EXHIBIT 10.1

 

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CREDIT AGREEMENT

NEW YORK

 

March 16, 2009

 

Borrower:  Hardinge Inc.

 

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

 

organized under the laws of New York

 

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

 

Bank:

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

 

The Bank and the Borrower agree as follows:

 

1.

DEFINITIONS.

 

 

 

 

a.

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

 

 

 

 

b.

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

 

 

 

 

c.

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

 

 

 

 

d.

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

 

 

 

 

e.

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

 

 

 

 

f.

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

 

 

 

 

g.

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

 

 

 

 

h.

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

 

 

 

 

i.

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

 

 

 

 

j.

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

 

 

 

 

K.

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

 

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l.

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

 

 

 

 

m.

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

 

 

 

 

n.

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

 

 

 

 

o.

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

 

 

 

 

p.

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

 

 

 

 

q.

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

 

 

 

 

r.

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

 

 

 

2.

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

 

 

 

 

a.

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

 

 

 

 

b.

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

 

 

 

 

c.

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

 

 

 

 

d.

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

 

 

 

 

e.

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

 

 

 

 

f.

Judgments and Litigation. There is no pending or threatened claim, audit,
investigation, action or other legal proceeding or judgment, order or award of
any court, agency or other governmental authority or arbitrator which involves
the Borrower, its Subsidiaries or their respective assets and might have a
material adverse effect upon the Borrower or any Subsidiary or threaten the
validity of the Credit or any Transaction Document (any, an “Action”).

 

 

 

 

g.

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

 

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3.

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

 

 

 

 

a.

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

 

x audited

 

o reviewed

 

o compiled

 

 

 

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

 

 

 

 

b.

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

 

 

 

 

c.

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

 

 

 

 

d.

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

 

 

 

 

e.

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

 

 

 

 

f.

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

 

 

 

 

g.

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

 

 

 

 

h.

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

 

 

 

4.

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

 

 

 

 

a.

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

 

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b.

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

 

 

 

 

c.

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

 

 

 

 

d.

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

 

 

 

 

e.

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

 

 

 

 

f.

Distributions. Intentionally Omitted.

 

 

 

 

g.

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

 

 

 

5.

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

 

 

 

o

A.

Borrower shall maintain Tangible Net Worth of not less than $ N/A, measured
(select one: quarterly or annually) N/A as

 

 

of each (select one: quarter or fiscal year) N/A end.

 

 

 

 

 

o

B.

Borrower shall maintain a ratio of Total Liabilities to Tangible Net Worth of
not greater than N/A: N/A, measured (select

 

one: quarterly or annually) N/A as of each (select one; quarter or fiscal year )
N/A end.

 

 

 

 

 

o

C.

Borrower shall maintain a Current Ratio of not less than N/A: N/A, measured
(select one: quarterly or annually) N/A as

 

of each (select one: quarter or fiscal year) N/A end.

 

 

 

 

 

o

D.

Borrower shall maintain Working Capital of not less than $ N/A, measured (select
one: quarterly or annually) N/A as of

 

each (select one: quarter or fiscal year) N/A end.

 

 

 

 

 

o

E.

Borrower shall maintain Cash Flow Coverage of not less than N/A: N/A, measured
for the previous four quarters as of

 

each (select one: quarter or fiscal year) N/A end.

 

 

 

 

 

o

F.

Without the prior written consent of Bank, Borrower shall not make any Capital
Expenditures in excess of $ N/A in the

 

aggregate during any fiscal year of Borrower.

 

 

 

 

 

o

G.

Borrower shall not pay or accrue during any fiscal year compensation (including
but not limited to all salary, bonuses,

 

consulting, management or other fees, rentals and other payments to any person
owning or managing 5%or more of the Borrower or any relative or cohabitant of
such a person, and to any entity under common control with or controlling the
Borrower) exceeding $ N/A in the aggregate.

 

 

 

 

 

o

H.

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

 

fiscal year.

 

 

 

 

6.

DEFAULT.

 

 

 

 

 

a.

Events of Default.  Any of the following events or conditions shall constitute
an “Event of Default”:  (i) failure by the Borrower to pay when due (whether at
the stated maturity, by acceleration, upon demand or otherwise) any principal
installments on the Obligations, or to pay any interest thereon or any fee or
other amount payable under the Transaction Documents and such failure continues
unremedied for a period of three (3) business days; (ii) default by the Borrower
in the performance of any obligation, term or condition of this Agreement, the

 

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other Transaction Documents or any other agreement with the Bank or any of its
affiliates or subsidiaries (collectively, “Affiliates”); (iii) failure by the
Borrower to pay when due (whether at the stated maturity, by acceleration, upon
demand or otherwise) any material indebtedness or obligation owing to any third
party or any Affiliate, the occurrence of any event which results in
acceleration of payment of any such indebtedness or obligation or the failure to
perform any agreement with any third party or any Affiliate; (iv) the Borrower
is dissolved, becomes insolvent, generally fails to pay or admits in writing its
inability generally to pay its debts as they become due; (v) the Borrower makes
a general assignment, arrangement or composition agreement with or for the
benefit of its creditors or makes, or sends notice of any intended, bulk sale;
the sale, assignment, transfer or delivery of all or substantially all of the
assets of the Borrower to a third party; or the cessation by the Borrower as a
going business concern; (vi) the Borrower files a petition in bankruptcy or
institutes any action under federal or state law for the relief of debtors or
seeks or consents to the appointment of an administrator, receiver, custodian or
similar official for the wind up of its business (or has such a petition or
action filed against it and such petition action or appointment is not dismissed
or stayed within sixty (60) days); (vii) the reorganization, merger,
consolidation or dissolution of the Borrower (or the making of any agreement
therefor); (viii) the death or judicial declaration of incompetency of the
Borrower, if an individual; (ix) the entry of one or more judgments  of any
court, other governmental authority or arbitrator against the Borrower in an
aggregate amount of $500,000.00 over and above any insurance coverage which has
been determined by the insurance carrier to be applicable to the claim
underlying the judgment, and any such judgments remain unbonded, unstayed or
undismissed for a period of thirty (30) consecutive days; (x) falsity, material
omission or inaccuracy of facts submitted to the Bank or any Affiliate (whether
in a financial statement or otherwise); (xi) an adverse change in the Borrower,
its business, assets, operations, affairs or condition (financial or otherwise)
from the status shown on any financial statement or other document submitted to
the Bank or any Affiliate, and which change the Bank reasonably determines will
have a material adverse affect on (a)  the Borrower, its business, assets,
operations or condition (financial or otherwise), or (b) the ability of the
Borrower to pay or perform the Obligations; (xii) any pension plan of the
Borrower fails to comply with applicable law or has vested unfunded liabilities
that, in the opinion of the Bank, might have a material adverse effect on the
Borrower’s ability to repay its debts; (xiii) any indication or evidence
received by the Bank that the Borrower may have directly or indirectly been
engaged in any type of activity which, in the Bank’s reasonable judgment, might
result in the forfeiture or any property of the Borrower to any governmental
authority; or (xiv) the occurrence of any event described in
Section 6(a)(i) through and including 6(a)(xiii) with respect to any material
Subsidiary or to any endorser, guarantor or any other party liable for, or whose
assets or any interest therein secures, payment of any of the Obligations.

 

 

 

 

b.

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

 

 

 

7.

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

 

 

8.

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

 

 

9.

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

 

 

10.

MISCELLANEOUS.

 

 

 

a.

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

 

 

 

 

b.

Generally Accepted Accounting Principles.  Any financial calculation to be made,
all financial statements and other financial information to be provided, and all
books and records, system of accounting and reserves to be kept in connection
with the provisions of this Agreement, shall be

 

5

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

 

 

 

 

c.

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

 

 

 

 

d.

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

 

 

 

 

e.

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

 

 

 

 

f.

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

 

 

 

 

g.

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

 

 

 

 

h.

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

 

 

 

 

i.

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

 

6

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

 

 

j.

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

 

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

 

 

 MANUFACTURERS AND TRADERS TRUST COMPANY

 

 

 

 

 

By

/S/ SUSAN A. BURTIS

 

 

 

 

 

 

Name:

Susan A. Burtis

 

 

 

 

 

 

Title:

Vice President

 

 

 

 

 

 

 

 HARDINGE INC.

 

 

 

 

 

 

 

By

/S/ EDWARD J. GAIO

 

 

 

 

 

Name:

Edward J. Gaio

 

 

 

 

 

 

Title:

Vice President and CFO

 

7

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

 

ACKNOWLEDGMENT

 

STATE OF NEW YORK

)

 

: SS.

COUNTY OF CHEMUNG

)

 

On the 16th day of March in the year 2009, before me, the undersigned, a Notary
Public in and for said State, personally appeared SUSAN A. BURTIS, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual(s) whose name(s) is (are) subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.

 

 

/S/ NANCY L. CURREN

 

Notary Public

 

 

 

NANCY L. CURREN

 

 

ACKNOWLEDGMENT

 

STATE OF NEW YORK

)

 

: SS.

COUNTY OF CHEMING

)

 

On the 16th day of March, in the year 2009, before me, the undersigned, a Notary
Public in and for said State, personally appeared EDWARD J. GAIO, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual(s) whose name(s) is (are) subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.

 

 

/S/ NANCY L. CURREN

 

Notary Public

 

 

 

NANCY L. CURREN

 

 

BANK USE ONLY

 

Authorization Confirmed:

 

 

Signature

 

8

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SCHEDULE

 

Additional Representations and Warranties (§2)

 

Additional Affirmative Covenants (§3)

 

Permitted Indebtedness (§4(a)):

 

1.     the Obligations;

 

2.     Indebtedness existing on the date hereof or incurred pursuant to a credit
facility existing on the date hereof and set forth in Schedule 6.01 of the
Credit Agreement dated as of June 13, 2008 among Borrower, Hardinge Holdings
GMBH (the “Swiss Borrower”), certain lenders and JPMorgan Chase Bank, N.A. as
Administrative Agent (the “JPMorgan Agreement”) and extensions, renewals and
replacements of any such Indebtedness with Indebtedness of a similar type that
does not increase the outstanding principal amount thereof;

 

3.     Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to
the Borrower Borrower or any other Subsidiary; provided that Indebtedness of any
Subsidiary that is not a party to the transaction contemplated by the JPMorgan
Agreement to any Loan Party as defined in the JPMorgan Agreement shall be
subject to the limitations set forth in Section 6.04(d) of the JPMorgan
Agreement;

 

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

 

5.     Indebtedness of the Borrower or any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations (as that term is defined in the JPMorgan
Agreement) and any Indebtedness assumed in connection with the acquisition of
any such assets or secured by a Lien (as that term is defined in the JPMorgan
Agreement) on any such assets prior to the acquisition thereof, and extensions,
renewals and replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof; provided that (i) such Indebtedness is
incurred prior to or within ninety (90) days after such acquisition or the
completion of such construction or improvement and (ii) the aggregate principal
amount of Indebtedness permitted by this clause shall not exceed $10,000,000 at
any time outstanding;

 

6.     Indebtedness of the Borrower or any Subsidiary as an account party in
respect of trade letters of credit;

 

7.     Indebtedness of Foreign Subsidiaries (as that term is defined in the
JPMorgan Agreement) in an aggregate principal amount not exceeding $7,500,000 at
any time outstanding;

 

8.     Indebtedness of the Borrower or any Subsidiary secured by a Lien (as that
term is defined in the JPMorgan Agreement) on any asset of the Borrower or any
Subsidiary; provided that the aggregate outstanding principal amount of
Indebtedness permitted by this provision shall not in the aggregate exceed
$10,000,000 at any time; provided, further, that any Subordinated Indebtedness
(as that term is defined in the JPMorgan Agreement) incurred in reliance on this
provision shall be on terms and conditions reasonably satisfactory to the Bank;

 

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

 

9.     Indebtedness with respect to Swap Obligations (as that term is defined in
the JPMorgan Agreement) permitted under Section 6.05 of the JPMorgan Agreement
or with respect to Banking Services Obligations (as that term is defined in the
JPMorgan Agreement);

 

10.   existing Indebtedness incurred to finance the acquisition and/or
construction of a proposed manufacturing and distribution center in Taiwan or
China so long as the aggregate principal amount of such Indebtedness does not
exceed $7,000,000 at any time outstanding; and

 

11.   unsecured Indebtedness in an aggregate principal amount not exceeding
$10,000,000 at any time outstanding; provided, that any Subordinated
Indebtedness (as that term is defined in the JPMorgan Agreement) incurred in
reliance on this provision shall be on terms and conditions reasonably
satisfactory to the Bank.

 

Permitted Guaranties (§4(b)):

 

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

 

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

 

1.     Liens (as that term is defined in the JPMorgan Agreement) imposed by law
for taxes that are not yet due or being contested in compliance with
Section 5.04 of the JPMorgan Agreement;

 

2.     carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and
other like Liens (as that term is defined in the JPMorgan Agreement) imposed by
law, arising in the ordinary course of business and securing obligations that
are not overdue by more than thirty (30) days or are being contested in
compliance with Section 5.04 of the JPMorgan Agreement;

 

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

 

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

 

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

 

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

provided that the term “Permitted Liens” shall not include any Lien (as that
term is defined in the JPMorgan Agreement) securing Indebtedness.

 

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

 

Permitted Investments (§4(d)) means:

 

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

 

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

 

maturing within one year from the date of acquisition thereof;

 

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

 

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

 

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

 

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

 

6.     investments made in compliance with the Investment Policy (as that term
is defined in the JPMorgan Agreement); and

 

7.     investments by the Borrower and any Subsidiary existing on the date
hereof in the capital stock or other ownership interests of Subsidiaries.

 

Permitted Loans (§4(e)):

 

Investments, capital contributions, loans or advances made by the Borrower in or
to any Subsidiary and made by any Subsidiary to the Borrower in excess of an
aggregate amount of $7,500,000 outstanding at any one time.

 

Additional Financial Covenants (§5)

 

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

 

SCHEDULE 4(C)

 

EXISTING LIENS

 

Debtor

 

Secured Party

 

Jurisdiction

 

Filing Information

 

Collateral

Hardinge, Inc.

 

IBM Credit LLC

 

New York
Secretary of State

 

200407205605560
07/20/2004

 

Certain leased equipment

Hardinge Machine Tools Limited

 

Hormann (UK) Limited

 

UC Companies House;
England and Wales

 

Registered
02/09/2005

 

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

Hardinge Machine Tools Limited

 

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

 

UK Companies House; England and Wales

 

To be registered
following completion

 

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

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

 

UBS AG

 

Switzerland

 

05/07/2003

 

Mortgage on real property in Biel, Switzerland

Hardinge Taiwan Precision Machinery Limited

 

Mega International Commercial Bank

 

Taiwan

 

06/2006

 

Mortgage on real property in Taiwan

Hardinge Inc.

 

Citicapital Commercial Leasing Corporation

 

New York
Secretary of State

 

200511176009826
11/17/2005

 

Certain leased equipment

 

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