Exhibit 10.1

 

SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT

among

HARDINGE INC.

(the “Borrower”)

the Banks signatory hereto

MANUFACTURERS AND TRADERS TRUST COMPANY

as Agent
and
Lead Arranger

JPMORGAN CHASE BANK, N.A.

as Syndication Agent

and

KEYBANK NATIONAL ASSOCIATION

As Documentation Agent

Amended and Restated as of November 21, 2006

 

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TABLE OF CONTENTS

ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS

 

 

Section 1.01  Definitions

 

 

Section 1.02. Other Defined Terms; Rules of Interpretation

 

 

Section 1.02. Other Defined Terms; Rules of Interpretation

 

 

 

 

 

ARTICLE 2. THE CREDIT

 

 

Section 2.01. The Commitments

 

 

Section 2.02. The Notes and Recordkeeping

 

 

Section 2.03. Purpose

 

 

Section 2.04. Borrowing Procedures

 

 

Section 2.05. Payments

 

 

Section 2.06. Interest Periods

 

 

Section 2.07. Interest

 

 

Section 2.08. Certain Notices

 

 

Section 2.09. Changes in Commitment

 

 

Section 2.10. Minimum Amounts

 

 

Section 2.11. Fees

 

 

Section 2.12. Prepayments

 

 

Section 2.13. Swing Loans

 

 

Section 2.14. Facility Letters of Credit

 

 

 

 

 

ARTICLE 3. YIELD PROTECTION; ILLEGALITY; ETC.

 

 

Section 3.01. Additional Costs

 

 

Section 3.02. Limitation on Types of Loans

 

 

Section 3.03. Illegality

 

 

Section 3.04. Certain Variable Rate Loans Pursuant to Sections 3.01 and 3.03

 

 

Section 3.05. Compensation

 

 

Section 3.06. Survival

 

 

 

 

 

ARTICLE 4. CONDITIONS PRECEDENT

 

 

Section 4.01. Documentary Conditions Precedent

 

 

Section 4.02. Additional Conditions Precedent

 

 

Section 4.03. Deemed Representations

 

 

 

 

 

ARTICLE 5. REPRESENTATIONS AND WARRANTIES

 

 

Section 5.01. Incorporation, Good Standing and Due Qualification

 

 

Section 5.02. Corporate Power and Authority: No Conflicts

 

 

Section 5.03. Governmental Approval

 

 

Section 5.04. Legally Enforceable Agreements

 

 

Section 5.05. Financial Statements

 

 

Section 5.06. Litigation

 

 

Section 5.07. Margin Stock

 

 

Section 5.08. Use of Loan Proceeds

 

 

Section 5.09. Tax Returns

 

 

Section 5.10. ERISA

 

 

Section 5.11. Subsidiaries

 

 

Section 5.12. Ownership and Liens

 

 

Section 5.13. Hazardous Materials

 

 

Section 5.14. No Default on Other Agreements

 

 

Section 5.15. Partnerships

 

 

Section 5.16. No Forfeiture

 

 

Section 5.17. Solvency

 

 

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Section 5.18. Operation of Business

 

 

Section 5.19. No Defaults on Outstanding Judgments or Orders

 

 

Section 5.20. No Defaults on Other Agreements

 

 

Section 5.21. Labor Disputes and Acts of God

 

 

Section 5.22. Governmental Regulation

 

 

Section 5.23. Compliance with Terms and Conditions of the ROC Joint Venture
Agreement

 

 

Section 5.24. Compliance with Terms and Conditions of the Bridgeport Acquisition
Documents

 

 

Section 5.25. Disclosure

 

 

 

 

 

ARTICLE 6. AFFIRMATIVE COVENANTS

 

 

Section 6.01. Compliance With Laws, Corporate Existence

 

 

Section 6.02. Reporting Requirements

 

 

Section 6.03. Notice of Proceedings

 

 

Section 6.04. Insurance

 

 

Section 6.05. Environmental Laws

 

 

Section 6.06. Books and Records; Inspection Rights

 

 

Section 6.07. Notice of Default

 

 

Section 6.08. Subsidiaries

 

 

Section 6.09. Material Adverse Changes

 

 

Section 6.10. Reports to Other Creditors

 

 

Section 6.11. Payment of Obligations

 

 

Section 6.12. General Information

 

 

 

 

 

ARTICLE 7. NEGATIVE COVENANTS

 

 

Section 7.01. Debt

 

 

Section 7.02. Liens, Etc

 

 

Section 7.03. Lease Obligations

 

 

Section 7.04. Prohibited Transactions

 

 

Section 7.05. Margin Stock

 

 

Section 7.06. Consolidations, Mergers, Acquisitions and Sales of Assets

 

 

Section 7.07. Affiliate Transactions

 

 

Section 7.08. Loans and Advances

 

 

Section 7.09. No Activities Leading to Forfeiture

 

 

Section 7.10. Capital Expenditures

 

 

Section 7.11. Restricted Payments

 

 

Section 7.12. Restrictive Agreements; Put Agreements

 

 

Section 7.13. Changes in Accounting Principles; Fiscal Year

 

 

Section 7.14. Amendments to Organic Documents

 

 

Section 7.15 Plan Terminations, Minimum Funding, Etc.

 

 

 

 

 

ARTICLE 8. FINANCIAL COVENANTS

 

 

Section 8.01. Leverage Ratio

 

 

Section 8.02. Consolidated Tangible Net Worth

 

 

Section 8.03. Fixed Charges Coverage Ratio

 

 

Section 8.04. Calculations

 

 

 

 

 

ARTICLE 9. EVENTS OF DEFAULT

 

 

Section 9.01. Events of Default

 

 

Section 9.02. Remedies

 

 

 

 

 

ARTICLE 10. THE AGENT; RELATIONS AMONG BANKS AND BORROWER

 

 

Section 10.01. Appointment, Powers and Immunities of Agent

 

 

Section 10.02. Reliance by Agent

 

 

Section 10.03. Defaults

 

 

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Section 10.04. Rights of Agent as a Bank

 

 

Section 10.05. Indemnification of Agent

 

 

Section 10.06. Documents

 

 

Section 10.07. Non-Reliance on Agent and Other Banks

 

 

Section 10.08. Failure of Agent to Act

 

 

Section 10.09. Resignation of Agent

 

 

Section 10.10. Amendments Concerning Agency Function

 

 

Section 10.11. Liability of Agent

 

 

Section 10.12. Transfer of Agency Function

 

 

Section 10.13. Withholding Taxes

 

 

Section 10.14. Several Obligations and Rights of Banks

 

 

Section 10.15. Sharing of Payments Among Banks

 

 

Section 10.16. No Other Agents

 

 

Section 10.17 Benefit of Article

 

 

 

 

 

ARTICLE 11. MISCELLANEOUS

 

 

Section 11.01. Amendments and Waivers

 

 

Section 11.02. Usury

 

 

Section 11.03. Expenses and Indemnification

 

 

Section 11.04. Survival

 

 

Section 11.05. Assignment; Participations

 

 

Section 11.06. Notices

 

 

Section 11.07. Setoff

 

 

Section 11.08. Jurisdiction; Immunities

 

 

Section 11.09. Table of Contents; Headings

 

 

Section 11.10. Severability

 

 

Section 11.11. Counterparts

 

 

Section 11.12. Integration

 

 

Section 11.13. Governing Law

 

 

Section 11.14. Confidentiality

 

 

Section 11.15. Treatment of Certain Information

 

 

Section 11.16. USA Patriot Act

 

 

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EXHIBITS

Exhibit A

 

Authorization Letter

Exhibit B

 

Form of Revolving Credit Note

Exhibit C

 

Form of Swing Line Note

Exhibit D

 

Form of Term Loan Note

Exhibit E

 

Opinion of Counsel for Borrower

Exhibit F

 

Confidentiality Agreement

Exhibit G

 

Form Notice of Borrowing

Exhibit H

 

Assignment and Assumption Agreement

Exhibit I

 

Compliance Certificate

 

SCHEDULES

 

Schedule I

 

Existing JP Morgan Letters of Credit

Schedule II

 

Existing Other Debt

Schedule III

 

Revolving Commitment Amounts

Schedule IV

 

Term Loan Commitment Amounts

Schedule V

 

Subsidiaries of Borrower

Schedule VI

 

Hazardous Materials

Schedule VII

 

Insurance

 

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SECOND AMENDED AND RESTATED REVOLVING CREDIT AND
TERM LOAN AGREEMENT

THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT dated
as of November 21, 2006 is entered into by and among HARDINGE INC., a
corporation organized under the laws of New York, each of the banks which is a
signatory hereto, MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking
corporation, as Agent and Lead Arranger for the Banks, JPMORGAN CHASE BANK,
N.A., a national banking association formed and existing under the laws of the
United States of America, as Syndication Agent and KEYBANK NATIONAL ASSOCIATION,
a national banking association formed and existing under the laws of the United
States of America, as Documentation Agent.

RECITALS

A.            The Borrower, the Banks, the Agent, the Syndication Agent and the
Documentation Agent are parties to an Amended and Restated Revolving Credit and
Term Loan Agreement dated January 28, 2005, as the same has been amended by
Amendment No. 1 to the Amended and Restated Revolving Credit and Term Loan
Agreement dated February 11, 2005, Amendment No. 2 to the to the Amended and
Restated Revolving Credit and Term Loan Agreement dated July 16, 2005, Amendment
No. 3 to the Amended and Restated Revolving Credit and Term Loan Agreement dated
December 22, 2005 and Amendment No. 4 to the Amended and Restated Revolving
Credit and Term Loan Agreement dated June 7, 2006. (collectively, the “Existing
Credit Agreement”).

B.            The parties hereto desire to amend, restate and modify, but not
extinguish, the Existing Credit Agreement in its entirety, as herein provided.

NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree as follows:

ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS

Section 1.01  Definitions.  As used in this Agreement the following terms have
the following meanings:

“Account Control Agreements” means the Account Control Agreements as may be
required pursuant to the terms of the Security Documents, given by the Borrower
and the applicable financial institutions where Borrower maintains its operating
accounts in favor of the Agent for the benefit of the Banks, which Account
Control Agreements shall in all respects be acceptable to the Agent and the
Banks, as such agreement may be amended, restated, supplemented or otherwise
modified from time to time.

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“Acquisition” means the acquisition of: (a) a controlling equity interest in
another Person (including the purchase of an option, warrant or convertible or
similar type security to acquire such a controlling interest at the time it
becomes exercisable by the holder thereof), whether by purchase of such equity
interest or upon exercise of an option or warrant for, or conversion of
securities into, such equity interest, or (b) assets of another Person which
constitute all or substantially all of the assets of such Person or of a line or
lines of business conducted by such Person.

“Additional Costs” has the meaning given to such term in Section 3.01 hereof.

“Additional Technical Information” shall mean and refer to the technical
information required for the manufacture of the products, accessories and
spares, including but not limited to the blueprints, designs, schematics,
drawings, specifications, computer source and object codes, customer lists and
other proprietary rights and assets of a similar nature, all as described with
particularity in the Bridgeport Acquisition Documents.

“Administrative Questionnaire” means the administrative questionnaire in the
form supplied by the Agent.

“Affected Loans” has the meaning given to such term in Section 3.04 hereof.

“Affected Type” has the meaning given to such term in Section 3.04 hereof.

“Affiliate” means any Person: (a) which directly or indirectly controls, or is
controlled by, or is under common control with, the Borrower or any of its
Subsidiaries; (b) which directly or indirectly beneficially owns or holds 5% or
more of any class of voting stock of the Borrower or any such Subsidiary; (c) 5%
or more of the voting stock of which is directly or indirectly beneficially
owned or held by the Borrower or such Subsidiary; or (d) which is a partnership
in which the Borrower or any of its Subsidiaries is a general partner.  The term
“control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.

“Agent” means M&T Bank in its capacity as agent of the Banks pursuant to Article
10, and not in its individual capacity as a Bank, and any successor Agent
appointed pursuant to Article 10.

“Agreement” means this Second Amended and Restated Revolving Credit and Term
Loan Agreement, as amended, supplemented, restated or otherwise modified from
time to time.  References to Articles, Sections, Exhibits, schedules and the
like refer to the Articles, Sections, Exhibits, schedules and the like of this
Agreement unless otherwise indicated.

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“Aggregate Commitment” means, on any date of determination, the aggregate amount
on such date of the Commitments of all of the Banks.  On the Effective Date, the
Aggregate Commitment is $91,600,000.

“Aggregate Revolving Commitment” means, on any date of determination, the
aggregate amount on such date of the Revolving Commitments of all of the Banks. 
On the Effective Date, the Aggregate Revolving Commitment is $70,000,000.

“Aggregate Revolving Credit Exposure” means as of any date of determination, the
sum of Revolving Credit Exposure of all the Banks.

“Aggregate Term Loan Commitment” means on any date of determination, the
aggregate amount on such date of the Term Loan Commitments of all of the Banks..

“Applicable Margin” means for each Variable Rate Loan or Eurocurrency Loan, or
with respect to the Revolving Commitment Fees payable hereunder, as the case may
be, the applicable rate per annum on the table next following under the caption
“Variable Margin”, “Eurocurrency Margin” or “Revolving Commitment Fee Rate”,
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

 

Variable
Rate Margin

 

Eurocurrency
Margin

 

Revolving
Commitment
Fee Rate

Level I

 

Less than 1.5

 

0 Basis Points

 

100 Basis
Points

 

15 Basis
Points

 

 

 

 

 

 

 

 

 

Level II

 

Equal to or greater
than 1.5 and less than 2.0

 

0 Basis Points

 

125 Basis
Points

 

17.5 Basis
Points

 

 

 

 

 

 

 

 

 

Level III

 

Equal to or greater
than 2.0 and less than 2.5

 

25 Basis Points

 

150 Basis
Points

 

20 Basis
Points

 

 

 

 

 

 

 

 

 

Level IV

 

Equal to or greater
than 2.5 and less than 3.0

 

50 Basis Points

 

175 Basis
Points

 

25 Basis
Points

 

 

 

 

 

 

 

 

 

Level V

 

Equal to or greater
than or equal to 3.0

 

75 Basis Points

 

200 Basis
Points

 

37.5 Basis
Points

 

For purposes of the foregoing, notwithstanding anything herein to the contrary

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(a)           if at any time the Borrower fails to deliver the Financials
required under Sections 6.02(a) or 6.02(b) on or before the date such Financials
are due, Pricing Level V shall be deemed applicable for the period commencing
five (5) Business Days after such required date of delivery and ending on the
date which is five (5) Business Days after such Financials are actually
delivered, after which the Pricing Level shall be determined using such
Financials in accordance with the table above as applicable;

(b)           adjustments, if any, to the Pricing Level then in effect shall be
effective five (5) Business Days after the Agent has received the applicable
Financials (it being understood and agreed that each change in Pricing Level
shall apply during the period commencing on the effective date of such change
and ending on the date immediately preceding the effective date of the next such
change); and

(c)           each determination of the Applicable Margin made by the Agent in
accordance with the foregoing shall, in the absence of demonstrable error, be
conclusive and binding on the Borrower and each Bank; and

(d)           the initial Applicable Margin on the Effective Date shall be based
on Level IV until the first adjustment thereto as provided above.

“Arranger” means M&T Bank in its capacity as sole arranger for the credit
facilities provided under this Agreement.

“Assignment and Assumption Agreement” has the meaning given to such term in
Section 11.05(b) hereof.

“Assignment of Leases and Rents” means that certain Assignment of Leases and
Rents dated as of the Original Effective Date (as the same may be amended,
restated, supplemented or otherwise modified from time to time), as granted by
Hardinge Technology Systems, Inc. in favor of the Agent for the benefit of the
Banks, whereby Hardinge Technology Systems, Inc. granted, as collateral for the
Obligations, an assignment of the leases and rents for the principal place of
business for the Borrower.

“Authorization Letter” means the letter agreement executed by the Borrower in
the form of Exhibit A hereto.

“Authorized Officer” means the president, chief executive officer, chief
financial officer or the secretary of the Borrower or any other Person
designated by any of the foregoing in writing to the Agent from time to time to
act on behalf of any Borrower which designation has not been rescinded in
writing, in each case acting singly, provided that two Authorized Officers shall
be required to modify the wiring instructions for any Loan.

“Bank” means the banks who are parties to this Agreement on the date hereof and
any other bank that shall become a party hereto after the date hereof pursuant
to an Assignment and Assumption, other than any such Person that shall have
ceased to be a party hereto pursuant to an

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Assignment and Assumption.  Unless the context otherwise requires, the term
“Bank” includes the Swing Line Bank.  In addition to the foregoing, for the
purpose of identifying the Persons entitled to share in the collateral and the
proceeds thereof under, and in accordance with the provisions of, this Agreement
and the Security Documents, the term “Bank” shall include Affiliates of a Bank
providing Bank Products.

“Bank Product Agreements” means those agreements entered into from time to time
by the Borrower or any Subsidiary in connection with any of the Bank Products.

“Bank Product Obligations” means all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing pursuant to or evidenced by
the Bank Product Agreements and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and including all such amounts that the
Borrower or any of its Subsidiaries is obligated to reimburse to anyone as a
result of purchasing participations or executing indemnities or reimbursement
obligations with respect to the Bank Products.

“Bank Products” means any service or facility (but excluding the Loans and the
Facility Letters of Credit) extended to Borrower or any Subsidiary, including:
(a) credit cards, (b) credit card processing services, (c) debit cards, (d)
purchase cards, (e) ACH Transactions, (f) cash management, including controlled
disbursement accounts or services, or (g) facilities for foreign exchange,
foreign derivative products and foreign exposures.

“Bankruptcy Event” has the meaning given to such term in Section 2.08(b)
thereof.

“Basis Point” means one one-hundredth of one percent.

“Borrower” means Hardinge Inc., a New York corporation, and its successors.

“Bridgeport Acquisition Documents” means the various agreements and instruments
executed by and between the Borrower and BPT IP, LLC, including but not limited
to, that certain Alliance Agreement dated November, 2004, whereby among other
things, BP IP, LLC granted to the Borrower an option to purchase the Additional
Technical Information on or before December 31, 2005, as described with
particularity in Section 7.6.3 of the Alliance Agreement.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided that when used in connection with a Eurocurrency Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in deposits in the applicable currency in the London interbank
market.

“Capital Expenditures” means for any period, the sum of (without duplication) of
all expenditures during such period (including, but not limited to, the
purchase, construction or rehabilitation of equipment or other physical assets)
that are required to be capitalized under GAAP, whether or not financed.

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“Capital Lease” means any lease which has been or should be capitalized on the
books of the lessee in accordance with GAAP.

“Capital Securities” means, with respect to any Person, all shares, interests,
participations or other equivalents (however designated, whether voting or
non-voting) of such Person’s capital, whether now outstanding or issued or
acquired after the Original Effective Date, including common shares, preferred
shares, membership interests in a limited liability company, limited or general
partnership interests in a partnership, interests in a trust, interests in other
unincorporated organizations or any other equivalent of such ownership interest.

“Change in Control” means: (a) except as to: (i) officers and directors in
office as of the Original Effective Date, and (ii) the Hardinge Inc. Pension
Plan, Hardinge Inc. Retirement Plan or other compensation plan of Borrower, the
acquisition of ownership, directly or indirectly, beneficially or of record, of
any Person or group (within the meaning of the Securities Act of 1934 and Rule
13d-5 of the Securities and Exchange Commission as in effect on the date hereof)
of Capital Securities representing more than twenty five percent (25%) of the
aggregate ordinary voting power in the election of Borrower’s directors; or (b)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of the Borrower by Persons who are neither: (i) nominated by the board
of directors of the Borrower, nor (ii) appointed by the directors so nominated.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Commercial Letter of Credit” shall mean a documentary Letter of Credit issued
in respect of the purchase of goods or services by Borrower or any of its
Subsidiaries in the ordinary course of its business.

“Commitment” means, with respect to a Bank, both its Revolving Commitment and
its Term Loan Commitment.

“Compliance Certificate” has the meaning given to such term in Section 6.02(c)
hereof.

“consolidated” and “consolidating”, when used with reference to any term, mean
that term as applied to the accounts of the Borrower (or other specified Person)
and all of its Subsidiaries (or other specified group of Persons), or such of
its Subsidiaries as may be specified, consolidated or consolidating, as the case
may be, in accordance with GAAP.

“Consolidated Interest Expense” means for any period, the sum for the Borrower
and its Consolidated Subsidiaries (determined on a consolidated basis without
duplication, in accordance with GAAP) of the following: (a) all interest with
respect of Funded Debt (including, without limitation, the interest component of
any payments in respect of Capital Leases) accrued or capitalized during such
period (whether or not actually paid during such period), (b) the net amount
payable (or minus the net amount receivable) under Hedging Agreements during
such period (whether or not actually paid or received during such period); (c)
without duplication any

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periodic commitment fees and other fees payable to the Agent or the Bank
pursuant to the Loan Documents; and (d) without duplication, any periodic fees
paid by the Borrower or any of its Subsidiaries to other creditors, which fees
shall be related to or arising out of any Debt owed to other creditors.

“Consolidated Net Income” means for any period the net income or loss of the
Borrower and its Consolidated Subsidiaries for such period determined on a
consolidated basis, without duplication, in accordance with GAAP, provided that
there shall be excluded from such net income or loss: (a) the income of any
Person (other than a Consolidated Subsidiary) in which any other Person (other
than the Borrower or any Consolidated Subsidiary or any director holding
qualifying shares in compliance with applicable law) owns an Equity Interest,
except to the extent of the amount of dividends or other distributions actually
paid to the Borrower or any of the consolidated Subsidiaries by such Person
during such period, and (b) the income or loss of any Person accrued prior to
the date on which it becomes a Subsidiary or is merged into or consolidated with
the Borrower or any consolidated Subsidiary or the date on which such Person’s
assets are acquired by the Borrower or any Consolidated Subsidiary.

“Consolidated Tangible Net Worth” means as of the date of determination, without
duplication and determined in accordance with GAAP: (a) the total assets of the
Borrower and its Consolidated Subsidiaries, minus (b) the total liabilities of
Borrower and its Consolidated Subsidiaries and all intangible assets of the
Borrower and its Consolidated Subsidiaries, and (c) minus any decrease or plus
any increase in the value of intangible assets related to the translation of
adjustments, provided, however, that there shall be excluded from all such
calculations both: (x) cumulative foreign currency translation adjustments, and
(y) changes in pension liabilities recorded in accordance with SFAS 87.

“Credit Party” or “Credit Parties,” individually or collectively, means and
refers to the Borrower and the Subsidiary Guarantors.

“Customer Notes” means any and all notes and other evidence of indebtedness
(except accounts receivable arising in the ordinary course of business) listed
on that certain Due Diligence Certificate to be delivered by the Borrower to the
Agent on or before the Effective Date, which notes were issued prior to the
Original Effective Date to the Borrower and its Subsidiaries for the payment
obligations of customers for goods or services provided in the ordinary course
of business and that Borrower and its Subsidiaries sold prior to the Original
Effective Date pursuant to the Customer Note Sale Agreements.

“Customer Note Sale Agreements” means, collectively, those agreements entered
into prior to the Original Effective Date, between the Borrower and certain
third party purchasers, for the sale, by the Borrower of certain of its Customer
Notes, all of which are listed on that certain Due Diligence Certificate to be
delivered by the Borrower to the Agent on or before the Effective Date.

“Customer Note Sale Agreement Guaranties” means, collectively, those limited
guaranties granted by the Borrower prior to the Original Effective Date, whereby
the Borrower

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guaranteed, on a limited basis, the payment of its certain of its Customer Notes
as contemplated under the terms of the Customer Note Sale Agreements, all of
which are listed on listed on that certain Due Diligence Certificate to be
delivered by the Borrower to the Agent on or before the Effective Date.

“Debt” means, with respect to any Person: (a) indebtedness of such Person for
borrowed money whether or not evidenced by bonds, debentures, notes or similar
instruments; (b) obligations of such Person as lessee under Capital Leases or
Synthetic Lease Obligations, (c) obligations under direct or indirect guaranties
in respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clause (a) and
(b) above, (not otherwise reserved for), which in the case of the Borrower,
shall specifically include any contingent and direct obligations arising under
or in connection with the Customer Note Sale Agreement Guaranties, (d) all
obligations of such Person to pay the deferred purchase price of property or
services (excluding trade accounts payable in the ordinary course of business
and accrued expenses arising in the ordinary course of business), (e) all
obligations, contingent or otherwise, with respect to the face amount of all
letters of credit, including the Facility Letters of Credit issued hereunder
(whether or not drawn) (excluding, however, in all cases, Commercial Letters of
Credit), bankers’ acceptances and similar obligations issued for the account of
such Person, , (f) all guaranties of indebtedness of any Person, and (g) all
Debt of any partnership of which such Person is a general partner.

“Default” means any event which with the giving of notice or lapse of time, or
both, would become an Event of Default.

“Default Rate” means, with respect to the principal of any Loan and, to the
extent permitted by law, any other amount payable by the Borrower under this
Agreement (including the repayment of any Facility LC Disbursement) or any Note
that is not paid when due (whether at stated maturity, by acceleration or
otherwise), a rate per annum during the period from and including the due date,
to, but excluding the date on which such amount is paid in full equal to three
percent (3.0%) above the Variable Rate as in effect from time to time plus the
Applicable Margin (provided that, if the amount so in default is principal of a
Eurocurrency Loan and the due date thereof is a day other than the last day of
the Interest period therefor, the “Default Rate” for such principal shall be,
for the period from and including the due date and to but excluding the last day
of the Interest Period therefor, three percent (3.0%) above the interest rate
for such Loan as provided in Section 2.07 hereof and, thereafter, the rate
provided for above in this definition).

“Documentation Agent” means KeyBank National Association in its capacity as
documentation agent of the Banks, and not in its individual capacity as a Bank.

“Domestic Subsidiary” means any Subsidiary of Borrower that is organized and
existing under the laws of any jurisdiction in the United States of America.

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“EBITDA” means Consolidated Net Income prior to the deduction of Consolidated
Interest Expense, prior to the deduction of federal or foreign corporate income
and corporate franchise taxes, prior to the deduction of depreciation and
amortization and MINUS to the extent included in the determination of
Consolidated Net Income for such period, the sum of the following for the
Borrower and its Consolidated Subsidiaries: (a) interest income, (b) any
extraordinary, unusual or non-recurring income or gains (including, whether or
not otherwise able to be included as a separate item in the statement of
Consolidated Net Income for such period, gains on the sales of assets outside
the ordinary course of business), and (c) any other non-cash income, all as
determined on a consolidated basis.

“Effective Date” means November 21, 2006, or, if later, the date on which the
conditions contained in Article 4 have been satisfied (or waived in accordance
with Section 11.01).

“Environmental Laws” means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing
distribution, use, treatment, storage, disposal, transport, or handling-of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.

“ERISA Affiliate” means each Person (as defined in Section 3(9) of ERISA), which
together with the Borrower or a Subsidiary of the Borrower, would be deemed to
be a “single employer” (i) within the meaning of Section 414(b), (c), (m) or (o)
of the Code or Section 4001(a)(14) or 4001(b)(i) of ERISA or (ii) as a result of
the Borrower or a Subsidiary of the Borrower being or having been a general
partner of such Person.

“Equity Issuance” means: (a) any issuance or sale by the Borrower or any of its
Subsidiaries of: (i) any Capital Securities, (ii) any warrants or options
exercisable in respect of Capital Securities (other than any warrants or options
issued to directors, officers or employees of the Borrower or any of its
Subsidiaries in their capacity as such and any Capital Securities of the
Borrower issued upon the exercise of such warrants), or (iii) any other security
or instrument representing an equity interest (or the right to obtain any equity
interest) in the Borrower, or (b) the receipt by the Borrower of any
contribution to its capital (whether or not evidenced by any Capital
Securities).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, including any rules and regulations promulgated thereunder.

“Eurocurrency Loan” means any Loan when and to the extent the interest rate is
determined on the basis of the definition of “LIBOR Rate”.

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“Eurocurrency Rate” means for any Interest Period for any Eurocurrency Loan a
rate per annum determined by the Agent to be equal to the relevant LIBOR Rate
for the Eurocurrency Loan, adjusted for any applicable Reserve Requirement.

“Existing Bridge Loans” means the Bridge Loans made pursuant to, and as defined
in, Amendment No. 3 to the Existing Credit Agreement that are outstanding
immediately prior to the Effective Date.

“Existing Facility Letter of Credit” means a Facility Letter of Credit issued by
the Issuing Bank pursuant to Section 2.14 of the Existing Agreement.  For the
avoidance of doubt, Existing Facility Letters of Credit do not include the
JPMorgan Letters of Credit.

“Existing JP Morgan Letters of Credit” means the outstanding Letters of Credit
issued by JPMorgan for the account of the Borrower prior to the date of this
Agreement which are set forth on Schedule I to this Agreement.

“Excluded Foreign Subsidiaries” has the meaning given thereto in Section
5.12(b).

“Existing Other Debt” means the Debt of the Borrower and its Subsidiaries
existing as of the Original Effective Date, all of which is set forth in
Schedule II to this Agreement

“Existing Revolving Loans” means the Loans made pursuant to, and as defined in,
the Existing Credit Agreement that are outstanding immediately prior to the
Effective Date.

“Existing Term Loans” means the Loans made pursuant to, and as defined in, the
Existing Credit Agreement that are outstanding immediately prior to the
Effective Date.

“Event of Default” has the meaning given such term in Section 9.01 hereof.

“Facility LC Commitment” means the commitment of the Issuing Bank to issue
Facility Letters of Credit pursuant to Section 2.14.

“Facility LC Disbursement” means a payment made by the Issuing Bank pursuant to
a Facility Letter of Credit.

“Facility Letter of Credit Collateral Account” has the meaning given to such
term in Section 2.14(i) hereof.

“Facility LC Exposure” means, at any time, the sum of: (a) the aggregate undrawn
amount of all outstanding Facility Letters of Credit at such time, plus (b) the
aggregate amount of all unreimbursed Facility LC Disbursements.  The Facility LC
Exposure of any Bank at any time shall be its Pro Rata Share of the Facility LC
Exposure at such time determined in accordance with the foregoing sentence.

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“Facility Letter of Credit” means a Letter of Credit issued by the Issuing Bank
pursuant to Section 2.14 of this Agreement.  For the avoidance of doubt,
Facility Letters of Credit do not include JPMorgan Letters of Credit.

“Facility Letter of Credit Fee” has the meaning given to such term in Section
2.11(b) hereof.

“Facility Letter of Credit Fronting Fee” has the meaning given to such term in
Section 2.11(b).

“Facility Letter of Credit Collateral Shortfall Amount” has the meaning given to
such term in Section 9.02(a) hereof.

“Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight federal funds transactions as
published by the Federal Reserve Bank of New York for such day (or for any day
that is not a Business Day, for the immediately preceding Business Day).

“Fee Letters” means the Engagement Letter dated October 11, 2006 between
Borrower and M&T Bank, the letter agreement dated December 14, 2004 between
Borrower and M&T Bank, both relating to certain fees payable by the Borrower
with respect to the transactions contemplated by the Existing Credit Agreement
and this Agreement

“Financials” means the annual or quarterly financial statements, and
accompanying certificates and other documents, of the Borrower required to be
delivered pursuant to Section 6.02(a) or 6.02(b).

“Fiscal Quarter” means the three (3) month period ending on or around March 31,
June 30, September 30 and December 31 of each year.

“Fiscal Year” means the twelve (12) month period ending on December 31 of each
year.

“Fixed Charges” means as of the date of determination all of the scheduled
principal payments on Debt, interest payments on Debt, dividends and all other
distributions of the Borrower and its Subsidiaries (excluding dividends and
distributions from a Subsidiary to the Borrower) for the twelve (12) month
period ending on such date.

“Fixed Charges Coverage Ratio” means as of the date of determination, the ratio
of: (a) EBITDA minus: (i) Non-Financed Capital Expenditures, and (ii) Taxes paid
in cash, for the twelve (12) month period ending on such date, divided by (b)
Fixed Charges for the same period.

“Foreign Subsidiary” means any Subsidiary of Borrower that is not a Domestic
Subsidiary.

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“Forfeiture Proceeding” means any action, proceeding or investigation affecting
the Borrower or any of its Subsidiaries or Affiliates before any court,
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or the receipt of notice by any such party that any of them
is a suspect in or a target of any governmental inquiry or investigation, which
may result in an indictment of any of them or the seizure or forfeiture of any
of their property.

“Funded Debt” means, without duplication determined in accordance with GAAP, all
of Borrower’s and its Consolidated Subsidiaries’ Debt.

“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time, applied on a basis consistent with those
used in the preparation of the audited financial statements referred to in
Section 5.05 (except for changes concurred in by the Borrower’s independent
public accountants).

“Guaranty” means the Amended and Restated Guaranty made by Hardinge Technology
Systems, Inc. in favor of the Agent for the benefit of the Banks dated as of the
Original Effective Date, as it may be amended, supplemented, restated or
otherwise modified from time to time.

“Guaranty Supplement” means supplements to the Guaranty to be executed by the
required Subsidiaries of the Borrower pursuant to Section 6.08 herein, which
shall be in the form attached to the Guaranty as an exhibit.

“Hazardous Materials” means any substance regulated under any Environmental
Laws.

“Hedging Agreement” means any interest rate swap agreement, cap agreement or
collar agreement, and any other agreement or arrangement designed to protect a
Person against fluctuations in interest rates.

“Hedging Obligation” means any liability of the Borrower or any of its
Subsidiaries under any Hedging Agreement.  The amount of obligation in respect
of any Hedging Obligation shall be deemed to be the incremental obligation that
would be reflected in the financial statements of the Borrower and its
Consolidated Subsidiaries in accordance with GAAP.

“Indemnified Liability” has the meaning given to such term in Section 11.03
hereof.

“Intellectual Property Security Agreement” means the Intellectual Property
Security Agreement granted by the Borrower, certain Subsidiaries of the Borrower
and any other Person listed in the signature pages thereto, in favor of the
Agent for the benefit of the Banks dated as of Original Effective Date securing
the Obligations and in the form attached to the Security Agreement as an
exhibit, as such agreement may be amended, supplemented, restated or otherwise
modified from time to time.

“Intellectual Property Security Agreement Supplement” means supplements to the
Intellectual Property Security Agreement to be executed by the required
Subsidiaries of the

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Borrower pursuant to Section 6.08 herein, which shall be in a the form attached
to the Intellectual Property Security Agreement as an exhibit.

“Intercompany Debt” shall mean Debt that is owed by a Subsidiary to the Borrower
or any other Subsidiary or by any Subsidiary to any other Subsidiary.

“Interest Period” means the period commencing on the date a Loan is made and
ending, as the Borrower may select pursuant to Section 2.08: (a) in the case of
Variable Rate Loans, the period commencing on the date such Variable Rate Loan
is made and ending on the Quarterly Date next succeeding such date; and (b) in
the case of Eurocurrency Loans, on the numerically corresponding day in the
first, second, third, or sixth calendar month thereafter, provided, however,
that each such Interest Period which commences on the last Business Day of a
calendar month (or any day for which there is no numerically corresponding day
in the appropriate subsequent calendar month) shall end on the last Business Day
of the subsequent calendar month.

“Issuing Bank” means M&T Bank in its capacity as the Issuing Bank of a Facility
Letter of Credit or any Affiliate of M&T Bank that may from time to time issue
Facility Letters of Credit, and their successors and assigns in such capacity.

“JPMorgan” means JPMorgan Chase Bank, N.A., a national association formed and
existing under the laws of the United States of America.

“JPMorgan Exposure” means the sum of: (a) the aggregate maximum amount that
Borrower and its Subsidiaries could be required to pay under the Customer Note
Sale Guaranties and the JPMorgan Letters of Credit, plus (b) the aggregate
amount of all unreimbursed disbursements made by JPMorgan or its Affiliates
pursuant to the JPMorgan Letters of Credit.

“JPMorgan Letters of Credit” means the Existing JPMorgan Letters of Credit and
the Letters of Credit issued by JPMorgan after the Original Effective Date for
the account of the Borrower or any of its Subsidiaries.

“JPMorgan Obligations” means the obligation of the Borrower and its Subsidiaries
to pay to JPMorgan under the Customer Note Sale Guaranties and the obligation of
the Borrower and its Subsidiaries to reimburse JPMorgan or its Affiliates with
respect to any disbursement made pursuant to a JPMorgan Letters of Credit.

“Letter of Credit” of a Person means a letter of credit or similar instrument
which is issued upon the application of such Person or upon which such Person is
an account party or for which such Person is in any way liable.

“Leverage Ratio” means, as of the date of its determination, with respect to the
Borrower, the ratio of: (a) Funded Debt as of such date, over (b) EBITDA for the
twelve (12) months ending as of such date.

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“LIBOR Rate” means with respect to a Eurocurrency Loan for any Interest Period
thereof:

(a)           an interest rate per annum at which U.S. dollar deposits are
offered in the London interbank market in an amount approximately equal to the
portion of the Loan subject to the LIBOR Rate for a period of time equal to such
Interest Period that appears on Page 3750 of the Dow Jones Markets Service (or
on an successor to or substitute for such service, providing rate quotations
comparable to those currently provided on such page of such service), as
determined by the Agent after 11:00 a.m. (London time) on the day that is two
(2) Business Days prior to the first day of such Interest Period;

(b)           if no such rate appears on the Telerate Page 3750, the rate of
interest determined by the Agent to be the average of up to four interest rates
per annum at which U.S. Dollar deposits are offered in the London interbank
market in an amount approximately equal to the portion of the Loan subject to
the LIBOR Rate, for a period of time equal to such Interest Period which appear
on the Reuter’s Screen LIBOR Page as of 11:00 a.m. (London time) two (2)
Business Days prior to the Business Day on which such Interest Period begins if
at least two such offered rates so appear on the Reuter’s Screen LIBOR Page, or

(c)           if no such rate appears on the Telerate Page 3750 and fewer than
two offered rates appear on the Reuter’s Screen LIBOR Page, the rate of interest
at which deposits in an amount approximately equal to the portion of the Loan as
to which the related LIBOR Rate has been elected and which have a term
corresponding to such Interest Period are offered to the Agent by first class
banks in the London inter-bank market for delivery in immediately available
funds at a LIBOR Office on the first day of such Interest Period as determined
by the Agent at approximately 11:00 a.m. (London time) two (2) Business Days
prior to the date upon which such Interest Period is to commence (which
determination by shall, in the absence of manifest error, be conclusive).

“Lien” means any interest in property securing any Debt or other obligation owed
to, or a claim by, a Person other than the owner of the property, whether the
interest is based on common law, statute or contract (including the security
interest or lien arising from a mortgage, encumbrance, pledge, conditional sale
or trust receipt or a lease, consignment or bailment for security purposes). 
The term “Lien” shall not include minor reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions and other minor
title exceptions affecting real property, provided that they do not constitute
security for a monetary obligation.  For the purposes of this Agreement, the
Borrower or a Subsidiary shall be deemed to be the owner of any property which
it has acquired or holds subject to a conditional sale agreement, Capital Lease
or other arrangement pursuant to which title to the property has been retained
by or vested in some other Person for security purposes, and such retention or
vesting shall be deemed to be a Lien.

“Loan” or “Loans” means, as the context may require, Revolving Loans, Term Loans
and/or Swing Line Loans.

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“Loan Documents” means this Agreement, the Notes, the Facility Letters of
Credit, the Fee Letter, the Authorization Letter, the Security Documents, the
Guaranty, the Omnibus Assignment, the Termination Agreement, the letter
agreement described in Section 4.01(l) below and any certificate or other
document furnished pursuant to or in connection with this Agreement or any of
the foregoing.

“Material Adverse Effect” means a material adverse effect on: (a) the business,
assets, operations, prospects or financial condition of the Borrower and the
Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of
its obligations under this Agreement or any other Loan Document, (c) the ability
of any of the Credit Parties other than the Borrower to perform any of their
respective obligations under any other Loan Document, or (c) the rights of or
benefits available to the Agent or any of the Banks under this Agreement and the
other Loan Documents, including, without limitation, the enforceability of the
Security Documents or the attachment, perfection or priority of any Liens
intended to be created thereby, or the validity of any of the Loan Documents or
the consummation of any of the transactions contemplated therein.

“M&T Bank” means Manufacturers and Traders Trust Company, a New York banking
corporation, and its successors.

“Multiemployer Plan” means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA to which the Borrower or any Subsidiary of the Borrower or
any ERISA Affiliate is making or accruing an obligation to make contributions or
has within any of the preceding five plan years made or accrued an obligation to
make contributions.

“Multiple Employer Plan” means an employee benefit plan, other than a
Multiemployer Plan, to which the Borrower or any Subsidiary of the Borrower or
any ERISA Affiliate, and one or more employers other than the Borrower or a
Subsidiary of the Borrower or an ERISA Affiliate, is making or accruing an
obligation to make contributions or, in the event that any such plan has been
terminated, to which the Borrower or a Subsidiary of the Borrower or an ERISA
Affiliate made or accrued an obligation to make contributions during any of the
five plan years preceding the date of termination of such plan.

“Net Cash Proceeds” means:

(a)           with respect to any sale, lease, transfer, casualty loss or other
disposition (including condemnation, confiscation or other similar event) or
loss of any assets of the Borrower or its Subsidiaries other than those
contemplated by Sections 7.06(b) and (c), the aggregate cash proceeds (including
cash proceeds received pursuant to policies of insurance or by way of deferred
payment of principal pursuant to a note, installment receivable or otherwise,
but only as and when received) received by the Borrower or any of its
Subsidiaries pursuant to such disposition net of: (i) the direct costs relating
to any non-Affiliate for such sale, lease, transfer, casualty loss or other
disposition (including condemnation, confiscation or other similar event) or
loss (including sales commissions and legal, accounting and investment banking
fees), (ii) taxes paid or reasonably estimated by the Borrower to be payable as
a result thereof (after

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taking into account any available tax credits or deductions and any tax sharing
arrangements), and (iii) amounts required to be applied to the repayment of any
Debt secured by a Lien on the asset subject to such any sale, lease, transfer,
casualty loss or other disposition (including condemnation, confiscation or
other similar event) or loss (other than the Obligations);

(b)           with respect to any Equity Issuances, the aggregate cash proceeds
received by the Borrower or any of its Subsidiaries pursuant to such issuance,
net of the direct costs relating to such issuance (including sales and
underwriters’ commissions); and

(c)           with respect to any issuance of Funded Debt, the aggregate cash
proceeds received by the Borrower or any of its Subsidiaries pursuant to such
issuance, net of the direct costs of such issuance (including up-front,
underwriters’ and placement fees).

“Non-Financed Capital Expenditures” means, with respect to the Borrower and its
Subsidiaries (determined on a consolidated basis), as of the date of
determination, all Capital Expenditures for the for the twelve (12) month period
ending on such date paid out of the operating cash flow or the proceeds of the
Revolving Loans or Swing Line Loans.

“Notes” mean the Revolving Credit Notes, the Swing Line Note and the Term Loan
Notes.

“Notice” means that form Notice of Borrowing/Conversion/Continuation in the form
of Exhibit G hereto evidencing the Borrower’s request for funding and/or the
continuation or conversion of an applicable rate of interest.  In the case of
any Eurocurrency Loans, such Notice shall also indicate the applicable Interest
Period.

“Obligations” means all: (a) Loans, unreimbursed Facility LC Disbursements,
advances, debts, liabilities, obligations (monetary or otherwise, including
post-petition interest, allowed or not), covenants and duties owing by any
Credit Party to the Agent, any Bank, the Swing Bank, the Issuing Bank or any
Affiliate of any of the foregoing or any indemnified Person hereunder, of any
kind or nature, present or future, arising under this Agreement or any other
Loan Document, including all interest, charges, expenses, fees, reasonable
attorneys’ fees and disbursements, and any reimbursement obligations of each
Credit Party in respect of Letters of Credit and surety bonds, (b) all Hedging
Obligations of each Credit Party permitted hereunder which are owed to any Bank
or its Affiliate, (c) all Bank Product Obligations of the Borrower or any of its
Subsidiaries permitted hereunder which are owed to any Bank or its Affiliates,
and (d) JPMorgan Obligations, in all cases whether or not evidenced by any note,
guaranty or other instrument, whether or not for the payment of money, whether
arising by reason of an extension of credit, loan, guaranty, indemnification, or
in any other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired.

“Omnibus Assignment” means that certain Omnibus Assignment dated as of the
Original Effective Date, whereby the Borrower and the Banks agreed, among other
things, to: (a) accept the resignation of JPMorgan Chase Bank, N.A. as Agent,
(b) appoint the Agent as the successor

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agent to JPMorgan Chase Bank, N.A., and (c) JPMorgan Chase Bank, N.A. assigned
to the Agent all of its rights, title and interest under, in and to guaranties,
security agreement and other instruments executed by the Borrower and certain of
its Subsidiaries in connection with: (i) that certain Multicurrency Agreement
entered into by and among the Borrower and the Banks dated October 24, 2002,
which Multicurrency Agreement was superseded and replaced by the terms of the
Existing Credit Agreement, and (ii) that certain Term Loan Agreement entered
into by and among the Borrower and the Banks dated October 24, 2002, which Term
Loan Agreement was superseded and replaced by the terms of the Existing Credit
Agreement.

“Original Effective Date” means January 28, 2005.

“Payor” has the meaning given to such term in Section 10.13 hereof.

“PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding
to any or all of its functions under ERISA.

“Permitted Acquisitions” means any Acquisition by the Borrower involving a
Person which is engaged in a line of business which is the same or substantially
similar to the business of the Borrower; provided (a) the Agent shall have
received evidence reasonably satisfactory to them that any assets of such Person
which are the subject of the Permitted Acquisition are, or will be promptly
following the closing of such Permitted Acquisition, free and clear of all
Liens, except Liens permitted pursuant to Section 7.02 and other Liens for which
the Borrower has sought and obtained the prior written consent of the Agent,
which consent may be withheld, conditioned or delayed in the sole discretion of
the Agent; (b) no Default or Event of Default shall have occurred and be
continuing immediately prior to or would occur after giving effect to the
Acquisition on a pro forma basis, and (c) the Acquisition has either: (i) been
approved by an officer of such Person which is transferring assets having
authority to grant such approval, (ii) been approved by the Board of Directors
or other governing body of the Person which is the subject of the Acquisition,
or (iii) been recommended for approval by the Board of Directors or other
governing body of such Person to the shareholders or other members of such
Person and subsequently approved by the shareholders or such members if
shareholder or such member approval is required under applicable law or the
by-laws, certificate of incorporation or other governing instruments of such
Person.

“Person” means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other entity of whatever nature.

“Plan” means any Multiemployer Plan or Single-Employer Plan.

“Pledged Subsidiary” means any: (a) Domestic Subsidiary which has all of its
outstanding capital stock has been pledged to the Agent for the benefit of the
Banks pursuant to the Security Documents, and (b) Foreign Subsidiary which has
at least sixty five percent (65%) of its outstanding capital stock pledged to
the Agent for the benefit of the Banks pursuant to the Security Documents.

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“Prime Rate” means that rate of interest from time to time announced by the
Reference Bank at its Principal Office as its prime commercial lending rate.

“Principal Office” means the principal office of the Agent, presently located at
One M&T Plaza, Buffalo, New York.

“Prohibited Transaction” means a transaction with respect to a Plan that is
prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt
under Section 4975 of the Code or Section 408 of ERISA.

“Pro Rata Share” means:

(a)           with respect to a Bank’s obligation to make Revolving Loans,
participate in Facility Letters of Credit, reimburse the Issuing Bank,
participate in Swing Loans and prior to an acceleration of all amounts due under
the Notes in accordance with Section 9.02, to receive payments of principal,
interest, fees, costs, and expenses with respect thereto: (i) prior to the
Aggregate Revolving Commitment being terminated or reduced to zero, the
percentage obtained by dividing (1) such Bank’s Revolving Commitment, by (2) the
Aggregate Revolving Commitment, and (ii) from and after the time the Aggregate
Revolving Commitment has been terminated or reduced to zero, the percentage
obtained by dividing (1) the aggregate unpaid principal amount of such Bank’s
Revolving Credit Exposure (after settlement and repayment of all Swing Line
Loans by the Banks), by (2) the Aggregate Revolving Credit Exposure;

(b)           with respect to a Bank’s obligation to make a Term Loan and prior
to an acceleration of all amounts due under the Notes in accordance with Section
9.02, to receive payments of interest, fees, and principal with respect thereto:
(i) prior to the making of the Term Loans, the percentage obtained by dividing:
(1) such Bank’s Term Loan Commitment, by (2) the Aggregate Term Loan Commitment,
and (ii) from and after the making of the Term Loans, the percentage obtained by
dividing: (1) the unpaid principal amount of such Bank’s Term Loan, by (2) the
unpaid principal amount of all Term Loans of all Banks;

(c)           with respect to the allocation and payment of any proceeds
received after the acceleration of all amounts due under the Notes in accordance
with Section 9.02, the percentage obtained by dividing: (i) all of the
Obligations (including required payments into the Facility Letter of Credit
Collateral Shortfall Account) owed to the applicable Bank and payable under the
applicable subsection of Section 2.05(a)(iv), by (ii) the aggregate amount of
all Obligations (including required payments into the Facility Letter of Credit
Collateral Shortfall Account) owed to all the Banks and payable under the
applicable subsection of Section 2.05(a)(iv); and

(d)           with respect to all other matters as to a particular Bank, the
percentage obtained by dividing: (i) the amount of such Bank’s Revolving Credit
Exposure (after settlement and repayment of all Swing Line Loans by the Banks)
plus the unpaid principal amount of such

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Bank’s Term Loan, by (ii) the Aggregate Revolving Credit Exposure plus the
unpaid principal amount of all Term Loans.

“Purchase Money Debt” means and includes: (a) Debt (other than the Obligations)
for the payment of all or any part of the purchase price of any fixed assets,
(b) any Debt (other than the Obligations) incurred at the time of or within ten
(10) days prior to or after the acquisition of any fixed assets for the purpose
of financing all or any part of the purchase price thereof, and (c) any
renewals, extensions, or refinancings thereof, but not any increases in the
principal amounts thereof outstanding at such time, including, for purposes of
this definition, any such Debt constituting a Capital Lease.

“Purchase Money Lien” means a Lien upon fixed assets which secures Purchase
Money Debt, but only if such Lien shall at all times be confined solely to the
fixed assets to the extent they had their purchase price financed through the
incurrence of Purchase Money Debt.

“Quarterly Date” means the last day of March, June, September, and December in
each year, the first of which shall be the first such day after the date of this
Agreement.

“Reaffirmation Agreement” shall mean and refer to the Reaffirmation Agreement
dated on or about the date of this Agreement, whereby: (a) the Borrower, certain
Subsidiaries of the Borrower and any other Persons listed on the signature pages
to the Security Agreement, shall among other things, reaffirm their respective
obligations under the Security Agreement, as such agreement may be amended,
supplemented, restated or otherwise modified from time to time, and (b) each
Guarantor shall, among other things, reaffirm its respective obligations under
the Guaranty, as such agreement may be amended, supplemented, restated or
otherwise modified from time to time.

“Reference Bank” means M&T Bank.

“Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System as the same may be amended or supplemented from time to time.

“Regulation U” means Regulation U of the Board of Governors of the Federal
Reserve System as the same may be amended or supplemented from time to time.

“Regulatory Change” means, with respect to any Bank, any change after the
Original Effective Date in United States federal, state, municipal or foreign
laws or regulations (including, without limitation, Regulation D) or the
adoption or making after such date of any interpretations, directives or
requests applying to a class of banks including such Bank of or under any United
States, federal, state, municipal or foreign laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.

“Required Banks” means, (a) at any time while no Obligations are outstanding,
Banks having Commitments equal to at least 66 2/3% of the Aggregate Commitments
and, (b) at any

19

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time while any Obligations remain outstanding and unpaid, Banks having a
Revolving Credit Exposure, unused Revolving Commitment and unpaid principal with
respect to their Term Loans which constitute at least 66 2/3% of the sum of (i)
the Aggregate Revolving Credit Exposure and, to the extent unused, the Aggregate
Revolving Commitment, and (ii) the unpaid principal amount of all outstanding
Term Loans.

“Required Payment” has the meaning given to such term in Section 10.13 hereof.

“Reportable Event” means an event described in Section 4043 of ERISA or the
regulations thereunder with respect to a Plan, other than those events as to
which the notice requirement is waived under subsection .22, .23, .25, .27, .28,
.29, .30, .31, .32, .34, .35, .62, .63, 64, .65 or .67 of PBGC Regulation
Section 4043.

“Reserve Requirement” means, with respect to any Interest Period, the reserve
percentage (expressed as a decimal) in effect from time to time during such
Interest Period, as provided by the Federal Reserve Board, or any other
governmental authority, applied for determining the maximum reserve requirements
(including, without limitation, basic, supplemental, marginal and emergency
reserves) applicable to M&T Bank under Regulation D of the of the Board of
Governors of the Federal Reserve System with respect to “Eurocurrency
liabilities” within the meaning of Regulation D, or under any similar or
successor regulation with respect to Eurocurrency liabilities or Eurocurrency
funding.  Without limiting the effect of the foregoing, the Reserve Requirement
shall also reflect any other reserves required to be maintained by M&T Bank by
reason of any Regulatory Change against: (a) any category of liabilities which
includes deposits by reference to which the LIBOR Rate for Eurocurrency Loans is
to be determined as provided in the definition of “LIBOR Rate” in this Section
1.01 or (b) any category of extensions of credit or other assets which include
Eurocurrency Loans.

“Revolving Commitment” means, with respect to each Bank, the commitment and
obligation of such Bank to make Revolving Loans under the terms of this
Agreement and to participate in Facility Letters of Credit and Swing Line Loans
under the terms of this Agreement, in an aggregate principal amount not to
exceed the amount set forth opposite such Bank’s name on Schedule III, or in an
Assignment and Assumption Agreement executed by it, in all cases as such amount
may be modified from time to time in accordance with the terms hereof.

“Revolving Credit Exposure” means, with respect to any Bank at any time, the sum
of: (a) the outstanding principal amount of such Bank’s Revolving Loans, (b)
such Bank’s Facility LC Exposure, and (c) such Bank’s Swing Line Exposure at
such time.

“Revolving Credit Notes” means the Amended and Restated Revolving Credit Notes
of the Borrower to each of the Banks in the principal amount of their respective
Revolving Commitment, in the form of Exhibit B hereto evidencing the Revolving
Loans made by the Banks hereunder (each a “Revolving Loan Note”) as the same may
be amended, modified, extended, renewed, restated, consolidated and replaced
from time to time.

“Revolving Loans” means any Loan made pursuant to Section 2.01.

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“ROC Joint Venture Agreement” means the Joint Venture Agreement dated as of
February 12, 1999 entered into by and among the Borrower and the ROC
Shareholders, as the same may have been amended, supplemented, restated or
otherwise modified from time to time.

“ROC Shareholders” shall mean and refer to the ROC Shareholders identified under
the terms of the Joint Venture Agreement (as such agreement was in effect on
February 12, 1999) as Mr. R.M. Yang, Ms. Shain Wu, Mr. Paul Ling and Ms. J.R.
Ho.

“Security Agreement” means the Amended and Restated Security Agreement granted
by the Borrower, certain Subsidiaries of the Borrower and any other Persons
listed on the signature pages thereto, in favor of the Agent for the benefit of
the Banks dated as of the Original Effective Date, securing among other things,
the Obligations and in form and substance satisfactory to the Agent and the
Banks, as such agreement may be amended, supplemented, restated or otherwise
modified from time to time.

“Security Agreement Supplement” means supplements to the Security Agreement to
be executed by the required Subsidiaries of the Borrower pursuant to Section
6.08 herein, which shall be in the form attached to the Security Agreement as an
exhibit.

“Security Documents” means collectively any and all documentation executed in
connection with this Agreement which is intended, by virtue of its terms and
conditions to serve as security for the Obligations of the Borrower under the
terms of this Agreement or any Loan Document, any Credit Party under any Loan
Document or otherwise, including, but not limited to, the Account Control
Agreements, the Assignment of Leases and Rents, the Security Agreement, the
Intellectual Property Security Agreement, each Security Agreement Supplement,
each Intellectual Property Security Agreement Supplement, the Guaranty and each
Guaranty Supplement.

“Single Employer Plan” means a single employer plan, as defined in Section
4001(a)(15) of ERISA, to which the Borrower, any Subsidiary of the Borrower or
any ERISA Affiliate is making or accruing an obligation to make contributions
or, in the event that any such plan has been terminated, to which the Borrower,
any Subsidiary of the Borrower or any ERISA Affiliate made or accrued an
obligation to make contributions during any of the five plan years preceding the
date of termination of such plan.

“Subsidiary” means, with respect to any Person, any corporation or other entity
of which at least a majority of the securities or other ownership interests
having ordinary voting power (absolutely or on a contingent basis) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by such Person.

“Subsidiary Guarantor” means certain of the Domestic Subsidiaries that have
executed and delivered to the Agent for the benefit of the Banks the Guaranty or
a Guaranty Supplement.

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“Subsidiary Real Property Liens” has the meaning given to such term in Section
5.12 hereof.

“Swing Bank” means M&T Bank, in its capacity as Bank of Swing Line Loans
hereunder.

“Swing Line Exposure” means, at any time, the aggregate principal amount of all
Swing Line Loans outstanding at such time.  The Swing Line Exposure of any Bank
at any time shall be its Pro Rata Share of the Swing Line Exposure at such time
determined in accordance with the foregoing sentence.

“Swing Line Loan” has the meaning given to such term in Section 2.13 hereof.

“Swing Line Note” means the Amended and Restated Swing Line Note of the Borrower
to the Swing Line Bank in the principal amount of $7,000,000, in the form of
Exhibit C hereto evidencing the Swing Line Loans made by the Swing Line Bank, as
the same may be amended, modified, extended, renewed, restated, consolidated and
replaced from time to time.

“Syndication Agent” means JPMorgan Chase Bank, N.A. in its capacity as the
syndication agent of the Banks, and not in its individual capacity as a Bank.

“Synthetic Lease Obligations” means all monetary obligations of a Person under:
(a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property creating obligations which do
not appear on the balance sheet of such Person but which, upon the insolvency or
bankruptcy of such Person, would be characterized as the Debt of such Person
(without regard to accounting treatment).

“Termination Agreement” means the Termination Agreement by and among the
Existing Agent, the Documentation Agent and the Banks dated as of the Original
Effective Date, whereby the parties thereto agreed, among other things, to
terminate that certain Intercreditor Agreement dated on or about October 24,
2002 by and among such parties.

“Termination Date” means January 28, 2010.

“Term Loan Commitment” means, with respect to each Bank, the commitment and
obligation of such Bank to make Term Loans under this Agreement, in an aggregate
principal amount not to exceed the amount set forth opposite such Bank’s name on
Schedule IV, or in an Assignment and Assumption Agreement executed by it, in all
cases as such amount may be modified from time to time in accordance with the
terms hereof.

“Term Loan Maturity Date” means January 28, 2011.

“Term Loan Notes” means the Amended and Restated Term Loan Notes of the Borrower
to each of the Banks in the principal amount of their respective Term Loan
Commitment, in the form of Exhibit D hereto evidencing the Term Loans made by
the Banks hereunder (each a

22

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“Term Loan Note”) as the same may be amended, modified, extended, renewed,
restated, consolidated and replaced from time to time.

“Term Loan Quarterly Payment Dates” means the 20th day of each June, September,
December and March in each year.

“Taiwanese Property” shall mean and refer to the lands located at and commonly
known as 305 Nan-Kang Sub-section Lin-Tze Section, Nanto County, Taiwan and the
buildings thereon (including a four-floor office building and a factory with two
floors above the ground level and one basement below the ground level.

“USA Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.

“Variable Rate” means, for any day, the higher of: (a) the Federal Funds Rate
for such day plus fifty (50) Basis Points, and (b) the Prime Rate for such day.
Any change in the Variable Rate due to a change in the Prime Rate or the Federal
Funds Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Rate, respectively.

“Variable Rate Loan” means any Loan when and to the extent the interest rate for
such Loan is determined in relation to the Variable Rate.

“Wholly Owned Subsidiary” shall mean a Subsidiary for which all of the
outstanding shares of stock or other equity of such entity is owned directly or
indirectly by Borrower or one of Borrower’s Wholly Owned Subsidiaries.

Section 1.02.  Other Defined Terms; Rules of Interpretation .

(a)           All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto, unless otherwise expressly provided therein.

(b)           As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined herein and accounting
terms partly defined herein to the extent not defined, shall have the respective
meanings given to them under GAAP.

(c)           The words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.  The words “include,”
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation.”  Unless the context in which used herein otherwise clearly
requires, “or” has the inclusive meaning represented by the phrase “and/or.”

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(d)           Terms defined in this Agreement by reference to any other
agreement, document or instrument shall have the meanings assigned to them in
such agreement, document or instrument, whether or not such agreement, document
or instrument is then in effect.

(e)           All terms defined in the UCC and not otherwise defined herein have
the meanings assigned to them in the UCC.

(f)            References to Articles, Sections, subsections, Exhibits,
Schedules and the like, are to Articles, Sections, subsections of, or Exhibits
or Schedules attached to, this Agreement (as amended from time to time) unless
otherwise expressly provided.

(g)           Defined terms include in the singular number the plural and in the
plural number the singular.

(h)           Reference to any law, rule, regulation, order, decree,
requirement, policy, guideline, directive or interpretation means as amended,
modified, codified, replaced or reenacted, in whole or in part, and in effect on
the determination date, including rules and regulations promulgated thereunder.

(i)            All references herein to the Banks or any of them shall be deemed
to include the Issuing Bank unless specifically provided otherwise or the
context otherwise requires.

Section 1.03.  Amendment and Restatement. This Agreement is and shall for all
purposes be deemed to be an amendment and a restatement of the provisions of the
Existing Credit Agreement. This Agreement shall supersede the Existing Credit
Agreement insofar as it constitutes the entire agreement between the parties
concerning the subject matter of this Agreement, but does not constitute a
novation of the Existing Credit Agreement or any of the Indebtedness,
liabilities or obligations of the Borrower thereunder.  All Existing Revolving
Loans and Existing Term Loans together with all Existing Facility Letters of
Credit pursuant to the Existing Credit Agreement shall be deemed to be Loans and
Letters of Credit under this Agreement, and all Obligations (as defined in the
Existing Credit Agreement) shall be deemed to be Obligations under this
Agreement.

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ARTICLE 2. THE CREDITS

Section 2.01.  The Commitments.

(a)           Revolving Loans.

(i)            On the Effective Date, the Existing Revolving Loans and the
Existing Bridge Loans shall automatically, and without any action on the part of
any Person, be deemed to be Revolving Loans under this Agreement, and the Banks
shall , through the Agent, make such adjustments as shall be necessary so that
after giving effect thereto, each Bank holds its Pro Rata Share of the
outstanding Revolving loans, provided that such amount is not greater than its
Revolving Commitment.

(ii)           Subject to the terms and conditions set forth in this Agreement,
each Bank agrees to make Revolving Loans to the Borrower from time to time from
the Effective Date until the Termination Date in an aggregate principal amount
that will not result in: (A) such Bank’s Revolving Credit Exposure exceeding
such Bank’s Revolving Commitment, and (B) the Aggregate Revolving Credit
Exposure exceeding the Aggregate Revolving Commitment.  Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, repay and re-borrow from time to time Revolving Loans.

(b)           Term Loans.  Immediately prior to the Effective Date, the Banks
held the Existing Term Loans with an aggregate outstanding principal amount
being $21,600,000.  On the Effective Date, the Existing Term Loans held by each
Bank shall automatically, and without any action on the part of any Person, be
deemed to be Term Loans under this Agreement.

Section 2.02.  The Notes and Recordkeeping.

(a)           The Revolving Credit Loans of each Bank shall be evidenced by a
Revolving Credit Note, with appropriate insertions, payable to the order of such
Bank in a face principal amount equal to the sum of such Bank’s Revolving
Commitment.  The Term Loans of each Bank shall be evidenced by a Term Loan Note,
with appropriate insertions, payable to the order of such Bank in a face
principal amount equal to the sum of such Bank’s Term Loan Commitment.  The
Swing Loans shall be evidenced by a Swing Line Note, with appropriate
insertions, payable to the order of the Swing Line Bank in a face principal
amount equal to $7,000,000.  Each Note shall be dated the date of this Agreement
and otherwise duly completed and executed by the Borrower.

(b)           The date, type, amount, interest rate, duration of Interest
Period, and conversion of each Loan made by each Bank to the Borrower, and each
payment made on account of the principal thereof, shall be recorded by such Bank
on its books and, on the schedule attached to each Note or any continuation
thereof.  The aggregate unpaid principal amount so recorded shall be presumptive
evidence of the principal amount of the Loans owing and unpaid.  The failure of
such Bank to make, or any error in making, any such recordation shall not affect
the Obligations of Borrower hereunder or under any Note to pay when due of any

25

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amount owing hereunder or under such Note in respect of the Loan together with
interest accruing thereon.

Section 2.03.  Purpose.  The Borrower shall use the proceeds of the Revolving
Loans to refinance Existing Revolving Loans and Existing Bridge Loans and Swing
Line Loans and may otherwise use the proceeds of the Revolving Loans: (i) for
working capital requirements and other general corporate purposes in the
ordinary course of business and (ii) up to a maximum of $5,000,000 to fund
Permitted Acquisitions.  The proceeds of Swing Line Loans may be used only for
working capital requirements and general corporate purposes in the ordinary
course of business.  The Borrower shall use the proceeds of the Term Loans to
refinance the Existing Term Loans.  Notwithstanding any provision herein to the
contrary, the proceeds of the Borrower shall not use the proceeds from any
Loans, whether immediately, incidental or ultimate, for the purpose of buying or
carrying “margin stock” within the meaning of Regulation U.

Section 2.04.  Borrowing Procedures.

(a)           To effect a funding, the Borrower shall give the Agent a Notice,
delivered in accordance with this Section 2.04 and in Section 2.08, specifying
the type, amount and date of each intended borrowing and the manner in which the
same will be disbursed.

(b)           Each Revolving Loan shall be, and each Term Loan may be, divided
into tranches which are, either a Variable Rate Loan or a Eurocurrency Loan
(each a “type” of Loan), as the Borrower shall specify in the related notice of
borrowing or conversion pursuant to Section 2.08.  Both Variable Rate Loans and
Eurocurrency Loans may be outstanding at the same time, provided that not more
than eight (8) different Eurocurrency Loans shall be outstanding at any one
time.  Each request for a Eurocurrency Loan shall be treated as a single Loan,
this despite any Eurocurrency Loans having the same Interest Period which expire
on the same day.  All borrowings, conversions and repayments of Loans shall be
effected so that each Bank will have a ratable share, according to its Pro Rata
Share, of all types of Loans.

(c)           Promptly upon receipt of each Notice, the Agent shall advise each
Bank thereof and their respective proportionate share of the Loans.  The amount
so received by the Agent shall, subject to the conditions of this Agreement, be
made available to the Borrower, in immediately available funds, by the Agent
crediting an account of the Borrower designated by the Borrower and maintained
with the Agent at a banking office designated by the Agent, provided that
Revolving Loans made to finance the reimbursement of a Facility LC Disbursement
as provided in Section 2.14(e) shall be remitted by the Agent to the Issuing
Bank.

(d)           Unless the Agent shall have received notice from a Bank prior to
the proposed date of any borrowing under this Agreement that such Bank will not
make available to the Agent such Bank’s share of such borrowing, the Agent may
assume that such Bank has made such share available on such date in accordance
with Section 2.04(c) and may, in reliance upon such assumption, make available
to the Borrower a corresponding amount.  In such event, if a Bank has not in
fact made its share of the applicable borrowing available to the Agent, then the
applicable Bank and the Borrower severally agree to pay to the Agent forthwith
on demand such

26

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corresponding amount with interest thereon, for each day from and including the
date such amount is made available to the Borrower to but excluding the date of
payment to the Agent, at: (i) in the case of such Bank, the greater of the
Federal Funds Rate and a rate determined by the Agent in accordance with banking
industry rules on interbank compensation, or (ii) in the case of the Borrower,
the interest rate applicable to Variable Loans.  If such Bank pays such amount
to the Agent, then such amount shall constitute such Bank’s Loan included in
such borrowing.

Section 2.05.  Payments.

(a)           Except to the extent otherwise provided herein, all payments of
principal of and interest on Loans payable by the Borrower under this Agreement
and the Notes shall be made in immediately available funds not later than 11:00
a.m. New York time on the date on which such payments shall become due (each
such payment made after such time on such date to be deemed to have been made on
the next succeeding Business Day).  So long as no Default or Event of Default
has occurred and is continuing: (i) payments matching specific scheduled
payments then due shall be applied to those scheduled payments, and (ii)
voluntary and mandatory prepayments shall be applied as set forth in Section
2.12.  Subject to the foregoing, and except as otherwise below, all principal
payments in respect of the Loans (other than the Swing Line Loans) shall be
applied first, to repay outstanding Variable Rate Loans and then to repay
outstanding Eurocurrency Loans in direct order of Interest Period maturities. 
After the occurrence and during the continuance of a Default or Event of
Default, payment by Borrower or any Credit Party to and all amounts collected or
received by the Agent or any Bank as payments from the Borrower or any Credit
Party or otherwise or as proceeds from the sale of, or other realization upon,
all or any part of the collateral, shall be applied as follows anything
contained herein to the contrary notwithstanding:

(i)            first, to the payment of any outstanding costs and expenses
incurred by the Agent in protecting, preserving or enforcing rights under this
Agreement and the other Loan Documents and in any event including all costs and
expenses of a character which the Borrower has agreed to pay under Section 11.03
hereof (such funds to be retained by the Agent for its own account unless it has
previously been reimbursed for such costs and expenses by the Banks, in which
event such amounts shall be remitted to the Banks to reimburse them for payments
theretofore made to the Agent);

(ii)           second, to the payment of any outstanding interest or other fees
or indemnification amounts due with respect to the Obligations, ratably as among
the Agent and the Banks in accord with the amount of such interest and other
fees or indemnification amounts owing each;

(iii)          third, to the payment of the principal of the Swing Loans;

(iv)          fourth, to the payment of all other Obligations in accordance with
each Bank’s Pro Rata Share (including required payments into the Facility Letter
of Credit Shortfall Collateral Account), except that the JPMorgan Obligations
shall be only to a maximum

27

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amount of $8,000,000 and the Bank Product Obligations of Subsidiaries of the
Borrower that are not Credit Parties shall be only to a maximum of $3,000,000;

(v)           fifth,  to payment of any remaining unpaid JPMorgan Obligations
and Bank Product Obligations; and

(vi)          sixth, to the Borrower or to whomever the Agent reasonably
determines to be lawfully entitled thereto.

If the due date of any payment under this Agreement or the Notes would otherwise
fall on a day which is not a Business Day, such date shall be extended to the
next succeeding Business Day and interest shall be payable for any principal so
extended for the period of such extension.  Each payment received by the Agent
hereunder or under the Notes for the account of a Bank shall be paid promptly to
such Bank, in immediately available funds.

(b)           Unless earlier due pursuant to Section 2.12 or Section 9.02, the
Revolving Loans of each Bank shall be paid in full and the Revolving Commitments
shall terminate on the Termination Date.

(c)           Unless earlier due pursuant to Section 2.12 or Section 9.02, the
Borrower promises to pay to the Agent, for the pro rata accounts of the Banks in
accordance with their Pro Rata Share, the principal amount of the Term Loans in
seventeen (17) consecutive quarterly payments on each Term Loan Quarterly
Payment Date in an amount equal to the amount set forth in the table below
opposite the calendar year containing the date of such payment (subject to
reductions from prepayments as set forth in Section 2.12), commencing on
December 20, 2006, with a final payment due on the Term Loan Maturity Date in an
amount equal to the unpaid balance of the Term Loans.

Calendar Year

 

Amount of
Quarterly Payment

 

2006

 

$

1,200,000

 

2007

 

$

1,275,000

 

2008

 

$

1,275,000

 

2009

 

$

1,275,000

 

2010

 

$

1,275,000

 

 

Section 2.06.  Interest Periods.  In the case of each Eurocurrency Loan, the
Borrower shall select in each Notice an Interest Period of any duration in
accordance with the definition of Interest Period in Section 1.01 hereof,
subject to the following limitations: (a) in the case of Revolving Loans, no
Interest Period may extend beyond the Termination Date; (b) in the case of Term
Loans if, after giving effect to an Interest Period, the aggregate principal
amount of all Term Loans having Interest Periods ending after any date on which
an installment of the Term

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Loans is scheduled to be repaid would exceed the aggregate principal amount of
the Term Loans scheduled to be outstanding after giving effect to such
repayment, such Interest period may not be selected, (c) notwithstanding clause
(a) above, no Interest Period for a Eurocurrency Loan shall have a duration less
than one month and if any such proposed Interest Period would otherwise be for a
shorter period, such Interest Period shall not be available; and (d) if an
Interest Period would end on a day which is not a Business Day, such Interest
Period shall be extended to the next Business Day, unless, in the case of a
Eurocurrency Loan, such Business Day would fall in the next calendar month in
which event such Interest Period shall end on the immediately preceding Business
Day.

Section 2.07.  Interest.

(a)           Interest shall accrue on the outstanding and unpaid principal
amount of each Loan for the period from and including the date of such Loan to
but excluding the date such Loan is paid at the following rates per annum: (i)
for a Variable Rate Loan, at a rate per annum equal to the Variable Rate plus
the Applicable Margin, and (ii) for a Eurocurrency Loan, at a fixed rate equal
to the Eurocurrency Rate plus the Applicable Margin.  If the principal amount of
any Loan and any other Obligation payable by the Borrower hereunder or under a
Note or other Loan Document shall not be paid when due (at stated maturity, by
acceleration or otherwise), interest shall accrue at the Default Rate on such
amount to the full extent permitted by law from and including such due date to
but excluding the date such amount is paid in full.

(b)           The applicable LIBOR Rate for each Interest Period for each
Eurocurrency Loan shall be determined by the Agent, and notice thereof shall be
given by the Agent promptly to the Borrower and each Bank. Each determination of
the applicable LIBOR Rate by the Agent shall be conclusive and binding upon the
parties hereto, in the absence of demonstrable error.  The Agent shall, upon
written request of the Borrower or any Bank, deliver to the Borrower or such
Bank a statement showing the computations used by the Agent in determining any
applicable LIBOR Rate hereunder.

(c)           Interest shall be computed for the actual number of days elapsed
on the basis of a year of 360 days; provided that calculations of interest with
respect to Variable Rate Loans shall be for the actual number of days elapsed on
the basis of a year of 365/366 days.  The applicable interest rate for each
Variable Rate Loan shall change simultaneously with each change in the Variable
Rate.

(d)           Accrued interest on each Variable Rate Loan shall be payable in
arrears on each Quarterly Date for Revolving Loans and each Term Loan Quarterly
Payment Date for Term Loans, upon a prepayment of any such Loan and at maturity
of any such Loan.  Accrued interest on each Eurocurrency Loan shall be payable
on the last day of each Interest Period relating to such Loan (and, in the case
of a Eurocurrency Loan with an Interest Period in excess of three months, on the
three-month anniversary of the first day of such Interest Period), upon a
prepayment of any such Loan, and at maturity of any such Loan. After maturity,
and at any time an Event of Default exists, accrued interest on all Loans shall
be payable on demand.

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Section 2.08.  Certain Notices.

(a)           The Borrower shall deliver to the Agent a Notice for: (1) each
borrowing pursuant to Section 2.04, and (2) each conversion/continuation of an
Interest Period pursuant to Section 2.08(b).  The Borrower shall also deliver to
the Agent advance written notice pursuant to this Section 2.08 of each
prepayment pursuant to Section 2.12 and each reduction or termination of the
Revolving Commitments pursuant to Section 2.09(b).  All Notices received by the
Agent shall be irrevocable and shall be effective only if received by the Agent:
(i) in the case of borrowings for Variable Rate Loans, the Borrower shall
deliver a Notice to the Agent no later than 2:00 p.m. New York time at least one
(1) Business Day prior to the date of such borrowing, (ii) in the case of any
prepayment for Variable Rate Loans, written notice shall be delivered to the
Agent no later than 11:00 p.m. New York time on the date of prepayment, (iii) in
the case of borrowings, conversion from a Variable Rate Loan to a Eurocurrency
Loan, a conversion/ continuation of an Interest Period, prepayment or required
prepayment for Eurocurrency Loans, written notice or a Notice (as applicable)
shall be delivered to the Agent by 2:00 p.m., at least three (3) Business Days
prior to the date of such borrowing, conversion of the applicable rate of
interest, conversion/continuation of an Interest Period, prepayments and/or
required prepayment for Eurocurrency Loans; (iv) in the case of Swing Line
Loans, a Notice shall be delivered to the Agent no later than 12:00 noon, New
York time, on the date of such borrowing, and (v) in the case of reductions or
terminations of the Revolving Commitments, written notice shall be delivered to
the Agent at least three (3) Business Days prior thereto.  Each written notice
of reduction or termination shall specify the amount of the Revolving
Commitments to be reduced or terminated.  Each Notice for the
conversion/continuation of a Loan shall specify the proposed date of conversion
or continuation; the aggregate amount of Loans to be converted or continued; the
type of Loans resulting from the proposed conversion or continuation; and in the
case of conversion into, or continuation of, Eurocurrency Loans the duration of
the requested Interest Period therefor.  Without limiting the foregoing, any
failure by the Borrower to deliver the required notice in connection with the
prepayment of any Eurocurrency Loan will result in the payment of any necessary
fees or costs (if any) as described in Section 3.05 below.

(b)           If upon the expiration of any Interest Period applicable to
Eurocurrency Loans, the Borrower has failed to select timely a new Interest
Period to be applicable to such Eurocurrency Loans, the Borrower shall be deemed
to have elected to convert such Eurocurrency Loans into Variable Rate Loans
effective on the last day of such Interest Period.  Furthermore, unless the
Required Banks otherwise consent in writing, if there exists a Default or Event
of Default, Borrower may not thereafter elect to have an existing Loan converted
to a Eurocurrency Loan or have any new Eurocurrency Loans extended thereafter. 
Further, at the sole discretion of the Agent and the Required Banks, the Agent
may convert any Eurocurrency Loan to a Variable Rate Loan.  Notwithstanding the
foregoing, if Borrower commences, or has commenced against it, any proceeding or
request for relief under any bankruptcy, insolvency or similar laws not 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
dissolution, liquidation or settlement of claims against or winding up of
affairs of Borrower (sometimes hereinafter collectively referred to as a
“Bankruptcy Event”), any outstanding Eurocurrency Loans shall be automatically
converted to Variable Rate Loans without further action of the Agent and/or the
Banks,  Nothing

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herein shall be construed as a waiver by the Banks to have any Obligations
accrue interest at the Default Rate.

(c)           Subject to Sections 2.08(a) and 2.10, and subject to the
restrictions on the number of Eurocurrency Loans that may be outstanding at any
given time as set forth in Section 2.04(b) above, the Borrower may, upon
irrevocable written notice to the Agent:

(i)            Elect, as of any Business Day, to convert any Variable Rate Loans
into Eurocurrency Loans; or

(ii)           Elect, as of the last day of the applicable Interest Period, to
continue all or any part of any Eurocurrency Loans having Interest Periods
expiring on such day  for a new Interest Period of its choice, provided that
after giving effect to any prepayment, conversion or continuation: or

(iii)          Elect, as of the last day of the applicable Interest Period, to
convert any or a part of any Eurocurrency Loan into a Variable Rate Loan.

Section 2.09.  Changes in Revolving Commitment.

(a)           The Borrower shall have the right to reduce or terminate the
amount of unused Revolving Commitments at any time or from time to time,
provided that: (i) the Borrower shall give notice of each reduction or
termination to the Agent as provided in Section 2.08(a); and (ii) each partial
reduction shall be in an aggregate amount of at least Three Million Dollars
($3,000,000).

(b)           The Revolving Commitments once reduced or terminated may not be
reinstated.  All reductions in the Revolving Commitments shall be made pro rata
according to the amount of each Bank’s Revolving Commitment. Any reduction of
the Revolving Commitments to a level below the maximum principal amount set
forth in Section 2.13(a) for Swing Line Loans and the maximum Facility LC
Exposure set forth in Section 2.14(a) for Facility Letters of Credit shall
effect a concurrent reduction in those amounts so as to equal the total
Aggregate Revolving Commitments after giving effect to such reduction.

Section 2.10.  Minimum Amounts.

(a)           Except for borrowings which exhaust the full remaining amount of
the Aggregate Revolving Commitment, and prepayments which result in the
prepayment of all Revolving Loans, each borrowing and prepayment of principal
shall be in an amount equal to at least One Million Dollars ($1,000,000) and
shall be in incremental multiples of One Hundred Thousand Dollars ($100,000).

(b)           Except for borrowings which exhaust the full remaining amount of
the Swing Line Loan available to the Borrower, all Swing Line Loans shall be in
an amount equal to

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at least One Hundred Thousand Dollars ($100,000) and shall be in incremental
multiples of Fifty Thousand Dollars ($50,000).

Section 2.11.  Fees.

(a)           The Borrower shall pay to the Agent for the account of each Bank a
fee (the “Revolving Commitment Fee”) on the daily average unused Revolving
Commitment of such Bank for the period from and including the Original Effective
Date to the earlier of the date the Bank’s Revolving Commitment is terminated or
the Termination Date.  The Revolving Commitment Fee shall equal the daily
average unused Revolving Commitment of such Bank during the period for which
payment is due, multiplied by the applicable Revolving Commitment Fee Rate.  For
purposes of calculating usage under this Section, the Revolving Commitment of
each Bank shall be deemed used to the extent of the Revolving Credit Exposure,
except that the Swing Loan Exposure shall not be taken into account for such
purpose.  The accrued Revolving Commitment Fee shall be due and payable in
arrears, upon any reduction or termination of the Revolving Commitments and on
each Quarterly Date commencing on the first such date after the Original
Effective Date, and shall be calculated on the basis of a year of three hundred
sixty (360) days for the actual number of days elapsed.

(b)           The Borrower shall pay to the Agent, for the benefit of the Banks,
an amount equal to the Applicable Margin for Eurocurrency Loans multiplied by
the aggregate face amount of all outstanding Facility Letters of Credit as of
each payment date therefor (the “Facility Letter of Credit Fee”) prior to the
termination of such Facility Letter of Credit.  In addition, the Borrower shall
also pay to the Agent for the benefit of the Issuing Bank, a fronting fee for
each Facility Letter of Credit equal to one eighth of one percent (.125%) per
annum multiplied by the aggregate face amount of all outstanding Facility
Letters of Credit as of each payment date therefor (“Facility Letter of Credit
Fronting Fee”) prior to the termination of such Facility Letter of Credit. 
Finally, the Borrower, shall upon demand of the Agent, and for the benefit of
the Issuing Bank, pay to the Agent, such other fees and expenses as the Issuing
Bank customarily requires in connection with the issuance, negotiation,
processing and/or administration of letters of credit in similar situations.

(c)           The accrued Facility Letter of Credit Fee and Facility Letter of
Credit Fronting Fee shall be due and payable on each Quarterly Date commencing
on the first such date after the Original Effective Date that a Facility Letter
of Credit is issued and on the Termination Date.  The Facility Letter of Credit
Fee and the Facility Letter of Credit Fronting Fee shall be calculated on the
basis of a year of three hundred sixty (360) days for the actual number of days
elapsed.

(d)           The Borrower shall pay such other fees, if any, as the Borrower
has otherwise agreed in writing to pay to the Agent, Arranger, and/or the Banks,
including but not limited to any fees described in the Fee Letter.

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Section 2.12.  Prepayments.

(a)           Subject to the notice provisions contained within Section 2.08 or
as otherwise stated in this Agreement, the Borrower shall have the right to
prepay the Loans at any time or from time to time provided that each such
voluntary prepayment of principal shall be in an amount of at least Three
Million Dollars ($3,000,000) and shall be in incremental multiples of One
Million Dollars ($1,000,000).

(b)           Notwithstanding anything herein to the contrary, if at any time
(including after giving effect to any reduction or termination of the Revolving
Commitments pursuant to Section 2.09 hereof), the Aggregate Revolving
Commitments exceeds the Aggregate Revolving Credit Exposure, the Borrower shall
pay or repay the Revolving Loans on the date of such reduction or termination in
an aggregate principal amount equal to the excess, together with interest
thereon accrued to the date of such payment or repayment and any amounts payable
pursuant to Section 3.05 in connection therewith.

(c)           Until the Term Loans has been paid in full, the Borrower shall
make a mandatory prepayment in accordance with this Section 2.12(c) upon the
occurrence of any of the following at the following times and in the following
amounts:

(i)            Unless otherwise permitted in Sections 7.06(b) and (c),
concurrently with the receipt by any Credit Party of any Net Cash Proceeds from
the sale, lease, transfer, casualty loss (whether due to damage or destruction)
or other disposition or loss of any assets of the Borrower or any of its
Subsidiaries, in an amount equal to 100% of such Net Cash Proceeds provided,
however, that: (A) the foregoing provisions shall be inapplicable to proceeds
received by the Agent under the Security Documents if and so long as, pursuant
to the terms of the Security Documents, the same are to be held by the Agent and
disbursed for the restoration, repair or replacement of the property in respect
of which such proceeds were received, (B) no prepayment shall be required with
respect to the first $500,000 of Net Cash Proceeds received during any Fiscal
Year from the sale or other disposition (including condemnation, confiscation or
other similar event) of equipment, furniture and fixtures of the Borrower and
its Subsidiaries, taken together, which are worn out, obsolete or, in the good
faith judgment of the Borrower or such Subsidiary, no longer desirable to the
efficient conduct of its business as then conducted, (C) no prepayment shall be
required with respect to proceeds received from the sale, damage or destruction
of any of the equipment or other assets subject to Liens permitted by Section
7.02 hereof if and to the extent such proceeds are applied to reduce the
indebtedness secured by such Liens, and (D) so long as no Default or Event of
Default has occurred or is continuing the Borrower or such Subsidiary, as the
case may be, may retain the proceeds derived from the sale, damage or
destruction of fixtures, furniture and equipment if and to the extent that the
Borrower or such Subsidiary establishes to the reasonable satisfaction of the
Agent that the equipment sold, damaged, or destroyed has been replaced within
one hundred eighty (180) days of the sale, damage or destruction of fixtures,
furniture and equipment (or repaired in the case of damaged property) with
fixtures, furniture or equipment of at least equal value and utility to that
replaced (before any such damage or destruction) which is subject to a first
Lien in favor of the Agent for the benefit of the Banks.  Nothing herein
contained shall in any manner impair or otherwise affect the prohibitions
against the sale or other disposition (including condemnation, confiscation or
other similar event) of collateral contained herein and in the Security
Documents.

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(ii)           Concurrently with the receipt by any Credit Party of any Net Cash
Proceeds from any Equity Issuances (excluding: (A) any issuance of Capital
Securities pursuant to any employee or director option program, benefit plan or
compensation program, and (B) any issuance by a Subsidiary to the Borrower or
another Subsidiary), in an amount equal to 50% of such Net Cash Proceeds;
provided, however, that notwithstanding the foregoing, the Borrower shall not be
required to make the prepayment described in this Section 2.12(c)(ii) if: (1) no
Default or Event of Default exists at the time when any Credit Party receives
the Net Cash Proceeds from any Equity Issuances, (2) and no Default or Event of
Default would be created by the failure to pay over the receipts by any Credit
Party of any Net Cash Proceeds from any Equity Issuances.

(iii)          Concurrently with the receipt by any Credit Party of any Net Cash
Proceeds from any issuance of any Funded Debt of any Credit Party (excluding 
Debt permitted by clauses (a)(ii), (a)(iii) and (a)(iv) of Section 7.01), in an
amount equal to 100% of such Net Cash Proceeds.

The proceeds from each such prepayment made by the Borrower shall be applied to
the prepayment of the Term Loans.

(d)           Each prepayment shall hereunder be applied pro rata among the Term
Loans and Revolving Loans, as the case may be, according to each Bank’s Pro Rata
Share and, as to each Term Loan, to the remaining installments thereof in the
inverse order of the maturity thereof, starting with the final payment due on
the Term Loan Maturity Date.  All voluntary and mandatory prepayments of an
existing Eurocurrency Loan on a day other than the last day of an Interest
Period therefor shall include interest on the principal amount being repaid and
shall be subject to Section 3.05.

Section 2.13. Swing Loans.

(a)           Subject to the terms and conditions hereof, the Swing Line Bank
may, in its sole discretion, make available from time to time until the
Termination Date one or more loans (each, a “Swing Line Loan”), provided that
after giving effect to such Swing Line Loan: (i) the aggregate principal amount
of all outstanding Swing Line Loans does not exceed $7,000,000, and (ii) the sum
of the total Aggregate Revolving Credit Exposures does not exceed the Aggregate
Revolving Commitment.  Until the Termination Date, the Borrower may from time to
time borrow, repay and re-borrow under this Section 2.13.

(b)           Each Swing Line Loan shall be made pursuant to a notice of
borrowing delivered by the Borrower to the Agent in accordance with Section
2.08.  Each such notice shall be irrevocable and shall specify the requested
date (which shall be a Business Day) and amount of the requested Swing Line
Loan.  The Agent will promptly advise the Swing Line Bank of any such notice
received from the Borrower.  Unless the Swing Line Bank has received prior
written notice from the Required Banks instructing it not to make a Swing Line
Loan, the Swing Line Bank shall, notwithstanding the failure of any condition
precedent set forth in Section 4.02, be

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entitled to fund that Swing Line Loan, and to have such Bank purchase
participating interests in accordance with Section 2.13(c).  The Swing Line Bank
shall make each Swing Line Loan available to the Borrower by means of a credit
to the general deposit account of the Borrower with the Swing Line Bank (or, in
the case of a Swing Line Loan made to finance the reimbursement of an Facility
LC Disbursement as provided in Section 2.14(d), by remittance to the Issuing
Bank) by 3:00 p.m., New York time, on the requested date of such Swing Line
Loan.

(c)           The Swing Line Bank may by written notice given to the Agent
require the Banks to acquire participations on such Business Day in all or a
portion of the Swing Line Loans outstanding.  Such notice shall specify the
aggregate amount of Swing Line Loans in which the Banks will participate. 
Promptly upon receipt of such notice, the Agent will give notice thereof to each
Bank, specifying in such notice such Bank’s Pro Rata Share of such Swing Line
Loan or Swing Line Loans.  Each Bank hereby absolutely and unconditionally
agrees, upon receipt of notice as provided above, to pay to the Agent, for the
account of the Swing Line Bank, such Bank’s Pro Rata Share of such Swing Line
Loan or Swing Line Loans.  Each Bank acknowledges and agrees that its obligation
to acquire participations in Swing Line Loans pursuant to this Section 2.13(c)
is absolute and unconditional and shall not be affected by any circumstance,
including: (i) any setoff, counterclaim, recoupment, defense or other right that
such Bank  may have against the Swing Line Bank, the Borrower or any other
Person for any reason whatsoever; (ii) the occurrence or continuance of any
Default or Event of Default; (iii) any inability of the Borrower to satisfy the
conditions precedent to borrowing set forth in this Agreement at any time, (iv)
the reduction or termination of the Revolving Commitments, or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.  Each Bank shall comply with its obligation under this Section
2.13(c) by wire transfer of immediately available funds, in the same manner as
provided in Section 2.04 with respect to Loans made by such Bank (and Section
2.04 shall apply, mutatis mutandis, to the payment obligations of the Bank), and
the Agent shall promptly pay to the Swing Line Bank the amounts so received by
it from the Bank.  The Agent shall notify the Borrower of any participations in
any Swing Line Loan acquired pursuant to this Section, and thereafter payments
in respect of such Swing Line Loan shall be made to the Agent and not to the
Swing Line Bank.  Any amounts received by the Swing Line Bank from the Borrower
(or other party on behalf of the Borrower) in respect of a Swing Line Loan after
receipt by the Swing Line Bank of the proceeds of a sale of participations
therein shall be promptly remitted to the Agent; any such amounts received by
the Agent shall be promptly remitted by the Agent to the Banks that shall have
made their payments pursuant to this Swing Line Loan and to the Swing Line Bank,
as their interests may appear.  The purchase of participations in a Swing Line
Loan pursuant to this Section 2.13 shall not relieve the Borrower of any default
in the payment thereof.

(d)           Notwithstanding anything herein or in any the other Loan Document
to the contrary, each Swing Line Loan shall constitute a Variable Rate Loan. 
The Borrower shall repay all principal (together with accrued interest) on each
Swing Line Loan no later than 3:00 p.m., New York time on the earliest of: (i)
the date that is five (5) Business Days after the date that such Swing Line Loan
is made, (ii) the date that demand is made therefore by the Swing Bank, or (iii)
the Termination Date.

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Section 2.14. Facility Letters of Credit.

(a)           All Existing Facility Letters of Credit outstanding on the
Effective Date shall be deemed to be Facility Letters of Credit.  .Subject to
the terms and conditions set forth herein, the Borrower may request from the
Issuing Bank the issuance of Facility Letters of Credit for its own account in a
form reasonably acceptable to the Agent and the Issuing Bank, at any time and
from time to time from the Effective Date and continuing through Termination
Date.  In the event of any inconsistency between the terms and conditions of
this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the Borrower to, or entered into by
the Borrower with, the Issuing Bank relating to any Facility Letter of Credit,
the terms and conditions of this Agreement shall control.  The parties hereto
acknowledge and agree that (i) Facility Letters of Credit may be issued to
support obligations of Subsidiaries of the Borrower as well as the Borrower,
(ii) Facility Letters of Credit issued to support obligations of a Subsidiary
may state that they are issued for such Subsidiary’s account and (iii)
regardless of any such statement in any Facility Letter of Credit, the Borrower
is the “account party” in respect of all Facility Letters of Credit and will be
responsible for reimbursement of Facility LC Disbursements as provided herein.

(b)           To request the issuance of a Facility Letter of Credit (or the
amendment, renewal or extension of an outstanding Facility Letter of Credit),
the Borrower shall hand deliver (or transmit by electronic communication or
facsimile transmission, if arrangements for doing so have been approved by the
applicable Issuing Bank) to the Issuing Bank and the Agent (reasonably in
advance of the requested date of issuance, amendment, renewal or extension) a
notice requesting the issuance of a Facility Letter of Credit, or identifying
the Facility Letter of Credit to be amended, renewed or extended, and specifying
the date of issuance, amendment, renewal or extension (which shall be a Business
Day), the date on which such Facility Letter of Credit is to expire (which shall
comply with Section 2.14(c)), the amount of such Facility Letter of Credit, the
name and address of the beneficiary thereof and such other information as shall
be necessary to prepare, amend, renew or extend such Facility Letter of Credit. 
If requested by the applicable Issuing Bank, the Borrower also shall submit a
letter of credit application on such Issuing Bank’s standard form in connection
with any request for a Facility Letter of Credit.  A Facility Letter of Credit
shall be issued, amended, renewed or extended only if (and upon issuance,
amendment, renewal or extension of each Facility Letter of Credit the Borrower
shall be deemed to represent and warrant that), after giving effect to such
issuance, amendment, renewal or extension (i) the Facility LC Exposure shall not
exceed $10,000,000, and (ii) the Aggregate Revolving Credit Exposure shall not
exceed the Aggregate Revolving Commitment.

(c)           Each Facility Letter of Credit shall expire at or prior to the
close of business on the earlier of: (i) the date one year after the date of the
issuance of such Facility Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension), and (ii) the date
that is thirty (30) Business Days prior to the Termination Date.

(d)           By the issuance of a Facility Letter of Credit (or an amendment to
a Facility Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Bank, such Issuing Bank
hereby grants to each Bank, and each Bank

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hereby acquires from such Issuing Bank, a participation in such Facility Letter
of Credit equal to such Bank’s Pro Rata Share of the aggregate amount available
to be drawn under such Facility Letter of Credit.  In consideration and in
furtherance of the foregoing, each Bank hereby absolutely and unconditionally
agrees to pay to the Agent, for the account of the Issuing Bank, such Bank’s Pro
Rata Share of each Facility LC Disbursement made by such Issuing Bank and not
reimbursed by the Borrower on the date due as provided in Section 2.14(e), or of
any reimbursement payment required to be refunded to the Borrower for any
reason. Each Bank acknowledges and agrees that its obligation to acquire
participations pursuant to this Section 2.14(d) in respect of Facility Letters
of Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including: (i) any amendment, renewal or extension of
any Facility Letter of Credit, (ii) the occurrence and continuance of a Default
or Event of Default, (iii) the reduction or termination of the Revolving
Commitments, (iv) any setoff, counterclaim, recoupment, defense or other right
that such Bank may have against the Issuing Bank, (v) any inability of the
Borrower to satisfy the conditions precedent to borrowing set forth in this
Agreement at any time, or (iv) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.

(e)           If an Issuing Bank shall make any Facility LC Disbursement, the
Borrower shall reimburse such Facility LC Disbursement by paying to the Agent an
amount equal to such Facility LC Disbursement not later than 12:00 Noon, New
York time, on the date that such Facility LC Disbursement is made, if the
Borrower shall have received notice of such Facility LC Disbursement prior to
10:00 A.M., New York time, on such date, or, if such notice has not been
received by the Borrower prior to such time on such date, then not later than
12:00 Noon, New York time, on  the Business Day immediately following the day
that the Borrower receives such notice.  If the Borrower fails to make such
payment when due, the Agent shall notify each Bank of the applicable Facility LC
Disbursement, the payment then due from the Borrower in respect thereof and such
Bank’s Pro Rata Share thereof. Promptly following receipt of such notice, each
Bank shall pay to the Agent its Pro Rata Share of the payment then due from the
Borrower, in the same manner as provided in Section 2.04 with respect to
Revolving Loans made by such Bank (and Section 2.04 shall apply, mutatis
mutandis, to the payment obligations of the Bank), and the Agent shall promptly
pay to the Issuing Bank the amounts so received by the Agent from the Banks. 
Promptly following receipt by the Agent of any payment from the Borrower
pursuant to this Section 2.14(e), the Agent shall distribute such payment to the
Issuing Bank or, to the extent that Banks have made payments pursuant to this
Section 2.14(e) to reimburse the Issuing Bank, then to such Banks and the
Issuing Bank as their interests may appear.  Any payment made by a Bank pursuant
to this Section 2.14(e) to reimburse the Issuing Bank for any Facility LC
Disbursement shall not constitute a Loan and shall not relieve the Borrower of
its obligation to reimburse such Facility LC Disbursement.

(f)            The Borrower’s obligation to reimburse Facility LC Disbursements
as provided in Section 2.14(e) shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms of this Agreement
under any and all circumstances whatsoever and irrespective of: (i) any lack of
validity or enforceability of any Facility Letter of Credit, this Agreement or
any other Loan Document, or any term or provision therein, (ii) any draft or
other document presented under a Facility Letter of Credit proving to be

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forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a
Facility Letter of Credit against presentation of a draft or other document that
does not comply with the terms of such Facility Letter of Credit, or (iv) any
other event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section 2.14(f),
constitute a legal or equitable discharge of, or provide a right of setoff
against, the Borrower’s obligations hereunder.  Neither the Agent, the Banks nor
the Issuing Bank (nor any of their Affiliates, directors, officers, employees,
agents and advisors, or their Affiliates’ directors, officers, employees, agents
and advisors), shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Facility Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Facility Letter of Credit
(including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond
the control of the Issuing Bank; provided that the foregoing shall not be
construed to excuse any Issuing Bank from liability to the Borrower to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrower to the extent permitted by
applicable law) suffered by the Borrower that are caused by such Issuing Bank’s
failure to exercise care when determining whether drafts and other documents
presented under a Facility Letter of Credit comply with the terms thereof.  The
parties hereto expressly agree that, in the absence of gross negligence or
willful misconduct on the part of the Issuing Bank (as finally determined by a
court of competent jurisdiction), the Issuing Bank shall be deemed to have
exercised care in each such determination.  In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Facility Letter of Credit, the applicable Issuing Bank may,
in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Facility Letter of Credit.

(g)           If an Issuing Bank shall make any Facility LC Disbursement, then,
unless the Borrower shall reimburse such Facility LC Disbursement in full on the
date such Facility LC Disbursement is made, the unpaid amount thereof shall bear
interest, for each day from and including the date such Facility LC Disbursement
is made to but excluding the date that the Borrower reimburses such Facility LC
Disbursement at the Default Rate for Variable Rate Loans.  Interest accrued
pursuant to this Section 2.14(g) shall be for the account of the Issuing Bank,
except that interest accrued on and after the date of payment by any Bank
pursuant to Section 2.14(e) to reimburse the Issuing Bank shall be for the
account of the Bank to the extent of such payment.

(h)           If any Default or Event of Default shall occur and be continuing,
on the Business Day that the Borrower receives notice from the Agent that the
Required Banks are demanding the deposit of cash collateral pursuant to this
Section 2.14(i), the Borrower shall deposit in an account with the Agent (the
“Facility Letter of Credit Collateral Account”), in the

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name of the Agent and for the benefit of the Issuing Bank and the Banks, an
amount in cash equal to the Facility LC Exposure as of such date plus any
accrued and unpaid interest thereon; provided that the obligation to deposit
such cash collateral shall become effective immediately, and such deposit shall
become immediately due and payable, without demand or other notice of any kind,
upon the occurrence of any Event of Default with respect to the Borrower
described in Section 9.01(e) or Section 9.01(h).  Such deposit shall be held by
the Agent as collateral for the payment and performance of the Obligations.  The
Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over such account.  Other than any interest earned on the
investment of such deposits, which investments shall be made at the option and
sole discretion of the Agent and at the Borrower’s risk and expense, such
deposits shall not bear interest. Interest or profits, if any, on such
investments shall accumulate in such account.  Moneys in such account shall be
applied by the Agent to reimburse the Issuing Bank for Facility LC Disbursements
for which it has not been reimbursed and, to the extent not so applied, shall be
held for the satisfaction of the reimbursement obligations of the Borrower for
the Facility LC Exposure at such time or, if the maturity of the Loans has been
accelerated (but subject to the consent of the Required Banks), be applied to
satisfy other Obligations of the Credit Parties to the Banks.  If the Borrower
is required to provide an amount of cash collateral hereunder as a result of the
occurrence of a Default or Event of Default, such amount (to the extent not
applied as aforesaid) shall be returned to the Borrower within three (3)
Business Days after all Defaults or Events of Default have been cured or waived
so long as the Loans have not been accelerated and the Commitments and the
Facility LC Commitment terminated pursuant to Section 9.02.

ARTICLE 3. YIELD PROTECTION; ILLEGALITY; ETC.

Section 3.01.  Additional Costs.

(a)           Within thirty (30) days of any demand therefor, the Borrower shall
pay directly to each Bank from time to time on demand such amounts as such Bank
may reasonably determine to be necessary to compensate it for any costs which
such Bank determines are attributable to its making or maintaining any
Eurocurrency Loans under this Agreement or its Note or its obligation to make
any such Loans hereunder, or any reduction in any amount receivable by such Bank
hereunder in respect of any such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called “Additional
Costs”), resulting from any Regulatory Change, or any Reserve Requirement for
any such Loans which: (i) changes the basis of taxation of any amounts payable
to such Bank under this Agreement or its Note in respect of any of such Loans
(other than taxes imposed on the overall net income of such Bank by the
jurisdiction in which such Bank has its principal office); or (ii) imposes or
modifies any reserve, special deposit, deposit insurance or assessment, minimum
capital, capital ratio or similar requirements relating to any extensions of
credit or other assets of, or any deposits with or other liabilities of, such
Bank (including any of such Loans or any deposits referred to in the definition
of “LIBOR Rate” in Section 1.01); or (iii) imposes any other condition affecting
this Agreement or its Note (or any of such extensions of credit or
liabilities).  Each Bank will notify the Borrower of any event occurring after
the Original Effective Date which will entitle such Bank to compensation
pursuant to this Section 3.01(a) as promptly as practicable after it obtains
knowledge thereof and determines to request such compensation.  The

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amount payable to any such Bank shall be computed from the date of the
occurrence giving rise to Additional Cost, or the date that is one hundred
twenty (120) days prior to the date of demand by such Bank, whichever is later. 
If any Bank requests compensation from the Borrower under this Section 3.01(a),
or under Section 3.01(c), the Borrower may, by notice to such Bank (with a copy
to the Agent), suspend the obligation of such Bank to maintain Loans of the type
with respect to which such compensation is requested (in which case the
provisions of Section 3.04 shall be applicable).

(b)           Without limiting the effect of the foregoing provisions of this
Section 3.01, in the event that, by reason of any Regulatory Change, any Bank
either: (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Bank which includes deposits by reference to which the interest rate on
Eurocurrency Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank which includes Eurocurrency
Loans, or (ii) becomes subject to restrictions on the amount of such a category
of liabilities or assets which it may hold, then, if such Bank so elects by
notice to the Borrower (with a copy to the Agent), the obligation of such Bank
to make Loans of such type hereunder shall be suspended until the date such
Regulatory Change ceases to be in effect (in which case the provisions of
Section 3.04 shall be applicable).

(c)           Without limiting the effect of the foregoing provisions of this
Section 3.01 (but without duplication), the Borrower shall pay directly to each
Bank from time to time on request such amounts as such Bank may reasonably
determine to be necessary to compensate such Bank for any costs which it
determines are attributable to the maintenance of capital by it or any of its
Affiliates pursuant to any future law or regulation of any jurisdiction or any
interpretation, directive or request (whether or not having the force of law and
whether in effect on the Original Effective Date or thereafter) of any court or
governmental or monetary authority in respect of its Loan hereunder or its
obligation to make its Loan hereunder (such compensation to include, without
limitation, an amount equal to any reduction in return on assets or equity of
such Bank to a level below that which it could have achieved but for such law,
regulation, interpretation, directive or request).  Each Bank will notify the
Borrower if it is entitled to compensation pursuant to this Section 3.01(c) as
promptly as practicable after it determines to request such compensation.  The
amount payable to any Bank shall be computed from the date of the occurrence
entitling such Bank to compensation, or the date that is one hundred twenty
(120) days prior to the date of demand by such Bank, whichever is later.

(d)           Determinations and allocations by a Bank for purposes of this
Section 3.01 of the effect of any Regulatory Change pursuant to subsections (a)
or (b), or of the effect of capital maintained pursuant to subsection (c), on
its costs of making or maintaining Loans or its obligation to make Loans, or on
amounts receivable by, or the rate of return to, it in respect of Loans or such
obligation, and of the additional amounts required to compensate such Bank under
this Section 3.01, shall be conclusive, provided that such determinations and
allocations are made on a reasonable basis.

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Section 3.02.  Limitation on Types of Loans.  Anything herein to the contrary
notwithstanding, if:

(a)           the Agent determines (which determination shall be conclusive)
that quotations of interest rates for the relevant deposits referred to in the
definition of “Variable Rate” in Section 1.01 are not being provided in the
relevant amounts or for the relevant maturities for purposes of determining the
rate of interest for any type of Eurocurrency Loans as provided in this
Agreement; or

(b)           the Required Banks determine (which determination shall be
conclusive) and notify the Agent and the Borrower (which notice shall include
each Bank’s respective calculation of cost) that the relevant rates of interest
referred to in the definition of “LIBOR Rate” in Section 1.01 upon the basis of
which the rate of interest for any type of Eurocurrency Loans is to be
determined do not adequately cover the cost to the Banks of making or
maintaining such Loans;

then the Agent shall give the Borrower and each Bank prompt notice thereof, and
so long as such condition remains in effect, the Banks shall be under no
obligation to make or maintain a Loan of such type.

Section 3.03.  Illegality.  Notwithstanding any other provision in this
Agreement, in the event that it becomes unlawful for any Bank to honor its
obligation to make or maintain a Eurocurrency Loan hereunder, then such Bank
shall promptly notify the Borrower thereof (with a copy to the Agent) and such
Bank’s obligation to make or maintain a Eurocurrency Loan hereunder shall be
suspended until such time as such Bank may again make and maintain such affected
Loan (in which case the provisions of Section 3.04 shall be applicable).

Section 3.04.  Certain Variable Rate Loans Pursuant to Sections 3.01 and 3.03. 
If the obligations of any Bank to make a Loan of a particular type (Loans of
such type being herein called “Affected Loans” and such type being herein called
the “Affected Type”) shall be suspended pursuant to Sections 3.01 or 3.03, a
Loan which would otherwise be maintained by such Bank as a Loan of the Affected
Type shall be made instead as Variable Rate Loan and, if an event referred to in
Sections 3.01(b) or 3.03 has occurred and such Bank so requests by notice to the
Borrower (with a copy to the Agent), the Affected Loan of such Bank then
outstanding shall be automatically converted into Variable Rate Loan on the date
specified by such Bank in such notice.

Section 3.05.  Compensation.

(a)           The Borrower shall immediately pay to the Agent for the account of
each Bank, upon the demand of such Bank through the Agent, such amount or
amounts as shall be sufficient (in the reasonable opinion of such Bank) to
compensate it for the higher of $250.00, or any loss, cost, funding expenses or
other expenses which such Bank reasonably determines is directly or indirectly
attributable to: (a) any payment to such Bank of a Eurocurrency Loan made by
such Bank on a date other than the last day of an Interest Period for such Loan
(whether by

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reason of acceleration or otherwise);  (b) any failure by the Borrower (for
whatever reason) to borrow, in whole or in part, on a Eurocurrency Loan to be
made by a Bank on the date specified therefor in the relevant notice given under
Section 2.08 or on the day specified therefore in such notice, (c) Borrower
otherwise tries to revoke any Eurocurrency Loan, in whole or in part, or (d)
there occurs a Bankruptcy Event or the applicable Eurocurrency Loan of interest
in converted to a Variable Rate Loan or Variable Rate Loans (as the case may
be), in accordance with the terms of this Agreement.  All such amounts shall be
determined by the applicable Bank, and in the absence of manifest error, shall
be conclusive and binding upon the Borrower.  Without limiting the foregoing,
any loss, cost, funding expenses or other expenses by reason of: (i) any
reduction in yield, by reason of liquidation or reemployment of any deposit or
other funds acquired by the Bank, or (ii) the fixing of the interest rate
payable on any Eurocurrency Loan(s) shall fall within the purview of this
Section 3.05.

(b)           Without limiting the foregoing, such compensation shall also
include an amount equal to the excess, if any, of: (i) the amount of interest
which otherwise would have accrued on the principal amount so paid or not
borrowed for the period from and including the date of such payment or failure
to borrow to but excluding the last day of the Interest Period for such Loan
(or, in the case of a failure to borrow, to but excluding the last day of the
Interest Period for such Loan which would have commenced on the date specified
therefor in the relevant notice) at the applicable rate of interest for such
Loan provided for herein; over (ii) the amount of interest (as reasonably
determined by such Bank) such Bank would have bid in the London interbank market
for amounts comparable to such principal amount and maturities comparable to
such period.

Section 3.06.  Survival.  The obligations of the Borrower under this Article 3
shall survive the repayment of the Loans and the termination of the Revolving
Commitment.

ARTICLE 4. CONDITIONS PRECEDENT

Section 4.01.  Documentary Conditions Precedent.  The obligations of the Banks
to make the Loans constituting the borrowing hereunder are subject to the
condition precedent that the Agent shall have received on or before the date of
such Loans each of the following, in form and substance satisfactory to the
Agent and its counsel:

(a)           the Notes duly executed by the Borrower for each Bank;

(b)           the Reaffirmation Agreement duly executed by the parties thereto,
together with all instruments, transfer powers and other items required to be
delivered in connection therewith;

(c)           a Due Diligence Certificate completed and executed by each Credit
Party;

(d)           in the case of any leased real property on which any collateral
described under any of the Security Documents is located, to the extent not
previously provided to Agent,

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an agreement from the landlord for such property waiving any landlord’s Lien in
respect of personal property kept at the premises subject to such lease;

(e)           a search of all relevant real property indexes covering the period
from the date that the Borrower or Hardinge Technology Systems, Inc. took title
to the real property described in the Assignment of Leases and Rents through and
including the Effective Date (with title re-dates through the Effective Date, if
necessary), which will among other things, indicate: (i) that such Credit
Parties are the owner of the fee simple interest in such real property, (b) that
there are no liens or encumbrances thereon (including but not limited to,
mortgages, judgment liens, mechanic’s liens, lease, security interest, easement
and right-of-way or any other tight to, or interest in, property, which subsists
in a third party and which constitutes a claim, lien, charge or liability
attached to and binding upon such real property); provided, however, that the
Agent will review all easements, covenants and conditions of record, and so long
as such easements, covenants and/or conditions do not, in the sole discretion of
the Agent and counsel for the Agent, interfere with the current or future
intended use of such real property or render the title unmarketable, Agent may
permit such easements, covenants and conditions to remain of record;

(f)            evidence of the existence of insurance required to be maintained
pursuant to Section 6.04, together with evidence that the Agent has been named
as a Bank’s loss payee and an additional insured on all related insurance
policies;

(g)           payment by the Borrower of all fees, costs and expenses (including
attorney costs) of the Agent to the extent invoiced prior to the Effective Date,
plus such additional amounts of attorney costs as shall constitute the Agent’s
reasonable estimate of attorney costs incurred or to be incurred by the Agent
through the closing proceedings (provided that such estimate shall not
thereafter preclude final settling of accounts between the Borrower and the
Agent);

(h)           certified copies of Uniform Commercial Code search reports dated a
date reasonably near to the Effective Date, listing all effective financing
statements which name any Credit Party as debtors ( together with  copies of
such financing statements)

(i)            Agent shall be satisfied that existing financing statements filed
against Borrower naming Agent for the benefit of Bank as the secured creditor
are sufficient to create a first priority security interest in all personal
property collateral described in the Security Documents, except as otherwise
permitted herein;

(j)            Tax, and judgment search reports with respect to each Credit
Party in all necessary or appropriate jurisdictions and under all legal and
appropriate trade names indicating that there are no tax Liens or judgments on
any of the collateral described in the Security Documents; and

(k)           if required by the Agent, an Account Control Agreement, as
referred to in the Security Documents duly executed by Chemung Canal Trust
Company and any other parties required under the Security Document, the
applicable Credit Party and the Agent;

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(l)            the delivery of the letter agreement by the Borrower to the Agent
whereby the Borrower shall agree to deliver certain delineated items to the Bank
on a post closing basis and within a specified time frame;

(m)          Agent shall be satisfied that existing collateral assignments
and/or intellectual property security agreements filed against Borrower and
other Credit Parties in favor of Agent for the benefit of Bank as secured
creditor are sufficient to create a first priority security interest in all
registered intellectual property of the Credit Parties described in the
Intellectual Property Security Agreement;

(n)           a certificate of the Secretary or Assistant Secretary of each
Credit Party, dated the Effective Date, attesting to all corporate action taken
by the Credit Party, including certified copies of all resolutions of its Board
of Directors authorizing the execution, delivery and performance of the Loan
Documents to which it is a party;

(o)           a certificate of the Secretary or Assistant Secretary of each
Credit Party, dated the Effective Date, certifying the names and true signatures
of the officers of the Credit Party authorized to sign the Loan Documents to
which it is a party;

(p)           a certificate of a duly Authorized Officer of the Borrower, dated
the Effective Date, stating that the representations and warranties in Article 5
are true and correct on such date as though made on and as of such date and that
no event has occurred and is continuing which constitutes a Default or Event of
Default;

(q)           a favorable opinion of counsel for the Credit Parties, dated the
Effective Date, in substantially the form of Exhibit E and as to such other
matters as the Agent or any Bank may reasonably request;

(r)            a recently dated certificate of the Secretary of State of the
State of formation and of each foreign jurisdiction where it is required to be
qualified to conduct business of the good standing of each Credit Party; and

(s)           such other documents as the Agent or any Bank may reasonably
request.

Section 4.02.  Additional Conditions Precedent.  The obligations of the Banks to
make the Loans and the Issuing Bank’s obligation to issue Facility Letters of
Credit shall be subject to the further conditions precedent that on the date of
such Loan:

(a)           the following statements shall be true: (i) the representations
and warranties contained in Article 5 and by the Credit Parties in the other
Loan Documents are true and correct on and as of the date that the Loan is made
or the Facility Letter of Credit is issued as though made on and as of such
date; and (ii) no Default or Event of Default has occurred and is continuing, or
would result from such Loan or issuance of the Facility Letter of Credit; and

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(b)           the Agent shall have received such approvals, opinions or
documents as the Agent or any Bank may reasonably request.

Section 4.03.  Deemed Representations.  Each request for a Loan and acceptance
by the Borrower of the proceeds thereof and each notice of a request for the
issuance of a Facility Letter of Credit and the issuance thereof shall
constitute a representation of warranty that the statements contained in Section
4.02(a) hereof are true and correct both on the date of such notice and, unless
the Borrower otherwise notifies the Agent prior to such Borrowing, as of the
date of such Loan or issuance of the Facility Letter of Credit.

ARTICLE 5. REPRESENTATIONS AND WARRANTIES

The Borrower hereby represents and warrants to the Agent and each Bank that:

Section 5.01.  Incorporation, Good Standing and Due Qualification.  The Borrower
and each of its Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
formation, has all power and authority to carry on its business as now being
conducted and to own its properties and is duly licensed or qualified and in
good standing or a foreign corporation in each other jurisdiction in which its
properties are located or in which failure to qualify would reasonably be
expected to have a Material Adverse Effect.

Section 5.02.  Corporate Power and Authority: No Conflicts.  The execution,
delivery and performance by the Borrower of the Loan Documents are within the
Borrower’s corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene (a) the Borrower’s charter or by-laws,
or (b) any law or any contractual restriction or provision binding on or
affecting the Borrower.

Section 5.03.  Governmental Approval.  No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Borrower of the Loan Documents to which the Borrower is a party.

Section 5.04.  Legally Enforceable Agreements.  Each Loan Document to which
Borrower is a party is, or when delivered hereunder will be, legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.

Section 5.05.  Financial Statements.  The audited consolidated balance sheets of
the Borrower and its Consolidated Subsidiaries as at December 31, 2005, and the
related statements of income, retained earnings and cash flows of the Borrower
and its Consolidated Subsidiaries for the Fiscal Year then ended, and the
unaudited balance sheet of the Borrower and its Subsidiaries as at June 30, 2006
and the related statements of income, retained earnings and cash flows, copies
of which have been furnished to Agent and each Bank, fairly present the assets,
liabilities and financial condition of the Borrower and its Consolidated
Subsidiaries at such date and the results of the operations and the changes in
financial condition of the Borrower and its

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Consolidated Subsidiaries for the period ended on such date, all in accordance
with GAAP.  Since June 30, 2006, there has been no material adverse change in
the business, assets, operations, prospects or financial condition of the
Borrower and its Subsidiaries, taken as a whole.

Section 5.06.  Litigation.  There is no pending or threatened action or
proceeding affecting the Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator, which may have a Material Adverse Effect.

Section 5.07.  Margin Stock.  The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System).

Section 5.08.  Use of Loan Proceeds.  No part of the proceeds of the Loans or
from Facility Letters of Credit will be used, whether directly or indirectly,
and whether immediately, incidentally or ultimately: (a) to purchase or to carry
margin stock or to extend credit to others for the purpose of purchasing or
carrying margin stock, or to refund indebtedness originally incurred for such
purpose, or (b) for any purpose which violates or is inconsistent with the
provisions of the Regulations G, T, U or X of the Board of Governors of the
Federal Reserve System.

Section 5.09.  Tax Returns.  Each of the Borrower and its Subsidiaries has filed
(or has obtained extensions of the time by which it is required to file) all
United States federal income tax returns and all other material tax returns
required to be filed by it and has paid all taxes shown due on the returns so
filed as well as all other taxes, assessments and governmental charges which
have become due, except such taxes, if any, as are being contested in good faith
and as to which adequate reserves have been provided.

Section 5.10.  ERISA.  The Borrower and each of its Subsidiaries and each ERISA
Affiliate (a) has fulfilled all material obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan that is not a
Multiemployer Plan or a Multiple Employer Plan, (b) has satisfied all material
contribution obligations in respect of each Multiemployer Plan and each Multiple
Employer Plan, (c) is in compliance in all material respects with all other
applicable provisions of ERISA and the Code with respect to each Plan, each
Multiemployer Plan and each Multiple Employer Plan, and (d) has not incurred any
unsatisfied material liability under Title IV of ERISA to the PBGC (other than
required premium payments to the PBGC) with respect to any Plan, any
Multiemployer Plan, any Multiple Employer Plan, or any trust established
thereunder. No Plan or trust created thereunder has been terminated, and there
have been no Reportable Events, with respect to any Plan or trust created
thereunder or with respect to any Multiemployer Plan or Multiple Employer Plan,
which termination or Reportable Event will or could reasonably be expected to
give rise to a material liability of the Borrower or any ERISA Affiliate in
respect thereof.  Neither the Borrower nor any Subsidiary of the Borrower nor
any ERISA Affiliate was as of the Original Effective Date, or has been at any
time within the five years preceding the date hereof, an employer required to
contribute to any Multiemployer Plan or Multiple Employer Plan, or a
“contributing sponsor” (as

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such term is defined in Section 4001 of ERISA) in any Multiemployer Plan or
Multiple Employer Plan.  Neither the Borrower nor any Subsidiary of the Borrower
nor any ERISA Affiliate has any contingent liability with respect to any
post-retirement “welfare benefit plan” (as such term is defined in ERISA) except
as has been disclosed to the Agent and the Bank in writing or as would not have
or be reasonably be expected to have a Material Adverse Effect.

Section 5.11.  Subsidiaries.  The Borrower has no Subsidiaries other than those
set forth on Schedule V attached hereto as amended from time to time to reflect
changes which occur after the date hereof.

Section 5.12.  Ownership and Liens.

(a)           Each of the Borrower and its Subsidiaries has good and marketable
title to its properties and assets reflected on the balance sheet dated as of
June 30, 2006 referred to in Section 5.05 hereof and any properties and assets
acquired since that date, except for such properties and assets of a nonmaterial
nature as have been disposed of since the date of such balance sheet as no
longer used or useful in the conduct of its business or as have been disposed of
in the ordinary course of business, and all such properties and assets are free
and clear of mortgages, pledges, liens, charges and other encumbrances, except:
(a) the Assignment of Leases and Rents encumbering the principal place of
business for the Borrower, (b) mortgages encumbering real property located in
(i) Switzerland in the approximate principal amount of Sfr. 15,100,000 and (ii)
the United Kingdom in the approximate principal amount of L 1,080,000, (c)
encumbrances that do not materially interfere with the use or operation of such
property or assets (the encumbrances referred to in sub-sections (b) and (c)
above shall collectively hereinafter be referred to as the “Subsidiary Real
Property Liens”).

(b)           The Borrower and each of its Pledged Subsidiaries owns, or is
licensed to use, all patents, trademarks, trade names, service marks,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted and as contemplated to be conducted (the
“Intellectual Property”), and the use of such Intellectual Property by the
Borrower and each of its Pledged Subsidiaries does not infringe on the rights of
any Person.  The Security Agreement grants a first priority, perfected and
enforceable Lien on all of the Domestic Subsidiaries owned by Borrower except
(i) for those having assets with a book value of $1,000,000 or less and (ii) 65%
of the Capital Securities of the Foreign Subsidiaries owned by the Borrower
except for those Foreign Subsidiaries existing as of the Original Effective Date
with assets having a net worth of $2,000,000 or less (the “Excluded Foreign
Subsidiaries”).  At all times after the Original Effective Date, Borrower has
been, and shall continue to be in compliance with Section 6.08.

Section 5.13.  Hazardous Materials.  Except as set forth in Schedule VI hereof,
and qualified in each instance whereby a breach of this representation set forth
in this Section 5.13 would not reasonably be expected to have a Material Adverse
Effect, the Borrower is in compliance in all material respects with all
Environmental Laws governing Hazardous Materials and the Borrower has not used
Hazardous Materials on, from, or affecting any property now owned or occupied or
hereafter owned or occupied by the Borrower in any manner which

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violates federal, state or local laws, ordinances, rules, regulations, or
policies governing the use, storage, treatment, transportation, manufacture,
refinement, handling, production or disposal of Hazardous Materials, and that,
to the best of the Borrower’s knowledge, no prior owner of any such property or
any tenant, subtenant, prior tenant or prior subtenant have used Hazardous
Materials on, from, or affecting such property in any manner which violates
federal, state or local laws, ordinances, rules, regulations, or policies
governing the use, storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of Hazardous Materials; without limiting the
foregoing, the Borrower shall not cause or permit any property owned or occupied
by it to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process Hazardous Materials, except in
compliance with all applicable Federal, state and local laws or regulations, nor
shall the Borrower cause or permit, as a result of any intentional or
unintentional act or omission on its part or any tenant or subtenant, a release
of Hazardous Materials onto any property owned or occupied by the Borrower or
onto any other property; the Borrower shall comply with and ensure compliance by
all tenants and subtenants with all applicable Environmental Laws, whenever and
by whomever triggered, and shall obtain and comply with any and all approvals,
registrations or permits required thereunder.

Section 5.14.  No Default on Other Agreements.  Neither the Borrower or any of
its Subsidiaries is in default in any manner which would reasonably be expected
to have a Material Adverse Effect or in the Borrower’s or any Subsidiaries’
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any material agreement or instrument to which it is a
party.

Section 5.15.  Partnerships.  Neither the Borrower nor any of its Subsidiaries
is a partner in any partnership.

Section 5.16.  No Forfeiture.  Neither the Borrower nor any of its Subsidiaries
or to the knowledge of Borrower Affiliates, is engaged in or proposes to be
engaged in the conduct of any business or activity which could result in a
Forfeiture Proceeding and no Forfeiture Proceeding against any of them is
pending or threatened, which reasonably be expected to have a Material Adverse
Effect.

Section 5.17.  Solvency.

(a)           The present fair saleable value of the assets of the Borrower
after giving effect to all the transactions contemplated by the Loan Documents
and the funding of all Revolving Commitments hereunder exceeds the amount that
will be required to be paid on or in respect of the existing debts and other
liabilities (including contingent liabilities) of the Borrower and its
Subsidiaries as they mature.

(b)           The property of the Borrower does not constitute unreasonably
small capital for the Borrower to carry out its business as now conducted and as
proposed to be conducted including the capital needs of the Borrower.

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(c)           The Borrower does not intend to, nor does it believe that it will,
incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be received by the Borrower, and of
amounts to be payable on or in respect of debt of the Borrower).  The cash
available to the Borrower after taking into account all other anticipated uses
of the cash of the Borrower, is anticipated to be sufficient to pay all such
amounts on or in respect of debt of the Borrower when such amounts are required
to be paid.

(d)           The Borrower does not believe that final judgments against it in
actions for money damages will be rendered at a time when, or in an amount such
that, the Borrower will be unable to satisfy any such judgments promptly in
accordance with their terms (taking into account the maximum reasonable amount
of such judgments in any such actions and the earliest reasonable time at which
such judgments might be rendered).  The cash available to the Borrower after
taking into account all other anticipated uses of the cash of the Borrower
(including the payments on or in respect of debt referred to in paragraph (c) of
this Section 5.17), is anticipated to be sufficient to pay all such judgments
promptly in accordance with their terms.

Section 5.18.  Operation of Business.  The Borrower and its Subsidiaries possess
all licenses, permits, franchises, patents, copyrights, trademarks and trade
names, or rights thereto, to conduct its business substantially as now conducted
and as presently proposed to be conducted, and neither the Borrower nor any of
its Subsidiaries is in violation of any valid rights of others with respect to
any of the foregoing.

Section 5.19.  No Defaults on Outstanding Judgments or Orders.  The Borrower and
its Subsidiaries has satisfied all judgments and neither the Borrower nor any of
its Subsidiaries is in default with respect to any judgment, writ, injunction,
decree, rule or regulation of any court, arbitrator or federal, state, municipal
or other governmental authority, commission, board, bureau, agency or
instrumentality, domestic or foreign.

Section 5.20.  No Defaults on Other Agreements.  Neither the Borrower nor any of
its Subsidiaries is a party to any indenture, loan or credit agreement or any
lease or other agreement or instrument or subject to any charter or corporate
restriction which could have a Material Adverse Effect.  Neither the Borrower
nor any of its Subsidiaries is in default in any material respect in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument material to a business to
which it is a party.

Section 5.21.  Labor Disputes and Acts of God.  Neither the business nor the
properties of the Borrower or any of its Subsidiaries are affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God, or of the public enemy or other casualty
(whether or not covered by insurance)which could have a Material Adverse Effect.

Section 5.22.  Governmental Regulation.  Neither the Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Investment Company Act of 1940, the Interstate Commerce Act,
the Federal Power Act or any

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statute or regulation limiting its ability to incur indebtedness for borrowed
money as contemplated hereby.

Section 5.23  Compliance with Terms and Conditions of the ROC Joint Venture
Agreement. The Borrower and its Subsidiaries have been and remain in compliance
with the terms and conditions of the ROC Joint Venture Agreement and/or the
Lease Agreement referenced in and attached to the ROC Joint venture Agreement as
an Exhibit thereto.

Section 5.24  Compliance with Terms and Conditions of the Bridgeport Acquisition
Documents and Termination of Royalty Payments .  The Borrower and its
Subsidiaries have been and remain in compliance with the terms and conditions of
the Bridgeport Acquisition Documents.  In addition, with the exception of the
payment of any royalties due under the terms of the Bridgeport Acquisition
Documents for transactions contemplated prior to the date of the Borrower’s
purchase of the Additional Technical Information, then on and after the date of
the Borrower’s purchase of the Additional Technical Information, no further
royalty payments shall be due and owing to any of the parties under the
Bridgeport Acquisition Documents.

Section 5.25.  Disclosure. Neither the reports, financial statements,
certificates or other information furnished by or on behalf of any Credit Party
to the Agent or any Bank in connection with the negotiation of the Existing
Credit Agreement or this Agreement or any other Loan Document or delivered
hereunder or thereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, provided that with
respect to projected financial information, Borrower represents only that such
information was prepared in good faith based upon assumptions believed by it to
be reasonable at the time delivered and as of the Effective Date.

ARTICLE 6. AFFIRMATIVE COVENANTS

Until the Commitments have expired or terminated and the Obligations have been
paid in full and all Facility Letters of Credit and JPMorgan Letters of Credit
have expired or terminated, the Borrower shall comply with each of the following
covenants:

Section 6.01.  Compliance With Laws, Corporate Existence.  The Borrower shall
comply, and cause each of its Subsidiaries to (a) comply, in all material
respects with all applicable laws, rules, regulations and orders of any
governmental authority, the breach of which would be reasonably expected to have
a Material Adverse Effect.  Such compliance shall include, without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges or levies imposed upon it or on its income or profits or upon its
property except to the extent: (i) such payment is being contested in good faith
and by proper proceedings, and (ii) adequate reserves are being maintained with
respect thereto; (b) do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, rights, franchises, trade
names and preserve all of its property used or useful in the conduct of its
business and keep same in good repair and working condition except for property
it deems no

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longer useful; and (c) carry on and conduct its principal business substantially
as it is now conducted.

Section 6.02.  Reporting Requirements.  The Borrower shall furnish directly to
each of the Banks:

(a)           as soon as available and in any event within forty-five (45) days
after the end of each of the first three Fiscal Quarters of each Fiscal Year of
the Borrower, consolidated and consolidating balance sheets of the Borrower and
its Subsidiaries as of the end of such quarter and statements of income,
retained earnings and cash flows of the Borrower and its Subsidiaries for the
period commencing at the end of the previous Fiscal Year and ending with the end
of such Fiscal Quarter, all in reasonable detail setting forth in comparative
form the corresponding figures for the preceding Fiscal Year and prepared by the
Borrower in accordance with GAAP other than the absence of footnotes and subject
to year-end audit and adjustments and, if applicable, containing disclosure of
the effect on the financial position or results of operations of any change in
the application of accounting principles and practices during the period and
certified by the chief financial officer of the Borrower that such Financials
comply with the foregoing requirements;

(b)           as soon as available and in any event within ninety (90) days
after the end of each Fiscal Year of the Borrower, a copy of Borrower’s Annual
Report on Form 10-K for such Fiscal Year, containing consolidated balance sheets
of the Borrower and its Subsidiaries as of the end of such Fiscal year and
statements of income, retained earnings and cash flows of the Borrower and its
Subsidiaries for such Fiscal Year prepared in accordance with GAAP, and audited
by Ernst & Young, LLP or other independent certified public accountants of
national standing reasonably acceptable to the Agent and, if applicable,
containing disclosure of the effect on the financial position or results of
operation of any change in the application of accounting principles and
practices during the year, and accompanied by a report thereon by such certified
public accountants that is not qualified with respect to scope limitations
imposed by the Borrower or any of its Consolidated Subsidiaries or with respect
to accounting principles followed by the Borrower or any of its Consolidated
Subsidiaries not in accordance with GAAP

(c)           concurrently with the deliveries being made pursuant to Section
6.02(b) consolidating balance sheets of the Borrower and its Subsidiaries as of
the end of such Fiscal year and statements of income, retained earnings and cash
flows of the Borrower and its Subsidiaries for such Fiscal Year prepared in
accordance with GAAP;

(d)           with the Financials submitted under subsections (a) and (b) above,
a certificate in a form and substance similar to the compliance certificate
attached hereto as Exhibit I (the “Compliance Certificate”) signed by the chief
financial officer of the Borrower, stating: (i) the representations and
warranties made in Article 5 and in the other Loan Documents by the Credit
Parties are true and correct as of the date of the Compliance Certificate (ii)
the calculation of all financial covenants and ratios required under Article 8
hereof, (iii) whether a Default has occurred and, if a Default has occurred,
specifying the details thereof and any action taken or proposed to be taken with
respect thereto, (iv) the determination of the Applicable Rate,

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and (iv) whether any change in GAAP or in the application thereof has occurred
since the date of the audited financial statements referred to in Section 5.05
and, if any such change has occurred, specifying the effect of such change on
the financial statements accompanying such certificate;

(e)           promptly upon receipt thereof, copies of any reports submitted to
the Borrower or any of its Subsidiaries by the independent certified public
accountant in connection with the examination of the financial statements of the
Borrower or any such Subsidiary made by such accountants including, without
limitation, accountant letters, management reports, and management responses
thereto;

(f)            promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to any of its security holders, and copies of
all reports and registration statements which the Borrower or any Subsidiary
files with the Securities and Exchange Commission or any national securities
exchange;

(g)           promptly upon request, any documentation or other information that
a Bank reasonably requests in order to comply with its ongoing obligations under
applicable “know your customer” and anti-money laundering rules and regulations,
including the USA Patriot Act;

(h)           prior to the end of each Fiscal Year of the Borrower, a budget (in
format satisfactory to the Agent and approved by Borrower’s Board of Directors)
for the succeeding Fiscal Year of the Borrower, plus from time to time any
revisions or modifications to such budget within forty-five (45) days of the
adoption of such revision or modification; and

(i)            promptly upon request, such other information respecting the
condition or operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as any Bank through the Agent may from time to time reasonably
request.

Section 6.03.  Notice of Proceedings.  The Borrower shall promptly give notice
in writing to the Agent and each of the Banks of all litigation, arbitral
proceedings, regulatory proceedings and Forfeiture Proceedings affecting the
Borrower or any Subsidiary, except litigation or proceedings which, if adversely
determined, could not have a Material Adverse Effect.

Section 6.04.  Insurance.  The Borrower shall, and shall cause each Subsidiary
to, maintain insurance with insurance companies or associations rated “A-” or
better by A.M. Best & Company or a comparable rating agency in such amounts and
against such risks as is set forth in Schedule VII.

Section 6.05.  Environmental Laws.  The Borrower shall comply in all material
respects with all Environmental Laws and provide to the Agent all documentation
in connection with such compliance that the Agent may reasonably request.

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Section 6.06.  Books and Records; Inspection Rights. The Borrower will, and will
cause each of its Subsidiaries to: (a) maintain complete and accurate books and
financial records in accordance with GAAP; and (b) at any reasonable time and
from time to time, upon reasonable notice and during normal business hours,
permit the Agent and each of the Banks, or any agent or representative thereof
to examine the records and books of account and visit the properties of the
Borrower or its Subsidiaries and to discuss the affairs, finances and accounts
of the Borrower and any Subsidiary with any of the officers and directors of
Borrower or any Subsidiary.

Section 6.07.  Notice of Default.  The Borrower shall in the event any financial
officer of the Borrower or any Subsidiary knows of any default or event of
default under any material agreement to which the Borrower or any Subsidiary is
a party or any Default or Event of Default which shall have occurred, promptly
and in any event within ten (10) days after the occurrence of each Default or
Event of Default, furnish to the Agent a written statement as to such occurrence
specifying the nature and extent thereof and the action (if any) which is
proposed to be taken with respect thereto.

Section 6.08.  Subsidiaries.

(a)           The Borrower and its Subsidiaries shall within ten (10) days of
the creation or acquisition of any new Domestic Subsidiary having assets with a
book value of One Million Dollars ($1,000,000) or more, or the acquisition of
assets by or the transfer of assets to any existing Domestic Subsidiary which
after such transfer will have assets with a book value of One Million Dollars
($1,000,000) or more deliver or cause to be delivered to the Agent (i) a pledge
of all its outstanding capital stock pursuant to the Security Agreement by
delivering to Agent  undated stock power(s) for such certificate(s), executed in
blank (or if any such shares of capital stock are uncertificated, confirmation
and evidence reasonably satisfactory to Agent that the security interest in such
uncertificated securities has been transferred to and perfected by the Agent),
for the benefit of the Banks, in accordance with the applicable Sections under
Articles 8 and 9 of the UCC or any other similar law that may be applicable and
(ii) if required by the Agent or the Banks in their sole discretion, a Guaranty
Supplement, Security Agreement Supplement and Intellectual Property Security
Agreement Supplement from such Subsidiary and take such other actions as may be
necessary for the Agent to perfect, for the benefit of the Banks, in accordance
with the applicable Sections under Articles 8 and 9 of the UCC or any other
similar or local or foreign law that may be applicable to its first priority
Lien in the assets (if any) covered by the Security Agreement Supplement and the
Intellectual Property Security Agreement Supplement.

(b)           Except for the Excluded Foreign Subsidiaries, the Borrower and its
Subsidiaries shall within ten (10) days of the creation or acquisition of any
new Foreign Subsidiary having assets with a book value of One Million Dollars
($1,000,000) or more, or the acquisition of assets by or the transfer of assets
to any existing Foreign Subsidiary which after such transfer will have assets
with a book value of One Million Dollars ($1,000,000) pledge to Agent, or cause
the Subsidiary holding such new Foreign Subsidiary’s capital stock to pledge to
the Agent, sixty five percent (65)% of the outstanding capital stock of each
such new Foreign Subsidiary or Foreign Subsidiary by delivery to Agent undated
stock powers for such

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certificates, executed in blank (or if any such shares of capital stock are
uncertificated, confirmation and evidence reasonably satisfactory to Agent that
the security interest in such uncertificated securities has been transferred to
and perfected by the Agent), for the benefit of the Bank, in accordance with the
applicable Sections under Articles 8 and 9 of the UCC or any other similar or
local or foreign law that may be applicable.

(c)           If: (i) at any time the net worth for an Excluded Foreign
Subsidiary exceeds Two Million Dollars ($2,000,000), or (ii) the acquisition of
assets by and/or the transfer of assets to any Excluded Foreign Subsidiary
shall, after the acquisition and/or transfer (as the case may be), cause such
Excluded Foreign Subsidiary to have a net worth of Two Million Dollars
($2,000,000) or more, then the Borrower and its Subsidiaries shall, within ten
(10) days, pledge to Agent, or cause the Subsidiary holding such Foreign
Subsidiary’s capital stock to pledge to the Agent, sixty five percent (65%) of
the outstanding capital stock of each such Foreign Subsidiary by delivery to
Agent undated stock powers for such certificates, executed in blank (or if any
such shares of capital stock are uncertificated, confirmation and evidence
reasonably satisfactory to Agent that the security interest in such
uncertificated securities has been transferred to and perfected by the Agent),
for the benefit of the Bank, in accordance with the applicable Sections under
Articles 8 and 9 of the UCC or any other similar or local or foreign law that
may be applicable.

(d)           In connection with the deliveries described in subsections (a) and
(b) and (c) above, the Agent may also require that the applicable Subsidiary
deliver to the Agent its governing documents, authorizing resolutions and a
legal opinion satisfactory to Agent, provided, however, nothing contained in
this Section 6.08 shall be deemed to be consent by the Agent or any Bank of such
creation, acquisition or transfer.

Section 6.09.  Material Adverse Changes.

                                (a)           The Borrower shall promptly notify
the Agent and the Banks of any of the following which has resulted in, or could
reasonably be expected to have a Material Adverse Effect: (a) any litigation
matter, investigation, audit, business development or change in financial
condition or could; (b) any notice of any violation received by Borrower or any
of its Subsidiaries from any governmental authority, including, without
limitation, any notice of violation of Environmental Laws; (c) any labor
controversy that has resulted in a strike or other work action against Borrower
or any of its Subsidiaries; (d) any event which makes any of the representations
set forth in Article 5 inaccurate in any respect; or (e) any other development. 
Each notice delivered under this Section shall be accompanied by a statement of
the Chief Financial Officer or other executive officer of the Borrower setting
forth the details of the event or development requiring such notice and any
action taken or proposed to be taken with respect thereto.

                                (b)           The Borrower shall promptly notify
the Agent and the Banks of any of the following, and at such time will deliver
to the Agent and each of the Banks a certificate on behalf of the Borrower of an
Authorized Officer of the Borrower setting forth the details as to such
occurrence and the action, if any, that the Borrower or such Subsidiary of the
Borrower or such

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ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given by the  Borrower or such Subsidiary of the
Borrower or the ERISA Affiliate to or filed with the PBGC, a Plan participant or
the Plan administrator with respect thereto: (i) that a Reportable Event has
occurred with respect to any Plan; (ii) the institution of any steps by the
Borrower, any Subsidiary of the Borrower, any ERISA Affiliate, the PBGC or any
other Person to terminate any Plan or the occurrence of any event or condition
described in Section 4042 of ERISA that constitutes grounds for the termination
of, or the appointment of a trustee to administer a Plan; (iii) the institution
of any steps by the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate to withdraw from any Multiemployer Plan or Multiple Employer Plan, if
such withdrawal could result in withdrawal liability (as described in Part 1 of
Subtitle E of Title IV of ERISA or in Section 4063 of ERISA) in excess of
$250,000; (iv) a non-exempt “prohibited transaction” within the meaning of
Section 406 of ERISA in connection with any Plan; (v) the cessation of
operations at a facility of the Borrower, any Subsidiary of the Borrower or any
ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (vi)
the conditions for imposition of a lien under Section 302(f) of ERISA shall have
been met with respect to a Plan; (vii) the adoption of an amendment to a Plan
requiring the provision of security to such Plan pursuant to Section 307 of
ERISA; (viii) the insolvency of or commencement of reorganization proceedings
with respect to a Multiemployer Plan; or (ix) the taking of any action by the
Internal Revenue Service, the Department of Labor or the PBGC with respect to
any of the foregoing.

Section 6.10.  Reports to Other Creditors.  The Borrower shall promptly after
the furnishing thereof, deliver to the Agent copies of any statement or report
furnished to any other party pursuant to the terms of any indenture, loan or
credit or similar agreement and not otherwise required to be furnished to the
Agent or the Banks pursuant to any clause of this Article 6.

Section 6.11.  Payment of Obligations. The Borrower will, and will cause each of
its Subsidiaries to, pay and discharge, before they become delinquent, all
taxes, assessments and other governmental charges imposed upon it, its
properties, or any part thereof, or upon the income or profits therefrom and all
claims for labor, materials or supplies which if unpaid might be or become a
Lien or charge upon any of its property and other material obligations, except
such items as it is in good faith appropriately contesting and as to which
adequate reserves have been provided to the Agent’s satisfaction.

Section 6.12.  General Information.  The Borrower shall provide the Agent such
other information respecting the condition or operations, financial or
otherwise, of the Borrower or any of its Subsidiaries as the Agent may from time
to time reasonably request.

ARTICLE 7. NEGATIVE COVENANTS

Until the Commitments have expired or terminated and the Obligations have been
paid in full and all Facility Letters of Credit and JPMorgan Letters of Credit
have expired or terminated, the Borrower shall not:

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Section 7.01.  Debt.

(a)           Create, incur, assume or permit to exist, or permit any of its
Subsidiaries to create, incur, assume or permit to exist any Debt, except:

(i)            Debt under this Agreement and the other Loan Documents;

(ii)           Intercompany Debt;

(iii)          Existing Other Debt and refinancings or renewals of such borrowed
money; provided that any such refinancing of such Debt is of the same type, of
the same tenor, and in an aggregate principal amount not greater than the
aggregate principal amount of the Debt being renewed or refinanced, plus the
amount of any premiums required to be paid thereon and reasonable fees and
expenses associated therewith;

(iv)          Debt incurred after the Original Effective Date that is not
secured by a Lien (including, without limitation, Capital Leases), provided that
(A) prior written notice thereof describing its terms and intended use is given
to Agent and the Banks and (B) such Debt does not collectively, exceed at any
time the aggregate principal amount and committed availability of $2,000,000;

(v)           JPMorgan Obligations, provided that the JPMorgan Exposure does not
at any time exceed in the aggregate $8,000,000;

(vi)          Debt other than Existing Other Debt incurred after the Original
Effective Date by Foreign Subsidiaries which does not any time exceed in the
aggregate $5,000,000;

(vii)         Debt arising in connection with endorsement of instruments for
deposit in the ordinary course of business;

(viii)        Debt arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in the
case of daylight overdrafts) drawn against insufficient funds in the ordinary
course of business; provided, however, that such Indebtedness is extinguished
within five (5) Business Days of incurrence;

(ix)           Purchase Money Debt that does not exceed at any time $3,000,000
in the aggregate;

(x)            Any Debt approved in advance by the Agent and the Required Banks
in writing; and

(xi)           Provided that the Borrower is at all times in compliance with the
terms and conditions of this Agreement, no Default or Event of Default exists,
and no event or condition has occurred or is continuing which with the giving of
notice, lapse of time or other

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condition would constitute a Default or Event of Default, the Borrower and/or
its Subsidiaries may incur, assume or permit to exist Debt in connection with
the mortgage of the Taiwanese Property; provided, however, that: (a) the
aggregate amount of any such mortgage Debt shall not at any one time or from
time to time exceed $6,000,000.00, (b) said mortgage Debt shall be secured only
by a mortgage on the Taiwanese Property or a sale/leaseback transaction
affecting the Taiwanese Property, and (c) all net proceeds (with net proceeds
being defined as the proceeds available to the Borrower after the payment of the
Purchase Price for the Taiwanese Property in accordance with the terms of the
ROC Joint Venture Agreement and the Lease Agreement attached thereto, and the
payment of any reasonable costs and expenses incurred in connection with the
Borrower’s purchase of the Taiwanese Property) received by the Borrower or any
of its Subsidiaries (whether directly or indirectly) in connection with
incurrence of such mortgage Debt shall be paid over to the Agent within five (5)
Business Days and shall be applied by the Agent as a mandatory prepayment under
the terms of this Agreement.  In all events, if completed in accordance with the
terms of this Agreement, any resulting liens and encumbrances on the Taiwanese
Property shall be considered a permitted Subsidiary Real Property Lien under the
terms of Section 5.12(a) of this Agreement.

For purposes of this Section 7.01, the amount of the Debt incurred by a Foreign
Subsidiary shall be determined and fixed by using the “rate of exchange” to
purchase United States Dollars in effect as of the documented closing date for
such Debt.

                                (b)           Prepay, redeem, purchase, defease
or otherwise satisfy prior to the scheduled maturity thereof in any manner, or
make any payment in violation of any subordination terms of, any Debt other than
the Obligations.

Section 7.02.  Liens, Etc.  Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien, or any other type of
preferential arrangement, upon or with respect to any of its properties, whether
now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to
assign, any right to receive income, in each case to secure any Debt of any
Person or entity, other than:

(a)           Liens securing the Obligations hereunder;

(b)           The Assignment of Leases and Rents;

(c)           Liens securing the payment of taxes, assessments or governmental
charges or levies or the demands of suppliers, mechanics, carriers, warehouses,
landlords and other like Persons, provided that: (i) they do not in the
aggregate materially reduce the value of any properties subject to the Liens or
materially interfere with their use in the ordinary conduct of the owning
business, and (ii) all claims which the Liens secure are being actively
contested in good faith and by appropriate proceedings so long as they have been
revered for by Borrower in accordance with GAAP;

(d)           Liens incurred or deposits made in the ordinary course of
business: (i) in connection with worker’s compensation, unemployment insurance,
social security and other like

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laws, or (ii) to secure the performance of letters of credit, bids, tenders,
sales contract, leases, statutory obligations, surety, appeal and performance
bonds and other similar obligations, in each case not incurred in connection
with the borrowing of money, the obtaining of advances or the payment of the
deferred purchase price of property;

(e)           attachment, judgment and other similar Liens arising in connection
with court proceedings provided that: (i) execution and other enforcement are
effectively stayed, and (ii) all claims which the Liens secure are being
actively contested in good faith and by appropriate proceedings;

(f)            Subsidiary Real Property Liens to the extent securing Existing
Other Debt;

(g)           Liens securing Debt incurred by Foreign Subsidiaries to the extent
permitted by Section 7.01 (a)(vi);

(h)           Liens related to operating lease obligations, and within the
limitations, described in Section 7.03; and

(i)            Purchase Money Liens to the extent securing Purchase Money Debt
permitted by Section 7.01(a)(ix).

Section 7.03.  Lease Obligations.   Create or suffer to exist, or permit any of
its Subsidiaries to create or suffer to exist, any obligations for the payment
of rental for any property under leases or agreements to lease, other than
Capital Leases and Synthetic Lease Obligations, which would cause the
liabilities of the Borrower and its Subsidiaries, on a consolidated basis, in
respect of all such obligations to exceed $5,000,000 payable in any period of
twelve (12) months.

Section 7.04.  Prohibited Transactions.  Use the proceeds of any Loan either
directly or as the proceeds of an Intercompany Loan to acquire any security in
any transaction which is subject to Sections 13 and 14 of the Securities
Exchange Act of 1934 or use the proceeds of any Loan to otherwise acquire any
public company other than on a friendly basis.

Section 7.05.  Margin Stock.  Use the proceeds of any Loan either directly or as
the proceeds of an Intercompany Loan to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.

Section 7.06.  Consolidations, Mergers, Acquisitions and Sales of Assets. 
Consolidate or merge with or into, or sell, lease, transfer, abandon or
otherwise dispose of any of its assets to any Person, liquidate or dissolve
itself (or suffer any liquidation or dissolution) or otherwise wind up its
business  or engage in an Acquisition, except that:

(a)           any Subsidiary may consolidate or merge with the Borrower or any
wholly-owned Subsidiary of the Borrower;

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(b)           the Borrower or any Subsidiary may sell, lease, transfer or
otherwise dispose of any of its inventory in the ordinary course of business;

(c)           the Borrower or any Subsidiary may use and consume assets in the
ordinary course of business;

(d)           the Borrower or any Subsidiary may sell, lease, transfer or
otherwise dispose of equipment, furniture and fixtures in the ordinary course of
business, provided, however, that the aggregate net book value of all such
assets of the Borrower and its Subsidiaries sold, leased, transferred or
otherwise disposed of during any Fiscal Year of the Borrower pursuant to this
clause (d) shall not exceed $2,000,000 in the aggregate;

(e)           the Borrower may engage in Permitted Acquisitions, provided that
the aggregate purchase price (including covenant not to compete and other forms
of purchase price payment) does not exceed $5,000,000 (in the aggregate) for any
given Fiscal Year.

All sales, leases, transfer or other disposition of assets pursuant to clauses
(b) or (d) shall be not less than at fair market value.

Section 7.07.  Affiliate Transactions.  Enter into or permit any Subsidiary to
enter into any transaction (including the purchase, sale or exchange of Property
or the rendering of any service) with any Affiliate except in the ordinary
course of and pursuant to the reasonable requirements of such Person’s business
upon fair and reasonable terms which are at least as favorable to the Borrower
or the Subsidiary as would be obtained in a comparable arms-length transaction
with a non-Affiliate.

Section 7.08.  Loans and Advances.  Make or permit to exist or permit any of its
Subsidiaries to make or permit to exist any loans or advances to or any other
investment in any Person, except investments in:

(a)           interest-bearing United States Government obligations,

(b)           certificates of deposit issued by or time deposits with any
commercial bank organized and existing under the laws of the United States or
any state thereof having capital and surplus of not less than $25,000,000,

(c)           prime commercial paper rated AAA by S&P or Prime P-1 by Moody’s,

(d)           agreements involving the sale and guaranteed repurchase of United
States government securities,

(e)           investments in securities of trade creditors or customers in the
ordinary course of business and consistent with the Borrower’s or such
Subsidiaries’ past practices that are received in settlement of bona fide
disputes or pursuant to any plan of reorganization or

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liquidation or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers,

(f)            loans and advances made in the ordinary course of business for
bona fide business purposes, including but not limited to any loans evidenced by
Customer Notes, which in the aggregate do not exceed $3,000,000.00 at any time
outstanding,

(g)           investments in the Borrower,

(h)           the endorsement of negotiable instruments held for collection in
the ordinary course of business and the making of lease, utility and other
similar deposits in the ordinary course of business,

(i)            loans and advances made to, and investments in a Wholly-Owned
Subsidiary provided that: (i) it is a Pledged Subsidiary and (ii) if it is a
Domestic Subsidiary, it is a Creditor Party.

All instruments and documents evidencing such investments shall be pledged to
the Agent promptly after the relevant Person’s receipt thereof, shall be
security for the Obligations.

Section 7.09.  No Activities Leading to Forfeiture.  Engage in or propose to be
engaged in, or permit any Subsidiary to engage in or propose to be engaged in,
the conduct of any business or activity which could result in a Forfeiture
Proceeding, which could, individually or in the aggregate, have a Material
Adverse Effect.

Section 7.10.  Capital Expenditures.  Make, incur or permit Capital Expenditures
by the Borrower and its Subsidiaries during any twelve (12) month period which
in the aggregate exceed $7,500,000 in any Fiscal Year.

Section 7.11.  Restricted Payments .  The Borrower will not, and will not permit
any of its Subsidiaries to, declare or pay any dividends on or make any other
distributions in respect of its Capital Securities or redeem or otherwise
acquire any such Capital Securities without in each instance obtaining the prior
written consent of the Required Banks; provided, however, that: (a) any
Subsidiary of the Borrower may pay dividends or other distributions to the
Borrower, (b) Borrower may pay regularly scheduled dividends with respect to its
common stock, and (c) Borrower may redeem Capital Securities owned by any
executive of Borrower, if such Capital Securities were acquired by such person
pursuant to the Hardinge Inc. 2002 Stock Incentive Plan, and any such executive
has the right to require the Borrower to redeem such Capital Securities to
discharge tax liabilities resulting from the acquisition or ownership of such
Capital Securities, provided that in each of the foregoing cases: (i) on the
date of payment, there exists no Default or Event of Default, and (ii) Borrower
would have been in compliance with all financial covenants set forth in Article
8 as of the last Quarterly Date if any such proposed dividend or payment had
been made as of such last Quarterly Date.

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                Section 7.12.  Restrictive Agreements; Put Agreements;
Speculative Hedging.

(a)           The Borrower will not, and will not permit any of its Subsidiaries
to, directly or indirectly, enter into, incur or permit to exist any agreement
or other arrangement that conflicts with any provision of this Agreement or the
other Loan Documents.  Furthermore, with the exception of the Subsidiary Real
Property Liens, the Borrower will not, and will not permit any of its
Subsidiaries to, enter into any agreement in connection with or incur any Debt
which contains any covenants (including, without limitation, a negative pledge
on assets that does not permit the Liens securing the Obligations) more
restrictive than the provisions of Articles 6 and 7, or any negative pledge on
assets that does not permit the Liens securing the Obligations.

(b)           The Borrower will not, and will not permit any of its Subsidiaries
to: (i), enter into any put agreement or similar agreement with any other Person
granting such Person put rights or similar arrangements with respect to the
Capital Securities of the Borrower or its Subsidiaries (other than in connection
with compensation arrangements with directors, officers or employees of the
Borrower or any Subsidiary); or (ii) or for speculative purposes any interest
rate, currency or commodity swap agreement, cap agreement or collar agreement,
and any other agreement or arrangement designed to protect a Person against
fluctuations in interest rates, currency exchange rates or commodity prices.

                Section 7.13.  Changes in Accounting Principles; Fiscal Year. 
The Borrower will not, and will not permit any of its Subsidiaries to, make any
change in its principles or methods of accounting as currently in effect, except
such changes as are required by GAAP, nor, without first obtaining the Agent’s
written consent, change its Fiscal Year.

                Section 7.14.  Amendments to Governing Documents.  The Borrower
will not, and will not permit any of its Subsidiaries to, amend or otherwise
modify their respective certificate or articles of incorporation or by-laws or
any similar governing documents in any manner that would affect the Agent or the
Banks without the prior written consent of the Required Banks.

                Section 7.15  Plan Terminations, Minimum Funding, Etc. The
Borrower will not, and will not permit any Subsidiary of the Borrower or ERISA
Affiliate to,fail to materially comply with the minimum funding standards of
ERISA and the Code with respect to any Plan, or  fail to satisfy all material
contribution obligations in respect of any Multiemployer Plan or Multiple
Employer Plan.

ARTICLE 8. FINANCIAL COVENANTS

Until the Commitments have expired or terminated and the Obligations have been
paid in full and all Facility Letters of Credit and JPMorgan Letters of Credit
have expired or terminated, the Borrower shall comply with each of the following
financial covenants:

                Section 8.01.  Leverage Ratio.  The Leverage Ratio measured as
of each Quarterly Date shall not exceed: (a) 3.50 to 1.00 for the period from
the Effective Date through and including December 31, 2007; (b) 3.25 to 1.00 for
the period from January 1, 2008 through and including September 30, 2008, and
(c) 3.00 to 1.00 from October 1, 2008 and at all times thereafter.

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Section 8.02. Consolidated Tangible Net Worth.  The Consolidated Tangible Net
Worth as measured as of each Quarterly Date of not less than the sum of: (a) 85%
of the Consolidated Tangible Net Worth as of December 31, 2004, (b) an
additional $500,000 as of each successive Quarterly Date after December 31,
2004, and (c) 90% of the Net Cash Proceeds received by Borrower or any of its
Subsidiaries after the Effective Date from any Equity Issuances.

Section 8.03.  Fixed Charges Coverage Ratio.  The Fixed Charges Coverage Ratio
measured as of each Quarterly Date of not less than 1.25 to 1.00.

Section 8.04.  Calculations.  Whenever appropriate and without duplication,
calculations made pursuant to this Article 8 shall give effect, on a pro-forma
basis, to the Permitted Acquisitions, if any, and/or acquisitions of the
Additional Technical Information and the minority interests of the ROC
Shareholders made during the quarter or year to which the required compliance
relates, as if such acquisitions had been consummated on the first day of the
applicable reporting period.

ARTICLE 9. EVENTS OF DEFAULT

Section 9.01.  Events of Default.  Any of the following events shall be an
“Event of Default”:

(a)           The Borrower shall fail to pay when due any installment of
principal of, or interest on, any Loan, any reimbursement obligation in respect
of any Facility LC Disbursement, any amount of a fee or any other amount payable
under this Agreement or any other Loan Document, as and when due and payable or
at a date fixed for prepayment or otherwise; or

(b)           Any representation or warranty made or deemed made by or on behalf
of the Borrower herein or any Credit Party in any other Loan Document, or by the
Borrower (or any of its officers) in connection with this Agreement shall prove
to have been incorrect in any material respect when made or deemed made; or

(c)           The Borrower shall fail to perform or observe any other term,
covenant or agreement required of it in this Agreement or any Credit Party shall
fail to perform or observe any other term, covenant or agreement required of it
in any other Loan Documents; provided, however, with respect to the affirmative
covenants set forth in Article 6 hereof, the Borrower’s non-compliance shall not
be considered an Event of Default unless any such failure shall remain
unremedied for ten (10) days after written notice thereof shall have been given
to the Borrower by the Agent (which notice shall be given at the request of the
Required Banks); or

(d)           The Borrower or any of its Subsidiaries shall fail to pay any Debt
(but excluding Debt evidenced by the Notes) of the Borrower or such Subsidiary
as the case may be, or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Debt; or any other default under
any agreement or instrument relating to any such Debt, or any other

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event, shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such default or
event is to accelerate, or to permit the acceleration of, the maturity of such
Debt; or any such Debt shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof; or

(e)           The Borrower or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower or
any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property; or the
Borrower or any of its Subsidiaries shall take any corporate action to authorize
any of the actions set forth above in this subsection (e); or

(f)            Any judgment or order for the payment of money in excess of
$1,000,000 shall be rendered against the Borrower or any of its Subsidiaries or
any combination thereof, and either: (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall be any
period of twenty (20) consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; or

(g)           any of the events described in clauses (i) through (ix) of Section
6.09(b) shall have occurred; or

(h)           Any Forfeiture Proceeding shall have been commenced or the
Borrower shall have given any Bank written notice of the commencement of any
Forfeiture Proceeding, which would, individually or in the aggregate, have a
Material Adverse Effect, or any Bank has a good faith basis to believe that a
Forfeiture Proceeding has been threatened or commenced, which would,
individually or in the aggregate, have a Material Adverse Effect; or

(i)            A Change in Control shall occur; or

(j)            Any of the Loan Documents shall cease in any material respect to
be in full force and effect or shall be declared to be null and void in whole or
in a material part by the final judgment of a court or other governmental or
regulatory authority having jurisdiction or the validity or enforceability
thereof shall be contested by, or on behalf of, any Credit Party; or any Credit
Party shall renounce any of the same or deny that it has any or further
liability under any Credit Document to which it is a party; or any security
interest purported to be created by any Credit Document shall cease to be, or
shall be asserted by any Credit Party not to be, a valid, perfected, first
priority (except as expressly otherwise provided in this Agreement or such
Credit Document) security interest in the collateral covered thereby.

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Section 9.02.  Remedies.

(a)           If any Event of Default referred to in Section 9.01(e) or Section
9.01(h) above shall occur: (i) the Commitments shall immediately terminate, (ii)
the Notes, all interest thereon and all Obligations shall be immediately due and
payable without notice, presentment, demand protest or other formalities of any
kind, all of which are hereby expressly waived by the Borrower, and (iii) the
Borrower will be and become thereby unconditionally obligated, without the need
for demand or the necessity of any act or evidence, to deliver to the Agent, at
its Principal Offices, for deposit into the Facility Letter of Credit Collateral
Account, an amount (the “Facility Letter of Credit Collateral Shortfall Amount”)
equal to the excess, if any, of: (A) 100% of the sum of the aggregate maximum
amount remaining available to be drawn under the Facility Letters of Credit
(assuming compliance with all conditions for drawing thereunder) issued by the
Issuing Bank and outstanding as of such time, over (B) the amount on deposit for
such Borrower in the Facility Letter of Credit Collateral Account at such time
that is free and clear of all rights and claims of third parties (other than the
Agent and the Banks).

(b)           If any Event of Default, other than those specified in Section
9.01(e) or Section 9.01(h), shall occur and be continuing, the Agent shall, upon
request of the Required Banks, by notice to the Borrower: (i) declare the
Commitments to be terminated, whereupon the same shall forthwith terminate, (ii)
declare the outstanding principal of the Notes, all interest thereon and all
other Obligations to be forthwith due and payable, whereupon the outstanding
principal of the Notes, all such interest and all such other Obligations shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; and (iii) make the deposit of the Facility Letter of Credit Collateral
Shortfall Amount in the Facility Letter of Credit Collateral Account.

ARTICLE 10. THE AGENT; RELATIONS AMONG BANKS AND BORROWER

Section 10.01.  Appointment, Powers and Immunities of Agent.

(a)           Each Bank, the Swing Bank and the Issuing Bank hereby irrevocably
appoints and authorizes the Agent to act as its agent hereunder and under any
other Loan Document with such powers as are specifically delegated to the Agent
by the terms of this Agreement and any other Loan Document, together with such
other powers as are reasonably incidental thereto.  The Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement
and any other Loan Document, and shall not by reason of this Agreement be a
trustee for any Bank.  The Agent shall not be responsible to the Banks for any
recitals, statements, representations or warranties made by the Borrower or any
officer or official of the Borrower or any other Person contained in this
Agreement or any other Loan Document, or in any certificate or other document or
instrument referred to or provided for in, or received by any of them under,
this Agreement or any other Loan Document, or for the value, legality, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or any other document or instrument referred to or
provided for herein or therein, for the satisfaction of any conditions in
Article 4, for the perfection or priority of any collateral

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security for any Obligations or for any failure by the Borrower to perform any
of its obligations hereunder or thereunder.  The Agent may employ agents and
attorneys-in-fact and shall not be responsible, except as to money or securities
received by it or its authorized agents, for the negligence or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care.  Neither
the Agent nor any of its directors, officers, employees or agents shall be
liable or responsible for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith, except for its or their own gross negligence or willful misconduct. 
The Borrower shall pay any fee agreed to by the Borrower and the Agent with
respect to the Agent’s services hereunder, including but not limited to all fees
described in the Fee Letter.

                                (b)           The Issuing Bank shall act on
behalf of the Banks (according to their Pro Rata Shares) with respect to any
Facility Letters of Credit issued by it and the documents associated therewith. 
The Issuing Bank shall have all of the benefits and immunities: (i) provided to
the Agent in this Section 10 with respect to any acts taken or omissions
suffered by the Issuing Bank in connection with Facility Letters of Credit
issued by it or proposed to be issued by it and the applications and agreements
for letters of credit pertaining to such Letters of Credit as fully as if the
term “Agent”, as used in this Section 10, included the Issuing Bank with respect
to such acts or omissions and (ii) as additionally provided in this Agreement
with respect to the Issuing Bank.

Section 10.02.  Reliance by Agent.  The Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Agent.  The Agent may deem and treat each Bank as
the holder of the Loan made by it for all purposes hereof unless and until a
notice of the assignment or transfer thereof satisfactory to the Agent signed by
such Bank shall have been furnished to the Agent together with the assignment
fee referred to in Section 11.05(b), but the Agent shall not be required to deal
with any Person who has acquired a participation in any Loan from a Bank.  As to
any matters not expressly provided for by this Agreement or any other Loan
Document, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with instructions signed by the
Required Banks, and such instructions of the Required Banks and any action taken
or failure to act pursuant thereto shall be binding on all of the Banks and any
other holder of all or any portion of any Loan.

Section 10.03.  Defaults.  The Agent shall not be deemed to have knowledge of
the occurrence of a Default or Event of Default  unless the Agent has received
notice from a Bank or the Borrower specifying such Default or Event of
Default..  The Agent shall (subject to Section 10.08) take such action with
respect to such Default or Event of Default which is continuing as shall be
directed by the Required Banks; provided that, unless and until the Agent shall
have received such directions, the Agent may take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interest of the Banks; and provided further that the
Agent shall not be required to take any such action which it determines to be
contrary to law.

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Section 10.04.  Rights of Agent as a Bank.  With respect to its Commitments and
the Loans made by it, the Agent in its capacity as a Bank hereunder shall have
the same rights and powers hereunder as any other Bank and may exercise the same
as though it were not acting as the Agent, and the term “Bank” or “Banks” shall,
unless the context otherwise indicates, include the Agent in its capacity as a
Bank.  The Agent and its affiliates may (without having to account therefor to
any Bank) accept deposits from, lend money to (on a secured or unsecured basis),
issue letters of credit, and generally engage in any kind of banking, trust or
other business with, the Borrower (and any of its affiliates) as if it were not
acting as the Agent, and the Agent may accept fees and other consideration from
the Borrower for such services in connection with this Agreement or otherwise
without having to account for the same to the Banks.  Although the Agent and its
affiliates may in the course of such relationships and relationships with other
Persons acquire information about the Borrower, its Affiliates and such other
Persons, the Agent shall have no duty to disclose such information to the Banks
except to the extent, if any, expressly required by this Agreement or any other
Loan Documents.

Section 10.05.  Indemnification of Agent.

(a)           The Banks agree to indemnify the Agent (to the extent not
reimbursed under Section 11.03 or under the applicable provisions of any other
Loan Document, but without limiting the obligations of the Borrower under
Section 11.03 or such provisions) and its directors, officers, employees and
agents, ratably in accordance with their Pro Rata Share (without giving effect
to any participations, in all or any portion of any Obligations, sold by them to
any Person other than another Bank), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Agreement, any other Loan Document or any other documents contemplated
by or referred to herein or the transactions contemplated hereby or thereby
(including, without limitation, the costs and expenses which the Borrower is
obligated to pay under Section 11.03 or under the applicable provisions of any
other Loan Document but excluding, unless a Default or Event of Default has
occurred, normal administrative costs and expenses incident to the performance
of its agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents or instruments; provided that no Bank
shall be liable for any of the foregoing to the extent to the extent determined
by a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from the applicable Person’s they arise from the gross negligence or
willful misconduct of the party to be indemnified.

                                (b)           Without limitation of the
foregoing, each Bank shall reimburse the Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including attorney costs and taxes)
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the Agent
is not reimbursed for such expenses by or on behalf of the Borrower.

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                                (c)           The undertaking in this Section
10.06 shall survive repayment of the Loans, cancellation of the Notes,
expiration or termination of the Facility Letters of Credit, any foreclosure
under, or modification, release or discharge of, any or all of the Security
Documents, termination of this Agreement and the resignation or replacement of
the Agent.

Section 10.06.  Documents.  The Agent will forward to each Bank, promptly after
the Agent’s receipt thereof, a copy of each report, notice or other document
required by this Agreement or any other Loan Document to be delivered to the
Agent for such Bank.

Section 10.07.  Non-Reliance on Agent and Other Banks.  Each Bank agrees that it
has, independently and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower and its Subsidiaries and decision to enter
into this Agreement and that it will, independently and without reliance upon
the Agent or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any other Loan
Document.  The Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower of this Agreement or of the Borrower
or any other Credit Party in any other Loan Document or any other document
referred to or provided for herein or therein or to inspect the properties or
books of the Borrower or any Subsidiary.  Except for notices, reports and other
documents and information expressly required to be furnished to the Banks by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide
any Bank with any credit or other information concerning the affairs, financial
condition or business of the Borrower or any Subsidiary (or any of their
Affiliates) which may come into the possession of the Agent or any of its
affiliates.  The Agent shall not be required to file this Agreement, any other
Loan Document or any document or instrument referred to herein or therein, for
record or give notice of this Agreement, any other Loan Document or any document
or instrument referred to herein or therein, to anyone.

Section 10.08.  Failure of Agent to Act.  Except for action expressly required
of the Agent hereunder, the Agent shall in all cases be fully justified in
failing or refusing to act hereunder unless it shall have received further
assurances (which may include cash collateral) of the indemnification
obligations of the Banks under Section 10.05 in respect of any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.

Section 10.09.  Resignation of Agent.  Subject to the appointment and acceptance
of a successor Agent as provided below, the Agent may resign at any time by
giving written notice thereof to the Banks and the Borrower; provided that the
Borrower and the other Banks shall be promptly notified thereof.  Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent.  If no successor Agent shall have been so appointed by the Required Banks
and shall have accepted such appointment within thirty (30) days after the
retiring Agent’s giving of notice of resignation, then the retiring Agent may,
on behalf of the Banks, appoint a successor Agent.  The Required Banks or the
retiring Agent, as the case may be, shall upon the

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appointment of a successor Agent promptly so notify the Borrower and the other
Banks.  Upon the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations hereunder and
any other Loan Document.  After any retiring Agent’s resignation hereunder as
Agent, the provisions of this Article 10 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Agent.

Section 10.10.  Amendments Concerning Agency Function.  The Agent shall not be
bound by any waiver, amendment, supplement or modification of this Agreement or
any other Loan Document which affects its duties hereunder or thereunder unless
it shall have given its prior consent thereto.

Section 10.11.  Liability of Agent.  The Agent shall not have any liabilities or
responsibilities to the Borrower on account of the failure of any Bank to
perform its obligations hereunder or to any Bank on account of the failure of
the Borrower to perform its obligations hereunder or under any other Loan
Document.  This Section 10.11 shall not be construed to limit the Agent’s
liability or responsibility where the Agent is acting as a Bank under this
Agreement.

Section 10.12.  Transfer of Agency Function.  Without the consent of the
Borrower or any Bank, the Agent may at any time or from time to time transfer
its functions as Agent hereunder to any of its offices wherever located,
provided that the Agent shall promptly notify the Borrower and the Banks
thereof.

Section 10.13.  Withholding Taxes.  Each Bank represents that it is entitled to
receive any payments to be made to it hereunder without the withholding of any
U.S. tax and will furnish to the Agent such forms, certifications, statements
and other documents as the Agent may request from time to time to evidence such
Bank’s exemption from the withholding of any U.S. tax imposed by any domestic
jurisdiction or to enable the Agent to comply with any applicable laws or
regulations relating thereto.  Without limiting the effect of the foregoing, if
any Bank is not created or organized under the laws of the United States of
America or any state thereof, in the event that the payment of interest by the
Borrower is treated for U.S. income tax purposes as derived in whole or in part
from sources from within the U.S., such Bank will furnish to the Agent Form
W-8BEN or Form W-8ECI of the Internal Revenue Service, or such other forms,
certifications, statements or documents, duly executed and completed by such
Bank as evidence of such Bank’s exemption from the withholding of U.S. tax with
respect thereto.  The Agent shall not be obligated to make any payments
hereunder to such Bank in respect of any Loan or such Bank’s Revolving
Commitment until such Bank shall have furnished to the Agent the requested form,
certification, statement or document.

Section 10.14.  Several Obligations and Rights of Banks.  The failure of any
Bank to make the Loan to be made by it on the date specified therefor shall not
relieve any other Bank of its obligation to make its Loan on such date, but no
Bank shall be responsible for the failure of any other Bank to make the Loan to
be made by such other Bank.  The amounts payable at any time hereunder to each
Bank shall be a separate and independent debt, and each Bank shall be

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entitled to protect and enforce its rights arising out of this Agreement, and it
shall not be necessary for any other Bank to be joined as an additional party in
any proceeding for such purpose.

Section 10.15.  Sharing of Payments Among Banks.  If a Bank shall obtain payment
of any principal of or interest on any Obligation made by it through the
exercise of any right of setoff, banker’s lien, counterclaim, or by any other
means (including any payment obtained from or charged against any Third Party),
in excess of its applicable Pro Rata Share (determined pursuant to subpart (c)
of the definition of Pro Rata Share herein) it shall promptly purchase from the
other Banks participations in (or, if and to the extent specified by such Bank,
direct interests in) the Obligations made by the other Banks in such amounts,
and make such other adjustments from time to time as shall be equitable to the
end that all the Banks shall share the benefit of such payment (net of any
expenses which may be incurred by such Bank in obtaining or preserving such
benefit) in accordance with Section 2.05(a).  To such end the Banks shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored. The
Borrower agrees that any Bank so purchasing a participation (or direct interest)
in the Obligations made by other Banks may exercise all rights of setoff,
banker’s lien, counterclaim or similar rights with respect to such participation
(or direct interest).  Nothing contained herein shall require any Bank to
exercise any such right or shall affect the right of any Bank to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness of the Borrower.

Section 10.16.  No Other Agents.  None of the Banks or other Persons identified
herein, including on the facing page or signature pages of this Agreement, as a
“syndication agent,” “Arranger”, “documentation agent” or “lead arranger” shall
have any right, power, obligation, liability, responsibility or duty under this
Agreement other than, in the case of such Banks, those applicable to all Banks
as such.  Without limiting the foregoing, none of the Banks or the Persons so
identified shall have or be deemed to have any fiduciary relationship with any
Bank. Each Bank acknowledges that it has not relied, and will not rely, on any
of the Banks or other Persons so identified in deciding to enter into this
Agreement or in taking or not taking action hereunder.

                Section 10.17  Benefit of Article. The provisions contained in
this Article are solely for the benefit of the Agent, the Issuing Bank, and the
Banks and are not for the benefit of, nor may they be relied upon by, the
Borrower, any Credit Party, or any third party.

ARTICLE 11. MISCELLANEOUS

Section 11.01.  Amendments and Waivers.

(a)           Except as otherwise expressly provided in this Agreement, any
provision of this Agreement may be amended or modified only by an instrument in
writing signed by the Borrower, the Agent and the Required Banks, or by the
Borrower and the Agent acting with the consent of the Required Banks and any
provision of this Agreement may be waived by the Required Banks or by the Agent
acting with the consent of the Required Banks; PROVIDED

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that no amendment, modification or waiver shall, unless by an instrument signed
by all of the Banks or by the Agent acting with the consent of all of the Banks:
(i) increase or extend the term, or extend the time or waive any requirement for
the reduction or termination, of the Commitments, (ii) extend the date fixed for
the payment of principal of or interest on any Loan or any fee payable
hereunder, (iii) reduce the amount of any payment of principal thereof or the
rate at which interest is payable thereon or any fee payable hereunder, (iv)
alter the terms of this Section 11.01, (v) amend the definition of the term
“Required Banks”, (v) waive any of the documentary conditions precedent set
forth in Section 4.01 hereof, or (vi) release all or substantially all of the
collateral described in the Security Documents or the release of any of the
Guarantors.  No provision of Section 2.12 with respect to the timing or
application of mandatory prepayments of the Loans shall be amended, modified or
waived without the consent of Banks having a majority of the aggregate Pro Rata
Shares of the Term Loans affected thereby.  No provision of Article 10 or other
provision of this Agreement affecting the Agent in its capacity as such shall be
amended, modified or waived without the consent of the Agent.  No provision of
this Agreement relating to the rights or duties of the Issuing Bank in its
capacity as such shall be amended modified or waived without the consent of the
Issuing Bank.  No provision of this Agreement relating to the rights or duties
of the Swing Line Bank in its capacity as such shall be amended modified or
waived without the consent of the Swing Line Bank.

(b)           No failure on the part of the Agent or any Bank to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver thereof or
preclude any other or further exercise thereof or the exercise of any other
right.  The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.

Section 11.02.  Usury.  Anything herein to the contrary notwithstanding, the
obligations of the Borrower under this Agreement and the Notes shall be subject
to the limitation that payments of interest shall not be required to the extent
that receipt thereof would be contrary to provisions of law applicable to a Bank
limiting rates of interest which may be charged or collected by such Bank.

Section 11.03.  Expenses and Indemnification.  The Borrower shall reimburse the
Agent and the Banks on demand for all costs, expenses, and charges (including,
without limitation, fees and charges of legal counsel for the Agent and each
Bank) incurred by the Agent or the Banks in connection with the enforcement of
this Agreement or the Notes by reason of any Event of Default or any event
which, after the giving of notice or passage of time, or both, would constitute
an Event of Default.  The Borrower agrees to indemnify and hold harmless the
Agent and each Bank from and against any and all claims, damages, liabilities
and expenses (including, without limitation, fees and disbursements of counsel)
(each an “Indemnified Liability”) which may be incurred by or asserted against
the Agent or such Bank in connection with or arising out of any threatened or
actual litigation, or proceeding related to any acquisition or proposed
acquisition by the Borrower, or by any Subsidiary, of all or any portion of the
stock of substantially all the assets of any Person whether or not the Agent or
such Bank is a party thereto.  The Borrower agrees that any Indemnified
Liability will be promptly paid to the Person to be indemnified upon the written
demand of such Person.

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Section 11.04.  Survival.  The obligations of the Borrower under Sections 3.01,
3.05 and 11.03 shall survive the repayment of the Obligations and the
termination of the Commitments.

Section 11.05.  Assignment; Participations.

(a)           This Agreement shall be binding upon, and shall inure to the
benefit of, the Borrower, the Agent, the Banks and their respective successors
and assigns, except that the Borrower may not assign or transfer its rights or
obligations hereunder.

(b)           Each Bank may, with the consent of the Agent and the Issuing Bank
(for an assignment of Facility Letters of Credit (which consent will not be
unreasonably withheld or delayed) assign all or any part of its Revolving
Commitments, its Note or Loans to another bank or other Person provided,
however, that: (i) no consent of the Borrower shall be required if an Event of
Default under Section 9.01 hereof shall have occurred and is continuing; (ii) no
such consent by the Borrower or the Agent shall be required in the case of any
assignment to a Bank; and (iii) any such partial assignment shall be made in an
amount of at least $5,000,000.  Upon execution and delivery by the assignee to
the Borrower and the Agent of an instrument in writing pursuant to which such
assignee agrees to become a “Bank” hereunder (if not already a Bank) having the
Commitment and Loan specified in such instrument, and upon consent thereto by
the Borrower and the Agent, to the extent required above, the assignee shall
have, to the extent of such assignment (unless otherwise provided in such
assignment with the consent of the Borrower and the Agent), the obligations,
rights and benefits of a Bank hereunder holding the Commitments and Loans (or
portions thereof) assigned to it (in addition to the Commitments and Loans, if
any, theretofore held by such Assignee) and the assigning Bank shall, to the
extent of assignment, be released from the Commitments (or portion thereof) so
assigned.  The parties to each such assignment shall execute and deliver to the
Agent, for its acceptance, an Assignment and Assumption Agreement in the form of
Exhibit H (each, an “Assignment and Assumption Agreement”) together with an
assignment fee of $3,500.  Furthermore, if the assignee shall not be a Bank, the
parties to the assignment shall deliver to the Agent an Administrative
Questionnaire.

(c)           A Bank may sell or agree to sell to one or more banks or other
Persons a participation in all or any part of any Loans held by it, or in its
Commitment, in which event each purchaser of a participation (a “Participant”)
shall not, have any rights or benefits under this Agreement or any Note or other
Loan Document (the Participant’s rights against such Bank in respect of such
participation to be those set forth in the agreements executed by such Bank in
favor of the Participant).  All amounts payable by the Borrower to any Bank
under Article 2 hereof in respect of Obligations held by it and its Commitment,
shall be determined as if such Bank had not sold or agreed to sell any
participations in such Loan and Commitment, and as if such Bank were funding
each of such Obligations and Commitment in the same way that it is funding the
portion of such Obligations and Commitment in which no participations have been
sold.  The agreement executed by such Bank in favor of the Participant shall not
give the Participant the right to require such Bank to take or omit to take any
action hereunder except action directly relating to: (i) the extension of the
Termination Date with respect to any interest acquired in the Revolving
Commitment and the Revolving Loans and the Term Loan Maturity

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Date with respect to any interest acquired in the Term Loan Commitment and the
Term Loans, (ii) the extension of a payment date with respect to any fees
payable hereunder or any portion of the principal of or interest on any amount
outstanding hereunder allocated to such Participant, (iii) the reduction of the
principal amount outstanding hereunder, or (iv) the reduction of the rate of
interest payable on such amount or any amount of fees payable hereunder to a
rate or amount, as the case may be, below that which the Participant is entitled
to receive under its agreement with such Bank.

(d)           In addition to the assignments and participations permitted under
paragraphs (b) and (c) above, any Bank may assign and pledge all or any portion
of its Loan and Note to: (i) any affiliate of such Bank, or (ii) any Federal
Reserve Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any operating Circular issued by
such Federal Reserve Bank.  No such assignment shall release the assigning Bank
from its obligations hereunder.

(e)           A Bank may furnish any information concerning the Borrower or any
of its Subsidiaries in the possession of such Bank from time to time to
assignees and Participants (including prospective assignees and participants),
provided that such Bank shall require any assignee or Participant (prospective
or otherwise) to agree in writing to maintain the confidentiality of such
information.

Section 11.06.  Notices.  All notices, requests and other communications
provided for herein (including, and not by way of limitation, any modifications
of, or waivers, requests or consents under, this Agreement) shall be given or
made in writing (including and not by way of limitation by telecopy), or, with
respect to notices given pursuant to Section 2.04 hereof, by telephone confirmed
in writing by telecopier or other writing by the close of business on the day
notice is given, delivered (or telephoned, as the case may be) to the intended
recipient at the “Address for Notices” specified below its name on the signature
pages hereof); or, as to any party, at such other address as shall be designated
by such party in a notice to each other party.  Except as otherwise provided in
this Agreement, (a) notices shall be given to the Agent by telephone, confirmed
by telecopy or other writing by the close of business on the day notice is
given, and (b) notices to the Banks and to the Borrower by telecopy, commercial
overnight courier service, or ordinary mail, or addressed to such party at its
address on the signature page of this Agreement.  Notices shall be effective:
(i) if given by mail, three (3) days after deposit in the mails with first class
postage prepaid, addressed as aforesaid; and (ii) in all other cases when
delivered or received.  Provided, however, that notices to the Agent and the
Banks shall be effective upon receipt.

Section 11.07.  Setoff.  The Borrower agrees that, in addition to (and without
limitation of) any right of setoff, banker’s lien or counterclaim a Bank may
otherwise have, each Bank shall be entitled, at its option, to offset balances
(general or special, time or demand, provisional or final) held by it for the
account of the Borrower at any of such Bank’s offices, in Dollars or in any
other Currency, against any amount payable by the Borrower to such Bank under
this Agreement or such Bank’s Note which is not paid when due (regardless of
whether such balances are then due to the Borrower), in which case it shall
promptly notify the Borrower and the Agent

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thereof; provided that such Bank’s failure to give such notice shall not affect
the validity thereof. Payments by the Borrower hereunder shall be made without
setoff or counterclaim.

Section 11.08.  Jurisdiction; Immunities.

(a)           THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
NEW YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN ERIE COUNTY NEW YORK
OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE NOTES, AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE
OR FEDERAL COURT. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND
ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH
PROCESS TO THE BORROWER AT ITS ADDRESS SPECIFIED IN SECTION 11.06.  THE BORROWER
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW.  THE BORROWER FURTHER WAIVES ANY OBJECTION
TO VENUE IN SUCH STATE AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN SUCH
STATE ON THE BASIS OF FORUM NON CONVENIENS.  THE BORROWER FURTHER AGREES THAT
ANY ACTION OR PROCEEDING BROUGHT AGAINST THE AGENT SHALL BE BROUGHT ONLY IN NEW
YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN ERIE COUNTY.  THE BORROWER
WAIVES ANY RIGHT IT MAY HAVE TO JURY TRIAL.

(b)           Nothing in this Section 11.08 shall affect the right of the Agent
or any Bank to serve legal process in any other manner permitted by law or
affect the right of the Agent or any Bank to bring any action or proceeding
against the Borrower or its property in the courts of any other jurisdictions.

(c)           To the extent that the Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether from
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, the Borrower
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement and the Notes.

Section 11.09.  Table of Contents; Headings.  Any table of contents and the
headings and captions hereunder are for convenience only and shall not affect
the interpretation or construction of this Agreement.

Section 11.10.  Severability.  The provisions of this Agreement are intended to
be severable.  If for any reason any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting

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the validity or enforceability thereof in any other jurisdiction or the
remaining provisions hereof in any jurisdiction.

Section 11.11.  Counterparts.  This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.

Section 11.12.  Integration.  The Loan Documents set forth the entire agreement
among the parties hereto relating to the transactions contemplated thereby and
supersede any prior oral or written statements or agreements with respect to
such transactions.

Section 11.13.  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT EXCLUDING
ALL OTHER CONFLICT-OF-LAW RULES.

Section 11.14.  Confidentiality.  Each Bank and the Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable pre cautions to keep confidential, in
accordance with safe and sound banking practices, any non-public information
supplied to it by the Borrower pursuant to this Agreement which is identified by
the Borrower as being confidential at the time the same is delivered to the
Banks or the Agent, provided that nothing herein shall limit the disclosure of
any such information: (a) to the extent required by statute, rule, regulation or
judicial process, (b) to counsel for any of the Banks or the Agent, (c) to bank
examiners, auditors or accountants, (d) in connection with any litigation to
which any one or more of the Banks is a party, (e) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to the respective Bank a Confidentiality Agreement in substantially the form of
Exhibit F hereto; or (f) to the extent such information becomes publicly
available other than as a result of disclosure by a Bank; and provided further
that in no event shall any Bank or the Agent be obligated or required to return
any materials furnished by the Borrower.

Section 11.15.  Treatment of Certain Information.  The Borrower: (a)
acknowledges that services may be offered or provided to it (in connection with
this Agreement or otherwise) by each Bank or by one or more of their respective
subsidiaries or affiliates and (b) acknowledges that any information delivered
to each Bank or its subsidiaries or affiliates regarding the Borrower may be
shared among such Bank and such subsidiaries and affiliates.  This Section 11.15
shall survive the repayment of the Loans and the termination of the Revolving
Commitments.

Section 11.16. USA Patriot Act.  Each Bank hereby notifies the Borrower that
pursuant to the requirements of the USA Patriot Act, it is required to obtain,
verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will
allow such Bank to identify the Borrower in accordance with the

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requirements of the USA Patriot Act.  The Borrower hereby agrees to cooperate
with each Bank to provide such information promptly following a request therefor
from such Bank.

[Signature Pages To Follow]

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BORROWER:

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

HARDINGE INC.

 

 

 

 

 

 

 

By:

/S/ CHARLES R. TREGO, JR.

 

 

 

 

 

Name:  Charles R. Trego, Jr.

 

 

 

 

 

Title:    Senior Vice President and Chief Financial Officer

 

 

 

Address for Notices:

 

 

 

One Hardinge Drive

 

Elmira, New York 14902

 

Attention: Chief Financial Officer

 

Telephone No.: (607) 734-2281

 

Telecopier No.: (607) 734-5517

 

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AGENT:

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

MANUFACTURERS AND TRADERS TRUST COMPANY

 

 

 

 

 

 

 

By:

/S/ KEVIN P. O’HARA

 

 

 

 

 

Name:

Kevin P. O’Hara

 

 

 

 

 

 

Title:

Vice President

 

 

 

Address For Notices:

 

 

 

Manufacturers and Traders Trust Company

 

2 Court Street

 

Binghamton, New York 13901

 

Attention: Susan A. Burtis, Vice President

 

Telephone No.: (607) 217-3242

 

Telecopier No.: (607) 724-6627

 

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SYNDICATION AGENT:

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

JPMORGAN CHASE BANK, N.A.

 

 

 

 

 

 

 

By:

/S/ CHRISTINE M. DESCHAMPS

 

 

 

 

Name:

Christine M. Deschamps

 

 

 

 

 

 

Title:

Senior Vice President

 

 

 

Address for Notices:

 

 

 

JPMorgan Chase Bank, N.A.

 

1975 Lake Street

 

Elmira, New York 14901

 

Attn: Christine M. Deschamps, Senior Vice President

 

Telephone No.: 607-734-7824

 

Telecopier No.: 607-734-7645

 

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DOCUMENTATION AGENT:

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

 

KEYBANK NATIONAL ASSOCIATION

 

 

 

 

 

 

 

By:

/S/ CARL J. LUGER, JR.

 

 

 

 

 

Name:

Carl J. Luger, Jr.

 

 

 

 

 

 

Title:

Vice President

 

 

 

Address for Notices:

 

 

 

Keybank National Association

 

1700 Bausch & Lomb Place

 

Rochester, New York 14604

 

Attn: Carl J. Luger, Jr., Vice President

 

Telephone No.: 585-238-4118

 

Telecopier No.: 585-238-4142

 

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BANKS:

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

MANUFACTURERS AND TRADERS TRUST COMPANY

 

 

 

 

 

 

 

By:

/S/ KEVIN P. O’HARA

 

 

 

 

 

Name:

Kevin P. O’Hara_

 

 

 

 

 

 

Title:

Vice President

 

 

 

Address for Notices:

 

 

 

Manufacturers and Traders Trust Company

 

2 Court Street

 

Binghamton, New York 13901

 

Attention: Susan A. Burtis, Vice President

 

Telephone No.: (607) 217-3242

 

Telecopier No.: (607) 724-6627

 

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BANKS:

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

 

JPMORGAN CHASE BANK, N.A.

 

 

 

 

 

 

 

By:

/S/ CHRISTINE M. DESCHAMPS

 

 

 

 

 

 

Name:

Christine M. Deschamps

 

 

 

 

 

 

Title:

Senior Vice President

 

 

 

Address for Notices:

 

 

 

JPMorgan Chase Bank, N.A.

 

1975 Lake Street

 

Elmira, New York 14901

 

Attn: Christine M. Deschamps, Senior Vice President

 

Telephone No.: 607-734-7824

 

Telecopier No.: 607-734-7645

 

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BANKS:

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

 

KEYBANK NATIONAL ASSOCIATION

 

 

 

 

 

 

 

By:

/S/ CARL J. LUGER, JR.

 

 

 

 

 

 

Name:

Carl J. Luger, Jr.

 

 

 

 

 

 

Title:

Vice President

 

 

 

Address for Notices:

 

 

 

Keybank National Association

 

1700 Bausch & Lomb Place

 

Rochester, New York 14604

 

Attn: Carl J. Luger, Jr., Vice President

 

Telephone No.: 585-238-4118

 

Telecopier No.: 585-238-4142

 

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BANKS:

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

 

NBT BANK, NATIONAL ASSOCIATION

 

 

 

 

 

 

 

By:

/S/ RONALD G. GOODWIN

 

 

 

 

 

 

Name:

Ronald G. Goodwin

 

 

 

 

 

 

Title:

Senior Vice President

 

 

 

Address for Notices:

 

 

 

NBT Bank National Association

 

3121 Vestal Parkway East

 

Vestal, New York 13850

 

Attn: Ronald G. Goodwin, Senior Vice President

 

Telephone No.: 607-797-3434

 

Telecopier No.: 607-797-1559

 

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