EXHIBIT 10.1

 

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CREDIT AGREEMENT

NEW YORK

 

December 10, 2009

 

Borrower:  Hardinge Inc.

 

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

 

organized under the laws of New York

 

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

 

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

 

The Bank and the Borrower agree as follows:

 

1.     DEFINITIONS.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

i.      “Eligible Account” or “Eligible Accounts” shall mean an account
receivable of the Borrower (net of any credit balance, trade discount, or
unbilled amount or retention) for which each of the following statements is
accurate and complete (and the Borrower by including such account receivable in
any computation of the collateral value of the borrowing base shall be deemed to
represent and warrant to the Bank the accuracy and completeness of such
statements): (i) said account receivable is a binding and valid obligation of
the obligor thereon, in full force and effect and enforceable in accordance with
its terms; (ii) said account receivable is genuine, in all respects as appearing
on its face or as represented in the books and records of the Borrower, and all
information set forth therein is true and correct; (iii) said account receivable
is free of all default of any party thereto, counterclaims, offsets, and
defenses and from any rescission, cancellation, or avoidance, and all right
thereof, whether by operation of law or otherwise; (iv) the payment of said
account receivable is not more than sixty (60) days past the due date nor more
than ninety (90) days past the invoice date thereof; (v) said account receivable
is free of concessions or understandings with the obligor thereon of any kind
not disclosed to and approved by Bank in writing; (vi) said account receivable
is, and at all times will be, free and clear of all liens except in favor of the
Bank; (vii) said account receivable is derived from sales made or services
rendered to the obligor in the ordinary course of business; (viii) the obligor
on said account receivable (a) is located within the United States, the District
of Columbia or Canada or are foreign receivables that are covered by a letter of
credit or appropriate credit insurance; (b) is not the subject of any bankruptcy
or insolvency proceeding nor has a trustee or receiver been appointed for all or
a substantial part of its property, nor has said obligor made an assignment for
the benefit of creditors, admitted its inability to pay its debts as they mature
or suspended its business; (c) is not affiliated, directly or indirectly, with
the Borrower as a Subsidiary or other Affiliate, employee or otherwise; and
(d) is not a state or federal governmental department, commission, board, bureau
or agency; (ix) said account receivable did not arise from sales to an obligor
as to whom twenty-five percent (25%) or more of the total accounts receivable
owing by such obligor to the Borrower are more than ninety (90) days past due
the invoice

 

© Manufacturers and Traders Trust Company, 2004

 

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date thereof; (x) said account receivable arises from sales in excess of the
amount of any account payable owed by the Borrower to the obligor unless said
obligor has entered into a written agreement with the Borrower to waive its
right of offset against said receivable; and (xi) said account receivable is
otherwise satisfactory to the Bank, in its reasonable judgment.

 

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

 

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

 

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

 

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

 

N.     “OBLIGATIONS” MEANS ANY AND ALL INDEBTEDNESS OR OTHER OBLIGATIONS OF THE
BORROWER TO THE BANK IN ANY CAPACITY, NOW EXISTING OR HEREAFTER INCURRED,
HOWEVER CREATED OR EVIDENCED, REGARDLESS OF KIND, CLASS OR FORM, WHETHER DIRECT,
INDIRECT, ABSOLUTE OR CONTINGENT (INCLUDING OBLIGATIONS PURSUANT TO ANY
GUARANTY, ENDORSEMENT, OTHER ASSURANCE OF PAYMENT OR OTHERWISE), WHETHER JOINT
OR SEVERAL, WHETHER FROM TIME TO TIME REDUCED AND THEREAFTER INCREASED, OR
ENTIRELY EXTINGUISHED AND THEREAFTER REINCURRED, TOGETHER WITH ALL EXTENSIONS,
RENEWALS AND REPLACEMENTS THEREOF, AND ALL INTEREST, FEES, CHARGES, COSTS OR
EXPENSES WHICH ACCRUE ON OR IN CONNECTION WITH THE FOREGOING, INCLUDING ANY
INDEBTEDNESS OR OBLIGATIONS (I) NOT YET OUTSTANDING BUT CONTRACTED FOR, OR WITH
REGARD TO WHICH ANY OTHER COMMITMENT BY THE BANK EXISTS; (II) ARISING PRIOR TO,
DURING OR AFTER ANY PENDENCY OF ANY BANKRUPTCY, INSOLVENCY, RECEIVERSHIP OR
OTHER SIMILAR PROCEEDING, REGARDLESS OF WHETHER ALLOWED OR ALLOWABLE IN SUCH
PROCEEDING; (III) OWED BY THE BORROWER TO OTHERS AND WHICH THE BANK OBTAINED, OR
MAY OBTAIN, BY ASSIGNMENT OR OTHERWISE; AND (IV) PAYABLE UNDER THIS AGREEMENT.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

x audited

 

o reviewed

 

o compiled

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

f.      Distributions.  Intentionally Omitted.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6.     DEFAULT.

 

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

 

5

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

 

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

 

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

 

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

 

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

 

10.   MISCELLANEOUS.

 

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

 

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

 

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

 

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

 

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

 

6

--------------------------------------------------------------------------------

 

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 all of which shall
constitute but one and the same instrument, and shall be binding upon each of
the undersigned as fully and completely as if all had signed the same
instrument.

 

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.

 

7

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MANUFACTURERS AND TRADERS TRUST COMPANY

 

 

 

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

 

8

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ACKNOWLEDGMENT

 

STATE OF NEW YORK

 

)

 

 

: SS.

COUNTY OF BROOME

 

)

 

On the 10th day of December in the year 2009, 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/ ANGEL M. ATON

 

Notary Public

 

Angel M. Aton

 

 

ACKNOWLEDGMENT

 

STATE OF NEW YORK

 

)

 

 

: SS.

COUNTY OF CHEMUNG

 

)

 

On the 10th day of December, in the year 2009, 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 CURREN

 

Notary Public

 

Nancy Curren

 

 

BANK USE ONLY

 

Authorization Confirmed:

 

 

Signature

 

9

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SCHEDULE

 

Additional Representations and Warranties (§2)

 

1.     Judgments and Litigation.  The parties acknowledge that there is existing
litigation known as Weiner vs. Hardinge Inc. et al.  This action was commenced
in the United States District Court for the Western District of New York on
October 28, 2008, and an amended complaint was filed on March 30, 2009.  The
Plaintiff, who sues on behalf of a putative class of purchasers of the
Borrower’s securities between January 16, 2007 and February 21, 2008, alleges in
the amended complaint that the Borrower and certain former officers named as
defendants made materially false and misleading statements in violation of the
federal securities laws.  The complaint, as amended, seeks unspecified
compensatory damages in favor of the class, together with interest, attorneys’
fees and other expenses.  By order entered January 23, 2009 the Court approved
the lead plaintiff’s appointment and his selection of counsel.  Defendants filed
a motion to dismiss the complaint, as amended, on May 29, 2009 which motion is
pending.

 

Additional Affirmative Covenants (§3)

 

1.     Accounts.  As soon as is practicable but no later than March 31, 2010,
the Borrower shall establish a lock box with the Bank into which Borrower shall
cause to be deposited monies payable to it by account debtors.  The Borrower
shall also establish an interest bearing account for excess cash balances.

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

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

 

Permitted Indebtedness (§4(a)):

 

1.     the Obligations;

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

3.     Indebtedness that is the subject of that certain Intercreditor Agreement
between Bank and Keybank International Association dated June 1, 2009 in the
amount of $10,000,000.00.

 

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; and

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

 

Permitted Investments (§4(d)) means:

 

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

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

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

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

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

 

Permitted Loans (§4(e)):

 

Investments, capital contributions, loans or advances made by the Borrower in or
to any Subsidiary and made by any Subsidiary to the Borrower in excess of an
aggregate amount of $7,500,000.00 outstanding at any one time.  Existing
investments and capital contributions by Borrower in any Subsidiary are
permitted and are not considered Loans for purposes of the limitations of this
Section. In addition, the Parties hereto acknowledge that the Borrower is in the
process of contributing its shares of Hardinge Taiwan Precision Machinery
Limited to Hardinge Holdings, B.V. in exchange for the shares of Hardinge
Holdings, B.V. after which time Borrower will then contribute its shares in
Hardinge Holdings, B.V. to Hardinge Holdings, GmbH in exchange for additional
capital in Hardinge Holdings, GmbH.  This transfer and subsequent additional
capital shall not be considered Loans for the purposes of the limitations of
this Section.

 

Additional Miscellaneous Covenants (§11)

 

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

 

--------------------------------------------------------------------------------

 

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

 

--------------------------------------------------------------------------------

 

SCHEDULE 4(C)

 

EXISTING LIENS

 

Debtor

 

Secured Party

 

Jurisdiction

 

Filing Information

 

Collateral

Hardinge Machine Tools Limited

 

Hormann (UK) Limited

 

UC Companies House; England and Wales

 

Registered
02/09/2005

 

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

Hardinge Machine Tools Limited

 

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

 

UK Companies House; England and Wales

 

To be registered following completion

 

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

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

 

UBS AG

 

Switzerland

 

05/07/2003

 

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

Hardinge Inc.

 

Citicapital Commercial Leasing Corporation

 

New York
Secretary of State

 

200511176009826
11/17/2005

 

Certain leased equipment

L. Kellenberger & Co. AG

 

Credit Suisse

 

Switzerland

 

N/A

 

Mortgage on real property in St. Gallen, Switzerland

 

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