,000.00

Promissory Note Date: May 9, 2013

DEFINITIONS. The above-referenced Promissory Note is referred to herein as the “Note”. As used in the Note and this Rider, each capitalized term shall have the meaning specified in the Note, and the following terms shall have the indicated meanings:

Pricing Level	Leverage Ratio	Base Rate Margin	LIBOR Margin	Commitment Fee
Level I	Equal to or greater than 2.50	100 Basis Points	300 Basis Points	0.38	%

Level II	Equal to or greater than 2.0 but less than 2.5	75 Basis Points	275 Basis Points	0.25	%

Level III	Equal to or greater than 1.5 but less than 2.0	50 Basis Points	250 Basis Points	0.25	%

Level IV	Less than 1.5	25 Basis Points	225 Basis Points	0.25	%

b. “Applicable Rate” shall mean either the LIBOR Rate or the Base Rate as the case may be

c. “Base Rate” shall mean the Applicable Margin (Base Rate Margin) above the rate of interest announced by the Bank each day as its prime rate of interest (“Prime Rate”)

d. “Conversion Date” shall mean the date on which Borrower’s election to convert a Base Rate Loan to a LIBOR Rate Loan, or a LIBOR Rate Loan to a Base Rate Loan, becomes effective in accordance with this Note.

e. “Interest Period” shall mean, as used in connection with a non-daily adjusting LIBOR Rate, the period commencing on the date of this Note or any Rate Adjustment Date (as the case may be) and ending on, as applicable, the next succeeding Payment Due Date or the Payment Due Date of the calendar month that is one (1) or three (3) months thereafter (as applicable in accordance with the LIBOR Rate in effect); provided, however, that if an Interest Period would end on a day that is not a Joint Business Day, such Interest Period shall be extended to the next succeeding Joint Business Day unless such next succeeding Joint Business Day would fall in the next calendar month, in which case such Interest Period shall end on the immediately preceding Joint Business Day. To the extent that the preceding clause results in either the extension or shortening of an Interest Period, the Bank shall have the right (but not the obligation) to shorten or extend, respectively, the succeeding Interest Period so that it shall end on a day that numerically corresponds to the intended Payment Due Date indicated in the Note.

f. “Joint Business Day” shall mean a day that is both a New York Business Day and a London Business Day.

g. “Leverage Ratio” means, as of the date of its determination, with respect to the Borrower, the ratio of (a) funded debt, excluding subordinate debt existing at the time of execution of this Note as of such date, over (b) EBITDA for the twelve (12) months ending as of such date, measured quarterly.

h. “LIBOR” shall mean the rate per annum (rounded upward, if necessary, to the nearest 1/16 th of 1%) obtained by dividing (i) either the one-day (i.e., overnight), one-month or three-month interest period London Interbank Offered Rate (as applicable in accordance with the LIBOR Rate in effect), fixed by the British Bankers Association for United States dollar deposits in the London interbank market at approximately 11:00 a.m. London, England time (or as soon thereafter as practicable) as determined by the Bank from any broker, quoting service or commonly available source utilized by the Bank, by (ii) a percentage equal to 100% minus the stated maximum rate of all reserves required to be maintained against “Eurocurrency Liabilities” as specified in Regulation D (or against any other category of liabilities which includes deposits by reference to which the interest rate on LIBOR-based loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States’ office of a bank to United States residents) on such date to any member bank of the Federal Reserve System. Notwithstanding any provision above, the practice of rounding to determine LIBOR may be discontinued at any time in the Bank’s sole discretion.

i. “LIBOR Rate” shall mean the Applicable Margin (LIBOR Margin) above the applicable LIBOR-based interest rate in effect from time to time, as provided for in the Note and this Rider.

j. “London Business Day” shall mean any day on which dealings in United States dollar deposits are carried on by banking institutions in the London interbank market.

k. “New York Business Day” shall mean any day other than Saturday, Sunday or other day in which commercial banking institutions in New York, New York are authorized or required by law or other governmental action to remain closed for business.

l. “One-Month LIBOR” shall mean LIBOR as fixed for a one-month interest period.

m. “Rate Adjustment Date” shall mean the effective date of a change in the applicable LIBOR Rate, as follows:

i. For a daily-adjusting LIBOR Rate, the Rate Adjustment Date shall be each London Business Day.

ii. For a monthly-adjusting LIBOR Rate (i.e., having an Interest Period of one (1) month), the Rate Adjustment Date shall be, in each month, the calendar day of that month that corresponds with the Payment Due Date in such month (as may be adjusted pursuant to the definition of “Payment Due Date” in the Note).

iii. For a quarterly-adjusting LIBOR Rate (i.e., having an Interest Period of three (3) months), the Rate Adjustment Date shall be, initially, the Payment Due Date that is three (3) months after the first day such LIBOR Rate is in effect (“Effective Date”), and thereafter, the Payment Due Date that is three (3) months after each prior Rate Adjustment Date, respectively; provided, however, that if the Effective Date is not a Payment Due Date, the first Rate Adjustment Date shall be the next succeeding Payment Due Date, after which a new three-month Interest Period shall begin with quarterly Rate Adjustment Dates thereafter, as provided above.

ADDITIONAL PROVISIONS:

Interest Rate Determinations and Adjustments.

· To the extent a daily-adjusting LIBOR Rate is in effect, the LIBOR Rate shall be determined using the One-Month LIBOR in effect on the date of the Note (or if such day is not a London Business Day, on the immediately preceding London Business Day), and shall be adjusted thereafter on each subsequent Rate Adjustment Date using the One-Month LIBOR in effect on each respective Rate Adjustment Date.

· To the extent a monthly-adjusting LIBOR Rate (i.e., a LIBOR Rate adjusting each month) or a quarterly-adjusting LIBOR Rate (i.e., a LIBOR Rate adjusting every three (3) months) is in effect, the initial LIBOR Rate shall be determined using the applicable LIBOR in effect two (2) London Business Days prior to the date of the Note (or two (2) London Business Days prior to the Amortization Commencement Date, as applicable), and shall be adjusted thereafter on each subsequent Rate Adjustment Date using the applicable LIBOR in effect (2) London Business Days prior to each Rate Adjustment Date, respectively.

Prepayment; Breakage Fee. Subject to the following, during the term of this Note, Borrower shall have the option of paying the Principal Amount to the Bank in advance of the Maturity Date, in whole or in part in minimum amounts of $1,000,000.00, at any time and from time to time upon written notice received by the Bank at least three (3) days prior to making such payment; provided, however, that if (i) Borrower prepays, in whole or in part, any Principal Amount, when a LIBOR Rate is in effect (other than on a Rate Adjustment Date), or (ii) the LIBOR Rate is converted to the Base Rate on any day other than a Rate Adjustment Date, then Borrower shall be liable for and shall pay the Bank, on demand, the higher of $250.00 or the actual amount of the liabilities, expenses, costs or funding losses that are a direct or indirect result of such prepayment or other condition described above, whether such liability, expense, cost or loss is by reason of (a) any reduction in yield, by reason of the liquidation or reemployment of any deposit or other funds acquired by the Bank, (b) the fixing of the interest rate payable on any LIBOR-based loan or (c) otherwise (collectively, the “Breakage Fee”). The determination by the Bank of the foregoing amount shall, in the absence of manifest error, be conclusive and binding upon Borrower. The provisions of this paragraph shall not be applicable if the LIBOR Rate in effect at the time of the prepayment has an Interest Period of one day.

Inability to Determine LIBOR Rates, Increased Costs, Illegality.

a. Increased Costs. If the Bank shall determine that, due to either (a) the introduction of any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the LIBOR Rate) in or in the interpretation of any requirement of law or (b) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to the Bank of agreeing to make or making, funding or maintaining any loans based on LIBOR, then Borrower shall be liable for, and shall from time to time, upon demand therefor by the Bank, pay to the Bank such additional amounts as are sufficient to compensate the Bank for such increased costs.

b. Inability to Determine Rates. If the Bank shall determine that for any reason adequate and reasonable means do not exist for ascertaining LIBOR, the Bank will give notice of such determination to Borrower. Thereafter, the Bank may not maintain the loan hereunder at the LIBOR Rate until the Bank revokes such notice in writing and, until such revocation, the Bank may convert the applicable interest rate to the Base Rate.

Conversion To Base Rate Upon Default. Unless the Bank shall otherwise consent in writing, if (i) Borrower fails to pay when due, in whole or in part, the indebtedness under the Note (whether upon maturity, acceleration or otherwise), or (ii) there exists a condition or event which with the passage of time, the giving of notice or both shall constitute an Event of Default, the Bank, in its sole discretion, may (i) permit the LIBOR Rate to remain in effect until a Rate Adjustment Date, at which time the applicable interest rate shall automatically be converted to the Base Rate, or (ii) convert the LIBOR Rate to the Base Rate at or before a Rate Adjustment Date. Nothing herein shall be construed to be a waiver by the Bank of the right to have the Principal Amount accrue interest at the Default Rate or the right of the Bank to charge and collect a Breakage Fee.

Repayment Upon Conversion To Base Rate. If a LIBOR Rate with an Interest Period duration of greater than one day is converted to the Base Rate at a time when the repayment terms under the Note require the Borrower to make principal payments to the Bank, Borrower shall thereafter pay the unpaid Principal Amount in consecutive monthly installments commencing on the first Payment Due Date after the date of such conversion and on the same Payment Due Date thereafter, plus accrued interest in amounts that may vary, until (a) conversion back to the LIBOR Rate (at which time Borrower shall resume the monthly, bi-monthly or quarterly installments in the amount set forth in the Note, or as otherwise agreed to by the Bank and Borrower in writing) or (b) the Maturity Date (at which time Borrower shall pay the Final Installment), with each such installment being equal and in the amount necessary to fully amortize the outstanding Principal Amount of the Note in full by the Maturity Date or such other date agreed to by the Bank and Borrower in writing. The determination by the Bank of the foregoing amount shall, in the absence of manifest error, be conclusive and binding upon Borrower.

HARDINGE INC.

By			/s/ Edward J. Gaio
Name:			Edward J. Gaio
Title:			Vice President and Chief Financial Officer

HARDINGE HOLDINGS GMBH


By		/s/ Peter Huersch
Name:		Peter Huersch
Title:		Officer

HARDINGE HOLDINGS GMBH


By	/s/ Edward J. Gaio
Name:	Edward J. Gaio
Title:	Director

Exhibit 10.7

GENERAL SECURITY AGREEMENT

New York

Debtor (Name): Hardinge Inc.

(Organizational Structure): Corporation

(State Law organized under): New York

(Organizational Identification Number, if any; note that this is NOT a request for the Taxpayer Identification Number):

(Address of residence/chief executive office): One Hardinge Drive, Elmira, New York 14902

Bank/Secured Party: M&T Bank , a New York banking corporation with its banking offices at One M&T Plaza, Buffalo, New York 14203 Attention: Office of General Counsel.

For good and valuable consideration, the receipt and sufficiency of which is acknowledged, and intending to be legally bound, Debtor agrees with Secured Party as follows:

1. Security Interests.

1.2 Obligations . The term “Obligations” means any and all indebtedness or other obligations of Debtor and Hardinge Holdings GmbH (collectively, the “Borrowers”) to Secured Party 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, without limitation, any indebtedness or obligations (i) not yet outstanding but contracted for, or with regard to which any other commitment by Secured Party 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 Borrowers to others and which Secured Party obtained, or may obtain, by assignment or otherwise; or (iv) payable under this Agreement.

2. Covenants. Debtor covenants and agrees as follows:

2.12 Lien Law . If any account or general intangible included in the Collateral represents money owing pursuant to any contract for the improvement of real property or for a public improvement for purposes of the Lien Law of the State of New York (the “Lien Law”), Debtor shall (i) give Secured Party notice of such fact; (ii) receive and hold any money advanced by Secured Party with respect to such account or general intangible as a trust fund to be first applied to the payment of trust claims as such term and/or concept is defined in the Lien Law (in Section 71 thereof, or otherwise); and (iii) until such trust claim is paid, not use or permit the use of any such money for any purpose other than the payment of such trust claims.

3. Representations and Warranties. Debtor represents, warrants and agrees as follows:

6. Certain Rights and Remedies.

7. Default.

7.1 Events of Default . Any of the following events or conditions shall constitute an “Event of Default”: (i) failure by Borrowers to pay when due (whether at the stated maturity, by acceleration, upon demand or otherwise) any principal installments on 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 Debtor in the performance of any obligation, term or condition of this Agreement or any other agreement with Secured Party or any of its affiliates or subsidiaries (collectively, “Affiliates”); (iii) failure by Borrowers 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 could result 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) Debtor or Borrowers are dissolved, becomes insolvent, generally fails to pay or admits in writing its inability generally to pay its debts as they become due; (v) Debtor or Borrowers 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 Debtor or Borrowers to a third party; or the cessation by Debtor or Borrowers as a going business concern; (vi) Debtor or Borrowers 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 Debtor or Borrowers (or the making of any agreement therefor); (viii) the death or judicial declaration of incompetency of Debtor or Borrowers , if an individual; (ix) the entry of any judgment or order of any court, other governmental authority or arbitrator against Debtor or Borrowers 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 unbounded, unstayed or undismissed for a period of thirty (30) consecutive days ; (x) falsity, material omission or inaccuracy of facts submitted to Secured Party or any Affiliate (whether in a financial statement or otherwise); (xi) an adverse change in the Collateral, Debtor, or Borrowers their business, operations, affairs or condition (financial or otherwise) from the status shown on any financial statement or other document submitted to Secured Party, and which change Secured Party reasonably determines will have a material adverse effect on (a) Debtor, its business, operations or condition (financial or otherwise), or (b) the ability of Debtor or Borrowers to pay or perform the Obligations; (xii) any pension plan of Debtor fails to comply with applicable law or has vested unfunded liabilities that, in the opinion of Secured Party, might have a material adverse effect on Debtor’s ability to repay its debts; (xiii) any indication or evidence received by Secured Party that Debtor may have directly or indirectly been engaged in any type of activity which, in Secured Party’s reasonable judgment , might result in the forfeiture of any property of Debtor to any governmental authority; or (xiv) the occurrence of any event described in Section 7.1(i) through and including 7.1(xiii) with respect to any material endorser, guarantor or any other party liable for, or whose assets or any interest therein secures, payment of any of the Obligations.

7.2.1

7.2.2 Access to Collateral . Secured Party, or its agents, may peaceably retake possession of the Collateral with or without notice or process of law, and for that purpose may enter upon any premises where the Collateral is located and remove the same. At Secured Party’s request, Debtor shall assemble the Collateral and deliver it to Secured Party or any place designated by Secured Party, at Debtor’s expense.

7.2.3 Sell Collateral . Secured Party shall have the right to sell, lease or otherwise dispose of the Collateral in one or more parcels at public or private sale or sales upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Each purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of Debtor. Debtor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal which Debtor now has or may at any time in the future have under any applicable law now existing or hereafter enacted. Secured Party shall have the right to use Debtor’s premises and any materials or rights of Debtor (including any intellectual property rights) without charge for such sales or disposition of the Collateral or the completion of any work in progress for such times as Secured Party may see fit. Without in any way requiring notice to be given in the following time and manner, Debtor agrees that with respect to any notice by Secured Party of any sale, lease or other disposition or realization or other intended action hereunder or in connection herewith, whether required by the UCC or otherwise, such notice shall be deemed reasonable and proper if given at least ten (10) days before such action in the manner described below in the Section entitled “Notices”.

7.2.4 Collect Revenues . Secured Party may either directly or through a receiver (i) demand, collect and sue on any Collateral consisting of accounts or any other Collateral including notifying account debtors or any other persons obligated on the Collateral to make payment on the Collateral directly to Secured Party; (ii) file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Secured Party with respect to the Collateral or to enforce any other right in respect of the Collateral; (iii) take control, in any manner, of any payment or proceeds from the Collateral; (iv) prosecute or defend any suit, action or proceeding brought against Debtor with respect to the Collateral; (v) settle, compromise or adjust any and all claims arising under the Collateral or, to give such discharges or releases as Secured Party may deem appropriate; (vi) receive and collect all mail addressed to Debtor, direct the place of delivery thereof to any location designated by Secured Party; to open such mail; to remove all contents therefrom; to retain all contents thereof constituting or relating to the Collateral; (vii) execute, sign or endorse any and all claims, endorsements, assignments, checks or other instruments with respect to the Collateral; or (viii) generally, use, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral; and

Debtor hereby irrevocably appoints Secured Party, its officers, employees and agents, or any of them, as attorneys-in-fact for Debtor with full power and authority in the place and stead of Debtor and in the name of Debtor or in its own name from time to time in Secured Party’s discretion, to take any and all appropriate action Secured Party deems necessary or desirable to accomplish any of the foregoing or otherwise to protect, preserve, collect or realize upon the Collateral or to accomplish the purposes of this Agreement. Debtor revokes each power of attorney (including any proxy) heretofore granted by Debtor with regard to the Collateral. This power of attorney, being coupled with an interest, is irrevocable and shall not be affected by the subsequent disability or incompetence of Debtor.

7.2.5 Setoff . Secured Party may place an administrative hold on and set off against the Obligations any property held in a deposit or other account with Secured Party or any of its Affiliates or otherwise owing by Secured Party or any of its Affiliates in any capacity to Debtor. Such set-off shall be deemed to have been exercised immediately at the time Secured Party or such Affiliate elects to do so.

8. Expenses. Debtor shall pay to Secured Party on demand all costs and expenses (including all reasonable fees and disbursements of all counsel retained for advice, suit, appeal or other proceedings or purpose and of any experts or agents it may retain), which Secured Party may incur in connection with (i) the administration of this Agreement, including any administrative fees Secured Party may impose for the preparation of discharges, releases or assignments to third-parties; (ii) the custody or preservation of, or the sale, lease or other disposition or realization on the Collateral; (iii) the enforcement and collection of any Obligations or any guaranty thereof; (iv) the exercise, performance, enforcement or protection of any of the rights of Secured Party hereunder; or (v) the failure of Debtor or Borrowers 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, Borrowers shall pay interest at the highest default rate specified in any instrument evidencing any of the Obligations from the date payment is demanded by Secured Party to the date reimbursed by Debtor or Borrowers . All such costs, expenses or fees under this Agreement shall be added to the Obligations.

10. Miscellaneous.

10.2 Governing Law; Jurisdiction . This Agreement has been delivered to and accepted by Secured Party 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. DEBTOR AND BORROWERS 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 SECURED PARTY MAINTAINS A BRANCH AND CONSENTS THAT SECURED PARTY MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT DEBTOR’S AND BORROWERS’ ADDRESSES SET FORTH ABOVE FOR PROVIDING NOTICE OR DEMAND; PROVIDED THAT NOTHING CONTAINED IN THIS AGREEMENT WILL PREVENT SECURED PARTY FROM BRINGING ANY ACTION, ENFORCING ANY AWARD OR JUDGMENT OR EXERCISING ANY RIGHTS AGAINST DEBTOR INDIVIDUALLY, AGAINST ANY SECURITY OR AGAINST ANY PROPERTY OF DEBTOR WITHIN ANY OTHER COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. Debtor and Borrowers acknowledge and agrees that the venue provided above is the most convenient forum for both Secured Party and Debtor. Debtor and Borrowers waive any objection to venue and any objection based on a more convenient forum in any action instituted under this Agreement.

taken shall be without prejudice to Secured Party’s rights under this Agreement and shall be deemed to have been conditioned upon such payment having become final and irrevocable.

10.4 Remedies Cumulative; Preservation of Rights . The rights and remedies herein are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies which Secured Party may have under other agreements now or hereafter in effect between Debtor and Secured Party, at law (including under the UCC) or in equity. No failure or delay of Secured Party 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. Debtor expressly disclaims any reliance on any course of dealing or usage of trade or oral representation of Secured Party including representations to make loans to Debtor. No notice to or demand on Debtor in any case shall entitle Debtor to any other or further notice or demand in similar or other circumstances.

10.5 Joint and Several; Successors and Assigns . If there is more than one Debtor or 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 “Debtor” shall include each as well as all of them. This Agreement shall be binding upon Debtor and Borrowers and upon their heirs and legal representatives, its successors and assignees, and shall inure to the benefit of, and be enforceable by, Secured Party, 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 Debtor without the prior written consent of Secured Party.

[The remainder of this page has been intentionally left blank]

Dated May 9, 2013	HARDINGE INC.


/s/ Douglas J. Malone	By:	/s/ Edward J. Gaio
Signature of Witness	Name:	Edward J. Gaio
Douglas J. Malone	Title:	Vice President and CFO
Typed Name of Witness

ACKNOWLEDGMENT

STATE OF NEW YORK	)
	: SS.
COUNTY OF Chemung	)

	/s/ Nancy L. Curren
	Notary Public

FOR SECURED PARTY USE ONLY:
Authorization confirmed:
If Debtor’s Obligations arise under a guaranty in favor of Secured Party, list the name whose indebtedness is being guaranteed under such guaranty:

Exhibit A

1. Permitted Liens (§3.1) means and includes:

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

c. judgment liens in respect of judgments that do not constitute an Event of Default under Section 7;

e. existing liens set forth on Exhibit B hereto.

f. any liens in favor of M&T Bank or its affiliates.

2. Residence, principal place of business or chief executive office (§3.5(i))

3. Location of Books and Records (§3.5(ii))

4. Location of Inventory, Equipment, Fixtures, Crops or Timber (§3.5(iii) and §3.5(iv))

5. Locations Not Owned by Debtor and Name of Record Owner (§3.5)

6. Trade Name, “Doing Business As” Name or Assumed Name (§3.6)

EXHIBIT B

EXISTING LIENS

(A)

Debtor	Secured Party	Jurisdiction	Filing Information	Collateral
Jones & Shipman Hardinge Ltd.	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

Jones & Shipman Hardinge Ltd.	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 £4.2 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 and Romanshorn, Switzerland

EXHIBIT B (Continued)

EXISTING LIENS

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

Hardinge, Inc.	The Robert E. Morris Company	New York	New York SOS — Filing No. 201203028075963	Specific Equipment

Hardinge, Inc.	Machine Tool Systems, LLC	New York	New York SOS — Filing No. 201203218099177	Specific Equipment

Hardinge, Inc.	Bank of America, N.A	New York	New York SOS — Filing No. 201206110331952	All assets

(B) A lien in favor of American Chartered Bank on all personal property assets of USACH Technologies, Inc. securing indebtedness of USACH Technologies, Inc. to American Chartered Bank.

(C) Any security transfer of mortgage notes by Kellenberger in favor of Credit Suisse AG in connection with the Credit Suisse Facility.

Exhibit 10.8

Schedule Required by Instruction 2 to Item 601
of Regulation S-K

The General Security Agreements entered into in connection with the Credit Agreement, dated May 9, 2013, by and betweenM&T Bank, Hardinge Inc. and Hardinge Holdings GmbH are substantially identical in all material respects to the General Security Agreement, dated May 9, 2013, by and between Hardinge Inc. and M&T Bank (which is featured as Exhibit 10.7 to the Form 10-Q for the quarter ended June 30, 2013) (the “Hardinge Security Agreement”) except as to (i) the parties thereto, (ii) the inclusion of the provision referenced below, which appears in Section 1.1 of the Hardinge Security Agreement, (iii) the inclusion of the language in certain subsections of Section 7.1 as highlighted in brackets in the text of such subsections of Section 7.1 referenced below (which appears in the Hardinge Security Agreement) and (iv) the treatment of the language in the last sentence of Section 10.5 as highlighted in brackets in the text of such provision of Section 10.5 referenced below (which appears in the Hardinge Security Agreement):

Section 1.1 Provision

Nothing herein shall be construed to be a grant of a security interest in more than sixty-five percent (65%) of Debtor’s equity interests in any foreign subsidiary.

Text of Section 7.1(vii) (as highlighted with bracketed language)

(vii) the reorganization, merger, consolidation or dissolution of Debtor [or Borrowers] (or the making of any agreement therefor);

Text of Section 7.1(ix) (as highlighted with bracketed language)

(ix) the entry of any judgment or order of any court, other governmental authority or arbitrator against Debtor [or Borrowers] 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 unbounded, unstayed or undismissed for period of thirty (30) consecutive days;

Text of Section 7.1(xi)(b) (as highlighted with bracketed language)

(xi) an adverse change in the Collateral, Debtor or Borrowers their business, operations, affairs or condition (financial or otherwise) from the status shown on any financial statement or other document submitted to Secured Party, and which change Secured Party reasonably determines will have a material adverse effect on … (b) the ability of [Debtor or] Borrowers to pay or perform the Obligations;

Last Sentence of Section 10.5 (as highlighted with bracketed language)

This Agreement shall be binding upon Debtor and Borrowers and upon their heirs and legal representatives, its successors and assignees, and shall insure to the benefit of, and be enforceable by, Secured Party, its successors and assigns and each direct or indirect assignee or other transferee of any of the Obligations; provided, however, that this Agreement may not be assigned by [Debtor] without the prior written consent of Secured Party.

Party to General Security Agreement with M&T Bank	Inclusion of Language in Section 1.1	Inclusion of Bracketed Language in Section 7.1(vii)	Inclusion of Bracketed Language in Section 7.1(ix)	Inclusion of Bracketed Language in Section 7.1(xi)(b)	Treatment of Bracketed Language in Section 10.5
Cherry Acquisition Corporation (n/k/a Forkardt Inc.)	No	No	Yes	No	Replaced with “any party”
Hardinge Technology Systems, Inc.	No	Yes	Yes	Yes	Replaced with “any party”
Usach Technologies, Inc.	No	Yes	No	No	Replaced with “any party”

EXHIBIT 31.1

HARDINGE INC.

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard L. Simons, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hardinge Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2013	/s/ Richard L. Simons

	Richard L. Simons
	Chairman, President and
	Chief Executive Officer

EXHIBIT 31.2

HARDINGE INC.

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Edward J. Gaio, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hardinge Inc.;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2013	/s/ Edward J. Gaio

	Edward J. Gaio
	Vice President and
	Chief Financial Officer

EXHIBIT 32

HARDINGE INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hardinge Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard L. Simons, Chairman, President and Chief Executive Officer of the Company and I, Edward J. Gaio, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Richard L. Simons
	Richard L. Simons
	Chairman, President and
	Chief Executive Officer
	August 8, 2013


	/s/ Edward J. Gaio
	Edward J. Gaio
	Vice President and
	Chief Financial Officer
	August 8, 2013

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to Hardinge Inc. and will be retained by Hardinge Inc. and furnished to the Securities and Exchange Commission or its staff upon request.