EXHIBIT 10.1


 





 


CREDIT AGREEMENT


New York


 


December 10, 2009


 


Borrower:  Hardinge Inc.


 


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


 


organized under the laws of New York


 


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


 


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


 


The Bank and the Borrower agree as follows:


 


1.     DEFINITIONS.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


©
Manufacturers and Traders Trust Company, 2004


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 




	
  x
  audited

  	
   

  	
  o
  reviewed

  	
   

  	
  o
  compiled

  






 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


f.      Distributions.  Intentionally Omitted.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


6.     DEFAULT.


 


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


 


5

















 


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


 


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


 


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


 


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


 


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


 


10.   MISCELLANEOUS.


 


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


 


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


 


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


 


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


 


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


 


6

















 


event of any unreconcilable inconsistencies,
this Agreement shall control.  No single
or partial exercise by the Bank of any right or remedy pursuant to this
Agreement or otherwise shall preclude any other or further exercise thereof, or
any exercise of any other such right or remedy, by the Bank.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


7

















 


	
   

  	
  MANUFACTURERS
  AND TRADERS TRUST COMPANY

  
	
   

  	
   

  
	
   

  	
  By

  	
  /S/ SUSAN A. BURTIS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Susan A. Burtis

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARDINGE
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /S/ EDWARD J. GAIO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Edward J. Gaio

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President and CFO

  



 


8

















 


ACKNOWLEDGMENT


 


	
  STATE OF NEW YORK

  	
   

  	
  )

  
	
   

  	
   

  	
  : SS.

  
	
  COUNTY OF BROOME

  	
   

  	
  )

  



 


On the 10th day of December in the year
2009, before me, the undersigned, a Notary Public in and for said State,
personally appeared SUSAN A. BURTIS,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the
instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.


 


	
   

  	
  /s/ ANGEL M. ATON

  
	
   

  	
  Notary Public

  
	
   

  	
  Angel M. Aton

  



 


 


ACKNOWLEDGMENT


 


	
  STATE OF NEW YORK

  	
   

  	
  )

  
	
   

  	
   

  	
  : SS.

  
	
  COUNTY OF CHEMUNG

  	
   

  	
  )

  



 


On the 10th day of December,
in the year 2009, before me, the undersigned, a Notary Public in and for said
State, personally appeared EDWARD J. GAIO,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the
instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.


 


	
   

  	
  /S/ NANCY CURREN

  
	
   

  	
  Notary Public

  
	
   

  	
  Nancy Curren

  



 


 


BANK USE ONLY


 


	
  Authorization Confirmed:

  	
   

  
	
   

  	
  Signature

  



 


9
















 


SCHEDULE


 


Additional Representations and Warranties (§2)


 


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


 


Additional Affirmative Covenants (§3)


 


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


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


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


 


Permitted Indebtedness (§4(a)):


 


1.     the Obligations;


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


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


 


Permitted Guaranties (§4(b)):


 


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


 


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


 


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


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


 

















 


in
the ordinary course of business;


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


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


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


 


Permitted Investments (§4(d)) means:


 


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


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


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


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


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


 


Permitted Loans (§4(e)):


 


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


 


Additional Miscellaneous Covenants (§11)


 


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


 

















 


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


 

















 


SCHEDULE 4(C)


 


EXISTING LIENS


 


	
  Debtor

  	
   

  	
  Secured Party

  	
   

  	
  Jurisdiction

  	
   

  	
  Filing Information

  	
   

  	
  Collateral

  
	
  Hardinge Machine Tools Limited

  	
   

  	
  Hormann (UK) Limited

  	
   

  	
  UC Companies House; England and Wales

  	
   

  	
  Registered

  02/09/2005

  	
   

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

  
	
  Hardinge Machine Tools Limited

  	
   

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

  	
   

  	
  UK Companies House; England and Wales

  	
   

  	
  To be registered following completion

  	
   

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

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

  	
   

  	
  UBS AG

  	
   

  	
  Switzerland

  	
   

  	
  05/07/2003

  	
   

  	
  Mortgage on real property in Biel, Switzerland

  
	
  Hardinge Taiwan Precision Machinery Limited

  	
   

  	
  Mega International Commercial Bank

  	
   

  	
  Taiwan

  	
   

  	
  06/2006

  	
   

  	
  Mortgage on real property in Taiwan

  
	
  Hardinge Inc.

  	
   

  	
  Citicapital Commercial Leasing Corporation

  	
   

  	
  New York

  Secretary of State

  	
   

  	
  200511176009826

  11/17/2005

  	
   

  	
  Certain leased equipment

  
	
  L. Kellenberger & Co. AG

  	
   

  	
  Credit Suisse

  	
   

  	
  Switzerland

  	
   

  	
  N/A

  	
   

  	
  Mortgage on real property in St. Gallen, Switzerland